Energy and Environment Monitor

Supreme Court Divided Over Industry Challenge To Mercury Air Rule

May 5, 2015

EPA issued the Mercury and Air Toxics Standards (“MATS”) rule under Section 112 of the Clean Air Act in December 2011.  That statutory section required EPA to “perform a study of the hazards to public health reasonably anticipated to occur as a result of emissions by electric utility steam generating units” of mercury and other identified pollutants.  It also required EPA to study mercury emissions from steam-generating electric utilities, including “the health and environmental effects of such emissions, technologies which are available to control such emissions, and the cost of such technologies.”  Finally, the statute provides that after reviewing these studies, EPA “shall regulate [electric utilities] . . . if [it] finds such regulation is appropriate and necessary . . . .”  42 U.S.C. § 112(n)(1)(A).  

A convoluted history followed.  First, in 2000, EPA determined that the regulation of hazardous air pollutants from electric generating units—including mercury—was “appropriate and necessary” based on health and environmental impacts.  It later recanted and, in 2005, removed electric generating units from the list of sources for which regulation was appropriate and necessary.  A federal court then vacated that decision, which determined that the test for de-listing sources to be controlled was considerably more stringent than the test for listing them.  See New Jersey v. EPA, 517 F.3d 574, 583 (D.C. Cir. 2008).  

Forced to address mercury in late 2011, EPA finalized its MATS rule, which established “emissions standards” for mercury and other pollutants for new and existing coal and oil-fired electric plants.  Relying largely on the “co-benefits” of the rule in reducing particulates, EPA claimed at the time that the rule would prevent, on an annual basis, “up to” 11,000 premature deaths and 130,000 asthma attacks; 540,000 missed work days; 5,700 emergency room visits and 3.2 million “restricted activity days” and represented a “value” of $37–90 billion annually.  It also claimed that the standards could be implemented for $9.6 billion, which would result in $3?9 of health benefits for every dollar spent on control.  The rule was immediately challenged. 

In its ultimately unsuccessful 2005 effort to de-list electric generating units from the list of sources for which it was “necessary and appropriate” to regulate mercury emissions from power plants, the Bush Administration EPA determined that “costs” were an allowable component of the test for determining if controls were “appropriate.”  In issuing its final rule in 2011, however, the Obama Administration EPA claimed that it considers costs in choosing a level of control, but that it was not required to consider costs when it decided to regulate power plants in the first place.  In 2014, a divided D.C. Circuit Court ruled in EPA’s favor—finding that the statute was silent as to the need to consider costs on a decision to regulate power plants and that EPA’s construction of the statute was a reasonable one.  White Stallion Energy Center, LLC v. EPA, 748 F.3d 1222 (D.C. Cir. 2014).  

The U.S. Supreme Court agreed to hear the narrow issue whether the term “necessary and appropriate” necessarily required EPA to consider the costs of the MATS rule in deciding to regulate power plants.  It held oral arguments on March 25, 2015.  A transcript of the arguments is here. 

The Arguments of the Parties

State of Michigan 

In their Brief to the Supreme Court, Michigan and the other Petitioner states argued that Congress intended § 7412(n)(1)(A) to be a two-step process:  (1) EPA was to conduct a study of the public-health hazards associated with a proposed action; and (2) EPA was then to decide whether regulation under § 7412 was “appropriate and necessary” after considering the results of the study.  EPA has determined that a regulation is necessary where regulating would produce public-health benefits.  If the analysis were to stop there, then “appropriate” would serve no purpose.  The word “appropriate” was meant to cover the other circumstances relevant to any regulation; costs are one such relevant circumstance.  It would therefore be unreasonable of the Agency to exclude all consideration of the costs associated with a regulation. 

The States also argued that the structure of § 7412(n)(1) shows that costs are relevant to the “necessary and appropriate” determination.  Congress created a separate regime in this subsection for electric utilities, in which it directed EPA to decide whether regulation is appropriate.  This shows that Congress expected EPA to exercise judgment in deciding whether it is appropriate to regulate, not to just automatically regulate if regulating could produce any benefit, regardless of the cost. 

