By Lisa Soronen

The U.S. Supreme Court can’t seem to avoid deciding one big-impact environmental case a term—and this term was no exception.

In Michigan v. EPA the Supreme Court held 5-4 that the Environmental Protection Agency (EPA) acted unreasonably in failing to consider cost when deciding whether regulating mercury emissions from power plants is “appropriate and necessary.” Twenty-three states challenged the regulations.

The Clean Air Act requires the EPA to regulate air pollution from stationary sources based on how much pollution the source emits. But EPA may only regulate emissions from fossil-fuel-fired power plants if it finds that regulation is “appropriate and necessary.”

EPA found it “appropriate” to regulate mercury emissions because they pose a risk to human health and the environment and controls are available to reduce them. EPA found it “necessary” to regulate mercury emissions because other requirements in the act did not eliminate these risks.

EPA did not consider costs when determining whether power plants should be regulated. It did estimate that the regulations would cost about $10 billion per year, that benefits would be from $4 million to $6 million per year, and that ancillary benefits—from cutting emissions of particulate matter and sulfur dioxide—would equal from $37 billion to $90 billion per year.

Per Chevron v. Natural Resource Defense Council (1984) courts accept an agency’s reasonable interpretation of an ambiguous statute.

The majority of the court, in an opinion written by Justice Antonin Scalia, concluded the EPA’s interpretation of “appropriate and necessary” to exclude costs wasn’t reasonable.

“Agencies have long treated cost as a centrally relevant factor when deciding whether to regulate. Consideration of cost reflects the understanding that reasonable regulation ordinarily requires paying attention to the advantages and the disadvantages of agency decisions. It also reflects the reality that ‘too much wasteful expenditure devoted to one problem may well mean considerably fewer resources available to deal effectively with other (perhaps more serious) problems.’ ”  

The court also rejected EPA’s argument it need not consider costs when deciding whether to regulate power plants because it can consider costs when deciding how much to regulate them. That costs may be relevant at a later stage does not mean they are irrelevant at this stage: “By EPA’s logic, someone could decide whether it is ‘appropriate’ to buy a Ferrari without thinking about cost, because he plans to think about cost later when deciding whether to upgrade the sound system.”

The court’s opinion leaves many unanswered questions, including how the EPA may account for costs and whether the EPA may consider the ancillary benefits in the cost-benefit analysis.

Lisa Heinzerling attempts to answer these questions and more on the American Constitution Society’s blog.

Lisa Soronen is the executive director of the State and Local Legal Center and writes frequently for the NCSL blog about the U.S. Supreme Court.