A Cost Benefit Analysis for BTA?

Cooling water intake structureThe U.S. Supreme Court is trying to decide whether the Environmental Protection Agency can compare costs with benefits, do a cost-benefit analysis, in determining the "best technology available for minimizing adverse environmental impact" in structures using water to cool power plants and other industrial facilities.

The Clean Water Act, 33 U.S.C. §1326(b) which requires the EPA to make this determination, doesn’t say one way or the other.

In the case, which is actually several consolidated cases, Riverkeeper, Inc. v. United States EPA, 475 F.3d 83, the lower court, the U.S. Second Circuit Court of Appeals, put the problem this way:

"Power plants and other industrial operations withdraw billions of gallons of water from the nation’s waterways each day to cool their facilities. The flow of water into these plants traps … large aquatic organisms against grills or screens, which cover the intake structures, and draws … small aquatic organisms into the cooling mechanism; …these operations kill or injure billions of aquatic organisms every year. …Indeed, a single power plant can kill or injure billions of aquatic organisms in a single year".

A little background

To address this problem, Congress amended the Clean Water Act in 1972, 33 U.S.C. §§ 1251-1387, to regulate cooling water intake structures.

Cooling water systems fall into three groups. "Once-through" systems take water in, use it to absorb heat, and return the water to its source at a higher temperature. "Closed-cycle" systems recirculate the water (after allowing it to cool off in a reservoir or tower before being reused) and add water to the system only to replace that which is lost through evaporation. Closed-cycle systems, therefore, withdraw far less water than once-through systems. Dry cooling systems . . . use air drafts to transfer heat, and, as their name implies, they use little or no water.

On December 18, 2001, the EPA issued its first rule ("the Phase I Rule") governing cooling water intake structures for new facilities. Regulations Addressing Cooling Water Intake Structures for New Facilities; Final Rule, 66 Fed. Reg. 65,256 (Dec. 18, 2001) (codified at 40 C.F.R. pts. 9, 122-25). The Phase I Rule established a two-track approach to regulating cooling water intake systems at new facilities: "Track I created national intake capacity and velocity standards based on closed-cycle cooling technology, which the EPA  deemed the best technology available for minimizing adverse environmental impacts. Track II did not require the use of any specific technology so long as the facility "can show, in a demonstration study, ‘that the technologies employed will reduce the level of adverse environmental impact . . . to a comparable level to that which’ would be achieved applying Track I’s capacity and velocity requirements." 40 C.F.R. § 125.84(d)(1)).

In July 2004, EPA adopted a rule to regulate water intake structures at large existing power plants. The Phase II Rule sets forth five compliance alternatives. See 40 C.F.R. § 125.94(a). Section 125.94(a) requires that a facility select and implement one of the listed alternatives "for establishing the best technology available for minimizing adverse environmental impact". Section 125.94(b) establishes national performance standards to be achieved through one of these compliance alternatives. The rule does not require existing power plants to adopt closed-cycle cooling systems which use far less water with less impact on marine life. The EPA allowed a cost benefit analysis in establishing BTA.  (Other regulations governing these facilities are found at 40 C.F.R. § 125.94(c),(d),(f).)

The cost factor

In deciding the cases brought to challenge these rules, the 2nd Circuit reasoned "the EPA may permissibly consider cost in two ways: (1) to determine what technology can be "reasonably borne" by the industry and (2) to engage in cost-effectiveness analysis in determining BTA (best technology available)…. Thus, the EPA must first determine what is the most effective technology that may reasonably be borne by the industry. …In making this initial determination, the most effective technology must be based not on the average Phase II facility but on the optimally best performing Phase II facilities…[A]lthough, of course, the EPA must still ascertain whether the industry as a whole can reasonably bear the cost of the adoption of the technology, bearing in mind the aspirational and technology-forcing character of the CWA. This technology constitutes the benchmark for performance. Once this determination has been made, the EPA may then consider other factors, including cost-effectiveness, to choose a less expensive technology that achieves essentially the same results as the benchmark….Cost-benefit analysis, however, is not permitted under the statute".

The 2nd Circuit decided, "[T]he record is unclear as to the basis for the EPA’s selection of the suite of technologies as BTA". The Court concluded the EPA exceeded its authority, in part, by using a cost-benefit analysis.

The U.S. Supreme Court agreed to hear the case, and oral argument took place last week. The Bush administration argued a cost benefit analysis was appropriate, pointing out it could otherwise cost billions to meet BTA standards. 

Justice David Souter illustrated the difficulty of a cost benefit analysis that would compare wildlife with technology. He asked, "Are 1,000 plankton worth $1 million?..I don’t know."  Justice Souter stated a cost benefit analysis would certainly favor industry and "basically eliminate the whole technology-driven point of the statute."

Chief Justice John Roberts pointed out, "If you told somebody that you were going to buy the best TV available nobody would think you meant that you were going to buy a very cheap TV because, considering the costs and benefits, that was the best one…They would think you are going to get the fanciest TV you could."

Justice Anthony Kennedy agreed the Clean Water Act did not suggest cost standards were permissible for cooling water intake rules.

Justice Stephen Breyer put it this way: "As I read it, it says: Of course you can’t avoid taking into account costs, but don’t do it too much…And, therefore, you would say: ‘Don’t apply one of these big formal things when you reach your final goal. There are other ways of getting there. Of course, see that it isn’t absurd.’