[Federal Register Volume 81, Number 79 (Monday, April 25, 2016)]
[Rules and Regulations]
[Pages 24419-24452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09429]



[[Page 24419]]

Vol. 81

Monday,

No. 79

April 25, 2016

Part VII





 Environmental Protection Agency





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40 CFR Part 63





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

Federal Register / Vol. 81 , No. 79 / Monday, April 25, 2016 / Rules 
and Regulations

[[Page 24420]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 63

[EPA-HQ-OAR-2009-0234; FRL-9945-33-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: Final supplemental finding.

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SUMMARY: This action responds to the U.S. Supreme Court decision in 
Michigan v. EPA, 135 S. Ct. 2699 (2015), and explains how the 
Environmental Protection Agency (EPA) has taken cost into account in 
evaluating whether 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). The EPA requested comment on 
all aspects of its approach to considering cost through a proposed 
supplemental finding and on a companion Legal Memorandum available in 
the rulemaking docket. After consideration of public comments, the EPA, 
in this final supplemental finding, concludes that a consideration of 
cost does not cause us to change our determination that regulation of 
hazardous air pollutant (HAP) emissions from coal- and oil-fired EGUs 
is appropriate and necessary and that EGUs are, therefore, properly 
included on the CAA section 112(c) list of sources that must be 
regulated under CAA section 112(d).

DATES: This final supplemental finding is effective on April 25, 2016.

ADDRESSES: The EPA has an established docket for this action under 
Docket ID No. EPA-HQ-OAR-2009-0234 (National Emission Standards for 
Hazardous Air Pollutants for Coal- and Oil-fired Electric Utility Steam 
Generating Units). All documents in the docket are listed on the 
www.regulations.gov Web site. Although listed in the index, some 
information is not publicly available, e.g., Confidential Business 
Information 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 www.regulations.gov or 
in hard copy at the EPA Docket Center (EPA/DC), Room 3334, EPA WJC West 
Building, 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 legal 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.

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: [email protected].

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

I. General Information
    A. Executive Summary
    B. Does this action apply to me?
    C. Where can I get a copy of this document?
    D. Judicial Review
II. Overview and Background on the Proposed Supplemental Finding
    A. Overview
    B. 2000 Finding and 2012 Affirmation
    C. Proposed Supplemental Finding
III. Final Supplemental Finding and Affirmation
    A. Supplemental Analyses Conducted in Response to Comments
    B. Basis for the Final Supplemental Finding
    C. Affirmation of the Appropriate and Necessary Finding
IV. Public Comments on the Proposed Supplemental Finding
    A. Comments on Considerations of Cost
    B. Comments on Consideration of Benefit-Cost Analysis in the 
MATS RIA
    C. Comments on the Legal Interpretation of CAA Section 112(n)(1)
    D. Comments on Topics that are Beyond the Limited Scope of the 
Supplemental Finding
V. 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. Congressional Review Act (CRA)
    L. Determination under CAA Section 307(d)
VI. Statutory Authority

I. General Information

A. Executive Summary

    The EPA is taking this final action in response to (1) the U.S. 
Supreme Court (Supreme Court) decision in Michigan v. EPA, 135 S. Ct. 
2699 (2015), which held that the EPA must consider cost in evaluating 
whether it is appropriate and necessary to regulate coal- and oil-fired 
EGUs under CAA section 112, and (2) the comments received on the 
agency's proposal.
    After evaluating cost reasonableness using several different 
metrics, the Administrator has, in accordance with her statutory duty 
under CAA section 112(n)(1)(A), weighed cost against the previously 
identified advantages of regulating HAP emissions from EGUs--including 
the agency's prior conclusions about the significant hazards to public 
health and the environment associated with such emissions and the 
volume of HAP that would be reduced by regulation of EGUs under CAA 
section 112.
    In evaluating the costs of the Mercury and Air Toxics Standards 
(MATS), the EPA uses several cost metrics specific to the power sector 
to determine whether the costs of MATS are reasonable. The evaluations 
across each of the different metrics reveal that the cost of complying 
with MATS--compared to historical annual revenues, annual capital 
expenditures, and impacts on retail electricity prices--is well within 
the range of historical variability. The EPA further finds that the 
power sector is able to comply with the rule's requirements while 
maintaining its ability to perform its primary and unique function--the 
generation, transmission, and distribution of reliable electricity at 
reasonable cost to consumers. The EPA thus concludes that under every 
metric examined, the cost of MATS is reasonable and that no new 
information provided during the public comment period demonstrates 
otherwise.
    In exercising the discretion granted to her under CAA section 
112(n)(1)(A), the Administrator has taken numerous factors into 
account, in addition to the consideration of the cost of regulation, 
including Congress's concern about the hazardous nature of these 
pollutants, the wealth of public health and environmental effects 
research examined under the agency's prior findings showing substantial 
risks from

[[Page 24421]]

the emission of HAP from EGUs, and the fact that the power sector is 
the largest remaining anthropogenic source of many HAP in the U.S. The 
Administrator finds in this final action that, in her judgment, after 
determining under each metric examined that the cost of MATS is 
reasonable, and weighing this consideration against the many identified 
advantages to regulation, it clearly remains appropriate and necessary 
to regulate HAP emissions from EGUs.
    The Administrator's approach to making her determination is fully 
consistent with the dictates of the statute and with the Michigan 
decision because it reflects her consideration of the full range of 
factors relevant to making a decision under CAA section 112(n)(1)(A) 
regarding whether it is appropriate to regulate HAP emissions from EGUs 
under CAA section 112. She prefers--and the CAA supports--this approach 
because, in addition to cost, it places value on the statutory goals of 
achieving prompt, permanent, and ongoing reductions in significant 
volumes of HAP emissions and on the important, and, in many cases, 
unquantifiable advantages of reducing the significant hazards to public 
health posed by such emissions, including addressing the risk to the 
most exposed and most sensitive members of society.
    The EPA also presents in this action a second independent approach 
that supports the appropriate and necessary determination as informed 
by consideration of the cost of MATS: consideration of a formal 
benefit-cost analysis. Although the EPA does not view formal benefit-
cost analysis as required to support the appropriate finding, the 
agency had performed such an analysis for the regulatory impacts 
analysis (RIA ) \1\ for the final MATS rule. In this final action--as 
in the proposal--the EPA finds that the analysis demonstrates that the 
benefits (monetized and non-monetized) of the rule are substantial and 
far outweigh the costs. The benefit-cost analysis, thus, fully and 
independently supports the finding that it is appropriate to regulate 
HAP emissions from EGUs.
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    \1\ U.S. EPA. 2011. Regulatory Impact Analysis for the Final 
Mercury and Air Toxics Standards. EPA-452/R-11-011. Docket ID No. 
EPA-HQ-OAR-2009-0234-20131.
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    The EPA provided an opportunity for public comment on both 
approaches through a proposed supplemental finding \2\ published on 
December 1, 2015 and on a supporting Legal Memorandum.\3\ The EPA 
received numerous comments both supporting and opposing the proposed 
approaches and the agency has considered all of these comments.
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    \2\ 80 FR 75025.
    \3\ ``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). Docket ID No. EPA-HQ-
OAR-2009-0234-20519.
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    Based on all of these considerations, the Administrator finds that 
both approaches--the preferred approach and the alternative benefit-
cost analysis in the MATS RIA--support her determination that 
consideration of cost does not cause her to alter the previous 
conclusion that regulation of HAP emissions from EGUs is appropriate 
and necessary. Therefore, in this final notice, the Administrator 
affirms that it is appropriate and necessary to regulate coal- and oil-
fired EGUs under CAA section 112 and that these sources are properly 
listed as an affected source category under CAA section 112(c).

B. Does this Action Apply to Me?

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

     Table 1--Potentially Affected Regulated Categories and Entities
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                                                        Examples of
           Category               NAICS Code \1\    potentially affected
                                                          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
                                           921150   electric utility
                                                    steam generating
                                                    units owned by
                                                    municipalities.
                                                   Fossil fuel-fired
                                                    electric utility
                                                    steam generating
                                                    units in Indian
                                                    country.
------------------------------------------------------------------------
\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. Where can I get a copy of this document?

    In addition to being available in the docket, an electronic copy of 
this final action will also be available on the World Wide Web (WWW). 
Following signature, a copy of this final action will be posted at the 
following address: http://www3.epa.gov/mats/.

D. Judicial Review

    Under section 307(b)(1) of the CAA, judicial review of this final 
supplemental finding is available only by filing a petition for review 
in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. 
Circuit Court) by June 24, 2016. Moreover, under section 307(b)(2) of 
the CAA, the requirements established by this final supplemental 
finding may not be challenged separately in any civil or criminal 
proceedings brought by the EPA to enforce these requirements.
    In the proposal, the EPA provided notice that CAA section 307(d) 
was applicable to this action and has followed the requirements of that 
subsection. 80 FR 75042. CAA section 307(d) establishes procedural 
requirements specific to certain enumerated rulemakings under the CAA, 
and CAA section 307(d)(1)(V) provides for the extension of these 
procedural requirements to ``such other actions as the Administrator 
may determine.'' Section 307(d)(7)(B) of the CAA further provides that 
``[o]nly an objection to a rule or procedure which was raised with 
reasonable specificity during the period for public comment (including 
any public hearing) may be raised during judicial review.'' This 
section also provides a mechanism mandating the EPA to convene a 
proceeding for reconsideration ``[i]f the person raising an objection 
can demonstrate to the EPA that it was impracticable to raise such 
objection within [the period for public comment] or if the grounds for 
such objection arose after the period for public

[[Page 24422]]

comment (but within the time specified for judicial review) and if such 
objection is of central relevance to the outcome of the rule.'' Any 
person seeking to make such a demonstration should submit a Petition 
for Reconsideration to the Office of the Administrator, U.S. EPA, Room 
3000, EPA WJC North Building, 1200 Pennsylvania Ave. NW., Washington, 
DC 20460, with a copy to both the person(s) listed in the preceding FOR 
FURTHER INFORMATION CONTACT section, and the Associate General Counsel 
for the Air and Radiation Law Office, Office of General Counsel (Mail 
Code 2344A), U.S. EPA, 1200 Pennsylvania Ave. NW., Washington, DC 
20460.

II. Overview and Background on the Proposed Supplemental Finding

A. Overview

    On June 29, 2015, the Supreme Court ruled in Michigan v. EPA that 
the agency had erred when it failed to take cost into account in 
evaluating whether it is appropriate to regulate HAP emissions from 
coal- and oil-fired EGUs. On December 1, 2015, in response to the 
Michigan ruling, the EPA published the proposed supplemental finding 
and companion Legal Memorandum. In the proposed supplemental finding, 
the EPA proposed to determine that including a consideration of cost 
does not cause the agency to alter its previous conclusion that 
regulation of HAP emissions from EGUs is appropriate and necessary.
    In Section II.B of this final supplemental finding, the EPA 
provides background information regarding the 2000 appropriate and 
necessary finding and the 2012 affirmation. Section II.C provides a 
summary of the proposed consideration of cost, explaining that, in the 
preferred approach, the EPA evaluated the cost of MATS and compared 
those costs to other metrics relevant to the power sector. In 
evaluating those cost metrics, the EPA proposed to determine that the 
MATS compliance costs are reasonable and that the power sector is able 
to comply with the rule's requirements while retaining its ability to 
perform its primary and unique function--the generation, transmission, 
and distribution of reliable electricity at a reasonable cost to 
consumers. The Administrator then weighed this evaluation of cost 
against previously identified advantages of regulation--such as 
addressing the significant hazards to public health and the environment 
posed by HAP emissions from EGUs. The EPA also considered the formal 
benefit-cost analysis from the final MATS RIA that showed the benefits 
(monetized and non-monetized) of the rule are substantial and far 
outweigh the costs. The EPA then proposed to find that consideration of 
such costs does not cause the agency to alter its previous finding that 
regulation of HAP emissions from EGUs is appropriate and necessary.
    The EPA received numerous public comments on the proposed 
supplemental finding. In Section III.A below, the EPA explains how 
consideration of the public comments resulted in the addition of a 
limited analysis that reinforces the final supplemental finding. In 
Section III.B, we explain the basis for the final action, and, in 
Section III.C we affirm the proposed finding that a consideration of 
cost does not cause the EPA to change its conclusion that regulation of 
HAP emissions from coal- and oil-fired EGUs is appropriate and 
necessary and that EGUs are, therefore, properly included on the CAA 
section 112(c) list of sources that must be regulated under CAA section 
112(d).
    In Section IV below, the EPA provides a summary of selected 
significant comments and the agency's response to those comments. The 
Response to Comments (RTC) document \4\ for this action summarizes all 
comments the EPA received. The RTC document also presents responses to 
significant comments or citations to Section IV below in the instances 
where relevant comment responses are presented in the preamble.
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    \4\ Response to Comments (RTC) for Supplemental Finding that it 
is Appropriate and Necessary to Regulate Hazardous Air Pollutants 
from Coal- and Oil-Fired Electric Utility Steam Generating Units. 
Available in the rulemaking docket. Docket ID EPA-HQ-OAR-2009-0234.
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B. 2000 Finding and 2012 Affirmation

    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 Finding; 65 FR 79825. The appropriate and 
necessary finding was based primarily on consideration of the Utility 
Study Report to Congress (Utility Study),\5\ the Mercury Study Report 
to Congress (Mercury Study),\6\ the National Academy of Sciences' 
Toxicological Effects of Methylmercury (NAS Study),\7\ and mercury data 
collected from coal-fired EGUs after completion of the studies. 65 FR 
79826. The EPA found that mercury is a significant hazard to public 
health, and EGUs are the largest domestic source of mercury emissions. 
The EPA also identified control strategies that would effectively 
reduce HAP emissions from U.S. EGUs. The EPA found that implementation 
of other requirements under the CAA would not adequately address the 
significant public health and environmental hazards arising from HAP 
emissions from U.S. EGUs. 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 there were available controls to 
effectively reduce mercury and other HAP emissions from EGUs. 64 FR 
79825, 79830. 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. See also 76 FR 24984-20985 (for further 
discussion of conclusions supporting the 2000 finding).
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    \5\ 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.
    \6\ U.S. EPA. 1997. Mercury Study Report to Congress. EPA-452/R-
97-003. December. Docket ID No. EPA-HQ-OAR-2009-0234-3054.
    \7\ 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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    In 2005, the EPA issued the Section 112(n) Revision Rule (70 FR 
15994) that revised the agency's December 2000 appropriate and 
necessary finding and removed coal- and oil-fired EGUs from the CAA 
section 112(c) source category list. The agency also promulgated the 
Clean Air Mercury Rule (CAMR) which established CAA section 111 
standards of performance for mercury emissions from EGUs. Several 
groups challenged these actions and on February 8, 2008, the D.C. 
Circuit Court vacated both the Section 112(n) Revision Rule and CAMR 
holding that the EPA had failed to comply with the requirements of CAA 
section 112(c)(9) for delisting source categories. New Jersey v. EPA, 
517 F.3d 574 (D.C. Cir. 2008).
    In May 2011, in conjunction with the proposed MATS, the EPA 
conducted additional technical analyses to reaffirm the appropriate and 
necessary finding, including peer-reviewed risk assessments on human 
health effects

[[Page 24423]]

associated with mercury and non-mercury HAP emissions from EGUs, 
focusing on risks to the most exposed and sensitive individuals in the 
population. These analyses found that mercury and non-mercury HAP 
emissions from EGUs remain a significant public health hazard and 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 other metallic HAP emissions including arsenic, 
chromium, and nickel.\8\
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    \8\ Specifically, the EPA estimated that in 2005 (the most 
recent inventory year available during the MATS rulemaking), U.S. 
EGUs emitted approximately 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.
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    Between the proposed and final MATS rule, the EPA conducted peer 
reviews of the Mercury Risk Assessment \9\ and the approach for 
estimating inhalation cancer risk from two non-mercury metal HAP, and 
the agency also changed the input data for the non-mercury HAP risk 
assessment based on new data and information obtained during the public 
comment period. The revised 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 level above which 
there is increased risk of adverse health effects (i.e., the reference 
dose). See, e.g., 77 FR 9310-6. In addition, the revised inhalation 
risk assessment for non-mercury HAP \11\ of 16 facilities estimated a 
lifetime cancer risk \12\ 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. 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.
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    \9\ U.S. EPA. 2011. 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. EPA-HQ-OAR-2009-
0234-3057.
    \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\ 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.
    \12\ As described in the preamble to the proposed MATS (76 FR 
25011), the non-mercury risk assessments calculated the maximum 
individual risk (MIR) for each facility as the cancer risk 
associated with a continuous lifetime (24 hours per day, 7 days per 
week, and 52 weeks per year for a 70-year period) exposure to the 
maximum concentration at the centroid of an inhabited census block.
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    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. 77 FR 9363.
    Based on the agency's updated analyses, a consideration of the peer 
reviews of the analyses, and public comments, the EPA affirmed the 
findings in the February 2012 final rule (77 FR 9304) that mercury and 
non-mercury HAP emissions from U.S. EGUs pose hazards to public health 
and found that it remains appropriate to regulate U.S. EGUs under CAA 
section 112. The EPA also concluded, at that time, that it remains 
appropriate to regulate U.S. EGUs under CAA section 112 because of the 
magnitude of mercury and non-mercury HAP emissions, environmental 
effects of mercury and certain non-mercury HAP emissions, and the 
availability of controls to reduce HAP emissions from EGUs. In 
addition, the EPA concluded that the hazards to public health from 
mercury and non-mercury HAP emissions from U.S. EGUs are reasonably 
anticipated to remain after imposition of the requirements of the CAA. 
The same is true for hazards to the environment. Thus, the agency 
confirmed that it is necessary to regulate U.S. EGUs under CAA section 
112. 77 FR 9311.
    After MATS was promulgated, 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 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 under CAA section 112 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.

C. Proposed Supplemental Finding

    In response to the Supreme Court's direction, the EPA proposed two 
different approaches to incorporate cost into the appropriate and 
necessary finding. 80 FR 75025. The first--which the EPA identified as 
its preferred approach--evaluated the cost estimates in the RIA for the 
final MATS rule using several different metrics and weighed these costs 
against the previously identified advantages of regulating HAP 
emissions from EGUs--including the agency's prior conclusions about the 
significant hazards to public health and the environment associated 
with such emissions and the volume of HAP that would be reduced by 
regulation of EGUs under CAA section 112. In a second independent 
approach, the EPA proposed consideration of the formal benefit-cost 
analysis \13\ in the RIA for the

[[Page 24424]]

final MATS rule, which demonstrates that the benefits (monetized and 
non-monetized) of the rule are substantial and far outweigh the costs. 
Each of these approaches is discussed further below.
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    \13\ In this supplemental finding, we use the term ``formal 
benefit-cost analysis'' to refer to an economic analysis that 
attempts to quantify all significant consequences of an action in 
monetary terms in order to determine whether an action increases 
economic efficiency. In other words, it is a determination of 
whether the willingness to pay for an action by those advantaged by 
it exceeds the willingness to pay to avoid the action by those 
disadvantaged by it. Measuring willingness to pay in a common metric 
of economic value, like dollars, is called monetization, and it 
allows for such comparisons across individuals. Assuming that all 
consequences can be monetized, actions with positive net benefits 
(i.e., benefits exceed costs) improve economic efficiency. When 
there are technical limitations that prevent certain benefits or 
costs that may be of significant magnitude from being quantified or 
monetized, then information is provided describing those potentially 
important non-monetized benefits or costs. This usage is consistent 
with the definition of a benefit-cost analysis used in the economics 
literature and the EPA's Guidelines for Preparing Economic Analyses 
(``Guidelines'').''
    U.S. EPA. 2010. Guidelines for Preparing Economic Analyses. EPA-
240-R-10-001. National Center for Environmental Economics, Office of 
Policy. Washington, DC. December. Available at http://
yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/EE-0568-50.pdf/$file/EE-0568-
50.pdf. Docket ID No. EPA-HQ-OAR-2009-0234-20503.
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    In the preferred approach, the EPA considered whether the cost of 
compliance with MATS is reasonable, and whether a consideration of such 
costs, when weighed against, among other things, the substantial 
hazards to public health and the environment posed by HAP emissions 
from power plants, causes the agency to alter its conclusion that 
regulation is appropriate and necessary. The EPA explained that it 
preferred this approach to a formal benefit-cost analysis given the 
statutory objectives of CAA section 112, in particular Congress' 
determination that HAP emissions are inherently harmful, and the 
instruction from Congress to protect the most sensitive populations 
from those harms. See Legal Memorandum at 6-20. The EPA found that CAA 
section 112(n)(1)(A)'s emphasis on the required studies supported its 
interpretation that while cost is an important factor that it must 
consider in making the appropriate and necessary finding, it is one of 
several factors that must be considered and the statutory text does not 
support a conclusion that cost should be the predominant or overriding 
factor. See id. at 11-15. The EPA's preferred approach to considering 
cost allows the Administrator to weigh the full range of factors 
relevant to making a determination under CAA section 112(n)(1)(A) of 
whether it is appropriate and necessary to regulate HAP emissions from 
EGUs. Moreover, because the Supreme Court's holding did not disturb the 
scientific assessments and conclusions made in the original appropriate 
and necessary finding, many of which were challenged and upheld by the 
D.C. Circuit in White Stallion, the Administrator concluded that the 
task on remand was to determine whether a consideration of cost caused 
her to alter her prior conclusion that it was appropriate to regulate 
HAP emissions from EGUs under CAA section 112. See 80 FR 75038; Legal 
Memorandum at 20.
    The agency further explained that, as a check on the conclusion 
that the cost of MATS is reasonable, the EPA considered the power 
industry's ability to comply with MATS and still perform its primary 
and unique function--to provide a reliable source of electricity at a 
reasonable cost to consumers.
    Specifically, the EPA considered several metrics to evaluate 
whether the estimated cost of compliance with MATS is reasonable for 
the power sector.\14\ First, the EPA evaluated the annual compliance 
costs as a percent of the revenue from the power sector's annual retail 
electricity sales.\15\ The EPA found that the $9.6 billion annual cost 
of MATS is a small fraction of the revenue from the sector's annual 
retail sales, which ranged from $277.2 billion in 2000 to a peak of 
$356.6 billion in 2008.\16\ See 80 FR 75033, Table 2. Thus, the 
projected annual cost for MATS represents between 2.7 and 3.5 percent 
of annual revenues from electricity sales from 2000 to 2011--a small 
fraction of the value of overall sales.
---------------------------------------------------------------------------

    \14\ As explained in the proposed Supplemental Finding and 
described in the final MATS RIA and supporting materials for the 
RIA, the $9.6 billion compliance cost is an estimate of the change 
in electricity power generation costs between a base case without 
MATS and a policy case with MATS. These compliance costs represent a 
projection of the increase in expenditures by EGUs required to serve 
a particular level of electricity demand as a result of MATS. The 
compliance cost includes capital, fuel, and other variable and 
operating costs and was projected in the final MATS RIA to be $9.6 
billion (2007 dollars) in 2015. The costs may be borne by 
electricity producers, or passed along to electricity consumers in 
the form of higher electricity prices.
    \15\ In the proposed supplemental finding, the analysis of 
annual compliance costs as a percent of the revenue from the power 
sector's annual retail electricity sales was referred to as a 
``sales test.''
    \16\ Unless otherwise noted, all dollar amounts reported in this 
section and elsewhere in this notice are expressed in 2007-dollar 
equivalents to be directly comparable to the estimates in the 2011 
final MATS RIA, which were expressed in 2007 dollars.
---------------------------------------------------------------------------

    A second way the EPA evaluated cost was to compare the annual 
capital expenditures due to MATS compliance to the range of variation 
in the power sector's annual capital expenditures between 2000 and 
2011. As noted in the proposed supplemental finding, this comparison is 
a relevant metric because capital costs represent largely irreversible 
investments that must be paid off regardless of future economic 
conditions. Moreover, additional capital expenditures needed to comply 
with MATS represented about 26 percent of the total annual compliance 
cost projected for 2015, further emphasizing the importance of 
considering capital expenditures. Based on two different sources of 
data, capital expenditures for the electric power sector generally 
increased from 2000 to 2011. See 80 FR 75034, Table 3. Despite the 
generally increasing trend, the data show substantial year-to-year 
variability in industry capital expenditures. The EPA found that the 
incremental capital expenditures of $2.4 billion estimated to be 
required for MATS compliance in 2015 represent a small fraction--about 
3.0 percent--of the power sector's overall capital expenditures in 
recent years and are well within the range of annual variability 
between 2000 and 2011. Even if power sector-level capital expenditures 
were to decline to 2004 levels, the lowest level observed during the 
2000 to 2011 period, the incremental capital expenditures estimated for 
MATS would represent about 5.9 percent, a level we also find to be 
reasonable for this sector.
    The third metric the EPA evaluated was the impact of MATS 
compliance cost on the retail price of electricity. Potential changes 
in retail electricity prices can be indicative of the ``cost'' of MATS, 
in this instance to consumers specifically, as opposed to the 
compliance cost to the power sector, which is borne collectively by EGU 
owners and electricity consumers. The MATS RIA estimated that 
relatively small changes in the average price of electricity would 
result from MATS compliance. The projected impact of MATS on 
electricity rates was 0.3 cents/kWh or 3.1 percent. Meanwhile, between 
2000 and 2011, changes in national average retail prices ranged from -
0.13 cents/kWh to as high as 0.52 cents/kWh. See 80 FR 75035, Table 4. 
Based on this analysis, the EPA found that the estimated MATS retail 
price impact is well within the range of price fluctuations in recent 
years.
    The agency then proposed that each of these three metrics 
independently demonstrates that the MATS compliance costs are 
reasonable, and that each metric supports the EPA's proposed 
determination that weighing this consideration of cost against the 
prior conclusions reached by the agency does not alter the previous 
finding that it is appropriate to regulate HAP emissions from EGUs.
    In addition to the analysis summarized above, the EPA recognized it 
was important to consider the ability of the power sector to comply 
with MATS and maintain a reliable supply of electricity. The agency's 
compliance modeling indicated that additional coal-fired capacity 
projected to retire as a result of MATS represented EGUs that are, on 
average, older and smaller units that are less frequently used. See 80 
FR 75036, Table 6. The analysis indicated that the vast majority of the 
generation capacity directly affected by MATS requirements would be 
able to absorb

[[Page 24425]]

the anticipated compliance costs and remain operational. In addition, 
an analysis of the impacts of expected retirements on electric 
reliability found that reserve margins could be maintained over a 3-
year MATS compliance period, indicating that the power sector would be 
able to comply with MATS while maintaining the capacity necessary to 
meet projected electricity demands. This determination that reliability 
and resource adequacy would not be adversely affected provided further 
support for the EPA's proposed determination that the cost of MATS is 
reasonable.
    The EPA then weighed the reasonable cost of the rule against a 
number of other factors, including the agency's prior conclusions about 
the significant hazards to public health and the environment, as 
discussed above in Section II.B, and the volume of HAP that would be 
reduced by regulation of EGUs under CAA section 112. Keeping in mind 
Congress' statutory goals in enacting CAA section 112, the EPA proposed 
to find that a consideration of the cost of compliance with MATS did 
not outweigh the rule's many advantages and, therefore, does not cause 
the EPA to alter the prior determination that it is appropriate and 
necessary to regulate EGUs under CAA section 112.
    In the proposed supplemental finding, the EPA also presented a 
second independent basis for concluding that consideration of cost 
supports affirmation of the finding that it is appropriate and 
necessary to regulate HAP emissions from coal- and oil-fired EGUs. The 
EPA explained that the formal benefit-cost analysis in the RIA for the 
final MATS rule, although not required to support the appropriate 
finding, also demonstrates that the benefits (monetized and non-
monetized) of MATS are substantial and far outweigh the costs. 
Specifically, the EPA estimated that the final MATS would yield total 
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 in addition to many categories 
of unquantified benefits in comparison to the projected $9.6 billion in 
annual costs. The benefit-cost analysis thus supports the finding that 
it is appropriate to regulate HAP emissions from EGUs.
    Using both of these independent approaches, the EPA proposed to 
find that it remains appropriate to regulate HAP emissions from EGUs 
after considering costs. As such, the EPA proposed to find that 
including a consideration of cost does not alter the agency's previous 
determination that it is appropriate to regulate HAP emissions from 
EGUs under CAA section 112 and that coal- and oil-fired EGUs are 
properly listed pursuant to CAA section 112(c).

