In a 5-4 ruling, the U.S. Supreme Court today ruled that the EPA acted unreasonably when it refused to consider the cost of implementing its Mercury and Air Toxics Standard (MATS).

The MATS rule, issued in 2012, established emissions limits from power plants for mercury, filterable particulate matter, and hydrogen chloride.  U.S. power plants were required to come into compliance with the MATS rule by April 16 of this year, but 170 coal-fired power plants received a one year extension to either install control technology or shut down.

EPA estimated that it would cost the power industry nearly $9.6 billion per year in compliance costs while providing a pollution reduction benefit of only $4 to $6 million per year.  However, EPA said that Section 112 of the Clean Air Act only required it to consider compliance costs when establishing an appropriate emission level but not when deciding whether to regulate in the first place.

Justice Scalia, writing for the majority, found that the words “appropriate and necessary” under Section 112 required EPA to consider the costs of the regulation at the initial stages and that “EPA must consider cost—including cost of compliance—before deciding whether regulation is appropriate and necessary.”  Justice Scalia further said “Against the backdrop of [] established administrative practice, it is unreasonable to read an instruction to an administrative agency to determine whether ‘regulation is appropriate and necessary’ as an invitation to ignore costs.” Slip opinion pp 7-8.

Justice Scalia wrote that Section 112 requires EPA to consider “all of the relevant factors” and that “agencies must operate within the bounds of reasonable interpretation. EPA strayed far beyond those bounds when it read §7412(n)(1) to mean that it could ignore cost when deciding whether to regulate power plants.”  Slip op. p. 6.

Writing for the minority, Justice Kagan said that Congress had allocated broad authority to EPA to determine whether to regulate an industry and that EPA had properly considered costs at a later stage in the regulation, something EPA has done in other rules.