What Should We Make of the Supreme Court MATS Ruling?

The recent Supreme Court ruling on the U.S. Environmental Protection Agency’s (EPA’s) Mercury and Air Toxics Standard generated dramatic headlines in the media: The Wall Street Journal published an article entitled “Supreme Court Strikes Down EPA Limits on Mercury” and the New York Times came out with “Supreme Court Blocks Obama’s Limits on Power Plants.” But a closer look shows an outcome that is less earth-shaking and more pedantic.

Justice Scalia and four other justices found that EPA was wrong to say that cost was “irrelevant” in its determination of whether regulating mercury and other hazardous emissions from power plants was “appropriate and necessary,” adding that cost is one of the many factors that EPA should have taken into account. However, the Court left the MATS rule in place while it remanded the D.C. Circuit’s decision (which had upheld EPA’s interpretation) back to the court “for further proceedings consistent with this opinion.”

To understand the implications of this ruling, it’s important to delve into some background. In 2000, under the Bush administration, EPA determined that it was appropriate and necessary to regulate mercury from power plants. Under Obama in 2012, EPA reaffirmed that determination and set limits on mercury and other toxic air pollutants coming from power plants. Notably, these standards were court-ordered replacements of the Bush EPA’s Clean Air Mercury Rule (CAMR). In its 2012 reaffirmation of the “appropriate and necessary” finding, EPA stated that cost was irrelevant to this determination. With the MATS rule, EPA also released a Regulatory Impact Analysis (RIA), which discussed the costs and benefits of the rule. Costs were estimated at $9.6 billion and the overall benefits were uncertain: those that were directly related to mercury reduction were estimated at $4-6 million, and co-benefits due to reductions in other pollutants were estimated at $37-90 billion. EPA was explicit that it did NOT rely on the RIA in its determination of whether it was “appropriate and necessary” to regulate mercury since it had already determined that cost was irrelevant.

A majority of the Supreme Court did not agree with this:

One would not say that it is even rational, never mind “appropriate,” to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits. In addition, “cost” includes more than the expense of complying with regulations; any disadvantage could be termed a cost. EPA’s interpretation precludes the Agency from considering any type of cost—including, for instance, harms that regulation might do to human health or the environment. The Government concedes that if the Agency were to find that emissions from power plants do damage to human health, but that the technologies needed to eliminate these emissions do even more damage to human health, it would still deem regulation appropriate. . .No regulation is “appropriate” if it does significantly more harm than good.

Just a few pages before that, the Court concedes that “the Agency could not fully quantify the benefits of reducing power plants’ emissions of hazardous air pollutants,” though it does not go on to highlight the need to fully account for all possible benefits from the rule. Justice Scalia concludes:   

The Agency must consider cost—including, most importantly, cost of compliance—before deciding whether regulation is appropriate and necessary. We need not and do not hold that the law unambiguously required the Agency, when making this preliminary estimate, to conduct a formal cost-benefit analysis in which each advantage and disadvantage is assigned a monetary value. It will be up to the Agency to decide (as always, within the limits of reasonable interpretation) how to account for cost.

The Court goes on to say: “Even if the Agency could have considered ancillary benefits when deciding whether regulation is appropriate and necessary—a point we need not address—it plainly did not do so here.” So while Justice Scalia may be hinting at his distaste for EPA’s argument that, in fact, the benefits do outweigh the costs if you take into account the co-benefits (as it did in the RIA), the Court did not determine that this was or was not reasonable.

The ramifications of this decision are unlikely to be significant. The rule, which has been driving retrofits and retirement of coal plants for the past several years, is still in place. Once the rule is remanded, the lower court will have to decide what to do in light of the Supreme Court’s ruling. It may still vacate the rule, or, more likely, it may ask EPA to go back and do the cost consideration while the rule remains in place (this is essentially what happened when the Clean Air Interstate Rule was remanded as the court did not want to leave the public without protection while the rule was corrected). The debate at that stage may be over whether it is appropriate for EPA to consider co-benefits in its cost consideration. But such a case would take many more years to make its way back to the Supreme Court.