Home » Case Summaries » 2008 » Natural Resources Defense Council v. U.S. Environmental Protection Agency

 
 

Natural Resources Defense Council v. U.S. Environmental Protection Agency

 

The Natural Resources Defense Council, along with various environmental advocacy groups (collectively NRDC),[1] petitioned the Ninth Circuit for review of a stormwater discharge rule promulgated by the U.S. Environmental Protection Agency (EPA). The challenged rule exempted discharges of sediment from oil and gas construction activities from the permitting requirements of the Clean Water Act (CWA),[2] even if these activities contributed to violations of water quality standards. The Ninth Circuit held the rule was an impermissible interpretation of section 402(l)(2) of the CWA because it was arbitrary and capricious. The Ninth Circuit vacated the rule and remanded the rule to EPA for further proceedings.

The National Pollutant Discharge Elimination System (NPDES) under the CWA requires dischargers obtain permits for any discharge of a pollutant from a point source.[3] Relevant to the case before the court, section 402(l)(2) exempts the discharge of uncontaminated stormwater runoff from oil, gas, and mining operations from the NPDES permitting requirements.[4] Section 402(l)(2) also provides the EPA Administrator discretion to determine whether stormwater runoff at such sites is contaminated.[5] In interpreting section 402(l)(2) prior to 2005, EPA took the position that all construction activities associated with oil, gas, or mining operations were ineligible for the exemption because of the serious water quality impacts caused by stormwater discharges polluted with construction site sediment.[6]

In 2005, Congress passed the Energy Policy Act.[7] Section 323 of the Energy Policy Act amended the CWA by expressly incorporating construction activities that occur at oil and gas operation sites into the definition of “‘oil and gas exploration, production, processing, or treatment operations, or transmission facilities’ . . . thereby bringing such activities within the CWA section 402(l)(2) exemption from the NPDES permitting requirement.”[8] In response, EPA issued a notice of proposed rulemaking, indicating the agency would modify EPA’s NPDES stormwater permit regulations to change the definition of oil and gas operations and to modify the agency’s interpretation of section 402(l)(2).[9] Ultimately, EPA promulgated the challenged rule, which exempted stormwater discharges comprised solely of sediment from oil and gas construction activities from the permitting requirements, even if such discharges contributed to a violation of a water quality standard.[10] In 2006, NRDC petitioned the Ninth Circuit for direct review of EPA’s promulgated rule.

The Ninth Circuit began by determining it had jurisdiction to review the petition and that petitioners NRDC had standing to bring the petition under the doctrine of associational standing. Next, the court explained it would review EPA’s final rule under the Administrative Procedure Act (APA),[11] which authorizes the court to set aside agency action that is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”[12] Because petitioners challenged EPA’s interpretation of section 323 of the Energy Policy Act, the court applied the two-step approach first set out in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (Chevron).[13]

The first step of the Chevron analysis required the court to determine whether “Congress, when it amended section 503(24) of the CWA, through section 323 of the Energy Policy Act, unambiguously intended to exempt from NPDES permitting requirements for oil and gas construction activities the discharge of storm water runoff contaminated solely with sediment.”[14] Explaining that neither CWA section 402(l) nor section 323 of the Energy Policy Act mention the term “sediment,” the court concluded a plain language analysis of the statute does not indicate Congress unambiguously intended to exempt stormwater discharges contaminated only with sediment from the NPDES permitting process. Similarly, the court concluded the legislative history of section 402(l)(2), which included the history of section 323 of the Energy Policy Act, did not unambiguously indicate whether Congress intended to exempt such discharges. Because the Ninth Circuit could not find evidence to show Congress intended to exempt stormwater discharges contaminated only by sediment, the court moved to step two of the Chevron test, which requires the court to determine if an agency’s interpretation is based on a permissible construction of the statute.[15]

Applying step two of Chevron, the Ninth Circuit held EPA’s interpretation of CWA section 402(l)(2), as amended by the Energy Policy Act, was an impermissible construction of the statute. EPA argued that “‘because sediment is the pollutant most commonly associated with construction activities,’ Congress must have meant to exempt all construction-related sediment when it made construction activities eligible for the exemption.”[16] However, the court concluded EPA’s interpretation of the amended section 402(l)(2) was arbitrary and capricious because the agency changed its position on what constitutes contamination.

In reaching a conclusion, the court determined that EPA did not adequately justify the reason for changing the agency’s position on the meaning of “contamination” under section 402(l)(2). In reviewing the statements made by EPA during the rulemaking process prior to the rulemaking under the Energy Policy Act, the court noted the agency previously recognized that stormwater polluted with sediment caused “serious water quality impacts”[17] and that oil and gas facilities had an obligation to apply for an NPDES permit for stormwater runoff contaminated only with sediment.[18] Because EPA’s change from its prior stance regarding the impact of stormwater discharge containing only sediment represented a “complete departure from its previous interpretation,” the court characterized EPA as having taken an “inconsistent and conflicting position” regarding whether NPDES permits were required for oil and gas construction activity runoff contaminated solely with sediment.[19] Consequently, the Ninth Circuit concluded that EPA’s regulation was arbitrary and capricious, and was therefore an impermissible construction of section 402(l)(2) of the CWA. In sum, the Ninth Circuit granted NRDC’s petition for review, vacated the challenged rule, and remanded the matter to EPA for further proceedings.

