Last week, Peabody Energy, the world’s largest privately owned coal producer, filed for US bankruptcy protection following a sharp fall in coal prices. Benchmark Australian coal prices have dropped by 40% since January 2011. Fifty US coal companies have filed for bankruptcy since 2012, including Peabody and Arch Coal, the two largest in the country.
Peabody makes most of its money by selling its coal to utility companies that use it to generate electricity. This includes the Navajo Generating Station (NGS) on the Navajo Nation tribal reservation, which employs 500 people and is supplied by Peabody’s Kayenta mine, which itself employs 500.
The development of the NGS, the Kayenta mine and a railroad between the three, was agreed in 1968 as an incentive for the Navajo to relinquish most of their federally guaranteed tribal rights to the waters of the Colorado River, so that it could be used to irrigate non-tribal agricultural land. In turn, the power station would be used to power the Central Arizona Project, a 338-mile system of canals and pipelines which transports Colorado River water to southern Arizona.
Both the NGS and the Kayenta mine have been the subject of much controversy over the years. The Environmental Protection Agency has made repeated threats to shut down the power plant due to illegal air pollution. Meanwhile, the Navajo have claimed that Peabody’s mine has polluted groundwater supplies, caused land subsidence, as well as respiratory health problems among workers on the site. In this way, the Navajo have been coerced into sacrificing their own resources, health and wellbeing in order that the towns and cities of the west can be fed and watered.
Oil and coal leases and royalties comprise a relatively large portion of the Navajo Nation’s income. However, many utilities are shifting to using natural gas, which costs less than coal and produces less pollution. Consequently, the tribe is seeking to reduce it’s dependence upon the volatile fossil fuel market, and it’s exposure to local environmental risks.
Yet with more than 40% of the Navajo population in poverty, with many deficient in the most basic infrastructure and utilities (a large proportion still have to haul water to their homes), the potential for an economic shock caused by the closure of the mine is a serious concern.
Meanwhile, on the western seaboard, a proposed terminal to export coal to Asia is creating tension in the port city of Oakland, California. As reported by Maria L La Ganga today, Asian market is being seen as a potential saviour for the coal industry, and perhaps also for the Navajo’s short-term economic security. However, with an environmental impact statement for the terminal due before the end of April, key players are contesting the potential health risks and economic benefits to local people.
On the one hand, the new terminal could provide much needed jobs, which is the go-to argument for many developments of this kind. On the other hand, opponents argue that air pollution will impact disproportionally upon the already unhealthy and chronically poor local black neighbourhood. Moreover, as La Ganga highlights, environmentalists see California, Oregon and Washington state as “the thin green line”, a barrier they hope will prevent coal from being exported to Asia and further contribute to global warming.
In short, the boom and bust nature of the global fossil fuels market highlights the complexity of the relationships between local, regional and global interests in resource development and the environment. The publication of the draft Environmental Impact Statement for the new coal terminal, and the subsequent public engagement process, will be worth watching carefully.