## Facts

- The Clean Air Act hazardous-air-pollutants program directs EPA to regulate certain sources and includes a special provision for fossil-fuel-fired power plants (EGUs), allowing regulation only if EPA finds it “appropriate and necessary” after a required study.
- In 2000, after completing the utility study, EPA found regulating EGUs under the hazardous-air-pollutants program was “appropriate and necessary.”
- In 2012, EPA reaffirmed that threshold finding and issued the Mercury and Air Toxics Standards (MATS) for EGUs under 42 U.S.C. § 7412.
- At the “appropriate and necessary” stage, EPA treated cost as irrelevant, taking the position that costs could be considered later when setting specific standards.
- States and industry groups challenged the rule, arguing the statute required EPA to consider costs when deciding whether to regulate EGUs at all.
- The D.C. Circuit upheld EPA’s interpretation.
- The Supreme Court granted certiorari, consolidated related petitions, and reviewed the D.C. Circuit’s decision sustaining the rule.

## Issues

1. Whether EPA unreasonably refused to consider costs when determining that regulating EGUs was “appropriate and necessary” under 42 U.S.C. § 7412(n)(1)(A).
2. Whether EPA could lawfully defer consideration of cost until later stages of the rulemaking after deciding to regulate EGUs.

## Decision

- The Court held, 5–4, that EPA acted unreasonably by interpreting “appropriate and necessary” to permit ignoring cost at the threshold decision to regulate EGUs.
- The Court reversed the D.C. Circuit’s judgment and remanded for further proceedings.
- The Court did not require a particular method of cost consideration or a formal cost-benefit analysis, but required that cost not be treated as irrelevant at the threshold stage.
- Justice Thomas concurred in part and in the judgment, questioning the constitutional and structural implications of broad judicial deference to agencies.
- Justice Kagan dissented, concluding EPA’s overall approach reasonably accounted for costs and warranted deference.

## Legal Principles

- Agencies must engage in reasoned decisionmaking and cannot treat an important aspect of a statutory determination—such as cost—as categorically irrelevant when the governing standard naturally calls for its consideration.
- A broadly worded statutory trigger like “appropriate and necessary,” read in context, requires at least some consideration of regulatory costs when deciding whether to regulate.
- Under deferential review of agency statutory interpretations, an agency still must stay within the bounds of reasonable interpretation; an interpretation that excludes cost from the threshold inquiry can be unreasonable even if costs are considered later in setting the level of regulation.

## Conclusion

The Court required EPA to consider cost when deciding whether regulating power plants is “appropriate and necessary” under the Clean Air Act’s hazardous-air-pollutants provisions, holding that EPA’s decision to treat cost as irrelevant at the threshold stage was unreasonable and remanding for further proceedings.


Michigan v. E.P.A., 576 U.S. 743 (2015)