Cooling Water Intake Structure Coalition v. Center for Biological Diversity

          Argued: September 14, 2017

         Environmental conservation groups and industry associations petition for review of a final rule promulgated by the United States Environmental Protection Agency ("EPA") pursuant to section 316(b) of the Clean Water Act, establishing requirements for cooling water intake structures at existing facilities. The Petitioners also seek review of a May 19, 2014 biological opinion jointly issued by the United States Fish and Wildlife Service and the National Marine Fisheries Service at the close of formal Endangered Species Act consultation on the final rule. Because we conclude that both the final rule and the biological opinion are based on reasonable interpretations of the applicable statutes and sufficiently supported by the factual record, and because the EPA gave adequate notice of its rulemaking, we DENY the petitions.

          Russell S. Frye, FryeLaw PLLC, Washington, DC, for Petitioner Cooling Water Intake Structure Coalition.

          Fredric P. Andes, Jill M. Fortney, Barnes & Thornburg LLP, Chicago, IL; Jeffrey S. Longsworth, Barnes & Thornburg LLP, Washington, DC, for Intervenor-Petitioner American Petroleum Institute.

          Kristy A.N. Bulleit (Andrew J. Turner, Todd S. Mikolop, Kerry L. McGrath, on the brief), Hunton & Williams LLP, Washington, DC, for Intervenors-Petitioners Utility Water Act Group, Entergy Corporation.

          Reed W. Super, Edan Rotenberg, Super Law Group, LLC, New York, NY, for Intervenors-Petitioners Riverkeeper Inc., American Littoral Society, Casco Baykeeper, Delaware Riverkeeper Network, Hackensack Riverkeeper, Natural Resources Defense Council, Inc., Raritan Baykeeper, Inc. d/b/a NY/NJ Baykeeper, Save the Bay -Narragansett Bay, Scenic Hudson, Inc., Sierra Club, Soundkeeper, Inc., Surfrider Foundation, Waterkeeper Alliance, Inc., and for Intervenors Center for Biological Diversity, Louisiana Environmental Action Network, California Coastkeeper Alliance, Humboldt Baykeeper, Suncoast Waterkeeper, Inc., Puget Soundkeeper Alliance.

          Eric E. Huber, Sierra Club, Boulder, CO, for Intervenor-Petitioner Sierra Club, and for Intervenors Center for Biological Diversity, California Coastkeeper Alliance, Humboldt Baykeeper, Louisiana Environmental Action Network, Suncoast Waterkeeper, Inc.

          Charles C. Caldart, National Environmental Law Center, Seattle, WA, for Intervenors-Petitioners Environment America, Environment Massachusetts.

          Perry M. Rosen, United States Department of Justice, Environment & Natural Resources Division, Environmental Defense Section, Washington, DC; Bridget Kennedy McNeil, United States Department of Justice, Environment & Natural Resources Division, Wildlife & Marine Resources Section, Denver, CO (Simi Bhat, United States Department of Justice, Environment & Natural Resources Division, Environmental Defense Section, Washington, DC, Clifford E. Stevens, Jr., United States Department of Justice, Environment & Natural Resources Division, Wildlife & Marine Resources Section, Denver, CO, on the brief; Richard T. Witt, Alexis Wade, United States Environmental Protection Agency, Office of General Counsel, of counsel), for Respondents.

          Andrew K. Jacoby, Varadi, Hair & Checki, LLC, New Orleans, LA (Ann Brewster Weeks, Legal Director, Clean Air Task Force, Boston, MA, of counsel), for Amicus Curiae Clean Air Task Force.

          Before: JACOBS, CABRANES, and LOHIER, Circuit Judges.

