A divided Supreme Court today wrestled with whether U.S. EPA should have considered compliance costs before forging ahead with its power plant emissions standards for mercury and other air toxics.
For the third time in a year, the high court reviewed a pillar of President Obama's environmental agenda.
Finalized in December 2011 and set to go into effect next month, EPA's Mercury and Air Toxics Standards, or MATS, require coal-burning power plants to reduce emissions of hazardous substances including mercury, lead, arsenic and cadmium by installing control technologies or retiring the plant.
Coal plants are the country's leading emitters of mercury, and EPA estimated that once implemented, MATS would prevent 11,000 premature deaths and yield between $37 billion and $90 billion in health benefits. In particular, EPA said the rules would protect vulnerable populations, such as pregnant women.
But its requirements make the rule one of the most expensive ever promulgated by the agency. EPA estimates it will cost industry $9.6 billion per year.
Twenty-one Republican-led states, as well as utility and industry groups, argued today that EPA should have considered those costs before it determined it was "appropriate and necessary" to move forward with the regulations.
That determination was a threshold hurdle to regulating power plants under a section of the Clean Air Act based on environmental and public health risks.
The challengers contend that costs should also have been included.
Michigan Solicitor General Aaron Lindstrom said EPA defined both "appropriate" and "necessary" as health risks. "Appropriate," he said, should have included costs.
EPA, he said, is "reading a word out of the statute" using that definition.
That argument, however, quickly ran into sharp opposition from some of the liberal justices on the bench.
Justice Elena Kagan was particularly aggressive in questioning why EPA must consider costs, as the challengers contend, when the relevant section of the law doesn't mention cost anywhere.
"To get from silence," she said, referring to the law, "to a requirement ... seems like a pretty big jump."
The challengers are appealing a U.S. Court of Appeals for the District of Columbia Circuit 2-1 decision last April that upheld EPA's regulations.
EPA contends that it deserves deference in interpreting the ambiguous word "appropriate." And Justice Sonia Sotomayor hammered that point in her questioning of Lindstrom.
"Why do you get to pick what it means?" she asked. "It's ambiguous."
Justice Ruth Bader Ginsburg noted that there has never been a Supreme Court case that held that the absence of explicit instructions to consider costs meant EPA should, in practice, take them into consideration.
The court's conservative wing, however, had equally tough questions for Solicitor General Donald Verrilli, representing EPA.
Justice Antonin Scalia called the regulations "outrageously expensive." Chief Justice John Roberts took issue with EPA's saying at the preliminary listing stage -- when the agency determined that it was "appropriate and necessary" to include power plants in its air program -- that it would not consider costs.
He called that determination "unusual" and asked why the agency "deliberately tied its hands."
Verrilli countered that he didn't think that was the case, arguing that both the text and the legislative history indicated that the "appropriate and necessary" language was "all related to health hazards."
The challengers also argue that the regulations yield only $4 million to $6 million in health benefits if only reduced emissions of hazardous air pollutants are considered, removing from the calculation "co-benefits" of lowered emissions of other pollutants, such as particulate matter or soot.
(The emission control technology required to comply with MATS also reduces emissions of sulfur dioxide, which converts to soot in the atmosphere.)
Roberts said that issue raises a "red flag" and asked whether the rules were an "end around" in an attempt to regulate other pollutants.
Verrilli said the co-benefit analysis is a "well-recognized methodology that goes back decades."
Much of the arguments focused on whether EPA would take costs into account after the initial listing, when setting the standards themselves. EPA contends that it can when it sets the specific standards, including breaking power plants into "subcategories" for standard setting.
Justice Anthony Kennedy, who may be the swing vote in the case, asked few questions but expressed some sympathy for both sides.
He said the term "appropriate" was "capacious," seeming to indicate there is ambiguity that allows EPA some flexibility.
Later, however, he took issue with EPA's contention that the initial listing should be upheld because the agency implicitly considers costs later, after the threshold determination at issue in the case.
"At that point, the game is over," he said.
The case represents the third time in a year that the Supreme Court has reviewed a major EPA air program. The agency is on a winning streak at the typically business-friendly court, having largely prevailed in challenges to its air program for pollution that drifts across state lines and its first climate change regulations.
According to the independent U.S. Energy Information Administration, 64 percent of the country's coal-fired generation is already in compliance with the rules. An additional 10 percent of the sector is planning to retire coal plants in the coming years, and only 20 percent has yet to decide how it will meet the regulation's requirements.
A decision in the consolidated cases -- Utility Air Regulatory Group v. EPA, National Mining Association v. EPA and Michigan v. EPA -- is due by the end of June.
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