A last gasp for coal?Published by MAC on 2015-06-14
Source: Statements, Guardian, Bloomberg, blogs, Mining.com (2015-06-12)
With US$141 billion having been splurged out on acquisitions last year, it would be extremely foolhardy to predict the coming-of-the end of coal.
But the messages are certainly being writ larger on the wall than at any time until now:
- Total and Shell have announced they are now withdrawing all investment in the black stuff
- French bank Credit Agricole has just promised to do the same thing
- The world's biggest proposed new coal mining complex is heading inexorably to almost-certain failure
- The Norwegian government pension fund says it will dump all its investments in coal
- The USA's largest private coal company is virtually bankrupt, and future domestic supply is likely to markedly reduce
- Bank of America last month announced it would be cutting back its credit exposure to coal
- Chinese coal consumption has already significantly fallen - and will drop further in coming years
- France's top bank, BNP Paribas, refuses to budge from its financing for coal
- The UK's Standard Chartered bank is following suit
- India's coal consumption, like that of many smaller countries is on the rise
- Global demand for metallurgical - as opposed to thermal - coal isn't going away, so along as we all need steel
No, it's not a "last gasp" for the dirtiest and one of the most dangerous of fuels - by any means.
However, when we look back in two decades time, 2015 might be regarded as the critical year in which banks, and some governments, turned the tide.
Just so along as the growing militancy of communities - from South as well as North - doesn't flag in the meantime.
Pressure Builds for UK’s Standard Chartered Bank to refuse investment to Great Barrier Reef coal project
Joint press release
9 June 2015
London - Civil society groups are this week ramping up public pressure on Standard Chartered Bank to end its involvement with a controversial Australian mining project. Groups including Greenpeace, 350.org and SumOfUs have launched a joint effort calling for Standard Chartered to rule out finance for the Carmichael mega mine and any coal projects associated with port expansion on the Great Barrier Reef, with activities kicking off in Europe, Asia and Australia. The Carmichael coal mine would be one of the biggest mines in the world and by far the biggest coal mine ever built in Australia.
The mines would also require construction of one of the world's largest coal ports, on the Great Barrier Reef - the largest living coral system in the world. The Carmichael mine alone would release more emissions than New Zealand and Sweden combined.
Three weeks ago, organisations* representing almost 50 million members, sent a joint letter to Standard Chartered, calling on them to rule out involvement in the mines and port expansion. With little indication that their concerns have been heeded, NGOs are now calling upon hundreds of thousands of their supporters to petition the Bank and email its CEO.
"These projects will wreck one of the world's most precious natural icons and send the mercury soaring to dangerous levels. It behoves Standard Chartered to join the 11 major global banks who have already ruled out involvement in these disastrous projects," said Charlie Wood, Campaigns Director with 350.org Australia
"By ending its role as an active advisor on the project, Standard Chartered has the unique chance to protect the climate and the Reef by stopping one of the planet's biggest and most destructive coal projects from seeing the light of day," said Sebastian Bock, Investment Campaigner with Greenpeace UK
"The Reef is already under huge pressure from climate change. The last thing it needs is a massive new coal port and armada of ships traipsing across its waters. Our supporters are urging Standard Chartered not to be the bank that puts the final nail in the coffin of one of the world's most precious natural icons," said Katherine Tu, Campaigner with SumOfUs.
"Either Standard Chartered gets its brand out of this mess or it will continue to face a creative and unrelenting campaign led by hundreds of thousands of people around the world who want our Banks to say no to financing Reef and climate destruction," concluded Wood.
A 2015 report ranked the Abbot Point project the third biggest threat to corporate reputation of any project currently progressing globally (from 12,000 assessed). A recent court case in Queensland revealed that Standard Chartered had previously provided a loan of $680 million to the controversial Carmichael Mine and Rail Project - the first to be moving ahead in exploiting the Galilee Basin's coal reserves. While the bank disputes this, Standard Chartered has not publicly explained where that money has come from.
Notes for editors
*Signatories to the letter include: Greenpeace, Avaaz, 350.org, The Sierra Club, SumOfUs, 38 Degrees, Rainforest Action Network, BankTrack, The Australian Youth Climate Coalition, Whitsunday Residents Against Dumping and Dredging, The Mackay Conservation Council, Friends of the Earth United States, Friends of the Earth Australia and Market Forces.
A BankTrack analysis published today shows that Standard Chartered will only be able to involve itself in the financing of these projects by contravening its own guidelines.
For further inquiries and interview requests, please contact:
Kate Blagojevic, Greenpeace UK Press Officer, +44 7801 212 959, kate.blagojevic[at]greenpeace.org
Charlie Wood, 350.org Campaigns Director, +61 427-485-233, charlie[at]350.org.au
Sebastian Bock, Investment Campaigner, Greenpeace UK, +44 7951 864 675, sebastian.bock[at]greenpeace.org
BankTrack is the global tracking, campaigning and support organisation targeting the operations and investments of international commercial banks.
