Petitioners Brief — NATIONAL COTTON COUNCIL OF AMERICA v. RAYMOND J. DONOVAN (Nos. 79-1583, 79-1429)

No. 79-1583

(Consolidated with No. 79-1429) “> >"

IN THE

Supreme Court of the United States

OcTOBER TERM, 1980

NATIONAL CoTTON CouNciL OF AMERICA,

Petitioner,

Ti

Ray MARSHALL, SECRETARY OF LaABor,

UNITED STATES DEPARTMENT OF Lasor, et. al.,

Respondents.

On a Writ of Certiorari to the United States Court of Appeals

for the District of Columbia Circuit

BRIEF FOR PETITIONER,

NATIONAL COTTON COUNCIL OF AMERICA

CHARLES M. Crump

APPERSON, CRUMP, DUZANE

& MAXWELL

2610 - 100 North Main Building

Memphis, TN 38103

901/525-1711

Counsel of Record for

Petitioner, National Cotton

Council of America

JosePH A. Moss

4143 27th Street, N.

Arlington, VA 22207

703/525-4063

Counsel for Petitioner,

National Cotton Council

of America

St. Louis Law Printing Co., Inc., 411 No. Tenth Street 63101 314-231-4477

QUESTIONS PRESENTED FOR REVIEW

1. Does substantial evidence in the record as a whole support

OSHA’s determination that the Occupational Safety and

Health Standard promulgated as 29 C.F.R. § 1910.1043 (the

*‘Standard’’) is economically feasible?

2. Does the Occupational Safety and Health Act require

OSHA te demonstrate that a standard is reasonably necessary

and that its benefits bear a reasonable relationship to its costs?

PARTIES IN COURT BELOW

Petitioners

American Federation of Labor & Congress of Industrial

Organiations

Industrial Union Department, AFL-CIO

Amalgamated Clothing and Textile Workers Union, AFL-CIO

National Cotton Council of America

The National Cottonseed Products Association

The Cotton Warehouse Association

The American Cotton Shippers Association

ii

American Textile Manufacturers Institute, Inc.'

Milliken & Company

Arkwright Mills

Spartan Mills

Blair Mills, Inc.

Hermitage, Inc.

Dan River, Inc.

Cone Mills Corporation

Mayfair Mills

Springs Mills, Inc.

Riegel Textile Corporation

Fieldcrest Mills, Inc.

West Point-Pepperell, Inc.

Respondent

Ray Marshall, Secretary of Labor, United States Department of

Labor

' ATMI and the listed textile mills, Petitioners in No. 79-1429, are

hereinafter referred to as the ‘‘Textile Petitioners.”’

ill

TABLE OF CONTENTS

Page

Questions Presented for Review............... ered i

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SUMIBGRGOME CIPOUMED og woke ccc ccceccviscces 2

lh sia wae kwunesbes 2

Supplemental Statement of the Case ................. 2

A. The Occupational Safety and Health Act .... 3

B. Petitioner, National Cotton Council of

America, and the American Cotton Industry . 3

eR a 4

IY OP III ii ca vs wens dad cdveacveedccs 5

I i ee ee 8

I. The Cost Estimate On Which The Court Of

Appeals Affirmed OSHA’s Economic

Feasibility Determination Is Not Supported

By Substantial Evidence In The Record As A

CN ae eS Cuke hee ks outdhae ck is 8

A. The evidence of record shows the Stand-

ard’s compliance cost to be three to five

times greater than OSHA claims ....... 8

iV

B. The court of appeals did not carefully

consider the economic feasibility

evidence of the record in keeping with

the standard of review which is prescribed

gay Ere Cea For cee

C. OSHA’s economic feasibility determina-

tion ignored the conclusion of its own

contractor, that the Standard would

severely impact the American cotton in-

NE vbk-0 3 veh Manes tien bane

D. OSHA misconstrued the findings of its

contractor in making its economic

feasibility determination..............

E. OSHA’s economic feasibility determina-

tion did not consider the cost conse-

quences to other cotton industry sectors

of imposing the Standard on textile

mills, nor was the impact of the Stand-

ard on the rest of American agriculture

CE 6 ¥k0 90534000000

II. OSHA Must First Determine That The

Benefits Expected From Its Standard Bear A

Reasonable Relationship To The Cost Of

Complying With It, Else A Valid Showing

Cannot Be Made That The Standard Is

Reasonably Necessary ............ccecee0:

RE so v.w Ki cas wewew Red CLE uence cade a

10

15

19

21

TABLE OF AUTHORITIES

Cases

American Federation of Labor, Etc. v. Marshall, 617

a 1,5,7,10,25

American Petroleum Institute v. OSHA, 581 F.2d 493

ES 25

Burlington Truck Lines v. United States, 371 U.S. 156

ES EE 11

Chem-Haulers, Inc. v. ICC, 565 F.2d 728 (D.C. Cir.

EE SE 11

FPC v. Texaco, Inc., 417 U.S. 380 (1974)............. 1]

Industrial Union Department, AFL-CIO v. American

Petroleum Institute, 100 Sup.Ct. 2844 (ae 2,5,25

SEC v. Chenery Corp., 332 U.S. 194 EL s 6's od c's'a 1]

Statutes

ccc c cue ccnccceccce, 2

ESS 2

ESN EL 3,A-1

rr 3,6,15,A-1

vi

Regulations

se I 5k hiss i,2

PE ee PO 55 8g oa Ce As 5

SPE id cee Piva teataei oboe ]

PT Ca oak kee EKER IS ena eS 13

I I 65k FUNG 5 aa nd dak ees 8

I a abs bk hiie nade Widede box ole che 12

ee EE S's o'n4. on aw Abad naveval tite awecaus 12,13,14

TW PN POPS. 6 oS lend Gis bade vndwekeiicndde 11,14

PI EIA 6.0 kk sob id och caekcue epee 19

SP Wes III itd rsa bhawn Cockn es ck eee tasoas 25

43 Fed. Reg. 27380, Tables 1 and2 .................. 9

OF FN ES head kk 6 os hor ge eb cab cccd a chit 5

TP PU HOS ie ccc tlbdomantd val. dkueceseei. 13

PP a. 66 68 ik skew eed vd Cio nudans 10

ore en eae l

OF Ce I: MOE in as 6 dev bd edi da diekeeccus ]

Ta PU. TU Oe is dlc oi Shi eenisnel ]

No. 79-1583

(Consolidated with No. 79-1429)

IN THE

Supreme Court of the United States

OCTOBER TERM, 1980

NATIONAL COTTON COUNCIL OF AMERICA,

Petitioner,

Vv.

