Thursday, April 2, 2009

Supreme Court: Entergy Corp. v. Riverkeeper, Inc.

Apr 1: In the U.S. Supreme Court, Case Nos. 07-588, 07-589, 07-597 [See WIMS 1/26/07 & 3/23/07, 12/3/08]. The cases involve regulation under the Clean Water Act (CWA) of the intake structures used by power plants to take in cooling water. After 30 years of regulating new facilities, the Environmental Protection Agency (EPA) promulgated a regulation requiring existing cooling water intake structures to be retrofitted to comply with EPA’s latest determination of the “best technology available for minimizing adverse environmental impact,” measured in terms of the potential effects on early life stages of fish. The Second Circuit, deferring to EPA, held that EPA has authority to retrofit existing facilities. Siding with environmental petitioners and against EPA, the court also held that EPA’s weighing of costs and benefits is limited to a narrow “cost-effectiveness” test.

The majority opinion upholds EPA's use of cost-benefit analysis and overturns the Second Circuit opinion. The majority opinion was delivered by Justice Scalia, in which Justices Roberts, Kennedy, Thomas, and Alito, joined. Justice Breyer filed an opinion concurring in part and dissenting in part. Justice Stevens filed a dissenting opinion, in which Justices Souter and Ginsburg joined.

As stated by the High Court, respondents -- environmental groups and various States -- challenged EPA's regulations, and the Second Circuit set them aside. Riverkeeper, Inc. v. EPA, 475 F. 3d 83, 99–100 (2007). The issue for our decision is whether, as the Second Circuit held, the EPA is not permitted to use cost-benefit analysis in determining the content of regulations promulgated under §1326(b). Petitioners operate -- or represent those who operate -- large power plants. In the course of generating power, those plants also generate large amounts of heat. To cool their facilities, petitioners employ "cooling water intake structures" that extract water from nearby water sources.These structures pose various threats to the environment, chief among them "the squashing against intake screens (elegantly called 'impingement') or suction into the cooling system ('entrainment') of aquatic organisms that live in the affected water sources.

The crux of the argument, framed by the High Court is, "In its Phase II rules. . . the EPA expressly declined to mandate adoption of closed-cycle cooling systems or equivalent reductions in impingement and entrainment, as it had done for new facilities subject to the Phase I rules. . . It refused to take that step in part because of the 'generally high costs' of converting existing facilities to closed-cycle operation, and because 'other technologies approach the performance of this option.'. . Thus, while closed-cycle cooling systems could reduce impingement and entrainment mortality by up to 98 percent . . (compared to the Phase II targets of 80 to 95 percent impingement reduction), the cost of rendering all Phase II facilities closed-cycle-compliant would be approximately $3.5 billion per year. . . nine times the estimated cost of compliance with the Phase II performance standards . . . Moreover, Phase II facilities compelled to convert to closed-cycle cooling systems 'would produce 2.4 percent to 4.0 percent less electricity even while burning the same amount of coal,' possibly requiring the construction of '20 additional 400–MW plants . . . to replace the generating capacity lost.'"

The Second Circuit Court of Appeals, concluded, that cost-benefit analysis, which "compares the costs and benefits of various ends, and chooses the end with the best net benefits," is impermissible under §1326(b). The Court of Appeals held the site-specific cost-benefit variance provision to be unlawful. Finding it unclear whether the EPA had relied on cost-benefit analysis in setting the national performance standards, or had only used cost-effectiveness analysis, it remanded to the agency for clarification of that point. (The remand was also based on other grounds but those are not at issue).

The case focuses on “the best technology available for minimizing adverse environmental impact,” which the Court calls the “BTA” test and says that is "the one at issue here." The majority opinion says, "In the Phase II requirements challenged here the EPA sought only to avoid extreme disparities between costs and benefits." The Court compared the annualized use-benefits of $83 million to annual costs of $389 million and said it, "demonstrates quite clearly that the agency did not select the Phase II regulatory requirements because their benefits equaled their costs." Saying further, "While not conclusive, it surely tends to show that the EPA’s current practice is a reasonable and hence legitimate exercise of its discretion to weigh benefits against costs that the agency has been proceeding in essentially this fashion for over 30 years."

In its final conclusion, the majority ruled, "We conclude that the EPA permissibly relied on cost-benefit analysis in setting the national performance standards and in providing for cost-benefit variances from those standards as part of the Phase II regulations. The Court of Appeals’ reliance in part on the agency’s use of cost-benefit analysis in invalidating the site-specific cost-benefit variance provision. . . was therefore in error, as was its remand of the national performance standards for clarification of whether cost-benefit analysis was impermissibly used. . . We of course express no view on the remaining bases for the Second Circuit’s remand which did not depend on the permissibility of cost-benefit analysis. . . The judgment of the Court of Appeals is reversed, and the cases are remanded for further proceedings consistent with this opinion."

Access the complete opinion and dissent (
click here). Access the Supreme Court docket (click here). Access questions presented and merit and amicus briefs in the case (click here, scroll to Entergy Corp. v. EPA). Access the oral argument transcript (click here). Access the 2nd Circuit opinion (click here). Access EPA's Cooling Water Intake Structure website for additional information (click here).