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The Dirty Dance: Export Plan Puts North Idaho in the Middle of a New Coal Rush

Plans to bring coal trains across the Northwest raise big questions

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There's a stretch of road on Highway 200, as it nears the Idaho-Montana line in rural North Idaho, where the biggest traffic hazard is tourists parked on the side of the shoulder snapping pictures.

It's there that the narrow ribbon of asphalt climbs from the muddy flats of the Pack River Delta and winds its way up onto the toes of the Cabinet Mountains. From that vantage point the huge southern sweep of Lake Pend Oreille can be seen, and the view can be just as distracting as the idling roadside motorists.

Like most scenic vistas, almost everybody's pictures look the same, and it's a safe bet that any panoramic shot taken down Pend Oreille's northeastern shoreline will not only include water, trees and islands but a freight train chugging down the tracks that run along the water's edge.

Trains are so much a part of the scenery that they go unnoticed. While Highway 200 sees a steady stream of cars and trucks traveling to and from nearby Montana, it runs parallel with one of the Northwest's busiest rail lines. And through a confluence of much larger global forces--including Warren Buffett, economic growth in Asia and coal mined in Montana and Wyoming--those vacation snapshots could come to include a whole lot more trains.

Not everybody thinks the result will be too picturesque.

The Dirty Dance

Kally Thurman is an artist. She also makes a mean lentil soup and some of the best ham sandwiches you'll ever eat. Her combination art gallery/cafe (Outskirts/Hope Marketplace) is something of a gathering place in the tiny sister hamlets of Hope and East Hope. It's there that locals sit around funky tables and share news and gossip, warmed by the wood stove and surrounded by paintings.

Thurman's business, which was a grocery store and filling station as far back as 1919, sits on the old highway and boasts a grandiose view of the lake. That view was maybe more grandiose before the new highway went in, but the tracks that run just across the street from her front door have always been there. Sit at the Hope Marketplace for long enough and you'll have a front row seat to the never-ending shuttle of commodities between the Washington coast and the American interior.

"I don't mind the trains," Thurman said. "I find them mystical, especially in the morning and the fog."

Ask how she would feel about a dramatic upswing in cars loaded with coal mined in Montana and Wyoming, and the mystical twinkle in her eye fades.

"That just makes me happy," she said with evident sarcasm and a sigh. "But what are we going to do about it? It's the dirty dance we gotta do. If we're going to be a capitalism-based economy, that's the dirty dance. I'd rather dirty dance with Warren Buffett than Dick Cheney."

Buffett would be pleased to hear that. True to his world-moving sense of opportunity, coal is a dirty dance that he's more than happy to get down with--especially considering his main partners, China and India.

While climate-change concerns have prompted a national cold shoulder toward king coal in the United States, the ravenous industrial engines of the Pacific Rim and India have lost none of their appetite for combustible fossil fuels.

Despite the crippling international economic downturn, the U.S. Energy Information Administration noted that coal exports from the United States to Asia grew 176 percent from 2009 to 2010--17.9 million short tons worth. The stream of coal flowing from American mines to Asian industry is so great that if left unchecked, world coal consumption will actually increase by 2030, and 90 percent of that consumption will be attributed to China, which burned 125.8 million tons in 2009 alone.

With a shaky domestic market, mining giants like Buffett's Peabody Energy are looking to cash in, and the new boom is centered on the Powder River Basin, which straddles the Montana-Wyoming border southeast of Billings, Mont., and is home to the single-largest reserve of coal in the United States and one of the world's richest deposits.

As Peabody CEO Gregory Boyce said in 2010, as quoted by Bloomberg: "The real goal here is to see if we can't get large volumes of Powder River Basin coal to Asia. ... We know we can sell it in China and Korea."

The big hurdle, however, is getting it there. And for that, you need a really, really big port. Make it two.

Boom Time

While energy industry execs have for years trumpeted the vast opportunities for coal exports to Asia, they only hinted at the challenge of shipping that much commodity. Starting in early 2011, it started to become much clearer that firms like Peabody and Arch Coal had their eyes on either acquiring or building coastal export terminals of their own--always with the explicit intention of using them to move product from the Powder River Basin.

According to figures cited in "Exporting Powder River Basin Coal: Risks and Costs," a September 2011 analysis by the Western Organization of Resource Councils, Peabody's increased exports "could mean an investment of as much as $500 million in new terminals."

Buffett's company is heavily involved in one such terminal near Cherry Point, Wash., termed the Gateway Pacific Terminal. Though still in the permitting process, and facing stiff opposition from residents and conservation groups in the region, Peabody has plans to build 24 million tons of coal capacity there with the ultimate goal of doubling that.

Arch, meanwhile, bought a stake in the Millennium Bulk Terminal near Longview, Wash.--across the Columbia River from Portland, Ore.--and plans to ship 5.7 million tons of coal per year. As in the case of the Gateway Pacific Terminal, that project is also under fire from a consortium of environmental groups.

With some of the biggest financial muscle in the world pushing the project on both ends, from the mines in the Powder River Basin to the ports on the coast, that leaves every community along the shipping route stuck in the middle. And perhaps nowhere is that more apparent than in the Inland Northwest, through which shipments--regardless of their destination port--will almost certainly be funneled.

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