The Supreme Court in early April upheld an Environmental Protection Agency (EPA) decision to consider costs as well benefits in setting requirements for utilities to overhaul cooling water intake systems at power plants to better protect fish and shellfish. It was a victory for electric utilities.

In a 6-3 decision, reversing a lower-court ruling, the high court said the EPA’s decision to consider cost in setting somewhat looser cooling system standards for existing plants than for new ones was “reasonable.”

The court also disputed environmentalists’ view that the EPA’s rules ordering cooling system upgrades focused too much on the cost that utilities would have to accept, saying the EPA had crafted the rule merely to prevent cases where compliance costs would grossly outweigh benefits. The ruling overruled the U.S. Court of Appeals for the 2nd Circuit in New York, which said in 2007 that the EPA had impermissibly considered costs in setting requirements for the cooling system upgrades.

The high court ruling will lower the cost of complying with the EPA rule at more than 500 existing power plants around the country, which collectively provide more than half of the country’s electricity, according to the court filings.

Riverkeeper Inc., a New York-based environmental group, and others, sued the EPA over rules it set in 2004 on the new cooling system requirements. After the green groups won in the 2nd Circuit, Entergy Corp. challenged the decision at the Supreme Court. Entergy and Riverkeeper have had a long, contentious relationship over the Indian Point nuclear plant on the Hudson River in Westchester County, N.Y.

The recent decision affects a wide variety of power plant types that use once-through cooling. Some environmentalists have long pushed for the EPA to require plants to install closed-cycle cooling systems, which reduce the amount of freshwater that plants pull from local waterways. Closed-cycle plants recirculate and condense water from the plant, significantly lowering the water they need from outside.

In its 2004 rulemaking, the EPA said that new plants had to install closed-cycle cooling systems. For retrofits of existing plants, the agency set looser rules, requiring that plant owners install systems that would reduce mortality of fish and shellfish by 80% to 95%, while explicitly declining to impose the closed-cycle standard. In doing so, the EPA cited the “generally high costs” of converting existing plants to closed-cycle systems, saying that would be nine times as expensive for utilities to comply with as the standard for which the EPA opted.

The EPA also included another cost safety valve for generators in the 2004 rule, allowing for site-specific variances of the 80% to 95% standard if a plant owner could show that compliance costs were “significantly greater” than the EPA considered in setting the rule. The 2nd Circuit court ruled that those site-specific variances were unlawful under the Clean Water Act and remanded the rule to the EPA for revamping.

The appeals court said the EPA had limited authority to consider costs as it set the rule, but indicated the agency had gone too far by “compar[ing] the costs and benefits of various ends, and choos[ing] the end with the best net benefits.”

Writing for the majority, Justice Antonin Scalia disagreed with the lower court, saying the EPA’s consideration of cost in the rulemaking was limited and appropriate. “EPA sought only to avoid extreme disparities between costs and benefits…[in] circumstances where the costs are ‘significantly greater than the benefits of compliance,’” Scalia wrote. Scalia said that even environmental groups, in previous filings, “ultimately recognize that some form of cost-benefit analysis is permissible.”

In a dissent joined by Justices David Souter and Ruth Bader Ginsburg, Justice John Paul Stevens said the only time that the EPA, under the Clean Water Act, can consider costs is if the costs are so high as to make the best available remediation technology “unavailable” as a practical matter. Stevens wrote, “I am convinced that the EPA has misinterpreted the plain text. . . .[The act] neither expressly nor implicitly authorizes the EPA to use cost-benefit analysis when setting regulatory standards; fairly read, it prohibits such use.”

The EPA is reworking the rule governing cooling system upgrades for existing plants.

—Jeff Beattie is a reporter for The Energy Daily, a sister publication of MANAGING POWER.