Petition for Writ of Certiorari — Texas Cities Coalition on Stormwater v. Environmental Protection Agency

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Supreme Cour, U.S.

/ FILED

No. 031125 DEC 15 2003

OFRICE OF THE CLERK

In The

Supreme Court of the Anited States

TEXAS CITIES COALITION ON STORMWATER,

Petitioner,

vs.

UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY, et al.,

Respondents.

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

JIM MATHEWS

Counsel of Record

JOE FREELAND

MATHEWS & FREELAND, LLP

327 Congress Avenue

Suite 300

Austin, Texas 78701

(512) 404-7800

Fax: (512) 703-2785

Attorneys for Petitioner,

Texas Cities Coalition on

Stormwater

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

The U.S. Environmental Protection Agency (EPA)

adopted its Phase II stormwater rules requiring certain

local governments to obtain National Pollutant Discharge

Elimination System (NPDES) permits for discharges from

the local governments’ municipal separate storm sewer

systems (MS4s). To obtain an NPDES permit under EPA’s

rule, regulated local governments must adopt ordinances

regulating the conduct of individuals within their jurisdic-

tional boundaries regarding activities that could add

pollutants to stormwater that might flow through the MS4

to waters of the United States. As an alternative to obtain-

ing permits that commandeer the local governments’

regulatory powers, EPA added a provision to its rule

allowing local governments to seek individual permits

containing indeterminable provisions that could be diffi-

cult and expensive to comply with and that might also

require local governments to regulate the conduct of

others.

The questions presented in this case are as follows:

1. Whether EPA, without a clear statement from Con-

gress, is authorized to induce sovereign local govern-

ments to surrender their police powers to avoid

obtaining permits containing indeterminable, but

more onerous and expensive, conditions.

2. Whether the Ninth Circuit erred in interpreting EPA’s

~ rules to conclude that the Phase II stormwater rules

do not commandeer the police powers of the local

governments subject to the rule.

PARTIES TO THE PROCEEDING

Petitioner is the Texas Cities Coalition on Stormwater

(TCCOS), an association of approximately 100 Texas munici-

palities. TCCOS’ members are subject to EPA’s Phase II

stormwater regulations.

Respondents are the U.S. Environmental Protection

Agency; the Natural Resources Defense Council; and the

Environmental Defense Center.

CORPORATE DISCLOSURE STATEMENT

TCCOS has no parent corporations and no subsidiar-

ies, wholly-owned or otherwise.

ili

TABLE OF CONTENTS

| Page

QUESTIONS PRESENTED 2.0.0... oo occecccccccceseeceeceseees.n. i

PARTIES TO THE PROCEEDING. ......-..ccccccsececcocecc... ii

CORPORATE DICLOSURE STATEMENT... ii

TABLE OF AUTHORITIES ...0.......cccccccccccsssesesceececseccesn. Vv

OPTINEOITS BELOW ........0...0.0csesssesersessscsoseesesesssseses,..... 1

I is beicenssnsassessssvesuansavserssarssesversecesocce-<.,.,, 1

CONSTITUTIONAL, STATUTORY AND REGULA-

TORY PROVISIONS INVOLVED ..........0000000000....... 1

STATEEMEDIT ...........0:s00csceeceessensoeees aeeadaphanciiinasiasbecienaes 2

REASONS FOR GRANTING THE PETITION ........... 13

I. THE DECISION BELOW CONFLICTS WITH

COURT'S PRECEDENTS BARRING DEFER-

ENCE TO AN AGENCY’S STATUTORY CON-

STRUCTION WHERE THE AGENCY’S CON-

STRUCTION ENCROACHES UPON STATE

SOVEREIGNTY WITHOUT A CLEAR INDI-

CATION THAT CONGRESS INTENDED THE

Sei cabtsenondesdersinisivwseilncnsesanesisisosonesenisuveseseases

A.- The Ninth Circuit’s Holding That EPA

Can, Without a Clear Statement From

Congress, Induce Local Governments to

Yield Control of Their Regulatory Powers

Conflicts with Decisions of this Court and

Presents an Important Question of Fed-

eral Law that Should be Settled by this

_______ 0 ES CEE ee

TABLE OF CONTENTS - Continued

Page

B. The Ninth Circuit’s Holding that EPA has

the Authority to Induce Local Govern-

ments to Surrender Their Regulatory

Powers or Comply with Indeterminable

Permit Provisions is a Decision on an Im-

portant Federal Question that Conflicts

with Decisions of this Court and Presents

an Important Question of Federal Law

that Should be Settled by this Court..........

II. THE NINTH CIRCUIT ERRED IN DETER-

MINING THAT THE ALTERNATIVE PER-

MIT OPTION WOULD NOT COMMANDEER

LOCAL POLICE POWERG............sesseccscosccssseeees 27

SE III cui pecans mcgasausaiesashinesseieseuiericn cuavenlionin 30

APPENDICIES

Opinion of the United States Court of Appeal for

i Fe Se iiiiititirrteesictninicenns App. 1

Clean Water Act § 402(p), 33 U.S.C. § 1342(p)....... App. 93

EPA Final Phase II Stormwater Rule, 64 Fed. Reg.

68722-68851 (Dec. 8, 1999) (excerpts)................ App. 98

OPS 6 Oe aikido App. 167

ee Se I sisi shadsiahidaconoaeaaaain App. 168

MO CPI. § VRB BG ocecioccscscscscsesenccvesvesnssusosenesasenvenes App. 181

TABLE OF AUTHORITIES

Page

CASES

American Mining Congress v. EPA, 965 F.2d 759

SN SIE: BUND iisichcccnscchessstantnrndimesmaenacecaae cnc we ee 5

Brown v. EPA, 521 F.2d 827 (9th Cir. 1975) .ecceccecccccccesceee. 22

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

Council, Inc., 467 U.S. 837 (1984) ....ccccccccccccceee. 12, 16, 23

City of Abilene v. EPA, 325 F.3d 657 (5th Cir.

END ectrisensorencensntehuunvusaiaanadaeubianaeiaeda ae 12, 21, 29

College Sav. Bank v. Florida Prepaid Postsecondary

Educ. Expense Bd., 527 U.S. 666 (1999).................. 18, 25

Environmental Defense Fund v. EPA, 319 F.3d 398,

vacated, 344 F.3d 832 (9th Cir. 2008) .......cccccccceccceceeceees 1

Environmental Defense Fund v. EPA, 344 F.3d 832

(9th Cir. 2003) .......... lib bnehdintintnniadasdabadieanbanacunsianasiddgtamamiemiaias 1

Garcia v. San Antonio Metropolitan Transit Author-

SE, OD TBO UIE vsenisisssnsssnsctilcsneaancantnceenindeanaiencen 22

Gregory v. Ashcroft, 501 U.S. 452 (1991) ..ccccccccecceoceeee. 17, 24

Headwaters, Inc. v. Talent Irrigation Dist., 243 F.3d

526 (9th Cir. 2001) ............ nidotdinedhhiseawudeiansdstedijcettaaieee 5

Hodel v. Virginia Surface Min. & Recl. Ass’n, Inc.,

OD UD, FE TREE ssntessoninipisniciuvitamecamitaeantitune: 18

Miccosukee Tribe of Indians of Florida v. South

Florida Water Management Dist., 280 F.3d 1364

CR RERN IGE BIIIA ane sansonivuitiisasiakcinddeanenmaiea cee 5

National Resources Defense Council, Inc. v. Costle,

GGG FOG LIOR CD, Cie, OTP vs sicessesssssicrcsinercerccoeenl 6

Natural Resources Defense Council, Inc. v. EPA, 966

FO BBOB COU Clie, TODD ccscicssveciesssvensssinilevsassnacunsens 29

TABLE OF AUTHORITIES — Continued

Page

New York v. United States, 505 U.S. 144 (1992)....11, 22, 27

Pennhurst State Sch. & Hosp. v. Haldermann, 451

Ba Be Ec sscee sicsncbpnvpecnanncnenversianieaacsaiinmeneiel 18, 25

Solid Waste Agency of Northern Cook County v.

Army Corps of Engineers, 531 U.S. 159

I niciccschcasadacssedesuanipnvceksnerenlemnedbadaaieunn 11, 17, 22, 30

South Dakota v. Dole, 483 U.S. 203 (1987)..............06. 18, 25

United States v. Bass, 404 U.S. 336 (1971) ....... eee 17

United States v. Deaton, 332 F.3d 698 (4th Cir.

SITE a sssiisn-susbikassdsiviadiciiovtaeiuaaaialeeaaneiua: nanan edema aaa: 4

United States v. Eidson, 108 F.3d 1336 (11th Cir.

MI Sidiksess:ticsccrausensitcceeskssbibiony ibehadatannebialon ihn tnsinedlianemvele tienes 5

Williams v. Babbitt, 115 F.3d 657 (9th Cir. 1997).............. 17

STATUTES & REGULATIONS

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

Section 101(b), 33 U.S.C. $ 1ZB10D) ...........0ccesscccsvescsessss 20

Section 204(b), 33 U.S.C. § 1284(b) ...............ccccssscceesvees 20

es SED, BP U7. BR ecvcssiseicccrosongtareacien 20

eens OL, FP GIB G., © TE sestsenstncteersscenticteen 5

eis: SO, BD UTES. © BI ois oecsesisncencessasstvieerrvictnens 5

Section 402(b), 33. U.S.C. $ 1342(p) ................cccccsscoeseess 20

Section 402(p), 33 U.S.C. § 1342(p)............. 2, 6, 7, 18, 19

sO NE nésaceescincensesexio eee ae 4,7

re © UO 5 iiinitincccdomnne 9, 10, 27, 28, 29

Pe sosivickssncencesdvsaseiacuasausecease eae 2

ee LD cisisisicsscssncsovniceedisontireueueenaeen 8

Lot « SE. SF OReR nD rrr en ee = Sete 8

Vii

TABLE OF AUTHORITIES - Continued

Page

PSR G AMUN sicirsessvarsesisisssnsvesnseistesazterececosssces passim

40 C.PLR. § 122.33(f)...........ccscssssessssessssesesssssssssessceseoseessse., 10

WOO BME. © UBB BG no scsvvesssccnsnsnsenseasececoreesesoesonsese.: 2, 18, 19

MO CBB. © UBD GOD) oi vcscssessessessssssarsosacececesesseesseesg, 8, 9, 16

Pe NI scsiconcinihhasesssavctotedonbacaoocitenac 2

£O CBIR. § 123.4206) .....scessersssossesossssersesasosesesesersareseeseseses, 28

40 C.BLR. § 124.3(C) oo. cecccsssssssssessssessesssssssssssssseceesesessc, 28

64 Fed. Reg. 68722-68851 (Dec. 8, 1999)......... 1, 2, 7, 20, 25

63 Fed. Reg. 1536-1643 (Jan. 9, 1998)......ccccccccceccoceocesse.... 15

55 Fed. Reg. 47998 (Nov. 16, 1990)......cecccccccccscscecescesesces.., 3

OTHER AUTHORITIES

Laurence H. Tribe, American Constitutional Law

86, 1009-1010 (3d ed. 2000)

PETITION FOR A WRIT OF CERTIORARI

Petitioner Texas Cities Coalition on Stormwater

respectfully petitions for a writ of certiorari to review the

judgment of the United States Court of Appeals for the

Ninth Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals, Environmental

Defense Fund v. EPA, 344 F.3d 832 (9th Cir. 2003). App. 1-

92. The initial opinion of the court of appeals, which was

subsequently vacated by the court, is reported at Enui-

ronmental Defense Fund v. EPA, 319 F.3d 398 (9th Cir.

2003). EPA’s final rulemaking, which promulgated the

challenged rules, is reported at 64 Fed. Reg. 68722-68851

(Dec. 8, 1999). App. 98-166 (excerpts).

JURISDICTION

The judgment of the court of appeals was entered on

September 15, 2003. The jurisdiction of this Court is

invoked under 28 U.S.C. § 1254(1).

CONSTITUTIONAL, STATUTORY AND

REGULATORY PROVISIONS INVOLVED

The Tenth Amendment to the United States Constitu-

tion provides: The powers not delegated to the United

States by the Constitution, nor prohibited by it to the

States, are reserved to the States respectively, or to the

people.

The relevant provision of the Clean Water Act (CWA),

CWA § 402(p), CWA 33 U.S.C. § 1342(p) is reproduced at

App. 93-97. The pertinent regulations, 40 C.F.R. §§ 122.30,

122.34 and 122.36 and excerpts from the preamble accom-

panying the adoption of these regulations (64 Fed. Reg.

68722-68851 (Dec. 8, 1999)) are reproduced at App. 98-181.

STATEMENT

The Ninth Circuit’s holding that EPA can, without a

clear statement from Congress, induce local governments

to yield control of their sovereign regulatory powers in

exchange for avoiding a noncommandeering alternative

approach of indeterminable expense and difficulty repre-

sents a decision on an important federal question that

conflicts with relevant decisions of this Court and presents

an important question of federal law, with continuing

nationwide significance, that has not been, but should be,

settled by this Court. TCCOS does not contest that CWA

grants EPA the authority to require local governments to

obtain permits for their own activities that add pollutants

to stormwater and ultimately to the waters of the United

States. Moreover, TCCOS does not question that Congress,

if it spoke directly to the issue, could offer inducements to

local governments to use their police powers to further a

federal regulatory program. The question here is whether

Congress has directly spoken to the issue, and if not,

whether EPA can offer inducements that significantly

alter the traditional federal-state balance without a clear

statement from Congress.

Furthermore, the Ninth Circuit erred in determining

that the alternative permit option offered by EPA in 40

C.F.R. § 122.33(b)(2)(ii) does not also directly commandeer

the regulatory powers of local governments. Because of

th:s error the Ninth Circuit erroneously concluded that

EPA’s Phase II stormwater rules are constitutional. The

Ninth Circuit’s erroneous interpretation of the effect of the

alternative permit option offered by EPA effectively

surrenders local control of the regulatory powers of more

than 35,000 municipal governments, 2,500 county gov-

ernments, and more than 40,000 other local governmental

bodies to the federal government. Unquestionably, EPA

has the authority to regulate the activities and conduct

that add pollutants to runoff. EPA could require an

NPDES permit from each person that adds pollutants to

the MS4, as well as to the owner/operator of the MS4 for

the owner/operator’s own activities that add pollutants to

the MS4.' The Ninth Circuit’s error, however, has extended

EPA's reach to include the power to force local govern-

ments to regulate the activities and conduct that add

pollutants to the MS4.

Pollutants in stormwater runoff are of pervasive

origin. As precipitation, such as rain and snow, forms in

and falls from the sky it picks up pollutants from the

atmosphere such as sulfur dioxide, mercury and other

pollutants emitted into the atmosphere. Once it lands on

the ground, stormwater runoff picks up pollutants from

everything it contacts as it travels down towards a water

' When it promulgated its Phase I stormwater rules, EPA expressly

noted that it has “the authority to require a permit from the operator of

the point source conveyance (such as a municipal storm sewer or a

privately-owned treatment works), or from any person causing pollut-

ants to be present in that conveyance and discharged through the point

source, or both.” 55 Fed. Reg. 47998 (Nov. 16, 1990).

body. Thus, every physical thing and every activity ex-

posed to rainfall or runoff is a source of pollutants in

runoff — air emissions, residential lawn fertilizers and

pesticides, animal droppings, litter, tree detritus, brake-

pad lining, and vehicle wash water to name just a few. The

only way to keep pollutants out of stormwater runoff is to

keep the precipitation and runoff from contacting any

pollutants. The underlying issue here is whose obligation

is it to regulate this conduct, when the conduct is subject

to the regulatory power of both the federal and local

governments.

Local governments physically cannot avoid conveying

stormwater from the point where precipitation lands on

the earth to the waters of the United States. As broadly

defined by EPA, a MS4 consists of virtually all publicly-

owned property located within the boundaries of a local

government.’ Due to the inescapable effect of gravity,

precipitation falls from the sky and works its way to the

lowest topographic area (usually a river, stream, or lake).

This runoff will use every surface that it crosses as a

conveyance to the point where it enters waters of the

United States.* Every roof, gutter, sidewalk, curb, vacant

* According to EPA, a MS4 is “a conveyance or system of convey-

ances (including roads with drainage systems, municipal streets, catch

basins, curbs, gutters, ditches, man-made channels, or storm drains...

[djesigned or used for collecting stormwater” that is “[olwned or

operated by a State, city, town, borough, parish, district, association, or

other public body (created by or pursuant to State law) having jurisdic-

tion over disposal of sewage, industrial wastes, stormwater or other

wastes.” 40 C.F.R. § 122.26(b)(8).

* Adding the complexity of EPA’s scheme is the elusive nature of

“the waters of the United States.” United States. v. Deaton, 332 F.3d

698, 710-712 (4th Cir. 2003), petition for cert. filed, 72 U.S.L.W. 3356

(Continued on following page)

eceiieiiaieiaemiie

(Ril rertectcetidr i ns ete irene

lot, parking lot, street, ditch, public right-of-way, and

constructed storm drain, is part of the system of convey-

ances used for collecting stormwater, and those parts of

this system of conveyances that are owned by local gov-

ernments (regardless of their primary function) are part of

the MS4. Runoff cannot be physically kept out of the MS4

because the MS4 will always be located between the place

where precipitation falls and the nearest water of the

United States.

