Petition for Writ of Certiorari — Entergy Corp. v. Riverkeeper, Inc.

Supreme Court, U.S.

FILED

07-589 60% 2- 2007

No. OFFICE OF THE CLERK

In the

Supreme Court of the Anited States

PSEG Fossit. LLC AND PSEG NUCLEAR LLC,

PETITIONERS,

V.

RIVERKEEPER INC, ET AL.,

RESPONDENTS.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNtreED STATES COURT OF APPEALS FOR THE

SECOND CLRCUIT

PETITION FOR A WRIT OF CERTIORARI

CHRISTOPHER J. MAUREEN E. MAHONEY

MCAULIFFR Counsel of Record

JOHN G. VALERI, IR. PHILIP J. PERRY

PSEG SERVICES CORP. J. SCOTT BALLENGER

OFFICE OF CASSANDRA STURKIE

ENVIRONMENTAL, DREW C. ENSIGN

COUNSEL LATHAM & WATKINS LLP

80 PARK PLAZA, TSC 555 LITH STREET, N.W.,

NEWARK, NJ 07102-4194 SUITE 1000

(973) 430-6298 WASHINGTON, DC 20004

(202) 637-2200

KARLS. LYTZ

LATHAM & WATKINS LLP

505 MONTGOMERY STREET

SUITE 2000

SAN FRANCISCO, CA 94111

(415) 391-0600

NOVEMBER 2, 2007

i

QUESTIONS PRESENTED

1. Whether the Second Circuit erred by holding

that §316(b) of the Clean Water Act, 33 U.S.C.

§1326(b), bars any use of cost-benefit analysis, in

conflict with decisions of several other circuits and the

precedents of this Court.

2. Whether the Second Circuit erred by concluding

that §316(b) bars the use of restoration measures as a

compliance alternative to “minimizie] adverse

environmental impact,” in conflict with decisions of

other courts of appeals.

il

RULE 29.6 STATEMENT

Petitioners PSEG Fossil LLC and PSEG Nuclear

LLC (collectively, “PSEG”) are wholly-owned by

PSEG Power LLC. PSEG Power LLC is wholly

owned by Public Service Enterprise Group

Incorporated, which is a publicly traded company.

iil

TABLE OF CONTENTS

Page

OE Be POPC BF BORIS BB a cccscencccecesconececsscnecoocnnneseosenense i

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SI TITTTTTIITITT 1s sisiesicsehiteiscincienh cuiscsbanetinieapecniiadabionsetaiediaiaadiibeiaies 1

STATUTORY AND REGULATORY

PR BONS TIVO VOD nccccescecccesscssscscccccevesessess 1

STATEMENT OF THE CASE. .......0cc.cceccccccccscvcsscesensecesen 2

I STATUTORY BACKGROUND ....................cceseeeee 5

Il. SECTION 316(b) REGULATION AND

JUDICIAL PROCEEDINGG................eeeeeeeceeees 8

RITE EES ere aww ee eae aa I 8

as REIN Se IIE clinistiieaieciidiseieipnicininsinsiendienieeniommenciiantii 9

Dh, II Ee RID sittrcsccciicscsnsicscntccicntonens 9

2. Phase II Proceedings

TUE CE NT 12

a Re ee I hiteincetiicieitnlainedecasieesieiivieraseniiaciiiaalbi 13

REASONS FOR GRANTING THE WRIT... 14

I. THE SECOND CIRCUITS = COST-

BENEFIT HOLDING IS INCORRECT

AND CONFLICTS WITH DECISIONS OF

Fe IG OO cccesenicerisesrapenmenenanneunenesennnes 17

A. The Statutory Structure

Supports EPA’s Use Of Cost-

ee BID sincicsdbsicsiidsisietaninnnesisnsiinnineninoniamecaiea 18

iv

TABLE OF CONTENTS—Continued

Page

B. The Text And Legislative

History Of §316(b) Supports

EPA’s Discretion To Use

CSE IGRIEE BAITED ce eescccsecncesccessovsseeseseceseseses 22

C. The Second Circuit Wrongly

Presumed That Cost-Benefit

Analysis Is Prohibited Unless

Congress Expressly

I Di cicsthitictpcncinntansesnningnatininninincmnienn 25

Il. THE SECOND CIRCUIT'S

RESTORATION HOLDING IS

ERRONEOUS AND IN CONFLICT WITH

ee eR crciitinititnscinniicinatiniiiiimmmnpsnienns 28

Ill. THE SECOND CIRCUITS HOLDINGS

RAISE QUESTIONS OF NATIONAL

IMPORTANCE THAT MERIT REVIEW

Fe I CTT E crcinsiersenectensidinintescceatninsmmmnnnetnnees 32

A. The Panel’s Cost-Benefit

Holding Will Impose

Enormous Costs and Disrupt

National Environmental

SpPaIaa I iccstalseshhiceeascanceladldtisaleianitiipidiatidagpettiindinncinenntinded 32

B. Restoration Measures Provide

A Critically Important Policy

BERET SRE NERS Rees rer vein, 2 eR ae 36

Sama cainiiinidenitsiceniiniininiieiinnienandtitiisntssiibiedinseonitibiniions 37

Vv

APPENDIX TABLE OF CONTENTS

Opinion of the United States Court of Appeals

of the Second Circuit, Riverkeeper, Inc. v.

U.S. Environmental Protection Agency,

Nos. 04-6692-ag(T.), et al. (2d Cir. Jan. 25,

ODED csenevesninesipnvepnssevessnensiniiidaesitainiiiieiiaigaiieinebemdenn

Order of United States Court of Appeals of the

Second Circuit Denying Rehearing,

Riverkeeper, Inc. v. U.S. Environmental

Protection Agency, No. 04-6692-ag (2d Cir.

PGE TIO ceisiisnicrinsetiiinssinamsiaietetaeeteaamaenal

TNE. BN a iiccincccseovetencentnienananmaaa

OE DU iil eee

COG CE iii icicmenenniidiadiaua

Carl Michael Smith, Department of Energy,

Subject Matter Code 17.03.02 (Comment ID

316bEFR.010.027), RFC: EPA rationale to

OE TOGUETE CLODOE “CYCLE ..cccrcecrccsvesosecessesnscseseceesse

Carl Michael Smith, Department of Energy,

Subject Matter Code 9.0 (Comment ID

tg ET De a

Car] Michael Smith, Department of Energy,

Subject Matter Code 9.0 (Comment ID

316bEFR.010.101), Costs (Working Draft)......

Page

148a

vi

APPENDIX TABLE OF CONTENTS—Continued

Elise N. Zoli, Godwin Proctor Counselors at

Law obo Entergy Corporation, Subject

Matter Code 9.0 (Comment ID

SIGDE FR.029.032), Cost.........ccescsccscsssrcsesssorees

Mark V. Carney, PG&E National Energy

Group, Subject Matter Code 2.04.06

(Comment ID 316bEFR.060.022),

Restoration measures in place of

SEITE siciaellichenitnibanntidnsesinedsesasenssdsceseocencceseses

Maureen F’. Vaskis & Mark F. Strickland,

PSEG Services Corp., Office of

Environmental Counsel, Subject Matter

Code 9.04 (Comment ID

316bEFR.075.057), Cooling system costs

(e.g., Ary, Wet, TECUPCULALING) .......cceeseeeeereeeereees

R. McLean, State of Maryland Department of

Natural Resources, Subject Matter Code

11.0 (Comment ID 316bEFR.099.013), Role

ST rh iiesceiasinadasnnseieisdecnsissenenereaescoseseesees

Page

.. 172a

Vii

APPENDIX TABLE OF CONTENTS—Continued

Page

Bradley M. Campbell, N.J. Department of

Environmental Protection, Subject Matter

Code 11.01 (Comment ID

316bE FR.202.029), Proposed use of

ne a iciciciccictiscnstnctacsencnnisnsinenpnenti 188a

Aubrey D. McKinney & Paul E. Davis,

Tennessee Wildlife Association &

Tennessee Department of Environmental

& Conservation, Subject Matter Code

2.04.06 (Comment ID 316bEFR.309.001),

Restoration measures in place of

I eE ceccticcnnsscennnaninnccinntnatnntsinanibernntnenesnsensin 19la

Application for an Extension of Time Within

Which to File a Petition for a Writ of

Certiorari to the United States Court of

Appeals for the Second Circuit, United

States Environmental Protection Agency v.

Riverkeeper, Inc.

