Off the Hook: Supreme Court Approves Cost Benefit Analysis in Regulations For Power Plant Intake Structures

April 7, 2009

In yet another twist in the long running struggle to regulate impacts on aquatic life from power plant water intakes, the Supreme Court held in Entergy Corp. v. Riverkeeper, Inc., 556 U.S. _____ (2009), issued on April 1, that the EPA could properly consider costs and benefits in adopting rules regarding intakes at existing power plants. As a result, the Court reversed this portion of the Second Circuit’s decision in Riverkeeper, Inc. v. USEPA, 475 F3d 83 (2d Cir. 2007) and remanded the rule for further consideration by the EPA in accordance with both opinions.

EPA has attempted to regulate the intake of aquatic organisms by cooling water intake structures (CWIS) of large power plants since 1973. Using “once through” cooling systems, these plants draw in enormous amounts of cooling water and either trap fish on their intake screens (impingement) or draw smaller organisms through the cooling water system (entrainment). Section 316(b) of the Clean Water Act (CWA) required that EPA identify and require the Best Technology Available (“BTA”) for minimizing environmental impacts associated with impingement and entrainment. The EPA’s first rules on this issue were invalidated in 1977 on procedural grounds and the EPA adopted the current, three phase rules under a consent decree by environmental groups.

In the Phase I rule the EPA identified closed cycle cooling (i.e. using cooling towers and recirculating cooling water) as BTA for new power plants, noting that by reducing the amount of water used, the plants could reduce entrainment and impingement by 80-90%. The EPA recognized however that closed cycle cooling presented enormous additional costs and environmental impacts. In the Phase II rule for existing power plants (the rule at issue here), EPA determined not to limit BTA to closed cycle cooling but identified a group of technologies that achieved similar results. EPA recognized that closed cycle cooling at existing plants was even more expensive than for new plants in that existing plants would have to retrofit cooling water systems onto existing systems, presenting difficult if not insurmountable construction and plant balance issues.

In its decision on the Phase II rules in 2007, the Second Circuit attacked the very basis for EPA’s decisionmaking, ruling that EPA impermissibly applied cost-benefit analyses to develop BTA options. The court ruled that the CWA did not authorize the EPA to compare the costs of technical alternatives to the environmental benefits and that once it identified the best technology for controlling the impacts it could not then determine that the dischargers could use alternate technologies solely based on the cost of the best technology.

In an opinion authored by Justice Scalia (joined by Chief Justice Roberts and Justices Thomas, Kennedy, and Alito), the Supreme Court rejected this decision, finding, through a strict construction of the CWA, that Congress had not limited the EPA’s authority to consider cost benefit analyses in evaluating BTA. The court noted that Congress set no criteria for EPA to use in determining BTA and rejected as unsupported arguments that fine distinctions in the use of permitted cost assessments under other standards (i.e. Best Practical Control Technology and Best Available Technology Economically Achievable) limited the EPA’s evaluation of BTA. The court reasoned that every administrative decision involves some weighing of costs and benefits and that there was no reason to preclude the EPA from doing so here, absent more direct Congressional language.

Justice Breyer concurred, agreeing that the EPA could use cost benefit analysis in this rule but also dissented, arguing that EPA’s use should be more limited than that envisioned by the majority. Justice Stevens (joined by Justices Souter and Ginsburg) dissented, echoing the Second Circuit’s decision.

To a certain extent, the decision represents common cause between the Court’s strict constructionists and its pragmatists rather than a commentary on the use of cost benefit analysis in environmental regulations. Like many environmental statutes, the CWA is written to reflect legislative compromises and frequently lacks clarity, especially in difficult areas where Congress shifts tough decisions to the EPA. Despite this (or because of it) the strict constructionists have been loathe to divine Congressional meaning when it is not otherwise clear on the face of the statute. By the same token, there is no question that requiring existing power plants to retrofit closed cycle cooling would be astronomically expensive and the Court noted that EPA’s rule reasonably sought to achieve similar benefits without such enormous costs.

The Court’s decision remands the rule to the EPA to revise it in accordance with other portions of the Second Circuit’s opinion which struck certain sections of the regulations for receiving inadequate public notice. The Obama Administration may take a different approach on these issues but that would require much additional analysis and further delay the issuance of these rules. In the meantime, EPA and the states will continue to muddle through, issuing permits on a site specific basis, using what they can of the vast regulatory history to determine appropriate standards.