EPA regulations face new test at high court

The Environmental Protection Agency’s regulatory power faces another key test at the Supreme Court Wednesday, when justices weigh arguments that the agency failed to consider industry costs before issuing a landmark air quality rule.

The case, Michigan v. EPA, centers on the EPA’s first-ever limits on mercury, arsenic and acid gases emitted by power plants, slated to take effect next month for some plants.

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It is the latest in a series of legal clashes between the EPA and critics who contend the agency has repeatedly overstepped with its rules. The agency, however, has held a formidable federal court winning streak that environmental groups believe will continue.

“We believe EPA’s arguments are very strong,” said Sean Donahue, counsel for the Environmental Defense Fund, one of several groups touting the benefits of a rule projected to prevent thousands of deaths each year.

But opponents, including the National Federation of Independent Business, place the rule among the costliest ever. They warn that upholding it could set a dangerous standard.

“We are concerned that businesses will have to absorb many of the regulatory costs if the Supreme Court rules in favor of the EPA, but our bigger concern is ensuring agencies do not overstep their authority by refusing to consider the costs of all regulations before implementing them,” said Karen Harned, NFIB Small Business Legal Center director.

The EPA estimates the rule would cost $9.6 billion and produce between $37 billion and $90 billion in benefits, preventing up to 11,000 premature deaths annually. But, importantly, the agency concluded that its regulatory impact analysis should have “no bearing on” the determination of whether regulations are appropriate, as set forth in the Clean Air Act.

The D.C. Circuit Court of Appeals sided with the EPA. A Supreme Court decision upholding that ruling would add a victory to the agency’s record in the courts.

Last June, the high court handed down a split decision largely affirming the EPA’s power to regulate greenhouse gas emissions. That case capped a string of cases in which federal courts upheld the agency’s air pollution decisions eight times and never ruled against it.

Twenty-three states and more than two dozen industry and labor groups argue that the agency unreasonably refused to consider costs before imposing the mercury regulations on coal- and oil-fired electricity generating units. 

Challengers say the benefits of controlling the utility emissions of mercury, which ends up in fish that’s eaten, only amount to $4 million to $6 million annually and that the rest of the benefits come from the reduction of particle pollution.

“No rational person would spend $960 for something worth 40-60 cents,” the National Mining Association said in its opening brief. “A decision to do so would be decidedly inappropriate under any common understanding of the word. Perhaps understandably, EPA asserts that it does not have to offer a reason why spending so much for so little is a rational decision.”

Other critics of the rule say it’s unnecessary because fine particles are already regulated by other mandates. 

“If they were regulating just mercury it’d be a very different rule and less costly,” said Susan Dudley, director of the GW Regulatory Studies Center at The George Washington University and former administrator of the White House Office of Information and Regulatory Affairs.

On top of the $9.6 billion in annual compliance costs, the rule would result in higher electricity costs for consumers, according to Peabody Energy Corp., which filed an amicus brief.

“Fixed-income seniors are particularly vulnerable to increased energy costs,” Peabody Energy said. “Consumer electricity prices correlate strongly with the poverty rate. In fact, inability to pay utility bills is the second leading cause of homelessness in the United States.”

In a prepared statement, the EPA said it “acted properly under its Clean Air Act authority in regulating harmful toxic air pollution from power plants.”  

How the court’s ruling will impact the federal rule-making process going forward, experts say, depends.

“The broader implications could be small,” said Stuart Shapiro, Rutgers University public policy program director.

Supporters of the rule say even a finding that the EPA failed to consider costs would not ultimately derail it.

“What would happen is there would be some sending of the rule back to the agency for consideration, but the agency has already taken a close look at cost and benefits,” Donahue said, adding that Environmental Defense Fund is confident the costs would still be justified.

“It’d be overwhelmingly likely that the rule would stand up,” he said.

But that could be a major hiccup for the Obama administration.

If the high court sends the rule back to the EPA for cost consideration, Shapiro said, it could take the agency the rest of the Obama administration to reissue the rule.

“Nothing is ever easy in a large government organization,” he said. “My guess is, given that it’s not that complicated, they would have time to get it out before the end of the administration, but I would not be surprised if it took the bulk of that time.”