Obama Boosts Coal Exports, Prompting Allies’ Complaints
The U.S. government’s export lender backed $90 million in loans to boost overseas sale of coal, drawing criticism from environmental groups that say the Obama administration is ignoring coal’s risks to air and health.
XCoal Energy & Resources LLC, a Pennsylvania exporting company, received final approval from the U.S. Export-Import Bank yesterday for a working capital guarantee to help it boost shipments of coal to Japan, South Korea and China.
It’s the first direct transaction for coal exports in at least five years, and has taken on symbolic importance for the Sierra Club and other organizations. They say the administration of President Barack Obama -- which also helped finance two overseas coal-fired power plants in its most recent fiscal year -- is running afoul of its pledge to deal with the climate- change impact of Ex-Im financing.
Coal has “a serious health and environmental impact that their policy should cover,” Doug Norlen, policy director for Pacific Environment, a San Francisco-based watchdog of government-financing bodies. “If it doesn’t, that’s a serious deficiency.”
The Ex-Im loan has larger political overtones, as lobbyists for coal producers and other groups have targeted Obama with negative campaign commercials, saying regulations from the Environmental Protection Agency threaten to stall the industry. Republican opponent Mitt Romney traveled to Craig, Colorado, on May 29 for an event to highlight this theme. A nearby Peabody Energy Corp. (BTU) mine halted production so workers could attend the Romney rally, CNN reported.
With demand for coal slumping in the U.S. because of falling natural-gas prices, exports are rising and with it environmental fights. Exports more than doubled from 2009 to 2011, totaling $15.9 billion last year. Exports are on track to top that total again this year, according to Commerce Department statistics.
Meanwhile, environmental groups are trying to block plans to build a coal-exporting hub in the Pacific Northwest, as they worry the U.S. will just be exporting its carbon dioxide emissions to fast-growing developing nations such as China.
Burning coal releases pollutants such as mercury and sulfur dioxide, and also emits more than twice the carbon dioxide --the primary cause of climate change -- as natural gas, according to the EPA. Mining coal is often dangerous for miners and destructive to nearby waterways.
XCoal, based in Latrobe, Pennsylvania, is a coal trader, buying minerals extracted from Pennsylvania and West Virginia and exporting it from East Coast ports such as Baltimore, according to its website. It had a working-capital guarantee from the Export-Import Bank, and yesterday’s approval from the lender quadrupled the size of that support. The financing is offered as a guarantee to a commercial bank.
The coal will be used to fuel overseas steel plants.
Ernie Thrasher, XCoal’s chief executive officer, is traveling this week and couldn’t be reached for comment. Other company officials didn’t respond to messages seeking comment on the credit guarantee.
As long as XCoal complies with appropriate U.S. environmental laws, it can receive Ex-Im support, said James Mahoney, the lender’s vice president for engineering and environment. Because XCoal isn’t sending coal to a specific overseas project, the lender didn’t conduct its own environmental review before agreeing to provide this guarantee, he said.
“We’re open in all industry sectors,” Mahoney said in an interview.
Mahoney said he wasn’t aware of similar Ex-Im support for other coal exporters in the past. None of the exports detailed in the bank’s annual reports over the past five years is identified as shipping coal overseas.
The Washington-based lender has increased support for overseas projects, such as coal-fired power generation. It’s provided $1.7 billion for five new fossil-fuel power plants in the 12 months through September 2011, resulting in a record 63.95 million metric tons of carbon-dioxide emissions, according to its 2011 annual report. Two coal plants -- in South Africa and India -- accounted for 88 percent of the total.
The bank, which often announces loan agreements with overseas buyers, didn’t issue a public statement on the XCoal support while posting a press release on a $48 million loan for green-technology exports to Brazil.
With the latest financing, Obama’s administration is running afoul of the Sierra Club, which already endorsed his re- election campaign.
“The Ex-Im Bank has once again demonstrated its commitment to the world’s most heavily polluting fuel: coal,” Justin Guay, Washington representative at the Sierra Club’s International Climate Program, said in a statement. This will “prop up a dirty and outdated industry.”
To contact the reporters on this story: Mark Drajem in Washington at firstname.lastname@example.org;
To contact the editor responsible for this story: Jon Morgan at email@example.com