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SCOTUS Grants Cert. on EPA Electric Utility Regulation

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By Mark Wilson, Esq. on November 26, 2014 3:09 PM

On Tuesday, the Supreme Court agreed to hear three cases, consolidated into one argument, on the issue of EPA regulation of electric utilities. Michigan v. EPA, Utility Air Regulatory Group v. EPA, and National Mining Association v. EPA all seek to address whether it was unreasonable for the EPA to refuse to consider cost when determining whether to regulate air pollutants emitted by electric utilities under Section 112 of the Clean Air Act.

The cases have nationwide importance, as indicated by the gazillions of states that are petitioners and respondents in this case.

Back and Forth

Back in 2000, the EPA concluded that it could regulate air pollution emitted by coal- and oil-powered electric plants due to the large volume of mercury they emitted. In 2005, the EPA changed its mind and decided it wasn't "appropriate" to regulate those utilities.

In 2008, the D.C. Circuit Court said the EPA couldn't do that; it first had to make "specific determinations" about the public health consequences before it could stop regulating oil and gas utilities. In 2012, the EPA decided it didn't have the power to consider cost when deciding whether and how much to regulate electric utilities; it could regulate exclusively on the basis of public health effects.

That Depends on What You Mean by 'Appropriate and Necessary'

The problem rests on what the phrase "appropriate and necessary" means as it applies to Section 112. Michigan, along with 22 other states and some electric utility trade groups, contends that the cost of compliance must be taken into account when regulating electric utilities. This cost, they claim, is $9.6 billion annually, far outstripping the $4-6 million worth of benefits. Ipso facto, no regulation.

On the flip side, respondents claim that petitioners are distorting the cost-benefit analysis by "exclud[ing] from its benefit-cost analysis any benefits that do not arise directly and exclusively from a reduction in human exposure to hazardous pollutants." In reality, they say, the EPA determined that the benefits would be between $37 and $90 billion.

A Rorschach Test

Part of the problem here is that Congress has really said nothing about whether the EPA must take cost into account. This makes Section 112 into a Rorschach test: The petitioners claim that the absence of an explicit reference to cost means that the statute is too "broad and all-encompassing," while respondents argue that it's perfectly appropriate for Congress not to tie an agency's hands.

The answer to this question is more on respondents' side. In Entergy Corp. v. Riverkeeper, Inc., the Supreme Court allowed the EPA to rely on a cost-benefit analysis when interpreting "best technology available for minimizing adverse environmental impact." Notably, that case was a 6-3 decision with the conservatives on the winning side, in favor of the EPA. If we're looking at ideology, Riverkeeper was a pro-business decision in favor of letting the EPA do its job however it wanted.

The instant case presents a quandary in that a decision in favor of letting the EPA do its job would also be an anti-business decision. It makes one wonder which four justices agreed to hear this case.

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