Supreme Court Decides Michigan v. Environmental Protection Agency

On June 29, 2015, the United States Supreme Court decided Michigan v. Environmental Protection Agency, No. 14-46, and two other consolidated cases, holding that the Environmental Protection Agency (EPA) acted unreasonably, and hence unlawfully, when it refused to take cost into account in deciding whether to regulate hazardous air pollutants emitted by power plants under the Clean Air Act, 42 U.S.C. §7412.

Under the Clean Air Act, EPA may regulate emissions of hazardous air pollutants by power plants only after deciding whether such regulations are “appropriate and necessary.” In 2000 and again in 2012, EPA determined that regulating power plants was “appropriate” because the emission of hazardous air pollutants jeopardizes public health and the environment, and “necessary” because no other Clean Air Act provisions adequately addressed those risks. EPA expressly concluded that costs should not be considered in making this determination. Petitioners, including 23 States, challenged EPA’s refusal to consider the cost of regulation. The D.C. Circuit upheld EPA’s decision. 

In a 5-4 decision, the Supreme Court reversed and held that EPA must consider cost, including the cost of compliance, in the initial decision to regulate hazardous air pollutants from power plants. The Court rejected EPA’s contention that the Clean Air Act’s “appropriate and necessary” language does not require consideration of costs, reasoning that “[n]o regulation is ‘appropriate’ if it does significantly more harm than good.” The Court held that “EPA strayed far beyond” the bounds of reasonable interpretation of the Clean Air Act in failing to consider costs as an initial matter, and therefore the agency’s interpretation did not deserve deference under Chevron U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 387 (1984). The Court acknowledged that there “are undoubtedly settings in which the phrase ‘appropriate and necessary’ does not encompass cost,” but said “this is not one of them” because agencies “have long treated cost as a centrally relevant factor when deciding whether to regulate.” The Clean Air Act’s use of the phrase “appropriate and necessary” thus requires EPA to consider costs: “One would not say that it is even rational, never mind ‘appropriate,’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.”

Justice Scalia delivered the opinion of the Court, in which Chief Justice Roberts and Justices Kennedy, Thomas, and Alito joined. Justice Thomas wrote a concurring opinion. Justice Kagan wrote a dissenting opinion, joined by Justices Ginsburg, Breyer, and Sotomayor.