Reply Brief — Util. Air Regulatory Grp. v. Envtl. Prot. Agency, 135 S. Ct. 702 (2014) (No. 14-47)

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Nos. 14-46, 14-47, & 14-49 MAR 17 2015

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MICHIGAN, ET AL., PETITIONERS

Vv.

ENVIRONMENTAL PROTECTION AGENCY, ET AL.

UTILITY AIR REGULATORY GROUP, PETITIONER

Vv.

ENVIRONMENTAL PROTECTION AGENCY, ET AL.

NATIONAL MINING ASSOCIATION, PETITIONER

Vv.

ENVIRONMENTAL PROTECTION AGENCY, ET AL.

ON WRITS OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

REPLY BRIEF FOR PETITIONERS

STATE OF MICHIGAN, ET AL.

Bill Schuette

Michigan Attorney General

Neil D. Gordon Aaron D. Lindstrom

Assistant Attorney Solicitor General

General Counsel of Record

Environment, Natural P.O. Box 30212

Resources, and Lansing, Michigan 48909

Agriculture Division LindstromAGmichigan.gov

(517) 373-1124

Attorneys for Petitioners

[additional counsel listed after conclusion]

Table of Contents

Table of Authorities

Introduction

TABLE OF CONTENTS

EPA’s interpretation of § 7412(n)(1) treats

the word “appropriate” as meaningless and

ignores a factor—costs—that Congress

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SESE EERE EEE EERE EEE EEE ERR EEE EEE EHEC RHO EES

POPU CREEP CO CESS OSC OCCOSCE CCC CEC eee eee TCC eee eee eee eee ee eee

intended EPA to COMGIGET. .............ccccccccccceccsoscccees

A. EPA’s reading unreasonably fails to give

“appropriate” any meaning beyond that

already ascribed to “necessary.” .................... 2

B. By asking EPA to exercise its judgment

to determine whether regulation was

“appropriate,” Congress intended that

EPA consider both benefits and costs. .......... 7

C. Congress intended for EPA to consider all

relevant aspects of the problem, and costs

FO OM UMMOTEAME ASMSCE. ..........0ccccccecccccccecesess

. Congress intended to treat electric utilities

differently from all other sources. ..................... 13

A. EPA’s decision to treat electric utilities

the same as other source categories

unreasonably disregards § 7412(n)(1)’s

creation of a separate regime for them. ...... 13

B. Congress required EPA to consider costs

at the threshold stage by creating

(n)(1)(A)’s unique “appropriate” finding......

C. Other provisions that apply to other

source categories are not comparable to

§ 7412(n)(1)’s unique approach.................... 18

Ill. The delisting provisions in § 7412(c)(9)

confirm that Congress established different

criteria for when different sources should be

I viccrniceniesnienanianncsininininnntinesemnarenentinmatiions 19

IV. The rule’s costs ($9.6 billion annually)

outweigh its benefits ($4 to $6 million

I vccessncnittnirencansevtnsccinesanssutinttnnasnticinwinantons 20

SESE IESE TALEO NOAM TATE AA OEE LE 22

EEN EES SEA IIE ER LOIN DEA SG OO 23

il

TABLE OF AUTHORITIES

Page

Cases

Chevron U.S.A. Inc. v. Echazabal,

I a 1,8

Davis v. Mich. Dep’t of Treasury,

A 16

Duncan v. Walker,

I i at 2

Michigan v. EPA,

Ee Be Be Cs Cie, BD vvncncnsccccnenccnceccccccee 11

Morrison v. Natl Australia Bank Ltd.,

8 BEER EA REN a ea 2

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

Auto. Ins. Co.,

es Te ED sedis tite iciatociaktechendaccishcdnnsreisdnces 4,9

Natural Resources Defense Council v. EPA,

824 F.2d 1146 (D.C. Cir. 1987) .................... 10, 11

Union Elec. Co. v. EPA,

So hf Snr een 12

University of Texas Southwestern Med. Ctr. v.

