Document ID: EPA-HQ-OAR-2009-0234-20497
Agency: epa
Document Type: Proposed Rule
Title: Supplemental Finding that it is Appropriate and Necessary to Regulate Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility Steam Generating Units
Posted Date: 2015-12-01T05:00Z

[Federal Register Volume 80, Number 230 (Tuesday, December 1, 2015)]
[Proposed Rules]
[Pages 75025-75042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30360]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 63

[EPA-HQ-OAR-2009-0234; FRL-9939-45-OAR]
RIN 2060-AS76

Supplemental Finding That It Is Appropriate and Necessary To 
Regulate Hazardous Air Pollutants From Coal- and Oil-Fired Electric 
Utility Steam Generating Units

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed supplemental finding and request for comment.

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SUMMARY: The Environmental Protection Agency (EPA) is soliciting 
comment on a proposed supplemental finding that consideration of cost 
does not alter the agency's previous conclusion that it is appropriate 
and necessary to regulate coal- and oil-fired electric utility steam 
generating units (EGUs) under section 112 of the Clean Air Act (CAA). 
In light of the U.S. Supreme Court decision in Michigan v. EPA, 135 
S.Ct. 2699 (2015), the EPA has taken cost into account in evaluating 
whether such regulation is appropriate. In this document, the EPA sets 
forth its proposed supplemental finding and requests comment on all 
aspects of that finding and the supporting legal memorandum in the 
docket for this action. This proposed supplemental finding, if 
finalized after consideration of comments, will conclude that coal- and 
oil-fired EGUs are properly included on the CAA section 112(c) list of 
sources that must be regulated under CAA section 112(d).

DATES: Comments. Comments must be received on or before January 15, 
2016.

ADDRESSES: Comments. Submit your comments, identified by Docket ID No. 
EPA-HQ-OAR-2009-0234 at http://www.regulations.gov. Follow the online 
instructions for submitting comments. Once submitted, comments cannot 
be edited or removed from regulations.gov. The EPA may publish any 
comment received to its public docket. Do not submit electronically any 
information you consider to be Confidential Business Information (CBI) 
or other information whose disclosure is restricted by statute. 
Multimedia submissions (audio, video, etc.) must be accompanied by a 
written comment. The written comment is considered the official comment 
and should include discussion of all points you wish to make. The EPA 
will generally not consider comments or comment contents located 
outside of the primary submission (i.e., on the Web, Cloud, or other 
file sharing system). For additional submission methods, the full EPA 
public comment policy, information about CBI or multimedia submissions, 
and general guidance on making effective comments, please visit http://www2.epa.gov/dockets/commenting-epa-dockets.
    Instructions: All submissions must include the agency name and 
Docket ID No. (EPA-HQ-OAR-2009-0234). The EPA's policy is to include 
all comments received without change, including any personal 
information provided, in the public docket, available online at http://www.regulations.gov, unless the comment includes information claimed to 
be CBI or other information whose disclosure is restricted by statute. 
Do not submit information that you consider to be CBI or otherwise 
protected through http://www.regulations.gov or email. Send or deliver 
information identified as CBI only to the following address: OAQPS 
Document Control Officer (C404-02), Office of Air Quality Planning and 
Standards, U.S. EPA, Research Triangle Park, North Carolina 27711, 
Attention Docket ID No. EPA-HQ-OAR-2009-0234. Clearly mark the part or 
all of the information that you claim to be CBI. For CBI information on 
a disk or CD-ROM that you mail to the EPA, mark the outside of the disk 
or CD-ROM as CBI and then identify electronically within the disk or 
CD-ROM the specific information you claim as CBI. In addition to one 
complete version of the comment that includes information claimed as 
CBI, you must submit a copy of the comment that does not contain the 
information claimed as CBI for inclusion in the public docket. 
Information so marked will not be disclosed except in accordance with 
procedures set forth in 40 CFR part 2.
    The EPA requests that you also submit a separate copy of your 
comments to the contact person identified below (see FOR FURTHER 
INFORMATION CONTACT). If the comment includes information you consider 
to be CBI or otherwise protected, you should send a copy of the comment 
that does not contain the information claimed as CBI or otherwise 
protected.

[[Page 75026]]

    The www.regulations.gov Web site is an ``anonymous access'' system, 
which means the EPA will not know your identity or contact information 
unless you provide it in the body of your comment. If you send an email 
comment directly to the EPA without going through http://www.regulations.gov, your email address will be automatically captured 
and included as part of the comment that is placed in the public docket 
and made available on the Internet. If you submit an electronic 
comment, the EPA recommends that you include your name and other 
contact information in the body of your comment and with any disk or 
CD-ROM you submit. If the EPA cannot read your comment due to technical 
difficulties and cannot contact you for clarification, the EPA may not 
be able to consider your comment. Electronic files should avoid the use 
of special characters, any form of encryption, and be free of any 
defects or viruses.
    Docket: All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some 
information is not publicly available (e.g., CBI or other information 
whose disclosure is restricted by statute). Certain other material, 
such as copyrighted material, will be publicly available only in hard 
copy. Publicly available docket materials are available either 
electronically in http://www.regulations.gov or in hard copy at the EPA 
Docket Center, EPA WJC West Building, Room 3334, 1301 Constitution Ave. 
NW., Washington, DC. The Public Reading Room is open from 8:30 a.m. to 
4:30 p.m., Monday through Friday, excluding federal holidays. The 
telephone number for the Public Reading Room is (202) 566-1744, and the 
telephone number for the Air Docket is (202) 566-1742. Visit the EPA 
Docket Center homepage at http://www.epa.gov/epahome/dockets.htm for 
additional information about the EPA's public docket.
    In addition to being available in the docket, an electronic copy of 
this proposed supplemental finding will be available on the World Wide 
Web (WWW). Following signature, a copy of the proposed supplemental 
finding will be posted at the following address: http://www3.epa.gov/mats/actions.html.
    Public Hearing: A public hearing will be held if requested by 
December 6, 2015 to accept oral comments on this proposed action. The 
hearing will be held, if requested, on December 16, 2015 at the EPA's 
North Carolina Campus located at 109 T.W. Alexander Drive, Research 
Triangle Park, NC 27711. The hearing, if requested, will begin at 9:00 
a.m. (local time) and will conclude at 1:00 p.m. (local time). To 
request a hearing, to register to speak at a hearing, or to inquire if 
a hearing will be held, please contact Ms. Virginia Hunt at (919) 541-
0832 or by email at hunt.virginia@epa.gov. The last day to pre-register 
to speak at a hearing, if one is held, will be December 14, 2015. 
Additionally, requests to speak will be taken the day of the hearing at 
the hearing registration desk, although preferences on speaking times 
may not be able to be fulfilled. Please note that registration requests 
received before the hearing will be confirmed by the EPA via email.
    Please note that any updates made to any aspect of the hearing, 
including whether or not a hearing will be held, will be posted online 
at http://www3.epa.gov/mats/actions.html. We ask that you contact Ms. 
Virginia Hunt at (919) 541-0832 or by email at hunt.virginia@epa.gov or 
monitor our Web site to determine if a hearing will be held. The EPA 
does not intend to publish a notice in the Federal Register announcing 
any such updates. Please go to http://www3.epa.gov/mats/actions.html 
for more information on the public hearing.

FOR FURTHER INFORMATION CONTACT: Dr. Nick Hutson, Energy Strategies 
Group, Sector Policies and Programs Division (D243-01), U.S. EPA, 
Research Triangle Park, NC 27711; telephone number (919) 541-2968, 
facsimile number (919) 541-5450; email address: hutson.nick@epa.gov.

SUPPLEMENTARY INFORMATION: 
    Organization of This Document. The information presented in this 
document is organized as follows:

I. General Information
    A. Executive Summary
    B. Does this action apply to me?
    C. The Limited Scope of This Action
II. Hazards to Public Health and the Environment From HAP Emitted by 
EGUs
III. Cost Consideration Under CAA Section 112(n)(1)
IV. Considerations of Cost
    A. Introduction
    B. Consideration of Cost to the Power Sector
    C. Other Costs
    D. Incorporating Cost Into the Appropriate Finding
V. Consideration of the Benefit-Cost Analysis in the MATS RIA
    A. Introduction
    B. Background on Benefit-Cost Analyses
    C. Consideration of HAP Benefits
    D. Consideration of Total Benefits and Benefit-Cost Comparisons
    E. Conclusions Regarding the Benefit-Cost Analysis
VI. Conclusion
VII. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act (PRA)
    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act (UMRA)
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From 
Environmental Health Risks and Safety Risks
    H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act (NTTAA)
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Determination Uunder CAA Section 307(d)
VIII. Statutory Authority

I. General Information

A. Executive Summary

    The EPA is requesting comment on this proposed supplemental finding 
that including a consideration of cost does not alter the agency's 
previous determination that it is appropriate and necessary to regulate 
coal- and oil-fired EGUs under section 112 of the CAA. In light of the 
U.S. Supreme Court (Supreme Court) decision in Michigan v. EPA, 135 
S.Ct. 2699 (2015), the EPA has taken cost into account in evaluating 
whether such regulation is appropriate and has determined that 
including such consideration does not alter the EPA's original 
conclusion that it is appropriate to regulate hazardous air pollutant 
(HAP) emissions from EGUs. This proposed supplemental finding, if made 
final after consideration of public comments, will conclude that coal- 
and oil-fired EGUs are properly included on the CAA section 112(c) list 
of sources that must be regulated under CAA section 112(d).
    The EPA issued national emission standards for hazardous air 
pollutants (NESHAP) for coal- and oil-fired electric utility units, 
known as the Mercury and Air Toxics Standards or ``MATS,'' on February 
16, 2012. Almost 12 years earlier, on December 20, 2000, the EPA 
determined, pursuant to CAA section 112(n)(1)(A), that it was 
appropriate and necessary to regulate coal- and oil-fired EGUs under 
CAA section 112 and added such units to the CAA section 112(c) list of 
sources that must be regulated under CAA section 112(d). (December 2000

[[Page 75027]]

Finding; 65 FR 79825.) The appropriate and necessary finding was based 
primarily on consideration of the Utility Study Report to Congress 
(Utility Study),\1\ the Mercury Study Report to Congress (Mercury 
Study),\2\ the National Academies of Science's Toxicological Effects of 
Methylmercury (NAS Study),\3\ and mercury data collected from coal-
fired EGUs after completion of the studies. 65 FR 79826. After 
consideration of this information, the EPA found that it was 
appropriate to regulate HAP emissions from EGUs because such emissions 
pose significant hazards to public health and the environment and also 
because the EPA determined that there were available controls to 
effectively reduce mercury and other HAP emissions from EGUs. 64 FR 
79825, 79830/2. The EPA found that it was necessary to regulate HAP 
emissions from EGUs because implementation of the other requirements of 
the CAA would not adequately address the serious hazards to public 
health and the environment posed by HAP emissions from EGUs and because 
CAA section 112 is the authority intended to regulate HAP emissions 
from stationary sources. Id.
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    \1\ U.S. EPA. 1998. Study of Hazardous Air Pollutant Emissions 
from Electric Utility Steam Generating Units--Final Report to 
Congress. EPA-453/R-98-004a. February. Docket ID No. EPA-HQ-OAR-
2009-0234-3052.
    \2\ U.S. EPA. 1997. Mercury Study Report to Congress. EPA-452/R-
97-003. December. Docket ID No. EPA-HQ-OAR-2009-0234-3054.
    \3\ National Research Council. 2000. Toxicological Effects of 
Methylmercury. Committee on the Toxicological Effects of 
Methylmercury, National Academy Press, Washington, DC. Docket ID No. 
EPA-HQ-OAR-2009-0234-3055.
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    On May 3, 2011, the EPA reaffirmed the 2000 appropriate and 
necessary finding and listing of EGUs, and proposed MATS pursuant to 
CAA section 112(d). 76 FR 24976. The EPA responded to comments on the 
appropriate and necessary finding, as well as the proposed MATS, and 
issued the final MATS on February 16, 2012. 77 FR 9304. Industry, 
states, environmental organizations, and public health organizations 
challenged many aspects of the EPA's appropriate and necessary finding 
and the final MATS rule in the U.S. Court of Appeals for the District 
of Columbia Circuit (D.C. Circuit Court), and the Court denied all 
challenges. White Stallion Energy Center v. EPA, 748 F.3d 1222 (D.C. 
Cir. 2014). Some industry and state petitioners sought further review 
of the final MATS rule, and the Supreme Court granted certiorari to 
determine whether the EPA erred when it concluded that the appropriate 
and necessary finding under CAA section 112(n)(1)(A) could be made 
without consideration of cost. On June 29, 2015, the Supreme Court 
ruled that the EPA acted unreasonably when it determined cost was 
irrelevant to the appropriate and necessary finding. Michigan v. EPA, 
135 S.Ct. 2699 (2015). Specifically, the Supreme Court held that the 
agency must consider cost before deciding whether regulation is 
appropriate and necessary, noting also that it will be up to the agency 
``to decide, within the limits of reasonable interpretation, how to 
account for cost.'' Michigan, 135 S.Ct. at 2711.
    The EPA, in response to the Supreme Court's direction, has now 
added consideration of cost to the appropriate and necessary finding as 
detailed in this document. In this document, the EPA concludes that 
including such consideration of cost does not alter the agency's 
previous determination that it is appropriate to regulate HAP emissions 
from EGUs. The agency is taking comment on the proposed supplemental 
finding through this document. The EPA is also taking comment on the 
supporting document ``Legal Memorandum Accompanying the Proposed 
Supplemental Finding that it is Appropriate and Necessary to Regulate 
Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility 
Steam Generating Units (EGUs)'' (Legal Memorandum) available in the 
docket for this action (EPA-HQ-OAR-2009-0234).

B. Does this action apply to me?

    The regulated categories and entities potentially affected by this 
proposed supplemental notice are shown below in Table 1.

