Overview
The US Environmental Protection Agency (EPA) issued its final Clean Water Act (CWA) Section 401 rule on June 1, which aims to tighten up the requirements for state and tribal water quality certifications under the CWA. CWA Section 401 grants authority to states (and tribes that have been approved for "treatment as a State" status) to issue "water quality certifications" for a proposed activity that requires a federal permit. A state can deny or condition certification if it determines the project will have a negative impact on water quality within the state's borders. Some states have used their water quality certification authority to block energy project developments. For example, New York has denied the 401 certification for several natural gas pipelines, and Washington state denied the 401 certification for the Millennium Coal Export Terminal. Some state decisions were perceived as politically motivated, and were criticized for relying on considerations beyond traditional water quality impacts, including climate change. The new EPA rule is part of the Trump administration's broader efforts to limit this perceived misuse of Section 401.
The new rule is 289 pages, and involves numerous changes, but the following are a few key points from the rule:
- The rule emphasizes that CWA Section 401 is limited to water quality considerations only. A state cannot block or condition a water permit for a project for reasons other than water quality impacts on state waters. This is to avoid 401 denials or conditions based on climate change, energy policy, or other non-water quality considerations.
- The rule imposes a firm one-year deadline for a decision. EPA is clarifying that a certifying authority must act on a Section 401 certification within a reasonable period of time, which shall not exceed one year after receipt of a certification request. The final rule defines "certification request" as a written, signed, and dated communication that includes project documents and information as specified in the final rule. In the past, states have often attempted to extend the one year period by seeking further information from the applicant or denying the application as incomplete at the 11th hour.
- The rule clarifies that a certifying state can impose conditions only on the discharge subject to 404 permitting, not on the project as a whole. This is largely related to CWA section 401(d), which allows the certifying authority to include conditions "to assure that any applicant for a Federal license or permit will comply" with applicable provisions of the CWA and other appropriate requirements of state or tribal law. The text of section 401(d) has been interpreted by some states and courts as broadening the scope of section 401(a) beyond consideration of water quality impacts from the "discharge" which triggers the certification requirement, to allow certification conditions that address water quality impacts from any aspect of the construction or operation of the activity as a whole. EPA is using this rulemaking to reject such prior interpretations, and to clarify that the 401(a)(1) certification relates to the discharge involved with the federal action, not the project as whole.
- The rule is also aimed at tightening up the 401 provisions regarding downstream states. CWA § 401(a)(2) provides neighboring states with an opportunity to object to 404 permits if EPA determines the permitted discharge "may affect" the water quality in the state. With regard to 401(a)(2), the new rule establishes a discretionary authority for EPA to determine if a permit may impact the water quality in a neighboring jurisdiction. The proposal's emphasis on EPA’s discretion is important because it indicates that a state can't trigger 401(a)(2) simply by asserting that downstream impacts will occur. In addition, a discretionary decision is generally not subject to judicial review. In other words, the ultimate permit or license decision will be subject to judicial review, but EPA arguably can’t be challenged for failing to notify a downstream state.
The final rule becomes effective 60 days after it is published in the federal register. EPA provides that certification requests that have been submitted or that are currently pending should continue to be processed in accordance with pre-existing law.
The 401 rule will be challenged, and there is some potential legal vulnerability. For example, the rule takes on a 1994 Supreme Court decision that considered the scope of a state's authority to condition a Section 401 certification and concluded that Section 401 authorizes a state to impose conditions on the activity as a whole, not just the discharge. PUD No. 1 v. Washington DOE, 511 U.S. 700 (1994). There will likely be challenges that the new rule is contrary to the Supreme Court's prior ruling. Several states have already indicated that they would challenge the rule. In addition, we may see efforts to undo the rule by a future administration or Congress.
