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Legal Update

The US Supreme Court Releases Opinion on the Clean Water Act and the Regulation of Power Plant Cooling Structures

2 April 2009
Mayer Brown Legal Update

On April 1, 2009, the US Supreme Court released its opinion in Entergy Corp. v. EPA, No. 07-588 (previously discussed in February 19, 2008 Docket Report).

The Clean Water Act, 33 U.S.C. § 1251 et seq., regulates “cooling water intake structures” found in large powerplants. The Clean Water Act (Act) requires the Environmental Protection Agency (EPA) to determine that such intake structures “reflect the best technology available for minimizing adverse environmental impact.”  33 U.S.C. § 1326(b). In 2004, the EPA promulgated rules governing its determination of what constitutes the “best technology available” (BTA). In issuing those rules, the EPA determined that existing powerplants did not have to adopt closed-cycle cooling systems, although such systems provide the greatest environmental protection, because, in the agency’s view, the financial cost of retrofitting existing powerplants with such systems would outweigh the environmental benefits achieved. The Respondents, plaintiffs below, challenged the EPA’s use of cost-benefit analysis.

In an opinion by Justice Scalia, the Supreme Court rejected the challenge. According to the Court, although the relevant statutory phrase—“best technology available for minimizing adverse environmental impact”—could be read (as it was by the court below) to mean “the technology that achieves the greatest reduction in adverse environmental impacts at a cost that can reasonably be borne by the industry,” the phrase can also be reasonably read (as it was by the EPA) to refer to the technology that produces a reduction in adverse environmental impacts “at the lowest per-unit cost, even if it” reduces adverse environmental impacts to a lesser degree “than other available technologies.”  Slip op. 8. Moreover, the fact § 1326(b)—in contrast to other provisions of the Act—directs the agency to “minimize” rather than “eliminate” the harm in question, suggests that Congress vested the EPA with “some discretion to determine the extent of reduction that is warranted under the circumstances.”  Slip op. 9. Having found the agency’s interpretation of the relevant statutory phrase to be reasonable, the Court upheld it under Chevron U.S.A. Inc., v. Natural Resources Defense Council, Inc. 467 U.S. 837 (1984).

In finding the EPA’s interpretation reasonable, the Court rejected an argument based on statutory silence. The plaintiffs challenging the agency’s rules argued that Congress’s failure to specifically authorize cost-benefit analysis under § 1326(b) while expressly authorizing it under other provisions of the Act reflected Congress’s intent that cost-benefit analysis not be used for BTA determinations under § 1326(b). According to the Court, that argument proved too much, because those other provisions allow the agency to consider cost. The BTA provision is totally silent, not only as to cost-benefit analysis, but also as to cost. Thus, if the argument were accepted, the agency could not consider cost at all when implementing the BTA standard—an implausible result that not even the plaintiffs or the court below endorsed. Slip op. 11–15.

Justice Breyer filed a separate opinion, concurring in part and dissenting in part. He agreed that § 1326(b) allows for cost-benefit analyses, but wrote separately to emphasize the section’s legislative history, which in his view indicates that the provision was meant to restrict, though not forbid, the use of cost-benefit comparisons. Slip op. 1 (concurring and dissenting opinion). Justice Breyer dissented insofar as the Court upheld the EPA’s standard for approving, on a cost-benefit basis, a powerplant’s application for a variance from the otherwise applicable national performance standards established by the agency. Slip op. 7 (concurring and dissenting opinion). In Justice Breyer’s view, the agency had not adequately justified its standard, which was a departure from the prior standard, and he would have remanded the case so that the EPA could either provide such justification or apply the prior standard.

Justices Stevens, Souter and Ginsburg dissented, finding that “Section 316(b) neither expressly nor implicitly authorizes the EPA to use cost-benefit analysis when setting regulatory standards.”  Slip op. 2 (dissenting opinion).

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