Oilfield Daily News

Apple’s 4.8 megawatt fuel cell farm in North Carolina stands as the country’s largest private fuel cell energy project.

The fuel cells are set to be installed in the following weeks with the entire system in full operation by December of this year in the same complex that powers the company’s Maiden, NC data center, the birthplace of iCloud.

The facility will be powered by California-based Bloom Energy “energy servers,” currently being used for clean energy production by several of the leading tech firms such as Adobe, eBay, and Google.

Fuel cell installations will require 24 200-kilowatt Bloom units that extract hydrogen from natural gas provided by Piedmont Natural Gas.

Apple’s newly constructed fuel cell facility is a step in the right direction away from previous public criticism for its delay in joining the green energy initiative.

At $6.7 million per megawatt, fuel cells are among today’s most expensive methods of energy production. Apple’s 4.8 megawatt fuel cell facility will amount to roughly $30 million. But a company powered by creative innovation, and that’s achieved as much success as it has, is put on a pedestal for others to emulate; embracing its commitment to the environment is practically obligatory.

Until next time,

Stephanie

Apple Joins Clean Energy Production Movement originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

Royal Dutch Shell (NYSE: RDS-A) upped the ante this week in the acquisition of Cove Energy (LON: COV), a London-based oil and gas company with primary assets in Africa and off the Mediterranean coast.

Shell increased its offer to $1.8 billion, 12 percent higher than its previous bid of $1.6 billion in late February of this year following Cove’s decision to sell in the first few days of 2012 after reporting one of the world’s largest gas discoveries in a decade off of Mozambique.

Shell’s takeover of Cove Energy would grant Europe’s largest oil company access to Cove’s 8.5 percent stake in Rovuma Area 1, an LNG gold mine with natural gas reserves of up to 30 trillion cubic feet.

In February, Cove shares jumped a record 26 percent following Shell’s original offer of 195 pence per share. Not surprisingly, the attention sparked a renewed interest in African oil; Shares of Ophir Energy and Afren, two other oil and gas companies with operations in Africa, climbed between six and seven percent. Shell’s revised bid is 12 percent higher than its previous offering at 220 pence per share.

Analysts contend Shell’s takeover is driven by its interest in East African natural gas to expand its LNG agenda. But Shell’s not the only one cashing in on the acquisition:

“The board believes that the recommended cash offer from Shell Bidco provides very significant value to Cove shareholders.” – Michael Blaha, Cove Energy’s chief executive

That’s all for now,

Stephanie

Shell Goes All In on African Gold Mine originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

On April 3, German solar cell maker Q-Cells (ETR: QCE) filed for insolvency after failed attempts at restructuring.

It’s been just one of many solar company bankruptcies over the past year, beginning with Solyndra.

But unlike many others, Q-Cells is showing potential once again.

The company’s insolvency administrator, Henning Schorisch of HWW Wienberg Wilhelm, hired Deloitte Touche Tohmatsu Ltd. to find investors for the company.

And since then he has announced that a number of investors have come forward, both foreign and domestic.  In his press release, Schorisch said:

“Our aim is to save as much of Q-Cells as possible.  The next few weeks will show the extent of investors’ interest.”

Since the insolvency filing, Q-Cells has been able to return the production of mono- and mulitcrystalline cells to half normal levels.

In addition, module production is operating on three shifts.  The company is making plans to return to a full four shifts soon.

After filing, the company was anxious to return to production, particularly since its storage facilities were empty at the time of the filing.

And heading into spring and summer, when solar power is most popular, they couldn’t afford to lose too much business.

There have also been discussions of bringing in employers from Q-Cells’ subsidiary, Solibro, to help return to full production.  Schorisch said:

“The workforce at Q-Cells is understandably upset by the insolvency proceeding, but it is still highly motivated.  Everyone is pulling together.”

The company’s shares jumped 20% on Monday to 15.6 euro cents.

That’s all for now,

Brianna

Q-Cells Stays in the Game originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

Obama, hookers, booze, coke-filled sex orgies!

That was the takeaway for most folks in the United States regarding the recent Summit of Americas Conference.

And that’s the way our country likes it.

Give us the dirt that doesn’t dirty our own hands.

Give us a fresh coat of high-def shine on the American dream so we don’t have to pay attention to our political leaders who are dismantling our freedoms from inside the halls of Congress.