Nassar,

Ss ie Re CD Seticcticinccchciigisicicececntdas 16

Whitman v. American Trucking Associations,

Inc.,

Ge RE ET ee meee een 12

iv

Statutes

Oh FIN ioisceeuvesssnvcsiencnssseosiccccsenevanssr 18

I I secre tainientgsinmnnabinnais passim

aia adda coe tip leentinbadted 10

CE EE, EGR ae eae ean re ae eee passim

Oe ls Oe Pe Giirnicietnitvcsncctsvicnicctminenio 19, 20

I I ec passim

ee ls Oe FE isicttcinsiteetnintiseiinciexateines passim

Oe Es BS PR ID eicitscsinicisnersiscdcstaneies 1, 8, 9, 10

Other Authorities

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

77 Fed. Reg. 9304 (Feb. 16, 2012) ................ 3, 4, 6, 21

The New Oxford American Dictionary

kA EES, PEA AO a Oe POS 7

INTRODUCTION

The major theme of the respondents’ briefs is

that Congress intended to treat all of American

industry, including electric utilities, the same under

42 U.S.C. § 7412. But if that were Congress’s intent,

it would have had no reason to write a special

provision imposing different criteria for regulating

electric utilities. In § 7412(n)(1), Congress created a

regime that separates out electric utilities from the

§ 7412(c) regime that “Congress enacted for all other

stationary sources.” EPA Br. 44. EPA’s starting

premise, then—that it should “harmonize”

subsection (n)(1) with the rest of the statute by

applying the same criteria that would govern if the

subsection did not exist at all—is an unreasonable

reading of the overall statutory scheme.

EPA’s reading of § 7412(n)(1)’s specific language

is equally unreasonable. EPA’s brief confirms that its

interpretation takes the central provision governing

EPA’s discretion over whether to regulate electric

utilities—whether “such regulation is appropriate

and necessary,” § 7412(n)(1)(A}—and reads the term

“appropriate” to be a word entirely redundant with

the separate word “necessary.” Treating a pivotal

statutory term as surplusage is not Chevron gap

filling; it is rewriting the statute. Here, the statutory

text (the word “appropriate,” which requires

considering relevant circumstances, and (n)(1)(B)’s

reference to costs, which shows costs are a relevant

circumstance) and the context (Congress giving EPA

discretion to decide whether to impose regulation

that will affect the entire economy) confirm that it is

unreasonable to conclude that costs are irrelevant.

ARGUMENT

I. EPA’s interpretation of § 7412(n)(1) treats

the word “appropriate” as meaningless and

ignores a factor—costs—that Congress

intended EPA to consider.

“{Courts] need ‘accept only those agency inter-

pretations that are reasonable in light of the

principles of construction courts normally employ.’”

Morrison v. Natl Australia Bank Ltd., 561 U.S. 247,

272 (2010). Treating the key term “appropriate” as

surplusage is not a reasonable or permissible reading

of the statute. See Duncan v. Walker, 533 U.S. 167,

174 (2001) (noting that the Court is reluctant to treat

statutory terms as surplusage in any setting, and is

“especially unwilling to do so when the term occupies

so pivotal a place in the statutory scheme”). Yet that

is what EPA’s approach to § 7412(n)(1) does: though

the provision’s focal point for whether EPA should

regulate electric utilities is whether EPA concludes it

is “appropriate and necessary” to regulate, EPA

interprets the statute in a way that deprives the

word “appropriate” of any independent meaning.

This outcome is especially unreasonable given that

“appropriate” has a broad meaning requiring EPA to

consider relevant circumstances, EPA Br. 22, and the

cost of imposing “such regulation” is a relevant

circumstance.

A. EPA’s reading unreasonably fails to give

“appropriate” any meaning beyond that

already ascribed to “necessary.”

As its brief makes clear, EPA views § 7412(n)(1)

as establishing a “harm-based inquiry” that focuses

on the potential public-health hazards that could be

averted by regulating electric utilities. EPA Br. 26.

In EPA’s view, it is thus “necessary” to regulate if

public-health hazards will exist after the imposition

of other Clear Air Act requirements. EPA Br. 47

(“the ‘necessary’ prong considers how those dangers

will be affected by the imposition of the Title IV acid-

rain program and other CAA requirements.”).

The following side-by-side comparison shows that

EPA’s “necessary” finding fully accounts for the

potential public-health benefits of regulating.

Utility Study

“The Administrator shall

perform a study of the

hazards to public health

reasonably anticipated to

occur as a result of

emissions by electric

utility steam generating

units of pollutants listed

under subsection (b) of

this section after the

imposition of the

requirements of this

chapter.” § 7412(n)(1)(A)

(emphasis added).

“Necessary” finding

“[Ajfter implementation

of other provisions of the

CAA, HAP emissions

fi.e., emissions of pollu-

tants listed under

§ 7412(b)] from USS.

EGUs_ are reasonably

anticipated to pose haz-

ards to public health;

therefore, it is necessary

to regulate EGUs under

CAA.” 77 Fed. Reg. 9304,

9363 (Feb. 16, 2012)

(emphasis added); see

also EPA Br. 13.

