Amicus Curiae Brief — Utility Water Water Act Group Group v. Riverkeeper, Inc. (Nos. 07-597, 07-588, 07-589)

S\ laeay i “3 eT

\ (a) %\ sp) OCT 6 - 2008

Nos. 07-588, 07- Ve onsoy’ OF oe THE CLUKK

ee ee sae

_—_—— =

Jn the Supreme Court of * United States

— SE” -_——- — —-

ENTERGY Guciiniaiaines Petitioner, Qy2>% 2

Vv.

ENVIRONMENTAL PROTECTION AGENCY, ET AL., Respondents.

PSEG FossiL LLC, ET AL., Petitioners,

Vv.

RIVERKEE” EF , INC., ET AL., Respondents.

Utiuity WaTER Act GRoupP, Petitioner,

V.

RIVERKEEPER, INC., ET AL., Respondents.

On Writ of Certiorari to the United States

Court of Appeals for the Second Circutt

PRIEF FOR THE STATES OF ILLINOIS, [OWA, MARYLAND,

MONTANA, OHIO, AND OKLAHOMA, THE COMMONWEALTH

OF PENNSYLVANIA, DEPARTMENT OF ENVIRONMENTAL

PROTECTION, AND THE COMMONWEALTH OF PUERTO

RICO AS AMICI CURIAE IN SUPPORT OF RESPONDENTS

Micwae- A. Scopro* Lisa MADIGAN

Solicitor General Attorney General of Illinois

100 West Randolph Street

JANE ELINOR Notz Chicago, Illinois 60601

Deputy Solicitor General (312) 814-3698

* Counsel of Record

{additional counsel listed on signature page]

Becker Gallagher - Cincinnati, OH - Washington, D.C. - 800.890.5001

i

QUESTION PRESENTED

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

§ 1326(b), authorizes the Environmental] Protection

Agency to compare costs with benefits in determining

the “best technology available for minimizing adverse

environmental impact” at cooling water intake

structures.

n

TABLE OF CONTENTS

Page

i yy 8 Be 4. yy: | ne i

TABLE OF AUTHORITIES .................. ill

INTEREST OF THE AMICI CURIAE ........... HT

I a arn ad oa mist oe wn kid Re 2

SUMMARY OF ARGUMENT .................. 9

a6 Oe et Mates bi WS eel ieee 10

I. SITE-SPECIFIC CONSIDERATIONS ARE PROPERLY

ADDRESSED THROUGH THE VARIANCE PROCESS,

WITHOUT RezsortT To CostT-BENEFIT

ee ee vi oe ieee oo hae eens ws 10

Il. Use Or Cost-BENEFIT ANALYSIS POSES

SIGNIFICANT PRACTICAL PROBLEMS FOR STATE

PERMITTING AUTHORITIES ................. 17

Te eee ee oT ee ee 23

ill

TABLE OF AUTHORITIES

Cases: Page

Alabama Power Co. v. Costle,

636 F.2a 323 (D.C. Cir. 1979) .............- 14

Appalachian Power Co. v. Train,

og Ff fe ey: re 4

EI. du Pont de Nemours & Co. v. Train,

ee I cc ue rewucaeeeue 12,13

E.P.A. v. Nat'l Crushed Stone Ass'n,

I I ee ian he a te oe a 12

Monsanto Co. v. Kennedy,

613 F.2d 947 (D.C. Cir. 1979) ......... ieee ae

Riverkeeper, Inc. v. United States Environmental

Protection Agency, 358 F.3d 174

ee oa his eee ae eae 2 passim

Weyerhaeuser Co. v. Costle,

590 F.2d 1011 (D.C. Cir. 1978) ............. 13

Statutes and Rules:

Ne ee tae aS eM 4

ee iio Pn a Bd 4

Se EE 6 ok be eee eeu s ees ols 12

iV

oN ee ere 16

EE in ow coe een we ewe enews passim

CL Tree rT rer Tre 6

BE err rrr 6

et eee eee ere Tere 6

oe ee ee 6

I nv cn ce bh ceecndcenecues 5

Oe OM ong cccco ccc cekccucees 5

Gar ae Oe ID no vec cccceecenaces 18

40 C.F.R. § 125.95(b)(6)GiM(A) ................. 19

40 C.F.R. § 125.95(b)(G)GiM(C) ..... 2.2.22. 19

40 C.F.R. § 125.95(b)(6)(ii)(E) .. 2... eee. 19

66 Fed. Reg. 65,256-01 (2001) ............. 20, 21

69 Fed. Reg. 41,576 (2004) .............. passim

Miscellaneous:

Frank Ackerman & Lisa Heinzerling,

Pricing the Priceless: Cost-Benefit Analysis of

Environmental Protection, 150 U. Pa. L. Rev.