III. Final Supplemental Finding and Affirmation

A. Supplemental Analyses Conducted in Response to Comments

    A number of groups representing states, tribes, industries, 
environmental organizations, health organizations, and others submitted 
comments on the proposed supplemental finding. The EPA has considered 
the comments and provided detailed responses to the significant 
comments either below in Section IV of this final notice or in the RTC 
document for this action.
    The EPA has taken all the submitted comments into consideration in 
the preparation of this final supplemental finding. The EPA received 
comments that were both supportive and critical of both proposed 
approaches to considering cost. The EPA has carefully evaluated these 
comments and responded to them, as outlined in detail in Section IV 
below.
    The EPA did not receive any public comments that caused the agency 
to conclude that the interpretation of the statute or the approaches 
for consideration of cost that were detailed in the proposed action 
were in error. Therefore, in this final action, the EPA continues to 
rely on the analyses contained in the proposed supplemental finding and 
in the companion Legal Memorandum. Specifically, in this final 
consideration of cost, the EPA continues to rely on the ``Consideration 
of Cost to the Power Sector'' metrics discussed in Section IV.A of the 
proposed supplemental finding. 80 FR 75032. These metrics are 
summarized above in Section II.C. The metrics include an evaluation of 
the cost of MATS compliance in comparison to the power sector's 
revenues from retail sales of electricity. In addition, the EPA 
continues to rely on the metric comparing the impact of MATS on the 
retail price of electricity to historical fluctuations of the average 
retail price of electricity. The EPA also stands by the evaluation of 
resource adequacy that was presented in the final MATS rulemaking and 
in the proposed supplemental finding. We explain here in this final 
notice--and in the RTC document--the decision not to alter these 
analyses for this final action.
    While the agency has not changed its approaches to consideration of 
cost, the EPA has, in response to comments, supplemented the proposed 
metrics by incorporating additional information considering annual 
operating expenses to this industry. Specifically, the EPA added 
information on historical total production expenditures to the 
historical total capital expenditures in order to estimate total 
capital and production expenditures for the power sector from 2000 to 
2011. The agency conducted this analysis to provide additional 
perspective to the projected cost information by looking at a broader 
range of power industry costs beyond the capital cost comparison 
conducted at proposal. The additional analysis reinforces the EPA's 
conclusion that the cost of compliance with MATS is reasonable.
    Consistent with the proposal's focus on sector-level analysis, the 
EPA obtained historical information on power sector production costs. 
These production costs, which include operation and maintenance costs, 
fuel costs, and fixed costs were obtained from ABB Velocity Suite, a 
private sector firm that provides data and analytical services for the 
energy sector. The production costs were added to the two separate 
estimates of annual capital expenditures that were provided in the 
proposed supplemental finding (See Table 3, 80 FR 75034) in order to 
provide an estimate of historical trends in total capital and 
production costs faced by the power sector.\17\ The EPA then, as it had 
done in the proposal, compared year-to-year changes in the total cost 
estimates to the projected total compliance cost estimate for the final 
MATS rule in 2015. The total production costs along with the electric 
power sector's capital expenditures are provided below in Table 2.
---------------------------------------------------------------------------

    \17\ For power sector-level capital expenditures, the EPA relies 
on two sets of information: The U.S. Census Bureau's Annual Capital 
Expenditures Survey and SNL, a private sector firm that provides 
data and analytical services. As noted in the proposed supplemental 
finding, while each dataset has limitations, the estimates from each 
correspond to one another reasonably well. However, we present both 
sets of information to better depict capital expenditures in the 
power sector.

[[Page 24426]]



                                                 Table 2--Total Capital and Production Expenditures for the Electric Power Sector, 2000 to 2011
                                                                                     [Billions 2007 dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Total                                           Total
                                                             Capital         Capital       production         Total                       expenditures
                                                          expenditures    expenditures    expenditures    expenditures     Change from     (with U.S.      Change from
                          Year                             (SNL-based)    (U.S. census-     (velocity      (with SNL-     previous year   census-based    previous year
                                                               \1\         based) \2\     suite-based)    based capital                      capital
                                                                                               \3\        expenditures)                   expenditures)
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------
2000...................................................            51.8            62.5           102.3           154.2                           164.9
2001...................................................            70.1            85.9           106.9           177.0            22.8           192.9            28.0
2002...................................................            56.4            66.4            93.7           150.1           -26.9           160.0           -32.9
2003...................................................            43.8            52.7           105.2           149.0            -1.1           157.9            -2.2
2004...................................................            40.4            45.0           111.6           152.0             3.0           156.6            -1.3
2005...................................................            46.7            50.0           133.6           180.2            28.2           183.5            27.0
2006...................................................            57.6            61.6           127.5           185.0             4.8           189.1             5.6
2007...................................................            66.9            73.9           133.5           200.4            15.3           207.4            18.3
2008...................................................            78.1            83.5           147.6           225.7            25.4           231.1            23.7
2009...................................................            76.6            87.9           117.3           193.9           -31.8           205.2           -25.9
2010...................................................            75.1            79.8           126.1           201.2             7.3           205.9             0.7
2011...................................................            79.6            79.2           121.3           200.9            -0.3           200.5            -5.4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\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.
\3\ Source: Velocity Suite ``Total Production Costs'' dataset. This dataset compiles operations and maintenance costs, fuel costs, and fixed costs reported in the FERC Form 1, RUS 12, and EIA
  412. For plants that do not report cost information, production costs are estimated by Velocity Suite.
Note: Dollar figures adjusted to 2007 dollars using the Gross Domestic Product--Implicit Price Deflator, https://research.stlouisfed.org/fred2/series/GDPDEF series/GDPDEF, accessed 10/14/15. Changes may
  not sum due to independent rounding.

    The estimated $9.6 billion total annual cost of the rule represents 
the total incremental annual capital and production costs to the sector 
for 2015. This incremental cost due to MATS requirements represents a 
small fraction of the power sector's annual capital and production 
expenditures in recent years, as illustrated in Table 2. For example, 
when compared to historical total expenditures that rely upon SNL-based 
estimates of capital expenditures, the total 2015 MATS cost represents 
about 4.3 percent of total expenditures in 2008 to 6.4 percent of total 
expenditures in both 2002 and 2003. With respect to historical total 
expenditures that rely upon Census Bureau-based estimates of capital 
expenditures, the total 2015 MATS cost represents about 4.2 percent of 
total expenditures in 2008 to 6.1 percent of total expenditures in 
2004.
    Additionally, the EPA notes that, similar to the capital 
expenditures analysis set forth in the proposed supplemental finding, 
the projected $9.6 billion in incremental capital plus production costs 
is well within the range of annual variability in costs in general over 
the 2000 to 2011 period. For example, during this period, the largest 
year-to-year decrease in power sector-level capital and production 
expenditures ranged from $31.8 billion (from 2008 to 2009, according to 
the sum of SNL-based capital expenditure and Velocity Suite-based 
production expenditure estimates) to $32.9 billion (from 2001 to 2002, 
according to the sum of U.S. Census-based capital expenditure and 
Velocity Suite-based production expenditure estimates). The largest 
year-to-year increase in power sector-level capital and production 
expenditures in this period ranged from $28.0 billion (from 2000 to 
2001, according to the sum of U.S. Census-based capital expenditure and 
Velocity Suite-based production expenditure estimates) to $28.2 billion 
(from 2004 to 2005, according to the sum of SNL-based capital 
expenditure and Velocity Suite-based production expenditure estimates).
    This wide range indicates substantial year-to-year variability in 
industry expenditures, and the projected $9.6 billion increase in total 
expenditures in 2015 attributable to MATS falls well within this 
variability. Therefore, the supplemental analysis that is responsive to 
commenters' suggestion provides additional support for the conclusion 
that the cost of MATS is reasonable when weighed against historical 
metrics.

B. Basis for the Final Supplemental Finding

    As directed by the Supreme Court, the EPA has now considered cost 
in its evaluation of whether or not it is appropriate to regulate coal- 
and oil-fired EGUs under CAA section 112. The EPA's approach to 
considering cost under CAA section 112(n)(1)(A) is based on the 
interpretation of the relevant CAA provisions as described in the Legal 
Memorandum accompanying the proposed supplemental finding. As explained 
below in Section IV.C, the EPA stands by the interpretations presented 
in that document in this final action.
    As previously mentioned in Section III.A, the EPA, in this final 
action, is continuing to rely on the same cost metrics that were 
presented in the proposed supplemental finding--supplemented by an 
additional evaluation of MATS compliance cost estimates in the context 
of total capital and production costs from the 2000 to 2011 period that 
simply confirms the proposed findings. No commenter provided any 
evidence or information that convinced the EPA that the preferred 
approach to consideration of cost is inadequate or unreasonable. Thus, 
the EPA concludes in this final action that the preferred approach to 
considering cost in the appropriate and necessary finding is to weigh 
the cost of compliance with section 112(d) standards against, among 
other things, the volume of HAP emitted by EGUs and the associated 
hazards to public health and the environment. See e.g., 77 FR 9310-9364 
(Section III. Appropriate and Necessary Finding). Specifically, the EPA 
has evaluated several metrics that are relevant to the power sector to 
determine whether the estimated cost of compliance with MATS is 
reasonable. The EPA has also considered the impact of the cost of MATS 
compliance on the power sector's ability to continue to reliably 
generate, transmit and distribute electricity, at a reasonable cost to 
consumers. These analyses and the conclusions the EPA draws from the 
analyses were summarized above in Sections II.C and III.A and were

[[Page 24427]]

described in detail in the proposed supplemental finding. See 80 FR 
75031-39 (Section IV. Consideration of Cost). The EPA concludes, after 
considering all significant comments, that these technical analyses are 
reasonable evaluations of cost and that each supports a conclusion that 
the cost of MATS is reasonable. Id. The agency also finds that the 
power industry is able to comply with MATS while continuing to perform 
its primary and unique function--to provide consumers with a reliable 
source of electricity at a reasonable price--which further confirms 
that the cost of MATS is reasonable. Id. The supplemental analysis 
conducted in response to comments further confirms that the cost of 
MATS is reasonable based on historical fluctuations. See Section III.A 
above.
    The EPA also continues to rely on the results of the formal 
benefit-cost analysis contained in the RIA for MATS as we received no 
public comments that convinced us that this analysis is an insufficient 
approach to considering costs. Although the EPA does not view formal 
benefit-cost analysis as required to support the appropriate finding, 
the final RIA demonstrates that the benefits (monetized and non-
monetized) of MATS are substantial and far outweigh the costs. In fact, 
the monetized benefits exceed the cost by 3 to 9 times. Thus, for this 
final action, the EPA finds that the formal benefit-cost analysis in 
the final MATS RIA provides an independent basis to support the finding 
that a consideration of cost does not cause the agency to alter its 
determination that it is appropriate and necessary to regulate HAP 
emissions from EGUs. This conclusion is explained in greater detail in 
the proposed supplemental finding. See 80 FR 75039-41 (Section V. 
Consideration of Benefit-Cost Analysis in the MATS RIA).
    The EPA further notes that the Supreme Court's decision in Michigan 
neither called into question nor reversed the portions of the D.C. 
Circuit Court's opinion in White Stallion that unanimously rejected all 
other challenges to the appropriate and necessary interpretation and 
finding (the lone dissenting opinion addressed only the issue of cost 
on which the Supreme Court granted certiorari). Per the Supreme Court's 
instruction, the EPA has reversed its prior determination that cost 
need not be considered in deciding whether regulation is appropriate 
and has taken steps to add cost considerations to its analysis under 
CAA section 112(n)(1)(A). Aside from the considerations of cost 
described above, the EPA is not revisiting, in this final action, any 
other aspects of the final MATS rule or legal interpretations 
established therein. Many other challenges to the final MATS rule were 
unanimously rejected in White Stallion and left undisturbed by the 
Supreme Court's decision in Michigan. This action does not provide an 
opportunity for stakeholders to re-litigate issues previously decided 
in White Stallion or to raise new objections to the MATS rule that 
could have been, but were not, raised in that case.

C. Affirmation of the Appropriate and Necessary Finding

    The Administrator has weighed the cost of MATS against other 
relevant considerations in determining that it remains appropriate and 
necessary to regulate HAP emissions from EGUs. These other 
considerations include prior conclusions reached regarding the 
significant hazards to public health and the environment from HAP 
emissions from EGUs, and the agency's prior determination that these 
hazards will not be addressed through imposition of the requirements of 
the CAA. The Administrator's conclusion that, on balance, these factors 
support the appropriate finding is presented in the proposed 
supplemental finding, see 80 FR 75038-39 (Section IV.D. Incorporating 
Cost Into the Appropriate Finding). The supplemental analysis presented 
in this final notice and conducted in response to comments further 
supports the conclusion that the cost of compliance with MATS is 
reasonable and, thus, the Administrator determines that the 
supplemental analysis supports and does not alter the results of the 
proposed finding. Based on these conclusions, the EPA confirms that the 
preferred cost approach provides an independent basis to support the 
determination that a consideration of cost does not cause the agency to 
alter its previous conclusion that regulation of HAP emissions from 
EGUs is appropriate and necessary.
    The EPA also concludes that the formal benefit-cost analysis 
contained in the RIA for MATS provides an independent basis to support 
the finding that a consideration of cost does not cause us to alter our 
determination that it is appropriate and necessary to regulate HAP 
emissions from EGUs. This conclusion is explained in detail in the 
proposed supplemental finding. See 80 FR 75039-41 (Section V. 
Consideration of Benefit-Cost Analysis in the MATS RIA). Although the 
EPA does not view formal benefit-cost analysis as required to support 
the appropriate finding, the final RIA demonstrates that the benefits 
(monetized and non-monetized) of MATS are substantial and far outweigh 
the costs. Id. In fact, the monetized benefits exceed the cost by 3 to 
9 times.
    Based on all of these considerations, the Administrator finds that 
the preferred approach and the benefit-cost analysis in the RIA for 
MATS each provide alternative independent bases to support the 
conclusion that a consideration of cost does not cause the agency to 
alter its previous determination that it is appropriate to regulate HAP 
emissions from EGUs. For all these reasons, the Administrator affirms 
that it is appropriate and necessary to regulate coal- and oil-fired 
EGUs under CAA section 112 and that these sources are properly listed 
as an affected source category under CAA section 112(c).

IV. Public Comments on the Proposed Supplemental Finding

    This final action is in response to the Supreme Court's ruling that 
the agency erred by not considering cost in the initial determination 
that regulation of HAP emissions from EGUs is appropriate under CAA 
section 112. In the proposed supplemental finding, the EPA provided 
detailed information on how the agency has added such a consideration 
of cost and further explained why including such consideration does not 
alter the agency's previous determination. The EPA specifically 
requested comment on the proposed supplemental finding and on the 
companion Legal Memorandum.
    The EPA received a number of comment submissions from groups 
representing states, tribes, industries, environmental organizations, 
health organizations, and others. The EPA has taken all the submitted 
comments into consideration in preparing this final supplemental 
finding. All of the comments have been summarized and the EPA has 
provided detailed responses to the significant comments either here in 
this final notice or in the RTC document for the supplemental finding 
available in the rulemaking docket.

A. Comments on Considerations of Cost

    This Section of the notice addresses comments and responses to the 
EPA's preferred approach to consideration and incorporation of costs, 
analytical issues such as the use of compliance costs for the entire 
power sector, the use of the compliance cost and impact estimates from 
the final MATS RIA, and responses to comments on the cost metrics used 
to

[[Page 24428]]

evaluate the reasonableness of the MATS compliance costs.
1. The EPA's Preferred Approach to Considering and Incorporating Costs 
in Its Appropriate and Necessary Finding
    Comment: Numerous commenters supported the EPA's preferred approach 
to considering cost and asserted that the approach is ``well-suited'' 
to fulfilling the agency's obligation under the statute and the 
Michigan decision. These commenters also approved of the four cost 
metrics selected by the agency to evaluate the cost reasonableness of 
the compliance costs--revenues, capital expenditures, retail 
electricity rates, and impact on reliability. Many commenters stated 
that these are relevant measures for evaluating costs to the utility 
sector, and another pointed out that these are the types of metrics 
that are taken into consideration by electric companies.
    Moreover, many commenters strongly supported the EPA's preferred 
approach of weighing a consideration of cost against the many 
advantages of regulating HAP emissions from EGUs already identified by 
the agency. Several federally-recognized Indian tribes and inter-tribal 
organizations commented in support of the agency's methodology of 
weighing the hazards of HAP emissions from EGUs to public health and 
the environment against the costs of compliance. These commenters 
emphasized that this method of analysis would allow for consideration 
of important tribal interests and threats to longstanding Indian 
cultural traditions and critical social practices of fishing and fish 
consumption. Moreover, the tribal commenters also added that a benefit-
cost analysis would not fully account for the MATS rule's impact on the 
tribes and pointed to the United States' treaty obligations to protect 
tribal rights and the resources of American Indians and tribes as an 
important consideration supporting the finding. Commenters supporting 
the EPA's preferred cost approach pointed out that the statute and the 
Michigan decision do not require the Administrator to perform a 
benefit-cost analysis in order to adequately consider cost and make a 
determination that it is appropriate and necessary to regulate EGUs for 
HAP emissions. These commenters cited the lack of statutory text 
requiring such an analysis or monetization of benefits before those 
benefits may be considered by the Administrator, as well as the fact 
that limiting the agency's appropriate determination to this framework 
would thwart goals clearly identified by Congress--such as limiting 
grave harms associated with pollutants that Congress had already deemed 
hazardous.
    Other commenters, however, claimed that the EPA's preferred 
approach to considering cost for purposes of CAA section 112(n)(1)(A) 
does not rationally balance the costs of the rule against the public 
health and environmental harms previously identified. Those commenters 
acknowledged that the Supreme Court's decision in Michigan did not 
require the EPA to perform a ``formal cost-benefit analysis,'' in order 
to satisfy the agency's obligation to consider cost as part of its CAA 
section 112(n)(1)(A) appropriate and necessary finding, but they argue 
that any rational balancing necessarily requires the EPA to compare the 
costs of compliance with the rule to the quantified and monetized 
benefits of the rule. One commenter claimed that because it was the 
EPA's position in the proposed supplemental finding that ``the 
significant hazards to public health and the environment from HAP 
emitted by EGUs (and the substantial reductions in HAP emissions 
achieved by MATS. . .) should be weighed against the costs of 
compliance,'' 80 FR 75028, that EPA had ``acknowledge[d]'' that its 
task was to assess whether the rule's benefits outweigh the costs. 
Another commenter argued that Michigan required such a comparison, 
based on the portion of the decision which stated that ``[o]ne would 
not say that it is even rational, never mind `appropriate,' to impose 
billions of dollars in economic costs in return for a few dollars in 
health or environmental benefits.'' 135 S. Ct. 2699, 2707 (U.S. 2015). 
The commenter alleged that the Supreme Court therefore required the EPA 
to weigh the rule's annual compliance costs of $9.6 billion against the 
monetized benefits from reducing HAP alone (not other pollutants) and 
determine whether the rule has positive net benefits (i.e., benefits 
exceed costs), in order to satisfy its obligation to consider cost 
under CAA section 112(n)(1)(A). Similarly, another commenter noted that 
the EPA's Guidelines (U.S. EPA, 2010) provide that the ``foundation'' 
for a benefit-cost analysis is ``that a policy's net benefits to 
society be positive.''
    Response: The EPA maintains that its preferred approach, where 
costs are considered in light of the significant hazards to public 
health and the environment posed by HAP emissions from EGUs, is 
consistent with the statute and the Michigan decision. CAA section 
112(n)(1)(A) states that ``the Administrator shall regulate [EGUs] . . 
. if the Administrator finds such regulation is appropriate and 
necessary.'' The Supreme Court's directive to the agency was to 
consider cost when making this initial decision, but the Court 
explicitly stated that ``[i]t will be up to the Agency to decide (as 
always, within the limits of reasonable interpretation) how to account 
for cost.'' 135 S. Ct. at 2711. Given the broad discretion afforded the 
Administrator by both the statute and the Supreme Court's decision in 
Michigan, the agency reasonably interpreted CAA section 112(n)(1)(A) to 
require the Administrator to apply her expert judgment in weighing 
several considerations in order to determine whether it is appropriate 
and necessary to regulate HAP emissions from EGUs.
    As discussed above in Section II.C and III.A, the agency evaluated 
the reasonableness of the regulation's cost of compliance by comparing 
that cost to metrics relevant to the utility sector: revenues, 
expenditures (including capital and production costs), and retail 
electricity rates, and also the impact that compliance with the CAA 
section 112(d) standards would have on the power sector's ability to 
provide a reliable source of electricity. After concluding the costs of 
MATS are reasonable based on these metrics, the agency confirmed that 
the industry could comply with MATS without unreasonably increasing 
electricity prices or undermining the reliability of the electric grid.
    The Administrator has taken this consideration of cost and weighed 
it against the other findings that were part of the EPA's prior 
evaluation of whether regulation of HAP emissions from EGUs is 
appropriate and necessary. See Section II.B above. The prior record 
supporting the original appropriate and necessary finding includes the 
agency's prior conclusions, based on the scientific evidence, that HAP 
emissions from EGUs pose significant hazards to public health and the 
environment and the conclusion that those emissions will not be 
addressed through imposition of other requirements of the CAA. The EPA 
also previously concluded that EGUs are by far the largest remaining 
source of mercury, selenium, hydrogen chloride, and hydrogen fluoride 
emissions, accounting for half or more of all U.S. anthropogenic 
emissions of such HAP, and that EGUs contribute a considerable 
percentage of all U.S. anthropogenic emissions of arsenic, chromium, 
nickel, and other metallic HAP emissions. The agency also confirmed the 
availability of controls to reduce these HAP emissions from EGUs. In 
addition, the agency found that MATS would achieve significant 
reductions of EGU emissions of HAP and a failure to regulate would 
result in continued emissions of significant

