High on the list of Trump administration rules that will be reevaluated by the Biden administration is the Environmental Protection Agency’s (EPA’s) Clean Water Act (CWA) section 401 rule on state water quality certifications of federal permits. Frustrated by states that have used their section 401 authority to thwart new energy projects—particularly natural gas pipelines—the Trump administration directed the EPA to overhaul its 50-year-old section 401 rule. The revised rule, which took effect last September, interprets state section 401 authority more narrowly, and deadlines to exercise that authority more strictly.
Twenty states and several other entities immediately challenged the rule. It would not be surprising if the Biden administration ceased defending these challenges and revised the rule to at least broaden the grounds on which states may reject or restrict projects. Moreover, because section 401 clearly allows states to reject projects based on a wide range of water quality concerns, the rule, even if it survives, may do little in practice to prevent a state that opposes a project from identifying a sufficient water quality reason to reject it.
Section 401 is a powerful tool for states, and for tribes that are treated as states under the CWA. It prohibits issuing a federal permit for an activity that may discharge to “waters of the United States,” unless the state where the discharge originates certifies that the discharge will comply with specified provisions of the CWA, including water quality standards. A certification must include conditions necessary to ensure compliance with these provisions, as well as with “any other appropriate requirement of State law.” These become conditions of any federal permit for the activity. If, however, the state fails to act on a request for certification “within a reasonable period,” not to exceed one year, the certification requirement is waived.
Because most activities subject to section 401 are also regulated under state law, a state ordinarily does not need section 401 to regulate the activity. Some federal laws, however, “preempt” state law, including federal laws that give the Federal Energy Regulatory Commission exclusive authority to license hydropower projects, natural gas pipelines, and certain other facilities. In these instances, section 401 may be the principal or only means for a state to block or restrict the facility.
The EPA’s rule attempts to constrain the states’ section 401 authority by strictly interpreting the statutory deadline to make a certification decision, and by limiting the grounds for denying or conditioning a certification to specified “water quality requirements.” Under the rule, if a state does not act on a certification request within a year or any shorter period that the federal permitting agency determines is reasonable, certification is waived. The state may not extend this period by deeming a request to be “incomplete”; the federal agency may not allow the state more than a year; and the applicant may not agree to more time.
A state can obtain more time simply by denying the certification request, forcing the applicant to either challenge the denial or submit a new request, restarting the clock. Or the state may certify the project with conservative conditions, forcing the applicant to submit a request and supporting information to modify it. In either case, obtaining a certification with acceptable conditions might still require longer than a year.
The EPA’s rule also narrows the grounds on which a state may deny or condition a certification in two substantial ways. First, it interprets “any other appropriate requirement of State law” under section 401 to be limited to “regulatory requirements for point source discharges.” Courts have generally interpreted the statutory phrase more broadly, albeit not uniformly. For example, many courts have held that it includes any requirement related to water quality.
Second, and contrary to a 1994 U.S. Supreme Court decision, the rule interprets section 401 to be limited to a project’s discharges, not other aspects of the project that may affect water quality. These elements of the rule are the most controversial and most likely to be revised, either through litigation or modifications.
The fate of the EPA’s rule under the Biden administration is likely to be similar to that of Obama administration rules during the Trump presidency—multiple, protracted legal challenges to the rule, the adoption of a revised rule, and then multiple, protracted legal challenges to the revised rules, with the challengers and defenders switching sides. Section 401 is 50 years old and, like much of the rest of the CWA, needs to be clarified and updated. But with a divided and partisan Congress and almost no political consensus on water quality issues, that will not happen in the foreseeable future. The scope of the states’ section 401 authority will likely remain in the courts, with uncertainty for years to come.
—Michael Campbell is a partner in the Portland, Oregon, office of Stoel Rives LLP, advising energy clients on Clean Water Act section 401 and water quality issues. Veronica Keithley is a lawyer in the Seattle, Washington, office of Stoel Rives; she advises clients on water quality and other environmental issues.