Respondents Brief — National Ass'n v. Defenders of Wildlife

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Gels

Nos. 06-340, 06-549

In The

Supreme Court of the United states”

NATIONAL ASSOCIATION OF HOME BUTLDERS, ef a/..

Petitioners.

DEFENDERS OF WILDLIFE. e7 a/..

Respondent S

UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY,

Petitioner

¥.

DEFENDERS OF WILDLIFE. ef a/..

Res} mondents.

— r

On Writs Of Certiorari To The

United States Court Of Appeals

For The Ninth Circuit

BRIEF FOR RESPONDENTS

DEFENDERS OF WILDLIFE, ET AL.

@ —

MICHAEL Po SENATORE ERIC R. GLITZENSTEIN

DEFENDERS OF WILDLIFE (Counsel of Record)

1130 Seventeenth Street. N.W. KATHERINE A. MEYER

Washington, D.C. 20036 MEYER GLITZENSTEIN &

(202) 682-9400 CRYSTAL.

1601 Connecticut Avenue, NW.

Washington, D.C. POO0O9

(P02) 588-5206

BEST AVAILABLE COPY

QUESTIONS PRESENTED

1. Whether the court of appeals correctly held that EPA’s

decision to transfer permitting authority to Arizona under

Section 402(b) of the Clean Water Act was arbitrary and

capricious because it was based on inconsistent interpreta-

tions of Section 7(a)(2) of the Endangered Species Act; and,

if so, whether the court of appeals should have remanded

to EPA for further proceedings without ruling on the

interpretation of Section 7(a)(2).

2. Whether EPA may raise in this Court a rationale for

avoiding compliance with Section 7(a)(2) of the Endan-

gered Species Act, 16 U.S.C. § 1536(a)(2), that EPA not

only failed to rely on during the administrative proceed-

ings and before the Ninth Circuit issued its ruling, but

which the agency expressly disavowed in the administra-

tive proceedings and advised the court of appeals panel it

was not raising.

3. Whether EPA must comply with Section 7(a)(2) of the

Endangered Species Act when EPA authorizes States to

administer the Clean Water Act permitting program,

where Section 7(a)(2)’s requirements apply to “any action

authorized, funded, or carried out” by a federal agency, 16

U.S.C. § 1536(a)(2), and this Court has already construed

this language as “admit|ting] of no exception.” TVA v. Hill,

437 U.S. 153, 173 (1978).

CORPORATE DISCLOSURE STATEMENT

The Corporate Disclosure Statement in respondents’

Brief in Opposition to Petitions for a Writ of Certiorari

remains valid.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ................sessccsssssssesessecesceees i

CORPORATE DISCLOSURE STATEMENT ................ ii

TABLE OF AUTHORITIEG................csssssccssssrseresscesseees Vv

IT ce nT ee TT eT 1

A. Section 7 Of The Endangered Species Act......... 2

B. Pertinent Provisions Of The CWA..................0+ 6

C. EPA's Past Successful Compliance With Section

7(aX2) And The CWA In Making NPDES Trans-

* EE UTI cesiiicnictaintdenhilecgiibiniintaianbaadistintibdilaieniene 10

D. EPA’s Internally Inconsistent Approach To

Section 7(a)(2) When Considering. Arizona’s

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SUMMARY OF ARGUMENT. ..............:cccsessesereeeeeeeeeeeees 20

ET sictithiamseviccicnininedeiniiieciueinidiiniattaninniebessavantin 22

I. THE COURT OF APPEALS CORRECTLY

HELD THAT EPA'S DECISION WAS ARBI-

TRARY AND CAPRICIOUS AND THE CASE

SHOULD BE REMANDED ON THAT BASIS.... 22

A. EPA Now Concedes That Its Approach To

Section 7(a)(2) Was Internally Inconsistent

ee cscntninccvcntvntevnianietinninnaumaiaiane 22

B. EPA Cannot Avoid A Remand Based On Its

Extra-Record Post Hoc Explanation ........... 24

C. EPA’s “Harmless Error” Argument Is

I sennsciiiceiiinnnincnpintinuignnrinnninainenibiiniendion 27

TABLE OF CONTENTS -— Continued

Page

II. IN MAKING TRANSFER DECISIONS, EPA

MUST COMPLY WITH SECTION 7(a)(2).........

A. Compliance With Section 7(a)(2) Is Re-

quired By The Plain Language Of Section

7(aX(2), This Court’s Ruling In Hill, And

Congress’s Subsequent Ratification Of

. Congress’s Ratification Of Hill And

Creation Of The Endangered Species

Committee To Resolve Conflicts Be-

tween Section 7(a)(2) And Other Statu-

I ID ccvesdececennenincminneninensisnenineeiann

B. Petitioners’ Remaining Arguments Are Base-

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TABLE OF AUTHORITIES

Page

FEDERAL CASES

Air Courier Conference of America v. America

Postal Workers Union, 498 U.S. 517 (1991).................. 32

Alaska Professional Hunters Association v. FAA,

177 F.3d 1030 (D.C. Cir. 1999) .........ccccccccccrrcrssserssesseees 28

American Forest & Paper Association v. EPA, 137

Ae ee CE GE er ncctncccniutinsinsthicadnsstiatinicieniammsentisiiiee 12

American Textile Manufacturers Institute, Inc. v.

Donovan, 452 U.S. 490 (1981)..........ccccsscccsescccercesseeceeees 26

Arkansas v. Oklahoma, 503 U.S. 91 (1992)....... 6, 7, 8, 9, 46

Auer v. Robbins, 519 U.S. 452 (1997) .............cesceeceeeeeeeeeee 27

Babbitt v. Sweet Home Chapter of Communities for

a Great Oregon, 515 U.S. 687 (1995) ........... eee 3, 35, 38

Bates v. United States, 522 U.S. 23 (1997)............c cece eee 37

Bennett v. Spear, 520 U.S. 154 (1997).............0..04 5, 34, 37-

Board of Governors of the Federal Reserve System v.

Dimension Financial Corp., 474 U.S. 361 (1986)......... 46

Burlington Truck Lines v. U.S., 371 U.S. 156 (1962) .....25, 26

Chevron, U.S.A. v. Natural Resources Defense

Cpanel, GIS WB. GF Ce cctecscccnsetiscsintcsitantntocaninntins 33

Christensen v. Harris County, 529 U.S. 576 (2000).......... 33

Citizens to Preserve Overton Park v. Volpe, 401 U.S.

GB CE Be ncccensacesnnsanavinisssnsiatntaniniasinsistiaiibiaadiinianaiaian 25

Dep't of Hous. and Urban Dev. v. Rucker, 535 U.S.

See CD orcaniccosnestusstansnendseiiiennentiidseisiimmmmanamanil 34

TABLE OF AUTHORITIES — Continued

Page

Department of Transportation v. Public Citizen, 541

_ 8 ae 21, 47, 48, 49

EPA v. California ex rel. State Water Resources

Control Board, 426 U.S. 200 (1976)........ccccceccccceeseceeeeees 7

Florida Power & Light Corp. v. Lorion, 470 U.S.

a ee 24

Gerber v. Norton, 294 F.3d 173 (D.C. Cir. 2002)............... 31

Gonzales v. Oregon, 126 S. Ct. 904 (2006) ...........cccceeceeee: 33

Gonzales v. Thomas, 126 S. Ct. 1613 (2006)...............00008 24

Hormel v. Helvering, 312 U.S. 522 (1941) ..........cccccccceeeees 28

Merrill Lynch, Pierce, Fenner & Smith v. Dabit, 126

eee 43

Motor Vehicle Manufacturers Association v. State

Farm Mutual Automobile Insurance Co., 463

SETTLE ORS ena 23, 46

Mount Graham Coalition v. Thomas, 89 F.3d 554

I TT ictal asesaiecercemnebmaneinintateineenmeeneds 45

National Cable and Telecomm. Association v. Brand

X Internet Services, 545 U.S. 967 (2005)...............ccce0e0 30

New England Coalition on Nuclear Pollution uv.

NRC, 727 F.2d 1127 (D.C. Cir. 1984) .............cccceeceeeeeees 24

Norton v. Southern Utah Wilderness Alliance, 542

ne 47

PDK Labs., Inc. v. United States DEA, 362 F.3d 786

I ieee tit err tenireitetcamanieanits 28, 32

Posadas v. National City Bank of New York, 296

| ET eee aE 45

vii

TABLE OF AUTHORITIES -— Continued

Page

Reno v. American-Arab Anti-Discrimination Com-

ee 33

Robinson v. Shell Oil Co., 519 U.S. 337 (1997) .............0 35

Russello v. United States, 464 U.S. 16 (1983).............. 36, 37

SEC v. Chenery, 332 U.S. 194 (1947).........cccceeeeeeeeeeee 24, 45

Sierra Club v. U.S. Fish and Wildlife Service, 245

ee ee EIS Se cinincecnesencnantnntinimeumenennsecteibionnnen 37

TVA v. Hill, 437 U.S. 153 (1978)... ccesereceseseseereneneee passim

Train v. New York City, 420 U.S. 35 (1975) 00... ceeceeeceeeees 39

United States v. Mead Corp., 533 U.S. 218 (2001)........... 33

Watt v. Alaska, 451 U.S. 259 (1981)............:cccccecceseeeeeeeeees 43

Weinberger v. Romero-Barcelo, 456 U.S. 305 (1982).....21, 49

Witters v. Washington Department of Services for

the Blind, 474 U.S. 481 (1986)...............:csesssesserserereeeees 27

Wygant v. Jackson Board of Education, 476 U.S.

Sie Gael hnisnevciputnnuntiniadniasentidniinephimntniesemmanniontia 27

FEDERAL STATUTES AND REGULATIONS

Clean Water Act,

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I 7

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ere

TABLE OF AUTHORITIES - Continued

Page

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Neen CUTE iicieniicenennctibdingecniaseiacceiitaiimiciiaiiia passim

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EA NMI iii aia 9

a SIT cicsicinnctensabininintiticnbendenibaaeeiatinit euteilaiunes 9

a ee 9

Endangered Species Act,

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eae RI hncindinciciiinmevicnsimetdonniiininininiinidinsennats 1,3

es OF ee hcintecencnssonininsiiennnasanmpmapemiebainmsuetiiniin 1,3

Fe es Oe Se cinsnrsiersctincstenpepinientrieaibasnesibisibaniinindiniiciaiie 44

Ne ee Se iaiicrnevciescesiiiiininieneiiiniiniippeiasicinipainiiis 3, 36

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ee ae SE runioctiiicninesiisiiinnineniinintienntsdmne passim

