EPA's Rare Loss in Michigan Case Carries Minimal Practical Effect

“You know, sometimes, when they say you’re ahead of your time, it’s just a polite way
of saying you have a real bad sense of timing.” 

—  George McGovern

After several close and newsworthy 5-4 decisions, the U.S. Supreme Court just finished releasing its rulings for the current term, including one in which the justices agreed 9-0 that the Environmental Protection Agency (EPA) must consider costs when issuing regulations governing fossil-fueled power plants. Of course, I am talking about the Supreme Court’s decision in Michigan v. EPA.

Well, perhaps you’ve heard that the EPA’s rule regulating mercury emissions from coal-fired power plants was actually rejected by a 5-4 vote, and you’d be right. However, while the justices agreed unanimously that the Clean Air Act provision at issue (which deals specifically with power plants) required EPA to consider the costs of regulating mercury emissions, they disagreed about the timing of EPA consideration of costs. The majority ruled that EPA should have considered costs at the outset, while the minority believed the costs could be considered during EPA’s normal regulatory process, as EPA routinely does.

The Clean Air Act requires the EPA to regulate a hazardous air pollutant, of which mercury is one, from “electric utility steam generating units” (i.e., power plants) if the EPA finds that that regulating it is “appropriate and necessary.”  In this case, the EPA conducted its analysis, concluding that regulating mercury was “appropriate” because mercury posed a significant risk to human health and the environment and controlling those emissions was technically possible. Regulating mercury was “necessary” because other provisions of the Clean Air Act did not adequately control mercury emissions.

However, in making this initial determination, the EPA expressly did not consider the costs of regulating mercury emissions, deferring instead to the process that  would include cost considerations as it developed the rule, which the Supreme Court's majority and minority agreed occurred.

According to the majority, the EPA did not have the discretion of considering costs later, because their reading of the word “appropriate” included the consideration of costs. Congress specifically included the appropriateness requirement and because  appropriateness included costs consideration, the EPA could not put off that consideration for later.

The EPA estimated the mercury rule would cost power plants about $9.6 billion a year, but net only $4 million to $6 million in direct benefits. The EPA also concluded that ancillary benefits (i.e., reductions in particulate and sulfur dioxide, which are not regulated as hazardous air pollutants) would increase the benefits to $37 billion to $96 billion per year.

The Supreme Court's minority focused on what the EPA actually did in creating the rule. It noted that the rule was a decade in the making and involved multiple studies, including an analysis of the costs of the rule. It also noted that any effort by the EPA to consider costs at the beginning of the process would have been grossly inaccurate, because costs become more clear as the rule takes shape, including what types of plants would be covered by the rule and which would not be.

The Supreme Court's minority also concluded that the EPA’s rule-making process was within its discretion as an executive agency and consistent with the hundreds of rules it had already promulgated on a number of regulated activities.

So, what does this decision do with respect to future EPA regulations, generally, and mercury rules, specifically? Generally, this ruling will likely have no effect on EPA rules promulgated under other provisions of the Clean Air Act because those other requirements do not have the “appropriate and necessary” language at issue here.

The decision now goes back to the circuit court to decide the matter consistent with Supreme Court’s ruling, which likely means that the EPA will be asked to go back and reconsider costs, which it has already done. Most likely, the EPA will reissue the rule, including the cost estimates it has already prepared; however, it may be a year or more before it sees the light of day again.

What is the decision’s practical effect? For the most part, most utilities have already complied with the rule and installed the necessary equipment. Even before the decision, many considered the decision moot, regardless of how it came out. The Clean Power Plan should also have the effect of stemming mercury emissions as an ancillary effect.

In Michigan, several coal plants are scheduled to close, mainly due to their age and the low costs of alternative fuels, like natural gas, so it will have little effect there. Plus, Michigan already has mercury air emission rules in place and will remain in place now that the Supreme Court has invalidated the federal rule. While this decision has received significant press about a rare loss by the EPA in the Supreme Court, its practical effect appears to be minimal.

Finally, expect that when the mercury rule gets reissued, there will be more legal challenges, this time focusing on whether the EPA can consider ancillary benefits in its economic analysis, something it has been doing since the 1970s. The question will be whether it has the discretion to do so?

The statute requires the EPA to consider costs, but doesn't tell it which benefits to consider. Will it be considered within its discretion or will the Supreme Court decide that unless Congress explicitly allows the EPA to consider ancillary benefits that it cannot do so?

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