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

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[Supreme Coun, US.

FILED

JAN 27 2015

Nos. 14-46, 14-47, 14-49 ie an

IN THE

Supreme Court of the Gnited States

STATE OF MICHIGAN, ET AL.

Petitioners,

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

SSS Ee

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@maasey gail. com

TOOT: STN I «PEAR EIEN LBE INERT

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 — WastuncTon, 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

SPIE, GP MUNI IINO © a iiscciinneancccrnscnseivecsessiunsen 2

FRE I EEN A On nn oO On ee 5

I. Reasoned Decision-Making Requires

Consideration Of Costs And Risk Trade-Offs.......... 5

II. An Agency’s Duty Includes The Obligation To

Give Adequate Consideration To The Full Scope Of

CI Oe TE IN, netictccisnceccctssencsneussccosss 15

III. Many Reasons Grounded In Legal Principle

Require An Agency To Consider Costs And Risk

III cane ccaepiesccueenadniinsipinetntiateninsebaceconcaeniamanons 25

A. The Clean Air Act Requires Consideration Of

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

B. The Clean Air Act Mandates Economic

Impact And Employment Analyses. ........... 29

C. Principles Of Administrative Law Mandate

Consideration Of Costs And

IY I atic il 31

D. The Common Law Frequently Involves

Consideration Of Costs And

BE III, ivcnsscactocnncocnnataiiunessisitlonsinasebeinibiats 33

E. The Panel’s Reliance On The “Negative

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

NE MNO cccicesaho cuacienes dl acinmumsicdambeneueesbicnshiasceansonemamandanled 36

ili

TABLE OF AUTHORITIES

Cases

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

I es ae ei cca iniitencieaicbiajhianatenatanibica 28

Ass’n of Battery Recyclers, Inc. v. EPA,

po ed eRe ere 28

Competitive Enter. Inst. v. NHTSA,

Re Bas ee Gs CI, BID av vssiscisninivccssescsseccossees 32

Corrosion Proof Fittings v. EPA,

947 F.2d 1201 (5th Cir. 1991) 2o......-...ccccececeseceeoeees 32

Entergy Corp. v. Riverkeeper, Inc.,

I nT a catanteicieciashsanieinials 7,8

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

RE EER cathe Ree eer 26

Forester v. Consumer Prod. Safety Comm..,

A ee Fe Ry , RE eee 33

Hampton v. Mow Sun Wong,

Cy A I aS stcdsiinniasinaiaainn 27

Honda Motor Co. Ltd. v. Oberg,

I ers UR ie 26

Indus. Union Dept., AFL-CIO v. Am. Petroleum Inst.,

gk RT eree Rs ee eee 6

Intl Union, UAW v. OSHA,

ee Be RU ts GIN, ccc ckcdecccsccavcssdcccsens 22

Monsanto Co. v. EPA,

EE EE: IEE wisticnenticictndnnciesnaneteaseounn 21

Motor Vehicle Mfrs. Ass'n of U.S. v. State Farm Mut.

Auto Ins. Co., 463 U.S. 29 (1983) .............0.0...... 4, 32

National Cable Television Ass’n v. United States,

Se ae Se II io icciciatesnasicaniamdnnicnlevinndobesdaunbendoecorsnll 27

Natural Res. Def. Council v. EPA,

ee ee ee Cs Cy i icicccccsescesesescccevecsvess 28

U. S. v. Carroll Towing Co.,

ee ae I I ns seccctuticinnnicinnnneenteimes 33

Union Electric Co. v. EPA, 427 U.S. 246 (1976).......... 7

United Auto Workers v. OSHA,

938 F.2d 13810 (D.C. Cir. 1981)............................... 32

United States v. Ottati & Goss, Inc.,

900 F.2d 429 (let Cir. 1980) ...............cccccccccsccsees 9, 10

Utility Air Regulatory Group v. EPA,

es Be ED icitinieecrceciciicinsamatepmnnicavionniong 26

Whitman v. Am. Trucking Ass'ns,

ne Se EE consi iecidaliinantnienenantedeshinnivnentioniinl 6

Statutes

B U.S.C. § 706 ....c.cccccccceccececcececcececsesecsescseececeseseeeees 4, 32

ee PE seictintinnidgsienpeeniiabctiondesninamndiins 29

Ae Sas 1 PED scinsincinticicicisnitnsnttoniisineinds 3, 27

ls ie PD iiseniiininkascnnintintinsnnnaboeiidiiious 32

1 rs Oe cai aici atinnaalaiasnhclidasic eels tetaae 30

Other Authorities

Jonathan H. Adler, More Sorry Than Safe: Assessing

the Precautionary Principle and the Proposed

International Biosafety Protocol, 35 TEX. INTL L.dJ.