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ee IED ccnpenscpicnnenssenmeteninintaniczeapendinsnins 5

ee ee ntensrecnstnccimsctinnntetinddiananinttins 6, 43

A IIIT sxsinitasiincsicieiehinritaiatineaiciiiatinniaiieaienibaiasis 6

ee ee TTI sichiciicliecielncnitietapunseeiieaialiinitaingiail 6

eee TT i cnscniniidendnienninmainenniideindiaeninesindes 6

RS _ 5

eae SEE cconntnsemnesinnninpieniietinntnemans 6, 43

BD AAG. 9 BESS erncreserescrssccssreesrnsnnnanncseneneen 15, 16

TABLE OF AUTHORITIES — Continued

Page

National Environmental Policy Act,

ae Be OD cscccscirnescstnsersnssssccnsssenneinessmenn 21

National Historic Preservation Act,

ee ee Se ID eniernenecnsemnenntenmeemaiennmetbeneniins 31

FEDERAL REGULATIONS

ee BE itaciicensininiiinininaiannpiiabianpumenieaindmniaiiniess 9

es ee crnenscenccnnsnsnsitnsninmemonsicmmmnementiins 9

SD ctnnncenricemmmnnsingncnimenmmennins 9, 28

ee ee cecrtcctcrenscmensansemncementinnnmnenmnnnetionts 9

BF ne 7

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ee 45, 46

8 ee spinduimiameses 5

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a ey Op i tcmresnstnsecncrenscereinensnutininesnsentemtentin 5

es Se GR ecrccnnicrenennecnenstemnnenmennsitacnneuinnns 5

EER CD ctccccntenssnssreneccensmnensensennenietaiigpinnnptesenees 5

FEDERAL REGISTER NOTICES |

51 Fed. Reg. 19,926 (Jume 3, 1986)..............cccccceeeeeeeeee 24, 37

60 Fed. Reg. 25,718 (May 12, 1995)...............::sssssersereerees 10

61 Fed. Reg. 65,047 (Dec. 10, 1996)... ceeseeesereeeereees 10

63 Fed. Reg. 51,164 (Sept. 24, 1998) .......ccscesssesseesessees 11, 12

TABLE OF AUTHORITIES — Continued

64 Fed. Reg. 2,742 (Jan. 15, 1999)............ccccesscessseseeseeerees 12

67 Fed. Reg. 79,629 (Dec. 30, 2002).............cccceceeseceeees 1, 21

LEGISLATIVE HISTORY

H.R. Rep. No. 92-911, 92d Cong., 2d Sess. (1972).............. 6

H.R. Rep. No. 93-412, 93d Cong., Ist Sess. (1973)............. 3

H.R. Rep. No. 95-1625, 95th Cong., 2d Sess. (1978)........... 4

Res es Ge PCS Gere iccenricrntcisisatantensncnnmenemanmnsnnion 42

S. Rep. No. 97-418, 97th Cong., 2d Sess. (1982)................. 4

GE a: Ge CeO cccncccnsennscssscenesenessonssuseveeneentne 41

MISCELLANEOUS ;

Kilbourne, The Endangered Species Act Under the

Microscope: A Closeup Look From a Litigator’s

Perspective, 21 Envtl. L. 499 (1991).........cccssesseeseeseeeneees 6

Webster’s New World Dictionary (1990)...............:0csceeeeees 34

STATEMENT

This case concerns the United States Environmental

Protection Agency's (“EPA's”) “final action authorizing

Arizona to implement the NPDES [National Pollutant

Discharge Elimination System] program,” 67 Fed. Reg.

79,629, 79,631 (Dec. 30, 2002), and whether, in taking that

action, EPA failed to comply with its duties under the

Endangered Species Act, 16 U.S.C. § 1531 et seq. (“ESA”).

Section 7(a)(2) of the ESA provides that “le]ach federal

agency shall, in consultation with and with the assistance

of the Secretary [of the Interior], insure that any action

authorized, funded, or carried out by such agency ... is

not likely to jeopardize the continued existence of any

endangered species or threatened species or result in the

destruction” of the “critical” habitat of a listed species. 16

U.S.C. § 1536(a)(2) (emphasis added).

The plain terms of section 7(a)(2) therefore apply to

EPA’s action and, indeed, this Court has already ruled that

the “language {of section 7] admits of no exception.” TVA v.

Hill, 437 U.S. 153, 173 (1978). Nonetheless, EPA and the

National Association of Home Builders (“NAHB”) contend

that section 7(a)(2) “does not apply” to EPA’s decisions on

whether to transfer NPDES authority regardless of

whether such transfers will lead to the extinction of

federally protected species. EPA Br. at 42. This position is

not only impossible to reconcile with the language and

purpose of section 7(a)(2), but it also conflicts with (1)

EPA’s statements in the decision documents under review,

(2) EPA’s position in the court of appeals, and (3) addi-

tional published statements of agency policy adopted

following public notice and comment proceedings.

According to petitioners, however, the Court should

overlook EPA’s conceded “confusion” and “misstatements of

law” in the record, EPA Br. at 42, 45, 46, and instead

“defer” to EPA’s extra-record post hoc “clarification” that

compliance with the ESA is never “required in this con-

text.” Id. at 38, 49. To endorse that position the Court

would be compelled to discard fundamental principles of

administrative law and judicial review, contort the lan-

guage of the ESA beyond recognition, and ignore the

Court’s own ruling and reasoning in Hill. Rather, the case

should be remanded to EPA for further administrative

proceedings so that EPA may “clarify” its position based on

a full administrative record, including important factual

and legal considerations unaddressed in the extra-record

explanation on which EPA asks the Court to rely.

To place these issues in legal and factual context,

respondents will first summarize the “complementary”

wildlife protection provisions of the two environmental

statutes at issue, NAHB App. 274, and then describe EPA’s

shifting positions on compliance with section 7(a)(2).

A. Section 7 Of The Endangered Species Act

When Congress enacted the ESA in 1973, its “plain

intent ... was to halt and reverse the trend towards

species extinction, whatever the cost.” Hill, 437 U.S. at

184. The House Report relied on in Hill explained that

“[f]rom all evidence available to us, it appears that the

pace of disappearance of species is accelerating” and that

[f}rom the most narrow possible point of view, it

is in the best interests of mankind to minimize

the loss of genetic variations. The reason is sim-

ple: they are potential resources. They are keys

to puzzles which we cannot solve, and may pro-

vide answers to questions which we have not yet

learned to ask ... Who knows, or can say, what

potential cures for cancer or other scourges, pre-

sent or future, may lie locked up in the struc-

tures of plants which may yet to be [] discovered

... Sheer self-interest impels us to be cautious.

H.R. Rep. No. 93-412, 93d Cong., Ist Sess. (1973) (“1973

House Report”), reprinted in A Legislative History of the

Endangered Species Act of 1973, As Amended in 1976, 1978,

1979, and 1980, at 144 (1982) (hereafter “ESA Leg. Hist.”).

Congress determined that the “principal” threats to

species are “pollution, destruction of habitat and the pres-

sures of trade” and that strong federal legislation was

essential because “protection of endangered species is not a

matter that can be handled in the absence of coherent

national and international policies. . . .” 1973 House Report,

ESA Leg. Hist. at 141, 146. Congress therefore passed “‘the

most comprehensive legislation for the preservation of

endangered species ever enacted by any nation.’” Babbitt v.

Sweet Home Chapter of Communities for a Great Oregon,

515 U.S. 687, 698 (1995) (quoting Hill, 437 U.S. at 180).

The ESA “finds” that “species of fish, wildlife, and plants...

in danger of or threatened with extinction” are of

“lalesthetic, ecological, educational, historical, recreational,

and scientific value to the Nation and its people,” and the

Act’s “purpose” is to provide a “program for the conserva-

tion” of such species, which means recovering them until

the “measures provided pursuant to [this Act] are no longer

necessary.” 16 U.S.C. §§ 1531(a), (b); id. at § 1532(3).

The statute’s “broad purpose,” Sweet Home, 515 U.S. at

698, is reflected in section 7, which “provides a particularly

good gauge of congressional intent.” Hill, 437 U.S. at 181.

In Hill, the Court held that section 7’s “very words affirma-

tively command all federal agencies ‘to insure that actions

authorized, funded, or carried out by them do not jeopardize

the continued existence’ of an endangered species or ‘result

in the destruction or modification of habitat of such spe-

cies.’” id. at 173 (emphasis in original; internal citation

omitted). The Court construed this language as flatly

“‘prohibit{ing] [a] federal agency from taking action which

does jeopardize the status of endangered species.’” Jd. at

179 (emphasis in original; internal quotation omitted).

In 1978, Congress ratified Hill’s plain language reading

of section 7 and established a new mechanism for address-

ing unavoidable “conflicts” between the “primar” missions”

of federal agencies and the prohibition in section 7 on

agency actions that jeopardize species and destroy critical

habitat. H.R. Rep. No. 95-1625, 95th Cong., 2d Sess. (1978)

(“1978 House Report”), ESA Leg. Hist. at 734, 737. While

finding that the “consultation process” required by section 7

“can resolve many if not most of the conflicts that might

develop under the Act,” the relevant Congressional commit-

tees recognized that “there will continue to be some Feder-

ally authorized activities that cannot be modified in a

manner which will avoid a conflict with a listed species.” Jd.

at 737 (emphasis added). Accordingly, to address “those

cases where a Federal action cannot be completed ...

without directly conflicting with the requirements of

Section 7,” id., the 1978 amendments created a “process by

which actions authorized, funded, or carried out by Federal

agencies could be exempted from the provisions of the Act.”

S. Rep. No. 97-418, 97th Cong., 2d Sess. (1982) (“1982

Senate Report”), reprinted in NAHB App. 531.

Under Fish and Wildlife Service (“FWS” or “Service”)

regulations, each “action agency” triggers the section 7

process by determining if its action “may affect” a listed

species or critical habitat; if so, the agency must conduct

“formal consultation” with FWS, unless the Service concurs

that the action is unlikely to “adversely affect” the species.

50 C.F.R. § 402.14(a), (b). The formal consultation process

culminates in a “Biological Opinion” that “[e]valuate{s] the

effects of the action,” and determines whether it is “likely to

jeopardize” any listed species or impair critical habitat. Jd.

at §§ 402.14(g)(3), (4); see also Bennett v. Spear, 520 U.S.

154, 158 (1997). This analysis must include all “direct,”

“cumulative,” and “indirect effects,” which are those “caused

by the proposed action and are later in time, but still are

reasonably certain to occur.” 50 C.F.R. § 402.02. The agency

must then determine “whether and in what manner to

proceed,” id. at § 402. 15(a), to ensure that the “action” does

not “jeopardize” any listed species or “result in” the destruc-

tion or “adverse modification” of “critical” habitat. 16 U.S.C.

§ 1536(a)(2).

For example, if the FWS finds that the action will

“result in” destruction of critical habitat, the action agency

must determine whether to adopt any “reasonable and

prudent alternatives” proposed by the Service to avoid

that result. 16 U.S.C. § 1536(b)(3)(A). If there are no such —

“alternatives” within the agency’s statutory authority, the

recourse for the agency or other affected parties is to seek

an exemption from the Endangered Species Committee.

Id. at § 1536(h)(1 (AD.

Pursuant to the exemption process, any federal

agency, “permit or license applicant,” or the “Governor of

the State in which an agency action will occur,” may

“apply ... for an exemption” if FWS determines, after

consultation, that the “agency action would violate” section

7(a\(2) but the Service and agency are unable to develop a

“reasonable and prudent alternative” the agency can

implement to avoid that result. 16 U.S.C. §§ 1536(g)(1),

(3). The ultimate decision to grant such an exemption is

vested in an “Endangered Species Committee” composed of

high-ranking federal officials, including the Administrator

of EPA, and one representative from “each affected State.”

Id. at §§ 1536(e)(1), (3). If the Committee grants an ex-

emption, it also “establish[es]” measures “to minimize the

adverse effects of the agency action” on endangered species

regardless of whether the agency has authority to imple-

ment such measures under its own statute. Id. at

§ 1536(h)(1)(B).’

B. Pertinent Provisions Of The CWA

The “broad purpose” of the Clean Water Act (“CWA”) is

“‘to restore and maintain the chemical, physical, and

biological integrity of the Nation’s waters.’” Arkansas uv.

Oklahoma, 503 U.S. 91, 105-06 (1992) (quoting 33 U.S.C.

§ 1251(a)) (emphasis added). Accordingly, the CWA, enacted

in 1972, establishes a “national goal” of achieving “water

quality which provides for the protection and propagation of

fish, shellfish, and wildlife. . . .” 33 U.S.C. § 1251(a)(2).’

* Because of its extraordinary power to authorize a federal action

that may result in the extinction of a species, the Committee is “eu-

phemistically known as the ‘God’ committee.” Kilbourne, The Endan-

gered Species Act Under the Microscope: A Closeup Look From a

Litigator’s Perspective, 21 Envt'l L. 499, 560-61 (1991).

