Power plants generate lots of heat. To cool down, they flush vast amounts of water through a cooling system (called “cooling water intake structures”). In the process, aquatic organisms (fish, shellfish and plants) that live in this water get squashed against the screens (“impingement”) or in the cooling system itself (“entrainment”). Under the Clean Water Act, these cooling systems must use the “best technology available for minimizing adverse environmental impact.”

It took the EPA three decades to issue regulations for these structures. For new power plants, the EPA required the best technology available, which would reduce fish mortality by 98 percent. But, for existing plants, the EPA permitted technology that reduced impingement by 80 to 95 percent and entrainment by 60 to 90 percent. The agency made this choice because the cost of converting existing plants to the better system would be $3.5 billion per year, which was nine times the cost of the cheaper version. In addition, the EPA reserved the right to reduce standards for specific plants if they demonstrated that the costs of compliance would be significantly greater than the benefits. 

Riverkeeper, Inc. an environmental organization, challenged these regulations. The appeals court ruled that the EPA could only consider costs in two circumstances: (1) determining if they could be ‘reasonably borne’ by the industry or, (2) if there were two ways to achieve the same goal, the EPA could mandate the cheaper option. The court said, however, that the EPA could not compare the costs and benefits of various methods, and choose the technology with the best net benefits. Nor could the EPA alter standards for specific sites based on cost-benefit analysis. The Supreme Court granted certiorari.

Questions:

1. Is the EPA permitted to use cost-benefit analysis when issuing regulations?

2. Is the EPA now allowed to use a cost-benefit analysis under the Clean Water Act?

3. What would be the annual benefit cost?

4. What would the annual costs be?