Supreme Court rules on EPA power plant regulations

Wednesday, July 1, 2015

The Supreme Court of the United States has ruled that the U.S. Environmental Protection Agency acted unreasonably in developing new regulations on hazardous air emissions from power plants without considering the cost impact of those regulations.  This ruling reinjects uncertainty into EPA's "Mercury and Air Toxics Standards" and other efforts to regulate power plant emissions under the Clean Air Act.

The federal Clean Air Act was designed to improve environmental quality and human health, among other goals.  It broadly allows federal regulation of air emissions of pollutants of various types and from various sources.

Because certain specific provisions in the Clean Air Act applied specifically to power plants, Congress placed a special restriction on EPA's regulation of power plant emissions under Section 7412(n)(1)(A) of the Clean Air Act.  That provision allows EPA to regulate emissions of hazardous air pollutants from power plants under Section 7412 only if it “finds such regulation is appropriate and necessary.”  In 2000, after a study, EPA concluded that regulating power plants under Section 7412 was "appropriate and necessary."  EPA reaffirmed this finding in 2012, and promulgated standards for emissions from power plants.

Along with those standards, EPA issued a “Regulatory Impact Analysis” estimating that the regulation would force power plants to bear costs of $9.6 billion per year.  That analysis also found that while benefits were hard to fully quantify, estimated benefits were worth $4 to $6 million per year.  Based on this analysis, compliance costs to power plants were thus between 1,600 and 2,400 times as great as the quantifiable benefits from reduced emissions of hazardous air pollutants.  At the same time, EPA argued that it did not have to consider costs in establishing its standards.

Following the issuance of these standards, 23 states sought review of EPA’s rule in the D. C. Circuit Court of Appeals in a series of cases which were later consolidated.  The D.C. Circuit upheld EPA's refusal to consider costs in its decision to regulate, at which point petitioners appealed to the Supreme Court. As my partner Jeff Talbert explains, in a 5-4 decision issued June 29, the Supreme Court held that EPA interpreted §7412(n)(1)(A) unreasonably when it deemed cost irrelevant to the decision to regulate power plants.

So what does the Supreme Court's ruling mean for U.S. power plants?  Uncertainty -- but not necessarily freedom from regulation.  The Supreme Court remanded the case back to the D.C. Circuit for further consideration.  The D.C. Circuit could uphold the rule again (on new grounds, compliant with the Supreme Court's decision) -- or it could invalidate the rule based on the Supreme Court ruling.  If that happens, EPA will likely have to resume the process of developing new regulations for hazardous air emissions from power plants under Section 7412.

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