Reply Brief — Environmental Protection Agency v. Defenders of Wildlife

| Supreme “our, U.S.

* J WS Ja FILED |

a0 PP @ | APRS ~ 2007 |

Nos. 06-340 and 06-549 ‘

In The

Supreme Court of the Anited States

NATIONAL ASSOCIATION OF.

HOME BUILDERS, et ai.,

Petitioners.

VS.

DEFENDERS OF WILDLIFE, et a/.,

Respondents.

¢

UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY,

Petitioner.

vs.

DEFENDERS OF WILDLIFE, et a/.,

Respondents.

On Writs Of Certiorari To The

United States Court Of Appeals

For The Ninth Circuit

°

REPLY BRIEF OF PETITIONERS NATIONAL

ASSOCIATION OF HOME BUILDERS, et al.

°

RUSSELL S. FRYE NORMAN D. JAMES

FRYE LAW PLLC (Counsel of Record)

3050 K Street NW, Suite 400 FENNEMORE CRAIG, P.C.

Washington, DC 20007-5108 3003 North Central Avenue,

(202) 527-8267 Suite 2600

Phoenix, AZ 85012-2913

(602) 916-5346

DUANE J. DESIDERIO

THOMAS J. WARD

NATIONAL ASSOCIATION OF

HOME BUILDERS

1201 15th Street, NW

Washington, DC 20005-2800

(202) 266-8200

TABLE OF CONTENTS

Page

Remand to EPA is unnecessary because this

case turns on the interpretation of federal

statutes, and no facts are in dispute..................

The plain language of Section 402(b) of the

Clean Water Act precludes the application of

Section 7(a)(2) of the Endangered Species Act

to the approval of State NPDES permitting

The application of Section 7(a)(2) is governed

by the Services’ longstanding regulations,

which are entitled to deference ....................000008

TVA v. Hill and the 1978 amendments to the

Endangered Species Act do not support the

court of appeals’ decision. ..............cccccssseeeeeeereees

1. TVA v. Hill does not support respondents’

expansive view of Section 7.................2e0000+

2. The legislative history confirms that

Section 7(a)(2) does not apply to non-

GEOSDOUISREEY COTIGID ccncesececscsceccesssesseseveseees

3. The creation of the Endangered Species

Committee did not expand the

applicability of Section 7(a)(2)..................06

EPA’s clarification of-its position is not a

reversal of prior agency policy, nor is EPA's

clarification post hoc rationalization..................

Respondents will not be prejudiced by the

Court’s resolution of the legal questions

I a I icetnsicnresisiinitintctidnimagemei

SN a a Ee

11

12

TABLE OF AUTHORITIES

Page

CASES:

American Forest and Paper Ass’n v. EPA, 137 F.3d

Ny Se pciertnciennsicarintucececinniinnsinetninncsnnetia 2,14,17

Auer v. Robbins, 519 U.S. 452 (1997) .0.........ccceccceceeeeeeeeees 16

Chevron, U.S.A., Inc. v. Natural Res. Def. Council,

mg eee 1,16

Citizens to Preserve Overton Park, Inc. v. Volpe, 401

es Gee Cae Ed tccetnnseniencncninctmnentainrincsinsiinataieniaadnnen 2

Davis v. Michigan Dep't of Treasury, 489 U.S. 803

ee nicreainisvnntnsncianesntvcinigaitiiiebetiineiiniitibihdmtidnntieinimenni 6

EPA v. California ex rel. State Water Res. Control

eg G8 Bs FRO CG ctvcsercerseterenseneenctninanmna 4

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

EE sicscsenttnnnnntcatavenenmeniaiubiinigdiinmeneniauminiemngiiiitinauietinti 3

Food & Drug Admin. v. Brown & Williamson

Tobacco Corp., 529 U.S. 120 (2000) ................ssesrsessssseees 6

Ground Zero Ctr. for Non-Violent Action v. U.S.

Dep't of Navy, 383 F.3d 1082 (9th Cir. 2004)............ 7,17

In re Operation of the Missouri River System

Litigation, 421 F.3d 618 (8th Cir. 2005).............cseseeseeeees 7

Lincoln v. Vigil, 508 U.S. 182 (1993) ............scssessesseeeereeeees 9

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

IE TINE venievnccitcinsnnnisnnssnniondinmnidnnmennaailinmeimetonn 12

Mount Graham Red Squirrel v. Madigan, 954 F.2d

Ge ee Se innitenicagtinicnnninmnenicimens 12

Natural Res. Def. Council, Inc. v. EPA, 822 F.2d 104

ST I, i ieeenieaeinensimmsadniiaiall 4

ill

TABLE OF AUTHORITIES ~— Continued

Page

New Motor Vehicle Bd. v. Orrin W. Fox Co., 434 U.S.

1345 (Rehnquist, Circuit Justice 1977) ............:ccccceeeeee 17

Ohio Forestry Ass’n, Inc. v. Sierra Club, 523 U.S.

eae IT csicsinsorvuicradeviciancieciimumutaiinsiaaiitaindiaiianiiseiasiinpepademaidadialsiil 2

Platte River Whooping Crane Critical Habitat

Maint. Trust v. FERC, 962 F.2d 27 (D.C. Cir.

Se Sccesiineietiantenienienigpiineabivasindiontvadiiseasnsannaniidanatasindeiiniie 9

Riverside Irr. Dist. v. Andrews, 758 F.2d 508 (10th

I A cies icccesieatiiitetlaenci taints aibet acc clin inaiahiig 9

Solid Waste Agency of N. Cook Cty. v. U.S. Army

Corps of Engineers, 531 U.S. 159 (2001)....................08 19

Train v. New York City, 420 U.S. 35 (1975)........ccccccceseeeees 9

Turtle Island Restoration Network v. NMFS, 340

a I iene neti ciialabeabiaitanisiniale 7

TVA v. Hill, 437 U.S. 153 €1978)..........ccccccccccosscccsceees 8,9,11

Union Electric Co. v. EPA, 427 U.S. 246 (1976) ...............+ 3

United States v. Monsanto, 491 U.S. 600 (1989)................ 3

Whitman v. American Trucking Ass’ns, Inc., 531

RRR RRS SE Diora evo nN meee Pen NE 2

STATUTES:

Clean Water Act, 33 U.S.C. §§ 1251 to 1387

I ati 4,5

RRR ERE TERE ear oem ee RENEE 1,4, 19

33 U.S.C. § 1251(g)....... ESSE ee nr noe oD NES TO PTE 19

i a 5

Be is SF Se crenctnicsinticcinccsintsnnevsemenemasseeinitinambninnmeitas 4

lv

TABLE OF AUTHORITIES -— Continued

Page

83 U.S.C. § 1342(b) (§ 402(b)) .............cccccccesseevesceee passim

ee IID cnssisissisaiiiignbeciciicsitthiainiatndetinleaiiaitaidnianetaienti 4

ee ne: Op Ee ccecsitenniennesennpsnsieseasstisineninaeions 18

Endangered Species Act, 16 U.S.C. §§ 1531 to 1544

UTES Tir SUIT tisnhciscnsintsihcinsicnigtnndindiandneenniaiiinties 10

I a iiitiiiieecinttisnieneitininacce passim

I I iscsi ncnnailstnbelaiinnghinanieidinnd 9

16 U.S.C. § 1536(a)(2) (§ 7(a)(2)).......ccccccccserrrersseeee passim

TNs TET sctsa iia etninicniaiiniarepcnacninantidnionesbemenduedenin 11

Miscellaneous

ne TE icapithinininesibninesetiidinineniaciananenniicinbinbdamiseeies 2,3

ar TIT cxisticinecihdeieecicciicintieiansiaptanntiondsdinindiniennibainie 19

SESSION LAWS, COMMITTEE REPORTS &

CONGRESSIONAL RECORD:

Endangered Species Act of 1973, Pub. L. No.

SE ee Ss lt airtiicistentninsnsdninideitaedstbimsenineniuminninmnaientes 10

I i Gr i Ci eicrticitsctncccectcinnstienintanennmnecsnes 10

a Ce I inc iiss cialecicdiiaiiriticsnniianatadeandinenes 10

Endangered Species Act Amendments of 1978,

Pub. L. No. 95-632, 92 Stat. 3751..............scccccssesseeees 10

es SI See SINE COED ccciencennccscnctanconeninnssanemnnenbecncen 10

H.R. Rep. No. 95-1625 (1978) ................ andidisiaiebieeaiaaumebid il

H.R. Conf. Rep. No. 95-1804 (1978) ....c..cecsssscesssessseeeees 10, 11

Be ens a GPU crccrctcniccencccinensnccssesencscesenes 4

124 Cong. Rec. 37,115 (daily ed. Oct. 13, 1978)....e..e..:.0+.. 10

TABLE OF AUTHORITIES — Continued

Page

REGULATIONS:

40 C.F.R.

Boctiam BAB BMAN TD). ccccccccccccscccssssssonssvsenseccnsinnsnsmnniniain 18

Bocthats BER IIDD ..ccsssccssccscssccsscsecstoonesissnsmnamanmiaieia 18

50 C.F.R.

eer ID cicewesennissinss-~<scessniaaniaanansaa 6, 7, 12,17

RRs BE Ie cnccccnactetcsemnsstvetsntininiienmeeniana 6,7

AGENCY RULEMAKING AND RELATED NOTICES:

Approval of Application by Oklahoma to Administer

the NPDES Program, 61 Fed.Reg. 65,047 (Dec.

BD, SII ecccctcscccsrcenssvincstinesssensienseminimibaaade 13

Approval of Application by Texas to Administer the

NPDES Program, 63 Fed.Reg. 51,164 (Sept. 24,

BIIPED cccececccssecesncscncsnsusonensenensnnmsmnnsnnnnmnnmmmmiiiaie 13, 14, 15

Interagency Cooperation Regulations; Final Rule,

51 Fed.Reg. 19,926 (June 3, 1986) (codified at 50

CBRE. FR GED acccecsescussncncsnccscsspassonisienipusiatiniaiaiiaiamsa 6, 18

Memorandum of Agreement Between EPA, FWS

and NMFS Regarding Enhanced Coordination

Under the CWA and the ESA, 66 Fed.Reg. 11,202

Cale. BE, BBBE) ocncccccncssccnntnstesmentuinminemnmemaiiila 14, 15

1

REPLY BRIEF OF PETITIONERS NATIONAL

ASSOCIATION OF HOME BUILDERS, et al.

Petitioners Home Builders submit their reply brief

and, for the reasons set forth below and those stated in

Home Builders’ opening brief, the judgment of the court of

appeals should be reversed.’

A. Remand To EPA Is Unnecessary Because This

Case Turns On The Interpretation Of Federal

Statutes, And No Facts Are In Dispute.

As explained below and in Home Builders’ opening

brief (HB Br. 25-27), under the plain language of CWA

Section 402(b) and EPA’s implementing regulations, EPA

must approve a State’s NPDES program if the program

satisfies the nine statutory criteria, in accordance with

Congress’ express policy “that the States manage” the

NPDES program. 33 U.S.C. § 1251(b). Given that this

statutory mandate is clear and unambiguous, this Court

can decide, as a matter of law, whether EPA’s decision was

subject to ESA Section 7(a)(2). Under Chevron, U.S.A., Inc.

v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43

(1984), there is nothing for EPA to reconsider on remand:

there is no statutory gap for EPA to fill or ambiguity for

EPA to interpret.

