The U.S. Environmental Protection Agency’s (EPA’s) final Mercury and Air Toxics Standards (MATS) quietly took effect on December 16, 2011, kicking off the three-year compliance period mandated under the Clean Air Act. Several more groups filed suit before the filing deadline for legal challenges on April 16, including the Utility Air Regulatory Group (UARG), Colorado’s Tri-State Generation and Transmission Association, and the American Public Power Association (APPA).

MATS applies to electric generating units larger than 25 MW that burn coal or oil to generate power for sale and distribution through the national electric grid. These include investor-owned units, as well as units owned by the federal government, municipalities, and cooperatives. Under the rule, about 1,400 units at about 600 power plants—1,100 coal-fired units and 300 oil-fired units—will be required to reduce emissions of heavy metals, including mercury and arsenic, and acid gases. According to the EPA, “dozens of coal-fired plants” already meet at least some part of the standards; but about 40% of coal-fired units covered by the rule still don’t use advanced controls.

The rule’s publication in the Federal Register on Feb. 16 has already spurred half the nation’s states to challenge the rule in federal appeals court, while dozens of other states have intervened on behalf of the EPA to defend the rule. A torrent of industry groups and power companies are also challenging the rule.

Industry Groups File Last-Minute Challenges

The UARG has filed a second challenge to the Mercury MATS rule in the D.C. Circuit, focused specifically on opposing the New Source Performance Standards (NSPS) that are part of the rule. In its first filing on March 16, the group had challenged the standards generally.

The APPA said in a statement, following its first legal challenge to the EPA that the rule’s deadlines were "unachievable" for public power utilities that face state and municipal legal requirements.

“Our primary concern is not with the rule itself but with the timeline given for compliance. APPA members have every intention of complying with the rule, and we appreciate the need to regulate mercury and other air toxics to protect public health and the environment,” APPA spokesperson Nick Braden told POWERnews. “But in our comments to the EPA on the rule, we emphasized that public power utilities need more time and flexibility to comply.”

APPA President & CEO Mark Crisson reiterated that point during the ELECTRIC POWER 2012 keynote panel discussion on May 15.

About 115 public utilities of the nonprofit group’s 2,000 community-owned electric utility members own some coal-fired capacity, Braden said. A survey undertaken by the APPA showed that 90% to 99% of its affected members needed at least 77 months to comply. “That includes time to plan, finance, conduct extensive public comment periods, and multiple years to bid for, construct, install, and calibrate the necessary equipment to comply with the rule,” he said. “EPA has so far ignored our concerns, leaving us with no other viable option but to file suit in federal court.”

On Friday, meanwhile, wholesale power supplier Tri-State Generation and Transmission filed a legal challenge to what it said was a “costly” rule. The association owned by 44 electric cooperatives across Colorado, Nebraska, New Mexico, and Wyoming asked the D.C. Circuit to review the rule, which it said “is not lawful under the Clean Air Act and will significantly increase electricity costs.”

“The EPA’s MATS rule harms rural electric consumers,” said Ken Anderson, executive vice president and general manager of Tri-State. “The rule was developed in a flawed regulatory process, will impose substantial and unwarranted costs on existing plants, and will effectively prohibit the construction of new coal plants.”

Tri-State’s coal-fired plants must comply with already stringent mercury limits in Colorado and New Mexico, it said, yet plants will still be burdened with additional regulatory requirements under the rule. “The EPA overstates the benefits of the rule and underestimates the costs,” said Anderson. “The rule is unworkable and has an unrealistic timeframe to implement.”

Senate Committee Hearing Tackles Rule’s Public Benefits

Meanwhile, in Congress, where measures to block the bill have stalled, a hearing on the rule was held on April 17 in the Senate Committee on Environment and Public Works’ Subcommittee on Clean Air and Nuclear Safety. Sen. James Inhofe (R-Okla.), who has been sharply critical of the rule and what he calls the EPA’s "regulatory onslaught," said in an opening statement that the standards had generated "tremendous bipartisan concern."