                         Table 1--Potentially Affected Regulated Categories and Entities
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                                                                             Examples of potentially affected
                    Category                          NAICS Code \1\                     entities
----------------------------------------------------------------------------------------------------------------
Industry.......................................                   221112  Fossil fuel-fired electric utility
                                                                           steam generating units.
Federal government.............................               \2\ 221122  Fossil fuel-fired electric utility
                                                                           steam generating units owned by the
                                                                           federal government.
State/local/tribal government..................               \2\ 221122  Fossil fuel-fired electric utility
                                                                           steam generating units owned by
                                                                           municipalities.
                                                                  921150  Fossil fuel-fired electric utility
                                                                           steam generating units in Indian
                                                                           country.
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\1\ North American Industry Classification System (NAICS).
\2\ Federal, state, or local government-owned and operated establishments are classified according to the
  activity in which they are engaged.

    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities that may be affected by this 
action. If you have any questions regarding the applicability of this 
action to a particular entity, consult either the air permitting 
authority for the entity or your EPA Regional representative as listed 
in 40 CFR 60.4 or 40 CFR 63.13 (General Provisions).

C. The Limited Scope of This Action

    This action is in response to the Supreme Court's decision that the 
EPA must consider cost in the initial determination that regulation of 
HAP emissions from EGUs is appropriate under CAA section 112. In this 
document, the EPA provides detailed information on how the agency has 
taken cost into account in evaluating whether regulation of HAP from 
coal- and oil-fired electric utility steam generating units is 
appropriate and explains why the EPA proposes to find that including 
such consideration does not alter the previous determination. The EPA 
requests comment on this proposed supplemental finding and on the 
supporting Legal Memorandum available in the rulemaking docket (EPA-HQ-
OAR-2009-0234).
    The EPA is accepting comment only on the consideration of cost in 
making the appropriate determination and listing of EGUs. The analyses 
presented in this document and the Legal Memorandum in support of this 
document do not affect or alter other aspects of the appropriate and 
necessary interpretation or finding, or the CAA section 112(d) emission 
standards promulgated in MATS. These analyses also do not alter the 
Regulatory Impact Analysis (RIA) prepared for the final MATS. 
Specifically, the EPA is not

[[Page 75028]]

accepting comment on the scientific or technical aspects of the 2000 
appropriate and necessary finding and subsequent reaffirmation. These 
findings include that mercury and other HAP emissions are hazardous to 
public health and the environment, that EGUs are the largest emitter of 
many HAP, that effective control strategies for HAP emissions are 
available, and that HAP hazards remain after implementation of other 
CAA provisions. We are only accepting comment on the consideration of 
cost aspect presented in this proposed supplementary finding. 
Therefore, we are not opening for comment or proposing to revise any 
other aspects of the appropriate and necessary interpretation or 
finding, or the MATS standards themselves, as part of this action. The 
final MATS standards were supported by an extensive administrative 
record and based on available control technologies and other practices 
already used by the better-controlled and lower-emitting EGUs, and the 
EPA previously concluded that the standards are achievable and reduce 
hazards to public health and the environment from HAP emitted by EGUs. 
76 FR 24976 (MATS proposal); 77 FR 9304 (MATS final). In addition, the 
public had ample opportunity to comment on all aspects of the CAA 
section 112(d) standards, the RIA, and the appropriate and necessary 
finding beyond the consideration of cost; and the EPA responded to all 
of the significant comments.\4\
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    \4\ 77 FR 3919-62; 77 FR 9386-9423; U.S. EPA. 2011. EPA's 
Responses to Public Comments on EPA's National Emission Standards 
for Hazardous Air Pollutants from Coal- and Oil-Fired Electric 
Utility Steam Generating Units. December 2011. Volumes 1 and 2. 
Docket ID No. EPA-HQ-OAR-2009-0234-20126.
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    Also, the Supreme Court's decision neither calls into question nor 
reverses the portions of the D.C. Circuit Court's opinion unanimously 
rejecting all other challenges to the appropriate and necessary 
interpretation and finding and the HAP emission standards that the EPA 
promulgated in the final MATS rule. Industry, states, environmental 
organizations, and public health organizations challenged many aspects 
of the EPA's appropriate and necessary finding and the MATS emissions 
standards, including: (1) The EPA's reliance on the CAA section 
112(c)(9) delisting criteria for determining the level of risk worth 
regulating; (2) the EPA's decision not to consider cost in making the 
appropriate and necessary determination and listing of EGUs; (3) the 
EPA's use of identified environmental harms as a basis for finding it 
appropriate and necessary to regulate HAP emissions from EGUs; (4) the 
EPA's consideration of the cumulative impacts of HAP emissions from 
EGUs and other sources in determining whether EGUs pose a hazard to 
public health or the environment; (5) the EPA's regulation of EGUs 
pursuant to CAA section 112(d) after adding EGUs to the section 112(c) 
list pursuant to the appropriate and necessary finding; (6) the EPA's 
determination that all HAP from EGUs should be regulated; (7) the EPA's 
technical basis for concluding that EGUs pose a hazard to public health 
or the environment; (8) the EPA's determination to regulate all EGUs as 
defined in CAA section 112(a)(8) in the same manner whether or not the 
individual units are located at major or area sources of HAP; (9) the 
EPA's emissions standards for mercury and acid gas HAP, including the 
EPA's decision not to set health based emission standards for acid gas 
HAP; (10) the EPA's use of certified data submitted by regulated 
parties; (11) the EPA's denial of a delisting petition filed by an 
industry trade group; (12) the EPA's decision not to subcategorize a 
certain type of EGU; and (13) the EPA's decision to allow EGUs to 
average HAP emissions among certain EGUs. The D.C. Circuit Court denied 
all challenges to the CAA section 112(n)(1)(A) appropriate and 
necessary finding and to the CAA section 112(d) MATS rule, and, with 
the exception of the cost issue relevant to the section 112(n)(1)(A) 
finding, all the challenges were unanimously rejected. White Stallion 
Energy Center v. EPA, 748 F.3d 1222 (April 15, 2014). Consequently, we 
are not soliciting comment nor are we revisiting those final actions 
that were unanimously upheld in White Stallion Energy Center v. EPA, 
748 F.3d 1222 (April 15, 2014).
    In addition, the EPA's citation to any final decision, 
interpretation, or conclusion in the MATS record does not constitute a 
re-opening of the issue or an invitation to comment on the underlying 
decision in which the EPA considered some cost of MATS (e.g., in CAA 
section 112(d) beyond-the-floor analyses either establishing or 
declining to establish a standard more stringent than the maximum 
achievable control technology (MACT) floor).
    It is worth noting that the issue addressed in this document--
whether a consideration of cost alters the agency's previous 
determination that it is appropriate and necessary to regulate HAP 
emissions from coal- and oil-fired EGUs--goes to the listing of EGUs 
under CAA section 112. Under CAA section 112, such listing decisions 
are not final agency actions for purposes of judicial review. Instead, 
the public can comment on listing decisions during the CAA section 
307(d) standard development process and challenge such decisions when 
the EPA issues final standards for a source category. See CAA section 
112(e)(4) (``Notwithstanding section [307 of the CAA], no action of the 
Administrator . . . listing a source category or subcategory under 
subsection (c) of this section shall be a final agency action subject 
to judicial review, except that any such action may be reviewed under 
section [307 of the CAA] when the Administrator issues emission 
standards for such . . . category.''). Because the final standards for 
coal- and oil-fired EGUs have been issued, the normal vehicle for 
taking comment on aspects of the listing decision is not available to 
the EPA at this time. Consequently, the agency is providing this 
separate proposal to provide an opportunity for public comment on this 
nationally applicable proposed supplemental finding that it is 
appropriate and necessary to regulate coal- and oil-fired EGUs after 
considering cost, the cost analyses set forth below, and the 
supplemental legal analysis in the supporting Legal Memorandum 
available in the docket for this rulemaking. The EPA will issue its 
final determination after consideration of significant comments, 
consistent with the rulemaking requirements set forth in CAA section 
307(d).

II. Hazards to Public Health and the Environment From HAP Emitted by 
EGUs

    In the current action, the EPA adds a consideration of cost to the 
determination of whether it is appropriate to regulate HAP emissions 
from EGUs. As discussed in Sections III and IV.D of this document, it 
is the EPA's view that the consideration of cost in the appropriate 
finding should be weighed against, among other things, the volume of 
HAP emitted by EGUs and the associated hazards to public health and the 
environment. In this supplemental finding, therefore, the significant 
hazards to public health and the environment from HAP emitted by EGUs 
(and the substantial reductions in HAP emissions achieved by MATS that 
are described in Section IV.B.2 of this document) should be weighed 
against the costs of compliance.\5\ Indeed, these

[[Page 75029]]

hazards provided the basis for the EPA's December 2000 Finding,\6\ and 
the agency's 2011 reaffirmation of the finding,7 8 that 
regulation of HAP emissions from EGUs is appropriate and necessary. In 
this Section, we provide a summary of these hazards, which are further 
described in the record for the MATS.
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    \5\ The context provided by CAA section 112 generally 
demonstrates Congress' focus on the inherent risks posed by HAP 
emissions. To address those risks, Congress substantially amended 
CAA section 112 in 1990 to achieve prompt, permanent and ongoing 
reductions of HAP emissions from stationary sources and to reduce 
the associated risks to public health, including the effects on the 
most exposed and sensitive members of the population, and the 
environment. See NMA v. EPA, 59 F.3d at 1352-53 (discussing the 
purpose and impact of the 1990 CAA Amendments to section 112); see 
also Cement Kiln Recycling Coalition v. EPA, 255 F.3d 855, 857-58 
(D.C. Cir. 2001); Sierra Club v. EPA, 353 F.3d at 978-80; NRDC v. 
EPA, 489 F.3d 1364, 1368-69 (D.C. Cir. 2007); NRDC v. EPA, 529 F.3d 
1077, 1079-80 (D.C. Cir. 2008).
    \6\ 65 FR 79825-31.
    \7\ 76 FR 24976-25020.
    \8\ 77 FR 9304-66.
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    As described in the peer-reviewed Mercury Study, mercury is a 
persistent, bioaccumulative toxic metal that can be emitted from coal-
fired power plants in several chemical forms. Once deposited to water 
or land, mercury can be transformed into methylmercury (MeHg) by 
microbial action. MeHg is efficiently taken up by aquatic organisms and 
bioaccumulates in the aquatic food web. Larger predatory fish may have 
MeHg concentrations many times higher than, typically on the order of 1 
million times, that of the concentrations in the freshwater body in 
which they live. Exposure to MeHg through ingestion of fish is the 
primary route for human exposures in the U.S. In 2000, the NAS Study 
reviewed the effects of MeHg on human health and concluded that mercury 
is highly toxic to multiple human and animal organ systems. Chronic 
low-dose prenatal exposure to MeHg from maternal consumption of fish 
has been associated with subtle neurotoxicity, which is manifest as 
poor performance on neurobehavioral tests, particularly on tests of 
attention, fine motor-function, language, and visual-spatial ability. 
The NAS concluded that the population at highest risk is the children 
of women who consumed large amounts of fish and seafood during 
pregnancy and that the risk to that population is likely to be 
sufficient to result in an increase in the number of children who have 
to struggle to keep up in school.
    Exposure to high levels of the various non-mercury HAP (e.g., 
arsenic, nickel, chromium, selenium, cadmium, hydrogen chloride, 
hydrogen fluoride, hydrogen cyanide, formaldehyde, benzene, 
acetaldehyde, manganese, and lead) emitted by EGUs is associated with a 
variety of adverse health effects. See, e.g., 76 FR 25003-5. These 
adverse health effects include chronic health disorders (e.g., 
irritation of the lung, skin, and mucus membranes, effects on the 
nervous system, and damage to the kidneys), and acute health disorders 
(e.g., lung irritation and congestion, alimentary effects such as 
nausea and vomiting, and liver, kidney and nervous system effects). 
Three hazardous air pollutant metals (i.e., arsenic, nickel, and 
chromium) have been classified as human carcinogens, and cadmium is 
classified as a probable human carcinogen.
    In 2011, the EPA conducted additional technical analyses to support 
the appropriate and necessary finding reaffirmation, including peer-
reviewed risk assessments on human health effects associated with 
mercury and non-mercury HAP emissions from EGUs, focusing on risks to 
the most exposed and sensitive individuals in the population. In 
addition, the EPA found that EGUs are by far the largest U.S. 
anthropogenic source of mercury, selenium, hydrogen chloride, and 
hydrogen fluoride emissions, and a significant source of metallic HAP 
emissions including arsenic, chromium, nickel, and others.\9\ The 
revised nationwide Mercury Risk Assessment \10\ estimated that up to 29 
percent of modeled watersheds potentially have sensitive populations at 
risk from exposure to mercury from U.S. EGUs, including up to 10 
percent of modeled watersheds where deposition from U.S. EGUs alone 
leads to potential exposures that exceed the reference dose \11\ for 
MeHg. See, e.g., 77 FR 9310-6. In addition, the inhalation risk 
assessment for non-mercury HAP \12\ of 16 facilities estimated a 
lifetime cancer risk for an oil-fired EGU facility of 20-in-1 million, 
five coal-fired EGU facilities with cancer risks greater than 1-in-1 
million, and one coal-fired facility with cancer risks of 5-in-1 
million. See, e.g., 77 FR 9317-9.\13\ Further, qualitative analyses on 
ecosystem effects found that mercury emissions from U.S. EGUs 
contribute to adverse impacts on fish-eating birds and mammals and that 
acid gases contribute to environmental acidification and chronic non-
cancer (respiratory) toxicity. See, e.g., 77 FR 9362-3. Moreover, the 
EPA concluded that in 2016, after implementation of other provisions of 
the CAA, HAP emissions from U.S. EGUs would still reasonably be 
anticipated to pose hazards to public health. See, e.g., 77 FR 9362-3. 
Finally, the EPA stated that the only way to ensure permanent 
reductions in HAP emissions from U.S. EGUs and the associated risks to 
public health and the environment is through standards set under CAA 
section 112.
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    \9\ Specifically, the EPA estimated that in 2005 (the most 
recent inventory year available during the MATS rulemaking), U.S. 
EGUs emitted 50 percent of total domestic anthropogenic mercury 
emissions, 62 percent of total arsenic emissions, 39 percent of 
total cadmium emissions, 22 percent of total chromium emissions, 82 
percent of total hydrogen chloride emissions, 62 percent of total 
hydrogen fluoride emissions, 28 percent of total nickel emissions, 
and 83 percent of total selenium emissions. Docket ID No. EPA-HQ-
OAR-2009-0234-19914.
    \10\ U.S. EPA. 2011. Revised Technical Support Document: 
National-Scale Assessment of Mercury Risk to Populations with High 
Consumption of Self-caught Freshwater Fish In Support of the 
Appropriate and Necessary Finding for Coal- and Oil-Fired Electric 
Generating Units. Office of Air Quality Planning and Standards. 
November. EPA-452/R-11-009. Docket ID No. EPA-HQ-OAR-2009-0234-
19913.
    \11\ A reference dose is an estimate of daily exposure, 
experienced over a lifetime that is likely to be without a risk of 
adverse health effects to humans, including sensitive 
subpopulations.
    \12\ U.S. EPA. 2011. Supplement to Non-mercury Case Study 
Chronic Inhalation Risk Assessment for the Utility MACT Appropriate 
and Necessary Analysis. Office of Air Quality Planning and 
Standards. November. Docket ID No. EPA-HQ-OAR-2009-0234-19912.
    \13\ For context, CAA section 112(c)(9)(B) does not allow the 
EPA to delete a source category from the CAA section 112(c) list if 
any source in the category emits HAP in quantities that may cause a 
lifetime risk of cancer greater than 1-in-1 million to the most 
exposed individual.
---------------------------------------------------------------------------

