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March 25 — The validity of an EPA rule regulating power plant emissions was still up in the air even though it was clear from oral argument at the U.S. Supreme Court March 25 that the agency did everything the challengers wanted—just not when they wanted it.
The challengers argued that the Environmental Protection Agency should have considered the enormous cost of the disputed rule when it initially “listed” power plants—that is, when it first decided that regulating hazardous air pollutants from power plants was warranted.
But EPA said it couldn't consider costs until the second step, when it actually set the specific emissions standards.
Although a great deal of the heated 90-minute argument focused on how EPA might have considered costs at the later stage, there was no discussion of that process in any of the ten party briefs filed in these consolidated cases.
That's because the specifics of the process by which EPA might have undertaken to consider costs was first raised during oral argument by Justice Stephen G. Breyer.
Chief Justice John G. Roberts Jr. suggested that that might ultimately sink the regulation. It's “a very important principle of administrative law that we will only uphold a rule based on the arguments that were considered and addressed by the agency,” Roberts noted.
As Justice Antonin Scalia put it, “It's not enough that the argument be right. The agency must have rested its decision on the point.”
The challenged rule regulating power plant emissions comes out of the 1990 Clean Air Act amendments.
According to Jenner & Block LLP's Paul M. Smith, who argued on behalf of the industry respondents supporting the EPA rule, Congress was frustrated with 20 years of “regulatory paralysis,” so it “came in and said we're going to force regulation of these chemicals.”
Nevertheless, the Mercury and Air Toxics Standards rule was stymied in three administrations and took over a decade to complete.
The resulting rule—which Smith said goes into effect in April—is primarily intended to reduce mercury emissions from power plants. In its brief, EPA said these emissions can cause neurological abnormalities and delays in unborn children.
But William Brownell, of Hunton & Williams LLP, who argued for the industry petitioners challenging the law, said that power plants already pay an estimated $10.4 billion per year in EPA compliance costs. This “single regulation” now imposes an additional $9.6 billion in annual costs, he said.
Considering that power plants are already “the most aggressively regulated industry under the Clean Air Act,” he said EPA should have considered costs when deciding whether to add this additional regulation.
Also arguing on behalf of the rule's challengers, Michigan Solicitor General Aaron D. Lindstrom explained that Congress told EPA it could regulate power plants only if it was “appropriate and necessary.”
When deciding what is “appropriate,” EPA can't just ignore costs, which is “an essential part of the problem,” Lindstrom said.
Scalia agreed. He noted that EPA's calculated benefits from reducing mercury emissions were only about $4 million per year, compared to the estimated $9.6 billion in costs.
Referring to the Administrative Procedure Act, Scalia said “it's classic arbitrary and capricious agency action for an agency to command something that is outrageously expensive and in which the expense vastly exceeds whatever public benefit can be achieved.”
But several justices suggested that reading the term “appropriate” to mandate a cost/benefit analysis was itself unreasonable.
Justice Anthony M. Kennedy said the term was “capacious,” and Justice Ruth Bader Ginsburg said “appropriate” often is “a signal that discretion is what's fitting.”
Justice Elena Kagan even suggested that the challengers' “quest” for particular meaning was superficial, and meant only to catch the agency “in a redundancy or a super fluidity.”
But Justice Sonia Sotomayor asked, even if the court were to assign particular meaning to the term “appropriate,” why should the challengers get to pick?
All we have to do to uphold EPA's contrary interpretation is find that it's “a plausible reading” of the statute, she said.
Arguing for the federal government in support of the rule, Solicitor General Donald B. Verrilli Jr. said that EPA's reading wasn't only plausible, it's the best one.
It “applies the same regulatory logic to power plants that Congress directed EPA to apply to regulate hazardous air pollution from every other type of source.”
That logic is to “decide whether to list for regulation based on health and environmental hazards alone, and consider costs in setting the emission standards,” Verrilli explained.
But “we know that that's what Congress didn't want,” said Justice Samuel A. Alito Jr., to treat power plants the same as all other sources.
That's because Congress set a up a different regime to address only power plants, he said.
Verrilli responded that all Congress did differently for power plants was to “push the pause button” so that EPA could see if other Clean Air Act programs would alleviate the need to lower the emissions at issue here.
He said it was “critical” that Congress used that same “regulatory logic” in a host of other Clean Air Act programs.
If “Congress intended to mandate that EPA cut so deeply against the grain and make such a radically different approach with respect to this one category of sources, you would expect to see very clear legislative language to that effect,” he said.
Verrilli admitted that $9.6 billion was “a big number.” But he said that it represents only around 2 percent of the industry's $360 billion in annual revenues.
But Breyer said it does “look a little irrational” to say the agency isn't going to look at costs ever.
What if a rule was going to place draconian costs on the industry and put a large portion of it out of business? Is there any way EPA could look at costs then? Breyer wanted to know.
Verrilli said not when making the “listing” decision, but EPA could consider costs when setting the actual emissions standards.
Kennedy suggested that cost considerations were implicit in the statute when setting those standards. That's because the minimum standards required under the Clean Air Act are what the best 12 percent of plants are already achieving.
The challengers' Brownell countered that that wasn't enough because it doesn't take into account the greater burden on older plants.
But EPA could fix that by placing older plants into a different “sub-category,” right? Breyer asked.
Verrilli said that EPA does have the discretion to break up source groups—like power plants—into subcategories for determining the appropriate emissions standards.
So if you put older plants in a separate category, their standards would be less onerous and probably less expensive, Kagan determined.
We “can't uphold an agency rule on a ground that they didn't adopt below,” Roberts said.
So where in the record was this argument made by the agency, as “opposed to Justice Breyer's chambers?” Roberts asked Verrilli.
While it was clear that the government hadn't made this specific sub-categorization argument in its brief, Verrilli said the government said “over and over again” that it was only in the listing phase that EPA was disregarding costs.
Well how can we be sure that EPA would actually consider costs when doing sub-categorization? Alito wanted to know.
Because that's what happened here, responded Verrilli.
When the challengers' Lindstrom suggested that wasn't true, Breyer wasn't buying it.
“Well, I thought we just heard that” one group of power plants “said, look, we have special ways of producing our stuff,” so “please don't put us in the same category as you put the other people in.” And for “the purposes of figuring out the best 12 percent, the agency said, right, okay, separate.”
Now, “how would you do that without considering cost?” Breyer wanted to know.
Lindstrom's response: “I don't know.”
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Full text at http://pub.bna.com/lw/14-46Transcript.pdf.
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