A. The Statutory and Regulatory Scheme

The cornerstone of the CWA, as enacted in 1972, is the

regulation of the discharge of pollutants to waters of the

United States through “point sources” using NPDES

permits. 33 U.S.C. §§ 1341(a) and 1342. Since 1973, EPA

has issued several rules in an attempt to address the

appropriate regulation of stormwater runoff, and each rule

has been the focus of substantial controversy. See American

(U.S. Nov. 10, 2003) (No. 03-701) (holding that roadside ditches are

waters of the United States); Headwaters, Inc. v. Talent Irrigation Dist.,

243 F.3d 526, 533-534 (9th Cir. 2001) (holding that man-made ditches

are waters of the United States); United States v. Eidson, 108 F.3d

1336, 1341-1343 (11th Cir. 1997) (holding that municipal storm sewers

are waters of the United States). If the MS4 is part of waters of the

United States and discharge of pollutants to the MS4 occur at a point

source (which most do), then the question becomes what obligation does

the owner of the MS4 have to obtain a permit for the subsequent

conveyance of the pollutants to another water of the United States.

Miccosukee Tribe of Indians of Florida v. South Florida Water Manage-

ment Dist., 280 F.3d 1364 (11th Cir. 2002), cert. granted, 123 S.Ct. 2638

(U.S. June 27, 2003) (certiorari granted on issue of whether pumping of

water from one water of the United States to another such water

constitutes the addition of a pollutant from a point source subject to

regulation).

Mining Congress v. EPA, 965 F.2d 759, 762-763 (9th Cir.

1992). Initially, EPA promulgated NPDES permit regula-

tions exempting uncontaminated stormwater discharges

from regulation on the basis of administrative infeasibility.

These regulations were challenged and set aside in Na-

tional Resources Defense Council, Inc. v. Costle, 568 F.2d

1369, 1377 (D.C. Cir. 1977), on the ground that EPA could

not exempt categories of point sources from the CWA’s

permitting requirements. Following that decision, EPA

issued proposed and final rules addressing stormwater

discharges in 1980, 1982, 1984, 1985 and 1988. These

rules were challenged at the administrative level and in

the courts.

In 1987, Congress amended the Clean Water Act. In

particular, Congress set up a new scheme for regulating

stormwater runoff, Clean Water Act § 402(p); 33 U.S.C.

§ 1342(p), App. 93-97. Congress identified four categories

of stormwater discharges for regulation in the short term:

(1) discharges for which a permit had been issued before

February 4, 1987; (2) discharges associated with industrial

activity; (3) discharges from municipal separate storm

sewer systems serving a population of 100,000 or more;

and (4) discharges that contribute to violations of water

quality standards or are significant contributors of pollut-

ants to the waters of the United States. The permit pro-

gram developed by EPA to address these four categories of

stormwater discharges is known as EPA’s Phase I storm-

water program.

Congress also expressly directed EPA to conduct

studies to: (1) identify those stormwater discharges or

classes of stormwater discharges exempted from Phase J;

(2) determine, to the maximum extent practicable, the

nature and extent of pollutants in such discharges; and (3)

5 7

establish procedures and methods to control discharges to

the extent necessary to mitigate impacts on water quality.

CWA § 402(pX(5), 33 U.S.C. § 1342(p)(5), App. 96. Finally,

Congress directed EPA, in consultation with State and

local officials, to issue regulations based on the studies to

“establish a comprehensive program to regulate” the

sources identified in the study. CWA § 402(p)(6), 33 U.S.C.

§ 1342(p)(6), App. 97. Congress directed that the program,

at a minimum: (1) establish priorities; (2) establish re-

quirements for State stormwater management programs;

and (3) establish expeditious deadlines. Id. Congress

further stated that the program could include performance

standards, guidelines, guidance, and management prac-

tices and treatment requirements, as appropriate. Id.

The comprehensive program developed by EPA, which

is known as EPA’s Phase II stormwater program, was

adopted by EPA on December 8, 1999 (64 Fed. Reg. 68722),

and is the subject of this petition. In particular, EPA’s

program expanded the NPDES permitting program to

include stormwater discharges from municipal separate

storm sewer systems serving less than 100,000 people

(“small MS4s”)." Small MS4s, by definition, are govern-

mental entities, either local, state or Federal, having

regulatory powers to control discharges to the MS4. 40

C.F.R. § 122.26(b)(8). The program automatically ex-

panded the NPDES permit requirement to all small MS4s

located in “urbanized areas” as defined by the Census

Bureau, and to any other small MS4s identified by the

NPDES permitting authorities (either EPA or States that

* EPA readily acknowledges that the CWA does not compel the use

of the NPDES permit program for Phase II. 64 Fed. Reg. 68739-68741.

have been authorized to implement the NPDES -program)

as meeting specific designation criteria. 40 C.F.R. § 122.32.

Small MS4s required to obtain NPDES permits are known

as “regulated small MS4s.”

EPA’s regulations require regulated smail MS4s to

obtain NPDES permits for their stormwater discharges. 40

C.F.R. § 122.33. At a minimum, the regulations direct that

any such permit require regulated small MS4s to develop,

implement and enforce stormwater management programs

designed to reduce the discharge of pollutants from the

MS4 to the maximum extent practicable, to protect water

quality, and to satisfy the appropriate water quality

requirements of the Clean Water Act. 40 C.F.R. § 122.34,

App. 168-181. EPA mandated that the stormwater man-

agement programs contain the six minimum control meas-

ures specified in the regulations: (1) public education and

outreach; (2) public involvement/participation; (3) illicit

discharge detection and elimination; (4) construction site

stormwater runoff control; (5) post-construction stormwa-

ter management in new development and redevelopment;

and (6) pollution prevention/good housekeeping for mu-

nicipal operations. 40.C.F.R. § 122.34(b), App. 168-177.

The six minimum measures, in part, require that the

regulated small MS4 use their police powers to regulate

activities within their jurisdictions, which are the actual

sources of pollutants in stormwater. The fcllowing are

some examples:

Illicit Discharges — Small MS4s must “effectively

prohibit, through ordinance or other regulatory mecha-

nism, non-stormwater discharges into [their] storm sewer

systems, and implement appropriate enforcement proce-

dures and actions.” 40 C.F.R. § 122.34(b)(3)(ii)(B), App.

171. Given the breadth of EPA’s definition of MS4 to

include municipal streets, curbs and gutters, this re-

quirement literally requires regulated small MS4s to

regulate a broad range of ordinary activities, including dog

walking, lawn maintenance and charity car washes (all of.

which will cause “illicit discharges”).

Construction Site Runoff —- Small MS4s must “develop,

implement, and enforce a program to reduce pollutants .. .

from construction activities that result in land distur-

bances of greater than or equal to one acre.” 40 C.FR.

§ 122.34(b)(4)(i), App. 172. Specifically, the program

developed by a regulated small MS4 must include “[a]n

ordinance or other regulatory mechanism to require

erosion and sediment controls” and procedures for site

plan review and site inspection for construction sites. 40

C.F.R. § 122.34(b)(4)(ii), App. 172-173. x

Post-Construction Stormwater Management — Small

MS4s must use “an ordinance or other regulatory mecha-

nism to address post-construction runoff from new devel-

opment and redevelopment.” 40 C.F-R. § 122.34(b)(5)(iiXB),

App. 174. This requirement directly affects local land-use

controls. App. 175-176.

As an alternative to being forced to implement EPA’s

“preferred approach” (a permit containing the six minimum

measures), EPA’s regulations allow regulated small MS4s to

submit permit applications under 40 C.FR. § 122.26(d)

(application requirements for medium and large MS4s). 40

C.F.R. § 122.33(b)(2)Gi). EPA did not include this “alterna-

tive permit option” in its proposed rule, but added it to the

final rule in response to TCCOS’ comments regarding the

questionable constitutionality of EPA’s preferred approach.

Although EPA provided application requirements for the

alternative permit option in the final rule, EPA did not

provide any guidance on how permit conditions would be

developed for regulated small MS4s that opt for the

alternative. 40 C.F.R. § 122.34(f), App. 179. Under the

application requirements of 40 C.F.R. § 122.33(b)(2)(ii)

(which are the application requirements of 40 C.F.R.

§ 122.26(d)) a small MS4 must submit a proposed man-

agement program that includes, among other require-

ments, “a program to implement and enforce an ordinance,

orders or similar means, to prevent illicit discharges to the

MS4.” 40 C.F.R. § 122.26(d)(2)(iv)(B)(1). The rule further

states that the proposed programs “will be considered by

[EPA] when developing permit conditions to reduce pollut-

ants in discharges to the maximum extent practicable.” 40

C.F.R. § 122.26(d)(2)(iv). Thus, to obtain a permit under

EPA’s alternative permit option, a small MS4 must pro-

pose a management program, including the obligation to

regulate the conduct of others, as part of the application

that will be turned into permit provisions.

B. The Ninth Circuit Decision

TCCOS filed a petition for review of EPA’s final action

adopting the Phase II stormwater program in the Fifth

Circuit in April 2000. TCCOS’s petition was consolidated

in the Fifth Circuit with the petition filed by the Texas

Counties Stormwater Coalition. The consolidated petitions

were transferred to the Ninth Circuit in June 2000 and

consolidated with two other petitions for review of EPA’s

action.

In its petition for review, TCCOS advocated two

primary positions.’ First, TCCOS argued, based on this

Court’s holding in Solid Waste Agency of Northern Cook

County v. Army Corps of Engineers, 531 U.S. 159 (2001)

(hereinafter S.W.A.N.C.C.), that EPA lacked the statutory

authority to compel local governments to regulate third

persons because such compulsion raises serious constitu-

tional questions altering the traditional federal-state

balance and because the Act contains no clear statement

that Congress intended to give EPA this power. Second,

TCCOS argued, based on this Court’s holding in New York

v. United States, 505 U.S. 144 (1992), that even Congress

lacks the constitutional authority to commandeer the

police powers of local governments to carry out a federal

program.

The Ninth Circuit denied TCCOS’ petition for review,

initially pursuant to an opinion and dissent entered on

January 14, 2003. That opinion and dissent were vacated

by the Ninth Circuit on September 15, 2003, when the

court entered a new opinion and dissent and denied all

petitions for rehearing and petitions for rehearing en banc.

App. 3-4.

The Ninth Circuit rejected TCCOS’ position that EPA

lacks the statutory authority to require local governments

to regulate the conduct of third persons. The court

* TCCOS also raised issues regarding whether the public education

minimum measure offended the First Amendment by compelling local

governments to engage in political speech and whether EPA lacked the

statutory authority to implement the Phase II stormwater program

through the NPDES permit program. TCCOS is not seeking review of

those issues.

;

= caeninaaccreaRe

acknowledged that the usual Chevron® deference should

not be given to agency interpretations that raise signifi-

cant constitutional issues, but disagreed that EPA’s

minimum measures presented significant constitutional

questions or altered the traditional federal-state balance.

App. i6 n. 18. The court based its conclusion on the

presence of the alternative permit option. Id. The court

further stated, “even if a clear statement of congressional

intent were necessary, § 402(p) of the Clean Water Act is

replete with clear statements that Congress intended EPA

to require MS4s to either obtain NPDES permits or to stop

discharging stormwater.” Id.

The Ninth Circuit’s conclusion that EPA’s minimum

measures approach did not present a significant constitu-

tional question was based on the court’s analysis of Con-

gress’ ultimate power under the Commerce Clause, and

not on any clear statement by Congress. The court did not

dispute that the minimum measures would compel local

governments to regulate the conduct of third persons. App.

16-18. Instead, the court reviewed EPA’s alternative

permit option and concluded that it would not necessarily

result in permits with commandeering provisions. There-

fore, the court concluded that EPA was merely encourag-

ing local governments to implement rather than

compelling them to do so. App. 19-22. The court agreed

with the holding of the Fifth Circuit in City of Abilene v.

EPA, 325 F.3d 657, 662 (5th Cir. 2003), that so long as

an alternative to implementing the federal regulatory

program exists and “does not offend the Constitution’s

* Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,

467 U.S. 837, 842-43 (1984).

guarantees of federalism, the fact that the alternative is

difficult, expensive or otherwise unappealing is insuffi-

cient to establish a Tenth Amendment violation.” App. 19-

20.

REASONS FOR GRANTING THE PETITION

The Ninth Circuit’s decision presents an issue of

immense importance to our federalist concept of dual

sovereignty. The court’s ruling allows a federal adminis-

trative agency, without guidance or direction from Con-

gress, to encourage, through the use of threats to impose

more onerous provisions, the States to surrender their

sovereignty. This court’s decision has immeasurable

consequences to the States and local governments. By

allowing administrative agencies to decide on their own

when and how to pressure the States into yielding their

sovereignty, the Ninth Circuit has removed the protections

provided by the lawmaking process against intrusive

exercises of Congress’ Commerce Clause powers. The

court’s decision creates an unprecedented device by which

an agency may impose any requirements, no matter how

constitutionally suspect, so long as the agency offers a

constitutionally sound alternative, no matter how difficult,

expensive or otherwise unappealing the alternative may

be.

The Ninth Circuit’s decision represents a radical

departure from settled law regarding the etiquette of

federalism. The court’s decision conflicts with this Court’s

decisions relating to the power of federal administrative

agencies to expand their authority in ways that upset the

traditional federal-state balance.

Moreover, the court of appeals’ mistaken understand-

ing of the “alternative” provided by EPA allows EPA to

directly conscript the legislative power of the States into

federal service. The effect of the Ninth Circuit’s error is

difficult to overstate. Every municipality, county, inde-

pendent school district, district, and state university in the

country that is not a medium or large MS4 (more than

50,000 governmental bodies) is potentially subject to the

rule, and more than 5,000 municipalities and counties

located in urbanized areas are directly regulated by the

rule and the Ninth Circuit’s misinterpretation. Only this

Court can correct the Ninth Circuit’s error and provide

relief for the small local governments of the nation.

I. THE DECISION BELOW CONFLICTS WITH

THIS COURT’S PRECEDENTS BARRING DEF-

ERENCE TO AN AGENCY’S STATUTORY CON-

STRUCTION WHERE THE AGENCY’S CON-

STRUCTION ENCROACHES UPON STATE

SOVEREIGNTY WITHOUT A CLEAR INDICA-

TION THAT CONGRESS INTENDED THE RE-

SULT

A. The Ninth Circuit’s Holding That EPA Can,

Without A Clear Statement From Congress,

Encourage Local Governments To Yield

Control Of Their Regulatory Powers Con-

flicts With Decisions Of This Court And

Presents An Important Question Of Federal

Law That Should Be Settled By This Court.

The Ninth Circuit’s decision that EPA has the statu-

tory authority to impose commandeering provisions as

conditions of NPDES permits, so long as EPA provides an

arguably constitutional sound alternative, presents a

novel and important issue regarding the power of federal

agencies and an important federalism question with

profound implications regarding the independent sover-

eignty of the States and their subdivisions — whether an

administrative agency may encourage a state to waive its

constitutional protection against federal commandeering,

when Congress has not clearly indicated that it has

empowered the agency to use such encouragement. The

Ninth Circuit’s holding represents a decision on an impor-

tant federal question that conflicts with relevant decisions

of this Court and presents an important question of

federal law, with continuing nationwide significance, that

has not been, but should be settled by this Court.

The crux of the Ninth Circuit’s decision is that by

adding the alternative permit option at the last minute,’

EPA brought the Phase II program for small MS4s within

the outer bounds of the scope of federal power. While not

agreeing with the court’s conclusion that the alternative

permit option does not also commandeer the police powers

of local governments, which will be explained subse-

quently, TCCOS’ position is that the decision to put a State

" The alternative permit option was not included in EPA’s proposed

Phase II rules. 63 Fed. Reg. 1536-1643 (Jan. 9, 1998). EPA added the

rule in response to TCCOS’ comments that the rule as proposed would

be unconstitutional because it would directly commandeer the police

powers of the States. App. 153-157. EPA never intended for the alterna-

tive permit option to be used by a regulated small MS4. The application

requirements do not explain how the detailed applications designed for

medium and large MS4s could be tailored for small MS4s. EPA’s

economic and regulatory analyses do not consider the cost effects

associated with the alternative permit option. In fact, EPA’s analyses

were based on the assumption that all regulated small MS4s would

obtain a general permit based on the minimum measures approach.

to the choice of surrendering its sovereignty or not in

exchange for a federal benefit is a decision that rests solely

in Congress and not within an administrative agency, and

that an agency cannot create that power through the

interpretation of an ambiguous statute. Because Congress

has not directed the States to choose between comman-

deering provisions or the alternative permit option, EPA

lacks the authority to put the States and their local

governments to such a choice.

Unquestionably, many of the provisions of EPA’s

Phase II rule commandeer local police powers. EPA’s rule

contains numerous express requirements that local gov-

ernments adopt “ordinances or other regulatory measures”

to regulate those subject to the local government’s jurisdic-

tion according to EPA’s plans. For example, the rules

require local governments to “effectively prohibit, through

ordinance or other regulatory mechanism, non-stormwater

discharges,” (40 C.F.R. § 122.34(b)(3)(ii)(B), App. 171), and

to adopt “an ordinance or other regulatory measure to

require erosion and sediment controls, as well as sanctions

to ensure compliance” (40 C.F.R. § 122.34(b)(4)(i)(A), App.

172). Even the Ninth Circuit did not dispute the comman-

deering nature of these provisions.