[[Page 24429]]

volumes of HAP emissions without any requirement to reduce or monitor 
those emissions. The finding also documented the persistent nature of 
HAP such as mercury, which, once emitted, can be re-emitted in the 
future, thereby resulting in continued contribution to mercury 
deposition and associated health and environmental hazards. In making 
the finding, the EPA noted the statutory goal of reducing the inherent 
hazards associated with HAP emissions and reducing the risks posed by 
such emissions, including risks to the most exposed and sensitive 
members of the population. 80 FR 75038. Based on all of these factors, 
the Administrator finds that, after considering cost, it remains 
appropriate and necessary to regulate HAP emissions from EGUs.
    Not only does the agency's preferred approach comport with the 
statute and the Michigan decision, it also has the advantage of 
allowing the Administrator to consider the full range of factors 
relevant to the appropriate and necessary determination. Nothing in the 
statute or in Michigan requires the EPA to ignore advantages of 
regulation that cannot be represented by monetary values. The agency's 
preferred approach permits the Administrator to weigh impacts to 
society that are not easy, or in some cases are impossible, to quantify 
or monetize, but are no less real than any other advantage of 
regulation.\18\ For example, the Administrator has taken into account 
distributional concerns (established as part of the agency's risk 
assessments performed for the prior affirmation of the appropriate and 
necessary finding) that found more severe risks from EGU HAP emissions 
to the most sensitive individuals, particularly subsistence fishers. 
Indeed, the EPA's Guidelines (U.S. EPA, 2010), cited by commenters who 
insist a benefit-cost analysis or some showing of economic ``net 
positive benefit'' of regulation is required under CAA section 
112(n)(1)(A), explicitly acknowledges the limitations of purely 
economic analyses. ``It is important to note that economic analysis is 
but one component in the decision-making process . . . Other factors 
that may influence decision makers include enforceability, technical 
feasibility, affordability, political concerns, and ethics, to name but 
a few.'' \19\
---------------------------------------------------------------------------

    \18\ Though not explicitly addressed at proposal, the interests 
raised by the federally-recognized Indian tribes and inter-tribal 
organizations--such as the cultural impacts to tribes and the 
furtherance of the United States' treaty obligations to tribes--are 
an example of the type of societal value that cannot be monetized. 
The Administrator recognizes the importance of such interests and, 
though they are not necessary in affirming the finding here, only 
weigh in favor of the Administrator's conclusion that it remains 
appropriate and necessary to regulate EGUs for HAP emissions.
    \19\ See Guidelines at p. 1-2.
---------------------------------------------------------------------------

    Moreover, the EPA notes that most commenters opposed to the EPA's 
preferred approach appear to dismiss outright the advantages of 
regulating HAP emissions, including the EPA's assessment, as 
articulated in the Legal Memorandum, that such regulation furthers the 
goal of CAA section 112 to obtain prompt, permanent, and ongoing 
reductions in significant volumes of HAP emissions that pose hazards to 
public health and/or the environment. No commenter has demonstrated 
that any of the HAP that are emitted from EGUs are chemically different 
than HAP emitted from other stationary sources or provided any other 
support for a conclusion that the inherent risks associated with HAP 
emissions that were acknowledged by Congress are somehow inapplicable 
to HAP emissions from EGUs.
    Instead, these commenters dismiss the agency's preferred approach 
without much analysis and conclude that the only rational consideration 
of cost is a bare comparison of the rule's costs of compliance with its 
monetized HAP-specific benefits, and the only way the EPA may find 
regulation to be appropriate and necessary under CAA section 
112(n)(1)(A) is if that comparison results in a ``positive net 
benefit.'' The EPA disagrees that a benefit-cost analysis, particularly 
one that only accounts for monetized HAP specific benefits, or a 
finding of an economic positive net benefit, is required by CAA section 
112(n)(1)(A) to determine whether regulation of HAP emissions from EGUs 
is appropriate and necessary, nor does the agency agree that such an 
analysis is the better approach.
    The Supreme Court explicitly declined to mandate that the 
Administrator perform a benefit-cost analysis to satisfy her obligation 
to consider cost under CAA section 112(n)(1)(A). Specifically, the 
Court stated, ``We . . . do not hold that the law unambiguously 
required the Agency, when making this preliminary estimate, to conduct 
a formal cost-benefit analysis in which each advantage and disadvantage 
is assigned a monetary value.'' 135 S. Ct. at 2711 (emphasis added). 
Some commenters nonetheless insist that the Supreme Court intended the 
EPA's consideration of cost to be circumscribed to a comparison with 
monetized benefits, and specifically HAP-specific monetized benefits, 
because the Court proffered one scenario of when regulation would not 
be appropriate, where a rule would impose ``billions of dollars in 
economic cost in return for a few dollars in health or environmental 
benefits.'' 135 S. Ct. at 2707. The Court's identification in dicta of 
one hypothetical, portrayed in the extreme for emphasis, does not 
establish a statutorily required formula by which the EPA must consider 
cost, particularly when the Court explicitly held, ``[i]t will be up to 
the Agency to decide (as always, within the limits of reasonable 
interpretation) how to account for cost.'' 135 S. Ct. at 2711. There 
is, thus, no basis for commenters' assertion that a formal benefit-cost 
test is the only permissible way for the agency to consider cost.
    We note that, in insisting that the Administrator is required to 
perform a benefit-cost analysis to satisfy her obligation to consider 
cost, the commenters also assert that the EPA may not rely on co-
benefits associated with reductions in non-HAP emissions in weighing 
the advantages and disadvantages of regulation under CAA section 
112(n)(1)(A).\20\ Under the agency's preferred approach, however, the 
EPA did not consider co-benefit impacts at all. As summarized above in 
Section II.B, the public health and environmental risks from mercury 
and non-mercury HAP emissions from EGUs are significant, and it is 
these risks, not co-benefits associated with reductions in ancillary 
emissions, that inform the Administrator's finding that it is 
appropriate to regulate under the preferred approach.
---------------------------------------------------------------------------

    \20\ We disagree with commenters' position regarding the proper 
way to conduct a formal benefit-cost analysis and address the 
comments on this issue below in Section IV.B.
---------------------------------------------------------------------------

    Finally, while the EPA disagrees that section 112(n)(1)(A) in any 
way requires the Administrator to determine that regulation will have 
monetized positive ``net benefits'' to society, the record amply 
demonstrates that the advantages of MATS for society do in fact 
outweigh the disadvantages. The Administrator found that regulation of 
HAP emissions from EGUs has many advantages, chief among them is 
furthering Congress' goal of protecting the public, including sensitive 
populations, from risks posed by HAP emissions by reducing the volume 
of, and thus, the exposure to, those harmful pollutants. In light of 
the risk findings and the determination that the regulations are cost 
reasonable and will not impair the power sector's primary function of 
providing reliable electricity at a reasonable cost to consumers, the 
Administrator concludes that ``the significant advantages of

[[Page 24430]]

regulating these emissions outweigh the costs of regulation.'' See 80 
FR 75039. We agree that the appropriate and necessary finding requires 
the Administrator to determine that regulating HAP emissions from EGUs 
will, on the whole, be beneficial as opposed to detrimental to society. 
But the agency does not agree that whether a regulation is beneficial 
must be determined by weighing only those considerations that can be 
monetized. There are many societal values--such as protecting the most 
vulnerable among us--that could never be reduced to a monetary value. 
In sum, there is no basis to conclude that the finding requires the EPA 
to show that regulation of EGUs under CAA section 112 provides greater 
monetized benefits, much less HAP-specific monetized benefits, than 
costs.
    Comment: Several commenters stated that the EPA's finding that 
regulation of EGUs is ``appropriate and necessary'' after consideration 
of a number of factors is arbitrary and capricious because the EPA's 
alleged balancing of several factors is ``indecipherable,'' and because 
commenters assert that the agency lists the factors it considered 
without explaining the relative weight of each factor, and how that 
weighing supports the agency's finding.
    The commenters alleged that, in the proposed supplemental finding, 
the EPA sets out the factors that it has considered and then declares 
``by fiat'' that the regulation is appropriate, without comparing the 
significance of the factors on either side or explaining how the 
different factors relate to one another. One commenter stated that, 
even if the EPA had discretion to use an approach like the multi-factor 
balancing one, the agency ``must cogently explain why it has exercised 
its discretion in a given manner,'' citing Motor Vehicle Mfrs. Ass'n v. 
State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 48-49 (U.S. 1983). 
Similarly, another commenter alleged that, by failing to articulate and 
explain its decision, the agency makes meaningful comment on its 
conclusion impossible, citing Appalachian Power Co. v. EPA, 249 F.3d 
1032, 1055 (D.C. Cir. 2001).
    Response: It is well within the bounds of the EPA's authority to 
interpret CAA section 112(n)(1)(A) as directing the Administrator to 
exercise her discretion in making a determination based on the 
consideration of a number of factors, including cost, as to whether it 
is appropriate and necessary to regulate HAP emissions from EGUs. 
Commenters took issue with the use of the EPA's method of analysis, but 
the approach the agency has taken here, which sets out the many 
relevant factors, including cost, the Administrator weighed and 
considered, is a reasonable and fitting response to Congress' open-
ended instruction to the Administrator to determine whether a 
regulation of EGUs is ``appropriate and necessary.''
    As noted by the D.C. Circuit Court, ``[a]gencies routinely employ 
multi-factor standards when discharging their statutory duties, and we 
have never hesitated to uphold their decisions when adequately 
explained.'' PDK Labs. v. DEA, 438 F.3d 1184, 1194 (D.C. Cir. 2006). 
Moreover, a totality-of-the-circumstances approach can be particularly 
appropriate when a statute confers broad discretionary authority. See, 
e.g., Catawba Cty. v. EPA, 571 F.3d 20, 39 (D.C. Cir. 2009); Chippewa & 
Flambeau Improvement Co. v. FERC, 325 F.3d 353, 358 (D.C. Cir. 2003) 
(noting, ``[b]y enacting the ``necessary or appropriate'' standard [in 
section 309 of the Federal Power Act, 16 U.S.C. 825h], the Congress 
invested the Commission with significant discretion,'' and affirming 
FERC's use of a balancing of relevant factors as reasoned decision 
making). Here, CAA section 112(n)(1)(A) provides the broad directive 
that the Administrator shall regulate HAP emissions from EGUs under 
section 112 if she finds that such regulation is appropriate and 
necessary after considering the results of the CAA section 112(n)(1)(A) 
study. Michigan establishes that the Administrator must also consider 
the costs of regulation as part of her determination, but the Court's 
directive to ``pay[] attention to the advantages and disadvantages'' of 
regulation supports the EPA's choice to employ an approach that weighs 
a number of factors before reaching a conclusion.
    We also disagree with the commenters who suggest the proposed 
notice failed to explain and articulate the basis for the finding. The 
Supreme Court has said that a rule will be found to be arbitrary and 
capricious ``if the agency has relied on factors which Congress has not 
intended it to consider, entirely failed to consider an important 
aspect of the problem, offered an explanation for its decision that 
runs counter to the evidence before the agency, or is so implausible 
that it could not be ascribed to a difference in view or the product of 
agency expertise.'' State Farm, 463 U.S. at 43 (U.S. 1983). Further, an 
agency is required to give ``some definitional content'' to vague 
statutory terms by ``defining the criteria it is applying,'' because a 
refusal to do so is equivalent to ``simply saying no without 
explanation.'' Pearson v. Shalala, 164 F.3d 650, 660 (D.C. Cir. 1999). 
And finally, as cited by commenters, the courts have also held that the 
judicial branch cannot ``be compelled to guess at the theory underlying 
the agency's action.'' Appalachian Power Co. v. EPA, 249 F.3d 1032, 
1055 (D.C. Cir. 2001).
    But here, the EPA has not relied on factors that Congress has 
prohibited it to consider, nor have commenters demonstrated that there 
is an aspect to the problem that the EPA has ignored. There is no 
question as to the theory underlying the agency's action; the agency 
has given meaning to its understanding of the appropriate and necessary 
determination by laying out all of the many factors and criteria that 
it considered based on a thorough examination of the statute in light 
of the Michigan decision. See 80 FR 75038-39 and Legal Memorandum. In 
choosing how to consider cost, the EPA took note of section 
112(n)(1)(A)'s silence on the question, and the Supreme Court's 
direction that on remand the agency was to reasonably interpret the 
statute to decide how to account for cost. 135 S.Ct. at 2711. 
Furthermore, the agency heeded the D.C. Circuit's previous decisions 
holding that in other statutory provisions where the EPA is required to 
consider cost, the agency is prohibited from adopting a standard where 
the cost of doing so would be ``exorbitant,'' ``excessive,'' or 
``unreasonable.'' See Legal Memorandum at 19 (citations omitted). The 
EPA also considered Congress' statement issued with the 1990 CAA 
Amendments that its goal ``has been to promote the public health and 
welfare and the productive capacity of our nation.'' 80 FR 75031 
(citing ``A Legislative History of the Clean Air Act Amendments of 
1990,'' Vol. II., p. 3187). Based on these considerations and 
consistent with the Supreme Court's direction in Michigan, the EPA 
developed an approach to considering cost that acknowledges the unique 
function of EGUs and their importance to the power grid. Specifically, 
the EPA looked to whether the cost of potential section 112(d) 
standards is reasonable and whether the standards can be implemented 
without impairing the industry's ability to provide reliable 
electricity at a reasonable cost to consumers.
    The EPA used four metrics to evaluate the cost reasonableness of 
MATS and concluded that the costs associated with MATS are consistent 
with historical costs incurred in the power sector. 80 FR 75033-36. The 
EPA also confirmed that the power sector can reasonably absorb the 
compliance costs associated with MATS without impairing its ability to 
perform its primary and unique function --the generation, transmission,

[[Page 24431]]

and distribution of reliable electricity at a reasonable cost, i.e., 
its ``productive capacity.'' 80 FR 75038. In addition, given Congress' 
directive in section 112(n)(1)(B) to examine the cost of mercury 
controls as part of the Mercury Study, and the Michigan court's 
implication of the relevance of section 112(n)(1)(B)'s reference to 
cost, the EPA also considered the declining cost of technologies 
available to control mercury, as well as the cost of controls for other 
HAP emissions from EGUs. 80 FR 75036-38. All of these cost metrics 
support a conclusion that the costs of MATS are reasonable.
    The commenters are also incorrect that the Administrator failed to 
provide any sense of the relative weight or importance of the different 
factors considered under the agency's preferred approach. Commenters 
complain that the Administrator's balancing of the factors against each 
other is ``indecipherable,'' but it seems instead that they simply 
disagree that the costs are reasonable, that HAP emissions from EGUs 
pose hazards to public health and the environment, that the finding can 
consider harms to the environment, and that there is any benefit to 
regulating HAP emissions. As explained above, we disagree with the 
commenters' interpretations and further note that the bright line tests 
and thresholds they appear to prefer are not required under the statute 
or the case law. The D.C. Circuit Court has found that ``[a]n agency is 
free to adopt a totality-of-the-circumstances test to implement a 
statute that confers broad authority, even if that test lacks a 
definite ``threshold'' or ``clear line of demarcation to define an 
open-ended term.'' '' Catawba Cty. v. EPA, 571 F.3d at 37 (citation 
omitted) (noting that ``EPA's use of a multi-factor analysis is not in 
and of itself unreasonable just because it lacks quantitative 
standards''). Rather than requiring a quantification of the weight of 
each factor, courts have affirmed balancing tests where the agency 
provides an explanation of the relative significance of its 
considerations. See PDK Labs. v. U.S. DEA, 438 F.3d at 1194 (finding 
that the Deputy Administrator's explanation that one piece of evidence 
was by itself sufficient to induce action was enough of an explanation 
of the relative importance of that evidence to her decision); Chippewa 
v. FERC, 325 F.3d at 357-359 (deferring to FERC's ``expert judgment'' 
in determining on a case-by-case basis whether a reservoir is 
``necessary or appropriate,'' where the Commission has made clear the 
emphasis it places on the positive impact on downstream generation).
    In its proposed supplemental finding and the Legal Memorandum, the 
EPA pointed out section 112(n)(1)(A)'s silence regarding the weight to 
be given to the relevant factors in determining whether it is 
``appropriate'' to regulate HAP emissions from EGUs. 80 FR 75030; Legal 
Memorandum at 19. Given this statutory silence, the EPA concluded that 
it was reasonable to consider the objectives of section 112 in deciding 
how to assign relative weight to the factors under consideration. See 
Legal Memorandum at 20. Taking note of Congress' determination in 
section 112 that HAP emissions are inherently harmful and the statutory 
goal of protecting the most sensitive populations from that harm, the 
agency interpreted ``section 112(n)(1) . . . not [to] support a 
conclusion that cost should be the predominant or overriding factor.'' 
80 FR 75030. Cost, as the agency explained, is one of the factors to be 
considered. The EPA further emphasized the relative importance of its 
consideration of the public health and environmental risks in its 
analysis by noting that ``[i]f EPA were to conclude, prior to 
considering costs, that [HAP emissions from EGUs] posed no risk or that 
such risks had already been addressed by other provisions of the CAA 
(most notably the Acid Rain Program), a decision that regulation is not 
appropriate could be made without considering cost. Yet, the statutory 
focus on protecting public health and the environment suggests that the 
EPA could not make a finding under CAA section 112(n)(1)(A) solely on 
the basis of cost.'' Legal Memorandum at 25-26. The relative weight 
given to the EPA's consideration of cost is also tied, in this case, to 
its finding that maximum achievable control technology (MACT) standards 
in MATS can be implemented at a cost that will not impair the utility 
sector's ability to provide reliable electricity at a reasonable cost. 
As a 7th Circuit Court case cited by commenters acknowledges, ``one 
factor of great weight may offset several which lean slightly in the 
other direction.'' Volkman v. Ryker, 736 F.3d 1084, 1092 (7th Cir. 
2013). Not all considerations are required to be given equal weight, 
and here, given the statutory goals of CAA section 112 and the EPA's 
finding that the cost of MATS is reasonable, it was correct for the EPA 
to place importance on reducing the significant hazards to public 
health and environment posed by HAP emissions from EGUs.
    Finally, the Administrator must exercise her judgment in deciding 
whether the costs of regulation justify its advantages and the agency 
need not demonstrate that her decision is the same decision that would 
be made by another Administrator or a reviewing court. An agency action 
need not be the only approach or even the approach that a reviewing 
court might find most reasonable. Instead, the test is ``whether the 
decision was based on a consideration of the relevant factors and 
whether there has been a clear error of judgment.'' Citizens to 
Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (U.S. 1971); 
see also ExxonMobil Gas Mktg. Co. v. FERC, 297 F.3d 1071, 1083-1084 
(D.C. Cir. 2002) (``Accordingly, we will uphold the Commission's 
application of the test as long as it gives ``reasoned consideration to 
each of the pertinent factors'' and articulates factual conclusions 
that are supported by substantial evidence in the record.'' (citation 
omitted)). Reasonable people, and different decision-makers, can arrive 
at different conclusions under the same statutory provision, but those 
conclusions must be reasonable under the statutory structure. The 
agency does not agree with the commenters' positions that HAP emissions 
from EGUs do not pose significant hazards to public health and the 
environment and that the cost of compliance with MATS is unreasonable. 
This factual disagreement with the commenters does not render the 
agency's statutory interpretation of how to consider cost and the 
Administrator's weighing of the relevant factors arbitrary. Absent 
clear direction from the statute and a demonstration that the 
Administrator has made a ``clear error of judgment,'' the EPA's 
interpretation and analysis should govern.
    Comment: Several commenters stated that the EPA's cost analysis is 
unlawful and does not meet the Supreme Court's directive because it 
focuses mainly on whether the power sector can absorb the cost of 
compliance. The commenters argued that the EPA's focus on the 
``affordability'' of controls compared to revenues, capital 
expenditures, and impacts on electricity rates does not satisfy the 
statutory prerequisite to engage in some meaningful balancing analysis 
of costs and benefits. Rather, the commenters alleged that the EPA's 
consideration of cost in this manner is a ``cost-only'' approach, and 
does not meet the Supreme Court's instruction to consider both 
advantages and disadvantages of regulation. One commenter posited that 
by arbitrarily placing emphasis on the economic well-

[[Page 24432]]

being of the power industry rather than on whether the costs of 
compliance are appropriate when comparing them to the benefits achieved 
from reducing HAP, ``an industry that was financially strained would 
not be subject to regulation, regardless of the human health and 
environmental risks posed from HAP emissions from those sources, merely 
because the costs of compliance would constitute too high a percentage 
of the industry's revenue.'' Such an outcome, the commenter argued, 
would be inconsistent with CAA section 112's objective to protect the 
public from the risks posed by HAP.
    Response: The EPA disagrees that its consideration of cost in the 
proposed supplemental finding was confined to an analysis of whether 
the power sector could absorb the cost of compliance. The agency did 
not only consider whether the cost of regulation under CAA section 112 
was reasonable, but also weighed the costs of compliance with MATS 
against previously established conclusions about the significant risk 
and harm to public health and the environment attributable to HAP 
emissions from EGUs. See 80 FR 75038-39; Legal Memorandum at 20, 25-26. 
It was this latter step that met the Supreme Court's directive to 
consider both the advantages and disadvantages of regulation.
    Commenters' preference for a different approach that would have 
compared cost of compliance to monetized benefits of reducing HAP does 
not undermine the validity of the EPA's interpretation of CAA section 
112(n)(1)(A) and Michigan's requirement to consider cost. As the EPA 
explained in the Legal Memorandum, and as explained below in response 
to comments, the agency concluded that commenters' preferred cost 
approach of comparing costs to monetized HAP-specific benefits is not 
required by CAA section 112 or CAA section 112(n)(1), nor does the 
statute provide the tools to quantify and monetize benefits 
attributable to reductions in HAP emissions from EGUs or any other 
source category. Legal Memorandum at 24. In addition, given the known 
scientific limitations on the ability to quantify and/or monetize HAP-
specific benefits, there is no statutory basis for the assertion that 
the agency must decline to regulate HAP emissions from EGUs based on a 
comparison of costs to any HAP-specific benefits that could be 
monetized, and indeed it might not even be reasonable to do so. Id.
    The hypothetical scenario posed by commenters regarding how the 
EPA's approach would apply to a financially strained industry is 
neither realistic nor relevant. The hypothetical they pose could never 
occur as cost considerations are not relevant to listing decisions for 
any source category besides EGUs. Moreover, nothing in the EPA's 
preferred approach would require the EPA to ignore the potential 
benefits (e.g., reduced risk of cancer) of regulating a financially 
strapped industry based solely on a determination regarding the 
reasonableness of compliance costs for that industry.
2. Use of 2011 final MATS RIA costs and impacts
    Comment: Some commenters supported the EPA's reliance upon the 
final MATS RIA for compliance cost estimates used in the proposed 
notice. One commenter noted that RIA cost estimates incorporated the 
actual MATS regulations as the compliance target, so they are much more 
reliable than the type of pre-regulatory estimate anticipated by the 
statute. In particular, one commenter expressed confidence in the 
estimates because the EPA derived those estimates using the Integrated 
Planning Model (IPM), which the agency has relied on for over 20 years 
to forecast the cost and emissions impacts of environmental policy. 
Some commenters noted that the EPA's use of the first compliance year, 
2015, to estimate costs ensures that its cost consideration in this 
action is based on the highest cost year, and therefore is a 
``representation of the maximum impact.''
    Several commenters stated that some estimates of industry 
compliance costs have been much lower than those projected by the EPA 
in the final MATS RIA. One study cited by commenters found that the 
costs of control technologies have been less expensive and more 
effective than assumed in the RIA, and therefore the actual cost of 
complying with MATS has been significantly less than estimated by the 
EPA. This analysis was based on existing contracts for the installation 
of air pollution control systems, experience with the performance of 
emissions control technologies, and assessments of the amount of 
pollution control capacity installed by the power sector to comply with 
MATS. This analysis estimated that industry's actual annual compliance 
costs are currently approximately $2 billion, which is less than one-
quarter of the $9.6 billion annual cost that the EPA estimated for 
MATS.\21\ The commenters stated that the apparent dramatic cost 
reductions are the result of three key factors: (1) Improvements in the 
materials (sorbents) used to control acid gases and mercury have 
resulted in reduced operating costs and increased efficiency; (2) far 
fewer power plants than the EPA estimated have required installation of 
high-cost pollution controls, such as fabric filters and flue gas 
desulfurization systems (``FGD'' or ``scrubbers'') or system upgrades; 
and (3) natural gas prices have been significantly lower than the EPA 
projected, reducing the cost of gas conversion and related compliance 
strategies.
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    \21\ White Stallion Energy Center, LLC v. EPA, D.C. Circuit Case 
No. 12-1100, Motion of Industry Respondent Intervenors to Govern 
Future Proceedings, filed September 24, 2015 (see Declaration of 
James E. Staudt and accompanying exhibits).
---------------------------------------------------------------------------

