Clean Water Act §401—Whose Certification Is It?

Posted on April 19, 2019 by Richard Glick

As part of the Administration’s policy in favor of domestic oil and gas development, President Trump issued an Executive Order on April 10 “Promoting Energy Infrastructure and Economic Growth.”  The EO seeks to make the regulatory process more efficient and to create “increased regulatory certainty.”   

A policy focus in the EO is water quality certification under section 401 of the Clean Water Act.  Section 401 provides that before a federal agency may approve a project that could result in a “discharge” to navigable waters, the state or tribe with jurisdiction must certify that the discharge would comply with water quality standards, effluent limitations and “other appropriate requirements of State law.”  The statute imposes a one-year period for the state or tribe to act. 

This issue arises most often in the context of permits issued by the Corps of Engineers under section 404 of the CWA to fill wetlands, and licenses issued by the Federal Energy Regulatory Commission for hydroelectric projects under the Federal Power Act.  Both trigger state review under section 401.  Gas pipelines and LNG terminal developments almost always involve stream crossings or shoreline work, which means filling of wetlands.

The EO directs EPA to take the lead to review federal policy and regulations concerning section 401 implementation.  In particular, EPA is to revisit the 2010 interim guidance entitled “Clean Water Act Section 401 Water Quality Certification: A Water Quality Protection Tool for States and Tribes.”  In its review, EPA is directed to focus on a list of issues, including the appropriate scope of 401 review, the “types of conditions that may be appropriate to include in a certification,” reasonable review times and how much information should be requested of the applicant.

Who could be opposed to improved regulatory efficiency and certainty?  To be sure, the section 401 process can be contentious and time consuming. Although section 401 prescribes a one-year review period, the issues are thorny and it has become a common practice for applicants to withdraw and refile applications to restart the clock.  A recent decision by the D. C. Circuit Court of Appeals throws a shadow on that practice, but one year doesn’t necessarily mean one year.  It is also true that states have used section 401 as a cudgel to block LNG developments, as in the AES Sparrows Point LNG Project.

The problem with the EO is that it directs EPA to “fix” a problem over which it has little authority.  Section 401 is a program administered by the states and EPA has just a marginal role to ensure that one state’s 401 decision doesn’t violate a downstream state’s water quality standards.  Even EPA’s 2010 interim guidance is just a compendium of case law and general principles to aid state implementation, not a document that establishes policy.

Indeed, the scope of state section 401 authority is broad, and states use that authority to promote state policies far beyond water quality standards.  Any limitations on state discretion over the process and conditions of certification are likely to come from the courts, not EPA.  States are not shy in asserting their sovereignty and no state is going to cede any of its authority to EPA, regardless of what any new guidance or rules might suggest.

Hoopa Valley Tribe v. FERC: When Does One Year Mean One Year?

Posted on March 19, 2019 by Rick Glick

As Seth Jaffe noted in this blog, on January 25, 2019, the U. S. Court of Appeals for the D. C. Circuit rendered a highly significant opinion with respect to state water quality certification under section 401 of the Clean Water Act (CWA).  In Hoopa Valley Tribe v. FERC, the court rejected the commonly used workaround of the one-year statutory limit on state action by allowing multiple cycles of withdrawal-and-resubmittal of applications, holding that the States of Oregon and California had waived their authority by acceding to this practice.  The attached article, just published in The Water Report, discusses the case and its implications in detail.

Section 401 provides that before a federal agency can approve a project that may result in a “discharge to the navigable waters” the applicant must obtain water quality certifications from the affected state.  However, the state is deemed to have waived its delegated authority under section 401 if it "fails or refuses to act on a request for certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request."   

Determining the water quality effects and appropriate mitigation for hydroelectric facilities that have been in place for over half a century is a complex undertaking.  Additional study and data are often needed, which could take more than one year to complete.  Moreover, since relicensing brings out a myriad of stakeholders seeking an opportunity to influence the next license term, 401 issues are frequently addressed through multi-party settlement negotiations, which can also take a long time to resolve.  This has led state 401 agencies and applicants to enter into understandings under which the applicant would withdraw its application before the end of one year and then resubmit it to reset the clock.  Such withdrawal-and-resubmittal cycles have often stretched over a period of many years. 

The case arises under a settlement agreement between the States of California and Oregon, PacifiCorp and other stakeholders leading to eventual removal of PacifiCorp’s Klamath River hydroelectric projects.  Such removal requires FERC approval, and thus water quality certification by the two states. The parties contemplated that this process would take years to complete and agreed that each year PacifiCorp would withdraw and resubmit its 401 applications to avoid waiver, but the new annual applications would be unchanged from the previous ones.  The D. C. Circuit was plainly put off by this common practice, and it is clear that the particular facts of this case drove the outcome. 

