The State Role in the Federal Licensing of Hydropower Dams: S.D. Warren Co. v. Maine Board of Environmental Protection

The State Role in the Federal Licensing

of Hydropower Dams: S.D. Warren Co. v.

Maine Board of Environmental Protection

name redacted

Legislative Attorney

name redacted

Specialist in Resources and Environmental Policy

September 18, 2006

Congressional Research Service

7-....

www.crs.gov

RS22429

CRS Report for Congress

Prepared for Members and Committees of Congress

The State Role in the Federal Licensing of Hydropower Dams

Summary

On May 15, 2006, the U.S. Supreme Court decided S.D. Warren Co. v. Maine Board of

Environmental Protection, unanimously holding that states, through water quality certification

under Section 401 of the Clean Water Act, can impose conditions on Federal Energy Regulatory

Commission licensing (or relicensing) of hydropower facilities. The Court may have taken the

case, involving a technical issue of statutory construction, to indulge its continuing interest in

questions of federal-state allocation of authority under federal environmental statutes and

elsewhere. States and environmental groups view Section 401 as an important tool for

conditioning the construction and operation of federally licensed projects, and had feared that an

adverse decision in S.D. Warren would hinder the ability of states to require measures to

ameliorate the harmful effects of hydropower dams on water quality and aquatic life.

Congressional Research Service

The State Role in the Federal Licensing of Hydropower Dams

Contents

Statutory Background..................................................................................................................1

Facts and State Supreme Court Decision .....................................................................................2

U.S. Supreme Court Decision......................................................................................................2

Policy Implications .....................................................................................................................3

Legal Comments .........................................................................................................................5

Contacts

Author Contact Information ........................................................................................................6

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The State Role in the Federal Licensing of Hydropower Dams

O

n May 15, 2006, the U.S. Supreme Court decided S.D. Warren Co. v. Maine Board of

Environmental Protection,1 one of two important Clean Water Act (CWA) cases heard in

its 2005-2006 term.2 The decision addressed a fundamental issue as to the role of state

water quality concerns in the licensing (or relicensing) of hydropower facilities by the Federal

Energy Regulatory Commission (FERC). In brief, the Court held that the state where the

hydropower facility is located, through water quality certification under CWA Section 401, can

impose conditions on such licensing. Considered together with several recent decisions of the

Court, the case also affirms the Court’s abiding interest in the allocation of state and federal

authority over environmental matters.

Statutory Background

This is a tale of two statutes. The first is the Federal Power Act, a 1920 enactment, since

amended, that establishes “a broad federal role in the development and licensing of

hydropower.”3 The act requires a FERC-issued license for the construction, operation, and

maintenance of hydropower dams located in any navigable water of the United States.4

Importantly here, the act mandates that FERC include a variety of environmental considerations

in its licensing process.

FERC’s charge to balance the nation’s energy needs with environmental considerations is subject

to a major constraint: our second statute, the CWA.5 Under the CWA, FERC may not license an

activity involving a “discharge” into waters of the United States unless the applicant first obtains

a certification or waiver from the state in which the discharge originates.6 Such certification,

required by CWA Section 401 and known as “401 certification,” must among other things assure

the federal agency that the proposed project will not cause violations of state water quality

standards.7 The conditions and terms in the state’s certification, designed to assure such

compliance with such standards, are to be incorporated as conditions in the FERC-issued license. 8

Plainly, 401 certification is a powerful means by which states can affect the characteristics of

FERC-licensed projects. And since FERC licenses may be issued for up to 50 years, the

importance to the states of having input at the licensing stage is hardly surprising.

However, the application of the 401 certification requirement turns, as mentioned, on whether the

proposed project will cause a “discharge” into federal jurisdictional waters. And therein lies the

issue in S.D. Warren Co.: do the company’s hydropower dams—which impound water, pass it

1

126 S. Ct. 1843 (2006).

The other case was Rapanos v. United States, 126 S. Ct. 2208 (2006), involving the geographic scope of the Corps of

Engineers’ CWA permitting authority over wetlands.

3

California v. Federal Energy Regulatory Comm’n, 495 U.S. 490, 496 (1990). The Federal Power Act is at 16 U.S.C.

§§ 791a-828c.