Ultimately, the resolution of this issue depends on the

scope of EPA’s authority under the CWA. Ordinarily, the

question of EPA’s statutory authority would be decided

based on the language of the statute and the traditional

deference given to agency interpretations under Chevron

U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467

U.S. 837, 842-43 (1984). This is the approach used by the

Ninth Circuit. App. 16 n. 18. However, “[w]here an admin-

istrative interpretation of a statute invokes the outer

limits of Congress’ power,” the Court will not defer to the

iiiasaemraaaiiscrancteiginistiin sis atin as 6

agency's interpretation unless there is a clear indication

that Congress intended the result. S.W.A.N.C.C., 531 U.S.

at 172. In S.WA.N.C.C., this Court noted that this re-

quirement stems from the Court’s prudential desire to

avoid needlessly reaching constitutional issues and the

Court’s assumption that Congress does not casually

authorize administrative agencies to “push the limit of

congressional authority.” S.WA.N.C.C., 531 U.S. at 172-

73.° This rule of statutory construction is particularly

heightened in situations altering the traditional federal-

state balance. S.W.A.N.C.C., 531 U.S. at 173. As this Court

has stated, “we must be absolutely certain that Congress

intended such an exercise. T]o give the state-displacing

weight of federal law to mere congressional ambiguity

would evade the very procedure for lawmaking on which

Garcia relied to protect states’ interests.’” Gregory v.

Ashcroft, 501 U.S. 452, 464 (1991) (citations omitted). By

requiring a clear statement from Congress, the Court can

effectively prevent Congress from avoiding hard questions

of federal-state relations and ensure that the political

process properly considers the interests of the States.

United States v. Bass, 404 U.S. 336, 349 (1971); see also

Laurence H. Tribe, American Constitutional Law 86, 1009-

1010 (3d ed. 2000).

This Court has made it clear that Congress may, in

some instances, encourage the States to surrender part of

* As noted by the Ninth Circuit itself: “When agencies adopt a

constitutionally troubling interpretation, however, we can be confident

that they not only lacked the expertise to evaluate the constitutional

problems, but probably did not consider them at all.” Williams v.

Babbitt, 115 F.3d 657, 662 (9th Cir. 1997).

their sovereignty (waive their protection from federal

intrusion) in exchange for some federal benefit. South

Dakota v. Dole, 483 U.S. 203 (1987) (conditioning receipt of

federal funds on state setting minimum drinking age to

federal standard); Hodel v. Virginia Surface Min. & Recl.

Ass’n, Inc., 452 U.S. 264 (1981) (allowing states to avoid

preemption by agreeing to implement a federal program).

In these instances, however, the Court has insisted on two

requirements: (1) that Congress has unambiguously

expressed its desire to invite the States to alter the tradi-

tional federal-state balance by accepting the federal

inducement, and (2) that the state voluntarily and know-

ingly accepts the terms of the bargain cognizant of the

consequences of their participation. College Sav. Bank v.

Florida Prepaid Postsecondary Educ. Expense Bd., 527

U.S. 666, 680-684 (1999); South Dakota v. Dole, 483 U.S.

at 207; Pennhurst State Sch. & Hosp. v. Haldermann, 451

U.S. 1, 17-18 (1981). Thus, a court should apply a “clear

statement rule” to determine whether Congress intended

to encourage the States to succumb to the federal gift and

not infer such power from ambiguous statutory language.

With regard to the regulation of small MS4s specifi-

cally and to NPDES permits in general, the CWA neither

authorizes EPA to impose commandeering provisions nor

to force local governments to choose between implement-

ing EPA’s regulatory program or being subject to an

alternative approach. Section 402(p) of the CWA author-

izes EPA to establish a “comprehensive program to regu-

late” small MS4s. 33 U.S.C. § 13842(p)(6), App. 97. This

program must, at a minimum, establish priorities, re-

quirements for State stormwater management programs,

and expeditious deadlines. Id. In addition, the program

may include performance standards, guidelines, guidance,

and management practices and treatment requirements,

as appropriate. Id. The permit requirements for medium

and large MS4s, CWA § 402(p)(3)(B), which EPA asserts

apply in this case, direct EPA to include a requirement to

effectively prohibit non-stormwater discharges into the

storm sewers and require controls to reduce the discharge

of pollutants to the maximum extent practicable including

management practices, control techniques and system,

design, and engineering methods. 33 U.S.C. § 1342(p)(3)(B),

App. 94-95.

Congress directed EPA to develop a comprehensive

program to regulate sources of stormwater discharges not

regulated by the Phase I program, and Congress knew

that this program might include stormwater discharges

from small MS4s owned and operated by local govern-

ments. The question is whether Congress clearly contem-

plated that EPA’s comprehensive regulatory program

might include EPA directing local governments to regulate

activities that add pollutants to water ultimately dis-

charged through the local government’s drainage system.

Congress’ use of terms such as “performance standards,

guidelines, guidance, and management practices and

treatment requirements” does not indicate that Congress

wanted EPA to fundamentally alter the federal-state

balance by imposing commandeering provisions or to

induce local governments into surrendering their sover-

eignty. In particular, an interpretation that Congress

wanted EPA to direct local governments to impose land-

use controls, such as those contained in 40 C.FR.

§ 122.34(b)(5), App. 174-176, would be antithetical to

Congress’ expressly stated policy to “recognize, preserve

and protect the primary responsibilities and rights of the

States ... to plan the development and use (including

restoration, preservation, and enhancement) of land and

water resources.” 33 U.S.C. § 1251(b).

Other portions of the CWA do contain clear statements

inviting the States to surrender portions of their sover-

eignty in exchange for a federal benefit. The provisions in

the CWA cover the gamut of acceptable “cooperative

federalism” techniques. Clean Water Act § 402(b) allows

any state to administer its own NPDES permit program if

it demonstrates to EPA that it has sufficient legal author-

ity to carry out the program; if a state fails to adequately

administer the program, EPA may revoke delegation. 33

U.S.C. § 1342(b). Clean Water Act §319 requires the

States to prepare nonpoint source management programs,

including regulatory programs to implement best man-

agement practices to reduce pollutant loadings resulting

from nonpoint sources; if a state fails to submit a plan or if

EPA disapproves the state’s plan, EPA must prepare a

report for the state that identifies water quality problems

caused by nonpoint sources and report to Congress regard-

ing EPA’s actions. 33 U.S.C. § 1329. Clean Water Act

§ 204(b) requires that a local government, as a condition of

obtaining funds to construct treatment works, adopt a

system of charges other than ad valorem taxes to fund

treatment plant operation and maintenance costs; if a

local government refuses to alter its funding method, the

local government will not receive federal funds. 33 U.S.C.

§ 1284(b).

In the Phase II rule, what EPA offers to local govern-

ments is the option of implementing a federal regulatory

program through the terms of a general permit to avoid

being held responsible for the pollution causing activities of

others through the provisions of an individual permit. See

64 Fed. Reg. 68765-68766, App. 156-157 (“The operator of a

small MS4 that does not prohibit and/or control discharges

into its system essentially accepts “title” for those dis-

charges.”). In the vernacular of cooperative federalism,

EPA’s permitting scheme (either accept a general permit

with the commandeering provisions or apply for an alter-

native individual permit) can best be analogized to a

delegation program; that is, a program through which the

States can be delegated the authority to implement a

federal regulatory program (the federal benefit) to avoid

being preempted altogether from the regulatory field. Just

as the Court would not allow EPA to create a delegation

program without a clear statement from Congress, the

Court should not allow EPA to create the program pre-

sented in the Phase II rule. -

In a case involving the permit requirements for

medium and large MS4s, the Fifth Circuit, held that EPA

has the statutory authority to impose commandeering

provisions pursuant to CWA § 402(p)(3)(B), App. 94-95.

City of Abilene v. EPA, 325 F.3d 657, 660-661 (5th Cir.

2003). The Fifth Circuit relies upon the language of the

statute that medium and large MS4 permits contain “such

other provisions as the Administrator ... determines

appropriate to control of such pollutants.” Id. The Fifth

Circuit’s holding is not directly applicable here because it

relates solely to the permit requirements for medium and

large MS4s. Moreover, the Fifth Circuit’s analysis is clearly

wrong. As illustrated by CWA § 319, which directs the States

to develop regulatory or nonregulatory best management

practices to control nonpoint source pollution, Congress

knows how to direct the States to use their “regulatory”

powers. Moreover, the scope of “provisions” available to EPA

cannot include the power to directly commandeer local police

powers without violating the anti-commandeering principles

laid down in New York v. United States, 505 U.S. 144

(1992). See also Brown v. EPA, 521 F.2d 827 (9th Cir.

1975), vacated and remanded, 431 U.S. 99 (1977), aff’d,

566 F.2d 665 (9th Cir. 1977) (vacated as moot after EPA

withdrew the challenged rule). In Brown, the Ninth —

Circuit court found the presence of these cooperative

federalism techniques to be incompatible with the view

that buried within the statute were provisions that would

allow EPA to merely conscript the States. Jd.

The Ninth Circuit’s deference to EPA’s construction

that it is authorized to encourage local governments to

yield their police powers to federal control conflicts with

this Court’s holding in S.W.A.N.C.C. Rather than first

asking whether EPA’s specific interpretation invokes the

outer limits of Congress’ power, the court jumped straight

to resolving whether Congress itself could propose such

encouragement. The problem with the court’s analysis is,

by directly addressing the ultimate bounds of Congres-

sional power without looking to see if Congress directly

addressed the issue, the court failed to ensure the efficacy

of the procedural political safeguards that were the focus

of this Court’s decision in Garcia v. San Antonio Metropoli-

tan Transit Authority, 469 U.S. 528, 552 (1985). The

ultimate question is not whether the provision of the

alternative brings EPA’s commandeering provisions into

the outer limits of federal power; rather the ultimate

question whether Congress itself, and not some adminis-

trative agency, has properly considered the effects of that

action.

The effect of the Ninth Circuit’s decision, simply put,

is circumvention of all federalism protections for the

States in those situations where the States engage in

conduct subject to the outer boundaries of Congress’

Attias

Commerce Clause powers (such as when local govern-

ments allow stormwater runoff to flow down their streets

and empty into a natural watercourse). The pernicious

effect of the court’s opinion is that the decision whether to

nullify the States’ federalism protections will be made

solely by federal agencies without direction from Congress.

To impose any condition upon the States, no matter how

constitutionally suspect, all an agency need do is provide

an alternative that does not offend the Constitution’s

guarantees of federalism, no matter how “difficult, expen-

sive or otherwise unappealing” the alternative. App. 19-20.

Under the Ninth Circuit’s rationale, EPA could permissibly

demand that local governments stop discharging stormwa-

ter altogether,’ or that local governments actively promote

the campaigns of pro-environment candidates, both of which

might fit within the maximum extent practicable standard

articulated by Congress.” Clearly, Congress did not intend to

allow an agency to boundlessly expand its statutory

authority by bootstrapping off of its clear authority. Just

because Congress empowered an agency to do X, does not

mean that Congress empowered the agency to do Y or Z, so

long as the agency offers X as an alternative to doing Y or

Z. In situations not implicating federalism, a court might

defer under Chevron to the agency’s interpretation that Y

* The Ninth Circuit hints at a third option available to small MS4s

that raises no federalism concerns — the no discharge option. As TCCOS

argued before the court, no small MS4 can avoid discharging stormwa-

ter through its storm sewers. Water flows down hill.

The text of the Ninth Circuit decision appears to suggest that

EPA could also avoid the constriction of the maximum extent practica-

ble standard so long as EPA promulgates at least one approach meeting

the standard. App. 19-20.

and Z are permissible, but where Y or Z raise federalism or

other serious constitutional issues, a court should not

defer to the agency’s interpretation.

The Ninth Circuit’s decision marks a profound shift in

the balance of power from the States to the federal admin-

istrative agencies. Under the decision, the States lose the

structural protections from excess federal intrusion

provided by Gregory v. Ashcroft. Under the decision,

administrative agencies can radically alter the balance of

power based solely on ambiguous delegations of power

from Congress. This Court should review the court of

appeals’ decision and determine whether such an altera-

tion in the federal-state balance is appropriate.

B. The Ninth Circuit’s Holding That EPA Has

The Authority To Encourage Local Govern-

ments to Surrender Their Regulatory Pow-

ers Or Comply With Indeterminable Permit

Provisions Is A Decision On An Important

Federal Question That Conflicts With Deci-

sions Of This Court And Presents An Impor-

tant Question of Federal Law That Should

Be Settled By This Court.

Assuming, arguendo, that EPA has the authority to

force local governments to choose between regulating

others or having to obtain some other form of permit, The

Ninth Circuit’s holding, which clearly encourages local

governments to strike a Faustian bargain (i.e., one that

encourages local governments to bargain away their souls

to gain a short-term advantage), conflicts with this Court’s

precedents mandating that a State make an informed

choice when striking a bargain with the federal govern-

ment and presents an important question of federal law,

‘Si

with continuing nationwide significance, that has not

been, but should be, settled by this Court.

When Congress invites the States to accept federal

funds, waive their Eleventh Amendment protections, or

avoid preemption, Congress must do so in a manner that

ensures that the States voluntarily and knowingly accept

the terms of the bargain cognizant of the consequences of

their participation. College Sav. Bank, 527 U.S. at 680-

684; South Dakota v. Dole, 483 U.S. at 207; Pennhurst

State Sch. & Hosp. v. Haldermann, 41 U.S. at 17-18. EPA’s

alternative permit option is an offer to allow local govern-

ments to use their police powers to implement EPA’s

program in exchange for avoiding some more onerous, but

indeterminable, permit provision. In other words, EPA’s

offer fails to provide sufficient notice of the terms of the

bargain because it fails to fully inform the States of the

terms of the alternative permit option.

The only description offered by EPA of this alternative

permit option is found in the preamble to EPA’s final

Phase II rule. 64 Fed. Reg. 68785-86, App. 152-160. This

description provides little substantive information regard-

ing what might be required in such a permit. EPA states

that effluent limits in such permits might be set using

“equivalency” determinations, but EPA admits that the

limits set through such determinations will have a wide

range because of the lack of information regarding such

discharges. App. 158-159. As EPA candidly states,

“[plermit writers will undoubtedly find ways to ensure

that permit limits ensure reduction of pollutants to the

maximum extent practicable.” App. 159. Since the promul-

gation of the rule in 1999, EPA has issued no guidance

explaining how permit terms for such permits should be

determined. At the time small MS4s decide whether to

a a Stee ES

succumb to EPA’s offer, they have no way of knowing how

much more onerous the alternative permit option will be

than EPA’s minimum measures approach. Granted, EPA’s

description of the alternative permit option clearly implies

that the approach will be far more onerous than the

minimum measures approach, but EPA’s description looks

more like euphemistic encouragement than an objective

explanation of the alternative. EPA’s approach ensures

that small MS4s have no way of making an informed

choice.

The Ninth Circuit’s decision gives federal administra-

tive agencies the power, without any clear authorization

from Congress, to bully local governments into surrender-

ing their regulatory powers to avoid the imposition of the

most difficult and expensive (but arguable constitutional)

alternative within the imagination of an agency. By

depriving local governments of the ability to make an

informed choice, EPA deprived the local governments of

the ability to make a choice; EPA’s encouragement became

coercion. Given the choice between regulating in accor-

dance with EPA’s mandates or pursuing an option of

indeterminable cost and difficulty, only those elected

officials truly committed to the Constitution at any cost

would pursue the alternative. On this basis as well, the

Ninth Circuit’s decision marks a profound shift in the

balance of power from the States to fedéral agencies. This

Court should review the court of appeals’ decision and

determine whether such an alteration in the federal-state

balance is appropriate.

II. THE NINTH CIRCUIT ERRED IN DETERMIN-

ING THAT THE ALTERNATIVE PERMIT OP-

TION WOULD NOT COMMANDEER LOCAL

POLICE POWERS

The Ninth Circuit’s conclusion that the alternative

permit option does not require a small MS4 to implement

a federal regulatory program in order to receive a permit,

App. 20-22, is flawed. The alternative permit option

unquestionably requires small MS4s to obtain permits

with conditions forcing small MS4s to regulate the conduct

of others. Since both of EPA’s options, the minimum

measures option and the alternative permit option, force

local governments to regulate others, EPA’s rules violate

the anti-commandeering rule laid down by this Court in

New York. The Court should review the court of appeals’

decision and correct this obvious mistake, which poten-

tially affects more than 50,000 State and local governmen-

tal entities in the nation.

EPA’s alternative permit option allows a small MS4 to

seek authorization to discharge under an individual

permit by complying with the provisions of 40 C.F.R.

§ 122.26(d), except for the information required by

§§ 122.26(d)(1)(ii) and (d)(2) regarding legal authority. 40

C.F.R. § 122.33(b)(2)Gi). Under 40 C.FR. § 122.26(d),

however, a small MS4 must, as part of its permit applica-

tion, submit a proposed management program that in-

cludes provisions regulating those subject to the small

MS4s’ regulatory powers. One example is the requirement

to implement and enforce an ordinance, orders or similar

means, to prevent illicit discharges to the MS4. 40 C.F.R.

§ 122.26(d)(2)(iv(B)(1). The only conclusion that can

logically be drawn from this application requirement is

that final permits will incorporate the proposed programs.

Local governments will not be free to simply not propose

the programs, because EPA’s rules direct EPA to only

review applications that are complete, and if local gov-

ernments refuse to submit required portions of applica-

tions, the applications will be denied. 40 C.F.R. § 124.3(c).

That the final permit will incorporate the proposed man-

agement programs is clearly demonstrated in other EPA

rules addressing applications submitted under 40 C.F‘\R.

§ 122.26(d), which require the permittee to annually

report on the status of, and changes to “the components of

the stormwater management program that are established

as permit conditions. 40 C.F.R. § 122.42(c).

In the preamble to the final Phase II rule, EPA offers

no explanation of how a local government will be able to

submit an application for permit, which must contain

regulatory programs, and ensure that those regulatory

programs will not be incorporated into the NPDES per-

mit.’ Instead, EPA purposefully obscures what permits

issued under this alternative approach will contain by

stating that the alternative “provides for greater flexibility

in program implementation” and gives a local government

“the option to seek an individual permit that varies from

the minimum measures/management approach that is

"The vagueness of EPA’s alternative permit option could have

been addressed at the administrative level if EPA had included this

option in its proposed rule and TCCOS had the opportunity to comment

on the approach. TCCOS unsuccessfully asserted before the Ninth

Circuit that EPA failed to comply with the minimum notice and

comment procedures of the APA. App. 27-29. EPA should not be allowed

to argue now that its alternative permit option is sufficiently clear

regarding the ability of local governments to avoid regulating others

when TCCOS was denied the opportunity to comment on EPA’s

approach in the rulemaking.

otherwise specified.” App. 157. However, EPA nowhere

denies that the submission of a complete application would

not result in commandeering provisions being included in

the permit.

The Ninth Circuits analysis of 40 C.FR.

§ 122.33(b)(2)(ii) is likewise uninformative. The court

merely restates the obvious, that § 122.26(d) does not

require small MS4s to regulate the conduct of others

because § 122.26(d) is merely an application requirement.

The court’s only attempt to explain that the permit ulti-

mately issued based on these application requirements

will not require the regulation of others is by relying on

the Fifth Circuit’s decision in City of Abilene. The court’s

reliance on City of Abilene to support its proposition is

misplaced. A review of that case reveals the NPDES

permits at issue contained conditions requiring the af-

fected local governments to regulate the conduct of others.

City of Abilene, 325 F.3d at 662-63. The case does not

stand for the proposition that EPA could lawfully issue a

permit without such conditions. Later in the opinion, App.

33 n. 31, the Ninth Circuit recognizes that it previously

relied on EPA’s position that “inadequate proposals will

result in the denial of permit applications” in Natural

Resources Defense Council, Inc. v. EPA, 966 F.2d 1292 (9th

Cir. 1992). In the prior case, the Ninth Circuit held that

permit application requirements of § 122.26(d) provided

sufficient guidance because “[a]pplicants must submit

information on source control methods.” NRDC v. EPA,

966 F.2d at 1308 n. 17. In other words, the Ninth Circuit

previously held that permits written based on the permit

application requirements of § 122.26(d) would contain

commandeering provisions because such requirements

would be based on the plans submitted by applicants,

which would necessarily contain such provisions.

The Ninth Circuit’s error in construing the require-

ments of 40 C.F.R. § 122.33(b)(2)(ii) caused the Ninth

Circuit to misapply S.W.A.N.C.C. and the Court’s anti-

commandeering rule. Because both the minimum meas-

ures option and the alternative permit option require local

governments to regulate the conduct of those subject to

their control, EPA’s interpretation that it has the authority

to require these provisions clearly raises significant

federalism issues (and demonstrates a constitutional

violation). The Ninth Circuit erred in deferring to EPA’s

construction of the statute. This Court should grant

certiorari to correct this error.

CONCLUSION

The petition for writ of certiorari should be granted.

Respectfully submitted,

JIM MATHEWS

Counsel of Record

JOE FREELAND

MATHEWS & FREELAND, LLP

327 Congress Avenue

Suite 300

Austin, Texas 78701

(512) 404-7800

Fax: (512) 703-2785

Attorneys for Petitioners,

Texas Cities Coalition

on Stormwater

App. l

Volume 1 of 2

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ENVIRONMENTAL DEFENSE CENTER,

INC.,

Petitioner,

NATURAL RESOURCES DEFENSE No. 00-70014

COUNCIL, INC., EPA No.

Petitioner-Intervenor, Clean Water 40

CFR

UNITED STATES ENVIRONMENTAL

PROTECTION AGENCY,

Respondent.

AMERICAN FOREST & PAPER

ASSOCIATION; NATIONAL ASSOCIATION

oF HOME BUILDERS,

Petitioner, No. 00-70734

= EPA No.

UNITED STATES ENVIRONMENTAL Clean Water 40

PROTECTION AGENCY, CFR

Respondent,

NATURAL RESOURCES DEFENSE

COUNCIL, INC.,

Applicant-Intervenor.

App. 2

TEXAS CITIES COALITION ON

STORMWATER; TEXAS COUNTIES

STORM WATER COALITION, No. 00-70822

i EPA No.

Petitioners,

Clean Water 40

Vv. CFR

UNITED STATES ENVIRONMENTAL ORDER AND

PROTECTION AGENCY, OPINION

Respondent,

NATURAL RESOURCES DEFENSE COUN-

CIL, INC.,

Respondent-Intervenor.

On Petition for Review of an Order of the

Environmental Protection Agency

Argued and Submitted

December 3, 2001 — Pasadena, California

Filed September 15, 2003

Before: James R. Browning, Stephen Reinhardt, and

Richard C. Tallman, Circuit Judges.

Opinion by Judge Browning; Partial Concurrence and

Partial Dissent by Judge Tallman

COUNSEL

Victoria Clark, Environmental Defense Center, Santa

Barbara, California, for petitioner Environmental Defense

Center, Inc.

Andrew G. Frank and Arlene Yang, Paul, Weiss, Rifkind,

Wharton & Garrison, New York, New York, and Nancy K.

Stoner, Natural Resources Defense Council, Washington,

App. 3

D.C., for intervenor National Resources Defense Council,

Inc.

R. Timothy McCrum, Ellen B. Steen, and Donald J. Ko-

chan, Crowell & Moring, Washington, D.C., for petitioners

American Forest & Paper Association and National Asso-

ciation of Home Builders.

Steven P. Quarles and J. Michael Klise, Crowell & Moring,

Washington, D.C., and William R. Murray, American

Forest & Paper Association, Washington, D.C., for peti-

tioner American Forest & Paper Association.

Jim Mathews and Clarence Joe Freeland, Mathews &

Freeland, Austin, Texas, for petitioner Texas Cities Coali-

tion on Stormwater.

Sydney W. Falk, Jr. and William D. Dugat III, Bickerstaff,

Heath, Smiley, Pollan, Kever & McDaniel, Austin, Texas,

for petitioner Texas Counties Storm Water Coalition.

John C. Cruden, Daniel M. Flores and Kent E. Hanson,

United States Department of Justice, Washington, D.C.,

and Stephen J. Sweeny, United States Environmental

Protection Agency, Washington, D.C., for respondent

United States Environmental Protection Agency.

ORDER

The opinion and dissent filed in this case on January

14, 2003, and published at 319 F.3d 398 are vacated. They

are replaced by the Opinion and Dissent filed today.

With the filing of the new Opinion and Dissent, the

panel has voted to deny the petitions for rehearing and the

petition for rehearing en banc. (Judge Tallman would

App. 4

grant the petition for rehearing filed by the Environ-

mental Protection Agency.) The full court has been advised

of the new Opinion, new Dissent, and petition for rehear-

ing en banc. No judge has requested a vote on the petition

for rehearing en banc. Fed. R.App. P. 35.

The petitions for rehearing and the petition for re-

hearing en banc are DENIED. The clerk is instructed not

to accept for filing any new petitions for rehearing or

petitions for rehearing en banc in this case.

Each party shall bear its own costs in this appeal.

OPINION

BROWNING, Circuit Judge:

Petitioners challenge a rule issued by the United

States Environmental Protection Agency pursuant to the

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

pollutants introduced into the nation’s waters by storm

sewers.

Storm sewers drain rainwater and melted snow from

developed areas into water bodies that can handle the

excess flow. Draining stormwater picks up a variety of

contaminants as it filters through soil and over pavement

on its way to sewers. Sewers are also used on occasion as

an easy (if illicit) means for the direct discharge of un-

wanted contaminants. Since storm sewer systems gener-:

ally channel collected runoff into federally protected water

bodies, they are subject to the controls ot the Clean Water

Act.

In October of 1999, after thirteen years in process, the

Environmental Protection Agency (“EPA”) promulgated a

- App. 5

final administrative rule (the “Phase II Rule” or “the

Rule”) under § 402(p) of the Clean Water Act, 33 U.S.C.

§ 1342(p), mandating that discharges from small munici-

pal separate storm sewer systems and from construction

sites between one and five acres in size be subject to the

permitting requirements of the National Pollutant Dis-

charge Elimination System (“NPDES”), 33 U.S.C.

§§ 1311(a), 1342. EPA preserved authority to regulate

other harmful stormwater discharges in the future.

In the three cases consolidated here, petitioners and

intervenors challenge the Phase II Rule on twenty-two

constitutional, statutory, and procedural grounds. We

remand three aspects of the Rule concerning the issuance

of notices of intent under the Rule’s general permitting

scheme, and a fourth aspect concerning the regulation of

forest roads. We affirm the Rule against all other chal-

lenges.

BACKGROUND

A. The Problem of Stormwater Runoff

Stormwater runoff is one of the most significant

sources of water pollution in the nation, at times “compa-

rable to, if not greater than, contamination from industrial

The “Phase II Rule” reviewed here is the product of the second

stage of EPA’s two-phase stormwater rulemaking effort. The “Phase I

Rule,” governing larger-scale stormwater discharges, was issued in

1990 and reviewed by this court in Natural Res. Def. Council v. EPA,

966 F.2d 1292 (9th Cir. 1992).

App. 6

and sewage sources.” Storm sewer waters carry sus-

pended metals, sediments, algae-promoting nutrients

(nitrogen and phosphorus), floatable trash, used motor oil,

raw sewage, pesticides, and other toxic contaminants into

streams, rivers, lakes, and estuaries across the United

States.’ In 1985, three-quarters of the States cited urban

stormwater runoff as a major cause of waterbody impair-

ment, and forty percent reported construction site runoff

as a major cause of impairment.‘ Urban runoff has been

named as the foremost cause of impairment of surveyed

ocean waters.’ Among the sources of stormwater contami-

nation are urban development, industrial facilities, con-

struction sites, and illicit discharges and connections to

storm sewer systems.°

B. Stormwater and the Clean Water Act

Congress enacted the Clean Water Act in 1948 to

“restore and maintain the chemical, physical, and biologi-

cal integrity of the Nation’s waters.” 33 U.S.C. § 1251(a)

(originally codified as the Federal Water Pollution Control

Act, 62 Stat. 1155). The Clean Water Act prohibits the

* Richard G. Cohn-Lee and Diane M. Cameron, Urban Stormwater

Runoff Contamination of the Chesapeake Bay: Sources and Mitigation,

THE ENVIRONMENTAL PROFESSIONAL, Vol. 14, p. 10, at 10 (1992); see also

Natural Res. Def. Council, 966 F.2d at 1295 (citing a study by the

Nationwide Urban Runoff Program).

* Regulation for Revision of the Water Pollution Control Program

Addressing Storm Water, 64 Fed. Reg. 68,722, 68,724, 68,727 (Dec. 8,

1999) (codified at 40 C.F.R. pts. 9, 122, 123, and 124).

* Id. at 68,726.

* Id.

* Id. at 68,725-31.

App. 7

discharge of pollutants from a “point source” into the

waters of the United States without a permit issued under

the terms of the National Pollutant Discharge Elimination

System, 33 U.S.C. §§ 1311(a), 1342, which requires dis-

chargers to comply with technology-based pollution limita-

tions (generally according to the “best available technology

economically achievable,” or “BAT” standard). 33 U.S.C.

§ 1311(b)(2)(A). NPDES permits are issued by EPA or by

States that have been authorized by EPA to act as NPDES

permitting authorities. 33 U.S.C. § 1342(a)-(b). The per-

mitting authority must make copies of all NPDES permits

and permit applications available to the public, 33 U.S.C.

§§ 1342(j), 1342(b)(3); state permitting authorities must

provide EPA notice of each permit application, 33 U.S.C.

§ 1342(b)(4); and a permitting authority must provide an

opportunity for a public hearing before issuing any permit,

33 U.S.C. §§ 1342(a)(1), 1342(b)(3); cf. 33 U.S.C. § 1251(e)

(requiring public participation).

Storm sewers are established point sources subject to

NPDES permitting requirements. Natural Res. Def.

Council v. Costle, 568 F.2d 1369, 1379 (D.C. Cir. 1977)

(holding unlawful EPA’s exemption of stormwater dis-

charges from NPDES permitting requirements); Natural

Res. Def. Council v. EPA, 966 F.2d 1292, 1295 (9th Cir.

1992).* In 1987, to better regulate pollution conveyed by

” A point source is “any discernible, confined and discrete convey-

ance, including but not limited to any pipe, ditch, channel, tunnel,

conduit, well, discrete fissure, container, rolling stock, concentrated

animal feeding operation, or vessel or other floating craft, from which

pollutants are or may be discharged.” 33 U.S.C. § 1362(14).

* Diffuse runoff, such as rainwater that is not channeled through a

point source, is considered nonpoint source pollution and is not subject

(Continued on following page)

App. 8

stormwater runoff, Congress enacted Clean Water Act

§ 402(p), 33 U.S.C. § 1342(p), “Municipal and Industrial

Stormwater Discharges.” Sections 402(p)(2) and 402(p)(3)

mandate NPDES permits for stormwater discharges

“associated with industrial activity,” discharges from large

and medium-sized municipal storm sewer systems, and

certain other discharges. Section 402(p)(4) sets out a

timetable for promulgation of the first of a two-phase

overall program of stormwater regulation. Jd. at

§ 1342(p)(2)-(4); Natural Res. Def. Council, 966 F.2d at

1296. In 1990, pursuant to § 402(p)(4), EPA issued the

Phase I Rule regulating large discharge sources.”

C. The Phase II Stormwater Rule

In Clean Water Act § 402(p), Congress also directed a

second stage of stormwater regulation by ordering EPA to

identify and address sources of pollution not covered by

the Phase I Rule. Section 402(p)(1) placed a temporary

moratorium (expiring in 1994) on the permitting of other

stormwater discharges pending the results of studies man-

dated in § 402(p)(5) to identify the sources and pollutant

to federal regulation. Oregon Natural Desert Ass’n v. Dombeck, 172 F.3d

1092, 1095 (9th Cir. 1998).

° National Pollutant Discharge Elimination System Permit

Application Regulations for Stormwater Discharges, 55 Fed. Reg.

47,990 (Nov. 16, 1990) (codified at 40 C.F.R. pt. 122-124). The Phase I

rule was challenged in this court in Natural Res. Def. Council, 966 F.2d

at 1292. We held, inter alia, that EPA must impose deadlines for permit

approvals, id. at 1300, that EPA’s decision to regulate construction sites

only over five acres in size was arbitrary and capricious, id. at 1306,

and that EPA did not act capriciously in defining “municipal,” id. at

1304, or in placing differently-sized municipalities on different permit-

ting schedules, id. at 1301.

App. 9

content of such discharges and to establish procedures and

methods to-control them as “necessary to mitigate impacts

on water quality.” 33 U.S.C. § 1342(p)(5). Section 402(p)(6)

required that EPA establish “a comprehensive program to

regulate” these stormwater discharges “to protect water

quality,” following the studies mandated in § 402(p)(5) and

consultation with state and local officials. Jd. at

§ 1342(p)(6).

EPA proposed the Phase II Rule in January of 1998.”

In October, 1999, Congress passed legislation precluding

EPA from promulgating the new Rule until EPA submitted

an additional report to Congress supporting certain

anticipated aspects of the Rule." EPA was also required to

publish its report in the Federal Register for public com-

ment. Pub. L. No. 106-74, § 431(c), 113 Stat. at 1097. Later

that month, EPA submitted the required (“Appropriations

Act”) study and promulgated the Rule.”

Under the Phase II Rule, NPDES permits are required

for discharges from small municipal separate storm sewer

systems (“small MS4s”) and stormwater discharges from

construction activity disturbing between one and five acres

(“small construction sites”). 40 C.F.R. §§ 122.26(a9\iXA){B).

Program Addressing Storm Water Discharges, 63 Fed. Reg. 1536

(proposed Jan. 9, 1998).

" Pub. L. No. 106-74, § 431(a), 113 Stat. 1047, 1096 (1999) (“Appro-

priations, 2000 — Department of Veterans Affairs and Housing and

Urban Development, and Independent Agencies”).

” Regulations for Revision of the Water Pollution Control Program

Addressing Storm Water Discharges, 64 Fed. Reg. 68,722 (Dec. 8, 1999)

(codified at 40 C.F.R. pts. 9, 122, 123, and 124).

App. 10

Small MS4s may seek permission to discharge by submit-

ting an individualized set of best- management plans in

six specified categories, id. at § 122.34, either in the form

of an individual permit application, or in the form of a

notice of intent to comply with a general permit. Jd. at

§ 122.33(b). Small MS4s may also seek permission to

discharge through an alternative process, under which a

permit may be sought without requiring the operator to

regulate third parties, id. at §§ 122.33(b)(2)(ii), 122.26(d).”

Small construction sites may apply for individual NPDES

permits or seek coverage under a promulgated general permit.

Id. at § 122.26(c). EPA also preserved authority to regulate

other categories of harmful stormwater discharges on a

regional, as-needed basis. Jd. at § 122.26(aX9)(iX(C)-(D).

—s

D. Facial Challenges to the Phase II Rule

The Rule was challenged in the Fifth, Ninth, and D.C.

Circuits in three separate actions ultimately consolidated

before the Ninth Circuit.

The Texas Cities Coalition on Stormwater and the

Texas Counties Stormwater Coalition (collectively, “the

Municipal Petitioners”) assert that EPA lacked authority

to require permitting, that its promulgation of the Rule

was procedurally defective, that the Rule establishes

categories that.are arbitrary and capricious, and that the

Rule impermissibly requires municipalities to regulate

The Rule also allows a small MS4 to be regulated under an

individual NPDES permit covering a nearby large or medium MS4,

with provisions adapted to address the small MS4. 40 C.FR.

§ 122.33(b)(3).

App. 11

their own citizens in contravention of the Tenth Amend-

ment and to communicate a federally mandated message

in contravention of the First Amendment. The Natural

Resources Defense Council (“NRDC”) intervened on behalf

of EPA.

