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Second Circuit Upholds EPA’s Water Transfer Rule

The United States Second Circuit Court of Appeals (Second Circuit) recently upheld the Environmental Protection Agency’s (EPA) rule that exempts certain water transfers from obtaining a National Pollution Discharge Elimination System (NPDES) permit.  Catskill Mts. Chptr. of Trout Unlimited, Inc. v. United States EPA, Nos. 14-1823, 14-1909, 14-1991, 14-1997, 14-2003, 2017 U.S. App. LEXIS 914 (2d Cir. Jan. 18, 2017) (Catskill Mountains).  In a 2-1 decision, the Court deferred to EPA’s expertise in formulating the rule and found that it was consistent with the Clean Water Act (CWA), which requires NPDES permits.  This ruling was a defeat for environmental groups who argued that the rule violated the CWA because it allows the transfer of polluted low quality water from one water body to a water body with high quality clean water.  However, the Second Circuit’s decision was an important victory for municipalities and irrigation districts, which would have been required to comply with the costly NPDES permitting process if the rule had been struck down.

Prior to officially promulgating the rule, it has been the EPA’s long standing position that an NPDES permit under section 402 of the CWA was not required when water is transferred from one water body to another without an intervening industrial, municipal, or commercial use.  The EPA promulgated the water transfer rule in 2008, and it was immediately challenged in court by a coalition of environmental groups, fishing enthusiasts, nine states, and one Canadian province (collectively “Plaintiffs”).  These Plaintiffs, led by the Catskill Mountains Chapter of Trout Unlimited, argued that EPA’s interpretation of the CWA was unreasonable.  Numerous cities, tribes, states and private entities intervened to defend the rule, including Californian entities like the State Water Contractors who rely on water transfers from the State Water Project.  The New York District Court ruled in favor of the Plaintiffs, finding that the rule was not a reasonable interpretation of the CWA because it “was contrary to the requirements established by the Act.”  Catskill Mountains at 10.

Both the New York District Court and the Second Circuit found that the Chevron deference test applied to the EPA’s water transfer rule, but only the Second Circuit held that the rule was reasonable and must be upheld.  Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (Chevron).  In applying the Chevron deference test, the Second Circuit found that the language of the CWA was ambiguous because there could be multiple interpretations of the language “addition of any pollutant to navigable waters.”  Catskill Mountains at 41-42, quoting 33 U.S.C. 1362(12).  Then the Second Circuit broke with the New York District Court and held that the EPA’s interpretation of the statute was reasonable, explaining:

Although the Rule may or may not be the best or most faithful interpretation of the Act in light of its paramount goal of restoring and protecting the quality of U.S. waters, it is supported by several valid arguments—interpretive, theoretical, and practical.  And the EPAʹs interpretation of the Act as reflected in the Rule seems to us to be precisely the kind of policymaking decision that Chevron is designed to protect from overly intrusive judicial review.  Catskill Mountains at 59.

It is likely that the Plaintiffs will seek a rehearing in the Second Circuit or review by the Supreme Court, but for now the water transfer rule will provide stability and certainty to entities who rely on water transfers.

For additional information, please contact Kristian Corby at kcorby@somachlaw.com or 916-446-7979.

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