# 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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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2009

## Text

“)\

_ Supreme Court, U.S.
P FILED .

No. (Cv

CIn c) he OFFICE OF THE CLERK
Supreme Court of the Chited States

S

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

i]

= ——— 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

lll

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.

lV

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
Se ee TO binccctsesiiscessncssciciedbiaceiniaaiemaalaal 1
FRAT i maiminununiiniiniimmam 1
STATUTORY AND REGULATORY PROVISIONS
BV eee BIS RES CAI wicvescecssccssvnestesccaccdbdanncnne ]
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

v1

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
SO CETTE, © I os necresisecsscesecosscsneiiseie 103a
|” SNARE Ra ae anave erat car re 104a
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I I asehesissniieoitieseeiniceecidecuiabe 116a
$8 USC. § 1008 ......:............... sliaedsalgeaaia 120a
Rs aainssccdnsecininessenssincallaniiin 122a
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DO ITE, BUM ints inseecis sc encessesncsessevsnsevins 125a
GO CITE. © BIBI occ ceseesccnceccosesssscescnnseons 125a
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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Vill

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

ix

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
I RI iene liaiachiaalc ated ‘a
Be ee i I tc sscisclasnteeliceialidaidndidneeihiadelaualoaaieal 35
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

xl

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

Se SA es Git EE ialssddenstinstiishinnieaiisipiasininsinesiiniuenapanians li
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.

2

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

10

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

11

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.

12

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

13

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

14

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....”

16

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

17

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

18

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.

19

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 -

20

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.

21

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

22

(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

23

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

24

(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

25

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

26

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.

27

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.

28

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.

29

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

30

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

3]

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

32

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

33

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.

34

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.

35

= 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

36

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,

37

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.

38

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,

39

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.

40

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

ia

TABLE OF CONTENTS
Appendix to Petition
Page

Opinion of
The United States Court of Appeals
For The Second Circuit

entered January 25, 2007.................cccscceseceeecenees la
Order of
The United States Court of Appeals
For The Second Circuit
Re: Denying Petition for Rehearing

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RETR AO CAE Rae Ps eect 103a
I I asi icecehdsleaneaiiaiieelbaaneiinabiael 104a
I I a sceletednemaninaeeiiienspeaeaiall 109a
I a ls decid enmalinsanumalibel 116a
Be ICE IIA ss caceen coupenganbainncsendenmmbannbtemdeinin 120a
eo dies poabeneaceeaieaneanall 122a
SI a a os i sibggbeih sdcdemebisnannnion 124a
Se I a iicn:sesniceiesrdaddeesannnbsonsdatiansvanbevsentid 125a
40 C.F.R. § 125.90...........
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

16

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

19

The specific provision requires that when a facility's
permit expires, any reissued permit must contain a
requirement that “the facility . reduce impingement
mortality and entrainment. ..commensurate with the efficacy
at the facility of the installed design and construction
technologies, operational measures, and/or _ restoration
measures.” 40 C.F.R. § 125.98(b)( 1 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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385015_0048%3A02. Public record. Not legal advice.