The U.S. Export-Import (Ex-Im) bank has given XCoal Energy & Resources, a coal-exporting firm, a $90 million loan guarantee. The decision has drawn the ire of environmentalists across the country.
Burning coal is the most polluting, in terms of greenhouse gas emissions, energy source available on the planet. As a result of its threats to the environment and public health, the U.S. Environmental Protection Agency has placed significant air quality standards for American coal power plants. These measures have led to the closure of several power plants because utilities say the standards are too expensive to implement.
The new standards, coupled with falling natural gas prices have led to a sharp decrease in domestic demand for coal in the United States. This does not mean the demand does not exist in other regions of the globe, however. With a serious influx of energy demand as a result of blooming economies, China and India are clamoring for more energy. And, they are more than willing to take U.S. coal exports.
The new capital backing for XCoal Energy will be used to help the company move its coal in the Asian energy hotbed. Specifically, XCoal Energy will be targeting China, Japan, and South Korea. The financial guarantee represents the first direct transaction for coal exports in at least five years; it couldn't come at a more sensitive time for the Obama administration.
Energy is shaping up to be one of the most important, if not the most important, issue in the U.S. Presidential election. The Republican Party has heavily criticized President Obama for not doing enough to develop America's oil and gas resources, as well as for his perceived moves to eliminate the coal industry.
The coal industry is nowhere near dead, though. In fact, between 2009 and 2011, coal exports doubled to $15.9 billion. And, the Commerce Department expects the number to grow in 2012. The market for coal is not evaporating, it is just changing.
Energy progressives and environmentalists are keenly aware of this, which is why they have so vehemently lobbied against the development of a coal exporting hubs in the Pacific Northwest, which would be capable of shipping more than 150 million tons of coal to Asia annually. This will have adverse effects for not only mitigating climate change, but also for the development of new energy economies in Asia.
There is no doubting the political weight of the Ex-Im's financial backing of XCoal Energy. It will help the Obama Administration in its campaign in key coal-rich states like Ohio and Pennsylvania, where Republicans have framed the administration energy policy as anti-coal, anti-fossil fuels, and, therefore, anti-American.
Image credit: Tom Rafferty via Flickr
Any opinion contained in this article is solely that of the writers, and does not necessarily shape or reflect the editorial opinions of Energy Boom. Energy Boom content is for informational purposes only and is not intended to be advice regarding the investment merits of, or a recommendation regarding the purchase or sale of, any security identified on, or linked through, this site.