Gateway Pacific Terminal: Developing the Conflict

The promised analysis of loss/benefit flows:

Image compilation: Kathlyn Kinney

A strong showing of beneficiaries (on the right) explains why this situation is so hotly debated.

Interesting to look at are those actors which fall in the middle. The BNSF railway company will certainly realize profits from increased shipping needs, but may wind up cleaning the coal dust from their tracks (or risk derailments). Canada, it is said, will hardly notice the effect of competition because the demand for coal is so astronomical.

Noteworthy in this diagram is that many of the beneficiaries (from Goldman Sachs to Christine Gregoire) are those who can take their profit – or their vote – & slip quietly from the scene. The entities left to bear the enduring burden are such as the Lummi Nation, the salmon population, and the atmosphere (along with, incidentally, everyone who breathes it).

If a Venn diagram were drawn of the long-term benefits and losses, it would likely show a migration from right to left, as actors even such as the US realize they have fallen behind in the wake of shortsighted gain.

Alyssa Mehl commented on the 49% ownership of SSA Marine by Goldman Sachs mentioned earlier. This is not inherently a bad thing. A well-endowed investment firm puts forward the funds to move a major project forward. They reap a portion of the rewards and are therefore able to invest more.

An illustrative diagram came up in last week’s discussion about how the economy should work versus how it does work:

Without money flowing downward there would be no wages, and without money flowing upward to the “big guys” there could be no massive investment in worthwhile projects. In a sense, the system works. Regardless, a constant policy battle embitters these two factions.

For perspective on why this might be, see “Some Are More Unequal Than Others” by Joseph Stiglitz, brought up in Norm Becker’s “The Cost of Inequality”.

This begs the question: are the people at the bottom of the pyramid any better equipped to make decisions regarding proper investment than the people at the top? There is varying evidence either way. Right now in Bellingham, two picket sign campaigns wage war. On one side, “NO COAL PORT”, “POWER PAST COAL”, “Another Family Against Coal” – and on the other, “GOOD JOBS NOW”. (It took me some time to realize that this last sign pertained to the Gateway Pacific Terminal. It’s tempting to put out a modified “DIRTY JOBS NOW”.) The immediacy of the demand in this last one is telling. It’s altogether possible that ordinary people are just as (if not more) concerned about the short-term and the bottom dollar as the investment firms.

Image compilation: Kathlyn Kinney

I personally believe investment is the key to our sustainable future. If I were to write the definition of sustainability, it would be: “The ability & incentive to direct current resources toward future benefits.” Large investment firms play an incredibly vital role in this. They simply must invest in the right direction.

Unfortunately, the current trend sees investment pouring into “proven” sectors, some that exacerbate environmental or social welfare issues, and many that represent dying industries. What do I mean when I say this? Coal certainly does not seem to be a “dying industry”. It is, in fact, doing remarkably well. What I mean is that it is based on a finite resource that will become increasingly difficult and dangerous to extract. It will grow obsolete as the world moves toward cleaner energy infrastructure. It is based not on continuous innovation, but continued reliance on a dwindling reserve. In short, it defies the first law of The Natural Step:

“In a sustainable society, nature is not subject to systematically increasing concentrations of substances extracted from the Earth’s crust.”

So, turning to the question: Is this good for the economy? What happens when we have what looks to be essentially infinite demand (in the case of China) for a finite resource? Let’s take a look at the supply and demand curve:

OK, now let’s zoom out to get a better picture:

Notice that the demand curve is high, but not inelastic. I have every reason to believe that consumption of coal by Chinese markets is in fact influenced by the price of coal. Cheap energy fuels inefficient infrastructure. The opposite – expensive energy – requires more compact and resource-sensitive development. China is right now in its rapid-development phase. The built infrastructure is not yet in place. Therefore the costs and delays of rebuilding an inefficient system do not apply. Imagine someone considering the purchase of an energy-efficient vehicle. This is a much different decision for someone buying their first car than for someone who already owns a perfectly good gas-guzzler.

This does mean, however, as the Chinese decide whether to build “coal-guzzling” cities, that the price of coal now will determine the demand for coal for many years to come.

So, what if the supply curve, as we can see, shifts outwards? This is the effective result of pumping more coal through the Bellingham port. Price drops. For each unit of coal produced out of the remaining supply, the mining industry earns less than if they held out over a longer period of time.