RAY MARSHALL, SECRETARY OF LABOR,

UNITED STATES DEPARTMENT OF LABor, ef. ai.,

Respondents.

On a Writ of Certiorari to the United States Court of Appeals

for the District of Columbia Circuit

BRIEF FOR PETITIONER,

NATIONAL COTTON COUNCIL OF AMERICA

OPINIONS BELOW

The opinion of the court of appeals is reported at 617 F.2d

636 (D.C. Cir. 1979) (Pet.App. 19-102).? The Occupational

Safety and Health Standard at issue (Pet. App. 1-18) and the

preamble which the Secretary of Labor issued with the Standard

were filed on June 19, 1978 and are reported at 43 Fed. Reg.

27350-99 (June 23, 1978), as amended at 43 Fed. Reg. 28473-74

(June 30, 1978), and 43 Fed. Reg. 35032-35 (August 8, 1978),

and 43 Fed. Reg. 56892-94 (December 5, 1978).

> “Pet. App.’’ refers to the bound appendix filed in No. 79-1429.

“*J.A.”’ refers to the joint appendix filed in this Court. ‘‘Tr.’’ refers to

the transcript of the agency rulmaking proceedings.

a ee

JURISDICTIONAL GROUNDS

The judgment of the court of appeals was entered on October

24, 1979 and petitions for rehearing were denied on January 11,

1980 (Pet. App. 103). The Petition for a Writ of Certiorari in

No. 79-1583 was filed on April 9, 1980, the petition in No.

79-1429 on March 14, 1980, and the petition in No. 79-1789 on

May 9, 1980. The petitions were granted on October 6, 1980. In

No. 79-1789, involving application of the Standard to cotton

warehouses and shippers’ classing Offices, judgment was

vacated and the case was ‘‘remanded to the United States Court

of Appeals for the District of Columbia Circuit for further con-

sideration in light of Industrial Department, AFL-CIO v.

American Petroleum Institute, 448 U.S. ___ (1980).’’ The

cases in 79-1429 and 79-1583 were consolidated. The jurisdic-

tion of this Court is invoked under 28 U.S.C. 1254(1).

STATUTE AND REGULATION

The statute involved is the Occupational Safety and Health

Act of 1970, 29 U.S.C. 651, et seg. Pertinent provisions, Sec-

tions 3(8), 6(b)(5) and 6(f), are appended hereto.

The Cotton Dust Standard, 29 C.F.R. § 1910.1043, is set

forth in the Appendix to Petition for Writ of Certiorari of the

Textile Petitioners. (No. 79-1429 at pages 1-18)

SUPPLEMENTAL STATEMENT OF THE CASE:

* Petitioner, the National Cotton Council, adopts the more com-

plete Statement of the Case presented in the Textile Petitioners’ brief.

This Statement of the Case presents only those facts germane to the

arguments advanced in NCC’s Brief.

oii aie

A. The Occupational Safety and Health Act

The Act defines an occupational safety and health standard

as ‘‘a standard which requires conditions, or the adoption or

use of one or more practices, means, methods, operations, or

processes, reasonably necessary or approrriate to provide safe

or healthful employment and places of employment.’’ (Em-

phasis added) 29 U.S.C. § 652(8)

The Secretary is required to ‘‘set the standard which most

adequately assures, fo the extent feasible, on the basis of the

best available evidence, that no employee will suffer material

impairment of health or functional capacity even if such

employee has regular exposure to the hazard dealt with by such

standard for the period of his working life.’’ Additionally, the

standard ‘‘shall be based upon research, demonstrations, ex-

periments, and such other information as may be appropriate. .

. . Other considerations shall be the latest available scientific

data in the field, the feasibility of the standards, and the ex-

perience gained under this and other health and safety laws.’’

(Emphasis added) 29 U.S.C. § 655(b)(5)

Section 6(f) of the Act provides that, upon judicial review,

the determinations of the Secretary shall be conclusive, and the

standard upheld, only if supported by ‘‘substantial evidence in

the record considered as a whole.’’ 29 U.S.C. § 655(f)

B. Petitioner, National Cotton Council of America,

and the American Cotton Industry

The National Cotton Council of America (NCC) is a not-for-

profit corporation organized and existing under the laws of the

State of Tennessee with its principal office in Memphis, Ten-

nessee. It was chartered for the purpose of increasing

throughout the world the consumption of cotton, cottonseed

and the products thereof produced in the United States of

America, and by so doing, to improve the economic and social

ee ere

status and the welfare of the people of the United States engaged

in various aspects of the cotton industry from the farm to the

textile manufacturers.

The record below establishes the significant value of the

American cotton industry to the nation. Cotton provides about

$3.8 billion in farm income to growers in an 18-state region;

more than $11 billion is invested in land and equipment to grow

cotton, and billions more are invested in cotton gins, cottonseed

oil mills, warehouses and compresses, and raw cotton merchan-

dising operations, which involve classing offices and textile

mills; cotton is the highest value crop grown in the Cotton Belt

states and ranks fourth in the entire U.S.; cotton accounts for

more than $1 billion annually in exports.‘

NCC’s constituency includes members from all seven

segments of the U. S. raw cotton industry: producers (farmers),

ginners, warehousemen and compressmen, merchants

(shippers), cottonseed crushers, cooperatives,’ and textile

manufacturers.

Approximately 70 percent of the volume of cotton, cot-

tonseed and its products is grown, handled or processed by

dues-paying members of NCC.

C. Background

As originally promulgated, the Standard included in its ap-

plication warehouses, shippers’ classing offices, cottonseed oil

* Exhibit 65, pages 2, 3: Testimony of G. C. Cortright, Jr.

