12/17/2018 - Power Sector Rules - Regulatory Rollbacks

Preview: Mercury and Air Toxics Standards (MATS) – EPA Review

by Joe Goffman

The Environmental Protection Agency (EPA) is expected to issue a proposal, possibly as early as this week, that will include options for re-opening MATS (See our MATS Rollback Tracker post for updates). Information we have been able to gather suggests that the EPA is considering options that directly or potentially eliminate the rule’s current pollution control requirements, and bar future additional emissions reduction requirements for toxic or hazardous air pollutants emitted by power plants.

Section 112 of the Clean Air Act Amendments of 1990 required the EPA to set pollution control standards for toxic or hazardous air pollutants for a variety of source categories, including power plants. Because the 1990 Amendments required power plants to meet other pollution control requirements as well, section 112 required, in the unique case of power plants, that the EPA make a finding that it is “appropriate and necessary” to regulate toxic or hazardous air pollutants from power plants before it can issue hazardous air pollutant regulations. See our Legal Backgrounder for a more detailed history and explanation of the issues.

When it promulgated MATS in 2012, the EPA determined that it was appropriate and necessary to regulate hazardous air pollutants emitted by power plants and set pollution control requirements for hazardous pollutants emitted by power plants. Both the pollution control requirements set in MATS and the appropriate and necessary finding were challenged in federal court. The Supreme Court effectively upheld all of MATS by way of declining to take up any issue apart from the single question of whether the EPA had to have considered cost when making the appropriate and necessary determination. After the Supreme Court ruled in Michigan v. EPA, 576 U.S. ___ (2015) that the agency must consider cost in making the finding, the EPA in 2016 issued a supplemental appropriate and necessary finding reflecting the consideration of cost as the Supreme Court instructed.

It appears that the EPA will revisit the supplemental finding and propose to rescind it, thus negating the 2012 finding. The proposal is expected to rely on the argument that in taking account of cost, the agency must use a benefit-cost analysis and may consider only those benefits that flow specifically from reducing the hazardous air pollutants “targeted” by MATS. Other pollutants reduced in the course of achieving compliance with MATS, most notably particulate matter, may not be included in calculating the benefit when conducting the appropriate and necessary determination. Following from its rescinding of the appropriate and necessary finding, the proposal is expected to address the consequences of that rescission, which may include several options, including rescinding the pollution control requirements of MATS itself.

Utilities had up to 3 years from the date on which MATS was finalized in 2012 to comply with their requirements, with the opportunity for an additional year under certain circumstances. Thus, the compliance deadlines have passed, and since 2016 the power sector has been achieving the very substantial toxic air pollution reductions required by MATS, as well as reductions in sulfur dioxide emissions, resulting in reductions of deadly ambient fine particles. When issued in 2012, the EPA projected that the annual cost of complying with MATS would be $9.8 billion while the annual benefits would be $37-$90 billion. MATS was projected to forestall annually up to 11,000 premature deaths, 4,700 heart attacks, 130,000 asthma attacks and 5,700 emergency room and hospital visits, among other benefits. Since the 2011 EPA analysis of MATS, public health scientists have identified even more benefits of reducing mercury and air pollution overall.

This summer, the utility industry reported to the EPA that it had already spent $18 billion cumulatively to comply with MATS, and that all power plants still in operation had installed and were operating equipment needed for compliance with the standards. They asked the EPA to “allow the industry to continue full implementation of the MATS rule, which was completed in April 2016”. MATS does not appear to have led to significant electricity rate increases; the average retail price of electricity has increased by less than ten percent over the past ten years per the EIA. There is also little available evidence pointing to reliability failures linked to MATS implementation.

Nevertheless, and despite assurances from Acting EPA Administrator Andrew Wheeler that the MATS pollution control standards would not change, reports are that the proposal could include up to three different options for public comment, each of which either would undermine MATS or would eliminate the rule completely. Based on expectations of the contents of the proposal, each of the options under consideration poses significant practical and legal challenges for the EPA. Some could well require the agency to rely on strained logic and even more strained legal interpretation, which the agency would have difficulty defending. Each option entails sacrificing pollution reductions, air quality, and public health, while creating regulatory uncertainty and practical problems for the utility industry:

