On January 25, 2007, siding mostly with environmental organizations who were among those initiating the action, the Second Circuit remanded or set aside key components of the Clean Water Act § 316(b) Phase II rule in Riverkeeper, Inc. et al. v. U.S. EPA, Docket No. 04-6692-ag(L) et al. This action has left EPA with a rule whose application and effect are uncertain and which potentially requires further rulemaking. In summary, the court remanded EPA’s best technology available determination, the rule’s performance standards, and its cost-cost and TIOP provisions, and struck down restoration measures and site specific compliance alternatives which relied on a cost-benefit analysis.
Section 316(b) of the Clean Water Act 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 are pushed against intake screens by cooling water) 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, Inc. and several other environmental organizations and six states mounted the challenge to EPA’s decision shortly after the rule’s promulgation.
Best Technology Available
At the core of last week’s decision is the court’s remand of EPA’s “best technology available” (BTA) determination. The Court reasoned that it was unclear whether EPA used a cost-benefit analysis, which is not permitted under the statute, to conclude that closed-cycle cooling was not BTA. The court explained that the 316(b) “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 can reasonably bear, but that the statute does not permit the EPA to choose BTA on the basis of cost-benefit analysis.” As a result, the court remanded this issue for clarification or a new determination based on permissible considerations.
The court held that restoration measures contradicted Congress’s clearly expressed intent, concluding that “however beneficial to the environment, [restoration measures] have nothing to do with the location, the design, the construction, or the capacity of cooling water intake structures because they are unrelated to the structures themselves.” The result is that restoration and fish stocking cannot be used to satisfy the 316(b) rule.
Site Specific Compliance Alternatives and Cost Provisions
Next, the court addressed certain site specific compliance alternatives. The cost-cost variance provision of the rule was remanded because it was not properly noticed. EPA did not give interested parties the requisite notice and opportunity to challenge the variance. EPA failed in that it did not identify cost data for actual, named facilities, as opposed to model facilities, until after the notice and comment period had ended. Moreover, the Second Circuit stated that the variance is expressly premised on the validity of the BTA determination, which has been remanded for further explanation.
The Phase II rule authorizing site specific determinations based on a cost-benefit analysis was struck down by the court. “Just as the Agency cannot determine BTA on the basis of cost-benefit analysis, it cannot authorize site-specific determinations of BTA based on cost-benefit.” Moreover, the cost-benefit variance provision in the rule was remanded because it impermissibly authorized EPA to consider the degraded quality of waterways in selecting site-specific BTA, which Riverkeeper I had expressly rejected. “This kind of water-quality-based regulation is not authorized by the CWA because it would exempt facilities from meeting the mandated performance standards simply because wildlife levels in the waterbody were already low, and as [this court] held in Riverkeeper I, the CWA does not permit the EPA to consider water quality in making BTA determinations.”
The performance standards, which set ranges for reductions in impingement and entrainment, were also questioned by the court. The court recognized that although no single technology can measure precisely the reductions in impingement and entrainment, EPA cannot allow facilities to be in compliance with the rule when they achieve the lower end of the percentage reductions if those facilities “can and have” achieved reductions at the higher end of the range. The court held that EPA “must require facilities to choose the technology that permits them to achieve as much reduction of adverse environmental impacts as is technologically possible.”
In addition, the Technology Installation and Operation Plan (TIOP) provision which allowed compliance with the national performance standards to be determined on the basis of whether the facility has “complied with the construction, operational, maintenance, monitoring, and adaptive management requirements of a [TIOP]” was remanded because EPA did not give adequate notice regarding the final rule. The court also remanded the TIOP provision because the record justification depended on EPA’s selection of a suite of technologies as BTA, which was remanded for further explanation.
Definition of New Facility
The court, again siding with the non-industry petitioners on the claim that EPA attempted to change the definition of a new facility (Phase I) in its definition of existing facility (Phase II), ordered that on remand, the agency must either stick with the definition of new facility in Phase I or revise it only after notice and public comment.
Independent Supplier Provision
On the other side of the continuum, the court sided with the industry petitioners in one area. The court agreed that EPA had given inadequate notice of the third-party or independent supplier provision in the rule. The rule allows a Phase II facility to purchase cooling water only from suppliers whose intake structures are in compliance with the Phase II rule. The provision was intended to prevent circumvention of the rule with purchases of cooling water from non-Phase II entities. The court reasoned that interested parties were given notice that EPA sought to prevent circumvention of its rules and an opportunity comment on this general policy, but that they could not have anticipated the final rule’s scope.
The court’s decision creates uncertainty among industry and federal and state agencies as to how to comply with the requirements of the surviving rule. Given the court’s wide ranging ruling it is unclear how the rule, in its surviving form, would be practically applied, including near term deadlines, absent further agency direction or rulemaking. Adding to the uncertainty is the possibility of an appeal to the U.S. Supreme Court, which could further delay any remanded deliberations or rulemaking proceedings by EPA.