Federal Appellate Court Upholds EPA’s Clean Water Act Water Transfers Rule

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by Meline MacCurdy

Published with permission of the author.

EPA’s 2008 Water Transfers Rule recently survived its first attack in federal court in the latest decision regarding controversial water transfers in the Florida Everglades. Water transfers, which are particularly common in western states, involve routing water from one water body to another for uses such as public water supplies, irrigation, power generation, flood control, and environmental restoration. EPA’s 2008 Water Transfers Rule[1] excludes such transfers from the permitting requirements of the National Pollutant Discharge Elimination System (NPDES). The Eleventh Circuit’s decision, Friends of the Everglades v. South Florida Water Management District,[2] follows a lengthy procedural history in related cases, including a 2004 decision from the Supreme Court, as well as similar cases from other federal circuits.

A central issue in these cases is the so-called “unitary waters theory,” under which transferring contaminated water between distinct water bodies does not constitute an “addition” of pollutants to “navigable waters” that triggers NPDES requirements. EPA has supported the unitary waters theory for some time, and entities have offered EPA’s interpretation of the CWA’s NPDES requirements in defense of un-permitted water transfers in multiple lawsuits. Although, as the Friends court stated, “[t]he unitary waters theory … has struck out in every court of appeals where it has come up to the plate,” no court prior to Friends had assessed the unitary waters theory as embodied in a final rule. In Friends, the Eleventh Circuit upheld EPA’s Water Transfers Rule under Chevron-level deference, holding that excluding water transfers from the NPDES program was a reasonable construction of the CWA.

The decision has far-reaching implications for water rights allocation and water resource management across the U.S., because potentially thousands of NPDES permits would have been required if the court had reached a contrary result. The decision is likely to be appealed, and multiple cases challenging the Water Transfers Rule have already been filed.

Background to the Water Transfers Rule
Thousands of water transfers, through tunnels, channels, or other means, are routinely conducted by federal, state, and local agencies across the United States, for purposes such as providing public water supply, irrigation, power generation, flood control, and environmental restoration.[3] The Bureau of Reclamation alone provides approximately 140,000 farmers with irrigation water through transfers in western states, and many cities rely on water transfers for their water supply.

Diverting water from one area can have the effect of also placing contaminants from the source water body into the receiving water body. The CWA prohibits the discharge of a pollutant by any person, except in compliance with specified statutory sections, including the NPDES permit provisions in CWA Section 402.[4] The CWA broadly defines “discharge of a pollutant” as “any addition of any pollutant to navigable waters from any point source,” but it does not define the term “additional.”[5] As a result, disputes between the entities that conduct water transfers, EPA, citizen groups, and other stakeholders have focused on whether transferring contaminants between water bodies constitutes an “addition” of pollutants that is subject to an NPDES permit.

In its Water Transfers Rule, EPA sought to clarify that water transfers are not subject to NPDES requirements, because, according to the unitary waters theory, moving contaminants that are already within “navigable waters” does not constitute an “addition” of pollutants.[6] The Rule defines “water transfer” to mean “an activity that conveys or connects waters of the United States without subjecting the transferred water to intervening industrial, municipal, or commercial uses.”[7]

EPA published the Rule in part to respond to court decisions that rejected the unitary waters theory and required NPDES permits for water transfers, despite EPA’s consistent position that NPDES permits are not required.[8] However, some of these decisions left open the possibility that EPA’s position could be entitled to heightened deference if embodied in a final rule. For example, in the Supreme Court’s 2004 decision in South Florida Water Management District v. Miccosukee Tribe,[9] which involved the Florida Everglades project at issue in Friends, EPA offered the unitary waters theory in an amicus brief as one reason why an NPDES permit was not required for the water transfers. Although the Court’s analysis suggested that it was not persuaded by EPA’s interpretation of the CWA, the Court declined to issue a holding on this ground, and noted an absence of agency documents that recorded EPA’s interpretation.[10] Additionally, in the Second Circuit’s 2006 Catskills II[11]decision, the Second Circuit rejected the City of New York’s arguments that the unitary waters theory excluded water transfers from NPDES requirements, which were based in part on a 2005 EPA interpretative memorandum that supported this argument.[12] That case involved the transfer of water for New York City’s drinking water supply from a reservoir in upstate New York to a world-renowned trout stream in the Catskill Mountains, which has caused an increased turbidity of the stream. The Second Circuit affirmed its prior decision in Catskills I[13]that rejected the unitary waters theory based on “the plain language” of the CWA, this time despite EPA’s 2005 memorandum.[14] However, the Catskills II court did not assess EPA’s memorandum under Chevron.-level deference,[15] and the Catskills I court acknowledged that its decision might have been different if “EPA’s position had been adopted in a rulemaking or other formal proceeding.”[16]

