Form for Compliance with E. O. 12866 Docket Requirements Title of Regulation: Final Regulations to Establish Requirements for Cooling Water Intake Structures at Phase III Facilities Contact person: Paul Shriner Phone number: 202 566 1076 Was this regulation reviewed by OMB under Executive Order 12866  Regulatory Planning and Review?

xYes 9 No If you checked " no", you are done with this form. Simply place it in the docket for your regulation. If you checked " yes", please fill out the remainder of the form before placing it in the docket. Also docket any relevant documents referenced in the form.

For regulations that are checked " Yes" above:

This regulation was reviewed by OMB under Executive Order 12866  Regulatory Planning and Review.

Attached is the draft regulation and any other documents sent to OMB for review, such as analyses and assessments. E. O. 12866 requires agencies to make these publicly available.

E. O. 12866 also requires agencies to identify the substantive changes between the draft regulation sent to OMB for review and the regulation subsequently announced [ Please check the appropriate box below:]

X EPA made substantive changes to this regulation ( includes changes initiated by EPA or OMB). Attached is a document which: ( 1) identifies all the substantive changes made, and ( 2) notes those changes OMB suggested or recommended.

No substantive changes were made to this regulation Therefore, no further attachments are required.

If you have questions about this regulation, please call the EPA contact person listed above. Section 316( b) Phase III Final Rule Summary of Substantive Changes During Interagency Review Changes to Rule Language 125.139( c)( 3)   OMB recommended EPA strike " and daily" from third sentence Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 1 ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 9, 122, 123, 124, and 125 [ OW 2004 0002, FRL   XXXX]

RIN 2040  AD70 National Pollutant Discharge Elimination System   Final Regulations to Establish Requirements for Cooling Water Intake Structures at Phase III Facilities AGENCY: Environmental Protection Agency ( EPA).

ACTION: Final rule.

SUMMARY: On November 1, 2004, EPA published a proposal that contained several options for the control of cooling water intake structures at existing Phase III facilities and at new offshore oil and gas extraction facilities. This rule establishes categorical section 316( b) requirements for new offshore oil and gas extraction facilities that have a design intake flow threshold of greater than 2 million gallons per day and that withdraw at least 25 percent of the water exclusively for cooling purposes. For existing Phase III facilities, EPA determined that uniform national standards are not the most effective way at this time to address cooling water intake structures at these facilities. Instead, EPA believes that it is better to continue to rely upon the existing National Pollutant Discharge Elimination System ( NPDES) program, which implements section 316( b) for existing facilities not covered under the Phase II rule on a case by case, best professional judgment basis. This final action constitutes Phase III of EPA's section 316( b) regulation development. This rule does not alter the regulatory requirements for facilities subject to the Phase I or Phase II regulations. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 2 DATES: This regulation is effective [ INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. For judicial review purposes, this final rule is promulgated as of 1 p. m. Eastern Daylight Time ( EDT) on [ INSERT DATE 14 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER] as provided in 40 CFR 23.2.

ADDRESSES: EPA has established a docket for this action under Docket ID No.

EPAOW 2004 0002. All documents in the docket are listed on the www. regulations. gov web site. Although listed in the index, some information is not publicly available, e. g.,

confidential business information ( CBI) or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically through www. regulations. gov or in hard copy at the Water Docket in the EPA Docket Center, EPA/ DC, EPA West, Room B102, 1301 Constitution Ave., NW, Washington, DC. The Public Reading Room is open from 8: 30 a. m. to 4: 30 p. m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is ( 202) 566 1744, and the telephone number for the Water Docket is ( 202) 566 2426.

FOR FURTHER INFORMATION CONTACT: For additional technical information contact Paul Shriner, OW/ OST at ( 202) 566 1076. For additional biological information contact Ashley Allen, OW/ OST at ( 202) 566 1012. The address for the above contacts is: Office of Science and Technology, Engineering Analysis Division ( Mailcode 4303T),

Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460; fax number: ( 202) 566 1053; e mail address: rule. 316b@ epa. gov. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 3 SUPPLEMENTARY INFORMATION:

I. General Information A. What Entities Are Regulated By This Action?

This final rule applies to new offshore and coastal oil and gas extraction facilities,

which were specifically excluded from the Phase I new facility rule. New offshore and coastal oil and gas extraction facilities with a design intake flow threshold of greater than 2 million gallons per day ( MGD) are subject to requirements similar to those under the Phase I rule. A new offshore and coastal oil and gas extraction facility is defined as any building, structure, facility, or installation that ( 1) meets the definition of a " new facility"

in 40 CFR 125.83; ( 2) is regulated by the Offshore and Coastal Subcategories of the Oil and Gas Extraction Point Source Category Effluent Guidelines in 40 CFR 435.10 or 435.40; and ( 3) but only if it commences construction after [ INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. Exhibit I 1 provides examples of other industrial facility types potentially interested in this final action.

Exhibit I 1  Industrial Facility Types Potentially Interested in this Final Action Category Examples of Potentially Regulated Entities Standard Industrial Classification Codes North American Industry Codes ( NAIC)

Federal, State and local government Operators of steam electric generating point source dischargers that employ cooling water intake structures 4911 and 493 221111, 221112, 221113, 221119, 221121, 221122 Operators of industrial point source dischargers that employ cooling water intake structures. See below See below Agricultural production 0133 111991 11193 Industry Metal mining 1011 21221 Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 4 Category Examples of Potentially Regulated Entities Standard Industrial Classification Codes North American Industry Codes ( NAIC)

Oil and gas extraction 1311, 1321 211111, 211112 Mining and quarrying of nonmetallic minerals 1474 212391 Food and kindred products 2046, 2061, 2062, 2063, 2075, 2085 311221, 311311, 311312, 311313, 311222, 311225, 31214 Tobacco products 2141 312229, 31221 Textile mill products 2211 31321 Lumber and wood products, except furniture 2415, 2421, 2436, 2493 321912,321113, 321918, 321999, 321212, 321219 Paper and allied products 2611, 2621, 2631, 2676 3221, 322121, 32213, 322121, 322122, 32213, 322291 Chemical and allied products 28 ( except 2895, 2893, 2851, and 2879) 325 ( except 325182, 32591, 32551, 32532)

Petroleum refining and related industries 2911, 2999 32411, 324199 Rubber and miscellaneous plastics products 3011, 3069 326211, 31332, 326192, 326299 Stone, clay, glass, and concrete products 3241 32731 Primary metal industries 3312, 3313, 3315, 3316, 3317, 3334, 3339, 3353, 3363, 3365, 3366 324199, 331111, 331112, 331492, 331222, 332618, 331221, 22121, 331312, 331419, 331315, 331521, 331524, 331525 Fabricated metal products, except machinery and transportation equipment 3421, 3499 332211, 337215, 332117, 332439, 33251, 332919, 339914, 332999 Industrial and commercial machinery and computer equipment 3523, 3531 333111, 332323, 332212, 333922, 22651, 333923, 33312 Transportation equipment 3724, 3743, 3764 336412, 333911, 33651, 336416 Measuring, analyzing, and controlling instruments; photographic, medical, and optical goods; watches and clocks 3861 333315, 325992 Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 5 Category Examples of Potentially Regulated Entities Standard Industrial Classification Codes North American Industry Codes ( NAIC)

Electric, gas, and sanitary services 4911, 4931, 4939, 4961 221111, 221112, 221113, 221119, 221121, 221122, 22121, 22133 Educational services 8221 61131 Engineering, accounting, research, management and related services 8731 54171 This exhibit is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be interested in this action. This exhibit also lists the types of entities that EPA is now aware could potentially be regulated by this action.

Other types of entities not listed in the exhibit could also be regulated. To determine whether your facility is regulated by this action, you should carefully examine the applicability criteria in § 125.131 of this rule. If you have questions regarding the applicability of this action to a particular entity, consult the persons listed for technical information in the FOR FURTHER INFORMATION CONTACT section.

B. Supporting Documentation The final regulation is supported by three major documents:

1. Economic and Benefits Analysis for the Final Section 316( b) Phase III Existing Facilities Rule ( EPA  821 R 06 001), hereafter referred to as the Economic and Benefits Analysis. This document presents the methodology employed to assess economic impacts of the options we considered for this action and the results of the analysis.

2. Regional Analysis for the Final Section 316( b) Phase III Existing Facilities Rule ( EPA  821 R 06 002), hereafter referred to as the Regional Analysis Document. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 6 This document examines cooling water intake structure impacts and the environmental benefits of the national categorical regulatory options we considered for this action at the regional level.

3. Technical Development Document for the Final Section 316( b) Phase III Existing Facilities Rule ( EPA  821 R 06 003), hereafter referred to as the Technical Development Document. This document presents the technical information that formed the basis for our decisions in this action, including information on the costs and performance of the impingement and entrainment reduction technologies we considered.

Table of Contents I. General Information II. Scope and Applicability of the Final Rule III. Legal Authority, Purpose, and Background of This Regulation IV. Environmental Impacts Associated with Cooling Water Intake Structures V. Description of the Rule VI. Basis for the Final Rule Decision VII. Summary of Major Comments and Responses to the Proposed Rule and Notice of Data Availability ( NODA)

VIII. Implementation IX. Economic Impact Analysis X. Benefits Analysis XI. Comparison of Benefits and Costs XII. Statutory and Executive Order Reviews Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 7 II. Scope and Applicability of the Final Rule The national categorical requirements in this rule apply to new offshore oil and gas extraction facilities, which were specifically excluded from the Phase I new facility rule. ( 40 CFR Part 125, Subpart I). This rule defines the term " new offshore oil and gas extraction facility" to include facilities in both the offshore and the coastal subcategories of EPA's Oil and Gas Extraction Point Source Category for which effluent limitations are established at 40 CFR Part 435. Although the term " offshore" denotes only one of these two subcategories for purposes of the effluent guidelines, EPA is using the term " offshore" here to denote facilities in either subcategory because the requirements are the same for both offshore and coastal facilities and the term " offshore" is commonly understood to include any facilities not located on land. In order to be covered by this rule, these facilities would need to use cooling water intake structures to withdraw water from waters of the U. S. and meet all other applicability criteria, as described in this section.

New facilities that meet all of the following criteria are subject to this rule:

  The facility is a point source;

  The facility proposes to use cooling water intake structures, including a cooling water intake structure operated by one or more independent suppliers ( other than a public water system), with a total design intake flow equal to or greater than 2 million gallons per day ( MGD) to withdraw cooling water from waters of the United States;

  The facility uses at least 25 percent of water withdrawn exclusively for cooling purposes, measured on an average monthly basis. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 8 For the purposes of this rule, a new facility is a point source if it has, or is required to have, an NPDES permit. If a new facility is a point source that uses a cooling water intake structure, but does not meet the applicable design intake flow/ source waterbody threshold or the 25 percent cooling water use threshold, it would continue to be subject to permit conditions implementing CWA section 316( b) set by the permit director on a caseby case, best professional judgment basis. Section II. A of the preamble discusses what constitutes a " new" offshore oil and gas extraction facility for purposes of the section 316( b) Phase III rule. Requirements for new offshore oil and gas extraction facilities are specified in 40 CFR Subpart N.

Existing Phase III facilities, including manufacturing facilities, electric power producers with a design intake flow ( DIF) less than 50 MGD, and existing offshore oil and gas extraction facilities, are not subject to the national categorical requirements of this final rule. These facilities will continue to be regulated on a case by case basis using a permit director's best professional judgment.

Finally, this rule does not establish national categorical requirements for seafood processing vessels or offshore liquefied natural gas import terminals. Those facilities would be subject to permit conditions implementing CWA section 316( b) set by the permit director on a case by case, best professional judgment basis where the facility is a point source and uses a cooling water intake structure. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 9 A. What is a " New" Offshore Oil and Gas Extraction Facility for Purposes of the Section 316( b) Phase III Rule?

For purposes of this rule, new offshore oil and gas extraction facilities are those facilities that 1) are subject to the Offshore and Coastal Subcategories of the Oil and Gas Extraction Point Source Category Effluent Guidelines ( i. e., 40 CFR 435.10 Offshore Subcategory or 40 CFR 435.40 Coastal Subcategory); 2) that commence construction after [ INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]; and 3) that meet the definition of a " new facility" in 40 CFR 125.83. New offshore oil and gas extraction facilities were not subject to the Phase I new facility rule, but rather, are subject to requirements under this Phase III rule. Therefore,

the date for distinguishing new offshore oil and gas extraction facilities from existing ones is the effective date of the final Phase III rule. The definition of new facility may be found at 40 CFR 125.83.1 For a discussion of this definition, see 66 FR 65256, 65258

59, 65785 87 ( December 18, 2001) and 69 FR 41576, 41578 80 ( July 9, 2004).

1 The Phase I rule listed examples of facilities that would be " new" facilities and facilities that would " not be considered a ` new facility'" in two numbered paragraphs. These read as follows: "( 1) Examples of ` new facilities' include, but are not limited to: the following scenarios: ( i) A new facility is constructed on a site that has never been used for industrial or commercial activity. It has a new cooling water intake structure for its own use. ( ii) A facility is demolished and another facility is constructed in its place. The newlyconstructed facility uses the original facility's cooling water intake structure, but modifies it to increase the design capacity to accommodate the intake of additional cooling water. ( iii) A facility is constructed on the same property as an existing facility, but is a separate and independent industrial operation. The cooling water intake structure used by the original facility is modified by constructing a new intake bay for the use of the newly constructed facility or is otherwise modified to increase the intake capacity for the new facility. ( 2) Examples of facilities that would not be considered a ` new facility' include, but are not limited to, the following scenarios: ( i) A facility in commercial or industrial operation is modified and either continues to use its original cooling water intake structure or uses a new or modified cooling water intake structure. ( ii) A facility has an existing intake structure. Another facility ( a separate and independent industrial operation), is constructed on the same property and connects to the facility's cooling water intake structure behind the intake pumps, and the design capacity of the cooling water intake structure has not been increased. This facility would not be considered a ` new facility' Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 10 The determination of whether a facility is " new" or " existing" is focused on the point source discharger   not on the cooling water intake structure. In other words,

modifications or additions to the cooling water intake structure ( or even the total replacement of an existing cooling water intake structure with a new one) does not convert an otherwise unchanged existing facility into a new facility, regardless of the purpose of such changes. Rather, the determination as to whether a facility is new or existing focuses first on the point source itself, i. e., whether it is a greenfield facility or a stand alone facility.

B. What is " Cooling Water" and What is a " Cooling Water Intake Structure?"

This rule adopts the same definition of a " cooling water intake structure" that applies to new facilities under the final Phase I rule and existing facilities under the final Phase II rule. Under this final rule, a cooling water intake structure is defined as the total physical structure and any associated constructed waterways used to withdraw cooling water from waters of the Unites States. Under this definition, the cooling water intake structure extends from the point at which water is withdrawn from the surface water source up to and including the intake pumps. This rule also adopts the definition of " cooling water" used in the Phase I and Phase II rules: water used for contact or noncontact cooling, including water used for equipment cooling, evaporative cooling tower makeup, and dilution of effluent heat content. The definition specifies that the intended use of cooling water is to absorb waste heat rejected from the processes used or auxiliary operations on the facility's premises. Consistent with the Phase I and Phase II even if routine maintenance or repairs that do not increase the design capacity were performed on the intake structure." Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 11 rules, only the water used exclusively for cooling purposes is to be counted when determining whether the 25 percent threshold in § 125.131( a)( 2) is met.

C. Would My Facility Be Covered if It is a Point Source Discharger?

This rule applies only to facilities that have an NPDES permit or are required to obtain one. This is the same requirement EPA included in the Phase I and Phase II final rules ( see, 40 CFR 125.81( a)( 1), and 40 CFR 125.91( a)( 1), respectively). Requirements for complying with section 316( b) will continue to be applied through NPDES permits.

The Agency also recognizes that some facilities that have or are required to have an NPDES permit might not own and operate the intake structure that supplies their facility with cooling water. For example, facilities operated by separate entities might be located on the same, adjacent, or nearby property( ies); one of these facilities might take in cooling water and then transfer it to other facilities prior to discharge of the cooling water to a water of the United States. Section 125.92( c) of this rule addresses such a situation. It provides that use of a cooling water intake structure includes obtaining cooling water by any sort of contract or arrangement with one or more independent suppliers of cooling water if the supplier withdraws water from waters of the United States. This provision is intended to prevent new Phase III facilities from circumventing the requirements of this rule by creating arrangements to receive cooling water from an entity that is not itself subject to the requirements of Phase III. EPA expects that a facility that is otherwise subject to the requirements of Phase I and that is an independent supplier to a Phase III facility would still be subject to the requirements of Phase I. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 12 D. When Would a New Offshore Oil and Gas Extraction Facility Be Required to Comply With Any New 316( b) Requirements?

This final rule will become effective [ INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. After that date, new offshore oil and gas extraction Phase III facilities will need to comply when an NPDES permit containing requirements consistent with this rule is issued to the facility ( see § 125.132).

Under current NPDES program regulations, this will occur when a new NPDES permit is issued or when an existing NPDES permit is issued, reissued, or modified or revoked and reissued.

A discussion of the timing of implementation of this rule is provided in section VIII. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 13 III. Legal Authority, Purpose, and Background of This Final Regulation A. Legal Authority This action is issued under the authority of sections 101, 301, 308, 316, 401, 402,

501, and 510 of the Clean Water Act ( CWA), 33 U. S. C. 1251, 1311, 1318, 1326, 1341,

1342, 1361, and 1370. Publication of this action fulfills an obligation of the U. S.

Environmental Protection Agency ( EPA) under a consent decree in Riverkeeper, Inc. v.

Johnson, No. 93 Civ. 0314, ( S. D. N. Y).

B. Purpose of This Regulation Section 316( b) of the CWA provides that any standard established pursuant to section 301 or 306 of the CWA and applicable to a point source must require that the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact. This rule establishes requirements that apply to new offshore oil and gas extraction facilities that have a design intake flow threshold of greater than 2 MGD. This is the same design intake flow threshold for new facilities in the Phase I rule. To be covered, a facility would need to use at least 25 percent of the water withdrawn exclusively for cooling purposes and meet other specified criteria in order to be within the scope of the rule ( see section II   Scope and Applicability of Final Rule). In this action, EPA is not promulgating any new section 316( b) requirements for existing facilities. Therefore,

existing facilities that are not covered by the Phase II rule ( Phase II is described in section III. C. 5 of this preamble) must continue to meet requirements under Section 316( b) of the Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 14 CWA determined by the permitting authority on a case by case, best professional judgment ( BPJ) basis. See 40 CFR 125.90( b).

C. Background 1. The Clean Water Act The Federal Water Pollution Control Act, also known as the Clean Water Act ( CWA), 33 U. S. C. 1251 et seq., seeks to " restore and maintain the chemical, physical,

and biological integrity of the nation's waters." 33 U. S. C. 1251( a). The CWA establishes a comprehensive regulatory program, key elements of which are 1) a prohibition on the discharge of pollutants from point sources to waters of the United States, except as authorized by the statute; 2) authority for EPA or authorized States or Tribes to issue National Pollutant Discharge Elimination System ( NPDES) permits that regulate the discharge of pollutants; and 3) requirements for limitations in NPDES permits based on effluent limitations guidelines and standards and water quality standards.

Section 316( b) addresses the adverse environmental impact caused by the intake of cooling water, not discharges into water. Despite this special focus, the requirements of section 316( b) are closely linked to several of the core elements of the NPDES permit program established under section 402 of the CWA to control discharges of pollutants into navigable waters. For example, while effluent limitations apply to the discharge of pollutants by NPDES permitted point sources to waters of the United States, section 316( b) applies to facilities subject to NPDES requirements that withdraw water from Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 15 waters of the United States for cooling and that use a cooling water intake structure to do so.

Section 301 of the CWA prohibits the discharge of any pollutant by any person,

except in compliance with specified statutory requirements, including section 402.

Section 402 of the CWA provides authority for EPA or an authorized State or Tribe to issue an NPDES permit to any person discharging any pollutant or combination of pollutants from a point source into waters of the United States. Forty five States and one U. S. territory are currently authorized under section 402( b) to administer the NPDES permitting program. NPDES permits restrict the types and amounts of pollutants,

including heat, that may be discharged from various industrial, commercial, and other sources of wastewater. These permits control the discharge of pollutants primarily by requiring dischargers to meet effluent limitations established pursuant to section 301 or section 306. Effluent limitations may be based on Federal effluent limitations guidelines,

new source performance standards, or the best professional judgment of the permit writer.

Limitations based on these guidelines, standards, or best professional judgment are known as technology based effluent limits. Where technology based effluent limits are inadequate to ensure attainment of water quality standards applicable to the receiving water, section 301( b)( 1)( C) of the CWA requires permits to include more stringent limits based on applicable water quality standards. NPDES permits also routinely include monitoring and reporting requirements, and other conditions, including conditions to implement the requirements of section 316( b).

Section 510 of the CWA provides that, except as provided in the CWA, nothing in the Act shall preclude or deny the right of any State or political subdivision thereof to Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 16 adopt or enforce any requirement respecting control or abatement of pollution; except that if a limitation, prohibition or standard of performance is in effect under the CWA,

such State or political subdivision may not adopt or enforce any other limitation,

prohibition or standard of performance which is less stringent than the limitation,

prohibition or standard of performance under the Act. EPA interprets this to reserve for the States authority to implement requirements that are more stringent than the Federal requirements under State law. PUD No. 1 of Jefferson County v. Washington Dep't of Ecology, 511 U. S. 700, 705 ( 1994).

Under sections 301, 304, and 306 of the CWA, EPA issues effluent limitations guidelines and new source performance standards for categories of industrial dischargers based on the pollutants of concern discharged by the industry, the degree of control that can be attained using various levels of pollution control technology, consideration of economics, as appropriate to each level of control, and other factors identified in sections 304 and 306 of the CWA. EPA has promulgated regulations setting effluent limitations guidelines and standards under sections 301, 304, and 306 of the CWA for more than 50 industries. See 40 CFR Parts 405 through 471. EPA has established effluent limitations guidelines and standards that apply to most of the industry categories that use cooling water intake structures ( e. g., steam electric power generation, iron and steel manufacturing, pulp and paper manufacturing, petroleum refining, and chemical manufacturing).

Section 316( b) states, in full:

Any standard established pursuant to section 301 or section 306 of [ the Clean Water] Act and applicable to a point source shall require that the Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 17 location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact.

The phrase " best technology available" in CWA section 316( b) is not defined in the statute, but its meaning can be understood in light of similar phrases used elsewhere in the CWA. See Riverkeeper v. EPA, slip op. at 11 ( 2nd Cir. Feb. 3, 2004) ( noting that the cross reference in CWA section 316( b) to CWA section 306 " is an invitation to look to section 306 for guidance in discerning what factors Congress intended the EPA to consider in determining ` best technology available'" for new sources.)

In sections 301 and 306, Congress directed EPA to set effluent discharge standards for new sources based on the " best available demonstrated control technology"

and for existing sources based on the " best available technology economically achievable." For new sources, section 306( b)( 1)( B) directs EPA to establish " standards of performance." The phrase " standards of performance" under section 306( a)( 1) is defined as being the effluent reduction that is " achievable through application of the best available demonstrated control technology, processes, operating methods or other alternatives. . . . " This is commonly referred to as " best available demonstrated technology" or " BADT." For existing dischargers, section 301( b)( 1)( A) requires the establishment of effluent limitations based on " the application of best practicable control technology currently available." This is commonly referred to as " best practicable technology" or " BPT." Further, section 301( b)( 2)( A) directs EPA to establish effluent limitations for certain classes of pollutants " which shall require the application of the best available technology economically achievable." This is commonly referred to as " best Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 18 available technology" or " BAT." Section 301 specifies that both BPT and BAT limitations must reflect determinations made by EPA under CWA section 304. Under these provisions, the limitations on the discharge of pollutants from point sources are based upon the capabilities of the equipment or " control technologies" available to control those discharges.

The phrases " best available demonstrated technology" and " best available technology"   like " best technology available" in CWA section 316( b)   are not defined in the statute. However, section 304 of the CWA specifies factors to be considered in establishing the best practicable control technology currently available and best available technology.

For best practicable control technology currently available, the CWA directs EPA to consider:

the total cost of application of technology in relation to the effluent reduction benefits to be achieved from such application, and shall also take into account the age of the equipment and facilities involved, the process employed, the engineering aspects of the application of various types of control techniques, process changes, non water quality environmental impact ( including energy requirements), and such other factors as [ EPA] deems appropriate.

33 U. S. C. 1314( b)( 1)( B).

For " best available technology," the CWA directs EPA to consider: Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 19 the age of equipment and facilities involved, the process employed, the engineering aspects . . . of various types of control techniques, process changes, the cost of achieving such effluent reduction, non water quality environmental impacts ( including energy requirements), and such other factors as [ EPA] deems appropriate.

33 U. S. C. 1314( b)( 2)( B).

Section 316( b) expressly refers to section 301, and the phrase " best technology available" is very similar to " best available technology" in that section. These facts,

coupled with the brevity of section 316( b) itself, prompted EPA to look to section 301 and, ultimately, section 304 for guidance in determining the " best technology available to minimize adverse environmental impact" of cooling water intake structures for Phase III existing facilities.

By the same token, however, there are significant differences between section 316( b) and sections 301 and 304. See Riverkeeper, Inc. v. United States Environmental Protection Agency, slip op. at 13, ( 2nd Cir. Feb. 3, 2004) (" not every statutory directive contained [ in sections 301 and 306] is applicable" to a section 316( b) rulemaking).

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 Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 20 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 rulemaking, EPA therefore interprets CWA 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. Accordingly, national categorical requirements for cooling water intake structures may be based on a determination that the technology bases for these are technically available, economically practicable, and justified by the benefits to the source waterbody. Taking into account these same factors,

as well as the unacceptable cost to benefit ratio, and the particular concern in ensuring benefits justify costs when manufacturing facilities are involved, EPA has decided not to promulgate national categorical requirements for existing Phase III facilities, but rather to allow the establishment of best technology available for minimizing adverse environmental impact for existing facilities not covered by the Phase II rule based on the permitting authority's case by case, best professional judgment.

EPA's authority to direct permit writers to use their case by case, best professional judgment ( BPJ) for determining the best technology available for minimizing adverse environmental impact ( BTA) for Phase III existing facilities derives Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 21 from section 316( b). 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." Although EPA has chosen under 316( b) to promulgate national categorical performance standards applicable to certain classes of point sources using cooling water intake structures, see 40 CFR Subpart J ( existing power generating facilities), and Subpart N ( new offshore oil and gas facilities),

the statute does not preclude EPA from determining BTA on a site specific basis.

Indeed, the U. S. Court of Appeals for the Second Circuit, in upholding virtually the entire new 316( b) Phase I rule, specifically noted that section 316( b) does not compel EPA to regulate cooling water intake structures based on either one overarching regulation,

categories of sources, or on a case by case basis. Riverkeeper, 358 F. 3d at 203. In fact,

EPA and state permitting authorities have been implementing Section 316( b) on a caseby case basis for over 25 years ( see Section III. C. 3 below), and courts have recognized this practice as consistent with the statute. See Hudson Riverkeeper Fund v. Orange &

Rockland Utils., Inc., 835 F. Supp. 160, 165 ( S. D. N. Y. 1993) (" This leaves to the Permit Writer an opportunity to impose conditions on a case by case basis, consistent with the statute . . . .").

Consistent with this, in both the Phase I and II rules, EPA uses a case by case,

BPJ permitting regime for facilities that do not meet the applicability criteria for EPA's national categorical rules. See 40 CFR 125.81( a), 125.90( b). In Riverkeeper, this provision of the Phase I rule was upheld by the Second Circuit. 358 F. 3d at 203 ("[ w] e see no textual bar in sections 306 or 316( b) to regulating below threshold structures on a case by case basis."). Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 22 EPA bases its decision to rely on BPJ permitting for the Phase III facilities on its consideration of the direct costs of the proposed national categorical regulation in comparison to the benefits the rule would produce. EPA's authority to consider costs as well as benefits in making that decision derives from section 316( b).

Section 316( b) of the CWA states that cooling water intake structures must " reflect the best technology available for minimizing adverse environmental impact." In this action, EPA has chosen to evaluate environmental impacts in terms of benefits.

Because section 316( b) is silent as to the factors EPA should consider in determining the best technology available to minimize 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 rulemaking authority to EPA); see id. at 195 ( appellate courts give EPA " considerable discretion to weigh and balance the various factors" where the statute does not state what weight should be accorded) ( citation omitted).

Section 316( b) authorizes EPA to consider the benefits that a technology based standard would produce in order to ensure that the standard will " minimize adverse environmental impact." Section 316( b) does not define minimized adverse environmental impact, but rather it leaves its interpretation to EPA's judgment. In the context of the Phase III action, EPA has concluded that the relationship between costs and benefits is an important component of deciding whether to proceed with a rule or whether the choice of BTA should be left to case by case decisionmaking. In EPA's view, when the costs of establishing a national categorical rule substantially outweigh the Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 23 benefits of such a rule, a national categorical section 316( b) rule is not the best tool for implementing section 316( b)' s direction.

2. Consent Decree This final action fulfills EPA's obligation to comply with the Second Amended Consent Decree, which was filed on November 25, 2002, in the United States District Court, Southern District of New York, in Riverkeeper, Inc. v. Johnson, No. 93 Civ 0314 ( AGS). That case was brought against EPA by a coalition of individuals and environmental groups. The original Consent Decree, filed on October 10, 1995, provided that EPA was to propose regulations implementing section 316( b) by July 2, 1999, and take final action with respect to those regulations by August 13, 2001. Under subsequent interim orders, the Amended Consent Decree filed on November 22, 2000, and the Second Amended Consent Decree, EPA divided the rulemaking into three phases. EPA took final action promulgating a rule governing cooling water intake structures used by new facilities ( Phase I) on November 9, 2001 ( 66 FR 65255, December 18, 2001). EPA took final action promulgating a rule governing cooling water intake structures used by large existing power producers ( Phase II) on February 16, 2004 ( 69 FR 41576, July 9,

2004). The consent decree further requires that EPA propose by November 1, 2004, and take final action by June 1, 2006, regulations applicable to the following categories:

utility and non utility power producers not covered by the Phase II regulations, pulp and paper manufacturing, petroleum and coal products manufacturing, chemical and allied products manufacturing, and primary metals manufacturing ( Phase III). EPA proposed Phase III regulations on November 1, 2004 ( 69 FR 68444) and this final action fulfills EPA's obligations for Phase III. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 24 3. What Other EPA Rulemakings and Guidance Address Cooling Water Intake Structures?

In April 1976, EPA published a final rule under section 316( b) that addressed cooling water intake structures. 41 FR 17387 ( April 26, 1976), see also the proposed rule at 38 FR 34410 ( December 13, 1973). The rule added a new § 401.14 to 40 CFR Chapter I that reiterated the requirements of CWA section 316( b). It also added a new part 402,

which included three sections: 1) § 402.10 ( Applicability), 2) § 402.11 ( Specialized definitions), and 3) § 402.12 ( Best technology available for cooling water intake structures). Section 402.10 stated that the provisions of part 402 applied to " cooling water intake structures for point sources for which effluent limitations are established pursuant to section 301 or standards of performance are established pursuant to section 306 of the Act." Section 402.11 defined the terms " cooling water intake structure,"

" location," " design," " construction," " capacity," and " Development Document." Section 402.12 included the following language:

The information contained in the Development Document shall be considered in determining whether the location, design, construction, and capacity of a cooling water intake structure of a point source subject to standards established under section 301 or 306 reflect the best technology available for minimizing adverse environmental impact.

In 1977, fifty eight electric utility companies challenged those regulations,

arguing that EPA had failed to comply with the requirements of the Administrative Procedure Act ( APA) in promulgating the rule. Specifically, the utilities argued that EPA had neither published the Development Document in the Federal Register nor properly Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 25 incorporated the document into the rule by reference. The United States Court of Appeals for the Fourth Circuit agreed and, without reaching the merits of the regulations themselves, remanded the rule. Appalachian Power Co. v. Train, 566 F. 2d 451 ( 4th Cir.

1977). EPA later withdrew part 402. 44 FR 32956 ( June 7, 1979). The regulation at 40 CFR 401.14, which reiterates the statutory requirement, remains in effect.

Since the Fourth Circuit remanded EPA's section 316( b) regulations in 1977,

NPDES permit authorities have made decisions implementing section 316( b) on a caseby case, site specific basis. EPA published draft guidance addressing section 316( b)

implementation in 1977. See Draft Guidance for Evaluating the Adverse Impact of Cooling Water Intake Structures on the Aquatic Environment: Section 316( b) P. L. 92

500 ( U. S. EPA, 1977). This draft guidance described the studies recommended for evaluating the impact of cooling water intake structures on the aquatic environment and recommended a basis for determining the best technology available for minimizing adverse environmental impact. The 1977 section 316( b) draft guidance states, " The environmental intake interactions in question are highly site specific and the decision as to best technology available for intake design, location, construction, and capacity must be made on a case by case basis." ( Section 316( b) Draft Guidance, U. S. EPA, 1977, p.

4). This case by case approach was also consistent with the approach described in the 1976 Development Document referenced in the remanded regulation.

The 1977 section 316( b) draft guidance suggested a general process for developing information needed to support section 316( b) decisions and presenting that information to the permitting authority. The process involved the development of a sitespecific study of the environmental effects associated with each facility that uses one or Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 26 more cooling water intake structures, as well as consideration of that study by the permitting authority in determining whether the facility must make any changes for minimizing adverse environmental impact. Where adverse environmental impact is present, the 1977 draft guidance suggested a stepwise approach that considers screening systems, size, location, capacity, and other factors.

Although the draft guidance described the information that should be developed,

key factors that should be considered, and a process for supporting section 316( b)

determinations, it did not establish uniform technology based national standards for best technology available for minimizing adverse environmental impact. Rather, the draft guidance left the decisions on the appropriate location, design, capacity, and construction of cooling water intake structures to the permitting authority. Under this framework, the Director determined whether appropriate studies have been performed, whether a given facility has minimized adverse environmental impact, and what, if any, technologies may be required.

4. Phase I New Facility Rule On November 9, 2001, EPA took final action on Phase II regulations governing cooling water intake structures at new facilities. 66 FR 65255 ( December 18, 2001). On December 26, 2002, EPA made minor changes to the Phase I regulations. 67 FR 78947.

The final Phase I new facility rule ( 40 CFR Part 125, Subpart I) establishes requirements applicable to the location, design, construction, and capacity of cooling water intake structures at new facilities that withdraw greater than two ( 2) MGD and use at least twenty five ( 25) percent of the water they withdraw solely for cooling purposes. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 27 With the new facility rule, EPA promulgated national minimum requirements for the location, design, capacity, and construction of cooling water intake structures at new facilities. The final new facility rule establishes a reasonable framework that creates certainty for permitting of new facilities, while providing significant flexibility to take site specific factors into account.

EPA specifically excluded new offshore oil and gas extraction facilities from the Phase I new facility rule, but committed to consider establishing requirements for such facilities in the Phase III rulemaking. 66 FR 65338 ( December 18, 2001).

5. Phase II Existing Facility Rule On February 16, 2004, EPA took final action on regulations governing cooling water intake structures at certain existing power producing facilities. 69 FR 41576 ( July 9, 2004). The final Phase II rule applies to existing facilities that are point sources; that,

as their primary activity, both generate and transmit electric power or generate electric power for sale to another entity for transmission; that use or propose to use cooling water intake structures with a total design intake flow of 50 MGD or more to withdraw cooling water from waters of the United States; and that use at least 25 percent of the withdrawn water exclusively for cooling purposes.

Under the Phase II rule, EPA established performance standards for the reduction of impingement mortality and entrainment ( see 40 CFR 125.94). The performance standards consist of ranges of reductions in impingement mortality and/ or entrainment ( e. g., reduce impingement mortality by 80 to 95 percent and under certain conditions entrainment by 60 to 90 percent). These performance standards reflect the best technology available for minimizing adverse environmental impacts at facilities covered Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 28 by the Phase II rule. The type of performance standard applicable to a particular facility ( i. e., reductions in impingement mortality only or impingement mortality and entrainment) is based on several factors, including the facility's location ( i. e., source waterbody), rate of use ( capacity utilization rate), and the proportion of the waterbody withdrawn. The Phase II regulations address more than 90 percent of total cooling water intake flows in the United States.

6. Public Participation EPA worked extensively with stakeholders from the industry, public interest groups, State agencies, and other Federal agencies in the development of this rule. EPA included industry groups, environmental groups, and other government entities in the development, testing, refinement, and completion of the section 316( b) survey, which was used as a primary source of data for Phase III. As discussed in section III of this preamble, the survey, " Information Collection Request, Detailed Industry Questionnaires:

Phase II Cooling Water Intake Structures & Watershed Case Study Short Questionnaire,"

was initiated in 1997, and was used to collect data during 2000.

EPA sponsored a Symposium on Cooling Water Intake Technologies to Protect Aquatic Organisms, on May 6  7, 2003. This symposium brought together professionals from Federal, State, and Tribal regulatory agencies; industry; environmental organizations; engineering consulting firms; science and research organizations;

academia; and others concerned with mitigating harm to the aquatic environment by cooling water intake structures. Efficacy and costs of various technologies to mitigate impacts to aquatic organisms from cooling water intake structures, as well as research and other future needs, were discussed. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 29 During the development of this regulation, EPA met several times with trade associations whose members would be subject to Phase III requirements. EPA also conducted Phase III specific data collection activities, including a study of entrainment at Phase III facilities, contacting Phase III facilities to request biological studies and conducting an industry survey of offshore oil and gas extraction facilities and seafood processing vessels.

In developing requirements for new offshore oil and gas extraction facilities, EPA drew on its experience from the offshore oil and gas, the coastal oil and gas, and the synthetic drilling fluids effluent limitations guidelines, which included extensive public outreach, meetings, public comment periods, industry surveys, and economic analysis and modeling of representative oil and gas operations as detailed in 61 FR 66086 66130 and 66 FR 6849 6919.

Finally, EPA convened a Small Business Advocacy Review ( SBAR) panel ( in accordance with the Regulatory Flexibility Act section 609( b) as amended by the Small Business Regulatory and Enforcement Fairness Act) to provide information to small entities and receive feedback during the Phase III rulemaking process. EPA hosted a prepanel outreach meeting for small entities potentially subject to Phase III on January 22,

2004. The SBAR panel held an outreach meeting with small entity representatives ( SERs) on March 16, 2004. Based on the information gathered from the participating small entities during these outreach meetings and subsequent correspondence, the SBAR panel produced a final report to the EPA Administrator on April 27, 2004. Results of the final report were considered in the development of the Phase III rule. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 30 These coordination efforts and all of the meetings described in this section, as well as the comments submitted on the Phase I and II section 316( b) rules and EPA's response to these comments, are documented or summarized in the dockets for these three rules. The Administrative Record for this rule includes all materials from the Phase I, Phase II, and Phase III section 316( b) rule dockets. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 31 IV. Environmental Impacts Associated With Cooling Water Intake Structures EPA has determined that there are multiple types of environmental impacts that can be associated with Phase III facilities, depending on conditions at an individual facility's site. These impacts include organism entrainment and impingement, which can contribute to impacts to threatened and endangered species; reductions in ecologically critical aquatic organisms, including important elements of an ecosystem's food chain;

diminishment of organism populations' compensatory reserves; losses to populations,

including reductions of indigenous species population levels, commercial fisheries, and recreational fisheries; and stresses to overall communities and ecosystems as evidenced by reductions in diversity, changes in species composition, or other changes in ecosystem structure or function. ( See discussion at 69 FR 68461 66.)

The withdrawal of water affects a variety of aquatic organisms including phytoplankton ( tiny, free floating photosynthetic organisms suspended in the water column), zooplankton ( small aquatic animals, including fish eggs and larvae, which may consume phytoplankton and other zooplankton), macroinvertebrates, shellfish, and fish.

Other organisms, including reptiles, birds, and mammals can also be impinged or entrained.

Impingement takes place when organisms are trapped against a cooling water intake structure, particularly screening materials, by the force of water being drawn through the intake structure. The velocity of the water intake by the structure can remove fish scales or other organism structures, prevent proper gill function, or otherwise physically harm or cause the death of impinged organisms through exhaustion, starvation,

asphyxiation, and descaling or other injury. Death from impingement (" impingement Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 32 mortality'') can take place while organisms are impinged on an intake structure or it can take place after organisms have escaped impingement and have returned to a waterbody.

An organism can die despite escaping impingement because of injuries it receives during the impingement process.

Entrainment occurs when organisms are drawn through a cooling water intake structure into a facility's cooling system. Organisms that become entrained are typically relatively small aquatic organisms, including many early life stages of fish and shellfish.

As entrained organisms pass through a facility's cooling system they can be subject to mechanical, thermal, and/ or, chemical stress. Sources of stress include physical impacts in the pumps and condenser tubing, pressure changes caused by diversion of the cooling water into the plant or by the hydraulic effects of the condensers, shear stress, thermal shock in the condenser and discharge tunnel, and chemical toxic effects from cooling system antifouling agents such as chlorine. Similar to impingement mortality, death from entrainment can occur during entrainment or at some time after the entrainment and return of entrained organisms to a waterbody.

Environmental Impacts from New Offshore Oil and Gas Extraction Facility Cooling Water Intake Structures Offshore oil and gas extraction facilities currently operate off the coasts of California and Alaska and throughout the Gulf of Mexico. Most activity currently takes place in the Gulf of Mexico. EPA expects that most new facility activity will also take place in this region. ( See Phase III TDD; DCN [ 9 XXXX], document ID OW 2004

0002[ XXXX], pp. 3[ XXX] to 3[ XXX]). Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 33 While EPA is not aware of any studies that directly examine or document impingement mortality and entrainment by offshore oil and gas extraction facilities,

numerous studies show that offshore marine environments provide habitat for a number of species of fish, shellfish, and other aquatic organisms. Many of these species have life stages that are small and planktonic or have limited swimming ability. These life stages are potentially vulnerable to entrainment by cooling water intake structures. Larger life stages are potentially vulnerable to impingement. The introduction of cooling water intake structures into the offshore habitat in which these organisms live creates the potential for impingement and entrainment of these organisms.

The densities of organisms in the immediate vicinity of offshore oil and gas extraction facilities relative to densities in estuaries and other nearshore coastal waters is not well characterized. In the Phase III NODA ( 70 FR 71059), EPA presented analysis of additional data from the general regions in which existing offshore oil and gas extraction facilities operate and where new facilities might operate in the future in order to better characterize the potential for impingement and entrainment by these facilities.

EPA obtained data on densities of ichthyoplankton ( planktonic fish eggs and larvae) in the Gulf of Mexico from the Southeast Area Monitoring and Assessment Program ( SEAMAP). 2,3 This long term sampling program collects information on the density of fish eggs and larvae throughout the Gulf of Mexico. EPA analyzed the SEAMAP data to determine average ichthyoplankton densities in the Gulf of Mexico for 2 Adam Rettig and Blaine Snyder, Tetra Tech, Inc. Memorandum to Ashley Allen, EPA. A summary of ichthyoplankton presence and abundance in the Gulf of Mexico, as part of an assessment of the potential for entrainment by offshore oil and gas facilities. 2005. DCN 8 5220. Document ID OW 2004 0002 951. 3 Adam Rettig and Blaine Snyder, Tetra Tech, Inc. Memorandum to Ashley Allen, EPA. A Summary of Fish Egg Presence and Abundance in the Gulf of Mexico, as Part of an Assessment of the Potential for Entrainment by Offshore Oil and Gas Facilities. DCN 9 5200. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 34 the period of time for which sampling data was available ( 1982 2003). Actual conditions at any one location and at any one point in time vary from the calculated averages.

EPA's analysis of the SEAMAP data indicates that ichthyoplankton occur throughout the Gulf of Mexico. On average, densities are highest at sampling stations in the shallower regions of the Gulf of Mexico and lowest at sampling stations in the deepest regions. The overall range of average larval fish densities was calculated to be 25 450+ organisms/ 100m3.4 The wide range of ichthyoplankton densities seen in the offshore Gulf of Mexico region falls within the range of larval fish densities documented in freshwater and coastal water bodies in various coastal and inland regions of the United States. 5 Over 600 different fish taxa were identified in the SEAMAP samples, including species of commercial and recreational utility.

In the area surrounding existing offshore oil and gas extraction facilities off the California coast, the California Cooperative Oceanic Fisheries Investigations ( CalCOFI)

program has gathered data on densities of ichthyoplankton and other organisms.

According to the CalCOFI and other research programs, a number of fish and shellfish species, including species of commercial and recreational value, are known to live and spawn in this region. EPA does not know of similarly extensive sampling programs for the Alaska offshore region. However, a number of fish and shellfish species, including species of commercial and recreational value, are known from various research programs to live and spawn in the offshore regions of Alaska where oil and gas extraction activities 4 Average larval fish densities are greater than 450 organisms/ 100 m3 at sampling stations in waters less than 50 meters deep. Average larval fish densities gradually decrease to 100 organisms/ 100 m3 as sampling station depth at location increases to 150 meters. At stations in waters greater than 150 meters deep, larval fish densities are relatively uniform and fall between 25 organisms/ 100 m3 and 100 organisms/ 100 m3. See Document ID OW 2004 0002 951. 5 A. L. Allen ( EPA). Memorandum to EPA Docket OW 2004 0002. Summary of Information on Ichthyoplankton Densities in Various Aquatic Ecosystems in the United States. DCN 8 5240. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 35 currently take place or may take place in the future. 6 The eggs and larvae of many species found in the offshore regions of California and Alaska are planktonic and could therefore be vulnerable to entrainment by a facility's cooling water intake structure operating in these regions. Larger life stages ( e. g., juveniles and adults) could be vulnerable to impingement.

The densities of organisms in the immediate vicinity of offshore oil and gas extraction facilities may differ from those suggested by analysis of SEAMAP and other collections of data that characterize typical organism densities in marine waters.

Offshore oil and gas extraction facilities have been shown to attract and concentrate aquatic organisms in the immediate vicinity of the underwater portions of their structures.

A variety of species of pelagic fish have been found to gather around the underwater portions of offshore oil and gas extraction facilities within short time periods after the facilities' appearance in the water column. If a facility remains in one place for a sufficient length of time, some aquatic organism species take up residence directly upon the underwater structure and form reef like communities. The increased number of organisms living near the underwater portion of facilities where cooling water intake structures are located increases the potential for impingement mortality and entrainment of those organisms. The extent to which the increased numbers of aquatic organisms represents an overall increase in organism populations, rather than a concentration of organisms from surrounding areas, is not known. ( For additional information, see DCN 7 0013.)

6 A. L. Allen ( EPA). Memorandum to EPA Docket OW 2004 0002. Summary of Information on Fish Species that Live and Spawn off the Coasts of Alaska and California in the Vicinity of Offshore Oil and Gas Production Areas. DCN 8 5260. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 36 EPA believes the data it has gathered on organisms that inhabit offshore environments indicate the potential for their entrainment and impingement by cooling water intake structures associated with new offshore oil and gas extraction facilities.

Given this potential for impingement and entrainment, EPA believes that these new facilities have the potential to create multiple types of undesirable and unacceptable impacts. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 37 V. Description of the Rule Section 316( b) of the CWA requires EPA to ensure that the location, design,

construction, and capacity of cooling water intake structures reflect the best technology available to minimize adverse environmental impact. Such impacts include death or injury to aquatic organisms by impingement ( being pinned against screens or other parts of a cooling water intake structure) or entrainment ( being drawn into cooling water systems and subjected to thermal, physical or chemical stresses).

This Phase III rulemaking addresses new offshore and coastal oil and gas extraction facilities that are designed to withdraw at least 2 MGD. New offshore oil and gas extraction facilities were specifically excluded from the scope of the Phase I new facility rule so that EPA could gather additional data on these facilities ( see 66 FR 65311). This regulation reflects a decision not to promulgate a national rule for existing Phase III facilities. See section II of this preamble for more information.

A. Summary of Proposed Rule The proposed rule would establish national requirements for new offshore and coastal oil and gas extraction facilities. EPA has established a two track approach to offer maximum flexibility. Track I establishes uniform requirements based on facility cooling water intake capacity. Track II provides dischargers with the opportunity to establish that alternative requirements will achieve comparable performance. Under Track I, these facilities would be required to design their cooling water intake structures to meet a through screen velocity of 0.5 feet per second ( ft/ s) or less and, if they are located in estuaries or tidal rivers, they would also be required to meet proportional flow Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 38 requirements. Facilities would need to implement technologies and/ or operational measures for minimizing impingement if there are specific impact concerns ( e. g.,

threatened or endangered species, critical habitat, migratory, sport, or commercial species). Facilities that do not employ sea chests ( openings in the hull of a vessel for withdrawing cooling water) and are fixed facilities would be required to use fish protection technologies and/ or operational measures to minimize entrainment.

As with other new facilities covered by the Phase I rule, fixed facilities could comply under Track II which allows the facility to demonstrate that alternative technologies ( in this case, alternatives to meeting the 0.5 ft/ s velocity standard, or for fixed facilities without sea chests, the requirement to minimize entrainment) provide comparable protection. EPA did not propose to extend this provision to mobile facilities,

as EPA did not believe that there were alternatives to the low velocity standard for mobile facilities.

EPA also proposed national categorical requirements for Phase III existing facilities that use or propose to use a cooling water intake structure to withdraw water for cooling purposes from waters of the United States and that have or are required to have a National Pollutant Discharge Elimination System ( NPDES) permit issued under section 402 of the CWA. As proposed, Phase III existing facilities would have included manufacturing facilities on all waterbody types who have a design intake flow of 50 MGD or greater, and that use at least 25 percent of the water it withdraws exclusively for cooling purposes. EPA co proposed design intake flow thresholds of 200 MGD on all waterbody types, as well as 100 MGD for facilities located on sensitive waterbodies ( i. e.,

estuaries, tidal rivers, coastal waters, or the Great Lakes). Facilities with intakes below Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 39 these thresholds would have continued to be subject to 316( b) requirements set by the Director on a case by case basis.

For existing Phase III facilities meeting the selected threshold, the proposed rule would have established national performance standards for the reduction of impingement mortality and, when appropriate, entrainment at land based Phase III existing facilities ( i. e., non offshore facilities). The type of performance standard applicable to a particular facility ( i. e., reductions in impingement only or impingement and entrainment) was based on several factors, including the facility's location ( i. e., source waterbody) and the proportion of the waterbody withdrawn. Under the proposed rule, the performance standards could be met, in whole or in part, by using design and construction technologies, operational measures, or restoration measures.

B. Final Rule for New Offshore Oil and Gas Extraction Facilities This rule establishes categorical section 316( b) requirements for new offshore oil and gas extraction facilities that have a design intake flow of 2 MGD or greater and that withdraw at least 25 percent of the water exclusively for cooling purposes and meet other applicability criteria ( see § 125.131). Under this final rule, EPA has established requirements for the reduction of impingement mortality ( see § 125.134) at new offshore oil and gas extraction facilities. In this final rule, fixed facilities7 with sea chests and all non fixed ( or " mobile") facilities are not required to comply with standards for 7 A fixed facility is defined as a bottom founded offshore oil and gas extraction facility permanently attached to the seabed or subsoil of the outer continental shelf ( e. g., platforms, guyed towers, articulated gravity platforms) or a buoyant facility securely and substantially moored so that it cannot be moved without a special effort ( e. g., tension leg platforms, permanently moored semi submersibles) and which is not intended to be moved during the production life of the well. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 40 entrainment. Fixed facilities may choose either Track I or Track II to comply with impingement mortality performance standards. Non fixed facilities must comply with the 0.5 feet per second through screen design intake flow velocity performance standard for impingement mortality of Track I. In addition, the Director may determine additional design and construction technologies to minimize impingement mortality are necessary where there are protected species or critical habitat for those species, or species of concern within the hydrologic zone of influence of the cooling water intake structure, or based on other information from fishery management services or agencies, that the proposed facility, after meeting the technology based performance requirements, would still contribute unacceptable stress to protected species or critical habitat of those species,

or species of concern.

As described in ' 125.135, facilities have the opportunity to conduct a cost cost test and provide data to determine if compliance with the Subpart N requirements would result in compliance costs wholly out of proportion to those EPA considered in establishing the requirement, or would result in significant adverse impacts on local water resources other than impingement or entrainment, or significant adverse impacts on energy markets. In this case, alternative requirements may be imposed in the permit. See the Phase I final preamble for a more detailed explanation of this cost cost test at 66 FR 65322, which is different than the cost cost test for Phase II facilities.

EPA's data suggest that the only physical technology controls for entrainment at facilities with sea chests and non fixed ( i. e., mobile) facilities would entail installation of equipment projecting beyond the hull of the vessel or facility. Such controls may not be practical or feasible since the configuration may alter fluid dynamics and impede safe Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 41 seaworthy travel, even for new facilities that could avoid the challenges of retrofitting control technologies. As such, EPA is not promulgating national entrainment controls ( e. g., use of planar wedgewire screens) for fixed facilities with sea chests or mobile facilities in this final rule.

C. Existing Facilities with Cooling Water Intake Structures For existing Phase III facilities, EPA determined that uniform national technology based standards are not the most effective way to address cooling water intake structures existing Phase III facilities because the use of national categorical requirements would result in an unacceptable cost benefit ratio. Instead, EPA believes that it is better at this time to utilize the existing National Pollutant Discharge Elimination System ( NPDES) program, which implements section 316( b) on a case by case, best professional judgment basis. This rule does not alter the regulatory requirements for facilities subject to the Phase I or Phase II regulations.

This rule clarifies that any cooling water intake structure not subject to the national categorical requirements in Phase I, Phase II, or Phase III of EPA's 316( b)

regulation development is still subject to section 316( b). For example, existing power generators with a design intake flow of less than 50 MGD, new seafood processing vessels, and existing manufacturers are not subject to national section 316( b) categorical requirements, but these facilities continue to be subject to 316( b) requirements set by the Director on a case by case basis. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 42 VI. Basis for the Final Rule Decision This section discusses EPA's basis for final requirements applicable to new offshore oil and gas extraction facilities and EPA's decision to apply case by case, best professional judgement permit conditions implementing CWA section 316( b) at existing Phase III facilities.

A. Why is EPA Promulgating National Requirements for New Offshore and Coastal Oil and Gas Extraction Facilities?

After EPA proposed the Phase I rule for new facilities ( 65 FR 49060, August 10,

2000), the Agency received adverse comment from operators of offshore and coastal ( collectively " offshore") drilling facilities concerning the limited information about their cooling water intakes, associated impingement mortality and entrainment, costs of technologies, or achievability of the controls proposed by EPA. On May 25, 2001, EPA published a Notice of Data Availability ( NODA) for Phase I that, in part, sought additional data and information about mobile offshore and coastal drilling facilities ( see 66 FR 28857). In the Phase I final rule, EPA committed to " propose and take final action on regulations for new offshore oil and gas extraction facilities, as defined at 40 CFR 435.10 and 40 CFR 435.40, in the Phase III section 316( b) rule." See 66 FR 65256. This regulation establishes national requirements for new offshore oil and gas extraction facilities that meet the applicability requirements in § 125.131.

Requirements for new offshore oil and gas extraction facilities are specified in a new Subpart N of Part 125. New onshore oil and gas extraction facilities are currently regulated by section 316( b) Phase I requirements if these facilities meet the applicability Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 43 criteria of the 316( b) Phase I regulations. As described in more detail below, the requirements for the offshore facilities are similar to some, but not all, of the requirements contained in the Phase I rule applicable to other new facilities. For example, the Phase I requirement to reduce intake flow commensurate with a closedcycle recirculating cooling system does not apply to these offshore facilities.

This rule distinguishes between new offshore oil and gas facilities that are " fixed," and those that are not fixed. For " fixed" facilities, the rule further distinguishes between those with sea chests and those without. Under this rule, new offshore oil and gas extraction facilities that meet the applicability criteria in § 125.131 and that employ sea chests as cooling water intake structures and are fixed facilities would have to comply with the requirements in § 125.134( b)( 1)( ii). These requirements address intake flow velocity, percentage of the source waterbody withdrawn ( if applicable), specific impact concerns ( e. g., threatened or endangered species, critical habitat, migratory or sport or commercial species), required information submission, monitoring, and recordkeeping.

Under this rule, new offshore oil and gas extraction facilities that meet the applicability criteria in § 125.131, that do not employ sea chests as cooling water intake structures, and are fixed facilities would have to comply with the requirements in § 125.134( b)( 1)( i).

The one additional requirement for these facilities is § 125.134( b)( 5), which requires the selection and implementation of design and construction technologies or operational measures to minimize entrainment of entrainable life stages of fish or shellfish. Fixed facilities can also choose to comply through Track II, which allows a site specific demonstration that alternative requirements would produce comparable levels of impingement mortality and entrainment reduction. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 44 New offshore oil and gas facilities that are not fixed facilities would have to comply with the regulations at § 125.134( b)( 1)( iii), which address intake flow velocity,

specific impact concerns ( e. g., threatened or endangered species, critical habitat,

migratory or sport or commercial species), required information submission, monitoring,

and recordkeeping. Track II is not available to non fixed ( mobile) facilities because nonfixed facilities, which are expected to operate at multiple locations, would not be able to perform a site specific demonstration. For this same reason, EPA has dropped some of the other site dependent requirements for non fixed facilities ( e. g., source waterbody flow information).

EPA has limited information on specific environmental impacts associated with the use of cooling water intake structures at new offshore oil and gas extraction facilities but believes the potential for such impacts is sufficient to warrant including requirements for new offshore oil and gas extraction facilities in this rule ( see section IV for more detailed discussion). SEAMAP data for the Gulf of Mexico identified over 600 different fish taxa and indicate that ichthyoplankton occurs throughout the Gulf of Mexico, with densities highest ( e. g., average densities greater than 450 organisms/ 100 m3) at sampling stations in the shallower regions ( less than 50 meters deep) of the Gulf, and lower in deeper waters. ( 70 FR 71,059   71,060). Most offshore oil and gas facilities operate any cooling water intake structure in these near surface ( e. g., 20   100 feet deep) waters,

rather than in deeper waters. ( TDD, Chap. 3, Sec. III). As stated earlier in this preamble,

offshore oil and gas extraction facilities have been shown to attract and concentrate aquatic organisms in the immediate vicinity of the underwater portions of their structures.

Data also indicate the presence of aquatic organisms identified off the California and Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 45 Alaska coasts, both additional areas of offshore oil and gas production. In addition,

although such technologies are not generally in use at all existing offshore oil and gas extraction facilities, technologies are in use and are available to new facilities in this subcategory to meet the requirements as described below.

Some offshore oil and gas extraction facilities employ an underwater compartment within the facility or vessel hull or pontoon through which sea water is drawn in or discharged, often called a " sea chest." A passive screen ( strainer) is often set along the flush line of the sea chest. Pumps draw seawater from open pipes in the sea chest cavity for a variety of purposes ( e. g., cooling water, fire water, and ballast water).

These intakes are normally the only source of cooling water for the facility; therefore, it is crucial to the operation of these facilities that the intake structures be kept clean and clear of fish, jellyfish, plastic bags, and other debris. To accomplish this, these intake structures can be, and have been, designed for low intake velocity ( i. e., less than 0.5 feet per second) and/ or include fish protection equipment. See the Technical Development Document for details.

As outlined in Alaska's oil and gas leasing requirements ( see [ DCN 9 XXXX]),

oil and gas extraction facilities in Alaskan State waters are currently subject to an impingement control velocity limit of 0.1 feet per second ( i. e., more stringent than EPA's design requirement of 0.5 feet per second in the Phase I new facility rule to minimize impingement mortality of aquatic organisms). These State regulations suggest that impingement controls that would meet the velocity requirements of this rule are demonstrated as available for offshore oil and gas extraction facilities in Alaskan or similar waters. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 46 However, facilities using sea chests may have few, if any, opportunities to meet the entrainment control requirements applicable to facilities subject to the Phase I rule. A 2003 literature survey by Mineral Management Services ( DCN 7 0012) identified no evidence of entrainment controls successfully fitted to offshore oil and gas extraction vessels with sea chests such as drill ships, jack ups, MODUs, and barges. EPA's data suggests that the only physical technology controls available for entrainment at facilities with sea chests would entail installation of equipment projecting beyond the hull of the vessel. Such controls may not be feasible due to facility design requirements, even for new facilities that could avoid the challenges of retrofitting control technologies.

EPA also considered whether all new offshore vessels could be constructed without employing sea chests. A technology must prove to be practicable to be a viable alternative to current technology. In this case, a viable alternative to a sea chest is any alternative configuration/ technology successfully implemented at existing facilities,

including those in other manufacturing industries, with similar seawater intake structures.

EPA data suggest the only demonstrated design for drill ships and semi submersible MODUs is to use sea chests because they allow the vessel to maintain appropriate fluid dynamics, overall optimal vessel shape, and a safe seaworthy profile. Therefore, building new offshore oil and gas facilities without sea chests is impracticable. As noted above,

facilities with sea chests would not be able to meet entrainment requirements without installing a technology that projects outward from the vessel's hull. This outward projection has been shown to create similar problems with the respect to fluid dynamics,

vessel shapes and safe seaworthy profile. Therefore, EPA does not believe entrainment controls are feasible at such facilities. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 47 For new fixed offshore oil and gas extraction facilities with intake structures other than sea chests, EPA believes that both impingement and entrainment controls are feasible. For example, technologies to reduce impingement mortality and entrainment of marine life at a caisson intake structure8 may be passive intake screens or velocity caps.

Other technologies such as acoustic barriers, electro barriers, or intake relocation may also be used to reduce impingement and entrainment at intake structures. Air sparges and copper nickel alloys can also be used to control biofouling. EPA has concluded that these are all " available" technologies for these facilities and therefore justify impingement and entrainment requirements.

In summary, EPA is establishing requirements that are similar to some   but not all   of the Phase I provisions. EPA is doing so because there are differences in technological availability between offshore oil and gas extraction facilities and those facilities covered in the Phase I rule.

Impingement and entrainment requirements for new offshore oil and gas facilities are not based on closed cycle recirculating cooling because available information indicates that it is not feasible for all new offshore oil and gas extraction facilities to employ closed cycle recirculating cooling systems. The rest of the requirements are similar to those in Phase I ( e. g., velocity information and design and construction technology plan for Track I facilities, comprehensive demonstration study for Track II facilities.)

8 A caisson intake ( a steel pipe attached to a fixed structure that extends from an operating area down some distance into the water) is used to provide a protective shroud around another process pipe or pump that is lowered into the caisson from the operating area. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 48 B. Why is EPA Implementing CWA Section 316( b) at Existing Phase III Facilities Through Case By Case, Best Professional Judgment Permit Conditions?

Based on consideration of available data, analyses and comments, EPA has decided not to promulgate a national categorical rule today for Phase III existing facilities. EPA bases this decision on EPA's judgment that the ratio of costs to the expected benefits of the proposed national categorical rule options are unacceptable.

This does not mean that Phase III facilities will escape impingement and entrainment controls. Rather, permit writers must impose impingement and/ or entrainment controls under Section 316( b) on a case by case, best professional judgment basis.

Regulatory Planning and Review Executive Order 12866 or " EO 12866"

( September, 1993) sets forth a policy that agencies should " assess all costs and benefits of regulatory alternatives, including the alternative of not regulating." The executive order acknowledges that some costs and benefits are difficult to quantify. Consistent with this policy, EPA has looked to the cost use benefit ratio and also considered non use benefits in reaching its final decision for Phase III existing facilities.

As presented in section X of this preamble, EPA estimated that the total pre tax costs of the 50 MGD option would be $ 38.2 to $ 39 million and the monetized use benefits would be $ 1.8 to $ 2.3 million ($ 2004, 7 percent and 3 percent discount rates).

This yields a cost to benefit ratio ranging from a low of 19 to 1 to a high of 24 to 1. EPA also examined the cost and monetized benefits of the two other regulatory options EPA had co proposed. Even at higher flow thresholds, national categorical requirements for Phase III existing facilities still result in ratios of estimated monetized costs to estimated monetized benefits that are unacceptable. The total annualized costs of the 200 MGD Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 49 option would be $ 22.8 to $ 24.1 million and the monetized benefits would be $ 1.2 to $ 1.5 million ($ 2004, 7 percent and 3 percent discount rates, respectively), yielding a cost to benefit ratio ranging from a low of 16 to 1 to a high of 19 to 1. Similarly, EPA estimated the total annualized costs of the 100 MGD option to be $ 17.6 to $ 18.2 and the monetized benefits to range from $ 1.1 to $ 1.4 million ($ 2003, 3 percent and 7 percent discount rate,

respectively), resulting in a cost to benefit ratio ranging from a low of 13 to 1 to a high of 16 to 1.

EPA also considered non quantified benefits in reaching its final decision.

Nonuse benefits may arise from reduced impacts to ecological resources that the public considers important. This may include reduced impacts to threatened or endangered species or to species without direct commercial or recreational fishing value, such as forage fish, which play a role in the functioning of an aquatic ecosystem. Non use benefits can generally only be monetized through the use of stated preference methods.

As described in the Benefits Analysis, EPA was not able to monetize aggregate non use benefits for this national rulemaking. Instead, EPA qualitatively considered the impact of the potential non use benefits in making the decision to employ the BPJ approach for existing Phase III facilities. Doing so is consistent with the policy outlined in EO 12866,

EPA's Phase III proposal, and EPA's past practice of fully evaluating benefits for purposes of section 316( b). EPA took into account the uncertainty inherent in qualitative benefits assessment, magnitude of the cost use benefit ratio, policy concerns over burdening manufacturers, and other policy concerns outlined in this preamble. When fully considering these non monetized benefits in light of all of these factors, EPA determined that they were not likely to be of sufficient magnitude to alter EPA's decision Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 50 to continue to use a case by case, best professional judgment approach to existing Phase III facilities.

EPA's decision to reject a national categorical rule for Phase III existing facilities based on a cost benefit analysis was motivated by three important considerations: ( 1) the fact that this rule would have principally affected the manufacturing sector; ( 2) the fact that the vast majority of the environmental benefit has already been realized by the Phase II rule; and ( 3) the fact that effective control of cooling water intake structures for the purpose of minimizing adverse environmental impacts can be achieved through sitespecific decisionmaking. Because of the unique confluence of these considerations, EPA found the results of its cost benefit analysis to be particularly compelling.

The federal government has particular concern in ensuring benefits justify costs when manufacturing facilities are involved. According to " Manufacturing in America: A Comprehensive Strategy to Address the Challenges to U. S. Manufacturers" ( U. S.

Department of Commerce, January 2004), manufacturers have " focused on reducing costs to improve productivity and ensure their competitiveness." At the same time,

according to that report, some manufacturers have found these efforts " eroded by costs they cannot control  costs that result in part from government policy." In another report, entitled " Regulatory Reform of the U. S. Manufacturing Sector" ( U. S. Office of Management and Budget, 2005), streamlining regulation was identified as " a key plank in the President's economic program."

Recognizing the regulatory burdens upon manufacturers is becoming more important. The costs of regulatory compliance have risen significantly over time and U. S. manufacturers face considerably higher compliance costs than do many of the U. S.' s Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 51 trading partners. One OMB study found that regulatory costs in 1997 comprise 3.7 percent of gross domestic product ( GDP) (" Report to Congress on the Costs and Benefits of Federal Regulations," September 1997). Since U. S. manufacturers compete with other firms from both developed and developing countries in a global economy, any additional regulatory costs should be carefully evaluated in order to ensure U. S. firms' continued competitiveness in the global marketplace. To address these concerns for U. S.

manufacturers, benefits justifying costs is of paramount importance.

