Vermont Law Top 10 Environmental Watch List 2016

Michigan v. EPA

The Michigan v. EPA decision is significant for the development of environmental law.

In Michigan v. EPA, the Supreme Court’s major environmental decision of 2015, the court struck down an Environmental Protection Agency regulation intended to control emissions of mercury and other hazardous air pollutants from coal- and oil-fired power plants. The court ruled that the agency erred by failing to consider industry’s costs of compliance in deciding, at the outset of the regulatory process, whether to develop the regulation. In the short term, the decision will likely cause only a small hiccup in the EPA’s progress toward regulating these emissions. Over the longer term, however, the case is a significant recognition of the importance of costs in environmental standard-setting, and illustrates the growing skepticism of some justices about whether it is appropriate—or even constitutional—for the judiciary to defer to agencies’ interpretations of federal statutes.

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The litigation arose from a set of mind-numbingly complicated provisions of the Clean Air Act (CAA). In 1990, Congress adopted amendments to the CAA creating a new program designed to control air pollution from power plants. Hedging its bets, Congress included language in the amendments directing the EPA to study how effective this new initiative was in controlling so-called “hazardous” air pollutants from power plants. If the EPA determined based on the study that it was “necessary and appropriate” to do more to control hazardous pollutants from power plants, the agency was charged with developing further regulations under the auspices of the EPA’s separate hazardous air pollution program.

The EPA completed the study called for by Congress and determined that further regulatory restrictions on power plants were both “appropriate and necessary.” It said they were appropriate because mercury and other hazardous pollutants pose a serious risk to human health and the environment, and technology is available to control these emissions; they were necessary because the primary air pollution program targeting power plants had not solved the toxic pollution problem. The EPA did not explicitly consider industry’s costs of compliance at this stage of the administrative process. Thereafter, following a set of fits and starts (including two changes in presidential administrations and much litigation), the Obama administration’s EPA issued a final regulation for hazardous emissions from power plants. The EPA’s regulatory impact analysis concluded that the final regulation would force power plants to bear costs of $9.6 billion per year but produce quantifiable direct and indirect benefits of $37 to $90 billion per year.

The issue before the Supreme Court was whether the EPA erred in failing to consider the costs of compliance at the outset of the regulatory process in deciding whether it was “necessary and appropriate” to develop the regulations. On that issue, in a decision issued June 29, 2015, the court split 5 to 4. Justice Antonin Scalia wrote the opinion for the majority joined by Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas, and Samuel Alito. While recognizing that the statute was ambiguous, Justice Scalia said it was “unreasonable” for the EPA to read the word “appropriate” as not requiring the agency to consider costs, among other relevant factors, in deciding whether to regulate. Accordingly, the court struck down the regulation and sent it back to the agency for further work.

Justice Elena Kagan, joined by Justices Ruth Bader Ginsburg, Stephen Breyer, and Sonya Sotomayor, dissented. Justice Kagan conceded that it was sensible for the EPA to consider costs at some stage in the course of developing the regulation. But she argued that it was “appropriate” for EPA to consider only health effects and technological issues in deciding the initial question of whether to develop a regulation, and to defer consideration of costs to the later stage when the EPA actually formulated the regulation. Without a specific proposed regulation to analyze, she argued, it was impossible to conduct meaningful assessment of potential costs.

The debate between the Supreme Court majority and the dissenters ultimately came down to a dispute over how much to defer to the EPA’s reading of the Clean Air Act in light of the court’s landmark 1984 decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council, which requires courts to defer to an agency’s reasonable interpretation of an ambiguous statute. Justice Scalia said the agency “strayed far beyond” the bounds of a “reasonable interpretation” of the statute. By contrast, Justice Kagan argued that the EPA acted “well within its authority in declining to consider costs” at the initial stage of deciding whether to regulate.

The decision is significant for the development of environmental law for at least two reasons. First, the decision elevates the importance of costs in environmental standard setting, perhaps to the point of creating a virtual presumption that costs must be considered. For decades environmental lawyers and policymakers have debated whether compliance costs should be considered in setting rules to protect public health and the environment. In Michigan v. EPA every justice accepted the idea that costs should be taken into account at some stage of the process of developing this Clean Air Act rule.

Second, the decision appears to signal potential erosion of the Chevron doctrine. Echoing other recent expressions of skepticism from some justices about Chevron’s deference mandate, Justice Scalia, while nominally following the command of Chevron, appears to have applied the precedent narrowly. More pointedly, Justice Thomas, in a concurring opinion, raised the question of whether the Chevron doctrine violates the constitutional separation of powers principle by forcing judges to abandon their responsibility to “say what the law is.” Because so much environmental law involves questions of statutory interpretation, the weakening or potential overthrow of Chevron could have profound implications for environmental law. It is hard to say whether this move would help or harm the cause of environmental protection given that in Chevron itself the court’s stance of deference led it to reject an environmental group’s challenge to an EPA decision not to adopt stricter Clean Air Act rules.

In the meantime, the Michigan v. EPA decision likely will not cause much if any delay in the implementation of the new hazardous pollution rules for power plants. The EPA has already calculated the costs and benefits of controlling these pollutants, and to comply with the court’s mandate the agency simply needs to go back and incorporate these calculations into a revised assessment of whether it is “appropriate” to regulate. The only open question is whether the new regulation—which many power plant operators are now working hard to comply with—can remain in effect while the EPA revises its analysis, an issue currently pending before the U.S. Court of Appeals for the District of Columbia Circuit.