Petition for Writ of Certiorari — Utility Water Water Act Group Group v. Riverkeeper, Inc. (Nos. 07-597, 07-588, 07-589)

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_ Supreme Court, U.S.

P FILED .

No. (Cv

CIn c) he OFFICE OF THE CLERK

Supreme Court of the Chited States

UTILITY WATER ACT GROUP,

Petitioner,

RIVERKEEPER, L.(C., et al.,

Respondents.

ON PETITION FOR WRIT OF CERTIORARI

To THE UNITED STATES COURT OF AP?’EALS

For THE SECOND CIRCUIT

PETITION FOR WRIT OF CERTIORARI

Kristy A.N. Bulleit

Counsel of Record

HIUNTON & WILLIAMS LLP

1900 K Street, NW

Washington, DC 20006

(202) 955-1547

Counsel for Petitioner NOVEMBER 2, 2007

= ——— ee ee

TM TEX GROUP ¢© 1750 K Street NW @ Suite 475 © Washington, DC 20006

(202) 955 0001 @ (300) 815-3791 @ Fax (202) 9550022 @www thelexgroupd: com

QUESTIONS PRESENTED FOR REVIEW

1. Whether § 316(b) of the Clean Water Act,

33 U.S.C. § 1326(b), which specifies that standards

set under §§ 301 or 306 of the statute shall require

that cooling water intake structures reflect the “best

technology available for minimizing adverse

environmental impact,” prohibits the United States

Environmental Protection Agency (“EPA”) from

considering the cost of a technology in comparison to

the level of control it achieves and to the

environmental “benefit” of that level of control?

2. Whether § 316(b) prohibits EPA from

authorizing existing facilities to use restoration

measures (for example, fish stocking or habitat

restoration) that, taken collectively with the existing

characteristics of the cooling water intake structure,

ensure that the intake structure minimizes “adverse

environmental impact”?

PARTIES TO THE PROCEEDING

The Utility Water Act Group (“‘UWAG”) is a

petitioner in this Court and was a petitioner in the

court of appeals.

Appalachian Power Company, [Illinois Energy

Association, PSEG Fossil LLC, PSEG Nuclear LLC,

and Entergy Corporation are respondents in this

Court per Rule 12.6 and were petitioners in the court

of appeals. PSEG Fossil LLC, PSEG Nuclear LLC,

and Entergy Corporation are expected to be

petitioners in this Court as well.

The United States Environmental Protection

Agency is a respondent in this Court and was a

respondent in the court of appeals.

The following parties are respondents in this

Court and were petitioners in the court of appeals:

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 Coa stkeeper

Columbia Riverkeeper

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Conservation Law Foundation

Surfrider Foundation

The following States are respondents in this

Court and were petitioners in the court of appeals:

Connecticut

Delaware

Massachusetts

New Jersey

New York

Rhode Island

The industry parties, environmental groups,

and States jointly petitioned to intervene in the

other petitioners’ cases on August 27, 2004.

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 29.6 of the Rules of the

Supreme Court of the United States, counsel for

petitioner Utility Water Act Group hereby provides

the following Disclosure Statement:

The Utility Water Act Group (““UWAG’”) is a

voluntary, ad hoc, non-profit, unincorporated group

of individual energy companies and national trade

associations of energy companies. The individual

energy companies operate power plants and other

facilities that generate, transmit, and distribute

electricity to residential, commercial, industrial, and

institutional customers. UWAG’s purpose is to

participate on behalf of its members in EPA

rulemakings under the Clean Water Act. UWAG is

not a parent, subsidiary, or affiliate of any

corporation or other entity that has issued shares or

debt securities to the public.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW ...........-.. i

PARTIES TO THE PROCEEDING......................00008 il

CORPORATE DISCLOSURE STATEMENT .......... iv

TABLE OF AUTHORITIEG..................ccccscsssccesseoees Vill

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STATUTORY AND REGULATORY PROVISIONS

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RETIREES scsccisnesssntissmenisaspiehiniaiciedpammemanaael 2

REASONS FOR GRANTING THE PETITION ...... 16

I. Tee “CSR BUDD ciisinticcctinoceeeennn 16

A. The Plain Language of § 316(b)

Does Not Contradict, and the

Legislative History Supports, an

“Economic Practicability” Test........... 19

B. The First Circuit Affirmed EPA's

Consideration of Costs In

Comparison to Results.....................46. 19

C. The BA’/NSPS Requirements Do

Not Compel the Second Circuit’s

Decision on Costs, and Other

Circuits Have Disagreed .................... 25

D. The Split in the Circuits Will

Cause Serious Problems..................... 29

Il. SESS EEL SL 30

A. Restoration Is Compatible with

the Words of § 316(b), as the

Seacoast Decision Recognized ............ 30

B. Like §316(b), the BAT/NSPS

Provisions Allow EPA to Consider

Ambient Conditions.........................065 34

C. Other Parts of the Clean Water

Act, Including its “Objectives,”

Support EPA's Interpretation............ 35

III. Practical Implications for the Nation........... 36

a as usnisededecenenesseneessees 40

APPENDIX

Opinion of

The United States Court of Appeals

For The Second Circuit

entered January 25, 2007.................... la

vll

Order of

The United States Court of Appeals

For The Second Circuit

Re: Denying Petition for Rehearing

entered July 5, 2007 ...................... 10la

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I I asehesissniieoitieseeiniceecidecuiabe 116a

$8 USC. § 1008 ......:............... sliaedsalgeaaia 120a

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40 C.F.R. § 125.91 o.oo ccccccccccccceceeseeeeeee cess. 126a

CT 6 ii revs ececcictcsenesevnsninsnliti 127a

40 C.F.R. § 125.95.....0.ccccccccccescsesesecsesseseeees 137a

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TABLE OF AUTHORITIES

Page(s)

CASES

Am. Petrol. Inst. v. EPA,

787 F.2d 965 (5% Cir. 1986) ......................0... 28

American Textile Manufacturers Institute v.

Donovan,

nts Oa pcceantelieaeiaeintal 24

Appalachian Power Co. v. Train,

566 F.2d 451 (4° Cir. 1977) ..................cccceceees 5

Barnhart v. Walton,

I al a 32

BP Exploration & Oil, Inc. v. EPA,

66 F.3d 784 (6% Cir. 1995) ................ 15, 27, 28

Chevron U.S.A. Inc. v. Natural Res.

Def. Council, Inc.,

re rs Ne CID caiivedsceverancccscecececs 13, 19, 27

Citizens Coal Council v. EPA,

447 F.3d 879 (6% Cir. 2006) ......20.0.0.. cee... 34

ConocoPhillips Co., et al. v. EPA,

EER Re Ae ian Lae an ae EP 7

Consolidated Rail Corp. v. United States,

855 F.2d 78 (3d Cir. 1988)................ ramadan 26-27

Envtl. Def. v. Duke Energy Corp.,

Se i a i 24

EPA v. National Crushed Stone Ass'n,

ee ee eI rn nciccatiicnssnitiintiiniaabiiiadiintiiimenans 27

In the Matter of Public Service Company of

New Hampshire, et al. (Seabrook Station, Units

1 and 2), NPDES Appeal No. 76-7, 1 E.A.D.

455, 1978 EPA App. LEXIS 17

i srncdnminnndicdunesiindad 6, 20, 21

Massachusetts v. Hayes,

GOl F.Sa ST Chat Cie. 19GB) ....0cccccccccccccssccsees. 25

Nati Wildlife Fed’n v. EPA,

286 F.3d 554 (D.C. Cir. 2002)...........00..... 28, 34

NRDC v. EPA,

624 F.24 1146 (D.C. Cir. 1967)...................0+. 24

Ohio Valley Envtl. Coalition v. Bulen,

429 F.3d 493 (4® Cir. 20085)...........cccsccsccesevees 36

Riverkeeper, Inc. v. EPA,

358 F.3d 174 (2d Cir. 2004)

ER ene” Same mea passim

Riverkeeper, Inc. v. EPA,

475 F.3d 83 (2d Cir. 2007)

III TI occa ocsdcaeckvsvcdssndesss Seat passim

Russello v. United States,

Uy en ss Th a ee 24

S. D. Warren Co. v. Maine Bd. of Envtl. Prot.,

126 S. Ct. 1843 (2006) .............0000 ce. sda 24

Seacoast Anti-Pollution League v. Costle,

597 F.2d 306 (15* Cir. 1979)......... ha aad passim

Sierra Club v. U.S. Army Corps of Eng’rs,

464 F. Supp. 2d 1171 (M.D. Fla. 2006)......... 36

United States Steel Corp. v. Train,

556 F.2d 822 (7 Cir. 1977) ..............ccceeeeeeees 21

Waterkeeper Alliance, Inc. v. EPA,

399 F.3d 486 (2d Cir. 2005)...............0.. ee. 34

Weyerhaeuser Co. v. Costle,

590 F.2d 1011 (D.C. Cir. 1978) ............... 26, 28

STATUTES

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TS OO dasa iiasncceal aniinsaieanlendidiasieiabeniaaiionnabad passim

33 U.S.C. § 1311(b)(1)(A) ........ scealeeliat reciiineabidbencamuaeiieas 23

33 U.S.C. § 13110D)(2)(B) «........cecec-ceccesscececececsacesecess 23

I a icosnccisnssiniensinsimssiipslosagibateiion 26

ee TE cache ncprntensincdiaiabibaniiuniaaedioameadal passim

Be Ere ae PIII ee cisitceconsincsinnninninisetitnciatatsininileniitabia 23

33 U.S.C. § 1314(b)(2) ....ceccccccceccececescscscscscesescsesceeees 23

Se WAS. B RBI GD ccrecsercescccccssescccenccevsvssonnnsins 26

Se Ns ME iuieictpscnnsnsiodheinicedsendntibeaktensiadsienne passim

ee ee SE itinntiiindidenasiinnndenniecinbedinmnettt passim

a Ae NE ccietitecndiviniosisactisniccniitasnsiocnnitmenncinbabsieiies 30, 35

Be as Se I a ciccchisiih cclistsihsenicsscehenesbniediebimniniiaie 35

BS U.S.C. F BGSRG MANE) .crccccrcccvscesccecccsccovccsssosseeses 12

RULES

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SCN, EN, TL SIU ir cicadas dinicidaiciccrnsiddlccnnaansieibiuiiiaianalie iV

