Presidential Election: Auto Bailout Trumps Coal Mining

Ken Silverstein | Nov 07, 2012

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When the major networks declared last night that President Obama had carried Ohio and had thus clinched the White House, the analyses concluded that it centered on the auto bailout, not the coal industry.

As it turns out, the president didn’t need to carry Ohio to win a second term, having secured enough of the battleground states to give him a comfortable margin of victory. But the state still represents a cross-section of voters that any candidate would love to have in their column. To that end, President Obama focused on the revival of the auto industry that is integral to the region while Mitt Romney pounded Obama for his administration’s “war on coal.”

The president, obviously, made the more persuasive case. CNN reports that allowing General Motors and Chrysler to fail would have cost the federal treasury about $28 billion in lost tax revenues and in unemployment assistance over a two-year time frame. Instead of 400,000 lost jobs, 113,000 such positions were recovered-- all consisting of real people who voted.

Here, the electorate had a clear choice between one candidate who spearheaded the bailout and the other who felt that allowing the auto companies to bottom out and then naturally recover was the healthier economic choice. In essence, it’s Candidate Obama opting for a government-led solution compared with that of Candidate Romney who favored a free market revival.

The same thinking went into the coal argument. President Obama got elected four years ago on the promise of implementing a clean energy agenda. An extension of that was and remains tougher regulations on coal, which releases more pollutants than any of the competing electric generation fuels. His policies, which include tougher rules for mercury, nitrogen oxide, sulfur dioxide and greenhouse gases, are blamed by opponents for injuring coal’s status in the utility market place.

Romney then sought to fill that void, saying that he would attempt to rollback such rules and to let free markets reign. The laissez-fair argument is in line with his thinking, although it does contradict his earlier positions on the issue. Nevertheless, he used it to rally the coal constituencies in Ohio, and across Appalachia.

Path Forward

In the end, that strategy fell short. The coal miner unions didn’t endorse Obama but they didn’t back Romney either. Perhaps, though, Ohio’s coal communities didn’t buy the position that coal’s relegation in the market is solely attributed to tougher rules and regulations.

“There is no war on coal, period,” says Senator Sherrod Brown, D-Ohio, who won re-election. “There are more coal jobs and more coal produced in Ohio than there was five years ago, in spite of the talking points and yard signs.”

PolitiFact says that he is right, although the increased economic output is attributed to more exports headed to China and India -- not because more U.S. utilities are using coal to create electricity. With that, the U.S. Energy Information Administration says that coal production is up about 2 percent from the year before while 2,570 people held coal mining jobs in 2011 compared to 2,010 in 2007, all in Ohio.

To be sure, coal mine production is down nationally by 11 percent during the same time period, says the energy administration. To that end, Romney’s coal stance carried the day in such states as Kentucky, Tennessee and West Virginia. But is the decline because of stricter oversight or is it because natural gas has become more accessible and less costly? The price, right now, is on par with that of coal.

"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,” says Nick Akin, chief executive of American Electric Power, in a story appearing in the Charleston, WV Gazette.

It’s not just about the cost of natural gas and the increased monitoring of coal burning generators. It is also about diminishing coal reserves in the Appalachia region. Even the coal companies agree with that, noting that more accessible reserves are located in the Powder River Basin that cost less to dig out. That leaves surface mining as the biggest reservoir on the East Coast, which has its own set of controversies.

The path of least resistance is therefore shale gas. It is abundant and doable in Ohio’s Utica region. And it could be the next gold mine in the Marcellus Region that stretches down the eastern coastline. Both presidential candidates emphasized those riches and the associated jobs.

When it was said and done, the issue of coal mining and coal jobs did not carry the election in Ohio, which had been considered the premier state to win. It was the auto bailout, all of which gave Obama the lift he needed to win re-election.



EnergyBiz Insider has been awarded the Gold for Original Web Commentary presented by the American Society of Business Press Editors. The column is also the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has been honored as one of MIN’s Most Intriguing People in Media.

Twitter: @Ken_Silverstein

energybizinsider@energycentral.com


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Comments

Future Coal jobs will depend upon price of Natural Gas

Energy economics govern predominantly with politics/environmental a secondary impact. As long as Natural Gas < $4/MMBTU no new coal plants, natural gas fuel switching and conversion to natural gas will continue. By 2014/15 with > 1 GW of converted coal plants coming on line as base-loaded, Natural Gas will ratchet up to $6/MMBTU - this is the tipping point > $6/MMBTU result in return to coal plant as base loaded.

 

Based on Duke's Edwardsport IGCC CAPEX ~ $5100/KW and it has not been built or operated. So Electric Utility industry will wait and see about new plants to determine if implementing clean coal is financially and technically sound.