Factual and Procedural History of Friends
Lake Okeechobee is the second largest freshwater lake in the continental United States, serves a multimillion dollar sport and commercial fishery, and provides habitat for multiple species. A series of flood control and water management projects beginning in the 1930s now control nearly all water flow in South Florida through gates, dikes, canals, and pump stations, and have replaced the Lake’s natural water flow. The system moves billions of gallons of water daily, and is responsible for the reclamation of much of the land in South Florida, providing the flood protection and stable water supply that allows millions of people to live in the flood plain of the Everglades ecosystem.[17]

The structures at the center of the Friends dispute are flow diversion facilities at the south end of the lake in the Everglades Agricultural Area, which collect rainwater from agricultural, industrial, and residential areas in canals and pump it back into the lake. The South Florida Water Management District (District), which operates and maintains these pumping stations without an NPDES permit, does not subject the waters to any intervening industrial, municipal or commercial use, or introduce anything to the water as it is conveyed to Lake Okeechobee.

In 2006, the district court held that an NPDES permit was required to discharge water containing pollutants into Lake Okeechobee.[18] The District and EPA, in intervention, argued that, consistent with EPA’s then-proposed Water Transfers Rule, the conveyance of one “water of the United States” into another without subjecting the water to intervening industrial, municipal or commercial use should be exempt from regulation under the NPDES permitting program. The district court rejected the analysis in EPA’s proposed Water Transfers Rule, concluding that the CWA unambiguously requires an NPDES permit for water transfers that result in the addition of a pollutant to the receiving body. In so doing, the district court stated that its decision would have been the same even if EPA had promulgated its Water Transfer Rule: “[T]he statute is unambiguous. No agency interpretation, or court order for that matter, can alter the unambiguous congressional intent expressed in a statute and the Court thus rejects the interpretation proposed by EPA.”[19]

The Eleventh Circuit’s Decision
On appeal, the Eleventh Circuit upheld EPA’s Water Transfers Rule under Chevron-level deference, although it appeared to do so with serious misgivings. The court stated that the “unitary water theory ha[d] a low batting average,” that the position had “struck out in every court of appeals where it ha[d] come to the plate,” and that the court was poised to “make it unanimous” but-for EPA’s final Rule.[20] In light of EPA’s Rule, however, the court determined that EPA’s interpretation was “a reasonable construction of an ambiguous statute” under Chevron-level deference.[21]

Both sides argued that the CWA was unambiguous, offering case law that supported or rejected EPA’s interpretation. The District pointed to two federal appellate court decisions that upheld EPA’s interpretations of NPDES requirements under the CWA in the context of transferring water through dams and power plants.[22] According to the court, neither of these decisions directly addressed the issue in EPA’s Water Transfers Rule, because they “involved water that wound up where it would have gone anyway.”[23] The plaintiffs argued that the CWA unambiguously required NPDES permits for the water transfers, pointing to the Catskills and Miccosukee line of cases, among others, and arguing that “all of the courts of appeal that have addressed the issue have found that ‘any addition of any pollutant to navigable waters’ includes moving polluted water between meaningfully distinct water bodies.”[24] The court rejected this argument, because none of these cases addressed the issue in front of the court, which was “whether the EPA’s interpretation of the statutory language is reasonable, even if [the court] might prefer another one.”[25]

In determining that the CWA was ambiguous, the court noted that Congress defined “discharge” as “any addition … to navigable waters” and defined “navigable waters” as “waters of the United States.”[26] The court noted the absence of the word “any” in front of terms “navigable waters” and “waters of the United States,” which the court viewed as support for the unitary waters theory. Further, the court acknowledged the use of the term “any navigable waters” in other areas of the CWA, which suggested to the court that “Congress knows how to use the term ‘any navigable water[s]’ when it wants to protect individual water bodies instead of navigable waters as a collective whole.”[27]

The court also assessed whether the language was ambiguous in light of the broad purposes of the CWA and the effect that exempting water transfers from NPDES requirements might have on effectuating these purposes.[28] For example, the court observed that NPDES permits are “intertwined with” state “water quality standards, which are specific to individual water bodies,” and that, as the plaintiffs argued, “it would make little sense to allow uncontrolled, un-permitted pumping between navigable waters that could have different water quality standards.”[29] Although the court acknowledged that the “unitary waters theory [might] not comport with the broad, general goals” of the CWA, and could even result in “horrible hypotheticals” such as pumping “the most loathsome navigable water in the country into the most pristine one,” it pointed out that multiple aspects of the statute are in tension with each other and the purposes of the statute as a whole.[30] “What this illustrates,” according to the court, “is that even when the preamble to legislation speaks single-mindedly and espouses lofty goals, the legislative process serves as a melting pot of competing interests and a face-off of battling factions. What emerges from the conflict to become the enactment is often less pure than the preamble promises.”[31] The court held that the CWA was ambiguous with respect to the unitary waters theory, and that EPA’s interpretation in the Water Transfers Rule was a reasonable construction of the statute.

