Opinion ID: 796659
Heading Depth: 2
Heading Rank: 3

Heading: The State and Environmental Petitioners

Text: 45 Perhaps the most significant challenge to the Phase II Rule is the petitioners' contention that the EPA exceeded its authority in rejecting closed-cycle cooling, and selecting instead the suite of technologies, as the best technology available as required by section 316(b), 33 U.S.C. § 1326(b), in large part because the Agency engaged in improper cost considerations. 46 This challenge requires us at the outset to determine to what extent, if any, the EPA can consider cost when selecting the best technology available for minimizing adverse environmental impact under the statute. 47
48 Section 316(b) does not itself set forth or cross-reference another statutory provision enumerating the specific factors that the EPA must consider in determining BTA. The statute, however, does make specific reference to CWA sections 301 and 306, which we have taken previously as an invitation to look to those sections for guidance in discerning what factors Congress intended the EPA to consider in determining BTA. Riverkeeper I, 358 F.3d at 186. We look to each of these statutes in turn. 49 Section 301(b)(1)(A) established the BPT standard that governed the effluent limitations applicable to existing sources through 1989. Congress provided that, in determining BPT, the Agency could consider the total cost of application of technology in relation to the effluent reduction benefits to be achieved from such application. CWA § 304(b)(1)(B), 33 U.S.C. § 1314(b)(1)(B). As noted above, however, the CWA created standards that were to become increasingly stringent over time, and in 1989, the more lenient BPT standard for existing sources was replaced by the BAT standard of section 301(b)(2)(A), in which Congress provided that the EPA could consider only the cost of achieving such effluent reduction. CWA § 304(b)(2)(B), 33 U.S.C. § 1314(b)(2)(B). Notably omitted from the list of permissible factors to which the EPA could look in determining BAT was the cost of technology in relation to the benefits that technology could achieve. 50 This shift from BPT to BAT fundamentally altered the way in which the EPA could factor cost into its CWA determinations. Indeed, in analyzing BPT and BAT, the Supreme Court stated that in assessing BAT[,] total cost is no longer to be considered in comparison to effluent reduction benefits, as it had been in assessing BPT. EPA v. Nat'l Crushed Stone Ass'n, 449 U.S. 64, 71, 101 S.Ct. 295, 66 L.Ed.2d 268 (1980). The Court indicated that the less stringent BPT standard had allowed for a limited cost-benefit analysis intended to `limit the application of technology only where the additional degree of effluent reduction is wholly out of proportion to the costs of achieving such marginal level of reduction.' Id. at 71 n. 10, 101 S.Ct. 295 (quoting Remarks of Senator Muskie reprinted in Legislative History of the Water Pollution Control Act Amendments of 1972 (Committee Print compiled for the Senate Committee on Public Works by the Library of Congress) Ser. No. 93-1, p. 170 (1973)). In determining BAT, by contrast, the EPA may consider cost as a factor to a limited degree, see id., but only as to whether the cost of a given technology could be reasonably borne by the industry and not the relation between that technology's cost and the benefits it achieves, Riverkeeper I, 358 F.3d at 195. 51 Section 306, which governs the effluent limitations that apply to new sources, provides that a standard of performance established by the EPA must reflect the best available demonstrated control technology. CWA § 306(a)(1), 33 U.S.C. § 1316(a)(1). In language identical to the text of § 304(b)(2)(B) governing BAT, Congress provided that in establishing standards of performance, the EPA shall take into consideration the cost of achieving such effluent reduction, CWA § 306(b)(1)(B), 33 U.S.C. § 1316(b)(1)(B), but did not require the EPA to conduct cost-benefit analysis. Nat'l Wildlife Fed'n v. EPA, 286 F.3d 554, 570 (D.C.Cir.2002) ([S]ection 306 requires that, when setting the [new source performance standards], the Administrator must take costs into consideration, but does not require that she conduct a cost-benefit analysis.). Sections 301 and 306 of the CWA thus demonstrate that, after 1989, cost is a lesser, more ancillary consideration in determining what technology the EPA should require for compliance under those sections. 52 The shift from the BPT standard to the more stringent BAT one clearly signaled Congress's intent to move cost considerations under the CWA from a cost-benefit analysis to a cost-effectiveness one. We understand the difference between these two analyses to turn on the difference between means and ends. Cost-benefit analysis, like BPT, compares the costs and benefits of various ends, and chooses the end with the best net benefits. By contrast, cost-effectiveness considerations, like BAT, determine which means will be used to reach a specified level of benefit that has already been established. 10 Given the above and considering the parallel language of sections 304(b)(2)(B) and 306(b)(1)(B), the reasoning of National Crushed Stone strongly suggests that cost-benefit analysis is no longer permitted under those sections of the CWA.
53 As already noted, section 316(b) does not itself set forth the factors that the Agency can consider in determining the best technology available for minimizing adverse environmental impact. The BTA standard of section 316(b), however, is linguistically similar to the BAT standard of section 301 and the standard that applies to new sources under section 306, and to the extent that cost-benefit analysis is precluded under those statutes, one might reasonably conclude that it is similarly not permitted under section 316(b). We conclude in any event that the language of section 316(b) itself plainly indicates that facilities must adopt the best technology available and that cost-benefit analysis cannot be justified in light of Congress's directive. 54 We stated in Riverkeeper I that the EPA can consider cost in establishing BTA, but only in a limited fashion and not as a primary consideration. Indeed, [w]ith respect to costs, `the Administrator must inquire into the initial and annual costs of applying the technology and make an affirmative determination that those costs can be reasonably borne by the industry.' Riverkeeper I, 358 F.3d at 195 (quoting Chem. Mfrs. Ass'n v. EPA, 870 F.2d 177, 262 (5th Cir.1989)) (emphasis added). While the statutory language suggests that the EPA may consider costs in determining BTA, in that a technology that cannot be reasonably borne by the industry is not available in any meaningful sense, cost-benefit analysis is not similarly supported by the language or purpose of the statute. Section 316(b) expressly requires a technology-driven result, cf. Natural Res. Def. Council, Inc. v. EPA, 822 F.2d 104, 123 (D.C.Cir.1987) ([T]he most salient characteristic of [the CWA's] statutory scheme, articulated time and again by its architects and embedded in the statutory language, is that it is technology-forcing.), not one driven by cost considerations or an assessment of the desirability of reducing adverse environmental impacts in light of the cost of doing so. A selection of BTA based on cost-benefit considerations is thus impermissibly cost-driven, but a selection based in part on cost-effectiveness considerations, while taking cost into account, remains technology-driven. The statute therefore precludes cost-benefit analysis because Congress itself defined the basic relationship between costs and benefits. Am. Textile Mfrs. Inst., Inc. v. Donovan, 452 U.S. 490, 509, 101 S.Ct. 2478, 69 L.Ed.2d 185 (1981). Moreover, this conclusion is further supported by the fact that Congress in establishing BTA did not expressly permit the Agency to consider the relationship of a technology's cost to the level of reduction of adverse environmental impact it produces. 11 When Congress has intended that an agency engage in cost-benefit analysis, it has clearly indicated such intent on the face of the statute. Id. at 510, 101 S.Ct. 2478. 55 Given the above, the EPA may permissibly consider cost in two ways: (1) to determine what technology can be reasonably borne by the industry and (2) to engage in cost-effectiveness analysis in determining BTA. Thus, the EPA must first determine what is the most effective technology that may reasonably be borne by the industry. In making this initial determination, the most effective technology must be based not on the average Phase II facility but on the optimally best performing Phase II facilities, see, e.g., Kennecott v. United States EPA, 780 F.2d 445, 448 (4th Cir.1985) (In setting BAT, EPA uses not the average plant, but the optimally operating plant, the pilot plant which acts as a beacon to show what is possible.), although, of course, the EPA must still ascertain whether the industry as a whole can reasonably bear the cost of the adoption of the technology, bearing in mind the aspirational and technology-forcing character of the CWA. This technology constitutes the benchmark for performance. Once this determination has been made, the EPA may then consider other factors, including cost-effectiveness, to choose a less expensive technology that achieves essentially the same results as the benchmark. 