Trump Has Options in Utility Emissions Battle

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By Patrick Ambrosio

Nov. 22 — States and industry organizations engaged in a years-long legal battle over federal air pollution standards covering power plants may soon have a new ally: the incoming administration of President-elect Donald Trump, which attorneys said could take various actions to weaken or try to overturn the regulation.

While Trump’s transition website promises to eliminate several Environmental Protection Agency regulations—including all actions taken under President Barack Obama’s Climate Action Plan—it doesn’t specifically mention the 2011 Mercury and Air Toxics Standards. That regulation, commonly known as MATS or Utility MACT, was estimated by the EPA to cost the power sector $9.6 billion per year and factored into the decision of many utilities to shutter some coal-fired power plants.

Trump repeatedly pledged on the campaign trail that he would take action to boost the coal industry and, in a video released Nov. 21, promised to “cancel job-killing restrictions” on domestic energy production as part of his economic agenda.

Several attorneys told Bloomberg BNA the Trump administration will have numerous options on how to address the standards, including the possibility of requesting a voluntary remand of ongoing litigation over a regulatory finding that underpins the rule. However, all of those options are likely to face opposition from environmental advocacy organizations and would only have a limited practical effect on industry because most power plants have already either made the required capital investments to come into compliance or opted to shut down, according to attorneys.

Regulatory Review Promised

The Trump agenda also includes a “top-down” review of all regulations on the coal industry issued under the Obama administration, according to the transition website.

That review will likely include a look at how to address the MATS rule given its effect on coal-fired power plants, according to Jim Rubin, a partner at Dorsey & Whitney LLP in Washington, D.C. Rubin’s practice focuses on various environmental and energy issues, including air pollution and climate change.

“I’d assume to take them at their word, that they’re going to look at all the regulations,” Rubin told Bloomberg BNA. “This one [MATS] probably had a greater impact on the coal industry than anything else the Obama administration did on the clean air side.”

Environmental regulations such as the MATS rule—combined with the low price of natural gas—have driven coal’s share of U.S. electricity generation down in recent years. About 30 percent of the coal-fired generating capacity that was retired in 2015 shut down in April, when power plants that didn’t receive an extension were required to come into compliance with MATS, according to the U.S. Energy Information Administration.

Legal Battle Ongoing

The MATS rule remains in place even though a coalition of states led by Michigan were victorious in a 2015 decision by the U.S. Supreme Court. In a 5-4 opinion, the high court ruled that the EPA erred when it didn’t consider cost in its decision that it was “appropriate and necessary” to regulate power plant emissions under Section 112 of the Clean Air Act.

A lower court decided to leave MATS in place while the EPA worked to address the Supreme Court’s decision in Michigan v. EPA. The agency in April published a supplemental finding (RIN:2060-AS76) reaffirming that it’s “appropriate and necessary” to regulate hazardous pollutant emissions from power plants after factoring in cost considerations.

States and industry organizations are back in court over that supplemental finding, with litigation ongoing before the U.S. Court of Appeals for the District of Columbia Circuit.

The petitioners, in a joint brief filed Nov. 18, argued that the EPA’s “preferred approach” to considering cost in support of that finding is inconsistent with the Supreme Court’s Michigan ruling because the agency failed to directly weigh costs against benefits. Instead, the agency “carefully walled off” the cost consideration by weighing compliance costs against the power sector’s annual revenue and capital expenditures, as well as the possible effect of the regulation on retail electric prices and grid reliability, according to the petitioners ( Murray Energy Corp. v. EPA, D.C. Cir., No. 16-1127, brief filed 11/18/16 ).

The EPA’s supplemental finding included a secondary approach to cost consideration that weighed the $9.6 billion annual cost of the rule against as much as $90 billion in related benefits. The state and industry petitioners also objected to that approach, which they argued illegally relies on “co-benefits” associated with limiting emissions of pollutants like particulate matter that aren’t directly regulated.

Coal Giant Looks to Trump

Murray Energy Corp., the lead petitioner in the litigation over the supplemental finding, pointed to Trump’s vows to “unwind the Obama administration’s disastrous regulatory rampage” against the coal industry when asked about how a Trump EPA could impact the ongoing litigation.

“This litigation against the Utility MACT rule presents an opportunity for the Trump administration to ensure the best possible regulatory future for coal,” Murray Energy told Bloomberg BNA in an e-mailed statement. “We are confident in the legal positions we have raised in our brief and that the issues we raised will be resolved favorably by the courts or the Trump administration.”

