In a 5-4 decision, the Supreme Court ruled the EPA was unreasonable when it did not consider costs when it decided to regulate mercury emissions from power plants. The Court, in an opinion by Justice Scalia, held that the EPA must consider costs, including compliance costs, when deciding whether a regulation is appropriate and necessary.
The EPA had decided to regulate under the authority of §7412 if the Clean Air Act. This section grants the EPA the authority to regulate emissions of hazardous air pollutants from certain stationary sources. The EPA may regulate power plants under the program only if it finds doing so to be “appropriate and necessary” and studying the hazards.
While determining whether to regulate mercury from power plants, the EPA determined that the regulation would cost power plants around $9.6 billion a year. The EPA quantified the benefits of reducing mercury emissions to add up to $4-6 million a year. Now at this point most sane individuals would realize that the costs outweigh the benefits and drop the attempt to regulate.
However, the folks at the EPA are not normal individuals. The EPA gathered the costs and benefits of the program but then chose to totally ignore that information. They argued the mercury regulations were “appropriate” because emissions pose risks to the public health and environment. The regulations were “necessary” because other regulations under the Clean Air Act did not eliminate those risks.
In his opinion, Justice Scalia tore these arguments to shred.
The Court reviewed the agency’s action using the Chevron standard. This test, which applies to an agency’s interpretation of law, has two parts. The first asks whether the authorizing statute is ambiguous. If the statute is ambiguous, the agency’s interpretation is given deference if reasonable. Unfortunately, this standard has really become a one part test since nearly every law now passed by Congress is ambiguous.
Despite the broad deference given to agencies under the Chevron standard, which is often even called Chevron deference, the Court ruled that the EPA had moved beyond reasonableness.
While the Court agreed that the term “appropriate and necessary” is capacious, it found that the words clearly include costs. The Court ruled that the rulemaking was not appropriate, nor was it rational, to impose billions in costs to save millions.
The Court quickly dismissed two other arguments of the EPA. First, it ruled that other provisions that specifically mention costs does not mean that the EPA cannot consider costs, it just shows that costs are a relevant factor. Second, the Court ruled that although the EPA could consider costs at a later time, when actually implementing the rules, that does not make costs irrelevant at this earlier stage.
The EPA tried to exceed its authority under the Clean Air Act by not considering costs as a factor of appropriateness. Rather than give excessive deference to the government, the Court properly slapped down this overreach.