CSRHub Blog Research on ESG metrics and comments on sustainability best practice

Investors Beware: Coal’s Dirty Money Could Blow Up

[fa icon="calendar'] Apr 16, 2013 10:03:18 AM / by Carol Pierson Holding

By Carol Pierson Holding

In the most recent sign that coal is in trouble, Wyoming's only new coal mine, Kiewit's Haystack Mine, halted construction last week before shipping any coal: “The coal market is very, very soft,” Uinta County Economic Development Director Dell Atkinson told the Uinta County Herald. “It’s off about 11 percent from last year. They’ve got more coal than they can use right now.”

As reported by Ross Macfarlane, Senior Advisor, Business Partnerships for Climate Solutions, the only other new mine in the state, Cloud Peak's Young Creek Mine, has been indefinitely delayed, awaiting word on export ports.

Exporting coal from the proposed West Coast coal ports is coal companies’ only hope.
The investment required is enormous. Train tracks must be upgraded and new ports built. Because of local objections to coal ports, the coal and train companies are pouring additional millions into PR and ad campaigns to change the minds of local citizens and lawyers to lobby local, state and federal politicians.

The motivation for the companies is clear – it’s survival. But what’s the motivation for investors? "Ambre Energy: Caveat Investor" catalogues a number of money woes for just one of the coal companies and its need for $1 billion in new capital to make its coal projects financially viable. Who will invest?

So far, Macfarlane and his constituencies have some pretty powerful arguments.

Targeting coal investors and investment analysts who cover coal, Macfarlane starts with coal company valuations, which have fallen 70-90% over the last two years due to the fall in domestic demand. The only escape from this disaster for coal companies is exports, which won’t happen without West Coast coal ports. And they’ll spend anything to make those ports happen, however unlikely. Even Seeking Alpha agrees that “this would be a high-risk, high-reward investment as badly needed West Coast terminals may not be allowed to move forward.”

Two of the six proposed ports – Grays Harbor, Washington and Coos Bay, Oregon — have already been withdrawn or derailed. The other four face fierce opposition.

The numbers alone make a pretty conclusive argument.

But Macfarlane also has an ethical argument too: coal investors are playing with dirty money.

No matter what your politics, some things are just plain wrong. One investor, candy heir Forrest Mars, Jr., negotiated permits for running the coal on a route that bypasses his ranch – then bought a 1/3 stake in the railroad that will send the Otter Creek coal to market, fouling the fertile Tongue River Valley.

The blowback is that the Mars candy company has launched a social responsibility campaign, with Principles in Action,” which commit the company to “minimizing environmental impacts.” Anti-coal activists picked up on Mar’s vulnerability and plastered anti-coal stickers on Snickers, Skittles and other Mars candy. Mars makes money on coal, but hurts his candy investment and his personal reputation. Not a sound investment strategy.

Or this one: Peabody Coal, the largest pure coal play for investors and a participant in two of the coal ports, spun off some of its older, less productive Appalachian coal mines to a subsidiary called Patriot. Five years later, Peabody bankrupted Patriot, eliminating pensions and health benefits for thousands of older mine employees.

This one exploded too: Patriot’s creditors and its union are investigating Peabody for potential fraud, adding risk to this coal investment.

Another participant in West Coast coal ports, Arch Coal, is simply a bad player, with an Accounting and Governance Rating in the 5th percentile, a higher risk than 95% of companies measured. As Business Insider comments, “Incidents and settlements in 2011 included a violations of the Clean Water Act in three states, the death of a miner in Virginia, and a wrongful death lawsuit settlement with six families.” Arch is also at risk for its pension liabilities.

Still another coal port sponsor, Kinder Morgan, is in AGR’s 10th percentile.

But perhaps worst of all might be Peabody’s use of the promise of “clean coal technology” to bankrupt Midwestern cities. Here’s that story:

Peabody persuaded municipalities in the Midwest to invest in a new cleaner coal power plant cynically named Prairie State Energy Campus (PSCE). Peabody sold 95% of the plant to local utilities and rushed to begin construction before the EPA’s recapture rule took effect, resulting in as the Chicago Tribune called it “largest source of carbon dioxide built in the United States in a quarter-century.” Then costs soared beyond the original investment, forcing the utilities to borrow. Two utilities pulled out. Energy from PSCE is so expensive that utilities sell at a loss or increase prices for customers. Several municipalities have had to declare bankruptcy.

How did this come to light? In February, the SEC served Peabody with a subpoena. Securities fraud anyone?

Desperation can breed bad behavior, and bad behavior has a habit of coming back around. We’ve all seen the bully taken down. I had that experience when I was young. A workplace bully took aim at me, using nasty tactics, and was eventually fired. I remember an older employee telling me “That kind always blows themselves up.”