    As explained above, the agency's conclusions regarding these public 
health and environmental hazards are not affected by the cost analyses 
presented in this document and comments on the hazard conclusions will 
be considered outside the scope of this action. However, it is critical 
to note that the EPA's conclusions regarding the public health and 
environmental hazards associated with emissions from EGUs form the 
primary basis for the agency's previous determinations that regulation 
of HAP emissions from coal- and oil-fired EGUs is appropriate and 
necessary. See December 2000 Finding and proposed and final MATS. 
Furthermore, in evaluating costs (Section IV, below), the agency has 
considered whether the cost of compliance estimated to be incurred by 
the utility sector under MATS is reasonable when weighed against, among 
other things, the substantial hazards to public health and the 
environment posed by HAP emissions from EGUs.

III. Cost Consideration Under CAA Section 112(n)(1)

    In Michigan, the Supreme Court held that the EPA erred when it 
concluded that it need not consider cost when determining whether the 
regulation of HAP emissions from coal- and oil-fired EGUs was 
appropriate and necessary. Because the EPA had adopted this

[[Page 75030]]

interpretation in the December 2000 Finding and confirmed it in the 
MATS rulemaking, before now the agency had not evaluated the statute to 
determine how cost should be considered when determining whether 
regulation is appropriate. The EPA has now reevaluated its 
interpretation of CAA section 112(n)(1) to identify how cost 
considerations should be incorporated into this threshold listing 
determination. See ``Legal Memorandum Accompanying the Proposed 
Supplemental Finding that it is Appropriate and Necessary to Regulate 
Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility 
Steam Generating Units (EGUs)'' (Legal Memorandum). In this Section, 
the EPA provides a summary of the legal conclusions relating to the 
consideration of cost in the appropriate finding. The Legal Memorandum 
lays out, in more detail, the interpretation of CAA section 
112(n)(1)(A) that provides the basis for this proposed action. The EPA 
is requesting comment on the Legal Memorandum.\14\
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    \14\ Nothing in this document or the Legal Memorandum disturbs 
the EPA's prior interpretations of the terms ``appropriate'' and 
``necessary'' set forth in the proposed and final MATS rules, except 
to the extent they concluded that the EPA was not required to take 
cost into account when deciding whether regulation is 
``appropriate.''
---------------------------------------------------------------------------

    In the Legal Memorandum, the EPA reevaluates the statute in light 
of the Supreme Court's holding in Michigan. The EPA considers the 
purpose and scope of the 1990 amendments to CAA section 112, including 
section 112(n)(1), to determine the cost considerations generally 
relevant to HAP-related actions, the advantages of regulating HAP 
emissions from stationary sources, and a reasonable approach to 
weighing the costs with the other factors relevant to determining 
whether regulation of HAP emissions from EGUs is appropriate. See Legal 
Memorandum, pages 6-23.
    The EPA's evaluation of CAA section 112 leads us to conclude that 
the purpose of that section of the CAA is to achieve prompt, permanent 
and ongoing reductions in HAP emissions from stationary sources to 
reduce the hazards to public health and the environment inherent in 
exposure to such emissions, with the goal of limiting the risk to the 
most exposed and most sensitive members of the population. See Legal 
Memorandum, pages 6-13. To accomplish this goal, the statute requires 
as a starting point uniform levels of control from all sources in the 
same listed category or subcategory, and ongoing review to determine 
whether additional reductions can be achieved to further reduce the 
volume of HAP emissions. Id. Thus, the EPA concludes that the benefit 
Congress sought in amending CAA section 112 was permanent and ongoing 
reductions in the volume of HAP emissions. Id. These general goals are 
relevant to the EPA's evaluation of specific statutory provisions 
including the EGU specific requirements in CAA section 112(n)(1). See 
New Jersey v. EPA, 517 F.3d at 582 (rejecting the EPA's argument that 
section 112(c)(9) does not apply to EGUs, and citing section 112(c)(6) 
as support for the conclusion that ``where Congress wished to exempt 
EGUs from specific requirements of section 112, it said so 
explicitly.'').
    The EPA has also evaluated the specific section under which the 
appropriate and necessary determination is made--CAA section 
112(n)(1)--to further inform our interpretation of the role of cost in 
making the appropriate determination under section 112(n)(1)(A). See 
Legal Memorandum, pages 13-17. The studies required under CAA section 
112(n)(1) focus on potential hazards to public health and the 
environment, including the potential hazards to the most sensitive 
members of the population. In addition, the statute requires the agency 
to evaluate available control technologies for HAP emissions from EGUs, 
and to specifically evaluate the cost of mercury controls. See CAA 
sections 112(n)(1)(A) and 112(n)(1)(B). Thus, cost is one of the 
several factors that the EPA must consider in addition to the other 
relevant factors identified in the statute when determining whether 
regulation of HAP emissions from EGUs is appropriate, but CAA section 
112(n)(1) does not support a conclusion that cost should be the 
predominant or overriding factor. See Legal Memorandum, pages 13-17.
    CAA section 112(n)(1)(A) also does not dictate the manner in which 
cost is to be considered in the appropriate finding. In fact, the sole 
mention of cost in CAA section 112(n)(1) is the direction in section 
112(n)(1)(B) to consider the costs of mercury controls. The statute 
thus gives the EPA discretion to identify a reasonable approach to 
incorporating cost into the analysis required under CAA section 
112(n)(1)(A). In addition, because section 112(n)(1)(A) is a listing 
provision, the EPA must focus on whether HAP emissions from EGUs 
collectively should be regulated, and not on the specific manner of 
regulation.\15\ Under the statutory structure, this listing decision is 
to be made significantly before the 112(d) standards would be 
promulgated, and, therefore, it is reasonable for the EPA to consider 
what types of cost information would be available at that threshold 
stage when determining how to consider cost in the analysis. See Legal 
Memorandum, pages 19-21.
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    \15\ As explained in the MATS record and the Legal Memorandum, 
the manner of regulation for listed source categories is established 
pursuant to CAA section 112(d)(2) for major stationary sources. In 
addition, the EPA determined in the Legal Memorandum that CAA 
section 112(d)(3) minimum stringency standards are technologically 
feasible and presumptively cost reasonable because the standards are 
based on existing sources in the same category or subcategory of 
sources. See Legal Memorandum, page 8 and Section III of this 
document.
---------------------------------------------------------------------------

    In determining whether it is appropriate to regulate HAP emissions 
from EGUs, the EPA concludes that it is reasonable to focus on whether 
the power sector can reasonably absorb the cost of compliance with 
MATS. The D.C. Circuit has previously provided general guidance on how 
to evaluate cost in the context of determining the reasonableness of 
New Source Performance Standards under section 111 of the CAA. The 
approach under CAA section 112 is somewhat different as section 
112(d)(3) of the statute defines the minimum level of control based on 
levels that have been actually achieved by the best performing similar 
sources in the source category--a level deemed per se reasonable for 
other similar sources. Thus, the agency need not determine in the 
analysis the level of control that is technologically feasible and cost 
reasonable as is required when establishing standards under CAA section 
111. Instead, the purpose of the cost analysis under CAA section 
112(n)(1)(A) is to help evaluate whether the costs of regulation are 
reasonable when weighed against other relevant factors, most notably 
the identified hazards to public health and the environment from HAP 
emitted by EGUs that are reduced when the significant volume of HAP 
emission from EGUs is reduced. For EGUs, the reasonableness of the 
costs of CAA section 112(d) standards could be determined in part by an 
evaluation of this sector's ability to perform its primary and unique 
function--the generation, transmission and distribution of electricity. 
As explained below, the EPA considered several different cost metrics 
to evaluate whether cost of compliance with MATS are reasonable.
    The statute also does not specify how much weight should be given 
to cost relative to other relevant factors. It thus provides the EPA 
discretion to develop reasonable approaches to considering

[[Page 75031]]

cost while taking into account the goals of the statute. Cost is but 
one of several factors the EPA must consider before it may add, 
pursuant to CAA section 112(n)(1)(A), EGUs to the list of source 
categories to be regulated under section 112. Specific pollutants were 
listed by Congress as HAP under CAA section 112 due to their inherently 
harmful characteristics, and this section instructs the EPA to reduce 
the risks to public health and the environment, including the risks to 
the most sensitive individuals in the population from those harms, by 
reducing the volume of such HAP emissions from stationary sources. 
Thus, the advantages of reducing identified hazards to public health 
and the environment must be considered and weighed against the costs or 
disadvantages, taking into account the statutory goals. See Legal 
Memorandum, pages 21-29.
    The EPA also concludes in the Legal Memorandum that a benefit-cost 
analysis is not required to support a threshold finding that regulation 
is appropriate. However, to the extent a benefit-cost analysis is used 
to evaluate whether regulation of HAP emissions from EGUs is 
appropriate, it is important to account for the full range of benefits 
associated with the action, including benefits that cannot be monetized 
due to lack of data. The statute does not require the EPA to compare 
only the monetized HAP-specific benefits to the compliance costs to 
support the finding. Neither does the statute direct the EPA to 
consider only the HAP benefits of the rule and ignore co-benefits, if 
the control strategies employed achieve multi-pollutant reductions. 
Instead, the EPA concludes that such an analysis would appropriately 
evaluate all of the known consequences of the rule. The Legal 
Memorandum concludes that the benefit-cost analysis in the RIA that 
accompanied the final MATS presents a reasonable evaluation of the 
costs and benefits of the final MATS rule.
    The legal interpretations summarized above, and explained in 
greater detail in the Legal Memorandum, provide the basis for the 
evaluation of cost and conclusions presented in the remainder of this 
document. The EPA is requesting comment on all aspects of the Legal 
Memorandum and all conclusions contained therein.

IV. Considerations of Cost

A. Introduction

    This Section explains how the EPA has taken cost into account in 
evaluating whether regulation of coal- and oil-fired EGUs under section 
112 of the CAA is appropriate. As the EPA explains above, and in the 
Legal Memorandum, there is little guidance in CAA section 112 on how 
the EPA could or should consider cost when making the threshold finding 
under CAA section 112(n)(1)(A) and the EPA has substantial discretion 
in identifying appropriate metrics for considering cost. The EPA has 
evaluated costs in this Section primarily through a consideration of 
whether the cost of compliance to the power sector is reasonable.
    In Section IV.B below, the EPA discusses how it evaluated the 
reasonableness of the direct and indirect costs of the final CAA 
section 112(d) standards. As discussed earlier and in the Legal 
Memorandum, the EPA has substantial discretion in identifying 
appropriate metrics for considering cost. In evaluating how to 
appropriately consider costs, the EPA was mindful of Congress' 
statement regarding the 1990 CAA Amendments: ``Our goal . . . has been 
to promote the public health and welfare and the productive capacity of 
our nation. We have given EPA both the regulatory tools to accomplish 
cleaner air and the flexibility to protect our industrial and 
productive capacity.'' \16\ In the context of CAA section 112(n)(1), 
adherence to Congress' goal can be evaluated by considering whether the 
cost of addressing, through MATS, the significant public health and 
environmental hazards posed by emissions of HAP from EGUs is reasonable 
and whether those hazards can be addressed while protecting the 
``productive capacity'' of the power sector (i.e., without significant 
harm to the power sector's ability to perform its primary and unique 
function--the generation, transmission, and distribution of 
electricity.) In Section IV.B the EPA presents an evaluation of 
multiple metrics to determine the cost reasonableness of the CAA 
section 112(d) standards for EGUs.
---------------------------------------------------------------------------

    \16\ ``A Legislative History of the Clean Air Act Amendments of 
1990'' (CAA Legislative History), Vol II, p. 3187.
---------------------------------------------------------------------------

    The EPA has also identified other costs that help inform the 
agency's understanding of whether it is appropriate to regulate HAP 
emissions from EGUs. As discussed in the Legal Memorandum, the explicit 
reference to the cost of mercury controls in CAA section 112(n)(1)(B) 
and the reference to the availability of alternative control strategies 
in section 112(n)(1)(A) suggests that the EPA should consider the cost 
of controls for mercury and other HAP emitted from EGUs when 
determining whether regulation is appropriate.\17\ The cost of the ARP 
is also worth noting in light of its relationship to the inclusion of 
CAA section 112(n)(1)(A) in the 1990 CAA amendments. Thus, in Section 
IV.C below, the EPA discusses briefly the cost of the ARP, the 
evolution of mercury controls and the reduction in the cost of such 
controls since the EPA issued the Mercury Study. The EPA also discusses 
the controls for other HAP emissions from EGUs.
---------------------------------------------------------------------------

