Michigan v. Environmental Protection Agency: Court Strikes Down EPA Emissions Rule

In Michigan v. Environmental Protection Agency, 576 U.S. (2015), the U.S. Supreme Court struck down an EPA rule regulating the emissions of mercury and other chemicals from electric power plants.

By a vote of 5-4, the majority held that the EPA interpreted amendments to the Clean Air Act unreasonably when it deemed cost irrelevant to the decision to regulate power plants.

The Clean Air Act authorizes the EPA to regulate the emissions of hazardous air pollutants from refineries, factories, and other similar sources. Power plants are treated separately. The statute specifically stated that the EPA may regulate electric utility steam generating units (EGUs) under this program only if it concludes that “regulation is appropriate and necessary” after studying hazards to public health posed by power-plant emissions.

Under this standard, the EPA found power-plant regulation “appropriate” because the plants’ emissions pose risks to public health and the environment and because controls capable of reducing these emissions were available. It found regulation “necessary” because the imposition of other Clean Air Act requirements did not eliminate those risks. The EPA did not consider cost when making its decision. The agency determined that the cost of its regulations to power plants would be $9.6 billion a year, but also declared that the quantifiable benefits from the resulting reduction in hazardous-air-pollutant emissions would be $4 to $6 million a year.

In 2012, the EPA promulgated its final emission standards. In response, twenty-three states, along with industry and labor groups, filed suit. They challenged the EPA’s interpretation of the “appropriate and necessary” requirement with respect to the regulations. The U.S. Court of Appeals for the D.C. Circuit upheld the EPA’s refusal to consider costs in its decision to regulate.

The majority concluded that the EPA erred in interpreting the “appropriate and necessary” requirement of the Clean Air Act. Justice Antonin Scalia authored the majority opinion, which was joined by Chief Justice John G. Roberts, Jr., Justices Samuel A. Alito, Jr., Anthony M. Kennedy, and Clarence Thomas.

The justices concluded, “Even under the deferential standard of Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, which directs courts to accept an agency’s reasonable resolution of an ambiguity in a statute that the agency administers, id., at 842–843, EPA strayed well beyond the bounds of reasonable interpretation in concluding that cost is not a factor relevant to the appropriateness of regulating power plants.”

The majority further rejected EPA’s arguments that cost is irrelevant to the initial decision to regulate. Justice Scalia explained:

[T]he possibility of considering cost at a later stage, when deciding how much to regulate power plants, does not establish its irrelevance at this stage. And although the Clean Air Act makes cost irrelevant to the initial decision to regulate sources other than power plants, the whole point of having a separate provision for power plants was to treat power plants differently.

Justice Elena Kagan filed a dissenting opinion, which was joined by Justices Stephen G. Breyer, Ruth Bader Ginsburg, and Sonia Sotomayor. Justice Kagan argued that the EPA did not violate its regulatory duty to consider costs by electing to perform its cost-benefit analysis later in the decision-making process. In the dissenters view, courts should “interfere only if the Agency’s way of ordering its regulatory process is unreasonable—i.e., something Congress would never have allowed.”