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

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MICHIGAN, ET AL., PETITIONERS

Vv.

ENVIRONMENTAL PROTECTION AGENCY, ET AL.

_ — —

UTILITY AIR REGULATORY GROUP, PETITIONER

Vv.

ENVIRONMENTAL PROTECTION AGENCY, ET AL.

NATIONAL MINING ASSOCIATION, PETITIONER

Vv.

ENVIRONMENTAL PROTECTION AGENCY, ET AL.

ON WRITS OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF FOR PETITIONERS STATE OF

MICHIGAN, ET AL.

Bill Schuette

Michigan Attorney General

Neil D. Gordon Aaron D. Lindstrom

Assistant Attorney Solicitor General

General Counsel of Record

Environment, Natural P.O. Box 30212

Resources, and Lansing, Michigan 48909

Agriculture Division LindstromA@michigan.gov

(617) 373-1124

Attorneys for Petitioners

[additional counsel listed after conclusion]

QUESTION PRESENTED

Whether the Environmental Protection Agency

unreasonably refused to consider costs’. in

determining whether it is appropriate to regulate

hazardous air pollutants emitted by electric utilities.

PARTIES TO THE PROCEEDING

The Court has consolidated No. 14-46 with Nos.

14-47 and 14-49. Petitioners in No. 14-46, who were

petitioners below, are the States of Michigan,

Alabama, Alaska, Arizona, Arkansas (ex rel. Leslie

Rutledge, Attorney General), Idaho, Indiana, Iowa

(Terry E. Branstad, Governor of the State of Iowa on

behalf of the People of Iowa), Kansas, Kentucky,

Mississippi, Missowri, Nebraska, North Dakota,

Ohio, Oklahoma, South Carolina, Texas, Utah, West

Virginia, and Wyoming, and the Texas Commission

on Environmental Quality, the Texas Public Utility

Commission, and the Railroad Commission of Texas.

Petitioner in No. 14-47 is the Utility Air

Regulatory Group. Petitioner in No. 14-49 is the

National Mining Association.

Respondents who were petitioners in the court of

appeals are (by court of appeals case number):

No. 12-1100: White Stallion Energy Center,

LLC

No. 12-1102: National Black Chamber of

Commerce and Institute for Liberty

No. 12-1170: Eco Power Solutions (USA)

Corporation (voluntarily dismissed on Dec-

ember 6, 2012)

No. 12-1172: Midwest Ozone Group

No. 12-1173: American Public Power Asso-

ciation

No. 12-1174: Julander Energy Company

No. 12-1175: Peabody Energy Corporation

No. 12-1176: Deseret Power Electric Coop-

erative

No. 12-1177: Sunflower Electric Power Corp-

oration

No. 12-1178: Tri-State Generation and

Transmission Association, Inc.

No. 12-1180: Tenaska Trailblazer Partners,

LLC

No. 12-1181: ARIPPA

No. 12-1182: West Virginia Chamber of

Commerce Incorporated; Georgia Association

of Manufacturers, Inc.; Indiana Chamber of

Commerce, Inc.; Indiana Coal Council, Inc.;

Kentucky Chamber of Commerce, Inc.;

Kentucky Coal Association, Inc.; North

Carolina Chamber; Ohio Chamber of

Commerce; Pennsylvania Coal Association;

South Carolina Chamber of Commerce; The

Virginia Chamber of Commerce; The Virginia

Coal Association, Incorporated; West

Virginia Coal Association, Inc.; and

Wisconsin Industrial Energy Group, Inc.

No. 12-1183: United Mine Workers of

America

No. 12-1184: Power4Georgians, LLC

No. 12-1186: The Kansas City Board of

Public Utilities — Unified Government of

Wyandotte County/Kansas City, Kansas

No. 12-1187: Oak Grove Management Comp-

any LLC

No. 12-1188: Gulf Coast Lignite Coalition

No. 12-1189: Puerto Rico Electric Power

Authority

No. 12-1191: Chase Power Development, LLC

No. 12-1192: FirstEnergy Generation Corp.

No. 12-1193: Edgecombe Genco, LLC;

Spruance Genco, LLC

No. 12-1194: Chesapeake Climate Action

Network, Conservation Law Foundation,

Environmental Integrity Project, and Sierra

Club

No. 12-1195: Wolverine Power Supply Coop-

erative, Inc.

No. 12-1196: State of Florida, Common-

wealths of Pennsylvania and Virginia.

Respondents who were respondents in the court

of appeals are the Environmental Protection Agency

(the respondent in all of the cases that were

consolidated below), and Lisa P. Jackson,

Administrator, EPA (who was named as a

respondent in Nos. 12-1174, 12-1189, and 12-1191).

Ms. Jackson ceased to hold the office of EPA

Administrator on February 15, 2013; that office is

currently held by Gina McCarthy.

Respondents who were intervenors in the court

of appeals in support of the respondents there are:

No. 12-1100: the Commonwealth of Mass-

achusetts, the States of Connecticut,

Delaware, Dlinois, Iowa, Maine, Maryland,

New Hampshire, New Mexico, New York,

Rhode Island, and Vermont, the District of

Columbia, the City of New York, the

American Academy of Pediatrics, American

Lung Association, American Nurses

Association, American Public Health

Association, Chesapeake Bay Foundation,

Citizens for Pennsylvania's Future, Clean Air

Council, Conservation Law Foundation,

Environment America, Environmental

Defense Fund, Izaak Walton League of

America, Natural Resources Council of

Maine, Natural Resources Defense Council,

Ohio Environmental Council, Physicians for

Social Responsibility, Sierra Club,

Waterkeeper Alliance, Calpine Corporation,

Exelon Corporation, Public Service

Enterprise Group, lInc., the States of

California, Minnesota and Oregon, the

County of Erie in the State of New York, the

City of Baltimore in the State of Maryland,

the City of Chicago in the State of Dlinois,

and the National Association for the

Advancement of Colored People

No. 12-1147: the State of North Carolina,

National Grid Generation LLC

No. 12-1170: Oak Grove Management Comp-

any LLC (also in Nos. 12-1174 and 12-1194)

No. 12-1174: White Stallion Energy Center,

LLC; Deseret Power Electric Cooperative;

Sunflower Electric Power Corporation; Tri-

State Generation and Transmission

Association, Inc.; Tenaska Trailblazer

Partners, LLC; Power4Georgians, LLC;

Peabody Energy Corporation (also in No.

1194)

No. 12-1194: Eco Power Solutions (USA)

Corporation, National Black Chamber of

Commerce, and Institute for Liberty,

Sunflower Electric Power Corporation, Gulf

Coast Lignite Coalition, Lignite Energy

Council, White Stallion Energy Center, LLC,

Chase Power Development, LLC

vii

TABLE OF CONTENTS

I I sisciitrnctein tibiae bisnicniia iinsrateitteinertinetiinanleime i

nr Os I Sr i caininiealianelanieiniia n

I aa ee vii

IE Ge III ois schiisiinidinicisastiniicisdatiecuinesinciaiinitsigisachcislomtial x

I a 1

SEC RE SOR cle BP MORC EE DNRC An men ND Pee DOR l

Statutory and Regulatory Provisions Involved ......... l

SN a ae 3

I Ir I I aiscsiittticesiiscinessisincisiithcesisnceninaptctalettiste 5

A, Bbeieabeery embed q.....ccacecnccccccecccescecccoscess: 5

1. Sources other than electric utilities........ 6

ee OD ciinncccssisisenesemcistinnnesiennnbinnt 7

B. EPA’s findings in 2000, 2005, and 2012........ 8

DF re SE ictecicrevisessensisenineesaaces 9

I veitteniricersertvccerencseesss 10

i Fe ee INE vc enintnisciinsaccescevesestnacsend 12

cE ee ED CUIIIIE oiecseccpseenciseonsencencse 14

I Or III So veiicenicceccrrinennimechsioninniekcoudaves 16

SITIES ..cahecactaisseeshcnscestivhstebdauieeeasneseeieataaaanidsadaianseaiadanibsdcaes 19

I. By construing the word “appropriate” to

allow it to completely disregard the costs of

regulating, EPA adopted an unreasonable

interpretation of § 7412(n)(1)

