Appendix — Arkansas v. Oklahoma

Supreme VOUL, Weve |

FILED

> 8 1991

LERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1990

STATE OF ARKANSAS, et al.,

Petitioners,

STATE OF OKLAHOMA, et al.,

Respondents.

Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Tenth Circuit

APPENDIX TO

PETITION FOR A WRIT OF CERTIORARI

Winston Bryant

Attorney General

Mary Stallcup

OFFICE OF THE ATTORNEY

GENERAL

200 Tower Building

4th & Center

Little Rock, AR 72201

James N. McCord

CITY OF FAYETTEVILLE

207 West Center Street

Fayetteville, AR 72701

Anne Roberts Bobo

A.D.P.C. & E.

P.O. Box 8913

Little Rock, AR 72219-8913

February 8, 1991

Edward W. Warren, P.C.

David G. Norrell

(Counsel of Record)

Gary E. Marchant

KIRKLAND & ELLIS

Suite 1200

655 Fifteenth Street, N.W.

Washington, D.C. 20005

(202) 879-5070

Walter R. Niblock

’ THE NIBLOCK LAW FIRM

P.O. Drawer 818

Fayetteville, AR 72702

Nancy L. Hamm

HAMM LAW FIRM

193 West Lafayette

Fayetteville, AR 72702

——

WILSON - Epes PrinTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

Appendix A:

Appendix B:

Appendix C:

Appendix D:

Appendix E:

Appendix F:

Appendix G:

Appendix H:

Appendix I:

Appendix J:

TABLE OF CONTENTS

Tenth Circuit Opinion, July 11, 1990......

Tenth Circuit Order Denying Rehearing

and Rehearing En Banc, October 11,

a untsones

Tenth Circuit Order Granting Stay of

Mandate, October 31, 1990 ...0 0...

Order of Justice Byron R. White Ex-

tending Time To File Petition For Writ

of Certiorari, December 28, 1990 ...........

Tenth Circuit Judgment ..........000.0000000...

EPA Administrative Law Judge, Initial

Decision, January 12, 1988 _...........0......

EPA Chief Judicial Officer, Order on

Petitions for Review, June 28, 1988 ._......

EPA Administrative Law Judge, Deci-

sion on Remand, September 19, 1988......

EPA Chief Judicial Officer, Second Order

on Petitions for Review, December 22,

RE ERLE ISL I RE A AORN A

Pertinent Provisions of Clean Water Act

Sections 301, 303, 401, 402 and 510...

Page

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87a

89a

90a

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93a

108a

122a

145a

154a

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APPENDIX A

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

Nos. 89-9503, 89-9507 and 89-9516

THE STATE OF OKLAHOMA, OKLAHOMA SCENIC RIVERS

COMMISSION AND POLLUTION CONTROL COORDINATING

BOARD; SAVE THE ILLINOIS River (STIR), a non-profit

corporation of the State of Oklahoma; City or Fay-

ETTEVILLE, ARKANSAS; THE BEAVER WATER DISTRICT;

STATE OF ARKANSAS; ARKANSAS DEPARTMENT OF POL-

LUTION CONTROL AND ECOLOGY,

Petitioners,

Vv.

ENVIRONMENTAL PROTECTION AGENCY,

Respondent,

OKLAHOMA WILDLIFE FEDERATION,

Intervenor.

July 11, 1990

Robert A. Butkin (Robert H. Henry, Atty. Gen., and

William J. Holmes, Asst. Atty. Gen., State of Okl., Ed

Edmondson and Julian K. Fite, Muskogee, Okl., on the

briefs), Oklahoma City, Okl., for petitioners, State of

Okl., Oklahoma Scenic Rivers Com’n and Pollution Con-

trol Coordinating Bd.

2a

John Steven Clark, Atty. Gen. (R.B. Friedlander, Sol.

Gen., Attys. for State of Ark., Steven Weaver, Anne Rob-

erts Bobo, Attys. for Arkansas Dept. of Pollution Control

& Ecology, Little Rock., Ark., James N. McCord, Atty.

for City of Fayetteville, Ark., Niblock Law Firm, Atty.

for Beaver Water Dist., Fayetteville, Ark., on the brief),

for petitioners, City of Fayetteville, Ark., Beaver Water

Dist., State of Ark., Arkansas Dept. of Pollution Control

and Ecology.

Gary Guzy (Catherine A. Winer, Pat Rankin, U.S.

E.P.A., and Richard B. Stewart, Asst. Atty. Gen., with

him on the briefs), U.S. Dept. of Justice, Washington,

D.C., for respondent.

Ed Edmondson, Muskogee, Okl., appearing for Save

the Illinois River.

Before ANDERSON and BRORBY, Circuit Judges,

and THEIS,* District Judge.

BRORBY, Circuit Judge.

In these consolidated appeals, appellants challenge cer-

tain actions of the U.S. Environmental Protection Agency

(EPA) in issuing a discharge permit pursuant to the

National Pollutant Discharge Elimination System

(NPDES) of the Clean Water Act, 33 U.S.C. § 1342.

We review EPA’s action pursuant to our authority under

33 U.S.C. § 1369(b) (1) and reverse.

OVERVIEW

The city of Fayetteville, Arkansas, applied to EPA

for an NPDES permit for a new municipal wastewater

treatment plant. Fayetteville proposed to discharge

treated wastewater via a split flow into the White River

in Akansas and into Mud Creek, a tributary of the IIli-

nois River, an Arkansas-Oklahoma interstate stream.

*The Honorable Frank G. Theis, Senior United States District

Judge for the Distr’ of Kansas, sitting by designation.

The State of Oklahoma and a nonprofit group, Save The

Illinois River (STIR), requested denial of the permit.

The State of Arkansas and the Oklahoma parties re-

quested an evidentiary hearing on EPA’s issuance of the

permit. A hearing request was granted in part and de-

nied in part by an Administrative Law Judge (ALJ),

and the partial denial was upheld by the EPA Adminis-

trator acting through his Chief Judicial Officer (CJO).

After the evidentiary hearing, the ALJ determined that

the permit would not have an undue impact on water

quality or violate Oklahoma’s water quality standards

(WQS). This initial decision was appealed by both Ar-

kansas and Oklahoma. On appeal, the ALJ’s decision was

affirmed in part and reversed in part and remanded for

a determination whether the record showed by a pre-

ponderance of the evidence that the permitted discharge

would not cause an actual, detectable violation of WQS.

On remand the ALJ reviewed the record and made de-

tailed findings. He concluded that the permit could issue

as written, finding that it would not result in any meas-

urable violations of Oklahoma’s WQS. The ALJ’s deci-

sion on remand was appealed to the CJO who upheld it

in a decision dated December 22, 1988. These petitions

for review followed.

Appellants the State of Oklahoma, Oklahoma Scenic

Rivers Commission, Oklahoma Pollution Control Coor-

dinating Board, and STIR (the “Oklahoma parties,” or

Oklahoma) set forth ten issues in their joint brief-in-

chief. Essentially they contend that EPA erred in con-

cluding that the permit would not violate Oklahoma’s

WQS; that EPA did not properly consider the Wild and

Scenic Rivers Act, 16 U.S.C. §§ 1271-1287 (WSRA), as

it applies to the upstream portions of the Illinois River;

and that EPA erred in denying review of certain issues

and in refusing to reopen the evidentiary hearing. The

State of Arkansas, Arkansas Department of Pollution

Control Ecology, City of Fayetteville, and Beaver Water

District (the “Arkansas parties,” or Arkansas) challenge

4a

EPA’s authority to require an Arkansas discharger to

comply with Oklahoma water quality standards.

BACKGROUND

The cornerstone of the Clean Water Act, 33 U.S.C.

$§ 1251-1387, is its prohibition of any discharge of\ pol-

lutants to navigable waters except as permitted by the

Act. 33 U.S.C. §1311(a). Section 101 of the Act, 33

U.S.C. § 1251(a) (1), states that “it is the national goal

that the discharge of pollutants into navigable waters be

eliminated by 1985.” “Discharge of a pollutant” is de-

fined expansively as “any addition of any pollutant to

navigable waters from any point source.” § 1362(12)

(A). “Pollutant” is also broadly defined; it includes

“dredged spoil, solid waste, .. . sewage, garbage, sewage

sludge, . . . chemical wastes, . . . rock, sand, ... and

industrial, municipal, and agricultural waste.” § 1362

(6). “Point source” encompases “any discernible, con-

fined and discrete conveyance, including . . . any pipe,

ditch, channel, tunnel, [for] conduit . . . from which

pollutants are or may be discharged.” § 1362(14).

“Navigable waters” means “the waters of the United

States.” § 1367(7).

Discharges of pollutants must comply with limitations

established in and pursuant to the Act. “Effluent limita-

tions,” i.e., limits on “quantities, rates, and concentra-

tions of chemical, physical, biological, and other con-

stituents which are discharged from point sources,”

§ 1362(11), may be water quality-based, §§ 1312, 1313,

or technology-based, §§ 1311(b), 1314(b). EPA is re-

quired to establish water-quality based restrictions when-

ever technology-based limits are inadequate to protect a

particular body of water. §1312(a). The CWA sets

minimum requirements for water pollution control; states

may devise more stringent measures. § 1370. State

standards, once approved by EPA, become the water qual-

ity standards for the applicable waters of the State.

§ 1313.

5a

Federal and state effluent limitations anc. water quality

standards are transformed into individual point source

obligations through NPDES discharge permits. § 1342;

EPA v. California ex rel. State Water Resources Con-

trol Bd., 426 U.S. 200, 205, 96 S.Ct. 2022, 2025, 48 L.Ed.

2d 578 (1976). Permits may be issued if the discharge

will meet all applicable requirements under the Act.

§ 13842(a)(1). EPA is responsible for issuing permits,

id., but may delegate that authority to qualified states,

§ 1342(b). In those states, however, it retains oversight

authority with respect to individual permits and the

permitting programs in general. § 1342(c), (d).

EPA issued Fayetteville’s NPDES permit because at

the time this proceeding commenced Arkansas had not

yet been delegated permitting authority pursuant to

§ 1342(b). The permit was issued on November 5, 1985,

and finally approved on December 22, 1988, following the

administrative appeals described above. The treatment

plant has been in operation since December 1988.

The permit (NPDES Permit No. AR0020010) specifies

that half of the city’s treated wastewater wili be dis-

charged to the White River in Arkansas (this portion

of the discharge is not in contention here), and half will

be discharged to the Illinois River basin. Specifically, this

latter effluent will be discharged to an unnamed stream

in northwestern Arkansas, which flows approximately

two miles before joining Mud Creek. Mud Creek flows

three miles from that point to its confluence with Clear

Creek, thirteen miles upstream from the Illinois River

in Arkansas. Twenty-two miles downstream from Clear

Creek—and thirty-nine miles from the Fayetteville plant—

the Illinois River crosses the state line into northeastern

Oklahoma and almost immediately flows into Lake

Frances. A segment of the Illinois River (including Lake

Frances) from the Oklahoma-Arkansas state line to Ten-

killer Ferry Reservoir has been designated an Oklahoma

state scenic river and was proposed for study as a po-

6a

tential addition to the National Wild and Scenic Rivers

System when the WSRA was enacted in 1970. 16 U.S.C.

§ 1276(40). To date, this segment, which is approxi-

mately sixty miles long, has not been designated a com-

ponent of the national system. See 16 U.S.C. § 1273.

The Fayetteville permit sets limits on the amounts of

certain pollutants that may be discharged and establishes

maximum or minimum effluent concentrations of those

pollutants and other chemical parameters. Permit, EPA

Supp. Addendum at 12-30. The permit prohibits the dis-

charge of any incompletely treated effluent to Mud Creek.

Id. at 27. It also includes, inter alia, a provision for

modifying the permit to incorporate more stringent limi-

tations if an ongoing study of the Illinois River demon-

strates such limitations are needed to ensure compliance

with water quality standards. /d.

ANALYSIS

I. Standard of Review

Review of the EPA rulings on appeal here is gov-

erned by the Administrative Procedure Act, 5 U.S.C.

§§ 701-706. We must uphold the agency’s actions, find-

ings, and conclusions unless they are outside the agency’s

statutory authority, are not supported by substantial evi-

dence, or are arbitrary, capricious, an abuse of discre-

tion, or otherwise not in accordance with law. 5 U.S.C.

§ 706(2) (A), (C), and (E). We may not substitute our

judgment for that of the agency. Motor Vehicle Mfrs.

Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29,

43, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 443 (1983).

Nevertheless, the agency must examine the relevant

data and articulate a satisfactory explanation for its

action including a “rational connection between the

facts found and the choice made.” In reviewing that

explanation, we must “consider whether the decision

was based on a consideration of the relevant factors

7a

and whether there has been a clear error of judg-

ment.” Normally, an agency rule would be arbitrary

and capricious if the agency has relied on factors

which Congress has not intended it to consider, en-

tirely failed to consider an important aspect of the

problem, offered an explanation for its decision that

runs counter to the evidence before the agency, or

is so implausible that it could not be ascribed to a

difference in view or the product of agency expertise.

Id. at 43, 103 S.Ct. at 2866 (citations omitted).

Determining the extent of EPA’s authority under the

Clean Water Act is a question of law that we review

de novo. “Our first inquiry is whether ‘Congress has

directly spoken to the precise question at issue. If the

intent of Congress is clear that is the end of the matter;

for the court, as well as the agency, must give effect to

the unambiguously expressed intent of Congress.’” Mar-

tin Exploration Management Co. v. FERC, 813 F.2d

1059, 1065 (10th Cir.1987) (quoting Chevron, U.S.A.,

Inc. v. NRDC, 467 U.S. 837, 842-43, 104 S.Ct. 2778,

2781-82, 81 L.Ed.2d 694 (1984), rev’d on other grounds,

486 U.S. 204, 108 S.Ct. 1765, 100 L.Ed.2d 238 (1988) ).

However, where the statute is ambiguous, EPA’s con-

struction, as that of the agency charged with administer-

ing the statute,' is entitled to substantial deference. Chev-

ron, U.S.A., Inc. v. NRDC, 467 U.S. 837, 844, 104 S.Ct.

2778, 2782, 81 L.Ed.2d 694 (1984). If EPA’s interpre-

tation of the Clean Water Act is reasonable, we should

not disturb it unless it “is contrary to the policies Con-

gress sought to implement in enacting the statute.” 813

F.2d at 1065; see also 467 U.S. at 845, 104 S.Ct. at

2783.

133 U.S.C. §1251(d) provides: “Except as otherwise expressly

provided in this chapter, the Administrator of the Environmental

Protection Agency .. . shall administer this chapter.”

8a

II. Preliminary Procedural Matters

As an initial matter we address EPA’s argument that

Arkansas lacks standing to challenge EPA’s interpre-

tation of the Clean Water Act. EPA reasons that

Arkansas, by not challenging any of the terms of the

Fayetteville permit, has failed to state a justiciable

case or controversy. ... Arkansas’ claim is purely

hypothetical and would not be redressed by a favor-

able decision of this Court, just as its allegations as

to future permit conditions are purely speculative.

EPA Brief at 13-14. EPA also rejects Arkansas’s argu-

ment that it may be collaterally estopped in subsequent

proceedings if it does not pursue this argument now by

assuring Arkansas that EPA would not contest the jus-

ticiability of the claim if raised in the context of future

permit decisions. EPA Brief at 14; see Arkansas Reply

Brief at 11 n. 18.2

Section 509 of the Clean Water Act provides that

“[rleview of [EPA’s] action... in [, inter alia,] issu-

ing or denying any permit under section 1342 of this

title . . . may be had by any interested person.” 33

U.S.C. § 1369(b) (emphasis added). The legislative his-

tory corroborates what the language itself suggests—that

the Act intended liberal review of EPA’s actions in is-

* Arkansas also attempted to raise the Clean Water Act interpre-

tation issue in another forum. In September 1988 it moved for

leave to file a complaint against Oklahoma in the Supreme Court,

invoking the Court’s original jurisdiction under Article III, section

2, of the Constitution. The United States opposed the motion,

arguing (according to Arkansas) that the statutory question could

more appropriately be resolved in the context of judicial review of

L.Ed.2d 769 (1989). Arkansas now argues that “it cannot rely to

its detriment on such ‘assurances’ from the EPA in this case for

the same reason it could not rely on the United States’ ‘assurances’

in [Arkansas v. Oklahoma].” Arkansas Reply Brief at 11 n. 18.

“ 2 ee

_ ct

9a

suing permits and promulgating rules and standards.

The Senate Public Works Committee explained section

509’s judicial review provision as follows:

Any person has standing in court to challenge ad-

ministratively developed standards, rules and regula-

tions under the Act. The courts are increasingly

adapting this test to what administrative actions are

reviewable. .. . The Courts have grantéd this re-

view to those being regulated and to those who seek

“to protect the public interest in the proper admin-

istration of a regulatory system enacted for their

benefit.” Since precluding review does not appear to

be warranted or desirable, the bill would specifically

provide for such review within controiled time pe-

riods. ...

. . . For review of permits issued ander section

402 [33 U.S.C. § 1342] ... , the section places jr-

risdiction in the U.S. Court of Appeals. . . .

S.Rep. No. 414, 92d Cong. 2d Sess., reprinted in 1972

U.S.Code Cong. & Admin.News 3668, 3750-51 (emphasis

added; citation omitted); see also Conf.Rep. No. 1236,

reprinted in 1972 U.S. Code Cong. & Admin. News 3776,

3825. The Supreme Court reiterated the expansive lan-

guage of the Senate Report in Middlesex County Sewerage

Auth. v. National Sea Clammers Ass’n, 453 U.S. 1, 14 n.

23, 101 S.Ct. 2615, 2623 n. 23, 69 L.Ed.2d 435 (1981)

(“review provisions of 509 are open to ‘[a}ny person,’

S.Rep. No. 92-414, p. 85 (1971)”) ; ef. Montgomery Envtl.

Coalition v. Costle, 646 F.2d 568, 576-78 (D.C.Cir.1981)

(§ 509 “incorporate[s] the injury in fact rule for standing

set out in Sierra Club v. Morton,” 405 U.S. 727, 92 S.Ct.

