Appendix — Entergy Corp. v. Riverkeeper, Inc.

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UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

RIVERKEEPER, INC., Natural Resources Defense

Council, Waterkeeper Alliance, Soundkeeper, Inc.,

Scenic Hudson, Inc., Save the Bay-People for

Narragansett Bay, Friends of Casco Bay, American

Littoral Society, Delaware Riverkeeper Network,

Hackensack Riverkeeper, Inc., New York/New Jersey

Baykeeper, Santa Monica Baykeeper, San Diego

Baykeeper, California Coastkeeper, Columbia

Riverkeeper, Conservation Law Foundation, Surfrider

Foundation, State of Rhode Island, State of

Connecticut, State of Delaware, Commonwealth of

Massachusetts, State of New Jersey, State of New

York, Appalachian Power Company, Illinois Energy

Association, Utility Water Act Group, PSEG Fossil

LLC, PSEG Nuclear LLC, Entergy Corporation,

Petitioners,

UNITEDSTATES ENVIRONMENTAL

PROTECTION AGENCY, STEPHEN L. JOHNSON,

in his official capacity as Administrator of the United

States Environmental Protection Agency,

Respondents.

Docket Nos. 04-6692-ag(L), 04-6693-ag(CON ), 04-4694-

ag(CON), 04-6695-ag(CON), 04-6696-ag(CON), 04-6697-

ag(CON ), 04-6698-ag(CON ), 04-6699-ag(CON).

Argued: June 8, 2006.

Decided: Jan. 25, 2007.

425 F.3d 83

Before STRAUB, SOTOMAYOR, and HALL, Circuit

Judges.

SOTOMAYOR, Circuit Judge.

This is a case about fish and other aquatic

organisms. Power plants and other industrial

operations withdraw billions of gallons of water from

the nation’s waterways each day to cool their facilities.

The flow of water into these plants traps (or

“Impinges”) large aquatic organisms against grills or

screens, which cover the intake structures, and draws

(or “entrains”) small aquatic organisms into the cooling

mechanism; the resulting impingement and

entrainment from these operations kill or injure billions

of aquatic organisms every year. Petitioners here

challenge a rule promulgated by the Environmental

Protection Agency (“the EPA” or “the Agency”)

pursuant to section 3i6(b) of the Clean Water Act

(““CWA” or “the Act”), 33 U.S.C. § 1326(b),! that is

intended to protect fish, shellfish, and other aquatic

organisms from being harmed or killed by regulating

“cooling water intake structures” at large, existing

power-producing facilities.

For the reasons that follow, we grant in part and

deny in part the petitions for review, concluding that

certain aspects of the EPA’s rule are based on a

1 We refer to statutory provisions mentioned in the text by

their section in the CWA and provide in citations both the section

of the Act and the parallel section of the United States Code.

reasonable ir* . pretation of the Act and supported by

substantial evides* =. in the administrative record, but

remanding several aspects of the rule because they are

inadequately explained or inconsistent with the

statute, or because the EPA failed to give adequate

notice of its rulemaking. We also dismiss for lack of

jurisdiction one aspect of the petitions because there is

no final agency action to review.

BACKGROUND

Our decision in Riverkeeper, Inc. v. EPA, 358 F.3d

174 (2d. Cir. 2004) (“Riverkeeper I’), which addressed

challenges to the EPA’s rule governing cooling water

intake structures at new—as opposed to existing—

facilities discusses at length the procedural and factual

background of the rulemaking pursuant to section

316(b). We presume familiarity with Riverkeeper I

and provide here only a brief overview of the statute

and the various stages of the rulemaking.

These consolidated petitions for review concern a

final rule promulgated by the EPA regarding the

water that large, existing power plants withdraw from

rivers, lakes, and other waterways of the United States

to cool their facilities. See 40 C.F.R. § 125.91(a). This

cooling process requires power plants to extract

billions of gallons of water per day from the nation’s

waters, thereby impinging and entraining a huge

number of aquatic organisms. Riverkeeper I, 358 F.3d

at 181. Indeed, a single power plant can kill or injure

billions of aquatic organisms in a single year. /d.

Cognizant of this problem, Congress in 1972

amended the CWA, 33 U.S.C. §§ 1251-1387, to regulate

cooling water intake structures. See Federal Water

Pollution Control Act Amendments of 1972, Pub. L.

No. 92-500, 86 Stat. 816 (1972). We have described

Congress's regulation of such structures as “something

of an afterthought,” Riverkeeper I, 358 F.3d at 186 n.

12, given that the directive appears in a section of the

Act addressing the seemingly unrelated issue of

thermal pollution, see CWA §316(a), 33 U.S.C.

§ 1326(a). The Act, as amended, provides that “[aJny

standard established pursuant to section 1311 of this

title [CWA section 301] or section 1316 of this title

|\CWA section 306] 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.” CWA §316(b), 33 U.S.C.

§ 1326(b).

The provisions of the Act cross-referenced in

section 316(b) direct the EPA to issue rules regulating

the discharge of pollution from existing point sources,

CWA § 301, 33 U.S.C. § 1311, and new point sources,

CWA §306, 38 U.S.C. § 13162 As we noted in

Riverkeeper I, “[wlhen the EPA established new

source performance discharge standard|s] ... it ought

then to have regulated ... intake structures ....” 358

F.3d at 185 (internal quotation marks omitted;

emphasis in original). Put differently, section 316(b)

required the EPA to promulgate regulations for

cooling water intake structures at the same time that it

established pollution discharge standards pursuant to

sections 301 and 306. The EPA’s first attempt at

regulation under section 316(b), however, was

remanded by the Fourth Circuit in 1977 on procedural

grounds, and years passed without the EPA issuing

new rules. /d. at 181 (citing Appalachian Power Co. v.

Train, 566 F.2d 451 (4th Cir. 1977)). Environmental

2 A “point source” is “any discernible, confined and discrete

conveyance ... from which pollutants are or may be discharged.”

33 U.S.C. § 1362(14).

groups ultimately sued the EPA and won a consent

decree, pursuant to which the Agency established a

timetable to issue rules pursuant to Section 316(b) in

three “phases.” Jd. & n. 3. Phase I—addressed in

Riverkeeper I—governs new facilities; Phase II—

addressed here—covers large, existing power plants;

and Phase III will regulate existing power plants not

governed by Phase II, as well as other industrial

facilities. See Riverkeeper, Inc. v. Whitman, 2001 WL

1505497, at *1 n. 3 (S.D.N.Y. Nov. 27, 2001).

Our interpretation of section 316(b) is informed by

the two provisions it cross-references, CWA sections

301 and 306. Section 301 sets forth a framework under

which limitations on the discharge of pollutants from

existing sources would become more stringent over

time. CWA §301(b), 33 U.S.C. §1311(b); see

Riverkeeper I, 35% F.3d at 185.

Section 301(b)(1)(A) required the EPA, beginning in

1977, to set effluent limitations for existing sources

based on “the best practicable control technology

currently available,” or “BPT.” CWA § 301(b)(1)(A), 38

U.S.C. §1811(b))(A). By 1989, existing source

effluent limitations were to be based on the more

stringent “best available technology economically

achievable,” or “BAT.” CWA § 301(b)(2)(A), 33 U.S.C.

§ 1311(b)(2)(A). Additionally, section 306 requires the

EPA to establish “standards of performance” for the

control of the discharge of pollutants from new sources

based on “the best available demonstrated control

technology,” a standard that “reflects the greatest

degree of effluent reduction.”. CWA § 306(a)(1), 33

U.S.C. § 1816(a)(1).

In section 316(b), Congress established yet another

standard to govern cooling water intake structures,

which requires such structures to reflect the “best

technology available for minimizing adverse

environmental impact,” or “BTA.” CWA § 316(b), 33

U.S.C. § 1326(b). We noted in Riverkeeper I that

“{ajithough the EPA is permitted to consider a

technology’s cost in determining whether it is

‘practicable,’ ‘economically achievable,’ or ‘available,’ it

should give decreasing weight to expense as facilities

have time to plan ahead to meet tougher restrictions.”

358 F.3d at 185 (citations omitted). Additionally, we

observed that “[blecause section 316(b) refers to

sections 301 and 306 but provides a different standard

(‘best technology available for minimizing adverse

environmental impact’ instead of, for example, ‘best

available demonstrated control technology’) and does

not explicitly provide that regulations pursuant to

section 316(b) are subject to the requirements of

sections 301 and 306, we think it is permissible for the

EPA to look to those sections for guidance but to

decide that not every statutory directive contained

therein is applicable” to rulemaking under section

316(b). Jd. at 187. With this general background in

mind, we consider Phases I and II of the EPA’s

rulemaking.

I. The Phase I Rule

On December 18, 2001, the EPA issued its first rule

(“the Phase I Rule’) governing cooling water intake

structures for new—as opposed to existing— facilities.

Regulations Addressing Cooling Water’ Intake

Structures for New Facilities; Final Rule, 66 Fed.

Reg. 65,256 (Dec. 18, 2001) (codified at 40 C.F.R. pts. 9,

122-25). The Phase I Rule established a two-track

approach to regulating cooling water intake systems at

new facilities, under which a new facility could choose

one of two “tracks” to comply with the statute. Track I

created national intake capacity and velocity standards

based on closed-cycle cooling technology,* which the

EPA deemed the best technology available for

minimizing adverse environmental impacts. See

Riverkeeper I, 358 F.3d at 182-83. Track II did not

require the use of any specific technology so long as the

facility “can show, in a demonstration study, ‘that the

technologies employed will reduce the level of adverse

environmental impact ... to a comparable level to that

which’ would be achieved applying Track I’s capacity

and velocity requirements.” /d. at 183 (quoting 40

C.F.R. § 125.84(d)(1)).

Environmental and industry groups challenged

certain aspects of the rule, including, inter alia, the

part of the Track IT procedure allowing power plants to

comply with section 316(b) by undertaking so-called

“restoration measures,” such as_ restocking the

waterbody with fish, reclaiming abandoned mines to

reduce drain-off, or removing barriers to fish

migration, to maintain fish and shellfish in a waterbody

at certain levels. In Riverkeeper I, we upheld most

aspects of the Phase I Rule, but remanded the

provisions relating to the Track II restoration option.

We found that the restoration option was inconsistent

3 As we noted in Riverkeeper 1,

Cooling water systems fall into three groups. “Once-

through” systems take water in, use it to absorb heat,

and return the water to its source at a_ higher

temperature. “Closed-cycle” systems recirculate the

water (after allowing it to cool off in a reservoir or tower

before being reused) and add water to the system only to

replace that which is lost through evaporation. Closed-

cycle systems, therefore, withdraw far less water than

once-through systems. Dry cooling systems ... use air

drafts to transfer heat, and, as their name implies, they

use little or no water.

358 F.3d at 182 n. 5 (internal citations omitted).

with section 316(b)’s requirement that the EPA

minimize adverse environmental impacts by regulating

the “location, design, construction, and capacity of

cooling water intake structures” because this option

has nothing to do with the location, design,

construction, or capacity of such structures. /d. at 189

(quoting CWA §316(b), 33 U.S.C. § 1326(b)). Given

this, we held that the EPA had impermissibly exceeded

its authority in allowing Phase I facilities to use these

restoration measures to comply with regulations

implementing the statute. /d.

Il. The Phase II Rule

On July 9, 2004, the EPA issued a final rule,

pursuant to the second phase of the consent decree

(“the Phase II Rule” or “the Rule”), that governs

cooling water intake structures at large, existing

power plants. See Final Regulations to Establish

Requirements for Cooling Water Intake Structures at

Phase II Existing Facilities, 69 Fed. Reg. 41,576 (July

9, 2004) (codified at 40 C.F.R. pts. 9, 122-125). The

Phase II Rule covers existing facilities that are “point

sources” and that, as their primary activity, “both

generate[] and transmit[] electric power, or

generate[ ] electric power but sell{ | it to another entity

for transmission,” “use[ ] or propose[ ] to use cooling

water intake structures with a total design intake flow

of 50 million gallons per day (MGD) or more,” and

“use| | at least 25 percent of water withdrawn

exclusively for cooling purposes.” 40 C.F.R. § 125.91.

Although we will discuss the specifics of the Rule with

respect to each challenge, we provide here an overview

of the Rule.

The Phase [I Rule sets forth five compliance

alternatives. See 40 C.F.R. § 125.94(a). Section

125.94(a) requires that a facility select and implement

one of the following “for establishing best technology

available for minimizing adverse environmental

impact”:

(1)i) You may demonstrate to the Director that

you have reduced, or will reduce, your flow

commensurate with a ciosed-cycle recirculating

system. In this case, you are deemed to have met

the applicable performance standards and will not

be required to demonstrate further that your

facility meets the impingement mortality and

entrainment performance standards specified in

paragraph (b) of this section ....; or

(ii) You may demonstrate to the Director that you

have reduced, or will reduce, your maximum

through-screen design intake velocity to 0.5 ft/s or

less. In this case, you are deemed to have met the

impingement mortality performance standards

and will not be required to demonstrate further

that your facility meets the performance

standards for impingement mortality specified in

paragraph (b) of this section and you are not

subject to the requirements in §§ 125.95, 125.96,

125.97, or 125.98 as they apply to impingement

mortality. However, you are still subject to any

applicable requirements for entrainment

reduction .... |;]

(2) You may demonstrate to the Director that

your existing design and _— construction

technologies, operational measures, and/or

restoration measures meet the performance

standards specified in paragraph (b) of this section

and/or the restoration requirements in paragraph

(3) You may demonstrate to the Director that you

have selected, and will install and properly

operate and maintain, design and construction

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technologies, operational measures, and/or

restoration measures that will, in combination

with any existing design and _ construction

technologies, operational measures, and/or

restoration measures, meet the performance

standards specified in paragraph (b) of this section

and/or the restoration requirements in paragraph

(4) You may demonstrate to the Director that you

have installed, or will install, and properly operate

and maintain an approved design and construction

technology in accordance with § 125.99(a) or (b);

(5) You may demonstrate to the Director that you

have selected, installed, and are _ properly

operating and maintaining, or will install and

properly operate and maintain design and

construction technologies, operational measures,

and/or restoration measures that the Director has

determined to be the best technology available to

minimize adverse environmental impact for your

facility in accordance with paragraphs (a)(5)(i) or

(ii) of this section ....

40 C.F.R. § 125.94(a).

The Phase II Rule does not require large, existing

power plants to install closed-cycle cooling systems,

although a facility with such a system (or one whose

intake flow is commensurate with that of a closed-cycle

system) will be considered in compliance with the Rule.

40 C.F.R. § 125.94(a)(1)G). The Rule instead references

national performance standards, discussed below, that

“are based on consideration of a range of technologies

that EPA has determined to be commercially available

for the industries affected as a whole.” 69 Fed. Reg. at

41,598-99. And rather than limiting BTA to

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technologies based on closed-cycle cooling systems, the

EPA designated a “suite” of technologies—including

fine- and wide-mesh wedgewire screens, aquatic filter

barrier systems, barrier nets, and fish return systems,

among others, id. at 41,599; see also 40 C.F.R.

§ 125.99(a)—as BTA for large, existing power plants.

Section 125.94(b) establishes national performance

standards to be achieved through one of the compliance

alternatives set forth in section 125.94(a). With respect

to impingement mortality, it provides that facilities

choosing “compliance alternatives in paragraphs (a)(2),

(aX(3), or (a)(4) of this section .. must reduce

impingement mortality for all life stages of fish and

Shellfish by 80 to 95 percent from the calculation

baseline.”4 /d. § 125.94(b)(1). With respect to

entrainment, facilities that choose

compliance alternatives in paragraphs (a)(1)(ii),

(a)(2), (a)(3), or (a)(4) of this section ... must also

reduce entrainment of all life stages of fish and

shellfish by 60 to 90 percent from the calculation

baseline if:

(i) [the] facility has a capacity utilization rate

of 15 percent or greater, and

(ii)(A) ... uses cooling water withdrawn from a

tidal river, estuary,.ocean, or one of the Great

Lakes; or (B) ... uses cooling water withdrawn

from a freshwater river or stream and the

design intake flow of your cooling water intake

4 The “calculation baseline” is “an estimate of impingement

mortality and entrainment that would occur” at a specific site

based on a number of quantitative assumptions regarding intake

velocity and the locatio.: and design of the site’s intake structures.

40 C.F.R. § 125.93. The regulation also permits a site’s specific

historical and current data on impingement and entrainment to

serve as a basis for this baseline. /d.

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structures is greater than five percent of the

mean annual flow.

Id. § 125.94(b)(2).

Section 125.94(c) permits facilities to comply with

the Rule by implementing restoration measures “in

place of or as a supplement to installing design and

control technologies and/or adopting operational

measures that reduce impingement mortality and

entrainment.” /d. §125.94(c). In order to adopt

restoration measures under the 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.” Id. § 125.94(c)(1). Moreover, the

restoration measures implemented by the facility must

produce ecological benefits “at a level that is

substantially similar” to what would be achieved by

meeting the national performance standards of section

125.94(b). Id. § 125.94(c)(2).