A. The text of § 7412(n)(1) requires EPA to

weigh both costs and benefits when

deciding whether it is “appropriate” to

regulate electric utilities.............................. 21

When Congress drafted § 7412(n)(1),

controlling caselaw provided that costs

should be considered under § 7412 unless

Congress expressly directs otherwise. ........ 27

EPA's interpretation that it is reasonable

to ignore costs renders the term

“appropriate” meaningless........................... 33

1. EPA’s reliance on the existence or

severity of public-health hazards did

not give “appropriate” meaning. ........... 34

2. EPA's reference to the availability of

controls is also immaterial to its

interpretation of “appropriate.” ............ 36

II. EPA’s interpretation unreasonably

disregards the structure of § 7412, which

creates distinct regimes that treat electric

utilities differently than other sources.............. 37

Congress’s decision to tie listing decisions

under § 7412(c) to emission quantities

does not make costs irrelevant under

I a 38

The fact that other provisions of § 7412

expressly require consideration of costs

does not render EPA’s interpretation of

§ 7412(n)(1) reasonable.......................0c.cccee. 41

Ill. EPA’s unreasonable interpretation of

“appropriate” imposes costs that are wholly

disproportionate to the benefits......................... 46

TABLE OF AUTHORITIES

Page

Cases

Cannon v. Univ. of Chicago,

ee Se Oe EEE Giiiderccntepenceieintisdndexsectntnesanecead 28

Chevron, U.S.A., Inc. v. Natural Resources

Defense Council, Inc.,

A ls Ge ED we teniceceiicevapainnenipcerinens 14, 19, 20

City of Arlington, Tex. v. FCC,

es ls Se I sek satihconixesesninvecnnesixvcatesacte 20

Clark v. Rameker,

Be Be Gi Se CO edi ceniscnttactsdacsaciiesssmradiocnes 23

Entergy Corp. v. Riverkeeper, Inc.,

Ne le Se I vite dichdasednucectnsevsndvuriaantinseis 30, 31

Hamdan v. Rumsfeld,

ea re Ce ciincisdcdccahcieacsccapiicsanenseonentints 41

In re Public Service Co. of New Hampshire,

es ME PT OD jackatanccondunscintascnismscocessetncunsecce 31

Marx v. Gen. Revenue Corp.,

ee es eI O einiiciedasnseipiasncncsstcéssasginbies 42

Merck & Co. v. Reynolds,

I as aes oe CD Siccie in catcoocknceisrapseacaaginsucians 28

Michigan v. EPA,

A Fe ee Ce Cen vv vnnncescenseccccssness 29

Mississippi ex rel. Hood v. AU Optronics Corp.,

Se ks Marcin odandenscdickemuieensinawixantacen 28

Mossville Envtl. Action Now v. EPA,

ec, pe bl of. foils | neers 7

Motor Vehicle Mfrs. Ass’n v. State Farm Mutual

Auto. Ins. Co.,

Ee ey CUE wcdddnantanedcenenseanentovnibuanen 35, 36, 37

Nat? R.R. Passenger Corp. v. Boston & Maine

Corp..,

Se res Ge IED ski. cceknidantaniatckinivedinncsicnseunecovts 20

Natural Res. Def. Council v. EPA,

— fe § seg ti oie Xen 6

Natural Res. Def. Council, Inc. v. EPA,

824 F.2d 1146 (D.C. Cir. 1987) ........ 18, 27, 28, 29

New Jersey v. EPA,

Oe eae re Cates GR. BD ovvitkcs ceccccvasddvenscccees 12

Russello v. United States,

A I I aha a a hae 41

Ryan v. Gonzales,

a a es Me NOD i ccerostcincccsscsccovctsnsnscseursondons 28

Union Elec. Co. v. EPA,

427 U.S. 246 (1976) ...... ak ka A 26

United States v. Butler,

a i eal al eae 23

United States v. Vonn,

I is ae 42

Util. Air Regulatory Grp. v. EPA,

I Sa Pe CD veccetinvecsunacecnavckissceninietadacnbas 20

Whitman v. American Trucking Ass'n,

ee Ns CUED CIOD cncnccucstcuciesnscouaeiossanens 25, 26, 41

Statutes

te ee ak ale 1

Be his B PTD tetctensicrsniscnenpincananecesenbnasneanseaios 26

ee eG nee ee ee es 10

Ah BETES Ra et A A Nt AS ed passim

as te ED cdnccccircoctone tneemnasdkduansnudbensincal 6, 39

OE EE ee te PE Siicicitisccnsinsncecdiinnsyaretniastionaseveices 38

Be Ee PE iiisdindeicodessecsceceanchvastusentucnisaniebenenin 5

Se se Oe EE ibe cncnsncehenstonsdcdsceciintsemeddasibadean 39

ey ae I chic honcscensiconecadentattcusatabaniiauiae passim

Oe es Oe ED eich banistncasincenciereiicennnes passim

A SE rs Oe I ica ccnsocicokdnsocescrsiausnccnesvanensiaie 38

ee ee Oe I ip ci cacclcuoedduccmiecacenencenaanite 12

A ee te i iiccitnns cote’ caeidipadiiciniabiebanielaba 6, 44

OO a er PD sisitsdcpatinnvnssonesiintecrecsennieencdaciants 6

EE eas Oe Fe IE sisiencdsinnansacicccaubcneveisssecenins passim

Be ae Oe PE sikichocisvecusuccrnnucecnnsceccieies 7, 43, 45

oe Tel |” lene t Aas eioe 41, 43

> pw Ee ge). 6 1 SRS nemenee 41, 43, 45

Oe TEE, BP icici dsavececnssstsssessesisesonsaminenens 45

BE TEA. DS FAT svesiccivesiscnteesnsccesesenss 41, 43, 45

ee are Oe Pi iiiensntenicsnecacedcinccscnscansesmiis passim

Oe Te Fe ID habicicisicicccecccctccnsscisnsees passim

Rik Roe ge kt Sar nE passim

se I ctetencineccctieccicdeasiiaanncaseicein 41, 43, 45

kB Cll SLR ME ne ERE ee oe 27, 28

Tas Oe OE I vaicatcintitcesctctivinsinnintininiiccnanis 7

OE GS ES Teo Rolie wn ePIC NER 7

Be TEA, Tie Ft OO st iictctciniiitirvisacncensionmrptsancevenn 1

Pub. L. No. 91-604, § 112(a)(1), 84 Stat. 1676,

a Tera ERS A re ae ie REESE eh RE Sah 5

Other Authorities

1 A LEGISLATIVE HISTORY OF THE CLEAN AIR ACT

I Fi vcitisiakcncncnntensssiveandsbinantcennens 30

2 A LEGISLATIVE HISTORY OF THE CLEAN AIR ACT

ee Be iiiitciersanesavisidbunissambsssiuien 5, 30

3 A LEGISLATIVE HISTORY OF THE CLEAN AIR ACT

AMENDMENTS OF 1990 (1993) .................cccceceeeees 30

a a, ee IR Fu UII eeditesicdepeecnaccntcniccatncness 8

65 Fed. Reg. 79,825 (Dec. 20, 2000) ..................... 9,10

69 Fed. Reg. 4652 (Jan. 30, 2004) ........cccccccceeeeeeees 7,8

70 Fed. Reg. 15,999 (Mar. 29, 2005)......... 7. 2 15 33

76 Fed. Reg. 24,976 (May 3, 2011) ................... passim

77 Fed. Reg. 9304 (Feb. 16, 2012) .................... passim

A. SCALIA & B. GARNER, READING LAW: THE

INTERPRETATION OF LEGAL TEXTS 107

CI WIE TO vc tice cccnevecssicscenctnsscsesssscsene 42

James E. McCarthy, Congressional Resource

Service, R42144, EPA’s Utility MACT: Will

Cie EArt Glo GmeT 1 GUE) occ ccncescscsccccssseseccsscses 46

New Oxford American Dictionary 76 (2d ed.

Eee AO ae AS nee eee ee eer es 23

Tr. of Oral Arg.

EPA v. EME Homer City Generation, L.P.,

No. 12-1182 (U.S. Dec. 10, 2013) ................... 4, 25

OPINIONS BELOW

The opinion of the U.S. Court of Appeals for the

District of Columbia Circuit is included in the

appendix to the State Petitioners’ petition for a writ

of certiorari at la—105a and is reported at 748 F.3d

1222.

JURISDICTION

The court of appeals entered its judgment on

April 15, 2014. The petitioners filed for writs of

certiorari on July 14, 2014, and this Court granted

the writs on November 25, 2014. This Court's

jurisdiction rests on 28 U.S.C. § 1254(1).

STATUTORY AND REGULATORY

PROVISIONS INVOLVED

The primary provision of the Clean Air Act, 42

U.S.C. §§ 7401—-7671q, at issue in this case is

§ 7412(n)(1)(A):

(n) Other provisions

(1) Electric utility steam generating

units

(A) The Administrator shall perform a study

of the hazards to public health reasonably

anticipated to occur as a result of emissions

by electric utility steam generating units of

pollutants listed under subsection (b) of this

section after imposition of the requirements

of this chapter. The Administrator shall

report the results of this study to the

Congress within 3 years after November 15,

1990. The Administrator shall develop and

describe in the Administrator’s report to

Congress alternative control strategies for

emission which may warrant regulation

under this section. The Administrator shall

regulate electric utility steam generating

units under this section, if the Administrator

finds such regulation is appropriate and

necessary after considering the results of the

study required by this subparagraph.

The other pertinent provisions of the Clean Air

Act are set forth in the State Petitioners’ petition

appendix at 106a—108a. The pertinent provisions of

EPA’s final rule, National Emission Standards for

Hazardous Air Pollutants from Coal- and Oil-Fired

Electric Utility Steam Generating Units, 77 Fed.

Reg. 9304-9513 (Feb. 16, 2012), are set forth in the

State Petitioners’ petition appendix at 109a—11la.

And the pertinent provisions of EPA’s proposed rule

are set forth in the State Petitioners’ petition

appendix at 112a—115a.

INTRODUCTION

Some words, appearing in a vacuum, are

ambiguous. But adding a little context can make

everything clear. Consider, for example, the word

“staple.” It could mean a small fastener for paper, or

it could mean a main element of one’s diet. But if one

said, “I found a staple in my vacuum cleaner,”

possible ambiguities fall away. Context matters.

Here, Congress commanded EPA to decide if it is

“appropriate and necessary” to regulate certain

electric utilities, after considering the effect their

emissions have on public health. EPA contends that

the word “appropriate” is ambiguous, leaving EPA

free to find it appropriate to regulate without any

regard for the regulation’s cost. But all relevant

context—from 42 U.S.C. § 7412(n)(1)(A)’s textual

command, to § 7412’s creation of a regime that treats

electric utilities different from other sources, to

judicial precedent predating § 7412(n)(1)’s enactment

that informs how Congress expected § 7412 to be

interpreted—confirms that Congress did not intend

for EPA to act with deliberate indifference to cost

when answering the basic regulatory question

whether it is appropriate to regulate.

The phrase “appropriate and necessary” shows

that Congress wanted EPA to consider relevant cir-

cumstances when deciding whether it is appropriate

to regulate electric utilities, and cost is a relevant

factor. By refusing to consider costs, and considering

only whether hazards exist—a consideration already

addressed by EPA’s interpretation of “necessary”—

EPA adopts an unreasonable interpretation that

renders the word “appropriate” surplusage.

EPA’s interpretation also disregards § 7412's

structure: while other sources automatically trigger

regulation if they emit a certain quantity of

hazardous air pollutants, there is no automatic

trigger for electric utilities. Instead, electric utilities

may be regulated only if EPA finds such regulation

“appropriate and necessary”; this decision requires

EPA to consider relevant factors, necessarily includ-

ing costs. And EPA’s interpretation ignores the back-

ground rule that costs are a key factor in regulation.

In fact, shortly before Congress passed § 7412(n)(1),

the D.C. Circuit held, in a unanimous en banc

decision, that EPA is not precluded from considering

costs in § 7412 unless Congress expressed a clear

intent to preclude consideration of costs. Section

7412(n)(1)(A) passed just three years after that

decision by the court that Congress had given

exclusive jurisdiction over § 7412’s requirements, yet

it does not express a clear intent to preclude

considering costs. This shows that Congress intended

that costs would be included.

All of this confirms a basic intuition: Congress

did not need to tell EPA that regulating “without any

attention to costs” is not appropriate—that is,

Congress did not need to tell EPA not to regulate in

what one member of this Court recently called “a

fundamentally silly way.” Tr. of Oral Arg. at 13, EPA

v. EME Homer City Generation, L.P., No. 12-1182

(U.S. Dec. 10, 2013). EPA’s decision that it is

“appropriate” to achieve $4 to $6 million in health

benefits at a cost of $9.6 billion is not reasonable,

imposes great expenses on consumers, and threatens

to put covered electric utilities out of business.

The decision of the court of appeals should be

reversed, and EPA’s final rule should be vacated.

STATEMENT OF THE CASE

A. Statutory background

Congress enacted Section 112 of the Clean Air

Act in 1970 to limit the emission of hazardous air

pollutants (HAPs). 42 U.S.C. § 7412. In its original

form, § 7412(a)(1) defined a HAP as an “air pollutant

which in the judgment of the [EPA]

Administrator may cause or contribute to an increase

in mortality or an increase in serious irreversible, or

incapacitating reversible, illness.” Pub. L. No. 91-

604, § 112(a)(1), 84 Stat. 1676, 1685 (1970). The 1970

statute required EPA to publish a list containing

“each hazardous air pollutant for which [it] intends

to establish an emission standard.” Jd. EPA then had

360 days either to promulgate a risk-based emission

standard that “provided an ample margin of safety to

protect the public health” or to explain why the

particular HAP was not hazardous. Id.

Over the next 20 years, EPA promulgated

emissions standards for only seven HAPs. H.R. Rep.

No. 101-490, pt. 1, at 151 (1990), reprinted in 2 A

LEGISLATIVE HISTORY OF THE CLEAN AIR ACT

AMENDMENTS OF 1990, at 3175. This delay was due,

in part, to problems with promulgating risk-based

standards. Id.