1361, 31 L.Ed.2d 636 (1972) ).

It would strain the meaning of “any interested person”

to exclude from those eligible to obtain review of an EPA

permit action the state in which the publicly owned treat-

ment works seeking the permit is located, which partially

10a

financed the facility’s construction, and which, among

other entities, has review and approval authority over the

facility’s construction and operation. We conclude Arkan-

sas does have standing to challenge EPA’s determination

that Oklahoma water quality standards apply to the plant."

Before undertaking a discussion of the merits, we must

consider a second procedural issue—whether Arkansas has

exhausted its administrative remedies. EPA’s regulations

provide that a petition “for review of any initial decision

. . is, under 5 U.S.C. 704, a prerequisite to the seeking

of judicial review of the final decision of the Agency.”

40 C.F.R. § 124.91(e). The rule requires EPA to “issue

an order either granting or denying the petition for re-

view” within a reasonable time after the petition is filed.

§ 124.91(c) (1). “Final Agency action” for purposes of

judicial review occurs “upon completion of the remanded_

proceeding, including any appeals to the [EPA] Adminis-

trator from the results of the remanded proceeding.”

§ 124.91 (f) (3).

Although the parties do not raise this issue, we have de-

tected two arguable procedural deficiencies in Arkansas’s

appeal in light of § 124.91. First, the Arkansas parties

may have failed to comply with the technical requirements

of subsection (e). Although they filed a petition for

review of the ALJ’s decision on remand, R., B-155, it

appears they did not file a petition for review of the

ALJ’s initial decision as required by the rule, but merely

filed a response to the Oklahoma parties’ petitions for

® Moreover, we could reach the statutory construction issue—a

legal question—even if we were to decide Arkansas lacked standing

to raise it. Whether EPA acted within its statutory authority is

subject to our review under 5 U.S.C. § 706(2) (A). Thus, we reject

any suggestion by EPA that, if Arkansas lacks standing, this court

lacks jurisdiction to decide the statutory issue on the merits. See

EPA Brief at 14 n. 8, 15. For similar reasons we reject EPA’s

argument that Arkansas’s claim is not ripe for review. EPA

Brief at 14.

lla

review of that decision. Compare Order on Petitions for

Review, R., A-28 at 1, with EPA Brief at 8. Although

“[t]he Arkansas parties raised [the statutory interpreta-

tion] issue in numerous pleadings filed with EPA,” Ar-

kansas Brief at 32 n. 24, Arkansas’s argument that Okla-

homa WQS should not apply to a discharge located in

Arkansas was first asserted to (and rejected by) the ALJ

after remand by the CJO.*

Secondly, EPA’s action in this case was arguably not

“complete” with respect to the Arkansas parties because

the CJO failed to “issue an order either granting or deny-

ing [Arkansas’s] petition for review.” § 124.91(c) (1).

Although all parties petitioned EPA for review of the

ALJ’s decision on remand, R., B-155-59, the CJO’s second

order ruled -only on the petitions filed by EPA-Region VI

and the Oklahoma parties. The order failed even to ac-

knowledge Arkansas’s petition. See Second Order on Peti-

tions for Review, R., A-37, at 1-2.

Nevertheless, under the circumstances of this case, we

do not view these shortcomings as fatal to Arkansas’s

appeal. EPA’s position on the basic issue raised by the

Arkansas parties—whether the Fayetteville discharge

must comply with Oklahoma WQS—has been clear since

the ALJ’s initial decision and is directly at odds with

Arkansas’s position. In his second and final opinion the

CJO clearly affirmed his June 1988 ruling that Oklahoma

WQS are applicable to the Fayetteville discharge. In so

doing, he implicitly, if not expressly, denied Arkansas’s

petition for review of the ALJ’s decision on remand. Thus,

it would be fruitless to remand to the agency for mere

technical compliance with subsection (c) (1)’s requirement

* Moreover, Arkansas presented inconsistent arguments in the

remand proceeding, claiming first that the 1982, not the 1985,

Oklahoma WQS should apply, but then arguing that Oklahoma’s

Beneficial Use Limitations specifically cannot apply to a discharge

located in Arkansas. See Decision on Remand, R., A-33, at 2-3;

Supplemental Joint Briefs submitted by Arkansas Parties, R.,

B-144 at 7-8, 25-33.

12a

for “an order... denying review.” Cf. Mathews v. Eld-

ridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976) :

Koerpel v. Heckler, 797 F.2d 858, 862 (10th Cir.1986) ;

Clonce v. Presley, 640 F.2d 271, 273 (10th Cir.1981)

(citing Lewis v. New Mexico, 423 F.2d 1048, 1049 (10th

Cir.1970) ).

decision on remand.” Order on Petitions for Review, R..,

A-28, at 17 ( emphasis added). Accordingly, the Arkansas

parties’ appeal is ripe for our review, and we proceed

with our discussion of the merits.

III. Statement of Issues

Arkansas poses the fundamental question in this case:

Does the Clean Water Act require a point source of pollu-

tion to comply with the water quality standards of al]

affected downstream states? Oklahoma assumes such a

requirement in that it challenges EPA’s determination

that the Fayetteville permit would not result in Viclations

of Oklahoma’s water quality standards and argues ac-

Oklahoma formulates the issues on appeal as “[ w]hether

the Chief Judicial Officer erred in denying review” of vari-

ous ALJ rulings and whether the CJO and ALJ “erred in

[refusing] to reopen the evidentiary hearing.” Despite

employed by the Fayetteville plant and the possible su-

periority of land application methods; (2) the propriety

of considering evidence concerning future reductions in

AN ny ca -

13a

the discharges of other Arkansas cities; (3) the propri-

ety of relying on “protective language” in the permit

authorizing more stringent discharge limitations if shown

to be necessary by an ongoing study of the Illinois River;

(4) the correctness of EPA’s interpretation and ap-

plication of Oklahoma’s beneficial use limitation, nutri-

ent standard, and anti-degradation policy; (5) the rele-

vance of new information concerning overflows at the

old treatment plant; and (6) whether Fayetteville met its

burden of proof in showing that a permit should be issued

for its treatment plant. Our review of the record con-

vinces us that we need not resolve many of the issues

raised by the Oklahoma parties. In the following pages

we address first tne statutory interpretation question

posited by Arkansas and then a significant issue not

raised by any party—the significance of evidence of exist-

ing degradation of Illinois River water quality.

A. Construction of the Clean Water Act

The Opposing Views

The full ramifications of Arkansas’s formulation of the

Clean Water Act issue are exposed once it is realized that

an upstream state has the ability (if not the legal right)

largely to control the quality of certain of the waters of

a downstream state. It can accomplish this simply by

setting and enforcing its own water quality standards

and releasing water of that quality to the downstream

state. If the upstream state’s water quality standards

are lower than those considered desirable by the down-

stream state, so will be the actual quality of the inter-

state waters in the downstream state. In other words,

the lowest common denominator will prevail. The ulti-

mate question posed to this court is whose water quality

standards take precedence under the Clean Water Act—

the upstream state’s, the downstream state’s, the federal

government’s, or nobody’s. We conclude that no state

“imposes” its standards on another state, but rather that

the Clean Water Act mandates compliance with federal

Se ieiiieaeaalt

l4a

law, including the federally approved water quality stand-

ards of affected states,

Specifically, Arkansas alleges an affected downstream

state “may advise and make recommendations, but no-

where in the Clean Water Act did Congress authorize af-

fected states such as Oklahoma to impose their water qual-

ity standards upon a discharger in another state.” Arkan-

sas’s Brief at 39. We treat this, the principal issue of the

case, as whether the Clean Water Act requires that any

discharge permitted under 33 U.S.C. § 1342 comply with

all applicable water quality standards, including the EPA-

approved regulations of any affected downstream state.*

This is an issue of first impression in the circuit courts.*

° We reformulate the issue to reflect more accurately the facts

and legal context of this case. Section 303 of the CWA, 33 U.S.C.

§ 1313, requires periodic review by states of their WQS and pro-

vides for FPA approval of any modified WQS as long as such

standard “meets the requirements” of the CWA. § 1313(c) (3).

Once approved, “such standard shall thereafter be the water quality

standard for the applicable waters of that State.” Jd. EPA is

required to promulgate revised WQS for any state that fails to

adopt WQS consistent with CWA requirements and in any case

where EPA determines that a revised or new standard is necessary

to meet the requirements of the Act. § 1313(c) (4).

The Fayetteville plant has been required by EPA to observe

federal law, i.e., Oklahoma’s EPA-approved water quality standards.

See Order on Petitions for Review, R., A-28, at 11 n. 13. Thus, it is

misleading to say “Oklahoma - « « impose[d its] water quality

standards” on Arkansas, or that Oklahoma has the “right to block”

a permit issued by Arkansas. See, e.g., Arkansas’s Brief at 33, 36,

38-40. The 1982 Oklahoma water quality standards, which EPA

judged aplicable to the Fayetteville plant, had been approved by

EPA. Whether Fayetteville might also be subject to observing

Oklahoma state standards that have not received EPA approval is

not an issue in this case, and we do not address it. Accordingly,

throughout this opinion we use “applicable water quality standards”

affected waters, and “Oklahoma water quality standards” to mean

* This statement requires a brief explanation of a recent Fourth

Circuit case. In Champion Int'l Corp. v. EPA, 648 F.Supp. 1390

—— — we oe

a iim

15a

EPA’s Chief Judicial Officer, in his first order in this

case dated June 28, 1988, stated the law and applied

it as follows:

(W.D.N.C.1986), motion for withdrawal of mandate denied, 652

F.Supp. 1398 (W.D.N.C.1987), the district court upheld EPA’s

assumption of permitting authority under 33 U.S.C. § 1342(d) (4)

after EPA objected when North Carolina proposed to permit a

discharge in North Carolina without regard for Tennessee water

quality standards. The court held that a discharge permit must

ensure compliance with the requirements of the CWA, and that

EPA reasonably could have concluded that the North Carolina per-

mit, in disregarding the Tennessee water quality standard for

color, would not ensure such compliance. 648 F.Supp. at 1394-99.

Upon reconsideration in light of an intervening Supreme Court

case, however, the district court offered the following limiting state-

ment: “Nothing in the regulatory framework surrounding the CWA

would automatically require that a source state comply with the

water quality standards of every downstream state.” 652 F.Supp.

at 1400.

Subsequently, the district court’s judgment was vacated by the

Fourth Circuit with instructions to dismiss for lack of subject

matter jurisdiction. Champion Int'l Corp. v. EPA, 850 F.2d 182

(4th Cir.1988). The circuit court prefaced and postscripted its de-

cision by expressing its general agreement with “much of the district

court’s opinion.” 850 F.2d at 183, 190. It also stated that “EPA’s

act in assuming the permit issuing authority was consistent with

statute and regulation, and the objections it made to the North

Carolina permit do not seem to be out of bounds.” Jd. at 187.

However, the appellate court ultimately concluded:

The actions of EPA .. . at this stage of the NPDES proceeding

are not now subject to judicial review. EPA has neither

granted nor denied a permit, so such action is not yet review-

able under [33 U.S.C.] § 1369(b) (1). The nature of EPA’s ob-

jections are well within the contemplation of those it is entitled

to make under applicable regulations. 40 C.F.R. § 123.44(c).

Whatever may be the result should EPA make an objection

completely without its delegated authority, so as to subject

that action to present judicial review under Leedom v. Kyne,

[358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958) |, we have

no occasion to consider, for such objections have not been made

here.

850 F.2d at 190. The court stated that the district court “properly

retained jurisdiction of the case in order to ascertain whether or not

l6a

The CWA requires an NPDES permit to impose

any effluent limitations necessary to comply with

The

- - + In this case, the permit should be upheld if

applicable water quality standards are those that have

been approved by EPA under the CWA.” Order on Peti-

North Carolina’s permit (and we do not intimate tlc they are),

its acts are not so clearly outside its authority to subject them to

immediate judicial review... .” Id. at 187. Thus, Champion does

not decide the merits of the question we face, i.e., whether the CWA

requires that an NPDES permit ensure compliance with an effected

downstream state’s water quality standards.

One other case deserves brief mention here. In Montgomery

Envtl. Coalition, the D.C. Circuit stated: “A state whose water

ee

- Se ee ee + em

17a

tions for Review at 11 n. 13 (citing Illinois v. City of

Milwaukee, 731 F.2d 403, 413-14 (7th Cir.1984), cert.

denied, 469 U.S. 1196, 105 S.Ct. 979, 980, 83 L.Ed.2d

981 (1985)). In noninterstate disputes, however, “the

source state may impose more stringent non-EPA-

approved water quality standards in NPDES permits

under 33 U.S.C.A. § 1370.” Order on Petitions for Re-

view at 12 n. 13.

On remand, the ALJ expressed stmilar views:

It is clear that an out-of-state source must meet

the W.Q.S. of another downriver state. See § 401

(a) (2) of the CWA [33 U.S.C. § 1341(a)(2)]; 40

C.F.R. §§ 122.4(D) and 122.44(d) (4); International

Paper Co. v. Ouellette, 479 U.S. 481, 107 S.Ct. 805,

93 L.Ed.2d 883 (1987). Therefore the Fayetteville

discharge must meet Oklahoma’s W.Q.S. as they exist

at the border of the two states... .

.. + To accept [the Arkansas parties’ argument

that the beneficial use limitations do not apply to

Fayetteville] would violate the principals [sic] set

out above since it is premised on the notion that

such standards only apply to sources located in the

State of Oklahoma. There is no factual issue among

the parties that the Illinois River at the border of

the two states is a Class (A) River and therefore

the standards applicable to pollution crossing that

border must comply with Oklahoma’s W.Q.S. as they

exist at that point. Any other interpretation would

allow a source to locate its discharge just across the

line in Arkansas and freely violate Oklahoma stand-

ards. Such a result is contrary to the [Clean Water

Act], regulations and Court decisions.

Decision on Remand, R., A-33, at 4-5. The ALJ’s inter-

pretations of Oklahoma’s WQS, including the Beneficial

Use Limitations, were ultimately affirmed by the CJO.

The CJO also reiterated the mandate cf his first order—

18a

<

that “ ‘the permit should be upheld if . . . the authorized

discharges would not cause. . . [a] violation of Okla-

homa’s water quality standards,’ ”—and accepted the

ALJ’s conclusion that no violation would occur. Second

Brief at 42; see id. at 33-40. Alternatively, if we decide

congressional intent is ambiguous, they urge us to reject

ry

Id. at 20 (citing United States v. Oregon, 366 U.S. 643,

648, 81 S.Ct. 1278, 1280-81, 6 L.Ed.2d 575 ( 1961)). In

the event we conclude congressional] intent is ambiguous,

EPA alternatively defends the reasonableness of its inter-

pretation of the CWA and argues that, under Chevron,

467 U.S. at 844-45, 104 S.Ct. at 2782-83, it must there-

fore be upheld. EPA Brief at 13, 15.

issue as any of the parties suggests. Significantly, how-

ever, EPA’s interpretation is not one the agency

only, or in the first instance, in the context of this permit

tions cannot ensure compliance with the applicable water

quality requirements of all affected States.” ( Emphasis

ee ele al eee,

CRI Or ec Si a antes ee oe =

19a

added.) Concomitantly, EPA’s rules require permits to

include, where applicable, “any requirements . . . neces-

sary to... [cjonform to applicable water quality re-

quirements . . . when the discharge affects a state other

than the certifying State [i.e., the state in which the

discharge will be located].” § 122.44(d) (4). See also 40

C.F.R. § 131.10(b) (state “shall ensure that its water

quality standards provide for the attainment and main-

tenance of the water quality standards of downstream

waters”). We accord deference to the consistent inter-

pretation of a statute by the agency entrusted with its

administration. See 33 U.S.C. § 1251( d); Federal Elec-

tion Comm’n v. Democratic Senatorial Campaign Comm.,

454 U.S. 27, 37, 102 S.Ct. 38, 44, 70 L.Ed.2d 23 (1981);

cf. El. DuPont De Nemours & Co. v. Train, 430 U.S.

112, 135 n. 25, 97 S.Ct. 965, 978 n. 25, 51 L.Ed.2d 204

(1977) (EPA interpretation entitled to deference, even

if not contemporaneous with enactment of CWA, in light

of technical nature of statute, agency’s expertise, and am-

biguous statutory language). After considering the Act

as a whole and its legislative history, we conclude EPA’s

interpretation is reasonable and consistent with Con-

gress’s purposes in enacting the CWA.

2. The Parties’ Statutory Arguments

In defending its construction of the CWA the EPA

relies principally on § 301(b)(1)(C) of the Act, 33

U.S.C. § 1311(b) (1) (C), which provides:

In order to carry out the objective of this chapter

li.e., to “restore and maintain the chemical, physical,

and biological integrity of the Nation’s waters,” 33

U.S.C. § 1251] there shall be achieved . . . not later

than July 1, 1977, any more stringent limitation,

including those necessary to meet water quality

standards, . . . established pursuant to any State law

or regulations (under authority preserved by section

1370 of this title). . . or required to implement any

20a

applicable water quality standard established pursu-

ant to this chapter.

(Emphasis added.) Section 402(a)(2) and (b)(1)(A)

of the CWA, 83 U.S.C. § 1342(a) (2), (b) (1) (A), in turn

mandates that any NPDES permit issued under the Act

_, contain terms adequate to insure compliance with § 301

” above. See EPA Brief at 16.

EPA rejects Arkansas’s argument that these sections

are “mere timing provisions.” Jd. (citing Arkansas

Brief at 34-35). On the contrary, EPA argues, these

sections establish fundamental requirements of the Act.