Indigenous Australians call on Standard Chartered not to fund coal mine project
Representatives from Wangan and Jagalingou people meet executives in London in push to persuade financiers to snub project on group’s ancestral land
12 June 2015
A group of Indigenous Australians has urged Standard Chartered to rule out funding a massive coal mine on their ancestral lands in a meeting with executives in London.
Representatives of the Wangan and Jagalingou people travelled to the bank’s headquarters on Friday, as part of a 24,000-mile (39,000 km) round-the-world trip aimed at persuading some of the world’s most powerful financial institutions to steer clear of the controversial mining project.
The Wangan and Jagalingou argue that the A$16.5bn (£8.2bn) Carmichael mine, potentially one of the largest coal mines in the world, would devastate ancestral territory in Queensland’s nature-rich Galilee basin.
Standard Chartered, one of the UK’s largest banks with a business model that largely focuses on Africa and Asia, is advising Adani, the Indian conglomerate hoping to build the mine.
Adrian Burragubba, a Wangan and Jagalingou elder, called on the bank not to fund the project. “It is going to have a terrible impact on our people,” he said. “We are the original people and we say no. All of our people are saying ‘Leave that area alone’ because it is sacred and it is vital to the balance of the whole ecosystem.
“[The land] was given to us by our ancestors who have been there for over 100,000 years looking after that land. We are not about to give it up for Adani to destroy and decimate and totally obliterate and fracture the whole environment forever.”
Burragubba is on a whistlestop tour of some of the world’s biggest financial institutions. He has already taken his message to Wall Street at meetings with Goldman Sachs and Bank of America, followed by a stop in Washington to see the US Export Import Bank, the US government agency which is one of Adani’s biggest hopes for a loan. Next week, the group goes to UBS and Credit Suisse in Zurich.
A total of 11 banks have so far distanced themselves from the project, including the Royal Bank of Scotland, HSBC and Barclays.
Murrawah Johnson, 20, who is Burragubba’s niece, took time out from revising for her university finals to meet the bankers.
“As a young woman it is my duty to protect the land and our people and our children,” she said. “I am not going to give that up for a mining company to profit from the destruction and devastation of my land, leaving me with nothing to pass on to my children and future generations.”
The Wangan and Jagalingou people, who have a native title claim to over 30,000 sq km of central Queensland, recently lodged a legal bid to overturn a decision that clears the way for the Carmichael mine.
Adani argues that it has the support of the Wangan and Jagalingou people and claims that Burragubba does not represent them. Burragubba responded: “I come from there, I don’t come from anywhere else.”
He was one of three named applicants in the Wangan and Jagalingou case at Australia’s national native title tribunal.
Standard Chartered has promised to review its involvement in the Carmichael mine, amid concerns from green campaigners that the project would threaten the Great Barrier Reef and stymie efforts to keep global warming below the widely agreed “safe limit” of 2C.
The bank maintains that it is not funding the mine, despite court testimony from a senior executive at Adani’s Australian mining subsidiary that Standard Chartered had lent it $680m (£448m) for the project.
Julien Vincent, director of the fossil-fuel divestment group Market Forces, who also attended Friday’s meeting, described the Standard Chartered review as meaningless.
While stressing that the latest talks were constructive, he said Standard Chartered had failed to explain the $680m loan. “I am confused. Either what comes out of the Queensland land court is incorrect or there has been a huge failure of process.”
He hopes Standard Chartered’s new chief executive, Bill Winters, who started on Wednesday, will look again: “It has got to be treated as an opportunity to take a fresh approach.”
A Standard Chartered spokesman declined to discuss the meeting in detail: “It was a private meeting. We listened to Adrian Burragubba’s concerns and felt it was a constructive discussion.”
The bank’s head of corporate affairs, Stephen Atkinson, led the meeting for the bank. Burragubba said they were heard respectfully, adding that he felt comfortable the bank was going to do something.
At the meeting Burragubba played the didgeridoo, a performance he repeated outside the bank’s gleaming glass and steel headquarters in the City. “When I play this instrument, it is like playing the rhythm of the land of Australia, the animals, the birds and all those things that are unique to Australia.”
Traditional owners of Carmichael 'optimistic' banks will baulk at financing
16 June 2015
The Wangan and Jagalingou (W&J) people, traditional owners of central Queensland’s Galilee Basin, today released an update on their international meetings with the world’s biggest investment banks, in which they urged them to rule out funding Adani’s $16.5 billion Carmichael coal mine.
The W&J have vowed to stop the mine because they say it threatens to permanently destroy their traditional lands and waters, and their ancestral connection to country. They also hold grave concerns for the impact of mining and burning coal on the climate and the world’s people.
“The banks - including Bank of America, Citibank, Goldman Sachs, the US Export Import Bank and Standard Chartered, UBS and Credit Suisse - recognised the authority of the W&J representatives, respectfully received us, and understood that our people have made a formal and final decision to reject a Land Use Agreement with Adani for the mine”, W&J spokesperson and senior traditional owner Adrian Burragubba said.
