Shortly after 10 a.m. on Wednesday, the Supreme Court will hold ninety minutes of argument on the government’s regulation of mercury and other forms of pollution from electricity-generating power plants.  Four attorneys will divide the time in three consolidated cases; the lead case is Michigan v. Environmental Protection Agency.  In order of appearance, the counsel will be Michigan’s solicitor general, Aaron D. Lindstrom, representing the twenty-one states challenging the EPA, with thirty minutes; F. William Brownell of the Washington, D.C., office of Hunton & Williams LLP, speaking for industry challengers and for coal-producing companies, with fifteen minutes; U.S. Solicitor General Donald B. Verrilli, Jr., arguing for the EPA, with thirty minutes; and Paul M. Smith of the Washington, D.C., office of Jenner & Block LLP, speaking for industrial firms and other groups that support the EPA’s approach, with fifteen minutes.

 Background

It is a simple fact that nearly sixty percent of the power plants that generate electricity in the U.S. by burning coal are more than forty years old.  That has made them an obvious target for the Environmental Protection Agency, which has blamed those older facilities using fossil fuels for much of the air pollution that the agency says threatens the nation’s health and its environment.

But those plants, and the coal-mining companies that supply them with fuel, have very strong allies in Congress — most notably, now, the Republican majority leader of the Senate, Kentucky’s Sen. Mitch McConnell.  He has regularly denounced the EPA, and the Obama administration, for waging what he calls a “war on coal,” and he recently wrote to all of the nation’s governors to urge them not to cooperate with the EPA in threatening the future of the older power plants.  This battle over coal and air pollution gets an airing this week in a legal format, at the Supreme Court.

The running fight over air and water pollution has made the EPA the federal government’s most embattled agency, and it has regularly found itself back before the Supreme Court as it moves its agenda under federal anti-pollution law from industry to industry.  It has no more determined adversary, though, than the nation’s generators of electricity, especially the operators of older plants.

That sector’s strongest complaint is that the plants cannot afford the control mandates that the EPA is preparing to put into effect shortly.  And cost is at the center of controversy as the two sides battle it out on the latest controversy over a sweeping EPA regulatory regime that is due to be in full operation by next year.

The EPA rule that is directly at issue before the Justices will cost the industry, it has said, some $9.6 billion a year, which, the companies contend, will buy very little public health benefit — $4 million to $6 million, at most.  EPA has conceded the annual cost for the companies, but it estimates that this will yield — in dollar terms — benefits between $37 billion and $90 billion annually.

The Justices, taking up the case of Michigan v. EPA and two companion cases (National Mining Association v. EPA and Utility Air Regulatory Group v. EPA) will not have to settle that difference in benefit yields.  Rather, the somewhat disarmingly simple question the Court has agreed to answer is this: when, in pursuing its sweeping anti-pollution goal for power plants, must it take their costs of compliance into account?

The EPA says it does not have to do that, under Congress’s directions in the Clean Air Act, when it makes up its mind which specific pollutants or sources to target for regulation; instead, it has to do so only when it calculates specific regulatory standards for each harmful substance.  The power plants respond that it makes no sense to wait until standards are developed, because industry needs to know up front what its costs will be when the EPA first reaches out to regulate a given pollutant.  And, industry contends, the EPA must make those cost calculations for each pollutant, one at a time.

The case has been widely understood as focusing on mercury pollution, because that is one of the most hazardous emissions from industrial plants: it gets into the nation’s food supply through fish and is particularly harmful to pregnant women who consume mercury-containing fish, as well as their babies.  But the EPA’s broad regulatory regime for the power plants also will target other, non-mercury metals, as well as various gases emitted from those facilities.

Complicating the dispute, for the Court, is that Congress has established two regimes for regulations under the Clean Air Act: one for virtually everybody else, and one for the power plants.  The regime that the EPA began developing in late 2010 and finished early in 2012 is based on its broader authority to regulate pollutants in general, because it found that it would not be sufficient to draft rules that treated coal-fired and oil-fired power plants separately.

The broader regulatory mission assigned by Congress to the EPA has existed since the Clean Air Act was amended in 1990.  Initially, Congress itself provided a list of 180 hazardous air pollutants, but from time to time it told the EPA to revise or add to that list when it discovered new risks to health and the environment.  The agency also had a mandate to list all sources of hazardous pollutants.