12 For example, assuming the EPA has determined that power plants governed by the Phase II Rule can reasonably bear the price of technology that saves between 100-105 fish, the EPA, given a choice between a technology that costs $100 to save 99-101 fish and one that costs $150 to save 100-103 fish (with all other considerations, like energy production or efficiency, being equal), could appropriately choose the cheaper technology on cost-effectiveness grounds. Cost-benefit analysis, however, is not permitted under the statute because, as noted, Congress has already specified the relationship between cost and benefits in requiring that the technology designated by the EPA be the best available. 13 Cf. Am. Textile Mfrs. Inst., 452 U.S. at 509-10, 101 S.Ct. 2478. The Agency accordingly could not make the policy decision, in the face of Congress's determination that facilities use the best technology available, that an economically feasible level of reduction of impingement mortality and entrainment is not desirable in light of its cost. Indeed, in the example above, the EPA could not choose the cheaper technology on cost considerations under section 316(b) if the EPA had first determined that the power plants could reasonably bear the cost of technology that could save at least 102 fish. 56 We nevertheless acknowledge that the comparable technologies considered by the Agency need not be identically effective for the Agency to engage in cost-effectiveness analysis. Were that the case, all that would be required would be the simple determination of which among competing technologies that achieved the same degree of reduction of adverse environmental impacts is the cheapest. Instead, the specified level of benefit is more properly understood as a narrowly bounded range, within which the EPA may permissibly choose between two (or more) technologies that produce essentially the same benefits but have markedly different costs. With these considerations in mind, we turn to the Rule as promulgated. 57
58 As noted previously, unlike the Phase I Rule, the Phase II Rule does not require facilities to reduce intake flow to a level commensurate with the intake of closed-cycle systems. Instead, the Rule requires facilities to meet the national performance standards associated with the suite of technologies the EPA identified as BTA. Petitioners' challenge here has two components. First, the state petitioners contend that closed-cycle cooling is the best technology available and that the EPA has exceeded its authority by promulgating a rule that does not require closed-cycle cooling, or the use of technologies producing a commensurate reduction of water usage for existing facilities in the same manner as the Phase I Rule required for new facilities. 14 Second, the environmental petitioners argue that the EPA improperly rejected closed-cycle cooling as BTA for the largest facilities on the most sensitive waterbodies at the direction of OMB because it sought to maximize net economic benefits rather than to minimize adverse environmental impact. They further argue that the BTA standard of section 316(b) requires a commitment of the maximum resources economically feasible to the goal of eliminating adverse environmental impacts and that the statute does not permit the EPA to select BTA on the basis of cost-benefit analysis. 59 For the reasons that follow, we conclude that the statute's best technology available standard permits cost-effectiveness considerations to influence the choice among technologies whose performance does not essentially differ from the performance of the best-performing technology whose cost the industry reasonably can bear, but that the statute does not permit the EPA to choose BTA on the basis of cost-benefit analysis. As we explain below, however, the record is unclear as to the basis for the EPA's selection of the suite of technologies as BTA, and we therefore remand for clarification of the basis for the Agency's decision and potentially for a reassessment of BTA. 60 The EPA stated in the Rule's preamble that the BTA standard should be interpreted as best technology available commercially at an economically practicable cost, and explained that an important component of economic practicability is the relationship of costs to environmental benefits. 69 Fed.Reg. at 41,604. The EPA further explained that this inquiry required that there should be some reasonable relationship between the cost of cooling water intake structure control technology and the environmental benefits associated with its use. Id. (emphasis added). 61 The EPA took this economically practicable concept directly from the text of a floor speech of a single representative — the only specific reference to section 316(b) in the congressional debates. See Riverkeeper I, 358 F.3d at 186 n. 12. We noted in Riverkeeper I that the paucity of legislative history counsels against imputing much specific intent to Congress beyond the section's words themselves. Id. Moreover, we find the EPA's interpretation of section 316(b) problematic because its construction significantly resembles the less stringent, and now obsolete, BPT standard of section 301(b)(1)(A). As noted earlier, in setting forth the factors for the EPA to consider in establishing BPT under section 301(b)(1)(A) and the more stringent BAT under section 301(b)(2)(A), Congress made only one distinction: while the Agency could consider the relationship between cost and benefits in establishing BPT, CWA § 304(b)(1)(B), 33 U.S.C. § 1314(b)(1)(B), it could consider cost insofar as it can be reasonably borne by the industry, but not the relationship between cost and benefits, in establishing BAT, CWA § 304(b)(2)(B), 33 U.S.C. § 1314(b)(2)(B). Riverkeeper I, 358 F.3d at 195. 62 This difference in how the EPA can consider cost under section 304(b) in establishing BPT and BAT is directly mirrored by the most significant textual distinction between sections 301(b)(1)(A) and 301(b)(2)(A) — the requirement that a technology be practicable under only the less stringent BPT standard. Compare CWA § 301(b)(1)(A), 33 U.S.C. § 1311(b)(1)(A) (BPT is the best practicable control technology) with CWA § 301(b)(2)(A), 33 U.S.C. 1311(b)(2)(A) (BAT is the best available technology). The use of the word practicable, therefore, when coupled with the permissible cost considerations under section 304, signals that Congress intended the EPA to strike a balance between cost and benefits in determining BPT. But the word practicable is missing from the more stringent BAT standard, under which Congress prohibited the EPA from considering the relation of cost to benefits. This omission is thus significant. See Russello v. United States, 464 U.S. 16, 23, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983) ([W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion. (quotation marks and citation omitted; alteration in original)). Because Congress also omitted practicable from section 316(b), we are troubled by the Agency's interpretation of the statute to require practicability analysis here and its implicit corollary that the Agency can undertake a cost-benefit analysis in establishing BTA under section 316(b). 63 Our concern with the EPA's determination with respect to section 316(b) is further deepened by the Agency's rejection of closed-cycle cooling and selection of a suite of technologies as the basis for BTA for existing facilities because the suite of technologies were the most cost effective option. 69 Fed.Reg. at 41,667. The EPA explained this decision on several grounds. It first noted that it was rejecting closed-cycle cooling as BTA because of (1) its generally high costs (due to conversions), (2) the fact that other technologies approach the performance of this option, and (3) concerns for energy impacts due to retrofitting existing facilities, and other considerations. Id. at 41,605. The EPA emphasized that it selected BTA based on its determination that a national requirement to retrofit existing systems is not the most cost-effective approach and at many existing facilities, retrofits may be impossible or not economically practicable. Id. It further explained that its rejection of closed-cycle cooling as BTA was based on total social costs and lack of cost-effectiveness, as well as concerns regarding potential energy impacts. Id. at 41,606. 