“The banks we met with said they would seriously consider the issue of human rights due diligence surrounding Adani’s proposal, and confirmed their commitment to the principle of free, prior and informed consent and respect for Indigenous people’s rights. They also understood the serious environmental and climate risks of investing in coal ”.
But the W&J said concerns persisted over UK-based bank Standard Chartered's involvement in the project.
“We met with Standard Chartered, which according to sworn testimony by Adani’s chief financial officer in the Queensland Land Court has already loaned Adani $A680m to develop Carmichael mine. We are deeply concerned that the bank has extended corporate finance to Adani prior to any due diligence, including the application of the Equator Principles to which the bank is signatory," Mr Burragubba said.
“These principles require that projects impacting indigenous owners have their consent. Dishing out $0.7bn to Adani for development of the mine before any scrutiny of its impacts – and given the mine does not have our consent – puts Standard Chartered in a very questionable position on the Equator Principles, as well as international law and UN Declaration on the Right of Indigenous Peoples.
Mr Burragubba said despite their concerns "we appreciated the opportunity to meet [with the bank's representatives], entered the meeting in good faith, and confirmed our opposition to the mine."
"We now welcome further dialogue with Standard Chartered”, he said adding: “We note that at Standard Chartered’s AGM in April this year chairman Sir John Peace stated that the bank would go no further with the Carmichael project until it is satisfied with the environmental aspects, and that the bank invites engagement from stakeholders. This approach was confirmed to us in our meeting, with an independent assessment based on the Equator Principles to be conducted before any further finance will be considered.”
The cracks in coal financing are getting bigger – Round-up of a fruitful bank AGM season
By Yann Louvel and Greig Aitken
3 June 2015
It must have been a bewildering scene at the Paris headquarters of Crédit Agricole last Wednesday when the news came through that rival bank BNP Paribas would be joining other French multinationals such as EDF, Engie, Renault Nissan and Air France as official sponsors of the United Nations Climate Summit (COP21) to be held in the French capital at the end of the year. We’ve no idea how such sponsorship deals come together, though COP21 will cost an estimated €170 million and the chosen corporate sponsors – already being slammed by French and international groups for comprising some of France’s worst climate culprits – are projected to pick up 20 per cent of the tab. But the announcement must have left something of a bitter taste in the mouths of Crédit Agricole executives, given that it was them that delivered the stand-out moment from the recent bank AGM season. More on that shortly.
BankTrack has been busy over the last month working with our partners in Europe – Friends of the Earth France and urgewald in Germany – and around the world to take the ‘Banks: Quit Coal!’ message direct to the shareholders and executives of various big international banks.
We were joined most notably by: Paul Corbit Brown from Keeper of the Mountains, a group that campaigns vociferously against the use of the destructive mountaintop removal (MTR) practice in the Appalachian mountains; Maha Mirza, a researcher and activist from Bangladesh who is campaigning, in tandem with groups such as BankTrack around the world, against the development of the Rampal coal power plant project that poses serious implications for local communities and the vast Sundarbans mangrove forest, a UNESCO site; and Thomas Mnguni from groundwork/Friends of the Earth South Africa, long-time campaigners against the spread of coal mining and power in already coal-intensive South Africa.
This year’s AGM season, featuring a string of highly significant coal breakthroughs, involved more victories and good news than ever – no more so than at the Crédit Agricole event on May 21 in Lille, one of the homes of the former French coal mining industry.
As one of our newly published Coal Bank Briefings describes, Crédit Agricole has a troubling legacy of global coal investments, and while its coal finance volumes are not the highest among its peers, in recent years they have been stubbornly consistent. You could say the bank has been clinging on to coal, until now that is. After 10 years of campaigning by Friends of the Earth France, the bank disclosed in Lille that it is ending its multi-million euro lending for coal mining projects and pure-play coal mining companies. This even trumped Bank of America’s surprise announcement on May 7, also after years of hard-hitting campaigning by Rainforest Action Network, that its new global coal mining policy will see it “continue to reduce our credit exposure over time to the coal mining sector globally”. The challenge for Crédit Agricole is now to not rest on its laurels and end its association with coal mining diversified companies, and coal power too. The Thabametsi coal plant being developed by Engie in South Africa and the Plomin C coal plant in Croatia (Crédit Agricole has already provided advisory services for the latter, hugely unpopular project) are just two projects coming down the line where campaigners are now pushing for the bank to say ‘Non’.
Such commitments indeed would really stick it to France’s top coal bank … sorry, the new COP21 sponsor: BNP Paribas. Its AGM the week before in Paris featured no announcements on coal, and no apparent budging from its heavy coal financing course, this despite the launch of the Paris Pledge for French banks on the same day with an advert published in Le Monde, supported by assorted French politicians, scientists, environment groups and Naomi Klein and Bill McKibben, all calling on the French banking sector to end their coal financing in the run-up to COP21.
