## Facts

- The Clean Air Act required EPA to study hazardous air pollutant emissions from fossil-fuel-fired power plants and to regulate them under §112 only if the Administrator found regulation “appropriate and necessary” after considering the study’s results.
- In 2000, EPA made an “appropriate and necessary” finding and listed coal- and oil-fired power plants under §112.
- After an attempted delisting, EPA in 2012 reaffirmed the “appropriate and necessary” finding and issued the Mercury and Air Toxics Standards (MATS).
- EPA estimated annual compliance costs of about $9.6 billion and quantified direct hazardous-air-pollutant benefits of about $4–6 million annually, while also identifying large non-HAP co-benefits from reductions in other pollutants.
- States and industry groups challenged MATS, arguing EPA unlawfully treated cost as irrelevant when making the threshold “appropriate and necessary” finding.
- The D.C. Circuit denied the petitions and upheld EPA’s approach; the Supreme Court granted certiorari on whether EPA unreasonably refused to consider cost at the threshold stage.

## Issues

1. Whether EPA acted unreasonably under the Administrative Procedure Act in interpreting §112(n)(1)(A) to allow it to deem cost irrelevant to the “appropriate and necessary” finding.
2. Whether, even assuming Chevron deference applies, EPA’s no-cost interpretation of “appropriate and necessary” is a permissible construction of the statute.
3. Whether EPA may postpone cost consideration to later standard-setting steps rather than account for it when deciding whether to regulate power plants under §112 at all.

## Decision

- The Supreme Court reversed and remanded in a 5–4 decision.
- The Court held EPA’s interpretation was unreasonable because it refused to consider cost when making the initial “appropriate and necessary” finding.
- The Court concluded that “appropriate” is broad enough to require consideration of compliance costs at the threshold decision whether to regulate.
- The Court rejected EPA’s argument that later cost consideration in setting standards could make cost irrelevant to the earlier “appropriate and necessary” determination.
- The Court did not require any particular cost methodology and left EPA discretion on remand to determine how to account for cost within the bounds of reasonable interpretation.

## Legal Principles

- Agency action must reflect reasoned decisionmaking and consideration of relevant factors; ignoring an obviously relevant factor can be unreasonable under the APA.
- When a statute conditions regulation on a judgment that action is “appropriate,” the agency generally must take account of cost unless the statutory context clearly excludes it.
- Chevron deference does not protect an agency interpretation that falls outside the range of reasonable statutory constructions.
- An agency cannot justify refusing to consider cost at a threshold regulatory decision merely by pointing to opportunities to consider cost at later implementation stages.

## Conclusion

The Court held that EPA’s threshold decision to regulate power plants for hazardous air pollutants under the Clean Air Act must include consideration of cost, and it vacated the contrary judgment and remanded for further proceedings consistent with that requirement.


Michigan v. Environmental Protection Agency, 576 U.S. 743 (2015)