* Cooperatives are organizations of cotton farmers who also are in-

volved in one or more of the other major processing or handling func-

tions of the industry, e.g., ginning, warehousing, merchandising,

crushing and textile manufacturing.

ee

mills and textile mills. 43 Fed. Reg. 27381. On October 24,

1979, the court below affirmed the Standard except as it relates

to cottonseed oil mills. That part of the Standard was remanded

because OSHA’s position with regard to economic feasibility

was ‘‘too unclear.’’ 617 F.2d 636, at 673 (Pet.App. 92)

On October 6, 1980, this Court granted the petition for a Writ

of Certiorari in No. 79-1789 (filed on behalf of warehouses and

classing offices), vacated judgment, and remanded the case to

the court below for further consideration in light of Jndustrial

Union Department AFL-CIO v. American Petroleum Institute,

100 Sup.Ct. 2844 (1980).

Although textile manufacturing is the only NCC member sec-

tor for which the Standard in question is currently in effect, its

enforcement will affect every sector of the American cotton in-

dustry because all the sectors are interdependent.’ Cotton pro-

duction, ginning, see crushing, warehousing and merchandising

can survive only if cotton textiles can be produced and sold pro-

fitably.

SUMMARY OF ARGUMENT

The court of appeals held that an OSHA standard is

economically feasible unless its compliance cost is so pro-

hibitively expensive that it will put the entire regulated industry

° The ginning industry was covered under a separate standard (29

C.F.R. 1910.1046) which was vacated and remanded to OSHA on

November 14, 1980 by the United States Court of Appeals for the

Fifth Circuit because the agency failed to show that the standard was

‘*reasonably necessary and appropriate.’’ Cotton harvesting (the farm

sector) was never covered by this or any cotton dust standard.

” Exhibit 101: Testimony of John S. Barr, III, page 7, JA 330,

hereinafter referred to as ‘‘Exhibit 101.’’

—

out of business. 617 F.2d 636, at 661-662 (Pet. App. 67-69) The

court below further held that the Act imposes on OSHA no re-

quirement to show that a standard’s cost bears some reasonable

relationship to the benefits sought from compliance with it. 617

F.2d 636, at 662-666 (Pet. App. 69-77) The court of appeals

thereby left no reasonable or practical restraints on OSHA’s

standard-setting authority consistent with Sections 6(b)(5) and

3(8) of the Act and granted license for the issuance of any oc-

cupational safety and health rule, so long as its costs will not

ruin an entire regulated industry. This case calls on the Court to

decide whether the court of appeals held properly on these

critically important points.

Another issue is the question of whether OSHA’s determina-

tion of economic feasibility is supported by substantial evidence

in the record as a whole. In support of its feasibility determina-

tion, OSHA cited a compliance cost of $550 million for the

standard which it promulgated. It attributed the estimate to in-

dustry witnesses.’ But the industry estimate which OSHA cited

dealt with compliance with a far less severe standard than the

one OSHA issued. The evidence of record indicates that the

Standard’s cost could be three to five times what OSHA claims

(see paragraph I-A of the Argument, infra). OSHA does not,

and cannot, say that a compliance cost which may exceed $2.5

billion is feasible.

Further, neither OSHA nor the court of appeals considered

how the substantial costs incurred at the textile mill level would

affect the other, interdependent sectors of the cotton industry.

The compliance-inflicted loss of volume at the textile mill level

* Exhibit 60, Att. 1, J.A. 251 (Pet. App. 154) and Exhibit 62, Att. 1

(Pet. App. 156): The testimony of Hovan Hocutt and Arthur Thomas,

i.e., the ‘‘Hocutt-Thomas estimate.” Hocutt and Thomas represented

dust and temperature control manufacturers, not textile manufac-

turers.

os

would cost cotton farmers more than $100 million per year (see

note 36, infra). The loss of volume would result in still further

(though unestimated) costs at the ginning, warehousing, seed

crushing and merchandising levels.

The court of appeals’ refusal to assess meaningfully the

record as a whole resulted in its failure to consider the cost im-

pact of the Standard on the non-textile sectors of the industry,

including farming. This further contributed to the court’s

misperception of the Standard’s total cost and its economic con-

sequences. The court’s misperception of the facts concerning

the Standard’s economic feasibility is apparent in its observa-

tion: ‘‘Ironically, it is now the industry that challenges the ac-

curacy of its own data.’’ 617 F.2d 636, at 660 (Pet. App. 64) The

industry did not challenge its own data. The industry challenged

OSHA’s misuse of its data to represent the cost of a standard

far more severe and far more costly than the one for which the

estimate was made. The court apparently failed to perceive the

difference.

The court below affirmed an enormously costly Standard

without substantial evidence showing it was economically feasi-

ble. And, despite the clear intent of Congress to require OSHA

to be pragmatic in its rulemaking, the court below has conferred

upon OSHA virtually unlimited authority to find any standard

economically feasible — the only limitation being that it must

not shut down the entire industry subject to the regulation. The

decision of the court of appeals drains the Act’s economic

feasibility requirement of its intended meaning and its decision,

therefore, should be overturned.

=

ARGUMENT

I. The Cost Estimate On Which The Court Of Appeals Af-

firmed OSHA’s Economic Feasibility Determination Is Not

Supported By Substantial Evidence In The Record As A Whole.

A. The evidence of record shows the Standard’s com-

pliance cost to be three to five times greater than

OSHA claims.

Whether OSHA must show that its standards are economically

feasible is not at issue in this case. OSHA concedes that the

feasibility requirement of Section 6(b)(5) includes economic as

well as technological feasibility. 43 Fed. Reg. 27361-2

A critical element in the economic feasibility question is the

magnitude of the Standard’s cost — i.e., will compliance with

the Standard cost the cotton textile industry just over half a

billion dollars as OSHA claims — and as accepted by the court

of appeals — or will it cost three to five times that much as

evidenced by any fair assessment of the record?

For textile manufacturing there were only two compliance

cost estimates in the record. One was supplied by Research

Triangle Institute (RTI) with whom OSHA contracted. This was

the only estimate in the record for achieving the required 0.2

mg/m3 exposure limit in the opening through warping opera-

tions of textile manufacturing. That estimate in 1974 dollars was

$1.112 billion.®

* RTI estimated capital costs for the opening through spinning

operations at $984.4 million (Exhibit 6, No. 76, p.I-15, Table I-6, J.A.

