Coal Reaps The Benefit Of EPA Ruling Delay (BTU, ANR, PCX, ACI, KOL)
Richard Rittorno: Coal miners rose Tuesday for the first day of trade in the new year after federal court appeals pushed back the EPA deadline for better air quality across 27 states.
The Environmental Protection Agency’s Cross-State Pollution Rule was delayed by the U.S. Court of Appeals D.C. Circuit made up of a three judge panel. The reason cited for delay was to further review of the regulation.
The new EPA rule was to go in effect in January requiring the 27 states to significantly reduce power plant emissions, forcing many of the plants to turn away from coal-fired power
With over a dozen power companies, municipal power plant operators and six states asking for the delay, oral arguments will not being until April. Even if the court upholds ruling many analysis feel it will not be implemented in 2012.
The delay gives the utility companies a chance to ramp up activity at the coal fire plants, causing an increase demand for new coal supplies.
In late afternoon trading, shares of Peabody Energy Corp. (NYSE:BTU) rose by $3.47 / 10.48%, Alpha Natural Resources (NYSE:ANR) rose by $1.78 / 8.71%, Patriot Coal Corp. (NYSE:PCX) rose by $0.685 / 8.09%, and Arch Coal Inc (NYSE:ACI). rose by $0.73 / 5.03%.
Traders can also gain exposure to the coal market via Market Vectors Coal ETF (NYSEARCA:KOL), which seeks to replicate as closely as possible — before fees and expenses — the price and yield performance of the Stowe Coal Index. The fund invests at least 80% of its total assets in equity securities of U.S. and foreign companies principally engaged in the coal industry.
Trader should use caution as each of these coal play have moved greatly on the news and may want to consider looking for a pullback. To further reduce risk, traders can also consider looking into a bull option spread during the pullback.
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