To address these issues, Congress amended

§ 7412 as part of the 1990 Amendments to the Clean

Air Act. Rather than requiring EPA to publish a list

of HAPs, Congress itself created a statutory list of

189 HAPs. § 7412(b). And instead of requiring risk-

based emission standards, Congress directed EPA to

promulgate technology-based standards. § 7412(d).

When it made these changes, Congress also

chose to treat electric-utility steam-generating units

(EGUs) differently than other sources of HAPs by

establishing fundamentally different criteria for

whether HAP emissions from electric utilities should

be regulated at all. For sources other than electric

utilities (sources such as oil refineries, factories, and

chemical manufacturing plants), Congress itself

decided when they must be regulated. For electric

utilities, in contrast, Congress directed EPA to

exercise its judgment and to decide whether such

regulation is “appropriate.” § 7412(n)(1)(A).

1. Sources other than electric utilities

For sources other than electric utilities, Congress

required EPA to regulate “major sources” of

hazardous air pollutants based on the quantity of

HAPs they emit. A “major source” is defined as any

stationary source that emits more than a specific

tonnage of HAPs: 10 tons per year or more of any

single hazardous air pollutant or 25 tons per year or

more of any combination of hazardous air pollutants.

§ 7412(a)(1). EPA is required to publish a list of

categories of major sources based solely on whether

their HAP emissions exceed those numeric

thresholds. § 7412(c)(1). Once EPA lists a source

category, Congress directed it to promulgate

technology-based emission standards for sources in

the listed category under § 7412(d)(1). Natural Res.

Def. Council v. EPA, 529 F.3d 1077, 1079 (D.C. Cir.

2008).

Congress created a two-step process for setting

emission standards for listed source categories based

on the maximum achievable control technology, or

“MACT,” for sources in each category. In step one,

Congress instructed EPA to set a minimum

emissions-reduction level, or “floor,” based on the

emission reductions that could be achieved by the

best controlled sources in that category. § 7412(d)(3).

In step two, Congress directed EPA to determine

whether a more restrictive standard is achievable (a

“beyond-the-floor” reduction standard) based on

costs, energy requirements, and other factors.

§ 7412(d)(2); Mossville Envtl. Action Now v. EPA, 370

F.3d 1232, 1235—36 (D.C. Cir. 2004).

2. Electric utilities

Congress created a different approach for electric

utilities. It directed EPA to decide whether electric

utilities should be regulated in light of the other

requirements that the 1990 Amendments to the

Clean Air Act imposed on electric utilities (but not on

other major sources). Those requirements include a

new program to address acid rain. 42 U.S.C. § 7651

et seq. To meet the requirements of that program,

many EGUs installed “scrubbers” that reduce HAP

emissions along with the sulfur-dioxide emissions

that contribute to acid rain. 79 Fed. Reg. 15,999,

16,003 (Mar. 29, 2005). The purpose of the Acid Rain

Program is to reduce the adverse effects of acid

deposition by, among other things, lowering

emissions of sulfur dioxide from electric utilities by

50% from 1980 levels. 42 U.S.C. § 7651(b); 69 Fed.

Reg. 4652, 4697 (Jan. 30, 2004). The centerpiece of

the program is a cap-and-trade program designed to

achieve those reductions at the lowest cost. 69 Fed.

Reg. at 4697; 63 Fed. Reg. 714, 715 (Jan. 7, 1998).

In hght of the other programs already regulating

electric utility emissions, Congress did not require

regulation of electric utilities if their HAP emissions

exceed the 10- or 25-ton thresholds applicable to

other major sources. Instead, Congress established

two conditions for EPA to satisfy before regulating

EGUs. First, EPA must conduct a study—commonly

referred to as the Utility Study—of “the hazards to

public health reasonably anticipated to occur as a

result of emissions” of HAPs from electric utilities

“after imposition of the requirements” of the Act.

§ 7412(n)(1)(A). Second, Congress provided that EPA

may regulate electric utilities under § 7412 only “if

the Administrator finds such _ regulation is

appropriate and necessary after considering the

results of the study.” Jd. (emphasis added). Instead of

Congress deciding when electric utilities must be

regulated and itself striking the balance between

costs and benefits, Congress directed EPA to decide

to regulate electri. utilities only if, after exercising

its judgment and discretion, it finds that regulation

is “appropriate.”

B. EPA’s findings in 2000, 2005, and 2012

The regulation at issue in this case has a long

and complex history. In just a dozen years, EPA has

issued a regulatory finding that it is appropriate and

necessary to regulate electric utilities under § 7412,

reversed that finding, had its reversal vacated in

litigation, and issued an “appropriate” finding yet

again.

1. EPA’s 2000 finding

On December 20, 2000, EPA issued a finding

that regulation of emissions of hazardous air

pollutants from electric utilities is appropriate and

necessary under § 7412(n)(1)(A). 65 Fed. Reg. 79,825

(Dec. 20, 2000). EPA based its finding on the results

of the Utility Study it completed in 1998 that

evaluated the hazards to public health from HAPs

emitted by EGUs. EPA assessed the hazards and

determined that mercury is the HAP of greatest

concern. Id. at 79,827.

Mercury emitted into the atmosphere from EGUs

and other sources “eventually deposits onto land or

water bodies.” Jd. After deposition, mercury changes

into methylmercury, a form that “biomagnifies in the

aquatic food chain” and accumulates in fish. Id.

When people eat fish with methylmercury, it is

absorbed into the blood and transferred to the brain.

According to EPA, “the greatest concern is the

consumption of mercury contaminated fish by women

of childbearing age” because “the developing fetus is

the most sensitive to the effects of methylmercury.”

Id. at 79,829. Children born to women exposed to

“relatively high levels of methylmercury during

pregnancy have exhibited a variety of developmental

neurological abnormalities,” including delayed

developmental milestones. Jd.

When it made its finding in December 2000, EPA

did not interpret the term “appropriate.” Instead, it

found it was appropriate to regulate HAP emissions

from coal- and oil-fired electric utilities because

EGUs “are the largest domestic source of mercury

emissions, and mercury in the environment presents

significant hazards to public health and environ-

ment.” Jd. at 79,830. EPA also found that “it is

appropriate to regulate HAP emissions from such

units because EPA has identified a number of control

options which EPA anticipates will effectively reduce

HAP emissions from such units.” Jd. In light of its

finding that it was appropriate to regulate, EPA

added coal- and oil-fired EGUs to the list of regulated

source categories under § 7412(c). Jd.

2. EPA’s 2005 finding

In 2005, EPA reached the opposite conclusion. It

revised its earlier finding and concluded it is neither

appropriate mor necessary to regulate electric

utilities under § 7412. 70 Fed. Reg. 15,994 (Mar. 29,

2005). In light of its revised finding, EPA removed

coal- and oil-fired EGUs from the § 7412(c) list. Id.

EPA noted that, in deciding whether it is

“appropriate” to regulate electric utilities, Congress

directed the agency to consider the results of the

study of health hazards reasonably anticipated to

occur “after imposition of the requirements” of the

Act. EPA interpreted the phrase “after imposition of

the requirements” of the Act to include both

requirements already in effect and those that EPA

“reasonably anticipates will be implemented and will

result in reductions of utility HAP emissions.” Jd. at

15,999. Because EPA was also promulgating a new

rule requiring reductions in mercury emissions from

electric utilities under a different section of the Act

(§ 7411), it concluded it was not appropriate to

regulate EGUs under § 7412. Id. at 16,004. EPA

concluded that this new rule, the Clean Air Mercury

Rule, “will result in levels of utility [mercury]

emissions that do not result in hazards to public

health.” Id.

In addition, EPA provided for the first time an

interpretation of the term “appropriate.” Quoting

Webster’s dictionary, it noted that “appropriate”

means “especially suitable or compatible” and that

“[djetermining whether something is ‘especially

suitable or compatible’ in a particular situation

requires consideration of different factors.” Jd. at

16,000. Although the “paramount factor” is the

hazards to public health from EGU HAP emissions

remaining after imposition of the requirements of

Act, EPA recognized there may be other relevant

factors that would lead it to conclude that it is not

“especially suitable” or appropriate to regulate EGUs

even if such hazards existed. For example, “it might

not be appropriate to regulate remaining utility HAP

emissions under [§ 7412] if the health benefits

expected as the result of such regulation are margin-

al and the cost of such regulation is significant and

therefore substantially outweighs the benefits.” Id. at

16,000—01 (emphasis added).

Further, EPA emphasized that Congress

“entrusted EPA to exercise judgment by evaluating

whether regulation of [EGUs] under [§ 7412] is, in

fact, ‘appropriate’” and that, in making that

judgment, the agency is to consider “all relevant

facts and circumstances,” including costs. Jd. at

16,001. And although § 7412(n)(1)(A) requires that

EPA only “consider” the results of the Utility Study

on health hazards, EPA noted that this “mild

direction” contrasts with tthe “considerable

discretion” Congress directed the agency to exercise

in deciding whether regulation is “appropriate.” Jd.

at 15,998.

In 2008, the U.S. Court of Appeals for the D.C.

Circuit vacated EPA’s removal of electric utilities

from the § 7412(c) list of regulated source categories.

New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008).

The court of appeals concluded that Congress

established specific requirements in § 7412(c)(9) for

removing any source category from the § 7412(c) list

and that EPA had not satisfied those requirements.

Id. at 581-82.

3. EPA’s 2012 finding

In 2012, EPA issued the final rule being

challenged in this case: National Emission Standards

for Hazardous Air Pollutants from Coal- and Oil-

Fired Electric Utility Steam Generating Units, 77

Fed. Reg. 9304 (Feb. 16, 2012). When proposing the

rule, the agency rejected its 2005 position that it

could consider all relevant factors, including costs, in

deciding whether regulation of electric utilities was

“appropriate.” Instead, EPA determined it “must find

that it is appropriate to regulate EGUs if it

determines that any single HAP emitted by utilities

poses a hazard to public health or the environment.”

76 Fed. Reg. 24,976, 24,988 (May 3, 2011) (emphasis

added). EPA also interpreted “appropriate” to

preclude any consideration of costs: “We further

interpret the term ‘appropriate’ to not allow for the

consideration of costs in assessing whether HAP

emissions from EGUs pose a hazard to public health

or the environment.” Jd.

In the final rule, the agency explained that it

viewed its “appropriate and necessary” finding under

§ 7412(n)(1)(A) to regulate electric utilities as

analogous to its listing decisions for other source

categories under § 7412(c)—listing decisions that

turn solely on whether a source’s HAP emissions

exceed the 10- and 25-tons per year thresholds.

According to EPA, “nothing in the statute required

us to consider costs” when listing source categories

other than electric utilities under § 7412(c). 77 Fed.

Reg. at 9327. EPA concluded that “it is reasonable to

make the listing decision [for electric utilities],

including the appropriate determination, without

considering costs.” Jd. In other words, no matter how

slight the hazard or how high the costs, such

regulation was “appropriate.”