REGULATIONS

Se a i ae SIs siiki iicdsccsccnctcsscncddacnsdbenssiieimiens 36

a a a i Ts niccninsiin Seltshesnibndesinntinnsininibaoinisieobt 36

a iT I iis sasccstecnesehiccies hiienantmpnatenktabellicaioes 2

40 C.F.R. § Tiel

40 C.F.R. § 124.10(d)(1)(X) oeececccccceccccscececcecsesecsvsvseeeee. 2

40 C.F.R. § 125.90-99 ..oo.ccccccccccccccssececeeceeeceeees salt 2

ae ae ae ND hice itheshastddeieahisiscaiaiaiicibiuilaaladantedicaen 16

40 C.F... § 1B5.DA(aMG)ii).......cccrccsorsssesesssccrcssesesoosess 9

ae le Oe IED censcescisnssevessensscicecsoncecsieniniespan 9

40 C.F.R. § 125.94(b)(2) .....ceccccecececcececcececececeeceessesees 9

SF ails Be te tesesscicecvccsevssccscsesescsesestossoese 11

40 C.F. F UDB.DEGa MOGI) «..cccccivccccccsccccccoscsccsecsessesees 9

OD CITE. © BO TI asses cscs ev ececsccesccosovesscscecosesesese 36

OTHER AUTHORITIES

41 Fed. Reg. 17,387 (Apr. 26, 1976).............000000.00.0... 5

67 Fed. Reg. 2020 (Jan. 15, 2002)...............00....e eee. 36

67 Fed. Reg. 2092-93 (Jan. 15, 2002) ......0... 36

69 Fed. Reg. 41,575-693 (July 9, 2004) ............ passim

71 Fed. Reg. 35,006 (June 16, 2006)...............0..0...0... 7

71 Fed. Reg. 35,015 (June 16, 2006)........00.00.e. 7

71 Fed. Reg. 35,017 (June 16, 2006)..........0..000.0...... 29

72 Fed. Reg. 37,107 (July 9, 2007).................00.... 2,16

118 Cong. Rec. 33,762 (1972), reprinted in A

Legislative History of the Water Pollution

Control Act Amendments of 1972 (1973) ................ 19

Xlll

Consumers Responses to EPA Questions

Regarding the Conversion of Palisades Nuclear

Plant from A Once-Through Cooling System to

A Cooling Tower System, DCN 4-2829...................

EPA, Guidance for Evaluating the Adverse

Impact of Cooling Water Intake Structures on

the Aquatic Environment: Section 316(b) P.L.

ee EB Big Be PO cisitisciccccnttesanintibisnicntmnisuoen

Fact Sheet for Draft NJPDES Permit Renewal

Including Section 316(a) Variance

Determination and Section 316(b) “BTA”

Decision, (NJ DEPE 1993), DCN:2-025E ...............

UWAG Comments on Proposed § 316(b) Rule

for Existing Facilities, Comment 1.41, Aug. 7,

ie cncesenésccmsaseutninvuntinnsensnntiqnnenianshsnnicenensommiaguannetis

PETITION FOR A WRIT OF CERTIORARI

The Utility Water Act Group respectfully

petitions for a writ of certiorari to review the

judgment of the United States Court of Appeals for

the Second Circuit in this case.

OPINION BELOW

The opinion of the court of appeals (App. la-

100a) is Riverkeeper, Inc. v. U.S. Environmental

Agency, 475 F.3d 83 (2d Cir. 2007).

JURISDICTION

The judgment of the court of appeals was

entered January 25, 2007. The court of appeals

denied requests for rehearing and rehearing en banc

on July 5, 2007. On September 25, 2007, Justice

Ginsburg extended the time to file this petition until

November 2, 2007. The jurisdiction of the Supreme

Court is invoked under 28 U.S.C. § 1254(1).

STATUTORY AND REGULATORY

PROVISIONS INVOLVED IN THIS CASE

This case involves § 316(b) of the Clean Water

Act, 33 U.S.C. § 13260), as well as §§ 301, 304, and

306, 33 U.S.C. §§ 1311, 1314, 1316, and EPA § 316(b)

regulations for “Phase II” facilities, 69 Fed. Reg.

41,576 et seq. (July 9, 2004),! codified at 40 C.F.R.

8§ 122.21(r)()(1), (2), (3), (5), 123.25(a)(4), (36),

124.10(d)(1)(x), and 125, Subpart J (125.90-99)

(suspended by notice dated July 9, 2007, 72 Fed.

Reg. 37,107). These statutory provisions and

regulations are reproduced in the appendix to this

petition (App. 103a-124a (statutory provisions); App.

124a-141a (regulations)).

STATEMENT

1. This petition addresses two issues critical

to EPA's ability to achieve the objectives of the Clean

Water Act using the fundamental principles it has

applied for the past thirty years. First, the Second

Circuit decided that § 316(b) — which applies to

thousands of cooling water intake’ structures

nationwide — prohibits EPA from weighing costs

against environmental results in selecting the “best

technology available for minimizing adverse

environmental impact.” This result has no basis in

the statute and is inconsistent with longstanding

First Circuit precedent on which EPA and state

agencies have relied in making permitting decisions

for nearly thirty years. Second, the Second Circuit

decided that § 316(b) prohibits EPA from considering

the beneficial effects of “restoration” measures in

deciding whether existing cooling water intake

structures have “minimiz[ed] adverse environmental

impacts.”

1 The Federal Register notice of the rule is too lengthy

(118 pages) to include in the Appendix. UWAG will make it

avaulable if the Court requests

2. To attain the objectives of the Clean Water

Act, Congress established substantive requirements,

overwhelmingly directed at pollutant discharges

from industria) facilities. Only one — § 316(b), the

provision at issue here - regulates intake structures

through which water enters a plant.

Section 316(b) provides that any standard

established pursuant to §§ 301 or 306 of the Clean

Water Act (which call for technology-based limits to

reduce pollutants in industrial wastewater) “shall

require that the location, design, construction, and

capacity of cooling water intake structures reflect

the best technology available for minimizing adverse

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

12la. The standards at issue here apply to existing

power plants, for which the intake structure features

already have been chosen, thus _ significantly

constraining technological changes.

3. Cooling water is vital to many industrial

facilities, but particularly to steam electric plants,

which compose 53 percent of the Nation’s generating

capacity. Economic and Benefits Analysis, DCN 4-

0002, at A3-13. The turbines of these plants are

driven by steam which is then condensed by cooling

water. The cooling water is withdrawn through a

“cooling water intake structure” (‘intake structure”

or “CWIS”). The amount of cooling water depends on

the design of the condenser cooling system. “Once-

through’ systems pass cooling water through the

condenser once or twice before discharge. “Closed-

cycle” systems coo] the water, usually using a tower

or pond. and reuse it several times before discharge.

When cooling water is pumped into a power

plant, aquatic organisms can be carried with it.

Larger biota may be swept against the intake

screens and “impinged.” Smaller organisms (e.g.,

eggs, larvae, and other early life stages) are carried

through the cooling system, t.e., “entrained.” Some

of the impinged or entrained fish, but not all, will be

killed. 69 Fed. Reg. 41,586/2, 41,620/2-3.

Whether operation of a cooling water intake

structure will cause environmental effects, and if so

what they will be, depends on factors that have

nothing to do with the type of industry, its products,

or its raw materials. The number and type of

organisms in the source water, the time of year, and

currents in the waterbody largely determine what

numbers, life stages, and species of fish are impinged

or entrained. A power plant is unlikely to impinge

many fish if its CWIS is located in an area that is

not desirable habitat or where fish do not dwell in

the water column. See 69 Fed. Reg. 41,592/2.

Impingement also may be low where the velocity of

the intake water is such that fish can perceive and

avoid it. 69 Fed. Reg. 41,601/3. A plant is unlikely

to entrain many eggs and larvae if the intake is not

near a spawning area, or if the eggs and larvae are

not free-floating. 69 Fed. Reg. 41,612/2. Eggs and

larvae will be entrained only during species-specific

spawning seasons. 69 Fed. Reg. 41,616/2.

With existing plants, technologies that reduce

impingement or entrainment may not be available

given site and facility constraints. See 69 Fed. Reg.

41,603/2, 41,628/1 (“more lmuiuted availability of

other technologies’). Some technologies which

decrease impingement and entrainment create other

adverse environmental and social effects. Barrier

nets that prevent organisms from entering areas

around the intake may foreclose use of those areas

as habitat by organisms not susceptible to the

intake. Large in-stream screen assemblages may

create hazards to navigation. Enlarging intake

structures to reduce velocity may _ require

construction in wetlands or shoreline habitat. And

technologies that increase power needs or produce

wastes or emissions may create adverse

environmental and energy effects that far outweigh

any environmental benefits from reducing

impingement and entrainment.

Recirculating cooling systems often have such

effects, most notably the energy penalties and

increased air emissions associated with the

increased cooling system power needs. 69 Fed. Reg.

41,605/2-3, 41,606-07. For example, the Department

of Energy has determined that approximately

twenty new 400-megawatt plants would be required

to compensate for lost generating capacity associated

with closed-cycle retrofit. Jd.

4. EPA first published regulations

implementing § 316(b) in 1976. 41 Fed. Reg. 17,387

(Apr. 26, 1976). They were struck down by the

Fourth Circuit on procedural grounds. Appalachian

Power Co. v. Train, 566 F.2d 451 (4% Cir. 1977).

Thereafter, EPA and state agencies implemented

§ 316(b) by developing standards site-by-site, based

on their “best professional judgment” (“BPJ”). 69

Fed. Reg. 41,584.

For thirty years, BPJ determinations have

been shaped by principles embodied in precedent

and EPA guidance. First, § 316(b) does not require

selecting the technology that most reduces

impingement and entrainment mortality, if its cost

would be wholly disproportionate to the benefits

obtained (that is, the number of organisms spared or

the effects of reduced losses on the waterbody). 69

Fed. Reg. 41,606/1, 41,626-27; EPA, Guidance for

Evaluating the Adverse Impact of Cooling Water

Intake Structures on the Aquatic Environment:

Section 316(b) P.L. 92-500 (Draft May 1, 1977); In

the Matter of Public Service Company of New

Hampshire, et al. (Seabrook Station, Units 1 and 2),

NPDES Appeal No. 76-7, 1 E.A.D. 455, 1978 EPA

App. LEXIS 17 (August 4, 1978), affd, Seacoast

Antti-Pollution League v. Costle, 597 F.2d 306, 331

(1st Cir. 1979).

Second, in evaluating whether an existing

CWIS reflects the best technology for “minimizing

adverse environmental impact,” the permitting

agency may take into account measures that

enhance the number, type, or condition of fish in the

waterbody. These “restoration” or mitigation

measures are designed to avoid or minimize “adverse

environmental impact” resulting from impingement

or entrainment. 69 Fed. Reg. 41,609/1, 41,627-28,

41,637/3; see also infra at 32.

5. In the mid-1990’s, to resolve a lawsuit filed

by environmental groups, EPA entered a consent

decree obligating it to create § 316(b) regulations in

three phases: Phase I (new facilities of all kinds,

including new steam electric power plants); Phase II

(electric power plants built before 2002 that

withdraw over 50 million gallons per day of cooling

water from the waters of the United States. as well

as expansions at such facilities); and Phase III

(existing power plants and industrial facilities not

subject to Phase II).2 See 69 Fed. Reg. 41,583/3.