The compliance provision of section 125.94(a)(5)

permits what is in effect a site-specific compliance

alternative to the generally applicable performance

standards in two _ circumstances. In the first

circumstance (“the cust-cost compliance alternative” or

“the cost-cost variance”), if a facility demonstrates that

its compliance costs “would be significantly greater

than the costs considered by the Administrator,” the

permitting authority must make a_ site-specific

determination of BTA that is “as close as practicable to

the applicable performance standards ... without

resulting in costs that are significantly greater than the

costs considered by the Administrator” in establishing

those standards. 40 C.F.R. § 125.94(a)(5)(i). In the

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second circumstance (“the cost-benefit compliance

alternative” or “the cost-benefit variance”), the

permitting authority must make a_ site-specific

determination of BTA that is “as close as practicable”

to the national performance standards if a facility

demonstrates that its compliance costs would be

“significantly greater than the benefits of complying”

with the performance standards at the facility. /d.

§ 125.94(a)(5)(ii).

For those facilities installing technologies

designated as BTA, section 125.94(d) allows the

national performance standards set forth in section

125.94(b) to be satisfied by demonstrating compliance

with a technology installation and operation plan

(“TIOP”), which concerns, inter alia, a_ facility’s

installation, operation and ms intenance of BTA. As the

Rule is enforced through the permitting process under

the National Pollutant Discharge Elimination System

(“NPDES”),® section 125.94(d)(1) provides that a

facility that uses one of the compliance methods other

than closed-cycle cooling may request that compliance

with the national performance standards during the

first permit cycle be determined with respect to

whether the facility has complied with the TIOP it

submitted with its permit application. Section

125.94(d)(2) authorizes facilities to request that

compliance. during subsequent permit terms be

determined based on whether a facility remains in

compliance with its TIOP, and in accordance with any

necessary revisions, “if applicable performance

standards are not being met.” 40 C.F.R. § 125.94(d)(2).

Finally, section 125.94(f) applies solely to nuclear

power facilities. It provides that if a nuclear facility’s

® The NPDES process is promulgated under CWA section

402(a)(1), 33 U.S.C. § 1342(a)(1).

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compliance with the Rule would conflict with a safety

requirement established by the Nuclear Regulatory

Commission, the EPA must make a site-specific

determination of BTA that would not conflict with the

Commission’s safety requirement. 40 C.F.R.

§ 125.94(f).

For purposes of judicial review, the Phase II Rule

was promulgated on July 23, 2004. See 69 Fed. Reg. at

41,576. Three sets of petitioners, discussed below,

brought timely challenges to the Rule.®

DISCUSSION

I. Standard Of Review

We have jurisdiction to review this Rule pursuant

to CWA section 509(b)(1), 38 U.S.C. § 1369(b)(1). See

Riverkeeper I, 358 F.3d at 183 (stating that the Phase I

Rule is covered by the jurisdictional grant of

§ 1369(b)(1)). As we explained in Riverkeeper I, our

substantive review is twofold. “First, we examine the

regulation against the statute that contains the EPA’s

charge.” Jd. at 184. If Congress “has directly spoken

to the precise question at issue” and its intent is clear,

we “must give effect to the unambiguously expressed

intent of Congress.” Chevron U.S.A., Inc. v. Natural

Res. Def. Council, Inc., 467 U.S. 837, 842-43, 104 S. Ct.

2778, 81 L.Ed.2d 694 (1984). If, however, the statute is

silent or ambiguous, we ask whether “the agency’s

answer is based on a permissible construction of the

statute.” /d. at 843, 104 S. Ct. 2778.

6 The parties filed petitions for review here as well as in several

of our sister circuits. The petitions were consolidated in the Ninth

Circuit by order of the judicial panel on multi-district litigation

pursuant to 28 U.S.C. §§ 1407 and 2112(a)(3). The Ninth Circuit

thereafter transferred the case here pursuant to 28 USC.

§ 2112(a)(5).

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Second, if the agency has followed Congress’s

unambiguously expressed intent or _ permissibly

construed an ambiguous statute, “we measure the

regulation against the record developed during the

rulemaking, but we ‘hold unlawful’ the agency’s

regulation only if it is ‘arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law.”

Riverkeeper I, 358 F.3d at 184 (quoting 5 US.C.

§ 706(2)(A)). “Normally, we must deem arbitrary and

capricious an agency rule where ‘the agency has relied

on factors which Congress has not intended it to

consider, entirely failed to consider an important

aspect of the problem, offered an explanation for its

decision that runs counter to the evidence before the

agency, or is so implausible that it could not be ascribed

to a difference in view or the product of agency

expertise.” Waterkeeper Alliance, Inc. v. EPA, 399

F.3d 486, 498 (2d Cir. 2005) (quoting Motor Vehicle

Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S.

29, 43, 103 S. Ct. 2856, 77 L.Ed.2d 443 (1983) (internal

quotation marks and citations omitted)).

Finally, our review has a procedural dimension.

The Administrative Procedure Act (“APA”) requires

that notice of proposed rulemaking be published in the

Federal Register, 5 U.S.C. § 553(b)(3), and _ that

interested parties be allowed an opportunity to

comment on proposed rules, id. § 553(c). Where an

agency fails to comply with the APA’s notice and

comment provisions, we remand to the agency for

further proceedings. See Sprint Corp. v. FCC, 315

F.3d 369, 371 (D.C. Cir. 2003) (“Because the [agency |

failed to provide adequate notice and opportunity to

comment, we grant the petition and remand the case to

the [agency }.”’).

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Il. The Petitions For Review

The state petitioners’ and the self-styled

environmental petitioners® challenge the Rule on

similar grounds. Their petitions contain the following

arguments: (1) the EPA exceeded its authority in

rejecting closed-cycle cooling as BTA for existing

facilities generally, and the Agency’s rejection of

closed-cycle cooling as BTA for facilities on sensitive

waterbodies is not entitled to deference because the

decision was made at the direction of the Office of

Management and Budget (“OMB”); (2) the EPA

exceeded its authority by establishing ranges of

acceptable performance rather than a single-numeric

performance standard; (3) the CWA does not allow

restoration measures as a means of compliance; (4) the

EPA failed to give adequate notice that it would allow

site-specific determinations of BTA based on cost-cost

analysis, and the EPA impermissibly construed the

statute to allow site-specific determinations of BTA

based on cost-benefit analysis; (5) the provision

allowing that compliance with the performance

standards be determined by establishing compliance

with a facility’s TIOP is unauthorized and violates the

rulemaking requirement of notice and comment; and (6)

the Agency has classified certain new constructions as

“existing facilities” contrary to the definitions set forth

’ Rhode Island, Connecticut, Delaware, Massachusetts, New

Jersey, and New York.

* Riverkeeper, Inc., Natural Resources Defense Council,

Waterkeeper Alliance, Soundkeeper, Inc., Scenic Hudson, Inc.,

Save the Bay—People for Narragansett Bay, Friends of Casco Bay,

American Littoral Society, Delaware Riverkeeper Network,

Hackensack Riverkeeper, Inc., New York/New Jersey Baykeeper,

Santa Monica Baykeeper, San Diego Baykeeper, California

Coastkeeper, Columbia’ Riverkeeper, Conservation Law

Foundation, and Surfrider Foundation.

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in the Phase I Rule without providing adequate notice

and opportunity for comment.

Three groups of industry petitioners, which we will

refer to collectively as the “industry petitioners” or

individually as Entergy Corporation (“Entergy”), the

Utility Water Act Group (“UWAG”),9 and PSEG Fossil

LLC and PSEG Nuclear LLC (“PSEG”), advance

various challenges to the Phase II Rule. Their

challenges raise the following arguments: (1) section

316(b) of the CWA does not apply to existing facilities;

(2) the Agency’s definition of “adverse environmental!

impact” is insufficiently supported by the record; (3)

the EPA’s assumption of zero entrainment survival is

insufficientiy supported by the record; (4) the EPA

improperly requires evaluation of qualitative non-use

benefits in site-specific cost-benefit analyses; (5) the

Agency failed to account for the Rule's

disproportionate impact on nuclear facilities; (6) the

EPA gave inadequate notice of the independent-

supplier provision; and (7) the Agency provided no

notice of its post-rulemaking definition of “Great

Lakes.” The industry petitioners also seek to preserve

the right on this petition for review to raise new

challenges to the Rule if we remand significant aspects

of it. We consider first the challenges raised by the

state and environmental petitioners and then will turn

to the industry petitioners’ challenges.

Ill. The State and Environmental Petitioners

A. Determination of BTA

Perhaps the most significant challenge to the Phase

Il Rule is the petitioners’ contention that the EPA

exceeded its authority in rejecting closed-cycle cooling,

and selecting instead the suite of technologies, as the

% UWAG petitions this court in conjunction with the

Appalachian Power Company and the [inois Energy Association.

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“best technology available” as required by section

316(b), 33 U.S.C. § 1326(b), in large part because the

Agency engaged in improper cost considerations.

This challenge requires us at the outset to

determine to what extent, if any, the EPA can consider

cost when selecting “the best technology available for

minimizing adverse environmental impact” under the

statute.

1. Cost Analysis Pursuant to Sections

301 and 306

Section 316(b) does not itself set forth or cross-

reference another statutory provision enumerating the

specific factors that the EPA must consider in

determining BTA. The statute, however, does make

specific reference to CWA sections 301 and 306, which

we have taken previously as “an invitation” to look to

those sections for guidance in “discerning what factors

Congress intended the EPA to. consider in

determining” BTA. Riverkeeper I, 358 F.3d at 186.

We look to each of these statutes in turn.

Section 301(b)(1)(A) established the BPT standard

that governed the effluent limitations applicable to

existing sources through 1989. Congress provided

that, in determining BPT, the Agency could consider

“the total cost of application of technology in relation to

the effluent reduction benefits to be achieved from

such application.” CWA § 304(b)1)(B), 38 U.S.C.

§ 1314(b)(1)(B). As noted above, however, the CWA

created standards that were to become increasingly

stringent over time, and in 1989, the more lenient BPT

standard for existing sources was replaced by the BAT

standard of section 301(b)(2)(A), in which Congress

provided that the EPA could consider only “the cost of

achieving such effluent reduction.” CWA

§ 304(b)(2)(B), 33 U.S.C. § 1314(b)(2)(B). Notably

omitted from the list of permissible factors to which the

19a

EPA could look in determining BAT was the cost of

technology in relation to the benefits that technology

could achieve.

This shift from BPT to BAT fundamentally altered

the way in which the EPA could factor cost into its

CWA determinations. Indeed, in analyzing BPT and

BAT, the Supreme Court stated that in “assessing

BATI,] total co:. is no longer to be considered in

comparison to effluent reduction benefits,” as it had

been in assessing BPT. EPA v. Nat'l Crushed Stone

Ass’n, 449 U.S. 64, 71, 101 S. Ct. 295, 66 L.Ed.2d 268

(1980). The Court indicated that the less stringent

BPT standard had allowed for a “limited cost-benefit

analysis” intended to “limit the application § of

technology only where the additional degree of effluent

reduction is wholly out of proportion to the costs of

echieving such marginal level of reduction.” /d. at 71

n. 10, 101 S. Ct. 295 (quoting Remarks of Senator

Muskie reprinted in Legislative History of the Water

Pollution Control Act Amendments of 1972 (Committee

Print compiled for the Senate Committee on Public

Works by the Library of Congress) Ser. No. 93-1, p.

170 (1973)). In determining BAT, by contrast, the EPA

may consider cost as a factor to a limited degree, see

id., but only as to whether the cost of a given

technology could be reasonably borne by the industry

and not the relation between that technology’s cost and

the benefits it achieves, Riverkeeper I, 358 F.3d at 195.

Section 306, which governs the effluent limitations

that apply to new sources, provides that a “standard of

performance” established by the EPA must reflect the

“best availdble demonstrated control technology.”

CWA § 306(a)(1), 33 U.S.C. § 1316(a)1). In language

identical to the text of § 304(b)(2)(B) governing BAT,

Congress provided that in establishing standards of

performance, the EPA “shall take into consideration

20a

the cost of achieving such effluent reduction,” CWA

§ 306(b)(1)(B), 33 U.S.C. § 1816(b)(1)(B), but did not

require the EPA to conduct cost-benefit analysis. Nat’

Wildlife Fed’n v. EPA, 286 F.3d 554, 570 (D.C. Cir.

2002) (“{Slection 306 requires that, when setting the

[new source performance standards], the

‘administrator must take costs into consideration, but

does not require that she conduct a cost-benefit

analysis.”). Sections 301 and 306 of the CWA thus

demonstrate that, after 1989, cost is a lesser, more

ancillary consideration in determining what technology

the EPA should require for compliance under those

sections.

The shift from the BPT standard to the more

stringent BAT one clearly signaled Congress’s intent

to move cost considerations under the CWA from a

cost-benefit analysis to a cost-effectiveness one. We

understand the difference between these two analyses

to turn on the difference between means and ends.

Cost-benefit analysis, like BPT, compares the costs and

benefits of various ends, and chooses the end with the

best net benefits. By contrast, cost-effectiveness

considerations, like BAT, determine which means will

be used to reach a specified level of benefit that has

already been established.!0 Given the above and

considering the parallel language of sections

304(b)(2)(B) and 306(b)(1)(B), the reasoning of National

10 See, eg., OMB Circular A-94, Guidelines and Discount Rates

for Benefit-Cost Analysis of Federal Programs, Appendix A

(1992) (defining “benefit-cost analysis” as “fa] systematic

quantitative method of assessing the desirability of government

projects or policies when it is important to take a long view of

future effects and a broad view of possible side-effects” and “cost-

effectiveness” as “la] systematic quantitative method for

comparing the costs of alternative means of achieving the same

stream of benefits or a given objective”).

2la

Crushed Stone strongly suggests that cost-benefit

analysis is no longer permitted under those sections of

the CWA.

2. Cost Analysis Pursuant to Section

316(b)

As already noted, section 316(b) does not itself set

forth the factors that the Agency can consider in

determining the “best technology available for

minimizing adverse environmental impact.” The BTA

standard of section 316(b), however, is linguistically

similar to the BAT standard of section 301 and the

standard that applies to new sources under section 306,

and 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).

We conclude in any event that the language of section

316(b) itself plainly indicates that facilities must adopt

the best technology available and that cost-benefit

analysis cannot be justified in light of Congress’s

directive.

We stated in Riverkeeper I that the EPA can

consider cost in establishing BTA, but only in a limited

fashion and not as a primary consideration. Indeed,

“[wlith respect to costs, ‘the Administrator must

inquire into the initial and annual costs of applying the

technology and make an affirmative determination that

those costs can be reasonably borne by the industry.””’

Riverkeeper I, 358 F.3d at 195 (quoting Chem. Mfrs.

Ass'n v. EPA, 870 F.2d 177, 262 (5th Cir. 1989))

(emphasis added). While the statutory language

suggests that the EPA may consider costs in

determining BTA, in that a technology that cannot not

pe reasonably borne by the industry is not “available”

in any meaningful sense, cost-benefit analysis is not

similarly supported hy the language or purpose of the

statute. Section 316(b) expressly requires a

22a

technology-driven result, cf. Natural Res. Def.

Council, Inc. v. EPA, 822 F.2d 104, 123 (D.C. Cir. 1987)

(“(Tlhe most salient characteristic of [the CWA’s}

statutory scheme, articulated time and again by its

architects and embedded in the statutory language, is

that it is technology-forcing.”), not one driven by cost

considerations or an assessment of the desirability of

reducing adverse environmental impacts in light of the

cost of doing so. A selection of BTA based on cost-

benefit considerations is thus impermissibly cost-

driven, but a _ selection based in part on cost-

effectiveness considerations, while taking cost into

account, remains technology-driven. The statute

therefore precludes cost-benefit analysis because

“Congress itself defined the basic relationship between

costs and benefits.” Am. Textile Mfrs. Inst., Inc. v.

Donovan, 452 U.S. 490, 509, 101 S. Ct. 2478, 69 L.Ed.2d

185 (1981). Moreover, this conclusion is further

supported by the fact that Congress in establishing

BTA did not expressly permit the Agency to consider

the relationship of a technology’s cost to the level of

reduction of adverse environmental impact it

produces.'! “When Congress has intended that an

11 This conclusion accords with the analysis in Riverkeeper I

that the EPA may consider cost in establishing BTA pursuant to

section 315(b), but only in a limited way. In our discussion of the

EPA’s choice of closed-cycle, rather than dry, cooling as BTA for

Phase I facilities, see 358 F.3d at 194-95, 194 n. 22, we noted that

“dry cooling costs more than ten times as much per year as closed-

cycle wet cooling,” but emphasized that “it is estimated to reduce

water intake by only an additional 5 percent relative to once-

through cooling.” Jd. at 194 (internal footnotes omitted). We

acknowledged that dry cooling is both much more effective and

much more expensive than closed-cycle cooling in absolute terms,

but stressed that, as compared to the baseline of once through

cooling systems, the marginal benefits of dry cooling were small:

“it is undeniably relevant that that difference represents a

23a

agency engage in cost-benefit analysis, :t has clearly

indicated such intent on the face of the statute.” Jd. at

510, 101 S. Ct. 2478.

