Amicus Curiae Brief — Michigan v. Envtl. Prot. Agency, 135 S. Ct. 702 (2014) (No. 14-46)

Supreme Cou

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No. 14-46 AUG 1 ’ 2014

IN THE

Supreme Court of the Anited States

b

STATE OF MICHIGAN, ET AL.,

Petitioners,

Vv

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY,

Respondent.

°

On Petition for Writ of Certiorari

to the United States Court of Appeals

for the District of Colurabia Circuit

+

AMICUS CURIAE BRIEF OF

MURRAY ENERGY CORPORATION

IN SUPPORT OF PETITION FOR

WRIT OF CERTIORARI

J. VAN CARSON

Counsel of Record

GEOFFREY K. BARNES

JOHN D. LAZZARETTI

ROBERT D. CHEREN

SQUIRE PATTON Bocas (US) LLP

4900 Key Tower

127 Public Square

Cleveland, Ohio 44114

(216) 479-8559

van.carson@squirepb.com

August 15, 2014 Counsel for Murray Energy

i

QUESTION PRESENTED

Congress ordered EPA to regulate power plants

under Clean Air Act Section 112 only if the agency

determined it would be “appropriate and necessary”

because Congress recognized that this would undo a

century of state and local decisions on how best to

provide affordable and reliable electricity. Congress

also amended Clean Air Act Section 111 to provide a

more flexible alternative that preserves a far greater

role for the states.

Can EPA find it is “appropriate and necessary” to

regulate power plants under Section 112 without

first considering the Section 111 alternative?

CONTENTS

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INTERESTS OF THE AMICUS CURIAE ...............--.00c00s00000e 1

I rcs cccmnnssesesnnconoensanvovesccse 2

REASONS FOR GRANTING THE WRIT ....................00s000000 5

1. Regulating power plants under Section 112

would undo state and local government eZforts to

provide affordable and reliable electric power and

supplant the traditional role of the states. ............ 5

2. The lower court upheld EPA’s decision based on

EPA’s erroneous claim that no alternative to

2 esintemannenenial i]

3. EPA’s refusal to evaluate an alternative that

would have preserved a larger role for states

implicates important federalism concerns that

make this case worthy of review. ....................0000 12

4. EPA’s decision to usurp state authority over

power plants and impose a stringent nationwide

standard will be permanent without the Court’s

RE eee 14

EEE a ae 16

iii

TABLE OF AUTHORITIES

Cases

Bond v. United States

a a essanmmasabedoeenane 12

FERC v. Mississippi

ee eccousnsbopusseomnsanbinesemcummienn 5

FPC v. East Ohio Gas Co.

I Ee Ge CID ects: enncsesenveceneennneseecnncens 5, 13,16

General Motors Corp. v. Tracy

ER SEES ea cn eee oT 6

New Jersey v. EPA

417 P.3a S74 CDC. Cle. BOGS) «.....cccccccccccccccecccsccece 14

New State Ice Co. v. Liebmann

ns EE) sens ceablanieniibeanounmedsaned 6

Younger v. Harris

er nn ccducuutanmenmiieandendiel 4

Statutes and Other Authorities

Clean Air Act Section 111

a I sists enicdenccmemeegentonesennesapennmeniies 9-10

Clean Air Act Section 112

a coneseecormienenrunnnis 7,14

Pub. L. No. 101-549, § 108g)

104 Stat. 2399, 2467 (1990) .................0.....2... Career 9

76 Fed. Reg. 24,976 (May 3, 2011).................. 8-11, 13

77 Fed. Reg. 9,304 (Feb. 16, 2012)........... eee 6

THE POWER INDUSTRY AND THE PUBLIC INTEREST

a A 6

Robert L. Swartwout, Current Utility Regulatory

Practice from a Historical Perspective

Se Es IE SE RUUD ercesesinentisintinenniomitciniiinindi 6

1

INTERESTS OF THE AMICUS CURIAE

Murray Energy Corporation (“Murray Energy”)

respectfully supports the petition for writ of certiorari

to review the judgment of the United States Court of

Appeals for the District of Columbia Circuit.”