          LOHIER, CIRCUIT JUDGE

         In these consolidated cases, several environmental conservation groups and industry associations petition for review of a final rule promulgated four years ago, in August 2014, by the United States Environmental Protection Agency ("EPA") pursuant to section 316(b) of the Clean Water Act ("CWA"), 33 U.S.C. § 1326(b), establishing requirements for cooling water intake structures ("CWISs") at existing regulated facilities, see National Pollutant Discharge Elimination System-Final Regulations to Establish Requirements for Cooling Water Intake Structures at Existing Facilities and Amend Requirements at Phase I Facilities, 79 Fed. Reg. 48, 300 (Aug. 15, 2014) (codified at 40 C.F.R. pts. 122, 125) ("Final Rule" or "Rule").^[1] The Petitioners also seek review of a May 19, 2014 biological opinion jointly issued by the United States Fish and Wildlife Service ("FWS") and the National Marine Fisheries Service ("NMFS," and, together with the FWS, the "Services") at the close of formal Endangered Species Act ("ESA") consultation on the Final Rule. The Government continues to defend the Rule today. Because we conclude, among other things, that both the Rule and the biological opinion are based on reasonable interpretations of the applicable statutes and sufficiently supported by the factual record, and because the EPA gave adequate notice of its rulemaking, we DENY the petitions for review.

         BACKGROUND

         To start, we describe CWISs; their general impact on the environment; and the statutes, regulations, and rules relevant to these petitions. We then provide an overview of the relevant regulatory and procedural history and a summary of the arguments advanced in the various petitions before us.

         1. Cooling Water Intake Structures

         To dissipate waste heat, power plants and manufacturing facilities use CWISs to extract large volumes of water-nearly 75 trillion gallons annually- from nearby water sources. The force of inflowing water can trap, or "impinge," larger aquatic organisms against the structures and draw, or "entrain," smaller aquatic organisms into a facility's cooling system. Impingement and entrainment kill hundreds of billions of aquatic organisms from waters of the United States each year.

         The harm to aquatic organisms caused by a CWIS most directly relates to the amount of water the structure withdraws, which in turn depends on the type of cooling system the facility uses. "Once-through" cooling systems draw cold water from a waterbody and return heated water to the waterbody in a continuous flow. See Riverkeeper, Inc. v. EPA, 358 F.3d 174, 182 n.5 (2d Cir. 2004) ("Riverkeeper I"). "Closed-cycle" cooling systems generally recirculate the same cooling water within a CWIS by using towers or reservoirs to dissipate heat from the water. Id.; see also 79 Fed. Reg. at 48, 333. Closed-cycle cooling withdraws approximately 95 percent less water than once-through cooling.

         2. Statutory Framework

         A. The Clean Water Act

         The express purpose of the CWA is "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters." 33 U.S.C. § 1251(a). Sections 301 and 306 of the CWA broadly authorize the EPA to establish pollution discharge standards. Id. §§ 1311, 1316. In 1972 Congress amended the CWA to specifically address the operation of CWISs. See Federal Water Pollution Control Act Amendments of 1972, Pub. L. No. 92-500, 86 Stat. 816; see also Riverkeeper I, 358 F.3d at 184 (describing the 1972 amendments as marking a "sea of change" in Congress's approach to water pollution). In section 316(b), it directed the EPA to establish standards governing the operation of CWISs:

Any standard established pursuant to [CWA section 301] or [CWA section 306] 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.

33 U.S.C. § 1326(b). Section 316(b) lists no specific factors that the EPA should consider in establishing the applicable "best technology available" ("BTA") standard. We have held that "interpretation of section 316(b) is informed by the two provisions it cross-references," Riverkeeper, Inc. v. EPA, 475 F.3d 83, 91 (2d Cir. 2007) ("Riverkeeper II"), rev'd on other grounds, Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208 (2009), but that the EPA need not comply with "every statutory directive contained" in those two provisions when acting pursuant to section 316(b), id. (quoting Riverkeeper I, 358 F.3d at 187). Moreover, the EPA may consider "the benefits derived from reductions [in adverse environmental impact] and the costs of achieving them" when establishing the BTA. Entergy, 556 U.S. at 219.

         The standards promulgated under CWA sections 301, 306, and 316(b) are implemented by permits issued through the National Pollutant Discharge Elimination System ("NPDES"). See 33 U.S.C. § 1342; 40 C.F.R. §§ 122.44(b)(3), 125.90(a). "An NPDES permit serves to transform generally applicable . . . standards . . . into the obligations . . . of the individual discharger . . . ." EPA v. California ex rel. State Water Res. Control Bd., 426 U.S. 200, 205 (1976). NPDES permits are issued by the EPA or, if the EPA has approved a State's permitting program, by the Director of the NPDES program for the State.^[2] See 33 U.S.C. § 1342. Under the authorized State programs, Directors must submit draft permits to the EPA for review. Id. § 1342(d)(1)-(2). If a Director fails to amend the permit in response to any EPA objections, the EPA may federalize the permit (i.e., reclaim permitting authority for that permit). Id. § 1342(d)(4). And if a State fails to administer the NPDES program in accordance with standards promulgated pursuant to the CWA, the EPA may withdraw approval of the State program. Id. § 1342(c).