Moreover, no factual issues exist warranting further

development of the administrative record. No party

questioned whether Arizona’s program satisfied the criteria

set forth in CWA Section 402(b). E.g., Pet. App. 31 n.11,

136. In their petition for review, respondents contended

* Home Builders will use the same abbreviations and conventions

as were used in their opening brief. The key statutes at issue are

Section 402 of the Clean Water Act (CWA), 33 U.S.C. §§ 1251-1387, and

Section 7 of the Endangered Species Act (ESA), 16 U.S.C. §§ 1531-1544.

2

that EPA violated the ESA, not the CWA. J.A. 257-61.

Because the issues to be decided involve the interpretation

of statutes, with no dispute about any relevant facts, there

is no need for additional investigation by EPA or further

explanation of the basis for its decision.

In Citizens to Preserve Overton Park, Inc. v. Volpe, 401

U.S. 402 (1971), the Court explained that in reviewing an

agency’s decision under the Administrative Procedure Act,

5 U.S.C. § 706, a court must initially decide whether the

agency “acted within the scope of [its] authority. ... This

determination naturally begins with a delineation of the

scope of the [agency’s] authority and discretion.” 401 U.S.

at 415-16. More recently, in deciding whether an EPA

decision under the Clean Air Act was ripe for review, the

Court explained:

The question before us here is purely one of

statutory interpretation that would not “benefit

from further factual development of the issues

presented.” ... Nor will our review “inappropriately

interfere with further administrative action,” ...

since the EPA has concluded its consideration of the

implementation issue.

Whitman v. American Trucking Ass’ns, Inc., 531 U.S. 457,

479 (2001) (quoting Ohio Forestry Ass’n, Inc. v. Sierra

Club, 523 U.S. 726, 733 (1998)).

Here, EPA has likewise completed its consideration of

Arizona’s NPDES program submission, and determined

that Arizona’s program satisfied the exclusive statutory

criteria. The “key question is whether EPA may deny a

State’s proposed program based on criterion — the

protection of endangered species — that is not enumerated

in § 402(b).” American Forest and Pape~ Ass’n v. EPA, 137

F.3d 291, 297 (5th Cir. 1998) (AFPA). This question is

purely a matter of statutory interpretation involving EPA’s

“authority and discretion.” Overton Park, 401 U.S. at 416.

3

This is not a case in which the reviewing court “lack/s] an

adequate agency-compiled factual basis to evaluate the

agency action.” Florida Power & Light Co. v. Lorion, 470

U.S. 729, 743 (1985) (emphasis supplied).

In short, the Court can and should decide whether

EPA has discretion to deny a State’s proposed NPDES

permit program on grounds that are not specified in

Section 402(b). The Court also can decide whether ESA

Section 7(a)(2) overrides statutory mandates and requires

agencies to take affirmative action to benefit endangered

species. These are legal questions that a reviewing court is

required to decide initially under the Administrative

Procedure Act. 5 U.S.C. § 706.

B. The Plain Language Of Section 402(b) Of The

- Clean Water Act Precludes The Application Of

Section 7(a)(2) Of The Endangered Species Act

To The Approval Of State NPDES Permitting

Programs.

The plain language of Section 402(b) of the CWA

precludes the application of Section 7 of the ESA to EPA’s

approval of State NPDES programs because the criteria

specified by Congress in Section 402(b) are exclusive; EPA

must approve State NPDES programs meeting those

criteria. HB Br. 25-27; EPA Br. 17-19. By stating that EPA

“shall” approve State NPDES programs “unless”

specifically enumerated statutory criteria are not satisfied,

“Congress could not have chosen stronger words to express

its intent that [approval] be mandatory.” United States v.

Monsanto, 491 U.S. 600, 607 (1989); see also Union

Electric Co. v. EPA, 427 U.S. 246, 257 (1976).

Congress’ intent is supported by the CWA’s explicit

policy “to recognize, preserve, and protect the primary

responsibilities and rights of States to prevent, reduce,

4

and eliminate pollution” and to implement the NPDES

permit program. 33 U.S.C. §1251(b). That intent is

evidenced further by Congress’ deliberate use of “shall” in

place of “can” in reconciling the Senate’s bill with the

House’s amended version of the Act. Compare S. Conf.

Rep. No. 92-1236, at 138 (1972) (“the Administrator can

delegate permit authority to a State”), with id. at 139 (“the

Administrator is required to approve a submitted State

program” (emphasis supplied)).

Respondents ignore the plain language of the CWA as

well as Congress’ explicit choice of mandatory terms in

Section 402(b). Instead, they contend that EPA must

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

the ‘protection and propagation of fish, shellfish, and

wildlife,’” which in turn implies that ESA Section 7(a)(2)

applies to approvals of State NPDES programs. Resp. Br.

8, 46. Respondents’ argument is without merit.

The objective of the CWA is “to restore and maintain

the chemical, physical, and biological integrity of the

Nation’s waters.” 33 U.S.C. §1251(a). This objective is

achieved through the implementation of water quality

standards pursuant to CWA Section 303, 33 U.S.C. § 1313,

which are developed by each State and approved by EPA.

See, eg., Pet. App. 589-90. NPDES permits must

incorporate appropriate effluent discharge limitations and

other requirements to ensure that water quality standards

are achieved. See EPA v. California ex rel. State Water Res.