    Other commenters contended that the EPA's use of the MATS RIA cost 
estimates does not accurately reflect costs of compliance. One 
commenter said the EPA significantly overestimated the capability of 
dry sorbent injection (DSI) by assuming that it could be used to meet 
the acid gas emission standards regardless of the size of the unit. The 
commenter also alleged that the EPA incorrectly projected that wet 
scrubbers would not be widely required to meet the proposed emission 
limits, and that the MATS RIA estimates therefore underestimated 
compliance costs and the number of retirements. Other commenters 
asserted that the EPA's alleged underestimate of retirements generally 
demonstrates that the costs of the rule are not reasonable and that the 
agency's assessment was based on flawed assumptions. Commenters 
disagreed with the EPA's focus on projected compliance costs and 
generation capacity estimated at the time of MATS promulgation and 
suggested that the EPA should consider actual costs and retirements 
that have occurred since the promulgation of MATS to update the 
assumptions made in the RIA instead of using assumptions that the 
commenters argue are unrepresentative. The commenters alleged that the 
EPA's continued use of those assumptions when actual, new data are 
available is arbitrary and capricious.
    Response: The EPA maintains that its use of compliance cost and 
impact estimates from the MATS RIA for the year of 2015 is a reasonable 
way to assess expected costs of MATS for purposes of analyzing the cost 
reasonableness of the rule as part of its consideration of cost for the 
appropriate and necessary finding. As noted in the proposed 
supplemental finding and the Legal Memorandum, under the statutory

[[Page 24433]]

structure of CAA section 112, the CAA section 112(n)(1)(A) finding is a 
preliminary determination that is made significantly before the CAA 
section 112(d) standards would be promulgated. The suggestion by some 
commenters that the EPA is required to conduct a new analysis that 
attempts to estimate the actual costs incurred through compliance with 
the final CAA section 112(d) standards is thus not consistent with the 
statute. Moreover, the independent analysis cited by several commenters 
suggests that the actual costs of compliance have been much lower than 
the cost estimates contained in the MATS RIA.
    Both the statute and the Michigan decision support the EPA's 
reliance on the cost estimates from the RIA. First, any cost analysis 
included in an ``initial decision to regulate,'' Michigan, 135 S. Ct. 
at 2709, must precede any regulations flowing out of that decision. 
Therefore, in considering the costs of compliance as part of its 
appropriate and necessary finding, it is reasonable for the EPA to look 
at what types of cost information, such as the MATS RIA cost estimates, 
would be available at this threshold stage. 80 FR 75030; Legal 
Memorandum at 19-21. In addition, nothing in the Michigan decision 
precludes the EPA's use of the existing cost information in the record 
in addressing the agency's obligation on remand to consider cost as 
part of the appropriate and necessary finding. In Michigan, the Court 
rejected arguments that it could conclude that the agency had properly 
considered cost based on the agency's consideration of costs in other 
stages of the rulemaking (e.g., in setting the emission standards or in 
the RIA). The Court emphasized that the agency itself had not relied 
upon these rationales at the finding stage. 135 S. Ct. 2710-11 (citing 
SEC v. Chenery Corp., 318 U.S. 80, 87 (1943)). However, the Court left 
open the possibility that the economic analyses the agency had already 
conducted could suffice to satisfy its obligation to consider costs as 
part of the appropriate finding. Id. at 2711.
    We also disagree with the suggestion by commenters that the entire 
economic analysis that the EPA performed in the MATS RIA is invalid 
simply because of a discrepancy between modeling projections and actual 
outcomes. See, e.g., EME Homer City Generation, L.P. v. EPA, 795 F.3d 
118, 135-36 (D.C. Cir. 2015) (``We will not invalidate EPA's 
predictions solely because there might be discrepancies between those 
predictions and the real world. That possibility is inherent in the 
enterprise of prediction. The best model might predict that the 
Nationals will win the World Series in 2015. If that does not happen, 
you can't necessarily fault the model.''). The EPA used the best 
available data and modeling information, in accordance with Office of 
Management and Budget (OMB) \22\ and EPA guidance (U.S. EPA, 2010), and 
provided the public with the opportunity to comment on all aspects of 
its analysis in developing the final MATS RIA.
---------------------------------------------------------------------------

    \22\ 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. Docket ID No. EPA-
HQ-OAR-2009-0234-20507.
---------------------------------------------------------------------------

    The EPA disagrees with commenters who assert that the EPA 
underestimated the costs of particular control technologies. In 
response to comments received on the proposed MATS rule, the EPA 
reviewed control technology cost and performance assumptions and 
updated some of these assumptions in the final RIA. Additionally, in 
the response to comment section of the final MATS preamble, the EPA 
responds to a series of comments on the cost and performance 
assumptions of the control technologies in the RIA. For example, in 
Section VII.G.1 of the final MATS preamble, the EPA responds to 
comments regarding the technical applicability, cost, and performance 
of DSI, explaining that the ``representation of DSI in MATS compliance 
modeling is reasonable, is properly limited to applications that are 
technically feasible, and reflects a conservative approach to modeling 
future use of this technology.'' \23\ Furthermore, the EPA does not 
agree and the record does not support the assertion that the total 
costs projected in the RIA are underestimated as a result of the EPA's 
assumptions regarding the cost and performance of DSI and wet scrubber 
retrofits.
---------------------------------------------------------------------------

    \23\ 77 FR 9330, 9411.
---------------------------------------------------------------------------

    The EPA also disagrees with commenters that the number of 
retirements of coal- and oil-fired power plants that have occurred 
since the rule's promulgation indicates that the EPA's assumptions in 
the MATS RIA were flawed. Commenters argue that because there have been 
more retirements in recent years than the EPA predicted in the RIA 
would be attributable to MATS, that the EPA's assumptions are 
necessarily flawed. However, commenters fail to show that the 
additional retirements they cite are attributable to MATS. Coal-fired 
power plants shut down for reasons other than MATS. Numerous 
publications have pointed out that recent trends in the electric power 
industry, such as low natural gas prices and slow demand growth, have 
placed significant economic pressure on coal-fired power plants, even 
those that are compliant with MATS.\24\ Lower natural gas prices have 
made natural gas generation increasingly more competitive as compared 
to coal. Moreover, lower natural gas prices result in a reduction in 
wholesale electricity prices, leading to a reduction in the revenues 
received by some coal-fired generators. These and other factors lead to 
EGUs retiring, and they are unrelated to MATS.
---------------------------------------------------------------------------

    \24\ See, e.g., ``FirstEnergy's Largest Coal Plant Idled Due to 
Low Power Prices.'' March 11, 2016. Power Engineering News. 
Available at: http://www.power-eng.com/articles/2016/03/firstenergy-s-largest-coal-plant-idled-due-to-low-power-prices.8.leftinheritedbottom_standard_8.html.
    Mooney, Chris. 2015. ``How super low natural gas prices are 
reshaping how we get our power.'' The Washington Post. October 28. 
Available at: https://www.washingtonpost.com/news/energy-environment/wp/2015/10/28/how-super-low-natural-gas-prices-are-reshaping-how-we-get-our-power/.
    Larson, Aaron. 2016. ``Power Generation Industry Faces 
Fundamental Changes.'' POWER Magazine. January 19. Available at: 
http://www.powermag.com/power-generation-industry-faces-fundamental-changes/?printmode=1.
    Cassell, Barry. 2015. ``Luminant switches a second unit at the 
Martin Lake coal plant into seasonal operations.'' Generation Hub. 
July 24. Available at: http://generationhub.com/2015/07/24/luminant-switches-a-second-unit-at-the-martin-lake.
    Smith, Rebecca. 2014. ``How Shale-Gas Boom Led to Demise of 
Energy Future Holdings.'' The Wall Street Journal. April 29. 
Available at: http://www.wsj.com/articles/SB10001424052702304163604579531644232506988.
    U.S. EIA. 2016. ``Natural gas expected to surpass coal in mix of 
fuel used for U.S. power generation in 2016.'' Today in Energy. 
March 16. Available at: http://www.eia.gov/todayinenergy/detail.cfm?id=25392#.
---------------------------------------------------------------------------

    The EPA's cost analysis, summarized in the MATS RIA, was based on 
reasonable assumptions at the time of promulgation for important 
factors such as fuel supply, fuel prices, and electricity demand. More 
importantly, retirements that are not attributable to MATS cannot 
reasonably be considered a cost of compliance for MATS. Commenters have 
not demonstrated that any recent retirements not accounted for in the 
MATS RIA are solely or disproportionately a result of MATS and would 
not have occurred in the absence of MATS. For these reasons, in making 
the initial appropriate finding, it is reasonable for the EPA to use 
the final MATS RIA cost estimates, which were developed at the time the 
rule was finalized and are based on high quality economic, technical, 
and regulatory assumptions.
    Moreover, in its consideration of cost here, the agency elected to 
focus on the 2015 impacts presented in the RIA because, as some 
commenters note, the modeling the agency conducted

[[Page 24434]]

indicated that compliance costs would be highest in that first 
compliance year under the rule. By using the estimate from the year 
when compliance costs are highest to compare against the various cost 
metrics, the EPA ensured that its assessment of cost reasonableness 
was, if anything, conservative, and that these comparisons would, 
therefore, be applicable for other future years.
    The independent analysis cited by several commenters, which was the 
only retrospective analysis of MATS costs submitted to the EPA in 
comments, finds that a variety of control technology costs have shown 
to be lower than the EPA's projection from the final MATS RIA. These 
results further contradict the assertions of some commenters that the 
assumptions in the RIA led to an underestimate of costs. The EPA 
recognizes it is possible, and has historically been the case for other 
regulations, that the regulated industry develops ways to comply with 
regulations at lower cost than what the agency projects at the time of 
rule promulgation. However, the suggestion by the retrospective 
analysis that important components of the actual compliance cost of 
MATS are lower than the agency's projections does not alter the 
agency's determination that the analysis in the final MATS RIA 
represents the best and most comprehensive estimate of the cost of 
compliance with MATS available to the EPA for use in this finding, 
because it was developed at the time the agency reaffirmed the 
appropriate and necessary finding and established CAA section 112(d) 
standards for EGUs.
3. Consideration of Costs at the Sector Level
    Comment: Some commenters questioned whether the EPA's consideration 
of cost at the sector level was reasonable. These commenters argued 
that because MATS regulated only coal- and oil-fired power plants, that 
it was incorrect for the EPA to use sector-level data when comparing 
the costs of the rule to the array of metrics that the EPA used to 
assess the reasonableness of the rule.
    Another commenter stated that the EPA's framing of the cost 
inquiry--whether the power sector can reasonably absorb the cost of the 
MATS Rule, 80 FR 75030--is reasonable, and well within its discretion, 
citing Michigan 135 S. Ct. at 2711 (``It will be up to the Agency to 
decide (as always, within the limits of reasonable interpretation) how 
to account for cost.''
    Response: As explained here and below, the EPA's estimate of the 
MATS compliance costs reflects the cost to the entire power sector. 
MATS is an economically consequential rulemaking that is expected to 
induce changes in both electricity and fuel markets. To focus on the 
projected impact of MATS on only affected coal- and oil-fired EGUs 
would produce an incomplete estimate of the entire cost of complying 
with the rule and, thus, lead to an inappropriate consideration of the 
costs of the final MATS rule. The costs associated with installation 
and operation of pollution controls (or fuel switching) at some 
affected EGUs can influence the generation decisions of both EGUs that 
are regulated by MATS and those that are not regulated by MATS. As the 
EPA noted in the proposal, the U.S. electric power system is complex 
and interconnected and the generation decisions of a single affected 
EGU can influence the dispatch of other EGUs, wholesale power prices, 
and fuel prices. Therefore, for a rule with the scope and projected 
impacts of MATS it is necessary for the EPA to consider the full cost 
of the rule by capturing costs expended at all electric generators, not 
just those subject to emissions requirements under MATS. For example, 
the EPA's analysis estimated a small increase in generation from 
natural gas-fired sources as a result of the rule. This increase in 
generation results in increased demand for natural gas and, thus, a 
small increase in the price of natural gas. This results in additional 
costs for EGUs that utilize natural gas, which the EPA appropriately 
captured in the analysis for the RIA. Furthermore, an evaluation of the 
costs borne solely by EGUs subject to MATS would need to account for 
the potential ability of owners of these EGUs to recoup their increased 
expenditures through higher electricity prices, or else an estimate of 
the costs of MATS borne by the owners of those EGUs (i.e., their 
economic incidence) would be an overestimate. However, in doing so, the 
costs borne by the consumers of electricity from these higher prices 
would be ignored, which the EPA finds inappropriate. This is especially 
true given that the demand for electricity is not particularly price-
responsive and many firms in the industry are assured cost-recovery, 
and, therefore, there is considerable potential for producers to pass 
through their expenditures to consumers. Therefore, the EPA determined 
it was appropriate to account for all of the costs that may be expended 
as a result of the rule that could be reasonably estimated, recognizing 
that these expenditures would ultimately be borne either by electricity 
consumers or electricity producers, and not limiting our consideration 
of costs to just those borne by a subset of producers or consumers. 
Again, even non-regulated EGUs can be affected by the rule through 
changes in prices as a result of MATS, such as the example of a gas 
generator just provided. Another example is that of a generator that 
benefits from higher electricity prices induced by MATS without 
incurring costs, such as a renewable generator owned by a highly 
diversified firm. Ultimately, consumers and producers bear the costs of 
a regulation, not specific pieces of machinery. Therefore, a 
consideration of cost incurred by only directly regulated EGUs would 
not fully capture the impacts on the owners of those directly regulated 
EGUs.
    Finally, many commenters in MATS and in this supplemental finding 
agree that cost reasonableness can be determined in part by increases 
in electricity prices, which reflect increased expenditures by EGUs 
resulting from MATS. By advocating for the consideration of electricity 
price impacts, these commenters further support EPA's determination 
that it is appropriate to consider other cost metrics at the sector 
level as well. The EPA's estimate of the cost of MATS is an 
appropriately complete accounting of the costs incurred by the sector, 
and the agency's comparison of these costs to the sector-wide metrics 
is reasonable.
4. Power Sector Sales
    Comment: Commenters supporting the consideration of compliance 
costs as a percentage of power sector sales noted that the EPA has 
routinely used this type of analysis as a means of evaluating whether 
compliance costs for HAP regulations are reasonable. These commenters 
believe the comparison of compliance costs to power sector sales 
produces a useful metric to help the EPA determine whether the power 
sector can reasonably absorb the cost of compliance with MATS. These 
commenters also agree that this analysis supports the agency's 
conclusion and demonstrates that the costs of the standards are low, as 
compared to annual revenues of the electric utility sector.
    Commenters disagreeing with the agency's analysis of compliance 
costs as a percentage of power sector sales argue it is misleading 
because it ignores the relationship between revenues and expenses and, 
therefore, in their view, provides no indication of cost 
reasonableness. The commenters suggested that given the high operating 
costs for EGUs, a comparison of

[[Page 24435]]

compliance costs to affected facilities' net operating income (i.e., 
revenues from retail sales minus operating expenses) would more 
appropriately highlight the cost impacts on the marginal operations of 
affected sources.
    One commenter stated that the EPA does not explain why the analysis 
of compliance costs as a percentage of power sector sales is 
appropriate for the utility sector. The commenter noted that this type 
of analysis is generally used for measuring economic impacts to small 
entities under the Regulatory Flexibility Act (RFA) and, in that 
context, sales are generally measured per company or on another more 
granular level.
    Response: The EPA maintains that it is reasonable to employ an 
analysis of compliance costs as a percentage of power sector sales, a 
frequently used indicator of economic impact, to evaluate the cost of 
MATS. A comparison of revenues to costs is informative and relevant to 
an evaluation of whether the costs associated with a rule are 
reasonable.
    While the EPA recognizes that alternative metrics could also be 
useful, the application of such alternative metrics would not 
invalidate the use of compliance costs as a percentage of power sector 
sales as demonstrating cost-reasonableness. The level of sales in the 
industry is, over time, representative of the costs incurred by the 
industry to generate, transmit, and distribute electricity, as the 
firms that operate in the electricity sector usually do so with the 
expectation that they will recover their costs (i.e., expenditures) in 
addition to a profit. Therefore, total sales provides a sense of scope 
of economic activity in the industry, and annual changes in those sales 
provide a sense of the scope of fluctuations in that industry.
    The EPA disagrees that a comparison of the costs of complying with 
MATS and the power sector's sales is an unreasonable way to evaluate 
costs simply because this type of comparison is often made in the 
context of evaluating economic impacts on small businesses. While 
commenters point out that the analysis is often used for smaller 
entities, they do not demonstrate why the metric holds no value for 
examining economic impacts on the power sector.
    Further, with regard to the specific metric suggested by commenters 
opposed to using compliance costs as a percentage of power sector sales 
to consider costs, we note that while net operating income is an 
important indicator for utilities and other operating entities, as 
discussed in this section above, a significant share of operating 
expenditures may ultimately be borne by consumers. Therefore, comparing 
the costs borne by electricity producers to their net operating income 
(i.e., a measure of profits that does not account for payments on costs 
that have been committed to previously, like financing of existing 
capital) would be an incomplete assessment of the cost of MATS. Thus, 
it would be unreasonable to compare the total expenditures incurred as 
a result of MATS to historical net operating income in the sector 
without accounting for the ability of firms to pass through these costs 
through higher electricity prices.
    Additionally, there are difficulties associated with estimating 
changes in firm-level net-operating income or other measures of firm 
profits with the data and tools available to the agency. For example, 
many firms in the industry are not publicly traded, so historical 
profit data for many of these firms are not readily available; 
therefore, a comparison of an estimate of the change in profits to 
historical data on profits in the industry would be limited by data 
availability. Furthermore, there are accounting and tax practices that 
affect the timing of when profits are reported, and therefore measures 
of profits may fluctuate on an annual basis for reasons not directly 
related to coincident annual changes in revenues and expenditures. In 
addition, the fact that a large proportion of affected EGUs in the 
power sector operate within regulated markets and are able to pass 
regulatory costs to electricity consumers, yet often face different 
specific requirements for how and when they may recover those costs, 
presents challenges to the use of a change in net operating income as a 
metric for evaluating costs.
    Commenters advocating changes in net operating income as a more 
appropriate metric than a metric based on compliance costs as a 
percentage of power sector sales for measuring cost reasonableness do 
not supply any analysis in their comment, nor do they provide a source 
of historical data to use for this analysis, nor a way to address these 
technical challenges with estimating historical profits, nor do they 
assert that a different metric would result in a conclusion that 
contradicts the EPA's findings. However, in response to comments 
highlighting the importance of considering annual operating expenses to 
this industry, the EPA considered additional information on operating 
expenses in order to ensure that our analysis of retrospective and 
projected cost information is robust and complete. This supplemental 
analysis was discussed earlier in Section III.A. In sum, the EPA 
continues to find that it is reasonable, when evaluating the 
reasonableness of the costs of MATS, to compare those costs to utility 
sector sales.
5. Capital Expenditures
    Comment: Several commenters supported the EPA's use of the metric 
comparing MATS compliance costs to capital expenditures as one way to 
evaluate whether MATS compliance costs are reasonable. One commenter 
stated that projected compliance expenditures are small in relation to 
both the typical capital expenditures undertaken each year by the 
utility industry, as well as typical year-to-year changes in such 
expenditures. One commenter particularly approved of the focus of this 
metric on comparing the precise impact of a particular category of the 
rule's compliance costs to industry spending on that category of costs. 
The commenter stated that this metric provides a clear understanding of 
whether the rule's capital expenditure costs could readily be absorbed 
by industry.
    Other commenters took issue with the EPA's comparison of annual 
capital expenditures required by MATS to overall power-sector capital 
expenditures as a way to assess whether the rule's compliance costs are 
reasonable. These commenters stated that the power sector's historical 
annual capital expenditures are broad, all-encompassing statistics that 
do not provide an adequate basis to judge whether compliance 
expenditures are reasonable. Specifically, this commenter suggested 
that the EPA's analysis should instead focus on the historical annual 
capital expenditures of only the entities that own affected sources. 
One commenter argued that the EPA did not explain the benefits of this 
approach over any other approach, or why it is a good measure of the 
reasonableness of the costs of a regulation.
    Response: As an initial matter, the EPA notes that while a number 
of commenters disagreed with the agency's use of historical annual 
capital expenditure data for the power sector in its analysis, no 
commenter objected more generally to the agency's examination of the 
rule's capital expenditures as one way to consider whether the rule's 
costs are reasonable. In demonstrating that an analysis is reasonable, 
particularly in the absence of any statutory guidance, the EPA is not 
required to show that its chosen approach is better than ``any other 
approach.'' Instead, the agency is required to show that there is a 
``rational connection between the facts found and

[[Page 24436]]

the choice made.'' State Farm, 463 U.S. at 52. As discussed in the 
proposed supplemental finding, capital costs are one aspect of total 
compliance costs that can be evaluated against historical levels. As 
the EPA explained in the proposed supplemental finding, 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. For an action that was 
projected to result in a large number of pollution control retrofits 
nationwide for multiple HAP, the EPA determined it was reasonable to 
consider projected capital costs as one component of a comprehensive 
evaluation of overall compliance costs. This is further supported by 
the EPA's projection that the annual projected capital costs 
represented about 26 percent of the total annual compliance cost 
projected for 2015. For this rulemaking, the EPA was able to access 
reliable historical data from multiple sources over a sufficient time 
horizon, which enabled comparisons of the EPA's projections of 
incremental capital expenditures under MATS to sector-level historical 
trends in capital expenditures.
    We disagree with the comment alleging that the EPA's analysis of 
this metric is ``too broad''. Specifically, we do not agree with the 
commenter's suggestion that we should restrict our analysis of capital 
expenditures to focus on only the entities directly regulated by MATS 
(i.e., ``the entities that own the affected sources''). As discussed in 
Section IV.A.3, the EPA views a sector-level assessment of costs, 
including capital expenditure requirements, to be the correct scale of 
analysis for this notice, in part because analyzing cost at the sector-
level better captures impacts on entities, many of which own complex 
holdings that include units that are not regulated by MATS. Further, 
adopting the commenter's methodology for analyzing capital expenditures 
more narrowly would force the agency to ignore costs associated with 
installing additional new generating technologies that would be 
attributable to MATS (because those new units that are installed are 
not directly regulated by MATS and are not necessarily owned by 
entities that own units regulated by MATS), and those costs are not 
insignificant and increase over time. We also note that although the 
commenter urges the EPA to analyze historical annual capital 
expenditures by a subset of units, the commenter provides no 
information regarding that metric, nor is the agency aware of data to 
reliably analyze that metric. Therefore, for all of the reasons above, 
we decline to confine our analysis of capital expenditures to only 
those units that are directly regulated by MATS.
    Moreover, we disagree with the commenter's implied premise that an 
estimate of the capital expenditure costs associated with installing 
controls to comply with MATS actually reflects capital expenditure 
impacts on entities owning ``affected sources''. As noted in Section 
IV.A.3, many of these sources are able to pass-through compliance costs 
to ratepayers, and, thus the cost of compliance, including capital 
expenditure costs, are in many cases ultimately borne by consumers. The 
EPA's sector-level approach to analyzing cost for this metric, as for 
others, takes into account all costs whether they are borne by 
producers or consumers, and is therefore the most comprehensive and 
well-suited to evaluating whether such costs are reasonable.
    Additionally, in response to comments, the EPA supplemented its 
analysis of annual capital costs with annual production costs, the sum 
of which provides a more comprehensive metric to use to compare against 
total projected compliance costs (see Section IV.A.4 above). This 
addition confirmed the EPA's earlier finding that the compliance costs 
of this rule are projected to be well within historical variability, 
and continues to demonstrate that the agency's projected costs are 
reasonable when weighed against historical metrics.
6. Retail Electricity Prices
    Comment: A commenter supporting the EPA's retail price of 
electricity metric stated that in evaluating the economic impacts of 
CAA regulation, the EPA has often considered the projected costs of 
regulation to electricity consumers. Additionally one commenter noted 
that recent data show that the EPA's estimate for 2015 was conservative 
and that actual electricity prices have been lower than the EPA 
projected. Commenters supporting the metric concluded that the agency's 
analysis demonstrates that on a regional and national basis, the 
increases in the retail price are reasonable in light of the benefits 
afforded, and well within the range of variability.
    A commenter stated that the EPA's retail price of electricity 
metric masks the true effects of the rule because the commenter 
believes that the EPA failed to acknowledge that, of the 11 years 
examined, only 3 years saw greater average price increases than would 
be caused by the rule. The commenter added that the EPA did not 
acknowledge that the MATS rule causes average retail price of 
electricity increases that are almost double that of an average of the 
11 examined years and that the EPA did not recognize that the price 
increases caused by the rule are additive.
    Response: The EPA reviewed changes in average retail price of 
electricity over the 2000-2011 period and compared the projected impact 
of MATS on the average retail price of electricity to annual 
variability over this period. The EPA believes that the estimated 
increase in electricity price is reasonable because it falls well 
within the range of historical variation. The EPA does not believe that 
comparing the projected impact to an average or percentile of 
historical fluctuation is the appropriate approach for examining this 
particular impact. This is because the context of whether MATS incurs a 
disproportionate change is relevant in the context of positive changes 
in price, not simply the average trend in price changes, which includes 
both net-positive and net-negative changes. MATS will impact 
electricity prices; what is relevant is whether that change is 
disproportionate to the differences in electricity prices that happen 
for various different reasons, and that reveal themselves in year-to-
year fluctuations. To compare the effect of MATS to an average of those 
variations over time, essentially dampening those variations to an 
average growth rate in electricity prices, would prove misleading when 
trying to compare the effect of MATS on retail electricity price with 
other influences.
    Additionally, the EPA notes that the commenters' point regarding 
additive impacts is incorrect. The 0.3 cents per kilowatt-hour is 
incremental to the EPA's estimated average retail electricity price in 
the absence of the rule, not historical levels (which are actually 
higher in 2006-2011, on average, than the EPA's base case estimates for 
2015). As the EPA explains in the preamble to the final MATS rule, 
``Even with this rule in effect, electricity prices are projected to be 
lower in 2015 and 2020 than they were in 2010.'' In the EPA's 
consideration of the potential impacts of MATS on retail electricity 
prices, the agency appropriately considered the estimated increase in 
prices projected to occur as a result of MATS in the context of 
historical variability.

