SUPREME COURT

Mercury regs ruling emboldens Clean Power Plan critics, but few changes seen for utilities

U.S. EPA critics heralded a Supreme Court decision yesterday that the agency should have considered the compliance costs of its mercury standards for coal plants, saying the ruling is proof that states should refuse to comply with the agency's Clean Power Plan until legal challenges play out.

"While much of the damage of this regulation has already been done, the ruling serves as a critical reminder to every governor contemplating the administration's demands to impose more regressive -- and likely illegal -- regulations that promise even more middle-class pain," said Senate Majority Leader Mitch McConnell (R-Ky.). "Clearly, there is no reason to subject their states to such unnecessary pain before the courts have even had a chance to weigh in, especially if the Supreme Court simply ends up tossing the regulation out as we saw today."

Twenty-three states and various industry groups challenged the mercury rules, called the Mercury and Air Toxics Standards, or MATS. In a 5-4 decision, with the majority opinion written by Justice Antonin Scalia, the Supreme Court found EPA erred in not considering compliance costs of $9.6 billion in determining whether it was "appropriate and necessary" to regulate mercury emissions from power plants.

The court remanded the case to the U.S. Court of Appeals for the District of Columbia Circuit to reconsider whether to strike down the rule (Greenwire, June 29).

Opponents of the air regulations said the ruling could foreshadow how much deference the court will afford EPA in future cases.

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Scott Segal, a utility industry lobbyist and partner at law firm Bracewell & Giuliani, said the opinion should serve as a warning as EPA prepares to release the final Clean Power Plan this summer.

"Today the Supreme Court clearly had cautionary words for an agency that would proceed without due consideration of cost," Segal said. "These considerations should serve as important warnings to consider cost and reliability in a thorough manner before it finalizes its carbon rules."

But EPA said in a statement that the decision "was about how and when the Agency considered costs in its decision that mercury and air toxic emissions from power plants threaten public health and the environment, and not EPA's Clean Air Act authority to limit hazardous air pollutants."

The Sierra Club's managing attorney, Sanjay Narayan, backed that assessment, calling the decision a narrowly scoped ruling that won't affect other EPA regulations like the Clean Power Plan.

"The majority took some pains to be clear that this is just about a particular threshold finding," he said, "which basically involves a different portion of the Clean Air Act from the Clean Power Plan, different language than the Clean Power Plan, and different pollutants than the Clean Power Plan."

Narayan dismissed McConnell's argument that states should wait and see if carbon regulations are overturned by the courts before starting to write compliance plans.

"Despite this decision, EPA's record in front of the D.C. circuit and Supreme Court during this administration has actually been very strong. The courts have upheld their rules," Narayan said.

Compliance already in motion

Nonetheless, McConnell is using the ruling to bolster his campaign for governors to "just say no" to the carbon rule.

The House last week passed legislation that would allow states to opt out of the carbon standards until court challenges are settled, but the White House will likely veto any legislative threat to the rule. Critics are instead counting on state resistance and legal attacks to hamper EPA's plans.

The Texas Public Policy Foundation, a frequent EPA critic, said the mercury ruling means "states should think long and hard before complying with the newest Clean Power Plan before it is fully litigated."

"While the EPA lost the case today, their rule has already caused damage to the economy, jobs, and cost of energy," said a statement from Doug Domenech, director of TPPF's Fueling Freedom Project.

A majority of the coal-fired units affected by the Mercury and Air Toxics Standards had already installed the appropriate controls, switched fuels or shut down before the rule's compliance date in April.

Many coal-fired units already had installed controls needed to comply with MATS in order to meet the requirements of other rules, according to a study by MJ Bradley & Associates. EIA predicted last year that more than 64 percent of coal capacity was already in compliance with MATS at the end of 2012, the study said.

Chris Van Atten, a senior vice president at MJ Bradley & Associates, said roughly half of the country's coal capacity -- 142 gigawatts -- applied for extensions to comply with MATS. The National Association of Clean Air Agencies in its own survey found that one-third of coal plants applied for extensions.

