Court Upholds Power Sector Environmental Regulation

In an April ruling, the DC Circuit Court of Appeals dismissed all challenges to U.S. Environmental Protection Agency’s (EPA) Mercury and Air Toxics Standards (MATS) for Power Plants. This regulation is set to require pollution controls or fuel switching for some of the existing fleet of coal-fired and oil-fired generators by 2015 or 2016 to control a selection of hazardous air pollutants that currently flow out of their exhaust stacks. In addition, a number of announced coal plant retirements cite MATS as a factor.

After the MATS rule became final in 2012, it faced several hurdles on the way to becoming an implemented regulation. The first hurdle was a vote under the Congressional Review Act (CRA), but the MATS opposition was not able to garner enough votes in the U.S. Senate to overrule the EPA regulation. The next hurdle was the inevitable litigation that results from just about any EPA regulation and is a sure thing for a rule with compliance costs as high as MATS – about $10 billion per year. Not surprisingly, EPA’s MATS regulation was challenged by industry, states and environmental advocates – on the one hand, for being unauthorized and too stringent and, on the other, for being too weak.

The map below shows the variety of states that officially weighed in on the lawsuit, either as petitioners (in green) to challenge EPA or as interveners (in yellow) in support of EPA. The 17 supportive states tend to have less coal-fired generation or have more coal plants that already comply with the MATS regulation—because they are newer and were built with advanced pollution controls or because they comply with state pollution laws intended to protect the health of citizens. The 22 challenging states tend to have a greater percentage of their generation come from coal and older coal plants that will require retrofits or fuel switching to comply with the MATS rule.

Breakdown of States Officially Challenging or Supporting the MATS Rule

By ruling in support of EPA’s interpretation of the Clean Air Act with respect to MATS, the D.C. Circuit Court of Appeals departed from the themes of a recent court decision regarding another power sector air quality regulation, the Cross State Air Pollution Rule (CSAPR). The D.C. Circuit’s CSAPR decision, which is currently awaiting a Supreme Court ruling on appeal, overturned EPA’s interpretation of its Clean Air Act authority to regulate pollution that crosses state lines.

Circuit Judges Rogers and Kavanaugh sat on the three-judge panels for both the CSAPR and MATS cases, with Rogers offering a dissenting argument in the CSAPR case and Kavanaugh offering a partial dissent in the MATS case. For both decisions, the third judge was the deciding factor. To be sure, there were different issues to be addressed in each of these cases and a significant variation in the recipe Congress provided EPA in the authorizing statute. Nonetheless, given that President Obama appointed four new judges to the D.C. Circuit last year, it is reasonable to wonder whether the new makeup of the court could improve the chances of EPA surviving challenges on future rulemakings, including carbon pollution standards for power plants.

The MATS decision cites case law indicating “[i]f EPA acted within its delegated statutory authority, considered all of the relevant factors, and demonstrated a reasonable connection between the facts on the record and its decision, we will uphold its determination.” The MATS decision declared that, “[t]he court will show particular deference where [EPA’s] decision rests on an evaluation of complex scientific data within the agency’s technical expertise.” The judges upheld EPA’s approach on every issue, with at least five different mentions that EPA is “entitled to deference.”

Legal issues in the MATS case include whether EPA could reasonably exclude consideration of costs in determining whether it is “appropriate” to regulate electric generating units under the strict hazardous air pollutant section of the Clean Air Act. The provision of the Act that requires EPA to determine if such regulation is “appropriate and necessary” does not discuss cost. The majority held that EPA’s position is “clearly permissible” and stated that “petitioners and our dissenting colleague seek to impose a requirement that Congress did not.” The court also noted the “EPA’s interpretation is also consistent with the purpose of the 1990 Amendments, which were aimed at remedying ‘the slow pace of EPA’s regulation of [hazardous air pollutants]’ following the initial passage of the [Clean Air Act].” Although en banc rehearing by the full D.C. Court seems unlikely, it remains to be seen whether petitioners will appeal to the Supreme Court of the U.S. (SCOTUS) and, if so, whether the SCOTUS would take up the case.

MATS has cleared a major hurdle with the D.C. Circuit decision. Although the potential for additional obstacles cannot be ruled out, MATS is one step closer and one year closer to reality. In the meantime, the power sector has begun to rise to the challenge of implementing the regulation under authority passed by Congress decades ago.

For information on BPC’s work on section 111(d) of the Clean Air Act regulations, please visit: https://bipartisanpolicy.org/projects/energy/ghg-regulation.