[[Page 24437]]

7. Reliability of Electricity Supply
    Comment: Several commenters took issue with the EPA's analysis of 
the impacts of MATS on power sector generation capacity and stated that 
impacts on reliability alone are not a measure of the reasonableness of 
costs. Commenters stated that the EPA vastly underestimated the number 
of retirements that have occurred as a result of MATS and presented 
several estimates of retirements and facility closures. Several 
commenters alleged that the EPA arbitrarily compares its projection of 
MATS-related coal-fired capacity retirements to the nation's total 
generation capacity and the nation's coal-fired generation capacity.
    Other commenters stated that the analysis of the impact on the 
sector's generating capacity supports the agency's finding. Commenters 
noted that retirement decisions are based on consideration of numerous 
factors (e.g., age of the unit, capacity factors, fuel prices, etc.) 
making it difficult to determine whether a given coal- or oil-fired 
unit retired due to MATS compliance obligations or due to other 
unrelated factors that make operation uneconomic.
    One commenter noted that the EPA's modeling and analysis in the 
MATS RIA provides the best estimate of the impact of MATS on 
retirements and stated that the fact that retirements have been higher 
than projected does not suggest that they were a result of MATS, much 
less that the EPA erred in concluding that the retirement of 4.7 
gigawatts (GW) of generation capacity would be a reasonable burden for 
the electric power industry to bear. Commenters stated that the EPA's 
resource adequacy analyses showed that reserve margins can be 
maintained while the power sector complies with MATS and supports the 
agency's determination that MATS compliance costs are reasonable.
    Response: In Section III.A.2 above, the EPA explains why 
commenters' assertions that the EPA underestimated the retirements due 
to MATS are unsupported and do not demonstrate that the EPA's 
assumptions and modeling for the MATS RIA are flawed. In fact, numerous 
factors unrelated to MATS have affected the rate of retirements in this 
sector (see Section III.A.2). Moreover, the EPA notes that, even while 
commenters argued that the EPA underestimated the total number of 
retirements that would occur, they do not provide any examples, nor 
could they, that the retirements that have occurred since promulgation 
of MATS have actually caused reliability problems.\25\
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    \25\ We note that, when promulgating MATS, the EPA recognized 
the statutory concern for meeting environmental goals without 
jeopardizing electric reliability, and consequently took steps to 
ensure that sources would be able to comply with the rule while 
maintaining a reliable supply of electricity. The rule set a 3-year 
compliance deadline for existing sources, which is the longest time 
period allowed by the statute. See 77 FR 9407. The rule also 
provided EGU specific guidance addressing how sources could obtain 
an extension for a fourth year from the relevant permitting 
authorities under CAA section 112(i)(3)(B) if such time is needed 
for the installation of controls. See id. at 9409-10. Finally, the 
EPA separately issued an enforcement response policy concurrently 
with MATS to provide additional flexibility for certain reliability-
critical power plants. Memorandum from Cynthia Giles, Assistant 
Administrator of the Office of Enforcement and Compliance Assurance, 
The Environmental Protection Agency's Enforcement Response Policy 
for Use of Clean Air Act Section 113(a) Administrative Orders in 
Relation to Electric Reliability and The Mercury and Air Toxics 
Standard (Dec. 16, 2011); see also 77 FR 9411. To date, only a few 
sources have approached the agency regarding the policy.
---------------------------------------------------------------------------

    As some commenters highlighted, the EPA's proposed supplemental 
finding 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. 
The EPA's analysis conducted in conjunction with promulgation of the 
final rule demonstrated the feasibility of installing the retrofit 
controls projected by the EPA.\26\ Given the fact that HAP control 
technologies are technically feasible and available, it is important to 
understand that the economics that drive retirements are based on 
multiple factors including: Expected demand for electricity, the cost 
of alternative generation, and the cost of continuing to generate using 
an existing unit. The EPA's analysis shows that factors other than 
MATS, such as the supply of natural gas, would have a greater impact on 
the number of projected retirements than the MATS rule itself.
---------------------------------------------------------------------------

    \26\ See An Assessment of the Feasibility of Retrofits for the 
Mercury and Air Toxics Standards Rule. Docket ID No. EPA-HQ-OAR-
2009-0234-20001.
---------------------------------------------------------------------------

    Additionally, in order to ensure that any retirements resulting 
from MATS would not adversely impact the ability of the power sector to 
meet the demand for electricity, the EPA conducted a regional analysis 
of the impacts of projected retirements on electric reliability. This 
resource adequacy analysis looked at capacity projections in each of 
the 32 modeled subregions in the contiguous U.S. and demonstrated that, 
with the addition of very little new capacity, average reserve margins 
are significantly higher than required.\27\ Additionally, several 
external analyses have reached conclusions that are consistent with the 
EPA's analysis.\28\
---------------------------------------------------------------------------

    \27\ 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.
    \28\ 77 FR 9408.
---------------------------------------------------------------------------

    With regard to commenters' assertion that the impacts on 
reliability alone are not a measure of whether a rule's compliance 
costs are reasonable, given Congress' overall goal of maintaining the 
nation's productive capacity, it is reasonable for the EPA to consider 
such impacts as part of its consideration of costs under CAA section 
112(n)(1)(A). The potential impact of MATS on reliability was one of a 
series of independent analyses, each supporting conclusions that the 
costs of MATS are reasonable.

B. Comments on Consideration of Benefit-Cost Analysis in the MATS RIA

1. Co-Benefits
    Comment: Several commenters supported the EPA's conclusions 
regarding the benefit-cost analysis for MATS and also supported the 
inclusion of monetized co-benefits in that analysis. These commenters 
asserted that it would not be reasonable or legally defensible for the 
EPA to ignore the real and significant advantages of reductions in 
PM2.5 and SO2 emissions that result from reducing 
emissions of HAP from power plants. These commenters agreed that CAA 
section 112(n)(1)(A) reflects congressional intent that co-benefits are 
important considerations, and they highlighted legislative history, 
court instructions to agencies to consider indirect effects, and the 
EPA's consideration of co-benefits in justifying other CAA regulations. 
Commenters supporting the inclusion of co-benefits also noted that the 
EPA's consideration of co-benefits is consistent with well-settled 
principles of regulatory analysis supported by multiple presidential 
administrations of both parties as well as practices by states 
evaluating the benefits and costs of implementing state regulations on 
mercury.
    Other commenters, however, argued that the EPA must conduct a 
monetized benefit-cost analysis to support the appropriate and 
necessary finding and that the agency may not include monetized co-
benefits in such an analysis. These commenters argued that the plain 
language of CAA section 112(n)(1)(A) establishes that a finding of

[[Page 24438]]

whether regulation of HAP emitted by EGUs is ``appropriate'' must be 
based on the costs and benefits of regulating HAP, not other pollutants 
like PM2.5. These commenters further asserted that it makes 
no difference whether such reductions in fine particulate matter 
(PM2.5) are a ``direct consequence'' of the use of 
filterable PM as a surrogate for non-mercury metal HAP. These 
commenters argued that reductions in PM emissions are not relevant for, 
and cannot form the basis of, an ``appropriate'' finding.
    One commenter also maintains that the EPA claims that Congress 
intended for the agency to take into account criteria pollutant co-
benefits in shaping HAP regulation of EGUs under CAA section 112 and 
argues such a position is a logical fallacy.
    Several commenters asserted that considering co-benefits 
circumvents the established regulatory framework of the CAA. These 
comments state that criteria pollutant emissions, like PM, are to be 
addressed through the national ambient air quality standards 
(``NAAQS'') program under CAA section 109. These commenters argued that 
PM co-benefits are irrelevant to the ``appropriate'' determination and 
that reliance on criteria pollutant emission reductions in this 
determination is an impermissible ``end run'' around the NAAQS program. 
Several commenters asserted that the EPA double-counts the co-benefits 
of MATS because the criteria pollutant emissions reductions should be 
attributable to other regulations, such as the PM NAAQS or the Cross-
State Air Pollution Rule.
    One commenter noted that although consideration of co-benefits in a 
benefit-cost analysis is fully consistent with economic principles and 
guidance documents, it is irrelevant to the decision about whether or 
not to regulate EGUs that co-benefit reductions are a direct 
consequence (or even an indirect consequence or mere chance relation) 
to HAP reductions. The commenter also asserted that the EPA's reliance 
on OMB guidance (OMB, 2003) is misplaced because the RIA benefit-cost 
analysis seeks to achieve a different purpose than is required for 
determining whether regulating HAP from EGUs is appropriate.
    The commenters disagreeing with the inclusion of co-benefits assert 
that when co-benefits associated with PM2.5 are excluded 
from the benefit-cost analysis for MATS, the quantified and monetized 
net benefits are overwhelmingly negative, which does not support a 
conclusion that it is appropriate to regulate HAP emissions from power 
plants.
    Response: The EPA disagrees with the commenters stating that the 
EPA may not consider monetized co-benefits in determining that it is 
appropriate to regulate HAP emissions from EGUs if the EPA uses a 
formal benefit-cost analysis to support the finding. As explained in 
the proposed supplemental finding and the Legal Memorandum accompanying 
the proposal, CAA section 112(n)(1)(A) does not mandate any particular 
type of cost analysis. The EPA further explained in the proposed 
supplemental finding (80 FR 75039-41), the Legal Memorandum, and in 
Section IV.A above, why a formal benefit-cost analysis is not the 
preferred way of analyzing cost under CAA section 112(n)(1). 
Nevertheless, the EPA had conducted a formal benefit-cost analysis for 
MATS in the RIA, as required under Executive Orders 12866 and 13563. 
Thus, in responding to the Supreme Court's directive to consider cost, 
while the agency maintains that a formal benefit-cost analysis is not 
statutorily required or, in the Administrator's judgment, the best way 
to consider cost under CAA section 112(n)(1), we find that the formal 
benefit-cost analysis performed for the MATS rulemaking demonstrates 
that the benefits of the rule do substantially outweigh the costs. That 
analysis therefore fully and independently supports the EPA's finding 
that the consideration of cost does not cause us to alter our 
conclusion that it is appropriate and necessary to regulate HAP 
emissions from coal- and oil-fired EGUs.
    As discussed in this response, the EPA included the air quality co-
benefits associated with reductions in PM2.5 and 
SO2 (a PM2.5 precursor) emissions when the agency 
evaluated the direct and indirect consequences of MATS in the RIA.\29\ 
Regulation of a particular pollutant often necessarily and unavoidably 
results in reductions of other non-target pollutants. Reductions of the 
non-target pollutants are often referred to as ancillary reductions and 
the associated benefits referred to as co-benefits. All of the 
estimated PM co-benefits in the MATS RIA are attributable to the 
emissions reductions that would occur as a direct result of achieving 
the HAP emission limits under MATS, and these co-benefits are 
important, real, quantifiable, and monetizeable. Specifically, as 
outlined in the proposed supplemental finding (80 FR 75041), 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. While reductions of PM2.5 and 
SO2 are not the objective of the MATS rule, these emission 
reductions are a direct consequence of regulating the HAP emissions 
from EGUs.\30\
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    \29\ As noted in the proposed supplemental finding (80 FR 
75041), ``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).'' SO2 emissions form sulfate particles in 
the atmosphere and contribute to ambient concentrations of 
PM2.5. In the MATS RIA, the PM2.5 co-benefits 
estimates included reducing exposure to both directly emitted 
particles as well as secondarily-formed sulfate particles. The MATS 
RIA did not quantify the benefits from reducing direct exposure to 
SO2.
    \30\ Consider a hypothetical individual that quits smoking to 
decrease the likelihood he will develop lung cancer later in life. 
Although the objective of his quitting is to decrease the incidence 
of lung cancer, that individual will also unavoidably benefit from a 
decreased risk of cardiovascular disease, gum disease, and other 
health risks. The EPA believes that it would be unreasonable not to 
consider these co-benefits of quitting smoking, even though they are 
not the goal motivating the individual's health decision.
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    As an initial matter, the Supreme Court left it to the agency to 
determine a reasonable approach to considering costs in the finding, 
and the Court explicitly declined to address whether it would be 
reasonable to consider monetized co-benefits in evaluating the cost of 
the rule. Michigan v. EPA, 135 S. Ct. at 2711 (``[e]ven if the Agency 
could have considered ancillary benefits when deciding whether it is 
appropriate and necessary--a point we need not address--it plainly did 
not do so here'') (emphasis in original). The EPA thus first looks to 
whether the statutory text of the CAA addresses this issue. The 
statutory text of CAA section 112(n)(1)(A) supports the EPA's 
conclusion that it is reasonable to consider monetized co-benefit 
pollutant reductions as part of such an analysis. That provision 
directs the EPA to perform a study of the hazards to public health from 
EGU HAP emissions that are likely to remain after imposition of other 
provisions of the CAA, including the Acid Rain Program. This 
requirement to consider ancillary (i.e., co-benefit) reductions in HAP 
emissions that are the result of other CAA programs highlights 
Congress' understanding that programs targeted at reducing pollutants 
other than HAP can and do result in the reduction of HAP emissions. The 
statutory text thus

[[Page 24439]]

recognizes the relevance of benefits associated with concomitant 
reductions in pollutants other than the targeted pollutants. See CAA 
section 112(n)(1)(A) (requiring consideration of remaining HAP from 
EGUs ``after imposition of the other requirements of this chapter 
[i.e., the CAA]''). The benefits associated with these concomitant 
reductions are just as real as benefits from reductions in the targeted 
pollutants.
    In light of the requirement to consider the co-benefits of other 
CAA programs, the EPA believes that it is reasonable to conclude that 
the CAA would also allow the EPA to consider other pollutant reductions 
directly resulting from regulation of HAP emissions if a monetized 
benefit-cost analysis were required (or used as a means of considering 
cost at the agency's discretion) to support the appropriate and 
necessary finding. In addition, in the legislative history to CAA 
section 112(d)(2), the Senate Report recognized that MACT standards 
would have a collateral benefit of controlling criteria pollutants as 
well and viewed this as an important benefit of the air toxics program. 
See S. Rep. No. 101-228, 101st Cong. 1st sess. at 172; Legal 
Memorandum, page 25.
    Even if one were to disagree that CAA section 112(n)(1)(A) and the 
legislative history expressly support our consideration of monetized 
co-benefits, nothing in the CAA, or the supporting legislative history, 
suggests that benefits associated with pollutants other than the 
targeted pollutants are irrelevant to a benefit-cost analysis or must 
be ignored by the EPA in this context. There is no statutory provision 
prohibiting consideration of direct co-benefits. The EPA believes that, 
consistent with economic principles and best practices regarding 
benefit-cost analysis and the fundamental linkages between reducing HAP 
emissions and reducing SO2 and PM2.5 emissions as 
a direct consequence of actions taken to meet the standards, it is 
reasonable to consider co-benefits in making the appropriate and 
necessary finding. Chevron U.S.A. Inc. v. Nat'l Res. Defense Council, 
467 U.S. 837 (1984) (holding that a court will defer to an agency's 
position on how to interpret an ambiguous statutory provision if ``the 
agency's answer is based on a permissible construction of the 
statute''); Catawba Cty. V. EPA, 571 F.3d 20 (D.C. Cir. 2009) 
(acknowledging that the EPA is warranted deference especially when 
administering complicated provisions of the CAA). Further, as explained 
in previous Sections of this notice, the Legal Memorandum (pages 22-24) 
and the proposed supplemental finding (80 FR 75040), neither the 
statute nor the Michigan decision support, much less mandate, that the 
EPA's consideration of benefits must be limited to monetized HAP-
specific benefits.
    The EPA further notes that consideration of co-benefits is also 
consistent with economic principles and best practices, executive 
guidance on regulatory review, and longstanding agency practice under 
administrations of both parties. Commenters argued, on the one hand, 
that the EPA is required to undertake a formal benefit-cost analysis to 
support the finding. At the same time, commenters contend that the 
agency cannot follow standard economic principles when undertaking such 
an analysis in this context. The EPA agrees that a formal benefit-cost 
analysis is not the preferred way of analyzing cost under CAA section 
112(n)(1). However, if a benefit-cost analysis is to be undertaken, and 
relied on, to support the finding, it should be conducted following 
standard economic principles. Commenters' argument that these 
principles should not be followed in this context undermines their 
argument that such a formal benefit-cost analysis is required. The EPA 
followed well-established principles for conducting such an analysis in 
the MATS RIA. Consistent with standard practice, the benefit-cost 
analysis for MATS accounted for all of the significant consequences of 
a policy decision (i.e., direct and indirect, intended and unintended, 
beneficial and harmful). In commenters' view, however, formal benefit-
cost analysis is not the best tool for evaluating costs and benefits 
under CAA section 112(n)(1). Their conclusion may weigh in favor of 
using an alternate approach such as EPA's preferred approach, but it 
does not provide a sufficient basis to conduct a distorted form of a 
benefit-cost analysis that ignores standard economic principles and 
well-established practices for conducting such analyses.
    As noted in the proposed supplemental finding (80 FR 75039), the 
agency is directed to include ancillary benefits in benefit-cost 
analysis by economic guidance documents from OMB (2003) \31\ and the 
EPA (2010).\32\ The EPA's Guidelines (U.S. EPA, 2010) are based on a 
well-developed body of economics literature identifying rigorous 
methods for conducting benefit-cost analysis, were extensively peer-
reviewed by the independent Environmental Economics Advisory 
Committee,\33\ and represent the current consensus of the economics 
discipline as to the purpose and appropriate practice of benefit-cost 
analysis. As discussed in the proposed supplemental finding (80 FR 
75039), the core purpose of a benefit-cost analysis is to determine 
whether a policy's overall net benefits to society are positive. 
Actions with positive net benefits (i.e., benefits exceed costs) 
increase economic efficiency. A key requirement for conducting a proper 
benefit-cost analysis is that all known consequences of an action 
should be considered.\34\
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    \31\ See p. 26 of OMB's Circular A-4: ``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.''
    \32\ See p. 11-2 of EPA's Guidelines: ``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.''
    \33\ U.S. EPA--Science Advisory Board (U.S. EPA-SAB). 2009. 
Science Advisory Board (SAB) Advisory on EPA's draft Guidelines for 
Preparing Economic Analyses (2008). EPA-SAB-09-018. September. 
Available at https://yosemite.epa.gov/sab/sabproduct.nsf/
559B838F18C36F078525763C0058B32F/$File/EPA-SAB-09-018-unsigned.pdf.
    \34\ Under a strict economic efficiency test, an action should 
only be undertaken if the benefits exceed the costs, assuming all 
significant consequences can be quantified and monetized. However, 
as both the EPA's and OMB's guidance acknowledge, there are often 
other important considerations, such as distributional concerns, 
that limit the reasonableness of employing strict economic 
efficiency tests in decision-making. As noted in the proposed 
supplemental finding (80 FR 75040), distributional concerns, such as 
impacts to the most exposed and sensitive individuals in a 
population, are important for MATS.
    See p. 1-2 of the EPA's Guidelines: ``It is important to note 
that economic analysis is but one component in the decision-making 
process and under some statutes it cannot be used in setting 
standards. Other factors that may influence decision makers include 
enforceability, technical feasibility, affordability, political 
concerns, and ethics, to name but a few.''
    See p. 2 of OMB's Circular A-4: ``Where all benefits and costs 
can be quantified and expressed in monetary units, benefit-cost 
analysis provides decision makers with a clear indication of the 
most efficient alternative, that is, the alternative that generates 
the largest net benefits to society (ignoring distributional 
effects). This is useful information for decision makers and the 
public to receive, even when economic efficiency is not the only or 
the overriding public policy objective.''
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    In conducting benefit-cost analyses, the EPA routinely considers 
consequences (both positive and negative) that are ancillary to the 
intended purpose of a regulation. For example, the $9.6 billion cost 
estimated in the MATS RIA included costs that would be passed on to 
electricity customers and higher fuel costs, which are beyond the costs 
borne by owners of coal- and oil-fired units regulated by

[[Page 24440]]

MATS. If it were unreasonable to consider co-benefits, then it would be 
unreasonable to consider these ancillary costs. The EPA notes that it 
similarly accounts for negative consequences such as increases in 
pollution emissions or concentrations (also called ``disbenefits'') in 
benefit-cost analyses when they occur.\35\
---------------------------------------------------------------------------

    \35\ See e.g., p. 5-14 of the MATS RIA.
---------------------------------------------------------------------------

    Because controlling HAP emissions necessarily results in fewer 
emissions of other non-HAP pollutants, the economic value of these 
consequences (i.e., co-benefits) are clearly within the scope of a 
proper benefit-cost analysis. Based on previous peer-reviewed studies 
(e.g., U.S. EPA, 2011),\36\ the large economic value of reducing air 
pollution, particularly ambient PM2.5, is well-known. 
Excluding such a large positive consequence has no basis in economic 
principles. Further, such deliberate disregard for the important 
consequences of an action would result in a benefit-cost analysis that 
would not be recognizable to most economists \37\ and would provide an 
incorrect conclusion regarding the net impact of MATS on economic 
efficiency. In addition, because the monetized value of the 
PM2.5 co-benefits were estimated to be $33 to $90 billion 
per year, it would likely be unreasonable to fail to consider such 
important economic consequences of MATS.
---------------------------------------------------------------------------

    \36\ U.S. EPA. 2011. The Benefits and Costs of the Clean Air Act 
1990 to 2020: EPA Report to Congress. Office of Air and Radiation, 
Office of Policy, Washington, DC. March. Available at https://www.epa.gov/sites/production/files/2015-07/documents/fullreport_rev_a.pdf.
    \37\ See e.g., Chapter 1 (``Introduction'') of Just, Richard E., 
Darrell L. Hueth, and Andrew Schmitz. 2005. The Welfare Economics of 
Public Policy: A Practical Approach to Project and Policy 
Evaluation. Edward Elgar Publishing, Cheltenham, UK.
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    The EPA also disagrees with commenters' contentions that it is 
inappropriate for the EPA to consider co-benefits from reducing 
criteria pollutants below the level established in the NAAQS program. 
The EPA believes that the commenters mischaracterized the NAAQS 
program. As the EPA has consistently stated, the NAAQS are not zero-
risk standards.\38\ Unlike the CAA section 112 program, the agency is 
not required to take into account the health effects experienced by the 
most susceptible individual within at-risk populations when setting the 
NAAQS.\39\ Further, there is no scientific basis for ignoring health 
benefits (including avoiding premature death) that occur as a result of 
reducing PM2.5. In fact, there is a substantial body of 
scientific evidence supporting the existence of health impacts from 
exposure to PM2.5, even at low concentrations below the 
NAAQS (U.S. EPA, 2009).\40\ As a result, consistent with the robust 
scientific evidence and recommendations from multiple panels of the 
independent Science Advisory Board, the EPA routinely includes benefits 
of reductions in air pollution at levels below the NAAQS in benefits 
assessments. The most recent Integrated Science Assessment for 
Particulate Matter (PM ISA) concludes that the current science supports 
use of log-linear, no-threshold concentration-response functions, 
recognizing uncertainty in those relationship at concentrations where 
little data exists (U.S. EPA, 2009). In other words, there is no 
evidence of a PM2.5 concentration below which health effects 
would not occur.\41\ Based on these peer-reviewed scientific 
conclusions in the PM ISA, the EPA maintains that the most 
scientifically-defensible approach for estimating the benefits from 
reducing exposure to PM2.5 includes benefits both above and 
below the levels of the NAAQS. The EPA responds to additional technical 
comments regarding the calculation of PM2.5 co-benefits in 
the RTC document for this action.
---------------------------------------------------------------------------

