Coal's Shine is Dulled — At Least This Week

People gather at a church near the Sago Mine in West Virginia, where 12 miners died in a January 2006 mine explosion.
Photo: Chuck Holton

Wall Street says it is taking two things into account when it figures the stock price of companies that mine coal: is the company safe and will utilities find a way to burn coal cleanly.

Several coal companies are in the Yonder 40, the Daily Yonder's index of publicly traded stocks that reflect the rural economy. Last week, the Yonder 40 was down slightly. Mining stocks Peabody Energy and Walter Industries were down six and five percent, respectively, while Mine Safety Appliances, the maker of mine safety equipment, was up sharply.

"The market price of coal must ultimately reflect the cost of mining it safely," Mark Liinamaa, coal-company analyst at Morgan Stanley, told the Wall Street Journal. Moreover, the environmental costs of coal are finally being realized among investors, especially as states begin to enact their own global warming policies.

And those calculations are tempering what had been excitement about coal mining firms.

"The coal boom of three to four years ago is over," Roger Ballentine, president of Green Strategies Inc., a Washington, D.C.-based energy and environmental consulting firm, told the Wall Street Journal. Not even efforts to turn coal into an oil-replacing liquid seem to be finding much favor in this climate. The Union of Concerned Scientists just issued a report saying that turning coal into liquid fuels would create more greenhouse gasses than using oil or biofuels, according to the Charleston Gazette.

Moreover, this is not been a good time for safe mining. There were 22 coal mine fatalities in 2005 and 47 in 2006. The federal government has largely been withdrawing from its long-standing mission of maintaining safety standards in the nation's mines. Even as coal production increased 9 percent from 2002 to 2006, the number of federal mine inspectors dropped 18 percent.

In 2002 there were 605 federal mine inspectors. In 2006, when mining deaths peaked, there were only 496 inspectors.

Also, the Washington Post reported Saturday, federal inspectors failed to conduct inspections required by law in one out of seven of the nation's more than 700 underground coal mines. The Department of Labor's inspector general reported that budget constraints and a lack of emphasis on worker safety by the Bush administration led to the lapses in inspections.

Moreover, the inspector general found, even when inspectors did enter mines they failed to do complete inspections. The inspector general also found that the federal mine safety agency wasn't following its rules in how mine fatalities are counted, according to the Gazette.

The Yonder 40 overall treaded water this week, dropping slightly while the other indexes were up slightly. The Dow Industrial average led the way, with a rise of one percent in the week. The 40 was off by a third of a percent.

Here is the business news from the Yonder 40 this week:

"¢ Much of the talk this week was about the upcoming Christmas season, which retailers are predicting to be poor. So, stores are opening earlier and earlier, according to the New York Times. CompUSA is beginning the Christmas shopping season at 12:01 am the day after Thanksgiving. Wal-Mart has been offering 6 a.m. specials every morning since November 2.

"¢ ConAgra can reopen its pot pie plant in Marshall, Missouri. Frozen pies from the plant were recalled in early October after finding the products were linked to a salmonella outbreak.

"¢ Deere will split its stock two-for-one for those holding shares November 26.

"¢ Ralcorp Holdings will buy Kraft Food's Post cereal line for $1.6 billion. That buys Ralcorp brands such as Honey Bunches of Oats, Raisin Bran, Grape Nuts and Spoon Size Shredded Wheat. Ralcorp stock was up more than 12 percent for the week.

Here are the results for the full Yonder 40 for the week ending November 16, 2007: