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Supreme
Court Ruling Allows EPA to Base Decisions on Cost-Benefit Analysis
By Larry
West
On
In a 6-3
decision, the Supreme Court ruled that the Clean Water Act gives the EPA
authority to use cost-benefit analyses as the basis for such decisions, but the
Court stopped short of saying the EPA was required to base its decisions on a
cost-benefit analysis.
What’s at Stake?
The EPA
was planning to require more than 500 older power plants to upgrade their
systems that use water to cool machinery before the lawsuits began. The water
intake systems used by older power plants kill an estimated 3.4 billion fish
and shellfish every year. Such power plants draw 214 billion gallons of water
from
The
closed-cycle cooling systems used by newer plants reduce the death rate by 98
percent, but installing closed-cycle systems in older power plants would cost
$3.5 billion annually. Alternative technology could reduce the number of fish
killed by 80 percent to 95 percent, according to the EPA, and would cost
roughly one-tenth as much to install.
Installing
closed-cycle cooling systems at older power plants might also force electricity
costs to rise by 2.4 percent to 5.3 percent, the EPA said. Closed-cycle systems
would reduce the amount of electricity the power
plants generate, and would require utilities to build 20 new 400-megawatt power
plants to replace the lost electricity. Installation and construction of the
new cooling systems could also force some plants to close down for a few
months, resulting in even more costs.
What’s
the Background?
The
Supreme Court decision overruled an earlier decision by the 2nd U.S. Circuit
Court of Appeals in
The three
dissenting Supreme Court justices—John Paul Stevens, Ruth Bader Ginsburg, and
David Souter—argued that, in passing the Clean Water
Act, Congress never intended for agencies to base their decisions on
cost-benefit analyses because its members understood that it is nearly
impossible to put a dollar value on the loss of wildlife.
What’s
the Problem?
And
that’s the primary problem most environmentalists have with the notion of using
cost-benefit analyses to make conservation decisions—it’s difficult to find a
valuation method that everyone can agree on, or that even makes sense.
In the
current case, the EPA analysis placed a value of $83 million per year on the
fish that would be saved by installing close-cycle cooling systems at older
power plants. But that number only takes into account the value of fish that
are caught by either sport or commercial fishermen—less than 2 percent of all
the fish currently killed by water-intake systems. The EPA assigned no value at
all to more than 98 percent of the fish, shellfish and other aquatic life
killed by power plants each year.
My Take
on the Issue
Don’t get
me wrong. Balancing the needs of business and consumers with what it takes to
protect and preserve the natural environment is essential. We are, after all,
part of the environment we are trying to manage. Yet, in failing to address the
value of a living resource, and the benefit of conserving it, both the EPA and
the Supreme Court have clearly demonstrated the shortcomings of the agency’s
current cost-benefit method and its application to important environmental
decisions.
By clearing the way for the EPA to base critical decisions on a flawed method, with no mandate for the agency to first improve its cost-benefit calculations, the Supreme Court may have inadvertently laid the groundwork for a series of short-sighted environmental decisions with no long-term benefits for anyone.