What work, then, is the word “appropriate” to

do? According to EPA, it dees the exact same work as

“necessary.” According to EPA, it is “appropriate” to

regulate if (1) “hazardous-air-pollutant emissions

from [power] plants pose a hazard to either public

health or the environment” and (2) “controls are

available to reduce such emissions.” EPA Br. 45.

The first of these two criteria for “appropriate” is

identical to the criterion EPA applies to

“necessary —the existence of a public-health hazard.

This equivalence shows that the first criterion is not

providing any independent meaning to “appropriate.”

Neither is the second. While EPA contends the

availability of controls factored into its “appropriate”

finding, the argument is inconsistent with EPA's

repeated statements during the rulemaking that it

was required to find it appropriate to regulate if a

hazard exists. E.g., 77 Fed. Reg. at 9326 (“The EPA

reasonably concluded that we must find it

‘appropriate’ to regulate EGUs under CAA section

112 if we determine that a single HAP emitted from

EGUs poses a hazard to public health or the

environment.”) (emphasis added); 76 Fed. Reg. at

24,988 (“EPA must find that it is appropriate to

regulate EGUs if it determines that any single HAP

emitted by utilities poses a hazard to public health or

the environment.”) (emphasis added). If the simple

existence of a hazard requires regulation, then the

availability of controls is logically irrelevant and

therefore not an actual basis for the “appropriate”

finding. See Motor Vehicle Mfrs. Ass’n v. State Farm

Mutual Auto. Ins. Co., 463 U.S. 29, 50 (1983) (“[A]n

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

articulated by the agency itself.”).

EPA fails to address these key portions of the

administrative record, despite being confronted with

them in the State Petitioners’ opening brief (Br. 21—

25). Instead, EPA paraphrases this key portion of the

administrative record and, by substituting “may” for

“must,” changes its core meaning. Compare EPA Br.

Ql

12 (“EPA further proposed that it may find

regulation to be ‘appropriate’ based ‘on a finding that

any single [hazardous air pollutant] emitted from

power plants poses a hazard to public health or the

environment.” (emphasis added) (citing 76 Fed. Reg.

at 24,988)), with 76 Fed. Reg. at 24,988 (“EPA must

find that it is appropriate to regulate EGUs if it

determines that any single HAP emitted by utilities

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

(emphasis added).

EPA’s paraphrasing contradicts what it actually

said. EPA interpreted “appropriate” to require reg-

ulation based solely on identifying a hazard to public

health or the environment from HAPs emitted by

EGUs. This interpretation is unreasonable because

Congress directed EPA to determine if regulation of

electric utilities is both “appropriate” and “necess-

ary.” Rather than give each of those terms their own

meaning, EPA interprets both “appropriate” and

“necessary” to be satisfied if there are nazards to

public health after imposition of the requirements of

the Act, thereby turning the word “appropriate”—a

pivotal term in § 7412(n)(1)’s statutory scheme—into

surplusage.

Attempting to avoid this problem with its

interpretation, EPA offers a single paragraph to

explain how the terms “necessary” and “appropriate”

might not “entirely overlap[].” EPA Br. 47. EPA

concedes that “both terms require an inquiry into the

health dangers posed by power-plant emissions,” but

appears to suggest that the two terms examine the

dangers at different points in time: the “appropriate”

finding looks at the “dangers as they exist ‘at the

time’ the finding is made,” while the “necessary”

finding “considers how those dangers will be affected

lin the future] by the imposition of the Title IV acid-

rain program and other CAA requirements.” EPA Br.

47. But EPA made both components of the

“appropriate and necessary” finding at the same

time, and it based both findings on the same eval-

uation of those dangers—that is, on the Utility

Study. Further, the Utility Study itself is forward

looking: it looks not just at dangers existing at the

time of the finding, but also at public-health hazards

“reasonably anticipated to occur” even “after

imposition of the requirements of this chapter.”

§ 7412(n)(1){A). In other words, it looks to the future

after the imposition of the Title [IV program and

other CAA requirements. So EPA’s one attempt to

identify a difference between its “necessary” finding

and its “appropriate” finding falls short.