64 Given the EPA's discussion, noted above, of economically practicability, it is unclear whether the Agency improperly weighed the benefits and the costs of requiring closed-cycle cooling. Indeed, a comparison between the cost of closed-cycle cooling and the monetized benefits of this technology appears to have played some role in the EPA's rejection of this option as BTA. In the preamble to the proposed Rule, for instance, the EPA examined whether to require closed-cycle cooling on specific large bodies of waters and stated that the incremental costs of [this closed-cycle cooling] option relative to the proposed option ($413 million) significantly outweigh the incremental benefits ($146 million). 67 Fed.Reg. at 17,158. Other record evidence on the EPA's rejection of closed-cycle cooling as BTA is a terse EPA memorandum indicating that a requirement commensurate with closed-cycle cooling for facilities on sensitive water-bodies would cost three times as much as the option ultimately adopted by the EPA and reduce entrainment, at most, by 1.33 times that option. 65 Given the above indications that the EPA engaged in cost-benefit analysis, we remand for the EPA to explain its conclusions. At the outset, it is difficult to discern from the record how the EPA determined that the cost of closed-cycle cooling could not be reasonably borne by the industry. 15 Additionally, the EPA did not explain its statement that the suite of technologies approach[es] the performance of closed-cycle cooling. We see no adequate comparison in the Rule's proposal, the final Rule or its preamble, or the EPA's submissions to this Court of the effectiveness of closed-cycle cooling and the group of technologies whose effectiveness provided the basis for the Phase II Rule's performance standards. 16 In a technical area of this sort, it is difficult for judges or interested parties to determine the propriety of the Agency's action without a justification for the action supported by clearly identified substantial evidence whose import is explained. The record evidence alone here, which consists in large part of a voluminous database compilation of studies that assess the efficacy of various technologies at different locations, is oblique, complicated, and insufficient to permit us to determine what the EPA relied upon in reaching its conclusion. As the Supreme Court has emphasized, [o]ur recognition of Congress' need to vest administrative agencies with ample power to assist in the difficult task of governing a vast and complex industrial Nation carries with it the correlative responsibility of the agency to explain the rationale and factual basis for its decision, even though we show respect for the agency's judgment in both. Bowen v. Am. Hosp. Ass'n, 476 U.S. 610, 627, 106 S.Ct. 2101, 90 L.Ed.2d 584 (1986) (plurality opinion). 66 The EPA was required to explain its judgment and the basis for it. Because the EPA purported to base its decision in large part on cost-effectiveness considerations, it was required to identify and explain any evidence indicating a minimal performance difference between comparable technologies, but it did not do so here. It stated only that the performance of the technologies it identified as BTA approach the performance of closed-cycle cooling. 17 67 We therefore find it impossible to judge whether the performance of these technologies is essentially the same as the performance of closed-cycle cooling, or whether they simply are cheaper per percentage point of reduction in entrainment and impingement mortality. That is, on the record before us, it is impossible to tell whether the EPA based its decision on permissible cost-effectiveness analysis or exceeded its authority by relying impermissibly upon a cost-benefit analysis. To the extent that the record does not indicate the EPA's basis, however, its statement that the relationship of costs to environmental benefits is an important component of economic practicability, 69 Fed.Reg. at 41,604, indicates that cost-benefit analysis, under the cover of considerations of practicability, was central to the Agency's decisionmaking. 68 In short, the EPA's failure to explain its decision frustrates effective judicial review. If the EPA construed the statute to permit cost-benefit analysis, its action was not based on a permissible construction of the statute. Chevron, 467 U.S. at 843, 104 S.Ct. 2778. It may also be that the EPA misunderstood or misapplied cost-effectiveness analysis. If so, its decision was arbitrary and capricious because the Agency relied on factors Congress has not intended it to consider. See Waterkeeper Alliance, 399 F.3d at 498. Finally, the EPA may have simply failed either to perform the required analysis or to explain adequately a decision that was within its authority to make. We cannot opine on this subject, because we must consider only those justifications that the EPA offered at the time of the rulemaking. See SEC v. Chenery, 318 U.S. 80, 87-88, 63 S.Ct. 454, 87 L.Ed. 626 (1943). Moreover, while the EPA could rely on factors other than impingement and entrainment in establishing BTA, such as negative environmental impacts or concerns about energy production and efficiency, see Riverkeeper I, 358 F.3d at 195-96, we are unable to determine, on the record before us, whether the EPA gave paramount consideration to an improper factor in determining BTA. We therefore remand for clarification of the basis for the Agency's action and possibly for a new determination of BTA. 18 69
70 The Phase II Rule establishes performance standards expressed as an 80 to 95 percent reduction in impingement mortality and a 60 to 90 percent reduction in entrainment, which existing power plants must achieve, subject to certain exceptions, in order to be considered in compliance with the Rule. 40 C.F.R. § 125.94(b)(1), (2). The environmental petitioners challenge the Rule's wide and indeterminate ranges as failing to constitute precise single-level limitations based on the best technology available for minimizing adverse environmental impact and argue that these ranges are inconsistent with Congress's intent that there be a national standard under section 316(b). We agree in part and, because the EPA in reconsidering its selection of BTA on remand may alter the suite of technologies it originally selected, thereby causing a coordinate alteration in the performance ranges, we provide some guidance to the EPA insofar as the petitioners' challenge touches on the limits of the Agency's authority. Although the EPA may, in the circumstances to be discussed, set performance standards as ranges, it must require facilities to minimize the adverse environmental impacts attributable to their cooling water intake structures to the best degree they can. 71 The petitioners note that the EPA has found that certain screens and filter systems can reduce impingement mortality by up to 99 percent and that similar technologies can produce 80 to 90 percent reduction in entrainment. 69 Fed.Reg. at 41,599. They contend that the CWA therefore requires the EPA to set BTA standards reflecting these best performers, see Texas Oil & Gas Ass'n v. EPA, 161 F.3d 923, 928 (5th Cir.1998) (Congress intended these [BAT] limitations to be based on the performance of the single best-performing plant in an industrial field. (citation and internal quotation marks omitted)), particularly given the EPA's acknowledgment that [t]he higher end of the range is a percent reduction that available data show many facilities can and have achieved with the available technologies upon which the performance standards are based. 69 Fed.Reg. at 41,600. The petitioners emphasize that the Rule's ranges impermissibly fail to require facilities even to attempt to achieve performance equal to the upper bound of the prescribed ranges. 72 According to the EPA, section 316(b) does not require a single-numeric standard applicable to all Phase II existing facilities, and expressing the performance standards as ranges is necessary to account for the variables involved in reducing impingement mortality and entrainment under local conditions at particular facilities. The EPA contends that [b]ecause the Phase II requirements are applied in a variety of settings and to existing facilities of different types and sizes, no single technology is most effective for all facilities subject to the Rule. The Agency argues that the technologies do not provide a fixed level of performance at all facilities and that their performance is affected by the nature of the waterbody, facility intake requirements, climatic conditions, and the waterbody's biology. The EPA argues also that the permit process requires facilities to reduce impingement mortality and entrainment commensurate with the efficacy of the installed technologies, which it claims ensures that the installed technologies will be maintained to ensure their utmost efficacy. 19 The difficulty with the EPA's arguments is that the Rule does not require facilities to choose technologies that produce the greatest reduction possible. 