There are a few poignant reasons why this logic has not taken hold in the real world. For one, while the world market price for coal may increase due to Montana and Wyoming’s restraint, Wyoming and Montana would likely find themselves out-competed for profits. This partially explains the collapse of the OPEC oil cartel after 1981 (Goodwin, N. Microeconomics in Context. 2^nd ed. 2009. p. 106). Coal is a fairly undifferentiated good, leaving individual players like the US relatively powerless, and yet paradoxically responsible.

The anti-coal coalition is fighting, in effect, a market-driven move toward a higher-production equilibrium – Adam Smith’s invisible hand at work. I liken it to the sale of cigarettes or soda-pop on a global level – just because money can buy it does not mean the market should supply it. Here we see perhaps the most glaringly uncomfortable flaw of capitalism: investments made for profit do not inherently enhance the wellbeing of the world.

Gateway Pacific Terminal: Introducing the Actors

In the unfolding narrative of the coal-export terminal scheduled to be built at Cherry Point, I'll be asking several questions:

First, who are the actors?

Image compilation: Kathlyn Kinney

Next, where do the benefits flow?

This is noteworthy in the context of the massive trade deficit garnered by the US toward China. (See Norm Becker on "Does Growth in the East Depend Upon Consumption in the West?") Coal may be one of the few remaining exports capable of balancing that deficit.

While this may look good to lawmakers, there may appear to be a conflict of interest in that SSA Marine is 49% owned by Goldman Sachs.

Where are the losses felt?

There are already instances of the coal-mining industry cutting safety corners to meet burgeoning demand oversees.

Photo credit: Paul Damien, National Geographic

In this 2010 National Geographic article ("Mine Tragedy Amid Push to Produce More"), a former U.S. Mine Safety and Health Administration investigator points out that current investigative practices rely on interviews with responsible parties and focus only on technical causes of accidents, rather than public hearings which might unearth larger issues of voluntary oversight.

The common conflict of profits vs. precautions will likely come into play in a work environment exhibiting high exposure to coal dust, a cause of black lung cancer.

It promises little to address the effect of coal dust on the broader population, with direct and indirect health costs from fine particulates amounting to $190 million per year according to the Washington State Department of Ecology (2009 report: "Health Effects and Economic Impacts of Fine Particle Pollution in Washington", as cited in "Health Impacts of Coal Transport on Communities").

It will almost certainly ignore the affront to the sovereignty of the Lummi Nation, which attaches not only economic, but spiritual and cultural significance to Cherry Point (STPO - Xwe'chi'eXen (Cherry Point) Position "NO"). They will be hard-pressed in the months ahead to bring to the table a more holistic view of "environmental services".

Over the following weeks, I will delve into:

Whether the terminal is good for the economy in the long run

Even if it is good for the economy, is it good?

Does an environmental impact assessment capture this?

How can it be captured?

And lastly, what can concerned citizens do?

Gateway Pacific Terminal: Setting the Stage

Good to be back in the blogging world. It's at this point I look back at a blog begun January 2011 in Sustainability Marketing class and think, "I should have seen a sustainable business degree coming".

Had a conversation on the bus this morning with a gentleman studying biology and geography at WWU. He waxed eloquent on the wonders of the natural environment and how we shouldn't be destroying it all. It's in these situations I love being able to say, "We're working on that!"

My hope & dream for the coming year: being able to say, "We did that."

This brings me to a topic that surfaced in an earlier post (Bellingham Scheduled to Become Major Coal-Exporting Port) and has since raged back and forth beneath the subdued surface of my home community.

Right now we're in the middle of the scoping process, with one session yesterday, Oct. 15th, and another Nov. 3rd. These determine what factors will be considered in the environmental impact assessment. (Does "establishing system boundaries" sound familiar?)

A group called "Safeguard the South Fork" is equipping public participants to submit meaningful comments during the review (tipping the "self-organization" leverage point).

It turns out that where the system boundary is drawn can make a big difference. The Gateway Pacific Terminal site claims the completed project will furnish 1,250 long-term jobs. This doesn't take into account whether adverse effects to the local marine ecosystem will cause a collapse in the fishing industry, which currently numbers among major employers in Bellingham.

It doesn't take into account where housing will be built to accommodate these workers. If it expects them to commute from Bellingham, it's not factoring in transportation costs to the community.*

(*With further research I found how they solved this dilemma: by claiming a maximum of 213 long-term jobs on the traffic impact segment of their land use application.)

I plan to take a look at some of the systems elements in this situation over the next few weeks, and maybe locate a few more "leverage points".