Environmental -- 2015

Michigan v. EPA   (U.S. Supreme Court)

Consideration of costs in Utility MATS rule

The NAM filed an amicus brief in the Supreme Court supporting a challenge to EPA’s decision not to consider costs in determining whether regulation of hazardous air pollutant (HAP) emissions from electric generating units was appropriate and necessary under Sec. 112 of the Clean Air Act. EPA’s regulation, known as the Utility MATS Rule, will cost more than $9.6 billion annually, according to EPA’s own analysis, and is one of the most expensive regulations ever for power plants. (The NAM’s estimate is $12 billion annually). These costs are passed on to manufacturers and other consumers of electricity, and could endanger the reliability of electricity.

We argued that the regulatory record compiled by EPA reflects little or no public health benefit from the reduction in HAP emissions. A federal appeals court ruled that EPA was allowed to refuse to consider the costs of the rule, despite a statutory requirement that the regulation be “appropriate.” Our brief argues that a rulemaking procedure that does not consider the rule’s substantial cost burden on the regulated community violates the express and intended meaning of this statute, particularly because energy regulation affects all sectors of society and the economy. “A determination of whether regulation is ‘appropriate’ inherently involves a balancing of costs and benefits,” we argued.

We also argued that the regulation is not necessary because other EPA regulations already impose restrictions on hazardous air pollutants, and EPA improperly tried to justify its new HAP regulation by touting the potential for reduction in emissions not regulated under the HAP rules, namely further reductions in particulate matter emissions that EPA would be unable to require directly.

On 6/29/15, by a vote of 5 to 4, the Court rejected EPA's failure to consider costs when determining whether the regulation was "appropriate and necessary." Even though EPA is entitled to considerable deference in its rulemaking powers under the Chevron case, the Court found that the agency's interpretation was not reasonable or even rational. According to the majority, "an agency may not 'entirely fai[l] to consider an important aspect of the problem' when deciding whether regulation is appropriate." The phrase is very broad, and a natural reading of it requires some attention to cost. Considering costs avoids the problem of spending too much on one problem and not having enough to spend on other -- perhaps more serious -- problems. The majority also rejected EPA's argument that it could consider costs when deciding how much to regulate power plants, rather than as a threshold issue in deciding whether to regulate them. The statute requires cost considerations at the first step. But it left it to EPA to decide how to account for cost in making its initial determination, without requiring "a formal cost-benefit analysis in which each advantage and disadvantage is assigned a monetary value." The Court did not address EPA's claim that the regulation provides ancillary benefits that make it cost-effective.

Related Documents:
Press release  (June 29, 2015)
ShopFloor blog post  (January 28, 2015)
NAM amicus brief  (January 27, 2015)


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