Coal Stocks Beaten Up on New EPA Emissions Rules (BTU, ANR, PCX, ACI, JRCC, KOL)

Yesterday’s publication of proposed new carbon emissions rules related to electricity power generating plants have taken even more steam out of US coal company stocks. The new rules are generally regarded as being nearly impossible for new coal-fired plants to be built at anywhere near a competitive cost.

Coal miners Peabody Energy Corp. (NYSE: BTU), Alpha Natural Resources Inc. (NYSE: ANR), Patriot Coal Corp. (NYSE: PCX), Arch Coal Inc. (NYSE: ACI), and James River Coal Co. (NASDAQ: JRCC) are getting punished by investors as a result.

Analysts at Sterne Agee have taken a contrarian view, noting that the new EPA rules do not apply to existing plants nor to plants that will commence construction in the next 12 months. The analysts say that the proposed rules will have a “minimal” effect on coal production for the foreseeable future.

If the proposed rules are adopted, though, as coal plants age and need to be renovated or replaced, the costs of renovating/building a new coal-fired plant make such a choice nearly inconceivable unless expensive — and as yet untested — technologies like carbon capture and storage are implemented. Coal’s days are probably numbered, but that number is still pretty big.

Peabody’s shares are down about -4.8% at $28.42 after posting a new 52-week low earlier today of $28.18. Alpha’s shares also hit a new 52-week low this morning of $14.71, while Patriot fell to within a nickel of its 52-week low. Arch Coal posted a new 52-week low, and James River came within three cents of its yearly low. The Market Vectors Coal ETF (NYSE: KOL) is down about -2.9% at $31.51 in a 52-week range of $27.42-$51.87.

Paul Ausick