The Phase II regulations, and the Second

Circuit’s decision overturning the longstanding

interpretation of §316(b) reflected in those

regulations and relied on by permitting agencies and

power companies, are the subject of this petition.

EPA published final Phase II regulations on

July 9, 2004, 69 Fed. Reg. 41,576, culminating a

nine-year rulemaking during which the Agency and

the regulated community spent millions of dollars to

collect and analyze the biological, technological, and

economic information on which EPA based its expert

judgment. 69 Fed. Reg. 41,585. EPA estimates that

the Phase II regulations apply to over 540 steam

electric power plants. 69 Fed. Reg. 41,593/2. This is

an important and far-reaching rule, by any measure.

a. To evaluate intake structure technologies

and determine which were the “best” of those

2 EPA issued its § 316(b) determination for Phase II]

facilities on June 16, 2006. 71 Fed. Reg. 35,006. There, FPA

determined that § 316(b) should continue to be implemented

case-by-case for Phase III facilities (which encompass existing

power plants and industry facilities not subject to Phase []).

rather than by uniform standards. EPA reached this decision

because the c ‘3 of applying umform standards would be

wholly disproporta, nate to the benefits. 71 Fed. Reg. 35,015/1.

Environmental groups have filed petitions to review that

rulemaking decision; those petitions have been consoldated in

the Fifth Cirewit. ConocoPhillips Co., et al. v. EPA, No. 06-

60662 and consolidated cases.

“available,” EPA “selected reductions in

impingement and entrainment as a quick, certain,

and consistent metric for determining performance

at Phase II existing facilities.” Jd. at 41,586/1. The

Agency then evaluated a variety of technologies to

determine their ability to reduce impingement

mortality and entrainment. One option considered

was requiring all or some existing facilities with

once-through cooling to retrofit closed-cycle systems.

EPA recognized that retrofitting closed-cycle cooling

at existing once-through units could reduce flow

substantially — by EPA’s estimate, 70-96 percent at

facilities using salt water and 96-98 percent at

facilities using fresh water. 69 Fed. Reg. 41,601

n.44. EPA estimated that flow reductions would

achieve a comparable reduction in entrainment and,

in some cases, impingement. 69 Fed. Reg. 41,612/2.

Although recognizing that the range of reduction

potentially achievable could be greater in some cases

from closed-cycle cooling than from _ other

technologies (barriers, behavioral devices, or

screening), EPA chose not to base the Phase II

standards on closed-cycle cooling. 69 Fed. Reg.

41,605/1.

EPA based its decision partly on its conclusion

that “other technologies approach the performance of

[closed-cycle cooling]” at about one-ninth the cost of

closed-cycle cooling. Id.; cf. 69 Fed. Reg. 41,605/2 to

41,650/2. Other factors also influenced EPA's

decision: the huge plant-specific and national cost of

retrofitting existing facilities with cooling towers and

their potential to cause plant closures; the energy

penalties associated with retrofitting existing

facilities and the resulting risks to national energy

reliability; increases in air emissions from additional

generation needed to compensate for such penalties;

the fact that retrofitting would be physically

impossible at some plants; and other adverse effects

such as fog, icing, and noise. See 69 Fed. Reg.

41,606.

b. EPA found that “best technology” varies

among sites but is reflected by national performance

standards that require reducing impingement

mortality 80-95%. 40 C.F.R. § 125.94(b)(1), App.

132a, 69 Fed. Reg. 41,686/1. At many sites, the

standards also require entrainment to be reduced

60-90%. 40 C.F.R. § 125.94(b)(2), App. 132a, 69 Fed.

Reg. 41,686. These standards reflect EPA’s

judgment that, “given the wide range of various

factors that affect the environmental impact posed

by Phase II existing facilities, different technologies

or different combinations of technologies can be used

and optimized to achieve the performance

standards.” 69 Fed. Reg. 41,598/2.

c. EPA provided various compliance options,

including setting alternative standards where site

conditions justified different treatment. Notably,

EPA allowed site-specific standards to be set where

the costs of meeting the national standards would be

substantially greater than the benefits. 40 C.F.R.

§§ 125.94(a)(5)(Gi), App. 13la, 125.95(b)(6)(ai), App.

149a, 69 Fed. Reg. 41,685-86. This provides the

ruie’s only mechanism for testing EPA’s assumption

that the net environmental benefits of reducing

impingement mortality and entrainment will

outweigh other adverse environmental impacts

created by an intake alternative. The rule provides

detailed instructions for assessing benefits both

quantitatively (in economic terms) and qualitatively.

Id.

This provision reflects EPA’s recognition that

its national estimate of impingement mortality and

entrainment levels at Phase II plants was unlikely

to hold true for all sites. Thus, “because of the

location of the intake, the characteristics of a

particular waterbody, or the behavioral patterns of

the fish or shellfish in that particular waterbody,

there may be little or no impingement mortality or

entrainment occurring at the site.” 69 Fed. Reg.

41,604/1. The Agency found legal authority for site-

specific requirements taking costs and benefits into

account in the statute and its legislative history, as

well as EPA’s longstanding interpretation of

§ 316(b), which had been approved by the First

Circuit in Seacoast. 69 Fed. Reg. 41,625-27.

Further, instead of requiring changes in

intake hardware, EPA allowed use of restoration

measures capable oof achieving _ in-stream

substantially the same environmental benefits that

would result from reducing impingement mortality

and entrainment. The record shows that such

measures can, 1n appropriate cases, be superior to

hardware changes, because they can be scaled to

more than make up for losses, can produce or protect

more important species, and often last longer than

the life of the facility. See New Jersey Department

of Environmental Protection (““NJDEP”) Comment

2.002 at 24; New Jersey Department of

Environmental Protection and Energy, Response to

Comments Document, PSEG Salem Generating

Station NJPDES/DSW Draft Permit NJ0O005622, at

13-14, DCN:1-5024-PR: USEPA Phase I Response to

Comments (Author Version), 508.011. Restoration is

available only where the permittee shows that such

measures are “more feasible, cost-effective, or

environmentally desirable” than changing the

location, design, construction, and capacity of the

existing cooling water intake structure. 69 Fed. Reg.

41,638/1; see 40 C.F.R. § 125.94(c)(1), App. 134a.

For over two decades, facilities have made extensive

investments in restoration projects, based on EPA's

authorization of restoration measures’ under

§ 316(b).

EPA recognized that the Second Circuit, in an

earlier case involving the Phase I regulations for

new facilities (Riverkeeper, Inc. v. EPA, 358 F.3d

174, 189-91 (2d Cir. 2004) (Riverkeeper JI)), concluded

that § 316(b) does not authorize restoration for new

facilities. EPA explained in detail why that decision

did not determine the outcome for existing facilities.

EPA noted that the Second Circuit itself had

explicitly stated that “[iJn no way [does it] mean to

predetermine the factors and standard applicable to

Phase II and III of the rulemaking.” 69 Fed. Reg.

41,628/1 (citations omitted). EPA then explained

why restoration is consistent both with the

overarching objective of the Act and with the terms

of § 316(b) itself, especially the broad injunction to

“minimize adverse environmental impact.” 69 Fed.

Reg. 41,627-28. Further, it concluded that

restoration 1s consistent with longstanding federal

and state interpretation and application of § 316(b)

(69 Fed. Reg. 41,627/3) and is necessary given the

narrower range and higher cost of hardware options

available to existing facilities. 69 Fed. Reg. 41,628/1.

6. Environmental groups and_ several

Northeastern states, as well as three power

companies, a State energy association, and UWAG,

sought review of the Phase II rule, albeit on different

grounds. Petitions for review were filed in several

different circuits, pursuant to § 509(b)(1)(E) of the

Clean Water Act, 33 U.S.C. § 1369(b)(1)(E), and,

ultimately, consolidated in the Second Circuit.

7. The Second Circuit reversed and remanded

virtually every important feature of the Phase II

regulation. The court (1) narrowly prescribed how

EPA may consider costs for purposes of selecting the

best technology available at the national level,

(2) prohibited EPA from allowing any site-specific

consideration of costs and benefits in determining

what intake technology best minimizes adverse

environmental impacts, and (3) _ prohibited

consideration of restoration efforts that reduce or

eliminate the environmental impacts of impingment

and entrainment in assessing whether an existing

intake “minimizes adverse environmental impact.”

a. On both cost issues, the Second Circuit

recognized that § 316(b) “does not itself set forth ...

the specific factors that the EPA must consider in

determining’ what technology is “BTA.” App. 24a-

25a. Indeed, the court in Riverkeeper I had

emphasized that § 316(b) is suorum generum; it

concluded that the paucity of legislative history,

combined with the brevity of the section itself,

“counsels against imputing much specific intent to

Congress beyond the section's words themselves.”

Riverkeeper J, 358 F.3d at 187 n.12. Thus, “[t]o the

extent the provision is silent on issues to which other

sections speak, we hesitate to draw the negative

inference that the brevity of section 316(b) reflects

an intention to limit the EPA’s authority rather than

a desire to delegate significant rulemaking authority

to the Agency.” Id.

Faced with the palpable ambiguity of § 316(b),

the Second Circuit in Riverkeeper II, after reciting

the standard of review this Court articulated in

Chevron U.S.A. Inc. v. Natural Res. Def. Council,

Inc., 467 U.S. 837, 842-43 (1984), proceeded to

substitute its own interpretation of the Act for

EPA’s. Based primarily on its reading of §§ 301 and

306, the court concluded that consideration of cost-

benefit analysis “was not ‘based on a permissible

construction of the statute.” App. 4la. According to

the Second Circuit, § 316(b) requires EPA first to

identify the technology that most effectively reduces

impingement and entrainment (based on the

optimally performing, not the average, facility) and

can “reasonably be borne” by the industry. App. 30a.

EPA then may base its standards on a less costly

technology only if the level of performance

achievable by that technology is “essentially the

same” as the more costly technology. App. 3la. This

approach, the court says, constitutes the only

allowable “cost-effectiveness” analysis. App. 30a-

3la.

Based on this interpretation, the court held

that EPA violated the statute if it selected BTA

based partly on its determination that the marginal

difference between the levels of impingement

mortality and entrainment reduction achievable by

closed-cycle cooling was insufficient to justify the

marginal increase in cost and significant decrease in

generating capacity compared with other technology

alternatives. App. 4la. The court concluded that

this analysis, which EPA explained is the same type

of cost-effectiveness analysis it uses to set other

technology-based guidelines and standards (see

Final Brief for Respondents at 54 (April 17, 2006)),

was an impermissible “cost-benefit” analysis.

Having reached the conclusion that even weighing

cost and performance was impermissible when

setting the national standards, the court also struck

down the compliance alternative of evaluating site-

specific costs and benefits. App. 62a. For ease of

reference, we will refer to both these issues as

involving “cost-benefit” analysis, although in truth

they involve distinct methods of weighing costs

against results.

