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Is Coal Dead?

July 13, 2012

In the wake of Patriot Coal’s filing for bankruptcy on Monday, other coal stocks have plummeted. James River Coal (JRCC) began the week at $3.47 and dropped a whopping 42.7 % to $1.99 at the market’s close on Friday, Alpha Natural Resources (ANR) started the week at $8.71 and ended at $7.63, Peabody Energy Corp (BTU) dwindled from $24.73 to $22.51, Walter Energy Inc (WLT) decreased from $41.15 to $37.66, Arch Coal (ACI) declined from $7.17 to $6.09.

These recent price decreases are only a part of a general trend taking place over the course of 2012, which coincided with a diminishing electric power generation from coal. At the beginning of the year, the U.S. carried roughly 130 million megawatt hours of coal; in April of 2012, the U.S. Energy Information Administration reported last week that coal generation was at 96 million megawatt hours. Natural gas generation, on the other hand, has increased since late last year, and is now up to 95.9 million megawatt hours. This is the first time since the Energy Information Administration began collecting data that the generation from coal plants and the generation from natural gas plants are essentially equal. Both account for 32 percent of the generation in the U.S.

Extremely strict government regulations on coal, along with historically low natural gas prices, have contributed to this trend in which coal generation is on the down and natural gas generation is on the rise. Hot temperatures this summer have required increased production of both coal and natural gas. With regulations giving more incentive to burn natural gas and stay away from coal, will coal ever recover?