The Second Circuit ruled that EPA could not use cost-benefit analysis when implementing certain provisions of the Clean Water Act. The regulations at issue address existing power plants, but the court's ruling directly jeopardized favorable regulations governing all other users of cooling water, such as in the steel, chemical, paper and petroleum industries. Indeed, all consumers of electric power are likely to be impacted by an increase in the cost of electricity.
The NAM joined with four other organizations in an amicus brief urging the Supreme Court to hear this appeal. The issue involves Section 316(b) of the Clean Water Act, which establishes requirements for cooling water intake structures at electric power plants, in order to minimize the impact of such structures on fish. The Second Circuit ruled that EPA choose the most effective technologies for minimizing the impact of these structures that the affected companies as a whole "can reasonably bear," without any consideration of the costs and benefits of that technology, unless two different technologies "produce essentially the same benefits."
The Second Circuit's ruling conflicted with that of another federal circuit as well as EPA's own interpretation of the statute. Our brief argued that this interpretation may affect thousands of industrial, commercial and institutional facilities that use cooling water. We also argued that the EPA acted within its authority to take into account "restoration measures" that enhance the numbers and conditions of the affected fish, but the Second Circuit rejected that as an acceptable method of minimizing the adverse impact of water intake structures on aquatic life. The operative statutory language is unclear and the EPA's interpretation is entitled to judicial deference.
Third, we argued that the Second Circuit's decision was based in part on its interpretation of Section 301 of the Clean Water Act, which governs wastewater treatment requirements. This erroneous interpretation had the potential to affect many more facilities than just the electric generating plants that were the subject of this case, and even many more than plants that have cooling water intake structures.
After the Supreme Court agreed to hear this appeal, along with Entergy Corp. v. EPA (No. 07-588) and Utility Water Act Group v. Riverkeeper (No. 07-597). We filed a brief on the merits of the legal issues on appeal on July 21, 2008.
On April 1 in a 6-3 decision, the Supreme Court held that EPA permissibly relied on cost-benefit analysis in setting the national performance standards and in providing for cost-benefit variances from those standards. Even though the legislation did not expressly provide for consideration of costs, it was within the EPA’s discretionary authority to do so, and the courts will uphold a reasonable exercise of that discretion.