Moreover, EPA contends that Congress, by making no

distinction between the water quality standards of source

and affected states in these requirements, “indicated the

Arkansas counters that §1311 does not explain

whether the “more stringent limitations” must he

’ Under the 1972 CWA amendments, water quality standards are

considered “supplementary control measures” —“supplementary” in

the sense that they are in addition to peint source effluent limita-

tions, the control measure upon which the 1972 CWA Amendments

antenttiendiieee hee eee

et eR elt ar

2la

5J0, 38 U.S.C. § 1370 limits the “reach” of any stricter

standards to discharges originating within the state im-

posing those standards. Arkansas Brief at 35." This ar-

gument relies largely on language in § 1370 preserving

“any right or jurisdiction of the States with respect to

the waters .. . of such States.” The argument suffers

from at least three flaws, however.

First, § 1870 is a savings clause that merely preserves

the preexisting right of the states “to set more restrictive

standards than those imposed by [the CWA].” S.Rep.

No. 414, reprinted in 1972 U.S. Code Cong. & Admin.

News 3668, 3751. See also International Paper Co. ».

Ouellette, 479 U.S. 481, 493, 107 S.Ct. 805, 812, 93

L.Ed.2d 883 (1987) (§ 1370 savings clause “preserves

the authority of a State,” but “does not preclude pre-

emption” of state law); Milwaukee v. Illinois, 451 US.

804, 327-28, 101 S.Ct. 1784, 1797-98, 68 L.Ed.2d 114

(1981). Accordingly, there is no basis for believing that

Congress intended § 1370 to limit or define the scope of

one of the CWA’s crucial provisions. The cases Arkansas

* 33 U.S.C. § 1370 provides:

Except as expressly provided in this chapter, nothing in this

chapter shall (1) preclude or deny the right of any State or

political subdivision thereof or interstate agency to adopt or

enforce (A) any standard or liimtation respecting discharges

of pollutants, or (B) any requirement respécting contro! or

abatement of pollution; except that if an effluent limitation, or

other limitation, effluent standard, prohibition, pretreatment

standard, or standard of performance is in effect under this

chapter, such State or political subdivision or interstate agency

may not adopt or enforce any effluent limitation, or other limi-

tation, effluent standard, prohibition, pretreatment standard,

or standard of performance which is less stringent than the

effluent limitation, or other limitation, effluent standard, pro-

hibition, pretreatment standard, or standard of performance

under this chapter; or (2) be construed as impairing or in any

manner affecting any right or jurisdiction of the States with

respect to the waters (including boundary waters) of such

States.

22a

cites to the contrary are unavailing for that purpose.

See Arkansas Brief at 35-36 n. 28.

Second, the “waters .. . of such States” language,

which Arkansas deems significant, occurs in and applies

only to the second of two principal provisions of § 1370.

first provision ( subparagraph (1) ) specifically addresses

the rights of states and their subdivisions to regulate pol-

lution. Subparagraph (1) Says nothing about the bound-

aries within which such rights may be exercised. Thus,

“waters .. . of such states” cannot be construed as a

limitation on the rights to regulate pollution preserved

in the first part of this section.°

Third, thoughtful consideration of the language of

§ 1311(b) (1) (C)—

there shall be achieved . . - any more stringent limi-

tation, including those necessary to meet water qual-

ity standards .. . established pursuant to any State

law or regulations .. . or required to implement

any applicable water quality standard established

pursuant to this chapter

argument. In order to ensure that ¢ e EPA-approved

water quality standards in all States are “met” or “im-

plemented,” it is “necessary” to require dischargers to

23a

meet the applicable requirements of other afiected states

as well as those of the source state. There could be no

assurance of achieving a state’s more stringent WQS if

an upstream, out-of-state discharger were not required

to comply with those standards.

EPA concludes and we agree that Arkansas’s construc-

tion of the Act would make achieving downstream water

quality standards “impossible in many circumstances or

- + + possible . . . only by imposing a disproportionate

burden on dischargers located in the downstream state.”

EPA Brief at 21, Moreover, rewarding sources for

locating in states with less stringent water quality re-

quirements (by relieving them from complying with more

stringent downstream Y/QS) would also result in “pol-

lution shopping,” contrary to Congress’s intent in pass-

ing the 1972 CWA amendments."

Arkansas counters that EPA’s construction of the Act

would have “chaotic” consequences because any down-

stream state could impose its requirements on proposed

sources in any upstream state. Arkansas Brief at 46-

©The agency contends that its regulations and the legislative

history manifest an intent to distribute the burden of meeting water

quality standards among all discharges on and affecting a particlular

waterway. See EPA Brief at 22 & n. 19.

"1 In its bill amending section 402 of the Act in 1977 to authorize

EPA to issue an NPDES permit where it determines a state-

issued permit is inadequate, the Senate committee stated: “EPA

has been much too hesitant to take any actions where States have

approved permit programs. The result might well be the creation

of ‘pollution havens’ in some of those States which have approved

permit programs. This result is exactly what the 1972 amendments

were designed to avoid.” S.Rep. No. 370, 95th Cong. Ist Sess. at

73, reprinted in 1977 U.S.Code Cong. & Admin.News 4326, 4398.

EPA argues reasonably that Arkansas’s interpretation would

encourage sources to locate in states with less stringent water

quality requirements. A source located immediately above a state

boundary would not be required to meet the more stringent require-

ments, if any, of the downstream state, even though that state

may be most affected by the discharge.

24a

47. Thus, Arkansas hypothesizes, a permit authorizing

a discharge to the Mississippi River in Minnesota would

be subject to challenge based on the water quality stand-

ards of each of the nine downstream states. Jd. at 46

(citing Ouellette, 479 U.S. at 496 n. 17, 107 S.Ct. at

814 n. 17). Arkansas’s purported concern is that this

would undercut the CWA’s “orderly regulatory scheme,”

making it “ ‘virtually impossible to predict the standard

for a lawful discharge into an interstate body of water.’ ”

Arkansas Brief at 47 (quoting Illinois v. Milwaukee,

731 F.2d at 414).

We find little practical merit in Arkansas’s agreement.

The ability, as well as the authority, te require com-

pliance with the WQS of downstream states is necessarily

limited by the ability to measure a source’s impact on

the water quality of the receiving waters. At some point

downstream, the impact on water quality of a particular

pollution source becomes so attenuated as to be unde-

tectable. Assuming the quality of the receiving waters

currently meets or exceeds standards, there can be no

violation of standards if the impact of the proposed

source on the water quality could not be measured.”

Nor is it “impossible to predict the standard([s]” ap-

plicable to a new discharge, as Arkansas claims. First,

EPA approval of state WQS determines the potentially

applicable rules. Furthermore, the permitting system es-

tablished in the 1972 and 1977 amendments to the CWA

clearly provides for consultation with and input by states

that may be affected. Finally, computer modeling (such

as that performed for the Fayetteville plant) can pre

dict the extent of a new source’s potential impact, thus

demonstrating which states’ WQS must be met.

2 See part III.B. of this opinion for a discussion of the signifi-

cance in the permitting context of preexisting WQS violations.

25a

3. Illinois v. Milwaukee and Ouellette

Arkansas cites International Paper Co. v. Ouellette

and Illinois v. Milwaukee in support of its statutory con-

struction argument, but that reliance is misplaced. In

each of those cases an affected state was seeking to en-

join an ongoing discharge in another state by resort to

its own state law nuisance remedies. 479 U.S. at 483,

107 S.Ct. at 807; 731 F.2d at 404. In contrast, this case

is a permitting, rather than an enforcement, action

wherein Oklahoma seeks to ensure compliance with fed-

eral law, i.e., its EPA-approved WQS. The Seventh Cir-

cuit in Illinois v. Milwaukee recognized this distinction

when it pointed out that

Illinois’ basic grievance is that the permits ise-1ed

to Milwaukee pursuant to the [CWA] do not impose

stringent enough controls on the discharges. Never-

theless, Illinois failed to participate in the permit

issuing process when the Milwaukee permits were

issued. . . . [T]hat process seems now to be the

appropriate federal forum for adjusting the com-

peting claims of states in the environmental quality

of interstate waters.

731 F.2d at 412-13 n. 5. The court found that Illinois

had “not sought to enforce an effluent limitation under

Wisconsin [law] nor sought to enforce federal limita-

tions as provided for under the 1972 [CWA]” and con-

cluded that the CWA “preclude[s] the type of applica-

tion of state law sought by Illinois.” 731 F.2d at 414.

The Supreme Court’s decision in Ouellette is somewhat

more problematic, even though, like Illinois v. Milwaukee,

it is not factually or procedurally similar to this case.

The specific issue in Ouellette was whether the CWA pre-

empted a common law nuisance suit filed in a Vermont

court under Vermont law against a New York dis-

charger, which was the source of the alleged injury in

Vermont. The Court concluded that “Vermont nuisance

26a

law is applicable to a New York point source,” 479 U.S.

at 497, 107 S.Ct. at 814; however, it chose to express

its holding more broadly. The Court stated: “We hold

that when a court considers a state-law claim concern-

ing interstate water pollution that is subject to the CWA,

the court must apply the law of the State in which the

point source is located,” id. at 487, 107 S.Ct. at 809, and

“we conclude that the CWA precludes a court from ap-

plying the law of an affected State against an out-of-

state source,” id. at 494, 107 S.Ct. at 813. The Ouellette

Court’s discussion of the CWA includes statements that

Arkansas concedes “may be dicta.” Arkansas Reply

Brief at 18. But it is these statements concerning the

regulatory framework of the CWA and the relative roles

of source and affected states which Arkansas embraces.

In particular, Arkansas asks us to give weight to the

following discussion :

While source States have a strong voice in regu-

lating their own pollution, the CWA contemplates a

much lesser role for States that share an interstate

waterway with the source (the affected States).

Even though it may be harmed by the discharges, an

affected State only has an advisory role in regulat-

ing pollution that originates beyond its borders. . . .

Significantly, however, an affected State does not

have the authority to block the issuance of the per-

mit if it is dissatisfied with the proposed standards.

An affected State’s only recourse is to apply to the

EPA Administrator, who then has the discretion to

disapprove the permit if he concludes that the dis-

charges will have an undue impact on interstate

waters.

Ouellette, 479 U.S. at 490-91, 107 S.Ct. at 810-11, quoted

in Arkansas Brief at 41.

While we agree these statements seem to undercut

EPA’s position, it is beyond dispute that they are dicta

and not controlling here. Ouellette was an enforcement

27a

action in which the issue was the availability of a nuis-

ance remedy under the common law of an affected state

against an out-of-state discharger. Even the Court’s

broadly stated holdings were expressed in terms of “a

state-law claim concerning interstate water pollution,”

479 U.S, at 487, 107 S.Ct. at 809 (emphasis added), and

“applying the law of an affected State,” id. at 494, 107

S.Ct. at 813 (emphasis added). In contrast, the case

before us poses the question of the applicability of the

federally approved water quality standards of an af-

fected downstream state in permitting a discharge in an

upstream state."

Moreover, Ouellette contains other dicta that mitigate

the apparent impact of the language quoted above. For

instance, the Court noted that nothing in its decision

affected the piaintiffs’ right to “pursue remedies that

may be provided by the Act.” 479 U.S. at 498 n. 18, 107

S.Ct. at 814-15 n. 18. The Court pointed out, as ex-

amples, that the plaintiffs had the opportunity to pro-

tect their interests before permit issuance by comment-

ing on and objecting to the proposed permit conditions,

and that they still were entitled to bring a citizen suit

to compel compliance with the permit. /d.

Ouellette also suggested that what the plaintiffs there

sought to do was akin to establishing a second permit

system, which the Court held is disallowed by 33 U.S.C.

§ 1342(b). See id. at 491, 496-97, 107 S.Ct. at 811, 814.

That § 1342(b) limits a state’s permitissuing authority

to “discharges . . . within its jurisdiction” is beyond dis-

pute. But this provision must not be construed to imply

anything concerning the applicability of an affected state’s

EPA-approved WQS to the process of permitting a dis-

Both EPA judicial officers here referred to this distinction

in discussing what water quality standards are “applicable” or

“enforceable” for purposes of NPDES permitting. Order Denying

Review, R., A-3, at 7; Order on Petitions for Review, R., A-28, at

11-12 n. 13.

28a

charge in an upstream state. The Act contains several

provisions for considering and protecting the water qual-

ity of downstream states (including provisions authoriz-

ing the actions taken by EPA here). Those provisions

are not inconsistent with the Act’s implicit prohibition

of dual permitting systems. Indeed, if properly imple-

mented, they negate any need for separate permits is-

sued by source and affected states.

The Court’s opinion in Ouellette corroborates this rea-

soning. As the Court observed:

Nothing in the Act gives each affected State this

power to regulate discharges. The CWA carefully

defines the role of both the source and affected

States, and specifically provides for a process whereby

their interests will be considered and balanced by

the source State and the EPA. This delineation of

authority represents Congress’ considered judgment

as to the best method of serving the public interest

and reconciling the often competing concerns of those

affected by the pollution. It would be extraordinary

for Congress, after devising an elaborate permit sys-

tem that sets clear standards, to tolerate common-

law suits that have the potential to undermine this

regulatory structure.

479 U.S. at 497, 107 S.Ct. at 814. Plainly, Ouellette was

concerned not with the CWA’s provisions for incorporat-

ing a downstream’s water quality criteria in the permit-

ting process, but with preventing a downstream state

from circumventing or superseding that process by impos-

ing on an already-permitted source additional require-

ments based on its own state law. So viewed, Ouellette is

entirely consistent with EPA’s interpretation of the ap-

plicability of Oklahoma’s WQS. Cf. Champion, 652 F.

Supp. at 1400 (concluding that nothing in Ouellette re-

quired a modification of the decision of 648 F.Supp. 1390

that a North Carolina discharge permit must require

compliance with an applicable Tennessee WQS).

29a

4. The Statutory and Regulatory Framework

The erroneous interpretation of Ouellette, which Ar-

kansas advocates, runs aground when the Clean Water

Act is considered as a whole. The Act contains several

mechanisms for ensuring that minimum water quality

and pollution criteria will apply to all navigable waters

of the United States; for example, prohibiting the dis-

charge of pollutants except pursuant to a permit, 33

U.S.C, §§ 1311, 1342; requiring EPA to establish effluent

limitations for point source discharges; $$ 1311-1312:

providing for EPA’s approval of water quality standards,

$ 1313, and state permit programs, § 1342(b) ; and estab-

lishing minimum procedural requirements for state per-

mit programs, §1314(i). As discussed above, however,

states are not precluded from imposing pollution limita-

tions more stringent than those promulgated by EPA. 33

U.S.C. § 1370; 40 C.F.R. § 122.1(f) ; Milwaukee v. Illinois,

451 U.S. at 327-28, 101 S.Ct. at 1797-98. Moreover, the

CWA requires the application of best available control

technology or best practicable treatment to discharges of

pollutants, 33 U.S.C. $1311, and the Act’s legislative his-

tory reveals that Congress intended the CWA to be

“technology-forcing.” S.Rep. No. 414, reprinted in 1972

U.S.Code Cong. & Admin.News 3668, 3709 (Act con-

tains a “mandate to press technology and economics” to

achieve practicable and attainable levels of effluent re-

duction; thus, “increasingly tougher controls on industry”

will be required); see also Natural Resources Defense

Council, Inc. v. EPA, 822 F.2d 104, 123-24 (D.C.Cir.

1987). Any standard or limitation adopted by a state and

approved by EPA becomes the “water quality standard

for the applicable waters of that State,” and thus is

federally enforceable. 33 U.S.C. $1313/(c¢) (3). See also

££ 1319, 1342; S.Rep. 414, reprinted in 1972 U.S.Code

Cong. & Admin.News 3668, 3672; Order on Petitions for

Review, R., A-28, at 11-12 n. 13.

30a

a 33 U.S.C. § 1341

EPA finds support for its action here in certain of the

foregoing sections. In addition, we consider 33 U.S.C.

$1341 particularly persuasive. It provides that no

NPDES permit may be granted until a “certification” is

obtained from the state in which the discharge originates

(or from EPA where no state agency possesses such

authority, § 1341 (a) (1) ; 40 C.F.R. § 121.21 (b) ), stating

that the discharge will comply with, among other things,

$1311 water quality requirements. Section 1341 (a) (2)

provides:

Whenever such a discharge may affect, as determined

by the [EPA] Administrator, the quality of the

waters of any other State, the Administrator . . :

shall so notify such other State. --. If... such

other State determines that such discharge will affect

the quality of its waters so as to violate any water

quality requirement in such State, and .. . notifies

the Administrator . . . and requests a public hear-

ing . . ., the licensing or permitting agency shall

hold such a hearing. . . . [The licensing or permit-

ting] agency, based upon the recommendations of

such State, . . . shall condition such license or permit

in such manner as may be necessary to insure com-

plianee with applicable water quality requirements.

If the imposition of conditions cannot insure such

compliance such agency shall not issue such license or

permit.

““{T]he purpose of [§ 1341(a) (2)] notice requirement

is to enable a state whose water quality may be affected

by the proposed federal activity an opportunity to insure

that its standards will be complied with.’” EPA Brief at

17-18 (emphasis added) (quoting Lake Erie Alliance for

the Protection of the Coastal Corridor v. U.S. Army Corps

of Eng’rs, 526 F.Supp. 1063, 1075 ( W.D.Pa.1981), aff'd

without opinion, 707 F.2d 1392 (3d Cir.), cert. denied,

464 U.S. 915, 104 S.Ct. 277, 78 L.Ed.2d 257 (1983) ),

8la

EPA’s regulations reaffirm this view, see 40 C.F.R.

§§ 121.1-.30,"* as does the limited case law, see, ¢.g.,

United States v. Commonwealth of Puerto Rico, 721 F.2d

832, 833-34 (1st Cir. 1983) (certification is a “condition

precedent to the EPA’s issuance of a NPDES permit”;

“state decision denying certification, or one imposing con-

ditions or restrictions, is not reviewable administratively

by the EPA” and is “exempt from review in federal

court”).

Arkansas disputes that “applicable water quality re-

quirements” in § 1341(a)(2) refers to the WQS of the

affected state.'* Based on its plain language, however, we

agree with EPA that the purpose of this provision must

be to enable affected states to ensure that their water

quality will not be jeopardized by a discharge in another

state. Only a strained interpretation of the statute could

produce the result Arkansas seeks—that “applicable

water quality requirements” refers to the WQS of only

the source state. Moreover, there would be no reason for

§ (a) (2) to refer to the effect on the quality of the

affected state’s waters in terms of “violat [ing] any water

quality requirement in such State” if the affected state’s

water quality requirements were irrelevant in the permit-

ting process. Given that this subsection of the statute

deals expressly with effects on states other than the source

state, it is much more likely that “applicable” refers

simply to those federally approved water quality require-

ments of affected states that would be violated if the

permit were not appropriately conditioned. We reject

Arkansas’s argument to the contrary.

The legislative history of the certification statute sheds

additional light on this matter. In 1977 Congress amended

the statute

--—-

'* Subpart B of these rules deals specifically with determining the

effect of proposed discharges on other states.

Arkansas refers erroneously to the section as 33 U.S.C.

§ 1342(a)(1). Arkansas Brief at 24 n. 27.

82a

to add section 303 [33 U.S.C. § 1313, “water quality

standards and implementation plans”) to the list of

the act’s provisions for which a State must certify

compliance .... This means that a federally licensed

or permitted activity, including a discharge permit

under section 402, must be certified to comply with

State water quality standards adopted under section

303.

water quality standards.” 1977 U.S.Code Cong. & Admin.

News at 4397. The conference committee added that

“[slection 303 is always included by reference where sec-

tion 301 is listed.” H.Conf.Rep. No. 830, at 96, reprinted

amendment:

[A]ll States have approved water quality standards.

Thus, it is reasonable to require that Federal] permits

and licenses should take into account State water

quality plans, standards and requirements adopted

under section 303 to assure maintenance of water

quality in the respective States.

state water quality standards is a reasonable interpreta-

tion in light of this history.

See supra note 5 for a brief discussion of § 303 of the CWA,

33 U.S.C. § 1313.

SE Ce a et IR te. deg

33a

b. 33 U.S.C. § 1342

Also germane to EPA’s construction of the CWA is the

fact that, in those states authorized to issue NPDES per-

mits, the EPA Administrator retains authority to veto

any proposed permit if he objects to its issuance. 33

U.S.C. § 1342(d) (2)."" EPA may object on the basis of

either of two grounds: (1) that a permitting state failed

to accept recomendations from another state whose waters

may be affected by permit issuance; or (2) that the per-

mit is “ ‘outside [i.e., inconsistent with] the guidelines

and requirements’ of the Act.” EPA Brief at 18-19 (quot-

ing 33 U.S.C. § 1342(d)(2)).% The statute mandates

that “|njo permit shall issue” if EPA objects for either

reason. § 1342/d) (2). If the source state does not revise

the proposed permit to satisfy EPA’s objection, EPA may

issue a discharge permit, § 1342(d) (4), but it may not

issue a permit less stringent than that required by any

state’s effluent limitations and water quality criteria.

H.R.Conf.Rep. No. 830, 95th Cong., 1st Sess., 97, re-

printed in 1977 U.S. Code Cong. & Admin.News 4424,

4472. Given that a permit program administered by

EPA is subject to the same requirements as apply to an

approved state program, § 1342(a)(3), no reasonable

argument would justify invalidating a state-issued per-

mit that fails to account for the WQS of another state,

yet allowing EPA to issue a permit objectionable on the

same ground."’

‘EPA may also withdraw approval of a state permit program

if EPA determines the state is not administering its program in

accordance with CWA requisites. 33 U.S.C. § 1342(c) (3).

* EPA’s regulations elaborate on these two grounds. enumerating

seven possible bases for an EPA objection to a state-issued permit.

40 C.F.R. § 123.44(c).

Section 1342(d) (3), the paragraph immediately following the

veto provision, states: “The {EPA}! Administrator may, as to any

permit application, waive paragraph (2) of this subsection.” The

discretionary language of this paragraph initially gave us pause,

especially in light of the mandatory tone of paragraph (2) (“No

34a

Although several of the CWA terms discussed in the

foregoing paragraphs have no direct application to the

permit in this case (because EPA, not Arkansas, is the

permitting agency), they reflect the objectives and _poli-

cies behind the Act and the Statutory framework estab-

lished for implementing them. Because nothing in the

Act suggests that permits issued by states are subject to

more stringent requirements than those issued by EPA—

indeed, § 1342(a)(3) mandates that permits issued by

EPA and the states “shall be subject to the same terms,

conditions and requirements”—any term of the Act di-

rected to state permitting agencies is instructive as to

EPA’s permitting responsibilities and authority as well.

permit shall issue” if the Administrator objects). After careful

study of the statute and the legislative history, however, we believe

the legislative history reveals that EPA's discretion arises only

with respect to its authority to choose te review or not review

a permit application of which it is notified by a permit-issuing state

pursuant to § 1342(d)(1). See Mianus River Preservation Comm.

v. Administrator, EPA, 541 F.2d 899, 907-09 (2d Cir.1976) (dis-

cussing legislative history of § 402 of the CWA). Such discretion

is consistent with congressional intent to allow EPA-approved,

qualified states to administer their own permit programs. An

implicit component of this discretion, once exercised, is EPA’s

authority to determine the impact of a proposed discharge and

whether that impact is acceptable under the CWA.

Once EPA chooses to review a permit application an@ proposed

permit under this section, we do not believe it has “discretion” to

overlook any violation of the CWA revealed by its review. Cf.

§ 1342(c)(3) (if EPA determines a state permit program is not

being administered in accordance wtih § 1342, it “shail withdraw

approval of such program” (emphasis added) ) ; § 1313(c) (4) (EPA

“shall promulgate” new or revised WQS where necessary to meet

CWA requirements or where state has promulgated inadequate

standard) ; contra Mianus River, 541 F.2d at 909 & n. 24. Inter-

preting § 1342(d) (3) otherwise (i.e, as making all of the provi-

sions of § 1342(d) (2) discretionary) is inconsistent with the spirit

and framework of the CWA and with the express prohibition

against discharging any pollutant except in compliance with the

Act. 33 U.S.C. § 1311(a).

ae ey men + eel di

35a

The Arkansas parties construct a similar argument

(based on the relation between EPA’s and the states’ per-

mitting responsibilities) to urge an opposite result, how-

ever. They contend:

Section 1342(b)(5) very clearly indicates that an

affected state can only be an advisor to the source

state in the permitting process when that process has

been delegated to a state to administer. ... Thus,

it makes little sense to suggest . . . that a source

state discharger must comply with affected state

water quality standards when the permitting author-

ity is the EPA rather than a delegated state.

Arkansas Brief at 38-39.% Arkansas correctly suggests

it would make “little sense” if the applicability of a

downstream state’s water quality standards depended on

what entity (EPA or the source state) issues the permit.

However, Arkansas’s argument that affected states are

limited to an advisory role contains several fatal flaws.

First, in arguing, in effect, “an affected state may not

require a source state to comply with the former’s WQS;

therefore, EPA may not require such compliance,” Ar-

kansas’s fundamental premise is faulty. The fact that an

affected state may have only an “advisory role’ under

§ 1342(b) (5) does not mean compliance with that state’s

approved water quality standards is discretionary. More-

2° Section 1342(b) (5) provides:

The Administrator shall approve each such submitted [ permit}

program unless he determines that adequate authority does not

exist ... [to insure that any State (other than the permitting

State), whose waters may be affected by the issuance of a per-

mit may submit written recommendations to the permitting

State (and the Administrator) with respect to any permit appli-

cation and, if any part of such written recommendations are

not accepted by the permitting State, that the permitting State

will notify such affected State (and tne Administrator) in

writing of its failure to so accept such recommendations to-

gether with its reasons for so doing|.|

36a

over, § 1342(b) (5) merely describes part of the pro-

cedures a state permit program must provide for insur-

ing communications among the source state, an affected

state, and EPA concerning the permitting of a new dis-

charge in the source ( permitting) state. See also

§ (b) (3)-(4). Standing alone, the subsection Says noth-

ing about whether compliance with affected states’ Was

is optional or obligatory.

Second, Arkansas’s argument focuses on one paragraph

in isolation, rather than in the context of the entire Act,

or even in the context of § 1342 as a whole. Section

1342(b) provides that the EPA Administrator shall

approve any program submitted by a state desiring to

administer its own permit program unless he determines,

essentially, that the state proposal does not ensure ade-

quate authority to administer the NPDES permit pro-

gram properly. Subsection (b) (5), upon which Arkansas

relies, is only one of nine specific grounds upon which

EPA may refuse permitting authority to a state.

.'42(b)(1)-(9). Subsection (pb) (1) (A), for example,

ires adequate state authority to “issue permits which

apply, and insure compliance with, any applicable

requirements of sections 1311, 1312, 1316, 1317, and

1348 of this title.” *" § 1342(b) (1) (A).

Arkansas’s argument also overlooks the fact that

§ 1342(b) (5) derives from § 1341, the certification stat-

ute. As discussed earlier in this opinion, § 1341 not only

provides for notice to potentially affected states, it re-

quires that permits be conditioned SO as to insure com-

pliance with all applicable water quality requirements,

and it prohibits issuing any permit that cannot insure

such compliance. § 1341(a) (2).

*1 As EPA argues and we have already discussed, the require-

ment of compliance with state water quality standards arises from

$1311. Thus, via § 1342(b)(1)(A)’s requirement of compliance

with § 1311, permits issued by states must ensure compliance with

all applicable WQS.

AS My tah ny

37a

Finally, Arkansas’s argument must fail in the face of

other CWA provisions heretofore discussed—in particu-

lar, EPA’s authority to veto permits and to suspend state

programs if they do not meet the requirements of the

Act, § 1342(c)-(d), and the proviso that state and EPA

permit programs be subject to the same terms and con-

ditions, § 1842(a) (3).

c. EPA’s “Upset” Regulation

We find still further support for EPA’s construction

of the CWA in the views the agency expressed in an

earlier rulemaking proceeding. In the course of promul-

gating final regulations providing dischargers with a

defense to violating effluent limits during unavoidable

source “upset” conditions, EPA stated that “the CWA

requires strict compliance with water quality standards” ;

thus, “water quality standards are. . . legally required

to be met at all times.” 49 Fed.Reg. 37,998, 38,038

(1984), quoted in Sierra Club v. Union Oil Co., 813 F.2d

1480, 1489 (9th Cir.1987), judgment vacated, 485 U.S.

931, 108 S.Ct. 1102, 99 L.Ed.2d 264 (1988); see 40

C.F.R. §§ 122.41(n), -.4(d).

The final “upset” rule provides that in certain nar-

rowly defined circumstances technology-based effluent

limitations may be exceeded (i.e,-sfailure of pollution

controls may be allowed). 40 C.F.R. § 122.41(n). Sig-

nificantly, an industry-proposed defense for violation of

water quality-based permit limits ** was deleted in the

final rule. EPA reasoned that, because water quality

standards must be met at all times, even during “upset”

conditions, “permittees would need to do continuous moni-

toring on all stream segments that may be affected” to

ensure that water quality standards were not violated in

order to establish the defense. 49 Fed.Reg. at 38,038

*2In other words, industry proposed an “upset” defense for ex-

ceeding water quality-based effluent limitations, so long as the actual

quality of the receiving waters did not fall below established WQS.

38a

(emphasis added). The impracticality of such a require-

ment led EPA to reject the industry proposal. 49 Fed.

Reg. at 38,038. Jd.

This view that all potentially affected stream segments

would have to be monitored reflects EPA’s conviction

that an upstream source whose effluent might affect the

water quality of downstream states must comply with

the WQS of those states. It is also consistent with EPA’s

belief that “strict compliance” with water quality

standards is required by the CWA, because such com-

plianee would be impossible if sources could disregard the

WQS of states other than the source state.

According to EPA, the requirement of strict compli-

ance with WQS derives from 33 U.S.C. § 1311(b) (1)

(C), which mandates that “there shall be achieved . :

not later than July 1, 1977, any more stringent limita-

tion . . . necessary to meet water quality standards.”

(Recall that all NPDES permits must ensure compliance

with § 1311. § 1342(a) (1), (b)(1).) The legislative

history of the section bears out EPA’s interpretation.

See S.Rep. No. 414, reprinted in 1972 U.S.Code Cong.

& Admin.News 3668, 3710 (EPA “is under a specific

obligation to require that level of effluent control which

is needed to implement existing water quality standards

without regard to the limits of practicability”). Even in

1977 when Congress “relaxed” the best available

technology requirements in certain circumstances, the

amended statute and the legislative history leave no doubt

that water quality standards still must be maintained.24

~ “EPA has held this view consistently since at least 1979. 44

Fed.Reg. 32,854, 32,863 (1979) (“violations of... water quality

based effluent limitations are not subject to a defense of upset”’) ;

see also Student Pub. Interest Research Group v. P.D. Oil & Chem.

Storage, Inc., 627 F.Supp. 1074, 1086 (D.N.J.1986); Union Oil,

813 F.2d at 1489.

*4The 1977 amendments added a “waiver” provision in section

301 of the Act (33 U.S.C. § 1311(g)) allowing for use of “best

—

39a

In explaining the amendment the Senate committee cau-

tioned :

[T]he gains made as a result of the 1977 require-

ments could evaporate in the middle of the next

decade if only the 1977 [effluent limitations] and

new source performance standards are applied.

Thus, for many riverways . . ., pressure must be

maintained to assure improved water quality and to

avoid slipping back.

The Committee intends that current effluent limi-

tations . . . should represent a “floor” or minimum

requirement of the modifications authorized by this

section. Current levels of discharge must not be re-

laxed by this provision because that would imply

additional] treatment requirements on other point or

nonpoint source dischargers.

Id. at 42, 44, reprinted in 1977 U.S. Code Cong. & Admin.

News at 4367, 4369 (emphasis added).** The Committee

practicable technology” instead of “best available technology” if

1983 water quality standards could be met thereby. The Senate

committee explained that this allowance was being made to avoid

“(effluent| treatment for the sake of treatment.” S.Rep. No. 370,

95th Cong., Ist Sess. at 43-44, reprinted in 1977 U.S.Code Cong. &

Admin.News 4326, 4368. To qualify for the waiver, the amended

statute requires compliance with certain conditions, including attain-

ment or maintenance of a high standard of water quality.

2533 U.S.C. §1311(m) provides another example of Congress’s

willingness to relax statutory effluent limitations as long as com-

pliance with WQS is assured. This statute governs industrial dis-

charges into “deep waters of the territorial seas.” Subsection

(m)(1) provides for issuing, under certain unique circumstances,

permits containing “modified” effluent limitations (i.e., less stringent

limits than otherwise required), provided that effluent limitations

established in such permits are “sufficient to implement the appli-

cable State water quality standards.” § (m) (2). The statute further

provides that EPA may terminate such a permit if it subsequently

determines there has been a “decline in ambient water quality of

the receiving waters . . . even if a direct cause and effect relation-

40a

also stated: “There igs nothing in these new provisions

Which in any way preempts the rights of States to have

more stringent water quality standards or associated efflu-

ent limitations... .” Jd. at 43, U.8.Code Cong. & Admin.

News at 4368.

d. 33 U.S.C. § 1365

One final provision of the CWA deserves mention in

our discussion of the statutory interpretation issue. Sec-

tion 505(h), 33 U.S.C. § 1865 / h), authorizes the governor

of a state to sue EPA to enforce an effluent standard or

limitation under this chapter,” the violation of which is

occurring in another state and is “causing a violation of

any water quality requirement in his state.” Subsection

(f) defines “effluent limitation or standard under this

chapter” as including, for purposes of this section, certifi-

cation under § 1341 and permits or conditions thereof

issued under § 1342.

Clearly, the injury sustained by a state for which

§ 1365 provides a remedy is the impact on that state’s

water quality, not the violation of the “effluent standard

or limitation” per se. This interpretation is dictated by

common sense and congressional intent. See S.Rep. No.

414, reprinted in 1972 U.S.Code Cong. & Admin.News

3668, 3675 (“[T)he basis of pollution prevention and

elimination will be the application of effluent limitations.

Water quality will be a measure of program effectiveness

and performance.”). Arkansas’s view that discharge per-

mits are not required to ensure compliance with the ap-

plicable WQS of all affected States cannot be reconciled

with § 1365(h)’s express remedy for the violation of “any

water quality requirement” in one State, which results

ship cannot be shown,” but that EPA shall terminate such a permit

if the effluent from the source “is contributing to a decline in am-

bient water quality of the receiving waters.” § (m)(4) (emphasis

added ) .

dla

from the violation of an “effluent limitation” (defined to

include a permit condition) in another state.

Section 1365 reminds us that, under the CWA, effluent

limitations are not an end in themselves, but simply a

means to an end—the desired water quality. The plainest

evidence of this can be found in 33 U.S.C. § 1311(b) (1)

(C) (discussed at pages 604-605 of this opinion) and in

3 1312, each of which reveals that the purpose of effluent

limitations is to achieve a desired level of water quality.

Section 1312, “Water quality related effluent limitations,”

provides:

Whenever, in the judgment of the [EPA] Adminis-

trator, discharges of pollutants from a point source or

a group of point sources, with the application of

effluent limitations required under section 1311 (b)

(2) of this title, would interfere with the attainment

or maintenance of that water quality in a specific

portion of the navigable waters which shall assure

protection of public water supplies, agricultural and

industrial uses, and the protection and propagation of

a balanced population of shellfish, fish and wildlife,

and allow recreational activities in and on the water,

effluent limitations (including alternative effluent con-

trol strategies) for such point source of sources shall

be established which can reasonably be expected to

contribute to the attainment or maintenance of such

water quality.

83 U.S.C. § 1312(a) (emphasis added). In other words,

effluent limits more stringent than those required by 33

U.S.C. §1311(b) (2) must, if feasible, be established by

EPA and imposed on any sources responsible for interfer.

ing with the desired water quality in a specific stream seg-

ment.” In the words of the Senate committee:

26In addition, states are required to identify waters for which

the effluent limitations established pursuant to $1311 are “not

stringent enough to implement any water quality standard applicable

42a

The limitations necessary to achieve a given level of

water quality in one reach of a waterway may re-

quire more control of effluents than that attainable

through application of the best available technology.

Where that is desirable to implement the policies of

the Act, and feasible, [this section] provides the au-

thority to impose controls based on water quality.

The concept of “alternative effluent control strate-

gies” is necessary to account for [certain] difficulties

in simply setting more stringent effluent limitations,

... [F Jurther reduction of the level of effluent enter-

ing the affected waters may not be possible through

control technology, yet essential to water quality. Al-

ternative effluent control strategies, such as the trans-

portation of effluents to other less affected waters or

the control of in-plant processes would have to be

developed.

S.Rep. No. 414, reprinted in 1972 U.S.Code Cong. &

Admin.News 3668, 3712-13 ( emphasis added).

This section and its legislative history reveal the pre-

eminent importance of water quality—actual and desired

—in the framework of the CWA. Significantly, they lack

evidence of any intent to limit the scope of § 1312 to the

intrastate water quality effects of discharges, Indeed, the

statute’s use of the term “specific portion of the navigable

waters” (like the Senate report’s use of “one reach of a

waterway” and “affected waters”), rather than language

specifying waters of the source or permitting state, sug-

gests that the section contemplates regulation of water

quality without regard to state boundaries, Vesting au-

to such waters,” 33 U.S.C. § 1313(d) (1) (A), and to establish the

acceptable “total maximum daily load” for pollutants in those waters,

§ 1313(d) (1) (C). Eventually, the states are required to establish

total maximum daily loads for all waters. § 1313(d) (3).

43a

thority in EPA, instead of in individual states, arguably

suggests a similar intent.”

Considered together, all of the provisions of the CWA dis-

cussed above (§§ 1311, 1312, 1313, 1314, 1341, 1342, 1365,

and 1370), as well as the legislative history and EPA’s

implementing regulations, evidence the reasonabless of

EPA’s interpretation of the Act. Accordingly, we hold

that no discharge to a navigable water, such as the Illinois

River, may be permitted unless compliance with all ap-

plicable water quality requirements, including the federally

approved standards of affected downstream states, is

assured.

B. Significance of Existing Violations of Illinois

River Water Quality Standards

There is substantial evidence in the record of ongoing

violations of Illinois River water quality standards, yet

neither of the EPA judicial officers nor any of the parties

addresses whether, or how, this is relevant to Fayette-

ville’s application to discharge to the Illinois River. We

believe this situation poses an issue of critical importance

—whether a new discharge may be permitted when the

applicable water quality standards are already being

violated.** Guided by the Supreme Court’s pronouncement

*? Section 302 of the conference substitute bill, which was ulti-

mately enacted, was identical to the Senate provision discussed

above with one exception: The conference committee eliminated

the Senate bill’s grant of authority to the states. In the statute

as enacted (33 U.S.C. § 1312), authority to impose additional efflu-

ent limitations is vested solely in EPA. 1972 U.S.Code Cong. &

Admin.News at 3799.

** Throughout this and the prior section of our opinion, we use

“applicable water quality standards” to refer to those federally ap-

proved water quality requirements of affected states with which

a proposed discharge must comply. See supra note 5. In this section,

we refine the scope of the term to denote federally approved water

quality requirements that are relevant to the physical and chemical!

makeup of a proposed source’s effluent. For example, Oklahoma's

nutrients standard is relevant to the Fayetteville plant because the

44a

of the problem [or] offered an explanation for its deci-

sion that runs counter to the evidence before the agency,”

Motor Vehicle Mfrs., 463 U.S. at 43, 103 S.Ct. at 2856,

we conclude EPA’s decision to issue the Fayetteville per-

mit was arbitrary and capricious. The agency’s decision

is also flawed by misinterpretation and misapplication of

two important Oklahoma water quality regulations and

by arbitrary disregard for certain expert testimony. For

these reasons, discussed more fully below, we hold that

applicable water quality standards have already been vio-

lated) and reverse EPA’s decision to permit Fayetteville

to discharge any part of its effluent to the Illinois River

Basin.

1. Law Applicable to Oklahoma Scenic Rivers

The Upper Illinois River, including Lake Frances, from

the Arkansas state line down to the 650-foot elevation

level of Tenkiller Ferry Reservoir, is designated an Okla-

homa state scenic river. Okla.Stat. tit. 82, § 1452(b) ( 1)

(1990). As such, certain water quality standards apply

to these waters. See Oklahoma Water Quality Standards

(OWQS) § 4 & App. A (1982). Water quality standards

plant discharges Phosphorus and nitrogen, but the temperature

standard is irrelevant because, presumably, any impact that the

plant’s effluent might have on the temperature of water in the river

would be so attenuated at the state line as to be undetectable. For

the sake of convenience, we often refer simply to “Oklahoma water

quality standards,” or “WQS,” but in each instance it is implied

that those standards have been approved by EPA. We draw no

conclusions about state requirements that may not have been ap-

proved by EPA.

2° Water quality standards are promulgated by the Oklahoma

Water Resources Board pursuant to Okla.Stat. tit. 82 § 926.2.6

Appendix A of the standards lists the following beneficial uses,

45a

consist of two parts: a designated use or uses for the

identified waters and water quality criteria for such

waters based on those uses. 40 C.F.R. § 130.2(c); Okla.

Stat. tit. 82 §904(f); OWQS $4. Of greatest interest

for purposes of this discussion are the Illinois River’s

“fish and wildlife propagation” (primary warmwater

fishery), “aesthetics,” and “smallmouth bass” designated

“beneficial uses.” Within the latter two use categories,

the following water quality criteria are particularly sig-

nificant: turbidity (OWQS § 4.10(b)), nutrients (OWQS

$4.10(c)), and dissolved oxygen (OWQS §4.11(a)).

The occurrence of phosphorus and nitrogen in Fayette-

ville’s effluent necessitates the consideration of these cri-

teria.”

As a preliminary matter, Oklahoma contends and we

agree that EPA’s judicial officers erred in concluding that

Oklahoma’s nutrients standard, {4.16(c), applies only

to lakes, not to streams. Decision on Remand, R., A-33, at

6; Second Order on Petitions for Review, R., A-37, at 8.

Section 4.10(c) provides: “The total phosphorus concen-

tration and the nitrogen/phosphorus concentration ratio

inter alia, for the Illinois River, including Lake Frances, and Ten-

killer Reservoir below the scenic river: “public and private water

supply,” “fish and wildlife propagation” (primary warm-water

fishery), “agriculture” (Class I irrigation), “primary and secondary

recreation,” “aesthetics,” and “smallmouth bass.” See OWQS § 4

& App. A. Recall that Oklahoma WQS have been approved by EPA.

The particular standards applicable to the Fayetteville permit are

those adopted in 1982. Second Order on Petitions for Review. R..

A-37, at 5-6.

* In oversimplified terms, phosphorus and nitrogen are nutrients

which, when added to an aquatic system, stimulate the growth of

aquatic plants and other organisms, eventually altering bioloyical

characteristics of the system, such as species populations, biomass,

and species abundance and diversity, as well as physical and chem-

ical parameters, such as temperature, turbidity, color, and dis-

solved oxygen. In part B.2.c. of this discussion, we cite evidence

in the record relating to the composition of Fayetteville’s effluent

and compliance with these criteria.

46a

agency’s confusion is the definition of “eutrophication

(natural)” (included in Appendix C of the OWQS),

which refers only to lakes.*" An Oklahoma witness at

the administrative hearing explained that the definitions

in the appendix are “scientific definitions,” provided

merely for clarification purposes, and that “the state does

apply the eutrophication principle . . . to rivers.” Tr. at

578. Apparently no one scrutinized the OWQS carefully

enough to discover that the regulations themselves define

the scope of the nutrient standard’s application. Section

4, “Standards for Water Quality,” unequivocally states:

“Narrative standards lineluding] Section . . . 4.10(c)

- » . Shall be maintained at al] times and apply to all

perennial and intermittent streams.” (Emphasis added. )

In addition, the preface to Appendix A of the OWQS

states that §4.10(c) applies even to those stream seg-

ments not listed in the appendix (i.e., stream segments

for which beneficial uses have not been designated). Ac-

cordingly, we reject EPA’s ruling that the nutrients

standard applies only to Lake Frances and Tenkiller

Reservoir and hold that it applies to the entire reach of

the Illinois River in Oklahoma.

In addition to the nutrients standard, Oklahoma’s

“Anti-Degradation Policy,” OWQS § 3, and “Beneficial

Use Limitations,” id, $5, also protect the Upper Illinois

River.** The Oklahoma parties assert that EPA also mis-

31 “Eutrophication ( natural)” is defined:

The normally slow aging process by which a lake evulves into

a bog or marsh and ultimately assumes a terrestrial state.

During eutrophication the lake becomes so rich in nutritive com-

pounds (especially nitrogen and phosphorus) that algae and

other microscopic plant life become superabundant, thereby

“choking” the lake, and causing the lake to advance in seral

stages.

* The text of OWQS §§3 and 5 is included as an appendix to

this opinion.

47a

interpreted and misapplied these regulations. Their ar-

gument is rather unfocused, but they basically claim that

“any increase in any ‘wastes’. . . which may pollute or

tend to pollute” the waters of a scenic river violates these

rules. Oklahoma Brief at 32 (emphasis in original) ; see

generally id. at 30-38.

The Beneficial] Use Limitations regulation provides that

scenic rivers “are protected by prohibition of any new

point source discharge of wastes . . . except under condi-

tions described in Section 3 [the Anti-Degradation Pol-

icy}.” OWQS § 5. The relevant provision of § 3 states:

“No degradation shal! be allowed in high quality waters

. . . includ[ing] ter bodies . . . designated ‘Scenic

Rivers.’ The OK homa courts apparently have not in-

terpreted these provisions.” Nevertheless, we believe the

** The Oklahoma Attorney Genera! has issued an opinion, how-

ever, addressing the question: May the Oklahoma Water Resources

Board (OWRB) adopt an antidegradation policy that allows for

lower water quality or limited degradation of certain waters?

Opinion No. 84-124 (Dec. 28, 1984). The Attorney Genera! acknowl-

edged the federal antidegradation regulation, which provides for

lowering water quality in certain limited circumstances, but ob-

served that federal law was meant to set minimum standards. He

then set forth the Oklahoma Legislature's intent that state waters

were to be classified “for the purpose of progressively improving

the quality . . . and upgrading them from time to time by reclassi-

fying them,” Okla.Stat. tit. 82, § 926.6(A), and that it was state

policy to “protect, maintain, and improve the quality {of the waters

of the state|,” id. § 926.2. He concluded:

It is clearly the intent of the Legislature that the quality of

state waters be progressively improved and not be allowed to

be degraded. Oklahoma law does not set forth any exceptions.

It is, therefore, the official opinion of the Attorney General

that ... the [OWRB] may not adopt a statewide antidegrada-

tion policy which allows for lower water quality or limited

degradation of certain waters.

Thus, it is the expressed view of the Oklahoma executive depart-

ment that Oklahoma law does not allow even the limited degradation

authorized by the federal regulation. OWQS § 3, however, suggests

a contrary position.

48a

plain language of the regulations manifests a clear intent

to allow no degradation of the water quality of scenic

rivers. More specifically, the regulations disallow any

additional discharge of pollution (either a new point

source or an increase from an existing source) to a scenic

river if its water quality has been degraded or if the new

Source would degrade it.

Closer examination of the language and structure of

the Anti-Degradation Policy, guided by the minimum re-

quirements for such policies set forth in EPA’s regula-

tion, confirms our plain language construction." The Ok-

the federal and state ruies establish three levels of protection for

State waters. Under level 1, existing instream water uses must be

maintained and protected in all streams. Compare 40 C.F.R.

§ 131.12(1) with OWQS § 3, para. 1. The Oklahoma rule adds that

this level of protection prohibits any “further degradation which

would interfere with or become injurious to existing instream water

uses” and that “Oklahoma’s waters ... shall be... improved.”

Under level 2, “limited degradation” may be allowed in certain

“high quality waters” whose “water quality .. . exceeds those levels

necessary to support propagation of fish, shellfish, wildlife, and

recreation.” Compare OWQS § 3, para. 2 with 40 C.F.R. § 131.12(2),

planning requirements, that “necessary and justifiable economic or

social development” necessitates this degradation. OWQS § 3, para.

2; ef. §131.12(2), Moreover, in allowing such degradation, the

state is required to “assure that there shall be achieved the highest

Statutory and regulatory requirements for all new and existing

point sources and all cost effective and reasonable best! manage-

ment practices for non-point source control.” § 131.12(2) (em-

phasis added). (The comparable provision in the Oklahoma rule

is not as clear, but under EPA regulations, it must be interpreted

at least as stringently. ) Finally, level 3 provides for maintaining

and protecting certain exceptional, high quality waters (which in

Oklahoma includes scenic rivers). Compare OWQS §3, para. 3

with 40 C.F.R. § 131.12(3). The Oklahoma rule expressly prohibits

49a

lahoma regulation allows “no degradation” of water qual-

ity in designated scenic rivers. “Limited degradation” is

permitted limited only in other “high quality waters”

where the existing water quality “exceeds those levels

necessary to support propagation of fish, shellfish, wild-

life, and recreation.” OWQS § 3, para. 2. Even if the

Upper Illinois were not a scenic river, it would not be

eligible for the limited degradation exception because its

waters in their present condition do not qualify as such

“high quality waters.” See infra part B.2. Clearly, then,

the Oklahoma Anti-Degradation Policy prohibits any fur-

ther degradation of the Illinois scenic river.

We conclude the requirements of the Beneficial Use

Limitations/Anti-Degradation Policy are violated when

the water quality of a scenic river undergoes any human-

caused, detectable change. By “detectable change” we

mean any detectable change in a water quality parameter

such as turbidity or phosphorus (with the perhaps unnec-

essary qualification that an improvement in water quality

is excepted). We do not mean a detectable change that

violates a numeric criterion for that parameter (e.g., 25

NTUs for turbidity), which criterion would otherwise

apply if the Beneficial Use Limitations were not appli-

cable (i.e., if the receiving waters were not designated

as a scenic river or otherwise as “(a)” in Appendix A).”

any degradation of these waters, the prohibition in EPA’s regula-

tion is implicit.

5° For example, assume the turbidity in Lake Frances is 20

NTUs. If the Upper Illinois River (including Lake Frances) were

not designated (a) as well as a scenic river, it would be permissible

to allow the lake’s turbidity to increase to 25 NTUs, the criterion

applicable to “Warm Water Lakes” in OWQS §4.10(b). (T!

Illinois scenic river is designated a warm water fishery in Appendix

A.) Because the lake is part of a scenic river, however, the Bene-

ficial Use Limitations apply. In conjunction with the Anti-Degrada-

tion Policy, it prohibits any human-caused, detectable change in the

turbidity conditions extant at the time of the scenic river designa-

tion. Thus, if the turbidity of the lake in 1970 did not exceed 15

NTUs, human activities may not cause it to exceed that level.

50a

The Beneficial Use Limitations / Anti-Degradation Policy

are designed to provide additional protection beyond that

conferred by the numeric limits of other water quality

standards. Interpreting these regulations as merely pro-

hibiting violations of otherwise applicable WQS would

render them a nullity because, as we have seen, WQS may

not be contravened in any waters, regardless of whether

these additional regulations apply.

The ALJ on remand, did not explicitly address the

Anti-Degradation Policy but did construe the Beneficial

Use Limitations. The 1985 version of the Beneficial Use

Limitations, which the ALJ deemed applicable, provides:

““All streams and bodies of water designated as (a)

- + + are protected by prohibition of any new point source

discharge which increases pollutant loading or increased

load from an existing point source.’ ” Decision on Re-

mand, R., A-33, at 4. Construing this regulation in light

of the OWQS definition of “pollution,” ** he concluded:

“[{T]he Oklahoma parties must show by substantial evi-

dence that the City’s discharge will create a nuisance or

render the Illinois River in Oklahoma harmful, detre-

mental [sic] or injurious to any beneficial use of the

river.” Decision on Remand, R., A-33, at 5. The CJO

upheld this interpretation with minimal discussion. Sec-

ond Order on Petitions for Review, R., A-37, at 8. He

excused the ALJ’s failure to discuss the Anti-Degrada-

86 “Pollution” is defined as:

(C]ontamination or other alteration of the physical, chemical or

biological properties of any natural waters of the state, or such

discharge of any liquid, gaseous or solid substance into any

waters of the state as will or is likely to create a nuisance or

render such waters harmful or detrimental or injurious to public

health, safety or welfare, or to... legitimate beneficial uses,

or to likestock, wild animals, birds, fish or other aquatic life.

Okla.Stat. tit. 82 § 926.1.1., quoted in Decision on Remand at 5.

The ALJ consulted the statutory definition of “pollution” because

the 1985 version of the Beneficial Use Limitations does not define

its term “pollutant loading.” See our discussion of this compound

error in the text.

5la

tion Policy by explaining that the ALJ “implicitly ad-

dressed the policy in his detailed analysis of the dis-

charge’s potential impact on all relevant water quality

parameters.” Jd. at 9; see id. at 10 (if ALJ erred in

this regard, it was “harmless error’). The CJO rea-

soned that “if the Fayetteville discharge will not cause

a detectible change in any of the relevant water quality

parameters [as the ALJ found], it logically follows that

there will not be a ‘quality degradation.’” Jd. at 9-10.