Although EPA refused to consider costs when

making its appropriate finding, it estimated the costs

and benefits of the final rule pursuant to Executive

Order 13563, “Improving Regulation and Regulatory

Review.” 77 Fed. Reg. at 9305-06. EPA was unable

to quantify all the costs and benefits. But for those

costs it was able to calculate, it determined that the

“annual social costs” (i.e., the compliance costs for

electric utilities that will be borne by consumers) are

$9.6 billion. Jd. It also calculated that the annual

benefits from lower HAP emissions (that is, the

health benefits from reducing mercury in fish) to be

only $4 to $6 million. Jd. In other words, the ratio of

costs to benefits from reducing HAP emissions is

between 2,400 to 1 and 1,600 to 1. But because EPA

interpreted “appropriate” to mean it must regulate

electric utilities if it determines one HAP poses a

hazard to public health or the environment, the

agency refused to consider the fact that the costs of

the rule are wholly disproportionate to the health

benefits.

C. The D.C. Circuit’s ruling

Michigan, 22 other States, and one governor filed

petitions for review in the D.C. Circuit, challenging

the final rule and, more specifically, EPA’s refusal to

consider costs when deciding whether it is

“appropriate” to regulate HAP emissions from

electric utilities under § 7412(n)(1)(A).

The D.C. Circuit, in a divided opinion, denied the

petitions. Applying the standard of review set forth

in Chevron, U.S.A., Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837 (1984), the court of

appeals determined that the term “appropriate” was

ambiguous, that Congress did not explicitly require

EPA to consider costs, and that EPA reasonably

refused to consider costs in determining whether it is

appropriate to regulate hazardous air pollutants

emitted by electric utilities.

In addition, the court of appeals determined that

Congress accounted for costs by directing EPA to

consider costs under § 7412(d)(2) when setting

“beyond-the-floor” emission-reduction standards for

listed source categories that are subject to

regulation. According to the majority, EPA's decision

to focus its “appropriate” determination on factors

related to public health and to refuse to consider

costs when deciding whether to regulate electric

utilities at all “properly puts the horse before the

cart[.]” Mich. Pet. App. 31a. Under this approach,

EPA could find it appropriate to regulate an industry

even if it may impose billions in costs to achieve

minimal public-health benefits.

Judge Kavanaugh dissented. In his view,

“whether one calls it an impermissible interpretation

of the term ‘appropriate’ at Chevron step one, or an

unreasonable interpretation or application of the

term ‘appropriate’ at Chevron step two, or an

unreasonable exercise of agency discretion under

State Farm,” it was “entirely unreasonable for EPA

to exclude consideration of costs[.]” Mich. Pet. App.

78a—79a. Cost, he explained, is an “essential factor”

in deciding whether it is appropriate to regulate, and

“consideration of costs is a central and well-

established part of the regulatory decisionmaking

process.” Mich. Pet. App. 80a, n.5, 83a. And,

although the costs of EPA’s rule are, as the State

Petitioners emphasized, wholly disproportionate to

the health benefits produced, under EPA's

unreasonable interpretation of “appropriate,” it is

“irrelevant how large the costs are or whether the

benefits outweigh the costs.” Mich. Pet. App. 84a.

In addition, Judge Kavanaugh viewed as “a red

herring” the majority’s reliance on costs being

considered when setting beyond-the-floor standards.

Mich. Pet. App. 85a. If EPA does not take costs into

account when finding it is appropriate to regulate

electric utilities, then it will also not take costs into

account “at the first, ‘setting the floor’ stage of the

MACT program. And meeting that floor will be

prohibitively expensive, particularly for many coal-

fired electric utilities, regardless of whether EPA

decides to go further and set a ‘beyond-the-floor’

standard.” Mich. Pet. App. 85a. The real world

consequence of complying with the minimum

stringency standards of the MACT floor is to require

enormous expenditures of electric utilities and “will

likely knock a bunch of coal-fired electric utilities out

of business.” Mich. Pet. App. 85a.

Moreover, Judge Kavanaugh noted that if

Congress had intended for EPA to consider costs only

when setting beyond-the-floor standards (and not

when making the threshold finding of whether it is

appropriate to regulate electric utilities at all), “it

would have done one of two things: It would have

either automatically regulated electric utilities under

the MACT program, as it did with other sources, or

provided that regulation under the program would be

automatic if the three-year study found that these

sources indeed emitted hazardous air pollutants.”

Mich. Pet. App. 86a. The fact that Congress chose

neither of these options and instead directed EPA to

regulate electric utilities only if it finds regulation is

appropriate, “reinforces the conclusion that Congress

intended EPA to consider costs in deciding whether

to regulate electric utilities at the threshold, and not

simply at the second beyond-the-floor stage of the

MACT program.” Mich. Pet. App. 86a.

SUMMARY OF ARGUMENT

When Congress wrote § 7412(n)(1)(A), it created

a two-step process. The first step requires EPA to

conduct a study of the public-health hazards; the

second step requires EPA to decide whether

regulation under §7412 “is appropriate and

necessary’ after considering the results of the study.

This two-step process cannot reasonably be read, as

EPA does, to exclude all consideration of the costs of

regulation. The study required by the first step

focuses on the benefits side of the cost-benefits

balance, because it examines the health benefits that

regulation could produce. But EPA has fully

accounted for these benefits through its interpret-

ation of the term “necessary’"—-EPA concludes that

regulation is “necessary” if regulating would produce

public-health benefits. 77 Fed. Reg. at 9363 (“HAP

emissions from U.S. EGUs are reasonably antici-

pated to pose hazards to public health; therefore, it is

necessary to regulate EGUs under CAA.”). EPA’s

interpretation thus leaves the word “appropriate”

with nothing to do. E.g., 76 Fed. Reg. at 24,987

(“[W]e interpret the statute to require the Agency to

find it is appropriate to regulate EGUs under

{§ 7412] if the Agency determines that the emissions

of one or more HAP emitted from EGUs pose an

identified or potential hazard to public health or the

environment at the time the finding is made.”)

(emphasis added). Depriving a statutory word of all

meaning is not a reasonable interpretation of the

statute.

EPA’s approach cannot be reconciled with

Congress’s decision to use the broad term

“appropriate.” The word “appropriate” by definition

covers relevant circumstances, and costs are a

relevant circumstance for a decision whether it is

“appropriate” to regulate. Indeed, the very next

subsection of the statute requires EPA to conduct a

second study and to report to Congress on “the costs”

of technologies that can control “mercury emissions

from electric utility steam generating units.”

§ 7412(n)(1)(B). Looking at § 7412(n)(1) as a whole,

Congress made it clear that EPA must look not just

at the benefits of regulating electric utilities, but also

at whether it is appropriate to do so, which means

looking at the costs too.

Other context confirms this. In 1987, the D.C.

Circuit held, in a unanimous en banc opinion

interpreting § 7412, that EPA is allowed to consider

costs unless the statute expresses a clear congress-

ional intent to preclude consideration of costs.

Natural Res. Def. Council, Inc. v. EPA, 824. F.2d

1146, 1163 (D.C. Cir. 1987) (en banc). Thus, when

Congress enacted § 7412(n)(1) just three years later,

in 1990, it was against the backdrop of this

controlling precedent by the court to which Congress

itself gave exclusive jurisdiction over the require-

ments of § 7412. In this context, the fact that

Congress did not expressly preclude consideration of

costs in § 7412(n)(1) shows that Congress intended

EPA to consider costs when deciding whether it was

appropriate to regulate. And this background

principle is consistent with ordinary principles of

regulation. which recognize that costs are a relevant

considera..on.

The structure of § 7412 also confirms that costs

are relevant to § 7412(n)(1)’s “appropriate” finding.

Congress created one regime, under subsection (c)(1),

for sources other than electric utilities—sources

including petroleum refineries and other major

industrial sources of hazardous air pollutants. Under

the (c)(1) regime, Congress itself decided when reg-

ulation is appropriate—when it is worth the costs—

by imposing quantitative thresholds for regulation.

Specifically, if sources other than electric utilities

emit more than a certain number of tons of

emissions, then EPA must regulate them. But

Congress created a separate regime in subsection

(n)(1) for electric utilities, and in the (n)(1) regime it

directed EPA to decide whether regulation is

appropriate. This separate regime shows that

Congress expected EPA to exercise judgment in

deciding whether it is appropriate to regulate, not

simply to automatically regulate if regulating could

produce any benefit, regardless of the cost.

EPA’s interpretation is an unreasonable,

impermissible interpretation of § 7412(n)(1). It

deprives Congress’s command that EPA decide

whether regulation is appropriate of any meaning

and instead allows EPA to impose costs that are

wholly disproportionate to their benefits—to impose

$9.6 billion in costs on Americans who consume

electricity for a benefit of only $4 to $6 million worth

of HAP emission reductions. EPA’s rule, which

threatens to drive a number of coal-fired electric

utilities out of business, should be vacated.

ARGUMENT

I. By construing the word “appropriate” to

allow it to completely disregard the costs of

regulating, EPA adopted an unreasonable

interpretation of § 7412(n)(1).

Under the Chevron doctrine, EPA is entrusted

with a large measure of discretion as to how it

interprets the statutes it administers. But that

discretion is not unlimited. If Congress has “directly

spoken to the precise question at issue,” then the

agency, like the courts, “must give effect to the

unambiguously expressed intent of Congress.”

Chevron, 467 U.S. at 842-43. And even if “the

statute is silent or ambiguous with respect to the

specific issue,” the agency may only adopt “a

permissible construction of the statute.” Jd.

Thus, “[e]ven under Chevron’s deferential

framework, agencies must operate ‘within the

bounds of reasonable interpretation.’” Util. Air

Regulatory Grp. v. EPA, 134 S. Ct. 2427, 2442 (2014)

(quoting City of Arlington, Tex. v. FCC, 133 S. Ct.

1863, 1868 (2013)). “[A]n agency interpretation that

is ‘inconsisten|[t] with the design and structure of the

statute as a whole’ does not merit deference.” Jd.

(citation omitted); see also Nat? R.R. Passenger Corp.

v. Boston & Maine Corp., 503 U.S. 407, 417 (1992)

(“In ascertaining whether the agency’s interpretation

is a permissible construction of the language, a court

must look to the structure and language of the

statute as a whole.”).

Here, EPA’s interpretation is unreasonable

because it is inconsistent both with § 7412(n)(1)’s

text and with § 7412’s structure as a whole. Congress

instructed EPA in § 7412(n)(1)(A) to determine

whether it is “appropriate” to regulate hazardous air

pollutants emitted by electric utilities, and it is not

reasonable to interpret that instruction to allow that

determination to be made with deliberate

indifference to the regulation’s cost.

A. The text of § 7412(n)(1) requires EPA to

weigh both costs and benefits when

deciding whether it is “appropriate” to

regulate electric utilities.

Section 7412(n)(1)(A) requires EPA to take two

distinct steps before it may regulate hazardous air

pollutants emitted by steam-generating electric

utilities. Congress instructed EPA first to evaluate

the benefits of regulating—i.e., the public-health

hazards that could be reduced—and then to use its

judgment to decide whether it is “appropriate and

necessary’ to regulate. It is unreasonable to distill

this two-step process into solely a consideration of

the benefits of regulating, when Congress told EPA

to look not just at the hazards that could be reduced,

but also at whether it is “appropriate and necessary”

to regulate—terms that cover both the costs and

benefits of regulating. It is unreasonable to interpret

EPA’s obligation to determine whether it is

“appropriate” to regulate as precluding EPA from

considering a fundamental regulatory factor: the cost

of regulation.

