The Supreme Court ended its most recent term with a sharp rebuke of the Environmental Protection Agency when it ruled, in a 5-4 decision, that the Agency must consider the costs of regulating mercury before deciding to regulate the pollutant.
So what happens when the EPA refuses to consider costs at the onset of the regulatory process? You get a regulation that looks a lot like the one the Supreme Court just threw out.
The cost-benefit analysis
Under Section 112(n) of the Clean Air Act, the EPA has authority to regulate certain air pollutants, but only if the agency determines that the regulation is “appropriate and necessary.”
According to the Agency’s own analysis, the EPA’s Mercury and Air Toxics Standards (MATS) regulation, which was finalized in 2012, would have cost the economy $9.6 billion per year in exchange for quantifiable health benefits estimated to be between $4 and $6 million per year.
In other words, the costs of implementing this regulation were between 1,600 and 2,400 times as great as the benefits of mercury reduction.
How the EPA responded
And what did the regulators at the EPA do with this cost-benefit analysis? They ignored it.
After deciding that costs are irrelevant in the initial decision to regulate power plants, the EPA used “ancillary benefits” to justify its regulation of mercury. But what they don’t tell you is that the EPA already has separate regulations in place to protect Americans against the pollutants whose reductions were used to sell the MATS rule. This is a perfect example of how the current regulatory process often results in a tangled web of costs and benefits that obscure both the question being asked and its answer.
Writing for the majority, Justice Antonin Scalia explains the illogic of this approach to the regulatory process:
"The government concedes that if the Agency were to find that emissions from power plants do damage to human health, but that the technologies needed to eliminate those emissions do even more damage to human health, it would still deem regulation appropriate."
Clarifying what only bureaucrats could fail to see, Justice Scalia concludes: “No regulation is ‘appropriate’ if it does significantly more harm than good.”
The Supreme Court’s decision, which remanded the regulation back to the lower courts for reconsideration, is an important check on the overbearing federal bureaucracy, but it does not address the structural problems with the modern regulatory state.
The consequences of EPA action
Just look at the damage already done by the EPA’s MATS regulation.
When the Agency finalized the regulation in 2012, electricity companies did not know that it would later be found to be illegal, so they began adjusting their operations – which increased the cost of electricity – to comply with the government’s new rules. Now, three years later, MATS has been rightfully remanded. The EPA is required to take into account the costs of the MATS regulation, but much of its damaging effects are already baked into the cake and will hit ratepayers regardless of the court’s ruling.
To make matters worse, the EPA sees no problem in a regulatory process that forces electricity companies to comply with an illegal regulation. “EPA is disappointed that the Court did not uphold the rule, but this rule was issued more than three years ago, investments have been made and most plants are already well on their way to compliance,” an EPA spokesperson said in a statement.
Unfortunately, this broken process could repeat itself if states begin implementing the EPA’s legally questionable regime to reduce carbon emissions.
The EPA has ignored the law – to nobody’s amazement
The EPA’s flouting of the law is unsurprising. Under the Obama Administration, the EPA has become a politicized agency bent on implementing policies by bureaucratic fiat that Congress has explicitly rejected in the lawmaking process.
One way to reassert congressional authority over the regulatory process is to pass the REINS Act, legislation I have cosponsored in the Senate. The REINS Act would require Congress and the President to affirm major federal rules with an economic impact greater than $100 million, which would deter agencies like the EPA from abusing their statutory authority.
It is difficult to fully comprehend the scope of the regulatory state. Last year alone President Obama’s bureaucrats imposed $181.5 billion in regulatory costs contained within 79,066 pages of regulations. Americans rarely hear about these regulations but they bear the burden of their effects, including artificially inflated costs of electricity, housing and gasoline.
How to fix the regulatory state
To help illuminate the regulatory process, I have introduced the Federal Regulation Reduction, Reform and Budget Act that would require the Office of Management and Budget and the Congressional Budget Office to project federal regulatory costs for five years. Each congressional committee would be allocated a portion of the total regulatory costs. If proposed legislation would exceed a committee’s regulatory allocation, members would be allowed to raise a point of order against the bill.
Particularly disconcerting is the fact that two of last year’s most expensive regulations, the Clean Power Plan and the ozone rule, were also issued by the EPA, the same agency that the Supreme Court just reprimanded. Congress must act to control the regulatory shadow legislature. While the Supreme Court’s rebuke of the EPA should be celebrated, regulatory structural reform is necessary to ensure that we can stop these regulations before they take effect.