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Michigan v. Environmental Protection Agency

United States Supreme Court

June 29, 2015

MICHIGAN, ET AL., PETITIONERS
v.
ENVIRONMENTAL PROTECTION AGENCY, ET AL.; UTILITY AIR REGULATORY GROUP, PETITIONER
v.
ENVIRONMENTAL PROTECTION AGENCY, ET AL. NATIONAL MINING ASSOCIATION, PETITIONER
v.
ENVIRONMENTAL PROTECTION AGENCY, ET AL

Argued March 25, 2015.

As Corrected July 2, 2015.

Editorial Note:

This opinion is uncorrected and subject to revision before publication in the printed official reporter.

ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT [*]

White Stallion Energy Ctr., LLC v. EPA, 748 F.3d 1222, 409 U.S.App.D.C. 248 (2014)

Reversed and remanded.

SYLLABUS

[135 S.Ct. 2700] [192 L.Ed.2d 678] The Clean Air Act directs the Environmental Protection Agency to regulate [135 S.Ct. 2701] emissions of hazardous air pollutants from certain stationary sources (such as refineries and factories). 42 U.S.C. § 7412. The Agency may regulate power plants under this program only if it concludes that " regulation is appropriate and necessary" after studying hazards to public health posed by power-plant emissions. § 7412(n)(1)(A). Here, EPA found power-plant regulation " appropriate" because the plants' emissions pose risks to public health and the environment and because controls capable of reducing these emissions were available. It found regulation " necessary" because the imposition of other Clean Air Act requirements did not eliminate those risks. The Agency refused to consider cost when making its decision. It estimated, however, that the cost of its regulations to power plants would be $9.6 billion a year, but the quantifiable benefits from the resulting reduction in hazardous-air-pollutant emissions would be $4 to $6 million a year. Petitioners (including 23 States) sought review of EPA's rule in the D. C. Circuit, which upheld the Agency's refusal to consider costs in its decision to regulate.

Held : EPA interpreted § 7412(n)(1)(A) unreasonably when it deemed cost irrelevant to the decision to regulate power plants. Pp. 5-15.

(a) Agency action is unlawful if it does not rest " 'on a consideration of the relevant factors.'" Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443. Even under the deferential standard of Chevron U.S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694, which directs courts to accept an agency's reasonable resolution of an ambiguity in a statute that the agency administers, id., at 842-843, 104 S.Ct. 2778, 81 L.Ed.2d 694, 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. Pp. 5-6.

(b) " Appropriate and necessary" is a capacious phrase. 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. Statutory context supports this reading. Section 7412(n)(1) required the EPA to conduct three studies, including one that reflects concern about cost, see § 7412(n)(1)(B); and the Agency agrees that the term " appropriate and necessary" must be interpreted in light of all three studies. Pp. 6-9.

(c) EPA's counterarguments are unpersuasive. That other Clean Air Act provisions expressly mention cost only shows that § 7412(n)(1)(A)'s [192 L.Ed.2d 679] broad reference to appropriateness encompasses multiple relevant factors, one of which is cost. Similarly, the modest principle of Whitman v. American Trucking Assns., Inc., 531 U.S. 457, 121 S.Ct. 903, 149 L.Ed.2d 1--when the Clean Air Act expressly directs EPA to regulate on the basis of a discrete factor that does not include cost, the Act should not be read as implicitly allowing consideration of cost anyway -- has no bearing on this case. Furthermore, the possibility of considering cost at a later stage, when deciding how much to regulate power plants, does not establish its irrelevance at this stage. And although the Clean Air Act makes cost irrelevant to the initial decision to regulate sources other than power plants, the whole point of having a separate provision for power plants was to [135 S.Ct. 2702] treat power plants differently. Pp. 9-12.

(d) 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. Pp. 12-15.

748 F.3d 1222, 409 U.S.App.D.C. 248, reversed and remanded.

Aaron D. Lindstrom argued the cause for state petitioners.