    \17\ The EPA believes that it could have developed rough 
projections of the control technology costs of an eventual standard 
based on information obtained in the CAA section 112(n)(1) studies 
and general knowledge of the costs of controls at the time the 
agency made the appropriate finding. For example, the Mercury Study 
estimated the potential cost of mercury controls for EGUs and other 
sources, and the EPA could have attempted to provide similar cost 
estimates for the other HAP emissions from EGUs based on available 
information, including information in the Utility Study. However, 
the agency now has an updated and further refined cost estimate of 
the cost of compliance with the final MATS rule, and the EPA is 
using this cost information in this action because it was developed 
at the time the EPA reaffirmed the finding that regulation of HAP 
emissions from EGUs is appropriate and necessary. See U.S. EPA. 
2011. Regulatory Impact Analysis for the Final Mercury and Air 
Toxics Standards. Office of Air Quality Planning and Standards, 
Research Triangle Park, NC. EPA-452/R-11-011. Docket ID No. EPA-HQ-
OAR-2009-0234-20131.
---------------------------------------------------------------------------

    Finally, while the EPA recognizes that cost is an important 
consideration in the determination of whether it is appropriate to 
regulate HAP emissions from EGUs, it is not the only consideration and 
CAA section 112(n)(1) does not support a conclusion that cost should be 
the predominant or overriding factor. As stated earlier, and detailed 
in the Legal Memorandum, the EPA must weigh the cost of compliance 
against other relevant factors--such as the advantages of regulation 
and achievement of statutory goals--in determining whether such 
consideration of cost causes the agency to alter its previous 
determination that it is appropriate to regulate HAP emissions from 
EGUs. This is discussed below in Section IV.D. As noted in Section I.C 
of this document, the public had ample opportunity to comment on all 
aspects of the MATS RIA, and the EPA responded to all of the 
significant comments.\18\ Although the EPA is not accepting comments on 
the methods applied in the MATS RIA, the agency requests comments on 
the use of the MATS RIA results as a way to consider cost in the CAA 
section 112(n)(1)(A) determination.
---------------------------------------------------------------------------

    \18\ See pp. 477-660 of the EPA's Responses to Public Comments 
on EPA's National Emission Standards for Hazardous Air Pollutants 
from Coal- and Oil-Fired Electric Utility Steam Generating Units. 
Volume 2. Docket ID No. EPA-HQ-OAR-2009-0234-20126.

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[[Page 75032]]

B. Consideration of Cost to the Power Sector

1. Introduction
    In light of the statutory ambiguity regarding how to consider cost 
in making the appropriate and necessary finding, the EPA has exercised 
the discretion granted to it and applies several metrics relevant to 
the power sector to determine whether the estimated cost of compliance 
with MATS is reasonable. The EPA has also considered the reasonableness 
of the direct and indirect costs of compliance with MATS and the power 
sector's ability to maintain performance of its primary and unique 
function--the generation, transmission, and distribution of 
electricity.
    As explained below, the EPA considered direct and indirect costs at 
the sector level because of the interconnectedness of the electricity 
grid and the fact that most power companies own diverse inventories of 
power generating units, including coal- and oil-fired EGUs. In this 
Section, the EPA has applied a number of different analyses (metrics) 
to assess whether the power sector's costs of compliance with the CAA 
section 112(d) standard is reasonable. Each of these analyses 
independently support a conclusion that the estimated costs of 
compliance with MATS are reasonable.
    In 2012, the EPA reaffirmed the appropriate and necessary finding 
and established CAA section 112(d) standards, and, as part of that 
rulemaking, the EPA estimated the cost of compliance with the proposed 
and final MATS standards pursuant to Executive Orders 12866 and 13563 
and other applicable statutes and executive orders. In this Section, 
the EPA is evaluating whether the costs of compliance with MATS is 
reasonable, based on the RIA cost estimates.
    In the following Sections, the EPA presents the methodology used to 
estimate annual compliance costs for MATS. The EPA then evaluates the 
estimates of the total annual costs of compliance with the standards, 
including a focus on estimates of total annualized costs of compliance 
compared to power sector retail sales and a comparison of capital 
expenditures required under MATS to overall power sector capital 
expenditures. We also present analyses of the impacts these costs are 
projected to have on the power sector and its consumers, including 
estimates of impacts on the average retail price of electricity and the 
characteristics of the units choosing to retire as a result of MATS.
2. Predicted Compliance Costs for MATS
    In this and the following Sections, we present compliance cost and 
impact estimates from the MATS RIA for the year of 2015 in the broader 
historical context of power sector trends. The analyses demonstrate 
that the projected costs and impacts of MATS requirements are 
reasonable.
    We focus on the 2015 impacts presented in the RIA because these 
results represent the first year of compliance with the MATS rule, and 
those compliance cost estimates would be the most relevant to the 
threshold determination. As discussed later, of the years analyzed in 
the MATS RIA, the compliance costs are highest in 2015, and thus we 
focus on it here as a representation of the maximum impact. The 
analyses in the final MATS RIA represented the best forecast of cost 
and impacts available to the EPA when MATS was promulgated.
    In accordance with guidance issued by the Office of Management and 
Budget (OMB) \19\ and the EPA,\20\ the EPA developed RIAs for the 
proposed \21\ and final \22\ MATS rulemakings. In the MATS RIAs, the 
compliance cost estimates were established using the Integrated 
Planning Model (IPM).\23\ IPM, developed by ICF International, is a 
state-of-the-art, peer-reviewed dynamic, deterministic linear 
programming model of the contiguous U.S. electric power sector. IPM 
provides forecasts of least-cost capacity expansion, electricity 
dispatch, and emission control strategies while meeting electricity 
demand and various environmental, transmission, dispatch, and 
reliability constraints. The EPA has used IPM for over 2 decades to 
understand power sector behavior under future business-as-usual 
conditions and to evaluate the economic and emission impacts of 
prospective environmental policies. The model is designed to reflect 
electricity markets as accurately as possible using the best available 
information from utilities, industry experts, gas and coal market 
experts, financial institutions, and government statistics. Notably, 
the model includes state-of-the-art estimates of the cost and 
performance of air pollution control technologies with respect to 
mercury and other HAP controls.\24\
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    \19\ Office of Management and Budget. 2003. Circular A-4: 
Regulatory Analysis. Washington, DC. Available at: http://www.whitehouse.gov/omb/circulars/a004/a-4.html.
    \20\ U.S. EPA. 2010. Guidelines for Preparing Economic Analyses. 
EPA 240-R-10-001. National Center for Environmental Economics, 
Office of Policy Economics and Innovation. Washington, DC. December. 
Available at http://yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/EE-0568-
50.pdf/$file/EE-0568-50.pdf.
    \21\ U.S. EPA. 2011. Regulatory Impact Analysis of the Proposed 
Toxics Rule. March 2011. Docket ID No. EPA-HQ-OAR-2009-0234-3051.
    \22\ U.S. EPA. 2011. Regulatory Impact Analysis for the Final 
Mercury and Air Toxics Standards. EPA-453/R-11-011. December 2011. 
Docket ID No. EPA-HQ-OAR-2009-0234-20131.
    \23\ Detailed IPM documentation and run files for MATS are 
available in the docket (see, for example, EPA-HQ-OAR-2009-0234-
19996 and EPA-HQ-OAR-2009-0234-3071). The underlying data inputs to 
IPM continually evolve as the emissions profile of the power sector 
changes with time in response to control technology advances, 
environmental regulation, and economic influences, such as changes 
in fuel prices. The EPA provides information on, and documentation 
of, underlying assumptions and any changes to the IPM each time it 
is used in a regulatory context.
    \24\ See, for example, USEPA Base Case v.4.10 Documentation 
(EPA-HQ-OAR-2009-0234-3049) and Documentation Supplement for EPA 
Base Case v.4.10_MATS--Updates for Final Mercury and Air Toxics 
Standards (MATS) (EPA-HQ-OAR-2009-0234-19996).
---------------------------------------------------------------------------

    In the MATS RIA, the power sector's ``compliance costs'' are 
estimated in IPM as the change in electric power generation costs 
between a base case without MATS and a policy case where the sector 
complies with the HAP emissions limits in the final MATS. The base case 
provides a future projection of the power sector in the absence of 
MATS, and serves as the baseline against which projections under policy 
cases are compared. The policy case examined in the MATS RIA introduces 
the requirements of the rule as constraints on affected EGUs, which 
results in new projections of power sector outcomes under MATS. In 
simple terms, these compliance costs are an estimate of the increased 
expenditures by the entire power sector to comply with the EPA's 
requirements while continuing to serve a given level of electricity 
demand. Therefore, the projected compliance cost estimate is not 
limited to the increase in expenditures by those EGUs directly affected 
by MATS, nor does it account for the ability of many electricity 
producers to reduce the costs they bear by passing along their costs to 
consumers of electricity through higher electricity prices.\25\
---------------------------------------------------------------------------

    \25\ The MATS RIA does not clearly distinguish how much of the 
increased expenditures are incurred by owners of EGUs and how much 
are borne by consumers of electricity. Therefore, the $9.6 billion 
in compliance costs are relevant to all participants in the U.S. 
economy, not just individuals that own EGUs. In addition, these 
compliance costs do not account for changes in profits for firm 
owners who supply inputs such as coal and natural gas to the 
electricity sector. The compliance costs for MATS are, in part, 
attributable to higher fuel prices due to higher fuel demand, 
particularly natural gas, which would likely increase the profits 
for those fuel producers. A more comprehensive assessment of costs 
that accounted for these net changes in profits and consumer welfare 
would also subtract the higher profits to fuel producers from the 
compliance costs. Similarly, such an assessment would also subtract 
from the compliance costs changes in tax payments by electricity 
producers, which are transfers rather than the use of real resources 
that have an opportunity cost to society as a whole.

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[[Page 75033]]

    The EPA notes that the projected compliance cost estimate 
represents the incremental costs to the entire power sector to generate 
electricity, not just the compliance costs projected to be borne by 
coal-fired and oil-fired EGUs regulated under MATS. EGUs operate 
interdependently within a large and complex system. While the MATS 
requirements are directed at a subset of EGUs in the power sector, the 
compliance actions of the MATS-regulated EGUs will affect production 
costs and revenues of other units due to fuel and electricity price 
changes. Furthermore, EGUs are often owned and operated by firms with 
multiple generating sources, many of which are not subject to MATS 
requirements. Therefore, limiting the consideration of costs only to 
those expenditures incurred by EGUs directly regulated by MATS, and not 
the other costs expended by their owners, would provide an incomplete 
assessment of the costs of the rule. Thus, analyses that compare 
system-wide (or sector-level) compliance cost impacts of MATS to 
sector-level economic indicators are appropriate for considering 
whether the power sector can absorb compliance costs, and do so without 
diminishing its ability to supply electricity. This approach is also 
consistent with the EPA's analytical objective to evaluate as best as 
is reasonable and possible all consequences of economically significant 
regulatory actions.
    Using IPM, the EPA estimated the emissions reductions and annual 
incremental costs resulting from MATS, including the costs of 
installing and operating additional pollution controls, investments in 
new generation capacity, shifts between or amongst various fuels, and 
other actions associated with compliance. The EPA estimated that, 
relative to the base case, the final MATS rule would reduce annual 
emissions of mercury by 75 percent, hydrogen chloride by 88 percent, 
and fine particulate matter (PM2.5) (filterable PM is a 
surrogate for non-mercury metal HAP) by 19 percent from coal-fired EGUs 
greater than 25 megawatts (MW) projected for 2015. IPM was also used to 
estimate reductions of other pollutants that resulted from the 
application of the MATS emissions limits. The EPA projected sulfur 
dioxide (SO2) emissions reductions of 41 percent and carbon 
dioxide (CO2) reductions of one percent from coal-fired EGUs 
greater than 25 MW in 2015, relative to the base case. The EPA 
projected that the annual incremental cost of final MATS would be $9.6 
billion in 2015.\26\ The MATS RIA also reports estimates of compliance 
costs of $8.6 billion and $7.4 billion in 2020 and 2030, respectively. 
Compliance cost estimates are, therefore, highest in 2015. Incremental 
annual capital expenditures represent approximately $2.4 billion of the 
$9.6 billion in annual costs in 2015.\27\ All costs in this and 
subsequent Sections are reported in 2007 dollars.
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    \26\ As described in the MATS RIA, IPM was used to estimate the 
compliance costs to the sector associated with applying MATS 
emissions limitations to coal-fired EGUs. The EPA did not use IPM, 
however, to estimate compliance costs to the sector associated with 
applying MATS emissions limitations to oil-fired steam boilers or to 
estimate monitoring, reporting, and recordkeeping (MR&R) costs for 
MATS-regulated EGUs. The cost of control for oil-fired steam boilers 
was estimated separately in the RIA, and then added to the IPM-based 
compliance costs for coal-fired unit emissions limitations. The cost 
of control for the oil-fired steam boilers was either the 
expenditures by these units to install pollution controls or 
increased expenditures of switching to lower-emitting fuels. Broken 
into the three components, IPM-based compliance costs were $9.4 
billion, the separately estimated cost of control for oil-fired 
steam boilers was $56 million, and MR&R costs were $158 million, 
totaling the $9.6 billion compliance cost estimate. Note the sum 
does not total exactly because of independent rounding.
    \27\ The $2.4 billion increase in capital expenditures under 
MATS is found by taking the difference between capital expenditures 
in the IPM MATS policy case and the capital expenditures in the IPM 
MATS base case. These values are found in Table 15 of ``MATS Policy 
Case Summary Report'' (Docket ID No. EPA-HQ-OAR-2009-0234-19985) and 
Table 15 in ``MATS Base Case Summary Report'' (Docket ID No. EPA-HQ-
OAR-2009-0234-19984).
---------------------------------------------------------------------------

3. Annual Compliance Costs as a Percent of Power Sector Sales
    We compare annual compliance costs to electricity sales at the 
power sector-level, often called a sales test. The sales test is a 
frequently used indicator of potential impacts from compliance costs on 
regulated industries.\28\
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    \28\ For example, the sales test is often used by the EPA when 
evaluating potential economic impacts of regulatory actions on small 
entities. In the context of a small entity analysis, an evaluation 
of the change in profits to owners is likely the best approach to 
assessing the economic burden to owners from a regulatory action. In 
the analysis provided in this section, the sum of the change in 
profits to EGU owners in the entire sector and the increased 
electricity bills of consumers of electricity is compared to total 
revenues. Data limitations prevent solely analyzing profit changes 
to EGU owners as a result of MATS in this proposed supplemental 
finding.
---------------------------------------------------------------------------

    Table 2 presents the value of retail electricity sales from 2000 to 
2011, based on information from the U.S. Energy Information 
Administration (EIA).\29\
---------------------------------------------------------------------------

    \29\ We do not include figures for years after 2011 in this and 
later comparisons as this information would not have been available 
during the development of the MATS RIA.

