Reply Brief — Nat'l Mining Ass'n v. Envtl. Prot. Agency, 135 S. Ct. 703 (2014) (No. 14-49)

Supreme Court brief2014

Ask Donna

What actually matters in this document.

Text

| Supreme Coun. US.

' FILED

| MAR 18 2015

Nos. 14-46, 14-47 AND 14-49 |

THE CLERK

IN THE

Supreme Court of the United States

STATE OF MICHIGAN, ET AL., PETITIONERS,

Vv.

ENVIRONMENTAL PROTECTION AGENCY, RESPONDENT.

ON WRITS OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA

CIRCUIT

REPLY BRIEF OF PETITIONER THE

NATIONAL MINING ASSOCIATION

CARROLL W. MCGUFFEY III PETER S. GLASER

JUSTIN T. WONG (Counsel of Record)

TROUTMAN SANDERS LLP TROUTMAN SANDERS LLi’

600 PEACHTREE STREET, NE 401 NINTH STREET N.W.

SUITE 5200 SUITE 1000

ATLANTA, GA 30308-2216 WASHINGTON, D.C. 20004

202-274-2998

Peter.glaser@

troutmansanders.com

March 18, 2015 Counsel for Petitioner

TABLE OF CONTENTS

Oe Feler BE TED cnscnctncccscccsscciccesevcssvccsscses ili

Be Re IGT, ceitticsiccnccsceccnsdcvesescnnssoseoreonnes 1

ST il 1

ARGUMENT. .................-+. SRW rOR rE atInCe MEGNOD RENE eR maLe PERL eT 2

I. Respondents’ Statutory Analysis Is

RRR SRE SSSR. Cie AE Rasen eee eae 2

A. Respondents Misread the Plain Text of

Section 7412(m)(1)(A). ................ccccccceeeeeeeeeceeees 2

B. Respondents’ Context Arguments Ignore

the Most Basic Statutory Context of All—

that Congress Intended a Different

Regulatory Approach for Electric

i ccciennticdssccncnniucnsrecvenhinptitunibiccmininidtonbins 4

Il.

C. The (At Best) Merely Implicit

Consideration of Costs Allowed in Setting

“MACT-Floor” Standards Proves Rather

than Disproves the Relevance of Costs in

Determining Whether Regulation Is

FI, ccntnsenmntiencicnnsibimnisiaticiensinnneniaccinein 7

D. Other Section 7412 Context Supports

Congress’ Intent that EPA Consider Costs

under Section 7412(m)(1)(A).............0..ccccccceeeees 8

Respondents Provide No Valid Reason for

Ignoring Costs Given the Rule’s

Extraordinarily Unbalanced Regulatory

a al 10

Ill.NMA’s Acid Gas Argument Is Within the

Scope of the Issue on Which This Court

Granted the Petitions for Writ of Certiorari. .....

I IUNT coiininishadcclinmcsusiorensiansmicesepaiddiaceaisiaaaciiiices

TABLE OF AUTHORITIES

Page(s)

CASES

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

Defense Council, Inc.,

Re Te IE inciicoutacscesirnetccnsnersccnindetamenenanisee l

Entergy Corp. v. Riverkeeper, Inc.,

I, Tins sts sarc amieonanammegeceonnianendennioneds 6

Motor Vehicle Manufacturers Ass’n, Inc. v.

State Farm Mutual Auto. Insurance Co.,

eG Si I cicerncssiccesdernienctssneintinionrtenanssieuieiebines 1,10

Russello v. United States,

I a IED iiss cactcerninhiesectadeanniciinenssnciovecnagibcnocsbrinmicipiaines 4

Utility Air Regulatory Group v. EPA,

a Oe ee OID tecicersseccetieoinitecerssinntrinnnoiceaien 12

Whitman v. American Trucking Ass’ns, Inc.,

Se a Cee IID viciccteecnmntnccncsinncetcastinmaictistbaiiiniute 4

STATUTES

LE Ee SERRE MEP RSE AED PEMA Re eB passim

rr a a 5

ee a ee 3,5

& J PR EERO ener Sane 6

OO 6 a ae 9

lit Ck |): ee 13

42, U.S.C. § 7412(d)(B)(A) -..-cceeccecceecseessessesssveceesucenveeees 7

42 U.S.C. § 7412(m)(1)(A) ..-..-.ceceesceescesceessesseesees passim

42 U.S.C. § 7412(m)(1)(B).........ceesecseessesseesveeseeceeeseeees 9

FEDERAL REGISTER NOTICES

76 Fed. Reg. 24,976, 25,050-51 (May 3, 2011)......... 13

Ps Se BS I ieccernctancenseriesesseenmassmacsiamsienn 13

77 Fed. Reg. 9,304, 9,323 (Feb. 16, 2012) .................. 7

Be es I FE REID beictcctcintinpanasbiniacdinendscnacbineianiadans 13

Be Toi geeincedeakaaiaanid 11

RULE 29.6 STATEMENT

The petitioner does not have a parent

company, and no publicly-held corporation has a 10%

or greater ownership interest in the petitioner.

INTRODUCTION

Despite hundreds of pages of briefing,

Respondents and their supporting amici fail to

provide a convincing and reasonable explanation for

adopting a rule with annual compliance costs of $9.6

billion and annual benefits of only $4-$6 million.

They could have at least attempted to justify this

result by arguing that Congress prevented EPA from

considering the rule’s cost, but they did not do so.

Instead, they took the position that Congress left the

choice of whether to consider costs in EPA’s hands.

Nor did they contend that EPA rationally concluded

that unquantified benefits and co-benefits tip the

cost-benefit analysis in favor of regulation. Despite

all their words about those benefits, Respondents

were forced to concede that EPA, because it decided

to ignore costs, did not weigh costs and benefits in

making the appropriateness determination.

Respondents were thus left with the

unenviable task of defending the rationality of EPA’s

position that it could determine whether regulation is

“appropriate” without even considering the cost of

that regulation. But EPA’s position is indefensible

either as a matter of statutory construction under

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

Council, Inc., 467 U.S. 837 (1984), or as a matter of

rational decisionmaking under Motor Vehicle

Manufacturers Ass’n, Inc. v. State Farm Mutual Auto.

Insurance Co., 463 U.S. 29 (1983). Congress did not

delegate to EPA the immense power of adopting

regulations that are so costly that they are

transforming the electric power sector without

requiring the Agency to at least consider the impact

of its decision. And even if Congress did delegate

that authority, no rational person, faced with

evidence that the costs of a decision far outweigh its

benefits, decides to simply ignore the costs and

proceed anyway.

Acid gas regulation proves the point.

Regulating acid gases will cost over $5 billion per

year yet produce no health benefit (as EPA concedes)

and will create only the vaguest of environmental

benefits in possibly reducing water-body acidification.

None of the Respondents, however, offered a

satisfactory explanation of how a Congress that

adopted an entire Title devoted to cost-effectively

addressing the electric sector's contribution to water-

body acidification could have simultaneously

intended that EPA would adopt hugely expensive

supplemental regulations to achieve virtually no

benefit at all.

ARGUMENT

I. Respondents’ Statutory Analysis Is

Unavailing.

A. Respondents Misread the Plain Text of

Section 7412(n)(1)(A).

Respondents’ statutory analysis begins with a

misreading of what Section 7412(n)(1)(A) actually

says. In Respondents’ reading, Congress directed

EPA to determine whether it is appropriate and

necessary to include electric generators on the

Section 7412(c) list. E.g., EPA Br. 17. Because, for

other source categories, costs are not a relevant factor

in a listing decision, Respondents reason that costs

should also not be a factor in a Section 7412(n)(1)(A)

appropriate and necessary determination. Id. at 24-

25. They buttress their analysis by claiming that,

under Section 7412 and other Clean Air Act (“CAA”)

provisions, costs are relevant only later in the

regulatory process, when EPA sets standards. Id. at

25; State Resp. Br. 28; Brief of American Academy of

Pediatrics, et al. “Env. Resp. Br.”) 31.