In the first step, Congress directed EPA to study

health hazards relating to EGU emissions:

[EPA] shall perform a study of the hazards to

public health reasonably anticipated to occur

as a result of emissions by electric utility

steam generating units of pollutants listed

under subsection (b) of this section after

imposition of the requirements of {the Act].

[§ 7412(n)(1){A).]

In other words, this first step requires EPA to

identify the public-health hazards that exist because

of these HAP emissions—hazards that would remain

if EPA were to do nothing. In short, this step focuses

on the consequences of not regulating, or, to put it

affirmatively, on the benefits that regulating to

reduce those risks could provide.

If all Congress had cared about was the potential

public-health benefits of regulating, it would have

stopped there. But it did not. Instead, it required

EPA to take a second step before regulating:

[EPA] shall regulate electric utility steam

generating units under this section, if the

Administrator finds such regulation is

appropriate and necessary after considering

the results of the study required by this

subparagraph. [§ 7412(n)(1)(A).]

To begin with the word “necessary,” EPA has

read this term to be satisfied by the fact that the

Utility Study did identify public-health hazards. The

study, remember, examined “the hazards to public

health reasonably anticipated to occur as a result of

emissions by electric steam generating utilities of

[HAP emissions] after imposition of the

requirements of this chapter.” § 7412(n)(1)(A). EPA’s

explanation for why it concluded that regulation is

“necessary” parallels that language: “HAP emissions

from U.S. EGUs are reasonably anticipated to pose

hazards to public health; therefore, it is necessary to

regulate EGUs under CAA.” 77 Fed. Reg. at 9363;

see also 76 Fed. Reg. at 24,987. Thus, EPA has

concluded that regulation is always “necessary” if

hazards to public health exist.

The fact that EPA equates the “necessary”

finding with the results of the public-health study is

significant. If both the study and the “necessary”

finding depend solely on one factor—the existence of

public-health hazards—then the word “appropriate”

must direct EPA to look at some factor other than

public health. Otherwise, the term “appropriate”

would be superfluous. See Clark v. Rameker, 134 S.

Ct. 2242, 2248 (2014) (“a statute should be construed

so that effect is given to all its provisions, so that no

part will be inoperative or superfluous”) (internal

quotation marks omitted). In short, if, as EPA con-

tends, the word “appropriate” hinges solely on

whether there are public-health hazards that could

be reduced—just as it says the word “necessary”

does—then the word “appropriate” would be mere

surplusage. But see United States v. Butler, 297 U.S.

1, 65 (1936) (“These words cannot be meaningless,

else they would not have been used.”).

Congress included the word “appropriate” for a

reason: to direct EPA to exercise its judgment, based

on relevant factors beyond public health, when

deciding whether to regulate electric utilities

further—that is, beyond the many requirements the

Clean Air Act already imposes on them. And

Congress chose a broad term to guide the decision to

regulate: “appropriate.” § 7412(n)(1)(A); see also 76

Fed. Reg. at 24,988 (EPA stating that “the term

‘appropriate’ is extremely broad”).

On its face, the term “appropriate” directs EPA

to determine whether regulation is “‘suitable or

proper under the circumstances.” New Oxford

American Dictionary 76 (2d ed. 2005) (emphasis

added). This common meaning of the word—one EPA

accepts, 77 Fed. Reg. at 9327—-shows that Congress

wanted EPA to consider the circumstances that

would normally inform the decision whether or not to

regulate. And when deciding whether it is

appropriate to impose regulation, a reasonable

person would consider both the pros and cons—in

other words, the benefits and costs—of regulation.

In fact, the very next subsection of (n)(1)

confirms that Congress thought costs were relevant

to this specific issue—that is, to regulating steam-

generating electric utilities. Section 7412(n)(1)(B)

requires EPA to study “the costs of [control]

technologies” that could be used to reduce mercury

emissions from electric utilities. Specifically, it

directs EPA to conduct “a study of mercury emissions

from electric utility steam generating units and

other sources,” including “technologies which are

available to control such emissions[] and the costs of

such technologies.” § 7412(n)(1)(B) (emphasis added).

And while (n)(1)(B) gives EPA an additional year to

complete this mercury study (compared to the time

allotted for the public-health-hazards study in

subsection (A)), it is a specific directive requiring

EPA to study “the costs” that regulatory controls

would impose on electric utilities.

This- context further confirms that Congress

expected EPA to consider the costs, not to

intentionally ignore them. Indeed, if EPA were

correct in its conclusion that § 7412(n)(1) can

reasonably be read as meaning that costs are

irrelevant to whether it is appropriate to regulate

electric utilities, it would be hard to understand why

Congress would require this study into the costs of

control technologies.

All of this goes to show that Congress was not

silent on whether EPA should consider costs when

deciding whether regulating electric utilities is

appropriate. And while Congress did not explicitly

use the word “costs” in § 7412(n)(1)(A), it might well

have thought that it was not necessary to spell ou

the background principle that costs are a relevant

factor that agencies must consider when deciding

whether it is “appropriate” to regulate. Put another

way, Congress might have thought it did not need to

expressly remind EPA not to regulate “‘in a

fundamentally silly way,” by regulating “ ‘without

any attention to costs.’” Mich. Pet. App. 80a (quoting

Justice Kagan in Tr. of Oral Argument at 13, EPA v.

EME Homer City Generation, L.P., No. 12-1182 (U.S.

Dec. 10, 2013)). And in any event, Congress’s use of

the word “costs” in § 7412(n)(1)(B), confirms that

Congress thought costs were relevant and part of the

calculus in determining whether regulation is

“appropriate.”

The two-step process set out in subsection

(n)(1)(A) and the directive to study costs in

subsection (n)(1)(B) show that Congress intended

EPA to consider costs when deciding whether it is

“appropriate” to regulate electric utilities under

§ 7412(n)(1). Taken together, this shows a clear

“textual commitment of authority to the EPA to

consider costs[.]” See Whitman v. American Trucking

Ass'n, 531 US. 457, 468 (2001).

This broad language is quite different from the

language this Court addressed in Whitman. There

the Court, finding no authorization in the relevant

text, held that EPA could not consider costs when

setting national ambient air quality standards under

§ 7409(b)(1). 531 U.S. at 471. The statutory provision

directed EPA to set standards “requisite to protect

the public health” with an “adequate margin of

safety.” Id. at 465. The Court concluded that these

statutory phrases do not “leave room” for EPA to

consider costs when setting the standards. 531 U.S.

at 468. Because costs are “both so indirectly related

to public health and so full of potential for canceling

the conclusions drawn from direct health effects,”

Congress surely would have expressly mentioned

costs if they were to be considered. Id. at 469. The

Court, therefore, determined that § 7409(b)(1)

neither explicitly nor implicitly allowed EPA to

evaluate costs when setting the air quality

standards. Id. at 467-69.

In the statutory language at issue in Whitman,

Congress limited EPA’s discretion in § 7409(b)(1) by

requiring standards “requisite to protect the public

health” with an “ample margin of safety,” phrases

that both focus solely on the benefits side of the cost-

benefit balance. By contrast, the statutory criterion

Congress used in § 7412(n)(1)(A)}—“appropriate’—

covers both sides of the cost-benefit balance. In other

words, when Congress identifies only benefits for

EPA to consider, like protecting public health, it

presumably intends to preclude consideration of

costs that would cut directly against protecting

public health. See id.; see also Union Elec. Co. v.

EPA, 427 U.S. 246, 257 (1976) (when Congress

directs EPA to consider eight specific criteria when

deciding whether to approve state implementation

plans under the Clean Air Act, EPA may not

consider other factors—such as cost—that Congress

did not identify). But when Congress instructs EPA

to decide whether regulation is “appropriate,”

without enumerating any factors to limit EPA’s

judgment and discretion, it intends for EPA to

consider costs too.

B. When Congress drafted § 7412(n)(1),

controlling caselaw provided that costs

should be considered under § 7412

unless Congress expressly’ directs

otherwise.

As Judge Kavanaugh explained in his dissent,

“consideration of cost is commonly understood to be a

central component of ordinary regulatory analysis,

particularly in the context of health, safety, and

environmental regulation.” Mich. Pet. App. 79a.

“Congress legislated against the backdrop of that

common understanding when it enacted this statute

in 1990.” Id.

But this understanding was more than a

background princ'ple. Before the 1990 enactment of

§ 7412(n)(1), the en banc D.C. Circuit—the court of

appeals to which Congress gave exclusive juris-

diction over any petition addressing a “requirement

under section 7412,” 42 U.S.C. § 7607—had held that

EPA is allowed to consider costs under § 7412 unless

there is clear congressional intent to preclude

consideration of costs. Natural Res. Def. Council, Inc.

v. EPA, 824 F.2d 1146, 1163 (D.C. Cir. 1987) (en

banc).

When interpreting statutes, courts “presume

that Congress is aware of existing law when it passes

legislation.” Mississippi ex rel. Hood v. AU Optronics

Corp., 134 S. Ct. 736, 742 (2014) (internal quotation

marks omitted). This presumption includes the

assumption that Congress “‘is aware of relevant

judicial precedent.’” Ryan v. Gonzales, 133 S. Ct.

696, 703 (2013) (quoting Merck & Co. v. Reynolds,

130 S. Ct. 1784, 1795 (2010)). And that presumption

applies to the precedents of lower federal courts.

E.g., Cannon v. Univ. of Chicago, 441 U.S. 677, 696

& n. 21 (1979) (referring to decisions by the Fifth

Circuit and by district courts); Merck & Co., 559 U.S.

at 647—48 (referring co decisions by the courts of

appeals).

That presumption is particularly applicable in

this case for an additional reason: in 1970, Congress

gave the D.C. Circuit exclusive jurisdiction over

multiple components of the Clean Air Act. And as is

specifically relevant here, Congress specified that a

“petition for review of action of the Administrator in

promulgating any emission standard or

requirement under section 7412 may be filed only

in the United States Court of Appeals for the District

of Columbia.” 42 U.S.C. § 7607.

In 1987 (three years before Congress enacted

§ 7412(n)(1) into law), the en banc D.C. Circuit

unanimously held that EPA may consider costs

under § 7412 so long as there is no clear statement in

the statute precluding consideration of costs. Natural

Res. Def. Council, Inc. v. EPA, 824 F.2d 1146, 1163

(D.C. Cir. 1987) (en banc) (“Since we cannot discern

clear congressional intent to preclude consideration

of cost and technological feasibility in setting

emission standards under section 112, we necessarily

find that the Administrator may consider these

factors.”); see also Michigan v. EPA, 213 F.3d 663,

678 (D.C. Cir. 2000) (“It is only where there is ‘clear

congressional intent to preclude consideration of cost’

that we find agencies barred from considering

costs.”) (quoting NRDC, 824 F.2d at 1163).

