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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0331%3A20

## Record

- **Collection:** Supreme Court brief
- **Document type:** Reply Brief
- **Published:** January 1, 2014

## Text

ear.
| MAR 18 2015
Nos. 14-46, 14-47 AND 14-49 _|
THE CLERK
IN THE
Supreme Court of the Anited States

STATE OF MICHIGAN, ET AL., PETITIONERS,
Vv.
ENVIRONMENTAL PROTECTION AGENCY, RESPONDENT.

ON WRITS OF CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA
CIRCUIT

REPLY BRIEF OF PETITIONER THE
NATIONAL MINING ASSOCIATION

CARROLL W. MCGUFFEY III PETER S. GLASER

JUSTIN T. WONG (Counsel of Record)
TROUTMAN SANDERS LLP TROUTMAN SANDERS LLP
600 PEACHTREE STREET, NE 401 NINTH STREET N.W.

SUITE 5200 SUITE 1000
ATLANTA, GA 30308-2216 WASHINGTON, D.C. 20004
202-274-2998
Peter.glaser@
troutmansanders.com
March 18, 2015 Counsel for Petitioner

TABLE OF CONTENTS

pe S FP fe Pw tips + 55: -emem ene th iii
RULE 20.6 STATEMENT. ..........0.cccccccocccoccccccocccccccccees 1
EDGE DEEP BIOS vecceccseewovnsenvesesecsendiainiaie 1
pi y RRC EEE ET ie 2
I. Respondents’ Statutory Analysis Is
i A NN eT Py 2
A. Respondents Misread the Plain Text of
Section 7412(m)(1)(A). ..................cccccsecccececeeceee 2

IT.

B. Respondents’ Context Arguments Ignore
the Most Basic Statutory Context of All—
that Congress Intended a Different

Regulatory Approach for Electric
I. WENNER NE 4

C. The (At Best) Merely Implicit
Consideration of Costs Allowed in Setting
“MACT-Floor” Standards Proves Rather
than Disproves the Relevance of Costs in
Determining Whether Regulation Is
ROUTED. cocesvrscnsnnnneceisssit ee 7

D. Other Section 7412 Context Supports
Congress’ Intent that EPA Consider Costs
under Section 7412(n)(1)(A).............ccccccccceeeceees 8

Respondents Provide No Valid Reason for
Ignoring Costs Given the Rule’s

Extraordinarily Unbalanced Regulatory

Cates edd TBMIIIB. cccesecccessvecccessssanzaceiniacaeanes 10

a

ILl.NMA’s Acid Gas Argument Is Within the
Scope of the Issue on Which This Court
Granted the Petitions for Writ of Certiorari. .....

EE

TABLE OF AUTHORITIES
Page(s)
CASES
Chevron, U.S.A., Inc. v. Natural Resources
Defense Council, Inc.,
a ls I I as tititiciiinctterciiniteieeeell ee l
Entergy Corp. v. Riverkeeper, Inc.,
LG itt Ae eee 6
Motor Vehicle Manufacturers Ass’n, Inc. v.
State Farm Mutual Auto. Insurance Co.,
ee ED ccntccarncisntinnseeneciucanoarceientgiati 1, 10
Russello v. United States,
og ere en 4
Utility Air Regulatory Group v. EPA,
ey ls IIE chcanticnindagiucanibebiinianiattsnnianes 12
Whitman v. American Trucking Ass’ns, Inc.,
ee ea: IE CED encotnenemennccdinieetsadbncinionniilldlocktansec 4
STATUTES
tS Te ena eae Ae passim
a te I piiiikte tiie 5
MUsSC 696 i 3.5
ee I sitet ie 6

42 U.S.C. § 7412(c)(9)

iv

Oe I icc ect rseeettcncncencs 13
42 U.S.C. § 7412(d)(3)(A) -o--coeccceescesecseesseecsueecesesnesencee 7
42 U.S.C. § 7412(m)(1)(A) .......-.0e-cseeesseessseeseeeee passim
43 UB.C. & TERMI) anna ncnncsnnsscnesceeccvsececccnseceneen 9

