Legal & Regulatory

EPA: Mercury Rules for Coal, Oil Power Units Not ‘Appropriate and Necessary’

Because compliance costs to coal- and oil-fired power plants for the Mercury and Air Toxics Standards (MATS) far exceed quantifiable benefits to regulating hazardous air pollutant (HAP) emissions, the Trump administration has proposed it is not “appropriate and necessary” to regulate HAP emissions from power plants under Section 112 of the Clean Air Act (CAA), according to a document signed by acting Environmental Protection Agency (EPA) administrator Andrew Wheeler on Dec. 27. 

However, the EPA did not propose to remove coal- and oil-fired power plants from the list of source categories regulated under that section of the CAA, which means the 2012-finalized MATS remains in place. The EPA’s proposal, released publicly Dec. 28, is outlined in a revision to the agency’s final supplemental cost finding for MATS, which was required by a U.S. Supreme Court decision in June 2015. 

The agency on Friday also made public proposed results of the long-awaited MATS risk and technology review (RTR). The separate evaluations of risk and technology are required under CAA Section 112 every eight years after final HAP standards go into effect to determine if new developments should be incorporated into the standards.

According to the first agency’s MATS RTR, residual risks due to HAP emissions from coal and oil units “are acceptable” and that the current standards offer ample safety and protect public health. The EPA also said no new developments in HAP emission controls were identified to achieve “additional cost-effective reductions.” Based on these reviews, the agency proposed that “no revisions to MATS are warranted.”

Putting the New MATS Developments into Context

While the power industry aggressively opposed the MATS when it was proposed in 2011, and after it was finalized in 2012, several prominent power trade groups urged the EPA in a July 2018 letter to “leave the underlying MATS rule in place and effective,” citing investments of more than $18 billion by owners and operators of coal and oil units to comply with the rule since it became effective in 2012. However, the groups urged the EPA to “expeditiously” complete the RTR for power plants and submit it to Congress by April 2020.

The latest proposals are certain to trigger legal challenges and prompt a barrage of comments from industry and environmental groups. Industry groups note all power plants subject to MATS—600 in total, including 1,100 existing coal units and 300 oil units—have implemented measures to comply with MATS, either by installing pollution controls or by shutting down. (In its proposed rule Friday, the EPA said the MATS rule would affect 713 existing electric generating units at 323 facilities.) And the EPA itself acknowledges that environmental benefits associated with MATS are tangible. In a January 2018 report summarizing analysis of its 2016 Toxics Release Inventory, the EPA noted that since 2006, net electricity generation from coal decreased 38%, while the rate of release of mercury to air per GWh of electricity from coal dropped 77%. 

[For details about how MATS affected the U.S. power sector six years after it was finalized, see: “How Did MATS Affect U.S. Coal Generation?”]

Weighing the Cost Question

At the heart of the EPA’s proposed revisions are concerns about costs borne by industry as they are burdened with new regulations. In June 2015, the U.S. Supreme Court waded into the issue, and in a 5-4 decision (in Michigan v. EPA), told the agency it must consider costs in an “appropriate and necessary” finding that bolsters MATS. Justice Antonin Scalia, writing for the majority, 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 Obama administration responded to the high court’s decision with a “final supplemental finding” in April 2016—just days before power plants that received a one-year extension were supposed to be in compliance with the rule—which determined that public benefits of complying with MATS far outweigh the costs. 

The Trump administration in its proposed revision to that final supplemental finding cited the Obama administration’s projections that compliance costs for coal- and oil-plants would be $9.6 billion in 2015, and $8.6 billion, and $7.4 billion in 2020 and 2030, respectively. Those costs take into account increased capital expenditures, fuel, and other inputs by the entire power sector to comply with MATS while maintaining reliability.

The Obama administration argued that annual costs of MATS are just a “small fraction” compared to overall sales in the power sector, ranging between 2.7% and 3.5% of annual electricity sales from 2000 to 2011. Meanwhile, capital costs to comply with MATS were also said to be small compared to capital expenditures in a historical context. These represent between 3% and 5.9% of total annual power sector capital expenditures over a 10-year period, it said.

