Someone Really Should Explain to Mitt Romney How Markets Affect Coal

Someone Really Should Explain to Mitt Romney How Markets Affect Coal

If your debate-watching drinking game included a shot for each use of the word "coal," you either peed on your roommate's couch or had your stomach pumped. Or both. The primitive fuel was invoked some 22 times, apparently, mostly by Republican presidential candidate and former Massachusetts Governor Mitt Romney. Our energy future is an all-of-the-above, leave-no-fossil-unburned strategy, unless you're Romney, in which case wind energy jobs don't actually exist, and solar is an unending money pit (someone should tell the Chinese).

You're probably familiar with this by now. And I do realize that Willard and his running mate have turned these debates into dazzling displays of bald-face mendacity. But there was one claim last night that I simply couldn't let stand:

"I was in coal country," Romney intoned. "People grabbed my arms and said, 'Please save my job.' The head of the EPA said, 'You can't build a coal plant ... it's virtually impossible given our regulations.'"

What EPA Administrator Lisa Jackson actually said was that the hardships facing coal are "entirely economic." Odds are, Romney knows what he said is absolute malarkey. The point is, Jackson was right. Coal's getting its ass kicked, for sure, but it's not EPA regs doing the kicking. It's natural gas. The stuff is cheap as hell these days thanks to the shale gas boom that has transformed the American energy ledger over the last four or five years.

The future of coal cannot be extricated from its role as a fuel source for power plants. In a lot of places, including Texas, natural gas sets the price of electricity. Coal-fired power plants make their money on the margin. When the margin between the price of gas and cheap coal is wide, like it was in 2008, they rake it in. When the price of natural gas falls and the margin gets thinner than Romney's tax plan, coal-fired plants sometimes don't make enough profit to even bother generating electricity. If you'll recall, Dallas-based Luminant recently announced it was going to idle two coal-fired units at its Monticello plant (the very same units it threatened to shut down summer before last over EPA regs).

Say the wonks over at the Brattle Group (who study this kind of thing) the war on coal is being waged by the market, not Obama. What's weird is that they predict coal-fired plants in Texas will actually do better in the coming years, not because they think Obama is going to get his ass kicked in November, but because the price of natural gas is predicted to rise.

Somebody really ought to explain this to the private equity guy representing the GOP. Of all people, he should know.

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