FBR Capital on Energy & Natural Resources: Coal Retirements - Strict Draft MACT Released
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Up: 8 | Down: 5 | New: 26
Rating Summary:
18 Buy, 17 Hold, 7 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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FBR Capital on Energy & Natural Resources: Coal Retirements - Strict Draft MACT Released
FBR analyst says, "This morning, EPA Administrator Lisa Jackson unveiled the draft MACT rule for coal fired power plants. As expected the rule took a strict approach to hazardous air pollutants like mercury. Relatively little flexibility would help drive retirements of coal-fired generation and push incremental demand toward natural gas, renewable, and nuclear. We think steam coal names could see pressure on the MACT proposals but currently riding the nuclear renaissance reconsideration debate. We are firm believers in the global export market for US producers and expect companies to push for increased exports. Potential beneficiaries to export steam coal include Arch Coal (NYSE: ACI), Peabody (NYSE: BTU), CONSOL Energy (NYSE: CNX), and Cloud Peak (NYSE: CLD). Likewise Engineering and Construction firms active in building scrubbers and other environmental controls including Babcock and Wilcox (NYSE: BWC) and URS (NYSE: URS). Additionally, natural gas E&Ps could get a bid as investors contemplate impact of additional power generation demand. Natural gas names include Southwestern (NYSE: SWN), Devon (NYSE: DVN) and Chesapeake (NYSE: CHK)."
Health standard. EPA chose not to propose less-stringent health-based standards for any pollutant. Industry groups have argued for the application of a site-specific, health-based compliance alternative for HCl and other acid gases. The Clean Air Act allows EPA to set health-based emissions limitations in lieu of a technology-based MACT standard.
Unit averaging. EPA is allowing facility-wide averaging for all HAPs emissions from existing units within the same subcategory. This will allow operators flexibility in achieving low cost emissions reductions and enable some smaller or lower-utilization auxiliary units to continue operating without additional controls.
Timing. There will be a 60-day public comment period in which we expect industry and labor groups to build a record for greater flexibility. A final rule is expected by the November 16 consent decree deadline. EPA Administrator Jackson emphasized that power plants have 4 years to comply, emphasizing the additional year of flexibility available under the Clean Air Act if technology cannot be installed in time.
Proposed reduction levels toward stricter end of the spectrum. According to EPA, “The proposed rule establishes emission standards for mercury, acid gases (hydrochloric acid, or HCl, as a surrogate), and non-mercury metallic toxic pollutants (total particulate matter (PM) as a surrogate with alternative surrogate of total metal air toxics), and each year would: Prevent 91 percent of the mercury in coal burned in power plants from being emitted to the air; Reduce acid gas emissions from power plans by 91 percent; and Reduce sulfur dioxide (SO2) emissions from power plants by 55 percent.”
FBR analyst says, "This morning, EPA Administrator Lisa Jackson unveiled the draft MACT rule for coal fired power plants. As expected the rule took a strict approach to hazardous air pollutants like mercury. Relatively little flexibility would help drive retirements of coal-fired generation and push incremental demand toward natural gas, renewable, and nuclear. We think steam coal names could see pressure on the MACT proposals but currently riding the nuclear renaissance reconsideration debate. We are firm believers in the global export market for US producers and expect companies to push for increased exports. Potential beneficiaries to export steam coal include Arch Coal (NYSE: ACI), Peabody (NYSE: BTU), CONSOL Energy (NYSE: CNX), and Cloud Peak (NYSE: CLD). Likewise Engineering and Construction firms active in building scrubbers and other environmental controls including Babcock and Wilcox (NYSE: BWC) and URS (NYSE: URS). Additionally, natural gas E&Ps could get a bid as investors contemplate impact of additional power generation demand. Natural gas names include Southwestern (NYSE: SWN), Devon (NYSE: DVN) and Chesapeake (NYSE: CHK)."
Health standard. EPA chose not to propose less-stringent health-based standards for any pollutant. Industry groups have argued for the application of a site-specific, health-based compliance alternative for HCl and other acid gases. The Clean Air Act allows EPA to set health-based emissions limitations in lieu of a technology-based MACT standard.
Unit averaging. EPA is allowing facility-wide averaging for all HAPs emissions from existing units within the same subcategory. This will allow operators flexibility in achieving low cost emissions reductions and enable some smaller or lower-utilization auxiliary units to continue operating without additional controls.
Timing. There will be a 60-day public comment period in which we expect industry and labor groups to build a record for greater flexibility. A final rule is expected by the November 16 consent decree deadline. EPA Administrator Jackson emphasized that power plants have 4 years to comply, emphasizing the additional year of flexibility available under the Clean Air Act if technology cannot be installed in time.
Proposed reduction levels toward stricter end of the spectrum. According to EPA, “The proposed rule establishes emission standards for mercury, acid gases (hydrochloric acid, or HCl, as a surrogate), and non-mercury metallic toxic pollutants (total particulate matter (PM) as a surrogate with alternative surrogate of total metal air toxics), and each year would: Prevent 91 percent of the mercury in coal burned in power plants from being emitted to the air; Reduce acid gas emissions from power plans by 91 percent; and Reduce sulfur dioxide (SO2) emissions from power plants by 55 percent.”
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