Trump Track: EPA Finalizes New Clean Water Act Section 401 Certification Rules—Will States Bite Back?

On June 1, 2020, the Environmental Protection Agency (EPA) released its new rules implementing section 401 of the Clean Water Act (CWA). Section 401 provides that before a federal agency can approve a project that may result in a "discharge to the navigable waters" the applicant must obtain water quality certifications from the affected state. The certification encompasses compliance with water quality standards and "any other appropriate requirement of State law."

However, the state is deemed to have waived its delegated authority under section 401 if it "fails or refuses to act on a request for certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request." The rules adopt the D.C. Circuit’s view in Hoopa Valley Tribe v. FERC that one year means one year, and they narrow the scope of conditions that states can impose on a project as part of the certification.

One Year Means One Year 

The section 401 process has been controversial in the context of energy infrastructure projects requiring federal approvals, such as natural gas pipelines, LNG terminals and hydroelectric facilities. Historically, states have commonly avoided the one-year limit by allowing multiple cycles of withdrawal-and-resubmittal of 401 certification applications, stretching the review period over many years.

This in part was thought necessary to allow adequate time to assess the water quality effects and appropriate mitigation measures for complex facilities, which would often draw comments from many stakeholders seeking to influence the terms of a new certification. However, in Hoopa Valley the court rejected this workaround and denounced the withdrawal-and-resubmittal practice as a tool "for states to use Section 401 to hold federal licensing hostage."

Shortly after Hoopa Valley, President Trump issued an Executive Order "Promoting Energy Infrastructure and Economic Growth," to make the regulatory process more efficient and to create "increased regulatory certainty." Among other things, the Executive Order directed EPA to review federal policy and regulations on section 401 implementation in light of the Hoopa Valley decision.

With the new rules, EPA has adopted Hoopa Valley’s position that the one-year limit of section 401 actually means one year, and explicitly rejected state practices resulting in certification processes extending to several years. The rules make clear that upon receiving a complete 401certification application, a state has one year to grant, grant with conditions, or deny the certification. Failure to do so will result in the state waiving its authority.

Scope of 401 Certification Conditions

The Supreme Court has ruled that section 401 confers on a state broad authority to impose conditions on a water quality certification. In the 1994 case of PUD No. 1 v. Wash. Dep’t of Ecology, the Court found that water quality certifications could include conditions related to quantity of water flow, holding that a state could require minimum stream flows as part of the section 401 certification. Twelve years later, the Court found in S.D. Warren Co. v. Me. Bd. Of Envtl. Prot. that states have broad latitude in imposing conditions that are not directly water quality-related, such as provision for fish passage or recreation.

However, in the preamble to the rules, EPA found that nothing in the CWA nor section 401 contains any statement suggesting that section 401 "authorize[s] consideration or the imposition of certification conditions based on air quality or transportation concerns, public access to waters, energy policy, or other multi-media or non-water quality impacts."

EPA reasoned that the phrase "any other appropriate requirement of State law," often used to justify broad state authority, only included "those provisions of State or Tribal law that contain requirements for point source discharges into water of the United States." The rejection of conditions not directly related to water quality seems to ignore Supreme Court guidance in PUD No.1 and S.D. Warren.

The Rules' Prospects in Court 

The new rules are certain to draw legal challenges from environmental groups and from states concerned that EPA’s interpretation denies them the full authority conferred under the statute. EPA’s interpretation that one year means one year is consistent with Hoopa Valley and with subsequent decisions and may fare well in court. However, narrowing the scope of the states’ authority to impose conditions on a certification will face serious judicial scrutiny in light of PUD No. 1 and S.D. Warren. In addition, opponents of the new rules may take issue with EPA’s authority, or lack thereof, to make rules governing how a program delegated to states should be administered.

One thing is for sure: the upheaval of the 401certification process initiated by Hoopa Valley is far from over, so stay tuned for future developments on this topic.