We have considerable difficulty with the agency’s treat-

ment of these crucial Oklahoma regulations. First, and

most importantly, the ALJ’s interpretation defies the

plain language of the Beneficial Use Limitations and the

Anti-Degradation Policy that it references.’ Secondly,

87 The ALJ’s interpretation of the Beneficial Use Limitations is

also inconsistent with an earlier position taken by the EPA with

respect to permitting additional discharges in the Illinois River

Basin. The record contains a letter, dated Oct. 1, 1986, from

Lawrence Edmison, Director, Oklahoma Department of Pollution

Control, to Kenton Kirkpatrick, Deputy Director, Water Manage-

ment Division, EPA-Region 6. Mr. Edmison was writing to con-

firm a conversation with Mr. Kirkpatrick in which they apparently

reached an “understanding that Tahlequah’s discharge must not

increase loading on the Illinois River.” Addendum to R., OK-4

(emphasis in original). The discussion and letter were precipi-

tated by a debate concerning how the Illinois River’s (a) desig-

nation affected proposed revisions to the effluent limits in the

city of Tahlequah’s wastewater treatment plant permit, given that

the plant is located a short distance upstream from the Illinois

on a tributary not designated (a). An earlier memorandum to

Mr. Edmison from Quang Pham, an Oklahoma State Department

of Health employee, stated that, because Tahelquah was located

on a tributary of an (a) stream, “EPA indicated that no load

increase could be allowed for Tahlequah.” Addendum to R., OK-4

(emphasis added). This memo also referenced a recent EPA study

“on eutrophication of Illinois River [that] indicated that phos-

phorus plays a major role in the stimulation of algae growth in

the river.” Jd. at 2. These documents reflect a significantly dif-

ferent understanding of Oklahoma’s Anti-Degradation Policy and

Beneficial Use Limitation than that adopted by the ALJ and ap-

proved by the CJO in this permit proceeding.

52a

the CJO ruled that the ALJ erred in applying the 1985,

rather than the 1982, OWQS. Second Order on Petitions

for Review, R., A-37, at 5-6. The CJO deemed this error

harmless, but we disagree.** The 1985 version of the

Beneficial Use Limitations, which the ALJ improperly

applied, states: “All streams... designated as (a) in

Appendix A are protected by prohibition of any new

point source discharge which increases pollutant load-

ing. . . .” OWQS §7.11 (1985) (emphasis added),

quoted in Decision on Remand, R., A-33, at 4. Finding

no definition of “pollutant loading” in the 1985 rule, the

ALJ consulted the statutory definition of “pollution,”

Okla.Stat. tit. 82 § 926.1.1., to construct his interpreta-

tion of the regulation. The applicable 1982 rule, how-

ever, prohibits simply “any new point source discharge

of wastes” (emphasis added). Oklahoma law defines

“wastes” as “industrial waste and all other liquid, gase-

ous or solid substances which may pollute or tend to

pollute any waters of the state.” § 926.1.9 We do not

know whether Oklahoma intended to significantly change

the import of the Beneficial Use Limitation by this minor

language revision, but we cannot approve a construction

of the regulation based on the definition of a term (“pol-

lution”) not even contained in the applicable rule.

Finally, the agency’s construction of the Beneficial Use

Limitation is further flawed by the ALJ’s imposition of

the burden on Oklahoma to prove that the discharge

would “create a nuisance” or “render the Illinois River

... harmful... or injurious to any beneficial use.” De-

cision on Remand at 5. Granted, the opponent of a per-

mit has the “burden of going forward to present an af-

firmative case at the conclusion of the Agency case on

88 The CJO ruled the error harmless because, in his view, the

1985 and 1982 standards do not differ materially. Second Order on

Petitions for Review, R., A-37, at 6. However, the CJO did not

specifically consider the difference between the two versions of the

Beneficial Use Limitation and how that discrepancy may have

affected the ALJ’s conclusion.

53a

the challenged requirement.” 40 C.F.R. § 124.85(a) (3)

(ii). However, the “Agency has the burden of going

forward to present an affirmative case in support of any

challenged condition of a final permit,” id. § (a) (2), and

more importantly, the “permit applicant always bears

the burden of persuading the Agency that a permit...

should be issued and not denied,” id. § (a) (1). By re-

quiring Oklahoma to “show by substantial evidence that

the City’s discharge will create a nuisance,” the ALJ im-

properly transformed Fayetteville’s burden of showing

the permit should be issued into a burden on Oklahoma

to show that it should be denied.

As for the Anti-Degradation Policy, the CJO concluded

there could be no violation of the policy if there would

be no detectable change in water quality. However, it is

not clear whether the CJO interpreted the policy as re-

quiring that there be no detectable change in water qual-

ity, or whether he was merely reporting the legal signifi-

cance of the facts found by the ALJ. Although the CJO

determined in his first order that the applicable legal

standard is “whether [Fayetteville’s] discharges under

the permit will result in a detectable violation of the ap-

plicable water quality standards,” Order on Petitions for

Review, R., A-28, at 2, 12-13, his subsequent affirmation

of the ALJ’s erroneous construction of the Beneficial Use

Limitations casts doubt on whether he intended the “no

detectable change” test to apply to violations of the Ben-

eficial Use Limitations/Anti-Degradation Policy as well.

Because of this ambiguity and the errors in interpreting

the Beneficial Use Limitations, we agree with the Okla-

homa parties that the agency incorrectly construed and

applied both Oklahoma regulations.

2. Existing Degradation of Illinois Scenic River

Under other circumstances, the errors described above

might necessitate remanding to the agency with instruc-

tions to apply Oklahoma law as we have construed it.

54a

However, given the facts in this record, even proper in-

terpretation and application of Oklahoma water quality

standards cannot save this permit. The record contains

substantial evidence from which the ALJ could have

found that the water quality of the Illinois scenic river

has been degraded and that water quality standards were

being violated prior to the onset of Fayetteville’s dis-

charge to the river (see subpart a. below). We believe

that, where a proposed source would discharge effluents

that would contribute to conditions currently constitu-

ting a violation of applicable water quality standards,

such proposed source may not be permitted.** The ALJ

and the CJO erred in failing to consider whether or how

the river’s existing degraded condition is relevant to the

decision whether to permit a new source discharge.“

89 This issue has apparently never before been addressed by a

federal court, and it was only touched upon at the administrative

hearing. For example, the State of Oklahoma offered evidence

(visual slides with accompanying narrative testimony), the stated

purpose of which (according to counsel) was to “show that the

Illinois River is already in a degraded state and cannot assimilate

any more effluent” and that “the Illinois River has already exceeded

[its] assimilative capacity.” Tr. at 72, 76. An objection to part of

this testimony was overruled, Tr. at 76, although the ALJ indicated

he had “serious problems with the utility of these slides,” id. at 72.

Later in the hearing, in response to an objection that EPA official

Larry Champagne’s testimony concerning the history of the Fayette-

ville permit issuance process was irrelevant, an Oklahoma attorney

argued that testimony was “relevant to... the issue of whether or

not there is degradation” of the Illinois River. Again, the ALJ

expressed doubt, but allowed the testimony. Tr. at 154-55.

*°It might be considered surprising that the record contains

sufficient evidence from which to infer that Illinois River water

quality is already degraded, given that the parties did not recognize

the real significance of this issue. We suspect the evidence was

offered largely to show the potential for water quality deterioration

due to Fayetteville. Because pollutants in the Illinois River at the

Arkansas-Oklahoma border (see discussion in subpart b. below)

orginate from upstream, i.e., Arkansas, pollution sources, it logically

follows that a new Arkansas source (at a distance upstream com-

parable to that of existing sources) poses a risk of increasing the

55a

Three factual subissues are essential to our determi-

nation that the Fayetteville discharge to the Illinois

River may not be permitted: (1) whether the Illinois

scenic river is already degraded (i.e., whether its quality

has deteriorated since the river’s designation in 1970) ;

(2) whether Fayetteville’s effluent will reach the scenic

river; and (3) whether and how the components of

Fayetteville’s discharge would contribute to conditions in

the Illinois River. Although it is difficult to summarize

a record that consists of five boxes and four years of

briefs, orders, transcripts, prepared testimony, corre-

spondence, technical reports and miscellaneous other doc-

uments, in the following few pages we attempt to capsu-

lize the evidence relevant to these three issues.

a. Evidence of existing degradation. First, we address

the subject of the degradation of the Illinois scenic

river’s historically pristine water quality. Our review

of the record before the ALJ revealed ample evidence

from which the ALJ could have concluded that the river’s

condition has deteriorated since its designation as a

scenic river and that water quality standards are being

violated. Examples of this evidence follow.

Myron Knudson, Director of the Water Management

Division, EPA-Region 6, testified at the administrative

hearing: “There has [sic] been many conversations as

pollutant load at the state line. There is considerable evidence that

the principal point sources of pollution to the Upper Illinois River

above Lake Frances are the municipal wastewater treatment plants

at Rogers and Springdale, Arkansas. E.g., Gakstatter & Katko,

An Intensive Survey of the Illinois River (Arkansas and Oklahoma)

in August 1985 (“Gakstatter Report”), Addendum to Oklahoma

Brief, at 3, 5, 77; Tr. at 360-61. The Rogers and Springdale plants

are 41.5 and 39.5 miles, respectively, upstream from the state line

at Lake Frances. Gakstatter Report at 11-13. These distances are

nearly identical to Fayetteville’s distance (39 miles) from that

point. At least on the basis of distance, it is not unreasonable to

except that Fayetteville’s effluent will also reach the Oklahoma

portion of the Illinois River.

56a

related to what could be done in order to clean up the

Illinois River.” Tr. at 221. The Attorney General of

Oklahoma Robert Henry, in a prepared statement deliv-

ered at the hearing, described the Illinois River as “de-

graded,” Tr. at 232, and stated that “the river cannot

handle the existing load” of municipal wastewater treat-

ment plant discharges, Tr. at 233. Dr. Stephen Threl-

keld, witness for the Oklahoma Wildlife Federation and

author of the EPA-funded “Clean Lakes” report on Lake

Frances,’ summarized the results of the “Clean Lakes”

study, stating: “Water quality violations of the Okla-

homa Water Quality Standards in Lake Frances .. . are

in terms of bacteria and in terms of turbidity... .” Tr.

‘! The so-called “Clean Lakes” reports are prepared by states

pursuant to the requirement therefor in section 314 of the Act, 33

U.S.C. § 1324. Subparagraph (a) (1) of the statute specifically

requires that lakes be classified according to “eutrophic condition.”

The remarks in the Senate Report concerning reauthorization of

this section in 1977 are of considerable interest:

The 1972 act recognized the urgent need for a lake improve-

ment program to restore the significant number of the Nation’s

95,000 freshwater lakes that were in eutrophic and deteriorated

conditions. The clean lakes program was conceived to respond

to this problem... .

In the 5 years since Public Law 92-500 went into effect, lake

restoration programs essentially have not even begun ....

The committee hearing record clearly demonstrates that there

is a great interest in lake areas in the restoration and preser-

vation of degraded freshwater lakes... .

. » » The committee believes this authorization represents a

level of effort that reflects the expectations of the Congress

for this program, recognizing that the problem of lake eutrophi-

cation and deterioration nationwide far exceeds even this au-

thorization level.

The committee is hopeful that the new a ministration will

act to make lake restoration a key element of the EPA’s water

pollution control program contrary to the EPA’s implementa-

tion of this section to date.

S.Rep. No. 379 at 69-70, reprinted in 1977 U.S.Code Cong. & Admin.

News at 4394-95.

57a

at 356. He explained that EPA funded the study “be-

cause they wanted to know what the problems were in

Lake Frances.” Tr. at 359; see id. at 374.

Mike Schornick, Oklahoma witness and principal of

Schornick/Roberts & Associates, consulting engineers,

testified that significant degradation trends are and have

been occurring in the Illinois scenic river, including Lake

Frances. Tr. at 398-400 (citing prefiled testimony, R.,

OK-2, at 3-4). He stated that certain figures in his pre-

filed testimony, which reflect data obtained from regular

water quality monitoring conducted by Oklahoma at sev-

eral points along the Illinois River, illustrate the degra-

dation trends. Tr. at 414, 439. He claimed dissolved

oxygen concentrations are reaching levels that violate

OWQS. OK-2 at 4. He also stated that Arkansas and

Oklahoma monitor phosphorus in their regular 305(b)

trend analysis reports * to EPA, Tr. at 486, and that all

of those reports (1976-81 and 1984) show increasing

phosphorus concentrations, Tr. at 489-90. Accounting

for the addition of Fayetteville’s effluent, Schornick said

phosphorus loading and concentrations in Lake Frances

will have increased by 106 percent and 76 percent, re-

spectively, over 1974-75 background levels. Tr. at 454-

56 (citing prefiled testimony, OK-2, at 4).

Lawrence Edmison, Director, Oklahoma Department of

Pollution Control, testified that his department has re-

ceived “many complaints about odor problems and color

problems on the river.” Tr. at 542. He also discussed

the algae problem on the river in relation to the increas-

ing phosphorus concentrations and decreasing nitrogen

concentrations in the water. Tr. at 533-34 (citing pre-

filed testimony, OK-4, at 3). Based on his years of per-

sonal observation of the river and experience handling

citizen complaints and looking at trends documented in

*? Section 305(b) of the Clean Water Act, 33 U.S.C. & 1315(b),

requires the states to submit to Congress biennial reports on the

condition and quality of their surface waters.

58a

305(b) reports and other reports, Tr. at 546-48, he

stated, “I know how bad the river is now; I anticipate

that any increased load will only make it worse.” Tr.

at 548. He testified that the 305(b) reports for both

1984 and 1986 related an “apparent increasing trend”

in phosphorus concentrations at all four Illinois River

sampling sites, an “apparent decreasing trend” in dis-

solved oxygen at the same sites (with the exception of

the Baron Fork site in 1986), and an “apparent decreas-

ing trend” in nitrogen levels at all four sites (with the

exception of Tahlequah in 1986). OK-4, at 2-3. Decreas-

ing nitrogen and increasing phosphorus, he claimed, are

“indicative of the algae problem on the river.” OK-4,

at 2-3.

Oklahoma witness and consultant Dr. William Walker

reported that algae concentrations in Lake Frances al-

ready reach 90 parts per billion, which is three times the

level typically considered indicative of severe nuisance

conditions. Tr. at 609-10. Lake Frances is already “su-

persaturated with nutrients,” Tr. at 691; for example,

existing concentrations of phosphorus in Lake Frances

are more than ten times levels considered typical of eu-

trophic lakes, or where algae problems start to develop,

Tr. at 701. According to Dr. Walker, a “plume [of] de-

graded water” exists in the river downstream from Lake

Frances. Tr. at 701.

Jimmie Pigg, part-time ichthyologist with the Okla-

homa Water Quality Division and science coordinator for

an Oklahoma school district, Tr. at 65, narrated a slide

presentation at the administrative hearing showing

changes in the condition of the Upper Illinois River since

1972. In response to an objection concerning the rele-

vance of part of the testimony, counsel for the State of

Oklahoma stated that the evidence was offered for the

purposes of “show[ing] that the Illinois River is already

in a degraded state and cannot assimilate any more ef-

fluent” and that “the Illinois River has already exceeded

59a

[its] assimilative capacity.” Tr. at 72, 76. Mr. Pigg

said Lake Frances “is really a sewage lagoon,” which

“eatch(es}] and hold[s] the material from Arkansas.”

Tr. at 73.

The Gakstatter study reported that “dense phytoplank-

ton populations develop in Lake Frances and also adversely

affect water clarity in the Illinois River for several miles

downstream,” and that this growth is “stimulated by ex-

cessively high phosphorus levels originating from [the

sewage treatment plants at] Springdale and Rogers [in

Arkansas].” Report at 5.“ The Gakstatter Report also

** An Arkansas party attorney objected to the relevance of cer-

tain slides, which showed Sager and Flint creeks (both Illinois

River tributaries) below Siloam Springs, Arkansas’s, treatment

plant. In defending against the objection, the Oklahoma attorney

stated that the slides were “relevant to show that Fayetteville

should not be allowed to discharge because it will just exacerbate

the existing violation of Oklahoma Water Quality Standards.” Tr.

at 76. The objection was overruled, id., although the ALJ indicated

he had “serious problems with the utility of these slides,” id. at

72. Mr. Pigg testified to 30 years of personal experience with the

Illinois River, including making “collecting trips” and preparing

“hundreds of reports” on changes in the fish population. /d. at

65, 86. He was denied the opportunity to offer an opinion, based

on his experience with the river, as to whether algae in the river

had increased during those 30 years, apparently on the ground that

he had not been qualified as an expert. Jd. at 86-87.

**It should be noted that the Gakstatter study, on which the

ALJ relied, see Decision on Remand, R., A-33, at 10-11, 14-15, was

conducted during a two-week period of very atypical weather in

August 1985. Precipitation for that month was more than three

times the normal amount, streamflow was 50% greater than the

normal average, and three inches of rain fell during the survey.

Gakstatter Report at 1, 23. Throughout the report the authors

conceded several possible effects of these conditions—increased

turbidity due to increased surface runoff and scouring of stream

sediments, decreased concentrations of chemical parameters due

to dilution, and decreased incidence of periphytons (surface algae)

‘use of high stream flow. Moreover, even though the ALJ relied

« .« for evidence that the Fayetteville discharge would not affect

the Illinois River, the Gakstatter study supports our conclusions

60a

provides brief summaries of the results of several other

studies. For example, the U.S. Geological Survey (USGS)

in 1984 reported the Illinois River did not meet water

quality standards for dissolved oxygen, phosphorus, and

fecal coliform bacteria; Threlkeld (1983) described Lake

Frances as “very euthrophic” due to phosphorus from

Springdale and Rogers; the Oklahoma State Water Qual-

ity Laboratory (1977) reported Lake Frances was in the

“late stages of eutrophication,” due partially to “elevated

Illinois River nutrients”; and two EPA (1977) studies

classified as eutrophic both Lake Frances and, to a lesser

extent, Tenkiller Reservoir. Gakstatter Report at 7-9.

The evidence before the ALJ also included the record

of a hearing conducted by the Arkansas-Oklahoma Arkan-

sas River Compact Commission on June 3-4, 1985. See R.,

C-1, Tr. at 307. The subject of the Compact Commission

hearing was the Illinois River situation and the (at that

time) proposed Fayetteville permit. The Commission is-

sued an order (also included in the administrative hear-

ing record) containing several findings concerning the

degraded condition of the river. Findings of Fact, Con-

clusions of Law, and Commission Order (“Compact Com-

mission Order”), R., OK-5. The Commission began by

observing that, historically, the Illinois River “has been

recognized by Oklahomans as a watercourse of unique

natural scenic beauty and high quality . . . spring-fed

waters [that] ran clear and plentiful.” 16. But, the

Commission continued, the “Upper Illinois River System

in Oklahoma has, in recent years, undergone a process of

degradation in water quality, and the process appears to

be on an escalating trend.” { 32.

