[Federal Register Volume 81, Number 79 (Monday, April 25, 2016)]
[Rules and Regulations]
[Pages 24419-24452]
[FR Doc No: 2016-09429]

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

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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<PHONE_NUMBER>, and the telephone number for the Air
Docket is<PHONE_NUMBER>.

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<PHONE_NUMBER>,
facsimile number<PHONE_NUMBER>; email address<EMAIL_ADDRESS>
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

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
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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.
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\1\ North American Industry Classification System (NAICS).
\2\ Federal, state, or local government-owned and operated
  establishments are classified according to the activity in which they
  are engaged.

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

C. 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

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

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

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

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.

                                                 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

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

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

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\
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    \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

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,

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-

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

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

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

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

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