"To be clear, Republicans are for reducing mercury emissions," he said. "But this rule isn’t about reducing mercury. It’s part of President Obama’s grand strategy to end affordable energy in the United States and kill coal."

Inhofe criticized the rule’s cost factor. "EPA calls this the ‘Mercury and Air Toxics’ rule, but the Agency admits the benefits of reducing mercury are astonishingly small—especially when considering the rule’s price tag, roughly $10 Billion annually. EPA estimates the benefits of reducing mercury to be $6 million or less. That’s a cost-benefit ratio of approximately 1,600 to 1."

Inhofe’s sentiments were echoed by a witness, Jeff Holmstead, a partner at Bracewell & Giuliani and counsel to the Electric Reliability Coordinating Council, who said the MATS rule is "unnecessarily broad and overreaching." He also went so far as to say, however, that the MATS rule could actually adversely affect public health, pointing to increased electricity costs for hospitals, which he said spend an estimated $8.5 billion on energy each year. "Under the EPA’s power sector rules, energy costs are estimated to increase as much as 23.5% over the next decade."

Another witness, Charles Driscoll, a professor of environmental systems engineering at Syracuse University, testified that mercury—a major source of which, he said, is atmospheric deposition—had contaminated many bodies of water in the U.S. A retrospective analysis had shown that past decreases in U.S. emissions had led to beneficial improvements in the U.S., he said.

Federal Court Panel Hears Cross-State Rule Arguments

A three-judge panel at the U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments on April 13 in a case challenging the EPA’s Cross-State Air Pollution Rule (CSAPR). A decision in the case—which stayed implementation of the first phase of the rule on Jan. 1—is expected as early as June or July.

The CSAPR, finalized on July 6, 2011, requires 28 states to improve air quality by slashing power plant sulfur dioxide and nitrogen oxide emissions that contribute to ozone or fine particle pollution in other states. The rule replaces the Clean Air Interstate Rule (CAIR), which the EPA promulgated in 2005. The D.C. Circuit had struck down CAIR in July 2008, but later that year the court reinstated CAIR and directed the EPA to issue a new rule to implement Clean Air Act requirements concerning interstate air pollution.

Last December, however, it temporarily blocked the CSAPR, ordering the EPA to continue administering the previously promulgated CAIR until a final decision can be made on the merits of CSAPR.

The rule is being challenged by 16 states and various power companies, including Southern Co. and EME Homer City Generation. Several states and a few power companies have intervened in support of the EPA.

Judges Judith Rogers and Thomas Griffith seemed sympathetic to the EPA, while Judge Brett Kavanaugh was more skeptical of the agency on an issue raised by the petitioners that the EPA incorrectly gauged the “significant contribution” of particular states, reported E&E.

The “good neighbor” provision of the Clean Air Act, Section 110(a)(2)(D), requires states to reduce emissions that “contribute significantly” to nonattainment of air quality standards in downwind states. The petitioners have contested the EPA’s methodology for determining a "significant contribution."

According to the Daily Environment Report, however, it became apparent that the petitioners’ "significant contribution" argument may not have been raised during the rule’s public comment period. This posed a "significant problem," the news organization quoted Judge Griffith as saying, because petitioners may only litigate issues they brought to the agency’s attention in comments.

Analysts say that the oral argument also focused on claims that the EPA inappropriately imposed Federal Implementation Plans instead of first allowing affected states to submit State Implementation Plans.

“In addition to challenging CSAPR and its supplemental rule, parties are expected also to challenge the final CSAPR technical revisions rule. Petitions for review of this rule must be filed by April 23, 2012,” said legal group Troutman Sanders in an update in mid-April. “Notably, EPA has yet to act on the more than 60 petitions for reconsideration of CSAPR filed by numerous states and other parties.”

The case is EME Homer City Generation v. EPA.

—Sonal Patel is POWER’s senior writer. This material was first published in POWERnews.