Other findings by the Commission include: “[T)he

Illinois River has degraded substantially over the past

decade . . . [including] radical changes in the river’s

concerning the existing degradation of the river and the fact that

Fayetteville’s effluent will be carried downstream to the Illinois

River in Oklahoma.

6la

water color and turbidity, and the existence of increased

alga growth [and] offensive odors... .” 33. Violations

of the dissolved oxygen standard have been documented

by the Oklahoma Department of Health immediately be-

low Lake Frances. { 35. Degradation of dissolved oxygen

is also occurring farther downstream from Lake Frances.

1 36. A 1984 USGS study (presumably the one cited in

the Gakstatter Report) showed violations of Arkansas

WQS in the Arkansas portion of the river. 438. Phos-

phorus concentrations are continuing to increase in “sig-

nificant and undesirable amounts.” { 40. The “Arkansas

guideline for maximum phosphorus concentration to pre-

vent eutrophication has already been greatly exceeded in

certain Arkansas and Oklahoma river segments.” { 40.

The “trend of phosphorus degradation of the Upper TIIli-

nois River appears to be occurring at all locations.” { 41.

Lake Frances is in “an obvious state of eutrophication,

marked by putrid smells and dark brown turbid waters.”

145. Based on Oklahoma’s 305(b) report for 1978-83,

“(djegradation trends also appear to be occurring with

reference to levels of potassium, calcium, sodium, copper

and hardness.” {| 46. The Commission acknowledged Ar-

kansas’s “exceptions” to certain of Oklahoma’s sampling

methods and conclusions, {f 47-48, but decided Oklahoma’s

methods were generally accepted in the scientific commu-

nity and sanctioned by EPA, 7149. The Compact Com-

mission concluded: “{M]an-made pollution (degradation)

of the waters of the Upper Illinois River in both Arkansas

and Oklahoma . . . as defined by the compact, [has] oc-

curred and said pollution continues to occur at increasing

and alarming rates. . .. Further, said pollution is of

grave interstate magnitude and significance.” Conclu-

sions of Law { 9.

The record before the agency also included the Fay-

etteville 201 Facilities Plan, prepared by Fayetteville in

conjunction with its application for an EPA construction

grant for its new treatment plant. See 40 C.F.R.

62a

§ 35.2030(b) (3) (specifying the requirements for such

plans). The plan states that “nutrient loadings from

non-point sources and existing discharges do adversely

impact the Illinois under present conditions.” CH2M

Hill & McClellant Consulting Engrs., Inc., 201 Facilities

Plan Environmental Information Document for City of

Fayetteville, Arkansas (Jan. 1984), R., ARK-6, at 2-20.

The plan also states that the “net impact of point and

nonpoint sources is to increase nutrient loading, with

consequent increases in algal growth and increased tur-

bidity.” Id. at 2-22. The plan described the biological

community in the reach of the river near and below Lake

Frances as “slightly degraded.” Id. at 2-24. The Illinois

River Assessment Report, also in evidence, declares as

one of its “alarming” conclusions: “Overwhelming exist-

ing documentation demonstrates that significant degrada-

tion of the Upper Illinois River has already occurred.”

Roberts/Schornick & Assocs., Illinois River Assessment

Report (Dec. 1984), R., ARK-6, at ii.

At this juncture we note that the absence of any evi-

dence in the record that enforcement efforts have been

undertaken to remedy the pollution problems in the IIli-

nois River does not undermine our conclusion that water

quality violations have occurred and no doubt continue to

occur. Enforcement actions are not necessary to docu-

ment water quality degradation; it is only necessary that

there be reliable evidence that water quality criteria have

been exceeded.** See 33 U.S.C. §1319(a)(1) (“When-

*5 Additionally, in the circumstances of this case, evidence that

such exceedances are ongoing may be required. See Gwaltney of

Smithfield, Ltd. v. Chesapeake Bay Found., Inc., 484 U.S. 49, 57-59,

108 S.Ct. 376, 381-82, 98 L.Ed.2d 306 (1987) (EPA may take en-

forcement action against a discharger for wholly past violations

of permit conditions, but a citizen suit to enforce permit conditions

must be based on evidence of ongoing violations). Where a de-

cision to deny a permit is based in part on a finding that the water

quality of the receiving waters is degraded, it is reasonable to

require evidence of the continuing nature of the WQS violations.

Because eutrophication is not a rapid process (nor can the process

ever, on the basis of any information avaiable to him,

the Administrator finds that any person is in violation

of any condition ... in a permit... he shall {commence

enforcement proceedings]” (emphasis added)). Such

evidence may be found in the dischargers’ own monitor-

ing reports, see 40 C.F.R. § 122.41(j) ; the states’ obliga-

tory 305(b) or 205(j) (33 U.S.C. § 1285(j)) reports; or

other studies or surveys conducted according to accepted

methods.**

be reversed rapidly), the eutrophied state of the Illinois River al-

most certainly persists and perhaps has worsened since the date of

the most recent evidence of degradation in the record. We believe

there is substantial evidence in the record to support this conclu-

sion. Cf. Chesapeake Bay Found. v. Gwaltney of Smithfield, Ltd.,

890 F.2d 690, 693-95 (4th Cir.1989).

We also point out that this case is easily distinguished from a

situation in which a presumption of ongoing violations (for pur-

poses of taking enforcement action) is premised on past violations

of technology-based effluent limitations (for instance, failures of

control equipment). E.g., Sierra Club v. Shell Oil Co., 817 F.2d

1169 (5th Cir.), cert. denied, 484 U.S. 985, 108 S.Ct. 501, 98 L.Ed.2d

5f9 (1987). It is admittedly unreasonable to assume, on the basis

of “past, sporadic or largely unconnected permit violations,” that a

permittee is currently violating the effluent restrictions of his per-

mit. 817 F.2d at 1173. But it is highly probable that water quality

violations (e.g., eutrophication effects) that result from the cumu-

lative impacts of the ongoing discharges of several sources will con-

tinue as long as the discharges continue. This case is an example

of such a situation.

Finally, we note that, even if the Illinois River’s water quality

has improved since the Fayetteville permit was erroneously granted

(the record contains no evidence tending to suggest this), under

the Oklahoma Anti-Degradation Policy no degradation of that im-

proved quality may be allowed. OWQS § 3, para. 4.

#* Section 106(e) of the Act, 33 U.S.C. § 1256(e), requires states

to conduct water quality monitoring “including classification accord-

ing to eutrophic condition” and to annually update monitoring data

and include the data in 305(b) reports in order to qualify for fed-

eral grants for pollution control programs. According to EPA, the

305(b) report is the “primary water quality problem assessment

document under the Act.” 50 Fed.Reg. 1774, —— (1985) (WL pp.

22-23 of 57) (preamble to final rule, 40 C.F.R. Parts 355 and 130;

64a

Similarly, a history of lax enforcement with respect

to existing sources does not justify allowing a new source

of pollution. Water quality standards prescribe the de-

sired condition of surface waters to be met at all ap-

plicable times; they do not serve merely as a yardstick

for enforcement efforts when enforcement personnel may

be available to ascertain compliance.

Clearly then, the record before the ALJ contains sub-

stantial evidence from which it can be concluded that

water quality in the Upper [’linois River is degraded

and that Oklahoma water quality standards for nutri-

ents, dissolved oxygen, and/or aesthetics have been and

probably continue to be violated. The decisions of EPA’s

judicial officers ignore the bulk of this evidence. To our

consternation, however, the ALJ believed some of the

relevant testimony chronicled above, yet remained oblivi-

ous to its ramifications. In his Decision on Remand, for

example, the ALJ stated that “dissolved oxygen viola-

tions in Oklahoma are occurring without [Fayetteville’s]

discharge.” R., A-33, at 19 (emphasis added). It also

appears he accepted the testimony that nutrients, tur-

bidity, and solids standards were being violated, although

he disputed the conclusion that Fayetteville “would in-

crease the spatial and temporal . . . frequencies” of those

violations. /d. at 14-15 (citing Dr. Walker’s and Dr.

Gakstatter’s testimony). Significantly, no witness re-

futed the testimony concerning the river’s currently de-

§ 130.8(b)); see also 40 C.F.R. § 130.8(a) (“report serves as the

primary assessment of State water quality”). EPA’s regulations

state that problems identified in the 305(b) report “should be em-

phasized ... in the State’s | water quality management plan] .. .

under sections 106 and 205(j) of the |CWA]}.” 40 C.F.R. § 130.8(a).

In years in which a 305(b) report is not required, states may meet

their annual 295(j) report requirement by supplementing the most

recent 305(b) report with a certification that it still represents cur-

rent conditions, or by updating it as necessary to reflect current con-

ditions. 40 C.F.R. § 130.8(d); see also 50 Fed. Reg. 1774,

(1985) (WL p. 23 of 57).

65a

graded condition, nor did the ALJ discredit (or even

comment on) any of that testimony. He simply failed to

recognize the significance of this testimony with respect

to the permitting decision at hand.

b. Downstream transport of pollution from Fayette-

ville. Next, we address the question of the downstream

migration of Fayetteville’s effluent. Our review of the

transcript revealed that no person involved in the admin-

istrative hearing seriously disputed that pollution from

Fayetteville would reach the state line; instead, the par-

ties debated how much would reach Oklahoma and what

effect, if any, it would have. Indeed, in his final opinion,

the ALJ recites evidence that twenty to twenty-five per-

cent of the nutrients (specifically, phosphorus) in Fay-

etteville’s effluent would be “bio-available” at the Okla-

homa state line. Decision on Remand, R., A-33, at 8.

The evidence supporting downstream transport includes:

According to EPA witness and employee Garrett

Bondy, the Waste Load Allocation Study performed by

Arkansas predicts a six-percent increase in the phosphor-

ous load to Lake Frances due to Fayetteville. Tr. at 147.

Fayetteville witness Dr. Cliff Thompson testified to a

2.4-percent increase, based on a discharge of 35 lb. phos-

phorus per day. Tr. at 280-81. (Fayetteville’s permit

allows it to discharge 54 lb. phosphorus daily.) Thomp-

son, whose firm CH2M Hill prepared the 201 Facilities

Plan for the Fayetteville plant, said: “We recognized

that we would be adding discharge to the Illinois River.”

Tr. at 266-67. Dr. Robert Blanz, former deputy director

of the Arkansas Department of Pollution Control and

Ecology, testified that Fayetteville’s waste could reach

Lake Frances, the Illinois River below the lake, and Ten-

killer Reservoir. Tr. at 308-11, 321-22. He “guessed”

twenty to twenty-five percent of the phosphorus from the

plant would be cycled through the Upper Illinois River

system rather than taken out of it. Tr. at 311-12; cf.

Decision on Remand at 8.

66a

Mike Schornick, testifying for Oklahoma, suggested

that sixty percent of Fayetteville’s phosphorus discharge

would reach Lake Frances (based on his review of exist-

ing data). Tr. at 454-56 (citing prefiled testimony, R..,

OK-2, at 4). He stated that treatment plant operation

would result in measurable changes in Lake Frances dur-

ing low flow conditions. Tr. at 461-62. Another Okla-

homa witness, Dr. Walker, testified that Fayetteville

would increase the phosphorus load to Lake Frances by

4.69 percent in an average flow year. Tr. at 610-11

(referring to amended Table 5 in his prefiled testimony,

R., OK-9).

The Arkansas River Compact Commission found that

Lake Frances no longer acts as a “nutrient trap”; thus,

the “addition of any new waste effluent discharge into

the Illinois River from above Lake Frances . . . will be

transmitted downstream below Lake Frances into the

Illinois River in Oklahoma.” Compact Commission Order,

R., OK-5, Findings {| 44. The Commission further stated

that “the potential for or threat of an increased phos-

phorus loading . . . from [Fayetteville’s] discharge to the

Illinois River in Oklahoma clearly exists.” Jd. { 73.

Finally, the 201 Facilities Plan reports “considerable

downstream transport of enriched organic matter” in the

Upper Illinois River. R., ARK-6, at 2-22. Citing the

Oklahoma State Department of Health’s conclusion that

“nearly 60 percent of the nitrogen and 74.4 percent of the

phosphorus load measured in the Illinois River at Tah-

lequah, Oklahoma was [sic] contributed by. sources above

Lake Frances,” the report concludes the “data clearly

show that point and nonpoint sources in Arkansas are

a major source of nutrients in the Illinois River of Okla-

homa.” Id. at 2-24. The report states that additional

nutrients introduced to Lake Frances “may be passed

through [the lake] to downstream reaches of the Illinois,”

id., and that “transport of dissolved and suspended nu-

trients from Arkansas sections of the Illinois basin may

have some effects on Tenkiller Reservoir in Oklahoma,”

67a

id. at 2-28. “Fayetteville’s treated effluent,” the report

claims, “would increase downstream nutrient concentra-

tions by . . . perhaps 10-15 percent . . . during low-flow

conditions.” Jd. at 4-13.

Based on the foregoing, which is just a sample of the

record evidence pertaining to the downstream transport

of Fayetteville’s effluent, we conclude there was substan-

tial evidence before the ALJ to support a finding that

Fayetteville’s effluent would reach the Illinois scenic river,

ce. Significance of Fayetteville effluent to existing con-

ditions. Lastly, we recite some of the evidence relevant

to the third important subissue—whether and how the

components of Fayetteville’s discharge can be expected to

contribute to water quality conditions in the Illinois River.

Although this is more a scientific question than it is a

legal one, the inquiry helps to tie together the conclusions

drawn from the first and second subissues discussed

above. The evidence includes:

Mike Schornick asserted that Fayetteville’s effluent will

result in increased algae in Lake Frances. Tr. at 434-

35 (citing prefiled testimony, OK-2, at 15). He discussed

the relation between phosphorus and nutrient loading and

dissolved oxygen levels, Tr. at 436, offering a brief ex-

planation of how algae can increase and decrease the con-

centration of oxygen in water, Tr. at 438.‘7 He noted that

*? This crucial fact seems to have eluded the ALJ, who was aware

that photosynthesis by algae produces oxygen, but obviously did not

understand that respiration by algae at night consumes oxygen, as

does the process of decay of organic materials in the stream. See

Decision on Remand, R., A-33, at 19 (misciting the eminently quali-

fied Dr. Walker, see R., OK-7, regarding the mechanisms by which

dissolved oxygen levels are reduced, see R., OK-8, at 12-13). See also

Tr. at 129 (EPA witness Bondy’s testimony concerning sediment

oxygen demand).

The fact that algae reduce oxygen concentrations in streams (in

addition to causing other problems) is recognized by Congress and

EPA and has been widely acknowledged in the case law. See, e.g.,

68a

increased algae can result in many aesthetic problems, in-

cluding taste, odor, and the appearance of a river. Tr.

at 477-78. He reported that the decreasing dissolved oxy-

Chemical Mfrs. Ass’n v. U.S. EPA, 870 F.2d 177, 218 & n. 149 (5th

Cir.1989) (Congress in amending the CWA “specifically recognized

that algae are a significant cause of water quality problems,” i.e.,

that “ ‘algae [have] grown so rapidly that sufficient oxygen is not

available to support other forms of life.’” (quoting legislative his-

tory)). In Montgomery Envtl. Coalition v. Costle, 646 F.2d 568, 575

(D.C.Cir.1980), a case repeatedly cited to the ALJ by the Oklahoma

parties, the court described the same problem facing the Illinois

River: “Excessive nutrient levels degrade water quality both be-

cause the proliferation of algae is itself a nuisance and because

algae respiration and subsequent death and decay use up oxygen

dissolved in the river’s waters.” (Emphasis added.)

Nevertheless, relying on evidence submitted by the Arkansas par-

ties that Fayetteville’s effluent would experience “complete oxygen

recovery” before it enters the Illinois River, the ALJ concluded that

“it is not possible for the City’s effluent to violate the Oklahoma

dissolved oxygen standards.” See Decision on Remand at 18-19.

The “re-aeration” described by the Arkansas parties occurs as a

result of turbulence in Mud Creek and possibly Clear Creek above

Clear Creek’s confluence with the Illinois. This essentially mechani-

cal process takes no account of nutrients in the effluent and their

impact on algae growth and, eventually, oxygen levels.

The ALJ also labored under apparent misapprehensions concern-

ing the significance of phosphorus concentrations in the river and

the relation between phosphorus assimilation and eutrophication.

For example, the ALJ stated: “[T]he assimilative processes [at low

flows] is at its [sic] most effective stage and therefore removes

[sic] more nutrients upon which the algae feed... .” Decision on

Remand at 8. The glaring error of this statement is that the uptake

of nutrients by algae is itself one of the “assimilative processes”

that is “most effective” at low flows. Uptake of phosphorus by algae

does not reduce the potential for eutrophication, it is an intial step

of the process! The ALJ also cited testimony that “all of the

phosphorus below Lake Francis [sic] would be assimilated out of

the time it reached Lake Tenkiller.” Decision on Remand at 10.

The flaws in this statement are: (1) it presumes the nutrients

standard does not apply to streams (which we have seen is contrary

to Oklahoma law), and (2) it ignores the fact that one of the

processes by which phosphorus “assimilates out” (i.e., which cause

69a

gen trends in the Upper Illinois have paralleled increases

in phosphorus and other nutrients, calling this “strong

evidence that there is a definite relationship between the

two phenomena,” as well as a logical consequence of in-

creased biological activity. OK-2, at 4. In his opinion,

the Fayetteville discharge will “precipitate lower dissolved

phosphorus concentrations in the water to decrease) is uptake by

algae, which leads to eutrophication.

The ALJ’s erroneous conclusions may derive at least in part from

the inconsistent definitions of the term “assimilation” used by vari-

ous witnesses. See, e.g., Tr. at 308-09, 319, 491, 697. (“Assimila-

tion” in this context essentially refers to the uptake and removal

mechanisms by which nutrients are taken out of the water—uptake

by plants and animals, animals feeding on plants, sedimentation, etc.

