Coal stocks are leading the energy sector higher after President Donald Trump signed an executive order Tuesday to overhaul the Obama administration’s Clean Power Plan. While the executive order is certainly good news for coal investors in the near term, coal’s role in the future of the U.S. energy industry remains uncertain.
A growing number of power plants have transitioned to cleaner, cheaper natural gas in recent years, a trend that is likely to continue.
The Clean Power Plan is a set of regulations intended to reduce environmentally harmful carbon dioxide emissions from power plants. Trump says the regulations are part of the previous administration’s “war on coal.”
“The action I’m taking today will eliminate federal overreach, restore economic freedom and allow our companies and our workers to thrive, compete and succeed on a level playing field,” Trump said.
Shares of coal producer Ramaco Resources (ticker: METC) are up 19.5 percent so far this week. Consol Energy (CNX) and Cloud Peak Energy (CLD) shares are also higher by 4.8 percent and 9.7 percent, respectively.
Trump’s executive order eliminates a temporary federal ban on fossil fuel mining on federal land. It also eliminates a rule protecting streams and other waterways from coal mining waste.
The amount of coal used to fuel U.S. energy needs is down more than 50 percent in the last decade, the Energy Department says.
Since 2000, U.S. coal consumption has dropped from 812 million tons to just 511 million tons, according to the U.S. Energy Information Administration.
Seaport Global Securities analyst Roberto Friedlander says energy investors should look beyond coal stocks when assessing the positive impact of Trump’s order.
“Natural gas demand is here. It’s going to be here to stay,” Friedlander says. “There are two subsectors which I would exhibit caution on, which optically look good but really aren’t doing anything fundamentally, and that would be coal and offshore drilling.”
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