Memorandum

To: Clean Power Plan Docket

Subject: MATS Supreme Court Decision has Little Impact on the Clean Power Plan

Date: August 3, 2015

On June 29, 2015, the U.S. Supreme Court reversed a portion of the U.S. Court of Appeals 

for the D.C. Circuit (D.C. Circuit) decision upholding the Mercury and Air Toxics Standards 

(MATS).1Specifically, the Court reversed the D.C. Circuit’s conclusion that EPA was not required 

to consider cost when determining whether regulation of EGUs was "appropriate and 

necessary” pursuant to section 112(n)(1) of the Clean Air Act.

This decision does not affect the analyses done to develop the Clean Power Plan (CPP)

goals and will have little, if any, impact on its implementation. EPA has explicitly taken cost 

considerations into account in developing the CPP. In addition, the approach EPA used to set 

state goals under the CPP relies on power sector data from 2012 – data that is unaffected by 

MATS which has a 2015 compliance deadline. Moreover, many units affected by MATS are 

already in compliance with that standard and the actions the industry has taken or announced 

in response to MATS are not actions that can be easily reversed. 

Most investments for MATS compliance have been made: More than half of the units 

that are subject to MATS came into compliance in April 2015. The rest, over 400 units, received

one-year extensions for compliance from their states and are planning to come into compliance 

or retire by April 16 of next year or sooner2. Based on numerous conversations that EPA staff 

has had with the industry and with the grid operators, EPA is informed that those that are 

planning on coming into compliance are well on the way to completing MATS related retrofits.

In addition, some controls that units are currently running are needed to comply with other 

requirements, such as the Cross-State Air Pollution Rule, state control requirements, consent 

decrees, regional haze or state permit requirements. Decisions to discontinue using controls, 

while having potentially serious adverse effects on public health locally or regionally, would 

 

1 Michigan v. EPA, 135 S.Ct. 2699 (2015).

2

SNL Financial, May 14, 2015
2

have little impact in terms of CPP compliance. The operation of pollution controls requires a 

small amount of energy from the power plant itself (sometimes referred to as an “energy 

penalty”), such that when controls are turned off, the economics of the facility might be altered 

in a way that could result in changes in CO2 emissions3. The cost to operate these units may 

also decrease, and thus electricity generated from these plants might be slightly more 

competitive. However, these factors are likely to result in very small differences for power plant 

operators, and are not likely to have a substantial impact on expectations of future CO2 

emissions and the cost of compliance with the CPP.

Coal and Oil Plant Retirements: In the past decade, there have been significant changes 

in both the mix of generating capacity and in the share of electricity generation supplied by 

different types of generation. As EPA stated in the Regulatory Impact Analysis for the CPP, 

these result from multiple changes taking place in the power sector, including normal 

replacements of older generating units with new units, changes in the electricity intensity of the 

US economy, economic growth and regional changes in the US population, technological 

improvements in electricity generation from both existing and new units, changes in the prices 

and availability of different fuels, and substantial growth in electricity generation by renewable 

and distributed generation (to name a few). The evolving economics of the power sector, in 

particular the increased natural gas supply and relatively low natural gas prices, have resulted 

in more gas being used as base load energy in addition to supplying electricity during peak load. 

Thus it is not surprising that since MATS was promulgated there have been a number of coal

retirements. SNL reports that from January 2012 through July 9, 2015, 198 units totaling 33 GW 

of coal capacity have retired.

4

 In the changed environment of the power sector, these units are 

no longer economic to run. It would be a mistake to assume that these retirements were all, or 

even mostly, the result of MATS. In EPA’s economic analysis of MATS, the agency estimated 

that less than 5 GW of capacity would retire as a result of MATS. Moreover, most plant 

retirements are permanent. Plants that have retired are often torn down, coal contracts are 

 

3

There is less than a 1% energy penalty associated with the controls most often used for MATS compliance 

including ACI, DSI and a fabric filter. This includes reagent and sorbent handling a preparation. See: 

http://www.netl.doe.gov/File%20Library/Research/Energy%20Analysis/Publications/Rev3Vol1aPC_NGCC_final.pdf

4

SNL Financial; data 7/9/2015
3

given up, waste cleanup and remediation begins, and access to transmission service is

terminated. In many cases, new cleaner replacement capacity has come on line with new 

transmission lines and other infrastructure or transmission upgrades have been made so that 

the plant is no longer needed. These changes are reflected in EPA’s projections for CPP 

compliance. 

There are an additional 12 GW of coal and oil capacity that are projected to retire by 

April, 2016 according to the Energy Information Administration.

5

 As previously stated, there 

are many reasons that the operators of these plants choose to retire them, and many of those 

reasons are unrelated to MATS. Many large power generators have already said that they 

would not alter their plans to retire plants because of the Supreme Court decision.6 Moreover, 

even if some units did decide to delay their retirement plans, it would not alter the CPP 

emission guidelines, performance rates, and state goals since the methods and approach used 

by EPA uses the historical 2012 adjusted baseline for purposes of applying its “best system of 

emission reduction.” 

 

5

EIA Electric Power Monthly May 2015 issue. http://www.eia.gov/electricity/monthly/

6

SNL Financial, June 30, 2015