Amicus Curiae Brief — American Trucking Assns., Inc. v. Browner

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(@) Supreme Court, U.S.

FILED

No. 99-1426

IN THE

Supreme Court of the

AMERICAN TRUCKING ASSOCIATIONS,

INC., ET AL.,

Cross-Petitioners,

CAROL M. BROWNER, ADMINISTRATOR OF THE

ENVIRONMENTAL PROTECTION AGENCY, ET AL.,

Cross-Respondents.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF OF THE GENERAL ELECTRIC

COMPANY AS AMICUS CURIAE IN

SUPPORT OF CROSS-PETITIONERS

BENJAMIN W. HEINEMAN, JR. LAURENCE H. TRIBE

BRACKETT B. DENNISTON III Counsel of Record

MATTHEW TANZER JONATHAN S. MASSEY

GENERAL ELECTRIC COMPANY THOMAS C. GOLDSTEIN

3135 Easton Turnpike 420 Hauser Hall

Fairfield, CT 06431 1575 Massachusetts Ave.

(203) 373-2453 Cambridge, MA 02138

(617) 495-4621

Counsel for Amicus Curiae

July 20, 2000

QUESTION PRESENTED

Whether the Environmental Protection Agency is required,

in setting nationwide air-quality standards under Section 109 of

the Clean Air Act, to consider costs and risk trade-offs in order

to engage in reasoned decisionmaking.

TABLE OF CONTENTS

QUESTION PRESENTED .......ccccccscccccccccees i

EE cacbscncecccccccccccucescess ii

TAREE GP AUTTEBUIRIEED oc cccccccccccccscccccces iv

INTEREST OF THE AMICUS CURIAE ............... l

INTRODUCTION AND SUMMARY OF ARGUMENT l

PEE SOS dtececcnccscccccscccccccccecccecs 4

I. REASONED DECISIONMAKING REQUIRES

CONSIDERATION OF COSTS AND

SE ED oeScccocccccccccccccccccceces 4

II. THE CLEAN AIR ACT AND WELL-

ESTABLISHED LEGAL PRINCIPLES

MANDATE CONSIDERATION OF COSTS

BE 12

A. The Clean Air Act Compels Consideration of

I I nn. coco cccccecceces 12

1. EPA must consider costs and risk

trade-offs in using “judgment” to

provide “an adequate margin of safety.” ...... 13

2. EPA must consider costs and risk trade-

offs in protecting the “public health”

kw cag 14

3. Section 108 confirms that EPA must

consider costs and risk trade-offs. ........... 15

4. The structure of the statute likewise

confirms that EPA must consider costs

en oe ce ccecees 16

iii

5. In practice, it is impossible to set

NAAQS by reference to health alone. ........ 17

B. The Applicable “Clear Statement” Rule

Requires Consideration of Costs and Risk

. a eee 18

C. Administrative Law Principles Require

Consideration of Costs and Risk Trade-Offs ...... 22

CEES °« 6 cnc ccncandudeavesesbuceseosensens 26

—— ~~ —

TABLE OF AUTHORITIES

Cases

American Textile Mfrs. Institute, Inc. v. Donovan, 452 U.S.

SD ncccddcunsccaecnnudadédibnasncdiaetsds 23

Aqua Slide ‘N’ Dive Corp. v. Consumer Product Safety

Comm'n, 569 F.2d 831 (Sth Cir. 1978) ................ 24

Competitive Enterprise Institute v. NHTSA, 956 F.2d

PY SEED weneecunssesecndsesdacececeses 23

Consolidated Rail Corp. v. ICC, 646 F.2d 642 (D.C.

Gb BED occ cccndcvcecccecsecceccesseceeeseesecs 24

Gb BOSE neccncsedeccccecncscscnccesceesescoeses 22

FDA v. Brown & Williamson Tobacco Corp., 120

eG GS EEE ccocsocnseoscesctiéesocesececesces 9

Forester v. Consumer Product Safety Commission,

ee POs Ge EOE oc ccccncccoseceseeecaes 24

George E. Warren Corp. v. EPA, 159 F.3d 616 (D.C.

Cir. 1998), reh'g granted, 164 F.3d 676 (D.C. Cir. 1999) . 19

Grand Canyon Air Tour Coalition v. FAA, 154 F.3d

455 (D.C. Cir. 1998), cert. denied, 119 S. Ct. 2046 (1999) . 19

Industrial Union Dept., AFL-CIO v. American

Petroleum Institute, 448 U.S. 607 (1980) ............ 5,19

International Union v. OSHA, 37 F.3d 665 (D.C.

ale, SRE Rien hss PN 19

International Union, UAW v. OSHA, 938 F.2d 1310

See Ge BODE covcccececepeccossesocceséesesecess 9

Irving v. United States, 162 F.3d 154 (1st Cir.

1998), cert. denied, 120 S. Ct. 47 (1999)... 2... 0.6.0 eee 20

Lead Industries Assns. v. EPA, 647 F.2d 1130 (D.C.

Cir.), cert. denied, 449 U.S. 1042 (1980) ............4.. 2

Michigan v. EPA, 2000 U.S. App. LEXIS 3209 (D.C.

Cir. Mar. 3, 2000), pet. for reh'g and pet. for reh'g

en banc denied, June 22, 2000 ...............05- 3, 14, 19

Monsanto Co. v. EPA., 19 F.3d 1201 (7th Cir. 1994) ...... y

Motor Vehicles Mfrs. Ass'n v. State Farm Ins. Co.,

Se ocacvicscscusunecducadensess 2, 3, 22

Natural Resources Defense Council v. EPA, 824 F.2d

1146 (D.C. Cir. 1987) (em banc) ..............0 eee eee 14

Union Electric Co. v. EPA, 427 U.S. 246 (1976) ........ 15

United Auto Workers v. OSHA, 938 F.2d 1310 (D.C.

Eh SE cd Gcennecedcacdadbbendeeebedenetessbases 24

United States v. Carroll Towing Co., 159 F.2d

169 DL DEED Gdecnseseedoegsecoiseeesenceenes 22

United States v. Ottati & Goss, Inc., 900 F.2d 429

SE EEE 00666466606 s cednedveanceseoeseoetuceve 6

Statutes

1S UBC. § SEGSGSE) «occ ccccccccccccccccccccccece 21

EERE SEE OS eae Bae 19

EE lest tisiiedhcibedietcs coca a 20

ESSERE LS eae OED 12, 13, 16

CNG OI ons kos sccdncccwdivcccctincs 16

IID bdiccedicss dSavucctdcnsiccdnvs 16

TUBE CHINN once ccsecccccscccsscctes 14

SED nktentsascocieceskeccciasas 12, 13, 22

ORE. CPI oo ic viv vcisicdivcccvndenccs. 16

42 U.S.C. § 7412(c\9(BMi) ... 2.0... cece e cece eeeees 14

i sicdicicen ddsiieesssccasecaccciess 15

42 U.S.C. § T606(d)(9)(A) .. 0.6... cc cc eceeeeeeeeeeees 4

GRID iscnchncciédsencscdidunaneones) 20

IE dink sicnsdiscbacicixcanetchies .. 10

PEE stiinsendctdiasusidndectisuisads 2, 4, 25

Pe ictctntsrscckuntessthannincsssas 21

Flood Control Act of 1936, ch. 688, 1, 49 Stat.

1570, 1570 (codified as amended at 33 U.S.C. § 70la) ... 21

Food Quality Protection Act of 1996, Pub. L. No.