RRR ES oS ARERR Re Mer SAR eR 2 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.ccceee0es 22

AMERICAN COALITION FOR CLEAN COAL ENERGY,

ENERGY COST IMPACTS ON AMERICAN FAMILIES,

AN TN aie 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

Sig PN MI stiiccillidiin:cincneiiciaccieiticceielanlunttien taints 10, 13

Stephen Clowney, Environmental Ethics and Cost-

Benefit Analysis, 18 FORDHAM ENVTL. L. REV. 105

(2DOOG)....-..--2.seesecsccscecceessnnssessenenncnsesensensnsnsacsaanonstanans 12

Frank B. Cross, Paradoxical Perils of the

Precautionary Principle, 53 WASH. & LEE L. REV.

B51 (1996).........:cccesececceseceesssecsseeeerensnsensscneeneesestenses 13

Paul J. Crutzen, Ultraviolet on the Increase, 356

NATURE 104 (1992)

Susan E. Dudley & Wendy L. Gramm, EPA's Proposed

Ozone Standard May Harm Public Health and

Welfare, 17 INTL J. OF RISK ANALYSIS 403 (Aug.

Susan E. Dudley, Economic Impact Analyses, 16 PACE

ENVTL. L. REV. 81 (1908) ............ccccssrrcccccssceresceeeses 21

Env't & PUBLIC WORKS COMMITTEE, U.S. HOUSE OF

REPRESENTATIVES, QUESTIONS FOR THE RECORD

FROM SENATOR DAVID VITTER, GINA MCCARTHY

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) ..........:cccccecceeeeeesseeeeerteeeeeees 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 Am & WASTE MGMT. Ass’N 886

Vil

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) .................cccccceeeeees 13, 14

John D. Graham, Legislative Approaches to Achieving

More Protection Against Risk at Less Cost, 1997 U.

CURE, LABGAG. FF. ED cccnccxcsveccesccdianssansicatectusiaanaaaaaeean 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.

I Ci iccccccescacenssscncncscadandudiiosomeniemeduiemnnns Ine 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 (1977) ..........sssscsccescscccessseee 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.

BEY, BT CRI TED cccccecccsicsssstovssenesnnaiiaaaeasee 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

REG BOR on ccccsbccccceccensstenstniiaaasaaae 23, 24

vill

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)......... 14

NDP CONSULTING, A CRITICAL REVIEW OF THE

BENEFITS AND COSTs OF EPA REGULATIONS ON THE

a eneusuneusconnnnes 17

OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF

INFORMATION AND REGULATORY AFFAIRS, REPORT TO

CONGRESS ON THE COSTS AND BENEFITS OF FEDERAL

a eeennnneenns 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

Richard J. Pierce, Jr., The Appropriate Role of Costs

in Environmental Regulation, 54 ADMIN. L.

ee Bee Ce ctetiencctienessitetiennnthnmizchpaipdcnainichndimnan: 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 Oil-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)

eae AR DATE PO TIENT 2, 14

Christopher D. Stone, Is There a Precautionary

Principle?, 31 ENVTL. L. REP. 10790 (2001)........... 12

Cass R. Sunstein, Beyond the Precautionary Principle,

te KB Se ae 12

Cass R. Sunstein, Cost—Benefit Analysis and the

Environment, 115 ETHICS 351 (2005) .................... 11

Cass R. Sunstein, Cost-Benefit Default Principles, 99

MicH. L. REV. 1651 (2001) ....................... 6, 11, 12, 13

Cass R. Sunstein, Interpreting Statutes in the

Regulatory State, 103 HARV. L. REV. 406 (1989) ... 11

Cass R. Sunstein, Legislative Foreword: Congress,

Constitutional Moments, and the Cost-Benefit State,

48 STAN. L. REV. 247 (1996).......-----ceeeessesennnnenenennes 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

(Robert W. Hahn, ed. BODE) ....ccccccovcccccecccccccesosesecore 14

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

ms and Their Cost-Effectiveness, 15 RISK

ANALYSIS 369 (1995) .......-----ssesesseserenseeetnnennentnene sens 13

U.S. BUREAU OF LABOR STATISTICS, WORKER

DISPLACEMENT: 2011-2013 (Aug. 8) a 25

U.S. CHAMBER OF COMMERCE AND NERA ECONOMIC

CONSULTING, ESTIMATING EMPLOYMENT IMPACTS OF

REGULATIONS: A REVIEW OF EPA’s METHODS FOR ITS

AIR RULES (Feb. 2013) .........----:--secseeeeeeeennnentnnnnnsnes® 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’ ........-.--. 20

WORLD WILDLIFE FUND, ENERGY POVERTY RISES IN

SPAIN (Apr. 3, 2014)........-----c---eseeeseesesnsesnnenentnnensens

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,

1 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 amicus 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.”2 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):

[W]hat 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.” Id. 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 expressly refer to “cost,” this Court examined

“common parlance” and opined that “best technology’

may also describe the technology that most efficiently

produces some good.” Id. 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.” Id. 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.” Id. 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.” Id. at 233.

