The derailment had an outsized impact because utility companies hadn't built up coal reserves last year, expecting the price to drop, Bonskowski said. With winter around the corner and electricity demand expected to rise, utility companies now have little choice but to buy coal on the open market, he said.

But coal remains a far cheaper energy source, said Bonskowski. In July, it cost about $17 to generate a megawatt of electricity for an hour using coal. It cost $59 to generate the same energy with natural gas and $64 with liquid fuels such as kerosene, Bons-kowski said.

Coal carries hidden costs, such as the price of complying with air pollution rules, but as long as the price remains lower than other energy sources, it will be attractive to utilities, he said.

Coal companies are ramping up efforts to meet the demand and cash in on higher prices.

Arch executives have outlined $400 million worth of investment to open and expand mines from West Virginia to Utah, and Peabody's management has announced expansion plans that could generate 75 million tons of coal in five years.

Peabody's stock hit a record high Oct. 3 when it closed at $86.12 per share on the New York Stock Exchange. Arch soon followed when its stock hit an all-time high Nov. 3, closing at $80.31. Although they remain at historical highs, both stocks have declined since that time.

New federal law, such as the 2005 Energy Policy Act passed in August, is paving the way for coal's expanded use, Bons-kowski said. The biggest regulatory changes are geared toward the electric utility plants, which consume about 90 percent of all coal in the United States, he said.

The energy bill sets a limit on the plants' emissions but gives utility companies wide discretion for meeting the limits, Bonskowski said. If a utility can't meet the standard it can pay the government for extra emissions.

The energy bill doesn't mean it will be a free-for-all when it comes to building coal plants. Peabody has faced stiff opposition from the Sierra Club and other environmental groups as it presses forward with new power plants in the Midwest.

In Kentucky, the Sierra Club filed a request with state authorities asking them to review Peabody's plans to build a new power plant. The move has stalled a regulatory process that Peabody began in 2002.

The Sierra Club plans to resist new coal plants where they are proposed nationwide because emissions from the plants increase cases of asthma and other respiratory diseases, said spokesman Brendan Bell.

"If even a fraction of these (power) plants get built, we will be stuck with these plants for 30 or 40 years," he said.