The second important factor underlying EPA's decision to rely on a cost benefit justification here is the fact that the existing national categorical 316( b) regulations already address the majority of cooling water withdrawals. As a result of the Phase II rule, approximately 90 percent of the total volume of cooling water withdrawn nationally is already subject to national categorical requirements. The 2003 Phase II final rule regulates an estimated 543 facilities and 367,752 MGD maximum water withdrawals.

Reductions in fish impinged and entrained were estimated at 1.4 billion one year equivalents.

If EPA had decided to regulate additional cooling water intake structures at existing Phase III facilities through national categorical requirements at the 50 MGD threshold, the new national categorical rule would have increased the number of facilities subject to national categorical 316( b) requirements by an estimated 146 facilities, or a 27 percent increase in total facilities. At the same time, cooling water withdrawals subject to national categorical requirements would be increased by 29,308 MGD, or an incremental increase of 8 percent. Reductions in the numbers of fish impinged and entrained by existing Phase III facilities with more than a 50 MGD design intake flow were estimated Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 52 at 97 million, or a 7 percent increase incremental to Phase II. A key reason for this is that, on a per facility basis, a Phase III national categorical rule with a flow threshold of 50 MGD would regulate much smaller flows than are addressed under Phase II. For example, the average design intake flow ( DIF) at a Phase II facility is 667 MGD. In contrast, the average DIF at a Phase III facility with more than 50 MGD is 226 MGD.

Such lower flows support EPA's determination that a national categorical rule for Phase III facilities is not warranted.

These analyses show the majority of large flow facilities and cooling water intake flows are already regulated by the final Phase II rule. Most of the reductions in fish impinged and entrained at existing facilities, and therefore most of the benefits, are also already obtained through implementation of the Phase II regulations. The 200 MGD and 100 MGD co proposed options involved even less flow and fewer regulated facilities than the 50 MGD option.

Finally, EPA's decision to rely on a cost benefit rationale in this particular regulatory context is motivated by the fact that Section 316( b) is conducive to case by case decisionmaking. Under section 316( b), NPDES permits must require that the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact, and EPA is accorded discretion in implementing section 316( b). Those requirements can be based on national categorical regulations, as was the case with the Phase I and Phase II rules, or on site specific determinations, as is the case for all facilities outside the scope of those two rules. EPA recognized in its Phase II rule itself that some facilities could properly have 316( b) requirements established considering site specific considerations, through the cost benefit or cost cost compliance alternatives. For Phase III,

EPA determined that a site specific approach was appropriate for all potential Phase III existing facilities.

In sum, while permit conditions to implement section 316( b) requirements are necessary under the CWA, a national categorical rule is not. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 53 That section 316( b) readily accommodates case by case decisionmaking is confirmed by its own terms. The statute speaks in terms of site specific characteristics: not only the end goal of minimizing adverse environmental impacts associated with a facility's cooling water intake structure, but also the features of the cooling water intake structure itself, i. e., its " location, design, construction, and capacity."

While EPA had determined in the context of both new facilities and existing power generating facilities that these categories were amenable to national categorical regulation, in the case of manufacturing facilities EPA has determined that site specific decisionmaking is a better approach, with the permit writer rather than EPA applying the statutory decision factors. Indeed, BPJ decisionmaking does not necessarily diminish, and indeed may even enhance, environmental protection when compared to national rulemaking,

which necessarily looks at economic, technical, and other considerations ( such as cost benefit ratios), from a sweeping categorical perspective irrespective of the capability of individual facilities.

For the foregoing reasons, EPA has decided, based on its assessment of costs and benefits in this rulemaking, to continue to rely on permit writers' use of their best professional judgment to establish the statutorily mandated section 316( b) requirements on a case by case basis for existing Phase III facilities. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 54 VII. Summary of Major Comments and Responses to the Proposed Rule and Notice of Data Availability ( NODA)

Fifty one organizations and individuals submitted comments on a range of issues in the proposed rule. An additional six comments were received on the NODA. Detailed responses to all comments, including those summarized here, can be found in the Response to Comments document in the official public docket.

A. Offshore Oil and Gas Extraction Facilities Commenters raised many issues concerning the regulation of offshore oil and gas extraction facilities. One commenter requested that EPA exclude MODUs from the rule.

A few commenters also claimed that EPA did not demonstrate a need to regulate offshore oil and gas extraction facilities. Another commenter asserted that new offshore oil and gas extraction facilities should be included under the new facility definition promulgated under Phase I.

One commenter suggested that EPA exempt offshore oil and gas extraction facilities employing sea chests to facilitate international movement of MODUs. This commenter and others also requested that EPA establish a higher minimum flow threshold ( of at least 25 MGD) for offshore oil and gas units in shallow waters, and exempt units in unproductive deep waters ( over 100 meters deep).

One commenter added that the ichthyoplankton density data ( SEAMAP data)

provided in the NODA supports the assertion that location alone should be used to regulate requirements for offshore oil and gas extraction facilities and supports the exemption of units in unproductive waters offshore. The commenter stated that the Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 55 SEAMAP data shows that these waters have significantly reduced levels of biological life. Several commenters expressed concern that intake technologies from other industries may not be appropriate for offshore oil and gas extraction facilities.

As presented in the NODA, EPA collected biological data from the Gulf of Mexico and other locations demonstrating that there is a potential for adverse environmental impacts due to the operation of cooling water intake structures at new offshore oil and gas extraction facilities. While the data did show spatial and temporal variations, as well as variability at different depths, the range of ichthyoplankton densities found were within the same range seen in coastal and inland waterbodies addressed by the Phase I final rule. As discussed in section IX, there is no economic barrier for new offshore oil and gas facilities to meet the performance standards as proposed. Based in part on these results, EPA is addressing new offshore oil and gas extraction facilities in this final rule. EPA proposed to set a regulatory threshold of 2 MGD for new offshore oil and gas facilities. EPA has not identified nor have commenters provided a basis for selecting an alternative regulatory threshold. Therefore, consistent with the Phase I rule,

new offshore oil and gas extraction facilities with a design intake flow greater than 2 MGD are subject to this rule.

EPA recognizes the inherent differences in the design and operation of land based and offshore facilities ( as well as the differences between the several types of offshore facilities) and has adopted a regulatory approach that allows new offshore oil and gas extraction facilities ample flexibility in complying with the rule. EPA's record shows the technologies evaluated for use by new facilities are already in use at some existing offshore facilities. Furthermore, EPA does not have any ( and commenters did not Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 56 provide) data to suggest that MODUs with sea chests would be inhibited from international movement. Commenters did not submit any information that would lead EPA to believe that the intake technologies already used and demonstrated at existing facilities are inadequate or inappropriate for use at new offshore facilities. However,

EPA recognizes that differences in types of offshore facilities may limit the technologies available, and is therefore requiring different performance standards for these classes of facilities. For this reason, new offshore oil and gas extraction facilities are subject to a new Subpart N rather than being included under the new facility definition promulgated under Phase I. As discussed in section II. A of this preamble, new offshore oil and gas extraction facilities are defined based on three criteria, one of which is that the facility meets the definition o f a " new facility" in 40 CFR 125.83.

B. Applicability to Phase III Existing Facilities/ Costs & Benefits Numerous commenters argued that Phase III facilities should be regulated on a case by case basis, citing the proposed rule's high cost, low benefits, and a lack of Phase III data indicating environmental harm. Commenters questioned the need for and benefit of promulgating national standards covering existing manufacturing facilities and small electric utility plants that comprise smaller cooling water flows.

Many commenters expressed concern over the high costs relative to the monetized benefits of all three regulatory approaches presented in the proposed rule.

Several commenters also noted a poor ratio of costs to monetized benefits, which some commenters claimed would yield pennies of benefit per dollar of cost. Some commenters stated that, due to the low benefit to cost ratio, EPA should withdraw the proposed rule. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 57 As discussed in section VI of this preamble, EPA has decided not to promulgate national categorical requirements for Phase III existing facilities. Section 316( b)

requirements for these facilities will continue to be developed using a best professional judgement based approach.

C. Environmental Impacts Associated with Cooling Water Intake Structures Many commenters asserted that there is no demonstrated need for national requirements at Phase III facilities since Phase III facilities have much smaller flows than Phase II facilities. These commenters also noted that most of the environmental impact data cited in the Phase III proposed rule is from Phase II power generator facilities and is not relevant to Phase III facilities. One commenter stated that EPA did not define adverse environmental impact. Another commenter argued that any measure of impingement or entrainment constitutes adverse environmental impact.

Another commenter stated that the low number of 316( b) studies conducted at Phase III facilities indicates that these facilities are not causing a problem. Other commenters maintained that actual national impacts due to cooling water intake structures are vastly underestimated due to poor data collection methodologies utilized when the majority of the studies were performed and because studies conducted on impinged and entrained organisms overlooked the vast majority of affected species.

As discussed in section IV of this preamble, EPA collected impingement mortality and entrainment data from multiple existing facilities including many Phase III facilities, and believes that the data is sufficient to demonstrate the potential for adverse environmental impacts by Phase III facilities ( see also Regional Analysis Document). Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 58 EPA believes that using data from Phase II facilities to supplement data from Phase III facilities is appropriate since impacts from existing cooling water intake structures occur independent of industry type. In the NODA, EPA provided data from surveyed Phase II and Phase III facilities demonstrating no material differences between electric generators or the various manufacturing industries with respect to intake location, types of intake, or technologies installed on the intakes. 70 FR 71059  71060. EPA notes that it received no comments or data in response to its Phase II or Phase III proposals indicating any categorical difference in cooling water intake structures between Phase II and those Phase III facilities addressed in this final action.

Consistent with discussions presented in the Phase I and Phase II rules, EPA believes that it is reasonable to interpret adverse environmental impact as the loss of aquatic organisms due to impingement mortality and entrainment. Commenters did not suggest alternative interpretations of adverse environmental impact. For additional discussion, see section IV of this preamble.

EPA believes that the studies collected from existing facilities and utilized in its analysis of impingement and entrainment impacts are sufficient to estimate and generally characterize the potential for national level impacts for the purposes of this action. The Regional Analysis document discusses a number of issues associated with the quality of the data in these studies. It is difficult to predict the effects of these study limitations on the impacts estimates, specifically whether they have led to an overestimate or underestimate of impacts. EPA acknowledges that the studies often measure impacts to only some of the fish and shellfish species impacted by cooling water intake structures and typically do not measure impacts to other marine organisms such as phytoplankton or Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 59 numerous types of invertebrates. EPA's quantitative analysis of impacts for this final action does not reflect impacts to these types of organisms and instead only considers impacts to some species of fish and shellfish. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 60 VIII. Implementation Final section 316( b) requirements for new offshore oil and gas extraction facilities will be implemented through the NPDES permit program. This final rule establishes implementation requirements for new offshore oil and gas extraction facilities that are generally consistent with Phase I requirements. This regulation establishes application requirements under 40 CFR 122.21 and ' 125.136, monitoring requirements under '

125.137, and record keeping and reporting requirements under ' 125.138. The regulations also require the Director to review application materials submitted by each regulated facility and include monitoring and record keeping requirements in the permit (' 125.139).

A. When Does the Final Rule Become Effective?

This rule becomes effective [ INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. Under this final rule, new offshore oil and gas extraction facilities will need to comply with the Subpart N requirements when an NPDES permit containing requirements consistent with Subpart N is issued to the facility (' 125.132).

B. What General Information Will I Be Required to Submit to the Director When I Apply for My Reissued NPDES Permit?

The NPDES regulations that establish the application process at ' 122.21 generally require that facilities currently holding a permit submit information and data 180 days prior to the end of the permit term, which is five years. Under this final rule, Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 61 new offshore oil and gas extraction facilities are required to submit the information that is required under ' 122.21 with their application for permit issuance or reissuance.