EPA makes another argument about its inter-

pretation of “appropriate”: it contends that it did

“evaluate[] the severity of anticipated health effects

as part of its hazard analysis.” EPA Br. 46 n. 16. But

EPA evaluated the severity of health effects not

when making its “appropriate” finding, but when

determining “what constitutes a hazard to public

health” in the first place. 76 Fed. Reg. at 24,992. And

then it concluded that health effects that are severe

enough to rise to the level of a public-health hazard

must be regulated. E.g., 77 Fed. Reg. at 9326 (“The

EPA reasonably concluded that we must find it

‘appropriate’ to regulate EGUs under [§ 7412] if we

determine that a single HAP emitted from EGUs

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

(emphasis added). That is why EPA disavowed any

interest in the severity of remaining health hazards

from electric utilities when making its “appropriate”

finding. Instead, it concluded it “must” find it

appropriate to regulate electric utilities under § 7412

if health hazards remain after imposition of the Act’s

other requirements—a finding it already made under

its interpretation of “necessary.”

Because EPA’s interpretation treats a key

statutory term as redundant, it is an unreasonable

interpretation of the statute.

B. By asking EPA to exercise its judgment

to determine whether regulation was

“appropriate,” Congress intended that

EPA consider both benefits and costs.

Congress did not intend for the word

“appropriate” to be surplusage. To the contrary,

Congress’s use of that word demonstrates its intent

for EPA to exercise judgment when deciding whether

regulation would be “‘suitable or proper in the

circumstances.’” EPA Br. 22 (quoting The New

Oxford American Dictionary 76 (2d ed. 2005)). To put

it simply, Congress directed EPA to decide whether

regulation is worth it.

EPA embraces this grant of discretion, conceding

that by using the “ ‘open-ended’ ” word “appropriate,”

Congress gave EPA “[s]ubstantial [d]iscretion” to

make a policy judgment about whether it was also

“appropriate” to regulate electric utilities. EPA Br.

21-23. It also observes that Congress chose not to

“set forth an exclusive list of factors relevant to the

decision whether to list power plants” under § 7412.

EPA Br. 23. But the fact that Congress did not

expressly enumerate the relevant factors suggests

that Congress expected EPA to consider all relevant

factors, not to limit its judgment to considering only

the one factor that Congress did enumerate—the

benefits to public health that would result from

regulating. Indeed, it is unreasonable to treat a

grant of broad discretion to consider the relevant

circumstances as a directive to put on blinders with

respect to all circumstances except the one that

Congress specifically spelled out. Cf. Chevron U.S.A.

Inc. v. Echazabal, 536 U.S. 73, 80 (2002) (recognizing

that “expansive phrasing” in a statute “points

directly away” from applying the interpretative

canon that the enumerating one item implies

exclusion of others).

EPA also argues that the reference to costs in

§ 7412(n)(1)(B) does not show that costs are relevant

to the “appropriate” finding of § 7412(n)(1)(A),

because the statute required EPA to consider the

(n)(1)(A) study (the Utility Study), not the (n)(1)(B)

study (the Mercury Study). EPA Br. 48. But EPA

itself relied on certain components of the Mercury

Study (specifically, the fact that it directs EPA to

consider the “environmental effects” of emissions)

when making the “appropriate” finding. Specifically,

in the section addressing its basis for interpreting

the word “appropriate,” EPA reasoned that “the

inclusion of environmental effects in section

112(n)(1)B) indicates Congress’s interest in protect-

ing the environment from (hazardous-air-pollutant]

emissions from EGUs as well.” 76 Fed. Reg. at

24,988 (emphasis added). EPA thought that “Section

112(n)(1)(B) is direct evidence that Congress was

concerned with environmental effects and cumula-

tive impacts of HAP emissions from EGUs.” 76 Fed.

Reg. at 24,987 (emphasis added). That reasoning

applies with equal force to costs: § 7412(n)(1)(B) is

“direct evidence” that Congress was concerned with

costs of regulating HAP emissions from EGUs.

Indeed, EPA reasoned that subsection (n)(1)(A)’s

silence about a factor meant that the factor should be

considered if that factor was expressly mentioned in

(n)(1)(B): “had Congress intended to prohibit EPA

from considering adverse environmental effects in

the ‘appropriate’ finding, it would have stated so

expressly.” 76 Fed. Reg. at 24,988. This reasoning

also reinforces the relevance of costs: to paraphrase,

had Congress intended to prohibit EPA from consid-

ering costs in the appropriate finding, it would have

stated so expressly. In this too, EPA’s argument that

(n)(1)(B)’s reference to costs is irrelevant is inconsist-

ent with its own reasoning on a parallel issue.

C. Congress intended for EPA to consider

all relevant aspects of the problem, and

costs are an important aspect.

A number of background rules also show that

Congress intended for EPA to consider costs. First,

Congress was drafting against the background

principle of administrative law that reasoned

decision-making requires an agency to consider all

factors relevant to the problem before it. As this

Court explained in 1983 in State Farm, an agency

action qualifies as arbitrary and capricious if the

agency has “entirely failed to consider an important

aspect of the problem.” 463 U.S. at 43.

