Transcripts For CSPAN3 Key Capitol Hill Hearings 20150406

And because the minimum standard can vary dramatically so too will costs vary dramatically. So youre having the epa consider costs before the epa can know what the costs are. Your honor if i can respond to that before the other question at the other end of the bench, epa does know what the costs are through the rulemaking process in which it undertakes notice and comment with respect to both the m1a determination and the Emission Standard. Section 7607 d1c of the Clean Air Act lists subsection n as one of the provisions that requires notice and comment rulemaking und your the special Clean Air Act procedures. And this is why the agency explained that theres no final m1a until the end of the process, until notice and comment, and weve taken and determined what the costs are. And this is then confirming what Justice Breyer said. The point that you had an opportunity and apparently took advantage of it to tell the epa that it should subcategorize this source. And it decided to subcategorize just one piece of it. So what youre really saying to us is its not the listing its the way theyve set up their emissions standards that i disagree with because they could have decided that there were subcategories that didnt require standard at all. Im presuming that they could have said anybody by the water doesnt have to do more because theyre already part of the 12 , were going to do cost by everybody else thats not by the water. Conceptually, your honor i imagine they could have subcategorized away the entire industry. But thats not what they did in this rulemaking. And with respect to certain of the regulations no, they didnt do it but youre asking us this is almost this is a challenge to a regulation thats only piecemeal. Because youre arguing that they should have considered cost, but they obviously did before they issued the standards. You cant look at the standards and the emissions and the listing in a case like this in isolation. Justice sotomayor, if i could try the answer to the question once again. Subsection m1a question is if after considering results of the study, and i know the study looks at alternative control strategies for any emissions that may warrant regulation. The agency determines such regulation is appropriate and necessary. So the focus of the determination is not on listing and whatever may flow from that but the regulation that the agency decides to apply to address the remaining Public Health hazard that is identified from this source category. Mr. Brownell did epa say we are not going to take costs into account at the listing stage because we will take costs into account through this subcategorization possibility thats being discussed . No, they did not, your honor as i recall the record of the proceeding this discussion of subcategorization has come up in the briefing. Why didnt they write you see whats brothering these questions are difficult because theyre so hypothetical. It isnt true that 50 of the industry will use up 50 all the gross domestic product, et cetera. But they wrote this thing in a way that sounds as if even though that had been true they wouldnt have taken that into account. So what they say is the epa does not prove it is appropriate to consider crosswind in determining whether e. G. U. Is you see the problem for me. But esg is telling us dont worry. Maybe they should have written knowing what we know and what is undisputed so far we dont think that the cost problem is big enough for to us warrant a costbenefit analysis or other consideration. Okay. Then theyve taken it into account. So theres no problem. If its reasonable. Thats why im looking to see its really the sg. But is there really a different way that they could eliminate this horrible scenario if it existed, which it didnt. You understand what im driving at . Im trying to get your best answer on that. And i want to emphasize that this is not an argument about whether or not to regulate mercury where theres been an identified Public Health risk. Its whether the Regulatory Regime that has been defined here under section 7412, which the government says is the listing that applies to all other source categories and the d3 minimum control Technology Standards that apply to all other source categories is the right way to do it. Regardless of how you subcategorize, its going to have tremendous impacts as a result of acid gas regulation and for a pollutant that presents no Public Health risk. We cant uphold an agency rule on a ground that they didnt adopt below, correct . Thats correct. Under chennerly. So is your understanding correct that this is not an argument, a basis for decision that they adopted below . Thats correct, your honor. My understanding of the basis for the decision below is that costs are irrelevant in a determination under m1a, whether or not whether to regulate this source category under the typical subsection 7412 regime that applies to other sources. Exactly right, mr. Brownell. The agency at that point in time was only answering the very first question. The very threshold issue. And at that point the agency said costs were irrelevant. But costs become relevant later in the analysis. And in a variety of ways through the 12 1 2 , through the 12 . Through the categorization and subcategorization. Through the determination whether to raise standards even higher. So costs costs, costs later. But as to this particular thing the agency said yes here we dont consider costs. We could but we dont want to because theres all this potential for costs to come in afterwards. And your honor, its costs costs, costs. Under the statutory criteria that congress provided for setting d3 control Technology Standards and then having to find those standards at the end of the process. The agency finallizes its m1a determination in light of the costs and impacts and other factors that are mentioned. Do you think that whenever the term appropriate is used in a regulatory context in the Clean Air Act that it demands a costbenefit analysis . Your honor when you say in any context thats so broad i dont think that i can say that it would require costbenefit in any context, but in the specific context here where the focus is on whether such regulation is appropriate or necessary, that regulation has certain characteristics and consequences that weve talked about this morning including the fact that it imposes on a pollutant that presents no Public Health risk 5 million a year. Before you finish because your time is up can you clarify for me why this is at this stage something we should be concerned about because there is this Regulatory Impact assessment that i said that the benefits vastly exceed the costs. And thats an Impact Analysis that has gone through the process and they concluded the epa appropriately calculated the costs. The cobenefits, all of those benefits are cobenefits. Only 4 to 6 Million Dollars are associated with has the air pollutants. Those cobenefits that are in the Regulatory Impact analysis were not considered as part of the regulatory determination for good reason because theyre important questions regarding their legal importance and relevance under the proper standard. And what i mean, your honor, is that pm 2. 