D.C. Circuit Leaves MATS Rule In Place as EPA Tackles Cost Consideration

The Mercury and Air Toxics Standards (MATS) will remain in effect as the Environmental Protection Agency (EPA) works on a final cost finding, the U.S. Court of Appeals for the D.C. Circuit ordered on Dec. 15.

The court noted in a two-page order that the EPA “has represented that it is on track to issue a final finding” to address the Supreme Court’s concern that cost was a necessary consideration when deciding to regulate mercury emissions from power plants. That finding is expected on or before April 15, 2016, the appeals court said.

The order is the latest development for the rule limiting mercury and other hazardous air pollutants released from power plants.

Another Rung on the Rulemaking Ladder

On June 29, in Michigan v. EPA, the U.S. Supreme Court decided 5–4 that the EPA interpreted the Clean Air Act unreasonably when it deemed cost irrelevant to the statutory decision of whether regulating power plants was “appropriate and necessary.” In the high court’s majority opinion, Justice Antonin Scalia said that it was not appropriate for the EPA “to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.”

The Supreme Court, however, did not vacate the rule. Instead, it reversed an April 2014 judgment by the D.C. Circuit that upheld the EPA’s February 2012–finalized standards. The appeals court said in its 2–1 decision that the agency is not required to take costs into account when it promulgates rules that are “appropriate and necessary” to address hazards to public health.

In response to the Supreme Court’s holding, the EPA said in a Nov. 20 supplemental finding that it did conduct a benefit/cost analysis for the rule. Significantly, in that notice, the agency called for public comments on a proposal to declare that it would have reached the same conclusion if it had completed the analysis before making the “appropriate and necessary” finding rather than after it began the rule-making process.

In other words, the agency said that consideration of cost does not alter the EPA’s previous conclusion that regulation of the power sector for hazardous materials is “appropriate and necessary.”

If the D.C. Circuit had vacated the final MATS rule in its recent order, the EPA’s Nov. 20 supplemental finding would have been rendered mute. But on Dec. 15, providing no explanation, the court ordered in White Stallion Energy Center, LLC, v. EPA (Case No. 12-1100) that the rule be remanded to EPA without vacatur of the final rule.

Oral arguments heard by the D.C. Circuit’s three-judge panel—Chief Judge Merrick Garland and Judges Brett Kavanaugh and Judith Rogers—earlier this month were centered on the consequences of vacating MATS versus leaving the rule in place.

On behalf of more than 20 states and industry petitioners that have sought vacatur of the standards, Michigan Solicitor General Aaron Lindstrom argued that scrapping the rule could help power plants receive a one-year compliance extension that would help the power sector dodge $158 million in annual compliance costs.

The EPA has estimated that the 2012-finalized rule—affecting about 40% of all coal plants in the U.S.—will cost about $9.6 billion per year (in 2007 dollars).

In an e-mailed statement to POWER on Dec. 16, EPA press secretary Melissa Harrison said the EPA is “very pleased with the court’s decision” to leave MATS in place. “All told, for every dollar spent to make these cuts in emissions, the public is receiving up to $9 in health benefits. A majority of power plants have already installed and are operating the controls needed to meet MATS and the rest will be doing so in April 2016,” she said.

What Happens Now?

For now, the EPA will likely publish its final cost consideration by late spring 2016—just as the compliance deadline approaches for power plants that had secured one-year compliance extensions for MATS.

However, several attorneys have cautioned that whatever action the EPA takes now will surely be litigated, meaning legal uncertainties may persist for several years.

According to Seth Jaffe, a partner with law firm Foley Hoag, the D.C. Circuit’s decision was “not a surprise,” as it follows a trend towards refusing to vacate complex EPA rules.

“Where the rule is sufficiently complicated and EPA can tell any kind of credible story that maintaining a slightly tarnished rule is better than no rule at all, or leaving an outdated rule in place, I think that vacatur is now more the exception than the norm,” he said.

However, what will happen in the long run is less certain, he said. “Judge Kavanaugh joined the decision, but he’s hardly a safe bet to affirm the MATS rule on the merits after EPA has finished addressing the cost/benefit concerns raised by the Supreme Court. Nonetheless, I still think that EPA should win.”

Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)