Scott Tiller, a coal miner of 31 years, takes a break while operating a continuous miner machine in … [+]
The political season will enter guns a blazing after Labor Day. But the players are warming up now — something triggered by some states and their attorneys general who are asking that the Chinese government be held to account for the outbreak of COVID-19. It’s a ploy that has an uncommon twist.
One of the politicos calling for such action is West Virginia Attorney General Patrick Morrisey, who is struggling to get his footing after getting knocked out of the U.S. Senate race by Joe Manchin in 2016. The reason Morrisey’s signature stands out is that West Virginia is in deep in negotiations with the China Energy Investment Corp. — a deal that would have it invest $84 billion to develop the state’s shale gas fields; China wants to feed its chemical and manufacturing base.
The prospective deal would be a game-changer for West Virginia. The three-year investment from China would exceed the state’s annual $75 billion gross economic output. Moreover, China is one of the few countries in the world still buying coal and China paid American coal producers at least $128 million last year. U.S. utilities, meanwhile, are closing their coal-fired units and replacing them with natural gas and renewables.
“As the administration evaluates the spectrum of possible actions to take towards China, a coordinated effort involving all appropriate federal agencies and our states is crucial to ensuring the accountability our citizens deserve,” says Attorney General Morrisey in a recent letter sent to the president.
West Virginia sits atop the Marcellus Shale basin, which holds 141 trillion cubic feet of recoverable natural gas. The Utica Shale basin, which is next door, is just as plush. That means China could invest its $84 billion in Pennsylvania or Ohio — states that may value their business and that do not engage in inflammatory political rhetoric. The worst offender is Donald Trump, who said last week at the White House, “They’ve ripped off the United States like no one has ever done before.”
If China Energy does invest in West Virginia, it could trigger an economic boon there: It would attract cracker plants that break apart the “dry gas” used to heat homes from the “wet gas” used in chemical manufacturing. It could also be used as a magnet to attract an ethane storage and distribution hub to harness petrochemicals. Economic developers note that such an investment is worth 100,000 new jobs — chump change, though, for career politicians.
“China, the U.S. and India together accounted for more than two-thirds of the global increase in energy demand,” says BP’s statistical review of World Energy. It adds that China is one of the world’s largest consumers of natural gas and that it accounted for half of all liquefied natural gas imports.
Cash Infusion
Nomac Drilling Corp. floorman Matthew Brown, right, steadies a section of drill pipe as floorman … [+]
All of this is also in the context of the U.S. trade war against China. The two sides entered into a cold peace as far as trade goes, with China agreeing to buy over two years $200 billion in U.S. produced goods. About $34 billion of that would go to buying LNG and coal. The deal is now essentially dead as Trump tries to shirk his role in the spread of the coronavirus. China has quit taking the president seriously, having moved to exert more control over Hong Kong — all a response to Trump’s mercurial conduct. It will be left to a different president to fix this mess.
And the more that Attorney General Morrisey ties his fortunes to Trump, the less likely China is to consider West Virginia as a potential business partner. In other words, by alienating China, Morrisey is hurting the state he represents — a state he moved to just 8 years ago after losing a New Jersey congressional race. The state’s governor, Jim Justice, says that he remains committed to bringing China Energy to the state.
It gets worse. The U.S. Energy Information Administration is predicting that total U.S. electric power sector generation will decline by 5% in 2020. It says that coal generation will fall by 25% in 2020. And the woes will only mount: just recently, Alliant Energy Corp., Arizona Public Service and Vistra Energy Corp. said that they are closing coal plants ahead of schedule. A manifestation of all the retirements has been that 11 coal companies have filed for bankruptcy since Trump came to office.
To top it off, the International Energy Agency expects China’s coal use to level off in 2022. Its share of the power generation mix there is expected to fall from 67% in 2018 to 59% in 2024, it says. After that, it will continue to wane but a comeback is in the realm of possibility.
“Natural gas is cheaper than what many people thought possible,” says Dan Cohan, energy and environmental professor at Rice University in Houston, in an interview with this writer. “It is below $2 per mmBtu. And it can be burned less expensively and more cleanly than coal. If energy demand rebounds, there are still hundreds of coal plants out there being used less than half the time. So it is possible it could bounce back. But the future is likely headed toward more renewables.”
What it all means for coal-producing states like West Virginia is that they have to diversify their economies. The quickest way for the Mountain State is to develop its rich natural gas fields — and a multi-billion cash injection by China would certainly help its cause. But now that pathway is closing off, given the incendiary language used by self-dealing politicians and the ones who are desperate to hold power.
