News of Coal's Demise Could Prove Premature

Fortnightly Magazine - September 15 1997
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Despite recent announcements by the Environmental Protection Agency to place additional restraints on power plant emissions, coal continues to dominate electric fuels markets. Though some fear new EPA standards could pressure marginal coal plants to close, it is unlikely this will happen. Coal markets are propped up by a marked decrease in contract prices, cleaner mining, productivity gains, troubled nuclear power and instability in gas and oil prices. Through the first quarter of 1997, coal accounted for nearly 58 percent of the electric output by utilities (em up from 56.5 percent in 1996 and 55.2 percent in 1995.

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Contract coal prices have declined steadily since early 1991 (see Chart 1). More than 80 percent of all coal delivered to electric power plants is under long-term contract (em about 700 million tons annually. Lower prices primarily are driven by the roll-over of high-priced contracts signed in the late '70s and early '80s. Contracts will continue to expire in the future.

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