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

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

3n The

Supreme Court of the Gnited

STATE OF MICHIGAN, et al.,

Petitioners,

ENVIRONMENTAL PROTECTION AGENCY, et ail.,

Respondents.

UTILITY AIR REGULATORY GROUP,

Petitioner,

Vv.

ENVIRONMENTAL PROTECTION AGENCY, et ai.,

Respondents.

NATIONAL MINING ASSOCIATION,

Petitioner,

ENVIRONMENTAL PROTECTION AGENCY, et ai.,

Respondents.

On Writs Of Certiorari To The United States Court

Of Appeals For The District Of Columbia Circuit

BRIEF OF THE INSTITUTE FOR POLICY

INTEGRITY AT NEW YORK UNIVERSITY

SCHOOL OF LAW AS AMICUS CURIAE

IN SUPPORT OF RESPONDENTS

RICHARD L. REVESz*

DENISE A. GRAB

JAYNI FOLEY HEIN

MICHAEL A. LIVERMORE

JASON A. SCHWARTZ

INSTITUTE FOR POLICY INTEGRITY

New YORK UNIVERSITY

SCHOOL OF LAW

139 MacDougal St., 3rd Floor

New York, NY 10012

Tel: (212) 998-6185

nichard.revesz@nyu.edu

*Counsel of Record

——e————————— See

QUESTION PRESENTED

Whether the Environmental Protection Agency

unreasonably refused to consider costs in

determining whether it is appropriate to regulate

hazardous air pollutants emitted by electric utilities.

TABLE OF CONTENTS

Interest of the Amicus Camiae..........0-.ccccscsssesccscssessssscenees l

Ir ee I ic siiccnicticiniecnsctenteniesionncomtnciatinntsincs 3

IE sociiccaionirhceciiseniataiasetriamiiaidiaiamiipiiaiiaiiaiaiagital 6

L The Mercury and Air Toxics Standards Generate

Substantial Indirect and Unquantified Benefits That

Must Be Considered as Part of the Rule’s Overall

I ac iaeneea tenia cacentecnnsyenanbidanteduasiedeliaastiiinsiirin 6

A. Regulatory Cost-Benefit Analysis Must

Include Indirect Benefits..................-......-....-.- 7

1. Executive Orders and Best Practices for

Federal Agencies Strongly Support the

Inclusion of Indirect Effects ........................ 7

2. Courts Require Agencies to Account for the

Indirect Consequences of Regulation.......... 4

3. There Is No Reason Agencies Should Treat

Indirect Benefits Differently than Indirect

SESE ES EE ei yA PALA veer we ean ne Fata ES 11

B. Under Executive Orders and Best Practices

for Cost-Benefit Analysis, Unquantified

Benefits Must Also Be Taken into Account.. 12

[LEPA Properly Assessed the Benefits Resulting From

the Particulate Matter Reductions Attributable to the

Sox.n:tthsssaetaastiiianahiigsiedcnshipsiamamiabhiatinedeeetidaaian 15

A. The Benefits That EPA Attributes to the Rule

Flow from That Rule, Not from Earlier

Rulemakings, and Also Are Not Attributed to

iy TD intiiecsciciiiesnianinetcumncemnsen 15

B. EPA Properly Assessed Benefits from

Particulate Matter Reductions Beyond the

National Ambient Air Quality Standards.... 17

Ill. The Office of Information and Regulatory

Affairs’s Positive Review of the Rule Indicates

That EPA Considered Costs and Benefits in a

Reasonable Manner

IV. EPA's Decision Not to Base the Section

112(n)(1)(A) Listing on Cost Considerations

Warrants Particular Deference........................ 24

A. This Court Consistently Affords Agencies

Discretion on Whether to Consider Costs

When the Statutory Text Is Silent or

ED scnitiitentatintetenisacdecidintainiiniaehdsinsiaal 25

B. EPA’s Approach to Listing Categories Is on

Especially Strong Footing Because Section

112(d) Sets Standards According to a

Deliberate Balancing of Costs and Air Quality

Rs ccacinsicesnianiedentiadeiaaguateiadinia abba cadiitniid dda cela ee 26

C. For Over Twenty Years, Under

Administrations of Both Political Parties,

EPA Has Consistently Interpreted Category-

Listing Decisions Not to Require Cost

pS IIT NSB INS SITS EER ETE ARE EE wes 29

D. Premature Cost Assessment Could Be

Impossible or Misleading, Because Costs

Depend on Regulatory Choices That EPA Can

Make Only After an Initial Listing Decision 33

TABLE OF AUTHORITIES

Cases

Alaska Dep't of Envtl. Conservation v. EPA, 540 U.S.

BE Ge icscsisscscnchnachiaeitiasenentiaacanaeniusiein nisteuetsamecaied 30

Am. Dental Ass’n v. Martin, 984 F.2d 823 (7th Cir.

RIS SR ey ee ee ae 10

Am. Textile Mfrs. Inst., Inc. v. Donovan, 452 U.S. 490

(REA RANGERS aed Ue eeie enice ereneans Sree ctv OO 25

Am. Trucking Ass’ns v. EPA, 175 F.3d 1027 (D.C.

SEIN STII iss ccdica cedceicilaasiantcaiancanaaciactincanaiiianimammmanacnat cca 10

Chevron U.S.A. Inc. v. Natural Res. - Council,

Ge i Ce icitiatacisisinicesetersntninniiaubbdiuedinns 24

Coal. for Responsible Regulation, Inc. v. EPA, 684

A Se i: RI i euleionnanines 33

Competitive Enterprise Inst. v. Nat? Highway Traffic

Safety Admin., 956 F.2d 321 (D.C. Cir. 1992)...... 10

Corrosion Proof Fittings v. EPA, 947 F.2d 1201 (5th

EEE, TI saci sdcesnnanenbeisbendeesitieadesenniasshiemibeasinidsaanbincete 10

Ctr. for Biological Diversity v. Natl Highway Traffic

Safety Admin., 538 F.3d 1172 (9th Cir. 2008)...... 12

Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208

RES S EEERENEE irc lel atari ie nerve 25, 30

EPA v. EME Homer City Generation, L.P., 134 S. Ct.

TIT IIII i cosdcsnniaiduheuddeatuns enniianibameniasasmadenmiebaass 25

Nat'l Lime Ass’n v. EPA, 627 F.2d 416 (D.C. Cir.

SIT ccits aicieencconenpichiessaoniaheibshuiiioaiieat nase anintedgridieieunioetadaastansis 27

Util. Air Regulatory Group v. EPA, 134 S.Ct. 2427

Tints cca cid nubiiibintaciesbamesiansabedalianiasinmmesdiammaanmens 33

White Stallion Energy Ctr., LLC v. EPA, 748 F.3d

nD nO M,N. leleteainetienienael 27

Whitman v. Am. Trucking Ass’ns, Inc., 531 U.S. 457

SETI I iciserctinaiiecssiaestepesehipetbicscesineihiainehnetualnelbsieneaisnnasaaliaoéeiies 10, 17, 26