Here, the regulatory problem before EPA was

whether it was appropriate to impose regulation on

10

electric utilities. This decision, Congress knew,

would have widespread effects on the economy, given

electricity’s ubiquitous role in keeping things

running (lights, technology, heating) in everything

from homes to hospitals to recycling plants. Congress

also knew that mercury emissions were hazardous

(having designated mercury as a hazardous air

pollutant, §7412(b), and having required the

Mercury Study, § 7412(n)(1)(B)). By directing EPA

not merely to conduct a study but also to take the

additional step of deciding whether “such regulation

is appropriate and necessary after considering the

results of [the Utility Study],” § 7412(n)(1)(A),

Congress was instructing EPA to look not just at the

public-health hazards but at the whole problem—at

the benefits and costs of regulating. Congress did not

intend for EPA to depart from reasoned decision-

making by acting with deliberate indifference to an

important aspect of the problem—costs.

Second, when Congress enacted § 7412(n)(1) in

1990, it was drafting against the background

principle of statutory interpretation that if Congress

had wanted EPA to ignore costs, as EPA contends,

Congress would have said so expressly. Natural

Resources Defense Council v. EPA, 824 F.2d 1146,

1163 (D.C. Cir. 1987) (en banc).

For sources other than electric utilities, Congress

did just that. As EPA acknowledges, Congress clearly

precluded EPA from considering costs when it

established criteria in § 7412(c) for listing “major”

sources (the tonnages of hazardous-air-pollutant

emissions above which listing is required) and for

listing “area” sources (the threats to human health or

11

the environment that EPA must evaluate). E.g., EPA

Br. 36 (“[T]he CAA unambiguously precludes consid-

eration of costs in making the decision whether to

list other source categories” under § 7412(c).) (first

emphasis added).

In marked contrast, Congress did not preclude

EPA from considering any factors; it directed EPA to

determine whether regulation is “appropriate,” using

a broad term that requires EPA to consider the

relevant factors. In the wake of the D.C. Circuit’s

1987 ruling in NRDC, Congress’s decision in 1990

not to expressly preclude EPA from considering costs

in § 7412(n)(1)(A), even as it did preclude EPA from

considering costs when listing other sources under

§ 7412(c), supports the plain-language argument that

Congress intended EPA to take into account the

relevant (and critical) factor of costs when making its

appropriate finding. This background rule shows

that any negative implications cut in favor of

considering costs.

Rather than addressing how the D.C. Circuit’s

decision informed Congress’s choice not to preclude

EPA from considering costs in § 7412(n)(1)(A), the

agency simply summarizes the court of appeals’

ruling and contends that the State Petitioners

“misread” it. EPA Br. 51. But if we are misreading it,

then we are in good company. After all, the D.C.

Circuit itself understands NRDC to stand for the

principle that “[iJt is only where there is ‘clear

congressional intent to preclude consideration of cost’

that we find agencies barred from considering costs.”

Michigan v. EPA, 213 F.3d 663, 678 (D.C. Cir. 2000)

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

12

Whitman v. American Trucking Associations,

Inc., 531 U.S. 457 (2001), does not announce a

contrary principle. It merely observes that in cases

examining ambiguous sections of the Clean Air Act,

the Court has refused to read in “an authorization to

consider costs that has elsewhere, and so often, been

expressly granted.” Jd. at 467 (citing Union Elec. Co.

v. EPA, 427 U.S. 246, 257, & n.5 (1976)). Here,

Congress did authorize the consideration of all

relevant factors, including costs, by telling EPA to

decide whether regulation was appropriate. In

contrast to both Whitman and Union Electric, where

Congress enumerated specific criteria, see State

Pet’rs. Br. 26-27, here Congress did not enumerate

factors. Rather, it ordered EPA to consider all

circumstances—not just regulatory benefits—

relevant to its determination whether to impose

regulations. This is not trying to hide an elephant in

a mousehole, Whitman, 531 U.S. at 468; this is about

EPA's refusal to confront the elephant in the room—

the enormous costs of its regulation.

Third, EPA does not appear to dispute “the

common sense point that it is often reasonable to

consider costs in determining whether particular

regulatory burdens should be imposed.” EPA Br. 19.

