EPA’s Mercury and Air Toxics Standards (MATS) Rule and States
The Environmental Protection Agency in December 2011 issued new stringent regulations called the Mercury and Air Toxics Standards, or MATS, Rule to limit mercury emissions and other hazardous substances from fossil fuel power plants. The standards have been controversial because of industry concerns with costs and grid reliability. The EPA, however, contends the standards are reasonable, provide billions of dollars in public health benefits and will prevent thousands of premature deaths.
The Environmental Protection Agency in December 2011 issued new regulations called the Mercury and Air Toxics Standards, or MATS, rule, which was intended to significantly reduce mercury emissions from electric utility power plants under the Clean Air Act. The final rule sets limits for all hazardous air pollutants emitted by coal and oil-fired electric generating units with a capacity of 25 megawatts or greater. Many states with substantial amounts of coal-fired generation are likely to be significantly impacted, as 600 power plants are covered under the new standards (see EPA map showing distribution and scale of plants that could potentially be affected).
The new regulation is among the most expensive rules ever developed by EPA, which by the agency’s own estimates, will have more than $9.6 billion in yearly compliance costs. In addition, the agency estimates that up to 4.7 gigawatts of coal-fired generation are expected to go offline by 2015 because of the new rule. The industry cost estimates for the final rule, and its predictions on the negative impacts the rule could have on grid reliability, are much more drastic.
- According to the EPA, the new MATS rule would prevent up to 11,000 premature deaths and 130,000 asthma attacks, and would provide $37 billion to $90 billion in improved air quality benefits per year. Pollutants like mercury, a neurotoxin, can impair brain development in children.1
- The agency believes the new MATS standards—which are based on the best-performing technology currently in operation—will speed the retirement of older, more polluting fossil fuel plants, thereby improving public health and creating new jobs to retrofit existing units.
- The agency believes, based on its analysis, utilities have been given sufficient time for compliance. Existing power plants will be given three years to comply with the new MATS rule. The Clean Air Act allows state permitting authorities to grant additional compliance time of up to one additional year for utilities to make needed technology installations to reduce emissions.
- The utility industry reaction to the MATS rule is mixed depending on each company’s overall power generation portfolio. Companies with a larger reliance on nuclear power or natural gas units tend to view the rule more favorably than utilities with a significant number of coal-fired units.
- A November 2011 industry analysis by NERA Economic Consulting, a global consultancy group headquartered in New York City, found the rule would accelerate coal plant retirements at a rate nearly four times higher than EPA estimates. When combined with the agency’s proposed Cross-State Air Pollution Rule to reduce ozone and particulate matter emissions, up to 38 gigawatts of coal generation will be taken offline.
- NERA’s analysis also projected up to 180,000 job losses and a reduction of at least $84 billion in gross domestic product over the life of the new standards.2
- In addition, critics of the MATS proposal contend EPA’s cost-benefit analysis is misleading because nearly all the public health benefits—$37 billion to $90 billion annually—are found in other proposed agency regulations, most notably in new rules covering particulate matter. The actual public health benefits in EPA’s analysis from removing additional mercury from the environment are estimated to be $500,000 to $6.1 million a year.
- The Federal Energy Regulatory Commission—the federal regulator for wholesale electricity generation, transmission and bulk power markets—will have an advisory role to the EPA in recommending additional compliance time for permitting projects to ensure grid reliability.
- In order to receive additional compliance time, electric generators must show that closing a plant would violate at least one commission reliability standard or cause power reserves to fall below federally required margins.
- The commission’s Office of Electricity Reliability found that when the new MATS standard was combined with other EPA regulatory proposals, 41,000 megawatts of coal-fired power generation could be lost under a range of compliance scenarios.3 To put these figure into perspective, 40,000 megawatts of power is approximately 7 to 8 percent of the nation’s electricity capacity.
- In 2011, the North American Energy Reliability Corporation, the agency that enforces reliability standards, found that “Environmental regulations (being proposed by EPA) are shown to be the number one risk to reliability over the next 1 to 5 years.”4
- According to congressional testimony by former EPA Air Administrator Jeff Holmstead, at least 24 states had filed legal challenges against the MATS rule by April 2012; that’s the highest number ever for a proposed air regulation.5
- In response to concerns raised by states, CSG’s Executive Committee passed a policy resolution May 20, 2012, asking the EPA for more time to harmonize compliance deadlines under the MATS rule with state permitting, construction, control installation and other mitigation measures that can often take several years.6
- The resolution urges more congressional oversight of the rule to examine the impact it would have on jobs, the economy and electric reliability, as well as supporting the adoption of bipartisan federal legislation that would give additional compliance time to meet the MATS rule standards without reducing the stringency of its emissions reduction targets.
- Lastly, it encourages continued communication by federal and state regulators with all impacted stakeholders to avoid potential electricity rate increases or reliability problems that may be associated with the final MATS rule.