Ce es NED ercenscnesetinannecenmnscnepasnuianieeniiannionian 192a

Viii

TABLE OF AUTHORITIES

Page(s)

CASES

American Iron & Steel Institute v. EPA,

GES FG BEIT GO CIR. TTI cceccccvcccccsccccccssscsssssosessess 19

American Petroleum Institute v. EPA,

Fe ee ee Cle Pe itccetienensensccssesescsencessinean 20

American Textile Manufacturers Institute,

Inc. v. Donovan,

2 RRR ESE cera eee 15, 26

Association of Pacific Fisheries v. EPA,

ee ee ee es Be enirctensctctnctatcsitniicnninisnsenvin 20

Barnhart v. Walton,

gg | CN ao ae nen aD 30

BP Exploration & Oil, Inc. v. EPA,

66 F.3d 784 (6th Cir. 1995)...................... 20, 21, 23, 27

Cabinet Mountains Wilderness v. Peterson,

er ey ts Gaile MIIIIEID epeenconcescasestosctectsncsctsines 31

Chevron U.S.A. Inc. v. NRDC,

(gg Ff NEO ener 12,18

City of Olmsted Falls v. EPA,

435 F.3d G32 (6th Cir. BOOGB).........ccccccccsssoscccscsesessesers 31

Consolidated Rail Corp. v. United States,

Re ee Oe Ee BID veiinscnussctinteinctassensacesinnscinians 27

CPC International, Inc. v. Train,

oe 8) 7: Le Se. | RR eeneneenenEED 19

ix

TABLE OF AUTHORITIES—Continued

Page(s)

Environmental Protection Information Center

v. United States Forest Service,

451 F.3d 1005 (9th Cir. 2006)...............cccsescssereeceeseees 31

EPA v. National Crushed Stone Association,

a IT iccintaiaitnestnentonndneppictiounndensannineaiinn 19, 20

Fund for Animals v. Rice,

ee te | ee 31

Greater Yellowstone Coalition v. Flowers,

359 F’ 3d 1257 (10th Cit. 2OD4).........c.ccccccccssssvesssssesees 31

Massachusetts v. Hayes,

Fe fT ft ke enn 27

Michigan v. EPA,

213 F.3d 663 (D.C. Cir. 2000) ...............cccccsssccessessoeee 27

National Cable & Telecommunications

Association v. Brand X Internet Services,

FE ee ener 27

National Wildlife Federation v. EPA,

286 F.3d 554 (D.C. Cir. 2002) ..........cscccossssrssssseee 19, 21

NRDC v. EPA,

824 F.2d 1146 (D.C. Cit. 1987) .......ccccrecerscssessserseese 26

Quivira Mining Co. v. United States Nuclear

Regulatory Commission,

866 F.2d 1246 (10th Cir. 1989)...............ccccssrresssssesses 27

Reynolds Metal Co. v. EPA,

760 F.2d 549 (4th Cir. 1985)............cccccssssssseoresees 19, 20

xX

TABLE OF AUTHORITIES—Continued

Page(s)

Riverkeeper, Inc. v. EPA,

358 F.3d 174 (2d Cir. 2004) .... eee 3, 6, 7, 8, 9, 22

Roanoke River Basin Association v. Hudson,

940 F.2d SB (4th Cir. 1991)......ccccsccscsccssccesocososecceseeses 31

Rybachek v. EPA,

904 F.2d 1276 (Sth Cir. 1990)..........csccssecccsesoccesesesees 20

Seacoast Anti-Pollution League v. Costle,

597 F.2d 306 (1st Cir. 1979) .00. eee eee 15, 25, 29

Sierra Club v. Army Corps of Engineers,

295 F.3d 1209 (11th Cir. 2002)....................cccccesereeees 31

Sierra Club v. EPA,

375 F.3d 537 (7th Cir. 2004).................cscccsssscccessoseee 27

Sierra Club v. EPA,

314 F.3d 786 (Gth Cir. BO0R)......ccccososcesocccscssocccecsseees 27

Spiller v. White,

362 F.3d 235 (Sth Cir. BOOB).......ccccsccsoccrscsssesscoceseesees 31

Texas Oil & Gas Association v. EPA,

161 F.3d 923 (Sth Cir. 1998).............ccccessscssssseesseres 20

Town of Norfolk v. Army Corps of Engineers,

O68 F’ 2d 1496 (let Cir. 19GB) .....ccccecccccosersccsscsocsseesses 31

Weyerhaeuser Co. v. Costle,

590 F.2d 1011 (D.C. Cir. 1978) ........ eee 19, 20, 21

xi

TABLE OF AUTHORITIES—Continued

Page(s)

STATUTES AND REGULATIONS

Be Cenc SPIE OP scsrecccccersnsenscnsennesunsscseseneonsesveedvaninnsminnentnta 1

Siti enicistencestnssencscencasctinmeineesevnenenenineien 1,5

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Be is SE cciniceinsscnoresevcnssescereccuvensinasunoempeesamnesonentens 6

Se ls SIE wencccavccnsrsorecsosessennsensssnsnasnensioia 6, 23

Se Eas IEEE erccsteecensocesvscvensnoveneesenonsenensensenns 2,6

BD CP ess BSI EUILEED ccvcrsocsssccsnceccsssssesessevensinnnessennennnietes 7

Be i Bi ctidsaiensenerecnsnecrencecsnsnsesussnnsesenenenmnetinnmstes 1,5

Be a SED srsicttinsssiscnncevencenocietnsoneenstinenenmenintnenies 6

Be Pars IED cscrenssceccscncsssscvqceenennesiioninnnn 7,19

Be ere See ierenecnsnccnnencennoneesnnicevenvemmnsnton i, 1, 2, 5, 30

Ae ae ID ctccesccnscrsnccnninsiacmnsounacennesntaemninniniiets 6

ar Eile SE irrnrntarciemtnertientesnnenenmanniniiiins 28

OTHER AUTHORITY

118 Cong. Rec. 33,762 (1972) ..............sscrersessrseseeees 10, 24

69 Fed. Reg. 41,576 (July 9, 2004)... eee passim

71 Fed. Reg. 35,006 (June 16, 2006)... ccceeeeeeeeeetees 13

xii

TABLE OF AUTHORITIES—Continued

Page(s)

North American Reliability Corp., 2007 Long-

Term Reliability Assessment (Oct. 2007)

(“NERC Report”), available at

ftp://www.nerc.com/pub/

sys/all_updl/docs/pubs/LTRA2007.pdf.............34, 35

Cass R. Sunstein, /nterpreting Statutes in the

Regulatory State, 103 Harv. L. Rev. 405

CIID snetcsitesonisomsnenprinenrinesiatsnanndlsabiiemnevenecmaneere 27

Thomas J. Schoenbaum & Richard B. Stewart,

The Role of Mitigation and Conservation

Measures in Achieving Compliance with

Environmental Regulatory Statutes:

Lessons from Section 316 of the Clean

Water Act, 8 N.Y.U. Envtl. LJ. 237 (2000) ........... 31

OPINION BELOW

The Second Circuit’s opinion (App.la-86a) is

reported at 475 F.3d 83.

JURISDICTION

The Second Circuit entered judgment on January

25, 2007, and denied petitions for rehearing and

rehearing en banc on July 5, 2007. Justice Ginsburg

extended the time to file this Petition until November

2, 2007. This Court has jurisdiction pursuant to 28

U.S.C. §1254(1).

STATUTORY AND REGULATORY

PROVISIONS INVOLVED

Section 316(b) of the Federal Water Pollution

Control Act (“Clean Water Act” or “CWA”) states:

Any standard established pursuant to section

1311 of this title or section 1316 of this title and

applicable to a point source shall require that

the location, design, construction, and capacity

of cooling water intake structures reflect the

best technology available for minimizing

adverse environmental impact.

33 U.S.C. § 1326(b).! Relevant portions of CWA §§301,

304, and 306, 33 U.S.C. §§1311, 1314, 1316, are set forth

in the Appendix.

1 We refer to CWA sections (“§316(b)”) and, where appropriate,

provide citations to the U.S. Code (“33 U.S.C. $1326(b)”).

2

STATEMENT OF THE CASE

Many power plants and industrial facilities are built

on bodies of water so they can circulate water through

their equipment to absorb heat. “Once-through”

cooling systems used by most existing plants are far

more cost- and energy-efficient than “closed-cycle

cooling” systems (which recirculate water through

cooling towers) or dry/air cooling systems, but they

require more water and thus potentially have a greater

impact on aquatic life.

Under CWA § 316(b), “{aJny standard established”

under §§301 and 306 to regulate a discharge to

navigable waters from a “point source” must also

require “that the location, design, construction, and

capacity of cooling water intake structures reflect the

best technology available for minimizing adverse

environmental impact.” 33 U.S.C. §1326(b). In

implementing this provision for 30 years, EPA relied

on the “best professional judgment” of federal and

state permitting authorities, which took into account

site-specific conditions and impacts and the capabilities

of individual facilities. Consistent with the broad

discretion granted by §§301 and 306 (in conjunction

with §304) to consider “the cost of achieving such

effluent reduction, non-water quality environmental

impact (including energy requirements), and such other

factors as the Administrator deems appropriate,” 33

U.S.C. §1314(b)(2)(B), permitting authorities

considered both costs and environmental benefits when

setting design and construction requirements.

Facilities have in turn relied on those permits in

making enormous capital investments.

In response to a 1995 consent decree, EPA agreed

to promulgate nationwide regulations governing

3

cooling water intake structures in three phases—Phase

I for new facilities, Phase II for large existing power

plants, and Phase III for other existing facilities and

new offshore oil and gas facilities. In the Phase I Rule,

EPA exercised its discretion to require closed-cycle

cooling for new facilities, and was upheld Ly the Second

Circuit in Riverkeeper, Inc. v. EPA, 358 F.3d 174 (2d

Cir. 2004) (“Riverkeeper I’). The Phase III Rule

implements §316(b) on a case-by-case basis for existing

facilities not covered by the Phase IJ Rule, and is

currently under review in the Fifth Circuit.