4

Federal Power Act § 23(b), 16 U.S.C. § 817. FERC authority to issue such licenses is found in Federal Power Act §

4(e), 16 U.S.C. § 797(e).

5

33 U.S.C. §§ 1251-1387.

6

CWA § 401(a), 33 U.S.C. § 1341(a).

2

7

The setting of state water quality standards is governed by CWA sections 303 and 304(a), 33 U.S.C. §§ 1313, 1314(a)

respectively. Achieving those standards is “one of the Act’s central objectives.” Arkansas v. Oklahoma, 503 U.S. 91,

106 (1992).

8

CWA § 401(d), 33 U.S.C. § 1341(d).

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The State Role in the Federal Licensing of Hydropower Dams

through turbines, and reintroduce it to the same waterway downstream of the dam—bring about a

“discharge” within the meaning of Section 401?

Facts and State Supreme Court Decision

The S.D. Warren Co. owns five hydropower dams on the Presumpscot River in Maine, which

generate electricity for the company’s paper mill. Each dam is operated in “run of river” mode,

meaning that moment to moment, outflow from each dam is about equal to inflow. In seeking

renewal of its FERC licenses for the dams, S.D. Warren filed applications for state water quality

certification with the Maine Board of Environmental Protection (DEP), and in 2003, the DEP

approved certification, subject to conditions. S.D. Warren then challenged the 401 certification

requirement in a state trial court, arguing that its dams did not produce the requisite “discharge”

under the CWA.

The trial court disagreed and the state Supreme Court affirmed: the reintroduction of the water

downstream of the dams is indeed a “discharge,” the state high court held, and thus 401

certification applied. The CWA does not define the term “discharge,” it reasoned, but merely says

that “when used without qualification [it] includes a discharge of a pollutant, and a discharge of

pollutants.”9 These latter phrases, however, are defined to mean “(A) any addition of any

pollutant to navigable waters from any point source, [and] (B) any addition of any pollutant to the

waters of the contiguous zone or the ocean from any point source other than a vessel or other

floating craft.”10 Based on this definition, the court found that an “addition” is a key feature of

any covered discharge. S.D. Warren’s dams resulted in such an “addition” because, when

removed from nature to pass through the dams, the water loses its status as waters of the United

States. Thus, when redeposited into the natural course of the river, there occurs an “addition” to

the waters of the United States.

Nor, said the state supreme court, can the CWA’s explanation of “discharge” be limited to

discharge of pollutants, since the provision uses only the word “includes,” suggesting that the

listed “addition of any pollutant(s)” examples do not exhaust the universe of covered discharges.

U.S. Supreme Court Decision

The Supreme Court unanimously affirmed the Maine Supreme Court. The water released from a

hydropower dam, it held, constitutes a “discharge” within the meaning of CWA Section 401.

Thus, FERC licensing of such dams is subject under that section to state conditions regarding

water quality.

The Court’s rationale was different from the Maine High Court’s, however, not depending on the

existence of an “addition” to the navigable waters as a prerequisite for a “discharge.” The Court

found that lacking a statutory definition, “discharge” had to be interpreted in its everyday,

dictionary sense as a “flowing or issuing out.” This is the sense of the word, it found, that it had

9

CWA § 502(16), 33 U.S.C. § 1362(16) (emphasis added).

CWA § 502(12), 33 U.S.C. § 1362(12) (emphasis added).

10

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assigned to the term in previous water cases, including its one previous case involving CWA

Section 401.

All of S.D. Warren’s arguments that “discharge” as used in Section 401 should be read more

narrowly were rejected. Most broadly, the Court noted that the CWA is not concerned only with

the “addition” of pollutants, but more broadly with any adverse alteration in water quality. Such

adverse alterations, it said, are “a risk inherent in limiting river flow and releasing water through

turbines.” In particular, dams can cause changes in the circulation of a river leading to less

dissolved oxygen and other chemical modifications. Changes in a river like these, the Court

found, “fall within a State’s legitimate legislative business.” It is the very reason, the Court

concluded, that Congress provided the states in Section 401 with power to enforce state law.

Policy Implications

The S.D. Warren Co. case tested the legal question of what is a discharge for the purposes of

Section 401. This seemingly narrow question has broad policy implications for the ability of

states to control the water quality impacts of federally licensed or permitted facilities, particularly

but not solely with respect to hydropower projects.

