May the EPA perform a cost-benefit analysis to decide which technologies best minimize adverse environmental impacts on marine life stemming from cooling water intake structures?
Cooling water intake structures divert billions of gallons of water into coolant systems for industrial equipment and power generation. These systems can injure or kill billions of aquatic organisms, resulting in severe environmental impacts. Congress sought to remedy this problem through 33 U.S.C. §1326(b). The statute requires that “cooling water intake structures reflect the best technology available for minimizing adverse environmental impact.” The “best technology available” requirement is the heart of the dispute. In enforcing the statute, the Environmental Protection Agency (“EPA”) turned to a cost-benefit analysis. If the cost of a particular technology was not justified by a corresponding environmental benefit, the technology was not required. Environmental groups sued to require the EPA to employ a cost only analysis. This analysis requires the best technology a facility could afford, even if the environmental benefit generated was minimal. This case will affect the EPA’s method of regulating cooling water intake structures, potentially leading to greater costs for power plants and industry. Increased costs may disrupt the energy industry and potentially lead to greater costs for consumers.
Questions as Framed for the Court by the Parties
Whether 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. The cases are consolidated and a total of one hour is allotted for oral argument.
Industry diverts billions of gallons of water a day into water-intake coolant systems in order to cool industrial equipment and also to generate power. Though this water is returned to the environment, this can result in the destruction of some or all of the fish species in that water, drastically altering the content of the earth’s bodies of water. Congress sought to solve this problem in § 316(b) of the Clean Water Act (“CWA”). The statute requires that “the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact.”The CWA requires the Environmental Protection Agency (“EPA”) to uphold § 316(b) by issuing regulations for these water-intake coolant systems to ensure that industry complies with its directives.
In 1993, the environmental group Riverkeeper, Inc., along with other groups, sued the EPA for failing to issue regulations upholding § 316(b). The EPA responded with a three-phase rule governing new intake structures, existing intake structures, and smaller facilities; it promulgated a Phase II rule for existing intake structures in 2004. The rule holds that the standard for following § 316(b) is a cost-benefit analysis when determining whether facilities are using the “best technology available” for their cooling structures in preventing environmental harm. This standard compares the monetary costs of the most effective cooling structures (in terms of § 316(b)) with how much aquatic life is to be saved.
Riverkeeper and a variety of other environmental groups (“Riverkeeper et al.”) again sued the EPA, this time with several coastal state petitioners: Rhode Island, Connecticut, Delaware, Massachusetts, New Jersey, and New York (“state petitioners”). The environmental groups have an overarching concern for the protection of aquatic life, and are especially concerned with how the EPA upholds its duties under the Clean Water Act. The state petitioners have a more immediate concern in that coolant systems directly affect both their coastal waters and their bodies of water connecting to the coast. The environmental and state petitioners contended that the Phase II cost-benefit rule is deficient because the EPA exceeded its authority and engaged in improper cost considerations, creating a very lax standard and failing in its duty to uphold § 316(b). A series of industry groups joined the EPA in defending the cost-benefit standard for § 316(b): Entergy Corporation (“Entergy”), the Utility Water Act Group (“UWAG”), and PSEG Fossil LLC and PSEG Nuclear LLC (“PSEG”). These industry groups are particularly concerned because the standard the EPA promulgates directly affects them; though they are in compliance with the cost-benefit standard, a stricter rule would most likely require them to update existing or install new cooling structures, at a huge cost.;
The Second Circuit ruled in favor of the environmental and state petitioners, holding that the application of a “cost-benefit analysis” was improper, in that it is not in keeping with the language of § 316(b) and thwarts Congress’s intent in passing the statute. Instead, after considering the statute itself and the Act as a whole, the Court held that the proper standard to apply is one that considers “feasibility” – whether the best technology available is in fact feasible to apply to the industry in question. The Court determined that the EPA could consider cost only after it had determined what the most effective technology, in terms of § 316(b), is, and whether that technology could reasonably be borne by the industry as a whole. Only after determining what technology meets the “most effective” benchmark can the EPA consider factors of cost-effectiveness, which might allow for a cheaper solution that has essentially the same effect on wildlife as the established benchmark.