73 Our decision in Riverkeeper I sheds some light on the parties' arguments. In that case, we discussed the differences between the two tracks in the Phase I Rule: Track I set forth precise velocity and capacity requirements while Track II permitted compliance via technologies that would achieve at least 90 percent of the reduction in impingement mortality and entrainment that compliance with Track I would yield. See 358 F.3d at 182-83. The petitioners in that case challenged the Track II provision on the ground that it deviated from the statutory requirement that the EPA establish a single level of performance applicable to all facilities. Id. at 187. The EPA argued that Tracks I and II reflected the same standard and that 10 percent is an acceptable margin of error given that measurements of reduction of impingement mortality and entrainment are necessarily inexact and depend upon natural fluctuations in animal populations and sampling errors. Id. at 188. In assessing the parties' arguments, we stated that the EPA, consistent with Congress's intention that there be a national standard governing the discharge of pollutants, must promulgate precise effluent limitations under sections 301 and 306.... Id. (emphasis added). We went on to note, however, that while pollutant concentration and the velocity and volume of water withdrawn can be measured accurately, impingement mortality and entrainment cannot always be measured directly and with mathematical precision. Id. at 189. We concluded that the EPA acted reasonably in specifying how much ambiguity it is willing to tolerate in measuring compliance and what it considers a reasonable margin of error in comparing the performance of different technologies. Id. In short, we acknowledged that the Track II performance requirements, unlike the Track I requirements, could not be measured precisely and that it was therefore reasonable to consider a margin of error in comparing performance under the two standards. 74 This case is not entirely similar to Riverkeeper I because of the rationales that animate the EPA's creation of the performance ranges in Phases I and II. The Phase II Rule generally require facilities to reduce impingement mortality and entrainment by the specified percent ranges from the calculation baseline. 40 C.F.R. § 125.94(b). These ranges, as explained by the EPA, are based on the reductions achievable by using various technologies. See 69 Fed.Reg. at 41,599. The EPA explained that it expressed the performance standards in the form of ranges rather than a single performance benchmark because of the uncertainty inherent in predicting the efficacy of any one of these technologies. Id. at 41,600. It stated further that the lower end of the range is the percent reduction it expects all facilities could eventually achieve if they were to implement and optimize available design and construction technologies and operational measures on which the performance standards are based and that the higher end of the range is a percent reduction that available data show many facilities can and have achieved with the available technologies upon which the performance standards are based. Id. Unlike Riverkeeper I, therefore, a margin of error from a relatively precise benchmark that is tolerable given measurement difficulties is not at issue here. Instead, the performance standards reflect the range of performance associated with various technologies identified as BTA. That performance, in turn, depends in part on local conditions and natural fluctuations. Id. 75 Record evidence supports the EPA's conclusion that the percent reduction of impingement mortality and entrainment is not completely within the control of a facility and therefore may not be precisely achieved by a facility. See TDD for the Final § 316(b) Phase II Existing Facilities Rule 4-3. Reducing these adverse environmental impacts is not as easily measured and controlled as are the discharge of pollutants and the capacity and flow rate of water intake. 20 We therefore acknowledge that in many cases it may be difficult, as a practical matter, for the EPA or other permitting authority to predict which plants will be able to achieve the upper, as opposed to the lower, end of the ranges. This uncertainty, however, does not justify a rule that permits even those facilities that could achieve the upper end of a range to be deemed in compliance if they reach only the lower end, particularly when the EPA has acknowledged that many facilities can and have achieved reductions at the high end of the range. 69 Fed.Reg. at 41,600. Congress's use of the superlative best in the statute cannot be read to mean that a facility that achieves the lower end of the ranges, but could do better, has complied with the law. The statutory directive requiring facilities to adopt the best technology cannot be construed to permit a facility to take measures that produce second-best results, see Chevron, 467 U.S. at 843, 104 S.Ct. 2778, especially given the technology-forcing imperative behind the Act, Natural Res. Def. Council, 822 F.2d at 123. Insofar as the EPA establishes performance standards instead of requiring facilities to adopt particular technologies, it must require facilities to choose the technology that permits them to achieve as much reduction of adverse environmental impacts as is technologically possible. 21 For this reason, the EPA on remand should address these concerns if in its BTA determination, it retains performance ranges.
76 The Phase II Rule allows a facility to meet the national performance standards set forth in 40 C.F.R. § 125.94(b) through the use of restoration measures such as restocking fish killed by a cooling water system and improving the habitat surrounding the intake structure in order, as the EPA explains, to provide additional flexibility to facilities in complying with the rule by eliminating or significantly offsetting the adverse environmental impact caused by the operation of a cooling water intake structure. 69 Fed.Reg. at 41,609; 40 C.F.R. § 125.94(c). The state and environmental petitioners contend that the EPA exceeded its authority by allowing compliance with section 316(b) through restoration measures because Riverkeeper I held that the statute's meaning is plain and that restoration measures cannot substitute for the best technology available for minimizing adverse environmental impact in cooling water intake structures. The EPA contends that its interpretation of the statute to permit restoration measures as a means of compliance is entitled to deference because it defined certain statutory terms in the Phase II Rule that it had not defined in the Phase I Rule. The EPA also relies on the Supreme Court's holding in National Cable & Telecommunications Association v. Brand X Internet Services, 545 U.S. 967, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005), and our statement in Riverkeeper I limiting the decision's reach to the Phase I Rule, to argue that our prior interpretation of the statute does not trump the Agency's construction. We agree with the petitioners that Riverkeeper I held that the Agency's decision to permit restoration measures in the Phase I Rule was not based on a permissible construction of the statute, Chevron, 467 U.S. at 843, 104 S.Ct. 2778, and that this holding applies equally here. 77 We began Riverkeeper I by noting that we were remanding the Phase I restoration provision because it contradicts Congress's clearly expressed intent. 358 F.3d at 181. We went on to state that however beneficial to the environment, [restoration measures] have nothing to do with the location, the design, the construction, or the capacity of cooling water intake structures, because they are unrelated to the structures themselves. Id. at 189. Restoration measures correct for the adverse environmental impacts of impingement and entrainment, we noted, but they do not minimize those impacts in the first place. Id. (emphasis added). For this reason and others, we concluded in Riverkeeper I that the EPA had exceeded its authority in promulgating the Phase I Rule by allowing compliance with section 316(b) through restoration measures because this Rule was plainly inconsistent with the statute's text and Congress's intent. Id. at 189, 191. 