One French bank taking the hint though – after a direct BankTrack intervention from the AGM floor – was Natixis which, in a little reported move, announced at its AGM that it is pulling out of the MTR sector. With Paul Corbit Brown in attendance in Amsterdam, further MTR momentum also materialised at Dutch bank ING’s AGM where it too pledged to dump MTR financing. Paul’s luck ran out, however, in Frankfurt where Deutsche Bank was unable to wrench itself out of MTR for good – in keeping with much of its approach to the coal industry, Germany’s top bank continues to cling on as a supporter of MTR thanks to a mealy-mouthed statement on its websitethat reads: “Deutsche Bank does not provide direct financing for and is not directly involved in Mountain Top Removal, apart from providing credit support to reclamation bonds that are issued to guarantee financing for the reconstitution of disturbed land.”
Most of the banks mentioned above have of course firmly distanced themselves from the ‘carbon bomb’ that is ticking in Australia’s Galilee Basin with the potential Adani-led coal mining complex. One major western bank, though, is still dragging its heels, despite the reputational catastrophe that lies in wait should it continue its association with the Indian mining company in Australia – Standard Chartered was duly visited by Greenpeace activists at its event, and encouraged, shall we say, to think again.
There is clearly a head of steam building in coal finance activist networks, as the AGM season’s piecemeal and landmark breakthroughs have been demonstrating. This is in step with the wider momentum being enjoyed by the fossil fuels divestment movement right now, as seen spectacularly in the last ten days with both Norway’s decision to dump all coal-focused investments from its $900 billion sovereign wealth fund and French insurer Axa announcing that it will get rid of around €500 million worth of coal investments from its portfolio.
Amidst the positivity, though, there is a need for perspective about the mountains and coal slag heaps that still have to be climbed and conquered: the Coal Report Card for 2015, published by Rainforest Action Network, the Sierra Club and BankTrack identified $141 billion dollars of coal bank finance disbursed globally in 2014. In climate terms alone, with time fast running out, this is an urgent and perilous situation. But the coal tide is most definitely turning.
The U.S.’s Biggest Coal Company Can’t Pay To Clean Up Its Own Mines
by Claire Moser & Nicole Gentile
8 June 2015
A new investigation has found that the world’s largest private-sector coal company does not have adequate funds or insurance to clean up its own mining operations, increasing the risk that taxpayers will have to pay billions of dollars to clean up toxic coal mine sites across the country.
Reuters reported last week that St. Louis-based Peabody Energy is “under scrutiny” from the federal government over concerns that the company is violating federal bonding regulations that are intended to guarantee that if a mining company goes bankrupt, it has sufficient insurance to pay to clean up its own mines. Instead of paying a third party for cleanup insurance, Peabody Energy has sought to comply with federal and state rules by promising regulators that it has sufficient financial resources on hand to pay for any cleanup costs — a practice known as self-bonding.
A review of securities filings by Reuters, however, found that at the end of 2014, Peabody’s assets were insufficient to meet federal and state self-bonding requirements. According to Reuters, “slumping coal prices and declining demand have put [coal] industry balance sheets under stress,” raising serious questions about whether Peabody and its competitors can continue to insure their own operations. In 2014, Peabody posted more than $700 million in losses.
“One of the key elements of (federal mining law) is to hold mine operators responsible and avoid taxpayers being saddled with the bill,” Greg Conrad, director of the Interstate Mining Compact Commission, an independent agency representing state coal programs, told Reuters in April.
Peabody, which operates the largest coal mine in the United States, is one of the five largest coal companies operating on the Powder River Basin in Wyoming and Montana. The basin provides more than 40 percent of the country’s coal. Coal in this region is primarily mined in strip mines, a type of surface mining which leaves an open pit with coal exposed, requiring extensive cleanup by companies once mining is completed. Companies are required to replant vegetation, restore topsoil “to match the original topography,” and rebuild the original surface ecosystem.
With their own finances deteriorating, Peabody and other coal companies are now using subsidiary companies to supply the insurance needed to meet the bonding requirements, though it is not clear why the finances of the subsidiary companies are more stable than those of the parent companies. Regulators in Colorado, Illinois, Wyoming, Indiana, and New Mexico denied Reuters’ request to review the financial records of Peabody Investment Corporation, which is the subsidiary that Peabody is using in several states to meet its bonding requirements.
Although the use of subsidiaries to self-insure a company appears to be legal under current regulations, lawyers that Reuters consulted believe that the “language may have been meant to allow smaller coal companies to lean on the strength of their well-financed parent — but never the other way around.”
A Peabody spokesperson told Reuters that the company is following all regulations and its subsidiaries are in “full compliance with the various state and federal requirements.” However, if pushed to bankruptcy, Peabody would leave $1.38 billion in cleanup liabilities to the American taxpayer, according to the investigation.
The investigation also found that if the nation’s four largest coal companies — Peabody, Alpha Natural Resources, Arch Coal Inc and Cloud Peak Energy — were to file for bankruptcy, they would leave behind $2.7 billion in cleanup costs and no insurance to shield taxpayers from this liability.
The scrutiny of Peabody comes on the heels of Alpha Natural Resources losing the right to self-insure in Wyoming just last week because it no longer had enough cash on hand to cover cleanup costs. Reuters also found that in 2014 that Arch Coal failed to meet the financial requirements to be eligible to self-insure.