Murray Energy is the largest privately-owned

coal company in the United States and the fifth

largest coal producer in the country, employing

roughly 7,300 workers in the mining, processing,

transportation, distribution, and sale of coal. In 2014,

Murray Energy expects to produce 65 million tons of

coal from twelve active coal mining complexes in six

states. Murray Energy also owns 2 billion tons of

proven or probable coal reserves in the United States.

Murray Energy sells coal to public and private

power plants. Affordable and reliable power, much of

which is generated by coal, remains essential to the

health of our nation’s economy. Murray Energy and

its employees proudly serve their public and private

power plant customers in providing this essential

service.

Here, a court has affirmed a crucial decision by

EPA that failed to comply with requirements of the

Clean Air Act, and that will have a dramatic adverse

impact on the nation’s power sector unless reviewed

and overturned by the Court.

* No counsel for any party authored any portion of this brief.

No person or entity other than Murray Energy made any

monetary contribution to the preparation and submission of

this brief. Murray Energy gave timely notice to counsel! of

record and obtained consent to the filing of this brief.

2

SUMMARY OF ARGUMENT

For over a century, state and local governments

have constructed and supported power plants in

order to provide affordable and reliable electric power.

These power plants are as diverse in size and age as

the states themselves and also vary widely in design.

Applying Section 112 of the Clean Air Act to these

power plants will undo much of the state and local

governments’ efforts and effectively nationalize the

power industry. Section 112 does this by forcing all

existing power plants to either equal the emission

levels achieved by a small set of the nation’s best-

performing facilities or else shut down completely.

Section 112 also prohibits the construction of any

new power plants unless they match the emission

levels achieved by the nation’s very best power plant.

These requirements are imposed without regard to

cost, energy requirements, or local resources.

Mindful that regulating power plants under

Section 112 might well be a costly mistake, Congress

ordered EPA to do so only after first evaluating the

degree of health impacts from power plant emissions

in light of all other Clean Air Act requirements, and

then to subject power plants to Section 112 only after

deciding that regulation under Section 112 was still

“appropriate and necessary.”

As an alternative, Congress provided Section 111

of the Clean Air Act. Section 111 is a more flexible

program that considers costs, energy requirements,

and the remaining useful life of existing sources.

Section 111 provides a greater role for the states by

tasking them with setting standards for their own

existing facilities rather than imposing a uniform

nationwide standard set by EPA.

3

In 2012, EPA decided to regulate power plants

under Section 112. But in making this decision EPA

defined “appropriate and necessary” so narrowly that

it allowed EPA to avoid considering any factor other

than whether power plant emissions posed any risks

to public health whatsoever. This allowed EPA to

ignore both the costs of regulating power plants

under Section 112 and the alternative regulatory

program Congress provided in Section 111.

EPA’s decision to subject power plants to Section

112 will, by EPA’s estimate, impose $9.6 billion per

year in compliance costs on utilities and shutter

generating capacity sufficient to power three and

half million households. In the past, EPA had found

that Section 111 could be used to adequately regulate

power plant emissions without the need for these

harsh consequences. But in EPA’s latest rulemaking,

EPA has refused to even consider the lower cost and

more flexible alternative of regulating power plants

under Section 111 instead. In doing so, EPA has

effectively abdicated its responsibility to decide

whether regulating power plants under Section 112

is “appropriate and necessary.”

EPA’s abdication is not only clear error in its own

right, it also fails to give effect to a provision

designed to properly respect the states.

By providing in Section 111 a flexible alternative

that would give states the primary say in deciding

which power plants to shutter, if any, and ordering

EPA to decide whether Section 112 regulation would

be “appropriate and necessary,” Congress showed

deep concern and appreciation for the federalism

implications of undoing a century of state and local

effort and supplanting traditional state authority

with the strict and inflexible Section 112 program.

4

Federalism “occupies a highly important place in our

Nation’s history and its future.” Younger v. Harris,

401 U.S. 37, 44 (1971). EPA’s refusal to consider costs

and the availability of Section 111 as an alternative

has allowed EPA to seize control of an important

state function and force the closure of power plants

built and supported by state efforts. Federalism

concerns demand this action usurping state

authority and intruding on legitimate state activities

should not be taken lightly, if at all, and only after

full and fair consideration of alternatives. As the

lower court decision upholding the agency’s conduct

pays short shrift to these weighty concerns, this case

is worthy of the Court’s review.

