Member Pipeline - Legal - Alert (Leg 06-04)
| To: | Members & Affiliates, Legal Affairs Committees |
| From: | National Office |
| Date: | June 23, 2006 |
| Subject: | SECOND CIRCUIT DETERMINES WATER TRANSFER REQUIRES NPDES PERMIT, CONTRARY TO ONGOING EPA RULEMAKING |
| Reference: | Legal Alert 06-04 |
Printer friendly versionOn June 13, the U.S. Court of Appeals for the Second Circuit (Second Circuit) affirmed its 2001 decision that the City of New York (City) requires a National Pollutant Discharge Elimination System (NPDES) permit for its drinking water tunnel discharge. The Second Circuit also upheld the subsequent decision of the U.S. District Court for the Northern District (Northern District) to assess New York a $5.7 million penalty for the City’s operation of its Shandaken Tunnel[1] – a critical component of the City’s drinking water supply – without an NPDES permit. The court remanded the case to the Northern District for correction of a calculation error in the City’s penalty assessment, which will reduce the penalty by only approximately $500,000. The court’s decision in Catskill Mountains Chapter of Trout Unlimited v. City of New York (Catskills) stands in sharp contrast to the June 7 U.S. Environmental Protection Agency (EPA or Agency) proposed rule to plainly exempt water transfers, like the City’s, from the NPDES permitting program. See Regulatory Alert 06-05, http://www.nacwa.org/private/regalerts/ra06-05.cfm.
NACWA used its Targeted Action Fund (TAF) to participate in this case as amicus curiae in support of the City (specifically, NACWA member agency the New York City Department of Environmental Protection) with a coalition of municipal organizations, including the National League of Cities (NLC), the Association of Metropolitan Water Agencies (AMWA), and the New York State Conference of Mayors and Municipal Officials. The municipal coalition also submitted a December 2005 post oral argument letter to the court on variances from water quality standards.
This Alert summarizes the Catskills decision on water transfers and its implications for NACWA member agencies. This Alert also outlines NACWA’s next steps in this evolving legal and regulatory arena. A copy of the decision is available on NACWA’s Member Pipeline at http://www.nacwa.org/private/littrack/#20. As always, if you have any questions regarding this legal decision or NACWA’s other legal activities, please contact NACWA’s General Counsel Alexandra Dunn by e-mail at adunn@nacwa.org or by telephone at 202/533-1803.
I. Background
The Catskills case began in March 2000, when the Northern District
dismissed Trout Unlimited’s claims against the City, and held that the discharge
from the Shandaken Tunnel did not constitute an “addition” of a pollutant to the
Esopus Creek under the definition of “discharge of a pollutant” contained in CWA
§ 502(12), and thus, no NPDES permit was required. Trout Unlimited appealed the
decision to the Second Circuit, which in 2001 reversed the Northern District’s
findings and held that the City’s tunnel is subject to the NPDES permitting
program. The Second Circuit focused on the fact that the tunnel discharged water
containing suspended solids into the Esopus Creek, in violation of state water
quality standards. In the court’s mind, the City’s “point source” (tunnel) did
“discharge a pollutant” under CWA § 502(12) because it added solids to the
creek, and thus an NPDES permit was required. The fact that the pollutants were
naturally occurring, and that the City was merely moving the water between
locations, was not persuasive to the court. On remand, the Northern District
ordered the city to obtain an NPDES permit for the discharge to the Esopus Creek
and to pay $5.7 million in CWA civil penalties – the largest penalty assessment
ever under the CWA.
The City began applying for a permit for the tunnel discharge. Simultaneously, however, the City pursued an appeal back to the Second Circuit, specifically because of the U.S. Supreme Court’s 2004 decision in South Florida Water Management District (SFWMD) v. Miccosukee Tribe of Indians (Miccosukee). See Legal Alert 04-04, http://www.nacwa.org/private/legalalerts/leg04-4.cfm. Most relevantly, the Miccosukee Court held that water transfers within a single water basin do not require NPDES permits, but left open the question of whether interbasin water transfers required NPDES permits. The City also asserted that the penalty assessment was excessive due to the inconsistent policy on this matter nationwide, and given EPA’s plans to issue a rulemaking to exempt such water transfers from the NPDES program.
II. Summary of the Catskills Decision
In its June 13 opinion, the Second Circuit undertakes a series of
distinct analyses to reaffirm its October 2001 decision that the City’s tunnel
requires a permit, as follows.
A. Miccosukee Did Not Change the Law
The court holds that while not directly answering whether a permit is needed
for interbasin transfers, Miccosukee affirms the court’s view that
intrabasin and interbasin transfers are deserving of different treatment.