Once a pollutant or a source gets on the EPA list, the agency must develop specific control standards to achieve the maximum reduction in pollution.  It can take pollutants or sources off the list, if it can justify doing so.

The 1990 amendments to the Act also gave the EPA a separate assignment regarding whether and how to regulate pollution from power plants, regulating them if it found that to be “appropriate and necessary.”  In 2000, the agency determined that those plants should be regulated, and listed them as pollution sources.   It made clear it was particularly troubled by mercury emissions from those plants, although it identified other pollutants that it said would cause cancer.

In 2005, when the George W. Bush administration was in power, it tried to take power plants off the regulatory list, but the U.S. Court of Appeals for the District of Columbia Circuit blocked that in a 2008 ruling.  The Bush administration filed an appeal of that ruling in the Supreme Court but, when the Obama administration came into power in early 2009, it backed off of that appeal, and the Supreme Court dismissed the case.

The EPA under new leadership began moving ahead, applying the test that Congress had laid down for power plants: was such regulation “appropriate and necessary”?   It specifically found a health and environmental need to regulate the power plants’ emissions, and concluded — in making the finding that those plants had to remain on the list — that it was not allowed to take their costs into account at that stage.

In focusing on mercury, the EPA found that the power plants generated half of the nation’s mercury emissions.  It also found that the power plants contributed significant amounts of other air pollutants, including arsenic and various acid gases. The agency put its final rule for power plants into effect in February 2012, broadly reaffirming its perception that this was “appropriate and necessary.”   And, as it was obliged to do, it then calculated specific emissions standards for the pollutants emitted from power plants, taking costs and benefits into account in that step in the process.

A group of states and a list of industry groups challenged the final rule in the D.C. Circuit, where they lost on their complaint that EPA should have made cost calculations before ever deciding to put power plants and their emissions on the regulated list.   While that court said it was not explicitly clear that Congress did not want cost calculations made as part of that initial policy choice, it was at least permissible for the EPA to conclude that it should not do so.   The court agreed that it was acceptable for the EPA to postpone cost calculations until it set specific limits on pollution emissions for the power plants.  The court of appeals split two to one on the cost calculation question.

Twenty-one states, the Utility Air Regulatory Group (a trade group of the power plants), and the National Mining Association (a trade group of the coal-mining companies that supply fuel to those plants) filed separate petitions at the Supreme Court.

The challengers complained to the Court that the EPA had confined its focus to health and environmental risks, and ignored what it would cost industry to comply with the broad new regulatory regime.  Once the agency perceived those risks, the challengers contended, it essentially eliminated the cost factor, although they insisted that cost is a necessary part of any policy that is based upon an “appropriate and necessary” standard.

Congress, they contended, has always treated power-plant regulation differently.  Costs may not be a significant calculation for everybody else subjected to EPA pollution controls, they said, but it is vital to the power plants because they have a special, independent duty imposed by the EPA to install scrubbers to reduce pollution from their stack emissions.   EPA opposed Supreme Court review, arguing that the D.C. Circuit got it right.

Some of the petitions sought to widen the challenge to the EPA and to the D.C. Circuit’s decision upholding the EPA’s choices, but the Court, in granting review on November 25, said it would review only the question of whether it was unreasonable for the EPA to refuse to consider costs in deciding that it was “appropriate” to regulate power plant emissions.

Briefs on the merits

The merits brief of the twenty-one challenging states argued that the Court’s focus should be on the word “appropriate” in the Act.  While it is up to the EPA to decide when regulation of a pollutant is “necessary,” once it finds that a pollutant poses risks, that simply leads to the more significant question, the brief said, of what regulatory approach is “appropriate.”

The Court should defer to the EPA on how to interpret that statutory word, the states asserted, only if that word is ambiguous.  Placed in the context of a broad regulatory regime, the filing went on, the word is not ambiguous, because there is no way that an approach can be mandated as “appropriate” if it does not take into account the cost of compliance.

Congress, the states noted, has decided what other industries the EPA should regulate, but has told the agency to move against power plants only if that is “appropriate and necessary,” and given it a mandate to take into account all relevant regulatory factors.  What factor, they asked, could be more relevant than cost?

