Master Supreme Court held EPA acted unreasonably by refusing to consider costs when deciding whether it was 'appropriate and necessary' to regulate power plants under the Clean Air Act. with this comprehensive case brief.
Michigan v. EPA is a cornerstone case on the role of cost in administrative decision-making. At stake was the Environmental Protection Agency’s authority to regulate hazardous air pollutants from power plants under Section 112 of the Clean Air Act after making a threshold determination that regulation was 'appropriate and necessary.' The Supreme Court held that EPA acted unreasonably in refusing to consider costs at that threshold stage, clarifying that when a statute uses capacious language like 'appropriate,' agencies generally must consider both advantages and disadvantages—including compliance costs—unless Congress clearly indicates otherwise.
For law students, Michigan v. EPA operates at the intersection of administrative law, statutory interpretation, and environmental regulation. It refines Chevron deference by insisting that even when Congress uses broad terms, an agency’s interpretation must be reasonable in light of the statutory text and structure. The decision reinforces the State Farm principle that agencies must consider the important aspects of the problem they are addressing and signals a broader presumption that cost is relevant across regulatory contexts unless expressly barred.
576 U.S. 743 (2015) (U.S. Supreme Court)
In the 1990 Amendments to the Clean Air Act, Congress directed EPA to study the public health hazards of power plant emissions and to regulate those plants under Section 112 only if the Administrator found such regulation 'appropriate and necessary.' See 42 U.S.C. § 7412(n)(1)(A). In 2000, EPA made the 'appropriate and necessary' finding for coal- and oil-fired electric utility steam generating units, and in 2012 it finalized the Mercury and Air Toxics Standards (MATS), establishing stringent Maximum Achievable Control Technology (MACT) limits under § 7412(d). EPA expressly declined to consider costs when making the threshold 'appropriate and necessary' determination, asserting that cost would be addressed later when setting emission standards. The agency estimated annual compliance costs around $9.6 billion, while quantifying direct mercury-specific benefits between roughly $4–6 million annually; EPA also identified large co-benefits from reductions in particulate matter (tens of billions of dollars), but those were not part of the initial threshold decision. A coalition of states (including Michigan) and industry petitioners challenged the rule. The D.C. Circuit upheld EPA’s interpretation, deferring under Chevron. The Supreme Court granted certiorari and reversed, holding that EPA unreasonably refused to consider costs at the threshold 'appropriate and necessary' stage.
Does the Clean Air Act permit EPA to deem regulation of power plants 'appropriate and necessary' under § 7412(n)(1)(A) without considering the costs of such regulation at the threshold decision to regulate?
When a statute commands an agency to decide whether regulation is 'appropriate' (and does not expressly bar consideration of cost), the agency must consider costs—including the cost of compliance—at least to some meaningful degree in making that determination. An agency’s refusal to consider costs where the statute makes them relevant is unreasonable under Chevron and arbitrary-and-capricious review under the Administrative Procedure Act.
No. EPA acted unreasonably by refusing to consider costs when determining that it was 'appropriate and necessary' to regulate power plants under § 7412. The Court reversed and remanded for EPA to consider costs in its threshold determination.
