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Supreme Court Remands MATS Rule For Failing to Consider Cost to Power Plants
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On June 29, the U.S. Supreme Court ruled that EPA was required to consider the cost of compliance when deciding whether it was “appropriate and necessary” to regulate emissions of mercury and other air toxics from power plants (Michigan v. EPA, U.S., No. 14-46).  The court remanded the MATS (mercury and air toxics standards) rule to the U.S. Court of Appeals for the District of Columbia Circuit, which will decide whether to vacate, stay or leave the rule in place while EPA considers costs.  The court, in a majority opinion written by Justice Antonin Scalia, reversed a 2014 D.C. Circuit’s decision that upheld MATS, a rule that the agency estimated would cost the power industry $9.6 billion annually. Scalia was joined in the 5-4 majority by Chief Justice John Roberts and justices Anthony Kennedy, Clarence Thomas and Samuel Alito.  The petitioners in the case were a coalition of 21 states led by Michigan, the National Mining Association and the Utility Air Regulatory Group.


The ruling did not address the substance of the 2012 MATS rule, which established emissions limits for mercury, filterable particulate matter as a surrogate for toxic metals and hydrogen chloride as a surrogate for acid gases.  Instead, the litigation focused on EPA's December 2000 determination that it was appropriate and necessary to regulate hazardous air pollution from power plants, which are the largest U.S. source of mercury emissions.  EPA had argued that Section 112(n)(1)(A) of the Clean Air Act, which instructed the agency to study air toxics emissions from power plants and determine whether to regulate those emissions, did not explicitly require the agency to consider cost in making that determination.  The court ruled that was an unreasonable interpretation of the statutory language.  “EPA must consider cost—including cost of compliance—before deciding whether regulation is appropriate and necessary,” Scalia wrote. “It will be up to the agency to decide (as always, within the limits of reasonable interpretation) how to account for cost.”


The other four members of the court, in a dissenting opinion written by Justice Elena Kagan, described the majority opinion as “micromanagement” of the EPA rulemaking process. Kagan wrote that the EPA reasonably declined to analyze cost during a single step in a rulemaking process that was “otherwise imbued with cost concerns.”  Kagan highlighted EPA's ability to divide power plants into different categories subject to different standards and the agency's cost-benefit analysis prepared for the final MATS rule as examples of the agency's consideration of cost.  “The central flaw of the majority opinion is that it ignores everything but one thing EPA did,” Kagan wrote.


Despite the court's ruling, the MATS rule is still in force.  The circuit court panel ultimately will determine whether MATS is vacated, stayed or remain in effect while EPA reconsiders its determination to regulate power plant emissions.  In a June 29 e-mail statement, EPA said that the agency is reviewing the Supreme Court's decision and will determine “any appropriate next steps” once that review is complete.  The agency noted that the court's decision did not focus on the substance of the standards themselves, nor the EPA's authority under the Clean Air Act to limit hazardous air pollutants.  EPA “remains committed” to ensuring that appropriate regulations are in place to protect the public from hazardous power plant emissions, the agency said. 


One issue the Supreme Court did not address in the Michigan v. EPA opinion is EPA's use of “co-benefits” to justify regulation.  During oral arguments, several members of the court were critical of the EPA's cost-benefit analysis for the MATS rule because it attributed up to $90 billion in annual public health benefits to the standards, even though the agency could only quantify between $4 million and $6 million in benefits to reductions of hazardous air pollutants.  Chief Justice John Roberts questioned the legitimacy of counting benefits from reductions of fine particulate matter and other pollutants that are regulated under other sections of the Clean Air Act.  Scalia wrote the court did not need to address whether the EPA could have legally considered those ancillary benefits in making the “appropriate and necessary” determination because the agency plainly did not do so.


On July 1, ICAC held a webinar with John Walke, Natural Resources Defense Council, as guest speaker to better understand the court’s decision and its potential ramifications.  To hear the recording, click here.

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