Michigan v. Environmental Protection Agency
576 U. S. ____ (2015) (2015)
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Rule of Law:
When a statute authorizes an agency to regulate if it finds regulation to be "appropriate and necessary," the agency must consider the costs of regulation at the threshold stage of its decision-making process, as a failure to do so is an unreasonable interpretation of the statute.
Facts:
- In the Clean Air Act Amendments of 1990, Congress created a program to regulate stationary-source emissions of hazardous air pollutants.
- While most sources were regulated based on emissions volume, Congress established a unique procedure for fossil-fuel-fired power plants.
- The Act directed the Environmental Protection Agency (EPA) to first study the public health hazards from power plant emissions that remained after other requirements of the Act were imposed.
- Under § 7412(n)(1)(A), the statute provided that if the EPA "finds such regulation is appropriate and necessary after considering the results of the study," it shall regulate power plants.
- The EPA completed its study and in 2000, found regulation of power plants to be "appropriate and necessary," concluding that costs should not be considered in making this initial determination.
- In 2012, the EPA reaffirmed its finding and promulgated a final rule subjecting power plants to regulation.
- The EPA's own Regulatory Impact Analysis, which the agency conceded played no role in its finding, estimated the annual compliance costs of the regulation for power plants to be $9.6 billion.
- The same analysis estimated the quantifiable annual benefits from the reduction of hazardous air pollutants to be worth $4 to $6 million.
Procedural Posture:
- The EPA issued a final rule regulating hazardous air pollutants from power plants.
- A group of 23 states and other private parties (Petitioners) sought review of the EPA's rule in the U.S. Court of Appeals for the D.C. Circuit.
- The Court of Appeals for the D.C. Circuit upheld the EPA's regulation, finding that the agency was not required to consider costs when making its initial 'appropriate and necessary' finding.
- The Petitioners filed a petition for a writ of certiorari, which the U.S. Supreme Court granted.
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Issue:
Does the Environmental Protection Agency's decision to refuse to consider costs when determining whether it is 'appropriate and necessary' to regulate hazardous air pollutants from power plants under § 7412(n)(1)(A) of the Clean Air Act represent a permissible interpretation of the statute?
Opinions:
Majority - Justice Scalia
No. The EPA's interpretation of the Clean Air Act was unreasonable because it is not 'appropriate' to impose billions of dollars in economic costs in return for a few million dollars in health or environmental benefits without at least considering that disparity. The term 'appropriate' is a broad, all-encompassing term that naturally includes consideration of all relevant factors, and cost is a centrally relevant factor in agency decision-making. The statutory context, including a related provision that explicitly requires studying the 'costs of such technologies,' further indicates that Congress was concerned with cost. The EPA's argument that it can consider cost at later stages of the regulatory process is unpersuasive; the initial decision to regulate triggers the imposition of mandatory, expensive 'floor standards' regardless of later cost considerations. Therefore, the EPA strayed far beyond the bounds of reasonable interpretation when it read the statute to mean it could ignore cost when deciding whether to regulate power plants.
Concurring - Justice Thomas
This case raises serious questions about the constitutionality of the Court's practice of deferring to agency interpretations under Chevron v. Natural Resources Defense Council, Inc. Such deference transfers the judicial power to 'say what the law is' from the courts to the Executive Branch, in tension with Article III. Furthermore, when an agency fills a statutory ambiguity with its own policy judgments, it is engaging in rulemaking that is functionally a legislative act, which is in tension with Article I's vesting of legislative power in Congress. The EPA's claim that the broad term 'appropriate' allows it to decide which policy goals to pursue exemplifies this potentially unconstitutional delegation of power.
Dissenting - Justice Kagan
Yes. The EPA's interpretation was reasonable because the 'appropriate and necessary' finding is merely the first step in a multi-stage regulatory process that is infused with cost considerations. The majority's view is improperly 'blinkered' by focusing only on the threshold finding while ignoring that the EPA considered costs extensively when setting floor standards, creating subcategories for different types of plants, offering compliance flexibilities, and deciding against more stringent standards. The EPA reasonably chose to structure its rulemaking by assessing health harms first and deferring cost analysis until later stages when costs could be more accurately calculated. This approach is consistent with how the EPA regulates every other source of hazardous air pollutants, and the final cost-benefit analysis showed the regulation's benefits far outweighed its costs.
Analysis:
This decision represents a significant check on the interpretive authority of administrative agencies, even under the deferential Chevron framework. It reinforces the principle that an agency must engage in 'reasoned decision-making' by considering all important aspects of a problem, which for a regulation with massive economic impact, necessarily includes cost. The ruling suggests a lower tolerance for agency interpretations of broad statutory terms that lead to economically significant outcomes without clear congressional authorization, prefiguring the later formalization of the 'major questions doctrine.' Consequently, agencies are now more likely to conduct some form of cost analysis at the outset of the regulatory process, rather than deferring it, to avoid having their rules invalidated for failing to consider a crucial factor.
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