Why the Entergy Decision Shouldn’t Hobble the Clean Water Act’s Future

The Clean Water Act turns 40 today.   One of the remarkable things about those four decades is the extent to which the Act has largely withstood repeated attempts by industry to water down its technology-based standard-setting provisions with cost-benefit analysis.   Just three years ago, when the U.S. Supreme Court decided Entergy Corp. v. Riverkeeper, environmentalists largely lost one skirmish in this ongoing war, but the legacy of that opinion may actually be less harmful to the statute’s ability to protect clean water than appears at first blush.  Understanding all that requires going back to the origins of the Act.

It’s not that there wasn’t a federal statute aimed at preventing water pollution back before 1972.   It’s just that the old statute wasn’t working.   A key problem was that the old statute set standards based on the water quality of a river or lake as a whole.  This was difficult and cumbersome and made enforcement virtually impossible, because one polluter could always point the finger at another discharging into the same river in order to evade responsibility.  The big innovation of the Clean Water Act of 1972 was to vastly simplify the standard setting and enforcement process by saying to polluters, “regardless of what others are doing, you must reduce the pollution levels coming out of your discharge pipe as much as is technologically feasible.”   These technology-based standards were far easier to implement and enforce, and the result was a dramatic improvement in water quality throughout the nation’s rivers, lakes and streams in subsequent decades.

Industry fought these standards almost from the beginning, and one of their stock arguments was always that pollution standards should be set by a cost-benefit analysis rather than on the basis of the best technology available.  Industry figured, correctly, that requiring EPA to prove that the environmental benefits of a given pollution standard outweighed its costs would bog the agency down in endless calculation and analysis and give industry lots of opportunities to delay and challenge rules and permits.  Technology-based standards already take costs into account, because EPA and the courts have always interpreted the determination of whether a technology is feasible or “available” as including an estimation of the technology’s economic feasibility.   But requiring the agency to specifically prove that the costs did not outweigh the monetized benefits of a standard would mire them down in exactly the kinds of cumbersome evaluations of overall water quality that Congress sought to avoid by enacting technology based standards in the first place.  

These arguments never gained much traction until 2009, when the U.S. Supreme Court heard Entergy Corp. v. Riverkeeper, a case involving one relatively unknown technology-based standard-setting provision tucked away in an obscure corner of the Clean Water Act.  While most of the Act addresses the discharge of pollution into waterways, Section 316(b) directs EPA to set standards for the intake of millions of gallons of water from rivers, lakes and estuaries for cooling systems at power plants and other industrial facilities.  It turns out that the large intake pipes associated with these systems kill billions of fish and other aquatic organisms each year by squashing them against intake screens or sucking them into the mechanism. Congress recognized this problem and so in Section 316(b) directed EPA to “require that the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact.”

Even though it reads like a straightforward technology-based standard-setting provision, industry argued, as it often does, that EPA should use cost-benefit analysis instead to set the standard.   This time, for a variety of reasons, EPA did just that.  Environmentalists challenged the resulting rule, which was less stringent than it could have been, arguing that EPA violated the statutory language by relying on cost-benefit to craft it.   Much to environmentalists’ dismay, the high court upheld EPA’s decision, holding that the agency’s use of cost-benefit analysis under this provision was permissible. 

Environmentalists were primarily dismayed by the implications of the Supreme Court’s ruling both for this rule in particular and for future applications of Section 316(b).  But they also worried that the same arguments and logic might be used to apply cost-benefit analysis to weaken the very backbone of the Clean Water Act – the set of technology-based standard-setting provisions that control the discharge of pollutants into the nation’s rivers, streams, lakes, and estuaries.   So far, no lower court opinions have applied Riverkeeper to those other provisions of the Clean Water Act.  And, if and when such cases do arise, there are, of course, a whole set of specific legal arguments based in the language of the statute that can and will be deployed to argue that the Riverkeeper case should not even apply to these other portions in the statute.  But it is also important to remember that what the Supreme Court actually said in Riverkeeper is narrower than it might at first appear.  

First, while the Supreme Court upheld EPA’s use of cost-benefit analysis rather than a technology-based standard setting process, the Court did not hold that EPA is required to use cost-benefit analysis.  It simply said that it was reasonable for “EPA to conclude that cost-benefit analysis is not categorically forbidden.”  Accordingly, the Court simply gave EPA discretion to use cost-benefit analysis if it wants to. 

Second, the kind of cost-benefit analysis the Court endorsed was not the kind of highly formalized analysis that requires all environmental and health benefits of regulation to be expressed in dollar terms.  Rather, it was a rough, qualitative, apples-to-oranges comparison of costs and benefits aimed at simply ensuring that costs are not “grossly disproportionate” to benefits.  Indeed, Justice Breyer, in a concurring opinion, praised EPA for “avoiding lengthy formal cost-benefit proceedings and futile attempts at comprehensive monetization.”  These are two very different kinds of analyses, and calling them both “cost-benefit analysis” leads to a lot of unnecessary confusion.  Indeed, the problems that tend to make environmentalists nervous are mostly, if not entirely, associated with formal cost-benefit analysis and its often nonsensical attempts to attach dollar figures to things like human lives and healthy functioning ecosystems. Unfortunately, at least with respect to Section 316’s cooling water intake provision, EPA appears to be reading the opinion as though it requires them to perform a highly formalized version of cost-benefit analysis.

The bottom line is, while Riverkeeper was certainly a loss for environmentalists, it need not have sweeping effect if EPA and others are careful to pay close attention to what the Court actually said – and didn’t say – in the opinion.