Opinion ID: 519994
Heading Depth: 3
Heading Rank: 1

Heading: CMA's Challenge Based on the Knee-of-the-Curve

Text: Cost-Effectiveness Test 140 CMA argues that Congress was concerned generally that the EPA's regulations not require expenditures that would pass the point at which costs escalate rapidly in relation to benefits--the knee-of-the-curve on a diagram depicting the cost curve. CMA conceives of the knee-of-the-curve test as a generally applicable cost-effectiveness test with the knee defining the most stringent level of regulation permissible. Thus, CMA asserts, whether the EPA labels its regulations BPT or BCT, the EPA is required to consider whether the marginal costs exceed the marginal benefits of the rule. Applying this test, CMA argues that increasing the removal of conventional pollutants from 96 to 99 percent as required by the limitations would cost the OCPSF industry almost twice as much per pound of pollutant removed as current treatment methods: The annual removal of 108 million pounds would cost 76 million dollars per year--71 cents per pound--whereas industry efforts to date have required an expenditure of only 38 cents per pound. CMA concludes that the cost per pound for removal of pollutants is thus well beyond the knee-of-the-curve and that the regulations are therefore not cost-effective. 141 The EPA argues, however, that even if the knee-of-the-curve test applies to any of its regulations, the test is applicable only to assess the cost-effectiveness of incremental increases in limitations beyond BPT--that is, only to BCT. 85 Representative Roberts, the author of the conference report on the 1977 amendments, emphasized that the additional technology requirements of BCT were to be imposed only to remove additional cheap pounds of conventional pollutants beyond BPT. 86 Congress, however, did not specify that initial BPT must be cheap. In fact, Congress anticipated that initially BPT might cause many plant closures and the loss of 50,000 to 125,000 jobs. 87 142 The BCT provisions were intended to establish an intermediate level between BPT and the stricter BAT limitations for conventional pollutants by adding a cost-effectiveness test for incremental technology requirements that exceed BPT technology. 88 Under BCT, additional limitations on conventional pollutants that are more stringent than BPT can be imposed only to the extent that the increased cost of treatment [would] be reasonable in terms of the degree of environmental benefits. 89 143 Thus, Congress intended that cost would occupy a different role in EPA's promulgation of BPT limitations than it would in the promulgation of BCT because of the different aims of the two standards. While Congress did not consider cost to be irrelevant to BPT, it clearly intended it to be a less significant factor than in the promulgation of BCT limitations. The EPA's interpretation of the Act is rational and supported by both the legislative history and the case law insofar as the EPA emphasizes that the BPT limitations are not subject to the type of stringent cost-benefit analysis required for BCT. The relevant inquiry with respect to BPT, as indicated above, is whether the costs are wholly disproportionate to the benefits. 144 To the extent that CMA's claim is that wholly disproportionate is to be measured by a knee-of-the-curve test, the EPA responds that CMA misconceives the nature of the test. Rather than displaying the rate at which costs increase relative to pounds of pollutant removed, CMA's curve displays the rate at which the cost-per-pound increases relative to the percent of pollutant removed, resulting in a misleadingly steep curve. While both the BPT and BCT tests require a comparison between costs and effluent reduction, 90 neither test requires the comparison of costs to the percentage removed, as implied by CMA's curve. 145 CMA relies upon legislative history to justify its percent-removal approach to evaluating the reasonableness of costs. However, the statute does not require that a percent-removal approach be used to establish BPT regulations. 91 Almost all of the BPT regulations promulgated by the EPA since the 1972 enactment of the Clean Water Act are based upon either concentration limitations (as in the case of the OCPSF rule) or more stringent mass limitations which limit both concentrations and flow volumes. 92 In the current case, the regulation will require a 10% increase above current industry costs to remove 108 million additional pounds. 93 The EPA reasonably concluded that these costs were not wholly disproportionate to the benefits.