The Supreme Court's decisive blow against the Environmental Protection Agency's pollution rules could bring coal-fired power plants back from the brink.
But not before a lot more legal action that could take months to wrap up.
The high court on Monday ruled 5-4 that the EPA cannot simply ignore compliance costs in enacting strict power plant rules for mercury and acid gases that are forcing utilities to close dozens of coal plants.
"The decision effectively puts EPA on notice: reckless rulemaking that ignores the cost to consumers is unreasonable and won't be tolerated," said Hal Quinn, the National Mining Association's president and CEO. "It recognizes what the administration has ignored: that every regulatory benefit comes with a cost, and the value of that benefit cannot be known unless its costs are considered."
Quinn pointed out that the decision offers "a welcome reprieve" for coal plants that are "at risk of closing" due to the rule. "These plants may again be used to strengthen grid reliability and lower energy costs for families and industries."
Nevertheless, the real world impact of the Supreme Court's decision may take months to figure out. That's because Monday's decision begins a new legal process that most likely will be put off until after Labor Day, as the matter of EPA's cost assessment goes back to the D.C. Circuit Court of Appeals, where the issue will have to be fought again, say mining association officials and legal experts.
"This will not be something that will happen quickly," said Luke Popovich, the mining association's vice president for external affairs. "We aren't looking to see anything until Labor Day."
What the Supreme Court decision does is reverse a prior decision made by the D.C. Circuit Court of Appeals, which ruled in a split 2-1 decision in favor of the EPA's Mercury and Air Toxics Standard.
After the defeat, the mining association and others asked the Supreme Court to take up the court's decision to address the cost issue. So, although the Supreme Court decision does not kill the pollution rule, it does direct the appeals court to re-examine the matter, requiring the EPA to assess the rule's compliance costs.
The EPA ignored the compliance costs in assessing the need for the regulations, arguing it has the discretion not to consider the costs. But the Supreme Court decision eviscerated that argument.
Jeff Holmstead, a partner with the law firm Bracewell & Guiliani and a former EPA official, said the coal plant retirements will likely be argued in the Court of Appeals, where "[s]ome will argue that MATS should be stayed until EPA goes back and does what the Supreme Court required," Holmstead said in an email. That argument "will almost certainly" be opposed by the EPA, and the court will have to find a way forward.
It gets more complicated. "Others will argue that the rule should only be stayed for plants that received compliance extensions [under the rule] and do not need to come into compliance until April 2016 — A number of plants are scheduled to be shut down at that time," Holmstead said.
Nevertheless, he said he believes it will be difficult for the EPA to "insist that more plants should be forced to shut down before EPA goes back and reconsiders" the cost of the rule, suggesting that the agency will likely agree to some sort of stay before next year's round of plant closures.
The industry argues that the regulations have cost it $10 billion annually to comply. Those are costs borne not only by the industry, but also through the higher rates that individual consumers have to pay, according to the National Mining Association, which represented the coal industry in the case brought before the high court.
Jonathan Martel, a partner with the law firm Arnold & Porter, said that how far Monday's decision goes depends on what the D.C. Circuit court does in response. "First, assuming that the D.C. Circuit vacates the rule pending an EPA 'redo' of its mercury regulations, any plants that have not yet invested in controls would not have to proceed.
"Many coal-fired power plant closures were announced due to the costs of compliance with this rule, and though most compliance and closure decisions may now be irreversible, there might be some for whom this will matter a lot," Martel said.
But Popovich and others say the rule continues to be law, and although the EPA may choose to halt the rule temporarily, much remains to be seen.
Nevertheless, environmentalists say the EPA is prepared to issue a cost assessment rapidly and could wrap up the issue quickly.
Earthjustice, a nonprofit environmentalist group representing respondents in the case, said the ruling in no way affects the rule's implementation. It does say that the EPA and the D.C. Circuit Court must take some remedial action to address the cost issues, but that the EPA should be able to deliver that in short order.
"The court decided that EPA erred, but the court did not strike down or block the MATS standards," Earthjustice spokesman Phillip Ellis said. "The standards were already in effect, and are still in effect after today's decision, pending further review by the D.C. Circuit and EPA. The court also left it up to EPA to decide how to consider cost on remand, as long as EPA acts reasonably."
Conservative Justice Antonin Scalia, who wrote the majority decision, said he does not agree with environmental groups that argue in favor of EPA on the grounds that the rule's "ancillary benefits" outweigh the cost of compliance. Ancillary benefits would include the public health benefits from reducing harmful pollution and mercury.
That is an argument that the four court justices who opposed Monday's decision reiterated in dissenting opinions.
"Some of the respondents supporting EPA ask us to uphold EPA's action because the accompanying regulatory impact analysis shows that, once the rule's ancillary benefits are considered, benefits plainly outweigh costs. The dissent similarly relies on these ancillary benefits when insisting that 'the outcome here [was] a rule whose benefits exceed its costs,'" Scalia wrote.
He reminded the dissenting justices and respondents that "we may uphold agency action only upon the grounds on which the agency acted." The ancillary effects of the rules cannot be calculated appropriately in measuring these costs, he said.
"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," Scalia said.
Meanwhile, Republicans on Capitol Hill said they were encouraged by the decision and will continue to try to rein in the EPA.
House Science, Space, and Technology Committee Chairman Lamar Smith of Texas said the decision "is an important step towards reining in the actions of the EPA."
Sens. David Vitter, R-Louisiana, and Shelley Moore Capito, R-W.Va., also said the decision underscores the need for greater oversight of EPA regulations, and the need to hold the agency accountable.