Petition for Writ of Certiorari — Arkansas v. Oklahoma

Supreme Court brief1991

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90-1 2664 FEB g 1991

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Iu the Supreme Court of the United States

OCTOBER TERM, 1990

ENVIRONMENTAL PROTECTION AGENCY, PETITIONER

WG,

STATE OF OKLAHOMA, ET AL.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

KENNETH W. STARR

Solicitor General

RICHARD B. STEWART

Assistant Attorney General

LAWRENCE G. WALLACE

Deputy Solicitor General

HARRIET S. SHAPIRO

Assistant to the Solicitor General

MICHAEL A. McCorp

ANNE S. ALMY

Gary S. GUZY

Attorneys

Department of Justice

Washington, D.C. 20530

E. DONALD ELLIOTT (202) 514-2217

General Counsel

Environmental Protection

Agency

Washington, D.C. 20460

QUESTIONS PRESENTED

1. Whether determination of the appropriate

standards governing the issuance of permits under

the Clean Water Act for discharges into interstate

waters involves a question of federal law, requiring

a reviewing court to uphold the validity of the En-

vironmental Protection Agency’s permitting action if

based upon a reasonable interpretation and applica-

tion of the federally approved water quality stand-

ards of the receiving State.

2. Whether the Environmental Protection Agency

reasonably concluded that the contemplated discharge

would comply with the applicable water quality

standards because it would have no detectable impact

on current water quality within the receiving State.

3. Whether the court exceeded the proper scope of

judicial review.

(I)

PARTIES TO THE PROCEEDINGS

The petitioner is the United States Environmental

Protection Agency.

The respondents are the State of Arkansas, the

Arkansas Department of Pollution Control & Ecology,

the City of Fayetteville, Arkansas, the Beaver Water

District, the State of Oklahoma, the Oklahoma Scenic

Rivers Commission and Pollution Control Coordinat-

ing Board, and Save the Illinois River (STIR).

TABLE OF CONTENTS

Page

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a... ssausaunesssencssnccsces 7 1

Statutory and regulatory provisions tavelved a ~ 2

EE SS ST EEE T 2

Reasons for granting the petition . OSS i 12

Conclusion .............. ee cdciaaeti Tee 27

ee la

Appendix B ..... II iiesdisiidieeasdddeeninecoaspenacceesztceoseocene 98a

TTI Taisitatiecneteepysnsqseeecevacessvessenseseescsseccosecoscssvoceecceocs 100a

TABLE OF AUTHORITIES

Cases:

Arkansas v. Oklahoma, 488 U.S. 1000 (1989)... 9

Baltimore Gas & Elec. Co. v. NRDC, Inc., 462 U.S.

Iai ececnsenetecadseceonecceusveeeunneseceess 19

Bowles v. Seminole Rock & Sand Co., 325 U.S. 410

Tt liieeeid tints Abciensensmenmnecnsecsencscnsceraresesecenee 18

Champion Int'l Corp. Vv. EPA, 850 F.2d 182 (4th

ES LE TEE 15

Chevron U.S.A. Ine. V. NRDC, Inc., 467 U.S. 837

tai ccicndcenseatenscetecsnenecentneconnccceces 17-18

Citizens to Preserve Overton Park, Inc. Vv. Volpe,

rT 25

Consolo v. Federal Maritime Comm'n, 383 U.S.

EEE SE 19

Department of the Treasury Vv. FLRA, 110 S. Ct.

EES TLE 26

EPA V. California ex rel. State Water Resources

Control Bd., 426 U.S. 200 (1976)... 2 SSE 3,4

E.1. duPont de Nemours & Co. Vv. Train, 430 U.S.

a ecsesecnenes 2

Ford Motor Credit Co. Vv. Milhollin, 444 U.S. 555

(1980) ........ Er 17

FCC Vv. Pottsville Broadcasting Co., 309 U.S. 134

ST an CE 7% 26

Cases—Continued :

FPC v. Idaho Power Co., 344 U.S. 17 (1952)........

Gardebring Vv. Jenkins, 485 U.S. 415 (1988)........

Illinois Vv. Milwaukee, 406 U.S. 91 (1972) .............

International Paper Co. v. Ouellette, 479 U.S. 481

GIDE <xcecssnssscsnsessssesenrecnnseimntenctnnsitveinapebetseianeseense 13,

Kleppe v. Sierra Club, 427 U.S. 390 (1976) ............

Milwaukee Vv. Illinois, 451 U.S. 304 (1981) ......... 13,

Navistar Int'l Transp. Corp. Vv. EPA, 858 F.2d 282

(6th Cir. 1988), cert. denied, 490 U.S. 1039

eaten ares ES SS Se

Oklahoma v. Arkansas, 460 U.S. 1020 (1983) _.......

United States v. Larionoff, 431 U.S. 864 (1977)....

Statutes and regulations:

Clean Water Act, 33 U.S.C. 1251 et seq. ......00000...

3 Bee

§ 101 (a), 33 U.S.C. 1251 (a) ................................

§ 101 (d), 38 U.S.C. 1261 (d)................................

fae

§ 301 (a), 38 U.S.C. 1811 (a) ...............................

§ 308 (a), 33 U.S.C. 1818 (a) ...............................

§ 308 (b), 38 U.S.C. 1818 (b) ...............................

§ 308(c), 38 U.S.C. 1818(¢) ..............................

§ 303 (c) (1),33 U.S.C. 1813 (c) (1) ~..

§ 303 (c) (2), 33 U.S.C. 1313 (c) (2) 0.

§ 303 (c) (3), 33 U.S.C. 1813 (e) (3) 0...

§ 303 (c) (4), 33 U.S.C. 1813 (ec) (4) — 0...

§ 303 (d) (4) (B), 33 U.S.C. 1313(d) (4) (B)..

§ 304, 33 U.S.C. 1314 ............. inssinaibunnaipaiiiniadaniines

§ 401 (a), 38 U.S.C. 1841 (a) .........................2000.

§ 401 (a) (1), 33 U.S.C. 1341 (a) (1) 0.

§ 401 (a) (2), 33 U.S.C. 1841 (a) (2) —..............

§ 402, 38 U.S.C. 1842 ................. alae

§ 402 (a), 33 U.S.C. 1842 (a) ...............................

§ 402 (b), 38 U.S.C. 1842 (b) ...............................

§ 402 (b) (3), 33 U.S.C. 1342 (b) (3)

§ 402 (b) (5), 33 U.S.C. 1342 (b) (5)

§ 402(d), 38 U.S.C. 1842(d) _...... en...

§ 402(d) (1), 33 U.S.C. 1842(d) (1)

Page

14, 15

14, 23

— a

AN WAAWWAWKWWANW NN &

—

moro

Statutes, regulations and rule—Continued : Page

§ 402 (d) (2), 33 U.S.C. 1342(d) (2) ............. 5, 15

§$ 402 (d) (2) (a), 33 U.S.C, 1342 (d) (2) (a)... 5

$ 402 (d) (2) (A), 33 U.S.C. 1342(d) (2) (A). 15

§ 402(d) (2) (B), 33 U.S.C. 1342(d) (2) (B).. 5,15

§ 402 (d) (4), 33 U.S.C. 1342 (d) (4) —............. 5

OB OBO, Fe ee FIG eccccncccncscccvnssccccccceseccccccasssesse 4

§ 404 (a), 33 U.S.C. 1344 (a)... ee 4

§ 502 (6), 33 U.S.C. 1362 (6) ...............------2.------- 4

§ 502(11), 33 U.S.C. 1862(11) ........................... 2

§ 502 (14), 33 U.S.C. 1362 (14) ..............-....... 2

Oklahoma Scenic Rivers Act, Okla. Stat. tit. 82,

§ 1451 (1970):

2 sheoupnamnascaivomptuennnatisdsinianuiaiemnetoe 23

ay 6, 23

40 C.F.R.:

Pt. 122:

BREED BERGE) ccccccccecesccussscszscnsssscensensesvaese 24

Bestion 188.44 (6E) (1) -....----...--...-c2.ecc2-00-0 4

Pt. 131, Subpt. B ................ Le

Section 131.12(a) (3) ....... seneiianiateniaabiaaeniel 17

8 8 24

In the Supreme Court of the United States

OCTOBER TERM, 1990

No.

ENVIRONMENTAL PROTECTION AGENCY, PETITIONER

v~.

STATE OF OKLAHOMA, ET AL.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

The Solicitor General, on behalf of the United

States Environmental Protection Agency, petitions

for a writ of certiorari to review the judgment of the

United States Court of Appeals for the Tenth Circuit

in this case.

OPINION BELOW

The opinion of the court of appeals (App., infra,

la-97a) is reported at 908 F.2d 595.

JURISDICTION

The judgment of the court of appeals was entered

on July 11, 1990. Petitions for rehearing were de-

nied on October 11, 1990 (App., infra, 98a-99a). On

December 29, 1990, Justice White extended the time

for filing a petition for a writ of certiorari to and

including February 8, 1991. The jurisdiction of this

Court is invoked under 28 U.S.C. 1254(1).

(1)

STATUTORY AND REGULATORY

PROVISIONS INVOLVED

The relevant provisions of the Clean Water Aet,

33 U.S.C, 1251 et seq., are reproduced at App. C,

infra, 100a-106a. The relevant provisions of the

Oklahoma Water Quality Standards are reproduced

at App., infra, 96a-97a.

STATEMENT

1. The Clean Water Act, 33 U.S.C. 1251 ef seq.,

is a comprehensive statute designed “to restore and

maintain the chemical, physical, and biological integ-

rity of the Nation’s waters” through reduction and

eventual elimination of the discharge of pollutants

into those waters. Section 101(a), 33 U.S.C. 1251

(a). The Act anticipates a partnership between the

federal government and the States to achieve this

fundamental goal. The Administrator of the Envi-

ronmental Protection Agency (EPA) is, with certain

explicit exceptions not relevant here, responsible for

administering the Act. Section 101(d), 33 U.S.C.

1251(d). A major responsibility of the Administra-

tor under the Act is the developrrent and promulga-

tion of uniform national technology-based standards,

known as “effluent limitations guidelines,” for cate-

gories and classes of discharges. Sections 301 and

304, 33 U.S.C. 1311 and 1314. EJ. duPont de

Nemours & Co. v. Train, 430 U.S. 112, 126-136

(1977). An “effluent limitation” is “a[] restriction

* * * on quantities, rates, and concentrations of

chemical, physical, biological, and other constituents

which are discharged from point sources * * *.” Seec-

tion 502(11), 33 U.S.C. 1362(11).'

‘A point source is “any discernible, confined and discrete

conveyance * * * from which pollutants are or may be dis-

charged.” Section 502(14), 33 U.S.C. 1362(14).

A second major source of authority for reducing

pollution is found in Section 303, which directs States,

with federal approval and oversight, to institute a

range of comprehensive requirements, potentially

more stringent than the federally promulgated guide-

lines, to assure protection of the quality of all state

waters. Section 303(a), (b), and (c) (1), 33 U.S.C.

1313(a), (b), and (c)(1). These water quality stan-

dards are not technology-based standards; instead,

they are based on the desired uses and condition of

the particular waterway involved. Congress utilized

water quality standards “as a supplementary basis

* * * so that numerous point sources, despite individ-

ual compliance with effluent limitacions, may be fur-

ther regulated to prevent water quality from falling

below acceptable levels.” EPA v. California ex rel.

State Water Resources Control Bd., 426 U.S. 200, 205

n.12 (1976). Section 303(c)(2), 33 U.S.C. 1313(c)

(2). A water quality standard is a method of express-

ing the desired condition of a waterway. Water qual-

ity standards under the Act generally consist of three

elements: (1) a designated “use” of that waterway

(e.g., public water supply, recreation, propagation of

fish, or agriculture) consistent with the goals of the

Act as set forth in Section 101; (2) “criteria” speci-

fying the amount of various pollutants that may be

present in those waters and still protect the desig-

nated uses, expressed in numerical concentration

limits or narrative form; and (3) a restriction on

the degradation of higher quality waters, /.¢e., an

antidegradation provision. Section 303(c)(2), 35

U.S.C. 1313(c)(2); Section 303(d)(4)(B), 33

U.S.C. 1313(d)(4)(B); 40 C.F.R. Pt. 131, Subpt. B.

The States must submit their water quality standa:ds

to EPA for review and approval. Upon approval by

EPA, a state-adopted water quality standard “shall

thereafter be the water quality standard for the ap-

plicable waters of that State.” Section 303(c) (3), 33

U.S.C. 1313 (¢) (3).

The primary means for achieving and enforcing

effluent limitations and state water quality require-

ments is the “national pollutant discharge elimina-

tion system” (NPDES) permit program under Sec-

tion 402 of the Act, 33 U.S.C. 1342. State Water Re-

sources Control Bd., 426 U.S. at 205. The Act pro-

hibits the discharge of any pollutant’ into the waters

of the United States except when authorized by an

NPDES permit or a Section 404 permit.* Section

301(a), 33 U.S.C. 1311(a). Thus, an NPDES permit

—which typically includes a timetable for compliance

—transforms generally applicable effluent limitations

and state water quality standards into obligations of

the individual discharger. See 40 C.F.R. 122.44

‘AY 1).

