Is This the End for Coal?

The overhaul of fuel technologies isn’t limited to just cars. The same story can be seen in electricity generation for the whole country. Increasingly strict standards are set to protect the environment, and the as more are expected to come, the coal industry could take a major hit.

Everyone knows there are some dangers in coal mining. Almost any film featuring a coal mine also features an accident. In the past 3 years, 88 people have died in coal mining accidents. But these accidents are not the only hazards associated with the energy-rich black rocks.

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Between the 1980s and 1990s, the EPA found that burning coal released sulfur dioxide and nitrogen oxides — two toxins that contribute to acid rain. The resulting Clean Air Act of 1990 hit coal operations with heavy regulations.

With President Obama in office, coal miners expect even greater regulations. To Obama and the EPA, coal-fired power plants are a leading source of emissions, as 40 percent of carbon dioxide emissions result from electricity generation, and coal pollutes the most. From 2005 to 2012, coal-generated electricity dropped from 50 percent of the U.S.’s electricity supply, to 38 percent…

In late 2008 and early 2009, many coal manufacturers’ shares took sharp dives, likely as investors saw Obama’s environmental stance in opposition to coal. James River Coal Company (NASDAQ:JRCC), Peabody Energy Corp. (NYSE:BTU), Alpha Natural Resources (NYSE:ANR), and Arch Coal (NYSE:ACI) were among those to take the dive. With the exception of James River Coal, all of these companies’ shares were down Wednesday morning, with Arch Coal dropping over 8 percent.

Things may continue to get worse for coal, as Obama is expected to push harder emission standards on new power plants that could effectively stop the construction of any new coal-fired plants.

In addition, competition from other power sources could put the final hurting on the industry. As coal use fell between 2005 and 2012, natural gas use grew from 19 percent to 30 percent of the country’s electricity generation.

Even solar may be able to trump coal, as First Solar (NASDAQ:FSLR) recently purchased a solar project in New Mexico and could soon be offering electricity at half the price per kilowatt-hour that coal plants offer, on average. A typical new coal plant could be expected to charge $0.128 per kilowatt-hour, but First Solar will be offering energy at a rate of $0.0579 per kilowatt-hour in an agreement with one electrical company.

Now, James River Coal Company, Peabody Energy Corp., Alpha Natural Resources, and Arch Coal not only face competition from one another, but they face competition with natural gas companies and solar companies like First Solar, and they also have to deal with the increasing regulation from the government. Murray Energy Corp.’s own Robert Murray believes that the coal industry in the U.S. could be “totally eliminated by 2035.”

As time marches forward, James River Coal Company, Peabody Energy Corp., Alpha Natural Resources, and Arch Coal will have to consider how to proceed and keep the companies functioning if their founding industry is pulled out from under them.

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