But Section 7412(n)(1)(A) does not say that

EPA shall assess whether listing is appropriate and

necessary. It directs EPA to determine whether

“such regulation”—that is, regulation “under this

section [7412]”—is appropriate and necessary. Since,

as Respondents state, Congress made costs relevant

(either implicitly or explicitly) when EPA sets Section

7412 regulatory standards, EPA must consider costs

in making a Section 7412(n)(1)(A) determination of

whether regulation under Section 7412 is

“appropriate and necessary.” Thus, the very fact that

EPA must consider costs in adopting Section 7412

regulations proves Petitioners’ point that EPA must

consider costs in the appropriate and necessary

finding—and disproves Respondents’ point that EPA

may ignore costs in making that finding.

B. Respondents’ Context Arguments Ignore

the Most Basic Statutory Context of All—

that Congress Intended a Different

Regulatory Approach ffor’§ Electric

Generators.

Respondents’ contextual analysis misses an

obvious point. On the one hand, they place a great

deal of weight on what they call Congress’ consistent

practice in Section 7412 and throughout the CAA

generally of barring EPA from considering costs in

making a threshold decision of whether to regulate.

EPA Br. 38-41. On the other hand, they are forced to

concede that Congress did not follow this practice

under Section 7412(n)(1)(A). In their view, under

that provision, Congress left it in EPA’s hands to

make the decision to either consider or not consider

costs, unlike any other program they cite. Jd. at 22-

23, State Resp. Br. 18. And so, by Respondents’ own

admission, a contextual analysis of Section

7412(n)(1)(A) must begin with the recognition that

Congress intended a different regulatory approach for

electric generator hazardous air pollutant (“HAP”)

emissions than it did for other source categories.! Cf.

Russello v. United States, 464 U.S. 16, 23 (1983)

(‘where Congress includes particular language in one

section of a statute but omits it in another ... it is

generally presumed that Congress acts intentionally

' For this reason, Respondents cannot find support in Whitman

v. American Trucking Aas’ns, Inc., 531 U.S. 457, 469 (2001),

where, unlike Respondents’ position here, the Court found that

the statute unambiguously barred EPA from considering costs.

and purposely in the disparate inclusion or

exclusion.”).

Respondents maintain nevertheless’ that

because Congress barred EPA from considering costs

in making a threshold decision to list sources for

regulation under these other programs, EPA must be

seen as acting reasonably here by adopting the same

regulatory appruach. EPA Br. 24-25. Respondents’

argument, however, ignores the Section 7412

regulatory structure that Respondents rely on in

justifying EPA’s approach. As Respondents state,

because all of the HAPs that the rule regulates are

listed under Section 7412(b), Congress has already

deemed that these substances, if emitted in amounts

exceeding the Section 7412(c) thresholds, “pose[] an

inherent risk warranting regulation.” Id. at 25.

Thus, if Congress’ intent was as limited as

Respondents claim, it had no need to require EPA to

do a health study and make an appropriate and

necessary finding. To ensure that electric generator

HAP emissions would be regulated if warranted, it

could either have not adopted Section 7412(n)(1)(A)

at all and left in place a regime under which EPA

would be required to regulate those emissions if EPA

determined that they exceeded the statutory

thresholds. Or, if there was concern that the

language of Section 7412(c) was not broad enough for

EPA to project forward whether generator emissions

following implementation of other CAA programs

exceeded the Section 7412(c) tons-per-year criteria for

listing, Congress could have simply instructed EPA to

make the necessary forward projection.”

Congress did have a purpose for the health

effects study and the appropriate and necessary

finding, however. The Panel got close to Congress’

purpose when it stated that EPA was required to

consider the results of the health effects study in

determining whether regulation would be appropriate

“based on its assessment of the existence and

severity” of any health hazards. NMA App. 28a. But

the Panel never considered why information about

the existence and severity of impacts would be

relevant to a Congress that had already determined

that HAPs emitted beyond defined threshold

amounts create a significant enough health concern

to warrant regulation. The only possible explanation

is that Congress, in contrast to its otherwise

applicable approach, and because of its concern about

the multiple, costly regulations which it had adopted

for the power sector, wanted EPA to exercise policy

judgment as to whether the severity of the impacts

warrant the type of regulation “under this section”

that EPA has undertaken. That judgment

necessarily involves weighing costs and benefits.

NMA Br. 35-37. As this Court has said, “[e]very real

choice requires a decisionmaker to weigh advantages

against disadvantages....” Entergy Corp. ov.

Riverkeeper, Inc., 556 U.S. 208, 232 (2009).

2 The Section 7412(n)(1)(A) health study and appropriate and

necessary finding would be similarly unnecessary for facilities

emitting below the statutory thresholds. Because these facilities

are “area eources,” EPA was already required to regulate those

sources’ emissions if it found they imperil public health or the

environment. 42 U.S.C. § 7412(c)(3).

C. The (At Best) Merely Implicit

Consideration of Costs Allowed in Setting

“MACT-Floor” Standards Proves Rather

than Disproves the Relevance of Costs in

Determining Whether Regulation Is

Appropriate.

Respondents also trip themselves up by

arguing that EPA properly ignored costs in making

the appropriateness finding because, in line with

other CAA programs, EPA would consider costs in

fashioning regulatory standards. EPA Br. 25. But

EPA did not consider costs in setting standards for

electric generators because virtually all of the

standards it adopted were based on the “MACT-floor”

methodology, NMA Br. 34, which, as EPA has

conceded, 77 Fed. Reg. 9,304, 9,323 (Feb. 16, 2012),

precludes the consideration of costs.

The best Respondents can do is to argue that

costs are implicitly considered in setting MACT-floor

standards in that those standards, by definition, have

been achieved by some currently operating units.

EPA Br. 25-265 Although Respondents recognize

that setting standards in this fashion can result in

extremely high compliance costs for the large

majority of other units and can lead to plant closures,

they argue that result is simply the scheme Congress

intended. Id. at 26. But that claim is directly

inconsistent with Respondents’ admission that it is

8 Actually, by definition, they have been achieved by only a very

small number of facilities. Under Section 7412(d)(3)(A), MACT-

floor standards are based on the average performance of the 12

percent lowest-emitting units, meaning 88 percent (or even 94

percent) of units may not meet the standard.

EPA that chose to ignore costs here, not Congress.

Moreover, Respondents’ argument still leaves

Congress without a reason for requiring a study of

the existence and severity of any health impacts of

electric generator HAP emissions and for directing

EPA to meke an appropriate and necessary finding.

Under Pespondents’ view, EPA does not weigh the

severity of impacts against the cost of regulation

when EPA makes the appropriate and necessary

determination, and, given that MACT-floor standards

are formulaic, it also does not do so when it sets

regulatory standards.

D. Other Section 7412 Context Supports

Congress’ Intent that EPA Consider Costs

under Section 7412(m)(1)(A).

First, although focused on the health study

that Section 7412(n)(1)(A) authorizes, Respondents

recognize that the study must also include an

examination of alternative control technologies. EPA

Br. 28, n.6. Respondents argue improbably that a

study of alternative control strategies does not

include the cost of those technologies. Jd. However,

the notion that Congress was interested in knowing

only whether control technologies were technically

feasible, not whether they were economically feasible,

is not credible. Many things are technically feasible

but completely infeasible as a practical matter

because of their cost. Respondents pooh-pooh NMA's

point that, under their reading of the statute, EPA

could proceed with regulation even if the cost of the

controls was $1 trillion, EPA Br. 43, n.13, but that is

the implication of their view that only the technical

feasibility of controls was relevant for study, not the

cost of those controls.