5 is the pollutant. Fine particles that is associated with these cobenefits. That is extensively regulated under the National Air Quality Standard Program. Those air quality standards were only recently revised to be tightened. And in the context of that proceeding the agency found that the low levels of exposure for these cobenefits did not produce effects or risks that were of regulatory significance because theyre too uncertain. There were serious questions about legal relevance and importance. Thank you counsel. Thank you mr. Chief justice. Section 7412 m1a should be affirmed for three basic reasons. First, it is the most natural and certainly a permissible reading of the statutory text that directs epa to focus on Health Concerns and doesnt mention costs. Second, it harmonizes the provision with section 7412s structure and design because 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 and that is to decide whether to list for regulation based on health and environmental hazards alone and consider costs in setting the Emission Standards. And third, as a matter of common sense and sound government practice it was certainly appropriate for epa to list power plants for regulation based solely on health and environmental hazards because that reflects the approach congress chose not only in 7412 in this Regulatory Program but in all of the major Regulatory Programs under the Clean Air Act. Now that you have three outs your first point you concede, dont you, that epa could have interpreted the statutory language to allow them to consider costs . I think epa read it as read the best interpretation of the statute was it didnt provide for the considerational costs at the listing stage. If you adopted a regulation that said appropriate and necessary allows us to consider costs, you think that would be appropriate . I think the phrase appropriate and necessary doesnt by its terms preclude the epa from considering costs. But under chevron what the epas got to do is explain the justification for its reading of the statute. Since youre dealing with the term as capacious as appropriate and since you could have issued a regulation allowing the consideration of costs as appropriate, youre saying that the agency deliberately tied its hands and said were not going to consider something, were going to issue a rule saying were not going to consider something we could consider otherwise . I think the best way to think about this mr. Chief justices what the agency did was decide that it was appropriate to approach the question of whether to regulate power plants in the same manner that Congress Found it was not only appropriate but mandated. I understand your argument they could have done that. But i think its unusual for an agency to say when they want to do something that thats the only thing we could do. Agencies usually like to maintain for themselves as much discretion when they can. It strikes me as unusual maybe the agency could go ahead and not consider cost. But it say that were prohibited from considering costs under the phrase appropriate it strikes me as very unusual. I dont think so mr. Chief justice. It said didnt say were prohibited from considering costs. It said we are not going to consider costs at the listing stage in making a decision about whether power plants should be listed for regulation under section 7412. I thought the rule was that the phrase appropriate and necessary did not allow them to consider costs. And appropriate and necessary goes to the question of whether power plants should be listed for regulation under section 7412 which would then kick in the regulatory mechanism by which standards were set and costs were considered at the standard. I had the same question for mr. Chief justice. Let me ask one more time. Could this agency reasonably have considered costs at stage 1 . I dont think the statutory text unambiguously forbids them from considering costs. But they determine the best reading of the statutory text is power plants after the study was conducted that congress required, epa determined that power plants are no differently situated than any other source of hazardous air pollutants regulated under section 7412. If i may. Yes. And for every other source of hazardous air pollutants what Congress Mandated as appropriate was that you do not consider costs when you decide whether to regulate, you only consider health and environmental effects and then you do consider costs under section 7412d and you set the emissions standard. How is that consistent with this statutory scheme . If your argument is that epas only reason for doing this is that it wants to treat our plants the same as other sources we know that thats what congress didnt want or it would have it would not have enacted a separate provision for power plants. I agree justice alito, that Congress Proposed different treatment for power plants. But that doesnt answer the question. That just asks the question. The question is what different treatment did congress prescribe . Now, what petitioners are arguing is that what congress prescribed and mandated was a costbenefit analysis that does not apply to any other source of hazardous pollutants. But thats not what the text or statute says and thats not what the history reflects. What the text of the statute says in 1a is even though for every other source regulation would proceed immediately, for power plants there was uncertainty about whether power plants emitted hazardous pollutants at a level that would cause problem, whether the acid rain regulations would solve the problem, and whether there were alternative control strategies available. This if i may, im sorry. Yeah, sure. What Congress Told epa to do was to study those three things. Those go to health considerations. And then once epa made a judgment about that it was to decide whether to list power plants for regulation, whether it was appropriate, necessary to list them for regulation. This is what i dont understand about your position. At least to hold open the possibility that power plants would not be listed even if their emissions exceeded the levels that would result in listing for other sources. I dont see another reason why they would treat