In addition to the serious concerns about avoiding insurance obligations and costs, recent investigations have shown that coal companies operating on public lands in Wyoming and Montana are using their subsidiary companies to intentionally dodge payments owed to taxpayers from mining publicly owned coal.
The Department of the Interior’s Office of Surface Mining and Reclamation and Enforcement is currently examining “all aspects” of the coal companies’ insurance practices.
According to the Office of Surface Mining Reclamation and Enforcement’s Abandoned Mine Land Reclamation Program, “despite remarkable achievements, more than $4 billion worth of High Priority health and safety coal-related abandoned sites remain,” and “millions of Americans live less than a mile from abandoned coal mines.”
Did BHP & friends just blow $1.3bn on a Colombian coal project?
By Bob Burton
10 June 2015
Late last year BHP Billiton – along with Glencore and Anglo American Plc, its two joint venture partners in the Cerrejón coal mine in Colombia – completed a US$1.3 billion expansion project to supply an extra 8 million tonnes of thermal coal a year to the global market.
The Cerrejón mine expansion may have been commissioned but – since the project was given the go-ahead in August 2011 – the seaborne thermal coal market has tanked and the profitability of the existing mining project has taken a big hit. Now, despite the substantial increase in mine capacity, a Cerrejón official recently acknowledged that coal production this year may be roughly on a par with 2012 exports.
Have three of the world’s biggest coal exporters just blown US$1.3 billion on a stranded coal asset?
The coal party rages on
Back in August 2011 – when the Cerrejón Coal Company announced that it was proceeding with the ‘P40’ expansion project – the seaborne thermal coal market seemed destined to only go up. (The ‘P40’ moniker is derived from lifting the nameplate capacity of the mine from 32 million tonnes a year to 40 million tonnes, making it amongst the largest coal mines in the world. However, it is worth noting that in 2012 – well before the mine expansion had been commissioned – changes in the mine layout had seen production pushed to 34.6 million tonnes.)
Demand from China was booming, new coal plants were still being built in Europe – the bastion of concern about climate change – and easy money was available from international finance agencies tempting a long line of countries to go on a coal power station building binge.
To top it all off, prices were high: in 2011 coal from Cerrejón sold for US$101 a tonne with the mine generating revenue of over US$3.2 billion. With low production costs – in no small part due to the low labour costs – Colombian coal producers were ranked as the lowest cost coal exporters. In 2010 – for the first time in Cerrejón’s 25 year life – the company sold coal into the Asia-Pacific coal market. A year later, a fifth of the company’s exports were destined for the Asian market.
With a belief that the boom times would continue, the three companies agreed to each tip in US$437 million to expand the Cerrejón mine. The expansion would not only increase mine production but add an extra loading berth at the joint venture’s fully-owned Puerto Bolivar port.
In a media release announcing the go-ahead for the project, BHP Billiton stated that the “ramp up to expanded capacity of 40mtpa is expected by the end of the 2015 calendar year.” BHP Billiton’s then Energy Coal President, Jimmy Wilson proclaimed that the announcement “highlights our commitment to invest in growth throughout the cycle and to continue to produce at maximum volumes to take advantage of the strong demand for energy coal.”
The Cerrejón mine has a long and controversial history, including the displacement of thousands of local residents. More recently, residents and mine workers have opposed the joint venture’s plans to divert one of the area's few rivers – to enable access to more coal. One river diversion was defeated but another has now been proposed. The displacement or residents continues too. Last week, while a NGO delegation was in a meeting with Cerrejón management, workers were busy demolishing the house of 97-year old Don Isidro.
Things turn sour for Cerrejón
No sooner had work on the P40 mine expansion commenced than the global thermal coal price began what was to become a relentless fall.
Slowly, the optimism of the joint venture evaporated.
In a January 2014 media release the Cerrejón joint venture coyly cautioned that “as regards expectations in 2014” it was “working to produce and export a greater volume than in 2013, which could vary depending on the trend in international coal prices.” What the company didn’t say was that 2013 had been a below par year due to a 32-day strike, so production in 2014 would have been expected to be higher anyway.
Later that year BHP Billiton stated in its 2013-2014 annual report that the P40 project had produced its first coal in the December 2013 quarter though the new port facilities were still being commissioned. “Operational issues are expected to constrain capacity to approximately to 35 Mtpa [million tonnes per annum] … in the medium term,” the company stated.
In a low-key statement in late August 2014, Cerrejón Coal announced that the expanded port was in operation and had loaded its first shipment.
None of the three joint venture partners though were in much of a mood for celebrating. None issued announcements designed to excite shareholders and analysts by boasting about the milestone they had just passed. Instead, the P40 project was born to an embarrassed silence: the era of hyping coal expansion projects was all but over.
At the time the Cerrejón expansion was being commissioned the joint venture partners were grappling with just what to do with their portfolio of thermal coal mines. In November Glencore announced that it would shut down all its Australian coal mines for three weeks from mid-December in a bid to reduce the supply glut. Meanwhile BHP Billiton had just announced plans to offload the bulk of its thermal coal assets into South32 (Cerrejon escaped being dumped and remains with the corporate mothership). Anglo American announced plans to sell stakes in or exit its South African and Australian thermal-coal operations as part of a review of assets to increase the group’s earnings.
