Congress can't rein in coal, but the Environmental Protection Agency can.
One of the most amazing shams I have seen in my life is the alleged "clean coal" campaign by so-called King Coal. Arch Coal (NYSE: ACI) (Cramer's Take), Peabody (NYSE: BTU) (Cramer's Take) and the rest of the gang have incredible congressional mindshare, and the notion of carbon sequestration -- which has no potential for feasibility within the next 10 years, if ever -- has become gospel in Washington.
That's how this fuel has surpassed natural gas despite the potential for nat gas to be used en masse in cars -- forget coal for that -- and the huge finds in coal that have made us energy self-sufficient for our lifetime.
Now, while everyone's focused on employment here, the EPA is proposing tough greenhouse rules that directly affect coal and makes mining of coal more expensive by curtailing mountaintop mining. Aside from the obvious negative job implications, these rules will prove difficult to block by the coal lobby.
Our coal strategy vs. our natural gas strategy makes no sense at all, as everyone from the Sierra Club to Al Gore would tell you. Coal's much, much dirtier and because of coal we have to put through incredibly draconian rules that affect all other businesses if we go cap-and-trade. Again, that's a known issue.
If we went with natural gas, where 100 years' worth of use has now been discovered -- enough to solve much of our trade deficit, make us energy self-sufficient and put millions of people to work drilling and building pipelines -- then we would not have to worry about mountaintop mining or EPA rules. But we can't because of a couple of committees in Congress that are dominated by coal people. So instead we cut jobs for coal and raise the price of coal.
Just the dumbest thing we can do. But it doesn't matter. This Congress talks a huge game of carbon reduction and pursues the exact opposite course.
Arch and Peabody have been trading up here because of China, not the U.S., so I don't know if you have a good reason to sell these here. They are very promotional companies. But longer term, this fuel is doomed no matter how much Congress defends it. Longer term, companies like Devon (NYSE: DVN) (Cramer's Take) and Chesapeake (NYSE: CHK) (Cramer's Take) will prevail. Even short term, though, they are getting hurt. New York just announced it is putting in new rules that make drilling more difficult in the state's portion of the Marcellus Shale. Unbelievable.
Right now the news flow away from Congress is awful for coal even though it is just as ugly for natural gas. It will matter some day for certain that coal's dirty, except in Congress, which seems like it will never come around to making nat gas a preferred fuel. Nat gas stocks are under pressure once again in this selloff. Some of it is market weakness. But some of it has to be that while the EPA is going at coal, no one in Washington of any import is championing gas.
I think the stocks take another leg down if someone doesn't break ranks with coal and go for the cleaner, safer fuel.
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Devon.
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Reader Comments (Page 1 of 1)
10-02-2009 @ 10:21AM
wa4veg said...
How's "APC" looking through all of this energy policy uncertainty?
10-02-2009 @ 10:27AM
ebrandler34 said...
"and the desire to not be short ahead of what already is being rumored to be a good employment number could propel the market back to levels that are parallel to where we were." - Jim Cramer BloggingStocks 09/28/09
Where do you get YOUR rumors, Jim?
A Magic 8-ball ?
10-02-2009 @ 10:37AM
Beltway Greg said...
Damn you Cramer. End coal = end country music. So many songs were written and inspired by tough times over in Appalachia and descending into those inky black depths that
if we end that way of life America will fall into a cultural funk from which it many never extricate itself. Consider these facts. In addition to the termination of America's music we'll see a decline in NASCAR and them boys will have to go back to a running from the feds. The consumption of Mountain Dew will decline. Likewise, Red Man and other assorted tobacco products will also fall.
So let them be. First Robert Kennedy tried to clean-up coal country and now you've decided to hoist the cross of human kindness upon your increasing unstable shoulders sir. He failed and you will suffer the same fate. How would you feel if we Rednecks loaded up the kin and drove to the Short Hills Mall and blocked the entrance to the Apple Store and told you to do something different with your lives except download apps, buy True Religion jeans, and suck down lattes? Remember all roads lead to other roads and we have GPS systems so you can't hide. Son, I don't need no mall. My mall is the woods and it's got everything I need. I can survive in your world, could you survive in mine?
And remember the King is #43 Richard Petty not Elvis.
10-02-2009 @ 7:47PM
Robert Fulton said...
Interesting stuff, this coal vs. natural gas debate. Where I come from, natural gas is plentiful, and so are the oil sands, which are very heavy users of natural gas. Naturally, the environmentalists are all over our tar sands projects, and yes, the extraction process spews out a lot of CO2. It's likely been a topic of discussion between our prime minister, Stephen Harper and the POTUS Obama.
In China, it seems like they are opening up coal fired plants every other day. It's cheap, I guess. They know that they have a massive pollution problem in many areas of the country. But even them communists are getting the message. They encourage little companies to re-cycle waste heat to generate power at various factories, and they are coming up with applications of clean technologies such as coal water to render the burning of coal a lot more efficient and cleaner.
We are fortunate to be blessed with an abundance of natural gas, and coal and oil, and farm land. We don't want to close down our oil sands projects, either, or we won't have enough oil to export to the USA. Already, there has been a massive slow-down in some of the big oil sands projects, and lots of people are out of work here.
There has been a supply glut of nat gas building up for a while, and storage is at record highs. Drilling for more of the stuff is off more than 50% from last year. The gas price hit a seven year low price in early September and is now in resuscitation mode. If production costs continue to out-run the selling price, everything slows down, some existing wells get shut in, and more of nothing happens. The companies that produce and ship natural gas are waiting for supply destruction to kick in forcing the gas price up.
This will not happen right away, since more gas than is used is being put into storage until November. Just in time for winter as you know it. (Our winter starts any minute, usually before the end of October).
So you can't run the family sedan on coal? Hmm, yes natural gas works fine. As for me, I would buy lithium stocks. I think they have something to do with batteries to run cars and a lot of other things.
Heh, I know, I know, you still have to generate some powere to recharge them things.
Regards,
RMFCAN
10-05-2009 @ 4:00PM
thain said...
I don't understand the debate, if we have enough coal for our lifetime, and enough natural gas for 100 years, use them both and stop importing billions upon billions of gallons of oil.
Heck why not have some X-Prize type setup and let whoever can get you X amount of local energy following the same limitations(pollution, cost, etc) first get a billion dollar prize.
10-23-2009 @ 2:28PM
ronandlane said...
I believe nothing that snake oil salesman Cramer has to say. Have another Red Bull Jim.