The Act provides that EPA will issue NPDES per-

mits except in those States where EPA has approved

a state permit program pursuant to Section 402(b),

33 U.S.C. 1342(b).* Even in those States with ap-

proved permit programs, the State must submit a

copy of each proposed permit to EPA before it may

2 The term “pollutant” is defined in Section 502(6) of the

Act. 33 U.S.C. 1362(6).

* Section 404 permits authorize the discharge of “dredged

or fill material,” whereas NPDES permits authorize the dis-

charge of all other pollutants. Section 404(a), 33 U.S.C.

1244(a). The permit at issue here is an NPDES permit.

‘IEPA had permit-issuing authority in this case, which

involves discharges arising in Arkansas, because Arkansas

did not have an approved permit program at the time the

permit application was made. Arkansas’ permit program

has subsequently been approved by EPA.

be issued. Section 402(d)(1) and (2), 33 U.S.C.

1342(d)(1) and (2). EPA may object to the issu-

ance of an NPDES permit if it determines that is-

suance would be “outside the guidelines and require-

ments” of the Act. Section 402(d) (2) (B), 33 U.S.C.

1342(d)(2)(B). On receipt of such an objection, the

State may submit an appropriately revised permit;

if it fails to do so, EPA will issue a permit “in ac-

cordance with the guidelines and -requirements” of

the Act. Section 402(d) (4), 33 U.S.C. 1342(d) (4).

The Clean Water Act establishes specific mecha-

nisms for resolving interstate water pollution ques-

tions, i.e., situations where a discharge in one State

may affect the waters of another State. The statu-

tory conditions for EPA approval of state permit pro-

grams require each state program to contain spe-

cified provisions for dealing with such situations.

The source, or permit issuing, State must have pro-

cedures for notifying other States “the waters of

which may be affected” of a permit application con-

templating such discharges. Section 402(b) (3), 33

U.S.C. 1342(b)(3). The potentially affected State

must then be given an opportunity to “submit writ-

ten recommendations to the permitting State” and

EPA regarding the application. Section 402(b) (5),

33 U.S.C. 1342(b) (5). If any part of those recom-

mendations is not accepted by the permitting State,

that State must notify the affected State and EPA.

Section 402(b) (5), 33 U.S.C. 1342(b) (5). EPA then

has the right to object to the issuance of the permit,

as provided in Section 402(d)(2)(a), 33 U.S.C.

1342(d) (2) (a).

Where EPA itself retains permit-issuing author-

ity, the statutory procedures for the resolution of in-

terstate disputes are contained in the provisions gov-

erning the issuance of federal licenses and permits

that may affect water quality. Thus, Section 401(a),

33 U.S.C. 1341(a), requires applicants for federal

licenses or permits for activities that may result in

discharges to navigable waters to provide a certifica-

tion from the source State that the proposed: dis-

charge will comply, inter alia, with applicable water

quality standards. If the source State denies cer-

tification, no permit may be issued. Section 401(a),

33 U.S.C. 1341(a). Whenever EPA (or any other

federal permitting authority) determines that a

discharge might affect water quality in another

State, it must notify that State. Section 401

(a) (2), 33 U.S.C. 1341(a) (2). If the notified State

determines that the discharge will violate its water

quality requirements, the federal permitting author-

ity must (if the State requests) hold a hearing to

consider the State’s objections and EPA’s recommen-

dations, and “condition such * * * permit in such

manner as may be necessary to insure compliance

with applicable water quality requirements.” Section

401(a) (2), 33 U.S.C. 1341(a) (2).°

2. This case involves an interstate dispute con-

cerning the waters of the Illinois River, which orig-

inates in the State of Arkansas and flows into the

State of Oklahoma.* In the early 1980’s the City of

Fayetteville, Arkansas, operated a sewage treatment

plant that discharged all of its wastewater into the

*If EPA is itself the permitting agency, the hearing is held

pursuant to the provisions of Section 402(a), 33 U.S.C.

1342 (a).

®*In 1970, Oklahoma designated the portion of the Illinois

River from the state line to the Tenkiller Reservoir a state

scenic river. App., infra, 50a, 62a; Okla. Stat. tit. 82, § 1452

(b) (1) (1976).

White River, which is not a tributary of the Illinois

River. The White River was unable to assimilate

that waste without violating the Arkansas water

quality standards. To alleviate this situation, Fay-

etteville constructed a new wastewater treatment

plant, with federal financial assistance provided by

EPA under the Clean Water Act. The plant was de-

signed so that the plant’s discharges into the White

River would not cause a violation of the state water

quality standards: wastewater pollutants were to be

reduced, and half of the treated effluent was to be

discharged into the Illinois River. App., infra, 2a,

5a.”

In 1985, Fayetteville applied to EPA for an

NPDES permit for its new treatment plant. Follow-

ing public notice and an informal public hearing (see

40 C.F.R. Pt. 124), EPA issued an NPDES permit

to Fayetteville on November 5, 1985, to become effec-

tive on December 10, 1985. The permit authorized

split flow into both the White and Illinois Rivers and

contained stringent limits on oxygen demand, total

suspended solids, and phosphorus in the discharge. It

also prohibited discharge of inadequately treated

sewage, so that in the case of a plant malfunction,

untreated waste would have to be stored and re-

7 Fayetteville’s plans prompted the State of Oklahoma to

move this Court for leave to file an original action against

the State of Arkansas (and other entities) alleging causes

of action under the federal and state common law of nuisance.

Oklahoma v. Arkansas, No. 93 Orig. In response to the

Court’s invitation, the United States filed a brief opposing the

motion for leave to file the complaint, on the ground that the

Clean Water Act permitting procedures would afford the

State an adequate remedy for any threat to its water quality

standards. This Court denied the motion for leave to file the

complaint. 460 U.S. 1020 (1983).

treated. Finally, a reopener in the permit specified

that if an ongoing study of existing problems in the

Illinois River showed a need for more stringent lim-

itations on Fayetteville’s discharge to ensure com-

pliance with Oklahoma water quality standards, the

permit would be modified accordingly. App., infra,

5a-6a.

Both Oklahoma and Arkansas requested an evi-

dentiary hearing before EPA on its issuance of the

NPDES permit. After an evidentiary hearing, the

Administrative Law Judge upheld the permit, find-

ing that the discharge into the Illinois River would

not have an “undue impact” on Illinois River water

quality in Oklahoma. App., infra, 2a. Oklahoma ap-

pealed to the Administrator; the Chief Judicial Offi-

cer, acting on behalf of the Administrator, reversed

and remanded to the ALJ for a redetermination.

The Chief Judicial Officer ruled that the Fayetteville

discharges would have to comply with the Oklahoma

water quality standards at the state boundary.’ Com-

pliance with the antidegradation provisions was to

be judged by whether there would he a “detectable”

or “measurable” impact on water quality parameters

* State-designated scenic rivers, such as the portion of the

Illinois River at issue here, are protected by Oklahoma’s

antidegradation and beneficial use standards. The beneficial

use standard prohibits “any new point source discharge of

wastes [into such rivers] except under conditions described

in Section 3.” Oklahoma Water Quality Standard (OWQS)

§ 5, App., infra, 96a. Section 3, Oklahoma’s antiderradation

provision, in turn provides that “No further water quality

degradation which would interfere with or become injurious

to existing instream water uses shall be allowed.” App.,

infra, 96a. Recognizing that certain high quality waters .

currently exceed their beneficial use standards, Section 3 also

provides that “No degradation shall be allowed in high quality

waters * * *.” App., infra, 97a.

(i.e., on the measurements of pollutants governed by

the standards) at the boundary. Jbid. On remand,

the ALJ ruled that a “detectable” impact had not

been established, and upheld the permit. He explic-

itly ruled that the proposed discharge would not

cause violations of any of the Oklahoma water qual-

ity standards. Oklahoma’s appeal to the Administra-

tor resulted in an affirmance by the Chief Judicial

Officer. Jd. at 2a-3a. The permit went into effect,

and the discharge commenced on January 21, 1989.”

3. Three petitions for review challenging EPA’s

final decision were filed in early 1989. The Arkansas

petition challenged EPA’s authority to require, as a

condition ,of an NPDES permit, that an Arkansas

discharger comply with Oklahoma water quality

standards. The petitions by the Oklahoma parties

and by an environmental group, Save The Illinois

River (STIR), alleged violations of Oklahoma water

quality standards resulting from EPA’s grant of the

NPDES permit. The Arkansas petition, which was

initially brought in the Eighth Circuit, was trans-

ferred to the Tenth Circuit and consolidated with

those of the Oklahoma parties and STIR.

®In the course of the administrative proceedings, several

rulings were made to which Arkansas objected; Arkansas

thereupon moved this Court for leave to file an original action

against Oklahoma concerning the application of Oklahoma’s

water quality standards to an Arkansas permittee. Arkansas

v. Oklahoma, No. 115 Orig. The United States filed a brief

as amicus curiae, arguing that Arkansas was attempting to

bypass the established administrative procedures for resolv-

ing this interstate dispute. Arkansas’ remedy, the brief ar-

gued, was to let the permitting process run its course and

seek judicial review under the Clean Water Act if it was dis-

pleased with the result. The Court denied leave to file an

original action. 488 U.S. 1000 (1989).

On July 11, 1990, the Tenth Circuit issued its

opinion in this matter. App., infra, la-95a. The

court first determined that EPA had properly inter-

preted the Act to require it to consider, in the

NPDES permit procedure, whether a discharge

would violate the federally approved water quality

standards of a downstream State. Jd. at 14a-48a.

The court nevertheless reversed EPA’s decision to is-

sue the permit. The court rejected EPA’s conclusion

that the antidegradation provisions of the Oklahoma

water quality standards (OWQS)” are satisfied so

long as the Fayetteville discharge does not result in

any detectable change to any water quality param-

eter at the Oklahoma state line. Finding that EPA

“incorrectly construed and applied [the] Oklahoma

regulations” (id. at 60a, 83a-84a), the court adopted

an interpretation of the antidegradation provisions

of the OWQS not proposed by any party (id. at 48a).

In light of the court’s view of the federal policies

embodied in the Clean Water Act and EPA regula-

tions," it read the OWQS antidegradation provisions

as prohibiting any further release of pollutants that

1” See note 8, supra.

"! See, e.g., App., infra, 85a-90a (discussing Clean Water

Act policy and legislative history), App., infra, 54a (court’s

examination of state policy is “guided by the minimum re-

quirements * * * set forth in EPA’s regulation”), App., infra,

85a (EPA’s position inconsistent with “federal water pollu-

tion control strategy engineered by the Clean Water Act and

enhanced by Oklahoma law”), App., infra, 90a (“We will

not ascribe to the [Clean Water] Act either the gaping loop-

hole or the irrational purpose necessary to uphold EPA’s

action.”), App., infra, 94a (EPA “decision is inconsistent

with the language of the Clean Water Act, as interpreted in

light of the legislative history, and frustrates the policy that

Congress sought to implement”).

ee ee ——o

will reach an “already degraded” river.” The court

summarized its view of the relevant provisions

(App., infra, 90a-9la):

[I]f a body of water is experiencing [water

quality standard] violations and a proposed new

source would discharge the same pollutants to

which those standards apply, that source may

not be permitted if its effluent will reach the de-

graded waters.

Analyzing the record presented to EPA, the court

concluded that there was “ample evidence from which

the ALJ could have concluded” (App., infra, 63a)

that the Illinois River in Oklahoma was already de-

graded (id. at 62a-73a),"* and that pollutants from

the Fayetteville discharge would reach the Oklahoma

boundary (id. at 73a-76a) and would contribute to

the existing degradation of the river at that point

(id. at 76a-82a)."" The court expressly “reject{ed]

any notion that once water quality standards have

been violated (i.e., the quality of the receiving waters

12 The court used 1970, the date of Oklahoma’s designation

of the rolevant portion of the Illinois River as a “scenic river,”

as the benchmark from which to determine whether water

quality vad been degraded. App., infra, 62a.

13 Because the parties had not considered the historic water

quality of the Illinois River significant to the propriety of the

issuance of the permit, the court’s factual findings on this

aspect of the case constitute gleanings from “a record that

consists of five boxes and four years of briefs, orders, tran-

scripts, prepared testimony, correspondence, technical reports,

and miscellaneous other documents” (App., infra, 62a) on

a matter that had not been addressed in the EPA proceedings,

nor briefed and argued by the parties. See fd. at 61a n. 40.

4 The court was not deterred by its recognition that this

latter issue is “more a scientific question than it is a legal

one” (App., infra, 76a).

has been degraded), the incremental impact of a

proposed additional discharge must itself be detect-

able.” App., infra, 90a. Instead, the court was of

the view that it was necessary to deny the permit

because “[a]t worst, [permitting the proposed dis-

charges] will increase the frequency and severity of

ongoing violations; at best, it will thwart efforts to

bring the river back into compliance with the ap-

plicable standards.” Jd. at 91a.

