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TheStreet Open House

Romney Continues His Coal Crusade (Update 1)

Stock quotes in this article: ANR, BHP, RIO, VALE

Updated from 10:02 a.m. EDT with comment from a commodity analyst

NEW YORK ( TheStreet) -- Mitt Romney asked a simple question on Wednesday: We have 250 years of coal, so why wouldn't we use it?

Out with a new television advertisement, Romney's campaign continued to blame President Barack Obama's policies for ruining the coal industry and erasing jobs.

"The policies that the current administration has got is attacking my livelihood," said a coal worker in the ad.

Romney's slam against Obama on the coal industry comes as the Republican presidential nominee is attempting to pick up critical blue collar votes in Virginia, West Virginia and Pennsylvania -- hubs for Appalachian mining of metallurgical and thermal coal. Virginia and Pennsylvania also are two critical battleground states; Obama leads an average of statewide polls in Pennsylvania by 8.3 percentage points and in Virginia by 3 percentage points.

The short answer to Romney's question of why the United States wouldn't use 250 years of coal is that the country is using coal. The problem for the coal industry is that shale-driven cheaper natural gas has wooed many utility companies to switch resources.

The move to natural gas comes before an Environmental Protection Agency rule, the utility MACT, goes into effect.

The new rule would not favor coal as an input for power plant electricity generation without significant upgrades to coal plant technology. Current market conditions suggest that energy companies may not prefer coal over natural gas for reasons distinct from the EPA rule.

Coal and natural gas now have equal shares of the power-generation market.

"The reason for this is ... low natural gas prices have encouraged switching from coal, and as long as natural gas prices remain around their current level around $3, this will continue," Matt Smith, commodity analyst at Summit Energy Services, wrote in an email.

Companies like Alpha Natural Resources, which cut 1,200 jobs Tuesday, has said an unfavorable regulatory environment has hurt its thermal coal sales, but it also pointed to a global decrease in prices and demand -- like China and India -- as a drag on metallurgical coal. Simply, companies have acknowledged the problem extends beyond U.S. policy.

Romney must stem Obama's widening lead in key coal battleground states, especially as coal miners, residents and Democratic politicians in these areas haven't shown great support for the current president's energy policies.

A so-called "War on Coal" moniker -- which is the name of Romney's newest television ad -- could work, but voters would be wise to understand that the coal industry's woes may have less to do with Obama and more to do with global pressures and evolving market demands.

-- Written by Joe Deaux in New York.

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