EPA Advances Proposed Changes to Mercury Rule

The Environmental Protection Agency (EPA) confirmed it has submitted proposed changes to the Mercury and Air Toxics Standards (MATS) to the White House for review, despite urging by the industry to let the rule stand.

EPA spokesperson John Konkus told POWERon October 2 that the agency does not intend to withdraw the existing MATS. It instead intends to "meaningfully address fundamental legal problems" raised by the U.S. Supreme Court, which in June 2015 (in Michigan v. EPA) told the agency it must consider costsin an "appropriate and necessary" finding that bolsters MATS.

Konkus said the changes will be focused on the Obama administration's April 2016-issued "Supplemental Finding That It Is Appropriate and Necessary To Regulate Hazardous Air Pollutants From Coal- and Oil-Fired Electric Utility Steam Generating Units," addressing the "previous administration's lack of cost considerations and over reliance on benefits associated with the reduction of co-pollutants that were used to justify the rule's otherwise exorbitant compliance costs."

The Cost-Benefit Dispute

When the EPA published its final MATS rule in February 2012 requiring all U.S. coal- and oil-fired power plants with a capacity of 25 MW or more to comply within the standard three years, it released a companion regulatory impact analysis that projected annual incremental private costs of the final MATS rule to the power sector would be $9.6 billion in 2015 (in 2007 dollars). But it also estimated that the annual benefits of the rule, including the avoidance of up to 11,000 premature deaths annually, would be between $37 billion and $90 billion.

In its final supplemental finding-issued in April 2016, just days before power plants that received a one-year extension were supposed to be in compliance with the rule-the Obama administration determined that public benefits of complying with MATS far outweigh the costs. It said projected annual costs of MATS are just a "small fraction" compared to overall sales in the power sector, ranging between 2.7% and 3.5% of annual electricity sales from 2000 to 2011. Meanwhile, capital costs to comply with MATS were also said to be small compared to capital expenditures in a historical context. These represent between 3% and 5.9% of total annual power sector capital expenditures over a 10-year period, it said.

But, according to Konkus, "In fact, when the MATS analysis is adjusted to account for costs and benefits associated with the targeted pollutant-[m]ercury-the rule imposed $9 billion in costs for $4 million in benefits." Konkus called MATS "an egregious example of the Obama administration's indifference toward required cost benefit analysis and dismissive attitude towards Supreme Court decisions that interfered with its political agenda to shut down coal."

The EPA's draft proposed rule, which was sent to the White House Office of Management and Budget (OMB) last week, seeks to "correct" the agency's approach to weighing costs and benefits in a way that is consistent with the Supreme Court's direction, Konkus said. "It is not intended to roll-back or reduce important health protections associated with the continued reduction of [m]ercury."

The EPA acknowledges that the power sector has made investments of up to $18 billion to slash mercury emissions, and their actions have reduced mercury emissions by 90%, he added. "EPA knows these issues are of importance to the regulated community and the public at large and is committed to a thoughtful and transparent regulatory process in addressing them. Any proposal remains being considered internally at this time."

A Court-Required Solution

The EPA's action comes two weeks before a new 90-day status report on its review of the supplemental finding is due to the U.S. Court of Appeals for the D.C. Circuit. The appeals court in April 2017 indefinitely postponed oral hearings in Murray Energy Corp. v. EPA, et al., a case consolidating six appeals that challenged the supplemental finding, to give the Trump administration time to review the rule. Petitioners include coal mining company Murray Energy Corp., coal refuse-generation organization ARIPPA, several power companies, and 15 states. Seventeen states, five cities and counties, some power companies, and health and environmental groups backed the EPA's defense of the finding.

In its last report filed with the court on July 18, the EPA said it is continuing to review the supplemental finding to determine whether the rule should be maintained, modified, or otherwise reconsidered. The agency had previously indicated that it was reviewing the supplemental finding to determine whether it is subject to President Trump's March 28 executive order, which directed the EPA to "review for possible reconsideration any rule that could potentially burden the development or use of domestically produced energy resources, with particular attention to oil, natural gas, coal, and nuclear energy resources."

The Industry Calls for More Regulatory Certainty

While the power industry aggressively opposed the rule when it was proposed, and after it was finalized, this July, several prominent power trade groups urged the EPA in a letter to "leave the underlying MATS rule in place and effective," citing investments of more than $18 billion by owners and operators of coal and oil units to comply with the rule since it became effective in 2012.

"These investments, parallel state requirements, other [Clean Air Act (CAA)] programs, and non-environmental drivers have reduced mercury emissions by nearly 90 percent over the past decade," said the letter from the group, which includes the Edison Electric Institute (EEI), the American Public Power Association, the National Rural Electric Cooperative Association, the Clean Energy Group, and others, including unions representing electrical workers and boilermakers. "Given this investment and these emissions reductions, regulatory and business certainty regarding regulation under CAA 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. In the case of public power utilities and rural electric cooperatives (even those that are rate regulated by state commissions), compliance costs are directly borne by their customers."

The groups instead asked the EPA to "expeditiously" complete the Residual Risk and Technology Review (RTR) for power plants-an evaluation required under CAA Section 112 of both risk and technology after application of maximum achievable control technology (MACT) standards-and submit it to Congress by April 2020. The EPA has not yet announced a schedule for completing the review, and the EEI told POWER on October 2 that the trade group does not have any "new or additional comments at this time."

The groups, however, also urged the EPA to consider potential technical revisions to MATS, such as considering whether performance tests could be performed less frequently if units are running less frequently. "We believe this approach can provide the regulatory and business certainty our members need as they continue to provide safe, reliable, affordable, and increasingly clean energy to their customers."

-Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)

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