Do water transfers require NPDES permits? The debate continues.

Whether or not a discharge qualifies as a “discharge of a pollutant” determines whether or not it is regulated under the Clean Water Act, which has significant consequences for the person discharging.  Section 301 of the Act broadly prohibits “the discharge of any pollutant by any person” except as otherwise provided in the Act.  If a person wishes to discharge a pollutant without running afoul of this broad prohibition, he or she must obtain and comply with a permit issued under the National Pollutant Discharge Elimination System (NPDES) program.

Section 502 of the Act defines a “discharge of a pollutant” as “any addition of any pollutant to navigable waters from any point source.”  Applying this definition, it’s relatively easy to ascertain whether some discharges qualify as a “discharge of a pollutant.”  Consider a situation where an industrial facility sends its wastewater through a pipe that discharges to Crummy Creek.  Because it adds a pollutant (industrial waste) to navigable waters (Crummy Creek) from a point source (the pipe), this discharge is clearly a “discharge of a pollutant.”

But now consider a situation where a local government pumps water from Crummy Creek and sends it through a pipe that discharges to Lovely Lake, a pristine body of water in an entirely different watershed.  Is that a “discharge of a pollutant?”  On the one hand, it adds pollutants to navigable waters (Lovely Lake) from a point source (the pipe), in the sense that it delivers pollutants to Lovely Lake that would not otherwise have entered that waterbody.  On the other hand, it doesn’t really add pollutants to navigable waters, in the sense that these pollutants were already contained in navigable waters (Crummy Creek) and are simply being transferred to other navigable waters (Lovely Lake).

The U.S. Environmental Protection Agency (EPA) has historically taken the position that a pollutant is “added” to a navigable water only when it is introduced to that water from the “outside world” (i.e., outside of navigable waters).  As such, the agency has asserted that transfers of water between navigable waters do not qualify as a “discharge of a pollutant” and therefore do not require a NPDES permit under the Act.  After a number of courts declined to defer to that interpretation because it had not been adopted through formal rulemaking, EPA promulgated the Water Transfers Rule (WTR).

Finalized in 2008, the WTR provides that discharges from a water transfer do not require NPDES permits.  The rule then defines 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.”  In the preamble to the WTR, EPA defines “activity” to mean “any system of pumping stations, canals, aqueducts, tunnels, pipes, or other such conveyances constructed to transport water from one water of the U.S. to another water of the U.S.”

In 2009, the U.S. Court of Appeals for the Eleventh Circuit accorded the WTR significant deference in deciding that a water management district did not violate the Clean Water Act by not obtaining a NPDES permit to operate certain pump stations that withdraw contaminated water from canals and move it through pipes that discharge to a lake.  See Friends of the Everglades v. S. Fla. Water Mgmt. Dist., 570 F.3d 1210 (11th Cir. 2009).  Earlier this spring, however, District Judge Kenneth M. Karas of the U.S. District Court for the Southern District of New York, in adjudicating a pair of direct challenges to the WTR, was far less charitable.  See Catskill Mts. Chptr. of Trout Unlimited, Inc. v. EPA, Nos. 08-CV-5606 and 08-CV-8430 (S.D.N.Y. Op. and Order issued Mar. 28, 2014).

Like the Eleventh Circuit, Judge Karas analyzed the WTR under traditional Chevron analysis.  And like the Eleventh Circuit, in step one of that analysis, Judge Karas found that the Clean Water Act does not answer the precise question of whether a transfer of water and its pollutants is an “addition” of those pollutants “to navigable waters.” Rather, he concluded that the statutory text is ambiguous and susceptible to two reasonable interpretations — one in which such an “addition” occurs when polluted water is transferred from one distinct body of water to another distinct body of water, and one in which such an “addition” only occurs when a pollutant is first introduced to navigable waters (as a whole) and not when it is moved from one navigable water to another.

Where Judge Karas departed from the Eleventh Circuit was in his application of Chevron step two.  Criticizing the Eleventh Circuit both for abdicating its responsibility to ensure that EPA had engaged in “reasoned decisionmaking” and for supplying a basis for EPA’s action that the agency itself had not articulated, Judge Karas recited a litany of agency actions and omissions that have led courts to decline to defer to agency interpretations.  He then proceeded to explain how EPA committed each and every one of those in promulgating the WTR.

Judge Karas began by evaluating EPA’s interpretation of the term “addition.”  In that context, he kicked out all three legs of the stool, finding fault with EPA’s methodology, application, and conclusions.  In the process, he criticized EPA’s failure to explain both how its chosen policy option was consistent with the goals of the Act and why alternative policies — including a proposal supported by a number of states that would have allowed EPA, on a case-by-case basis, to designate certain water transfers as requiring a NPDES permit — were not.

Judge Karas then turned his attention to EPA’s interpretation of “navigable waters.”  Under EPA’s interpretation, a water is considered part of “navigable waters” as long as it retains its “status” as a navigable water.  Moreover, in EPA’s view, a water retains that status even as it is withdrawn from a navigable body of water and travels through “pumping stations, canals, aqueducts, tunnels, pipes, or other such conveyances constructed to transport water.”  Judge Karas rejected this interpretation, which he found expanded the scope of “navigable waters” beyond its limits, regardless of which of the standards developed by the U.S. Supreme Court in Rapanos v. United States, 547 U.S. 715 (2006), one applies.  (Query whether that analysis changes if and when EPA and the U.S. Army Corps of Engineers finalize their recently proposed rule that more broadly defines the term “waters of the United States” to include at least some of these features.)

In the end, Judge Karas vacated the WTR to the extent that it is inconsistent with the Act and remanded the rule to EPA for additional explanation.  So where does the agency go from here?  On the one hand, it seems entirely possible that EPA under the current administration might welcome the opportunity to revisit the WTR, which was promulgated under the previous administration.  Perhaps the agency might even elect to regulate water transfers in some limited capacity, like through a general permit.

On the other hand, it seems equally plausible that EPA might appeal.  If the Second Circuit were to sustain Judge Karas’ decision, it would create a circuit split, which could send this issue back to the Supreme Court.  The last time the Supreme Court considered this issue, the Court declined to resolve it but expressed significant skepticism that EPA’s interpretation was entitled to deference in the absence of “any administrative documents in which EPA has espoused [its] position.”  See S. Fla. Water Mgmt. Dist. v. Miccosukee Tribe of Indians, 541 U.S. 95, 107 (2004).  This time around, EPA would be armed with a rule.

Whatever happens, stakeholders would do well to follow these proceedings closely.  There likely will be opportunities to register views, either in regulatory comments or through amicus briefs.  Stay tuned.