This final rule modifies regulations at ' 122.21 to require new offshore oil and gas extraction facilities to prepare and submit some of the same information required for new Phase I and existing Phase II facilities. New offshore oil and gas extraction facilities may be required to submit the Source Water Baseline Biological Characterization Data depending on whether they are fixed or non fixed facilities. Non fixed facilities would be exempt from the requirement. Specific data requirements for the Source Water Baseline Biological Characterization Data are described later in this section. Studies to be submitted by new offshore oil and gas extraction facilities are described below.

1. Source Water Physical Data (' 122.21( r)( 2))

Under the requirements at ' 122.21, new offshore oil and gas extraction facilities are required to provide the source water physical data specified at ' 122.21( r)( 2) in their application for a reissued permit. These data are needed to characterize the facility and evaluate the type of waterbody and species potentially affected by the cooling water intake structure. The Director will use this information to evaluate the appropriateness of the design and construction technologies and/ or operational measures proposed by the applicant.

The applicant is required to submit the following specific data: ( 1) a narrative description and scale drawings showing the physical configuration of all source waterbodies used by the facility, including areal dimensions, depths, salinity and temperature regimes, and other documentation; ( 2) an identification and characterization Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 62 of the source waterbody= s hydrological and geomorphological features, as well as the methods used to conduct any physical studies to determine the intake= s zone of influence and the results of such studies; and ( 3) locational maps. For new non fixed ( mobile)

offshore oil and gas extraction facilities, this provision requires only some of the location information and not the source water physical data required for new fixed offshore oil and gas extraction facilities.

EPA recognizes that mobile facilities may not always know where they will be operating during the permit term, and the requirement in ( r)( 2)( iv) is not meant to restrict them only to locations identified in the permit application. However, EPA expects that permit applicants will provide, based on available information, their best estimate as to where they will be operating during the permit term, at whatever level of detail they can.

2. Cooling Water Intake Structure Data (' 122.21( r)( 3))

New offshore oil and gas extraction facilities are required to submit the cooling water intake structure data specified at ' 122.21( r)( 3) to characterize the cooling water intake structure and evaluate the potential for impingement and entrainment of aquatic organisms. Note that ' 122.21( r)( 3)( ii)  latitude and longitude of each intake structure

is not applicable to non fixed ( mobile) offshore oil and gas extraction facilities.

Information on the design of the intake structure and its location in the water column allows the permit writer to evaluate which species or life stages are potentially subject to impingement mortality and entrainment. A diagram of the facility= s water balance is used to identify the proportion of intake water used for cooling, make up, and process water.

The water balance diagram also provides a picture of the total flow in and out of the Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 63 facility, allowing the permit writer to evaluate the suitability of proposed design and construction technologies and/ or operational measures.

The applicant is required to submit the following specific data: ( 1) a narrative description of the configuration of each of its cooling water intake structures and where they are located in the waterbody and in the water column; ( 2) latitude and longitude in degrees, minutes, and seconds for each of its cooling water intake structures ( not applicable to new non fixed ( mobile) offshore oil and gas extraction facilities); ( 3) a narrative description of the operation of each of the cooling water intake structures,

including design intake flows, daily hours of operation, number of days of the year in operation, and seasonal operation schedules, if applicable; ( 4) a flow distribution and water balance diagram that includes all sources of water to the facility, recirculating flows, and discharges; and ( 5) engineering drawings of the cooling water intake structure.

The flow limit in ' 125.131( a)( 2) is based on total design intake flow. Total design intake flow should be specified by the applicant with the information required above. A facility may permanently decrease its total design intake flow ( e. g., by removing an intake structure or installing intake pumps with a lower maximum capacity)

and request that the permitting authority consider the facility's new total design intake flow to determine the applicability of the 316( b) Phase III Rule at the time of permitting.

Note that for facilities which have variable speed pumps, the maximum intake capacity for the cooling water intake structure is the total combined design intake flow for those cooling water intake structures. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 64 C. New Offshore Oil and Gas Extraction Facilities Under this final rule, new offshore oil and gas extraction facilities are required to submit the application requirements consistent with ' 122.21( r)( 2) ( except ( r)( 2)( iv)), ( 3),

and ( 4) and ' 125.136 of Subpart N if they are fixed facilities and choose to comply with the Track I or II requirements in ' 125.134( b) or ( c). A fixed facility is defined as a bottom founded offshore oil and gas extraction facility permanently attached to the seabed or subsoil of the outer continental shelf ( e. g., platforms, guyed towers, articulated gravity platforms) or a buoyant facility securely and substantially moored so that it cannot be moved without a special effort ( e. g., tension leg platforms, permanently moored semi submersibles) and which is not intended to be moved during the production life of the well. This definition does not include MODUs ( e. g., drill ships, temporarily moored semi submersibles, jack ups, submersibles, tender assisted rigs, and drill barges).

The Track I and Track II requirements are generally consistent with the Phase I requirements for new facilities ( 66 FR 65256). Under Track I, this includes velocity information, source waterbody flow information, and a design and construction technology plan. Track II requirements include source waterbody flow information and Track II comprehensive demonstration study ( including source water biological study,

evaluation of potential cooling water intake structure effects, and verification monitoring plan). These requirements are detailed later in this section.

As described in ' 125.135, fixed facilities have the opportunity to conduct a costcost test and provide data to determine if compliance with the Subpart N requirements would result in compliance costs wholly out of proportion to those EPA considered in establishing the requirement, or would result in significant adverse impacts on local water Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 65 resources other than impingement or entrainment, or significant adverse impacts on energy markets. In this case, alternative requirements may be imposed in the permit. See the Phase I final preamble for a more detailed explanation of this cost cost test which is different than the cost cost test for Phase II facilities ( 66 FR 65256).

In this final rule, fixed facilities with sea chests and all non fixed ( or Amobile@)

facilities are not required to comply with standards for entrainment. Fixed facilities with sea chests may choose either Track I or Track II to comply with impingement mortality performance standards. Non fixed facilities must comply with the 0.5 feet per second through screen design intake flow velocity performance standard for impingement mortality of Track I. In addition, the Director may determine additional design and construction technologies to minimize impingement mortality are necessary where there are either protected species or critical habitat for these species or other species of impingement concern within the hydrologic zone of influence of the cooling water intake structure, or based on other information from fishery management services or agencies.

The new mobile facility, when applying to operate under a general permit, must identify where it expects to be operating. The Director consults with the fishery management agencies, considers their data as well as any other relevant data, and decides whether to propose additional requirements based on any concerns the Director identifies ( see '

125.134( b)( 4)). For example, Region 10 has established a general permit for Cooks Inlet that established a 0.1 feet per second through screen design intake flow velocity performance standard. However, non fixed facilities are not required to submit the source water baseline biological characterization data and some aspects of the source Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 66 water physical data requirements. Requirements for non fixed facilities are described later in this section.

1. For New Offshore Oil and Gas Extraction Fixed Facilities, What Information is Required to be Collected for the NPDES Application?

Source Water Baseline Biological Characterization Data (' 122.21( r)( 4)) ( both Track I and II)

Under this final rule, new offshore oil and gas extraction fixed facilities are required to submit source water baseline biological characterization data as required under Phase I. The data will be used to characterize the biological community in the vicinity of the cooling water intake structure and to characterize the operation of the cooling water intake structure. The data must include existing data ( if available)

supplemented with new field studies as necessary. Detailed data requirements are at '

122.21( r)( 4). EPA recognizes that many offshore oil and gas extraction facilities are regulated under NPDES general permits and that regional studies are typically conducted as part of the general permit requirements. EPA expects that some new offshore oil and gas extraction fixed facilities may choose to jointly conduct a regional study to collect the source water baseline biological characterization data. The biological conditions characterized by a regional study should reflect the conditions found at each individual cooling water intake structure. EPA anticipates the regional studies would be conducted once each permit cycle. Under this final rule, the regional study would also include annual monitoring requirements. Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 67 Velocity Information ( Track I)

The final rule requires that new offshore oil and gas extraction fixed facilities submit velocity information consistent with ' 125.136( b)( 2). The information will be used to demonstrate to the Director that the facility is complying with the requirement to meet a maximum through screen design intake velocity of no more than 0.5 feet per second at the cooling water intake structure. The following information must be submitted: 1) a narrative description of the design, structure, equipment, and operation used to meet the velocity requirement; and 2) design calculations showing that the velocity requirement would be met at minimum ambient source water surface elevations ( based on best professional judgment using available hydrological data) and maximum head loss across the screens or other device or, if the facility uses devices other than a surface intake screen, at the point of entry to the device.

Source Waterbody Flow Information ( Track I and II)

The final rule also requires that new offshore oil and gas extraction fixed facilities submit source waterbody flow information in accordance with ' 125.136( b)( 2) or ( c)( 1).

The information will be used to demonstrate to the Director that the facility= s cooling water intake structure meets the proportional flow requirements at ' 125.134( b)( 3) or ( c)( 2). These requirements include specific provisions for fixed facilities located on estuaries or tidal rivers to provide greater protection for these sensitive waters.

Specifically, the final rule requires that the total design intake flow over one tidal cycle of ebb and flow must be no greater than one ( 1) percent of the volume of the water column within the area centered about the opening of the intake with a diameter defined by the Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 68 distance of one tidal excursion at the mean low water level. Calculations and guidance on determining the tidal excursion is found in the preamble to the final Phase I rule at section VII. B. 1. d.

Design and Construction Technology Plan ( Track I)

The final regulation requires that new offshore oil and gas extraction fixed facilities submit a design and construction technology plan consistent with Subpart N requirements at ' 125.136( b)( 3). The design and construction technology plan must demonstrate that the facility has selected and will implement the design and construction technologies necessary to minimize impingement mortality and/ or entrainment in accordance with ' 125.134( b)( 4) and/ or ( 5). The design and construction technology plan requires delineation of the hydrologic zone of influence for the cooling water intake structure; a description of the technologies implemented ( or to be implemented) at the facility; the basis for the selection of that technology; the expected performance of the technology, and design calculations, drawings and estimates to support the technology description and performance. The Agency recognizes that the selection of a specific technology or a group of technologies depends on the individual facility and waterbody conditions.

Track II Comprehensive Demonstration Study ( Track II)

If a fixed facility chooses to comply under the Track II approach, the facility must perform and submit the results of a Comprehensive Demonstration Study ( Study). This information will be used to characterize the source water baseline in the vicinity of the Interagency Review Draft 05/ 05/ 06 Deliberative: do not cite, quote or distribute 69 cooling water intake structure( s); characterize operation of the cooling water intake( s);

and to confirm that the technology( ies) proposed and/ or implemented at the cooling water intake structure reduce the impacts to fish and shellfish to levels comparable to those the facility would achieve were it to implement the applicable requirements in '

125.134( b)( 2) and, for facilities without sea chests, in ' 125.134( b)( 5). To meet the Acomparable level@ requirement, the facility must demonstrate that it has reduced both impingement mortality and entrainment of all life stages of fish and shellfish to 90 percent or greater of the reduction that would be achieved through the applicable requirements in ' 125.134( b)( 2) and, for facilities without sea chests, in ' 125.134( b)( 5).

Similar to the Proposal for Information Collection required in Phase II, the facility must develop and submit a plan to the Director containing a proposal for how information will be collected to support the study. The plan must include:

  A description of the proposed and/ or implemented technology( ies) to be evaluated in the Study;