Cost Consideration Not Required for Decision On Power Plant Mercury Rule, EPA Says

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By Patrick Ambrosio

Feb. 26 — The Environmental Protection Agency wasn't required by the Clean Air Act to consider the cost of regulation when the agency determined it was “appropriate and necessary” to regulate power plant emissions of mercury and other hazardous air pollutants, the agency told the U.S. Supreme Court.

In a brief filed Feb. 25, the EPA argued that industry and state government petitioners have failed to establish that Section 7412(n)(1)(A) of the Clean Air Act unambiguously compels the EPA to consider costs when making that determination, which triggered a requirement that the agency promulgate standards limiting power plant emissions. The agency in 2012 promulgated the mercury and air toxics standards (MATS), which is estimated to cost the power industry $9.6 billion annually.

The Supreme Court is reviewing an April 2014 decision by the U.S. Court of Appeals for the District of Columbia Circuit, which found that the EPA decision not to consider costs is consistent with the Clean Air Act because Congress didn't expressly require the agency to do so (White Stallion Energy Center LLC v. EPA, 748 F.3d 1222, 2014 BL 103957 (D.C. Cir. 2014)).

The Supreme Court is scheduled to hear oral arguments March 25.

Split Over Congressional Intention 

The mercury and air toxics standards are being challenged by the National Mining Association, the power plant trade group Utility Air Regulatory Group and a coalition of 21 state governments led by Michigan. The petitioners have requested that the court invalidate the 2012 MATS standards because the determination to regulate power plants is based on an unlawful interpretation of the Clean Air Act.

The state and local petitioners argued in their briefs, filed in January, that Congress did not intend for the EPA to ignore costs when deciding whether it is appropriate to regulate power plant emissions. The state petitioners argued that if the EPA considered costs, it would have found that regulating power plants is not appropriate due to “disproportionately high” costs compared with minimal public health benefits.

The EPA said in its brief that the petitioners have failed to identify any “textual or practical justification” for requiring a different approach to regulating power plant emissions.

“With respect to all other source categories, the CAA unambiguously directs EPA to consider costs only in setting the proper level of regulation, not in making the threshold determination whether a particular source category should be listed,” the agency said.

The text, structure, context and history of Section 7412(n)(1)A) support EPA's decision to consider costs when setting the proper level of regulation, not in making the determination it was appropriate and necessary to regulate, according to the EPA.

Chevron Test Not Met 

The EPA said the D.C. Circuit correctly upheld the agency's decision under Chevron U.S.A. Inc. v. NRDC, a 1984 Supreme Court decision that established a two-part test for review of agency actions. Under Chevron, a court must decide whether the plain text of the law is clear. If the statutory text is ambiguous, then the court must decide if the agency's interpretation of the law is permissible.

The petitioners' claims can only prevail if the petitioners show that EPA's interpretation of the Clean Air Act is unreasonable, the agency said. The petitioners have not satisfied the standard under Chevron to establish that the Clean Air Act unambiguously requires cost consideration, according to the EPA.

The agency argued that it “reasonably concluded” that Congress did not intend for cost to be considered when the agency decided whether to list power plants for air toxics regulation. Even if cost consideration were required, the regulatory impact analysis that accompanied the 2012 MATS standards does not provide a basis for inferring that the EPA would or should have made a different decision, the agency said.

That regulator impact analysis document found that the associated benefits of the MATS standards would “greatly” exceed costs.

Respondents Support EPA Argument 

State and local governments, industry groups and public health and environmental organizations all filed respondent briefs in defense of EPA's decisionmaking.

The state and local petitioners, which include Massachusetts, California and Chicago, agreed in their brief that the Clean Air Act permitted the EPA to decline to consider costs in making its threshold determination and that the agency properly considered costs when actually setting the MATS standards.

The state and local governments also touted the public health benefits of the MATS standards. While many states have implemented state requirements on power plant emissions, those state regulations cannot address the issue of mercury and other hazardous air pollutants that cross state lines.

“The Air Toxics Rule imposes national controls that are essential to both protecting public health and the environment and leveling the regulatory playing field across the country,” the state and local petitioners said.

The nonprofit organizations and the industry respondents agreed in their briefs that the EPA made a reasonable interpretation of the Clean Air Act with respect to cost.

The American Academy of Pediatrics, the American Lung Association and other health and environmental groups attempted to refute the petitioners' argument that under the EPA interpretation, the agency could impose regulations that impose $9.6 billion per year in compliance costs and result in $1 in annual benefits. The agency's interpretation did not lead to “such absurdly unbalanced results,” as the agency applied the section 7412(d) standard-setting criteria to power plants, according to the environmental and public health respondents.

The petitioners failed to show how those criteria, which have been applied to refineries, steel mills and other industries in the past, has resulted in “irrational or wildly unbalanced costs,” the environmental and public health groups said.

The industry respondents, which include Calpine Corp. and Exelon Corp., said that even if the Supreme Court determines the EPA should have considered costs, it should affirm the MATS standards because EPA found the benefits of the rule significantly exceed the costs.

To contact the reporter on this story: Patrick Ambrosio in Washington at pambrosio@bna.com

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

The EPA's brief is available at http://op.bna.com/env.nsf/r?Open=pamo-9u4qmp.

The state and local respondents' brief is available at http://op.bna.com/env.nsf/r?Open=pamo-9u4ukg.

The industry respondents' brief is available at http://op.bna.com/env.nsf/r?Open=pamo-9u4uhc.

The public health and environmental respondents' brief is available at http://op.bna.com/env.nsf/r?Open=pamo-9u4ujr.