The court’s holding has huge implications for owners of hydroelectric facilities going through the licensing or relicensing process at FERC.  In the attached article, I describe the decision, the context in which it was reached, and what it might mean for the FERC and section 401 processes going forward.

More litigation is likely to come.  Watch this space for updates.

DAVID AND GOLIATH AT THE CONOWINGO DAM

Posted on June 26, 2018 by Ridgway Hall

Exelon owns and operates the Conowingo Dam across the Susquehanna River in Maryland just below the Pennsylvania border, including a 573 megawatt hydroelectric power plant. It is seeking a renewal of its operating license from FERC under the Federal Power Act for 50 years. Section 401 of the Clean Water Act requires that any applicant for a federal license that may result in a discharge submit a certification by the state where the discharge will occur that the discharge “will comply with the applicable provisions” of the CWA, including water quality standards. The certification may include conditions and requirements, including monitoring and reporting, deemed necessary to ensure compliance. The certification becomes part of the federal license, and the licensing agency may not change it.

The facts in this case are unusual, and the outcome will likely be precedential. For decades, sediment has flowed down the 450 miles of the Susquehanna River from New York and Pennsylvania and accumulated in the reservoir behind the dam, trapping nitrogen, phosphorus, metals, PCBs and other pollutants along with the sediment,  Now the trapping capacity has been reached. Several times in recent decades severe storms have scoured out tons of this sediment and carried it over the dam and into the Chesapeake Bay 10 miles downstream, causing not just violation of water quality standards, but severe damage to oysters, bay grasses and benthic organisms.  In addition, the dam has blocked historic fish passage. Measures such as fish ladders and transportation have produced only modest relief. Since 2010 the entire Chesapeake Bay and its tributary system has been subject to a multi-state total maximum daily load (TMDL) for nitrogen, phosphorus and sediment, but at the time that was set, it was not anticipated that the Conowingo trapping capacity would be exhausted this soon.

On April 27, 2018, the Maryland Department of the Environment issued a CWA certification in which it determined that numerous conditions must be complied with by Exelon in order to reasonably ensure compliance with water quality standards. It requires, among other things, measures to ensure compliance with standards for dissolved oxygen (DO), chlorophyll-A (an indicator of algae), turbidity, temperature, pH and bacteriological criteria in the reservoir and downstream waters including the Bay, plus compliance with plans to protect various fish species, waterfowl and habitat. It also requires shoreline protection, removal of trash from the reservoir and a variety of monitoring programs.

Notably, to satisfy the DO standards, which are adversely affected by nutrients and are critical to aquatic life, MDE requires that starting in 2025 Exelon must annually reduce the amount of nitrogen in its discharges by 6 million pounds, and phosphorus by 260,000 pounds. Exelon can also satisfy this requirement by installing best management practices elsewhere upstream or paying $17 per pound of nitrogen and $270 per pound of phosphorus for any amounts not removed.

Exelon promptly filed a request for reconsideration and administrative appeal with MDE. It also filed a complaint in Maryland state court seeking a declaration that the certification could not be considered “final action” until proceedings before MDE were concluded, including Exelon’s right to an evidentiary hearing; an injunction against any consideration of the certification by FERC, and, alternatively, for judicial review. Exelon also filed suit in the U.S District Court in Washington, D.C., claiming that MDE’s certification exceeded its CWA authority and constituted an unconstitutional taking of its property, and seeking declaratory and injunctive relief.  See Exelon’s filings at here.

Among Exelon’s complaints is the fact that the certification would require it to spend vast sums to remove pollutants that did not come from its operations, but from upstream polluters. The fee equivalent of the nitrogen and phosphorus removals would amount to $172 million per year – far more than Exelon earns from the operation of Conowingo. An environmental impact statement had concluded that efforts to remove the sediment from behind the dam “would be cost-prohibitive and ineffective.” Releases from the dam, Exelon contends, are not “discharges” but “pass-through.” Exelon also argues that fish passage damage was caused decades ago and it would be unfair to make Exelon bear the full cost of restoring it.

Some environmental groups have joined the administrative appeal process.  Stewards of the Lower Susquehanna and Waterkeepers Chesapeake (a group of 18 Waterkeeper organizations in the Chesapeake Bay watershed) appealed to MDE asking that protection against scouring by big storms be strengthened and that likely effects from climate change be considered, but otherwise supporting the certification. The Nature Conservancy and the Chesapeake Bay Foundation, both with longstanding interests in water quality and restoration of the fisheries and fish passage, have also been actively involved.

The stakes are high. MDE, “David” in my title, has taken some bold measures to address some enormous problems, and Exelon is fighting back hard. However it comes out, the resolution will have precedential value for other CWA 401 cases across the country, and particularly for hydroelectric projects.