IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 06-60662

CONOCOPHILLIPS CO; ANADARKO PETROLEUM CORP; SURFRIDER

FOUNDATION; ENVIRONMENT MASSACHUSETTS; RIVERKEEPER

INC; NATURAL RESOURCES DEFENSE COUNCIL; WATERKEEPER

ALLIANCE INC; SOUNDKEEPER INC; DELAWARE RIVERKEEPER

NETWORK; AMERICAN LITTORAL SOCIETY; RARITAN BAYKEEPER

INC, dba NY/NJ BAYKEEPER; SAVE THE BAY-PEOPLE FOR

NARRAGANSETT BAY; FRIENDS OF CASCO BAY; SANTA MONICA

BAYKEEPER

Petitioners

v.

UNITED STATES ENVIRONMENTAL PROTECTION AGENCY;

STEPHEN L JOHNSON, ADMINISTRATOR, UNITED STATES

ENVIRONMENTAL PROTECTION AGENCY, IN HIS OFFICIAL

CAPACITY AS ADMINISTRATOR OF THE UNITED STATES EPA

Respondents

Petitions for Review of an Order of the

Environmental Protection Agency

United States Court of Appeals

Fifth Circuit

F I L E D

July 23, 2010

Lyle W. Cayce

Clerk

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Before JOLLY, WIENER, and BARKSDALE, Circuit Judges.

*

WIENER, Circuit Judge:

Before us are various consolidated challenges to a Final Rule (the “Rule”)

promulgated 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

use of cooling water intake structures (“CWIS”) for both existing and new

offshore oil and gas extraction facilities. Originally, the environmental

Petitioners (collectively “Riverkeeper”) challenged the Rule as it applies to

existing facilities, and the industry Petitioners (collectively “ConocoPhillips”)

challenged the Rule as it applies to new facilities. In light of the Supreme Court’s

decision in Entergy Co. v. Riverkeeper, however, Riverkeeper and the EPA have

1

now jointly moved voluntarily to remand the existing-facilities portion of the

Rule for reconsideration; Intervenor American Petroleum Institute (“Intervenor

API”) opposes remand.

We grant the joint motion to remand and affirm the portion of the Rule

that regulates new offshore facilities.

I. Facts and Proceedings

A. Prior Rule Making under Rule 316(b) of the Clean Water Act

Through the use of CWIS, industrial facilities, such as offshore oil and gas

extraction vessels (or “rigs”), withdraw and re-circulate, in the aggregate,

2

billions 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 2

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.

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This enormous intake of water often results in the impingement and

entrainment of aquatic biomass. (Impingement is the trapping of an organism

against the intake structure, and entrainment is the uptake of an organism into

the cooling system itself.) Impingement and entrainment can seriously affect

3

not only the population and viability of an aquatic species, but the health of

aquatic ecosystems as well.

The purpose of the CWA is to restore and maintain the chemical, physical,

and biological integrity of the nation's waters. Recognizing the impact of CWIS

4

on the nation’s marine environments, Congress empowered the EPA to regulate

CWIS under the Act. Section 316(b) of the Act regulates CWIS by requiring

that:

Any standard established pursuant to section 1311 of this title or section

1316 of this title 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.

5

Despite the seemingly straightforward mandate of § 316(b), successful and

effective rule making under this section has been elusive. The first Rule was

issued in 1976, but, before being implemented, it was successfully challenged

6

and remanded by the Fourth Circuit for procedural defects that violated the

 Establishing Requirements for Cooling Water Intake Structures at Phase III Facilities, 71 Fed. 3

Reg. 35,013 (June 16, 2006) (codified at 40 C.F.R. pts. 9, 122, 123, 124, and 125).

 33 U.S.C. 1251(a).

4

 Codified at 33 U.S.C. § 1326(b). 5

 41 Fed. Reg. 17,387 (Apr. 26, 1976). 6

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Administrative Procedures Act (the “APA”). The EPA withdrew the remanded

7

portions of the Rule, but left intact those unremanded portions that required

each National Pollutant Discharge Elimination System (“NPDES”) permitting

authority to use its “best professional judgment” to determine the “best

technology available” for CWIS regulation. This regulatory regime remained

8

in effect until 1995, when Riverkeeper and other petitioners obtained a consent

decree 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

making: Phase I applies to all new CWIS facilities above a particular intake

10

threshold size, except new offshore oil rigs (the regulation of which was

postponed until Phase III); Phase II applies to existing large power plants that

11

take in more than 50 millions gallons of water a day; and Phase III (at issue

12

here) regulates (1) existing facilities, including paper, chemical, petroleum,

aluminum, and steel manufacturers, small power plants, and other facilities

(collectively “existing facilities”), (2) new offshore oil and gas extraction facilities

Appalachian Power Co. v. Train, 566 F.2d 451 (4th Cir. 1977). 7

 71 Fed. Reg. at 35,011. 8

 71 Fed. Reg. at 35,011. 9

 The EPA entered into a Second Amended Consent Decree on November 25, 2002, modifying 10

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. 11

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

12

Existing Facilities, 69 Fed. Reg. 41,576 (July 8, 2004) (codified at 40 C.F.R. pts. 122, 123, 124, and

125).

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(“new oil rigs”), (3) new offshore liquified natural gas facilities, and (4) new

seafood processing vessels.

13

1. Final Phase I Rule

After the Final Phase I Rule was published, it was challenged by both

environmental and industry petitioners. The Second Circuit reviewed the Rule

and generally upheld it in Riverkeeper, Inc. v. EPA (Riverkeeper I). The Phase

14

I Rule established two tracks for regulating CWIS for new facilities. Track I

created a uniform, national system for intake and velocity based on closed-cycle

cooling technology. The EPA stated that the closed-cycle system is the “best

15

technology available” for minimizing environmental impact. Track II allowed

16

the use of any technological approach that “can show, in demonstration study,

‘that the technologies employed will reduce the level of adverse environmental

impact . . . to a comparable level to that which’ would be achieved applying Track

I’s capacity and velocity requirements.” Track II also allowed facilities to

17

employ “restoration measures” – such as restocking, reclamation, and migration

barrier removal – as part of its “comparable” standard, so as to maintain

wildlife levels in affected bodies of water.

18

Although the Second Circuit upheld most of the Phase I Rule, it did rule

that the “restoration measures” provision was inconsistent with § 316(b)’s

 71 Fed. Reg. 35,030. 13

 358 F.3d 174 (2d Cir. 2004). 

14

 Id. at 182-83. 15

Id. at 183.