Second, Respondents recognize the

contradiction of relying on Section 7412(n)(1)(B)’s

reference to environmental effects to justify

consideration of those effects under Section

7412(n)(1)(A), while ignoring costs under Section

7412(n)(1)(A) even though costs are also referred to in

Section 7412(n)(1)(B). Indus. Resp. Br. 21, n.9.

Respondents argue that EPA’s discretion is broad

enough under Section 7412(n)(1)(A) to either consider

or not consider environmental impacts and to either

consider or not consider environmental costs. Id.

But this argument cuts against Respondents’

principal contention that EPA reasonably ignored

costs because of Section 7412(n)(1)(A)’s focus on

health impacts. Env. Resp. Br. 16; State Resp. Br.

18. This is particularly so given that EPA chose to

consider environmental impacts because it wanted to

extend its appropriateness finding to acid gases,

which, in the amounts emitted by electric generators,

do not, as the Agency conceded, create public health

impacts. See Argument III infra. Given that acid gas

regulation drives more than half of the cost of the

rule, NMA Br. 13, choosing to regulate based on

possible environmental concerns, while ignoring the

resulting cost impacts, is hardly reasonable.

Third, Respondents argue that ignoring costs

in making the appropriateness finding harmonizes

with the fact that costs are not considered in delisting

a source category under Section 7412(c)(9). EPA Br.

32-34. But the high hurdles for undoing an EPA

listing decision further emphasize why Congress

would want to ensure that EPA considered all

relevant factors, including costs, before EPA listed

generators for regulation under Section 7412.

IL. Respondents Provide No Valid Reason for

Ignoring Costs Given the Rule’s

Extraordinarily Unbalanced Regulatory

Costs and Benefits.

Even if Congress gave EPA the choice to either

consider or not consider costs in determining whether

“such regulation” under Section 112 is appropriate,

EPA must provide a reasoned explanation for the

choice it made. State Farm Mutual Auto. Insurance

Co., 463 U.S. at 43-44. Respondents’ principal

rationale for EPA’s decision to ignore the $9.6 billion

cost of the rule was that, however extreme the cost-

benefit imbalance might be, it cannot. be

unreasonable because the same imbalance could

occur with regulation of other source categories under

Section 7412. EPA Br. 19. This explanation,

however, suffers from the same problem as EPA's

statutory interpretation. No doubt, if Congress had

not adopted Section 7412(n)(1){(A) and subjected EPA

to the otherwise applicable Section 7412 regulatory

structure, this imbalance would have occurred. But

Congress did adopt Section 7412(n)(1)(A) and directed

EPA to regulate only if “such regulation” was

“appropriate.” EPA thus must do more to justify the

appropriateness of the hugely disproportionate costs

and benefits that occurred here than to pretend that

Congress never instructed it to determine whether

regulation with such consequences is appropriate in

the first place.

Respondents seek to justify the enormous costs

of the rule by arguing that the costs must be

affordable because some facilities have already

complied with the standards. State Resp. Br. 2.

Given that the initial three-year compliance period

expires this April (with many units obtaining a one-

year extension to next April), 77 Fed. Reg. at 9,407, it

is not surprising that some units have already

complied. At the same time, it is no use pretending

that $9.6 billion per year is not a steep price simply

because facilities are being forced to pay it.

Respondents similarly argue that the rule’s

costs must be reasonable because the Section 7412

program, in their view, has been successfully

implemented for other industries. Env. Resp. Br. 39.

But none of those industries have experienced the

extraordinary regulatory costs that EPA has imposed

on the power sector under the MATS rule, and none

has seen the wave of plant closures that is occurring

here. Most important, because none are subject to

nearly the same level of regulation under other CAA

programs, Congress did not specify that EPA must

make an appropriateness finding for these other

industries before regulating under Section 7412.

Respondents also argue that the costs must be

affordable because some states have adopted even

more stringent standards, State Resp. Br. 9-11, and

some companies have complied with these standards,

Indus. Resp. Br. 29. But the States supporting EPA

that have adopted these standards (like California

and the northeastern states) are typically located far

from the country’s coal fields and have little coal

generation. Similarly, the companies supporting

EPA historically are not large coal users. These

companies and these States stand to gain a

competitive advantage under the rule, but that does

not prove that the compliance costs are reasonable.

In the end, as EPA intended, the rule is having

a transformative effect on the electric power sector,

with projected retirements of one-sixth to one-quarter

of all coal-fired electric generation, NMA Br. 15,

which only a few years ago supplied half of the

country’s electric power. Energy Information

Administration, http://www.eia.gov/electricity/

capacity/, Congress cannot be seen as having

authorized regulation of such “vast economic and

political significance,” Utility Air Regulatory Group v.

EPA, 134 S. Ct. 2427, 2444 (2014), by instructing

EPA to regulate only if “appropriate.”

Ill, NMA’s Acid Gas Argument Is Within the

Scope of the Issue on Which This Court

Granted the Petitions for Writ of

Certiorari.

NMA’s third argument in its opening brief

addressed EPA’s alternative justifications for

regulating acid gases—first, that regulating acid

gases is appropriate and necessary because they

contribute to water-body acidification and second,

that EPA is compelled to regulate acid gases even if

they pose no health or environmental threat if EPA

determines that it is appropriate and necessary to

reguiate any other electric generator HAP. NMA Br.

37-44. Respondents claim that NMA’s response to

this second justification is not within the scope of the

issue this Court set for briefing. EPA Br. 52-53.

Respondents are incorrect. The Court asked

the parties to brief whether EPA unreasonably

ignored costs. EPA argues alternatively that it could

reasonably ignore the benefits and costs of acid gas

regulation because those benefits and costs became

irrelevant when EPA determined that it was

appropriate and necessary to regulate other electric

generator HAP emissions. 77 Fed. Reg. at 9,361.

NMA maintains that the costs and benefits of acid

gas regulation did not become irrelevant when EPA

made that determination. NMA Br. 42-44. Given the

interplay between Sections 7412(n)(1)(A) and 7412(d),

NMA maintains that Congress did not intend that

EPA would regulate electric generator emissions that

EPA had determined did not “warrant regulation.”

Id. Respondents and NMA dispute this point, but

EPA's reasons for ignoring the cost of acid gas

regulation are unquestionably relevant to the overall

issue of the reasonableness of EPA’s decision to

ignore the cost of HAP regulation as a whole. -

Respondents barely engage the merits of the

acid-gas arguments that NMA made. They claim

that EPA did find that acid gases harm the public

health. Env. Resp. Br. 42, n.7. But their citation is

to 76 Fed. Reg. 24,976, 25,050-51 (May 3, 2011),

where EPA discusses the health effects of acid gases

if inhaled in sufficient amounts. In contrast, they

ignore EPA's conclusion in the same Federal Register

notice that acid gases in the amount emitted by

electric generators (and dispersed over very wide

areas) do not pose a cancer risk and that “our case

studies did not identify significant chronic non-cancer

risks from acid gas emissions.” Jd. at 25,016.

As to environmental impacts, Respondents

argument that the study of acidification in the United

Kingdom supports EPA’s position, Indus. Resp. Br.

42, misses the point that the United Kingdom study

obviously does not show that electric generators in

the United States emit acid gases in sufficient

amounts to affect the acidification levels in domestic

water bodies. The fact remains that EPA chose to

force the domestic power sector to spend over $5

billion per year to reduce emissions of a substance

that EPA concedes does not present a significant

health risk and that it cannot provide any concrete

evidence is causing material acidification anywhere.

It did so even though Congress adopted a separate

program that was intended to cost-effectively

ameliorate the power sectors contribution to

acidification. NMA Br. 25-27. Given the paucity of

evidence of any continuing impact that power sector

acid gas emissions might be having on acidification,

and given the huge costs that EPA’s acid gas

regulations imposed, EPA’s refusal to consider the

cost of those regulations was unreasonable.

