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EPA Narrows States’ Veto Power Over Infrastructure Projects (4)

June 1, 2020, 6:25 PMUpdated: June 1, 2020, 10:22 PM

States will have less time and no reasons other than water quality concerns to try to block energy infrastructure projects requiring federal licenses and permits—including oil and natural gas pipelines— under a final EPA rule released Monday.

The Environmental Protection Agency rule (RIN: 2040-AF86) aims to discourage coastal states from relying on part of the Clean Water Act to block fossil fuel projects that pass through their states.

Certain states were “inappropriately” holding up critical energy infrastructure projects, and this rule “puts an end to an abuse to this practice,” EPA Administrator Andrew Wheeler told news reporters Monday.

The part of the Clean Water Act in question, Section 401, directs states to ensure that proposals needing federal permits also meet water quality standards within their borders. A project can’t obtain a federal license until it has received state certification.

“EPA is returning the Clean Water Act certification process under Section 401 to its original purpose, which is to review potential impacts that discharges from federally permitted projects may have on water resources, not to indefinitely delay or block critically important infrastructure,” Wheeler said in a statement announcing the rule’s release.

In writing the rule, the EPA said it followed President Donald Trump’s April 2019 directive (E.O. 13868) to review the time states took to issue a veto, and the reasons the states gave for justifying their vetoes.

Republicans strongly back the EPA’s regulation. Oklahoma Gov. Kevin Stitt (R) said at a U.S. Senate Environment and Public Works hearing last year that “a hatred of fossil fuels” is driving a handful of coastal states to block federal projects to export coal or transport natural gas that have nothing to do with protecting water quality.

And Sen. John Barrasso (R-Wyo.), who chairs the Environment committee, praised the rule Monday, saying that certain states “can no longer abuse the water certification process for political purposes.”

“The state of Washington has hijacked this process and blocked Wyoming coal from being exported,” Barrasso said in a statement.

Break from Past Practice

In a break from past practice, the EPA now requires states to complete application reviews within one year, or waive the right to object to projects requiring federal licenses or permits. The EPA also said it reserves the right to override state vetoes if they aren’t consistent with the law or the final EPA rule.

Until now, states began the one-year clock after they deemed an application complete. That enabled states to start reviews and make objections beyond the one-year time frame.

The rule provides much-needed certainty for companies on the timelines of their applications, according to Larry Liebesman, a former Justice Department environmental lawyer now at the environmental and water permitting firm of Dawson & Associates.

The American Petroleum Institute was quick to praise the rule, saying “the addition of a well-defined timeline and review process will provide certainty to operators as they develop infrastructure projects that meet state water quality standards.”

Democratic Opposition

Democratic lawmakers and environmental groups, as well as state water officials, oppose the rule.

Lisa Feldt, vice president of environmental protection and restoration at the Chesapeake Bay Foundation, said the rule “arbitrarily limits how long states can review projects and restricts the potential damages, including the effects of climate change and air pollution, states can consider.”

The Natural Resources Defense Council’s federal water policy director, Jon Devine, said the group was “evaluating the claimed legal basis for it and will be making a decision on next steps.”

New York and Massachusetts have used Section 401 authority to veto interstate pipeline projects, while Washington state has used it to block a coal export terminal. Laura Watson, director of Washington State Department of Ecology, described the rule as “unprecedented.”

“We will work with Attorney General Bob Ferguson to defend our state’s authority to protect water quality for the environment and for the 7.5 million Washingtonians we serve,” Watson said.

EPA said the scope of state review or action must be limited directly to water quality concerns, as the Clean Water Act requires under Section 401.

Wheeler made it clear that states can’t use this veto power to block projects due to climate change impacts, as New York Gov. Andrew Cuomo (D) did a year ago with his veto of an interstate pipeline project. Describing Cuomo’s veto as “the worst environmental decision ever made by an elected official,” Wheeler said: “You can’t use climate change as a reason going forward, only for water quality.”

But Wheeler said the rule wouldn’t apply retroactively.

‘No Appetite for It’

The EPA maintained in its proposed rule that nothing in the text of the Clean Water Act, or its legislative history, signals that “Congress intended to impose federal regulations on anything more than water quality-related impacts to waters of the United States.”

If Congress had intended Section 401 to authorize consideration of air quality concerns, public access to waters, energy policy, or other concerns, the EPA said “it would have provided a clear statement to that effect.”

But Sen. Tom Carper of Delaware, the top Democrat on the Senate Environment and Public Works Committee and a frequent critic of the Trump administration’s environmental policies, said the rule “defies congressional intent and flies in the face of cooperative federalism.”

California Attorney General Xavier Becerra (D) called the rule the Trump administration’s “latest assault on the Clean Water Act” and the state’s natural resources.

“We won’t stand idly by as they rip away our authority under the law to preserve water quality,” Becerra said.

State water officials said the rule is “frustrating on many levels.”

Wheeler said he consulted with states.

Julia Anastasio, executive director and general counsel for the Association of Clean Water Administrators, which represents state water officials, said Wheeler only spoke with interested industry stakeholders, “but not with the agency’s co-regulators, the states.”

Inviting Litigation

Sean Herman, a Hanson Bridgett LLP attorney who has been tracking the rulemaking, said the EPA is inviting litigation by hewing to the minority view of a 1994 U.S. Supreme Court ruling in PUD No. 1 of Jefferson Cty v. Wash. Dept. of Ecology

“The EPA faces an uphill battle since the Supreme Court has already weighed in on this issue,” Herman said in an interview.

In a 7-2 decision, the justices interpreted Section 401 broadly and held that states may impose conditions on the project activity as a whole, and not merely on the project’s discharges.

At the time, they agreed with EPA’s conclusion that “activities—not merely discharges—must comply with state water quality standards is a reasonable interpretation of § 401, and is entitled to deference.”

Writing for the minority, Justice Clarence Thomas insisted that certification was limited to discharges into federally protected waters and that as a result, states couldn’t impose conditions on project activities other than those affecting water quality.

Wheeler, however, insisted, that the rule is fully in line with the Supreme court’s ruling. “When a state uses 401 veto power for separate reasons, we consider that to be an abuse. This rule guards against further abuses,” he said.

Brand X Deference

Herman said the EPA is invoking what is known as the “Brand X deference” that the Supreme Court articulated in yet another unrelated case in 2005, National Cable & Telecommunications Association v. Brand X Internet Services.

Under this deference, agencies may interpret ambiguous statutes differently than the precedent set in courts, as long as their interpretation is lawful and reasonable.

Herman said the EPA’s reliance on Brand X deference raises several questions, given the history of how the Supreme Court and lower courts have ruled on this provision of the law.

“The EPA must surmount these administrative hurdles before it even gets to the proposed rule’s substance,” Herman said.

Sarah Peterman Bell, an environmental attorney with Farella Braun + Martel, said the EPA’s reliance on Justice Thomas’ dissent in PUD No. 1 is unlikely to be “the deciding factor in any challenges to this rulemaking. But it will certainly be part of the discussion.”

(Adds comments from Sen. Tom Carper in paragraph 24. A previous version corrected Lisa Feldt's title.)

To contact the reporter on this story: Amena H. Saiyid in Washington at asaiyid@bloombergenvironment.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergindustry.com; Chuck McCutcheon at cmccutcheon@bloombergenvironment.com

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