  • Option 1 – Rescind the finding that it is “appropriate and necessary” to regulate power plant hazardous air pollutant emissions under section 112(d) of the Clean Air Act but leave power plants on the list of sources covered pursuant to section 112(c) and leave the pollution control standards of MATS in place.
    • Section 112(n)(1)(A) requires the EPA to determine whether regulation of hazardous air pollutants from power plants is “appropriate and necessary.” The proposal would argue that the appropriate and necessary finding now in place is flawed because it considered all of the pollution reductions from MATS, rather than only considering the reductions of the pollutants “targeted” by MATS – namely, mercury and acid gases. The EPA would propose that the relatively modest monetary benefits calculated under the targeted-pollutant-only approach when weighed against the costs would show that regulating power plant hazardous air pollutant emissions is not appropriate and necessary.
    • Although this would technically leave the standards in place, it could as a practical matter render them ineffective. With the EPA negating its legal authority for the standards and throwing into doubt its commitment to enforcing compliance, it is unclear whether utilities would operate pollution control equipment at current levels of reduction, if they operated them at all.
    • Air Quality Threat: In the absence of the appropriate and necessary finding, MATS opponents would bring a legal challenge to the continued implementation of the standards on the grounds that the appropriate and necessary finding prerequisite for those standards had been removed.
    • Legal Problem: To prevail, the EPA will have to overcome its own previously compiled record of information and analysis as well as arguments it has already made to the D.C. Circuit and the Supreme Court, in support of the MATS appropriate and necessary finding, as well as the logic of the Office of Management and Budget’s approach to benefit-cost analysis in place since at least the first term of the George W. Bush administration – which directs agencies conducting benefit-cost analysis to consider all of the benefits and costs it can identify.
  • Option 2 – Rescind both the appropriate and necessary finding and the pollution control standards on the grounds that the standards cannot be imposed in the absence of an appropriate and necessary finding.
    • Legal Problem: To justify rescinding the MATS pollution control requirements the EPA could still face the difficult task of explaining why it can ignore the explicit, unqualified mandate in section 112(d) to set standards for hazardous air pollutants from all listed source categories, of which power plants are one. Ten years ago, the D.C. Circuit, in New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008) ruled that a negative appropriate and necessary finding did not by itself remove power plants from the list of source categories subject to the section 112(d) mandate.
  • Option 3 – Rescind the appropriate and necessary finding and the pollution control standards and remove power plants from the list of sources that the EPA is authorized to regulate in any event under section 112.
    • Legal Problem: For the last step the EPA would likely have to explain why it can ignore the D.C. Circuit decision in New Jersey while going well beyond the Supreme Court’s holding in Michigan v. EPA, the case in which the Court ruled on but a single narrow and unrelated issue in the MATS rule.
  • Risk and Technology Review – As part of Option 1, the EPA may also propose to make an affirmative determination not to impose a second round of more stringent pollution control standards on the grounds that at their current reduced levels hazardous air pollutants emitted by power plants do not pose a significant public health risk.
    • Once technology-based emissions reduction standards such as those in MATS are fully implemented, section 112 requires the EPA to review the remaining levels of hazardous air pollution and issue additional reductions requirements if needed to reduce residual risks to public health posed by hazardous air pollutants.
    • If the EPA adopted Option 2 or Option 3 it would remove the grounds for any risk and technology review determination and for further reduction requirements.
    • The utility industry has asked the EPA, however, to complete the risk and technology review and the EPA – and the industry – may see it as desirable to issue a determination that a second round of more stringent standards is not warranted.
  • Maintaining the MATS standards is a prerequisite for the EPA’s authority to make a risk and technology review determination, which may explain the EPA’s inclusion of Option 1 and its maintenance of the MATS standards in the Option 1 proposal. Option 1 would stand in direct contradiction, however, with both Option 2 and Option 3. In each of those two options, the proposal would have to rely on arguments that rescinding the appropriate and necessary finding nullified the standards (Option 2) or nullified both the standards and the inclusion of power plants on the list of covered source categories (Option 3). Although the proposal would be offering the various arguments as alternative interpretations of section 112, their juxtaposition in the proposal would serve to highlight the potential weaknesses of each set of arguments.

Any of these EPA proposals threatens to undermine or eliminate an ongoing, successful pollution reduction program on the basis of a single narrow – and, since 2016, moot – issue: whether all or just some pollution reductions “count” in the benefit-cost analysis used to make an appropriate and necessary finding. The rationale for rescinding the appropriate and necessary finding itself is challenging to justify, and the fact that the EPA is considering including up to three options in the proposal is a sign that rescinding the finding has practical consequences that the agency will struggle to manage.

That the EPA is willing to face the legal and practical challenges created by rescinding the finding speaks to its commitment to a deregulatory agenda that hinges on tilting the scales against the benefits to the public of reducing air pollution. If ultimately issued as a final EPA action, the MATS review proposal would enshrine in regulation a distinction (first signaled in the October 2017 Clean Power Plan Repeal proposal) between the benefits of “targeted pollutant” reductions and the benefits of the full range of reductions beyond the “targeted pollutant”. As a result, the agency would be ignoring the full range of benefits of the actual effect of air pollution regulation (while likely counting the full range of costs).

The expected proposal adopts the key tactic in this EPA’s ongoing campaign to hide the fact that air pollution reductions have enormous public health benefits. It would join a campaign that includes: the Clean Power Plan repeal proposal’s analysis; a proposal to exclude certain scientific studies when evaluating the health benefits of reducing air pollution (euphemistically titled “Strengthening Transparency in Regulatory Science”); a request for comment on systematically excluding co-benefits from analysis that specifically mentioned the existing MATS appropriate and necessary finding for criticism (titled “Increasing Consistency and Transparency in Considering Costs and Benefits in the Rulemaking Process”); the Regulatory Impact Analysis for the Affordable Clean Energy proposal; and now the new MATS review proposal.

See our Legal Backgrounder for in-depth analysis on this rule.