Here, the decision to regulate means that particular

regulatory burdens will be imposed. As EPA admits,

“hijf EPA determines that power plants should be

listed,” “it must set emissions standards” under

§ 7412. EPA Br. 7 (emphasis added). And, according

to EPA, that means it must impose “floor” emission-

reduction standards for which it “does not explicitly

consider costs.” EPA Br. 25. EPA’s approach thus

runs afoul of this “common sense point” that costs

13

are inherently relevant to an agency’s decision

whether to impose regulations. See State Pet’rs. Br.

29-32; see also Peabody Energy Amicus Br. 2.

II. Congress intended to treat electric utilities

differently from all other sources.

A. EPA’s decision to treat electric utilities

the same as other source categories

unreasonably disregards § 7412(n)(1)’s

creation of a separate regime for them.

Rather than focusing on § 7412(n)(1)’s text, EPA

steps back and looks at what it believes to be the big

picture: EPA thought it was reasonable to interpret

§ 7412(n)(1) “to harmonize with the criteria that

govern analogous NESHAP listing determinations

for other stationary sources,” rather than concluding

“that Congress intended to depart from those

criteria.” EPA Br. 31. The problem with this

argument is that it ignores the fact that Congress

did expressly depart from those criteria in

§ 7412(n)(1), and that departure means those listing

decisions are not analogous. If Congress wanted to

treat electric utilities the same as other sources, it

would have had no reason to include subsection

(n)(1) in § 7412 in the first place.

EPA concedes that § 7412(n)(1) is “a special

listing provision that applies only to power plants”

and that it imposes “special requirements.” EPA Br.

27. EPA also concedes, indeed emphasizes, that the

§ 7412(c) program—the National Emissions Stand-

ards for Hazardous Air Pollutants, or NESHAP—

governs the listing determination for “all other

source categories.” EPA Br. 17; see also EPA Br. 12

4

(“any other source category”), 18 (“all other station-

ary sources”), 19 (“all other source categories”), 24

(“all source categories other than power plants”), 26,

27, 28, 29, 31, 32, 37, 44 (discussing “the regime that

Congress enacted for all other stationary sources”),

45.

EPA thus recognizes that Congress created two

different regimes for deciding whether to regulate a

source category. Under the § 7412(c) regime that

applies to “all source categories other than power

plants,” EPA has little to no discretion when deciding

whether to list the source: “Section 7412(c) requires

the agency to list” any source that emits specific

tonnages of hazardous air pollutants (i.e., major

sources) or that “present[s] ‘a threat of adverse

effects to human health or the environment.” EPA

Br. 24, 25 (second emphasis added); see also EPA Br.

4 (acknowledging that in the 1990 amendments,

“Congress eliminated much of EPA’s discretion”).

With respect to the § 7412(c) NESHAP regime, these

specific criteria “reflect Congress’s determination”

about when it is appropriate to regulate. EPA Br. 25.

In contrast, under the § 7412(n)(1) regime, EPA has

substantial discretion to determine whether to

regulate electric utilities based on its judgment as to

whether “such regulation is appropriate and

necessary.” § 7412(n)(1)(A). Congress asked EPA to

make the policy decision Congress made for other

source categories.

Accordingly, § 7412(n)(1)(A) is not, as EPA

mistakenly asserts, merely another threshold listing

decision like those under § 7412(c) that focuses solely

on hazards to public health or the environment. EPA

15

Br. 26 (construing “appropriate” to turn on a “harm-

based inquiry” comparable to listing decisions under

§ 7412(c)). Section 7412(n)(1)(A)’s plain language

requires EPA to also conduct a regulation-based

inquiry after it considers the remaining health

hazards. That regulation-focused analysis is reflected

in the requirement that EPA “shall regulate” electric

utilities under § 7412 if, “after considering the

results of the study” on health hazards, it finds “such

regulation is appropriate and necessary.”

§ 7412(n)(1)(A) (emphasis added).

The criteria EPA must therefore apply when

making the threshold determination that emissions

from electric utilities warrant regulation is

fundamentally different than the health-based

inquiry for listing other sources under § 7412(c). For

electric utilities, Congress mandated that EPA

consider not only the remaining public health

hazards identified in the study but also whether

“such regulation” (that is, emissions standards EPA

might develop to address any remaining hazards)

would be “appropriate.” And by instructing EPA to

determine whether it would be “appropriate” to

subject electric utilities to those emission standards,

Congress requireu EPA to look ahead to the costs of

those standards.

EPA maintains it is “farfetched” to suppose that

Congress required EPA to use “fundamentally differ-

ent” criteria when making the threshold determin-

ation whether to regulate electric utilities versus

other sources. EPA Br. 32. But there is nothing far-

fetched about it; that is precisely the scheme

Congress created. Congress explicitly established one

16

set of criteria for electric utilities (the study of public-

health hazards and the “appropriate and necessary”

finding under § 7412(n)(1)(A)) and a very different

set of criteria for all other sources (tonnage

quantities for major sources and a risk analysis for

area sources under § 7412(c)).