At the heart of the CWA is the concept of shared administration of water pollution control

programs between the federal government and states. Congress established two different and

complementary pathways to accomplish the ambitious objectives of the law: (1) federally

promulgated technology-based effluent reduction limitations, administered through National

Pollutant Discharge Elimination System (NPDES) permits, authorized by CWA Section 402,

which are aimed at discharges of pollutants; and (2) state water quality standards to regulate

water pollution more generally. Water quality standards consist of criteria (narrative or numeric)

that limit ambient concentrations of specific pollutants and designated beneficial uses (such as

recreation or water supply). States are to protect existing and beneficial uses of water by

enforcing their water quality standards.

Under Section 401, states must certify that a federally licensed activity complies with the

applicable provisions of the CWA regarding effluent limitations, water quality standards,

standards of performance, toxic pollutant standards, or any other appropriate requirement of state

law. It provides states with two distinct powers: one, the power indirectly to deny federal permits

or licenses by withholding certification (if a state denies certification, the federal agency may not

issue the license or permit); and two, the power to impose conditions upon federal permits by

placing limitations on certification. Generally, Section 401 certification has been applied to

hydropower projects seeking a license from FERC and for dredge-and-fill activities in wetlands

and other waters that require permits from the Army Corps of Engineers under Section 404 of the

CWA and Sections 9 and 10 of the Rivers and Harbors Act. It also is applied to permit

requirements for industrial and municipal point source dischargers under Section 402 of the

CWA, the NPDES permit requirement. In addition, it has the potential to be applied to other

activities that could affect water quality, a point that has increasingly become an issue.

In recent years, some states have come to view Section 401 as an important tool in their overall

programs to protect the physical and biological, in addition to the chemical, integrity of their

waters. Some have begun using Section 401 to address a wide range of impacts to the quality of

their waters, including impacts to aquatic habitat such as wetlands where issues of non-chemical

impacts arise. In the 32 states that do not have independent wetlands regulatory programs, the

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The State Role in the Federal Licensing of Hydropower Dams

water quality certification process may be the only way in which a state can exert any direct

control over projects in or affecting wetlands that must obtain a Section 404 permit. Through

Section 401, some states have addressed such impacts of a project as inadequate river flow,

inundation of habitat, dissolved oxygen levels, and impacts on fish and other wildlife.

The S.D. Warren Co. case highlighted these issues with respect to hydropower facilities. The

Federal Power Act preempts states from independently regulating hydropower, thus making 401

certification critical to protecting water quality standards, states say. Hydropower projects

contribute to water pollution, as that term is broadly defined in the CWA,11 in a number of ways,

thus causing rivers to fail to meet water quality standards. Hydropower dams can harm the

physical integrity of rivers by creating lakes, flooding upstream areas, and limiting downstream

flow. They can harm biological integrity by changing conditions upstream and downstream, such

as barring passage of fish to spawning areas. They can harm chemical integrity by resulting in

discharge of water that is too warm or too cold for affected fish species, more or less turbid, or

containing greater or lesser amounts of dissolved oxygen.

The expanded use of Section 401is acknowledged and criticized by groups such as hydropower

interests, electric utilities, and others. According to their view, in many states the 401 process has

evolved from a focused review of compliance with state water quality standards to a much more

expansive parallel state licensing or permitting scheme, often requiring attention to factors such

as “aesthetic” flows, in-stream levels, fish passage, and recreational access. Some state agencies

also assert authority to impose a broad range of procedural and substantive requirements under

other state law. In the United States, there are more than 1,600 hydroelectric projects at over

2,000 dams across the nation that are regulated by FERC under the Federal Power Act. The

Court’s ruling is believed to be especially significant for California, Oregon, Washington, and

Idaho in the West; Michigan and Wisconsin in the Great Lakes region; Connecticut, New

