News

January 19, 2016

EPA MAT Rule Cost Consideration Outcome

I. General InformationBack to Top

A. Executive Summary

The EPA is requesting comment on this proposed supplemental finding that including a consideration of cost does not alter the agency's previous determination that it is appropriate and necessary to regulate coal- and oil-fired EGUs under section 112 of the CAA. In light of the U.S. Supreme Court (Supreme Court) decision in Michigan v.EPA, 135 S.Ct. 2699 (2015), the EPA has taken cost into account in evaluating whether such regulation is appropriate and has determined that including such consideration does not alter the EPA's original conclusion that it is appropriate to regulate hazardous air pollutant (HAP) emissions from EGUs. This proposed supplemental finding, if made final after consideration of public comments, will conclude that coal- and oil-fired EGUs are properly included on the CAA section 112(c) list of sources that must be regulated under CAA section 112(d).

The EPA issued national emission standards for hazardous air pollutants (NESHAP) for coal- and oil-fired electric utility units, known as the Mercury and Air Toxics Standards or “MATS,” on February 16, 2012. Almost 12 years earlier, on December 20, 2000, the EPA determined, pursuant to CAA section 112(n)(1)(A), that it was appropriate and necessary to regulate coal- and oil-fired EGUs under CAA section 112 and added such units to the CAA section 112(c) list of sources that must be regulated under CAA section 112(d). (December 2000Finding; 65 FR 79825.) The appropriate and necessary finding was based primarily on consideration of the Utility Study Report to Congress (Utility Study),1 the Mercury Study Report to Congress (Mercury Study),2 the National Academies of Science's Toxicological Effects of Methylmercury (NAS Study), [3] and mercury data collected from coal-fired EGUs after completion of the studies. 65 FR 79826. After consideration of this information, the EPA found that it was appropriate to regulate HAP emissions from EGUs because such emissions pose significant hazards to public health and the environment and also because the EPA determined that there were available controls to effectively reduce mercury and other HAP emissions from EGUs. 64 FR 79825, 79830/2. The EPA found that it was necessary to regulate HAP emissions from EGUs because implementation of the other requirements of the CAA would not adequately address the serious hazards to public health and the environment posed by HAP emissions from EGUs and because CAA section 112 is the authority intended to regulate HAP emissions from stationary sources. Id.

On May 3, 2011, the EPA reaffirmed the 2000 appropriate and necessary finding and listing of EGUs, and proposed MATS pursuant to CAA section 112(d). 76 FR 24976. The EPA responded to comments on the appropriate and necessary finding, as well as the proposed MATS, and issued the final MATS on February 16, 2012. 77 FR 9304. Industry, states, environmental organizations, and public health organizations challenged many aspects of the EPA's appropriate and necessary finding and the final MATS rule in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit Court), and the Court denied all challenges. White Stallion Energy Center v. EPA, 748 F.3d 1222 (D.C. Cir. 2014). Some industry and state petitioners sought further review of the final MATS rule, and the Supreme Court grantedcertiorari to determine whether the EPA erred when it concluded that the appropriate and necessary finding under CAA section 112(n)(1)(A) could be made without consideration of cost. On June 29, 2015, the Supreme Court ruled that the EPA acted unreasonably when it determined cost was irrelevant to the appropriate and necessary finding. Michigan v. EPA, 135 S.Ct. 2699 (2015). Specifically, the Supreme Court held that the agency must consider cost before deciding whether regulation is appropriate and necessary, noting also that it will be up to the agency “to decide, within the limits of reasonable interpretation, how to account for cost.”Michigan, 135 S.Ct. at 2711.

The EPA, in response to the Supreme Court's direction, has now added consideration of cost to the appropriate and necessary finding as detailed in this document. In this document, the EPA concludes that including such consideration of cost does not alter the agency's previous determination that it is appropriate to regulate HAP emissions from EGUs. The agency is taking comment on the proposed supplemental finding through this document. The EPA is also taking comment on the supporting document “Legal Memorandum Accompanying the Proposed Supplemental Finding that it is Appropriate and Necessary to Regulate Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility Steam Generating Units (EGUs)” (Legal Memorandum) available in the docket for this action (EPA-HQ-OAR-2009-0234).