The Second Circuit reached this conclusion

based not on any statement in § 316(b) or its

legislative history, but instead on the court’s own

interpretation of different statutory provisions

(§§ 301, 304, and 306) that govern effluent guidelines

for pollutant discharges. App. 24a-27a. Those

provisions, it said, constrain EPA's discretion.

The court claimed to find support for this

proposition in Riverkeeper I, even though the earlier

panel interpreted both §§ 301 and 306 (to which the

court said EPA could look for guidance) as allowing

EPA to weigh costs and results. There, the Second

Circuit rejected claims that § 316(b) required “PA to

select “dry cooling” as BTA for new facilities because

dry cooling, although 95% more effective at reducing

entrainment, also was ten times as expensive as wet

closed-cycle cooling. Riverkeeper I, 358 F.3d at 194

nn.22-23. The court characterized the marginal

improvement, compared to anticipated once-through

levels, as “a relatively small improvement ... at a

very significant cost.” Jd. at 195. Citing § 306's

instruction that EPA consider “the cost of achieving

such effluent reduction,” the panel concluded that

EPA could weigh the cost of technologies and the

“level of reduction” they achieve (that is, their

“benefit”) in deciding which was best. /d. (citing BP

Exploration & Oil, Inc. v. EPA, 66 F.3d 784, 802 (6

Cir. 1995)).

Industry petitioners May 11, 2007 requests

for rehearing and rehearing en banc highlighted this

inconsistency, but they were denied July 5, 2007.

App. 102a. Thus, the Second Circuit appears to have

embraced the new and radical interpretation of the

statute of Riverkeeper IT.

The Second Circuit's interpretation of § 316(b)

conflicts with the First Circuit’s in Seacoast. The

decision also conflicts with the decisions of other

circuits construing §§ 301, 304, and 306.

b. The court’s determination on restoration

reflects a similar lack of consideration for the terms

and purpose of § 316(b), and lack of deference to

EPA's longstanding interpretation of the statute and

prevailing precedent. Citing the decision in

Riverkeeper I for new facilities (which the panel in

Riverkeeper II viewed as dispositive), the court

reasoned that §316(b)~ prohibits restoration

measures because they “are not part of the location,

design, construction, or capacity of cooling water

intake structures, .. and a_ rule’ permitting

compliance with the statute through restoration

measures allows facilities to avoid adopting any

cooling water intake structure technology at all....”

App. 53a (emphasis in original). The court rejected

EPA’s determination that existing facilities, which

already have intake structures in place, have less

flexibility, and thus require a different approach.

The court also dismissed with little analysis EPA's

decision that §316(b)’s directive to “minimize

adverse environmental impact” affords the Agency

discretion to determine that a facility has met the

standard where it has compensated for impingement

and entrainment using restoration measures.

8. Because of the Second Circuit’s decision, on

July 9, 2007, EPA suspended virtually all the Phase

Il rule. 72 Fed. Reg. 37,107 (July 9, 2007). The only

part not suspended is 40 C.F.R. § 125.90(b), which

directs permit writers to develop BPJ controls for

existing CWIS not subject to categorical § 316(b)

regulations. Thus, 543 Phase II facilities will now be

regulated case-by-case.

REASONS FOR GRANTING THE PETITION

a The “Cost-Benefit” Issue

This case presents an important issue having

ramifications far beyond § 316(b). That is, when

Congress instructs EPA to identify the “best”

technology “available” to achieve an outcome

(minimization of adverse environmental impact), has

it thereby shown a clear intent to strip EPA of any

discretion to weigh costs against the level of

performance achieved or the marginal

environmental! “benefit” of that performance? The

Second Circuit, ignoring decisions of other circuits

and its own precedent, said that is what Congress

intended. The Second Circuit's ruling compels EPA

to use tunne] vision when it considers costs in

setting BTA standards.

That ruling is erroneous. [t 1s not based on

§ 316(b)'s plain language or its legislative history.

Rather, it is based on the Second Circuit’s own new

and highly selective interpretation of different

statutory provisions referenced by § 316(b), despite

the fact that those provisions have a different

structure, use different terms, and specify a different

objective to address a different type of activity. That

interpretation is unsupported even by the Second

Circuit's own earher interpretation of § 316(b) in

Riverkeeper I, which properly concluded that EPA

could reject an intake technology for new facilities

that was more effective, but far more costly, than the

technology ultimately chosen. Equally important,

the court’s interpretation 1s unsupported by the

statutes on which the court rehes (§§ 301, 304, and

306) or the decisions of other circuits construing

those provisions.

Consequently, the Second Circuit ruling

creates a double conflict. First, it creates a conflict

with the First Circuit, whose decision in Seacoast

has been good law for nearly three decades. Second,

it creates a conflict in principle with the Fifth, Sixth,

and D.C. Circuits, which recognize that other Clean

Water Act provisions directing EPA to set effluent

lamitations reflecting the “best available technology, '

although not requiring cost-benefit analysis,

nevertheless afford EPA broad discretion to consider

cost, performance, and other factors.

The Second Circuits decision aiso has serious

implications for EPA's Phase III determination See

infra at 29. Appeals of that determination now

pending in the Fifth Circuit raise precisely the same

issue; yet, because of the procedural juxtaposition of

that case with this one, even if the Fifth Circuit

disagrees with the Second, neither the government

nor UWAG will have the right to ask this Court to

resolve the further split among the circuits.

Equally important, until EPA can complete a

new rulemaking, the uncertainty created by this

split in the circuits will have widespread

consequences for administration of the NPDES

permit process for hundreds of Phase II and Ph*3e

III facilities, because § 316(b) continues to apply

nationwide even without uniform standards. And,

should the Second Circuit’s new legal standard

ultimately result in a rule that requires existing

plants to retrofit cooling towers, the national energy,

environmental, and economic implications would be

enormous.

Review by the Court on this issue therefore is

warranted by the errors in the Second Circuit’s

ruling; the conflict it creates with other circuit

decisions interpreting not only § 316(b) but also

§§ 301, 304, and 306; the need to provide clarity to

the Fifth Circuit in the Phase III case; the cost to

permittees and regulators and the permitting delays

the Second Circuit's decision will generate as permit

writers and reviewing courts nationwide struggle to

decide which circuit’s interpretation of § 316(b) to

follow; and the national energy, environmental, and

economic implications of the decision and the

constraints it imposes as EPA _ rewrites its

regulations to conform with the decision.

A. The Plain Language of § 316(b)

Does Not Contradict, and _ the

Legislative History Supports, an

“Economic Practicability” Test

Section 316(b) calls only for features of intake

structures to reflect the “best technology available

for minimizing adverse environmental impact.”

Nothing in that section limits EPA’s ability to

consider and weigh costs against other factors such

as the level of performance or the environmental

benefit of that performance. Given § 316(b)’s

ambiguity, under Chevron EPA’s interpretation was

entitled to deference. The Second Circuit gave it

none.

Moreover, the only apposite legislative history

supports EPA's interpretation, saying that best

technology available means “best technology

available commercially at an _ economically

practicable cost.” 118 Cong. Rec. 33,762 (1972),

reprinted in A Legislative History of the Water

Pollution Control Act Amendments of 1972, at 264

(1973) (statement of Congressman Don H. Clausen).

The Second Circuit rejected this statement (App.

34a), though Congressman Clausen was a member of

the conference managers group for the statute.

B. The First Circuit Affirmed EPA’s

Consideration of Costs In

Comparison to Results

Other courts have upheld EPA's authority to

weigh costs against environmental results under

§ 3160). The First Circuit — the only other circuit

that has decided the § 316(b) issue presented here -

upheld EPA’s authority to weigh costs against

environmental results in implementing § 316(b). Its

1979 decision in Seacoast (as well as the EPA

administrative decisions on which it was based)

focused properly on the specific terms of § 316(b) and

its legislative history, concluding that § 316(b)

authorizes EPA to consider both costs and benefits

(whether in terms of the number of organisms saved

or the effect of impingement and entrainment on

affected populations) when it selects “best technology

available for minimizing adverse environmental

impact.”

The Seacoast case arose from the EPA

Administrator's decision In the Matter of Public

Service Company of New Hampshire, et al. (Seabrook

Station, Units 1 and 2), NPDES Appeal No. 76-7, 1

E.A.D. 455, 1978 EPA App. LEXIS 17 (August 4,

1978). The proposed intake for the Seabrook Station

was about 7,000 feet offshore in 58 feet of water. An

environmental group argued that the intake tunnel

should be extended another 4,000 feet to water 75

feet deep. EPA’s Administrator decided that moving

the intake structure “could result in undesirable

environmental consequences and }® very expensive

and time-consuming” and that not much would be

gained in terms of minimizing adverse effects. Jd. at

n.22. His conclusion was based squarely on a

comparison of costs to benefits:

I conclude that, based on this record,

the costs of any further movement of

the intake beyond the _ presently

proposed far site location would be

wholly disproportionate to any

environmental benefit.

Id. at 66. The First Circuit Court of Appeals

affirmed, embracing the “wholly disproportionate”

approach of the Administrator and adding:

Petitioners, wisely, do not argue that

the cost may not be considered, and no

harm is done by noting that there

would be other costs. The legislative

history clearly makes cost an

acceptable consideration in

determining whether the _ intake

design “reflect(s) the best technology

available” [footnote omitted].

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

306, 311 (1st Cir. 1979); accord United States Steel

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

trust that EPA will conduct a limited cost-benefit

analysis” under § 316(b)).

In permitting decisions over the past thirty

years, EPA and the states have relied on the “wholly

disproportionate” test in Seacoast in making § 316(b)

decisions. E.g., Boston Edison Co. (Pilgrim Power

Piant), Determination Regarding Issuance of

Proposed NPDES Permit No. MA0025135 at 19

(EPA Region I 1977) (“decision regarding the

required degree of minimization calls for a

determination that the costs involved are not wholly

out of proportion to the adverse environmental

impact being avoided’); Florida Power Corp. (Crystal

River Power Plant), NPDES No. FLO000159 (EPA

Region IV 1988), DCN:2-025N (closed-cyvcle cooling

costs “wholly disproportionate” to environmental

benefits; permit required intake flow reduction and

fish hatchery instead); Tennessee Valley Authority

(John Sevier Steam Plant), NPDES No. TN0005436

(EPA Region 1986), DCN:2-025J (costs associated

with intake modification “would be wholly

disproportionate to the anticipated benefits”;

different measures, primarily restoration, required

instead); Potomac Electric Power Company (Chalk

Point Generating Station), NPDES No. MD0002658B

(Maryland DNR 1987), DCN:1-5023-PR (cost of

closed-cycle cooling “exceedingly high” compared to

benefits; fish stocking and removal of barriers to fish

migration required instead); Fact Sheet for Draft

NJPDES Permit Renewal Including Section 316(a)

Variance Determination and Section 316(b) “BTA”

Decision, (NJ DEPE 1993), DCN:2-025E (“estimated

cost of closed cycle cooling is wholly disproportionate

to the environmental benefit to be realized”; wetland

restoration, fish ladders, and baywide biological

monitoring required instead).

