Will US coal exports to Asia grow as domestic demand for coal drops as a result of EPA emissions standards ?

In December 2011 the U.S. Environmental Protection Agency (EPA) announced the Mercury and Air Toxics Standards (MATS), the first national standards for mercury, arsenic, acid gas, nickel, selenium, and cyanide emissions from power plants under the Clean Air Act Amendments, signed by President Bush in 1990.  The EPA says that MATS and the Cross-State Air Pollution Rule (CSAPR), issued earlier in 2011 and vacated by a court in 2012, are the most significant steps to clean up pollution from power plant smokestacks since the Acid Rain Program of the 1990s.

In March 2012 the EPA proposed the first carbon pollution standard for new power plants.  New natural gas combined cycle (NGCC) power plant units are expected to be able to meet the proposed standard without add‐on controls.  But new power plants that are designed to use coal or petroleum coke would have to incorporate technology such as carbon capture and storage (CCS) to reduce carbon dioxide emissions to meet the standard. The U.S. Court of Appeals in Washington has ruled that the EPA has the legal responsibility to control carbon dioxide emissions because CO2 is a  pollutant that endangers human health.

As  a result of EPA's rule-making, many utilities are planning no new coal-fired plants and are looking at natural gas plants instead.  Many are also planning to shut down existing coal-fired plants and to replace them with gas-fired plants. The result is a significant drop in domestic demand for coal.  Exports to Europe are already at a record high.

But the real opportunity for the US coal industry may be Asia.  According to a recent New Scientist article, some 40% of US coal burned by US power plants comes from the Powder River Basin coal field in Montana and Wyoming.  Currently about 7 million tonnes of Power River Basin coal is exported to Asia.  But as domestic demand declines as result of the EPA rules, much of this coal could end up being shipped to Asia.  Proposals to build three new ports have already been submitted to the US Corps of Engineers and proposals for two more ports are in process.  It is estimated that exports to Asia through these ports could reach 100 to 135 million tonnes annually.  The CO₂ emissions resulting from shipping and burning this much coal is estimated to be 194 to 266 million tonnes of CO₂ annually.  To put this in perspective, if Keystone XL bitumen flows at maximum capacity it would result in 212 million tonnes of CO₂ emissions annually.