*Notice - As of 12/30/11, the U.S. Court of Appeals has delayed implementation of the CSAPR.

Effective January 2012, the Cross-State Air Pollution Rule (CSAPR) will require 27 states, mostly in the eastern half of the United States, to significantly reduce emissions from coal fired plants. The purpose of this rule is to help states reduce ground level ozone and other pollutants, replacing the EPA's 2005 Clean Air Interstate Rule (CAIR). The first restrictions go into effect on January 1, 2012, with another wave of restrictions kicking in on May 1, 2012.

The question we ask is, "How will CSAPR affect energy prices"? Well, regions with heavy coal based generation could see their power prices increase as much as 5-10%, according to initial estimates from industry source. Coal plants could see $5 or more per MWh of additional dispatch costs added in 2012. However it might be a little premature to say what this increases might really be, however it's worth monitoring.

Another impact we are watching is the affect this may place on natural gas prices. Generation plants may switch their production from coal to natural gas, because natural gas is a cleaner method of production. This will increase the demand for natural gas and could force the price of natural gas up in 2012 and beyond.

This rule is far from being imposed, even though the looming January 1, 2012 date is set. Numerous parties are considering challenges to the CSAPR. Under the Clean Air Act, the deadline to file petitions for review of the rule is October 7, 2011. Petitions for reconsideration must also be filed by that same date. We will be watching for developments and will report these to you as they become available.