The U.S. Supreme Court continued its busy summer this week, issuing a landmark ruling limiting the mpower of the Environmental Protection Agency. The ruling could have significant financial implications for a number of energy sector stocks.
What Happened? On Thursday, the Supreme Court ruled 6-3 to restrict the EPA's ability to limit carbon emissions from power plants. The court ruled the EPA must first gain approval from Congress before enacting sweeping climate change regulations. The decision specifically focused on the Clean Power Plan, an Obama administration regulation calling for U.S. power plants to cut carbon emissions by 32% from 2005 levels by 2030.
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Why It's Important: The Supreme Court ruling should be good news for fossil fuel producers, such as coal, oil and gas stocks. Many of these stocks are already some of the market's top performers of 2022, and the court's decision could remove the EPA as a potential headwind in the years ahead.
Shares of coal producers Consol Energy Inc (NYSE: CEIX), Alpha Metallurgical Resources Inc (NYSE: AMR) and Peabody Energy Corporation (NYSE: BTU) have all more than doubled so far in 2022. All seven of the top-performing S&P 500 stocks of 2022 come from the energy sector, including Occidental Petroleum Corporation (NYSE: NYSE:OXY), Hess Corp . (NYSE: NYSE:HES) and Valero Energy Corporation (NYSE: NYSE:VLO).
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The court ruling may also be bad news for alternative energy stocks, some of which have had a difficult 2022 so far. Sunnova Energy International Inc (NYSE: NOVA), Shoals Technologies Group Inc (NASDAQ: SHLS) and Sunrun Inc (NASDAQ: RUN) are all down more than 30% year-to-date.
Fortunately for environmentalists, Morningstar analyst Travis Miller said coal stocks will likely see a limited positive impact from the ruling.
"Utilities have already largely implemented the EPA rule, installing scrubbers on surviving plants and shutting down other plants where economics made implementation cost prohibitive," Miller said.
Benzinga's Take: The long-term future of the energy industry is certainly renewable, clean energy. Yet it may be decades before the U.S. can completely wean itself off of fossil fuels, and surging energy prices and stocks have made clear to investors in 2022 that there is still plenty of money to be made in coal, oil and gas.
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| Mar 2022 | B of A Securities | Downgrades | Buy | Neutral |
| Mar 2022 | MKM Partners | Maintains | Buy |
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