them differently. I think if i could just continue. You may disagree with that. But it seems to me that thats a necessary inference from the statutory scheme. If that is the case what factor might congress have thought would justify allowing power plants tomeit more than would be permitted if there were other sources . Now, the petitioners have an explanation, which is costs. And they say that power plants have to bear a lot of costs that other sources dont have to bear. In particular the title 4 program. Their emissions might exceed the otherwise permissible limit because they have participated in the cap and trade program. So they have contributed to the reduction in emissions in that way in a way that wouldnt be reflected in there. In their own emissions. So that is an explanation. Cost is whats missing. I dont know what your explanation is. I know your honor asked me to accept the premise but i cant accept the premise because both the text of m1a and the legislative history tell you what krgsz Congress Left open. And they were all related to the possibility of health hazards. The argument that your honor just posed is not in the legislative history and its not in the text. And if Congress Really thought that then what they would have said to epa is push the pause button, take the three years and study, dont subject them to the same schedule as everybody else, and study the cost problem. They would have expressly told epa to study cost and they did not do that. If all they were concerned about was health why wouldnt they impose on power plants the same standard thats imposed on area sources . Just ask epa to determine whether there is i forget the exact term. But is there an effect on Public Health, a significant effect on Public Health, whatever if so list. I think they came very close to that because what they said first of all, they told epa to make its judgment after considering the results of the study and they told epa to study things that went to health hazards. So that comes very close, it seems to me, and reason it used the appropriate and necessary language rather than the language your honor suggests is because congress when it was legislating here in 1990 understood that there might well be uncertainty at the end of of the Analysis Congress directed the epa to undertake, mr. Tl might be uncertainty about the projected effects of the acid rain regulations. I think thats what the legislative history said. I do want to clear up a misconception about that i think. Which is that the way these acid rain regulations unfolded they were put in place in 1990 at the same time as 7412. But they were to unfold over a tenyear period. Five years until the first stage and then five more years until the second stage. So epa was going to have to make a longterm projection here about which there could be some uncertainty. So i think what congress was saying toechlt pa was you may need to exercise your judgment. And in fact epa did exercise its judgment because it concluded there are two parts to this argument. One is were they thinking of if it wasnt costs. I see your answer to that. But the second which i think your argument very much depends on in my mind anyway is dont worry because there is a way to take into account costs. So if in fact i mean you know, its a lot of money, 9 billion. And if you divide it by the population you have 30 a person or a family of four of 120 thats a lot of money for people. For some people. And if you say, gee, you couldnt take it into account ever, it could have been 500. It begins to look a little irrational to say im not taking it into account at all. But to say never fear. Because they will take it into account when they set standards. And at that point i read the thing about the 12 . Ive got the word similar source, which then can refer me back to the categorization of two things earlier as i say maybe, and then i have aside from that hey heres what you do. When youre regulating, you look at the top 12 generators and thats the minimum standard. So they may want to say thats not right. I mean, its right. It says it. But if you go to the bottom 50 generators youre going to see its not going to cost 120 per family, its going to cost 1,000 a family. And we have the epa saying we wont even look at that. At that point i begin to say oh my goodness, why . Why wont you even look at it . You can say it isnt true. But why wont you even look at it . And now the answers seem to me to be in that word similar source and the classes and the subclasses because were there such an argument maybe the epa could say dont worry if there is such an argument, which there isnt. We have the power here under the statute to take it into account. Now, you know where that argument came from . From discussion and thought in my chambers. Now, maybe it came out of the briefs too. But is what i say right . Can the epa take that into account or do they have to just blindly say if its the top 12 thats for everybody no matter what the cost . In which they cant take it into account ever except for the word appropriate. Now, thats the argument. You got it. My argument. Im going to make three points in response to it. The first one goes to the empirical situation in this case. But then were going to get to the theoretical question you asked me. The first is this. 9 billion is a big number. This is an industry with 360 billion a year in annual revenues. So youre talking about 2 to 2. 5 annual revenues. Of annual revenues. And what congress and what epa concluded talk about profit. This is a cost. And the cost is about 2. 5 of revenues. Whaechlt pa concluded was that about 2 of electrical generating capacity could go offline as a result of it being uneconomic. So its not a 50 or a 78 88 soon as you said that youve taken costs into account, which is what they said they wouldnt do. Let me talk about the way epa under this regime does take costs into account. The first point i would make is the situation your honor described in the hypothetical is a quite unusual one. In the normal case the 12 rule, its a technologyforcing rule, the kind your honor discussed in your concurring opinions in whitman and in enterg. Its that kind of a rule. And in the normal case its not going to have that effect. It means this percentage of the industry has been able to meet this without an operator in an economic matter and congress is trying to force the rest of the industry to catch up. And as we know from multiple experiences as your honor identified with respect to catalytic converters and Motor Vehicles and with respect to acid rain it turned out that the cost was vastly lower on industry than epa anticipated it would be. Theres a very great tendency to overestimate cost in that