After Seacoast, no challenge to the wholly

disproportionate test has been brought in any

federal court, nor are we aware of any in a state

court. The cost-benefit test is established law,

repeatedly applied and never challenged. It has

been relied on by EPA, state permitting agencies,

and the power industry as foundation of § 316(b) for

almost thirty vears.

Instead of following its own previous decision

and the First Circuit's decision in Seacoast, the

Second Circuit has now chosen to yo in a new and

wholly unsupported direction, thereby creating a

split between the First and Second Circuits.

Rather than reviewing EPA's well-founded

interpretation of § 316(b) by looking to the terms and

history of the section itself, the court relied on its

own erroneous interpretation of the language,

structure, and history of Clean Water Act §§ 301,

304, and 306. Those sections, unlike § 316(b), list

the factors that EPA must at a minimum consider

when setting standards for reducing pollutant

discharges. The Riverkeeper I panel concluded that

those sections, while providirg helpful guidance,

were not binding. 358 F.3d at 187. Riverkeeper IT

concluded otherwise and, compounding the error,

ignored the broad reservation of authority explicitly

conferred by those sections.

The court focused on Congress's use of

“available” in §316(b) and _. other _ statutory

provisions. Its reasoning went something like this:

The statutes governing effluent limitations reflecting

“best practicable control technology currently

available” (BPT) (§§ 301(b)(1)(A) and 304(b)(1))

specifically require EPA to compare costs to effluent

reduction benefits. The statutory provisions

(§§ 301(b)(2)(B) and 304(b)(2)) governing effluent

limitations reflecting the “best available technology

economically achievable” (BAT) do not. Instead, the

BAT provisions instruct EPA to consider “the cost of

achieving such effluent reduction.” Since Congress

specifically required comparison of costs and effluent

reduction benefits in the BPT provisions, but not in

the BAT provisions, the court concluded Congress

must have forbidden weighing costs and benefits

when EPA adopts BAT limits. And, because

Congress used the words “best,” “available,” and

“technology” in both § 316(b) and the BAT provisions

(as well as in the BPT provisions — a fact the Second

Circuit ignored), Congress also must have intended

to prescribe a wholly “technology-driven” result

(App. 29a), with which the court said any “cost-

benefit analysis” would be inconsistent. App. 3la-

32a.

However, as this Court has _ stressed

repeatedly in recent decisions, Congress’s use of the

same word or phrase in different provisions within

the same statute is not determinative, even where

there is a specific cross-reference. Envtl. Def. v.

Duke Energy Corp., 127 S. Ct. 1423, 1437-38 (2007);

S. D. Warren Co. v. Maine Bd. of Envtl. Prot., 126

S. Ct. 1843, 1848 (2006). The Second Circuit ignored

that instruction here.

Instead, it mistakenly relied on this Court’s

holdings in Russello v. United States, 464 U.S. 16, 23

(1983), and American Textile Manufacturers Institute

v. Donovan, 452 U.S. 490 (1981). It looked to

Russello to support its view that the omission of

“practicable” from § 316(b) was determinative. App.

35a-36a. But Russello does not apply when the

statute confers discretion on the administrative

agency or when other provisions of the statute are

directed at a markedly different type of regulatory

program.

It cited American Textile for the proposition

that cost-benefit analysis is prohibited absent a

specific Congressional authorization. App. 63a.

Here too, its reliance is misplaced, as the Court

there held only that cost-benefit analysis was not

required absent a clear Congressional statement to

the contrary. American Textile, 452 U.S. at 509-12.

See also NRDC v. EPA, 824 F.2d 1146, 1159 n.6

(D.C. Cir. 1987) (en banc) (“American Textile would

seem to be limited to the finding that ... the agency is

not required to employ cost-benefit analysis.”)

(emphasis added); Massachusetts v. Hayes, 691 F.2d

57, 61 n.4 (1% Cir. 1982) (“The Court there held only

that the statute ... did not require ... cost/benefit

analysis”).

By conflating § 316(b) with the effluent

guidelines provisions, the court ignored fundamental

differences between the two regulatory schemes. As

Riverkeeper I recognized, § 316(b) is the only section

applicable to intake structures rather than to

effluents; it sets a standard markedly different from

those used in §§ 301 and 306 — one that focuses

specifically on environmental impacts; it is

structurally different from those sections, in that it

does not specifically anticipate increasingly stringent

levels of control; it is located in a separate section

concerned generally with the uniqueness of heat as a

pollutant; and it lacks the explanatory detail which

accompanies the sections governing effluents.

Riverkeeper I, 358 F.3d at 186-87. EPA

acknowledged both the similarities and _ the

differences between § 316(b) and the other sections

and explained why, in light of the record evidence,

its interpretation was appropriate to the terms of

§ 316(b).

C. The BAT/NSPS Requirements Do

Not Compel the Second Circuit’s

Decision on Costs, and Other

Circuits Have Disagreed

Even if the Second Circuit were justified in

substituting its judgment for EPA’s based on the

courts interpretation of other statutory provisions

governing different regulatory programs, that

interpretation was itself erroneous for several

reasons. First, nothing in the BAT or NSPS

provisions either compels or forbids EPA to weigh

costs against effluent reductions or environmental

results. Indeed, § 304(b)(2)(B) tells EPA to “specify

factors to be taken into account in determining”

BAT, identifying “the cost of achieving such effluent

reduction” as one such factor. 33 U.S.C.

§ 1314(b)(2)(B), App. 11l4a. Further, it explicitly

authorizes EPA to specify “such other factors as the

Administrator deems appropriate.” Jd. This broad

reservation of authority suggests that EPA retains

discretion to weigh costs against “benefits” in

appropriate cases. See Weyerhaeuser Co. v. Costle,

590 F.2d 1011, 1046 (D.C. Cir. 1978) (section 304

“cannot logically be interpreted to impose on EPA a

specific structure of consideration or set of weights

because it gave EPA authority to ‘upset’ any such

structure by exercising its discretion to add new

factors to the mix”).

Indeed, the 1977 addition of § 301(g) is an

explicit signal of Congress's intent that EPA weigh

costs and water quality benefits to avoid

unnecessary treatment for treatment’s sake by

existing facilities. 33 U.S.C. §1311(g). Section

301(g) provides a variance from BAT limits for non-

toxic, non-conventional pollutants where the

discharger can show that relaxed limits will, inter

alia, protect water quality.

The Second Circuit ignored all these statutory

signals, instead overruling EPA’s judgment that

comparing costs and benefits is an “appropriate”

factor here. Other courts, including the Third

Circuit in Consolidated Rail Corp. v. United States.

855 F.2d 78, 85-86 (3d Cir. 1988), have recognized

that an agency is entitled to Chevron deference when

determining whether a statute permits cost-benefit

analysis.

To support its interpretation of the BAT

provisions, the Second Circuit cited this Court's

decision in EPA v. National Crushed Stone Ass'n,

449 U.S. 64, 71 n.10 (1980). App. 26a. Here, too, it

was wrong. In National Crushed Stone, the Court

considered what economic factors EPA must consider

when deciding whether a variance from “best

practicable technology” (“BPT”) guidelines is

warranted. The Court was not called on to decide

nor did it opine on whether the BAT provisions,

which do not require cast-benefit balancing,

nevertheless afford EPA discretion to weigh costs

and benefits as the Agency deems necessary.

Second, the Second Circuit’s decision is

directly at odds with decisions of many circuits that

have upheld EPA's discretion to weigh costs and

results or “benefits” in selecting BAT. Indeed,

although several courts have held that EPA is not

required to do a cost-benefit analysis under §§ 301,

304, and 306, no court until now has said EPA is

forbidden to do cost-benefit analysis. Instead, both

the statute and the case law call for deference to

EPA’s judgment about how costs and environmental]

benefits should be taken into account.

Most notably, in BP Exploration & Oil, Inc. v.

EPA, 66 F.3d 784, 796-97 (6% Cir. 1995), the Sixth

Circuit, relying on a D.C. Circuit case, held that EPA

has discretion to use cost-benefit analysis in making

“best available technology” (BAT) determinations.

The Sixth Circuit explained that Congress “left EPA

with discretion to decide how to account for the

consideration factors, and how much weight to give

each factor.” Id. at 796. Because these

“consideration factors” included costs and benefits,

the Sixth Circuit held that environmental

petitioners were “wrong to contend that EPA is not

permitted to balance factors such as cost against

effluent reduction benefits.” Jd. (citing Weyerhaeuser

Co., 590 F.2d at 1045); see also Am. Petrol. Inst. v.

EPA, 787 F.2d 965, 972 (5% Cir. 1986) (EPA would

“disserve its mandate” if it imposed “possibly

cisabling costs” in return for removing only “de

minimis” amounts of pollutants); Natl Wildlife Fed’n

v. EPA, 286 F.3d 554, 563 (D.C. Cir. 2002) (EPA

need not on its own undertake more than a “net cost-

benefit balancing”). The Second Circuit itself cited

BP Oil and National Wildlife with approval in

Riverkeeper I, 358 F.3d at 195, yet failed in

Riverkeeper II to convincingly distinguish those

cases or its own past decision. App. 28a-30a.

This Court should grant certiorari to resolve

this conflict in principle on the interpretation of

§§ 301, 304, and 306. If it does not, EPA and

reviewing courts will be forced to choose between the

majority approach to considering costs in setting

effluent limitation guidelines and the Riverkeeper II

approach. Moreover, if this conflict festers, any

effluent limitation guideline may be subject to a

different legal standard depending on where a

petition for review is heard.

dD. The Split in the Circuits Will Cause

Serious Problems

Review by this Court also is essential to avoid

the disruption of the NPDES permit process for

hundreds of power plants and industrial facilities

nationwide and to ensure that § 316(b) is interpreted

consistently from one facility to another.

Because of the Second Circuit’s decision, EPA

is considering another rulemaking. Even if EPA

makes that rulemaking a priority, it will take time.

In any case, until EPA decides how to proceed, state

and federal permit writers must continue to make

BPJ § 316(b) determinations for the over 540

facilities covered by the Phase II rule. EPA’s Phase

II] determination also calls for BPJ decisions for

over 140 industrial and power plants. 71 Fed. Reg.

35,017/3.

In each case, the permit writer will have to

decide which circuit's interpretation of the statute to

follow. Inevitably, this uncertainty will lead to

permitting authorities applying different legal

standards under § 316(b) to sources across the

country. Such asymmetrical application of § 316(b)

will increase the Ikelihood that permits will be

challenged. Reviewing courts will then be forced to

choose between the Riverkeeper 11 and Seacoast

interpretations of § 316(b). Review by this Court

will avoid that inconsistency, delay, and litigation.

