(Adds timing of Supreme Court ruling in seventh paragraph.)
Dec. 10 (Bloomberg) -- U.S. Supreme Court justices hinted they might revive one of President Barack Obama’s biggest air- quality efforts, a rule that would curb emissions from coal- fired power plants in 28 states.
In a 90-minute argument session today featuring analogies to last-second shots in close basketball games, the justices questioned contentions made by challengers to the Environmental Protection Agency rule, which targets air pollution that crosses state lines.
The rule -- struck down by a lower court and being tested by power companies, states and miners -- has never taken effect. It would force companies including Texas’s largest power producer, Energy Future Holdings Corp.’s Luminant, to either shutter old plants or invest billions of dollars in pollution- control technology. The administration says the rule would prevent as many as 34,000 premature deaths a year.
The rule would use a modified cap-and-trade system to limit emissions of sulfur dioxide and nitrogen oxide in 28 states whose pollution blows into neighboring jurisdictions. All are in the eastern two-thirds of the country. A cap-and-trade system would create a limited number of pollution permits that companies could trade or sell.
The court’s four Democratic appointees, at times joined by Chief Justice John Roberts and Justice Anthony Kennedy, suggested that the EPA had adhered to the language of the Clean Air Act.
“If EPA had taken a different view, it would have been contrary to the statute,” Roberts said.
Justice Samuel Alito isn’t taking part in the case, meaning the administration must persuade five of the other eight justices to revive the rule. A 4-4 split would leave intact the lower court ruling voiding the regulation. The court will rule by July.
The argument is one of two court clashes in Washington today that will determine the future of Obama’s environmental agenda. Judges at a federal appeals court less than a mile away are considering a challenge to separate EPA standards on mercury and acid gases from power plants.
That same federal appeals court rejected the cross-state pollution rule last year. The court ordered the agency to continue to enforce a 2005 measure known as the Clean Air Interstate Rule until a viable replacement to the cross-state regulation can be issued -- a process the Obama administration has said could take years.
Attorneys general from 14 states, led by Texas, are challenging the rule alongside Luminant, Entergy Corp., Edison International, Peabody Energy Corp., Southern Co. and the United Mine Workers of America.
The companies say the EPA improperly focused on the cost of emission reductions, rather than basing its rule solely on the amount of pollutants created in each state.
“What this means is that states here which are making only a very slight contribution to air-quality problems in downwind states are nonetheless required to make very substantial reductions,” said Peter Keisler, a lawyer representing the companies and miners.
That argument drew resistance from several justices, including Sonia Sotomayor, who said it would be “crazy” for the agency not to consider cost. Justice Elena Kagan said the agency was focusing on “states that have lots of cheap and dirty emissions.”
The EPA rule aims to implement what is known as the “good neighbor” provision of the Clean Air Act. That requires states to cut emissions that “contribute significantly” to pollution in another state.
A government lawyer, Malcolm Stewart, today used a basketball analogy to argue that the EPA should be able to focus on the emissions that can be eliminated at the lowest cost. He said a coach asked to explain a close loss would point to a missed easy shot, rather than a half-court shot at the final buzzer.
“If you’re talking about significant contributions to a bad result,” Stewart said, then you’d more likely focus “on errors that could and should have been avoided, not simply the failure to accomplish something that’s extraordinarily difficult.”
Roberts later said he thought the analogy was “pretty good.”
The states argue that the EPA didn’t give them a chance to put in place their own pollution-reduction plans before imposing a nationwide standard. Texas Solicitor General Jonathan Mitchell said states were being asked to come up with plans without knowing how much pollution they had to eliminate.
States “can only guess at how EPA will quantify their good-neighbor obligations,” Mitchell argued.
Roberts, who probed both sides, suggested sympathy for that predicament.
“There’s no possible way for a state to know how much burden you expect them to address,” Roberts told Stewart. Later, Roberts said that, while the states’ task is “certainly hard,” it was dictated by the Clean Air Act.
The states also say the EPA is requiring some upwind states to reduce pollutants that the agency has found are so minimal they don’t contribute to unhealthy air.
The lower court decision was a reprieve for coal-dependent power generators facing the combined threats of increasing federal regulation and low natural-gas prices.
The EPA rule targets sulfur dioxide, which can lead to acid rain and soot harmful to humans and ecosystems, and nitrogen oxide, a component of ground-level ozone and a main ingredient of smog. Coal accounts for 98 percent of sulfur dioxide and 92 percent of nitrogen oxide released into the air by power plants, according to the EPA.
The appeals court case over the EPA’s mercury rule puts the litigants on the opposite side of the cost question. Opponents of the EPA standard, including Peabody Energy and Texas, argued to a three-judge panel that the agency didn’t appropriately consider cost in crafting the rule. The opponents also say the agency used a muddled process to determine allowable levels of mercury in plant emissions.
Judges Merrick Garland and Judith Rogers said the agency is entitled to use discretion to craft rules under the Clean Air Act. Garland told Lee Zeugin, an attorney for an industry group challenging the mercury standard, that he wouldn’t win by arguing that there was a “better” way to read the statute.
“When lawyers say ‘better’ they lose,” Garland said. He said the question for judges is “Is the agency’s choice permissible?”
Judge Brett Kavanaugh said the rule might mean “the bankruptcy of part of the industry.” He said the mercury rule’s benefits “may be worth the cost” and it “seems weird” that the EPA didn’t try to determine the cost earlier.
A cost-benefit analysis by the White House budget office found that the health benefits from lower mercury levels far outweighed costs, said Sean Donahue, an Environmental Defense Fund lawyer who argued in support of the EPA rule.
The Supreme Court cases are U.S. Environmental Protection Agency v. EME Homer City Generation, 12-1182, and American Lung Association v. EME Homer City, 12-1183. The appeals court case is White Stallion Energy Ctr. LLC v. EPA No. 12-1100, U.S. Court of Appeals for the District of Columbia Circuit.
--With assistance from Andrew Zajac in Washington. Editors: Laurie Asseo, Mark McQuillan