104-170, 110 Stat. 1489, 1514-35, codified at 21

U.S.C. § 346a (1994 & Supp 1996) .............200 ee. 21

vii

Pub. L. 104-304, 110 Stat. 3793 (1996), codified at

49 U.S.C. § 60101 et seq (1994 & Supp 1996) .......... 21

Pub. L. No. 104-121, 110 Stat. 857-874 (1996)

(codified as amended in scattered sections of 5 U.S.C.,

15 U.S.C. and 28 U.S.C.) .........0ee cues See S 21

Pub. L. No. 104-182, 110 Stat. 1613, codified at

42 U.S.C. § 300f et seq (1994 & Supp 1996) ........... 21

Pub. L. No. 105-178, § 6103(a), 112 Stat. 465 (1998) ..... 8

Pub. L. No. 105-178, §§ 6101-03, 112 Stat. 465 (1998) .... 8

Executive Orders

Exec. Order No. 12,866, 3 C.F.R. 638, 639 (1993),

reprinted in 5 U.S.C. 601 (1994) ........ cece cece eens 4

Exec. Order No. 12,291, 3 C.F.R. 127 (1981), revoked

by Exec. Order No. 12,866 ..........0c cece e eee eeeee 4

Regulations

National Ambient Air Quality Standards for Ozone,

62 Fed. Reg. 38,856 (1997) (to be codified at 40

CHE. GR FED ccccccccccccccccccesvcscceses 7-9, 17, 18

National Ambient Air Quality Standards for

Particulate Matter, 62 Fed. Reg. 38,652, 38,655

(1997) (to be codified at 40 C.F.R. pt. 50)............. 7,8

Viii

Revised Requirements for Designation of

Reference and Equivalent Methods for PM and

Ambient Air Quality Surveillance for Particulate

Matter, 62 Fed. Reg. 38,764 (1997) (to be codified

at 40 C.F.R. pts. 53 and 58) .. 0... eee eee

Legislative History

H. R. Rep. No. 92-1153 (1972) ........cecccceceee.

H.R. Rep. No. 104-812 (1996) .........00cccceceee.

H.R. Rep. No. 105-297 (1997) ..........ccceeeeeees

H.R. Rep. No. 95-294 (1977) ...........ceeee. aad

S. Rep. No. 92-749 (1972) .......ccccccccccccssens

Secondary Authorities

9 ENCYCLOPEDIA BRITANNICA: MICROPEDIA (15th

GER SES. Covdceccecscscccécesccessccesecesoese

Alan F. Hoskin, J. Paul Leigh & Thomas W. Planek,

Estimated Risk of Occupational Fatalities

Associated With Hazardous Waste Site Remediation,

14 RISK ANALYSIS 1011 (1994) ..............00005.

Anne E. Smith, et al., Costs, Economic Impacts, and

Benefits of EPA’s Ozone & Particulate Standards 9

SISO UE UES SUED cet esscccdsescccccecoecoeccces

Board of Environmental Studies and Toxicology,

National Research Council, RESEARCH

PRIORITIES FOR ‘AIRBORNE PARTICULATE MATTER:

1. IMMEDIATE PRIORITIES AND A LONG-RANGE

RESEARCH PORTFOLIO (1998) ..........0 ccc ceeceeeees 7

Cass R. Sunstein, /nterpreting Statutes in the

Regulatory State, 103 HARV. L. REV. 405 (1989) ........ 20

Christopher Anderson, Cholera Epidemic Tied

to Risk Miscalculation, 354 NATURE 255 (Nov. 28, 1991) . 12

EPA, Calculations of the Impact of Tropospheric

Ozone Changes on UV-B Flux and Potential Skin

Cancers (Draft) (Sept. 1994) (Ozone JA 3089-3104) ..... 1]

EPA, Office of Air Quality, Nat’) Air Quality and

SS CPU EEE ccdcecnccvcscsaveseceas 10

G. Seckmeyer & R.L. McKenzie, /ncreased

Ultraviolet Radiation in New Zealand (45 [degrees] S)

Relative to Germany (48 [degrees} N), 359 NATURE

EOE 6Ab000 desucnnccescaveecevdestebesesees 11

Ignacio Galindo et al., Ultraviolet Irradiance over

Mexico City, 45 AiR & WASTE MGMT. ASS’N 886 (1995) ... 11

Innovative Strategies and Economics Group, EPA,

Regulatory Impact Analyses for the Particulate

Matter and Ozone National Ambient Air Quality

Standards and Proposed Regional Haze Rule (1997) ...... 8

John Cairns, CANCER: SCIENCE AND SOCIETY (1978) ..... 15

John D. Graham & Jonathan B. Wiener, eds., RISK

PT ero er 6, 15

John E. Frederick et al., Empirical Studies of

Tropospheric Transmission in the Ultraviolet:

Broadband Measurements, 32 J. APPLIED METEOROLOGY

DL tiddcidbuhe Wentetdddednbus beets akee ds 1]

National Research Council, Rethinking the Ozone

Problem in Urban and Regional Air Pollution 110 (1991) . 11

Office of Air and Radiation, EPA, The Benefits and

Costs of the Clean Air Act: 1970 to 1990 (1997) ......... 9

Paul J. Crutzen, Ultraviolet on the Increase, 356 NATURE |

POUEUUUED op ccoccccnncevceccsesccccssececesccess 1]

Randall Lutter & Christopher Wolz, UV-B

Screening by Tropospheric Ozone: Implications for

the National Ambient Air Quality Standard, 31 ENVTL.

TD cnn dagkéccccateeseccesaces 11

Restatement (Second) of Torts ................00005: 22

Richard H. Pildes & Cass R. Sunstein,

Reinventing the Regulatory State, 62 U. CHi. L.

PR Ceh ine edd boeeiueuededadneseeesse sees 4

Statement of Marvin Frazier, DOE Office of

Health & Environmental Research Before CASAC

(Mar. 21, 1995), Ozone JA 258-59 ..............0.05. 11

Stephen Breyer, BREAKING THE VICIOUS CIRCLE:

TOWARD EFFECTIVE RISK REGULATION (1993) ........ 6, 20

Stephen G. Breyer, Richard B. Stewart, Cass R.

Sunstein & Matthew L. Spitzer, ADMINISTRATIVE

LAW AND REGULATORY POLICY (4th ed. 1999) .......... 13

Susan E. Dudley & Wendy L. Gramm, EPA's

Proposed Ozone Standard May Harm Public

Health and Welfare, 17 INT’L J. OF RISK ANALYSIS

GED Chae, BEG FD occ ccccccccccccccccceseccccceces 2, 10

Susan E. Dudley, Economic Impact Analyses, 16

PACE ENVTL. L. REV. 81, 84 (1998) ............. 2, 7,9, 10

—— -_—.

oo ees 1m

INTEREST OF AMICUS CURIAE

The General Electric Company (“GE”) is a diversified

manufacturing and financial services company headquartered in

Fairfield, Connecticut.’ GE has numerous business units that

provide a broad range of goods and services throughout the

United States and the world, including aircraft engines,

appliances, capital services, industrial systems, lighting, medical

systems, the NBC television network, plastics, power systems,

and transportation systems.

GE has a continuing interest in the proper interpretation not

only of the Clean Air Act, but of health and safety regulation

generally. Society’s interests are best served by a rational

system of risk management that considers not merely the

benefits of proposed agency action, but also costs of compliance

and likely risk trade-offs. Because of the diversity of GE’s

business activities, it can offer helpful guidance to this Court on

the need to focus on a global, reasoned, and systematic approach

to risk regulation, which will result in better policies that provide

more protection for human health and the environment.

