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The Winds of Change: Cost Consideration in the Clean Air Act in Michigan v. EPA

Tue Jun 30th, On Environmental Law, by

In a 5-4 decision, the Supreme Court yesterday struck down EPA’s decision to regulate power plants under the Clean Air Act. The demise of the regulation is itself significant. Compliance cost was estimated at $9.6B per year and the short rap up period further complicated compliance.   More far reaching than that though is the basis for the holding.   EPA can regulate power plants under the CAA only if the “regulation is appropriate and necessary.” With such a loose standard and the interpretative deference typically afforded agencies under Chevron, one might have expected EPA to have an easy time of it. EPA read that phrase to render cost irrelevant, then proceeded to prove it by promulgating a regulation with an estimated $9.6B in costs for a public benefit of “$4 to $5 million a year” as far as hazardous air pollutants were concerned. Put differently, “[t]he costs to power plants were thus between 1,600 and 2,400 times as great as the quantifiable benefits from reduced emissions of hazardous air pollutants.” States challenged, teeing up a showdown on the outer bounds of Chevron deference.

In reversing, the Court held that “[r]ead naturally in the present context, the phrase ‘appropriate and necessary’ requires at least some attention to cost.” But EPA had disclaimed considering any harm, not just monetary costs. There is an obvious tension between that and the Whitman v. American Trucking Assns., Inc. Clean Air Act jurisprudence. There, the Supreme Court did not allow consideration of costs when levels where to be set “to protect the public health” and with “adequate margin of safety.” The Court distinguished by holding the “appropriate and necessary” mandate “a far more comprehensive criterion[.]”

The decision is arguably limited and one of process. The clause at issue applied to power plants, not CAA regulations generally.   Even then, the Court did not require a formal “cost-benefit analysis,” only that EPA consider cost in some defensible way. Nevertheless, the decision may raise the profile of costs as a consideration of regulation under the CAA and environmental statutes more generally. No doubt Justice Scalia’s retort that “[i]t 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,” will find a home in many briefs challenging EPA regulations.

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