16

Id. (quoting 40 C.F.R. § 125.84(d)(1)).

17

Id. 18

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requirement that the EPA minimize adverse environmental impacts by

regulating the location, design, construction, and capacity of CWIS. This was

because the “restoration measures” had nothing to do with location, design,

construction, or capacity. Holding that the EPA exceeded its authority by

19

including the “restoration measures” in the Rule, the Second Circuit remanded

that portion of the Rule to the EPA.

20

2. Final Phase II Rule

The Final Phase II Rule regulates CWIS at large, existing power plants

that are “point sources” and that primarily generate electric power and either

transmit it or sell it to another entity for transmission, and whose CWIS use are

proposed to use 50 million gallons or more of water a day. That rule set forth

21

five compliance alternatives from which a facility could select and implement

“‘for establishing [the] best technology available for minimizing adverse

environmental impact.’” One of the compliance alternatives available to

22

existing power plants was to employ a closed-cycle CWIS, but selection of such

a system was not required. The remaining compliance alternatives referenced

23

national performance standards that “‘are based on consideration of a range of

technologies that [the] EPA has determined to be commercially available.’” The

24

Id. at 189.

19

Id. 20

Riverkeeper II, 475 F.3d 83, 92 (2d Cir. 2007) (citing 40 C.F.R. § 125.91) rev’d and remanded

21

by Entergy Corp. v. Riverkeeper, Inc., 129 S.Ct. 1498 (2009).

Id. (quoting 40 C.F.R. § 125.94(a)). 22

Id. at 93. 23

Id. (quoting 69 Fed. Reg. at 41,598-99).

24

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Phase II Rule also created two site-specific compliance variances from the

national performance standards. The first compliance variance – the “costcompliance alternative” – provides that if a facility demonstrates that the cost

of compliance would be significantly greater than the projected costs by the EPA,

the local permitting authority had to make a site-specific determination of the

“best technology available” as close to the applicable national performance

standards as practicable, but without producing costs “significantly greater”

than those considered by the EPA during rule making. The second compliance

25

variance – the “cost-benefit alternative” – provides that, if a facility

demonstrates that the costs of compliance with the national standards is

significantly greater than the benefits of compliance, the local permitting

authority could make a site-specific determination of the “best technology

available” that is as close as practicable to the national performance standards.

26

After various states and environmental groups challenged the Final Phase

II 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

remediation can be reasonably borne by the industry; or (2) which remedial

technologies are the most cost-effective. The Second Circuit also held, however,

27

that it is impermissible under § 316(b) to consider a cost-benefit analysis that

compares the costs and benefits of various regulatory options and choose the

option with the best net benefits. The court remanded the Rule to the EPA for

28

Id. at 94 (citing 40 C.F.R. § 125.94(a)(5)(I)).

25

Id. (citing 40 C.F.R § 124.94(a)(5)(ii)).

26

Id. at 98. 27

Id. 28

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clarification whether the national performance standards set out in the Phase

II Rule incorporated a cost-benefit analysis. On remand, the EPA suspended

29

operation of the Rule pending further rule making, and the Supreme Court

granted certiorari limited to the question whether § 316(b) “authorizes the

30

[EPA] to compare costs with benefits in determining the best technology

available for minimizing adverse environmental impact at cooling water intake

structures.”

31

3. Entergy Corp. v. Riverkeeper

In Entergy Corp. the Supreme Court considered both the plain language

of the Act and the structure of the Act as a whole to address whether the Act

precludes a cost-benefit analysis. The Court first considered the Second

32

Circuit’s interpretation of § 316(b) that the phrase “best technology available for

minimizing adverse environmental impact” means “technology that achieves the

greatest reduction in adverse environmental impacts.” The Court described

33

this interpretation as “plausible,”but reasoned that “best technology available”

could also mean “technology that most efficiently produces some good.” The

34

Court read the statute’s phrase “minimizing adverse environmental impact” as

allowing the EPA to consider the degree of adverse-impact reduction rather than

Id. at 104-105. 29

 128 S. Ct. 1867 (2008). 30

Id. at 1867 (internal quotation marks omitted).

31

 129 S. Ct. at 1505-07. 32

Id. at 1506 (citing Riverkeeper II, 475 F.3d at 88-100).

33

Id. (emphasis original).

34

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mandating that the “greatest possible reduction in environmental harm” be

achieved. The Court determined that the statute afforded the EPA “some

35

discretion to determine the extent of reduction that is warranted under the

circumstances” and that the phrase “best technology available” does not

36

preclude cost-benefit analysis.

37

The Court also considered whether § 316(b)’s silence as to cost-benefit

affirmatively prohibited the agency from employing a cost-benefit analysis. The

Court rejected such a reading, holding that the statute’s silence “is meant to

convey nothing more than a refusal to tie an agency’s hands as to whether costbenefit analysis should be used, and if so to what degree.” The Court reversed

38

the Second Circuit’s remand of the Phase II Rule that rested on that court’s

reading of cost-benefit preclusion.

Entergy Corp. lucidly establishes that the EPA may employ cost-benefit

analysis when effecting regulations that reflect the “best technology available for

minimizing adverse environmental impact.” The Entergy Corp. Court also

endorsed 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

consider to what degree, if any, costs and benefits should be weighed in

determining the “best technology available to minimizing adverse environmental

impact.”

39

Id. 35

Id. 36

Id. 37

Id. at 1507. 38

Id. at 1506. 39

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4. The Phase III Rule

The final phase of CWIS rule making commenced in November, 2004 when

the EPA published and sought comment on its Phase III Rule. For existing

40

facilities, the EPA proposed three classifications based on daily volume of water

intake use: 50 million gallons; between 100 and 200 million gallons; and more

than 200 million gallons. Additionally, the EPA gave notice that it might

41

continue its current case-by-case regulation instead of implementing a national

categorical approach. For new facilities, however, the EPA proposed national

42

categorical standards for CWIS regulation. On November 25, 2005, the EPA

43

published a Notice of Data Availability that summarized the data that the EPA

had received and collected since publishing the Proposed Rule; on June 16,

44

2006, the EPA published the Final Phase III Rule. The EPA noted that it

45

considered input from environmental, industry, engineering, and governmental

entities, held symposia to discuss research and costs of proposed technologies,

and considered the materials from the Phase I and II rule makings.

