Load Up on Coal: Play the Upcoming Senate Brawl over Cap-and-Trade

At the rate things are going, the best way for investors to play the upcoming brawl in the U.S. Senate over cap-and-trade may be to buy shares of the very companies this carbon-busting legislation is intended to squeeze out of business.

We’re talking the big coal-mining companies: Peabody Energy Corp. (BTU), Arch Coal Inc. (ACI), Massey Energy Co. (MEE) and CONSOL Energy Inc. (CNX).

This counter-intuitive investment strategy really isn’t counter intuitive at all when you “dig” beneath the surface.

As the New York Times pointed out in a July 22 editorial, the House-passed cap-and-trade bill, while it imposes a cap “from all industrial facilities that tightens slowly over time,” does not “impose any performance standards on existing (coal) power plants.” Moreover, the House version “explicitly removes these plants from the reach of the Clean Air Act.” In short, the Times laments, the House bill doesn’t “impose lower-emissions standards on the older, dirtiest plants.”

As Kate Sheppard recently wrote on Grist.org, the Senate may ratchet up the irony by cushioning the coal industry even more than the House has. “The coal industry got a lot of goodies in the House-passed energy and climate bill,” Sheppard wrote, “but it’s pressing for even more in the Senate version.” Among other things, the coal industry wants more for sequestration technology (even though it’s already getting some $60 billion under the House version), and it wants the gravy train known as free pollution credits to last longer than the House has prescribed.

Having been bloodied by the healthcare debate, and in desperate need to go to the Copenhagen climate conference in December with a mandate from Congress, logic strongly suggests that Obama will accept whatever the Senate does to further water down the anti-coal aspects of cap-and-trade, even as he publicly denounces anyone who charges that he “sold out” to the coal lobby.

While some investors will no doubt be scared away from coal by the heated rhetoric, the smart play here likely will be to bet on King Coal keeping his crown, at least for now.

Comments

[Doc 224899:]

The White House effort to bankrupt the coal utilities when our economy is tanking due to an energy crunch makes about as much sense as the White House attacking Wall Street execs who still know how to make a profit as a solution to the problem of the economy tanking because corporations can't employ workers and still make profits.

Did I sleep through a key lecture in the ridiculously liberal, neo-marxist, revisionist-history-lo... anti-war, anti-male, anti-Semitic Ivy League University it got my degrees from? Or, is the Cap-and-Trade Bill really as stupid as it seems to be?

Aug 17 11:59 AM

[epeon:]

Yes, the Cap-and-Trade bill is as exactly as stupid as it seems. At this point, the best thing to do is not to pass the stupid bill.

Aug 17 12:05 PM

[sethmcs:]

Load up on coal? I will ponder this.

Aug 17 05:30 PM

[huangjin:]

Cap & Trade: A Smoot-Hawley for the information age!

I'm interested in clean coal technologies as well, especially since their stocks haven't rebounded as much.

Aug 18 08:57 AM

[joevans:]

In my opinion, Global Warming is a misconception, it looks to me that we are going into an ice age, Africa is experiencing colder and wetter winters for the last three years, this winter has been very cold and wet.

Joevans

Aug 18 10:23 AM

[Jimbo:]

joevans: But Al (Nobel Prize) Gore says it ain't so and he has a movie to prove it. Al is going to build an Ark to save us from the rising seas, just like the cuckolded husband in the "Miller's Tale".

Aug 18 01:00 PM

[GPCooper:]

www.viddler.com/explor.../

This documentary counters "An Inconvenient Truth"

Aug 18 05:16 PM

[realold:]

This may be the ultimate irony of the current green generation. They will not only impoverish their children, they will freeze them to death. Instead of trying, once again, to concur mother nature, why not go with the flow and figure out how to profit (in humanitarian ways) from what ever is going on. From what I have read and feel in my gut, any man-made warming should be looked upon as a blessing. This planet is destined to freeze as radiation, orbit and rotation all work against it. Enjoy the nice weather while you can.

Your coal idea is very interesting and politically incorrect. Two reasons to look into it.


On Aug 18 10:23 AM joevans wrote:

> In my opinion, Global Warming is a misconception, it looks to me
> that we are going into an ice age, Africa is experiencing colder
> and wetter winters for the last three years, this winter has been
> very cold and wet.
>
> Joevans

Aug 18 11:41 PM

[realold:]

Sorry, "conquer"

Aug 18 11:42 PM

[realold:]

I will play this through closed-end fund BGR.

Aug 18 11:44 PM

[Yael:]

Oh, but capntrade might, just might, lower global temperatures by one or two tenths of a degree... by 2050. Isn't that justification enough to endure the loss of millions of jobs (even after accounting for "green job" creation) in EACH YEAR of the policy.. through 2030?

Cap and Trade: A Comparison of Cost Estimates
www.heritage.org/resea...

Aug 20 04:40 PM

[Jakomo:]

The result(s) of any attempt by man to manage global warming, or cooling of this planet would be infinitily small and unnoticeable. The event, if it occurs, is inevitable and may even be a good one; if it is even noticed.
All man will succeed in doing with this 'Global warming scam', is to create financial chaos and setbacks that will plague our technology, industry and lifestyle for generations to come.
There is no doubt in my mind that the so-called experts on global warming should find some useful work; writing fairy tales, inter-galactic fiction, or other harmless 'brain teasers', and quit sucking up research grants and tax dollar perks...

Aug 24 02:32 AM

[Jakomo:]

The result(s) of any attempt by man to manage global warming, or cooling of this planet would be infinitily small and unnoticeable. The event, if it occurs, is inevitable and may even be a good one; if it is even noticed.
All man will succeed in doing with this 'Global warming scam', is to create financial chaos and setbacks that will plague our technology, industry and lifestyle for generations to come.
There is no doubt in my mind that the so-called experts on global warming should find some useful work; writing fairy tales, inter-galactic fiction, or other harmless 'brain teasers', and quit sucking up research grants and tax dollar perks...

Aug 24 02:32 AM

[alexbakertech:]

global warming scam??

haha, you guys are hilarious. I wonder how many of you have a degree in any kind of science (no, political science doesnt count). Global Warming is no longer considered a 'debate' by anyone with half a brain and has been recognized by 99% of the world's top scientists/researchers... as fact. Our reaction to it, of course, is highly debatable but there remains no question that we are having a disproportionate and negative impact----btw, the whole "winters have been colder" argument just furthers the real tenant of global warming---it should be called "Global Climate Crisis" because while the core idea is that our globe is warming, that results in freezing temperatures for half the word as the polar caps melt and winds push those temperatures across our globe.

I love investing in BTU and coal and your analysis is great, but lets not start pretending that people at SeekingAlpha have any kind of science knowledge. If anyone wants to refute global warming with a PhD in a relevant field, I welcome it.

Aug 24 10:34 AM