The industry groups and the EPA each appealed the Second Circuit ruling, arguing that it improperly interpreted § 316(b) of the CWA, and that the language of the section and the Act in fact grants the EPA authority to use a cost-benefit analysis. The Supreme Court granted certiorari in April 2008.
At issue is the lower court’s ruling on the interpretation of one section of the Clean Water Act: whether § 316(b) authorizes the EPA to use a cost-benefit analysis in following the directive that industries use “the best technology available for minimizing adverse environmental impact” at cooling water intake structures. The Second Circuit ruled that the statement “best technology available” does not allow for cost-benefit considerations to be taken, but instead requires industries to follow a narrower interpretation of the statute. Petitioners contest this interpretation, while Respondents argue that the Second Circuit’s ruling is consistent with the intent and meaning behind the statute.
Plain Language of the Statute
Parties on both sides point to the plain language of the statute as supporting their interpretations of § 316(b). The industry groups contend that the statute’s language shows that Congress intended for the EPA to use a cost-benefit analysis when determining whether industries had the “best technology available.” Furthermore, because Congress never expressly prohibited the EPA from doing such an analysis, the statute impliedly gives the agency authority to do so. The federal parties argue that when considering the “best technology available,” the phrase does not mean “best” without any reference to other factors, but instead should be interpreted more holistically, as taking in considerations of cost. Furthermore, they state that the plain meaning of what methods are “available” generally means availability depending on cost. The industry parties argue that determining availability includes determining what is “economically reasonable.” In sum, these parties argue that because the statute made no mention of forbidding cost-benefit analysis, and the plain meaning of the statute’s language infers such permission, the EPA has the freedom to consider many different factors in determining “best technology available,” including cost.
Environmental groups and several states, on the other hand, argue that the plain meaning of this same language clearly shows that Congress intended for cost to be a secondary factor. According to the states, because the language “best technology available” was not qualified by any other considerations such as cost, Congress did not intend that the EPA’s role in minimizing adverse environmental impact include the ability to make value judgments about whether they are cost-effective. The environmental groups contend that such an analysis is bolstered by the fact that Congress did not expressly tell the EPA to consider cost in determining the “best technology available”: instead, Congress deliberately adopted a technology-based performance standard. Thus, as all the parties contend, the EPA may consider the feasibility of technology in determining whether it is the best way of minimizing adverse effects, but cost cannot be a main consideration.
§ 316(b) in Context
The federal parties and industry groups contend that because § 316(b) of the Clean Water Act cross-references other sections of the Act promulgating several other “best” standards that do expressly require the EPA to consider costs, the EPA’s consideration of costs and benefits is at best implied and at the very least reasonable in this context.
The state party respondents counter this argument, contending that because the Clean Water Act does require the EPA to consider costs in relation to benefits in certain other contexts, Congress could not have intended for the EPA to consider costs in the context of § 316(b) when it expressly told the Agency in what contexts it could do so. The environmental groups contend that Congress would have expressly provided for the EPA to engage in a cost-benefit analysis, as it does in other sections of the Act, if it had intended for the Agency to do so.
The federal parties, contend that the special nature of § 316(b), in comparison with the rest of the statute, also grants the EPA greater authority in determining a “best technology available” standard. They argue that because it is the only section that does not govern the discharge of pollutants, but is instead more of an “afterthought” dealing with the intake of water, it did not receive the detailed provisions Congress made in those parts. Instead, Congress left the determination of this “afterthought” standard to the authority of the EPA, as it was much more concerned with other provisions in the Act.
