In a 5-4 decision, the Supreme Court ruled today that the Environmental Protection Agency (EPA) misinterpreted the Clean Air Act when it enacted a rule that set limits for mercury, arsenic and acid gases that can be emitted by coal- and oil-fired power plants without taking into account how much it would cost those plants to comply. The rule, which began rolling out at some locations in April 2015, was estimated to cost the industry $9.6 billion annually. 

The majority opinion, written by Justice Scalia, found that the agency should have considered the power industry’s costs associated with its 2011 Mercury and Air Toxic Standards before putting them in place. “EPA strayed well beyond the bounds of reasonable interpretation in concluding that cost is not a factor relevant to the appropriateness of regulating power plants,” Scalia wrote. “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.” Scalia was joined by Chief Justice Roberts, and Justices Thomas, Alito and Kennedy. Justices Kagen, Breyer, Ginsburg and Sotomayor dissented.

In Kagan’s dissenting opinion, she wrote that though the EPA didn’t consider cost in deciding whether to enact the rule, it did consider the costs at multiple times in the approval process:

I agree with the majority—let there be no doubt about this—that EPA’s power plant regulation would be unreasonable if “[t]he Agency gave cost no thought at all.” Ante, at 5 (emphasis in original). But that is just not what happened here. Over more than a decade, EPA took costs into account at multiple stages and through multiple means as it set emissions limits for power plants. And when making its initial “appropriate and necessary” finding, EPA knew it would do exactly that—knew it would thoroughly consider the cost-effectiveness of emissions standards later on. That context matters. The Agency acted well within its authority in declining to consider costs at the opening bell of the regulatory process given that it would do so in every round thereafter—and given that the emissions limits finally issued would depend crucially on those accountings. Indeed, EPA could not have measured costs at the process’s initial stage with any accuracy. And the regulatory path EPA chose parallels the one it has trod in setting emissions limits, at Congress’s explicit direction, for every other source of hazardous air pollutants over two decades. The majority’s decision that EPA cannot take the same approach here—its micromanagement of EPA’s rulemaking, based on little more than the word “appropriate”—runs counter to Congress’s allocation of authority between the Agency and the courts. Because EPA reason- ably found that it was “appropriate” to decline to analyze costs at a single stage of a regulatory proceeding otherwise imbued with cost concerns, I respectfully dissent.

While the SCOTUS ruling in Michigan v. Environmental Protection Agency is a setback that allows plants to halt compliance efforts, it doesn’t mean they won’t be regulated in the future; it just means the EPA must go back to the table and factor the costs into a new version of the rule at the initial stage. “EPA is disappointed that the [c]ourt did not uphold the rule, but this rule was issued more than three years ago, investments have been made and most plants are already well on their way to compliance,” said EPA spokeswoman Melissa Harrison in a statement. “EPA remains committed to ensuring that appropriate standards are in place to protect the public from the significant amount of toxic emissions from coal and oil-fired electric utilities and continue reducing the toxic pollution from these facilities.”