* See also H.R. Rep. No. 92-911, 92d Cong., 2d Sess. 76 (1972) (The

CWA’'s “objective” is the “restoration and maintenance of the chemical,

physical, and biological integrity of the Nation’s waters ... The word

‘integrity’... refers to a condition in which the natural structure and

function of ecosystems is maintained.”).

The CWA “anticipates a partnership between the

States and the Federal Government” and “provides for two

sets of water quality measures.” Arkansas, 503 U.S. at 101

(internal citation omitted). First, the CWA requires EPA to

issue technology-based “[e]ffluent limitations,” 33 U.S.C.

§ 1311, including limitations needed to “assure . . . protec-

tion and propagation of a balanced population of shellfish,

fish, and wildlife.” Jd. at § 1312(a). Second, the States and

EPA jointly develop “[wlater quality standards” so that

pollution sources “may be further 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). These standards must also

“tak[e] into consideration the[] use and value” of navigable

waters for the “propagation of fish and wildlife.” 33 U.S.C.

§ 1313(c)(2)(A).

States must submit proposed water quality standards

for review by EPA, and if the “State fails to comply with

[EPA’s] recommendation, the Act authorizes the EPA to

promulgate water quality standards for the State.” Arkan-

sas, 503 U.S. at 101. Hence, the States and, if necessary,

EPA establish water quality standards that provide “for

the protection and propagation of fish, shellfish, and

wildlife.” 40 C.F.R. § 131.2.

The NPDES program is the “primary means for

enforcing these limitations and standards,” Arkansas, 503

U.S. at 101, because the CWA prohibits point sources from

discharging pollutants into navigable waters without a

permit. See 33 U.S.C. § 1311(a). Section 402 of the Act, 33,

U.S.C. § 1342, “establishes the NPDES permitting regime,

and describes two types of permitting systems: state

permit programs that must satisfy federal requirements

and be approved by the EPA, and a federal program

administered by the EPA.” Arkansas, 503 U.S. at 105.

Thus, the States play an important role in implementing

the program, but “Congress has vested in [EPA] broad

discretion to establish conditions for NPDES permits,” and

“[s]imilarly, Congress preserved for [EPA] broad authority

to oversee state permit programs|.]” Id. (emphasis added).

Consistent with EPA’s “broad authority” over the

program, it is not the case that Congress imposed a minis-

terial duty on EPA to transfer permitting authority to the

States. To the contrary, while section 402(b)(1) provides

that EPA “shall approve” the transfer of permitting au-

thority when EPA finds that a State has met nine criteria,

EPA can and does employ considerable discretion — or, in

the government’s words, an “exercise of judgment,” EPA

Br. at 17 — in assessing and applying those criteria, which

range from the specific to the very general. Of particular

relevance here, several of the statutory factors as to which

EPA exercises “judgment” encompass the wildlife-related

concerns that are manifested throughout the CWA scheme.

For example, one general criterion is whether the

State has “adequate authority” to “apply, and insure

‘compliance with” multiple provisions of the CWA. 33

U.S.C. § 1342(b)(1)(A). In turn, one of those provisions

concerns any “effluent limitations” established for the

“protection and propagation of a balanced population of

shellfish, fish and wildlife....” Jd. at § 1312(a). Another

requires that all permits satisfy “any applicable water

quality standard|[s],” id. at § 1311(b)(1)(C), including those

that protect the “use and value” of navigable water bodies

“for ... propagation of fish and wildlife.” Jd. at

§ 1313(c)(2)A). Through these and other transfer criteria,

therefore, EPA has the responsibility under the CWA to

evaluate the adequacy of a State’s program to provide for

the “protection and propagation of fish, shellfish, and

wildlife.” If EPA “determines” that a State’s program is not

“adequate” in that or any other respect, it denies the

transfer. Id. at § 1342(b).’

Even after EPA authorizes a State to administer the

NPDES program, “Congress intended to grant the [EPA]

discretion in [its] oversight of the issuance of NPDES

permits.” Arkansas, 503 U.S. at 106; see also NAHB App.

97. The State must advise EPA of each permit it “pro-

pose[s]” to issue, 33 U.S.C. § 1342(d)(1), and EPA may

“object” to any permit. Jd. at § 1342(d)(2); see also 40

C.F.R. § 123.44(c). The State must then either address

EPA’s concerns or authority over the permit reverts to

EPA. 33 U.S.C. § 1342(d)(4). In addition, the State must

enter into a Memorandum of Agreement with EPA that is

“consistent with EPA’s statutory oversight responsibility”

and “include{s] other terms, conditions, or agreements”

deemed “relevant to the administration and enforcement

of the State’s regulatory program.” 40 C.F.R. § 123.24(a).

States must also provide draft permits to the FWS and

all other “Federal and State agencies with jurisdiction

over fish, shellfish, and wildlife resources....” Jd. at

§ 124.10(c)(iii).

* That EPA in fact exercises considerable discretion in determining

whether, and on what terms, to delegate NPDES authority to a State is

also reflected in EPA's solicitation and consideration of public comments

on a State’s application to administer the NPDES program. See 40

C.F.R. § 123.61(b); see also Joint Appendix (“J.A.”) at 194-256 (address-

ing public comments on Arizona’s application).

C. EPA’s Past Successful Compliance With Section

7(a)(2) And The CWA In Making NPDES Transfer

Decisions

EPA's new position that it is impossible to comply with

both section 7(a)(2) of the ESA and section 402(b)(1) of the

CWA is directly at odds with EPA’s and FWS’s past decla-

rations and actions. In public notice and comment proceed-

ings, EPA has repeatedly determined that it must comply

with section 7(a)(2) in making transfer decisions, and the

agencies have successfully used the section 7(a)(2) consul-

tation process to evaluate and mitigate the potential

adverse effects of such decisions on federally listed species.

With regard to Florida’s application, for example, the

federal agencies, together with the State, agreed to a

process “for close coordination between EPA, the State,

and the Service[] to ensure that the state-issued permits

are not likely to jeopardize the continued existence of

Federally listed species.” 60 Fed. Reg. 25,718, 25,719 (May

12, 1995). In connection with Oklahoma’s application, EPA

and FWS complied with section 7(a)(2) and agreed, along

with the State, that FWS would have an opportunity to

“confer on permits which are likely to affect federally

listed species.” 61 Fed. Reg. 65,047, 65,053 (Dec. 10, 1996).

In response to comments, EPA declared that “consultation

conducted on the authorization of a state NPDES program

is consistent with the intent, definitions and the require-

ments of the ESA and CWA,” and that “[t]he approval of a

state program under section 402 of the CWA is a federal

authorization and not simply a review of the state’s

documents. EPA views the approval as ‘discretionary.’” Jd.

at 65,051.

Likewise, before EPA granted Texas’s application,

FWS issued a Biological Opinion that found that the

State’s water quality “standards require that permits be

written in such a manner that would avoid jeopardy to

aquatic and aquatic dependent wildlife (including listed

species)... .” 63 Fed. Reg. 51,164, 51,196 (Sept. 24, 1998).

EPA and FWS also “developed procedures for ensuring the

protection of endangered and threatened species” following

the transfer of authority, including by “facilitat[ing]

coordination among the federal agencies and timely

communication of information and recommendations to

the State.” Jd. at 51,198. In response to public comments,

EPA again stated that “section 7 does apply to its ac-

tion. .. .” Id.

In 2001, after again soliciting public comment, EPA

and FWS jointly published in the Federal Register a

“Memorandum of Agreement” that “addressled] inter-

agency coordination under” the CWA and ESA, NAHB

App. 245, and “ensure[d) that EPA actions meet the

substantive requirements of section 7(a)(2)....” Jd. at 253.

Emphasizing that the “ESA requires the involvement of all

Federal agencies in the protection and recovery of our

Nation’s unique biological resources,” id. at 274, the

agencies confirmed that “EPA’s current practice is to

consult with the Services where EPA determines that

approval of a State’s or Tribe’s application to administer

the NPDES program may affect federally listed species.”

Id. at 260."

* EPA’s compliance with section 7(a)(2) was consistent with

positions it took in cases brought by industry groups in the Fifth and

Tenth Circuits. EPA argued that consultation with FWS is necessary to

“satisfy EPA’s obligations under ESA section 7(aX2),” and that the

contrary position is a “myopic approach [that] ignores the plain

language of ESA section 7(a)(2), the Supreme Court’s expansive reading

of agency action in section 7, the broad regulatory definition of ‘action’

(Continued on following page)

D. EPA's Internally Inconsistent Approach To Section

7(a)(2) When Considerig Arizona’s Application

As the government acknowledges, the administrative

record reflects EPA’s “confusion,” to say the least, concern-

ing its section 7(aX2) obligations in reviewing Arizona’s

transfer application. EPA Br. at 42. In fact, not only was

EPA’s position internally inconsistent, but there were

serious conflicts between EPA and FWS officials who

believed that without appropriate safeguards the transfer

could lead to the extinction of federally protected species.

1. In 2002, Arizona “submitted a request for [EPA's]

approval” to regulate “most discharges of pollutants

subject to the federal NPDES program,” including “storm

water point source discharges,” “industrial wastewater,”

and “discharges from federal facilities.” NAHB App. 543,

and ‘effects of the action’ in the ESA implementing regulations, and

EPA's role in approving state applications.” Brief for the Respondents at

29, 30, American Forest & Paper Ass’n v. EPA, No. 96-60874 (5th Cir.

1997) (hereafter “EPA 5th Cir. Br.”) (reproduced in Addendum to

Respondents’ Court of Appeals’ Reply Brief).

Neither the Fifth nor Tenth Circuits disagreed with EPA's position

that section 7 compliance is mandatory. The Tenth Circuit did not reach

the merits. The Fifth Circuit suggested that section 7(a)(2) does

“require{] EPA to consult with FWS” before making an NPDES transfer

decision, American Forest & Paper Ass’n v. EPA, 137 F.3d 291, 298 (5th

Cir. 1998), but ruled against EPA on the narrower ground that EPA

could not “require” the State to consult with federal agencies regarding

the impact of state-issued permits on endangered species. Jd. at 297.

EPA subsequently explained to the public that it “believes that this case

was wrongly decided,” 64 Fed. Reg. 2,742, 2,746 (Jan. 15, 1999), but

EPA nonetheless complied with it by devising, along with FWS, species

safeguards that did not impose any consultation duties directly on

States. See, e.g., 63 Fed. Reg. 51,164, 51,198 (“EPA and the Services

have developed procedures for ensuring the protection” of species that

“do not impose obligations, procedural or otherwise, on the State”).

550. Arizona also requested that the federal government

fund much of its program. Id. at 567; J.A. 44.

When soliciting public comments, EPA stated that it

would “not make a final decision on [] program approval

until after ... completion of the ongoing consultations

with the [FWS] on effects program approval may have on

endangered or threatened species.” NAHB App. 546. As

before, EPA declared that

the ESA requires federal agencies to consult with

the U.S. Fish and Wildlife Service on the effects

of federal actions on endangered species. EPA

has determined that its action on the AZPDES

program application constitutes a federal action

that is subject to section 7 of the ESA. Section

7(a)(2) of the ESA places a statutory requirement

(separate and distinct from CWA section 402(b))

for EPA to ‘ * * * insure that any action... * * * is

not likely to jeopardize the continued existence of

any endangered species or threatened species’... .

Id. at 548 (emphasis added; ellipses in original).

EPA initiated section 7 consultation by providing FWS

with a “Biological Evaluation” that “discuss|[ed) the effects

of [EPA’s] approval” of the Arizona program, and acknowl-

edged that “all Federally-listed [species] and critical

habitats in, adjacent to, or dependent on all surface waters

in Arizona may be affected by the action.” NAHB App. 587,

614. EPA attached a list of 60 federally listed species that

could be harmed by the transfer. Jd. at 621-23.