INTRODUCTION AND SUMMARY OF ARGUMENT

This case presents an important opportunity not only to

correct the Court of Appeals’ misinterpretation of Section 109 of

the Clean Air Act, but also to establish a broader principle about

risk regulation generally. This Court should hold that agency

action under environmental and other regulatory statutes,

including the Clean Air Act, is not reasoned unless the agency

considers (1) costs of compliance (including marginal costs) and

(2) risk trade-offs caused by the agency action. The agency must

also give a reasoned explanation of how it considered those

' Pursuant to Rule 37.6 of the Rules of this Court, amicus states that no

counsel for a party authored this brief in whole or in part, and that no person

or entity other than amicus, its members, or its counsel, has made any

monetary contribution to the preparation or submission of this brief. Pursuant

to Ryle 37.3, amicus states that the parties have consented to the filing of this

brief. Their letters of consent have been filed with the Clerk of this Court.

factors. These principles are grounded both in organic regulatory

statutes (such as the Clean Air Act) and in the requirements of

the Administrative Procedure Act, 5 U.S.C. § 706. See Motor

Vehicles Mfrs. Ass'n v. State Farm Ins. Co., 463 U.S. 29, 42, 52,

57 (1983).

This case demonstrates the astonishing results of an agency’s

failure to take costs and risk trade-offs into account. EPA never

considered whether the massive costs associated with its

proposals (as much as $150 billion annually) might ironically

promote the very conditions that lead to the asthma and other

respiratory problems EPA sought to prevent. In fact, EPA

deliberately refused to consider such costs due to a misguided

20-year-old-decision of the D.C. Circuit Court of Appeals. Lead

Industries Assns. v. EPA, 647 F.2d 1130, 1148, 1153-54 (D.C.

Cir.) (Wright, C.J.), cert. denied, 449 U.S. 1042 (1980).

Because the costs of EPA’s rules are likely to be passed on to

society at large, they can be expected to increase consumer

prices and will almost certainly have a disproportionate impact

on the poorest segments of the population, which are at the

highest risk for asthma and other respiratory diseases.” Given

the conclusion of the American Thoracic Society that “poverty

may be the number one risk factor for asthma,” EPA’s rules may

aggravate the problem they are intended to solve.

Moreover, EPA ignored the likely effect of its ozone rule on

skin cancer rates. Due to ozone’s beneficial blocking effect on

ultraviolet-B (UV-B) radiation, the revised ozone standard will

increase malignant and non-melanoma skin cancers and

cataracts. An uncontradicted Department of Energy analysis

indicates that EPA’s ten parts per billion (ppb) change in the

ozone standard could result in 25-50 new melanoma-caused

fatalities, 130 to 260 incidences of cutaneous melanoma, 2,000

to 11,000 new cases of non-melanoma skin cancer, and 13,000

? See Susan E. Dudley, Economic Impact Analyses, 16 PACE ENVTL. L. REV.

81, 84 (1998); Susan E. Dudley & Wendy L. Gramm, EPA 's Proposed Ozone

Standard May Harm Public Health and Welfare, 17 INT’L J. OF RISK

ANALYSIS 403 (Aug. 1997).

= tee perenne

to 28,000 new incidences of cataracts each year. EPA refused to

consider this purely health-related trade-off effect of its revised

standard.

The text and structure of Section 109 indicate that EPA must

consider costs and risk trade-offs in setting National Ambient

Air Quality Standards (“NAAQS”). If there were any doubt

about the meaning of Section 109, this case would be governed

by the principle that reasoned decisionmaking about the

regulation of economic activity demands consideration of costs

and of risk trade-offs. Under basic precepts of administrative

law, agencies are required to conduct a “reasoned analysis” and

provide a “reasoned basis” for their decisions. State Farm, 463

U.S. at 42, 52, 57. To qualify as “reasoned” under this standard,

agency action must consider costs and risk trade-offs. Congress,

administrative agencies, and courts have all recognized the

importance of considering these factors, and regulatory statutes

should be construed with reference to that background principle.

An agency which is permitted to consider costs and risk

trade-offs is acting arbitrarily unless it actually does consider

them. Consideration of costs and risk trade-offs is necessary for

reasoned decisionmaking in the absence of an express

congressional statement precluding an agency from taking those

factors into account. “It is only where there is ‘clear

congressional intent to preclude consideration of cost’ that

[courts] find agencies barred from considering costs.” Michigan

v. EPA, 2000 U.S. App. LEXIS 3209, *36 (D.C. Cir. Mar. 3,

2000) (citation omitted), pet. for reh'g and pet. for reh’g en banc

denied, June 22, 2000.

Because there is no clear congressional statement forbidding

EPA from considering compliance costs or risk trade-offs in

setting NAAQS, EPA is required to consider those factors in

order to exercise reasoned decisionmaking under Section 109 of

the Clean Air Act.

ARGUMENT

I. REASONED DECISIONMAKING REQUIRES

CONSIDERATION OF COSTS AND RISK

TRADEOFFS

This Court should articulate a strong presumption that agency

action under environmental and other regulatory statutes is

unreasonable and contrary to law unless the agency considers (1)

costs of compliance (including marginal costs) as well as

benefits and (2) risk trade-offs caused by the agency action.

This principle follows both from organic regulatory statutes and

from the requirements of the Administrative Procedure Act, 5

U.S.C. § 706.’ |

The principle is little more than plain common sense. Two

months after the EPA finalized the ozone rule at issue in this

case, the Office of Management and Budget reported to

Congress that “the only way we know to distinguish between the

regulations that do good and those that cause harm is through

careful assessment and evaluation of their benefits and costs.”

Executive orders issued by the Reagan and Clinton

Administrations have required agencies to consider costs.* Even

EPA’s Science Advisory Board has documented the dangers of

ignoring costs and risk trade-offs.* Because allocative choices

> The Clean Air Act itself provides that a reviewing court may reverse any

action of the EPA that is “arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law.” Section 307(d)(9)(A), 42 U.S.C. §

7607(d)(9)(A).

* Office of Information and Regulatory Affairs, Office of Management and

Budget, Report to Congress on the Costs and Benefits of Federal Regulations

10 (1997).

* See Exec. Order No. 12,866, 3 C.F.R. 638, 639 (1993), reprinted in 5

U.S.C. 601 (1994); Exec. Order No. 12,291, 3 C.F.R. 127 (1981), revoked by

Exec. Order No. 12,866. See generally Richard H. Pildes & Cass R.

Sunstein, Reinventing the Regulatory State, 62 U. CHI. L. REV. 1, 6-7 (1995).

* Reducing Risk: Setting Priorities and Strategies for Environmental

ee ec AE

/- = —s —_ eer -

made in protecting health and the environment cannot be made

in a vacuum, risk management decisions made without regard to

associated costs, or without regard to risk trade-offs, are

necessarily arbitrary and unreasonable.

As Justice Powell commented in the Benzene case,

“[tJhousands of toxic substances present risks that fairly could be

characterized as ‘significant.”” Industrial Union Dept.,

AFL-CIO v. American Petroleum Institute, 448 U.S. 607, 670

(1980) (concurring opinion). But “[e}ven if OSHA succeeded in

selecting the gravest risks for earliest regulation, a standard-

setting process that ignored economic considerations would

result in a serious misallocation of resources and a lower

effective level of safety than could be achieved under standards

set with reference to the comparative benefits available at a

lower cost.” Jd. (emphasis added). “I would not attribute such

an irrational intention to Congress.” /d.

The need to consider costs and risk trade-offs finds wide

support in contemporary studies of the regulatory process.’ One

noted commentator has estimated that a more rational

prioritization of regulatory policies could save 60,000 lives, with

the expenditure of no additional resources.*

Protection, Report of the Science Advisory ard: Relative Risk Reduction

Strategies Committee to Administrator, U.S.E.P.A. (Sept. 1990).

” See, e.g., Harvard Group on Risk Management Reform, Reform of Risk

Regulation: Achieving More Protection at Less Cost, 1 HUM & ECOLOGICAL

RISK ASSESSMENT 183 (1995); National Academy of Public Administration,

Setting Priorities, Getting Results: A New Direction for the U.S.