Let us cry about high gas prices while turning a blind eye to the economic implosion that’s going to leave our children on the hook for a debt they shouldn’t have to pay.

Let us debate politics on Internet message boards with hostility and vitriol while the bureaucrats we continue to elect conduct business as usual.

And of course, let us ignore the fact that this most recent Summit of Americas Conference further demonstrates how we continue to ignore failed policies and free market opportunities in an effort to placate partisan slaves.

A 40-Year Train Wreck

For the sake of clarification, the Summit of America’s Conference wasn’t a complete dud. After all, Colombia did agree to implement a free trade agreement ratified by the U.S. last year (one that will increase exports to the tune of about $1 billion).

But I would argue that President Obama still dropped the ball on two very important issues addressed at this summit. And these are issues that directly affect our economy and national security.

The first was the discussion of drug policy — more specifically, legalization.

As is typical with any run-of-the-mill politician, the president shied from offering anything substantial, only barely catering to a “potential” debate. In other words, this guy ain’t rocking the boat this close to an election.

But the fact remains the U.S. war on drugs has been the longest-running failed war this country has ever waged.

In 2010 alone, the U.S. spent more than $15 billion fighting this war.

That’s a rate of about $500 per second.

To date, this 40-year train wreck has shown to be a political, social, and economic burden that has cost taxpayers more than $1 trillion. 

And what do we have to show for that money?

Well, since the war on drugs started, drug use has been relatively consistent, particularly among young adults. And with the U.S. serving as a supply chain endpoint, drug-related violence continues to wreak havoc throughout South, Central, and North America.

Our prisons are now insanely overcrowded with non-violent drug offenders. Since 1995, the U.S. prison population has grown an average of 43,000 inmates per year, of which about 25 percent are sentenced for drug law violations.

At an average cost of about $29,000 a year to incarcerate a single non-violent prisoner on a drug-related charge, this is hardly a wise use of our tax dollars, resources, and human capital.

The second issue Obama ducked was Cuba.

Big shocker there.

But you know the story… You can’t win national elections without Florida, and you can’t win Florida if you support opening up relations with Cuba (at least right now).

As a result, we continue to miss out on the dozens of opportunities that the rest of the world has access to.

~~eac_alt_energy~~

¡Viva Cuba!

The bottom line is Cuba poses absolutely no threat to the United States.

Moreover, ever since Raul Castro took over for his brother, steps towards economic reforms have increased.

These include, but are not limited to:

• Moving 500,000 people out of the state sector into private enterprise

• Allowing citizens to start small businesses

• Permitting the sale of real estate

And of course, we know there’s a lot of money at stake here for us, too.

The American Farm Bureau has estimated the export market for products of U.S. farms and ranchers could be worth about $1 billion.

And the U.S. International Trade Commission has reported the embargo costs U.S. firms as much as $1.2 billion a year.

Meanwhile, I’ve yet to hear a single rational argument that can justify the continuation of this embargo.

There’s always the hypocritical human rights argument, an issue that’s irrelevant when it comes to plenty of other countries we regularly do business with.

Then there are those who point to Cuba as being an enemy of the U.S. and hosting terrorists. Yet we do plenty of business with Saudi Arabia, home to 15 of the 19 hijackers from September 11th.

And of course, there are the few remaining dinosaurs in Washington who continue to believe if we stand our ground and hold our breath long enough, Cuba will wave a white flag.

But as Congressman Ron Paul pointed out earlier this year, we should quit this isolation business of not talking to people:

We talked to the Soviets. We talk to the Chinese. And we opened up trade, and we’re not killing each other now. We fought with the Vietnamese for a long time.

We finally gave up, started talking to them, now we trade with them. I don’t know why the Cuban people should be so intimidating.

I think we’re living in the dark ages when we can’t even talk to the Cuban people. I think it’s not 1962 anymore. And we don’t have to use force and intimidation and overthrow governments.

We couldn’t agree more.

A Facade of Morality

Of course, despite recent economic reform in Cuba — and really, just the pure logic of it all — there’s still no telling when we’ll have enough lawmakers in Washington with the stones to stand up to this facade of patriotism and morality.

And while I do believe this embarrassing embargo will be lifted some day, it’s nearly impossible to get any clarity on when that’ll actually happen.

