What will last week's moves by U.S. EPA on ozone standards and the Supreme Court on the agency's mercury rule mean for the future of air regulations? During today's OnPoint, Thomas Lorenzen, a partner at Dorsey & Whitney and the former assistant chief in the Environment and Natural Resources Division at the Department of Justice, discusses the significance and impact of both actions.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Thomas Lorenzen, a partner at Dorsey and Whitney and the former assistant chief in the Environment and Natural Resources Division at the Department of Justice. Tom, it's great to have you back on the show.
Thomas Lorenzen: Great to be here again, Monica.
Monica Trauzzi: Tom, it's been a busy few weeks for U.S. EPA. Just last week the agency released its newly proposed ozone standards, which many are classifying as aggressive. What's changed since 2011 when the agency took a step away from something that looked very similar to what they released?
Thomas Lorenzen: Well, what's changed since 2011 is that we're not facing the re-election of President Obama in 2012. EPA really announced back in 2009 that the 2008 ozone standard of 75 parts per billion was not adequate. And in fact, in the opinion of Lisa Jackson, then head of EPA, it wasn't legally defensible. EPA was proceeding down the road towards precisely what they proposed last week, but withdrew it because of the perceived impacts on the economy at the time and the possible effects of that perception on the outcome of the 2012 election. We're beyond that.
Monica Trauzzi: Is it legally defensible now?
Thomas Lorenzen: Is the 2008 ozone standard legally defensible? The D.C. Circuit upheld it just last year in a case. EPA was forced to defend that standard after it withdrew its proposal to knock the standard down. The D.C. Circuit upheld that 2008 standard based on the information that was available to the agency in 2008. So what has changed, perhaps, is that we now have five or six years of additional accumulated evidence that EPA says it can point to, of the health effects of heightened ozone.
Monica Trauzzi: And the administrator highlighted that there are some clear health benefits to this proposal. What do you see as the costs versus benefits of this plan?
Thomas Lorenzen: Well, the costs, you know, we're talking about a plan that, at 70 parts per billion, will put 358 additional counties in the United States into nonattainment. If you knock this down to 65 parts per billion, which is within the realm of possibility, EPA's proposed it, that's an additional 200 counties beyond that, so 550-some counties in the U.S. that would have to now take significant additional steps to reduce ozone. Many are saying it will be difficult, if not impossible, to do so. So the cost could be billions. The benefits, according to EPA and the science, are reduced asthma, reduced hospitalization, other respiratory ailments, health benefits.
Monica Trauzzi: Last week we also heard from the Supreme Court that the justices will consider EPA's controversial mercury rule. The question there will be whether EPA should have considered compliance costs before proceeding with the regulations. How is this case significant in the broader context of EPA's air regulations?
Thomas Lorenzen: It's significant because, to this point, the courts have been fairly clear that, unless the statute specifically mandates the consideration of cost, consideration of cost is discretionary within the agency's, pardon me, discretion. They get to decide whether an unclear statute requires consideration of costs, doesn't or whether they have some room to wiggle. Here they determined that they didn't have to consider costs at the first stage of determining whether to regulate power plant emissions and they would consider it later in determining what level those regulations should be set at.
Monica Trauzzi: So cost is likely to be an issue with the Clean Power Plan as well. Does the outcome of this case directly tie into what potential litigation we could see on the Clean Power Plan and the outcome of that?
Thomas Lorenzen: It depends. It depends on where the court goes with this. If the court comes down and basically adopts Judge Kavanaugh's dissenting opinion from the D.C. Circuit that it is crazy not to consider the costs of regulation when adopting something that is potentially very burdensome and enormous in scope, then yes, it could conceivably have an impact on what EPA's permitted to do under Section 111 in the Clean Power Plan. If, on the other hand, the court is just interpreting what is this term appropriate mean, 112 and 1(A) is a very particular provision of the Clean Air Act, and it just deals with regulation of power plant emissions. It says that EPA is to conduct a study of the health effects of power plant emissions. And then after considering the health effects that are shown in that study, determine whether it's appropriate and necessary to regulate those power plant emissions. The court could confine its analysis to those very particular terms. If it does, it will have no bearing whatsoever on Section 111, which doesn't use that term.
Monica Trauzzi: So the court has deferred to EPA in the most recent cases. We could potentially see something different this time around.
Thomas Lorenzen: You could. There are at least four justices on the Supreme Court who think that there ought to be, or at least it's a reasonable question, whether there ought to be consideration of costs in determining whether to regulate. There are cases that hold, for instance, like Whitman v. American Trucking, which had to do with establishment of national ambient air quality standards, that where the standard points you to consideration of health effects only or health and welfare, consideration of costs is precluded. There's no such language in 112 and 1(A) that directs EPA to only consider health and welfare. So when the statute has the ambiguity, then it just says it's appropriate. Is it, nonetheless, arbitrary and capricious not to consider those costs?
Monica Trauzzi: This week also marked the close of the public comment period on EPA's Clean Power Plan. Over 1.5 million comments, pressure from all sides on the agency. How aggressive do you anticipate the agency will be in changes we see from its draft proposal to the final rule?
Thomas Lorenzen: I think there will be some changes. They have recognized that a number of states, the base lines from 2012 were miscalculated. They will have to adjust those. There are some very difficult issues before the agency regarding consideration of, for instance, under-construction nuclear plants. Should those have been considered in the 2012 base line or should they be considered like every other renewable or zero-emitting resource and credited towards compliance but not towards calculation of that target? Will they significantly change the 30 percent goal that they're seeking to get? I don't think so. And one reason is that the United States committed about two weeks ago with the Chinese to obtain 26 to 28 percent reductions from 2005 levels by 2025. The only way you get that is by sticking pretty close to the goals that EPA has already proposed in this rule.
Monica Trauzzi: All right. A lot for us both to keep our eye on. Thank you so much for coming on the show, as always.
Thomas Lorenzen: Thank you very much, and happy holidays.
Monica Trauzzi: Thank you. You too. And thanks for watching. We'll see you back here tomorrow.
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