Notice & Comment

Wednesday’s Good Neighbor Argument Showed Why the Supreme Court Should Not be a Court of First Instance in Complex Administrative Law Cases, by Megan M. Herzog and Sean H. Donahue

On Wednesday, the Supreme Court heard oral arguments on a set of stay applications, consolidated under the caption Ohio v. EPA, that ask the Court to block the Environmental Protection Agency’s Good Neighbor Rule. The rule sets out requirements for 23 upwind states to meet their obligations under the Clean Air Act not to contribute to downwind states’ violation of updated health-based standards for smog pollution. The Act’s Good Neighbor Provision, 42 U.S.C. 7410(a)(2)(D)(i), recognizes the federal government’s indispensable role in protecting against the cross-border pollution that is a structural hazard in a federal system. It reflects repeated refinements and strengthening by Congress. 

Conservative attorneys general and polluting industries filed these stay applications to block the rule while the D.C. Circuit decides whether their legal challenges to the rule have any merit. (The court of appeals itself denied such relief). As for what EPA supposedly did wrong, the applicants’ claim boils down to flyspecking EPA’s explanation of the rule based on events that occurred after EPA approved it. The applicants do not argue that EPA lacked statutory authority to issue this rule (the Clean Air Act clearly required EPA to issue it). Nor do they argue that the agency’s approach exceeds its statutory authority (EPA used the same framework the Supreme Court upheld in a decade-old, 6-2 decision). Instead, they argue that EPA did not sufficiently consider what might happen if any 1 (or combination of) those 23 states drops out of the federal plan – as has temporarily happened due to judicial stays of separate administrative actions affecting 12 of the 23 originally covered states. The upshot of their argument is that the Good Neighbor Rule would be valid if EPA had said just a little more about that scenario.  

That argument runs headlong into just about every basic administrative law principle that applies when a court reviews an agency’s actions. Those flaws would have been clearly exposed had this case proceeded in the ordinary course of things, with merits briefing on a schedule that allows for full development of the issues and arguments before a court that gets the benefit of that briefing. But because the Supreme Court has deviated from that ordinary course by crediting these hyper-ambitious stay applications, Wednesday’s argument was marked by incorrect assumptions about the rule’s basic mechanics. 

Basic Administrative Law Principle #1: You Can’t Fault the Agency for Not Addressing Something That You Didn’t Ask It to Consider

At oral argument, the applicants described their problem with the rule as follows. EPA set a cost-threshold at which emissions reductions were deemed “substantial” (and thus required) in the rule, which covered 23 states when it was issued.  But EPA did not consider whether “the relevant cost threshold for a different mix of states could be cheaper.” 

But the cost thresholds very likely wouldn’t change, regardless of whether the rule has 23 states or 11 (or 4, or 31, etc.).  EPA’s conclusion that cost-effective control measures were widely available for power plants was based on a survey of the nationwide fleet, and was not dependent on the number of states in the rule. And for industrial sources, EPA identified control technologies and their costs by looking at examples in nationally-applicable standards, as well as standards not just from the states regulated in the rule but from other states as well. Indeed, even if every upwind state dropped out of the Rule except the upwind state with the smallest allowable emissions “budget” under the rule (New Jersey), the Good Neighbor Rule would still validly apply to that one state. Not only would EPA have authority to address that state, but EPA would have a duty to do so.

But here’s the critical thing. Neither the applicants nor other commenters told EPA that they thought a different mix of states might affect the cost threshold, or even asked EPA to better explain whether it might.  If any commenter had, you’d have expected the applicants to point to them in their briefing.  But none of the comments they cited contains any such argument (briefing linked hereherehere, and here).   

And the Clean Air Act requires more from challengers to important public health rules than just raising the general issue. It expressly provides that “[o]nly an objection . . . raised with reasonable specificity” in comments may be raised on judicial review. 42 U.S.C. s 7607(d)(7)(B). The applicants’ comments don’t come close.

Basic Administrative Law Principle #2: Agencies Don’t Have to Consider Insubstantial Comments

The applicants’ core argument is that “the EPA had an obligation to consider what happens to the federal plan when one or more states drop out, that is, when the inputs, 23 states, don’t match the outputs, now the 11 states that remain in the plan.”  The most likely explanation for why no commenter asked EPA to address the issue is because this Good Neighbor Rule, like past rules, expressly recognizes that the mix of states covered by the Rule will change over time.  That’s because the Clean Air Act only allows EPA to issue a rule to cover a state if the state doesn’t submit an adequate plan of its own; if a state later submits an adequate plan of its own, then it can exit the Rule and operate under that state plan.  EPA’s Rule contains 5 pages laying out that process. (88 Fed. Reg. 36,654, 36,838-43). Agencies need only respond to significant comments, or those that go to the fundamental premises of the proposed rule and would require the agency to change course.  No commenter asked EPA to say more about any effect that a state’s exit would have on states remaining in the plan, presumably because they’d be asking EPA to engage in an exercise in futility: considering the millions of possible combinations (more than 8 million) of 23 states that could be covered by the rule. 

