On Monday, the U.S. Supreme Court halted further implementation of a U.S. EPA’s regulation limiting mercury and other hazardous air toxic emissions from coal- and oil-fired electric power plants. In a 5-4 decision, the majority held that EPA failed to take costs into account when deciding to regulate power plants under this rule, thereby imposing substantial and costly emissions limits and control requirements on them. However, the Court did not strike down the rule, instead remanding the case for further proceedings.   The Opinion can be viewed here.

Members of Congress and industry officials cheered the decision as a significant limit on EPA authorities (The Hill), but the effects are not quite so clear. Under the procedures used to bring the litigation, the rule was not suspended pending the outcome of the court challenge, meaning that the challenged rule has been in effect for several years. As a consequence, much of the power industry has already taken extensive and expensive steps to comply. Thus, while EPA will find it necessary to address deficiencies associated with the rule, specifically its economic impacts, this may be too late for most power plants. (For example,The Anniston Star’s article on the likely impact on Alabama Power).

The Court’s decision turned on EPA’s failure to assess the potential costs of the rule at the outset of the rulemaking process when the Agency made the initial decision to apply the regulation to the power industry. Although EPA sought to supplement the rulemaking record with an economic analysis done after the rule was promulgated, the Court said this was too late. However, the opinion left open the possibility that EPA could revive the rule and made clear that it was not requiring a formal cost benefit analysis (which would effectively require attribution of costs and benefits to each advantage and disadvantage). The assessment of costs is left to EPA’s discretion so long as it is exercised reasonably.

Prospectively, the ruling may have a greater impact on future rules related to the electric power industry. While the mercury rule’s impacts have already been substantially imposed, and are not likely to be removed entirely, or even modified substantially, future rule making associated with this industry and coal combustion generally will almost certainly receive greater scrutiny from the standpoint of costs related to benefits.