Coal Dealt Another Heavy Blow In California

The bad news continues for the coal industry on Wednesday as the California Assembly passed a bill that would require the states pension funds CalPers and CalSTRS to liquidate their investments in coal companies. The two public employee pension funds manage a combined $476 billion in assets.

Why coal?
According to the bill’s author and California Senate President pro Tempore Kevin de Leon, the opposition to public coal investments is not just a matter of dollars and cents. “It’s a nuisance to public health and it’s inconsistent with our values as a state on the forefront of efforts to address global climate change,” he said of the bill.

Who are the losers?
CalPers is currently invested in 20-30 thermal coal mining companies, stakes that are valued at more than $100 million. CalSTRS reportedly has coal holdings of around $40 million. If the bill is made law, the funds would be required to sell all companies that derive at least half of their revenue from coal by July 2017.

Although the entire coal industry suffers from negative headlines such as this one, CalPers’ latest investment report specifically disclosed stakes in Peabody Energy Corp BTU and Arch Coal Inc ACI. Both stocks are down more than 75 percent in the past year.

The Market Vectors Coal ETF KOL is also down more than 53 percent during that time.


What’s next?
Now that the bill has made it past the Assembly, it will go to California governor Jerry Brown, who is expected to sign it into law.

While California’s potential liquidation of its coal stocks is not particularly painful for the coal industry in itself, the major danger is that this type of politically-rooted selling becomes a trend. New York and Massachusetts are reportedly considering similar bills.