The Supreme Court is currently debating the fate of one of the Obama administration's most sweeping environmental policies — a big crackdown on mercury pollution from coal plants. And, by many accounts, the Court could potentially strike the rule down. This will be a close call.
The issue at hand is arcane but important: it's all about whether the Environmental Protection Agency properly considered costs in crafting its 2012 mercury regulations, which is forcing coal-fired power plants to spend $9.6 billion per year cleaning up toxic mercury emissions. Combined with other economic and regulatory pressures, that rule has already hastened the retirement of many coal plants.
The Clean Air Act is fairly ambiguous on the legal point here, which is why, on March 25, 2015, the Supreme Court heard oral arguments on the case, Michigan v. EPA. Here's a very basic guide to the fight, which could have big implications for Obama's environmental legacy.
The debate over the mercury rule's costs and benefits
Back in 2012, the EPA finalized a new regulation under the Clean Air Act to limit mercury emissions and other toxic pollution from coal-fired power plants. (This was in response to earlier court decisions that had ordered the agency to redo the way it regulates mercury.)
The rule was potentially a huge deal from a public health perspective, expected to save tens of thousands of lives every year. But a closer look at the numbers explains why the rule was so controversial.
When it put out the rule, the EPA tallied up the costs and benefits. On the one hand, it estimated that power plants would have to pay about $9.6 billion per year to install scrubbers and other technologies to reduce mercury and other toxics. That would make this one of the costliest regulations of the Obama era. Many older coal plants, already facing competition from cheaper natural gas, would likely just retire.
And what about the benefits? That's where things get tricky. There's plenty of evidence that mercury, a neurotoxin, inflicts plenty of harm on the public. One 2005 study in Environmental Health Perspectives found that 637,000 babies were born each year with significant amounts of mercury in their bloodstream. About two-thirds of those kids suffered IQ loss as a result.
And yet, when the EPA analyzed the rule, it estimated the benefits of reducing mercury from power plants were only $4 million to $9 million. There's a decent case that the EPA understated those benefits, in part because economists aren't yet able to quantify all the damages from mercury. The EPA, for instance, only looked at potential "lost wages" — which is hardly the only reason we'd want to limit neurological harm to children. But regardless, what the EPA's published numbers said is that the benefits of curbing mercury were way lower than the costs.
At that point, EPA took another step. The agency pointed out that if coal-fired power plants installed scrubbers to clean up mercury, that would also reduce other pollutants, particularly fine particulates like soot. And these pollutants are widely known to damage lungs and kill people. The EPA estimated that the benefits from doing so were worth some $26 billion to $89 billion per year. Looked at in this light, the benefits of the rule far exceeded the cost.
When the rule came out, environmentalists hailed it as a sweeping public health measure and a worthy investment. Industry groups complained that the costs of reducing mercury appeared to vastly outweigh the benefits of cleaning up mercury. And, in a sense, both sides were right.
The key question is whether EPA considered costs properly
In theory, the EPA is supposed to consider costs and benefits when setting a regulation. The key question is how this is supposed to happen. And the Clean Act turns out to be a little vague on this point.
After all, the EPA did two distinct things here. First it had to determine whether regulating mercury was "appropriate and necessary" in the first place. The agency decided that, yes, mercury is harmful and it should be regulated.
Then the EPA actually crafted the regulations. At that stage, it took all of the relevant costs and benefits into account.
Industry groups and states like Michigan sued the EPA, arguing that the agency should have taken costs into account during that first stage — when determining whether mercury was worth regulating. If the agency had done so, they argue, it would have realized that its initial determination was not "appropriate" since the costs vastly outweigh the tiny benefits.
The EPA, for its part, is arguing the Clean Air Act does not require costs to be taken into account in that initial stage. Instead, the agency considers costs in the later stage, when it's actually setting regulations. And, the EPA says, that's what it did — it crafted rules with at least $27 billion in annual benefits and $9.6 billion in costs.
It's unclear who will win this fight — the law is vague
The reason this is a big legal brawl is that the Clean Air Act is ambiguous on this question. "It's a question of how to take costs into account under statutes that are silent on the issue," Richard Revesz, a law professor at New York University, told me in Novemeber.
Last year, two out of three judges on a panel for the United States Court of Appeals for the District of Columbia Circuit ruled that the EPA did the right thing here.
"For EPA to focus its ‘appropriate and necessary’ determination on factors relating to public health hazards, and not industry’s objections that emission controls are costly, properly puts the horse before the cart," wrote Judge Judith W. Rogers in the majority opinion.
But Brett Kavanaugh, a conservative judge on the court, dissented, saying that EPA should have considered costs in that first stage as a matter of "common sense." "The problem here is that EPA did not even consider the costs. And the costs are huge, about $9.6 billion a year — that’s billion with a ‘b’ — by EPA's own calculation."
The Supreme Court then took up the case. And, on Wednesday, they heard oral arguments. According to David Savage of The Los Angeles Times, the Supreme Court seemed closely divided over arguments, with conservative justices skeptical of the EPA. Even Stephen Breyer noted that $9.6 billion per year in costs was a huge number.
There are some possible precedents that could be brought to bear here, Revesz told me. In an earlier case, EPA v. Homer City, the Supreme Court also heard arguments on an instance in which the agency crafted a rule in which the statute was silent about costs. In that case, the Supreme Court voted 6-2 to defer to the EPA — which it often does on administrative law cases when the statute is vague.
Ironically, though, in that case it was industry arguing that the EPA inappropriately considered costs in setting rules. This time around, Revesz says, the positions are basically reversed.
The Supreme Court could strike the rule down — although many coal plants have already retired
The Supreme Court likely won't issue a decision until June 2015. And there are a couple different options here. Most obviously, the Supreme Court could side with the EPA and uphold the regulation, which would continue moving forward.
Conversely, the Supreme Court could reverse the DC Circuit Court's decision, at which point the lower court would have to figure out what to do. It might tell the EPA to reconsider the rule in some way — or strike down the rule altogether, at which point the agency would have to start all over in crafting a new way to regulate mercury.
But even if the rule does get struck down, it's unclear how big an impact that will have. Ever since the rule was finalized back in 2012, the vast majority of utilities have been working to comply with it, either by installing scrubbers — or, in many cases, shutting down their coal plants. The rule has already had a sweeping impact.
An analysis in May from SNL took a deeper look at the potential consequences if the rule gets struck down. Among other things, it noted that only 22 plants have yet to comply with the rule at all, so it's unlikely the Supreme Court can avert too many plant retirements. But there's this: "While very few plants could be saved by the court, a ruling vacating [the mercury rule] would have potential emissions implications. For instance, operators could decide not to run their controls, something that is not without precedent."
In addition, Revesz says, the Supreme Court could take this opportunity to try to clarify the relevant parts of the Clean Air Act. "The Supreme Court has now decided 3 cases about [the EPA] taking costs into account, and it's hard to square these different cases," he says. "So the court might want to use this case to clarify this area of law, that happens sometimes. Or it might make things murkier. It will depend on the opinion."
Further reading: Here's an excellent legal analysis of the case (plus lots of resources and links) from SCOTUSBlog