Environmental Protection Agency (1995); President’s Council on Sustainable

Development, Eco-Efficiency Task Force Report ch 2 (1995)

<http://www.whitehouse.gov/W H/EOP/pcsd/tf-reports/eco-top.htm!>;

Carnegie Commission on Science, Technology, and Government, Risk and

the Environment: Improving Regulatory Decision Making (1993).

* John D. Graham, Legislative Approaches to Achieving More Protection

at Less Cost, 1997 U. CHI. LEGAL F. 13; see also Tammy O. Tengs et al., Five

Hundred Life-Saving Programs and Their Cost-Effectiveness, 15 RISK

ANALYSIS 369 (1995); Tammy O. Tengs & John D. Graham, The

Opportunity Costs of Haphazard Social Investments in Lifesaving, in Robert

For instance, agency action in the context of CERCLA, the

Superfund statute, has often been plagued by a failure to

consider costs and risk trade-offs. Cleanup of hazardous waste

sites creates increased risk of accidental fatalities, especial’ in

construction and transportation jobs. For a typical site, the

accident fatality risk from a cleanup appears to be several times

larger than the health risk from not cleaning up.” See generally

John D. Graham & Jonathan B. Wiener, eds., RISK vS. RISK

(1995) (documenting many instances where regulatory actions

aimed at one risk have spawned even greater countervailing

risks).

EPA has often proposed costly Superfund remedies to target

trivial risks. In United States v. Ottati & Goss, Inc., 900 F.2d

429, 441 (ist Cir. 1990) (Breyer, J.), the First Circuit affirmed

a district court’s denial of EPA’s proposed remedy for cleaning

up soil contaminated with PCBs. EPA sought a remedy that

would have reduced PCB concentrations to 20 parts per million

(“ppm”) rather than 50 ppm, at a marginal cost of $9.3 million.

EPA’s decision was based on its extraordinary assumptions that

(a) developers would build residential housing on the previously

undeveloped site, (b) small children, playing in the backyard,

would eat dirt containing PCBs, and (c) the children would eat

such dirt each day for 245 days per year for three and a half

years. Jd. at 441. The court of appeals opined that “[o]ne might

conclude from the cited portions of the record that this amounts

to a very high cost for very little extra safety.” Jd. See also

Stephen Breyer, BREAKING THE VICIOUS CIRCLE: TOWARD

EFFECTIVE RISK REGULATION 12 (1993) (spending $9.3 million

to protect “non-existent dirt-eating children” is the problem of

W. Hahn, ed., RISKS, COSTS, AND Lives SAVED: GETTING BETTER RESULTS

FROM REGULATION 167, 172 (Oxford 1996). See also Cass R. Sunstein,

Legislative Foreword: Congress, Constitutional Moments, and the

Cost-Benefit State, 48 STAN. L. REV. 247 (1996).

* Alan F. Hoskin, J. Paul Leigh & Thomas W. Planek, Estimated Risk of

Occupational Fatalities Associated With Hazardous Waste Site Remediation,

14 RISK ANALYSIS 1011 (1994).

“the last 10 percent”).

This case demonstrates the dangers of ignoring costs and risk

trade-offs. EPA has cited the effects of ozone on asthma and

other respiratory diseases, predicting that its rule will reduce

‘ “hospital admissions and emergency room visits for respiratory

causes, among children and adults with pre-existing respiratory

disease such as asthma” and may avoid “possible long-term

damage to the lungs.” National Ambient Air Quality Standards

for Ozone, 62 Fed. Reg. 38,856 (1997) (to be codified at 40

C.F.R. pt. 50). Yet even proponents of the EPA rule

acknowledge that the vast majority of the population “will

observe no effect on their health or well-being as a result of this

rule.”"* The President’s Council of Economic Advisors has

concluded that “reductions in adverse health effects, even for

‘sensitive’ populations, are small.”"'

With respect to particulate matter, which encompasses a

range of different substances of varying sizes and composition,

EPA has acknowledged the “uncertainty in the characterization

of health effects attributable exposure of ambient PM.”" The

National Academy of Sciences warned that “at the present time,

there is uncertainty as to what specific types or components of

particulate matter need to be reduced to achieve substantial

health-risk reduction cost effectively” and that “[p]roceeding in

the absence of such information could leave policymakers to

focus on standards and controls for particulate matter that are not

of the highest public health priority.”” In appropriating funds

for further PM research, Congress has stated in conference

" Dudley, supra note 2, at 84.

"' Id. (quoting comments).

" National Ambient Air Quality Standards for Particulate Matter, 62 Fed.

Reg. 38,652, 38,655 (1997) (to be codified at 40 C.F.R. pt. 50).

Board of Environmental Studies and Toxicology, National Research

Council, RESEARCH PRIORITIES FOR AIRBORNE PARTICULATE MATTER: I.

IMMEDIATE PRIORITIES AND A LONG-RANGE RESEARCH PORTFOLIO 10, 15

(1998).

reports that “at present, there appears to be insufficient data

available for the Agency to decide what changes, if any, should

be made to the current standard””* and that “sufficient facts are

not yet available to proceed with future regulations for a new

particulate standard.”"* After EPA issued the revised PM

standard, Congress postponed implementation until monitors

were put in place and three years’ worth of data were gathered. "*

Congress also postponed implementation of the ozone standard

by one year.”

Both Congress and EPA have thus recognized that the

benefits claimed by the agency are speculative. Weighing

against these tenuous benefits are substantial costs. According

to the EPA’s analysis, full implementation of the ozone standard

will impose direct annual costs of $ 9.6 billion, with monetized

health and welfare benefits ranging from $ 1.5 to $ 8.5 billion.”

Hence, EPA acknowledged that the costs of the ozone standard

will exceed its expected benefits. Implementation of both the

ozone and the particulate standards will cost, according to EPA,

close to $47 billion annually’’ — more than the Nation currently

“ HLR. Rep. No. 104-812, at 70 (1996).

'S H.R. Rep. No. 105-297, at 115 (1997).

Pub. L. No. 105-178, §§ 6101-03, 112 Stat. 465 (1998).

Pub. L. No. 105-178, § 6103(a), 112 Stat. 465 (1998).

'* See National Ambient Air Quality Standards for Ozone, 62 Fed. Reg.

38,856 (1997) (to be codified at 40 C.F.R. pt. 50); National Ambient Air

Quality Standards for Particulate Matter, 62 Fed. Reg. 38,652 (1997) (to be

codified at 40 C.F.R. pt. 50); Revised Requirements for Designation of

Reference and Equivalent Methods for PM and Ambient Air Quality

Surveillance for Particulate Matter, 62 Fed. Reg. 38,764 (1997) (to be

codified at 40 C.F.R. pts. 53 and 58); Innovative Strategies and Economics

Group, EPA, Regulatory Impact Analyses for the Particulate Matter and

Ozone National Ambient Air Quality Standards and Proposed Regional Haze

Rule 13-2 (1997).

'* Innovative Strategies and Economics Group, supra note 18, at 13-2.

—a>-<—P « --

spends for all Clean Air Act programs combined.”

There are substantial indirect costs as well. EPA believes

that, even by the year 2010, a large part of the country will not

be able to meet the new standards and thus will face penalty

provisions under the law that will slow economic growth.”" One

analyst calculates some $80 billion in hidden costs stemming

from the penalty provisions triggered by such inability to

comply.” Another analyst puts the total cost at $150 billion.”

The very magnitude of these costs makes it unthinkable that

Congress intended EPA to disregard them. Cf. FDA v. Brown &

Williamson Tobacco Corp., 120S. Ct. 1291, 1301 (2000) (“[W]e

must be guided to a degree by common sense as to the manner

in which Congress is likely to delegate a policy decision of such

economic and political magnitude to an administrative

agency.”). Moreover, EPA has made no effort to justify the

tremendous costs associated with its proposal. This failure is

significant because regulatory costs have substantial negative

impacts on public health. As one federal court has cautioned,

“{hjigher income is associated with better nutrition and medical

care; regulations creating costs exceeding $ 7.5 million per, life

(directly) saved may well yield greater indirect loss of life.”