74, Pet.App. 139). For the twisting through warping operations, RTI

estimated capital costs of $127.7 million to reach 0.2 mg/m3 (Exhibit

6, No. 76, p.V-28, Table V-11, J.A. 94, Pet.App. 140). RTI’s total

estimate for reaching 0.2 mg/m3 in the opening through warping

operations is therefore $1.112 billion in 1974 dollars.

—

The second was the Hocutt-Thomas estimate (note 8, supra).

It was based on the cost of controls to reduce dust levels to 0.2

mg/m3 in opening through roving operations, to 0.5 mg/m3 in

spinning through warping operations and to 1.0 mg/m3 in

Slashing and weaving operations. (Exhibit 60, Att. 1, J.A. 251,

Pet. App. 154; Exhibit 62, Att. 1, Pet. App. 156). The Hocutt-

Thomas estimate of the cost of capital to reach these dust levels

was $550 million. This figure was appropriated by OSHA to

reflect the capital cost to comply with its much more severe

standard. (43 Fed. Reg. 27380, Tables 1 and 2)

The Hocutt-Thomas estimate in no way reflects the cost of

complying with the Standard OSHA promulgated. But even the

much higher RTI estimate of $1.1 billion for complying with the

Standard in the opening through warping operations

understates the Standard’s total compliance cost to the textile

sector.'° Adjustment for inflation between 1974 and the time of

promulgation would boost the RTI estimate of $1.1 billion for

opening through warping up to $1.54 billion.'' This figure alone

is three times what OSHA says the Standard will cost. If

automated opening and chute-fed systems for carding are re-

quired, another $818 million in capital cost will be incurred.'?

'* The record is void of any estimate of the cost of reducing dust

levels to 0.75 mg/m3 in weaving operations.

'' RTI considered the Wholesale Price Index for machinery and

equipment to be a reliable indicator of price increases for textile plant

and equipment expenditures (Exhibit 6, No. 76, C-20, Table C-12,

J.A. 139). That Index rose from 139.4 in 1974 to 195.1 in June of 1978

(Monthly Labor Review, March 1975, p. 114, and October 1978, p.

94). Thus, $195.1/$139.4 x $1.1 = $1.54.

'* Exhibit 69, pp. 25-28, J.A. 263-265. It is not clear whether

automated opening equipment and chute-fed cards should be factored

into compliance costs. OSHA’s brief in the court below would in-

dicate that production costs will be saved by the installation of such

equipment. But, if OSHA expects the industry to install this kind of

production equipment to comply with the Standard and the associated

dust control equipment the record shows would be required (TR.

2377, 2451-53, 2463-65), then these costs should, indeed, be con-

sidered a part of compliance cost.

—

This addition alone would raise compliance costs to almost $2.4

billion ($1.54 billion + $818 million). And nothing is included

for costs associated with the Standard’s restrictions on the com-

mon practice of blow-down cleaning.'’ So the Standard’s total

cost could well approximate the magnitude of the proposed

Standard’s compliance cost — i.e., $2,696,500,000'* — and ex-

ceed OSHA’s $550 million estimate of compliance cost nearly

five-fold.

B. The court of appeals did not carefully consider the

economic feasibility evidence of the record in keeping

with the standard of review which it prescribed for

itself.

Although the court of appeals articulated a standard for a

thorough, careful review of the record as a whole, 617 F.2d 636,

at 648-652 (Pet.App. 38-46), its review was not sufficiently

thorough to discern the difference between what the record con-

tained and what OSHA and OSHA’s counsel said the record

contained.

In affirming OSHA’s economic feasibility determination, the

court below said:

. .. OSHA’s technological assessment concluded that little

more than the dust control measures assumed by the in-

dustry would be necessary to achieve the final PEL. 617

F.2d 636, at 660 (Pet. App. 65)

'* The Standard prohibits compressed air blow-down cleaning ex-

cept where alternative means are not feasible. 43 Fed. Reg. 27396

Where blow-down is used, those employees not directly involved are

required to leave the area during the cleaning operations. This means

that employers would have to shut down machinery for substantial

periods of time during the workday. (LeSourd Tr. 545; Wright Tr.

636-638; Neefus Tr. 2060-2061; Hocutt Tr. 2363; Thomas Tr. 2532;

Fitzgerald Tr. 2706)

'* Exhibit 6, No. 76, page I-15, Table I-6, J.A. 74 (Pet. App. 139).

ia WE ed

The record was not cited in support of this statement. In-

stead, statements by OSHA’s counsel in their brief were

referenced. 617 F.2d 636, at 660, note 136 (Pet. App. 65)

In their brief in the court below, OSHA’s counsel attempted

to defend the agency’s use of the Hocutt-Thomas estimate by

making the raw assertion that it ‘‘reasonably appeared to

OSHA that Hocutt’s suggested dust control techniques would

require little additional effort or cost to achieve’ the PELs re-

quired by the Standard.'* This was a post hoc rationalization of

counsel, not a finding by the agency.'* The agency’s stated

reason for using the Hocutt-Thomas estimate was simply that it

was more recent than RTI’s:

Since ATMI (Hocutt-Thomas) estimates are based on the

most recent data, OSHA believes them to be more realistic

than those offered by the IIS (Inflationary Impact State-

ment) on the information available to RTI. 43 Fed. Reg.

27373

This cannot be construed by OSHA’s counsel as a finding by

the agency that compliance with its Standard can be achieved

with ‘‘little additional effort or cost.’’ This is particularly true

with respect to the spinning operation where the agency found

just the opposite:

OSHA, however, does recognize that implementation of

the standard in certain operations, such as spinning, where

the application of ventilation controls may involve unusual

'S OSHA’s brief in the court below, at p. 113.

'* FPC v. Texaco, Inc., 417 U.S. 380, 397 (1974); Burlington Truck

Lines v. United States, 371 U.S. 156, 168 (1962) (‘‘The courts may not

accept appellate counsel’s post hoc rationalizations for agency action.

- . »’); SEC v. Chenery Corp., 332 U.S. 197, 196 (1947); Chem-

Haulers, Inc. v. ICC, 565 F.2d 728 (D.C. Cir. 1977).

sain

difficulties, significant innovation or indeed necessitate

more than improvement in existing technology to achieve

compliance, may be difficult. 43 Fed. Reg. 27363

The “‘little more’”’ theory is clearly a charade of OSHA’s

counsel which would have been exposed as such had the court

below adhered to the standard of review which it prescribed for

itself. But even if the agency itself had found that compliance

with the Standard could be achieved with Hocutt’s techniques

plus a “‘little additional effort or cost,” the court below should

have required identification of the additional techniques and

quantification of their costs.