B. Does this action apply to me?

The regulated categories and entities potentially affected by this proposed supplemental notice are shown in Table 1.

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities that may be affected by this action. If you have any questions regarding the applicability of this action to a particular entity, consult either the air permitting authority for the entity or your EPA Regional representative as listed in 40 CFR 60.4 or40 CFR 63.13 (General Provisions).

C. The Limited Scope of This Action

This action is in response to the Supreme Court's decision that the EPA must consider cost in the initial determination that regulation of HAP emissions from EGUs is appropriate under CAA section 112. In this document, the EPA provides detailed information on how the agency has taken cost into account in evaluating whether regulation of HAP from coal- and oil-fired electric utility steam generating units is appropriate and explains why the EPA proposes to find that including such consideration does not alter the previous determination. The EPA requests comment on this proposed supplemental finding and on the supporting Legal Memorandum available in the rulemaking docket (EPA-HQ-OAR-2009-0234).

The EPA is accepting comment only on the consideration of cost in making the appropriate determination and listing of EGUs. The analyses presented in this document and the Legal Memorandum in support of this document do not affect or alter other aspects of the appropriate and necessary interpretation or finding, or the CAA section 112(d) emission standards promulgated in MATS. These analyses also do not alter the Regulatory Impact Analysis (RIA) prepared for the final MATS. Specifically, the EPA is notaccepting comment on the scientific or technical aspects of the 2000 appropriate and necessary finding and subsequent reaffirmation. These findings include that mercury and other HAP emissions are hazardous to public health and the environment, that EGUs are the largest emitter of many HAP, that effective control strategies for HAP emissions are available, and that HAP hazards remain after implementation of other CAA provisions. We are only accepting comment on the consideration of cost aspect presented in this proposed supplementary finding. Therefore, we are not opening for comment or proposing to revise any other aspects of the appropriate and necessary interpretation or finding, or the MATS standards themselves, as part of this action. The final MATS standards were supported by an extensive administrative record and based on available control technologies and other practices already used by the better-controlled and lower-emitting EGUs, and the EPA previously concluded that the standards are achievable and reduce hazards to public health and the environment from HAP emitted by EGUs. 76 FR 24976 (MATS proposal); 77 FR 9304 (MATS final). In addition, the public had ample opportunity to comment on all aspects of the CAA section 112(d) standards, the RIA, and the appropriate and necessary finding beyond the consideration of cost; and the EPA responded to all of the significant comments. [4]

Also, the Supreme Court's decision neither calls into question nor reverses the portions of the D.C. Circuit Court's opinion unanimously rejecting all other challenges to the appropriate and necessary interpretation and finding and the HAP emission standards that the EPA promulgated in the final MATS rule. Industry, states, environmental organizations, and public health organizations challenged many aspects of the EPA's appropriate and necessary finding and the MATS emissions standards, including: (1) The EPA's reliance on the CAA section 112(c)(9) delisting criteria for determining the level of risk worth regulating; (2) the EPA's decision not to consider cost in making the appropriate and necessary determination and listing of EGUs; (3) the EPA's use of identified environmental harms as a basis for finding it appropriate and necessary to regulate HAP emissions from EGUs; (4) the EPA's consideration of the cumulative impacts of HAP emissions from EGUs and other sources in determining whether EGUs pose a hazard to public health or the environment; (5) the EPA's regulation of EGUs pursuant to CAA section 112(d) after adding EGUs to the section 112(c) list pursuant to the appropriate and necessary finding; (6) the EPA's determination that all HAP from EGUs should be regulated; (7) the EPA's technical basis for concluding that EGUs pose a hazard to public health or the environment; (8) the EPA's determination to regulate all EGUs as defined in CAA section 112(a)(8) in the same manner whether or not the individual units are located at major or area sources of HAP; (9) the EPA's emissions standards for mercury and acid gas HAP, including the EPA's decision not to set health based emission standards for acid gas HAP; (10) the EPA's use of certified data submitted by regulated parties; (11) the EPA's denial of a delisting petition filed by an industry trade group; (12) the EPA's decision not to subcategorize a certain type of EGU; and (13) the EPA's decision to allow EGUs to average HAP emissions among certain EGUs. The D.C. Circuit Court denied all challenges to the CAA section 112(n)(1)(A) appropriate and necessary finding and to the CAA section 112(d) MATS rule, and, with the exception of the cost issue relevant to the section 112(n)(1)(A) finding, all the challenges were unanimously rejected. White Stallion Energy Center v. EPA, 748 F.3d 1222 (April 15, 2014). Consequently, we are not soliciting comment nor are we revisiting those final actions that were unanimously upheld in White Stallion Energy Center v. EPA, 748 F.3d 1222 (April 15, 2014).