      Table 2--Retail Electricity Sales, All Sectors, 2000 to 2011
                             [2007 dollars]
------------------------------------------------------------------------
                                              Revenue from retail sales
                   Year                      (billions of 2007 dollars)
------------------------------------------------------------------------
2000......................................  277.2
2001......................................  287.5
2002......................................  285.5
2003......................................  291.5
2004......................................  295.0
2005......................................  315.3
2006......................................  335.2
2007......................................  343.7
2008......................................  356.6
2009......................................  343.9
2010......................................  354.8
2011......................................  349.6
------------------------------------------------------------------------
Source: U.S. Energy Information Administration, Form-826 Detailed Data,
  http://www.eia.gov/electricity/data/eia826/, accessed 10/14/15.
Note: Dollar figures adjusted to 2007 dollars using the Gross Domestic
  Product--Implicit Price Deflator, https://research.stlouisfed.org/fred2/series/GDPDEF fred2/series/GDPDEF, accessed 10/14/15.

    Revenues from retail electricity sales increased from $277.2 
billion in 2000 to a peak of $356.6 billion in 2008 (an increase of 29 
percent during this period). As would be expected, the general increase 
in sales (in dollar terms) over this time period is partly due to 
increases in electricity sales (in electricity sold) and increases in 
prices over the same time period. The $9.6 billion in annual compliance 
costs of MATS projected for 2015 would represent about 2.7 percent of 
2011 power sector revenues from retail electricity sales. If retail 
sales were to return to their 2008 peaks, the annual compliance costs 
would also represent about 2.7 percent of sales. If retail electricity 
sales were to decline to 2000 levels, the estimated annual compliance 
costs for MATS would represent approximately 3.5 percent of retail 
sales. Thus, the projected annual compliance costs of MATS represent a 
small fraction of the value of overall sales.
    After considering the potential costs of MATS in light of power 
sector sales, the EPA concludes that the costs to the power sector are 
reasonable. As noted above, the EPA is not accepting comments on the 
methods applied in the MATS RIA, but rather the agency requests 
comments on the use of incremental compliance costs from the MATS RIA 
results as a way to consider costs in the CAA section 112(n)(1)(A) 
determination.

[[Page 75034]]

4. Annual Compliance Capital Expenditures Compared to the Power 
Sector's Annual Capital Expenditures
    Another way in which cost can be evaluated is by comparing the 
annual capital expenditures required by MATS to the range of variation 
in capital expenditures from year to year. Capital costs represent 
largely irreversible investments for firms that must be paid off 
regardless of future economic conditions, as opposed to other important 
variable costs, such as fuel costs, that may vary according to economic 
conditions and generation needs. Table 3 presents two sets of estimates 
for trends in the annual capital expenditures by the electric power 
sector. This information informs the second metric used to consider the 
costs of MATS to the power sector, namely a ratio of annual capital 
expenditures estimated to be needed for MATS compliance to historical 
power sector-level overall capital expenditures.
    For power sector-level capital expenditures, the EPA relies on two 
sets of information. The first set of information is from the U.S. 
Census Bureau's Annual Capital Expenditures Survey. The second set of 
information is from information compiled by SNL, a private sector firm 
that provides data and analytical services. While each dataset has 
limitations, the estimates from each correspond to one another 
reasonably well. The annual sector-level capital expenditures reported 
by SNL are generally lower than the information from the Census Bureau. 
This is in part because SNL captures information on capital 
expenditures from Securities and Exchange Commission (SEC) filings, 
which are submitted by most but not by all entities in the power 
sector, whereas the U.S. Census Bureau's estimate of capital 
expenditures in the power sector is intended to capture capital 
expenditures for all entities in the power sector. For this reason, we 
present both sets of information to better depict capital expenditures 
in the power sector.

               Table 3--Total Capital Expenditures for the Electric Power, Generation, Transmission, and Distribution Sector, 2000 to 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Capital expenditures collected by SNL from SEC     Capital expenditures based on U.S. census bureau
                                                                      filings \1\                           annual capital expenditures survey \2\
                                                 -------------------------------------------------------------------------------------------------------
                      Year                          Capital expenditures      Change from previous      Capital expenditures      Change from previous
                                                      (billions of 2007      year (billions of 2007       (billions of 2007      year (billions of 2007
                                                          dollars)                  dollars)                  dollars)                  dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2000............................................                      51.8  ........................                      62.5  ........................
2001............................................                      70.1                      18.2                      85.9                      23.4
2002............................................                      56.4                     -13.6                      66.4                     -19.6
2003............................................                      43.8                     -12.6                      52.7                     -13.7
2004............................................                      40.4                      -3.4                      45.0                      -7.7
2005............................................                      46.7                       6.3                      50.0                       5.0
2006............................................                      57.6                      10.9                      61.6                      11.6
2007............................................                      66.9                       9.3                      73.9                      12.3
2008............................................                      78.1                      11.2                      83.5                       9.6
2009............................................                      76.6                      -1.5                      87.9                       4.4
2010............................................                      75.1                      -1.5                      79.8                      -8.2
2011............................................                      79.6                       4.5                      79.2                      -0.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Source: SNL, accessed 10/14/15.
\2\ Source: U.S. Census Bureau, Annual Capital Expenditures Survey, http://www.census.gov/econ/aces/index.html, accessed 10/14/15.
Note: Dollar figures adjusted to 2007 dollars using the Gross Domestic Product--Implicit Price Deflator, https://research.stlouisfed.org/fred2/series/GDPDEF GDPDEF, accessed 10/14/15. Changes may not sum due to independent rounding.

    Capital expenditures generally increase from 2000 to 2011 but not 
in a linear fashion, partly a result of increased demand. In 2000, 
capital expenditures for the electric power sector are estimated to be 
$51.8 billion (based on SNL) and $62.5 billion (based on Census). 
Capital expenditures for this sector reached a low in 2004 at $40.4 
billion (based on SNL) and $45.0 billion (based on Census), rising to 
their peak in 2011 at $79.6 billion (based on SNL) or in 2009 at $87.9 
billion (based on Census).
    The final MATS RIA estimated the incremental capital expenditures 
to be $2.4 billion for 2015, which represent about 3.0 percent of 2011 
power sector-level capital expenditures using either SNL or Census 
information.\30\ If power sector-level capital expenditures declined to 
2004 levels, the incremental capital expenditures estimated for MATS 
would represent about 5.9 percent (based on SNL) or 5.3 percent (based 
on Census).
---------------------------------------------------------------------------

    \30\ As noted above in this Section, the incremental annual 
capital expenditures represent approximately $2.4 billion of the 
$9.6 billion in annual compliance costs in 2015. The incremental 
capital expenditures is the change in capital expenditures for the 
entire sector as a result of the MATS emissions limitations (that 
is, above those estimated in the base case). As a result, the 
estimate includes the change in capital expenditures from installing 
pollution controls and the capital expenditures of new generating 
technologies in the MATS policy case relative to the base case.
---------------------------------------------------------------------------

    The increased capital expenditures estimated to be required under 
MATS represent a small fraction of the power sector's overall capital 
expenditures in recent years. Additionally, the EPA notes that the 
projected $2.4 billion in incremental capital costs is well within the 
range of annual variability over the 2000-2011 period. During this 
period, based on the Census information for example, the largest year-
to-year decrease in power sector-level capital expenditures was $19.6 
billion (from 2001 to 2002) and the largest year-to-year increase in 
power sector-level capital expenditures was $23.4 billion (from 2000 to 
2001). This wide range indicates substantial year-to-year variability 
in industry capital expenditures, and the projected $2.6 billion 
increase in capital expenditures in 2015 projected under MATS falls 
well-within this variability. Similar results are found using the SNL 
information.
    After considering the potential impacts of MATS on industry capital 
expenditures, the EPA concludes that the costs to the power sector are 
reasonable. As noted above, the EPA is not accepting comments on the 
methods applied in the MATS RIA, but rather the agency requests 
comments on the use of incremental compliance expenditures from the 
MATS RIA results as a way to

[[Page 75035]]

consider costs in the CAA section 112(n)(1)(A) determination.
5. Impact on Retail Price of Electricity
    In electricity markets, costs imposed on utilities can be fully or 
partly passed through to consumers, which can result in increased 
retail electricity prices. Evaluating the projected effect on retail 
electricity prices against the variations in electricity prices from 
year to year therefore provides an additional way to evaluate the 
``cost'' or impact of MATS, in this instance on electricity consumers, 
instead of on owners of EGUs in the power sector. Using data from the 
EIA, Table 4 presents trends in the average retail price of electricity 
for all sectors (residential, commercial, industrial, transportation, 
and other sectors) from 2000 to 2011. This information informs the 
comparison of the percent increase in retail electricity prices 
projected to result from MATS for 2015 to historical levels of 
variation in electricity prices.
    While compliance costs and electricity prices are evaluated 
independently when considering whether it is appropriate to regulate 
steam-fired EGUs under MATS, they are not independent or separable 
economic indicators. The cause of higher electricity prices is the 
increase in expenditures by the power sector described earlier. 
Therefore, the electricity price impacts and the associated increase in 
electricity bills by consumers are not costs that are in addition to 
the compliance costs described earlier in this section, and, in fact, 
to the extent the compliance costs are passed on to electricity 
consumers, the costs to the EGU owners in the power sector are reduced.

                     Table 4--Average Retail Price of Electricity, All Sectors, 2000 to 2011
----------------------------------------------------------------------------------------------------------------
                                                                  Average electricity      Change from previous
                                                                retail price (cents per      year (cents per
                             Year                                kilowatt-hour in 2007    kilowatt-hour in 2007
                                                                        dollars)                 dollars)
----------------------------------------------------------------------------------------------------------------
2000..........................................................                     8.10
2001..........................................................                     8.47                     0.38
2002..........................................................                     8.24                     0.23
2003..........................................................                     8.35                     0.11
2004..........................................................                     8.31                     0.04
2005..........................................................                     8.61                     0.30
2006..........................................................                     9.14                     0.52
2007..........................................................                     9.13                    -0.01
2008..........................................................                     9.55                     0.42
2009..........................................................                     9.56                     0.01
2010..........................................................                     9.45                    -0.11
2011..........................................................                     9.33                    -0.13
----------------------------------------------------------------------------------------------------------------
Source: U.S Energy Information Administration, Electricity Data Browser, http://www.eia.gov/electricity/data/browser browser, accessed 10/14/15.
Notes: Dollar figures adjusted to 2007 dollars using the Gross Domestic Product--Implicit Price Deflator, https://research.stlouisfed.org/fred2/series/GDPDEF, accessed 10/14/15. Changes may not sum due to independent
  rounding.

    The final RIA estimated that MATS would result in relatively small 
changes in the average retail price of electricity. Retail electricity 
prices for 2015 were projected to increase from 9.0 cents per kilowatt-
hour on average in the base case to 9.3 cents per kilowatt-hour with 
MATS, an increase of about 3.1 percent. The regional price increases 
projected for MATS ranged from 1.3 percent to 6.3 percent. Four regions 
out of the 13 regions for which retail prices were estimated 
(encompassing all lower 48 states) were projected to have a higher 
percentage increase in prices than the national average increase of 3.1 
percent. However, each of these four regions also has a price that is 
lower than the national average.
    The EPA notes that the projected 0.3 cents per kilowatt-hour 
increase in national average retail electricity price under MATS is 
well within the range of annual variability over the 2000-2011 period. 
During this period, based on the EIA information, the largest year-to-
year decrease in national average retail electricity price was -0.2 
cents per kilowatt-hour (from 2001 to 2002) and the largest year-to-
year increase in national average retail electricity price was 0.5 
cents per kilowatt-hour (from 2005 to 2006). This wide range indicates 
substantial variability, and the 0.3 cents per kilowatt-hour increase 
in the national average retail electricity price under MATS is well-
within normal historical fluctuations.
    After considering the potential impacts of MATS on retail 
electricity prices, the EPA concludes that the estimated increase in 
electricity prices is within the historical range and is reasonable. In 
addition, because the increase in electricity prices is in part due to 
the ability of many EGUs to pass their costs on to consumers, the 
estimated MATS compliance costs discussed above are in fact less of a 
burden on owners of EGUs in the power sector. As noted above, the EPA 
is not accepting comments on the methods applied in the MATS RIA, but 
rather the agency requests comments on the use of average retail price 
increases from the MATS RIA results as a way to consider costs in the 
CAA section 112(n)(1)(A) determination.
6. Impact on Power Sector Generating Capacity
    The EPA believes the statutory concern with the cost of compliance 
expressed in CAA section 112(n)(1) can reasonably be tied to a concern 
with the ability of EGUs to comply with the ARP and other CAA 
requirements, as well as CAA section 112(d)(3) standards, while at the 
same time maintaining a reliable supply of electricity.\31\ Therefore, 
the EPA recognized the importance of considering the ability of EGUs to 
comply with MATS and maintain a reliable supply of electricity.
---------------------------------------------------------------------------

    \31\ The EPA generally uses the term ``reliability'' to refer to 
the ability to deliver the resources to the projected electricity 
loads so the overall power grid remains stable, and the term 
``resource adequacy'' generally refers to the provision of adequate 
generating resources to meet projected load and generating reserve 
requirements in each region.
---------------------------------------------------------------------------

    The MATS RIA reported projected net changes in generation capacity 
under MATS, as compared to the base case. Relative to the base case, 
about 4.7 gigawatts (GW) of additional coal-fired capacity was 
projected to retire by 2015

[[Page 75036]]

as the result of MATS.\32\ These projected retirements reflect less 
than two percent of all coal-fired generation capacity projected in 
2015 (310 GW in the base case without MATS) and less than 0.5 percent 
of total projected capacity (1,026 GW in the base case without MATS). 
As with the estimate of compliance costs and capital expenditures 
projected by IPM and described above in this Section, this projection 
was based on assumptions about a number of factors that affect the 
power sector (e.g., other available capacity, demand for electricity, 
fuel supply and fuel prices) and unit attributes (e.g., 
efficiency).\33\ In addition, as Table 6 shows, the units that were 
projected to retire under MATS are, on average, older, smaller in terms 
of capacity, and less frequently used as indicated by capacity factors.
---------------------------------------------------------------------------

    \32\ In this analysis, changes in generation capacity levels 
should be viewed as ``net'' changes as some units that retire from 
service in the base case do not do so in the MATS policy case.
    \33\ A number of these factors have changed since promulgation 
and as a result there were additional retirements that are not 
directly attributed to MATS. The EPA's projections under MATS are 
based on information available at the time of MATS promulgation.

