EPA Misstates the Costs, Benefits of Its Mercury Rule

Published May 26, 2015

The EPA claims new mercury and air toxic standards (MATS) will result in $24 to $80 billion in net health benefits per year. Others disagree with this assessment, arguing, the EPA dramatically overstates the benefits of the new rule while understating its direct and indirect costs. 

SCOTUS Challenge

The Supreme Court of the United States is being reviewing the EPA’s mercury rule to determine whether the EPA unreasonably refused to consider costs when formulating the rule. The EPA claims the clean air act does not require it to consider costs when regulating hazardous air pollutants, merely health benefits. The U.S. Court of Appeals for the District of Columbia Circuit upheld the mercury and air toxics standards in April 2014, determining the Clean Air Act doesn’t expressly require the agency to consider costs in making a finding on the appropriateness of regulating power plant emissions.

 The Supreme Court agreed to hear an appeal of the District Court’s decision granting certiorari to three separate petitions filed by the Utility Air Regulatory Group, the National Mining Association and 21 states, including Michigan and Texas, in a consolidated case. 

Though the court case does not expressly concern the accuracy of the EPA’s health benefit claims, during oral arguments on March 25, Chief Justice John Roberts lambasted the EPA for inflating the rule’s estimated net benefits, calling the EPA’s public health benefits “illegitimate.” 

Benefits Inflated, Costs Ignored

EPA’s mercury rule requires approximately 600 U.S. power plants to reduce their mercury emissions by approximately 75% starting in 2016. According to the EPA the direct benefits of these mercury reductions will be approximately $6 million per year while the EPA acknowledges the mercury rule will be its most expensive rule ever—approximately $9.6 billion dollars per year.

The EPA doesn’t limit its analysis of the benefits to the reduction in mercury emissions. Rather, according to the EPA, the vast majority of the benefits come from “co-benefits,” the health benefits associated with reducing other ancillary pollutants, such as carbon-dioxide and particulate matter (PM) in the process of reducing mercury. 

EPA estimates reduced carbon-dioxide emissions resulting from its mercury rule will produce $360 million per year in “social welfare” benefits. The bulk of the health benefits from the rule will come from reduced PM emissions, producing an estimated $33 to $90 billion in annual public health benefits. 

Chief Justice John Roberts called 90 percent of the EPA’s estimated benefit calculations “illegitimate,” since the EPA had previously determined it had established levels protective of public health for particulate matter in earlier rules setting power plant PM emission limits. 

If one discounts the EPA’s estimated benefits by 90 percent, one is left with less with between $3.4 and $9.7 billion in benefits, meaning the benefits of the rule outweigh the costs.

Outside analysts say the balance sheet is even worse since the EPA only accounted for the direct costs to power plants of meeting the rule, not the impact on the wider economy as a whole. 

NERA Economic Consulting, analyzed the rule and estimated its ancillary or indirect costs will top $16 billion per year. If this estimate is correct, combined with the EPA’s $9.6 billion estimate of annual direct costs, the total of the rule would exceed $25.6 billion per year. 

Steve Van Dyke, vice president of Communications, Lignite Energy Council argues the EPA ignored tremendous gains states have already made in protecting air quality when it formulated its mercury rule. “The Mercury Rule is poorly crafted and takes money out of ratepayers’ pockets, when the State has already demonstrated it is best able to protect its own environment,” said Van Dyke. “States make better energy policy, have more respect for the environment and actually care about ratepayers, in contrast to those who wrote the misguided Mercury rule. 

In a Forbes.com article, Brian Pott, a partner with the international law firm of Foley and Lardner, LLP, argues while there may be some benefits from the rule, the EPA is overstating these in order to impose unjustified costs on the wider economy. “It may be the case that mercury emissions have acute health effects on some marginalized populations. And it may be good public policy to issue this rule—despite all its costs—to protect those people,” said Potts. “If that’s the rationale for issuing the rule, fine. But EPA, don’t play with the numbers and try to make the rule something it’s not—namely, a boon for the economy.”

Consequential Court Decision.

According to Bloomberg BNA news on November 25, Jeffrey Holmstead, a partner at Bracewell & Giuliani LLP who represents the power industry, said while the Supreme Court agreed to consider a relatively narrow issue, the issue of considering cost “goes to the heart” of the mercury and air toxics standards.

“If the Supreme Court overturns the EPA’s finding that it was appropriate and necessary to regulate these sources under Section 112, then that really completely eliminates the EPA’s authority to do the MATS rule,” Holmstead says.

Bette Grande ([email protected]) is a Heartland Institute research fellow and former North Dakota state legislator.

INTERNET INFO

Oral Arguments in Supreme Court case concerning EPA Mercury Rules, 3/25/15; https://www.heartland.org/policy-documents/transcript-supreme-court-arguments-concerning-epa-mercury-rule

Anne E. Smith, et. al, An Economic Impact Analysis of EPA’s Mercury and Air Toxics Standards Rule, NERA Economic Consulting, March 1, 2012; https://www.heartland.org/policy-documents/economic-impact-analysis-epas-mercury-and-air-toxics-standards-rule