Statutes

Oe TG: BRI a aseiiicscecenchcesnseanctaonnscdssennscs 27

TE OB wiv disvivneievecsicetianntedacerscivesnces 27

Ee EE acccrscsterssiissesdcinceisnconstanincdvacecousin 17

a, Se Pe ED Goittesicinsweactncennneracsaoanseneatios 27, 32

OE, Fe Pe I veisiicicenecsestinsvcsanininiensnsancene 32

TE, Be ID mescnenssvexconisisainiccesstsssnivlenoeets 32

SE, Oe Pe Ricci ccsinccnncesetscocscecncupeconioinsemanaine 34

es ae i asicndiccs scrceennnaendmiebsencdouetinsmsuaees 24

ks Be EE bisriesinisesscscermtsnstsiiveses 27, 36, 37

BO TET, © PURI onic nciesccsnsassesssesasoereneacens 27, 28

SE, ee PT LIE iain ncccedccicnccsatecsvensuvsseisce 24, 34

es Oe FP thataatcievnicscernsontia abana sae ieanameeaine al 27

Te BF ice innasapcannaiinsnneonsesnacciensis 32

OE ON ioc csexnsincvenseserssansabdenixmnannes 32

Be Re, FT iiss Si cek sccecescienncsiscresaccecsinn 27

BE Ras Oe PRED se wnncsca ses siadicendccesincisicnssasneaes 27

Legislative History

BE. Rew. INO. 1012-4BD (1 GBO)........ccccccceesscccesscsescessecessss 29

S. Rep. No. 101-228 (1989).......cccccccccccseeseeseees 9, 27, 29

Regulatory History

44 Fed. Reg. 49,222 (Aug. 21, 1979)..................ccee00 32

52 Fed. Reg. 25,399 (July 7, 1987) ..............ccccceeseeeeees 8

55 Fed. Reg. 8292 (Mar. 7, 1990)...............ccccssscceseees 14

56 Fed. Reg. 24,468 (May 30, 1991) ................0... 8

57 Fed. Reg. 31,576 (July 16, 1992) ......................... 30

63 Fed. Reg. 18.504 (Apr. 15, 1998) ....................0.0... 8

64 Fed. Reg. 52,828 (Sept. 30, 1999) ....................08. 14

65 Fed. Reg. 79,825 (Dec. 20, 2000) ............. 31, 35, 36

69 Fed. Reg. 38,958 (June 29, 2004) ........0....... ee. 14

69 Fed. Reg. 4652 (Jan. 30, 2004) ......0.2...00.0. cece. 36

70 Fed. Reg. 15,994 (Mar. 29, 2005)..................0002... 31

73 Fed. Raw. 8438-(Peb. BG, BOOT) .......<isccccccccsccccccosess: 4

74 Fed. Reg. 51,950 (Oct. 8, 2009)...................cccseeee: 32

74 Fed. Reg. 66,496 (Dec. 15, 2009) ............0000000000... 33

75 Fed. Reg. 25,324 (May 7, 2010) .....-..ceccecceceseeesese- 33

75 Fed. Reg. 51,570 (Aug. 20, 2010)...............00.0000008.. i)

77 Fed. Reg. 9304 (Feb. 16, 2012)... ............ 18, 28, 34

78 Fed. Reg. 3086 (Jan. 15, 2013) ..........000......... ee 18

Executive Orders

Exec. Order No. 12,291, 46 Fed. Reg. 13,193 (Feb. 17,

IIIS i isiticiecac anand onadenameea anbimmmeedenpidndpansemiemuinasia 20

Exec. Order No. 12,866, 58 Fed. Reg. 51,735 (Oct. 4,

SII cds ious ieeanisgsesebdeaeinnnelaan aimigumeieeunaudinnnaia passim

Exec. Order No. 13,563, 76 Fed. Reg. 3821 (Jan. 21,

TIE Ti icestbciaitebbuhiceanhaaeaubnlsiniveenisetetssnciembabennnanteds 7, 13, 20

Other Authorities

Cass R. Sunstein, Simpler: The Future of

I no cacsdicetinbinamnabbabadinesice 22

Cass R. Sunstein, The Office of Information and

Regulatory Affairs: Myths and Realities, 126 Harv.

in ER I censsctecciintonguanssaseniensnaipeiesiaannes 21, 22

Cass R. Sunstein, The Real World of Cost-Benefit

Analysis: Thirty Six Questions (and Almost as

Many Answers), 114 Colum. L. Rev. 167 (2014) .. 12

Catherine M. Sharkey, State Farm “With Teeth’:

Heightened Judicial Review in the Absence of

Executive Oversight, 89 N.Y.U. L. Rev. 1589, 1592

cca caain a tistescnins eeceai asus aceatudiumpiGaseeauaicndaninaanoieas 23

Christopher C. DeMuth & Douglas H. Ginsburg,

Rationalism in Regulation, 108 Mich. L. Rev. 877

en nnn CII oo. con ccaiionndudmenntbcaeneninnecdons 12

Dallas Burtraw & Erin Mansur, The Effects of

Trading and Banking in the SO2 Allowance Market

(Resources for the Future, Discussion Paper 99-25,

1999), http://www.rff.org/documents/RFF-DP-99-

EPA, Guidelines for Preparing Economic Analyses

SETI sistssinsticiaiinenbcisia asinine pti eisabienninaiiminaidaaeaealas 8, 16, 21

EPA, Regulatory Impact Analysis for the Final

Mercury and Air Toxics Standards (2011)... passim

EPA, Regulatory Impact Analysis for the Final

Revisions to the National Ambient Air Quality

Standards for Particulate Matter (2012)........ 16, 18

EPA, Regulatory Impact Analysis for the Proposed

Carbon Pollution Guidelines for Existing Power

Plants and Emission Standards for Modified and

Reconstructed Power Plants (2014) .................0000- 17

EPA, Regulatory Impact Analysis for the Revised

Particulate Matter National Ambient Air Quality

I CED siinsiciitdininsdceathieancancininsahitintnsiomimadacen 19

John D. Graham et al., Managing the Regulatory

State: The Experience of the Bush Administration,

33 Fordham Urb. L.J. 953 (2006) ......................... 20

Kenneth J. Arrow et al., Benefit-Cost Analysis in

Environmental, Health, and Safety Regulation: A

Statement of Principles (1996) .................eecseeeeeeees 14

Letter from Cass R. Sunstein, Adm’r, Office of Info.

& Regulatory Affairs, to Lisa P. Jackson, Adm’r,

Envtl. Prot. Agency (Sept. 2, 2011), available at

http://www.reginfo.gov/public/return/EPA_Return_

Be I Bil sceiiticentcicthnacnisecstncentnsonecncnsinpaniains 21

Letter from Susan E. Dudley, Adm'r, Office of Info. &

Regulatory Affairs to the Hon. Marcus C. Peacock.

Deputy Adm’r, Envtl. Prot. Agency (July 3, 2008),

available at

http://www.reginfo.gov/public/return/Epa_Return_]

EO eaiiidisdaciicitnn a Dibeci ciate eres 21

Michael A. Livermore & Jason A. Schwartz, Analysis

to Inform Public Discourse on Jobs and Regulation,

in Does Regulation Kill Jobs? 239 (Cary Coglianese

I I SI a iernicictbteincdaiianatataniandaa cen tae eee ae 11

Vill

Michael A. Livermore & Richard L. Revesz,

Regulatory Review, Capture, and Agency Inaction,

eT, Ss Ie Ci cticecdnnesccicencnnneviesssinicsites 22

Michael A. Livermore & Richard L. Revesz,

Rethinking Health-Based Environmental

Standards, 89 N.Y.U. L. Rev. 1184 (2014).....17, 19

Nina A. Mendelson & Jonathan B. Wiener,

Responding To Agency Avoidance of OIRA, 37

Harv. J.L. & Pub. Pol’y 447 (2014) ....................... 23

Office of Info. & Regulatory Affairs, O[RA Conclusion

of EO 12866 Regulatory Review, RIN 2060-AP52

(Dec. 16, 2011), available at

http://www.reginfo. gov/public/do/eoDetails?rrid=12

Uri cssesecuitssidisoaienisempistindeatsssienadasbiigeisiamedadiapiamaaeiiseniiinaiinameiee 21

Office of Mgmt. & Budget, Circular A-4 (2003) passim

Office of Mgmt. & Budget, Meeting Record (Nov. 29,

2011), available at

http://www.whitehouse.gov/omb/2060_meeting 112

IIIT sescnslassacen i cacicnatcanpanetacediseadaniagisaaasiabnesiicandiciaraiainases 23

Office of Mgmt. & Budget, Meeting Record (Nov. 7,

2011), available at

http://www.whitehouse.gov/omb/2060_meeting_110

SII issihiardiscilctesctinnstimnsdendongaiapecamiessniccgh cielea lobdaceutiinctnamuaieaablons 23

Richard L. Revesz & Michael A. Livermore, Retaking

Rationality: How Cost-Benefit Analysis Can Better

Protect the Environment and Our Health (2008). 20

Richard L. Revesz, Quantifying Environmental

Benefits, 102 Cal. L. Rev. 1423 (2014).................. 14

Samuel J. Rascoff & Richard L. Revesz, The Biases of

Risk Tradeoff Analysis: Towards Parity in

Environmental and Health-and-Safety Regulation,

, ae Be US lll ee 10, 12

Stephen Breyer, Breaking the Vicious Circle: Toward

Effective Risk Regulation (1993)........................0- 23

Summary of Interagency Working Comments on

Draft Language under EO 12866 Interagency

Review, Doc. No. EPA-HQ-OAR-2009-0234-2984

a RE iy PP erat AT ee evel og ade ss 23

INTEREST OF THE AMICUS CURIAE!

The Institute for Policy Integrity at New York

University School of Law? (“Policy Integrity”) is

dedicated to improving the quality of government

decisionmaking through advocacy and scholarship in

administrative law, economics, and public policy.

Policy Integrity is a collaborative effort of faculty; a

full-time staff of attorneys, economists, and policy

experts; and law students.°

Policy Integrity has produced’ extensive

scholarship on Clean Air Act regulation and

regulatory impact analysis. An area of special

concern for Policy Integrity is the promulgation of

federal environmental regulations justified by cost-

benefit analysis. Policy Integrity has _ specific

expertise in the proper scope and estimation of costs

and benefits, and the application of economic

analysis to regulatory decisionmaking. The question

presented directly bears on these issues. Therefore.

Policy Integrity has a significant interest in the

outcome of this case—particularly in supporting the

proper application of cost-benefit analysis in

rulemakings, and in protecting the Environmental

' The parties have submitted letters to the Clerk granting

blanket consent to the filing of amicus briefs. No counsel for any

party authored this brief in whole or in part, and no person or

entity other than amicus and its counsel made a monetarv

contribution intended to fund the preparation or submission of

this brief.

2 No part of this brief purports to present New York University

School of Law's views, if any.

3 Policy Integrity runs New York University School of Law's

Regulatory Policy Clinic, and thanks four clinic students for

assisting with the brief: Daniel Cheung, Cerin Lindgrensavage,

Hilary Nakasone, and Alec Webley.

Protection Agency’s reasonable interpretations of the

Clean Air Act’s requirements.

SUMMARY OF THE ARGUMENT

The Mercury and Air Toxics Standards (the Rule)

is massively cost-benefit justified, delivering tens of

billions of dollars in net benefits each year, including

thousands of lives saved annually plus other

significant health and environmental improvements.