situation. But then the third point is your honors point about subcategories. And section 7412c1, which is the provision that governs the listing of categories, it mentions the availability of subcategories. And in fact the last sentence of it says nothing the page. Im sorry justice kennedy. Its 35a of the appendix to our brief. This is c1. And its the last sentence. It talks about the epas authority. It says nothing in the preceding sentence limits anything in the administrators authority to establish subcategories under this section as appropriate. And in fact, that is can those subcategories apply to the minimum standards . Yes. Thats how it would work because youve identified the category. And then you generate the standard based on the category. I thought the standards are automatic. There are certain minimums. Once they find on the basis of the study that these things should be listed i thought theres an automatic requirement imposed on which is the reason theyre complaining. The requirement it depends on how you categorize. And so if there were a situation if there were a situation in which one segment of the industry was so vastly different from another segment of the industry in terms of its economics, in terms of its technology, then epa would have the authority to break those into two separate subcategories and then you dont calculate the before the performing 12 which is what the standard is. Its the best performing 12 of the people you put in the category. Language that does that is the first sentence of three, which says the maximum degree that is deemed achievable not less stringent than the emission control. That is achieved in practice by the best controlled similar source as determined by the administrator. Thats what allows them to break it into categories and apply the mims to similar source. Am i right . Thats correct. And epa did that in this case. It broke out power plants that generate power, burning natural gas. And it said thats a separate subcategory. Where in the record where can you point me into the record where this argument was made or considered by the agency as opposed to Justice Breyers chambers . Because its 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. So as i said, its not something i recall from of course mr. Chief justice. Youre exactly right. In stating that principle. But our argument in this case is this question here is under m1a, m1a says epa shall regulate under this section if it determines that such regulations are appropriate and necessary. And therefore, when epa makes a judgment to regulate under this section because its appropriate and necessary epa is triggering all of youre just saying that the argument is right not that the agency made it. I guess what i would say its not enough that the argument be right. The agency must have rested its decision on the point. I think the agency in the order being challenged here did use the approach but beyond that whether or not it would be one thing if this were a case in which you had a situation in which epa or epa faced a situation in which 50 or 75 were going to face vastly uneconomic consequences, but this case didnt present that situation. Epa made a judgment about can i simplify your answer for you . Yes, id be delighted if you did that. All right. Basically, you have consistently in your brief and so has the other respondents, basically said at the listing stage we dont consider costs, we consider it later. And everybody gave a few examples. Whether this example was given or not is irrelevant. The issue here was do you have to do it at listing . Its only some of my colleagues here who are concerned that when you issue standards you never consider costs. And thats exactly right. The question here is whether epas got to conduct a costbenefit analysis when it goes to the listing. And the logic of the statute of 7412 doesnt offer at that point the game is over. No, i dont think it is justice kennedy, for several reasons. First, the standard under section 7412d for setting emissions standards once youve decided to list that is your honors question to my friend general lidstrom pointed out, that does take costs into account in the sense that a segment of the industry can operate economically. I didnt understand that. I thought there were automatic requirements imposed once the plants are listed. Once epa lists and defines the category for listing then the automatic requirement that is applied is that everyone in the category has to match the performance of the best 12 . Where did these categories come from . I really dont like the fact that your friend on the other side was not permitted to mount an argument in opposition to this categorization that Justice Breyers chambers devised. Usually they have arguments on both sides. This is an argument ive never heard of. I certainly didnt know the agency to say oh, were just listing but were going to categorize the listing. I understand your point about the focus or nonfocus on subcategories. But point that were just listing, we say that over and over again in our brief. And in fact the petitioners concede, and this is at page 5 and 6 of the uarg reply brief, that if this is just about listing that of course costs are irrelevant. But it is just about listing. That is the way the statute works. You responded to the fairly dramatic disparity your friends on the other side say 6 million benefits, 9. 6 million costs. You responded with a different calculation that looks to i call them collateral. Ancillary cobenefits. And the argument is raised that thats not quite proper because youre using your the hap regulation to get at the criteria pollutants that you otherwise would have to go through a much more difficult process to regulate. In other words, you cant regulate the criteria pollutants through the happ program so you get here weve got this tiny bit of memoriry and so were going to regulate and thats how were going to get additional regulation of the criteria pollutants. Its sort of an end run around the restriction thats would otherwise give you less control over the regulation. But whats your let me address that. Theres several points and i actually need to make all of them i think to make this clear. The first point is that thats not an argument that any party can raise. One amicus brief raised it and it and heres the problem with the argument. The problem with the argument is that is two problems. One is that once epa concludes that a source emits a hazardous pollutant, and here epas concluded that these sources emit mercury at levels that run safe. I dont think petitioners dispute that. And by the unambiguous terms of section 7412depa is under an obligation to regulate all hazardous pollutants that the source