Fine coals are dewatered in an energy efficient process in which a non-polar liquid or a mixture of different hydrophobic liquids are used to displace the water from the coal surface. This process works with higher rank coals that are naturally hydrophobic so that the coal surface from which the water is displaced has a stronger affinity for the hydrophobic liquid than the water. Thermodynamically, this process is spontaneous and, hence, requires no energy. The only energy required for this process is to recover the spent hydrophobic liquid(s) for recycling purposes. The hydrophobic liquids are recovered in gaseous form either by lowering the pressure or by heating, and coverted back to liquid form for re-use. The most economical reagents that can be used for this purpose include propane, butane, pentane, and ethane. Carbon dioxide can also be used for the dewatering process described in the present invention. The process of dewatering by displacement is capable of achieving the same level of moisture reduction as thermal drying but at substantially lower energy costs.