Environmental Defense Center, joined by petitioner-

intervenor NRDC (“the Environmental Petitioners”),

asserts that the regulations fail to meet minimum Clean

Water Act statutory requirements because they constitute

a program of impermissible self-regulation, fail to provide

required avenues of public participation, and neglect to

address stormwater runoff associated with forest roads

and other significant sources of runoff pollution.

The American Forest & Paper Association (“AF&PA”)

and the National Association of Home Builders (“the

Industrial Petitioners”) assert that promulgation of the

Rule was procedurally defective and violated the Regula-

tory Flexibility Act, that EPA’s retention of authority to

regulate future sources of runoff pollution is ultra vires,

and that the decision to regulate discharge from construc-

tion sites one to five acres in size is arbitrary and capri-

cious. NRDC again intervened on behalf of EPA.

We have jurisdiction pursuant to section 509(b)(1) of

the Clean Water Act, 33 U.S.C. § 1369(b)(1) (assigning

review of EPA effluent and permitting regulations to the

Federal Courts of Appeals).

App. 12

II.

DISCUSSION

A. The Permit Requirements

The Municipal Petitioners’ primary contention is that

the Phase II Rule compels small MS4s to regulate citizens

as a condition of receiving a permit to operate, and that

EPA lacks both statutory and constitutional authority to

impose such a requirement. Because we avoid considering

constitutionality if an issue may be resolved on narrower

grounds, Greater New Orleans Broadcasting Ass’n ov.

United States, 527 U.S. 173, 184 (1999), we first ask

whether the Phase II Rule is supported by statutory

authority.

1. Statutory Authority

The Municipal Petitioners assert that the statutory

command in Clean Water Act § 402(p)(6) that EPA develop

a “comprehensive program to regulate” small MS4s did not

authorize a program based on NPDES permits. Petitioners

argue that because § 402(p)(6) explicitly indicates ele-

ments that the program may contain (performance stan-

dards, guidelines, etc.) without mentioning “permits,”

Congress must have intended that the program exclude

permitting. “

“ The text of that section reads: “Not later than October 1, 1993,

[EPA], in consultation with state and local officials, shall issue regula-

tions (based on the results of the studies conducted under paragraph

(5)) which designate stormwater discharges, other than those dis-

charges described in paragraph (2), to be regulated to protect water

quality and shall establish a comprehensive program to regulate such

(Continued on following page)

App. 13

The fact that “permitting” is not included on a statu-

tory list of elements that the program “may” include is not

determinative, because the list is manifestly nonexclusive.

The only constraints are that the § 402(p)(6) regulations

be based on the § 402(p)(5) studies, that they be issued in

consultation with state and local officials, and that — “at a

minimum” — they establish priorities, requirements for

state stormwater management programs, and expeditious

deadlines, and constitute a comprehensive program “to

protect water quality.” 33 U.S.C. § 1342(p)(6). EPA was

free to adopt any regulatory program, including a permit-

ting program, that included these elements. See Chevron,

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

(1984) (deference to an agency’s reasonable interpretation

is required unless Congress expressed its intent unambi-

guously). It is more reasonable to interpret congressional

silence about permits as an indication of EPA’s flexibility

not to use them than as an outright prohibition.”

The Municipal Petitioners further contend that their

interpretation is supported by the structure of § 402(p),

which expressly requires permits for large and medium

sized MS4s in a separate section, § 402(p)(3)(B).'° However,

designated sources. The program shall, at a minimum, (A) establish

priorities, (B) establish requirements for State stormwater manage-

ment programs, and (C) establish expeditious deadlines. The program

may include performance standards, guidelines, guidance, and man-

agement practices and treatment requirements, as appropriate.” 33

U.S.C. § 1342(p)(6).

18 The lesser category of “permits” may also be implied by the

inclusion of “performance standards” in the list of possible program

features.

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

(Continued on following page)

App. 14

as EPA counters, the language in § 402(p)(3) requiring

permits for municipal storm sewers may be interpreted to

apply both to Phase I and Phase II MS4s. Moreover, as

respondent-intervenor NRDC notes, the mere existence of

the § 402(p)(1) permitting moratorium, designed to apply

only to Phase II dischargers, necessarily implies that EPA

has the authority to require permits from these sources

after the 1994 expiration of the moratorium.

Since there would have been no need to establish a

permitting moratorium for these sources if the sources

could never be subject to permitting requirements, peti-

tioners’ interpretation violates the bedrock principle that

statutes not be interpreted to render any provision super-

fluous. See Burrey v. Pacific Gas & Elec. Co., 159 F.3d 388,

394 (9th Cir. 1998). EPA’s interpretation of its mandate

under § 402(p)(6) was reasonable and EPA acted within its

statutory authority in formulating the Phase II Rule as a

permitting program.

2. The Tenth Amendment

The Municipal Petitioners contend that the Phase II

Rule on its face compels operators of small MS4s to regu-

late third parties in contravention of the Tenth Amend-

ment. We conclude that the Rule does not violate the

Tenth Amendment, because it directs no unconstitutional

coercion.

presumed that Congress acts intentionally and purposely in the

disparate inclusion or exclusion.” Baies v. United States, 522 U.S. 23,

29-30 (1997).

App. 15

The Phase II Rule contemplates several avenues

through which a small MS4 may obtain permission to

discharge. First, if the NPDES Permitting Authority

overseeing the small MS4 has issued an applicable general

permit, the small MS4 may submit a notice of intent

wherein the small MS4 agrees to comply with the terms of

the general permit and specifies plans for implementing

six “Minimum Measures” designed to protect water qual-

ity. 40 C.FR. §§ 122.33(b)(1), 122.34(d)(1)(i), 122.34(b).

Second, the small MS4 may apply for an individual permit

under 40 C.F.R. § 122.34, which would again require

compliance with the six Minimum Measures. Id. at

§§ 122.33(b)(2)(i), 122.34(a), 122.34(b). Third, under an

“Alternative Permit” option, the small MS4 may apply for

an individualized permit under 40 C.FR. § 122.26(d), the

permitting program established by the Phase I Rule for

large and medium-sized MS4s. Id. at §8§ $22.33(b)(2)(ii),

122.26(d).”

The Minimum Measures mentioned above require

small MS4s to implement programs for: (1) conducting

public education and outreach on stormwater impacts, id.

at § 122.34(b)(1); (2) engaging public participation in the

development of stormwater management programs, id. at

§ 122.34(b\(2); (3) detecting and eliminating illicit dis-

charges to the MS4, id. at § 122.34(b\(3); (4) reducing pollu-

tion to the MS4 from construction activities disturbing one

acre or more, id. at § 122.34(b)(4); (5) minimizing water

quality impacts from development and redevelopment

17 The Phase II Rule also allows a small MS4 to be regulated under

an NPDES permit covering a nearby large or medium-sized MS4, with

provisions adapted to address the small MS4. 40 C.F.R. § 122.33(b)(3).

App. 16

activities that disturb one acre or more, id. at

§ 122.34(b)(5); and (6) preventing or reducing pollutant

runoff from municipal activities, id. at § 122.34(b)(6).”

The Municipal Petitioners contend that the measures

regulating illicit discharges, small construction sites, and

development activities unconstitutionally compel small

* The Municipal Petitioners argue that the Minimum Measures

exceed EPA's statutory authority under § 402(p) of the Clean Water Act.

We disagree. The list of elements for a regulatory program that appears

in § 402(p)(6) is nonexclusive, and EPA’s adoption of the Minimum

Measures represents a permissible interpretation of its authority under

§ 402(p)(6). See Chevron, 467 U.S. at 843-44.

The Municipal Petitioners argue that EPA is not entitled to

Chevron deference, and that the Minimum Measures must be rejected

absent a clear statement of congressional intent that EPA enact the

Minimum Measures. The Municipal Petitioners argue that this clear

statement requirement arises because there are “significant constitu-

tional questions” about the permissibility of the Minimum Measures

under the Tenth Amendment, and because the Minimum Measures

alter “the federal-state framework by permitting federal encroachment

upon a traditional state power.” Solid Waste Agency of N. Cook County

v. Army Corps of Eng’rs, 531 U.S. 159, 173 (2001).

As we explain, because the Phase II Rule includes at least one

alternative to the Minimum Measures, i.e., the option of seeking a

permit under 40 C.F.R. § 122.26(d), the Minimum Measures do not

present significant Tenth Amendment problems demanding a clear

statement of congressional intent. Nor does the Phase II Rule alter the

federal-state balance. To the contrary, the option of seeking a permit

under 40 C.F.R. § 122.26(d) maintains precisely the same federal-state

balance as existed prior to the Phase II Rule. See, e.g., Natural Res. Def.

Council v. EPA, 966 F.2d 1292 (9th Cir. 1992) (reviewing Phase I Rule);

Natural Res. Def. Council v. Costle, 568 F.2d 1369, 1379 (D.C. Cir. 1977)

(denying EPA authority to exempt MS4s from regulation under the

Clean Water Act). Furthermore, even if a clear statement of congres-

sional intent were necessary, § 402(p) of the Clean Water Act is replete

with clear statements that Congress intended EPA to require MS4s

either to obtain NPDES permits or to stop discharging stormwater.

App. 17

MS4 operators to regulate third parties, z.e., upstream

dischargers. The Illicit Discharge Detection and Elimina-

tion measure requires that a permit seeker prohibit non-

stormwater discharges to the MS4 and implement appropri-

ate enforcement procedures. 40 C.F.R. § 122.34(b\X3\iiXB).”

The Construction Site Stormwater Runoff Control meas-

ure requires a permit seeker to implement and enforce a

program to reduce stormwater pollutants from small

construction sites. Id. at §§ 122.34(b)(4)(i)-(ii).” It man-

dates erosion and sedimentation conticls, site plan re-

views that take account of water quality impacts, site

inspections, and the consideration of public comment, and

requires that construction site operators implement

'* This subsection provides that permit seekers must, “[tlo the

extent allowable under State, Tribal, or local law, effectively prohibit,

through ordinance or other regulatory mechanism, non-stormwater

discharges into your storm sewer systems and implement appropriate

enforcement procedures and actions... ” 40 C.FR. § 122.34(b)(3)(ii)(B).

2 This subsection provides that permit seekers “must develop,

implement, and enforce a program to reduce pollutants in any storm

water runoff to your small MS4 from construction activities that result

in a land disturbance of greater than or equal to one acre .... [The]

program must include the development and implementation of, at a

minimum: (A) An ordinance or other regulatory mechanism to require

erosion and sediment controls, as well as sanctions to ensure compli-

ance, to the extent allowable under State, Tribal, or local law; (B)

Requirements for construction site operators to implement appropriate

erosion and sediment control best management practices; (C) Require-

ments for construction site operators to control waste such as discarded

building materials, concrete truck washout, chemicals, litter, and

sanitary waste at the construction site that may cause adverse impacts

to water quality; (D) Procedures for site plan review which incorporate

consideration of potential water quality impacts; (E) Procedures for

receipt and consideration of information submitted by the public, and

(F) Procedures for site inspection and enforcement control measures.”

40 C.F-R. §§ 122.34(b)(4)(i)-(ii).

App. 18

erosion, sedimentation, and waste management best

management practices. Jd. The Post-Construction/New

Development measure requires permit seekers to address

post-construction runoff from new development and

redevelopment projects disturbing one acre or more. Id. at

§ 122.34(b)(5)(i)(B).”

Noting that most MS4s are operated by municipal

governments, and that “(t]he drainage of a city in the

interest of the public health and welfare is one of the most

important purposes for which the police power can be

exercised,” New Orleans Gaslight Co. v. Drainage Comm’n,

197 U.S. 453, 460 (1905), the Municipal Petitioners argue

that requiring operators of small MS4s to implement

“through ordinance or other regulatory mechanism” the

regulations required by the Minimum Measures contra-

venes the Tenth Amendment. See, e.g., New York v. United

States, 505 U.S. 144, 188 (1992).

EPA counters that the Phase II Rule does not violate

the Tenth Amendment because operators of small MS4s

may opt to avoid the Minimum Measures by seeking a

permit under the Alternative Permit option, 40 C.F.R.

§ 122.33(b)(2)(ii).”

*" This subsection provides that permit seekers must “[uJse an

ordinance or other regulatory mechanism to address post-construction

runoff from new development and redevelopment projects [disturbing

one acre or more] to the extent allowable under State, Tribal or local

law.” 40 C.F.R. §§ 122.34(b)(5)(i)(B).

*” EPA and NRDC also argue that the Minimum Measures are

facially constitutional, and that the Phase II Rule presents no Tenth

Amendment difficulties because operators of small MS4s may avoid

stormwater regulation entirely by electing not to discharge stormwater

(Continued on following page)

App. 19

Under the Tenth Amendment, “the Federal Govern-

ment may not compel States to implement, by legislation

or executive action, federal regulatory programs.” Printz v.

United States, 521 U.S. 898, 925 (1997); see also New York,

505 U.S. at 188. Similarly, the federal government may not

force the States to regulate third parties in furtherance of

a federal program. See Reno v. Condon, 528 U.S. 141, 151

(2000) (upholding a federal statutory scheme because it

“does not require the States in their sovereign capacity to

regulate their own citizens”). These protections extend to

municipalities. See, e.g., Printz 931 n.15.

However, while the federal government may not

compel them to do so, it may encourage States and mu-

nicipalities to implement federal regulatory programs. See

New York, 505 U.S. at 166-68. For example, the federal

government may make certain federal funds available only

to those States or municipalities that enact a given regula-

tory regime. See, e.g., South Dakota v. Dole, 483 U.S. 203,

205-08 (1987) (upholding federal statute conditioning state

receipt of federal highway funds on state adoption of

minimum drinking age of twenty-one). The crucial pro-

scribed element is coercion; the residents of the State or

municipality must retain “t).¢ ultimate decision” as to

whether or not the State or niicipality will comply with

the federal reguiatory program. New York, 505 U.S. at 168.

However, as long as “the alternative to implementing a

federal regulatory program does not offend the Constitu-

tion’s guarantees of federalism, the fact that the alterna-

tive is difficult, expensive or otherwise unappealing is

into federal waters in the first place. In light of our holding with regard

to the Alternative Permit option, we do not consider these arguments.

App. 20

insufficient to establish a ‘ienth Amendment violation.”

City of Abilene v. EPA, 325 F.3d 657, 662 (5th Cir. 2003).

With the Phase II Rule, EPA gave the operators of

small MS4s a choice: either implement the regulatory

program spelled out by the Minimum Measures described

at 40 C.F.R. § 122.34(b), or pursue the Alternative Permit

option and seek a permit under the Phase I Rule as

described at 40 C.F.R. § 122.26(d). Thus, unless § 122.26(d)

itself offends the Constitution’s guarantees of federalism,

the Phase II Rule does not violate the Tenth Amendment.

Pursuing a permit under the Alternative Permit

option does require permit seekers, in their application for

a permit to discharge, to propose management programs

that address substantive concerns similar to those ad-

dressed by the Minimum Measures. See 40 C.FR.

§ 122.26(d). However, § 122.26(d) lists the requirements

for an application for a permit to discharge, not the re-

quirements of the permit itself. Therefore, nothing in

§ 122.26(d) requires the operator of an MS4 to implement

a federal regulatory program in order to receive a permit

to discharge, because nothing in § 122.26(d) specifies the

contents of the permit that will result from the application

process.

City of Abilene, 325 F.3d 657, provides a helpful

illustration. The cities of Abilene and Irving, Texas, have

populations between 100,000 and 250,000, and so were

required to apply for permits under the Phase I Rule, 40

C.F.R. § 122.26(d). City of Abilene, 325 F.3d at 659-60.

Under § 122.26(d) the cities were required to submit

proposed stormwater management programs. Jd. at 660.

They negotiated the terms of those programs with EPA,

and EPA eventually presented the cities with proposed

App. 21

management permits that contained conditions requiring

the implementation of stormwater regulatory programs,

and potentially requiring the regulation of third parties.

Id. But, as the Fifth Circuit noted, this did not mean that

the cities had no choice but to implement a federal regula-

tory program. Instead:

The Cities filed comments objecting to those con-

ditions, and negotiations continued until the EPA

offered the Cities the option of pursuing numeric

end-of-pipe permits, which would have required

the Cities to satisfy specific effluent limitations

rather than implement management programs.

The Cities declined this offer, electing to continue

negotiations on the management permits.

Id. The Fifth Circuit rejected the cities’ contention that the

resulting permits violated the Tenth Amendment by

requiring the cities to regulate third parties according to

federal standards. Id. at 661-63. Because the cities chose

to pursue the management permits despite the fact that

EPA provided them with an option for obtaining permits

that would not have involved implementing a manage-

ment program or regulating third parties, no unconstitu-

tional coercion occurred. Id. at 663. The ultimate decision

to implement the federal program remained with the

cities.

Any operator of a small MS4 that wishes to avoid the

Minimum Measures may seek a permit under § 122.26(d),

and, as City of Abilene demonstrates, nothing in

§ 122.26(d) will compel the operator of a small MS4 to

implement a federal regulatory program or regulate third

parties, because § 122.26(d) specifies application require-

ments, not permit requirements. Therefore, by presenting

the option of seeking a permit under § 122.26(d), the

App. 22

Phase II Rule avoids any unconstitutional coercion. The

Municipal Petitioners’ claim that the Phase II Rule vio-

lates the Tenth Amendment therefore faiis.

3. The First Amendment and the Minimum

Measures

The Municipal Petitioners contend that the Public

Education and Illicit Discharge Minimum Measures

compel municipalities to deliver EPA’s political message in

violation of the First Amendment. The Phase II Rule’s

“Public Education and Outreach” Minimum Measure

directs regulated small MS4s to “distribute educational

materials to the community ... about the impacts of

stormwater discharges on water bodies and the steps the

public can take to reduce pollutants in stormwater runoff.”