EPA recognized that projects requiring NPDES

permits may have “detrimental effect{[s] on Federally-

listed species and habitats” and that an immediate conse-

quence of the transfer decision would be “a reduction in

the number of mechanisms available . . . to protect Feder-

ally-listed species,” i.e., “[iJm changing from a Federal

permitting program to a State permitting program, the

permit-related ESA Section 7 processes for consultation

will no longer apply.” NAHB App. 610, 615. EPA asserted,

however, that various measures would adequately protect

species in the absence of section 7 safeguards. Jd. at 617.

2. If FWS had concurred with this conclusion, the

consultation would have ended at that point. See 50 C.F.R:

§ 402.14(b). But FWS did not agree because its biologists

concluded that, in the absence of additional safeguards,

the transfer would in fact “result in significant effects to

the[] survival and recovery” of various endangered species

“through destruction, degradation, and fragmentation of

their habitats.” J.A. 54; see also id. at 31.

For example, Service biologists explained that FWS

reviews of NPDES permits issued by EPA had been vital

in protecting the Southwestern willow flycatcher, a highly

endangered bird species dependent on river ecosystems in

Arizona. See J.A. 39, 43. Because the Service’s ability to

provide such essential protections would be lost upon

transfer of the NPDES program, Service biologists con-

cluded that, in the absence of agreed-on protections, the

transfer “could have a devastating effect” on survival of

the flycatcher. Jd. at 39. Service biologists expressed

similar concerns about the fate of other animal species,

such as bald eagles and certain endangered fish species.”

* FWS biologists believed that the transfer could harm both

aquatic and upland species that had in fact benefitted greatly from

section 7 consultations on NPDES permits. See, e.g., J.A. 41 (describing

potential adverse impacts on “eagle breeding areas”), id. at 52 (finding

that listed fish species “may be adversely affected”).

FWS scientists also concluded that without additional

safeguards the transfer would “appreciably reduce the

conservation status” of federally protected plants because

[glreat strides in minimizing the disturbance of

construction projects in the range of these species

to provide for their survival and recovery will be

diminished, if not lost ... [T]his action is more

than a shift in program authority; we will lose

our section 7 nexus for consultation, and con-

struction projects ... will destroy important

~—~hhabitat and adversely affect listed species.

J.A. 46 (emphasis added). With regard to the Huachuca

water umbel, an aquatic plant “dependent on steady water

levels for habitat stability,” FWS biologists determined

that “[slection 7 consultations with EPA” on NPDES

permits “have allowed for the development of conservation

measures that minimize the impact of water withdrawals”

in critical habitat but that, in the absence of adequate

protections, the transfer of authority “could compromise

the water quantity in critical habitat, reducing the likeli-

hood of the long-term survival and recovery” of the species.

J.A. 49 (emphasis added).°

* Service biologists also concluded that the transfer could lead to

the rapid extinction of another plant endangered by ongoing habitat

destruction because, .of the species’ dwindling habitat that had been

protected in some manner, nearly half had been “conserved through

conservation measures gained through section 7 consultation with EPA”

on NPDES permits and, “|wJith no conservation measures in place with

EPA and the State” tailored to the plant, the “species will be at risk of

severe decline.” J.A. 47-49. The biologists further found that no other

existing federal or states measures would address adverse effects to

listed plants because the ESA's general prohibition on “taking”

members of a listed species does not apply to plants on private land,

see 16 U.S.C. § 1538(a)2)(B), and there is no Arizona statute or

(Continued on following page)

3. EPA and FWS disagreed on how these serious

impacts should be addressed under section 7(a)(2). How-

ever, in contrast to the post hoc position EPA is now urging

~ i.e., that compliance with section 7(a)(2) “is not required”

on transfer applications under any circumstances, EPA Br.

at 49 — the agencies’ disagreement related to the scope of

the required analysis. EPA officials maintained that, while

they were required to comply with section 7(a)(2), the

Biological Opinion should focus on analyzing adverse

effects over which EPA believed it had statutory authority

under the CWA, i.e., adverse impacts “relating to both

aquatic and upland species if they are water quality-

related.” J.A. 143 (emphasis added).

In contrast, FWS took the position that, once consul-

tation is initiated, the “Service must analyze all potential

effects (i.e., direct, indirect, and cumulative effects),” and

that the “action agency’s ability to control those effects is

irrelevant to the analysis.” J.A. 143. FWS officials further

explained that, if such an analysis yielded a “jeopardy

determination” but the Service and EPA could not devise a

“reasonable and prudent alternative” that would avoid

extinction, EPA or Arizona could seek “an exemption via”

the Endangered Species Committee process. Jd.’

regulation that forbids the destruction of federally listed plants. See

NAHB App. 57.

” See also J.A. 148 (“The indirect effects of future permitted actions

could result in a jeopardy biological opinion on EPA's approval of the

assumption by Arizona.”); id. at 140 (“EPA has backtracked on [its]

commitment to consider both the direct and indirect effects ... [T]hey

will only address impacts to listed species directly related to water

quality.”).

4. The Biological Opinion that resulted from this

interagency dispute is a hybrid of the agencies’ legally

incompatible positions. The Opinion reiterates EPA’s and

FWS’s longstanding recognition that the “proposed ap-

proval” of a State permitting program is a federal “action”

subject to section 7(a)(2), and also that the ESA and CWA

are “consistent” statutory schemes. NAHB App. 82, 84.

Indeed, the document stresses that:

[t]he environmental protection goals of the CWA

contain specific references to protecting ‘fish,’

‘shellfish,’ ‘wildlife,’ and ‘aquatic life,’; these terms

clearly encompass federally listed and proposed

species. Section 101(a) provides as its goal to ‘re-

store and maintain the chemical, physical, and

biological integrity of the Nation’s waters,’ 33

U.S.C. § 1251{a)(2). This goal is consistent with

the ESA’s purpose of providing ‘a means whereby

the ecosystems upon which endangered species

and threatened species depend may be conserved.’

NAHB App. 84 (emphasis added).

The Opinion further states that “we [FWS] have

expressed concerns that the approval will result in a loss

of section 7 consultation-related conservation benefits” for

various species, NAHB App. 111-12, and that the “loss of

conservation benefits as an indirect effect will appreciably

reduce the conservation status” of several species. Id. at

112 (emphasis added); see also id. at 110, 111. The Opinion

also suggests that these anticipated adverse effects should

be addressed under section 7(a)(2) because “/rj/egarding

causation, the FWS uses the ‘but for’ test. This test means

that a Federal action is the cause of an effect if. . . ‘but for’

the action the effect would not have occurred.” NAHB App.

112 (emphasis added). Yet, while recognizing that some

listed species would lose “conservation benefit|s]” that had

proven crucial to their survival, id., and that this loss of

protection would not occur “but for” the transfer decision,

the Opinion fails to analyze whether this impact will in

fact lead to species jeopardy or loss of critical habitat, or

whether the agencies should, as in past consultations,

agree on measures to prevent those impacts.

Instead, several pages after stating that FWS uses a

“but for” test, the Opinion applies a very different causa-

tion rationale to avoid addressing those impacts, asserting

that the “action, as proposed is not likely to jeopardize”

affected species because the “loss of any conservation

benefit is not caused by EPA’s decision to approve the

State of Arizona’s program,” but, rather, by “Congress’

decision” in 1972 to enact section 402(b) of the CWA.

NAHB App. 114, 116. Nonetheless, EPA’s final decision

“approvling] the application” again advised the public that

EPA had completed the “consultation process required by

ESA section 7(a)(2)” and that its “approval of the State

program meets the substantive requirements of the ESA.”

NAHB App. 73 (emphasis added).

E. Proceedings Below

Because EPA conceded that it was required to comply

with section 7(a)(2), respondents brought a straightfor-

ward “arbitrary and capricious” challenge to the adequacy

and logical consistency of the Biological Opinion and EPA’s

reliance on that document. Respondents argued that, as in

past consultations on transfer applications, the Opinion

should at least address how endangered species will in fact

be affected by the transfer and, if jeopardy or critical habitat

destruction will result, either fashion a “reasonable and

prudent alternative” or refer EPA and Arizona to the

Congressionally-mandated exemption process. While

defending its decision, EPA repeatedly advised the court of

appeals that it was not arguing that NPDES transfer

decisions are non-discretionary actions, or that such

decisions may avoid section 7(a)(2) compliance for any

other reason.*

In ruling that EPA’s reliance on the Biological Opinion

was arbitrary and capricious, the court of appeals rea-

soned that the section 7(a)(2) obligation to avoid jeopardy

is coterminous with the duty to consult — i.e., both are

triggered by “any action authorized, funded, or carried out

by such agency” — and

this being the case, the two propositions that un-

derlie the EPA’s action — that (1) it must, under

the [ESA], consult concerning transfers of CWA

permitting authority, but (2) it is not permitted,

as a matter of law, to take into account the im-

pact on listed species in making the transfer de-

cision — cannot both be true. Because the

agency’s decisionmaking was based on contradic-

tory views of the same words in the same statu-

tory provision, the ultimate decision was not the

result of reasoned decisionmaking.

NAHB App. 26-27. While it was unnecessary for the court

of appeals to go beyond this rationale for remanding to

EPA, the court also explained that EPA’s position that it

* See EPA’s Court of Appeals’ Answering Brief, at 31 n.9; see also

J.A. 321-22, 325. Because EPA had recognized that it was required to

comply with section 7(a)(2) and respondents’ sole concern was with the

adequacy of that compliance, respondents, while never conceding that

the CWA transfer criteria were satisfied, did not base their challenge on

them.

was under no obligation to address the actual effects of its

transfer decision was contrary to the language of section

7(aX(2), that provision’s legislative history and patent

purpose, and Hill. The court, however, did not hold that

EPA could not approve the transfer but, rather, remanded

the matter for a “more careful consideration of the actual

protection” that would be afforded by other federal and

state measures following transfer. Jd. at 61.

SUMMARY OF ARGUMENT

1. EPA now agrees that the court of appeals correctly

ruled that EPA’s approach to section 7(a)(2) reflected an

internally inconsistent interpretation of the meaning and

function of the provision. Therefore, in accordance with

established principles of administrative law, the case

should be remanded to EPA for further proceedings,

notwithstanding EPA’s extra-record post hoc effort to

“clarif[y]” its position for the first time in this Court. EPA

Br. at 49.

2. Should the Court nevertheless address whether

section 7(a)(2) applies in this context, petitioners’ position

that section 7(a)(2) has no bearing on NPDES transfer

decisions contradicts the plain language of the ESA, which

provides that EPA must “insure that any action authorized,

funded, or carried out” by EPA is “not likely to jeopardize

the continued existence of species or result in the destruc-

tion or adverse modification” of critical habitat. 16 U.S.C.

§ 1536(a)(2) (emphasis added). In Hill, this Court ruled that

“loJne would be hard pressed to find a statutory provision

whose terms were any plainer.” 437 U.S. at 173. Those

“terms” apply squarely to EPA’s “final action authorizing

Arizona to implement the NPDES program,” 67 Fed. Reg.

79,631, as well as to EPA’s expenditure of federal funds on

the program. Petitioners’ position also flies in the face of

Congress’s response to Hill, which ratified this Court’s

plain language reading while also creating an exemption

process for the specific purpose of resolving any intractable

conflicts between section 7(a)(2) and agency actions under

other statutes. Thus, in sharp contrast to the National

Environmental Policy Act, 42 U.S.C. § 4321 et seq.

(“NEPA”) — which imposes “only procedural requirements

on federal agencies,” Department of Transportation v.

Public Citizen, 541 U.S. 752, 756-57 (2004) - section 7

contains a “flat ban” on agency actions likely to result in

jeopardy to listed species or the “destruction of critical

habitats,” Weinberger v. Romero-Barcelo, 456 U.S. 305,

313-14 (1982), and also sets forth a Congressionally-

mandated process for resolving any conflicts between that

“ban” and agency actions under other statutes.