EPA thus ignores the context in which (n)(1)(A)

appears in § 7412’s overall statutory scheme. And in

doing so, EPA violates a basic rule of statutory

interpretation: it has adopted an interpretation that

is inconsistent with “the design and structure of the

statute as a whole.” University of Texas Southwestern

Med. Ctr. v. Nassar, 133 S. Ct. 2517, 2529 (2013); see

also Davis v. Mich. Dep’t of Treasury, 489 U.S. 803,

809 (1989).

B. Congress required EPA to consider

costs at the threshold stage by creating

(n)(1)(A)’s unique “appropriate” finding.

EPA also couches its argument as simply

following the same two-step process Congress used

elsewhere. EPA asserts that § 7412(n)(1)(A) is “a

listing decision for power plants” like EPA’s listing

decisions for other sources under § 7412(c). EPA Br.

31. Under EPA’s view of § 7412’s overall scheme, all

sources are subject to the same “multistage

regulatory process” for listing “major” and “area”

sources in §7412(c), under which costs are

considered only at the standard-setting second stage

and not at the initial listing stage. EPA Br. 38-39.

The agency interpreted § 7412(n)(1)(A) as a first-

stage, threshold listing decision for electric utilities,

like the listing decisions it makes for other sources,

in which costs are not considered.

17

EPA’s reading of § 7412 suffers from the same

fatal flaw already noted: it ignores the fact that

Congress treated electric utilities differently with

regard to when EPA is to consider costs. Under the

criteria it crafted in § 7412(n)(1)(A), Congress

required EPA to evaluate health hazards and costs

when it makes the threshold determination whether

electric utilities should be regulated at all. More

specifically, Congress directed EPA to evaluate any

health hazards that remain after imposition of the

Act’s requirements, and then, critically, to consider

the costs of complying with emission standards by

deciding whether “such regulation” under § 7412 is

“appropriate”’—that is, by deciding whether the

benefits from reducing the hazards are worth the

costs. In other words, Congress required EPA to

consider what the costs would be before imposing

those costs on electric utilities and consumers of

electricity throughout the country.

As EPA notes, the meaning and application of

the “appropriate” requirement “depends on the

particular context in which the term appears.” EPA

Br. 22. But EPA and the other respondents fail to

acknowledge that in the context “appropriate” is

used here (within § 7412(n)(1)(A) itself and in the

broader context of § 7412 as a whole), Congress

created a different approach for electric utilities than

it took for all other sources. In this context,

“appropriate” requires EPA to consider both the

benefits of reducing any remaining health hazards

by regulating electric utilities and the costs of

regulation—to decide whether the benefits are worth

the costs.

18

C. Other provisions that apply to other

source categories are not comparable to

§ 7412(n)(1)’s unique approach.

EPA’s attempt to analogize § 7412(n){1)(A) to

other sections of the Clean Air Act suffers from the

same flaw: they are not comparable. The agency

identifies other sections of the Act that establish a

“multistage regulatory process” whereby EPA makes

a threshold decision in stage one about whether to

regulate specific sources or pollutants based on an

evaluation of hazards to public health or the environ-

ment and then considers costs when setting stand-

ards and limits in stage two. EPA Br. 38-39

(discussing the National Ambient Air Quality pro-

gram, the New Source Performance Standards pro-

gram, and the Motor Vehicle Emission and Fuel

Standards program). What EPA overlooks is that

Congress adopted different criteria in § 7412(n)(1)(A)

by directing EPA to perform a study of health

hazards and then make a finding of whether

regulation is “appropriate and necessary.” None of

the provisions EPA cites has similar language.

EPA’s reliance on other statutory provisions in

which the word “appropriate” appears is also beside

the point, because it misses a basic principle of

statutory interpretation: context matters. No one

claims (as EPA erroneously suggests) that EPA must

consider costs in the context of deciding whether it is

appropriate to invite the participation of the

Secretary of Agriculture “when conducting a study of

pollution damage to ecosystems” pursuant to 42

U.S.C. § 7403(e). EPA Br. 42. The point is not that

the word “appropriate” by itself, divorced from any

19

statutory context, necessarily requires consideration

of costs.