Given the above, the EPA may permissibly

consider cost in two ways: (1) to determine what

technology can be “reasonably borne” by the industry

and (2) to engage in cost-effectiveness analysis in

determining BTA. Thus, the EPA must first

determine what is the most effective technology that

may reasonably be borne by the industry. In making

this initial determination, the most effective technology

must be based not on the average Phase II facility but

on the optimally best performing Phase IT facilities,

see, e.g., Kennecott v. United States EPA, 780 F.2d 445,

448 (4th Cir. 1985) (“In setting BAT, EPA uses not the

average plant, but the optimally operating plant, the

pilot plant which acts as a beacon to show what is

possible.”), although, of course, the EPA musi still

ascertain whether the industry as a whole ce»

reasonably bear the cost of the adoption of the

technology, bearing in mind the aspirational and

technology-forcing character of the CWA. This

technology constitutes the benchmark for performance.

Once this determination has been made, the EPA may

then consider other factors, including cost-

effectiveness, to choose a less expensive technology

that achieves essentially the same results as the

relatively small improvement over closed-cycle cooling at a very

significant cost.” /d. at 194 n. 22. In dicta, we characterized this

mode of analysis as “relevant” and stated that it “adds a useful

perspective,” id., but did not treat it as the fulcrum of our analysis.

Ultimately, we deferred to the EPA’s determination insofar as it

was based on the grounds that dry cooling was too expensive for

industry reasonably to bear and that dry cooling has negative

environmental effects best left to the considered judgment of the

Agency. Id. at 195-96.

24a

benchmark.! For example, assuming the EPA has

determined that power plants governed by the Phase

II Rule can reasonably bear the price of technology

that saves between 100-105 fish, the EPA, given a

choice between a technology that costs $100 to save 99-

101 fish and one that costs $150 to save 100-103 fish

(with all other considerations, like energy production

or efficiency, being equal), could appropriately choose

the cheaper technology on cost-effectiveness grounds.

Cost-benefit analysis, however, is not permitted under

the statute because, as noted, Congress has already

specified the relationship between cost and benefits in

requiring that the technology designated by the EPA

be the best available.!°> Cf. Am. Textile Mfrs. Inst., 452

U.S. at 509-10, 101 S. Ct. 2478. The Agency

accordingly could not make the policy decision, in the

face of Congress’s determination that facilities use the

12 We note that the EPA is by no means required to engage in

cost-effectiveness analysis. Indeed, to require the Agency to

conduct cost-effectiveness analysis would transform such analysis

into a primary factor in choosing BTA, which clearly is contrary to

the technology-forcing principle that animates the CWA. Equally

important, we note that the Agency may also depart from this

performance benchmark because of other permissible

considerations aside from cost, for instance, energy efficiency or

environmental impact. See Riverkeeper I, 358 F.3d at 195-96

(noting “the EPA was permitted to consider ... energy efficiency in

determining the ‘best technology available’ and could also factor

in environmental impact). While the EPA has _ indicated

throughout the record and its briefing before us that its

determination of BTA here included such considerations as energy

efficiency and production concerns, we nevertheless must remand,

as we explain below, for further explanation from the Agency.

Accordingly, we express no view on the merits of the EPA's

determination regarding the other factors it claims influenced its

decision.

13 For this reason, we reject Entergy’s argument that the Rule

is improper because its cost exceeds its benefits.

25a

best technology available, that an economically feasible

level of reduction of impingement mortality and

entrainment is not desirable in light of its cost. Indeed,

in the example above, the EPA could not choose the

cheaper technology on cost considerations under

section 316(b) if the EPA had first determined that the

power plants could reasonably bear the cost of

technology that could save at least 102 fish.

We nevertheless acknowledge that the comparable

technologies considered by the Agency need not be

identically effective for the Agency to engage in cost-

effectiveness analysis. Were that the case, all that

would be required would be the simple determination

of which among competing technologies that achieved

the same degree of reduction of adverse environmental

impacts is the cheapest. Instead, the specified level of

benefit is more properly understood as a narrowly

bounded range, within which the EPA may permissibly

choose between two (or more) technologies that

produce essentially the same benefits but have

markedly different costs. With these considerations in

mind, we turn to the Rule as promulgated.

3. The Determination of BTA under the

Phase II Rule

As noted previously, unlike the Phase I Rule, the

Phase II Rule does not require facilities to reduce

intake flow to a level commensurate with the intake of

closed-cycle systems. Instead, the Rule requires

facilities to meet the national performance standards

associated with the suite of technologies the EPA

identified as BTA. Petitioners’ challenge here has two

components. First, the state petitioners contend that

closed-cycle cooling is the best technology available and

that the EPA has exceeded its authority by

promulgating a rule that does not require closed-cycle

cooling, or the use of technologies producing a

26a

commensurate reduction of water usage for existing

facilities in the same manner as the Phase I Rule

required for new facilities.!4 Second, the

environmental petitioners argue that the EPA

improperly rejected closed-cycle cooling as BTA for the

largest facilities on the most sensitive waterbodies at

the direction of OMB because it sought to maximize net

economic benefits rather than to minimize adverse

environmental impact. They further argue that the

BTA standard of section 316(b) requires a commitment

of the maximum resources economically feasible to the

goal of eliminating adverse environmental impacts and

that the statute does not permit the EPA to select

BTA on the basis of cost-benefit analysis.

For the reasons that follow, we conclude that the

statute’s “best technology available” standard permits

cost-effectiveness considerations to influence the choice

among technologies whose performance does not

essentially differ from the performance of the best-

performing technology whose cost the industry

reasonably can bear, but that the statute does not

permit the EPA to choose BTA on the basis of cost-

benefit analysis. As we explain below, however, the

record is unclear as to the basis for the EPA’s selection

of the suite of technologies as BTA, and we therefore

remand for clarification of the basis for the Agency’s

decision and potentially for a reassessment of BTA.

The EPA stated in the Rule’s preamble that the

BTA standard should be interpreted as “best

technology available commercially at an economically

14 While the state petitioners frame their argument as a

challenge to the site-specific compliance alternatives, their brief

presses the view that closed-cycle cooling is the best technology

available and that the EPA exceeded its authority in failing to

require Phase II facilities to adopt it.

27a

practicable cost,” and explained that “an important

component of economic practicability” is “the

relationship of costs to environmentai benefits.” 69

Fed. Reg. at 41,604. The EPA further explained that

this inquiry required that “there should be some

reasonable relationship between the cost of cooling

water intake structure control technology and the

environmental benefits associated with its use.” Jd.

(emphasis added).

The EPA took this “economically practicable”

concept directly from the text of a floor speech of a

single representative—the only specific reference to

section 316(b) in the congressional debates. See

Riverkeeper I, 358 F.3d at 186 n. 12. We noted in

Riverkeeper I that the “paucity” of legislative history

“counsels against imputing much specific imtent to

Congress beyond the section’s words themselves.” /d.

Moreover, we find the EPA’s interpretation of section

316(b) problematic because its construction

significantly resembles the less stringent, and now

obsolete, BPT standard of section 301(b)(1)(A). As

noted earlier, in setting forth the factors for the EPA

to consider in establishing BPT under section

301(b)(1)(A) and the more stringent BAT under section

301(b)(2)(A), Congress made only one distinction:

while the Agency could consider the relationship

between cost and benefits in establishing BPT, CWA

§ 304(b)(1)B), 33 U.S.C. §1314(b)(1)(B), it could

consider cost insofar as it can be “reasonably borne” by

the industry, but not the relationship between cost and

benefits, in establishing BAT, CWA § 304(b)(2)(B), 33

U.S.C. § 1314(b)(2)(B). Riverkeeper 1, 358 F.3d at 195.

This difference in how the EPA can consider cost

under section 304(b) in establishing BPT and BAT is

directly mirrored by the most significant textual

distinction between sections 301(b)(1)(A) and

28a

301(b)\(2)(A)—the requirement that a technology be

“practicable” under only the less stringent BPT

standard. Compare CWA § 301(b)(1)(A), 33 U.S.C.

§ 1311(b)(1)(A) (BPT is the “best practicable control :

technology”) with CWA §301(b)(2)A), 35 U.S.C.

1311(b)(2)(A) (BAT is the “best available technology”).

The use of the word “practicable,” therefore, when

coupled with the permissible cost considerations under

section 304, signals that Congress intended the EPA to

strike a balance between cost and benefits in

determining BPT. But the word “practicable” is

missing from the more stringent BAT standard, under

which Congress prohibited the EPA from considering

the relation of cost to benefits. This omission is thus

significant. See Russello v. United States, 464 U.S. 16,

23, 104 S. Ct. 296, 78 L.Ed.2d 17 (1983) (“(WJhere

Congress includes particular language in one section of

a statute but omits it in another section of the same

Act, it is generally presumed that Congress acts

intentionally and purposely in the disparate inclusion

or exclusion.” (quotation marks and citation omitted;

alteration in original)). Because Congress also omitted

“practicable” from section 316(b), we are troubled by

the Agency’s interpretation of the statute to require

“practicability” analysis here and its implicit corollary

that the Agency can undertake a cost-benefit analysis

in establishing BTA under section 316(b).

Our concern with the EPA’s determination with

respect to section 316(b) is further deepened by the

Agency’s rejection of closed-cycle cooling and selection

of a suite of technologies as the basis for BTA for

existing facilities because the suite of technologies

were the most “cost effective” option. 69 Fed. Reg. at

41,6467. The EPA explained this decision on several

grounds. It first noted that it was rejecting closed-

cycle cooling as BTA because of (1) “its generally high

29a

costs (due to conversions),” (2) “the fact that other

technologies approach the performance of this option,”

and (3) “concerns for energy impacts due to retrofitting

existing facilities, and other considerations.” Jd. at

41,605. The EPA emphasized that it selected BTA

based on its determination that “a _ national

requirement to retrofit existing systems is not the

most cost-effective approach and at many existing

facilities, retrofits may be impossible or not

economically practicable.” /d. It further explained

that its rejection of closed-cycle cooling as BTA was

based on “total social costs” and “lack of cost-

effectiveness,” as well as “concerns regarding potential

energy impacts.” /d. at 41,606.

Given the EPA’s discussion, noted above, of

economically practicability, it is unclear whether the

Agency improperly weighed the benefits and the costs

of requiring closed-cycle cooling. Indeed, a comparison

between the cost of closed-cycle cooling and the

monetized benefits of this technology appears to have

played some role in the EPA’s rejection of this option

as BTA. In the preamble to the proposed Rule, for

instance, the EPA examined whether to require closed-

cycle cooling on specific large bodies of waters and

stated that “the incremental costs of [this closed-cycle

cooling) option relative to the proposed option ($413

million) significantly outweigh the incremental benefits

($146 million).” 67 Fed. Reg. at 17,158. Other record

evidence on the EPA’s rejection of closed-cycle cooling

as BTA is a terse EPA memorandum indicating that a

requirement commensurate with closed-cycle cooling

for facilities on sensitive waterbodies would cost three

times as much as the option ultimately adopted by the

EPA and reduce entrainment, at most, by 1.33 times

that option.

30a

Given the above indications that the EPA engaged

in cost-benefit analysis, we remand for the EPA to

explain its conclusions. At the outset, it is difficult to

discern from the record how the EPA determined that

the cost of closed-cycle cooling could not be reasonably

borne by the industry.! Additionally, the EPA did not

explain its statement that the suite of technologies

“approachies}” the performance of closed-cycle cooling.

We see no adequate comparison in the Rule’s proposal,

the final Rule or its preamble, or the EPA’s

submissions to this Court of the effectiveness of closed-

cycle cooling and the group of technologies whose

effectiveness provided the basis for the Phase II Rule’s

performance standards.!© In a technical area of this

15 Indeed, at one point in the Rule’s proposal, the EPA mentions

that requiring closed-cycle cooling at 539 existing power plants

nationwide subject to the Phase II Rule would cost upwards of

$2.26 billion and could close nine power plants (about 1.6% of all

Phase II facilities). 67 Fed. Reg. at 17,155. There is little

discussion about whether the industry could reasonably bear this

burden. We note that in Riverkeeper I, it appears the EPA

supplied the court with better data on this question, noting that of

the 83 facilities subject to the Phase I Rule, dry cooling compliance

costs would equal on average more than 4% of revenue for all 83

producers and more than 10% of the revenue at 12 facilities

(nearly 15% of all Phase I facilities), presenting a possibly high

barrier to entry for new facilities. See Riverkeeper I, 358 F.3d at

194. We have found no comparable data in the record, nor has the

EPA cited any.

16 Some limited evidence, however, is available in the record in

intelligible form. In the Rule’s proposal, the EPA noted that

closed-cycle systems “generally reduce the water flow from 72

percent to 98 percent, thereby using only 2 percent to 2& percent

of the water used by once-through systems.” Proposed

Regulations to Establish Requirements for Cooling Water Intake

Vructures at Phase II Existing Facilities; Proposed Rule, 67

Fed. Reg. 17,122, ,17,189 (Apr. 9, 2002). The Agency went on to

state that “{iJt is generally assumed that this would result in a

comparable reduction in impingement and entrainment,” id.,

dla

sort, it is difficult for judges or interested parties to

determine the propriety of the Agency’s action without

a justification for the action supported by clearly

identified substantial evidence whose import is

explained. The record evidence alone here, which

consists in large part of a voluminous database

compilation of studies that assess the efficacy of

various technologies at different locations, is oblique,

complicated, and insufficient to permit us to determine

what the EPA relied upon in reaching its conclusion.

As the Supreme Court has emphasized, “[olur

indicating that closed-cycle systems reduce the adverse impacts of

impingement and entrainment by 72 to 98 percent. In a technical

development document (“TDD”) for the proposal, however, the

EPA disaggregated these data, stating that closed-cycle cooling

systems use 96 to 98 percent less fresh water and 70 to 96 percent

less salt water than once-through systems. TDD for the Proposed

§316(b) Phase II Existing Facilities Rule 4-1; see also

Riverkeeper I, 358 F.3d at 194 n. 22 (“{C]losed-cycle wet cooling

systems use 96 to 98 percent less fresh water (and 70 to 96 percent

less salt water) than similarly situated once-through systems.”

(citing 66 Fed. Reg. at 65,273)). The EPA's analysis in its proposal

suggests that the disaggregated data indicate that closed-cycle

cooling would reduce impingement mortality and entrainment by

96 to 98 percent at facilities that use fresh water and by 70 to 96

percent at facilities that use salt water. A 72 to 98 percent

reduction of impingement mortality and entrainment, and the

corresponding disaggregated percent reductions for facilities

using salt and fresh water, differs from the Phase II requirement

that facilities reduce ‘““apingement mortality by 80 to 95 percent

and entrainment b, 60 to 90 percent. These differences seem

potentially significant, especially in determining whether this

suite of BTA technologies achieve essentially the same result as

closed-cycle cooling, but are neither explained nor adequately

compared for purposes of our review here. For instance, there

does not appear to be any discussion regarding the seemingly

large differences in the rates of impingement and entrainment

reduction between closed-cycle cooling and the Phase II national

performance standards.

32a

recognition of Congress’ need to vest administrative

agencies with ample power to assist in the difficult task

of governing a vast and complex industrial Nation

carries with it the correlative responsibility of the

agency to explain the rationale and factual basis for its

decision, even though we show respect for the agency’s

judgment in both.” Bowen v. Am. Hosp. Ass’n, 476

U.S. 610, 627, 106 S. Ct. 2101, 90 L.Ed.2d 584 (1986)

(plurality opinion).

The EPA was required to explain its judgment and

the basis for it. Because the EPA purported to base its

decision in large part on cost-effectiveness

considerations, it was required to identify and explain

any evidence indicating a minimal performance

difference between comparable technologies, but it did

not do so here. It stated only that the performan => of

the technologies it identified as BTA “approach” the

performance of closed-cycle cooling.!*

We therefore find it impossible to judge whether

the performance of these technologies is essentially the

same as the performance of closed-cycle cooling, or

whether they simply are cheaper per percentage point

of reduction in entrainment and impingement

mortality. That is, on the record before us, it is

impossible to tell whether the EPA based its decision

on permissible cost-effectiveness analysis or exceeded

its authority by relying impermissibly upon a cost-

benefit analysis. To the extent that the record does not

indicate the EPA’s basis, however, its statement that

17 The Agency, however, did provide some indication of the

relative costs of closed-cycle cooling and the suite of technologies

identified as BTA. The EPA stated in the preamble to the Rule

that the “total social cost” of closed-cyecle cooling would be “$3.5

billion per year,” 69 Fed. Reg. at 41,605, and that the “final rule

will have total annualized social (pre-tax) costs of $389 million,” 7d.

at 41,650.

