MATS Ruling Offers Little Reprieve

Why the Supreme Court decision isn't what it seems

There's a brand-new, gleaming gas-fired barbecue in our backyard, acquired and presented to me for Father's Day. After spending nearly four hours assembling the beast, I cooked up some burgers. They turned out great. But you know, they might have been better if only I had used a bag of charcoal. As coal fans know, you get a deeper, smoky flavor, and, for steaks, that crucial seared crust.

On the other hand, I also might have had to deal with uneven heating and been left with a sooty mess to clean up - which helps to explain the rising popularity of gas-fired grills and, perhaps to some degree, the depressed state of affairs in the coal industry.

The much bigger problem for lowly coal, of course, has been that it pollutes our air. The low price nowadays of natural gas doesn't help. 

Pope Francis didn't do coal producers any favors with his environmental encyclical a few weeks back, which, of course, only helped President Obama's climate-change agenda.

All of which helps explain why coal producers were so jubilant a few days back after the Supreme Court ruled 5-4 that the EPA's rule on mercury and acid gases from coal-burning power plants was improperly crafted.

Specifically, the court took issue with the EPA for failing to consider the billions of dollars in compliance costs associated with its 2011 Mercury and Air Toxics Standards rule, or MATS. Writing for the majority, Justice Antonin Scalia said, "The agency gave cost no thought at all, because it considered cost irrelevant to its initial decision to regulate."

Actually, as Justice Elana Kagan pointed out in her dissent, while the EPA did not stop to analyze costs "at the very first stage of the regulatory process, it later took costs into account again and again."

"I agree with the majority ... that EPA's power plant regulation would be unreasonable if `the agency gave cost no thought at all,'" Kagan wrote. "But that is just not what happened here. Over more than a decade, EPA took costs into account at multiple stages and through multiple means as it set emissions limits for power plants."  

In any case, the news saw shares of Peabody Energy Corp., the largest coal supplier in the U.S., climb 9.6 percent. Arch Coal Inc. jumped 4.5 percent and Alpha Natural Resources Inc. gained 8.6 percent.

Yet does anyone really doubt that coal's prospects are dim? 

First, as we all know, dozens of old coal plants have already been closed and utilities have spent billions on scrubbers. More of that is coming.

Secondly, MATS remains in effect, despite the high court's ruling.

The court merely remanded the case to the D.C. Circuit Court - which is the same court that found the EPA acted within its legal mandate in upholding MATS the first time around. My guess is that the lower court won't order the EPA to re-start the process but merely direct it to set things right.

In other words, MATS isn't going away. (By the way, can you just imagine the legal nightmare that would ensue were the EPA to throw in the MATS towel? How many of the utilities that have spent the money in complying with the rule would simply suck it up instead of racing to court in pursuit of some measure of retribution?)

Some people hope the Supreme Court's rebuke will somehow prompt the EPA to rein in its soon-to-be released Clean Power Plan and its costly carbon-dioxide mandates.

They shouldn't hold their breaths. The court's MATS ruling was a middling setback at best, not a serious blow to the president's environmental agenda, as some have suggested. As the EPA itself said, it plans to press ahead with its rulemaking on mercury emissions. And there's not likely to be another Supreme Court intervention.  

To be fair, the EPA doesn't always get things wrong. A few weeks ago, it and the Transportation Department announced draft standards for big rigs that were, in fact, applauded by the American Trucking Associations and others in industry.

"In 2014, trucking spent nearly $150 billion on diesel fuel alone," said Glen Kedzie, a vice president of the ATA. "So the potential for real cost savings and associated environmental benefits of this rule are there."

But in plenty of other instances over the years, the EPA has been guilty of the regulatory overreach that so many complain about.

There's no doubt we will see this again with CPP later this summer, when the EPA is expected to demand more than existing emission-control technology can deliver.

Southern Co., in one of the more strongly worded condemnations of the CPP, calls the coming reg unworkable, saying it would increase electricity prices and jeopardize reliability.

Could Southern be overstated things? Perhaps. But there's no doubt its concerns are valid, and that more legal battles are coming.

The EPA, by the way, did take into account the anticipated cost of the CPP to industry - a minimum of $7.3 billion a year, much of which will be passed along to ratepayers and which, unfortunately, will cut into their burger budget.