In the final ruling of an historic Supreme Court term, the Obama administration was handed a loss on Monday, but the fallout will likely be minimal. In a 5-4 decision written by Justice Antonin Scalia, the court found that the Environmental Protection Agency (EPA) should have considered costs when it first began the regulatory process for its Mercury and Air Toxics Standards.
What this means for the mercury rule
The EPA's Mercury and Air Toxics Standards aim to reduce mercury, arsenic and other harmful pollution emitted by power plants. This rule is expected to reduce premature mortality from heart attacks and respiratory disease, creating between $37 billion and $90 billion in quantified benefits per year, versus $9.6 billion in compliance costs. But the industries and states that challenged the rule claimed that the EPA didn't consider costs early enough in the regulatory process. Five justices agreed, saying the EPA can establish that a regulation is "appropriate and necessary" only if the agency evaluates the compliance costs when it first considers regulating a pollutant. Instead, the EPA evaluated this rule's costs later in the regulatory process, when determining how stringent the standards should be for various categories of plants (the merits of this approach are discussed in a brief by the Institute for Policy Integrity, and in Justice Elena Kagan's dissent for the case).
The Supreme Court ruling did not invalidate the mercury rule, or even decide on a remedy for fixing it. The court merely remanded the rule back to the U.S. Court of Appeals for the D.C. Circuit, which can now either vacate the rule, or opt for the "remand without vacatur" technique, leaving the rule in place while the EPA responds to the Supreme Court's concerns.
The D.C. Circuit judges have often made use of "remand without vacatur" for other EPA regulations, such as the Clean Air Interstate Rule. There is good reason to use this technique here, because the EPA already conducted a cost-benefit analysis for this rule, finding it to be economically justified. The Supreme Court did not dispute that the direct and ancillary benefits of the rule vastly outweigh compliance costs. In fact, the most important part of the majority opinion is Scalia's acknowledgement that the court did not preclude the agency from taking the ancillary benefits of the regulation into account. The justices merely wanted costs to be considered at an earlier stage.
In the coming months, the D.C. Circuit — the same panel of judges that already upheld the rule — will remand the rule back to the EPA. They will likely do so without vacating it, citing the fact that the rule's benefits greatly exceed its costs. The EPA is then likely to say that the cost-benefit analysis that it already conducted is also relevant to the threshold determination on whether to regulate the toxic pollution from power plants. At that point, the D.C. Circuit is likely to uphold the rule, because the agency will have done what it was told to do and because the D.C. Circuit panel did not have a problem with the agency's cost-benefit analysis when the rule was first challenged. And the Supreme Court will likely decline to take up the case again, leaving the rule intact, because the case would no longer present the kind of discrete legal issue that tends to prompt Supreme Court review.
This Supreme Court ruling will certainly delay the final resolution of an important public health regulation that has been in the works since 2000, when the EPA made its "appropriate and necessary" finding. But the cost to the public will be somewhat muted, as the majority of power plants have already begun installing pollution controls to comply with this rule, which was finalized in 2012. And if the rule remains in place during the remand to the EPA, other plants will be required to follow suit even before the rule is ultimately upheld.
What this means for the Clean Power Plan
Reading the tea leaves on how courts might view the Clean Power Plan — President Obama's signature climate change initiative — has become a popular pastime in the energy world. Fossil fuel interests have trumpeted this ruling as evidence that greenhouse gas regulations are doomed. But the legal standing of the Clean Power Plan is essentially unaffected by this decision, and it remains strong.
The American Energy Alliance, a group linked to the Koch brothers, said in a statement: "[The] EPA can no longer ignore the costs of its reckless agenda. This decision shows that states should resist EPA’s calls to submit plans for the upcoming climate rule." Such statements are simply an effort to mislead the public about the Clean Power Plan, and have no connection to any plausible legal argument.
The Supreme Court ruled in 2007's Massachusetts v. EPA case that the EPA is required to regulate greenhouse gases under the Clean Air Act. It has affirmed the EPA's authority in two more cases, American Electric Power v. Connecticut, and last term's Utility Air Regulatory Group v. EPA. The Clean Power Plan is the agency's attempt to follow through on this court-mandated authority. The court has further specified that the agency can regulate emissions from existing power plants — the main subject of the Clean Power Plan.
The cost issues at the center of the mercury rule case do not apply to the Clean Power Plan, as the later rule was drafted under a totally separate Clean Air Act provision that explicitly calls for analysis of costs. The EPA has already conducted extensive economic reviews of the Clean Power Plan, which was designed to prioritize flexible compliance options and minimize costs. In short, nothing in this decision calls into question the legal legitimacy of the Clean Power Plan.
In a Supreme Court term filled with momentous cases, the repercussions of this ruling will be minor.
Revesz is dean emeritus and Lawrence King Professor of Law at New York University (NYU) School of Law. He is also the director of the Institute for Policy Integrity at NYU Law School, which filed an amicus brief in Michigan v. EPA.