Nov. 25 — The U.S. Supreme Court said Nov. 25 it will consider challenges to the Environmental Protection Agency's 2012 mercury and air toxics emissions standards for power plants, which are among the costliest regulations the agency has promulgated.
The court announced it will review whether the EPA “unreasonably refused to consider costs” when it determined that it was appropriate to regulate hazardous air pollution from power plants. The court granted certiorari to three separate petitions filed by the Utility Air Regulatory Group, the National Mining Association and 21 states, including Michigan and Texas, and consolidated the cases.
The 2012 mercury and air toxics standards, which apply to about 600 power plants, established emissions limits for mercury, filterable particulate matter as a surrogate for toxic metals, and hydrogen chloride as a surrogate for acid gases. The EPA estimates that the standards will cost the power industry $9.6 billion annually.
The industry groups and states asked the court to review whether it was reasonable for the EPA to determine that it was “appropriate and necessary” to regulate power plant emissions without considering the cost of regulating those emissions. The EPA made a determination in December 2000 that power plants are the largest U.S. source of mercury emissions and should be regulated.
The U.S. Court of Appeals for the District of Columbia Circuit upheld the mercury and air toxics standards in April, ruling that the EPA's decision not to consider costs is permissible under the Clean Air Act because the statute doesn't expressly require the agency to consider costs in making a finding on the appropriateness of regulating power plant emissions (White Stallion Energy Center LLC v. EPA,748 F.3d 1222, 2014 BL 103957 (D.C. Cir. 2014)).
A ruling against the EPA could overturn the emissions standards for power plants, which the agency has identified as major sources of several other toxic pollutants in addition to mercury.
Jeffrey Holmstead, a partner at Bracewell & Giuliani LLP who represents the power industry, told Bloomberg BNA Nov. 25 that while the Supreme Court agreed to consider a relatively narrow issue, the issue of considering cost “goes to the heart” of the mercury and air toxics standards.
“If the Supreme Court overturns the EPA's finding that it was appropriate and necessary to regulate these sources under Section 112, then that really completely eliminates the EPA's authority to do the MATS rule,” Holmstead said.
Eric Groten, an attorney with Vinson & Elkins LLP, agreed that a ruling against the EPA would have huge implications for the mercury and air toxics standards. Groten told Bloomberg BNA that the emissions limits would “not be sustainable” if the Supreme Court rules that costs must be considered, given that the agency's own cost-benefit analysis shows that the costs would greatly outweigh the benefits.
Groten represents White Stallion Energy Center, one of the petitioners in the underlying D.C. Circuit case. He said his client isn't involved in the Supreme Court challenge because the company got the relief it was seeking when the EPA agreed to a voluntary remand of some of the new source components of the MATS rule.
However, Groten noted that White Stallion and every other company looking to develop new coal plants would be advantaged by a decision against the EPA and would like to see the MATS rules “taken off the books.”
The EPA, in a Nov. 25 statement e-mailed to Bloomberg BNA, said the agency is confident that it acted properly in regulating hazardous air pollutant emissions from power plants.
The agency expressed disappointment that the Supreme Court decided to review the standards but said that the MATS rule will remain in place during the Supreme Court's review and will continue to provide important health benefits.
The EPA, in a brief filed in October, argued that the Clean Air Act doesn't mention cost in instructing the EPA to determine whether it is appropriate or necessary to regulate toxic pollution from power plants.
The Clean Air Act requires the EPA to consider the cost of required pollution controls when determining the level at which emissions should be controlled, but it doesn't instruct the agency to consider costs when deciding whether to regulate such plants, according to the agency's brief.
Sean Donahue, an attorney representing the Environmental Defense Fund, told Bloomberg BNA that he is confident in the legal merits of the case.
Donahue said that there is a “very strong case” that EPA took a reasonable approach to Congress's instructions under Section 112(n)(1)(A) of the Clean Air Act to study how power plant emissions affect public health and determine if it would be appropriate and necessary to regulate those emissions.
James Pew, an attorney with Earthjustice, told Bloomberg BNA that the court has limited its review of the mercury standards to whether the EPA acted unreasonably, an area in which the agency has gotten a fair amount of deference from the courts. Pew said it is important to note that the EPA determined that regulating hazardous air pollution would save up to 11,000 lives a year.
“People have needed protection from this pollution for decades,” Pew said. “Once these limits go into effect, they're going to save thousands of lives every year.”
