Special Topics in Environmental Management

2nd Circuit Upholds EPA’s Water Transfers Rule

In a majority opinion, a panel of the U.S. Court of Appeals for the 2nd Circuit reversed a district court ruling that vacated EPA’s 2008 Water Transfers Rule because it did not impose National Pollutant Discharge Elimination System (NPDES) permitting requirements on such transfers.

The 2nd Circuit majority agreed with the district court and the 2nd Circuit dissent that the Clean Water Act (CWA) is not clear on whether NPDES permitting should apply to transfers between waters of the United States. It was also agreed that the case therefore needed to be decided on whether the EPA based its rule on a reasonable interpretation of ambiguous aspects of the statute and the Agency’s statutory authority. This approach to regulation is called the Chevron deference, which was explained by the U.S. Supreme Court. While both the district court and the dissent acknowledged EPA’s right to interpret statutory ambiguity, they concluded that, in this instance, the Agency did not act in a reasonable manner. The majority disagreed and reinstated the vacated rule.

Unitary Waters Reading

In its 2008 rule, the EPA defined a water transfer as “an activity that conveys or connects waters of the United States without subjecting the transferred water to intervening industrial, municipal, or commercial use.” Such transfers, the Agency continued, are not subject to regulation under the NPDES permitting program.

The case against this interpretation was initiated by environmental groups and states that argued that under the CWA, waters of the United States could be polluted by transfers from other waters of the United States because water bodies are individual entities under that term. In the Water Transfers Rule and the litigation, the EPA—supported by other states, water districts, and industry groups—argued that the waters of the United States are to be considered collectively—an approach called the unitary waters reading—and the transfer of pollutants from one part of that collective entity to another part is not an “addition” requiring a NPDES permit.

Catskill I and II

The plaintiffs based much of their argument on two previous cases decided by the 2nd Circuit. In Catskill I, the court held that in transferring turbid water from the Schoharie Reservoir through the Shandaken Tunnel into Esopus Creek without a NPDES permit, the city of New York violated the CWA because the transfer was the “addition” of a pollutant. New York’s appeal from that ruling was resolved in Catskill II, in which the court reaffirmed the holding of Catskill I. (The 2nd Circuit calls the case discussed here Catskill III.) While those decisions appeared to run against the unitary waters reading, the court stated that it did not intend to foreclose the EPA from adopting a unitary waters reading of the Act (i.e., “waters of the United States” means all of those waters rather than each of them) in a formal rule.

“Indeed, we stated in Catskill I that ‘[i]f the EPA’s position had been adopted in a rulemaking or other formal proceeding, [Chevron] deference … might be appropriate,’” said the court. “This statement implies that we thought the relevant statutory text was at least possibly ambiguous.”

Indeed, in looking at the CWA as a whole, the majority said it could not conclude that Congress spoke specifically to the kind of clear distinction between water bodies that would refute the unitary waters reading.

Nuisance Suits

The plantiffs also contended that it was unreasonable to conclude that the CWA does not protect waters in downstream states from pollution caused by transfers from upstream states. But the majority answered that downstream states could protect themselves. The majority stated:

“As to the effect of the Rule on downstream states, even in the absence of NPDES permitting for water transfers, the states can seek to protect themselves against polluted water transfers through other means—for example, through filing a common-law nuisance or trespass lawsuit in the polluting state’s courts—even if the protections provided by such lawsuits are less robust than those that would be available through the NPDES permitting program’s application to transfers.”

Also, said the majority, the rule is supported by Congress’s intention to leave primary oversight of water transfers to state authorities in cooperation with federal authorities. Additionally, Congress intended to create a balance between federal and state oversight of activities affecting the nation’s waters. The majority was also sympathetic to EPA’s concern that subjecting water transfers to NPDES permitting could affect states’ ability to effectively allocate water and water rights.

“This rationale, while not immune to criticism or counterargument, was sufficiently reasoned to clear Chevron‘s rather minimal requirement that the agency give a reasoned explanation for its interpretation,” said the majority. “We see nothing illogical in the EPA’s rationale.”

The majority adds that “as far as we have been able to determine, in the nearly forty years since the passage of the Clean Water Act, water transfers have never been subject to a general NPDES permitting requirement. Congress thus appears to have, however silently, acquiesced in this state of affairs.”

The majority concedes that the Water Transfers Rule may or may not be the best or most faithful interpretation of the CWA in light of its paramount goal of restoring and protecting the quality of U.S. waters. Still, the majority held that the EPA provided a reasoned rationale for the Water Transfers Rule.

Dissent

In his dissent, Justice Denny Chin held that Congress did not intend to give a pass to interbasin transfers of dirty water and that “excluding such transfers from permitting requirements is incompatible with the goal of the Act to protect our waters.” According to Chin, the unitary waters approach is flawed because the use of the plural “waters” (in waters of the United States) indicates that Congress was referring to individual water bodies, not one collective water body.

Chin also points out that Congress created specific exemptions to the NPDES permitting requirements for, e.g., return flows from irrigated agriculture, stormwater runoff, and discharging dredged or fill material into navigable waters. But Congress did not create an exception for interbasin water transfers, wrote Chin.

“It is well-settled that when exceptions are explicitly enumerated, courts should not infer additional exceptions,” Chin writes.

The 2nd Circuit’s opinion in Catskill Mountains Chapter of Trout Unlimited et al. v. EPA is here.

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