Monsanto Co. v. EPA., 19 F.3d 1201, 1210 (7th Cir. 1994); see

also International Union, UAW v. OSHA, 938 F.2d 1310, 1326

(D.C. Cir. 1991) (Williams, J., concurring) (explaining that

recent studies predict that “each $7.5 million of costs generated

* See Office of Air and Radiation, EPA, The Benefits and Costs of the

Clean Air Act: 1970 to 1990, at ES-2 (1997).

" EPA estimates that between thirty-nine and fifty-seven million people

will live in areas that cannot attain the old standard, and an additional

fourteen to thirty-two million people will live in areas that are out of

compliance with the new standard. See National Ambient Air Quality

Standards for Ozone, 62 Fed. Reg. at 38,856.

” Dudley, supra note 2, at 83.

® Anne E. Smith, et al., Costs, Economic Impacts, and Benefits of EPA's

Ozone & Particulate Standards 9 (1997), OJA 3323.

by regulation may . . . induce one premature fatality” in the

public through reduced availability of resources for medical care

and safety).

EPA’s revised standards will impose massive costs on

economically productive activities — increasing consumer prices,

reducing employment, and decreasing incomes and living

standards. These effects will be felt most acutely by the poor

and other segments of the population at highest risk for the

health problems targeted by EPA. Asthma is overrepresented

among the urban poor and has increased in recent years despite

overall improvements in air quality (ground ozone levels in

particular declined six percent between 1986 and 1995).% A

report by the National Institute of Allergy_and Infectious

Diseases concluded that “the leading cause of asthma by far was

. . . proteins in the droppings and carcasses of the German

cockroach.”** The American Thoracic Society has offered that

“poverty may be the number one risk factor for asthma.”

The substantial costs imposed by EPA’s rules could

ironically promote the very conditions that lead to asthma and

other respiratory problems. Yet EPA never even considered the

possibility that its “cure” could be worse than the disease.

Moreover, EPA ignored the likely effect of its ozone rule on

skin cancer rates.”’ Due to ozone’s beneficial blocking effect on

ultraviolet-B (UV-B) radiation, the revised ozone standard will

increase malignant and non-melanoma skin cancers and

cataracts. The protective effect of ozone is well documented and

forms the basis for EPA’s own stratospheric ozone rules.”

Tropospheric ozone is, if anything, more effective than

“ EPA, Office of Air Quality, Nat’ Air Quality and Emission Trends Rep.

(1995).

% Quoted in Dudley, supra note 2, at 84.

* Id. at 84-85.

”” See Dudley & Gramm, supra note 2.

® 42 U.S.C. § 7671.

stratospheric ozone at blocking UV-B radiation.” EPA has

acknowledged that its ozone rule will have a deleterious impact

on UV-B related health problems.” An uncontradicted

Department of Energy analysis indicates that the ten parts per

billion (ppb) change in the ozone standard could result in 25-50

new melanoma-caused fatalities, 130 to 260 incidences of

cutaneous melanoma, 2,000 to 11,000 new cases of

non-melanoma skin cancer, and 13,000 to 28,000 new incidences

of cataracts each year.’ A peer-reviewed scientific paper by two

Office of Management and Budget staff members reached a

similar conclusion.”

Rather than addressing these important tradeoffs, EPA

declined to consider them in promulgating its new ozone

standard. And it declined to consider the possible existence of

other, cheaper means to achieve its objectives. Such

decisionmaking is arbitrary and unreasonable. The risks of such

a process are illustrated by the tragic decision by Peru to suspend

chlorination of its drinking water in the wake of U.S. risk

” Paul J. Crutzen, Ultraviolet on the Increase, 356 NATURE 104 (1992)

(“Ozone in the troposphere, an industrial pollutant, is (molecule for molecule)

a stronger absorber of ultraviolet than ozone in the stratosphere”), see

generally \gnacio Galindo et al., Ultraviolet Irradiance over Mexico City, 45

AiR & WASTE MGMT. ASS’N 886 (1995); National Research Council,

Rethinking the Ozone Problem in Urban and Regional Air Pollution 110

(1991); G. Seckmeyer & R.L. McKenzie, /ncreased Ultraviolet Radiation in

New Zealand (45 [degrees] S) Relative to Germany (48 [degrees] N), 359

NATURE 135 (1992); John E. Frederick ef al, Empirical Studies of

Tropospheric Transmission in the Ultraviolet: Broadband Measurements, 32

J. APPLIED METEOROLOGY 1883 (1993).

* EPA, Calculations of the Impact of Tropospheric Ozone Changes on UV-

B Flux and Potential Skin Cancers (Draft) (Sept. 1994) (Ozone JA 3089-

3104).

3" Statement of Marvin Frazier, DOE Office of Health & Environmental

Research Before CASAC (Mar. 21, 1995), Ozone JA 258-59.

* Randall Lutter & Christopher Wolz, UV-B Screening by Tropospheric

Ozone: Implications for the National Ambient Air Quality Standard, 31

ENVTL. Sci. & TECH. 142A (1997).

assessments classifying the chlorination process as carcinogenic.

This decision led to the largest outbreak of cholera in recent

times, in which over 800,000 people became ill and nearly 7,000

died.”

Il. THE CLEAN AIR ACT AND WELL-

ESTABLISHED LEGAL PRINCIPLES MANDATE

CONSIDERATION OF COSTS AND RISK TRADE-

OFFS

EPA’s refusal to consider costs and risk trade-offs in the

ozone and particulate matter rulemakings is thus the hallmark of

arbitrary and capricious decisionmaking. EPA’s action should

be held violative both of the Clean Air Act and of familiar

principles of administrative law. Acts of Congress empowering

agencies to regulate economic activity should be construed in

light of the fact that reasoned decisionmaking about these

matters requires consideration of costs and of risk trade-offs.

A. The Clean Air Act Compels Consideration of Costs

and Risk Trade-Offs

Two sections of the Act govern the establishment, review,

and revision of National Ambient Air Quality Standards

(“NAAQS”). Section 108 (42 U.S.C. § 7408) directs EPA to

identify certain pollutants which “may reasonably be anticipated

to endanger public health or welfare” and to issue air quality

criteria for them. These air quality criteria are to “accurately

reflect the latest scientific knowledge useful in indicating the

kind and extent of all identifiable effects on public health or

welfare which may be expected from the presence of [a]

pollutant in the ambient air... .”

Section 109 (42 U.S.C. § 7409) directs EPA to propose and

* Christopher Anderson, Cholera Epidemic Tied to Risk Miscalculation,

354 NATURE 255 (Nov. 28, 1991).

promulgate “primary” and “secondary” NAAQS for pollutants

identified under Section 108. Those standards may then be

reviewed and revised as “appropriate.” Section 109(d)(1).

Section 109(b)(1) defines a primary standard as one “the

attainment and maintenance of which in the judgment of the

Administrator, based on [the] criteria and allowing an adequate

margin of safety, are requisite to protect the public health.” A

secondary standard, as defined in section 109(b)(2), must

“specify a level of air quality the attainment and maintenance of

which in the judgment of the Administrator, based on [the]

criteria, [are] requisite to protect the public welfare from any

known or anticipated adverse effects associated with the

presence of [the] pollutant in the ambient air.”

1. EPA must consider costs and risk trade-offs in using

“judgment” to provide “an adequate margin of safety.”