    \38\ In the preamble to the final revisions of the PM NAAQS in 
2012 (78 FR 3090), the EPA noted that ``[t]he CAA does not require 
the Administrator to establish a primary NAAQS at a zero-risk level 
or at background concentration levels, see Lead Industries v. EPA, 
647 F.2d at 1156 n.51, but rather at a level that reduces risk 
sufficiently so as to protect public health with an adequate margin 
of safety.''
    \39\ In the preamble to the final revisions of the PM NAAQS in 
2012 (78 FR 3090), the EPA noted that ``[t]he legislative history of 
section 109 indicates that a primary standard is to be set at ``the 
maximum permissible ambient air level . . . which will protect the 
health of any [sensitive] group of the population,'' and that for 
this purpose ``reference should be made to a representative sample 
of persons comprising the sensitive group rather than to a single 
person in such a group.'' S. Rep. No. 91-1196, 91st Cong., 2d Sess. 
10 (1970).''
    \40\ 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. Docket ID No. EPA-HQ-OAR-2009-0234-
20501.
    \41\ The recognition that there is ``no population threshold, 
below which it can be concluded with confidence that 
PM2.5-related effects do not occur'' (78 FR 3098) and 
``there is no evidence of a threshold'' (78 FR 3119, 3138) is 
consistent throughout the 2012 PM NAAQS rulemaking process, 
including in the assumptions for quantifying the mortality and 
morbidity health risks in the peer-reviewed risk assessment 
supporting the rulemaking.
    U.S. EPA. 2010. Quantitative Health Risk Assessment for 
Particulate Matter--Final Report. EPA-452/R-10-005. Office of Air 
Quality Planning and Standards, Research Triangle Park, NC. 
September. Available at http://www.epa.gov/ttnnaaqs/standards/pm/data/PM_RA_FINAL_June_2010.pdf.
---------------------------------------------------------------------------

    The EPA further disagrees that the monetized PM2.5 
health benefits from MATS are double-counted with the health benefits 
achieved by other regulations, such as the Cross-State Air Pollution 
Rule or the NAAQS. The EPA's standard practice for its rules is to 
estimate, to the extent data and time allow, all benefits of the 
emissions reductions achieved by a rule beyond control requirements for 
other rules. If this rule was duplicative with other rules, then there 
would be no additional costs or benefits attributable to this rule. As 
stated in the EPA's previous response on this issue in the 2011 MATS 
rulemaking (MATS RTC, Vol 2, pp. 482-484),\42\ the agency includes 
other rules such as the Cross-State Air Pollution Rule in the 
``baseline'' in estimating the benefits and costs for rules like MATS. 
Any emission changes expected as a result of MATS are additional 
emission reductions beyond previous regulations. Therefore, the 
benefits from reducing PM2.5 are not double counted--they 
are real additional health benefits from emissions reductions achieved 
by MATS alone. Further, the PM2.5 health benefits expected 
from MATS are not double-counted with benefits estimated in the NAAQS 
RIAs. The NAAQS RIAs hypothesize, but do not predict, the control 
strategies that states may choose to enact. In implementing MATS, 
emission controls may lead to reductions in ambient PM2.5 
concentrations below the NAAQS in some areas and assist other areas 
with attaining these NAAQS. As noted above, because the NAAQS are not 
set at a level of zero risk and the science fully supports quantifying 
benefits below the NAAQS, the EPA considers them to be legitimate 
components of the total benefits estimate. Subsequent to the final MATS 
rule, the EPA proposed and finalized a revision to the PM NAAQS (78 FR 
3086 (Jan. 15, 2013)). The RIA accompanying that rule (U.S. EPA, 2012) 
\43\ explicitly included MATS in the baseline (p. 3-6) to avoid double-

[[Page 24441]]

counting the benefits and costs of MATS in that rulemaking.
---------------------------------------------------------------------------

    \42\ 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. 
Volume 2 of 2. Docket ID No. EPA-HQ-OAR-2009-0234-20126.
    \43\ U.S. EPA. 2012. Regulatory Impact Analysis for the Final 
Revisions to the National Ambient Air Quality Standards for 
Particulate Matter. EPA-452/R-12-003. Office of Air Quality Planning 
and Standards, Health and Environmental Impacts Division, Research 
Triangle Park, NC. December. Available at http://www.epa.gov/ttnecas1/regdata/RIAs/finalria.pdf.
---------------------------------------------------------------------------

    In conclusion, for all of the reasons stated above, it is 
appropriate for the benefit-cost analysis to consider co-benefits, 
which are a direct consequence of actions to reduce HAP emissions. It 
is consistent with economic guidance documents and best practices to 
include such benefits in a formal benefit-cost analysis. The inclusion 
of such benefits is consistent with the underlying science. In 
addition, including such benefits is consistent with statutory 
requirements in CAA section 112(n)(1)(A) and the legislative history 
for the CAA section 112(d) maximum achievable control technology or 
MACT program. The final MATS RIA demonstrates that the quantified and 
monetized benefits and the unquantified benefits of the rule 
significantly outweighed the costs of the rule; thus, that analysis 
fully and independently supports the EPA's determination that it is 
appropriate to regulate HAP emissions from EGUs.
2. Monetized HAP Benefits
    Comment: Several commenters stated that the quantified and 
monetized mercury benefits in the MATS RIA vastly understated the full 
benefits from reducing mercury emissions and that there are many 
categories of unquantified HAP benefits. These commenters supported 
this conclusion by submitting recent research to the docket for this 
rulemaking, including studies that quantify additional categories of 
benefits not included the MATS RIA. Each of these cited studies \44\ 
indicate that the monetized mercury benefits from MATS could be in the 
hundreds of millions to billions of dollars per year. For example, the 
cited Giang and Selin (2016) study found that the monetized mercury 
benefits from implementation of MATS would exceed $3.7 billion (in 2005 
dollars) per year in lifetime benefits for affected individuals and 
$1.1 billion per year in economy-wide benefits. Additional commenters 
stated that new studies (e.g., Zhang et al. (2016), Castro and 
Sherwell, 2015; Drevnick et al., 2012; Evers et al., 2007; Hutcheson et 
al., 2014; Cross et al., 2015) \45\ demonstrate that reductions in 
mercury deposition to U.S. ecosystems and resulting human and 
ecological exposures were underestimated in the MATS RIA.
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    \44\ Giang, Amanda, and Noelle E. Selin. 2016. ``Benefits of 
Mercury Controls for the United States.'' Proceedings of the 
National Academy of Sciences 113 (2): 286-291. Docket ID No. EPA-HQ-
OAR-2009-0234-20544.
    Rice, Glenn E, James K Hammitt, and John S Evans. 2010. ``A 
Probabilistic Characterization of the Health Benefits of Reducing 
Methyl Mercury Intake in the United States.'' Environmental Science 
& Technology 44 (13) (July 1): 5216-24. Docket ID No. EPA-HQ-OAR-
2009-0234-19897.
    NESCAUM. 2005. Economic Valuation of Human Health Benefits of 
Controlling Mercury Emissions from U.S. Coal-Fired Power Plants. 
Available at: http://www.nescaum.org/documents/rpt050315mercuryhealth.pdf.
    \45\ Zhang et al. 2016. ``Observed decrease in atmospheric 
mercury explained by global decline in anthropogenic emissions.'' 
PNAS 113 (3): 526-531. Docket ID No. EPA-HQ-OAR-2009-0234-20558, 
Exhibit 4.
    Castro, M.S. and J. Sherwell. 2015. ``Effectiveness of emission 
controls to reduce the atmospheric concentrations of mercury.'' 
Envtl. Sci. Tech. 49(24): 14000-14007.
    Drevnick, P.E., et al. 2007. ``Spatial and temporal patterns of 
mercury accumulation in lacustrine sediments across the Great Lakes 
region.'' Environmental Pollution 161: 252-260. Evers, D.C., et al. 
2007. ``Biological mercury hotspots in the northeastern United 
States and southeastern Canada.'' Bioscience 57(1): 29-43. Docket ID 
No. EPA-HQ-OAR-2009-0234-20559, Exhibit I-22.
    Hutcheson, M.S., et al. 2014. ``Temporal and spatial trends in 
freshwater fish tissue mercury concentrations associated with 
mercury emissions reductions.'' Envtl. Sci. Tech. 48: 2193-2202.
    Cross, F.A., et al. 2015. ``Decadal declines of mercury in adult 
bluefish (1972-2011) from the mid-Atlantic coast of the U.S.A.'' 
Envtl. Sci. Tech. 49: 9064-9072.
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    Several commenters agreed that consideration of unquantified 
benefits is appropriate and consistent with economic principles and 
best practices, executive guidance on regulatory review, and 
longstanding EPA practice under administrations of both parties. These 
commenters noted that 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. For example, several commenters noted 
that the monetized mercury benefits in the MATS RIA did not capture the 
breadth and severity of the hazards that mercury poses to wildlife and 
the ecosystem services that wildlife provides, including benefits to 
fish, sensitive bird species, marine mammals, and amphibian 
populations. Several commenters asserted that because the monetized 
benefits in the MATS RIA do not cover all of the benefits from reducing 
HAP emitted from power plants, a formal benefit-cost comparison is 
incomplete and potentially misleading. However, these commenters 
concluded that recent scientific findings on the quantified and 
unquantified benefits of reducing HAP exposure supports the EPA's 
determination that it is appropriate to regulate HAP from power plants 
after considering the costs.
    However, numerous other commenters asserted that the $4 to $6 
million in monetized mercury benefits in the RIA were the only real 
benefits attributable to MATS, and thus the rule is not justified 
because these small benefits do not exceed the projected $9.6 billion 
in costs.
    Response: For all of the reasons discussed above in Sections IV.A.1 
and IV.B.1, the EPA disagrees with commenters that the only benefits 
that should be included in a benefit-cost analysis are the HAP-specific 
monetized benefits. When all of the benefits are properly considered, 
the monetized benefits of MATS far outweigh the costs.
    Further, the EPA agrees with the commenters stating that the 
monetized mercury health benefits in the MATS RIA significantly 
underestimate the HAP health benefits associated with MATS. In the MATS 
RIA, the EPA could only quantify and monetize a small subset of the 
health and environmental benefits attributable to reducing mercury and 
none of the health and environmental benefits attributable to 
reductions in other HAP. As noted in the proposed supplemental finding 
(80 FR 75040), the monetized mercury benefits 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.'' This is because data and methods for 
monetizing these benefits are largely unavailable in scientific 
literature, including 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. However, the 
EPA acknowledges the submission of new research from several commenters 
that further corroborates the EPA's conclusion that the HAP benefits 
are underestimated in the MATS RIA and demonstrates the potential 
extent of that underestimation. See Section 3-3 of the RTC for the 
supplemental finding for additional details regarding new studies cited 
by commenters.

[[Page 24442]]

    The EPA also agrees that consideration of unquantified benefits is 
appropriate and consistent with economic principles and best practices, 
executive guidance on regulatory review, and longstanding EPA practice. 
The EPA agrees that it is important to recognize the full range of 
impacts associated with an action in a benefit-cost analysis, including 
those impacts that cannot be quantified or monetized due to a lack of 
data, for which the MATS RIA accounted qualitatively.
    Although the MATS RIA did not quantify and monetize all of the 
benefits that would result from reducing HAP emissions, the EPA 
maintains that the benefits of this rule (both quantified and 
unquantified) are substantial and far outweigh the costs, which 
independently supports the determination that regulating HAP emissions 
from EGUs is appropriate.
3. Impacts to Tribes
    Comment: One commenter representing several federally-recognized 
Indian tribes and inter-tribal organizations strongly agreed that a 
formal benefit-cost analysis is not a preferred approach to considering 
whether the costs of compliance are reasonable. The commenter stated 
that the EPA's inclusion of non-quantifiable benefits in the proposed 
supplemental finding is essential to the commenter's support of the 
agency's methodology because the benefits of MATS are difficult to 
monetize--and in the case of the impacts to American Indian culture--
are impossible to monetize. The commenter stated that benefits of MATS 
to American Indians are fundamentally different in kind than the 
economic costs the rule imposes on coal- and oil-fired EGU operators 
and ratepayers and provided examples of substantial non-quantitative 
benefits of MATS that are unique to tribal communities. The commenter 
stated that American Indians are disproportionately impacted by mercury 
emissions because many are subsistence fishers that rely on locally-
caught fish for daily sustenance and consume fish at far higher rates 
than the general population. The commenter stated that American Indians 
are therefore at unusually high risk for neurodevelopmental disorders, 
cardiovascular disease, autoimmune disorders, infertility, and other 
adverse health effects from methylmercury exposure, the impacts of 
which the EPA could not monetize. In addition to health concerns, the 
commenter describes how methylmercury contamination threatens 
longstanding Indian cultural traditions and critical social practices 
of fishing and fish consumption that are central to many tribes' 
cultural identity. The commenter explained that tribes are often 
connected to particular waters for cultural, spiritual, or other 
reasons (and others' fishing rights are limited to certain grounds by 
treaty), so they cannot simply move their fishing to another location 
to avoid mercury contamination. In addition, mercury fish advisories 
harm Indian subsistence and fishing economies, including commercial 
harvests and tourist revenues. The commenter states that MATS provides 
critical protections for Indian health, fishing rights, and traditional 
cultures that help the United States fulfill its legal duties to 
protect tribal rights and resources of American Indians and tribes.
    Response: The EPA acknowledges the supportive comments of the 
Indian tribes and inter-tribal organizations. The EPA shares the 
tribes' concerns about the potential impact of mercury emissions on 
tribes and agrees that tribes are likely to be affected differently by 
mercury contamination compared to the general population. The EPA 
acknowledges the importance of subsistence fishing and fishing cultures 
to numerous tribes and agrees that those who traditionally consume fish 
at higher rates than the general population are disproportionately 
exposed to higher levels of mercury. The EPA is committed to honoring 
and respecting tribal treaty rights by ensuring that its actions do not 
conflict with those rights, and by implementing its programs to enhance 
protection of treaty rights where there is discretion to do so. The EPA 
believes that MATS will substantially reduce emissions of mercury in 
the U.S. and that this reduction will benefit communities with 
subsistence fishing lifeways, including American Indians and Alaska 
Natives. The EPA also acknowledges that it was unable to monetize many 
of the benefits of MATS and recognizes the difficulty in attempting to 
quantify or monetize impacts to American Indian culture.

C. Comments on the Legal Interpretation of CAA Section 112(n)(1)

    Comment: Some states, tribes, industries, environmental 
organizations, and health organizations, and others generally supported 
the EPA's interpretation of the statute as set forth in the proposed 
supplemental finding and Legal Memorandum. Some commenters expressly 
agree that the purpose of CAA section 112 is to achieve prompt, 
permanent and ongoing reductions in HAP emissions from stationary 
sources to reduce the inherent risks associated with exposure to such 
emissions. Some commenters further agreed that these goals apply to HAP 
emissions from EGUs and that the EPA determined a reasonable approach 
to incorporating cost into the appropriate and necessary finding in 
light of the statute and the Michigan decision. Several of these 
commenters specifically agreed that cost should not be the predominant 
or overriding factor in the appropriate and necessary finding.
    Response: The EPA agrees that the interpretation of the statute and 
the Michigan decision set forth in the companion Legal Memorandum is 
reasonable. As stated above and in detail below, the EPA stands by the 
interpretation in the Legal Memorandum in this final action.
    Comment: Some state and industry commenters disagreed with several 
aspects of the EPA's interpretation of CAA section 112 and its reading 
of the Supreme Court's decision in Michigan. Several commenters argued 
that the Supreme Court's decision in Michigan, in essence, requires the 
EPA to discard all aspects of the EPA's prior appropriate and necessary 
finding. These commenters implicitly suggest that the Michigan decision 
by itself invalidates aspects of the finding unrelated to EPA's 
erroneous conclusion that it was not required to consider cost under 
section 112(n)(1)(A). These commenters argued that the agency must 
disregard or reevaluate all of its prior findings concerning the 
hazards to public health and the environment posed by HAP emissions 
from EGUs. They also argued that the EPA must reconsider all of its 
prior interpretations of CAA section 112(n)(1), including its 
conclusion that CAA section 112(n)(1) is a listing provision and not a 
regulatory provision.
    For example, these commenters asserted the Supreme Court's decision 
in Michigan requires the EPA to consider the potential cost of 
regulating HAP emissions from EGUs under statutory provisions other 
than CAA section 112(d). Among the approaches that the commenters 
asserted the EPA must consider are regulation of HAP emissions under 
CAA sections 112(n), 112(f), and 111(d). At least one commenter also 
asserted that the EPA must determine whether the cost of regulation of 
HAP emissions by the individual states would be more cost effective 
than regulation of HAP emissions from EGUs under the CAA at all. No 
commenter suggested a specific mechanism for regulating under those 
other authorities or for determining the

[[Page 24443]]

cost of such regulation. They appear to suggest, however, that the EPA 
must compare the cost of these undefined approaches to regulating HAP 
against the potential cost of standards under CAA section 112(d), and 
that the EPA must regulate under the least cost option or only to the 
level necessary to address the identified risks.
    As support for their positions, commenters point to the Supreme 
Court's Michigan decision; to the CAA section 112(n) Revision Rule and 
the Clean Air Mercury Rule (CAMR); to the requirement in CAA section 
112(n)(1)(A) to consider ``alternative control strategies'' for 
emissions of HAP that warrant regulation and to regulate EGUs ``under 
this section [112]''; and to statements in the legislative history. 
Specifically as concerning the citation to the requirement to consider 
``alternative control strategies'', commenters asserted that the EPA 
improperly interpreted the requirement when conducting the CAA section 
112(n)(1)(A) Utility Study that was issued in 1998, and that if the EPA 
had properly conducted the Utility Study, it would have had the 
information necessary to conduct these additional analyses.
    Some commenters also challenged the EPA's prior findings that HAP 
emissions from EGUs pose hazards to public health and the environment, 
specifically the findings for mercury, non-mercury metal HAP, and acid 
gas HAP. Some of these commenters also acknowledged that the Supreme 
Court only addressed the requirement to consider the cost of regulation 
in the threshold finding and did not disturb any other findings or 
legal conclusions in the MATS rule or the White Stallion decision. The 
commenters also resubmitted many comments previously submitted on the 
proposed MATS rule and addressed in the D.C. Circuit Court challenge to 
the MATS standards in White Stallion. In addition, the comments raised 
issues that were submitted in petitions for reconsideration on the MATS 
final rule and that were denied by the agency.\46\ The comments 
included arguments that the risk threshold of 1-in-1 million is not 
reasonable, that the EPA cannot base the appropriate and necessary 
finding on environmental risks, and that the volume of HAP emissions is 
not a legitimate basis for listing, even when the sources are emitting 
at major source levels.
---------------------------------------------------------------------------

    \46\ 80 FR 24218; ``Denial of Petitions for Reconsideration of 
Certain Issues: MATS and Utility NSPS'' (March 2015). Docket ID No. 
EPA-HQ-OAR-2009-0234-20493.
---------------------------------------------------------------------------

    The same commenters also argued that the EPA must evaluate the cost 
of regulating each HAP individually and may only regulate those HAP for 
which a specific finding is made and then only to the level of 
regulation that is required to address the identified risk. The 
commenters maintained that the EPA must separately consider the cost of 
regulation of each HAP emitted by EGUs under various approaches (as 
identified above) before regulating any of the HAP at all, and 
certainly before regulating all the EGU HAP under CAA section 112(d).
    Commenters also argued that CAA section 112(n)(1)(A) is not a 
listing provision as the EPA states in the proposal. Legal Memorandum 
Accompanying at 2, 11-12. The commenters argued that CAA section 
112(n)(1)(A) does not mention listing because listing is only a 
precondition to regulation under CAA section 112(d), and that the EPA 
was not required or even authorized to regulate EGUs under that 
subsection. The commenters asserted that whether to list EGUs is not 
the question raised by CAA section 112(n)(1)(A). Instead, the 
commenters asserted, the question is whether additional regulation of 
EGU HAP emissions under CAA section 112 is ``appropriate and 
necessary.'' The commenters argued that the statutory question calls 
for a decision to authorize or to preclude specific regulation of EGU 
HAP emissions under CAA section 112. One commenter further asserted 
that the Supreme Court's opinion in Michigan confirms that New Jersey 
v. EPA, 517 F.3d 574 (D.C. Cir. 2008), was wrongly decided on this 
point. The commenter asserted that the New Jersey holding cannot stand 
because the D.C. Circuit Court found that even if the ``appropriate and 
necessary'' CAA section 112(n) finding and CAA section 112(c) listing 
of EGUs were erroneous, the EPA could only remove EGUs from the list of 
source categories regulated under CAA section 112(d) if it followed the 
delisting requirements of CAA section 112(c)(9). Id. at 583. The 
commenter maintained that holding cannot stand because, according to 
the commenter, the Supreme Court's opinion makes clear that the 
``appropriate and necessary'' finding is the gateway to deciding to 
regulate EGU HAP emissions under CAA section 112, and if that finding 
is not made, then regulation cannot be imposed. See Michigan, 135 S. 
Ct. at 2707.
    Commenters further maintained that CAA section 112(n)(1)(A) 
requires the EPA to decide whether regulation of HAP emissions from 
EGUs ``under this section'' is ``appropriate and necessary'' after 
considering a study that addresses ``hazards to public health'' that 
remain ``after imposition of the requirements of this chapter,'' and 
``alternative control strategies for emissions which may warrant 
regulation.'' Commenters characterized the EPA's first task as a 
requirement to find whether a residual public health hazard is posed by 
specific EGU HAP emissions remaining after those emissions have been 
reduced under other provisions of the Act. Commenters also asserted 
that, if the EPA finds that any remaining EGU HAP emissions pose a 
hazard, then the EPA must determine how and ultimately whether to 
regulate those emissions ``under this section [112].'' Commenters 
argued that the EPA must therefore calculate a ``preliminary estimate'' 
of the costs of the specific form of CAA section 112 regulation that it 
is considering. Commenters also maintained that the EPA's 
interpretation of the statute--which the commenters characterized as 
mandating regulation under CAA section 112(d) if the EPA finds that one 
HAP emitted by one EGU is found to pose either a residual health or 
environmental risk--is no longer valid because of the Michigan 
decision.
    Commenters also asserted that CAA section 112(n)(1)(A) is, on its 
face, a residual risk regulatory provision and, as such, it requires 
the EPA to make a risk management decision regarding whether health 
risks exist, and if so, the degree to which they need to be reduced 
further. The commenters maintained that regulation must necessarily 
depend on what remaining risks, if any, are identified, that certain 
HAP should only be regulated to the extent necessary to address the 
risks and only if the monetized HAP-specific benefits exceed the costs 
of standards, and that the EPA must undertake this analysis before 
regulating each HAP individually. Commenters asserted that the statute 
allows the EPA to regulate only those HAP from EGUs that do pose some 
risk, and then only to the extent ``appropriate'' (from a cost point of 
view) and ``necessary'' (from a risk reduction point of view). The 
commenters argued that the EPA's approach impermissibly uses the risk 
allegedly associated with one HAP to regulate another HAP. The 
commenters maintain that the EPA must instead evaluate different 
regulatory approaches available to it in order to determine costs and 
benefits on an individual HAP basis. The commenters concluded that the 
EPA cannot interpret the statute to permit regulation of all HAP under 
CAA section 112(d)(2)-(3) because that approach results in high HAP 
control