78 The EPA's argument that Riverkeeper I is not binding on this issue here has three components. First, the EPA contends that our rejection of the restoration measures at issue in Riverkeeper I did not turn on the statute's text, but instead was based on various other indicators of Congressional intent. The Agency makes much of Riverkeeper I's brief discussion of Congress's rejection of a proposed amendment to section 316(b) that would have explicitly allowed restoration measures and of the EPA's support of that amendment because in its opinion, the existing language did not authorize restoration measures. Id. at 190-91. Second, the EPA argues that its interpretation of section 316(b) in the Phase II Rule is entitled to deference because the Rule defined certain statutory terms it had not defined in the previous rulemaking phase and that its reasonable interpretation of these terms is entitled to deference. Specifically, the Agency defined three statutory terms in the preamble: it (1) read the phrase minimiz[e] adverse environmental impact to let facilities minimize adverse environmental impact by reducing impingement and entrainment, or to minimize adverse environmental impact by compensating for those impacts after the fact, 69 Fed.Reg. at 41,628; (2) interpreted reflect to authorize it to consider the full range of technologies, including restoration measures, that minimize adverse environmental impact; and (3) viewed restoration measures as part of the `design' of a cooling water intake structure, and one of several technologies that may be employed . . . to minimize adverse environmental impact, 69 Fed.Reg. at 41,637. Finally, the EPA relies on our statement in Riverkeeper I that our ruling on the Phase I Rule was not meant to predetermine the factors and standard[s] applicable to Phases II and III of the rulemaking, 358 F.3d at 186 n. 13, and on the Supreme Court's holding in Brand X that [a] court's prior judicial construction of a statute trumps an agency construction otherwise entitled to Chevron deference only if the prior court decision holds that its construction follows from the unambiguous terms of the statute and thus leaves no room for agency discretion. 545 U.S. at 982, 125 S.Ct. at 2700. 79 We reject each of the EPA's contentions. First, our primary conclusion in Riverkeeper I was that restoration measures are plainly inconsistent with the statute's text, 358 F.3d at 189, and our statements regarding the legislative history of a proposed amendment, which we offered as ancillary, but not dispositive, support for our construction of the statute, in no way diminish the force of our conclusion that Congress unambiguously expressed its intent in the statute. See Chevron, 467 U.S. at 842-43, 104 S.Ct. 2778 (If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.). Second, as to the EPA's claim that its construction of the statute is entitled to deference because it has now interpreted certain statutory terms, our holding in Riverkeeper I was and remains clear: restoration measures contradict the unambiguous language of section 316(b). The EPA's promulgation of the Phase II Rule obviously did nothing to alter the text of section 316(b), and the Agency cannot create ambiguity where none otherwise exists by defining statutory terms contrary to their plain meaning. Finally, as the foregoing analysis suggests, our decision in Riverkeeper I foreclosed the EPA from interpreting section 316(b) in the Phase II Rule to permit restoration measures as a means of complying with the statute, and, therefore, nothing in Brand X undermines the precedential value of our prior holding. Our statement in Riverkeeper I that we did not mean to predetermine the factors and standard applicable to Phases II and III of the rulemaking, was made in the narrow context of identifying one reasonable reading of particular statutory language relating to the standard for new and existing sources, not the restoration measures. 358 F.3d at 186 n. 13. Where we held that the statutory language is unambiguous, Riverkeeper I is binding. 80 Even assuming arguendo that we did not consider ourselves bound by Riverkeeper I, we are persuaded by its reasoning as applied here. Restoration measures are not part of the location, design, construction, or capacity of cooling water intake structures, Riverkeeper I, 358 F.3d at 189, and a rule permitting compliance with the statute through restoration measures allows facilities to avoid adopting any cooling water intake structure technology at all, in contravention of the Act's clear language as well as its technology-forcing principle. As we noted in Riverkeeper I, restoration measures substitute after-the-fact compensation for adverse environmental impacts that have already occurred for the minimization of those impacts in the first instance. Id. The Agency's attempt to define the word minimize to include compensati[on] ... after the fact, 69 Fed.Reg. at 41,628, is simply inconsistent with that word's dictionary definition: to reduce to the smallest possible extent, Webster's Third New Int'l Dictionary 1438 (1986). 81 Accordingly, the EPA impermissibly construed the statute by allowing compliance with section 316(b) via restoration measures, and we remand that aspect of the Rule.
82 As noted earlier, the Phase II Rule includes two site-specific compliance alternatives or variances from the generally applicable requirements. The cost-cost alternative authorizes a site-specific determination that data specific to [a] facility demonstrate that the costs of compliance under . . . this section would be significantly greater than the costs considered by the Administrator . . . in establishing the applicable performance standards, 40 C.F.R. § 125.94(a)(5)(i), while the cost-benefit alternative authorizes a site-specific determination that data specific to [a] facility demonstrate that the costs of compliance under ... this section would be significantly greater than the benefits of complying with the applicable performance standards. Id. § 125.94(a)(5)(ii). If a facility makes either showing, the permitting authority must make a site-specific determination of the best technology available and impose site-specific alternative requirements that are as close as practicable to the applicable performance standards. Id. § 125.94(a)(5)(i), (ii). 83 Petitioners challenge the cost-cost compliance alternative because, inter alia, they claim as a threshold matter that the Agency failed to comply with the APA's notice and comment requirements by disclosing cost data for specific facilities that would be used in determining whether a facility qualifies for the cost-cost compliance alternative only at the time the final Rule was issued. Petitioners also challenge the cost-benefit compliance alternative on two substantive grounds. They contend that this alternative (1) impermissibly allows compliance with the statute to be based on cost-benefit analysis and (2) is analogous to a water-quality standard, which the Act permits only for thermal pollution. CWA § 316(a), 33 U.S.C. § 1326(a). We address each of these arguments in turn. 22
84 As already noted, a variance may be available to a facility pursuant to 40 C.F.R. § 125.94(a)(5)(i) if the facility's compliance costs would be significantly greater than the costs considered by the Agency in establishing the applicable performance standards. This variance requires a calculation of compliance costs based on the suite of BTA technologies that the EPA has identified and promulgated in the final Rule. 69 Fed.Reg. at 41,644-46. We remand this provision because (1) the EPA did not give interested parties the requisite notice and opportunity to challenge the variance by failing to identify cost data for actual, named facilities, as opposed to model facilities, until after the notice and comment period had ended, Sprint Corp., 315 F.3d at 371, and (2) the variance is expressly premised on the validity of the BTA determination, 23 which itself has been remanded for further explanation, see, e.g., Solite Corp. v. U.S. EPA, 952 F.2d 473, 494-95 (D.C.Cir.1991) (remanding rule where the underlying grounds for its promulgation had been remanded to the EPA for procedural defects); cf. Chenery, 318 U.S. at 87-88, 63 S.Ct. 454 (a rule may only be upheld on the grounds that the agency proffers). 85 In the Rule's proposal, the EPA indicated that it had estimated compliance costs for 539 model plants based on factors such as fuel source, mode of electricity generation, existing intake technologies, waterbody type, geographic location, and intake flow. 67 Fed.Reg. at 17,144. An accompanying technical development document set forth the Agency's cost calculation methodology for these model plants and listed the compliance cost estimates for each of the 539 model plants. The proposal indicated that a facility must determine which model plant [it] most closely resembles in order to identify the costs considered by the Agency in establishing the national performance standards. See id. The EPA subsequently published in the Federal Register a so-called Notice of Data Availability (NODA) in which it explained that it had changed its methodology for estimating the model plants' compliance costs. Proposed Regulations to Establish Requirements for Cooling Water Intake Structures at Phase II Existing Facilities; Notice of Data Availability; Proposed Rule, 68 Fed.Reg. 13,522, 13,527 (Mar. 19, 2003). Accompanying documents explained in greater detail the costing methodology and cost data underlying the revised approach. The revised proposal, however, did not depart from the model plant approach. The final Rule, by contrast, assigned cost estimates to specific, named facilities rather than model facilities. 