Supremes Let Hoopa Stand, Leave Door Open for EPA to Reshape CWA 401

On December 9, the Supreme Court denied certiorari to review the D.C. Circuit Court of Appeals ruling in Hoopa Valley Tribe v. FERC. As reported in this space, in January the D.C. Circuit roundly rejected the common practice of withdrawing and then refiling applications for state water quality certification to avoid the one-year limit for state action under Section 401 of the Clean Water Act.

Under Section 401, applicants for federal authorizations that could result in a discharge to navigable waters must first obtain certification from the state that applicable water quality standards would be met. States must act on Section 401 applications within one year or they are deemed to have waived their authority. State authority under Section 401 is broad and presents an opportunity to super-impose state policy on federal licenses or permits, an opportunity many states are eager to exercise.

Section 401 is often invoked in the context of licensing and relicensing of hydroelectric power facilities before the Federal Energy Regulatory Commission. Such facilities and their impacts are complex, and states struggle to complete their analysis within one year. This has led to states offering applicants the choice of either withdrawing and refiling the application to reset the clock, or having their certification denied.

In the Hoopa case, PacifiCorp entered into a settlement agreement with the states of Oregon and California and other stakeholders concerning removal of four dams on the Klamath River. As part of the settlement, PacifiCorp would annually submit a letter to withdraw its pending Section 401 applications before both states and simultaneously refile the application with no changes. The D.C. Circuit found this practice a subversion of the plain statutory language limiting state action to one year.

So, with the Supreme Court’s denial of certiorari, the withdrawal/refile stratagem seems less viable. Where do we go from here? One answer is that when states need more time they will simply deny Section 401 applications without prejudice, meaning the applicant can reapply. But that approach could also be seen by the courts as an evasion of the one-year limitation.

Another answer lies with EPA, which recently proposed new rules to constrain state authority under Section 401. As part of the reform of Section 401 policy, the new rules would adopt time limitations "consistent" with the Hoopa decision:  "The certifying authority is not authorized to request the project proponent to withdraw a certification request or to take any other action for the purpose of modifying or restarting the established reasonable [i.e., no more than one year] period of time."

Under the new rules, then, one year means one year. However, the new rules, once adopted, will certainly be challenged. Two related issues are whether EPA has authority to direct state implementation of Section 401 and, if it does, whether EPA’s interpretation is entitled to Chevron deference.

While all of this plays out, however, the D.C. Circuit’s decision in Hoopa stands, but many questions remain to be answered. Did Hoopa effectively kill the withdraw/refile workaround? Or should Hoopa be read narrowly and limited to the unique facts underlying the case? And how will all this ultimately affect the timing and content of federal permits for major projects? Stay tuned.