ConocoPhillips Co, et al v. EPA

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06-60772

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Case: 06-60662 Document: 00511197363 Page: 1 Date Filed: 08/06/2010 REVISED AUGUST 6, 2010 IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED July 23, 2010 N o . 06-60662 Lyle W. Cayce Clerk C O N O C O P H I L L I P S CO; ANADARKO PETROLEUM CORP; SURFRIDER F O U N D A T I O N ; MASSACHUSETTS PUBLIC INTEREST PROTECTION R E S E A R C H GROUP; SOUNDKEEPER INC; DELAWARE RIVERKEEPER N E T W O R K ; AMERICAN LITTORAL SOCIETY; RARITAN BAYKEEPER I N C , dba NY/NJ BAYKEEPER; SAVE THE BAY-PEOPLE FOR N A R R A G A N S E T T BAY; FRIENDS OF CASCO BAY; SANTA MONICA BAYKEEPER P e titio n e rs v. U N IT E D STATES ENVIRONMENTAL PROTECTION AGENCY; S T E P H E N L JOHNSON, ADMINISTRATOR, UNITED STATES E N V I R O N M E N T A L PROTECTION AGENCY, IN HIS OFFICIAL C A P A C I T Y AS ADMINISTRATOR OF THE UNITED STATES EPA R espon dent A M E R I C A N PETROLEUM INSTITUTE R e s p o n d e n t -I n t e r v e n o r A p p e a l from the Environmental Protection Agency 1 Case: 06-60662 Document: 00511197363 Page: 2 Date Filed: 08/06/2010 No. 06-60662 B e fo r e JOLLY,* WIENER, BARKSDALE, Circuit Judges. W I E N E R , Circuit Judge: B e fo r e us are various consolidated challenges to a Final Rule (the "Rule") p r o m u lg a t e d 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 u s e of cooling water intake structures ("CWIS") for both existing and new o ffs h o r e oil and gas extraction facilities. Originally, the environmental P e t it io n e r s (collectively "Riverkeeper") challenged the Rule as it applies to e x is t in g facilities, and the industry Petitioners (collectively "ConocoPhillips") c h a lle n g e d the Rule as it applies to new facilities. In light of the Supreme Court's d e c is io n in Entergy Co. v. Riverkeeper,1 however, Riverkeeper and the EPA have n o w jointly moved voluntarily to remand the existing-facilities portion of the R u le for reconsideration; Intervenor American Petroleum Institute ("Intervenor A P I " ) opposes remand. We grant the joint motion to remand and affirm the portion of the Rule t h a t regulates new offshore facilities. I . Facts and Proceedings A . Prior Rule Making under Rule 316(b) of the Clean Water Act T h r o u g h the use of CWIS, industrial facilities, such as offshore oil and gas e x t r a c t io n vessels (or "rigs"),2 withdraw and re-circulate, in the aggregate, b illio n s of gallons of water per day from this country's seas, lakes, and rivers. * Judge Jolly concurs in the result. 129 S. Ct. 1498 (2009). 1 For simplicity's sake, we adopt ConocoPhillips's convention of referring to all offshore oil and gas drilling and extraction facilities as "facilities" or "rigs," even though only offshore mobile drilling units are called "rigs," as both and fixed and mobile units employ CWIS. 2 2 Case: 06-60662 Document: 00511197363 Page: 3 Date Filed: 08/06/2010 No. 06-60662 T h is enormous intake of water often results in the impingement and e n tr a in m e n t of aquatic biomass. (Impingement is the trapping of an organism a g a in s t the intake structure, and entrainment is the uptake of an organism into t h e cooling system itself.)3 Impingement and entrainment can seriously affect n o t only the population and viability of an aquatic species, but the health of a q u a t ic ecosystems as well. T h e purpose of the CWA is to restore and maintain the chemical, physical, a n d biological integrity of the nation's waters.4 Recognizing the impact of CWIS o n the nation's marine environments, Congress empowered the EPA to regulate C W I S under the Act. Section 316(b) of the Act regulates CWIS by requiring th a t: A n y standard established pursuant to section 1311 of this title or section 1 3 1 6 of this title and applicable to a point source shall require that the lo c a tio n , design, construction, and capacity of cooling water intake s t r u c t u r e s reflect the best technology available for minimizing adverse e n v ir o n m e n ta l impact.5 D e s p ite the seemingly straightforward mandate of 316(b), successful and e ffe c t i v e rule making under this section has been elusive. The first Rule was is s u e d in 1976,6 but, before being implemented, it was successfully challenged a n d remanded by the Fourth Circuit for procedural defects that violated the Establishing Requirements for Cooling Water Intake Structures at Phase III Facilities, 71 Fed. Reg. 35,013 (June 16, 2006) (codified at 40 C.F.R. pts. 9, 122, 123, 124, and 125). 4 3 33 U.S.C. 1251(a). Codified at 33 U.S.C. 1326(b). 41 Fed. Reg. 17,387 (Apr. 26, 1976). 5 6 3 Case: 06-60662 Document: 00511197363 Page: 4 Date Filed: 08/06/2010 No. 06-60662 A d m in is tr a t iv e Procedures Act (the "APA").7 The EPA withdrew the remanded p o r t io n s of the Rule, but left intact those unremanded portions that required e a c h National Pollutant Discharge Elimination System ("NPDES") permitting a u t h o r it y to use its "best professional judgment" to determine the "best t e c h n o lo g y available" for CWIS regulation.8 This regulatory regime remained in effect until 1995, when Riverkeeper and other petitioners obtained a consent d e c r e e 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 m a k in g :1 0 Phase I applies to all new CWIS facilities above a particular intake t h r e s h o ld size, except new offshore oil rigs (the regulation of which was p o s t p o n e d until Phase III);1 1 Phase II applies to existing large power plants that t a k e in more than 50 million gallons of water a day;1 2 and Phase III (at issue h e r e ) regulates (1) existing facilities, including paper, chemical, petroleum, a lu m in u m , and steel manufacturers, small power plants, and other facilities (c o lle c t iv e ly "existing facilities"), (2) new offshore oil and gas extraction facilities 7 Appalachian Power Co. v. Train, 566 F.2d 451 (4th Cir. 1977). 71 Fed. Reg. at 35,011. 71 Fed. Reg. at 35,011. 8 9 The EPA entered into a Second Amended Consent Decree on November 25, 2002, modifying each phase's deadlines as established in the first Consent Decree. Id. at 35,011. Regulations Addressing Cooling Water Intake Structures for New Facilities, 66 Fed. Reg. 65,256 (December 18, 2001) (codified at 40 C.F.R. pts. 9, 122, 123, 124, and 125). The EPA made minor changes to this Final Rule in 67 Fed. Reg. 78,948 (December 26, 2002). Final Regulations to Establish Requirements for Cooling Water Intake Structures at Phase II Existing Facilities, 69 Fed. Reg. 41,576 (July 8, 2004) (codified at 40 C.F.R. pts. 122, 123, 124, and 125). 12 11 10 4 Case: 06-60662 Document: 00511197363 Page: 5 Date Filed: 08/06/2010 No. 06-60662 (" n e w oil rigs"), (3) new offshore liquified natural gas facilities, and (4) new s e a fo o d processing vessels.13 1 . Final Phase I Rule A fte r the Final Phase I Rule was published, it was challenged by both e n v ir o n m e n t a l and industry petitioners. The Second Circuit reviewed the Rule a n d generally upheld it in Riverkeeper, Inc. v. EPA (Riverkeeper I).1 4 The Phase I Rule established two tracks for regulating CWIS for new facilities. Track I c r e a t e d a uniform, national system for intake and velocity based on closed-cycle c o o lin g technology.1 5 The EPA stated that the closed-cycle system is the "best t e c h n o lo g y available" for minimizing environmental impact.1 6 Track II allowed t h e use of any technological approach that "can show, in demonstration study, `t h a t the technologies employed will reduce the level of adverse environmental im p a c t . . . to a comparable level to that which' would be achieved applying Track I 's capacity and velocity requirements."1 7 Track II also allowed facilities to e m p lo y "restoration measures" such as restocking, reclamation, and migration b a r r ie r removal as part of its "comparable" standard, so as to maintain w ild life levels in affected bodies of water.18 A lt h o u g h the Second Circuit upheld most of the Phase I Rule, it did rule t h a t the "restoration measures" provision was inconsistent with 316(b)'s 13 71 Fed. Reg. 35,030. 