In addition, the EPA's citation to any final decision, interpretation, or conclusion in the MATS record does not constitute a re-opening of the issue or an invitation to comment on the underlying decision in which the EPA considered some cost of MATS (e.g., in CAA section 112(d) beyond-the-floor analyses either establishing or declining to establish a standard more stringent than the maximum achievable control technology (MACT) floor).

It is worth noting that the issue addressed in this document—whether a consideration of cost alters the agency's previous determination that it is appropriate and necessary to regulate HAP emissions from coal- and oil-fired EGUs—goes to the listing of EGUs under CAA section 112. Under CAA section 112, such listing decisions are not final agency actions for purposes of judicial review. Instead, the public can comment on listing decisions during the CAA section 307(d) standard development process and challenge such decisions when the EPA issues final standards for a source category. See CAA section 112(e)(4) (“Notwithstanding section [307 of the CAA], no action of the Administrator . . . listing a source category or subcategory under subsection (c) of this section shall be a final agency action subject to judicial review, except that any such action may be reviewed under section [307 of the CAA] when the Administrator issues emission standards for such . . . category.”). Because the final standards for coal- and oil-fired EGUs have been issued, the normal vehicle for taking comment on aspects of the listing decision is not available to the EPA at this time. Consequently, the agency is providing this separate proposal to provide an opportunity for public comment on this nationally applicable proposed supplemental finding that it is appropriate and necessary to regulate coal- and oil-fired EGUs after considering cost, the cost analyses set forth below, and the supplemental legal analysis in the supporting Legal Memorandum available in the docket for this rulemaking. The EPA will issue its final determination after consideration of significant comments, consistent with the rulemaking requirements set forth in CAA section 307(d).

II. Hazards to Public Health and the Environment From HAP Emitted by EGUsBack to Top

In the current action, the EPA adds a consideration of cost to the determination of whether it is appropriate to regulate HAP emissions from EGUs. As discussed in Sections III and IV.D of this document, it is the EPA's view that the consideration of cost in the appropriate finding should be weighed against, among other things, the volume of HAP emitted by EGUs and the associated hazards to public health and the environment. In this supplemental finding, therefore, the significant hazards to public health and the environment from HAP emitted by EGUs (and the substantial reductions in HAP emissions achieved by MATS that are described in Section IV.B.2 of this document) should be weighed against the costs of compliance. [5]Indeed, thesehazards provided the basis for the EPA's December 2000 Finding, [6] and the agency's 2011 reaffirmation of the finding, 7 8that regulation of HAP emissions from EGUs is appropriate and necessary. In this Section, we provide a summary of these hazards, which are further described in the record for the MATS.

