Administrative Law--Cost-Benefit Analysis--Clean Water Act. The Clean Water Act ("Act") authorizes the Environmental Protection Agency ("EPA") to promulgate rules governing cooling water intake structures. Section 316(b) of the Act, 33 U.S.C. § 1326(b), provides that those rules "shall require" that such structures "reflect the best technology available for minimizing adverse environmental impact." The Supreme Court granted certiorari today in three consolidated cases, Entergy Corp. v. EPA (No. 07-588), PSEG Fossil v. Riverkeeper (No. 07-589), and Utility Water Act Group v. Riverkeeper (No. 07-597), to consider whether section 316(b) authorizes the EPA to engage in cost-benefit analysis when determining the best technology available ("BTA") for minimizing the adverse environmental impact of cooling water intake structures.
In the decision below, the Second Circuit held that the EPA "can consider cost in establishing BTA, but only in a limited fashion and not as a primary consideration." Riverkeeper, Inc. v. US EPA, 475 F.3d 83, 99 (2d Cir. 2007). Thus, while the EPA can consider whether the "costs [of applying a technology] can be reasonably borne by the industry" (and thus whether the technology is "available in a meaningful sense") and whether the technology is "cost-effective" (i.e., significantly more expensive than another technology that achieves "essentially the same" level of environmental protection), the EPA cannot base its determination of the BTA on "cost-benefit considerations." Id. at 99-100 (internal quotation marks omitted). In other words, section 316(b) obliges the EPA to identify and require use of the most environmentally protective affordable technology, even if the technology's costs outweigh its benefits. Id. According to the Second Circuit, this conclusion is supported by the purposes of the Act as well as "the fact that Congress in establishing BTA did not expressly permit the Agency to consider the relationship of a technology's cost to the level of reduction of adverse environmental impact it produces." Id.
This issue is of extraordinary importance to businesses in a wide range of industries because many federal statutes, like section 316(b) of the Act, are silent on whether an administrative agency can conduct cost-benefit analysis when promulgating rules. Interpreting these statutes, other federal circuit courts have held that agencies are permitted to conduct cost-benefit analysis except when expressly precluded by the underlying statute (the opposite of the rule applied by the Second Circuit). This case is also very important to energy firms in particular, because the regulations concerning cooling water intake structures might be much costlier than would otherwise be the case if the EPA can conduct cost-benefit analysis.
Absent extensions, amicus briefs in support of petitioners will be due on May 29, 2008; amicus briefs in support of the respondents will be due on June 30, 2008. Any questions about the case should be directed to Tim Bishop (312-701-7829) in our Chicago office.