3. Petitioners’ arguments are predicated on the

demonstrably erroneous premise that it is impossible for

EPA to comply with both section 7(a)(2) and section

402(b)(1) of the CWA, and hence that the agencies (and the

Court) must, in effect, choose sides in a battle of statutory

commands. However, as EPA and FWS have announced to

the public, the “CWA and ESA [are] compatible and com-

plementary” statutes that “contain powerful tools that,

when integrated effectively, will advance the objectives of

both Acts.” NAHB App. 267, 274. Accordingly, as demon-

strated by EPA’s and FWS’s past successful efforts at

compliance with both laws — in which State applications

were approved and sensible steps were taken to safeguard

federally protected species — the federal agencies’ real-world

experience belies any need to read these statues as being

in unavoidable conflict.

4. On close inspection, petitioners are actually

asking the Court to create a gaping loophole in section

7(a)(2) that bears no relationship to the words or extinc-

tion prevention purpose of the provision. Thus, if the

Court were to rule that section 7(a)(2) does not apply

simply because Congress established criteria for EPA to

apply in making transfer decisions (criteria that in fact

encompass a consideration of wildlife concerns) section

7(a)(2) will be gutted, because Congress generally legis-

lates by delineating the factors that agencies consider in

making decisions. But as Hill makes crystal-clear, section

7(a)(2) was enacted so that agencies would also be re-

quired to address endangered species impacts before

taking action. If petitioners believe that is bad public

policy, their proper recourse is with Congress, rather than

asking this Court to rewrite section 7(a)(2).

ARGUMENT

I. THE COURT OF APPEALS CORRECTLY HELD

THAT EPA’S DECISION WAS ARBITRARY AND

CAPRICIOUS AND THE CASE SHOULD BE

REMANDED ON THAT BASIS

A. EPA Now Concedes That Its Approach To

Section 7(a)(2) Was Internally Inconsistent

And Confusing

EPA now agrees that the court of appeals was “cor-

rect” in ruling that EPA’s decision was based on inconsis-

tent interpretations of section 7(a)(2):

[T]he court of appeals was correct in stating that

the no-jeopardy and consultation requirements of

Section 7(a)(2) go hand in hand, and that Section

7(a)(2) does not require federal agencies to consult

about conduct to which the no-jeopardy mandate

does not apply. The court was also correct that

the course of agency proceedings in this case re-

flected a degree of confusion regarding the ESA’s

application to the NPDES transfer decision.

EPA Br. at 42 (emphasis added). Evidently, therefore, the

government concurs with the court below that EPA’s

decision reflects an arbitrary, if not “nonsensical,” view

that EPA “had to consult but had no authority to do

anything concerning the matter about which it had to

consult.” NAHB App. 25-26. Indeed, EPA goes so far as to

characterize its own decision documents as being based on

a “misstatement of law,” EPA Br. at 45, a “misperception”

and “erroneous view” of the meaning of section 7(a)(2), id.

at 46, and a “failure ... to appreciate the full logical

implications” of the agency’s position before the court

below. Jd. at 47.

Ordinarily, such concessions of legal “confusion” and

internal inconsistency should result in the case being

remanded to the agency for “reasoned decisionmaking.”

Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins.

Co., 463 U.S. 29, 52, 56-57 (1983) (“State Farm”). As the

Court has explained:

liJf the record before the agency does not support

the agency action, if the agency has not consid-

ered all relevant factors, or if the reviewing court

simply cannot evaluate the challenged action on

the basis of the record before it, the proper course,

except in rare circumstances, is to remand to the

agency for additional investigation or explana-

tion.

Florida Power & Light Corp. v. Lorion, 470 U.S. 729, 744

(1985) (emphasis added); see also SEC v. Chenery, 332 US.

194, 196-97 (1947) (“If the administrative action is to be

tested by the basis on which it purports to rest, that basis

must be set forth with such clarity as to be understand-

able.”).”

B. EPA Cannot Avoid A Remand Based On Its

Extra-Record Post Hoc Explanation

Here, petitioners present “no special circumstances,”

Gonzales v. Thomas, 547 U.S. 183, 126 S. Ct. 1613, 1615

(2006), that justify deviating from what the government

acknowledges are “established principles” of administra-

tive law. EPA Br. at 48 n.17. To the contrary, EPA seeks to

sidestep these principles by resorting to the kinds of “‘post

* As noted earlier, the record reflects not only a now-conceded

incongruity in EPA’s view on the applicability of section 7(a)(2) as a

whole, but also a related inconsistency in the Biological Opinion

concerning how the “effects” of an action should be analyzed once

section 7(a\(2) is triggered. The Opinion says that FWS uses a “but for”

test in assessing such effects, NAHB App. 112, and that statement is

consistent with other explanations of the Service's longstanding

approach. See 51 Fed. Reg. 19,926, 19,932 (June 3, 1986) (preamble to

ESA regulations). But the Opinion then applies a different “legal cause”

analysis, EPA Br. at 25 (emphasis added), to avoid evaluating all of the

actual impacts on endangered species. This discordance affords an

additional basis on which the case should be remanded on arbitrary and

capricious grounds. See, eg., New England Coalition on Nuclear

Pollution v. NRC, 727 F.2d 1127, 1130 (D.C. Cir. 1984) (Scalia, J.)

(where an agency may choose between two approaches to a problem, the

agency cannot say it is “adoptling) one and [then] apply the other. To do

so is the essence of arbitrary and capricious action.”) (internal quotation

omitted).

hoc rationalizations’” the Court has long held “to be an

inadequate basis for review” of agency action. Citizens to

Preserve Overton Park v. Volpe, 401 U.S. 402, 419-20

(1971) (queting Burlington Truck Lines v. U.S., 371 U.S.

156, 168-69 (1962)).

EPA contends that the Court need not remand be-

cause the “federal agencies have since” — i.e., “since” the

agency decision under review was made - “clarified their

understanding of the legal principles that govern in this

setting.” EPA Br. at 42. This “clarification” - which is

actually a reversal of the agencies’ prior policy — is that

section 7(a)(2) compliance is “not required in this context.”

Id. at 49. The government acknowledges that this newly-

minted argument conflicts with EPA’s declarations in

connection with past NPDES transfer decisions that

section 7(a)(2) compliance is mandatory, as well as with

EPA's published positions “|a]t both the beginning and the

end of the consideration of Arizona’s transfer application.”

Id. at 6, 44. Nonetheless, EPA maintains that because it

has now provided this Court with the “very clarification

that might have occurred if the court of appeals had ...

remanded for further administrative proceedings,” the

Court should decide the case based on EPA’s new “under-

standing” of its statutory duties. Jd. at 49 (emphasis

added).

The Court should decline this invitation to dispense

with fundamental principles of administrative law and

appellate review. EPA’s purported “clarification” took place

not only long after EPA decided to transfer authority to

Arizona, but many months after the court of appeals

issued its ruling based on the administrative record.

Indeed, the agency’s revised position — as embodied in an

October 2006 unpublished “exchange of letters,” EPA Br.

at 37-38 — was hastily developed during the time that EPA

was asking this Court for extensions of time to file its

petition for certiorari. See EPA’s 9/26/06 Application for a

Further Extension of Time, at 5. Plainly, having lost below

— including on the now-conceded ground that its approach

to section 7(a)(2) was internally inconsistent — EPA set out

to manufacture a new “clarified” position that the agency

now seeks to substitute in this Court for the admittedly

“confus[ing]” rationale invoked in the administrative

proceeding and presented to the court of appeals. EPA Br.

at 42.

There are good reasons, however, why this Court has

ruled that such post hoc explanations “cannot serve as a

sufficient predicate for agency action.” American Textile

Mfrs. Inst., Inc. v. Donovan, 452 U.S. 490, 539 (1981). They

are

incompatible with the orderly functioning of the

process of judicial review. This is not to depre-

cate, but to vindicate the administrative process,

for the purpose of the rule is to avoid ‘propel(ling)

the court into the domain which Congress has set

aside exclusively for the administrative agency.’

Burlington Truck Lines, 371 U.S. at 168, 169 (internal

citation omitted).

This interest in protecting the “orderly functioning of

the process of judicial review,” id., is at its zenith in this

case because the letters on which EPA is now relying were

not available to either the court of appeals or the parties

in the court below. In other words, EPA has compounded

its administrative law violation by also disregarding this

Court’s directive that the Court ordinarily refrains from

even considering facts and materials that are “not part of

the record” compiled in the court below “[bjecause this

Court must affirm or reverse upon the case as it appears

in the record... .” Witters v. Washington Dep't of Services

for the Blind, 474 U.S. 481, 488 n.5 (1986); see also Wygant

v. Jackson Board of Education, 476 U.S. 267, 278 n.5

(1986).”°

C. EPA’s “Harmless Error” Argument Is Base-

less

1. EPA also argues that a remand is unnecessary

because “‘[i]Jn administrative law ... there is a harmless

_ ™ EPA's reliance on Auer v. Robbins, 519 U.S. 452, 461 (1997), for

the novel proposition that the Court should not only consider but

“defer” to the agency's post hoc explanation, EPA Br. at 38, is misplaced.

In Auer, the Court did not consider a challenge to an agency action but,

rather, resolved litigation between two private parties that turned in

part on the meaning of a regulation previously issued by the Depart-

ment of Labor. Accordingly, the Court requested the Secretary of Labor

to file an amicus brief explaining how the agency’s regulations applied

to the case. Aver, 519 U.S. at 461. In relying on the interpretation it

had requested, the Court explained that, under the “circumstances of

this case,” the “Secretary's position is in no sense a ‘post hoc rationaliza-

tio[n)’ advanced by an agency seeking to defend past agency action

against attack.” Id. at 462 (internal quotation omitted; emphasis

added). Here, in contrast, the rapid-fire “exchange of letters” that was

evidently engineered for the purpose of bolstering EPA’s position in this

Court constitutes the quintessential post hoc effort to “defend past

agency action against attack.” See EPA App. 93a-110a (indicating that

EPA sent ‘letters on October 13, 2006, and received nearly identical

responses from FWS and the National Marine Fisheries Service four

and five days later, and that these responses were received less than

one week before EPA filed its petition for certiorari). In this connection,

it is also noteworthy that the Alaska application the letters purport to

address has not even been noticed for public comment in the Federal

on various grounds. See http://www.dec.state.ak.us/water/npdes/pdfs/

- WG_mtg_13_Handout_5.pdf.

error rule,” EPA Br. at 45 (quoting PDK Labs., Inc. v.

United States DEA, 362 F.3d 786, 799 (D.C. Cir. 2004)),

and “[rlespondents [|] were not prejudiced by EPA’s errone-

ous view that the consultation was required by Section

7(aX2).” EPA Br. at 46. Petitioners made no such “harm-

less error” argument in the court of appeals, and hence it

should be deemed waived. See, e.g., Hormel v. Helvering, 312

U.S. 522, 556 (1941). But even if the Court entertains this

new argument, respondents have in fact been severely

“prejudiced” by EPA’s shifting, inconsistent positions on its

section 7(a)(2) responsibilities, as well as by its belated

attempt to clarify its position for the first time in this Court.

In addition to the patent unfairness of putting re-

spondents in the position of having to address in this

Court a “clarified” explanation that was not raised in

either the administrative process or the court below, EPA

is effectively nullifying respondents’ rights to participate

in administrative proceedings concerning Arizona’s appli-

cation, and particularly respondents’ rights under EPA’s

own regulations to comment on NPDES transfer applica-

tions. See 40 C.F.R. § 123.61(b). Because EPA, both in past

published pronouncements and in soliciting comments on

Arizona’s transfer application, declared that EPA is re-

quired to comply with section 7(a)(2), EPA Br. at 44, under

established administrative law principles the agency's

revised understanding of its legal obligations should at

least be exposed to public comment before being adopted

and subjected to judicial review. See, e.g., Alaska Profes-

sional Hunters Ass’n v. FAA, 177 F.3d 1030, 1034 (D.C. Cir.

