How the 2012 election could come down to one thing: coal.
Mitt Romney and the U.S. coal industry are engaged in a very public love affair. In August, the Republican candidate stood on a stage in Ohio and condemned Barack Obama's "war on coal," backed by a group of beefy, safety-helmeted men who looked like they just stomped out of a coal mine. Those miners later appeared in one of Romney's two September ads focused on coal, the "way of life" that, in his telling, Obama is ruthlessly attempting to crush.
"By the way," Romney said in his first debate with Obama, lest America miss the point, "I like coal!"
That was Oct. 3. On Oct. 4, coal stocks soared. On Friday, Romney was in Abingdon, Virginia, holding a "Coal Country" rally, proclaiming, "I don't believe in putting our coal under the ground forever." (Was that one of Obama's shovel-ready projects?)
If it feels like he's trying too hard, it's probably because Romney is not a natural fit for the industry's affections. When he was governor of Massachusetts, Romney signed a climate change plan, supported clean-energy startups, and famously went after a coal plant that was shirking pollution controls, saying, "I will not create jobs or hold jobs that kill people. And that plant kills people." (In one of its most cynical maneuvers, the Obama campaign has run ads attacking Romney for making this eminently defensible point.)
Now, however, Romney needs coal's love, and badly. Coal jobs and cheap coal electricity are important to several of the swing states upon which the election hinges, most especially Ohio, which may single-handedly decide the race. It's not enough for coal fans to be upset with Obama; Romney needs them actively working on his behalf.
It doesn't come easy to him -- Romney isn't exactly known for his easy rapport with the working class. Remember those miners on stage in Ohio? It turns out that they were forced to attend the rally, without pay, and aren't very happy about it. And for all that environmental regulations have turned the United Mine Workers of America against Obama this year, they aren't endorsing Romney either. The union is sitting this one out.
Nonetheless, where it counts -- in board rooms and executive suites -- Romney is being richly rewarded for his support. The boss who forced his miners to attend Romney's rally, CEO Robert Murray of Murray Energy, hosted a $1.7 million fundraiser for the candidate in May and has apparently been bullying his employees into contributing to his anti-Obama PAC, prompting a complaint to the SEC.
Coal executives are in need of friends in Washington these days, as they're running out of them in U.S. power markets. In the late 1990s, coal provided half the power used in the United States. By 2011, that figure was down to 42 percent. In April, for the first time since the U.S. Energy Information Administration began collecting data in the 1970s, natural gas generated as much power as coal -- each claimed 32 percent of the total.
That is an extraordinary milestone, and the trend shows no sign of reversing. In a recent report, the Brattle Group research consultancy estimated that between 59 and 77 gigawatts of coal power capacity will retire or announce retirement by 2016 -- between 20 and 25 percent of the entire U.S. coal fleet. And that's without any new restrictions on the carbon emissions that drive climate change.
Republicans are keen to convince the public that the faltering fortunes of coal-fired power are a result of Obama's "war on coal," i.e., new regulations from EPA. But Brattle, most other independent researchers, and, in their confidential moments, utility executives themselves agree that the real culprit is cheap natural gas. Advances in hydraulic fracking technology have produced an enormous glut of gas in the United States, fatally undercutting the economics of coal generation. In February, CEO Nick Akins of American Electric Power, one of America's biggest coal-burning utilities, said, "I can tell you there will not be any new coal plants built, with the current price of gas and the forecast for the future for gas."
Analysts expect natural gas prices to rise from their recent historic lows, but not far or fast enough to prevent a continued decline of coal. Dozens of aging coal plants the United States are reaching the point where they must be upgraded (thus becoming subject to more stringent air pollution rules) or retired. Cheap gas is tilting more and more of these decisions in favor of retirement.
