On Tuesday, June 30, the US Supreme Court issued its decision on Michigan v. EPA, regarding the EPA’s regulation of mercury emissions from power plants. Burning coal and oil releases mercury into the atmosphere, which scientists have said can eventually be absorbed into fish and thereby wind up in humans who eat the fish. Excess mercury can cause neurological damage, though there is some doubt about how much of that can be attributed to U.S. power plants.

In Michigan v. EPA, the EPA claimed that it did not have to consider costs and benefits when deciding whether to regulate power plants for mercury emissions. The costs to power plants were estimated at $9.6 billion a year, 1,600 to 2,400 times as great as the benefits from environmental mercury reduction (which the EPA estimated at $4 to $6 million a year). Twenty-three states appealed the decision of the EPA, and the Court ruled 5-4 against the EPA.

Justice Scalia delivered the opinion of the court. He was joined by Justices Roberts, Kennedy, and Alito, while Justice Thomas filed a concurring opinion, yielding the 5–4 decision. Justices Kagan, Ginsburg, Breyer, and Sotomayor dissented.

The EPA admitted that the benefits specifically from reduced mercury were relatively small but claimed that its regulations on mercury would have created secondary benefits in the form of reduced emissions of particulates and sulfur dioxide. Adding these other pollutants into the benefits side of the calculation allowed the EPA to claim benefits of $37 to $90 billion a year.

But the EPA also said its determination that the mercury rule was “appropriate and necessary” did not depend on these additional benefits. It specifically claimed that it could ignore the costs and benefits, or at least defer those considerations to a later time as it set specific emissions limits.

Justice Scalia disagreed, saying that “appropriate and necessary” required at least some attention to costs up front, and adding, “No regulation is ‘appropriate’ if it does significantly more harm than good.” And in fact, Congress had required that the EPA study “the health and environmental effects of [mercury] emissions, technologies which are available to control such emissions, and the costs of such technologies.”

The EPA, Scalia said, tried to pick-and-choose from that study and two others, using the mercury study to argue that “Congress was concerned with environmental effects,” but ignoring the part of the study that said costs should be considered. Scalia incisively referred to this as “interpretive gerrymanders under which an agency keeps parts of statutory context it likes while throwing away parts it does not.”

Justice Kagan’s dissenting opinion claimed that the EPA was going to consider costs later, and that the minimum (“floor”) standards imposed on power plants would be implicitly based on costs. The best-performing 12% of power plants would have been used as a benchmark in setting those standards, she said, and since power plants are profit-seeking enterprises, those power plants took account of costs when they selected their emissions levels. Therefore, Kagan argued, the EPA was really considering costs when it contemplated forcing all power plants to come up to the level of the best 12 percent. Furthermore, the EPA would have built in flexibility to its standards by setting different standards for different power plants, depending on fuel type, location, etc.

Clearly, the Court was split on whether this constituted sufficient consideration of costs.

Scalia argued that the EPA’s plan to set up different categories of power plants that would be subject to different emissions standards was not consideration of costs, since the EPA had itself said that “it is not appropriate to premise subcategorization on costs.”

But more fundamentally, Scalia said that the EPA’s decision to regulate is separate from its decisions about how to regulate. Scalia contended that whether the EPA would consider costs in how to regulate, the EPA had ignored costs when answering the antecedent question of whether mercury regulation should be imposed at all. “If (to take a hypothetical example) regulating power plants would yield $5 million in benefits,” Scalia wrote, “the prospect of mitigating cost from $11 billion to $10 billion at later stages of the program would not by itself make regulation appropriate.”

One must wonder if the EPA’s track record of imposing costs that significantly exceed benefits, and its history of using tortured analysis of costs and benefits, played some background role in the majority’s opinion. Perhaps there is good reason for courts to have little confidence in the EPA’s willingness to honestly consider costs and benefits.

In a Cornwall Alliance briefing paper released in October 2011, The Cost of Good Intentions: The Ethics and Economics of the War on Conventional Energy, I pointed out the following problems with the EPA’s mercury risk assessments:

• The EPA’s benchmark limit for mercury exposure is based largely on a study of a (vanishingly small hypothetical) population that consumes unrealistically large amounts of fish that are high in mercury but are low in the selenium that can mitigate the effects of mercury.
• Other studies show far less reason for concern, such as a 12-year study conducted in the Seychelles Islands finding no connection between a high-fish diet and neurological damage in children.
• Power plants regulated by the EPA are not responsible for the vast majority of the mercury that may end up in American diets—only 16 percent of atmospheric mercury deposited in the continental US comes from the US and Canada, and natural sources make up a large fraction of the total mercury in the environment. For example, forest fires in the US emit roughly the same amount of mercury each year as all US power plants.
• Most fish consumed by Americans are either low-mercury farm-raised fish, or oceanic fish that obtain no more than 1 percent of their mercury from US power plants. That leaves only wild freshwater fish, which make up only 10 percent of US fish consumption and almost always have enough selenium to counteract the effects of the mercury.

Furthermore, the particulate matter reductions mentioned by EPA as an ancillary benefit to the mercury reductions have a dubious connection to human health.

Dr. Anne E. Smith of NERA says that the use of these co-benefits is inappropriate, due to the problems with estimating their actual impact. By regulating mercury (or ozone, lead, NO2, or other pollutants) and claiming that most of the benefits come from concurrently reducing particulates, the EPA is doing a bait-and-switch. By not setting lower limits on particulates directly, EPA appears to be dodging the problem of presenting credible estimates of what particulate reduction accomplishes. Bob Murphy’s “Death and Toxins: How Krugman Botched His Mercury Commentary,” at the Institute for Energy Research, provides further support for this.

The sketchy numbers don’t stop there, of course. For example, the EPA has likely underestimated the economic costs of its carbon dioxide regulation as well. See “How EPA Cooks Books to Downplay Costs,” also at IER.

Perhaps the EPA could have had success in Michigan v. EPA had it been willing to consider costs and benefits up front as part of its “appropriate and necessary” determination. That would have allowed the EPA to add the weight of its estimates—however suspect—of the secondary benefits of the particulate and sulfur dioxide reductions. Perhaps this would have alleviated Scalia’s concerns about the 1,600 to 1 relationship between costs and benefits.

But the EPA evidently wishes to free itself from such constraints. Regulation that is part of a political and philosophical agenda—one might even say a religious crusade—cannot be impeded by base considerations like cost. If a regulation drives up costs for a politically unpopular industry, so be it. And the coal industry has been in the Obama Administration’s sights for years.

To the EPA, it matters not one whit that coal provides a larger fraction of our electric power than any other single source, or that coal-fired power can be produced whether or not the sun is shining or the wind is blowing. The target has been acquired, and regulation has become the weapon of destruction.

A victory in this case could have given the EPA the legal precedent to promulgate all kinds of regulations—on coal and other industries—that cause more harm than good. Unfortunately, the mercury rule that has just been declared illegal was in effect for over three years. While objections made their way through the courts, electric utilities were forced to make expensive and probably needless changes to their facilities. We can only hope that in the future, the EPA’s bureaucratic overreach will be slowed by this case.