33a

“the relationship of costs to environmental benefits is

an important component of economic practicability,” 69

Fed. Reg. at 41,604, indicates that cost-benefit analysis,

under the cover of considerations of “practicability,”

was central to the Agency’s decisionmaking.

In short, the EPA’s failure to explain its decision

frustrates effective judicial review. If the EPA

construed the statute to permit cost-benefit analysis,

its action was not “based on a permissible construction

of the statute.” Chevron, 467 U.S. at 848, 104 S. Ct.

2778. It may also be that the EPA misunderstood or

misapplied cost-effectiveness analysis. If so, its

decision was arbitrary and capricious because the

Agency relied on factors Congress has not intended it

to consider. See Waterkeeper Alliance, 399 F.3d at 498.

Finally, the EPA may have simply failed either to

perform the required analysis or to explain adequately

a decision that was within its authority to make. We

cannot opine on this subject, because we must consider

only those justifications that the EPA offered at the

time of the rulemaking. See SEC v. Chenery, 318 U.S.

80, 87-88, 63 S. Ct. 454, 87 L.Ed. 626 (1943). Moreover,

while the EPA could rely on factors other than

impingement and entrainment in establishing BTA,

such as negative environmental impacts or concerns

about energy production and_ efficiency, see

Riverkeeper I, 358 F.3d at 195-96, we are unable to

determine, on the record before us, whether the EPA

gave paramount consideration to an improper factor in

determining BTA. We therefore remand for

clarification of the basis for the Agency’s action and

possibly for a new determination of BTA.!*

IS As previously noted, the environmental petitioners,

supported by amicus curiae OMB Watch, have challenged the

EPA’s decision to reject closed-cycle cooling as BTA for 59

34a

4. Performance Standards Expressed as

Ranges

The Phase II Rule establishes performance

standards expressed as an 80 to 95 percent reduction in

impingement mortality and a 60 to 90 percent

reduction in entrainment, which existing power plants

must achieve, subject to certain exceptions, in order to

be considered in compliance with the Rule. 40 C.F.R.

§ 125.94(b)(1), (2). The environmental petitioners

challenge the Rule’s “wide and indeterminate ranges”

as failing to constitute “precise single-level limitations

based on the best technology available for minimizing

adverse environmental impact” and argue that these

ranges are inconsistent with Congress’s intent that

there be a national standard under section 316(b). We

agree in part and, because the EPA in reconsidering its

selection of BTA on remand may alter the suite of

technologies it originally selected, thereby causing a

coordinate alteration in the performance ranges, we

provide some guidance to the EPA insofar as the

petitioners’ challenge touches on the limits of the

Agency’s authority. Although the EPA may, in the

facilities on the most sensitive waterbodies in part because of

OMB'’s participation in the rulemaking process. They contend that

the EPA’s action is not entitled to deference because the EPA was

improperly influenced by OMB in promulgating this aspect of the

Phase II Rule. The petitioners and the EPA have also sought

either to strike from the record or to supplement the record with

certain OMB review documents. Because we have granted the

petitioners’ challenge to the EPA’s determination of BTA without

considering OMB’s role in interagency review, we do not reach the

petitioner's arguments regarding OMB’s involvement in the

rulemaking and deny the motions to strike and to supplement as

moot. See Waterkeeper Alliance, 399 F.3d at 524 n. 34 (denying

petitioners’ motion to supplement the record with OMB review

documents as moot where the Court granted the petitions without

considering the OMB review documents).

35a

circumstances to be discussed, set performance

standards as ranges, it must require facilities to

minimize the adverse environmental impacts

attributable to their cooling water intake structures to

the best degree they can.

The petitioners note that the EPA has found that

certain screens and filter systems can reduce

impingement mortality by up to 99 percent and that

similar technologies can produce 80 to 90 percent

reduction in entrainment. 69 Fed. Reg. at 41,599. They

contend that the CWA therefore requires the EPA to

set BTA standards reflecting these best performers,

see Texas Oil & Gas Ass’n v. EPA, 161 F.3d 923, 928

(5th Cir. 1998) (“Congress intended these [BAT]

limitations to be based on the performance of the single

best-performing plant in an industrial field.” (citation

and internal quotation marks omitted)), particularly

given the EPA’s acknowledgment that “(t]he higher

end of the range is a percent reduction that available

data show many facilities can and have achieved with

the available technologies upon which the performance

standards are based.” 69 Fed. Reg. at 41,600. The

petitioners emphasize that the Rule’s’” ranges

impermissibly fail to require facilities even to attempt

to achieve performance equal to the upper bound of the

prescribed ranges.

According to the EPA, section 316(b) does not

require a single-numeric standard applicable to all

Phase II existing facilities, and expressing the

performance standards as ranges is necessary to

account for the variables involved in reducing

impingement mortality and entrainment under local

conditions at particular facilities. The EPA contends

that “[bJecause the Phase II requirements are applied

in a variety of settings and to existing facilities of

different types and sizes, no single technology is most

36a

effective for all facilities subject to the Rule.” The

Agency argues that the technologies do not provide a

fixed level of performance at all facilities and that their

performance is affected by the nature of the

waterbody, facility intake requirements, climatic

conditions, and the waterbody’s biology. The EPA

argues also that the permit process requires facilities

to reduce impingement mortality and entrainment

commensurate with the efficacy of the installed

technologies, which it claims ensures that the installed

technologies will be maintained to ensure their utmost

efficacy.!9 The difficulty with the EPA’s arguments is

that the Rule does not require facilities to choose

technologies that produce the greatest reduction

possible.

Our decision in Riverkeeper I sheds some light on

the parties’ arguments. In that case, we discussed the

differences between the two tracks in the Phase I Rule:

Track I set forth precise velocity and capacity

requirements while Track II permitted compliance via

technologies that would achieve at least 90 percent of

the reduction in impingement mortality and

entrainment that compliance with Track I would yield.

See 358 F.3d at 182-83. The petitioners in that case

challenged the Track IT provision on the grounc that it

deviated from the statutory requirement that the EPA

establish a single level of performance applicable to all

facilities. /d. at 187. The EPA argued that Tracks |

and II reflected the same standard and that 10 percent

is an acceptable margin of error given that

19 The specific provision requires that when a facility’s permit

expires, any reissued permit must contain a requirement that “the

facility ... reduce impingement mortality and entrainment ...

commensurate with the efficacy at the facility of the installed

design and construction technologies, operational measures,

and/or restoration measures.” 40 C.F.R. § 125.98(b)(1 (iii).

37a

measurements of reduction of impingement mortality

and entrainment are necessarily inexact and depend

upon natural fluctuations in animal populations and

sampling errors. /d. at 188. In assessing the parties’

arguments, we stated that “the EPA, consistent with

Congress’s intention that there be a national standard

governing the discharge of pollutants, must promulgate

precise effluent limitations under sections 301 and 306

.’ Id. (emphasis added). We went on to note,

however, that while pollutant concentration and the

velocity and volume of water withdrawn can be

measured accurately, impingement mortality and

entrainment “cannot always be measured directly and

with mathematical precision.” Jd. at 189. We

concluded that the EPA acted reasonably in specifying

“how much ambiguity it is willing to tolerate in

measuring compliance and what it considers a

reasonable margin of error in comparing the

performance of different technologies.” Jd. In short,

we acknowledged that the Track II performance

requirements, unlike the Track I requirements, could

not be measured precisely and that it was therefore

reasonable to consider a margin of error in comparing

performance under the two standards.

This case is not entirely similar to Riverkeeper |

because of the rationales that animate the EPA’s

creation of the performance ranges in Phases I| and II.

The Phase II Rule generally require facilities to reduce

impingement mortality and entrainment by the

specified percent ranges from the calculation baseline.

40 C.F.R. § 125.94(b). These ranges, as explained by

the EPA, are based on the reductions achievable by

using various technologies. See 69 Fed. Reg. at 41,599.

The EPA explained that it expressed the performance

standards “in the form of ranges rather than a single

performance benchmark because of the uncertainty

38a

inherent in predicting the efficacy of any one of these

technologies.” Jd. at 41,600. It stated further that the

lower end of the range is the percent reduction it

“expects all facilities could eventually achieve if they

were to implement and optimize available design and

construction technologies and operational measures on

which the performance standards are based” and that

the higher end of the range “is a percent reduction that

available data show many facilities can and have

achieved with the evailable technologies upon which

the performance standards are based.” /d. Unlike

Riverkeeper I, therefore, a margin of error from a

relatively precise benchmark that is tolerable given

measurement difficulties is not at issue here. Instead,

the performance standards reflect the range of

performance associated with various technologies

identified as BTA. That performance, in turn, depends

in part on local conditions and natural fluctuations. /d.

Record evidence supports the EPA’s conclusion

that the percent reduction of impingement mortality

and entrainment is not completely within the control of

a facility and therefore may not be precisely achieved

by a facility. See TDD for the Final § 316(b) Phase II

Existing Facilities Rule 4-3. Reducing these adverse

environmental impacts is not as easily measured and

controlled as are the discharge of pollutants and the

capacity and flow rate of water intake.2° We therefore

20 Nothing in Hooker Chems. & Plastics Corp. v. Train, 537

F.2d 620 (2d Cir. 1976), suggests the contrary. While we did

announce in that case that performance ranges did not comport

with the effluent limitations established by the CWA, id. at 630,

the discharge limitations at issue there were easily measured,

unlike the reductions in impingement and entrainment at issue in

both this case and Riverkeeper I, which “cannot always be

measured directly and with mathematical precision,”

Riverkeeper 1, 358 F.3d at 189.

39a

‘acknowledge that in many cases it may be difficult, as a

practical matter, for the EPA or other permitting

authority to predict which plants will be able to achieve

the upper, as opposed to the lower, end of the ranges.

This uncertainty, however, does not justify a rule that

permits even those facilities that could achieve the

upper end of a range to be deemed in compliance if they

reach only the lower end, particularly when the EPA

has acknowledged that many facilities “can and have”

achieved reductions at the high end of the range. 69

Fed. Reg. at 41,600. Congress’s use of the superlative

“best” in the statute cannot be read to mean that a

facility that achieves the lower end of the ranges, but

could do better, has complied with the law. The

statutory directive requiring facilities to adopt the best

technology cannot be construed to permit a facility to

take measures that produce second-best results, see

Chevron, 467 U.S. at 843, 104 S. Ct. 2778, especially

given the technology-forcing imperative behind the

Act, Natural Res. Def. Council, 822 F.2d at 123.

Insofar as the EPA establishes performance standards

instead of requiring facilities to adopt particular

technologies, it must require facilities to choose the

technology that permits them to achieve as much

reduction of adverse environmental impacts as is

technologically possible.*! For this reason, the EPA on

“! Although it may be difficult to know e. ante which plants can

achieve the upper end of the range, this is at least in part because

the technologies preferred by the EPA are somewhat new and

untested. In future permitting cycles, permitting authorities will

be likely to have a clearer notion of which facilities can feasibly

achieve the upper end of the range.

Finally, the upper end of the range established by the EPA,

should it retain this provision on remand, should not be set at a

level that many facilities “have achieved” with the installation of

one or more of the technologies determined to be BTA but, as we

noted earlier, at the best possible level of impingement and

40a

remand should address these concerns if in its BTA

determination, it retains performance ranges.

B. Restoration Measures

The Phase Il Rule allows a facility to meet the

national performance standards set forth in 40 C.F.R.

§ 125.94(b) through the use of restoration measures

such as restocking fish killed by a cooling water system

and improving the habitat surrounding the intake

structure in order, as the EPA explains, “to provide

additional flexibility to facilities in complying with the

rule by eliminating or significantly offsetting the

adverse environmental impact caused by the operation

of a cooling water intake structure.” 69 Fed. Reg. at

41,609; 40 C.F.R. § 125.94(c). The state and

environmental petitioners contend that the EPA

exceeded its authority by allowing compliance with

section 316(b) through restoration measures because

entrainment reduction the EPA determines these technologies

can achieve. See, e.g., Kennecott, 780 F.2d at 448 (“In setting BAT,

EPA uses not the average plant, but the optimally operating

plant, the pilot plant which acts as a beacon to show what is

possible.”). If, at a particular Phase II facility, the adoption of

BTA technologies can achieve a 95% reduction in entrainment and

impingement, it is unclear why, under our jurisprudence and the

clear dictates of the CWA, the EPA could establish a performance

standard that has placed the ceiling at the 90% threshold which

“many” Phase II facilities “can and have” achieved with the same

technology. See Am. [ron & Steel Institute v. EPA, 526 F.2d 1027,

1051 (3d Cir. 1975) (“It will be sufficient, for the purpose of setting

the level of control under available technology, that there be one

operating facility which demonstrates that the level can be

achieved.") (internal quotation marks and citations omitted). This

would not require every Phase II facility to meet the upper end of

the ranges, but only that each Phase II facility achieve the highest

reduction it can with the installation of technologies determined

by the EPA to be BTA. The performance ranges, if retained on

remand, should accordingly reflect this understanding.

4la

Riverkeeper I held that the statute’s meaning is plain

and that restoration measures cannot substitute for the

“best technology available for minimizing adverse

environmental impact” in cooling water intake

structures. The EPA contends that its interpretation

of the statute to permit restoration measures as a

means of compliance is entitled to deference because it

defined certain statutory terms in the Phase II Rule

that it had not defined in the Phase I Rule. The EPA

also relies on the Supreme Court’s holding in National

Cable & Telecommunications Association v. Brand X

Internet Services, 545 U.S. 967, 125 S. Ct. 2688, 162

L.Ed.2d 820 (2005), and our statement in Riverkeeper |

limiting the decision’s reach to the Phase I Rule, to

argue that our prior interpretation of the statute does

not trump the Agency’s construction. We agree with

the petitioners that Riverkeeper I held that the

Agency’s decision to permit restoration measures in

the Phase I Rule was not “based on a permissible

construction of the statute,” Chevron, 467 U.S. at 843,

104 S. Ct. 2778, and that this holding applies equally

here.

We began Riverkeeper I by noting that we were

remand ng the Phase I restoration provision because it

“contradicts Congress’s clearly expressed intent.” 358

F.3d at 181. We went on to state that “however

beneficial to the environment, [restoration measures]

have nothing to do with the location, the design, the

construction, or the capacity of cooling water intake

structures, because they are unrelated to the

structures themselves.” J/d. at 189. “Restoration

measures correct for the adverse environmental

impacts of impingement and entrainment,” we noted,

but “they do not minimize those impacts in the first

place.” Jd. (emphasis added). For this reason and

others, we concluded in Riverkeeper I tha. the EPA

424

had exceeded its authority in promulgating the Phase I

Rule by allowing compliance with section 316(b)

through restoration measures because this Rule was

“plainly inconsistent” with the statute’s text aud

Congress’s intent. Jd. at 189, 191.

The EPA’s argument that Riverkeeper I is not

binding on this issue here has three components. First,

the EPA contends that our rejection of the restoration

measures at issue in Riverkeeper J did not turn on the

statute’s text, but instead was based on various other

indicators of Congressional intent. The Agency makes

much of Riverkeeper I’s brief discussion of Congress’s

rejection of a proposed amendment to section 316(b)

that would have explicitly allowed restoration

measures and of the EPA’s support of that amendment

because in its opinion, the existing language did not

authorize restoration measures. /d. at 190-91. Second,

the EPA argues that its interpretation of section 316(b)

in the Phase II Rule is entitled to deference because

the Rule defined certain statutory terms it had not

defined in the previous rulemaking phase and that its

reasonable interpretation of these terms is entitled to

deference. Specifically, the Agency “defined” three

statutory terms in the preamble: it (1) read the phrase

“minimizle] adverse environmental impact” to let

facilities “minimize adverse environmental impact by

reducing impingement and entrainment, or to minimize

adverse environmental impact by compensating for

those impacts after the fact,” 69 Fed. Reg. at 41,628; (2)

interpreted “reflect” to authorize it to consider the full

range of technologies, including restoration measures,

that minimize adverse environmental impact; and (3)

viewed “restoration measures as part of the ‘design’ of

a cooling water intake structure,” and “one of several

technologies that may be employed ... to minimize

adverse environmental impact,” 69 Fed. Reg. at 41,637.

43a

Finally, the EPA relies on our statement in

Riverkeeper I that our ruling on the Phase I Rule was

not meant to “predetermine the factors and standard(s]

applicable to Phases II and III of the rulemaking,” 358

F.3d at 186 n. 13, and on the Supreme Court’s holding

in Brand X that “[a] court’s prior judicial construction

of a statute trumps an agency construction otherwise

entitled to Chevron deference only if the prior court

decision holds that its construction follows from the

unambiguous terms of the statute and thus leaves no

room for agency diseretion.” 545 U.S. at 982, 125 S. Ct.

at 2700.

