Top U.S. Court Questions EPA Emissions Rule for Power Plants

(Bloomberg) — U.S. Supreme Court justices signaled they

are divided over Obama administration rules that would cut

emissions from 460 coal-fired power plants in an effort to curb

birth defects, heart disease and premature deaths.

During arguments Wednesday, justices questioned

Environmental Protection Agency controls on mercury and acid

gases from the plants owned by Southern Co., American Electric

Power Co. and other utilities. Lawyers for power companies and

some states said the agency didn’t adequately consider costs

before imposing rules estimated to cost $9.6 billion a year.

“It’s classic arbitrary and capricious agency action,”

Justice Antonin Scalia said, referring to a legal standard the

court can use to block an agency rule.

The Obama administration says it considered costs in how it

set the rules but wasn’t required to do so at the initial stage

of deciding whether to issue regulations at all.

That argument was questioned by Scalia and other

Republican-appointed justices, who said it could lead to onerous

costs for power companies. Justices appointed by Democrats

defended the EPA’s decision.

“Costs become relevant later in the process,” Justice

Elena Kagan said. Justice Sonia Sotomayor added, “All we have

to find is a plausible reading to uphold the EPA’s

interpretation.”

The case concerns a 2011 EPA regulation that curtails

mercury emissions. The rule, which takes effect next month for

most plants, has forced companies to close aging facilities or

install expensive scrubbing equipment.

Kidney Disorders

Mercury accumulates in fish and can cause neurological and

kidney disorders when people consume those fish.

Air-pollution controls rank high on President Barack Obama’s list of accomplishments. That’s in large part because

courts have given the EPA broad power to interpret the Clean Air

Act and impose tighter curbs on emissions from power plants and

other facilities.

The outcome may hint at how the Supreme Court will handle

an even bigger fight down the road, a clash over the

administration’s plan to tackle climate change.

In this case, the Clean Air Act says the EPA may regulate

mercury and other hazardous power-plant pollutants if the agency

concludes action is “appropriate and necessary.”

The question for the court is whether the agency must

consider the cost before deciding whether to regulate. The

administration contends the Clean Air Act requires that costs be

taken into account only at a later stage — when the EPA is

deciding the extent of the regulation.

Broad Discretion

A federal appeals court in Washington agreed in a 2-1

decision, saying the law gives the EPA broad discretion.

The administration is relying on a 1984 Supreme Court

decision that requires judges to defer to an agency’s

interpretation of an ambiguous statute as long as its reading is

a reasonable one.

Industry trade groups and almost two dozen states say that

the administration’s interpretation is unreasonable and that it

isn’t entitled to that type of deference.

The EPA estimates the rule will cost $9.6 billion annually

once fully implemented next year. The agency says the new

standards will prevent 11,000 premature deaths a year and

produce as much as $90 billion in annual benefits.

Many are so-called “co-benefits” that accrue not from

curbing mercury or acid gases, but from reducing other

pollutants also captured by the scrubbing equipment. The

agency’s use of those benefits to justify its regulation drew

skepticism from Chief Justice John Roberts.

‘End Run’

“It’s an end run,” Roberts said. “The issue that raises

a red flag is that there’s such a tiny benefit from regulating”

the stated pollutants, he said.

Roberts and Justice Anthony Kennedy, who sided with the EPA

in two clean-air cases last year, also pressed U.S. Solicitor

General Donald Verrilli to agree that the agency could have

chosen to consider costs in its initial decision.

Justice Ruth Bader Ginsburg said the word “appropriate”

is “commonly used to indicate that the expert agency will do

what it finds fit based on its expertise.”

Opponents of the rule include Peabody Energy Corp., the

largest U.S. coal producer, as well as the National Mining

Association, which represents the industry.

Not all power companies are fighting the EPA rules. Exelon

Corp., the nation’s largest owner of nuclear plants, joined with

other businesses to file a brief supporting the EPA’s actions,

saying they will produce overwhelming public health benefits.

Nuclear facilities don’t emit large quantities of mercury and

other pollutants and aren’t covered by the EPA rule.

Reissuing Rule

A Supreme Court decision against the EPA wouldn’t

necessarily kill the rule. The agency might be able to reissue

the regulation after doing the cost-benefit analysis the

industry says is necessary. Even if the rule doesn’t survive,

many utilities have already complied.

The total U.S. capacity for coal-generated electricity will

drop an unprecedented 17 percent to 250 gigawatts by 2020 as

plants shut or switch to natural gas as a fuel, according to

Bloomberg New Energy Finance.

A decision is expected by the end of June. The cases are

Michigan v. EPA, 14-46; Utility Air Regulatory Group v. EPA,

14-47; and National Mining Association v. EPA, 14-49.

To contact the reporters on this story:

Greg Stohr in Washington at

gstohr@bloomberg.net;

Mark Drajem in Washington at

mdrajem@bloomberg.net

To contact the editors responsible for this story:

Jon Morgan at

jmorgan97@bloomberg.net;

Patrick Oster at

poster@bloomberg.net

Mark McQuillan, Laurie Asseo

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