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What Comes Next for Mercury Emissions from Power Plants?

The U.S. Supreme Court held this morning that the U.S. Environmental Protection Agency (EPA) acted unreasonably when it determined in 2000, and again in 2012, that it was “appropriate and necessary” to regulate mercury emissions from coal-fired power plants.  The central flaw in EPA’s reasoning, the Court held, is that the agency failed to consider the cost of regulation when making the threshold determination that regulation was “appropriate.”  Under Section 112 of the federal Clean Air Act, EPA must conclude that it is “appropriate” to regulate power plant mercury emissions before it can actually regulate those emissions.

The immediate effect of today’s decision is that the ongoing challenge to EPA’s mercury regulations will be remanded to the U.S. Court of Appeals for the D.C. Circuit, which previously upheld those regulations.  The D.C. Circuit will then face a choice:  Should it vacate the regulations, or should it leave them in place while giving EPA additional time to attempt to justify the agency’s threshold conclusion that the regulations are “appropriate.”

In the past, the D.C. Circuit has sometimes vacated environmental regulations that it found to suffer from threshold flaws, but it has also occasionally left those regulations in place pending agency revisions.  For example, several years ago the D.C. Circuit found that EPA’s Clean Air Interstate Rule (CAIR) was fatally flawed but it nevertheless declined to vacate CAIR.  Instead, it left CAIR in place pending promulgation of a replacement rule.  It remains to be seen whether the D.C. Circuit will take such an approach here.

If the mercury regulations are vacated, today’s decision may have the ironic effect of helping EPA defend its forthcoming greenhouse gas (GHG) regulations for existing power plants.  One of the principal legal objections to the forthcoming GHG regulations is that EPA allegedly lacks authority to issue them because power plants are regulated for mercury emissions.  Thus, if the mercury regulations go away, one of the principal objections to the GHG regulations will be eliminated.

Nevertheless, today’s decision has to be considered a loss for EPA.  The power plant mercury regulations took over two decades to promulgate and were anticipated to have significant environmental benefits, primarily in the form of reductions of particulate matter and sulfur dioxide emissions.  Today’s decision creates some uncertainty about the future of those regulations.  Equally important, today’s decision is another reminder that a majority of the Supreme Court remains deeply skeptical of EPA’s claims about the agency’s statutory authority.

If there is a silver lining for EPA in today’s decision, it is that the Supreme Court did not go so far as to dictate exactly how EPA is to consider costs.  Instead, the Court concluded:  “It will be up to the Agency to decide (as always, within the limits of reasonable interpretation) how to account for cost.”




Divided Appeals Court Vacates Air Transport Rule Targeted at Coal-Fired Power Plants

by Jeffrey D. Watkiss

In EME Homer City Generation, L.P. v. EPA, two judges of a divided three-judge panel of the United States Court of Appeals for the D.C. Circuit vacated the Environmental Protection Agency’s (EPA) 2011 Cross-State Air Pollution Rule (Transport Rule), which implemented the so-called "good-neighbor" provision of § 110 of the four-decade-old Clean Air Act (CAA). Recognizing that upwind emissions pollute downwind regions, the good-neighbor provision requires CAA implementation plans (federal or state) to prohibit upwind sources of air emissions from contributing significantly to a downwind state’s inability to attain or maintain compliance with national ambient air quality standards (NAAQS). Had it not been stayed and later vacated, the Transport Rule would have put 28 upwind states on emission "budgets" for sulfur dioxides (SO2) and nitrogen oxide (NOx) — both NAAQS criteria pollutants — requiring emission reductions primarily from upwind coal-fired electric generating stations.

Coal-burning power companies, coal companies, labor unions, associated trade associations, states and local governments petitioned for review of EPA’s Transport Rule. On December 30, 2011, the court stayed the Transport Rule and instructed EPA, pending a decision on the merits, to continue administering the agency’s predecessor Clean Air Interstate Rule (CAIR). The Transport Rule was EPA’s attempt to develop a rule that cured problems with CAIR, which a different panel of the D.C. Circuit in 2008 found to violate the CAA in North Carolina v. EPA.

The majority’s August 21, 2012 opinion ruled in favor of the petitioners and vacated EPA’s Transport Rule on the ground that the EPA exceeded its CAA authority in two respects. First, the majority held that, under the Transport Rule, upwind states may be required, in violation of the CAA good-neighbor requirement, to reduce emissions by more than their proportional share of significant upwind contributions to a downwind state’s inability to attain or maintain NAAQS compliance. Second, EPA simultaneously set a Federal Implementation Plan (FIP), according to the majority, that ran afoul of the federalism embedded in the CAA, which requires that states be given the first opportunity to devise a compliance strategy in the form of a State Implementation Plan (SIP).

The dissent opinion is excoriating. It accuses the majority of creating and deciding straw-man issues that the majority wanted to decide, but which were not raised before the agency and were therefore not properly before the court. With respect to EPA’s calculation of the emissions reductions that the Transport Rule would impose on upwind states, the dissent accuses the majority of intentionally misreading North Carolina as requiring the agency to use the same metrics to determine which upwind sources are subject to good-neighbor emissions reductions, on the one hand, and the emissions reductions budget for each such state, on the other hand. According to the dissent, North Carolina ruled to the contrary that EPA’s measure of a state’s “significant contribution” to downstream non-attainment or non-maintenance of NAAQS did not have to correlate directly with the state’s air [...]

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