So for investors with an eye on Cuba, it should be understood that opportunities will be severely limited for the foreseeable future. Beyond the Herzfeld Caribbean Basin Fund (NASDAQ: CUBA), there remain few opportunities for the average U.S. investor…

Of course, we’re more than happy to continue to profit in the meantime from some pretty sweet natural gas developments here in the United States.

~~jeffs_signoff~~

Cuba Embargo Opportunities originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

Just when you think Iran’s oil industry is at its wit’s end, they come up with a new bit of shenanigans to play.

This time it’s a global game of hide-and-seek.

At least, that’s what it looks like now that the country’s oil tankers are turning off their on-board tracking systems. Naturally, doing so would make them disappear from public radar. And according to reports, more than half of the National Iranian Tanker Company’s fleet have joined the act.

It’s a game they’ve been playing for decades, and it’s working.

Just Playing Their Roles

We’ll call them the dynamic duo in OPEC, because if it’s not Iran stirring up geopolitical unrest, it’s Venezuela – the OPEC price hawks.

And lately it seems as if Chavez and friends have let Iran take the reins. The last serious shake up by Venezuela was years ago, when Chavez booted every major oil company out of the country after nationalizing the country’s oil assets.

For the last few years, the two have practically taken turns cranking up the geopolitical heat. But one thing that most people don’t realize is that unlike Iran, Venezuela needs us to stay afloat. Even today, we buy nearly a million barrels per day from them.

But it goes even deeper than that, too. The quality of Venezuela’s oil is far from the light, sweet crude coming out of Texas and North Dakota fields.

We’re talking heavy, sour crude with more similarities to the bitumen being produced from the Canadian oil sands. Our Gulf Coast refineries are set up to refine this heavy oil – which is why Chavez would be in a sore position should he lose our business.

Running Out of Options

Unfortunately for Iran, they’re quickly running out of options.

Several months back, Iran played one of the few cards left in their global game of poker… again. Remember the hoopla over closing the Strait of Hormuz that was making headlines in January?

As you know, the Strait of Hormuz is a critical choke-point for more than 15 million barrels of Middle Eastern oil. That amount makes up almost one-fifth of the world’s oil trade.

Usually, Iran would simply ignore U.S. threats and turn their eyes east towards Russia and China. We have gotten to a point where nearly all of the country’s 2.2 million bbls per day of oil exports are shipped to China, India, Japan and South Korea:

There’s no sugarcoating it for Iran – they’re in serious trouble without China buying their oil.

And no matter how much fiery rhetoric comes out of the country, the sanctions in place aren’t making things any easier for them. Chinese oil imports from Iran have already dropped 21% during January and February of this year.

Perhaps it’s time for them to deal, which may be why the latest round of negotiations started back up this week.

Of course, the amount of progress made in these talks may only depend on whether Iran’s bag of tricks is empty.

Enjoy your weekend,

Keith Kohl

Natural Gas Going to Zero: Drillers Must Continue Drilling
The industry’s ability to extract shale gas has led to such a rapid surge in production that the market is having difficulty absorbing it all.

Bakken Infrastructure Investing: Rail or Pipe?
Energy and Capital editor Keith Kohl explains a win-win scenario developing in bringing Bakken oil to market. 

Picks and Shovels for Natural Gas: These Three Companies Will Make Money
It’s hard to make money when what you sell is in abundance while your costs are fixed.

A New OPEC: For Rare Earths, Not Oil
A new OPEC has been unveiled. It’s been put together by the Chinese to further manipulate the supply of critical rare earth metals.

2012 ASCO Conference Stocks: How to Trade this Most Anticipated Event
Analyst Ian Cooper takes a look at some of the top presenters at this year’s 2012 ASCO conference and offers a few ways to trade the event.

Russia Steals Shale Technology: Joining the Energy Race 
Energy and Capital editor Keith Kohl explains why Russia is so eager to deal with Big Oil, and how investors can take advantage.

Offshore Wind Investment Opportunities: Is Offshore Wind a Dead Market?
Cherry-picking offshore wind investment opportunities in Europe.

Iran’s Deadly Game of Hide-and-Seek originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

After a Reuters report revealed an undisclosed $1.1 billion in loans by Chesapeake Energy’s (NYSE: CHK) CEO Aubrey McClendon, shares have struggled and a lawsuit has arisen.

McClendon took out personal loans and used company stakes as collateral in order to fund a 2.5% stake for himself in each of the company’s wells.

