Making Challenges to an Impaired Waters Listing Stick

This article is reprinted with the permission of Law360, where it originally appeared on July 30, 2014, under the title “Arguing Injury Can Prevent Harm From EPA Water Listing.”

The listing of a water body as impaired under the Clean Water Act often sets off a chain reaction of events that can lead to significant increases in costs for those who discharge to that body of water or who would propose to do so in the future. By attacking this reaction at its source, challenges to an erroneous listing can effectively prevent unnecessary future expenditures. These challenges, however, often face formidable jurisdictional hurdles. Based on recent case law, this article explores strategies for overcoming these hurdles in order to increase the likelihood that challenges to impaired waters listings will be decided on their merits.

Background

The CWA requires states to establish “water quality standards” for water bodies within their boundaries. Among other things, water quality standards consist of the uses that states designate for their waters, as well as the numeric or narrative water quality criteria that states adopt to protect those designated uses. In preparing National Pollutant Discharge Elimination System permits for point source dischargers, permit writers must determine whether their discharges “will cause, have the reasonable potential to cause, or contribute to an excursion above any state water quality standard, including state narrative criteria for water quality.” This analysis is often referred to as a “reasonable potential determination.” If a permit writer makes an affirmative reasonable potential determination in connection with a discharge, the NPDES permit authorizing that discharge must include, in addition to technology-based effluent limitations, more stringent “water-quality based effluent limitations” (“WQBELs”) to control the pollutants that created the reasonable potential.

Section 303(d) of the CWA requires states to identify their water bodies that are not meeting their water quality standards and to record these impaired waters on lists, often referred to as “303(d) lists.” States must submit their 303(d) lists to the U.S. Environmental Protection Agency for approval. For all waters appearing on 303(d) lists, states must develop total maximum daily loads (“TMDLs”), according to priority rankings that the states assign to those water bodies based on their uses and severity of pollution. A TMDL calculates the total maximum daily load of a pollutant that a water body can assimilate from all sources of pollution within the watershed and still meet water quality standards. The TMDL then allocates that total load among point sources and nonpoint sources. The loads that the TMDL allocates to point sources are known as wasteload allocations (“WLAs”). After a TMDL has been developed, effluent limitations in NPDES permits must be consistent with the assumptions and requirements underlying the WLAs. To comply with the more stringent WQBELs that often result, point source dischargers frequently must implement more effective controls, which can require significant expenditures on their part.

To avoid these significant expenditures, a number of point source dischargers have challenged the issuance or approval of the impaired waters listings that have threatened to set this chain reaction in motion. In some cases, point source dischargers have alleged flaws in the methodologies and protocols used in the assessments that resulted in the listing. In others, they have alleged defects in the ways that states have translated their narrative criteria to numeric values for purposes of assessing their waters for impairment.

Recent Case Law

In one recent example, City of Dover v. EPA, three cities that own and operate wastewater treatment plants that discharge into the Great Bay Estuary filed a complaint alleging the EPA violated the Administrative Procedure Act in approving New Hampshire’s 303(d) list that identified the Great Bay Estuary waters as impaired by nitrogen.

New Hampshire has adopted narrative water quality criteria for various pollutants, including nitrogen. After conducting a site-specific water quality analysis, the New Hampshire Department of Environmental Services (“NHDES”) published a report translating its narrative nutrient criteria into proposed numeric values for different designated uses in the Great Bay Estuary waters. Then, when sampling revealed that these waters had nitrogen levels that exceeded those numeric values, NHDES placed the Great Bay Estuary waters on New Hampshire’s 303(d) list, which the EPA approved.

In their complaint, the cities alleged that NHDES set numeric nitrogen values too low in its report, and therefore the EPA acted arbitrarily, capriciously and otherwise not in accordance with law when it approved New Hampshire’s 303(d) list based on those values. The EPA filed a motion to dismiss the complaint for lack of subject-matter jurisdiction, which the U.S. District Court for the District of Columbia granted.

