Obama May Win by Losing in Quirk of Supreme Court EPA Review

Here’s a twist for the Obama administration as it awaits a U.S. Supreme Court decision on the biggest environmental rule of its first term: A loss shores up the legal basis of the biggest environmental rule of the second term.

The high court is set to decide as soon as Thursday on the 2012 rule by the Environmental Protection Agency that ordered curbs in mercury and other toxic pollutants emitted from coal-fired power plants. As a result of the rule, dozens of old coal plants were shuttered, and utilities have invested billions of dollars to install expensive scrubbers.

The legal irony in this case is that when industry lawyers challenged another major EPA initiative -- a proposal to also mandate cuts in carbon emissions from power plants -- they argued that the Clean Air Act would preclude that regulation if the mercury rule is in effect. If the mercury rule were tossed out, that argument might go with it.

“It unquestionably would help EPA’s carbon rule,” said Brian Potts, an attorney specializing in Clean Air Act cases. “Both sides have something to lose by winning here.”

The legal two-step for the EPA underscores the degree to which President Barack Obama’s environmental legacy, especially in regulating greenhouse gases blamed for climate change, is dependent on favorable decisions from federal courts. The mercury rule was fought all the way to the Supreme Court, even as analysts say utilities such as American Electric Power Co. and Southern Co. won’t reverse decisions to close old coal plants if the EPA loses.

Remaining Retired

“Units that will have retired will remain retired,” said Christi Tezak, an analyst at ClearView Energy in Washington. If the rule is struck down by the courts, some of the 173 units that applied for an extension from the EPA until next April may continue operating longer, she said.

The likelihood of an EPA loss seems significant since Justice Antonin Scalia will probably write the mercury opinion. Scalia, who criticized the EPA’s approach during oral arguments, is the only justice who hasn’t issued a majority opinion in a case that was argued during the court’s two-week sitting in late March. That’s when the EPA case was argued.

All coal plants -- new or old, scrubbed or not -- face additional constraints from the EPA’s plan to curb carbon emissions. Coal emits the most carbon dioxide for every unit of energy created, so the EPA plan would mandate cuts in the use of coal and increasing reliance on solar, wind and natural gas.

EPA Challenge

Coal producer Peabody Energy Corp., coal-dependent states such as West Virginia, and business groups such as the U.S. Chamber of Commerce already challenged the EPA’s first-ever plan to curb carbon emissions under section 111(d) of the Clean Air Act. Those groups, represented by Harvard University legal scholar Laurence Tribe, had one main argument: The Clean Air Act prohibits regulation of power plants under 111(d) if they were first regulated under section 112.

You guessed it: The mercury rule is under section 112.

“If we are right about this, there is nothing they can do to make this rule lawful,” Tribe told the U.S. Court of Appeals in Washington in April. The 111(d) section was meant as a catch-all for polluting sources not regulated by other sections of the law, and so lawmakers were trying to prevent duplicative rules, critics say.

The Obama administration counters that competing provisions of the act provide ambiguity, and that the agency should be given deference from the courts in how to interpret the law.

Premature Case

The three-judge panel tossed that case as premature because the EPA hadn’t completed the rule yet, but the judges sounded sympathetic to Tribe’s reading of the measure during oral arguments. In getting that case dismissed, government lawyer Amanda Shafer Berman told the panel it should wait on the Supreme Court’s decision.

To be sure, a loss at the Supreme Court could still set a bad precedent for any future case over the EPA carbon rule, and might not result in a clear repeal of the mercury rule.

“The rule in the past has been: Ambiguity favors the agency,” said Jody Freeman, a Harvard law professor who has contended that Tribe’s argument is wrong. “If the court changes its mind, it would signal that it is not in an especially deferential mood, which is not a good sign.”

And if the mercury rule is allowed to stay in effect while EPA performs further analysis, it would allow that same legal challenge to a carbon rule, said William Yeatman, a senior fellow at the Competitive Enterprise Institute, a group critical of Obama’s climate plans. And, the fact the rule was once in effect could be enough to allow the legal challenge, he said.

Still, Richard Revesz, a professor at the New York University School of Law, predicts the EPA will prevail in both instances. And he points out one oddity of the legal arguments: If the mercury rule were tossed and the carbon regulation put in place, there’s nothing to prevent the agency from coming back weeks, months or years later and regulating mercury from power plants.

“Everyone agrees that if EPA were to set the 111(d) rule first, it could then issue the 112 rule,” he said.

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