SUPREME COURT

Mercury rule tests justices' deference to EPA on compliance costs

It'll be all about money when the Supreme Court weighs U.S. EPA's rules for curbing power plants' emissions of mercury and other toxics.

The justices last week agreed to consider whether EPA should have taken into account compliance costs before proceeding with the regulations.

It's a major challenge to EPA's mercury and air toxics standards, or MATS, a landmark environmental rule of President Obama's first term -- and one of the most expensive regulations ever. Its price tag: an EPA-estimated $9.6 billion a year.

The case is the fourth time the court has reviewed a regulation in which EPA's cost analysis was the main issue.

In the previous cases, the court has largely deferred to EPA's cost decision -- whether it was to take cost into account or to ignore it.

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The MATS case, said Justin Savage, a former Department of Justice environmental attorney, may signify the court's growing unwillingness to go along with the agency.

"This is part of a broader trend of the court pushing for consideration of costs in mega-rulemaking," said Savage, who's now in private practice at Hogan Lovells. "This could break ground. Before, EPA has gotten discretion on costs. Maybe in this case, [the justices] will read costs more broadly as a constraint."

The MATS case hinges on the agency's determination that it was "appropriate and necessary" under the Clean Air Act to regulate emissions of mercury, cadmium, arsenic and other pollutants because they threaten public health. The Obama administration reversed a George W. Bush administration decision that they didn't meet the "appropriate and necessary" criteria and went forward with the standards in December 2011. EPA estimates the rules will prevent 11,000 premature deaths and provide $90 billion in health benefits.

At that introductory phase, EPA didn't consider how much it would cost oil- and coal-fired power plants and other industrial pollution sources to install emission-control technologies.

The challengers -- 21 states and two industry groups, the Utility Air Regulatory Group and National Mining Association -- contend that costs should be part of such an "appropriate" determination (E&ENews PM, Nov. 25).

A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit upheld the rules in a 2-1 vote in April. The majority deferred to the agency's interpretation that the law did not explicitly instruct it to consider costs.

But influential conservative Judge Brett Kavanaugh dissented, writing that taking costs into account is "just common sense and sound government practice" (Greenwire, April 15).

'A step farther'?

Comparable to the MATS case is a 2009 dispute over cooling water intakes for power plants.

In Entergy v. Riverkeeper, environmental groups challenged EPA's decision to conduct a cost-benefit analysis in setting standards under the Clean Water Act.

The court's five conservatives -- Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas, Samuel Alito and Anthony Kennedy -- upheld EPA's decision. Liberal justice Stephen Breyer also sided with the agency in a separate opinion that provided a more restrictive rationale for considering costs than the majority opinion written by Scalia.

In the MATS case, the conservatives could see an opportunity to mandate such an analysis, said Thomas Lorenzen, a former Justice Department environmental attorney.

"This suggests the court is maybe thinking about going a step farther," said Lorenzen, who is now at Dorsey & Whitney.

Previously, the court has "rarely held" that the agency is required to consider costs, he added.

"Now the question is, must you?" he said. "Is it unreasonable not to consider costs?"

The Supreme Court has weighed costs in other administrative decisions spanning from the Tennessee Valley Authority to the Occupational Safety and Health Administration.

And for EPA, the court hasn't presented a clear picture of when cost considerations are mandatory, said Jonathan Adler, an environmental law professor at Case Western Reserve University School of Law.

"The court has not been entirely consistent about when and how it is appropriate to consider costs," he said.

For example, the court in EPA v. EME Homer City Generation LP last term upheld EPA's decision to take cost into account in setting air-emission limits for states in its program for pollution that drifts across state lines. The agency considered costs in determining how much upwind states must cut emissions as part of its Cross-State Air Pollution Rule, or CSAPR.

"Using costs in the Transport Rule calculus, we agree with EPA, also makes good sense," Justice Ruth Bader Ginsburg wrote for the majority. "Eliminating those amounts that can cost-effectively be reduced is an efficient and equitable solution to the allocation problem the Good Neighbor Provision requires the Agency to address" (Greenwire, April 29).

Joining Ginsburg in the six-judge majority in that case was Roberts and Kennedy, two potential swing votes whom observers will be closely watching in the MATS case.

Adler said those justices may be swayed by the general context of the regulations.

"Some of the justices have very clear commitments when it comes to statutory interpretation and administrative law," Adler said, referring to Scalia and Breyer. "[But] most of the justices don't have such strong commitments in these areas. They are influenced by a broader notion of what makes sense in a given case."

Going back to 2001, for example, the court -- which was then composed of several different justices -- unanimously upheld EPA's decision not to consider costs in setting expensive nationwide standards for smog-causing ozone in Whitman v. American Trucking Associations.

Impact on lower courts

The MATS case also has the potential to upend well-established precedents in lower courts, Savage said.

At the D.C. Circuit, there are more than a dozen cases where the court deferred to the agency's decisions on costs -- whether it was to consider them or not -- in challenges to EPA's setting maximum achievable control technology, or MACT, standards for various hazardous air pollutants and sources.

Should the court decide that not weighing costs is unreasonable, even where the Clean Air Act doesn't explicitly tell the agency to, it could open the floodgates to more challenges to a variety of agency regulations.

"The broader point," Savage said, "is that the court appears to be pushing strongly toward the consideration of costs given the ambitious regulatory agenda of the administration."

Twitter: @GreenwireJeremy | Email: jjacobs@eenews.net

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