ConocoPhillips v. EPA, Nos. 06-60662 et al.

This case involves the Phase II Rule, promulgated

at 69 Fed. Reg. 41,576 (July 9, 2004). EPA collected

and analyzed technological, biological, and economic

data about operations at existing power plants. /d. at

41,585. It determined that a “significant degree of

flexibility” was necessary to account for the wide

variability in the size, location, operations, and

environmental impacts of the approximately 550 Phase

II facilities—comprising more than 50% of the Nation’s

electric capacity-—-to avoid the staggering costs,

complexities, and lost generating capacity associated

with imposing a_ closed-cycle’ cooling retrofit

requirement on all of those facilities. Jd. at 41,591,

41,593. EPA accordingly established national

performance standards and _ five “compliance

alternatives” to meet them—including restoration

measures to enhance fish habitat, and site-specific

“best technology available” determinations based on a

cost-benefit test. /d. at 41,592-98 (Exh. V-2), 41,598.

In particular, FPA rejected a national closed-cycle

cooling retrofit requirement. EPA estimated that such

a requirement would impose retrofit costs as high as

4

$200 million, and up to $20 million annually in

additional operating costs, per facility—but noted that

actual costs could be at least double those estimates.

Id. at 41,605. PSEG estimates that closed-cycle retrofit

costs—design, construction, operation, and _ lost

generation—could easily total $1 billion at some

facilities. See infra at 33. EPA also emphasized the

U.S. Department of Energy’s conclusion that 20 new

400-megawatt generating plants might be required to

replace the generating capacity lost from converting all

Phase II facilities to closed-cycle technology. See infra

at 11.

The Second Circuit struck down core provisions of

the Phase II Rule, reasoning (a) that since Congress

did not expressly authorize cost-benefit analysis, the

bare language of §316(b) forbids it, and (b) that §316(b)

bars EPA from authorizing compliance through the use

of restoration measures. App.18a-25a (“Riverkeeper

IT’). Both holdings misunderstand the broad discretion

accorded to EPA by relevant provisions of the CWA,

fail to defer to EPA’s interpretation, and conflict with

decades of consistent practice by EPA and States with

delegated authority, as well as the settled precedent of

other circuits.

PSEG operates seven Phase II facilities, including

the Salem Generating Station in New Jersey. Since

1994, Salem has met its §316(b) compliance obligations,

in part, through one of the world’s largest privately-

funded restoration projects. As a condition of its

permit issued by New Jersey, PSEG purchased

thousands of acres of degraded wetlands—including

“diked” wetlands previously converted into farmland,

and wetlands impacted by invasive species—and has

undertaken a massive program to restore and/or

5

enhance them, ensuring their permanent protection

through deeds and/or conservation restrictions in New

Jersey and Delaware. That program, on which PSEG

has spent more than $100 million, produces far more

direct, longer-lasting benefits to aquatic life and the

environment than could be achieved by modifying the

intake system alone. The Second Circuit’s decision, if

allowed to stand, would eliminate the use of this

program (and many others) as a compliance tool,

jeopardizing the extensive benefits to aquatic life

achieved by Salem (and recognized by New Jersey) in

the Delaware Estuary. It may also force PSEG’s

facilities, as well as all Phase II facilities, either to close

or to convert to closed-cycle cooling at a total cost of

billions of dollars, even though EPA has determined

that this technology would provide only marginal

additional benefits to aquatic life, while creating other

adverse energy and environmental impacts.

I. STATUTORY BACKGROUND

EPA has implemented §316(b) through the National

Pollutant Discharge Elimination System (“NPDES”)

program, under which facilities discharging pollutants

from a “point source” must obtain a permit under CWA

§§301 and 306. See 33 U.S.C. §$§1311, 1314, 1316. But

unlike §$301 and 306, $316(b) addresses the “adverse

environmental impact” caused by the withdrawal of

water. 33 U.S.C. §1326(b).

Section 301 required EPA to set effluent limitation

guidelines for existing facilities by 1977 based on the

“best practicable control technology currently

available” (“BPT”). 33 U.S.C. $1311(b)(1)(A). By 1989,

EPA had to base effluent guidelines for existing

facilities on the “best conventional pollutant control

6

technology” (“BCT”) for conventional pollutants and

the “best available technology economically achievable”

(“BAT”) for toxic and non-conventional pollutants. Jd.

§1311(b)(2)(A), (E); 40 C.F.R. §125.3(d). For new

facilities, §306 requires EPA to establish performance

standards based on the “best available demonstrated

control technology” (““BADT”), 33 U.S.C. $1316(a)(1), a

higher standard reflecting Congress’s understanding

that it is far more feasible and economical to install

technologies when a facility is being constructed. See

Riverkeeper I, 358 F.3d at 185; 69 Fed. Reg. at 41,628.

The CWA does not define these standards or

mandate specific technologies. Rather, in §304

Congress enumerated the factors EPA must consider

in selecting BPT, BCT, and BAT for existing facilities,

and entrusted EPA with broad discretion to consider

other “appropriate” factors. 33 U.S.C. $1314(b). In

determining BAT, EPA must consider:

[T]he age of equipment and facilities involved

... the cost of achieving such effluent reduction,

non-water quality environmental impact

(including energy requirements), and such

other factors as [EPA] deems appropriate.

Id. §1314(b)(2)(B) (emphasis added). Section 304

requires these same “consideration factors” for BPT

and also mandates “consideration of the total cost of

application of technology in relation to the effluent

reduction benefits to be achieved from such

[technology].” /d. §1314(b)(1)(B). Similarly, for BCT,

EPA must “consider[] ... the reasonableness of the

relationship between the costs of attaining a reduction

in effluents and the effluent reduction benefits

7

derived,” in addition to the core consideration factors

and “such other factors as the Administrator deems

appropriate.” /d. §1314(b)(4)(B). In determining

BADT for new facilities, EPA must consider “the cost

of achieving such effluent reduction, and any non-water

quality, environmental impact and_- energy

requirements,” and thus is permitted to evaluate costs

in relation to benefits. Jd. §1316(b)(1)(B); Riverkeeper

I, 358 F.3d at 195-96. As these provisions make clear,

EPA may “consider a technology’s cost in determining

whether it is ‘practicable,’ ‘economically achievable,’ or

‘available.”” Riverkeeper I, 358 F.3d at 185.

Congress also did not define “best technology

available” in §316(b), but (as Riverkeeper II

acknowledges) the explicit statutory cross-reference to

§§301 and 306 indicates that it meant §316(b) to be

understood in light of the similar “technology”

language used in those provisions. For Phase II

facilities, EPA looked to §§301 and 304—and

specifically to the BAT requirement—in establishing

BTA. 69 Fed. Reg. at 41,583.

Intake systems may “impinge” aquatic organisms

by trapping them, by the force of the water

withdrawal, against screens or other parts of the intake

structure. It may also “entrain” them—pulling small

fish and shellfish, including eggs and larvae, into and

through the cooling water system. Impingement and

entrainment cause losses of early life stages of fish and

shellfish. Jd. at 41,586-87. To minimize these effects

and comply with §316(b), facilities historically have

utilized equipment-based technologies (e.g., barrier

systems and screens to exclude aquatic organisms),

operational measures (¢.g., reductions in water

velocity), and/or restoration measures (¢.g., the

8

conservation, creation, and/or rehabilitation of aquatic

habitats to increase fish and shellfish populations).

The amount of cooling water needed for different

systems varies dramatically—with once-through

systems requiring the most and dry cooling virtually

none. Water usage is only one consideration, however,

as closed-cycle and dry cooling systems are

extraordinarily more expensive than once-through

cooling, reduce electric generating capacity (resulting

in an “energy penalty”), may require more electric

generators to operate, and often create additional

adverse environmental impacts (such as undesirable air

emissions resulting from greater use of fossil fuels). Jd.

at 41,605-06.

II. SECTION 316(b) REGULATION AND

JUDICIAL PROCEEDINGS

A. Phase I Rule

EPA promulgated the Phase I Rule governing BTA

determinations for new facilities in 2001. In 2004, the

Second Circuit generally approved the Phase I Rule,

but held that EPA exceeded its authority by allowing

new facilities to comply with §316(b) through

restoration measures. See Riverkeeper I, 358 F.3d at

189-91 (remanding restoration provision). The Second

Circuit upheld EPA’s determination that closed-cycle

cooling is the “best technology available” for new

facilities, even though EPA had found that dry cooling

was superior in “dramatically reduc[ing] impingement

and entrainment.” when compared to closed-cycle

cooling. Jd. at 194-95 & 195 n.22 (citation omitted).

Endorsing EPA’s consideration of the relative costs

and environmental benefits, the Second Circuit

9

reasoned that “while ... dry cooling is 95 percent more

effective [at eliminating entrainment] than closed-cycle

cooling, it is wndeniably relevant that that difference

represents a relatively small improvement ... at a very

significant cost.” Id. at 194 n.22 (emphasis added).