But in the statutory context at issue here—

(n)(1)(A) and its place within § 7412—Congress used

“appropriate” as a criterion for the “stage one”

threshold determination for electric utilities, thereby

choosing a standard that is fundamentally different

from the criteria for making the threshold listing

decisions for other sources under § 7412(c). When

viewed in context, it is clear that by requiring EPA to

decide whether regulation of hazardous-air-pollutant

emissions from electric utilities is “appropriate” in

light of the remaining health hazards from such

emissions after imposition of the Act’s other

requirements, Congress required EPA to weigh the

costs and benefits of such regulation.

lil.The delisting provisions in § 7412(c)(9)

confirm that Congress established different

criteria for when different sources should

be regulated.

EPA claims that its. interpretation of

“appropriate” is reinforced by the delisting provisions

in § 7412(c)(9). EPA Br. 18. According to the agency,

the fact that costs are not considered when removing

a category from the list of sources subject to regula-

tion supports its refusal to consider costs when

deciding whether it is appropriate to regulate electric

utilities in the first place. Id.

Section § 7412(c)(9) supports the opposite

conclusion. The delisting provisions are another

example of how Congress established different

criteria within § 7412 for when sources must be

20

regulated. In other subsections, Congress has

established the standards that require EPA to

regulate without EPA considering costs (including,

for example, the tonnage thresholds above which

“major” sources must be regulated).

But for electric utilities, Congress took a very

different approach. Rather than use clear language

as it did elsewhere to preclude EPA from considering

costs, Congress instructed EPA to regulate if it found

it was “appropriate” to do so in light of the public-

health hazards remaining after imposition of the

Act’s other requirements. As noted above, Congress

thereby intended that EPA would evaluate whether

the benefits of regulating any remaining health

hazards were worth the costs of imposing such

regulation on consumers of electricity nationwide

and the economy generally.

Thus, the delisting provisions in § 7412(c)(9) and

the standards EPA must apply in § 7412(m)(1)(A) are

not (as EPA supposes) “two sides of the same coin.”

EPA Br. 34. The provisions contain wholly different

criteria, with one enumerating specific factors for

EPA to consider when delisting sources and the other

showing that Congress intended that EPA consider

costs and benefits when deciding whether is

“appropriate” to regulate electric utilities.

IV. The rule’s costs ($9.6 billion annually)

outweigh its benefits ($4 to $6 million

annually).

EPA concludes its brief by arguing that the

benefits of the rule will in fact greatly exceed its

costs, because the rule would reduce the emissions of

21

non-hazardous air pollutants, such as particulate

matter. EPA Br. 55—56; see also 77 Fed. Reg. at

9305, 9306 (“EPA estimates that this final rule will

yield annual monetized benefits (in 2007$) of

between $37 to $90 billion,” with, according to an

accompanying chart, almost all of the benefits—$36

to $89 billion—coming from PMz2>5-related co-

benefits). EPA then argues that it would be

“appropriate” to consider these co-benefits and

indeed that § 7412(n)(1)(A) “itself reflects Congress’s

judgment that co-benefits are a valid basis for

making regulatory decisions under the CAA.” EPA

Br. 56—57 (emphasis added).

This is a classic case of the tail wagging the dog.

Section 7412(n)(1)(A) is about regulating something

specific: hazardous air pollutants. So, the cost-benefit

analysis must focus on the benefits of reducing those

particular pollutants and the costs of the regulation

that would create the reductions. State Pet’rs. Br. 48.

The benefits of reducing non-hazardous air

pollutants do not factor in. And that presumably is

why EPA emphatically refused to consider co-

benefits in making its finding: as EPA put it when

responding to one commenter, “a review of the

proposed and final rules utterly refutes [the]

commenters assertion that [particulate matter]

reductions form the basis for the appropriate and

necessary finding.” 77 Fed. Reg. at 9323.

In the end, EPA’s argument that the $9.6 billion

in costs it refuses to consider are not too high

founders on a simple question: If EPA really thought

the benefits outweighed the costs, why take the

22

position that costs are irrelevant? Why not simply

conduct a cost-benefit analysis?

CONCLUSION

For the foregoing reasons, the court of appeals’

decision should be reversed and EPA’s final rule

vacated.

Respectfully submitted,

Bill Schuette

Michigan Attorney General

Aaron D. Lindstrom

Solicitor General

Counsel of Record

P.O. Box 30212

Lansing, Michigan 48909

LindstromA@michigan.gov

(517) 373-1124

Neil D. Gordon

Assistant Attorney General

Environment, Natural

Resources, and Agriculture

Division

Attorneys for Petitioners

Dated: MARCH 2015

23

ADDITIONAL COUNSEL

Luther Strange

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Jim Hood

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Alan Wilson

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