In sum, the court concluded that “EPA’s failure to

exercise its authority to deny the Fayetteville permit

is arbitrary and capricious or otherwise not in ac-

cordance with law.” App., infra, 94a. Under the

analysis adopted by the court, Fayetteville dis-

charges “may not be permitted” (id. at 61a), and

“the Fayetteville permit may not issue” (id. at 83a

n.49). Accordingly, instead of remanding to EPA

for reconsideration of the permit decision under the

judicially prescribed standards, the court of appeals

simply “reverse[d] EPA’s decision authorizing Fay-

etteville’s municipal treatment plant to discharge a

portion of its effluent to the Illinois River basin.” Jd.

at 95a."

REASONS FOR GRANTING THE PETITION

This case presents an important issue of adminis-

trative law in the context of a fundamental part of

EPA’s mission under the Nation’s environmental

laws. In its decision, the court of appeals has sig-

nificantly undermined EPA’s authority to implement

the Clean Water Act by usurping EPA’s role under

* On October 31, 1990, the court granted Arkansas’ mo-

tion to stay the issuance of the mandate pending this Court’;

action on petitions for certiorari: accordingly, the discharges

from the Fayetteville plant are continuing.

the Act as the arbiter of interstate water pollution

disputes. The court reversed EPA’s permitting de-

cision on the basis of the court’s own interpretation

of federally approved water quality standards. That

approach dramatically transforms the appropriate

province of both court and agency. Under a proper

analysis, the validity of EPA’s permitting decision

depends on whether the Agency reasonably inter-

preted and applied those standards, and is not prop-

erly subject to collateral attack based on the review-

ing court’s own interpretation of those standards as

a question of the law of the receiving State sim-

pliciter. Otherwise, EPA’s exercise of its federal

statutory responsibilities would be deprived of coher-

ence and predictability, notwithstanding the Agency’s

peculiar expertise with respect to Clean Water Act

standards. The decision of the court of appeals is

thus seriously inconsistent with well established prin-

ciples governing judicial review of agency actions. If

not reversed, it will inevitably sow seeds of confusion

among States that share particular waters—and all

those who use those waters—as to the standards for

discharges into those waters.

1.a. This Court has previously considered the pro-

visions of the Clean Water Act regarding discharges

into interstate waters. It has done so in the context

of resolving interstate disputes over the standards to

be applied in the issuance of permits for such dis-

charges. See Illinois v. Milwaukee, 406 U.S. 91, 105

(1972) (Milwaukee 1): Milwaukee y. Illinois, 451

U.S. 304 (1981) (Milwaukee 11); International

Paper Co. v. Ouellette, 479 U.S. 481 (1987). In these

cases, the Court has emphasized that interpretation

of the Act’s requirements is a matter of federal, not

state law (Milvaukee I, 406 U.S. at 102, 105; Ouel-

‘te, 479 U.S. at 492), and that the 1972 Amend-

ments to the Federal Water Pollution Control Act

(now the Clean Water Act) “establish an all-

encompassing program of water pollution regulation”’

(Milwaukee II, 451 U.S. at 318), under which

“[fjederal courts lack authority to impose more

stringent effluent limitations * * * than those im-

posed by the agency charged by Congress with ad-

ministering this comprehensive scheme” under the

guise of applying federal common law. /d. at 320."

And in Ouellette, the Court specifically concluded

that “the CWA precludes a court from applying

the [common] law of an affected State against an

out-of-state source.” Instead, “the Act limits the

right to administer the permit system to the EPA

and the source States.” 479 U.S. at 494-495. It fol-

lows from this Court’s precedents that the question

of the proper standards to be applied to the Fayette-

ville discharges under the Clean Water Act ulti-

mately involves a question of federal, not simply

Oklahoma, law.

b. The statutory scheme confirms that EPA has

ultimate responsibility for the interpretation and ap-

plication of water quality standards whenever inter-

state pollution issues arise in the course of permit

proceedings.

In explaining why courts should not invoke federal com-

mon law to supplement the comprehensive statutory scheme,

the Court noted (451 U.S. at 325): “[n]ot only are the tech-

nical problems difficult—doubtless the reason Congress vested

authority to administer the Act in administrative agencies

possessing the necessary expertise—but the general area i+

particularly unsuited to the [case-by-case] approach inevita-

ble under a regime of federal common law.” These same

factors, of course, counsel reliance on the expert agency’s

interpretation and application of the relevant federal stand-

ards. See pp. 22-25, infra.

The Act directs EPA to address interstate water

pollution issues in either of two ways, depending upon

whether the source State or EPA is the permit-

issuing authority. If the source State’s program has

been approved by EPA under Section 402(b), 33

U.S.C, 1342(b), the State may issue the permit, un-

less EPA objects pursuant to Section 402(d)(2),

33 U.S.C. 1342(d) (2). Where, as here, EPA is the

permit-issuing authority, EPA is directly responsible

for determining whether a proposed permit will meet

all applicable requirements of the Act and imple-

menting regulations (Section 402(a)). Although the

federal permitting authority may not issue a permit

if the source State determines that the permit will

not comply with its water quality standards, the fed-

eral permitting authority need only consider the

“recommendations” of the receiving State in deter-

mining whether the permit will comply with that

State’s standards. Section 401(a)(1) and (2), 35

U.S.C. 1341(a)(1) and (2). As this Court ex-

plained in Ouellette, 479 U.S. at 491, “the Act makes

it clear that affected States occupy a subordinate po-

sition to source States in the federal regulatory pro-

gram.” Thus, in any interstate dispute involving the

17 That provision sets forth two grounds for an objection.

See Champion Int’l Corp. Vv. EPA, 850 F.2d 182, 185 (4th Cir.

1988). Under Section 402(d) (2) (A), EPA may object when

there is an unresolved interstate dispute that has been brought

to EPA’s attention under the procedures in Section 402

(b) (5) (providing for notification to EPA of a receiving

State’s objections to the issuance of the permit, and of the

permitting State’s action with regard to those objections).

Under Section 402(d)(2)(B), 33 U.S.C. 1342(d) (2) (B),

EPA may—even in the absence of a state complaint—object

to the issuance of any permit “as being outside the guidelines

and requirements” of the Act.

application of a downstream State’s water quality

standards, the statutory scheme provides that EPA

—not the downstream State—is to determine the

proper application of the standards, either in review-

ing the permits for possible objection under Section

402(d) or in its role as permit issuer. ,

This federal responsibility is consistent with the

fact that the Act requires EPA to review proposed

State water quality standards before they may be-

come effective. Section 303(c), 33 U.S.C. 843 (c).

Before granting approval, EPA must determine that

the proposed standard “meets the requirements” of

the Act. Section 303(c) (3), 33 U.S.C. 1313(e) (3)."

In determining whether a proposed standard meets

the statutory requirement, it is, of course, necessary

for EPA to determine the meaning of that standard.

Therefore, if a dispute concerning the meaning of the

standard subsequently arises in the context of a per-

mitting decision, EPA’s interpretation of the dis-

puted provision, which will reflect its understanding

of that provision when approval to implement it was

granted, should normally be dispositive."

This is particularly true where, as in this case, the

water quality standard adopted by the State substan-

tially reflects the model standard promulgated by

**If EPA cannot make that finding, it must permit the

State to make the changes necessary to bring the standards

into conformity with the Act. If the State fails to do so in a

timely manner, EPA will promulgate the water quality stand-

ards for the State. Section 303(c) (3) and (4), 33 U.S.C.

1513(¢) (3) and (4).

' Since many water quality standards are in narrative

form and are necessarily stated in general terms, disagree-

ments as to their meaning will often surface only when the

standards are applied in the context of a specific proceeding.

EPA.” Absent a clear indication at the time the pro-

posed standard was submitted to EPA for approval

that the State intended a different meaning, it is

surely reasonable for EPA to construe the state

standard as having the same meaning as the model

provision. Indeed, this approach is necessary to en-

sure uniform application of substantially identical

terms and thus to provide certainty and predictabil-

ity in the administrative process.

c. For all these reasons, it is particularly impor-

tant in the context of EPA’s administration of the

Clean Water Act to apply the well-established rule

that a reviewing court should defer to an agency’s

reasonable interpretation of a regulation it is

charged with administering. Gardebring v. Jenkins,

485 U.S. 415, 429-430 (1988); Ford Motor Credit

Co. v. Milhollin, 444 U.S. 555, 566 n.9 (1980):

United States v. Larionoff, 431 U.S. 864, 872-873

(1977); Navistar Int’l Transp. Corp. v. EPA, 858

F.2d 282, 288 (6th Cir. 1988), cert. denied, 490 U.S.

1039 (1989) (EPA’s interpretation of a federally

approved state air quality standard is accorded the

same deference by a reviewing court as EPA’s inter-

pretation of its own regulations). Cf. Chevron

U.S.A. Ine. v. NRDC, Inc., 467 U.S. 837, 844

2° Compare the antidegradation provision of OWQS § 3:

No degradation shall be allowed in high quality waters

which constitute an outstanding resource or in waters of

exceptional recreational or ecological significance.

with the corresponding language in EPA’s model antidegrada-

tion regulations (40 C.F.R. 131.12(a) (3)):

Where high quality waters constitute an outstanding

National resource, such as * * * waters of exceptional

recreational or ecological significance, that water quality

shall be maintained and protected.

(1984). Thus, if the terms of a standard are ambig-

uous or silent on a particular point in the context of

an interstate dispute, EPA’s interpretation of the

standard should be followed “unless it is plainly er-

roneous or inconsistent with the regulation.” United

States vy. Larionoff, 431 U.S. at 872 (quoting Bowles

v. Seminole Rock & Sand Co., 325 U.S. 410, 414

(1945) ).

In short, the question is not whether EPA inter-

preted the water quality standards applicable to the

Oklahoma portion of the Illinois River the same way

they would be interpreted by the reviewing court or

by Oklahoma itself (see, e.g., App., infra, 60a); in-

stead, the question is whether EPA’s reading and ap-

plication of those standards in the permitting pro-

ceeding was reasonable. But rather than focusing on

that question and considering whether there was sub-

stantial evidence in the record to support EPA’s find-

ings, the court took an almost diametrically opposite

approach. It combed the record to find evidence to

sustain the court’s own contrary findings, in support

of an interpretation of the relevant regulations that

the court developed on its own initiative. Jd. at 73a,

76a, 8la-82a.

The court’s decision thus reflects its assurance that

it was capable of making scientifically-based policy de-

terminations without benefit of briefing or argument,

and without evaluation by the expert agency to which

Congress assigned the responsibility for making such

policy determinations. The court embarked on an in-

dependent analysis of the complex and highly tech-

nical evidence contained in this very extensive ad-

ministrative record, which led it to reject the scien-

tific findings underlying EPA’s action.”

*! Most notably, in footnote 47 of the opinion (App., infra,

76a-79a), the court severely criticized the ALJ’s understanding

That inquiry went well beyond the permissible

scope of judicial review. The proper inquiry is

whether the administrative agency’s findings are sup-

ported by substantial evidence, and “‘the possibility of

drawing two inconsistent conclusions from the evi-

dence does not prevent an administrative agency’s

finding from being supported by substantial evi-

dence.” Consolo vy. Federal Maritime Comm’n, 383

U.S. 607, 620 (1966). Moreover, when examining

agency scientific findings, as opposed to simple find-

ings of fact, “a reviewing court must generally be at

its most deferential.” Baltimore Gas & Elec. Co. v.

NRDC, Inc., 462 U.S. 87, 103 (1983).

of certain expert testimony. In doing so, however, the court

took statements of the ALJ out of context, focused on the

irrelevant, and materially misconceived what the ALJ did

say.

The first error ascribed to the ALJ is an alleged failure

to recognize that algae can consume, as well as produce,

oxygen. Jd. at 76a, 84a. In fact, all the ALJ was saying was

that Dr. Walker erred in not recognizing that photosynthesis

by algae increases oxygen (a fact the court concedes) ; to infer

from that statement that the ALJ did not recognize that

other processes could also consume oxygen is unwarranted

conjecture.

The second basic error ascribed to the ALJ concerns phos-

phorus assimilation. Id. at 77a-78a, 84a. Here, the court

apparently misunderstood the ALJ’s point, which was that

the testimony showed that increased flow would increase

the assimilative capacity of the stream, and that that would

be particularly beneficial in summer when algae flourish and

the flow would otherwise be low.

In any event, Dr. Walker (whom the court recognized as

“eminently qualified,” id. at 77a n. 47) testified that there

would be no measurable phosphorus increase at the state

line from the Fayetteville discharge. Tr. 702-703. This tes-

timony surely provides adequate support for the ALJ’s con-

clusion that the antidegradation provision would not be vio-

lated by the phosphorus in the Fayetteville effluent.

2.a. Analyzed under the appropriate standards for

judicial review, the record here amply supported

EPA’s permitting decision. EPA concluded that the

Fayetteville discharge would not cause a prohibited

degradation of Oklahoma waters because it would

cause no detectable change in the quality of any

waters within the State. That conclusion was entirely

reasonable and consistent with the policies and pur-

poses of the Clean Water Act. The court of appeals’

preferred reading of the EPA-approved antidegrada-

tion provision apparently turned on its belief that

“degradation” must be measured from some historic

point, and that if current river quality is poorer than

it was at that time, no further discharges may be

permitted regardless of whether such discharges will

have any detectable effect within the State. These

beliefs, however, represent policy choices, rather than

demonstrating that EPA’s decision was in any way

unreasonable.

