AIR POLLUTION

Conservative judge predicts court battle over EPA 'co-benefits'

As opponents sparred in court last week over the fate of a major U.S. EPA rule to slash mercury emissions, a federal judge forecast that the next big fight over the rule will center on how the agency measures so-called co-benefits.

The U.S. Court of Appeals for the District of Columbia Circuit is grappling with how to handle EPA's standards to cut power plants' emissions of mercury and other hazardous pollutants after the Supreme Court earlier this year ruled that the agency had failed to properly consider costs before it issued the rule.

During oral arguments before the appeals court Friday, Republican-appointed Judge Brett Kavanaugh pointed to concerns raised by Supreme Court Chief Justice John Roberts with EPA's practice of counting health "co-benefits" in justifying the economic impacts of its clean air rules. Those are health benefits not directly attributable to reductions in mercury.

"He referred to that as an end-run and bootstrapping and disproportionate," Kavanaugh said of Roberts' comments. "I assume that's going to be the key battleground six months, a year from now, will be whether co-benefits are properly part of the analysis or not."

Kavanaugh and two of his Democratic-appointed colleagues are now weighing a request from industry and states to vacate EPA's rule while the agency brings it in line with the Supreme Court's ruling. But the three-judge panel on Friday appeared reluctant to gut the rule, in part because much of the industry has already made investments to comply with the standards and because EPA appears poised to reissue the same standards with revised considerations of costs (Greenwire, Dec. 4).

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The agency has committed to fully addressing the high court's concerns by April 15, and EPA issued a proposed finding last month concluding that the benefits of its mercury standards justified the costs of the rule.

If the court agrees to keep the rule in place while EPA tweaks its finding, states and industry could return to court to challenge that finding. Kavanaugh and others have predicted that EPA's assessment of co-benefits will be a key part of their arguments.

"I think there is a pretty good chance that that will be front and center if there is a challenge" to EPA's finding that it is appropriate and necessary to regulate power plants' mercury emissions, said Jeff Holmstead, an industry attorney at Bracewell & Giuliani LLP who served as EPA's air chief during the George W. Bush administration. "A lot of people, including me, have been pretty critical of EPA relying on co-benefits to justify pretty much everything, including the Clean Power Plan."

The Clean Power Plan aims to slash greenhouse gas emissions from existing power plants. EPA has predicted the rule will lead to big cuts in soot and smog, curbing emissions of sulfur dioxide, nitrogen oxides and particulates along with reducing heat-trapping carbon dioxide. Industry contends that EPA's reliance on co-benefits double-counts health benefits for reductions of pollutants that aren't the regulation's focus.

Whether the co-benefits issue comes up in the mercury case or elsewhere, Holmstead said, "I think it will find its way into the courts."

EPA's analysis of the mercury rule found that it would cost industry $9.6 billion a year, while overall benefits would tally as much as $90 billion annually. Of those total benefits, up to $6 million would come from reduced mercury pollution. Most of the rest of the monetary benefits would stem from reductions in particulate matter, a pollutant that is not a target of the mercury rule.

During oral arguments in March, Roberts grilled the Obama administration's solicitor general, Donald Verrilli, about the analysis, suggesting EPA was using the mercury rule to get reductions in particulate matter that it wouldn't be able to otherwise under the Clean Air Act.

"It's a good thing if your regulation also benefits in other ways," Roberts said. "But when it's such a disproportion, you begin to wonder whether it's an illegitimate way of avoiding the different -- quite different limitations on EPA that apply in the criteria program."

Earthjustice attorney Jim Pew said EPA "doesn't have to consider benefits at all to satisfy the Supreme Court decision," and said industry challenges to the agency's calculations of co-benefits are "extraordinarily disingenuous."

John Walke, an attorney at the Natural Resources Defense Council, said Kavanaugh's comments Friday "could be him signaling reservations about EPA's co-benefits." But more likely, he said, it "reflects that industry has been raising that issue from day one."

Kavanaugh was the lone judge to dissent in the appeals court's divided ruling last year that upheld EPA's mercury rule before the high court shot it down.

But while Kavanaugh "has shown himself skeptical of EPA's position in this rulemaking and other rulemakings," Walke said, his "remarks from the bench won't influence what industry will do at all because they have already been doing what he is forecasting."

Twitter: @rbravender Email: rbravender@eenews.net

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