B. Phase II Rule

1. Phase II Rulemaking

EPA promulgated the Phase II Rule in 2004.

Cost-Benefit Considerations. For existing

facilities, EPA _ established national performance

standards that consist of “ranges of reductions” in

impingement mortality and/or entrainment from a

facility’s baseline estimate (“calculation baseline”). 69

Fed. Reg. at 41,590; see also id. at 41,683-84. Although

EPA anticipated that many facilities could meet the

standards using equipment-based technologies and/or

operational measures, it determined that a single

approach for all Phase II facilities did not make sense.

Id. at 41,590. Instead, FPA determined that a “range

of technologies” was both “commercially available” for

the industry and most appropriate in light of the wide

variability among existing facilities. /d. at 41,599. It

established five compliance alternatives—four based on

meeting the performance standards, and the fifth

allowing a “site-specific determination” of BTA to

address unique, facility-specific factors. /d. at 41,591,

41,685-87. A facility could, for example, demonstrate

that it had reduced its intake flow “commensurate

with” closed-cycle cooling; demonstrate that it would

install technologies, operational measures, and/or

restoration measures to meet the performance

standards; or qualify for a site-specific determination

10

based on a “cost-cost” or “cost-benefit” test. Jd. at

41,591, 41,603.

As part of this analysis, EPA rejected closed-cycle

cooling (and, for that matter, dry cooling) as BTA for

all Phase II facilities due to its “high costs (due to

conversions), the fact that other technologies approach

[its] performance, [and| concerns for energy impacts

due to retrofitting,” among other considerations. /d. at

41,605.

EPA concluded that it had authority to implement

$316(b) in this manner for several reasons. First,

because the “best technology available” standard in

§316(b) is linguistically similar to the “best available

technology” standard in §301, and because §316(b)

expressly cross-references that provision, EPA

“look|ed] to section 301 and, ultimately, section 304 for

guidance.” 69 Fed. Reg. at 41,583. EPA considered the

statutory factors listed in §§301 and 304, including

costs and environmental benefits, as appropriate,

consistent with its longstanding practice in establishing

$316(b) limits in individual permits. /d.

Second, the §316(b) legislative history instructs

EPA to make its BTA determinations after assessing

the “economic practicability” of possible technologies—

“including [their] economic impact and the relationship

of costs with benefits.” Jd. at 41,604 (citing 118 Cong.

Rec. 33,762 (1972) (statement of Rep. Clausen)). To

that end, EPA “conducted extensive analyses” of the

Rule’s economic impacts to ensure that the costs of the

chosen technologies were economically practicable. Jd.

EPA concluded that it was appropriate to require

“some reasonable relationship” between “the cost of ...

‘control technologlies|”” and “the environmental

benefits associated with [their] use.” Jd.; see also id. at

1]

41,606. EPA also analyzed each technology’s efficacy,

availability, and non-water quality environmental

impacts, including energy impacts. See 69 Fed. Reg. at

41,604.

On this basis, EPA rejected both a national and

waterbody-specific requirement for closed-cycle

cooling. Jd. at 41,605-07. EPA reviewed and adopted

extensive evidence showing that the costs of

mandatory closed-cycle retrofits would be exceedingly

high—ranging, per facility, from an estimated $130 to

$200 million in capital costs and $4 to $20 million in

annual operating costs. /d. at 41,605. EPA also

acknowledged that actual costs could be “at least twice

those projected” because its estimates did not reflect

“significant cost{s],” such as acquiring land for cooling

towers. /d. (emphasis added). EPA also considered

detailed information about the energy impacts and the

“significant” facility down time associated with

retrofits to closed-cycle cooling, including the

Department of Energy’s determination _ that

approximately 20 400-megawatt plants would be

required to compensate for lost generating capacity.

Id.; App.154a.

Restoration. EPA also decided that nothing in

§316(b) required it to abandon its long-standing

authorization of restoration measures as a compliance

alternative for existing (as opposed to new) facilities.

49 Fed. Reg. at 41,627-28. EPA determined that

restoration (like other technologies independent from

the intake structure) “reflect [BTA)” by influencing the

design of the intake, and that §316(b)’s unique

ecological standard (“minimiz|e ] adverse

environmental impact”) considers not — only

impingement and entrainment, but also compensation

12

for those losses. /d. at 41,628. EPA explained that the

Phase I remand did not foreclose this option for

existing facilities, which have a “narrower” range of

technologies “available” than new facilities. Jd. EPA

also made the Phase II restoration provision more

stringent than in the Phase I Rule, by requiring

facilities to demonstrate that their projects produce

ecological benefits (fish and shellfish) for their

waterbody or watershed at a level “substantially

similar to,” or greater than, the level achieved through

the use of other technologies or operational measures.

Id. at 41,627.

2. Phase II Proceedings Below

Environmental and state petitioners challenged

EPA’s conclusions, arguing that closed-cycle cooling is

the “best technology available” for all Phase II

facilities, and that EPA lacks authority to choose BTA

on the basis of cost-benefit analysis and to authorize

use of restoration measures.

The Second Circuit held that “[iJf ... EPA construed

the statute to permit cost-benefit analysis, its action

was ‘not based on a permissible construction of the

statute.” App.33a (quoting Chevron U.S.A. Inc. v.

NRDC, 467 U.S. 837, 843 (1984)). After interpreting

$316(b) in light of §$301, 304, and 306, it reasoned that

“(eJost-benefit analysis ... is not permitted” under

§$316(b) because “Congress has already specified the

relationship between cost and benefits,” and that

““(wJhen Congress has intended that an agency engage

in cost-benefit analysis, it has clearly indicated such

intent on the face of the statute.”” App.24a, App.22a-

23a (citation omitted). The court of appeals

“remand(ed|] for clarification ... and possibly for a new

13

determination of BTA.” App.33a. Giving no weight to

EPA’s interpretation, it also held that §316(b) barred

restoration measures because (in its view)

compensation for harm cannot be “minimiz[ation]” and

restoration measures are not “intake structure

technology.” App.40a-45a.

C. Phase III Rule

In June 2006, EPA promulgated the Phase III Rule,

governing existing facilities not covered under Phase

Il and new offshore oil and gas facilities. EPA

determined that the “cost-benefit ratios” of the

proposed national standards were “unacceptable,” and

the “best approach” for Phase III facilities is case-by-

case determinations using best professional judgment.

71 Fed. Reg. 3,006, 35,014-15, 35,017 (June 16, 2006).

In basing “this decision on its judgment that the

monetized costs [of national standards] ... are wholly

disproportionate to the monetized environmental

benefits,” 7d. at 35,017, EPA explicitly grounded its

Rule on the same cost-benefit analysis rejected by the

Second Circuit.

The environmental plaintiffs have argued to the

Fifth Circuit (as they did here) that EPA’s cost-benefit

considerations violated §316(b). The United States has

forcefully defended EPA’s right to engage in cost-

benefit analysis under §316(b), arguing that “[n]Jothing

in [§316(b)] unambiguously forbids costs-benefit

analysis,” U.S. Br. at 58, and that “the Second Circuit’s

construction of Section 316(b) ... is incorrect,” id. at 61.

Similarly, in this proceeding, the United States has

explained that Riverkeeper II “oversteps the courts’

bounds under [Chevron] by confining the agency’s

consideration of costs to two specific inquiries not

14

mandated by the statute’s text, structure, or history.”

App.194a.

REASONS FOR GRANTING THE WRIT

The Second Circuit’s decision invalidated two of

EPA’s most valuable policy tools: cost-benefit analysis

and restoration measures. On several critical issues,

its analysis directly conflicts with the reasoning and/or

holdings of virtually every court that has ever

addressed these issues. Its holding threatens to

require all large existing power plants to retrofit to

expensive, impracticable “closed-cycle cooling” systems

(or shutdown altogether), even though EPA has

determined that any expected environmental benefits

are not remotely worth the billions of dollars in

retrofitting costs. It also leaves EPA faced with

conflicting and irreconcilable precedents from different

circuits as it struggles to articulate nationwide

standards.

Several aspects of the Second Circuit’s reasoning

are deeply flawed and merit review. First, it held that

EPA iacks discretion to consider costs and benefits

under §316(b)—and also under §§301 and 306, which

regulate the discharge of pollutants. In the Second

Circuit’s view, “best technology available” under

§316(b) requires EPA to mandate the height of possible

technology for minimizing impingement and

entrainment, without regard to ecological significance

and even if it will bankrupt numerous individual power

plants, so long as the industry as a whole could

plausibly “bear” the costs. It also held that the BAT

standard under §30] (for existing facilities) and the

BADT standard under 8306 (for new facilities) require

a similarly maximalist approaci

15

Those holdings ignore the complexity of the

statutory terms and structure and the deference owed

to EPA. Congress did not intend this result, EPA does

not want it, and the negative economic and

environmental consequences will be severe. Indeed,

since EPA and States establish a “standard” for a

facility’s intake structure whenever they approve

NPDES permits, the Second Circuit’s faulty reasoning

would, presumably require facilities to redo

infrastructure investments that may cost hundreds of

millions of dollars after each permit cycle (typically five

years), if the steady progress of technology has made

some slight advance in fish protection possible. The

Second Circuit’s interpretation of §316(b) directly

conflicts with the First Circuit’s landmark decision in

Seacoast Anti-Pollution League v. Costle, 597 F.2d 306

(Ist Cir. 1979), which for nearly 30 years recognized

EPA’s authority to consider costs and benefits under

$316(b). Its reading of §§301 and 306 also directly

conflicts with decisions of the Sixth and D.C. Circuits,

and is inconsistent with the reasoning of many other

courts of appeals.

