Summary: The recent decision by the U.S. Supreme Court in  Michigan v. EPA  is a shift for this historically Clean Air Act-friendly Court. It is the first “anti-environmental” decision in the CAA realm since their 2007 Massachusetts v. EPA  ruling. Here, the Court concluded that EPA must consider compliance costs when determining  whether to  regulate toxic emissions from power plants, rather than consider the cost when determining  how to  regulate emissions. The consequences of which may be felt as the Obama Administration unveils the final version of the environmentally ambitious Clean Power Plan.

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Ashton H. Roberts

Annually, late June and July bring with them not only the heat of summer but also a plethora of influential U.S. Supreme Court (Court) opinions and this term was no different. The Court has a history of groundbreaking decisions in the realm of environmental law and the lesser-publicized Michigan v. Environmental Protection Agency (EPA) is one for the Clean Air Act (CAA) record books. The issue in the case, put simply, is whether EPA should consider compliance costs when determining anti-pollution power plant regulations. The answer is “yes,” but the application is not so simple.

An understanding of the history of this regulation is essential to grasp the gravity of the Court’s decision in this case; EPA’s regulation of toxic chemicals has been a long time coming—forty-one years to be exact. Since the Clean Air Act was enacted in 1970, EPA has been directed to regulate the emission of toxic chemicals by coal and oil fired power plants but had neglected to do so. Congress got involved in 1990 when they issued amendments to the CAA, which created a list of toxic chemicals that needed regulating and also ordered EPA to conduct a study to determine whether and how to regulate toxic emissions from power plants. That study was then intended to inform the EPA administrator’s decision to “regulate electric utility steam generating units [power plants] under this section [ § 112 ], if the Administrator finds such regulation appropriate and necessary after considering the results of the study…” In 2000, EPA determined, from the study released in 1998, that it was “appropriate and necessary” to regulate toxic emissions from power plants. In 2005, EPA, under President George W. Bush, reversed the “appropriate and necessary” finding, but the U.S. Court of Appeal for the D.C. Circuit vacated the decision, saying EPA’s attempt to reverse its finding was unlawful. Then, in 2011 the Obama Administration confirmed the 2000 findings and EPA issued the ” Mercury and Air Toxics or MATS rule ,” the regulation at issue in the Michigan case. This regulation, forty-one years after the CAA was enacted, was EPA’s first attempt to regulate power plant emissions of toxic chemicals under § 112 of the CAA.

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The MATS rule applies to the nation’s large network of coal and oil fired power plants; this includes the more than fifty percent of them that were built before the Clean Air Act was even passed in 1970. In the United States power plants are the primary emitters of mercury, acid gases, and numerous toxic metals and about 40% of them do not have advanced emissions controls. The rules would regulate the emission of many toxic pollutants including mercury, arsenic, benzene, and hydrochloric acid; power plants are the largest stationary emitters of these pollutants in the U.S. Mercury is especially hazardous; it causes birth defects in utero, causes major harm to the brain, kidneys, nervous system, and liver. But, the MATS regulations would reduce mercury emissions by about ninety percent. EPA estimated that by 2016 the rule would save up to 11,000 lives due to premature deaths and provide up to $90 billion in health benefits associated with meeting the new standards for air toxics. A lot was at stake for EPA when this case went before the Court on March 25, 2015.

The question before the court focused on EPA’s decision to exclude cost considerations associated with regulating emissions despite the phrase “appropriate and necessary” in § 112 of the CAA. In June, Justice Scalia delivered the opinion of the Court, which used the traditional two-step Chevron doctrine which asks two questions: first, “is the phrase at issue ‘unambiguous'”; and second, “is the agency’s interpretation of the disputed phrase is a reasonable one?” The Court determined first that the phrase “appropriate and necessary” was ambiguous and thus progressed to issue two, whether it was reasonable for EPA to exclude the consideration of cost when interpreting “appropriate and necessary.” The 5-4 majority decided that it was not reasonable to exclude cost; EPA should have used cost as a determining factor when regulating power plant toxic emissions, not solely when determining how to regulate the emissions. The opinion continues discussion of the “appropriate and necessary” standard as it relates to reasonableness and focuses on the context of the statute itself, which suggests that cost should be included.

Ironically, EPA did conduct a cost-benefit analysis of the toxics air rules when evaluating the standards it adopted. The agency concluded that, “the benefits of the MATS [program] are substantial and far outweigh the costs. Employmeed that nt impacts associated with the final rule are estimated to be small.” The costs to industry were estimated at $9.6 billion, where the benefits were found to be between $33 and $90 billion. However many of these benefits, termed co-benefits, were not directly attributable to reductions in the toxics actually being regulated, they come from reduction of other pollutants due to the installation of control technology. Thus, Justice Scalia was dismissive of these co-benefits, setting them aside and showing that in contrast to the previously stated $33 to $90 billion in benefits there were only $4 to $6 million in benefits expected. The Court did follow up saying EPA need not conduct a “formal cost-benefit analysis in which each advantage and disadvantage is assigned a monetary value. It will be up to the Agency to decide, (as always, within the limits of reasonable interpretation how to account for cost.” It seems that the agency will be given deference in how it accounts for cost in deciding whether toxic emissions regulations for power plants are “appropriate and necessary.”

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Interestingly, Michigan is the first anti-environmental ruling that the Court has decided in the four CAA cases that they have considered since the landmark decision in Massachusetts v. EPA in 2007 and a contrast to Justice Scalia’s opinion in Whitman v. American Trucking , where the Court held that EPA could not consider cost when setting air quality standards for ozone and particulate matter. While EPA must consider cost moving forward in regulations surrounding the limit on the emission of mercury or hazardous pollutants, almost 70% of power plants have already complied with MATS and the decision did not let those power plants that have not complied off the hook. The Court did not strike down the regulation; rather it sent the case back to the D.C. Circuit Court of Appeals for review where the court must determine whether to keep the emissions standards in effect while EPA takes cost into consideration.

When the U.S. Supreme Court’s decision came down in June environmentalists, industry, and government officials alike began speculating about Michigan ‘s affect on the Obama Administration’s Clean Power Plan. Industry representatives claim Michigan was a warning to EPA to reconsider the Plan because the decisions demonstrated the unwillingness of the Court to defer to EPA when regulating coal fired power plants. But, environmentalists disagreed noting that the narrow decision would have no bearing on the Plan, which arises under a different section of the CAA than MATS. Today, August 3, 2015, EPA issued a notice submitting the Clean Power Plan for publication in the Federal Register. It seems the ruling in Michigan did not deter EPA, because the final rule is slightly stronger than the drafted proposal from last summer and is President Obama’s most ambitious climate policy to date. The Clean Power Plan will be a rule to watch in the next months and maybe Michigan will come into play. Until then, EPA will be re-evaluating costs in MATS.

Ashton Roberts is a 3L at Vermont Law School, working towards her Juris Doctor, Masters of Environmental Law and Policy degree, General Practice Certificate, and Criminal Law Certificate. Prior to law school, she attended Virginia Tech where she earned a B.S. in Environmental Policy and Planning. She is a managing editor on the Vermont Journal of Environmental Law. Ms. Roberts is currently a law clerk at Our Children’s Trust in Eugene, Oregon, working on atmospheric trust litigation.

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