FCAT sd host, (ed ace darken & kaso Ra 17

Vv

James R. May & Maya K. van Rossum, The

Quick and the Dead: Fish Entrainment,

Entrapment, and the Implementation and

Application of Section 316(b) of the Clean

Water Act, 20 Vt. L. Rev. 373 (1995) ..........

Thomas O. McGarity, A Cost-Benefit State, 50

Peps. To: TG. Fe 6 4.450054c00anennnes

1

INTEREST OF THE AMICI CURIAE

The amici have two critical interests in the

outcome of this case. First, the amici are devoted to

preserving the aquatic ecosystems on which they

depend. Absent stringent regulation, cooling water

intake structures have devastating effects on fish and

other aquatic organisms, which are not only important

environmentally, but also serve critical commercial,

economic, and recreational purposes. Both because of

the importance of aquatic ecosystems and because

many have already been substantially compromised,

the amici have a vital interest in protecting these

ecosystems from additional, undue predation by

human activity.

Second, because the States share responsibility for

enforcing the Clean Water Act (“Act”) with the federal

Environmental Protection Agency (“EPA”), the amici

have a powerful interest in a regulatory system that is

workable in practice and provides for accurate and

consistent results. Yet under the EPA regulations

challenged here, permitting authorities are required to

undertake complicated and costly assessments that

Congress has not authorized and that EPA itself failed

to complete. The amici are concerned that requiring

state agencies to conduct such assessments would

strain state resources, encourage needless disputes

between state permitting authorities and applicants,

slow the permitting process—delaying the issuance of

timely permits—and likely lead to inconsistent or

inaccurate permitting decisions.

2

STATEMENT

1. Many power plants and other industrial

facilities cool their equipment with water drawn from

oceans, rivers, lakes, and streams using one of two

basic “cooling water intake structures.” Pet. App. 6a,

12a n.3.' A “once-through” cooling system takes in

water, sends it through the facility once to absorb heat,

and returns it directly to the water body at a much

higher temperature. /d. at 12 n.3. By contrast, a

“closed-cycle” system draws in an initial quantity of

water and then continually recirculates it between

heat-bearing machinery and an external cooling device,

such as a cooling tower or pond. /bid. Because new

water is added to closed-cycle systems solely to

compensate for evaporation, they use 96 to 98 percent

less fresh water (and 70 to 96 percent less salt water)

than comparable once-through systems. 69 Fed. Reg.

41,576, 41,601 1.44 (2004).

2. The environmental impact of withdrawing

large amounts of cooling water is “staggering.”

Riverkeeper, Inc. v. United States Environmental

Protection Agency, 358 F.3d 174, 181 (2d Cir. 2004)

(hereafter “Riverkeeper I’). In the rule at issue here,

EPA determined that cooling water intake structures

may cause “multiple * * * undesirable and

unacceptable environmental impacts,” including:

entrainment andimpingement; reductions of

threatened and endangered species; damage

to critica] aquatic organisms, including

' Citations are to the appendix to the petition for certiorari in

Utility Water Act Group v. Riverkeeper, Inc., No. 07.597 (U.S.).

3

important elements of the food chain;

diminishment of a population’s compensatory

reserve; losses to populations including

reductions of indigenous species populations,

commercial fisheries stocks, and recreational!

fisheries; and stresses to. overall

communities and ecosystems as evidenced by

reductions in diversity or other changes in

system structure and function.

69 Fed. Reg. at 41,586.”

Notwithstanding these devastating effects, the

nation’s power plants and factories continue to

withdraw more than 279 billion gallons of cooling

water each day. See Riverkeeper J, 358 F.3d at 181.

EPA estimates that the use of cooling water by the

thermoelectric power industry accounts for fully 47

percent of all withdrawals from U.S. waters. 69 Fed.

Reg. at 41,586. Because of the vast quantities of

cooling water used, and the associated destruction of

fish and other organisms, the power industry

“{cjollectively * * * constitutes the country’s single

largest consumer of aquatic life.” James R. May &

Maya K. van Rossum, The Quick and the Dead: Fish

Entrainment, Entrapment, and the Implementation and

Application of Section 316(b) of the Clean Water Act, 20

Vt. L. Rev. 373, 381 (1995). Indeed, EPA has

determined that the nation’s larger power plants alone

destroy the equivalent of more than 3.4 billion fish and

* “Impingement” occurs when larger organisms, like fish and

shellfish, are crushed against the screens at the mouth of the

intake pipe, while “entrainment” refers to smaller organisms, like

plankton, eggs, and larvae, being sucked into the pipe and killed

hy the system's pressure and heat. 69 Fed. Keg. at 41,586

4

shellfish each year. 69 Fed. Reg. at 41,586. This

means that a single power plant may impinge more

than one million adult fish in a three-week period. See

Riverkeeper I, 358 F.3d at 181.

