On April 1, 2009, the United States Supreme Court issued its decision overturning in part the Second Circuit's decision in Riverkeeper, Inc. v. U.S. EPA, 475 F. 3d 83 (2d Cir. 2007) ("Riverkeeper II"), holding that EPA had permissibly relied on cost-benefit analysis in setting the national performance standards, and in providing for cost-benefit variances from those standards, in its Phase II regulations adopted pursuant to Section 316(b) of the Clean Water Act. See Entergy Corp. v. Riverkeeper, Inc., et al., No. 07-588 (together with Nos. 07-589 and 07-597), 556 U.S. __ (2009) (Slip Op.).

Background

Section 316(b) of the Clean Water Act [33 U.S.C. 1326(b)] requires that "the location, design, construction and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact."

Effective September 7, 2004, EPA's Final Phase II Rule set national performance standards for reduction in impingement mortality (which occurs as aquatic organisms in cooling water meet a facility's intake screens) and entrainment (which occurs when organisms are drawn through a facility's cooling water system) for over 500 existing power plants designed to withdraw more than 50 million gallons of water per day from rivers, streams, lakes, reservoirs, estuaries, oceans, or other waters of the United States, to cool their facilities. Riverkeeper and several other environmental organizations, along with six states, mounted a challenge to EPA's decision shortly after the rule's announcement.

On January 25, 2007, the United States Court of Appeals for the Second Circuit remanded or set aside key components of the Clean Water Act § 316(b) Phase II Rule. In its decision in Riverkeeper II, the Second Circuit remanded EPA's "best technology available" determination, the rule's performance standards, and its cost-cost and technology installation and operation plan provisions. The Court also struck down restoration measures and site-specific compliance alternatives.

Several industry groups petitioned the United States Supreme Court for review of the Second Circuit's decision. The Supreme Court granted these petitions, limiting the appeal to the following question: "Whether [§1326(b)]... authorizes the [EPA] to compare costs with benefits in determining 'the best technology available for minimizing adverse environmental impact' at cooling water intake structures."

Entergy Corp. v. Riverkeeper, Inc.

Ruling that EPA permissibly relied on cost-benefit analysis, Justice Scalia, writing for the Court, reasoned that if EPA's interpretation of the Section 316(b) standard as allowing for consideration of a technology's costs and the relationship between those costs and the environmental benefits produced was reasonable, then that interpretation must govern under long-standing Supreme Court precedent granting deference to an agency's interpretation of a statute [see Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-844 (1984)].

Justice Scalia further reasoned that, unlike other provisions in the Clean Water Act mandating the greatest reduction possible -- i.e. "effluent limitations ...shall require the elimination of discharges of all pollutants," as per 33 U.S.C. § 1311(b)(2)(A) (emphasis added) -- the legislating of the "less ambitious goal" of "minimizing adverse environmental impact" supports the view that the agency has some discretion to determine the extent of reduction that is warranted under the circumstances.

The Court concluded the phrase "best technology available" did not preclude cost-benefit analysis.

The Court further distinguished other provisions in the Clean Water Act that do not permit cost-benefit analysis and considered the legislative history of Section 316(b). Finally, the Court commented that EPA's practice of applying a "wholly disproportionate cost" test for over thirty years, while not conclusive, tends to show that its interpretation was reasonable and, therefore, a legitimate exercise of its discretion to weigh benefits against costs.

The Supreme Court reversed and remanded to the Second Circuit for further proceedings consistent with its decision. Because it limited its review to the issue of whether EPA could permissibly use a cost-benefit analysis in its Phase II rulemaking, the Supreme Court did not address the remaining bases for the Second Circuit's decision.