We reject each of the EPA’s contentions. First, our

primary conclusion in Riverkeeper I was that

restoration measures are “plainly inconsistent” with

the statute’s text, 358 F.3d at 189, and our statements

regarding the legislative history of a proposed

amendment, which we offered as ancillary, but not

dispositive, support for our construction of the statute,

in no way diminish the force of our conclusion that

Congress unambiguously expressed its intent in the

statute. See Chevron, 467 U.S. at 842-43, 104 S. Ct.

2778 (“If the intent of Congress is clear, that is the end

of the matter; for the court, as well as the agency, must

give effect to the unambiguously expressed intent of

Congress.”). Second, as to the EPA’s claim that its

construction of the statute is entitled to deference

because it has now interpreted certain statutory terms,

our holding in Riverkeeper 1 was and remains clear:

restoration measures co vtradict the unambiguous

language of section 316(b). The EPA’s promulgation of

the Phase II Rule obviously did nothing to alter the

text of section 316(b), and the Agency cannot create

ambiguity where none otherwise exists by defining

statutory terms contrary to their plain meaning.

Finaity, as the foregoing analysis suggests, our decision

44a

in Riverkeeper I foreclosed the EPA from interpreting

section 316(b) in the Phase II Rule to permit

restoration measures as a means of complying with the

statute, and, therefore, nothing in Brand X undermines

the precedential value of our prior holding. Our

statement in Riverkeeper I that we did not “mean to

predetermine the factors and standard applicable to

Phases II and III of the rulemaking,” was made in the

narrow context of identifying “one reasonable reading”

of particular statutory language relating to the

standard for new and existing sources, not the

restoration measures. 358 F.3d at 186 n. 18. Where we

held that the statutory language is unambiguous,

Riverkeeper / is binding.

Even assuming arguendo that we did not consider

ourselves bound by Riverkeeper I, we are persuaded by

its reasoning as applied here. Restoration measures

are not part of the location, design, construction, or

capacity of cooling water intake _ structures,

Riverkeeper 1, 358 F.3d at 189, and a rule permitting

compliance with the statute through restoration

measures allows facilities to avoid adopting any cooling

water intake structure technology at all, in

contravention of the Act’s clear language as well as its

technology-forcing principle. As we noted in

Riverkeeper I, restoration measures substitute after-

the-fact compensation for adverse environmental

impacts that have already occurred for the

minimization of those impacts in the first instance. /d.

The Agency’s attempt to define the word “minimize” to

include “compensatilon] ... after the fact,” 69 Fed. Reg.

at 41,628, is simply inconsistent with that word’s

dictionary definition: “to reduce to the smallest

possible extent,” Webster’s Third New Int'l Dictionary

1438 (1986).

45a

Accordingly, the EPA impermissibly construed the

statute by allowing compliance with section 316(b) via

restoration measures, and we remand that aspect of

the Rule

C. Site-Specific Compliance Alternatives

As noted earlier, the Phase II Rule includes two

site-specific compliance alternatives or variances from

the generally applicable requirements. The cost-cost

alternative authorizes a site-specific determination that

“data specific to [a] facility demonstrate that the costs

of compliance under ... this section would be

significantly greater than the costs considered by the

Administrator .. in establishing the applicable

performance starmlards,” 40 C.F.R. § 125.94(a)(5)(i),

while the cost-benefit alternative authorizes a site-

specific determination that “data specific to [a] facility

demonstrate that the costs of compliance under ... this

section would be significantly greater than the benefits

of complying with the applicable performance

standards.” /d. § 125.94(a)(5)(ii). If a facility makes

either showing, the permitting authority “must make a

site-specific determination of the best technology

available” and impose “site-specific alternative

requirements” that are “as close as practicable to the

applicable performance standards.” Id.

§ 125.94(a)(5)(i), (ii).

Petitioners challenge the cost-cost compliance

alternative because, inter alia, they claim as a

threshold matter that the Agency failed to comply with

the APA’s notice and comment requirements by

disclosing cost data for specific facilities that would be

used in determining whether a facility qualifies for the

cost-cost compliance alternative only at the time the

final Rule was issued. Petitioners also challenge the

cost-benefit compliance alternative on two substantive

grounds. They contend that this alternative (1)

46a

impermissibly allows compliance with the statute to be

based on cost-benefit analysis and (2) is analogous to a

water-quality standard, which the Act permits only for

thermal pollution. CWA § 316(a), 33 U.S.C. § 1326(a).

We address each of these arguments in turn.22

1. Cost-Cost Compliance Alternative

As already noted, a variance may be available to a

facility pursuant to 40 C.F.R. § 125.94(a)(5)i) if the

facility’s compliance costs would be “significantly

greater than” the costs considered by the Agency “in

22 Section 316(b) does not specifically authorize the Agency to

allow variances from generally applicable requirements. — In

Riverkeeper i, we accepted the argument that the EPA can allow

variances even in the absence of explicit statutory authority. 358

F.3d at 193. Although the statutes to which section 316(b) refers

contained variance provisions, we did not read them to require

that section 316(b) permit (or by its silence prohibit) variances.

Instead, we stated that

[sJection 316(b)’s silence with respect to variances does

not ... equal an unambiguous prohibition. In the absence

of such a statutory bar, we think, consistent with

precedent, that it is reasonable for the EPA to allow

variances from regulations promulgated pursuant to

section 316(b), for a regulatory system which allows

flexibility, and a lessening of firm proscriptions in a

proper case, can lend strength to the system as a whole.

Id. at 193 (citation and internal quotation marks omitted).

Riverkeeper I thus rejected the view that the EPA’s authority

to grant a variance from the generally applicable requirements of

a rule promulgated pursuant to section 316(b) derives from the

statutory variance provisions in other sections of the Act.

Instead, Riverkeeper I found that the variance provision would not

be authorized if it left alternative requirements to the Agency’s

“unfettered discretion” but would be authorized if it “guide[d] the

permitting authority to consider appropriate factors and allow[ed |

relaxation of the Rule’s uniform technology requirements only

insofar as necessary to account for unusual circumstances not

considered by the Agency during its rulemaking.” /d. at 193-94

(internal quotation marks omitted).

47a

establishing the applicable performance standards.”

This variance requires a calculation of compliance costs

based on the suite of BTA technologies that the EPA

has identified and promulgated in the final Rule. 69

Fed. Reg. at 41,644-46. We remand this provision

because (1) the EPA did not give interested parties the

requisite notice and opportunity to challenge the

variance by failing to identify cost data for actual,

named facilities, as opposed to model facilities, until

after the notice and comment period had ended, Sprint

Corp., 315 F.3d at 371, and (2) the variance is expressly

premised on the validity of the BTA determination,@*

which itself has been remanded for further explanation,

see, e.g., Solite Corp. v. U.S. EPA, 952 F.2d 473, 494-95

(D.C. Cir. 1991) (remanding rule where the underlying

grounds for its promulgation had heen remanded to the

EPA for procedural defects); cf. Chenery, 318 U.S. at

87-88, 63 S. Ct. 454 (a rule may only be upheld on the

grounds that the agency proffers).

In the Rule’s proposal, the EPA indicated that it

had estimated compliance costs for 539 “model plants”

based on factors such as “fuel source, mode of

electricity generation, existing intake technologies,

waterbody type, geographic location, and intake flow.”

67 Fed. Reg. at 17,144. An accompanying technical

development document set forth the Agency’s cost

calculation methodology for these mode] plants and

listed the compliance cost estimates for each of the 539

model plants. The proposal indicated that a facility

23 This variance requires a comparison bet ween the actual costs

of compliance and those contemplated by EPA under the Rule.

Because the Agency has calculated the costs it believes specific

facilities will incur in adopting the appropriate BTA technologies

(as eurrently defined) and then promulgated these costs in the

final Rule, any change in the selection of BTA on remand will

necessarily alter these costs.

48a

must “determine which model plant [it] most closely”

resembles in order to identify the costs considered by

the Agency in establishing the national performance

standards. See id. The EPA subsequently published in

the Federal Register a so-called Notice of Data

Availability (“NODA”) in which it explained that it had

changed its methodology for estimating the model

plants’ compliance costs. Proposed Regulations to

Establish Requirements for Cooling Water Intake

Structures at Phase II Existing Facilities; Notice of

Data Availability; Proposed Rule, 68 Fed. Reg. 13,522,

13,527 (Mar. 19, 2003). Accompanying documents

explained in greater detail the costing methodology

and cost data underlying the revised approach. The

revised proposal, however, did not depart from the

“model plant” approach. The final Rule, by contrast,

assigned cost estimates to specific, named facilities

rather than model facilities. 69 Fed. Reg. at 41,670-82.

The Agency explained in the preamble to the final Rule

that the EPA will adjust facility-specific costs pursuant

to a multiple-step calculation formula to arrive at a

final estimated cost the EPA considers a comparison

for purposes of the cost-cost variance. /d. at 41,644-47.

The EPA acknowledges that it did not disclose in

the proposal or the NODA specific facility names in

connection with cost data and explains that it failed to

do so because it needed to protect certain confidential

business information (“CBI”) and had not developed

during the proposal stage a means to protect that

information while still providing cost data to the public.

We accept the EPA’s argument that masking the

facility names did not prevent interested parties from

commenting on the methodology and general cost data

underlying the EPA’s approach because the NODA

explained the costing methodology and because the

general cost data, while not identified by the Agency as

49a

relating to actual, specific facilities, was made available

to interested parties. Nat'l Wildlife Fed., 286 F.3d at

564-65 (holding that the EPA cannot be faulted for lack

of notice in not releasing CBI data). We are persuaded,

however, that the release of information and request

for comments on the EPA’s new approach to

developing compliance cost modules via the NODA did

not afford adequate notice of the costs associated with

specific facilities promulgated in the final Rule.

We have previously stated that “[n]Jotice is said not

only to improve the quality of rulemaking through

exposure of a proposed rule to comment, but also to

provide fairness to interested parties and to enhance

judicial review by the development of a record through

the commentary process.” Nat'l Black Media

Coalition v. FCC, 791 F.2d 1016, 1022 (2d Cir. 1986).

“While a final rule need not be an exact replica of

the rule proposed in the Notice, the final rule must be a

‘logical outgrowth’ of the rule proposed.” Jd. “The test

that has been set forth is whether the agency’s notice

would fairly apprise interested persons of the subjects

and issues” of the rulemaking. /d. (citation and internal

quotation marks omitted).24 Agencies accordingly are

not permitted “to use the rulemaking process to pull a

24 The D.C. Circuit has phrased the test somewhat differently,

stating that “[wJhether the ‘logical outgrowth’ test is satisfied

depends on whether the affected party ‘should have anticipated’

the agency's final course in light of the initial notice.” Covad

Comms. Co. v. FCC, 450 F.3d 528, 548 (D.C. Cir. 2006) (citation

omitted). It has also indicated that “[tJhe ‘logical outgrowth’

doctrine does not extend to a final rule that finds no roots in the

agency's proposal because something is not a logical outgrowth of

nothing, nor does it apply where interested parties would have

had to divine the agency's unspoken thoughts because the final

rule was surprisingly distant from the Agency’s proposal.” Envtl.

Integrity Project v. EPA, 425 F.3d 992, 996 (D.C. Cir. 2005)

(citations, internal quotation marks, and alteration omitted).

50a

surprise switcheroo.” Envtl. Integrity Project, 425

F.3d at 996.

Here, only the final Rule identified facilities by

name in estimating compliance costs. Interested

parties therefore could not comment on the basis for

particular facilities’ cost figures that the EPA

established. This is problematic because the

availability of a variance turns on the relationship

between the costs estimated in the Rule and those that

a specific facility establishes in a permit proceeding.

The EPA focuses on the notice it gave of its intended

methodology for calculating the costs the Agency

considered, but ignores the overriding importance of

the cost estimates for a particular facility in

determining whether a site-specific cost-cost variance

is appropriate. Thus, the EPA should have afforded

notice and an opportunity to challenge the cost

estimates for specific facilities and not simply an

opportunity to comment on the EPA’s methodology

and general cost data.*° We remand this variance for

25 Because we remand on this procedural ground, we do not

consider the provision on the merits. We presume that after

comment on remand, however, the EPA will reevaluate the merits

of the cost-cost variance provision, particularly in light of any

reevaluation of BTA in which the Agency may engage. While we

do not decide the issue here, we note our discomfort with the

“significantly greater than” standard of 40 C.F.R. § 125.94(a)(5)i),

given the historical applicability of a “wholly disproportionate to”

standard and the use of the latter standard in the Phase I Rule.

We have not found entirely persuasive the EPA’s position that

[t]his difference in standards for new and existing

facilities is based on (1) the greater flexibility available to

new facilities for selecting the location of their intakes

and installing technologies at lower costs relative to the

costs associated with retrofitting existing facilities and

(2) the desire to avoid economically impracticable impacts

on energy prices, production costs, and energy

5la

inadequate notice and because of our remand of the

BTA determination.

2. Cost-Benefit Compliance

Alternative?®

If a facility requests that it be permitted to

demonstrate compliance with the Phase II Rule

through the site-specific cost-benefit provision of 40

C.F.R. § 125.94(a)(5)Gii), the facility must submit with

its application a Comprehensive Cost Evaluation

Study, Benefits Valuation Study, and Site Specific

Technology Plan. 40 C.F.R. § 125.95(b)(6). As part of

the Benefits Valuation Study, the facility must indicate

the monetized value of commercial, recreational, and

ecological benefits of compliance with the generally

applicable national performance standards as well as a

qualitative assessment of any so-called “non-use”

benefits that cannot be monetized. 40 C.F.R.

§ 125.95(b)(6)(ii)( A), CE). Ultimately, the facility must

demonstrate that its compliance costs are “significantly

greater than” the benefits of compliance. The

petitioners contend that this alternative impermissibly

focuses on cost-benefit considerations, contrary to

production that could occur if large numbers of Phase II

existing facilities incurred costs that were more than

“significantly greater” than but not “wholly out of

proportion” to the costs in EPA’s record.

68 Fed. Reg. at 13,541. The EPA would presumably consider each

of these two factors in establishing BTA for existing facilities, and

need not further consider them in determining whether a

particular facility warrants a variance from the generally

applicable BTA. Because cost is not supposed to be a paramount

consideration in determining BTA, see Riverkeeper 1, 358 F.3d at

185, the “significantly greater than” standard poses substantial

concerns.

26 In contrast to the coxt-cost variance, the cost-benefit

compliance alternative will not change on remand for the

reconsideration of BTA. We thus reach the merits here.

52a

Congress’s directive, and is analogous to the kind of

water-quality-based standard we found to be

inconsistent with the statute in Riverkeeper I. 358

F.3d at 190. For both reasons, we are persuaded that

the EPA exceeded its authority in permitting site-

specific cost-benefit variances. In light of this

conclusion, we do not reach the industry petitioners’

claim that the provision impermissibly requires

consideration of qualitative non-use benefits in the

cost-benefit analysis.

As we discussed previously in analyzing the EPA’s

determination of BTA, cost-benefit analysis is not

consistent with the requirement of § 316(b) that cooling

water intake structures “reflect the best technology

available for minimizing adverse environmental

impact.” Indeed, the statutory language requires that

the EPA’s selection of BTA be driven by technology,

not cost. The Agency is therefore precluded from

undertaking such cost-benefit analysis because the

BTA standard represents Congress’s conclusion that

the costs imposed on industry in adopting the best

cooling water intake structure technology available

(.e., the best-performing technology that can be

reasonably borne by the industry) are worth the

benefits in reducing adverse environmental impacts.

Cf. Am. Textile Mfrs. Inst., 452 U.S. at 509, 101 S. Ct.

2478 (noting that where Congress has defined the basic

relationship between costs and benefits, a regulatory

standard that strikes a different balance is inconsistent

with the statute). Just as the Agency cannot

determine BTA on the basis of cost-benefit analysis, it

cannot authorize site-specific determinations of BTA

based on cost-benefit analysis.

The cost-benefit variance also impermissibly

authorizes the EPA to consider the degraded quality of

waterways in selecting a site-specific BTA. We stated

53a

in Riverkeeper / that in enacting the CWA, Congress

rejected regulation by reference to water quality

standards. 358 F.3d at 189-90. Before 1972, Congress

“regulated point sources based on their effect on the

surrounding water and allowed sources to discharge

pollutants provided the discharge did not cause water

quality to dip below an acceptable level.” Jd. at 189.

