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Two recent decisions by the D.C. Circuit Court of Appeals upheld United States Environmental Protection Agency (“EPA”) air quality standards and emissions limitations, continuing a string of legal victories for EPA.

On May 9, the D.C. Circuit upheld EPA’s 2012 revision to the National Ambient Air Quality Standards (“NAAQS”) for fine particulate matter  (PM2.5), citing the wide discretion EPA enjoys in setting the NAAQS. (As discussed in last week’s post, EPA approved New York’s request to designate the State as in attainment of with the previous NAAQS for PM2.5, and New York has requested the same designation for the more stringent 2012 NAAQS.)

And last month, the Court upheld EPA’s 2012 Mercury and Air Toxics Rule (the “MATS Rule”). The MATS Rule regulates emissions of mercury and other hazardous air pollutants (“HAPs”) by coal- and oil-fired power plants. The type of emission controls it requires will also lead to substantial reductions in other air pollutants, including PM2.5.

As in the Supreme Court’s recent decision on the Cross-State Air Pollution Rule (“CSAPR”), EPA’s consideration of costs was both a critical element of the challenge to the MATS Rule and the subject of a dissenting opinion. However, the EPA treated costs very differently in the two rules. CSAPR regulates emissions based in part on which emissions reductions are “cost-effective”, even though the Clean Air Act provision at issue does not explicitly direct EPA to consider the relative cost of emissions reductions. The Supreme Court held that EPA’s consideration of costs in CSAPR was a reasonable exercise of its discretion.

By contrast, EPA did not consider the cost of reducing HAP emissions in determining what regulation was necessary when it promulgated the MATS Rule. The Clean Air Act provision on which the MATS Rule is based, Section 112(n)(1)(A), is also silent on how (and whether) EPA should consider the cost of emissions reductions. Instead, it directs EPA to study power plant emissions of mercury and other listed HAPs, and determine whether regulating those emissions is “appropriate and necessary”.

The 2012 MATS Rule is EPA’s third attempt to make this determination. In 2000, EPA found that regulating power plant HAP emissions was “appropriate and necessary”, but it withdrew that determination in 2005, in part on the basis that the cost of controlling HAP emissions from power plants would result in too little benefit at too great a cost. The 2005 rule was overturned by the D.C. Circuit, and in 2012 EPA again issued a rule determining that regulation of HAP emissions from power plants was “appropriate and necessary.” In neither 2000 nor 2012 did EPA consider the costs of reducing HAP emissions in making that determination.

EPA’s refusal to consider costs was upheld by the D.C. Circuit on April 15. First, the Court pointed out that in regulating HAPs, such as mercury, the law’s paramount interest is public health, not the cost of reducing emissions. Second, the Court noted that section 112 does not mention costs as a consideration, in contrast to numerous provisions of the Clean Air Act that do require EPA to consider costs. Hence, the Court stated, EPA had the discretion to refuse to consider costs in deciding that regulation of power plant HAP emissions is “appropriate”.

Judge Kavanaugh, who also authored the D.C. Circuit’s recent NAAQS decision, dissented, and would have held that any decision on whether regulation was “appropriate” must consider the cost of that regulation and whether it outweighs the benefits. If appealed, this case could give the Supreme Court another opportunity to weigh in on EPA’s discretion to consider (or ignore) costs in writing regulations under the Clean Air Act. Such a decision could have far-reaching impacts for the consideration of costs in other areas of environmental regulation.

For more information on air quality laws and regulations, contact Jeff Gracer, Jonathan Kalmuss-Katz, or Ed Roggenkamp.