On April 15, 2014, the U.S. Court of Appeals for the D.C. Circuit (“D.C. Circuit”) fully upheld the Environmental Protection Agency’s (“EPA”) Mercury and Air Toxics Standards (“MATS”). As a result, all existing coal- and oil-fired electric utility units will be required to meet specific, numeric emission limits for mercury, particulate matter, and acid gases next year.
To uphold the regulation, the D.C. Circuit had to resolve a myriad of challenges raised by numerous industry, state, and environmental petitioners. In fact, during oral argument, the court heard 17 different arguments from 14 different attorneys in a marathon court session that lasted nearly four hours.
However, the key threshold issue for the court, and to which the court devoted most of its 90-page opinion, was whether EPA properly concluded that the regulation of hazardous air pollutant emissions from electric utilities was “appropriate and necessary.” On that issue the court split, but the majority deferred to EPA’s decision. Specifically, the two-judge majority agreed that EPA could ignore costs in determining whether to regulate the utility sector. The majority also agreed that EPA could focus solely on the utilities’ contribution to the pollutants of concern, rather than identifying any specific health hazards attributable to utility emissions alone.
In dissent, Judge Kavanaugh asked what “appropriate” could possibly mean other than to require EPA to conduct a cost-benefit analysis, which he believed to be “just common sense and sound government practice,” as well as consistent with several Supreme Court cases and a longstanding executive order from the President. Judge Kavanaugh also quoted the member of Congress responsible for inserting the term “appropriate” to confirm Congress was concerned over the potential cost of regulating utilities, which EPA admitted to be over $9.6 billion annually. But the other two judges noted that no court has ever before required EPA to consider costs where the word “cost” does not appear in the relevant statutory provision, after pointing out that Congress had more explicitly required EPA to consider costs elsewhere even within the same section of the Clean Air Act.
After upholding EPA’s “appropriate and necessary” determination, the court proceeded one-by-one through each of the specific objections raised by the many petitioners, unanimously deferring to EPA in each case. For example:
- EPA was not required to distinguish between large (“major”) and small (“area”) sources in setting its emission standards.
- EPA did not unfairly use a biased dataset to establish the mercury emissions standard.
- EPA was not required to set a health based standard for acid gas emissions.
- EPA was not required to establish a separate subcategory for circulating fluidized bed combustors, like it had in its boiler rule.
- EPA’s “beyond-the-floor” (more stringent) emission standard for lignite-fired units was reasonable.
- EPA’s decision to allow similar units at the same facility to average their emissions in determining compliance (without a “discount factor”) was reasonable.
- EPA’s monitoring provisions reasonably allowed sources to choose between quarterly stack tests, continuous parameter monitoring, or testing every three years after qualifying as a “low emitting” unit.
The court’s decision will not become effective until after the resolution of any requests for rehearing, and the challengers could also seek review of the decision by the U.S. Supreme Court. Meanwhile, industry petitioners’ challenges to the MATS provisions applicable to “new units” have been dropped, after EPA revised those provisions to address the challengers’ concerns, although the environmental petitioners are now challenging those revised new unit standards (which EPA recently decided to further reconsider). EPA’s June 2013 proposal to revise the provisions governing startup and shutdown also remains outstanding.
A copy of the opinion is available here.