As described in the peer-reviewed Mercury Study, mercury is a persistent, bioaccumulative toxic metal that can be emitted from coal-fired power plants in several chemical forms. Once deposited to water or land, mercury can be transformed into methylmercury (MeHg) by microbial action. MeHg is efficiently taken up by aquatic organisms and bioaccumulates in the aquatic food web. Larger predatory fish may have MeHg concentrations many times higher than, typically on the order of 1 million times, that of the concentrations in the freshwater body in which they live. Exposure to MeHg through ingestion of fish is the primary route for human exposures in the U.S. In 2000, the NAS Study reviewed the effects of MeHg on human health and concluded that mercury is highly toxic to multiple human and animal organ systems. Chronic low-dose prenatal exposure to MeHg from maternal consumption of fish has been associated with subtle neurotoxicity, which is manifest as poor performance on neurobehavioral tests, particularly on tests of attention, fine motor-function, language, and visual-spatial ability. The NAS concluded that the population at highest risk is the children of women who consumed large amounts of fish and seafood during pregnancy and that the risk to that population is likely to be sufficient to result in an increase in the number of children who have to struggle to keep up in school.

Exposure to high levels of the various non-mercury HAP (e.g., arsenic, nickel, chromium, selenium, cadmium, hydrogen chloride, hydrogen fluoride, hydrogen cyanide, formaldehyde, benzene, acetaldehyde, manganese, and lead) emitted by EGUs is associated with a variety of adverse health effects. See, e.g., 76 FR 25003-5. These adverse health effects include chronic health disorders (e.g., irritation of the lung, skin, and mucus membranes, effects on the nervous system, and damage to the kidneys), and acute health disorders (e.g., lung irritation and congestion, alimentary effects such as nausea and vomiting, and liver, kidney and nervous system effects). Three hazardous air pollutant metals (i.e., arsenic, nickel, and chromium) have been classified as human carcinogens, and cadmium is classified as a probable human carcinogen.

In 2011, the EPA conducted additional technical analyses to support the appropriate and necessary finding reaffirmation, including peer-reviewed risk assessments on human health effects associated with mercury and non-mercury HAP emissions from EGUs, focusing on risks to the most exposed and sensitive individuals in the population. In addition, the EPA found that EGUs are by far the largest U.S. anthropogenic source of mercury, selenium, hydrogen chloride, and hydrogen fluoride emissions, and a significant source of metallic HAP emissions including arsenic, chromium, nickel, and others. [9] The revised nationwide Mercury Risk Assessment [10] estimated that up to 29 percent of modeled watersheds potentially have sensitive populations at risk from exposure to mercury from U.S. EGUs, including up to 10 percent of modeled watersheds where deposition from U.S. EGUs alone leads to potential exposures that exceed the reference dose [11] for MeHg. See, e.g., 77 FR 9310-6. In addition, the inhalation risk assessment for non-mercury HAP [12] of 16 facilities estimated a lifetime cancer risk for an oil-fired EGU facility of 20-in-1 million, five coal-fired EGU facilities with cancer risks greater than 1-in-1 million, and one coal-fired facility with cancer risks of 5-in-1 million. See, e.g., 77 FR 9317-9. [13] Further, qualitative analyses on ecosystem effects found that mercury emissions from U.S. EGUs contribute to adverse impacts on fish-eating birds and mammals and that acid gases contribute to environmental acidification and chronic non-cancer (respiratory) toxicity. See, e.g., 77 FR 9362-3. Moreover, the EPA concluded that in 2016, after implementation of other provisions of the CAA, HAP emissions from U.S. EGUs would still reasonably be anticipated to pose hazards to public health. See, e.g., 77 FR 9362-3. Finally, the EPA stated that the only way to ensure permanent reductions in HAP emissions from U.S. EGUs and the associated risks to public health and the environment is through standards set under CAA section 112.

As explained above, the agency's conclusions regarding these public health and environmental hazards are not affected by the cost analyses presented in this document and comments on the hazard conclusions will be considered outside the scope of this action. However, it is critical to note that the EPA's conclusions regarding the public health and environmental hazards associated with emissions from EGUs form the primary basis for the agency's previous determinations that regulation of HAP emissions from coal- and oil-fired EGUs is appropriate and necessary. See December 2000 Finding and proposed and final MATS. Furthermore, in evaluating costs (Section IV, below), the agency has considered whether the cost of compliance estimated to be incurred by the utility sector under MATS is reasonable when weighed against, among other things, the substantial hazards to public health and the environment posed by HAP emissions from EGUs.

