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Michigan v. EPA: What’s Cost Got to Do with It

Yesterday, the Supreme Court heard oral arguments in Michigan v. EPA, a case that will decide whether the EPA properly decided to regulate mercury pollution from power plants. The problem with the regulations is that by the EPA’s own estimates they will cost $9.6 billion annually and have only $4-6 million in direct benefits. The issue before the Court will be whether the EPA must consider costs when deciding to regulate mercury emitted by power plants.

The EPA was granted the authority to determine whether mercury regulations were necessary by the Clean Air Act Amendments of 1990. In part, the Act stated, “The Administrator shall regulate [power plants] under this section, if the Administrator finds such regulation is appropriate and necessary after considering the results of the study required by this subparagraph.” (emphasis my own) The EPA has been working out how to regulate mercury emissions since 2000, although they took a hiatus from 2005-2012 after they determined regulations were not necessary.

The EPA argues that a regulation is both appropriate and necessary, regardless of costs, if they deem the pollution to be potentially hazardous to the public health or environment. The EPA believes it should only consider costs to determine the level of regulation that is proper, not the threshold question of whether there should be regulations at all. They further argue that there are other benefits, beyond the $4-6 million, but they are difficult to quantify.

Plaintiffs argue that costs must be considered from the start to determine whether regulation would be appropriate. They argue that first the EPA should determine whether regulation is necessary based on health and environmental risks. Next, the EPA should determine whether regulation is appropriate based on a cost-benefit analysis. The plaintiffs argue that EPA’s determination that costs do not need to be considered is unreasonable.

During oral arguments two key questions were raised. The first was what exactly is meant by the phrase “necessary and proper.” The plaintiffs argued that the EPA’s reading treats “appropriate” as surplusage and essentially reads the word out of the statute. The plaintiffs further argued that “appropriate” is a broad term and means that the EPA should look at all circumstances, including costs. While the government admitted that “appropriate” does not preclude the EPA from looking at costs, it does not necessitate their inclusion either. Justice Breyer questioned that if “appropriate” does not include costs, what else could the word even include?

The second issue was raised by Justice Alito. He raised the point that Congress has called for mercury regulation from other sources and ordered that only emissions and health risks could be considered, not costs. The fact that Congress differentiated power plants from these other sources shows that Congress wanted the EPA to treat power plants differently. This argument shows that the term “appropriate” meant the EPA should go beyond health and environmental risks and consider other items, such as costs.

Throwing $9.6 billion at a $4-6 million problem is ludicrous. No rational person would pay $1,600 for a good that was worth $1. If the EPA’s interpretation is accepted, it will drive coal plants out of business and drive up electricity prices for consumers across the country. Further, it creates a dangerous precedent to allow other costly EPA regulations that ignore a careful assessment of both benefits and costs.