By Patrick Ambrosio
Dec. 15 — A federal appeals court opted to leave the Environmental Protection Agency's mercury and air toxics standards for power plants in place, despite a ruling by the U.S. Supreme Court that the agency erred in the first step of its rulemaking process.
The U.S. Court of Appeals for the District of Columbia Circuit's decision, issued Dec. 15, means that power plants must continue to comply with the MATS rule while the EPA works to address the Supreme Court's holding that cost was a necessary factor for the agency to consider when deciding it was “appropriate and necessary” to regulate power plant emissions of mercury (Michigan v. EPA, 135 S. Ct. 2699, 80 ERC 1577, 2015 BL 207163 (2015)).
The brief order, issued by Chief Judge Merrick Garland and Judges Brett Kavanaugh and Judith Rogers, does not include the panel's rationale for opting to remand MATS back to the agency without vacating the rule. However, the court did note that the EPA has said it intends to quickly address the Supreme Court's decision in Michigan v. EPA. Several attorneys told Bloomberg BNA that they expect whatever action the EPA takes on remand will eventually be the focus of new litigation.
A November proposal from the EPA found that the required consideration of cost, for which the agency largely relied on an existing cost analysis prepared during promulgation of the standards, doesn't alter the appropriate and necessary finding. The EPA is taking comments on that proposal through Jan. 15 and intends to issue a final supplemental finding (RIN 2060-AS76) in April 2016, the agency said in a Dec. 15 statement (232 DEN A-6, 12/3/15).
“EPA is very pleased with the court's decision to leave the Mercury and Air Toxics Standards in place,” the EPA said. “These practical and achievable standards are already cutting pollution from power plants that will save thousands of lives each year and prevent heart and asthma attacks.”
James Rubin, a partner at Dorsey & Whitney LLP, told Bloomberg BNA that the D.C. Circuit's decision to leave MATS in effect on remand will be disappointing for power plants that were hoping to get relief from compliance obligations while the EPA addressed the Supreme Court's decision. While most power plants have already come into compliance with the standards or opted to shut down, some power plants received a one-year extension from compliance obligations that gave them until April 2016. Operators of those plants will need to “keep moving” towards compliance, Rubin said.
The court issued its order just 11 days after hearing oral arguments over whether the mercury standards should remain in place or be vacated.
Sanjay Narayan, managing attorney at the Sierra Club, told Bloomberg BNA that he wasn't surprised by the speed of the court's action because the arguments were “pretty one-sided.” The Sierra Club is one of the environmental and public health organizations that intervened in the litigation in support of the standards.
During oral arguments, Michigan Solicitor General Aaron Lindstrom argued on behalf of state and industry petitioners that the mercury standards must be vacated because the EPA failed to fulfill the “substantive precondition” of an appropriate and necessary finding, which Congress required the agency to meet before regulating power plant emissions. Garland and Kavanaugh questioned counsel on both sides during arguments on the practical effects of vacating the standards versus leaving the standards in place on remand (234 DEN A-2, 12/7/15).
The 2012 MATS rule (RIN 2060–AP52, RIN 2060-AR31) was projected by the agency to cost $9.6 billion per year. While most plants have already made the required investments, Lindstrom argued that a decision to vacate the standards could help plants that received a one-year compliance extension and could help the power industry avoid about $158 million in ongoing annual costs attributed to compliance. Attorneys arguing in support of leaving MATS in place cited the public health protection offered by the rule as something that could have been disrupted if the court opted to vacate MATS.
Rubin said the court's decision to remand MATS without vacating the standards was largely a procedural decision and did not weigh in on the merits of how the EPA is proposing to address the Michigan v. EPA decision.
“I wouldn't read that necessarily as any kind of statement that EPA's proposed rule is valid,” Rubin said.
Rubin said the next court action will likely come once the EPA issues its final supplemental “appropriate and necessary” finding, which will be a final agency action subject to judicial review.
Narayan agreed that there will be further litigation over the EPA's action on remand, which he expects the agency to be able to complete as scheduled by April. The relevant questions on the cost of regulating power plants were answered long before the Supreme Court made its decision in June 2015 because the EPA had already completed a full cost-benefit analysis that estimated the cost of complying with MATS, he said.
“It's not the kind of rulemaking where EPA needs to go out and do a whole bunch of research,” Narayan said.
Sean Donahue, who argued before the D.C. Circuit on behalf of the Environmental Defense Fund and other environmental petitioners, told Bloomberg BNA that the question before the EPA on remand is only one aspect of the MATS rule, whether it is appropriate and necessary to regulate after considering cost. That one issue will be the only one available for further judicial review once the EPA issues its final supplemental proposal, Donahue said.
Donahue said it will be a “very heavy lift” for opponents of the standards to successfully argue that the EPA considered cost but “didn't do it in the right way.” The Supreme Court in Michigan v. EPA declined to prescribe how the agency should consider cost, instead only mandating that the agency was required to do so.
However, during oral arguments in White Stallion Energy Ctr. LLC v. EPA, Kavanaugh said the EPA's use of “co-benefits,” the benefits of reducing fine particulate matter and other pollutants that are not directly regulated, would likely be the “key battleground” in future litigation over the EPA's action on remand. The EPA's cost-benefit analysis for MATS attributed as much as $90 billion in annual benefits to the rule, but only about $6 million of those benefits were attributable to reducing emissions of mercury and the other hazardous air pollutants directly regulated under MATS.
William Yeatman, a senior fellow at the Competitive Enterprise Institute, said in a Dec. 15 statement that future judicial review of the EPA's cost analysis will be “no cakewalk for the EPA.”
“Before the courts, the agency will have to justify costs of almost $10 billion annually as against ‘benefits' of about $6 million,” Yeatman said. “Although the courts afford agencies a great deal of discretion in their decision-making, EPA's ridiculous cost benefits ratio for the mercury rule will strongly tempt rejection during judicial review.”
Additionally, Stephanie Talbert, a Justice Department attorney, argued White Stallion Energy Ctr. LLC v. EPA on behalf of the EPA. Melissa A. Hoffer, assistant attorney general for Massachusetts, argued on behalf of intervening states that supported the standards and Brendan Collins, a partner at Ballard Spahr LLP, argued on behalf of Calpine Corp., Exelon Corp. and other industry groups that intervened on the EPA's behalf.
To contact the reporter on this story: Patrick Ambrosio in Washington at email@example.com
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