Alaska News

Faced with tough global market, Alaska coal prospects bleak

A sagging global coal market is dragging down prospects for two proposed mines in Southcentral Alaska.

Both the Chuitna and Wishbone Hill coal projects are intended to profit off coal consumption in Asia, but formerly promising markets in China, Japan and South Korea have slumped amid stricter pollution controls, cheaper natural gas, a slowdown in manufacturing and an oversupply of coal. In Asia, benchmark prices, general guidelines for the costs of global commodities, have fallen every year since 2011.

Last week's announcement by Usibelli, Alaska's only working coal mine, to idle its export facility in Seward highlighted the weakness of the coal market.

"There are not favorable market conditions now that would allow Usibelli to further develop the Wishbone Hill project," said Usibelli spokeswoman Lorali Simon.

But the company is not giving up on Wishbone Hill altogether. It installed water monitoring wells this summer to fulfill permitting requirements by the state Department of Natural Resources, Simon said.

The bituminous coal deposits at Wishbone Hill are located near Palmer, not far from the northern bank of the Matanuska River. A rough private road at mile 55.5 of the Glenn Highway leads to the mining area.

Usibelli, which purchased Wishbone Hill in 1997 from Alaska Native corporation CIRI, intends to hold on to the project for a long time, said Rob Brown, vice president of business development.

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"We don't have any interest in selling it off to anybody. At this point, we've put a lot of time, effort and expense into developing it," he said. "We want to develop it ourselves as soon as we possibly can."

Anchorage-based environmental law firm Trustees for Alaska brought a lawsuit earlier this year on behalf of several parties against the federal Office of Surface Mining for allowing the mine to operate under what the lawsuit alleges is an expired permit. Trustees for Alaska argued that more residential neighborhoods exist today in close proximity to the mine than did when the original permit was issued in the early 1990s.

A second mine, Chuitna, with sub-bituminous coal deposits that would directly compete for market share in Asia with Usibelli's mine in Healy, is subject to the same depressed market.

Chuitna is located about 45 miles west of Anchorage on the opposite side of Cook Inlet near the small communities of Tyonek and Beluga.The mine is controversial because plans call for the destruction of Middle Creek, a salmon stream that connects with the Chuitna River. Mine supporters and opponents are gearing up for the Oct. 6 deadline for the state Department of Natural Resources to decide whether to reserve stream flows for fish habitat. An affirmative decision could prevent the mine from being developed.

Several calls made last week and this week to the Anchorage offices of Chuitna's owner, Delaware-based and Texan-owned PacRim coal, were not returned. Critics, however, pointed out the barriers to making the project economically feasible.

"If Usibelli can't maintain market share, there's no way a new market entrant is going to get traction for the foreseeable future," said Bob Shavelson, executive director of environmental group Cook Inletkeeper.

The federal Energy Information Administration, which issues short- and long-term forecasts for a variety of energy types, plans to revise downward its outlook for the commodity in an upcoming report on the 25-year outlook for international energy.

"It's a real tough environment right now for the coal industry, and the U.S. coal industry is really struggling," said Mike Mellish, a coal analyst at the agency in Washington, D.C. "It's our sense that there isn't going to be as much growth in coal usage worldwide as we had projected in our previous report in 2013."

The global outlook for renewable energy is much more robust, Mellish said. In addition, coal production and exports from Australia and Indonesia are up, and these regional suppliers have an advantage over Alaska in terms of transportation distances to the major consuming markets in East Asia. The recent slowdown in China's heavily coal-dependent economy, which led to plunges in stock markets worldwide, and President Xi Jinping's announcement that China will adopt a national cap-and-trade program to reduce harmful fossil fuel emissions is also bad news for Alaska's coal prospects.

But energy markets are notoriously volatile and unforeseen circumstances could revive the market.

"It's a shifting market," Mellish said. "It's a hard market to keep tabs on."

Jeannette Lee Falsey

Jeannette Lee Falsey is a former reporter for Alaska Dispatch News. She left the ADN in 2017.

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