EPA expressed disappointment at the ruling but noted that the regulation "was issued more than three years ago [and] investments have been made and most plants are already well on their way to compliance."

The Sierra Club agreed that the ruling couldn't reverse decisions energy companies have already made to comply.

"Practically speaking, today's decision won't revive the fortunes of Big Coal or slow down our nation's transition to clean energy," said Mary Anne Hitt, director of Sierra Club's Beyond Coal Campaign. "Most utilities have long since made decisions about how to meet the standard. Only a few dozen coal plants are still operating today with no pollution controls for mercury and air toxics and no clear plans to install them."

No imminent effects for utilities

Utilities were still reviewing the ruling yesterday, but several said they were already compliant with MATS and the decision would have no effect on their plans to shutter older coal-fired units.

The nation's investor-owned utilities are already "making significant strides in reducing mercury and other emissions" as they transition their generation fleets to clean electricity, said Quin Shea, vice president for environmental issues at the Edison Electric Institute.

"The court's decision will not change this trend, and positive progress will continue well into the future," he said.

"It is unclear what instructions the D.C. Circuit Court ultimately will give to EPA and what effect they will have on the MATS rule and its future implementation," Shea said.

The trade association for rural electric cooperatives, which rely predominantly on coal-fired generation, expressed satisfaction with the court's ruling and its focus on the cost of regulations.

"Today's ruling is a victory for a balanced approach to regulating the utility sector," said Jo Ann Emerson, CEO of the National Rural Electric Cooperative Association.

Clair Moeller, the Midcontinent Independent System Operator's executive vice president of transmission and technology, recently told a group of Midwestern utility regulators that 12,000 MW of coal-fired generation was expected to be retired because of the MATS rule. Of that, 11,000 MW has already been shut down.

The Electric Reliability Council of Texas (ERCOT), the state's main grid operator, said about a third of coal-fired capacity in its region was compliant with MATS when the rule went into effect. Another two-thirds received extensions, with some of that segment now compliant, according to Robbie Searcy, an ERCOT spokeswoman.

Houston-based Dynegy Inc., which owns more than 12,000 megawatts of coal-fired generation following acquisitions in recent years, said its entire fleet is MATS-compliant. The company hasn't closed any of its plants because of the MATS rule, nor does it have plans to, said spokesman Micah Hirschfield.

Likewise, Minneapolis-based Xcel hasn't shut down any plants because of MATS, nor did it plan to. The company said its entire generation fleet is MATS-complaint.

Jackson, Mich.-based Consumers Energy is planning to retire its "Classic 7" coal plants by April under a separate settlement with EPA and said the MATS ruling won't affect those plans.

"Even if the federal [MATS] rule does not take effect as scheduled, the state of Michigan has its own environmental rule which requires significant controls on mercury emissions from power plants," spokesman Dan Bishop said in a statement.

Entergy Corp., which has utility operations in parts of Louisiana, Arkansas, Mississippi and Texas, said "because the courts did not issue a stay on implementation when the MATS rule was originally challenged, Entergy began installing the mandated controls so as to meet the U.S. EPA's 2015 deadline for compliance. ... [A]ccordingly, as of June 2015, the installation of these controls is substantially complete at all three of our affected plants."

"This ruling enhances our view that customer costs always should be a factor as new environmental regulations are considered," said Ajay Arora, Ameren Corp.'s vice president of environmental services and generation resource planning.

Elena Craft, a senior health scientist with the Environmental Defense Fund in Austin, Texas, said it's important to understand that the Supreme Court's decision was narrow in scope. She suggested that an updated version of a cost analysis will bolster EPA's position on cost-effectiveness.

"This is not something where EPA is going back to the drawing board," Craft said in an interview. "This is not something where these standards are going to be vacated."

Environmental Defense Fund President Fred Krupp added that it's "critically important for our nation that these life-saving protections remain in place while EPA responds to the court's decision, and EDF will focus its efforts on ensuring these safeguards are intact."

Reporters Scott Detrow and Rod Kuckro contributed.

Twitter: @emilyhholden | Email: eholden@eenews.net

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