CONCLUSION

The Court should vacate the rule.

Respectfully submitted,

CARROLL W. MCGUFFEY III PETERS. GLASER

JUSTIN T. WONG (Counsel of Record)

TROUTMAN SANDERS LLP TROUTMAN SANDERS LLP

600 PEACHTREE STREET, NE 401 NINTH STREET N.W.

SUITE 5200 SUITE 1000

ATLANTA, GA 30308-2216 WASHINGTON, D.C. 20004

202-274-2998

Peter.glaser@

troutmansanders.com

March 18, 2015 Counsel for Petitioner

BRIEF

[Sapam Coat OS

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

In the Supreme Court of the Gnited State =O aoe

tel

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 UNTTED 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 Genera!

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

CPR Re CHRP Ree eee eee eee eee ee eee eee

(DORR PERS RRS ER ERRRRE RES ERE REE RE REE RE RRR RRR SS

SEER EEE REE EERE REE ERE ERE RR ERR ERE E EEE EEE REE EE

intended EPA to consider. ...................0cccecceceeeeeee

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

are an important aspect....................ccccsceseeeee

. 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

DOTTIE, occccscccecesessossnnitneseasonsadmmnniananaalaae 19

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

outweigh its benefits ($4 to $6 million

SEER ERR: wisrsnidiniadiaaa 20

COOUIGIIIIN sicciscecciccicsnccosuciicncesecenedndbuadsaaenmeaaieneee 22

Ad Pithaal COGS ..ccccsescecsessaccesnieideaidaeieee 23

TABLE OF AUTHORITIES

Page

Cases

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

ES 1,8

Davis v. Mich. Dep’t of Treasury,

I MUI MID «0. ccccocccedesbecosescoccesoosooccocooes 16

Duncan v. Walker,

i snmenenoneionsens 2

Michigan v. EPA,

213 F.3d 663 (D.C. Cir. 2000) ................ eee 11

Morrison v. Nat? Australia Bank Ltd.,

Se EER 2

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

Auto. Ins. Co.,

a. cenansinnecanenecs 4,9

Natural Resources Defense Council v. EPA,

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

Union Elec. Co. v. EPA,

I icine a bali ebsbhonscdcconasconcesoceces 12

University of Texas Southwestern Med. Ctr. v.

Nassar,

EE 16

Whitman v. American Trucking Associations,

Inc.,

EE 12

Statutes

es Oe i iiinictincaicinctictnatathecas scniectnadtindagepeens 18

I las Oe Ce cathiiietniniti decir lee passim

A rs PU aeiciisesisaniseisisandsitiiniciceitetcnamimebimeendmanat 10

ie eee Oe Pe etiniiestasccaccsiniiinteninednaiadtptieninn passim

42 U.S.C. § 7412(c)(9) ............. ZiisiaenibiaaGaduieiiloniea 19, 20

ae Oh PO eeinscnccietasccnstcctiacabsiliaiintioiipiing passim

GD Ea BS Fe ecntiintdttticenicnictitetnentcti passim

gE ae lll ee 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

Ps i erinetactecstcccednctanntiananctsbiassiietdeiaunian 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

[. 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. Nat'l 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

[i.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 does 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.

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 hazards 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—ainto

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

[in 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 locks 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 cr 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 comcluded 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)(1XB) 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

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

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).

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,

“hajf 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

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.

Il. 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

(‘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

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 required 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

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, ail

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.

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.

C. Other provisions that apply to other

source categories are not comparable to

§ 7412(n)(1)’s unique approach.

EPA’s attempt to amalogize § 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

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.

Ul.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

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(n){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 greatiy exceed its

costs, because the rule would reduce the emissions of

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 PMbo;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 velid 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

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

ADDITIONAL COUNSEL

Luther Strange

Attorney General

State of Alabama

Office of the Attorney General

501 Washington Avenue

Montgomery, AL 36130

(334) 242-7445

Counsel for the State of Alabama

Michael C. Geraghty

Attorney General

State of Alaska

Steven E. Mulder

Assistant Attorney General

1031 W. 4th Avenue, Suite 200

Anchorage, AK 99501-1994

Counsel for the State of Alaska

Mark Brnovich

Attorney General

State of Arizona

James T. Skardon

Assistant Attorney General

Environmental Enforcement Section

1275 West Washington

Phoenix, AZ 85007

(602) 542-8535

James.Skardon@azag.gov

Counsel for the State of Arizona

Leslie Rutledge

Attorney General

State of Arkansas

Attorney General

323 Center Street, Suite 200

Little Rock, AR 72201

(501) 682-5310

Counsel for the State of Arkansas, ex rel.

Dustin McDaniel, Attorney General

Lawrence G. Wasden

Attorney General

State of Idaho

P.O. Box 83720

Boise, ID 83720-0010

Counsel for the State of Idaho

Gregory F. Zoeller

Attorney General

State of Indiana

Valerie Tachtiris

Deputy Attorney General

Office of the Attorney General

IGC-South, Fifth Floor

302 West Washington Street

Indianapolis, IN 46204

(317) 232-6290

Valerie. Tachtiris@atg.in.gov

Counsel for the State of Indiana

Michael Bousselot

1007 East Grand Avenue

Des Moines, IA 50319

Michael. Bousselot@iowa.gov

Counsel for Terry E. Branstad, Governor

of the State of Iowa on behalf of the

People of Iowa

Derek Schmidt

Attorney General

State of Kansas

Jeffrey A. Chanay

Chief Deputy Attorney General

Office of the Attorney General of Kansas

120 SW 10th Avenue, 3rd Floor

Topeka, KS 66612-1597

(785) 368-8435

jeff.chanay@ag.js.gov

Counsel for the State of Kansas

Jack Conway

Attorney General

Commonwealth of Kentucky

700 Capital Avenue, Suite 188

Frankfort, KY 40601

Counsel for Jack Conway, Attorney

General of Kentucky

Jim Hood

Attorney General

State of Mississippi

Harold E. Pizzetta III

Assistant Attorney General

Director, Civil Litigation Division

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

Jackson, MS 39205-0220

(601) 359-3816

hpizz@ago.state.ms.us

Counsel for the State of Mississippi

Chris Koster

Attorney General

State of Missouri

James R. Layton

P.O. Box 899

Jefferson City, MO 65102

(573) 751-1800

James.Layton@ago.mo.gov

Counsel for the State of Missouri

Doug Peterson

Attorney General

State of Nebraska

Dave Bydalek

Chief Deputy Attorney General

Blake Johnson

Assistant Attorney General

2115 State Capitol

Lincoln, NE 68509

(402) 471-2682

Blake johnson@nebraska.gov

Counsel for the State of Nebraska

Wayne Stenehjem

Attorney General

State of North Dakota

Margaret I. Olson

Assistant Attorney General

Office of Attorney General

500 North 9th Street

Bismarck, ND 58501-4509

(701) 328-3640

maiolson@nd.gov

Counsel for the State of North Dakota

Michael DeWine

Attorney General

State of Ohio

30 E. Broad Street, 17th Floor

Columbus, OH 43215

Counsel for the State of Ohio

E. Scott Pruitt

Attorney Genera!

State of Oklahoma

Patrick Wyrick

Solicitor General

P Clayton Eubanks

Deputy Solicitor General

Office of the Attorney General of Oklahoma

313 N.E. 21st Street

Oklahoma City, OK 73105

(405) 522-8992

clayton.eubanks@oag.ok.gov

Patrick.wyrick@oag.ok.gov

Counsel for the State of Oklahoma

Alan Wilson

Attorney Genera]

State of South Carolina

Robert D. Cook

Solicitor General

James Emory Smith, Jr.