Putting these pieces together, Congress knew (or

is presumed to know) that controlling judicial

precedent—unanimous en banc precedent, no less,

from the court with exclusive jurisdiction over the

relevant issue—meant that Congress would have to

clearly express an intent in § 7412(n)(1) to preclude

EPA from considering costs if it wanted that

outcome.

Congress did not do that. It did not clearly

express any intent to preclude the consideration of

costs. Quite the opposite, Congress directed EPA to

consider whether it is “appropriate” to regulate

electric utilities, using a broad term to require EPA

to consider relevant factors. Moreover, Congress

knew that one relevant factor (indeed, a key factor) is

the cost of regulation. Given this specific context

about how Congress expected courts to read § 7412,

Congress’s decision not to expressly preclude the

consideration of costs in § 7412(n)(1) shows that

Congress intended EPA to consider costs under

§ 7412(n)(1) when deciding whether it is appropriate

to regulate.

The legislative history also confirms that

Congress intended EPA to consider costs. Under the

Senate proposal, electric utilities would have been

regulated like other major sources; they would have

been listed as major sources if their emissions

exceeded the 10- and 25-ton thresholds, and EPA

would then be required to promulgate MACT

emission standards. See 3 A LEGISLATIVE HISTORY OF

THE CLEAN AIR ACT AMENDMENTS OF 1990, at 4119,

4418-34 (1993). The House of Representatives,

however, modified the Senate bill to include what

became § 7412(n)(1)(A), and based regulation on the

Utility Study and EPA’s subsequent determination

that regulation was “appropriate” and necessary. See

2 A LEGISLATIVE HISTORY OF THE CLEAN AIR ACT

AMENDMENTS OF 1990 at 2148—49.

In the Conference Committee, the House version

prevailed. During the House debate on the

conference report, Congressman Oxley, sponsor of

the House version Congress enacted, explained that

the goal of § 7412(n)(1)(A) was to provide “protection

of the public health while avoiding the imposition of

excessive and unnecessary costs on _ residential,

industrial, and commercial consumers of electricity.”

1 A LEGISLATIVE HISTORY OF THE CLEAN AIR ACT

AMENDMENTS OF 1990 at 1417 (emphasis added). In

other words, Congress intended that, when deciding

whether regulation is appropriate, EPA is to consider

both public health and the costs of regulation. EPA’s

refusal to consider costs is contrary to that clear

congressional intent.

The common-sense principle that ignoring costs

is an irrational way to regulate is one that this Court

has also recently affirmed. In Entergy Corp. v.

Riverkeeper, Inc., 556 U.S. 208 (2009), this Court

noted that, although Congress did not explicitly

require EPA to perform a formal balancing of costs

and benefits when setting standards, it may be

unreasonable and irrational for EPA not to consider

costs at all. In Entergy, EPA used @ cost-benefit

analysis when setting standards that reflect the

“best technology available” for minimizing adverse

environmental impacts from cooling water intake

structures used by large power plants. The Court

concluded that EPA reasonably interpreted “best

technology available” to allow it to consider the

relationship between the technology’s costs and the

environmental benefits produced. Although EPA did

not engage in a strict balancing of costs and benefits

and adopted standards whose costs were greater

than their benefits, the Court noted that for more

than 30 years EPA had determined it was “not

reasonable to ‘interpret the [best technology

available standard] as requiring use of technology

whose cost is wholly disproportionate to the

environmental benefit to be gained.” Id. at 225-26

(quoting In re Public Service Co. of New Hampshire,

1 E.A.D. 332, 340 (1977) (emphasis added)).

Justice Breyer, in his concurring opinion,

emphasized that an “absolute prohibition” on cost-

benefit comparisons “would bring about irrational

results.” Jd. at 232. “[I]t would make no sense to

require plants to ‘spend billions to save one more fish

or plankton’ ” even if they could afford it. Jd. at 232—

33 (quoting brief for Respondents Riverkeeper, Inc.

et al). EPA’s approach of generally evaluating costs

and benefits (without attempting to monetize

everything) allowed it to “prevent results that are

absurd or unreasonable in light of extreme

disparities between costs and benefits.” Jd. at 235.

In addition to the other jurists and scholars cited

by Judge Kavanaugh, Mich. Pet. App. 80a—82a,

EPA’s own chain-of-command also expects it to

consider costs when regulating. As Judge Kavanaugh

pointed out, “[e]very presidential administration for

more than three decades”—in other words, stretching

back before the 1990 enactment of § 7412(n)(1)}—“has

likewise made analysis of costs an integral part of

the internal Executive Branch regulatory process.”

Id. at 82a. This background provides further

confirmation that Congress in 1990 would expect

EPA to consider costs if given the discretion to decide

whether it is “appropriate” to regulate.

In the instant case, EPA’s refusal to consider

costs resulted in a rule whose costs are wholly

disproportionate to its benefits. According to EPA’s

own calculations, the benefits attributable to lower

HAP emissions are $4 to $6 million each year, while

the annual costs—costs that will be borne by

consumers of electricity across the nation (i.e.,

almost every American citizen)}—are $9.6 billion. 77

Fed. Reg. at 9306. That extreme disparity between

costs and benefits is precisely the kind of

unreasonable and irrational result that Congress

wanted to avoid when it instructed EPA to regulate

only if it determined that regulation is “appropriate.”

Congress intended that EPA look at both the costs

and benefits of any further regulation of electric

utilities, and did so by providing a clear statement of

that intent in the language, structure, and legislative

history of § 7412(n)(1)(A).

C. EPA’s interpretation that it is

reasonable to ignore costs renders the

term “appropriate” meaningless.

Despite all this, EPA argues that “it is

reasonable to make the listing decision [for electric

utilities], including the appropriate determination,

without considering costs.” 77 Fed. Reg. at 9327.

EPA’s position is not that regulating electric utilities

is, in its judgment, worth the cost; rather, it contends

it is reasonable to think that costs are irrelevant to

whether it is appropriate to regulate electric utilities.

76 Fed. Reg. at 24,989 (“It is reasonable to conclude

that costs may not be considered in determining

whether to regulate EGUs under [§ 7412] when

hazards to public health and the environment are at

issue.”) (emphasis added). EPA believes that

Congress, by using the ambiguous word

“appropriate,” intended to give EPA the freedom to

decide that costs do not matter to this decision at all.

But EPA’s interpretation, as noted above, fails to

give “appropriate” any meaning: it replaces the broad

question Congress asked EPA to answer (whether it

is “appropriate” to regulate) with a different, narrow

question (whether there is any hazard to public

health or the environment from HAP emission by

electric utilities). See also 76 Fed. Reg. at 24,987

(“[W]e interpret the statute to require the Agency to

find it is appropriate to regulate EGUs under

{§ 7412] if the Agency determines that the emissions

of one or more HAP emitted from EGUs pose an

identified or potential hazard to public health or the

environment at the time the finding is made.”)

(emphasis added); 76 Fed. Reg. at 24,988 (“EPA must

find that it is appropriate to regulate EGUs if it

determines that any single HAP emitted by utilities

poses a hazard to public health or the environment.”)

(emphasis added). And _ given that EPA's

interpretation of the word “necessary” already

answers that narrow question, EPA’s interpretation

leaves the term “appropriate” with no work to do.

1. EPA’s reliance on the existence or

severity of public-hea!th hazards did

not give “appropriate” meaning.

In response to this problem with EPA's

interpretation, the court of appeals’ majority argued

that EPA gave the term “appropriate” some meaning

because EPA could “apply its judgment in evaluating

the results of the study” and assess “the existence

and severity of such health hazards.” Mich. Pet. Cert.

App. 30a (emphasis added). That conclusion is wrong

for three reasons.

First, EPA already accounted for the existence of

health hazards through its finding that regulation

was “necessary.” 77 Fed. Reg. at 9363 (“HAP

emissions from U.S. EGUs_ are _ reasonably

anticipated to pose hazards to public health;

therefore, it is necessary to regulate EGUs under

CAA.”); see also 76 Fed. Reg. at 24,987. Interpreting

the term “appropriate” to depend on the same factor

that “necessary” depends on would_ render

“appropriate” superfluous.

Second, EPA did not state that it was basing its

appropriate finding on the severity of any health

hazards. To the contrary, it disclaimed any interest

in evaluating the severity of any health hazard by

stating that the mere existence of a health hazard

was sufficient: in its view, it “must find that it is

appropriate to regulate EGUs if it determines that

any single HAP emitted by utilities poses a

hazard’—any hazard, regardless of how severe—“to

public health or the environment.” 76 Fed. Reg. at

24,988; see also id. at 24,987 (“[W]le interpret the

statute to require the Agency to find it appropriate to

regulate EGUs under CAA section 112 if the Agency

determines that the emissions of one or more HAP

emitted from EGUs pose an identified or potential

hazard to public health or the environment at the

time the finding is made.”) (emphasis added). And

the fact that EPA did not rely on the severity of the

identified public-health hazards as a basis for its

“appropriate” finding means that a court cannot rely

on that ground either: “It is well-established that an

agency's action must be upheld, if at all, on the basis

articulated by the agency itself.” Motor Vehicle Mfrs.

Ass'n v. State Farm Mutual Auto. Ins. Co., 463 U.S.

29, 50 (1983).

Third (and most importantly), even if EPA had

analyzed the severity of health hazards in making its

appropriate finding, § 7412(n)(1)(A) requires EPA to

do more than assess health hazards. If EPA

determines that some hazards exist, it still must

make a judgment about whether regulating HAPs

emitted from electric utilities is “appropriate.” This

second step cannot merely repeat the first step. If

“appropriate” is to be something more than surplus-

age, the “appropriate” finding must be based on

relevant factors beyond health hazards alone. By

confining its analysis to health hazards, EPA ignored

factors that are not only relevant but central to

making a judgment of whether regulation is

appropriate: weighing the costs of reducing

emissions against the benefits to public health from

such reductions. As Judge Kavanaugh emphasized in

his dissent, “cost is an essential factor in deciding

whether it is ‘appropriate’ to regulate.” Mich. Pet.

App. 80a, n. 5. When EPA refused to consider costs,

it “entirely failed to consider an important aspect of

the problem,” and thereby failed to reasonably

interpret § 7412(n)(1)(A). State Farm, 463 U.S. at 43.

2. EPA’s reference to the availability of

controls is also immaterial to its

interpretation of “appropriate.”

EPA also argues, and the court of appeals’

majority agreed, that EPA did not “focus exclusively

on health hazards” because EPA stated in the final

rule that it is appropriate to regulate EGUs based on

“the availability of controls to reduce HAP emissions

from EGUs.” Mich. Pet. App. 30a (citing 77 Fed. Reg.

at 9311).

But the availability of controls made no

difference to EPA’s finding that regulation is

appropriate, as shown by the statements that have

already been quoted—that EPA concluded it “must”

regulate “if it determines that any single HAP

emitted by utilities poses a hazard to public health or

the environment” and that EPA interpreted

§ 7412(n)(1)(A) “to require” EPA to find that it is

appropriate to regulate “if the Agency determines

that the emissions of one or more HAP emitted from

EGUs pose an identified or potential hazard to public

health or the environment{.]” 76 Fed. Reg. at 24,987~—

88. Once it determined any such hazard existed, EPA

believed regulation was automatically required; the

availability of controls therefore had no effect on

whether regulation was appropriate. Thus, EPA’s

articulation of when it is appropriate to regulate

shows that the availability of controls is irrelevant.