III. Cost Consideration Under CAA Section 112(n)(1)Back to Top

In Michigan, the Supreme Court held that the EPA erred when it concluded that it need not consider cost when determining whether the regulation of HAP emissions from coal- and oil-fired EGUs was appropriate and necessary. Because the EPA had adopted thisinterpretation in the December 2000 Finding and confirmed it in the MATS rulemaking, before now the agency had not evaluated the statute to determine how cost should be considered when determining whether regulation is appropriate. The EPA has now reevaluated its interpretation of CAA section 112(n)(1) to identify how cost considerations should be incorporated into this threshold listing determination. See“Legal Memorandum Accompanying the Proposed Supplemental Finding that it is Appropriate and Necessary to Regulate Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility Steam Generating Units (EGUs)” (Legal Memorandum). In this Section, the EPA provides a summary of the legal conclusions relating to the consideration of cost in the appropriate finding. The Legal Memorandum lays out, in more detail, the interpretation of CAA section 112(n)(1)(A) that provides the basis for this proposed action. The EPA is requesting comment on the Legal Memorandum. [14]

In the Legal Memorandum, the EPA reevaluates the statute in light of the Supreme Court's holding in Michigan. The EPA considers the purpose and scope of the 1990 amendments to CAA section 112, including section 112(n)(1), to determine the cost considerations generally relevant to HAP-related actions, the advantages of regulating HAP emissions from stationary sources, and a reasonable approach to weighing the costs with the other factors relevant to determining whether regulation of HAP emissions from EGUs is appropriate. SeeLegal Memorandum, pages 6-23.

The EPA's evaluation of CAA section 112 leads us to conclude that the purpose of that section of the CAA is to achieve prompt, permanent and ongoing reductions in HAP emissions from stationary sources to reduce the hazards to public health and the environment inherent in exposure to such emissions, with the goal of limiting the risk to the most exposed and most sensitive members of the population. See Legal Memorandum, pages 6-13. To accomplish this goal, the statute requires as a starting point uniform levels of control from all sources in the same listed category or subcategory, and ongoing review to determine whether additional reductions can be achieved to further reduce the volume of HAP emissions. Id. Thus, the EPA concludes that the benefit Congress sought in amending CAA section 112 was permanent and ongoing reductions in the volume of HAP emissions. Id. These general goals are relevant to the EPA's evaluation of specific statutory provisions including the EGU specific requirements in CAA section 112(n)(1). See New Jersey v. EPA, 517 F.3d at 582 (rejecting the EPA's argument that section 112(c)(9) does not apply to EGUs, and citing section 112(c)(6) as support for the conclusion that “where Congress wished to exempt EGUs from specific requirements of section 112, it said so explicitly.”).

The EPA has also evaluated the specific section under which the appropriate and necessary determination is made—CAA section 112(n)(1)—to further inform our interpretation of the role of cost in making the appropriate determination under section 112(n)(1)(A). See Legal Memorandum, pages 13-17. The studies required under CAA section 112(n)(1) focus on potential hazards to public health and the environment, including the potential hazards to the most sensitive members of the population. In addition, the statute requires the agency to evaluate available control technologies for HAP emissions from EGUs, and to specifically evaluate the cost of mercury controls.See CAA sections 112(n)(1)(A) and 112(n)(1)(B). Thus, cost is one of the several factors that the EPA must consider in addition to the other relevant factors identified in the statute when determining whether regulation of HAP emissions from EGUs is appropriate, but CAA section 112(n)(1) does not support a conclusion that cost should be the predominant or overriding factor. See Legal Memorandum, pages 13-17.