OSHA’s attempt to qualify the Hocutt-Thomas estimate as

representative of the cost of complying with the Standard it pro-

mulgated is equally without merit. The agency claimed that the

Hocutt-Thomas estimate of the cost of complying with a less

stringent standard than the one it adopted was overstated. But

none of the reasons the agency gave for this conclusion is sup-

ported by the evidence of record.

First, OSHA said:

Compliance with the final regulation will be less costly

than it would have been for the proposed regulation. 43

Fed. Reg. 27372

This observation about the comparative costs of the final ver-

sus the proposed standard is totally irrelevant since Hocutt and

Thomas did not estimate the cost of either the proposed Stan-

dard or the final Standard.

Second, OHSA surmised that:

. . . the equipment reported and estimated for retrofit con-

trol may have included some equipment which is used ex-

clusively for synthetics. (Emphasis added) 43 Fed. Reg.

27372

This statement is pure speculation. But, even if synthetic pro-

cessing equipment were included, this does not mean that the

Hocutt-Thomas estimate is overstated. The OSHASstipulated

dust measuring device — the vertical elutriator — cannot

distinguish between synthetic dust and cotton dust.'’ So all dust

must be controlled in areas where cotton and synthetics or cot-

ton/synthetic blends are produced. Therefore, the cost for dust

abatement devices for this equipment cannot be excluded.

Third, the agency said:

While OSHA recognizes the validity of estimating com-

pliance costs for retrofit controls, OSHA also recognizes

the existing trend toward replacement of conventional

machines with newer equipment which is more productive

and produces less dust and which would lead to the predic-

tion of fewer machines to be retrofitted or to be controlled.

43 Fed. Reg. 27372

Here the agency speculates that newer machines would have a

lower dust-producing propensity, which would result in the

need for fewer machines to be retrofitted with dust abatement

equipment. No support was cited for this assumption. Rather,

in its brief in the court below, OSHA acknowledged its own

contractor’s findings that (a) there was little innovative

technology which would offer productivity savings aiid (b) the

cost of necessary ventilation would be about the same for the

new machines as for the old ones.'* But even if OSHA’s theory

were true, the cost of the new machinery would have to be in-

cluded in the cost of compliance.'®

'’The vertical elutriator is designed to capture respirable dust, i.e.,

any dust particles of up to approximately 15 microns. (43 Fed. Reg.

27355) Cotton dust is defined as ‘‘dust present during the handling or

Processing of cotton which may contain a mixture of many

substances. . . .’’ 43 Fed. Reg. 27395

'*OSHA’s brief in the court below, p. 51, note 54.

'*See note 12, supra.

—~—

Fourth, OSHA said the Hocutt-Thomas estimate failed to ac-

count for technological improvements that might occur during

the four-year compliance period:

While the costs of retrofit are based on currently and com-

mercially available technology controls, the estimates fail

to reflect improvements in technology that are likely to

continue during the period of compliance. 43 Fed. Reg.

27372

Again, the statement lacks record support. It is refuted by

Hocutt’s testimony which indicates expectations for little new

technology which would reduce compliance costs in spinning

through weaving in the next seven years (Tr. 2388-93, J.A.

459-463).

Finally, the agency said:

. . . since the ATMI estimates include some costs of com-

pliance with the current regulation OSHA finds them to be

overstatements of the incremental cost of this regulation.

43 Fed. Reg. 27373

While it is true that the ATMI (Hocutt-Thomas) estimate in-

cludes some expenditures already made, it does not mean the

estimate is overstated. It is simply further evidence that Hocutt

and Thomas provided a realistic estimate of the cost to achieve

the exposure limits on which the estimate was based.

The result of these positions by OSHA and its counsel is that

the agency is left with no way to make a valid finding that the

Standard is economically feasible. The only cost estimate in the

record for complying with a 0.2 mg/m? exposure limit in the

opening through warping operations was RTI’s. When OSHA

rejected the RTI estimate it rejected the only estimate of the cost

of complying with the mandated PEL in opening through warp-

ing. The Hocutt-Thomas estimate which the agency relied upon

related to the cost of complying with substantially higher ex-

posure levels than required by the final Standard.

— Pn

The upshot is that OSHA does not know what it will cost to

comply with its Standard. The agency and its counsel admit as

much:

Although it reasonably concluded that industry costs were

overstated OSHA could not quantify the margin of error

or attempt to calculate a closer estimate for the PEL’s

finally selected . . . (Emphasis added) OSHA’s brief in the

court below, p. 113

The court below accepted as a valid finding an economic

feasibility determination which, by the agency’s admission, was

based on an unknown cost of compliance. Petitioner respectful-

ly submits that no evidence can hardly be deemed sufficient

evidence to satisfy the best available evidence requirement of--

Section 6(b)(5), nor can it be considered substantial evidence

within the meaning of Section 6(f). Consequently, the agency’s

economic feasibility finding is not supported by substantial

evidence in the record as a whole and the decision of the court

below should be overturned.

C. OSHA’s economic feasibility determination ignored

the conclusion of its own contractor, that the Stand-

ard would severely impact the American cotton in-

dustry.

Research Triangle Institute (RTI) assessed the economic im-

pact of a capital cost of $2,696,500,000 on the cotton industry in

its study of the proposed Standard’s inflationary impact.?° Since

the evidence of record indicates the final Standard’s capital

costs will likely be of the same magnitude, RTI’s economic im-

pact findings are relevant.

*°Exhibit 6, No. 76, page I-15, Table I-6, J.A. 74 (Pet.App. 139).

— po

Regarding a capital cost of $2,696,500,000, RTI said:

. . unless the compliance capital investments are spread

over a substantial number of years, ai/ the companies

engaged heavily in cotton yarn spinning and weaving pro-

cesses will face severe difficulty in financing capital costs

. . . (Emphasis added)?!

