MATS rejection could send energy industry reeling

3 min read
6 July, 2015

The U.S. Supreme Court ruled 5-to-4 against the Environmental Protection Agency's Mercury and Air Toxics Standards, turning the measure back to the D.C. Appellate Court for further decision. The 2011 law targeted combustion-based generators nationwide - most notably coal-burning plants - in an effort to provide environmental relief for adjacent neighborhoods and the country at large.

Depending on the federal government's next move, this upset could have a ripple effect on energy generators across the U.S.

'Appropriate and necessary'
According to The Hill, these three words were enough to fuel the dissenting party. The five opposing justices, including Justice Scalia who wrote the majority opinion, found in favor of the plaintiff because of an issue in cost consideration. The court found the federal government did not adequately account for upfront costs to the energy industry when first crafting MATS. Though proponents of the measure argued financial estimates can be found elsewhere as the regulations was under construction, and that those estimates accurately reflected energy interests, the court instead took issue with word use.

Calling MATS "appropriate and necessary" early on in the initial text drafted before a bill becomes regulation sent up a red flag. Leading from that position without sufficiently proving merit demonstrated to the five dissenting justices that the EPA did not fully consider the ramifications of implementing MATS.

The Supreme Court believes the federal government should take a second crack at MATS.
The Supreme Court believes the federal government should take a second crack at MATS.

Weighing the costs
So how much will regulation like MATS cost at the end of the day? The EPA estimated costs associated with national compliance would hover around $9.6 billion annually. In the same report, the agency cites the return on such an investment could be nearly 10 times as high. Reducing airborne toxins would cut medical burdens shouldered by the federal government by promoting a healthier environment.

Additionally, MATS in theory could prevent people from missing work due to respiratory-related illnesses. The total projected benefit could be anywhere between $37 and $90 billion in 2016 alone. However, since the EPA has been sent back to the drawing board, those figures will most likely miss their mark for next year, depending on how long it takes the agency to draft something more suitable.

"Energy generators' punctuality could be their undoing."

Satisfaction not guaranteed
Kicking MATS back to square one has already begun to affect the ways utilities operate. While one might imagine the energy industry would be thrilled at the prospect of shrugging off costly regulations - however temporarily - the backlash isn't coming from businesses opposed to MATS. Rather, the biggest concerns are from those in the energy industry who've already begun to comply.

As Utility Dive reported, the deadline for MATS compliance ended back in April with more than 200 power plants nationwide holding one-year extensions. Now that the regulation is in limbo, the matter of overseeing these late bloomers has entered something of a purgatory all its own. Joe Hall, head of the Energy Industry Group at Dorsey & Whitney, added this "gray area" doesn't even take into account the money generators and other energy industrialists have already poured into new technology to battle carbon emissions. Their punctuality could be their undoing.

"We're talking about literally billion dollar investments, and every time you add another layer of uncertainty to it, you have questions about prudence." he said. "What happens if you've received one of these extensions to the MATS rule and the rule is invalidated?"

Consequences will ultimately hinge on what happens in D.C. While the EPA is optimistic it can produce a more acceptable version, should MATS be overturned entirely compliant generators might need to hike up costs to energy providers to cover "frivolous" expenditures.

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