Judge Callahan dissented from the majority’s opinion. Although Judge Callahan agreed with the majority’s conclusion under Chevron step one, Judge Callahan disagreed with the majority’s conclusion that, under Chevron step two, the EPA rule was an impermissible interpretation of the statute. Pointing out that an “agency interpretation [that] contradicts a prior agency position is not fatal,”[20] Judge Callahan argued that EPA’s interpretation of the statute was a reasonable construction and that EPA included “a reasoned analysis” that adequately explained the agency’s reasons for the modification.[21] Additionally, Judge Callahan noted, “there appears to be no authority that would compel EPA to stay its hand until Congress specifically amended the ambiguous exemption” to expressly include “sediment.”[22] Therefore, Judge Callahan concluded EPA made a reasonable choice in adopting the revised interpretation and would have deferred to the agency’s decision.


[1] The other environmental groups involved were the Oil and Gas Accountability Project (OGAP), Amigos Bravos, and Powder River Basin Resource Council.

[2] Federal Water Pollution Control Act, 33 U.S.C. §§ 1251-1387 (2006).

[3] See id. § 1342.

[4] Under section 402(l) of the CWA,

[t]he Administrator shall not require a permit under this section . . . for discharges of stormwater runoff from mining operations or oil and gas exploration, production, processing, or treatment operations or transmission facilities, composed entirely of flows which are from conveyances or systems of conveyances (including but not limited to pipes, conduits, ditches, and channels) used for collecting and conveying precipitation runoff and which are not contaminated by contact with, or do not come into contact with, any overburden, raw material, intermediate products, finished product, byproduct, or waste products located on the site of such operations.

Id. (emphasis added).

[5] Natural Res. Def. Council v. U.S. Envtl. Prot. Agency (NRDC I), 966 F.2d 1292, 1307 (9th Cir. 1992).

[6] See National Pollutant Discharge Elimination System Permit Application Regulations for Storm Water Discharges, 55 Fed. Reg. 47,990, 48,033-34 (Nov. 16, 1990) (codified at 40 C.F.R. pts. 122-124).

[7] Pub. L. No. 109-58, § 323, 119 Stat. 694 (codified as amended at 33 U.S.C. § 1362(34)).

[8] Natural Res. Def. Council v. U.S. Envtl. Prot. Agency (NRDC II), 526 F.3d 591, 599 (9th Cir. 2008) (quoting section 323 of the Energy Policy Act).

[9] Amendments to the National Pollutant Discharge Elimination System (NPDES) Regulations for Storm Water Discharges Associated With Oil and Gas Exploration, Production, Processing, or Treatment Operations, or Transmission Facilities, 71 Fed. Reg. 894 (proposed Jan. 6, 2006) (codified at 40 C.F.R. pt. 122).According to EPA, “This proposed action would modify [NPDES] regulations to provide that certain storm water discharges from field activities, including construction, associated with oil and gas exploration, production, processing, or treatment operations, or transmission facilities would be exempt from [NPDES] permit requirements.” Id.

[10] Amendments to the National Pollutant Discharge Elimination System (NPDES) Regulations for Storm Water Discharges Associated With Oil and Gas Exploration, Production, Processing, or Treatment Operations or Transmission Facilities, 71 Fed. Reg. 33,628 (June 12, 2006) (codified at 40 C.F.R. pt. 122).

[11] 5 U.S.C. §§ 551-559, 701-06, 1305, 3105, 3344, 4301, 5335, 5362, 7521 (2006).

[12] Id. § 706(2)(A).

[13] 467 U.S. 837, 842-44 (1984).

[14] NRDC II, 526 F.3d 591, 603 (9th Cir. 2008); see also Chevron, 467 U.S. at 842-43.

[15] Chevron, 467 U.S. at 843.

[16] NRDC II, 526 F.3d at 606 (quoting Amendments to the National Pollutant Discharge Elimination System (NPDES) Regulations for Storm Water Discharges Associated With Oil and Gas Exploration, Production, Processing, or Treatment Operations, or Transmission Facilities, 71 Fed. Reg. 33,628, 33,634 (Jun. 12, 2006) (codified at 40 C.F.R. pt. 122)).

[17] National Pollutant Discharge Elimination System Permit Application Regulations for Storm Water Discharges, 55 Fed. Reg. 47,990, 48,033-34 (Nov. 16, 1990) (codified at 40 C.F.R. pts. 122, 123, 124).

[18] 40 C.F.R. § 122.26(c)(1)(iii)(C) (1990).

[19] NRDC II, 526 F.3d at 607.

[20] Smiley v. Citibank (S.D.), 517 U.S. 735, 742 (1996).

[21] NRDC II, 526 F.3d at 609.

[22] Id. at 610.

 

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