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Eleventh Circuit Defers to EPA’s Water Transfers Rule In Bellwether Case

Beveridge & Diamond, P.C., June 9, 2009

On June 4, 2009, the United States Court of Appeals for the Eleventh Circuit held that Florida water managers did not violate the Clean Water Act (“CWA”) when they pumped pollutant-laden water from runoff canals into Lake Okeechobee without a permit.  Friends of the Everglades v. So. Fla. Water Mgmt. Dist., No. 07-13829 (11th Cir. June 4, 2009) (“Friends I”).  The opinion is the first to have considered a challenge to a permit-less water transfer in light of a controversial EPA-issued Rule that exempts certain water transfers from regulation under the National Pollutant Discharge Elimination System (“NPDES”) permitting program.  The court’s deference to EPA’s rationale stands in marked-contrast to a number of prior court opinions that the CWA requires permits for water transfers.  Although EPA’s Final Rule remains subject to pending litigation, the court’s decision in Friends I has the potential to influence subsequent judicial analyses.   

Water Transfers and the Clean Water Act

The CWA prohibits the “discharge of any pollutant by any person” unless authorized by statute.  33 U.S.C. § 1311.  The Act defines “discharge of a pollutant” broadly as “any addition of any pollutant to navigable waters from any point source.”  Id. § 1362.  NPDES permits are the regulatory centerpiece by which discharges may be authorized.  Id. § 1342.  Water transfers, which route waters from one jurisdictional water body to another through tunnels, channels, pumps or other diversion systems, often carry pollutants from the first water (the donor water) to the second (the receiving water).  The debate over whether water transfers require NPDES permits stems from the CWA’s failure to more specifically define “addition of a pollutant.”  Under EPA’s “unitary waters” theory, water transfers do not trigger the NPDES permit requirement because even though pollutants are carried from one water to another through a point source, the transfer does not result in an “addition” of pollutants.  According to EPA, “Congress generally did not intend to subject water transfers to the NPDES program and . . . there is no ‘addition’ of a pollutant which would trigger the requirement to obtain an NPDES permit because the pollutants are already in the waters being transferred and are not being added from the outside world.”  See NPDES Water Transfers Final Rule Fact Sheet.  On the other hand, environmental organizations and others concerned about the impacts of unregulated water transfers on water quality and drinking water have long argued that the CWA unambiguously requires a permit when pollutants are added from one distinct water body to another.  

In the past, EPA’s unitary water theory has endured harsh treatment from the courts.  In 2001, the United States Court of Appeals for the Second Circuit dealt a significant blow to the theory when it held that “the transfer of water containing pollutants from one body of water to another, distinct body of water is plainly an addition and thus a ‘discharge’ that demands an NPDES permit.”  Catskill Mountains Chapter of Trout Unltd., Inc. v. City of New York, 273 F.3d 481, 491 (2d Cir. 2001) (Catskill I).  In 2005, after the U.S. Supreme Court expressly declined to decide whether the “unitary waters” theory was a permissible interpretation of the CWA, (See S. Fla. Water Mgmt. Dist. v. Miccosukee Tribe of Indians, 541 U.S. 95 (2004)), EPA released an interpretive memorandum articulating the Agency’s policy that water transfers are exempt from the NPDES permitting program and subject only to state regulation.  In 2006, EPA issued a proposed water transfer rule that closely tracked the interpretive memorandum.  71 Fed. Reg. 32887 (June 7, 2006).  However, just six days after publication of the proposed rule, the Second Circuit again undermined the legal basis of EPA’s interpretation when it reaffirmed its decision in Catskill I and concluded that the interpretive memorandum, “simply overlook[ed the] plain language” of the CWA.  Catskill Mountains Chapter of Trout Unltd., Inc. v. City of New York, 451 F.3d 77 (2d Cir. 2006) (Catskill II). 

The unitary waters theory suffered yet another setback by the district court’s holding in Friends IFriends of the Everglades, Inc. v. S. Fla.
Water Mgmt. Dist.
, 2006 U.S. Dist. LEXIS 89450 (S.D. Fla. 2006).  Since the 1970’s, the South Florida Water Management District  pumped canal waters polluted by agricultural runoff into Lake Okeechobee without an NPDES permit.  Environmental organizations brought suit, claiming the water transfer violated the CWA as an unauthorized discharge of a pollutant.  In its decision, the court considered EPA’s proposed water transfer rule but ultimately rejected the Agency’s position, holding “it is evident that ‘addition . . . to the waters of the United States’ contemplates an addition from anywhere outside of the receiving water, including from another body of water.  2006 U.S. Dist. LEXIS 89450 at *131.  The U.S. Government, which had intervened in Friends I on behalf of EPA, appealed the decision to the U.S. Court of Appeals for the Eleventh Circuit.  Friends of the Everglades, Inc. v. S. Fla. Water Mgmt. Dist., No. 07-13829 (11th Cir. filed Aug. 20, 2007). 

