Federal administrative agencies are required to engage in “reasoned decisionmaking.” Not only must an agency’s decreed result be within the scope of its lawful authority, but the process by which it reaches that result must be logical and rational. It follows that agency action is lawful only if it rests on a consideration of the relevant factors.
The Clean Air Act directs the Environmental Protection Agency to regulate emissions of hazardous air pollutants from certain stationary sources (such as refineries and factories). The Agency may regulate power plants under this program only if it concludes that “regulation is appropriate and necessary” after studying hazards to public health posed by power-plant emissions. §7412(n)(1)(A). Here, EPA found power-plant regulation “appropriate” because the plants' emissions pose risks to public health and the environment and because controls capable of reducing these emissions were available. It found regulation “necessary” because the imposition of other Clean Air Act requirements did not eliminate those risks. The Agency refused to consider cost when making its decision. It estimated, however, that the cost of its regulations to power plants would be $9.6 billion a year, but the quantifiable benefits from the resulting reduction in hazardous-air-pollutant emissions would be $4 to $6 million a year. Petitioners (including 23 States) sought review of EPA's rule in the D. C. Circuit, which upheld the Agency's refusal to consider costs in its decision to regulate.
Was it reasonable for EPA to refuse to consider cost while making its finding?
There are undoubtedly settings in which the phrase “appropriate and necessary” does not encompass cost. But this is not one of them. Section 7412(n)(1)(A) directs EPA to determine whether “regulation is appropriate and necessary.” Agencies have long treated cost as a centrally relevant factor when deciding whether to regulate. Consideration of cost reflects the understanding that reasonable regulation ordinarily requires paying attention to the advantages and the disadvantages of agency decisions. It also reflects the reality that “too much wasteful expenditure devoted to one problem may well mean considerably fewer resources available to deal effectively with other (perhaps more serious) problems.” Moreover, Agency action is unlawful if it does not rest “ 'on a consideration of the relevant factors.' ” Motor Vehicle Mfrs. Ass'n of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U.S. 29, 43, 103 S. Ct. 2856, 77 L. Ed. 2d 443. Even under the deferential standard of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694, which directs courts to accept an agency's reasonable resolution of an ambiguity in a statute that the agency administers, id., at 842-843, 104 S. Ct. 2778, 81 L. Ed. 2d 694, 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. Thus, EPA interpreted §7412(n)(1)(A) unreasonably when it deemed cost irrelevant to the decision to regulate power plants.