1999) (“Once an agency gives its regulations an interpreta-

tion, it can only change that interpretation as it would

formally modify the regulation itself: through the process

of notice and comment rulemaking.”) (internal quotation

omitted).

2. Moreover, this is hardly a case in which further

agency proceedings — including EPA entertaining public

comment on its modified position — would be a pointless

exercise. Rather, as might be expected from a hurried,

litigation-driven “clarification,” the “exchange of letters”

avoids important issues that could — and should — be

addressed by EPA in the first instance through remanded

administrative proceedings. The agency’s consideration of

these issues may persuade it to adopt a different approach

and would at least result in a more complete record for

judicial review.

For example, as noted, EPA not only “authori[zed]”

and “approved” Arizona’s application, NAHB App. 69, 76,

but, at Arizona’s request, EPA also committed substantial

federal funds to the Arizona NPDES program. See J.A. 53

(“EPA has committed to funding [the Arizona program] for

the next three years”). While FWS maintained that EPA’s

funding of the State program was an independent basis for

triggering section 7(a)(2) duties, see 16 U.S.C. § 1536(a)(2),

this issue was largely of academic significance in view of

EPA’s concession that consultation was required by au-

thorization alone. See J.A. 44 (EPA disagreed that it must

consult on “funding” of Arizona’s program but conceded an

obligation to consult on “delegation of the program”).

However, in view of the agencies’ “clarified” position

that EPA’s “authorization” was insufficient to require

compliance with section 7(a)(2), EPA’s funding of Arizona’s

program becomes a far more crucial consideration, because

section 7(a)(2) applies to “any action ... funded” by a

federal agency. 16 U.S.C. § 1536(a)(2). At the very least,

given EPA’s belated reversal of its longstanding position

that program authorization alone is an adequate basis for

section 7(a)(2) compliance, a remand should at least

address whether, in the agencies’ view, authorization along

with federal funding is sufficient to trigger full section

7(a)(2) compliance.

3. Another issue that respondents (if afforded the

opportunity) would urge EPA to address on remand is how

EPA reconciles its revised position regarding section

7(a)(2) with the manner in which the agency has dealt

with other overarching legal obligations imposed on

federal agencies but not enumerated in the transfer

provision. Thus, EPA’s post hoc position is that section

7(a(2) should be ignored because “[njone of the nine

criteria contemplate or provide for consideration of poten-

tial effects to listed species [or] critical habitat.” EPA App.

97a. In reality, as previously explained, the CWA criteria

do “provide for consideration” of wildlife impacts and,

indeed, the Biological Opinion recognizes that the CWA’s

“specific references to protecting ‘fish,’ ‘shellfish,’ ‘wildlife,’

and ‘aquatic life’. . . clearly encompass federally listed and

proposed species.” NAHB App. 84.

Even aside from this conflict between EPA’s post hoc

position and the Biological Opinion actually before the

Court, EPA’s new explanation raises the important ques-

tion of whether the agency is acting consistently with

other statutory and legal obligations with far less of a

relationship to the transfer criteria than federally pro-

tected wildlife. See Natl Cable and Telecomm. Ass’n v.

Brand X Internet Services, 545 U.S. 967, 981 (2005)

(agency’s “[u]nexplained inconsistency” may afford a basis

for “holding an interpretation to be an arbitrary and

capricious change from agency practice”). For example,

when announcing its decision on the Arizona application,

EPA explained that the National Historic Preservation

Act, 16 U.S.C. § 470(f) (“NHPA”), “requires Federal agen-

cies to take into account the effects of their undertakings

on historic properties.” NAHB App. 73. Although such

“effects” are not mentioned in the CWA transfer criteria,

EPA explained that it had complied with the “coordination

process” required by the NHPA. 7d. at 74. Similarly, in

responding to comments submitted by the Inter-Tribal

Council of Arizona, EPA stated that, “consistent with the

federal trust responsibility” towards Native-American

tribes, EPA would take steps, post-transfer, to address

“matters that arise under the [Arizona] program which

may affect Tribes, including issues related to permits that

may have a potential adverse effect on tribal historic

properties.” J.A. 203. EPA did not suggest that it could

disregard the “trust responsibility” towards Native-

Americans because it is not enumerated in the CWA.

As now “clarified” therefore, EPA’s anomalous position

appears to be that section 7(a)(2) is the only legal obliga-

tion imposed on the federal government that EPA should

ignore in making NPDES transfer decisions — although

Congress intended to “afford[] endangered species the

highest of priorities. . . .” Hill, 437 U.S. at 194. At the very

least, respondents are indeed “prejudiced by the absence of

an opportunity” even to raise in remanded administrative

proceedings these and other significant issues implicated

by EPA’s conceded confusion concerning section 7(a)(2) and

the agency’s extra-record effort to cure that problem in

this Court. Gerber v. Norton, 294 F.3d 173, 184 (D.C. Cir.

2002).

In sum, because EPA’s decision was based on inconsis-

tent views of section 7(a)(2), the case should have been

remanded for further administrative proceedings, and it

was unnecessary for the court below to address the

broader statutory construction issue. See, e.g., Air Courier

Conference of Am. v. Am. Postal Workers Union, 498 U.S.

517, 531-32 (1991) (Stevens, J., concurring) (“Faithful

adherence to the doctrine of judicial restraint provides a

fully adequate justification for deciding this case on the

best and narrowest ground available.”); PDK Labs. 362

F.3d at 799 (Roberts, J., concurring in the judgment)

(applying the “cardinal principle of judicial restraint” that

“if it is not necessary to decide more, it is necessary not to

decide more”).

Il. IN MAKING TRANSFER DECISIONS, EPA MUST

COMPLY WITH SECTION 7(a)(2)

Because EPA now concedes that the court of appeals

was correct in ruling that the consultation and substantive

requirements of section 7(a)(2) “go hand in hand,” EPA Br.

at 42, respondents and EPA agree that EPA must either

comply with that provision in its entirety or not at all. See

id. EPA’s “clarified” answer is not at all. As the agency

recognizes, the “logical” implication of its argument is that

a transfer to a State could be certain to lead to extinction

of one or more federally protected species, and yet neither

the procedural nor substantive safeguards of section

7(a)(2) would ever come into play. EPA Br. at 14, 42, 47.

Here, for example, although the transfer could, without

further safeguards, prove “devastating” to survival of the

few remaining Southwestern willow flycatchers, J.A. 39, or

lead to the “severe decline” of endangered plants, id. at 49,

petitioners’ position is that the agencies need not consult

about such dire impacts or do anything to prevent them

even if simple solutions are at hand.

This is not a “logical” or even a plausible reading of

section 7(a)(2). EPA Br. at 47. To the contrary, adopting

petitioners’ approach would require the Court to engage in

“interpretive acrobatics,” Rene—v—American-Arab Anti-

Discrimination Committee, 525 U.S. 471, 482 (1999), and

cast aside both plain statutory language and the “institu-

tionalized caution” that Congress intended when federal

agencies take actions that affect listed species. Hill, 437

U.S. at 194.

A. Compliance With Section 7(a)(2) Is Required

By The Plain Language Of Section 7(a)(2),

This Court’s Ruling In Hill, And Congress’s

Subsequent Ratification Of That Ruling

In view of the “text and structure” of section 7, Gonza-

les v. Oregon, 546 U.S. 243, 126 S. Ct. 904, 910 (2006),

Hill’s reading of that provision, and Congress’s subsequent

creation of the Endangered Species Committee to address

conflicts, petitioners’ contention that the ESA has no

bearing on NPDES transfer decisions is simply unten-

able."

" Since “traditional tools of statutory construction” establish that

EPA must comply with section 7(a)(2), there is no need for the Court to

determine whether the unusual circumstances of this case warrant any

deference to the agencies’ inconsistent approach to the provision.

Chevron, U.S.A. v. Natural Resources Defense Council, 467 U.S. 837,

843 n.9 (1984). In any event, even if it were appropriate to consider the

extra-record letters, those documents would be entitled to little if any

deference. See United States v. Mead Corp., 533 U.S. 218, 228 (2001)

(amount of deference based on “the degree of the agency’s care, its

consistency, formality,” and related factors); Christensen v. Harris

County, 529 U.S. 576, 587 (2000) (denying Chevron deference to agency

opinion letter).

1. Plain Language Of Section 7(a)(2)

While EPA asserts that section 7(a)(2) does not “un-

ambiguously” apply, EPA Br. at 20, petitioners largely

ignore the provision’s plain language, which fits this case

perfectly. Section 7(a)(2) provides, in pertinent part, that:

[eJach federal agency shall, in consultation with

- and with the assistance of the Secretary, insure

that any action authorized, funded, or carried out

by such agency [| is not likely to jeopardize the

continued existence of any endangered species or

threatened species or result in the destruction or

adverse modification of [critical] habitat of such

species. ...

16 U.S.C. § 1536(a)(2) (emphasis added).

EPA is a “federal agency” and its self-described deci-

sion “authorizing Arizona to implement the NPDES

program” surely falls within the “any action authorized ...

by such agency” language. See Dep’t of Hous. and Urban

Dev. v. Rucker, 535 U.S. 125, 131 (2002) (“the word ‘any’

has an expansive meaning, that is, ‘one or some indis-

criminately of whatever kind’”) (internal citation omitted);

Webster’s New World Dictionary (1990) (“authorize”

means “to give official approval to” and “to give power or

authority to”); see also Bennett, 520 U.S. at 164-65 (phrase

“any person may commence a civil suit” in the ESA’s

citizen suit provision is “an authorization of remarkable

breadth” that should be taken “at face value”).

Accordingly, if section 7(a)(2) is interpreted in accor-

dance with its ordinary meaning, the provision “requires

federal agencies to ensure that none of their activities ...

will jeopardize the continued existence of endangered

species ‘or result in the destruction or modification’” of

critical habitat. Sweet Home, 515 U.S. at 692 (emphasis

added; internal citation omitted). In addition, because the

Arizona program is receiving substantial federal funds

and, indeed, the transfer would likely not have even

occurred in the absence of such funding, see J.A. 200-01,

the plain terms of section 7(a)(2) apply for that reason as

well. See also 50 C.F.R. § 402.02 (defining “[a]ction” for

purposes of section 7 as “all activities or programs of any

kind authorized, funded, or carried out, in whole or in

part, by Federal agencies”) (emphasis added).”

2. Statutory Context

The “specific context in which that language lof

section 7(a)(2)] is used,” Robinson v. Shell Oil Co., 519 U.S.

337, 341 (1997), makes even clearer that section 7(a)(2)

means what it says, because another subsection contains

the very limitation petitioners are asking this Court to

read into section 7(a)(2). Thus, section 7(a)(l1) of the

statute separately provides that

federal agencies shall, in consultation with and

with the assistance of the Secretary, utilize their

authorities in furtherance of the purposes of this

” That petitioners’ position distorts the statutory language is also

illustrated by EPA’s assertion that, “by its own terms, Section 7(a\2)

directs agencies to ‘insure’ only that their own actions are not likely to

be the cause of jeopardy.” EPA Br. at 27 n.8 (emphasis in original). That

approach reads federally “authorized” and “funded” activities out of the

provision, and also overlooks the fact that section 7 expressly refers to

federa! actions involving a “permit or license applicant.” 16 U.S.C.

§ 1536(b\ 1)(B); see also NAHB App. 75 (explaining that EPA has “long

considered a determination to approve or deny a State” NPDES

transfer request to be a “license” decision that is the product of an

“adjudication”.

‘chapter by carrying out programs for the conser-

vation of endangered species and threatened spe-

cies.

16 U.S.C. § 1536(a)(1) (emphasis added).

Hence, section 7(a)(1) imposes an affirmative obliga-

tion on federal agencies to implement “programs for the

conservation” — i.e., recovery, see 16 U.S.C. § 1532(3) — of

listed species, but that obligation is expressly limited to

agencies’ use of their own “authorities.” In contrast, the

section 7(a)(2) prohibitions on jeopardy and critical habitat

destruction apply to “any ... action authorized, funded, or

carried out” by an agency. In other words, section 7(a)(1)

creates a more far-reaching “conservation” duty but does

so with regard to a narrower range of agency conduct.

