Alaska coal creates demand, opposition

December 25, 2010 

The Seward Coal Facility's stacker-reclaimer operates on the coal pile. In the background a coal ship is being loaded from the coal facility dock. Coal developers buoyed by Asia's energy boom and soaring coal prices are contemplating even more expansion in Alaska.

PHOTO BY CHRIS AREND COURTESY OF USIBELLI COAL MINE.

One of Alaska's major exports -- coal -- has been racking up record shipments over the past couple of years.

Coal developers buoyed by Asia's energy boom and soaring coal prices are contemplating even more expansion in Alaska.

Two new coal strip-mine proposals are under serious study in Southcentral Alaska. Also, the state's single coal producer, Healy-based Usibelli Coal Mine Inc., is weighing expansion.

The bigger of the proposed new mines, called the Chuitna project, would ratchet up the state's total coal exports from about 1 million tons per year to 12 million tons. Exporting coal from the mine, about 45 miles southwest of Anchorage, would require building a massive dock for ocean-going cargo ships on the west side of Cook Inlet.

Coal development plans are triggering an intense land-use debate in various parts of Southcentral, where some small communities are fearful about major industrial expansion, particularly mining.

Deep-seated opposition in Chickaloon, for example, persuaded a Canadian company to abandon its coal exploration leases on 230,000 acres several years ago.

The debate is still raging over the two pending coal projects, Chuitna and Wishbone Hill, a small mine that could reopen north of

Palmer. The proposed mines have aroused local concerns about increased industrial traffic, reduced air quality and potential risk to Southcentral's salmon runs due to pollution and loss of habitat.

Chuitna and Wishbone Hill opponents have asked the state to declare the two locations as unsuitable for mining. The state rejected the Wishbone Hill petition, but the Chuitna petition is still pending.

Both mines remain under study with no final development plans published yet.

ASIAN BOOM

The United States has the second-biggest coal reserves in the world, after South Africa. Alaska contains half of the U.S. coal reserves, though relatively little of it is mined.

Alaska's coal remains largely untapped because most of the deposits scattered throughout the state are difficult to access by land or water, the coal is low grade or both.

The Asian boom is changing the economics of Alaska coal, possibly for decades to come.

Global demand for low-rank coal -- called so because it burns less efficiently -- is increasing. The low-rank coal from Usibelli's Healy coal leases and from Cook Inlet's massive Beluga coal field is less dirty in one respect: Burning it creates smaller amounts of sulfur dioxide, a noxious air pollutant.

But burning it still generates the carbon dioxide emissions implicated in global warming.

The price of coal exported to Asia -- a main destination for Alaska's coal for the past 25 years -- has more than doubled in the past five years. The United States exported 51 percent more coal in the first six months of this year than it did for the entire 2009.

Despite increased attempts to curb carbon dioxide emissions, and growing opposition to coal-fired power plants, Lower 48 and Alaska coal mines so far have had little trouble finding new customers overseas.

A NEW RECORD

In 1985, Usibelli began exporting low-grade coal from its Healy mine to South Korea. The company put the coal on trains to Seward, then the coal was loaded on ships. At the time, Usibelli says, it was the only company in the world shipping low-rank coal by sea.

This year, Usibelli, founded in the 1940s, exported about 1 million tons of coal via Seward to South Korea and Chile, where it is mainly used for power generation. Usibelli expects to export slightly more in 2011.

This year was the second record-breaking export year in a row for Usibelli. While the company has seen a modest increase of 25 percent in coal exports over the past 15 years, tellingly, most of that growth happened in 2009 and 2010.

"We probably have opportunity for significantly more exports in the coming years," said Steve Denton, Usibelli's vice president for business development.

"Do we have any major plans on the table right now? No, we don't. But we are going to look at what it would take to expand," he said.

DIZZYING GROWTH

China, the world's fastest growing major economy, has colossal coal reserves, but the country's energy consumption is growing so rapidly that last year China began importing more coal than it exports.

Usibelli doesn't see China as a likely customer, but the developers of the Chuitna mine do.

"The potential is there," said Dan Graham, the Anchorage-based project manager for PacRim Coal, the consortium seeking to develop the controversial mine. PacRim is owned by Dick Bass, the Lower 48 ski resort owner, and the Hunt Group, one of the world's largest privately-owned energy firms.

Chuitna opponents say the project is a classic example of trading a renewable resource -- salmon -- for a non-renewable, mined resource. PacRim is still working on its studies for the proposed mine, but opponents are decrying PacRim's idea of excavating some salmon-bearing waters within the coal deposit and creating new artificial habitat for the fish.

"If they can mine through a salmon stream here, this would just be the first (place)," said Dennis Gann, of Cook Inletkeeper, an environmental group fighting the mine.

EXPANSION IMPACTS

The increase in coal exports being contemplated in Alaska would have consequences throughout the Railbelt.

Here's a few of the impacts:

• If built, Usibelli's proposed Wishbone Hill mine would add 75 to 125 full-time jobs in the Mat Su for the five years while the mine is active.

• The Wishbone Hill mine likely would require a rail line expansion to carry the coal either to Port MacKenzie or to the existing coal terminal in Seward.

• If Usibelli takes additional steps to boost coal production from its Railbelt leases, the coal shipping terminal in downtown Seward could expand, potentially creating more economic benefits for the city but possibly increasing the amount of coal dust that blows off the terminal on windy days. Conservation groups are suing over the coal dust in Seward but a trial date has not been scheduled yet.

• If built, the proposed Chuitna mine could employ about 350 people and create a new tax base for the Kenai Peninsula Borough and the state government.

• To move Chuitna coal to foreign ports, the mine's developers would need to build a 2-mile-long dock on the western shore of Cook Inlet capable of receiving large cargo ships. By some estimates, more than 100 ships would call at the dock each year.


Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.

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