Petitioners and their amici falsely portray EPA and

the Rule as irrationally and recklessly bent on

decimating the electricity sector for the sake of

miniscule benefits and without any attention to

regulatory costs. That portrayal is false for at least

three reasons. First, the Rule’s net benefits are real

and extremely substantial. Second, the Rule and its

impact analysis were thoroughly vetted by the

executive branch regulatory review process. Third,

EPA did weigh the Rule’s costs when calibrating

regulatory stringency under Section 112(d) of the

Clean Air Act; assessing costs any earlier in the

regulatory process, such as upon listing power plants

under Section 112(n)(1)(A), both is not statutorily

required and could be grossly misleading. The Rule

reflects EPA’s rational consideration of costs and

benefits during the appropriate phase of the

rulemaking process, consistent with statutory

design, federal executive orders, case law,

longstanding regulatory precedents, and analytical

best practices.

Reducing hazardous emissions from coal- and oil-

fired power plants necessarily also reduces

particulate matter—a complex mixture of both

hazardous pollutants listed under Section 112 and

other dangerous chemicals. Congress anticipated the

reduction of co-pollutants under Section 112 and

contemplated that EPA would assess such indirect

benefits when setting emissions standards. EPA has

consistently done exactly that, weighing indirect

benefits in air pollution rules issued by presidential

administrations of both parties over the last several

decades. In fact, under executive orders, in any

regulatory impact analysis, agencies must assess

indirect benefits with the same degree of attention

given to all other significant costs and benefits. Even

Petitioners would have EPA count indirect costs that

support their arguments; yet there is no legal,

economic, or logical reason to treat indirect benefits

any differently than other significant regulatory

effects. When all direct and indirect effects are

quantified, this Rule’s monetized benefits range from

$37-$90 billion per year, substantially outweighing

the $9.7 billion in costs. These impressive monetized

benefits result from this Rule alone, and are not, as

Petitioners and amici imply, simply artifacts of past

air quality standards. EPA’s quantification of this

Rule’s unique benefits stands solidly on a foundation

of best practices for epidemiology and economics.

Beyond the billions in monetized benefits, federal

guidelines and historical practices also support

EPA’s consideration of all significant unquantified

benefits, such as mercury’s neurologic, genotoxic,

immunotoxic, and cardiovascular effects. The Rule’s

benefits are both real and considerable.

The Office of Information and Regulatory Affairs

(OIRA)’s approval of the Rule confirms that EPA

considered costs and benefits in a _ reasonable

manner. Executive branch agencies, including EPA,

must submit all significant rules to OIRA along with

regulatory impact analyses. OIRA reviewed and

approved this Rule and its regulatory impact

analysis, including the treatment of the Rule's

substantial indirect and unquantified benefits. This

)

positive executive branch review undermines

Petitioners claims that the Rule’s costs exceed its

benefits, and instead demonstrates that EPA

followed standard best practices in its economic

analysis.

Finally, there is no debate that EPA did, in fact,

consider costs when setting the Rule’s stringency

under Section 112(d); the only question is whether

EPA was also required to consider costs much

earlier, when deciding whether it is “appropriate and

necessary” to list power plants as a category under

Section 112(n)(1)(A). EPA’s choice not to base its

listing decision on costs warrants deference due to

statutory silence and ambiguity alone, but in this

case, the agency deserves additional deference. First,

this Court should grant EPA particular deference on

interpreting the criteria for listing decisions, because

Congress explicitly balanced cost considerations

against air quality goals when it prescribed the

criteria for setting regulatory stringency under

Section 112(d). Second, for at least two decades, EPA

has consistently interpreted category-listing

decisions under the Clean Air Act as not requiring

the consideration of costs. And third, many cost-

determinative choices between regulatory

alternatives could not be made at the time of EPA's

“appropriate and necessary’ finding, since the

authority for such decisions is found outside Section

112(n)(1)(A). Costs may decrease or increase

significantly as EPA chooses the regulation’s scope.

stringency, design, flexibility, timeline, and approach

toward different industry segments. Prematurely

assessing costs at the listing phase, therefore, could

be deeply misleading or even impossible.

ARGUMENT

lL. THE MERCURY AND AIR TOXICS STANDARDS

GENERATE SUBSTANTIAL INDIRECT AND

UNQUANTIFIED BENEFITS THAT MUST

BE CONSIDERED AS PART OF THE

RULE’S OVERALL IMPACT

The Rule’s monetized benefits of $37-—$90 billion

per year in health protections, lives saved, and

environmental improvements outweigh, by as much

as nine to one, its $9.6 billion in costs. EPA,

Regulatory Impact Analysis for the Final Mercury

and Air Toxics Standards ES-2 (2011) [hereinafter

“MATS _~ RIA”). Additional and _— substantial

unquantified health and environmental gains further

bolster the Rule’s strong economic justification. Yet

Petitioners and their amici argue that EPA’s cost-

benefit analysis should ignore the unquantified

benefits of reducing hazardous air pollutants, as well

as the Rule’s indirect benefits from reductions of co-

pollutants such as particulate matter and sulfur

dioxide.* E.g., Chamber of Commerce Amicus Br. at

17-18; State Petrs Br. at 47-48. While EPA

reasonably chose not to base its “appropriate and

necessary’ determination on cost-benefit analysis,

see Section IV, infra, the Agency acted consistently

with federal guidelines, case law, and best practices

by assessing all significant economic impacts—both

‘ Particulate matter is a complex mixture of diverse

components, including both hazardous air pollutants listed

under Section 112(b) and other harmful chemicals. At least

some of the billions of dollars’ worth of particulate matter-

related benefits, then, are directly attributable to hazardous

pollutant reductions. See Indust. Resp’ts Br. at 35; Non-Gov't

Resp'ts Br. at 13. Regardless, all the Rule’s direct and indirect

benefits deserve consideration.

direct and indirect, quantified and unquantified—in

its regulatory impact analysis.

A. Regulatory Cost-Benefit Analysis Must

Include Indirect Benefits

Il. Executive orders and best practices for

federal agencies strongly support the

inclusion of indirect effects

To accurately evaluate the costs and benefits of

significant rules, as required by executive orders,

federal agencies must consider not only direct effects,

but also all important indirect benefits (sometimes

called ancillary benefits or co-benefits) as well as

indirect costs (sometimes called countervailing

risks).

Federal agencies are required to take indirect

benefits into account. The executive orders governing

regulatory review call for agencies to accurately

measure the “actual results of regulatory

requirements” and explicitly require analysis of both

direct and indirect costs and benefits. Exec. Order No.

13,563 § 1, 76 Fed. Reg. 3821, 3821 (Jan. 21, 2011)

(affirming Exec. Order No. 12,866); accord. Exec.

Order No. 12,866 § 6(a)(3)(C), 58 Fed. Reg. 51,735,

51,741 (Oct. 4, 1993) (detailing the requirements for

cost-benefit analysis). The executive orders treat

indirect benefits in parity with indirect costs.

The Office of Management and Budget under

President George W Bush issued Circular A-4, to

“standardiz(e] the way benefits and costs of Federal

regulatory actions are measured.” Office of Mgmt. &

Budget, Circular A-4 at 1 (2003) [hereinafter

“Circular A-4”]. The Circular instructs agencies to

consider “any important” indirect benefits, which

includes any “favorable impact secondary to the

statutory purpose of the rulemaking,” and

recommends that agencies use the “same standards”

for assessing indirect and direct benefits. Jd. at 26.

EPA’s own cost-benefit guidelines, adopted after

extensive peer review, likewise instruct the agency to

assess “all identifiable costs and benefits,” including

both direct effects “as well as ancillary [indirect]

benefits and costs.” EPA, Guidelines for Preparing

Economic Analyses at 11-2 (2010). The assessment of

both direct and indirect effects is needed to “inform

decision making” and allow meaningful comparisons

between policy alternatives. Jd. at 7-1.

Moreover, EPA—under presidents of both parties

and across four decades—has consistently taken

indirect benefits into account when evaluating Clean

Air Act regulations. For example, when proposing to

develop New Source Performance Standards for

municipal waste combustors, EPA under President

Reagan explained that it intended to “consider the

full spectrum of the potential impacts of regulation,”

including “indirect benefits accruing from

concomitant reductions in other regulated

pollutants.” 52 Fed. Reg. 25,399, 25,406 (July 7,

1987). Similarly, in proposing performance standards

for landfill gases, EPA under President George H.W.

Bush justified the regulation partly on “the ancillary

benefit of reducing global loadings of methane.” 56

Fed. Reg. 24,468, 24,469 (May 30, 1991). EPA under

President Clinton analyzed the indirect benefits of

reducing co-pollutants like volatile organic

compounds, particulate matter, and carbon monoxide

from emissions standards addressing hazardous

pollutants from pulp and paper producers. 63 Fed.

Reg. 18,504, 18,585-86 (Apr. 15, 1998). In

promulgating a rule on mobile source air toxics, EPA

under President George W. Bush noted. “Although

ozone and PM2zs5 are considered criteria pollutants

rather than ‘air toxics,’ reductions in ozone and PM2s

are nevertheless important co-benefits of this

proposal.” 72 Fed. Reg. 8428, 8430 (Feb. 26, 2007).

Finally, EPA under President Obama considered the

indirect benefits from reducing carbon monoxide,

volatile organic compounds, and nitrogen oxides in

its analysis of regulating hazardous air pollutants

from combustion engines. 75 Fed. Reg. 51,570.