46

Additionally, the EPA conducted entrainment studies for existing Phase III

 69 Fed. Reg. 68,444. 40

Id. 41

Id. at 68,467. 42

Id. at 68,444. 43

 70 Fed. Reg. 71,057 (Nov. 25, 2005).

44

 71 Fed. Reg. 35,006 (codified in 40 C.F.R. pts. 9, 122, 123, 124, and 125).

45

Id. at 35,012/2-3. 46

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CWIS and collected industry-wide data regarding new facilities.

47

For existing Phase III facilities, the EPA performed cost-benefit analyses

for evaluating the national social and economic costs and benefits of the three

gallons-per-day categories of structures. It calculated social costs by evaluating

48

compliance and administrative costs to the state and federal governments. The

49

economic costs were evaluated based on the financial impact that the national

categorical standards would have on the existing facilities’ firms. The national

50

benefits assessment included considering use (economic resource exploitation)

and non-use (resource use for other than economic reason) benefits. The EPA

51

also compared the annual monetized social costs of compliance with the annual

monetized environmental benefits of compliance. For the 50 million gallons per

52

day category, the EPA concluded that the annual costs of compliance would be

between $38.3 million and $39 million and that the annual monetized benefits

would be between $1.8 and $2.3 million, which led the EPA to conclude that the

costs of compliance were “wholly disproportionate” to the benefits. The EPA

53

also concluded that the non-monetized benefits were unlikely to alter the

Id. 47

Id. at 35,030-32. 48

Id. at 35,031. 49

Id. at 35,032. 50

Id. at 35,032-33. 51

Id. at 35,017. 52

Id. 53

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monetized cost-benefit ratio.

54

For new Phase III facilities, the EPA concluded that it was impossible to

55

compare the costs incurred by individual facilities to the benefits of those

facilities because those facilities have not yet been built. Instead, the EPA

56

calculated the expected costs of compliance under the national uniform

standards and determined whether those costs would result in a barrier to entry

for new operations and whether those costs could be reasonably borne by the

industry.

57

The EPA also conducted a qualitative environmental impact study to

determine the adverse effects of impingement and entrainment by new CWIS.

58

The EPA stated that it was relying in part on information that had been

gathered since its Phase I rule making, including industry-wide surveys of

technical and economic data. The EPA calculated the total annualized social

59

cost of compliance to be between $3.2 million and $3.8 million, that the

60

economic impact would pose no barrier to entry, and that the industry could

reasonably bear the costs of compliance because no new facilities would be

prevented from operating and no new operations would be forced to cease

Id. 54

 40 C.F.R. § 125.130 et seq. 55

 71 Fed. Reg. 35,034. 56

Id. at 35,025-29. 57

Id. at 35,013-14/1, 35,016/1. 58

Id. at 35,012. 59

Id. at 35,025. 60

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operations because of the costs of compliance.

61

The EPA’s environmental impact analysis focused on the Gulf of Mexico,

where the majority of new rig construction would occur over the next 20 years.

62

The EPA could find no studies that specifically addressed entrainment or

impingement for new rigs, so it relied on the Southeast Area Monitoring and

Assessment Program (“SEAMAP”) to provide information about icthyoplankton

densities in the Gulf, which, it observed, were the same range of densities

63

observed in the inland and coastal waters addressed in the Phase I rule

making. The EPA also took into account that offshore rigs serve as marine

64

habitats, attracting and concentrating marine life in their vicinities.

65

The Phase III Rule for existing facilities specifies that CWIS requirements

are to be established on a case-by-case basis under the NPDES program, in

accordance with 40 C.F.R. § 125.90(b). Accordingly, individual permit writers

66

are to use their “best professional judgment” to determine, on a case-by-case

basis, the requirements that each facility must meet to achieve the best

Id. at 35,027-29. 61

Id. at 35,013. 62

 The Southeast Area Monitoring and Assessment Program (SEAMAP) is a two decades-long 63

study (1982-2203) 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. 

Id. at 35,013, 35,019. 64

Id. at 35,013 (citing studies of marine life densities surrounding California and Alaska offshore

65

rigs and in the Gulf).

Id. at 35,009. 66

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technology available for minimizing adverse environmental impact at that

facility.

67

For new offshore fixed and mobile facilities, the Rule applies national

performance standards for any rig that is a “point source” and is thus required

to have a NPDES permit, has a CWIS that uses at least 25% of water intake for

cooling only, and withdraws at least 2 million gallons of water per day. This

68

national standard applies to all “coastal” or “offshore” oil and gas extraction

facilities (there is an exception to the national standards for rigs located in tidal

rivers or estuaries).

69

The Phase III Rule for new facilities creates two compliance options.

First, the Rule distinguishes facilities as either fixed or non-fixed, and fixed

facilities are further distinguished as those possessing a sea chest (openings in

the hull of a vessel for withdrawing cooling water) and those that do not. Fixed

facilities may choose to employ either Track I or Track II. Mobile units may only

employ Track I, which requires the facility to minimize entrainment by reducing

through-screen velocity to 0.5 f/s or less. Facilities that use sea chests need not

employ fish-protection technologies, but facilities without sea chests must

employ entrainment protection. Mobile units need only comply with the

through-screen velocity limit and are not required to employ entrainment

controls. Track II allows a fixed facility to employ “alternative technologies”

70

Id. at 35,015. 67

 40 C.F.R. § 125.131(a).

68

 71 Fed. Reg. at 35,021. 69

 The Agency determined that such controls would compromise the seaworthiness of the mobile

70

units. 71 Fed. Reg. 35,014.

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to 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

either employ a sea chest or entrainment control.

Finally, all facilities are subject to impingement-minimization controls if

the permitting authority determines that endangered, sport, commercial, or

migratory species are threatened. Furthermore, any offshore facility may seek

a “variance” from the impingement and entrainment requirements by

demonstrating that the requirements would result in “compliance costs wholly

out of proportion to the costs the EPA considered in establishing the requirement

. . . or would result in significant adverse impacts on local water resources other

than impingement and entrainment, or significant adverse impacts on energy

markets.”

71

B. Petitioners’ Challenges

After the EPA published notice of the Final Rule on June 16, 2006

challenges to it were filed in several courts of appeals. As these challenges to

agency action were brought under the “other limitations” portion of 33 U.S.C. §

1369(b)(1)(E), the courts of appeal have exclusive jurisdiction to hear them.