         B. The Endangered Species Act

         In enacting the ESA, Congress wanted to ensure "that all Federal departments and agencies . . . seek to conserve endangered species and threatened species." 16 U.S.C. § 1531(c)(1). To "reverse the trend toward species extinction," Tenn. Valley Auth. v. Hill, 437 U.S. 153, 184 (1978), the ESA provides for the listing of species as threatened or endangered and the designation of their critical habitats, 16 U.S.C. § 1533. Once a species is listed, certain statutory protections apply. For example, section 9 of the ESA prohibits the "take"^[3] of endangered species and those threatened species to which the Services have extended protection, 16 U.S.C. § 1538(a)(1)(B), except that take "incidental" to an otherwise lawful activity may be exempted pursuant to the procedures set forth in ESA sections 7 or 10, id. § 1539(a)(1)(B). Section 7 of the ESA directs federal agencies, in consultation with one or both of the Services, to "insure that any action authorized, funded, or carried out by such agency . . . is not likely to jeopardize the continued existence of any endangered species or threatened species," or to adversely modify critical habitats designated for such species.^[4] Id. § 1536(a)(2). A federal agency must consult with the Services on a proposed action whenever there is "reason to believe that an endangered species or a threatened species may be present in the area affected by [the proposed action] and that implementation of such action will likely affect such species." Id. § 1536(a)(3); see 50 C.F.R. § 402.14(a) (requiring consultation where the acting agency determines that its action "may affect" listed species or critical habitat).

         Consultation with the Services may be informal or formal. Informal consultation is an optional process to determine whether formal consultation is necessary. 50 C.F.R. § 402.13(a). As part of informal consultation, the acting agency may prepare a "biological evaluation" that analyzes the potential effects of a proposed action on listed species and their critical habitat. See Memorandum of Agreement Between the Environmental Protection Agency, Fish and Wildlife Service and National Marine Fisheries Service Regarding Enhanced Coordination Under the Clean Water Act and Endangered Species Act, 66 Fed. Reg. 11, 202, 11, 210 (Feb. 22, 2001) ("MOA"). If the acting agency determines, with the written concurrence of the consulting Service, that the action "is not likely to adversely affect" listed species or critical habitat, the consultation process ends. 50 C.F.R. § 402.13(a); see id. §§ 402.12(k)(1), 402.14(b)(1). But if either the acting agency or the consulting Service determines that the proposed action is "likely to adversely affect" listed species or critical habitat, the agency and the Service must engage in formal consultation. Id. § 402.13(a); see id. § 402.14(a)-(b). At the end of formal consultation, the Service must, using "the best scientific and commercial data available," 16 U.S.C. § 1536(a)(2); 50 C.F.R. § 402.14(g)(8), prepare a biological opinion with both a "detailed discussion of the effects of the action on listed species or critical habitat," 50 C.F.R. § 402.14(h)(2), and a position "as to whether the action, taken together with cumulative effects, is likely to jeopardize the continued existence of listed species or result in the destruction or adverse modification of critical habitat," id. § 402.14(g)(4). If the Service concludes that the action is likely to jeopardize listed species, the biological opinion must suggest "reasonable and prudent alternatives" to the agency's proposed action. 16 U.S.C. § 1536(b)(3)(A); 50 C.F.R. § 402.14(g)(5). If the Service concludes that the action is not likely to jeopardize listed species but that incidental take is reasonably likely to occur, the Service is required to provide an incidental take statement ("ITS") that meets the requirements set forth in 16 U.S.C. § 1536(b)(4). A taking that complies with measures specified in an ITS "shall not be considered to be a prohibited taking of the species concerned." 16 U.S.C. § 1536(o)(2).

