Supreme Court’s Mercury Decision Spells Further Trouble for Coal

by | Mar 4, 2016

For the second time in just a few weeks, the coal-consuming-and-producing states have tried for a Hail Mary — to get the US Supreme Court to delay the implementation of EPA rules. This time: the mercury rule, which had previously been kicked back down to the federal district court in Washington DC.

The decision by the High Court on Wednesday is sending courtroom speculators into a frenzy. Why’s that? Last June, as we know, the Supremes said that EPA didn’t properly consider cost as it relates to the mercury rules and re-delivered the to the DC Court of Appeals for it to reconsider. That lower court will rehear the arguments but decided in the meantime, that the law could go forward.

That’s when 20 states decided to ask the US Supreme Court to intervene — to delay the mercury rule’s implementation, just as it had done with respect to the Obama administration’s Clean Power Plan to curb carbon emissions in February.  On the surface, the petitioners would appear to have the inside track, given the recent history. But, generally, the high court has been deferential to Obama’s EPA. That’s because EPA has fully studied the matter and the judges have not: the Chevron Doctrine, as it is formally known.

“The requested stay would harm the public interest by undermining reliance interests and the public health and environmental benefits associated with the rule,” EPA said in its filing with the Supreme Court. “The application lacks merit and should be denied.”

In June 2015, the Supreme Court ruled 5-to-4 that the EPA failed to properly consider the costs of its mercury regulation. It said that EPA must calculate those costs at the initial stage — the one where it determines that regulation of hazardous emissions from electric power plants would be “appropriate and necessary.”

In this case, EPA says that it had done so but had waited until a latter stage — the one where it had actually drawn up the proposed rules. At that point, EPA had estimated the cost of its proposal to be $9.6 billion a year. But it said that would produce as much as $90 billion a year in benefits.

With that, EPA set out to require cuts in mercury emissions of 90 percent in 2012, saying that the technologies to do so were available — a rule that was subsequently challenged by the state of Michigan, several coal-related groups, and Peabody Energy.

The agency says that at least 60 percent of the eligible coal units have already acted while 40 percent, or about 600 units have not. Of those, it estimates that about 1 percent may choose to close rather than spend the money to buy new equipment.

Those plaintiffs first took their arguments to the DC Circuit Court of Appeals, which had sided with EPA’s positions. However, the same plaintiffs appealed that ruling to the Supreme Court, which found that the cost of the proposal far exceeded the benefits, noting that the $90 billion EPA cited was nebulous and tied to the reduction of other air pollutants.

“Blithe statements that EPA will take costs into consideration at some ill-defined future moment are insufficient, particularly when billions of dollars can be spent even as rules make their way through judicial review,” says Scott Segal, director of the Electric Reliability Coordinating Council. Critics cite a financial toll of $170 billion.

What now? Two things have occurred since last December: The first is that the DC Court of Appeals has said that the regulation can proceed during the time EPA re-presents its facts and the second, is the death of Supreme Court Justice Scalia, who had sided with the states and with the coal industry. Assuming the lower court signs off on the “rewrite,” the case would get appealed to an evenly-split court. That means, the EPA prevails.

The fallout: In 2002, there were 633 coal plants, says the U.S. Energy Information Administration. By 2011, that number was 589, producing about 318,000 megawatts.?? Between 20,000 and 40,000 megawatts are expected to be retired over the next few years. The utilities shedding the most: American Electric Power, FirstEnergy Corp., NRG Energy, Southern Co. and Duke Energy, which have determined that retrofitting those older units with pollution controls would be too costly.

The Supreme Court’s decision to deny the coal-producing and coal-consuming states a delay with regard to the mercury rules is a precursor of what is to come: those regulations will take effect and get implemented, which in turn, will continue to spell trouble for the coal industry.

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