These challenges were consolidated by a multi-district litigation (“MDL”) panel

and randomly assigned to this court. Riverkeeper moved for change of venue to

the Second Circuit, which we denied. Riverkeeper then filed a parallel action in

the 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

pending our determination of jurisdiction. And then, after the instant case was

fully briefed, it was stayed pending the Supreme Court’s decision in Entergy

 40 C.F.R. § 125.135. 71

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Corp., which was handed down on April 1, 2009. It was in light of this decision

that Riverkeeper and the EPA filed a motion for voluntary remand of the

existing-facilities Rule, which motion Intervenor API opposes. We ordered that

motion to be carried with this case.

ConocoPhillips argues that the EPA acted arbitrarily and capriciously in

promulgating national categorical standards for new facilities because these

standards do no take into account facility location. ConocoPhillips also asserts

that the EPA acted arbitrarily and capriciously by failing to perform the

requisite cost-benefit analyses, and by relying on so-called “qualitative” rather

than quantitative data. In the alternative, ConocoPhillips also contends that the

qualitative data demonstrate that the EPA acted arbitrarily and capriciously in

promulgating a uniform national standard. Finally, ConocoPhillips now asserts

in its reply brief that the EPA has violated § 553(b)’s required notice and

comment procedure by advancing in its Response a “litigating position” that

differs from its original statutory interpretation of § 316(b) as articulated in the

Proposed and Final Rules.

II. Standard of Review

We have jurisdiction over challenges to an agency’s action that result in

“other limitations” under the CWA, and coolant water intake regulations are

72

deemed “other limitations.” Reviews of agency interpretations of statutes are

73

informed by the Supreme Court’s decision in Chevron, U.S.A. v. National

Resource Defense Counsel. Under Chevron, a reviewing court must first look

74

 33 U.S.C. § 1369(b)(1)(E). 72

E.g., Riverkeeper II, 358 F.3d at 183-84. 73

 467 U.S. 837, 842-43 (1984). 74

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to whether Congress has directly spoken to the precise question at issue. If the

75

court finds that congressional intent is clear, then that interpretation controls.

76

If not, however, the question for the reviewing court is whether the agency’s

interpretation is based on a permissible construction of the statute. An

77

agency’s interpretation is permissible if it is reasonable. The question of

reasonableness is not whether the agency’s interpretation is the only possible

interpretation or whether it is the most reasonable, merely whether it is

reasonable vel non.

78

In the absence of a specified mechanism of judicial review of the agency

action under judicial review, the APA governs. 5 U.S.C. § 706(2)(A) directs that

79

when reviewing agency “action, findings, and conclusions” the court shall hold

the action of the agency unlawful only if it is found to be “arbitrary, capricious,

an abuse of discretion, or otherwise not in accordance with law.” “Under this

80

highly deferential standard of review, a reviewing court has the least latitude

in finding grounds for reversal. Courts may not use review of an agency’s

environmental analysis as a guise for second-guessing substantive decisions

committed to the discretion of the agency.” “An agency rule is arbitrary and

81

Id. at 842.

75

Id. 76

Id. at 843.

77

Riverkeeper III, 129 S. Ct. at 1505. 78

 5 U.S.C. § 703. 79

Id. at 706(2)(A).

80

City of Dallas v. Hall, 562 F.3d 712, 717 (5th Cir. 2009) (internal citations omitted).

81

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capricious ‘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,

offered an explanation for its decision that runs counter to the evidence before

the agency, or is so implausible that it could not be ascribed to a difference in

view or the product of agency expertise.’” The scope of the reviewing court’s

82

inquiry is to determine if the agency’s judgment conforms to minimum standards

of rationality, i.e., whether the agency act bears a rational relationship to the

statutory purposes, and whether there is substantial evidence in the record to

support it.

83

III. Analysis

A. The EPA and Riverkeeper’s Joint Motion to Remand

The EPA and Riverkeeper jointly filed a motion to remand the Rule as it

applies to existing CWIS in light of the Supreme Court’s decision in Entergy

Corp. Specifically, the EPA seeks to “reevaluate the Phase III Rule’s existing

facilities decision in conjunction with the Agency’s proceedings on remand of the

‘Phase II Rule’ at issue in [Riverkeeper II] . . . in light of the Supreme Court’s

recent decision in [Entergy Corp.].”

Embedded in an agency’s power to make a decision is its power to

reconsider that decision. An agency’s inherent authority to reconsider its

84

decisions is not without limits, however. “An agency may not reconsider its own

85

Texas Oil & Gas Ass'n v. EPA, 161 F.3d 923, 933 (5th Cir.1998) (citing Motor Vehicle Mfrs. 82

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 83

Texas Oil & Gas Ass'n, 161 F.3d at 934).

Trujillo v. General Elec. Co., 621 F.2d 1084. 1086 (10th Cir. 1980).

84

Macktal v. Chao, 286 F.3d 822, 825 (5th Cir. 2002). 85

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decision if to do so would be arbitrary, capricious, or an abuse of discretion.”

86

Furthermore, reconsideration also must occur within a reasonable time after the

decision being reconsidered was made, and notice of the agency’s intent to

reconsider must be given to the parties.

87

We conclude that the EPA’s joint motion is not arbitrary, capricious, or an

abuse of discretion; neither do we find that it was filed untimely or without valid

notice to all parties. The Supreme Court in Entergy Corp. has remanded the

Phase II Rule for existing facilities to the EPA, and it is imminently reasonable

to address together the substantial similarities of fact between that aspect of the

Phase II Rule and the instant Phase III Rule in light of Entergy Corp.

Furthermore, remand will work no prejudice to any affected entity because it

merely maintains the status quo for existing facility regulation. Pending a new

Rule, the EPA’s § 316(b) case-by-case permitting procedure, which was in place

before the Phase III Rule was promulgated, will remain in effect. Accordingly,

we grant the EPA’s joint motion for remand of just the Phase III Rule for

existing CWIS.

B. ConocoPhillips’s Challenges to the Phase III Final Rule for New Facilities

1. EPA’s “Economic Feasability” Interpretation of § 316(b)

Before considering ConocoPhillips’s substantive arguments, we first

address 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

to constitute a violation of the notice provision for informal rule making set forth

Id. (citing 5 U.S.C. § 706(2)(A)). 

