Will EPA’s Utility Rule Turn Out the Lights?

EPA’s new Utility Maximum Available Control Technology (MACT) or Mercury and Air Toxics (MATS) rule looks to be just as contentious as the last mercury rule EPA issued. When Congress amended the Clean Air Act in 1990, it included a new requirement that EPA regulate hazardous air pollutants (HAPs) by imposing MACT on these sources. Accordingly, EPA submitted the  “Utility Air Toxics Study” to Congress, made the determination that it was “appropriate and necessary” to regulate power plant emissions under the Clean Air Act Section 112, and issued the final Clean Air Mercury Rule on March 15, 2005. The Clean Air Mercury Rule established “standards of performance” limiting mercury emissions from new and existing utilities and created a market-based cap-and-trade program to reduce nationwide utility emissions of mercury in two phases. After numerous challenges, on February 8, 2008, the D.C. Circuit vacated the Clean Air Mercury Rule, EPA’s rule, and its decision to remove power plants from the Clean Air Act list of sources of hazardous air pollutants. On December 21, 2011, EPA announced revision of the MATS standards for HAPS, which apply to power plants. The final rule was published in the Federal Register on February 16, 2012, starting the 60-day clock for filing legal challenges in federal appeals court.

The MATS rule is predicted to be one of the most expensive rules EPA has ever promulgated, with an annualized cost of compliance estimated to be $9.6 billion in 2015 (less than 3% of the electric industry’s annual revenue). The estimated benefits — premature deaths, nonfatal heart attacks, asthmas attacks and adverse developmental impacts on children—amount to $37 billion to $90 billion. The average consumer’s electric bill would see a peak increase of 3.1% ($3-$4 per month) in their 2015 energy bills.

The MATS rule will hit old coal-fired plants lacking modern control technology the hardest, leading to retirement of some of these plants. But EPA predicts that there will be an overall net job increase, even with closing plants, because 46,000 job-years will be required for manufacture and installation of new control technology, and additional jobs will be created through the maintenance the new control technology. EPA has also pointed out that gas prices are also a factor in the retirement of old coal plants and stalled construction of new coal plants.

In response to concerns that the MATS rule 5-year compliance timeframe is too short, leading to impairment of electric grid reliability and high consumer prices beyond EPA projections, EPA has offered case-by-case extensions for utilities whose installation of controls or retirement of is delayed due to factors beyond the operator’s control, and EPA plans to work with the Federal Regulatory Commission (FERC) to waive penalties for violating FERC-approved Reliability Standards. Some utility operators are not pleased by the uncommon fifth year EPA is granting to comply with the MATS rule, fearing it will expose them to third party lawsuits from environmental groups.

With the final rule publication looming, opponents are already mounting challenges to the MATS rule. Senator Inhofe will attempt to file a joint resolution of disapproval under the Congressional Review Act (CRA) for the rule, arguing EPA’s peer review of its risk assessment for mercury as inadequate. Concerns over the MATS rule’s high cost will be passed on to consumers leading to a spike in energy prices, and that EPA had not effectively communicated the rule’s impact to the public, were raised at a House Committee on Energy and Commerce hearing on February 8.

Written by: Shani Harmon, GIELR Staff