Last week, the U.S. Court of Appeals for the District of Columbia Circuit upheld the Obama administration's mercury and air toxics rule (MATS). How significant is this win for U.S. EPA? What is the impact of the ruling on future air regulations coming out of the agency? During today's OnPoint, James Rubin, counsel in the global energy, transport and infrastructure sector at Dentons and a former Department of Justice representative to the White House Climate Change Task Force, breaks down the ruling and its significance.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is James Rubin, counsel in the global energy, transport and infrastructure sector at Dentons and a former Department of Justice representative to the White House Climate Change Task Force. Jim, thanks for coming back on the show.
James Rubin: [Thank you for] having me.
Monica Trauzzi: Jim, last week, the D.C. Circuit Court of Appeals upheld the Obama administration's Mercury and Air Toxics rule. How significant is this win for the Obama EPA?
James Rubin: I think it's a very significant win. This is a priority flagship regulation for the administration. This was -- in the former administration, it was a big priority. The fact that this has gone through and, well, unlikely to be changed -- we'll probably be talking about that -- I think it's a very big victory itself for the administration.
Monica Trauzzi: So what is the future of the MATS rule at this point?
James Rubin: Well, assuming -- there's still a chance it could get appealed, both through the D.C. Circuit and the Supreme Court. I don't think it's likely to happen or likely -- I don't think it's likely to win if it happens, but at this point, it's business as usual. Essentially, the rule came out a year before the compliance date, almost to the date the year before, and its companies are going to be complying. The Energy Information Administration came out with a study in the end of 2012 that said that 70 percent of the industries were already in compliance and only another 16 percent were undecided. Since that time, I think a lot of companies have gone down their path of that. This ruling just makes it clear that everybody's going to be meeting the requirements here.
Monica Trauzzi: So does that signify to you that, then, we might not see an appeal in this case?
James Rubin: No. I think you'll see an appeal. I think it's inevitable, the way this litigation goes. You'll have an appeal both the D.C. Circuit and also the Supreme Court, and Judge Kavanaugh certainly laid out an argument. He really hoped to catch the eye of the Supreme Court, so I would be surprised to not see further appeals. But it's going to take a lot of time, and even in a successful appeal, the Supreme Court will take more than a year. So time is on EPA's side here.
Monica Trauzzi: Right. So what did the court say about EPA's use of costs in its MATS rule, and what does that tell us about how the agency may consider cost in future regulations?
James Rubin: Well, I have to emphasize that the Section 112, which is where this comes out of, is a very specific, unique provision. So whatever comes out of this litigation is very unlikely to have impacts beyond it except for general language about discretion.
There are a lot of parts to this opinion, and the cost issue is only a small piece, but the piece it was part of was a threshold finding the EPA made, whether it was appropriate or necessary to regulate toxics from power plants, and EPA took the position that they were appropriate. The statutory language didn't say they had to consider cost or couldn't consider cost. They had a choice. The EPA decided that the way the act was written, the legislative history and basically the context that public health was a peak consideration and they did not need to consider costs.
Now, the majority of the court, including Judge Rogers -- she wrote most of the opinion, but not all of it -- agreed and said EPA has deference to make that determination, that language ambiguous were going to get a discretion. Judge Kavanaugh disagreed only with that piece of the opinion. In fact, one of the things people are missing is that Judge Kavanaugh actually wrote a good portion of this opinion. ... He actually wrote a lot of the other provisions of the opinion where EPA was given discretion. So it's just one piece.
So the answer to your question is, here, EPA could've decided to consider cost or not, and it decided not to for what the court considered valid reasons. Whether that will affect other parts of the act or not, it's hard to say because even Section 112 itself has cost inclusions of other parts of the very same provision. It's just this particular piece didn't.
Monica Trauzzi: So all eyes are on Section 111(d) and the regulations that EPA will be putting forth on existing sources. Is there any link? Can you see a link?
James Rubin: I think the only link you're going to see is that people will use this case to cite for examples of when EPA gets discretion generally, but this is a completely different section. It's a very different section in the sense that Section 112 was a place where EPA uses hard science and technological decisions to determine what MATS standards -- they called it the floor and below the floor. It's very technical. It's the area where EPA has traditionally, historically, gets ... deference if they deserve to earn it.
111(d) is a totally different section; EPA is going to be using a lot of discretion. Some of it's going to be policy. It's going to be a much more wide-open provision. I don't see really a link between the two of them, nor, I think, anyone's expecting there to be that, except the lawyers will cite this case on the side of EPA's thing, they get deference. That's about it, I think.
Monica Trauzzi: Industry argues that the cost of electricity will go up as the result of this rule. What are the impacts on electric reliability in the U.S. as you see it?
James Rubin: It depends on who you ask. I mean, the EPA seemed to think there wasn't going to be much. FERC is concerned and keeping a close look at this. I think industry thinks EPA has under-considered the costs of it. A lot has to do with the price of gas and our next cold snap we have, so it's hard to say, but there certainly are retirements coming out, and whether they're directly related to this rule or an overall economic context augmented by this rule, it's hard to distinguish it. I don't think this rule is necessarily, by itself, going to jack up the cost of power across the country, as long as the natural gas prices stay so low.
Monica Trauzzi: What does this ruling indicate to you about how the D.C. Circuit Court of Appeals may take up and consider future air-related cases?
James Rubin: The D.C. Circuit takes up every air case. It's business as usual; every time somebody puts a rule out, everybody sues, and the D.C. Circuit -- an interesting point is what the new politics of the D.C. Circuit mean. I mean, that's what you're going toward. The EPA got a great panel in this one. They got two Democratic-appointed judges, and the panel makes all the difference. Judge Kavanaugh's opinion, had he had a Republican his side, would have changed everything. It would've knocked out the rule.
So the EPA now has at least seven Democratic-appointed judges. EPAs don't only win just because you have Democratic judges; you have to earn it, but the chances of having great discretion and great chance of victory is probably augmented by what's happening in the D.C. Circuit. That being said, every rule has to be challenged on its own merits, and EPA could certainly lose cases where they didn't show a reasonable, rational basis on their record.
Monica Trauzzi: All right, very interesting. Thank you for coming on the show ... again.
James Rubin: Thank you very much.
Monica Trauzzi: Thanks for watching. We'll see you back here tomorrow.
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