The statute certainly does not direct EPA to reduce health

risks without regard to cost or risk trade-offs. Rather, on its face

Section 109(b)(1) directs the EPA Administrator to use her

“judgment” in providing “an adequate margin of safety . . . to

protect the public health.” In order to make a reasoned

“judgment,” EPA is surely bound to consider costs and risk

trade-offs. In deciding whether a revised standard is

“appropriate” under Section 109(d)(1), EPA must consider the

same factors.

Further, in deciding whether a “margin of safety” is

“adequate” under Section 109(b)(1), EPA must address cost and

risk trade-offs — just as an agency must consider the same factors

in deciding whether a certain margin of safety is “ample” or

whether a particular health risk is “significant.” A margin of

safety is not “adequate” if it entails excessive costs or risks. Just

as one is entitled to ask, “Can an agency sensibly decide whether

a risk is ‘significant’ without also examining the cost of

eliminating it?”, Stephen G. Breyer, Richard B. Stewart, Cass R.

Sunstein & Matthew L. Spitzer, ADMINISTRATIVE LAW AND

REGULATORY POLICY 65 (4th ed. 1999), one is also entitled to

ask, “Can an agency sensibly exercise ‘judgment’ in deciding

whether a ‘margin of safety’ is ‘adequate’ without considering

cost?”

Thus, in Michigan v. EPA, 2000 U.S. App. LEXIS 3209, *34-

35 (D.C. Cir. Mar. 3, 2000), pet. for reh'g and pet. for reh'g en

banc denied, June 22, 2000, the D.C. Circuit held that

determining whether emissions “contribute significantly” to the

nonattainment of pollution standards entailed consideration of

costs. The D.C. Circuit held that cost is relevant where a

statutory “mandate directed to some environmental benefit is

phrased in general quantitative terms (‘ample margin of safety,’

‘substantial restoration,’ and ‘major’),” even where the text

“contains not a word alluding to non-health trade-offs.” Jd. at

*36.

And in Natural Resources Defense Council v. EPA, 824 F.2d

1146, 1163 (D.C. Cir. 1987) (en banc), the court of appeals held

that costs were relevant to determining whether an air quality

standard for hazardous pollutants under § 112 of the Clean Air

Act offered an “ample margin of safety” to protect the public

health.

Section 109 is structured in similarly “general quantitative

terms,” Michigan v. EPA, 2000 U.S. App. LEXIS 3209, at *36,

using precisely the sort of terminology (“judgment,”

“appropriate,” “adequate margin of safety”) that by its nature

requires consideration of cost and risk trade-offs.

2. EPA must consider costs and risk trade-offs in

protecting the “public health” under Section 109.

Section 109(b) directs EPA to protect the “public health”

rather than the health of any particular person. By contrast,

other provisions of the Clean Air Act direct EPA to focus on

certain specific subpopulations — such as particularly susceptible

individuals or those most exposed to a pollutant.“ The

distinction is important. “Public health” is a multi-dimensional

concept referring to a variety of factors relating to mortality,

morbidity, and life expectancy. Promoting the “public health”

* Section 108(f)(1)(C), 42 U.S.C. § 7408(f)(1(C); Section 112(c9)(B)i),

42 US.C. § 7412(cX9B)i); Section 112(f(2MA), 42 USC. §

7412(f)(2A).

entails managing risks in a comprehensive way.

“Public health” efforts are “directed toward sanitation of the

environment, control of communicable infections, . . . and the

development of social machinery to ensure for every individual

a standard of living adequate for the maintenance of health.” 9

ENCYCLOPEDIA BRITANNICA: MICROPEDIA 778 (15th ed. 1992)

(emphasis added). A leading public health official and cancer

specialist in the United Kingdom described “improvements in

nutrition, housing, water supplies, and sewage” as “fairly simple

improvements in public health.” John Cairns, CANCER: SCIENCE

AND SOCIETY 8 (1978).

As Justice Powell recognized in Union Electric Co. v. EPA,

427 U.S. 246 (1976), the “shutdown of an urban area’s electrical

service could have an even more serious impact on the health of

the public than that created by a decline in ambient air quality.”

Id. at 272 (concurring opinion). A House report accompanying

the 1977 Clean Air Amendments explained that “a healthful

environment, energy conservation, and a sound economy are

interrelated factors bearing on the quality of life of the Nation.”

H.R. Rep. No. 95-294, at 61 (1977). Precisely because of the

dangers of ignoring costs and risk trade-offs, public health

scholars have urged “a more holistic paradigm [in] which

decisionmakers would ‘treat the whole patient’ instead of

confining their thinking to bounded fragments of larger

systems.” Graham & Wiener, RISK VS. RISK, at 227.

By directing EPA to promote the “public health,” Congress

instructed the agency to take a broad view that necessarily

includes consideration of costs and risk trade-offs.

3. Section 108 confirms that EPA must consider costs and

risk trade-offs.

Section 109 must be read in conjunction with Section 108,

which sets out the criteria by which EPA is to identify pollutants

for which NAAQS must be set. Section 108(a)(2) directs EPA

to consider public “welfare” as well as “public health” and to

consider “any known or anticipated adverse effects on welfare,”

not just impacts on health. Welfare effects as defined in section

302(h) (42 U.S.C. § 7602(h)) include, but are not limited to,

“effects on soils, water, crops, vegetation, manmade materials,

animals, wildlife, weather, visibility, and climate, damage to and

deterioration of property, and hazards to transportation, as well

as effects on economic values and on personal comfort and

well-being.” (emphasis added).

Accordingly, from the very beginning of the process by

which NAAQS are established, EPA is instructed to consider

costs and risk trade-offs in the form of “effects on economic

values and on personal comfort and well-being.” Indeed,

Section 108(a)(2) directs EPA to consider “the latest scientific

knowledge useful in indicating the kind and extent of all

identifiable effects on public health or welfare.” 42 U.S.C. §

7408(a)(2).

4. The structure of the statute likewise confirms that EPA

must consider costs and risk trade-offs.

Section 109(d)(2) of the Clean Air Act requires appointment

of an independent scientific review committee to review criteria

and standards and recommend new standards or revisions of

existing criteria and standards, as appropriate. The committee

established under section 109(d)(2) is known as the Clean Air

Scientific Advisory Committee (CASAC), a standing committee

of EPA’s Science Advisory Board. Section 109(d)(2)(C)

requires the CASAC to “advise the Administrator of any adverse

public health, welfare, social, economic, or energy effects which

may result from various strategies for attainment and

maintenance of such national ambient air quality standards.” 42

U.S.C. § 7409(d)(2)(C).

Thus, Congress required, in the statutory section governing

adoption of NAAQS, that the EPA Administrator be advised on

the “economic” and “social” effects of such standards. Such a

mandate would be odd indeed if the Administrator were

precluded from considering such factors in adopting NAAQS.

In addition, before commencing a NAAQS rulemaking, EPA

must issue information on costs. Section 108(b)(1), 42 U.S.C.

§ 7408(b)(1). The only possible purpose of such a requirement

is to enable commenters to critique EPA’s cost assessment in the

NAAQS rulemaking proceeding.

5. In practice, it is impossible to set NAAQS by reference

to health alone.

In practical fact, NAAQS under the Clean Air Act are often

set with regard to non-health factors, whether explicitly or not.

Neither science nor health considerations alone can definitively

determine whether to set a given standard at one level rather than

another. For example, in this case, EPA’s science advisors

concluded that there was no basis for determining a specific

threshold level of ozone that would assure protection of public

health and welfare. EPA’s own scientific experts did not view

the agency’s decision as purely a health issue, and they did not

find the proposed standard to be significantly more protective of

public health than the existing standard.**

Moreover, the impossibility of excluding factors like costs is

underscored by the fact that there is a continuum of health

effects associated with many pollutants. EPA has conceded, for

instance, that there is no threshold level for ozone below which

no adverse health effects would be expected to occur.** Given

the absence of any threshold, consideration of health effects

alone logically would lead EPA to setting a standard of zero for

ambient pollutant concentrations. For zero is the only level at

which there can be assurance of no adverse health effects. Yet

EPA has long acknowledged that Congress never intended such

an absurd result.

