United States: EPA Failure To Consider Costs Results In U.S. Supreme Court Striking Down The Mercury Emissions Rule For Power Plants

The final month of the U.S. Supreme Court's annual term was stacked with high-profile cases on marriage, healthcare, and the death penalty, to name just a few, that are likely to have a ripple effect on legal issues for years to come. Those following the Court's review of the U.S Environmental Protection Agency's (EPA) "Mercury and Air Toxics Standard" (MATS) for power plants may have been expecting an opinion of equal weight. After all, the MATS rule is one of the most significant EPA rules in the last few years, with billions of dollars in investment decisions on the line as well as important public health concerns.

But the Court's June 29 decision in Michigan v. EPA ultimately rested on the fairly narrow, but nevertheless significant, conclusion that EPA's failure to consider the costs of compliance when deciding in the first instance whether it was "appropriate and necessary" to regulate hazardous air pollutants (HAPs) from power plants was contrary to law. The "appropriate and necessary" test is a unique statutory requirement for HAP emissions regulations for power plants, so the decision's applicability to other HAP emissions standards is somewhat limited.

The Court gave no instructions to vacate the MATS rule, however -- it was simply remanded to the D.C. Circuit Court of Appeals, and that court will have to fashion a more specific remedy, which would presumably include a remand to the EPA to address the error identified by the Supreme Court. Given that many utilities have already made investments to comply with the MATS rule, and others are currently subject to compliance plans with 2016 deadlines, the regulated community will be watching closely how the D.C. Circuit addresses the Supreme Court's remand and the timing of any new potential rulemaking. In the meantime, the EPA maintains that power plants must continue to comply with the MATS rule because the Court did not vacate it.

Although the decision was narrow, the three opinions in the case include substantial discussion of the appropriate role of agency deference in judicial decision-making. Other marquee EPA rules, like the recent "Waters of the U.S." rulemaking and the Clean Power Plan regulating greenhouse gas emissions, may eventually find their way to the Supreme Court, and any hint or intimation about how the Court might view those EPA rules is, of course, being heavily scrutinized. Although it can be a bit like reading tea leaves to try to predict how the Court would view those rules, Michigan v. EPA and other recent decisions could signal a shift in how the Court evaluates the weight of agency decisions under the Chevron standard of review, a judicial principle that requires courts to defer to an agency's reasonable interpretation of an ambiguous statute it is charged with administering.

Background on the MATS Rule

In the 1990 Clean Air Act (CAA) amendments, Congress established, among other things, the acid rain program, which directed the EPA to promulgate rules targeting power plant emissions of conventional pollutants, like sulfur dioxide (SO2) and nitrogen oxide (NOx). Congress also established certain limitations on emissions of HAPs from various sources, but for power plants Congress ordered the EPA to study how other CAA programs, like the acid rain program, affected power plant HAP emissions. If after the EPA's "study of the hazards to public health reasonably anticipated to occur" from power plant HAP emissions the agency found that "regulation [was] appropriate and necessary," then the statute says the EPA "shall" regulate power plants. 42 U.S.C. § 7412(n)(1)(A) (emphasis added). In a 2012 rulemaking, the agency determined that regulating power plants was "appropriate" due to human health risks from mercury and that emission controls were available. The EPA also found additional regulation was "necessary" because existing CAA regulations did not eliminate these risks. 77 Fed. Reg. 9363 (Feb. 6, 2012). While the EPA issued a Regulatory Impact Analysis with the Final Rule, it did not consider costs of compliance (e.g., pollution controls) when deciding whether to regulate power plants under 42 U.S.C. § 7412 in the first place. 77 Fed. Reg. 9306, 9326.

The Court's Decision in Michigan v. EPA

The majority opinion, authored by Justice Antonin Scalia, centered on the EPA's determination that the "appropriate and necessary" language of the statute did not "compel a consideration of cost" when deciding whether to regulate HAP emissions from power plants. 77 Fed. Reg. 9327. The majority concluded that "EPA strayed far beyond" the bounds of reasonable interpretation of the CAA when it ignored costs, even under the deferential Chevron standard of review. Michigan v. EPA, No. 14−46, slip op. at 6 (2015). Reading "appropriate" as an "all-encompassing term" that includes all factors, including cost, the Supreme Court majority stated that, in light of "established administrative practice," the agency's willingness to "impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits" was entirely inappropriate, if not irrational. Id. at 6−7.

Noting that the statute also required the EPA to consider the cost of technologies to reduce HAP emissions, the Court stated that "Chevron allows agencies to choose among competing reasonable interpretations of a statute; it does not license interpretive gerrymanders under which an agency keeps parts of statutory context it likes while throwing away parts it does not." Id. at 9. Interestingly, the majority hinted that the EPA "could have considered ancillary benefits" (such as cutting PM and SO2 emissions) to make the benefits outweigh the costs of regulation, but since the agency did not do so, the Court could not rule on the matter. Id. at 14.

Justice Elena Kagan, writing for the dissent, argued that the majority's invalidation of the rule merely because the EPA did not take cost into account "at the very first stage of the regulatory process" when the agency "later took costs into account again and again" was "a peculiarly blinkered way for a court to assess the lawfulness of an agency's rulemaking." Id. at 2 (Kagan, J., dissenting). Essentially, the dissenting Justices believe that the words "appropriate and necessary" should be analyzed in the context of the entire regulatory process, so it was perfectly acceptable that the EPA only began to consider costs after making the initial decision to regulate HAP emissions from power plants. Id. at 9.

Justice Clarence Thomas' lone concurrence focused exclusively on attacking Chevron deference, which he consistently argues is unconstitutional and violates the separation-of-powers between the branches of government. Id. at 2 (Thomas, J., concurring); see also Perez v. Mortgage Bankers Assn., 575 U. S. ___, ___ (2015) (concurring opinion) (slip op. at 8).

What Does Michigan v. EPA Mean for Future Appeals of Agency Rules?

Despite Justice Thomas' scathing critique of Chevron doctrine, there does not appear to be enough votes on the Court to overturn Chevron deference anytime soon. However, there do appear to be some differences of opinion in how and when Chevron should be applied that will play out in future cases. Courts typically give "considerable weight" to an agency's "construction of a statutory scheme it is entrusted to administer." Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844 (1984). So, it is noteworthy that the EPA has recently lost under Chevron review both for its MATS rule and for its attempt to "tailor" regulation of greenhouse gas emissions through the PSD and Title V CAA programs in Utility Air Regulatory Group v. EPA. 134 S. Ct. 2427, 2446 (2014). Further, and perhaps more importantly, Chief Justice John Roberts' decision in the recent Affordable Care Act case, King v. Burwell, side-stepped and refused to apply Chevron deference, while nevertheless upholding the government's interpretation of the healthcare law. No. 14–114, slip op. at 8 (2015). This may reflect some unease on the part of certain members of the Court in how it has granted agency deference in this past. Stay tuned...

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions