Tuesday, August 21, 2012

EPA shot down by appeals court, coal rallies

In a reversal of fortune of sorts today, the U.S. Court of Appeals struck down an EPA clean-air ruling. More here and excerpt below.
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A federal court threw out a U.S. Environmental Protection Agency rule aimed at cutting pollution from coal-fired power plants, dealing a blow to the Obama administration’s efforts to curb harmful emissions.

The U.S. Court of Appeals in Washington in a 2-1 ruling today struck down the EPA’s cross-state air pollution rule, saying the agency illegally imposed federal authority over state air pollution programs. The court sided with more than three dozen challengers to the measure, which caps emissions in more than two dozen states. The rule had been put on hold by the court in December while it considered the regulation’s legality.

“It is not our job to set environmental policy,” Circuit Judge Brett Kavanaugh wrote in the 60-page opinion. “Our limited but important role is to independently ensure that the agency stays within the boundaries Congress has set. EPA did not do so here.”

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This is a considerably positive for coal companies and removes a significant uncertainty from the markets. Provided this is also an election year, I would not be surprised that the EPA waits until after the election to come out with any replacement to its rule, which the court did allow. The coal names acted positively to the news. I continue to hold my positions in a few names and would add more if the stocks broke on strength. For instance, if Arch coal (ticker ACI, I own a position in the company) broke our above $7.50 on volume, it could hit $10 in a heartbeat.



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