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EPA Releases Cost Findings to Support Appropriate and Necessary Determination for MATS Rule

Posted Tuesday, April 19th, 2016

On April 14, 2016, U.S. Environmental Protection Agency (EPA) released the prepublication version of final, supplemental findings that take cost into account in determining that regulating power plants under the Mercury and Air Toxics Standards (MATS) rule is appropriate and necessary under Clean Air Act (CAA) section 112. The supplemental findings are a response to the U.S. Supreme Court’s ruling in Michigan v. EPA, 135 S. Ct. 2699 (2015), that EPA unreasonably interpreted the CAA when it determined cost was irrelevant to whether the MATS rule was appropriate and necessary. The MATS rule remained in place while on remand to EPA to address the Court’s ruling, which left EPA to decide, within the limits of reasonable interpretation, how to account for cost.

In the final, supplemental findings, EPA pursued two alternative approaches—an analysis of several cost metrics weighed against the advantages of the MATS rule (EPA’s preferred approach) and a formal benefit-cost analysis. In its preferred approach, EPA analyzed MATS rule compliance costs with respect to the range of historic variability in (1) annual revenues, (2) annual capital expenditures and total production expenditures, and (3) retail electricity prices. EPA also determined the power sector can maintain its primary and unique function of generation, transmission, and distribution of reliable electricity at reasonable cost while complying with the MATS rule. EPA then weighed the compliance costs against the risks to public health and the environment, and the volume of emission reductions from the MATS rule. In its alternative benefit-cost analysis, EPA determined that the substantial monetized and non-monetized benefits of the MATS rule far outweigh its costs. According to EPA, both approaches supported regulating power plants through the MATS rule under CAA section 112.

The final findings will be effective upon publication in the Federal Register, and challenges will be due within 60 days of publication.

For additional information contact Jon Harris Maurer.

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