DC Dispatch Supreme Court wrestles with air-pollution rule Should the EPA have considered how expensive the new regs would be for operators?

The Supreme Court is reviewing a major Obama administration rule aimed at cleaning up toxic power plant exhausts. The case puts in question both the cleanup and the court’s longstanding practice of deferring to federal agencies to interpret murky laws.

Under that 2011 Environmental Protection Agency rule, by the middle of next month, several hundred coal- and oil- fired power plants across the country must slash their emissions of mercury, arsenic and other toxic air pollutants or shut down.

But in response to a challenge by 21 states—including Arizona, Alaska, Utah, Wyoming, North Dakota and Idaho—and some industry groups, this week the Supreme Court held oral arguments on the rule. At issue is whether the EPA was wrong not to consider costs—such as how much plant operators would spend to install pollution control equipment or switch to other fuel sources—before it decided to regulate under the 1990 Clean Air Act.

The law doesn’t explicitly tell the EPA to consider costs, but directs the agency to set pollution standards if it “finds such regulation is appropriate and necessary” after studying the health impacts of these emissions. (The agency did consider costs later in its regulatory process, when it was setting specific standards for types of power plants. But the states and industry argue that this wasn’t adequate and costs should have played a role earlier.)

During oral arguments in the case Wednesday, Justice Elena Kagan pushed back when a lawyer representing states and industry argued that with the words “appropriate and necessary” Congress was directing the EPA to take into account costs.

“Congress knows how to require consideration of costs, to get from silence to this notion of a requirement seems to be a pretty big jump,” Kagan said.

But some conservative justices made it clear they side with industry, especially considering that the EPA estimated costs of complying with the

rule at $9.6 billion a year.

“I would think it’s classic arbitrary and capricious agency action for an agency to command something that is outrageously expensive and in which the expense vastly exceeds whatever public benefit can be achieved,” said Justice Antonin Scalia.

In the past, the highest court usually has deferred to the EPA to use its own judgment in interpreting vague provisions of sweeping laws such as the Clean Air Act. Legal experts say this case could have broad implications if the court decides against the EPA.

“It will be precedent setting if they say the word ‘appropriate’ absolutely includes costs,” says Patrick Parenteau, a professor at Vermont Law School. “To argue that absolutely requires a cost-benefit analysis, how do you get that out of the word “appropriate?” What dictionary can you cite that says that’s what the word appropriate means?”

Jeff Holmstead, an industry lawyer who headed EPA’s air pollution programs under President George W. Bush, said the EPA should take costs into account unless they’re specifically prohibited.

“The hope on the industry side is the Supreme Court will send a message that says you have to be more aware of the costs of your regulations,” he said. “You can’t just ignore those. That would send an important signal to EPA and perhaps other agencies as well.”

Some industry representatives say that this ruling could have implications for another major EPA rule, which would control greenhouse gas emissions from power plants.

The Mercury and Air Toxics Standards are among the EPA’s costliest regulations ever. But the EPA estimated that the health benefits would far outweigh the costs. In addition to reducing mercury and other toxic pollutants, the rule also would reduce fine particles. The EPA calculated that it would avert up to 11,000 premature deaths, 4,700 heart attacks and 130,000 asthma attacks every year. But the states and industry argued that those benefits are grossly inflated because much of the benefits the EPA calculated are from reducing fine particles, which were not the main target of this regulation.

Most of the power plants impacted by this standard already have decided to shut down or have installed pollution control devices to capture mercury and other pollutants.

But environmentalists cautioned that if the court sided with industry, companies might opt to keep their dirty old plants running longer or not use the pollution control equipment that they’ve installed.

“There are operating costs and those aren’t trivial,” said Jim Pew, an attorney for Earthjustice who was representing environmental groups and the NAACP in the case. “If the court threw it out they might not run it.”

Although the EPA likely would rewrite the rule to address whatever shortcomings the court indicated, such a ruling could delay the cleanup of hazardous air pollution by several years.

Alternatively, the court could decide to keep the rule in effect while the EPA reworks it. As for the plants that have closed or are slated to be shut down because of the rule, some utilities say it’s too late to change their plans.

But by hearing the case, the Supreme Court put a question mark over the fate of the 60-year-old Carbon power plant, which is nestled into a narrow canyon near Helper, Utah.

That plant is scheduled to close next month, largely because of the 2012 EPA rule. Most of the 600 coal-fired and oil-fired plants nationwide that were impacted by the rule installed pollution controls or have gotten extensions from the EPA and are likely to do so in the future. But there wasn’t room for pollution control equipment near the 60-year-old Carbon plant.

“Right now we can’t envision a scenario that would result in changing our decision to close Carbon, but I’m not going to be absolutely unequivocal,” says David Eskelsen, spokesman for PacifiCorps, which owns the plant. “We don’t know what the Supreme Court might do and how that might change the company’s calculations.”

The Supreme Court will rule before its term ends in June.

Elizabeth Shogren is HCN’s Washington DC correspondent. She Tweets @ShogrenE.