Richard W. Goodwin West Palm Beach FL

 

Auto Bailout

Right, Alan. I did not want to get hung up on the auto bailout, especially in a column that centers on the energy sector. I make the point about the auto sector for a couple reasons -- stream of thought here -- which are:

1. Ohio turned on this issue and not coal, despite the intense advertising to make it the central issue.

2. If people are hurting they like government intervention. Witness: Hurricane Sandy and those subject to austerity in Europe, which I am reluctant to bring into the conversation. Needless to say, if your job -- or family -- are on the line and government will come in and save you, it is then your friend.

Let me be clear: I'm not endorsing government bailouts of any sector and that includes those that have made bad business choices. All I'm saying is that those who benefited from such federal help may have helped carry the day for Obama.  Ironically, that does not include the investment banking sector that not only contributed to the current mess but that also got more assistance than any person or any other industry. Go figure, or no "good deed" goes unpunished.

Ken

Auto bailout

Ken,

I agree.

Alan

Auto bailout

Ken,

GM and Chrysler did fail!  Otherwise they wouldn't have needed external intervention.   They were and continue to be mis-managed.  President Obama (actually the taxpayers) didn't save the auto industry, he just shored up the models of failure: GM and Chrysler (Fiat).  Ford, Toyota, Nissan, BMW, etc. didn't require bailouts.  A manged restructuring of GM and Chrysler under existing bankruptcy protection laws would likely have produced a superior long-term economic result for both the industry and taxpayers.  However, the bailout did produce a superior political result for Obama and the UAW.

Regards,

Alan

Nat Gas Prices Won't Stay Cheap

The point most overlook is that if more gas gets used to make electricity (say 10 or 20 Bcf/day), the price of gas will go up and that impacts every user of natural gas not just the a generator. 

Furthermore, in the deregulated states and the RTO/ISO markets, the price of electricity goes up because gas is the marginal fuel and that sets the price of all MWh, not just the ones produced by natural gas. 

It’s quite easy to see a $1.00/mmbtu increase in natural gas increases the cost of gas to all in the ~24 TCf gas market by $24 billion annually.  On top of that, the $1.00/mmbtu increase in natural gas increases the marginal cost of electricity by $7.00/MWh and if applied to half the electricity consumption in the U.S. or 1.85 Billion MWH is ~$13 billion per year.  The combined impact of ~$37 billion is energy cost increases is no trivial matter.  That is enough to cover 370,000 new jobs at $100k per job all-in or nearly all the auto jobs discussed in the article as being lost.
 
Furthermore, it would be unwise to pin all our home heating and electricity generation on gas, especially when the global price of gas is $10/mmbtu in Europe and $15 – 18/mmbtu in Asia.  They will be quite will to pay $7/mmbtu to U.S. exporters and ship all the gas they can to those countries.  The U.S. gas price will likely move up toward those values creating a doubling or tripling of the economic cost impact to the economy and you quickly back into $100 billion per year cost to the U.S. economy.
 
I completely agree with your assessment that coal jobs is the least of the concerns on the boarder U.S. energy and economic front.  Affordable and available energy for all is the big concern and that should be the real message.
 

Coal and the Dodo bird!

Mr. Silverstein, I agree with your premise that the auto bail out helped Obama more than his clean energy policies hurt him in Ohio.  I also agree with you that one of the major reasons that Utilities are switching to Natural Gas over coal is the fact that Natural gas is less expensive relative to coal.

That said and as I've mentioned here before, I don't think that the price of Natural Gas is going to remain low indefinately!  I also think that it's a mistake to rely upon fracked natural gas due to the fact that the price is going to go right back up once any percentage of the nation's transportation fleet is switched over to the Natural Gas and/or we start exporting Natural Gas abroad.

And that's not to mention that the future of fracking is not guranteed at all!  Anti-fracking initiatives passed on the ballets in several locations and that resistance is only going to get worse in the event that a major aquifer is contaminated or we see an increase in seismic activity that can be attributed to fracking.

Coal's future as a major energy source is also in doubt do the public's growing awareness and acceptance of man-made climate change.  As Brian Williams said on the NBC Nightly News during the coverage of Hurricane Sandy, ""A storm like this has a way of making you ask questions like, what's happening to our world and our weather? And yes, people are raising global warming already,"

Combine Hurricane Sandy with the drought from this past summer and maybe a few more nasty weather events and no amount of propaganda is going to be able to quiet people's concerns.  The end result is that while it might not happen overnight, change is coming and the coal industry is going to go the way of the dodo bird!

 

Bob "The Clean Energy Guy" Mitchell