A 'Cost-Benefit State'? Reports of Its Birth Have Been Greatly Exaggerated

Date01 November 2016
11-2016 NEWS & ANALYSIS 46 ELR 10933
A “Cost-Benef‌it
State”? Reports
of Its Birth Have
Been Greatly
by Amy Sinden
Amy Sinden is the James E. Beasley Professor of Law
at Temple University. She also sits on the Board of
Directors for the Center for Progressive Reform.
In a spate of recent cases (Michigan v. EPA, EME
Homer City v. EPA, and Entergy Corp. v. Riverkeeper),
the U.S. Supreme Court has been widely viewed as
abruptly changing course in its treatment of cost-
benet ana lysis (CBA) in environmental decision
making. In fact, these cases represent less of a change
in course than is commonly believed. ey did not
so much eliminate the Court’s previously emerging
anti-cost presumption as narrow and perhaps more
clearly dene it. e term “cost-benet ana lysis” can
refer to a broad range of decisionmak ing techniques,
and an even longer list of methods involve agencies
“considering costs” in one way or another. ese cases
indicate that the Court’s anti-cost presumption no
longer applies to informal CBA or feasibility analysis,
but they do nothing to disturb the presumption as
applied to other cost consideration tools. Indeed,
Riverkeeper can be read to at least gesture in the
direction of a continuing presumption against formal
CBA. It is not entirely clear that Michigan articulated
a pro-cost presumption at all, but to the extent it did,
that presumption can be read to exclude or at least
de-emphasize formal CBA.
In Michigan v. Environmental Protection Agency,1 the
U.S. Supreme Court waded into the decades-long
debate over the use of cost-benet analysis (CBA) in
environmental rulemaking.2 e decision struck down the
U.S. Environmental Protection Agency’s (EPA’s) limits on
mercury emissions from power plants for the Agency’s fail-
ure to consider costs, and so appears, supercially at least,
like a w in for the pro-CBA camp. Prof. Cass Sunstein,
President Barack Obama’s former “regulatory czar” and
one of CBA’s most prominent cheerleaders, viewed it that
way, heralding the opinion as a “rie shot” ringing in the
arrival of the “cost-benet state.3
Indeed, this is t he third in a recent spate of Supreme
Court opinions that seem to suggest—at rst blush, any-
way—that the Court may be reversing what had previ-
ously begun to look like a presumption disfavoring CBA.4
In Environmental Protection Agency v. EME Homer City
Generation,5 the Court upheld EPA’s consideration of costs
in setting limits on air pollution that crosses state lines, and
in Entergy Corp. v. Riverkeeper,6 the Court upheld EPA’s
use of CBA in setting sta ndards for cooling water intake
structures at power plants. But whi le the earlier rulings
simply ratied agency decisions to consider costs, Michigan
1. 135 S. Ct. 2699, 45 ELR 20124 (2015).
2. Compare R L. R  M A. L, R R-
: H C-B A C B  P  E-
  O H 13-16 (2008), and M D. A 
E A. P, N F  C-B A (2006),
and C R. S, T C-B S: T F  R-
 P 19-20 (2002) [hereinafter S, C-B
S], and John D. Graham, Saving Lives rough Administrative Law and
Economics, 157 U. P. L. R. 395, 429, 432-38 (2008), and Edward J.
M, C-B A 390 (1976), and A.R. Prest & Ralph Tur-
vey, Cost-Benet Analysis: A Survey, 75 E. J. 683, 683-85 (1965), with
D A. K, R F N: E L
  S  O 104 (2010), and F A 
L H, P: O K  P  E
  V  N (2004), and S A. S  R
L. G, R R  R: R  P A-
 (2003), and M S, T E   E: P-
, L,   E (1988), and Amy Sinden, In Defense of
Absolutes: Combating the Politics of Power in Environmental Law, 90 I L.
