How is Coal Formed? . . Coal is formed when peat is altered physically and chemically. This process is called "coalification." During coalification, peat undergoes several changes as a result of bacterial decay, compaction, heat, and time. Peat deposits are quite varied and contain everything from pristine plant parts (roots, bark, spores, etc.) to decayed plants, decay products, and even charcoal if the peat caught fire during accumulation. Peat deposits typically form in a waterlogged environm