Dr. David LeSourd, project leader in RTI’s study, further

stated that compliance would take as much as eight years or

more. Tr. 562, J.A. 415

It should be noted that RTI’s observations about the need to

spread compliance costs over a substantial number of years were

made at a time when the proposed Cotton Dust Standard was

calling for a staging-in of engineering controls over a seven-year

period. But, in the final Standard, OSHA shortened the com-

pliance period, requiring installation to be completed in four

years.

RTI found that a standard with capital costs of

$2,696,500,000 would add 21° per pound to the price of cotton

yarn” and result in a reduction of 150,303,000 pounds (313,000

bales) in raw cotton consumption by U.S. mills.?? While this loss

of volume is significant, NCC demonstrated in its testimony

that RTI’s 150,303,000 pound estimate seriously understates the

probable loss in cotton consumption for two reasons.

First, RTI inappropriately used empirical information on

short-term responses to price changes to judge responses and

compute losses that would develop over the long-term as a result

of the price increases the Standard would necessitate.

*\Ibid., page V1-127, J.A. 131.

**Ibid., page VI-90, Table VI-23, line 2, column 3.

**Ibid., page VI-106, Table VI-31.

sy. en

The U.S. Department of Agriculture expressed its concern

about RTI’s misuse of USDA elasticity coefficients during the

hearings:

. we believe that the inflationary impact analysis con-

ducted by the Research Triangle Institute substantially

underestimates the price impact on cotton consumption of

implementing the proposed new regulations. The er-

roneous use of elasticities designed only for short-run use

is primarily responsible. . . . Consequently, based on the

increased costs of implementing the proposed cotton dust

standards and their impact on cotton prices, we believe

that consumption will fall much sharper than envisioned in

the inflationary impact statement. Thus, the economic im-

pact on the cotton industry will be much more severe.‘

Moreover, RTI did not even take into account the loss of

volume resulting from increased imports and decreased exports

of cotton textile products that will surely result from a signifi-

cant increase in the price of domestically-produced cotton tex-

tiles versus foreign-produced cotton textiles.?° During cross-

examination, RTI’s Dr. David LeSourd said:

. . . we confined our analysis to a discussion of the foreign

trade issues, the factors affecting it and we did not attempt

fo quantify the resultant changes. . . . (Emphasis added)

Tr. 596, J.A. 417

During the hearings, NCC noted the potential serious impact

of the Cotton Dust Standard on the U.S. trade balance in cotton

textiles and textile products. Specifically, NCC witness John S.

Barr, III stated:

**Exhibit 92C, pages 2 and 3, J.A. 325-326.

** Exhibit 101, pages 4 and 7, J.A. 327 and 330. Also, Exhibit

158: NCC’s Post Hearing Comments, page 3.

ie

In 1975 the deficit widened to more than 600,000 bales,

largely the result of a price disadvantage for U.S. cotton

textiles. Imported cotton textiles accounted for 20 percent

of domestic cotton consumption in 1976.

We find RTI’s conclusion that the proposed standard

would have no effect on foreign trade in cotton textiles dif-

ficult to reconcile with their observations that ‘‘large

changes in the relative prices of domestic and foreign tex-

tile and apparel products do have an impact upon the

domestic textile industry.’

RTI’s study indicated that cotton fabric and yarn prices

would have to increase nearly 18 percent to pay for the

standard. Undoubtedly, they view this change as too small

to make any difference in the ability of the U.S. cotton tex-

tiles to compete in world markets. Yet, they observe that

“international monetary changes since August 1971 have

had a significant effect upon foreign trade of U.S. textile

products.’’ RTI failed to note that these monetary changes

were equivalent to a 7.5 or 8.5 percent change in the price

of U.S. cotton textiles — less than half the price increase

which they estimate would be required to pay for the dust

standard.”®

With regard to the inflationary impact of a standard requiring

a capital outlay of $2,696,500,000, RTI said:

The inflationary impact, with or without the cotton waste

sectors, is significant. . . . Increases in the Consumer Price

Index of 0.372 (or 0.365) . . . are Jarge increases . . . to

result from actions within a single sector of the economy.

(Emphasis added)?’

**Exhibit 101, page 7, J.A. 330.

"Exhibit 6, No. 76, page VI-104.

we Mh os

In summary, OSHA’s own contractor found that a standard

with compliance costs of the same magnitude as those of the

final Standard would cause severe difficulties in securing com-

pliance capital, would add 21° per pound to the price of cotton

yarn, would cause a substantial reduction in cotton consump-

tion and would cause a large increase in the Consumer Price In-

dex.

D. OSHA misconstrued the findings of its contractor in

making its economic feasibility determination.

OSHA purports to quote RTI in saying the Standard’s cost is

‘‘manageable’’. 43 Fed. Reg. 27378 However, RTI’s reference

to “‘manageable”’ costs related to its assessment of the impact of

a far less stringent standard than the one finally promulgated by

OSHA.

At the point in its study where the term *‘manageable’’ was

used, RTI was attempting to express the probable impact of

compliance costs for the ginning industry, together with com-

pliance costs expected to be incurred in only three sectors of the

textile industry, identified as Standard Industrial Codes (SIC)

2211 (weaving mills, cotton), 2221 (weaving mills, man-made

fiber and silk) and 2241 (narrow fabric mills).2* Compliance

costs for the ginning industry were included because RTI ex-

pected these costs to be passed forward in the form of higher

raw material prices at the textile mill level. All of the aforemen-

tioned textile industries use cotton in varying amounts, with in-

dustry 2211 being the largest in terms of cotton consumption.

The term ‘‘manageable’’ was used by RTI to describe the im-

pact of just one of several assumed costs.

“Exhibit 6, No. 76, page VI-95 and VI-98, J.A. 125, 127 and 130.

RTI in fact said:

The financial impact for SIC Code 2211 appears very high

even for the 0.2 mg/m’ exposure limit. The 0.5 mg/m! ex-

posure limit would impact much less severely and the cost

burden of compliance would be manageable for all but the

three smallest firms and possibly selected firms, especially

in SIC Code 2211. (Emphasis added)?*

The compliance cost which RTI considered to be

‘‘manageable”’ in industry 2211 was $135 million (i.e., the

capital cost for achieving a 0.5 mg/m’ PEL, according to its

study).*° The compliance cost which RTI found to be very high

in industry 2211 was $1.84 billion (i.e., its estimate of capital

costs for compliance with a 0.2 mg/m? PEL).”!