Second, the Second Circuit adopted a clear

statement rule that presumes Congress does not intend

to permit cost-benefit analysis unless it “expressly

permitis} the Agency to consider the relationship of

[costs and benefits]” on the face of the statute.

App.22a. It based that error on a misreading of this

Court’s decision in American Textile Manufacturers

Institute, Inc. v. Donovan, 452 U.S. 490 (1981), which

held only that if the statute is silent, an agency is not

required to engage in cost-benefit analysis. As the

United States has explained to the Fifth Circuit in the

pending Phase III litigation, “|b]y assuming Congress’s

16

silence in Section 316(b) amounts to a prohibition on

EPA’s authority, the Second Circuit turns the principle

of Chevron deference on its head.” U.S. Br. at 61. This

unprecedented holding conflicts with the settled law of

several other circuits that have properly recognized

that when a statute is silent or ambiguous the relevant

agency is entitled to decide for itself whether cost-

benefit analysis is appropriate. It drastically curtails

the discretion that Congress intended to provide

agencies and threatens the validity of countless

regulations.

Third, the Second Circuit’s restoration holding

conflicts with the previously unanimous consensus that

agencies may authorize restoration measures where

the relevant statute is silent or ambiguous. Indeed, the

Riverkeeper cases appear to be the first in which any

circuit court has ever concluded that restoration

measures may not be considered. Once again the

Second Circuit fails to engage with the complexity of

these problems and the range of practical solutions.

Restoration measures “minimiz([e] adverse

environmental impact” because they produce ecological

benefits equivalent to the level a facility would achieve

by using other technologies or operational measures.

Restoration measures ave not only been an

indispensable part of §316(b) compliance for existing

facilities since the 1980s, but they are crucially

important to the federal government’s implementation

of numerous environmental statutes. The Second

Circuit’s analysis directly conflicts with the First

Circuit’s interpretation of §316(b) in Seacoast, and

cannot be reconciled with the holdings of numerous

other courts of appeals that have affirmed the

legitimacy of restoration measures.

17

This case raises issues of great national importance.

The Second Circuit’s decision dramatically curtails

EPA’s discretion in setting national environmental

priorities. It creates enormous nationwide uncertainty,

for both industry and regulators, about the legality of

cost-benefit tradeoffs embodied in CWA permits (and

attendant infrastructure investments) going back three

decades. If EPA concludes from the court’s analysis

that no technology other than closed-cycle cooling is

permissible, the resulting retrofit would cost existing

facilities tens of billions of dollars that they otherwise

could spend on important environmental priorities. It

would cause reductions in generating capacity and

increase air pollution by, among other things, forcing

nuclear plants with near-zero emissions offline for

extended periods. And it would jeopardize our

Nation’s already fragile, overstretched electric

delivery system by (as the Second Circuit concedes)

pushing older or marginally-profitable facilities into

bankruptcy or early clos» ©.

Because EPA has completed this Phase II

rulemaking, and the United States and industry

participants would not be able to seek certiorari if they

prevail in the Phase III litigation pending in the Fifth

Circuit, this case may be the only practical vehicle for

this Court to resolve these important issues.

A THE SECOND CIRCUIT’S’~- COST-

BENEFIT HOLDING IS INCORRECT

AND CONFLICTS WITH DECISIONS OF

OTHER CIRCUITS

This Court has repeatedly explained that a

reviewing court should defer to an = agency’s

interpretation of the statute it administers if Congress

18

has not “directly spoken to the precise question at

issue” and the agency’s interpretation is permissible.

Chevron, 467 U.S. at 842-48. The Second Circuit

concluded that any consideration of costs in relation to

benefits rendered EPA’s construction of §316(b)

impermissible, for several reasons—including that the

text of the statute supposedly precludes cost-benefit

analysis; that it never explicitly authorizes cost-benefit

analysis; and that a cross-reference to §§301 and 306

suggests that Congress intended to preclude cost-

benefit analysis under §316(b). All of those reasons are

deeply flawed and conflict with decisions of other

courts of appeals.

A. The Statutory Structure Supports

EPA’s Use Of Cost-Benefit Analysis

The Second Circuit rested its holding primarily on

inferences from §316(b)’s cross-reference to §§$301 and

306, and a misunderstanding of what those sections

provide. It reasoned that the “best technology

available” language in §316(b) is “linguistically similar

to the BAT standard of section 301 and the [BADT]

standard that applies to new sources under section

306,” and that therefore “to the extent that cost-benefit

analysis is precluded under those statutes, one might

reasonably conclude that it is similarly not permitted

under section 316(b).” App.2la. The Second Circuit

asserted that this Court’s decisions in EPA v. National

Crushed Stone Ass’n, 449 U.S. 64 (1980), and American

Textile interpreted §§301 and 306 to prohibit cost-

benefit analysis. It then leapt from its observation that

“one might reasonably conclude that it is similarly not

permitted under section 316(b)” to a holding that EPA

has no discretion to reach any other conclusion.

19

That reasoning piles error upon error. First, as a

eareful reading of Crushed Stone and American

Textile—and even the Second Circuit’s opinion in this

very case—will reveal, cost-benefit analysis certainly is

not prohibited under §§301 and 306. Congress

provided the relevant criteria for setting BAT (as well

as BCT and BPT) standards in §304, and they

expressly include costs and benefits, as well as any

other factors EPA “deems appropriate.” Supra at 6-7;

Weyerhaeuser Co. v. Costle, 590 F.2d 1011, 1045 (D©.

Cir. 1978). As the D.C. Circuit observed, “the statute

directs [EPA] only to ‘take into account’ the

consideration factors,” and thus “on its face lets EPA

relate the various factors as it deems necessary.” 590

F.2d at 1046.

The same is true for BADT under §306, which

contains language “virtually identical to ... section

304(b)(2)(B).” Am. Iron & Steel Inst. v. EPA, 526 F.2d

1027, 1059 (3d Cir. 1975). Like $304, $306 does not

mandate a structure for analyzing costs, and instead

includes “the cost of achieving such effluent reduction”

us a consideration factor. See 33 U.S.C. §13816(b)(1)(B);

Nat'l Wildlife Fed’n v. EPA, 286 F.3d 554, 559, 563

(D.C. Cir. 2002); Reynolds Metal Co. v. EPA, 760 F.2d

549, 565 (4th Cir. 1985); CPC Int’l, Inc. v. Train, 540

F.2d 1329, 1341-42 (8th Cir. 1976); Am. Iron & Steel

Inst., 526 F.2d at 1059.

EPA obviously is not required to engage in cost-

benefit analysis under §§301 and 306. That is all this

Court meant in Crushed Stone when it said that in

“assessing BAT total cost is no longer to be considered

in comparison to effluent reduction benefits.” 449 U.S.

at 71. As the Fifth Circuit has explained, Crushed

Stone stands only for the proposition that “EPA is not

20

obligated to evaluate ... the relationship between costs

and benefits.” Tex. Oil & Gas Ass’n v. EPA, 161 F.3d

923, 936 (5th Cir. 1998) (citing Crushed Stone, 449 U.S.

at 71) (emphasis added). Numerous circuits have

recognized that EPA is not required to consider costs

and benefits when setting BAT. See, e.g., Rybachek v.

EPA, 904 F.2d 1276, 1290-91 (9th Cir. 1990); Am.

Petroleum Inst. v. EPA, 787 F.2d 965, 972 (5th Cir.

1986); Reynolds Metal Co., 760 F.2d at 565;

Weyerhaeuser, 590 F.2d at 1046-47. But until this case,

no court has ever held that EPA is prohibited from

considering costs in relation to benefits. Cf Ass’n of

Pac. Fisheries v. EPA, 615 F.2d 794, 818 (9th Cir. 1980)

(suggesting in dicta that Congress “did not intend the

Agency .. to engage in marginal cost-benefit

comparisons”). The cases strongly suggest that cost-

benefit analysis is permissible, since EPA may “relate

the various factors as it deems _ necessary.”

Weyerhaeuser, 590 F.2d at 1046.

Indeed, the Sixth Circuit has explicitly held that the

§304 “consideration factors” allow EPA to use cost-

benefit analysis in setting BAT. See BP Exploration &

Oil, Inc. v. EPA, 66 F.3d 784, 796 (6th Cir. 1995); supra

at 6-7. Citing Weyerhaeuser, the Sixth Circuit

concluded that environmental petitioners were “wrong

to contend that EPA is not permitted to balance factors

such as cost against effluent reduction benefits.” 66

I'.3d at 796. The court added that BAT standards

“must be acceptable on the basis of numerous factors,

only one of which is pollution control.” /d. It therefore

upheld EPA’s rejection of a standard based upon

“unacceptably high economic” costs. Jd. The D.C.