358 F.3d 174 (2d Cir. 2004). Id. at 182-83. Id. at 183. Id. (quoting 40 C.F.R. 125.84(d)(1)). Id. 14 15 16 17 18 5 Case: 06-60662 Document: 00511197363 Page: 6 Date Filed: 08/06/2010 No. 06-60662 r e q u ir e m e n t that the EPA minimize adverse environmental impacts by r e g u la t i n g the location, design, construction, and capacity of CWIS. This was b e c a u s e the "restoration measures" had nothing to do with location, design, c o n s t r u c t io n , or capacity.1 9 Holding that the EPA exceeded its authority by in c lu d in g the "restoration measures" in the Rule, the Second Circuit remanded t h a t portion of the Rule to the EPA.20 2 . Final Phase II Rule T h e Final Phase II Rule regulates CWIS at large, existing power plants t h a t are "point sources" and that primarily generate electric power and either t r a n s m it it or sell it to another entity for transmission, and whose CWIS use are p r o p o s e d to use 50 million gallons or more of water a day.2 1 That rule set forth fiv e compliance alternatives from which a facility could select and implement " `fo r establishing [the] best technology available for minimizing adverse e n v ir o n m e n t a l impact.'"2 2 One of the compliance alternatives available to e x is t in g power plants was to employ a closed-cycle CWIS, but selection of such a system was not required.2 3 The remaining compliance alternatives referenced n a t io n a l performance standards that "`are based on consideration of a range of t e c h n o lo g ie s that [the] EPA has determined to be commercially available.'" 2 4 The 19 Id. at 189. Id. 20 Riverkeeper, Inc. v. EPA (Riverkeeper II), 475 F.3d 83, 92 (2d Cir. 2007) (citing 40 C.F.R. 125.91) rev'd and remanded by Entergy Corp. v. Riverkeeper, Inc., 129 S.Ct. 1498 (2009). 22 21 Id. (quoting 40 C.F.R. 125.94(a)). Id. at 93. Id. (quoting 69 Fed. Reg. at 41,598-99). 23 24 6 Case: 06-60662 Document: 00511197363 Page: 7 Date Filed: 08/06/2010 No. 06-60662 P h a s e II Rule also created two site-specific compliance variances from the n a t io n a l performance standards. The first compliance variance the "costc o m p lia n c e alternative" provides that if a facility demonstrates that the cost o f compliance would be significantly greater than the projected costs by the EPA, t h e local permitting authority had to make a site-specific determination of the " b e s t technology available" as close to the applicable national performance s t a n d a r d s as practicable, but without producing costs "significantly greater" t h a n those considered by the EPA during rule making.2 5 The second compliance v a r ia n c e the "cost-benefit alternative" provides that, if a facility d e m o n s t r a t e s that the costs of compliance with the national standards is s ig n ific a n t l y greater than the benefits of compliance, the local permitting a u t h o r it y could make a site-specific determination of the "best technology a v a ila b le " that is as close as practicable to the national performance standards.2 6 A fte r various states and environmental groups challenged the Final Phase I I 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 r e m e d ia t io n can be reasonably borne by the industry; or (2) which remedial t ech n olog ie s are the most cost-effective.2 7 The Second Circuit also held, however, t h a t it is impermissible under 316(b) to consider a cost-benefit analysis that c o m p a r e s the costs and benefits of various regulatory options and choose the o p t io n with the best net benefits.2 8 The court remanded the Rule to the EPA for 25 Id. at 94 (citing 40 C.F.R. 125.94(a)(5)(I)). Id. (citing 40 C.F.R 124.94(a)(5)(ii)). Id. at 98. Id. 26 27 28 7 Case: 06-60662 Document: 00511197363 Page: 8 Date Filed: 08/06/2010 No. 06-60662 c la r ific a t io n whether the national performance standards set out in the Phase I I Rule incorporated a cost-benefit analysis.2 9 On remand, the EPA suspended o p e r a t io n of the Rule pending further rule making, and the Supreme Court g r a n t e d certiorari3 0 limited to the question whether 316(b) "authorizes the [E P A ] to compare costs with benefits in determining the best technology a v a ila b le for minimizing adverse environmental impact at cooling water intake s t r u c t u r e s ." 3 1 3 . Entergy Corp. v. Riverkeeper I n Entergy Corp. the Supreme Court considered both the plain language o f the Act and the structure of the Act as a whole to address whether the Act p r e c lu d e s a cost-benefit analysis.3 2 The Court first considered the Second C ir c u it 's interpretation of 316(b) that the phrase "best technology available for m in im iz in g adverse environmental impact" means "technology that achieves the g r e a t e s t reduction in adverse environmental impacts."3 3 The Court described t h is interpretation as "plausible,"but reasoned that "best technology available" c o u ld also mean "technology that most efficiently produces some good." 3 4 The C o u r t read the statute's phrase "minimizing adverse environmental impact" as a llo w in g the EPA to consider the degree of adverse-impact reduction rather than 29 Id. at 104-105. 128 S. Ct. 1867 (2008). Id. at 1867 (internal quotation marks omitted). 129 S. Ct. at 1505-07. Id. at 1506 (citing Riverkeeper II, 475 F.3d at 88-100). Id. (emphasis original). 30 31 32 33 34 8 Case: 06-60662 Document: 00511197363 Page: 9 Date Filed: 08/06/2010 No. 06-60662 m a n d a t in g that the "greatest possible reduction in environmental harm" be a c h ie v e d .3 5 The Court determined that the statute afforded the EPA "some d is c r e t io n to determine the extent of reduction that is warranted under the c ir c u m s t a n c e s "3 6 and that the phrase "best technology available" does not p r e c lu d e cost-benefit analysis.37 T h e Court also considered whether 316(b)'s silence as to cost-benefit a ffir m a t iv e ly prohibited the agency from employing a cost-benefit analysis. The C o u r t rejected such a reading, holding that the statute's silence "is meant to c o n v e y nothing more than a refusal to tie an agency's hands as to whether costb e n e fit analysis should be used, and if so to what degree."3 8 The Court reversed t h e Second Circuit's remand of the Phase II Rule that rested on that court's r e a d in g of cost-benefit preclusion. Entergy Corp. lucidly establishes that the EPA may employ cost-benefit a n a ly s is when effecting regulations that reflect the "best technology available for m in im iz in g adverse environmental impact." The Entergy Corp. Court also e n d o r s e d the idea, however, that, although it may employ cost-benefits analysis in rule making, the EPA is not required to do so, and is afforded discretion to c o n s id e r to what degree, if any, costs and benefits should be weighed in d e t e r m in in g the "best technology available to minimizing adverse environmental im p a c t ."3 9 35 Id. Id. Id. Id. at 1507. Id. at 1506. 36 37 38 39 9 Case: 06-60662 Document: 00511197363 Page: 10 Date Filed: 08/06/2010 No. 06-60662 4 . The Phase III Rule T h e final phase of CWIS rule making commenced in November, 2004 when t h e EPA published and sought comment on its Phase III Rule.4 0 For existing fa c ilit ie s , the EPA proposed three classifications based on daily volume of water in t a k e use: 50 million gallons; between 100 and 200 million gallons; and more t h a n 200 million gallons.4 1 Additionally, the EPA gave notice that it might c o n t in u e its current case-by-case regulation instead of implementing a national c a t e g o r ic a l approach.4 2 For new facilities, however, the EPA proposed national c a t e g o r ic a l standards for CWIS regulation.4 3 On November 25, 2005, the EPA p u b lis h e d a Notice of Data Availability that summarized the data that the EPA h a d received and collected since publishing the Proposed Rule;4 4 on June 16, 2 0 0 6 , the EPA published the Final Phase III Rule.4 5 The EPA noted that it c o n s id e r e d input from environmental, industry, engineering, and governmental e n tit ie s , held symposia to discuss research and costs of proposed technologies, a n d considered the materials from the Phase I and II rule makings.46 A d d it io n a lly , the EPA conducted entrainment studies for existing Phase III 40 69 Fed. Reg. 68,444. Id. Id. at 68,467. Id. at 68,444. 70 Fed. Reg. 71,057. 71 Fed. Reg. 35,006 (codified in 40 C.F.R. pts. 9, 122, 123, 124, and 125). Id. at 35,012/2-3. 41 42 43 44 45 46 10 Case: 06-60662 Document: 00511197363 Page: 11 Date Filed: 08/06/2010 No. 06-60662 C W I S and collected industry-wide data regarding new facilities.4 7 F o r existing Phase III facilities, the EPA performed cost-benefit analyses fo r evaluating the national social and economic costs and benefits of the three g a llon s-p e r-d a y categories of structures.4 8 It calculated social costs by evaluating c o m p lia n c e and administrative costs to the state and federal governments.4 9 The e c o n o m ic costs were evaluated based on the financial impact that the national c a t e g o r ic a l standards would have on the existing facilities' firms.5 0 The national b e n e fits assessment included considering use (economic resource exploitation) a n d non-use (resource use for other than economic reason) benefits.5 1 The EPA a ls o compared the annual monetized social costs of compliance with the annual m o n e tiz e d environmental benefits of compliance.5 2 For the 50 million gallons per d a y category, the EPA concluded that the annual costs of compliance would be b e tw e e n $38.3 million and $39 million and that the annual monetized benefits w o u ld be between $1.8 and $2.3 million, which led the EPA to conclude that the c o s t s of compliance were "wholly disproportionate" to the benefits.5 3 The EPA a ls o concluded that the non-monetized benefits were unlikely to alter the 47 Id. Id. at 35,030-32. Id. at 35,031. Id. at 35,032. Id. at 35,032-33. Id. at 35,017. Id. 48 49 50 51 52 53 11 Case: 06-60662 Document: 00511197363 Page: 12 Date Filed: 08/06/2010 No. 06-60662 m o n e tiz e d cost-benefit ratio.54 F o r new Phase III facilities,5 5 the EPA concluded that it was impossible to c o m p a r e the costs incurred by individual facilities to the benefits of those fa c ilit ie s because those facilities have not yet been built.5 6 Instead, the EPA c a lc u la t e d the expected costs of compliance under the national uniform s t a n d a r d s and determined whether those costs would result in a barrier to entry fo r new operations and whether those costs could be reasonably borne by the in d u s t r y .57 T h e EPA also conducted a qualitative environmental impact study to d e t e r m in e the adverse effects of impingement and entrainment by new CWIS.58 T h e EPA stated that it was relying in part on information that had been g a t h e r e d since its Phase I rule making, including industry-wide surveys of t e c h n ic a l and economic data.5 9 The EPA calculated the total annualized social c o s t of compliance to be between $3.2 million and $3.8 million,6 0 that the e c o n o m ic impact would pose no barrier to entry, and that the industry could r e a s o n a b ly bear the costs of compliance because no new facilities would be p r e v e n t e d from operating and no new operations would be forced to cease 54 Id. 40 C.F.R. 125.130 et seq. 71 Fed. Reg. 35,034. Id. at 35,025-29. Id. at 35,013-14/1, 35,016/1. Id. at 35,012. Id. at 35,025. 55 56 57 58 59 60 12 Case: 06-60662 Document: 00511197363 Page: 13 Date Filed: 08/06/2010 No. 06-60662 o p e r a t io n s because of the costs of compliance.6 1 T h e EPA's environmental impact analysis focused on the Gulf of Mexico, w h e r e the majority of new rig construction would occur over the next 20 years.6 2 T h e EPA could find no studies that specifically addressed entrainment or im p in g e m e n t for new rigs, so it relied on the Southeast Area Monitoring and A s s e s s m e n t Program ("SEAMAP") to provide information about icthyoplankton d e n s it ie s in the Gulf,6 3 which, it observed, were the same range of densities ob serv ed in the inland and coastal waters addressed in the Phase I rule m a k in g .6 4 The EPA also took into account that offshore rigs serve as marine h a b it a t s , attracting and concentrating marine life in their vicinities.6 5 T h e Phase III Rule for existing facilities specifies that CWIS requirements a r e to be established on a case-by-case basis under the NPDES program, in a c c o r d a n c e with 40 C.F.R. 125.90(b).6 6 Accordingly, individual permit writers a r e to use their "best professional judgment" to determine, on a case-by-case b a s is , the requirements that each facility must meet to achieve the best 61 Id. at 35,027-29. Id. at 35,013. 62 The Southeast Area Monitoring and Assessment Program (SEAMAP) is a two decades-long study (1982-2003) of icthyoplankton and fish egg density in the Gulf of Mexico. See id. at 35,013-35,016. The EPA referenced this study in evaluating the potential environmental harm associated with CWIS. The EPA used this Gulf study as a proxy for all the country's waters, as comparisons to other pinpoint studies of specific waters demonstrated similar to nearly uniform levels of biomass densities at corresponding depths. Id. at 35,013. 64 63 Id. at 35,013, 35,019. Id. at 35,013 (citing studies of marine life densities surrounding California and Alaska offshore rigs and in the Gulf). 66 65 Id. at 35,009. 13 Case: 06-60662 Document: 00511197363 Page: 14 Date Filed: 08/06/2010 No. 06-60662 t e c h n o lo g y available for minimizing adverse environmental impact at that fa c ilit y .67 F o r new offshore fixed and mobile facilities, the Rule applies national p e r fo r m a n c e standards for any rig that is a "point source" and is thus required t o have a NPDES permit, has a CWIS that uses at least 25% of water intake for c o o lin g only, and withdraws at least 2 million gallons of water per day.6 8 This n a t io n a l standard applies to all "coastal" or "offshore" oil and gas extraction fa c ilit ie s (there is an exception to the national standards for rigs located in tidal r iv e r s or estuaries).69 T h e Phase III Rule for new facilities creates two compliance options. First, the Rule distinguishes facilities as either fixed or non-fixed, and fixed fa c ilit ie s are further distinguished as those possessing a sea chest (openings in t h e hull of a vessel for withdrawing cooling water) and those that do not. Fixed fa c ilit ie s may choose to employ either Track I or Track II. Mobile units may only e m p lo y Track I, which requires the facility to minimize entrainment by reducing t h r o u g h -s c r e e n velocity to 0.5 f/s or less. Facilities that use sea chests need not e m p lo y fish-protection technologies, but facilities without sea chests must e m p lo y entrainment protection. Mobile units need only comply with the t h r o u g h -s c r e e n velocity limit and are not required to employ entrainment c o n t r o ls .7 0 Track II allows a fixed facility to employ "alternative technologies" 67 Id. at 35,015. 40 C.F.R. 125.131(a). 71 Fed. Reg. at 35,021. 68 69 The Agency determined that such controls would compromise the seaworthiness of the mobile units. 71 Fed. Reg. 35,014. 70 14 Case: 06-60662 Document: 00511197363 Page: 15 Date Filed: 08/06/2010 No. 06-60662 t o demonstrate impingement minimization comparable to that afforded by the 0 .5 f/s through-screen velocity limit. Like Track I, Track II fixed facilities must e it h e r employ a sea chest or entrainment control. F in a lly , all facilities are subject to impingement-minimization controls if t h e permitting authority determines that endangered, sport, commercial, or m ig r a t o r y species are threatened. Furthermore, any offshore facility may seek a "variance" from the impingement and entrainment requirements by d e m o n s t r a t in g that the requirements would result in "compliance costs wholly o u t of proportion to the costs the EPA considered in establishing the requirement . . . or would result in significant adverse impacts on local water resources other t h a n impingement and entrainment, or significant adverse impacts on energy m a r k e t s ." 