Control Bd., 426 U.S. 200, 205 (1976); Natural Res. Def.

Council, Inc. v. EPA, 822 F.2d 104, 109-11 (D.C. Cir. 1987);

Pet. App. 591-593. After a State NPDES program is

approved, EPA exercises its oversight authority to ensure

that State-issued permits attain water quality standards.

See 33 U.S.C. § 1342(d)(2); Pet. App. 603-07.

5

Consequently, all NPDES permits, regardless of the

issuing authority, must contain appropriate effluent

limitations designed to achieve the same water quality

standards. For this reason, EPA determined, and FWS

agreed, that Arizona’s NPDES program would have no

adverse water-quality-related impacts on any listed species:

there was no substantive change in the permit program

and no justification for consultation under ESA Section 7.

See, e.g., Pet. App. 562-63, 615-17.

Respondents nonetheless claim that the references to

“fish, shellfish, and wildlife” in other sections of the CWA,

eg., 33 U.S.C. §$1312(a), provide EPA discretionary

authority “with regard to wildlife-related impacts,”

triggering Section 7(a)(2). Resp. Br. 39 n.14, 46. As

explained, however, references in the CWA to “fish,

shellfish, and wildlife” concern the development of water

quality standards and effluent limitations necessary to

maintain the “biological integrity of the Nation’s waters,”

33 U.S.C. § 1251(a) (emphasis supplied), as opposed to

delegating EPA authority to generally regulate land use

activities that might affect wildlife. See HB Br. 45

(discussing cases addressing EPA’s CWA authority).

When read in context, the word “wildlife” plainly

refers to species that are dependent on water quality

rather than species found in upland desert, such as the

pygmy-owl (which is no longer a listed species) and the

Pima pineapple cactus — the principal species of concern in

this case:

[A] reviewing court should not confine itself to

examining a particular statutory provision in

isolation. The meaning — or ambiguity -— of

certain words or phrases may only become

evident when placed in context.... “It is a

fundamental canon of statutory construction that

the words of a statute must be read in their

6

context and with a view to their place in the

overall statutory scheme.”

Food & Drug Admin. v. Brown & Williamson Tobacco

Corp., 529 U.S. 120, 132-33 (2000) (quoting Davis v.

Michigan Dep't of Treasury, 489 U.S. 803, 809 (1989)).

Here, the court of appeals acknowledged that under

the CWA, EPA’s authority to consider the effects on listed

species is limited. E.g., Pet. App. 53 n.23 (“Pollution

permitting standards that apply to both federal permits

. and state permits ... incorporate concerns for the

effect of pollutants on aquatic species living in waterways

affected by water pollution.” (emphasis in original)).

Nevertheless, the court erroneously held that ESA Section

7(a)(2) “independently empowers EPA to make pollution

permitting transfer decisions on behalf of listed species

and their habitat.” Pet. App. 47. That ruling conflicts with

the plain language of CWA Section 402(b), and reads into

ESA Section 7(a)(2) a delegation of authority that does not

exist.

C. The Application Of Section 7(a)(2) Is Governed

By The Services’ Longstanding Regulations,

Which Are Entitled To Deference.

Home Builders explained in their opening brief (HB

Br. 30-34) that, consistent with the Services’ regulations,

Section 7 does not apply to the approval of State NPDES

programs because EPA lacks sufficient discretion to act for

the benefit of listed species. 50 C.F.R. 3 402.03,

promulgated in 1986 following notice-and-comment

rulemaking (see Interagency Cooperation Regulations;

Final Rule, 51 Fed.Reg. 19,926 (June 3, 1986)), provides

that Section 7 applies to “all actions in which there is

discretionary Federal involvement or control.” Similarly,

50 C.F.R. § 402.16 requires that consultation be reinitiated

when “discretionary Federal involvement or control over

the action has been retained or is authorized by law.”

Based on the Services’ regulations, the lower courts have

repeatedly held that a Federal agency’s obligation under

Section 7 is limited to its discretionary authority.

For example, in Ground Zero Ctr. for Non-Violent

Action v. U.S. Dep’t of Navy, 383 F.3d 1082 (9th Cir. 2004),

the court considered the extent of the Navy’s discretion in

operating a submarine base and, applying 50 C.F.R.

§ 402.03, held that Section 7 did not apply because the

agency lacked discretion to discontinue operations. Jd. at

1092. Although this action was “carried out” by the agency,

the court explained that “[wjhere there is no agency

discretion to act, the ESA does not apply.” Jbid. In Turtle

Island Restoration Network v. NMFS, 340 F.3d 969 (9th

Cir. 2003), the court also applied 50 C.F.R § 402.03 in

determining whether NMFS was required to consult on

the issuance of fishing permits under the High Seas

Fishing Compliance Act. The court held NMFS was

required to consult because the “Compliance Act entrusts

the Fisheries Service with substantial discretion to

condition permits to inure to the benefit of listed species.”

Id. at 977; see also In re Operation of the Missouri River

System Litigation, 421 F.3d 618, 630-31 & n.9 (8th Cir.

2005) (evaluating the Corps of Engineers’ discretion in

operating dams on the Missouri River); Pet App. 64-65

(Thompson, J., dissenting) (listing other decisions applying

50 C.F.R. §§ 402.03 and 402.16).

In this case, once the court of appeals determined that

EPA lacked authority to make pollution permitting

transfer decisions for the benefit of listed species (see Pet.

App. 53), the court should have applied 50 C.F.R § 402.03.

Instead of deferring to the Services’ interpretation of

Section 7, which harmonizes the duties of Federal

agencies, the court of appeals reinterpreted Section 7,

8

effectively overruling the Services’ reasonable

interpretation of the statute’s applicability.