Circuit has approvingly cited BP Erploration and

adopted its reasoning that EPA has “considerable

21

discretion to weigh and balance the various factors

required by [CWA\].” Nat'l Wildlife Fed’n, 286 F.3d at

570. The D.C. Circuit also held that the CWA “cannot

logically be interpreted to impose on EPA a specific

structure of consideration or set of weights because it

gave EPA authority to ‘upset’ any such structure by

exercising its discretion to add new factors to the mix.”

Weyerhaeuser, 590 F.2d at 1046. The Sixth and D.C.

Circuits, at a bare minimum, would have decided this

case differently.

Instead of permitting “EPA [to] relate the various

factors as it deems necessary,” id., the Second Circuit

has erroneously imposed a_ single acceptable

framework for consideration of costs (what it calls

“cost-effectiveness”), and has denied EPA discretion to

use any other method. As the United States has

explained to the Fifth Circuit in the pending Phase III

case, “because nothing in Section 316(b) specifies what

weight EPA should give to [individual factors] ... the

Second Circuit erred in concluding that Congress

defined the relationship between costs and benefits.”

U.S. Br. at 59. The cross-reference im §316(b) and

linguistic similarity to the BAT standard in §301

clearly support EPA’s discretion to use cost-benefit

analysis under §316(b). The Second Circuit’s contrary

conclusion is inconsistent with the statute and with

decisions of at least two other courts of appeals, and (as

explained in greater depth below) will be enormously

disruptive.2

2 The Second Circuit's decision is also hard to reconcile with its

decision in Riverkeeper I that. dry cooling is unnecessary for Phase

I facilities. In Riverkeeper I, the panel approved EPA's rejection

of dry-cooling and described = supporting cost-benefit

considerations as “logical,” “relevant,” “only fair to note,” “a useful

22

B. The Text And Legislative History Of

§316(b) Supports EPA’s Discretion To

Use Cost-Benefit Analysis

The Second Circuit’s arguments from the statutory

language are no more persuasive, and are inconsistent

with the settled precedents of other circuits.

The Second Circuit held here that EPA may

consider costs when setting standards under the CWA

only in two ways: (1) “to determine what technology

can be ‘reasonably borne’ by the industry” as a whole,

without regard to whether that technology will

bankrupt any particular facility, App.23a, and (2) “to

engage in cost-effectiveness analysis in determining

BTA,” id., by which it means that within “a narrowly

bounded range” EPA “may permissibly choose

between two (or more) technologies that produce

essentially the same benefits but have markedly

different costs,” App.25a. The court of appeals

apparently drew the first principle from the word

“available” in §316(b)—reasoning that “technology that

cannot ... be reasonably borne by the industry is not

‘available’ in any meaningful sense.” App.2la. It drew

the second principle from the word “best,” theorizing

that a technology that fails to achieve the greatest

possible reduction in impingement and entrainment

cannot be the “best technology available.”

perspective” and “undeniably relevant.” 358 F.3d at 194-95 & 194

n.22 (also endorsing the Sixth Circuit’s reasoning in BP

Exploration.) But in this case the panel expressly (if

unconvincingly) disavowed any reading of Riverkeeper I that

would be consistent with cost-benefit analysis. App.22a n.11. The

full court denied rehearing en banc after this tension was brought

to its attention, and thus stands behind the panel’s decision.

23

Even if that were a plausible reading, it is not the

only plausible reading—-and EPA may interpret the

statute differently. The Second Circuit effectively

concedes that “available” does not mean literally

possible, but rather “reasonably available” in some

economic sense. App.2la-25a. Surely EPA is entitled

to make this determination based on its own economic

analysis. 69 Fed. Reg. at 41,585. And Congress’s use

of the word “best” certainly does not preclude cost-

benefit analysis; Congress has even used the word

“best” in CWA standards for which cost-benefit

analysis is mandatory. See 33 U.S.C. §1314(b)(1)(B)

(mandating cost-benefit analysis for “best practicable

control technology”); see also BP Exploration, 66 F.3d

at 796 (“CWA’s requirement that EPA choose the

‘best’ technology does not mean that the chosen

technology must be the best pollutant removal.”). In

the context of a statute that authorizes EPA to

consider many different factors, the “best” technology

may be one that best accommodates competing

concerns, both environmental and economic. As the

United States has explained to the Fifth Circuit, “{iJn

contrast to the Second Circuit’s reasoning, an

interpretation that permits EPA to weigh benefits and

costs in determining whether a technology is the ‘best’

gives full meaning to Section 316(b)’s text.” U.S. Br. at

59.

Indeed, by taking sane judgment about relative

costs and benefits off the table, the Second Circuit

threatens to render the statute absurd. As technology

advances, it is entirely possible that the ideal

technological solution will change, perhaps

dramatically, from one permitting period to the next.

Under the Second Circuit’s reasoning, existing

24

facilities could be at risk of having to invest collectively

billions of dollars in retrofits every time their permit is

up for renewal, if a new design is found to impinge or

entrain marginally fewer fish. Congress obviously did

not intend to make CWA compliance such a Sisyphean

task.

EPA’s interpretation is also supported by the

legislative history, which states that “best technology

available’ is intended to mean the best technology

available commercially at an economically practicable

cost.” 69 Fed. Reg. 41,604 (quoting 118 Cong. Rec.

33,762). Although the Second Circuit acknowledged

that EPA took its interpretation “directly from ...

[this] floor speech—the only specific reference to

section 316(b),” App.27a, it deemed the legislative

history “problematic” and refused to give it weight

because it did not accord with the court’s own

interpretation of the “more stringent BAT standard”

under §301. App.27a. As explained above, however,

the Second Circuit was simply wrong about what §301

means. The legislative history of §316(b) is entirely

consistent with the Sixth and D.C. Circuit precedents

under §301.

The Second Circuit’s reasoning is also flatly

inconsistent with the First Circuit’s decision in

Seacoast, which upheld EPA’s use of cost-benefit

analysis under §316(b) and has been the controlling

standard for §316(b) permitting decisions for nearly 30

years. In Seacoast, the First Circuit considered an

argument by environmental petitioners that §316(b)

required an intake structure to be moved further

offshore. 597 F.2d at 311. EPA declined to require the

move on the sole basis that the costs “would be ‘wholly

disproportionate to any environmental benefit.” Td.

25

(emphasis added) (citation omitted). On appeal, the

First Circuit affirmed EPA’s use of cost-benefit

analysis under that “wholly disproportionate”

standard, reasoning that “(t]he legislative history

clearly makes cost an acceptable consideration.” /d.

Notably, the First Circuit reached that conclusion prior

to Chevron, without deference to EPA’s interpretive

discretion. The Second Circuit’s decision here thus not

only creates a circuit split, but also effectively holds

that the First Circuit’s de novo interpretation of the

statute was so flawed as to be beyond the limits of

Chevron deference. EPA’s decision in the Phase II

Rule to permit consideration of whether costs bear

some “reasonable relationship” to environmental

benefits is very. similar to the “wholly

disproportionate” test affirmed in Seacoast, and it is

clear the First Circuit would have decided this case

differently.

C. The Second Circuit Wrongly Presumed

That Cost-Benefit Analysis Is

Prohibited Unless Congress Expressly

Authorizes It

The Second Circuit’s holding also rests on an

unprecedented presumption, drawn from = a

misunderstanding of American Textile, that cost-

benefit analysis is barred unless Congress explicitly

authorizes it. It placed great weight on the supposed

“fact that Congress in establishing BTA did not

expressly permit the Agency to consider the

relationship of a technology’s cost to [benefits].”

App.22a (emphasis added). It observed that “(nJotably

omitted from the list of permissible factors ... was the

cost of technology in relation to the benefits.” App.18a-

26

19a. Both observations are incorrect, since the statute

does authorize EPA to consider both costs and benefits

(indeed, any factors it deems relevant). But even if its

premise were correct, the court’s new clear statement

rule would not be.

The Second Circuit selectively quoted this Court’s

observation in American Textile that “(when

Congress has intended that an agency engage in cost-

benefit analysis, it has clearly indicated such intert on

the face of the statute.”” App.22a-23a (quoting Am.

Textile, 452 U.S. at 509). But the issue in American

Textile was whether the statute in question mandated

cost-benefit analysis, not whether it was permissible.

See 452 U.S. at 510-12 (rejecting “the argument that

Congress required cost-benefit analysis”). The

sentence quoted by the Second Circuit stands for the

unexceptional proposition that cost-benefit analysis is

not ordinarily mandated unless Congress has

expressed such an intent. Notably, every court of

appeals that has addressed American Textile’s impact

on cost-benefit analysis has held that the case is limited

to whether cost-benefit analysis is required by statute.

See NRDC v. EPA, 824 F.2d 1146, 1159 n.6 (D.C. Cir.