The relevancy of both of RTI’s findings (i.e., one cost being

“‘manageable’’ and the other being ‘‘very high’’) can now be

considered with respect to the final Standard’s estimated com-

pliance costs (i.e., $1.54 billion to perhaps more than $2.5

**Exhibit 6, No. 76, page VI-98, J.A. 130. The U.S. Department of

Commerce defines industry 2211 (weaving mills, cotton) as,

“‘establishments primarily engaged in weaving fabrics over 12 inches

in width, wholly or chiefly of cotton.’’ Most weaving establishments

in industry 2211 spin their own yarns. Consequently, industry 2211 is

the largest of the cotton-consuming textile industries.

*° $16.905 million for ginning, $111.500 million for yarn prepara-

tion, and $6.771 million for weaving in industry 2211. The total is

$135.176 million. See Exhibit 6, No. 76, page VI-19, Table VI-4a for

yarn preparation costs and page I-14, Table I-5 for ginning and weav-

ing costs.

*'$292.190 million for ginning, $517.000 million for yarn prepara-

tion, and $1,028.230 million for weaving in industry 2211. The total is

$1,837.420 million. See Exhibit 6, No. 76, Page VI-19, Table VI-4a

for yarn preparation costs and page I-14, Table I-5 for ginning and

weaving cosis.

Bly. Yee

billion, paragraph I-A, supra). Clearly, the $135 million cost

RTI judged to be manageable bears no resemblance to the much

higher compliance cost of the final Standard. The

“‘manageable’’ cost is only 5 percent to 9 percent of the final

Standard’s estimated cost and only 25 percent of OSHA’s $550

million understatement of the cost.*? Just as clearly, the cost

RTI judged to be ‘‘very high’’ is of the same magnitude as the

final Standard’s expected cost.°?

There are no data in the record, either from RTI or from any

other source, which indicate that a compliance cost of from

$1.54 billion to $2.5 billion is ‘‘manageable”’ by the cotton tex-

tile industry.

E. OSHA’s economic feasibility determination did not

consider the cost consequences to other cotton in-

dustry sectors of imposing the Standard on textile

mills, nor was the impact of the Standard on the rest

of American agriculture considered.

The evidence of record shows that the economic impact of the

final Cotton Dust Standard will be severe, that the various in-

dustry sectors are interdependent; and that if the Standard is

beyond the financial capability of one sector, it is, therefore,

beyond the capability of all, for no sector is dispensable.*

” $.135 = .054; $.135 = .088; and $.135 = .245.

$2.5 $1.54 $.550

*® $1.84 billion judged by RTI to be ‘‘very high’’ versus the Stand-

ard’s $1.54 billion to $2.5 billion expected cost.

“Exhibit 101, page 7, J.A. 330.

a

The record further shows that while cotton farmers are ex-

empted from the Standard’s coverage, they are by no means ex-

empted from its consequences.** The full and very substantial

impact of the Standard affects the American cotton farmer as

surely as if he were directly covered by it. Even the approximate-

ly 150,000,000 pounds per year which RTI estimated would be

lost as the result of a compliance expenditure of just over $2.5

billion represents more than a $100,000,000 loss annually to cot-

ton farmers.** This would be equivalent to a direct annual cost

to farmers with no corresponding benefits.*’ And, as the com-

plete record shows, RTI’s estimate does not approach the loss

that could be expected if both the long term interfiber competi-

tion effects of the Standard and its adverse effects on the cotton

textile trade balance are taken into account.**

Aside from the Standard’s substantial impact on cotton

farmers, which was never taken into consideration by OSHA,

the Standard would obviously affect the whole of American

agriculture. Testifying for the U.S. Department of Agriculture,

P. R. Smith stated:

It is estimated that if the proposed standard is adopted and

enforced, perhaps 50 percent, and possibly more, of the

U.S. cotton acreage would no longer be used to produce

cotton. Farmers and mills would no longer be able to com-

**Tbid., page 1.

In 1976, when RTI’s study was completed, the average price of

base grade cotton (grade 41, staple 34) was 67.7‘/pound (‘‘Cotton

Price Statistics, ‘‘USDA, AMS, Cotton Division, Vol. 58, No. 13,

August, 1977): 150,303,000 x 67.7° = $101,755,131. At October, 1980

prices (‘‘Cotton Price Statistics,’"” USDA, AMS, Cotton Division, Oc-

tober, 1980), the annual loss would be $129,000,000: 150,303,000 x

85.8° = $128,959,974.

37 Additional, unquantified costs (in the form of lost revenue) would

be inflicted on cotton ginners, warehousemen, seed crushers and mer-

chants.

*Exhibit 101, pages 4-7, J.A. 327-330.

pete with their synthetic and foreign competitors who

would not have to meet such a standard. This raises the

question of what would be done with this 6 million or more

acres that no longer could be used to grow cotton.

The main crops that compete for cotton acreage are the

food and feed grains and soybeans. Food and feed grains

are now in surplus supply. And, as a result, market prices

are depressed. Large stocks of these commodities are

under price support loans, requiring huge government

outlays. While soybeans are presently in a tight supply

situation, it is expected that enough acreage devoted to

feed grains in 1976 will be diverted to 1977 soybean pro-

duction to take care of that situation. The feed grain in-

dustry would not miss this diverted acreage. However, if

several million acres of cotton land are diverted to food

and/or feed grain production, the result will be disastrous

for these crops and the country. In addition to the losses to

the cotton industry, costs under government price support

and storage programs would skyrocket, and further

downward pressure would be exerted on food and feed

grain market prices from the addition to existing surpluses

for these crops. We believe some of the cotton acreage

would be planted to sunflowers, which contain a high

percentage of vegetable oil. This would add to the present

worldwide surplus of vegetable oil.

We could well find ourselves in the same position we were

in a few years ago when many billions of tax dollars were

invested in surplus commodities exceeded four million

dollars per day. This would force the government to re-

quire farmers to withdraw farmland from production until

the surpluses could be worked off. Enormous sums would

have to be expended to pay for idling this acreage.*?

*Exhibit 92b, pages 4-5: Statement of P. R. Smith, Consultant to

the Secretary, U. S. Department of Agriculture, on a proposed stan-

dard for exposure to cotton.

has OE

This potential impact on American agriculture was not taken

into consideration by OSHA.