86

Id. (citing Dun & Bradstreet Corp., 946 F.2d at 193; Bookman v. United States, 197 Ct.Cl. 108,

87

453 F.2d 1263, 1265 (1972)).

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in § 4 of the APA. ConocoPhillips asserts that (1) the EPA gave notice, in both

88

the Proposed and Final Phase III Rule, that it was employing a cost-benefit

analysis in its rule making for new CWIS, but (2) the EPA has abandoned its

cost-benefit rationale and instead adopted during this appeal an “economic

achievability” rationale for its rule making. ConocoPhillips argues that this post

hoc rationalization should be afforded no deference under Chevron and that the

agency should be held to its original basis of statutory interpretation.

For almost seventy years, the rule has been that “‘the grounds upon which

an administrative order must be judged are those upon which the record

discloses that its action was based.’” This is necessary because:

89

If an [administrative] order is valid only as a determination of policy or

judgment which the agency alone is authorized to make and which it has

not made, a judicial judgment cannot be made to do service for

administrative judgment.

90

Furthermore, an agency must comply with the notice and comment procedures

in informal rule making that are set out in § 4 of the Administrative Procedures

Act, namely:

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

 5 U.S.C. § 553. 88

See Global Van Lines v. ICC, 714 F.2d 1290, 1297 (5th Cir. 1983) (quoting SEC v. Chenery 89

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)).

Chenery, 318 U.S. at 88. 90

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rule is proposed . . . .

91

and

After notice required by this section, the agency shall give interested

persons an opportunity to participate in the rule making through

submission of written data, views, or arguments with or without

opportunity 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

Sections 553(b)(2) and (c) require that (1) an agency identify the source of its

legal authority during the notice and comment period, and (2) “the reference to

legal authority must be sufficiently precise to apprise interested persons of the

agency’s legal authority to issue the proposed rule.”

93

ConocoPhillips does not dispute that the EPA has maintained, and

continues to maintain, that § 316(b) is the statutory authority under which it

has promulgated the Phase III Rule. Its argument is that the EPA’s “economic

achievability” test, asserted during this appeal, is sufficiently different from the

“cost-benefit” test announced during rule making that it amounts to a mere

“litigation position” and the agency’s justifications for its Phase III Rule that rest

on the “economic achievability” argument should be ignored.

ConocoPhillips makes much of the EPA’s use on appeal of the phrase

“economic achievability” – a term that appears nowhere in the Proposed or Final

Rule. An agency’s alteration of its terminology, however, does not mean that it

 5 U.S.C. § 553(b)(2) (emphasis added). 91

Id. at § 553(c) (emphasis added). 92

Global Van Lines, 714 F.2d at 1298 (internal citation and punctuation omitted). 93

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has altered its methodology. Certainly, it may be possible for an agency to alter,

post 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

violated. Even so, when an agency, in its discretion, has flexibility to execute its

statutory 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

valid exercise of its statutory authority to regulate in different ways. We have

long held that the Final Rule and the Proposed Rule need not be identical. The

Final Rule must be a “‘logical outgrowth’” of the rule making process, and

94

courts must proceed with caution before deeming a Final Rule too attenuated

from the Proposed Rule, lest we supplant the agency’s role in the nation’s

regulatory scheme. In the instant case, however, ConocoPhillips does not

95

complain that the Proposed Rule and the Final Rule are different; rather, it

insists that both the Proposed Rule’s and the Final Rules’s stated interpretations

of § 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

phrase “economic achievability” for the first time on appeal. The crux of the

question is whether the EPA’s justificatory argument on appeal so differs from

the justification articulated during the rule making process to have deprived

interested 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,

94

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 95

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”).

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the Phase III Rule in the Proposed Rule reads:

Section 316(b) requires that cooling water intake structures reflect

the best technology available for minimizing adverse environmental

impact. In contrast to the effluent limitations provisions, the object of the

“best technology available” is explicitly articulated by reference to the

receiving water: To minimize adverse environmental impact in the waters

from which cooling water is withdrawn. This difference is reflected in

EPA’s past practices in implementing sections 301, 304, and 316(b). While

EPA has established effluent limitations guidelines based on the efficacy

of one or more technologies to reduce pollutants in wastewater,

considering costs, but without necessarily considering the impact on the

receiving waters, EPA has previously considered the costs of technologies

in relation to the benefits of minimizing adverse environmental impact in

establishing section 316(b) limits. In Re Public Service Co. of New

Hampshire, 10 ERC 1257 (June 17, 1977); In Re Public Service Co. of New

Hampshire, 1 EAD 455 (Aug. 4, 1978); Seacoast Anti-Pollution League v.

Costle, 597 F. 2d 306 (1st Cir. 1979).

For this Phase III rule making, EPA therefore interprets Clean

Water Act section 316(b) as authorizing EPA to consider not only

technologies but also their effects on and benefits to the water from which

the cooling water is withdrawn. Based on these two considerations, today’s

proposed rule establishes national requirements for facilities to install

technology, as appropriate, that is technically available, economically

practicable, cost-effective, and justified by the benefits to the source

waterbody.

96

The preamble to the Final Rule reads:

Because section 316(b) is silent as to the factors EPA should

consider in deciding whether a candidate technology minimizes adverse

environmental impact, EPA has broad discretion to identify the

appropriate criteria. See Riverkeeper, 358 F.3d at 187, n.12 (brevity of

section 316(b) reflects an intention to delegate significant rule making

authority to EPA); see id. at 195 (appellate courts give EPA “considerable

discretion to weigh and balance the various factors” where the statute does

 69 Fed. Reg. 68,449. 96

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not state what weight should be accorded) (citation omitted).

For this Phase III rule making, EPA therefore interprets the phrase

“best available technology for minimizing adverse environmental impacts”

as authorizing EPA to consider the relationship of the costs of the

technologies to the benefits associated with them. EPA has previously

considered the costs of technologies in relation to the benefits of

minimizing adverse environmental impact in establishing section 316(b)

limits, which historically have been done on a case-by-case basis. In Re

Public Service Co. of New Hampshire, 10 ERC 1257 (June 17, 1977); In Re

Public Service Co. of New Hampshire, 1 EAD 455 (Aug. 4, 1978); Seacoast

Anti-Pollution League v. Costle, 597 F.2d 306 (1st Cir. 1979).

In addition to helping EPA determine the effects of candidate

technologies on the receiving water, considering the relationship of costs

and benefits also helps EPA determine whether the technologies are

economically practicable. EPA has long recognized, with the support of

legislative history, that section 316(b) does not require adverse

environmental impact to be minimized beyond that which can be achieved

at an economically practicable cost. See 118 Cong. Rec. 33762 (1972)

reprinted in 1 Legislative History of the Water Pollution Control Act

Amendments of 1972, at 264 (1973) (Statement of Representative Don H.

