Ruling Strikes a Blow for Regulatory Accountability
In a 5-to-4 opinion handed down Monday, the U.S. Supreme Court ruled that the Environmental Protection Agency was wrong when it decided to set limits on the emissions of toxic pollutants from power plants without first considering the potential cost impact on energy producers and consumers. NECA is pleased with the ruling in Michigan v. Environmental Protection Agency just as we are supportive of legislation to require government agencies to institute regulations based on sound data and at the lowest possible cost to taxpayers.
The case centered on the EPA’s Mercury and Air Toxic Standards (MATS), which were finalized back in 2012 to take effect in April 2015. Under MATS, the nations’ approximately 600 coal-fired power plants would have to spend an estimated $9.6 billion per year cleaning up and controlling the emission of mercury, arsenic and other toxic metals and gases.
Even while arguing that it was not required to take costs into account when it made the initial determination to regulate power plant emissions under the federal Clean Air Act, EPA contended that the benefits would far outweigh the costs. However, energy industry participants and advocates estimated that purchasing the required equipment and following the mandated procedures would achieve annual benefits of no more than about $6 million, making the “mercury rule” one of the most expensive and least cost-effective proposals ever issued by the federal government.
When industry groups and more than 20 states sued EPA on the grounds that the agency did not adequately consider the costs before instituting the regulations, they also pointed out that abiding by MATS would cost jobs, interfere with plans to build and repair more power generating, transmission and distribution infrastructure, delay smart grid development and even force utilities out of business, thereby doing more harm than good.
The Clean Air Act requires the regulations for implementing it to be “appropriate and necessary.” While federal agencies are afforded some authority to interpret the law, “EPA strayed well beyond the bounds of reasonable interpretation in concluding that cost is not a factor relevant to the appropriateness of regulating power plants,” according to the majority opinion written by Supreme Court Justice Antonin Scalia. “It is not rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits. Statutory context supports this reading.”
While the court’s 5-to-4 decision did not strike down the mercury rule, it does halts further enforcement of it for now while requiring EPA to review and reconsider MATS. A final decision on how to proceed will be left to the District of Columbia Circuit Court, which has to follow this guidance from Scalia: "EPA must consider cost — including cost of compliance —before deciding whether regulation is appropriate and necessary. It will be up to the Agency to decide (as always, within the limits of reasonable interpretation) how to account for cost.”
Court Action, Legislation Could Impact EPA Carbon Proposal
The decision could alter the administration’s strategy for rolling out an even more ambitious environmental initiative — EPA’s first-ever regulations on power plants’ greenhouse gas emissions, which had been expected to be announced later this summer. According to the agency’s own analysis, the carbon proposal would force the closure of up to 49 gigawatts of coal-fired power plant capacity, equivalent to 15 percent of all nationwide coal capacity.
In anticipation of this proposal, last week the House passed the Ratepayer Protection Act (H.R. 2042) by a 247-to-180 vote. This NECA-supported legislation would allow states to opt out of complying with the forthcoming rule should a state find that it would have an adverse impact on retail, commercial, or industrial ratepayers.
NECA submitted a letter of support for the bill to the House Subcommittee on Energy and Power, noting that “The Ratepayer Protection Act is a commonsense solution that would not only uphold the spirit and intent of the Clean Air Act but also serve to prevent disruption to the affordable and reliable electricity that provides the backbone of the American economy.” NECA will now follow up with the Senate to urge passage of this important legislation there.