Once shareholders learned of this, problems began.

Deborah Mallow IRA SEP Investment Plan filed the lawsuit in the U.S. District Court of Western District of Oklahoma.  It was filed as a potential conflict of interests and was sparked by the secretive nature of these loans.

The lawsuit requests that all information regarding the loans is disclosed to shareholders:

“This action is brought to address material disclosure violations permitted by the board of directors and to ensure that any damages suffered by Chesapeake by reason of these violations are borne by the individual defendants, and not by Chesapeake and its innocent shareholders.”

The company fell $500 million on Wednesday, when the Reuters article disclosed the borrowing.

EIG Global Energy Partners is Aubrey McClendon’s main personal lender, and some believe that the company has received perks from Chesapeake.

McClendon’s ethical decisions are being questioned as a result of the situation.  Though what he did was legal under the Founder Well Participation Plan, enacted in 1993, he put his shareholders in a difficult position.

Shares of Chesapeake dropped 10.2% after the news leaked on Wednesday.  Today, shares are down 2.2% to $17.60.

That’s all for now,

Brianna

Lawsuit Against Chesapeake Energy’s Aubrey McCledon originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

“I think there’s a reasonable chance we will fill up the storage this year.”

That’s what Joe Averett said about natural gas storage in Texas and Louisiana this week.

Joe would know.

His company, Crystal Gas Storage, built the huge salt-dome caverns that store natural gas in the Gulf states.

He says the industry’s ability to extract shale gas has led to such a rapid surge in production that the market is having difficulty absorbing it all.

And yet, the drillers can’t stop drilling.

Many of the contracts they signed will expire if they don’t drill.

“They’re still drilling wells just to hold the lease, and them having to do that, that’s continued the excess production,” Joe says.

Natural gas prices fell to a fresh 10-year low yesterday below $2.00, settling at $1.94 per mmBtu.

Pleasure and Pain

People like us who pay electric bills are loving it.

Last year at this time I was paying over $0.60 per therm. This year it’s down to $0.57.

My March gas bill was $43.60. (I spent over $300 filling my truck that same month.)

If you burn natural gas for heat, hot water, or cooking… I know you’re loving it, too.

But drillers aren’t loving it so much.

Chesapeake Energy (NYSE: CHK) and Encana (NYSE: ECA), for example, are down over 40% in the past year.

And like I said, they have to continue to drill in order to hold their leases, even as storage reaches capacity.

These guys would have to drill even if the price of natural gas goes to zero, which it may. If production continues at current rates, peak storage capacity of 4.1 tcf will be reached by October.

The only way to make money from natural gas drillers right now is to short them.

~~eac_nat_gas~~

Where’s It Gonna Go?

That is the question you need to be asking, because the answer will lead you to natural gas profits.

For starters, Cheniere Energy (AMEX: LNG) just received federal approval to build the largest U.S. natural gas export terminal ever.

The $10 billion facility will be built in Cameron, Louisiana and has already lined up customers from the UK, Spain, India, and South Korea.

What’s more, almost every new electric plant in the works burns natural gas in some way, whether as a primary fuel or, in the case of solar, a back-up fuel.

And there’s also a plan to convert the nation’s trucking and fleet vehicles to run on natural gas, which would help eat up excess supply.

So there is plenty of money to be made. Exporters, shippers, engine manufacturers, and infrastructure plays are all on the table, and some are already starting to move.

Natural gas engine maker Westport (NASDAQ: WPRT) is up 40% in the past year to $32.00. I first recommended that stock in 2007 when it traded for $10.00, and again in 2010 at $14.00. 

We know the energy market around here.

And with the focus of the natural gas market shifting so quickly, we’ve just released a brand new report on how to play it.

It explains in more detail why you should stay away from explorers and drillers, and focus on the “picks and shovels” of the industry.

You can have it for free, right here.

~~nicks_signoff~~

Natural Gas Going to Zero originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

A new OPEC has been unveiled.

Only it isn’t for Middle East sheiks to jeopardize control of the world’s oil.

Instead, it’s been put together by the Chinese to further manipulate the supply of critical rare earth metals.

Here’s what you need to know…

Rare Earth Monopoly

China already controls about 95% of global rare earth production, which are needed to make your smart phone, TV, and countless other high-tech devices.

