Federal Appeals Court Rules on EPA Regulation Governing Cooling Water Structures

August 8, 2010
by BART CASSIDY
Client Alert Newsletter August 2010

On July 23, 2010, the U.S. Court of Appeals for the Fifth Circuit issued an opinion governing the U.S. Environmental Protection Agency's ("EPA") regulation of cooling water intake structures under the Federal Clean Water Act. EPA had issued the so-called "Phase III" Cooling Water Intake Rule to regulate cooling water intake structures at existing industrial facilities and small power plants, as well as new offshore oil and gas production facilities. In the case of ConocoPhillips v. EPA, the Court affirmed the provisions of EPA's Phase III rule applicable to the offshore oil and gas facilities, and remanded, consistent with EPA's request, the provisions of the Phase III rule applicable to existing facilities. The Court's decision rejected arguments by industry petitioners that the provisions of the Phase III rule applicable to new offshore oil and gas facilities were arbitrary and capricious because EPA did not engage in an appropriate cost-benefit analysis in establishing the proposed standards.

With respect to the regulation of cooling water intake structures at existing industrial facilities, EPA had requested that the Court remand that portion of the rule to allow EPA to proceed with additional rulemaking. EPA had previously stated that it had intended to propose a new rule governing these sources during 2010, but that schedule appears to be slipping. Indeed, EPA recently announced that it is planning to conduct a public survey in an attempt to determine the willingness of the public to pay for substantially-improved cooling water intake structures and the corresponding reduction in fish kill. EPA appears to recognize that enhanced technology will substantially increase the cost of certain industrial operations, and, as part of its cost benefit analysis, will reportedly proceed with the public survey to determine the public perception of the resulting benefit. This process will likely further delay the promulgation of Phase III standards for cooling water intake structures at existing industrial facilities and small power producers.