Deputy Attorney General

Office of the Attorney General

P.O. Box 11549

Columbia, SC 29211

Counsel for the State of South Carolina

Ken Paxton

Attorney Genera!

State of Texas

Charles E. Roy

First Assistant Attorney General

James E. Davis

Deputy Attorney General for Civil Litigation

Jon Niermann

Chief, Environmental] Protection Division

Mark Walters, Assistant Attorney General

Mary E. Smith, Assistant Attorney General

Office of the Attorrey General of Texas

Environmental Protection Division

P.O. Box 12548

Austin, TX 78711-2548

(512) 463-2012

mark. walters@texasattorneygeneral.gov

mary.smith@texasattorneygeneral.gov

Counsel for the State of Texas, Texas

Commission on Environmental Quality,

Texas Public Utility Commission, and

Railroad Commission of Texas

Sean D. Reyes

Attorney General

State of Utah

350 North State Street, #230

Salt Lake City, UT 84114-2320

(801) 538-1191

Counsel for the State of Utah

Patrick Morrisey

Attorney General

State of West Virginia

State Capitol

Building 1, Room E-26

Charleston, WV 25305

(304) 558-2021

Counsel for the State of West Virginia

Peter K. Michael

Attorney General

State of Wyoming

Michael J. McGrady

Senior Assistant Attorney General

123 State Capitol

Cheyenne, WY 82002

Counsel for the State of Wyoming

BRIEF

~~ Guprame Cour, U.S.)

FILED

MAR 18 2015

LOFFICE OF THE CLERK |

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

IN THE

Supreme Court of the Anited States

STATE OF MICHIGAN, ET AL.,

Petiti

Vv.

UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY, ET AL.,

Respondents.

On Writs of Certiorari to the

United States Court of Appeals

for the District of Columbia Circuit

REPLY BRIEF OF PETITIONER

UTILITY AIR REGULATORY GROUP, ET AL.

F. WILLIAM BROWNELL

(Counsel of Record)

HENRY V. NICKEL

LEE B. ZEUGIN

ELIZABETH L.. HORNER

HUNTON & WILLIAMS LLP

2200 PENNSYLVANIA AVENUE, NW

WASHINGTON, D.C. 20037

(202) 965-1500

bbrownell@hunton.com

March 18, 2015 Counsel for Petitioner

[Counsel for Respondents in Support of Petitioner Joining

in This Brief Are Listed Inside This Cover]

COUNSEL FOR RESPONDENTS IN SUPPORT OF

PETITIONER JOINING IN THIS BRIEF

LESLIE SUE RITTS

Ritts LAW GROUP, PLLC

THE CARRIAGE HOUSE

620 FORT WILLIAMS

PARKWAY

ALEXANDRIA, VA 22304

(703) 823-2292

Counsel for American

Public Power Association

BART E. CASSIDY

KATHERINE L. VACCARO

MANKO, GOLD, KATCHER &

Fox, LLP

401 Crry AVENUE

SUITE 901

BALA CYNWYD, PA 19004

(484) 430-6700

SUITE 1100

DENNIS LANE

STINSON LEONARD STREET

LLP

1775 PENNSYLVANIA

AVENUE, NW, SUITE 800

WASHINGTON, D.C. 20006

(202) 785-9100

dennis.lane@

stinsonleonard.com

PARTHENIA B. EVANS

STINSON LEONARD STREET

LLP

1201 WALNUT STREET

SUITE 2900

KANSAS CITY, MO 64106

(816) 842-8600

parthy.evans@

stinsonleonard.com

Counsel for Kansas City

Board of Public Utilities

ERIC GROTEN

VINSON & ELKINS LLP

2801 VIA FORTUNA

SUITE 100

AUSTIN, TX 78746-7568

(512) 642-8709

egroten@velaw.com

Counsel for White Stallion

Energy Center, LLC

RULE 29.6 DISCLOSURE STATEMENTS

Petitioner

Utility Air Regulatory Group (“UARG’) is an

ad hoc, unincorporated association of individual elec-

tric generating companies and industry trade associ-

ations that participates on behalf of its members col-

lectively in administrative proceedings under the

Clean Air Act, and in litigation arising from those

proceedings, that affect electric generators. UARG

has no outstanding shares or debt securities in the

hands of the public and has no parent company. No

publicly held company has a 10% or greater owner-

ship interest in UARG.

Respondents in Support of Petitioner

American Public Power Association (“APPA”)

is a nonprofit trade association whose members are

units of state and local governments that own and

operate electric generating, distribution and trans-

mission assets. APPA addresses issues of interest to

its members, including those issues related to the

development and implementation of requirements

under federal and state Clean Air Act programs.

APPA does not have any outstanding securities in

the hands of the public, nor does APPA have a pub-

licly owned parent, subsidiary, or affiliate.

ARIPPA is a non-profit trade association that

represents a membership primarily comprised of

electric generating plants using environmentally-

friendly circulating fluidized bed boiler technology to

convert coal refuse and/or other alternative fuels

such as biomass into alternative energy and/or

steam, with the resultant alkaline ash used to re-

claim mine lands. ARIPPA was organized in 1988

for the purpose of promoting the professional, legis-

lative and technical interests of its member facilities.

ARIPPA has no outstanding shares or debt securities

in the hands of the public and does not have any par-

ent, subsidiary, or affiliate that has issued shares or

debt securities to the public.

Gulf Coast Lignite Coalition (“GCLC”) is a

non-profit corporation organized under the laws of

the State of Texas and comprised of individual elec-

tric generating and mining companies. GCLCL partic-

ipates on behalf of its niembers collectively in pro-

ceedings brought under United States environmental

regulations, and in litigation arising from those pro-

ceedings, which affect electric generators and mines.

GCLC has no outstanding shares or debt securities

in the hands of the public and has no parent compa-

ny. No publicly held company has a 10% or greater

ownership interest in GCLC.

Kansas City Board Of Public Utilities-

Unified Government Wyandotte County/Kansas

City, Kansas is not required to provide a Rule 29.6

Disclosure Statement because it is a governmental

entity organized under the laws of the State of Kan-

sas. Accordingly, no Disclosure Statement is being

provided.

White Stallion Energy Center, LLC (WSEC’)

is a limited liability company organized under the

laws of the State of Texas engaged in the business of

energy development and production. Maris Invest-

ment Company, LLC, and Sky Global Partners, LLC

each hold a 10% or greater ownership interest in it.

TABLE OF CONTENTS

Page

RULE 29.6 DISCLOSURE STATEMENTS ................ i

Ey i EP ITIEE seeseccnivcsccseussvovedecancsbecsnansnenss il

Ee Ce Hr BE Oi ercnctesctccccconscscecscessccssonscus Vv

RR EAE SE Re SERN Te in Nie ee ]

PRAISE SIE SP EID Ne EASE REIS th tM An 3

I. “Appropriate and Necessary” Is Not

Used in §7412(n)(1)(A) to Decide

Whether, or Not, to List EGUs Under

§7412(c), But Is the Ultimate

Decisional Standard Governing

Whether or Not to Regulate Under

§7412 EGU HAP Emissions That

Pose Public Health Risks............................... 3

Il. Section 7412(n)(1)(A) Authorizes

“Residual Risk” Regulation Only If

“Such Regulation” Is “Appropriate

I a ae 9

SESE TSAR ai Se OREN SC RE cet inn 13

TABLE OF AUTHORITIES

Page

Cases:

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

Auto. Ine. Co., 4638 U.S. 29 (1968)............0000022......- 2

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

A RW RET ai tA AI a Ae 12

Natural Res. Def. Council v. EPA, 529 F.3d 1077

Re: a. SEED peiocticient sci duidl cade had idiebaeniiasnait 10, 12

Statutes:

Clean Air Act, 42 U.S.C. §§7401, et seq.