69 Fed.Reg. at 41,670-82. The Agency explained in the preamble to the final Rule that the EPA will adjust facility-specific costs pursuant to a multiple-step calculation formula to arrive at a final estimated cost the EPA considers a comparison for purposes of the cost-cost variance. Id. at 41,644-47. 86 The EPA acknowledges that it did not disclose in the proposal or the NODA specific facility names in connection with cost data and explains that it failed to do so because it needed to protect certain confidential business information (CBI) and had not developed during the proposal stage a means to protect that information while still providing cost data to the public. We accept the EPA's argument that masking the facility names did not prevent interested parties from commenting on the methodology and general cost data underlying the EPA's approach because the NODA explained the costing methodology and because the general cost data, while not identified by the Agency as relating to actual, specific facilities, was made available to interested parties. Nat'l Wildlife Fed., 286 F.3d at 564-65 (holding that the EPA cannot be faulted for lack of notice in not releasing CBI data). We are persuaded, however, that the release of information and request for comments on the EPA's new approach to developing compliance cost modules via the NODA did not afford adequate notice of the costs associated with specific facilities promulgated in the final Rule. 87 We have previously stated that [n]otice is said not only to improve the quality of rulemaking through exposure of a proposed rule to comment, but also to provide fairness to interested parties and to enhance judicial review by the development of a record through the commentary process. Nat'l Black Media Coalition v. FCC, 791 F.2d 1016, 1022 (2d Cir.1986). 88 While a final rule need not be an exact replica of the rule proposed in the Notice, the final rule must be a `logical outgrowth' of the rule proposed. Id. The test that has been set forth is whether the agency's notice would fairly apprise interested persons of the subjects and issues of the rulemaking. Id. (citation and internal quotation marks omitted). 24 Agencies accordingly are not permitted to use the rulemaking process to pull a surprise switcheroo. Envtl. Integrity Project, 425 F.3d at 996. 89 Here, only the final Rule identified facilities by name in estimating compliance costs. Interested parties therefore could not comment on the basis for particular facilities' cost figures that the EPA established. This is problematic because the availability of a variance turns on the relationship between the costs estimated in the Rule and those that a specific facility establishes in a permit proceeding. The EPA focuses on the notice it gave of its intended methodology for calculating the costs the Agency considered, but ignores the overriding importance of the cost estimates for a particular facility in determining whether a site-specific cost-cost variance is appropriate. Thus, the EPA should have afforded notice and an opportunity to challenge the cost estimates for specific facilities and not simply an opportunity to comment on the EPA's methodology and general cost data. 25 We remand this variance for inadequate notice and because of our remand of the BTA determination.
90 If a facility requests that it be permitted to demonstrate compliance with the Phase II Rule through the site-specific cost-benefit provision of 40 C.F.R. § 125.94(a)(5)(ii), the facility must submit with its application a Comprehensive Cost Evaluation Study, Benefits Valuation Study, and Site Specific Technology Plan. 40 C.F.R. § 125.95(b)(6). As part of the Benefits Valuation Study, the facility must indicate the monetized value of commercial, recreational, and ecological benefits of compliance with the generally applicable national performance standards as well as a qualitative assessment of any so-called non-use benefits that cannot be monetized. 40 C.F.R. § 125.95(b)(6)(ii)(A), (E). Ultimately, the facility must demonstrate that its compliance costs are significantly greater than the benefits of compliance. The petitioners contend that this alternative impermissibly focuses on cost-benefit considerations, contrary to Congress's directive, and is analogous to the kind of water-quality-based standard we found to be inconsistent with the statute in Riverkeeper I. 358 F.3d at 190. For both reasons, we are persuaded that the EPA exceeded its authority in permitting site-specific cost-benefit variances. In light of this conclusion, we do not reach the industry petitioners' claim that the provision impermissibly requires consideration of qualitative non-use benefits in the cost-benefit analysis. 91 As we discussed previously in analyzing the EPA's determination of BTA, cost-benefit analysis is not consistent with the requirement of § 316(b) that cooling water intake structures reflect the best technology available for minimizing adverse environmental impact. Indeed, the statutory language requires that the EPA's selection of BTA be driven by technology, not cost. The Agency is therefore precluded from undertaking such cost-benefit analysis because the BTA standard represents Congress's conclusion that the costs imposed on industry in adopting the best cooling water intake structure technology available (i.e., the best-performing technology that can be reasonably borne by the industry) are worth the benefits in reducing adverse environmental impacts. Cf. Am. Textile Mfrs. Inst., 452 U.S. at 509, 101 S.Ct. 2478 (noting that where Congress has defined the basic relationship between costs and benefits, a regulatory standard that strikes a different balance is inconsistent with the statute). Just as the Agency cannot determine BTA on the basis of cost-benefit analysis, it cannot authorize site-specific determinations of BTA based on cost-benefit analysis. 92 The cost-benefit variance also impermissibly authorizes the EPA to consider the degraded quality of waterways in selecting a site-specific BTA. We stated in Riverkeeper I that in enacting the CWA, Congress rejected regulation by reference to water quality standards. 358 F.3d at 189-90. Before 1972, Congress regulated point sources based on their effect on the surrounding water and allowed sources to discharge pollutants provided the discharge did not cause water quality to dip below an acceptable level. Id. at 189. Congress changed its approach in 1972, in part because a plaintiff attempting to prove a violation of the law faced a nearly impossible burden of showing that a particular polluter had caused the water quality to dip below the regulatory standards. Id. at 189-90. The Act now regulates discharges from point sources rather than water quality. We thus concluded in Riverkeeper I that water-quality standards cannot be considered under section 316(b). Id. at 190. Of course, water quality in the context of the Act is generally understood to refer to pollutant concentration. As we noted in Riverkeeper I, however, for purposes of section 316(b), which regulates water intake rather than the discharge of pollutants, water quality is measured by wildlife levels. Id. at 189. This analysis in Riverkeeper I is, thus, equally applicable here. 27 93 The challenged provision of the Phase II Rule apparently would permit a facility to argue that, based on water quality (i.e., the level of aquatic wildlife in a particular body of water), the cost of complying with the national performance standards is not justified. The Agency explained in the preamble to the Rule that in a waterbody that is already degraded, very few aquatic organisms may be subject to impingement or entrainment, and the costs of retrofitting an existing cooling water intake structure may be significantly greater than the benefits of doing so. 69 Fed.Reg. at 41,604. This kind of water-quality-based regulation is not authorized by the CWA because it would exempt facilities from meeting the mandated performance standards simply because wildlife levels in the waterbody were already low, and as we held in Riverkeeper I, the CWA does not permit the EPA to consider water quality in making BTA determinations. Finally, we note that to the extent that facilities on highly degraded waterbodies with relatively low wildlife levels face high compliance costs to achieve the national performance standards, those facilities may qualify for the cost-cost variance if such variance is retained on remand. 94 Because the EPA exceeded its authority under section 316(b) by permitting (1) cost-benefit analysis and (2) assessment of the quality of the receiving water (i.e., the receiving water's wildlife levels) in determining whether a variance is warranted, we do not need to defer to the Agency's construction of the statute. We therefore remand this aspect of the Rule.