The court found the “plain language” of the OWQS

beneficial use and antidegradation provisions showed

that they disallow discharges of pollutants into a

scenic river if “its water quality has been degraded

or if the new source would degrade it.” App., infra,

53a-54a (emphasis in original). But the court did

not identify the regulatory language upon which it

relied, and in fact no language in the regulations

suggests that whether water quality “has been de-

graded” is a relevant consideration. See OWQS § 3,

App., infra, 97a. Instead, the regulations themselves

give no indication that the time from which “de-

gradation” is to be measured is at any time in the

past—still less do they give any indication of how

such a benchmark date would be determined. In-

stead, the standards address only the prospective im-

pact of a proposed activity. The regulations protect

the status quo by prohibiting new discharges which

threaten to degrade the river—i.e., to cause it to fall

below the quality it has at the time the permit is

under consideration. They are thus entirely consist-

ent with the federal standards on which they are

modeled, since those standards are also clearly de-

signed to protect the status quo. See note 20, supra.

It is scarcely surprising that, as the court itself noted

(App., infra, 48a), “neither of the EPA judicial offi-

cers nor any of the parties addresse[d] whether, or

how, this [preexisting condition] is relevant to Fay-

etteville’s application to discharge to the [Illinois

River.” Under EPA’s model antidegradation provi-

sion, it is not relevant; and the court erred in hold-

ing that EPA was required to conclude otherwise in

interpreting that provision as adopted by Oklahoma.™

The court also incorrectly rejected EPA’s conclu-

sion that the antidegradation provision applies only

to detectable changes.** A discharge that has no per-

22 Indeed, the court’s misconception led it into the further

error of believing that the water quality of the river itself

could constitute a violation of an antidegradation provision.

See, e.g., App., infra, 61a-62a, 90a. That is a flawed and un-

workable concept. Unlike designated use standards and nu-

meric criteria, antidegradation provisions are designed to pro-

tect the status quo—particular discharges may of course

violate the antidegradation provision, but that provision takes

the river as it is; it is designed to prevent backsliding.

23 The court’s discussion on this matter is somewhat obscure.

The court notes EPA’s finding that the challenged discharge

will have no detectable impact on Oklahoma waters, observing

(App., infra, 89a, footnote omitted), “[w]hile this may prove

true (and we pass no judgment thereon), we reject the argu-

ment” that the antidegradation provision is therefore satis-

fied. Apparently the court believes that the first adverse

impact must be detectable, but subsequent ones need not be.

See id. at 90a-9la. The regulation itself, of course, contains

ceptible effect on the quality of a stream would not

normally be considered to “degrade” it; the concept

of degradation surely implies at least some verifiable

change in quality.“ And it is only discharges that

can be expected to result in degradation that are pro-

hibited by the applicable regulations, not all dis-

charges from any additional sources whatsoever, or

even discharges of pollutants that are already present

in the affected waters. See App., infra, 81a.

In short, EPA’s interpretation of the applicable

regulations was reasonable and consistent with the

complex statutory and regulatory scheme for the pro-

tection of this nation’s waters. Since Congress has

entrusted the administration of that scheme to EPA,

the court should have deferred to that Agency’s rea-

sonable interpretation, rather then substituting its

own reading, based on its own policy preferences.

b. Serious adverse consequences in the adminis-

tration of the Clean Water Act will flow from sub-

stitution by reviewing courts of their own inter-

pretation of an EPA-approved water quality stand-

ard for that of EPA. First, the Agency’s responsi-

bility for approving state standards will be undercut

if its reasonable interpretations of those standards

are nonetheless to be jettisoned on judicial review.

This is of fundamental practical importance, because

EPA’s ability to perform effectively its statutory role

in resolving interstate disputes over the issuance of

no such distinction between initial and subsequent dis-

charges—it simply prohibits “degradation”.

** As Oklahoma itself observed in briefing before EPA, “any

detectible [sic] increase in any ‘wastes’, defined as ‘[i]ndus-

trial waste and all other liquid, gaseous or solid substances

which may pollute or tend to pollute any waters of the State,’

will be a violation of the [scenic river] designation” (empha-

sis added). A.R. Doc. B146, at 45.

NPDES permits requires the Agency to rely on its

own reasonable construction of a state standard. In-

deed, if reviewing courts were free to substitute their

own interpretations of an EPA-approved state stand-

ard, the similarly worded standards of various States

could well have different meanings in different cir-

cuits, or even within the same circuit. The resultant

uncertainty and confusion—especially in lengthy

river systems involving several or numerous receiv-

ing States—would lead to precisely the situation that

Congress sought to avoid by enacting the comprehen-

sive Clean Water Act Amendments to replace the

former case-by-case approach of the federal common

law. Milwaukee IT, 451 U.S, at 324-325.

Indeed, the dangers of judicial intrusion into EPA’s

responsibilities are vividly illustrated by the Tenth

Cireuit’s reinterpretation of the EPA-approved water

quality standards. The court’s interpretation involved

two fundamental misconceptions. First, the court’s

belief that an antidegradation provision requires that

a protected river be returned to its quality at some

point in the past may well be administratively un-

workable. The court offered no principled basis on

which the historical benchmark date is to be selected.”

25 The Oklahoma antidegradation provision does not, of

course, establish any such benchmark date. The court simply

adopted the date the river was designated under the Okla-

homa Scenic Rivers Act, Okla. Stat. tit. 82, § 1452(b) (1)

(1970). That statute, however, bears no direct relation to

Oklahoma’s water quality standards. It simply recognizes that

the designated part of the Illinois River is among those state

rivers that should be preserved because of their “unique nat-

ural scenic beauty, water conservation, fish, wildlife and out-

door recreational values.” Okla. Stat. tit. 82, § 1452(a)

(1970). While the date of designation under that statute is

certainly one possible benchmark date, it is not readily appar-

Moreover, the court simply assumed that it is possible

to determine what the quality of the water was at

that particular historical date with sufficient preci-

sion to make its use as a benchmark feasible. The

record here is quite barren of any support of that

assumption.”

The court’s adoption of a “zero-discharge” policy

is equally flawed. Nothing in the Act or the EPA-

approved antidegradation regulations requires such

a draconian policy.” At least where the effects of a

discharge are undetectable at the State boundary, the

receiving State can have little more than a theoretical

ent why it is preferable to any other historic date—or even to

some theoretical time when the river was in a “pristine”

condition.

** The parties, EPA’s Administrative Law Judge, and EPA’s

Chief Judicial Officer all accepted the traditional view that

Oklahoma’s antidegradation provision requires compliance to

be measured from existing water quality. App., infra, 48a.

Therefore, the record below simply does not address the

issue created by the court’s novel interpretation of the anti-

degradation provision, and the court supported its applica-

tion of that provision to these facts by concluding that “[t]he

record contains substantial evidence from which the ALJ

could have found that the water quality of the Illinois scenic

river has been degraded.” Jd. at 61a. This distortion of the

proper scope of judicial review is by itself a significant de-

parture from the accepted and usual course of judicial pro-

ceedings. See Rule 10 of the Rules of this Court.

“7 Nor is it entirely clear whether the court intended this

policy to apply only to “high quality waters” subject to an

antidegradation policy similar to Oklahoma’s, or whether it

was intended to apply to any application for a permit to dis-

charge into waters not presently in compliance with any

applicable standard. Cf. 40 C.F.R. 122.4(d) (requiring per-

mit for additional discharges into non-complying waters to

contain conditions that will assure compliance).

basis for concluding that its water has been degraded.

In such circumstances, it is at least reasonable for

the responsible agency to conclude that the balance

of equities favors permitting the discharge and that

the discharge is not prohibited. Cf. App., infra, 92a

(recognizing that “it is arguably unfair to ‘punish’

Fayetteville for preexisting dischargers’ past failure

to comply with [water quality standards]’’).

8. The court exacerbated its errors by the extreme

and unwarranted remedy it imposed. The court flatly

“reversed” Fayetteville’s permit without remanding

to EPA. App., infra, 95a. If a reviewing court finds

that the agency’s findings are not supported by the

record, the court must allow the agency an oppor-

tunity to supplement the record, to reexamine its

findings on the basis of the full record, and to correct

or clarify them. See generally Kleppe v. Sierra Club,

427 U.S. 390 (1976); Citizens to Preserve Overton

Park, Inc. v. Volpe, 401 U.S. 402 (1971). The court’s

failure either to defer to EPA’s scientific expertise or

to give EPA an opportunity to explain satisfactorily

its reasoning or otherwise address the court’s con-

cerns transgressed the limits of judicial review.

Accordingly, even if the court had been correct in

finding the permit to be inconsistent with applicable

standards, firmly established principles of administra-

tive law would require a remand to EPA for further

proceedings. It is for the administrative agency and

not the court to evaluate different courses of action

and ultimately make a choice. Kleppe v. Sierra Club,

427 U.S. at 410 n.21; Citizens to Preserve Overton

Park, Inc. v. Volpe, 401 U.S. at 416. This Court

stated the “guiding principle” nearly forty years ago:

[T]he function of the reviewing court ends when

an error of law is laid bare. At that point the

matter once more goes to the [agency] for re-

consideration.

FPC vy. Idaho Power Co., 344 U.S. 17, 20 (1952).

See FCC vy. Pottsville Broadcasting Co., 309 U.S. 134,

140-146 (1940).. An agency’s task on remand re-

mains “irfused with judgment and discretion, requir-

ing the ‘ “accommodation of conflicting policies that

were committed to the agency’s care.”’” Depart-

ment of the Treasury v. FLRA, 110 S. Ct. 1623, 1629

(1990) (citations omitted). “It is not a_ task

[courts] ought to undertake on the agency’s behalf

in reviewing its orders.” Jd. at 1630.

In sum, the court of appeals undermined the care-

fully developed legislative system for resolving inter-

state permitting disputes under the Clean Water Act

by imposing its own construction of the applicable

water quality standards on the parties. Moreover, it

did so on the basis of independent fact finding that

ignored the technical expertise of the federal agency

to which such determinations are reserved, and im-

posed a judicially devised remedy without remanding

the case to that agency for further evaluation and

correction of any perceived inadequacies in its

approach.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

RICHARD B. STEWART

Assistant Attorney General

LAWRENCE G. WALLACE

Deputy Solicitor General

HARRIET S. SHAPIRO

Assistant to the Solicitor General

MICHAEL A. McCorp

ANNE 8. ALMY

Gary 8. GUZY

Attorneys

E. DONALD ELLIOTT

General Counsel

Environmental Protection

Agency

FEBRUARY 1991

-— = Se Saree 7 :

et : 2 ee a a _ —- -

APPENDIX A

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

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

THE STATE OF OKLAHOMA, OKLAHOMA SCENIC RiIv-

ERS COMMISSION AND POLLUTION CONTROL COORDI-

NATING BOARD; SAVE THE ILLINOIS River (STIR),

a non-profit corporation of the State of Oklahoma;

CITY OF FAYETTEVILLE, ARKANSAS; THE BEAVER

WATER DISTRICT; STATE OF ARKANSAS; ARKANSAS

DEPARTMENT OF POLLUTION CONTROL AND ECOL-

OGY, PETITIONERS

Vv.

ENVIRONMENTAL PROTECTION AGENCY, RESPONDENT

OKLAHOMA WILDLIFE FEDERATION, INTERVENOR

July 11, 1990

Before ANDERSON and BRORBY, Circuit Judges,

and THEIS,* District Judge.

BRORBY, Circuit Judge.

In these consolidated appeals, appellants challenge

certain actions of the U.S, Environmental Protection

* The Honorable Frank G. Theis, Senior United States Dis-

trict Judge for the District of Kansas, sitting by designation.

(la)

Agency (EPA) in issuing a discharge permit pursu-

ant 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 au-

thority 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 waste-

water treatment plant. Fayetteville proposed to dis-

charge treated wastewater via a split flow into the

White River in Arkansas and into Mud Creek, a trib-

utary of the Illinois River, an Arkansas-Oklahoma

interstate stream. The State of Oklahoma and a non-

profit group, Save The Illinois River (STIR), re-

quested denial of the permit. The State of Arkansas

and the Oklahoma parties requested an evidentiary

hearing on EPA’s issuance of the permit. A hearing

request was granted in part and denied in part by

an Administrative Law Judge (ALJ), and the partia'

denial was upheld by the EPA Administrator acting

through his Chief Judicial Officer (CJO). After the

evidentiary hearing, the ALJ determined that the per-

mit would not have an undue impact on water quality

or violate Oklahoma’s water quality standards

(WQS). This initial decision was appealed by both

Arkansas and Oklahoma. On appeal, the ALJ’s deci-

sion was affirmed in part and reversed in part and

remanded for a determination whether the record

showed by a preponderance of the evidence that the

permitted discharge would not cause an actual, de-

tectable violation of WQS. On remand the ALJ re-

viewed the record and made detailed findings. He

concluded that the permit could issue as written, find-

ing that it would not result in any measurable viola-

tions of Oklahoma’s WQS. The ALJ’s decision 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

River Commission, Oklahoma Pollution Control Co-

ordinating Board, and STIR (the “Oklahoma par-

ties,” or Oklahoma) set forth ten issues in their joint

brief-in-chief. Essentially they contend that EPA

erred in concluding that the permit would not violate

Oklahoma’s WQS; that EPA did not properly con-

sider 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 Arkan-

sas, Arkansas Department of Pollution Control Ecol-

ogy, City of Fayetteville, and Beaver Water District

(the “Arkansas parties,” or Arkansas) challenge

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

pollutants 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 defined expansively as “any addi-

tion of any pollutant to navigable waters from any

point source.” § 1262(12)(A). “Pollutant” is also

broadly defined; it includes “dredged spoil, solid

waste, . . . sewage, garage, sewage sludge, .. .

chemical wastes, . . . rock, sand, . . . and industrial,

municipal, and agricultural waste.” § 1362(6).