[[Page 24444]]

costs for no HAP benefit, at least for some pollutants (e.g., acid 
gases), according to the comments.
    For acid gas HAP, the commenters appear to maintain that the EPA 
could potentially use CAA section 112(d) to regulate, but that the 
nature of such regulation must change to satisfy the Michigan decision. 
For example, some commenters asserted that the agency could impose less 
costly health-based emissions limits for acid gas HAP. The commenters 
point to other CAA section 112 standards that include CAA section 
112(d)(4) health-based emissions limits for the acid gases, including 
the recently promulgated CAA section 112(d)(4) standards for hydrogen 
chloride, hydrogen fluoride, and chlorine for the Brick and Structural 
Clay Products Manufacturing and Clay Ceramics Manufacturing source 
categories as support for their position. 80 FR 65470-71 (Oct. 26, 
2015).
    Response: The EPA does not agree with these comments. For the 
reasons set forth below, the EPA stands by the interpretation of the 
statute and the Michigan decision set forth in the companion Legal 
Memorandum.
    These comments focus on several primary arguments: (1) The Michigan 
decision rendered invalid all aspects of the EPA's interpretation of 
CAA section 112(n)(1)(A) as set forth in the MATS record and the 
portions of the White Stallion decision upholding the EPA's 
interpretation; (2) the EPA cannot satisfy its obligation to consider 
cost without evaluating alternatives to regulating HAP emissions from 
EGUs under CAA section 112(d); and 3) that the requirement to consider 
cost renders invalid and/or insufficient the EPA's prior analyses of 
the significant hazards posed by HAP emissions from EGUs as well as the 
EPA's specific findings regarding the risks to public health and the 
environment. The EPA explains below why we disagree with these 
arguments.
    1. The Michigan decision does not disturb aspects of the EPA's 
interpretation of CAA section 112(n)(1)(A) that are unrelated to its 
prior conclusion that cost need not be considered.
    Many of the comments in opposition to the EPA's interpretation of 
the statute are largely, if not wholly, premised on the position that 
the Supreme Court's decision in Michigan that the EPA must consider 
cost in the appropriate and necessary finding rendered invalid, in all 
respects, the EPA's prior interpretation of CAA section 112(n)(1)(A) 
and also the specific findings that supported the appropriate and 
necessary finding in the original 2000 listing and in the reaffirmation 
of that finding in the MATS rulemaking.\47\ In essence, many of the 
comments opposed to the proposed supplemental finding are premised on a 
belief that the Supreme Court decision in Michigan invalidated 
interpretations and analyses presented in the MATS rule that were 
unrelated to the EPA's erroneous decision not to consider cost when 
evaluating whether regulation is appropriate and necessary. That 
premise and the assertions on which it is based lack merit.
---------------------------------------------------------------------------

    \47\ The record in support of the appropriate and necessary 
finding is extensive and includes: (1) The three studies requires by 
CAA section 112(n)(1) and the additional NAS study of methylmercury 
directed in the appropriations report for the EPA's fiscal year 1999 
appropriations; (2) the 2000 Finding, 65 FR 79825 (December 20, 
2000) (Finding it appropriate and necessary to regulate HAP 
emissions from coal- and oil-fired EGUs and adding such units to the 
CAA section 112(c) list of sources that must be regulated under CAA 
section 112(d)); (3) the Proposed MATS rule, 76 FR 24976, 24980-
25020 (May 3, 2011) (The EPA affirmed the 2000 Finding was valid at 
the time it was made based on the available information, and 
reaffirmed that it remains appropriate and necessary to regulate HAP 
emissions from EGUs based on new information and analyses in the 
proposed MATS rule); and (4) the Final MATS rule, 77 FR 9304, 9310-
9366 (February 16, 2012) (reaffirming the appropriate and necessary 
finding and denying a petition to delist coal- and oil-fired EGUs 
from the CAA section 112(c) list).
---------------------------------------------------------------------------

    We note that many of the commenters opposed to the proposed 
supplemental finding were parties to the Michigan case. The Court 
granted certiorari to consider one issue: Whether it was reasonable for 
the EPA to refuse to consider cost when making the section 112(n)(1)(A) 
``appropriate and necessary'' finding. Michigan, 135 S. Ct. at 2704. 
The Court held that the EPA was obligated to consider cost, but 
emphasized that ``it will be up to the Agency to decide (as always, 
within the limits of reasonable interpretation) how to account for 
cost.'' 135 S. Ct. at 2711.\48\ It thus remanded the rule to the D.C. 
Circuit Court ``for further proceedings consistent with this opinion.'' 
Id. at 2712.\49\
---------------------------------------------------------------------------

    \48\ In addition, the Supreme Court specifically stated in the 
Michigan decision that ``EPA has interpreted the Act to mean that 
power plants become subject to regulation on the same terms as 
ordinary major and area sources, see 77 Fed. Reg. 9330 (2012), and 
we assume without deciding that it was correct to do so.'' Id. at 
2705. This statement indicates that the Court did not intend for the 
Michigan decision to call into question legal interpretations, such 
as those relating to the terms on which power plants are to be 
regulated if an appropriate and necessary finding is made, that are 
beyond the scope of the grant of certiorari. All aspects of the 
agency's interpretation of section 112(n)(1)(A) were commented on 
during the MATS rulemaking and many were challenged and unanimously 
affirmed in the D.C. Circuit's White Stallion decision. The parties 
could have petitioned, and in one case did petition, the Supreme 
Court to review those other decisions. The Supreme Court explicitly 
limited its grant of certiorari and addressed only one question, 
leaving all other aspects of the White Stallion decision in place. 
It would not be reasonable to interpret the Supreme Court's decision 
in Michigan as reaching beyond the scope of the grant of certiorari 
to address issues that were decided by the EPA in the MATS 
rulemaking, and either not litigated in the lower court or 
unanimously upheld by that court in the White Stallion decision.
    \49\ On remand, the D.C. Circuit considered competing motions to 
govern the proceedings. Some states and industry asked for vacatur 
while the EPA, other states, industry groups and environmental NGOs 
asked the court to remand without vacatur. On December 15, 2015, the 
same D.C. Circuit panel that had originally heard the challenges to 
the MATS rule in the White Stallion case unanimously decided to 
remanded the proceeding to the EPA without vacatur of the rule. 
White Stallion Energy Center, LLC v. EPA, No. 12-1100 (Dec. 15, 
2015) (order granting remand without vacatur). Docket ID No. EPA-HQ-
OAR-2009-0234-20567.
---------------------------------------------------------------------------

    In sum, the Michigan decision obligates the EPA to take cost into 
account when deciding whether regulation is appropriate and necessary 
but does not disturb other legal interpretations and technical findings 
made by the agency in support of the appropriate and necessary finding. 
The interpretation set forth in the Legal Memorandum reasonably 
incorporates a consideration of cost into the appropriate and necessary 
finding. The EPA's legal interpretation of CAA section 112(n)(1)(A) 
was, with the exception of the cost issue, unanimously upheld by the 
D.C. Circuit Court, and undisturbed by the Supreme Court decision. The 
agency thus used that legal structure as the starting point for the 
incorporation of cost into the appropriate and necessary finding. See 
White Stallion Energy Center, LLC v. EPA, 748 F.3d 1222 (D.C. Cir. 
2014) (Judge Kavanaugh dissented only on the issue of cost). The 
commenters opposed to the EPA's interpretation make conclusory 
statements that the prior interpretations are rendered invalid because 
the EPA must consider cost in the appropriate and necessary finding. 
However, none of the commenters opposed to the agency's interpretation 
demonstrate in any substantive way that the agency's interpretation in 
the Legal Memorandum is unreasonable, and in developing the 
interpretation the agency considered not only the Michigan decision, 
but also the purpose of the 1990 amendments to CAA section 112 to 
obtain prompt, permanent and ongoing reductions in HAP emissions; the 
structure and context of the statute; and the long rulemaking and 
litigation history at issue in this case. The commenters did not 
clearly articulate an alternative to the EPA's reasoned interpretation 
of the role of cost in the appropriate and necessary finding; thus,

[[Page 24445]]

the EPA finds no reason to revise the interpretations set forth in the 
proposed supplemental finding and the companion Legal Memorandum.
    Furthermore, while not expressly stated, the commenters appear to 
assume that the EPA could never justify the cost of the MATS rule and 
that no analysis of whether the costs of the rule are reasonable would 
even be relevant. The Administrator disagrees and believes the EPA 
should evaluate and consider the cost of the MATS rule. Furthermore, 
having concluded that the cost of MATS is reasonable under several 
metrics and that the rule will not impair the ability of the industry 
to provide reliable electricity, the Administrator believes she must 
consider those conclusions. In light of those conclusions and the 
findings that HAP emissions pose significant hazards to public health 
and the environment that will not be addressed through imposition of 
the other requirements of the CAA, the Administrator concludes in this 
final notice that regulation is appropriate and necessary.\50\ The EPA 
went through an extensive process that spanned approximately 20 years 
before finally establishing standards for HAP emissions from EGUs in 
2012. The agency took comment on its legal interpretations and on its 
findings that HAP emissions from EGUs pose hazards to public health and 
the environment. Many of those interpretations and findings were 
challenged in the D.C. Circuit Court in petitions to review MATS, and 
some were not. With the exception of the cost issue, the challenges 
were unanimously rejected by that Court in the White Stallion 
decision.\51\
---------------------------------------------------------------------------

    \50\ In light of New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 
2008), the EPA may only remove coal and oil-fired EGUs from the CAA 
section 112(c) list if it demonstrates that the delisting criteria 
in CAA section 112(c)(9) have been met. A finding by the EPA that 
regulation of these sources is not appropriate or necessary would 
not be a sufficient basis for the EPA to remove EGUs from the CAA 
section 112(c) list, but the D.C. Circuit Court could vacate the 
rule upon review if the court concluded the agency's revised finding 
was unreasonable.
    \51\ Judge Kavanaugh dissented on the cost issue but otherwise 
joined the majority on all other challenges to the appropriate and 
necessary finding and HAP standards, including the EPA's decision to 
decline to establish a health based emission limit for acid gas HAP 
under section 112(d)(4) and to establish a more stringent beyond-
the-floor standard for Hg from certain coal-fired EGUs. The fact 
that Judge Kavanaugh dissented on the cost issue alone suggests that 
it is separate and distinct and that a decision that cost must be 
taken into consideration does not upend the other holdings in White 
Stallion.
---------------------------------------------------------------------------

    The EPA's approach to evaluating cost is also supported by the 
Michigan decision wherein the Court directed the agency to ``consider 
cost--including, most importantly, cost of compliance--before deciding 
whether regulation is appropriate and necessary.'' 135 S. Ct. 2711. The 
``cost of compliance'' at issue in that case was the cost of MATS, and, 
as the EPA finds that the costs associated with the rule are reasonable 
under several different metrics, the agency cannot and should not 
ignore those conclusions. The Michigan decision itself does not, as 
some commenters appear to suggest, draw any conclusions regarding 
whether the cost of MATS is reasonable, or otherwise undermine the 
EPA's conclusion that the costs are reasonable. In addition, the EPA 
does not rely on this conclusion alone to support a determination that 
regulation is appropriate and necessary. Instead, as explained in 
greater detail in the proposed notice and this final action, the EPA's 
conclusion that the cost of MATS is reasonable is but one of the 
factors the agency considers when determining whether regulation is 
appropriate and necessary.
    2. Cost considerations can reasonably be incorporated as an 
additional factor to be considered under CAA section 112(n)(1)(A) 
without disturbing the EPA's prior interpretation of the statutory 
structure.
    The agency has reversed its prior conclusion that cost need not be 
considered when making an appropriate and necessary finding and adopted 
a new interpretation of the role of cost in that finding. That new 
interpretation is consistent with the Michigan decision and the EPA's 
non-cost-related interpretations of CAA section 112(n)(1)(A) that went 
through notice and comment during the MATS rulemaking and were upheld 
in White Stallion. The commenters appear to assume, without much 
explanation, that the requirement to consider cost renders the EPA's 
prior interpretation unreasonable because, according to the commenters, 
the approach set forth in the proposed supplemental finding did not, in 
their view, give sufficient weight to cost. The commenters seek to 
overturn several of the EPA's prior conclusions regarding CAA section 
112(n)(1)(A) such as: (1) The appropriate and necessary finding can be 
based on a finding that significant hazards to public health and/or the 
environment remain after imposition of the requirements of the Act; (2) 
the finding can be based on an identified hazard for any one HAP; and 
(3) the most reasonable approach to regulating HAP emissions from EGUs 
is listing under CAA section 112(c) and regulation under CAA section 
112(d) after a finding that regulation is appropriate and necessary. 
The Michigan decision does not undermine the legitimacy of any prior 
interpretation except the conclusion that cost need not be considered. 
It was thus reasonable for the EPA to take these prior conclusions into 
consideration when determining the manner in which to incorporate a 
consideration of cost into the appropriate and necessary finding.
    The EPA discussed the Michigan decision in the proposed 
supplemental finding and explained how cost can be reasonably 
incorporated into the statutory structure that was otherwise 
unanimously affirmed by the D.C. Circuit. Thus, the agency expressly 
stated in the proposed supplemental finding that it was not reopening 
or requesting comment on issues beyond its proposed approach to 
incorporating a consideration of cost as an additional factor into the 
appropriate and necessary finding. 80 FR 75028. Comments on other 
interpretations are therefore outside the scope of this rulemaking. 
Nonetheless, the EPA explains below why it disagrees with the comments 
and also addresses the specific arguments raised by the commenters in 
support of their positions.
    As background, the EPA issued MATS in response to the New Jersey 
decision vacating the EPA's CAA Section 112(n) Revision Rule removing 
coal- and oil-fired EGUs from the CAA section 112(c) list and CAMR 
regulating such units under CAA section 111(d) instead of CAA section 
112(d). New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008) (vacating the 
delisting action as inconsistent with the statute because the EPA did 
not comply with the requirements for delisting in CAA section 
112(c)(9), and also vacating CAMR because the EPA stated that the rule 
could not be legally supported if EGUs remained on the CAA section 
112(c) list). The New Jersey court did not address the legal 
interpretations of CAA section 112(n)(1)(A) nor the conclusions that 
HAP emissions from EGUs did not pose a hazard to public health that 
supported the appropriate and necessary finding.\52\
---------------------------------------------------------------------------

    \52\ Several commenters wrongly asserted that the Section 112(n) 
Revision Rule was based on a determination that it was neither 
appropriate nor necessary to regulate HAP emissions because of cost. 
In fact, the EPA concluded that cost need not be considered in that 
revised finding because the agency concluded that HAP emissions from 
EGUs did not pose a hazard to public health warranting regulation 
based on the agency's interpretations of the statute in the 112(n) 
Revision Rule.
---------------------------------------------------------------------------

    The EPA recognized in MATS that it must reevaluate the prior 
interpretations of the statute and the technical findings concerning 
the hazards to public health from HAP emissions from EGUs as part

[[Page 24446]]

of the appropriate and necessary finding. In the process of reviewing 
the conclusions in the Section 112(n) Revision Rule, the EPA determined 
that the interpretations contained in that rule should be revised to 
better reflect the structure and intent of the statute and concluded 
that the prior technical findings were either insufficient (e.g., for 
mercury) or essentially absent (e.g., non-mercury metal HAP and acid 
gas HAP). Thus, the agency addressed in detail how it intended to 
interpret the statute going forward, how the interpretation of the 
statute in MATS was consistent with the 2000 Finding, and how the new 
interpretation differed from the interpretation in the Section 112(n) 
Revision Rule. See 76 FR 24986-24998. The agency received numerous 
comments on the interpretations and the EPA responded to those comments 
in the final MATS rule and the RTC document. See 77 FR 9319-9336; see 
also MATS RTC, Vol. I.\53\ In affirming all of the changes in 
interpretation, the White Stallion court found that the agency has 
authority to change its interpretation of CAA section 112(n)(1)(A) as 
long as ``the policy is permissible under the statute, that there are 
good reasons for it, and that the agency believes it to be better.'' 
White Stallion, 748 F.3d at 1235. Stated another way, a change is 
prohibited unless the agency determines that the alternative is legally 
permissible, that there is a good reason for the change, and that the 
alternative interpretation is better. Id. As explained further below, 
the commenters' suggested alternatives may not be reasonably supported 
under the terms of the statute. In addition, the EPA neither believes 
there are good reasons to adopt the alternatives offered nor finds that 
they would better address the identified risks and further the goals of 
the statute. The commenters appear to (and in at least one case 
expressly) place cost above all other considerations and the agency 
does not see ``good reasons'' for adopting that interpretation above 
our own in the comments, in the statute, or in the legislative history. 
See Legal Memorandum. There is no basis for concluding that any of 
these alternative approaches are mandatory, and the agency does not 
believe they are ``better'' than the approach we set forth in the MATS 
rule and the proposal notice. Among other things, as discussed below, 
the alternatives offered by commenters lack structure, are not easily 
supported by the statutory language, and do not further the statutory 
goals better than the EPA's approach.
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    \53\ The commenters do not in any meaningful way attempt to 
demonstrate why the prior reasoned interpretations are suddenly 
unreasonable because of cost. The agency maintains the lack of 
specificity and failure to explain more fully why those prior 
interpretations must be rejected because of cost is a significant 
flaw in the comments. See CAA section 307(d)(7)(B) (``Only an 
objection to a rule or procedure which was raised with reasonable 
specificity during the period for public comment . . . may be raised 
during judicial review.'').
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    Under the commenters' approaches, the EPA would be required to make 
specific separate cost findings for each HAP, but only if the EPA has 
determined that the HAP at issue poses a hazard to public health (not 
the environment). The commenters argued that the Michigan decision 
mandates this approach, but it does not. The Supreme Court did not 
disturb the EPA's prior conclusions (which were upheld in White 
Stallion) that the appropriate and necessary finding can be based on a 
finding that any one HAP emitted by EGUs poses a hazard to public 
health or the environment, that the statute contemplates that 
regulation under CAA section 112 will occur by listing pursuant to CAA 
section 112(c) based on the appropriate and necessary finding, and that 
EGUs are regulated like other sources once listed. In fact, the Supreme 
Court specifically limited its grant of certiorari and did not, as some 
petitioners had requested, grant certiorari on the question of whether 
the EPA ``may regulate EGU HAP emissions that pose no hazard to public 
health.'' See UARG Petition for Writ of Certiorari, July 14, 2014.\54\ 
The request for certiorari on this question focused on the lower 
court's conclusion that it was permissible for the EPA to regulate acid 
gas HAP from EGUs absent specific conclusions regarding public health 
hazards associated with such emissions from EGUs. The Supreme Court 
also explicitly acknowledged and did not disturb the conclusion that 
once the agency finds it appropriate and necessary to regulate HAP 
emissions from EGUs, power plants are regulated like other sources. See 
Michigan at 2705. The approach selected by the EPA is consistent with 
these undisturbed prior conclusions, and nothing in Michigan mandates 
that the EPA take a different approach now.
---------------------------------------------------------------------------

    \54\ Docket ID No. EPA-HQ-OAR-2009-0234-20563.
---------------------------------------------------------------------------

    The rationale for these conclusions is valid and in no way 
undermined by the conclusion that the EPA must incorporate cost 
considerations into the appropriate and necessary finding. The EPA 
stated in MATS that ``the use of the terms section, subsection, and 
subparagraph in section 112(n)(1)(A) demonstrates that Congress was 
consciously distinguishing the various provisions of section 112 in 
directing EPA's action under section 112(n)(1)(A). Congress directed 
the agency to regulate utilities ``under this section'' not ``under 
this subparagraph [112(n)],'' and accordingly EGUs should be regulated 
under section 112 in the same manner as other categories for which the 
statute requires regulation.'' See Final MATS, 77 FR 9326. The agency 
also cited the New Jersey case wherein the D.C. Circuit Court found 
that CAA section 112(n)(1) ``governs how the Administrator decides 
whether to list EGUs'' and that once listed, EGUs are subject to the 
requirements of section 112. Id. citing New Jersey, 517 F.3d at 583 The 
New Jersey court expressly noted that ``where Congress wished to exempt 
EGUs from specific requirements of section 112, it said so 
explicitly,'' noting that ``section 112(c)(6) expressly exempts EGUs 
from the strict deadlines imposed on other sources of certain 
pollutants.'' Id. The EPA concluded that ``Congress did not exempt EGUs 
from the other requirements of section 112, and, once listed, the EPA 
is reasonably regulating EGUs pursuant to the standard-setting 
provisions in section 112(d), as it does for all other listed source 
categories.'' Id.
    During the MATS rulemaking, the EPA explicitly considered and 
rejected comments suggesting that the agency could regulate under CAA 
section 112(n)(1), and neither the EPA's conclusion nor its rationale 
are affected by the Michigan decision. As the agency explained ``even 
assuming for the sake of argument, that we could issue standards under 
section 112(n)(1), we would decline to do so because there is nothing 
in section 112(n)(1)(A) that provides any guidance as to how such 
standards should be developed.'' Id. The EPA noted that ``[a]ny 
mechanism we devised, absent explicit statutory support, would likely 
receive less deference than a CAA section 112(d) standard issued in the 
same manner in which the Agency issues standards for other listed 
source categories.'' Id.\55\ A requirement to consider cost does not 
change these conclusions.
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    \55\ Several commenters asserted that the EPA indicated that it 
must regulate HAP emissions from EGUs under CAA section 112(d), but 
this argument is contradicted by the quoted statement from the final 
rule explaining that any other mechanism would likely receive less 
deference. The EPA maintained in the MATS rule that the best reading 
of the statute was that an affirmative appropriate and necessary 
finding should be followed by listing under CAA section 112(c) and 
regulation under CAA section 112(d). See e.g., 77 FR 9326. The EPA 
did not, however, identify an alternative approach to regulation 
``under this section [112]'' that is as reasonable or defensible as 
the approach we followed, and the commenters have not provided any.

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[[Page 24447]]

    The White Stallion court upheld the EPA's determination to regulate 
---------------------------------------------------------------------------
under CAA section 112(d) and held:

    EPA acted properly in regulating EGUs under Sec.  112(d). 
Section 112(n)(1)(A) directs the Administrator to ``regulate 
electric steam generating units under this section, if the 
Administrator finds such regulation is appropriate and necessary.'' 
CAA Sec.  112(n)(1)(A). EPA reasonably interprets the phrase ``under 
this section'' to refer to the entirety of section 112. See Desert 
Citizens Against Pollution v. EPA, 699 F.3d 524 (D.C. Cir. 2012). 
Under section 112, the statutory framework for regulating HAP 
sources appears in Sec.  112(c), which covers listing, and Sec.  
112(d), which covers standard-setting. See CAA Sec.  112(c), 112(d). 
This court has previously noted that ``where Congress wished to 
exempt EGUs from specific requirements of section 112, it said so 
explicitly.'' New Jersey, 517 F.3d at 583. EPA reasonably concluded 
that the framework set forth in Sec.  112(c) and Sec.  112(d)--
rather than another, hypothetical framework not elaborated in the 
statute--provided the appropriate mechanism for regulating EGUs 
under Sec.  112 after the ``appropriate and necessary'' 
determination was made. Therefore, EPA's interpretation is entitled 
to deference and must be upheld.

    White Stallion, 748 F.3d at 1243-44 (emphasis added).
    The White Stallion court also addressed, and rejected, arguments 
that the EPA erred by regulating all HAP emissions from EGUs:

    Although the petitioners attempt to distinguish National Lime on 
grounds that it concerned ``major sources'' rather than EGUs, they 
have not provided any compelling reason why EGUs should not be 
regulated the same way as other sources once EPA has determined that 
regulation under Sec.  112 is ``appropriate and necessary.'' It also 
bears emphasis that the plain text of Sec.  112(n)(1)(A) directs the 
Administrator to ``regulate electric utility steam generating 
units''--not to regulate their emissions as petitioners suggest. 
This source based approach to regulating EGUs HAPs was affirmed in 
New Jersey, 517 F.3d at 582, which held that EGUs could not be 
delisted without demonstrating that EGUs, as a category, satisfied 
the delisting criteria set forth in Sec.  112(c)(9). The notion that 
EPA must ``pick and choose'' among HAPs in order to regulate only 
those substances it deems most harmful is at odds with the court's 
precedent.