95 The Phase II Rule's TIOP provision, 40 C.F.R. § 125.94(d), permits a facility to comply with the national performance standards determined on the basis of whether the facility has complied with the construction, operational, maintenance, monitoring, and adaptive management requirements of a Technology Installation and Operation Plan. Id. § 125.94(d)(1). The petitioners contend that this provision impermissibly allows a facility's compliance to be determined not by reference to the performance standards themselves, but by evaluating whether a facility has complied with a plan to achieve the performance standards. In other words, they argue that the TIOP provision essentially allows for an unauthorized margin of error. The petitioners also argue that the EPA denied the public an opportunity to comment on the provision. Like the cost-cost compliance alternative, remand is appropriate here on two grounds: (1) the EPA did not give adequate notice regarding the provisions in section 125.94(d)(2); and (2) the record justification for the TIOP provision depends on the EPA's selection of a suite of technologies as BTA, a selection which has been remanded for further explanation. Given this, we remand the TIOP provision without reaching the merits here. 96 The Rule provides that during the first permit term, a facility may request that its compliance be determined based on whether it has complied with its TIOP, which must be designed to meet the performance standards, 40 C.F.R. § 125.94(d)(1), and submitted with a permit application, id. § 125.95(b)(4)(ii). During subsequent permit terms, if a facility has complied with its TIOP but is not meeting the performance standards, the facility may request that its compliance with the standards during the following term be based on whether it remains in compliance with its TIOP, revised in accordance with the facility's adaptive management plan. 40 C.F.R. § 125.94(d)(2). The EPA explained in the Rule's preamble that it is difficult to determine reductions in impingement mortality and entrainment relative to what would have occurred in the absence of control technologies given natural variability and the vagaries of sampling methods. 69 Fed.Reg. at 41,613. The EPA explained further that it established the TIOP compliance options to account for these variabilities on the ability of a technology to meet the performance standards consistently over time. Id. at 41,613-14. 97 As previously noted, a final rule must be a `logical outgrowth' of the rule proposed. Nat'l Black Media Coalition, 791 F.2d at 1022. The final rule must have roots in the proposal, Envtl. Integrity Project, 425 F.3d at 996, which must fairly apprise interested persons of the subjects and issues involved in the rulemaking, Nat'l Black Media Coalition, 791 F.2d at 1022. An agency cannot pull a surprise switcheroo on interested parties between a proposal and the issuance of a final rule. See Envtl. Integrity Project, 425 F.3d at 996. 98 Although the Rule's proposal notified interested parties that the Agency was considering a provision that would give facilities time to achieve the performance standards after implementing new technologies, the EPA gave inadequate notice of the potentially indefinite scope of this provision. Specifically, the EPA failed to provide notice of the Rule codified at 40 C.F.R. § 125.94(d)(2), which permits a facility to be deemed in compliance with the Phase II Rule in subsequent permit terms if it continues to adhere to its TIOP. 99 In the Rule's proposal, the EPA stated only that it was considering the need for regulatory language that would allow facilities time to come into compliance [with the performance standards] if they choose to install technologies to meet the performance standards. 68 Fed.Reg. at 13,586. The proposal indicated further that the EPA was evaluating and considering allowing six months, one year, two years, or five years (one permit term) for a facility to come into compliance after issuance of its permit. Id. The TIOP provision in the final Rule, by contrast, does not simply allow facilities additional time, up to one permit term, to come into compliance with the performance standards. Instead, it appears to permit a facility to satisfy the Rule's requirements in subsequent permit terms, for an indefinite period, without ever demonstrating compliance with the performance standards, so long as the facility has adhered to its TIOP. 40 C.F.R. § 125.94(d)(2) (stating that [d]uring subsequent permit terms a facility may request that compliance ... be determined based on whether [it] remain[s] in compliance with its TIOP). This aspect of the TIOP provision appears then not to be a logical outgrowth of the proposal, see Nat'l Black Media Coalition, 791 F.2d at 1022, because interested parties would not have divined from the proposal that facilities could be given an indefinite period to come into compliance with the national performance standards. 100 We thus remand the rule for failure to provide notice and comment and because the record justification for the TIOP provision depends on the EPA's selection of BTA, which has been remanded. 101
102 The environmental petitioners challenge the reclassification in the Phase II Rule preamble of certain new constructions as existing facilities, thereby rendering them subject to the Phase II Rule rather than the more stringent Phase I requirements that apply to new facilities. We agree with the petitioners that the Agency interpretively modified a definition appearing in the Phase I Rule via statements in the preamble to the Phase II Rule without providing interested parties notice and an opportunity for comment. 103 An agency's interpretation of its own ... regulation must be given controlling weight unless it is plainly erroneous or inconsistent with the regulation. Fowlkes v. Adamec, 432 F.3d 90, 97 (2d Cir.2005) (citations and internal quotation marks omitted). Although we typically owe considerable deference to an agency's construction of its own regulation, Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965), [u]nder settled principles of statutory and rule construction, a court may defer to administrative interpretations of a statute or regulation only when the plain meaning of the rule itself is doubtful or ambiguous, Pfizer, Inc. v. Heckler, 735 F.2d 1502, 1509 (D.C.Cir. 1984) (emphasis in original). Deference to agency interpretations is not in order if the rule's meaning is clear on its face. Id. Implicit in the rule that an agency cannot interpret a regulation contrary to its unambiguous meaning is the requirement that an agency must adhere to its own rules and regulations. Reuters Ltd. v. FCC, 781 F.2d 946, 950 (D.C.Cir.1986). An agency may modify a regulation that has already been promulgated, therefore, only through the process of notice and comment rulemaking. See Alaska Prof'l Hunters Ass'n, Inc. v. FAA, 177 F.3d 1030, 1034 (D.C.Cir.1999); see also 5 U.S.C. § 551(5) (defining rule making, which is governed by the notice and comment requirements of 5 U.S.C. § 553, as the agency process for formulating, amending, or repealing a rule); Shalala v. Guernsey Memorial Hosp., 514 U.S. 87, 100, 115 S.Ct. 1232, 131 L.Ed.2d 106 (1995) (noting in dicta that APA rulemaking is required where an agency interpretation adopt[s] a new position inconsistent with ... existing regulations). 104 The Phase I Rule defined new facility as any structure whose construction commenced after January 17, 2002 that meets both the definition of new source in 40 C.F.R. § 122.29 (discussed below) and one of two other requirements: the structure must use either (1) a newly constructed cooling water intake structure or (2) an existing cooling water intake structure whose design capacity is increased to accommodate the intake of additional cooling water. See 40 C.F.R. § 125.83. A new source under section 122.29 is a facility that (1) is constructed at a site at which no other source is located, (2) totally replaces the process or production equipment that causes the discharge of pollutants at an existing source, or (3) undertakes processes ... substantially independent of an existing source at the same site. 28 40 C.F.R. § 122.29(b) (emphasis added). Section 122.29(b) provides further that, in determining whether a facility is substantially independent of an existing source, the director should consider the extent to which the new facility is integrated with the existing plant; and the extent to which the new facility is engaged in the same general type of activity as the existing source. 40 C.F.R. § 122.29(b)(iii). 