 Table 6--Characteristics of Covered Operational Coal Units and Additional Coal Units Projected To Retire Under
                                                   MATS, 2015
----------------------------------------------------------------------------------------------------------------
                                                                                                Average capacity
                                                            Average age      Average capacity    factor in base
                                                              (years)              (MW)             case (%)
----------------------------------------------------------------------------------------------------------------
Retire.................................................                 52                129                 54
Operational............................................                 43                322                 71
----------------------------------------------------------------------------------------------------------------
Source: Integrated Planning Model run by the EPA, 2011. Table 3-7 in final MATS RIA.

    This analysis indicates that the vast majority of the generation 
capacity in the power sector directly affected by the requirements of 
MATS would be able to absorb the anticipated compliance costs and 
remain operational. In order to ensure that any retirements resulting 
from MATS would not adversely impact the ability of affected sources 
and electric utilities from meeting the demand for electricity, the EPA 
conducted an analysis of the impacts of projected retirements on 
electric reliability. These resource adequacy analyses found that 
reserve margins could be maintained over a three-year MATS compliance 
period indicating that reliability could be maintained as the power 
sector complied with MATS.\34\
---------------------------------------------------------------------------

    \34\ U.S. EPA. 2011. Resource Adequacy and Reliability in the 
Integrated Planning Model Projections for the MATS Rule, http://www3.epa.gov/ttn/atw/utility/revised_resource_adequacy_tsd.pdf, 
Docket ID No. EPA-HQ-OAR-2009-0234-19997.
---------------------------------------------------------------------------

    After considering the potential impacts of MATS on power sector 
generation capacity, the EPA concludes that the costs to the power 
sector are reasonable. As noted above, the EPA is not accepting 
comments on the methods applied in the MATS RIA, but rather the agency 
requests comments on the use of the MATS RIA results as a way to 
consider costs in the CAA section 112(n)(1)(A) determination and on the 
analyses (metrics used to assess whether the power sector's cost of 
compliance with the CAA section 112(d) standards are reasonable).
7. Conclusions of Considerations of Costs to Power Sector
    In this Section, the EPA considers the costs of MATS to the power 
sector from a variety of perspectives. First, the EPA estimates that 
the total projected cost of the MATS rule to the power sector in 2015 
represents between 2.7 and 3.5 percent of annual electricity sales when 
compared to years from 2000 to 2011, a small fraction of the value of 
overall sales. Second, the EPA demonstrates that the projected capital 
expenditures in 2015 represent between 3.0 and 5.9 percent of total 
annual power sector capital expenditures when compared to years leading 
up to the finalization of the MATS rule. This investment by the power 
sector comprises a small percentage of the sector's historical annual 
capital expenditures on an absolute basis and also falls within the 
range of historical variability in such capital expenditures. Third, 
the EPA finds the projected average retail price increases are within 
the range of historical variability as well as lower than their peak on 
an absolute basis. The EPA has compared the projected national average 
retail electricity price for 2015 under MATS to the period from 2000 to 
2011 and has shown that the projected increase in electricity rates of 
0.3 cents/kWh for 2015 represents an increase of 3.1 percent, well 
within the range of retail price fluctuations over the 2000 to 2011 
period. Finally, this analysis indicates that the vast majority of the 
generation capacity in the power sector would be able to absorb the 
anticipated compliance costs and remain operational and that the 
generating capacity the EPA estimated would retire as a result of the 
rule was generally older and less efficient than the capacity projected 
to operate.
    The EPA judges each of these analyses to be appropriate bases for 
evaluating whether the costs to the power sector are reasonable. Having 
performed these analyses independently, the EPA concludes that every 
one of them supports its conclusion that costs are reasonable.

C. Other Costs

1. Introduction
    In addition to the cost considerations described in Section IV.B 
above, the EPA considered the cost of mercury controls consistent with 
the requirement in CAA section 112(n)(1)(B), and the cost of controls 
for other HAP emissions from EGUs. In addition, we discuss the cost of 
implementing the ARP because of its relationship to the inclusion of 
section 112(n)(1)(A) in the 1990 CAA Amendments. Below we first address 
the ARP and then the costs of mercury and other controls.
2. Cost of the Acid Rain Program (ARP)
    As explained above and in the MATS record, section 112(n)(1)(A) was 
added to the CAA in 1990 along with other significant revisions to 
section 112, and that provision requires the EPA to conduct the Utility 
Study and determine the hazards to public health reasonably anticipate 
to occur after imposition of the other requirements of the CAA. In 
addition to significantly revising section 112, the 1990 amendments to 
the CAA included the utility specific ARP. The ARP was established with 
the goal of reducing emissions of SO2 and nitrogen oxides 
(NOX) from the power sector, and

[[Page 75037]]

there was an expectation that compliance with the ARP could result in 
widespread installation of control technologies that would also lead to 
ancillary or co-benefit reductions in HAP emissions.\35\ The ARP was 
also projected to be costly--estimates of the cost of the program 
ranged from $6 to $9 billion per year (2000 dollars).\36\ Notably, the 
ARP has been extremely successful in reducing emissions of 
SO2 and NOX from the utility power sector, and 
the cost of the ARP has been shown to be much less than what was 
initially estimated (up to 70 percent lower than initial 
estimates).\37\ In addition, the compliance choice to not use scrubbers 
reduced the cost of the ARP and significantly reduced the co-benefit 
reductions in HAP emissions that would have occurred if more EGUs 
installed SO2 scrubbers. As a result, in both 2000 when the 
EPA made its initial finding and in 2011 when it reaffirmed the finding 
that it is appropriate and necessary to regulate HAP from EGUs, those 
sources were still significant emitters of HAP, and almost all EGUs are 
major sources of HAP.
---------------------------------------------------------------------------

    \35\ For example, flue gas scrubbers that control SO2 
can also be effective at controlling acid gas HAP such as hydrogen 
chloride, hydrogen fluoride, and selenium oxide. Note, however, that 
NOX controls are not effective at directly controlling 
HAP (though selective catalytic reduction units can promote improved 
mercury control in scrubbers).
    \36\ U.S. EPA Clean Air Markets Div., 2005, National Acid 
Precipitation Assessment Program Report to Congress 2005: An 
Integrated Assessment, National Science and Technology Council, 
Washington, DC; Note: These estimates would be approximately $7 to 
$11 billion in 2007 dollars using a GDP deflator.
    \37\ U.S. EPA Clean Air Markets Div., 2011, National Acid 
Precipitation Assessment Program Report to Congress 2011: An 
Integrated Assessment, National Science and Technology Council, 
Washington, DC.
---------------------------------------------------------------------------

3. Consideration of the Cost of HAP Control Technologies
    As described below, the EPA first considers the cost of mercury 
control technologies, consistent with CAA section 112(n)(1)(B), 
focusing on information available at the time the agency issued the 
Mercury Report through the time the EPA reaffirmed the appropriate and 
necessary finding in 2011. The EPA then considers the cost of control 
technologies for non-mercury HAP, and the changes in those costs over 
time.
    The Mercury Study estimated the potential cost of mercury controls 
for EGUs and other sources,\38\ and the agency updated and further 
refined the mercury control cost estimate information in the RIA 
conducted for the final MATS rule.\39\ The EPA also estimated the cost 
of controls for other HAP in the RIA. These analyses show that mercury 
control is more effective and less costly than initially estimated in 
1997. The cost of non-mercury HAP control has also generally decreased 
since 1990.
---------------------------------------------------------------------------

    \38\ At the time the Mercury Study was developed, mercury 
controls for utility boilers were still in the research, development 
and pilot program phase. The Mercury Study concluded that full-scale 
emission tests were needed and that the presented cost estimates 
were highly uncertain. The Mercury Study also noted that significant 
research on mercury emission control was underway and concluded that 
there were strong incentives for technology innovation and that the 
development of more cost-effective controls was likely.
    \39\ U.S. EPA. 2011. Regulatory Impact Analysis for the Final 
Mercury and Air Toxics Standards. Office of Air Quality Planning and 
Standards, Research Triangle Park, NC. EPA-452/R-11-011. Docket ID 
No. EPA-HQ-OAR-2009-0234-20131.
---------------------------------------------------------------------------

a. Cost of Technologies for Control of Mercury Emissions
    Pursuant to CAA section 112(n)(1)(B), the EPA completed the peer-
reviewed Mercury Study in 1997, and it considered, among other things, 
the availability and cost of mercury controls. The EPA used the 
findings in the Mercury Study to develop the mercury-related findings 
contained in the Utility Study.
    Based on data available at the time, detailed estimates of mercury 
control costs were developed for several model plants that represented 
electric power generation at coal-fired power plants. For the EGUs, the 
Mercury Study evaluated the costs of activated carbon injection and 
carbon filter beds at model plants with different pre-existing 
controls. The Mercury Study also described the potentially significant 
co-benefit control of mercury emissions by conventional SO2 
scrubbers and PM controls. At the time the Mercury Study was developed, 
mercury controls for utility boilers were still in the research, 
development and pilot program phase. The Mercury Study concluded that 
full-scale emission tests were needed and that the presented cost 
estimates were highly uncertain. The Mercury Study also noted that 
significant research on mercury emission control was underway and 
concluded that there were strong incentives for technology innovation 
and that the development of more cost-effective controls was likely. 
Because the EPA did not incorporate consideration of cost into the 
December 2000 Finding, no conclusions were reached at that time 
regarding whether the costs of the technologies outlined in the Mercury 
Study were reasonable for purposes of the mercury reductions that could 
be achieved.
    The agency also considered alternative control strategies that were 
available and effective in reducing HAP emissions from EGUs pursuant to 
CAA section 112(n)(1)(A). In fact, in the December 2000 Finding, the 
EPA stated that ``the application of technologies used to control 
mercury emissions in conjunction with technologies used to control 
other pollutants, an approach called multi-pollutant control, can 
substantially reduce or offset the costs of HAP control.'' 65 FR 79825, 
at 79828 (December 20, 2000). The EPA also discussed new methods in 
development to adsorb mercury onto injected particles (sorbents) so 
that the mercury could be more readily removed by PM controls. Id. at 
79829. While the EPA did not explicitly consider costs in the December 
2000 Finding, the inclusion of this information demonstrates that the 
EPA was mindful even then of mercury controls and associated costs.
    The EPA similarly concluded in the MATS rule that there were 
available mercury controls (76 FR 25014), and the record reflects that 
mercury control costs have declined considerably since 2000.\40\ In 
fact, the mercury sorbents discussed in the Mercury Study and the 
December 2000 Finding are now routinely used and newer and more 
effective mercury sorbents and other control strategies have been 
developed prior to and during the MATS rulemaking process.
---------------------------------------------------------------------------

    \40\ For example, see Docket ID No. EPA-HQ-OAR-2009-0234-20232.
---------------------------------------------------------------------------

b. Cost of Technology for Control of Non-Mercury HAP
    The EPA considered the cost of controls for the non-mercury metal, 
acid gas, and organic HAP. In 1990, the types and costs of control 
technologies were generally known (e.g., PM controls (bag-houses and 
electrostatic precipitators) were the best controls for non-mercury 
metal HAPs and SO2 scrubbers were the best controls for acid 
gas HAP, and the costs of those controls were known in 1990). CAA 
section 112(n)(1)(A) thus reasonably required the EPA to ``develop and 
describe . . . alternative control strategies for [HAP] emissions which 
may warrant regulation under this section'',\41\ but did not require 
the EPA to consider the cost of such alternative controls. In the 
Utility Study, the EPA developed and described many pre- and post-
combustion controls, both proven and being developed, for HAP

[[Page 75038]]

emissions, and many of those control approaches are in use today at 
other HAP sources to reduce the cost of compliance with CAA section 
112(d) standards. The EPA believes that many EGUs will use these 
approaches to reduce the cost of compliance with MATS.
---------------------------------------------------------------------------

    \41\ The EPA states in the Utility Study that ``[t]he HAPs of 
concern include the trace elements identified in chapter 5 as 
potential health risks. These consist of arsenic, cadmium, chromium, 
lead, manganese, mercury, and nickel; dioxins and furans (due to the 
toxicity of the organic chemical); and HCl [hydrogen chloride] and 
HF [hydrogen fluoride] (due to the estimated emission quantities of 
the compounds).'' Utility Study, 13-1.
---------------------------------------------------------------------------

    Concerning the cost of non-mercury controls, we considered flue gas 
desulfurization (FGD) controls that can effectively reduce acid gas HAP 
and can also reduce mercury and other non-mercury HAP to varying 
degrees based in part on control configuration (e.g., some 
NOX controls facilitated the removal of mercury with a wet 
scrubber). The cost to reduce acid gas HAP using SO2 
controls has declined over time with the increased use of alternative 
technologies such as spray drier absorber and dry sorbent injection.