D. TVA v. Hill And The 1978 Amendments To The

Endangered Species Act Do Not Support The

Court Of Appeals’ Decision.

-

Like the court of appeals, respondents ignore the

Services’ regulations implementing Section 7 and instead

contend the ESA is superior to ail other laws. Respondents

rely principally on TVA v. Hill, 437 U.S. 153 (1978), and

Congress’ 1978 amendments to the ESA. Neither TVA uv.

Hill nor the 1978 amendments support respondents’

argument. Indeed, when analyzed in the context of the

original version of Section 7 — which respondents fail to

address ~ and the Services’ 1986 rulemaking, Section 7’s

consultation obligation is plainly limited by the authority

delegated to the agency in its governing statutes.

1. TVA v. Hill does not support respondents’

expansive view of Section 7. In TVA v. Hill, this Court

enjoined completion of the Tellico Dam because the dam’s

operation would jeopardize the continued existence of a

listed species and destroy that species’ critical habitat —

facts that were not disputed. 437 U.S. at 171. Although the

Court found, based on those facts, that “an irreconcilable

conflict [existed] between operation of the Tellico Dam and

the explicit provisions of § 7,” the Court was urged to

balance the equities in favor of Tellico Dam based on the

status of construction and the expenditure of public funds

on the project. Jd. at 194-95. The Court declined to do so,

concluding that Congress had removed any equitable

discretion by balancing the equities in favor of endangered

_ species. Contrary to respondents’ argument, that is the

extent of the holding in TVA v. Hill; this Court did not

consider whether, let alone hold that Section 7 of the ESA

9

serves as a font of additional authority, allowing agencies

to ignore statutory mandates.’ See Platte River Whooping

Crane Critical Habitat Maint. Trust v. FERC, 962 F.2d 27,

34 (D.C. Cir. 1992) (TVA v. Hill “did not even consider

whether Section 7 allows agencies to go beyond their

statutory authority to carry out the purposes of the ESA.”);

Riverside Irr. Dist. v. Andrews, 758 F.2d 508, 512 (10th Cir.

1985) (“The [ESA] does not, by its terms, enlarge the

jurisdiction of the Corps of Engineers under the [CWA].”).

2. The legislative history confirms that Section

7(a)(2) does not apply to non-discretionary actions.

Respondents ignore the original version of Section 7.

Instead they argue that because the current version of

Section 7(a)(1) is qualified by “utilize their authorities”

and Section 7(a)(2) is not, Congress intended to override

other, more specific statutory mandates. Resp. Br. 35-36.

As Home Builders explained in their opening brief (HB Br.

35-36), Sections 7(a)(1) and 7(a)(2) originated as a single

provision, under which the obligations to carry out

conservation programs (Section 7(a)(1)) and to avoid

_* Relying on Train v. New York City, 420 U.S. 35, 43-45 (1975),

respondents contend that Congress mandated the completion of Tellico

Dam by appropriating funds for the project. Resp. Br. 39 n.14.

Respondents’ argument mischaracterizes both TVA v. Hill and Train.

First, no party in TVA v. Hill argued ‘that the TVA had a

non-discretionary obligation to complete the dam, nor did the Court

hold that the ESA trumps any such obligation. Rather, TVA v. Hill

concerned an irreconcilable conflict between a discretionary public

works project and Section 7. Second, the holding in Train was based on

@ statutory mandate imposed on the agency by Congress to allot funds

to qualifying projects. Train, 420 U.S. at 43-44. The Court concluded

that if funds had been appropriated and the project was eligible to

receive them, the agency must comply with the statute and allot the

funds. Jd. In contrast, lump-sum appropriations, such as those at issue

in TVA v. Hill, are generally discretionary in nature. Lincoln v. Vigil,

508 U.S. 182, 192 (1993) Teiting 7VA v. Hill).

10

jeopardy (Section 7(a)(2)) were both qualified by the

phrase “utilize their authorities.” Endangered Species Act

of 1973, Pub. L. No. 93-205, § 7, 87 Stat. 884, 892 (1973).

Moreover, Section 2(c) of the ESA declared Congress’ policy

that all federal agencies “shall utilize their authorities in

furtherance of” the Act. Jd. at §2(c), 87 Stat. 885

(currently at 16 U.S.C. § 1531(c)(1)). The 1973 legislative

history reinforces that policy. See H.R. Rep. No. 93-412, at

6 (1973) (“Federal agencies are to use the authorities that

are available to them in carrying out the objectives of the

bill”); id. at 9 (“The policy of the legislation is to state a

national purpose that all federal agencies and

instrumentalities will take steps within their authorities

to protect endangered species.”).

For respondents’ argument to be valid, Congress must

have expanded Section 7’s substantive obligation when it

reorganized Section 7 in 1978. As the court of appeals

acknowledged, however, the “1978 amendment did not

change section 7’s substantive provisions.” Pet. App. 36;

see Endangered Species Act Amendments of 1978, Pub. L.

No. 95-632, 92 Stat. 3751. Indeed, Congress’ primary

concern in authorizing funding for the ESA in 1978 was

whether to weaken Section 7 because of perceived abuses.

See, e.g., 124 Cong. Rec. 37,115 (daily ed. Oct. 13, 1978)

(“Now, not all of us have snail darters, furbish lousewarts,

or sand hill cranes in our districts; but we do have a vested

interest in making the agency in charge of enforcing the

provisions of the act conform to its original intent.”

(statement of Rep. Lott)).

