Opinion ID: 796659
Heading Depth: 3
Heading Rank: 5

Heading: Independent Suppliers

Text: 135 The Phase II Rule provides that a large, existing facility is subject to the Rule's requirements even when it obtains cooling water from an independent supplier that is not itself a Phase II existing facility. 40 C.F.R. § 125.91(c). Put differently, a Phase II facility can purchase cooling water only from suppliers whose intake structures are in compliance with the Phase II Rule. The provision is intended to prevent circumvention of the Rule by purchasing cooling water from non-Phase II entities. UWAG argues that the EPA gave inadequate notice of the scope of this so-called third-party or independent-supplier Rule. We agree. 136 UWAG contends that while the Phase I Rule included an independent-supplier provision similar to the one at issue here, the parallel provision of the Phase I Rule applies only to third-party suppliers that are not point sources, and thus do not need discharge permits and are not subject to any rule promulgated pursuant to section 316(b). 38 UWAG argues that the Rule's proposal indicated that the Phase II provision would track the language of the Phase I provision. UWAG contends, therefore, that the EPA gave inadequate notice of the more broadly phrased provision that was actually promulgated: a rule applying both to the intake structures of third-parties that are not point sources, and therefore not subject to direct regulation under section 316(b), as well as to facilities with intake structures that will be governed by the Phase III rule, which will encompass smaller power plants and other facilities. The issue is thus whether the EPA provided adequate notice that the Rule ultimately promulgated would impose Phase II requirements on Phase III facilities that supply cooling water to Phase II facilities. 137 As we have noted, our inquiry into whether an agency has provided adequate notice of its rulemaking as required by the APA is guided by the logical outgrowth test. Nat'l Black Media Coalition, 791 F.2d at 1022. That is, we must determine whether the Agency's notice fairly apprised interested parties of the rulemaking, id., or whether the final Rule was sufficiently remote or distant from the Agency's proposal to constitute a surprise switcheroo, Envtl. Integrity Project, 425 F.3d at 996. 138 The proposed Rule published in the Federal Register stated that [u]se of a cooling water intake structure includes obtaining cooling water by any sort of contract or arrangement with an independent supplier (or multiple suppliers) of cooling water if the supplier or suppliers withdraw(s) water from waters of the United States. 67 Fed.Reg. at 17,220. The notice then stated that the provision was intended to prevent circumvention of these requirements by creating arrangements to receive cooling water from an entity that is not itself a point source,  id. (emphasis added), indicating that the provision would track the Phase I Rule's language. The initial language of the provision appearing in the proposal — defining independent supplier as any provider that withdraws water from waters of the United States — is virtually identical to the language in the final Rule. 39 The final Rule, however, states that it is intended to prevent circumvention of these requirements by creating arrangements to receive cooling water from an entity that is not itself a Phase II existing facility.  40 C.F.R. § 125.91(c) (emphasis added). This difference, while small, is not insignificant. As noted, under the proposed Rule, Phase II facilities could purchase cooling water from facilities complying with the Phase I, II, or III requirements. Under the final Rule, by contrast, Phase II facilities can purchase cooling water only from facilities complying with the Phase II Rule. The proposal therefore apprised affected parties of the general subject, but not the scope, of the Rule ultimately promulgated. 139 Interested parties were thus given notice that the EPA sought to prevent circumvention of its rules and an opportunity to comment on this general policy, but could not have anticipated the final Rule's scope. Indeed, while the final provision has roots in the proposal, it clearly reaches further than the proposed provision and even the more stringent Phase I Rule. Affected parties would therefore have had no reason to anticipate the Agency's final course in light of the initial notice. Because the EPA provided inadequate notice of the scope of the Phase II Rule's independent-supplier provision, we conclude that the Rule ultimately promulgated is not a logical outgrowth of the proposed Rule. Nat'l Black Media Coalition, 791 F.2d at 1022. 140 Our conclusion rests in large part on the similarity between the Phase I Rule's independent-supplier provision and the proposed Phase II Rule's parallel provision. Given that the requirements under the Phase I Rule are more stringent than those imposed under the Phase II Rule, the proposal provided no notice that the Phase II Rule's independent-supplier provision would be more stringent than the Phase I Rule's provision. We therefore remand this aspect of the Rule. 141