1987) (en bane) (“American Textile would seem to be

limited to the finding that ... the agency is not required

to employ cost-benefit analysis.”) (emphasis added);

Massachusetts v. Hayes, 691 F.2d 57, 61 n.4 (1st Cir.

1982) (“The Court there held only that the statute ...

did not require ... cost/benefit analysis.”).

That understanding of American Textile is

consistent with principles of Chevron deference, and

completely inconsistent with the Second Circuit's

reasoning. Statutory silence or ambiguity is ordinarily

a “delegation[] of authority to the agency to fill the

27

statutory gap.” Nat'l Cable & Telecomms. Ass’n v.

Brand X Internet Servs., 545 U.S. 967, 980 (2005). If

the statute is silent on cost-benefit analysis, the agency

is not required to consider it—as American Textile

notes. But the Second Circuit’s holding that EPA is

forbidden by congressional silence from considering

costs in relation to benefits intrudes on the agency’s

interpretive prerogatives no less than (and in exactly

the same way as) the opposite presumption rejected in

American Textile. “(Algencies, not courts, ... fill

statutory gaps.” /d. at 982.

Numerous circuits have held that Chevron

deference applies to whether an ambiguous statute

permits, requires, or forbids cost-benefit analysis.*

The Second Circuit’s analysis is inconsistent with those

cases, as the United States has explained in the Phase

III litigation in characterizing that analysis as “flawed”

and “fail[ing] to give appropriate deference.” U.S. Br.

at 60-61, 65 (citing Sierra Club and Michigan). Indeed,

the United States pointed out that “[bly assuming

Congress’s silence in Section 316(b) amounts to a

prohibition on EPA’s authority, the Second Circuit

turns ... Chevron deference on its head.” /d. at 61.

3 See, e.g., Sierra Club v. EPA, 375 F.3d 537, 541 (7th Cir. 2004);

Sierra Club v. EPA, 314 F.3d 735, 744-45 (Sth Cir. 2002); Michigan

vu. EPA, 213 F.3d 663, 678-79 (D.C. Cir. 2000); BP Exploration, 66

F.3d at 796; Quivira Mining Co. v. U.S. Nuclear Regulatory

Comm’n, 866 F.2d 4246, 1258 (10th Cir. 1989); Consol. Rail Corp.

vu. United States, 855 F.2d 78, 85-86 (3d Cir. 1988); see also Cass R.

Sunstein, /rterpreting Statutes in the Regulatory State, 103 Harv.

L. Rev. 405, 487 (1989) (regulations must “impose benefits roughly

commensurate with their costs, unless there is a clear legislative

statement”).

28

II. THE SECOND CIRCUIT'S RESTORATION

HOLDING IS ERRONEOUS AND IN

CONFLICT WITH OTHER CIRCUITS

Section 316(b) requires facilities to “minimiz[e]

adverse environmental impact,” but does not specify

whether such impact must be minimized through the

use of equipment-based technologies and operating

measures, or by repairing or avoiding damage through

restoration measures. As the Second Circuit

acknowledged, restoration plays a very limited,

cautious role in the Phase II Rule. “[A] facility must

demonstrate that ‘meeting the applicable performance

standards or site-specific requirements through the use

of design and construction technologies and/or

operational measures alone is less feasible, less cost-

effective, or less environmentally desirable than

meeting the standards ... through the use of

restoration measures,” and that the proposed

restoration measures will “produce ecological benefits

‘at a level substantially similar’ to what would be

achieved by meeting the national performance

standards” in other ways. App.12a (citing 40 C.F.R.

§$125.94(c)). Restoration has been an important part of

EPA’s interpretation of §316(b) for decades, and the

Agency’s determination that such measures are

permissible is entitled to Chevron deference.

The Second Circuit concluded that the plain

meaning of “minimiz[e]” requires the minimization of

impingement and entrainment effects before they

occur, and is inconsistent with “substitut[ing] after-the-

fact compensation for adverse environmental impacts

that have already occurred.” App.43a-44a. The word

“minimize” is hardly unambiguous, however, and that

interpretation fails to engage with the complexity of

29

environmental regulation and the ambiguity of the

words “adverse environmental impact,” especially

since, for example, the entrainment of large numbers of

fish and shellfish larvae may have no such impact.4

Because §316(b) (unlike $§301 and 306) requires the

“best technology available” to achieve a_ specific

ecological result (“minimizing adverse environmental

impact”), EPA reasonably determined that it could

consider “not only technologies but also their effects on

and benefits to the water from which the cooling water

is withdrawn.” 69 Fed. Reg. at 41,583; see also id.

(“the object of [BTA] is explicitly articulated by

reference to the receiving water’).

The First Circuit in Seacoast likewise understood

that “adverse environmental impact” may consider

effects on and benefits to the source waterbody—in

that case, effects on overall fish populations.® 597 F.2d

at 309-11 (analyzing impacts to fish populations, rather

than individual fish, and affirming EPA). EPA’s

decision in the Phase II Rule that such “impact|s]|” may

4 Because large-scale egg and larval losses are recognized by

EPA and other governmental agencies as part of the life cycle of

aquatic organisms, losses caused by intake structures may have no

appreciable environmental effect.

2 As Seacvast reflects, EPA and States have long defined

“adverse environmental impact,” in part, as impact to fish

populations, rather than individual fish. EPA set the Phase II

performance standards on the basis of reductions in individual fish

impinged or entrained because this approach provides a “quick,

certain, and consistent metric,” 69 Fed. Reg. at 41,586, but

nonetheless reiterated its authority to “minimiz[e] adverse

environmental impact” by considering effects on and benefits to

the source waterbody. /d. at 41,583. Restoration accomplishes

this objective by “achievjing] comparable reductions” in those

impacts. Id.

30

be “minimize[d]” by restoration is consistent with the

statute and within EPA’s discretion.

The Second Circuit also reasoned that restoration

measures could not be considered because they “are

not part of the location, design, construction, or

capacity of ... intake structures.” App.44a. But the

statute requires the design and construction of intake

structure to “reflect” BTA; it does not say that the

technology must be physically incorporated into the

intake structure itself. See 33 U.S.C. §1326(b);

App.172a-76a. This argument is inconsistent with the

rest of the Second Circuit’s own analysis and ignores

that other permissible technologies, such as barrier

nets and the cooling towers apparently preferred by

the Second Circuit, are similarly not part of the intake

structure.

EPA’s discretion on this point is further supported

by the three decades that EPA and States have

interpreted §316(b) to allow restoration. Cf. Barnhart

v. Walton, 535 U.S. 212, 220 (2002) (“particular”

deference “normally accordi[ed] ... to an agency

interpretation of longstanding duration”). Congress

has never amended §316(b) to prohibit EPA from

authorizing restoration projects for existing facilities.

The absence of such action suggests that Congress

intended EPA’s longstanding interpretation or, at a

minimum, has “understood [it] as_ statutorily

permissible.” Jd.

The Second Circuit’s decision also threatens EPA’s

practice of considering restoration measures in many

environmental contexts, and upsets a well-established

consensus among courts of appeals that such measures

are permissible. EPA and other federal agencies have

approved environmental mitigation measures as a

31

compliance alternative under (among other programs)

CWA $404, the Endangered Species Act, the Fish and

Wildlife Coordination Act, and the National

Environmental Policy Act (“NEPA”).6

Most of these statutes—like §316(b)—are silent or

ambiguous as to whether restoration measures are

permissible. Nonetheless courts have widely affirmed

federal agencies’ discretion to consider restoration or

mitigation measures in making _ regulatory

determinations under NEPA.’ Similarly, the use of

restoration measures in wetlands regulation has been

upheld even though CWA §404 is silent as to

restoration. Departing from this broad national

consensus, the Second Circuit appears to be the first

court ever to conclude that an ambiguous statute bars

the use of restoration measures.

6 See Thomas J. Schoenbaum & Richard B. Stewart, The Role of

Mitigation and Conservation Measures in Achieving Compliance

with Environmental Regulatory Statutes: Lessons from Section

316 of the Clean Water Act, 8 N.Y.U. Envtl. L.J. 237, 249-79 (2000)

(analyzing statutes, regulations, and court decisions).

7 Envtl. Prot. Info. Ctr. v. U.S. Forest Serv., 451 F.3d 1008,

1015-16 (9th Cir. 2006); Greater Yellowstone Coal. v. Flowers, 359

F.3d 1257, 1276-77 (10th Cir. 2004); Spiller v. White, 352 F.3d 235,

241 (5th Cir. 2003); Sierra Club v. Army Corps of Eng’rs, 295 F.3d

1209, 1220-21 (llth Cir. 2002); Roanoke River Basin Ass’n v.

Hudson, 940 F.2d 58, 62-64 (4th Cir. 1991); Cabinet Mountains

Wilderness v. Peterson, 685 F.2d 678, 682 (D.C. Cir. 1982).

5 City of Olmsted Falls v. EPA, 435 F.3d 632, 637 (6th Cir.

2006); Fund for Animals, Inc. v. Rice, 85 F.3d 535, 544-45 (11th

Cir. 1996); Town of Norfolk v. Army Corps of Eng’rs, 968 F.2d

1488, 1448-50 (1st Cir. 1992).