FEDERAL REGISTER NOTICES

76 Fed. Reg. 24,976, 25,060-51 (May 3, 2011)......... 13
We Wi, Dies, at DUI i csascseicessssectsscssiitscnees 13
77 Fed. Reg. 9,304, 9,323 (Feb. 16, 2012) ...............-. 7
WE i I os cissieiniscinicisimetteniorsnainion 13

ch BO EF rere are 11

RULE 29.6 STATEMENT

The petitioner does not have a parent
company, and no publicly-held corporation has a 10%
or greater ownership interest in the petitioner.

INTRODUCTION

Despite hundreds of pages of briefing,
Respondents and their supporting amici fail to
provide a convincing and reasonable explanation for
adopting a rule with annual compliance costs of $9.6
billion and annual benefits of only $4-$6 million.
They could have at least attempted to justify this
result by arguing that Congress prevented EPA from
considering the rule’s cost, but they did not do so.
Instead, they took the position that Congress left the
choice of whether to consider costs in EPA’s hands.
Nor did they contend that EPA rationally concluded
that unquantified benefits and co-benefits tip the
cost-benefit analysis in favor of regulation. Despite
all their words about those benefits, Respondents
were forced to concede that EPA, because it decided
to ignore costs, did not weigh costs and benefits in
making the appropriateness determination.

Respondents were thus left with the
unenviable task of defending the rationality of EPA’s
position that it could determine whether regulation is
“appropriate” without even considering the cost of
that regulation. But EPA’s position is indefensible
either as a matter of statutory construction under
Chevron, U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1984), or as a matter of
rational decisionmaking under Motor Vehicle

2

Manufacturers Ass'n, Inc. v. State Farm Mutual Auto.
Insurance Co., 463 U.S. 29 (1983). Congress did not
delegate to EPA the immense power of adopting
regulations that are so costly that they are
transforming the electric power sector without
requiring the Agency to at least consider the impact
of its decision. And even if Congress did delegate
that authority, no rational person, faced with
evidence that the costs of a decision far outweigh its
benefits, decides to simply ignore the costs and
proceed anyway.

Acid gas regulation proves the _ point.
Regulating acid gases will cost over $5 billion per
year yet produce no health benefit (as EPA concedes)
and will create only the vaguest of environmental
benefits in possibly reducing water-body acidification.
None of the Respondents, however, offered a
satisfactory explanation of how a Congress that
adopted an entire Title devoted to cost-effectively
addressing the electric sector’s contribution to water-
body acidification could have _ simultaneously
intended that EPA would adopt hugely expensive
supplemental regulations to achieve virtually no
benefit at all.

ARGUMENT

I. Respondents’ Statutory Analysis Is
Unavailing.

A. Respondents Misread the Plain Text of
Section 7412(n)(1)(A).

Respondents’ statutory analysis begins with a
misreading of what Section 7412(n)(1)(A) actually

3

says. In Respondents’ reading, Congress directed
EPA to determine whether it is appropriate and
necessary to include electric generators on the
Section 7412(c) list. E.g., EPA Br. 17. Because, for
other source categories, costs are not a relevant factor
in a listing decision, Respondents reason that costs
should also not be a factor in a Section 7412(n)(1)(A)
appropriate and necessary determination. Id. at 24-
25. They buttress their analysis by claiming that,
under Section 7412 and other Clean Air Act (“CAA”)
provisions, costs are relevant only later in the
regulatory process, when EPA sets standards. Id. at
25; State Resp. Br. 28; Brief of American Academy of
Pediatrics, et al. “Env. Resp. Br.”) 31.

But Section 7412(n)(1)(A) does not say that
EPA shall assess whether listing is appropriate and
necessary. It directs EPA to determine whether
“such regulation”—that is, regulation “under this
section [7412]’—is appropriate and necessary. Since,
as Respondents state, Congress made costs relevant
(either implicitly or explicitly) when EPA sets Section
7412 regulatory standards, EPA must consider costs
in making a Section 7412(n)(1)(A) determination of
whether regulation under Section 7412 is
“appropriate and necessary.” Thus, the very fact that
EPA must consider costs in adopting Section 7412
regulations proves Petitioners’ point that EPA must
consider costs in the appropriate and necessary
finding—and disproves Respondents’ point that EPA
may ignore costs in making that finding.

4

B. Respondents’ Contex* Arguments Ignore
the Most Basic Statutor, Context of All—
that Congress Intended a Different
Regulatory Approach (ffor’_ Electric
Generators.

Respondents’ contextual analysis misses an
obvious point. On the one hand, they place a great
deal of weight on what they call Congress’ consistent
practice in Section 7412 and throughout the CAA
generally of barring EPA from considering costs in
making a threshold decision of whether to regulate.
EPA Br. 38-41. On the other hand, they are forced to
concede that Congress did not follow this practice
under Section 7412(n)(1)(A). In their view, under
that provision, Congress left it in EPA’s hands to
make the decision to either consider or not consider
costs, unlike any other program they cite. Jd. at 22-
23, State Resp. Br. 18. And so, by Respondents’ own
admission, a contextual analysis of Section
7412(n)(1)(A) must begin with the recognition that
Congress intended a different regulatory approach for
electric generator hazardous air pollutant (“HAP”)
emissions than it did for other source categories.! Cf.
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 ... it is
generally presumed that Congress acts intentionally

' For this reason, Respondents cannot find support in Whitman
v. American Trucking Ass’ns, Inc., 531 U.S. 457, 469 (2001),
where, unlike Respondents’ position here, the Court found that
the statute unambiguously barred EPA from considering costs.

and purposely in the disparate inclusion or
exclusion.”).

Respondents maintain nevertheless’ that
because Congress barred EPA from considering costs
in making a threshold decision to list sources for
regulation under these other programs, EPA must be
seen as acting reasonably here by adopting the same
regulatory approach. EPA Br. 24-25. Respondents’
argument, however, ignores the Section 7412
regulatory structure that Respondents rely on in
justifying EPA’s approach. As Respondents state,
because all of the HAPs that the rule regulates are
listed under Section 7412(b), Congress has already
deemed that these substances, if emitted in amounts
exceeding the Section 7412(c) thresholds, “pose[] an
inherent risk warranting regulation.” Id. at 25.
Thus, if Congress’ intent was as limited as
Respondents claim, it had no need to require EPA to
do a health study and make an appropriate and
necessary finding. To ensure that electric generator
HAP emissions would be regulated if warranted, it
could either have not adopted Section 7412(n)(1)(A)
at all and left in place a regime under which EPA
would be required to regulate those emissions if EPA
determined that they exceeded the _ statutory
thresholds. Or, if there was concern that the
language of Section 7412(c) was not broad enough for
EPA to project forward whether generator emissions
following implementation of other CAA programs
exceeded the Section 7412(c) tons-per-year criteria for

6

listing, Congress could have simply instructed EPA to
make the necessary forward projection.?

Congress did have a purpose for the health
effects study and the appropriate and necessary
finding, however. The Panel got close to Congress’
purpose when it stated that EPA was required to
consider the results of the health effects study in
determining whether regulation would be appropriate
“based on its assessment of the existence and
severity” of any health hazards. NMA App. 28a. But
the Panel never considered why information about
the existence and severity of impacts would be
relevant to a Congress that had already determined
that HAPs emitted beyond defined threshold
amounts create a significant enough health concern
to warrant regulation. The only possible explanation
is that Congress, in contrast to its otherwise
applicable approach, and because of its concern about
the multiple, costly regulations which it had adopted
for the power sector, wanted EPA to exercise policy
judgment as to whether the severity of the impacts
warrant the type of regulation “under this section”
that EPA has undertaken. That judgment
necessarily involves weighing costs and benefits.
NMA Br. 35-37. As this Court has said, “[e]very real
choice requires a decisionmaker to weigh advantages
against disadvantages....” Entergy Corp. ov.
Riverkeeper, Inc., 556 U.S. 208, 232 (2009).

2 The Section 7412(n)(1)(A) health study and appropriate and
necessary finding would be similarly unnecessary for facilities
emitting below the statutory thresholds. Because these facilities
are “area sources,” EPA was already required to regulate those
sources’ emissions if it found they imperil public health or the
environment. 42 U.S.C. § 7412(c)(3).

7

C. The (At Best) Merely Implicit
Consideration of Costs Allowed in Setting
“MACT-Floor” Standards Proves Rather
than Disproves the Relevance of Costs in
Determining Whether Regulation Is
Appropriate.

Respondents also trip themselves up by
arguing that EPA properly ignored costs in making
the appropriateness finding because, in line with
other CAA programs, EPA would consider costs in
fashioning regulatory standards. EPA Br. 25. But
EPA did not consider costs in setting standards for
electric generators because virtually all of the
standards it adopted were based on the “MACT-floor”
methodology, NMA Br. 34, which, as EPA has
conceded, 77 Fed. Reg. 9,304, 9,323 (Feb. 16, 2012),
precludes the consideration of costs.

The best Respondents can do is to argue that
costs are implicitly considered in setting MACT-floor
standards in that those standards, by definition, have
been achieved by some currently operating units.
EPA Br. 25-26. Although Respondents recognize
that setting standards in this fashion can result in
extremely high compliance costs for the large
majority of other units and can lead to plant closures,
they argue that result is simply the scheme Congress
intended. /d. at 26. But that claim is directly
inconsistent with Respondents’ admission that it is

8 Actually, by definition, they have been achieved by only a very
small number of facilities. Under Section 7412(d)(3)(A), MACT-
floor standards are based on the average performance of the 12
percent lowest-emitting units, meaning 88 percent (or even 94
percent) of units may not meet the standard.

8

EPA that chose to ignore costs here, not Congress.
Moreover, Respondents’ argument still leaves
Congress without a reason for requiring a study of
the existence and severity of any health impacts of
electric generator HAP emissions and for directing
EPA to make an appropriate and necessary finding.
Under Respondents’ view, EPA does not weigh the
severity of impacts against the cost of regulation
when EPA makes the appropriate and necessary
determination, and, given that MACT-floor standards
are formulaic, it also does not do so when it sets
regulatory standards.

D. Other Section 7412 Context Supports
Congress’ Intent that EPA Consider Costs
under Section 7412(mn)(1)({A).

First, although focused on the health study
that Section 7412(n)(1)(A) authorizes, Respondents
recognize that the study must also include an
examination of alternative control technologies. EPA
Br. 28, n.6. Respondents argue improbably that a
study of alternative control strategies does not
include the cost of those technologies. Jd. However,
the notion that Congress was interested in knowing
only whether control technologies were technically
feasible, not whether they were economically feasible,
is not credible. Many things are technically feasible
but completely infeasible as a practical matter
because of their cost. Respondents pooh-pooh NMA’s
point that, under their reading of the statute, EPA
could proceed with regulation even if the cost of the
controls was $1 trillion, EPA Br. 43, n.13, but that is
the implication of their view that only the technical

9

feasibility of controls was relevant for study, not the
cost of those controls.

Second, Respondents recognize the
contradiction of relying on Section 7412(n)(1)(B)’s
reference to environmental effects to justify
consideration of those effects under Section
7412(n)(1)(A), while ignoring costs under Section
7412(n)(1)(A) even though costs are also referred to in
Section 7412(n)(1)(B). Indus. Resp. Br. 21, n.9.
Respondents argue that EPA’s discretion is broad
enough under Section 7412(n)(1)(A) to either consider
or not consider environmental impacts and to either
consider or not consider environmental costs. Id.
But this argument cuts against Respondents’
principal contention that EPA reasonably ignored
costs because of Section 7412(n)(1)(A)’s focus on
health impacts. Env. Resp. Br. 16; State Resp. Br.
18. This is particularly so given that EPA chose to
consider environmental impacts because it wanted to
extend its appropriateness finding to acid gases,
which, in the amounts emitted by electric generators,
do not, as the Agency conceded, create public health
impacts. See Argument III infra. Given that acid gas
regulation drives more than half of the cost of the
rule, NMA Br. 13, choosing to regulate based on
possible environmental concerns, while ignoring the
resulting cost impacts, is hardly reasonable.

Third, Respondents argue that ignoring costs
in making the appropriateness finding harmonizes
with the fact that costs are not considered in delisting
a source category under Section 7412(c)(9). EPA Br.
32-34. But the high hurdles for undoing an EPA
listing decision further emphasize why Congress

10

would want to ensure that EPA considered all
relevant factors, including costs, before EPA listed
generators for regulation under Section 7412.

Il. Respondents Provide No Valid Reason for
Ignoring Costs Given the Rule’s
Extraordinarily Unbalanced Regulatory
Costs and Benefits.

Even if Congress gave EPA the choice to either
consider or not consider costs in determining whether
“such regulation” under Section 112 is appropriate,
EPA must provide & reasoned explanation for the
choice it made. State Farm Mutual Auto. Insurance
Co., 463 U.S. at 43-44. Respondents’ principal
rationale for EPA’s decision to ignore the $9.6 billion
cost of the rule was that, however extreme the cost-
benefit imbalance might be, it cannot be
unreasonable because the same imbalance could
occur with regulation of other source categories under
Section 7412. EPA Br. 19. This explanation,
however, suffers from the same problem as EPA's
statutory interpretation. No doubt, if Congress had
not adopted Section 7412(n)(1)(A) and subjected EPA
to the otherwise applicable Section 7412 regulatory
structure, this imbalance would have occurred. But
Congress did adopt Section 7412(n)(1)(A) and directed
EPA to regulate only if “such regulation” was
“appropriate.” EPA thus must do more to justify the
appropriateness of the hugely disproportionate costs
and benefits that occurred here than to pretend that
Congress never instructed it to determine whether
regulation with such consequences is appropriate in
the first place.

1]

Respondents seek to justify the enormous costs
of the rule by arguing that the costs must be
affordable because some facilities have already
complied with the standards. State Resp. Br. 2.
Given that the initial three-year compliance period
expires this April (with many units obtaining a one-
year extension to next April), 77 Fed. Reg. at 9,407, it
is not surprising that some units have already
complied. At the same time, it is no use pretending
that $9.6 billion per year is not a steep price simply
because facilities are being forced to pay it.

Respondents similarly argue that the rule's
costs must be reasonable because the Section 7412
program, in their view, has been successfully
implemented for other industries. Env. Resp. Br. 39.
But none of those industries have experienced the
extraordinary regulatory costs that EPA has imposed
on the power sector under the MATS rule, and none
has seen the wave of plant closures that is occurring
here. Most important, because none are subject to
nearly the same level of regulation under other CAA
programs, Congress did not specify that EPA must
make an appropriateness finding for these other
industries before regulating under Section 7412.

Respondents also argue that the costs must be
affordable because some states have adopted even
more stringent standards, State Resp. Br. 9-11, and
some companies have complied with these standards,
Indus. Resp. Br. 29. But the States supporting EPA
that have adopted these standards (like California
and the northeastern states) are typically located far
from the country’s coal fields and have little coal
generation. Similarly, the companies supporting

12

EPA historically are not large coal users. These
companies and these States stand to gain a
competitive advantage under the rule, but that does
not prove that the compliance costs are reasonable.

In the end, as EPA intended, the rule is having
a transformative effect on the electric power sector,
with projected retirements of one-sixth to one-quarter
of all coal-fired electric generation, NMA Br. 15,
which only a few years ago supplied half of the
country’s electric power. Energy Information
Administration, http://www.eia.gov/electricity/
capacity/, Congress cannot be seen as having
authorized regulation of such “vast economic and
political significance,” Utility Air Regulatory Group v.
EPA, 134 S. Ct. 2427, 2444 (2014), by instructing
EPA to regulate only if “appropriate.”