71 B . Petitioners' Challenges A fte r the EPA published notice of the Final Rule on June 16, 2006, c h a lle n g e s to it were filed in several courts of appeals. As these challenges to a g e n c y action were brought under the "other limitations" portion of 33 U.S.C. 1 3 6 9 (b )(1 )(E ), the courts of appeal have exclusive jurisdiction to hear them. These challenges were consolidated by a multi-district litigation ("MDL") panel a n d randomly assigned to this court. Riverkeeper moved for change of venue to t h e Second Circuit, which we denied. Riverkeeper then filed a parallel action in t h e Southern District of New York challenging the "inaction" (as they now term it ) of the EPA in the Rule for existing facilities. That suit has been stayed p e n d in g our determination of jurisdiction. And then, after the instant case was fu lly briefed, it was stayed pending the Supreme Court's decision in Entergy 71 40 C.F.R. 125.135. 15 Case: 06-60662 Document: 00511197363 Page: 16 Date Filed: 08/06/2010 No. 06-60662 C o r p ., which was handed down on April 1, 2009. It was in light of this decision t h a t Riverkeeper and the EPA filed a motion for voluntary remand of the e x is t in g -fa c ilitie s Rule, which motion Intervenor API opposes. We ordered that m o t io n to be carried with this case. C o n o c o P h illip s argues that the EPA acted arbitrarily and capriciously in p r o m u lg a t in g national categorical standards for new facilities because these s t a n d a r d s do no take into account facility location. ConocoPhillips also asserts t h a t the EPA acted arbitrarily and capriciously by failing to perform the r e q u is it e cost-benefit analyses, and by relying on so-called "qualitative" rather t h a n quantitative data. In the alternative, ConocoPhillips also contends that the q u a lit a t iv e data demonstrate that the EPA acted arbitrarily and capriciously in p r o m u lg a t in g a uniform national standard. Finally, ConocoPhillips now asserts in its reply brief that the EPA has violated 553(b)'s required notice and c o m m e n t procedure by advancing in its Response a "litigating position" that d iffe r s from its original statutory interpretation of 316(b) as articulated in the P r o p o s e d and Final Rules. I I . Standard of Review W e have jurisdiction over challenges to an agency's action that result in " o t h e r limitations" under the CWA,7 2 and coolant water intake regulations are d e e m e d "other limitations." 7 3 Reviews of agency interpretations of statutes are in fo r m e d by the Supreme Court's decision in Chevron, U.S.A. v. National R e s o u r c e Defense Counsel.7 4 Under Chevron, a reviewing court must first look 72 33 U.S.C. 1369(b)(1)(E). E.g., Riverkeeper II, 358 F.3d at 183-84. 467 U.S. 837, 842-43 (1984). 73 74 16 Case: 06-60662 Document: 00511197363 Page: 17 Date Filed: 08/06/2010 No. 06-60662 t o whether Congress has directly spoken to the precise question at issue.7 5 If the c o u r t finds that congressional intent is clear, then that interpretation controls.76 I f not, however, the question for the reviewing court is whether the agency's in t e r p r e t a t io n is based on a permissible construction of the statute.7 7 An a g e n c y 's interpretation is permissible if it is reasonable. The question of r e a s o n a b le n e s s is not whether the agency's interpretation is the only possible in t e r p r e t a t io n or whether it is the most reasonable, merely whether it is r e a s o n a b le vel non.78 I n the absence of a specified mechanism of judicial review of the agency a c t io n under judicial review, the APA governs.7 9 5 U.S.C. 706(2)(A) directs that w h e n reviewing agency "action, findings, and conclusions" the court shall hold t h e action of the agency unlawful only if it is found to be "arbitrary, capricious, a n abuse of discretion, or otherwise not in accordance with law." 8 0 "Under this h ig h ly deferential standard of review, a reviewing court has the least latitude i n finding grounds for reversal. Courts may not use review of an agency's e n v i r o n m e n t a l analysis as a guise for second-guessing substantive decisions c o m m it t e d to the discretion of the agency."8 1 "An agency rule is arbitrary and 75 Id. at 842. Id. Id. at 843. Riverkeeper III, 129 S. Ct. at 1505. 5 U.S.C. 703. Id. at 706(2)(A). City of Dallas v. Hall, 562 F.3d 712, 717 (5th Cir. 2009) (internal citations omitted). 76 77 78 79 80 81 17 Case: 06-60662 Document: 00511197363 Page: 18 Date Filed: 08/06/2010 No. 06-60662 c a p r ic io u s `if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, o ffe r e d an explanation for its decision that runs counter to the evidence before t h e agency, or is so implausible that it could not be ascribed to a difference in v ie w or the product of agency expertise.'"8 2 The scope of the reviewing court's in q u iry is to determine if the agency's judgment conforms to minimum standards o f rationality, i.e., whether the agency act bears a rational relationship to the s t a t u t o r y purposes, and whether there is substantial evidence in the record to s u p p o r t it.8 3 I I I . Analysis A . The EPA and Riverkeeper's Joint Motion to Remand T h e EPA and Riverkeeper jointly filed a motion to remand the Rule as it a p p lie s to existing CWIS in light of the Supreme Court's decision in Entergy C o r p . Specifically, the EPA seeks to "reevaluate the Phase III Rule's existing fa c ilit ie s decision in conjunction with the Agency's proceedings on remand of the `P h a s e II Rule' at issue in [Riverkeeper II] . . . in light of the Supreme Court's r e c e n t decision in [Entergy Corp.]." E m b e d d e d in an agency's power to make a decision is its power to r e c o n s id e r that decision.8 4 An agency's inherent authority to reconsider its d e c is io n s is not without limits, however.8 5 "An agency may not reconsider its own Texas Oil & Gas Ass'n v. EPA, 161 F.3d 923, 933 (5th Cir.1998) (citing Motor Vehicle Mfrs. Assn. v. State Farm Mut., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)). Louisiana Environmental Action Network v. E.P.A., 382 F.3d 575, 582 (5th Cir. 2004) (citing Texas Oil & Gas Ass'n, 161 F.3d at 934). 84 83 82 Trujillo v. General Elec. Co., 621 F.2d 1084. 1086 (10th Cir. 1980). Macktal v. Chao, 286 F.3d 822, 825 (5th Cir. 2002). 85 18 Case: 06-60662 Document: 00511197363 Page: 19 Date Filed: 08/06/2010 No. 06-60662 d e c is io n if to do so would be arbitrary, capricious, or an abuse of discretion." 8 6 F u r t h e r m o r e , reconsideration also must occur within a reasonable time after the decision being reconsidered was made, and notice of the agency's intent to r e c o n s id e r must be given to the parties.8 7 W e conclude that the EPA's joint motion is not arbitrary, capricious, or an a b u s e of discretion; neither do we find that it was filed untimely or without valid n o tic e to all parties. The Supreme Court in Entergy Corp. has remanded the P h a s e II Rule for existing facilities to the EPA, and it is imminently reasonable t o address together the substantial similarities of fact between that aspect of the P h a s e II Rule and the instant Phase III Rule in light of Entergy Corp. F u r t h e r m o r e , remand will work no prejudice to any affected entity because it m e r e ly maintains the status quo for existing facility regulation. Pending a new R u le , the EPA's 316(b) case-by-case permitting procedure, which was in place b e fo r e the Phase III Rule was promulgated, will remain in effect. Accordingly, w e grant the EPA's joint motion for remand of just the Phase III Rule for e x is t in g CWIS. B . ConocoPhillips's Challenges to the Phase III Final Rule for New Facilities 1 . EPA's "Economic Feasability" Interpretation of 316(b) B e fo r e considering ConocoPhillips's substantive arguments, we first a d d r e s s whether the EPA's interpretation of 316(b), as reviewed in this appeal, is sufficiently different from the interpretation it proffered in the Proposed Rule t o constitute a violation of the notice provision for informal rule making set forth 86 Id. (citing 5 U.S.C. 706(2)(A)). Id. (citing Dun & Bradstreet Corp., 946 F.2d at 193; Bookman v. United States, 197 Ct.Cl. 108, 453 F.2d 1263, 1265 (1972)). 