The Supreme Court throws a small wrench in the EPA's crackdown on mercury pollution

The Supreme Court has thrown a small wrench into the Environmental Protection Agency's efforts to regulate mercury pollution from coal plants — one of the most ambitious environmental policies of President Obama's first term.

In a 5-4 majority opinion written by Justice Antonin Scalia, the Court ruled that the EPA didn't properly consider costs when crafting its mercury rule, which was finalized in 2012 and would require coal-fired power plants to spend an estimated $9.6 billion per year cleaning up mercury and other toxic air pollutants.

The mercury rule will remain in effect for now, but the EPA will likely need to review and revise it in the months ahead. A final decision on how to proceed will be left to the DC Circuit Court, which has to follow this guidance from Scalia: "EPA must consider cost — including cost of compliance — before deciding whether regulation is appropriate and necessary. It will be up to the Agency to decide (as always, within the limits of reasonable interpretation) how to account for cost."

So we'll have to see what the DC Circuit Court does. It could simply order the EPA to carry out additional cost analyses — in which case the rule stays in place with only slight tweaks. More drastically, the lower court could throw out the rule entirely, forcing the EPA to start all over. Many legal experts and environmentalists think the latter option is unlikely, though in the realm of possibility.

Even if the mercury rule does get struck down, however, the practical impact on air pollution could end up being limited. Ever since the EPA finalized the rule in 2012, electric utilities have spent billions installing scrubbers at coal plants and retiring older units. While a handful of slated-to-retire plants might get a reprieve if the regulation gets nixed, most of the investments in pollution control have already occurred.

Background: The debate over EPA's mercury rule

The EPA. (John Greim/LightRocket/Getty Images)

Back in 2012, the EPA finalized a new regulation under the Clean Air Act to limit mercury emissions and other toxic pollutants from coal-fired power plants. The rule was potentially a huge deal from a public health perspective, expected to save tens of thousands of lives each year. But a closer peek reveals why the rule garnered so much controversy.

When it put out the rule, the EPA tallied up the costs and benefits. On the one hand, it estimated that electric utilities would have to pay about $9.6 billion per year, all told, to install scrubbers and other technologies to reduce toxics like mercury. 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 be pushed into retirement.

What about the benefits? That's where things get tricky. There's ample evidence that mercury, a neurotoxin, inflicts 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.

Yet, when the EPA analyzed the rule, it calculated that the benefits of reducing mercury from power plants were just $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. But regardless, what the EPA's published numbers said is that the benefits from curbing mercury were way lower than the costs.

At that point, however, 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 these "co-benefits" were worth some $26 billion to $89 billion per year. Looked at in this light, the benefits of the mercury rule far exceeded the cost.

When the rule came out, environmentalists hailed it as a sweeping public health measure and a worthwhile investment. Industry groups complained that the costs of compliance vastly outweighed the benefits of cleaning up mercury. And, in a sense, both sides were right.

The big legal question: Did the EPA consider costs properly?

If we look at things through wheat it might be clearer. (Jeff Swensen/Getty Images)

That brings us to this legal case. In theory, the EPA is supposed to consider costs when crafting regulations for hazardous air pollutants like mercury. The key question is how and when this is supposed to happen. And the Clean Air Act turns out to be a little vague on this point.

During its rule-making process, the EPA did two distinct things. First it had to determine whether regulating mercury was "appropriate and necessary" in the first place. The agency noted that, yes, mercury endangers public health and was not yet regulated sufficiently. So it was appropriate and necessary to move forward with a rule.

Then the EPA actually crafted the regulations. At this second stage, the agency took stock of the relevant costs and benefits.

Industry groups and states like Michigan sued the EPA, arguing that the agency should have taken costs into account during that initial stage — when determining whether mercury regulations were "necessary and appropriate" in the first place. If the agency had done so, they argued, it would have realized that its initial determination was not "appropriate" since the costs vastly outweighed the tiny benefits.

The EPA, for its part, countered that the Clean Air Act does not require costs to be taken into account during that first stage. Instead, the agency only needs to consider costs in the second stage, when it's actually devising specific regulations. And, the EPA argued, that's precisely what it did — it crafted regulations with at least $27 billion in annual benefits and $9.6 billion in costs.

In 2014, a three-judge panel on the DC Circuit Court ruled 2-1 that the EPA did the right thing here. But now the Supreme Court has weighed in, and it says the EPA didn't do the right thing, after all.

The Supreme Court ruling: The EPA did not properly consider costs

Oh look. It's up to us! Again! (Chip Somodevilla/Getty Images)

That brings us to the Supreme Court. In his 5-4 majority opinion, Justice Antonin Scalia said the EPA interpreted the Clean Air Act "unreasonably" in not considering costs during that initial stage of determination.

"It is not rational, never mind 'appropriate,' to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits," wrote Scalia. "Furthermore, the possibility of considering cost at a later stage, when deciding how much to regulate power plants, does not establish its irrelevance at [the initial] stage."

Importantly, Scalia did not rule that it was invalid for the EPA to consider "co-benefits" — like the benefits of reducing particulate pollution — when crafting regulations. That was something a few industry groups had wanted, and it would have had a far-reaching impact, since it would have restricted the benefits that EPA could have considered for its pollution regulations.

"The most important part of the majority opinion is Justice Scalia’s acknowledgement that the agency is not precluded from taking co-benefits into account in its cost-benefit analysis of the rule," said Richard Revesz, a law professor at New York University.

What's next: The EPA will have to reconsider its rule

For now, the EPA's mercury rule will stay in effect, but the agency will have to revise and rewrite it in some way.

That decision has been "remanded" to the DC Circuit Court, which will have to follow this guidance from Scalia: "EPA must consider cost — including cost of compliance — before deciding whether regulation is appropriate and necessary. It will be up to the Agency to decide (as always, within the limits of reasonable interpretation) how to account for cost."

The DC Circuit Court has several options here. It could tell the EPA to keep the rule in place and simply carry out additional cost-benefit analyses. This would be known as "remand without vacatur," and the lower court often takes this approach for EPA regulations.

Alternatively, the lower court could strike down the rule altogether, at which point the agency would have to start all over in deciding how to regulate mercury. Some legal experts are optimistic that won't happen. "It is very likely that the mercury rule will ultimately be upheld, and that it will remain in place as the legal process continues," says Revesz. We'll have to wait and see.

The impact may be limited — many coal plants have already complied anyway

(Michael Williamson/Washington Post/Getty Images)

The A.E.P.(American Electric Power) coal burning plant in Conesville, Ohio. (Michael Williamson/Washington Post/Getty Images)

Even if the rule does get struck down entirely, however, the impact could prove relatively limited. 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 older coal units.

An analysis in May 2015 from SNL took a deeper look at the potential consequences if the rule gets struck down. It noted that, as of April, roughly half of the US coal-fired capacity was fully in compliance with the rule, and another 200 plants were well underway in installing and testing pollution controls.

If the rule gets overturned, it's possible that some of these plants will simply stop running their pollution-control equipment — but they've already spent millions of dollars installing and testing them, so they may as well run them anyway.

The SNL analysis did note that there are about 22 power plants that have received extensions for complying with the rule. Some of these plants were slated for retirement and could get a reprieve if the mercury rule is overturned, but this only represents about 1 percent of the US coal fleet.

Further reading

Here's the full majority opinion (and dissents) in the Supreme Court case, known as Michigan vs. EPA

This SNL analysis suggests that the decision will be mostly moot, since coal plants have largely complied with the rule anyway. This piece at RTO Insider suggests much the same thing.

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