32

Ill. THE SECOND CIRCUIT'S HOLDINGS

RAISE QUESTIONS OF NATIONAL

IMPORTANCE THAT MERIT REVIEW

BY THIS COURT

A. The Panel’s Cost-Benefit Holding Will

Impose Enormous Costs and Disrupt

National Environmental Policy

Without correction by this Court, the Second

Circuit’s decision will significantly affect our Nation’s

environmental priorities and impose _ substantial

burdens on the country’s already strained power

supply. It also threatens to impose billions in

compliance costs beyond what Congress intended.

The Second Circuit’s decision creates great

uncertainty nationwide about cost-benefit analysis

under §316(b). Before promulgating a new Phase II

rule on remand, EPA will have to decide whether to

follow this decision when reviewing permits for

facilities outside the Second Circuit, or instead follow

the First Circuit’s decision in Seacoast and the 30-year

permitting history allowing cost-benefit analysis.

(Indeed, if EPA adheres to the views it has expressed

to the Fifth Circuit and refuses to follow this decision

nationwide, the Second Circuit’s decision may doom the

effort to articulate consistent nationwide standards.)

More than 700 facilities nationwide also must decide

whether the permits they have relied upon for decades

when making infrastructure investments are worth the

paper they are printed on; and state permitting

authorities will have to decide whether to reexamine

and fundamentally alter many of those existing

decisions.

33

This confusion and uncertainty will only increase if

the United States persuades the Fifth Circuit to break

with the Second Circuit in the Phase III litigation. If

the Fifth Circuit holds that cost-benefit is allowed

under §316(b), the United States and industry will not

be able to seek certiorari. This Court may not have

another opportunity to review the resulting deepened

circuit split before facilities have to make new

infrastructure investments.

The clear implication of the Second Circuit’s opinion

is that the court believes EPA should require all Phase

Il facilities to convert to closed-cycle cooling

technology. See, e.g., App.28a (court’s “concern” “is

further deepened by the Agency’s rejection of closed-

cycle cooling”); App. 30a-33a & n.16 (noting “seemingly

large differences” between closed-cycle cooling and the

Phase II performance standards, and “remand[ing] ...

possibly for a new determination of BTA”).

EPA exhaustively considered that option, however,

and made an expert determination that closed-cycle

cooling was not BTA for all Phase II facilities, citing

the fact the other technologies “approach [its]

performance, [and] concerns for energy impacts due to

retrofitting,” among other considerations. 69 Fed. Reg.

at 41,605-06. For example, the record shows that the

capital costs of retrofitting one of PSEG’s plants with

cooling towers—the 2300-megawatt Salem Gencrating

Station—is an estimated $576 million. App.179a-80a.

PSEG expects the total expense associated with

closed-cycle retrofitting would rise to at least $1 billion.

That is the likely cost of retrofitting one plant. EPA

has estimated the cost of a closed-cycle cooling

requirement at all Phase II facilities would be

approximately $3.5 billion annually. 69 Fed. Reg. at

34

41,605. Furthermore, both EPA and Department of

Energy believe this estimate understates the true

costs significantly. /d.; App.141a-69a.

Beyond the direct costs of retrofitting and

operating closed-cycle systems, the Second Circuit’s

decision threatens to impose enormous indirect

economic burdens by impairing our Nation’s electricity

generating capacity. PSEG expects that a closed-cycle

retrofit at the nuclear-powered Salem Generating

Station would require partially suspending operations

for at least 14 months, causing a net loss of 1150

megawatts, or half of its generating capacity, during

that period. EPA has pegged “many other facilities” as

having a down time of 10 months. 69 Fed. Reg. at

41,605. Many facilities, especially those with short

remaining lives, may simply shut down or cancel

planned repowerings. App.170a-7la.9 Other facilities

may be physically unable to install cooling towers. 69

Fed. Reg. at 41,605. Nonetheless the Second Circuit’s

opinion blithely accepts the bankruptcy or closure of

numerous electricity generating facilities, without

considering impacts to the U.S. electric supply, so long

as “the cost of a given technology could be reasonably

borne by the industry” as a whole. App.19a-23a.

Even for certain facilities where retrofitting with

closed-cycle cooling systems is technologically possible

(App.153a-54a), the conversion will produce 2.4 to 4%

9 See alsu North Am. Reliability Corp., 2007 Long-Term

Reliability Assessment at 97 (Oct. 2007) (“NERC Report”),

available at __ ftp://www.nerc.com/pub/sys/all_updl/docs/pubs/

LTRA2007.pdf (federally-certified electric reliability organization

stating that “prohibitive” retrofitting costs may cause “many older

plants” to retire, “potentially jeopardizing resource adequacy in

many regions’’).

35

less electricity on average due to the lower energy

output, or “energy penalty,” associated with that less

efficient technology—including in areas of the country

already energy-constrained. 69 Fed. Reg. at 41,605

(estimated energy penalty of 5.3% for nuclear plant

providing 78% of Vermont’s electricity); see also

App152a-53a; NERC Report at 97 (loss would

represent “12 percent reduction in available capacity

margin”). As the Department of Energy warned, this

loss of efficiency is greatest in summer months, when

the energy demand is highest. Much of these costs—

monetary costs and increased risk of blackouts—will be

incurred by the public, as consumers of electric power.

69 Fed. Reg. at 41,654-55. Money spent on closed-cycle

cooling will actually frustrate the Department of

Energy’s efforts to improve reliability and generating

capacity of the power grid. App.15la-56a, 163a-71a.

Even from a pure environmental standpoint, the

electricity lost from that decrease in generating

efficiency, and from taking nuclear plants offline for

extended periods, will require more consumption of

fossil fuels, which, in turn, will increase emissions of

pollutants including sulfur dioxide, carbon dioxide,

NO,, and mercury. See 69 Fed. Reg. at 41,605. The

Second Circuit’s misreading of §316(b) also threatens to

force EPA and facilities to prioritize marginal

reductions in impingement and entrainment mortality

over competing environmental priorities. For example,

capital spent on retrofitting will not be available to

fund other environmental objectives, such as

greenhouse gas reduction. And given the Second

Circuit’s astonishingly unpragmatic interpretation of

§$316(b), there is no guarantee that those opportunity

36

costs will result in any significant benefit to aquatic

life.

This decision may also sweep far broader than

§316(b). As discussed above, the Second Circuit held

that the “best available technology” standard under

$301, which governs most toxic effluent discharges,

also forbids any consideration of cost-benefit analysis.

App.18a-2la. This holding, which conflicts with the

analysis of every circuit that has considered the issue,

will be enormously’ disruptive to EPA’s

implementation of the CWA. It invites a rash of

challenges to NPDES permits whenever plaintiffs can

establish venue in the Second Circuit, fragmenting

national environmental policy. The panel’s new clear

statement rule barring cost-benefit analysis whenever

a statute is silent on the issue is even more dangerous,

threatening agency discretion and the validity of

countless regulations. Indeed, respondents are already

contending in the Phase III litigation that cost-benefit

analysis is forbidden because §316(b) “includes no

language whatsoever authorizing [it].” Enviro. Pets.

Br. at 48. If Riverkeeper IT stands, similar challenges

under other statutes will follow.

B. Restoration Measures Provide A

Critically Important Policy Tool

The Second Circuit’s decision also raises questions

of national importance by invalidating an exceptionally

valuable, widely-used environmental policy tool.

Before the Riverkeeper decisions, EPA and States had

relied on restoration measures in §316(b) permitting

decisions for three decades. From that experience,

EPA concluded that restoration measures are often

“more cost-effective, more feasible or more

37

environmentally beneficial.” App.190a.

States have similarly supported _ restoration

measures for existing facilities because they provide

“eritical” regulatory flexibility. App.184a-87a

(Maryland); App.191la (Tennessee). Six amici States—

Texas, Alabama, Indiana, Kentucky, Nebraska, and

North Dakota—explained below that restoration is

valuable not only because it provides that essential

flexibility, but because it “provides ... broader

ecosystem benefits.” State Amici Br. at 4-8.

Restoration efforts indisputably have benefited the

environment on a massive scale, with PSEG alone

preserving or restoring more than 20,000 acres of

wetlands. Without intervention by this Court, this

valuable policy tool will be lost—for no reason other

than linguistic hair-splitting, and to the detriment of

these environmental protection efforts.

CONCLUSION

The petition for certiorari should be granted.

Respectfully submitted,

CHRISTOPHER J. MAUREEN E. MAHONEY

McCAULIFFE Counsel of Record

JOHN G. VALERI, JR. PHILIPJ. PERRY

PSEG SERVICES CORP. J. SCOTT BALLENGER

OFFICE OF CASSANDRA STURKIE

ENVIRONMENTAL COUNSEL DREWC. ENSIGN

80 PARK PLAZA, T5C LATHAM & WATKINS LLP

NEWARK, NJ 07102-4194 555 11TH STREET, N.W.

(973) 480-6298 SUITE 1000

WASHINGTON, DC 20004

(202) 637-2200

NOVEMBER 2, 2007

KARL S. LYTZ

LATHAM & WATKINS LLP

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