87 19 Case: 06-60662 Document: 00511197363 Page: 20 Date Filed: 08/06/2010 No. 06-60662 in 4 of the APA.8 8 ConocoPhillips asserts that (1) the EPA gave notice, in both t h e Proposed and Final Phase III Rule, that it was employing a cost-benefit a n a ly s is in its rule making for new CWIS, but (2) the EPA has abandoned its c o s t -b e n e fit rationale and instead adopted during this appeal an "economic a c h ie v a b ilit y " rationale for its rule making. ConocoPhillips argues that this post h o c rationalization should be afforded no deference under Chevron and that the a g e n c y should be held to its original basis of statutory interpretation. For almost seventy years, the rule has been that "`the grounds upon which a n administrative order must be judged are those upon which the record d is c lo s e s that its action was based.'"8 9 This is necessary because: I f an [administrative] order is valid only as a determination of policy or ju d g m e n t which the agency alone is authorized to make and which it has n o t made, a judicial judgment cannot be made to do service for a d m in is t r a t iv e judgment.9 0 F u r t h e r m o r e , an agency must comply with the notice and comment procedures in informal rule making that are set out in 4 of the Administrative Procedures A c t , namely: G e n e r a l notice of proposed rule making shall be published in the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof in accordance with law. The notice shall include . . . reference to the legal authority under which the 88 5 U.S.C. 553. See Global Van Lines v. ICC, 714 F.2d 1290, 1297 (5th Cir. 1983) (quoting SEC v. Chenery Corp., 318 U.S. 80, 87 (1943)) and id. ("General notice of proposed rule making shall be published in the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof in accordance with law. The notice shall include . . . reference to the legal authority under which the rule is proposed . . . .") (citing 5 U.S.C. 553(b)(2)). 90 89 Chenery, 318 U.S. at 88. 20 Case: 06-60662 Document: 00511197363 Page: 21 Date Filed: 08/06/2010 No. 06-60662 r u le is proposed . . . .9 1 and A fte r notice required by this section, the agency shall give interested p e r s o n s an opportunity to participate in the rule making through s u b m is s io n of written data, views, or arguments with or without o p p o r t u n it y for oral presentation. After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose. 92 S e c tio n s 553(b)(2) and (c) require that (1) an agency identify the source of its le g a l authority during the notice and comment period, and (2) "the reference to le g a l authority must be sufficiently precise to apprise interested persons of the a g e n c y 's legal authority to issue the proposed rule." 9 3 C o n o c o P h illip s does not dispute that the EPA has maintained, and c o n t in u e s to maintain, that 316(b) is the statutory authority under which it h a s promulgated the Phase III Rule. Its argument is that the EPA's "economic a c h ie v a b ilit y " test, asserted during this appeal, is sufficiently different from the " c o s t -b e n e fit " test announced during rule making that it amounts to a mere " lit ig a tio n position" and the agency's justifications for its Phase III Rule that rest o n the "economic achievability" argument should be ignored. C o n o c o P h illip s makes much of the EPA's use on appeal of the phrase " e c o n o m ic achievability" a term that appears nowhere in the Proposed or Final R u le . An agency's alteration of its terminology, however, does not mean that it 91 5 U.S.C. 553(b)(2) (emphasis added). Id. at 553(c) (emphasis added). Global Van Lines, 714 F.2d at 1298 (internal citation and punctuation omitted). 92 93 21 Case: 06-60662 Document: 00511197363 Page: 22 Date Filed: 08/06/2010 No. 06-60662 h a s altered its methodology. Certainly, it may be possible for an agency to alter, p o s t hoc, its previously announced interpretation of its legal authority to such a degree that the rule in Chenery and the notice requirements of the APA are v io la t e d . Even so, when an agency, in its discretion, has flexibility to execute its s t a t u t o r y authority in different ways, it may not always be clear whether a shift in an agency's approach to rule making runs afoul of the APA or is merely a v a lid exercise of its statutory authority to regulate in different ways. We have lo n g held that the Final Rule and the Proposed Rule need not be identical. The F in a l Rule must be a "`logical outgrowth'"9 4 of the rule making process, and c o u r ts must proceed with caution before deeming a Final Rule too attenuated fr o m the Proposed Rule, lest we supplant the agency's role in the nation's r e g u la to r y scheme.9 5 In the instant case, however, ConocoPhillips does not c o m p la i n that the Proposed Rule and the Final Rule are different; rather, it in s is t s that both the Proposed Rule's and the Final Rules's stated interpretations o f 316(b) differ from the agency's interpretation argument on appeal. This question does not turn on the mere invocation by the EPA of the p h r a s e "economic achievability" for the first time on appeal. The crux of the q u e s t io n is whether the EPA's justificatory argument on appeal so differs from t h e justification articulated during the rule making process to have deprived in t e r e s t e d parties of the notice required by the APA. The EPA's discussion in the preamble of its legal authority to promulgate Texas Office of Public Utility Counsel v. Federal Communications Commission, 265 F.3d 313, 326 (5th Cir. 2001) (quoting United Steelworkers of Amer., AFL-CIO-CLC v. Schuykill Metals Corp., 828 F.2d 314, 317-18 (5th Cir. 1987)). See Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 525 (1978) (stating that reviewing courts must not "engraft[] their own notions of proper procedures upon agencies entrusted with substantive functions by Congress"). 95 94 22 Case: 06-60662 Document: 00511197363 Page: 23 Date Filed: 08/06/2010 No. 06-60662 t h e Phase III Rule in the Proposed Rule reads: S e c t io n 316(b) requires that cooling water intake structures reflect t h e best technology available for minimizing adverse environmental im p a c t . In contrast to the effluent limitations provisions, the object of the " b e s t technology available" is explicitly articulated by reference to the r e c e iv in g water: To minimize adverse environmental impact in the waters fr o m which cooling water is withdrawn. This difference is reflected in E P A 's past practices in implementing sections 301, 304, and 316(b). While E P A has established effluent limitations guidelines based on the efficacy o f one or more technologies to reduce pollutants in wastewater, c o n s id e r in g costs, but without necessarily considering the impact on the r e c e iv in g waters, EPA has previously considered the costs of technologies in relation to the benefits of minimizing adverse environmental impact in e s t a b lis h in g section 316(b) limits. In Re Public Service Co. of New H a m p s h ir e , 10 ERC 1257 (June 17, 1977); In Re Public Service Co. of New H a m p s h ir e , 1 EAD 455 (Aug. 4, 1978); Seacoast Anti-Pollution League v. C o s tle , 597 F. 2d 306 (1st Cir. 1979). F o r this Phase III rule making, EPA therefore interprets Clean W a t e r Act section 316(b) as authorizing EPA to consider not only t e c h n o lo g ie s but also their effects on and benefits to the water from which t h e cooling water is withdrawn. Based on these two considerations, today's p r o p o s e d rule establishes national requirements for facilities to install t e c h n o lo g y , as appropriate, that is technically available, economically p r a c t ic a b le , cost-effective, and justified by the benefits to the source w a t e r b o d y .9 6 T h e preamble to the Final Rule reads: B e c a u s e section 316(b) is silent as to the factors EPA should c o n s id e r in deciding whether a candidate technology minimizes adverse e n v ir o n m e n ta l impact, EPA has broad discretion to identify the a p p r o p r ia te criteria. See Riverkeeper, 358 F.3d at 187, n.12 (brevity of s e c t io n 316(b) reflects an intention to delegate significant rule making a u t h o r it y to EPA); see id. at 195 (appellate courts give EPA "considerable d is c r e t io n to weigh and balance the various factors" where the statute does 96 69 Fed. Reg. 68,449. 