The power plant industry’s brief on the merits devoted more than half of its space to recounting the history of EPA regulation of air pollutants back to enactment of the original Clean Air Act in 1970.  In the early years, it noted, the EPA repeatedly concluded that the pollution problem at the power plants was too little to bother with.  Congress, the brief stressed, was well aware of that history when in 1990 it amended the Act and indicated how the EPA should go about considering action against the power plant industry: it wanted that to be separate from other pollution-control strategies.

Just as government regulation to serve “the public interest” may not be included specifically in the text of a statute does not mean that an agency can ignore it, the plants’ brief contended.  So, just because “cost” does not appear in the mandate to the EPA to consider what is “appropriate and necessary” for the power plant industry does not mean that the EPA can simply ignore it as a factor.   That brief closely tracks the structure of the Act’s language.

The Mining Association’s merits brief sought to lay upon the EPA, and not to Congress, the sole choice of whether to calculate costs as part of its regulatory mandate for the power plants.  But if Congress had wanted the agency to leave cost out of account, it would have made that clear and giving discretion to the agency did not carry with it the authority to leave such a vital factor unexamined, the brief suggested.

When one considers the serious mismatch the coal companies perceived between what the new regime will cost compared to its truly modest benefits, it was unreasonable for the EPA to decide that costs didn’t count at all in the initial regulatory judgment.

The EPA’s basic argument in its merits brief is that the Clean Air Act clearly directs it to consider costs only when it is setting the level at which it will regulate any other source of pollution, so there is no basis — in the text of the Act or as a practical matter — to treat power plants differently when they are the source of air pollution.

In addressing the prospect for regulating the electricity-generating facilities, the agency argued, Congress used “open-ended phrasing” — that is, the “appropriate and necessary” standard.  That clearly was a sign that Congress was making this call one for the agency to make as it saw fit.

Just as the EPA has not obligation to consider costs, when it decides whether to take a pollutant or a source off of its regulatory list, it has no duty to do so at the other end, when it is making up the list in the first place, according to the EPA.   When it devised a methodology for listing or de-listing a pollutant or a source, the EPA contended, Congress took the “cost-blind” approach.

As a final point, the EPA argued that, even if it had taken into account cost factors, it still would have found it reasonable to regulate the power plants’ emissions.   And, as it had at the petition stage, the EPA in its merits brief insists that it has the correct calculations on the value of the benefits that regulation of this sector would produce.

A collection of energy-generating companies that said they have already moved to adopt modern pollution-control technologies argued in their merits brief that the older coal-fired competitors are reaping an economic advantage by having delayed EPA regulation of their pollution emissions for twenty-five years after industry in general was told to clean up its emissions.

Until the EPA’s rules for older power plants start taking effect, these competitors contended, more modern plants that have spent billions of dollars to install emission controls will have economic competitors operating “old, high-emitting facilities” that do not bear the costs of pollution controls.   That will discourage investments “to modernize the nation’s generation fleet.”

A group of state and local governments also lined up on the EPA’s side in their brief on the merits, contending that many power plants are already complying with stricter mercury emission standards that are often tougher than what EPA has mandated.  That surely means, they contended, that the EPA’s approach is entirely affordable.   “There is no practical impediment to compliance” with what the EPA has required, they asserted.

A merits brief has also been filed by a wide array of medical and conservation organizations, arguing that Congress explicitly intended to have government move forward energetically to reduce air pollution “after decades of regulatory paralysis,” and the lawmakers were actually insistent that cost calculations not get in the way of getting the government started on the regulatory mission Congress was commanding.

The state and industry challengers have drawn the support mainly of other energy companies, along with business organizations and trade groups, as well as conservative legal advocacy organizations.  EPA has a somewhat lengthier list of amicus supporters, made up primarily of health organizations, scientists, think tanks, and emissions control companies and strategists.

Posted in Utility Air Regulatory Group v. Environmental Protection Agency, Michigan v. Environmental Protection Agency, National Mining Association v. Environmental Protection Agency, Analysis, Featured, Merits Cases

Recommended Citation: Lyle Denniston, Argument preview: EPA, on the defensive again, SCOTUSblog (Mar. 24, 2015, 4:56 PM), http://www.scotusblog.com/2015/03/argument-preview-epa-on-the-defensive-again/