Congress changed its approach in 1972, in part because

a plaintiff attempting to prove a violation of the law

faced a nearly impossible burden of showing that a

particular polluter had caused the water quality to dip

below the regulatory standards. /d. at 189-90. The Act

now regulates discharges from point sources rather

than water quality. We thus concluded in Riverkeeper

/ that water-quality standards cannot be considered

under section 316(b). Jd. at 190. Of course, “water

quality” in the context of the Act is generally

understood to refer to pollutant concentration. As we

noted in Riverkeeper I, however, for purposes of

section 316(b), which regulates water intake rather

than the discharge of pollutants, water quality is

“measured by wildlife levels.” /d. at 189. This analysis

in Riverkeeper I is, thus, equally applicable here.27

oe —

27 As the petitioners note, section 316(a) permits consideration

of the quality of the receiving water for purposes of granting

variances with respect to the rules concerning thermal pollution.

Section 316(a) provides that the Administrator may issue a

variance to the rules governing “thermal discharges” to a facility

that establishes that those rules “require effluent limitations more

stringent than necessary to assure the proltlection and

propagation of a balanced, indigenous population of shellfish, fish,

and wildlife in and on the body of water into which the discharge is

to be made.” CWA §$316(a), 33 U.S.C. § 1326(a). As the

petitioners also note, section 316(b) does not similarly permit

consideration of the quality of the receiving water, and this

distinction is significant. See Russello, 464 U.S. at 23, 104 8. Ct.

296. Moreover, as we discussed in Riverkeeper I, the heat-

54a

The challenged provision of the Phase II Rule

apparently would permit a facility to argue that, based

on water quality (7.e., the level of aquatic wildlife in a

particular body of water), the cost of complying with

the national performance standards is not justified.

The Agency explained in the preamble to the Rule that

“in a waterbody that is already degraded, very few

aquatic organisms may be subject to impingement or

entrainment, and the costs of retrofitting an existing

cooling water intake structure may be significantly

greater than the benefits of doing so.” 69 Fed. Reg. at

41,604. This kind of water-quality-based regulation is

not authorized by the CWA because it would exempt

facilities from meeting the mandated performance

standards simply because wildlife levels in the

waterbody were already low, and as we held in

Riverkeeper I, the CWA does not permit the EPA to

consider water quality in making BTA determinations.

Finally, we note that to the extent that facilities on

highly degraded waterbodies with relatively low

wildlife levels face high compliance costs to achieve the

national performance standards, those facilities may

qualify for the cost-cost variance if such variance is

retained on remand.

Because the EPA exceeded its authority under

section 316(b) by permitting (1) cost-benefit analysis

and (2) assessment of the quality of the receiving water

(i.e., the receiving water’s wildlife levels) in

determining whether a variance is warranted, we do

pollution provision of section 316(a) Is a “notable exception” to the

CWA, which “otherwise relies on limitations on what a source can

put into the water, not the ultimate effect of that discharge.” 358

F.3d at 190. Nothing in the statute, therefore, supports the view

that the EPA can consider the quality of the receiving water in

granting variances from generally applicable rules promulgated

pursuant to section 316(b).

5da

not need to defer to the Agency’s construction of the

statute. We therefore remand this aspect of the Rule.

D. TIOP Provision

The Phase II Rule’s TIOP provision, 40 C.F.R.

§ 125.94(d), permits a facility to comply with the

national performance standards determined on the

basis of whether the facility has “complied with the

construction, operational, maintenance, monitoring,

and adaptive management requirements of a

Technology Installation and Operation Plan.” § /d.

§ 125.94(d)(1). The petitioners contend that this

provision impermissibly allows a facility’s compliance

to be determined not by reference to the performance

standards themselves, but by evaluating whether a

facility has complied with a plan to achieve the

performance standards. In other words, they argue

that the TIOP provision essentially allows for an

unauthorized margin of error. The petitioners also

argue that the EPA denied the public an opportunity to

comment on the provision. Like the cost-cost

compliance alternative, remand is appropriate here on

two grounds: (1) the EPA did not give adequate notice

regarding the provisions in section 125.94(d)(2); and (2)

the record justification for the TIOP provision depends

on the EPA’s selection of a suite of technologies as

BTA, a selection which has been remanded for further

explanation. Given this, we remand the TIOP

provision without reaching the merits here.

The Rule provides that during the first permit

term, a facility may request that its compliance be

determined based on whether it has complied with its

TIOP, which must be designed to meet the

performance standards, 40 C.F.R. § 125.94(d)(1), and

submitted with a permit application, — id.

§ 125.95(b)(4)(ii). During subsequent permit terms, if a

facility has complied with its TIOP but is not meeting

56a

the performance standards, the facility may request

that its compliance with the standards during the

following term be based on whether it remains in

compliance with its TIOP, revised in accordance with

the facility’s adaptive management plan. 40 C.F.R.

§ 125.94(d)(2). The EPA explained in the Rule’s

preamble that it is difficult to determine reductions in

impingement mortality and entrainment relative to

what would have occurred in the absence of control

technologies given natural variability and the vagaries

of sampling methods. 69 Fed. Reg. at 41,613. The EPA

explained further that it established the TIOP

compliance options to account for these variabilities on

the ability of a technology to meet the performance

standards consistently over time. /d. at 41,613-14.

As previously noted, a “final rule must be a ‘logical

outgrowth’ of the rule proposed.” Nat'l Black Media

Coalition, 791 F.2d at 1022. The final rule must have

roots in the proposal, Envtl. Integrity Project, 425 F.3d

at 996, which must “fairly apprise interested persons of

the subjects and issues” involved in the rulemaking,

Nat'l Black Media Coalition, 791 F.2d at 1022. An

agency cannot “pull a_ surprise switcheroo” on

interested parties between a proposal and the issuance

of a final rule. See Envtl. Integrity Project, 425 F.3d at

996.

Although the Rule’s proposal notified interested

parties that the Agency was considering a provision

that would give facilities time to achieve the

performance standards after implementing new

technologies, the EPA gave inadequate notice of the

potentially indefinite scope of this provision.

Specifically, the EPA failed to provide notice of the

Rule codified at 40 C.F.R. § 125.94(d)(2), which permits

a facility to be deemed in compliance with the Phase II

57a

Rule in subsequent permit terms if it continues to

adhere to its TIOP.

In the Rule’s proposal, the EPA stated only that it

was considering “the need for regulatory language that

would allow facilities time to come into compliance

[with the performance standards] if they choose to

install technologies to meet the performance

standards.” 68 Fed. Reg. at 13,586. The proposal

indicated further that the EPA was “evaluating and

considering allowing six months, one year, two years,

or five years (one permit term) for a facility to come

into compliance after issuance of its permit.” Ja. The

TIOP provision in the final Rule, by contrast, does not

simply allow facilities additional time, up to one permit

term, to come into compliance with the performance

standards. Instead, it appears to permit a facility to

satisfy the Rule’s requirements in subsequent permit

terms, for an _ indefinite period, without ever

demonstrating compliance with the performance

standards, so long as the facility has adhered to its

TIOP. 40 C.F.R. § 125.94(d)(2) (stating that “(djuring

subsequent permit terms” a facility “may request that

compliance ... be determined based on whether [it|

remain{s] in compliance with” its TIOP). This aspect of

the TIOP provision appears then not to be a “logical

outgrowth” of the proposal, see Nat'l Black Media

Coalition, 791 F.2d at 1022, because interested parties

would not have divined from the proposal that facilities

could be given an indefinite period to come into

compliance with the national performance standards.

We thus remand the rule for failure to provide

notice and comment and _ ~because the record

justification for the TIOP provision depends on the

EPA’s selection of BTA, which has been remanded.

58a

FE. Definitions of “New Facility” and “Existing

Facility”

The environmental petitioners challenge the

reclassification in the Phase II Rule preamble of

certain new constructions as “existing facilities,”

thereby rendering them subject to the Phase II Rule

rather than the more stringent Phase I requirements

that apply to new facilities. We agree with the

petitioners that the Agency interpretively modified a

definition appearing in the Phase | Rule via statements

in the preamble to the Phase II Rule without providing

interested parties notice and an opportunity for

comment.

“An agency’s interpretation of its own ... regulation

must be given controlling weight unless it is plainly

erroneous or inconsistent with the _ regulation.”

Fowlkes v. Adamec, 432 F.3d 90, 97 (2d Cir. 2005)

(citations and internal quotation marks omitted).

Although we typically owe considerable deference to

an agency’s construction of its own regulation, Udall v.

Tallman, 380 U.S. 1, 16, 85 S. Ct. 792, 13 L.Ed.2d 616

(1965), “[u]nder settled principles of statutory and rule

construction, a court may defer to administrative

interpretations of a statute or regulation only when the

plain meaning of the rule itself is doubtful or

ambiguous,” Pfizer, Inc. v. Heckler, 735 F.2d 1502, 1509

(D.C. Cir. 1984) (emphasis in original). “Deference to

agency interpretations is not in order if the rule’s

meaning is clear on its face.” /d. Implicit in the rule

that an agency cannot interpret a regulation contrary

to its unambiguous meaning is the requirement that

“an agency must adhere to its own rules and

regulations.” Reuters Ltd. v. FCC, 781 F.2d 946, 950

(D.C. Cir. 1986). An agency may modify a regulation

that has already been promulgated, therefore, only

through the process of notice and comment rulemaking.

59a

See Alaska Prof'l Hunters Ass’n, Inc. v. FAA, 177 F.3d

1030, 1034 (D.C. Cir. 1999); see also 5 U.S.C. § 551(5)

(defining “rule making,” which is governed by the

notice and comment requirements of 5 U.S.C. § 553, as

the “agency process for formulating, amending, or

repealing a rule”); Shalala v. Guernsey Memorial

Hosp., 514 U.S. 87, 100, 115 S. Ct. 1232, 131 L.Ed.2d

106 (1995) (noting in dicta that APA rulemaking is

required where an agency interpretation “adopt[s] a

new position inconsistent with ... existing regulations’).

The Phase I Rule defined “new facility” as any

structure whose construction commenced — after

January 17, 2002 that meets both the definition of “new

source” in 40 C.F.R. § 122.29 (discussed below) and one

of two other requirements: the structure must use

either (1) “a newly constructed cooling water intake

structure” or (2) “an existing cooling water intake

structure whose design capacity is increased to

accommodate the intake of additional cooling water.”

See 40 C.F.R. § 125.83. A “new source” under section

122.29 is a facility that (1) ‘is constructed at a site at

which no other source is located,” (2) “totally replaces

the process or production equipment that causes the

discharge of pollutants at an existing source,” or (3)

undertakes “processes ... substantially independent of

aun existing source at the same site." 40 C.F.R.

§ 122.29%(b) (emphasis added). Section 122.29(b)

25 The Phase I Rule defined facilities meeting either of the first

two tests of section 122.29(b) as “greenfield” facilities and facilities

meeting the third test as “stand-alone” facilities. 40 C.F.R.

§ 125.88 (“A ygreenfield facility is a facility that is constructed at a

site at which no other source is located, or that totally replaces the

process or production equipment at an existing facility. A stand

alone facility ... is constructed on property where an existing

facility is located and whose processes are substantially

independent of the existing facility at the same site.”).

60a

provides further that, in determining whether a facility

is “substantially independent” of an existing source,

the director should consider “the extent to which the

new facility is integrated with the existing plant; and

the extent to which the new facility is engaged in the

same general type of activity as the existing source.”

40 C.F.R. § 122.29(b)(iii).

In determining whether a new construction

qualifies as a “new facility” for purposes of the Phase I

Rule, therefore, the permitting authority must perform

a two-part, but not necessarily sequential, analysis. It

must determine whether the construction uses a new

cooling water intake structure or an existing structure

whose capacity has been increased. The permitting

authority must also determine whether the new

construction qualifies as a “new source.” Failure to

meet either part of this analysis precludes the new

construction from qualifying as a “new facility,” and

thus from falling under the Phase I Rule’s purview.

The Phase I Rule stated that “new facilities”

meeting the foregoing requirements include a “stand-

alone” facility, which the Phase I Rule defined as “a

new, separate facility that is constructed on property

where an existing facility is located and whose

processes are substantially independent of the existing

facility at the same site.” Jd. § 125.83. This is because

such a facility, by definition, essentially qualifies as a

“new source.” Compare id. with § 122.29 (defining

“new source” as including a facility that undertakes

“processes ... substantially independent of an existing

source at the same site”). The Phase I Rule clarified,

however, that “new facility” does not include “new

units that are added to a facility for purposes of the

same general industrial operation (for example, a new

peaking unit at an electrical generating station).” /d.

$ 125.83. This is presumably because such units do not

6la

qualify as “new sources” in that they are not

substantially independent of existing sources. See id.

§ 122.29(b)(1)(iii) (setting forth the factors to be

considered in determining substantial independence,

including “the extent to which the new facility is

integrated with the existing plant; and the extent to

which the new facility is engaged in the same general

type of activity as the existing source”). The Phase I

Rule thus appears to have left regulation over the

following to a subsequent rulemaking phase: (1) new

stand-alone facilities that use existing intake

structures whose design capacity is not increased and

(2) new units that are added to a facility for purposes of

the same general industrial operation even if they

require either an increase in the intake structure

design capacity or the construction of a new cooling

water intake structure altogether. /d.29

The Phase Ji Rule defines “existing facility” as any

facility whose construction commenced on or before

January 17, 2002, “and any modification of, or any

addition of a unit at such a facility that does not meet

the definition of a new facility at § 125.83.” Jd. § 125.93.

Thus, from this definition, it appears that new stand-

alone facilities that use existing, unmodified intake

structures and new units added to a facility for

purposes of the same industrial operation, regardless of

their impact on the facility’s cooling water intake

structure, (i.e., the two kinds of new constructions left

29 A facility would clearly find it advantageous to classify a new

construction on its grounds as one added for purposes of the same

general industrial operation rather than as a stand-alone facility.

A stand-alone facility is treated as an existing facility only if it

uses an existing intake structure whose capacity is not inereased;

a “new unit,” by contrast, is treated as part of an existing facility

even if it requires the construction of a new intake structure or an

increase in an existing intake structure's capacity.

62a

unregulated by the Phase I Rule) are considered

“existing facilities” and governed by the Phase II Rule.

The parties’ dispute concerns statements in the

preamble to the Phase II Rule that purportedly

narrow, by way of interpretation, the Phase I Rule’s

definition of “new facility’®? without the required

procedures of notice and comment. In the preamble to

the Phase II Rule, the EPA states that “the Phase

I[RJule treated almost all changes to existing facilities

for purposes of the same industrial operation as

existing facilities.” 69 Fed. Reg. at 41,579. The

preamble then appears to distinguish stand-alone

facilities from new units that are part of the same

industrial operation, thereby defining the latter as

existing facilities without reference to the definition of

“new source” or the “substantial independence” test of

40 C.F.R. § 122.29. Id. at 41,579 n. 2a. The preamble

states that the “substantial independence” test does

not apply where there is an addition to an existing

facility for purposes of the same industrial operation,

such as the “addition of new generating units at the

same site” as an existing facility, id. at 41,579, because

such additions “are categorically treated as ‘existing

facilities’ regardless of any other considerations unless

they completely replace an existing facility and its

cooling water design intake capacity is increased,” id.

30 We find no merit to the EPA’s argument that the state and

environmental petitioners here are ostensibly challenging the

Phase II Rule’s definition of “existing facility” but are actually

seeking review of the meaning of “new facility” under the Phase |

Rule—for which their claim wouiu be time-barred. Though the

EPA claims that “{njothing in the Phase II Rule altered or

amended the definition of ‘new facility,’ “ it is clear from the

discussion above that the preamble to the Phase II Rule

eliminates without notice or comment the analysis the Phase I

Rule had required.

63a

at 41,579 n. 2a. These comments are contrary to the

plain meaning of the relevant portion of the Phase I

Rule.

The Phase I Rule unambiguously stated that “new

facility” means any structure that is a “new source,” as

defined by 40 C.F.R. § 122.29, subject to certain other

requirements. Under this provision, a source is

considered “new” if, inter alia, “[i]ts processes are

substantially independent of an existing source at the

same site.” 40 C.F.R. § 122.29(b)(1)(iii). A permitting

authority could not classify a source constructed at the

site of an existing source as new or existing for

purposes of the Phase I Rule, therefore, without

reference to the “substantial independence” test. It is

plain, then, that the Phase I Rule distinguished

between “stand-alone” facilities and “new units,” where

the new construction is not built at an empty site and

does not totally replace an existing source, by

reference to the definition of a “new source.” A stand-

alone facility is “substantially independent” of an

existing facility, and therefore a new source; a new unit

that is part of the same industrial operation as an

existing facility is not substantially independent of an

existing facility, and therefore not a new source. It is

impossible to determine which classification applies to

a particular construction under the Phase I Rule

without referring to the definition of “new source,” i.e.,

whether it satisfies the “substantial independence”

test. Put differently, the touchstone of the definition of

“new facility” in the Phase I Rule is whether a source is

a “new source.” The Phase I Rule’s plain terms thus

indicate that a unit that is “substantially independent”

of an existing facility is not “part of the same general

industrial operation” as the existing facility. Any

elimination of the “substantial independence” inquiry,

therefore, strikes at the heart of the Phase I Rule and

64a

its classification of what facilities are subject to its

requirements.