23 Case: 06-60662 Document: 00511197363 Page: 24 Date Filed: 08/06/2010 No. 06-60662 n o t state what weight should be accorded) (citation omitted). F o r this Phase III rule making, EPA therefore interprets the phrase "b est available technology for minimizing adverse environmental impacts" a s authorizing EPA to consider the relationship of the costs of the t e c h n o lo g ie s to the benefits associated with them. EPA has previously c o n s id e r e d the costs of technologies in relation to the benefits of m in im iz in g adverse environmental impact in establishing section 316(b) lim it s , which historically have been done on a case-by-case basis. In Re P u b lic Service Co. of New Hampshire, 10 ERC 1257 (June 17, 1977); In Re P u b lic Service Co. of New Hampshire, 1 EAD 455 (Aug. 4, 1978); Seacoast A n ti-P o llu tio n League v. Costle, 597 F.2d 306 (1st Cir. 1979). I n addition to helping EPA determine the effects of candidate t e c h n o lo g ie s on the receiving water, considering the relationship of costs a n d benefits also helps EPA determine whether the technologies are e c o n o m ic a lly practicable. EPA has long recognized, with the support of le g is la t iv e history, that section 316(b) does not require adverse e n v ir o n m e n ta l impact to be minimized beyond that which can be achieved a t an economically practicable cost. See 118 Cong. Rec. 33762 (1972) r e p r in te d in 1 Legislative History of the Water Pollution Control Act A m e n d m e n ts of 1972, at 264 (1973) (Statement of Representative Don H. C la u s e n ). EPA therefore may consider costs and benefits in deciding w h e t h e r any of the technology options for Phase III existing facilities a c t u a lly do minimize adverse environmental impact or whether the c h o ic e of technologies should be left to BPJ decision-making. When the c o s t s of establishing a national categorical rule substantially outweigh the b e n e fit s of such a rule, a national categorical section 316(b) rule may not b e economically practicable, and therefore not the "best technology a v a ila b le for minimizing adverse environmental impact." N o t h in g in section 316(b) requires EPA to promulgate a regulation t o implement the requirements for cooling water intake structures. S e c t io n 316(b) of the CWA grants EPA broad authority to establish p e r fo r m a n c e standards for cooling water intake structures based on the " b e s t technology available to minimize adverse environmental impact." 97 B o t h the Proposed and Final Rules reflect that the EPA considered the Act 97 71 Fed. Reg. at 35,010. 24 Case: 06-60662 Document: 00511197363 Page: 25 Date Filed: 08/06/2010 No. 06-60662 t o afford the agency the power to consider cost-benefits when regulating existing a n d new CWIS. Furthermore, the Proposed Rule expressed that the agency in t e n d e d to consider CWIS regulation from both a technological standpoint and a cost-benefit standpoint: "EPA therefore interprets Clean Water Act section 3 1 6 (b ) as authorizing EPA to consider not only technologies but also their effects o n and benefits to the water from which the cooling water is withdrawn." This fle x ib ilit y in regulatory approach is echoed in the Final Rule's statement that the E P A "has broad discretion to identify the appropriate criteria" for evaluating w h e t h e r candidate technology minimized adverse environmental impact and t h a t considering the costs and benefits aids the agency in determining whether a regulatory scheme is "economically practicable." Both preambles demonstrate that the agency interpreted 316(b) as a u th o r iz in g a cost-benefit approach to CWIS regulation, but also that the agency d o e s not consider itself bound to do so. What the preambles to the Proposed and F in a l Rules do indicate is that the agency purported to employ cost-benefit a n a ly s is in promulgating CWIS regulation for existing and new facilities as part o f its "discretion to weigh and balance various factors" when determining the " b e s t technology available for minimizing adverse environmental impact." T h e Phase III Final Rule is bifurcated in its application, regulating e x is t in g offshore facilities differently from new ones. It is therefore necessary t o look beyond the Rule's general statements in the preamble to the Rule's s p e c ific application to new CWIS facilities. The Final Rule provides a detailed s u m m a r y of the EPA's cost-estimation for the national categorical regulatory o p t io n s for new CWIS.9 8 The agency (1) identified the different types of CWIS 98 Id. at 35,025-29. 25 Case: 06-60662 Document: 00511197363 Page: 26 Date Filed: 08/06/2010 No. 06-60662 b e in g employed by different offshore facilities, (2) identified available im p in g e m e n t and entrainment control measures, and (3) estimated both capital a n d annual operating costs "for each technology option for the different c o n fig u r a t io n s of offshore . . . facilities and [CWIS]."9 9 The agency also estimated t h e predicted economic impact of the new Rule by evaluating the costs associated w it h available impingement and entrainment technology with "superior r e lia b ilit y and performance and ease of operation."1 0 0 After collecting this data, t h e EPA evaluated the likely economic impact (1) on offshore facility revenue a n d operating costs, and (2) as a barrier-to-entry.101 I n the "Comparison and Benefits and Costs" section of the Final Rule,1 0 2 t h e EPA states that it could not compare estimated benefits yielded from the R u le as it applies to new facilities because "such estimates would rely on s p e c u la tin g where these facilities would be built and/or operate . . . . Hence, it is not possible to compare quantified costs and benefits associated with this final r u le ."1 0 3 The agency did, however, perform "comparisons of the national benefits a n d costs of the national categorical regulatory options" by comparing the "total a n n u a liz e d use benefits to total annualized pre-tax costs at existing facilities t h a t remain open in the baseline." 1 0 4 I n short, the Final Rule indicates that the EPA estimated the compliance 99 Id. at 35,025. Id. Id. at 35,025-29. 71 Fed. Reg. 35,034. Id. Id. at 35,034. 