Moreover, the Court of Appeals for the Fifth

Circuit must now rule on petitions for review raising

precisely the same tissue with respect to the Phase III

rule. The government has argued forcefully in that

case that the Second Circuit was wrong. Perversely,

if the Fifth Circuit rejects the Second Circuit's

reasoning, only the environmental petitioners will

have the right to seek this Court’s review. Unless

they choose to exercise that right, § 316(b) would be

interpreted and implemented differently for existing

power plants (which fall within either Phase II or III

based on the amount of flow they require) solely on

the order in which EPA adopted the rules and the

circuits reached their decisions. In this

circumstance, granting certiorari! is essential to

promote proper judicial administration and prevent

disparate treatment of similarly situated plants.

Il. Restoration

In equally peremptory fashion, the Second

Circuit concluded that § 316(b) bars EPA from

counting improvements to a waterbody that increase

the supply of fish (“restoration”) when considering

whether “adverse environmental impact” is

“minimized.” This strips EPA of a tool that has long

been used under § 316(b) and that the Agency

concluded 1s necessary to achieve § 316(b)’s mandate

and the objectives of the Act. It also conflicts with

the analysis underlying the First Circuit's decision

in Seacoast, and with agency and _ judicial

interpretations of similar provisions in § 404 of the

Act. Thus, review by this Court is warranted.

A. Restoration Is Compatible with the

Words of § 316(b), as the Seacoast

Decision Recognized

EPA made a reasoned judgment that § 316(b)

taken as a whole 1s ambiguous and could reasonably

be interpreted to allow mitigation or “restoration” for

several reasons. 69 Fed. Reg. 41,628/2. First,

nothing in the statute instructs EPA to evaluate

intake location, design, or any other feature in the

abstract, without reference to water quality. Section

316(b)'s objective is to minimize “adverse

environmental impact” — a term that encompasses

water quality and does not focus on reducing any

specific type of stressor or impact. I/d.; see also 69

Fed Reg. 41,586/3, 41,612/1 Thus, in-stream

measures that ameliorate the risk of adverse

environmental impact stemming from impingement

and entrainment are consistent with the “plain

language” of the statute.

The First Circuit recognized this principle in

Seacoast by affirming EPA's discretion to measure

“adverse environmental impact” at the level of fish

populations, rather than individual fish. See

Seacoast, 597 F.2d at 309-11. If EPA has this

discretion, it necessarily has authority to determine

that restoration — which typically minimizes the loss

of fish through replacement and thus minimizes

“adverse environmental impact” is a lawful

compliance option.

Second, EPA focused on Congress's instruction

that intake structure features such as location and

design “reflect” BTA, and the absence of any

statutory definition of “technology” or “cooling water

intake structure.” It reasoned that those attributes

allow the Agency to consider both technologies which

are incorporated into the intake structure and those

Which are physically independent but nevertheless

influence the use and effectiveness of the structure.

EPA yave as examples barner nets and closed-cycle

cooling, neither of which is part of the CWIS but

which nevertheless influence the environmental

effects of the CWIS. 69 Fed. Reg. 41,628.

Third, EPA explained that the rule deals with

existing intake | structures. Congress’ has

consistently recognized that existing facilities have

limited options for minimizing their impacts, thus

meriting a broader range of approaches. 69 Fed.

Reg. 41,628/1. For an existing plant, the task is not

to decide what features the intake structure must

possess in the first instance; those features have

already been decided. MKather, the question is

whether existing features need to be changed to

“minimize adverse environmental impact.” Nothing

in § 316(b) limits EPA’s authority to decide that

“environmental impacts” from an existing intake

either are not adverse or have been otherwise

minimized.

Fourth, use of restoration is consistent with

EPA’s !ongstanding interpretation of the statute, as

reflected in the fact that federal and state permit

writers for years have considered restoration in

assessing whether impingement mortality and

entrainment are causing adverse environmental

impacts. 69 Fed. Reg. 41,627-28; see also Barnhart

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

deference to an agency’ interpretation of

longstanding duration). By deciding to focus on

impingement and entrainment in setting § 316(b)

standards, EPA did not, as the Second Circuit

appears to assume, lose its authority to decide how

“adverse environmental impact” should be

evaluated. That is precisely what EPA did by taking

restoration measures into account. Such measures

are part of the environment to be considered in

determining whether a CWIS is having adverse

effect. Indeed, nothing in § 316(b) suggests EPA

must focus exclusively on minimizing impingement

and entrainment, as the Aiverkeeper J panel

acknowledged. See Riverkeeper I, 358 F.3d at 196. If

that is what Congress had intended, it could easily

have said so. Instead, the “plain language” leaves

EPA discretion to consider the net result of

impingement and entrainment or other intake

technology effects on the broader “environment.”

The Second Circuit split with the First Circuit

when it overruled EPA’s interpretation of the

statute. It ignored EPA’s interpretation of “adverse

environmental impact,” see App. 52a-53a, instead

treating that phrase as a surrogate for impingement

and entrainment. App. 5la-52a. It also dismissed

the Agency's construction of other statutory terms,

finding instead that the Act requires a purely

“technology-driven” approach focused solely on

changes to the CWIS. App. 29a, 53a. And it

dismissed EPA’s explanation of the inextricable link

between waterbody characteristics (which

restoration enhances) and intake impacts on the

environment, holding that § 316(b) forbids

consideration of water quality effects. App. 63a-64a.

To reach this conclusion, the court again relied

heavily on its interpretation of §§ 301 and 306,

which it construed as barring consideration of water

quality. App. 52a, 63a.

B. Like §316(b), the BAT/NSPS

Provisions Allow EPA to Consider

Ambient Conditions

The Second Circuit’s assumption that EPA is

forbidden from considering water quality when it

sets technology-based requirements for pollutant

discharges is similarly unfounded. Indeed, several

circuits have upheld EPA’s authority to consider

water quality both in deciding whether to establish

guidelines and in evaluating technologies. For

example, in Natl Wildlife Fed’n v. EPA, 286 F.3d

554, 566 (D.C. Cir. 2002), the D.C. Circuit upheld

EPA’s decision to regulate “color” pollutants case-by-

case because the Agency found that the potential for

significant aesthetic or aquatic impacts from color

discharges is driven by site-specific conditions.

Likewise, in Waterkeeper Alliance, Inc. v. EPA, 399

F.3d 486, 515 (2d Cir. 2005), the Second Circuit

allowed EPA to regulate case-by-case because

variability and topography, climate, distance to

surface water, and geologic factors influence whether

and how pollutant discharges at a particular site

enter surface water by way of groundwater. /d. at

515. And in Citizens Coal Council v. EPA, 447 F.3d

879, 902-03 (6 Cir. 2006), the Sixth Circuit affirmed

EPA’s rejection of sedimentation ponds as treatment

for settleable solids because the ponds could disrupt

the natural sediment and hydrologic balance, cause

stream channel instability, and increase evaporative

losses.

= Other Parts of the Clean Water Act,

Including its “Objectives,” Support

EPA’s Interpretation

EPA’s decision to allow restoration also finds

support in the objectives of the statute, and in

agency and judicial interpretations of § 404, which

lke § 316(b) instructs EPA and the Army Corps of

Engineers to ensure that “adverse environmental

impacts” from a_e specific type of activity are

minimized.

The objective of the Clean Water Act is to

“restore” the “biological integrity of the Nation’s

waters.” 33 U.S.C. §125l(a), App. 103a. Used

correctly, restoration is as capable as hardware of

achieving this objective, and in some cases better.

See supra at 10. Thus, EPA properly interpreted the

ambiguity in § 316(b) to maximize attainment of the

statute's objectives.

This is exactly what EPA and the United

States Army Corps of Engineers (“Corps”) have done

when faced with almost identical statutory

instructions in § 404 of the Clean Water Act. For

example, § 404(e)(1) allows the Corps to issue

general permits for discharges of dredged and fill

material where the Corps determines that the

“activities ... will cause only minimal adverse

environmental effects when performe.. separately,

and will have only minimal cumulative adverse

effect on the environment.” 33 U.S.C. § 1344(e)(1),

App. 123a-124a. Both agencies and courts have

interpreted this to allow a permit applicant to

mitigate the impact of its activities using

restoration, enhancement, or creation of wetlands

offsite or onsite, so as to ensure minimal adverse

impacts. 67 Fed. Reg. 2020/1, 2092-93 (Jan. 15,

2002); Sierra Club v. U.S. Army Corps of Eng’rs, 464

F. Supp. 2d 1171, 1211 (M.D. Fla. 2006) (citing Ohio

Valley Envtl. Coalition v. Bulen, 429 F.3d 493, 502

(4th Cir. 2005); 40 C.F.R. § 230.75(d) (2005), App.

14la (habitat development and _ restoration

techniques can be used to minimize adverse impacts

and compensate for destroyed habitat); see also 33

C.F.R. § 325.4(a)(3), App. 125a, and § 320.4(r)(1),

App. 124a.

In short, the court's determination that

§ 316(b) forbids restoration is not supported by the

statutory language, is incompatible with other

circuit interpretations of § 316(b) and analogous

statutory provisions, and undermines EPA’s ability

to ensure that the statutory mandate is achieved.

Ill. Practical Implications for the Nation

For approximately thirty years, EPA and state

permitting authorities have used _ cost-benefit

analysis to make permitting decisions under

§ 316(b). In reliance on those decisions, existing

facilities have invested billions of dollars in

compliance measures. The Phase II rule reflects

nearly a decade of study by EPA; significant input by

environmental groups, states, and industry; and a

painstaking effort to craft comprehensive nationwide

standards consistent with EPA's longstanding

interpretation.

The Second Circuit decision sets that effort

back by years. It also threatens to impose billions of

dollars of retrofit costs on the power industry,

consumers, and the economy, with little benefit.

Although UWAG does not believe that retrofitting

closed-cycle cooling can be justified even after

Riverkeeper II, if retrofitting should be required, the

costs and energy impacts would be enormous.

Retrofitting would saddle the economy with billions

of dollars in costs, lose significant electric generating

capacity, and increase greenhouse gas emissions.

A study submitted by UWAG, for example,

estimated that the nationwide cost of retrofitting

would be $40 billion, about 18 percent of the

industry's revenues. Other consultants estimated

$44 to $66 billion. See UWAG Comments on

Proposed §316(b) Rule for Existing Facilities,

Comment 1.41, Aug. 7, 2002. EPA, which admits

that its estimates of costs may be too low, cited a

nuclear plant in Michigan where retrofitting cost

$18.8 million in 1973-74 dollars plus $683,000 in

abandoned equipment. Consumers Responses to

EPA Questions Regarding the Conversion of

Palisades Nuclear Plant from A Once-Through

Cooling System to A Cooling Tower System, DCN 4-

2529, p. 7.