The EPA claims that the Phase II Rule has in no

way eliminated the “substantial independence” test

and that the Rule’s preamble merely makes clear that

the fifth sentence in section 125.83 exempts “new

units” from regulation under the Phase I Rule. This

argument fails because the Phase I Rule provides no

way to distinguish between stand-alone facilities and

new units where the construction is built on a site

where a source is already located and does not totally

replace the existing source except by reference to the

“substantial independence” test, i.e., without assessing

the factors set forth at 40 C.F.R. § 122.29(b)(1)(iii) in

order to determine whether the source is new or

existing. Just as “stand-alone facility” has no intrinsic

meaning, neither does “new unit.” The Phase I Rule

defines each by reference to the “substantial

independence” test of section 122.29(b). Thus, while an

existing facility can be repowered with new generating

units and remain an “existing facility” for regulatory

purposes under section 316(b), the determination can

only be made by reference to whether a particular new

generating unit is a stand-alone facility or a new unit

that is part of the same general industrial operation as

an existing facility. In fact, a permitting authority

must first determine whether a source is “new” within

the meaning of 40 C.F.R. § 122.29(b) before it can

conclude that the source is a stand-alone facility or a

new unit added to an existing facility for purposes of

the same general industrial operation.

Because the Phase I Rule was not ambiguous, we

do not owe deference to the Agency’s interpretation of

the Phase I Rule in the preamble to the Phase II Rule.

See Fowlkes, 432 F.3d at 97; Pfizer, 735 F.2d at 1509.

By permitting the Agency to determine that a new

65a

construction is not subject to the Phase II Rule without

any definitional guidance and in contravention of the

Phase I Rule, the EPA has expanded the scope of what

may be classified as a “new unit” while narrowing the

Phase I definition of “stand-alone” facility. Moreover,

by including a potentially expansive definition of “new

unit” in the preamble to the Phase II Rule, the EPA

has interpretively modified the definitions that

appeared in the Phase I Rule without providing

interested parties an opportunity for notice and

comment.

Accordingly, we direct the EPA on remand to

adhere to the definitions set forth in the Phase | Rule,

see Reuters, 781 F.2d at 950-52, or to amend those

definitions following notice and comment, see Alaska

Prof’! Hunters, 177 F.3d at 1034.

IV. The Industry Petitioners

A. Applicability of Section 316(b) to Existing

Facilities

Entergy argues that the EPA lacks authority to

apply CWA section 316(b) to existing, as opposed to

new, facilities. We disagree and conclude that, at the

very least, the EPA permissibly interpreted the

statute to cover existing facilities and that its

interpretation is therefore entitled to deference under

Chevron.

Entergy’s argument turns primarily on the

statutory language that the best technology available

be reflected in the “location, design, construction, and

capacity of cooling water intake structures’—a

collection of words Entergy contends indicates

Congress’s intent to regulate only new facilities.*!

31 Entergy cites a number of federal statutory and regulatory

provisions using similar words and argues that each provision

applies only in the pre-construction context. The environmental

66a

Entergy argues further that the EPA has authority to

approve cooling water intake structures only before

construction and cannot regulate these structures

through the NPDES permits issued pursuant to CWA

section 402(a)(1), 38 U.S.C. § 1342(a)(1), which allows

the Administrator to “issue a permit for the discharge

of any pollutant,” but not, in Entergy’s view, to cover

existing intake structures.

The EPA emphasizes that section 316(b) cross-

references section 301, which applies to existing

facilities, and that the Agency’s historical practice of

applying section 316(b) to existing facilities effectuates

Congress’s objectives in enacting the CWA. The EPA

contends that Congress’s link between effluent

limitations established pursuant to section 301 and

BTA under section 316(b) indicates an intent to

regulate cooling water intake structures at existing

facilities. The EPA thus argues that the intake-

structure standard is to be applied whenever an intake

structure is present at a point source of pollutant

discharge, whether that point source is new or existing.

As to Entergy’s argument concerning the ability to

petitioners contend that the provisions upon which Entergy relies

explicitly limit their application to new facilities and that, as a

result, the words “location, design, construction and capacity,”

standing alone, do not apply solely to new facilities; otherwise, the

environmental petitioners’ argument goes, there would be no need

to limit expressly the provisions’ applicability to new facilities.

For example, 49 U.S.C. § 60103, which governs safety standards

for liquefied natural gas pipelines, by its express terms does not

apply to certain existing facilities. 49 U.S.C. § 60103(c) (“Except

as provided in paragraph (2) of this subsection, a design, location,

installation, construction, initial inspection, or initial testing

standard prescribed under this chapter after March 1, 1978, does

not apply to an existing liquefied natural gas pipeline facility ....”).

These are additional reasons for the holding discussed in this

opinion.

67a

ussess intake structures during NPDES permitting

proceedings, the EPA argues that its decision to

implement the Phase II requirements through NPDES

permits has a strong textual basis. It notes that

section 402 provides for the issuance of “a permit for

the discharge of any pollutant” so long as the discharge

meets “all applicable requirements under sections 1311

.. land} 1316,” sections 301 and 306 of the CWA

respectively. CWA § 402(a)(1), 38 U.S.C. § 1842(a)(1).

EPA contends that the Phase II requirements are

“requirements under sections 1311 ... [and] 1316” and

therefore that cooling water intake structures may be

regulated via permits issued pursuant to section 402.

The EPA has the better of both arguments. As to

whether section 316(b) applies to existing facilities, we

find Entergy’s textual argument, while superficially

appealing, ultimately to be unavailing. Nothing in

section 316(b) indicates that because it applies to the

“location, design, construction, and capacity” of a

facility’s cooling water intake structure, the section is

therefore limited to new facilities and does not require

existing facilities either to modify existing intake

structures or to construct new intake structures in

order to come into compliance with the EPA’s Rule."

32 We are not persuaded by Entergy’s selective definitions of

the terms “location, design, construction, and capacity.” While we

agree that words in a statute are to be accorded “their ordinary,

contemporary, common meaning,” Harris v. Sullivan, 968 F.2d

263, 265 (2d Cir. 1992), it is clear that the EPA’s interpretation of

the statute does not deviate from this requirement. See, e.g.,

Black’s Law Dictionary 958 (&th ed. 1999) (“[LJocation” is “{t}he

specific place or position of a person or thing.”); id. at 478

(“[Djesign” means “a plan or scheme” or “[t}he pattern or

configuration of elements in something.”); id. at 332

(“(C onstruction” is “(t]he act of building,” but also “the thing so

built.”); Webster's Third New Int'l Dictionary 330 (1986)

(“(CJapacity” means “the power or ability to hold, receive or

68a

In fact, given the cross-references in section 316(b) to

provisions governing both new and existing facilities,

the EPA’s reading is far more reasonable than

Entergy’s. See E.J. du Pont de Nemours & Co. v.

Train, 430 U.S. 112, 121, 97 S. Ct. 965, 51 L.Ed.2d 204

(1977) (Section 301(b) [to which section 316(b)

expressly refers] defines the effluent limitations that

shall be achieved by existing point sources ....”); id. at

136, 97 S. Ct. 965 (holding that “301 does authorize the

[Agency] to promulgate effluent limitations for classes

and categories of existing point sources”). The cross-

reference to section 301 is particularly significant given

that Congress, having made this explicit cross-

reference, did not then limit section 316(b)’s application

to new facilities—which would have been a simple task

to do. At the very least, the EPA’s view that. section

316(b) applies to existing facilities is a reasonable

interpretation of the statute, and we therefore accord it

deference. See Chevron, 467 U.S. at 842-48, 104 S. Ct.

2778.

Entergy’s argument concerning the permitting

process presents a closer question, but it is ultimately

not persuasive and does not undermine our conclusion

that section 316(b), on its face, applies to existing

facilities. The textual basis for the EPA to regulate

cooling water intake structures during the periodic

permitting process applicable to the discharge of

pollutants is not immediately apparent. Section 402

conditions the issuance of a permit on the circumstance

that a “discharge will meet... all applicable

requirements under sections 1311..[and] 1316.” CWA

accommodate” and “a containing space: a measure of content for

gas, liquid, or solid.”). Nothing in the above definitions suggests

the EPA could not have reasonably interpreted such words to

include existing facilities.

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§ 402(a)(1), 38 U.S.C. § 1842(a)(1) (emphasis added).

While the Phase II requirements are “requirements”

under sections 301 and 306, they do not apply to the

discharge of pollutants, and section 402 says nothing

about conditioning a permit on compliance with other

requirements of sections 301 and 306, i.e., requirements

not relating to the discharge of pollutants. Despite this

textual hiccup, the EPA’s decision to use the NPDES

process to enforce section 316(b) is not unreasonable.

Insofar as the provision applies to existing facilities—

and the cross-reference in section 316(b) to section 301

provides a clear textual basis for that conclusion—the

EPA could enforce it only through some permit process

following the issuance of an initial construction permit.

Moreover, the structure of section 316(b) supports the

view that its requirements are to be enforced through

the same process used to enforce the effluent

limitations of sections 301 and 306. As noted, the

statute requires that any standard established by the

EPA to govern the discharge of pollutants from

existing facilities must also regulate cooling water

intake structures. CWA § 316(b), 33 U.S.C. § 1326(b)

(providing that “[ajny standard established pursuant to

section 1311 ... or section 1316” shall also regulate the

cooling water intake structures of point sources). In

light of this language, it is at least reasonable to

conclude that Congress intended the requirements of

section 316(b) to be part and parcel of any regulation of,

and therefore any permit issuance relating to, the

discharge of pollutants. See Riverkeeper I, 358 F.3d at

185-26. It is a fair conclusion that section 402 implicitly

requires permitting authorities to ensure compliance

with section 316(b) as a permit condition. See U.S.

Steel Corp. v. Train, 556 F.2d 822, 850 (7th Cir. 1977)

(“[Section] 402(a)(1) implicitly requires the

Administrator to insure compliance with §316(b) as

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one of the permit conditions.”), overru/ed on other

grounds by City of West Chicago, Ill. v. U.S. Nuclear

Regulatory Comm’n, 701 F.2d 632, 644 (7th Cir. 1983)

(abandoning the view that 5 U.S.C. § 558(c)

independently provides that formal adjudicatory

hearings must be held when requested by a license

applicant under CWA § 402). Section 402 thus does not

undermine the deference to which the Agency’s

interpretation of section 316(b) is entitled under

Chevron.

Because section 316(b) plainly applies to existing

facilities and Congress intended the requirements of

section 316(b) to apply in tandem with the effluent

limitations established pursuant to sections 301 and

306, we conclude that the EPA may regulate cooling

water intake structures via the NPDES permit

process. Otherwise, Congress’s intent to regulate the

intake structures of existing facilities could not be

effectuated.** Accordingly, we reject this aspect of

Entergy’s challenge.

33 Entergy also contends that section 316(b) cannot be enforced

via a citizen suit pursuant to section 505(a)(1), 33 U.S.C.

§ 1365(a)(1), because that provision covers only violations of “an

effluent standard or limitation” or “an order issued by the

Administrator or a State with respect to such a standard or

limitation,” and that the statute therefore applies only in the pre-

construction context. Because the case before us is not a citizen

suit, we are not directly presented with the question of whether a

citizen can sue to enforce section 316(b) and do not decide the

question. We are not, however, persuaded by Entergy’s

argument. The citizen suit provision states that a citizen may

commence a suit against any person who is alleged to be in

violation of “an effluent standard or limitation under this chapter.”

CWA § 505(a)(1), 33 U.S.C. § 1365(a)(1). Viewed in light of this

language alone, it is difficult to characterize a violation of

regulations promulgated pursuant to section 316(b) as a violation

of an “effluent standard or limitation.” The statute, however,

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B. Definition of “Adverse Environmental

Impact”

In the Phase II Rule, as in the Phase | Rule, the

EPA has interpreted the statutory directive of section

316(b) to minimize “adverse environmental impact”

(“AEI”) to require the reduction of “the number of

aquatic organisms lost as a result of water withdrawals

associated” with cooling water intake structures. 69

Fed. Reg. at 41,586. This interpretation reflects the

fact that section 316(b) is a somewhat unusual

provision of the CWA in that it governs the

environmental effects of large scale withdrawals from

waters of the United States rather than the release of

pollutants into receiving water. As did the industry

petitioners in l2iverkeeper I, PSEG argues that the

EPA arbitrarily defined AEI to include any loss of or

harm to aquatic organisms due to impingement

mortality and entrainment rather than only more

severe “population-level effects.” It contends that the

FPA has historically focused on the “population

dynamics” of aquatic organisms and the fact that many

of these organisms are “density dependent,” i.e., they

produce large numbers of offspring, only a few of which

defines “effluent standard or limitation” to include “an effluent

limitation or other limitation under section 1311” and a “standard

of performance under section 1316.” CWA § 505(f), 33 U.S.C.

§ 1365(f). Arguably, therefore, « limitation established pursuant

to section 316(b) is an “other limitation under section 1311” and a

“standard of performance under section 1316,” given the cross-

reference to sections 301 and 306 in section 316(b), and thus falls

within the scope of the citizen-suit provision. While we do not

decide the question here, we do not read the citizen suit provision

to undermine the deference we accord the EPA's reasonable

interpretation pursuant to Chevron that section 316(b) applies to

existing facilities.

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survive to adulthood.*4 On the theory that the “vast

majority” of entrained organisms would have died of

natural causes in any event, PSEG argues that

reduction of impingement mortality and entrainment

will have only a marginal positive environmental

impact.*® PSEG contends that because the Agency has

changed course from its longstanding interpretation of

AEFI without giving a clear and reasoned justification

for its decision, the EPA’s Rule is entitled to less

deference than it otherwise would receive. PSEG also

argues that the Phase II Rule’s exclusion from the

entrainment-reduction requirement of facilities

withdrawing small amounts of water, facilities

withdrawing water from lakes other than the Great

34 PSEG relies on the Draft Guidance for Evaluating the

Adverse Impact of Cooling Water Intake Structures on the

Aquatic Environment, prepared by the EPA in 1977. While the

EPA indicated in this document that “[aldverse environmental

impacts occur whenever there will be entrainment or

impingement damage as a result of the operation of a specific

cooling water jntake structure,” PSEG focuses on the Agency’s

statement that the “critical question” is “the magnitude of any

adverse impact.”

35 The environmental petitioners contend that PSEG has missed

the mark here entirely. They argue that when organisms die of

natura) causes they remain available as food for top predators, but

that when organisms are entrained, and potentially disintegrated,

they are consumed by lower organisms. They argue also that

entrained organisms are not available to consume organisms lower

on the food chain. The environmental petitioners thus contend

that one of the primary adverse environmental impacts of

impingement mortality and entrainment is their effect on the

ecosystem as a whole by disrupting the food chain. The FPA

discussed these and other environmental impacts attributable to

impingement mortality and entrainment in the preamble to the

Phase II Rule, concluding that “[djecreased numbers of aquatic

organisms can disrupt aquatic food webs and alter species

composition and overall levels of biodiversity.” 69 Fed. Reg. at

41,586.

ida

Lakes, and facilities that have a small capacity

utilization rate undercuts the EPA’s determination

that impingement mortality and entrainment are per se

adverse environmental impacts. We are not persuaded

by PSEG’s arguments.

We agree with the EPA that the Phase II Rule is

based on substantially the same record evidence of

impingement mortality and entrainment relied upon in

promulgating the Phase I Rule and that we rejected

substantially the same arguments advanced here by

the industry petitioners in Riverkeeper /, 358 F.3d at

197 (“The EPA considered all of the factors that

UWAG now raises, and we are inclined to defer to the

EPA’s judgment of how best to define and minimize

‘adverse environmental impact.” (internal footnote

omitted)). Riverkeener I thus controls this issue.

In Riverkeeper i, we rejected the arguments that

some species are nuisances and require eradication,

that other species respond to population losses by

increasing their reproduction, and that removing large

numbers of aquatic organisms from waterbodies is not

in and of itself an adverse impact. 358 F.3d at 196. We

specifically rejected the view that “the EPA should

only have sought to regulate impingement and

entrainment where they have deleterious effects on the

overall fish and shellfish populations in the ecosystem,

which can only be determined through a case-by-case,

site-specific regulatory regime.” Jd. We emphasized

that “the EPA’s focus on the number of organisms

killed or injured by cooling water intake structures is

eminently reasonable.” /d. We reiterated that

Congress had “rejected a regulatory approach that

relies on water quality standards,” analogizing the

argument pressed there as urging what is essentially a

water quality standard that focuses on fish populations

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and consequential environmental harm.*6 Jd at 196-97.

Given that the record evidence on this issue has not

changed in any meaningful way since the Phase |

rulemaking, we are both persuaded and bound by our

statements on this issue in Riverkeeper I.