R. 1405, 1410, 1452-60 (2005), and Steven Kelman, Cost-Benet Analy-
sis: An Ethical Critique, R. 33 (Jan./Feb. 1981), and A S,
T B P   U S 344-46 (1955).
3. Cass R. Sunstein, anks, Justice Scalia, for the Cost-Benet State, B-
 V, July 7, 2015. See also Cass R. Sunstein, Cost-Benet Analysis and
Arbitrariness Review (draft, SSRN, 2016); John D. Graham & Paul R. Noe,
A Paradigm Shift in the Cost-Benet State, RB, Apr. 26, 2016.
4. See Whitman v. American Trucking Ass’ns, 531 U.S. 457, 470-71, 31 ELR
20512 (2001) (holding that in the absence of a “clear” “textual commit-
ment,” provisions of the Clean Air Act (CAA) must be read as precluding
consideration of costs); American Textile Mfrs. Inst., Inc. v. Donovan, 452
U.S. 490, 510, 11 ELR 20736 (1981) (“When Congress has intended that
an agency engage in cost-benet analysis, it has clearly indicated such intent
on the face of the statute.”); Union Electric v. Environmental Prot. Agency,
427 U.S. 246, 257, n.5, 6 ELR 20570 (1976) (“Where Congress intended
the Administrator to be concerned about economic and technological infea-
sibility, it expressly so provided.”).
5. 134 S. Ct. 1584, 44 ELR 20094 (2014).
6. 556 U.S. 208, 39 ELR 20067 (2009).
Author’s Note: anks to Sid Shapiro and Marcia Mulkey for
comments on an earlier draft, and to Zyg Plater for helpful
conversation about Tennessee Valley Authority v. Hill.
Copyright © 2016 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.
marks the rst time the Supreme Court has actually forced
cost considerations on an unwilling agency.
Nonetheless, we should not rush too quickly to ring in
Professor Sunstein’s cost-benet state. Appeara nces can be
deceiving. e term “cost-benet a nalysis” can refer to a
broad range of decisionmaking techniques, and an even
longer list of methods involve agencies “considering costs”
in one way or another. ere remains a fa irly wide gu lf
between the kinds of analysis the Court endorsed in these
cases and the par ticular brand of CBA that Professor Sun-
stein advocates. ere is, in fact, good reason to believe
that the Court remains quite skeptical of Professor Sun-
stein’s cost-benet state.
Agencies have many ways of considering costs in regula-
tory decisionmaking that are entirely distinct from CBA.7
e U.S. Congress has f requently, for example, directed
agencies to set environmental standards through the use of
various forms of feasibility ana lysis.8 ese kinds of analy-
ses consider costs in order to identify the most stringent
level of environmental protection that is economically and
technologically feasible, but do not balance costs against
benets as CBA does. Cost-eectiveness analysis—a nother
common tool used by agencies—considers costs but does
not involve CBA either.9 It takes a single regulatory goal
(like saving a human life) and compares the costs of reach-
ing that goal under various regulatory alternatives. So,
when the Supreme Court suggests a presumption in favor
of considering costs, as it did in Michigan, that is a very dif-
ferent matter from t he Court endorsing a presumption in
favor of cost-benet analysis, as Professor Sunstein claims.10
Even CBA itself comes in many forms —from an infor-
mal, intuitive balancing of qualitatively described pros and
cons, to a formal, quantied method grounded in wel-
fare economics.11 Congress and the courts have generally
favored the informal kind.12 Yet, the CBA that Professor
Sunstein envisions for the cost-benet state is well toward
the formal end of the spectrum.13
At its most formal, CBA requires quantify ing and mon-
etizing all of the social costs and benets of a regulation and
a host of incrementally varying alternatives, discounting
to present net va lue, and nding the point of net benets
maximization where the marginal cost curve intersects the
marginal benets curve. is is the kind of CBA embodied
in the CBA Executive Orders and promoted by the White
House Oce of Information and Regu latory Aairs
7. Amy Sinden, Cost-Benet Analysis, in E E E
 E L, V II, E D M
(Glicksman & Paddock eds., forthcoming).
