U.S. Supreme Court ruling says cost benefit analysis permitted

Daily Record (Rochester, NY), Apr 29, 2009 by Elizabeth Stull

A recent decision by the U.S. Supreme Court could result in major savings for some power plants regulated by the federal Environmental Protection Agency.

Overturning a ruling of the U.S. Court of Appeals for the Second Circuit's, the Supreme Court determined that the EPA may use a cost- benefit analysis in setting national performance standards for certain existing electricity-generating power plants. Entergy Corp. v. Riverkeeper Inc. et al., S.Ct. No. 07-588 (2009).

The case involved Entergy's Indian Point power plants on the Hudson River, and new EPA standards that used a modified cost- benefit analysis in determining the best technology available for minimizing adverse environmental impact.

The power plants' "cooling water intake structures" threatened the environment by squashing or sucking in fish and other aquatic creatures. Under the Clean Water Act, any applicable 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." 33 U.S.C. [section]1326(b).

The EPA historically determined "best technology available" on a case-by-case basis. National performance standards established a few years ago require new "Phase I" power facilities to use closed- cycle cooling water intake systems or equivalent reductions, but allow "Phase II" facilities to use alternative systems and site- specific variances.

Closed-cycle systems cost $3.5 billion a year, nine times the cost of other operations with a substantially similar performance, the Supreme Court said.

"The Supreme Court's decision has given state agencies such as [New York's Department of Environmental Conservation] some limited flexibility in deciding whether additional controls on incoming water cooling are necessary to protect aquatic organisms," Libby Ford, an in-house senior environmental engineer at Nixon Peabody LLP said.

"For some facilities, it could be a question of paying an additional $10 million a year to save another 10 fish," Ford said.

Ford noted that costs and environmental impact vary widely from plant to plant.

"Some of them catch under 100 or under 1,000 fish a year in these intake structures. At the other end, some of them had half a million or more. It depends on where the intakes are located. If they happen to be in an area where young fish are born or hang out in the first year of life, [they] tend to get the real high numbers," Ford said.

There are 10 to 12 generating plants Upstate that use coal, gas or nuclear power, according to the Energy Information Administration, which cites other federal statistics. The plants could be subject to the Phase II standards if they do not have closed-cycle systems and draw from natural water sources, according to attorney Marc Romanowski, of Harter Secrest & Emery LLP's Buffalo office.

"They're probably using old technologies and, since they have not been subject to scrutiny, we don't really know ... but the impact [on aquatic life] is probably huge," said Victor Tafur, senior litigation attorney for Riverkeeper.

Rochester companies RG&E and Constellation recently sold their power plants, attorney Thomas Walsh of Hiscock & Barclay LLP pointed out. He said he could not think of any power plants with cooling water towers in the Rochester area, except perhaps the Ginna nuclear plant.

The Ginna plant is an EPA Phase II facility. According to a chart generated by ENSR, a Massachusett-based environmental services provider, the EPA estimated 10 years ago that Ginna would pay about $3,530,513 to install and operate systems required under Phase II rules.

"We know that costs have gone through the roof since then," Ford said.

The state "has its own analysis that it uses," Walsh said.

The DEC in August 2008 issued a policy in keeping with the Second Circuit's decision in Riverkeeper, and the Supreme Court's decision doesn't mean the DEC will "necessarily have to change back," Walsh said.

"Even if the U.S. Supreme Court were to determine that the federal Clean Water Act allows for cost-benefit analysis in determining [best technology available], New York State may, pursuant to section n510 of the federal Clean Water Act, adopt or enforce through its federally delegated SPDES permit program a more stringent approach than cost-benefit analysis," the DEC concluded at that time, citing 33 USC [section]1370.

"Without a formal EPA rule, it will be up to the DEC to try to get the right analysis, the right balance, something that's reasonable," Tafur said.