** The CASAC stated “that there is no ‘bright line’ which distinguishes any

of the proposed standards (either the level or the number of allowable

exceedances) as being significantly more protective of public health” and that

“the selection of a specific level and number of allowable exceedances is a

policy judgment.” 62 Fed. Reg. at 38,862. The CASAC observed that “the

differences in the percent of outdoor children . . . responding between the

present standard and the most stringent proposal . . . are small and their

ranges overlap for all health endpoints.” /d.

** See Final Rule, 62 Fed. Reg. at 38,863 (“{I]n the absence of any

discernable threshold, it is not possible to select a level below which

absolutely no effects are likely to occur. Nor does it seem possible, in the

Administrator’s judgment, to identify a level at which it can be concluded

with confidence that no ‘adverse’ effects are likely to occur.”).

Instead of admitting to explicit consideration of costs and risk

trade-offs, EPA purported to set the ozone standard based solely

on “public health policy judgments in addition to determinations

of a strictly scientific nature.” Final Rule, 62 Fed. Reg. at

38,863 (citation omitted). EPA insisted that, because its decision

was “largely judgmental in nature,” it “may not be amenable to

quantification in terms of what risk is ‘acceptable’ or any other

metric.” Jd. at 38,883.

The invocation of the vague “policy judgments” label simply

masks the exercise of the agency’s discretion and ensures that its

decisions are neither publicly accountable nor subject to

meaningful judicial review. Rather than supporting EPA’s

construction of the statute, EPA’s defense demonstrates that the

agency operates by pragmatically considering factors such as

costs — but in an unreviewable, back-door fashion.

B. The Applicable “Clear Statement” Rule Requires

Consideration of Costs and Risk Trade-Offs

If the text and structure of the Clean Air Act left any doubt,

this case would be governed by the principle that, in order to

engage in reasoned decisionmaking, a federal agency is required

to consider costs and risk trade-offs in the absence of an express

congressional statement forbidding the agency from doing so.

An agency which is permitted to consider costs and risk trade-

offs is acting arbitrarily unless it actually does consider them.

The agency must also give a reasoned explanation of how it

considered those factors.””

57 It does not follow, of course, that it would necessarily be irrational to the

point of unconstitutionality for Congress itself to withhold cost-weighing

authority from a given agency in a particular setting, having perhaps

considered costs itself or assigned that task to another agency with coordinate

jurisdiction. The principle we urge upon the Court is the more modest one

that, unless Congress has clearly excluded consideration of costs from a given

agency’s decisionmaking process, such consideration must be deemed to fall

within that agency’s authority, and the agency’s refusal in those

circumstances to take costs into account is arbitrary and capricious, in

~~“ 2 2 ooo —

The test for finding that Congress has prohibited

consideration of costs and risk trade-offs is stringent: “It is only

where there is ‘clear congressional intent to preclude

consideration of cost’ that [courts] find agencies barred from

considering costs.” Michigan v. EPA, 2000 U.S. App. LEXIS

3209, *36 (D.C. Cir. Mar. 3, 2000) (citation omitted).

Thus, in /ndustrial Union Dept., AFL-CIO v. American

Petroleum Institute, 448 U.S. 607, 655 (1980), a plurality of this

Court refused to find that the phrase “significant risk” in § 3(8)

of the Occupational Health and Safety Act, 29 U.S.C. § 652(8),

precluded consideration of cost. The plurality understood a

“significant” risk as something more than a “mathematical

straitjacket” and held that “some risks are plainly acceptable and

others are plainly unacceptable.” /d. at 655 (plurality opinion).

The plurality withheld judgment on whether the Act required a

“reasonable correlation between costs and benefits,” id. at 615,

but OSHA has since interpreted § 3(8) and regulation of

“significant risk” to require “cost-effective protective measures”

and has set standards with an eye toward “the costs of safety

standards [being] reasonably related to their benefits.” See

International Union v. OSHA, 37 F.3d 665, 668-69 (D.C. Cir.

1994) (quoting OSHA’s final rule).

In George E. Warren Corp. v. EPA, 159 F.3d 616, 622-24

(D.C. Cir. 1998), reh'g granted, 164 F.3d 676 (D.C. Cir. 1999),

the D.C. Circuit interpreted the statutory scheme for the

reformulated gasoline program, which had the “overall goal” of

improving air quality and “reducing air pollution.” Jd. at 622.

Even though the relevant statutory provision contained no

reference to cost, the court held that the effect of a proposed rule

on the price and supply of gasoline were relevant factors for

EPA to consider. /d. at 623.

In Grand Canyon Air Tour Coalition v. FAA, 154 F.3d 455,

475 (D.C. Cir. 1998), cert. denied, 119 S. Ct. 2046 (1999), the

statute required the FAA to devise a plan for “substantial

violation of the APA and the agency’s own organic statute.

restoration of the natural quiet” in the Grand Canyon area. The

D.C. Circuit found that the statute did not preclude the FAA’s

consideration of costs to the air tourism industry in deciding how

“substantial” that restoration must be. See also Irving v. United

States, 162 F.3d 154, 168 n.13 (1st Cir. 1998), cert. denied, 120

S. Ct. 47 (1999) (“[Plaintiff] espouses the logic of zero tolerance

for any kind of risk. The indiscriminate application of this logic

as a guide for policy has met with considerable criticism.. See,

e.g., Stephen Breyer, BREAKING THE VICIOUS CIRCLE 11-19

(1993). . . . [Cjourts must be hesitant to impose such a gloss in

the absence of an explicit congressional command or proper

grant of agency discretion.”); Cass R. Sunstein, /nterpreting

Statutes in the Regulatory State, 103 HARV. L. REV. 405, 487

(1989) (suggesting an “interpretive principle” drawn from case

law that reviewing courts will read statutes as authorizing

regulations with benefits at least “roughly commensurate with

their costs, unless there is a clear legislative statement to the

contrary”’).

The Clean Air Act does not contain the requisite clear

statement prohibiting EPA from considering costs with respect

to the establishment of NAAQS. Indeed, Section 101(b) of the

Clean Air Act states that the purpose of the Act is “to protect and

enhance the quality of the Nation’s air resources so as to

promote the public health and welfare and the productive

capacity of its population.” 42 U.S.C. § 7401 (emphasis added).

The 1990 Amendments included a provision requiring EPA, in

consultation with other executive departments, to “conduct a

comprehensive analysis of the impact of [the Clean Air] Act on

the public health, economy, and environment of the United

States.” 42 U.S.C. § 7612(a). EPA was directed to “consider the

costs, benefits and other effects associated with compliance”

with the various provisions in the Act, specifically including the

NAAQS. /d. Thus, Congress spoke to the requirement to

consider costs and benefits in the Act, and EPA was remiss in

not doing so.

Section 109 should also be interpreted with reference to the

overriding principle that reasoned decisionmaking requires

ee A Ee eee

agency consideration of costs and risk trade-offs — a principle

that Congress has repeatedly recognized since the New Deal.

Flood Control Act of 1936, ch. 688, 1, 49 Stat. 1570, 1570

(codified as amended at 33 U.S.C. § 701a), for example, directs

that projects should be approved if “the benefits to whomsoever

they may accrue are in excess of the estimated costs.”

