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Sharp Legal Strategy in the Successful Challenge to Obama's Air Quality Rule

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On Tuesday, a three-judge panel threw out an EPA rule that would have dramatically decreased interstate air pollution. The EPA's rule had enormous benefits, estimated between $120 and $280 billion per year, with low costs that total less than $2.5 billion. The rule was anticipated to save tens of thousands of lives and prevent over a million missed days of work or school per year.

The court explicitly argued that its decision "should not be interpreted as a comment on the wisdom or policy merits of EPA's [rule]." But those policy merits, which are profound, do increase the stakes.

This decision is clearly a defeat for the environment, but it is bad news for business too. The court's opinion will make it even more difficult for EPA to reduce pollution through market-based approaches. The court narrowly construes the Clean Air Act to hamper a full interstate marketplace, reducing the ability of polluters to take advantage of low-cost emissions reductions. While some polluters may be happy to put off emissions reductions in the short term, the long-term effect of today's ruling is to increase the cost of pollution reduction for everyone. It will harm millions of Americans -- who will continue to be struck by preventable illness and death -- as well as the economy, which will be forced to shoulder unnecessary costs.

We disagree with the substantive conclusions of the court, and think that the Clean Air Act should be interpreted more generously to allow for market-based trading programs. But there is an even more fundamental problem with the decision.

As Judge Judith W. Rogers explains in her dissent, the rule's challengers did not make their specific complaints about EPA's market-based approach during the notice-and-comment period. The issues that formed the basis of the majority opinion were raised by petitioners for the first time in their briefing in the D.C. Circuit. It's possible to guess at why: industry and states recognize the tremendous cost savings that can be achieved through trading programs. They may not have wanted to raise these issues at the rulemaking stage because it might have goaded EPA into adopting a command-and-control regulation model. So they held onto their criticisms, allowed EPA to move forward with a market-based plan, and then slapped them with a lawsuit to overturn the entire rule.

The majority argues that EPA was presented with the industry argument because the agency had dealt with similar issues in an earlier rulemaking. But this expansion of the record for judicial review has several troubling consequences. Most importantly, it denies members of the public the opportunity to dispute the arguments that will be examined by the court, unless they too are expected to comb through past administrative records to identify the central questions.

Secondly, it presents the agency with the extraordinary challenge of responding not only to the actual comments received, but any past comments that were relevant in similar rulemakings. Finally, it reduces the incentive of challengers to signal the most important issues to the agency so that they can be addressed without litigation.

This legal gambit seems to have worked, and that is unfortunate. It is a foundational premise of administrative law that an agency's decision can be challenged only on the basis of arguments that were presented to the agency during its rulemaking process. This principle is meant to discourage exactly the kind of result that occurred in this case. An interest group displeased with an agency decision did not give the agency the chance to alter a rule and avoid litigation. Instead, they held on to their arguments and fought the regulation, successfully, in court. The result is a massive waste of agency resources and court time and a large, unnecessary delay in achieving the important net benefits of this rule.

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