40 C.F.R. § 122.34(b)(1)(i). The “Illicit Discharge Detection

and Elimination” measure requires regulated small MS4s

to “[iJnform public employees, businesses, and the general

public of hazards associated with illegal discharges and

improper disposal of waste.” 40 C.F.R. § 122.34(b)(3)(ii)(D).

The Municipal Petitioners argue that the First

Amendment prohibits EPA from compelling small MS4s to

communicate messages that they might not otherwise

wish to deliver. They further contend that EPA’s interpre-

tation of § 402(p) as authorizing these Measures does not

warrant Chevron deference because it raises serious

constitutional issues, but that even if deference were

given, the resulting rule is unconstitutional because

neither Congress nor EPA may dictate the speech of MS4s.

They contend that municipalities are protected by the

First Amendment, Pacific Gas & Elec. v. Public Utilities

Comm’n, 475 U.S. 1, 8 (1986) (“Corporations and other

OT I Ae

App. 23

associations, like individuals, contribute to the [discourse]

that the First Amendment seeks to foster ... .”), which

| applies as much to compelled statements of “fact” as to

those of “opinion.” Riley v. Nat'l Fed. of the Blind, 487 U.S.

781, 797-98 (1988).

We conclude that the purpose’ of the challenged

provisions is legitimate and consistent with the regulatory

goals of the overall scheme of the Clean Water Act, cf:

Glickman v. Wileman Bros. & Elliott, Inc., 521 U.S. 457,

476 (1997), and does not offend the First Amendment.”

The State may not constitutionally require an individual

to disseminate an ideological message, Wooley v. Maynard,

430 U.S. 705, 713 (1976), but requiring a provider of storm

sewers that discharge into national waters to educate the

public about the impacts of stormwater discharge on water

bodies and to inform affected parties, including the public,

about the hazards of improper waste disposal falls short of

compelling such speech.” These broad requirements do not

2 We decline to address two further arguments raised by EPA:

first, that municipalities do not receive full First Amendment protec- pe

tions, under Muir v. Alabama Educational Television Commission, 688

F.2d 1033, 1038 n.12 (5th Cir. 1982) (en banc) (“Government expression,

being unprotected by the First Amendment, may be subject to legisla-

tive limitation which would be impermissible if sought to be applied to

private expression... .”), and Aldrich v. Knab, 858 F. Supp. 1480, 1491

(W.D. Wash. 1994) (holding that “unlike private broadcasters, the state

itself does not enjoy First Amendment rights”), and second, that even if the

First Amendment were fully applicable, the Phase II regulations would

satisfy them because MS4s may avoid the compulsion to speak by seeking a

permit under the Alternative option, 40 C.FR. § 122.26(d\2Xiv), rather

than under the Minimum Measures.

* As a subsidiary matter, we note that it also falls short of compel-

ling the MS4 to “regulate” third parties in contravention of the Tenth

Amendment. Dispensing information to facilitate public awareness about

(Continued on following page)

App. 24

dictate a specific message. They require appropriate

educational and public information activities that need not

include any specific speech at all. A regulation is facially

unconstitutional only when every possible reading compels

it, Meinhold v. U.S. Dep’t of Def., 34 F.3d 1469, 1476 (9th

Cir. 1994),” but this is clearly not the case here.

As in Zauderer v. Office of Disciplinary Counsel of the

Sup. Ct. of Ohio, 471 U.S. 626 (1985), where the Supreme

Court upheld certain disclosure requirements in attorney

advertising, “[t]he interests at stake in this case are not of

the same order as those discussed in Wooley [invalidating

a law requiring that drivers display the motto “Live Free

or Die” on New Hampshire license plates]... and Barnette

[forbidding the requirement that public school students

salute the flag because the State may not impose on the

individual “a ceremony so touching matters of opinion and

political attitude”].” Jd. at 651. EPA has not attempted to

“prescribe what shall be orthodox in politics, nationalism,

religion, or other matters of opinion or force citizens to

confess by word or act their faith therein.” West Virginia

State Bd. of Ed. v. Barnette, 319 U.S. 624, 642 (1943).

Informing the public about safe toxin disposal is non-

ideological; it involves no “compelled recitation of a mes-

sage” and no “affirmation of belief.” Pruneyard Shopping

Ctr. v. Robins, 447 U.S. 74, 88 (1980) (upholding state law

safe disposal of toxic materials constitutes “encouragement,” not

regulation.

*° “When the constitutional validity of a statute or regulation is

called into question, it is a cardinal rule that courts must first deter-

mine whether a construction is possible by which the constitutional

problem may be avoided.” Meinhold, 34 F.3d at 1476.

App. 25

protecting petitioning in malls and noting that “Barnette is

inapposite because it involved the compelled recitation of a

message containing an affirmation of belief”). It does not

prohibit the MS4 from stating its own views about the

proper means of managing toxic materials, or even about

the Phase II Rule itself. Nor is the MS4 prevented from

identifying its dissemination of public information as

required by federal law, or from making available federally

produced informational materials on the subject and

identifying them as such.

Even if such a loosely defined public information

requirement could be read as compelling speech, the

regulation resembles another regulation that the Supreme

Court has held permissible. In Glickman, 521 U.S. 457,

the Court upheld a generic advertising assessment prom-

ulgated by the Department of Agriculture on behalf of

California tree fruit growers because the order was consis-

tent with an overall regulatory program that did not

abridge protected speech:

Three characteristics of the regulatory scheme at

issue distinguish it from laws that we have found

Lo abridge the freedom of speech protected by the

First Amendment. First, the marketing orders

impose no restraint on the freedom of any pro-

ducer to communicate any message to any audi-

ence. Second, they do. not compel any person to

engage in any actual or symbolic speech. Third,

they do not compel the producers to endorse or to

finance any political or ideological views. Indeed,

since all of the respondents are engaged in the

business of marketing California nectarines,

plums, and peaches, it is fair to presume that

they agree with the central message of the

speech that is generated by the generic program.

App. 26

Id. at 469-70 (footnotes omitted). Here, as in Glickman,

the Phase II regulations impose no restraint on the free-

dom of any MS4 to communicate any message to any

audience. They do not compel any specific speech, nor do

they compel endorsement of political or ideological views.

And since all permittees are engaged in the handling of

stormwater runoff that must be conveyed in reasonably

unpolluted form to national waters, it is similarly fair to

presume that they will agree with the central message of a

public safety alert encouraging proper disposal of toxic

materials.” The Phase II regulation departs only from the

second element in the Glickman analysis, because the

public information requirement may compel a regulated

party to engage in some speech at some time; but unlike

the offensive messages in Maynard and Barnette (and

even the inoffensive advertising messages at issue in

Glickman) that speech is not specified by the regulation.”

** In its most recent treatment of compelled speech, the Supreme

Court held that a generic advertising campaign violated free speech

where the message was specific and antagonistic to the preferred

advertising message of the plaintiff, and the regulation compelling

participation was not part of a broader regulatory apparatus already

constraining the plaintiff’s autonomy in the relevant arena. United

States Dep't. of Agriculture v. United Foods, 533 U.S. 405, 410-17

(2001). The court distinguished this advertising program from the one

in Glickman on the latter point: “(t]he program sustained in Glickman

differs from the one under review in a most fundamental respect. In

Glickman the mandated assessments for speech were ancillary to a

more comprehensive program restricting market autonomy.” Jd. at 411.

Although the Phase II Rule is not an advertising or marketing regula-

tion, it constitutes a “comprehensive program” restricting the autonomy

of MS4s in the relevant arena of controlling toxic discharges to storm

sewers that drain to U.S. waters.

* In deciding the similar question of whether a regulation impermis-

sibly compelled speech by requiring manufacturers of mercury-containing

(Continued on following page)

App. 27

The public information requirement does not imper-

missibly compel speech, and nothing else in the Phase II

Rule offends the First Amendment.” The Rule does not

compel a recitation of a specific message, let alone an

affirmation of belief. To the extent MS4s are regulated by

the public information requirement, the regulation is

consistent with the overall regulatory program of the

Clean Water Act and the responsibilities of point source

dischargers.

4. Notice and Comment on the Alternative

Permit Option |

The Municipal Petitioners contend that, in adopting

the Alternative Permit option, EPA did not comply with

products to inform consumers how to dispose safely of the toxic

material, the Second Circuit held that “mandated disclosure of accu-

rate, factual, commercial information does not offend the core First

Amendment values of promoting efficient exchange of information or

protecting individual liberty interests.” Nat'l Elec. Mfrs. Ass’n v. Sorrell,

272 F.3d 104, 114 (2d Cir. 2001). What speech may follow from the

Phase II directive will not be “commercial” in the same sense that

manufacturer labeling is, but it will be similar in substance to Sorrell to

the extent that it informs the public how to dispose safely of toxins. We

think the policy considerations underlying the commercial speech

treatment of labeling requirements, see, €.g., the Federal Cigarette

Labeling and Advertising Act, 15 U.S.C. §§ 1333-39, apply similarly in

the context of the market-participant municipal storm sewer provider.

2° The Alternative option contains a public education requirement

that is similar but even less specific, and therefore even less burden-

some, than the requirements in the Minimum Measures. See

§ 122.26(d)(2)(iv(B6) (requiring permit seekers to propose programs

to counter illicit discharges, including a “description of educational

activities, public information activities, and other appropriate activities

to facilitate the proper management and disposal of used oil and toxic

materials”).

App. 28

the minimum notice and comment procedures required in

informal rulemaking by the Administrative Procedures Act

(“APA”), 5 U.S.C. § 553. The APA requires an agency to

publish notice of a proposed rulemaking that includes

“either the terms or substance of the proposed rule or a

description of the subjects and issues involved.” Id. at

553(b)(3). :

We have held that a “final regulation that varies from

the proposal, even substantially, will be valid as long as it

is ‘in character with the original proposal and a logical

outgrowth of the notice and comments.’” Hodge v. Dawson,

107 F.3d 705, 712 (9th Cir. 1997). In determining whether

notice was adequate, we consider whether the complaining

party should have anticipated that a particular require-

ment might be imposed. The test is whether a new round

of notice and comment would provide the first opportunity

for interested parties to offer comments that could per-

suade the agency to modify its rule. Am. Water Works Ass’n

uv. EPA, 40 F.3d 1266, 1274 (D.C. Cir. 1994).

The Municipal Petitioners argue that the Alternative

Permit option is not a logical outgrowth of EPA’s proposed

rule because, although numerous alternatives were

discussed in the Preamble to the proposed rule, 63 Fed.

Reg. at 1554-1557, the Alternative Permit option eventu-

ally adopted was not. EPA counters that the proposed rule

included a supplementary alternative permitting system

based on concepts similar to those in the Minimum Meas-

ures, including “simplified individual permit application

App. 29

requirements.”” EPA contends that the Alternative Permit

option was a logical outgrowth of the comments it received

on the proposal expressing concern that the Minimum

Measures might violate the Tenth Amendment. 64 Fed.

Reg. at 68,765.

The Alternative Permit option passes the Hodge test.

The proposed rule suggested an individualized permitting

option to be developed in response to comments during the

notice and comment period. The Alternative option con-

tains no elements that were not part of the original rule,

even if they are configured differently in the final rule.

Petitioners had, and took, their opportunity to object to

the aspects of the Rule that they did not support in their

comments on the Minimum Measures.

B. The General Permit Option and Notices of

Intent

The Environmental Petitioners contend that the

general permitting scheme of the Phase II Rule allows

regulated small MS4s to design stormwater pollution

control programs without adequate regulatory and public

oversight, and that it contravenes the Clean Water Act

because it does not require EPA to review the content of

dischargers’ notices of intent and does not contain express

requirements for public participation in the NPDES

permitting process.

*» Municipal Petitioners concede that “simplified individual permit

application requirements” were discussed, but they contend that the

permit requirements discussed are not sufficiently similar to those

promulgated to establish a logical outgrowth.

App. 30

In reviewing a federal administrative agency’s inter-

pretation of a statute it administers, we first determine

whether Congress has expressed its intent unambiguously

on the question before the court. See Chevron, 467 U.S.

837, 842-44 (“If the intent of Congress is clear, that is the

end of the matter; for the court, as well as the agency,

must give effect to the unambiguously expressed intent of

Congress.”). “If, instead, Congress has left a gap for the

administrative agency to fill, we proceed to step two. At

step two, we must uphold the administrative regulation

unless it is arbitrary, capricious, or manifestly contrary to

the statute.” Defenders of Wildlife v. Browner, 191 F.3d

1159, 1162, amended by 197 F.3d 1035 (9th Cir. 1999)

(citations and internal quotations omitted).

We conclude that the Phase II General Permit option

violates the Clean Water Act’s requirement that permits

for discharges “require controls to reduce the discharge of

pollutants to the maximum extent practicable,” 33 U.S.C.

§ 1342(p)(3)(B)(iii). We also conclude that the Phase II

General Permit option violates the Clean Water Act

because it does not contain express requirements for

public participation in the NPDES permitting process. We

remand these aspects of the Phase II Rule.”

*° EPA argues that the Environmental Petitioner’s challenge is not

ripe for review because “the question of whether some general permit

somewhere might fail to assure that pollutants are reduced to the

maximum extent practicable is not ripe for review.” But we are not

addressing the merits of any specific permit. Rather, the question

before us “is purely one of statutory interpretation that would not

benefit from further factual development of the issues presented.”

Whitman v. American Trucking, 531 U.S. 457, 479 (2001). Specifically,

we are addressing whether EPA, in promulgating the Phase II Rule,

(Continued on following page)

App. 31

1. Phase II General Permits and Notices of

Intent

Primary responsibility for enforcement of the re-

quirements of the Clean Water Act is vested in the Admin-

istrator of the EPA. 33 U.S.C. § 1251(d); see also 33 U.S.C.

§ 1361(a) (“The Administrator [of EPA] is authorized to

prescribe such regulations as are necessary to carry out

his functions under this chapter.”). The Clean Water Act

renders illegal any discharge of pollutants not specifically

authorized by a permit. 33 U.S.C. § 1311(a) (“Except in

compliance with this section and [other sections detailing

permitting requirements] of this title, the discharge of any

pollutant by any person shall be unlawful.”). Under the

Phase II Rule, dischargers may apply for an individualized

permit with the relevant permitting authority, or may file

a “Notice of Intent” (“NOI”) to seek coverage under a

“general permit.” 40 C.F.R. § 122.33(b).

A general permit is a tool by which EPA regulates a

large number of similar dischargers. Under the traditional

general permitting model, each general permit identifies

the output limitations and technology-based requirements

necessary to adequately protect water quality from a class

of dischargers. Those dischargers may then acquire

permission to discharge under the Clean Water Act by

filing NOIs, which embody each discharger’s agreement to

abide by the terms of the general permit. Because the NOI

has accomplished the substantive controls for municipal stormwater

that Congress mandated in § 402(p) of the Clean Water Act. As we held

in Natural Resources Defense Council v. EPA, 966 F.2d at 1296-97, 1308,

this question is ripe for review.

App. 32

represents no more than a formal acceptance of terms

elaborated elsewhere, EPA’s approach does not require

that permitting authorities review an NOI before the

party who submitted the NOI is allowed to discharge.

General permitting has long been recognized as a lawful

means of authorizing discharges. Natural Res. Def. Coun-

cil v. Costle, 568 F.2d 1369 (D.C. Cir. 1977).

The Phase II general permitting scheme differs from

the traditional general permitting model. The Clean Water

Act requires EPA to ensure that operators of small MS4s

“reduce the discharge of pollutants to the maximum extent

practicable.” 40 U.S.C. § 1342(p)(3)(B). To ensure that

operators of small MS4s achieve this “maximum extent

practicable” standard, the Phase II Rule requires that

each NOI contain information on an individualized pollu-

tion control program that addresses each of the six general

criteria specified in the Minimum Measures; thus, accord-

ing to the Phase II Rule, submitting an NOI and imple-

menting the Minimum Measures it contains “constitutes

compliance with the standard of reducing pollutants to the

‘maximum extent practicable.’” 40 C.F.R. § 122.34(a).

Because a Phase II NOI establishes what the dis-

charger will do to reduce discharges to the “maximum

extent practicable,” the Phase II NOI crosses the threshold

from being an item of procedural correspondence to being

a substantive component of a regulatory regime. The text

of the Rule itself acknowledges that a Phase II NOI is a

permit application that is, at least in some regards,

functionally equivalent to a detailed application for an

individualized permit. See, e.g., 40 C.F.R. § 122.34(d)(1)

(“In your permit application (either a notice of intent for

coverage under a general permit or an individual permit

application), you must identify and submit to your NPDES

App. 33

permitting authority the following information... .”). For

this reason, EPA rejected the possibility of providing a

“form NOI” to Phase II permittees, explaining that “[w hat

will be required on an MS4’s NOL ... is more extensive

than what is usually required on an NOI, so a ‘form’ NOI

for MS4s may be impractical.” 64 Fed. Reg. at 68,764.

2. Failure to Regulate

The Environmental Petitioners argue that, by allow-

ing NPDES authorities to grant dischargers permits based

on unreviewed NOIs, the Rule creates an impermissible

self-regulatory system.” Petitioners contend the Rule

impermissibly fails to require that the permitting author-

ity review an NOI to assure compliance with Clean Water

Act standards, including the standard that municipal

stormwater pollution be reduced to “the maximum extent

practicable.” 33 U.S.C. § 1342(p)(3)(B)iii). See 40 C.FR.