Consideration of cost permeates environmental statutes,

demonstrating Congress’ recognition of the importance of taking

economic factors into account. For example, the Toxic

Substances Control Act™ and the Federal Insecticide, Fungicide

and Rodenticide Act” require EPA to balance costs and benefits

in regulating chemicals and pesticides. In the Safe Drinking

Water Act Amendments of 1996, Congress required

comprehensive risk analysis as well as independent peer review

of the scientific bases for EPA action. In the Accountable

Pipeline Safety and Partnership Act of 1996,“' Congress

mandated risk management and peer review. In reforming the

Delaney Clause, Congress moved away from a zero risk policy

regarding food additives.”

In addition to these specific statutes, Congress has also

generically mandated the systematic consideration of cost and

risk trade-offs. For example, the Small Business Regulatory

Enforcement Fairness Act of 1996“ requires EPA to consider

and minimize the impacts of its rules on small businesses.

During the enactment of the Consumer Products Safety Act,

* 15 U.S.C. § 2605(c)(1).

” 7 U.S.C. § 136(bb).

“ Pub. L. No. 104-182, 110 Stat. 1613, codified at 42 U.S.C. § 300f et seq

(1994 & Supp 1996).

“ Pub. L. 104-304, 110 Stat. 3793 (1996), codified at 49 U.S.C. § 60101

et seq (1994 & Supp 1996).

“ Food Quality Protection Act of 1996, Pub. L. No. 104-170, 110 Stat.

1489, 1514-35, codified at 21 U.S.C. § 346a (1994 & Supp 1996).

® Pub. L. No. 104-121, 110 Stat. 857-874 (1996) (codified as amended in

scattered sections of 5 U.S.C., 15 U.S.C. and 28 U.S.C.).

House and Senate reports summarized the pattern of

congressional action:

Protection against unreasonable risks is central to many

Federal and State safety statutes and the courts have had

broad experience in interpreting the term’s meaning and

application. It is generally expected that the

determination of unreasonable hazard will involve the

Commission in balancing the probability that risk will

result in harm and the gravity of such harm against the

effect on the product’s utility, cost, and availability to the

consumer.

H. R. Rep. No. 92-1153, at 33 (1972); S. Rep. No. 92-749, at

14-15 (1972).

EPA’s anomalous construction of Section 109 is out of step

with Congress’ repeated recognition of the importance of

considering costs and risk trade-offs.

C. Administrative Law Principles Require Consideration

of Costs and Risk Trade-Offs

The judicial branch is similarly familiar with the need to

consider costs and risk trade-offs. The standard of

“reasonableness” in tort law requires a court to consider the costs

of safety precautions as well as their expected benefits. See

United States v. Carroll Towing Co., 159 F.2d 169, 173 (2d Cir.

1947) (Hand, J.). The common-law doctrine of “nuisance” also

entails a balancing inquiry and a consideration of cost. See

Restatement (Second) of Torts §§ 826-28.

This Court has held that, under principles of administrative

law, agencies must conduct a “reasoned analysis” and furnish a

“reasoned basis” for their decisions. Motor Vehicles Mfrs. Ass'n

v. State Farm Ins. Co., 463 U.S. 29, 42, 52, 57 (1983).

Numerous decisions have recognized that, to qualify as

“reasoned” under this standard, agency action must consider

costs and risk trade-offs. In Corrosion Proof Fittings v. EPA,

947 F.2d 1201, 1214-15 (Sth Cir. 1991), for example, the court

of appeals held that EPA, under the Toxic Substances Control

Act, could not ban of the use of asbestos in brake linings without

considering countervailing risks. The court explained that EPA

sought to ban asbestos as a carcinogen, but had considered

neither the carcinogenicity of likely substitutes, nor whether

traffic accidents might be increased due to reduced brake

efficiency. The court held that EPA’s refusal to consider the risk

of substitutes “deprives its order of a reasonable basis” because

“EPA cannot say with any assurance that its regulation will

increase workplace safety when it refuses to evaluate the harm

that will result from the increased use of substitute products.”

“[Ejager to douse the dangers of asbestos, the agency

inadvertently actually may increase the risk of injury Americans

face.” Id.

Similarly, in Competitive Enterprise Institute v. NHTSA, 956

F.2d 321 (D.C. Cir. 1992), the D.C. Circuit held that the

National Highway Traffic Safety Administration’s automobile

fuel efficiency rulemaking was not “reasoned” when the agency

focused on the environmental risks of excessive fuel use but

failed to consider the countervailing risks posed by smaller and

less crash-worthy vehicles. Observing that an agency must

supply a “reasoned analysis” for its decision, the court of appeals

held that NHTSA had failed to confront the requisite trade-off.

The defect was “not . . . NHTSA’s judgment call, but .. .

NHTSA’s attempt to paper over the need to make a call.” Jd. at

323.

Courts construing regulatory statutes have recognized the

need for agencies to consider costs and risk trade-offs. In

American Textile Mfrs. Institute, Inc. v. Donovan, 452 U.S. 490

(1981), this Court refused to interpret the Occupational Health

and Safety Act as requiring absolute safety. To the contrary, this

Court recognized that “Congress was concerned that the Act

might be thought to require achievement of absolute safety, an

impossible standard, and therefore insisted that health and safety

goals be capable of economic and _ technological

accomplishment.” Jd. at 514. In upholding the OSHA cotton

dust standard, this Court noted that “OSHA presented a

‘responsible prediction’ of what its Standard would cost and its

impact on ‘production, employment, competition, and prices.”’”

Id. at 531.

Subsequently, the D.C. Circuit upheld an interpretation of

another provision of the OSH Act as entailing explicit cost-

benefit analysis: “Cost-benefit analysis requires identifying

values for lost years of human life and for suffering and other

losses from non-fatal injuries. . . . Thus, cost-benefit analysis

entails only a systematic weighing of pros and cons, or what

Benjamin Franklin referred to as a ‘moral or prudential

algebra.’” United Auto Workers v. OSHA, 938 F.2d 1310, 1320-

21 (D.C. Cir. 1991).

In Forester v. Consumer Product Safety Commission, 559

F.2d 774 (D.C. Cir. 1977), the court of appeals defined

“unreasonable risk” in the Federal Hazardous Substances Act, 15

U.S.C. § 1261(s), as involving “a balancing test like that familiar

in tort law: The regulation may issue if the severity of the injury

that may result from the product, factored by the likelihood of

the injury, offsets the harm the regulation itself imposes upon

manufacturers and consumers.” Jd. at 789; see also Aqua Slide

‘N’ Dive Corp. v. Consumer Product Safety Comm'n, 569 F.2d

831, 844 (Sth Cir. 1978) (vacating agency action because “the

Commission has a duty to take a hard look, not only at the nature

and severity of the risk, but also at the potential the standard has

for reducing the severity or frequency of the injury, and the

effect the standard would have on the utility, cost or availability

of the product”).

In Consolidated Rail Corp. v. ICC, 646 F.2d 642 (D.C. Cir.

1981), the court of appeals reviewed an Interstate Commerce

Commission adjudication of shippers’ claims that a rate based on

the expense of certain safety precautions was not “reasonable,”

because the precautions themselves were excessive. The court

explained that the ICC was bound to consider costs in setting

safety rules:

The safety measures for which expenditures are made

must be reasonable ones, which means first, that they

produce an expected safety benefit commensurate to their

cost; and second, that when compared with other possible

safety measures, they represent an economical means of

achieving the expected safety benefit.

Id. at 648.

EPA’s action in this case should be held invalid under both

the Clean Air Act and the APA. Decisionmaking that ignores

costs and risk tradeoffs should be held violative of the

underlying regulatory statute and should also be deemed

“arbitrary and capricious” under the APA, 5 U.S.C. § 706.

CONCLUSION

The decision of the Court of Appeals should be reversed to

the extent it held that EPA was not required to consider (and in

fact was precluded from considering) non-health factors,

including the costs of compliance and risk trade-offs. The case

should be remanded for application of a proper construction of