Supreme Court Favors Weak Form of Cost-Benefit Analysis in Environmental Cases, Cannon Says

February 9, 2010

The Supreme Court increasingly endorses a weak form of cost-benefit analysis when evaluating environmental cases, Professor Jonathan Cannon said at a chair lecture Wednesday.

Jonathan Cannon“My normative claim is, this is a good thing,” he told the group of faculty and students gathered in Caplin Pavilion.

Cannon’s lecture marked his appointment as Blaine T. Phillips Distinguished Professor of Environmental Law.

The trend culminated in a decision in Entergy Corp. v. Riverkeeper, Inc. a 2009 case in which the court upheld the Environmental Protection Agency’s authority to use a weak form of cost-benefit analysis in setting standards for electric utility plants.

“It is in line with the political consensus within this country,” Cannon said of the decision. “Therefore it’s appropriate that the court presumed in favor of it where the statute is silent or ambiguous.”

Cannon said this issue is important because it affects the choices we make in environmental policy.

Three cases demonstrate the progression in favor of a weak stance and highlight three ways to interpret cost-benefit analysis.

In Tennessee Valley Authority v. Hill, a 1978 case also known as the snail darter case, the court ruled that, in accordance with the Endangered Species Act, construction of a dam in Tennessee be halted to preserve the snail darter, an endangered species. At the time, the dam was over 80 percent completed and millions had been spent on it.

The dissent wrote that sacrificing the dam for the species was tantamount to an absurd result, Cannon said; the dissenting justices argued that “Congress should be presumed not to have intended an absurd result.”

The court could have followed a different tack, Cannon said, but the dissent laid the doctrinal groundwork favoring cost-benefit analysis used in Entergy.

In American Textiles Manufacturers Institute, Inc. v. Donovan in 1981, the court embraced a presumption against cost-benefit analysis, Cannon said.

The act required standards to protect worker health to the extent feasible.

The Occupational Safety and Health Administration refused to consider cost-benefit analysis and the court upheld that determination. The court ruled that cost-benefit analysis was not required if Congress didn’t expressly convey that it was.
In Entergy, the court addressed whether or not the EPA’s use of cost-benefit analysis was permissible in setting standards under the Clean Water Act. The EPA said the structures used to suction and cool water around power plants killed more than 3.4 billion fish and shellfish every year.

But the agency couldn’t put a monetary value on this type of aquatic life since most of the fish were not directly beneficial to human beings. Officials concluded that the most expensive option that saved the greatest percentage of fish was not warranted, and a less-protective standard was selected. They based their decision on the gross disparity between the cost of the more protective $3.5 billion option and that of the standard selected, which cost $250 million.

According to Cannon, this was not strict cost-benefit analysis.

“It showed a rough balancing comparison of costs and benefits with the purpose of weeding out an option which was determined to have disproportionate or unreasonable costs,” he said.

To Cannon this suggested that the court is in favor of cost-benefit analysis “to screen out irrational outcomes where the statue is silent or ambiguous on the issue.”
At the same time, the court ruled against a strong form of cost-benefit analysis, with efficiency as its goal.

The ruling is a modest step toward bridging the gap between the executive and legislative branches; a step away from the neutrality of TVA v. Hill; and a step in the opposite direction from American Textile, Cannon said.

“What made the difference was the Intuitive appeal of this weak form of cost-benefit analysis as a basic tool to distinguish rational from irrational decisions.”

As the debate over cost-benefit analysis continues, Cannon says he’s hopeful.  

“A new consensus on cost-benefit analysis… would be a welcome basis for a convergence of congressional and executive branch practice over time, with less need for courts to navigate between them.”

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