100 101 102 103 104 26 Case: 06-60662 Document: 00511197363 Page: 27 Date Filed: 08/06/2010 No. 06-60662 c o s t s of the national categorical standards for new CWIS and compared those c o s t s to the likely economic impact on the industry. Additionally, the EPA c o m p a r e d the compliance costs to the "baseline" benefits afforded by existing fa c ilit ie s . The agency was unable to perform a specific cost-benefit analysis for n e w facilities, however, as those facilities have not yet been built. On appeal, the EPA insists that it is not required to conduct a cost-benefit a n a ly s is when promulgating rules under 316(b), and that, given the available in fo r m a t io n (or lack thereof), "economic achievability . . . specifically, barriers to e n tr y , are the appropriate cost measures for new facilities because they analyze w h e t h e r a regulation will place new facilities at a competitive disadvantage as c o m p a r e d to existing facilities." The agency asserts further that, even though it could estimate the costs of compliance for new CWIS despite not knowing their l o c a t io n s , it could not estimate the benefits of the Rule because of the wide v a r ie t y of ecosystems in which new offshore facilities will be located. In contrast t o benefits, compliance costs can be estimated because they will remain constant ir r e s p e c t iv e of the specific location of the facility: The depths of all CWIS are a p p r o x im a t e ly the same regardless of the depth of the water at the facilities' lo c a tio n . A fte r comparing the EPA's statements in the Final Rule to those argued b e fo r e us, we are convinced that the EPA's "economic achievability" argument is not a mere litigating position, but is instead the very basis under which the F in a l Phase III Rule for new offshore facilities was promulgated. The EPA c o n s id e r e d barrier to entry and economic impact, as distinguished from making s p e c ific , facility-by-facility cost-benefit analyses, as the basis for the Final Rule, a n d that position has not changed during this appeal. We see no material 27 Case: 06-60662 Document: 00511197363 Page: 28 Date Filed: 08/06/2010 No. 06-60662 d iffe r e n c e between the EPA's statutory interpretation of its rule making a u t h o r it y and the interpretation previously articulated. ConocoPhillips's a r g u m e n t that the EPA did not provide adequate notice of the economica c h ie v a b ilit y test during rule making is unavailing. 2. Whether the EPA's Rule Making was Arbitrary and Capricious C o n o c o P h illip s makes two primary arguments that the EPA's Final Phase I I I Rule for new offshore facilities is arbitrary and capricious. Each of these c o n t e n t io n s rests at least in part on the assertion that the statutory language of 316(b) mandates that the EPA engage in a cost-benefit analysis to effect CWIS r e g u la tio n s . In Entergy Corp. v. Riverkeeper, the Supreme Court has now made p e llu c id that the EPA may but is not required to engage in cost-benefit analyses fo r CWIS rule making. And, as discussed above, the EPA has never interpreted t h e statute to require cost-benefit analyses in its rule making.1 0 5 Neither did the E P A give notice in this rule making that it was bound to do so or that it would d o so to the exclusion of other metrics. Thus, ConocoPhillips's objection to the F in a l Phase III Rule on this ground has been neutralized. We thus proceed to c o n s id e r the specific grounds on which ConocoPhillips urges us to hold that the E P A was arbitrary and capricious in its rule making. The central theme for ConocoPhillips's remaining objections is that the a g e n c y was arbitrary and capricious in failing to consider facility location when it promulgated the Final Phase III Rule. This objection rests on two primary a r g u m e n t s : (1) It is arbitrary and capricious for the EPA to fail to conduct a See, e.g., the EPA's first regulation of CWIS. 41 Fed. Reg. 17,387, 17388 (Apr. 26, 1976) ("No comparison of monetary costs with the social benefits of minimizing adverse environmental impacts, much less a formal, quantified "cost/benefit" assessment is required by the terms of [ 316] the [Clean Water] Act."). 105 28 Case: 06-60662 Document: 00511197363 Page: 29 Date Filed: 08/06/2010 No. 06-60662 b e n e fits analysis for specific facility locations, and (2) it is arbitrary and c a p r ic io u s for the EPA to rely on the general, "qualitative" SEAMAP study, r a t h e r than on site-specific quantitative studies, to estimate the environmental im p a c t of new CWIS. a. Costs and Benefits of Facility Location C o n o c o P h illip s asserts that the EPA failed properly to consider facility lo c a t io n as required by statute in promulgating the national categorical s t a n d a r d s for new offshore facilities. ConocoPhillips argues that, contrary to the E P A 's contention, the administrative record provided both the likely type and n u m b e r of new facilities to be deployed over the next 20 years, and the o v e r w h e lm in g majority of new oil and gas rigs will be situated in very deep w a t e r (greater than 1,000 feet in depth) in the Gulf of Mexico. ConocoPhillips a c k n o w le d g e s that this information did not include the precise latitude and lo n g it u d e of each new facility, but nevertheless "did tell the agency all it needed t o know to perform a meaningful cost/benefit study: what kinds of rigs . . ., o p e r a t in g in what seas, and at what depths." ConocoPhillips insists that, given t h is information and the fact that the EPA stated that it possessed enough in fo r m a t io n to calculate compliance costs for new facilities, the agency's claim t h a t it did not have enough information to perform a meaningful cost-benefit a n a ly s is is arbitrary and capricious or, in the alternative, that it was arbitrary a n d capricious for the agency not to develop this information if it did not have it during rule making. i. Statutory Argument S e c t io n 316(b) reads: "Any standard established pursuant to section 1311 o f this title or section 1316 of this title and applicable to a point source shall 29 Case: 06-60662 Document: 00511197363 Page: 30 Date Filed: 08/06/2010 No. 06-60662 r e q u ir e that the location, design, construction, and capacity of cooling water in ta k e structures reflect the best technology available for minimizing adverse e n v ir o n m e n ta l impact."1 0 6 ConocoPhillips claims that the emphasized language m a n d a t e s that the EPA consider the facility's physical location in its rule m a k in g ; the EPA responds that this language only pertains to CWIS's physical lo c a t io n and that a decision not to regulate on the basis of location does not mean t h a t the agency did not consider it. T o evaluate the agency's interpretation of 316(b), we employ Chevron's a b o v e -d e s c r ib e d two-step framework: We first decide whether Congress spoke d ir e c t ly to the precise question at issue, and, if it did, give effect to the u n a m b ig u o u s ly expressed intent of Congress; under such a situation, we will r e v e r s e an agency's interpretation if it does not conform to plain meaning of s t a t u t e .1 0 7 If the statute is silent or ambiguous, however, we ask whether the a g e n c y 's interpretation is based on a permissible construction of the statute. We m a y reverse the agency's construction of an ambiguous or silent provision only if we find it arbitrary, capricious, or manifestly contrary to the statute. That is t o say, we will sustain an agency's interpretation of an ambiguous statute if that in t e r p r e t a t io n is based on a permissible construction of the statute. This is C h e v r o n 's second step.1 0 8 T o determine whether a statue is ambiguous, we first look to its plain 106 33 U.S.C. 1326(b) (emphasis added). Texas Office of Public Utility Counsel v. F.C.C., 183 F.3d 393, 410 (5th Cir. 1999) (internal punctuation and citation omitted). 108 107 Id (internal punctuation and citation omitted).. 