Coal marketability: Effects of deregulation and regulation

Electrical utility deregulation will force power plants to compete for sales because they will not longer have captive markets. Market uncertainty and uncertainty about future environmental regulations have encouraged power plants to shift to low sulfur coal and/or to use emissions allowances to comply with Phase 2 of the 1990 Clean Air Act Amendments. Mines in Northern and Central Appalachia and the Illinois Basin shipped 240 million tons of non-compliance coal to power plants without scrubbers in 1997. Under Phase 2, this coal will be replaced by low sulfur coal and/or be used with emission permits. It is possible that Powder River Basin coal production will have to increase by over 200 million tons/year to meet new demand. The prices of emissions permits will impose penalties on non-compliance coal that will probably drive out marginal coal producers. For example, if the cost of an emission permit is $200, coal from the Pittsburgh bed could bear a sulfur penalty of $6.55 per ton and similarly, coal from the Herrinbed could bear a penalty of $8.64 per ton