As previously reported in the Dinsmore Air Quality Letter, the United States Supreme Court ruled last year in Michigan v. EPA that EPA unreasonably interpreted the Clean Air Act when it failed to consider cost in determining whether regulation of air toxics from power plants was appropriate and necessary, a Clean Air Act Section 112 prerequisite to regulation of hazardous air pollutants from power plants. The 5-4 Supreme Court decision reversed a D.C. Circuit opinion upholding EPA’s rule, commonly referred to as the Mercury and Air Toxics Standards (MATS), and remanded the case to the D.C. Circuit for further action. 

Upon remand, states critical of the rule and the power industry requested that the court vacate the rule. EPA asked the court to uphold the rule and return MATS to the agency. On December 15, 2015, the D. C. Circuit granted EPA’s request, leaving the rule in place despite the Supreme Court’s decision. Twenty states, led by Michigan and including Kentucky, Ohio and West Virginia, requested the Supreme Court to stay the D. C. Circuit’s action leaving MATS in place, but the states’ request was denied on March 3, 2016 by Chief Justice John Roberts. The denial came without explanation but was issued shortly after the death of Justice Antonin Scalia, who authored the Supreme Court’s opinion. 

On March 18, 2016, the states petitioned the Supreme Court to review the D. C. Circuit’s decision not to vacate MATS and specifically to answer the question “[w]hen an agency promulgates a rule without any statutory authority, may a reviewing court leave the unlawful rule in place?” The states again claim that MATS should have been vacated but also raise the question of how invalidated rules should be treated on remand. The death of Justice Scalia leaves an even 4-4 split between liberal and conservative justices causing many to wonder whether the high court will take the case and, even if it does, whether the result would be a 4-4 split leaving the D. C. Circuit decision in place. 

Meanwhile, EPA has published and accepted public comment on a supplemental appropriate and necessary finding dated December 1, 2015, that includes a cost analysis, which EPA believes meets the Supreme Court’s requirements. In the analysis, EPA considered the annual compliance costs as a percent of total power sector sales, annual compliance capital expenditures compared to the power sector’s annual capital expenditures, the impact on retail price of electricity, and the impact on power sector resource capacity. The public comment period ended January 15, 2016, and the final analysis was released on April 15, 2016, prior to publication in the Federal Register. Not surprisingly, EPA’s analysis supports its finding that the rule is appropriate and necessary even after considering cost. While the final cost analysis is likely to face challenges, April 16, 2015 was the compliance date for all operating plants to meet the requirements of the rule absent an implementing agency authorized one year extension until April 16, 2016. 

Finally, on April 6, 2016, EPA published in the Federal Register a final rule containing technical corrections to MATS and the associated new source performance standards (NSPS) for coal and oil-fired electric generating units. In the rule, EPA broadly categorized the corrections as a) resolution of conflicts between preamble and regulatory text, b) corrections that were inadvertently not made that EPA stated it would make in response to comments, and c) clarification of language in regulatory text. See 81 Fed. Reg. 20172 (April 6, 2016). EPA also removed the provision establishing an affirmative defense for malfunctions in response to the D. C. Circuit 2014 decision in NRDC v. EPA. The rule became effective on April 6, 2016.