Despite this controversy, Congress chose to “retain

existing law,” H.R. Conf. Rep. No. 95-1804, at 18, which

requires agencies to “utilize their authorities” in

complying with Section 7, i.e., to take action within their

discretion under their governing statutes. There is nothing

in either the 1978 amendments or the legislative history

11.

suggesting otherwise. For example, Congress added

Section 7(c) (codified at 16 U.S.C. § 1536(c)), which

requires Federal agencies to conduct biological

assessments before entering into construction contracts or

beginning construction of a project “to assist Federal

agencies in complying with section 7” by identifying

“conflicts between an agency action and a listed species.”

H.R. Rep. No. 95-1625, at 20 (1978). The House Report

also explained: “It is the intent of this committee that

this review process take place well before the exercise

of agency discretion which would result in contracts

for construction, actual construction activities, or other

potentially destructive activity.” Jbid. (emphasis supplied).

This discussion assumes that an agency is acting pursuant

to its discretionary authority, rather than fulfilling a

non-discretionary mandate.

3. The creation of the Endangered Species Committee

did not expand the applicability of Section 7(a)(2).

Respondents also contend the establishment of the

Endangered Species Committee (Committee) indicates

Congress intended for the ESA to supersede an agency’s

non-discretionary obligations. Resp. Br. 42-43. The

exemption process, however, assumes that the agency’s

proposed action is subject to Section 7 consultation.’ In

other words, the exemption process is available to address

irreconcilable conflicts between an agency’s proposed

discretionary actions and a jeopardy biological opinion —

such as the construction and operation of a dam in 7'VA v.

Hill. When an agency lacks discretion to act for the benefit

* Contrary to respondents’ suggestion (Resp. Br. 42-43), the

Committee cannot override laws or alter an agency’s authorities. Any

mitigation and enhancement measures must be both authorized and

funded by Congress “concurrently with all other project features.” H.R.

Conf. Rep. No. 95-1804, at 22 (1978).

12

of listed species in the first place, the duty to consult is not

triggered. 50 C.F.R. § 402.03. Consequently, respondents

point to nothing that shows the creation of the exemption

process was intended to resolve conflicts between the ESA

and other statutory mandates imposed by Congress, or

that Congress intended to expand the applicability of

Section 7 to non-discretionary actions.*

E. EPA’s Clarification Of Its Position Is Not A

Reversal Of Prior Agency Policy, Nor Is EPA’s

Clarification Post Hoc Rationalization.

Respondents attack the letters exchanged between

EPA and the Services, claiming that the letters constitute

a reversal of the agencies’ prior policy and are

impermissible post hoc rationalization. Resp. Br. 24-27. As

a preliminary matter, the letters do not constitute post hoc

rationalization because EPA, the agency charged with

administering the CWA, never took the pu. tion that it

could disapprove Arizona’s NPDES program even if the

program satisfied the statutory requirements in CWA

Section 402(b). Rather, the inconsistency was created by

the court of appeals, which acknowledged EPA’s lack of

discretion and, instead of applying 50 C.F.R. § 402.03,

reinterpreted ESA Section 7(a)(2) to conclude that

consultation was required. See Pet. App. 53 (“|T]he [CWA]

* Respondents note that Congress on several occasions has

exempted specific projects from Section 7, citing Mount Graham

Coalition v. Thomas, 89 F.3d 554 (9th Cir. 1996). Resp. Br. 45 n.16. This

point suffers from the same infirmity. The Federal action involved in

the red squirrel litigation, approval to construct an astrophysical

complex and access road on National Forest land, was discretionary.

See Mount Graham Red Squirrel v. Madigan, 954 F.2d 1441, 1443-48

(9th Cir. 1992) (discussing factual background). Respondents have not

pointed to any specific exemptions for non-discretionary projects.

13

does not grant the EPA authority to make pollution

permitting transfer decisions for the benefit of all

endangered species; the EPA has that authority only when

one also considers the [ESA].”); compare id. at 138-41

(Kozinski, J., dissenting from denial of rehearing).

The question of whether Section 7(a)(2) overrides

EPA’s non-discretionary obligation to approve State

NPDES programs was squarely raised below by the State

of Arizona and Home Builders, and that question was

argued before, and decided by, the court of appeals. See,

e.g., Pet. App. 68 (“The EPA’s authority to grant or to deny

the State of Arizona’s application to administer the

pollution permitting program was nondiscretionary; |

would deny the petition for review.”) (Thompson, J.,

dissenting). Regardless of whether the Court considers the

agencies’ letters, the legal issue of EPA’s authority and

discretion under CWA Section 402(b), as explained above,

is properly before this Court and ripe for decision.

Respondents also erroneously assume that EPA

previously adopted a policy governing the applicability of

Section 7 to State NPDES program approvals. As

explained in Home Builders’ opening brief (HB Br. 11-13),

for some 20 years, and on more than 100 occasions, EPA

approved State NPDES program submissions without

consulting with the Services. Consultation occurred only

six times prior to Arizona’s program submission. EPA’s

Federal Register notices concerning those States’ NPDES

programs indicated that EPA was uncertain whether

’ Section 7 applied to approvals under Section 402(b) and, if

so, whether EPA could refuse to approve a State’s program

meeting the statutory criteria. See Approval of Application

by Texas to Administer the NPDES Program, 63 Fed.Reg.

51,164, 51,198 (Sept. 24, 1998); Approval of Application

by Oklahoma to Administer the NPDES Program, 61

14

Fed.Reg. 65,047, 65,051 (Dec. 10, 1996).° In addition, those

consultations were limited to species dependent on surface

water quality, and did not involve assertions by the

Services that ESA Section 7 authorized EPA to disapprove

a State’s program on grounds unrelated to water quality.

