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July 6, 2015

U.S. Supreme Court Overrules EPA Mercury Rule, But What Does It Mean?

In a 5-4 decision released last Monday, the U.S. Supreme Court ruled against the Environmental Protection Agency (EPA) in a case challenging the agency’s Mercury and Air Toxics Standard (MATS) regulation, which went into effect this past April. 

The challenge, brought by the state of Michigan, focused on whether the EPA had properly calculated the economic costs and benefits of the rule. (The EPA had found the benefits could total up to $90 billion a year while the costs would be approximately $10 billion annually. The U.S. Chamber of Commerce explained last week why those estimates are questionable.) In the opinion of the court, written by Justice Antonin Scalia, the EPA must consider the potential costs of a regulation before determining whether the rule is “appropriate and necessary.” (The Associated Press explained the difference between what the EPA did, and what the court said it should have done, noting “The EPA did factor in costs at a later stage, when it wrote [the] standards … But the court said that was too late.”) 

Scalia also indicated that the costs of the rule could not significantly outweigh the benefits, a statement that Brookings scholar Philip A. Wallach said could indicate the Supreme Court may become more entwined in the question of what constitutes a proper cost-benefit analysis. 

Unfortunately, it is unclear whether the ruling will impact the EPA’s other pending regulations, some of which are much more costly that the MATS rule. Reuters wrote that the ruling might not have broader implications for those other regulations, including final rules, expected to be released this summer, governing power plant emissions. Susan Dudley of George Washington University’s Regulatory Studies Center was somewhat more hopeful. She wrote, “While the Supreme Court’s decision may not directly affect EPA regulations authorized by other sections of the Clean Air Act, which do not share the ‘appropriate and necessary’ language … this decision may set a precedent. Both Justice [Clarence] Thomas’ concurrence and the majority opinion signal a reduced willingness to defer to the EPA’s interpretation of its statute. The court’s focus on the statutory text, and the agreement among all justices that costs are an important consideration, signal to agencies that ‘absent contrary indication from Congress, an agency must take costs into account in some manner before imposing significant regulatory burdens.’” 

On the MATS regulation, it is now up to the Washington, DC Circuit Court of Appeals whether or not to vacate the EPA’s regulation, or to ask it to start over – a decision that means the debate over this regulation is not going away anytime soon. Indeed, groups supporting the EPA’s regulation were encouraged. According to the Center for Progressive Reform, “The court’s decision was narrow enough to preserve the rule and its vital contribution to public health and the environment.” (A Wall Street Journal analysis seemed to agree.) 

Stay tuned to Connecting The Dots as the circuit court and the EPA determine their responses.