emits. And thats the d. C. Circuit in a case called National Line 15 years ago i understand how the end run works. Its not im just questioning the legitimacy of it. Because what they would say, okay, youve found a hap you that want to list. But you ought to consider only the benefits of regulating that. You shouldnt consider the bootstrapped benefits that should be addressed through the i guess the next point i would make, mr. Chief justice, is that its not an end run and continuities its not a bootstrap. This issing regulating the surrogates. Regulating the surrogates is a wellrecognized methodology that goes back decades that epa has used for decades, that the d. C. Circuit has upheld for decades but that is a perfectly appropriate way to deal with getting at metals and other pollutants that would be hard to get at directly. And in fact the very argument that your honor is positing here as an end run is one that was made in the same National Line case to the d. C. Circuit 15 years ago and the d. C. Circuit rejected. So what epa is doing here is basically what the d. C. Circuit said that section 7412d required them to do with respect to regulating every hazardous pollutant that the sources emit and what d. C. Circuit has said for decades, epa and that it isnt an end run at all this is just a normal way in which you regulate. The issue that raises the red flag at least is that theres such a tiny proportion of benefit from the hap program. And such a disproportionate amount of benefit that would normally be addressed under the criteria of the program. So its not just that yes, when youre regulating one its a good thing if it also has benefits with respect to other pollutants. But if your basis for regulating what is the benefit from the copollutants that you get . Oh, its many, many billions. Do you remember how much it is . 30 to 90 billion. 30 to 90 billion. The benefit from the mercury is what, 4 million . So you say we get to regulate this because theres a 4 million impact on mercury. But when we do that, we get to regulate 35 billion in a way that gives us 35 billion in costs on the other side. So i understand the idea that you can have you know, its a good thing if your regulation also benefits in other ways. But when its such a disproportion you begin to wonder whether its an illegitimate way of avoiding the different quite different limitations on epa that apply in the criteria. So i dont i really dont think i understand the petitioners have put the case that way, mr. Chief justice. I dont think thats a fair way to put it. What epa did with respect to mercury was quantify one of the Public Health benefits. It did not quantify one of the many other Public Health benefits. If you look in the joint appendix, page 910 to 940, theres page after page of charts which epa has listed the other benefits which come from regulating mercury and the Hazardous Substances that it didnt try to quantify. Part of the reason it didnt try to quantify is because quantifying those kinds of benefits can be very difficult and challenging and frankly that is one of the key reason thats congress adapted not only in 7412 but under the max program and the Motor Vehicle program and the new source performance Standard Program the approach it did of not taking costs into consideration at the listing stage but only at the regulatory stage. Can you tell me about the natural gas . You were cut off earlier. Epa reached the conclusion natural gas power plants ought to be a separate category. And because they didnt generate Public Health problems at the level that would make them comparable to the they were listing but not correct. They were part of the listing but they were not regulated because you yes, your honor. Can i ask you another question about these subcategories . Your argument is that under the last sentence of 7412c1 the epa can create subcategories based in whole or in part on cost. Is that right . I think its more subtle than that. I think if and its not just that provision. There are numerous provisions within 7412 that allow for subcategorization. But i think that if there is such a vast difference in the technologies that the group of entities is using, that there be that vast a difference in cost that there might well be a basis to treat them as a different subcategory. Why did the epa say that . I thought epa said we are not going to take into account costs with regard to the listing. They could have said were going to take into account costs as to whether some categories should be listed and other categories shouldnt be listed. Thats not what they said. They said we will not take into account costs with regard to listing. We list all of these heres what they said, justice scalia. And heres why they said it. And i think this is critical. What they said was that we think it is appropriate with respect to power plants not to consider costs at listing and to consider costs at Emission Standards setting. And the reason we think it is appropriate is because that is the standard, that is the regulatory logic that congress deemed not only appropriate but mandatory more every other source category. So one would have to conclude then that what Congress Said was mandatory and therefore necessarily appropriate for every other category was inappropriate inappropriate thats how i understood their argument entirely. And i did not understand it to say we can exempt some people from these minimum standards because we categorize them differently. It definitely was not that is their main argument. But i do think the point the point of the logic of epas position here is that you make the listing decision and then you regulate as m1a says sunder section 7412 and these are provisions in section 7412 that give epa the authority as i understood it please. Are there regulation thats set out the criteria for creating these subcategories . Im not aware there are. I just dont know the answer to that. We dont know to what extent if any costs are created into account in creating subcategories, do we . Its going to be based on differences in technology and operation i think from which you might be able to infer costs but thats hypothetical in this case. This is not a case in which epa needed to confront that question except with respect to natural gas fired power plants which they did find to be so different that think wanted different treatment because it didnt have the kind of problem with Justice Breyers hypothetical raised. You didnt have that kind of problem. You didnt need to face these questions and the epa didnt. I think this is quite critical. Given that 7412s rathry logic provides for listing based on health Emission Standard setting based on cost including consideration of cost and given that