Cerrejón faced other headwinds too. While Colombian coal – from open cut mines – is cheap to produce, its geographical location meant that traditionally over half its production was destined for Europe with the remainder exported to the US, central and south America.
However, coal markets in both the US and Europe have been hit by profound switches in electricity demand and preferred generation technology. China’s dramatic reduction in imports has hit exporters hard and undermined the global price.
In its annual reports Glencore document the slide in price for coal from Cerrejon.
In 2011 coal from the Cerrejon mine sold for US$101 a tonne but by 2014 it had plummeted to just US$67 a tonne.
In October 2014– just as the mine expansion had been commissioned – Mining Magazine reported that the joint venture had switched focus from expanding production to cutting costs by improving the productivity of its fleet of haul trucks and excavation operations.
Things went from bad to worse. In its production review for the half year to the end of December 2014, BHP Billiton complained that “anticipated drought conditions constrained production volumes at Cerrejón given the need to manage dust emissions.”
By March 2015 Cerrejon Coal Company’s Chief Executive Officer, Roberto Junguito, told Bloomberg that Cerrejon was losing money on “a little less than 11 percent” of its current production. As production in the year to the end of 2014 was 33.7 million tonnes, the joint venture was only making money on a little over 30 million tonnes a year, less than its rated capacity before the P40 expansion.
Not surprisingly Junguito said the appetite for increasing production was negligible: “If there’s already a fraction that’s close to the profitability threshold, it’s very hard to justify additional investment … Our objective is to continue implementing initiatives to ensure that we can at least maintain our current production in a profitable way,” he said.
Junguito stated that the joint venture might export about 34 million tonnes in 2015, which is on a par with the volume produced in 2012 before the mine was expanded.
In effect BHP Billiton and its joint venture partners have spent over US$1.3 billion to expand the mine to 40 million tonnes a year capacity but are producing about the same volume as they did before the expansion.
The initial indications are that Cerrejón’s finances will be in even worse shape in 2015. In its report for the first quarter of 2015, Glencore stated that the coal from the project sold for just US$58 a tonne.
Perhaps it is a little early to classify the P40 expansion as a stranded asset but the outlook looks ominous. Chinese imports are falling fast, US coal consumption is dropping rapidly, the new Indian government is adamant that it wants to cease coal imports and European coal plant retirements are accelerating. The rapid rise in renewables and energy efficiency are increasingly posing a threat to the thermal coal’s growth prospects the industry previously took for granted.
At best BHP Billiton and their joint venture partners will be forced to defer plans to expand production until seaborne coal prices pick up. At worst, the three companies have blown over US$1.3 billion on production capacity that may never make shareholders any money.
Bob Burton is the Editor of CoalWire, a weekly bulletin on global coal industry developments. He is also a Director of the Sunrise Project, a non-profit group promoting a shift away from fossil fuels.
Total, Shell exit coal mining
2 June 2015
Six top oil producers are joining forces to make sure coal it is on its way out.
Oil giants Total SA and Royal Dutch Shell have decided to abandon coal mining and focus instead on ramping up production and trading of liquified natural gas as a cleaner alternative to cheap coal.
According to Bloomberg, Total aims to produce and trade about 32.5 million metric tons of LNG by 2020 compared with about 18.5 million tons it currently generates. The company, said CEO Patrick Pouyanne, also intends to charter a dozen LNG tankers for future trading, two of them currently under construction.
The move follows Shell CEO Ben Van Beurden’s comments at the Anglo-Dutch group’s annual meeting in The Hague last month, where he said the firm had changed from an “oil-and-gas company” to a “gas-and-oil" one.
Pouyanne and Van Beurden are joining BP boss Bob Dudley, Exxon chief Rex Tillerson, Statoil head Eldar Saetre and Chevron boss John Watson at the World Gas Conference, in Paris, this week to discuss ways to promote gas as the main fuel for a sustainable world.
In a joint statement these companies made a joint call for world leaders to introduce effective carbon pricing systems.
Speaking at the opening day of the event Tuesday, van Beurden reinforced the idea saying that a failure to properly price carbon dioxide emissions was allowing coal to maintain or grow its share in the energy mix alongside renewables, at the expense of gas.
Total Plans to Boost Gas Shipments, Exit Coal Mining
by Tara Patel
1 June 2015
Total SA plans to raise production and trading of liquified natural gas by 2020 and pull out of coal mining as part of a new policy on fossil fuels and climate change.
“Total is gas and gas is good,” Chief Executive Officer Patrick Pouyanne said Monday in Paris. The company plans to produce and trade about 32.5 million metric tons of LNG at the turn of the decade compared with about 18.5 million tons currently. Total also intends to charter a dozen LNG tankers for future trading, two of them currently under construction.