§ 123.35 (setting out requirements for permitting authori-

ties, but not requiring review of NOI); 64 Fed. Reg. at

68,764 (“EPA disagrees that formal approval or disap-

proval by the permitting authority is needed”).

*! Petitioners suggest that EPA should be held to the standard it

espoused to procure judicial approval for the Phase I program. In 1991,

responding to NRDC’s assertion that the Phase I Rule failed to set

“hard criteria” for review of MS4 stormwater programs, EPA responded

that “inadequate proposals will result in the denial of permit applica-

tions.” Respondent’s Brief at 67, Natural Res. Def. Council v. EPA, 966

F2d 1292 (9th Cir. 1992) (Nos. 91-70200, 91-70176, & 90-70671).

Petitioners contend that this court relied on that representation in

ruling for EPA on that issue. Natural Res. Def. Council v. EPA, 966 F.2d

at 1308 n.17 (“Individual NPDES permit writers ... will decide

whether application proposals are adequate . .. fy

App. 34

EPA maintains that the Phase II permit system is

fully consistent with the authorizing statute. It contends

that § 402(p)(6) granted EPA flexibility in designing the

Phase II “comprehensive program,” and notes that while

the statute does not require general permits, neither does

it preclude them. EPA contends that Congress delegated

the task of designing the program to EPA, and that EPA

reasonably adopted a “flexible version” of the NPDES

permit program to suit the unique needs of the Phase II

program. It disputes that the general permit program

creates “paper tigers,” especially since EPA, States, and

citizens may initiate enforcement actions. Finally, EPA

argues that the Rule does not create a self-regulatory

program, but that even if it did, nothing in § 402(p)(6)

precludes such a program.

Reviewing the Phase II Rule under the first step of

Chevron, we note that the plain language of § 402(p) of the

Clean Water Act, 33 U.S.C. § 1342(p), expresses unambi-

guously Congress’s intent that EPA issue no permits to

discharge from municipal storm sewers unless those

permits “require controls to reduce the discharge of pollut-

ants to the maximum extent practicable.”

Phase II general permits will likely impose require-

ments that ensure that operators of small MS4s comply

with many of the standards of the Clean Water Act. Thus,

general permits issued under Phase II will ordinarily

contain numerous substantive requirements, just as did

the permits issued under Phase I. See 40 C.F.R. §§ 123.35

& 123.35(a) (“§ 123.35 As the NPDES Permitting Author-

ity for regulated small MS4s, what is my role? (a) You

must comply with the requirements for all NPDES permit-

ting authorities under Parts 122, 123, 124 and 125 of this

App. 35

chapter.”); see also 40 C.F.R. § 122.28 (outlining requirements

for NPDES authorities issuing general permits). And every

operator of a small MS4 who files an NOI under Phase II

“must comply with other applicable NPDES permit require-

ments, standards, and conditions established in the ...

general permit.” See 40 C.FR. §§ 122.34 & 122.34(f).

However, while each Phase II general permit will

likely ensure that operators of small MS4s comply with

certain standards of the Clean Water Act, they will not

“require controls to reduce the discharge of pollutants to

the maximum extent practicable.” According to the Phase

II Rule, the operator of a small MS4 has complied with the

requirement of reducing discharges to the “maximum

extent practicable” when it implements its stormwater

management program, i.e., when it implements its Minimum

Measures. 40 C.FR. § 122.34(a); see also 64 Fed. Reg. at

68753 (stating EPA’s anticipation that limitations more

stringent that the minimum control measures ‘will be

unnecessary”). Nothing in the Phase II regulations ,equires

that NPDES permitting authorities review these Minimum

Measures to ensure that the measures that any given

operator of a small MS4 has decided to undertake will in fact

reduce discharges to the maximum extent practicable.”

2 That the Rule allows a permitting authority to review an NOI is

not enough; every permit must comply with the standards articulated

by the Clean Water Act, and unless every NOI issued under a general

permit is reviewed, there is no way to ensure that such compliance has

been achieved.

The regulations do require NPDES permitting authorities to

provide operators of small MS4s with “menus” of management practices

to assist in implementing their Minimum Measures, see 40 C.FR.

§ 123.35(g), but again, nothing requires that the combination of items

(Continued on following page)

App. 36

See 40 C.F.R. § 123.35 (“As the NPDES Permitting Author-

ity for regulated small MS4s, what is my role?”). There-

fore, under the Phase II Rule, nothing prevents the operator

of a small MS4 from misunderstanding or misrepresenting

its own stormwater situation and proposing a set of mini-

mum measures for itself that would reduce discharges by far

less than the maximum extent practicable.

In fact, under the Phase II Rule, in order to receive

the protection of a general permit, the operator of a small

MS4 needs to do nothing more than decide for itself what

reduction in discharges would be the maximum practical

reduction. No one will review that operator’s decision to

make sure that it was reasonable, or even good faith.”

Therefore, as the Phase II Rule stands, EPA would allow

permits to issue that would do less than require controls to

reduce the discharge of pollutants to the maximum extent

practicable.“ See 64 Fed. Reg. at 68753 (explaining that

that the operator of a small MS4 selects from this “menu” will have the

combined effect of reducing discharges to the maximum extent practicable.

Nor is the availability of citizen enforcement actions a substitute

for EPA’s enforcement responsibility, especially because, as discussed

below, the Rule does not require that NOIs be publicly available. Absent

review on the front end of permitting, the general permitting regulatory

program loses meaning even as a procedural exercise.

* EPA identifies no other general permitting program that leaves

the choice of substantive pollution control requirements to the regu-

lated entity, and we are not persuaded by the analogy it urges to the

traditional model of general permitting (where NOIs routinely are not

reviewed), because, as we have noted, the Phase II general permit

model is substantially dissimilar.

“ In its petition for rehearing, EPA argues for the first time that

because the regvlations require NPDES Permitting Authorities to

include in general permits “any additional measures necessary” to

ensure that the maximum extent practicable standard is met, 40 C.F.R.

(Continued on following page)

App. 37

the minimum control measures will protect water quality if

they are “properly implemented”). We therefore must reject

this aspect of the Phase II Rule as contrary to the clear

intent of Congress. Cf. Natural Res. Def: Council, 966 F.2d at

1305 (rejecting as arbitrary and capricious a permitting

system that allowed regulated industrial stormwater dis-

chargers to “self-report” whether they needed permit cover-

age).

Involving regulated parties in the development of

individualized stormwater pollution control programs is a

laudable step consistent with the directive to consult with

state and local authorities in the development of the

§ 402(p)(6) comprehensive program. But EPA is still required

to ensure that the individual programs adopted are consis-

tent with the law. Our holding should not prevent the Phase

II general permitting program from proceeding mostly as

planned. Our holding does not preclude regulated parties

from designing aspects of their own stormwater manage-

ment programs, as contemplated under the Phase II Rule.

However, stormwater management programs that are

§§ 123.35(h)(1), 123.35(f) (incorporating by reference the “maximum

extent practicable” requirement of 40 C.F-R. §§ 122.34(a)), 122.34(f)

(requiring small MS4s to comply with additional measures), the Phase

II Rule ensures that discharges will be reduced to the maximum extent

practicable.

The trouble with EPA’s reasoning is that the Phase II Rule defines

the “maximum extent practicable” standard in such a way that no

“additional measures” will ever be necessary under § 123.35(h)(1).

While a Permitting Authority may impose additional measures, nothing

compels it to do so because, merely by implementing the best manage-

ment practices that the operator of a small MS4 has chosen for itself,

that small MS4 will already have met the “maximum extent practica-

ble” standard. See 40 C.F.R. § 122.34(a).

App. 38

subject to meaningful review by an appropriate regulating

entity to ensure that each such program reduces the

discharge of pollutants to the maximum extent practica-

ble. We therefore remand this aspect of the Rule.

3. Public Participation

The Environmental Petitioners contend that the

Phase II Rule fails to provide for public participation as

required by the Clean Water Act, because the public

receives neither notice nor opportunity for hearing regard-

ing an NOI. The EPA replies on the one hand by arguing

that NOIs are not “permits” and therefore are not subject

to the public availability and public hearing requirements

of the Clean Water Act, and on the other hand by arguing

that the combination of the public involvement minimum

measure, 40 C.F.R. § 122.34(b)(2), the Federal Freedom of

Information Act, 5 U.S.C. §552, and state freedom of

information acts would fulfill any such requirements if

NOlIs were permits.

Reviewing the Phase II Rule under Chevron step one,

we conclude that clear Congressional intent requires that

NOIs be subject to the Clean Water Act’s public availabil-

ity and public hearings requirements. The Clean Water

Act requires that “[a] copy of each permit application and

each permit issued under [the NPDES permitting pro-

gram] shall be available to the public,” 33 U.S.C. § 1342(j),

and that the public shall have an opportunity for a hearing

before an permit application is approved, 33 U.S.C.

§ 1342(a)(1). Congress identified public participation

rights as a critical means of advancing the goals of the

Clean Water Act in its primary statement of the Act’s

App. 39

approach and philosophy. See 33 U.S.C. § 1251(e); see also

Costle v. Pacific Legal Found., 445 U.S. 198, 216 (1980)

(noting the “general policy of encouraging public participa-

tion is applicable to the administration of the NPDES

permit program”). EPA has acknowledged that technical

issues relating to the issuance of NPDES permits should

be decided in “the most open, accessible forum possible,

and at a stage where the [permitting authority] has the

greatest flexibility to make appropriate modifications to

the permit.” 44 Fed. Reg. 32,854, 32,885 (June 7, 1979).

As we noted above, under the Phase II Rule it is the

NOIs, and not the general permits, that contain the

substantive information about how the operator of a small

MS4 will reduce discharges to the maximum extent

practicable. Under the Phase II Rule, NOIs are function-

ally equivalent to the permit applications Congress envi-

sioned when it created the Clean Water Act’s public

availability and public hearing requirements. Thus, if the

Phase II Rule does not make NOIs “available to the

public,” and does not provide for public hearings on NOIs,

the Phase II Rule violates the clear intent of Congress.

EPA’s first argument — that NOIs are not subject to the

public availability and public hearings requirements of the

Clean Water Act — therefore fails.

We therefore reject the Phase II Rule as contrary to

the clear intent of Congress insofar as it does not provide

for public hearings on NOIs as required by 33 U.S.C.

§ 1342(a)(1). However, Congress has not directly addressed

the question of what would constitute an NOI being

“available to the public” as required by 33 U.S.C. § 1342().

Under Chevron step two, we must defer to EPA’s interpre-

tation of “available to the public” unless it is arbitrary,

capricious, or manifestly contrary to the statute.

App. 40

EPA argues that the NOIs are “available to the public”

as a result of the combined effects of the public participa-

tion minimum measures, and of federal and state freedom

of information acts. This argument is unconvincing. First,

the public participation Minimum Measure only requires

dischargers to design a program minimally consistent

with State, Tribal, and local requirements. 40 C.F\R.

§ 122.34(b)(2). Second, the federal Freedom of Information

Act only applies to documents that are actually in EPA’s

possession, not to documents that are in the possession of

state or tribal NPDES authorities, see 40 C.F.R. § 2 (pro-

viding EPA’s policy for releasing documents under the

federal Freedom of Information Act), and nothing in the

Phase II Rule provides that EPA obtain possession of every

NOI that is submitted to a NPDES permitting authority.

See 40 C.F.R. § 123.41(a) (making information provided to

state NPDES authorities available to EPA only upon

request). Thus, under the Phase II Rule, NOIs will only “be

available to the public” subject to the vagaries of state and

local freedom of information acts. We conclude that EPA’s

interpretation of 33 U.S.C. § 1342(j), as embodied in the

provisions of the Phase II Rule providing for the public

availability of NOIs, is manifestly contrary to the Clean

Water Act, which contemplates greater scope, greater

certainty, and greater uniformity of public availability

than the Phase II Rule provides. We therefore reject this

aspect of the Phase II Rule.”

* EPA argues for the first time in its petition for rehearing that

NOlIs will be publicly available under 40 C.F.R. § 122.34(g)(2). Address-

ing operators of regulated small MS4s, this section provides: “You must

make your records, including a description of your storm water

management program, available to the public at reasonable times

(Continued on following page)

App. 41

In sum, we conclude that EPA’s failure to require review

of NOIs, which are the functional equivalents of permits

under the Phase II General Permit option, and EPA's failure

to make NOIs available to the public or subject to public

hearings contravene the express requirements of the Clean

Water Act. We therefore vacate those portions of the Phase II

Rule that address these procedural issues relating to the

issuance of NOIs under the Small MS4 General Permit

option, and remand so that EPA may take appropriate action

to comply with the Clean Water Act.

C. Failure to Designate

We reject the Environmental Petitioners’ contention

that EPA’s failure to designate for Phase II regulation

serious sources of stormwater pollution, including certain

industrial (“Group A”) sources and forest roads, was

arbitrary and capricious. See Marsh v. Oregon Natural

Res. Council, 490 U.S. 360 (1989).”

during regular business hours.” While this section does seem to provide

for the public availability of a small MS4’s records, we are troubled that

nothing in EPA’s initial briefs indicated that EPA considered NOIs to be

subject to this section. We normally defer to an agency’s interpretations

of its own regulations, but we may decline to defer to the post hoc

rationalizations of appellate counsel. See, e.g., Martin v. Occupational

Safety and Health Review Commission, 499 U.S. 144, 150, 156 (1991). If

EPA intends this section to provide for the public availability of NOIs —

for example because it intends NOIs to be among the records subject to

this section — it may clarify on remand.

* Agency determinations based on the record are reviewed under

the “arbitrary and capricious” standard. 5 U.S.C. § 706(2)(A). The

standard is narrow and the reviewing court may not substitute its

judgment for that of the agency. Marsh, 490 U.S. at 378. However, the

agency must articulate a rational connection between the facts found

(Continued on following page)

App. 42

1. “Group A” Facilities

In addition to the small MS4s and construction sites

ultimately designated for regulation under the Phase II

Rule, EPA evaluated a variety of other point-source dis-

charge categories for potential Phase II regulation. One

group of dischargers (referred to as the “Group A” facili-

ties) included sources that “are very similar, or identical”

to regulated stormwater discharges associated with

industrial activity that were not designated for Phase I

regulation for administrative reasons unrelated to their

environmental impacts.” 64 Fed. Reg. at 68,779. EPA

estimates that Group A includes approximately 100,000

facilities, including auxiliary facilities and secondary

activities (“e.g., maintenance of construction equipment

and the conclusions made. Washington v. Daley, 173 F.3d 1158, 1169

(9th Cir. 1999). The reviewing court must determine whether the

decision was based on a consideration of the relevant factors and

whether there has been a clear error of judgment. Marsh, 490 U.S. at

378. The court may reverse under the “arbitrary and capricious”

standard only if the agency: ™

has relied on factors which Congress has not intended it to

consider, entirely failed to consider an important aspect of

the problem, offered an explanation for its decision that

runs counter to the evidence before the agency, or is so im-

plausible that it could not be ascribed to a difference in view

or the product of agency expertise.

Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43.

* EPA explains that the Group A facilities were not regulated with

the other Phase I sources because EPA used Standard Industrial

Classification Index (SIC) codes in defining the universe of regulated

industrial activities: “By relying on SIC codes, a classification system

created to identify industries rather than environmental impacts from

these industries [sic] discharges, some types of storm water discharges

that might otherwise be considered ‘industrial’ were not included in the

existing NPDES storm water program.” 64 Fed. Reg. at 68,779.

App. 43

and vehicles, local trucking for an unregulated facility such

as a grocery store,” id.) and facilities intentionally omitted

from Phase I designation (“e.g., publicly owned treatment

works with a design flow of less than 1 million gallons per

day, landfills that have not received industrial waste,” id.).

The Environmental Petitioners contend that EPA

should have designated the Group A facilities for categori-

cal Phase II regulation after finding (1) that stormwater

discharges from these facilities are the same as those from

the industrial sources regulated under Phase I, and (2)

that such discharges may cause “adverse water quality

impacts.” Id. Petitioners argue that these findings, and

EPA’s failure to provide individualized analysis regarding

whether any specific source category within Group A

requires regulation, render EPA’s decision not to regulate

any of these sources under the Rule arbitrary and capri-

cious. They maintain that EPA's “line-drawing,” which

regulates some pollution sources but leaves nearly identi-

cal sources unregulated without any persuasive rationale,

is necessarily arbitrary and capricious. See Natural Res.

Def. Council, 966 F.2d at 1306 (EPA's decision not to

regulate construction sites smaller than five acres was

arbitrary when EPA provided no data to justify the five-

acre threshold and admitted that unregulated sites could

have significant water quality impacts).

Petitioners argue that § 402(p)(6) at least required

EPA to make findings with respect to individual Group A

categories, and that data collected from Phase I permit

applications could be used to evaluate the pollutant

potential of the identical Group A sources. They contend

that these findings should have sufficed as a basis for

designating at least some Group A sources, and that EPA’s

conclusion that it lacked adequate nationwide data upon

App. 44

which to designate any of these sources is not supported by

the record evidence. Comparing EPA’s identification of the

serious polluting potential of some of these sources with its

statutory mandate under § 402(p\(6) “to protect water

quality,” they argue that EPA fails even the forgiving stan-

dard of arbitrary and capricious review in that it has “offered

an explanation for its decision that runs counter to the

evidence before [it]” and “is so implausible that it could not

be ascribed to a difference in view or the product of agency

expertise.” See Motor Vehicle Mfrs., 463 U.S. at 43.

EPA maintains that it considered Group A facilities’

similarity to already regulated sources as only one of

several criteria that it used in designating sources for

regulation under Phase II, 64 Fed. Reg. at 68,780, and

that sources that appear “similarly situated” under one

criterion are not necessarily similarly situated under all.