thats exactly the same logic under the max program, its exactly the same logic under the Motor Vehicle program its exactly the same logic under the new Source Performance Standards program, that if congress intended to mandate the epa cut so deeply against the grain and make such a radically different approach with respect to this one category of sources, we would expect to see very clear legislative language to that effect. You would expect to see a direction to epa in 7412 to study cost before making this judgment. Let me ask a question about cost. There are economic costs. There are other costs. Is it the agencys position that no cost can be taken into account for example, it may find that a particular material has an effect on health, but it may find that eliminating it will have other effects that are even more deleterious to health. Could that cost be taken into account . If i may answer mr. Chief justice, i think that cost would be taken into account in the oira Regulatory Impact analysis. Not for the listing. Not for the listing. I think thats right. Thank you. Thank you, general. Mr. Smith . Mr. Chief justice. And may it please the court. We agree with the government that the epa was not required to engage in a costbenefit analysis before making the initial listing decision to regulate hazardous pollutants emitted by power plants from applying the appropriate and necessary standard. I certainly want to acknowledge the beginning. Clearly congress did think that power plants needed to be treated differently. But what did they give them . They gave them a threeyear pause in which the epa was instructed to take account of the Health Effects of the particular pollutants emitted by power plants. They did this under an appropriate and necessary standard. If i could address the issue of what those two words mean in the reading of the epa. I would refer the court to pages 226 and 227 of the National Mining Association Petition appendix. I dont think its necessary to read from, it but what the epa said consistently throughout this record is we looked at two things. There was a claim made in the legislative history that these chemicals are simply not harmful enough to require any further regulation, that their effects are negligible, and they looked at that issue under the appropriateness rubric. And they said these are harmful chemicals, particularly mercury. In addition in this rubric they looked at the question whether or not there were technologies available to regulate them. The necessary rubric was used to look at the postClean Air Act postacid rain Health Effects that would persist. So they said a, these are harmful chemicals, harmful pollutants. And b, under necessary they will continue to be harmful after the acid rain program has kicked in. And thats how the court, the epa saw the different words, and its a perfectly logical way for them to proceed. Who would have guessed . I mean that seems such an Artificial Division of necessary and appropriate. Would you describe it again . I really didnt understand it. The claim necessary means what . The claim everybody can see its a necessary means that there will still be Health Problems after the acid rain Program Kicks in. Appropriate means . The appropriate was intended to meet the claim made by the industry that these chemicals are already sufficiently harmfree that we dont need to regulate here. Why isnt that part of the first one . It could have been done that way. They read i see. Thats the way the Government Read them. Its the only way to read them, i think. Perhaps so your honor. But the key thing is the issues they were directed to study, the issues that were then supposed to control the listing decision were the Health Effects of the pollutants that come out of these power plants. They then deferred the issue of considering a cost to the second stage just as occurs with every single other source of the same 189 hazardous pollutants that they were dealing with. If i could pause here and just clarify one thing about what happened at that listing stage. Natural gasfired plants were not turned into a category. They looked at the Health Effects of natural gasfired plants and said we are exempting them entirely from regulation under this section under the appropriate and necessary standard because they simply dont emit these chemicals in more than trace amounts and theres simply nothing for us to regulate. Natural gas plants get taken out at the listing stage. We then have coalfired and oilfired plants as to which they begin to apply the subsection d standards. Standards which were designed by congress to limit the emission regulation to reasonable amounts. Designed because the floors are in fact limited to what has already been achieved by comparable plants in the same category. There was some question raised about whether or not this categorization was something that epa recognized it could use to affect the Emission Standards and make them reasonable. In fact, as mr. Brownell acknowledged, they did create a category, a separate category of coalburning plants that burned lignite because it turns out that none of the lignite plants could meet the standards that would otherwise have applied with respect to mercury if they were in the category with the other coalfired plants. They then through this whole process looked at the issue of categorization. They started out with two coalfired categories. They ended up with they start out with one oilfired category. In the final rule there are fourp separate categories of oilfired plants depending on what they burn and how they operate. So this whole process of separating out these categories to produce Emission Standards that make sense and are practicable was built into that process under subsection d. Could you just clarify for me that the categorization happens after the listing . Is that correct . Yes, your honor. What they listed was all coalfired plants and all oilfired plants but no natural gas plants. They then go to the question of what Emission Standards should occur. With respect to other sources thats sometimes years after the listing decision is made. But they then have a process of saying what are our categories going to be . We have to put out we have to get information at that point. What are the top 12 of the category, what in fact are their emissions . They have to report in. They make a calculation about that. Arent these just requirements above the minimums that automatically apply . No, your honor. The mims are applied by the top 12 in the category that yes, but im saying the categorization that allows you to reduce some people and not to reduce others, that applies to requirements above the minimums. Your honor the mims are the things that