The EPA Won’t Kill the Coal Industry

Depending on whom you ask, the past week has either been a major hit to America's domestic and labor markets, or a huge step forward in environmental protection. And it's not obvious who is on which side of the argument.

When the Environmental Protection Agency finalized its Cross-State Air Pollution Rule that will affect many coal plants throughout the U.S., reactions from those involved were mixed. The measure will require about 1,000 power plants to cut sulfur dioxide emissions 73%, and nitrogen oxide emissions 54%, from 2005 levels by 2014. Sulfur dioxide is a major component in smog and acid rain so environmentalists cheered the move enthusiastically. But some aren't so excited.

Detractors say this regulation will hurt the U.S. coal industry, raise energy prices, and cost jobs. Companies who produce coal here, like Arch Coal (NYSE: ACI  ) , CONSOL Energy (NYSE: CNX  ) , Peabody Energy (NYSE: BTU  ) , and Patriot Coal (NYSE: PCX  ) , argue that hurting the coal industry will cost their employees jobs. A Southern (NYSE: SO  ) spokeswoman called the deadlines imposed "unreasonable, unnecessary and disruptive."

But many of the biggest users of coal aren't fighting the EPA ruling and are in fact in favor of the regulation. The Clean Energy Group, a coalition of major electric generators and distributors including Exelon (NYSE: EXC  ) and National Grid (NYSE: NGG  ) , supports the measure. The group's executive director, Michael Bradley, said, "We believe the compliance dates and emissions reductions are reasonable and achievable."

If utilities weren't the ones fighting the new regulation, you could assume coal producers would be the big losers of such a move. But increasing demand from China would likely overtake any demand lost here in the U.S. And with coal prices remaining high, coal producers are still in a strong position.

The headlines might read as though this is the end of the coal industry, but that's far from the case. Coal plants aren't shutting down soon and demand is still rising worldwide. Coal isn't the energy of the future but it still powers most of the U.S., as well as a growing number of Chinese plants.

Get more of our Foolish analysis of coal and energy stocks by adding them to My Watchlist.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Motley Fool newsletter services have recommended buying shares of National Grid, Southern, and Exelon. Motley Fool newsletter services have recommended creating a covered strangle position in Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (4)

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  • Report this Comment On July 15, 2011, at 12:56 PM, MrChapel wrote:

    I find it interesting you emphasize Exelon and National Grid as supporting the measure. A real quick look on the 'net shows that Exelon gets only 5 percent of its capacity from coal. National Grid doesn't even seem to HAVE any coal fired plants, just gas. I haven't gone through the other members of the CEG, but it is telling that these two are so happy about the measure. Of course, they and you forgot to tell us that it is very favorable to them, but I'm sure it's just an oversight, correct?

    I guess that we'll be seeing some M&O activity in the next four to five years, followed up by waivers to the companies who move into places vacated by companies like Luminant Generation?

    I'm sorry but I thought 'due diligence' was the mantra of TMF? I find it hard to believe that an author, who has written more than a dozen articles with regards to alternative energies would make such a mistake.

    Using Exelon and NGG as if they're major coal users makes you look very, very biased, at the very least.

  • Report this Comment On July 15, 2011, at 1:03 PM, AvianFlu wrote:

    Better check your facts again. The coal industry in the US is already being decimated. There are a number of plants that have already announced they will be shutting down permanently soon. I don't know what that means for their customers, but probably brownouts and blackouts. Welcome to Venezuela! Gee, I can't figure out why the unemployment figures fail to improve!

  • Report this Comment On July 15, 2011, at 1:03 PM, MrChapel wrote:

    Here is Exelon, one of your 'biggest users of coal's portfolio of energy generation plants:

    http://www.exeloncorp.com/energy/generation/Pages/generation...

    Here's an article from Reuters on this:

    http://www.bloomberg.com/news/2011-04-29/nuclear-future-is-n...

    National Grid Plc according to Wikipedia:

    http://en.wikipedia.org/wiki/National_Grid_plc

  • Report this Comment On July 15, 2011, at 4:58 PM, MrChapel wrote:

    @AvianFlu,

    It shouldn't surprise you that this article is filled with half-truths, whether deliberately or due to negligent due diligence. The writer is a staunch proponent of alternative energy sources, solar in particular. Over a dozen articles penned by him with regards to the solar sector. This is the only article he has written with regards to the coal industry. See for yourself:

    http://www.fool.com/author/1787/index.aspx?source=iapsitlnk0...

    I went back and did a little digging into the power generation abilities of the CEG members:

    Austin Energy owns 3 natural gas plants and part owns one nuclear and one coal fired plant.

    Calpine Corp. operates natgas and geothermal plants.

    Constellation Energy produces 23 percent of output with coal.

    Entergy has 7 out of 263 energy units that use coal.

    NextEra has generation capacity of 2.1 percent for coal.

    NRG has 10 out of 46 coal plants. That's 4.6 percent.

    I'm stopping now but I think I've made my point? Am I against a cleaner environment? No. What I am against is government interference that will give unfair advantages to certain parties. What I'm against is purporting to be giving unbiased information, yet not doing so. If I'm wrong, please do feel free to contradict me.

    I'm including the link to the website of the Clean Energy Group, at least, the one mentioned in the article, since there are two organizations with the same name. On the member page, you will find the links to the websites of the various utilities that are members of CEG. It is there, that I've compiled the numbers in this comment.

    http://www.thecleanenergygroup.com/cegcompanies.asp

  • Report this Comment On July 15, 2011, at 4:59 PM, MrChapel wrote:

    Edit:

    NRG has 10 out 46 plants that run on coal.

  • Report this Comment On July 15, 2011, at 5:25 PM, AvianFlu wrote:

    MrChapel:

    I own a couple of solar stocks in real life. I have nothing against alternative energy. However, we will rue the day we destroyed the coal industry...mark my words.

  • Report this Comment On July 15, 2011, at 5:39 PM, MrChapel wrote:

    Oh, I'm with you there. That is why I'm really interested in the writer's response to my questions. I'm giving him the benefit of the doubt at the moment. It might be that he just accepted the remarks of CEG at face value, without doing his dd. If so, that makes him a sloppy writer, but that can be fixed. If, however, that isn't the case, then we have a bigger problem here.

    It's all about trust. Tom, David and many of the other writers here, try to emulate Warren Buffett. Being honest and forthright. This article, however, if the writer cannot explain his conclusions satisfactorily, damages all that. It makes him look like a straw man for the alternative/clean energy groups as well as utilities who will win big due to the new directive.

    Now, I'm hoping the writer only looked at the financials of said companies, read their statements and didn't bother to check out exactly what kind of power production capability they have. That might explain his seeming ignorance. However, the longer the silence continues, the less I am willing to believe such.

  • Report this Comment On July 15, 2011, at 5:58 PM, MrChapel wrote:

    Ugh, again an edit:

    NRG has 10 coal fired plants out of 46. That is not 4.6 percent but about 21 percent of capacity. One fifth of their power generation capacity.

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