3. In 1972, Congress amended the Clean Water

Act “to restore and maintain the chemical, physical,

and biological integnty of the Nation’s waters,” 33

U.S.C. § 1251(a), “the national! goal” being to achieve

“water quality which provides for the protection and

propagation of fish, shellfish, and wildlife,” 33 U.S.C.

§ 1251(a)(2). Because of the devastating ecological!

impacts of impingement and entrainment, Congress

called on the EPA to remedy the problem by

“requir[ing] that the location, design, construction, and

capacity of cooling water intake structures reflect the

best technology available [(“BTA”)}] for minimizing

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

Congress recognized that even as the Act’s pollution

control efforts improve overall water quality, the

effects of impingement and entrainment could inhibit

the recovery and preservation of aquatic ecosystems.

In 1976, EPA issued its first regulations pursuant

to § 316(b), which the Fourth Circuit remanded to EPA

without addressing their merits. 69 Fed. Reg. at

41,583-41,584 (discussing Appalachian Power Co. v.

Train, 566 F.2d 452 (4th Cir. 1977)). After years

passed without new regulations, environmental groups

sued EPA and won a consent decree requiring the

agency to establish a timetable to issue rules under

§ 316(b) in three phases. 69 Fed. Reg. at 41,583.

Phase Il regulates intake structures at new sources,

Phase II covers large, existing power plants, and Phase

5

Ill regulates other power plants and industrial

facilities. Thbid.

The Phase I Rule requires use of a closed-cycle

cooling system or alternative technology capable of a

comparable reduction in impingement and

entrainment. 69 Fed. Reg. at 41,601. Because closed-

cycle systems withdraw substantially less water than

once-through systems, they destroy far less aquatic life.

69 Fed. Reg. at 41,601 & n.44. EPA estimates that a

closed-cycle system may reduce impingement mortality

and entrainment by as much as 98 percent, when

compared with a once-through system. Jbid. On

judicial review, the Second Circuit largely upheld the

Phase I Rule. See Riverkeeper I, 358 F.3d at 181.

4. On July 9, 2004, EPA issued its Phase II Rule.

Because large, existing power plants withdraw

approximately 214 bilhon gallons of cooling water each

day, 69 Fed. Reg. at 41,586, this rule regulates the vast

majority of withdrawals. EPA declined to select closed-

zycle cooling as BTA for large, existing power

plants—as it had for new plants under the Phase |

Rule—and instead adopted national performance

standards based on reductions in impingement

mortality and entrainment associated with a “range” of

technologies (including fine- and wide-mesh screens,

aquatic filter barrier systems, barrier nets, and fish

return systems) that EPA “determined to be

commercially available for the industries affected as a

whole.” 69 Fed. Reg. at 41,598-41,599, 41,601. The

performance standards require as little as 60 percent

reduction in entrainment and 80 percent reduction in

impingement mortality. 40 C.F_R. § 125.94(b)(1), (2).

Thus, the Phase II standards require far less than the

6

98 percent reductions achievable with closed-cycle

cooling.

The Phase II Rule also allows for two site-specific

exceptions from the general requirements—a “cost-cost

variance” and a “cost-benefit variance.” 40 C.F.R.

§ 125.94(a)(5)(i), (ii). The former is available if a plant

demonstrates that its costs of complying “would be

significantly greater than the costs considered by the

Administrator * * * in establishing the applicable

performance standards,” while the latter applies where

a plant shows that its compliance costs “would be

significantly greater than the benefits of complying

with the applicable performance standards.” J/bid.

Variance requests are evaluated by the applicable

permitting authority, including a state permitting

authority operating under the National Pollution

Discharge Elimination System (“NPDES”). 69 Fed.

Reg. at 41,593.° If a facility makes either required

showing, the permitting authority “must make a site-

specific determination” of BTA and impose “site-

specific alternative requirements” that are “as close as

practicable to the applicable performance standards.”

40 C.F.R. § 125.94(a)(5)G), (ii). Or the permitting

authority may conclude that additional measures are

unnecessary, either because of their “significantly

greater costs” under the cost-cost variance or because

. NPDES is the permitting process though which the

requirements of the Act and its regulations are enforced. 33

U.S.C. § 1342(b). Every facility operating a cooling water intake

structure must obtain a permit from either EPA or an EPA-

approved state agency. /bid.; see also 40 C.F.R. § 123.1(d). Forty-

five States and the Virgin Islands are authorized to administer the

NPDES permitting program. 69 Fed. Reg. at 41,582.

7

the “costs would be significantly greater than the

benefits” under the cost-benefit variance. Jbid.