         C. The Administrative Procedure Act

         The Administrative Procedure Act ("APA") requires a federal agency conducting notice-and-comment rulemaking to include in its notice of proposed rulemaking "either the terms or substance of the proposed rule or a description of the subjects and issues involved." 5 U.S.C. § 553(b)(3). A final rule "need not be an exact replica of the rule proposed in the [n]otice," only a "logical outgrowth." Riverkeeper II, 475 F.3d at 113 (quotation marks omitted). A central question under the APA is "whether the agency's notice would fairly apprise interested persons of the subjects and issues of the rulemaking." Nat'l Black Media Coal. v. FCC, 791 F.2d 1016, 1022 (2d Cir. 1986) (quotation marks omitted).

         3. Regulatory History

         Our decisions in Riverkeeper I, 358 F.3d 174, and Riverkeeper II, 475 F.3d 83, discuss at length the history of the EPA's rulemaking pursuant to section 316(b) of the CWA. We assume familiarity with those decisions and therefore provide only a brief overview of the various stages of the rulemaking relevant to these petitions.

         The EPA first promulgated a regulation implementing section 316(b) in 1976. See 41 Fed. Reg. 17, 387 (Apr. 26, 1976). The Fourth Circuit remanded certain aspects of that regulation for procedural reasons, see Appalachian Power Co. v. Train, 566 F.2d 451, 457 (4th Cir. 1977), and the EPA subsequently withdrew the remanded regulation, see 44 Fed. Reg. 32, 854, 32, 956 (June 7, 1979).

         In 1993 environmental conservation groups sued the EPA to compel the issuance of regulations under section 316(b), which had already been significantly delayed. An amended 1995 consent decree required the EPA to promulgate new regulations in three phases, each addressing a different category of facilities. See Riverkeeper, Inc. v. Whitman, No. 93 Civ. 0314(AGS), 2001 WL 1505497, at *1 (S.D.N.Y. Nov. 27, 2001); Cronin v. Browner, 898 F.Supp. 1052, 1055 (S.D.N.Y. 1995). We describe each phase in turn.

         The EPA's Phase I rule, published in 2001, ^[5] established uniform national BTA standards for new facilities based on closed-cycle cooling and offered two alternative compliance options. See 40 C.F.R. § 125.84; 79 Fed. Reg. at 48, 315-16. In Riverkeeper I, we upheld the Phase I rule with the exception of the compliance option based on "restoration measures," holding that restoration was inconsistent with Congress's expressed intent in section 316(b) that the EPA directly regulate the "design" of CWISs. 358 F.3d at 189-91.

         The EPA's Phase II rule, published in 2004, provided that large, existing power plants could comply with BTA performance standards by choosing from a suite of designated technologies that would reduce impingement mortality by 80 to 95 percent and entrainment by 60 to 90 percent. See 69 Fed. Reg. 41, 576, 41, 590 (July 9, 2004). The Phase II rule identified five compliance options, including a "cost-benefit comparison" option that allowed site-specific variances from the rule's standards if a facility demonstrated that its compliance costs would be "significantly greater than" the benefits. Id. at 41, 591, 41, 597. In Riverkeeper II, we held that section 316(b) does not authorize the EPA to determine the BTA or provide for site-specific determinations of the BTA based on a cost-benefit analysis. 475 F.3d at 101, 114, 130-31. Because we could not determine whether the EPA had relied on a cost-benefit analysis in selecting the rule's suite of technologies as the BTA, we remanded the Phase II rule for the EPA to clarify the basis for its decision and possibly to reassess the BTA. Id. at 101, 105. In Entergy Corp. v. Riverkeeper, Inc., the Supreme Court granted certiorari only as to the question whether section 316(b) "authorizes the EPA to compare costs with benefits in determining 'the best technology available for minimizing adverse environmental impact' at [CWISs]." 556 U.S. at 217. The Supreme Court answered that question in the affirmative, "express[ing] no view on the remaining bases for the Second Circuit's remand." Id. at 226.