30 Case: 06-60662 Document: 00511197363 Page: 31 Date Filed: 08/06/2010 No. 06-60662 m e a n in g .1 0 9 It is absurd and arbitrary to decide that "of cooling water intake s t r u c tu r e s " modifies some of the serial nouns but not "location." There is c e r t a in ly no evidence in the plain language or in the rules of English grammar to support such an interpretation. Nouns joined by coordinating conjunctions a r e usually treated as a single, compounded unit,1 1 0 and a postmodifying p r e p o s it io n a l phrase is most naturally read to modify that single unit.1 1 1 It is a ls o absurd to assume that Congress intended "capacity" to refer to CWIS, but fo r "location, design, and construction" to refer to the "facility." In short, to read t h is language as would ConocoPhillips that "location" refers to "point sources" finds no support in the plain language or the structure of the statute. Furthermore, construing "location" to mean the "facility's location" is wholly u n s u p p o r t e d by the plain meaning of the statute. Many facilities, such as power p la n ts , employ CWIS but are themselves located on land. Under C o n o c o P h illip s 's interpretation, the standards the EPA establishes must c o n s id e r the location of a terrestrial facility but may not consider the location of t h a t facility's remote maritime or riparian CWIS. Such a reading makes no sense. We hold that the plain language of the s t a t u t e requires the EPA to consider the location of the CWIS when establishing r u le s under 316(b), irrespective of whether the location of the CWIS is the s a m e as that of the facility served or is located in or contiguous to the water but Goswami v. American Collections Enterprise, Inc., 377 F.3d 488, 492 (5th Cir. 2004) ("[W]e do not look beyond the plain meaning of the statute unless the statute is absurd or ambiguous. Without ambiguity we are not permitted to look to the legislative history or agency interpretation.") . 110 109 SIDNEY GREENBAUM, OXFORD ENGLISH GRAMMAR 233 (1996). Consider, e.g., "The doctor decided that keeping a boat, trailer, and car in storage was too expensive." 111 31 Case: 06-60662 Document: 00511197363 Page: 32 Date Filed: 08/06/2010 No. 06-60662 d is t a n t from the facility. Having concluded that the statute is unambiguous, we d o not proceed to the second prong of Chevron. As for ConocoPhillips's substantive criticism of the agency's treatment of C W I S location, the EPA readily acknowledges that it did not attempt to estimate t h e likely benefits achieved by specific facilities at specific locations. Rather, the a g e n c y points to the portion of the record which reflects that it collected in fo r m a t io n to inform its decision in promulgating national categorical s t a n d a r d s . The EPA expressly found, by considering three economic impact a s s e s s m e n t s ,1 1 2 that uniform regulation was achievable, that it would not create b a r r ie r s to entry, and that it would not force operations to close.1 1 3 In addition, t h e EPA considered a wide range of industry, environmental, and economic data w h ic h related to the types of facilities that will be used 1 1 4 and the technologies a v a ila b le and their efficacy.1 1 5 The agency also considered this information in t h e context of the likely locations in the Gulf of Mexico (where almost all new o ffs h o r e facilities will be situated),1 1 6 and made an exception to the uniform s t a n d a r d for facilities to be located in tidal rivers or estuaries.1 1 7 Moreover, the d a t a in the record support the conclusion that environmental harm may result a t all likely facility locations: both estuarial and ocean biomass suffer the h ig h e s t rate of destruction from CWIS; eggs and plankton disperse over wide 112 71 Fed. Reg. 35,025-29. Id. 71 Fed. Reg. 35,024-25. Id. Id. at 35,013. Id. at 35,020. 113 114 115 116 117 32 Case: 06-60662 Document: 00511197363 Page: 33 Date Filed: 08/06/2010 No. 06-60662 a r e a s ; and aquatic organisms are attracted to and concentrate around offshore fa c ilit ie s .1 1 8 The EPA further notes that, regardless of any shortcomings that C o n o c o P h illip s finds in the data the agency relied on, ConocoPhillips provided n o more detailed data during rule making than that which the EPA considered; in d e e d , site-specific impingement and entrainment data for offshore facilities h a v e apparently never been collected.1 1 9 C o n s id e r in g the record as a whole, as well as the EPA's interpretation and a p p l ic a t io n of 316(b), we conclude that the EPA's decision to forgo a benefits a n a ly s is and promulgate the Phase III Rule on economic achievability grounds is at least "minimally related to rationality." Of the Texas Oil & Gas factors (1) a g e n c y reliance on factors which Congress has not intended it to consider, (2) fa ilu r e to consider an important aspect of the problem, (3) offering an e x p la n a t io n for its decision that runs counter to the evidence before the agency, o r (4) offering an explanation that is so implausible that it could not be ascribed t o a difference in view or the product of agency expertise 1 2 0 only the second is p o s s ib ly applicable. The record makes clear, however, that the EPA did consider lo c a t io n an "important aspect of the problem" specific benefits estimates for s p e c ific facilities and, with that precise data unavailable, that the agency e v a lu a te d the application of national categorical standards by looking at (1) the e c o n o m ic feasability of the approach to the industry as whole and (2) the e x p e c t e d benefits that will be achieved generally. in fo r m a t io n shortage, the "Given the admitted EPA must make use of the information it has, 118 Id. at 35,013. Id. 161 F.3d at 934. 119 120 33 Case: 06-60662 Document: 00511197363 Page: 34 Date Filed: 08/06/2010 No. 06-60662 r e c o g n iz in g the limits of the information; EPA cannot refuse to carry out its m a n d a t e , waiting for the day when it might possess perfect information." 121 A c c o r d in g ly , under the "highly deferential" standard of review mandated here, w e are unpersuaded that the EPA's failure to estimate benefits for specific new fa c ilit y locations renders the process arbitrary or capricious. ii. Reliance on SEAMAP Data C o n o c o P h illip s also faults the EPA's reliance on so-called "qualitative d a t a ," as opposed to "quantitative data," to justify its promulgation of national c a t e g o r ic a l standards for new facilities. Specifically, ConocoPhillips takes issue w it h EPA's conclusion that, although the "EPA has limited information on s p e c ific environmental impacts associated with oil and gas extraction facilities," t h e agency nevertheless was confident in the "potential for such impacts to w a r r a n t including [national categorical requirements] for new offshore oil and g a s extraction facilities in this rule."1 2 2 ConocoPhillips insists that the "limited in fo r m a t io n " that the EPA does possess the SEAMAP data1 2 3 is inadequate t o support the Final Rule and that it was arbitrary and capricious for the agency n o t to develop a "quantitative benefit study" for new facility location. ConocoPhillips also contends that the SEAMAP data itself demonstrates that it w a s arbitrary and capricious for the EPA either not to employ a case-by-case 121 BASF Wyandotte Corp. v. Costle, 598 F.2d 637, 652 (1st Cir. 1979). 71 Fed. Reg. 35,016. 122 The agency also points out that it relied on more than just the SEAMAP and similar studies to evaluate environmental impact. Other sources of corroborating information include evidence that the offshore facilities attract and concentrate a significant amount of aquatic life as a habitat and that the offshore areas where rigs will be located contain large a number of aquatic life forms with little or no motility (rendering such life especially vulnerable to entrainment). 123 34 Case: 06-60662 Document: 00511197363 Page: 35 Date Filed: 08/06/2010 No. 06-60662 p e r m it t in g regime or not to distinguish between deep water and shallow water fa c ilit ie s in promulgating the Rule. J u s t as we have concluded that the agency's treatment of facility location is not arbitrary and capricious, we also conclude that the EPA's reliance on the S E A M A P data is not arbitrary and capricious. Conducting precise "quantitative b e n e fits studies" for facilities that have yet to be built is impossible, and there a r e no existing quantitative studies of impingement and entrainment for new fa c ilit ie s . Again, when an agency is faced with such informational lacunae, the a g e n c y is well within

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