51,578 (Aug. 20, 2010).

Additionally, the legislative history of the 1990

Clean Air Act Amendments indicates that Congress

specifically contemplated that “[w]hen establishing

technology-based standards” to regulate hazardous

air pollutants under Section 112(d), EPA would

“consider the benefits which result from contro] of air

pollutants that are not listed but the emissions of

which are, nevertheless, reduced by _ control

technologies or practices necessary to meet the

prescribed limitation.” S. Rep. No. 101-228, at 172

(1989). Congress noted that these “other compounds,

although not listed [under Section 112], would be

precursors of ozone pollution,” and their “control,

even in attainment areas, may produce substantial

health and environmental benefits.” Jd. Congress

thus anticipated what would become EPA's standard

practice of considering indirect benefits. including

the substantial health gains from reducing co-

pollutants, when regulating under Section 112.

2. Courts require agencies to account for

the indirect consequences of regulation

When agencies choose or are required to justify

rules by a_ cost-benefit analysis, courts have

repeatedly instructed agencies to consider indirect

effects. See Samuel J. Rascoff & Richard L. Revesz,

The Biases of Risk Tradeoff Analysis: Towards Parity

in Environmental and Health-and-Safety Regulation,

69 U. Chi. L. Rev. 1763, 1772—80 (2002). And EPA

has specifically been required to consider indirect

effects when evaluating a rule under the Clean Air

Act. Am. Trucking Ass’ns v. EPA, 175 F.3d 1027,

1051-52 (D.C. Cir. 1999) (holding that EPA’s

consideration must include both the direct and

indirect effects of pollutants, rather than only “half

of a substance’s health effects”), rev'd on other

grounds sub nom. Whitman v. Am. Trucking Ass'ns,

Inc., 531 U.S. 457 (2001); see also Corrosion Proof

Fittings v. EPA, 947 F.2d 1201, 1225 (5th Cir. 1991)

(holding that EPA must consider the indirect safety

effects of substitute options for car brakes when

banning asbestos-based brakes under the Toxic

Substances Control Act).

Other agencies face similar requirements. A

National Highway Traffic Safety Administration

rule, for example, was struck down for failing to

consider whether benefits from more fuel-efficient

cars outweighed the potential increased safety risks

because smaller, more efficient cars might be less

protective in a crash. Competitive Enterprise Inst. v.

Nat! Highway Traffic Safety Admin., 956 F.2d 321,

326-27 (D.C. Cir. 1992); see also Am. Dental Ass'n v.

Martin, 984 F.2d 823, 826-27 (7th Cir. 1993)

(remanding in part an Occupational Safety and

Health Administration regulation for failure to

consider indirect costs).

3. There is no reason agencies should

treat indirect benefits differently than

indirect costs

Petitioners and their amici urge EPA to consider

all of the Rule’s potential direct and indirect costs,

such as less reliable electricity or job losses from

plant closures, e.g., Peabody Energy Amicus Br. at 3—

4, 17, yet simultaneously and illogically seek to

foreclose any consideration of the Rule’s significant

indirect benefits. Chamber of Commerce Amicus Br.

at 21-22. There are at least three fatal problems

with this argument. First, Petitioners and their

amici fail to recognize that EPA has already

accounted for indirect effects like job impacts and

electricity reliability. MATS RIA at 3-14, 6-1.

Moreover, their estimate of thousands of jobs lost

annually, Peabody Energy Amicus Br. at 7, is

inaccurate and misleading; EPA’s own analysis more

reasonably predicted minor and potentially positive

employment effects. MATS RIA at 6A-11. See

generally Michael A. Livermore & Jason A.

Schwartz, Analysis to Inform Public Discourse on

Jobs and Regulation, in Does Regulation Kill Jobs?

239 (Cary Coglianese et al. eds., 2013).

Second, Petitioners appear happy to count

indirect benefits when t’.ey suit their argument,

such as when Petitioners discuss the reductions of

hazardous air pollutants that result indirectly from

regulation of power plants under other Clean Air Act

provisions. Pet’r Util. Air Regulatory Grp. Br. at 4—5.

Though EPA's consistent approach to all indirect

effects may be inconvenient for Petitioners’

argument, it is well supported by principles of

rational decisionmaking and _ analytical best

practices.

Finally, no reason exists to include indirect costs

but exclude indirect benefits, since the two “are

simply mirror images of each other.” Rascoff &

Revesz, supra, at 1793. Agencies must treat costs

and benefits alike, and may not “put a thumb on the

scale by undervaluing the benefits and overvaluing

the costs of more stringent standards.” Ctr. for

Biological Diversity v. Natl Highway Traffic Safety

Admin., 538 F.3d 1172, 1198 (9th Cir. 2008). Under

the executive orders on regulatory analysis, Circular

A-4, and EPA’s own guidelines, indirect benefits

must be counted “equivalently” with other costs and

benefits, in order to “offer a full accounting” of a rule.

Cass R. Sunstein, The Real World of Cost-Benefit

Analysis: Thirty Six Questions (and Almost as Many

Answers), 114 Colum. L. Rev. 167, 190 (2014).

Moreover, there are “no legal, political, or

intellectual impediments to treating ancillary

benefits and countervailing risks equally in cost-

benefit analysis.” Christopher C. DeMuth & Douglas

H. Ginsburg, Rationalism in Regulation, 108 Mich.

L. Rev. 877, 888 (2010) (book review). Therefore,

EPA properly included indirect benefits in the Rule’s

regulatory impact analysis.

B. Under Executive Orders and Best

Practices for Cost-Benefit Analysis,

Unquantified Benefits Must Also Be

Taken into Account

Petitioners’ focus on just $4~-$6 million of the

$37—-$90 billion in annual, monetized benefits from

the Rule not only fails to recognize indirect benefits,

but also ignores the significant, unquantified

benefits that agencies must consider. EPA projected

that the Rule could result in “substantial”

unquantified health, environmental, and economic

benefits from the reduction of hazardous pollutants,°®

such as preventing neurologic, cardiovascular,

genotoxic. and immunologic damage to human

health, reproductive damage to wildlife, and negative

effects on commercial and recreational fishing yields

due to mercury exposure. See MATS RIA at ES-9 to

ES-13. EPA explained why data and methodological

limitations prevented quantification of these

important effects, eg., id. at 4-1; discussed

uncertainty, eg. id. at 4-2; and _ exercised

professional judgment to determine the relative

magnitude of the Rule’s unquantifiable benefits, e.g..

id. (concluding that mercury benefits were likely

underestimated due to data limitations).

Including a complete assessment of the Rule's

significant, unquantified benefits is consistent with

federal guidelines and best practices. The executive

orders governing the regulatory analysis instruct

agencies to include unquantified costs and benefits.

Exec. Order No. 13,563 § 1, 76 Fed. Reg. at 3821;

Exec. Order No. 12,866 § 1, 58 Fed. Reg. at 51,735.

Circular A-4 cautions agencies against ignoring the

potential magnitude of unquantified benefits,

because the most efficient rule may not have the

“largest quantified and monetized estimate.”

Circular A-4 at 2. Furthermore, best practices for

cost-benefit analysis require consideration of effects

that “defy quantification but are thought to be

important.” Kenneth J. Arrow et al., Benefit-Cost

Analysis in Environmental, Health, and Safety

6 Many significant benefits of co-pollutants such as particulate

matter also could not be fully quantified. MATS RIA at ES-9 to

ES-11. Again, particulate matter comprises at least some

hazardous air pollutants, like non-mercury metals. See supra

note 4.

Regulation: A Statement of Principles 8 (1996). In

fact, over the last few decades, some of the most

important categories of benefits of environmental

regulation that were once considered unquantifiable

were subsequently quantified. Richard L. Revesz,

Quantifying Environmental Benefits, 102 Cal. L. Rev.

1423, 1436 (2014). .

For the last twenty-five years, under presidents of

both parties, EPA has consistently taken into

account unquantified benefits when evaluating

regulations. In response to criticism of its benzene

regulations under Section 112, EPA under President

George H.W. Bush “reject[ed] the position that only

quantified information can be considered in the

decisions.” 55 Fed. Reg. 8292, 8302 (Mar. 7, 1990).

EPA under the Clinton administration considered

the “real, but unquantifiable benefits” of emissions

standards for hazardous waste combustors. 64 Fed.

Reg. 52,828, 55,023 (Sept. 30, 1999). EPA under

President George W. Bush evaluated a _ rule

restricting emissions from non-road diesel engines

based on “consideration of all benefits and costs

expected to result from the new standards, not just

those benefits and costs which could be expressed

here in dollar terms.” 69 Fed. Reg. 38,958, 39,138

(June 29, 2004).

In short, consistent with regulatory guidance and

longstanding agency practice under administrations

of both parties, EPA correctly considered the Rule’s

substantial unquantified benefits.

Il. EPA PROPERLY ASSESSED THE BENEFITS

RESULTING FROM THE PARTICULATE

MATTER REDUCTIONS ATTRIBUTABLE TO

THE RULE

EPA followed economic best practices and public

health science in its evaluation of the Rule’s benefits

resulting from particulate matter reductions.

