Dow Jones/Associated Press

      NEW YORK — After several years of stagnation, the price of coal mined in Wyoming's Powder River Basin has surged and may be primed for further increases mirroring the recent rise of other energy commodities.
      Since the beginning of the year, Basin coal for next-quarter delivery has risen 19 percent, and coal for 2006 delivery has risen 23 percent. Some market participants think the fuel is poised to get even more expensive as power plant owners in the East increasingly look west for their fuel, taking advantage of improved rail transportation from the Basin and the coal's low sulfur content.
      The demand from utilities like Allegheny Energy Inc. of Greensburg, Pa., should benefit miners like St. Louis-based Arch Coal Inc. and Peabody Energy Corp., the two companies with the largest supplies in the Basin.
      "There's a handful of utilities that want to burn Basin coal but haven't yet," said Stephen Doyle, a consultant for investment firms interested in the coal sector. "Anybody who can do it, will do it."
      That means Wyoming coal has been penetrating deep into the eastern coal market.
      "PRB coal is going about as far east as it can go," said Tom Hiemstra, vice president of coal services at Evolution Markets, an energy brokerage firm. Even power plants in the Mid-Atlantic region thousands of miles from Wyoming are testing the coal, Hiemstra said.
      Western coal has a number of benefits. At even current high prices of about $7.15 a ton for next-month delivery, it's far cheaper than eastern coals, though transportation to power plants in the East consumes part of the price differential. Comparable coal mined in central Appalachia trades now over $60 per ton.
      More crucially, western coal contains little sulfur, and sulfur is an expensive liability for power plant owners these days. Allowances to emit sulfur dioxide, or SO2, are trading at $880 a ton, a 26 percent increase since the beginning of the year.
      The increase in SO2 prices has raised the premium on the Basin's lowest sulfur coal about 40 cents a ton since the beginning of the year, Doyle estimates. A number of power plant owners will be forced to buy allowances on the market over the next three years, because their stockpiles of unused allowances are running out. Low-sulfur coal from the Basin is extremely attractive for utilities, because they can use it to reduce their SO2 emissions and lower the number of allowances they need to buy.
      Demand for Basin coal was strong throughout most of 2004, but jammed rail capacity limited how much could actually be shipped.
      "In 2004, you had high demand for PRB coal, but the railroads weren't able to get it to consumers," Doyle said. "In 2005, the performance of the railroads has been tremendous."

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