04/13/2023 - Power Sector Rules

EPA Reaffirms it is Appropriate and Necessary to Limit Hazardous Air Pollution from Power Plants

by Kipper Berven, JD 2024

On March 6, 2023, the Environmental Protection Agency (EPA) finalized its rule reaffirming that it is appropriate and necessary to regulate hazardous air pollutants (HAPs) from coal- and oil-fired power plants after considering costs.[1] This final rule also revokes the 2020 Trump administration’s determination that the Mercury and Air Toxics Standards (MATS) are not appropriate and necessary, concluding that the framework EPA applied in 2020 was “ill-suited to assessing and comparing the full range of advantages and disadvantages”.[2] This action marks an additional milestone in the years-long legal battles surrounding EPA’s regulation of HAP emissions from power plants; EPA’s 2012 MATS for power plants set emission standards for HAPs such as mercury and acid gases.

EPA’s 2020 Reconsideration of the 2012 MATS

Following EPA’s finalization of MATS in 2012, the Supreme Court held that the Clean Air Act (CAA) requires EPA to consider costs when considering whether HAP emissions regulations are appropriate and necessary.[3] In response to that decision, EPA compared the costs imposed on industry to the benefits to public health and the environment resulting from reduced HAP emissions, as well as co-benefits from ancillary reductions of non-HAP pollutants such as particulate matter (PM) and sulfur oxides and other unmonetized benefits. Based on that comparison, EPA published a supplemental finding on April 25, 2016 concluding that it remained appropriate and necessary to regulate power plants’ HAP emissions in light of these cost considerations.[4]

EPA reversed that determination under the Trump administration. In its 2020 benefit-cost analysis, EPA focused only on monetized HAP benefits, finding that the compliance costs outweighed the health and environmental benefits of HAP reductions.[5] Despite that conclusion, the Trump administration did not remove coal- and oil- fired power plants from the list of sources regulated under section 112 of the CAA, instead keeping the MATS rule in effect.

Power companies commented to the Trump administration that rescinding MATS would impede their ability to recover costs on significant capital expenditures, as the entire industry had complied with the standards by this time. [6]

As one of his first actions in office, President Biden issued Executive Order 13990 on January 21, 2021, directing EPA to review and reconsider the Trump administration MATS findings.

EPA’s Most Recent Final Determination

EPA’s final determination this March offers two approaches to support its determination that it is appropriate and necessary to regulate electric generating units (EGUs) under section 112 of the CAA. As a threshold matter, EPA states that under the Supreme Court’s Michigan holding, the CAA does not require EPA “to conduct a formal cost-benefit analysis in which each advantage and disadvantage is assigned a monetary value.”[7] EPA explains that the decision instead directs the agency to “pay attention” to these factors.[8]

EPA’s first, and preferred, approach considers the totality-of-the-circumstances and looks to CAA section 112 to “help determine the relevant factors to weigh.”[9] Under this framework, EPA considers the human health advantages of reducing power plant HAP emissions, regardless of whether there exists sufficient data to quantify and monetize every, or even most of the associated benefits. EPA then assesses the costs of MATS regulation, noting that the 2012 values were largely over-estimated.[10] EPA explains that it prefers this approach to a formal benefit-cost analysis because it is consistent with the statutory objectives of CAA section 112 and Congress’ instruction to protect the most sensitive populations from inherently dangerous HAP emissions.[11] EPA concludes that MATS are appropriate and necessary under the totality-of-the-circumstances approach when considering net benefits of reducing HAP alone and excluding benefits of co-pollutant reductions, using information available in 2012 and information updated in 2022.[12]

EPA’s alternative approach involves a formal benefit-cost analysis, and the final rulemaking explains the reasons it does not support this approach include its inability to account for distributional effects.[13] EPA explains it does not view this approach as required to support its finding, but had already calculated these factors for the final MATS rule’s Regulatory Impacts Analysis, pursuant to Executive Orders 12866 and 13563.[14] EPA also notes that in 2020 EPA rescinded the alternative approach because it gave equal weight to the non-HAP co-benefits of the rule.[15] In this rule, EPA also revokes that 2020 analytical framework “as being insufficiently attentive to the public health advantages of regulation” and reiterates its preference for the totality-of-the circumstances approach that allows EPA to “weigh primarily the benefits of reductions in HAP among the many advantages of regulation.”[16] EPA states that “with those caveats,” under the formal benefit-cost framework, it estimates that the net benefits associated with reduced annual HAP emissions are “overwhelmingly positive” and that this approach “independently supports” its final determination.[17]

What Comes Next?

Although EGUs have long complied with MATS, EPA’s recent reaffirmed appropriate and necessary finding has important legal significance. This determination provides the foundation for EPA’s evaluation of whether to propose new, more stringent HAP emission standards for power plants, which EPA subsequently proposed on April 5, 2023. Read about this proposal here: EPA’s Proposed MATS Residual Risk and Technology Review.

Given the history of this rulemaking, we expect any litigation will include a focus on EPA’s calculation of MATS’ net benefits. The Supreme Court in Michigan declined to reach the question of whether “the Agency could have considered ancillary benefits when deciding whether regulation is appropriate and necessary”.[18] In the final rule, EPA states that while co-pollutant reductions are not the primary purpose of MATS, the regulations generate important benefits from non-HAP emission reductions.[19] The final rule strikes a balance between making clear that the quantifiable benefits from HAP emissions reductions alone outweigh the projected costs and affirming EPA’s authority to consider non-HAP emissions and rely on its preferred totality-of-the-circumstances approach to calculating net benefits.[20]

We will track updates and litigation on our Mercury and Air Toxics Standards Regulatory Tracker page.

[1] See National Emission Standards for Hazardous Air Pollutants: Coal- and Oil-Fired Electric Utility Steam Generating Units—Revocation of the 2020 Reconsideration and Affirmation of the Appropriate and Necessary Supplemental Finding, 88 Fed. Reg. 13,956 (Mar. 6, 2023).

[2] Id.

[3] Id. at 13,961 (citing Michigan v. EPA, 576 U.S. 743, 759 (2015)) (noting that EPA has broad discretion to decide how to account for costs, so long as the decision remains “within the limits of reasonable interpretation.”).

[4] Id. at 13,957 (citing 81 Fed. Reg. 24,420 (Apr. 25, 2016)).

[5] Id. at 13,978 (citing 85 Fed. Reg. 31,299 (May 22, 2020)).

[6] 85 Fed. Reg 31298 (May 22, 2020).

[7] Id. at 13,990 (citing Michigan v. EPA, 576 U.S. at 759).

[8] Id.

[9] Id. at 13,956.

[10] Id. at 13,975.

[11]  Id. at 13967.

[12] Id. at 13,958.

[13] Id. at 13,990.

[14] Id. at 13,988.

[15] Id. at 13,989.

[16] Id.

[17] Id. at 13,990.

[18] Michigan v. EPA, 576 U.S. at 760 (emphasis in original).

[19] Id. at 13,962 (citing 81 Fed. Reg. 24425 (Apr. 25, 2016)).

[20] Id. at 13,987.