Photo courtesy of danielmoyle via Flickr CC.


Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 7,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.
Read More [fa icon="long-arrow-right"]

[fa icon="comment"] 0 Comments posted in Ambre Energy, Arch Coal, coal ports, coal trains, Uncategorized, Kinder Morgan, Carol Pierson Holding, Mars, Pacific Northwest, Peabody

Coal Port Sponsors Encounter the Global Village

[fa icon="calendar'] Apr 8, 2013 10:40:53 AM / by Carol Pierson Holding

By Carol Pierson Holding

A retired nurse friend related a story last week told to her by the young waitress at the Vol du Vent restaurant in the picturesque beach town of White Rock, British Columbia.  As the waitress was serving lunch, a train filled with coal passed between the restaurant and Semiamoo Bay. After her view cleared and the noise had abated, my friend mentioned her fear of the coal ports proposed for five Pacific Northwest sites and the harm to health the coal dust would inflict.

The waitress claimed empty cars were the worst offenders. Her house is covered with dust that is not tamped by the surfactant sprayed on full coal loads. Black soot enters through her windows to rest on blinds and furniture. Colors in her early spring flowerbed are greyed. She was too young to think about health impacts, but her images were heartbreaking.

The next day, still recovering from my friend’s apocalyptic nightmare and its implications for proposed coal ports near me in Washington State, I stopped everything to read the Sightline Weekly Newsletter headlined “Coal Exports: Two Weeks of Good News.”

I wasn’t disappointed.

Sightline has been investigating Pacific Northwest coal ports permitting since the beginning and has an exhaustive blog series on the subject. The series often chronicles the bad news, including the dispiriting number of strategy and PR firms under contract with coal companies and law firms with deep ties to the industry.

So what’s the good news? Small actions really do add up, and it looks like the coal ports issue may have reached a tipping point. As Sightline’s Program Director Clark Williams-Derry says, “When you string together all the new developments, there are more and more signs that coal export proposals are on the ropes.”

Williams-Derry’s article lists seven positive developments, the most impressive of which is that the coal port project at Coos Bay, Oregon was shut down. The last remaining partner, Metro Ports, withdrew after both Mitsui and Korea Electric Power Corp dropped out last month. “The port is moving on to the next phase,” said port CEO David Koch.

What killed Coos Bay? The port’s press release blames it on an group led by the Sierra Club, whose arguments were both environmental and financial: Asian demand for coal is falling as pollution and the effects of global warming grow.

These realities came first to the Asian partners, who suffer directly from coal pollution. Beijing’s heavy coal smog drifts to Tokyo, headquarters for Mitsui; the two cities have entered an agreement to pursue technical solutions. Seoul, headquarters for Korea Electric Power, has levels of sulphur and nitrogen oxide from coal burning in China that were four times over the acceptable level and is equally eager to forestall more coal burning.

[csrhubwidget company="Korea-Electric-Power-Corporation" size="650x100" hash="c9c0f7"]

Korea Electric’s decision was undoubtedly due to financial reasons as well. As the Huffington Post reports, a spokesperson for Korea Electric blamed the timing of the investment. But like the waitress in White Rock, company decision-makers from both Asian investors in Coos Bay had personal experience with coal’s mal effects. And they are certainly interested in their company’s financial health. But when coal smog affects their families, profit becomes secondary.

And there are plenty of personal experiences standing in the way of coal ports:

    • Local residents currently in the path of coal trains bound for the Gateway Pacific Terminal just north of Seattle sent most of the 124,000 comments to the lead agencies for the Environmental Impact Statement (EIS) Scoping Report, which highlighted public opposition as a key issue.
    • Puget Sound Native tribes sued to stop coal dust from imperiling their salmon habitat and won $1 billion from the state in culvert repairs, a ruling that makes habitat protection another hurdle for coal trains.
    • The Sierra Club issued an intent to sue rail and coal companies for coal dust pollution under the Clean Water Act, a direct attack on the coal ports.

You might think that the only way these massive coal port projects can be stopped is by an equally massive force. And yet, that turns out not to be the case. It’s an executive in Korea, Native-Americans in Washington, lots of people protesting online, and a waitress in White Rock stirring up people who live 100 miles away. It takes the global village. Let’s hope the efforts continue.

Photo courtesy of dherrera_96 via Flickr.


Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 7,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 7,000+ companies from 135 industries in 91 countries. By aggregating and normalizing the information from 200 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

Read More [fa icon="long-arrow-right"]

[fa icon="comment"] 1 Comment posted in Clean Water Act, coal ports, Mitsui, Sierra Club, Sightline Weekly Newsletter, Uncategorized, Puget Sound Native tribes, Semiamoo Bay, Carol Pierson Holding, Environmental Impact Statement (EIS) Scoping Repor, Gateway Pacific Terminal, Korea Electric Power Corp

EPA Protects West Coast Ports Besieged by Coal

[fa icon="calendar'] Apr 24, 2012 4:05:45 AM / by Carol Pierson Holding

By Carol Pierson Holding

In a long-awaited move, the EPA has called in the Army Corps of Engineers to review plans for West Coast coal ports. Finally, alarmed environmentalists and frightened local residents are getting help from the Federal government.

CoalIn December, 2010, I first heard about a proposed coal port in Longview, Oregon and was so outraged that I wrote an article for CSRHub.com. It was so shocking, here, in the Pacific Northwest, a place that prides itself on clean energy leadership. Where just months later, amidst great celebration, Washington state announced it will close its last remaining coal plant.

The environmental arguments against the Longview coal terminal seem indisputable: the coal that would have been shipped from Wyoming and Montana was the lowest grade, a grade outlawed in the US because it is so toxic. The trains carrying the coal would go through the Columbia River Gorge and other environmentally sensitive areas, spreading adjacent land and communities with coal dust.

And when the coal finally got to China, the resulting clouds of black soot could have resulted in pollution so thick as to reduce visibility in West Coast communities, a “myth” that I witnessed several years ago in San Francisco.

That Longview port proposal was withdrawn in the face of consumer opposition and a state review. But as I just found out, a new plan was submitted in late 2011 that “dwarfs the size of the original.” The $600 million project would create a port that exports a staggering 44 million tons of coal per year, making it twice as big as the largest coal port on the West Coast, which is located in metro Vancouver.

The strange thing is that even moderate voices in the coal industry question the viability of new coal ports. David Gambrel, coal consultant with many years working in coal companies, cautioned developers in Coal Age to take a lesson from the past. In the 1980s, the Port of Los Angeles responded to the same frenzied level of Asian demand for coal, then from Japan and India. The port hosted a $150-$200 million consortium to build LATX for coal exports and in the early 90s opened a world-class facility. It exceeded environmental requirements. Even tough union problems were overcome.

But several years later, the demand from Asian markets failed to meet LATX’s minimum annual guarantee requirements and the project was shuttered.

The Port of Portland went through a similar saga, investing $25 million in its own export terminal only to find Asian markets to be unstable and unreliable.

And yet, here we are again. This time, coal prices are sky high and many more determined coal port developers are jumping in, including SAA Marine in Cherry Point Washington; the Longview facility which is co-owned by Ambre Energy of Australia and the US Arch Coal; Rail America’s coal terminal at Grays Harbor Washington; and three smaller ports in Oregon, including the Port of Morrow’s proposed development soon to be under review by the Corps of Army Engineers.

Even if Asian demand for coal does stay strong, there are many other uncertainties that make investments risky, including increased competition from Alaska and South America when the Panama Canal widening is complete in 2014, the arrival of larger New Panamax vessels which cut shipping costs but require deeper harbors, and the ability of railways to handle heavy loads and trains longer than 100 cars.

But the most frightening risk of all to the coal port developers is the environmentalists. As David Gambrel writes in Coal Age:

“Finding a site that meets all the physical requirements will be but a small part of the job. Global warming, climate change, and a host of other scare phrases will be used by people who now genuinely believe the Chinese will burn high sulfur coal and send their unclean stack emissions back to us. In many cases their fear is so great they will do everything in their power to stop any new development.”

How right Gambrel turns out to be. It’s those crazy residents and even crazier environmentalists devoted to stopping the coal port developments who pushed the EPA to pull in the Corps of Engineers. It’s amazing what a determined group of people can do, even in the face of the combined forces of coal, railway, and shipping industries. I sure hope they succeed.

Photo published under Creative Commons license. Courtesy of Rainforest Action Network on Flickr.


CSRHub has a Special Issue of Coal Involvement. The 51 companies on this list are involved in the coal industry either via coal mining, production of coal mining-related equipment, coal-based power production, or engineering services. Sources used: Coal Mining Engineer's ListVan Eck Global CoalPower Shares Global CoalSource Watch CarbonU.S. Energy Information Administration Coal ProducersYahoo! Coal.


Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 5,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.

 

Read More [fa icon="long-arrow-right"]

[fa icon="comment"] 0 Comments posted in Army Corps of Engineers, coal ports, coal production, EPA, Uncategorized, Carol Pierson Holding, Pacific Northwest

Subscribe to Email Updates

Lists by Topic

see all

Posts by Topic

see all

Recent Posts