F. William Brownell argued the cause for industry petitioners and respondents.

Donald B. Verrilli, Jr. argued the cause for federal respondents.

Paul Smith argued the cause for industry respondent.

SCALIA, J., delivered the opinion of the Court, in which ROBERTS, C. J., and KENNEDY, THOMAS, and ALITO, JJ., joined. THOMAS, J., filed a concurring opinion. KAGAN, J., filed a dissenting opinion, in which GINSBURG, BREYER, and SOTOMAYOR, JJ., joined.

OPINION

[135 S.Ct. 2704] SCALIA, JUSTICE.

The Clean Air Act directs the Environmental Protection Agency to regulate emissions of hazardous air pollutants from power plants if the Agency finds regulation " appropriate and necessary." We must decide whether it was reasonable for EPA to refuse to consider cost when making this finding.

I

The Clean Air Act establishes a series of regulatory programs to control air pollution from stationary sources (such as refineries and factories) and moving sources (such as cars and airplanes). 69 Stat. 322, as amended, 42 U.S.C. § § 7401-7671q. One of these is the National Emissions Standards for Hazardous Air Pollutants Program--the hazardous-air-pollutants program, for short. Established in its current form by the Clean Air Act Amendments of 1990, 104 Stat. 2531, this program targets for regulation stationary-source emissions of more than 180 specified " hazardous air pollutants." § 7412(b).

For stationary sources in general, the applicability of the program depends in [135 S.Ct. 2705] part on how much pollution the source emits. A source that emits more than 10 tons of a single pollutant or more than 25 tons of a combination of pollutants per year is called a major source. § 7412(a)(1). EPA is required to regulate all major sources under the program. § 7412(c)(1)-(2). A source whose emissions do not cross the just-mentioned thresholds is called an area source. § 7412(a)(2). The Agency is required to regulate an area source under the program if it " presents a threat of [192 L.Ed.2d 680] adverse effects to human health or the environment . . . warranting regulation." § 7412(c)(3).

At the same time, Congress established a unique procedure to determine the applicability of the program to fossil-fuel-fired power plants. The Act refers to these plants as electric utility steam generating units, but we will simply call them power plants. Quite apart from the hazardous-air-pollutants program, the Clean Air Act Amendments of 1990 subjected power plants to various regulatory requirements. The parties agree that these requirements were expected to have the collateral effect of reducing power plants' emissions of hazardous air pollutants, although the extent of the reduction was unclear. Congress directed the Agency to " perform 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 of this chapter." § 7412(n)(1)(A). If the Agency " finds . . . regulation is appropriate and necessary after considering the results of the study," it " shall regulate [power plants] under [§ 7412]." Ibid. EPA has interpreted the Act to mean that power plants become subject to regulation on the same terms as ordinary major and area sources, see 77 Fed.Reg. 9330 (2012), and we assume without deciding that it was correct to do so.

And what are those terms? EPA must first divide sources covered by the program into categories and subcategories in accordance with statutory criteria. § 7412(c)(1). For each category or subcategory, the Agency must promulgate certain minimum emission regulations, known as floor standards. § 7412(d)(1) (3). The statute generally calibrates the floor standards to reflect the emissions limitations already achieved by the best-performing 12% of sources within the category or subcategory. § 7412(d)(3). In some circumstances, the Agency may also impose more stringent emission regulations, known as beyond-the-floor standards. The statute expressly requires the Agency to consider cost (alongside other specified factors) when imposing beyond-the-floor standards. § 7412(d)(2).

EPA completed the study required by § 7412(n)(1)(A) in 1998, 65 Fed.Reg. 79826 (2000), and concluded that regulation of coal- and oil-fired power plants was " appropriate and necessary" in 2000, id., at 79830. In 2012, it reaffirmed the appropriate-and-necessary finding, divided power plants into subcategories, and promulgated floor standards. The Agency found regulation " appropriate" because (1) power plants' emissions of mercury and other hazardous air pollutants posed risks to human health and the environment and (2) controls were available to reduce these emissions. 77 Fed.Reg. 9363. It found regulation " necessary" because the imposition of the Act's other requirements did not eliminate these risks. Ibid. EPA concluded that " costs should not be considered" when deciding whether power plants should be regulated under § 7412. Id., at 9326.