The targets could be achieved by completing projects in Australia, Russia and elsewhere while trading shale gas exports from the U.S., where prices are expected to stay relatively low for the coming years, Pouyanne said at a news conference. Deals to boost supplies are possible though not “essential.”
Pouyanne made his remarks ahead of the World Gas Conference this week when promoters are expected to highlight the energy as the cleanest burning fossil-fuel compared with coal and oil. Gas production is expected to grow almost everywhere but Europe by 2040, the International Energy Agency said in November. LNG exports will almost double, taking market share from pipelines, according to the Paris-based adviser to 29 developed countries.
“There will be a profound change in the world energy mix,” Pouyanne said Monday. Total will produce more natural gas than crude in the future compared with a 50-50 ratio this year. Total’s gas projects under development include Yamal LNG in the Russian Arctic and in Papua New Guinea.
“I still have a coal business and I have to get out of it,” he said. “I can’t say that coal is the enemy of gas and then continue to produce coal like some of my colleagues. I will get out of coal.”
Total marketed 8.5 million metric tons of coal on the international market last year, at least 70 percent of it from South Africa, according to its latest annual report. Almost three-quarters of the coal was sold in Asia, the rest to Europe.
Total last year agreed to sell its Total Coal South Africa unit, which produced 3.3 million tons in 2014, to Exxaro Resources Ltd. and is waiting for regulators in that country to approve the deal, according to Total’s head of gas, Laurent Vivier.
Coal facing worst year yet in 2015
31 May 2015
2015 is shaping up to be a fateful year for the coal industry.
After coal prices tumbled from their highs in 2011, the industry hit a rough patch. Years of buildup in mining capacity hit the markets at the same time, sending prices crashing. By the beginning of 2014, things were looking pretty grim. But optimists hoped it would be merely temporary; a supply glut that would ease once demand picked up.
However, demand has not been nearly as strong as expected. The US has been moving away from coal for a few years now, with cheap natural gas, more renewables, and energy efficiency.
China’s economic growth slowed a bit, but its efforts at reining air pollution have gone a long way at reducing coal demand. In fact, China may have already hit a peak in its coal consumption, which would be a shocking development considering the country was aiming to hit its peak no later than 2020.
With the world’s largest coal consumers trying to rid themselves of the dirty fuel, it appears that there is little room to maneuver for coal producers. The industry is in structural decline, and 2015 may be the year in which it all starts to fall apart.
China continues to ratchet down its coal use, achieving an 8 percent reduction in consumption between January and April of this year, over the same period in 2014.
In the US, 2015 will also be a dark one for coal. An estimated 13 gigawatts of coal-fired power plants are expected to be shuttered by December, as strict pollution controls kick in. The Mercury Air Toxic Standards (MATS) required plants to upgrade pollution controls.
For some, the costs of upgrading don’t make sense, so the only alternative is to shut down. Environmental groups like the Sierra Club have fast-tracked this dynamic, assaulting coal plant owners with legal challenges, a story nicely laid out in a Politico article by Michael Grunwald.
In many places across the US, renewable energy is now a cheaper option than coal. The pace of retirement will only accelerate in the coming years – pending regulations on carbon emissions would slash the number of coal plants by one-third by 2025.
To be sure, a lot of those plants are older, smaller, and are not run at full capacity, but they make up a huge loss for the coal industry. Fewer power plants burning coal means less demand for coal from miners.
But it gets worse. Not only is coal starting to lose the economic argument, but it is losing the moral one as well. In early May the Church of England announced that it would divest its assets from coal. And on May 27, the divestment campaign claimed an even larger victory in Norway.
Representing the world’s largest sovereign wealth fund – over $890 billion in assets – the Norwegian government came to an agreement to divest its holdings from coal companies. Having already announced that it would pull out from pure-play coal operators, the latest agreement would go farther. The agreement would block investment in any company that operates in multiple sectors, but receives more than 30 percent of its revenues from coal or in utilities that generate more than 30 percent of their electricity from coal.
With much of the world quickly shifting away from coal, there are few avenues for coal mining companies to turn to. The US market was already shrinking, but with customers in Asia no longer hungry for coal, the clock is beginning to run out. Bankruptcies are starting to hit the US coal industry. Patriot Coal just filed for bankruptcy for the second time. Arch Coal, which accounts for 13 percent of the US coal supply, is reportedly in restructuring talks over its debt. And due to its share price falling well below $1 per share, Arch received notice from the New York Stock Exchange that it may be delisted.
More announcements like that one are almost certainly in the works. The coal industry has had a painful few years, but 2015 could be its worst yet.
Tribal members, ranchers tell regulators to spike Tongue River railroad project
By Derek Brouwer
9 June 2015
About 25 people gathered Wednesday to hear and talk about why they don’t want federal regulators to approve the Tongue River Railroad.
Those who would be neighbors of what could become the country’s largest coal mine near Ashland gave an earful Monday to federal regulators who are reviewing plans for the railroad tied to it.
Ranchers and Northern Cheyenne tribal members spoke out against the proposed Tongue River Railroad during the first of five days of public hearings, saying the line would trample their land and questioning the environmental analysis completed by the U.S. Surface Transportation Board.
