US Supreme Court strikes down EPA mercury legislation

1 July 2015


In a US Supreme Court judgement on 29 June MATS (Mercury and Air Toxics Standard), the legislation which has been bounced back and forth between the US EPA and the law courts for several years, has been struck down - again. The Court's Ruling was split 5-4 in rejecting the EPA's Rule, This is not the end of the matter, but MATS will require some re-writing before it takes its final and permanent form.
MATS is the US EPA's legislation which aims to reduce several pollutants simultaneously from coal-fired power plants. The rule sets new emission limits for particulate, sulphates and nitrates (as acid emissions) and mercury. It is the mercury limit which has turned out to be most challenging. And the most expensive.

The US Supreme Court held that the Environmental Protection Agency (EPA) was wrong not to consider the cost of compliance when it decided to regulate mercury and other air toxic substances emitted from power plants. The Court held that EPA should have considered the compliance costs (almost $10 billion per year) when determining in 2000 that it was "necessary and appropriate" to promulgate the so-called MATS Rule as opposed to delaying cost considerations until the latter stage of crafting the regulations.

The "necessary and appropriate" determination was reversed in 2005 by the Bush administration, only to be reaffirmed in 2012 by the Obama administration. The reaffirmation found regulation was "appropriate" because the emissions posed risks to health and the environment, and available controls could reduce the emissions; and "necessary" because other requirements in the Clean Air Act did not eliminate the risks.
Along with its decision to regulate power plant emissions, EPA also issued a Regulatory Impact Analysis, estimating that to comply with the MATS Rule power plants would need to pay approximately $9.6 billion per year. But that analysis was not part of the Rule; it responded to an Executive Order requiring rulemakings with a major impact to include a cost-benefit analysis. Indeed, EPA admitted that the Regulatory Impact Analysis "played no role" in its "appropriate and necessary" finding and that it was not required to consider costs.
Twenty three states appealed the MATS Rule, which the DC Circuit upheld. The Supreme Court reversed and remanded the lower court's decision. The Supreme Court noted that, unlike other pollution sources that were required to be regulated under the hazardous air pollutants program under specified circumstances, "Congress instructed EPA to add power plants to the programme (but only if) the Agency finds regulation 'appropriate and necessary'." That determination, according to the Court, requires "at least some attention to cost." Thus, the Court rejected EPA's argument that it can postpone cost considerations from this initial decision about whether to regulate until later in the subsequent rulemaking when deciding how much to regulate.
EPA tested the boundaries of its discretion and power not only by arguing that it need not consider costs in determining to regulate MATS emissions of power plants, but also by issuing Regulatory Impact Analysis so that it could still claim that costs were considered. The Court essentially told EPA to put the analysis in the Rule.

According to an analysis of the Mercury Air Reduction Market published by the McIlvaine Company this ruling will have immediate consequences for the air pollution industry, but the impact will be uneven. It will affect the suppliers of certain types of equipment but not others. There are short-range and long-range impacts which are both negative and positive.
It reports that Justice Scalia, writing on behalf of the majority, said  "The agency must consider cost-including, most importantly, cost of compliance-before deciding whether regulation is appropriate and necessary. It is not rational, never mind 'appropriate,' to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits. Statutory context supports this reading."
This is disputed by Justice Elana Kagan in her dissent, in which she writes that while the EPA did not stop to analyse costs "at the very first stage of the regulatory process, it later took costs into account again and again."

"I agree with the majority ... that EPA's power plant regulation would be unreasonable if the agency gave cost no thought at all,'" Kagan wrote. "But that is just not what happened here. Over more than a decade, EPA took costs into account at multiple stages and through multiple means as it set emissions limits for power plants." 
The EPA had argued that it was not required to take costs into account when it made the initial determination to regulate but added that it had done so later in setting emissions standards and that, in any event, the benefits far outweighed the cost. The two sides had very different views on the costs and benefits involved. Industry groups said the government had imposed annual costs of $9.6 billion to achieve about $6 million in benefits. The agency said the costs yielded tens of billions of dollars in benefits.
However there is the significant possibility that the market will be little changed. The McIlvaine analysis reported comments by Patrick Parenteau, an expert on environmental law at Vermont Law School. "Given the fact that the EPA has already done a detailed cost benefit analysis justifying the rule, and the fact that the majority of the affected industries have already invested heavily in compliance, there is a good chance that the D.C. Circuit will allow the rule to remain on the books" [while the agency makes its revisions] he said.

 



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