     Case: 06-60662   Document: 00511183770     Page: 1    Date Filed: 07/23/2010




          IN THE UNITED STATES COURT OF APPEALS
                   FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                   Fifth Circuit

                                                FILED
                                                                   July 23, 2010

                                   No. 06-60662                    Lyle W. Cayce
                                                                        Clerk

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




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                                                 No. 06-60662

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,1 however, Riverkeeper and the EPA have
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”),2 withdraw and re-circulate, in the aggregate,
billions of gallons of water per day from this country’s seas, lakes, and rivers.

        *
            Judge Jolly concurs in the result.
        1
            129 S. Ct. 1498 (2009).
        2
           For simplicity’s sake, we adopt ConocoPhillips’s convention of referring to all offshore oil and
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.)3 Impingement and entrainment can seriously affect
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.4 Recognizing the impact of CWIS
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 1976,6 but, before being implemented, it was successfully challenged
and remanded by the Fourth Circuit for procedural defects that violated the




        3
         Establishing Requirements for Cooling Water Intake Structures at Phase III Facilities, 71 Fed.
Reg. 35,013 (June 16, 2006) (codified at 40 C.F.R. pts. 9, 122, 123, 124, and 125).
        4
            33 U.S.C. 1251(a).
        5
            Codified at 33 U.S.C. § 1326(b).
        6
            41 Fed. Reg. 17,387 (Apr. 26, 1976).

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Administrative Procedures Act (the “APA”).7 The EPA withdrew the remanded
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.8 This regulatory regime remained
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:10 Phase I applies to all new CWIS facilities above a particular intake
threshold size, except new offshore oil rigs (the regulation of which was
postponed until Phase III);11 Phase II applies to existing large power plants that
take in more than 50 millions gallons of water a day;12 and Phase III (at issue
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


        7
            Appalachian Power Co. v. Train, 566 F.2d 451 (4th Cir. 1977).
        8
            71 Fed. Reg. at 35,011.
        9
            71 Fed. Reg. at 35,011.
        10
         The EPA entered into a Second Amended Consent Decree on November 25, 2002, modifying
each phase’s deadlines as established in the first Consent Decree. Id. at 35,011.
        11
         Regulations Addressing Cooling Water Intake Structures for New Facilities, 66 Fed. Reg.
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).
        12
          Final Regulations to Establish Requirements for Cooling Water Intake Structures at Phase II
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).14 The Phase
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.15 The EPA stated that the closed-cycle system is the “best
technology available” for minimizing environmental impact.16 Track II allowed
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.”17 Track II also allowed facilities to
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

      13
           71 Fed. Reg. 35,030.
      14
           358 F.3d 174 (2d Cir. 2004).
      15
           Id. at 182-83.
      16
           Id. at 183.
      17
           Id. (quoting 40 C.F.R. § 125.84(d)(1)).
      18
           Id.

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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.19 Holding that the EPA exceeded its authority by
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.21 That rule set forth
five compliance alternatives from which a facility could select and implement
“‘for establishing [the] best technology available for minimizing adverse
environmental impact.’”22 One of the compliance alternatives available to
existing power plants was to employ a closed-cycle CWIS, but selection of such
a system was not required.23 The remaining compliance alternatives referenced
national performance standards that “‘are based on consideration of a range of
technologies that [the] EPA has determined to be commercially available.’” 24 The


       19
            Id. at 189.
       20
            Id.
       21
         Riverkeeper II, 475 F.3d 83, 92 (2d Cir. 2007) (citing 40 C.F.R. § 125.91) rev’d and remanded
by Entergy Corp. v. Riverkeeper, Inc., 129 S.Ct. 1498 (2009).
       22
            Id. (quoting 40 C.F.R. § 125.94(a)).
       23
            Id. at 93.
       24
            Id. (quoting 69 Fed. Reg. at 41,598-99).