No one spoke in support of the project during the evening hearing in Ashland.
“We want the quiet, we want the peace, we want the clean air, we want the clean water,” said Northern Cheyenne member Kitte Coffin. “And we’re not going to give it up without a fight.”
The 42-mile rail line would carry coal from the proposed Otter Creek mine to U.S. markets and to West Coast ports for shipping overseas. Arch Coal bought rights to the mine and would co-own the railroad with BNSF Railway Co., and Burlington Northern Sante Fe and candy industry billionaire Forrest Mars Jr.
“The people here are concerned that we can’t take on a big corporation because we don’t have the resources,” said Mildred Red Cherries.
A lengthy draft environmental impact statement was released earlier this year, which includes 11 alternative routes for the railroad.
Ranchers whose land could be taken or cut up by the line said the analysis overlooked important factors such as fire management and would limit access to their property.
Some, including famed cowboy poet Wallace McRae, accused regulators of serving the interests of the companies, not the people. As many as nine miles of his land sits on proposed portions of the railroad.
“People that are employed by two billionaires that are promoting this railroad don’t feel any need to be here,” McRae said, referring to Mars and BNSF owner Warren Buffett. “But they are being represented, even though they aren’t here. They are being represented by people from Washington, D.C., who have no concept whatsoever of Northern Cheyenne culture, of Amish culture, of the code of the west.”
BNSF spokesman Matt Jones spoke briefly, saying the company would be attending each of the public comment meetings this week.
Wearing a red T-shirt with “Save Otter Creek” printed in giant letters from her neck to her navel, Vanessa Braided Hair decried the environmental impacts of fossil fuels and recounted the history of exploitation of Indian Country.
“Why would we trust Arch Coal? Why would we trust BNSF? Why would we trust any of you?” she said.
When a moderator flipped a card to signal her time to speak was almost up, Braided Hair said, “I don’t care if I have 30 seconds left. We’re on my reservation, and you’re going to listen to me.”
Additional hearing will be held in Miles City on Tuesday, Colstrip on Wednesday, Lame Deer on Thursday and Forsyth on Friday.
The draft environmental impact statement, along with details for attending public hearings or submitting written comments, can be viewed at tonguerivereis.com.
Jindal coal mining affected villagers revolt!
20 May 2015
Last Tuesday, 12 May, hundreds of Jindal coal mining affected communities, held a spontaneous protest and paralysed the activities of the company. The protestors came from the 500 families of Cassoca villages, Luane, Cassica, Dzinda and Gulu, who are directly affected by the coal mine operated by Indian company JINDAL. JA! staff Mafigo Borges based in Tete was present for the protests, and recorded the short video available on JA facebook page. The video reveals how fed up the communities are with the way they are being treated.
The communities were protesting against the violation of their rights and against the failure of the promises made when the arrival of the mining company in the region. According to the communities, resettlement promises of agricultural land, employment and better living conditions, are today completely lacking, a situation that is compounded by the fact that these communities continue to live within the mine concession area subject to inhumane living conditions and are fully exposed to all impacts stemming from the operation of an open pit coal mine. These families are forced to breathe air polluted by coal clouds, consume contaminated water and they have less and less land to farm, their only source of livelihood.
Tired of being ignored, the women, men and children of these families rose up against the company, which has taken away land, has not provided any alternative housing or livelihood, has denied the right to a clean and healthy environment which is enshrined by law. There are constant reports of outbreaks of respiratory diseases and other health complications, said to affect both people and animals.
Until now, the company has been unwilling to provide any clarification. The government of Mozambique has often defended the company’s interests to the detriment of the interests and needs of the people. Some select local leaders, being the only ones to benefit from employment in the company, then control and repress the people, thus causing humiliation, abuse and marginalization for these families already impoverished. The communities have no free access to and contact with civil society and human rights institutions. It is as if, by living within the mining concession, communities have also been privately owned by the company.
This was neither the first nor the second time that the people have revolted. Since the beginning of the JINDAL operations, these demonstrations have been occurring regularly. In fact, the first one had shamefully taken place just days before then President Armando Guebuza personally inaugurated the immoral and illegal Jindal mine. This was just the formal inauguration, as we know that the mine was already operating before the Environmental Impact Study was approved.
But on 12 May, women with stones in their hands and children in their arms, men and kids with sticks, drums and other instruments, burned tyres on the roads and marched and chanted in the local language. Their songs and chants mirrored their dissatisfaction and helplessness:
“Even in our own land, JINDAL is making us suffer”
“Suca JINDAL Suca!” (curses)
As usual, in order to stop the demonstration, JINDAL called the Rapid Intervention Unit and the Civil Protection Police, which protects the safety of the private mining company. These so-called forces of public protection, fired several live ammunition into the air in an attempt to disperse the protesters, who refused to accept the order. The community remained defiant and fearless until the Marara district administrator arrived, and took responsibility to discuss their concerns with the company.
These families want nothing more than enjoy their right to a dignified life. Something that is constantly denied them in the name of development.