5. On petition for review, the Second Circuit

remanded for additional explanation of EPA’s choice of

BTA and, if necessary, for a new determination of BTA.

Pet. App. 4la-42a. The court noted that “the record is

unclear as to the basis for the EPA’s selection of the

suite of technologies as BTA,” and suggested that EPA

rejected closed-cycle cooling as BTA only by using cost-

benefit analysis in violation of § 316(b). Pet. App. 34a-

4ta. Because the Rule’s cost-benefit variance

authorized site-specific determinations of BTA based

on cost-benefit analysis, the court rejected it as well.

Pet. App. 63a.

The court did not reject outright the cost-cost

variance. Instead, the court noted that although

§ 316(b) does not expressly authorize EPA to allow

permitting authorities to grant variances from

gencrally applicable requirements, it did not doubt

that EPA could allow variances so long as the agency

“guide[d] the permitting authority to consider

appropriate factors and allow[ed] relaxation of the

Rule’s uniform technology requirements only insofar as

necessary to account for unusual circumstances not

considered by the Agency during its rulemaking.” Pet.

App. 55a-56a n.22 (brackets in original) (quoting

Riverkeeper 1, 358 F.3d at 193-194). However, because

of procedural problems in the promulgation of the cost-

cost variance and because the variance is expressly

premised on the validity of the BTA determination,

which itself was remanded for further explanation, the

court found it necessary to remand the cost-cost

8

variance, too, for additional proceedings. Pet. App.

56a-57a.

On April 14, 2008, this Court granted certiorari on

the question “[w]hether Section 316(b) of the Clean

Water Act, 33 U.S.C. § 1326(b), authorizes the

Environmental Protection Agency (EPA) to compare

costs with benefits in determining the ‘best technology

available for minimizing adverse environmental

impact’ at cooling water intake structures.”

9

SUMMARY OF ARGUMENT

This Court should affirm the judgment below for

all of the reasons set forth in state-respondents’ brief.

Petitioners’ contrary position is impossible to square

with the plain language of § 316(b), the provision’s

context within the Clean Water Act, and the legislative

history of the 1972 Clean Water Act amendments.

This brief provides two additional reasons—both of

particular significance to the States, who share

responsibility for enforcing the Clean Water Act—for

affirming the decision below.

First, petitioners and their amici incorrectly argue

that, without the authority to undertake a cost-benefit

analysis, neither EPA nor state permitting authorities

will be able to account for local circumstances by

providing for site-specific compliance alternatives. As

the Second Circuit correctly concluded, a properly

crafted variance provision would address site-specific

considerations, without weighing costs and benefits in

making these individualized determinations. Neither

petitioners nor their amici successfully identify any

circumstance under which site-specific relief from

generally applicable standards would be appropriate

under the Clean Water Act but somehow unavailable

without a cost-benefit variance provision.

Second, requiring state permitting authorities to

perform cost-benefit analysis on a case-by-case basis

would strain state resources, fuel needless disputes

between permit writers and applicants, and prolong

the permitting process. Given the complex nature of

biological systems and the concomitant complexities

associated with quantifying and monetizing

environmental benefits, any such analysis is a time-

10

consuming and resource-intensive process. Moreover,

because EPA failed to complete its own benefits

analysis for the Phase II Rule, and therefore

undervalued environmental benefits, there is a real

risk that States also will be unable to fully value the

benefits associated with reductions in impingement

and entrainment, yielding inconsistent or inaccurate

permitting decisions. For these practical reasons,

States should not be expected to perform cost-benefit

analysis when EPA itself did not deliver it and when

not required by Congress.

ARGUMENT

Petitioners and their amici fail in their effort to

overcome language and history with a_ policy

argument—that only a cost-benefit analysis can

account for loca] factors specific to individual sites. In

fact, the variance process already accounts for these

factors, without departing from the <Act’s plain

language and legislative history. And even if the

promotion of good policy were a sound basis for

ignoring text and history, that policy surely favors the

respondents here, for the rule that petitioners espouse

would require States needlessly to undertake

burdensome cost-benefit analyses.

I. SitTeE-SPECIFIC CONSIDERATIONS ARE PROPERLY

ADDRESSED THROUGH THE VARIANCE PROCESS,

WITHOUT RESORT TO COST-BENEFIT ANALYSIS.

Petitioners and their state amici argue that the

court below unadvisedly adopted a “one-size-fits-all”

approach to the regulation of cooling water intake

structures, Entergy/PSEG Br. 31, Nebraska Br. 10, and

that, without the authority to undertake cost-benefit

analysis when determining BTA, permitting

ll

authorities will be unable to “tak(e] account of local

waterbody characteristics” when writing permits and

“provide site-specific compliance options,” Nebraska Br.

