In Entergy Corp. v. Riverkeeper, Inc.,
the Supreme Court upheld Clean Water Act regulations issued by the Environmental Protection Agency (EPA) using cost-benefit analyses to set "national performance standards" for cooling water intake structures used by certain existing power plants, and in allowing site-specific variances from those standards based on costs of compliance with the standards.
Power plants which create heat in their processes often take in water from nearby water sources to cool their facilities. In the course of drawing in water for cooling, aquatic life forms are often squashed against intake structures ("impingement") or are drawn into the facility itself and destroyed ("entrainment").
Pursuant to Clean Water Act section 316(b), any effluent standard or national performance standard "shall require that the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact." After three decades of making "best technology available" determinations on a case-by-case basis, EPA issued regulations in 2001 establishing standards for new, large cooling water intake structures.
In 2004, EPA issued the "Phase II" regulations, which govern cooling water intake for about 500 electricity generating facilities, accounting for approximately 53 percent of the nation's electric-power generating capacity. The Phase II regulations, which were challenged in this case, set national performance standards requiring Phase II facilities to reduce impingement and entrainment of aquatic organisms by specific percentages from a calculated baseline.
The targets were based on the environmental improvements which could be achieved through use of a mix of technologies which EPA determined were commercially available and economically practicable. EPA declined to require "closed-cycle" cooling systems, which eliminate nearly all impingement and entrainment, because of the high cost of converting existing facilities to closed-cycle systems, the nearly equivalent results from using other technologies, and the reduction in electricity production from facilities which convert to closed-cycle systems.
The Phase II regulations also established site-specific variances for facilities which could prove that the costs of compliance would be "significantly greater than" the costs considered by EPA in setting the national performance standards, or that the costs of compliance "would be significantly greater than the benefits of complying with the applicable performance standards."
Environmental groups challenged the Phase II regulations, and the Second Circuit Court of Appeals remanded the regulations to EPA, concluding that the agency could not use a cost-benefit analysis in setting standards under section 316(b). The Supreme Court, in a 5-4 decision, reversed and upheld the regulations. It found that the statutory term "minimizing adverse environmental impact" gives EPA "some discretion to determine the extent of reduction that is warranted under the circumstances. That determination could plausibly involve a consideration of the benefits derived from reductions and the costs of achieving them."