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Joao Peixe

Joao Peixe

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Will Billion-Dollar Coal Remediation Tech Take a Hit After Supreme Court Ruling?

Now that the Supreme Court has blocked the federal government’s Clean Power Plan, investors will be wondering what it means for the multi-billion-dollar remediation technology industry that the new rules had promised to create overnight.

While the Supreme Court’s blocking of the new rule last week sent waves of hope through the depressed coal industry, which is now eyeing a reprieve—however elusive—a string of companies that were planning on becoming the first billion-dollar beneficiaries of the emissions rules could face even more difficulties now.

The floodgates for mercury remediation technology first opened on 16 April last year, when the EPA Mercury and Air Toxics Standards (MATS) took effect, requiring all U.S.-based coal- and oil-fired electric power plants generating 25MW and higher reduce their mercury emissions by approximately 90 percent. The new EPA plan calls for reducing US carbon-dioxide emissions 32 percent by 2030 and adds 28 more states to the list of 22 states that already have state-imposed mercury emission compliance rules. The new rules would have had to be implemented by 16 April this year. Related: UAE Offers India Free Oil To Ease Storage Woes

Then in June last year, the Supreme Court rejected the EPA’s MATS rule, remanding it back to the District of Columbia Circuit. In late September, the DC Court of Appeals ruled that the EPA could enforce its MATS rules even though it was still addressing some of the regulatory problems brought up by the Supreme Court.

According to the EPA, most power plants that came under the MATS shadow have either complied or shut down.

But the Supreme Court’s stay of implementation for the wider Clean Power Plan, which makes it impossible for the EPA to enforce the guidelines until the issue is resolved, is a much broader strike at emissions rules. MATS, after all, might have been the smaller rule that established interest in mercury remediation technology, but the Clean Power Plan and the Clean Air Act are the real coups here. Most power plants already complied with MATS, but what was to come after MATS in the form of the Clean Power Plan was the clincher. Related: U.S. Banks Growing Hesitant To Loan Money To Energy Firms

Mercury remediation technology companies who have quickly and adeptly jumped on this bandwagon are likely watching with baited breath. But while the Supreme Court’s stay of execution here—as the coal industry would view it—is bad news for remediation technology, it’s certainly not game over.

Any final court decision on the EPA rules is now further afield, and could come this fall, but may not come until next year, which also would make it possible for a new president to drop the whole thing, putting the remediation technology industry in a bit of a temporary holding pattern.

The death of conservative Supreme Court Justice Antonin Scalia will also play into what comes next. Scalia had noted that the “EPA strayed well beyond the bounds of reasonable interpretation in concluding that cost is not a factor relevant to the appropriateness of regulating power plants.”

The remediation tech companies affected by the Supreme Court stay will be first-generation emission control companies such as Federal Signal Corp. (NYSE: FSS), Cabot Corp. (NYSE: CBT), Advanced Emissions Solutions, Calgon Carbon Corporation and CECO Environmental Corp (NASDAQ: CECE). The second generation of tech companies will also be watching closely, including Albemarle Corporation (NYSE: ALB) and Fuel Tech Inc (NASDAQ: FTEK). Related: Struggling Venezuela Buys U.S. Crude, But Who Will Pay for It?

But while the new rules would mandate that by the middle of this year all of the coal-fired plants in the US would have to comply with the strict regulations, some states already have their own mercury emission regulations, and cost-effective remediation technology will likely be the only way forward for many power plants--eventually.

Mercury remediation will necessarily be a growing industry, but the Supreme Court’s stay of the EPA implementation means growth of this narrow segment might not be as explosive as previously envisioned.

By Joao Peixe of Oilprice.com

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