EPA Proposes Cost Finding to Support MATS Rule

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By Patrick Ambrosio and Andrew Childers

Nov. 20 — The Environmental Protection Agency has proposed to reaffirm its finding that it's “appropriate and necessary” to regulate power plant emissions of mercury after considering cost at the direction of the U.S. Supreme Court.

The agency Nov. 20 released a proposed supplemental finding that cost consideration doesn't alter the EPA's previous appropriate and necessary finding, which triggered a requirement that the EPA promulgate standards on power plant emissions under Section 112 of the Clean Air Act.

The U.S. Supreme Court in June ruled that the EPA erred by not factoring in cost consideration when it made that finding (Michigan v. EPA, 135 S. Ct. 2699, 80 ERC 1577, 2015 BL 207163 (2015); 125 DEN A-1, 6/30/15).

Attorneys contacted by Bloomberg BNA Nov. 20 weren't surprised by EPA's proposal, but one attorney predicted that the finding will eventually fuel future litigation over the agency's methodology.

The EPA had already prepared a regulatory impact analysis on the mercury and air toxics standards, which estimated compliance with the rule would cost the power industry $9.6 billion annually.

D.C. Circuit Schedules Dec. 4 Arguments

The EPA issued its proposed finding on MATS on the same day the U.S. Court of Appeals for the District of Columbia Circuit issued an order scheduling Dec. 4 oral arguments on the mercury and air toxics standards (White Stallion Energy Ctr. LLC v. EPA, D.C. Cir., No. 12-1100, order filed, 11/20/15).

While the Supreme Court ruled against the federal government in Michigan v. EPA, the court remanded the litigation back to the D.C. Circuit to determine whether the mercury and air toxics standards should be vacated or remain in place.

The petitioners in that litigation, which include the National Mining Association, White Stallion Energy Center and a coalition of 21 states led by Michigan, argued the D.C. Circuit should vacate the standards because the EPA failed to adequately answer the threshold question that Congress asked the agency to answer before issuing a regulation under Section 112 covering power plants.

The EPA has cited a “serious possibility” that the appropriate and necessary finding will quickly be reaffirmed as a reason for the D.C. Circuit to remand the standards back to the EPA without vacating them (187 DEN A-11, 9/28/15).

The EPA's fall 2015 regulatory agenda, released Nov. 20, projects that the agency will issue its final supplemental finding on MATS by May.

Additional Litigation Possible

The EPA's conclusion and the speed with which it conducted its analysis didn't come as a surprise to attorneys. However, the agency's findings and its methodology could spark additional litigation.

“That's going to be the subject of the next case, whether they did it properly and correctly,” Richard Alonso, a partner at Bracewell & Giuliani LLP, told Bloomberg BNA. “Whatever EPA does they get sued on. I don't expect this to be any different.”

Though the Supreme Court had ordered the EPA to consider the costs when making its determination that it's appropriate to regulate toxic pollution from power plants, it left to the agency how best to make that determination.

“It's telling EPA, ‘This is your job. We're not going to micromanage how you consider costs,' ” James Pew, an Earthjustice attorney, told Bloomberg BNA.

The EPA said in its proposal that the agency weighed the cost consideration against several other factors, including the amount of hazardous air pollution emitted by power plants, the associated hazards to public health and the benefits associated with the substantial reductions in hazardous emissions achieved through the MATS rule.

EPA Cites Cost, Benefits

Alonso said the EPA made it clear from the outset that it would reach the conclusion that the costs and benefits of the MATS rule justified the regulation.

“EPA sees this as a check box exercise basically,” he said. “Folks will now have the opportunity to look into the cost numbers and comment.”

However, environmental advocates said the benefits of the rule more than justify the costs incurred by the power sector.

“Our position has been all along the costs more than justify it. You have to go there,” Clean Air Task Force attorney Ann Weeks told Bloomberg BNA.

EPA Finds Costs to Be Reasonable

In its proposed supplemental finding (RIN 2060-AS76), the EPA compared those costs with the power sector's total revenue from retail sales, which reached a high of $356.6 billion in 2008 before declining to $349.6 billion in 2011.

“The projected annual compliance costs of MATS represent a small fraction of the value of overall sales,” the EPA said. “After considering the potential costs of MATS in light of power sector sales, the EPA concludes that the costs to the power sector are reasonable.”

The agency also reviewed required capital investments and the effect increased costs would have on electricity prices and determined that both are reasonable.

The EPA also cited a formal cost-benefit analysis for the mercury rule as supporting the appropriate and necessary finding. While the agency said such a formal analysis isn't required to support that finding, the analysis shows that the benefits of regulating power plant emissions “are significant and far exceed the cost.”

Comments on Proposed Finding 
The EPA will accept public comment on its proposed supplemental finding for 45 days following publication of the document in the Federal Register. Comments will be accepted at http://www.regulations.gov under Docket ID No. EPA-HQ-OAR-2009-0234.

To contact the reporters on this story: Patrick Ambrosio and Andrew Childers in Washington at pambrosio@bna.com and achilders@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

For More Information 
A prepublication copy of the EPA's proposed supplemental finding is available at http://www3.epa.gov/mats/pdfs/20151120fr.pdf.
A legal memorandum the EPA issued alongside the proposal is available at http://www3.epa.gov/mats/pdfs/20151120legalmemo.pdf.