Moreover, OSHA’s econornic feasibility determination was

contrary to the views of the Small Business Administration

(SBA) and the President’s Council on Wage and Price Stability

(CWPS). Concerning the impact of a standard costing

$2,696,500, SBA expressed concern that:

. . . the OSHA regulations adopted will protect workers

from cotton dust by shutting down the plants in which they

are now employed.*°

CWPS said the proposed standard would impose excessive

costs and urged OSHA to:

. . . consider the full range of alternatives and to develop

the information on costs and benefits necessary for ra-

tional and effective standard development.‘*'

The total disregard of the Standard’s impact at the farm (and

intermediate levels, see notes 36 and 37, supra) and the failure

of the court below to consider the record as a whole deprived

Petitioner of a proper judicial review.

II. Osha Must First Determine That The Benefits Expected

From Its Standard Bear A Reasonable Relationship To The

Cost Of Complying With It, Else A Valid Showing Cannot Be

Made That The Standard Is Reasonably Necessary.

There is a conflict among the Circuits as to whether OSHA

must show that there is a reasonable relationship between the

cost of a standard and the benefits expected from it before a

valid finding can be made that the standard is ‘‘feasible’’ and

“‘reasonably necessary”’ to protect workers from ‘‘material im-

“Exhibit 170, Addendum No. 2: Policy Considerations on Small

Business Impact of Proposed Regulations for Cotton Dust, page 13.

“Exhibit 111: Comments of the Council on Wage and Price Stabili-

ty, page 37, J.A. 342.

pairment of health and functional capacity.’”” OSHA contends

(43 Fed. Reg. 27379) and the court below affirmed (617 F.2d

636, at 662-666 [Pet.App. 69-77]) that the Act requires only a

showing that the benefits of the agency’s standards are likely to

be ‘‘appreciable”’ and, beyond that, it has no obligation to

determine whether the expected benefits bear a reasonable rela-

tionship to the cost of achieving them. In direct conflict with the

ruling of the court below is the decision of the Court of Appeals

for the Fifth Circuit in American Petroleum Institute v. OSHA,

when OSHA’s benzene standard was set aside because the agen-

cy failed to show that the standard was reasonably necessary or

that ‘‘the benefits expected from the standard bear a reasonable

relationship to the costs imposed by the standard.’’*?

Although this Court affirmed the Fifth Circuit’s decision, it

did so because, as a threshold matter, OSHA had not found:

. . the toxic substance in question poses a significant

health risk in the workplace and that anew, lower standard

is therefore ‘‘reasonably necessary or appropriate to pro-

vide safe or healthful employment and places of employ-

ment.’’*

Since that threshold finding had not been made, this Court

declined to address the further question of whether the court of

appeals correctly held that there must be a reasonable correla-

tion between costs and benefits.“

“*581 F.2d 493, 503 (Sth Cir. 1978).

*°100 Sup.Ct. 2844, at 2850.

“*Tbid.

oop, re

In the instant case, the Court is again asked to provide a rul-

‘ng on this important question involving OSHA’s rulemaking

authority. The nation’s financial resources for health and safety

protection are not unlimited. Consequently, OSHA must, as an

essential part of its rulemaking procedure, give consideration to

the expected benefits of its standards versus their costs. Unless

OSHA attempts to ascertain, at least roughly, the relationship

of benefits to costs, the inevitable result will be a waste of the

nation’s limited financial resources for safety and health protec-

tion.

OSHA’s interpretation of the Act, to preclude an assessment

of benefit expectations in relation to compliance costs, is incon-

sistent with the language of the Acct, its legislative history and

the weight of relevant precedent. Because the Textile Petitioners

develop fully this argument, NCC adopts the statement of the

Textile Petitioners and foregoes further treatment of this sub-

ject in this Brief.

ry

—_. pe

CONCLUSION

OSHA has exceeded its rulemaking authority and the judg-

ment of the court below should be reversed.

Respectfully submitted,

Charles M. Crump

APPERSON, CRUMP, DUZANE

& MAXWELL

2610 - 100 North Main Building

Memphis, TN 38103

901/525-1711

Counsel of Record for Petitioner,

National Cotton Council of America

Joseph A Moss

4143 27th Street, N.

Arlington, VA 22207

703/525-4063

Counsel for Petitioner,

National Cotton Council

of America

APPENDIX

ae ee ype

APPENDIX

Pertinent Provisions of

The Occupational Safety and Health Act of 1970

Section 3(8)

The term ‘‘occupational safety and health standard’’

means a standard which requires conditions, or the adop-

tion or use of one or more practices, means, methods,

operations, or processes, reasonably necessary or ap-

propriate to provide safe or healthful employment and

places of employment. 29 U.S.C. 652(8)

Section 6(b)(5)

The Secretary, in promulgating standards dealing with tox-

ic materials or harmful physical agents under this subsec-

tion, shall set the standard which most adequately assures,

to the extent feasibie, on the basis of the best available

evidence, that no employee will suffer material i impairment

of health or functional capacity even if such employee has

regular exposure to the hazard dealt with by such standard

for the period of his working life. Development of stan-

dards under this subsection shall be based upon research,

demonstrations, experiments, and such other information

as may be appropriate. In addition to the attainment of the

highest degree of health and safety protection for the

employee, other considerations shall be the latest available

scientific data in the field, the Jeasibility of the standards,

and experience gained under this and other health and

safety laws. Whenever practicable, the standard pro-

mulgated shall be expressed in terms of objective criteria

and of the performance desired. (Emphasis added) 29

U.S.C. 655(b)(5)

ic I ue

Section 6(f)

Any person who may be adversely affected by a standard

issued under this section may at any time prior to the six-

tieth day after such standard is promulgated file a petition

challenging the validity of such standard with the United

States court of appeals for the circuit wherein such person

resides or has his principal place of business, for a judicial

review of such standard. A copy of the petition shall be

forthwith transmitted by the clerk of the court to the

Secretary. The filing of such petition shall not, unless

otherwise ordered by the court, operate as a stay of the

standard. The determinations of the Secretary shall be con-

clusive if supported by substantial evidence in the record

considered as a whole. 29 U.S.C. 655(f)