This case also involves a rare situation where

review must come now or never. The Court of

Appeals has previously held that EPA’s decision

whether to subject power plants to Section 112 is a

permanent and irreversible “listing decision.”

In light of this precedent, the agency cannot change

its mind later, reverse its decision, or seek judicial

review after these appeals have run their course.

Thus, critical issues that will affect our national

energy supply, as well as important issues of

federalism presented by the lower court’s decision,

will only be addressed if the Court grants certiorari.

5

REASONS FOR GRANTING THE WRIT

1. Regulating power plants under Section 112

would undo state and local government

efforts to provide affordable and reliable

electric power and supplant the traditional!

role of the states.

a. State and local governments have historically

played a key role in building the nation’s diverse

array of power plants.

At stake in this litigation is the fate of a century

of state efforts to provide affordable and reliable

electricity by building and supporting the construc-

tion of public and private power plants.

The Court has long recognized that the nation’s

utilities are the legacy of pioneering state efforts.

As Justice Jackson stated, “[l]ong before the Federal

Government could be stirred to regulate utilities,

courageous states took the initiative and almost the

whole body of utility practice has resulted from their

experiences.” FPC v. East Ohio Gas Co., 338 U.S. 464,

489 (1950) (Jackson, J., dissenting); see also FERC uv.

Mississippi, 456 U.S. 742, 789 (1982) (O’Connor, J.,

concurring in judgment and dissenting in part)

(“Utility regulation is a field marked by valuable

state invention.”). Indeed, nearly all power plants in

this country, both public and private, are the result

of significant state and local government efforts.

Many were directly constructed by state and local

governments. Most others owe their economic

feasibility to a “regulatory compact” with the states.

In exchange for territorial monopolies that protect

their investments and provide the degree of certainty

necessary for enormous capital outlays, private

6

power utilities are intensely regulated by state com-

missions that determine what prices they charge and

what power plants they build. Robert L. Swartwout,

Current Utility Regulatory Practice from a Historical

Perspective, 32 NAT. RES. J. 289, 289-90 (1992).

Governmental support, whether direct or indirect,

has proved essential for the succeas of power utilities,

see General Motors Corp. v. Trecy, 519 U.S. 278,

288-90 (1997), and in this country that su, port has

come largely from the states rather than the national

government. This important legacy of state initiative

is especially evident in the public power sector that

provides electricity for communities that were previ-

ously unserved or underserved by private utilities.

See THE POWER INDUSTRY AND TPE PUBLIC INTEREST

104 (1944) (“Between 1882 and 1927 most municipal

systems were operating in communities never before

served by private companies.”); 77 Fed. Reg. 9,304,

9,440 (Feb. 16, 2012) (estimating “8&0 municipalities,

5 states, and 11 political subdivisions” are currently

operating large power plants that would be subject to

regulation under Section 112).

Given the traditional role of states in cultivating

the nation’s power industry, it is no surprise that

power plants are diverse in design, size, and age.

This diversity is no accident-—it is a central feature

of the federal system, which allows each community

to balance its own needs and resources and experiment

with different solutions to the same problem. See

New State Ice Co. v. Liebmann, 285 U.S. 262, 311

(1932) (Brandeis, J., dissenting) (“It is one of the happy

incidents of the federal system that a single courageous

State may, if its citizens choose, serve as a laboratory;

and try novel social and economic experiments without

risk to the rest of the country.”).

7

b. Regulating power plants under Section 112 will

undo the states’ historic efforts and supplant the

states’ traditional role in regulating power plants

with an inflexible federal standard.

Applying the Section 112 regulatory program to

power plants will unnecessarily and unwisely undo

the decades of state and local government effort put

into building and supporting the power plants that

are needed to make electricity available and affordable.

By design, subjecting power plants to Section 112

will force many existing plants to shut down.