In accordance with Executive Order, the Agency issued a " Regulatory Impact Analysis" alongside its regulation. This analysis estimated that the regulation would [135 S.Ct. 2706] force power plants to bear costs of $9.6 billion per year. Id., at 9306. The Agency could not fully quantify the benefits of reducing power plants' emissions of hazardous air pollutants; to the extent it could, it estimated that these benefits were worth $4 to $6 million per year. Ibid. [192 L.Ed.2d 681] The 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. The Agency continued that its regulations would have ancillary benefits -- including cutting power plants' emissions of particulate matter and sulfur dioxide, substances that are not covered by the hazardous-air-pollutants program. Although the Agency's appropriate-and-necessary finding did not rest on these ancillary effects, id., at 9320, the regulatory impact analysis took them into account, increasing the Agency's estimate of the quantifiable benefits of its regulation to $37 to $90 billion per year, id., at 9306 . EPA concedes that the regulatory impact analysis " played no role" in its appropriate-and-necessary finding. Brief for Federal Respondents 14.

Petitioners (who include 23 States) sought review of EPA's rule in the Court of Appeals for the D. C. Circuit. As relevant here, they challenged the Agency's refusal to consider cost when deciding whether to regulate power plants. The Court of Appeals upheld the Agency's decision not to consider cost, with Judge Kavanaugh concurring in part and dissenting in part. White Stallion Energy Center, LLC v. EPA, 748 F.3d 1222, 409 U.S.App.D.C. 248 (2014) ( per curiam ). We granted certiorari. 574 U.S. __, 135 S.Ct. 702, 190 L.Ed.2d 434 (2014).

II

Federal administrative agencies are required to engage in " reasoned decisionmaking." Allentown Mack Sales & Service, Inc. v. NLRB, 522 U.S. 359, 374, 118 S.Ct. 818, 139 L.Ed.2d 797 (1998) (internal quotation marks omitted). " Not only must an agency's decreed result be within the scope of its lawful authority, but the process by which it reaches that result must be logical and rational." Ibid. It follows that agency action is lawful only if it rests " on a consideration of the relevant factors." Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983) (internal quotation marks omitted).

EPA's decision to regulate power plants under § 7412 allowed the Agency to reduce power plants' emissions of hazardous air pollutants and thus to improve public health and the environment. But the decision also ultimately cost power plants, according to the Agency's own estimate, nearly $10 billion a year. EPA refused to consider whether the costs of its decision outweighed the benefits. The Agency gave cost no thought at all, because it considered cost irrelevant to its initial decision to regulate.

EPA's disregard of cost rested on its interpretation of § 7412(n)(1)(A), which, to repeat, directs the Agency to regulate power plants if it " finds such regulation is appropriate and necessary." The Agency accepts that it could have interpreted this provision to mean that cost is relevant to the decision to add power plants to the program. Tr. of Oral Arg. 44. But it chose to read the statute to mean that cost makes no difference to the initial decision to regulate. See 76 Fed.Reg. 24988 (2011) (" We further interpret the term 'appropriate' to not allow for the consideration of costs" ); 77 Fed.Reg. 9327 (" Cost does not have to be read into the definition of 'appropriate'" ).

We review this interpretation under the standard set out in Chevron [192 L.Ed.2d 682] U.S. A. [135 S.Ct. 2707] Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Chevron directs courts to accept an agency's reasonable resolution of an ambiguity in a statute that the agency administers. Id., at 842-843, 104 S.Ct. 2778, 81 L.Ed.2d 694. Even under this deferential standard, however, " agencies must operate within the bounds of reasonable interpretation. " Utility Air Regulatory Group v. EPA, 573 U.S. __, __, 134 S.Ct. 2427, 189 L.Ed.2d 372, 392 (2014) (internal quotation marks ...


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