When these subsections are viewed together, petition-

ers’ contention that section 7(a)(2) is implicated only by

“federal agencies’ exercise of existing discretionary author-

ity,” EPA Br. at 15, runs roughshod over well-entrenched

rules of statutory construction. First, “‘[w]here Congress

includes particular language in one section of a statute but

omits it in another section of the same Act, it is generally

presumed that Congress acts intentionally and purposely

in the disparate inclusion or exclusion.” Russello v. United

States, 464 U.S. 16, 23 (1983) (internal citation omitted)

(affording statutory phrase its broad plain language

meaning because a “succeeding subsection” had the same

limitation the Court was being asked to read into the

provision at issue; “[hJad Congress intended to restrict”

the provision in the same manner, it “presumably would

have done so expressly as it did in the immediately follow-

ing subsection”). Therefore, the short answer to petition-

ers’ overarching contention that section 7(a)(2) should, in

effect, be judicially rewritten to say that agencies need

‘only “utilize their authorities” to avoid jeopardy or critical

habitat destruction, see EPA Br. at 15, is that Congress

knew how to, but simply “did not write the statute that

way.” Russello, 464 U.S. at 23.”

By arguing that the prohibitions in section 7(a)(2)

apply only to an agency’s use of its “existing authority,”

EPA Br. at 15, rather than “any [agency] action author-

ized, funded, or carried out,” as Congress mandated,

petitioners’ approach also contravenes the “‘cardinal

principle of statutory construction ... [that] [i]t is [the

Court’s] duty to give effect, if possible, to every clause and

word of a statute... .’” Bennett, 520 U.S. at 173 (internal

citation omitted). This is because the section 7(a)(1) duty

to “conserve” listed species necessarily subsumes the

substantive prohibitions embodied in section 7(a)(2), i.e.,

an agency cannot “conserve” a listed species while also

causing its extinction. See Sierra Club v. U.S. Fish and

Wildlife Service, 245 F.3d 434, 441-42 (5th Cir. 2001)

* Petitioners assert that legislative history counsels in favor of

inserting into section 7(a)(2) the “utilize their authorities” limitation

that Congress omitted. EPA Br. at 15. Even if the Court were free to

“read|] words or elements into [section 7(a)(2)] that do not appear on its

face,” Bates v. United States, 522 U.S. 23, 29 (1997), the legislative

history actually reflects, as the decision below explains, that the broad

scope of the jeopardy prohibition “was, as one would expect, deliberate.”

NAHB App. 34. Thus, Congress specifically intended to impose a

“further require|ment]” on agency “action|[s]” that goes beyond agencies’

duty to “use their authorities in order to carry out programs” for the

recovery of endangered species. 1973 House Report, ESA Leg. Hist. at

153 (emphasis added); see also 51 Fed. Reg. 19,926, 19,934 (FWS

explanation that section 7(a)(1) “authorize[s] Federal agencies to factor

endangered species conservation into their planning processes,” and

- that “[iJn contrast, section 7(aX2) contains the mandatory ‘jeopardy’

standard” and the “ultimate barrier past which Federal actions may not

proceed” without an exemption from the Endangered Species Commit-

tee) (emphasis added).

(“‘{clonservation’ is a much broader concept than mere

survival”). As a consequence, unless section 7(a)(2) is read

to apply to “any [federal] action authorized, funded, or

carried out” - as Congress said — the provision is mere

“surplusage.” Sweet Home, 515 U.S. at 698 (“unless the

statutory term ‘harm’ [in the ESA] encompasses indirect

as well as direct injuries, the word has no meaning that

does not duplicate the meaning of other words that § 3

uses to define ‘take’ ”).

3. TVA v. Hill

While petitioners assert that Hill “had no occasion to

address the question presented here,” EPA Br. at 16, the

federal agency in Hill advanced essentially the same

arguments being made by EPA, albeit in a different factual

context, and the Court’s reasons for rejecting those argu-

ments apply with full force here.

In Hill, the agency argued that the section 7 jeopardy

prohibition did not apply to a dam that had already cost

“more than $ 100 million dollars” in public funds, was

“near completion” when the ESA was enacted, 437 U.S. at

172, 174, 184, and for which Congress had intentionally

“continued appropriations ... with full awareness of the

[endangered species] problem” posed by the action. /d. at

166. Indeed, Congress had specifically appropriated funds

“for completion” of the dam and “relocation of the snail

darter,” the endangered species at issue. Jd. at 171.

In that factual context, TVA argued that the phrase

“actions authorized, funded, or carried out” should not be

afforded its plain meaning but, rather, should be limited tc

only those actions “with respect to which the agency has

reasonable decision-making alternatives before it.” Pet. Br

at 26, Tennessee Valley Authority v. Hill, No. 76-1701 (filed

Jan. 26, 1978) (“TVA Br.”) (emphasis added); see also id.

(“the ‘actions’ referred to are not all the actions that an

agency can ever take, but rather actions that the agency is

deciding whether to authorize, to fund, or to carry out”)

(emphasis added). Therefore, TVA urged the Court to

reject an “over-literal construction” of section 7. Jd. at 29,

39."

While the dissent endorsed the view that the jeopardy

prohibition should apply only to actions an “agency is

deciding whether to authorize, to fund, or to carry out,” 437

U.S. at 205 (Powell, J.) (emphasis in original), Chief Justice

Burger’s majority opinion held that this reading of the

statute was contrary to the “ordinary meaning of [the]

plain language,” which the Court construed as “com-

mand|[ing] federal agencies” not to take actions that in fact

result in jeopardy to species or destruction of critical

habitat. Jd. at 173; see also id. at 188 (“ijn fact, there are

no exemptions in the [jeopardy prohibition] for federal

agencies”). The Court also found this “ordinary meaning”

consistent with the legislative history, particularly the fact

“ EPA's asserted distinction between this case and Hill — that Hill

dealt with “agency policy judgments concerning the appropriate

exercise of discretionary authority,” EPA Br. at 16 (emphasis in original)

— misstates both cases. In making NPDES transfer decisions, EPA has

“discretionary authority” under the CWA, particularly with regard to

wildlife-related impacts. See supra at 8-9. Moreover, the government's

position in Hill was that TVA did not have “decision-making alterna-

tives” because of Congress’s “determination that this project should be

completed” and the dam was nearly complete. TVA Br. at 29, 36. In that

connection, any notion that TVA had some inherent “discretion” to

refuse to spend funds that Congress had appropriated for completion of

the dam is mistaken. See Train v. New York City, 420 U.S. 35, 43-45

(1975) (federal agencies lack discretion to avoid spending appropriated

funds on policy grounds).

that the bills crafted by Congress were designed td both

“prohibit [a] federal agency from taking action which does

jeopardize the status of endangered species” and “fur-

thermore,” to direct each agency to “utilize [its) authorities

for carrying out programs” for the conservation of listed

species. Hill, 437 U.S. at 179-80 (emphasis in original;

internal quotation omitted). Accordingly, the Court’s ruling

confirms that it has been clear from the beginning of the

Act that the jeopardy prohibition applies, as the plain

language provides, to all “action{s]” authorized, funded, or

carried out by an agency and not simply to agencies’

decisions on how to use their own “authorities.” .

Indeed, the Court further explained that the ESA’s

predecessor statutes “qualified the obligation of federal

agencies by stating that they should seek to preserve

endangered species only ‘insofar as is practicable and

consistent with thelir] primary purposes,” Hill, 437 U.S.

at 181 (internal citation omitted), and that it was “very

significant” that, as enacted, the ESA “carefully omitted

all of the[se] reservations” and deleied “all phrases which

might have qualified an agency’s responsibilities” to avoid

actions that result in extinction. Jd. at 182. Accordingly,

the Court ruled that Congress’s decision to adopt “strin-

gent, mandatory” language, id. at 183, reflected “an

explicit congressional design to require agencies to afford

first priority to the declared national policy of saving

endangered species,” and that the “pointed omission of the

type of qualifying language previously included in endan-

gered species legislation reveals a conscious decision by

Congress to give endangered species priority over the

‘primary missions’ of federat agencies.” Id. at 185 (empha-

sis added). Hill, therefore, clearly stands for the proposi-

tion that agencies cannot escape the section 7(aX2

prohibitions merely by arguing that Congress assigned

them conflicting responsibilities. See also id. at 184

(“‘(T]he agencies of Government can no longer plead that

they can do nothing about it. They can, and they must. The

law is clear.’”) (emphasis in original) (quoting 119 Cong.

Rec. 42913 (1973) (Rep. Dingell)).

4. Congress’s Ratification Of Hill And Crea-

tion Of The Endangered Species Commit-

tee To Resolve Conflicts Between Section

7(a)(2) And Other Statutory Duties

In the 1978 amendments, Congress took two steps

that are also fatal to petitioners’ position. First, Congress

ratified Hill’s plain language ruling regarding the scope of

the section 7 prohibition on jeopardy and destruction of

critical habitat. Second, Congress created the Endangered

Species Committee for the precise purpose of resolving the

kind of conflict that petitioners (erroneously) insist exists

between section 7(a)(2) and the CWA transfer provision.

As explained in the 1978 House Report, Congress

understood the ruling in Hill as “indicatling] that the

pointed omission of any type of qualifying language in

[section 7 of] the statute revealed congressional intent to

give the continued existence of endangered species priority

over the primary missions of Federal agencies.” 1978

House Report, ESA Leg. Hist. at 734. The Report further

explained that Congress accepted this construction of

section 7 as “requirling] all federal agencies to consult

with the Department of the Interior . .. when any of their

actions may affect endangered species,” and that “whether

a particular activity violates Section 7 depends on the type

and degree of impact that the activity will have on the species

or its habitat.” Jd. at 735 (emphasis added). Accordingly,

rather than respond to Hill by qualifying the jeopardy

prohibition with the kind of limiting language in section

7(a)(1), Congress reenacted the prohibition without any

such restriction. See Pub. L. 95-632, 92 Stat. 3753, ESA

Leg. Hist. at 648.

Instead, to “introduce some flexibility into the Act,”

Congress enacted “a procedure through which Federal

agencies may be considered for an exemption from the Act’s

mandate that they not jeopardize the continued existence”

of listed species. 1978 House Report, ESA Leg. Hist. at 727

(emphasis added). Accordingly, the “basic premise” of

Congress’s response to Hill was that “the integrity of the

interagency consultation process designated under section

7 of the Act be preserved,” and that only “in those in-

stances where the consultation process has been ex-

hausted and a conflict still exists,” the Endangered Species

Committee shall consider granting an exemption for a

federal action. 1982 Senate Report, NAHB App. 532

(emphasis added).

Contrary to petitioners’ assertion that the exemption

process is somehow foreclosed when there are “legal

constraints on agency power to protect species,” EPA Br. at

29, Congress specifically anticipated that the Committee

would address conflicts between section 7(a)(2) and the

agency's “jurisdiction” to protect species under its own

authorities. See 1978 House Report, ESA Leg. Hist. at 746

(the Committee “should focus on a wider variety of alter-

natives [than the consultation process]. Their search

should not be limited to original project alternatives or the

acting agency’s jurisdiction.”) (emphasis added). Further

in granting an exemption, the Committee - which, once

again, is composed of high-ranking federal officials as wel

as a representative of each “affected State” — is authorizec

to establish such “mitigation and enhancement measures

. aS are necessary and appropriate to minimize the

adverse effects of the agency action” on listed species

irrespective of whether such measures are within the action

agency's statutory authority. 16 U.S.C. §§ 1536(e)(1)(3),

(h)(1)(B).

