Bloomberg Law
May 26, 2020, 8:01 AM

INSIGHT: What’s at Stake in EPA’s MATS Finding Reversal

Brendan K. Collins
Brendan K. Collins
Ballard Spahr LLP

The EPA published a final rule on May 22 concerning the Mercury and Air Toxics Standards (MATS), a 2012 EPA rulemaking that limits emissions of mercury, acid gases and other air pollutants from coal- and oil-fired electric power plants.

The EPA determined that it is not “appropriate and necessary” to regulate “hazardous air pollutants” (HAPs) from power plants—which is exactly what MATS does. Paradoxically, the EPA insists that those power plants would nevertheless continue to be required to comply with MATS, “ensuring that power plants will emit no more mercury to the air than before.”

In taking this action, the EPA has pleased no one, drawing ire not only from the environmental community, but from the only industry MATS regulates—the electric power industry. Even the most ardent MATS opponents are dissatisfied because the EPA stopped short of tearing up the rule itself.

History Repeats Itself

The long and tortured history of the “appropriate and necessary finding” began thirty years ago in 1990, when the Clean Air Act was amended to include a robust new program to regulate HAPs. 42 U.S.C. § 7412. The EPA was required to create a list of the largest HAP sources and develop stringent regulations limiting HAP emissions.

For power plants specifically, Congress required that the EPA regulate mercury and other HAPs if it “finds such regulation is appropriate and necessary after considering” a study of power plant HAP emissions remaining after other Clean Air Act programs were implemented. 42 U.S.C. § 7412(n)(1)(A). On making this finding, the EPA would be required to “list” power plants with other HAP sources and to adopt stringent HAP emission standards.

In December 2000, in the waning days of the Clinton administration, the EPA first found that it was “appropriate and necessary” to regulate power plant HAP emissions. But the clock ran out on the Clinton EPA, and in 2005, the Bush administration had a different view, determining that it was, after all, not “appropriate and necessary” to regulate power plants, and removing those plants from the HAP regulation list before any regulatory standards were adopted.

The D.C. Circuit, however, in New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008), vacated the EPA’s “de-listing decision,” concluding that Congress prohibited the EPA from reversing its decision to place source categories on the HAP regulation list.

In 2012, the Obama administration not only found, once again, that it was “appropriate and necessary” to regulate HAPs from coal- and oil-fired power plants, but also adopted the HAP emission standards we know as MATS. The U.S. Supreme Court, in Michigan v. EPA, 135 S. Ct. 2699 (2105), subsequently determined that the EPA’s 2012 finding was defective because the EPA had failed to consider the cost of regulation in its analysis.

On remand, following the Supreme Court’s instruction to consider cost, the EPA adopted in 2016 a supplemental finding affirming that it was still “appropriate and necessary” to regulate power plants. Murray Energy Corporation and others challenged the supplemental finding, but that case was stayed shortly before oral argument in 2017, and remains so today. Notwithstanding the constant litigation, the HAP emission standards for power plants established in MATS have remained in effect uninterrupted since 2015, the compliance date established by the 2012 rule.

Now, with another new administration, the EPA again has found its own prior action to be “flawed,” concluding that it is not “appropriate and necessary” to regulate power plants.

MATS Will Remain in Effect, for Now

Without even a wry reference to Groundhog Day, the movie featuring a different Murray but the same woeful pattern of repetition, the EPA acknowledges that its present action is “essentially indistinguishable” from its 2005 course reversal, with one key difference: the EPA concedes that it cannot remove power plants from the HAP regulation list, citing New Jersey v. EPA. For that reason alone, power plants will remain listed and MATS will remain in effect, according to EPA.

The EPA’s expressed motive for the reversal of the 2016 supplemental finding is not to disturb MATS but to “correct” what it has criticized as a “dishonest” calculation of costs and benefits that supported the supplemental finding. Yet, the “appropriate and necessary” finding is unique to this narrow statutory provision, and the EPA’s analysis of cost here does nothing to address the evaluation of costs in rulemaking in a broadly applicable way. For the electric power industry, though, any action that could undermine the settled law raises concern, and the finding reversal is just such an action.

Several commenters on the EPA’s proposal argued not only that the finding should be reversed, but that the rule itself must also be withdrawn. If these commenters were to persuade a court to adopt this view, MATS could be eliminated, with far reaching negative impacts on the electric power sector and other industries as well.

Hundreds of Millions Spent on Compliance

The electric power industry has fully implemented MATS in the eight years since its adoption. Long-term capital decisions—which plants to build, which to close and which to upgrade with new equipment—have been made and carried out with MATS as a key assumption in the analysis. Were MATS to be eliminated, many of these investments could be devalued or wasted entirely, and some companies might be unable to recover their stranded costs through electricity rates, or through the wholesale energy markets.

The pollution control industry also invested hundreds of millions of dollars in technology and capacity to supply electric generators with the systems and materials needed to comply with MATS. Without MATS, the market for these emission control consumables would be dramatically reduced and these investments eroded. Finally, these economic injuries do not take into account the public health benefits provided by MATS that would be lost if the rule were to be eliminated.

The stakes here are very high, and the EPA’s finding reversal will be appealed both by petitioners arguing that the finding should not be reversed, and by those arguing that the EPA is obliged to eliminate the MATS rule along with the finding.

Absent any precipitous action by the court, MATS will remain in effect while the litigation plays out in the D.C. Circuit, a process that could last three or more years if the Supreme Court grants certiorari to review that court’s decision. Meanwhile though, the parties most affected by the rule will likewise be most affected by the uncertainty that accompanies litigation, hampering investment decisions and clouding planning forecasts.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Brendan K. Collins is a partner with Ballard Spahr and represents clients in the electric power sector and the oil and gas industry. He has litigated civil, criminal and administrative matters in state and federal courts, including the U.S. Supreme Court.