Several attorneys told Bloomberg BNA that while there are live legal issues on MATS, particularly in how the EPA considers cost under the Clean Air Act, Trump administration action to pull back the standards would likely have a limited practical effect for most plants. Most utilities made irreversible decisions to comply with the standards by installing pricey pollution controls, shuttering older, smaller coal plants that were no longer economical and shifting toward natural gas and renewables.

“You wonder what could be done to actually remedy the situation at this point,” Rubin said.

Seth Jaffe, a partner at Foley Hoag LLP in Boston, agreed that “the train has left the station” with MATS from a practical perspective but noted that the case might still matter to the Trump administration in terms of the precedent it could set on how the EPA assesses the costs and benefits of regulations.

Several Options Available

The Trump administration will have several avenues it could opt to pursue on MATS beginning in January, according to Andrew Shaw, a senior managing associate at Dentons in Washington D.C. Shaw is a member of the firm’s Public Policy and Regulation practice, where he focuses on energy, environment and U.S.-Canada cross-border issues.

Shaw told Bloomberg BNA that each of the approaches that Trump could take carry different difficulties. For example, while the EPA under Trump could request that the D.C. Circuit remand the Murray Energy case back to the agency to allow for another look at the “appropriate and necessary finding,” that course of action would leave MATS in effect.

Another option for the Trump EPA would be to soften the MATS rule through administrative action, such as using discretion on whether to pursue enforcement actions against coal-fired power plants under the standards, Shaw said. That would shift the onus of pushing regulated power plants toward compliance from the EPA to advocacy groups and states that support the regulation, he said.

One option that the Trump administration won’t have is the option of signing a resolution of disapproval under the Congressional Review Act. The mercury standards have been on the books since 2011, well outside the window of 60 legislative days the Congressional Review Act provides for Congress to pass resolutions of disapproval under expedited floor procedures.

Shaw acknowledged there is “always the possibility that Congress may do something” but noted that would be a difficult path because there is strong support for the power plant standards among Democrats. The Republican majorities in both the House and the Senate will likely be more focused on the Clean Power Plan rule to limit carbon dioxide emissions from power plants, the Clean Water Rule to clarify federal jurisdiction over wetlands and regulations that actually are subject to review under the Congressional Review Act, Shaw said.

Rescission Would Be Lengthy, Difficult

The Trump EPA could try to rescind the regulation, but that would require a full notice-and-comment rulemaking, which Shaw said would be a lengthy process. In order to undo a regulation, Trump’s EPA would need to articulate an “adequate basis” for changing course, which would be subject to legal challenges by environmental advocates, he said.

“So, it’s not something they could rescind on Day 1,” Shaw said. “If a Trump-led EPA were to take that route… I think you’re looking at a long and potentially complicated effort to undo that rule.”

Jaffe of Foley Hoag said while the Trump administration might face some skepticism from the courts if it took that course of action, it’s a possible avenue to pursue. For the petitioners that are challenging the supplemental MATS finding, they’d likely be in a better position arguing in support of a revised approach issued by the Trump administration than arguing against the Obama EPA’s approach, Jaffe said.

“In my view what EPA did was defensible,” he said. “I think you could also defend a different approach to looking at cost.”

Advocates Ready to Push Back

No matter what approach the Trump administration takes with respect to the MATS rule, environmental advocates are prepared to fight back, according to Sean Donahue of Donahue & Goldberg LLP in Washington, D.C. Donahue is one of the attorneys representing the Environmental Defense Fund, an advocacy organization that helped the EPA defend MATS before the Supreme Court.

“We would vigorously oppose any effort to move backward,” Donahue told Bloomberg BNA.

Any attempt to pull back or soften the MATS rule would be “enormously difficult” given how far along the power sector is in complying with the rule and how strong the record is on the need to regulate hazardous pollutants like mercury, Donahue said.

Donahue acknowledged that the EPA didn’t assign a monetary value to many of the known benefits of reducing exposure to mercury, which has been criticized by some of the industry groups and states that are challenging the agency’s finding. While it wasn’t possible to quantify those benefits, the EPA did identify legitimate harms associated with mercury exposure, including to developing nervous systems and the environment, Donahue said.

“The record contains very strong science on that,” Donahue said. “We feel very good about where we are on the merits on that fight, if we have to have it again.”

To contact the reporter on this story: Patrick Ambrosio in Washington, D.C., at PAmbrosio@bna.com

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

For More Information

The opening brief in Murray Energy Corp. v. EPA is available at http://src.bna.com/kdj.

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