Nobody Likes Coal…Except the Stock Market
Public and scientific opinions are running against coal. No matter. In the stock market last week, coal was still king.
Holcomb, Kansas, the site of a new planned coal-fired power plant.
Photo: Jeroen van Bergeijk
Former vice president Al Gore recently called for a moratorium on new coal-fired electric generating plants until a way can be found to capture all the carbon dioxide released when the fuel is burned. That is no longer an outlandish prospect, as coal is having a tough time in the press, before regulatory commissions and among scientists concerned about global warming.
In the stock market, however, coal is doing just fine, thank you. Last week, companies that own or mine coal powered the Yonder 40 upward. The Yonder 40, forty stocks chosen to represent the economy of rural America, has risen 13 percent since mid-January and now is significantly ahead of all the other major stock indexes. (See the next page for chart and full Yonder 40 listings.)
Peabody Coal rose nearly 12 percent last week. Walter Industries rose 11 percent. Cimarex was up 6 percent. The Yonder 40 as a whole rose 4 percent last week.
Outside the stock market, however, coal is being increasingly challenged, largely because when it's burned the fuel produces large amounts of carbon dioxide, a gas that contributes to global warming. And coal is losing some battles with regulators and with public opinion because of its climate changing properties.
For example, in October, a Kansas regulator denied a request by Sunflower Electric Power Corp. to build a coal-fired power plant near the small town of Holcomb. Then, when the Kansas legislature passed a bill that would grant the permit, Gov. Kathleen Sebelius vetoed the bill.
(Yes, Holcomb is the Kansas town where, in 1959, two ex-convicts killed four members of the Clutter family, a crime made famous by Truman Capote in the book In Cold Blood.)
Sunflower Electric wants to add two units to its existing coal plant in Holcomb.
Sebelius' decision shows how far coal has fallen from grace. When Sunflower first proposed building the coal plant near Holcomb, Sebelius supported the project, according to a story in the Kansas City Star written by Karen Dillon and David Klepper. The state regulatory agency was set to issue the permit for the Holcomb plant, according to the reporters, but "what those in government had failed to fully realize was the change in public opinion surrounding global warming that had developed since Sunflower’s initial proposal. Only when hundreds of opponents of the coal plant expansion turned out for a public hearing in Lawrence in November 2006 did the magnitude of public opinion finally become apparent to many of those responsible for allowing the expansion."
That opposition changed Sebelius' opinion about the plant. Then, in October 2007, one of the governor's appointee's rejected Sunflower's proposal. After the Kansas legislature passed a bill that would resurect the plant, Sebelius vetoed the legislation in late March.
The fight over the Holcomb plant has set off a huge debate in Kansas about power, coal and the effects of global warming. The Kansas City Star reporters wrote that half the money spent by lobbyists in Kansas during 2007 was reported by energy companies. (A good portion of that was spent by a company that produced natural gas, a fuel that competes with coal.)
Late last week, the Kansas House of Representatives passed another bill that would allow the construction of the Sunflower plant near Holcomb — but with one vote less than would be needed to overcome a Sebelius veto. And, yes, the governor has vowed to veto this bill, too.
The governor is not alone. The Wichita newspaper editorially supports Sebelius' stand, noting that 85 percent of the power to produced at the Holcomb plant is for use outside the state.
Washington Post reporter Juliet Eilperin wrote a story this weekend headlined, "New Focus on Coal's Part in Warming." Eilperin reports that James E. Hansen, one of the best-known advocates for curbing greenhouse gasses, recently sent a letter to the head of Duke Energy, "calling on him to confront the role that his coal-fired plants play in global warming."
In the New York Times Sunday, Andrew Revkin reports that the debate about global warming has become "a lot more complicated" with new data "showing an unexpected rise in global emissions and a decline in energy efficiency…" There is growing consensus, Revkin writes, that simple attempts to cap greenhouse gas emissions "will be too little and come too late."
Economist Jeffrey D. Sachs wrote in Scientific American, “Even with a cutback in wasteful energy spending, our current technologies cannot support both a decline in carbon dioxide emissions and an expanding global economy. If we try to restrain emissions without a fundamentally new set of technologies, we will end up stifling economic growth, including the development prospects for billions of people.”
And the fight over coal isn't limited to the prairies of western Kansas. The Wall Street Journal reports that the Sierra Club and Environmental Defense are challenging a federal permit that would allow Deseret Power to build a new coal-burning plant in Utah. The environmental groups are arguing that the federal government must take greenhouse gases into account when considering permits for power plants.
There was other news in the past week affecting stocks in the Yonder 40:
“¢ Bloomberg noted that the "best trade on Wall Street these days may be buying Wal-Mart Stores Inc. and companies whose earnings will increase as the U.S. economy recovers, while selling the banks that were behind the subprime market meltdown." In other words, buy Wal-Mart and sell Goldman Sachs. Wal-Mart was up 4.4 percent last week.
“¢ That recovery is still yet to arrive, if Family Dollar's sales are any reflection. The low-priced retailer reported last week that its net income in its most recent quarter was off by 30 percent from the previous year. The company's sales in March were equally dismal, down 4% to 5%.
“¢ FairPoint Communications completed its purchase of Verizon Communication's wired telephone lines and high-speed Internet services in northern New England last week, but investors were not impressed. FairPoint was down nearly 24 percent last week.
FairPoint got 1.6 million telephone lines and 230,000 Internet customers in the $2.3 billion deal, with customers in Maine, New Hampshire and Vermont.
Here is the full listing of the Yonder 40 for the week ending April 4, 2008:
|Yonder 40||Ticker||Price April 4||Price Change 3/28 to 4/04||Percent Change 3/28 to 4/04|
|Burlington Northern Santa Fe Corp.||BNI||$95.94||$3.95||4.3%|
|Peabody Energy Corp.||BTU||$57.07||$5.92||11.6%|
|ConAgra Foods Inc.||CAG||$24.60||$0.51||2.1%|
|Cato Corp. Cl A||CTR||$15.59||$0.77||5.2%|
|Deere & Co.||DE||$85.74||$5.80||7.3%|
|Dean Foods Co.||DF||$20.61||$0.61||3.1%|
|Family Dollar Stores Inc.||FDO||$20.38||$1.26||6.6%|
|Fleetwood Enterprises Inc.||FLE||$4.60||$0.17||3.8%|
|Gaylord Entertainment Co.||GET||$32.04||$2.59||8.8%|
|International Speedway Corp.||ISCA||$42.54||$1.62||4.0%|
|Mohawk Industries Inc.||MHK||$76.08||$4.59||6.4%|
|Mine Safety Appliances Co.||MSA||$41.54||$0.83||2.0%|
|Plum Creek Timber REIT||PCL||$41.13||$0.97||2.4%|
|Penn Virginia Corp.||PVA||$48.03||$4.18||9.5%|
|Regions Financial Corp.||RF||$20.91||$1.26||6.4%|
|Sturm Ruger & Co.||RGR||$8.11||-$0.01||-0.1%|
|Stage Stores Inc.||SSI||$16.52||$0.65||4.1%|
|Tractor Supply Co.||TSCO||$38.71||-$0.69||-1.8%|
|Waddell & Reed Financial Inc.||WDR||$33.30||$1.90||6.1%|