Riverkeeper and the other environmental groups disagree that the special nature of § 316(b) in light of the rest of the Act gives the EPA more authority to determine the proper standard of “best technology available,” arguing that such an interpretation ignores the legislative history of the statute. This portion of the Act itself represents a legislative compromise over the very issue of whether to give the EPA authority to establish its own standard in determining water pollution controls, and, they point out, the final draft “repeatedly eliminated language” authorizing the EPA to do cost-benefit analysis. They argue that the specific situations in the Act where Congress allowed the EPA to undertake cost-benefit analysis should be viewed as a congressional compromise, in exchange for requiring the EPA to apply a strict technology-based approach to § 316(b). To ignore this legislative context, they say, is to ignore the clear policy choice Congress compromised over, in opting for a narrow standard of interpretation.
On the other hand, the industry groups contend that if the Clean Water Act is to be interpreted the way the Second Circuit has held—as containing a strict technology-based approach with no authority given to the EPA in determining the standard—this approach would result in huge costs for minimal benefit that Congress could not have intended. They argue that if the EPA must ignore cost-benefit considerations and opt for the best technology available in every case, this would lead to situations of facilities expending great amounts of money to prevent any adverse effect, even those that Congress would consider “trivial.” Besides the negative impact this would have on industry, these groups point out that this would also prevent facilities from operating even when they harm only “nuisance” fish that state regulators want to see diminished. They warn that such scenarios are likely if the Court concludes that Congress indeed took away the independent judgment of the EPA.
“Gap-Filling” the Act’s Ambiguities
The industry groups contend that, at the very least, the Act’s meaning is ambiguous and the EPA is entitled to deference in how it interprets § 316(b). This ambiguity, the groups argue, stems from the fact that the statute does not state expressly whether the EPA may use a cost-benefit analysis, or what should qualify as “best available technology.” The Utility Water Act Group in particular contends that Congress would never inappropriately hinder the EPA’s judgment in the way the Second Circuit has done, and instead intended to follow a history and tradition of deferring to the EPA’s determination of a statute’s meaning, where ambiguous. The Federal Parties also contend that Congressional silence in a particular statute confers discretion to the agency in charge of interpreting that statute. To do otherwise, the industry groups contend, would hinder the statutory objective of the Act because it would prevent the EPA from analyzing all relevant factors in considering “best technology available,” which is what the Act authorizes the EPA to do.
The industry groups also argue that the Second Circuit is wrong in believing that there is a presumption that the EPA may apply a cost-benefit analysis only if Congress expressly states that it may. They point out that Congress would instead intend that agencies implement statutes in ways that cause more good than harm, and so would be prepared to authorize agencies to ensure they are carried out in that manner, with consideration given to all of the effects of a particular application. Furthermore, the industry groups point to the fact that Congress has never addressed how the EPA has interpreted the Clean Water Act or its various sections, including the application of a cost-benefit analysis to § 316(b).
The environmental groups contend, on the other hand, that deference to the EPA’s interpretation is not an issue because the Act has no ambiguities and Congress has answered all major interpretive questions, including whether or not the EPA can engage in cost-benefit analysis. Congress could not have meant for the EPA to “gap-fill” the determinative standard when it clearly left no ambiguity on the issue. The state parties, pointing to the language, context, and legislative history of the statute, contend that the absence of an express reference to using cost-benefit analysis does not mean there is an ambiguity when Congress’s intent to use a strict technology-based approach is clear.
Although the billions of gallons of water diverted for industrial cooling purposes is ultimately returned to the environment, the environment is not made whole. The process of drawing this vast quantity of water into coolant systems generates suction, along the lines of sucking up liquid through a straw. This suction traps fish and other larger marine life against the intake, causing injury or death. Smaller organisms, such as plankton or eggs, pass into the system. While one might imagine a few fish stuck against a grate, the impact is far greater. As the court in Riverkeeper I noted, “[a] single power plant might impinge a million adult fish in just a three-week period, or entrain some 3 to 4 billion smaller fish and shellfish in a year, destabilizing wildlife populations in the surrounding ecosystem.”
Congress addressed this problem in the Clean Water Act. The statute “require[s] that the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact.” Industry and the Environmental Protection Agency (“EPA”) argue that the statute allows the EPA to run a cost-benefit analysis. Much like an investment, the resulting environmental benefits would need to exceed the monetary cost and efforts of the upgrade. The environmental groups argue that industry must use the “best technology available” without the use of a cost-benefit analysis.
