Environmental Protection Agency Adopts Rules Limiting States’ Review of Projects Under Clean Water Act

The Environmental Protection Agency (EPA) published regulations on July 13, 2020, to limit and streamline states’ review and regulation of projects approved by federal agencies under the Clean Water Act (CWA). States have increasingly over the years exercised their authority to issue “water quality certifications” under section 401 of the CWA to more vigorously review energy, commercial, residential, and other projects approved by the U.S. Army Corps of Engineers (Corps), Federal Energy Regulatory Commission (FERC), and other federal agencies. Many projects have been delayed, downsized, or otherwise modified; some have been effectively stymied or simply vetoed. Saying it seeks to “curb abuses” and return the water quality certification process to “its original purpose,” the EPA overhauled its nearly 50-year-old regulations to clarify and limit the scope of state review and prescribe time limits for states to act on requests for certification.

Background

Several federal laws authorize agencies to permit projects in waters and wetlands under federal jurisdiction. The CWA, for instance, authorizes the EPA and Corps to permit “discharges” of pollutants, including dredged or fill material, from “point sources” (confined means of conveyance, e.g., pipes, trucks, or the like) into waters and wetlands. The Federal Power Act and other laws enable the Federal Energy Regulatory Commission (FERC) to issue licenses for energy pipelines and hydropower facilities (e.g., dams) in rivers and streams.

Section 401 of the CWA establishes, though, that a federal agency may issue a permit authorizing any activity that may result in discharges into waters and wetlands only if the applicant provides a “certification” from the pertinent state (or tribe) that the proposed discharge will comply with certain sections of the CWA and state (or tribal) water quality standards. A state may prescribe limitations in its certification to assure compliance with water quality standards and “any other appropriate requirement of State law,” and those limitations will become conditions of any permit the federal agency issues. The section also provides that if a state fails or refuses to act on a request for certification within a reasonable period of time (which shall not exceed one year) after receipt of such a request, the certification requirement for the federal permit is waived.

Section 401 certification is the primary means by which many states, including California, regulate construction and other such activities in waters and wetlands. Over the years, states have gradually awakened to the power that section 401 affords them to regulate projects that state law might not otherwise allow. Increasingly, they have extensively conditioned or sometimes even denied certification of federal agency permits. In California, the State Water Resources Control Board and nine Regional Water Quality Control Boards make these certification decisions. The State Board recently adopted regulations establishing elaborate procedures and policies to guide their exercise of this regulatory power. (See Newsletter of April 9, 2019.)

Seeking to facilitate permitting of energy infrastructure projects, President Trump issued Executive Order 13868 on April 10, 2019, which directed the EPA to review its regulations and guidance on section 401 certification and update them to reflect recent court decisions and the Administration’s energy policies. The EPA issued updated guidance in June 2019 and proposed new regulations in August 2019.

New Rules

The EPA published its final regulations, which limit the scope of state review of projects, set strict deadlines for states to complete their reviews, tighten procedures states must follow, and empower federal agencies to oversee state compliance.

Scope of Review: Focus on “Discharges” from “Point Sources”

Some states have used the certification process to review not only discharges from point sources, but also unconfined or diffused discharges of any sort, such as stormwater and other surface runoff and seepage. Some have also broadly reviewed the environmental impacts of entire projects or activities, rather than just the discharges resulting from those projects and activities.

Seeking to curb these practices, the EPA establishes in its rule that the scope of states’ review is limited to a “discharge,” which it specifies means a discharge from a “point source.”

Scope of Review: Focus on Water Quality Requirements

Those states that expanded their review to entire projects or activities also sometimes imposed conditions largely unrelated to water quality, e.g., construction of biking and hiking trails, payments for various community improvements or enhancements, and requirements for public access for fishing and recreation along waters.

Finding nothing in the CWA to signal that Congress intended section 401 to be used to impose federal requirements on permitted projects and activities beyond those addressing water quality impacts, the EPA concludes that “imposition of conditions unrelated to water quality is not consistent with the scope of the CWA generally or section 401.” Accordingly, it declares in its new rule that the “scope of a Clean Water Act certification is limited to assuring that a discharge from a Federally licensed or permitted activity will comply with water quality requirements.” Leaving little to chance, it adds that such requirements mean specified provisions of the CWA “and state or tribal regulatory requirements for point source discharges into waters of the United States.”

Time Limit: No More Than One Year

Although section 401 provides that its certification requirement is waived if a state fails or refuses “to act on a request for certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request,” states have sidestepped this time limit by various procedural devices. Some have claimed that the prescribed time period does not begin until they deem a request for certification to be complete; they then repeatedly request additional information, thus delaying the start of the time limit. Some California Regional Boards have gone so far as to claim that requests are not complete until submitted documents, e.g., alternatives analyses, are revised to their liking and deemed “adequate.”