What about the "clean coal" both candidates claim to support? There is some calculated ambiguity around the term these days, as there has always been. The practice among U.S. power executives has been to fight off EPA rules as long as they can, and when they are eventually forced to install pollution controls, claim that whatever results is "clean coal." (It's not a new idea. The term dates back to the early 20th century.) But insofar as it's a term of art in contemporary energy discussions, "clean coal" means coal plants with attached facilities that capture carbon emissions and bury them underground.
Coal with carbon capture and sequestration (CCS) is good PR for the industry and a good way for Obama to be seen to support coal, but in terms of power markets, it is a non-entity. "Clean coal" currently produces zero percent of U.S. electricity. Of the handful of coal plants with CCS that were planned in recent years, most have been canceled or put on hold due to their extraordinary cost. One of the few going forward, the Kemper coal plant in Mississippi, is 25 percent done and has already gone over budget twice. Its tab, which is nearing $2.8 billion, will be paid by Mississippi ratepayers whether or not the plant ever reaches operation.
Absent huge new subsidies or a stiff carbon tax, it's unlikely that CCS will ever evolve into a serious market competitor. So the real question, the practical question, is what to do about dirty coal -- the kind that exists in the real world.
On that matter, there are real differences between the candidates. It's bit of hysterical overstatement to call Obama's EPA rules, which were mandated by courts in accordance with the Clean Air Act, a "war on coal." But he and his administration recognize that it's impossible to reduce air pollution, water pollution, and climate emissions in the United States without reducing the role of coal-fired power plants.
Those power plants are responsible for around 90 percent of the power sector's CO2, along with the vast bulk of its sulfur dioxide, nitrogen oxides, hydrochloric acid, mercury, arsenic, and particulate matter. According to the American Lung Association, these combine to create a stew of some 386,000 tons of hazardous air pollutants per year. A 2009 report from the National Research Council found that the sulfur dioxide, and nitrogen oxides alone impose $62 billion a year in public-health costs. A 2010 report from the Clean Air Task Force estimated coal power was responsible for 13,200 premature deaths, 20,000 heart attacks, and 9,700 additional hospitalizations that year. Needless to say, those costs are not factored into coal's market price.
Obama's campaign slogan on energy is "all of the above," but implicitly, he has acknowledged that coal must be phased out over time if any progress is to be made on climate change. For instance, the Clean Energy Standard he proposed last year would allow utilities to count nuclear, natural gas, and "clean coal" power toward their carbon-reduction goals. It's all of the above ... except dirty coal.
For political reasons, Obama will never say a cross word about coal. It is too popular in too many blue and swing states. He will continue to sing the praises of "clean coal" and maintain the pretense that there is a future for coal in a climate-constrained power system. But he will not do anything to halt coal's inevitable economic decline. He'll enforce existing EPA regulations and give the agency space to issue new ones. He'll back the natural gas industry and the clean-energy industry. And he'll let history take its course.
Romney, taking a page from the playbook of conservative icon William F. Buckley, will stand athwart history, yelling "Stop!" Despite his bluster, he can't just suspend EPA rules. But he can make sure that new rules are lax and existing rules poorly enforced. With a friendly legislature, he can insure that all future EPA rules pass through the congressional meatgrinder, effectively crippling the agency's independent rulemaking ability. But he can't put the natural gas genie back in the bottle. He can't stop the falling costs of solar and wind power. And he can't change the fact that an overwhelming majority of Americans, across regions and demographics, support a transition to modern, cleaner power system.
However much it may be a political football in this year's election, coal power is on the wane in the United States and no politician can do terribly much about it. The only future for U.S. coal companies now is export to burgeoning economies like China and India with weaker air pollution laws and growing demand for power. These exports have doubled since 2009, now representing 12 percent of U.S. production. They also account for the Obama campaign's frequently cited statistic that coal-mining employment hit a 15-year high in 2011. But to fully compensate for the decline of U.S. coal power, coal companies need big new export terminals on America's west coast. The political battles over those terminals could stretch on for decades.
So no matter where American electricity comes from in coming years, coal is likely to be a heated subject for many elections to come. Campaigns, order your prop hard hats now!
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