Petitioners and their amici cast unwarranted doubt

on the particulate matter benefits attributed to the

Rule by noting that EPA has separately regulated

particulate matter, and by challenging the

assumptions used in EPA's valuation of particulate

matter benefits. See, e.g., Chamber of Commerce

Amicus Br. at 22-24. However, the particulate

matter benefits that EPA assigns to: the Rule flow

directly from the Rule itself rather than from other

rulemakings that may also reduce particulate

matter. Further, reductions in particulate matter

below the National Ambient Air Quality Standards

(NAAQS) will, in fact, generate significant health

benefits, and EPA correctly evaluated them.

A. The Benefits That EPA Attributes to the

Rule Flow from That Rule, Not from

Earlier Rulemakings, and Also Are Not

Attributed to Later Rulemakings

The benefits that EPA assigns to particulate

matter reductions in its regulatory impact analvsis

do, in fact, flow from the Rule. In accordance with

best practices for cost-benefit analysis, EPA

developed a baseline scenario projecting future air

quality absent additional regulation to serve as a

control against which to compare projected air

quality under the Rule. MATS RIA at 1-11 to 1-12:

Circular A-4 at 2 (instructing agencies to “[i]Jdentify a

baseline” in order to “evaluate properly the benefits

and costs of regulations and their alternatives”).

EPA’s internal guidelines on economic analysis

instruct staff to “develop baseline and policy

scenarios that assume full compliance with existing

and newly enacted (but not yet implemented)

regulations,” which “enables the analysis to focus on

the incremental economic effects of the new rule or

policy without double counting benefits and costs

captured by analyses performed for other rules.”

EPA, Guidelines for Preparing Economic Analyses,

supra, at 5-9. This is precisely what EPA did here. In

particular, EPA developed a baseline that accounted

for “the emissions reductions of SOx, NOx, directly

emitted PM, and CO,” from “federal rules, state rules

and statutes, and other binding, enforceable

commitments in place by December 2010,” as well as

“the Cross-State Air Pollution Rule (CSAPR) as

finalized in July 2011.” MATS RIA at 1-11.

Furthermore, in developing its baselines in

subsequent rulemakings, EPA ensured that these

later rules did not count benefits that had already

been attributed to this Rule. In its regulatory impact

analysis for a subsequent revision of the particulate

matter NAAQS, EPA explained, “It is important to

emphasize that the EPA does not ‘double count’ the

costs or the benefits of our rules. Emission

reductions achieved under rules that require specific

actions from sources—such as MATS—are in the

baseline of this NAAQS analysis, as are emission

reductions needed to meet the current NAAQS.”

EPA, Regulatory Impact Analysis for the Final

Revisions to the National Ambient Air Quality

Standards for Particulate Matter at ES-18 (2012)

[hereinafter “2012 PM NAAQS RIA”); see also EPA,

Regulatory Impact Analysis for the Proposed Carbon

Pollution Guidelines for Existing Power Plants and

Emission Standards for Modified and Reconstructed

Power Plants at 3-4 to 3-5 (2014) (“Base

Case includes the Mercury and Air Toxics

Rule "). Thus, any benefits claimed to result

from subsequent regulations are due to the

additional incremental pollutant reductions of those

rules alone.

B. EPA Properly Assessed Benefits from

Particulate Matter Reductions Beyond

the National Ambient Air Quality

Standards

In conducting a methodologically sound analysis,

EPA properly valued the benefits resulting from a

decrease in particulate matter, including reductions

to levels below the National Ambient Air Quality

Standards (NAAQS). Petitioners and their amici

argue that EPA improperly counted benefits that

result from reductions of particulate matter to levels

below those required by the NAAQS. E.g., Pet’r Nat’

Mining Ass’n Br. at 41 n.19. Such assertions wrongly

treat the .,AAQS as a level below which no benefits

can be realized. In reality, health and welfare

benefits continue to accrue for reductions of

pollutants below the NAAQS, and EPA properly

accounted for them in its regulatory impact analysis.

Under the Clean Air Act, EPA must set the

NAAQS at a level “requisite to protect the public

health” with “an adequate margin of safety.” 42

U.S.C. § 7409(b)(1). This language does not require

eliminating all health risks. Whitman, 531 U.S. at

494 (Breyer, J., concurring) (characterizing a zero-

risk standard as “impossible and undesirable”); see

also Michael A. Livermore & Richard L. Revesz,

Rethinking Health-Based Environmental Standards,

89 N.Y.U. L. Rev. 1184, 1186-87 (2014)

(“Environmental pollutants often lack ambient

concentrations below which there is no risk of

negative health consequences. As a result, the

complete elimination of health risks for these

pollutants could be accomplished only by banning all

emissions.”). In analyzing the Rule, EPA expressly

disclaims the notion that the NAAQS are a zero-risk

standard, stating, “It is important to emphasize that

NAAQS are not set at a level of zero risk. While

benefits occurring below the standard may be less

certain than those occurring above the standard,

EPA considers them to be legitimate components of

the total benefits estimate.” 77 Fed. Reg. 9304, 9431

(Feb. 16, 2012) (emphasis added); see also MATS RIA

at ES-4 (same). In the Rule’s economic analysis, EPA

considered over a dozen peer-reviewed

epidemiological studies and elicited expert input to

estimate the health effects of particulate matter.

MATS RIA at 5-26 to 5-27. The scientific literature

and expert responses support using a no-threshold

model, MATS RIA at 5-98; 77 Fed. Reg. at 9430,

meaning that there is no concentration above zero

(including concentrations below the NAAQS) for

which health risks do not exist.

EPA developed its estimates of the benefits

attributable to the Rule by focusing on the additional

reductions in particulate matter that the Rule would

achieve beyond the 2006 particulate matter NAAQS.®

6 As indicated above, EPA subsequently finalized new, more

stringent particulate matter NAAQS. 78 Fed. Reg. 3086 (Jan.

15, 2013). As that standard’s regulatory impact analysis

indicates, substantial health benefits result from reducing

particulate matter below even these latest, more stringent

standards. See 2012 PM NAAQS RIA at ES-14 (projecting $6.7

billion to $20 billion more in total monetized net benefits if EPA

had chosen a standard of 11 micrograms per cubic meter

As the regulatory impact analysis for the 2006

particulate matter NAAQS illustrates, significant

health benefits will flow from the Rule’s reductions

in particulate matter below the NAAQS. In its 2906

rulemaking, EPA considered two alternative NAAQS

levels: 14 or 15 micrograms of particulate matter per

cubic meter. EPA, Regulatory Impact Analysis for the

Revised Particulate Matter National Ambient Air

Quality Standards at ES-7 (2006). EPA chose the 15

microgram option, but its cost-benefit analysis

showed that the more stringent standard would have

prevented an additional 1900 deaths, 3700 heart

attacks, 5700 cases of acute bronchitis, 2000

emergency rooms visits by asthmatic children, and

200,000 lost work days. Jd. at ES-8. These benefits,

among others, would have produced $9~-10 billion

more in monetized net benefits than the standard

EPA ultimately chose. Jd. at ES-7. While EPA

concluded that these incremental benefits were not

“requisite to protect the public health,” they are

nonetheless substantial quantified benefits that

cannot be ignored merely because they occur at

ambient concentrations below the chosen NAAQS.

For the same reason, EPA properly valued such

benefits flowing from this Rule’s particulate matter

reductions beyond the NAAQS.

instead of the 12 micrograms per cubic meter standard that was

ultimately selected); Livermore & Revesz. Rethinking Health-

Based Environmental Standards, supra. at 1244-45.

Ill. THE OFFICE OF INFORMATION AND

REGULATORY #£=AFFAIRS’S POSITIVE

REVIEW OF THE RULE INDICATES THAT

EPA CONSIDERED COSTS AND BENEFITS

IN A REASONABLE MANNER

Executive branch agencies, including EPA, must

conduct cost-benefit analyses for all significant rules

and submit such rules to the Office of Information

and Regulatory Affairs (OIRA), along with a

reguiatory impact analysis. Exec. Order No. 12,866 §

6(a)(3)(B), 58 Fed. Reg. at 51,741: Exec. Order No.

13,563 § 1(b), 76 Fed. Reg. at 3821; see also Circular

A-4 at 1-3. The principal purpose of OIRA review is

to ensure that a rule’s benefits justify its costs. See

Exec. Order No. 12,866 §§ 1(b)(5}46), 2(b), 58 Fed.

Reg. at 51,736-37. In this case, OIRA’s positive

review of the Rule undermines Petitioners’ claims

that the rule’s costs exceed its benefits.

Executive branch regulatory review has been a

defining feature of U.S. administrative law for the

past thirty years, during presidential

administrations of both political parties. Exec. Order

No. 12,291, 46 Fed. Reg. 13,193 (Feb. 17, 1981)

(Reagan); Exec. Order No. 12,866, 58 Fed. Reg. at

51,735 (Clinton); Exec. Order No. 13,563, 76 Fed.

Reg. at 3821 (Obama); see also Richard L. Revesz &

Michael A. Livermore, Retaking Rationality: How

Cost-Benefit Analysis Can Better Protect the

Environment and Our Health 11 (2008); John D.

Graham et al., Managing the Regulatory State: The

Experience of the Bush Administration, 33 Fordham

Urb. L.J. 953, 956 (2006) (“Virtually all scholarship

on this subject acknowledges the increasing

importance of OMB’s role in regulatory policymaking

over the past thirty years.”).