State Farm, 463 U.S. at 50 (“[A]n agency’s action

must be upheld, if at all, on the basis articulated by

the agency itself.”). Moreover, that extraneous

statement does not change the conclusion that EPA

unreasonably refused to consider costs in deter-

mining whether it is appropriate to regulate hazard-

ous air pollutants emitted by electric utilities.

II. EPA’s interpretation unreasonably

disregards the structure of § 7412, which

creates distinct regimes that treat electric

utilities differently than other sources.

Stepping back to examine the overall structure of

§ 7412 confirms that Congress wanted EPA to

consider costs when regulating steam-generating

electric utilities. Congress created a distinct regime

under § 7412(n)(1) for deciding whether to regulate

electric utilities, and that regime is different from

the regime that governs whether to designate other

sources for regulation by listing them under

§ 7412(c). These two regimes impose different

criteria on the decision of when a source must be

regulated. To regulate electric utilities covered by

subsection (n)(1), EPA must determine that

regulation is “appropriate,” a determination that, as

already explained, requires considering costs. But

deciding whether to list other sources under

subsection (c) for regulation simply requires EPA to

determine whether a quantitative threshold (a

certain tonnage of emissions) has been met. The fact

that Congress granted EPA broad discretion under

the (n)(1) regime but no dis:retion under the (c)(1)

regime confirms that these regimes take distinct

approaches to determining whether to regulate. Thus

EPA’s reliance on components of the § 7412(c) regime

is misplaced.

A. Congress’s decision to tie listing

decisions under § 7412(c) to emission

quantities does not make _ costs

irrelevant under § 7412(n)(1).

The structure of § 7412 reveals that Congress

knows how to regulate sources based on only their

emissions of hazardous air pollutants and the health

hazards they cause. Indeed, that is precisely the

approach Congress employed under subsection (c) for

sources of hazardous air pollutants other than

electric utilities—sources ranging from petroleum

refineries to chemical manufacturing plants to

industrial factories to hazardous-waste-incineration

facilities. Under the subsection (c) regime, Congress

first identified more than 180 air pollutants it

deemed to be hazardous and listed them in § 7412(b).

See § 7412(a)(6) (defining “hazardous air pollutant”

as “any air pollutant listed pursuant to subsection (b)

of this section.”). Then, Congress required EPA to

publish a list of categories of “major sources” other

than electric utilities, § 7412(c)(1), and to promulgate

emission standards for each listed category,

§ 7412(c)(2).

In subsection (c), Congress thus made the

judgment itself as to when those sources must be

regulated: they must be regulated if they emit more

than the 10- and 25-ton amounts Congress

established for “major sources” of such pollutants.

§ 7412(c)(1) (requiring EPA to list major and area

sources); see also § 7412(a)(1) (defining major sources

based on tons of emissions), (b)(1) (listing HAPs).

Rather than granting broad discretion to EPA,

Congress told EPA to look at one factor and only one

factor for its listing decision: emissions quantities.

If Congress had intended EPA to regulate

electric utilities based solely on one factor (health

hazards), as EPA contends, and wanted to preclude

EPA from considering costs, then there would have

been no need to create a separate regime in

§ 7412(n)(1). Congress could have instead regulated

electric utilities the same way it decided to regulate

petroleum refineries and other’ sources: by

mandating regulation if their emissions exceed

certain tonnage thresholds. Or, Congress would have

limited EPA’s discretion in § 7412(n)(1)(A)_ by

ordering the agency to regulate based on health

hazards and the benefits of emission reductions

alone, without asking EPA to exercise its judgment

as to whether regulation was “appropriate.” Congress

chose neither of those options.

Instead, Congress adopted a distinct approach

for electric utilities—and only for electric utilities—

in § 7412(mn)(1). It instructed EPA to “consider”

health hazards from electric utility HAP emissions

and then to exercise its judgment by deciding

whether regulation is appropriate. And the key

criterion Congress chose in § 7412(n)(1)(A}—whether

regulating electric utilities is “appropriate”—includes

relevant factors on both sides of the cost-benefit

balance, including the health benefits of regulating

electric utilities and the costs of doing so. Congress

therefore directed EPA to exercise its judgment

based on the relevant factors in addition to any

health hazards the study revealed—including a

review of both costs and benefits.

EPA argues that the fact that § 7412(c) does not

allow EPA to consider costs shows that costs may not

be considered under § 7412(n)(1) either. For example,

EPA observes that “[slection 7412(c) generally

deprives the EPA of any discretion to consider costs

when deciding whether to include a source category

in the list of those subject to regulation.” Fed.

Respondents’ Br. in Opp. 18. That is true, but it

simply highlights the two separate regimes Congress

created. Under § 7412(c), Congress itself decided it

was appropriate to regulate those sources based

solely on their emission tonnages, without regard to

costs.

In short, EPA’s observation does not support

EPA’s assertion that “this context” allowed it to

“reasonably conclude[}] that Congress did not intend

to require consideration of costs as part of the

determination whether to regulate power piants

under Section 7412(n)(1)(A).” Fed. Respondents’ Br.

in Opp. 24; see also 77 Fed. Reg. at 9327. Instead,

this context underscores the contrast between the

approach Congress dictated fur electric utilities

under subsection (n)(1) and the approach it dictated

for other sources under subsection (c).

B. The fact that other provisions of § 7412

expressly require consideration of costs

does not render EPA’s interpretation of

§ 7412(n)(1) reasonable.

The D.C. Circuit and EPA both overlook the fact

that Congress created two distinct regimes—the

subsection (c) regime, which requires listing sources

for regulation based on emissions quantities, and the

subsection (n)(1) regime for electric utilities, which

gives EPA discretion whether to regulate. Because

they overlook §7412’s overall structure, they

compare parts of § 7412 that are not comparable.

For example, EPA and the D.C. Circuit rely on

the fact that Congress affirmatively directed EPA to

consider costs in a number of different subsections of

§ 7412—in (d)(2), (d)(8), (C1), ((2)(A), (n)(1)(B), and

(s)(2)}—but that Congress did not expressly direct

EPA to consider costs in §7412(n)(1). Fed.

Respondents’ Br. in Opp. 23 & n.10; Mich. Pet. App.

26a. They contend that it was reasonable for EPA to

“declinef[] to find in an ambiguous section what in so

many other CAA sections Congress has mentioned

expressly.” Mich. Pet. App. 27a (citing Whitman v.

American Trucking Ass’ns, 531 U.S. 457 (2001)); Fed.

Respondents’ Br. in Opp. 23 (same). In short, they

base this argument on the statutory-interpretation

canon that “a negative inference may be drawn from

the exclusion of language from one statutory

provision that is included in other provisions of the

same statute.” Hamdan v. Rumsfeld, 548 U.S. 557,

578 (2006); see also Russello v. United States, 464

U.S. 16, 23 (1983) (“Where Congress includes

particular language in one section of a statute but

omits it in another section of the same Act, it is

generally presumed that Congress acts intentionally

. in the disparate inclusion or exclusion.”).

But the negative-implication canon depends on

context, and it “can be overcome by ‘contrary

indications that adopting a particular rule or statute

was probably not meant to signal any exclusion.”

Marx v. Gen. Revenue Corp., 133 S. Ct. 1166, 1175

(2013) (quoting United States v. Vonn, 535 U.S. 55,

65 (2002)); see also A. SCALIA & B. GARNER, READING

LAW: THE INTERPRETATION OF LEGAL TEXTS 107

(Thompson-West 2012) (“Virtually all the authorities

who discuss the negative-implication canon

emphasize that it must be applied with great

caution, since its application depends so much on

context.”). And here, the context already discussed

provides two contrary indications that overcome the

canon’s application.

First, the express mention of “costs” within the

EGU regime—in § 7412(n)(1)(B), which directs EPA

to study the costs of controlling emissions from

electric utilities—reinforces the conclusion, as

already discussed, that costs are relevant to that

regime. Congress required EPA to look beyond

public-health benefits of regulation and to exercise

its judgment as to whether it is “appropriate” to

regulate based on relevant circumstances, and the

specific mention of costs in subsection (n)(1)(B)

confirms that Congress thought the costs of

regulation are a relevant circumstance. In this

context, the comparison is not between (1) a

provision that enumerates specific factors but fails to

mention costs and (2) a provision that expressly

mentions costs. Rather, it is between (1) a provision

that requires, through the use of the word

“appropriate,” the consideration of all relevant

circumstances or factors (which inherently includes

costs), § 7412(n)(1)(A), and (2) a provision that

reaffirms the relevance of costs, § 7412(n)(1)(B).

Second, the remaining provisions EPA and the

D.C. Circuit relied on—({d)(2), (d)(8), (H(1), (f(2)(A),

and (s)(2), each of which expressly mentions “cost”—

also confirm the relevance of cost under subsection

(n)(1). Subsection (n)(1) asks a threshold question:

whether it is “appropriate” to impose “regulation

under this section.” § 7412(n)(1)(A). Subsection (n)(1)

thus requires EPA to consider the costs that will be

imposed if the regulation is to be implemented under

§ 7412. The provisions on which EPA relies all relate

to that implementation stage—to the costs EPA will

be imposing if it concludes regulation is appropriate.

In other words, when Congress directed EPA to

decide the threshold question whether it was

“appropriate” to impose “regulation under [§ 7412],”

§ 7412(n)(1)(A), Congress was directing EPA to look

ahead to the costs that would be imposed at the

implementation stage by, for example, the emissions

standards imposed under subsections (d)(2) and

(d)(3).

This approach is quite different from the

approach set out in subsection (c)(1). Under (c)(1),

the threshold question whether to regulate is

separate from questions about how regulation will be

implemented. The threshold determination under

subsection (c)(1) focuses on a single, enumerated

factor: whether a given source emits a certain

number of tons of emissions, thereby automatically

triggering regulation. Unlike § 7412(c)’s automatic

trigger approach, in § 7412(n)({1) Congress directed

EPA to look ahead to how regulation would be

implemented by telling it to regulate “if [EPA] finds

such regulation appropriate and necessary.” In short,

the fact that costs are relevant at the implement-

ation stage, as (d)(2) and the other cited provisions

confirm, is consistent with Congress’s directive that

EPA consider whether it is appropriate to impose

those costs on electric utilities by deciding to

regulate “under this section”—that is, under § 7412.

§ 7412(n)(1)(A).

EPA places much emphasis on § 7412(d)(2),

noting that Congress required EPA to take costs into

account at the implementation stage, when setting

beyond-the-floor emissions-reductions standards

under § 7412(d)(2) based on the “maximum

achievable control technology” (MACT). But that

requirement does not negate Congress’s intent that

EPA must evaluate both costs and benefits at the

threshold stage under § 7412(n)(1)(A), when deciding

whether it is “appropriate” to regulate electric

utilities at all. To the contrary, the fact that costs are

relevant at the implementation stage matches up

directly with § 7412(n)(1)’s consideration of whether

it is appropriate to impose such regulation. The

provisions in § 7412(d) that address how EPA must

set MACT emission standards thus reinforce the

conclusion that Congress required EPA to consider

costs when evaluating whether it is appropriate to

impose “such regulation” on electric utilities in the

first instance, before it sets emissions standards for

them.

