Coal, Cheap Clean and Plentiful
Research for Online Investors

by John Dalt

7/20/10

Our state has had a three year political battle over building a coal-fired electrical generation plant.  You would think that a prairie state (red) was conservative, but you might be wrong.  One of the amazing things about living in a red state is every politician recognizes the importance of the republican brand, but does not respect conservative values.

I suppose this also happens in blue states, where everyone labels themselves as a democrat, but all are not as hell bent on rushing to socialism as their leaders in Washington are.  It must be one heck of a wake-up call the first time they get their arm twisted by the house whip.

With this backdrop, I came across some interesting information this week about coal.  In the last thirty years, the U.S. has tripled consumption of coal.  More than 50% of our electricity is currently generated using coal.  During the time that our use has increased, coal emissions have been reduced by 40%.  Last year our consumption decreased by 10.7% because of the credit crisis and slowing economic growth.

According to the Energy Information Agency (EIA), scrubbers on old coal plants remove 99% of the toxic pollutants that escape from their chimneys.  Plants built earlier than the last few years (with the latest technology) are getting these scrubbers at a fast pace.  By the end of 2011, over half of the old coal fired electrical plants will have scrubbers in use.  That accounts for 90.6 gigawatts of electricity generated with “clean” energy.

The debate and politics surrounding alternative energy don’t always recognize the importance that fossil fuels play in our lives.  The U.S. burns 3.8 tons of coal per year for every citizen.  It accounts for 94% of our fossil fuel energy reserves, and we have enough to last 235 years, about 238 billion tons.

For the U.S. to wean ourselves off coal, we would have to build 250 nuclear plants or 500 more Hoover Dams.  How many solar panels would it take?  At a coal-fired electrical generation plant in Colorado, there are 6.8 acres of solar panels.  These solar panels save 900 tons of coal per year.  This is considered efficient.

The U.S. consumed one billion tons of coal in 2009.  A little back of envelope math tells us the U.S. would have to cover 7.5 million acres with solar panels!  There goes the neighborhood.

According to the Vancouver Sun, China consumes more energy than the United States.  New data from the International Energy Agency (IEA) showed that China passed the U.S. in 2009.  China uses about half the crude oil the U.S., uses, but much more coal.  The U.S. exports coal to China.  China plans to build 1,000 gigawatts of new electrical generation capacity in the next 15 years.

We have a great coal company in our Long-Term Portfolio.  It is organized as a Partnership, so it distributes 90% of the earnings to unitholders.  The partnership doesn’t pay taxes and we get a write off against our ‘dividends’ for capital expenses and depreciation.  We bought this stock in May and are already up 18%!  Even at the current high stock price, the partnership pays over 6% annualized dividend.  If you would like to own stocks like this, and have us monitor your holdings, why not join Galt’s Long-Term Portfolio?

Goldman Sachs disappointed the market this morning with earnings of $613 million, down from $3.43 billion in the second quarter of 2009.  Revenue was down 36% at $8.84 billion compared to $13.76 billion a year ago.  Earnings were hurt by the $550 million SEC fine and $600 million for a new British bank payroll tax.  The stock was down early, but by mid-day had clawed its way back to the green column.  The New York Times covers GS’s earnings.

Orin Hatch (R. Utah) appeared on CNBC’s Kudlow last night. He said the democrats are trying to build a “dependency constituency.” He continued that the democrat’s goal is to have 60% of the U.S. population dependent on the government for benefits to insure control of the government. They are well on their way. After 80 years it is nice that one Republican has figured it out.

To the mailbag:
The big banks will get bigger by absorbing the little banks or putting them out of business so that consumers have no choice but to go to them!!  Total monopoly of the banking system!  MAJOR ROBBER BARRONS HAVE TAKEN OVER.----paid up subscriber T.M.

John’s reply:  A continuing process of regulation and choking out the capitalist system.  We wrote about the cost of compliance in MarketToday on June 25, 2010.  The costs will hurt the big banks, but make small banks unprofitable.  The democrat reformers have just handed the small banks to the big boys on a silver platter.  All at the cost of the average American consumer!

I watched Obama state that BP will do nothing the government doesn't tell them to do, and exactly and only what the gov't. tells them to do it.  I've noticed that when things are going well, he uses "We", and when they aren't, he uses "They".  Now they've either blown a hole in the well or forced the oil & gas to exit via an existing hole, possibly enlarging it. But the Obamob has told them to keep the cap on for another 24 hours! Wonderful!  If they keep the cap on long enough, maybe they can blow a nice hole in the ocean floor as an eternal monument to bureaucratic stupidity!  What's with these idiots? Why haven't they told BP to put on a riser and let the production flow to the ships above (like you suggested a couple of letters back)?  We enjoy your letters!—subscriber W.H.

John’s reply:  I did not expand on this Monday, because I feel like we have covered it and our readers know how stupid these actions are.  It absolutely amazes me that they are taking this risk.  There was a press conference late Monday night, where Thad Allen admitted they have leakage on the floor close to the well.  Either my information about the danger of these actions is completely wrong, or these guys are playing with fire.  There is not recovery if it blows out.  Hofmeister called it a "volcano."  Wow.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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