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Phase II Rule also created two site-specific compliance variances from the
national performance standards. The first compliance variance – the “cost-
compliance 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.25 The second compliance
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.27 The Second Circuit also held, however,
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.28 The court remanded the Rule to the EPA for


      25
           Id. at 94 (citing 40 C.F.R. § 125.94(a)(5)(I)).
      26
           Id. (citing 40 C.F.R § 124.94(a)(5)(ii)).
      27
           Id. at 98.
      28
           Id.

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clarification whether the national performance standards set out in the Phase
II Rule incorporated a cost-benefit analysis.29 On remand, the EPA suspended
operation of the Rule pending further rule making, and the Supreme Court
granted certiorari30 limited to the question whether § 316(b) “authorizes the
[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.32                 The Court first considered the Second
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.”33 The Court described
this interpretation as “plausible,”but reasoned that “best technology available”
could also mean “technology that most efficiently produces some good.” 34 The
Court read the statute’s phrase “minimizing adverse environmental impact” as
allowing the EPA to consider the degree of adverse-impact reduction rather than



      29
           Id. at 104-105.
      30
           128 S. Ct. 1867 (2008).
      31
           Id. at 1867 (internal quotation marks omitted).
      32
           129 S. Ct. at 1505-07.
      33
           Id. at 1506 (citing Riverkeeper II, 475 F.3d at 88-100).
      34
           Id. (emphasis original).

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mandating that the “greatest possible reduction in environmental harm” be
achieved.35 The Court determined that the statute afforded the EPA “some
discretion to determine the extent of reduction that is warranted under the
circumstances”36 and that the phrase “best technology available” does not
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 cost-
benefit analysis should be used, and if so to what degree.”38 The Court reversed
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

      35
           Id.
      36
           Id.
      37
           Id.
      38
           Id. at 1507.
      39
           Id. at 1506.

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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.40 For existing
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.41 Additionally, the EPA gave notice that it might
continue its current case-by-case regulation instead of implementing a national
categorical approach.42 For new facilities, however, the EPA proposed national
categorical standards for CWIS regulation.43 On November 25, 2005, the EPA
published a Notice of Data Availability that summarized the data that the EPA
had received and collected since publishing the Proposed Rule;44 on June 16,
2006, the EPA published the Final Phase III Rule.45 The EPA noted that it
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




      40
           69 Fed. Reg. 68,444.
      41
           Id.
      42
           Id. at 68,467.
      43
           Id. at 68,444.
      44
           70 Fed. Reg. 71,057 (Nov. 25, 2005).
      45
           71 Fed. Reg. 35,006 (codified in 40 C.F.R. pts. 9, 122, 123, 124, and 125).
      46
           Id. at 35,012/2-3.

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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.48 It calculated social costs by evaluating
compliance and administrative costs to the state and federal governments.49 The
economic costs were evaluated based on the financial impact that the national
categorical standards would have on the existing facilities’ firms.50 The national
benefits assessment included considering use (economic resource exploitation)
and non-use (resource use for other than economic reason) benefits.51 The EPA
also compared the annual monetized social costs of compliance with the annual
monetized environmental benefits of compliance.52 For the 50 million gallons per
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.53 The EPA
also concluded that the non-monetized benefits were unlikely to alter the




      47
           Id.
      48
           Id. at 35,030-32.
      49
           Id. at 35,031.
      50
           Id. at 35,032.
      51
           Id. at 35,032-33.
      52
           Id. at 35,017.
      53
           Id.

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monetized cost-benefit ratio.54
      For new Phase III facilities,55 the EPA concluded that it was impossible to
compare the costs incurred by individual facilities to the benefits of those
facilities because those facilities have not yet been built.56 Instead, the EPA
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.59 The EPA calculated the total annualized social
cost of compliance to be between $3.2 million and $3.8 million,60 that the
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



      54
           Id.
      55
           40 C.F.R. § 125.130 et seq.
      56
           71 Fed. Reg. 35,034.
      57
           Id. at 35,025-29.
      58
           Id. at 35,013-14/1, 35,016/1.
      59
           Id. at 35,012.
      60
           Id. at 35,025.