“Point source” encompasses “any discernible, con-

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

ditch, channel, tunnel, [or] 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 limita-

tions established in and pursuant to the Act. Efflu-

ent limitations,” i.e., limits on “quantities, rates, and

concentrations of chemical, physical, biological, and

other constituents which are discharged from point

sources,” §1362(11), may be water quality-based,

$$ 1312, 1313, or technology-based, §§ 1311(b),

1314(b). EPA is required to establish water-quality

based restrictions whenever 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 quality stand-

ards for the applicable waters of the State. § 1313.

Federal and state effluent limitations and water

quality standards are transformed into individual

point source obligations through NPDES discharge

permits. § 1342; EPA v. California ex rel. State

Water Resources Control 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. § 1342(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 pro-

grams 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 De-

cember 1988.

The permit (NPDES Permit No. AR0020010)

specifies that half of the city’s treated wastewater

will be discharged 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 dis-

charged to an unnamed stream in northwestern Ar-

kansas, 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 Tenkiller Ferry Reservoir has

been designated an Oklahoma state scenic river and

was proposed for study as a potential addition to the

National Wild and Scenic Rivérs-System when the

WSRA was enacted in 1970. 16 U.S.C. § 1276(40).

To date, this segment, which is approximately sixty

miles long, has not been designated a component 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 es-

tablishes maximum or minimum effluent concentra-

tions of those pollutants and other chemical pars me-

ters. Permit, EPA Supp. Addendum at 12-30. The

permit prohibits the discharge of any incompletely

treated effluent to Mud Creek. Jd. at 27. It also in-

cludes, inter alia, a provision for modifying the per-

mit to incorporate more stringent limitations if an

ongoing study of the Illinois River demonstrates such

limitations are needed to ensure compliance with

water quality standards. 7d.

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,

findings, and conclusions unless they are outside the

agency’s statutory authority, are not supported by

substantial evidence, or are arbitrary, capricious, an

abuse of discretion, 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 rele-

vant data and articulate a satisfactory explana-

tion for its action including a “rational connec-

tion 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 and whether

there has been a clear error of judgment.” Nor-

mally, an agency rule would be arbitrary and

capricious if the agency has relied on factors

which Congress has not intended it to consider,

entirely failed to consider an important aspect of

the problem, offered an explanation for its deci-

sion 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 ‘Con-

gress 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 ex-

pressed intent of Congress.’” Martin 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 admin-

istering the statute,’ is entitled to substantial defer-

ence. Chevron, 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 interpretation of the Clean Water Act is

reasonable, we should not disturb it unless it “is con-

trary to the policies Congress sought to implement in

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

pressly provided in this chapter, the Administrator of the

Environmental Protection Agency . . . shall administer this

chapter.”

enacting the statute.” 813 F.2d at 1065; see also 467

U.S. at 845, 104 S.Ct. at 2783.

II]. Preliminary Procedural Matters

As an initial matter we address EPA’s argument

that Arkansas lacks standing to challenge EPA’s in-

terpretation 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 favorable decision of this Court,

just as its allegations as to future permit condi-

tions are purely speculative.

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

argument that it may be collaterally estopped in sub-

sequent proceedings if it does not pursue this argu-

ment now by assuring Arkansas that EPA would not

contest the justiciability of the claim if raised in the

context of future permit decisions. EPA Brief at 14;

see Arkansas Reply Brief at 11 n. 18.

* Arkansas also attempted to raise the Clean Water Act

interpretation 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 re-

solved in the context of judicial review of the issuance of

Fayetteville’s permit. Arkansas Reply Brief at 11 n. 18; EPA

Brief at 10. The Supreme Court denied Arkansas’s motion.

Arkansas v. Oklahoma, —— U.S. ——, 109 S.Ct. 776, 102

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

rely to its detriment on such ‘assurances’ from the EPA in

Section 509 of the Clean Water Act provides that

“Trjeview of [EPA’s] action ... in [, inter alia,]

issuing 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 legisla-

tive history corroborates what the language itself

suggests—that the Act intended liberal review of

EPA’s actions in issuing permits and promulgating

rules and standards. The Senate Public Works Com-

mittee explained section 509’s judicial review provi-

sion as follows:

Any person has standing in court to challenge

administratively developed standards, rules and

regulations under the Act. The courts are in-

creasingly adapting this test to what administra-

tive actions are reviewable. ... The Courts have

granted this review to those being regulated and

to those who seek “to protect the public interest

in the proper administration of a regulatory sys-

tem enacted for their benefit.” Since precluding

review does not appear to be warranted or de-

sirable, the bill would specifically provide for

such review within controlled time periods. .. .

... For review of permits issued under section

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

jurisdiction 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 (em-

phasis 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

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.

10a

expansive language 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)”); cf. 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 pub-

licly owned treatment works seeking the permit is

located, which partially financed the facility’s con-

struction, and which, among other entities, has re-

view and approval authority over the facility’s con-

struction and operation. We conclude Arkansas 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

3 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 statu-

tory 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

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 review” within

a reasonable time after the petition is filed. § 124.91

(c)(1). “Final Agency action” for purposes of judi-

cial review occurs “upon completion of the remanded

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

ministrator from the results of the remanded pro-

ceeding.” § 124.91(f)(3).

Although the parties do not raise this issue, we

have detected 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 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,”

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

Oklahoma WQS should not apply to a discharge lo-

cated 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

* 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 ap-

ply to a discharge located in Arkansas. See Decision on Re-

mand, R. A-33, at 2-3; Supplemental Joint Briefs submitted

by Arkansas Parties, R., B-144 at 7-8, 25-33.

12a

because the CJO failed to “issue an order either

granting or denying [Arkansas’s] petition for re-

view.” §$124.91(c)(1). Although all parties peti-

tioned EPA for review of the ALJ’s decision on re-

mand, 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 acknowl-

edge 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 Ar-

kansas’s appeal. EPA’s position on the basic issue

raised by the Arkansas parties—whether the Fayette-

ville 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 sec-

ond and final opinion the CJO clearly affirmed his

June 1988 ruling that Oklahoma WQS are applicable

to the Fayetteville discharge. In so doing, he im-

plicitly, 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 re-

quirement for “an order . . . denying review.” Cf.

Mathews v. Eldridge, 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

Mevico, 423 F.2d 1048, 1049 (10th Cir.1970)).

Moreover, no objection to Arkansas’s failure to seek

review of EPA’s initial decision should now be al-

lowed, given that Arkansas participated in the review

of the initial decision (by responding to Oklahoma’s

petition) and the CJO expressly provided that the

“parties will have the opportunity to petition for

13a

review of the ALJ’s 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 dis-

cussion 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 pollution to comply with the water quality

standards of all affected downstream states? Okla-

homa assumes such a requirement in that it chal-

lenges EPA’s determination that the Fayetteville per-

mit would not result in violations of Oklahoma's

water quality standards and argues accordingly that

no discharge to Oklahoma’s Illinois River system

should be allowed.

Oklahoma formulates the issues on appeal as

“{w]hether the Chief Judicial Officer erred in deny-

ing review” of various ALJ rulings and whether the

CJO and ALJ “erred in [refusing] to reopen the evi-

dentiary hearing.” Despite this formulation, it seems

clear that the Oklahoma parties’ chief concerns relate

to the substantive issues underlying these procedural

questions. The substantive issues are: (1) the ade-

quacy of the treatment technology employed by the

Fayetteville plant and the possible superiority of land

application methdos; (2) the propriety of considering

evidence concerning future reductions in the dis-

charges of other Arkansas cities; (3) the propriety

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 interpre-

tation and application of Oklahoma’s beneficial use

l4a

limitation, nutrient standard, and anti-degradation

policy; (5) the relevance of new information concern-

ing overflows at the old treatment plant; and (6)

whether Fayetteville met its burden of proof in show-

ing that a permit should be issued for its treatment

plant. Our review of the record convinces us that we

need not resolve many of the issues raised by the

Oklahoma parties. In the following pages we address

first the statutory interpretation question by Arkan-

sas and then a significant issue not raised by any

party—the significance of evidence of existing deg-

radation of Illinois River water quality.

A. Construction of the Clean Water Act

1. 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 cer-

tain of the waters of a downstream state. It can ac-

complish 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 downstream state, so will

be the actual quality of the interstate waters in the

downstream state. In other words, the lowest com-

mon denominator will prevail. The ultimate question

posed to this court is whose water quality standards

take precedence under the Clean Water Act—the up-

stream 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

15a

with federal law, including the federally approved

water quality standards of affected states.

Specifically, Arkansas alleges an affected down-

stream state “may advise and make recommenda-

tions, but nowhere in the Clean Water Act did Con-

gress authorize affected States such as Oklahoma to

impose their water quality standards upon a dis-

charger in another state.” Arkansas’s Brief at 39.

We treat this, the principal issue of this case, as

whether the Clean Water Act requires that any dis-

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

all applicable water quality standards, including the

affected downstream state.’ This is an issue of first

* 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 provides for EPA 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 deter-

mines 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 Okla-

homa has the “right to block” a permit issued by Arkansas.

See, e.g., Arkansas’s Brief at 33, 36, 38-40. The 1982 Okla-

homa water quality standards, which EPA judged applicable

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

l6a

impression in the circuit courts.°

standards” to mean EPA-approved water quality standards

that govern the affected waters, and “Oklahoma water quality

stanards” to mean Oklahoma’s EPA-approved water quality

regulations.

‘This statement requires a brief explanation of a recent

Fourth Circuit case. In Champion Int'l Corp. v. EPA, 648

F.Supp. 1390 (W.D.N.C.1986), motion for withdrawal of

mandate denied, 652 F.Supp. 1398 (W.D.N.C.1987), the dis-

trict court upheld EPA’s assumption of permitting authority

under 38 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 stand-

ards. 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

permit, in disregarding the Tennessee water quality stand-

ard 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 statement: “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 decision 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 pro-

ceeding are not now subject to judicial review. EPA has

neither granted nor denied a permit, so such action is

not yet reviewable under [33 U.S.C.] § 1369(b) (1). The

17a

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

this case dated June 28, 1988, stated the law and ap-

plied it as follows:

nature of EPA’s objections are well within the contem-

plation 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 with-

out its delegated authority, so as to subject that action

to present judicial review under Leedom v. Kyne, [358

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 ascer-

tain whether or not EPA acted within its delegated author-

ity,” and agreed with the district court’s decision that EPA

was so acting. But it held that, once the district court made

that determination, it should have dismissed for want of sub-

ject matter jurisdiction and not reached the merits. /d.

Champion's holding is limited to the narrow determination

that EPA had not acted “clearly beyond the boundaries of its

authority.” Jd. at 186. Indeed, the court added: “Even if

EPA may ultimately be shown to be incorrect in its objections

to North Carolina’s permit (and we do not intimate that they

are), its acts are not so clearly outside its authority to sub-

ject 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 affected downstream state’s water quality

standards.

One other case deserves brief mention here. In Montgomery

Envtl. Coalition, the D.C. -Cireuit stated: “A state whose

water quality will be affected by the issuance of a permit

for discharge in another state may block that permit until

conditions are imposed insuring compliance with applicable

water quality requirements of the objecting state.” 646 F.2d

at 594 n. 21. But in the next breath the court acknowledged

this was not an issue in Montgomery; thus, the language is

dictum.

18a

The CWA requires an NPDES permit to im-

pose any effluent limitations necessary to com-

ply with applicable state water quality standards.

_.. The meaning of [33 U.S.C. § 1311(b) (1)

(C)] is plain and straightforward. It requires

unequivocal compliance with applicable water

quality standards, and does not make any excep-

tions for cost or technological feasibility. .. .

_.. In this case, the permit should be upheld

if the record shows by a preponderance of the

evidence that the authorized discharge would not

cause an actual detectable violation of Okla-

homa’s water quality standards.

Order on Petitions for Review, R., A-28, at 11-13.

The CJO explained that in an interstate dispute the

“only applicable water quality standards are those

that have been approved by EPA under the CWA.”

Order on Petitions 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. § 1370.” Order

on Petitions for Review at 12 n. 13.

On remand, the ALJ expressed similar 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); Jn-

ternational Paper Co. v. Ouellette, 479 U.S. 481,

107 S.Ct. 805, 93 L.Ed.2d 883 (1987). There-

fore the Fayetteville discharge must meet Okla-

19a

homa’ W.Q.S. as they exist at the border of the

two states. ...