Clausen). EPA therefore may consider costs and benefits in deciding

whether any of the technology options for Phase III existing facilities

actually do minimize adverse environmental impact – or whether the

choice of technologies should be left to BPJ decision-making. When the

costs of establishing a national categorical rule substantially outweigh the

benefits of such a rule, a national categorical section 316(b) rule may not

be economically practicable, and therefore not the “best technology

available for minimizing adverse environmental impact.”

Nothing in section 316(b) requires EPA to promulgate a regulation

to implement the requirements for cooling water intake structures.

Section 316(b) of the CWA grants EPA broad authority to establish

performance standards for cooling water intake structures based on the

“best technology available to minimize adverse environmental impact.”

97

Both the Proposed and Final Rules reflect that the EPA considered the Act

 71 Fed. Reg. at 35,010. 97

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to afford the agency the power to consider cost-benefits when regulating existing

and new CWIS. Furthermore, the Proposed Rule expressed that the agency

intended to consider CWIS regulation from both a technological standpoint and

a cost-benefit standpoint: “EPA therefore interprets Clean Water Act section

316(b) as authorizing EPA to consider not only technologies but also their effects

on and benefits to the water from which the cooling water is withdrawn.” This

flexibility in regulatory approach is echoed in the Final Rule’s statement that the

EPA “has broad discretion to identify the appropriate criteria” for evaluating

whether candidate technology minimized adverse environmental impact and

that 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

authorizing a cost-benefit approach to CWIS regulation, but also that the agency

does not consider itself bound to do so. What the preambles to the Proposed and

Final Rules do indicate is that the agency purported to employ cost-benefit

analysis in promulgating CWIS regulation for existing and new facilities as part

of its “discretion to weigh and balance various factors” when determining the

“best technology available for minimizing adverse environmental impact.”

The Phase III Final Rule is bifurcated in its application, regulating

existing offshore facilities differently from new ones. It is therefore necessary

to look beyond the Rule’s general statements in the preamble to the Rule’s

specific application to new CWIS facilities. The Final Rule provides a detailed

summary of the EPA’s cost-estimation for the national categorical regulatory

options for new CWIS. The agency (1) identified the different types of CWIS

98

Id. at 35,025 to 35,029.

98

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being employed by different offshore facilities, (2) identified available

impingement and entrainment control measures, and (3) estimated both capital

and annual operating costs “for each technology option for the different

configurations of offshore . . . facilities and [CWIS].” The agency also estimated

99

the predicted economic impact of the new Rule by evaluating the costs associated

with available impingement and entrainment technology with “superior

reliability and performance and ease of operation.” After collecting this data,

100

the EPA evaluated the likely economic impact (1) on offshore facility revenue

and operating costs, and (2) as a barrier-to-entry.

101

In the “Comparison and Benefits and Costs” section of the Final Rule,

102

the EPA states that it could not compare estimated benefits yielded from the

Rule as it applies to new facilities because “such estimates would rely on

speculating where these facilities would be built and/or operate . . . . Hence, it

is not possible to compare quantified costs and benefits associated with this final

rule.” The agency did, however, perform “comparisons of the national benefits

103

and costs of the national categorical regulatory options” by comparing the “total

annualized use benefits to total annualized pre-tax costs at existing facilities

that remain open in the baseline.”

104

In short, the Final Rule indicates that the EPA estimated the compliance

Id. at 35,025. 99

Id. 100

Id. at 35,025 to 35,029.

101

 71 Fed. Reg. 35,034. 102

Id. 103

Id. at 35,034. 104

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costs of the national categorical standards for new CWIS and compared those

costs to the likely economic impact on the industry. Additionally, the EPA

compared the compliance costs to the “baseline” benefits afforded by existing

facilities. The agency was unable to perform a specific cost-benefit analysis for

new 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

analysis when promulgating rules under § 316(b), and that, given the available

information (or lack thereof), “economic achievability . . . specifically, barriers to

entry, are the appropriate cost measures for new facilities because they analyze

whether a regulation will place new facilities at a competitive disadvantage as

compared to existing facilities.” The agency asserts further that, even though

it could estimate the costs of compliance for new CWIS despite not knowing their

locations, it could not estimate the benefits of the Rule because of the wide

variety of ecosystems in which new offshore facilities will be located. In contrast

to benefits, compliance costs can be estimated because they will remain constant

irrespective of the specific location of the facility: The depths of all CWIS are

approximately the same regardless of the depth of the water at the facilities’

location.

After comparing the EPA’s statements in the Final Rule to those argued

before 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

Final Phase III Rule for new offshore facilities was promulgated. The EPA

considered barrier to entry and economic impact, as distinguished from making

specific, facility-by-facility cost-benefit analyses, as the basis for the Final Rule,

and that position has not changed during this appeal. We see no material

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difference between the EPA’s statutory interpretation of its rule making

authority and the interpretation previously articulated. ConocoPhillips’s

argument that the EPA did not provide adequate notice of the economicachievability test during rule making is unavailing.

2. Whether the EPA’s Rule Making was Arbitrary and Capricious

ConocoPhillips makes two primary arguments that the EPA’s Final Phase

III Rule for new offshore facilities is arbitrary and capricious. Each of these

contentions 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

regulations. In Entergy Corp. v. Riverkeeper, the Supreme Court has now made

pellucid that the EPA may but is not required to engage in cost-benefit analyses

for CWIS rule making. And, as discussed above, the EPA has never interpreted

the statute to require cost-benefit analyses in its rule making. Neither did the

105

EPA give notice in this rule making that it was bound to do so or that it would

do so to the exclusion of other metrics. Thus, ConocoPhillips’s objection to the

Final Phase III Rule on this ground has been neutralized. We thus proceed to

consider the specific grounds on which ConocoPhillips urges us to hold that the

EPA was arbitrary and capricious in its rule making.

The central theme for ConocoPhillips’s remaining objections is that the

agency was arbitrary and capricious in failing to consider facility location when

it promulgated the Final Phase III Rule. This objection rests on two primary

arguments: (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)

105

(“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.”).

