04/23/2008 12:54 pm ET Updated May 25, 2011

The Audacity of King Coal

Tucson, AZ -- "Lord, make me chaste -- but not yet." That's how a Utah Sierra Club member, quoting St. Augustine, characterized the latest moves by the coal industry. At negotiations on the Western Climate Initiative, King Coal's lobbyists argued that they should be able to offset their obligations to clean up carbon dioxide pollution from today's power plants with "reductions" in pollution that would result if, in the future, they were able to capture and sequester the pollution from tomorrow's plants. Such a proposal, based on technology that doesn't exist yet, if taken seriously, would make sub-prime mortgages look like blue chip investments.

But the dirtiest secret of all is that while coal is trying to ram a new generation of pulverized power plant polluters down America's throats by claiming to be the "cheap" electricity source, it is privately boasting to potential investors about the windfall profits it expects to make by allowing a huge supply shortage to develop and then squeezing electricity ratepayers.

(Utilities in most states simply pass such cost increases on to ratepayers, so they are delighted to cooperate by pretending that coal will continue to be cheap.)

In a sophisticated investor prospectus,  Peabody Coal's CEO, Gregory Boyce, opens his presentation with a slide titled, "Roaring Coal Demand Growth Straining Supplies in All Markets." He goes on to promise "Exporters Face Numerous Constraint" and "Coal Prices Reaching Record Highs."

His chart shows that in one year coal prices have increased by at least 64 percent for Chinese coal, and 200 percent for metallurgical-grade, the top of the market. Boyce tells investors that the percentage of coal being provided under long-term, price-constrained "legacy" contracts is doubling -- providing "significant upside." He shows how Peabody plans to manipulate demand for coal exports to increase prices domestically.

He downplays the recent cancellation of 58 coal-fired plants emphasizing instead that eleven new plants got under construction before environmental opposition began to roll back the coal rush, and blandly projects that U.S. consumption will dramatically increase yielding -- you guess it --- still higher windfall profits (and air, water and global-warming pollution).

And he closes by hinting that in the future, coal reserves deserve to be valued as highly on a BTU basis as those of oil and natural gas. Clearly he wants the same kinds of windfall profits that Exxon-Mobil is currently enjoying and thinks he can manipulate the market to get there.

This presentation should be required reading for utility regulators considering demands that they rush approval of new coal-fired power plants to "save customers money." The only thing they are saving is Peabody's share value.