Similarly, § 7412(f(1) and (f(2)(A) apply to risks

that remain “after application of standards under

subsection (d).” § 7412(f)(1)(A). The fact that costs

are relevant to regulating remaining risks confirms

that costs are also relevant to deciding whether any

regulation of electric utilities is appropriate.

As for the last provision EPA cites, subsection

(s)(2) further confirms the basic principle at issue in

this case: that Congress cares about the costs of

regulating. Subsection (s)(2) requires EPA to include

“the costs of compliance” when it provides Congress

with “a comprehensive report on the measures taken

by the Agency and by the States to implement the

provisions of this section.” Indeed, this reporting

requirement confirms the background principle that

costs are an important part of regulatory decision-

making.

All of this shows why EPA’s argument that

Congress accounted for costs in the beyond-the-floor

emission-reduction requirements that EPA might

impose under § 7412(d){2) is, as Judge Kavanaugh

noted, a “red herring.” Mich. Pet. App. 85a. Congress

precluded EPA from considering any costs or health

benefits when setting “MACT floor” emission

standards, the standards that reflect the minimum

level of emission reductions Congress mandated.

Those minimum standards are based solely on the

emissions limitations achieved by the best-

performing sources in a listed category. § 7412(d)(3).

As Judge Kavanaugh emphasized in his dissent,

meeting the MACT floor “will be prohibitively

expensive, particularly for many coal-fired electric

utilities, regardless of whether EPA decides to go

further and set a ‘beyond-the-floor’ standard” and

“will likely knock a bunch of coal-fired electric

utilities out of business.” Mich. Pet. App. 85a.

Indeed, EPA’s calculations in this case demonstrate

that the technology-based standards in the final rule

are “‘among the most expensive EPA has ever

promulgated.’” Jd. 83a (quoting James E. McCarthy,

Congressional Resource Service, R42144, EPA’s

Utility MACT: Will the Lights Go Out? 1 (2012)).

Although EPA can consider costs at the second,

beyond-the-floor stage, EGUs and their customers

are already required pay extraordinary costs to

achieve only a minimal benefit to public health

under EPA’s unreasonable interpretation. Congress

directed EPA to assess costs and benefits before

imposing such costs on electric utilities and their

customers by requiring, in § 7412(n)(1)(A), that EPA

first decide whether regulation is appropriate.

In the end, looking at these specific provisions

highlights the importance of costs at the

implementation stage and thus confirms that when

Congress created a regime that looks ahead to the

implementation of “such regulation,” it expected EPA

to consider implementation costs when deciding

whether it is “appropriate” to regulate electric

utilities. § 7412(n)(1)({A).

IIIl.EPA’s unreasonable interpretation of

“appropriate” imposes costs that are wholly

disproportionate to the benefits.

EPA estimated that the quantifiable annual

costs of compliance under the rule are $9.6 billion

while the annual benefits from reduced emissions of

hazardous air pollutants are only $4 to $6 million.

That ratio of costs to benefits is between 2,400 to 1

and 1,600 to 1. Although no reasonable person would

spend $1,600 (or $2,400) for $1 of benefit, EPA

refused even to look at costs due to its unreasonable

interpretation of “appropriate.”

At the certiorari stage, EPA quibbled over these

numbers, asserting that the cost-benefit balance was

not so unbalanced. Fed. Respondents’ Br. in Opp. 27.

But disputing the ratio is inconsistent with EPA's

position, which is that the numbers do not matter.

EPA’s position is that it would is reasonable to

construe the statute to allow it to not even look at

the ratio. In other words, it would be reasonable to

construe the statute to allow regulation even if the

costs were $9.6 billion per year and the benefits were

only $1.

In any event, the other benefits that EPA

estimated are irrelevant for the purpose of deciding

whether regulation is appropriate. EPA calculated

that the final rule will result in fewer emissions of

particulate matter smaller than 2.5 micrometers in

diameter (PMe2;s) and sulfur dioxide (a PMo;5

precursor). According to the agency, the annual “co-

benefits” from reducing PMzs5 are between $36 and

$89 billion. 77 Fed. Reg. at 9306; id. at 9305 (“The

great majority of the estimates are attributable to co-

benefits from reductions in PMg2=5-related

mortality.”); id. at 9323 (“the estimated HAP benefits

are small in relation to the co-benefits achieved

through reductions in non-HAP air pollutants, such

as PM and SO2”).

The ancillary co-benefits from lower PMao2>5

emissions are not relevant benefits for the purpose of

deciding whether it is appropriate to regulate HAP

emissions from electric utilities. Congress required

EPA to determine whether reducing emissions of

hazardous air pollutants (not PMz>5) is “appropriate.”

§ 7412(n)(1)(A) (addressing emissions of “pollutants

listed under -subsection (b) of this section”). EPA’s

“appropriate” finding is therefore limited to reducing

HAP emissions, and co-benefits from lower PMa2-+5

emissions are not part of the analysis. Had EPA

made its “appropriate” finding as Congress intended,

it would have found that the exceedingly high costs

to consumers is wholly disproportionate to the

minimal public health benefit and that regulating

electric utilities is not appropriate.

CONCLUSION

For the foregoing reasons, EPA’s final rule

should be vacated.

Respectfully submitted,

Bill Schuette

Attorney General

Aaron D. Lindstrom

Michigan Solicitor General

Counsel of Record

P.O. Box 30212

Lansing, Michigan 48909

LindstromA@michigan.gov

(517) 373-1124

Neil D. Gordon

Assistant Attorney General

Environment, Natural

Resources, and Agriculture

Division

Attorneys for Petitioners

Dated: JANUARY 2015

ADDITIONAL COUNSEL

Luther Strange

Attorney General

State of Alabama

Office of the Attorney Genera!

501 Washington Avenue

Montgomery, AL 36130

(334) 242-7445

Counsel for the State of Alabama

Michael C. Geraghty

Attorney General

State of Alaska

Steven E. Mulder

Assistant Attorney General

1031 W. 4th Avenue, Suite 200

Anchorage, AK 99501-1994

Counsel for the State of Alaska

Mark Brnovich

Attorney General

State of Arizona

James T. Skardon

Assistant Attorney General

Environmental Enforcement Section

1275 West Washington

Phoenix, AZ 85007

(602) 542-8535

James.Skardon@azag.gov

Counsel for the State of Arizona

Leslie Rutledge

Attorney General

State of Arkansas

Attorney General

323 Center Street, Suite 200

Little Rock, AR 72201

(501) 682-5310

Counsel for the State of Arkansas, ex rel.

Dustin McDaniel, Attorney General

Lawrence G. Wasden

Attorney General

State of Idaho

P.O. Box 83720

Boise, ID 83720-0010

Counsel for the State of Idaho

Gregory F. Zoeller

Attorney General

State of Indiana

Valerie Tachtiris

Deputy Attorney General

Office of the Attorney General

IGC-South, Fifth Floor

302 West Washington Street

Indianapolis, IN 46204

(317) 232-6290

Valerie.Tachtiris@atg.in.gov

Counsel for the State of Indiana

Brenna Findley

1007 East Grand Avenue

Des Moines, IA 50319

brenna.findley@iowa.gov

Counsel for Terry E. Branstad, Governor

of the State of Iowa on behalf of the

People of Iowa

Derek Schmidt

Attorney General

State of Kansas

Jeffrey A. Chanay

Chief Deputy Attorney General

Office of the Attorney General of Kansas

120 SW 10th Avenue, 3rd Floor

Topeka, KS 66612-1597

(785) 368-8435

jeff.chanay@ag.js.gov

Counsel for the State of Kansas

Jack Conway

Attorney General

Commonwealth of Kentucky

700 Capital Avenue, Suite 188

Frankfort, KY 40601

Counsel for Jack Conway, Attorney

General of Kentucky

Jim Hood

Attorney General

State of Mississippi

Harold E. Pizzetta III

Assistant Attorney General

Director, Civil Litigation Division

550 High Street, Suite 1100, P.O. Box 220

Jackson, MS 39205-0220

(601) 359-3816

hpizz@ago.state.ms.us

Counsel for the State of Mississippi

Chris Koster

Attorney Genera!

State of Missouri

James R. Layton

P.O. Box 899

Jefferson City, MO 65102

(573) 751-1800

James.Layton@ago.mo.gov

Counsel for the State of Missouri

Doug Peterson

Attorney General

State of Nebraska

Dave Bydalek

Chief Deputy Attorney General

Blake Johnson

Assistant Attorney General

2115 State Capitol

Lincoln, NE 68509

(402) 471-2682

Blake.johnson@nebraska.gov

Counsel for the State of Nebraska

Wayne Stenehjem

Attorney General

State of North Dakota

Margaret I. Olson

Assistant Attorney General

Office of Attorney General

500 North 9th Street

Bismarck, ND 58501-4509

(701) 328-3640

maiolson@nd.gov

Counsel for the State of North Dakota

Michael DeWine

Attorney General

State of Ohio

30 E. Broad Street, 17th Floor

Columbus, OH 43215

Counsel for the State of Ohio

E. Scott Pruitt

Attorney General

State of Oklahoma

Patrick Wyrick

Solicitor General

P. Clayton Eubanks

Deputy Solicitor General

Office of the Attorney General of Oklahoma

313 N.E. 21st Street

Oklahoma City, OK 73105

(405) 522-8992

clayton.eubanks@oag.ok.gov

Patrick.wyrick@oag.ok.gov

Counsel for the State of Oklahoma

Alan Wilson

Attorney General

State of South Carolina

Robert D. Cook

Solicitor General

James Emory Smith, Jr.

Deputy Attorney General

Office of the Attorney General

P.O. Box 11549

Columbia, SC 29211

Counsel for the State of South Carolina

Ken Paxton

Attorney General

State of Texas

Charles E. Roy

First Assistant Attorney General

James E. Davis

Deputy Attorney General for Civil Litigation

Jon Niermann

Chief, Environmental Protection Division

Mark Walters, Assistant Attorney General

Mary E. Smith, Assistant Attorney General

Office of the Attorney General of Texas

Environmental Protection Division

P.O. Box 12548

Austin, TX 78711-2548

(512) 463-2012

mark.walters@texasattorneygeneral.gov

mary.smith@texasattorneygeneral.gov

Counsel for the State of Texas, Texas

Commission on Environmental Quality,

Texas Public Utility Commission, and

Railroad Commission of Texas

Sean D. Reyes

Attorney General

State of Utah

350 North State Street, #230

Salt Lake City, UT 84114-2320

(801) 538-1191

Counsel for the State of Utah

Patrick Morrisey

Attorney General

State of West Virginia

State Capitol

Building 1, Room E-26

Charleston, WV 25305

(304) 558-2021

Counsel for the State of West Virginia

Peter K. Michael

Attorney General

State of Wyoming

Michael J. McGrady

Jeremiah I. Williamson

Senior Assistant Attorneys General

123 State Capitol

Cheyenne, WY 82002

Counsel for the State of Wyoming

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.