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States Sue EPA Over Water Rule, Alleging Loss of Veto Power (1)

July 21, 2020, 6:55 PMUpdated: July 21, 2020, 8:03 PM

A multistate coalition is suing the EPA over a rule that it claims limits the power of states to block infrastructure projects, such as interstate oil and gas pipelines, on water quality grounds.

Democratic Attorneys General Xavier Becerra of California, Bob Ferguson of Washington, and Letitia James of New York are leading a group of 20 states and the District of Columbia alleging that the new rule will hamper states’ ability to adequately review project proposals for water quality impacts.

Becerra said the rule “clears the deck for fossil fuel infrastructure” by limiting the scope of reviews states can conduct.

The recently published rule (RIN: 2040-AF86) will make it more difficult for states to protect their waters and wetlands, the attorneys general said Tuesday in a complaint filed in the U.S. District Court for the Northern District of California.

The Environmental Protection Agency’s rule amounts to a “drastic curtailment of state authority” that violates “the plain language, structure, purpose and legislative history of the Clean Water Act,” the attorneys general alleged.

Narrowed Scope

The rule, published July 13, reduces the scope of state reviews of pipeline crossings. States must focus on direct water quality impacts, and not on indirect impacts such as climate change or acid rain caused by air pollution, under the rule.

State reviews are mandated under Section 401 of the Clean Water Act, which 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.

The rule provides a new reading of Section 401 by specifically giving states a one-year deadline to veto projects requiring federal licenses or permits, like dredge-and-fill permits. 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 EPA declined to comment directly on the litigation, but said “the agency’s final rule increases the transparency and efficiency of the Section 401 certification process in order to promote the timely review of infrastructure projects while continuing to ensure that Americans have clean water for drinking and recreation.”

Becerra said the administration “once again” is “attempting to undermine the Clean Water Act—this time by limiting longstanding state authority to protect our waters from degradation tied to federally-approved projects,”

Two separate lawsuits already were filed by environmental groups on the day the EPA rule was published.

Similar Plaintiffs

Tuesday’s lawsuit is filed by roughly the same states that challenged the EPA over which waterways and wetlands are considered “waters of the U.S.” and protected under the Clean Water Act.

The states claim that the EPA’s two recent water rules have left states with no power to protect their waterways and wetlands against projects that would endanger drinking water supplies.

The lawsuit also alleges that the EPA, under President Donald Trump’s April 2019 executive order, has issued a rule that is contrary to U.S. Supreme Court precedent and EPA’s own longstanding guidance on interpreting the Clean Water Act provision.

The order required EPA to devise rules to remove impediments like the Section 401 authority exercised by states to block interstate pipeline projects passing through coastal states. Washington state in 2017 had blocked the construction of the Millennium Export Terminal that would have exported Powder River Basin coal mined in Wyoming, Montana, Colorado, and Utah to Japan and other countries

Supreme Court Ruling

States authority under section 401 to impose conditions on a federally permitted or licensed project is not limited to water quality controls specifically tied to an actual “discharge” of pollutants, according to the complaint.

EPA, however, has chosen to follow the minority view of a 1994 U.S. Supreme Court ruling in PUD No. 1 of Jefferson Cty v. Wash. Dept. of Ecology.

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.

Tough Rule to Defend

“I do think the EPA has its work cut out for it in defending this rule in courts,” Ashley Peck, a Holland Hart LLP partner based in Salt Lake City, said Tuesday. “The EPA is going against Supreme Court precedent and 40 years of states applying Section 401.”

Doug Obegi, a senior Clean Water Act lawyer with the nonprofit Natural Resources Defense Council, who joined Becerra for Tuesday’s announcement, said the EPA rule “eviscerates” the rights of states by imposing “unlawful and unreasonable” conditions on reviews.

In California alone, Obegi said, the state issues hundreds of these certifications and only a few are deemed controversial.

Peck agrees with Obegi, though she said the certification process is in need of streamlining, but not to the extent that EPA has gone with this rule.

Becerra said the one-year time limit prevents states from conducting a thorough review of water quality impacts.

Apart from California, New York, and Washington, the other states on the lawsuit are Colorado, Connecticut, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, New Jersey, North Carolina, Oregon, Rhode Island, Vermont, Virginia, and Wisconsin. The District of Columbia also joined in the lawsuit.

Cause of Action: Violation of the Clean Water Act and Administrative Procedure Act.

Relief: Vacate the 2020 Clean Water Act Section 401 Certification Rule.

Response: The EPA said it doesn’t comment on pending litigation, but made clear that prior to their revisions, “the EPA’s water quality certification regulations were nearly 50 years old and did not reflect the statutory language in Section 401.”

Attorneys: Attorneys general Xavier Becerra for California, Bob Ferguson for Washington, and Letitia James for New York.

The case is: California v. EPA, N.D. Cal., No. 20-04869, 7/21/20.

(Updated story with additional reporting. )

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

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergindustry.com; Rebecca Baker at rbaker@bloombergindustry.com

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