EPA Finalizes Clean Water Act Water Quality Certification Rule & Attempts to Narrow State and Tribal Review

On June 1, 2020, the US Environmental Protection Agency (EPA) released the final rule overhauling the regulations guiding states' and authorized tribes' issuance of required water quality certifications under Section 401 of the Clean Water Act.¹ The Administration touts this rulemaking as a key component of its efforts to expedite infrastructure permitting, fulfilling a commitment made in an April 2019 Executive Order.² Responding to criticism that states have used their Section 401 authority to significantly delay or block major infrastructures projects in recent years, the rulemaking is intended to provide certainty and require timely decisions. In the short run, however, it may lead to increased litigation and in some cases additional delays in project implementation. Here's what you need to know:

What Is the problem the rulemaking is intended to solve?

Through Section 401 of the Clean Water Act (CWA), Congress directly grants authority to States and certain Tribes to review any discharge into a water of the United States that may result from a proposed activity that requires a federal license or permit. Under CWA Section 401, a federal agency may not issue a permit or license authorizing a discharge into waters of the United States unless the state or authorized tribe where the discharge originates either (1) issues a certification verifying that the discharge complies with water quality requirements or (2) waives the certification requirement. Through this authority, states and certain tribes ("certifying authorities") have authority to impose conditions on, or even block projects otherwise approved by the federal government. The use of this direct federal authority by states and tribes to stop construction and operation of infrastructure projects has been hotly contested—especially in the northeast and primarily for projects where federal statutes otherwise preempt state regulatory authorities, including, for example, interstate natural gas pipelines³ and hydropower projects.⁴

Five key changes

Narrowing Certifying Authorities' Scope of Review. Among the most controversial changes in the final rule are those that narrow the factors that can be considered by state and authorized tribes when conducting their reviews. EPA attempts to strictly limit the scope of review through three changes, including:

• Adding a new section establishing that the "scope of certification" is "limited to assuring that a discharge from a Federally licensed or permitted activity will comply with water quality requirements."
• Defining "discharges" to include only those from "point sources into waters of the United States."
• Limiting "water quality requirements" to those standards established under the "applicable provisions of §§ 301, 302, 303, 306, and 307 of the Clean Water Act, and state or tribal regulatory requirements for point source discharges into waters of the United States."

These changes are controversial because they restrict states and authorized tribes from reviewing the entire scope of a proposed project. As a result, project impacts that might adversely impact water quality without violating promulgated standards (e.g., water availability and greenhouse gas emission impacts) are now off limits. For example, the New York Department of Environmental Conservation (NYSDEC) recently denied certification for the Northeast Supply Enhancement Project, a natural gas pipeline, based in part on the pipeline's greenhouse gas emissions that "cause climate change and thus indirectly impact water and coastal resources."⁵ These considerations would appear to be outside the scope of NYSDEC's authority under the new rules. The changes are also controversial because opponents argue they are in direct conflict with Supreme Court precedent in Public Utility District No. 1 of Jefferson County v. Washington Department of Ecology, which allows certifying authorities to consider the CWA's antidegradation policy to ensure that existing water uses and the level of water quality are maintained and protected.⁶

Limiting the Imposition of Conditions by Certifying Authorities. EPA also restricts states' and authorized tribes' ability to impose conditions on certifications. The rule requires that for each condition, the certificate include a "statement explaining why the condition is necessary to assure that the discharge from the proposed project will comply with the water quality requirements." Therefore, conditions to avoid, minimize, and mitigate impacts may only be imposed to address impacts within the narrowed scope of review.

Restricting Certifying Authorities' Review Timelines. The rulemaking imposes new restrictions on the time that states and tribes have to conduct their reviews. Specifically, it provides that the CWA's statutory "reasonable period of time" for review "shall not exceed one year from receipt" of an application for a 401 certification, though federal agencies have discretion to establish even shorter time frames. The changes are intended to codify the D.C. Circuit's decision in Hoopa Valley Tribe v. FERC, which rejected the practice of some states to "reset" the review clock by deeming applications incomplete or requiring applications to be withdrawn and resubmitted.⁷

Expanding Federal Agencies' Review Authorities. EPA has also arguably expanded the federal agencies' role by granting them authority to determine that a certification or condition is waived based on the certifying authorities' failure to comply with certain certification requirements, such as explaining the need for conditions or acting within "a reasonable period of time." To be sure, the preamble to the final rule makes clear that federal agencies must implement the certifying officials' decision even where it disagrees with the substantive determination, provided the certifying authority "meets the procedural requirements of section 401." However, the rule arguably blurs the line between "substantive" and "procedural" requirements by granting federal agencies authority to determine whether certifying authorities have, for example, complied with the substantive requirements for mitigation measures.⁸

Modifying Application Filing Requirements. Less controversially, the rule also includes a number of changes intended to expedite the application process, including requiring project proponents to request a pre-filing meeting and establishing detailed requirements for the elements of certification requests.

An Uncertain Path Forward

Potential for Repeal. This rulemaking could be subject to repeal under the Congressional Review Act (CRA) if Democrats win the presidency and both houses of Congress in November. Depending on how the calendar for the remainder of the congressional term plays out, the rule may fall within the CRA's "look back" period, in which a new administration can repeal regulations issued by a previous administration.

If it is not repealed, the rule will inevitably be challenged by states, tribes, and environmental interest groups, which have strongly opposed the rulemaking as an attack on environmental protections and the cooperative federalism mandated by the CWA. This litigation is likely to proceed in federal district court, as it appears to fall outside the scope of the CWA's provision for exclusive judicial review in the US Circuit Courts of Appeal.⁹ If plaintiffs are unable to succeed with a facial challenge to the rule, then it will inevitably by challenged in the context of specific cases.

Impact on Certifications. As a first task, some states and authorized tribes may seek to revise their regulations and guidance to conform to the new rule. Others may wait to see how things will play out in litigation. In the long term, it's unclear how this rulemaking will change the dynamic between federal agencies, state agencies, tribes, and project proponents. Critically, a group of Attorney Generals have argued that EPA does not have authority to promulgate this rulemaking.¹⁰ On the plus side, the procedural changes intended to improve the application submission process are likely to provide some additional clarity early in the process. However, any benefits of the other changes remain less certain. The time limits on certifying authorities' review is a welcome development for many project proponents; on the other hand, it could also restrict the opportunity for coordination between project proponents and certifying authorities, potentially leading to more denials and litigation. These time constraints may also push certifying authorities to issue incomplete or rushed certifications, making them vulnerable to collateral challenges.

ADVICE FOR INFRASTRUCTURE DEVELOPERS

In the months ahead, federal agencies and some certifying authorities will be amending their regulations and guidance to be consistent with the new rule.¹¹ Project proponents should closely follow these efforts, particularly if federal agencies establish significantly compressed agency-specific "reasonable timelines." For example, the US Army Corps of Engineers is likely to codify aspects of its August 2019 regulatory guidance letter clarifying that the default "reasonable time period" for certification reviews is only 60 days.¹²

If you have questions or concerns about the Section 401 regulations or other infrastructure permitting efficiency initiatives, please contact a member of Arnold & Porter's Infrastructure, Environmental Review and Permitting team.

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.