8. See generally David M. Driesen, Distributing the Costs of Environmental,
Health, and Safety Protection: e Feasibility Principle, Cost-Benet Analysis,
and Regulatory Reform, 32 B.C. E. A. L. R. 1 (2005).
9. See, e.g., E J. M  E Q, C-B A 8
(5th ed. 2007).
10. Sunstein, Cost-Benet Analysis and Arbitrariness Review, supra note 3. See also
Driesen, supra note 8, at 6 (noting that CBA is often erroneously equated
with consideration of costs).
11. Amy Sinden, Formality and Informality in Cost-Benet Analysis, 2015 U
L. R. 93 (2015).
12. Id. at 129-47.
13. Id. at 164-65.
(OIRA).14 It is also the kind that has generated enormous
controversy for decades because it requires putting a dollar
value on intangibles, like good health and a clean environ-
ment, that are impossible to measure in monetary terms.
It was undoubtedly these kinds of concerns that led the
Supreme Court to apply a presumption against CBA in a
number of cases in the 1980s, 1990s, and early 2000s.15
Indeed, its 2009 decision in Riverkeeper, upholding EPA’s
cooling water rule for power plants, marked the rst time
the Court had ever upheld an environmental agency’s use
of CBA.16 is was a big deal. But it was not as big a deal as
some have made it out to be.17 e Court did not employ
its earlier anti-CBA presumption, but neither did it cre-
ate a new pro-CBA presumption, as some have argued.18
Notably, the Court did not require A gency use of CBA
at all. It merely gave EPA discretion to use a n informal
CBA if it chooses to, but also left it free to choose other
forms of analysis entirely. Moreover, the Court was careful
in Riverkeeper to conne its endorsement of CBA to the
most informal varieties and act ually went out of its way to
express skepticism about more formal brands of CBA.19 In
so doing, it left the door wide open for a continuing pre-
sumption against formal CBA.
Nor did the Court’s subsequent decisions in Homer City
and Michigan close the door to a presumption against for-
mal CBA or create a new pro-CBA presumption. Indeed,
EME Homer City did not actually involve CBA at all.20
And in Michigan, all the Court said was that agencies
should generally consider costs in regulatory decisionmak-
ing, but that “[i]t w ill be up to the agency to decide . ..
how to account for cost.”21 us, while it’s possible to read
Michigan as gesturing toward a presumption in favor of cost
consideration, that’s a very dierent matter from the kind
of presumption in favor of formal CBA that would herald
the dawning of the cost-benet state. Indeed, in Michigan,
both the majority and the dissent took pains to make clear
that they were not requiring agencies “to conduct a formal
cost-benet analysis in which each advantage and disad-
vantage is assigned a monetary value.”22
is Article proceeds in four parts. Part I denes terms,
identifying the broad set of decisionmaking techniques
that can be described as involving some “consideration of
costs” and that include but are not limited to the various
varieties of CBA, formal and informal. Drawing on ideas
laid out more f ully in my previous work,23 this part also
provides an analytic framework for conceptualizing the
variety of methods that are usually lumped together under
the umbrella term “cost-benet a nalysis” and for arrang-
14. Id. at 147-52.
15. See supra note 4.
16. Entergy Corp. v. Riverkeeper, 556 U.S. 208, 226, 39 ELR 20067 (2009).
17. Graham & Noe, supra note 3.
18. Id.
19. Riverkeeper, 556 U.S. at 223.
20. See infra notes 189 to 191 and accompanying text.
21. Michigan v. Environmental Prot. Agency, 135 S. Ct. 2699, 2711, 45 ELR
20124 (2015).
22. Id. at 2711. See also id. at 2717 (Kagan, J., dissenting).
23. See Sinden, Formality and Informality in Cost-Benet Analysis, supra note 11.
Copyright © 2016 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.

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