For an impartial gauge of just how much the renegotiated House climate bill favors the coal industry, take a glance at the ticker.
Coal stocks were in a slump earlier this year as Capitol Hill buzzed with talk of a crackdown on greenhouse gases and a cap-and-trade program that would force big polluters to pay for their emissions.
Markets don't like uncertainty, especially regulatory uncertainty. Add to that a struggling economy, and coal stocks were down to near three-year lows – until the last two weeks of April.
Those two weeks, it become increasingly clear from congressional hearings and interviews that coal-state Democrats on the House Energy and Commerce Committee would force Reps. Henry Waxman and Ed Markey to weaken their American Clean Energy and Security Act or the bill wouldn't see the light of day.
Coal stocks made a quick upward swing, and they kept rising as Waxman announced on April 27 that he would need more time for negotiations, and as President Obama stepped in on May 5 to try to work out a compromise, and as Pennsylvania Rep. Mike Doyle told reporters on May 6 that coal-burning utilities would get most of the pollution credits they would need for free for at least a decade. (See charts at bottom)
In fact, the coal sector is up 27 percent for the month. Almost uniformly, the U.S. coal companies' stock prices show a bump at the start of the month with no clear trigger outside of Washington for such a revival.
It was a sudden rise that analysts weren't expecting, judging from the research notes they published in April.
The market price for coal had been trending down, and there hadn't been any significant developments in the companies' earnings reports to send stocks up. Massey lowered its production estimate for the rest of the year and said 2010 would likely be even lower.
Analysts expected some improvement in the coal sector due to economic growth in China and stabilizing fuel prices, shipping rates and currencies, but they only expected a gradual rise. Analysts at Credit Suisse, in their April coal sector analysis, anticipated a rebound based on supply and demand in late 2009. Their 12-month stock price estimate for No. 1 coal producer Peabody was $34 (the stock was over $31 today). Deutsche Asset Management raised its estimate for James River Coal from $20 and $21 after a stronger than expected earnings report, a significant increase, it said (the stock was over $21 today).
"The real question long term for coal is whether people believe we will build new coal plants," said one analyst from Deutsche Asset Management.
The coal union and industry appear to think they will. Which takes us to the more politicized side of coal for the explanation.
This week, the United Mine Workers of America and the coal industry front group American Coalition for Clean Coal Electricity both praised the renegotiated climate bill, and singled out Rep. Rick Boucher (D-Va.), who led the coal-state negotiations.
The UMWA took credit for the bill's giveaway of enough pollution credits to cover 90% of the utility industry's needs for the next 10 years and thanked Boucher for pushing it through. ACCCE wrote that it was optimistic that the bill, with Boucher's changes, "will ultimately lead to effective, affordable federal climate legislation."
Boucher has been perfectly clear on his goal of protecting the coal industry as well:
"I've been working extensively to fashion a controlled program that Congress can adopt which will preserve coal jobs, create the opportunity for increasing coal production and keep electricity rates in regions like Southwest Virginia affordable. The compromise that I have reached with Chairman Waxman achieves those goals."
But those are politicians and lobbyists talking. Here's how investors, whose number one concern is how well the business will thrive in the coming months and years, reacted: