# Amicus Curiae 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%3A32

## Record

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

## Text

Supreme Court, U.S.
FLED

JAN 27 2015
Nos. 14-46, 14-47, 14-49 = ae

IN THE

Supreme Court of the Anited States

STATE OF MICHIGAN, ET AL.
Petitioners,
Vv.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY,
ET AL.
Respondents.

ON WRITS OF CERTIORARI TO THE U.S. COURT OF APPEALS FOR THE
D.C. CIRCUIT

BRIEF OF PEABODY ENERGY CORP.
AS AMICUS CURIAE SUPPORTING

PETITIONERS
TRISTAN L. DUNCAN LAURENCE H. TRIBE
SHOOK, HARDY & BACON L.L.P. Counsel of Record
2555 Grand Blvd. 1575 Mass. Ave.
Kansas City, MO 64108 Cambridge, MA 02138
816-474-6550 617-495-1767
tlduncan@shb.com tribe@law.harvard.edu
JONATHAN S. MASSEY
MASSEY & GAIL LLP

1325 G St. NW, Suite 500
Washington, D.C. 20005
202-652-4511

jmassey@masseygail com

LE RIEL AY SCONES AMRIT ET TALE IS SMITE
WILSON-EPES PRINTING Co., INC. — (202) 789-0086 — WasnincTon, D. C. 20002

RULE 29.6 STATEMENT

Peabody Energy Corp. is a publicly-traded company
on the New York Stock Exchange under the symbol
“BTU.” Peabody Energy Corp. has no parent
corporation and no publicly held corporation owns
more than 10% of Peabody Energy Corporation’s
outstanding shares.

TABLE OF CONTENTS
INTEREST OF AMICUS CURIAE ............................. 1
SUMMARY OF ARGUMENT ....................ccccccccseeseeees 2
ee ssdudceussiooconsees 5
I. Reasoned Decision-Making Requires
Consideration Of Costs And Risk Trade-Offs.......... 5

Il. An Agency's Duty Includes The Obligation To
Give Adequate Consideration To The Full Scope Of
Costs And Risk Trade-Offs. ...................cccccccceeeeeeees 15

III. Many Reasons Grounded In Legal Principle

Require An Agency To Consider Costs And Risk
EL csnaneusduuunuposenesootes 25

A. The Clean Air Act Requires Consideration Of

B.

C.

D.

Costs And Risk Trade-Offs..............0.0000000... 27

The Clean Air Act Mandates Economic
Impact And Employment Analyses. ........... 29

Principles Of Administrative Law Mandate
Consideration Of Costs And
a 31

The Common Law Frequently Involves
Consideration Of Costs And
EE 33

E. The Panel’s Reliance On The “Negative

Implication” Canon Was Misplaced............ 34

TT inal tacnhnsndeannseeneceeseosecssesssoceosers 36

ili
TABLE OF AUTHORITIES
Cases

American Textile Mfrs. Institute, Inc. v. Donovan,

452 U.S. 490 (198})................... ‘ischeiiniadmedaummaninenminias 28
Ass'n of Battery Recyclers, Inc. v. EPA,

pope y ff ' 2 5 ££ 28
Competitive Enter. Inst. v. NHTSA,

fe ¢ F fd eee 32
Corrosion Proof Fittings v. EPA,

pe - fF |. ee 32

Entergy Corp. v. Riverkeeper, Inc.,
I Cin: ae 7,8

EPA v. EME Homer City Generation, L.P.,
Be GG Ses NP IID stncsicctitdesdedchnnauiedemboasatennibanen 26

Forester v. Consumer Prod. Safety Comm..,
fe iy | 6h. 3), ee 33

Hampton v. Mow Sun Wong,
Rs re 27

Honda Motor Co. Ltd. v. Oberg,
EE Es COU CR ecsscntonestnndncidiasaibsianieteteisiintocanysioans 26

Indus. Union Dept., AFL-CIO v. Am. Petroleum Inst.,
ee ie Ie Ce cctthicsintienctctunsasicnnntnbinsaedutcsesmmncilincaiis 6

Intl Union, UAW v. OSHA,
— Ps h: T F eR. | a eneenneeee 22

Monsanto Co. v. EPA,
Be ye ee CE I BE ccccnsncnesestinnnisasionnicedesti 21

iv

Motor Vehicle Mfrs. Ass'n of U.S. v. State Farm Mut.
Auto Ins. Co., 463 U.S. 29 (1983) ..................000-- 4, 32

National Cable Television Ass’n v. United States,
Oy i, iia TO 27

Natural Res. Def. Council v. EPA,

fe § f ' ERREREERe essere 28
U. S. v. Carroll Towing Co.,

By re I i 33
Union Electric Co. v. EPA, 427 U.S. 246 (1976).......... 7
United Auto Workers v. OSHA,

ge BS , Eee 32
United States v. Ottati & Goss, Inc.,

900 F.2d 429 (1st Cir. 1990) ..........0. cee. 9,10
Utility Air Regulatory Group v. EPA,

Sr, UU, SU a 26
Whitman v. Am. Trucking Ass'ns,

I en, ie 6
Statutes
I a a A ed 4, 32
ee rt) a 29
Be te OO PND wiccetiicccsicntionscicitsintnettomamientes 3, 37
ae Oe PI sitecksttccresenscinntecdencinisencemstetiennitte 32

ee Gs Oe PR rettetcecenitictictnmescnctnnstensenecanintuninnates 30

Other Authorities

Jonathan H. Adler, More Sorry Than Safe: Assessing
the Precautionary Principle and the Proposed
International Biosafety Protocol, 35 TEX. INTL L.J.
I iniciccaatitsi ne scrnendstacasddhenidnasaaganetebiiisnaaimmibacaad 13

THE AFFORDABLE POWER ALLIANCE, POTENTIAL IMPACT
OF THE EPA ENDANGERMENT FINDING ON LOW
INCOME GROUPS AND MINORITIES (March 2010) .... 19

AMERICAN COALITION FOR CLEAN COAL ELECTRICITY,
THE SOCIAL COSTs OF CARBON? NO, THE SOCIAL
BENEFITS OF CARBON (Jan. 2014) ............0..0ccceeceeees 22

AMERICAN COALITION FOR CLEAN COAL ENERGY,
ENERGY Cost IMPACTS ON AMERICAN FAMILIES,
I i seikicnsiaueseas 18, 19

Christopher Anderson, Cholera Epidemic Tied to Risk
Miscalculation, 354 NATURE 255 (1991)................ 15

ASSOCIATION FOR THE CONSERVATION OF ENERGY,
FACT-FILE: THE COLD MAN OF EUROPE.................. 20

Roger Bezdek, Florida Will be Hit Hard by MACT.
MODERN POWER SYSTEMS (Sept. 2012)................... 19

Roger Bezdek, Maximum Burden: The Electricity
Price Increases From the Proposed EPA Utility
MACT Will Act as a Regressive Tax on the Elderly,
PuB. UTILS. FORTNIGHTLY (Dec. 2012) ................... 19

STEPHEN BREYER, BREAKING THE VICIOUS CIRCLE:
TOWARD EFFECTIVE RISK REGULATION (Harvard
ON I a I 10, 13

vi

Stephen Clowney, Environmental Ethics and Cost-
Benefit Analysis, 18 FORDHAM ENVTL. L. REV. 105

Frank B. Cross, Paradoxical Perils of the
Precautionary Principle, 53 WASH. & LEE L. REV.
RENEE EEL SSR eee a OCP 13

Paul J. Crutzen, Ultraviolet on the Increase, 356
Ry SI IID bechssrinciecicsnicteacanncnicsisitlienemntiisiiecnteiaiveciiies 14

Susan E. Dudley & Wendy L. Gramm, EPA’s Proposed
Ozone Standard May Harm Public Health and
Welfare, 17 INTLJ. OF RISK ANALYSIS 403 (Aug.

Sue sdodscecubinesusapeeiiientihinbemsnnsndensibicadutemmciiisiiaiatiinies 21
Susan E. Dudley, Economic Impact Analyses, 16 PACE
A eR Oe noe 21

ENV'T & PUBLIC WORKS COMMITTEE, U.S. HOUSE OF
REPRESENTATIVES, QUESTIONS FOR THE RECORD
FROM SENATOR DAVID VITTER, GINA MCCARTHY

EPA, et al. vu. EME Homer City Generation, L.P., et al.,
No. 12—1182, 2013 WL 6702694 (U.S.), 13 (U.S.
I I cect tel 6

John E. Frederick et al., Empirical Studies of
Tropospheric Transmission in the Ultraviolet:
Broadband Measurements, 32 J. APPLIED
METEOROLOGY AND CLIMATOLOGY 1883 (1993)...... 14

Ignacio Galindo et al., Ultraviolet Irradiance over
Mexico City, 45 Ai & WASTE MGMT. Ass’N 886

Vii

John D. Graham and Jonathan Baert Wiener,
Confronting Risk Tradeoffs, in RISK VS. RISK:
TRADEOFFS IN PROTECTING HEALTH AND THE
ENVIRONMENT (John D. Graham & Jonathan Baert
Wiener eds., Harvard 1995) ..................ccccesseeee 13, 14

John D. Graham, Legislative Approaches to Achieving
More Protection Against Risk at Less Cost, 1997 U.
ee, MAMI IIT. TIED eich costo nckslscusesntensbinitnsaniinnipaiismmaiianiteiinaladailas 13

John D. Graham, Risk Assessment and Cost-Benefit
Analysis of New Regulations: Hearing on H.R. 9
Before the House Comm. on Commerce, 104th Cong.
SEP CIs srscsicieciorsisisenseiccheveesseiendbbieaciitalenieiiatinbiinntaaieniiadanaa 12

Alan F. Hoskin et al., Estimated Risk of Occupational
Fatalities Associated With Hazardous Waste Site
Remediation, 14 RISK ANALYSIS 1011 (1994)......... 15

H.R. REP. NO. 96-294 (19777) ..........ccccccccereccceesseees 30, 31

Improving Regulation and Review, Exec. Ord. No.
13,563, 76 Fed. Reg. 3,821 (Jan. 18, 2011)............ 10

Lucy Jolin, The Scandal of Britain’s Fuel Poverty
Deaths, THE GUARDIAN (Sept. 11, 2014) ........... 19, 20

Hans A. Linde, Due Process of Lawmaking, 55 NEB. L.
EE ewe 27

NAT'L CTR. FOR ENVTL. ECON., OFFICE OF POLicy, U.S.
ENVTL. PROT. AGENCY, GUIDELINES FOR PREPARING
ECONOMIC ANALYSES (Dec. 17, 2010, last updated
ee, OEE a SE ere eee 23, 24

viii

National Emission Standards for Hazardous Air
Pollutants From Coal- and Oil- Fired Electric
Utility Steam Generating Units and Standards of
Performance for Fossil-Fuel-Fired Electric Utility,
Industrial-Commercial-Institutional, and Small
Industrial-Commercial-Institutional Steam
Generating Units, 77 Fed. Reg. 9,304 (Feb. 16,

National Emission Standards for Hazardous Air
Pollutants From Coal- and Oil-Fired Electric Utility
Steam Generating Units and Standards of
Performance for Fossil-Fuel-Fired Electric Utility,
Industrial-Commercial-Institutional, and Small
Industrial-Commercial-Institutional Steam
Generating Units, 76 Fed. Reg. 24,976 (May 3,

NATIONAL RESEARCH COUNCIL, RETHINKING THE
OZONE PROBLEM IN URBAN AND REGIONAL AIR
POLLUTION (National Academy Press 1991)

NDP CONSULTING, A CRITICAL REVIEW OF THE
BENEFITS AND COSTS OF EPA REGULATIONS ON THE
cb BY ee ren near ee 17

OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF
INFORMATION AND REGULATORY AFFAIRS, REPORT TO
CONGRESS ON THE COSTS AND BENEFITS OF FEDERAL
I I eeaaemieniusinemeiins 10

Overview: Summary Results of the Study, in U.S.
CHAMBER OF COMMERCE, IMPACTS OF REGULATIONS
ON EMPLOYMENT: EXAMINING EPA’S OFT-REPEATED
CLAIMS THAT REGULATIONS CREATE JOBS .............. 24

ix

Richard J. Pierce, Jr., The Appropriate Role of Costs
in Environmental Regulation, 54 ADMIN. L.

I a ssa raedinlioebis 12
Simon Read, Energy Prices Climb as Fuel Poverty

Soars, THE INDEPENDENT (Dec. 21, 2012).............. 19
Regulatory Planning and Review, Exec. Ord. No.

12,866, 58 Fed. Reg. 51,735 (Sept. 30, 1993)......... 10
RESTATEMENT (SECOND) OF TORTS (1979) .................. 33

Revision of December 2000 Regulatory Finding on the
Emissions of Hazardous Air Pollutants From
Electric Utility Steam Generating Units and the
Removal of Coal]- and Oi)-Fired Electric Utility
Steam Generating Units From the Section 112(c)
List, 70 Fed. Reg. 15,994 (Mar. 29, 2005).............. 28

G. Seckmeyer & R.L. McKenzie, Increased Ultraviolet
Radiation in New Zealand (45 [degrees] S) Relative
to Germany (48 [degrees] N), 359 NATURE 135 (1992)

ibiidacendlamimissadeln tab cbietneddanddnenadanduaidddanerdnubdaiddeaicitmnmnabetidude 14
Christopher D. Stone, Js There a Precautionary
Principle?, 31 ENVTL. L. REP. 10790 (2001)........... 12

Cass R. Sunstein, Beyond the Precautionary Principle,
DR, Ca kn Mes HRs Ie CD wicicedacincdentsacascsccecsc 12

Cass R. Sunstein, Cost—Benefit Analysis and the
Environment, 115 ETHICS 351 (20085) .................... 1]

Cass R. Sunstein, Cost-Benefit Default Principles, 99
DENCE. Le. FRBV. 16GB] CHOOT) ...cccccccceccccceceses 6, 11, 12, 13

Cass R. Sunstein, Jnterpreting Statutes in the
Regulatory State, 103 HARV. L. REV. 405 (1989) ... 11

x

Cass R. Sunstein, Legislative Foreword: Congress,
Constitutional Moments, and the Cost-Benefit State,
RS ee 14

Tammy O. Tengs & John D. Graham, The
Opportunity Costs of Haphazard Social Investments
in Life-Saving, in RISKS, COSTS, AND LIVES SAVED:
GETTING BETTER RESULTS FROM REGULATION
SE Tl, GUE, BI conasinnssnccsscsionsapecetensavinse 14

Tammy O. Tengs et al., Five Hundred Life-Saving

Programs and Their Cost-Effectiveness, 15 Risk
ee ee I ciinininnckcticidnctinesnceneuteteanscttedetese 13

U.S. BUREAU OF LABOR STATISTICS, WORKER
DISPLACEMENT: 2011-2013 (Aug. 26, 2014)............ 25

U.S. CHAMBER OF COMMERCE AND NERA ECONOMIC
CONSULTING, ESTIMATING EMPLOYMENT IMPACTS OF
REGULATIONS: A REVIEW OF EPA’S METHODS FOR ITS
RI I I ics cs ds nseanneecnettaeinmaeenininenane 17

U.S. EPA SCIENCE ADVISORY BOARD: RELATIVE RISK
REDUCTION STRATEGIES COMMITTEE, REDUCING
RISK: SETTING PRIORITIES AND STRATEGIES FOR
ENVIRONMENTAL PROTECTION (Sept. 1990)............ 11

University of Wisconsin-Madison Institute for
Research on Poverty, “Health & Poverty”

WORLD WILDLIFE FUND, ENERGY POVERTY RISES IN
IES Sik SE ccthctintnsedsanasssvossqntienccinvaceuteeosns 20

BRIEF OF PEABODY ENERGY CORP.
AS AMICUS CURIAE SUPPORTING
PETITIONERS

INTEREST OF AMICUS CURIAE

Peabody Energy Corporation (“Peabody”) has a
continuing interest in the proper interpretation not
only of the Clean Air Act, but of health and safety
regulation generally.' Peabody is the world’s largest
private-sector, publicly-traded coal company and the
largest producer of coal in the United States.
Peabody’s products fuel approximately 10 percent of
America’s and 2 percent of the world’s electricity.
Peabody also has an ownership interest in a 1,600
megawatt coal-fueled electricity generation plant in
the United States.

Peabody seeks to vindicate not only its own
interests but the interests of the communities it serves
and the consumers who depend on affordable and
reliable electricity. Society's interests are best served
by a rational system of risk management that considers
not merely the benefits of proposed agency action, but
also the full scope of economic costs and potential “risk
trade-offs” — the danger that policies designed to
address one risk might inadvertently increase other
risks. Peabody is in a position to offer helpful guidance
to this Court on the need to focus on a global, reasoned,

‘| This brief has been filed with the written consent of the
parties, which is on file with the Clerk of Court. Pursuant to Rule
37.6, counsel for amicue affirms that no counsel for a party
authored this brief in whole or in part, nor did any person or
entity, other than amicus or its counsel, make a monetary
contribution to the preparation or submission of this brief.

and systematic approach to risk regulation, which will
result in policies that provide more protection for
human health and the environment.

SUMMARY OF ARGUMENT

This Court should clarify a fundamental principle
of administrative law: agency action under
environmental and other regulatory’ statutes,
including the Clean Air Act, ordinarily does not reflect
reasoned decision-making unless the agency
adequately considers economic costs and risk trade-offs
associated with the agency action. This practice is now
commonplace in the majority of agency rule-making. A
cost-benefit analysis is the necessary process by which
an agency arrives at a justifiable result, i.e., an outcome
that provides a net benefit to society. The alternative
— namely, the refusal to consider whether a rule does
more harm than good — strips away a procedural
safeguard necessary for reasoned decision-making,
rendering the agency’s decision-making presumptively
unreasonable, absent a clear congressional statement
to the contrary. Hence, a presumptive duty exists for
agencies to consider costs when rulemaking, unless
Congress clearly prohibits it.

Moreover, this Court should not confine its decision
simply to opining that agencies presumptively must
consider “costs” in the abstract, because such a course
would leave agencies the option of artificially
truncating their analysis by considering only some
costs and not all relevant ones. This danger is real.
Agencies often exclude categories of costs, or even
whole sectors of the economy, in performing their
analyses of the expected impact of a proposed rule,
which allows them to arrive at manipulated and

politically driven results.

This case demonstrates the astonishing
consequences of an agency’s failure to take costs and
risk trade-offs into account. In adopting its Utility
MATS Rule under Section 112(n)(1)(A) of the Clean Air
Act, 42 U.S.C. § 7412(n)(1)(A) (1999), EPA concluded
(in a reversal of its previous determination) that costs
were not a necessary factor to consider as part of a
determination whether a regulation was “appropriate.”
The upshot of EPA’s conclusion is a Rule with
estimated costs of $9.6 billion annually and estimated
annual benefits of a mere $4 to $6 million. National
Emission Standards for Hazardous Air Pollutants
From Coal- and Oil- Fired Electric Utility Steam
Generating Units and Standards of Performance for
Fossil-Fuel-Fired Electric Utility, Industrial-
Commercial-Institutional, and Small Industrial-
Commercial-Institutional Steam Generating Units
(“EPA Final Rule”), 77 Fed. Reg. 9,304, 9,306, Table 2
(Feb. 16, 2012); Pet. App. 208a. “Put simply, the Rule
is ‘among the most expensive rules that EPA has ever
promulgated.” Pet. App. 83a (citation omitted).

Further, even EPA’s huge figure of $9.6 billion in
costs represents a severe underestimation. The
calculation is limited to compliance costs and fails to
include the far-reaching systemic costs imposed by the
Rule on the U.S. economy. The Rule will cause a
significant percentage of power plants to shut down
and will also result in job losses, decreased reliability
of the electrical grid, and higher prices for electricity
and consumer goods. The Agency purports to consider
employment impacts, but only in the electricity sector.
EPA therefore does not consider job losses the Rule

would cause in other sectors or the substantial
increases in electricity prices that it would entail.

The massive costs associated with EPA’s proposal
will cause significant social hardship. For millions of
lower-income households, high energy costs force hard
decisions about what bills to pay — housing, food,
education, health care, or other necessities. Fixed-
income seniors are particularly vulnerable to increased
energy costs. Energy costs are also highly regressive,
and consumer electricity prices correlate strongly with
the poverty rate. In fact, inability to pay utility bills is
the second leading cause of homelessness in the United
States, second only to domestic abuse.

Ironically, the costs of EPA’s Rule will lead to the
respiratory problems and health problems the agency
is seeking to prevent. The costs will almost certainly
have a disproportionate impact on the poorest
segments of the population, who are at the highest risk
for respiratory diseases.

The text of Section 112 and the structure of the
Clean Air Act as a whole demonstrate that EPA is
required to consider costs and risk trade-offs in its
decision. The agency cannot properly determine
whether a new regulation is “appropriate” without
referring to costs and risk trade-offs.

In addition, under the Administrative Procedure
Act, agencies are required to conduct a “reasoned
analysis” and ‘provide a reasoned basis for their
decisions. Motor Vehicle Mfrs. Ass'n of U.S. v. State
Farm Mut. Auto Ins. Co., 463 U.S. 29, 42, 52, 57 (1983).
To qualify as “reasoned” under this standard — and
thus to survive judicial review under 5 U.S.C. § 706 —

agency action must consider costs and risk trade-offs.

Moreover, general administrative and legislative
practice has given rise to a baseline norm or customary
practice that agencies should consider costs in their
decisions. It is unreasonable for an agency to act
inconsistently with that norm, absent a clear
congressional directive otherwise. Under the
circumstances here, therefore, the proper
interpretation of “appropriate” must be informed by
the settled customary practice of cost consideration in
agency decision-making.

Indeed, a process that would permit an agency to
ignore overwhelming net harms to society, and to
accept a ratio of 1,500:1 between costs and benefits, is
a recipe for abuse and arbitrary decision-making
inconsistent with the constitutional presuppositions of
our system of government.

The judgment below should be reversed.
ARGUMENT

I. Reasoned Decision-Making Requires
Consideration Of Costs And Risk Trade-Offs.

This Court should make clear that there is a strong
presumption that agencies are required to give
adequate consideration to costs and risk trade-offs in
the absence of an express statutory provision to the
contrary. Consideration of costs and risk trade-offs is
necessary for reasoned decision-making in the absence
of an express congressional statement precluding an
agency from taking those factors into account.

As Justice Breyer has explained:
In order better to achieve regulatory goals —

for example, to allocate resources so that they
save more lives or produce a_ cleaner
environment — regulators must often take
account of all of a proposed regulation’s adverse
effects, at least where those adverse effects
clearly threaten serious and disproportionate
public harm.

Whitman v. Am. Trucking Ass'ns, 531 U.S. 457, 490
(2001) (concurring opinion); see also Cass R. Sunstein,
Cost-Benefit Default Principles, 99 MICH. L. REV. 1651,
1684 (2001) (“[I]}t is most unlikely that the Court would
disagree with Justice Breyer.”).

Justice Kagan has noted that proceeding with
regulations without considering cost is “silly.”? Justice
Powell similarly took the view that it would be
“irrational” to attribute to Congress “a standard-
setting process that ignored economic considerations,”
because it “would result in a serious misallocation of
resources.” Indus. Union Dept., AFL-CIO v. Am.
Petroleum Inst., 448 U.S. 607, 670 (1980) (concurring
opinion). Justice Powell also recognized in Union
Electric Co. v. EPA, 427 U.S. 246 (1976), that the
“shutdown of an urban area’s electrical service could
have an even more serious impact on the health of the
public than that created by a decline in ambient air

2 EPA, et al. v. EME Homer City Generation, L.P., et al., No.
12-1182, 2013 WL 6702694 (U.S.), 13 (U.S. Oral Arg., Dec. 10,
2013):

[What does it take in a statute to make us say, look,
Congress has demanded that the regulation here occur
without any attention to costs? In other words,
essentially, Congress has demanded that the regulation
has occurred in a fundamentally silly way.

quality.” Jd. at 272 (concurring opinion).

Thus, even where a statute does not expressly
articulate the factors governing agency action, the
agency must fully consider costs in order to engage in
reasoned decision-making. For example, in Entergy
Corp. v. Riverkeeper, Inc., 556 U.S. 208 (2009), this
Court affirmed EPA’s reliance on cost-benefit analysis
in promulgating regulations under a provision of the
Clean Water Act requiring “the best technology
available for minimizing adverse environmental
impact.” Even though the statutory section at issue did
not expresely refer to “cost,” this Court examined
“common parlance” and opined that “best technology
may also describe the technology that most efficiently
produces some good.” Jd. at 218 (emphasis in original).
This Court concluded that Congress’ decision not to
enumerate “cost” as a factor did not preclude its
consideration, because legislative “silence is meant to
convey nothing more than a refusal to tie the agency's
hands as to whether cost-benefit analysis should be
used, and if so to what degree.” Jd. at 222. Justice
Breyer explained in his concurring opinion that
consideration of costs (as well as benefits) is central to
rational regulatory decision-making because “every
real choice requires a decision to weigh advantages
against disadvantages, and disadvantages can be seen
in terms of (often quantifiable) costs.” Jd. at 232
(opinion of Breyer, J.). Justice Breyer added that
weighing costs and benefits is particularly important
“in an age of limited resources available to deal with
grave environmental problems, where too much
wasteful expenditure devoted to one problem may well
mean considerably fewer resources available to deal
effectively with other (perhaps more _ serious)

problems.” Jd. at 233.

Consideration of costs is particularly important in a
case like this, where an agency seeks to pursue
extraordinarily costly remedies in response to trivial
risks. “Put simply, the Rule is ‘among the most
expensive rules that EPA has ever promulgated.” Pet.
App. 83a (quoting JAMES E. MCCARTHY, CONG.
RESEARCH SERV., R42144, EPA’s UTILiITy MACT: WILL
THE LIGHTS GO OUT?, at 1 (2012)). EPA estimated the
cost of the Utility MATS Rule to be $9.6 billion
annually, while the estimated benefits are a mere $4 to
$6 million using a 3 percent discount rate. EPA Final
Rule, 77 Fed. Reg. at 9,306, Table 2; Pet. App. 208a.
Using a 7 percent discount rate, these benefits are
reduced to $500,000 to $1 million. Id. at 9,306.5

No rational person would exchange $9.6 billion for
a return of $4 to $6 million, and EPA was able to
generate this meager benefits estimate only by making
a series of outlandish assumptions about exposure to
mercury and other substances. For example, EPA
assumed that a pregnant woman would consume 13
ounces of locally caught fish every day during her
pregnancy and that the mercury levels in the fish
would represent some of the highest levels measured in

3 EPA claims that, overall, the regulation will create $33-$90
billion in benefits. EPA Final Rule, 77 Fed. Reg. at 9,306; but see
Pet. App. 208a. But virtually all of this amount consists of what
EPA deacribes as a “co-benefit” of reducing SO2 emissions. See
Pet. App. 208a. However, because SO2 is not a “hazardous air
pollutant” for purposes of Section 112, EPA recognizes that it
cannot rely on these asserted co-benefite as part of its
determination whether regulation is “appropriate and necessary.”
EPA Final Rule, 77 Fed. Reg. at 9,320; Pet. App. 268a-272a.

each of the fresh water rivers and lakes for which EPA
could find data. National Emission Standards for
Hazardous Air Pollutants From Coal- and Oil-Fired
Electric Utility Steam Generating Units and
Standards of Performance for Fossil-Fuel-Fired
Electric Utility, Industrial-Commercial-Institutional,
and Small Industrial-Commercial]-Institutional Steam
Generating Units (EPA Proposed Rule”), 76 Fed. Reg.
24,976, 25,007 (May 3, 2011); 77 Fed. Reg. at 9,349;
Pet. App. 397a-401, 1299a-1300a. In calculating
exposure to mnon-mercury trace metals, EPA
determined the exact location of the highest impact
from the emissions for each generating facility and
then assumed that a hypothetical individual would
remain at that precise spot 24 hours a day, 365 days a
year, for 70 years to determine whether the increased
cancer risk for that individual would exceed one-in-one-
million. EPA Proposed Rule, 76 Fed. Reg. at 25,011-
12; Pet. App. 1317a-1323a; 77 Fed. Reg. at 9,357-62;
Pet. App. 434a-461a.

Thus, this case is similar to United States v. Ottati
& Goss, Inc., 900 F.2d 429 (1st Cir. 1990) (Breyer, J.),
where the First Circuit affirmed a district court’s
denial of EPA’s proposed remedy for cleaning up soil
contaminated with PCBs. EPA sought a remedy that
would have reduced PCB concentrations to 20 parts per
million (“ppm”) rather than 50 ppm, at a marginal cost
of $9.3 million. EPA’s decision was based on its
extraordinary assumptions that (a) developers would
build residential housing on the previously
undeveloped site, (b) small children, playing in the
backyard, would eat dirt containing PCBs, and (c) the
children would eat such dirt each day for 245 days per
year for three and a half years. Id. at 441. The court

10

of appeals opined that “[o]ne might conclude from the
cited portions of the record that this amounts to a very
high cost for very little extra safety.” Id. See also
STEPHEN BREYER, BREAKING THE VICIOUS CIRCLE:
TOWARD EFFECTIVE RISK REGULATION 12 (Harvard
Univ. Press 1993) (spending $9.3 million to protect
“non-existent dirt-eating children” is the problem of
“the last 10 percent”).

The need to consider costs in regulatory decision-
making arises from the finite nature of society's
resources. Because allocative choices made in
protecting health and the environment do not occur in
a vacuum, risk-management decisions made without
regard to associated costs are necessarily arbitrary and
unreasonable. During the Clinton Administration, the
Office of Management and Budget reported to
Congress that “the only way we know to distinguish
between the regulations that do good and those that
cause harm is through careful assessment and
evaluation of their benefits and costs.”"4 Executive
orders issued by both the Clinton and Obama
Administrations have required agencies to consider
costs. Even EPA’s own Science Advisory Board has
documented the dangers of ignoring costs and risk
trade-offs.®

* OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF
INFORMATION AND REGULATORY AFFAIRS, REPORT TO CONGRESS ON
THE COSTS AND BENEFITS OF FEDERAL REGULATIONS 10 (1997).

5 See Regulatory Planning and Review, Exec. Ord. No. 12,866,
68 Fed. Reg. 51,736 (Sept. 30, 1993); Improving Regulation and
Review, Exec. Ord. No. 13,563, 76 Fed. Reg. 3,821 (Jan. 18, 2011).

® U.S. EPA SCIENCE ADVISORY BOARD: RELATIVE RISK

ll

As one leading expert in the regulatory process has
explained, “[a] rational system of regulation looks not
at the magnitude of the risk alone, but assesses the risk
in comparison to the costs.”’? “Without some sense of
both costs and benefits—both nonmonetized and
monetized—regulators will be making a stab in the
dark.”® Professor Sunstein continues:

[A]ny reasonable judgment will ordinarily be
based on some kind of weighing of costs and
benefits, not on an inquiry into benefits alone....
If the costs would be high and the benefits low,
on what rationale should ... the EPA refuse even
to consider the former? There appears to be no
good answer. If there is not, the agency's
interpretations should be declared
unreasonable.®

He therefore proposed that courts adopt a
rebuttable presumption that refusal to consider costs is
unreasonable.'® This consideration of costs should be
both procedural (considering them in the first place) as
well as substantive (giving them some weight in the

REDUCTION STRATEGIES COMMITTEE, REDUCING RISK: SETTING
PRIORITIES AND STRATEGIES FOR ENVIRONMENTAL PROTECTION,
(Sept. 1990).

7 Cass R. Sunstein, Interpreting Statutes in the Regulatory
State, 103 HARV. L. REV. 406, 493 (1989).

® Cass R. Sunstein, Cost-Benefit Analysis and the
Environment, 115 ETHICS 361, 354 (2005).

® Cass R. Sunstein, Cost-Benefit Default Principles, 99 MICH.
L. REV. 1651, 1694 (2001).

10 Id. at 1693-94.

12

calculus).!!

Numerous other scholars have agreed with the need
to consider costs:

e John D. Graham: Spending over $15 million to
save a life is “statistical murder” and becomes net
counterproductive because the wealth loss will
translate into an additional death. Risk Assessment
and Cost-Benefit Analysis of New Regulations: Hearing
on H.R. 9 Before the House Comm. on Commerce, 104th
Cong. 296 (1995) (statement of John D. Graham,
Ph.D.).

e Richard Pierce: “All individuals and institutions
naturally and instinctively consider costs in making
any important decision.... [I]t is often impossible for a
regulatory agency to make a rational decision without
considering costs in some way.” The Appropriate Role
of Costs in Environmental Regulation, 54 ADMIN. L.
REV. 1237, 1247 (2002).!?

1! Td. at 1703-04.

12 Some acholars have proposed that regulation should be risk-
averse under the “precautionary” principle, but in a world in
which taking regulatory actions inevitably has costs and trade-
offs, the precautionary principle provides no reason to ignore
them. See generally Stephen Clowney, Environmental Ethics and
Cost-Benefit Analysis, 18 FORDHAM ENVTL. L. REV. 105 (2006)
(arguing that cost-benefit analysis can ultimately produce better
environmental outcomes than the precautionary principle); Cass
R. Sunstein, Beyond the Precautionary Principle, 151 U. PA. L.
REV. 1003 (2003) (criticizing the precautionary principle for
causing paralysis because of its incoherence and dependence on
cognitive biases); Christopher D. Stone, Ie There a Precautionary
Principle?, 31 ENVTL. L. REP. 10790, 10791 (2001) (noting the

13

Closely related to the need to consider costs is the
need to consider risk trade-offs: “Risks never exist in
isolation. They are part of systems. For that reason,
any effort to reduce a single risk will have a range of
consequences, some of them likely unintended.”!5 John
Graham and Jonathan Wiener have warned that,
“[plaradoxically, some of the most well-intentioned
efforts to reduce identified risks can turn out to
increase other risks.”'4 One expert has estimated that
a more rational prioritization of regulatory policies
could save 60,000 lives, with the expenditure of no |
additional resources. '5 .

incoherence of the principle); Jonathan H. Adler, More Sorry Than
Safe: Assessing the Precautionary Principle and the Proposed
International Biosafety Protocol, 35 TEX. INTL L.J. 173 (2000)
(discussing the health-health trade-offs of the precautionary
principle, for example, in FDA drug approvals); Frank B. Cross,
Paradoxical Perils of the Precautionary Principle, 53 WASH. & LEE
L. REV. 851 (1996) (criticizing the precautionary principle as an
indeterminate decision rule that can conceal greater risks to
public health); BREYER, BREAKING THE VICIOUS CIRCLE, supra, at

18, (noting that “err[ing] on the safe side ... can produce random
resulta”).

18 Sunstein, supra note 9, at 1653.

14 John D. Graham and Jonathan Baert Wiener, Confronting
Risk Tradeoffs, in RISK VS. RISK: TRADEOFFS IN PROTECTING
HEALTH AND THE ENVIRONMENT 1 (John D. Graham & Jonathan
Baert Wiener eds., Harvard 1995).

15 John D. Graham, Legislative Approaches to Achieving More
Protection Against Risk at Less Cost, 1997 U. CHI. LEGAL F. 13; see
also Tammy O. Tengs et al, Five Hundred Life-Saving Programs
and Their Cost-Effectiveness, 15 RISK ANALYSIS 369 (1995);
Tammy O. Tengs & John D. Graham, The Opportunity Costs of
Haphazard Social Investments in Life-Saving, in RISKS, COSTS,

14

For example, “[t]he major policies to control
pollution in the United States have been aimed at one
target environmental medium (air, water, or land) at a
time, with the result that pollution has too often been
merely shifted from one medium to another instead of
reduced overall.”4* Thus, “the 1977 Clean Air Act
requirement that all coal-fired power plants install
scrubbers to remove sulfur dioxide from their
smokestacks has generated tons of toxic sludge that
must be disposed of elsewhere.”!’ Reducing
tropospheric ozone with clean air rules increases skin
cancer, due to ozone’s beneficial blocking effect on
ultraviolet-B (UV-B) radiation, because tropospheric
ozone is more effective than stratospheric ozone at
blocking UV-B radiation.'® Similarly, cleanup of

AND LIVES SAVED: GETTING BETTER RESULTS FROM REGULATION
167, 172 (Robert W. Hahn, ed. 1996). See also Cass R. Sunstein,
Legislative Foreword: Congress, Constitutional Moments, and the
Cost-Benefit State, 48 STAN. L. REV. 247 (1996).

16 Graham and Wiener, supra note 14, at 13.
17 Id.

18 Paul J. Crutzen, Ultraviolet on the Increase, 356 NATURE
104 (1992) (‘Ozone in the troposphere, an industrial pollutant, is
(molecule for molecule) a stronger absorber of ultraviolet than
ozone in the stratosphere”); see generally Ignacio Galindo et ai.,
Ultraviolet Irradiance over Mexico City, 45 AIR & WASTE MGMT.
ASS’N 886 (1996); NATIONAL RESEARCH COUNCIL, RETHINKING THE
OZONE PROBLEM IN URBAN AND REGIONAL AIR POLLUTION 110
(National Academy Press 1991); G. Seckmeyer & R.L. McKenzie,
Increased Ultraviolet Radiation in New Zealand (45 [degrees] S)
Relative to Germany (48 [degrees] N), 359 NATURE 135 (1992);
John E. Frederick et al., Empirical Studies of Tropospheric
Transmission in the Ultraviolet: Broadband Measurements, 32 J.
APPLIED METEOROLOGY AND CLIMATOLOGY 1883 (1993).

15

hazardous waste sites creates increased risk of
accidental fatalities, especially in construction and
transportation jobs. For a typical site, the accident
fatality risk from a cleanup appears to be several times
larger than the health risk from not cleaning up.!®
Another example is drinking water chlorination. U.S.
risk assessments classifying the chlorination process
as carcinogenic led Peru to suspend it, triggering the
largest outbreak of cholera in recent times, in which
over 800,000 people became ill and nearly 7,000 died.

Risk trade-offs are pervasive, and no rational
system of regulation would favor taking actions aimed
at a single risk if they result in even greater
countervailing risks. Nor would a rational system
ignore costs in regulatory decisions.

II. An Agency’s Duty Includes The Obligation To
Give Adequate Consideration To The Full
Scope Of Costs And Risk Trade-Offs.

This Court should make clear that an agency's duty
to consider costs is not satisfied by its decision simply
to consider some costs, or the subset of costs it prefers
to consider. Rather, the agency is required to consider
all relevant costs. This Court should not confine its
decision simply to opining that agencies must consider
“costs” in the abstract, because such a course would
leave agencies the option of artificially truncating their

18 Alan F. Hoskin et al., Estimated Risk of Occupational
Fatalities Associated With Hazardous Waste Site Remediation, 14
RISK ANALYSIS 1011 (1994).

* Christopher Anderson, Cholera Epidemic Tied to Risk
Miscalculation, 354 NATURE 2655 (1991).

16

analysis by considering only some costs and not all
relevant ones.

For example, in this case EPA acknowledged that it
performed an evaluation of some costs in its Regulatory
Impact Analysis (RIA), but admits that it intentionally
ignored the RIA in determining whether regulating
EGUs is “appropriate” under Section 112. Even if EPA
had considered the RIA, its cost evaluation was wholly
inadequate. In the RIA, EPA limited its consideration
of costs to those arising directly in the utility sector —
and arbitrarily to exclude even readily measurable
economy-wide employment effects and other impacts
caused by increased electricity prices. EPA's cost
estimate of $9.6 billion for the Utility MATS Rule is
confined to estimated compliance costs, EPA Final
Rule, 77 Fed. Reg. at 9,306, 9,425, not a full analysis of
the Rule’s economic impact. But the evidence indicates
that the economic effect of the Rule will be much
broader than EPA’s “cost” analysis would indicate. The
Rule will cause the shut-down of coal-fired plants,
reduce electric reliability, and increase retail electricity
prices. These economic burdens will be imposed on
consumers of electricity, including businesses, and will
ultimately translate into higher costs for consumer
goods and services and reduced employment. EPA did
not take any of these “ripple” effects into account, even
though it recognized that the Utility MATS Rule “is
likely to have a significant adverse effect on the supply,
distribution, or use of energy,” id. at 9,441, and
estimated that the Rule will increase the average
nationwide retail electricity prices by 3.1 percent in
2015. Id. at 9,425. Other studies put the estimated

17

price increase much higher, at 12-24 percent.?! Federal
officials have warned that the Rule threatens the
reliability of the electrical grid by causing plants to
shut down.22

Further, EPA conducted only a limited analysis of
the employment impact of its Utility MATS Rule in the
electricity sector, finding a net increase of 8,000 jobs
due to compliance activities. EPA Final Rule, 77 Fed.
Reg. at 9,425. EPA ignores the loss of jobs caused by
higher electricity prices and reduced business
competitiveness. Other assessments show job losses in
the range of 180,000-215,000 in 2015 alone and 50,000-
85,000 in later years. Thus, EPA’s failure to consider
the full scope of the economic costs associated with its

21 See NDP CONSULTING, A CRITICAL REVIEW OF THE BENEFITS
AND COSTs OF EPA REGULATIONS ON THE U.S. ECONOMY 16 (2012),
available at http://documents.nam.org/ERP/ NAM_PHAM.pdf.

22 Commissioner Moeller of the Federal Energy Regulatory
Commission has warned of the reliability implications of the
Utility MATS Rule, cautioning that “reliability is as much a
necessity for the EPA as it is for the American people.” Hearing
on FERC Perspective: Questions Concerning EPA’s Proposed Clean
Power Plan and other Grid Reliability Challenges, Before the
House Committee on Energy and Commerce Subcommittee on
Energy and Power, at 9 (July 29, 2014) (Written Testimony of
FERC Commissioner Philip D. Moeller), available at
http://www .ferc.gov/CalendarFiles/20140729091755-Moeller-07-
29-2014.pdf.

3 See U.S. CHAMBER OF COMMERCE AND NERA ECONOMIC
CONSULTING, ESTIMATING EMPLOYMENT IMPACTS OF
REGULATIONS: A REVIEW OF EPA’S METHODS FOR ITS AIR RULES 29
(Feb. 2013), available at http:/Awww.nera.com/67_8015.htm.

18

proposal has caused it to dramatically underestimate
those costs.

It is all too easy for people with a humanistic bent
and with disdain for the “dismal science” of economics
to equate hard-headed cost-benefit analysis with an
obsession with allocative efficiency and a disregard for
distributive justice. But that equation would be
profoundly misguided. This case illustrates the point
dramatically, for the burden of higher electricity rates
falls especially hard on low-income Americans, who
already devote substantial portions of their income to
basics like heating and cooling. Households with pre-
tax incomes less than $50,000 (49% of American
households) devote 20% of their after-tax budget to
energy costs.24 For households with less than $30,000
in pre-tax income (consisting of 37 million families),
energy costs represent 26% of their post-tax
expenditures.25 This fact is all the more alarming in
light of the fact that household incomes for the less
well-off segments of the population are still below their
pre-recession levels. For millions of households —
especially the unemployed, single parents, and those at
the bottom of socio-economic ladder — high energy costs
force painful decisions about which bills to pay:
housing, food, education, health care, and other
necessities. Fixed-income seniors are also particularly

% See generally AMERICAN COALITION FOR CLEAN COAL
ENERGY, ENERGY COST IMPACTS ON AMERICAN FAMILIES, 2001-
2014 (Feb.2014), available at _http://www.americaspower.org/
sites/default/files/Energy_Cost Impacts 2012 FINAL.pdf.

2% Id.
% Id.

19

vulnerable to increased energy costs.27 Energy costs
are highly regressive, since energy expenditures
consume larger shares of the budgets of low-income
families than they do for those of higher-income
families. It is no surprise that consumer electricity
prices correlate strongly with the poverty rate; in fact,
inability to pay utility bills is the second leading cause
of homelessness in the United States, lagging behind
only domestic abuse.*

High energy prices also lead directly to higher
mortality rates. The director of a British charity for
the aged has commented that “[cJold homes — caused by
a number of factors including high energy costs _
have a devastating impact on older people’s health, and
are a major cause of excess winter deaths.”2® Another
report found that “[t]housands of people die each
winter in the UK as a result of being unable to heat
their homes.” “And not being able to heat your home

27 Id. at 12.

28 THE AFFORDABLE POWER ALLIANCE, POTENTIAL IMPACT OF
THE EPA ENDANGERMENT FINDING ON LOW INCOME GROUPS AND
MINORITIES 8 (March 2010), available at http//www.misi-
net.com/publications/APA-0310.pdf; Roger Bezdek, Maximum
Burden: The Electricity Price Increases From the Proposed EPA
Utility MACT Will Act as a Regressive Tax on the Elderly, PuB.
UTILS. FORTNIGHTLY (Dec. 2012); Roger Bezdek, Florida Will be
Hit Hard by MACT, MODERN POWER SYSTEMS, 15-16 (Sept. 2012).

7? Simon Read, Energy Prices Climb as Fuel Poverty Soars,
THE INDEPENDENT (Dec. 21, 2012), available at
http://www .independent.co.uk/money/spend-save/energy-prices-
climb-as-fuel-poverty-scarse-8429468 html.

3% Lucy Jolin, The Scandal of Britain’s Fuel Poverty Deatha,
THE GUARDIAN (Sept. 11, £2014), available’ at

20

also takes a huge toll on health in general: those in fuel
poverty have higher incidences of asthma, bronchitis,
heart and lung disease, kidney disease and mental
health problems.”*!

Hence, the effects of higher energy costs are felt
most acutely by the poor and other segments of the
population at highest risk for the health problems
targeted by EPA. The Institute for Research on
Poverty at the University of Wisconsin has
summarized the available research: “Health in the
United States is very strongly correlated with income.
Poor people are less healthy than those who are better
off, whether the benchmark is mortality, the
prevalence of acute or chronic diseases, or mental
health.”®? Ironically, the costs of EPA’s Rule mean that
it may aggravate the very respiratory illnesses it seeks

http://www.theguardian.com/big-energy-debate/20 1 4/sep/11/fuel-
poverty-scandal-winter-deaths.

3} Jd; see also ASSOCIATION FOR THE CONSERVATION OF
ENERGY, FACT-FILE: THE COLD MAN OF EUROPE 2, 10, Appendix
V, available at http-//www.ukace.org/wp-
content/uploade/20 13/03/ACE-and-EBR-fact-file-2013-03-Cold-
man-of-Europe.pdf (diecuasing the link between increased heating
costs and excess winter deaths, as supported by data across
European Union countries)} WORLD WILDLIFE FUND, ENERGY
PoveRTY RISES IN SPAIN (Apr. 3, 2014), available at
http4/www .wwf_.gr/crisis-watch/crisis-watch/energy-climate/10-
energy-climate/energy-poverty-rises-in-spain (discussing energy
poverty in Spain, and specifically that there are “7 million people
who live in unhealthy conditions of homes that are very cold in the
winter”).

3% University of Wisconsin-Madison Institute for Research on
Poverty, “Health & Poverty,” http://www.irp.wisc.edu/
research/health htm.

21

to prevent, because poverty is highly correlated with
the incidence of those diseases.“ The American
Thoracic Society has opined that “poverty may be the
number one risk factor for asthma.”™

In short, by focusing solely on compliance costs,
EPA irrationally excludes the far-reaching and at least
as significant systemic costs imposed by the Rule on
the U.S. economy. EPA ignores the vital importance of
reliable and affordable electricity to consumers. It fails
to undertake a proper jobs and employment analysis.
The Agency purports to consider employment impacts,
but only in the electricity sector. EPA therefore does
not consider job losses in other sectors due to the Rule
and the substantial increases in electricity prices that
it will entail.

The regulatory costs that EPA seeks to ignore are
not simply a matter of concern to the industry within
the agency’s cross-hairs. These costs have substantial
negative impacts on public health and welfare. Judge
Easterbrook has cautioned, “fhjigher income is
associated with better nutrition and medical care;
regulations creating costs exceeding $7.5 million per
life (directly) saved may well yield greater indirect loss
of life.” Monsanto Co. v. EPA, 19 F.3d 1201, 1210 (7th
Cir. 1994) (dissenting opinion) (citing BREYER,
BREAKING THE VICIOUS CYCLE, at 23, supra); see also
Intl Union, UAW v. OSHA, 938 F.2d 1310, 1326 (D.C.

33 See Susan E. Dudley, Economic Impact Analyses, 16 PACE
ENVTL. L. REV. 81, 84-86 (1998); Susan E. Dudley & Wendy L.
Gramm, EPA's Proposed Ozone Standard May Harm Public
Health and Welfare, 17 INT'L J. OF RISK ANALYSIS 403 (Aug. 1997).

* Dudley, supra note 31, at 84-85.

22

Cir. 1991) (Williams, J., concurring) (explaining that
recent studies predict that “each $7.5 million of costs
generated by regulation may .. induce one fatality” in
the public through reduced availability of resources for
medical care and safety).

Regulatory actions increasing the price of electricity
will lead to unemployment, reduced business
competitiveness, and hardship for consumers. Studies
have found that a 10 percent increase in electricity
prices will result in a one percent reduction in GDP and
employment levels.“

Thus, EPA’s failure to include the Rule’s far-
reaching systemic effects severely understates not only
its net aggregate costs but the manifest unfairness of
the way those costs are distributed across society. This
case is not an aberration. EPA's policies predictably
ensure that its regulations are not analyzed against
the full scope of their societal impact. EPA’s own
written guidelines for cost-benefit analyses admit that
no independent examination of employment impacts is
regularly conducted:

At times of recession, questions arise about
whether jobs lost as a result of a regulation
should be counted as an additional cost of the
regulation. However, counting the number of
jobs lost (or gained) as a result of a regulation

3% See AMERICAN COALITION FOR CLEAN COAL ELECTRICITY,
THE SOCIAL COSTS OF CARBON? NO, THE SOCIAL BENEFITS OF
CARBON, Appendix III, at 175-181 @Jan. 2014), available at
http//www .americaspower.org/sites/default/files/Social_Cost_of_
Carbon.pdf.

23

generally has no meaning in the context of BCA
[cost-benefit analysis] as these are typically
categorized as transitional job losses.%

These Guidelines note that job losses should only
rarely be considered in the rulemaking process: “In
very rare cases in which a regulation contributes
additional job losses to a sector exhibiting structural
unemployment, analysts should consider including job
losses as a separate cost category.”°7 EPA has
historically considered employment impacts to be
generally irrelevant and optional:

The [Economic Analysis Guideline’s} chapters
on benefits (Chapter 7) and costs (Chapter 8)
point out that regulatory-induced employment
impacts are not, in general, relevant for a BCA.
For most situations, employment impacts
should not be included in the formal BCA [cost-
benefit analysis]. However, if desired the
analyst can assess the employment impacts of a
regulation as part of an EIA.

And EPA’s record bears this out. In one review of
EPA’s methods for estimating employment impacts

3 NATL CTR. FOR ENVTL. ECON., OFFICE OF POLICY, U.S.
ENVTL. Prot. AGENCY, GUIDELINES FOR PREPARING ECONOMIC
ANALYSES § 8.1.4 (Dec. 17, 2010, last updated May 2014)
(“Economic Analyses Guidelines”) (emphasis added), available at
http://yosemite .cpa.gov/ee/epa/eerm.nsf/vw AN/EE-0568-50.pdf/ $file/EE-
0568-50.pdf.

37 Id. § 8.1.4 0.16 (emphasis added).
% Id. at § 9.2.3.3 (emphasis added; footnote omitted).

24

related to air quality regulations, economic research
firm NERA found that:

EPA discussed the employment impacts of
proposed air quality regulations in only 11 of the
48 rulemakings over the 1995 through 2010
period. After 2010 (since the issuance of
Executive Order 13563), EPA discussed
empioyment impacts in 7 of 9 rulemakings.*®

But it is not plausible to assume that workers
displaced from jobs because of EPA regulations will
readily be able to find alternative employment.“ That
supposition is highly problematic. A recent Displaced
Worker Survey by the Bureau of Labor Statistics found
that, among the 4.3 million long-tenured displaced
workers who lost their jobs between 2011 and 2013,

%® Overview: Summary Results of the Study, in U.S. CHAMBER
OF COMMERCE, IMPACTS OF REGULATIONS ON EMPLOYMENT:
EXAMINING EPA’s OFT-REPEATED CLAIMS THAT REGULATIONS
CREATE JOBS, available at
https://www.uscham ber.com/sites/default/files/documents/files/02
0360_ETRA_Briefing NERA _Study_final pdf (emphasis added)
(laat visited on Jan. 26, 2015).

“ EPA has stated that it need not consider job losses because
job lose will be temporary. As stated in EPA’s Guidelines,

counting the number of jobs lost (or gained) as a result of a
regulation generally has no meaning in the context of BCA
as these are typically categorized as transitional job
losses.... The social cost of a regulation already includes
the value of lost output associated with the reallocation of
resources (including labor) away from production of output
and towards pollution abatement.

U.S. ENVTL. PROT. AGENCY, Economic Analyses Guidelines, supra
note 33, § 8.1.4 (footnote omitted; emphasis added).

25

39% were still unemployed.*! And among long-tenured
workers who were displaced from full-time wage and
salary jobs and were reemployed in such jobs in
January 2014, nearly half (or 48%) had earnings that
were lower than those of their lost job.*?

Accordingly, this Court should not limit its decision
to a general statement that agencies have a duty to
consider “costs” in the abstract. Rather, this Court
should make clear that agencies have a responsibility
to consider all relevant costs unless Congress directs
otherwise. In the absence of such a prescription, there
is nothing to stop agencies from gaming the system by
cherry-picking which costs to include and which to
exclude, artificially truncating their analysis to
consider only some costs rather than all relevant ones.

Ill. Many Reasons Grounded In Legal Principle

Require An Agency To Consider Costs And
Risk Trade-Offs.

The requirement to consider costs and risk trade-
offs is grounded both in organic regulatory statutes
(such as the Clean Air Act) and in broader principles of
administrative law. General legislative and
administrative practice has given rise to a custom or
norm that agencies should consider costs in their
decisions. Accordingly, absent a clear directive from
Congress otherwise, this Court ought to presume that
an agency is obliged to do so.

*! U.S. BUREAU OF LABOR STATISTICS, WORKER DISPLACEMENT:

2011-2013 (Aug. 26, 2014), available at
http://www.bls.gov/news.release/disp .htm.

2 Td.

26

This Court has instructed that, “[e}ven under
Chevron’s deferential framework, agencies must
operate ‘within the bounds of reasonable
interpretation” and must give meaning to “both ‘the
specific context in which ... language is used’ and ‘the
broader context of the statute as a whole.” Utility Air
Regulatory Group v. EPA, 134 S. Ct. 2427, 2442 (2014)
(citations omitted). The need to consider costs and risk
trade-offs is part of the broader context of any rational
regulatory scheme.

Thus, in EPA v. EME Homer City Generation, L.P.,
134 S. Ct. 1584 (2014), this Court reversed a D.C.
Circuit decision holding that the “Good Neighbor
Provision” of the Clean Air Act did not permit
consideration of costs. This Court opined that the D.C.
Circuit’s construction of the provision at issue would
result in “costly overregulation unnecessary to, indeed
in conflict with, the Good Neighbor Provision’s goal of
attainment.” Id. at 1605. The Court agreed with EPA
that using costs in the calculus “also makes good
sense,” finding it created “an efficient and equitable
solution to the allocation problem the Good Neighbor
Provision requires the Agency to address.” Jd. at 1607.

Indeed, a process that would permit.an agency to
ignore overwhelming net harms to society, and to
accept a ratio of 1,500:1 between costs and benefits, is
a recipe for abuse and arbitrary decision-making. Cf.
Honda Motor Co. Ltd. v. Oberg, 512 U.S. 415, 430-31
(1994) (absence of traditional procedural safeguards
against arbitrary and abusive decision-making violates
due process guarantees). Such a process would raise
serious questions of what might be called “structural
due process” by vesting undue discretion in an

27

unelected agency to make fundamental policy choices —
and to avoid political accountability for doing so. See,
e.g., Hampton v. Mow Sun Wong, 426 U.S. 88, 116
(1976) (invalidating Civil Service Commission
regulation denying federal employment to non-citizens
because, even though agency was not found to have
acted beyond its statutory mandate, decision to bar
aliens from federal employment was not a decision that
administrative officials were competent to make);
National Cable Television Ass’n v. United States, 415
U.S. 336, 341-42 (1974) (opining that “constitutional
problems” would arise if statute were construed as
vesting administrative agency with the discretionary
authority to impose a tax); Hans A. Linde, Due Process
of Lawmaking, 55 NEB. L. REV. 197 (1976) (stressing
the need in constitutional adjudication to focus on the
procedure of lawmaking as well as the substantive
limits on the legislative power).

A. The Clean Air Act Requires Consideration
Of Costs And Risk Trade-Offs.

The Clean Air Act provides clear indications that
implementing regulations should not ignore costs. The
particular statutory section at issue here — Section 112
of the Clean Air Act — requires EPA to determine
whether a rule is “appropriate and necessary after
considering the results of the [agency’s] study” of the
hazards to public health and after reporting available
control strategies to Congress. 42 U.S.C.
§ 7412(n)(1)(A).

Settled practice indicates that EPA should (and
customarily does) consider costs in determining

whether significant new regulations are “appropriate
and necessary.” In fact, EPA has previously considered

28

costs under Section 112, and courts have affirmed that
consideration.‘ In 2005, EPA opined that “[nJothing
precludes EPA from considering costs in assessing
whether regulation of Utility Units under section 112
is appropriate in light of all the facts and circumstances

Removal of Coal- and Oil-Fired Electric Utility Steam
Generating Units From the Section 112(c) List, 70 Fed.
Reg. 15,994, 16,001 n.19 (Mar. 29, 2005).

Further, this Court has approved consideration of
cost in determining whether a rule is “appropriate.” In
American Textile Mfrs. Institute, Inc. v. Donovan, 452
U.S. 490 (1981), this Court refused to interpret the
Occupational Health and Safety Act as requiring

‘reasonably necessary or appropriate’ under [OSHA].”
Id. at 513 n.31 (second emphasis added). In upholding

In contrast, EPA would treat the term “appropriate”
as imposing no constraint at all on its discretion with

8 See Ass'n of Battery Recyclers, Inc. v. EPA, 716 F.3d 667,

29

respect to its consideration of costs. Such a
construction would render superfluous the word
“appropriate.” Moreover, it would ignore the broader
custom under which agencies consider costs and risk
trade-offs, absent a specific directive otherwise by
Congress.

Other provisions of the Clean Air Act confirm the
need to consider costs. When Section 112 is read in the
context of other related provisions, construing
“appropriate and necessary” consistent with the
custom of cost consideration harmonizes Section 112
with the whole. The Act states that it seeks to promote
public welfare and this country’s productive capacity.
42 U.S.C. § 7401(b)(1). A “primary goal” of the Act is
to “encourage or otherwise promote reasonable
Federal, State, and local governmental actions” for
pollution prevention. Id. § 7401(c) (emphasis added).
The term “reasonable” obviously connotes
consideration of costs. This is so in this context because
if a regulation is not worth the costs, then it, by
definition, lacks “reason” for its promulgation. Both
administrative law and constitutional law require
transparency with respect to what an agency counts as
meaningful for setting standards — especially for
standards as far-reaching as those at issue, which
threaten to shut down entire businesses and put people
out of work. The constitutional value of public
accountability is at stake.

B. The Clean Air Act Mandates Economic
Impact And Employment Analyses.

EPA states that it “perform[s] detailed regulatory
impact analyses (RIAs) for each major rule it issues,
including cost-benefit analysis, various types of

30

economic impacts analysis, and analysis of any
significant small business impacts.”** That statement
represents the EPA’s purported compliance with
Section 321(a) of the Act 42 U.S.C. § 7621(a), which
expressly mandates that EPA conduct continuing
evaluations of how employment is affected by its
actions under the Act. With the title “Continuous

evaluation of potential loss or shifts of employment,”
§ 321(a) provides:

The Administrator shall conduct continuing
evaluations of potential loss or shifts of
employment which may result from the
administration or enforcement of the provision
of [the Clean Air Act} and applicable
implementation plans, including where
appropriate, investigating threatened plant
closures or reductions in employment allegedly
resulting from such administration or
enforcement.

42 U.S.C. § 7621(a) (emphasis added). The Committee
Report accompanying this provision noted concern
about “the extent to which the Clean Air Act or other
factors [were] responsible for plant shutdowns,
decisions not to build new plants, and consequent
losses of employment opportunities.” H.R. REP. No.
95-294, at 316 (1977). The Report observed that “a
healthful environment, energy conservation, and a

“ ENVT & PUBLIC WORKS COMMITTEE, U.S. HOUSE OF
REPRESENTATIVES, QUESTIONS FOR THE RECORD FROM SENATOR
DAVID VITTER, GINA MCCARTHY CONFIRMATION HEARING 17-18,
available at http://Awww.epw.senate.gov/public/index.cfm?
fuseaction=files. view &filestore_id=9a1465d3-1490-4788-95d0-
7d178b3dc320.

31

sound economy are interrelated factors bearing on the
quality of life of the Nation.” Jd. at 61. Accordingly,
the Report explained that Section 321(a) was meant to
ensure that EPA considered the economic effects of its
actions:

Under this provision, the Administrator is
mandated to undertake an ongoing evaluation of
job losses and employment shifts due to
requirements of the [CAA]. This evaluation is to
include investigations of threatened plant
closures or reductions in employment allegedly
due to requirements of the act or any actual
closures or reductions which are alleged to have
occurred because of such requirements.

Id. at 317. Thus, not only must “appropriate” be read
in the context of Section 321’s requirements for cost
considerations but Congress also requires EPA to
undertake evaluations of potential loss or shifts of
employment resulting from the Act on a “continuing”
basis in its regulatory actions. Section 321 not only
requires cost considerations but far broader cost
considerations than those EPA first considered in its
RIA analysis then ignored entirely.

C. Principles Of Administrative Law Mandate
Consideration Of Costs And Risk Trade-
Offs.

Even apart from the Clean Air Act and other
statutes, generally applicable’ principles’ of
administrative law ordinarily compel an agency to
consider cost as a factor in its decisions. The
Administrative Procedure Act authorizes reviewing
courts to set aside agency action that is “arbitrary,

32

capricious, an abuse of discretion, or otherwise not in
accordance with law.” 5 U.S.C. § 706(2)(A).45 This
Court has held that agencies must conduct a “reasoned
analysis” and furnish a “reasoned basis” for their
decisions. Motor Vehicle Mfrs. Ass’n of U.S. v. State
Farm Mut. Auto Ins. Co., 463 U.S. 29, 42, 52, 57 (1983).
To qualify as “reasoned” under this standard, and
hence to survive judicial review, agency action must
consider costs and risk trade-offs. “[C]lost-benefit
analysis entails only a systematic weighing of pros and
cons, or what Benjamin Franklin referred to as a ‘moral
or prudential algebra.” United Auto Workers v. OSHA,
938 F.2d 1310, 1321 (D.C. Cir. 1991); see also Corrosion
Proof Fittings v. EPA, 947 F.2d 1201, 1221 (5th Cir.
1991) (EPA’s refusal to consider the risk of substitutes
“deprives its order of a reasonable basis” because “EPA
cannot say with any assurance that its regulation will
increase workplace safety when it refuses to evaluate
the harm that will result from the increased use of
substitute products”); Competitive Enter. Inst. v.
NHTSA, 956 F.2d 321, 323 (D.C. Cir. 1992) (holding
that the National Highway Traffic Safety
Administration’s automobile fuel efficiency rulemaking
was not “reasoned” when the agency focused on the
environmental risks of excessive fuel use but failed to
consider the countervailing risks posed by smaller and
less crash-worthy vehicles).

“ The Clean Air Act reiterates that a reviewing court may
reverse any action of the EPA that is “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law.”
Section 307(d)(9)(A), 42 U.S.C. § 7607(d)(9)(A).

33

D. The Common Law Frequently Involves
Consideration Of Costs And Risk Trade-
Offs.

Finally, the need to consider costs and risk trade-
offs is deeply embedded in the common law as well.
The standard of “reasonableness” in tort law requires a
court to consider the costs of safety precautions as well
as their expected benefits. See U. S. v. Carroll Towing
Co., 159 F.2d 169, 173 (2d Cir. 1947) (Hand, J.). The
common-law doctrine of “nuisance” also entails a
balancing inquiry and a consideration of cost. See
RESTATEMENT (SECOND) OF TORTS §§ 826-28 (1979).
These principles are salient here. In Forester v.
Consumer Prod. Safety Comm., 559 F.2d 774 (D.C. Cir.
1977), for example, the court of appeals defined
“unreasonable risk” in the Federal Hazardous
Substances Act, 15 U.S.C. § 1261(s), as involving “a
balancing test like that familiar in tort law: “The
regulation may issue if the severity of the injury that
may result from the product, factored by the likelihood
of the injury, offsets the harm the regulation itself
imposes upon manufacturers and consumers.” Id. at
789 (footnote omitted).

Thus the need to give full and fair consideration to
costs and to risk trade-offs is widely recognized
throughout our law and our legal tradition, both
judicial and statutory, as a foundational basis for
creating duties. This well-settled legal foundation
demonstrates a strong presumption that agencies are
required to give adequate consideration to the full
range of costs and risk trade-offs in the absence of an
express statutory provision otherwise.

34

E. The Panel’s Reliance On The “Negative
Implication” Canon Was Misplaced.

Notwithstanding the acknowledged “centrality” of
cost consideration in agency rule-making (Pet. App.
78a-79a) (considering costs is a “central and well
established part of the regulatory decision-making
process”), the D.C. Circuit Panel did not construe
“appropriate” as informed by the customary agency
practice of considering costs in proceeding to regulate
source categories. Rather, the Panel essentially
applied the negative implication canon of construction,
that the expression of one thing implies the exclusion
of others (“expressio unius est exclusion alterius”). Id.
at 24a-25a.

The Panel erred for two primary reasons: (1) this is
not the kind of situation in which the negative
implication canon is particularly instructive, and (2)
the more helpful interpretive guideline is to construe
“appropriate” as being informed by the presumptive
duty to consider costs absent explicit congressional
intent to the contrary. Unlike the situation in which a
clear comparison can be drawn between an explicit
statute and a silent one with respect to a standard of
conduct (so that the meaning of the silence is clear),
this case involves the opposite situation. For example,
where a statutory duty is applicable to one class of
parties but not to others, the statutory silence with
respect to the other classes is properly construed as an
intent not to regulate those other classes. The
comparison between what is express versus silent is
specific and direct.

Not so here. This case concerns the widespread and
multi-faceted practice of cost consideration in agency

35

decision-making, and the negative implication canon is
inapplicable. Here, Congress used the term
“appropriate” in Section 112, and well-settled !aw and
administrative practice shows that the word
“appropriate” already incorporates the concept of
“cost.” Congress did not need to use the word “cost”
explicitly. Further, it assumes too much to contend
that Congress must have intended to suspend the
general customary practice of cost consideration,
merely because the Clean Air Act expressly refers to
“costs” elsewhere and does not refer to them in exactly
the same explicit terms in the portion of Section 112 at
issue here. Against the prevalent cost consideration
backdrop, the failure to explicitly refer to “costs” cannot
be read as an intended exclusion, particularly in light
of the use of the term “appropriate.”

Rather, the more instructive guideline is where cost
consideration has become the functional equivalent of
“standard operating procedure,” then it is far more
reasonable to assume Congress would not have
intended for an agency to ignore costs entirely unless it
said so expressly. This guideline is similar to the canon
against construing statutes in derogation of the
common law. It simply is presumptively invalid to
interpret a statute in derogation of the customary
administrative practice of cost consideration unless

Congress explicitly suspends that well established
practice.

Thus, reading the “silence” or construing the
ambiguity in this context is not a license to leap to the
erroneous conclusion that an agency, to which the
relevant statute entrusts decision-making power, may
ignore altogether the vital question whether its

36

proposal would hurt more than it helps. That simply is
a bridge too far.

CONCLUSION
The judgment below should be reversed.
Respectfully submitted.
TRISTAN .. DUNCAN LAURENCE H. TRIBE
SHOOK, HARDY & BACON L.L.P. Counsel of Record
2555 Grand Blvd. 1575 Mass. Ave.
Kansas City, MO 64108 Cambridge, MA 02138
816-474-6550 617-495-1767
tlduncan@shb.com tribe@law.harvard.edu

JONATHAN S. MASSEY
MASSEY & GAIL LLP

1325 G St. NW, Suite 500
Washington, D.C. 20005
202-652-4511

jmassey@masseygail.com

January 27, 2015

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0331%3A32. Public record. Not legal advice.