In its motion to dismiss, the EPA first challenged the cities’ standing to assert their claims. Article III only authorizes federal courts to hear “cases” and “controversies.” The doctrine of standing identifies those cases and controversies that are appropriately resolved through the judicial process. Under U.S. Supreme Court precedent, to establish standing, a plaintiff must allege “(1) an ‘injury in fact’ which is ‘concrete and particularized and (b) actual or imminent, not conjectural or hypothetical’; (2) ‘a causal connection between the injury and the conduct complained of’; and (3) a likelihood ‘that the injury will be redressed by a favorable decision.’” As shorthand, these standing criteria are often referred to as injury, causation and redressability.

The principal injury that the cities alleged in City of Dover was a regulatory impact; the cities asserted that the listing of the Great Bay Estuary waters resulted in the EPA issuing them more restrictive NPDES wastewater and stormwater permits. After carefully evaluating this alleged injury, however, the court observed that the EPA had in fact only either issued the plaintiffs draft permits containing greater restrictions or notified them that they would be receiving such permits. In either event, the restrictions were subject to change. For that reason, the court found that the “regulatory decisions that plaintiffs challenge have not yet caused them harm, and indeed whether plaintiffs will be harmed is still uncertain.” On that basis, the court concluded that this speculative injury was not “cognizable” under Article III. Moreover, even if this injury had been cognizable, the court concluded that the cities would still lack standing to assert their claims, both because there was an insufficient causal connection between that injury and the impaired waters listing and because a favorable decision would not necessarily redress that injury.

To support causation, the cities contended that the EPA’s own regulations required it to issue them more restrictive NPDES permits once the agency approved the inclusion of the Great Bay Estuary waters on the 303(d) list. Although allowing that 303(d) lists can indirectly affect permitting decisions, both because they are one factor among many that permit writers often consider in making reasonable potential determinations and because they eventually result in the establishment of the TMDLs that can more directly affect permitting decisions, the court concluded that the links were simply “too attenuated” to “establish causation under Article III.”

For similar reasons, the court concluded that any injury related to the permits was not redressable. The court observed that the EPA could make an affirmative reasonable potential determination even in the absence of a 303(d) listing, and that nothing would require the agency to issue plaintiffs less restrictive NPDES permits even if the Great Bay Estuary waters were removed from the 303(d) list. Because reversing the impaired waters listing would not necessarily ease any restrictions in plaintiffs’ permits, the court concluded that the cities could not demonstrate the redressability demanded by Article III.

In addition to challenging the cities’ standing to assert their claims, the EPA also challenged the ripeness of those claims. To demonstrate that it faces the “present injury” necessary to satisfy Article III, a plaintiff must show that the agency action is fit for judicial review and that it would face hardship if that review were withheld.

The EPA conceded that its approval of the 303(d) list was fit for review, but the court found that the cities would face no hardship if that review were withheld. While acknowledging that more restrictive permits may create hardship for plaintiffs down the road, the court found that plaintiffs must challenge those permits through the administrative process provided in the CWA:

The court is mindful that, assuming plaintiffs’ allegations are true, they may someday be forced to expend significant resources to comply with the EPA’s directives. That day is not today, however, which is the central flaw in their case. … Plaintiffs may yet have their day in court, but they have simply picked the wrong day.

As such, in addition to finding that the cities lacked standing to bring their claims, the court also concluded that those claims were not yet ripe for judicial review.

In reaching its decision, the court distinguished a case, Barnum Timber Co. v. EPA, in which a court in another jurisdiction did find standing to challenge a 303(d) listing. Barnum Timber involved the Redwood Creek in California. Redwood Creek first appeared on California’s impaired waters list in 1992. In 2006, California retained Redwood Creek on its 303(d) list. In 2007, the EPA approved that list, which identified Redwood Creek as impaired by both sediment and temperature.

In Barnum Timber, a company that owned property and conducted timber-harvesting operations in the Redwood Creek watershed filed a lawsuit under the APA challenging as arbitrary and capricious the EPA’s decision to “retain Redwood Creek as an impaired water body.” As in City of Dover, the EPA moved to dismiss the complaint for lack of Article III standing. After the district court denied the motion, the Ninth Circuit reversed.

To demonstrate injury, the company alleged it suffered a reduction in the economic value of its property in the Redwood Creek watershed. To support this allegation, the company attached declarations by two California registered professional foresters who testified to the reduction in property value. The circuit court found these sufficient to establish injury in fact.