And this was just one plant. Many facilities,

especially those with short remaining lives, may be

forced to shut down or cancel planned repowering

rather than incur the costs of cooling tower retrofits

or other measures required by the Second Circuit's

severely limiting decision. Other facilities may be

physically unable to install cooling towers or other

measures required by the decision. Much of the cost

would be passed on to consumers of electricity, who

already face rate increases from rising fuel costs.

These are not the only costs. Retrofitting

existing plants with closed-cycle cooling extracts a

significant energy penalty, which EPA estimated as

2.4 to 4.0 percent. 69 Fed. Reg. 41,605/2. The North

American Electric Reliability Corporation (“NERC”),

in its 2007 Long-Term Reliability Assessment (page

97), uses Department of Energy estimates to warn

that retrofitting cooling towers could reduce

available capacity margin by 12 percent. See

http://www.nerc.com/~filez/rasreports. html.

The plants that may be forced to shut down

and the energy penalties imposed by retrofitting

raise serious concerns about electric system

reliability. The nation’s electric system depends on a

balanced array of generation and transmission

facilities to provide a reliable supply of electricity.

Already, according to the NERC study cited above,

large areas of the United States are operating with

thin generation and transmission capacity margins.

In the study (page 10) NERC observes that

“projected increases in peak demands continue to

exceed projected committed resources beyond the

first few years of the ten-year planning horizon.”

NERC also notes (page 10) that “[a]reas of the most

concern include [the Western Electricity

Coordinating Council]-Canada, California, Rocky

Mountain States, New England, Texas, Southwest

and the Midwest.” The Second Circuit's decision

threatens to exacerbate this problem by forcing

generating plants to close or curtail operations.

To minimize or compensate for’ those

penalties, power producers must burn more fuel,

creating additional air emissions, 69 Fed. Reg.

41,605/3, as well as other impacts of extracting,

transporting, and burning fuel. Closed-cycle cooling

also increases evaporative water losses, concentrates

pollutants in intake water, and creates noise, drift,

fogging, and other adverse environmental effects.

Id. at 41,606/1. The Second Circuit decision does not

suggest that these environmental impacts are

irrelevant under § 316(b). Indeed, it acknowledges

EPA’s right to consider them. App. 30a n.11, 3la

n.12. Yet its decision in Riverkeeper II robs EPA of

an important tool — cost-benefit analysis — that the

Agency often uses to evaluate disparate types of

costs and benefits using a “common currency.”

The resulting energy, economic, and

environmental harms will not, in many cases, be

offset by appreciable environmental benefit to

aquatic life. EPA’s comprehensive nationwide

standards control impingement and entrainment

without disregarding other critical values. This

Court should not allow the court below to set EPA’s

judgment aside.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted,

| [Bruton

KRISTY. N. BULLEIT

Counsel of Record

HUNTON & WILLIAMS LLP

1900 K STREET, N.W.

WASHINGTON, DC 20006-1109

(202) 955-1547

Counsel for Petitioner

NOVEMBER 2, 2007

TABLE OF CONTENTS

Appendix to Petition

Page

Opinion of

The United States Court of Appeals

For The Second Circuit

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Order of

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[ENTERED: JANUARY 25, 2007]

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term, 2005

(Argued: June 8, 2006 Decided: January 25, 2007)

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

04-6694-ap(CON), 04-6695-apg(CON),

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

01-6698-ag(CON), 04-6699-ag(CON )

—— -- — ———_— ———— - —--

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,

— Vv _=—

UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY, STEPHEN L. JOHNSON,

in his official capacity as ADMINISTRATOR OF

THE UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY,

Respondents.

Before: STRAUB, SOTOMAYOR, and HALL,

Circuit Judges.

— — te

Petitioners challenge a final rule promulgated

by the Environmental Protection Agency pursuant to

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

§ 1326(b), that is intended to protect aquatic

organisms from being harmed or killed by cooling

water intake structures at large, existing power

producing facilities. While we conclude that certain

aspects of the rule are based on a reasonable

interpretation of the Clean Water Act and supported

by substantial evidence in the administrative record,

several aspects of the rule are not consistent with

the statute, are not supported by sufficient evidence,

or were not properly subject to notice and comment.

We therefore grant in part and deny in part the

petitions for review and dismiss in part one aspect of

the petitions for lack of jurisdiction because there is

no final agency action to review

REED W. SUPER, Morningside Heights Legal

Services, Inc., Environmental Law Clinic,

Columbia University School of Law (Michelle

Avallone, Julia FErrea, Vivian Mills, lan

Dattner, Monique Mendez, Misti Duvall,

Devon Knowles, Molly McOwan, Adam

Orford, Scott Sneddon, on the brief; P. Kent

Correll, of counsel), New York, New York, for

Petitioners Riverkeeper, Inc., Natural

Resources Defense Council, Waterkeeper

Alliance, Soundkeeper, Inc., Scenic Hudson,

Inc., Save the Bay-People for Narragansett

Bay, Friends of Casco Bay, Amertwan Littoral

Soctely, Delaware = Riverkeeper Network,

Hackensack Riverkeeper, Inc., New York/New

Jersey Baykeeper, Santa Monica Baykeeper,

San Diexo Baykeeper, California Coastkeeper,

Columbia Riverkeeper, Conservation Law

Foundation, and Surfrider Foundation.

TRICIA K. JEDELE, Special Assistant

Attorney General of Rhode Island, Providence,

Rhode Island (Patrick C Lynch, Attorney

General of Rhode Island; Michael Rubin,

Special Assistant Attorney General,

Providence, Khode Island, Richard

Blumenthal, Attorney General of Connecticut,

Kimberly Massicotte and Matthew Levine.

Assistant Attorneys General, Hartford,

Connecticut, Carl CC Danberp, Attorney

(reneral of Delaware, Kevin Maloney, Deputy

Attorney General, Wilmington, Delaware,

Thomas F. Reilly, Attorney General of

Massachusetts, Andrew Goldberg, Assistant

Attorney General, Boston, Massachusetts;

Zulima V. Farber, Attorney General of New

Jersey, Ellen Barney Balint, Deputy Attorney

General, Trenton, New Jersey; Eliot Spitzer,

Attorney General of New York, Maureen F.

Leary, Assistant Attorney General, Albany,

New York, on the brief), for State Petitioners

Rhode Island, Connecticut, Delaware,

Massachusetts, New Jersey, and New York.

KRISTY A.N. BULLEIT, Hunton & Williams,

Washington, D.C. (James N. Christman,

Elizabeth E. Aldridge, Hunton & Williams,

Richmond, Virginia, on the _ brief), for

Petitioners Appalachian Power Company,

Illinois Energy Association, and Utility Water

Act Group. KARL 5S. LYTZ, Latham &

Watkins LLP, San Francisco, California

(Christopher J. McAuliffe, PSEG Services

Corporation, Newark, New Jersey; David J.

Hayes, Cassandra’ Sturkie, Latham &

Watkins LLP, Washington, D.C., on the brief),

for Petitioners PSEG Fossil LLC and PSEG

Nuclear LLC.

CHUCK D. BARLOW, Entergy Services, Inc.,

Jackson, Mississippi and LLISE N. ZOLI,

Goodwin Procter LLP, Boston, Massachusetts

(Robert H. Fitzgerald, U. Gwyn Williams,

(woodwin Procter LLP, Boston, Massachusetts,

on the brief), for Petitioner Entergy Corp.

DAVID S. GUALTIERI, CYNTHIA J.

MORRIS, and JESSICA O'DONNELL, United

States Department of Justice (Sue Ellen

Woolridge, Assistant Attorney General, John

C. Cruden, Deputy Assistant Attorney

General, on the brief; Leslie J. Darman,

United States Environmental Protection

Agency, of counsel), Washington, D.C., for

Respondents.

Lisa Madigan, Attorney General of Illinois,

Matthew Dunn, Chief, Environmental

Enforcement/ Asbestos Litigation Division,

Ann Alexander, Environmental Counsel and

Assistant Attorney General, Chicago, Illinois,

for Amicus Curiae State of Illinois.

Jon Bruning, Attorney General of Nebraska,

Lincoln, Nebraska (David D. Cookson, Special

Counsel to the Attorney General, Lincoln,

Nebraska; ‘Troy King, Attorney General of

Alabama, Montgomery, Alabama; Gregory D.

Stumbo, Office of the Attorney General of the

Commonwealth of Kentucky, Frankfort,

Kentucky; Wayne Stenehjem, Attorney

General of North Dakota, Bismarck, North

Dakota; Paul G. Summers, Attorney General

of Tennessee, Nashville, Tennessee; Steve

Carter, Office of the Indiana Attorney

General, Indianapolis, Indiana, on the brief),

for State Amict Curiae Nebraska, Alabama,

Kentucky, North Dakota, Tennessee, and

Indiana.

Nancy Elizabeth Olinger, Assistant Attorney

General (Greg Abbott, Attorney General of

Texas, Barry R. McBee, First Assistant

Attorney General, Edward D._ Burbach,

Deputy Attorney General for Litigation,

Karen W. Kornell, Chief, Natural Resources

Division, on the brief), Austin, Texas, for

Amicus Curtae Texas Commission’ on

Environmental Quality.

Russell S. Frye, FryeLaw PLLC, Washington,

D.C., for Amicus Curiae American Petroleum

Institute.

Jonathan F. Lewis, Clean Air Task Force,

Boston, Massachusetts, for Amici Curiae

Healthlink, Kentucky Resources Council, New

Kngland Clean Water Action, The Ohio

Environmental Council, and Ohw Valley

Environmental Council.

Lisa Heinzerling, Georgetown University Law

Center, Washington, D.C., for Amicus Curiae

OMB Watch.

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 sereens, 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 316(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

reasonable interpretation of the Act and supported

by substantial evidence 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

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

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. Id.

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 “lalny 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 sourc® 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, 33 U.S.C. § 1316.2 As we

noted in Riverkeeper I, “[w|hen 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 FPA issuing new rules. Jd.

at 181 (citing Appalachian Power Co. v. Train, 566

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

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

discrete conveyance from which pollutants are or may be

discharged.” 33 U.S.C. § 1362(14).

10a

governed by Phase II, as well as other industrial

facilities. See Riverkeeper, Inc. v. Whitman, No. 93

Civ. 0314 (AGS), 2001 WL 1505497, at *1 n3

(S.D.N.Y. Nov. 27, 2001).

Our interpretation of sectior 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, 358 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), 33 U.S.C.

§ 1311(b)(1)(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 USC.

§ 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. § 1316(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 USC. § 1326(b). We noted in

Riverkeeper I that “{ajlthough the EPA is permitted

lla

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). Id. 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. Traek I created national

intake capacity and yelocity standards based on

12a

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 say 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 II 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

As we noted in Riverkeeper I,

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-eycle systems, therefore, withdraw tar 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 0.5 (internal citations omitted).

