Conocophillips Co v. United States Envtl. Prot. Agency

Decision Date06 August 2010
Docket NumberNo. 06-60662.,06-60662.
Citation612 F.3d 822
PartiesCONOCOPHILLIPS CO.; Anadarko Petroleum Corp.; Surfrider Foundation; Massachusetts Public Interest Protection Research Group; Soundkeeper, Inc.; Delaware Riverkeeper Network; American Littoral Society; Raritan Baykeeper, Inc., dba NY/NJ Baykeeper; Save the Bay-People for Narragansett Bay; Friends of Casco Bay; Santa Monica Baykeeper, Petitioners,v.UNITED STATES ENVIRONMENTAL PROTECTION AGENCY; Stephen L. Johnson, Administrator, United States Environmental Protection Agency, in His Official Capacity as Administrator of the United States EPA, Respondent,American Petroleum Institute, Respondent-Intervenor.
CourtU.S. Court of Appeals — Fifth Circuit

Jackson Battle (argued), Kurt Howard Kuhn, Brown McCarroll, L.L.P., Austin, TX, for ConocoPhillips Co. and Anadarko Petroleum Corp.

Jessica O'Donnell, Rochelle Leigh Russell, Trial Atty. (argued), U.S. Dept. of Justice, Environment & Natural Resources Scott Fulton, EPA, Washington, DC, for U.S. EPA.

Russell Scott Frye (argued), FryeLaw, P.L.L.C., Washington, DC, for Cooling Water Intake Structure Coalition.

Elise Zoli, Kevin Paul Martin, Goodwin Proctor, L.L.P., Boston, MA, Michael Brunston Wallace, Wise, Carter, Child & Caraway, P.A., Jackson, MS, for Entergy Corp.

Reed W. Super (argued), Super Law Group, L.L.C., New York City, for Surfrider Foundation and Environment Massachusetts.

Philip Kent Correll, New York City, Edward Lloyd, Morning Side Heights Legal Services, New York City, Deborah A. Sivas, Stanford Law School, Legal Clinics, Stanford, CA, for Surfrider Foundation.

Frederic P. Andes, Barnes & Thornburg, L.L.P., Chicago, IL, for American Petroleum Institute.

Charles Craig Caldart, Nat. Environmental Law Ctr., Seattle, WA, Joshua R. Kratka, Nat. Environmental Law Ctr., Boston, MA, for Environment Massachusetts.

Appeal from the Environmental Protection Agency.

Before JOLLY,* WIENER, BARKSDALE, Circuit Judges.

WIENER, Circuit Judge:

Before us are various consolidated challenges to a Final Rule (the “Rule”) promulgated by the Environmental Protection Agency (the EPA) pursuant to § 316(b) of the Clean Water Act (the Act or the “CWA”). The Rule regulates the use of cooling water intake structures (“CWIS”) for both existing and new offshore oil and gas extraction facilities. Originally, the environmental Petitioners (collectively Riverkeeper) challenged the Rule as it applies to existing facilities, and the industry Petitioners (collectively ConocoPhillips) challenged the Rule as it applies to new facilities. In light of the Supreme Court's decision in Entergy Co. v. Riverkeeper, 1 however, Riverkeeper and the EPA have now jointly moved voluntarily to remand the existing-facilities portion of the Rule for reconsideration; Intervenor American Petroleum Institute (Intervenor API) opposes remand.

We grant the joint motion to remand and affirm the portion of the Rule that regulates new offshore facilities.

I. Facts and Proceedings
A. Prior Rule Making under Rule 316(b) of the Clean Water Act

Through the use of CWIS, industrial facilities, such as offshore oil and gas extraction vessels (or “rigs”),2 withdraw and re-circulate, in the aggregate, billions of gallons of water per day from this country's seas, lakes, and rivers. This enormous intake of water often results in the impingement and entrainment of aquatic biomass. (Impingement is the trapping of an organism against the intake structure, and entrainment is the uptake of an organism into the cooling system itself.)3 Impingement and entrainment can seriously affect not only the population and viability of an aquatic species, but the health of aquatic ecosystems as well.

The purpose of the CWA is to restore and maintain the chemical, physical, and biological integrity of the nation's waters.4 Recognizing the impact of CWIS on the nation's marine environments, Congress empowered the EPA to regulate CWIS under the Act. Section 316(b) of the Act regulates CWIS by requiring that:

Any standard established pursuant to section 1311 of this title or section 1316 of this title and applicable to a point source shall require that the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact.5

Despite the seemingly straightforward mandate of § 316(b), successful and effective rule making under this section has been elusive. The first Rule was issued in 1976,6 but, before being implemented, it was successfully challenged and remanded by the Fourth Circuit for procedural defects that violated the Administrative Procedures Act (the “APA”).7 The EPA withdrew the remanded portions of the Rule, but left intact those unremanded portions that required each National Pollutant Discharge Elimination System (“NPDES”) permitting authority to use its “best professional judgment” to determine the “best technology available” for CWIS regulation.8 This regulatory regime remained in effect until 1995, when Riverkeeper and other petitioners obtained a consent decree from the EPA in which it agreed to issue permanent regulations under § 316(b).9

Under the consent decree, the EPA agreed to establish three phases of rule making:10 Phase I applies to all new CWIS facilities above a particular intake threshold size, except new offshore oil rigs (the regulation of which was postponed until Phase III);11 Phase II applies to existing large power plants that take in more than 50 million gallons of water a day;12 and Phase III (at issue here) regulates (1) existing facilities, including paper, chemical, petroleum, aluminum, and steel manufacturers, small power plants, and other facilities (collectively “existing facilities”), (2) new offshore oil and gas extraction facilities (“new oil rigs”), (3) new offshore liquefied natural gas facilities, and (4) new seafood processing vessels.13

1. Final Phase I Rule

After the Final Phase I Rule was published, it was challenged by both environmental and industry petitioners. The Second Circuit reviewed the Rule and generally upheld it in Riverkeeper, Inc. v. EPA ( Riverkeeper I).14 The Phase I Rule established two tracks for regulating CWIS for new facilities. Track I created a uniform, national system for intake and velocity based on closed-cycle cooling technology.15 The EPA stated that the closed-cycle system is the “best technology available” for minimizing environmental impact.16 Track II allowed the use of any technological approach that “can show, in demonstration study, ‘that the technologies employed will reduce the level of adverse environmental impact ... to a comparable level to that which’ would be achieved applying Track I's capacity and velocity requirements.”17 Track II also allowed facilities to employ “restoration measures”-such as restocking, reclamation, and migration barrier removal-as part of its “comparable” standard, so as to maintain wildlife levels in affected bodies of water.18

Although the Second Circuit upheld most of the Phase I Rule, it did rule that the “restoration measures” provision was inconsistent with § 316(b)'s requirement that the EPA minimize adverse environmental impacts by regulating the location, design, construction, and capacity of CWIS. This was because the “restoration measures” had nothing to do with location, design, construction, or capacity.19 Holding that the EPA exceeded its authority by including the “restoration measures” in the Rule, the Second Circuit remanded that portion of the Rule to the EPA.20

2. Final Phase II Rule

The Final Phase II Rule regulates CWIS at large, existing power plants that are “point sources” and that primarily generate electric power and either transmit it or sell it to another entity for transmission, and whose CWIS use are proposed to use 50 million gallons or more of water a day.21 That rule set forth five compliance alternatives from which a facility could select and implement ‘for establishing [the] best technology available for minimizing adverse environmental impact.’22 One of the compliance alternatives available to existing power plants was to employ a closed-cycle CWIS, but selection of such a system was not required.23 The remaining compliance alternatives referenced national performance standards that ‘are based on consideration of a range of technologies that [the] EPA has determined to be commercially available.’24 The Phase II Rule also created two site-specific compliance variances from the national performance standards. The first compliance variance-the “cost-compliance alternative”-provides that if a facility demonstrates that the cost of compliance would be significantly greater than the projected costs by the EPA, the local permitting authority had to make a site-specific determination of the “best technology available” as close to the applicable national performance standards as practicable, but without producing costs “significantly greater” than those considered by the EPA during rule making.25 The second compliance variance-the “cost-benefit alternative”-provides that, if a facility demonstrates that the costs of compliance with the national standards is significantly greater than the benefits of compliance, the local permitting authority could make a site-specific determination of the “best technology available” that is as close as practicable to the national performance standards.26

After various states and environmental groups challenged the Final Phase II Rule, the Second Circuit held that the EPA could consider costs under § 316(b) in either of two ways viz., it could determine (1) whether the costs of remediation can be reasonably borne by the industry; or (2) which remedial technologies are the most cost-effective.27 The Second Circuit also held, however, that it is impermissible under § 316(b) to consider a cost-benefit analysis that compares the costs and benefits of various regulatory options and choose the option...

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