Under the “best technology available” requirement, the best technology is not necessarily required. If an industry cannot afford the “best technology” then that technology is not “available.” Thus, under the “best technology available” approach advocated by the environmental groups, industry would be required to install the best technology they could afford.
Implications from the choice of upgrade: Money
One of the most basic implications of the Court’s decision in this case concerns money. If a plant is required to install the best technology they can afford, then that plant may be forced to install a very expensive upgrade that would have little advantage over a much cheaper, though slightly less effective, solution. As a result, industry would be forced to implement expensive upgrades that have little environmental advantage instead of the cheaper technologies permissible under the cost-benefit approach. Thus, a primary implication of the case concerns the level of cost placed on industry.
Moreover, upgrading to the “best technology available” would not be a one-time event. As new technologies are developed, plants may be forced to repeatedly pay for expensive upgrades with only marginal improvement in benefits to the environment.
The costs of these upgrades would not necessarily be confined to the coffers of the power plants. Nebraska and seventeen other states supporting the Utility Water Act Group point out that plants may pass those costs on to consumers. Elsewhere in the energy industry, the American Petroleum Institute raises concerns that costs applied to upgrading coolant systems at domestic oil and gas facilities may also be passed on to consumers. Moreover, according to the American Chemistry Counsel, “cooling water intake structures” regulation applies generally, not just to the power industry. Thus, any industry requiring cooling water intake structures could face a larger cost burden if the Court rejects the cost-benefit approach.
Effects of the upgrade
While an upgrade may be affordable, it may not be possible to force it on the industry without significant repercussions. The California Council for Environmental and Economic Balance states in its brief that compliance with this and other environmental regulations could lead some critical power plants to simply shut down. Applying this possibility to the nuclear power industry, the Nuclear Energy Institute (“NEI”) cites concerns that fossil fuel plants may replace nuclear facilities. According to the NEI, nuclear power plants provide twenty percent of the nation’s power, produce no greenhouse gasses, and stabilize energy prices. Their shutdown and replacement with fossil fuel facilities would destroy these advantages and lead to potentially greater environmental problems down the road. Even if a plant is willing to upgrade, it may be unable to comply. As Entergy argues, retrofitting power plants may cause them to be taken offline, resulting in stability problems for the supply of electricity.
Impact on the environment
While cost-benefit may seem to be straightforward, environmental groups and some industries argue that it is not clear-cut. The problem lies in defining “benefit” so that it is possible to compare environmental benefits with the monetary costs and difficulties associated with an upgrade. While an upgrade may cost a certain amount of money and cause a certain amount of down-time, it is difficult to place a value on the environmental benefits. The difficulty in placing a value on the environment is not necessarily a philosophical problem — current scientific tools may be unable to gauge a facility’s actual impact on an ecosystem. For example, the Commercial Fishermen of America argues that the EPA does not adequately capture damage to fish populations in the cost-benefit analysis. Essentially, as the National Wildlife Federation and the Sierra Club argue, nebulous benefit determinations will not properly address the environmental harms Congress sought to avoid. However, denying the EPA the ability to look at benefits could lead to expensive upgrades which offer only slight improvements over cheaper technology.
The Supreme Court’s ruling on the permissibility of a cost-benefit analysis will have an effect on the way industry complies with the Clean Water Act. If the Supreme Court decides against the cost-benefit approach, as the Second Circuit did, industry may be forced to apply expensive upgrades with little environmental benefits over cheaper alternatives. These upgrades may disrupt the energy industry and supply. Moreover, additional costs for the best affordable technology may be passed along to consumers. If the Supreme Court decides in favor of the EPA’s cost-benefit approach, industry would continue operating much as it has been. While this approach would not result in a freeze on upgrades, the EPA’s arguably inadequate weighing of benefits in the cost-benefit analysis could continue the kind of environmental degradation Congress sought to avoid.