Hampshire, New York, Maine, and Vermont in New England; and Alabama and parts of North

and South Carolina in the East. About two-thirds of these dams are due to be re-licensed over the

next 12 to 15 years. The renewal process, which can take four or more years to complete,

involves a reevaluation of a hydropower project’s impact on local water resources and fish and

wildlife species. A 2001 FERC staff report found that untimely issuance of 401 certification is a

significant factor in most delayed licensing proceedings, adding costs and uncertain

environmental or other public benefits.12

Because new licenses typically authorize operations for 30 to 50 years (original licenses were for

terms up to 50 years and generally were issued prior to enactment of the CWA and other current

federal environmental laws), states have a keen interest in ensuring that their water quality

concerns are addressed during the re-licensing process. The full extent of this interest was

expressed in congressional testimony in 1997.13

11

“The term ‘pollution’ means the man-made or man-induced alteration of the chemical, physical, biological, and

radiological integrity of water.” Clean Water Act § 502(19); 33 U.S.C. § 1362(19).

12

Federal Energy Regulatory Commission, “Staff Report on Hydroelectric Licensing Policies, Procedures, and

Regulations, Comprehensive Review and Recommendations Pursuant to Section 603 of the Energy Act of 2000,” May

2001, p. 92.

13

Kassel, John B., Deputy Secretary, Vermont Agency of Natural Resources, In, U.S. Congress, Senate, Committee on

Energy and Natural Resources, Subcommittee on Water and Power, “FERC Hydroelectric Relicensing Procedures,”

Hearing, 105th Congress, 1st Session, Oct. 30, 1997, (S.Hrg. 105-381), pp.80-81.

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Restricting the ability of states to ensure that federally licensed uses of state waters do not

violate state water policies threatens what is widely (and rightly) perceived as a core

prerogative and obligation of state government. States use Section 401 to make sure that

their citizens can swim, fish, boat on, drink and otherwise enjoy their waters as they wish....If

there ever was a states’ rights issue, this is it. States are committed to controlling water uses

and quality within their borders, under both state law and the CWA. Section 401

conditioning is an important tool. It should not be weakened.

In the view of varied stakeholders, including the industry, states, and environmental

organizations, the Court’s unanimous decision will not change the way federally licensed

hydropower dams operate, because it preserves states’ opportunities to require certification that

water protection laws will not be violated by the activity of such dams. How the decision might

be extended beyond hydropower dams to apply to any federally licensed or permitted activity

involving the Clean Water Act is an open question, since the ruling could be applied to projects

involving irrigation and water supply systems, where questions of water quality standards also

may arise.

Legal Comments

Interestingly, the U.S. Supreme Court agreed to resolve the S.D. Warren Co. case in the face of a

decades-old acceptance of the role of state water quality certification in federal hydropower

licensing, and an absence of any split in the circuits on this point. As we speculated earlier, the

Court’s interest in the case might have been provoked by the important question of federal-state

power allocation it raises. Buttressing this possibility is the fact that in recent years, the Court has

accepted a host of cases posing issues of environmental federalism, despite (in some cases) the

seeming mundaneness of the statutory construction issues involved and/or the lack of a circuit

split. Examples include decisions under several federal environmental statutes.14

In the U.S. Supreme Court, S.D. Warren Co. prompted the usual prodigious outpouring of amicus

briefs one sees in important federalism cases. Particularly notable were the brief filed by 34 states

and that filed by the United States, each taking the side of Maine. Indeed, the United States was

granted divided argument time in support of Maine. Parenthetically, the case was argued on

February 21, 2006, the first day of hearing oral arguments for newly appointed Justice Samuel

Alito.

The clear-cut nature of the S.D. Warren opinion, and its unanimity, suggest that the existence of a

state certification prerequisite in connection with FERC hydropower licensing is unlikely to see

further litigation. However, whether the scope of that certification authority will see further action

in the courts remains to be seen.

14

See, e.g., Alaska Dep’t of Environmental Conservation v. EPA, 540 U.S. 461 (2004) (Clean Air Act); Engine

Manufacturers Ass’n v. South Coast Air Quality Management District, 541 U.S. 246 (2004) (same); Bates v. Dow

Agrosciences, LLC, 544 U.S. 431 (2005) (Federal Insecticide, Fungicide and Rodenticide Act).

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Author Contact Information

(name redacted)

Legislative Attorney

[redacted]@crs.loc.gov, 7-....

Congressional Research Service

(name redacted)

Specialist in Resources and Environmental Policy

[redacted]@crs.loc.gov, 7-....

6

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