The Middle Kingdom’s control of the market, coupled with their willingness to manipulate prices, sent the cost of rare earths thousands of percent higher over the past few years.

China has effectively put an export tax of 42% on rare earths.

Many early retirements are being enjoyed by shareholders of rare earth miners outside of China as a result.

In March, the U.S., Europe, and Japan lodged a formal complaint with the World Trade Organization about China’s activities in the industry.

This has not only put rare earths back into the spotlight, sending shares higher, it’s also led to a quick reaction from China.

One-Country Cartel

Earlier this month, Beijing responded by creating a rare earth industry association to “consolidate the sector, promote international exchanges and help its 155 members deal with trade disputes.”

That’s Chinese for “control the supply and run up the prices.”

It’s basically going to put all the rare earth mines under control of a few large conglomerates to concentrate its already-strong monopoly. Baotou Steel, Rising Nonferrous, and China Minmetals are likely to be three of the strongest.

I won’t get into the trade dispute details.

I’d rather just make money.

But it’s not going to be from rare earths.

Check this out…

Not So Rare

To understand why future rare resource profits won’t be made from rare earths, you must read this incredibly insightful blurb from Forbes, emphasis mine:

There’s a reason why [China's rare earth cartel] won’t work. It’s that China doesn’t actually have anything like a monopoly on deposits of rare earths. Nor of the technical knowledge to extract them and process them. What they’ve got is a contestable monopoly. And the thing about contestable monopolies is that as soon as someone starts to throw their monopolistic weight around then someone starts to contest it.

The rare earths just aren’t rare you see. Just among the people I know and have talked to there’s a large new mine opening in Australia, two others being reopened, one in the US, another in South Africa. The three of them together, given a couple of years, could be supplying 40% of world demand: that’s a pretty big intrusion into a previous monopoly over 97% of production, isn’t it? And that’s before we start talking about the other four or five similar sized mines that are working through the technical process, or the 200 odd junior mining companies digging holes into likely looking heaps of rock.

If China actually did have a monopoly, or anything like it, on deposits of rare earths then it might be right to be worried about their setting up of what certainly looks like a cartel. Given that the things are actually more common than copper, occur darn near everywhere (another acquaintance claims a mountain of them in Greenland) and really are not as difficult to mine and process as many seem to think, the setting up of that cartel could be said to be too little and too late to protect their position. Or even, given that it has always been a contestable monopoly that cartel is what is driving the people to contest it.

Indeed, Lynas (ASX: LYC) and Molycorp (NYSE: MCP) are well on their way to increased production. And their share prices have been reflecting that of late.

The Forbes article is correct…

Rare earths aren’t rare and now many companies outside China will start bring production online.

The time to make your fortune in rare earths was two years ago.

And yet, there’s another resource no one’s paying attention to that’s about to undergo a similar market metamorphosis.

Like rare earths, China controls more than 70% of its production.

Like rare earths, China is starting to manipulate the market — adding export quotas and taxes and driving up the price.

Like rare earths, the need for this mineral is only rising, thanks to high-tech devices and batteries. Demand is up more than 4,000% over the past few years.

~~eac_rare_earth~~

~~nicks_signoff~~

A New OPEC originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

Desperate times call for desperate measures…

And if you’re Big Oil, your chances of making a deal with the devil have increased over the decades.

Sure, there was a time when Exxon execs stood atop a sand dune in Saudi Arabia, their eyes filled with greed.

Truth is, they owned the Middle East back then. Forty years ago, the seven major oil companies controlled more than 90% of the Middle East’s oil production, equating to roughly three-quarters of the world’s crude supply.

Oh, how the tables have turned, as national oil companies (NOCs) have come to dominate the industry…

Dealing with the Devil

When I say “dominate,” that’s not exaggerated in the least.

Since the 1970s, NOCs have literally taken control of the world’s oil reserves, squeezing Big Oil nearly out of the picture:

It turns out “Big Oil” ain’t so big anymore:

Click to Enlarge Image

As you can see, ExxonMobil (NYSE: XOM) doesn’t even show up on the list until the fourteenth spot.

But the recent surge in unconventional production from tight oil and gas formations has given companies like Exxon an ace up their sleeve.

Unfortunately, they’re about to lose that advantage.

You’ve heard of them before. Names like Petro-China, CNOOC, Statoil, Rosneft, Saudi Aramco, and PDVSA are just a few on the list.