8; see also Entergy/PSEG Br. 48. This concern is

misplaced. The Second Circuit correctly concluded that

site-specific considerations may be addressed through

the variance process, and that cost-benefit analysis is

unnecessary in making these’ individualized

determinations. Pet. App. 55a-56a & n.22. Tellingly,

neither petitioners nor their amici identify a single,

hypothetical circumstance in which a deviation from

generally applicable standards would be appropriate

yet unavailable without cost-benefit analysis.

Although the Second Circuit remanded the cost-

cost variance provision for further proceedings, the

court did not doubt EPA’s authority to make site-

specific compliance alternatives available. Pet. App.

55a-57a & n.22. The court thus followed its prior

holding in Riverkeeper I that while § 316(b) does not

specifically authorize EPA to allow site-specific

variances from general standards, this silence does not

prohibit EPA from allowing such variances, so long as

the variance provision does not leave “alternative

requirements to the Agency’s ‘unfettered discretion”

and “guide[s] the permitting agency to consider

appropriate factors * * *.” Pet. App. 55a-56a n.22

(quoting Riverkeeper I, 358 F.3d at 193-194). Although

the issue of whether EPA is either authorized or

required to provide for variances from § 316(b) for site-

specific conditions is not before this Court, neither

respondents nor their amici question the EPA’s ability

to provide site-specific compliance options—provided

their availability is limited by consideration of

appropriate factors—in light of this Court’s decision in

12

E.I. du Pont de Nemours & Co. v. Train, 430 U.S. 112

(1977).

In du Pont, the Court held that § 301 of the Act

allows the EPA to set uniform, industry-wide effluent

limitations for existing plants, “so long as some

allowance is made for variations in individual plants.”

430 U.S. at 128. In particular, the Court found that

although § 301 only expressly contemplates variances

from standards set pursuant to § 301(b)(2)(A),

(describing effluent limitations to become effective by

July 1, 1983), EPA also must authorize variances from

standards set pursuant to § 301(b)(1)(A) (describing the

effluent limitations to become effective by July 1,

1977). See 430 U.S. at 128; see also E.P.A. v. Nat'l

Crushed Stone Ass'n, 449 U.S. 64, 72 (1980) (noting du

Pont’s holding that although no “explicit variance

provision exists with respect to [1977] standards,” such

a provision was nevertheless “a necessary aspect of

[1977] limitations applicable by regulations to classes

and categories of point sources”).* The Court suggested

* Section 301(c) provides that

{t!he Administrator may modify the requirements

of subsection (b)(2)(A) of this section with respect

to any point source for which a permit application

is filed after July 1, 1977, upon a showing by the

ow ner or operator of such point source satisfactory

to the Administrator that such modified

requirements (1) willrespect the maximum use of

technology within the economic capability of the

owner or operator; an@ (2) will result in

reasonable further progress toward the

elimination of the discharge of pollutants.

33 U.S.C. § 131) ¢e).

13

that a variance provision was necessary to give state

permitting authorities an important role in

administering the Clean Water Act. See du Pont, 430

U.S. at 133 n.24; see also Weyerhaeuser Co. v. Costle,

590 F.2d 1011, 1034 (D.C. Cir. 1978) (explaining that,

in du Pont, “[t]he Court subscribed to the view that, by

leaving the granting of variances to the state agencies

in the first instance, the significance of their role would

be preserved”).

Following du Pont, therefore, the Secc nd Circuit

correctly recognized EPA’s authority to allow variances

from generally applicable requirements. Accordingly,

petitioners and their amici are wrong to contend that

state permitting authorities will be unable to make

site-specific determinations under the Second Circuit’s

decision.

Nor do petitioners or their amici offer even a

hypothetical scenario in which a variance from

generally applicable standards would be appropriate

but unavailable under the decision below. As an initial

matter, the suggestion that without cost-benefit

analysis, permitting authorities will be forced to

“require technology to protect aquatic organisms that

are not present” because the affected water bodies

contain “essentially minimal aquatic life,” Nebraska

Br. 9; see also Entergy/PSEG Br. 50 (“[t]he Second

Circuit’s interpretation would compel EPA to order

retrofits that are enormously expensive symbolic

gestures”), may quickly be put to the side. The Second

Circuit did not hold, and respondents do not contend,

that facilities must install outrageously expensive

technology under circumstances where it would provide

only trivial gains in effectiveness. To the contrary, the

court below emphasized that certain facilities “fac{ing]

14

high compliance costs to achieve the national

performance standards * * * may qualify for the cost-

cost variance if such variance is retained on remand.”

Pet. App. 65a.° Thus, if a power plant were situated on

a water body naturally devoid of aquatic life, the

plant’s operator would not have to retrofit it with

expensive technology that would achieve at best de

minimis reductions in impingement and entrainment

just for the sake of complying with the national rule.

