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Feds seen as more lenient than Oregon and Washington on coal exports

The Obama administration has signaled that it might be more willing than Oregon and Washington to allow coal exports from the states, giving the energy industry hope after Oregon nixed a crucial permit needed to ship the fuel abroad. 

The Obama administration has signaled that it might be more willing than Oregon and Washington to allow coal exports from the states, giving the energy industry hope after Oregon nixed a crucial permit needed to ship the fuel abroad.

After the Oregon state decision to deny a permit needed to build a dock for transporting coal, the U.S. Army Corps of Engineers told the Washington Examiner that it would continue its evaluation of Ambre Energy's Morrow Pacific project, though it could still stop the review at a later date. The Army Corps is using a narrower scope than the states to evaluate the environmental effects of the projects.

Green-lighting Morrow Pacific, which aims to export 8.8 million tons of coal, could set up a legal fight down the road — Ambre, an Australian company, needs both state and federal approval to proceed with the project.

Federal approval is certainly a possibility. The Obama administration has taken actions in recent months that indicate it is more lenient on coal exports, even as it pushes ahead with regulations that would make it more difficult to burn the fuel domestically.

Given that three Pacific Northwest proposals were already pulled due to local opposition, export advocates are willing to give anything a shot.

"Decisions like this simply confirm the impression that it's pointless to build environmental considerations into your project and therefore it's pointless to try to do business, create jobs and deepen the tax base in this state," Luke Popovich, a spokesman with the National Mining Association, said of the Oregon decision.

The three projects in Oregon and Washington would amount to an additional 101 million tons of export capacity, and the industry sees it as a way to make up for declines in U.S. consumption. Exports hit 117.6 million tons in 2013, nearly doubling 2008 levels, according to the U.S. Energy Information Administration. The coal industry is also calling the projects jobs boosters — 11,885 direct and indirect, according to the Alliance for Northwest Jobs & Exports, which backs the projects.

Oregon and Washington are using a broad scope to evaluate the projects' environmental effects. They are accounting for factors like coal dust pollution from trains carrying the fuel from the Powder River Basin in Montana and Wyoming and the coal's greenhouse gas emissions were it to be exported and burned in Asia, the likely destination.

That's not the tack the Army Corps is taking, David Gesl, the Army Corps' Northwestern division regulatory program manager, told the Examiner.

"It's a matter of what our responsibility and control is. We don't have responsibility and control over those particular activities," he said.

The Army Corps has applied a more narrow review to the three remaining proposed export terminals in the Pacific Northwest, focusing instead on the specific site of the project rather than a comprehensive regional review.

That stance has earned plaudits from industry officials and congressional Republicans.

"This is something we were supportive of, and we have generally been supportive of their process," said Charlotte Baker, a majority spokeswoman with the House Energy and Commerce Committee.

Gesl said that opponents' insistence they can block the projects based on Clean Water Act violations by shippers for coal dust that ends up in waterways is wrongheaded, as he said that's not something the Army Corps can assess.

Michael O'Leary, a spokesman with the National Wildlife Federation, said that's a matter that will be left to the courts.

"I get it. They have to make a decision here about what they will and won't review, and whatever they do decide, the other side is going to sue them for it and try to get their way in court. In this case, the Corps has decided to get sued by public health and clean habitat advocates," he said.

Environmental advocates believe they have a willing ear in the courts. A federal judge last week ordered Ambre Energy to release more than 300 pages of documents about why the Army Corps chose to pursue a less stringent environmental review.

Still, other developments have given export supporters hope that they might win federal approval.

White House Council on Environmental Quality Acting Chairman Mike Boots calmed fears among industry and Capitol Hill Republicans when he said in court documents that his council didn't intend to change national environmental review standards to clarify climate change evaluations agencies should take before making decisions.

Boots said current practice already requires agencies to consider the climate impact of its decisions. Some Republicans and industry groups had worried the council might implement a 2010 guidance that could have the effect of new standards, potentially resulting in restricting exports.

Without export potential from the West Coast, the Powder River Basin's low-sulfur coal could remain locked in the U.S. Though it is the largest coal reserve in the country, just 1.6 percent of it is shipped abroad, according to the EIA.

Whether knowingly or not, federal government policies have undervalued that coal, according to a June 2013 report by the Interior Department's internal watchdog. That's because of the 107 coal lease-sales held since 1990, 96 drew only one bidder, in effect allowing those companies to dictate prices. Various state agencies also didn't factor in the export potential for the coal, further undervaluing the coal.

That has come at a cost to taxpayers and has earned criticism from lawmakers on both sides of the aisle. The report noted the federal Bureau of Land Management had missed out on $60 million from potentially undervalued lease modifications.

But all that has made U.S. coal from the Powder River Basin more attractive to potential buyers in Asia.

"Here's what we're not winning on — we're not winning on stopping coal mining in the Powder River Basin," O'Leary said. "We're not winning on the demand side, either. We can't lobby with the nations of Korea and China."

But Tommy Beaudreau, then the acting assistant secretary of land and minerals management with Interior, downplayed the inspector general report's findings on exports, saying it made it appear that the U.S. exported a considerable amount from the Powder River Basin. Still, he said the BLM would consider making changes to how it valued the coal.

"The BLM intends to monitor changes in the export market in the future years that may result from changes in the North American market for natural gas," he said in a response to the report.