Stringent regulatory measures to control emissions are having an adverse impact on the unrestricted use of thermal coal for electric power generation. But notwithstanding the many hurdles in coal’s way at present, this fuel source still holds an advantageous position due to its wide availability and lower cost compared to other fossil fuels and renewable sources of energy.

Per a report from World Coal Association, we currently have 861 billion tons of proven coal reserves worldwide. This means that there is enough coal to last nearly 112 years at current rates of production. In comparison to this, proven oil and gas reserves are equivalent to around 46 and 54 years, respectively, at current production levels. Proven reserves are considered economically recoverable at any given time, taking into account available mining technology and costs.

As you can see, the current availability of coal even outpaces the combined proven reserves of oil and gas.

However, the recent Clean Power Plan will add to the mounting challenges that have been adversely impacting the demand for coal in the U.S. The crucial question is what’s keeping the coal industry afloat amid rising competition from other fuel sources and a hostile regulatory climate. We’ve attempted to address these factors below.

Coal Dominates U.S. Power Generation: Coal as a major source of generating fuel dominates the utility industry. Per the Energy Information Administration (EIA), coal was the generating fuel for nearly 35% of the electricity consumed in the U.S. for the first nine months of 2015. Electricity generation absorbs more than 90% of the total U.S. coal consumption. The reason is quite simple; coal is by far the least expensive and most abundant fossil fuel in the country.

Long-term Supply Agreements: Most of the coal operators in the business have existing long-term coal supply agreements with their customers. Coal producers are also prompt about renewing contracts on expiry as these provide earnings visibility into the future.

Westmoreland Coal Company (WLB – Snapshot Report) agreed to acquire the San Juan Mine in Farmington, NM from BHP Billiton Limited (BHP – Analyst Report) and entered into a new long-term coal supply agreement with the owners of the San Juan Generating Station. The new coal supply agreement states that Westmoreland will take over operations from the beginning of 2016. The agreement will expire in 2022, giving Westmoreland a good six years of supply visibility.

Not Just Electric Generation: Electricity generation is just one use of coal in the U.S. Manufacturing plants and industries use coal to make chemicals, cement, paper, ceramics and metal products, to name a few. Methanol and ethylene, which can be made from coal gas, are used to make products such as plastics, medicines, fertilizers and tar.

Certain industries consume large amounts of coal. For example, concrete and paper companies burn coal, and the steel industry uses coke and coal by-products to make steel for bridges, buildings and automobiles.