Consideration of costs is particularly important in a

case like this, where an agency seeks to pursue

extraordinarily costly remedies in response wo 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 Utiurry MACT: Wi

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

SEPA 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. 2084. 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-benefits as part of ite

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 non-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

of appeals opined that “[o]Jne 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.5 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. 51,735 (Sept. 30, 1993); Improving Regulation and

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

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

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.””7 “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 so.ne 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. 405, 493 (1989).

® Cass R. Sunstein, Cost-Benefit Analysis and the

Environment, 115 ETHICS 351, 354 (2005).

® Cass R. Sunstein, Cost-Benefit Default Principles, 99 MICH.

L. REV. 1651, 1694 (2001).

10 Jd. at 1693-94.

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).}”

'! Jd. 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 ignere

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, Is There a Precautionary

Principle?, 31 ENVTL. L. REP. 10790, 10791 (2001) (noting the

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.”!3 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, 356 TEx. INT'L 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

results”).

8 Sunstein, supra note 9, at 1653.

‘4 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).

16 John D. Graham, Legislative Approaches to Achieving More

Protection Against Risk at Less Cost, 1997 U. CuI. LEGAL F. 13; see

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

and Their Cost-Effectiveneas, 15 RISK ANALYSIS 369 (1995);

Tammy O. Tengs & John D. Graham, The Opportunity Costs of

Haphazard Social Investments in Life-Saving, in RISKS, COSTs,

—_—

For example, “[tJhe 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.”!¢ Thus, “the 1977 Clean Air Act

requiremsat that all coal-fired power plants instal]

scrubbers to remove sulfur dioxide from their

smokestacks has generated tons of toxic sludge that

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.'8 Similarly, cleanup of

17 Td.

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);

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.2°

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. Hoakin 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 255 (1991).

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

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.”2

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.2> 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/CalendarF iles/20 14072909 1755-Moeller-07-

29-2014.pdf.

33 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//www.nera.com/67_8015.htm.

proposal has caused it to dra:netically 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.26 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

34 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.

6 Id.

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 “[c]old 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

77 Id. at 12.

23 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).

” 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-soars-8429468 htm!.

® Lucy Jolin, The Scandal of Britain’s Fuel Poverty Deaths,

THE GUARDIAN’ (Sept. 11, 2014), available at

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.”52 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 14/sep/1 1/fuel-

poverty-scandal-winter-deaths.

31 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/uploada/20 13/03/ACE-and-EBR-fact-file-2013-03-Cold-

man-of-Europe.pdf (discussing 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

http//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”).

32 University of Wisconsin-Madison Institute for Research on

Poverty, “Health & # Poverty,” http://www.irp.wisc.edu’

research/health htm.

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.”™4

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 t : 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, “[hjigher 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 INTL J. OF RISK ANALYSIS 403 (Aug. 1997).

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

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

35 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_Coet_of_

Carbon_pdf.

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.”57 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 POLICcy, 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/vwAN/EE-0568-50.pdf/ $file/EE-

0568-50.pdf.

37 Td. § 8.1.4 n.16 (emphasis added).

3% Jd. at § 9.2.3.3 (emphasis added; footnote omitted).

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

employment 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/fileae/documente/files/02

0360_ETRA_Briefing NERA_Study_final. pdf (emphasis added)

(last visited on Jan. 26, 2015).

“ EPA has stated that it need not consider job losses because

job loss 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).

39% were still unemployed.4! 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), avatlable at

http://www.bls.gov/news.release/disp.htm.

42 Td.

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

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(m)(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

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 1 12

is appropriate in light of all the facts and circumstances

presented.” 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 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

absolute safety. To the contrary, this Court recognized

that “any standard that was not economically or

technologically feasible would a fortiori not be

‘reasonably necessary or appropriate’ under [OSHA].”

Id. at 513 n.31 (second emphasis added). In upholding

the OSHA cotton dust standard, this Court noted that

“OSHA presented a ‘responsible prediction’ of what its

Standard would cost and its impact on ‘production,

employment, competition, and prices.” Id. at 530 n.55.

In contrast, EPA would treat the term “appropriate”

as imposing no constraint at all on its discretion with

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

673-74 (D.C. Cir. 2013) (consideration of costs in revising

emissions standards under 42 U.S.C. § 7412(d)(6)); Natural Res.

Def. Council v. EPA, 529 F.3d 1077 (D.C. Cir. 2008) (consideration

of costs in setting residual risk standards to protect public health

with an ample margin of safety under 42 U.S.C. § 7412(f(2\B)).

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

economic impacts analysis, and analysis of any

significant small business impacts.”*4 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

“ ENV'T & 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.

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,

capricious, an abuse of discretion, or otherwise not in

accordance with law.” 5 U.S.C. § 706(2)(A).“ 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]ost-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 diacretion, or otherwise not in accordance with law.”

Section 307(d)(9)(A), 42 U.S.C. § 7607(d)(9)(A).

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.

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

decision-making, and the negative implication canon is

inapplicable. Here, Congress used the term

“appropriate” in Section 112, and well-settled law 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

proposal would hurt more than it helps. That simply is

a bridge too far.

CONCLUSION