are set by mathematical calculations from the categories. Everything else above the mims is done taking cost into account under d2 expressly. So the only thing that is done using not only express consideration of cost but consideration of cost indirectly basing the regulations on what the top 12 are doing is the minimums. And the minimums are then altered depending on what categories you establish. That is the way the regulation has worked for all the sources that theyve regulated. That is the practical mechanism just to clarify for my own mr. Smith. Its just you categorize one way, the minimums are down here. You categorize another way the minimums rupp there. Thats correct. It can make a huge difference in terms of what the minimums are. And theres a notice and comment process. They put out proposed categories, tell them empirically what we found about what the top 10 , 12 are doing. They then get comments in. And as they happened here they make different categories in the final rule adjusting. How can we tell the degree to which costs are taken into account if they are at all without knowing what the criteria are for creating these subcategories . Well, your honor its in the statute that they create the categories and applying this 12 . I dont no, no. I thought the 12 came into play after you created the category. The subcategory. So how do you i know how they create the subcategories . Well, you can see in the notice of proposed rulemaking they say here are our proposed categories. Two coal categories. One oil category. Then they get comment about how we are not what happens then is the people that comment say were so different from that category, we have these special problems we need our own separate category. And its a rulemaking after the rulemaking that applies to the listing. Is that right . Totally after, that your honor. Its the second phase. It happened here that they announced it all at the same time, that only because there had been an 11year delay. You confirmed it was not made up in my chambers. [ laughter ] the fact is they did a wonderful job figuring it out again, your honor. Right. The brief said congress esgs brief. Unambiguously required epa to consider costs at the second stage of the regulatory process. Thats what it said. A few pages later they had the statute. So not surprisingly, i read the statute. And reading the statute leads me to think it works along the lines you just said. That if you did have the most expensive set of generators in the wormdld you would ask epa to create a separate category for them in which case the top 12 would no longer be in your category and you wouldnt have to do it. And thats what happened with now what im asking is if you think its the system. Thats what i read in the statute. Esg thinks thats the system. But is there a treatise . Is there an explanation that epa has put out so that it is clear that it was not made up that its clear that this is the system that they follow, would you refer me to a source . Your honor the only source that i can refer to you and perhaps the government can supply something after it is the notice supply something after, is the notice of proposed rule making in the final rule in which all this categorization process is laid out in exquisite detail. You can see the comments that come in and say, the categories dont work we need new categories, they produce new categories. Is there something in the administrative record where epa adopts that when somebody says youre not considering costs, its a bad thing, were going to go to the Supreme Court if you dont consider cost, and epa says, oh, no were going to consider cost, were going to consider cost when we categoryize the power plants. Is there a reference to the administrative record where theres Something Like that . They certainly said, your, in notice of proposed rule making that we interpret the listing decision as being something that is based only on health and not on the listing decision is not based on cost. I want to know if theres anything there that says dont worry because were going to consider cost through the categorization process. I dont know whether they said that explicitly. That was implicit in the whole system. This is a system thats been in operation for other sources since 1990 implicit usually doesnt work when youre talking about an administrative record. Your honor they gave everybody the opportunity to attack the categories that they in fact proposed based on the argument that they were impractical for them i thought your position was that you didnt need to consider costs at the first step and that that would include your initial category. No, your honor, the categories are at the second step. The only thing that they did it the first step is say but you didnt take that second step. They did, your honor. They categorized oilfired plants into four categories. They categorized coalfired plants into various categories. That was all done through a notice and comment process which led then to different Emission Standards are you saying that was done based on cost . Yes your honor, it was done what was feasible for different technologies how much did that save . Do we know how much of the 9. 6 billion cost would be reduced by this categorization . Your honor thats the problem here. I dont have that calculus. I would point out that its important to recognize that Something Like 90 of that 9. 6 billion 90 of the capital costs which is most of the that 9. 6 billion has now already been spent. And industry has not experienced the kind of upreveals that are being described. The rule takes effect in the middle of april. So the idea that the result here was somehow ludicrous or out landishly expensive is belied by the fact that the industry is bringing itself into full compliance instead of going to jail. Is that it . In line with federal law ludicrous but it had to be done. The idea that the 4. 