Tuesday, February 2, 2016

Bad News, for Coal & Crude

Federal Coal Sales Moratorium Shakes Industry Stronghold

GILLETTE, Wyo. — Feb 1, 2016, 9:43 AM ET  
Signs of economic troubles first appeared a few years ago, when drilling for natural gas trapped in water-saturated coal seams went bust. Thousands of wells were idled as companies shifted focus to fracking for gas in Texas and the Northeast.Then last year, mining company Alpha Natural Resources filed for Chapter 11 bankruptcy. Industry giant Arch Coal Inc. followed in early January. Each company has two major mines in Wyoming. Arch's Black Thunder mine ranks among the largest in the world.
Less than a week after the Arch bankruptcy came the Obama administration moratorium on new coal lease sales.
"All these rules and regulations just make it harder to conduct business," said Susan Doop, owner of a local alternative therapy business. "Everything he (Obama) does to make it more costly to do business makes it harder. People are losing their jobs."
Doop and her husband, Marlin, who owns an auto body shop, already are seeing the changes. He just spent three weeks focused exclusively on repairing a Ford Super Duty pickup truck from a coal mine that had a crushed cab and bent frame.
A $15,000 check he got from Arch the same week the company filed for bankruptcy bounced. He said he can't afford health insurance and was going to use the money to pay for another round of treatments for advanced liver and colon cancer.

Big executive bonuses; shafting workers and the environment; and more. Via Sightline

In case you somehow missed the news, Arch Coal, North America’s second largest coal company, filed for bankruptcy a few weeks back. Arch’s management hopes to use bankruptcy protection to shed $4.5 billion in debt—money that Arch borrowed from investors near the peak of the coal market, but that the company can’t pay back now that coal prices have tumbled.
To anyone paying attention, Arch’s insolvency came as no surprise. The company hadmissed a bond interest payment in mid-December after unsuccessful negotiations with creditors. Besides, coal industry bankruptcies are a dime a dozen at this point: Alpha Natural Resources, the #4 coal company in the US, declared bankruptcy in August; Walter Energy declared itself insolvent back in July; and Patriot Coal filed for Chapter 11 protection in October, its second filing since 2012. All told, nearly 50 US coal mining companies have filed for bankruptcy protection since the beginning of 2012.
Arch’s bankruptcy obviously highlights the dire state of the industry’s finances. But it also raises important questions about public policy, fiscal responsibility, and the fate of the coal industry itself. 

Here are the top five stories that I’m going to keep my eye on as the Arch Coal bankruptcy unfolds. Read the article here 

As Coal topples, Crude also falters

Photo by Mark Ralston/AFP/Getty Images

The Syncrude oil sands extraction facility near the town of Fort McMurray in northern Alberta.

Once Unstoppable, Tar Sands
Now Battered from All Sides

Canada’s tar sands industry is in crisis as oil prices plummet, pipeline projects are killed, and new governments in Alberta and Ottawa vow less reliance on this highly polluting energy source. Is this the beginning of the end for the tar sands juggernaut?
by Ed Struzik via Environment360
In the summer of 2014, when oil was selling for $114 per barrel, Alberta’s tar sands industry was still confidently standing by earlier predictions that it would nearly triple production by 2035. Companies such as Suncor, Statoil, Syncrude, Royal Dutch Shell, and Imperial Oil Ltd. were investing hundreds of billions of dollars in new projects to mine the thick, highly polluting bitumen.
Eyeing this oil boom, Canadian Prime Minister Stephen Harper said he was certain that the Keystone XL pipeline — “a no-brainer” in his words — would be built, with or without President Barack Obama’s approval. Keystone, which would carry tar sands crude from Alberta to refineries along the Gulf of Mexico, was critical if bitumen from new tar sands projects was going to find a way to market.
What a difference 18 months makes. The price of oil today has plummeted to around $30 a barrel, well below the break-even point for tar sands producers, and the value of the Canadian dollar has fallen sharply. President Obama killed the Keystone XL project in November, and staunch opposition has so far halted efforts to build pipelines that would carry tar sands crude to Canada’s Pacific and Atlantic coasts.
The industry is suddenly weathering a perfect storm that analysts say has significantly altered its prospects.

Could Low Oil Prices Help Usher in a New Era?
Mark Trahant 1/27/16 Via Indian Country Today

Here is the problem: If the pipeline is built and the train system is upgraded there will be too much transportation capacity at current oil prices. So the railroad companies will have to seek out new customers. Or, as Sightline said, while “the projects are largely designed to transport and handle light shale oil from the Bakken oil formation in North Dakota … the infrastructure could also be used to export heavy Canadian oil.”
The idea of how much capacity — especially given the price of oil — is the wild card in any transportation scheme. Many projects were designed when oil prices were higher than $75 a barrel instead of around $30. Oil is a commodity and traded on international markets. That means it’s subject to the up and down of supply and demand. Currently there is far more oil supply than demand. A report by the International Energy Agency says last year “saw one of the highest volume increases in global oil demand this century, we have long believed that this could not be repeated in 2016. But, with crude oil prices plunging below $30/bbl, must we expect some boost to the rate of growth in 2016? Unfortunately, the New Year has been awash with pessimism about economic growth.”
And that means less economic growth — and less oil consumption. The IEA says that when Iran is fully online selling oil, and if other oil exporting countries maintain current production levels, the demand could exceed 1.5 million barrels a day and “unless something changes, the oil market could drown in over-supply.” So yes prices could go lower.

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