Specifically, Section 112 requires existing sources in

categories or subcategories with more than 30

sources to achieve emission standards that are no

“less stringent than the average emission

limitation achieved by the best performing 12

percent of existing sources.” 42 U.S.C. § 7412(d)(3).

Thus, existing power plants will have to either

upgrade to match the performance of the highest

performing facilities in the nation or stop operating

entirely. There is no opportunity to consider costs,

the age of the facility, or the needs of the community.

For many power plants, this is no choice at all—

application of Section 112 is a death sentence.

Section 112 also strips the states of their

traditional authority to decide what types of new

power plants to build. Every single new power plant

must be designed to meet emission standards that

are no “less stringent than the emission control that

is achieved in practice by the best controlled similar

source.” Id. In other words, any new power plant

must match the performance of the best-performing

power plant in the nation, again regardless of costs,

energy requirements, or local needs.

8

The result is that, under Section 112, states with

more money or newer power plants will be able to set

the emission standards for the entire country, forcing

other states to scrap many of their existing power

plants and either buy power from other states or

devote hundreds of millions of dollars building new

power plants, upgrading existing plants, or retro-

fitting plants to accept alternative fuels.

At the outset of the underlying rulemaking, EPA

acknowledged that subjecting power plants to the

Section 112 program would completely transform the

electric power generation fleet. 76 Fed. Reg. at 24,979.

Yet EPA has refused to consider the wisdom of such a

drastic reshaping of a core component of the nation’s

economy, despite Congress’ command to take this

step only if it was “appropriate and necessary.”

In light of the important traditional role of state

and local efforts in the power sector, EPA’s finding

that regulating power plants under Section 112 was

“appropriate and necessary” without considering the

costs of unwinding a century of state and local

decisions on how best to provide a necessary utility

to their citizens was a clear error with national

implications and thus worthy of review by the Court.

9

2. The lower court upheld EPA’s decision based

on EPA’s erroneous claim that no alternative

to Section 112 existed.

EPA justified its refusal to consider the costs of

Section 112 by claiming there was no alternative.

See 76 Fed. Reg. at 24,989. The lower court, in turn,

then relied on EPA’s assertion that there was no

alternative to Section 112 in upholding EPA’s

decision. Opp. at 28 (quoting 76 Fed. Reg. at 24,989).

EPA’s claim, however, was wrong because Congress

had provided EPA with the alternative to regulate

any sources whose emissions “cause[], or contribute[]

significantly to, air pollution which may reasonably be

anticipated to endanger public health or welfare.”

42 U.S.C. § 7411(b)(1KA). This includes regulation of

new sources under Section 111(b), and regulation of

existing sources under Section 111(d). Thus, the

decision Section 112(n)1MA) required EPA to make

was not whether to regulate power plant emissions,

as EPA claimed, but whether to use Section 112 or

Section 111 to regulate them.

The existence of Section 111 as an alternative to

regulate power plant emissions is no happenstance.

In the very legislation enacting Section 112(n)(1)A)

Congress included an amendment to provide for the

regulation of sources under Section 111(d) if they

were not regulated under Section 112. Pub. L. No.

101-549, § 108(g), 104 Stat. 2399, 2467 (1990).

Without that key amendment, Section 112(n)\1)(A)

would have required EPA to decide whether to

regulate some emissions from existing power plants

at all, because Section 111(d) would have excluded

the pollutants listed for regulation under Section 112.

10

The amendment assured that Section 111 could be

used to regulate any harmful power plants emissions

that could be regulated under Section 112 if EPA

found Section 112 inappropriate or unnecessary.

This demonstrates that through Section 112(n)(1\A),

Congress intended to give EPA the choice whether to

subject power plants to Section 112 or Section 111.

Section 111 is far more flexible than Section 112.

Rather than mandate that EPA force all sources to

match the performance of the top performing sources,

Section 111 standards for new and existing sources

must be designed with cost and energy requirements

“take[n] into account.” 42 U.S.C. § 7411(a)(1). For

existing sources, the standards are designed by the

states, not the federal government, and must “take

into consideration the remaining useful life of the

existing source.” 42 U.S.C. § 7411(d1)}<(2). Under

Section 111, the single very best performing source

also does not become the de facto blueprint for all

other new sources.