Io ilicnssiatcesnScidaatinioaenncaiions passim

Be es I iossistciccasansszcadecaackssemateesaibdes passim

rae i an passim

es cette ctibectaneuaien 1

re I cc ee ak 1

RRR EE ERASE SOR i Aaa Ra 1

Re es I ccinittnstasasestuscdigacaaeacaes 1, 10, 11, 13

A Ee a SIE cccsctessitctaceecncsnsensasncces 11, 12

ls I cceenscsiccevsencetouncccticiatninsecnan 1,13

Oe Oe ee I tines ctisttcashaceacetovennenesacsonces 1,12

~ ge Teh 4c |’ Een yore ie passim

Federal ister:

54 Fed. Reg. 38,044 (Sept. 14, 1989) ............0.000...... 12

INTRODUCTION

Section §112(n)(1)(A) of the Clean Air Act (“CAA”

or “Act”), 42 U.S.C. §7412(n)(1)(A), requires the U.S.

Environmental Protection Agency (“EPA” or “Agen-

cy”) to decide whether “regulation” of hazardous air

pollutant (HAP”) emissions from electric utility gen-

erating units (““EGUs”) “under this section” is “ap-

propriate and necessary” after considering a study

that addresses only two subjects: (1) “hazards to

public health” that remain “after imposition of the

requirements of this chapter,” and (2) “alternative

control strategies for emissions which may warrant

regulation.”

In §7412(n)(1)(A), EPA’s first task is to find that a

residual public health hazard is posed by specific

EGU HAP emissions remaining after those emissions

have been reduced under other provisions of the Act,

and to identify alternative control strategies to re-

duce further any emissions that “may warrant regu-

lation.” Next, if it finds any remaining EGU HAP

emissions pose a health hazard, EPA must deter-

mine how to regulate those emissions “under this

section.”

Different subsections of §7412 provide different

decisional standards for regulating HAP emissions

“under this section,” including subsections (d)(2)

(‘maximum achievable” control technology); (d)(3)

(“floor” control technology); (d)(5) (‘generally availa-

ble control technolog[y]”); (f) (‘ample margin of safe-

ty”); (m) (‘necessary and appropriate”); and (n) itself.

Once EPA determines the HAP emissions that war-

rant regulation and the degree to which those EGU

emissions would be regulated under §7412, EPA

must resolve whether or not “such regulation” under

this section “is appropriate and necessary.” Costs,

along with potentially myriad other factors, are rele-

vant in applying this broad regulatory decisional

standard that concludes the §7412(n)(1)(A) process.

Notwithstanding its mischaracterization of the

Chevron standard, see National Mining Ass’n Reply

Br. 1-2, 9, EPA is right that the interpretive question

before the Court is whether the term “appropriate”

requires EPA to consider costs “when deciding ... to

regulate” EGUs. EPA Br. 21. After correctly stating

the question, however, EPA addresses a wholly dif-

ferent question—that is, whether the term “appro-

priate” makes costs relevant to “listing” decisions

under §7412(c). See, e.g., id. at 17, 18, 28, 36, 48, 57

(arguing that “appropriate” addresses the threshold

“listing” decision).

According to EPA, if any EGU HAP emission

threatens “health or the environment” (i.e., satisfies

the criteria for “area source” listing under §7412(c)),

EPA can find that it is “appropriate and necessary”

to list, and that ends EPA’s responsibilities under

§7412(n)(1)(A). Id. at 26. But “to list or not to list” is

not the question raised by §7412(n)(1)(A); the ques-

tion raised by that section is whether additional

“regulation” of EGU HAP emissions “under this sec-

tion” is “appropriate and necessary.” The statutory

question calls for a decision to authorize or to pre-

clude specific regulation of EGU HAP emissions un-

der §7412.

This Court long ago made it clear that agency de-

cision-making is unreasonable whenever it has

“failed to consider an important aspect of the prob-

lem.” Motor Vehicle Mfrs. Ass’n v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29, 43 (1983). EPA’s failure

to make the §7412(n)(1)(A) finding whether “such

regulation” under §7412 is “appropriate and neces-

sary” after considering costs and other consequences

of that decision was per se unreasonable.

ARGUMENT

This case presents a stark difference in how the

parties read §7412(n)(1)(A). According to EPA and

its respondents, EPA's obligation under this provi-

sion is discharged once EPA concludes that “listing”

under §7412(c) is “appropriate and necessary.” In

Petitioners view, EPA’s’ obligation under

§7412(n)(1)(A) is not discharged until EPA decides on

the regulatory standard to apply “under this sec-

tion”—whether using §7412(d) or some other regula-

tory metric—and then determines that “such regula-

tion” is “appropriate and necessary.” For the reasons

discussed below, EPA’s construction of §7412(n)(1)(A)

is wrong and the Mercury and Air Toxics Standards

(“MATS Rule”) is unlawful.

I. “Appropriate and Necessary” Is Not Used

in §7412(n)(1)(A) to Decide Whether, or

Not, to List EGUs Under §7412(c), But Is

the Ultimate Decisional Standard Gov-

erning Whether or Not to Regulate Under

§7412 EGU HAP Emissions That Pose

Public Health Risks.

EPA’s brief presents a clearly drawn distinction

between the parties’ positions regarding the role of

§7412(n)(1)(A) and the relevance of costs under that

provision. According to EPA and its respondents,

the phrase “appropriate and necessary” merely de-

scribes a “special procedure” related to listing EGUs

under §7412(c). EPA Br. 7. As EPA sees it,

§7412(n)(1)(A) provides that, once the study of re-

maining EGU health hazards is completed, it is “ap-

propriate and necessary” to list EGUs under §7412(c)

when the criteria for listing would otherwise be pre-

sent after implementation of other EGU emission re-

ductions under the Act. Id. at 32 (“[I]t is farfetched

to suppose ... Congress required the agency to use

listing criteria fundamentally different from those

that Congress had mandated for all other stationary-

source categories.” (emphasis omitted)).

By contrast, in the Utility Air Regulatory Group’s

(“UARG’s”) view, the term “appropriate and neces-

sary’ calls on EPA to make the ultimate substantive

regulatory determination with respect to §7412 regu-

lation of EGU HAP emissions: Specific regulation

under §7412 limiting EGU HAP emissions may be

adopted by EPA only if “such regulation is appropri-

ate and necessary” after considering remaining pub-

lic health hazards and alternative control strategies

for those HAP emissions that “may warrant regula-

tion.” This decisional standard applies at the end of

the §7412(m)(1)(A) regulatory process to resolve

whether to promulgate, or to reject, a specific type

and level of regulation for any EGU HAP emissions

posing health hazards. Resolving the nature of

EPA’s “appropriate and necessary” finding resolves

the “contextual” debate in this case.

EPA describes the “appropriate and necessary”

language in §7412(n)(1)(A) as “a special procedure

that EPA must follow before deciding whether to list

power plants for regulation under the [national

emission standards for hazardous air pollutants

(NESHAP’] program.” EPA Br. 7 (emphasis added).

Through this prism, EPA and respondents repeat

over and over statements to the effect that nothing in

“the text of [§7412(n)(1)(A), or in] ... Congress’s rea-

sons for enacting it, suggest that Congress wished to

encourage (much less require) EPA to consider costs

in making the threshold listing decision.” Id. at 18

(emphasis added); see also id. at 17, 18, 28, 36 (de-

scribing the §7412(n)(1)(A) determination as a

threshold “listing” determination). To find that EGU

regulation is “appropriate,” EPA need only complete

its study of remaining hazards and find that, if any

remaining EGU HAP emissions pose a threat to

“public health or the environment,” listing is “appro-

priate.” Id. at 11, 26.