. . . To accept [the Arkansas parties’ argu-

ment that the beneficial use limitations do not

apply to Fayetteville] would violate the princi-

pals [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

standards. Such a result is contrary to the

[Clean Water Act], regulations and Court de-

cisions.

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

terpretations of Oklahoma’s WQS, including the Bene-

ficial Use Limitations, were ultimately affirmed by the

CJO. The CJO also reiterated the mandate of his

first order—that “ ‘the permit should be upheld if

. . . the authorized discharges would not cause .

[a] violation of Oklahoma’s water quality stand-

ards,’”—and accepted the ALJ’s conclusion that no

violation would occur. Second Order on Petitions for

Review, R., A-37, at 7-8.

The Arkansas parties contend we need look no

farther than the Clean Water Act to decide this issue

because “Congress has clearly manifested its intent

[in the CWA] that affected states cannot impose

their water quality standards upon dischargers in

other states.” Arkansas Brief at 42; see id. at 33-40.

20a

Alternatively, if we decide congressional intent is

ambiguous, they urge us to reject EPA’s interpreta-

tion as unreasonable. Jd. at 42. EPA also claims the

CWA is “clear that the terms of an NPDES permit

must include compliance with state water quality

standards—regardless of the source of a discharge.”

EPA Brief at 15-16. Therefore, EPA maintains,

resort to the legislative history—which EPA con-

tends corroborates EPA’s interpretation—is unneces-

sary. 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 in-

tent is ambiguous, EPA alternatively defends the rea-

sonableness of its interpretation of the CWA and ar-

gues that, under Chevron, 467 U.S. at 844-45, 104 S.

Ct. at 2782-83, it must therefore be upheld. EPA

Brief at 13, 15.

We do not find the Clean Water Act, on its face,

quite as clear a manifestation of congressional intent

on this issue as many of the parties suggests. Sig-

nificantly, however, EPA’s interpretation is not one

the agency adopted only, or in the first instance, in

the context of this permit proceeding. Rather, EPA’s

position herein is consistent with its CWA-imple-

menting regulations. For example, 40 C.F.R. § 122.4

(d) expressly provides: “No permit may be issued:

. . . (d) When the imposition of conditions cannot

ensure compliance with the applicable water quality

requirements of all affected States.” (Emphasis

added.) Concomitantly, EPA’s rules require permits

to include, where applicable, “any requirements. . .

necessary to... [cJonform to applicable water qual-

ity requirements . . . 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)

2la

(4). See also 40 C.F.R. §131.10(b) (state “shall

ensure its water quality standards provide for the

attainment and maintenance of the water quality

standards of downstream waters”). We accord def-

erence to the consistent interpretation of a statute by

the agency entrusted with its administration. See

33 U.S.C. $1251(d); Federal Election Comm’n v.

Democratic Senatorial Campaign Comm., 454 U.S.

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

E.I. 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 ex-

pertise, and ambiguous statutory language). After

considering the Act as a whole and its legislative

history, we conclude EPA’s interpretation is reason-

able and consistent with Congress’s purposes in en-

acting 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 chap-

ter [i.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 strin-

gent limitations, 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 applicable

22a

water quality standard established pursuant to

this chapter.

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

(A) of the CWA, 33 U.S.C. § 1342(a) (2), (b) (1)

(A), in turn mandates that any NPDES permit is-

sued under the Act contain terms adequate to insure

compliance with § 301 above. See EPA Brief at 16.

EPA rejects Arkansas’s argument that these sec-

tions are “mere timing provisions.” Jd. (citing Ar-

kansas Brief at 34-35). On the contrary, EPA ar-

gues, these sections establish fundamental require-

ments 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 uniform appli-

cability of such standards.” EPA Brief at 16-17.’

7 Under the 1972 CWA amendments, water quality stand-

ards are considered “supplementary control measures” —‘‘sup-

plementary” in the sense that they are in addition to point

source effluent limitations, the control measure upon which

the 1972 CWA Amendments primarily rely to achieve the

Act’s objective of eliminating pollutant discharges into nevi-

gable waters by 1985. State Water Resources Control Bd.,

426 U.S. at 203-05 & n. 12, 96 S.Ct. at 2024-25 & n. 12

(““[w]ater quality standards are retained 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”). See 33 U.S.C. §§ 1251

(a) (1), 1811(b) (1) (A) ; see also S.Rep. No. 414, reprinted

in 1972 U.S.Code Cong. & Admin.News 3668, 3675 (“Under

this Act the basis of pollution prevention and elimination will

be .. . effluent limitations. Water quality will be a measure

of program effectiveness and performance, not a means of

elimination and enforcement.”). That WQS are “supple-

mentary” in the scheme of the Clean Water Act is, however,

irrelevant to the question of their applicability across state

lines.

23a

Arkansas counters that § 1311 does not explain

whether the “more stringent limitations” must be

achieved by dischargers in other states, but that sec-

tion 510, 33 U.S.C. § 1370 limits the “reach” of any

stricter standards to discharges originating within

the state imposing those standards. Arkansas Brief

at 35." This argument 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, how-

ever.

First, § 1370 is a savings clause that merely pre-

serves 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 In-

ternational Paper Co. v. Ouellette, 479 U.S. 481, 493,

107 S.Ct. 805, 812, 93 L.Ed.2d 883 (1987) (§ 1370

* 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 limitation respecting dis-

charges of pollutants, or (B) any requirement respecting con-

trol 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 limitation, effluent standard, prohibition,

pretreatment standard, or standard of performance which

is less stringent than the effluent limitation, or other limita-

tion, effluent standard, prohibition, pretreatment standard, or

standard of performance under this chapter, or (2) be con-

strued as impairing or in ay manner affecting any right or

jurisdiction of the States with respect to the waters (includ-

ing boundary waters) of such States.

24a

savings clause “preserves the authority of a State,”

but “does not preclude pre-emption” of state law) ;

Milwaukee v. Illinois, 451 U.S. 304, 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 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 ap-

plies only to the second of two principal provisions of

§ 1370. That provision (subparagraph (2)) refers

broadly to “any right or jurisdiction of the States.”

In contrast, the first provision (subparagraph (1) )

specifically addresses the rights of states and their

subdivisions to regulate pollution. Subparagraph (1)

says nothing about the boundaries 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)—

®We do not suggest one state may directly regulate the

conduct of a discharger in another state. Such exercise of

jurisdiction would exceed traditional bounds of sovereignty.

Nor does the Act redefine those bounds to allow dual per-

mitting. See Ouellette, 479 U.S. at 491, 107 S.Ct. at 811.

But the question posed here is whether federal law embodied

in the Clean Water Act requires a discharge permit to ensure

compliance with the applicable WQS of all affected states.

Traditional concepts of state powers and the § 1370 savings

clause cannot provide the answer to that question. We must

look to the CWA as a whole.

25a

there shall be achieved . . . any more stringent

limitation, including those necessary to meet

water quality standards . . . established pur-

Suant to any State law or regulations . . . or

required to implement any applicable water

quality standard established pursuant to this

chapter

(emphasis added )—exposes the irrationality of Ar-

kansas’s argument. In order to ensure that the EPA-

approved water quality standards in all states are

“met” or “implemented,” it is “necessary” to require

dischargers to meet the applicable requirements of

other affected states as well as those of the source

state. There could be no assurance of achieving a

Sstate’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 con-

struction of the Act would make achieving down-

stream 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.” More-

over, rewarding sources for locating in states with

less stringent water quality requirements (by re-

lieving them from complying with more stringent

downstream WQS) would also result in “pollution

shopping,” contrary to Congress's intent in passing

the 1972 CWA amendments."'

The agency contends that its regulations and the legis-

lative history manifest an intent to distribute the burden of

meeting water quality standards among all discharges on and

affecting a particular waterway. See EPA Brief at 22 & n. 19.

"In its bill amending section 402 of the Act in 1977 to au-

thorize EPA to issue an NPDES permit where it determines a

26a

Arkansas counters that EPA’s construction of the

Act would have “chaotic” consequences because any

downstream state could impose its requirements on

proposed sources in any upstream state. Arkansas

Brief at 46-47. Thus, Arkansas hypothesizes, a per-

mit authorizing a discharge to the Mississippi River

in Minnesota would be subject to challenge based on

the water quality standards of each of the nine down-

stream states. /d. at 16 (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 /llinois v. Milwaukee,

731 F.2d at 414).

We find little practical merit in Arkansas’s argu-

ment. The ability, as well as the authority, to require

compliance 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

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. 1st 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 requirements, if any, of the downstream state,

even though that state may be most affected by the discharge.

27a

water quality of a particular pollution source be-

comes so attenuated as to be undetectable. 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 “im-

possible to predict the standard[s]” applicable to a

new discharge, as Arkansas claims. First, EPA ap-

proval of state WQS determines the potentially ap-

plicable rules. Furthermore, the permitting system

established in the 1972 and 1977 amendments to the

CWA clearly provides for consiltation with and in-

put by states that may be affected. Finally, com-

puter modeling (such as that performed for the

Fayetteville plant) can predict the extent of a new

source’s potential impact, thus demonstrating which

states’ WQS must be met.

3. Illinois v. Milwaukee and Ouellette

Arkansas cites International Paper Co. v. Ouellette

and //linois v. Milwaukee in support of its statutory

construction argument, but that reliance is misplaced.

In each of those cases an affected state was seeking

to enjoin 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 en-

sure compliance with federal law, ie, its EPA-

approved WQS. The Seventh Circuit in J/inois v.

Milwaukee recognized this distinction when it pointed

out that

See part ITI.B. of this opinion for a discussion of the

significance in the permitting context of preexisting WQS

violations.

Illinois’ basie grievance is that the permits

issued to Milwaukee pursuant to the [CWA] do

not impose stringent enough controls on the dis-

charges, Nevertheless, Illinois failed to partici-

pate in the permit issuing process when the Mil-

waukee permits were issued... . [T]hat process

seems now to be the appropriate federal forum

for adjusting the competing 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 un-

der Wisconsin [law] nor sought to enforce federal

limitations as provided for under the 1972 [CWA]”

and concluded that the CWA “preclude[s] the type

of application of state law sought by Illinois.” 731

F.2d at 414.

The Supreme Court’s decision in Ouellette is some-

what more problematic, even though, like //linois v.

Milwaukee, it is not factually or procedurally similar

to this case. The specific issue in Ovellette was

whether the CWA preempted a common law nuisance

suit filed in a Vermont court under Vermont law

against a New York discharger, which was the source

of the alleged injury in Vermont. The Court con-

cluded that “Vermont nuisance law is inapplicable 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 concerning inter-

state 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 applying the law of an affected State against

an out-of-state source,” id. at 494, 107 S.Ct. at 813.

29a

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 state-

ments concerning the regulatory framework of the

CWA and the relative role of source and affected

states which Arkansas embraces. In particular, Ar-

kansas asks us to give weight to the following dis-

cussion :

While source States have a strong voice in

regulating their own pollution, the CWA contem-

plates 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 ad-

visory role in regulating pollution that originates

beyond its borders .... Significantly, however,

an affected State does not have the authority to

block the issuance of the permit if it is dissatis-

fied with the proposed standards. An affected

State’s only recourse is to apply to the EPA Ad-

ministrator, who then has the discretion to dis-

approve 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 Brie‘ 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 en-

forcement action in which the issue was the avail-

ability of a nuisance remedy under the common law

of an affected state against an out-of-state discharger.

Even the Court’s broadly stated holdings were ex-

pressed in terms of “a sfate-law claim concerning

interstate water pollution,” 479 U.S, at 487, 107 S.Ct.

30a

at 809 (emphasis added), and “applying the law of

an affected State,” id. at 494, 107 S.Ct, at 813 (em-

phasis added). In contrast, the case before us poses

the question of the applicability of the federally ap-

proved water quality standards of an affected down-

stream state in permitting a discharge in an up-

stream state."

Moreover, Ouellette contains other dicta that miti-

gate the apparent impact of the language quoted

above. For instance, the Court noted that nothing in

its decision affected the plaintiffs’ 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 examples, that the plaintiffs had the

opportunity to protect their interests before permit

issuance by commenting on and objecting to the pro-

posed permit conditions, and that they still were en-

titled 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

permit-issuing authority to “discharges . . . within its

jurisdiction” is beyond dispute. 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 discharge in an

upstream state. The Act contains several provisions

% Both EPA judicial officers here referred to this distinc-

tion in discussing what water quality standards are “appli-

cable” or “enforceable” for purposes of NPDES permitting.

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

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

8la

for considering and protecting the water quality of

downstream states (including provisions authorizing

the actions taken by EPA here). Those provisions

are not inconsistent with the Act’s implicit prohibi-

tion of dual permitting systems. Indeed, if properly

implementad, they negate any need for separate per-

mits issued by source and affected states.