See HB Br. 12-13.

Although EPA and the Services entered into a

memorandum of agreement in 2001 to improve interagency

coordination, this document did not address whether

Section 7(a)(2) applies to State program approvals.

Memorandum of Agreement Between EPA, FWS and

NMFS Regarding Enhanced Coordination Under the CWA

and the ESA, 66 Fed.Reg. 11,202 (Feb. 22, 2001) (Pet. App.

245-317). Instead, as explained in Home Builders’ opening

brief (HB Br. 13), the National MOA stated only that

“EPA’s current practice” is to consult with the Services “on

a case-by-case basis.” Pet. App. 260. The agencies’

introductory discussion also acknowledged the Fifth

Circuit’s decision in AFPA, and indicated that the National

MOA “does not place conditions on approval of State

* For example, in connection with approving Texas’ NPDES

program, EPA explained:

It was clearly Congress’ intent that states have every

opportunity to directly administer the NPDES program and

that EPA’s main role would be providing national

consistency and guidelines in an oversight role. EPA was

only intended to run the NPDES program until states could

develop programs adequate to protect the waters of the U.S.

To this end, EPA has never been fully funded to do all the

jobs required for full direct implementation of the NPDES

program. This is the responsibility of State-run programs,

and provides incentives for states to take over the program.

States that wish to directly ensure protection of its [sic]

State resources, and equitable treatment of its regulated

public will take over the responsibilities of the NPDES

program as Texas has applied to do.

Approval of Application by Texas, 63 Fed.Reg. at 51,167.

15

NPDES programs.” Jd. at 266; see also Approval of

Application by Texas, 63 Fed.Reg. at 51,198.

When compared to the agencies’ prior administrative

practice, the consultation on Arizona’s NPDES program

submission is the outlier. EPA submitted a biological

evaluation to FWS, explaining that approval of Arizona’s

program is not likely to adversely affect any listed species

and critical habitat dependent on surface waters in

Arizona. Pet. App. 614-18. Although FWS employees in the

Arizona field office agreed that there would be no adverse

impacts related to water quality, they insisted on

consulting on impacts over which EPA has no control. Pet.

App. 562-63; J.A. 121-23. FWS employees also advocated

for the implementation of “a consultation process, or an

alternative process similar to that which currently exists”

as a condition to approval of Arizona’s program, which

would conflict with both the Fifth Circuit’s holding in

AFPA and the National MOA. Pet. App. 563, 571.

Ultimately, the agencies were required to elevate the

issue to senior officials in Washington, indicating the lack

of any definitive agency policy. The need to develop a

coherent administrative position was heightened by the

State of Alaska’s NPDES program submission last July.

See EPA Pet. App. 93a-94a.°

* Respondents suggest that Alaska’s program submission is

irrelevant to evaluating the degree of deference to which the agencies’

Jetters are entitled, noting that Alaska’s program submission was

determined to be deficient. Resp. Br. 27 n.10. As the record in this case

shows, however, a State’s program submission, even if initially

determined to be deficient, triggers administrative action by EPA.

Arizona initially requested NPDES program approval on December 20,

2001, and its submission package was received on January 14, 2002.

Pet. App. 546-47. Arizona’s program submission was found deficient in a

number of respects (J.A. 10-26), was resubmitted to EPA on June 11,

2002, and then supplemented on July 8 and 10, 2002 (Pet. App. 547).

(Continued on following page)

16

Consequently, it is ineccurate to characterize the

agencies’ letters as post hoc rationalization. Under

Chevron, an agency must be allowed to assess “the wisdom

of its policy on a continuing basis,” 467 U.S. at 864, and,

indeed, the agency’s discretion te establish policies does

not end once the agency action is appealed. See Auer v.

Robbins, 519 U.S. 452, 462 (1997) (deferring to agency’s

interpretation of its own regulation advanced in

litigation). The interpretation adopted by EPA and the

Services “reflect|s] the agenclies’] fair and considered

judgment on the matter in question” (ibid.), and is

consistent with the positions of the agencies at the time

Arizona’s program was approved, i.e, EPA cannot

withhold approval of a State’s NPDES program that meets

the criteria in CWA Section 402(b).

F. Respondents Will Not Be Prejudiced By The

Court’s Resolution Of The Legal Questions

Presented In This Case.

Respondents erroneously contend that they will be

prejudiced if the Court were to decide the questions

presented by this case. See Resp. Br. 27-32. To the

contrary, the only parties that will be prejudiced are the

State of Arizona and the regulated community if this

matter is remanded to EPA. If the court of appeals’

judgment vacating Arizona’s NPDES program becomes

effective, authority to issue NPDES permits would

immediately shift back to EPA. As explained by the State

of Arizona, this would disrupt the current permitting

Rather than waiting until Arizona’s program submission was found

complete, EPA requested the initiation of informal consultation on January

23, 2002 (J.A. 7-9) and prepared and submitted its biological evaluation on

June 21, 2002 (Pet. App. 581). EPA nevertheless was unable to meet the

90-day statutory deadline for acting on Arizona's submission.

17

process, halt or delay legitimate business activities, and

result in adverse environmental impacts. See Arizona’s Br.

3-6. Furthermore, Arizona would be forced to spend

additional public funds to duplicate the same process that

was successfully completed in 2002. Because the court of

appeals’ decision frustrates Congress’ intent, Arizona and its

citizens would suffer irreparable injury. See New Motor Vehicle

Bd. v. Orrin W. Fox Co., 434 U.S. 1345, 1351 (Rehnquist, -

Circuit Justice 1977) (“any time a State is enjoined by a court

from effectuating statutes enacted by representatives of its

people, it suffers a form of irreparable injury”).

