Courts Rule in Favor of Tighter EPA Standards

In a major victory for the Obama Administration, the Supreme Court has issued a series of landmark decisions on several EPA standards which will determine the future of the U.S. energy production sector.

In June 2013, President Barack Obama outlined his Climate Action Plan calling for aggressive legislation to limit greenhouse gas emissions in the United States. The plan uses the EPA and other agencies of the Executive Branch to enforce emissions limits in the transportation and energy production sectors. In particular, the Climate Action Plan targeted emissions from fossil fuel fired power plants.

The EPA issued the Mercury and Air Toxics Standards (MATS) on December 16, 2011, requiring power plants to limit their emissions of toxic air pollutants like mercury, particulate matter, and sulfur dioxide. These standards require utilities to invest in new scrubbers for their smokestacks or incur severe fines for failing to comply with the rules. Though these standards predated the President’s Climate Action plan, they were not finalized until 2013.

In the main thrust of the Climate Action plan the EPA proposed caps on new and existing coal and natural gas combined cycle power plants using Section 111 of the Clean Air Act, . Section 111b limits carbon emissions from new coal and natural gas plants over 100MW at 1,000 lbs CO2/MWh. Section 111d has not yet been finalized, but it will place emissions limits on existing power plants. President Obama gave the EPA a deadline of June1, 2015 to issue final standards for existing plants under Section 111d.

Until April of this year, all of these rules were merely proposals and had yet to pass judicial review.  On April 15, a federal court upheld the EPA’s finalized MATS standards in a 2-1 decision.  Industry groups challenged the EPA’s interpretation that rules to limit the hazards of power plant emissions to public health are “appropriate and necessary”. The court ruled that the MATS rule is “substantively and procedurally valid”. According to some sources, compliance with MATS standards will cost the power sector $9.6 billion per year.  However, the EPA counters that every dollar spent will return $3-$9 in benefits to the public. In practice, most utilities are choosing to retire their old, inefficient coal plants rather than invest in expensive scrubbing equipment.

Then, on April 29, in a 6-2 decision, the Supreme Court upheld the authority of the EPA to regulate the smog from coal plants that drifts across state lines from 28 Midwestern and Appalachian states to the East Coast. This victory comes months before the EPA is expected to propose sweeping new emissions standards on existing power plants, signaling that the courts will side with the EPA.

States will have until June 2016 to choose how to comply with the new standards, but based upon these recent court decisions, it appears that the future for coal-fired electricity generation in the United States is bleak.

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