Anticipated Supreme Court Ruling May Significantly Impact Industrial Use of Cooling Water

January 8, 2009
Client Alert Newsletter Forecast 2009

On December 2, 2008, the U.S. Supreme Court heard oral argument in the matter of Entergy Corp. v. EPA. At issue is a 2004 U.S. Environmental Protection Agency ("EPA") rule regulating the use of cooling water by existing power plants that use large amounts water. The Court's ruling, expected prior to its 2009 summer recess, will likely determine whether cost-benefit analyses may be considered in determining what technologies, if any, regulated plants must install to address ecological impacts associated with their use of cooling water.

Section 316(b) of the federal Clean Water Act requires the location, design, construction, and capacity of cooling water intake structures to reflect the "best technology available for minimizing adverse environmental impact" ("Best Technology Available") associated with the intake of cooling water by industrial facilities. Thousands of power plants and industrial facilities rely on cooling water for their operations, and some water intake structures can kill or injure aquatic organisms that are either drawn into the cooling water system or trapped against the screens that typically guard the water intake point.

The Entergy litigation involves the second of three EPA regulations addressing the Section 316(b) requirements. The first rule regulated cooling water use by new power plants and is the subject of separate litigation. In the second rule ("Phase II Rule"), EPA's considerations included the comparative costs and benefits of various technologies to determine which ones were considered the best available for existing power plants to minimize adverse environmental impacts. The Phase II Rule provided five compliance alternatives for meeting the Best Technology Available standard. EPA's consideration of costs and benefits and the resulting establishment of compliance alternatives was challenged by a number of environmental groups and states and ultimately rejected by the Second Circuit Court of Appeals, which invalidated significant sections of the Phase II Rule.

Following the Second Circuit ruling, EPA suspended virtually all of the provisions of the Phase II Rule, leaving existing power plants without regulatory compliance alternatives and instead subject to the case by case best professional judgment determinations of the relevant permitting authority. The Second Circuit ruling also brought into question the requirements applicable to existing industrial users of cooling water that were not regulated in the first two phases of EPA's rulemaking. Under the third phase of EPA's cooling water rules, those existing industrial facilities (with the exception of off-shore oil rigs) are also left to best professional judgment determinations. EPA indicated that regulatory agencies undertaking a best professional judgment analysis for existing facilities could rely on the compliance alternatives of the Phase II Rule for guidance. While those agencies may still consider whether various control technologies can be reasonably borne by a facility, the Second Circuit's remand of the Phase II Rule compliance alternatives and cost benefit analysis has limited the discretion available in a best professional judgment determination.

The Supreme Court granted certiorari in the Entergy litigation on the limited question of whether EPA is authorized under Section 316(b) of the Clean Water Act to compare costs and benefits in determining what constitutes the best technology available. In oral argument before the Court, the Department of Justice and industry appellants urged the Court to allow EPA and existing power plants to use a cost-benefit analysis, pointing to the great expense involved in the construction and operation of cooling water control technologies, and EPA’s history of considering costs and benefits in regulating cooling water intake. The success of this argument, and the Court's eventual ruling on the use of cost-benefit considerations under 316(b) may have sweeping impacts on the regulatory burden facing power plants and industrial users of cooling water across the country.