Thus, EPA’s assertion that it is “reasonable to

conclude that costs may not be considered” because

EPA was “evaluating whether to regulate HAP

emissions from EGUs at all,” 76 Fed. Reg. at 24,989,

and the lower court’s reliance on this assertion, see

Opp. at 28, were clear error.

It was also inexcusable for EPA not to bring

Section 111 to the lower court’s attention. Not only

did EPA wrongly claim that there was no alternative

to Section 112, EPA disingenuously proclaimed in its

rulemaking that it had no duty to identify and

consider any alternatives, claiming that EPA was not

“requir{ed) to scour the CAA to determine

whether there is a direct or indirect manner in which

EPA could regulate HAP emissions from EGUs.”

11

76 Fed. Reg. at 24,992. In essence, the agency is

saying that Congress did not expect the agency to be

aware of its own authority under the very statute

that EPA is charged with administering. But this is

precisely the form of agency expertise that EPA

claims as justification for Chevron deference in

interpreting Section 112(n)(1)(A). Either EPA is an

expert in the Clean Air Act or not. EPA cannot have

it both ways. And as a purported expert in the Clean

Air Act, the agency cannot feign ignorance of Section

111 as a flexible regulatory alternative for regulating

the very same emissions that could be regulated

under Section 112. As EPA noted in this rulemaking,

EPA previously in 2005 “[s]pecifically pointed to”

Section 111 regulation for power plant “HAP

emissions” in finding it would not be “appropriate

and necessary” to regulate power plants under

Section 112, 76 Fed. Reg. at 24,985, and criticized its

earlier 2000 decision for failing to “consider[] actions

under” Section 111 in determining whether it would

be “appropriate and necessary” to regulate power

plants under Section 112. Id. So EPA would not have

to “scour” the Act to find Section 111. EPA had

already found it. EPA had even already attempted to

use it to regulate the very emissions EPA claimed

could not be directly reguiated “at all” unless EPA

subjected power plants to Section 112.

Before choosing to regulate power plants under

Section 112, EPA was directed by Congress to

determine that it was “appropriate and necessary.”

Because EPA neglected to even consider an available

alternative to a rule that will have a dramatic impact

on this country’s energy system, and indeed led the

court to believe that no alternative existed, this case

is worthy of the Court’s review.

12

3. EPA’s refusal to evaluate an alternative that

would have preserved a larger role for states

implicates important federalism concerns

that make this case worthy of review.

This case is especially worthy of the Court’s

review because Section 112(nX1XA) reflects vital

federalism concerns that EPA should have

considered but ignored. While Congress created a

strict and inflexible federal program in Section 112,

Congress simultaneously amended Section 111 in a

way that would allow power plants to be regulated

entirely under Section 111 in the alternative, and

mandated that EPA avoid regulation of power plants

under Section 112 unless EPA determined it was

“appropriate and necessary.” In this way, Congress

provided a way to preserve, as much as possible, the

decades of state and local government efforts to

provide reliable and affordable power by assuring

power plants would not be inappropriately and

unnecessarily subjected to Section 112 regulation.

This reflects a “proper respect for state functions”

and serves to avoid regulations that could “unduly

interfere with the legitimate activities of the States.”

Younger, 401 U.S. at 44. As made clear by the Court’s

decision in Bond v. United States, Acts of Congress

“must be read consistent with principles of federalism

inherent in our constitutional structure” because

Congress carefully preserves the traditional role of

the states. Bond v. United States, 134 S. Ct. 2077

(2014). The interpretation of Section 112(n)\1)A)

upheld by the court below fails on this score entirely.

Federalism is built on the fundamental premise

that “the National Government will fare best if the

States and their institutions are left free to perform

their separate functions in their separate ways.”

13

Younger, 401 U.S. at 44 For “diversity” serves

“values which centralization and uniformity destroy.”

East Ohio Gas Co., 338 U.S. at 488. Protecting

diversity requires “sensitivity to the legitimate

interests of both State and National Governments”

and especially “a proper respect for state functions.”