The Court’s opinion in Ouellette corroborates this

reasoning. 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 Con-

gress’ 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 Con-

gress, after devising an elaborate permit system

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. Plainiy, Ouellette

was concerned not with the CWA’s provisions for

incorporating a downstream’s water quality criteria

in the permitting process, but with preventing a

downstream state from circumventing or superseding

that process by imposing on an already-permitted

source additional requirements based on its own state

law. So viewed, Ouellette is entirely consistent with

EPA’s interpretation of the applicability of Okla-

homa’s WQS. Cf. Champion, 652 F.Supp. at 1400

32a

(concluding that nothing in Ouellette required a mod-

ification of the decision at 648 F.Supp. 1390 that a

North Carolina discharge permit must require com-

pliance with an applicable Tennessee WQS).

4. The Statutory and Regulatory Framework

The erroneous interpretation of Ouellette, which

Arkansas advocates, runs aground when the Clean

Water Act is considered as a whole. The Act con-

tains 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 discharge of pollutants except pursu-

ant 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 ap-

proval of water quality standards, § 1313, and state

permit programs, § 1342(b); and establishing mini-

mum procedural requirements for state permit pro-

grams, §1314(i). As discussed above, however,

states are not precluded from imposing pollution limi-

tations more stringent than those promulgated by

EPA. 33 U.S.C. \§ 1370; 40 C.F.R. § 122.1(f); Mil-

waukee 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 history 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 contains a

“mandate to press technology and economics” to

achieve practicable and attainable levels of effluent

reduction, thus, “increasingly tougher controls on in-

dustry” will be required); see also Natural Resources

em,

33a

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.

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 “cer-

tification” 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 qual-

ity requirements. Section 1341(a)(2) provides:

Whenever such a discharge may affect, as deter-

mined by the [EPA] Administrator, the quality

of the waters of any other State, the Administra-

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

. such other State determines that such dis-

charge 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 hearing . . ., the licensing or

permitting agency shall hold such a hearing. ...

[The licensing or permitting] agency, based upon

the recommendations of such State, ... shall con-

dition such license or permit in such manner as

34a

may be necessary to insure compliance with ap-

plicable water quality requirements. If the im-

position of conditions cannot insure such compli-

ance Such agency shall not issue such license or

permit.

“(The purpose of the [§ 1341(a)(2)] notice re-

quirement is to enable a state whose water qualities

may be affected by the proposed federal activity an

opportunity to insure that its stanrads will be com-

plied 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 with-

out opinion, 707 F.2d 1392 (3d Cir.), cert. denied,

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

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

$§ 121.1-.30," as does the limited case law, see, e.9.,

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 certifica-

tion, or one imposing conditions or restrictions, is not

reviewable administratively by the EPA” and is

“exempt from review in federal court’).

Arkansas disputes that “applicable water quality

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

the affected state."* Based on its plain language, how-

ever, we agree with EPA that the purpose of this pro-

vision must be to enable affected states to ensure

that their water quality will not be jeopardized by a

1 Subpart B of these rules deals specifically with deter-

mining 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 34 n. 27.

35a

discharge in another state. Only a strained interpre-

tation of the statute could produce the result Arkan-

sas seeks—that “applicable water quality require-

ments” 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

permitting 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 requirements of affected states that

would be violated if the permit were not appropri-

ately conditioned. We reject Arkansas’s argument to

the contrary.

The legislative history of the certification statute

sheds additional light on this matter. In 1977 Con-

gress amended the statute

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.

S.Rep. No. 370, at 72, reprinted in 1977 U.S.Code

Cong. & Admin.News 4326,4397; H.Conf.Rep. No.

830, at 96, reprinted in 1977 U.S.Code Cong. &

Admin.News 4424, 4471."° According to the commit-

‘

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

CWA, 33 U.S.C. § 1313.

36a

tees, the amendment was not meant to change the

law but to follow and clarify the original congres-

sional intent that “State water quality standards

would be imposed through Section 301, and thus cer-

tification by the State would include consideration of

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

Admin.News at 4397. The conference committee

added that “‘[s]ection 303 is always included by ref-

erence where section 301 is listed.”” H.Conf.Rep. No.

830, at 96, reprinted in 1977 U.S.Code Cong. & Ad-

min.News 4424, 4471. The Senate committee offered

this further explanation of the amendment:

[A]ll States have approved water quality stand-

ards. Thus, it is reasonable to require that Fed-

eral permits and licenses should take into account

State water quality plans, standards and require-

ments.adopted under section 303 to assure main-

tenance of water quality in the respective States.

Id. at 4398. Neither the statute as amended nor the

committee reports concerning the bills distinguish be-

tween source and affected states. Thus, EPA’s view

that sources subject to NPDES permits must comply

with all approved state water quality standards is a

reasonable interpretation in light of this history.

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 permits, the EPA Administrator retains au-

thority to veto any proposed permit if he objects to

its issuance. 33 U.S.C. § 1342(d)(2).” EPA may

17 EPA may also withdraw approval of a state permit pro-

gram if EPA determines the state is not administering its

program in accordance with CWA requisites. 33 U.S.C.

§ 1342 (c) (3).

a ee ees

37a

object on the basis of either of two grounds: (1) that

a permitting state failed to accept recommendations

from another state whose waters may be affected by

permit issuance; or (2) that the permit is “ ‘outside

[i.e., inconsistent with] the guidelines and require-

ments’ of the Act.” EPA Brief at 18-19 (quoting

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

that “[n]Jo 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., Ist Sess. 97, reprinted in 1977 U.S.Code

Cong. & Admin.News 4424, 4472. Given that a per-

mit program administered by EPA is subject to the

same requirements as apply to an approved state pro-

gram, § 1342(a)(3), no reasonable argument would

justify invalidating a state-issued permit that fails to

account for the,WQS of another state, yet allowing

EPA to issue a permit objectionable on the same

ground.”

18 EPA’s regulations elaborate on these two grounds, enu-

merating seven possible bases for an EPA objection to a state-

issued permit. 40 C.F.R. § 123.44(c).

1 Section 1342(d) (3), the paragraph immediately follow-

ing the veto provision, states: “The [EPA] Administrator

may, as to any permit application, waive paragraph (2) of

this subsection.” The discretionary language of this para-

graph initially gave us pause, especially in light of the manda-

tory tone of paragraph (2) (‘No 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 to review or not review a permit

38a

Although several of the CWA terms discussed in

the foregoing paragraphs have no direct application

to the permit in this case (because EPA, not Ar-

kansas, is the permitting agency), they reflect the

objectives and policies behind the Act and the statu-

tory framework established for implementing them.

Because nothing in the Act suggests that permits is-

sued by states are subje¢t to more stringent require-

ments 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 directed to

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) (discussing legislative history of § 402 of the CWA).

Such discretion is consistent with congressional intent to allow

EPA-approved, qualified states to administer their own per-

mit 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 and pro-

posed permit under this section, we do not believe it has

“discretion” to overlook any violation of the CWA revealed

by its review. Cf. § 1842(c) (3) (if EPA determines a state

permit program is not being administered in accordance with

§ 1342, it “shall withdraw approval of such program” (em-

phasis added) ) ; § 1813(t) (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. Interpreting § 1342

(d) (3) otherwise (i.e., as making all of the provisions 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. § 1811(a).

state permitting agencies is instructive as to EPA’s

permitting responsibilities and authority as well.

The Arkansas parties construct a similar argu-

ment (based on the relation between EPA’s and the

states’ permitting responsibilities) to urge an oppo-

site result, however. 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 admin-

ister... . Thus, it makes little sense to sug-

gest . . . that a source state discharger must

comply with affected state water quality stand-

ards when the permitting authority is the EPA

rather than a delegated state.

Arkansas Brief a 38-39.” Arkansas correctly sug-

gests it would make “little sense” if the applicability

of a downstream state’s water quality standards de-

pended 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.

* Section 1342 (b) (5) provides:

The Administrator shall approve each such submitted

[permit] program unless he determines that adequate au-

thority does not exist . . . [t]o insure that any State

(other than the permitting State), whose waters may be

affected by the issuance of a permit may submit written

recommendations to the permitting State (and the Ad-

ministrator) with respect to any permit application 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 the Adminis-

trator) in writing of its failure to so accept such recom-

mendations together with its reasons for so doing[.]

40a

First, in arguing, in effect, “an affected state may

not require a source state to comply with the for-

mer’s WQS; therefore, EPA may not require such

compliance,” Arkansas’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 the state’s approved water

quality standards is discretionary. Moreover, § 1342

(b)(5) merely describes part of the procedures a

state permit program must provide for insuring

communications among the source state, an affected

state, and EPA concerning the permitting of a new

discharge in the source (permitting) state. See also

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

nothing about whether compliance with affected

states’ WQS is optional or obligatory.

Second, Arkansas’s argument focuses on one para-

graph 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 Ad-

ministrator shall approve any program submitted by

a state desiring to administer its own permit pro-

gram unless he determines, essentially, that the state

proposal does not ensure adequate authority to ad-

minister the NPDES permit program properly. Sub-

section (b) (5), upon which Arkansas relies, is only

one of nine specific ground= upon which EPA may

refuse permitting authority toa state. § 1342(b)(1)-

(9). Subsection (b)(1)(A), for example, requires

adequate state authority to “issue permits which .. .

apply, and insure compliance with, any applicable re-

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

1343 of this title.” § 1342(b)(1) (A).

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

quirement of compliance with state water quality standards

4la

Arkansas’s argument also overlooks the fact that

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

statute. As discussed earlier in this opinion, § 1341

not only provides for notice to potentially affected

states, it requires that permits be conditioned so as

to insure compliance with all applicable water quality

requirements, and it prohibits issuing any permit that

cannot insure such compliance. § 1341(a) (2).

Finally, Arkansas’s argument must fail in the

face of other CWA provisions heretofore discussed—

in particular, 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 sub-

ject to the same terms and conditions, § 1342(a) (3).

c. EPA’s “Upset” Regulation

We find still further support for EPA’s construc-

tion of the CWA in the views the agency expressed in

an earlier rulemaking proceeding. In the course of

promulgating final regulations providing dischargers

with a defense to violating effluent limits during un-

avoidable source “upset” conditions, EPA stated that

“the CWA requires strict compliance with water qual-

ity 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).

arises ‘rom § 1311. Thus, via § 1342(b)(1)(A)’s require-

ment of compliance with § 1311, permits issued by states

must ensure compliance with all applicable WQS.

42a

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

rowly defined circumstances technology-based effluent

limitations may be exceeded (i.e., failure of pollution

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

Significantly, an industry-proposed defense for viola-

tion of water quality-based permit limits” was de-

leted 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 monitoring on all stream seg-

ments that may be affected” to ensure that water

quality standards were not violated in order to estab-

lish the defense. 49 Fed.Reg. at 38,038 (emphasis

added). The impracticality of such a requirement led

EPA to reject the industry proposal. 49 Fed.Peg. at

38,088. Jd.”

This view that all potentially affected stream seg-

ments would have to be monitored reflects EPA’s con-

viction 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 con-

sistent with EPA’s belief that “strict compliance”

with water quality standards is required by the CWA,

because such compliance could disregard the WQS of

states other than the source state.

22 In other words, industry proposed an “upset” defense for

exceeding water quality-based effluent limitations, so long as

the actual quality of the receiving waters did not fall below

established WQS.

2° 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.

43a

According to EPA, the requirement of strict com-

pliance 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

limitation .. . necessary to meet water quality stand-

ards.” (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 in-

terpretation. 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 “re-

laxed” the best available technology requirements in

certain circumstances, the amended statute and the

legislative history leaves no doubt that water quality

standards still must be maintained.” In explaining

the amendment the Senate committee cautioned:

[Tjhe gains made as a result of the 1977 re-

quirements could evaporate in the middle of the

next decade if only the 1977 [effluent limita-

tions} and new source performance standards

are applied. Thus, for many riverways .. .,

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

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

of “best 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 com-

pliance with certain conditions, including attainment or main-

tenance of a high standard of water quality.

44a

pressure must be maintained to assure improved

water quality and to avoid slipping hack.

The Committee intends that current effluent

limitations . . . should represent a “floor” or

minimum requirement of the modifications au-

thorized by this section. Current levels of dis-

charge must not be relaxed 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 also stated: “There is nothing in these new

provisions which in any way preempts the rights of »

States to have more stringent water quality standards

or associated effluent limitations. ...” Jd. at 43, U.S.

Code. Con. & Admin. News at 4368.

"33 U.S.C. §1311(m) provides another example of Con-

gress's willingness to relax statutory effluent limitations as

long as compliance with WQS is assured. This statute governs

industrial discharges 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 re-

quired), provided that effluent limitations established in such

permits are “sufficient to implement the applicable State

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

provides that EPA may terminate such a permit if it subse-

quently determines there as been a “decline in ambient water

quality of the receiving waters .. . even if a direct cause and

effect relationship cannot be shown,” but that EPA shall

terminate such a permit if the effluent from the source “is

contributing to a decline in ambient water quality of the

receiving waters.” § (m) (4) (emphasis added).

45a

d. 33 U.S.C. § 1365

One final provision of the CWA deserves mention

in our discussion of the statutory interpretation issue.

Section 505(h), 33 U.S.C. § 1365(h), authorizes the

governor of a state to sue EPA to enforce an “effluent

standard or limitation under this chapter,” the viola-

tion of which is occurring in another state and is

“causing a violation of any water quality require-

ment in his state.” Subsection (f) defines “effluent

limitation or standard under this chapter” as includ-

ing, for purposes of this section, certification under

§ 1341 and permits or conditions thereof issued under

§ 1342.