The Brief for the State of Michigan and the other State Petitioners can be found here.

National Mining Association

NMA argued that Congress did not delegate the authority to EPA that would allow it to ignore the costs of a regulation.  NMA asserted that, as Congress “did not authorize the extreme mismatch of costs and benefits that occurred here,” EPA acted unreasonably.  NMA stated that § 7412(n)(1)(A) can only be examined within the framework of the CAA as a whole.  This section gave EPA a limited right to add supplementary regulation that was “appropriate and necessary” after the other requirements were met.  This was not the case here, where EPA adopted a sweeping regulatory program that ended up dwarfing the other programs rather than supplementing them.

NMA also argued that EPA misinterpreted § 7412(n)(1)(A) just within the context of § 7412, in addition to the CAA as a whole.  For example, NMA found that the differences between § 7412(n)(1)(A) and § 7412(n)(1)(B) indicate that EPA should study both the health effects and “alternative control strategies for emissions which may warrant regulation,” which logically includes the costs.

Finally, NMA asserted that even if EPA’s “appropriateness” finding was reasonable for other hazardous air pollutants, the same does not apply for acid gases.  The fact that Congress directed regulation only where “appropriate and necessary,” indicated that Congress wanted EPA to do something more than determine whether electric generator emissions created health effects—that “something more” was to see whether the severity of the health effects warranted regulation in light of the other factors at issue, such as cost.

The Brief for the National Mining Association can be found here.

Utility Air Regulatory Group

UARG argued that Congress did not intend for EPA to disregard costs when determining whether to regulate the emissions of hazardous air pollutants under §7412 of the CAA.  UARG stated that Congress required EPA to undertake a variety of tasks when making such policy decisions, including making health determinations, conducting studies, and setting emission standards; this also included considering cost in some fashion.  UARG also distinguished that the emissions from electric generating units are meant to be treated differently from those of non-electric generating units.  While emissions from non-electric generating units are subject to technology-based regulation, emissions from electric generating units are to be regulated only if the regulation is deemed “appropriate and necessary.”

UARG also appealed to common sense, stating that “[w]hen ‘appropriate and necessary’ is read in a common sense way and in the context of §7412(n)(1)(A)’s purpose and objectives, those broad and encompassing terms compel consideration of cost.  In refusing to consider cost, EPA erred.”

The Brief for the Utility Air Regulatory Group can be found here.

Environmental Protection Agency

In defense of its decision, EPA claimed that it properly declined to consider costs because the CAA “unambiguously directs EPA to consider costs only in setting the proper level of regulation, not in making the threshold determination whether a particular source category should be listed.”  EPA claims that this interpretation aligns with the Act’s text, structure, and purposes, which was evidenced by the fact that the Court of Appeals upheld EPA’s discretionary decision. 

EPA also claimed its approach was consistent with the CAA provision that governs the listing of other stationary-source categories, which requires EPA to list sources based on their hazardous-air-pollutant emissions or the health and environmental risks posed by such emissions.  As with all stationary sources of hazardous air pollutants, EPA makes the threshold listing decision about whether to list a particular source category without regard to cost. EPA said this is reinforced by the fact that, if costs are not relevant to the decision to de-list a source, then costs should also be irrelevant when deciding whether to list power plants in the first place.  EPA compared this decision to other CAA regulatory programs involving “multistage decision-making,” which require a threshold decision based exclusively on health and environmental factors, followed by a consideration of costs in order to choose the proper level of regulation.

EPA also attacked several of Petitioners’ main arguments, including that EPA’s interpretation of “necessary and appropriate” was unreasonable.  EPA said that its approach in this instance was the same approach that Congress mandated for all other source categories.  EPA also highlighted that, historically, statutory silence with respect to costs is typically “meant to convey nothing more than a refusal to tie the agency’s hands as to whether cost-benefit analysis should be used, and if so to what degree.”  

Finally, EPA claimed that even if EPA was required to conduct a cost-benefit analysis, the regulation is still justified because the benefits will exceed the costs by between $27 billion and $80 billion each year.

The Brief for the Environmental Protection Agency can be found here.

This article was authored by Jennelle Arthur.