What’s interesting is their growing interest in North America.

I have no doubt you recognize the increased number of recent deals that have been made over the years.

Whether its the billions of dollars that China is pouring into U.S. shale plays, or even Statoil’s emergence onto the scene with its buyout of Brigham Exploration last year.

Now we can add a new player to the mix – Russia.

~~oil-sign-up~~

Russia Enters the Shale Race

Back in September, Russia inked a $2 billion deal giving ExxonMobil the chance to explore Russia’s Kara Sea for oil and gas. Considering the difficulty involved in drilling in Arctic waters, Exxon’s victory may be short-lived.

Remember, we’re not talking about the shallow waters off the Gulf Coast. The cost alone to explore the Arctic deepwater will be in the billions.

However, this deal didn’t come without a hefty price.

In fact, two things come directly to mind.

The first is Exxon’s deepwater experience. Without it, extracting the potential 36 billion barrels of recoverable oil and gas from the Kara Sea would take decades.

The second is much closer to home. In return for their generosity in opening up the Arctic waters to Exxon, Russia will gain a share in Exxon’s projects in North America, including the Cardium oil play in Alberta.

So why are the Russians interested in a mature oil play in the heart of the Canadian energy industry?

It’s not as if the Cardium formation is a new play, companies have been drilling in the area for more than sixty years.

Still, there is something very specific Russia wants – and it’s not giving Exxon a leg-up over its competitors.

Putin and friends are after the one thing that can help them unlock the tight oil reserves in Western Siberia – technology.

The fracturing technology Russia can learn from Exxon is infinitely more important to them than spending billions on an arctic exploration campaign that won’t even begin for another two or three years.

And by then, we don’t even know if Russia will decide to keep them around by then. Besides, Exxon should be used to getting the boot, especially after being kicked out Venezuela a few years ago. With Putin’s track record of dealing with opposition, it wouldn’t be surprising to see it happen again.

You can’t say we didn’t see this deal coming from a mile away. Everyone wants a piece from the North American unconventional boom taking place.

And the Russian/Big Oil deal is only the latest team-up to happen. We know it’ll continue throughout 2012.

~~keiths_signoff~~

Russia Steals Shale Technology originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

Exports of U.S. coal reached the highest level in two decades last year thanks to high demand from Asia and Europe. The two continents offered a much needed outlet for coal suppliers in a time of very low domestic demand.

Data analyzed by the U.S. Department of Energy showed that coal exports peaked at 107 million tons worth $16 billion in 2011, levels unseen scene since 1991, and more than double the export volume from 2006.

Much of the increase in demand has been in response to the insatiable need for energy in Asia’s many power hungry markets, where rapid development has sparked renewed interest in American coal.

Last year coal imports were up 81 percent in South Korea to 10 million tons, up 65 percent in India to 4.5 million tons, and 119 percent in Japan to 7 million tons, as the country still reels in the wake of the Fukushima nuclear complex meltdown.

While the international market for American coal is soaring, domestic demand has been on a steady decline due to steep competition from cheap natural gas and costly new rules for power plants.

Over the past several years coal’s domestic share of the power supply has fallen by more than 20 percent, forcing companies to seek out new customers or cut production from U.S. mines.

Government projections released last Thursday said demand for coal in the domestic power sector could decline another 10 percent in 2012, driving total U.S. coal use below a billion tons annually for the second time since 1995.

The Energy Department’s forecasts were no less pessimistic expecting exports to drop over the next two years, then make a slow and steady climb to about 130 tons by 2030.

Projections within the industry are more optimistic.

Arch Coal (NYSE: ACI) expects the exponential increase in coal exports to continue. The St. Louis based company predicts export capacity could reach as high as 245 million tons by 2015.

But in order to reach this lofty goal shipping capacity must be improved and companies are demanding the construction or expansion of coal ports along on the West and Gulf coasts.

Jim Orchard, vice president of Wyoming-based Cloud Peak Energy, touched on the issue saying:

The U.S. has lots of coal. It has a wonderful rail infrastructure. But the piece of the logistical puzzle that is weakest is the terminals. To get to the next level of growth, the new terminals need to be built.  

Pending proposals in Washington state would add millions to overall port capacity for coal mined from the Powder River Basin of Montana and Wyoming.

Until next time,

Nate

U.S. Coal Exports Soar During Flailing Domestic Demand originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.