D. Incorporating Cost Into the Appropriate Finding

    In response to the Supreme Court's holding in Michigan that the EPA 
erred in concluding that it was appropriate and necessary to regulate 
EGUs without considering cost, the EPA has now evaluated cost. The EPA 
must now, because it has already determined that HAP emissions from 
EGUs present significant hazards to public health and the environment, 
consider its conclusions regarding the cost of MATS in light of other 
factors relevant to the appropriate determination. Other relevant 
factors include the EPA's prior conclusions that HAP emissions from 
EGUs pose significant hazards to public health and the environment that 
will not be addressed through imposition of the other requirements of 
the CAA and that there are controls available to reduce HAP emissions 
from EGUs. The EPA must also consider its prior conclusion that EGUs 
are by far the largest remaining source of mercury, selenium, hydrogen 
chloride, and hydrogen fluoride emissions, and a major source of 
metallic HAP emissions including arsenic, chromium, nickel, and 
others,\42\ and that MATS will significantly reduce EGU emissions of 
many HAP. The EPA has estimated that MATS would reduce annual emissions 
from EGUs of mercury by 75 percent, hydrogen chloride (a surrogate for 
all acid gas HAP) by 88 percent, and PM2.5 (filterable PM is 
a surrogate for all non-mercury metal HAP) by 19 percent.\43\
---------------------------------------------------------------------------

    \42\ See Section II of this document and Emissions Overview: 
Hazardous Air Pollutants in Support of the Final Mercury and Air 
Toxics Standard, Docket ID No. EPA-HQ-OAR-2009-0234-19914.
    \43\ See Section IV.B.2 of this document and 77 FR 9424.
---------------------------------------------------------------------------

    These conclusions, contained in the December 2000 Finding and the 
2011 MATS rule \44\ were not affected by the Supreme Court decision in 
Michigan. Instead, the Supreme Court concluded that the appropriate 
finding could not be made without also considering cost. Michigan, 135 
S.Ct. at 2711.
---------------------------------------------------------------------------

    \44\ December 2000 Finding, 65 FR 79825-31; Proposed MATS, 76 FR 
24976-25020; Final MATS, 77 FR 9304-66.
---------------------------------------------------------------------------

    The EPA has now evaluated cost and considered cost in light of the 
other factors relevant to determining whether regulation of HAP 
emissions from EGUs is appropriate. Based on a consideration of these 
factors, the EPA concludes that the consideration of cost does not 
cause us to alter our determination that regulation of HAP emissions 
from EGUs is appropriate.
    The EPA concludes above that the direct and indirect costs to the 
power sector to comply with the final MATS standards based on several 
different metrics. The EPA also concludes above that the costs of 
compliance with the CAA section 112(d) standards established in MATS 
are reasonable and do not jeopardize the power sector's ability to 
perform its primary and unique function--the generation, transmission 
and distribution of electricity.
    The EPA has considered the conclusion that the costs of compliance 
with the final MATS rule are reasonable in conjunction with the other 
relevant factors to determine whether the cost of regulation causes us 
to conclude that, despite the advantages of regulation such as the 
progress regulation will make toward reducing the identified hazards to 
public health, it would not be appropriate to regulate HAP emissions 
from EGUs. Specifically, the EPA considered the cost in light the 
findings that mercury and non-mercury HAP from EGUs pose significant 
hazards to public health and the environment that will not be addressed 
through imposition of the other requirements of the CAA. See Section II 
of this document, the December 2000 Finding, and the MATS record. The 
EPA also considered the fact that coal- and oil-fired EGUs are the 
predominant anthropogenic source in the U.S. of several listed HAP, 
including mercury, hydrogen chloride, selenium, and hydrogen fluoride, 
and all but a handful of EGUs are major sources of HAP.
    The EPA also considered the purpose of CAA section 112 to achieve 
prompt, permanent and ongoing reductions in the volume of HAP emissions 
that pose identified or inherent hazards to public health and the 
environment to reduce the risks posed by such emissions, including 
risks to the most exposed and most sensitive members of the population. 
The EPA considered the fact that absent regulation of HAP emissions 
from EGUs, such units would continue to emit significant volumes of HAP 
emissions without a need to reduce or even monitor such emissions. This 
is particularly problematic for persistent HAP such as mercury, which, 
once emitted, can be re-emitted in the future, and as a result continue 
to contribute to mercury deposition and associated health and 
environmental hazards.\45\ The EPA also considered the fact that the 
statute contemplates that all major sources of HAP will be subject to 
standards and that all listed sources will be evaluated every 8 years 
to determine if additional reductions in HAP emissions can be achieved 
at a reasonable cost, based on the availability of new controls or work 
practices. The statutory structure generally supports the regulation of 
all significant sources of HAP emissions, and the EPA has demonstrated 
that HAP are emitted in significant volumes by EGUs and such emissions 
have been determined to pose ongoing hazards to public health and the 
environment.
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    \45\ EGUs have emitted many hundreds of tons of mercury into the 
environment and those emissions will continue to pose hazards to 
public health and the environment into the future. 76 FR 25015.
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    Having considered all of the relevant factors, including cost, the 
EPA finds that the cost of compliance with CAA section 112(d) standards 
does not cause us to alter our determination that regulation of HAP 
emissions from EGUs is appropriate. Numerous independent metrics 
support the conclusion that MATS, the regulation promulgated by the EPA 
to address HAP emissions from EGUs, is reasonable. MATS makes 
significant progress toward implementing the statutory goals of 
reducing the inherent hazards associated with HAP emissions and to 
reduce the risks posed by such emissions, including risks to the most 
exposed and most sensitive members of the population. In light of the 
meaningful progress MATS makes towards the important statutory 
objectives, and the EPA's conclusion that its associate costs are 
reasonable and will not affect the power sector's ability to continue 
supplying reliable power, the EPA concludes that it is appropriate to 
regulate HAP emissions from EGUs after considering cost.
    Moreover, many of the congressional concerns related to costs and 
regulatory burden on the power sector, which led to the inclusion of 
section 112(n)(1) in

[[Page 75039]]

the CAA, have been mitigated by more recent developments and 
consideration of these developments further supports the EPA's proposed 
conclusion. The EPA is expressly required to consider the cost of 
mercury controls in CAA section 112(n)(1)(B). The EPA has done so and 
determined that the estimated cost of mercury control has decreased 
significantly since 1997 when the EPA issued the Mercury Study. In the 
MATS rule, the EPA determined that there were available mercury 
controls (76 FR 25014), and the record reflects that mercury control 
costs have further declined since 2000.\46\ In fact, the mercury 
sorbents discussed in the Mercury Study and the December 2000 Finding 
are now routinely used and new, more effective mercury sorbents and 
other control strategies have been developed prior to and during the 
MATS rulemaking process. The decreased cost of mercury controls and 
further supports our conclusion that consideration of cost does not 
cause us to alter our conclusion that it is appropriate to regulate HAP 
emissions from EGUs.
---------------------------------------------------------------------------

    \46\ For example, see Docket ID No. EPA-HQ-OAR-2009-0234-20232.
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    Finally, the EPA considered the fact that CAA section 112(d) 
ensures that the MACT floor level of control is technologically 
feasible and presumptively cost reasonable because it is based on the 
level of control actually achieved by existing sources in the same 
category or subcategory. See Legal Memorandum, Section III. In 
addition, while the statute requires a minimum level of control, the 
EPA maintains discretion under CAA section 112(d) to minimize the cost 
of compliance, for example, through subcategorization and emissions 
averaging. See December 2000 Finding, 65 FR 79830. The inherent 
reasonableness of MACT floor standards and the flexibility included in 
the standard setting process further support the EPA's proposed 
supplemental finding.
    By adding cost considerations into the EPA's evaluation of whether 
regulation of HAP emissions from EGUs is appropriate, the EPA has 
corrected the deficiency identified by the Supreme Court in Michigan. 
Now, having considered cost and for all of the reasons explained above, 
the EPA is proposing this supplemental finding that, as the costs 
imposed by MATS are reasonable, it is appropriate for the EPA to 
regulate HAP emissions from EGUs in light of the meaningful progress 
the rule makes toward achieving key statutory goals and reducing the 
previously identified significant hazards to public health and the 
environment. In sum, the significant advantages of regulating these 
emissions outweigh the costs of regulation.

V. Consideration of the Benefit-Cost Analysis in the MATS RIA

A. Introduction

    As discussed above and in the Legal Memorandum, the EPA has 
discretion to determine the manner in which to consider cost under CAA 
section 112(n)(1). The EPA does not interpret CAA section 112(n)(1)(A) 
as requiring a formal benefit-cost analysis in which benefits are 
monetized and compared against the monetary costs of an action. 
Further, it is the EPA's judgment that a formal, monetized benefit-cost 
analysis is not the preferred approach for weighing the advantages and 
disadvantages of regulating HAP emissions from EGUs. See Section IV.D 
(setting forth the EPA's preferred approach to incorporating cost in 
the appropriate finding). However, a formal benefit-cost analysis was 
conducted in accordance with all relevant guidance and is presented in 
the final MATS RIA. In this Section, the EPA provides background on the 
benefit-cost approach and considers the results of the benefit-cost 
analyses developed for MATS. As explained herein, the final MATS RIA 
demonstrates that the benefits of the rule significantly outweighed the 
costs of the rule and thus fully and independently supports the EPA's 
proposed supplemental finding.
    As noted in Section I.C of this document, the public had ample 
opportunity to comment on all aspects of the MATS RIA, including the 
benefits analysis, and the EPA responded to all of the significant 
comments.\47\ Although the EPA is not accepting comments on the methods 
applied in the MATS RIA, the agency requests comments on the use of the 
MATS RIA results as a way to consider costs in the CAA section 
112(n)(1)(A) determination.
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    \47\ See pp. 477-660 of the EPA's Responses to Public Comments 
on EPA's National Emission Standards for Hazardous Air Pollutants 
from Coal- and Oil-Fired Electric Utility Steam Generating Units. 
Volume 2. Docket ID No. EPA-HQ-OAR-2009-0234-20126.
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B. Background on Benefit-Cost Analyses

    The EPA developed RIAs for both the proposed and final MATS rule 
pursuant to Executive Orders 12866 and 13563, as well as other 
applicable statutes and executive orders. Among other requirements, 
these executive orders require agencies to assess the costs and 
benefits of significant regulatory actions with the recognition that 
some impacts are difficult to quantify. Agencies are also required to 
make a reasoned determination that the benefits of an action justify 
its costs. The final MATS RIA met these requirements and followed all 
applicable guidance documents by closely examining all of the important 
consequences of the rule and applying rigorous, peer-reviewed methods 
to calculate the monetized costs and benefits, when possible.
    According to the EPA's guidance, the foundation of benefit-cost 
analysis is determining whether a policy's overall net benefits to 
society are positive.\48\ Net benefits are derived by summing all of 
the benefits that result from a policy change less the costs of that 
policy, including all ancillary consequences (positive and negative). 
Further, OMB's guidance notes that benefit-cost analysis can be used to 
indicate which policy option generates the largest net benefits to 
society, at least to the extent that all benefits and costs can be 
quantified and expressed in monetary units.\49\ OMB also notes that 
this information can be useful for decision makers and the public, even 
when economic efficiency (e.g., maximizing net benefits) is not the 
overriding public policy objective, such as when a policy is explicitly 
designed to address distributional unfairness.\50\
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    \48\ See p. 1-4 of the EPA's Guidelines for Preparation of 
Economic Analyses.
    \49\ See p. 2 of OMB's Circular A-4.
    \50\ OMB's guidance also recognizes that there may be other 
social purposes for regulation beyond economic purposes such as 
removing distributional unfairness. See p. 5 of OMB's Circular A-4.
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    In addition to interpreting CAA section 112(n)(1)(A) as not 
requiring a benefit-cost analysis, the EPA does not consider a formal, 
monetized benefit-cost analysis to be the preferred approach for 
weighing advantages and disadvantages under that section for several 
important policy reasons. First, it is well-recognized that some 
categories of benefits can be difficult to monetize,\51\ and this 
incomplete quantitative characterization of the positive consequences 
can

[[Page 75040]]

underestimate the monetary value of net benefits. As discussed in 
Sections V.C. and V.D. of this document, the numerous categories of 
benefits that the EPA was unable to quantify leads to an underestimate 
of the benefits in the MATS RIA. Second, national-level benefit-cost 
analyses may not account for important distributional effects, such as 
impacts to the most exposed and most sensitive individuals in a 
population. Thus, these equity considerations that are difficult to 
quantify are often considered outside of analyses that test (or 
determine) whether actions strictly improve economic efficiency (i.e., 
increase net benefits).
---------------------------------------------------------------------------

    \51\ See Executive Order 13563; pp. 2 of OMB's Circular A-4 
(``It will not always be possible to express in monetary units all 
of the important benefits and costs. When it is not, the most 
efficient alternative will not necessarily be the one with the 
largest quantified and monetized net-benefit estimate.''; and pp. 7-
49 of the EPA's Guidelines for Preparation of Economic Analyses 
(``It often will not be possible to quantify all of the significant 
physical impacts for all policy options . . . When there are 
potentially important effects that cannot be quantified, the analyst 
should include a qualitative discussion of benefits results. The 
discussion should explain why a quantitative analysis was not 
possible and the reasons for believing that these non-quantified 
effects may be important for decision making.'').
---------------------------------------------------------------------------

    Using peer-reviewed methods consistent with the agency's standard 
practices and the EPA's and OMB's guidance, the final MATS RIA found 
significant net benefits. As described in Section IV.B.2 of this 
document, the EPA estimated the changes in costs and emissions from 
MATS by using IPM to model the consequences of achieving the HAP 
emission limits on the power sector (specifically, for coal-fired 
EGUs). As described in the MATS RIA, the EPA evaluates the health 
benefits associated with these changes in emissions using a multi-step 
process. First, the EPA models the chemical transport of those emission 
reductions and the associated change in exposure. Next, the EPA 
estimates the number of specific health effects associated with the 
modeled exposure changes using relationships from health studies. 
Lastly, the EPA assigns a dollar value to those health effects based on 
the economic literature.