Furthermore, because EPA interprets §7412 to

require regulation of EGUs the same as other source

categories, if a “single” HAP emitted by an EGU

“poses a hazard to public health or the environment”

requiring listing, EPA must “promulgate standards

for all hazardous air pollutants emitted” by EGUs,

regardless of cost or hazard. /d. at 12, 45 (“[Ijf EPA

lists power plants ... [under] Section 7412(n)(1)(A),

those facilities will be subject to the same standard-

setting provisions that govern stationary sources

within all other [§7412(c)] listed categories.”). Given

this interpretation of §7412, EPA _ continues,

§7412(n)(1)(A) “does not mandate distinct ‘appropri-

ate and necessary’ findings for each individual pollu-

tant [being regulated]” because §7412(c) listing can

be triggered by a single HAP. Id. at 12. Rather,

EPA’s §7412(n)(1)(A) responsibilities end with listing

EGUs, and Congress’s mandate that all HAPs emit-

ted by a source category listed under §7412(c) be

regulated under §7412(d) governs everything that

follows listing. Jd. at 30.

If §7412(n)(1)(A)’s only function is, as EPA claims,

to confirm that “listing” under §7412(c) is “appropri-

ate” based on a remaining threat to “public health or

the environment,” cost would be irrelevant to that

narrow decision. See id. at 30 n.8 (“Congress would

not have expected EPA to consider—at the listing

stage—the cost of complying with emission stand-

ards that had not yet been formulated.”). The con-

trast between what EPA would have §7412(n)(1)(A)

say and the actual language of that provision, how-

ever, is striking.

Section 7412(n)(1)(A) calls for EPA to prepare “a

study” (“Utility Study”) identifying those EGU emis-

sions that pose a “hazard[] to public health” after

compliance with other EGU CAA control programs,

and then to evaluate alternative control strategies

for only those EGU HAP emissions that “may war-

rant regulation.” That Utility Study, and only that

Utility Study, was identified by Congress for consid-

eration by EPA in making an “appropriate and nec-

essary” decision under §7412(n)(1)(A). Under the

terms of the statute, the Utility Study addresses fac-

tors irrelevant to §7412(c) listing (e.g., alternative

strategies to control emissions posing health haz-

ards) and ignores two of the three factors relevant to

listing (i.e., HAP tonnages and HAP “environmental!”

threats). In other words, there is a fundamental dis-

connect between the subject matter of the Utility

Study and the criteria for listing. But there is a di-

rect connection between the Utility Study and

whether and how regulation of those EGU emissions

posing remaining hazards to public health might be

regulated “under this section” if “appropriate and

necessary” (e.g., identification of alternative control

strategies for HAP emissions where further reduc-

tions may be “warrant[ed]”).

Furthermore, under EPA's construction of

§7412(n)(1)(A), if the Utility Study had not identified

any EGU HAP emissions that posed a health hazard,

EPA could still find that listing is “appropriate”

based on an “environmental!” risk, and that simple

finding would satisfy §7412(n)(1)(A). Following list-

ing, EPA could promulgate §7412(d) standards regu-

lating all EGU HAP emissions—even emissions that

pose no residual public health risk—and could prom-

ulgate these standards without any evaluation of

whether “such regulation” was “appropriate and nec-

essary.” EPA Br. 30. That result is not consistent

with any reasonable interpretation of the language of

§7412(n)(1)(A).

In §7412(m)(1)(A), Congress did not—as EPA

claims—“implicitly authorize[] EPA to determine the

‘appropriate[ness]’ of such listing.” Id. at 23 (empha-

sis added). Instead, Congress required EPA to “regu-

late ... under ... section [74127 HAP emissions from

EGUs that pose residual public health “hazards,” but

only “if the Administrator finds such regulation is

appropriate and necessary after considering the

[study] results.” 42 U.S.C. §7412(n)(1)(A) (emphases

added). Section 7412(n)(1)(A) does not mention list-

ing because listing is only a precondition to regula-

tion under one subsection of §7412: §7412(d), the

subsection under which EPA chose to regulate EGUs

in this case. Only after EPA determined what those

standards would require could EPA make the “ap-

propriate and necessary” finding called for in

§7412(n)(1)(A), as written by Congress: whether or

not “such [§7412] regulation [of EGU emissions] is

appropriate and necessary.” Jd. (emphasis added).

At the time of the 1990 Amendments, EGU HAP

emissions had been extensively controlled under oth-

er CAA programs and were targeted for substantial

further reductions under the 1990 Amendments. See

UARG Opening Br. 9-11. By contrast, the §7412(d)

regulatory program was established to bring about

expeditious regulation of non-EGU source categories

that had avoided regulation under the pre-1990

HAPs emission standards program. Congress made

costs (and a whole host of other factors) irrelevant to

the §7412(c) listing decision, which must be made as

a prerequisite to initiating §7412(d) standard setting.

As enacted by Congress in 1990, only two factors

are relevant to listing under §7412(c): whether ton-

nage thresholds are exceeded (for major sources) and

whether emissions pose a “health or environmenta]”

threat (for area sources). In construing EPA’s

§7412(n)(1)(A) “appropriate and necessary” responsi-

bilities to be fully discharged once EGUs are listed

under §7412(c), see, e.g., EPA Br. 26, EPA gives no

content to §7412(n)(1)(A)’s direction to EPA to de-

termine whether “such regulation” under this section

is “appropriate and necessary.” Because §7412(c)

listing precedes any regulation of HAP emissions, it

cannot discharge EPA’s obligation to engage the

question whether or not standards under §7412(d)

(or any other subsection of §7412 under which the

Administrator may choose to regulate) are “appro-

priate and necessary.”

In sum, “appropriate and necessary” is not a find-

ing focused on §7412(c) “listing” It is a finding that

must follow the identification of “hazards to public

health” in the Utility Study and the determination of

how emissions posing a hazard should be regulated

“under” §7412. Only after EPA determines the re-

ductions in EGU emissions required by that “regula-

tion” would EPA have the information that it must

have to discharge its §7412(n)(1)(A) obligation to de-

termine whether “such regulation” is “appropriate

and necessary.” For these reasons, the “appropriate

and necessary” finding is an independent regulatory

standard that authorizes, limits, or precludes regula-

tion of EGU emissions under §7412. A broad range

of factors—including costs—are relevant to that kind

of a regulatory judgment.

II. Section 7412(n)(1)(A) Authorizes “Resid-

ual Risk” Regulation Only If “Such Regu-

lation” Is “Appropriate and Necessary.”

On its face, §7412(m)(1)(A) is a “residual risk”

regulatory provision. It focuses exclusively on regu-

lation of “hazards to public health” from EGU HAP

emissions that are “reasonably anticipated to occur

... after imposition of ... requirements” of the Act,

and requires EPA to determine whether further reg-

ulation of EGU HAP emissions that pose public

health hazards is “appropriate and necessary.” 42

U.S.C. §7412(n)(1)(A). In this context, “appropriate

and necessary” requires EPA to make a risk man-

agement decision regarding whether and, if so, the

degree to which health risks need to be reduced.

This is a policy judgment to which cost is relevant.

See UARG Opening Br. 26.!

In the MATS rulemaking, EPA promulgated

three different §7412(d) standards that have signifi-

cant cost consequence for EGUs: (i) standards for

mercury emissions, (ii) standards for emissions of

“non-mercury metals,” and (iii) standards for “acid

gases.” The relevance of cost to determining whether

' For these reasons, State Respondents’ argument that

§7412(m)(1)(A) does not call for a residual risk determination

“because no such [§7412] standards have ever been in place” for

EGUs, State Resp’ts’ Br. 25, profoundly misses the point.

“such regulation” under §7412 is “appropriate and

necessary” is illustrated by the consequences of reg-

ulation under each of these §7412(d) standards.

