The Supreme Court ruled today that the Obama administration unlawfully failed to consider compliance costs before it issued its landmark power plant emission limits for mercury and other hazardous pollutants.
More than 20 Republican-led states and various industry groups challenged U.S. EPA's Mercury and Air Toxics Standards, or MATS.
The rules were finalized in December 2011 and are already in effect, requiring coal-burning power plants to reduce emissions of hazardous substances like mercury, lead and arsenic by installing control technologies or retiring plants.
Challengers contended that EPA should have considered the rule's $9.6 billion in annual compliance costs when determining it was "appropriate and necessary" as a threshold matter to move forward with the regulations. MATS is among the most expensive regulations ever promulgated by the agency.
The Supreme Court's conservative wing agreed in a 5-4 vote.
Writing for the majority in the last decision of the court's term, Justice Antonin Scalia said EPA failed to act rationally in its interpretation of "appropriate and necessary."
"The agency gave cost no thought at all, because it considered cost irrelevant to its initial decision to regulate," Scalia wrote in a 15-page opinion.
"It is unreasonable," he added, "to read an instruction to an administrative agency to determine whether 'regulation is appropriate and necessary' as an invitation to ignore cost."
Coal plants are the country's largest emitters of mercury, and EPA estimated that once fully implemented, MATS would prevent 11,000 premature deaths and yield between $37 billion and $90 billion in health benefits, including protecting particularly vulnerable populations like pregnant women.
The rule's challengers contested EPA's calculation of the rule's health benefits, arguing that the regulation's direct benefits were between $4 million and $6 million.
Scalia addressed the 1984 seminal Supreme Court decision in Chevron v. Natural Resources Defense Council, which held that a court must defer to an agency's interpretation of ambiguous statutory language if it is reasonable.
With the mercury rule, Scalia said EPA "strayed far beyond those bounds when it read" the law "to mean that it could ignore cost when deciding whether to regulate power plants."
Justice Elena Kagan, joined by three other justices in the court's traditionally liberal wing, dissented.
She wrote that the majority faults EPA because it did not explicitly consider costs at the "very first stage" of the regulatory process.
"And that is so even though EPA later took costs into account again and again and ... so on," Kagan wrote in a 25-page dissent. "The majority thinks entirely immaterial, and so entirely ignore, all the subsequent times and ways EPA considered costs in deciding what any regulation would look like."
Further, she said that under Chevron, the question of whether EPA reasonably interpreted the law "nearly answers itself."
"The central flaw of the majority opinion," Kagan wrote, "is that it ignores everything but one thing EPA did."
'Signal is clear'
The high court's ruling reversed an April 2014 U.S. Court of Appeals for the District of Columbia Circuit ruling that upheld the regulations in a 2-1 vote.
The rule's critics immediately welcomed the decision.
"Today's Supreme Court decision is a win for American consumers and a rebuke of EPA's callous approach to regulations," Mike Duncan, president of the American Coalition for Clean Coal Electricity, said in a statement. "We applaud the Court's commonsense decision which serves as a needed reminder that regulatory bodies must actually consider cost impacts of its regulations."
The Supreme Court did not vacate the rules; it remanded the case back to the D.C. Circuit. So, MATS will remain in effect at least until it is reconsidered at the appellate court.
EPA said in a statement that it is "reviewing the decision" but is "disappointed."
However it noted that "this rule was issued more than three years ago, investments have been made and most plants are already well on their way to making emissions reductions."
Nearly 70 percent of the coal industry is already in compliance with MATS, according to the U.S. Energy Information Administration, with other retirement decisions having already been made.
Some court watchers added that Scalia's ruling was limited in scope.
Environmentalists were concerned that the court could hold that EPA must consider costs whenever the word "appropriate" is found in the Clean Air Act, or provide hints on how it might rule on upcoming greenhouse gas standards for power plants, which are due to be finalized later this summer.
But Scalia's opinion does not appear to go that far. In several pages, the justice draws distinctions between the language authorizing the MATS program and other parts of the law, such as the one authorizing the National Ambient Air Quality Standard regime -- EPA's most robust air standard program.
"The more I think about it, the more I think this case will be of extremely limited precedential value, and be limited to the facts of this case," said Bill Snape, an attorney with the Center for Biological Diversity. "It does not appear to be a game changer at all."
EPA's critics on Capitol Hill nevertheless heralded the decision.
"The sweeping powers asserted by the EPA at issue in today's opinion could cost billions of dollars and impose unreasonably high costs on American families and businesses without making them any safer," Senate Energy and Natural Resources Chairwoman Lisa Murkowski (R-Alaska) said in a statement. "It is heartening to hear that the court has reined in the EPA, especially on the issue of the costs of regulation. We need balance, and I hope today's opinion will lead to it."
And even though it may have ruled narrowly, the Supreme Court has again shown itself to be an important check on EPA action, and the court sent a clear message to the agency as it moves forward with the controversial greenhouse gas rules, said Lisa Heinzerling, a Georgetown University Law Center professor and former EPA climate official.
Heinzerling added, "The signal is clear from all nine justices that unless you see a clear indication that you shouldn't consider costs, then you should consider costs."
Justin Pidot, a former Justice Department environmental attorney who is now a professor at the Sturm College of Law at the University of Denver, added that the court showed a willingness to delve into the intricacies of the Clean Air Act to rebuke the agency.
"In that sense, this is an ill omen," Pidot said. "It demonstrates a willingness for five of the justices to look at a voluminous administrative record to find reasons for the EPA's justification falters."
Click here for the opinion.
Reporter Amanda Peterka contributed.
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