Legal Corner

Michigan vs. EPA: A significant first step to ending federal overreach?

Legal Corner

The U.S. Supreme Court handed down several landmark decisions at the end of June 2015, covering a wide range of highly publicized issues such as same-sex marriage and the Affordable Healthcare Act. However, the one opinion issued June 29, 2015, that, for the most part, flew under the radar of mainstream media coverage was Michigan v. Environmental Protection Agency. Of all the opinions that the Court handed down in the final week of June, this decision that limits the ability of federal regulatory agencies to regulate entities without first considering the cost of compliance should perhaps be of the most interest to our county governments.

To provide some background to this case, the Clean Air Act, first passed by the U.S. Congress in 1970 and amended in 1977 and 1990, directs the Environmental Protection Agency (EPA) to regulate the hazardous air emissions from stationary sources such as refineries and factories. As a result of this act, the National Emissions Standards for Hazardous Air Pollutants Program was implemented. Under this program, sources that emit more than 10 tons of a single pollutant or 25 tons of any pollutants combined are called “major sources,” and the EPA is required to regulate them. Alternatively, a source that does not meet that emissions threshold is called an “area source,” and the program requires the EPA to regulate an area source if it “presents a threat of adverse effects to human health or the environment … warranting regulation.”

The Clean Air Act was amended in 1990 to also subject fossil-fuel-fired power plants (“power plants” for short) to various other regulatory requirements, with the expected result being the reduction of power plants’ emission of hazardous air pollutants — but the extent of this expected reduction was unclear. Congress directed the EPA to perform a study of the anticipated hazards to public health from the power plant emissions, and it and directed the EPA to regulate power plants under the Clean Air Act only if it finds the regulations “appropriate and necessary” after considering results of the study.

The EPA completed the study required in 1998, and in 2000 concluded that regulation of coal and oil power plants was “appropriate and necessary.” It reaffirmed this finding in 2012 and implemented what are known as “floor standards,” or minimum emission regulations, for these plants to follow. First, the EPA found the regulation was “appropriate” because the plants’ emission of mercury and other hazardous pollutants posed risks to human health and the environment, and there were controls available to reduce these emissions. Second, it found regulation “necessary” because other programs implemented under the Clean Air Act did not eliminate these risks. Additionally — and a key factor in the outcome of Michigan v. EPA — the EPA determined that “costs should not be considered” when deciding whether these power plants should be regulated under this act.

In its study, the EPA estimated that the cost for power plants to implement these standards would be $9.6 billion per year. While it could not “fully quantify” the benefits of the reduction of hazardous air pollutant emissions, the EPA estimated the benefits to be worth $4 to $6 million per year. Yes, you read that correctly — billion with a “B,” and million with an “M.” That LINDSEY BAILEY is a cost approximately 1,600 to 2,400 times greater than the quantifiable benGeneral Counsel efits of the regulations. In its study, but notably not included in its “appropriate and necessary” finding, the EPA mentioned some ancillary benefits, such as cutting emissions of particulate matter and sulfur dioxide (pollutants not covered by the hazardous-air-pollutants program), increasing the EPA’s estimated benefits of the regulations to $37 to $90 billion per year. The Court is sending a clear message to all federal regulatory agencies that, at least when its regulation must meet the threshold Twenty-three states (including Arkansas) and various utility companies joined as plaintiffs in challenging these regulations in Michigan v. EPA, which of “appropriate and necessary,” the cost of implemen- the D.C. Circuit of Appeals upheld. At the heart of this tation and compliance with their standards borne by appeal was the EPA’s refusal the entities being regulated must be considered before to consider cost when deciding whether to regulate that regulation is permitted. power plants. In its final appeal, the U.S. Supreme Court overturned the lower court’s decision, noting the EPA “gave cost no thought at all, because it considered cost irrelevant to its initial decision to regulate.” The Court went on to state that “agencies must operate within the bounds of reasonable interpretation” when implementing laws, and that the “EPA strayed far beyond those bounds when it read [The Clean Air Act] to mean that it could ignore cost when deciding whether to regulate power plants.” Furthermore, the Court recognized that government agencies have always considered cost in deciding whether certain regulations were appropriate. It noted the “reality that ‘too much wasteful expenditure devoted to one problem may well mean considerably fewer resources to deal effectively with other (perhaps more serious) problems.”’ The EPA presented a handful of reasons to the Court why cost was irrelevant in its decision to regulate — all of which the Court found unpersuasive. The Court finished by stating, “[t]he Agency must consider cost — including, most importantly, cost of compliance — before deciding whether regulation is appropriate and necessary.” This is the sentence of the ruling that should catch the attention of, or even excite, our county government officials — even if power plants seem See “EPA” on Page 61 >>>