Audit, Compliance and Risk Blog

Divided Supreme Court Vacates EPA Fossil Fuel Power Plants Rule

Posted by Jon Elliott on Tue, Jul 28, 2015 in June the U.S. Supreme Court issued its latest ruling on the Environmental Protection Agency (EPA) efforts to implement the Clean Air Act (CAA). This time a sharply divided Court voted 5 to 4 to vacate EPA’s attempt to regulate hazardous air pollutant (HAP) emissions from fossil fuel-fired electricity power plants. The justices split over when during a decade-spanning, multi-phase rulemaking did CAA require EPA to calculate the costs and benefits of regulation—the Court majority ruled that this calculation should have occurred in the first round, rejecting EPA’s decision to do so later in the rulemaking sequence.

The proceeding will now return to the lower courts and EPA—EPA presumably will reopen its rulemaking, but may or may not be able to complete its work before President Obama leaves office and the next administration inherits the decision whether to proceed. Readers should keep in mind that many national Republicans have considered this rulemaking to be part of the President’s so-called “war on coal”, so the ultimate fate of this initiative is difficult to predict.

What Was EPA’s Responsibility?

CAA assigns EPA general responsibilities to identify HAPs, define “source categories” that emit one or more of them, and define appropriate National Emissions Standards for Hazardous Air Pollutants (NESHAPs). For most source categories, EPA follows procedures assigned by the 1990 CAA Amendments under which the agency sets a NESHAP based on “Maximum Achievable Control Technology (MACT).” Despite the word “Maximum”, MACT is set based on controls already in place for the targeted source category; for industrial categories with fewer than 30 sources nationwide EPA requires the average emissions limitation achieved by the best-performing five sources in the category, and for industrial categories with 30 or more sources, the average emissions limitation achieved by the best-performing 12 percent of existing sources. Every 8 years, EPA is to consider the “residual risk” to health and safety left after application of MACT, and may tighten the NESHAP to reduce those risks further.

However, the 1990 Amendments provide unique provisions for fossil fuel power plants, in part because those amendments also provided for extensive Acid Rain prevention efforts. Congress considered the possibility that responses to these acid rain requirements might produce sufficient reductions in HAP emissions to forego additional NESHAP standards. Accordingly, EPA was directed to conduct risk studies, and then to decide if a NESHAP remained “appropriate and necessary” before proceeding to promulgate such standards.

What Did EPA Do?

EPA conducted the required studies, reporting to Congress in 1998 that power plant emissions of HAPs, particularly mercury, pose significant risks to public health. In 2000, EPA found it “appropriate and necessary” to regulate those emissions, deferring quantification of costs and benefits. Accordingly, EPA began 12 years of rulemakings, during which it conducted multiple additional benefit-cost studies and eventually adopted NESHAPs requirements in 2012. At that time EPA estimated that regulations would cost $9.6 billion to comply, and identified quantifiable benefits of $4-6 million from HAP reductions, and $37-90 billion from associated reductions in other pollutants.

How Did the Supreme Court Reach Its Decision?

The critical difference between the Court majority and minority was the question how early EPA was required to make a cost-benefit analysis. Although all nine justices agreed that the mandate to decide “appropriate and necessary” was broad and vague, the majority found it impossible for EPA to make a reasoned decision without considering costs. The dissent, on the other hand, thought it reasonable for EPA to decide that some regulation was “appropriate and necessary,” and only then to proceed to full-blown rulemaking that would produce concrete requirements against which more concrete costs and benefits could be calculated and compared.

Now What?

The majority opinion reverses the lower court decision affirming EPA’s rule, and remands the case for further proceedings. Based on typical approaches, the lower court (Court of Appeals for the District of Columbia Circuit) will either stay or vacate the rule, and remand to EPA for further rulemaking. EPA will probably re-start its rulemaking, seeking to apply updated cost-benefit analysis to re-decide whether to reissue a NESHAP. It remains to be seen whether that process will be completed during the remaining 18 months of President Obama’s administration, or is left to appointees of the next president to decide whether and how to proceed.

Self-Assessment Checklist

Does the organization own or operate any fossil fuel fired power plants subject to the NESHAP at issue in this case?

Does the organization own or operate any facilities that purchases electricity generated in significant proportion from fossil fuels (the costs and availability of which will be affected by EPA’s future actions)?

Where Can I Go For More Information?

Michigan v. EPA decision  

• EPA website: About Air Toxics webpage  

Specialty Technical Publishers (STP) provides a variety of single-law and multi-law services, intended to facilitate clients’ understanding of and compliance with requirements. These include:

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 About the Author Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 25 years. He was involved in developing 12 existing products, including Environmental Compliance: A Simplified National Guide and The Complete Guide to Environmental Law.

Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).

Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).

You may contact Mr. Elliott directly at:

photo credit: Power Plant at Sunset via photopin (license)
photo credit: Vattenfall power plant Berlin via photopin (license)

Tags: Environmental risks, Environmental, EPA, Hazcom, Oil & Gas