Accordingly, this is the paradigmatic case in which a

“‘Sudicial interpretation[] settled the meaning of an

existing statutory provision,” and Congress then mani-

fested its “‘intent to incorporate’” that interpretation into

the statutory scheme. Merrill Lynch, Pierce, Fenner &

Smith v. Dabit, 547 U.S. 71, 126 S. Ct. 1503, 1513 (2006)

(internal citation omitted). Moreover, application of that

principle is “particularly apt here,” id., because Congress

created a specific process for addressing any irreconcilable

conflicts between section 7(a)(2) and agency actions under

other statutory schemes.

B. Petitioners’ Remaining Arguments Are Base-

less

1. Petitioners argue that section 7(a)(2) does not

“impliedly repeal{]” the CWA’s-transfer provision. EPA Br.

at 19. As EPA acknowledges, however, “‘[wjhen two

statutes are capable of co-existence, it is the duty of the

courts, absent a clearly expressed congressional intention

to the contrary, to regard each as effective.’” Id. at 20

(quoting Morton v. Mancari, 417 U.S. 535, 551 (1974)); see

also Watt v. Alaska, 451 U.S. 259, 266-67 (1981) (courts

should adopt interpretations that “give effect to each” law

“while preserving their sense and purpose”).

Petitioners’ approach makes no genuine effort to “give

effect to each” of the laws at issue. To the contrary, par-

ticularly as now “clarified,” EPA’s position is that the

Court should hold that, although the plain terms of section

7(a)(2) surely apply to EPA’s “final action{s] authorizing”

State NPDES programs, NAHB App. 76, EPA may never-

theless disregard section 7(a)(2)’s consultation require-

ment and substantive prohibitions. That argument

obliterates, rather than gives effect to, the language and

purpose of section 7(a)(2).

There is no legal or practical justification for decimat-

ing section 7(a)(2) in this manner. Rather, the most

straightforward way of giving effect to both the ESA and

CWA - which EPA and FWS have previously recognized as

“compatible and complementary” statutory schemes,

NAHB App. 274, with “consistent” wildlife “protection

goals,” id. at 84 — is to do what the agencies successfully did

for many years before their reversal of position: use the

section 7 consultation process to devise reasonable methods

for ameliorating post-transfer impacts on federally listed

species of concern to Service biologists. Petitioners proffer

no reason whv this common-sense approach, which has

already furthered the objectives of both statutes, cannot

also work here or with regard to any other applications.”

* Indeed, in Hill the Court observed that Congress “foresaw that

§ 7 would, on occasion, require agencies to alter” actions unrelated to

environmental protection objectives. Hill, 437 U.S. at 186-87 (citing as

an example “Air Force practice bombing” activities that were affecting

whooping cranes). Accordingly, it makes no sense for EPA to contend

that it must disregard the provision when acting under a “complemen-

tary” conservation statute. NAHB App. 274; see also 16 U.S.C. § 1531(c

(declaring the “policy of Congress that Federal agencies shall] cooperate

(Continued on following page)

However, even if FWS were ultimately to conclude

that transfer to Arizona (or another State) would in fact

result in jeopardy or destruction of critical habitat and

that EPA cannot remedy the problem consistent with its

CWA duties that would sti// not necessitate an “implied

repeal” analysis. Thus, Congress itself has established the

legal mechanism for “giving effect” to both statutes under

such circumstances by providing that EPA and/or the

State may invoke the Endangered Species Committee

exemption process.”

2. Also misplaced is petitioners’ reliance on a FWS

regulation that provides that “section 7... appl[ies] to all

actions in which there is discretionary Federal involvement

or control.” 50 C.F.R. § 402.03 (emphasis added). The

simple answer is that EPA repeatedly stated in the court

below that it did not rely on that regulation in making its

decision. See supra at n.8; see also NAHB App. 43 n.19.

EPA cannot now contend that the Court should sustain the

transfer decision on the basis of a regulation that the

agency conceded had nothing to do with its action under

review. See Chenery, 332 U.S. at 196 (courts “must judge

with State and local agencies to resolve water resource issues in concert

with conservation of endangered species”) (emphasis added).

* Although the ESA and CWA can and should be harmonized, even

if they were found to conflict unavoidably, the correct result would not

be for the Court simply to disregard section 7(a)(2), as petitioners insist.

Rather, since the “text of Section 7(a)(2) unambiguously” does apply in

this context, EPA Br. at 20, it should be given effect as the “latter act”

passed by Congress. Posadas v. National City Bank of New York, 296

U.S. 497, 503 (1936). By the same token, there is nothing to prevent

Congress from specifically cxcluding any agency action from ESA

requirements, as Congress has done on several occasions. See, e.g.,

Mount Graham Coalition v. Thomas, 89 F.3d 554 (9th Cir. 1996)

(applying rider exempting telescope project from section 7(a)(2)).

the propriety of [agency] action solely by the grounds

invoked by the agency”).”

But even if the Court were to consider this new

rationale, the regulation has no bearing on this case. The

regulation cannot “be applied to alter the clearly expressed

intent of Congress” in section 7(a)(2), Board of Governors

of the Federal Reserve System v. Dimension Financial

Corp., 474 U.S. 361, 368 (1986) and, in any event, EPA

does have “discretionary ... involvement or control,” 50

C.F.R. § 402.03, particularly with regard to the considera-

tion of wildlife impacts, both before and after NPDES

transfer decisions are made. See supra at 8-9. Indeed, this

Court has observed that EPA has “broad authority to

oversee state [NPDES] programs,” Arkansas, 503 U.S. at

105, and EPA itself has recognized that its “authority to

disapprove an inadequate state program based upon [its]

informed judgment necessarily demonstrates discretionary

EPA control.” EPA Fifth Cir. Br. at 34 (emphasis added).

Even further, EPA is required to solicit and consider public

comment on transfer applications and thus, as the agency

has pointed out, “[i]f EPA were simply acting in a ministe-

rial fashion, such weighing of the merits of public com-

ments would not be necessary.” Jd.

" That the intervenors cited the regulation “in arguing that ...

Section 7(a\(2) was inapplicable” to the transfer decision, EPA Br. at 38

n.13, is of no legal moment because it is a bedrock principle of adminis-

trative law that an “agency’s action must be upheld, if at all, on the

basis articulated by the agency itself” at that time of its decision. State

Farm, 463 U.S at 50 (emphasis added). Moreover, even NAHB suggests

that it was appropriate for EPA and FWS to have consulted with regarc

to any “water-quality related impacts on listed species or critica

habitat.” NAHB Br. at 48.

Certainly, the mere fact that the transfer provision

has the word “shall” in it does not mean that EPA lacks

discretion in making decisions. See, e.g., Norton v. South-

ern Utah Wilderness Alliance, 542 U.S. 55, 66 (2004)

(statute providing that an agency “shall” prevent unneces-

sary or undue degradation of certain lands and resources

“is mandatory as to the object to be achieved, but it leaves

[the agency] with a great deal of discretion in deciding how

to achieve it”). Accordingly, when EPA loosely character-

izes the transfer provision as a Congressional “mandatle],”

EPA Br. at 25, it is apparently arguing that whenever

Congress circumscribes an agency’s exercise of discretion

by delineating factors for an agency to consider in making

a decision (as Congress generally does), but does not

expressly include consideration of endangered species

impacts, then the section 7(a)(2) requirements cease to

apply. But that approach, once again, eviscerates section

7(a)(2) in a way that cannot possibly be supported by its

plain language; indeed, it resurrects the very construction

of section 7 that was rejected in Hill, i.e., that federal

agencies need only avoid jeopardizing species to the extent

“consistent with thelir] primary purposes.” 437 U.S. at 181

(internal citation omitted).

3. Petitioners argue that Department of Transporta-

tion v. Public Citizen, supra, supports the proposition that

“[slection 7(a)(2) applies only to conduct that is attribut-

able to the federal agency itself” and that, if species ge

extinct as a result of EPA’s transfer decision, that is the

fault of Congress, not the agency. EPA Br. at 14. That, of

course, is only a different way of saying that EPA’s au-

thorization of the Arizona program is not the kind of

agency action that triggers section 7(a)(2) — a position that

has no support in the language of the statute and that

recapitulates the central argument rejected in Hill, in

which TVA likewise argued that it was Congress’s decision

to fund the dam, and hence the ESA should be oe

437 U.S. at 171.

In any case, the reasoning in Public Citizen supports

the proposition that EPA is required to comply with the

substantive mandate of section 7(a)(2), including by .

consulting with FWS on all of the actual effects of the

transfer decision. Public Citizen concerned whether the

Federal Motor Carrier Safety Administration (“FMCSA”)

had complied with NEPA, which, as explained by the

Court, “imposes only procedural requirements on federal

agencies with a particular focus on requiring agencies to

undertake analyses of the environmental impact of their

proposals and actions.” 541 U.S. at 756-57 (emphasis

added). FMCSA had prepared an Environmental Assess-

ment evaluating the environmental effects of its regula-

tions establishing safety standards for trucks. Jd. at 760-

62. Accordingly, the only issue was whether the agency’s

NEPA analysis was deficient because it failed to address

adequately the impacts associated with an “action of the

President” — who is not required to comply with NEPA — to

lift a moratorium on Mexican trucks entering the United

States. Id. at 769.

Focusing on the language and purpose of NEPA, the

Court held that where an agency “has no authority” to

take environmental impacts into account in making a

particular decision, then it “serve[s] ‘no purpose’ in light of

NEPA’s regulatory scheme as a whole” to require ar

agency to prepare a NEPA document thoroughly analyzing

those impacts. Jd. at 767 (internal citation omitted). The

Court reasoned that in view of NEPA’s purely procedura

requirements, impacts that could have no bearing on the

agency’s decision were not “legally relevant” to the NEPA

analysis. Jd. at 770.

Here, however, petitioners are advancing a far more

extreme position with respect to a fundamentally different

statutory obligation. Thus, although section 7(a)(2) prohib-

its “any” agency action that is likely to jeopardize the

continued existence of a species, and “contains a flat ban

on the destruction of critical habitats,” Weinberger v.

Romero-Barcelo, 456 U.S. at 314 (emphasis added), peti-

tioners contend that EPA’s authorizing action is not

subject to section 7(a)(2) at all. Moreover, as Hill itself

noted, NEPA decisions are “completely inapposite” in the

ESA context because NEPA “imposes a procedural re-

quirement on agencies,” but the “ESA is substantive in

effect, designed to prevent the loss of any endangered

species....” Hill, 437 U.S. at 188 n.34°(emphasis in

original).

Accordingly, as the Court further explained in Hill,

while “it would make sense to hold NEPA inapplicable” in

situations where an agency may not actually take any

action based on its NEPA analysis, “[s]ection 7, on the

other hand, compels agencies not only to consider the

effect” of their actions on endangered species, “but to take

such actions as are necessary to insure that species are not

extirpated as a result of federal activities.” Jd. (emphasis

in original); see also 1978 House Report, ESA Leg. Hist. at

743 (“each Federal agency is required to insure that any

action authorized, funded, or carried out by it does not

result in species or habitat degradation unless the action

has been exempted” by the Endangered Species Commit-

tee) (emphasis added). Thus, to apply Public Citizen in

this context would be to force a square precedential peg

into a round statutory hole.

CONCLUSION

The judgment of the court of appeals should be af-

firmed insofar as it was based on the inconsistency in

EPA’s approach to section 7(a)(2) and the case should be

remanded for further administrative proceedings.

Respectfully submitted,

ErRIc R. GLITZENSTEIN

(Counsel of Record)

KATHERINE A. MEYER

MEYER GLITZENSTEIN & CRYSTAL

1601 Connecticut Avenue, N.W.

Washington, D.C. 20009

(202) 588-5206

MICHAEL P. SENATORE

DEFENDERS OF WILDLIFE

1130 Seventeenth Street, N.W.

Washington, D.C. 20036

(° 92) 682-9400

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.