Arch, Peabody Anticipate Carbon Rules

As potentially costly carbon-emission rules become increasingly likely, leaders in the coal industry are spearheading efforts to get a jump on the game by investing in clean-carbon projects.

Author:: Andrea Tse
Publish date:: Mar 11, 2010 3:51 PM EST

NEW YORK (

TheStreet

) -- As potentially costly carbon-emission rules become increasingly likely, leaders in the coal industry are spearheading efforts to get a jump on the game by investing in clean-carbon projects.

The need for these investments is critical, if current utility trends are any indication of this. Utility companies are becoming more and more interested in -- or are already fueling their power plants with -- natural gas instead of coal, given that cleaner emissions would likely mean fewer future business costs. And wind and solar energy projects are also seen as potential threats to coal industry components.

Arch Coal

(ACI) - Get Report

, for one, is dealing with these challenges by making small, but strategic investments in technology companies focused on making coal use cleaner. Arch says its technology portfolio now includes an equity interest in

DKRW Advanced Fuels

, which is planning to convert coal into clean-burning transportation fuel on Arch reserves in southern Wyoming;

ADA-ES

, an emissions control company; and more recently, the

Trailblazer Energy Center.


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Arch Coal on Thursday said that it bought a 35% equity interest in the Trailblazer Energy Center, expected to rank among the world's cleanest fossil-fuel-based power plants, and being developed by power development company

Tenaska

near Sweetwater, Texas. Arch's investment will be made over time as the development of the project reaches key milestones.

Trailblazer is expected to emit 70% less carbon dioxide than the cleanest natural gas-based power plants and will ship captured carbon dioxide to the nearby Permian Basin, where it will be used to boost oil production.

Peabody Energy

(BTU) - Get Report

could also be in the process of making a similar type of investment to Arch Coal. In fact,

Peabody is expected to announce its decision to invest in energy start-up company Calera this week

, according to the

New York Times.

Calera's claim to fame is that is has developed technology converting most of the carbon dioxide emission from a coal or gas-fired power plant into calcium carbonate, which can then be prepared for use in wall or highway construction; and if Calera can replicate this process on a grander scale, companies could ultimately do away with costly carbon-sequestration systems that would need to be built next to these power plants.

At a time in which unprepared businesses could face financial pain amid the imminence of ever-toughening carbon-emission and broader environmental regulations, carbon-heavy coal companies like Arch and Peabody are clearly attempting to anticipate the coming wave.

In the meantime, coal companies are expected to watch their businesses perk up amid strong industrial growth in China, a host of other

positive indicators

, and the recovering global economy. Coal producers like

Alpha Natural Resources

(ANR)

Consol

(CNX) - Get Report

Massey

(MEE)

and

Patriot

(PCX)