13a

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 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. Id. 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. Jd.

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 “usel] at least 25 percent of water

withdrawn exclusively for cooling purposes.” 40

14a

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 II Kule 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)4) You may demonstrate to the Director

that you have reduced, or will reduce, your

flow commensurate with a _ closed-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 Directu. 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

l5a

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 (c) of this section|;]

(3) You may demonstrate to the Director that

you have selected, and will install and

properly operate and maintain, design and

construction 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 (c) of

this section;

(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). or

(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 maintaim design and

construction technologies, operational

16a

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)(1).

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

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, td. at 41,599; see also

40 C.F.R. § 125.99(a) — as BIA 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, tt

provides that facilities choosing “compliance

alternatives in paragraphs (a)(2), (a3), or (a4) of

this section ... must reduce impingement mortality

for all life stages of fish and shellfish by 80 to 95

percent from the caleulation baseline.”* /d.

§ 125.94(b)(1). With respect to entrainment, facilities

that choose

compliance alternatives iu paragraphs

(aye Ln), (a2), (a3), or (ay) 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

4) |thel faeility has a capacity

utilization rate of 15 percent or greater,

and

(uA)... 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 structures is preater than five

percent of the mean annual Now

Id. §& 125.940b)02)

: The “caleulation baseline’ ois “an estimate — of

impingement mortality and entramment that would occur’ ata

specie site based on a number of quantitative assumptions

reparding intake velocity and the location and desipn of the

cate s intake structures dOC FR § 125 93. The regulation also

permits a sites specie historeal and current) data on

impingement and entramment to serve as a basi for this

baseline Jd

18a

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.” Jd. § 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 cost-cost complhance

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 1s “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

19a

C.F_.R. § 125.94(a5)0). In the 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. Jd.

§ 125.94(a(5)(1).

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 maintenance 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 ‘>

compliance methods other than closed-cycle coolmy

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

The NPDES process is promulgated under CWA section

402taWw dD) B8USC § B4?tands

20a

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 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 I

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

[. Standard of Review

We have jurisdiction to review this Rule

pursuant to CWA section 509%b1), 33° USC.

§ 1369(b)(1). See Riverkeeper I, 358 F.3d at 183

(stating that the Phase I Rule is covered by the

jurisdictional grant of § 1869(b)(1)). As we explained

in Riverkeeper 1, our substantive review is twofold.

“First, we examine the regulation against the statute

that contains the EPA’s charge.” /d. at 184. If

The parties filed petitions for review here as well as in

several of our sister circuits. The petitions were consolidated tn

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

litigation pursuant to 28 USC §§ 1407 and 2112%anadi The

Ninth Cirewit thereafter transferred the case here pursuant to

28 USC. § 2112(an5)

2la

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 (1984). If, however, the

statute is silent or ambiguous, we ask whether “the

agencys answer is based on a_ permissible

construction of the statute.” /d. at 843.

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

U.S.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

‘vidence 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 (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 USC.

22a

§ 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.

vu. 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].”).

II. 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

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 Surfnder Foundation

23a

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 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’”),”

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

uf “adverse environmental impact” is insufficiently

supported by the record; (3) the EPA’s assumption of

zero entrainment survival is insufficiently supported

by the record; (4) the EPA improperly requires

evaluation of qualitative non-use benefits in site-

specifie cost-benefit analyses; (5) the Agency failed to

UIWAG petitions this court in conjunction with the

Appalachian Power Company and the Illinois Energy

Assvuciation

24a

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 II 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 “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.

L. 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

25a

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), 33 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 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 Swpreme Court stated that in

“assessing BATI{,) total cost is no longer to be

considered im comparison to effluent reduction

26a

benefits,” as it had been in assessing BPT. EPA uv.

Nat'l Crushed Stone Ass’n, 449 U.S. 64, 71 (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 achieving such marginal level of reduction.”

Id. at 71 n.10 (quoting Remarks of Senator Muskie

reprinted in Legislative History of the Water

Pollution Controi 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 available 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 the cost of achieving

such effluent reduction,” CWA § 306(b\1)\B), 33

U.S.C. § 1316(b)1B), but did not require the EPA

to conduct cost-benefit analysis. Nat? Wildlife Fed’n

vu. EPA, 286 F.3d 554, 570 (D.C. Cir. 2002) (“[Sjection

306 requires that, when setting the [new source

27a

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.*® Given

the above and considering the parallel language of

sections 304(b)(2)(B) and 306(b)(1\(B), the reasoning

of National Crushed Stone strongly suggests that

cost-benefit analysis is no longer permitted under

those sections of the CWA.

- See, e.g., OMB Circular A-94, Guidelines and Discount

Rates for Benefit-Cost Analysis of Federal Programs, Appendix

A (1992) (defining “benefit-cost analysis” as “[{a] 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 “|a] systematic quantitative method for

comparing the costs of a'ternative means of achieving the same

stream of benefits or a given objective”)

28a

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 mus* adopt the dest

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 Administrater

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 be reasonably borne by

the industry is not “available” in any meaningful

sense, cost-benefit analysis is not. similarly

supported by the language or purpose of the statute.

29a

Section 316(b) expressly requires a_technology-

driven result, cf. Natural Res. Def. Council, Inc. v.

EPA, 822 F.2d 104, 123 (D.C. Cir. 1987) (“[T]he 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 (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

- This conclusion accords with the analysis. in

Riverkeeper I that the EPA may consider cost in establishing

BTA pursuant to section 316(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 | 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 estumated 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 1s 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 cvuoling systeins,

30a

has intended that an agency engage in cost-benefit

analysis, it has clearly indicated such intent on the

face of the statute.” Jd. at 510.

Given the above, the EPA may permissibly

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

techrology 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 II 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 must still ascertain

whether the industry as a whole can 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

the marginal benefits of dry cooling were small: “it is

undeniably relevant that that difference represents a relatively

small improvement over closed-cycle cooling at a _ very

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

uude 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 tuo

expensive for industry reasonably to bear and that dry cooling

has negative environmental effects best left to the considered

judgment of the Agency. /d. at 195-96.

3la

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 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

oS 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.

32a

technology designated by the EPA be the best

available.’ Cf. Am. Textile Mfrs. Inst., 452 U.S. at

509-10. The Agency accordingly could not make the

policy decision, in the face of Congress’s

determination that facilities use the 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.

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

Rule is improper because its cost exceeds its benefits.

33a

3. The Determination of BTA under

the Phase ITI 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 :f

technologies producing a commensurate reduction o-

water usage for existing facilities in the same

manner as the Phase I Rule required for new

facilities.“ 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 div-ection 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.

” While the state petitioners frame their argument as a

challenge to the site-specific compliance alternatives, their brief

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

available and that the EPA exceeded its authority in failing to

require Phase II facilities to adopt it

- 34a

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 practicable cost,” and explained that

“an important component of economic practicability”

is “the relationship of costs to environmental

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.” /d. (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 intent to

35a

Congress beyond the section’s words themselves.” Jd.

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 I, 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

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), 33 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 halance

between cost and benefits in determining BPT. But

the word “practicable” is missing from the more

stringent BAT standard, under which Congress

36a

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 (1983)

(“(W]here 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 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 41,667. ‘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 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.” /d. 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,

37a

retrofits may be impossible or not economically

practicable.” Jd. 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.” Jd. 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.

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

38a

not be reasonably borne by the _ industry.”

Additionally, the EPA did not explain its statement

that the suite of technologies “aprroach[es]” 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

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 /, 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.

=e 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 28 percent of the water used by once-through systems.”

Proposed Regulations to Establish Requirements for Cooling

Water Intake Structures at Phase JI] Existing Fuctilites,

Proposed Rule, 67 Fed. Reg. 17,122, 17,189 (Apr. 9, 2002). The

Agency went on to state that “liJt is generally assumed that

this would result in a comparable reduction in impingement

and entrainment,” id., indicating that closed-cycle systems

reduce the adverse impacts of impingement and entrainment

by 72 to 98 percent. In a technical development document

39a

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,

(“TDD”) for the proposal, however, the EPA disaggregated

these data, stating that clesed-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 impingement mortality by 80

to 95 percent vad entrainment by 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.

40a

“fojur 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 (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 performance of the technologies it identified

as BTA “approach” the performance of closed-cycle

cocling.'’ 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

" 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-cycle

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,” id at 41,650.

4la

a cost-benefit analysis. To the extent that the record

does not indicate the EPA’s basis, however, its

statement that “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

843. 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 (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

42a

clarification of the basis for the Agency’s action and

possibly for a new determination of BTA.”®

4, Performance Standards

Expr 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

” 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

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)

43a

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

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 ar! 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 A3s’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

44a

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 “[blecause 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 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.’* The difficulty with the EPA’s

arguments is that the Rule does not require facilities

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 ii)

45a

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 II provision on the ground

that it deviated from the statutory requirement that

the EPA establish a single level of performance

applicable to all facilities. Jd. at 187. The EPA

argued that Tracks I and II reflected the same

standard and that 10 percent is an acceptable

margin of error given that measurements of

reduction of impingement mortality and

entrainment are necessarily inexact and depend

upon natural fluctuations in animal populations and

sampling errors. Jd. 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... .” Jd. (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.” Id. at 189. We concluded that the EPA

acted reasonably in specifying “how much ambiguity

46a

it is willing to tolerate in measuring compliance and

what it considers a reasonable margin of error in

comparing the performance of _ di§ifferent

technologies.” Jd. In short, we acknowledged that the

Track Il 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

I 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 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 _ available

technologies upon which the performance standards

are based.” Jd. Unlike Riverkeeper 1, therefore, a

47a

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

loca] conditions and natural fluctuations. Zd.

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.”? We

therefore 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

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,

1d. at 630, the discharge limitations at issue there were easily

measured, unhke 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 [, 358 F.3d at 189.

48a

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, 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

as Although it may be difficult to know ex 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 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.”). [f, at a particular Phase I]

facility, the adoption of BTA technologies can achieve a 95%

reduction in entrainment and impingement, it is unclear why,

49a

on remand should address these concerns if in its

BTA determination, it retains performance ranges.

B. R ion as Ss

The Phase II 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 Riverkeeper I held that

the statute’s meaning is plain and that restoration

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. Iron & Steel Institute v. EPA, 526 F.2d 1027, 1051 (3d

Cir. 1975) (“It will be sufficient, tor 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.

50a

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

(2005), and our statement in Riverkeeper I 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, and that

this holding applies equally here.

We began Riverkeeper I by noting that we

were remanding 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.” Jd. 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

5la

Riverkeeper I that the EPA 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 and 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 I 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 Is 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. Jd. 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 41,623;

(2) interpreted “reflect” to authorize it to consider

the full range of technologies, including restoration

52a

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. 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 discretion.” 545 U.S. at —, 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 (“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

EFA's claim that its construction of the statute is

entitled to deference

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