A method of treating coal. The method comprises passing the coal through a retort having a shell temperature of about 500.degree.-1000.degree. F. and shock heating the coal to a maximum surface temperature of about 500.degree.-1000.degree. F. without allowing the coal to become exothermic. The coal is prevented from going exothermic by a combination of factors, including the evaporation of moisture from the shock heated coal, the tendency of coal to absorb heat and maintain a temperature of about 390.degree.-570.degree. F. until the coal undergoes molecular transformation of complex hydrocarbons contained in the coal to simpler forms, and the effects of a cooling blanket gas passed through the shock heated coal. The blanket gas preferably comprises an oxygen lean blanket gas stream containing about 2-8% oxygen by volume. The treated coal exhibits extremely low moisture content and increased BTU value and other improved combustion characteristics.