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Inside 'big coal country' as coal-fired energy demand returns

Montana often is known as "big sky country." But ask any local, and they'll tell you the phrase "big coal country" is just as fitting.

Along with Wyoming, Montana is home to the Powder River Basin—a region that boasts some of the biggest coal mines in the world. The two states account for 40 percent of all the coal produced in the U.S.

So if you thought coal was a fading fuel—upstaged by natural gas and solar panels to power homes and businesses—guess again.

The frigid winter that froze much of the country also caused a surge in electricity demand. Natural gas prices soared to their highest level in years. So U.S. power plants trying to balance higher energy demand with rising fuel costs fired up more coal burners to keep consumer energy costs at bay.

Coal's recent growth naturally has created a ripple effect in the economy. Coal has boosted businesses throughout the supply chain including L&H Industrial, a Gillette, Wyo.-based maker of mining equipment. "Approximately 30 percent of our business is derived from coal mining," L&H Industrial's Joel Christophersen told CNBC recently. "That's a major contributor to the economy of our state."

Beyond growth prospects, energy providers like coal for its stability. Fuel naturally is the biggest cost for any power plant. And because coal supplies are less volatile than natural gas stockpiles, coal prices don't fluctuate as much. That's why coal still is the country's single biggest fuel source—accounting for nearly 40 percent of all the electricity generated in the U.S., according to government data. That's more than natural gas, solar and wind sources—combined.

A worker takes a break with a front end loader at Cloud Peak Energy's Spring Creek Mine in Montana. Coal mined there is shipped primarily to electric utilities and industrial customers.
Brad Quick | CNBC
A worker takes a break with a front end loader at Cloud Peak Energy's Spring Creek Mine in Montana. Coal mined there is shipped primarily to electric utilities and industrial customers.

There are environmental concerns associated with coal. The Environmental Protection Agency in September proposed steep reductions in carbon emissions for new power plants. While the rules still are in the comment stage, they have already effectively halted plans for any new plants.

That has U.S. coal companies looking overseas—particularly in Asia—for demand. But port capacity in the Pacific Northwest is limited, and proposals for a new port as well as added rail traffic to transport coal, are controversial.

For now, coal isn't going away any time soon. So the next time you flick on a light switch or crank up that AC, consider the commodity used to generate that power. There's a good chance the fuel source was mined from the bustling Power River Basin, aka "big coal country."

—By CNBC's Brad Quick.

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