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Uncertain times for Alaska coal miners thanks in part to natural gas boom

Suzanna CaldwellAlaska Dispatch News
Courtesy Usibelli

Fewer locomotives brimming with coal will make their way through the Alaska Railbelt this winter, thanks to a downturn in global coal markets that led to more than a dozen layoffs in Seward and Healy.

Last month, a handful of workers were laid off at the Seward Coal Loading Facility. The facility fills 12 to 19 ships a year bound for Chile, Korea and Japan with up to 85,000 metric tons of coal apiece. Thirteen others were let go at Healy’s Usibelli Coal Mine.

The Seward terminal, operated by Aurora Energy Services, a Usibelli subsidiary, had one ship docked as of Thursday, waiting to be filled with coal carted down from the Healy mine.

But that ship, M/V Fortune Iris, which is expected to carry 72,000 metric tons of coal to Chile, will be the last one for a while, according to Rob Brown, vice president of Southcentral operations for Usibelli. All the coal being produced in the U.S. and other parts of the world has glutted the market at a time when some energy users are turning toward increasingly abundant and cleaner natural gas. Seward isn't expected to have another ship in port until March.

“There appears to be an awful lot of supply in the market and not a lot in demand,” Brown said from his office in Palmer Tuesday.

Workers may be rehired

Typically the Seward facility sees about one coal ship a month between now and March. Last year, more than a million metric tons of coal was exported from the facility. Brown said about 874,000 metric tons will leave Seward, the state’s only coal export facility, this year.

There are 16 people employed full-time at the facility, and while some city residents speculated that as many as eight people were laid off, Brown said that number was high; he declined to offer a specific number. However, he was optimistic that the layoffs would only be temporary.

“I would like to think that when the market returns we'll bring them back,” he said. “We're hoping to hire more people back on. But we don't have any sort of definite answer when that will be at this point.”

That sort of market volatility is one of the challenges of developing a coal export market in Alaska. There is only one active coal mine in the state, the Usibelli mine in Healy. Market shifts prompted the layoffs there, according to spokeswoman Lorali Simon.

So with environmental advocates fighting passionately against proposed Mat-Su coal projects at Wishbone Hill near Sutton, at Canyon Creek near Skwentna and Chuitna near Tyonek, does it make sense for Alaska to pursue coal development? Will it be economically feasible? Depends on whom you ask.

Plenty of coal, but a tricky prospect

Alaska has some of the largest deposits of coal in the world. Bob Swenson, director of the Alaska Division of Geological and Geophysical surveys, said that about 17 percent of the world's coal is located in Alaska. Much of it is considered “ultra- low-sulfur” coal desired for its clean burning properties.

However, while geological estimates indicate trillions of short tons of coal, the amount available to mine profitably is far smaller.

Take, for example, Alaska's North Slope -- known for its lucrative gas and oil prospects.  Estimates point to 3.7 trillion short tons of hypothetical coal, but only 121 billion tons has been identified. In Southcentral Alaska, which has seen increasing interest in coal, Swenson said there's a hypothetical 1.65 trillion short tons, but only 12 billion tons of it have been identified.

But this is Alaska, vast and sprawling. Developing plentiful-but-remote resources profitably isn’t always feasible. Add in coal’s vulnerability to market shifts, and the resource becomes an especially complicated prospect.

'Highly uncertain future'

“The global coal trade economy is in flux and facing a highly uncertain future,” said Eric de Place, a senior researcher with the Sightline Institute, a Seattle-based environmental non-profit. “There are a number of good arguments to make in support of the claim there will be a strong demand for coal in east Asia and lots of strong compelling arguments for why there won’t be.”

De Place co-authored a recent report on the Asian markets -- the world leaders in energy consumption -- breaking them down by country.

Those export markets -- which include major producers like Indonesia, Russia and Australia -- have a variety of issues when it comes to bringing coal to market. However, de Place said, one thing is clear: Coal is a volatile commodity with an uncertain future in the world market.

'Booms and busts'

“Coal is not one of those things where there's a stable, long-term demand,” he said. “It's just the opposite. It's gone through tremendous booms and busts.”

China uses most of the world's coal, which provides 70 percent of the country’s electricity. But lately China, which faces huge pollution problems, has indicated an interest in moving away from coal in favor of liquefied natural gas, a much cleaner fuel source. If China decides to develop its own coal resources, world markets could struggle to find buyers.

“I just don't see how anyone can look at China's energy situation now and think its going to be the same going forward,” de Place said. “It seems like bizarre assumption.”

But Steve Borell counters that even if China reduces its coal dependency, it must still continue buying it.

Borell, former executive director of the Alaska Miners Association now working as an energy consultant, said China, with its extreme energy needs, is going to take advantage of every energy resource it can.

“Will there be downturns? Yes. Will (China) quit using coal? Not a chance,” Borell said. “They are going to develop every kind of energy source they can find.”

State demand is steady

While world markets are in flux, Alaska's own market is steady. About half of Usibelli's coal remains in Alaska, Brown said. The in-state coal goes to Alaska's six coal-fired power plants.

Borell said mining jobs are lucrative, with workers making about $100,000 a year according to a American Miners Association study. Those energy jobs are “second only to the oil patch” he added.

With 700 million tons of known reserves at the Healy mine, there are “generations” of jobs looking into the future, Simon said.

She also noted the Wishbone Hill project, which has been criticized by anti-coal advocates who contend Usibelli’s permit has expired, is in the process of being developed specifically for export.

Simon said this isn't the first time companies have pursued the Wishbone Hill project, which has stalled over the years because of economic prospects.

Jim Clough, a geologist with the state, said coal boom and bust periods are common. In the 1980s there was a major boom directly tied to high oil prices.

After prices crashed in 1986, so did coal production. But as oil prices creep back up, so does interest in coal. Clough said a spike in interest has come over the last five years, particularly in the Mat-Su.

Whether that spike will hold or fade remains to be seen. Once the total amount of coal available to be mined is broken down, it's very small, especially when you take the “global playing field” into account Swanson said.

“There's no question Alaska has all of these resources,” Swanson said. “But we are in a competitive world of development ... What (Alaska) is up against is its remoteness and the cost of doing business in an Arctic environment.”

Contact Suzanna Caldwell at suzanna(at)alaskadispatch.com

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