When a rule's benefits do not justify its costs,

OIRA can return a rule to the proposing agency for

further review. Exec. Order No. 12,866 § 6(b)(3), 58

Fed. Reg. at 51,742; see also Letter from Susan E.

Dudley, Adm’r, Office of Info. & Regulatory Affairs to

Marcus C. Peacock, Deputy Adm’'r, Envtl. Prot.

Agency (July 3, 2008) (returning draft Pesticide

Container Recycling rule for reconsideration because

the quantified costs exceed the benefits by more than

two orders of magnitude). available at

http://www.reginfo.gov/public/return/Epa_Return_let

ter_7_03.pdf; Letter from Cass R. Sunstein, Adm'r,

Office of Info. & Regulatory Affairs, to Lisa P.

Jackson, Adm’r, Envtl. Prot. Agency (Sept. 2, 2011)

(returning draft ozone NAAQS for reconsideration

for several reasons, and citing the need to minimize

regulatory costs and burdens), available at

http://www.reginfo.gov/public/return/EPA_Return_Le

tter_9-2-2011.pdf.

Here, OIRA reviewed EPA's analysis, including

the Rule’s substantial indirect benefits, and allowed

the agency to proceed, indicating that EPA

considered costs and benefits in a_ reasonable

manner. See Office of Info. & Regulatory Affairs,

OIRA Conclusion of EO 12866 Regulatory Review,

RIN 2060-AP52 (Dec. 16, 2011), available at

http://www.reginfo.gov/public/do/eoDetails?rrid=1211

72. Agencies like EPA are acutely aware of the cost-

benefit analysis requirements of Executive Orders

12,866 and 13,563. See EPA, Guidelines for

Preparing Economic Analyses, supra, at 2-1 to 2-2.

10-3; see also Cass R. Sunstein, The Office of

Information and Regulatory Affairs: Myths and

Realities, 126 Harv. L. Rev. 1838, 1865 (2013). While

EPA reasonably chose not to consider costs when

deciding whether it was “appropriate and necessary”

to list power plants under Section 112(n)(1)(A), see

Section IV, infra, EPA appropriately assessed both

costs and benefits when setting emissions standards

under Section 112(d) and submitted a regulatory

impact analysis to OIRA, consistent with Executive

Orders 12,866 and 13,563. The OIRA review process

thus provided an additional check on the agency’s

rulemaking.

OIRA also assesses the possible effect of rules on

other federal programs and coordinates interagency

review by specialists from affected agencies. See

Exec. Order No. 12,866 § 2(b), 58 Fed. Reg. at 51,737:

Sunstein, The Office of Information and Regulatory

Affairs: Myths and Realities, supra, at 1841 (“OIRA’s

goal is often to identify and convey interagency views

and to seek a reasonable consensus, not to press its

own positions.”). Rules and their regulatory impact

analyses are often modified through this interagency

process. Cass R. Sunstein, Simpler: The Future of

Government 180 (2013). Because agencies have

different perspectives and expertise, coordination

subjects the cost-benefit analysis to additional

scrutiny. See Michael A. Livermore & Richard L.

Revesz, Regulatory Review, Capture, and Agency

Inaction, 101 Geo. L.J. 1337, 1368 (2013) (“{AJ]ny

rules proposed by the EPA also will be examined by

the Department of Energy, the Department of

Transportation, and the Small Business

Administration—agencies with which

environmentalists are not thought to have overly

close connections.”).

Several agencies reviewed and suggested edits to

the Rule and its economic analysis. See, e.g.,

Summary of Interagency Working Comments on

Draft Language under EO 12866 Interagency Review

11, Doc. No. EPA-HQ-OAR-2009-0234-2984 (Mar. 4,

2011) (suggesting, for example, that EPA should

acknowledge the Federal Energy Regulatory

Commission’s energy forecasts). Meeting records

confirm that OIRA met with the Small Business

Administration, the National Economic Council, and

representatives from the electricity generation

industry, among others. See Office of Mgmt. &

Budget, Meeting Record (Nov. 7, 2011), available at

http//www.whitehouse.gov/omb/2060_meeting_11072011b;

Office of Mgmt. & Budget, Meeting Record (Nov. 29.

2011), available at http://www.whitehouse.gov/omb/

2060_meeting_11292011c. While Petitioners assert

that the Rule shows an irrational approach to costs,

the favorable OIRA and interagency review belies

that characterization.

Legal scholars have argued that courts should

take into account whether OIRA reviewed the

agency’s cost-benefit analysis when calibrating the

level of judicial scrutiny of regulations. Catherine M.

Sharkey, State Farm “With Teeth”: Heightened

Judicial Review in the Absence of Executive

Oversight, 89 N.Y.U. L. Rev. 1589, 1592, 1619-20

(2014); see also Nina A. Mendelson & Jonathan B.

Wiener, Responding To Agency Avoidance of OIRA.,

37 Harv. J.L. & Pub. Pol'y 447, 519 (2014)

(suggesting that favorable OIRA review could

provide evidence, or a presumption, that the agency

action is not “arbitrary” under the Administrative

Procedure Act). Similarly, Justice Breyer, in his

academic writing, recognized the connection between

executive review and judicial review. Stephen

Breyer, Breaking the Vicious Circle: Toward Effective

Risk Regulation 80 (1993) (“[T]he judicial tendency to

review less closely than in the past agency policy

determinations for reasonableness argues for some

such centralized reviewing capacity, perhaps within

the Executive Branch itself.”). Agencies and OIRA

have the technical expertise to conduct and review

cost-benefit analyses; when courts can refer to such

analysis and executive branch review, there is less

need to second-guess the agency’s analytical process.

In short, the interagency review process and

OIRA’s approval of the Rule and its regulatory

impact analysis strongly support a finding that

EPA's approach was reasonable.

IV.EPA’S DECISION NOT TO BASE THE

SECTION 112(n)(1)(A) LISTING ON COST

CONSIDERATIONS WARRANTS PARTICULAR

DEFERENCE

This case turns not on whether the costs of

regulating hazardous emissions from power plants

should be considered, but on when such costs should

be considered: upon listing the source category under

Section 112(n)(1)(A), 42 U.S.C. § 7412(n)(1)(A), or

only afterward when setting the _ standards’

stringency under Section 112(d), 42 U.S.C. § 7412(d).

EPA's interpretation that Section 112(n)(1)(A)’s

silence on costs does not require that costs must be

taken into account warrants, at minimum, this

Court’s standard Chevron deference. See Chevron

U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467

U.S. 837, 842—45 (1984). Moreover, this Court should

grant EPA additional deference on interpreting the

criteria for listing decisions, given that Congress, in

Section 112(d), explicitly balanced cost

considerations against air quality goals when it

prescribed the criteria that EPA must use to set the

stringency of standards for listed source categories.

The Court should also afford EPA particular

deference in light of the agency's consistent

interpretation, over more than two decades, under

administrations of both political parties, that

category-listing decisions do not require the

consideration of costs. Finally, prematurely assessing

costs at the listing stage under Section 112(n)(1)(A)

would be impossible or grossly misleading, because

subsequent regulatory choices under Section 112(d)

could dramatically affect the magnitude of costs.

A. This Court Consistently Affords Agencies

Discretion on Whether to Consider Costs

When the Statutory Text Is Silent or

Ambiguous

This Court recognizes that Congress generally

entrusts the questions of whether and how to weigh

regulatory costs to the sound discretion of agencies.

For example, in EPA v. EME Homer City Generation,

L.P., this Court upheld EPA's approach to the

“consideration of costs” as a “reasonable

interpretation of an ambiguous Clean Air Act

provision.” 134 S. Ct. 1584, 1593 (2014). Similarly, in

Entergy Corp. v. Riverkeeper, Inc., the Court stated:

“It is eminently reasonable to conclude that

[statutory] silence is meant to convey nothing more

than a refusal to tie the agency’s hands as to

whether cost-benefit analysis should be used :

556 U.S. 208, 222 (2009). See also Am. Textile Mfrs.

Inst., Inc. v. Donovan, 452 U.S. 490, 508-13 (1981)

(confirming the agencys _ interpretation of

“reasonably necessary or appropriate” and “to the

extent feasible” as not requiring § cost-benefit

analysis).

Indeed, this Court has never struck down an

agency’ interpretation of ambiguous statutory

language by affirmatively requiring the agency to

consider costs. In fact, in the one case when this

Court did not give EPA Chevron deference on this

type of question, it held that Section 109 of the Clean

Air Act precluded cost considerations. Whitman, 531

U.S. at 465-71. When, as in Section 112(n)(1)(A), the

statutory text is silent on whether costs should be

considered, EPA’s’ reasonable approach to

considering costs in a multi-step regulatory process

should receive deference.

B. EPA’s Approach to Listing Categories Is

on Especially Strong Footing Because

Section 112(d) Sets Standards According

to a Deliberate Balancing of Costs and

Air Quality Goals

When Congress specifies how costs must be

considered in determining the stringency of

regulatory standards for source categories, but

declines to prescribe whether costs should be

considered in the threshold decision whether to

regulate a source category, courts should afford an

agency particular deference in choosing not to base

category listings on costs. In Whitman, this Court

“refused to find implicit in ambiguous sections of the

[Clean Air Act] un authorization to consider costs

that has elsewhere, and so often, been expressly

granted.” 531 U.S. at 467. Here, Section 112(n)(1)(A)

instructs EPA, without any explicit reference to

costs, to make the threshold determination whether

hsting power plants as a category subject to

regulation is “appropriate and necessary.” Once a

category is listed, the Clean Air Act instructs EPA to

select the more stringent of two main pathways for

calibrating the “maximum degree of [emissions]

reduction achievable” for that category. 42 U.S.C.