However, the Trump administration claimed the quantifiable benefits “attributable to regulating HAPS” from these power plants range between only $4 million and $6 million annually. In comparison, the Obama administration estimated that the annual benefits of MATS, including the avoidance of up to 11,000 premature deaths annually, would be between $36 billion and $89 billion. 

In the Dec. 27 proposed revision to the 2016 final supplemental finding, the Trump administration said a re-examination showed “that neither of the Finding’s approaches to considering cost satisfies the Agency’s obligation under CAA section 112(n)(1)(A) as interpreted by the Supreme Court in Michigan.” It also claims that the 2016 supplemental finding “erred in its consideration of cost,” because its preferred approach—the “cost reasonable test”—“does not meet the statute’s requirements to fully consider costs, and was an unreasonable interpretation of the CAA mandate.” The Trump administration instead proposed to compare the cost of compliance with MATS with the benefits “specifically associated with reducing emissions of HAP.” That means it did not consider the simultaneous reduction of non-HAP pollutants , or “ancillary” co-benefits, as the Obama administration did in its 2011 MATS proposal.

Wide Implications

The revised cost-benefit analyses is the basis the EPA’s proposal to determine that it is not “appropriate and necessary” to regulate HAP emissions from power plants under Section 112 of the CAA. 

However, the agency did not remove coal- and oil-fired units from the list of affected source categories under Section 112, citing a 2008 D.C. Circuit decision in  New Jersey v. EPA, which vacated the agency’s 2005 delisting rule and held that the EPA’s attempted reversal of a 2000 “appropriate and necessary” finding did not mean the agency could remove coal- and oil-unit source category from going through delisting procedures outlined in Section 112. That decision triggered years of legal wrangling and ultimately shaped the authority under which the EPA ultimately regulated mercury emissions from power plants. 

Because the agency did not remove coal- and oil-fired units from the list of affected source categories under Section 112, the 2012 MATS remain effective. But lest the revision appear toothless, experts widely noted the proposal could block future administrations from issuing future rules concerning HAP emissions.

On Friday, the EPA itself plainly stated that the proposed reversal of the 2016 supplemental finding “is a continuation of the Agency’s response to the Supreme Court’s remand, and New Jersey does not limit the effect of an action made in response to a Supreme Court decision finding the original action flawed, nor does it limit the Agency’s ability to revise its response to a Supreme Court decision.” 

It added, starkly: “Therefore, the EPA would have authority to rescind MATS and remove EGUs from the list of source categories regulation under CAA section 112 after finalizing this reversal of the 2016 Supplemental Finding.” 

“This proposal is an outcome-driven reconsideration of the legal underpinnings of MATS,” said Janet McCabe, who was acting assistant administrator for air quality at the EPA during the Obama administration. “If finalized, it will leave the mercury reduction requirements vulnerable to rollback or further legal attack, and it puts at risk years of progress to reduce exposure to a known neurotoxin that accumulates in the environment.”

McCabe, who helped write MATS and noted that the rule was based on requirements signed by President George H.W. Bush in 1990, also said that the proposal sets “a very troubling precedent” for how the EPA evaluates the impact of policy on public health. “An objective cost-benefit analysis of MATS suggests that public health benefits far outweigh the costs. But the current EPA is going against what has been the required practice for several decades, under both Democratic and Republican administrations, of considering all the public health benefits of a rule and is now being selective in deciding which public health benefits should count—and which shouldn’t—when justifying the rollback of yet another environmental standard,” she said.

Meanwhile, the agency may be contemplating more action on MATS. The EPA also asked for comment on “alternative interpretations of the effects of its proposed finding.” The agency is specifically seeking comment on whether it has the authority or obligation to remove coal- and oil-fired EGUs from the CAA list of affected source categories and rescind MATS. 

The agency also requested comment on establishing a subcategory for emissions of acid gas HAP from existing electric generating units firing eastern bituminous coal refuse. The subcategory and possible standards would affect 10 existing units in Pennsylvania and West Virginia that burn coal refuse to generate power.

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)

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