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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,63 which, it observed, were the same range of densities
observed         in the inland and coastal waters addressed in the Phase I rule
making.64 The EPA also took into account that offshore rigs serve as marine
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).66 Accordingly, individual permit writers
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



        61
             Id. at 35,027-29.
        62
             Id. at 35,013.
        63
           The Southeast Area Monitoring and Assessment Program (SEAMAP) is a two decades-long
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.
        64
             Id. at 35,013, 35,019.
        65
           Id. at 35,013 (citing studies of marine life densities surrounding California and Alaska offshore
rigs and in the Gulf).
        66
             Id. at 35,009.

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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.68 This
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.70 Track II allows a fixed facility to employ “alternative technologies”


       67
            Id. at 35,015.
       68
            40 C.F.R. § 125.131(a).
       69
            71 Fed. Reg. at 35,021.
       70
          The Agency determined that such controls would compromise the seaworthiness of the mobile
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


      71
           40 C.F.R. § 125.135.

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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,72 and coolant water intake regulations are
deemed “other limitations.” 73 Reviews of agency interpretations of statutes are
informed by the Supreme Court’s decision in Chevron, U.S.A. v. National
Resource Defense Counsel.74 Under Chevron, a reviewing court must first look


      72
           33 U.S.C. § 1369(b)(1)(E).
      73
           E.g., Riverkeeper II, 358 F.3d at 183-84.
      74
           467 U.S. 837, 842-43 (1984).

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to whether Congress has directly spoken to the precise question at issue.75 If the
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.77                              An
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.79 5 U.S.C. § 706(2)(A) directs that
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.” 80 “Under this
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.”81 “An agency rule is arbitrary and



      75
           Id. at 842.
      76
           Id.
      77
           Id. at 843.
      78
           Riverkeeper III, 129 S. Ct. at 1505.
      79
           5 U.S.C. § 703.
      80
           Id. at 706(2)(A).
      81
           City of Dallas v. Hall, 562 F.3d 712, 717 (5th Cir. 2009) (internal citations omitted).

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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.’”82 The scope of the reviewing court’s
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.84             An agency’s inherent authority to reconsider its
decisions is not without limits, however.85 “An agency may not reconsider its own

       82
           Texas Oil & Gas Ass'n v. EPA, 161 F.3d 923, 933 (5th Cir.1998) (citing Motor Vehicle Mfrs.
Assn. v. State Farm Mut., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)).
       83
          Louisiana Environmental Action Network v. E.P.A., 382 F.3d 575, 582 (5th Cir. 2004) (citing
Texas Oil & Gas Ass'n, 161 F.3d at 934).
       84
            Trujillo v. General Elec. Co., 621 F.2d 1084. 1086 (10th Cir. 1980).
       85
            Macktal v. Chao, 286 F.3d 822, 825 (5th Cir. 2002).

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                                                 No. 06-60662

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


       86
            Id. (citing 5 U.S.C. § 706(2)(A)).
       87
          Id. (citing Dun & Bradstreet Corp., 946 F.2d at 193; Bookman v. United States, 197 Ct.Cl. 108,
453 F.2d 1263, 1265 (1972)).


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                                              No. 06-60662

in § 4 of the APA.88 ConocoPhillips asserts that (1) the EPA gave notice, in both
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.’”89 This is necessary because:
        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



        88
             5 U.S.C. § 553.
        89
           See Global Van Lines v. ICC, 714 F.2d 1290, 1297 (5th Cir. 1983) (quoting SEC v. Chenery
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)).
        90
             Chenery, 318 U.S. at 88.

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                                               No. 06-60662

      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



      91
           5 U.S.C. § 553(b)(2) (emphasis added).
      92
           Id. at § 553(c) (emphasis added).
      93
           Global Van Lines, 714 F.2d at 1298 (internal citation and punctuation omitted).

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                                            No. 06-60662

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’”94 of the rule making process, and
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.95          In the instant case, however, ConocoPhillips does not
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

       94
          Texas Office of Public Utility Counsel v. Federal Communications Commission, 265 F.3d 313,
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)).
       95
          See Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435
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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                                      No. 06-60662

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


     96
          69 Fed. Reg. 68,449.

