Welding on Gas PipelineOn August 7, 2019, US EPA Administrator Andrew Wheeler signed the Agency’s newest proposal to amend the Clean Water Act (CWA) to streamline permitting of energy projects. Specifically, the proposed rule would amend the regulations concerning Section 401 of the CWA. It represents US EPA’s first comprehensive effort to promulgate federal rules governing the implementation of Section 401 of the CWA.

The proposed rule is in response to President Trump’s April 2019 Executive Order 13868 (see our post here), which directs US EPA to revise guidance on the CWA Section 401 certification process and propose new rules to implement CWA Section 401 by August 8, 2019. When announcing the proposed rule, Administrator Wheeler stated: “[T]he United States has become the number one oil and gas energy producer in the world, while at the same time continuing to improve our air quality.” He then noted, “Our proposal is intended to help ensure that states adhere to the statutory language and intent of Clean Water Act. When implemented, this proposal will streamline the process for constructing new energy infrastructure projects that are good for American families, American workers, and the American economy.”

Federal Regulation of Interstate Pipelines

Interstate natural gas pipeline projects are regulated under the Natural Gas Act (NGA), which is a federal law governing the transportation of natural gas in interstate commerce. Regulatory authority over such interstate pipeline projects has been vested in the Federal Energy Regulatory Commission (FERC). The NGA designates FERC as the lead agency for coordination of all federal permits, special use authorizations, certifications, or other approvals of a natural gas pipeline. The NGA generally preempts conflicting state regulations; however, the NGA is subservient to the CWA. The CWA, therefore, is one of the primary vehicles through which states and authorized tribes participate in the permitting of pipeline projects.

The CWA is a federal law that reserves to the states the right to adopt and enforce standards or limitations involving discharges of pollutants into waters of the United States. Importantly, under Section 401, a federal agency such as FERC is prohibited from issuing a license or permit to conduct any activity that may result in discharge into waters of the United States, unless the state or authorized tribe where the discharge would originate either issues a Section 401 Water Quality Certification or waives the certification requirement. A Section 401 certification demonstrates that the discharge would comply with state or tribal water quality standards.

US EPA’s Proposed Rule

The proposed rule makes numerous clarifications to the current Section 401 regulations. The highlights of the proposed rule include clarifications to the triggering actions for Section 401 review, the timeline for state review, and the scope of state review.

Triggering Actions for Section 401 Review

US EPA first proposes that “section 401 is triggered by the potential for a discharge to occur, rather than an actual discharge.” US EPA then proposes that the potential discharge must be into a water of the United States. “Potential discharges into state or tribal waters that are not waters of the United States do not trigger the requirement to obtain section 401 certification.” US EPA also proposes that Section 401 is triggered “by any unqualified discharge, rather than by a discharge of pollutants.” This amendment is consistent with S.D. Warren Co. v. Maine Bd. of Envtl. Prot., 547 U.S. 370, 376 (2006) where the US Supreme Court concluded that Congress intended the term “discharge of pollutants” in Section 401 to be broader than is used elsewhere in the CWA.

Timeline for State Review

The proposed rule also clarifies the time period for state review of Section 401 requests (see our post here for a recent case regarding this issue). For example, US EPA proposes that “the statutory timeline for certification review starts upon receipt by the certifying authority of a ‘certification request.’” (Emphasis added.) The proposed rule then lists documents and information that must be included in a “certification request.” Several states currently have their own requirements for Section 401 certification requests (some of which are more extensive than the list provided in the proposed rule). Accordingly, US EPA recommends that states update their existing 401 certification regulations to ensure consistency with US EPA’s regulations.

Perhaps most importantly, US EPA proposes clarifications to the time limit for state and tribal review of Section 401 requests. Currently, the CWA states that “[i]f the State . . . 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, the certification requirements of this subsection shall be waived with respect to such Federal application.” (Emphasis added). The proposed rule clarifies that “a certifying authority has a reasonable period of time, not to exceed one year, to complete its section 401 certification analysis. If the authority fails or refuses to act within that reasonable period, the certification requirement will be deemed waived by the federal licensing or permitting agency.” (Emphasis added.) On this point, the proposed rule is in accord with Hoopa Valley Tribe v. FERC, 913 F.3d 1099 (D.C. Cir. 2019) where the D.C. Circuit concluded that one year is the absolute maximum time period for a state or authorized tribe to complete its review and determine whether to issue the 401 certification. Moreover, US EPA goes on to propose that “[t]he certifying authority may be subject to a shorter period of time, provided it is reasonable.”

Much of the controversy arising out of the proposed rule stems from US EPA’s clarification on the time limit for state review of Section 401 requests. Recently, some states, including New York and Washington, have been engaged in multi-year reviews of Section 401 requests. These multi-year reviews have been states’ de facto method of blocking pipeline projects. Accordingly, many stakeholders have cited concerns with this protracted review process. See Letter from National Tribal Water Council to David P. Ross, Assistant Administrator of the Office of Water, EPA (Mar. 1, 2019) (as cited in EPA’s proposed rule) (citing delays in Hoopa Valley as a “concrete example of how the §401 certification process was being manipulated by a state certification agency to delay implementation of effective water quality controls and enhancement measures”). Moreover, in Executive Order 13868, President Trump specifically noted “the need to promote timely Federal-State cooperation and collaboration.” (Emphasis added.)

Scope of State Review

Finally, the proposed rule defines the “scope of certification” as being “limited to assuring that a discharge from a Federally licensed or permitted activity will comply with water quality requirements.” This definition arguably narrows the scope of state and tribal review. The proposed rule, for examples, notes that “certifying authorities have included conditions not related directly to water quality in section 401 certifications, including requiring construction of biking and hiking trails, requiring one-time and recurring payments to state agencies for improvements or enhancements that are unrelated to the proposed federally licensed or permitted project, and creating public access for fishing along waters of the United States.”

In the proposed rule, however, US EPA states that “expanding the scope of section 401 to include consideration of effects and the imposition of conditions unrelated to water quality would, at a minimum, invoke the outer limits of power Congress delegated under the CWA.” Accordingly, as stated by US EPA in its June 2019 CWA Section 401 Guidance, “[i]f a state or tribe issues a Section 401 certification with conditions beyond the scope of Section 401 . . . federal permitting agencies should work with their Office of General Counsel and the EPA to determine whether a permit or license should be issued with those conditions or if waiver has occurred.” (Emphasis added.)

Comment Period

US EPA will accept comments on the proposed rule for 60 days after its publication in the Federal Register. Comments may be submitted online at https://www.regulations.gov/ under Docket ID No. EPA-HQ-OW-2019-0405. Squire Patton Boggs will closely monitor developments and provide updates on this issue.