In the case of mercury, the §7412(d) standard will

cost approximately $3 billion dollars annually, Amici

Curiae Brief of the Chamber of Commerce of the

United States of America, et al. in Support of Peti-

tioners (‘Chamber Br.”) 22, and is claimed by EPA to

reduce developmental health risks across the country

posed by current and past exposures. Had EPA con-

sidered costs, it is unclear whether the Agency would

have been able to explain why regulation is “appro-

priate and necessary” in light of the projected quan-

titative and qualitative health benefits. See Amicus

Curiae Br. of Cato Institute in Supp. of Pet’rs. But

there is no lack of clarity for the other two §7412(d)

standards.

In the case of non-mercury HAP metals, only a

small subset of EGUs were projected by EPA to re-

sult in public health risks slightly exceeding EPA’s

one-in-one million de minimis risk threshold, and

EPA projected no risk for the remaining EGUs sub-

ject to the standard. UARG Opening Br. 13. These

are risk levels that EPA has determined protect

“public health” with an “ample margin of safety” in

§7412(f) “residual risk” rulemakings. Id. at 8; Natu-

ral Res. Def. Council v. EPA, 529 F.3d 1077, 1081-83

(D.C. Cir. 2008). By comparison to these insignifi-

cant health risks, the §7412(d) non-mercury metal

standards impose control costs of approximately $1

billion annually on all EGUs that emit non-mercury

metals. Chamber Br. 22-23.

In the case of acid gases, EPA’s standards do not

address any public health hazard, but only an as-

serted “environmenta!” threat and will impose annu-

al costs that are almost two times the mercury costs.

UARG Opening Br. 19. This $5 billion annual ex-

penditure will result in approximately a 40,000 ton

reduction in hydrogen chloride (and lesser amounts

of other) acid gas emissions, UARG Pet. App. 442a,

all for no health benefit. By shifting the focus of the

“appropriate and necessary” determination from

“regulation” under §7412 to “listing” under §7412(c),

EPA avoided addressing the statutory question: Is

“such regulation” “appropriate and necessary” to ad-

dress residual public health risk.

EPA argues that it is “irrelevant” whether or not

§7412(n)(1)(A) addresses regulation of residual risk,

asserting that “[t]he fact that a particular CAA pro-

vision” like §7412(n)(1)(A) “requires EPA to take ac-

count of existing regulatory requirements when de-

ciding whether to impose further regulation” simply

has “no bearing” on whether EPA should have “con-

sider[ed] costs in making” its finding to list. EPA Br.

51, 52. That argument fails for the reasons dis-

cussed above. Section 7412(n)(1)(A) asks whether or

not “regulation” is “appropriate and necessary” in re-

sponse to a health hazard, not “listing.”

More fundamentally, §7412(f)(2)(B) confirms

Congress's general approach to regulation of residual

risk under §7412. Section 7412(f) is a residual risk

provision because its focus is on whether or not to

reduce “public health” or “environmental” risks posed

by emissions that remain after implementation of

control requirements under §7412(d). In the Sep-

tember 1989 Federal Register notice referenced by

Congress in §7412(f)(2)(B), EPA affirmed that, in de-

termining whether and how to regulate any remain-

ing health risk under the “ample margin of safety

standard,” EPA would take into account all “relevant

factors including costs and economic impacts, techno-

logical feasibility, and other factors relevant to each

particular decision.” 54 Fed. Reg. 38,044, 38,045

(Sept. 14, 1989) (emphasis added). As a result, even

if Natural Resources Defense Council v. EPA, 824

F.2d 1146 (D.C. Cir. 1987), only held that EPA had

“discretion” to consider costs in establishing an “am-

ple margin of safety,” EPA Br. 52, EPA exercised its

Chevron Step Two discretion to give “ample margin

of safety” that interpretation after that decision, and

Congress adopted that interpretation in the CAA.?

Congress included the §7412(n) residual risk pro-

vision in the 1990 Amendments because EGUs were

already extensively controlled, and those controls

would result in significant reductions in EGU HAPs.

In the case of acid gases, for example, other CAA

programs have resulted in millions of tons of reduc-

tion in emissions, at a fraction of the cost of the

thousands of tons of acid gas emissions reduction

mandated by the MATS Rule.

To conclude that Congress intended to give EPA

discretion to negate a carefully crafted, market-based

“acid deposition” program established in the 1990

Amendments by allowing EPA to impose command

and control regulation on EGU acid gases under

§7412 is a bridge too far. Congress’s focus on only

residual public health hazards in §7412(n)(1)(A), not

Cf. Natural Res. Def. Council, 5629 F.3d at 1082 (The word

‘interpretation’ [as used in §7412(f)(2)(B)] indicates that the

savings clause is not limited to EPA’s benzene-specific determi-

nations, but applies broadly to the agency's construction of the

Clean Air Act” as set forth in the benzene standard. (emphasis

added)).

both health and environment threats as provided in

§7412(f) and (m), took acid gases off the §7412 “regu-

latory table” for EGUs, leaving a mandate to regu-

late only as “appropriate and necessary” to reduce

remaining health risks. This broad subjective policy

judgment requires consideration of all regulatory

consequences, including cost.

CONCLUSION

The judgment below should be reversed. Further,

because of regulatory extensions granted by certain

states, approximately 130 EGUs still face a future

compliance date for the MATS Rule, by which they

must shut down or install costly control technology.

In light of these impending deadlines and the lead-

time needed to adjust compliance plans accordingly,

UARG requests that, if the rule is remanded for fur-

ther rulemaking, the Court direct that all future

compliance dates be suspended pending any such

additional rulemaking, and order such further relief

as is necessary based on this Court’s decision.

March 18, 2015

Respectfully submitted,

F. WILLIAM BROWNELL

(Counsel of Record)

HENRY V. NICKEL

LEE B. ZEUGIN

ELIZABETH L. HORNER

HUNTON & WILLIAMS LLP

2200 PENNSYLVANIA AVENUE, NW

WASHINGTON, D.C. 20037

(202) 955-1500

bbrownell@hunton.com

Counsel for Petitioner

Utility Air Regulatory Group

RESPONDENTS IN SUPPORT OF

PETITIONER JOINING IN THIS BRIEF

LESLIE SUE RITTS

Ritts LAW GRouP, PLLC

THE CARRIAGE HOUSE

620 FORT WILLIAMS

PARKWAY

ALEXANDRIA, VA 22304

(703) 823-2292

LSRitts@

rittslawgroup.com

Counsel for American

Public Power Associa-

tion

BART E. CASSIDY

KATHERINE L. VACCARO

MANKO, GOLD, KATCHER

& Fox, LLP

401 Crry AVENUE

SUITE 901

DENNIS LANE

STINSON LEONARD STREET

LLP

1775 PENNSYLVANIA

AVENUE, NW, SUITE 800

WASHINGTON, D.C. 20006

(202) 785-9100

dennis. lane@

stinsonleonard.com

PARTHENIA B. EVANS

STINSON LEONARD STREET

LLP

1201 WALNUT STREET

SUITE 2900

KANSAS CITY, MO 64106

(816) 842-8600

parthy.evans@

stinsonleonard.com

BALA CYNWYD, PA

19004

(484) 430-5700

bcassidy@

mankogold.com

Counsel for ARIPPA

MICHAEL NASI

JACKSON WALKER LLP

100 CONGRESS AVENUE

SUITE 1100

AUSTIN, TX 78701

(512) 236-2000

mnasi@jw.com

Counsel for Gulf Coast

Lignite Coalition

Counsel for Kansas City

Board of Public Utilities

ERIC GROTEN

VINSON & ELKINS LLP

2801 VIA FORTUNA

SUITE 100

AUSTIN, TX 78746-7568

(512) 542-8709

egroten@velaw.com

Counsel for White Stallion

Energy Center, LLC

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