During last week's presidential debate, Romney called attention to the stark differences between himself and U.S. President Barack Obama on coal policy.
"By the way, I like coal," Romney said. "I'm going to make sure we can continue to burn clean coal. People in the coal industry feel like it's getting crushed by your policies."
That was enough to grab the attention of investors. Just about every coal stock went up at least 4% the day after the debate, and several were up more than 5%.
It was a much needed shot in the arm for a sector that had been down 29% on the year.
"It's amazing what 15 words about coal in a presidential debate can do for the stocks," Michael Dudas of Sterne Agee told Reuters. "These stocks have been volatile, but you can't discount what a man running for president said about coal. Call it the Romney rally."
Coal stocks reacted strongly to Romney's industry-friendly comments because President Obama's energy policies have been tough on a sector already under pressure from cheap natural gas prices.
That's why Romney, in his campaign speeches, frequently refers to these policies as a "war on coal."
The Plight of Coal Stocks Under President Obama
Siding with environmental groups, President Obama has sought to reduce the pollution from coal-burning electricity plants by tightening Environmental Protection Agency (EPA) regulations.
Such regulations have made coal more expensive to burn and contributed to falling demand.
Earlier this year, for example, the EPA finalized its Mercury and Air Toxics Standards (MATS) Rule, which sets strict emissions requirements for utilities with a deadline of Jan. 1, 2015.
According to a new study by consultancy firm Brattle Group, compliance with the rule would cost between $126 billion and $144 billion to retrofit older coal-fired power plants.
With natural gas as a cheap and cleaner alternative, many in the power industry have elected to close older plants rather than invest more money in new emissions technologies.
Brattle estimated utilities would shut down between 59 gigawatts and 77 gigawatts of coal-fired electricity over the next five years, representing between 18.6% and 24.3% of U.S. coal-generated power.
Where we land in that range will depend on the severity of EPA regulations over the next few years, Brattle said.
If Romney Wins Election, Coal Catches a Break
Coal stocks would expect a Romney administration to put the brakes on such EPA regulations.
While Romney might not be able to change much about the MATS rule unless a court overturns it, he could prevent further emissions restrictions.
Romney could ease other restrictions, however. He could end, for example, an Obama administration attempt to tighten restrictions on mining in Appalachia.
If Romney wins election, he'd also do more to help producers export coal to Pacific Rim countries with a growing appetite for it.
Sen. Ron Wyden, D-OR, who could become chairman of the Senate Committee on Energy and Natural Resources next year if Democrats hold on to that chamber, wrote a letter to President Obama in May urging him to stop coal exports to allow time to study the environmental and economic impact.
"With demand for coal declining in the United States, the industry is seeking greater access to overseas markets, such as China," Kyle Danish, an attorney who specializes in energy policy at the Van Ness Feldman law firm in Washington, told NBCNews.com. "A number of port expansion projects in the Pacific Northwest and the Gulf Coast are critical to these exports. The industry generally expects that it will fare better in getting needed permits from a Romney administration."
Some of the coal stocks that would benefit if Romney wins include Arch Coal Inc. (NYSE: ACI), Peabody Energy Corp. (NYSE: BTU), Consol Energy Inc. (NYSE: CNX), Alpha Natural Resources Inc. (NYSE: ANR), Walter Energy Inc. (NYSE: WLT) and Alliance Resource Partners L.P. (Nasdaq: ARLP).
The hope for a Romney victory within the coal industry could turn out to be self-fulfilling, as it could earn Romney enough votes to win several key swing states. President Obama's policies are very unpopular in coal country, which reaches into parts of such battleground states as Ohio, Virginia and Pennsylvania.
"It's a narrow group of voters you're looking at it," Republican National Committee press secretary Kirsten Kukowskitold the National Review. "But in those areas, it's a big deal because it affects entire communities. It's really their whole livelihood."
David Zeiler
Money Morning
