The Future of Cost Concerns in Clear Air Act Regulation

March 26, 2015

On Wednesday, the Supreme Court heard Michigan v. Environmental Protection Agency (“EPA”). This case, an extension of previous cases regarding the Clean Air Act, is an additional challenge the Obama Administration’s ability to propagate regulations in an increasingly divisive political environment. This challenge falls less than one month after a challenge to the Obama Administration’s Internal Revenue Service rule granting subsidies under the Affordable Care Act to both state and federally established healthcare exchanges.

Michigan v. EPA will be a test of whether the Supreme Court will expand its concerns over the present administration’s regulatory concerns to Environmental matters.

Wednesday’s challenge is based on a EPA rule to restrict the emission of hazardous pollutants such as mercury and arsenic from both coal and oil power plants. This case is a continuation of the long standing debate in Clean Air Act litigation regarding the amount of consideration costs should play in EPA decisions regarding rules for environmental pollutants. Since Whitman v. American Trucking Assns., Inc., the EPA has interpreted the Clean Air Act to have minimal levels of concern regarding the costs when determining the “adequate margin” for safety of air pollutants.
On February 16, 2012, the EPA proposed a rule to regulate the emissions of coal fired power plants, especially in regards to mercury emissions. Mercury pollution, of which power plants are the biggest source of emissions, is responsible for an EPA estimated 11,000 premature deaths in the United States. The coal industry sued in response to the proposed rule, because cleaning up coal power plants is an expensive investment. As in American Trucking, the coal industry is again arguing that the EPA must weigh the health benefits against the costs required to achieve them.
However, the EPA has stated that it does weigh the cost of implementation of regulations, just later in the process. The EPA first determines if a pollutant is a threat to human health, which establishes a need to regulate. Then the EPA determines at what level to set emission standards. During the process of setting the emission standards, the EPA takes into account the costs by industry to comply with the EPA ruling.
The coal industry has challenged the regulation of mercury based on the fact that it estimates the costs of  it will cost ten billion dollars to comply but the benefits would be between four and six million dollars. The coal industry’s numbers are based on the costs to remodel existing power plants compared to an estimate of increased IQ based on lower prenatal mercury exposure. However, EPA estimates that the benefits in decreasing mercury and arsenic emissions between thirty seven and ninety billion dollars. These estimates are based on public health estimates.
The rule in this case has been classified by Michigan and the other 19 Republican states as the “most costly rule ever.” Michigan Attorney General Bill Schuette further stated that the rule would “result in rate increases for citizens across the country and threatens the reliability of the electricity grid by forcing the closure of many power plants.” Additionally these states are backed by the strong coal lobby as well as influential Senators such as Mitch McConnell.  Seventeen states, including California and New York, have stated their support for the EPA rule.
We will have to wait and see if the Supreme Court’s decision to take this case is a sign of a shift away from American Trucking to greater scrutiny of administrative regulations, and especially large acts such as the Clean Air Act or a step to reaffirm the long standing interpretations by the EPA. Oral arguments will be heard on Wednesday, March 25, 2015. An opinion for the case will likely follow in late summer early fall.