§ 7412(d)(2)}(3). 7 Both options for developing

emissions standards under Section 112(d) :eflect

Congress's deliberate balancing of costs against air

quality goals. Consequently, EPA's decision not to

consider costs during its’ threshold listing

determination under Section 112(n)(1){A)’s

ambiguous criteria warrants particular deference.

Of EPA’s two main options for calibrating

regulatory standards, the first, Section 112(d)(2), is

explicitly based on cost considerations. Using

phrasings found in numerous’ environmental

statutory provisions thet require cost analvsis—e.g.,

33 U.S.C. §§ 1314(b)(2)(B), 1316(b)(1)(B); 42 U.S.C.

§§ 7411(a)(1), 7479(3), 7521(a)(3)(A), 7545(k)(1)(A)—

Section 112(d)(2) instructs EPA to promulgate

standards requiring the maximum’ emissions

reductions that are “achievable” after “taking into

consideration the cost.” 42 U.S.C. § 7412(d)(2). Even

without explicit instructions to take costs into

account, the word “achievable” alone would lead to a

cost-conscious standard, because it implies that a

certain proportion of industry sources could achieve

that performance under real-world, “adverse” market

conditions, and do so “presumably in a cost efficient

manner.” White Stallion Energy Ctr., LLC v. EPA,

748 F.3d 1222, 1239, 1251 (D.C. Cir. 2014) (citing

Nat? Lime Ass'n v. EPA, 627 F.2d 416, 431 n.46 (D.C.

Cir. 1980)); see also S. Rep. No. 101-288, at 168-69

(1989) (“Cost considerations are reflected in the

selection of emissions limitations which have been

achieved in practice. ”).

7 EPA describes the Section 112(d)(3) standard as the “floor

and the Section 112(d)(2) standard as “bevond the floor.” That is

just a different way of saying that EPA must choose the more

stringent of the two standards.

The second option, Section 112(d)(3), similarly

uses an achievability benchmark to consider costs.

Congress specifies that EPA should set Section

112(d)(3) standards according to either the

performance “achieved in practice by the best

controlled similar source” or, for existing sources,

“the average emission limitation achieved by the best

performing [12 percent of existing sources or 5

individual sources, depending on the category's

size}].” 42 U.S.C. § 7412(d)(3). Contrary to Petitioner's

assertion that Section 112(d)(3) represents a cost-

indifferent standard, State Pet’rs Br. at 45-46, the

provision implicitly reflects cost considerations

through these achievability benchmarks. Indeed,

EPA chose its words carefully when it explained that

Section 112(d)(3) does not let the agency consider

costs in setting standards, 77 Fed. Reg. at 9307,

because Congress already’ integrated cost

considerations into the standard, by referencing the

best performance that sources could achieve while

remaining financially viable. Cf. Industry Resp’ts Br.

at 29 (“That so many [existing coal-fired] plants have

installed the necessary controls—and have remained

in business despite the cost advantage that polluting

plants enjoy—completely undercuts the notion that

the Rule will financially ruin the industry.”).

The view that both Sections 112(d)(2) and

112(d)(3) reflect cost considerations is consistent

with the Clean Air Act’s overarching goals.2 The

8 A few alternate options for setting standards reinforce Section

112(d)’s attention to costs. For example, Section 112(d)(4)

allows EPA to avoid setting regulatory stringency beyond a

“health threshold”"—a statutory precaution against imposing

regulatory costs that deliver truly zero health benefits. Of

course, EPA declined to use this provision in the MATS Rule, as

1990 amendments to Section 112 were largely a

congressional response to severe regulatory inaction

in combating hazardous pollution during the

previous decades, due to EPA’s concerns that its

statutory mandate required aggressively stringent

and costly limits of zero exposure. In revising Section

112(d), Congress deliberately struck a balance

intended to assuage EPA’s fear of imposing

“standards so stringent [that] they would shut

down .American industry,” S. Rep. No. 101-228, at

128 (1989), while still making substantial progress in

addressing the acute health dangers of mercury and

other hazardous emissions. See id. at 154-55

(discussing health effects of mercury and legislative

plan to regulate those emissions); H. Rep. No. 101-

490, at 319-20 (1990) (same). To the extent that

Section 112(d)(3) may bind EPA to standards more

stringent than those the agency would set under

Section 112(d)(2), that is by congressional design,

reflecting a desire to advance air quality goals and

avoid bureaucratic delay and timidity. See also Non-

Gov't Resp’ts Br. at 28—29.

C. For over Twenty Years, Under

Administrations of Both Political Parties,

EPA Has’ Consistently Interpreted

Category-Listing Decisions Not to

Require Cost Analysis

Since 1992, just after Congress revised Section

112 to its current form, EPA has consistently

interpreted Section 112 as not requiring cost

considerations during category-listing decisions. This

Court has repeatedly recognized the importance of

that Rule will deliver up to $90 billion in annual health and

welfare benefits, see supra at 6.

“accord[ing] particular deference to an agency

interpretation of longstanding duration.” Alaska

Dep’t of Envtl. Conservation v. EPA, 540 U.S. 461,

487 (2004) (internal quotation omitted); see also

Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 224

(2009) (explaining that EPA’s _ consistent

interpretation of a statutory provision for over three

decades, “[w]hile not conclusive, surely tends to

show that the EPA’s current practice is a reasonable

and hence legitimate exercise of its discretion”).

EPA’s long history of consistent regulatory

interpretation of Section 112 similarly warrants

“particular deference.”

In 1992, EPA under President George H.W. Bush

published the “Initial List of Categories of Sources

under Section 112(c)(1) of the Clean Air Act

Amendments of 1990.” 57 Fed. Reg. 31,576 (July 16,

1992). The criteria for listing categories of “area

sources’ under Section 112(c)(3) (“present[ing] a

threat of adverse effects to human health or the

environment warranting regulation under this

section”) are quite similar to the criteria for listing

power plants under Section 112(n)(1)(A)

(“appropriate and necessary after considering the

results” of a “study of the hazards to public health

reasonably anticipated to occur”). In 1992, industry

commenters asked EPA to establish a “de minimis

emission cutoff’ for listing area sources, to protect

“industry and Agency resources”—in other words, to

account for costs during the listing determination. 57

Fed. Reg. at 31,582. EPA declined and responded

that it would instead exercise its “discretion, when

establishing standards under section 112(d)(2)

[to] consider costs.” Jd. at 31,582—83.

During the Clinton administration in 2000, EPA

made the first “appropriate and necessary” finding

under Section 112(n)(1)(A) and listed power plants

under Section 112(c). 65 Fed. Reg. 79,825, 79,830

(Dec. 20, 2000). The finding did not reference any

cost considerations, and the notice explained that

listing power plants as a category “does not impose

regulatory requirements or costs.” Jd. at 79,831.

Rather, the notice announced that “[ajs a part of

developing a regulation [under Section 112(d)], the

effectiveness and costs of controls will be examined.”

Id. at 79,830.

Though under President George W. Bush, EPA

attempted in 2005 to reverse that earlier finding and

asserted that costs “might” be a factor under Section

112(n)(1)(A), 70 Fed. Reg. 15,994, 16,000-01 (Mar.

29, 2005) (emphasis added), EPA never found that

the statute required cost analysis. By contrast, EPA

emphatically declared that Section 112(n)(1)(A)’s

“paramount factor is whether the level of utility

HAP emissions remaining would result in

hazards to public health.” Jd. at 16,000 (emphasis

added). More generally, the 2005 revised finding

confirmed that the “appropriate and necessary”

determination undisputedly “entrust[s] EPA to

exercise judgment,” id. at 16,001, and that the

“appropriate and necessary” finding is preliminary

and “is not setting emissions standards.” /d. at n.19

(contrasting “setting emissions standards” to the

appropriate and necessary determination).

EPA has a similarly long history under analogous

Clean Air Act provisions, of first listing source

categories without necessarily considering costs, but

subsequently assessing costs as required when

designing regulatory standards. For example, under

Section 111, EPA first must “list categories of

stationary sources [that] cause[ }, or contribute| |

significantly to, air pollution which may reasonably

be anticipated to endanger public health or welfare.”

42 U.S.C. § 7411(b)(1)(A). After listing categories,

EPA then proposes “standards of performance,” 42

U.S.C. § 7411(b)(1)(B), which must “tak[e] into

account the cost of achieving such reduction.” 42

U.S.C. § 7411(a)(1). Partly because Congress

instructs EPA to consider costs when developing

Section 111 performance standards, the agency does

not consider costs when listing source categories.

E.g., 74 Fed. Reg. 51,950, 51,957 (Oct. 8, 2009)

(distinguishing between “the initial endangerment

finding” and “the time [when] performance standards

are promulgated,” and explaining that the latter

phase is when EPA may “exercise its discretion” on

the scope of regulation, for example by deferring

regulation of specific pollutants because controls are

not technologically or economically available); see

also 44 Fed. Reg. 49,222, 49,225 (Aug. 21, 1979)

(“The Clean Air Act {Section 111] priority list criteria

do not include the cost of pollution control, but

costs must be considered in determining each

{performance standard].”).

