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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2009
- **Citation:** 556 U.S. 208

## Text

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
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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
Be ila SITES cectsscasceccesccsoncrenennenerssievonnioniianstininn 5
Be EID woienscarincensntenonenevshsasnnansenecnemisiininbaaa 6
ee Se ire Se NEILES D crccccncnesecovscsnosvousneessensesonssopenssenneons 6
Be ie Se iaiiiinietennsctucnsccnseromepnonnnentuemorsereenmnauneias 1,5
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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SAN FRANCISCO, CA 94111

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385015_0046%3A02. Public record. Not legal advice.