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benefits analysis for specific facility locations, and (2) it is arbitrary and

capricious for the EPA to rely on the general, “qualitative” SEAMAP study,

rather than on site-specific quantitative studies, to estimate the environmental

impact of new CWIS.

a. Costs and Benefits of Facility Location

ConocoPhillips asserts that the EPA failed properly to consider facility

location – as required by statute – in promulgating the national categorical

standards for new offshore facilities. ConocoPhillips argues that, contrary to the

EPA’s contention, the administrative record provided both the likely type and

number of new facilities to be deployed over the next 20 years, and the

overwhelming majority of new oil and gas rigs will be situated in very deep

water (greater than 1,000 feet in depth) in the Gulf of Mexico. ConocoPhillips

acknowledges that this information did not include the precise latitude and

longitude of each new facility, but nevertheless “did tell the agency all it needed

to know to perform a meaningful cost/benefit study: what kinds of rigs . . .,

operating in what seas, and at what depths.” ConocoPhillips insists that, given

this information and the fact that the EPA stated that it possessed enough

information to calculate compliance costs for new facilities, the agency’s claim

that it did not have enough information to perform a meaningful cost-benefit

analysis is arbitrary and capricious or, in the alternative, that it was arbitrary

and capricious for the agency not to develop this information if it did not have

it during rule making.

i. Statutory Argument

Section 316(b) reads: “Any standard established pursuant to section 1311

of this title or section 1316 of this title and applicable to a point source shall

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require that the location, design, construction, and capacity of cooling water

intake structures reflect the best technology available for minimizing adverse

environmental impact.” ConocoPhillips claims that the emphasized language

106

mandates that the EPA consider the facility’s physical location in its rule

making; the EPA responds that this language only pertains to CWIS’s physical

location and that a decision not to regulate on the basis of location does not mean

that the agency did not consider it.

To evaluate the agency’s interpretation of § 316(b), we employ Chevron’s

above-described two-step framework: We first decide whether Congress spoke

directly to the precise question at issue, and, if it did, give effect to the

unambiguously expressed intent of Congress; under such a situation, we will

reverse an agency’s interpretation if it does not conform to plain meaning of

statute. If the statute is silent or ambiguous, however, we ask whether the

107

agency’s interpretation is based on a permissible construction of the statute. We

may 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

to say, we will sustain an agency’s interpretation of an ambiguous statute if that

interpretation is based on a permissible construction of the statute. This is

Chevron’s second step.

108

To determine whether a statue is ambiguous, we first look to its plain

 33 U.S.C. §1326(b) (emphasis added). 106

Texas Office of Public Utility Counsel v. F.C.C., 183 F.3d 393, 410 (5th Cir. 1999) (internal

107

punctuation and citation omitted).

Id (internal punctuation and citation omitted)..

108

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meaning. It is absurd and arbitrary to decide that “of cooling water intake

109

structures” modifies some of the serial nouns but not “location.” There is

certainly no evidence in the plain language – or in the rules of English grammar

– to support such an interpretation. Nouns joined by coordinating conjunctions

are usually treated as a single, compounded unit, and a postmodifying

110

prepositional phrase is most naturally read to modify that single unit. It is

111

also absurd to assume that Congress intended “capacity” to refer to CWIS, but

for “location, design, and construction” to refer to the “facility.” In short, to read

this 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

unsupported by the plain meaning of the statute. Many facilities, such as power

plants, employ CWIS but are themselves located on land. Under

ConocoPhillips’s interpretation, the standards the EPA establishes must

consider the location of a terrestrial facility but may not consider the location of

that facility’s remote maritime or riparian CWIS.

Such a reading makes no sense. We hold that the plain language of the

statute requires the EPA to consider the location of the CWIS when establishing

rules under § 316(b), irrespective of whether the location of the CWIS is the

same 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) 109

(“[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.”) . 

 SIDNEY GREENBAUM, OXFORD ENGLISH GRAMMAR 233 (1996).

110

 Consider, e.g., “The doctor decided that keeping a boat, trailer, and car in storage was too 111

expensive.” 

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distant from the facility. Having concluded that the statute is unambiguous, we

do not proceed to the second prong of Chevron.

As for ConocoPhillips’s substantive criticism of the agency’s treatment of

CWIS location, the EPA readily acknowledges that it did not attempt to estimate

the likely benefits achieved by specific facilities at specific locations. Rather, the

agency points to the portion of the record which reflects that it collected

information to inform its decision in promulgating national categorical

standards. The EPA expressly found, by considering three economic impact

assessments, that uniform regulation was achievable, that it would not create

112

barriers to entry, and that it would not force operations to close. In addition,

113

the EPA considered a wide range of industry, environmental, and economic data

which related to the types of facilities that will be used and the technologies

114

available and their efficacy. The agency also considered this information in

115

the context of the likely locations in the Gulf of Mexico (where almost all new

offshore facilities will be situated), and made an exception to the uniform

116

standard for facilities to be located in tidal rivers or estuaries. Moreover, the

117

data in the record support the conclusion that environmental harm may result

at all likely facility locations: both estuarial and ocean biomass suffer the

highest rate of destruction from CWIS; eggs and plankton disperse over wide

 71 Fed. Reg. 35,025 to 35,029.

112

Id. 113

 71 Fed. Reg. 35,024 to 35,025.

114

 Id.

115

Id. at 35,013. 116

Id. at 35,020. 117

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areas; and aquatic organisms are attracted to and concentrate around offshore

facilities. The EPA further notes that, regardless of any shortcomings that

118

ConocoPhillips finds in the data the agency relied on, ConocoPhillips provided

no more detailed data during rule making than that which the EPA considered;

indeed, site-specific impingement and entrainment data for offshore facilities

have apparently never been collected.

119

Considering the record as a whole, as well as the EPA’s interpretation and

application of § 316(b), we conclude that the EPA’s decision to forgo a benefits

analysis and promulgate the Phase III Rule on economic achievability grounds

is at least “minimally related to rationality.” Of the Texas Oil & Gas factors – (1)

agency reliance on factors which Congress has not intended it to consider, (2)

failure to consider an important aspect of the problem, (3) offering an

explanation for its decision that runs counter to the evidence before the agency,

or (4) offering an explanation that so implausible that it could not be ascribed to

a difference in view or the product of agency expertise – only the second is

120

possibly applicable. The record makes clear, however, that the EPA did consider

location an “important aspect of the problem” – specific benefits estimates for

specific facilities – and, with that precise data unavailable, that the agency

evaluated the application of national categorical standards by looking at (1) the

economic feasability of the approach to the industry as whole and (2) the

expected benefits that will be achieved generally. “Given the admitted

information shortage, the EPA must make use of the information it has,

Id. at 35,013. 118

Id. 119

 161 F.3d at 934.

120

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recognizing the limits of the information; EPA cannot refuse to carry out its

mandate, waiting for the day when it might possess perfect information.”