Thomas Lorenzen, a partner at Dorsey & Whitney LLP who previously served at the Justice Department, said the EPA's promulgation of the mercury and air toxics standards appears consistent with legal precedent on considering the cost of regulating pollution when the agency determines it should regulate.
Lorenzen told Bloomberg BNA Nov. 25 that the Supreme Court wasn't widely expected to grant certiorari on the mercury standards. He said that the decision to hear the cases could signal that the Supreme Court is shifting its opinion on cost consideration in environmental regulations.
Lorenzen pointed to a 2009 decision that held the EPA had discretion to consider the cost of regulating large industrial cooling water intake structures under the Clean Water Act, which doesn't expressly authorize or forbid the use of cost-benefit analysis (Entergy Corp. v. Riverkeeper Inc.,556 U.S. 208, 68 ERC 1001 (2009)).
Lorenzen said that given decision to hear the case, the court could be thinking of going further than it did in the Entergy decision and determining that it may be arbitrary and capricious for the EPA not to consider costs.
“That would be a significant shift and would make it substantially harder for EPA to determine to regulate,” he said.
A decision against the EPA could be very wide-reaching because it could set precedent that the EPA should begin to weigh costs when it considers when to regulate, rather then when it determines how pollution should be regulated, according to Lorenzen.
Holmstead of Bracewell & Giuliani said that while industry had been hoping the Supreme Court would take up the case, the decision is a “big surprise” to the EPA.
“They didn't think there was any chance the Supreme Court would grant cert,” Holmstead said.
Groten of Vinson & Elkins said the question of whether it was unreasonable for the EPA to refuse to consider costs is an “intriguing question in the abstract” that had “the hallmarks of a question of interest” for the Supreme Court given that the EPA's decision led to an expensive regulation that isn't cost-beneficial.
Holmstead said that broad conclusions shouldn't be drawn from recent EPA victories, such as the Supreme Court's decision to uphold the agency's approach to regulating air pollution that crosses state lines (EPA v. EME Homer City Generation LP,134 S. Ct. 1584, 78 ERC 1225, 2014 BL 118432 (U.S. 2014)).
“What the Supreme Court has done is they look at the actual statutory language,” Holmstead said.
He said industry and states want the court to determine what the word “appropriate” means with respect to EPA's determination to regulate. He said that the term appropriate “certainly seems to include more” than just health effects.
Holmstead also said that a decision against the EPA could affect industry challenges to the agency's proposed carbon dioxide standards for existing power plants, which are being promulgated under Section 111(d) of the Clean Air Act.
Lawsuits filed against the proposed rule argue that it is illegal for the EPA to regulate power plants under Section 111(d) because power plant emissions are already regulated under Section 112.
If the Supreme Court were to strike down the mercury and air toxics standards, which were promulgated under Section 112, that would remove a potentially strong industry argument against the agency's carbon rule, Holmstead said.
Groten said he would expect the challenge to the mercury and air toxics standards to be argued and resolved before the Supreme Court's term ends in June.
The timing of the court's decision is important to industry because the deadline for complying with the mercury and air toxics standards is April 16, which is less than five months away. Holmstead said it's unlikely that the court will rule before plants are required to comply with standards.
While several power plants have announced that they will be shutting down because they can't meet the standards, those shutdowns could end up being temporary if the Supreme Court rules against the EPA, Holmstead said.
Michigan Attorney General Bill Schuette (R), in a Nov. 25 statement, welcomed the Supreme Court's decision to hear a case that he said challenges the regulatory overreach of the EPA. Michigan filed the petition on behalf of the other state governments that also are challenging the standards.
Schuette said the agency refused to consider cost even though the mercury and air toxics standards will increase the cost of electricity and threaten the reliability of the nation's electric grid by forcing the closure of some power plants.
“Rising costs are hindering taxpayers at every turn and American families cannot afford yet another hike in their utility rates due to the EPA’s at-any-cost environmental mandates,” he said.
Hal Quinn, president of the National Mining Association, said in a Nov. 25 statement that it's necessary for federal agencies to consider costs during the promulgation of major regulations. He said the mercury and air toxics standards reflect a “stunningly unbalanced” regulatory approach by the EPA.
“The agency decided to impose expensive standards for certain emissions that it never found posed a threat to public health,” Quinn said. “EPA's decision imposed a cost on electricity consumers of at least $9.6 billion each year while offering at most $6 million in benefits.”
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