The Supreme Court on Monday ruled against the Obama administration’s plans to limit mercury and other toxic emissions from coal-fired power plants on the grounds that the U.S. Environmental Protection Agency (EPA) failed to adequately consider the costs to industry.

In a 5-4 decision, the high court said that while the Clean Air Act authorizes the EPA to regulate power plant emissions if the agency believes such rules are “appropriate and necessary,” the EPA held an unreasonable interpretation of the law when it deemed the costs to industry irrelevant.

“…it was unreasonable for EPA to read [the Clean Air Act] to mean that cost is irrelevant to the initial decision to regulate power plants,” Justice Antonin Scalia wrote for the majority. “The agency must consider cost — including, most importantly, cost of compliance — before deciding whether regulation is appropriate and necessary.

“We need not and do not hold that the law unambiguously required the agency, when making this preliminary estimate, to conduct a formal cost-benefit analysis in which each advantage and disadvantage is assigned a monetary value. It will be up to the agency to decide (as always, within the limits of reasonable interpretation) how to account for cost.”

The Supreme Court’s decision reverses a decision by the U.S. Court of Appeals for the District of Columbia Circuit, and sent the proposed Mercury and Air Toxics Standard (MATS) back to the EPA for further consideration of the costs to industry. The circuit court was also instructed to determine whether MATS should remain in effect while EPA conducts its analysis.

Scalia said environmental groups weighing in on the case have asked the court to uphold EPA’s actions, arguing that ancillary benefits from MATS would outweigh the costs in Michigan et al. v. Environmental Protection Agency et al., No. 14-46). But Scalia said the case revealed the EPA didn’t calculate the benefits. Even if it had, it wouldn’t take them into consideration.

“Even if the agency could have considered ancillary benefits when deciding whether regulation is appropriate and necessary — a point we need not address — it plainly did not do so here,” Scalia wrote. “In the agency’s own words, the administrative record ‘utterly refutes [the] assertion that [ancillary benefits] form the basis for the appropriate and necessary finding.’

“The government concedes, moreover, that ‘EPA did not rely on the [regulatory impact analysis] when deciding to regulate power plants,’ and that ‘[e]ven if EPA had considered costs, it would not necessarily have adopted…the approach set forth in [that analysis].'”

Scalia wrote that EPA’s regulatory impact analysis showed that if MATS were enacted, power plants would have to shoulder an additional $9.6 billion in annual costs. EPA “could not fully quantify” the benefits of compliance, but to the extent that it could it estimated benefits of $4-6 million per year. Ancillary effects boosted the benefits figure to $37-90 billion per year.

Industry backers hailed the decision.

“The sweeping powers asserted by the EPA at issue in today’s opinion could cost billions of dollars and impose unreasonably high costs on American families and businesses without making them any safer,” said Sen. Lisa Murkowski (R-AK). “It is heartening to hear that the court has reined in the EPA, especially on the issue of the costs of regulation. We need balance, and I hope today’s opinion will lead to it.”

Thomas Pyle, president of the American Energy Alliance, said the ruling “is an important step toward reining in the EPA. “For too long, EPA has ignored the costs of its regulations, which have become so large that they not only harm the economy, but also the health and welfare of American families. The Supreme Court made it clear: EPA can no longer ignore the costs of its reckless agenda.”

Environmental groups voiced their disappointment.

“Practically speaking, today’s decision won’t revive the fortunes of Big Coal or slow down our nation’s transition to clean energy,” said Sierra Club’s Mary Anne Hitt, director of the Beyond Coal Campaign. “Most utilities have long since made decisions about how to meet [MATS]. Only a few dozen coal plants are still operating today with no pollution controls for mercury and air toxics and no clear plans to install them.

“…the EPA and the Obama administration must now quickly propose revised safeguards that restore at least the same level of protections.”