Mercury ruling sets up legal ‘crapshoot’ on Clean Power Plan

By Jeremy P. Jacobs | 06/30/2015 01:00 PM EDT

Yesterday’s Supreme Court ruling on U.S. EPA’s mercury air standards left one marquee legal question in limbo: how the decision could affect coal companies’ first legal challenges to President Obama’s forthcoming greenhouse gas limits for power plants.

Yesterday’s Supreme Court ruling that U.S. EPA should have considered costs before issuing its mercury air standards for power plants left one major question unanswered: how the decision could affect coal companies’ first legal challenges to President Obama’s forthcoming greenhouse gas limits for power plants.

In a 5-4 ruling, the high court’s conservative wing said EPA should have considered the Mercury and Air Toxics Standards’ $9.6 billion price tag before going ahead with the regulations (Greenwire, June 29).

But the court did not vacate the rule, remanding that decision for a lower court.


And, consequently, the justices provided no guidance on how the ruling will affect Clean Power Plan critics’ primary legal argument that EPA doesn’t have authority to issue the greenhouse gas standards because it already regulated power plants with the 2011 mercury rule.

Thomas Lorenzen, a former Justice Department environmental attorney now representing industry clients at Crowell & Moring, called the issue "very urgent."

Justice Antonin Scalia’s majority opinion "doesn’t address what the current status of MATS is," he said. "That’s going to be a significant question that has profound implications" for the Clean Power Plan challenges.

The connection between the two regulations, which are pillars of President Obama’s environmental agenda, is complicated.

Later this summer, EPA is scheduled to finalize the greenhouse gas limits for power plants. The standards, the most ambitious ever promulgated, are designed to cut carbon emissions by 30 percent by 2030 from 2005 levels, shifting the country from coal-based power to renewables and natural gas.

And EPA air chief Janet McCabe emphasized today that the agency will move forward with the Clean Power Plan as planned.

"The Administration remains committed to finalizing the Clean Power Plan this summer and yesterday’s ruling will have no bearing on the effort to reduce carbon pollution from the largest sources of emissions," she said in a blog post.

The agency is promulgating the Clean Power Plan standards under Section 111(d) of the Clean Air Act.

But two versions of that section were signed into law, one from the Senate and one from the House. Critics of the plan, including utilities, coal companies and several states, contend that one version prohibits EPA from issuing standards under 111(d) for sources of pollution already covered by other regulations.

Critics of the Clean Power Plan claim EPA already regulated power plants with the mercury rule, so the agency lacks authority for the greenhouse gas rules (Greenwire, Dec. 16, 2014).

The other version of Section 111(d) prohibits only duplicative regulation of pollutants, and EPA and environmentalists contend both versions can be read to support the climate rule. So it is very unclear whether the industry argument will succeed.

The issue puts industry and challenging states in a precarious position that wasn’t resolved by yesterday’s Supreme Court ruling. If the mercury rule is vacated, one of their primary arguments against the greenhouse gas rule evaporates.

Speculation is already ramping up over what will happen next to the rule.

Technically, the rule should go back to the same three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit that upheld the mercury rule in a 2-1 April 2014 ruling. Yesterday’s Supreme Court ruling reversed that decision.

The panel will likely be quickly pressed to decide whether to vacate the rule while EPA reconsiders the cost issue. Vacating the rule could, in theory, help EPA with the inevitable challenges to the greenhouse gas regulations.

Paradoxically, if the court leaves the rule in place, that would bolster the industry Clean Power Plan arguments. That is particularly true because industry’s mercury rule argument is a threshold issue — meaning whether EPA has authority to issue the greenhouse gas limits in the first place. Industry challengers will want to make that argument when they ask the D.C. Circuit to immediately stay the climate rule after it is finalized.

Whether the D.C. Circuit vacates the rule is not a simple legal question.

Under the Administrative Procedure Act, a court is directed to vacate a rule that is deemed unlawful.

But there is precedent at the D.C. Circuit of the court leaving in place large environmental regulations that yield significant health benefits. For example, the court in 2011 left in place a George W. Bush-era EPA program to address air pollution that crosses state lines that it had previously found unlawful while it considered challenges to the Obama administration’s more stringent version (Greenwire, Jan. 3, 2012).

The question will likely come down to the three-judge panel. Judge Judith Rogers, a Democratic appointee, sat on the cross-state air case as well, so she may be inclined to leave the mercury rule in place.

Judge Brett Kavanaugh, a Republican appointee, was also on the cross-state panel, but he dissented from the court’s original mercury rule decision. He may, therefore, be inclined to follow a conservative reading of the Administrative Procedure Act and vacate the rule.

That leaves Chief Judge Merrick Garland, another Democratic appointee, who could be the decisionmaker on the issue, Lorenzen said.

Timing could be key

There is also a complicated timing issue. Lorenzen said he thinks challengers to the Clean Power Plan will push for a resolution of whether the mercury rule is vacated quickly so they will have time to adjust their legal strategy for their challenges to the greenhouse gas rule.

But there is a good chance that even with an expedited review, Lorenzen said, they still won’t have an answer on the vacateur question for months — perhaps not in time to file their Clean Power Plan lawsuits.

Patrick Parenteau of Vermont Law School said the challengers to the greenhouse gas regime may be better off pushing to delay that rule’s implementation.

"I could see industry tactically arguing, stay [the Clean Power Plan] until the [mercury rule] issue is sorted out," he said. That could, he said, prevent the Clean Power Plan from being completed before Obama leaves office in January 2017.

Suzanne Murray, a former EPA regional general counsel, countered that the agency’s legal team could see "slow walking" the vacate issue as advantageous.

"There may be some benefits to the Clean Power Plan to letting this sit or be acted," said Murray, now a partner at the firm Haynes and Boone. "During that time, you have a vacuum. And during that time, it makes the Clean Power Plan easier to defend."

EPA may feel comfortable with that option, she said, because nearly 70 percent of the coal industry is already complying with the mercury rule.

Sean Donahue, a lawyer who frequently represents environmental groups in air cases, said he thinks EPA will be more aggressive than that.

"I expect and hope that EPA rolls up its sleeves instead of saying, ‘We’ll wait for what the D.C. Circuit tells us what the status of the rule is,’" he said. "That does have the potential to be dragged out."

He and Parenteau both said they think the rule will remain in place and won’t be vacated.

But, Parenteau added, nothing is certain after the Supreme Court’s ruling.

"It’s a bit of a crapshoot," he said.