6 million benefit is the proper compare for is wrong on so many different levels. First of all, that was a single one Single Health benefit related to mercury is the 9 billion a year recurring annually . Are you saying that most of this is Capital Investment most of it is amortization of the Capital Expenditures that have already been made. In all the briefs from the petitioners. There will be its Something Like 40 will be operating costs, 60 is amortized capital costs, your honor. The industry has been able to do this and the situation now is were ready to finally have National Standards which mean that not the states that have been regulating in this area strenuously wont continue to have mercury flowing across state lines that they have. We have this national, highly competitive electricity market where some companies have costs reflect theyre in compliance some dont. That is a problem that really needs to be solved i want you to finish your thought. The 4 billion that theyre referring to 4 million. Is only mercury. The agency did not quantify all of the other costs for the other haps, correct . Actually it didnt quantify many if not most of the costs for mercury. More curry causes developmental delays, attention deficit order, all these order things that are not quaund guide. It causes cardiovascular problems its an extremely poisonous neuro toxin. The other thing about the 30 billion to 90 billion, that is accumulate particulate production. And some of the particulate produced is haps. It is mercury that sometimes goes out in the form of particles. It is the acid gases which when they get out in the atmosphere turn into particles because they become aerosolized. They go into your lungs as tiny droplets. Is all of those are in fact being taken care of in the controls of particulate. It is true that in controlling those haps you use the same technology and you end up controlling a lot of other kinds of particulate, primarily sulfur dioxide, which causes premature deaths. And so when they did the calculation they said, we put these particulate controls in to control haps. It happens to save lives because of sulfur dioxide thats not otherwise being controlled. So well tell you all the lives were saving, not just some of those lives. Was this the basis for the epas position . I thought the position was, does it matter how much the benefit how much the costs exceed the benefits we just will not take costs into account at the listing stage . Is that correct, your honor. They did not consider the cost benefit natural sister at the listing stage. Thats based on their quite reasonable i think terms of the statute, a statute with respect to every other source has conceded you dont do the cost benefit analysis up front. The statute came out of a period of regulatory paralysis of 20 years where eps wasnt regulating effectively. Congress came in and said, were going to force regulation of these chemicals that are being spewed into the environment and causing all these Health Effects. It gave one benefit to the power plant industry, three years you can prove there arent really Health Effects that are serious. But it didnt give them the benefit of having a cost benefit analysis done up front or create all the discretion in the world on the part of eps simply to say, we dont think you should regulate this particular category. Thank you, mr. Smith. Mr. Lindstrom, you have four minutes remaining. Thank you mr. Chief justice. Any subcategorization that was going to happen has already occurred because were talking about the rule thats been promulgated. And despite any subcategorization that happened theres still 9. 6 billion in costs that are being imposed on annual basis it wasnt the question presented. Is the question presented that not that you have to take that into account at listing but that somehow that ratio makes any emissions standards wrong . The question is whether even if for some people its really not backbreaking to do it . The question is whether costs have to be considered under n1 when youre regulating electric utilities they do say it does when youre regulating. The emissions standard. They say its being done physical you think about this what happens under 7412c is youve got a listing decision at the first stage, then youve got a floor standard, then youve gotten above the floor standard thats not youre taking out the categorization. If by they dont establish the floor until theyve categorized, correct . Categorization could happen here. My point is what happens under n1 is these first two steps are merged. Youre making the necessary and appropriate determination when youre looking at at it to list whether such regulation is appropriate and necessary. Thats the language in the statute. It says, is such regulation appropriate and necessary . So its not just whether its going to be listed. Its looking at whats actually going to happen. Thats why they did both at the same time. Why they made the appropriate and necessary at the same time. They published the Emission Standards. They were looking at the costs they had, they didnt know what the costs were going to be youre saying they purported to make the categorization decision without taking into account costs . Yes. Any categorization theyve done has already been done and they didnt consider costs. Didnt consider costs. Thats correct. And again, id like to return to one of the bigpicture principles which, is this is an Administrative Law case so it does this turns or falls on what the agency actually did below. So theyve actually made determinations that said costs are not relevant. Theyve ignored an important part of the regulatory problem. Im sorry. They proposed categories. And everybody had the opportunity to say its the wrong category. Correct . Yes your honor. And argue why its the wrang category. And the categories some people submitted complaints about costs relative to their technology and their kinds of plants, correct . Yes, your honor. So its not true that they proposed them, but everybody gets a chance to tell them these are this technology is different from the others or this kind of plant is different from the others and imposes a cost much greater than youre anticipating. Im saying were already past that phase. Theyve already any categorization they were going to do has already been done. What youre saying, its already past its past because thats been the final rule has been issued. Correct. Im talking during the rulemaking process. The rulemaking process does permit the agency to consider the cost of technology. In setting up categorizations. Theyve adopted the exact opposite position which is that cost dozen not matter. I thought we just heard that saying the league night people, i cant remember if thats the right name they said look we have special ways of producing our stuff stuff and theyre much more expensive so please dont put us in the same category as you put the other people in okay . For purposes of figuring the best 12 . And the agency said, right. Okay. Separate. Now, did that happen . Yes. All right, how would you do that without considering costs . Because their basis bass the league night people were saying our costs are more expense we dont know i dont know how they did it. They said throughout that were not considering costs. Thank you, your honor. Thank you counsel, the case is submitted. With congress out this week for the spring recess were featuring American History tv in primetime. Up next, part one of a twopart interview with daniel ellsberg. While working at the Rand Corporation in