• EPA Completes Cost-Benefit Analysis Required by U.S. Supreme Court
  • August 2, 2016 | Author: Seth V.D.H. Cooley
  • Law Firm: Duane Morris LLP - Philadelphia Office
  • In a 5-4 decision in 2015 (Michigan v. EPA), the U.S. Supreme Court found that EPA should have considered costs when deciding to implement EPA’s Mercury and Air Toxics Standard for power plants (MATS) (Justice Scalia writing for the majority). On April 14, 2016, EPA posted online its "final supplemental finding" that, after considering costs, MATS was still appropriate and necessary. The final supplemental finding will soon be published in the Federal Register.

    In its response to the Supreme Court’s directive, EPA presented two separate approaches to estimating costs. In its preferred approach, EPA compared (a) the power generation industry’s annual revenues with the projected cost of compliance, (b) the industry’s overall annual capital expenditures with those required to comply with MATS, (c) the effect on consumer electricity costs and (d) whether and to what extent MATS would cause plant closures and related reliability concerns. EPA found that the costs were "well within the range of historical variability" associated with annual revenues, annual capital expenditures and the retail price of electric power. EPA’s backstop approach was to present a cost-benefit analysis that identified as much as $90 billion in net annual benefits, a level of benefits that significantly outweighed the EPA-projected compliance costs.

    Opponents are fully anticipated to challenge EPA’s analyses in court. The arguments are expected to include the contentions that (a) EPA should have conducted an entirely new cost-benefit analysis (EPA relied on information in the existing administrative record regarding risk and harm) and (b) that EPA’s inclusion of so-called "co-benefits" resulting from implementation of MATS (e.g., a reduction in particulate matter emissions) is inappropriate. The only clear conclusion to be reached today is that MATS will remain on the long and winding litigation road for some time to come.