CAA section 112(n)(1)(A) also does not dictate the manner in which cost is to be considered in the appropriate finding. In fact, the sole mention of cost in CAA section 112(n)(1) is the direction in section 112(n)(1)(B) to consider the costs of mercury controls. The statute thus gives the EPA discretion to identify a reasonable approach to incorporating cost into the analysis required under CAA section 112(n)(1)(A). In addition, because section 112(n)(1)(A) is a listing provision, the EPA must focus on whether HAP emissions from EGUs collectively should be regulated, and not on the specific manner of regulation. [15] Under the statutory structure, this listing decision is to be made significantly before the 112(d) standards would be promulgated, and, therefore, it is reasonable for the EPA to consider what types of cost information would be available at that threshold stage when determining how to consider cost in the analysis. See Legal Memorandum, pages 19-21.

In determining whether it is appropriate to regulate HAP emissions from EGUs, the EPA concludes that it is reasonable to focus on whether the power sector can reasonably absorb the cost of compliance with MATS. The D.C. Circuit has previously provided general guidance on how to evaluate cost in the context of determining the reasonableness of New Source Performance Standards under section 111 of the CAA. The approach under CAA section 112 is somewhat different as section 112(d)(3) of the statute defines the minimum level of control based on levels that have been actually achieved by the best performing similar sources in the source category—a level deemed per se reasonable for other similar sources. Thus, the agency need not determine in the analysis the level of control that is technologically feasible and cost reasonable as is required when establishing standards under CAA section 111. Instead, the purpose of the cost analysis under CAA section 112(n)(1)(A) is to help evaluate whether the costs of regulation are reasonable when weighed against other relevant factors, most notably the identified hazards to public health and the environment from HAP emitted by EGUs that are reduced when the significant volume of HAP emission from EGUs is reduced. For EGUs, the reasonableness of the costs of CAA section 112(d) standards could be determined in part by an evaluation of this sector's ability to perform its primary and unique function—the generation, transmission and distribution of electricity. As explained below, the EPA considered several different cost metrics to evaluate whether cost of compliance with MATS are reasonable.

The statute also does not specify how much weight should be given to cost relative to other relevant factors. It thus provides the EPA discretion to develop reasonable approaches to consideringcost while taking into account the goals of the statute. Cost is but one of several factors the EPA must consider before it may add, pursuant to CAA section 112(n)(1)(A), EGUs to the list of source categories to be regulated under section 112. Specific pollutants were listed by Congress as HAP under CAA section 112 due to their inherently harmful characteristics, and this section instructs the EPA to reduce the risks to public health and the environment, including the risks to the most sensitive individuals in the population from those harms, by reducing the volume of such HAP emissions from stationary sources. Thus, the advantages of reducing identified hazards to public health and the environment must be considered and weighed against the costs or disadvantages, taking into account the statutory goals. See Legal Memorandum, pages 21-29.

The EPA also concludes in the Legal Memorandum that a benefit-cost analysis is not required to support a threshold finding that regulation is appropriate. However, to the extent a benefit-cost analysis is used to evaluate whether regulation of HAP emissions from EGUs is appropriate, it is important to account for the full range of benefits associated with the action, including benefits that cannot be monetized due to lack of data. The statute does not require the EPA to compare only the monetized HAP-specific benefits to the compliance costs to support the finding. Neither does the statute direct the EPA to consider only the HAP benefits of the rule and ignore co-benefits, if the control strategies employed achieve multi-pollutant reductions. Instead, the EPA concludes that such an analysis would appropriately evaluate all of the known consequences of the rule. The Legal Memorandum concludes that the benefit-cost analysis in the RIA that accompanied the final MATS presents a reasonable evaluation of the costs and benefits of the final MATS rule.

The legal interpretations summarized above, and explained in greater detail in the Legal Memorandum, provide the basis for the evaluation of cost and conclusions presented in the remainder of this document. The EPA is requesting comment on all aspects of the Legal Memorandum and all conclusions contained therein.

Read the full entry on the Federal Register HERE

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