C. Consideration of HAP Benefits

    The EPA estimated in the final RIA that MATS would reduce annual 
emissions from EGUs of mercury by 75 percent, hydrogen chloride (a 
surrogate for all acid gas HAP) by 88 percent, and PM2.5 
(filterable PM is a surrogate for all non-mercury metal HAP) by 19 
percent.\52\ Hazardous metals, acid gases, and organic pollutants can 
cause various adverse cancer and noncancer health effects including 
many chronic and acute health disorders, but the EPA was unable to 
quantify many of the health effects attributable to these emission 
reductions because data and methods available do not currently exist in 
the scientific literature.\53\ Nevertheless, the EPA qualitatively 
accounted for these benefits from HAP emission reductions in Chapter 4 
of the final MATS RIA, and the EPA maintains that the HAP-specific 
consequences of the rule are vital and further the goals of the 
statute.\54\ In fact, the MATS RIA specifically accounted for these 
benefits in the comparison of monetized benefits to costs by adding a 
``+B'' to denote the sum of all unquantified benefits (see Table ES-1 
of the final MATS RIA).
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    \52\ See 77 FR 9424.
    \53\ The EPA explained in the MATS RIA that there are 
significant obstacles to successfully quantifying and monetizing the 
public health benefits from reducing HAP emissions. These obstacles 
include gaps in toxicological data, uncertainties in extrapolating 
results from high-dose animal experiments to estimate human effects 
at lower doses, limited monitoring data, difficulties in tracking 
diseases such as cancer that have long latency periods, and 
insufficient economic research to support the valuation of the 
health impacts often associated with exposure to individual HAP.
    \54\ See p. 73-79 of the final MATS RIA for discussions of the 
health effects associated with reducing emissions of 13 non-mercury 
HAP emitted by EGUs.
---------------------------------------------------------------------------

    In the MATS RIA, the EPA could only quantify and monetize a small 
subset of the health and environmental benefits attributable to 
reducing mercury emissions. Specifically, among neurodevelopmental 
effects, the EPA was only able to quantify and monetize IQ loss among a 
small subset of recreational fishers. The analyses the EPA conducted 
for this endpoint generated an estimate of $4 to $6 million annually, 
which reflects the dollar value of the reduction in IQ loss associated 
with changes in mercury exposure for typical recreational fishers who 
consume fish during pregnancy from the freshwater watersheds where the 
EPA had fish tissue data. While IQ loss is the only health effect that 
could be quantified and monetized, the EPA's independent Science 
Advisory Board noted that it is not the most potentially significant 
health effect associated with mercury exposure as other neurobehavioral 
effects, such as language, memory, attention, and other developmental 
indices, that are more responsive to mercury exposure.\55\ This 
estimate of the monetized benefits of reducing mercury emissions did 
not account for (1) benefits from reducing adverse health effects on 
brain and nervous system development beyond IQ loss; (2) benefits for 
consumers of commercial (store-bought) fish (i.e., the largest pathway 
to mercury exposure in the U.S.); (3) benefits for consumers of self-
caught fish from oceans, estuaries or large lakes such as the Great 
Lakes; (4) benefits for the populations most affected by mercury 
emissions (e.g., children of women who consume subsistence-level 
amounts of fish during pregnancy); (5) benefits to children exposed to 
mercury after birth; and (6) environmental benefits from reducing 
adverse effects on birds and mammals that consume fish. Thus, the 
limited estimate for the single neurodevelopmental endpoint that could 
be monetized (IQ loss among certain recreational fishers) is a 
substantial underestimate of the total mercury impacts among affected 
populations. These monetized estimates also do not reflect any benefits 
associated with reducing non-mercury HAP emissions.
---------------------------------------------------------------------------

    \55\ U.S. Environmental Protection Agency-Science Advisory 
Board. 2011. Peer Review of EPA's Draft National-Scale Mercury Risk 
Assessment. EPA-SAB-11-017. September. Docket ID No. EPA-HQ-OAR-
2009-0234-19689. Available at: http://yosemite.epa.gov/sab/
sabproduct.nsf/BCA23C5B7917F5BF8525791A0072CCA1/$File/EPA-SAB-11-
017-unsigned.pdf. See p. 2 (``IQ loss is not a sensitive response 
endpoint for methylmercury and its use likely underestimates the 
impact of reducing methylmercury in water bodies'') and p. 8 (``[I]n 
the Faroe Island study the most sensitive indicators were in the 
domains of language (Boston Naming Test), attention (continuous 
performance) and memory (California Verbal Learning Test) . . . In 
the Seychelles study, the Psychomotor Development Index was the most 
sensitive measure'').
---------------------------------------------------------------------------

D. Consideration of Total Benefits and Benefit-Cost Comparisons

    Because the subset of mercury-only benefits that the EPA could 
quantify from MATS does not account for many of the important benefits 
associated with reducing HAP emissions from EGUs, it would be 
unreasonable to draw any conclusions from a comparison of the mercury-
only benefits to the full costs of MATS. Instead, a complete benefit-
cost comparison would account for all of the consequences of achieving 
the HAP emission limits (i.e., direct and indirect as well as 
quantified and unquantified).\56\ The MATS RIA contains a benefit-cost 
comparison that reflects only certain categories of benefits that could 
be confidently quantified and/or monetized. Reflecting just these 
impacts, the EPA estimated that the final MATS would yield annual 
monetized benefits (in 2007 dollars) of between $37 billion to $90 
billion using a 3-percent discount rate and $33 billion to $81 billion 
using a 7-percent discount rate. Despite the fact that these estimates 
capture only a portion of the benefits of the rule, it is clear that 
the benefits of MATS outweigh the costs substantially. Specifically, 
the monetized benefits outweigh the estimated $9.6 billion in annual 
costs by between 3-to-1 or 9-to-1 depending on the benefit estimate and 
discount rate used. As noted above, these total monetized benefits are 
underestimated due to the numerous categories of HAP and other benefits

[[Page 75041]]

that were not monetized in the MATS RIA.
---------------------------------------------------------------------------

    \56\ For example, as described in Section IV.B.2 of this 
document, the estimated costs of MATS reflect consequences beyond 
just the affected units.
---------------------------------------------------------------------------

    As discussed above in Section IV.B, installing control technologies 
and implementing the compliance strategies necessary to reduce the HAP 
emissions directly regulated by the MATS rule also results in 
concomitant (co-benefit) reductions in the emissions of other 
pollutants such as directly emitted PM2.5 and SO2 
(a PM2.5 precursor). PM2.5 emissions are 
comprised in part by the mercury and non-mercury HAP metals that the 
MATS rule is designed to reduce. The only way to effectively control 
the particulate-bound mercury and non-mercury metal HAP is with PM 
control devices that indiscriminately collect all PM along with the 
metal HAP, which are predominately present as particles. Similarly, 
emissions of the acid gas HAP (hydrogen chloride, hydrogen fluoride, 
hydrogen cyanide, and selenium oxide) are reduced by acid gas controls 
that are also effective at reducing emissions of SO2 (also 
an acid gas, but not a HAP). The benefits associated with reducing 
other pollutants (e.g., PM2.5 and SO2) are 
substantial and comprise a primary portion of the monetized benefits of 
MATS, and the quantification of PM2.5-related health effects 
is strongly supported by hundreds of peer-reviewed scientific 
studies.\57\ While these reductions are not the objective of the MATS 
rule, the reductions are, in fact, a direct consequence of regulating 
the HAP emissions from EGUs. Consideration of known and quantifiable 
co-benefits such as these in a benefit-cost analysis is fully 
consistent with economic principles and is directed by guidance 
documents for conducting benefit-cost analyses of federal regulations 
from the EPA and OMB.\58\
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    \57\ U.S. Environmental Protection Agency (U.S. EPA). 2009. 
Integrated Science Assessment for Particulate Matter (Final Report). 
EPA-600-R-08-139F. National Center for Environmental Assessment--RTP 
Division. December. Available at http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=216546.
    \58\ Consideration of ancillary benefits in benefit-cost 
analysis is directed by OMB (Circular A-4, 2003, p. 26): ``Your 
analysis should look beyond the direct benefits and direct costs of 
your rulemaking and consider any important ancillary benefits and 
countervailing risks. An ancillary benefit is a favorable impact of 
the rule that is typically unrelated or secondary to the statutory 
purpose of the rulemaking.'' It is also directed by the EPA's 
Guidelines for Preparation of Economic Analyses (2010, p. 11-2): 
``An economic analysis of regulatory or policy options should 
present all identifiable costs and benefits that are incremental to 
the regulation or policy under consideration. These should include 
directly intended effects and associated costs, as well as ancillary 
(or co-) benefits and costs.''
---------------------------------------------------------------------------

    Further, as discussed in the Legal Memorandum, CAA section 
112(n)(1)(A) itself supports the inclusion of co-benefits because the 
statute directs the EPA to perform a study of the hazards to public 
health from HAP emissions from EGUs that are likely to remain after 
imposition of the other provisions of the CAA, including the ARP. In 
other words, Congress directed the EPA to consider the HAP co-benefits 
attributable to the regulation of SO2 and nitrogen oxides in 
the ARP and other CAA programs. Thus, it is reasonable to conclude that 
the statute would also allow the EPA to consider other pollutant 
reductions directly resulting from regulation of HAP emissions if a 
benefit-cost analysis were required to support the appropriate finding. 
Because the co-benefits are a direct consequence of actions to reduce 
HAP emissions, are consistent with economic guidance documents, and are 
consistent with statutory requirements in CAA section 112(n)(1)(A), it 
would be unreasonable for the EPA to ignore co-benefits in the 
comparison of monetized benefits to monetized costs for MATS.

E. Conclusions Regarding the Benefit-Cost Analysis

    Although data and methodological limitations did not allow the EPA 
to calculate all of the benefits that would result from reducing HAP 
emissions, the benefits (monetized and non-monetized) of MATS are 
substantial and far outweigh the costs, thus, the benefit-cost analysis 
presented in the RIA for MATS fully and independently supports the 
EPA's determination that it is appropriate to regulate HAP emissions 
from EGUs. The EPA requests comments on this conclusion.

VI. Conclusion

    As directed by the Supreme Court, the EPA has now taken cost into 
account in evaluating whether it is appropriate to regulate coal- and 
oil-fired EGUs under section 112 of the CAA. As explained in Section IV 
of this document, the EPA considered the reasonableness of the direct 
and indirect compliance costs of MATS based on several metrics and 
weighed the cost of regulation with other factors relevant to a 
decision to regulate HAP emissions from EGUs. The EPA found based on 
that evaluation that including a consideration of cost does not cause 
the agency to alter its determination that regulation of HAP emissions 
from EGUs is appropriate. The EPA also found that other cost 
considerations further support this conclusion.
    In addition, though the EPA does not view formal benefit-cost 
analysis as required to support the appropriate finding, the EPA 
conducted a formal benefit-cost analysis in the RIA for MATS and that 
analysis demonstrates that the monetized and non-monetized benefits of 
MATS are significant and far exceed the cost. The benefit-cost analysis 
thus supports the finding that it is appropriate to regulate HAP 
emissions from EGUs.
    The EPA finds that the analysis set forth in Section IV of this 
document and the benefit-cost analysis in the RIA for MATS (and 
summarized in Section V) each provide independent support for a 
conclusion that regulation of HAP emissions from EGUs is appropriate. 
Based on these findings, the EPA proposes that the agency's previous 
determination that it is appropriate to regulate HAP emissions from 
EGUs under section 112(d) of the CAA is not altered by a consideration 
of cost and that coal- and oil-fired EGUs are properly listed pursuant 
to section 112(c).

VII. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This action is a significant regulatory action that was submitted 
to OMB for review because it ``raises novel legal or policy issues 
arising out of legal mandates.'' Any changes made in response to OMB 
recommendations have been documented in the docket. The EPA does not 
project any potential costs or benefits associated with this action.

B. Paperwork Reduction Act (PRA)

    This action does not impose an information collection burden under 
the PRA. There are no information collection requirements in this 
proposed action.

C. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities under the RFA. This 
action will not impose any requirements on small entities. The EPA does 
not project any potential costs or benefits associated with this 
action.

D. Unfunded Mandates Reform Act (UMRA)

    This action does not contain any unfunded mandate as described in 
UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect 
small governments. The action imposes no

[[Page 75042]]

enforceable duty on any state, local or tribal governments or the 
private sector.

E. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on the states, on the relationship between 
the national government and the states, or on the distribution of power 
and responsibilities among the various levels of government.

F. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This action does not have tribal implications as specified in 
Executive Order 13175. It would neither impose substantial direct 
compliance costs on tribal governments, nor preempt Tribal law. Thus, 
Executive Order 13175 does not apply to this action.

G. Executive Order 13045: Protection of Children From Environmental 
Health Risks and Safety Risks

    The EPA interprets Executive Order 13045 as applying only to those 
regulatory actions that concern environmental health or safety risks 
that the EPA has reason to believe may disproportionately affect 
children, per the definition of ``covered regulatory action'' in 
section 2-202 of the Executive Order. This action is not subject to 
Executive Order 13045 because it does not concern an environmental 
health risk or safety risk.

H. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    This action is not a ``significant energy action'' because it is 
not likely to have a significant adverse effect on the supply, 
distribution, or use of energy. This action is not anticipated to have 
notable impacts on emissions, costs, or energy supply decisions for the 
affected electric utility industry.

I. National Technology Transfer and Advancement Act (NTTAA)

    This action does not involve technical standards.

J. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    The EPA believes the human health or environmental risk addressed 
by this action will not have potential disproportionately high and 
adverse human health or environmental effects on minority, low-income 
or indigenous populations because it is limited in scope and only 
considers cost of whether it is appropriate to regulate HAP emissions 
from electric utility steam generating units.

K. Determination Under CAA Section 307(d)

    Pursuant to CAA section 307(d)(1)(V), the Administrator determines 
that this action is subject to provisions of section 307(d). Section 
307(d) establishes procedural requirements specific to rulemaking under 
the CAA. Section 307(d)(1)(V) provides that the provisions of section 
307(d) apply to ``such other actions as the Administrator may 
determine.''

VIII. Statutory Authority

    The statutory authority for this proposed action is provided by 
sections 112, 301, 302, and 307(d)(1) of the CAA as amended (42 U.S.C. 
7412, 7601, 7602, 7607(d)(1)). This action is also subject to section 
307(d) of the CAA (42 U.S.C. 7607(d)).

    Dated: November 20, 2015.
Gina McCarthy,
Administrator.
[FR Doc. 2015-30360 Filed 11-30-15; 8:45 am]
BILLING CODE 6560-50-P