Clearly, the inquiry 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 stand-

ard or limitation” pe rse. This interpretation is dic-

tated by common sense and congressiona! 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.”). Ar-

kansas’s view that discharge permits are not required

to ensure compliance with the applicable WQS of all

affected states cannot be reconciled with § 1365(h)’s

express remedy for the violation of “any water qual-

ity requirement” in one state, which results from the

violation of an “effluent limitation” (defined to in-

clude 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

46a

of this opinion) and in § 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] Ad-

ministrator, discharges of pollutants from a point

source or a group of point sourses, with the ap-

plication 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

control strategies). for such point source or

sources shall be established which can reasonably

be expected to contribute to the attainment or

maintenance of such water quality.

33 U.S.C. §1312(a) (emphasis added). In other

words, effluent limits more stringent than those re-

quired by 33 U.S.C. § 1311(b)(2) must, if feasible,

be established by EPA and imposed on any sources

responsible for interfering with the desired water

quality in a specific stream segment.” In the words

of the Senate committee:

2°In addition, states are required to identify waters for

which the effluent limitations established pursuant to § 1311

are “not stringent enough to impliment any water quality

standard applicable to such waters,” 33 U.S.C. § 1313(d)

(1) (A), and to establish the acceptable “total maximum

47a

The limitations necessary to achieve a given level

of water quality in one reach of a waterway may

require more control of effluents than that attain-

able through application of the best available

technology. Where that is desirable to implement

the policies of the Act, and feasible, [this sec-

tion] provides the authority to impose controls

based on water quality.

The concept of “alternative effluent control

strategies” is necessary to account for [certain]

difficulties in simply setting more stringent efflu-

ent limitations... . [F jurther reduction of the

level of effluent entering the affected waters may

not be possible through control technology, yet

essential to water quality. Alternative effluent

control strategies, such as the transportation of

effluents to other less affected waters or the con-

trol of in-plant processes would have to be de-

veloped.

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

preeminent importance of water quality—actual and

desired—in the framework of the CWA. Signifi-

cantly, 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 specify-

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).

48a

ing waters of the source or permitting state, sug-

gests that the section contemplates regulation of

water quality without regard to state boundaries.

Vesting authority in EPA, instead of in individual

states, arguably suggests a similar intent.?’

Considered together, all of the provisions of the

CWA discussed above ($$ 1311, 1312, 1313, 1314,

1341, 1342, 1365, and 1370), as well as the legisla-

tive history and EPA’s implementing regulations,

evidence the reasonableness 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 applicable

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 on-

going violations of Illinois River water quality stand-

ards, yet neither of the EPA judicial officers nor any

of the parties addresses whether, or how, this is rele-

vant to Fayetteville’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

*7 Section 302 of the conference substitute bill, which was

ultimately enacted, was identical to the Senate provision dis-

cussed 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 im-

pose additional effluent limitations is vested solely in EPA.

1972 U.S.Code Cong. & Admin.News at 3799.

49a

standards are already being violated.** Guided by

the Supreme Court’s pronouncement that an agency

decision is arbitrary and capricious if the agency

“entirely failed to consider an important aspect of the

problem [or] offered an explanation for its decision

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 Fayette-

ville permit 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 the Clean Water Act

prohibits granting an NPDES permit under the cir-

cumstances of this case! (i.e., where applicable water

quality standards have already been violated) and

reverse EPA’s decision to permit Fayetteville to dis-

28 Throughout this and the prior section of our opinion, we

use “applicable water quality standards” to refer to those

federally approved 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 pro-

posed source’s effluent. For example, Oklahoma’s nutrients

standard is relevant to the Fayetteville plant because the

plant discharges phosphorus and nitrogen, but the tempera-

ture 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 approved by EPA.

50a

charge 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 desig-

nated an Oklahoma state scenic river. Okla-Stat. tit.

82, §1452(b)(1) (1990). As such, certain water

quality standards apply to these waters. See Okla-

homa Water Quality Standards (OWQS) § 4 & App.

A (1982).* Water quality standards 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 § 940(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” desig-

nated “beneficial uses.” Within the latter two use

categories, the following water quality criteria are

particularly significant: turbidity (OWQS § 4.10(b) ),

nutrients (OWQS § 410(c)), and dissolved oxygen

*® Water quality standards are promulgated by the Okla-

homa Water Resources Board pursuant to Okla.Stat. tit. 82

§ 926.3.6. Appendix A of the standards lists the following

beneficial uses, inter alia, for the Illinois River, including

Lake Frances, and Tenkiller Reservoir below the scenic river:

“public and private water supply,” “fish and wildlife propa-

gation” (primary warm-water fishery), “agriculture” (Class

I irrigation), “primary and secondary recreation,” “aesthet-

ics,” and “smallmouth bass.” See OWQS §4 & App. A. Re-

call 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 Re-

view, R., A-37, at 5-6.

5la

(OWQS § 4.11(a)). The occurrence of phosphorus

and nitrogen in Fayetteville’s effluent necessitates

the consideration of these criteria.”

As a preliminary matter, Oklahoma contends and

we agree that EPA’s judicial officers erred in con-

cluding that Oklahoma’s nutrients standard, § 4.10

(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 concentration and the nitro-

gen ‘phosphorus concentration ratio shall not be in-

creased to levels which result in man-induced eutro-

phication problems.” The source of the agency’s con-

fusion is the definition of “eutrophication (natural)”

(included in Appendix C of the OWQS), which refers

only to lakes.*' An Oklahoma witness at the adminis-

trative hearing explained that the definitions in the

appendix are “scientific definitions,” provided merely

3° In oversimplified terms, phosphorus and nitrogen are nu-

trients which, when added to an aquatic system, stimulate

the growth of aquatic plants and other organisms, eventually

altering biological characteristics of the system, such as spe-

cies populations, bimass, and species abundance and diversity,

as well as physical and chemical parameters, such as tempera-

ture, turbidity, color, and dissolved 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.

31 “Eutrophication (natural)” is defined:

The normally slow aging process by which a lake evolves

into a bog or marsh and ultimately assumes a terrestrial

state. During eutrophication the lake becomes so rich in

nutritive compounds (especially nitrogen and phosphorus)

that algae and other microscopic plant life become super-

abundant, thereby “choking” the lake, and causing the lake

to advance in seral stages.

52a

for clarification purposes, and that “the state does

not 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 Qual-

ity,” unequivocally states: “Narrative standards [in-

cluding] Section . . . 4.10(c) .. .’ shall be main-

tained st all times and apply to all perennial and

intermittent streams.” (Emphasis ad@ed.) In addi-

tion, the preface to Appendix A of the OWQS states

that $4.10(c) applies even to those stream segments

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 “Bene-

ficial Use Limitations,” id. § 5, also protect the Upper

illinois River.” The Oklahoma parties assert that

EPA also misinterpreted and misapplied these regu-

lations. Their argument 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 conditions described in Section 3 [the Anti-

Degradation Policy].”” OWQS § 5. The relevant provi-

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

to tais opinion.

et aes

53a

sion of § 3 states: “No degradation shall be allowed

in high quality waters .. . includ[ing] water bodies.

. designated ‘Scenic Rivers.’” The Oklahoma

courts apparently have not interpreted these provi-

sions.** Nevertheless, we believe the 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 addi-

tional discharge of pollution (either a new point

source or an increase from an existing source) to a

38 The Oklahoma Attorney General has issued an opinion,

however, 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 General acknowedged the federal antidegradation

regulation, which provides for lowering water quality in cer-

tain limited circumstances, but observed 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 re-

classifying 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 qual-

ity 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

antidegradation policy which allows for lower water

quality or limited degradation of certain waters.

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

partment that Oklahoma law does not allow even the limited

degradation authorized by the federal regulation. OWQS

§ 3, however, suggests a contrary position.

54a

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 mini-

mum requirements for such policies set forth in

EPA’s regulation, confirms our plain language con-

struction.“ The Oklahoma regulation allows “no deg-

** EPA regulations mandate that all states adopt and imple-

ment an antidegradation policy meeting minimum federal

requirements. 40 C.F.R. §§ 131.6(d), 181.12. Oklahoma’s

policy is very similar to the EPA rule; one difference is that

Oklahoma specifies scenic rivers for protection from any deg-

radation. Cf. § 181.12(3). Both the federal and state rules

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. . . im-

proved.” 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 OW@QS § 3, para.

2 with 40 C.F.R. § 131.12(2). However, the state must first

decide, after fully satisfying state planning requirements,

that “necessary and justifiable economic or social develop-

ment” necessitates this degradation. OWQS § 8, para. 2; cf.

§ 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 management practices for non-point source control.”

§ 131.12(2) (emphasis added). (The comparable provision

in the Oklahoma rule is not as clear, but under EPA regula-

tions, it must be interpreted at least as stringently.) Finally,

level 3 provides for maintaining and protecting certain ex-

ceptional, high quality waters (which in Oklahoma includes

55a

radation” of water quality in designated scenic riv-

ers. “Limited degradation” is permitted limited only

in other “high quality waters” where the existing

water quality “exceeds those levels necessary to sup-

port propagation of fish, shellfish, wildlife, and rec-

reation.” OWQS §3, para. 2. Even if the Upper

Illinois were not a scenic river, it would not be eli-

gible 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 further degragation 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 unnecessary 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 tur-

bidity), which criterion would otherwise apply if the

Beneficial Use Limitations were not applicable (i.e.,

if the receiving waters were not designated as a

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

scenic rivers). Compare OWQS § 3, para. 3 with 40 C.F.R.

§ 131.12(3). The Oklahoma rule expressly prohibits any deg-

radation of these waters; the prohibition in EPA’s regula-

tion is implicit.

* 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

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 regula-

tions as merely prohibiting 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 regula-

tions apply.

The ALJ, on remand, did not explicitly address the

Anti-Degradation Policy but did construe the Bene-

ficial Use Limitations. The 1985 version of the Ben-

eficial Use Limitations, which the ALJ deemed ap-

plicable, 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 Remand, R., A-33, at 4.

Construing this regulation in light of the OWQS def-

inition of “pollution,” “ he concluded: “|T]he Okla-

NTUs, the criterion applicable to “Warm Water Lakes” in

OWS § 4.10(b). (The Illinois scenic river is designated a

warm water fishery in Appendix A.) Because the lake is

part of a scenic river, however, the Beneficial Use Limitations

apply. In conjunction with the Anti-Degradation Policy, it

prohibits any human-caused, detectable change in the turbid-

ity 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.

* “Pollution” is defined as :

[Cjontamination 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 harm-

57a

homa parties must show by substantial evidence that

“the City’s discharge will create a nuisance or render

the Illinois River in Oklahoma harmful, detremental

[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. Second

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

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

tion Policy by explaining that the ALJ “implicitly

addressed the policy in his detailed analysis of the

discharge’s potential impact on all relevant water

quality parameters.” /d. at 9; see id. at 10 (if ALJ

erred in this regard, it was “harmless error”). The

CJO reasoned 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 deg-

radation.’” Id. at 9-10.

We have considerable difficulty with the agency’s

treatment of these crucial Oklahoma regulations.

First, and most importantly, the ALJ’s interpreta-

tion defies the plain language of the Beneficial Use

Limitations and the Anti-Degradaticn Policy that it

references.” Secondly, the CJO ruled that the ALJ

ful or detrimental or injurious to public health, safety or

welfare, or to . . . legitimate beneficial uses, or to live-

stock, 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 discus-

sion of this compound error in the text.

** The ALJ’s interpretation of the Beneficial Use Limita-

tions 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

58a

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 Ap-

pendix A are protected by prohibition of any new

Oct. 1, 1986, from Lawrence Edmison, Director, Oklahoma

Department of Pollution Control, to Kenton Kirkpatrick,

Deputy Director, Water Management Division, EPA-Region 6,

Mr. Edmison was writing to confirm a conversation with Mr.

Kirkpatrick in which they apparently reached an “under-

standing that Tahlequah’s discharge must not increase loading

on the Illinois River.” Addendum to R., OK-4 (emphasis in

origina:). The discussion and letter were precipitated by a

debate concerning how the Illinois River’s (a) designation

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 IIlinois

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

to Mr. Edmison from Quang Pham, an Oklahoma State De-

partment of Health employee, stated that, because Tahlequah

was located on a tributary of an (a) stream, “EPA indicated

that no load increase could be allowed for Tahlequah.” Ad-

dendum to R., OK-4 (emphasis added). This memo also ref-

erenced a recent EPA study “on eutrophication of Illinois

River [that] indicated that phosphorus plays a major role

in the stimulation of algae growth in the river.” Jd. at 2.

These documents reflect a significantly different understand-

ing of Oklahcma’s Anti-Degradat..a Policy and Beneficial

Use Limitation than that adopted by the ALJ and approved

by the CJO in this permit proceeding.

* 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.

59a

point source discharge which increases pollutant load-

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

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

ing no definition of “pollutant loading” in the 1985

rule, the ALJ consulted the statutory definition of

“pollution,” Okla.Stat. tit. 82 § 926.1., to construct

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