Summary of a Recent
Judicial Development in
Clean Water Act

EPA Must Approve Transfer of NPDES Permitting
Authority with State Compliance of CWA Triggers

Eric H. Foy
National AgLaw Center Research Associate

Summary of Decision

In National Association of Home Builders v. Defenders of Wildlife, 127 S. Ct. 2518 (2007), the Supreme Court reversed and remanded the ruling of the Ninth Circuit panel, which held that the Environment Protection Agency's (EPA) decision to approve a transfer of permitting authority under the National Pollution Discharge Elimination System (NPDES) program to the state of Arizona was arbitrary and capricious. The Court found that the requirement under § 7(a)(2) of the Endangered Species Act (ESA) (16 U.S.C. § 1536(a)(2)) to consult with agencies designated by the Secretaries of Commerce and Interior did not apply to the EPA's authority to approve the transfer of water quality permitting authority under the Clean Water Act (CWA) (33 U.S.C.S. § 1251).

Background

In February 2002, Arizona officials sought authorization from the EPA to administer the state's NPDES program. Id. at 2526. After the EPA consulted with the Fish and Wildlife Service (FWS) to determine whether the transfer of NPDES permitting authority would adversely affect any species listed in the ESA, the FWS concluded that the transfer authority would not cause any direct impact on water quality that would adversely affect a listed species. Id. However, the FWS was concerned about the transfer of NPDES permitting authority because it would empower Arizona officials to issue individual permits without considering the indirect impact of overdevelopment on upland species. Id. at 2527. The EPA disagreed. Id. The EPA believed that the FWS's concern about the indirect impact on listed species was too attenuated and, as a legal matter, concluded that the mandatory nature of the CWA stripped it of authority to disapprove a transfer of NPDES permitting authority based on any consideration outside the nine criteria listed in CWA § 402(b). Id. After the dispute was referred to their national offices for resolution, the two agencies agreed to the following: (1) the EPA's continuing oversight of Arizona's permitting program would adequately protect listed species; (2) Arizona had met each of the nine statutory criteria listed in CWA § 402(b); and (3) Arizona would be granted NPDES permitting authority. Id.

On April 2, 2003, Defenders of Wildlife (DOW) filed a petition in the United States Court of Appeals for the Ninth Circuit seeking review of the transfer. Id. at 2528. The Ninth Circuit panel held that the EPA's approval of the transfer was arbitrary and capricious because the EPA relied on legally contradictory positions regarding its ESA § 7 obligations. Id. Rather than remanding the issue to the EPA, the panel decided the case on the merits, holding that the ESA granted the EPA both the power and the duty to determine whether the agency's transfer decision would threaten endangered species. Id.

Arguments

The EPA argued that Arizona satisfied all of the CWA § 402(b) statutory criteria to be the authorized NPDES permitting authority, and therefore the EPA was required to approve the transfer. Id.

The DOW asserted that, in addition to determining compliance with the nine CWA § 402(b) statutory criteria, the EPA was also required to determine compliance with the ESA by ensuring that the Arizona transfer would not threaten endangered species. Id. at 2528-29.

Analysis and Holdings

The Supreme Court first noted that if the EPA's action was arbitrary and capricious, then the Ninth Circuit panel should have remanded the case to the agency for clarification of its reasoning. Id. at 2529. Rather than remanding for clarification, the Ninth Circuit panel decided the case on its merits, which the majority believed deprived the EPA of its usual administrative avenue to explain and reconcile the agency's rationales. Id. Because the Court found that panel's determination that the EPA's decision was arbitrary and capricious was not supported by the record, the Court did not examine the procedural error by the panel any further. Id.

As noted, the Court held that the Ninth Circuit panel's determination that the EPA's action was arbitrary and capricious was not fairly supported by the record. Id. The Court's reasoning centered on the majority's interpretation of CWA § 402.03 as applied to ESA § 7(a)(2), also known as the no-jeopardy duty. Id. at 2536. The Court read this duty to cover only discretionary actions and not actions, like a transfer of NPDES permitting authority, that an agency is required by statute to take once specific triggering events occur. Id. Because the transfer of NPDES permitting authority was not discretionary, but rather mandated once the nine-part criteria were met, the Court held that a transfer of NPDES permitting authority did not trigger the ESA's consultation or no-jeopardy requirements. Id. at 2538.

The case was decided on June 25, 2007.