The court of appeals acknowledged that “all of the

actors in this case — Arizona, the EPA, and FWS -

operated in a somewhat murky legal environment,” and

were “[flaced with two circuit court cases suggesting that

EPA lacked authority to make pollution permitting

transfer decisions based on [ESA] concerns.” Pet. App. 62.

Without clear guidance from this Court, the same “murky

legal environment” will continue to exist. On remand,

what legal standard applies? And what legal standard

applies to NPDES program submissions by States in

circuits with no clear precedent to follow, such as

Massachusetts and New Mexico? Do those circuits follow

this case, AFPA, or perhaps previous Ninth Circuit

decisions, such as Ground Zero, that have followed 50

C.F.R. § 402.03 in holding that ESA Section 7(a)(2) applies

only to actions in which there is discretionary Federal

involvement or control? Home Builders submit this is

precisely the sort of intra- and inter-circuit conflict that

this Court should resolve.

Against this backdrop, respondents’ claim of being

prejudiced rings particularly hollow. Respondents initially

assert that they have been prejudiced by submission of the

agencies’ letters clarifying the applicability of Section 7 to

EPA’s approval of State NPDES program submissions.

Resp. Br. 28. That issue, however, was briefed and argued

18 .

below. Respondents are not entitled to remand in order to

relitigate the same issue.

Respondents also contend that the agencies’ letters

deprived them of their nght to participate in administrative

proceedings concerning Arizona’s program submission,

citing 40 C.F.R. § 123.61(b). Resp. Br. 28. The relevant

subsection of EPA’s regulation, 40 C.F.R. § 123.61(a)(1),

requires the agency to provide a comment period “during

which interested members of the public may express their

views on the State program” (emphasis supplied), not on

the “correct” interpretation of CWA Section 402.’ It would

be a pointless exercise to remand this matter back to EPA

for the purpose of receiving additional public comments on

Arizona’s NPDES program, which has already been

determined to satisfy the criteria in CWA Section 402(b).

Respondents additionally suggest that if the Court

were to remand this matter, they might raise new

challenges to Arizona’s program submission, i.e., claims

that were not asserted timely under 33 U.S.C. .

§ 1369(b)(1)D) and, therefore, have been waived. For

example, respondents state they would argue that funding

provided by EPA would trigger the application of Section

7(a\(2). Resp. Br. 29. However, EPA’s decision to provide

financial assistance to Arizona for the administration of

environmental programs is a separate and discrete agency

” Respondents’ argument further implies that they possess some

sort of public comment right in regard to consultations conducted under

ESA Section 7(a)(2). See Resp. Br. 28. No such right exists. In their

1986 rulemaking, the Services specifically addressed the extent of

public participation in the consultation process, explaining that

“Injothing in section 7 authorizes or requires the Service to provide for

public involvement (other than that of the applicant) in the ‘interagency’

consultation process.” Interagency Cooperation Regulations, 51 Fed. Reg. at

19,928 (Pet. App. 329).

19

action. Put simply, the criteria in Section 402(b) do

not include Federal financial assistance. Respondents

erroneously assume that approval of a State’s NPDES

program and agency funding decisions are a single action.

Next, respondents suggest that they would argue; on

remand, that compliance with ESA Section 7(a)(2) is

triggered by references in the CWA to “fish, shellfish, and

wildlife.” Resp. Br. 30. As explained above, the CWA’s

objectives are achieved through the implementation of

water quality standards, and NPDES permits, whether

issued by EPA or by a State, must incorporate appropriate

effluent discharge limitations to ensure those standards

are satisfied. Respondents apparently would argue instead

that, in issuing NPDES permits, EPA regulates how

private land is used under the guise of protecting “the

biological integrity” of navigable waters. That argument

flies in the face of Congress’ explicit recognition of the

right of each State to “plan the development and use

(including restoration, preservation, and enhancement) of

land and water resourres,” and of “the authority of each

State to allocate quantities of water within its

jurisdiction.” 33 U.S.C. § 1251(b) & (g); see also Solid

Waste Agency of N. Cook Cty. v. U.S. Army Corps of

Engineers, 531 U.S. 159, 174 (2001). —

Finally, respondents suggest that EPA’s position is

inconsistent with other statutory obligations imposed on

the agency because EPA complied with the “coordination

process” required by the National Historic Preservation

Act, 16 U.S.C. § 470(f) (“NHPA”). Respondents suggest that

'.PA’s voluntary compliance with the NHPA results in an

“anomalous position” that “section 7(a)(2) is the only legal

obligation imposed on the federal government that EPA

should ignore in making NPDES transfer decisions... .”

Resp. Br. 31. This argument is without merit. Respondents

do not explain why EPA’s coordination with others under

the NHPA is actually inconsistent with EPA’s position

that under the CWA, EPA must approve State NPDES

programs that meet the criteria in Section 402(b).

G. Conclusion

For the foregoing reasons, and for those stated in

Home Builders’ opening brief, the judgment of the court of

appeals should be reversed.

DATED: April 10, 2007.

Respectfully submitted,

RUSSELL S. FRYE

FrYE LAW PLLC

3050 K Street NW,

Suite 400

Washington, DC 20007-5108

(202) 572-8267

NORMAN D. JAMES

(Counsel of Record)

FENNEMORE CRAIG, P.C,

3003 North Central Avenue,

Suite 2600

Phoenix, AZ 85012-2913

(602) 916-5346

DUANE J. DESIDERIO.

THOMAS J. WARD

NATIONAL ASSOCIATION OF

HOME BUILDERS

1201 15th Street, NW

Washington, DC 20005-2800

(202) 266-8200