Similarly, under Section 202 of the Clean Air Act,

EPA first makes an endangerment finding with

respect to air pollution from motor vehicles, 42

U.S.C. § 7521(a)(1), and subsequently develops

emissions standards after “giving appropriate

consideration to the cost of compliance.” 42 U.S.C. §

7521(a)(2). In 2009, EPA issued an endangerment

finding for greenhouse gas emissions from motor

vehicles, explicitly choosing not to _ consider

regulatory costs or to propose emissions standards at

the same time. 74 Fed. Reg. 66,496, 66,509 (Dec. 15,

2009) (“[T]he issues of risk of harm and severity of

harm if it were to occur are separate from the issues

of the economic impacts of any resulting regulatory

provisions.”). The D.C. Circuit upheld this

independ«at, cost-blind endangerment finding,

confirming EPA’s view that “questions about the cost

of compliance are not part of the § 202(a)(1)

endangerment inquiry.” Coal. for Responsible

Regulation, Inc. v. EPA, 684 F.3d 102, 118 (D.C. Cir.

2012), limited cert. granted only on a non-

endangerment question, 134 S.Ct. 418, affd in part,

rev d on other grounds by Util. Air Regulatory Group

v. EPA, 134 S.Ct. 2427 (2014). Following the

endangerment finding, when EPA subsequently set

the stringency of emissions standards for motor

vehicles, it considered costs. 75 Fed. Reg. 25,324,

25,342 (May 7, 2010).

Under both Section 112 and other provisions of

the Clean Air Act, and during administrations of

both political parties, EPA has _ consistently

interpreted category-listing decisions not to require

cost analysis. This long regulatory history supports

giving additional deference to EPA's decision not to

take costs into account under Section 112(n)(1)(A).

D. Premature Cost Assessment Could Be

Impossible or Misleading, Because Costs

Depend on Regulatory Choices That EPA

Can Make Only After an Initial Listing

Decision

EPA cannot meaningfully predict potential costs

before making at least some fundamental choices

among distinct regulatory alternatives. Numerous

choices can significantly decrease or increase

regulatory costs, including a regulation’ proposed

scope, stringency, design, use of flexible compliance

options, compliance schedules, and approach toward

different segments of the regulated industry. See

Circular A-4 at 7—9. It is no accident that Circular A-

4 instructs agencies first to develop regulatory

alternatives, and only then to assess costs and

benefits. Jd. at 2 (describing the steps of regulatory

impact analysis as “(1) a statement of the need

(2) an examination of alternative approaches, and (3)

an evaluation of the benefits and costs—quantitative

and qualitative—of the proposed action and the main

alternatives identified.”).

Many _ cost-determinative choices among

alternatives were not or could not be made at the

time of EPA’s “appropriate and necessary” finding

under Section 112(m)(1)(A). For example,

subcategorization decisions can decrease or increase

costs substantially, especially because under Section

112(d)(3), the stringency of emissions standards is

determined by the performance achieved by the

cleanest sources only within a_ particular

subcategory. Indeed, the extensive bickering

preceding the final Rule over the particular

definition of subcategories, see 77 Fed. Reg. at 9378-

79, underscores the importance of subcategorization.

Though EPA exempted natural gas power plants

from its “appropriate and necessary” finding, Section

112(n)(1)(A)’s listing decision generally must be

made for “electric utility steam generating units” as

a group, and does not contemplate subcategorization.

42 U.S.C. § 7412(n)(1)(A). Instead, EPA’s “broad”

(though not unlimited) subcategorization authority is

found in Section 112(c). See NRDC v. EPA, 489 F.3d

1364, 1372 (D.C. Cir. 2007). Section 112(c) requires

that EPA list subcategories to be consistent with

Section 111’s_ subcategories, “[t]lo the extent

practicable.” 42 U.S.C. § 7412(c)(1). Because EPA

could only subcategorize electric utility steam

generating units under the authority of Section

112(c), and only upon analysis of consistency with

Section 111 regulations, EPA could not logically

predict precise subcategories at the time of the

“appropriate and necessary” review, and therefore

could not reasonably predict regulatory costs. For

that reason, in 2000, when EPA first made its cost-

blind “appropriate and necessary’ finding under

Section 112(n)(1)(A), the agency explained, “The

listing of source categories under Section 112(c) is a

dynamic process. Decisions as to the scope of

source categories listed will be perfected during the

course of the rulemaking process and will take

account of improvements in available information

and analysis ” 65 Fed. Reg. at 79,826.

Petitioners’ reading of Section 112 would force EPA

to complete such analysis and predict precise

subcategories before making the “appropriate and

necessary’ finding, effectively jumbling the order of a

multi-step decisionmaking process designed by

Congress, and “put[ting] the cart before the horse.”

See Industry Resp'ts Br. at 24-25.

Petitioners offer no reasonable methodology for

calculating costs at the Section 112(n)(1)(A) listing

phase, before many important, cost-determinative

regulatory choices like subcategorization have been

made under Sections 112(c) and (d). Implicitlv,

Petitioners want to force EPA to assume that, since

emissions standards must be at least as stringent as

the performance achieved by the cleanest 12% of

existing sources, minimum compliance costs for such

standards could be calculated. But to do so would

require figuring out the denominator used to

calculate the 12%, which is a function of

subcategorization.

Calculating costs at the listing stage would also

be misleading because the more stringent option is

not necessarily the more costly. In setting standards

under Section 112(d), EPA must select the more

stringent option between Section 112(d)(2) and (d)(3).

The language of Section 112(d)(2), however,

potentially allows for greater use of flexible

compliance tools than the language of (d)(3).

Specifically, Section 112(d)(2) permits EPA to apply

any “measures, processes, methods, systems, or

techniques,” whereas Section 112(d)(3) assumes

application of the best “emission control that is

achieved in practice.” Compare 42 U.S.C. §

7412(d)(2), with § 7412(d)(3). In 2000 and again in

2004. EPA discussed the potential to use

nontraditional methods hike demand-side

management or economic incentives like emissions

trading to implement Section 112 regulation. See 65

Fed. Reg. at 79,828-30; 69 Fed. Reg. 4652, 4661

(Jan. 30, 2004). Both economic experts and EPA's

own regulatory experience have demonstrated that

flexible compliance tools can achieve more ambitious

environmental goals at greatly reduced costs. See 69

Fed. Reg. at 4701 (explaining that the Clean Air

Act’s 1990 program on acid rain, “a market-based

cap-and-trade approach,” is “widely acknowledged as

a model air pollution control program because it

provides significant and measurable environmental

and human health benefits with low implementation

costs”); Dallas Burtraw & Erin Mansur, The Effects

of Trading and Banking in the SOz Allowance

Market 20 (Res. for the Future, Disc. Paper 99-25,

1999), http://www.rff.org/documents/RFF-DP-99-

25.pdf (“[Ojverall emission reductions might not

otherwise have been achieved, absent the

opportunity to bank and to trade allowances. The

flexibility in compliance that is afforded by these

aspects of the program led to significant decreases in

the cost of the program and made the program

economically affordable and politically acceptable.”).

Consequently, EPA could set a flexible standard

under 112(d)(2) that required greater pollution

reductions than a standard under 112(d)(3), but

would nevertheless be less costly. In short, before

completing the full analysis required by Section

112(d)(2) of all achievable “measures, processes,

methods, systems, or techniques,” including flexible

compliance options, as well as their “costs,” their

“non-air quality health and environmental! impacts,”

and their “energy requirements,” 42 U.S.C. §

7412(d)(2), EPA could not make any reliable cost

predictions.

Several other examples confirm that costs will

depend heavily on regulatory choices made after the

completion of the Section 112(n)(1)(A) listing. For

example, compliance schedules can alter costs

greatly, but must be set “as expeditiously as

practicable” under criteria specified by Section

112G)(3). Similarly, work practice standards are

typically less costly, but the appropriateness of such

options must be assessed under Section 112(h). See

also Industry Resp’ts Br. at 25-27 (detailing the

many ways that EPA accommodated costs through

regulatory decisions made after the initial listing

determination). Consequently, instead of basing its

listing decision on costs, EPA properly chose to

assess costs later, after identifying the regulatory

alternatives available under the authority of Section

112(d) and other such provisions.

Because any premature attempt to predict costs

in the context of the Section 112(n)(1)(A)

determination alone could have been grossly

misleading—if not practically impossible—EPA’s

choice not to base its “appropriate and necessary”

finding on costs was reasonable and deserves

deference.

CONCLUSION

For the foregoing reasons, this Court should

affirm the judgment of the court of appeals.

Respectfully submitted,

RICHARD L. REVESZ*

DENISE A. GRAB

JAYNI FOLEY HEIN

MICHAEL A. LIVERMORE

JASON A. SCHWARTZ

INSTITUTE FOR POLICY

INTEGRITY

NEW YORK UNIVERSITY

SCHOOL OF LAW

139 MacDougal St., 3rd Floor

New York, NY 10012

Tel: (212) 998-6185

richard.revesz@nyu.edu

*Counsel of Record

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.