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Energy industry seeks to move forward on exporting coal, gas

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As domestic use of coal slows and gas resources expand so rapidly that prices have plummeted to historic lows, the nation's fossil fuel giants are looking across the ocean for a solution.

Members of the U.S. House of Representatives hosted a hearing on June 18 titled "U.S. Energy Abundance: Regulatory, Market, and Legal Barriers to Export." Members of the drilling and mining industries were on hand to discuss a number of issues blocking development of energy export markets.

Coal

"U.S. coal exports drove economic growth both here at home and globally, adding $16.6 billion to the U.S. economy," said Hal Quinn, National Mining Association president. "In fact, coal represents the only net positive addition to our nation's trade balance from the energy sector."

About 90 percent of coal is currently used to generate electricity in the U.S. However, due to global and national economic woes, competitive domestic gas resources and low natural gas prices, the nation's coal markets have been challenged. Thermal coal in Appalachia has been particularly challenged by higher costs to mine coal.

Quinn said coal exports support high-wage jobs that pay out "nearly 50 percent more than the national average" – at about $96,100 annually including benefits.

"Last year, the U.S. coal industry exported a record volume of more than 125 million tons of coal, supporting 168,430 jobs at mines, railroads, ports and many other businesses that comprise the wide range of industries in the supply chain," Quinn said. "For every million tons of U.S. coal exported an estimated 1,320 total jobs are added to the U.S. economy."

The U.S. still has a lot of coal in the ground, and those who oppose exports believe it should stay there. Burning coal releases a number of pollutants into the atmosphere, and many countries have far less regulation for electric utilities.

"With the prospect of coal export, our region finds itself unwittingly positioned at an important global crossroads with respect to climate and energy," said K.C. Golden, policy director at Climate Solutions. "Our decisions will bear heavily on the energy future, advancing or undermining our ability to deploy effective climate solutions in a timely and responsible way."

Golden disputed the jobs argument made by Quinn, stating that "this is not a jobs vs. environment situation. It's a coal export vs. jobs and the environment situation."

"It's whether it will produce more jobs and other economic benefits than other, competing uses of these finite resources," he said. "It is difficult to imagine an economic development strategy that would consume more of these resources while producing fewer jobs than coal export."

Ross E. Eisenberg, vice president of energy and resources policy for the National Association of Manufacturers said NAM supports the export of coal in the U.S.

"Manufacturing jobs support coal exports in the United States," he said. "These jobs include mining and support activities for coal mining; construction; railroad transportation; transport by water and truck; port operations and cargo handling; and all the manufacturing supply chain jobs that support these activities."

Golden also said that the "lock-in" of capital associated with the infrastructure of an export facility could "make climate disruption unavoidable."

"Once these long-term investments are made, their emissions are locked in not for months or years, but for decades. And the impacts of those emissions will persist for centuries," Golden said.

Golden proposes that the nation instead support access to emissionless renewable energy technology.

"Will we pioneer the development of clean energy technologies and systems that deliver sustainable prosperity and reap the economic rewards of that leadership?" Golden said. "Or will we lag behind, facilitating and fueling the development of energy systems that lock us in to a future of dangerous climate disruption and economic stagnation?"

Lucian Pugliaresi, president of the Energy Policy Research Foundation Inc., said in his testimony that concern over increase in net increase of emissions is "misplaced."

"U.S. (Powder River Basin) production will merely replace higher-cost production with relatively small effects on world coal prices," Pugliaresi said. "Neither net world coal combustion nor GHG emissions will change substantially as a result of an expansion of U.S. PRB exports."

The environmental opposition to energy exports poses several layers of problems, from permitting at the extraction site to instigating litigation over the construction of ports. Quinn said those ports are job producers and could potentially be an economic engine for the Pacific Northwest.

"Coal export facilities located in Virginia, Louisiana, Maryland and Alabama alone generated $5.5 billion of economic activity and supported more than 45,000 jobs," Quinn said. "The economic lift provided by coal exports in these states underscores the potential for other states, especially on the West Coast, to benefit economically from sharply rising coal demand from Asia."

A recent assessment by energy analyst Michael Dudas revised coal demand from utilities up by 40 million tons. However, Dudas also lowered the 2013 forecast for net exports by 20 million tons. Central Appalachian coal forecasts were reduced by 10 million tons in his assessment.

Dudas said global metallurgical coal pricing "is not finding the support we had expected." Coal from the Central Appalachian basin is not expected to fare as well as its competitors such as the Powder River Basin or the Illinois Basin. Dudas predicted another round of cutbacks in thermal and marginal metallurgical coal in Central Appalachia coal.

One argument the coal industry presented is that the export of coal is a humanitarian issue. Basically, the argument goes, people in other countries should have access to the cheap power source that fueled development in the United States.

"Between 1990 and 2010, electricity access extended to 1.7 billion people," Quinn said. "With coal being the fastest growing energy source over the past decade, it is probably responsible for lifting half of them from energy poverty. However, 3.6 billion people still remain without any or only partial access to electricity."

Developing economies such as China and India are hungry for coal as they rapidly expand their demand for electricity.

Those testifying on behalf of industry agreed that the market was not a barrier. Eisenberg, on behalf of manufacturers, said energy export barriers are entirely regulatory and legal-based.

"There is a fundamental belief embedded in our nation's environmental laws that the environment and the economy can coexist, that we can depend on our laws and the agencies obligated to carry them out to identify what we have to do to minimize a project's impact on the environment and then move forward and build," Eisenberg said. "That is all we are asking for on coal exports."

Natural gas

Producers of natural gas have hoped to open liquefied natural gas export facilities to tap into foreign markets where the price of natural gas is much higher. Presently, said Bill Cooper, president of The Center for Liquefied Natural Gas, said the Department of Energy is not being reasonable in permitting LNG export facilities.

An applicant should have the reasonable expectation that upon completion of the application, its filing with DOE, payment of the filing fee, and the expiration of the comment period as established in the Federal Register notice without evidence being introduced to overcome the statutory presumption, DOE would require nothing more than the official record to render a decision, Cooper said.

"In other words, an applicant should have the reasonable expectation that DOE would follow its promulgated rules and not seek to unlawfully change the rules by agency decree," he said.

Pugliaresi said barriers to exporting natural gas are slowing a process that could contribute to an economic recovery.

"Over the last decade the national economy has grown at an average annual rate of less than 2 percent," Pugliaresi said. "We should view this low rate of growth as a crisis. While our rate of economic growth has its roots in a range of structural and financial setbacks within the economy, we can also point to regulatory and government policies which are delaying or outright prohibiting a large number of high value-added investments from proceeding.

"Exports are one area which can provide a much needed boost to economic growth if we can overcome the substantial regulatory and political constraints which place these opportunities at risk.

He added that the rapid expansion of the recent years occurred largely because the industry has been regulated lightly.

"A traditional strength of the U.S. economy is that political risk is low and can be contained, but a wide range of policies and regulatory delays are undermining these expectations," Pugliaresi said. "Government policy should send strong signals to both producers and the entire range of value-added manufacturers that our economy will remain open and that investment in new natural gas production will have access to the entire range of domestic and foreign markets."

The full testimony and witness panel of the hearing is available online at: http://goo.gl/Wg6mU