And Another Energy Titan Bites the Dust...

David Fessler
by David Fessler, Energy & Infrastructure Strategist, The Oxford Club

For some energy investors, 2016 is going from bad to worse.

How you perform, though, will depend entirely on which side of the energy fence you’re on...

You see, America is gradually becoming a green-energy country. At this point, the bulk of Americans and scientists agree that climate change is real and that it’s caused by the burning of fossil fuels.

The real winner from this is solar, which is growing steadily cheaper... and is being deployed at ever-increasing rates here in the United States.

Longtime readers know that solar is one of my top picks - not just for 2016, but for the near-term future.

Unfortunately, for every winner, there must be a loser. And the biggest loser here is coal...

Powering America No More

For over a century, coal has been a mainstay energy source in the U.S. It’s heated homes and powered electric generation stations.

Coke, a fuel made from coal, powered Bethlehem Steel’s furnaces for 140 years. But those furnaces - located not far from where I live in Pennsylvania - have fallen silent. The plant is now a venue for the performing arts.

These days, steel plants are far more efficient. They use cleaner-burning natural gas for fuel. Other industries - utilities, in particular - are moving away from coal as well.

This distancing has accelerated over the last few years. Why?

For one thing, the Environmental Protection Agency (EPA) has steadily tightened greenhouse gas emissions levels for fossil fuel plants. That has contributed to the shuttering of 72 gigawatts of coal-fired electrical generation capacity.

Let me put that into perspective...

Seventy-two gigawatts is roughly enough power to light 44.7 million homes. That’s every house west of the Mississippi River, excluding Texas.

At this point, it’s looking like one-fifth of America’s coal-fired power plants will close because of the new EPA rules. I expect that we’ll see even more closings in the future.

Decimating the Coal Industry

You may be asking... what’s going to happen to all of America’s coal reserves?

After all, we have estimated reserves of 480 billion tons.

A lot of it is going to stay right where it is - in the ground. It’s too dirty to burn. And thanks to the EPA’s stringent regulations, we are burning less and less of it each year.

Initially, America’s coal companies said, “Okay, we’ll just export it.” However, many coal-burning nations are changing their tune after last month’s U.N. climate conference in Paris.

The 195 countries in attendance agreed to limit global warming through 2050 to a maximum of two degrees Celsius. That will require a HUGE cut in our annual global emissions.

Since coal is the biggest polluter when it comes to fossil fuels, demand in much of the world should continue to collapse, putting even more miners out of business. (I should note that my Oxford Resource Explorer co-author Sean Brodrick still sees opportunity for coal in one part of the world. Click here for his thoughts.)

The latest to fall was Arch Coal Inc. (OTC: ACIIQ). Arch Coal is the second-largest coal miner in the U.S.

It filed for Chapter 11 bankruptcy protection on January 11, 2016. The court filing shows the company holds $5.8 billion in assets... and $6.5 billion in debt.

A year ago, one share of Arch Coal was worth $14.30. Now the stock is down to $0.19.

It’s just the latest in a growing list of bankruptcy filings by major coal companies. Others include Patriot Coal Corporation (OTC: PCXCQ), Walter Energy Inc. (OTC: WLTGQ) and Alpha Natural Resources Inc. (OTC: ANRZQ).

All three companies are still actively mining. In fact, Patriot Coal’s new owner wants to increase the output of his mines - which is the very definition of insanity.

In a lot of ways, the coal and oil industries are in the same boat. Neither wants to face the obvious: that demand for fossil fuels is dropping.

In order to attract investors, they need to cut back on supply. Until they do, they’ll only dig themselves deeper into debt...

And that’s a hole from which there may be no exit.

Good investing,


P.S. With stocks down across the board, now is a great time to audit your portfolio. You need to make sure you’re not a) overexposed to one particular sector or b) invested in companies that won’t survive the current rout in prices. To help you with that second bit, I put together an “Oil Company Death List.” It contains 17 energy stocks that have toxic amounts of debt and very little earnings and cash. (In other words, the stocks you need to dump ASAP.) Click here to learn more.

A "Pick and Shovel" Solar Play

Right now, consumers and businesses are using solar to generate a record 64,892 megawatts of energy. And as the cost of solar sinks, more and more consumers are electing to have panels installed.

To take advantage of this trend, Dave recommended Sprott Physical Silver Trust (NYSE: PSLV) to his Oxford Resource Explorer subscribers.

The Sprott Physical Silver Trust is fully backed by physical bullion and trades like any other stock. It currently has nearly $1 billion in physical bullion. You're probably asking, why silver? It's simple...

One GW of solar modules uses 8.3 million ounces of silver. And according to Dave, "That 1 GW of solar modules (about 50 million) is enough to power 750,000 homes. The total silver mine production in 2014 was 877.5 million ounces... solar module construction is currently using about 8% of the mined silver produced worldwide."

So as the solar boom gets underway, silver will tag along for the ride. Purchasing units of Sprott Physical Silver Trust is your safe and secure way to get in on the action.

- Alexander Moschina with David Fessler

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