EPA asserts that nothing in § 402(p)(6) implied a respon-

sibility to make individualized findings regarding each

Group A subcategory, and it maintains that it simply

lacked sufficient data to support nationwide designation of

the Group A facilities. EPA notes that, after failing to

receive requested comment providing such data, it pro-

posed instead “to protect water quality” by allowing

regional regulation of problem Group A facilities under the

residual designation authority. EPA contends that agen-

cies must be afforded deference in determining the data

necessary to support regulatory decisionmaking and that

it reasonably determined the quantum of data it would —

need to support the designation of additional sources on a

nationwide basis. See Sierra Club v. EPA, 167 F.3d 658,

662 (D.C. Cir. 1999).

We conclude that sufficient evidence supports EPA’s

decision not to designate Group A sources on a nationwide

App. 45

basis, and instead to establish local and regional designa-

tion authority to account for these sources and protect

water quality. Although we are troubled by the purely

administrative basis for the distinction between facilities

regulated under the Phase I Rule and the Group A facilities

that remain unregulated under Phase II,” EPA's choice of the

Phase I standard for designation is not the issue before us.

Before us is whether EPA acted arbitrarily in declining to

designate the Group A sources on a nationwide basis under

the Phase II Rule, and we cannot say that it did.

EPA has articulated a rational connection between

record facts indicating insufficient data to categorically

regulate Group A facilities and its corresponding conclu-

sion not to do so, and we defer to that decision. See Wash-

ington v. Daley, 173 F.3d 1158, 1169 (9th Cir. 1999). In the

text of the Rule, EPA explains that the process behind its

decision not to nationally designate Group A sources for

Phase II regulation focused not only on the likelihood of

contamination from a source category, but also on the

sufficiency of national data about each category and

whether pollution concerns were adequately addressed by

existing environmental regulations.” We cannot say that

% As discussed in footnote 37, Group A facilities were not regulated

with other Phase I industrial sources based on a government coding system

used to distinguish different types of industry (without reference to their

similar environmental impacts). See 64 Fed. Reg. at 68,779.

%® «tn identifying potential categories of sources for designation in

today’s notice, EPA considered designation of discharges from Group A

and Group B facilities. EPA applied three criteria to each potential

category in both groups to determine the need for designation: (1) The

likelihood for exposure of pollutant sources included in that category,

(2) whether such sources were adequately addressed by other environ-

mental programs, and (3) whether sufficient data were aveilable at this

(Continued on following page)

App. 46

EPA relied on factors Congress had not intended it to

consider, that it failed to consider an important aspect of

the problem, or that its rationale is implausible. See Motor

Vehicle Mfrs., 463 U.S. at 43. Nor did EPA’s decision run

counter to the evidence before it. Jd. The Environmental

Petitioners allege that its decision not to regulate Group A

facilities runs counter to evidence that similar sources are

highly polluting, but as EPA considered evidence beyond

those similarities that persueded it not to regulate, we

cannot say that EPA’s decision is unsupported by the

record. Nothing in § 402(p)(6) unambiguously requires

EPA to evaluate the Group A source categories individu-

ally, and we defer to EPA’s interpretation of the statute it

is charged with administering. See Royal Foods Co. v. RJR

Holdings, 252 F.3d 1102, 1106 (9th Cir. 2001).

time on which to make a determination of potential adverse water

quality impacts for the category of sources. As discussed previously,

EPA searched for applicable nationwide data on the water quality

impacts of such categories of facilities ....

“EPA’s application of the first criterion showed that a number of

Group A and B sources have a high likelihood of exposure of pollutants

... . Application of the second criterion showed that some categories

were likely to be adequately addressed by other programs.

“After application of the third criterion, availability of nationwide

data on the various storm water discharge categories, EPA concluded

that available data would not support any such nationwide designa-

tions. While such data could exist on a regional or local basis, EPA

believes that permitting authorities should have flexibility to regulate

only those categories of sources contributing to localized water quality

impairments ... . If sufficient regional or nationwide data become

available in the future, the permitting authority could at that time

designate a category of sources or individual sources on a case-by-case

basis.” 64 Fed. Reg. at 68,780.

Se ee ee ee

App. 47

2. Forest Roads

The Environmental Petitioners also contend that EPA

arbitrarily failed to regulate forest roads under the Rule

despite clear evidence in the record documenting the need

for stormwater pollution control of drainage from these

roads. Petitioners again contend that this agency action is

arbitrary, because EPA has offered an explanation for its

decision that runs counter to the evidence before it.

Petitioners point to EPA’s own conclusion that forest

roads “are considered to be the major source of erosion

from forested lands, contributing up to 90 percent of the

total sediment production from forestry operations.” They

note that both unimproved forest roads and construction

sites create large expanses of non-vegetated soil subject to

stormwater erosion, and argue that construction site data

thus also support regulation of forest roads. Petitioners

observe that EPA has cited no contrary evidence indicating

that forest roads are not sources of stormwater pollutant

discharges to U.S. waters, and they argue that Phase II

regulation is necessary “to protect water quality,” because

proper planning and road design can minimize erosion and

prevent stream sedimentation. Petitioners note that this

court has previously held that, in the absence of such

“supportable facts,” EPA is not entitled to the usual

assumption that it has “rationally exercised the duties

delegated to it by Congress.” Natural Res. Def. Council,

966 F.2d at 1305.

“ Guidance Specifying Management Measures For Sources of

Nonpoint Pollution in Coastal Waters, EPA guidance paper 840-B-93-

001lc (Jan. 1993), available at http://www.epa.gov/owow/nps/mmgi/

index.html (last visited Sept. 18, 2002) (“Coastal Waters”).

App. 48

EPA’s response is that we have no jurisdiction to hear

this challenge, chiefly because, it believes, the challenge is

time-barred by Clean Water Act § 509(b)(1), 33 U.S.C.

§ 1369(b)(1) (providing that “application for review shall

be made within 120 days from the date of [agency ac-

tion]”). EPA promulgated silviculture regulations in 1976

that exclude from NPDES permit requirements certain

silvicultural activities that EPA determined constitute

non-point source activities, including “surface drainage, or

road construction and maintenance from which there is

natural runoff.” 40 C.F.R. § 122.27(b)(1).” EPA asserts that

the exclusion applies to forest roads in general, not only to

“construction” and “maintenance” - an assertion disputed

by Petitioners — and that any challenge to the decision not

to regulate forest roads should have been brought within

120 days of the promulgation of that rule. See 33 U.S.C.

§ 1369¢b)(1).

“ The provision provides in full as follows:

Silvicultural point source means any discernible, confined

and discrete conveyance related to rock crushing, gravel

washing, log sorting, or log storage facilities which are op-

erated in connection with silvicultural activities and from

which pollutants are discharged into waters of the United

States. The term does not include non-point source silvicul-

tural activities such as nursery operations, site preparation,

reforestation and subsequent cultural treatment, thinning,

prescribed burning, pest and fire control, harvesting opera-

tions, surface drainage, or road construction and mainte-

nance from which there is natural runoff. However, some of

these activities (such as stream crossing for roads) may in-

volve point source discharges of dredged or fill material

which may require a CWA section 404 permit (See 33 CFR

209.120 and part 233).

40 C.F.R. § 122.27(b)(1).

App. 49

EPA’s argument. might be more persuasive if Petition-

ers’ contention could be understood essentially as a direct

challenge to the 1976 silviculture regulations, but this is

not the case. Even were we to assume that EPA exempted

forest roads from NPDES permit requirements in 1976

under 40 C.FR. § 122.27(b)(1), that would not resolve the

question whether EPA should have addressed forest roads

in its “comprehensive program ... to protect water qual-

ity” under § 402(p)(6), because § 402(p)(6) was not enacted

until 1987. Petitioners challenge EPA’s decision not to

regulate under the new portion of the statute, not the

decision not to regulate under other provisions that were

in effect earlier.

EPA argues in the alternative that Petitioners should

have sought judicial review when EPA considered amend-

ing § 122.27(b)(1) — to delete the language that it asserts

renders forest roads non-point sources — but then deter-

mined not to make the amendment. However, we are

aware of no statute or legal doctrine providing that a

party’s failure to challenge an agency’s decision not to

amend its rules in one proceeding deprives the party of the

right to challenge, in a contemporaneous proceeding, the

promulgation of an entire new rule which could have, but

did not, provide the full relief the party seeks. Assuming

that EPA is correct that § 122.27(b)(1) defines forest roads

as non-point sources, both the Phase II Rule proceedings

and the proceedings in which the proposed amendment to

§ 122.27(b)(1) was considered and rejected were proper

proceedings in which to raise the issue whether discharges

from forest roads should be regulated. Petitioners chose to

raise the issue in their comments to the proposed Phase II

Rule, because they believed that Clean Water Act

§ 402(p)(6) mandates the regulation of forest roads. They

App. 50

did not lose their right to challenge the final Phase II

Rule’s failure to regulate forest roads simply because they

did not also raise a challenge to EPA’s failure to adopt an

amendment to § 122.27(b)(1) that the agency initially

proposed. (We note, incidentally, that it appears that even

a successful challenge to § 122.27(b)(1) would likely not

have achieved the objective the Environmental Petitioners

sought: it would only have allowed case-by-case coverage

for forest roads, and not for overall coverage.)

Finally, EPA suggests that Petitioners’ comments

during the Phase II rulemaking process were too short to

create jurisdiction in this court to hear this challenge.

However, EPA exaggerates the slightness of those com-

ments, which comprised two paragraphs, with footnotes,

stating objections and providing support. We also agree

with Petitioners that EPA was aware of the forest road

sedimentation problem at the time of the rulemaking.”

Indeed, EPA responded to the comments without disputing

that the problem is serious. 3 EPA, Response to Public

Comments 8 (Oct. 29, 1999). Rather, the agency relied on

40 C.F-R. § 122.27(b)(1), indicating that it was barred from

acting under the Phase II Rule by § 122.27(b)(1).

EPA does not seriously address the merits of Petition-

ers’ objections to the Rule in its brief to this court. Instead,

EPA relies almost entirely on its assertion that we lack

“ Nonpoint Source Pollution: The Nation’s Largest Water Quality

Problem, EPA841-F-96-004A (“Pointer # 1”) (“The latest National Water

Quality Inventory indicates that agriculture is the leading contributor

to water quality impairments, degrading 60 percent of the impaired

river miles and half of the impaired lake acreage surveyed by states,

territories, and tribes.”).

aR, EE DOO

App. 51

jurisdiction to decide this question. It does, however,

strongly imply that its failure to adopt its own proposed

amendment in the proceeding pertaining to § 122.27(b)(1)

relieves it of its obligation to consider including forest

roads in the Phase II Rule proceedings. We reject any such

contention. Petitioners’ assertion that § 402(p)(6) requires

that the Phase II Rule contain provisions regulating forest

roads necessitates a response from EPA on the merits.

Having concluded that the objections of the Environ-

mental Petitioners are not time-barred, and that we have

jurisdiction to hear them, but that EPA failed to consider

those objections on the merits, we remand this issue to the

EPA, so that it may consider in an appropriate proceeding

Petitioners’ contention that § 402(p)(6) requires EPA to

regulate forest roads. EPA may then either accept Peti-

tioners’ arguments in whole or in part, or reject them on

the basis of valid reasons that are adequately set forth to

permit judicial review.

D. AF&PA’s Standing

The American Forestry & Paper Association (AF&PA),

a national trade association representing the forest, pulp,

paperboard, and wood products industry, is one of the two

Industry Petitioners asserting the remaining claims.”

Before considering these challenges, however, we consider

whether AF&PA has standing to raise them.

* The Municipal Petitioners join in asserting the “regulatory basis”

claim at Part II(F)(1).

App. 52

EPA argues that AF&PA lacks standing because it

cannot show that it represents entities that suffer a

cognizable injury under the Phase II Rule as promulgated.

EPA argues that the interests of AF&PA entities might

have supported standing had EPA decided to regulate

forest roads as Phase II stormwater dischargers, but since

EPA declined to do so, none of AF&PA’s members are

currently subject to the Rule. AF&PA contends that its

members have a cognizable legal interest in the Rule

because they risk becoming subject to regulation at any

future time under the continuing designation authority.

We agree that AF&PA lacks standing. A claimant

meeting Article III standing requirements must show that

“(1) it has suffered an ‘injury in fact’... ; (2) the injury is

fairly traceable to the challenged action of the defendant;

and (3) it is likely, as opposed to merely speculative, that

the injury will be redressed by a favorable decision.”

Friends of the Earth v. Laidlaw Envtl. Servs. (TOC), 528

U.S. 167, 180-81 (2000). Standing requires an injury that

is “actual or imminent, not ‘conjectural or hypothetical.’”

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).

AF&PA’s interest in avoiding future regulation of forest

roads is not actually or imminently threatened by any

potential result in this case. No ripe claim about misuse of

the residual authority to regulate forest road discharge, or

any other kind of discharge, is before the court. Should

members of AF&PA become subject to Phase II regulation

through subsequent administrative action, it will have

standing to challenge those actions at that time. In the

meanwhile, we proceed to the merits of the remaining

claims on behalf of AF&PA’s co-petitioner, the National

Association of Home Builders, which has established its

standing to raise them.

App. 53

E. Consultation with State and Local Officials

The Industry Petitioners contend that EPA failed to

consult with the States on the Phase II Rule as required

by § 402(p)(5), which instructs EPA to conduct studies “in

consultation with the States,” and § 402(p)(6), which

instructs the Administrator to issue regulations based on

these studies “in consultation with State and local offi-

cials.” 33 U.S.C. §§ 1342(p)(5)-(6). We conclude that EPA

satisfied its statutory duty of consultation. See Marsh, 490

USS. at 378.

Petitioners concede several instances in which EPA

- circulated drafts of-the Phase II Rule to state and local

authorities, but argue that these consultations were

meaningless because (1) the reports were circulated too far

in advance of the actual rulemaking, (2) the rulemaking

wrongfully proceeded based on other sources of input, (3)

standard APA notice and comment procedures could not

suffice because Congress must have intended something

more when it added the consultation requirements to the

language of § 402, and (4) consultation at the final stage of

rulemaking was inadequate because comment was sought

on the final report only after it had been submitted to

Congress and the Phase II Rule had been promulgated.

Petitioners provide examples of state feedback that alleg-

edly went unheeded by EPA in its promulgation of the

final Rule.

EPA maintains that it consulted extensively with

States and localities in developing the Phase II Rule,

discharging its obligations under §§ 402(p)(5) & (6). EPA

contends that the comments Petitioners cite as unheeded

by EPA demonstrate-that EPA did consult with States

App. 54

concerning the Rule, even if some States did not concur in

EPA’s ultimate conclusion, and that the final rule adopted

a good measure of the flexibility sought by state represen-

tatives. EPA argues that Industry Petitioners cannot

complain that consultation was inadequate simply because

it did not result in the adoption of Petitioners’ preferred

views.

EPA also disputes Petitioners’ allegation that while

EPA did comply with the terms of the 1999 Appropriations

Act (requiring EPA to defend the proposed Phase II Rule

before Congress and then publish the final report for

public comment), it demonstrated its failure to adequately

consult by publishing the report for public comment after

the Phase II Rule had been formally promulgated, render-

ing any subsequent public comment meaningless. EPA

counters that these actions do not indicate that it failed to

satisfy Congress’s directive that it consult with state and

local officials, because EPA had engaged in extensive

consultation before Congress requested the Appropriations

Act report, and Congress did not require further consulta-

tion when it conditioned promulgation of the Rule only on

the submission of this final report. EPA claims that while

Congress required it to publish the report after its submis-

sion, public comment on the report was not required before

promulgation, and that the statutory deadline structure

rendered any other interpretation impossible.

We conclude that the overall record indicates EPA met

its statutory duty of consultation. A draft of the first report

was circulated to States, EPA regional offices, the Associa-

tion of State and Interstate Water Pollution Control

Administrators (“ASIWPCA”), and other stakeholders in

November, 1993, and was revised based on comments

_ received. EPA established the Urban Wet Weather Flows

App. 55

Federal Advisory Committee (“FACA Committee”), balanc-

ing membership between EPA’s various outside stake-

holder interests, including representatives from States,

municipalities, Tribes, commercial and industrial sectors,

agriculture, and environmental and public interest groups.

64 Fed. Reg. 68,724. The 32 members of the Phase II

FACA Subcommittee, reflecting the same balance of

interests, met fourteen times over three years and state

and municipal representatives provided substantial input

regarding the draft reports, the ultimate Phase II Rule,

and the supporting data.“ Jd. EPA instituted the Phase II

Subcommittee meetings in addition to the standard APA

notice and comment procedures, which EPA also followed.

The fact that the Rule did not conform to Petitioners’

hopes and expectations does not bear on whether EPA

adequately consulted state and local officials. Although

required to consult with States and localities, EPA was

free to chart the substantive course it saw fit. EPA was not

required to consult with States on the Appropriations Act

report. Even if EPA should have sought further comment

at that late stage, failure to do so does not outweigh the

evidence demonstrating extensive consultation and coop-

eration with local authorities on development of the Rule.

“ NRDC argues that this claim is not only meritless for the

reasons stated by EPA, but also frivolous, since industry petitioner

National Association of Home Builders, as a member of the FACA Phase

II Subcommittee, participated in and affirmed that such consultation

took place. -

Anp. 56

F. Designation of Certain Small MS4s and Con-

struction Sites

The Industry Petitioners contend that, in designating

certain small MS4s and construction sites for regulation

under the Phase II Rule, EPA failed to adhere to the

statutorily required regulatory basis and misinterpreted

record evidence. We disagree.

1. Regulatory Basis

The Industry Petitioners and the Municipal Petitioners

contend

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