The majority (Justice Scalia) concluded that the term 'appropriate' in § 7412(n)(1)(A) is a broad, common-sense term that naturally encompasses consideration of cost, particularly where regulatory compliance costs are exceptionally high. The Court emphasized that reasoned decision-making requires attention to both advantages and disadvantages of agency action, citing Motor Vehicle Manufacturers Association v. State Farm. Although Congress elsewhere in the Clean Air Act sometimes forbids consideration of cost (e.g., Whitman v. American Trucking interpreting § 109 NAAQS), § 7412(n)(1)(A) contains no such prohibition. Instead, its open-textured 'appropriate and necessary' language invites the agency to consider all relevant factors, including cost. The Court noted the stark disparity between the rule’s annual compliance costs (approximately $9.6 billion) and the quantified direct benefits from mercury reductions (in the millions), using this disparity illustratively to show why cost is an important aspect of the problem at the threshold stage. The Court rejected EPA’s argument that it could ignore costs initially and consider them only later when setting MACT standards under § 7412(d). While the agency retains discretion about how to account for cost, it may not exclude costs entirely from the 'appropriate and necessary' determination. The majority did not require a particular form of cost analysis (such as a formal cost-benefit test) nor did it hold that co-benefits are impermissible; rather, it held that EPA must, at minimum, pay attention to compliance costs when making the threshold decision to regulate. Concurring, Justice Thomas questioned the constitutionality of broad delegations and the propriety of deference, but that view did not control. Justice Kagan’s dissent (joined by Justices Ginsburg, Breyer, and Sotomayor) would have upheld EPA’s approach, reasoning that the statutory scheme allowed consideration of cost downstream and that the agency did, in fact, meaningfully factor costs at later stages. The majority, however, deemed the timing and complete initial disregard of costs unreasonable under Chevron and APA principles.
Michigan v. EPA instructs that, absent a clear statutory bar, cost is a relevant and often required consideration when an agency determines whether regulation is 'appropriate.' The case tightens Chevron’s reasonableness inquiry: even where statutory language is broad or ambiguous, an agency’s interpretation is invalid if it irrationally excludes an important factor like cost. It also reinforces the State Farm duty to consider important aspects of the problem and has influenced subsequent administrative law debates about reasoned decision-making, the role of cost and co-benefits, and the limits of agency discretion in major regulatory programs. Practically, the decision did not immediately vacate MATS; on remand, the D.C. Circuit allowed the standards to remain in place while EPA issued a supplemental finding considering costs. The case remains a key citation for litigants challenging or defending regulations on the ground that an agency either improperly ignored costs or that the statute precludes their consideration.
No. The Court required EPA to consider costs as part of determining whether regulation is 'appropriate,' but it did not mandate a formal cost-benefit analysis or a particular methodology. Agencies retain discretion in how to weigh costs against benefits so long as they reasonably account for costs where the statute makes them relevant.
No. The Court did not decide the permissibility of counting co-benefits. It referenced the disparity between compliance costs and quantified mercury-specific benefits to illustrate why ignoring cost at the threshold was unreasonable. On remand and in later proceedings, EPA and courts have addressed co-benefits more directly, but Michigan v. EPA itself neither forbids nor requires counting them.
The Court applied Chevron’s framework and reasonableness review under the APA. It held that EPA’s interpretation—categorically excluding costs from the 'appropriate and necessary' determination—was unreasonable. The decision also reflects State Farm’s requirement that agencies consider important aspects of the problem.
On remand, EPA issued a supplemental 'appropriate and necessary' finding that considered costs, allowing MATS to remain in effect while the agency justified the rule in light of compliance costs. Subsequent administrations revisited the finding, but the core lesson from Michigan v. EPA—cost must be considered where the statute’s text makes it relevant—remains intact.
Whitman held that the Clean Air Act’s NAAQS provision forbids consideration of cost because its text requires standards 'requisite to protect the public health' with an 'adequate margin of safety.' By contrast, Michigan v. EPA interpreted the different 'appropriate and necessary' language in § 112 to permit and require consideration of cost. Together, the cases show that whether cost is relevant turns on the statute’s text and structure.
Michigan v. EPA establishes a clear principle: when Congress directs an agency to decide whether regulation is 'appropriate,' the agency must at least consider compliance costs unless the statute says otherwise. The decision thus tightens the bounds of Chevron deference and strengthens the APA’s demand for reasoned decision-making by requiring agencies to grapple with economically significant consequences at the threshold.
Beyond environmental law, the case is a staple of administrative law pedagogy, framing how courts read capacious statutory terms and evaluate agency choices about what factors matter and when. It encourages transparent, economically informed rulemaking and provides a template for challenging regulations that ignore an important aspect of the problem—cost—while preserving agency flexibility over the method and timing of cost assessment within statutory limits.