Some states, when faced with expiration of the prescribed time period, have either denied the request without prejudice or persuaded the applicant to withdraw the request, and then restart the clock when the applicant resubmits its request. One Court of Appeals recently rejected this practice, ruled that withdrawing and resubmitting the same certification request in order to circumvent section 401’s time limit does not restart the clock, and held that a state had waived the certification requirement owing to expiration of the time limit. (Hoopa Valley Tribe v. FERC, 913 F.3d 1099 (D.C. Cir. 2019).)

In its new rule, the EPA seeks to firm up section 401’s time limit and establish “an absolute outer bound of one year following receipt of a certification request.” The rule specifies the contents of a request for certification and defines “receipt” to nail down when the time clock starts. (The contents of a request specified by the EPA notably do not include some of items, e.g., alternatives analyses, prescribed by the State Board in its recently adopted regulations.) The rule also empowers federal agencies to establish “the reasonable period of time either categorically or on a case by case basis,” which may not exceed one year. Moreover, for each certification request, federal agencies must determine and inform the state (1) the date of receipt of the request, (2) the reasonable period of time to act on the request, and (3) the date of waiver if the state fails or refuses to act on the request.

To button down the time limit for state action, the EPA adds in the preamble to its rule that section 401 does not allow a state, after issuing a certification, to unilaterally modify that certification, either through conditions purporting to authorize it to reopen the certification in the future or through any other mechanism.

Other Procedures

In order to enable early coordination and facilitate timely action on certification requests, the EPA requires an applicant, at least 30 days before submitting such a request, to request a pre-filing meeting with the state.

Under the new rule, a state must explain in writing the basis for its decision on a request for certification. If denying certification, a state must identify the specific water quality requirement with which the discharge will not comply, explain why it will not comply, and specify what data are needed to assure the discharge would comply. If conditioning certification, a state must explain why each condition is necessary to assure compliance with water quality requirements and cite the federal or state law that authorizes the condition.

The rule requires federal permitting agencies to review state certifications, conditions, and denials to determine whether they include the information the rule requires. This review is to ensure compliance with the rule’s procedural requirements for information and not to substantively evaluate the sufficiency of the information the state provides. If the federal agency finds that the state did not provide the required rationale, this omission will be regarded a failure or refusal to act on the certification request as required under the rule, and the state will be deemed to have waived the certification requirement with respect to the certification, condition, or denial.

Federal Oversight and Enforcement

The EPA maintains in its rule that the federal permitting agency has the exclusive authority to enforce water quality certification conditions that have been incorporated into the federal permit. Once a state certifies a project and the conditions it prescribes are incorporated into the federal permit, the state has no ongoing role to enforce those conditions under federal law.

What Comes Next

The EPA’s rule becomes effective on September 11, 2020, sixty days after its publication in the Federal Register.

As directed by Executive Order 13868, other federal agencies, notably the Corps and FERC, are expected to initiate their own rulemaking as necessary within 90 days after publication of the EPA’s rule to ensure their regulations are consistent with the EPA’s.

States may respond to the new rule any number of ways. As the EPA hopes, states naturally may comply with the rule, limit their review to focus on water quality issues, and reach decisions faster than before. Some may endeavor to adjust their certification procedures to enable them to act within the federal deadline. That may pose a challenge for those with statutes prescribing processes to review projects’ environmental impacts, such as the California Environmental Quality Act (CEQA). Some states may react to the new rule and its deadlines by more frequently denying certifications (though they would need to explain themselves in writing). Those states with robust water quality statutes of their own, e.g., California with its Porter-Cologne Act, may increasingly resort to exercising their independent state authority to regulate activities in waters and wetlands, apart from the authority delegated to them under section 401 of the CWA.

The rule undoubtedly will be challenged in court. Several states and organizations have already signaled their intention to do so. Such litigation might produce preliminary injunctions to delay implementation of parts or all of the rule.

If November’s election yields a Congress so inclined, it could (depending on the congressional calendar during the rest of this year) repeal the rule under the Congressional Review Act. That Act enables Congress to review and overrule a federal agency’s regulation provided it does so within 60 “legislative days” of being notified by the agency of publication of a final rule.

Similarly, if the election ushers in a new administration, that administration could direct the EPA to review and revise the rule in keeping with its views and policies. Such a rulemaking would, of course, take some time, typically the better part of a year or so.

David Ivester
Briscoe Ivester & Bazel LLP
155 Sansome Street, 7th Floor
San Francisco, CA 94104
Telephone: (415) 402-2700
Fax: (415) 398-5630