This story was updated at 2:30 PM EDT on June 29.
The Supreme Court on Monday blocked the Environmental Protection Agency's tough regulations controlling mercury emissions from coal-fired power plants, sending back to the drawing board a rule that has already led to the closure of many of the industry's oldest and dirtiest plants.
The court's 5-4 ruling was written by Justice Antonin Scalia, generally one of the jurists most hostile to environmental regulations. In it, he said the agency erred in concluding that any consideration of the regulations' costs was irrelevant to its initial decision to limit mercury, a potent neurotoxin.
The ruling demonstrates that the court's more conservative majority is unwilling to give the EPA unfettered discretion in using the Clean Air Act to control industrial pollution, in particular from the combustion of coal.
The case has been closely watched for its implications not only for the fossil fuel industry and people who live downwind from those smokestacks, but also for the broader fight against climate change.
Even though this ruling was a victory for power companies that burn coal and the states that rely heavily on them for electricity, it was not a death blow for the rules on mercury.
What it did was send the case back to the lower court for review. In effect, the rules are still being litigated, as some analysts have said, and remain in force at least until the appeals court acts.
Nor did it necessarily signal a broader counterattack against pending EPA rules governing carbon dioxide, the greenhouse gas that causes climate change.
Instead, by effectively sending the EPA back to the drawing board on one of the most significant of several new rules affecting the use of coal, the high court seemed to leave the coal-power industry hanging.
The court overturned an appeals court that had upheld the mercury rule. Its instructions would require the agency to give some new thought to the costs of controls.
But nobody expects the agency to shrug its shoulders and declare that it's not worth the expense to control mercury pollution. Some states already do so; even Michigan, the named plaintiff here, had once planned to do so, but put its action on hold pending federal rules. And power companies that had already come into compliance with the EPA's standards had argued that it was unfair to let others off the hook, giving laggards a competitive edge.
Nor did this decision flatly forbid the agency, when it publishes a new cost analysis, from justifying the high costs of its rule by citing health benefits that go far beyond those of eliminating mercury pollution, which goes from the air into the water and builds up in plants and animals, including humans.
The health costs of other pollution like smog and soot are easier to quantify; mercury's costs often show up in signs like lower IQ among children whose mothers eat contaminated fish.
Scalia warned the agency that it is not rational "to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits." He added: "No regulation is 'appropriate' if it does significantly more harm than good."
But the merits of controlling pollution are rarely an open and shut case, once indirect costs and benefits are taken into account, as Scalia appears to allow. The agency, after initially deciding to regulate mercury, did conduct a comprehensive analysis of costs and benefits that found controlling mercury creates vastly greater indirect benefits than costs. Scalia's argument that it had neglected to consider costs turned on the fact that this work came later, rather than sooner, in the decision-making process.
Seizing on the EPA's analysis, environmentalists might turn the Scalia formula around, and produce a dictum that no regulation is inappropriate if it does significantly more good than harm.
Even as the court narrowed the deference it gave the agency in interpreting the ins and outs of the clean air law, with possible implications for other cases yet to come, it allowed significant wiggle room in how the agency conducts the additional cost analysis the court demands.
"The Agency must consider cost––including, most importantly, cost of compliance––before deciding whether regulation is appropriate and necessary," the court's majority ruled. "We need not and do not hold that the law unambiguously required the Agency, when making this preliminary estimate, to conduct a formal cost-benefit analysis in which each advantage and disadvantage is assigned a monetary value. It will be up to the agency to decide (as always, within the limits of reasonable interpretation) how to account for cost."
That reexamination, though, could delay further compliance actions by some utilities which had sought extensions to the rule's deadline earlier this year. So it might delay somewhat the closings of some coal plants.
Aside from burdensome regulations, coal-fired utilities are under other pressures, such as competition from cheap natural gas and clean renewable power.
Senator Mitch McConnell of Kentucky, the Republican leader, said the ruling "represents a cutting rebuke to the administration's callous attitude" toward the coal industry. "While much of the damage of this regulation has already been done, the ruling serves as a critical reminder to every governor contemplating the administration's demands to impose more regressive––and likely illegal––regulations."
That was a nod to the Clean Power Plan, the administration's coming rules cracking down on carbon dioxide emissions, which Mr. McConnell has been urging governors to reject.
The American Lung Association, which had taken the EPA's side in the case, called on the agency "to begin immediately to address the issues raised by the Court" so there would be "no further gap in protections."
Some analysts have even suggested that in setting aside the mercury regulation, at least temporarily, the Supreme Court might have undermined the industry's attack on the much more far-reaching carbon dioxide regulations. Frank O'Donnell of Clean Air Watch said the industry has been arguing in court that a source of carbon dioxide can't be regulated under one section of the law if its mercury emissions are regulated under another.
It might be simpler to see this decision mainly as the latest shot across EPA's bow over how expansively it will be allowed to interpret its powers. This question has been batted back and forth in court since the landmark decision that opened the way for the agency to take on greenhouse gases.
"It's hard to know what this ruling accomplished, other than to teach the agency a lesson," said Jonathan Z. Cannon, a University of Virginia law professor who has written a history of the Supreme Court's environmental rulings.