Posted on February 23, 2022 by Karl S. Coplan
The law of regulatory cost benefit analysis just became even more incoherent under a ruling of the Western District of Louisiana enjoining implementation of President Biden’s executive order setting parameters to establish the social cost of carbon for use in regulatory analysis. Invoking the “major questions doctrine,” the Court in Louisiana v. Biden reasoned that E.O 13,990’s direction to consider the value of global environmental harms flowing from greenhouse gas emissions could not be adopted absent a clear statutory mandate to consider extraterritorial benefits of regulatory action.
Cost benefit analysis for Clean Air Act regulations has a tortuous history, which just got more twisted.
In 2001, the Supreme Court ruled in Whitman v. American Trucking Association that EPA must not consider regulatory costs in establishing health based National Ambient Air Quality Standards for ozone and particulate matter. Justice Scalia’s opinion for the Court reasoned that the statute made clear that the NAAQS were to be based solely on public health considerations, and, in language that was to become the touchstone of the major questions doctrine, Congress does not “hide elephants” (i.e., cost benefit analysis) in “mouseholes.”
Of course, notwithstanding Whitman, regulatory agencies have been including cost benefit analysis in regulatory review under executive orders issued and renewed by every Presidential administration since Ronald Reagan issued E.O. 12,291 in 1981, requiring that “Regulatory action shall not be undertaken unless the potential benefits to society for the regulation outweigh the potential costs to society.“ Indeed, it is a little known fact that stringent proposed health-based ozone and PM-10 NAAQS were abandoned by the Obama Administration during regulatory impact review based on the exact sort of cost benefit analysis the Supreme Court said EPA must not consider. The regulatory review executive orders have been issued not pursuant to statute, but under the President’s inherent authority to supervise agency administration within the executive branch. Each regulatory executive order included a disclaimer that it did not purport to modify any statutory standards for regulatory action.
The Supreme Court clouded Clean Air Act cost benefit analysis in its decision in Michigan v. EPA, ruling (in another Justice Scalia opinion) that under an open-ended statutory standard for regulatory action, consideration of regulatory costs was not only permitted, but required before regulatory action. The Court sent EPA’s determination that it was “appropriate” to regulate coal fired power plants under the air toxics provisions of Clean Air Act § 112 back to the agency for reconsideration.
Now, the Western District of Louisiana has enjoined the Biden administration from considering global regulatory benefits of regulating greenhouse gases, reasoning that there is no clear statutory authority to place a value on global environmental benefits of regulatory action during regulatory impact review. If this decision holds, then apparently (1) cost benefit analysis is precluded under specific regulatory standards that do not include cost (Whitman), (2) cost benefit analysis can be applied anyway, without statutory authorization, by executive order, (3) costs must be considered under open ended statutory standards (Michigan), (and 4) extra-statutory regulatory review of costs and benefits established by executive order cannot be modified to expand consideration of benefits without clear statutory authority (Louisiana v Biden). There are any number of reasons that the Western District of Louisiana’s decision may not hold (ripeness is a real issue in the case), but at least for now, the law of regulatory cost-benefit review just became more incoherent than ever.