1 "Pie in the Sky" Idea to Save Coal

Coal gets a bad rap. Environmentalists call it a dirty fuel, while Santa Claus uses it to punish naughty little boys and girls. That really is a shame because coal has the power to produce a lot of energy, as well as high-paying jobs. Not only that, but coal produces some really good pizza.

SOurce: Flickr.

My wife and I stopped by a pizza place the other night which is known for baking it in coal-fired ovens. Believe it or not, coal was the fuel of choice for pizzerias early last century. This restaurant goes back to those roots and uses coal because it delivers a unique flavor and consistency that's not possible from wood or gas ovens. I can certainly agree with that statement; the pizza was fantastic.

The coal used in the process is called anthracite, and the company sources it from Pennsylvania and has it delivered by railroad. Each restaurant uses about 100 pounds of coal per day, which it says burns cleaner and is more eco-friendly than gas or wood-fired methods. All that being said, at 100 pounds per day and just a handful of locations across the country, coal-fired pizza ovens won't be a big future driver for Appalachian basin coal producers like CONSOL Energy (NYSE: CNX  ) or Alpha Natural Resources (NYSE: ANR  ) .

That's especially true when you consider that this particular variety of coal, anthracite, is among the hardest to find and makes up a very small component of coal production worldwide. Most of the reserves in the U.S. are located in Pennsylvania, and the overall U.S. market is limited to about 5 million tons per year. What is produced is burned as either a domestic fuel or to make great pizza. Unfortunately, that's simply not enough to move the needle.

What has been moving the needle for coal producers is to look outside our borders to export other more prevalent forms of coal. China and India are two top destinations. CONSOL Energy, for example, ships its coal through its wholly-owned Baltimore coal export terminal, while Alpha Natural Resources has been working with Kinder Morgan Energy Partners (NYSE: KMP  ) to export coal through its dry bulk terminals along the Gulf Coast. All three companies have been expanding export capacity to take advantage of demand from markets abroad. Exports really are crucial to the coal business as U.S. coal consumption has been plummeting, and last year alone our consumption dropped by 11.9% over the previous year.

In addition to exports, the coal industry has been working to clean up its image so it can reverse that trend. Overall, more than $12 billion is being spent on research across 43 states on clean coal projects thanks to funding from the Department of Energy. Even more recently, President Obama has called from $8 billion in federal loan guarantees to support "advanced fossil energy," which includes clean-coal-fired power plants. These funds are being used to not only make coal a cleaner-burning fuel, but to create and keep jobs. 

The current problem is that most of the solutions either aren't yet commercial or not very economical, especially when going up against cheap natural gas. Utilities like Duke Energy (NYSE: DUK  ) and Southern Company (NYSE: SO  ) , for example, have spent billions on projects to turn coal into cleaner-burning gas. These projects have been very costly to build and aren't able to completely capture the carbon dioxide emissions. However, what's most promising is that Southern's project in Mississippi will sell the carbon dioxide it captures to oil companies to use in enhanced oil recovery methods in the the Gulf of Mexico. It's one indication that these projects really do represent a step in the right direction.

Further, it's likely that we will continue to take steps forward in the future because the stakes really are quite high. We have such an ample supply of coal in our country, which produces very high paying jobs, that we can't simply abandon it completely. It also provides our nation with fossil fuel diversity, which could help keep natural gas prices in check. So, while the future of coal might not be in pizza, its dual future of exports as well as cleaner-burning technologies do look rather appetizing.

Unfortunately, coal won't be the darling of the utility industry that it once was. With the swelling of the global middle class, energy consumption will likely skyrocket over the next few decades, so long-term investors want exposure to this space now. While coal will most certainly have a role, we've picked one incredibly diverse utility that presents a rare "double-play" investment opportunity today. We're calling it "The One Energy Stock You Must Own Before 2014," and you can uncover it today, totally free, in our premium research report. Click here to read more.


Read/Post Comments (3) | Recommend This Article (1)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 06, 2013, at 1:57 PM, ironyworks wrote:

    First; You are flagrantly ignoring the stalwart blacksmiths of America. We burn high quality coal in our forges and have for a very long time. The national blacksmiths organization ( ABANA) is around 5000 members and most blacksmiths aren't joiners. We are probably more significant coal consumers than pizza ovens...grin.

    Second; until a practical clean coal technology is developed sometime in the future, it's an impractical power plant fuel because of CO2, acid rain and mercury emissions.

    But it's still OK for blacksmiths , of course.

    Third; in the long run, the coal reserves will prove to be an immensely valuable chemical feedstock and folks in the future will regard us as shortsighted idiots for burning it.

  • Report this Comment On July 07, 2013, at 8:32 AM, menefer wrote:

    Wrong, wrong, wrong. Any coal is dirtier than natural gas. The Southern Company plant in Mississippi will burn lignite not coal. The idea that the waste gases will be used by oil companies depends on unproven technology and is pie in the sky. I sold all of the Southern Company stock that I owned as this is going to be the biggest mistake that SO ever made and they've made some big ones. The term "clean coal" is an oxymoron.

  • Report this Comment On July 07, 2013, at 12:06 PM, TMFmd19 wrote:

    @menefer - FYI: Lignite is coal. Its the largest portion of the world's coal reserves and has the lowest carbon content. http://www.alphanr.com/poweringthefuture/Pages/LifecycleofCo...

    Also, let's not forget that the internet, radio, steam locomotives, etc. were all "unproven technologies" at one point.

    Matt

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