The witnesses disagreed, for example, as to whether assimilation

includes dilution.) But the fault is not entirely the witnesses’. As

explained above, the ALJ overlooked or misunderstood evidence of

fundamental biological processes. He also confused “assimilation”

with “assimilative capacity.” Ostensibly defining “assimilation,” he

quoted the 1985 OWQS Appendix C definition of “assimilative

capacity” (the “amount of pollution a stream can receive and stil]

maintain the W.Q.S. designated for that stream”). Decision on

Remand at 7. Yet the two terms are not interchangeable, nor did

the ALJ even acknowledge the existence of two discrete terms.

Moreover, as we discuss later in the text, the CJO later determined

that the 1982, not the 1985, OWQS are applicable to this permit.

(The 1982 definition of “assimilative capacity” varies somewhat

from the 1985 definition.) It should be noted that the “assimilative

capacity” of streams protected by the Beneficial Use Limitation may

be very limited (given that any detectable change in a water quality

parameter violates the applicable WQS for such a stream). More-

over, the term may have limited relevance to the Upper Illinois

River, given that existing water quality problems in the Illinois River

demonstrate that the “assimilative capacity” of the stream has

already been surpassed.

These are grave misunderstandings because the phenomena of

oxygen depletion, which results from “over-fertilization” of a stream

and the consequent increase in organic matter, and phosphorus

uptake by aquatic organisms, are intrinsic to the eutrophication

process. That the ALJ did not comprehend these fundamental con-

cepts casts doubt on his conclusions that Fayetteville’s discharge

would not jeopardize compliance with the applicable WQS.

70a

oxygen concentrations and more frequent violations of the

dissolved oxygen standards.” Jd. at 5. He also contends

Fayetteville will cause violations of the copper standard.

Id.

Robert Blanz, testifying for Arkansas, stated that

“scouring” (the action of high stream flows moving sedi-

ment on the stream bottom and along its banks) resus-

pends sedimented material, including algae, thus increas-

ing turbidity. Tr. at 322. EPA official Garrett Bondy

testified that the Fayetteville discharge “may raise” sedi-

ment oxygen demand, thus potentially contributing to re-

duced dissolved oxygen concentrations in the river. Tr.

at 129; see also id. at 133, 135. Dr. Threlkeld stated

that “algal growth and resuspension of sediments are a

part of turbidity [in Lake Frances].” Tr. at 356.

Dr. Walker agreed that one cause of water clarity prob-

lems in Lake Frances is algae. (The other is inorganic

turbidity.) Tr. at 680-81 (citing Gakstatter Report; see

id. at 78). He believes the increase in nitrogen pollution

of the Illinois River attributable to Fayetteville’s dis-

charge might increase the amounts of periphyton (surface

algae) in backwater areas and under low flow conditions.

Tr. at 693. He further believes these impacts would be-

come more significant as the phosphorus discharges from

upstream sources decrease. Tr. at 694, 716-18. In Dr.

** There was testimony at the hearing that future reductions are

expected in the phosphorus discharges of three existing municipal

treatment plants in the Upper Illinois basin. (In fact, Oklahoma

asserts that it was error for EPA to consider these anticipated

reductions in deciding whether to grant the Fayetteville permit.

Oklahoma Brief at 18-22.) These reductions would result from

the installation of new treatment facilities, but would not be

mandated by the plants’ permits. Phosphorus concentrations in

the effluent from the new plants would be approximately 1 milligram

per liter (mg/l, or about 50 percent less than previous concen-

trations. Initial Decision, R., A-26, at 13; R., ARK-1, at 2, 4-5. Dr.

Walker testified that, even if all point sources in the basin were

Tla

Walker’s opinion, an increased growth of periphyton (i.e.,

more floating algal “mats and scums on the river) would

violate Oklahoma’s aesthetics standard. Tr. at 705. He

further asserted that Fayetteville’s discharge would in-

crease turbidity in Tenkiller Reservoir. Tr. at 711.

Lawrence Edmison, director of Oklahoma Department

of Pollution Control, testified that algae degrades the river

and violates the aesthetics and coloration standards. OK.4,

at 3. He related the algae problem in the river to increas-

ing phosphorus and decreasing nitrogen concentrations in

the water. Tr. at 533-34 ( citing prefiled testimony, OK-4,

at 3). The record also includes a memorandum to Law-

rence Edmison from Quang Pham, an Oklahoma State

Department of Health employee, which references a recent

EPA study “on eutrophication of the Illinois River [that]

indicated that phosphorus plays a major role in the stimu-

lation of algae growth in the river.” Addendum to OK-4,

at 2. Gakstatter and Katko concluded tentatively that

“controlling algal growth in Lake Frances wil] result in

a marked improvement in water clarity in the reservoir

and in the Illinois River reach below the dam.” Gakstatter

Report at 76. Finally, the 201 Facilities Plan reports

that the “high productivity of the Illinois [River] waters

causes considerable downstream transport of enriched or-

ganic matter” and the “net impact of point and nonpoint

sources [such as Fayetteville] is to increase nutrient load-

ing, with consequent increases in algal growth and in-

creased turbidity.” ARK-6, at 2-22.

We conclude from the foregoing three-part review of

the record that there is substantial evidence that degraded

controlled to the 1 mg/l level, the phosphorus load to Lake Ten-

killer would be reduced by only 40 percent, and that a phosphorus

concentration of 1 mg/l is about forty times the concentration

sufficient to produce a significant algal bloom. Tr. at 648-49; see

also Prefiled testimony of Jack Gakstatter, R., B-56, at 4 (impact

of existing plants “could be substantially attenuated by phosphorus

removal... to at least... ] mg/l"; “benefits to Lake Frances of

reducing phosphorus to at least 1 mg/l” (emphasis added) ).

72a

water quality conditions currently exist in the Illinois

River in Oklahoma and that these conditions have been

caused at least in part by pollutants that are constituents

of Fayetteville’s effluent. There is also substantial evi-

dence that Fayetteville’s effluent will be transported down-

stream to Oklahoma; thus, the plant can be expected to

contribute to the ongoing deterioration of the scenic river

and possibly Tenkiller Reservoir as well. It is our ines-

capable conclusion, given this evidence and the requisites

of federal-Oklahoma state water pollution control laws,

that the Fayetteville discharge to the Illinois River may

not be permitted.

4° Issuance of Fayetteville’s permit requires substantial evidence

(1) that current water quality meets applicable WQS and that

Fayetteville’s effluent would not affect maintenance of the applicable

WQS; or (2) if current water quality does not meet applicable

WQS, that Fayetteville’s effluent would not reach the Illinois scenic

river. Instead of directly addressing whether the record contains

this requisite documentation, we have marshalled the opposing evi-

dence and concluded that there is substantial evidence that the

Illinois River is degraded and that Fayetteville’s effluent will reach

the state line. These conclusions negate the need for conducting the

usual substantial-evidence inquiry. However, we do not suggest

by this approach that the opponent of a permit bears the burden

of making the showings that our examination of the record has

revealed.

To understand this distinction, it is crucial to review how the

Clean Water Act and EPA’s implementing regulations allocate the

burden of proof in NPDES permitting decisions. Recall that the

“permit applicant always bears the burden of persuading the Agency

that a permit authorizing pollutants [to] be discharged should be

issued and not denied and this burden does not shift.” Initial

Decision, R. A-26, at 10 (quoting 40 C.F.R. § 124.85(a)(1)). In

other words, it is the proponent of a permit who bears the burden of

showing that a discharge will comply with all applicable standards,

not the opponent of a permit who must show that a discharge will

violate applicable requirements.

Moreover, EPA’s decision to issue a permit (which decision

necessarily reflects its judgment that the permit assures compliance

with all applicable requirements of the CWA) must be supported

by substantial evidence. 5 U.S.C. § 706(2)(E). Denial of a permit,

73a

IV. Discussion and Conclusions

As explained in part I. of this opinion (Standard of

Review), we normally give considerable deference to an

agency’s interpretation of its obligations and authority

under a statute it administers. Here, EPA’s view that no

discharge to a navigable water may be permitted unless

it will comply with the federally approved standards of

all affected downstream states is consistent with the stat-

utory language and EPA’s implementing regulations, sup-

ported by the legislative history, and reasonable on its

face; therefore, it is entitled to substantial deference. See

Chevron, 467 U.S. at 844-45, 104 S.Ct. at 2782-83. As we

discussed in part III.A. supra, we adopt the agency’s view

on this question of statutory interpretation as our first

holding in this case.

The balance of the agency’s actions, however, do not

warrant similar respect. In part III.B. we have identified

several errors or deficiencies in EPA’s interpretation of

the applicable Oklahoma regulations, in the agency’s

factual findings, and in its application of the law to the

relevant facts. We believe the most serious of these errors

is the failure to attribute any significance to the existing

on the other hand, need not be supported by substantial evidence,

because of the CWA’s fundamental premise that pollution is uniaw-

ful and EPA's discretion to issue permits under 33 U.S.C. § 1342(a).

In this case the ALJ erred in imposing the burden on the permit

opponents to show that water quality standards would be violated.

For example, he required the Oklahoma parties to “show by sub-

stantial evidence that the City’s discharge will create a nuisance,”

Decision on Remand at 5, and he cited the “lack of substantial evi-

dence to support the notion that the small increases in phosphorus

- - would result in an increase in eutrophication,” id. at 8. Iron-

ically, the record does contain substantial evidence showing that

the discharge would violate CWA requirements. This evidence

is more than sufficient to meet the permit opponent’s burden of

“going forward to present an affirmative case,” 40 C.F.R. § 124.85 (a)

(3) (ii), and it reinforces our conclusion that the Fayetteville permi'

may not issue.

:

h

.

74a

WQS violations. In this section we discuss the errors on

which we found our conclusion that the Fayetteville per-

mit decision must be set aside as “arbitrary, capricious,

. .. or otherwise not in accordance with law.” 5 U.S.C.

§ 706(2) (A).

As a preliminary matter, EPA undermined our usual

deference to its special expertise by the failure of its

presiding officer to consider an important scientific prin-

ciple, the oxygen-reducing effects of algae respiration and

decay, and by his incomplete understanding of phosphorus

assimilation.” “EPA’s failure to base its position on

scientific or policy considerations . . . [is] cause for re-

duced deference.” National Wildlife Fed’n v. Gorsuch,

693 F.2d 156, 169 (D.C.Cir.1982). Similarly, a lack of

thoroughness on the part of the agency warrants reduced

deference. Jd. at 166 (“ ‘thoroughness . . . of an agency’s

reasoning’ bears on the proper degree of deference”

(quoting Federal Election Comm’n v. Democratic Sena-

torial Campaign Comm., 454 U.S. 27, 37, 102 S.Ct. 38,

44, 70 L.Ed.2d 23 (1981) ). In light of other errors in the

agency’s reasoning, however, we need not decide whether

these flaws alone constitute reversible error.

EPA also misinterpreted and misapplied the Oklahoma

nutrients standard and the Beneficial Use Limitations/

Anti-Degradation Policy. In these respects the permit de-

cision is flawed as a matter of law and must be set aside.

5 U.S.C. § 706(2) (A).

Furthermore, the agency’s judicial officers believed ex-

pert testimony that nutrients in Fayetteville’s discharge

would be transported downstream to Oklahoma, but they

inexplicably rejected or discounted testimony concerning

the probable eutrophying effects of these nutrients. This

error may have resulted in part from the officers’ faulty

understanding of eutrophication processes and/or their

erroneous interpretation of the nutrients standard. In any

5° See supra note 47.

75a

event, the net result is that the agency’s decision to permit

the Fayetteville discharge to the Illinois River “runs

counter to the evidence before the agency” and lacks a

‘satisfactory explanation .. . including a rational con-

nection between the facts found and the choice made.’ ”

Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43, 103 S.Ct. at

2856 (citation omitted). As such, it is arbitrary and

capricious and must be set aside. Id,

Finally, we hold that EPA’s decision is arbitrary and

capricious on one significant additional ground. We be-

lieve that EPA, in failing to consider the significance of

the evidence of ongoing WQS violations, has not only

rendered a decision that “runs counter to the evidence,”

but has “entirely failed to consider an important aspect

of the problem.” Jd. We consider this the principal flaw

in the agency’s decision-making rationale.

It cannot be doubted that ongoing violations of federally

approved water wiality standards constitute “an im-

portant aspect” of the decision whether to permit an addi-

tional source of pollution on a waterway. Adherence to

EPA’s treatment of the facts and law of this case would

fatally undermine the federal water pollution control strat-

egy engineered by the Clean Water Act and enhanced by

Oklahoma law. As we have seen, the “first principle of

the [CWA] is... that it is unlawful to pollute at all... .

The foremost national goal enunciated by Congress is the

complete elimination of the discharge of pollutants.” Nat-

ural Resources Defense Council v. EPA, 822 F.2d 104, 123

(D.C.Cir.1987 ) (referring to 33 U.S.C. § 1251 (a) (1);

see also § 1251(a) (6) ).®

°! There is extensive legislative history on the goals and policy

section, § 101, of the CWA, 33 U.S.C. § 1251(a). See National

Wildlife Fed’n, 693 F.2d at 179-81, for one overview of that history.

The D.C. Circuit stated:

[T}he sponsors of the Act Successfully insisted on a zero-

discharge-of-pollutants goal despite strong objection from both

within and without... . Senator Muskie, the Senate sponsor

a es a elie

76a

The CWA further declares that it is the “primary

responsibilit(y] ... of States to prevent, reduce and

eliminate pollution.” § 1251(b). In at least one court’s

opinion, the “language of the Act indicates that striving

for the utter abolition of pollution is an acceptable ap-

proach for states to take.” Union Oil Co., 813 F.2d at

1487 n. 6. Oklahoma dutifully heeds the Act’s mandate.

Its water pollution control policies and requirements call

for: “protect({ing], maintain[ing] and improv[ing] the

quality” of the waters of the State, Okla Stat. tit. 82,

§ 926.2; employing the permitting system “‘to prevent, con-

trol or abate pollution,” id. § 926.3.10; classifying state

waters “for the purpose of progressively improving the[ir]

quality” and “upgrading them from time to time by re-

classifying them,” id. § 926.6.A.; and allowing “no degra-

dation” of the state’s scenic rivers, OWQS § 3. Common

sense dictates that a pollution control strategy designed to

prevent, abate, and eliminate pollution would be subverted

by allowing a new source of pollution on a currently pol-

luted watercourse.

This judgment is corroborated by the Supreme Court’s

pronouncements concerning the legislative purposes behind

the CWA. After painstaking review of the Act’s legisla-

tive history, the Court declared that “Congress’ intent

. . . Was clearly to establish an all-encompassing program

of water pollution regulation” and that the “ ‘major pur-

pose’ of the [CWA] Amendments was ‘to establish a

comprehensive long-range policy for the elimination of

water pollution.’” Milwaukee v. Illinois, 451 U.S. at 318,

101 S.Ct. at 1793 (citation omitted; emphasis in origi-

nal) ; see also Ouellette, 479 U.S. at 489, 107 S.Ct. at 810.

and principal force behind the bill, stated, in the post-conference

debate on the bill: “These [goais}] are not merely the pious

declarations that Congress so often makes in passing its laws;

on the contrary, this is literally a life or death proposition for

the nation.”

693 F.2d at 179 (quoting 118 Cong.Rec. 33,693 (1972) ).

77a

The Court explained that before it was amended in 1972

and 1977 the Clean Water Act relied solely on water

quality standards to control and reduce pollution. But

that system “proved ineffective. The problems stemmed

from the character of the standard themselves, which was

focused on the tolerable effects rather than the preventa-

ble causes of water pollution. ...” State Water Resources

Control Bd., 426 U.S. at 202, 96 S.Ct. at 2023 ( emphasis

added). The Court described the effect of the amendments:

[The 1972] Amendments introduced two major

changes. . . . First, the Amendments are aimed at

achieving maximum “effluent limitations” on “point

sources,” as well as achieving acceptable water quality

standards. .. .

Second, the Amendments establish the National

Pollutant Discharge Elimination System (NPDES)

aS a means of achieving and enforcing the effluent

limitations. . . .

Water quality standards are retained [in the

amended Act] as a supplementary basis for effluent

limitations . . . so that numerous point sources,

despite individual compliance with effluent limita-

tions, may be further regulated to prevent water

quality from falling below acceptable levels, . .

Id, at 204-05 & n. 12, 96 S.Ct. at 2024-25 & n. 12 (em-

phasis added).

Water quality standards could still be said to “focus on

the tolerable effects of water pollution,” but the focus of

the NPDES program clearly is the “preventable causes”

of pollution. As the passage quoted above reveals, even

licensed polluters in compliance with their permit limita-

This authority to regulate, along with the absence of any

right to pollute, necessarily subsumes the authority to

deny a request permit. These powers are essential to the

ability to prevent pollution and thereby accomplish the

78a

Act’s ultimate goal of eliminating pollutant discharges to

water.”

EPA and the Arkansas parties urge that the Fayette-

ville discharge should be permitted because its individual

impact on Illinois River water quality will not be detecta-

ble. While this may prove true (and we pass no judgment

thereon), we reject the argument because of its unavoid-

able results.” If we were to accept this logic, once water

quality standards in a stream were violated, additional

new discharges might be permitted indefinitely so long as

each one would have an unmeasurable individual impact.

The absurdity of such a policy is manifest.

Congress cannot reasonably be presumed to have in-

tended to exclude from the CWA’s “all-encompassing pro-

gram,” 451 U.S. at 318, a permiting decision arising in

52 EPA is never required to issue a discharge permit; rather,

under 33 U.S.C. § 1342(a) (1), EPA “may ... issue a permit...

upon condition that such discharge will meet . . . all applicable

requirements.” (Emphasis added.) See also § 1342(d)(4) (EPA

“may issue” a permit pursuant to § 1342(a) if it objects to a

state-issued permit) (emphasis added)). The CWA confers no

“right to pollute”; indeed, it takes away any license to pollute unless

a permit is first obtained. In fact, as we saw in the previous

This text is long and has been trimmed here. Open the source document for the complete record.