Basic Administrative Law Principle #3: Courts Don’t Strike Down Agency Action for a Procedural Error Unless the Error Affected the Outcome. 

Applicants don’t even claim that there is any practical problem with an 11-state rule. They admit the number of states in the rule may not make any difference to how it works.  Oral Argument Transcript at 9 (“I can’t tell you what that looks like, whether there is a difference in the obligations or not”), 5 (“with full candor to the Court, it could be the same”), 6 (“it could be the same or even be more expensive. The problem is we don’t know.”). They are resting—as to this claim, the main one in the case—on the purely procedural objection that EPA didn’t sufficiently explain itself. 

But it is black-letter administrative law that procedural errors only matter if they are prejudicial, and challengers to a rule bear the burden of showing prejudice.

The Clean Air Act’s adaptation of the harmless error rule is especially demanding when it comes to important clean air rules, providing that courts “may invalidate [those rules] only if the errors were so serious and related to matters of such central relevance . . . that there is a substantial likelihood that the rule would have been significantly changed if such errors had not been made.” 42 U.S.C. 7607(d)(8)-(9). Here, there’s no likelihood that further explanation would have led EPA to significantly alter this rule. The agency recognized that states may enter and exit the federal plan—as states have done historically under previous Good Neighbor rules—and said it intended for the rule to reduce pollution from the states that are covered, regardless of exactly how many states that may ultimately be. 

Basic Administrative Law Principle #4: If an Agency’s Only Error Is Not Giving Enough of an Explanation for Its Action, Courts Generally Leave the Action in Place While the Agency Provides That Explanation 

Again, the applicants made clear at yesterday’s argument they’re not even claiming EPA’s supposedly insufficient explanation was likely to have affected the outcome. Oral Argument Transcript at 5 (“with full candor to the Court, it could be the same”). But when an agency’s only error is insufficient explanation, agency rules that provide important benefits are typically left in place while the agency provides more explanation.  Striking rules down in that circumstance, courts have decided, would be disruptive and harmful: it would create the very dangers (here, tens of millions of people exposed to unhealthy air pollution) that Congress intended the agency to prevent. That’s why the appropriate remedy in these situations—and the only remedy that the applicants could possibly show a likelihood of winning—is “remand without vacatur.” Such remedies are particularly appropriate where, as with the already-in-effect Good Neighbor Rule—the regulations are already in effect, already providing important public health protection and engendering reliance from power plants engaged in the rule’s emissions trading program.

If the Supreme Court stayed the rule now on grounds of EPA’s allegedly insufficient explanation, it would give the applicants more relief than they would be likely to get if they ultimately prevailed. That doesn’t make sense, and it’s completely at odds with the rule that courts are supposed to be more circumspect in the preliminary, emergency posture we’re in now.

*Bonus* Clean Air Act Principle: Congress, in the Good Neighbor Provision, Did Not Espouse “Neutrality” When Weighing Harms and Hardships to Downwind States with Respect to Interstate Pollution

The stay applicants claim irreparable harm primarily from the costs to emitters of complying with the rule. These claims are far from compelling because the rule is phased in, and requirements are very modest during the near-term period relevant for stay purposes (for power plants, they reflect the costs of operating existing pollution controls, costs associated with requirements that do not require reductions until 2026).  Ranged against this are harms to public health and welfare from smog pollution in the downwind states. The suggestion arose at argument that since both sides claimed harm, everything should turn on the Court’s assessment of the merits. But the balance of hardships does not drop out of the analysis simply because some set of parties may be harmed regardless of the Supreme Court’s ruling. This premise is especially flawed in this context—in enacting the Good Neighbor provision, Congress recognized that upwind states already get the benefit of economic activity while exporting health or environmental costs, and while downwind States are saddled with someone else’s pollution, for which their residents and businesses received no benefit. A regime that restores this “status quo” — leaving widespread cross-boundary pollution unremedied — defies Congress’s core judgment. Leaving the full responsibility on downwind States, even at a cost (as is the case with some of the downwind states here) orders of magnitude larger than what it would cost the upwind source to abate their fair share of the mess, is not only highly inequitable, but also contrary to basic judgments reflected in the Clean Air Act.  

It is no answer that, even if a stay is granted, things could be fixed if EPA wins in the end. Health harms suffered in downwind states while the stay is in effect are irreparable, and the Clean Air Act itself recognizes this by establishing a rigorous system of deadlines compelling states in “nonattainment” to restore healthy air.  A stay would cause the very sort of injuries the Clean Air Act seeks to prevent, and the resulting delay would provide a basis for opponents of regulation to try to push back compliance obligations even after an ultimate court decision upholding the rule.

Megan M. Herzog and Sean H. Donahue are partners at Donahue, Goldberg & Herzog, which represents the Environmental Defense Fund, a respondent-intervenor in the Good Neighbor Rule litigation.

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