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                                    No. 06-60662

   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


   97
        71 Fed. Reg. at 35,010.

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                                        No. 06-60662

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.98 The agency (1) identified the different types of CWIS


      98
           Id. at 35,025 to 35,029.

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                                          No. 06-60662

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].”99 The agency also estimated
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.”100 After collecting this data,
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.”103 The agency did, however, perform “comparisons of the national benefits
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

      99
           Id. at 35,025.
      100
            Id.
      101
            Id. at 35,025 to 35,029.
      102
            71 Fed. Reg. 35,034.
      103
            Id.
      104
            Id. at 35,034.

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                                    No. 06-60662

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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                                             No. 06-60662

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 economic-
achievability 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.105 Neither did the
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



        105
          See, e.g., the EPA’s first regulation of CWIS. 41 Fed. Reg. 17,387, 17388 (Apr. 26, 1976)
(“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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                                   No. 06-60662

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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                                                 No. 06-60662

require that the location, design, construction, and capacity of cooling water
intake structures reflect the best technology available for minimizing adverse
environmental impact.”106 ConocoPhillips claims that the emphasized language
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.107 If the statute is silent or ambiguous, however, we ask whether the
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




        106
              33 U.S.C. §1326(b) (emphasis added).
        107
          Texas Office of Public Utility Counsel v. F.C.C., 183 F.3d 393, 410 (5th Cir. 1999) (internal
punctuation and citation omitted).
        108
              Id (internal punctuation and citation omitted)..

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                                              No. 06-60662

meaning.109 It is absurd and arbitrary to decide that “of cooling water intake
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,110 and a postmodifying
prepositional phrase is most naturally read to modify that single unit.111 It is
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


        109
          Goswami v. American Collections Enterprise, Inc., 377 F.3d 488, 492 (5th Cir. 2004)
(“[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.”) .
        110
              SIDNEY GREENBAUM , OXFORD ENGLISH GRAM M AR 233 (1996).
        111
          Consider, e.g., “The doctor decided that keeping a boat, trailer, and car in storage was too
expensive.”

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                                             No. 06-60662

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,112 that uniform regulation was achievable, that it would not create
barriers to entry, and that it would not force operations to close.113 In addition,
the EPA considered a wide range of industry, environmental, and economic data
which related to the types of facilities that will be used 114 and the technologies
available and their efficacy.115 The agency also considered this information in
the context of the likely locations in the Gulf of Mexico (where almost all new
offshore facilities will be situated),116 and made an exception to the uniform
standard for facilities to be located in tidal rivers or estuaries.117 Moreover, the
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

      112
            71 Fed. Reg. 35,025 to 35,029.
      113
            Id.
      114
            71 Fed. Reg. 35,024 to 35,025.
      115
            Id.
      116
            Id. at 35,013.
      117
            Id. at 35,020.

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                                          No. 06-60662

areas; and aquatic organisms are attracted to and concentrate around offshore
facilities.118 The EPA further notes that, regardless of any shortcomings that
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 120 – only the second is
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,


      118
            Id. at 35,013.
      119
            Id.
      120
            161 F.3d at 934.

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                                               No. 06-60662

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.”122 ConocoPhillips insists that the “limited
information” that the EPA does possess – the SEAMAP data123 – is inadequate
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


        121
              BASF Wyandotte Corp. v. Costle, 598 F.2d 637, 652 (1st Cir. 1979).
        122
              71 Fed. Reg. 35,016.
        123
            The agency also points out that it relied on more than just the SEAMAP and similar studies to
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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                                       No. 06-60662

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


      124
            71 Fed. Reg 35,013.

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                                             No. 06-60662

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.”125 We defer to the agency’s evaluation of the specific offshore and
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.126 In other words, even though a particular facility might
extract oil and gas from a great depth, the CWIS will draw water at or near the


      125
            Chemical Mfrs. Ass'n v. EPA, 870 F.2d 177, 231 (5th Cir. 1989).
      126
            71 Fed Reg. 35, 016.

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                                    No. 06-60662

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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                                   No. 06-60662

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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