Supreme Court says EPA didn’t adequately weigh costs of MATS policy

In a case watched closely by the electric power industry, the U.S. Supreme Court ruled five-to-four on June 29 that the U.S. Environmental Protection Agency (EPA) failed to adequately consider costs when it issued its Mercury and Toxics Standards (MATS) regulation.

Justice Antonin Scalia drafted the majority opinion for the high court in a series of related cases that included Michigan versus EPA Nos. 14–46, 14–47, and 14–49. Justice Elena Kagan issued a lengthy dissent for the minority.

The Supreme Court heard oral arguments on the matter in March.

The majority opinion held that EPA interpreted the key section of the Clean Air Act unreasonably when it deemed cost irrelevant to the decision to regulate emissions from the power plants.

The petitioners, which included 23 states, had sought review before the U.S. Supreme Court after the D.C. Circuit Court of Appeals had upheld EPA’s refusal to consider costs.

“’ Appropriate and necessary’ is a capacious phrase,” according to the court majority. “Read naturally against the backdrop of established administrative law, this phrase plainly encompasses cost. It is not rational, never mind “appropriate,” to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.”

EPA must consider cost—including cost of compliance—before deciding whether regulation is appropriate and necessary. It will be up to the agency to decide (as always, within the limits of reasonable interpretation) how to account for cost, according to the court opinion.

Scalia was joined in the majority by Chief Justice John Roberts and Justices Clarence Thomas (who issued a concurring opinion), Anthony Kennedy and Samuel Alito.

“Some of the respondents supporting EPA ask us to uphold EPA’s action because the accompanying regulatory impact analysis shows that, once the rule’s ancillary benefits are considered, benefits plainly outweigh costs,” Scalia said in the court opinion. “As we have just explained, however, we may uphold agency action only upon the grounds on which the agency acted,” according to the court majority.

Kagan was joined in the dissent by Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor.

“On the majority’s theory, the rule is invalid because EPA did not explicitly analyze costs at the very first stage of the regulatory process, when making its “appropriate and necessary” finding,” according to the minority dissent.

“And that is so even though EPA later took costs into account again and again and . . . so on. The majority thinks entirely immaterial, and so entirely ignores, all the subsequent times and ways EPA considered costs in deciding what any regulation would look like,” Kagan said in the dissent.

The Supreme Court ruling reverses and remands the D.C. Circuit’s earlier ruling and sends the dispute back to the lower court for further proceedings consistent with the opinion.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.