The U.S. Supreme Court on June 29 overturned the Obama administration’s landmark air quality rule, ruling the Environmental Protection Agency did not properly consider the costs of the regulation.

In a 5-4 ruling, the justices ruled that the EPA should have taken into account the costs to utilities and others in the power sector before deciding whether to set limits for the air pollutants it regulated in 2011.

By a 5-4 vote, the U.S. Supreme Court overturned an EPA rule on emissions.By a 5-4 vote, the U.S. Supreme Court overturned an EPA rule on emissions.The case, Michigan v. EPA, centers on the EPA’s first limits on mercury, arsenic and acid gases emitted by coal-fired power plants, known as mercury and air toxics (MATS). Opponents, including the National Federation of Independent Business, say it's among the costliest regulations ever issued.

The EPA estimated its rule, which took effect for some plants in April, would cost $9.6 billion, produce between $37 billion and $90 billion in benefits and prevent up to 11,000 premature deaths and 130,000 asthma cases annually.

But the agency concluded that its regulatory impact analysis should have “no bearing on” the determination of whether regulations are appropriate, as set forth in the Clean Air Act.

In the majority ruling, Justice Antonin Scalia finds that the EPA “unreasonably” interpreted the Clean Air Act when it decided not to consider industry compliance costs and whether regulating the pollutants is “appropriate and necessary.”

While the agency is afforded a certain level of power to interpret the law, the court writes, “EPA strayed well beyond the bounds of reasonable interpretation in concluding that cost is not a factor relevant to the appropriateness of regulating power plants.”

Chief Justice John Roberts and Justices Clarence Thomas, Samuel Alito and Anthony Kennedy joined Scalia in overturning the rule. Justices Elena Kagan, Sonia Sotomayor, Stephen Breyer and Ruth Bader Ginsburg sided with the EPA.

Writing for the minority, Kagan says the EPA properly considered costs at a later stage in the regulation, something that it has done in other rules and that the courts have allowed.

“The majority’s decision that EPA cannot take the same approach here — its micromanagement of EPA’s rulemaking, based on little more than the word ‘appropriate’ — runs counter to Congress’s allocation of authority between the Agency and the courts,” she writes.

The EPA says it is reviewing the decision and will decide any next steps — including re-doing the regulation — once that process is complete.

“EPA is disappointed that the Court did not uphold the rule, but this rule was issued more than three years ago, investments have been made and most plants are already well on their way to compliance,” EPA spokeswoman Melissa Harrison is quoted as saying in a statement.

She says the agency “remains committed to ensuring that appropriate standards are in place to protect the public from the significant amount of toxic emissions from coal and oil-fired electric utilities and continue reducing the toxic pollution from these facilities.”

Because the ruling only concerns the cost-benefit analysis, the EPA can try writing the rule again if it considers costs.

Many power plant operators have already complied with the rule by shutting down coal-fired power plants, retrofitting them or making firm plans to comply.

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