Supreme Court Strikes Down EPA Power Sector Rule

Supreme Court strikes Down EPA’s Mact Rule for the Power Sector

On June 29, 2015, In a 5-4 decision (J. Scalia) the Supreme Court invalidated EPA’s Clean Air Act MACT rule setting hazardous air pollution standards (including mercury) for the power sector on the grounds that EPA should have taken costs in account when it initially decided to list the power sector as a source.  See full opinion here.

The Clean Air Act subjects major sources of hazardous air pollutants to regulation, culminating in promulgation of source specific technological standards (“MACT”). However, the Act deferred similar regulation of power plants, requiring EPA first to study the health impacts from the power sector to determine if listing was “appropriate and necessary”.  Based on the study, EPA decided to list power plants as a source of hazardous air pollutants, but did not expressly consider costs in this listing decision, the same procedure it used when listing other major sources.  Although EPA argued that following the decision to list the power sector as a source it took a number of additional regulatory actions in which it expressly  took costs into account, J. Scalia wrote that EPA could not “gerrymander” its decision-making and defer consideration of costs since Congress intended to treat the power sector differently from other major sources of hazardous air pollutants.

J. Kagan’s lengthy dissent took the majority to task for ignoring the big picture, i.e. that EPA took costs into consideration at many stages of the complex regulatory process involving power plants.  For instance, EPA divided the power plant sector into subcategories, e.g. different types of coal-fired plants, oil plants, gas plants, such that a plant in one subcategory did not need to meet the standard met by the top 12% of plants in another subcategory (the statutory emissions standard).  J. Kagan also took issue with the majority’s comparison of costs, i.e. 9 billion of costs vs. a few millions of benefits, as erroneous since the ultimate cost-benefit analysis found that the benefits were between 3-9 times the costs. Further, she pointed out that the majority ignored the Congressional rationale for deferring the power sector’s inclusion in the MACT program pending a health effects study: not to treat the power industry differently than other major sources of hazardous air emissions, but to give EPA time to study whether existing regulation of the power industry would yield the same benefits as the MACT regulations.  Additionally, J. Kagan wrote that the language in issue:  “appropriate and necessary”, was ambiguous and that the Court should have deferred to EPA’s interpretation pursuant to the well-established Chevron doctrine.  J. Kagan concluded that the majority’s decision “deprives the Agency of the latitude Congress gave it to design an emissions-setting process sensibly accounting for costs and benefits alike.  And the result is a decision that deprives the American public of a pollution control measure that the responsible Agency acting well within its delegated authority, found would save many, many lives.”

The practical impact of the decision is limited since many power suppliers have already begun to install  technology to meet the MACT standard and there are few plans to install/retrofit coal plants.  However, this decision is potentially significant to the extent it signals a willingness by a majority of the Court to disregard Chevron deference to an agency’s interpretation of the statutes it administers where the stakes are high, as they usually are in challenges to EPA rulemaking.  Note that J. Thomas’ separate concurrence specifically called for an end to the Chevron doctrine.  The decision also is significant because the majority appears to have ignored its own precedent that where the Clean Air Act does not expressly require EPA to consider costs in rulemakings, it need not.

While EPA has generally fared well recently in the Supreme Court, the question is whether this decision (and a partial defeat by EPA in the UARG case last term) indicates a new trend or is just a reflection of the specific facts of this case.

For further information, please contact the author at kreich@kennethreichlaw.com or 781-608-7267.

Kenneth A. Reich, Esq. July 2015 Kenneth Reich 2015 ©, All Rights Reserved

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About Kenneth Reich

Experienced Environmental and Energy Attorney, Adjunct at Boston University Law School and legal mentor.

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