         Lastly, the EPA's Phase III rule, published in 2006, established standards for new offshore facilities, smaller existing power plants, and existing manufacturing facilities. See 71 Fed. Reg. 35, 006 (June 16, 2006). After petitioners challenged the Phase III rule in the Fifth Circuit, the EPA requested and received a partial remand of the rule so that it could reconsider the provisions addressing existing facilities in light of Entergy. See ConocoPhillips Co. v. EPA, 612 F.3d 822, 832, 842 (5th Cir. 2010).

         4. The Challenged Rule

         In response to the Phase II and III remands, the EPA proposed a new round of rulemaking for all existing facilities and new units at existing facilities. See National Pollutant Discharge Elimination System-Cooling Water Intake Structures at Existing Facilities and Phase I Facilities, 76 Fed. Reg. 22, 174 (Apr. 20, 2011). Several rounds of comment on the proposed rule followed, and the EPA ultimately reviewed comments from over 1, 100 organizations and individuals. 79 Fed. Reg. at 48, 352.

         In 2012 the EPA initiated ESA consultation with the Services on the effects of the proposed rule on listed species and their critical habitat. During informal consultation, the Services disagreed with the EPA's determination, in a draft biological evaluation, that the proposed rule was unlikely to have adverse effects on listed species. On June 18, 2013, after several meetings between the agencies, the EPA requested formal section 7 consultation and submitted a final biological evaluation. With that evaluation in hand, in late 2013 the Services preliminarily concluded that the proposed rule would cause "jeopardy" as defined in the ESA. The EPA and the Services continued to discuss the proposed rule and revisions, culminating in a draft final rule in March 2014. Soon thereafter, in May 2014, the Services jointly issued a biological opinion, concluding that although the operation of CWISs could have significant adverse effects on listed species and their critical habitat, the proposed rule's inclusion of certain process-based protections ensured that it was not likely to "jeopardize" the continued existence of listed species or "adversely modify" critical habitat within the meaning of ESA section 7. See U.S. Fish and Wildlife Service & National Marine Fisheries Service, Endangered Species Act Section 7 Consultation Programmatic Biological Opinion on the U.S. Environmental Protection Agency's Issuance and Implementation of the Final Regulations Section 316(b) of the Clean Water Act 71 (2014) ("Bio. Op."). The biological opinion also included an ITS, which found that the "large scale and broad scope" of the proposed rule precluded an accurate estimate of the precise amount of incidental take. Id. at 76. The Services therefore deferred quantification of incidental take to the site-specific permitting process laid out in the proposed rule.

         The Final Rule promulgated by the EPA and challenged by the Petitioners applies to existing power plants and manufacturing facilities that use CWISs to withdraw more than 2 million gallons of water per day ("mgd"), of which 25 percent or more is used for cooling.^[6] See 79 Fed. Reg. at 48, 304-05. As we discuss in more detail and as relevant below, the Rule establishes impingement and entrainment standards for existing facilities and for new units at existing facilities, id. at 48, 321-23, and it implements several processes to ensure compliance with the ESA, id. at 48, 380-83.

         5. Procedural History

         After the Final Rule was published, petitions for review were filed in six Circuits. The Fourth Circuit consolidated the petitions, allowed the Petitioners to intervene in one another's suits, and transferred the consolidated petitions to this Circuit pursuant to 28 U.S.C. § 2112(a)(5). We then granted the Petitioners leave to amend their petitions to include challenges to the Services' biological opinion and to add the Services as respondents. We also granted the motion filed by the Center for Biological Diversity, Louisiana Environmental Action Network, California Coastkeeper Alliance, Humboldt Baykeeper, Suncoast Waterkeeper, Inc., and Puget Soundkeeper Alliance for leave to intervene as petitioners.

         6. The Petitions

         Four petitions for review are before us.