Conclusion
The Friends decision is a victory for entities that are dependent on water transfers, particularly in the western states where a high percentage of water is transferred via inter-basin transfers, because it allows water supply and management projects throughout the United States to continue without the expense and potentially preclusive requirements of obtaining and following NPDES permits. However, the decision is unlikely to be the final word on the issue. The plaintiffs have expressed their intent to reverse the decision,[32] and multiple additional lawsuits challenging EPA’s Rule are pending in the Eleventh Circuit and federal district courts. Although the Friends court’s thorough analysis of the Rule under Chevron deference will surely present strong authority in these cases, particularly those pending in the Eleventh Circuit, aspects of the opinion and the potentially conflicting results from other cases that have addressed the unitary waters theory may leave room for a different result.

For more information on this decision or the Water Transfers Rule, please contact Meline MacCurdy or Jeff Kray.

[1] National Pollutant Discharge Elimination System (NPDES) Water Transfers Rule, 73 Fed. Reg. 33697 (June 13, 2008). For a description of the Water Transfers Rule, see, J. Kray, EPA Rule Exempts Water Transfers from NPDES Permit Requirements, Marten Law Group Environmental News (June 18, 2008).
[2] No. 07-13829, 2009 WL 1545551 (11th Cir. June 4, 2009).
[3] 73 Fed. Reg. at 33698-99.
[4] 33 U.S.C. § 1311(a).
[5] 33 U.S.C. § 1362(12).
[6] See,73 Fed. Reg. at 33699.
[7] 73 Fed. Reg. 33704.
[8] See J. Kray, EPA Says No NPDES Permit Required for Water Transfers, Marten Law Group Environmental News (October 12, 2005).
[9] South Florida Water Management District v. Miccosukee Tribe (“Miccosukee I”), 541 U.S. 95 (2004).
[10] Id. at 105-09.
[11] Catskills Mountains Ch. of Trout Unltd., Inc. v. City of New York (Catskills II), 451 F.3d 77 (2nd Cir. 2006). For further discussion of the Catskills II decision, see, J. Kray, Debate Continues on Whether Water Transfers are Exempt from NPDES Permit Requirements, Marten Law Group Environmental News (Aug. 2, 2006).
[12] See J. Kray, Interbasin Water Transfers Require NPDES Permit, Court Rules, Marten Law Group Environmental News (July 19, 2006).
[13] Catskill Mountains Chapter of Trout Unlimited, Inc. v. City of New York (Catskills I), 273 F.3d 481 (2d Cir. 2001).
[14] See, Catskills II, 451 F.3d at 84.
[15] See id. at 82.
[16] Catskills I,273 F.3d at 490.
[17] See Friends of the Everglades v. South Florida Water Management District, No. 07-13829, 2009 WL 1545551, *1-2 (11th Cir. June 4, 2009); Friends of Everglades, Inc. v. South Florida Water Management Dist., No. 02-80309, 2006 WL 3635465, *2-10 (S.D.Fla. Dec. 11, 2006).
[18] Friends of Everglades, Inc. v. South Florida Water Management Dist., No. 02-80309, 2006 WL 3635465 (S.D.Fla. Dec. 11, 2006).
[19] Id. at * 48.
[20] Friends of the Everglades v. South Florida Water Management District, No. 07-13829, 2009 WL 1545551, *5-6 (11th Cir. June 4, 2009).
[21] Id. at *6-7.
[22] Id.at *8-9 (discussing National Wildlife Federation v. Consumer Powers Co., 892 F.2d 580 (6th Cir. 1988) and National Wildlife Federation v. Gorsuch, 693 F.2d 156 (D.C. Cir. 1982)).
[23] Id. at *9.
[24] Id.
[25] Id.
[26] Id. at *12 (citing 33 U.S.C. §§ 1362(12), 3362(7)).
[27] Id.
[28] Id. at *14-16.
[29] Id. at *14.
[30] Id.
[31] Id. at *15.
[32] Friends of the Everglades, EPA Flushes CWA! (June 9, 2009).

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