With respect to causation, the company alleged its “property in the Redwood Creek watershed has lost value simply because of the inclusion of Redwood Creek on the § 303(d) list as impaired by sediment and by temperature.” To support this allegation, the company again cited the declarations of its two forestry experts. As one of them explained,

The public has ready access to the Section 303(d) listings, including the listing of Redwood Creek. When a listing occurs, the public perceives — whether accurately or not — that the subject property will be subject to additional and onerous regulation. … In this case, the market reaction is such as to deem Barnum’s property to be devalued because of the § 303(d) listing.

Based on the allegations in the complaint and supporting declarations, the circuit court concluded that the company “more than met its burden to demonstrate the causal connection element of Article III standing at the pleading stage.”

Finally, the circuit court turned to redressability. In that context, the court observed that, upon a finding that the listing of Redwood Creek was arbitrary and capricious, the district court would have the power under the APA to grant the declaratory judgment and injunctive relief that plaintiff requested. The circuit court found that these remedies would remove Redwood Creek from California’s § 303(d) list, which would effectively resolve the injury that the company alleged. On that basis, the circuit court concluded that the company had satisfied the redressability required under Article III.

Finding that plaintiff had demonstrated injury in fact, causation and redressability, the circuit court concluded that plaintiff had met the requirements of Article III standing and remanded the case back to the district court for further proceedings.

In distinguishing Barnum Timber, the City of Dover court stated:

Unlike plaintiffs in this case, the Barnum Timber plaintiffs did not challenge the 303(d) listing because of its perceived regulatory impact; rather, they showed that the very fact that waters on their land were on the list caused their property values to go down. If the waters were taken off the list, their property value would go back up.

Analysis

The City of Dover court distinguished Barnum Timber by focusing on the nature of the alleged injury, which in Barnum Timber was based on property value impacts. Presumably, the cities in the City of Dover case could also have told compelling stories about the impact that the Great Bay Estuary waters listing has had on their property values. In all likelihood, a private wastewater treatment company looking to acquire a wastewater treatment plant would pay less to acquire the cities’ plants now that they are discharging to an impaired water body than it would have paid when those plants were discharging to a water body that was attaining its water quality standards. In addition, the land underlying the wastewater treatment plants, like the land in Barnum Timber, probably lost value due to a perception that the listing would restrict future development. Depending on other factors, the listing might also have impacted the cities’ ability to finance or refinance debt.

While arguments can certainly be made that the City of Dover case was wrongly decided, particularly insofar as it threatens to allow impaired waters listings to evade judicial review, those seeking to challenge impaired waters listings in the future may be better served alleging injuries predicated on property value reductions. Because these kinds of injuries are more immediate than injuries based on regulatory impact, courts appear less likely to reject them as speculative and more willing to find that they are cognizable injuries that satisfy the causation and redressability requirements of Article III standing. The immediacy of these injuries should also help demonstrate the ripeness of the claims with which they are associated. The immediate impact of listing on property values should negate any argument that a plaintiff would not face hardship if review were withheld. Although the claims in Barnum Timber were not challenged on the basis of ripeness, it is difficult to imagine that such a challenge would have been successful.

Of course, challengers of impaired waters listings should be prepared to support their allegations of injury with competent testimony at each of the successive stages of litigation. Although it is not required, challengers may find it advantageous to address standing head-on by attaching declarations to their complaints. Appraisers, lenders and others can provide persuasive testimony about the injuries that challengers have sustained, their relationship to the impairment listing, and how the removal of that listing can restore the status quo. Challengers might also consider enlisting other stakeholders in the watershed who share their concerns about the impaired waters listing to join them as plaintiffs in order to increase the likelihood that there will be someone remaining to challenge the listing in the event that a court were to find that other challengers lack standing.

Conclusion

Successful challenges to erroneous impaired waters listings can pay dividends by avoiding unnecessary future expenditures. In order to have a chance of succeeding, however, challengers often must first overcome significant jurisdictional hurdles. By implementing the strategies discussed in this article, plaintiffs can increase the likelihood that their challenges to these listings will be decided on their merits. Making challenges to impaired waters listings stick is often half the battle.

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