By Sabrina Katz

On June 29, 2015, in a 5-4 ruling, the Supreme Court struck down the EPA’s regulation of mercury emissions from coal and oil power plants.  The decision was based on the EPA’s failure to consider the potential costs of a rule in making its initial decision to regulate the contaminant.  The EPA decided to regulate mercury after the results of its 1998 health study showed that mercury emissions at the current levels posed a substantial risk to public health.  The EPA also believed that a future regulation of mercury would be technologically feasible and that the best, most cost-efficient way of regulating the contaminant would be determined during the rulemaking process. 

The decision essentially came down to whether the EPA correctly interpreted 42 USC 7412 (n)(1)(A), which instructs the EPA to make the decision whether or not a regulation was “appropriate and necessary” based on a study of the hazards to public health that contaminants like mercury pose.  The text in question reads: "The Administrator shall regulate electric utility steam generating units under this section, if the Administrator finds such regulation is appropriate and necessary after considering the results of the study required by this subparagraph."  At this stage, the EPA considered the results of the study but not the potential costs to industry in deciding to regulate mercury emissions, believing that the law did not require the consideration of costs at this stage.  The EPA did consider costs at a later point in the rulemaking process, but it did not see any explicit or implied statutory reason that costs should be considered in the first stage of the process.

The opinion of the court, written by Justice Scalia, was that cost is an implied factor in determining whether regulation is "appropriate and necessary"; therefore, the EPA’s failure to consider costs before deciding to regulate violated this statute.  However, in the dissenting opinion, Justice Kagan argues that cost considerations are not necessary at this stage: "At the initial stage, EPA must decide whether to regulate a source, based solely on the quantity of pollutants it emits and their health and environmental effects."  Scalia illustrates his point by likening the EPA’s decision to regulate without considering costs to a person who finds it “’appropriate’ to buy a Ferrari without thinking about cost, because he plans to think about cost later when deciding whether to upgrade the sound system”. Kagan, in turn, rejects the analogy of luxury items like a sports car to the regulation of dangerous pollutants.  She instead compares the EPA to “a car owner who decides without first checking prices that it is ‘appropriate and necessary’ to replace her worn-out brake-pads, aware from prior experience that she has ample time to comparison-shop and bring that purchase within her budget”.

This decision has a variety of possible implications for the future of the federal rulemaking process.  Michigan may represent a pull away from the precedent set by Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.  Chevron is often interpreted as giving overwhelming deference to the regulating agency, unless the agency does something that explicitly violates the statute that gives it authority.  The precedent set by Chevron has prompted many courts to give deference to agencies in how regulatory decisions are made and how the rulemaking process is performed.

If courts begin to use the precedent established by Michigan, they will be able to exercise much greater authority over federal regulation through their decisions. The Supreme Court struck down the mercury rule because it inferred that the Clean Air Act implies that the consideration of costs is necessary during the first step in the rulemaking process.  Thus Michigan established precedent that an agency must address unspoken or implied requirements when determining whether or not to make a rule. This precedent may allow future judges to strike down a rule based on his or her particular interpretation of the authorizing statute.

Moreover, the Michigan decision was not based on whether but on when the EPA considered costs in the rulemaking process. This potentially means that judges can now examine each step of the rulemaking process individually as opposed to looking at the process as a whole.  Allowing this could lead to precedent that a rule can be overturned in the courts for not following a specific set of steps or considerations in a specific order.  Since Michigan was based on the EPA’s failure to follow an implied step of the rulemaking process, it suggests that not all mandatory steps of the rulemaking process are enumerated and precedent exists for a judge to rule on how a rulemaking decision should be made.

Michigan also suggests that the courts, not the agencies, have the ability to determine what rules must be made.  One could argue that the vague term “appropriate and necessary” in the Clean Air Act was used to give the EPA the freedom to determine what rules it determined were “appropriate and necessary”.  However, Michigan may allow courts to determine for themselves what rules fit the term based on any number of specific but unspecified factors.  Regulatory agencies by definition are parties given authority to interpret and implement legislation; however, this decision may give the courts the authority to determine the way an agency interprets law and what rules are needed to implement it.

The precedent set by Michigan may give substantial rulemaking authority to the judges reviewing rules.  For agencies, this decision may require them to follow a certain rulemaking process that is more specific and ambiguous than the steps laid out in administrative law.  Agencies must also be careful to simultaneously consider all relevant factors in rulemaking at all points in the process.  It is unclear to what extent the Michigan decision will affect rulemaking and regulatory law for the EPA and other agencies in the years to come.  However, the precedent set in Michigan seems to havethe potential to trump the precedent set by Chevron and transform the role of the judicial branch in the federal rulemaking process. 

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