Regulatory Developments, Special Topics in Environmental Management

EPA’s MATS Proposal Released Amid Government Shutdown

Hours before the EPA put almost all of its 14,000 workers on furlough because of the government shutdown, the Agency announced its latest measure to preserve coal-fired power in the United States.

Specifically, the Agency is proposing to revise the Obama administration’s 2016 Supplemental Finding that it is appropriate and necessary to regulate coal- and oil-fired electric generating units (fossil EGUs) under Section 112 of the Clean Air Act (CAA). According to the Agency, the methods the EPA used in the 2016 appropriate and necessary finding to calculate the economic benefits of regulating these facilities under Section 112 were flawed, and therefore, it is not appropriate and necessary to take such action, at least under Section 112.

The proposal is a limited measure. It does not indicate the EPA’s intention to remove fossil EGUs from the list of sources subject to Section 112, which was written by Congress to reduce emissions of hazardous air pollutants (HAPs) from industrial facilities. Neither does it announce any plan by the EPA to withdraw the Agency’s 2012 Mercury and Air Toxics Standards (MATS), which impose limits on mercury and other HAPs emitted by EGUs under the authority of Section 112.

While those actions would be premature before any reversal of the 2016 Supplemental Finding, the Agency is also soliciting public comment on whether, following any final reversal of the 2016 appropriate and necessary finding, the EPA would either have the discretionary authority to remove fossil-fired EGUs from the Section 112 list and/or rescind MATS or be obligated to rescind MATS with or without a Section 112 delisting of EGUs.

Consideration of Costs

In the CAA, Congress indicated that fossil EGUs are a special category of sources of HAP emissions, which should not be regulated under CAA Section 112 unless the EPA administrator finds that it is appropriate and necessary to do so. In 2000, the EPA stated that it was indeed appropriate to regulate EGUs under Section 112. The Agency proposed MATS in 2011 and included in that proposal a reaffirmation of the earlier appropriate and necessary finding. Following promulgation of MATS in 2012, industry sued. In a case ultimately decided by the U.S. Supreme Court, the Agency was informed that neither MATS nor its appropriate and necessary finding took adequate consideration of the compliance cost of MATS. The EPA responded with its 2016 Supplemental Finding, which stated that following consideration of costs, its appropriate and necessary finding was unchanged.

Cost Justifications Rebutted

In the 2016 supplemental finding, the Agency stated that the aggregated benefits of MATS ($37 billion to $90 billion each year) exceeded the costs of compliance ($9.6 billion annually) by three to nine times. The current proposal rebuts the Agency’s previous calculation of the benefits of MATS.

  • First, in the Supplemental Finding, the EPA indicated that the cost of compliance was reasonable because it could be absorbed by the power sector without negatively affecting the industry’s ability to continue performing its primary function.

The Agency now states that such a calculation disregards judicial precedent, which states that the cost of the rule may not far exceed the benefits regardless of whether industry can pay those costs and still keep functioning.

  • Second, in the Supplemental Finding, the EPA stated that the benefits of reducing HAP emissions alone amounted to $4 million to $6 million annually. However, compliance with MATS would also reduce emissions of the criteria air pollutants nitrogen oxides (NOx) and sulfur dioxide (SO2) that contributed to the formation of particulate matter (PM). These cobenefit reductions accounted for the great majority of the monetary benefits identified by the EPA.

While the EPA does not now dispute that cobenefits should be included in an appropriate and necessary finding, the Agency says such a calculation should not constitute the primary benefits calculation. According to the EPA, sections of the CAA other than Section 112 address NOx and SO2, and any need for additional regulation of those pollutants should be addressed under those sections.

  • Third, the Supplemental Finding indicated that the benefits of MATS should include unquantified benefits such as long-range reductions in human and ecosystem morbidity.

Again, the Agency does not now dispute that such unquantified benefits cannot be discounted, but it adds that the “substantial and important unquantified benefits of MATS are not sufficient to overcome the significant difference between the monetized benefits and costs of this rule.”

RTR

The proposal also includes the results of the Agency’s residual risk and technology review (RTR) of MATS.

The RTR indicates that residual risks due to emissions of air toxics from the EGU source category are acceptable and that the current standards provide an ample margin of safety to protect public health. Also, no new developments in HAP emissions controls to achieve further cost-effective emissions reductions were identified under the technology review.

“Therefore, based on the results of these analyses and reviews, we are proposing that no revisions to the MATS are warranted,” states the EPA.

The EPA’s prepublication version of the proposal is here.