105 In determining whether a new construction qualifies as a new facility for purposes of the Phase I Rule, therefore, the permitting authority must perform a two-part, but not necessarily sequential, analysis. It must determine whether the construction uses a new cooling water intake structure or an existing structure whose capacity has been increased. The permitting authority must also determine whether the new construction qualifies as a new source. Failure to meet either part of this analysis precludes the new construction from qualifying as a new facility, and thus from falling under the Phase I Rule's purview. 106 The Phase I Rule stated that new facilities meeting the foregoing requirements include a stand-alone facility, which the Phase I Rule defined as a new, separate facility that is constructed on property where an existing facility is located and whose processes are substantially independent of the existing facility at the same site. Id. § 125.83. This is because such a facility, by definition, essentially qualifies as a new source. Compare id. with § 122.29 (defining new source as including a facility that undertakes processes ... substantially independent of an existing source at the same site). The Phase I Rule clarified, however, that new facility does not include new units that are added to a facility for purposes of the same general industrial operation (for example, a new peaking unit at an electrical generating station). Id. § 125.83. This is presumably because such units do not qualify as new sources in that they are not substantially independent of existing sources. See id. § 122.29(b)(1)(iii) (setting forth the factors to be considered in determining substantial independence, including the extent to which the new facility is integrated with the existing plant; and the extent to which the new facility is engaged in the same general type of activity as the existing source). The Phase I Rule thus appears to have left regulation over the following to a subsequent rulemaking phase: (1) new stand-alone facilities that use existing intake structures whose design capacity is not increased and (2) new units that are added to a facility for purposes of the same general industrial operation even if they require either an increase in the intake structure design capacity or the construction of a new cooling water intake structure altogether. Id. 29 107 The Phase II Rule defines existing facility as any facility whose construction commenced on or before January 17, 2002, and any modification of, or any addition of a unit at such a facility that does not meet the definition of a new facility at § 125.83. Id. § 125.93. Thus, from this definition, it appears that new stand-alone facilities that use existing, unmodified intake structures and new units added to a facility for purposes of the same industrial operation, regardless of their impact on the facility's cooling water intake structure, (i.e., the two kinds of new constructions left unregulated by the Phase I Rule) are considered existing facilities and governed by the Phase II Rule. 108 The parties' dispute concerns statements in the preamble to the Phase II Rule that purportedly narrow, by way of interpretation, the Phase I Rule's definition of new facility 30 without the required procedures of notice and comment. In the preamble to the Phase II Rule, the EPA states that the Phase I[R]ule treated almost all changes to existing facilities for purposes of the same industrial operation as existing facilities. 69 Fed.Reg. at 41,579. The preamble then appears to distinguish stand-alone facilities from new units that are part of the same industrial operation, thereby defining the latter as existing facilities without reference to the definition of new source or the substantial independence test of 40 C.F.R. § 122.29. Id. at 41,579 n. 2a. The preamble states that the substantial independence test does not apply where there is an addition to an existing facility for purposes of the same industrial operation, such as the addition of new generating units at the same site as an existing facility, id. at 41,579, because such additions are categorically treated as `existing facilities' regardless of any other considerations unless they completely replace an existing facility and its cooling water design intake capacity is increased, id. at 41,579 n. 2a. These comments are contrary to the plain meaning of the relevant portion of the Phase I Rule. 109 The Phase I Rule unambiguously stated that new facility means any structure that is a new source, as defined by 40 C.F.R. § 122.29, subject to certain other requirements. Under this provision, a source is considered new if, inter alia, [i]ts processes are substantially independent of an existing source at the same site. 40 C.F.R. § 122.29(b)(1)(iii). A permitting authority could not classify a source constructed at the site of an existing source as new or existing for purposes of the Phase I Rule, therefore, without reference to the substantial independence test. It is plain, then, that the Phase I Rule distinguished between stand-alone facilities and new units, where the new construction is not built at an empty site and does not totally replace an existing source, by reference to the definition of a new source. A stand-alone facility is substantially independent of an existing facility, and therefore a new source; a new unit that is part of the same industrial operation as an existing facility is not substantially independent of an existing facility, and therefore not a new source. It is impossible to determine which classification applies to a particular construction under the Phase I Rule without referring to the definition of new source, i.e., whether it satisfies the substantial independence test. Put differently, the touchstone of the definition of new facility in the Phase I Rule is whether a source is a new source. The Phase I Rule's plain terms thus indicate that a unit that is substantially independent of an existing facility is not part of the same general industrial operation as the existing facility. Any elimination of the substantial independence inquiry, therefore, strikes at the heart of the Phase I Rule and its classification of what facilities are subject to its requirements. 110 The EPA claims that the Phase II Rule has in no way eliminated the substantial independence test and that the Rule's preamble merely makes clear that the fifth sentence in section 125.83 exempts new units from regulation under the Phase I Rule. This argument fails because the Phase I Rule provides no way to distinguish between stand-alone facilities and new units where the construction is built on a site where a source is already located and does not totally replace the existing source except by reference to the substantial independence test, i.e., without assessing the factors set forth at 40 C.F.R. § 122.29(b)(1)(iii) in order to determine whether the source is new or existing. Just as stand-alone facility has no intrinsic meaning, neither does new unit. The Phase I Rule defines each by reference to the substantial independence test of section 122.29(b). Thus, while an existing facility can be repowered with new generating units and remain an existing facility for regulatory purposes under section 316(b), the determination can only be made by reference to whether a particular new generating unit is a stand-alone facility or a new unit that is part of the same general industrial operation as an existing facility. In fact, a permitting authority must first determine whether a source is new within the meaning of 40 C.F.R. § 122.29(b) before it can conclude that the source is a stand-alone facility or a new unit added to an existing facility for purposes of the same general industrial operation. 111 Because the Phase I Rule was not ambiguous, we do not owe deference to the Agency's interpretation of the Phase I Rule in the preamble to the Phase II Rule. See Fowlkes, 432 F.3d at 97; Pfizer, 735 F.2d at 1509. By permitting the Agency to determine that a new construction is not subject to the Phase II Rule without any definitional guidance and in contravention of the Phase I Rule, the EPA has expanded the scope of what may be classified as a new unit while narrowing the Phase I definition of stand-alone facility. Moreover, by including a potentially expansive definition of new unit in the preamble to the Phase II Rule, the EPA has interpretively modified the definitions that appeared in the Phase I Rule without providing interested parties an opportunity for notice and comment. 112 Accordingly, we direct the EPA on remand to adhere to the definitions set forth in the Phase I Rule, see Reuters, 781 F.2d at 950-52, or to amend those definitions following notice and comment, see Alaska Prof'l Hunters, 177 F.3d at 1034.