         A. Environmental Petition

         The first petition, filed by the self-described "Environmental Petitioners" and "Environmental Intervenors" (collectively, the "Environmental Petitioners"), ^[7] argues that: (1) the Rule's entrainment and impingement requirements violate section 316(b) of the CWA in several ways; (2) the Rule's definition of "new unit" is arbitrary and capricious under the APA insofar as it excludes rebuilt, repowered, and replaced units; (3) the Services violated section 7 of the ESA and its implementing regulations, especially by finding that the Rule incorporates adequate process-based protections to avoid jeopardizing listed species; and (4) the Services' ITS fails to meet the requirements set forth in section 7(b)(4) of the ESA. The Environmental Petitioners seek vacatur and remand of the Final Rule and request that we declare unlawful and set aside the biological opinion and ITS issued by the Services. B. Industry Association Petition The second petition, filed by several industry associations we refer to collectively as "UWAG, "^[8] challenges the Rule primarily on the grounds that: (1) the EPA exceeded its authority under the CWA; (2) the Services violated the ESA by, among other things, issuing a biological opinion that relied on an erroneous environmental baseline; and (3) the EPA violated the APA by failing to provide notice of and an opportunity to comment on certain provisions of the Rule adopted at the Services' behest. UWAG requests that we vacate these so- called "Service-driven" provisions and set aside the Services' biological opinion.

         C. American Petroleum Institute Petition

         The third petition, separately filed by the American Petroleum Institute ("API"), argues that the EPA violated the APA when it concluded that manufacturing facilities will incur minimal compliance costs in meeting the Rule's standards for "new units," and when in the proposed rule it defined "new unit" so vaguely that interested parties were deprived of notice and an opportunity to comment.

         D.CWIS Coalition Petition

         The fourth petition, separately filed by the Cooling Water Intake Structure Coalition ("CWIS Coalition" or "Coalition"), argues that the EPA acted arbitrarily and capriciously in violation of the APA with respect to permit application requirements and with respect to requirements for intake structures that withdraw little or no water exclusively for cooling purposes.

         DISCUSSION

         1. Jurisdiction

         We have jurisdiction to review the Final Rule pursuant to CWA section 509(b)(1), 33 U.S.C. § 1369(b)(1). See Riverkeeper II, 475 F.3d at 95. Because evaluating the biological opinion's "evidentiary and analytic basis is . . . integral to reviewing the EPA's final decision," we can "consider the adequacy of both the section 7 consultation and the [b]iological [o]pinion that resulted from it while reviewing the EPA's final decision." Defs. of Wildlife v. EPA, 420 F.3d 946, 956 (9th Cir. 2005), rev'd on other grounds, Nat'l Ass'n of Home Builders v. Defs. of Wildlife, 551 U.S. 644 (2007).

         2. Standard of Review

         Our substantive review of the Rule has two steps. "First, we examine the regulation against the statute that contains the [agency's] charge." Riverkeeper II, 475 F.3d at 95 (quotation marks omitted). If Congress "has directly spoken to the precise question at issue" and has unambiguously expressed its intent, we must give effect to that intent. Chevron U.S.A., Inc. v. Nat'l Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984). If the statute is silent or ambiguous, we ask only "whether the agency's answer is based on a permissible construction of the statute," id. at 843, that is, we ask whether the agency's action is "arbitrary, capricious, or manifestly contrary to the statute," Riverkeeper I, 358 F.3d at 184 (quotation marks omitted). "Second, if the agency has followed Congress's unambiguously expressed intent or permissibly construed an ambiguous statute, we measure the regulation against the record developed during the rulemaking," Riverkeeper II, 475 F.3d at 95 (quotation marks omitted), holding it unlawful only if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law," id. (quoting 5 U.S.C. § 706(2)(A)). Our review is "narrow, limited to examining the administrative record to determine whether the agency decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Riverkeeper I, 358 F.3d at 184 (quotation marks omitted). Because "we lack the [agencies'] expertise when it comes to scientific or technical matters," id., we look only to see whether the agency "examined the relevant data and articulated a satisfactory explanation for its action," and whether there is a "rational connection between the facts found and the choice made," Nat. Res. Def. Council v. FAA, 564 F.3d 549, 555 (2d Cir. 2009) (quoting Motor Vehicle Mfrs. Ass'n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). We apply the same analysis to the Services' biological opinion. See Bennett v. Spear, 520 U.S. 154, 177-78 (1997); Defs. of Wildlife v. U.S. Dep't of the Navy, 733 F.3d 1106, 1114-15 (11th Cir. 2013).

         We also review the Rule for compliance with the procedural requirements of the APA. See 5 U.S.C. § 553(b), (c). In particular, we will remand for further proceedings if an agency fails to comply with the APA's ...