On July 23, 2018, the Second US Circuit Court of Appeals issued a decision in which it upheld EPA’s Cooling Water Intake Structures (CWIS) rule. The rule was promulgated in 2014 and established new requirements for existing power generating facilities and existing manufacturing and industrial facilities that are designed to withdraw more than 2 million gallons per day (mgd) from waters of the United States and use at least 25 percent of the water they withdraw exclusively for cooling purposes. This rule was required by section 316(b) of the Clean Water Act (CWA) and in conjunction with its predecessors has been the subject of decades of litigation.
The rule and its requirements were made part of 40 CFR 122 and 40 CFR 125. One of the rule’s most significant requirements allows local permitting authorities, via the NPDES permit program, to decide what kind of cooling water intake system is the best technology available (BTA) for minimizing environmental impacts using a cost-benefit analysis that includes weighing the permittee’s economic interests. Upon its promulgation, the rule was challenged by both environmental and industry groups.
The environmental groups challenged the rule on multiple bases. They argued that EPA acted arbitrarily and capriciously when it concluded that closed-cycle cooling is not nationally available, that the rule fails to adequately define best technology available and thus gives local directors and agencies too much authority to establish requirements for facilities, that using a cost-benefit analysis for BTA determinations exceeds EPA’s statutory authority, and that the wildlife agencies (Fish and Wild Service and NOAA Fisheries also referred to as services in the decision) who provided the incidental take statements (ITS) required by the Endangered Species Act (ESA) failed to use the best scientific and commercial data available and wrongly concluded that the rule was unlikely to harm listed species. Relying heavily on Chevron v. NRDC, the court sided with EPA, giving it considerable deference in how it interpreted section 316(b) of the CWA and, based on previous decisions regarding the application of BTA, that a cost-benefit analysis is an appropriate part of making BTA determinations. The court also rejected the ESA arguments on the basis that EPA had created an adequate process to avoid jeopardy to species and that the rule allows FWS and NOAA Fisheries to have meaningful opportunities to review specific permit applications and make recommendations about species impacts (40 CFR 125.95(f) requires facilities to include in their permit applications information about the presence of ESA-listed species and 125.98(h) requires the director who reviews the application to send it to FWS and NOAA Fisheries for a 60 day review period after which the director must publish any information or recommendations those services provide).
The industry petitioners challenged the rule on the grounds that EPA exceeded its authority under the CWA by delegating authority to other agencies, the services violated the ESA by issuing a biological opinion that relied on an erroneous environmental baseline, and the EPA violated the Administrative Procedures Act (APA) by failing to provide notice of an opportunity to comment on certain provisions of the rule. The court rejected each of these arguments. First, it found that EPA had not improperly delegated its authority because EPA and local authorities would make all final decisions with regards to issuing permits. Second, the court found that EPA and the other services conducted their environmental analyses properly. Third, the court found that EPA did not need to provide additional notice when it slightly changed the definition of “new unit” because it gave adequate reason for that change in its final rulemaking as permitted by the APA.
As a result of this decision, the 2014 CWIS rule and requirements remain effective, however, the petitioners can appeal to the US Supreme Court.