    White Stallion, 748 F.3d at 1244-45.\56\
---------------------------------------------------------------------------

    \56\ The findings in the White Stallion are premised in part on 
the holding in the New Jersey decision and those findings undermine 
many of the commenters' arguments against the EPA's interpretation 
of the proper role of cost in the appropriate and necessary finding. 
This fact explains why the commenters opposed to EPA's 
interpretation argue that the Michigan decision demonstrates that 
the New Jersey decision was wrongly decided. The commenters are 
incorrect in their assertions and certain commenters petitioned the 
Supreme Court for certiorari to review the New Jersey decision, and 
the request was denied. The commenters point to no legal precedent 
for their position and rely instead on a convoluted argument 
associated with the EPA's inability to delist a listed sources 
category without complying with CAA section 112(c)(9). However, the 
commenters failed to acknowledge that the EPA is not the only entity 
that can remove a source category from the section 112(c) list, and 
the other entity, in this case the D.C. Circuit Court, is not 
required to comply with the section 112(c)(9) requirements. CAA 
Section 112(e)(4) of the statute clearly authorizes judicial review 
of any listing decision pursuant to section 307(d) when the EPA 
issues section 112(d) standards. The courts thus have authority to 
determine that a listing was improper and to vacate any such 
listing. In this manner, an improper source category listing could 
be corrected.
---------------------------------------------------------------------------

    There is no basis for commenters' assertion that these 
interpretations are rendered unreasonable or otherwise invalid by the 
requirement that the EPA consider cost as part of the appropriate and 
necessary determination. Moreover, the agency's incorporation of a 
consideration of cost into the prior interpretation is reasonable, 
supported by the statutory text and context of the provision, and 
consistent with the purpose of the statute. See Legal Memorandum.
    3. The EPA is not required to consider the potential cost of 
alternative approaches to regulating HAP emissions from EGUs before 
finding that regulation is appropriate and necessary.
    As explained above, commenters maintain that listing under CAA 
section 112(c) and regulation under CAA section 112(d) is not 
reasonable for EGUs and that the EPA must instead look to other 
provisions of the statute to develop a regulatory approach that is only 
as costly as necessary to address specifically identified hazards to 
public health (hazards to the environment would not be sufficient to 
justify regulation of any HAP according to many commenters opposed to 
the agency's interpretation). The commenters point to various 
provisions including CAA sections 112(n)(1), 112(f), and 111(d), and to 
the potential for state action,\57\ and the commenters assert that the 
EPA must consider all these different approaches for each HAP, in 
addition to, or instead of, evaluating the cost reasonableness of MATS. 
The EPA does not agree that these alternative approaches are mandated 
by the Michigan decision or by the statute for the reasons above and as 
explained further below.
---------------------------------------------------------------------------

    \57\ The comments suggesting that the EPA must consider 
potential state action prior to making the appropriate and necessary 
finding is in direct conflict with CAA section 112(n)(1)(A). That 
provision only requires the agency to consider the potential impact 
of CAA requirements on HAP emissions from EGUs when determining 
whether hazards to public health remain ``after imposition of the 
requirements of this chapter [the CAA].'' See CAA section 
112(n)(1)(A). In light of this limitation, we do not believe the 
agency could reasonably defer federal regulation of HAP emissions 
from EGUs because of potential state action.
---------------------------------------------------------------------------

    As an initial matter, the commenters do not suggest a clear 
framework for developing standards under those alternative approaches 
and the statute does not provide one. The D.C. Circuit stated that the 
EPA is not required to adopt a ``hypothetical framework not elaborated 
in the statute''; thus, even if HAP emissions could theoretically be 
regulated under the alternative provisions of the CAA identified by the 
comments, the agency could reasonably decline to adopt those 
alternative approaches in lieu of the reasonable approach affirmed in 
White Stallion. See 748 F.3d at 1244.
    The lack of a statutory framework for the alternative approaches 
suggested by commenters would frustrate if not wholly undermine the 
agency's ability to achieve prompt, permanent and ongoing reductions in 
HAP emissions from EGUs after completion of the studies, thus unduly 
frustrating the purpose of CAA section 112. As the EPA explained in the 
Legal Memorandum, CAA section 112(n)(1) required the agency to conduct 
the three studies that Congress thought most relevant to a 
determination of whether to regulate HAP emissions from EGUs within 4 
years of the 1990 amendments to ensure that the EPA would have the 
information required to make the appropriate and necessary finding. 
Legal Memorandum at 13-18. The EPA maintains that this direction 
ensured that the agency could list and regulate HAP emissions from EGUs 
if warranted. Conversely, the commenters' different and supposedly 
mandated approaches would make it virtually impossible to obtain prompt 
reductions in HAP emissions,\58\ and none of the approaches would 
require ongoing evaluation of HAP emissions from EGUs. In addition, 
because of the legal uncertainty

[[Page 24448]]

surrounding the alternative approaches, the potential for loss in court 
makes the risk that the standards will not be permanent arguably 
unacceptable.
---------------------------------------------------------------------------

    \58\ We note that collectively the comments would mandate a 
significant process after the agency completes the section 112(n) 
studies that would necessarily delay potential regulation 
indefinitely. Even if we assume that the commenters would argue that 
EPA need not take the time to evaluate the cost of standards under 
section 112(d) (i.e., the MATS HAP standards), a position with which 
we disagree as explained above, the different approaches to 
considering cost under the different provisions would be difficult 
for a number of reasons, including the fact that there are no 
defined mechanisms for setting the level of the standard and there 
is no indication in the comments when the EPA would be authorized to 
conclude that sufficient alternatives had been evaluated. Even if 
only one of the alternative approaches were chosen, because there 
are no defined standards, commenters could provide endless 
alternative approaches with different costs and benefits. The EPA 
declines to interpret the statute in ways that are not mandated by 
the statute and that we believe would frustrate the purpose of the 
statute.
---------------------------------------------------------------------------

    We next address the commenters' assertion that the EPA could 
regulate under CAA section 112(f) and that such an approach is proper 
because CAA section 112(n)(1)(A) is a residual risk provision.\59\ As a 
legal matter, the commenters have failed to explain how the EPA could 
jump to regulation under CAA section 112(f)(2) when that provision, on 
its face, only applies after promulgation of CAA section 112(d) 
standards. See CAA section 112(f)(2)(A) (requiring review ``within 8 
years after promulgation of standards . . . pursuant to subsection (d) 
of this section''). In addition, CAA section 112(f)(2) embodies the 
failed approach to regulating HAP that existed prior to the 1990 
amendments wherein the agency listed as HAP only those air pollutants 
that the agency determined pose a risk and then regulate sources of 
those identified HAP based solely on the risk to human health. See 
Legal Memorandum at 9. As explained in the Legal Memorandum, the 
statute was completely revised in 1990 to ensure that there would be 
prompt, permanent and ongoing reductions in HAP emissions from 
stationary sources that meet the listing criteria. Id. at 6-7. CAA 
section 112(d) contains the statutory mechanism adopted to ensure 
prompt reductions and the risk approach incorporated into CAA section 
112(f) was explicitly relegated to secondary status. Id. at 6-11. Under 
this statutory scheme, the risk analysis is conducted when standards 
are reviewed and no provision authorizes setting standards, in the 
first instance, based on a CAA section 112(f) risk analysis. In 
addition, the fact that CAA section 112(n)(1)(A) uses the terms 
``section, ``subsection'' and ``subparagraph'' in a very careful and 
deliberate manner is an indication that Congress consciously directed 
the EPA to the relevant provisions of CAA section 112. If Congress 
intended the EPA to regulate under CAA section 112(f), it could have 
directed the EPA to that provision; in fact, however, the statute 
directs the agency to regulate under CAA section 112 as a whole.
---------------------------------------------------------------------------

    \59\ The characterization of CAA section 112(n)(1)(A) as a 
residual risk provision of a kind with the CAA section 112(f) 
residual risk program is not reasonable. As indicated in the Legal 
Memorandum, the only EGU specific regulatory program enacted in the 
1990 amendments to the CAA was the title IV acid rain program (ARP). 
The ARP was a trading program directed at the reduction in 
SO2 and NOX. Conversely, under CAA section 
112(f), the EPA evaluates whether a residual risk from HAP emissions 
remains within 8 years of implementation of section 112(d)(2) MACT 
standards. See CAA section 112(f)(2)(A). The requirement to comply 
with a trading program that does not require controls on any 
particular source or for any HAP does not in any meaningful way 
compare to the application of MACT standards that require reductions 
in all HAP emitted from a source category. As explained throughout 
the MATS rulemaking, CAA section 112(n)(1)(A) was included in the 
CAA in large part because EGUs were uniquely affected by the ARP and 
there was a belief that ARP trading program and other CAA programs 
applicable to all major stationary sources (e.g., NSR, PSD, haze) 
might address any risks associated with HAP emissions from EGUs. CAA 
section 112(n)(1)(A) required the EPA to estimate potential HAP risk 
after implementation of the ARP and other programs, and the EPA 
found unacceptable risks remain in 2000 and again in 2012, more than 
20 years after the CAA amendments.
---------------------------------------------------------------------------

    Commenters' challenges based on the legislative history are equally 
misplaced. The EPA has reviewed the legislative history cited by the 
commenters and the agency does not agree that it mandates or even 
supports the commenters' assertions concerning the proper consideration 
of cost. Commenters on the MATS rule used much of the same legislative 
history to argue against the non-cost related aspects of EPA's 
interpretation of CAA section 112(n)(1)(A), and the agency explained 
why the legislative history did not undermine the EPA's interpretation 
or compel a different approach. See e.g., 77 FR 9320-9323. The Michigan 
decision did not rely on the legislative history at all in its opinion, 
much less adopt the commenters' interpretation of that history. 
Instead, the Supreme Court relied on the context of the statute, 
specifically citing the requirement to consider cost in the Mercury 
Study required pursuant to CAA section 112(n)(1)(B). See Michigan, 135 
S. Ct. at 2708 and 2710. For these reasons, and after review of the 
additional legislative history cited, the EPA confirms that the 
legislative history does not mandate a particular approach to 
considering cost pursuant to section 112(n)(1)(A). See RTC, Chapter 1 
(providing additional discussion of the legislative history cited by 
commenters).
    Commenters also argue that the direction to conduct the Utility 
Study in CAA section 112(n)(1)(A) required the agency to consider 
regulation of HAP under other CAA authorities and that the agency 
incorrectly interpreted the scope of the study. Specifically, the 
commenters assert that the requirement to ``develop and describe . . . 
alternative control strategies'' for HAP emissions was a requirement to 
devise alternative regulatory approaches (other than CAA section 
112(d)) for reducing HAP emissions from EGUs and further required the 
agency to evaluate the comparative cost of the different approaches. 
The commenters argue that if the EPA had done what it was ``supposed'' 
to do in the study, it would have had the information commenters 
maintain is necessary to properly consider cost. The commenters' 
argument is flawed for several reasons. First, a natural reading of the 
statute does not support the type of analysis the commenters suggest is 
mandated and the legislative history does not support that conclusion 
either. In addition, the EPA completed the Utility Study in 1998 and to 
comply with the requirement to consider alternative control strategies 
the agency considered mechanisms to reduce HAP from EGUs before, 
during, and after combustion. See Utility Study, Chapter 13. The 
Utility Study was the last of the CAA section 112(n)(1) studies 
completed and Congress never indicated that the agency erred in the 
conduct of that study. Conversely, in the EPA's Fiscal Year 1999 
appropriations report, Congress did direct the agency to fund a NAS 
study to determine a reference dose for methylmercury, which is 
essentially the same study that was required in CAA section 
112(n)(1)(C), and the appropriations report stated that the EPA should 
not make the appropriate and necessary finding until after 
consideration of the NAS study. See Legal Memorandum, citing H.R. Conf. 
Rep. No 105-769, at 281-82 (1998). The fact that Congress specifically 
requested more information in relation to one of the CAA section 
112(n)(1) studies undermines the commenters' position that the EPA 
erred in the conduct of the Utility Study. Finally, the commenters fail 
to note that CAA section 112(n)(1)(A), unlike CAA section 112(n)(1)(B), 
did not require the agency to consider the cost of the alternative 
control strategies that the agency identified, thus further undermining 
their position that EPA erred in its conduct of the Utility Study. 
Congress could have explicitly required the EPA to consider the costs 
of alternative control strategies under CAA section 112(n)(1)(A). The 
fact that it did not do so is significant, particularly in light of the 
fact that it did include such a requirement in the very next 
subsection. For all these reasons, we reject the contention that the 
EPA erred in the conduct of the Utility Study.
    4. The Michigan decision does not affect the EPA's prior analyses 
and conclusions regarding the risks of HAP and its prior findings of 
hazards to public health and the environment from EGU HAP emissions.
    The commenters challenge either expressly or impliedly the legal 
and technical bases on which the agency determined that HAP emissions 
from EGUs pose hazards to public health and

[[Page 24449]]

the environment. Specifically, the commenters state that environmental 
harms cannot form the basis for a finding that it is appropriate to 
regulate HAP emissions from EGUs, that the 1-in-1 million standard is 
not reasonable, that HAP volume (particularly major source levels) is 
not a basis for determining risk, and that the agency has not 
demonstrated that a sufficient risk exists to warrant regulation of HAP 
emissions from EGUs. While we believe these comments are outside the 
scope of the proposed supplemental finding because they raise issues 
unrelated to cost, we respond briefly below.
    As to the consideration of environmental harms and the 1-in-1 
million standard, the White Stallion court unanimously affirmed the 
reasonableness of these standards for evaluating whether it is 
appropriate to regulate HAP emissions from EGUs. White Stallion, 748 
F.3d at 1236 (finding that ``EPA reasonably relied on the Sec.  
112(c)(9) delisting criteria [including the 1-in-1 million standard] to 
inform the interpretation of the undefined statutory term `hazard to 
public health.' ''), and 748 F.3d at 1242 (finding that ``[i]n the 
absence of any limiting text, and considering the context (including 
Sec.  112(n)(1)(B)) and purpose of the CAA, the EPA reasonably 
concluded that it could consider environmental harms in making its 
`appropriate and necessary' determination.''). The Michigan decision 
indirectly confirms that environmental harms are a valid basis for the 
finding because it is CAA section 112(n)(1)(B) that the Supreme Court 
cites as the context that demonstrates costs are relevant to the 
appropriate finding. The Michigan decision noted that the EPA used CAA 
section 112(n)(1)(B) to justify (in part) the consideration of 
environmental harms in support of the appropriate finding so it was 
unreasonable in the majority's view to ignore costs, which were also a 
required consideration under that provision. Michigan, 135 S. Ct. at 
2708. It is unreasonable to conclude based on the Michigan decision 
that the statute requires a consideration of cost and precludes in any 
way a consideration of environmental impacts. Id. (``Chevron allows 
agencies to choose among reasonable interpretations of a statute; it 
does not license interpretive gerrymandering under which an agency 
keeps parts of statutory context it likes while throwing away parts it 
does not.'').
    Commenters note that the White Stallion court specifically declined 
to determine ``whether environmental effects alone would allow the EPA 
to regulate EGUs under Sec.  112, because EPA did not base its decision 
solely on environmental effects'', and they argue that because the 
agency must consider cost, the appropriate finding for acid gas HAP 
cannot stand because it was based only on environmental effects.\60\ 
748 F.3d at 1242. Initially, we note that the commenters are not 
correct that the appropriate finding for acid gas HAP was based solely 
on environmental effects, as it was also based on the major source 
status of almost all EGUs and the concern about the potential for these 
emissions to add to the already high atmospheric levels of other 
chronic respiratory toxicants. See, e.g., 76 FR 25015-16; 77 FR 9363. 
More importantly, as with all of these comments, the arguments are 
based on an assumption that the EPA's prior interpretations of the act 
are invalid (e.g., that the EPA will list under CAA section 112(c) and 
regulate under CAA section 112(d) if we determine regulation is 
appropriate and necessary; that the EPA can base the finding on a 
hazard from one HAP), and we explain above why the consideration of 
cost does not mandate or otherwise support a change in the agency's 
interpretation in the MATS rule, as supplemented by the Legal 
Memorandum.\61\
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    \60\ The commenters' argument against regulating acid gas HAP 
does not apply to the non-mercury metal HAP risk assessment because 
that assessment found a hazard to public health, and commenters 
agreed that hazards to public health form a valid basis for the 
appropriate finding. For this reason, the commenters instead attempt 
to reargue issues raised and responded to in the MATS rule and the 
agency's response to petitions for reconsideration. See 80 FR 24218 
(April 30, 2015) (providing notice of the document titled ``Denials 
of Petitions for Reconsideration of Certain Issues: MATS and Utility 
NSPS'', March 2015. Docket ID No. EPA-HQ-OAR-2009-0234-20493). 
Specifically, the commenters cited data submitted after the final 
MATS rule was issued as supporting their conclusion that non-mercury 
metal HAP do not pose a significant risk. The EPA responded to the 
petitions in the reconsideration denials document, and certain 
commenters are currently challenging the agency's denial of that 
petition for reconsideration in the D.C. Circuit Court. For these 
reasons, the specific arguments challenging the sufficiency of the 
finding are outside the scope of this action and they require no 
additional response.
    \61\ Though some commenters acknowledged that the findings from 
the lower court were not disturbed, they appear to ignore the fact 
that the White Stallion court unanimously found that the hazards to 
public health from mercury emissions alone supported the appropriate 
finding. 748 F.3d at 1245. The commenters' attempt to use the 
limited nature of the White Stallion decision (i.e., find the 
determination sufficiently supported by the mercury health risks 
alone) as a justification for rearguing the merits of the other 
technical findings the EPA cited in support of the conclusion that 
regulation of HAP emissions from EGUs is appropriate and necessary 
(e.g., the non-mercury metal HAP related health findings, the 
mercury-related environmental findings, the acid gas HAP-related 
environmental findings, and the finding that the volume of HAP from 
EGUs support the decision to regulate). The commenters have not 
shown in any way how a consideration of cost necessarily implicates 
the actual development of the specific risks finding in the MATS 
record, and the agency explained in the Legal Memorandum that cost 
plays no role in those analyses. See Legal Memorandum at 10-11. 
Instead, cost is a factor only if the agency has first concluded 
that HAP emissions from EGUs pose a hazard to public health or the 
environment that will not be addressed through imposition of the 
other requirements of the act. Id. For these reasons, neither the 
requirement to consider cost nor issues related to the manner in 
which the EPA incorporated cost into the appropriate and necessary 
finding, has any impact on the health and environmental findings, 
and commenters' challenges are thus beyond the scope of this 
rulemaking.
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    Concerning the consideration of the volume of HAP emissions in the 
appropriate finding, the EPA explained in the Legal Memorandum why 
volume of HAP is relevant to the appropriate finding because one of the 
goals of the CAA is to obtain permanent reductions in the volume of HAP 
emissions from major stationary sources. See, e.g., Legal Memorandum at 
17. The commenters do not directly address the EPA's argument and 
instead state that CAA section 112(n)(1)(A) clearly prohibits the 
consideration of the volume of HAP as a basis for regulating HAP 
emissions from EGUs.\62\ The commenters' next point to acid gas HAP 
specifically and argue that the EPA cannot consider major source levels 
of those HAP because CAA section 112(n)(1)(A) was enacted in part 
because of the Acid Rain Program and if Congress wanted to regulate 
major source levels of HAP from EGUs it would simply have directed the 
agency to list and regulate EGUs. That argument is unpersuasive as 
Congress could have just as easily prohibited the EPA from regulating 
acid gas HAP emissions from EGUs if that was the intent. In addition, 
the EPA does not believe the commenters' interpretation is better than 
the agency's in light of the overall context of the CAA and the purpose 
of the 1990 CAA amendments. The history of CAA section 112(n)(1)(A) 
suggests that it was included due to uncertainty about whether the Acid 
Rain Program in Title IV and other CAA programs would sufficiently 
reduce HAP emissions from EGUs and Congress' interest in better 
understanding the impact of such reductions on risk before authorizing

[[Page 24450]]

regulation of HAP emissions from EGUs under CAA section 112. The Acid 
Rain Program required significant reductions in EGU SO2 
emissions and, as explained in the MATS record, other acid gases (e.g., 
hydrogen chloride and hydrogen fluoride) are removed from flue gas more 
easily than SO2 such that control of that pollutant could 
potentially address the acid gas HAP emissions, and to a lesser extent 
mercury and non-mercury metal HAP emissions. In fact, as the record 
reflects, the Acid Rain Program led to the installation of far fewer 
controls than estimated at a cost that was considerably below estimates 
at the time of promulgation. As a result the co-benefit HAP reductions 
attributable to the Acid Rain Program and other CAA programs were 
limited. The EPA believes adopting the commenters' interpretation that 
the agency must ignore the volume of HAP from EGUs would potentially 
undermine one of the purposes of CAA section 112, and we therefore 
decline to adopt that interpretation in the absence of express 
statutory support. For all these reasons, we maintain our position from 
the MATS rule that the volume of HAP emissions from EGUs, including 
acid gas HAP emissions, may form the basis for finding that HAP 
emissions from EGUs pose a hazard to public health and the environment 
that is appropriate to regulate. See e.g. Legal Memorandum at 10-11.
---------------------------------------------------------------------------

    \62\ The commenters appear to assume that the EPA was concerned 
only with the volume of acid gas HAP emissions from EGUs. In fact, 
the EPA determined that EGUs emitted almost half of all U.S. 
anthropogenic emissions of mercury, and more than half of all U.S. 
anthropogenic emissions of selenium, hydrogen chloride, hydrogen 
fluoride, and arsenic, along with significant volumes of other HAP 
such as nickel. The agency maintains it would be unreasonable not to 
at least consider the significant contribution of HAP emissions from 
EGUs in light of the statutory goals as discussed in the MATS record 
and the Legal Memorandum.
---------------------------------------------------------------------------

    The EPA also disagrees with commenters' assertion that the acid gas 
HAP that are emitted from EGUs do not warrant regulation under CAA 
section 112. CAA Section 112(b) identifies the HAP that Congress 
determined warrant regulation under CAA section 112. Congress also 
provided a mechanism to remove pollutants from the CAA section 112(b) 
list. See CAA section 112(b)(3). If such HAP are not harmful to human 
health or the environment as the commenters contend, they may petition 
the Administrator to remove those pollutants from the CAA section 
112(b) list. If the EPA grants such a petition, the agency would not be 
required to regulate such emissions from EGUs or any other sources. 
Absent such an action, the EPA must regulate all HAP on the CAA section 
112(b) list. See e.g., Sierra Club v. EPA, 479 F.3d 875, 883 (D.C. Cir. 
2007); Nat'l Lime Ass'n v. EPA, 233 F.3d 625, 634 (D.C. Cir. 2000).
    Finally, the agency also does not agree that it may establish a 
standard under CAA section 112(d)(4), which allows the agency to factor 
health thresholds into its decisions on standards in cases where health 
thresholds have been established for pollutants, simply based on cost 
and the Michigan decision. The EPA considered and rejected the 
establishment of a CAA section 112(d)(4) standard in the MATS 
rulemaking. In the proposed MATS rule, the EPA stated its basis for 
declining to establish a CAA section 112(d)(4) standard, which included 
concern over the combination of EGU acid gases with other acid gases 
emitted from other sources, and the agency requested data that would 
support the establishment of such standard. The commenters on the MATS 
rule objected to the determination but provided no data to support 
their position. The agency's decision was challenged in White Stallion, 
and the D.C. Circuit unanimously rejected those challenges. White 
Stallion, 748 F.3d at 1248. While the commenters again renew their 
arguments, they still have not provided the information that the agency 
indicated in the MATS proposal (in May 2011) was necessary to establish 
a CAA section 112(d)(4) standard for acid gas HAP from EGUs with their 
comments on the cost proposal.

D. Comments on Topics That Are Beyond the Limited Scope of the 
Supplemental Finding

    Because of the limited nature of the Supreme Court's remand, the 
EPA only solicited comments on its consideration of cost in its 
proposal reaffirming the appropriate determination. We explained that 
analyses presented in the proposed notice and in the accompanying Legal 
Memorandum did 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. The EPA also clearly explained that the 
analyses in the proposed supplemental finding did not, in any way, 
alter the RIA prepared for the final MATS.
    Therefore, we clearly stated that we would not accept comment on 
the scientific or technical aspects of the prior findings or the 
analyses supporting our conclusions regarding the hazards to public 
health and environmental benefits from HAP emissions from EGUs. These 
findings include that mercury and other HAP emissions pose significant 
hazards 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.
    The EPA did not open for comment or propose to revise any other 
aspects of the appropriate and necessary interpretation or finding, or 
the MATS standards themselves, as part of the proposed 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). Further, 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.\63\
---------------------------------------------------------------------------

    \63\ 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.
---------------------------------------------------------------------------

    The Supreme Court's decision in Michigan neither called into 
question nor reversed 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 CAA 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

[[Page 24451]]

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 CAA section 
112(n)(1)(A) finding, all the challenges were unanimously rejected. For 
that reason, the EPA clearly explained in the proposed supplemental 
finding that it was not soliciting comment nor revisiting, in any way, 
those final actions that were unanimously upheld in White Stallion 
Energy Center v. EPA, 748 F.3d 1222 (April 15, 2014). 80 FR 75028-29.
    The EPA further clarified that reference or 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 MACT floor).
    Despite the very clear direction that the EPA provided in the 
proposal and solicitation, numerous commenters submitted comments that 
were beyond the limited scope identified in the proposed supplemental 
finding. In many cases, the submissions contained comments on issues 
that the EPA had considered in Petitions for Reconsideration (80 FR 
24218) or that had been upheld in White Stallion and not disturbed by 
the Supreme Court's decision in Michigan. Those comments are noted in 
Section 5.0 of the Response to Comments document. However, the EPA has 
no obligation to respond to comments beyond the scope of the rulemaking 
and the EPA has not provided extensive responses to such comments.

V. Statutory and Executive Order Reviews

    Additional information about these statues and Executive Orders can 
be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.

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 incremental costs or benefits associated with this 
supplemental finding because this action does not impose standards or 
other requirements on affected sources.

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 
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 incremental costs or benefits associated with this 
supplemental finding because this action does not impose standards or 
other requirements on affected sources.

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 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 as this action does not impose 
standards or other requirements on affected sources.

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 the cost of whether it is appropriate to regulate HAP 
emissions from EGUs.

K. Congressional Review Act (CRA)

    This action is subject to the CRA, and the EPA will submit a rule 
report to each House of the Congress and to the Comptroller General of 
the United States. This action is not a ``major rule'' as defined by 5 
U.S.C. 804(2).

L. 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. CAA section 307(d)(1)(V) provides that the provisions of CAA 
section 307(d) apply

[[Page 24452]]

to ``such other actions as the Administrator may determine.''

VI. 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: April 14, 2016.
Gina McCarthy,
Administrator.
[FR Doc. 2016-09429 Filed 4-22-16; 8:45 am]
 BILLING CODE 6560-50-P