Were we considering the issue in the first instance,

however, we would be inctined to defer to the EPA’s

judgment in any event. The EPA explained that it has

set “performance standards for minimizing adverse

environmental impact based on a relatively easy to

measure and certain metric—reduction of impingement

mortality and entrainment.” 69 Fed. Reg. at 41,600. It

explained further that it chose this approach “because

impingement and entrainment are primary, harmful

environmental effects that can be reduced through the

use of specific technologies” and stated that “where

other impacts at the population, community, and

ecosystem levels exist, these will also be reduced by

reducing impingement and mortality.” /d. We see no

36 We make an additional observation here, which we cited in

Riverkeeper I as a reason for rejecting restoration measures as

impermissible under the statute. It is significant that in section

316(a), which governs thermal discharges, Congress permits the

EPA to vary the standard applicable to a point source “by

considering the particular receiving waterbody’s capacity to

dissipate the heat and preserve a ‘balanced, indigenous’ wildlife

population.” 358 F.3d at 190. It is also significant that Congress

“did not include that [water quality or population level] approach

(or make any reference to it) in the very next subsection,” id.,

since “where Congress includes particular language in one section

of a statute but omits it in another section of the same Act, it is

generally presumed that Congress acts intentionally and

purposely in the disparate inclusion or exclusion.” /d. (quoting

Bates v. United States, 522 U.S. 23, 29-30, 118 S. Ct. 285, 139

L.Ed.2d 215 (1997) (internal quotation marks omitted)). The

statutory structure thus indicates that Congress did not intend to

limit “adverse environmental impact” in section 316(b) to

population-level effects.

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reason to second-guess this judgment, given the

Agency’s consideration of the various environmental

consequences of cooling water intake structures. See

Nat'l Wildlife Fed’n, 286 F.3d at 570 (noting that

courts afford the EPA considerable discretion to weigh

and balance various factors in determining how to

establish performance standards).37

C. Zero Entrainment Survival Assumption

The Phase II Rule requires a_ reduction of

impingement mortality, but a reduction of entrainment

generally. See 40 C.F.R. § 125.94(b). The industry

petitioners contend that the EPA improperly

presumed that all entrained organisms are killed. They

argue that the Rule’s assumption that no organisms

survive entrainment is contrary to the evidence which,

in their view, indicates a survival rate of significantly

more than zero. We conclude that in light of uncertain

record evidence, the EPA acted within its discretion in

assuming zero entrainment survival.

The EPA explained in the preamble to the Phase II

Rule that it assumed zero percent entrainment survival

because it “does not have sufficient daca to establish

performance standards based on entrainment survival

37 We also find no merit in PSEG’s claim that the final Rule

gave no notice of the supposed change in the EPA’s view of

“adverse environmental impact.” Not only did the proposed Rule

seek comment on several competing definitions, one of which

referred to gauging such impact in part by examination of the

“absolute damage” wrought by impingement and entrainment, but

in which the EPA noted that “there will be adverse environmental

impact whenever there is entrainment or impingement ‘damage’

as a result of a cooling water intake structure.” 67 Fed. Reg. at

17,162. While the EPA did not ultimately adopt any of the

definitions it noticed, it is clear that PSEG was “fairly apprise[d]”

that the EPA was considering an approach to AEI that looked to

entrainment and impingement at the individual level. Natl Black

Media Coalition, 791 F.2d at 1022.

76a

for the technologies used as the basis for today’s rule.”

69 Fed. Reg. at 41,620. It explained further that it

“believes the current state of knowledge does not

support reliable predictions of entrainment survival

that would provide a_ defensible estimate for

entrainment survival above zero at a national level.”

Id. \t also stated that the performance standard would

likely have been higher had _ it _ incorporated

entrainment survival into its conclusions. Jd. While

impingement mortality can be readily quantified, the

EPA contends, entrainment mortality cannot because

many entrained organisms are small, fragile, and prone

to disintegrate during entrainment. The EPA also

contends that death from entrainment sometimes

occurs immediately but other times only after an

organism is discharged back into the waterbody. In

view of these factors, the EPA claims that it

reasonably concluded that the available data did not

support an estimate of entrainment survival at the

national level.

None of the peer reviewers accepted the EPA’s

assumption of zero percent survival. For instance,

peer reviewer Dr. Mark Bain was “not convinced by

the arguments presented that fish do not survive

entrainment in significant numbers” and concluded

that there is “very s?;vng evidence that entrainment

survival is not zero.” Another peer reviewer, Dr.

Charles Hocutt, concluded that the EPA’s assumption

is based on inference and innuendo and does not

statistically refute opposing views. Although peer

reviewer Dr. Greg Garman stated that the study

submitted by the power industry was “very clearly

biased” and “too seriously flawed to provide a serious

challenge to the EPA position,” he also noted that

“EPA’s position is only slightly more defensible” given

the lack of rigorous statistical analyses.

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No peer reviewer, however, expressed the belief

that reliable national statistics on entrainment survival

exist. Hocutt found “it difficult for the layman and

professional alike to draw confident conclusions

without a detailed analysis” of the evidence, and

Garman suspected a lack of sufficient data “to conduct

a definitive and statistically valid test of the EPA zero

survival assumption.” While these comments do not,

on balance, support the EPA’s assumption, neither do

they reflect any meaningful agreement on the incidence

of entrainment survival.

Given the statutory directive to set national

standards and the well-documented uncertainty in the

entrainment data, the EPA was well within its

authority to determine that it could not provide a

reasonable estimate of entrainment survival on a

national basis. Judicial review is considerably

deferential when “the agency’s decision rests on an

evaluation of complex scientific data within the

agency’s technical expertise.” Texas Oil & Gas Ass’n,

161 F.3d at 934; City of Waukesha v. EPA, 320 F.3d

228, 247 (D.C. Cir. 2003) (stating that an agency is

entitled to “an extreme degree of deference ... when it

is evaluating scientific data within its technical

expertise” (citation and internal quotation marks

omitted)). Moreover, “it is within EPA’s discretion to

decide that in the wake of uncertainty, it would be

better to give the values a conservative bent rather

than err on the other side.” Am. lron & Steel Inst. v.

EPA, 115 F.3d 979, 993 (D.C. Cir. 1997). Indeed, one

peer reviewer expressly noted that the EPA had

adopted a “conservative approach” by its assumption of

zero entrainment survival in the Rule. It is thus clear

that the EPA acted well within its discretion in

presuming zero entrainment survival after the Agency

had reviewed a substantial body of complex scientific

78a

data, and acknowledging that the evidence is

inconclusive, it adopted a conservative approach.

For these reasons and those stated in Riverkeeper

I, we therefore “defer to the EPA’s judgment of how

best to define and minimize ‘adverse environmental

impact.” 358 F.3d at 197.

D. Nuclear Plants

Entergy contends that the Phase II Rule fails to

account for its purportedly disproportionate impacts on

nuclear power plants and is therefore arbitrary and

capricious. Entergy argues that nuclear facilities face

unique safety concerns associated with the stable flow

of cooling water to ensure safe reactor operation and

shutdown. Any change in water intake or obstruction

of water intake systems due to, for example, the

clogging of screens, it argues further, affects nuciear

power facilities in specific and serious ways. Entergy

takes the position that the EPA failed to account for

these issues in the Phase II Rule. We disagree because

the record demonstrates adequate consideration by the

EPA of nuclear plants’ particular concerns.

The EPA considered and responded to comments

from nuclear facilities during the rulemaking process.

Most importantly, the Agency considered whether the

Rule’s requirements presented any concerns relating

to the safety of nuclear facilities. 69 Fed. Reg. at

41,585 (noting that the EPA had coordinated with the

Nuclear Regulatory Commission to ensure that there

would not be a conflict between the EPA Rule and

safety requirements applicable to nuclear facilities).

The EPA ultimately included in the Phase IT Rule a

provision that accounts for this concern by providing

for a site-specific compliance alternative for nuclear

facilities. This provision states that if a nuclear facility

“demonstrate[s} to the [EPA] based on consultation

with the Nuclear Regulatory Commission that

79a

compliance with this subpart would result in a conflict

with a_ safety requirement established by the

Commission, the [EPA] must make a site-specific

determination of best technology available for

minimizing adverse environmental impact that would

not result in a conflict.” 40 C.F.R. § 125.94(f).

We defer to the EPA’s determination that this

compliance alternative ensures that any safety

concerns unique to nuclear facilities will prevail over

application of the general Phase II requirements. See

Nat'l Wildlife Fed’n, 286 F.3d at 570 (noting that

appellate courts give an agency considerable discretion

when it has weighed and balanced the appropriate

factors); BP Exploration & Oil, Inc. v. EPA, 66 F.3d

784, 802 (6th Cir. 1995) (“The overriding principle in

our review of the Final Rule is that the agency has

broad discretion to weigh all relevant factors during

rulemaking. The CWA does not state what weight

should be accorded to the relevant factors; rather, the

Act gives EPA the discretion to make_ those

determinations.”). Moreover, we are persuaded that

the generous cost-cost compliance alternative, which

we remand for lack of notice but do not address on the

merits, may further account for Entergy’s concerns.

Accordingly, we deny the petition for review

insofar as it challenges the Rule’s application to nuclear

facilities.

I. Independent Suppliers

The Phase II Rule provides that a large, existing

facility is subject to the Rule’s requirements even

when it obtains cooling water from an independent

supplier that is not itself a Phase IT existing facility. 40

C.F.R. § 125.91(c). Put differently, a Phase II facility

can purchase cooling water only from suppliers whose

intake structures are in compliance with the Phase II

Rule. The provision is intended to prevent

80a

circumvention of the Rule by purchasing cooling water

from non-Phase II entities. UWAG argues that the

EPA gave inadequate notice of the scope of this so-

called third-party or independent-supplier Rule. We

agree.

UWAG contends that while the Phase I Rule

included an independent-supplier provision similar to

the one at issue here, the parallel provision of the

Phase I Rule applies only to third-party suppliers that

are not point sources, and thus do not need discharge

permits and are not subject to any rule promulgated

pursuant to section 316(b).°83 UWAG argues that the

Rule’s proposal indicated that the Phase II provision

would track the language of the Phase I provision.

UWAG contends, therefore, that the EPA gave

inadequate notice of the more broadly phrased

provision that was actually promulgated: a rule

applying both to the intake structures of third-parties

that are not point sources, and therefore not subject to

direct regulation under section 316(b), as well as to

facilities with intake structures that will be governed

by the Phase III rule, which will encompass smaller

power plants and other facilities. The issue is thus

whether the EPA provided adequate notice that the

Rule ultimately promulgated would impose Phase II

35 The Phase I Rule provided that

{ulse of a cooling water intake structure includes

obtaining cooling water by any sort of contract or

arrangement with an independent supplier (or multiple

suppliers) of cooling water if the supplier or suppliers

withdraw(s) water from waters of the United States ....

{t]his provision is intended to prevent circumvention of

these requirements by creating arrangements to receive

cooling water from an entity that is not itself a point

source.

40 C.FLR. § 125.81(b).

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requirements on Phase III facilities that supply cooling

water to Phase II facilities.

As we have noted, our inquiry into whether an

agency has provided adequate notice of its rulemaking

as required by the APA is guided by the “logical

outgrowth” test. Nat'l Black Media Coalition, 791

F.2d at 1022. That is, we must determine whether the

Agency’s notice fairly apprised interested parties of

the rulemaking, id., or whether the final Rule was

sufficiently remote or distant from the Agency’s

proposal to constitute a “surprise switcheroo,” Envtl.

Integrity Project, 425 F.3d at 996.

The proposed Rule published in the Federal

structure includes obtaining cooling water by any sort

of contract or arrangement with an independent

supplier (or multiple suppliers) of cooling water if the

supplier or suppliers withdraw(s) water from waters of

the United States.” 67 Fed. Reg. at 17,220. The notice

then stated that the provision was intended “to

prevent circumvention of these requirements by

creating arrangements to receive cooling water from

an entity that is not itself a point source,” id. (emphasis

added), indicating that the provision would track the

Phase I Rule’s language. The initial language of the

provision appearing in the _ proposal—defining

“independent supplier” as any provider that withdraws

water from waters of the United States—is virtually

identical to the language in the final Rule.*? The final

39 The final Rule provides that “fulse of a cooling water intake

structure includes obtaining cooling water by any sort of contract

or arrangement with one or more independent suppliers of cooling

water if the supplier withdraws water from waters of the United

States but is not itself a Phase I] existing facility.... This provision

is intended to prevent cireurnvention of the requirements by

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Rule, however, states that it “is intended to prevent

circumvention of these requirements by creating

arrangements to receive cooling water from an entity

that is not itself a Phase II existing facility.” 40 C.F.R.

§ 125.91(c) (emphasis added). This difference, while

small, is not insignificant. As noted, under the

proposed Rule, Phase II facilities could purchase

cooling water from facilities complying with the Phase

I, 11, or III requirements. Under the final Rule, by

contrast, Phase II facilities can purchase cooling water

only from facilities complying with the Phase II Rule.

The proposal therefore apprised affected parties of the

general subject, but not the scope, of the Rule

ultimately promulgated.

Interested parties were thus given notice that the

EPA sought to prevent circumvention of its rules and

an opportunity to comment on this general policy, but

could not have anticipated the final Rule’s scope.

Indeed, while the final provision has roots in the

proposal, it clearly reaches further than the proposed

provision and even the more stringent Phase I Rule.

Affected parties would therefore have had no reason to

anticipate the Agency’s final course in light of the

initial notice. Because the EPA provided inadequate

notice of the scope of the Phase II Rule’s independent-

supplier provision, we conclude that the Rule

ultimately promulgated is not a “logical outgrowth” of

the proposed Rule. Nat'l Black Media Coalition, 791

F.2d at 1022.

Our conclusion rests in large part on the similarity

between the Phase I Rule’s independent-supplier

provision and the proposed Phase II Rule’s parallel

provision. Given that the requirements under the

creating arrangements to receive cooling water from an entity

that is not itself a Phase II existing facility.” 40 C.F.LR. § 125.91(e).

83a

Phase | Rule are more stringent than those imposed

under the Phase II Rule, the proposal provided no

notice that the Phase II Rule’s independent-supplier

provision would be more stringent than the Phase I

Rule’s provision. We therefore remand this aspect of

the Rule.

F. Definition of “Great Lakes”

The entrainment performance standard of 40 C.F.R.

§ 125.94(b)(2) applies to facilities that use cooling water

“withdrawn from ... one of the Great Lakes.” 40 C.F.R.

§ 125.49(b)\(2\ii)(A). “Great Lakes,” however, is not

defined in the Rule. An affidavit of UWAG’s counsel

states that UWAG members

have been told by state regulators that they have

been told by EPA Headquarters that EPA would

apply the Great Lakes national performance

standards regarding impingement and

entrainment to the cooling water’ intake

structures located in the Great Lakes connecting

channels or in waterways with open fish passage

to a Great Lake and within 30 miles from a Great

Lake.

UWAG argues that interested parties were given no

notice of this interpretation of the Phase II Rule or

opportunity to comment on it and that’ the

interpretation has no record support. UWAG also

remarks that the EPA mentioned in the preamble to

the Rule that in assessing the national environmental

benefits of its final Phase II Rule, it had evaluated the

benefits in seven study regions. The EPA defined the

Great Lakes region for that purpose as follows:

The Great Lakes region includes all facilities in

scope of the Phase II rule that withdraw water

from Lakes Ontario, Erie, Michigan, Huron, and

Superior or are located on a waterway with open

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fish passage to a Great Lake and within 30 miles

of the lake.

69 Fed. Reg. at 41,655. UWAG contends that the EPA

never indicated that this definition would apply to

§ 125.94(b)(2) and seeks either a ruling that “Great

Lakes” has its ordinary meaning or a remand for an

express definition of what the term means.

Notwithstanding UWAGQ’s proffer that the EPA

has informally interpreted “Great Lakes,” the Rule

itself does not define what is encompassed by the term,

and UWAG has provided no documentary evidence

that the EPA has issued a formal and binding definition

or even applied a particular definition in a permitting

proceeding. There is, therefore, no final agency action

for us to review. We agree with the holding of the

Seventh Circuit in American Paper Institute, Inc. v.

Environmental Protection Agency, that in the absence

of a formal and binding rule or some other final agency

action, judicial review is not available at this time. 882

F.2d 287, 289 (7th Cir. 1989). We therefore dismiss for

lack of jurisdiction so much of the petition for review as

challenges the purported definition of “Great Lakes.”

G. Preemptive Preservation of Issues

UWAG has purported to “preserve” the right to

raise new challenges to the Phase II Rule if we remand

significant aspects of it to the EPA because UWAG

views the Rule as an integrated whole. If certain

aspects of the Rule are remanded, UWAG suggests,

previously unobjectionable provisions may become, in

its view, unacceptable. We are not sure what

challenges UWAG seeks to preserve. Of course,

UWAG will have the right to challenge any

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