At the recent Asia Montana Energy Summit, organized by the Mansfield Center at the University of Montana, two points of emphasis stood out. First, economies in Asia are rapidly expanding, but rely on imported energy to supply growing demand.
And second, energy-rich and strategically located Montana stands to benefit greatly by supplying energy to meet a portion of this demand. But in order to realize that opportunity, the United States needs to address transportation constraints and political opposition that have hampered growth in energy exports.
Demand for coal in Asia has increased by 400 percent in the last two decades and the demand growth curve is only accelerating. Asian imports of coal are projected by the International Energy Agency to increase an additional 65 percent by 2040. Simply put, coal has been the fastest-growing source of energy in the world of late, and is projected to continue to grow the fastest in the near term.
Of course, Asian countries are also rapidly expanding renewable capacities as quickly as possible. But without some unforeseen technological breakthrough, renewables can only meet a fraction of the increase in demand that is forecast over the next few decades.
As home to the largest coal reserves in the United States, Montana could benefit greatly from supplying a portion of the coal that the growing Asian market demands. And as the closest coal-producing state to the Pacific Coast, Montana enjoys a competitive advantage in marginally lower transportation costs.
Montana’s abundance of coal is only part of the appeal. The low-ash, low-sulfur PRB coal produced in Montana is in highest demand by Asian countries looking for a cleaner-burning product. South Korea in particular has a growing demand for Montana coal because it’s cleaner and because it helps solidify the strategic bond between our two countries.
The demand is there in Asia, and the supply exists in Montana. But the ability for Montana to realize the tremendous benefits of increased coal production are uncertain due to transportation constraints and political obstruction.
The primary transportation hurdle is the construction of the West Coast export terminals. New export capacity, such as the proposed Gateway Pacific Terminal at Cherry Point, Wash., is necessary to get Montana coal to Asia and to other consumers around the globe.
If the United States prevents the construction of a new export terminal on the Pacific Coast, such as they did with the Keystone XL pipeline, the result will be that Asian countries will simply find other suppliers to meet their growing demand. Countries like Indonesia, Russia and Australia will cash in on the opportunity passed over.
Political efforts to stymie coal production could also jeopardize Montana coal exports to the Asian market. In addition to political leaders attempting to block export terminals at the state level, federal regulatory barriers are also being thrown up. For instance, the Office of Natural Resource Revenue is proposing a new assessment scheme for coal bound for export markets. The ONRR rule would arbitrarily increase the royalty payments due on that coal to the point where it would no longer be profitable to mine that coal.
Montana has an economic opportunity that most states, and frankly most nations, would kill for. To let this opportunity lay dormant by erecting regulatory hurdles and letting other states dictate what you can and can’t do with your coal reserves is a detriment not only to Montanans, but to people around the world who are looking to Montana to meet their energy needs and to be a leader in energy development moving forward.