The Second Circuit dismisses the theories left open for consideration by the
Supreme Court in Miccosukee – the unitary waters theory[2]
and the holistic theory.[3] Instead, the Second
Circuit cultivates its own analytical approach, which focuses on a “balance”
between maintaining water quality and respecting the rights of states to
allocate water within their own boundaries.
While the court acknowledges the rights of states to allocate water within their borders, it finds the CWA’s goal of limiting water pollution paramount. The court concludes that regulation of the tunnel waters would not impede water flow altogether, and calls City arguments to the contrary “alarmist and unwarranted.”
B. Impact of EPA’s August 2005 Memorandum and June 2006
Proposed Rule
Although the court does not directly address EPA’s June 7 proposed rule to
exempt water transfers from the NPDES program, it discusses EPA’s August 2005
interpretation (which was the basis for the proposed rule). The court concludes
that EPA’s CWA interpretation is inappropriate, unconvincing, and inconsistent
with the plain language of the CWA. The court confirms its belief that
interbasin water transfers are among the discharges covered by the NPDES
permitting program, despite EPA’s statements to the contrary. The court returns
to its October 2001 assessment that under CWA’s broad definition of a “discharge
of a pollutant” as “any addition of any pollutant to navigable waters from any
point source” (CWA § 502(12)), the Shandaken Tunnel plainly qualifies as a point
source which adds a pollutant (silt and turbidity) to a navigable water.
C. Reasonableness of the CWA Penalty
The Second Circuit then turns to the issue of whether the $5.7 million
penalty was excessive. The City argued that the penalty was too high while on
cross-appeal, Trout Unlimited contended that the penalty was not high enough.
The court finds Trout Unlimited’s contention untrue and deems the reasoning
behind the fine appropriate. But, while investigating the enormous fine, the
Second Circuit determines the Northern District erroneously calculated the
penalty, and remands the case to the Northern District for a $500,000 reduction.
D. Practicalities of Permitting the Tunnel
The court contends that while obtaining a permit for the tunnel discharge
may be difficult and costly, it may be necessary to preserve water quality.
While recognizing the administrative burden caused by NPDES permitting
requirements for interbasin water transfers, the court expresses little doubt
that the City will still be able to deliver drinking water to New York City
residents.
III. NACWA’s Next Steps
NACWA’s next steps on the water transfer issue will follow two paths.
First, based on NACWA’s historic advocacy on this issue, NACWA plans to file
comments supporting EPA’s proposed water transfer rule by the July 24 deadline.
NACWA encourages member agencies impacted by EPA’s proposal to provide input to
the National Office for NACWA’s comments by July 10, and to file their own
individual comments as well. Comments may be sent by e-mail to NACWA’s Alexandra
Dunn at adunn@nacwa.org.
Second, it is possible that the City may file a petition for certiorari with the U.S. Supreme Court. Although the Court takes very few cases presented for review, it may be interested in this case because the Court left similar issues unresolved in its 2004 decision in Miccosukee. NACWA will ask the Board of Directors at the July meeting in Seattle, WA, for Fiscal Year (FY) 2007 TAF funds to continue our support of NYCDEP before the U.S. Supreme Court, if the City chooses to seek certiorari.
We will keep the membership apprised of further developments in this important matter.
[1] The Shandaken Tunnel conveys untreated, natural drinking water to the Esopus Creek, a distinct body of water that leads to the City’s Schoharie Reservoir.
[2] The unitary waters theory, advanced by the U.S. Government before the U.S. Supreme Court in Miccosukee, asserts that the CWA’s § 502(7) definition of “navigable waters” as “all waters of the United States, including territorial seas” means that all U.S. waterways should be viewed as a single system for the purposes of NPDES permitting. Thus, all water transfers would fall outside the NPDES program because they are all transfers within a single water basin – that being the navigable waters of the U.S. This theory was criticized as “extreme” by some Supreme Court Justices during oral argument in Miccosukee.
[3] The holistic theory looks to give full and equal purpose to various CWA provisions, such as § 402 (designed to control the introduction of pollutants to U.S. waters), § 101(g) (preserving states’ rights over water management), and § 304(f) (directing EPA to develop guidelines for nonpoint sources of pollutants from, among other things, “changes in the movement, flow or circulation of any navigable waters. . . including changes caused by the construction of dams, levees, channels, causeways, or flow diversion facilities”). Under the holistic theory, water transfers should not be permitted because other CWA provisions address them, and dictate a different outcome.