Supreme Court Rejects EPA Mercury Rule For Power Plants And Raises Questions About Judicial Deference To Future EPA Rules

On June 29, 2015, the U.S. Supreme Court issued its opinion in Michigan v. EPA, which may have serious implications for the Environmental Protection Agency's ("EPA") ability to regulate hazardous air pollutant emissions from power facilities going forward. 576 U.S. ___ (June 29, 2015). In a 5-4 decision, the Court invalidated EPA regulations setting limits on mercury, arsenic, and acid gas emissions from coal-fired power plants (the "MATS Rule" or "Rule") by determining that EPA should have considered the compliance costs imposed on utilities at the first stage of the Agency's regulatory analysis. The Court's opinion is a solid endorsement of the need for agencies to engage in a cost-benefit analysis in deciding whether to regulate. The opinion is also another example of the Court's gradual shift away from paying broad deference to EPA decisions.

The Clean Air Act authorizes EPA to regulate emissions of hazardous air pollutants from certain stationary sources, such as power plants, refineries, and factories under 42 U.S.C. § 7412. EPA may regulate fossil-fuel-fired power plants only if the Agency first "perform[s] a study of the hazards to public health reasonably anticipated to occur as a result of emissions by [power plants] of [hazardous air pollutants] after imposition of the requirements" imposed by law. 42 U.S.C. § 7412(n)(1)(A). If EPA "finds ... regulation is appropriate and necessary after considering the results of the study," it "shall regulate [power plants] under" § 7412. Id.

For the MATS Rule at issue in this case, EPA completed the study required by statute in 1998, 65 Fed. Reg. 79,826 (Dec. 20, 2000), and concluded that regulation of coal- and oil-fired power plants was "appropriate and necessary" in 2000, id. at 79,830. EPA reaffirmed its "appropriate and necessary" finding in 2012 but did not consider costs as part of that statutory analysis. 77 Fed. Reg. 9,326 (Feb. 16, 2012). EPA issued a "Regulatory Impact Analysis" with the new regulation and estimated that the regulation would impose $9.6 billion per year in costs on power plants to implement its requirements. At the same time, the Agency issued a vague estimation of potential benefits from the regulation, which it estimated at $4 million to $6 million per year. Industry groups and more than 20 states sought review of the Rule in the D.C. Circuit, by challenging EPA's refusal to consider costs in its required "appropriate and necessary" analysis. The appellate court...