By - Michael Drost

High Court Strikes Down EPA’s Mercury & Toxics Rule

SC

By Martin Rock, OMNI Professional Environmental & EUCI Instructor

On June 29, 2915, the U.S. Supreme Court ruled the U.S. EPA (Environmental Protection Agency) interpreted the federal Clean Air Act (CAA) unreasonably when it deemed cost irrelevant to the decision to regulate power plants stating that EPA strayed well beyond the bounds of reasonable interpretation and finding “EPA’s counterarguments are unpersuasive.”

Mercury is a global pollutant, and over 40% of global anthropogenic mercury emissions originate in eastern Asia (see Figure below), where a new, uncontrolled coal-fired power plant is placed in service virtually every week. The atmosphere is the foremost transport pathway of mercury emissions, but land and ocean processes play an important role in the redistribution of mercury worldwide. Simply stated, the mercury enters the hydrological cycle and travels around the planet. The amount of mercury contributed by sources located on the North American continent is actually trivial (~2.3%) in terms of the massive global pool of mercury.

MR Graph

This is the technical problem that EPA faced in writing the MATS (mercury and air toxics) Rule to replace the prior CAMR (Clean Air Mercury Rule) – it is simply very difficult to show a beneficial effect of reducing the amount of mercury emitted from sources in the United States when those sources are clearly dwarfed by the cumulative effects of other global emissions sources. Yet, the costs of removing mercury, acid gases and other HAPs (hazardous air pollutants) from coal plant emissions is very high, and removing them usually creates a massive amount of new solid waste and a sizable parasitic energy demand on the power plant. (CAMR Rule, if implemented, would have achieved about the same mercury reductions as the MATS Rule at about 1/5 of the cost of MATS and the US would already have achieved these reductions several years ago by using an emissions trading system similar to the successful acid rain emissions reduction program.)

EPA decided to calculate the “benefits” of the MATS Rule by counting the “co-benefits” of fine particle emissions (PM) reductions. However, the EPA has already counted such PM co-benefits for at least 22 other air quality rules, and the US is currently in attainment with ambient PM standards virtually everywhere in the country. (EPA has recently proposed lowering the PM-2.5 NAAQS.) During oral arguments on the DNREC v. EPA case (slip no. 14-46, DC Cir.) decided on June 29, 2015, Chief Justice John Roberts commented that this counting of PM co-benefits to justify the MATS Rule was an “end around” that allowed EPA to claim credit for PM reductions that would have required promulgating another, even less popular air emissions rule. Justice Roberts was also referring to the fact that the MATS Rule is a NESHAP (national emissions standard for hazardous air pollutants) Rule designed to reduce hazardous air pollutants and PM is a conventional pollutant regulated by other parts of the federal clean air act (CAA).

Justice Antonin Scalia, in delivering the majority opinion of the Court, bluntly stated EPA must consider cost—including cost of compliance—before deciding whether regulation is appropriate and necessary. Justice Scalia cited EPA’s own “Regulatory Impact Analysis” and this analysis estimated that the MATS regulation would force power plants to bear costs of $9.6 billion per year (over $10 billion per year in today’s dollars). The Agency could not fully quantify the benefits of reducing power plants’ emissions of hazardous air pollutants; to the extent it could, it estimated that these benefits were worth $4 to $6 million per year. The costs to power plants were thus between 1,600 and 2,400 times as great as the quantifiable benefits from reduced emissions of hazardous air pollutants. As a result, Petitioners (who include 23 States) sought review of EPA’s rule in the Court of Appeals for the District of Columbia (D. C.) Circuit and then petitioned the Supreme Court to review the costs issue.

This ruling is significant for a number of reasons. First, forcing EPA to consider the costs and benefits of the pollutants actually targeted by the rule in question will make it much more difficult for EPA to justify more costly rules with marginal benefits. The Clean Air Act treats power plants differently from other sources for purposes of the hazardous-air-pollutants program, so it will be interesting to see how this case opinion may affect non-power plant emissions sources. Second, the case defines the undefined terms “appropriate and necessary” so that regulatory outcomes may be more rational at least in terms of cost: “One would not say that it is even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.” Third, since this is a remand, rather than a vacatur, it leaves a utility HAP regulatory program in place for the electric utility industry sector, which program is one of the arguments against the ESPS (existing source performance standards) for GHGs (greenhouse gases) emissions from power plants.

Justice Scalia, as usual, had plenty of fun and interesting comments in his opinion. For example, one of his analogies was the following: “By EPA’s logic, some­one could decide whether it is “appropriate” to buy a Fer­rari without thinking about cost, because he plans to think about cost later when deciding whether to upgrade the sound system.” He also made a point of quoting from his own 2014, UARG v. EPA decision, which struck down the so-called “Tailoring Rule” and which the EPA is still working to implement.

For many electric utility companies, the Supreme Court’s ruling comes too late to avoid the huge capital outlays required to retire large numbers of coal-fired units and to install new non-coal power generation capacity required by MATS. In some cases, 90% or more of the capital has already been spent. But, depending on how the MATS Rule is ultimately revised and re-promulgated under this new ruling, companies may be able to achieve considerable savings on operating and control costs going forward and these developments are well worth watching. If you have concerns about the costs of these rules, you will have another opportunity to comment when the rules are re-proposed.

Stay Tuned!

Martin Rock is President and Senior Principal of OMNI Professional Environmental and EUCI instructor.  He is a registered professional engineer with three engineering degrees, including an M.S. in environmental engineering, as well as a licensed attorney.   He will be teaching EUCI’s “What’s New with ISO” webinar July 15, 2015.

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