Younger, 401 US. at 44.

EPA’s decision to regulate power plants under

Section 112 sacrifices a great deal of state effort in

favor of centralization and uniformity. While there

certainly can be an appropriate role for the federal

government in national environmental regulation,

when Congress has provided a middle course — one

that shows respect for the legitimate efforts of states

by allowing for costs and energy requirements to be

considered and allowing states to tailor standards to

their own power plants and needs — EPA must

provide a reasoned analysis of why this alternative

must be rejected.

Yet EPA has refused to consider regulation under

Section 111 as an alternative, instead favoring a

program EPA knows will “level” the power industry

and nationalize power plants. 76 Fed. Reg. at 24,979.

EPA has failed to make this decision in a way

that, as Congress intended, assures that the federal

government will not “unduly interfere with the

legitimate activities of the States” by supplanting the

role of the states going forward and by undoing

decades of past effort. Younger, 401 U.S. at 44.

The decision whether to regulate power plants

under Section 112 is imbued with highly important

federalism concerns that EPA and the court below

have ignored. Accordingly, this case is especially

worthy of review by the Court.

14

4. EPA’s decision to usurp state authority over

power plants and impose a stringent

nationwide standard will be permanent

without the Court’s review at this time.

Certiorari in this case is particularly important in

light of the D.C. Circuit’s New Jersey v. EPA decision.

517 F.3d 574 (D.C. Cir. 2008). In that case, the D.C.

Circuit ruled that EPA’s “appropriate and necessary”

determination cannot be revisited once it is made.

As a result, if the Court denies certiorari, the parties

will not be able to challenge EPA’s determination

again, no matter how devastating the consequences.

Even EPA will not be able to revisit its decision.

As the D.C. Circuit reasoned, Section 112(mX1)(A)

required EPA to “evaluate regulatory options with

care and to meet certain conditions before listing

EGUs as an HAP source under section 112(c\1).”

New Jersey, 517 F.3d at 579. Once this decision is

made, the court held EPA can delist power plants

“only after determining that ‘emissions from no

source in the category or subcategory concerned

exceed a level which is adequate to protect public

health with an ample margin of safety and no

adverse environmental effect will result from

emissions from any source.” Jd. at 579 (quoting

42 U.S.C. § 7412(cX9)) (internal edits omitted). Thus,

the D.C. Circuit reasoned, the only way for EPA to

correct a “listing error” is through “section 112(c)9)’s

delisting process” or a “court-sanctioned vacatur” of

EPA’s original listing decision. Jd. at 583.

As the court below rejected the petitioners’ efforts

to challenge the listing decision, denial of certiorari

in this case would permanently foreclose further

consideration and review of EPA’s decision to regulate

15

power plants under Section 112. Unlike most

petitions for certiorari, therefore, this is the only

opportunity for the Court to review whether EPA

properly fulfilled its obligations to the states before

deciding to regulate power plants under Section 112.

16

CONCLUSION

Twenty-three states and one governor submitted

a petition for a writ of certiorari. Below, fourteen

states and the District of Columbia intervened to

support EPA’s decision. “This alliance of state

authorities suggests that there must be more to

this case than meets the eye.” East Ohio Gas Co., 338

U.S. at 476. Indeed, “[t]his is a real conflict in which

experience shows state control will wither away and

leave the federal rule in possession of the field.” Jd.

at 478. But before that happens, Congress required

that EPA decide how far to intrude upon traditional

state authority in full view of the costs and after

evaluating a more flexible regulatory alternative

that would preserve a greater role for the states.

EPA has failed to do so and has thereby failed to

respect the states and honor their decades of efforts

as Congress intended.

The Court should grant a writ of certiorari.

Respectfully submitted,

J. VAN CARSON

Counsel of Record

GEOFFREY K. BARNES

JOHN D. LAZZARETTI

ROBERT D. CHEREN

SQUIRE PATTON Boacs (US) LLP

4900 Tower

127 Public Square

Cleveland, Ohio 44114

(216) 479-8559

van.carson@squirepb.com

August 15,2014 Counsel for Murray Energy