On June 9, 2008, with Friends I awaiting the Eleventh Circuit’s review, EPA published the Final Water Transfers Rule exempting from the permit requirement “activity that conveys or connects waters of the United States without subjecting the transferred water to any intervening industrial, municipal, or commercial use.”  73 Fed. Reg. 33697 (June 13, 2008) (codified at 40 C.F.R. § 122.3(i)).  Like its predecessor 2005 interpretive memorandum and 2006 proposed rule, the Final Rule is based on EPA’s unitary waters theory that water transfers do not require NPDES permits because any pollutants conveyed to the receiving water already exist in the waters of the United States, and therefore no pollutants are added. 

Eager to challenge EPA’s regulatory proclamation of the unitary waters theory once and for all, environmental groups initiated an onslaught of lawsuits against EPA in federal district courts and circuit courts around the country.  Lawsuits filed in the circuit courts of appeals were consolidated and randomly assigned to the Eleventh Circuit.  See Friends of the Everglades v. U.S. EPA, No. 08-13652-CC (11th Cir. consolidated Sept. 10, 2008) (Friends II).  Challenges filed at the District Court level were consolidated in the Southern District of New York, Catskill Mountains Chapter of Trout Unltd., Inc. v. EPA, No. 08-cv-05606-KMK (S.D.N.Y. consolidated Oct. 8, 2008) (Catskill III), and in the Southern District of Florida, Friends of the Everglades v. United States, No. 08-cv-21785-CMA (S.D. Fla. consolidated Sept. 18, 2008).  Each of the three consolidated petitions was stayed pending the Eleventh Circuit’s disposition of the appeal of Friends I.  In granting the stay, the U.S. District Court for the Southern District of New York explained that “[a]lthough [Friends I] does not involve a direct challenge to the [Final Rule], it involves a direct challenge to the [proposed rule] which is virtually identical to the [Final Rule].  Particularly given that the legality of the [Final Rule] ‘has not [yet] been the subject of a ruling federal court,’ the Eleventh Circuit’s review of the [proposed rule] will be instructive as to the underlying merits of the instant actions.  See Order at 19, Catskill III, No. 08-cv-05606-KMK (S.D.N.Y. docketed April 29, 2009).  

The Eleventh Circuit’s Decision in Friends I

Friends I did not involve a direct challenge to the Final Rule as the case was decided by the District Court before the Rule was officially promulgated.  However, without much analysis, the court stated that it “does not matter that the regulation was proposed and issued well after the beginning of this lawsuit.”  Friends, Slip Op. at 16.  The court then went on to express appreciation for its position as “the first court to address the ‘addition . . . to navigable waters’ issue in light of the regulation—to decide whether the regulation is due . . . deference.”  Id. at 15.  Thus, in deciding Friends I on appeal, a three-judge panel of the Eleventh Circuit squarely confronted EPA’s rationale for the Final Rule. 

The court held that the statutory meaning of “addition of any pollutant” is ambiguous, and that EPA’s “unitary waters theory is a reasonable, and therefore permissible, construction of the [CWA].”  Id. at 40.  The Eleventh Circuit panel declined to follow the trend of earlier judicial opinions that rejected the unitary waters theory, finding instead that promulgated as a regulation under notice and comment rulemaking procedures, the unitary waters theory was now entitled to greater deference than when expressed in the interpretive memorandum or proposed rule.  Id. at 15.  Reversing the district court, the court held that in light of the new Rule, the South Florida Water Management District could transfer the water without an NPDES permit.  Id. at  40. 

Conclusion

Now that the Eleventh Circuit has issued its opinion in Friends I, the consolidated challenges to the Rule in the Southern District of New York, the Southern District of Florida, and the Eleventh Circuit will reopen.  The direct effect of Friends I on the consolidated challenges is unclear.  While the courts hearing those challenges are not required to follow Friends I’s deference to EPA’s interpretation, they will need to account for this new case, either as guidance to be followed or as a background against which to contrast their own decisions. 

At a minimum, however, Friends I marks a significant victory for EPA’s unitary waters theory, and petitioners challenging the Final Rule will face an uphill battle to convince the courts that the Eleventh Circuit panel’s decision was erroneous.  Environmental groups are likely to continue their opposition to the unitary waters theory through appeals, petitions for rehearing, and potentially by seeking review by the U.S. Supreme Court.  Stakeholders are well-advised to stay tuned for new developments in the near future.     

To read the Eleventh Circuit’s decision in Friends I, click here.  To read EPA’s Final Water Transfers Rule, click here.  For further information, please contact Karen Hansen at (202) 789-6056, khansen@bdlaw.com or Richard Davis at (202) 789-6025, rdavis@bdlaw.com.  This alert was prepared with the assistance of Graham St. Michel.

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