Morgan Stanley: US Energy Security Is At Risk If EPA Doesn't Revise Pollution Rule

Coal Mine

Photo: eastcolfax via Flickr

The Environmental Protection Agency has to delay or soften new coal regulations or it would jeopardizing U.S. power supply, Morgan Stanley says in a note this morning:These rules were tougher than expected and affect Texas which had believed until a few months ago that it would be excluded from this regulation. Our utility team says that on first inspection up to 22% of the ERCOT and PJM coal fleet would be affected from January 1st 2012. With coal representing about 44% of US power generation and typical reserve capacity around 20%, this implies about half of the critical spare capacity that protects the reliability of the grid is under threat.

The EPA also faces lawsuits from eight states and pushback from Texas, which was recently added to the proposed rule.

Yesterday WSJ’s Deborah Solomon said the administration was already talking about revising the new rule. Coal stocks posted big gains yesterday on this report.

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