121

Accordingly, under the “highly deferential” standard of review mandated here,

we are unpersuaded that the EPA’s failure to estimate benefits for specific new

facility locations renders the process arbitrary or capricious.

ii. Reliance on SEAMAP Data

ConocoPhillips also faults the EPA’s reliance on so-called “qualitative

data,” as opposed to “quantitative data,” to justify its promulgation of national

categorical standards for new facilities. Specifically, ConocoPhillips takes issue

with EPA’s conclusion that, although the “EPA has limited information on

specific environmental impacts associated with oil and gas extraction facilities,”

the agency nevertheless was confident in the “potential for such impacts to

warrant including [national categorical requirements] for new offshore oil and

gas extraction facilities in this rule.” ConocoPhillips insists that the “limited

122

information” that the EPA does possess – the SEAMAP data – is inadequate

123

to support the Final Rule and that it was arbitrary and capricious for the agency

not to develop a “quantitative benefit study” for new facility location.

ConocoPhillips also contends that the SEAMAP data itself demonstrates that it

was arbitrary and capricious for the EPA either not to employ a case-by-case

BASF Wyandotte Corp. v. Costle, 598 F.2d 637, 652 (1st Cir. 1979). 121

 71 Fed. Reg. 35,016. 122

 The agency also points out that it relied on more than just the SEAMAP and similar studies to 123

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). 

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permitting regime or not to distinguish between deep water and shallow water

facilities in promulgating the Rule.

Just 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

SEAMAP data is not arbitrary and capricious. Conducting precise “quantitative

benefits studies” for facilities that have yet to be built is impossible, and there

are no existing quantitative studies of impingement and entrainment for new

facilities. Again, when an agency is faced with such informational lacunae, the

agency is well within its discretion to regulate on the basis of available

information rather than to await the development of information in the future.

And, as the EPA reiterates, almost all new offshore facilities will be located in

the Gulf of Mexico, precisely the area surveyed by the SEAMAP study. That

study demonstrates the presence of larval and planktonic life at increasing levels

of depth in the Gulf, and, as ConocoPhillips acknowledges, the study shows that

the vast majority of sensitive aquatic life lives in the first 100 meters of the

water column.

124

The EPA also relied on three additional studies of specific waterbodies as

comparators (Penobscot Bay, Caloosahatchee Estuary, and the St. Lawrence

River). ConocoPhillips asserts that those studies are so different from the

SEAMAP data as to discredit the EPA’s contention that the SEAMAP data

represents an accurate estimate of all offshore larval densities. The agency

counters that the “EPA’s biology experts concluded that, for purposes of

determining the potential for adverse environmental impact, they [the three

studies] are comparable.” Although ConocoPhillips insists that the EPA’s

 71 Fed. Reg 35,013. 124

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conclusion that the SEAMAP data and the three specific studies are comparable

is “highly arbitrary,” reading that conclusion would present questions of

scientific evaluation and meta-analysis, tasks that we are ill-equipped to

assume. “When reviewing an agency’s scientific determinations in an area

within the agency’s technical expertise, a reviewing court must be at its most

deferential.” We defer to the agency’s evaluation of the specific offshore and

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SEAMAP studies.

Relying in large part on the SEAMAP study, the EPA concluded that there

is “real potential for adverse environmental impact” for new offshore facilities,

regardless of location. This conclusion is greatly bolstered by the fact that the

statute commands that CWIS location – and not facility location – be considered

in regulating CWIS. This is important to our review of the EPA’s Final Rule

because there is potentially a great difference between the depth of the water in

which a facility is located and the depth of water in which its CWIS is located.

ConocoPhillips’s location argument rests largely on the assumption that because

facilities will be located in different water depths, and these disparate depths

contain a wide range of biomass density, new CWIS should be regulated on a

case-by-case basis. The record reflects, however, that, even though some of the

facilities will be located in deep waters and other in shallow waters (and, in the

case of mobile rigs, may in fact be located from time to time in a wide range of

water depths), the CWIS intakes will always be located at approximately the

same water depth. In other words, even though a particular facility might

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extract oil and gas from a great depth, the CWIS will draw water at or near the

Chemical Mfrs. Ass'n v. EPA, 870 F.2d 177, 231 (5th Cir. 1989). 125

 71 Fed Reg. 35, 016.

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surface, specifically, within the first 100 feet of the water column. Thus, the

most relevant water depth of water for evaluating the adverse environmental

impact for offshore facilities is 100 feet or less. It is this depth that the SEAMAP

and other data demonstrate is most populated by vulnerable species. We cannot

say that the record does not “substantially support” the agency’s reliance on the

SEAMAP data and its concern with only CWIS location and not facility location.

When we consider all of the forgoing analyses and reasoning, we conclude

that the EPA’s reliance on the SEAMAP data is not arbitrary and capricious.

First, the agency must make do with the available information. Second, the EPA

has run afoul of none of the Texas Oil & Gas factors here, and the agency’s

estimation of adverse environmental impact was justified by the SEAMAP and

other data, considering that (1) it is impossible for the agency to know precisely

where a new fixed or mobile facility will be located, and (2) the CWIS structures

themselves will be located almost uniformly in 100 meters of water or less.

Consequently, the agency’s decision to consider but not regulate on the basis of

facility location is rationally related to the statute’s purpose and substantially

supported by the record.

IV. Conclusion

Under the highly deferential standard of review here applicable, we hold

that the Final Phase III Rule for new facilities is substantially supported by the

record and is rationally related to the statutory purpose of § 316(b). The

Supreme Court has ratified the agency’s longstanding interpretation that it may,

but is not required to, employ cost-benefit analysis when making rules under §

316(b). The record reflects that the EPA gave sufficient notice that it could but

was not bound to engage in cost-benefit analyses when promulgating the Final

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Rule for new facilities. The agency’s decision to regulate on the basis of economic

achievability was borne out by the existence of cost information but not benefit

information. The scientific data available to the agency demonstrated the likely

adverse environmental impact of CWIS regardless of facility location.

We GRANT the joint motion to remand that portion of the Final Phase III

Rule regulating existing cooling water intake structures, and we AFFIRM that

portion of the Final Phase III Rule regulating new cooling water intake

structures.

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