Similarly, if the physical constraints of a plant’s

location made it technologically impossible to meet the

national requirements, that facility also could obtain

an exception from the generally applicable standards.

Petitioners and their amici also maintain that

cost-benefit analysis is a necessary tool because under

certain circumstances once-through cooling may

provide a better means of protecting native aquatic

populations than closed-cycle cooling. See UWAG Br.

52 & n.24; Nebraska Br. 9. But petitioners and their

amici together identify only two examples of this

purported phenomenon, neither one of which is

persuasive.

® The Second Circuit's approach comports with longstanding case

law authorizing agencies to make de minimis exceptions to

regulatory requirements even when the statutory language does

not authorize such exceptions. See Alabama Power Co. vu. Costle,

636 F.2d 323, 360 (D.C. Cir. 1979) (recognizing an “agency power,

inherent in most statutory schemes, to overlook circumstances

that in context may fairly be considered de minimis”); Monsanto

Co. v. Kennedy, 613 F.2d 947, 954 (D.C. Cir. 1979) (finding

“latitude inherent in the statutory scheme to avoid literal

application of the statutory [language] * * * in those de minimis

situations that * * * clearly present no public health or safety

concerns’).

15

First, amici argue that once-through cooling offers

the “best means of maintaining the native aquatic

organisms” in water bodies where “the major fish

species that would incur impingement and

entrainment mortality is invasive.” Nebraska Br. 9;

see also UWAG Br. 52-53 n.24. But as petitioners

concede, EPA itself has disapproved this view, see

ibid.; see also id. at 19 (noting that EPA “chose not to

draw distinctions * * * based on the type of species

affected”), rejecting in both the Phase I and Phase II

rulemaking the power industry’s argument that not all

impingement and entrainment effects qualify as

“adverse” environmental impacts because some

“nuisance” species “require eradication.” Pet. App. 86a

(citing Riverkeeper I, 358 F.3d at 196). The Second

Circuit, tn turn, has twice approved EPA’s approach on

this score as “eminently reasonable.” Riverkeeper J,

358 F.3d at 196; see also Pet. App. 86a-87a. In any

event, because the warmer water discharged by once-

through cooling may provide welcome habitat for

invasive species while negatively impacting native

organisms, there is no assurance that the use of this

method wili have the favorable outcome petitioners

and their amici hypothesize. Moreover, neither the

Clean Water Act nor § 316(b) contemplates that cooling

water intake structures, notwithstanding their

negative environmental effects, should be used to

address environmental problems from other sources.

States are far better off addressing invasive aquatic

organisms at their source than by counting on

environmentally destructive cooling methods to do so

incidentally.

Second, petitioners and their amici point to

Florida’s West Indian Manatee population, which now

16

makes its habitat in the heated water discharged by

once-through systems. See UWAG Br. 55-56 & n.27;

Nebraska Br. 9-10. This concern relates to the effects

of thermal discharges rather than impingement and

entrainment, however, and thus is properly addressed

by the Act’s provisions regulating the thermal

component of cooling water intake structures, not by

§ 316(b). Notably, § 316(a) of the Act provides for a

variance from the general requirements for thermal

discharges if the permit applicant can show that the

applicable limitation is “more stringent than necessary

to assure the protection and propagation of a balanced,

indigenous population of shellfish, fish, and wildlife in

and on the body of water into which the discharge is to

be made.” 33 U.S.C. § 1326(a). Accordingly, so long as

a permit applicant can establish that the effluent

limits for heat are unnecessary to maintain a balanced

indigenous population, the permitting authority may

allow a variance from the effluent discharge limits.

Finally, petitioners’ amici maintain that, unless

authorized to apply cost-benefit analysis, States

suffering from water shortages will be unable to

“ensure that the minimal water necessary is

consumed.” Nebraska Br. 10. But closed-cycle cooling

systems withdraw far less water—as much as 98

percent less—than once-through systems. Accordingly,

any concern that the use of closed-cycle cooling might

interfere with States’ efforts at water conservation

rings hollow. Not only will closed-cycle cooling

engender the substantial environmental benefits

associated with a reduction in impingement and

entrainment, but there is no reason to believe that

such systems will interfere with States’ water

management.

17

Il. Use Or CostT-BENEFIT ANALYSIS POSES

SIGNIFICANT PRACTICAL PROBLEMS FOR STATE

PERMITTING AUTHORITIES.

As amici explain, although cost-benefit analysis

may in some circumstances be a useful tool for

identifying when the benefits of regulation exceed its

costs and thereby assist in the process of allocating

resources efficiently, use of cost-benefit analysis results

in a misallocation of resources if benefits are not

correctly valued. See Economists Ackerman, et al. Br.

8-15. Critically, the complicated nature of biological

systems raises substantial challenges to efforts to

assign an accurate monetary value to environmental!

benefits. See id. at 8, 12. Quantifying and monetizing

environmental benefits is a complex, time-consuming,

and costly process, and, if the analysis is not completed

properly, there is a risk that the effects of maintaining

a healthy, biologically diverse environment will be

undervalued. See, e.g., Frank Ackerman & Lisa

Heinzerling, Pricing the Priceless: Cost-Benefit Analysis

of Environmental Protection, 150 U. Pa. L. Rev. 1553,

1563-1581 (2002); Thomas O. McGarity, A Cost-Benefit

State, 50 Admin. L. Rev. 7, 50-72 (1998).

The difficulties in accurately assessing the value

of environmental benefits would raise significant

practical problems for States under petitioners’ cost-

benefit approach. The Phase II Rule requires state

permitting authorities to verify that a permit applicant

meets the requirements of the approved compliance

alternative the applicant selects. 69 Fed. Reg. at

41,643. Under petitioners’ view that EPA may weigh

costs and benefits when setting national performance

standards for cooling water intake structures—and

make available a_ “cost-benefit” compliance

18

option—state agencies would have to perform cost-

benefit analyses in reviewing permit requests for such

structures.° But undertaking a cost-benefit analysis

is a labor-intensive and lengthy process that is likely

to strain already limited state resources, encourage

contention between applicants and permitting

authorities, and slow permitting decisions, thereby

delaying the timely issuance of necessary permits. In

addition, given EPA’s admitted failure to complete its

analysis of environmental benefits in the Phase II

Rule, there is a real risk that States also will be unable

to account for potentially significant benefits

associated with the installation of a_ particular

technology.

As petitioners acknowledge, see UWAG Br. 23-24,

to qualify for a cost-benefit variance, a permit

applicant must submit—and the permitting authority

must evaluate for accuracy—documents including a

“Benefits Valuation Study,” 40 C.F.R. § 125.95(b)(6)(ii).

The study must attempt to “fully value the impacts of

impingement mortality and entrainment” at the

applicant’s facility “and the benefits achievable by

meeting the applicable performance standards.” Ibid.

Accordingly, the applicant must assign a monetized

value to all of the benefits (commercial, recreational,

and ecological) of comphance with national standards.

40 C.F.R. § 125.95(b)(6)Gi)(A). The applicant also must

quantify and monetize certain “non-use” benefits,

® Petitioners’ amici suggest that under petitioners’ approach,

States would be permitted but not required to undertake a

weighing of costs and benefits. See Nebraska Br. 13. To the

contrary, if the cost-benefit variance is upheld, State permitting

authorities will be required to perform cost-benefit analyses when

reviewing permit requests that rely on the variance. *

19

ibid.—that is, benefits that arise from reduced impacts

to ecological resources that the public considers

important, such as threatened or endangered species,

69 Fed. Reg. at 41,647. Attaching « reliable value to

non-use benefits can be difficult, however, and,

according to EPA, for at least some of these benefits

“monetization is not feasible.” 69 Fed. Reg. at 41,648

n.50. The Benefits Valuation Study must also include

“a narrative description of any non-monetized benefits”

arising from compliance with national standards “and

a qualitative assessment of their magnitude and

significance.” 40 C.F.R. § 125.95(b)(6)(@i)(E). Finally,

if the permit applicant utilizes an entrainment

survival rate other than zero, the applicant must

support its chosen rate with “[aJn analysis of the effects

of significant sources of uncertainty on the results of

the study.” 40 C.F.R. § 125.95(b)(6)(11)(C).

Every request for a cost-benefit variance thus

requires the permitting authority to perform a complex

review in an effort. to verify the accuracy of the permit

applicant’s efforts to quantify and monetize the

benefits of using a given technology at a particular

facility. Indeed, in the rulemaking at issue here, EPA

failed to complete its own analysis of the

environmental benefits and conceded the difficulty of

this undertaking, explaining that:

[e]stimating economic benefits is challenging

becau se of the many steps necessary to link

reductions in impingement and entrainment

to changes in impacted fisheries and other

aspects of relevant aquatic ecosystems, and

then to link those ecosystem changes to the

resulting changes in quantities and values

for the associated environmental goods and

20

services that are ultimately linked to human

welfare.

69 Fed. Reg. at 41,655. Thus, EPA’s own findings

confirm that the availability of a cost-benefit variance

will make any agency’s review of a permit application

seeking such a variance an onerous process that will

require substantial expertise and consume significant

resources. Moreover, under petitioners’ view, state

permitting authorities will often be called upon to

make these difficult determinations. In petitioners’

own words, impingement and entrainment effects

“vary dramatically from facility to facility,” and, as a

result, a significant number of BTA determinations

must be made on a case-by-case basis. Entergy

Corp./PSEG Br. 47; accord UWAG Br. 51-57.

