NEWS RELEASE                                                                                                                JUNE 2015

Supreme Court Mercury Ruling Will Have Uneven Impact on the Pollution Control Industry

The Supreme Court in a 5-4 split ruling on Monday rejected the Environmental Protection Agency’s MATS rules governing toxic air pollutants including mercury. This ruling will have immediate consequences for the air pollution industry, but the impact will be uneven.  It will affect the suppliers of certain types of equipment but not others.  There are short-range and long-range impacts which are both negative and positive according to the analysis in the Mercury Air Reduction Market published by the McIlvaine Company.

Justice Scalia, writing for the court’s majority, said  “The agency must consider cost—including, most importantly, cost of compliance—before deciding whether regulation is appropriate and necessary.” “It is not rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits. Statutory context supports this reading.”

The EPA had argued that it was not required to take costs into account when it made the initial determination to regulate. But the agency added that it had done so later in setting emissions standards and that, in any event, the benefits far outweighed the cost .The two sides had very different understandings of the costs and benefits involved. Industry groups said the government had imposed annual costs of $9.6 billion to achieve about $6 million in benefits. The agency said the costs yielded tens of billions of dollars in benefits.

There is a good possibility that there will be little change in the market. “Given the fact that the EPA has already done a detailed cost benefit analysis justifying the rule, and the fact that the majority of the affected industries have already invested heavily in compliance, there is a good chance that the D.C. Circuit will allow the rule to remain on the books” while the agency makes its revisions, said Patrick Parenteau, an expert on environmental law at Vermont Law School.

If the rule is stricken during the re-write period, the largest and most immediate negative impact would be the loss of sales of activated carbon and other chemicals to aid in the mercury capture. There will be negative impacts on suppliers of trona and lime.   This rule could delay revenues by several years.  On the other hand, most of the equipment to capture the air toxics has already been installed. Also there are State regulations which require mercury reduction as well as limits on other pollutants. These lessen the impact.

Coal-fired generators are subject to other rules which require more efficient air pollution control equipment and more are lurking.  The States have the responsibility for meeting ambient air quality levels for particulate (PM2.5) SO2, NOx and ozone.  Substantial emission reduction of pollutants at coal-fired power plants is the most cost effective route for the States to proceed.  It is also the most politically popular as compared to prohibiting home barbecue grills.

Over time the decision to include cost could be positive for the air pollution industry. The cost of mercury reduction with the present technology is far less than anticipated at the time the rules were drafted.  Therefore, any revised rule is likely to be as stringent as the one being stricken.

In fact more stringent rules would be justified.  The cost per pound of mercury removed is a function of the efficiency.  The first 70 percent of the mercury can be removed very cost effectively.  At the time of the background analysis for the rules it was estimated that the cost per pound to move from 85 to 95 percent efficiency would be ten times that for lower efficiencies. This is no longer the case.  High removal efficiencies can be cost effectively achieved.

If cost is also included in climate change rules, the capture of CO2 will be hard to justify.  There are two reasons:

  • Benefits to U.S. citizens are less than to people living along the equator
  • The benefits are long term

Any cost benefit analysis of CO2 capture limited to U.S. citizens in the short term will compare unfavorably to other investments.  The Supreme Court ruling was narrow and focused just on the language in the Clean Air Act relative to mercury.  Nevertheless, there is a precedent set which could be the difference between shutting down and operating many coal-fired power plants. Scott Segal of Bracewell & Giuliani, said the decision should come as a warning to the Obama administration as the EPA prepares to unveil the climate change regulations this summer.

CO2 reduction can be cost effective if it is tied into efficiency. Extracting waste heat from the flue gas will be attractive.  As a result, modest CO2 reduction rules could have a positive effect on the industry. Coal-fired power plants have other opportunities to become attractively green.  One is the recovery of rare earths from flyash.  Another is to combust municipal and sewage waste.  Use of treated municipal wastewater with zero liquid discharge would mean that a coal-fired power plant has a positive impact on waterways.

For more on:N056 Mercury Air Reduction Market