W.H._SAMMIS_POWER_PLANT.JPG

FirstEnergy Corp.'s W.H. Sammis power plant is the largest coal-fired power plant in Ohio.

(Associated Press)

WASHINGTON, D. C. - The U.S. Supreme Court on Monday upended Environmental Protection Agency limits on mercury emissions from coal-fired power plants, saying the government must consider costs before deciding whether regulation is appropriate and necessary.

The limits at issue prompted closure of many coal-fired power plants in the Midwest, including facilities in Cleveland, Eastlake and Ashtabula run by Akron-based FirstEnergy. The rules also prompted FirstEnergy to spend $370 million to upgrade the six coal-fired plants it will retain, a spokeswoman said.

"It is not rational, never mind 'appropriate,' to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits," Justice Antonin Scalia wrote in the 5-4 decision. "EPA must consider cost--including cost of compliance--before deciding whether regulation is appropriate and necessary. It will be up to the Agency to decide (as always, within the limits of reasonable interpretation) how to account for cost."

The justices left the standards in place pending further consideration by lower courts and EPA. The ruling could hamper EPA's ongoing air pollution regulation efforts and make it easier for utilities to build and operate coal-fired power plants.

Organizations that represent the coal and utility industries, as well as more than a dozen states including Ohio, argued EPA acted with "deliberate indifference to costs" in setting standards that threaten to drive a number of coal-fired electric utilities out of business. A legal brief from 23 states including Ohio that rely on electricity from coal said the new mercury limits would have generated just $4 million to $6 million in health benefits, but cost utilities $9.6 billion for compliance.

"Congress made it clear that EPA must look not just at the benefits of regulating electric utilities, but also at whether it is appropriate to do so, which means looking at the costs, too," said the brief signed by Ohio Attorney General Mike DeWine and his counterparts in other states.

DeWine released a statement after the decision that said he is "pleased the court agreed the U.S. EPA violated the Clean Air Act by refusing to take into account the costs of its power plant regulations when deciding to adopt them."

EPA disputed the industry analysis, contending its standards would prevent thousands of deaths each year. It valued the air quality improvements for human health at $37 billion to $90 billion annually. In Ohio alone, the agency says the new standards would prevent up to 560 premature deaths in 2016 while creating up to $4.6 billion in health benefits.

The attorney who represented EPA before the court, U.S. Solicitor General Donald B. Verrilli, Jr., said the cost of imposing the mercury regulations amounts to 2.5 percent of the power industry's yearly revenues.

"By causing major overall reductions in numerous air toxics, the rule will importantly reduce serious hazards to the public," said a "friend of the court" brief filed by organizations that approve of the EPA rule, including the Ohio Environmental Council. "Those hazards, the record demonstrates, are particularly acute for vulnerable groups including children who can suffer debilitating, lifelong effects."

More than a dozen other states -- many of them downwind from the Midwest's coal-fired power plants -- urged the court to uphold the EPA's emissions limits. They noted that some states have stricter limits than EPA, which have been implemented without difficulty.

An attorney who represents industries sympathetic to the new rules, Paul M. Smith, told the court that power companies have already spent about 90 percent of the estimated $9.6 billion dollars required to meet the new mercury standards without experiencing "upheavals," so "the idea that the result here was somehow ludicrous or outlandishly expensive is belied."

Ohio-based coal producer Murray Energy also filed a "friend of the court" brief in the case. Its brief contends EPA's requirements were "imposed without regard to costs, energy requirements or local resources."

Murray Energy's brief said EPA's decision to cut mercury emissions from power plants would "have a dramatic effect on the power sector and those who supply the fuel to be converted to electricity to those power plants, including Murray Energy and other coal companies."

FirstEnergy spokeswoman Stephanie Walton said that regardless of the Supreme Court's decision, her company has already spent the money to comply with the mercury air and toxics standards. It will not reopen any of the plants it closed because of the regulation, she said.

"This case illustrates why planning certainty around environmental rules is so important, as it allows companies time to appropriately plan and implement investments and modifications," said Walton. "Continually changing rules make it difficult to make strategic capital investment decisions."

Like FirstEnergy, Columbus-based American Electric Power shut down some of its coal-fired power plants because of the new rules and spent money to upgrade others, says spokeswoman Melissa McHenry. She estimated the company will spend $3.5 billion between 2012 and 2020 to comply with new EPA regulations on pollutants.

She said the Supreme Court's decision that EPA should have considered the costs of its mercury regulations would have broad implications for EPA regulations of other substances "and are of long-term importance."

The Edison Electric Institute trade organization for the utility industry said the court's decision won't change the strides utilities have made toward reducing mercury and other emissions.

"It is unclear what instructions the DC Circuit Court ultimately will give to EPA, and what effect they will have," said the group's vice-president, Quin Shea.

S. William Becker of the National Association of Clean Air Agencies noted that successful implementation of the EPA's Mercury and Air Toxics Standards (MATS) shows the standards are both affordable and technologically feasible.

"In light of the fact that over two-thirds of power plants have already complied with EPA's Mercury and Air Toxics Standards (MATS) by the April 2015 deadline, and have not found it necessary to seek a near-automatic one-year extension, it is disappointing that the Supreme Court has reversed the agency's actions," Becker said.

An environmental group that supports the regulations, the Natural Resources Defense Council, said the organization is confident EPA "will meet its burden in justifying these important health standards, because the benefits to the American people overwhelmingly outweigh industry compliance costs."

Scalia's ruling noted that a "regulatory impact analysis" issued by EPA estimated the regulation would cost power plants $9.6 billion each year. It noted EPA estimated the health benefits of reducing mercury emissions were worth $4 million to $6 million per year, but "ancillary benefits" of employing the mercury extraction technology - such as reducing particulate matter and sulfur dioxide emissions - would boost the health benefits to between $37 billion and $90 billion each year.

"EPA argues that it need not consider cost when first deciding whether to regulate power plants because it can consider cost later when deciding how much to regulate them," Scalia wrote in the decision, which was joined by Chief Justice John Roberts, as well as Justices Anthony Kennedy, Clarence Thomas and Samuel Alito. "By EPA's logic, someone could decide whether it is 'appropriate' to buy a Ferrari without thinking about cost, because he plans to think about cost later when deciding to upgrade the sound system."

"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 continued. He declared EPA interpreted the Clean Air Act "unreasonably when it deemed cost irrelevant to the decision to regulate power plants," and remanded the cases to lower courts "for further proceedings consistent with this opinion."

In a dissent joined by Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor, Justice Elena Kagan wrote that "EPA took costs into account at multiple stages and through multiple means as it set emissions limits for power plants."

"The Agency acted well within its authority in declining to consider costs at the opening bell of the regulatory process given that it would do so in every round thereafter - and given that the emissions limits finally issued would depend crucially on those accountings," wrote Kagan.

Ohio State University environmental law expert Cinnamon Carlarne described the decision as a "blow, but not a knockout punch," to EPA's ability to regulate emissions of mercury and other power plant pollutants under the Clean Air Act.

"The decision sends EPA back to the drawing board in terms of considering costs at the initial stage of deciding whether or not to regulate hazardous air pollutants from power plants," the law professor said. "But EPA is prepared. .... EPA has already quantified both the costs of regulation and the numerous direct and co-benefits of regulation and these benefits support the regulations EPA has proposed. EPA may have lost the first round, but it is likely to win the fight."