EPA’s findings also demonstrate that use of cost-

benefit analysis is hkely to slow down the permitting

process. For example, under the_ cost-benefit

compliance option, the permitting authority

determines BTA only after it attempts to predict the

benefits that reductions in impingement and

entrainment will have on the fishing industry. As EPA

acknowledged, however, although there is no doubt

that “reducing the number of fish killed will increase

the number of fish available for harvest,” “[m]Jeasuring

the benefits of this effect is less straightforward.” 69

Fed. Reg. at 41,659. This is because, as EPA explained

in the Phase I Rule, “it is very difficult to assess the

cause and effect of cooling water intake structures on

ecosystems or an important species within an

ecosystem.” 66 Fed. Reg. 65,256-01, 65,285 (2001).

Such assessments require complex biological studies,

which “can take multiple years” and, in addition,

because the studies are performed outside controlled

21

laboratory conditions, they implicate “a multitude of

confounding factors,” making them “very difficult to

perform and * * * causation, in particular, very difficult

to determine.” Jbid. Thus, EPA concluded, “the time

and complexity of conducting population studies

properly is generally inconsistent with making fast and

reliable permitting decisions.” Ibid.

Finally, EPA, by its own admission, failed to

complete the benefits analysis, which raises a real

possibility that States will be unable to accurately

eonduct their own cost-benefit analyses. In the

ralemaking below, EPA conceded that it had not

assessed the value of all benefits associated with the

expected results of the Phase II Rule, resulting in the

undervaluation of environmental! benefits. 69 Fed.

Reg. at 41,657-41,661. For example, EPA

acknowledged that “[b]ecause of the uncertainties and

assumptions” underlying its analysis, its “estimates of

benefits * * * may understate the benefits to

recreational anglers.” 69 Fed. Reg. at 41,659. The

agency also recognized that although reducing

impingement and entrainment losses “may result in

both use and non-use benefits” and that “there is a real

possibility that ignoring non-use values could result in

serious misallocation of resources,” it was “unable to

value the non-use benefits associated with” the Phase

IT Rule. 69 Fed. Reg. at 41,660-41,661 (internal

quotation marks and citation omitted); see also 69 Fed.

Reg. at 41,666 (“EPA was not able to estimate the

monetary value of non-use benefits resulting from the

rule, although the Agency believes non-use benefits

may be significant.”).

There is no reason to believe that state permitting

authorities—who generally have fewer resources in

22

terms of funding and expertise than EPA—will be able

to perform an analysis that EPA failed to deliver.

Instead, the difficulties in quantifying and monetizing

environmental benefits will only fuel needless disputes

between permit writers and applicants, further

drawing out the permitting process and draining state

resources. Moreover, because regulated companies will

likely devote more resources to assessing the costs of

installing a particular technology than its benefits, the

complexity of the benefits inquiry may lead to

inconsistent permitting decisions or, worse, decisions

that purport to weigh costs against benefits but fail to

account for the full environmental benefits associated

with a particular technology and therefore authorize

less effective methods at the expense of aquatic

ecosystems. Given the Clean Water Act’s commitment

to preserving and maintaining the nation’s water

bodies, either result is intolerable.

23

CONCLUSION

The judgment of the court of appeals should be

affirmed.

Respectfully submitted.

LISA MADIGAN

Attorney General of Illinois

MICHAEL A. SCODRO*

Solicitor General

JANE ELINOR NOTZ

Deputy Solicitor General

100 West Randolph Street

Chicago, Illinois 60601

(312) 814-3698

* Counsel of Record mscodro@atg.state.il.us

OCTOBER 2008

TOM MILLER

Attorney General of lowa

1035 E. Walnut Street

Des Moines, [A 50319

DOUGLAS F. GANSLER

Attorney General of

Maryland

200 Saint Paul Place

Baltimore, MD 21202

MIKE MCGRATH

Attorney General of

Montana

P.O. Box 201401

Helena, MT 59620

NANCY H. ROGERS

Attorney General of Ohio

30 East Broad St., 17th FI.

Columbus, OH 43215

W.A. DREW EDMONDSON

Attorney General of

Oklahoma

313 N_E. 21st Street.

Oklahoma City, OK 73105

24

SUSAN SHINKMAN

Chief Counsel

Pennsylvania Department of

Environmental Protection

Richard P. Mather

Deputy Chief Counsel

400 Market Street

Harrisburg, PA 17105

ROBERTO J. SANCHEZ RAMOS

Secretary of Justice

Commonwealth of

Puerto Rico

P.O. Box 9020192

San Juan, PR 00902-0192