Power plant operators are shuttering aging coal facilities at record rates—a trend presidential candidate Mitt Romney and his supporters pin squarely on EPA air pollution rules.
"People in the coal industry feel like it's getting crushed by your policies," Romney told Obama during the first debate. "Stop the War on Coal. Fire Obama" signs dot lawns in coal-producing swing states, and Twitter is full of posts commenting on the "war on coal" refrain.
But analysts contend the issue is complicated and nuanced and can't be reduced to simple sound bites. Although the pending EPA regulations are responsible for some coal plant closures, recent studies conclude that low natural gas prices and other market forces are a larger culprit in coal's decline—and EPA's policies are probably not even half the story.
"What we are finding is that it's a combination of factors," said Metin Celebi, an electricity market analyst at the Brattle Group consultancy and co-author of a report "Potential Coal Plant Retirements: 2012 Update."
The Brattle Group's Oct. 1 study, an update to a similar paper released in 2010, analyzed coal plant retirements under two scenarios of future EPA rules—strict and lenient. All other factors were kept constant.
As in its previous report, the Brattle Group found that EPA regulations will have some effect on coal's future: Operators would retire 77 gigawatts' worth of coal by 2017 under strict regulations and would shutter 59 gigawatts under more lax requirements. All would be older, inefficient facilities—many between 40 and 50 years old—that have long been slated for closure.
But the report also found something new—that retirements will grow by about 25 gigawatts compared to 2010 projections. "[T]hat change is primarily due to changing market conditions, not environmental rule revisions, which have trended towards more lenient requirements and schedules," it said.
The reason is simple. Whereas sinking natural gas prices have had an immediate and merciless impact on the coal market, two key EPA pollution rules—the Cross-State Air Pollution Rule and the the Boiler Maximum Achievable Control Technology (MACT) Rule—are stuck in legal and regulatory limbo, and their impact on industry has actually lessened.
That finding punches a hole in the simple narrative that new environmental regulations are driving the decline of U.S. coal.
"Natural gas often sets the price of electricity, and wholesale prices are down," said Christopher Van Atten, a senior vice president at M.J. Bradley & Associates who has studied coal plant shutdowns. "That reduces the profitability of a coal-fired generation facility and makes it cheaper to run on natural gas."
In July 2011, the EPA set limits on sulfur dioxide and nitrogen oxide emissions under its cross-state pollution rule, but an industry challenge led to a federal court striking down the regulations in August. The EPA has asked for the case to be reheard and environmental groups are working on appeals or tweaks to the law so it could win wider support.
Also last year, the Obama administration finalized the MACT rule that requires emissions controls for hazardous materials spewed by coal plants. This summer, the EPA altered those standards to apply only to new facilities. They're set to be enforced by 2016, but the U.S. Chamber of Commerce and industry groups have filed a petition in a federal appeals court to block them. Other rules, including those on greenhouse gas emissions and on fine particulate matter, would also affect the industry, though they have drawn less attention.
While the rules are being challenged, U.S. production of natural gas has boomed thanks to the process of fracking, which has dramatically increased the size of recoverable reserves.
Last month natural gas prices averaged $2.85 per million British thermal units (mmBtu), down more than 25 percent compared to September of last year. By contrast, coal prices have stayed steady at roughly $3 per mmBtu, according to the U.S. Energy Information Administration (EIA).
The EIA estimates that 60 percent of new power between 2011 and 2035 will come from natural gas plants because of the fuel's low costs.
The Brattle Group report also examined a lower natural gas price scenario. It found that if natural gas prices fell by $1 by 2017, coal shutdowns would rise to 115 gigawatts by 2017, even in a lenient regulatory scenario. By contrast, an increase of $1 would keep more plants online, with retirements totaling just 21 gigawatts.
In short, it's complicated, said Celebi, the Brattle Group study co-author.
"If there were no EPA regulations forcing these coal units to install additional pollution control mechanisms, the retirements would be much fewer—even with the current low gas prices," he said in an interview. "But if there were just regulations and gas prices were high, I don't think you'd see as many."
Another factor working against the coal industry, according to Celebi and other analysts, is lower electricity demand due to the economic recession and recent mild winters.