Finding the Balance: FERC Carves Out Its Role on EPA’s Mercury and Air Toxics Standards

The following post by Margaret Claybour is in response to an advisory by Brian Gish of our DC office titled, "FERC Seeks Comments on How to Advise EPA Regarding the Reliability Impact of Clean Air Act Rules". Last month, FERC gave us a glimpse into its ongoing efforts to monitor the impact of the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) final rule on bulk-power system reliability.  For more information on FERC's Policy Statement, visit this site.

Before delving into FERC’s role, a brief background on the MATS is in order.  The MATS rule limits mercury, acid gases and other toxic emissions from power plants.  MATS is the short title for EPA’s final rule on national emission standards for hazardous air pollutants from coal- and oil-fired electric utility steam generating units (EGUs) and standards of performance for fossil-fuel fired electric utility, industrial commercial-institutional, and small industrial-commercial-institutional steam generating units.  The rule became effective April 16, 2012.  In short, owners/operators of affected EGUs have three years from that date to bring their sources into compliance with the MATS rule.  Some EGUs may qualify for up to a one year extension to comply with the MATS rule if the additional time is necessary for the installation of controls.

A further subcategory of EGUs may be eligible for yet an additional one year extension, for a total of five years, if the source meets the statutory and regulatory requirements to obtain an Administrative Order (AO) extension from EPA.  In December 2011, EPA’s Office of Enforcement and Compliance Assurance issued a policy memorandum describing the general requirements for AO requests.  The memorandum also describes EPA’s intended approach regarding the use of AO extensions under Section 113(a) of the Clean Air Act (CAA) with respect to sources that must operate in noncompliance with the MATS for up to a year to address specific and documented reliability concerns.  This approach includes relying on and seeking advice, as necessary and on a case-by-case basis, from “reliability experts” for identification and/or analysis of reliability risks.

This is where FERC comes in.  Although EPA has sole decision-making authority whether to grant an AO, it intends to rely on the expertise of FERC, among other entities, on reliability issues as it considers whether to grant an AO extension.  An owner/operator that submits an AO request for EGUs that may affect reliability due to deactivation or to delays related to the installation of controls must submit a copy of the request to FERC.  FERC will:

• Treat any AO request as an informational filing and will review the AO request under its general investigative authority.  This means that FERC will not establish a formal intervention procedure in the docket;
• Designate its Office of Electric Reliability as the lead office tasked with processing the informational filing;
• Provide comments to the EPA, including whether, based on the circumstances presented, there might be a violation of a FERC-approved Reliability Standard;
• Identify issues, pursuant to FERC’s other areas of authority, raised by the AO request for EPA to consider as critical to reliability, e.g., whether the potential plant closure could trigger FERC’s jurisdiction outside of Section 215  of the Federal Power Act (FERC’s reliability authority);
• Advise EPA whether, based on FERC’s review of the informational filing, there might be a violation of a FERC-approved Reliability Standard;
• Not address the appropriateness of granting or denying an AO.

FERC stresses that its policy statement “does not represent the entirety of the Commission’s efforts to monitor the impact of EPA regulations generally on bulk-power system reliability.”  FERC promises to continue to address these issues with state commissions; to review plans, reports, and other information made available regarding the impact of compliance with EPA regulations; and to hold additional technical conferences or workshops.  Yet, it’s not entirely clear what influence FERC can have on this front, particularly since, as FERC acknowledges in its policy statement, EPA has sole jurisdiction with respect MATS compliance under the CAA.  For now, however, it would behoove EGUs to carefully track the actions of both agencies as they feel their way forward across sensitive, new regulatory ground.