Ill. NMA’s Acid Gas Argument Is Within the
Scope of the Issue on Which This Court
Granted the Petitions for Writ of
Certiorari.

NMA’s third argument in its opening brief
addressed EPA’s alternative justifications for
regulating acid gases—first, that regulating acid
gases is appropriate and necessary because they
contribute to water-body acidification and second,
that EPA is compelled to regulate acid gases even if
they pose no health or environmental threat if EPA
determines that it is appropriate and necessary to
regulate any other electric generator HAP. NMA Br.
37-44. Respondents claim that NMA’s response to
this second justification is not within the scope of the
issue this Court set for briefing. EPA Br. 52-53.

13

Respondents are incorrect. The Court asked
the parties to brief whether EPA unreasonably
ignored costs. EPA argues alternatively that it could
reasonably ignore the benefits and costs of acid gas
regulation because those benefits and costs became
irrelevant when EPA determined that it was
appropriate and necessary to regulate other electric
generator HAP emissions. 77 Fed. Reg. at 9,361.
NMA maintains that the costs and benefits of acid
gas regulation did not become irrelevant when EPA
made that determination. NMA Br. 42-44. Given the
interplay between Sections 7412(n)(1)(A) and 7412(d),
NMA maintains that Congress did not intend that
EPA would regulate electric generator emissions that
EPA had determined did not “warrant regulation.”
Id. Respondents and NMA dispute this point, but
EPA’s reasons for ignoring the cost of acid gas
regulation are unquestionably relevant to the overall
issue of the reasonableness of EPA’s decision to
ignore the cost of HAP regulation asa whole. -

Respondents barely engage the merits of the
acid-gas arguments that NMA made. They claim
that EPA did find that acid gases harm the public
health. Env. Resp. Br. 42, n.7. But their citation is
to 76 Fed. Reg. 24,976, 25,050-51 (May 3, 2011),
where EPA discusses the health effects of acid gases
if inhaled in sufficient amounts. In contrast, they
ignore EPA’s conclusion in the same Federal Register
notice that acid gases in the amount emitted by
electric generators (and dispersed over very wide
areas) do not pose a cancer risk and that “our case

studies did not identify significant chronic non-cancer
risks from acid gas emissions.” Jd. at 25,016.

14

As to environmental impacts, Respondents
argument that the study of acidification in the United
Kingdom supports EPA’s position, Indus. Resp. Br.
42, misses the point that the United Kingdom study
obviously does not show that electric generators in
the United States emit acid gases in sufficient
amounts to affect the acidification levels in domestic
water bodies. The fact remains that EPA chose to
force the domestic power sector to spend over $5
billion per year to reduce emissions of a substance
that EPA concedes does not present a significant
health risk and that it cannot provide any concrete
evidence is causing material acidification anywhere.
It did so even though Congress adopted a separate
program that was intended to cost-effectively
ameliorate the power sectors contribution to
acidification. NMA Br. 25-27. Given the paucity of
evidence of any continuing impact that power sector
acid gas emissions might be having on acidification,
and given the huge costs that EPA’s acid gas
regulations imposed, EPA’s refusal to consider the
cost of those regulations was unreasonable.

15
CONCLUSION
The Court should vacate the rule.
Respectfully submitted,
CARROLL W.MCGUFFEY III #PETERS. GLASER
JUSTIN T. WONG (Counsel of Record)

TROUTMAN SANDERS LLP TROUTMAN SANDERS LLP
600 PEACHTREE STREET, NE 401 NINTH STREET N.W.

SUITE 5200 SUITE 1000

ATLANTA, GA 30308-2216 WASHINGTON, D.C. 20004
202-274-2998
Peter.glaser@

troutmansanders.com

March 18, 2015 Counsel for Petitioner

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0331%3A20. Public record. Not legal advice.