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US EPA proposes to revoke legal basis for Obama-era rule targeting coal plants

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US EPA proposes to revoke legal basis for Obama-era rule targeting coal plants

In a move with major implications for future air quality regulations, the U.S. Environmental Protection Agency released a proposal Dec. 28 to rescind the legal justification for an Obama-era rule that has dramatically reduced emissions of mercury and other toxic pollutants from existing coal- and oil-fired power plants.

Despite uprooting the rule's legal underpinning, however, the agency is proposing to keep its current performance standards for those electric generating units in place. The EPA is also proposing to determine that no further pollution reductions are necessary as part of a required eight-year review.

At its core, the proposal hinges on revoking an earlier finding that it was "appropriate and necessary" to regulate power plants through the Mercury and Air Toxics Standards, or MATS rule, under Section 112 of the Clean Air Act after considering "co-benefits" such as cuts to emissions of fine particulate matter.

When the EPA issued the MATS rule in 2012, the agency calculated the annual cost of complying with the regulation would be between $7.4 billion and $9.6 billion, while the annual benefits would total between $37 billion and $90 billion the vast majority of which would flow from fine particulate matter reductions. At the time, the agency estimated direct benefits associated with reductions in mercury emissions would fall between $4 million and $6 million, although it noted there were also significant unquantified benefits. The agency estimated compliance costs would add $2.71 to the average American household's monthly electric bill.

The EPA "has concluded that the identification of these benefits is not sufficient, in light of the gross imbalance of monetized costs and" hazardous air pollutant benefits, to support the Obama administration's previous finding, the agency said in a fact sheet.

U.S. electric utility groups have urged the Trump administration to maintain the current MATS, noting in a letter to the EPA in July that power companies have already spent $18 billion to install the required pollution control equipment and all affected power plants are now compliant with the rule. Using EPA data, the left-leaning Center for American Progress also recently found that nationwide mercury emissions from power plants dropped by 65% in the first three years the rule went into effect.

"Given this investment and these emissions reductions, regulatory and business certainty regarding regulation under [Clean Air Act] section 112 is critical — many of these same units are part of ongoing rate reviews regarding the generating fleet operated by investor-owned electric companies," groups including the Edison Electric Institute, American Public Power Association and National Rural Electric Cooperative Association wrote.

However, the EPA said it is also taking comment on whether it has the "authority or obligation" to remove coal- and oil-fired power plants from the list of sources regulated under Section 112 of the Clean Air Act and completely rescind the MATS rule.

Background

Issued in 2012, the MATS rule required existing coal plant operators to install modern pollution controls to reduce emissions of mercury and acid gases. Generating units that could not comply with the rule were forced to retire.

Mercury pollution is especially damaging to infants in the womb who are exposed when their mothers eat fish that contain methylmercury, a powerful neurotoxin that can permanently impair cognitive thinking, memory and fine motor skills. Coal plants are the nation's largest source of methylmercury, which is formed when mercury emissions react with water, soil or plants.

The Obama EPA issued the MATS rule in response to a decades-long effort to compel the agency to regulate certain hazardous airborne pollutants from power plants under Section 112 of the Clean Air Act.

When it issued the MATS rule, the EPA projected that the required pollution controls would cut mercury emissions from power plants by 90%, acid gases by 88%, and sulfur dioxide emissions by 41%. As a result, the agency estimated those cuts would avoid tens of thousands of premature deaths plus 100,000 heart and asthma attacks annually.

The electric utility industry, coal mining companies and coal-reliant states initially opposed the MATS rule, arguing in a legal challenge filed in the U.S. Court of Appeals for the D.C. Circuit that the EPA had overstepped its authority under the Clean Air Act. The matter was litigated all the way to U.S. Supreme Court, where a majority of justices in 2015 declined to vacate the MATS provisions while finding the EPA did not consider the cost of the regulation early enough in its rulemaking process. In doing so, the high court sent the rule back to the D.C. Circuit for further proceedings as it took effect. The D.C. Circuit ultimately directed the EPA to complete a supplemental "appropriate and necessary" finding consistent with the Supreme Court's opinion.

In April 2016, the EPA issued a two-pronged supplemental finding, concluding the annual cost to comply with the rule was reasonable because it represented 2.7% to 3.5% of the utility industry's annual revenue. In finding the MATS rule was necessary, the agency included additional health benefits known as co-benefits associated with cuts to sulfur dioxide, or SO2, and ambient fine particles in its analysis. Fine particles can make their way from ambient air through the lungs and into the heart and brain, causing respiratory health problems and premature death.

The Obama EPA's supplemental finding was challenged in the D.C. Circuit by the Utility Air Regulatory Group, which was represented by the same law firm where current EPA air chief Bill Wehrum worked at the time, and coal company Murray Energy Corp., a former lobbying client of Acting EPA Administrator Andrew Wheeler. Meanwhile, between January 2015 and April 2016, about 87 GW of coal-fired plants installed pollution-control equipment and nearly 20 GW of coal capacity retired as a result of the rule, according to the U.S. Energy Information Administration.

After President Donald Trump was elected on pro-coal platform, the administration asked the D.C. Circuit to hold the case in abeyance pending a review of the MATS supplemental finding.

Multiple legal interpretations

The EPA is proposing to find that its action would not remove power plants from regulation under Section 112 of the Clean Air Act, which requires the agency to issue performance standards for any source category listed under the section. As a result, the current MATS rule "would be unaffected by final action on this proposal," the agency said.

However, the agency is also seeking comment on two alternative interpretations of its proposed replacement finding. First, the EPA is specifically asking for comment on whether contrary to its proposed interpretation the EPA would have the authority to rescind the MATS rule and delist power plants from Section 112 by effectively acting on a continued remand following the Supreme Court's 2015 decision. Under that theory, the agency could propose to rescind the regulation as a result of the cost-benefit analysis required by the majority's opinion.

Second, the agency is also taking comment on whether it would be obligated to rescind the MATS rule if it finalizes its proposal because "appropriate and necessary" findings under the Clean Air Act involve a "threshold determination" on whether certain power plant emissions present a public health risk.

The EPA said it is also interested in whether it could reasonably conclude that a 2008 D.C. Circuit decision in New Jersey v. EPA does not limit its ability to rescind the MATS rule. In that decision, the D.C. Circuit held that once power plants were included on the Section 112 list, the EPA could remove them only by making extensive showings.

Under Section 112, the EPA is only allowed to delist source categories if the agency finds that no source in the category emits carcinogens or, if the category includes such sources, they do so at levels that do not "exceed a level which is adequate to protect public health with an ample margin of safety and no adverse environmental effect will result from emissions from any source."

Risk and technology review

After issuing performance standards, Section 112 of the Clean Air Act also requires the EPA to perform a risk and technology review every eight years to assess whether any residual risk remains. If the agency determines that a residual cancer risk of more than one-in-a-million persists and that additional reductions in hazardous air pollution can be achieved, the EPA is required to issue a second, more stringent set of pollution control requirements.

With a review under MATS required by 2020, the EPA said in its proposal that the results of a risk analysis indicate that residual risks due to air toxics emissions from coal- and oil-fired power plants are "acceptable and that the current standards provide an ample margin of safety to protect public health." The agency is also proposing to find that new developments in emissions controls to achieve further cost-effective emissions reductions were not identified in its review.

The EPA will take comment on its proposal for 60 days following its publication in The Federal Register.