Crown Simpson: Supreme Court Rules EPA Veto of State NPDES Permit Directly Reviewable in Court of Appeals

The central mechanism in the Federal Water Pollution Control Act (FWPCA)¹ for limiting discharges from industrial point sources is the national pollutant discharge elimination system (NPDES) permit program. Every discharge from such a source into navigable waters must be authorized by an NPDES permit issued under § 402 of the Act.² While Congress initially placed permitting authority for this program in the hands of the Environmental Protection Agency (EPA), it envisioned transfer of the function of permit issuance to the states.³ The statute provides EPA with continuing supervisory responsibility over state actions implementing the program, however. It requires state permitting agencies to submit proposed permits to EPA for approval and authorizes the Agency to veto state permitting decisions that do not comport with the "guidelines and requirements" of the Act.⁴

In a ruling of some importance to the smooth functioning of this federal-state mechanism, the United States Supreme Court recently held, in Crown Simpson Pulp Co. v. Costle,⁵ that the federal courts of appeals are the proper forum in which to seek judicial review of such EPA objections to state issuance of proposed NPDES permits. Prior to the Supreme Court's ruling, a conflict in authority on this question in the circuit courts of appeals threatened to cause confusion and hinder implementation of the statutory scheme. The Court's decision promises to facilitate expeditious resolution of NPDES permit disputes under the Act. Left unresolved, however, is whether an EPA veto, in the context of the Agency's new power under the Clean Water Act of 1977 to issue its own permits if the state refuses to accept its objections, is an interlocutory determination reviewable only after a permit has finally been issued.

Background

California's request to assume primary authority for administering the NPDES permit program for dischargers within its borders pursuant to § 402 of the FWPCA⁶ was approved by EPA in 1973.⁷ In 1976, a regional⁸ water resources board in northern California proposed to issue discharge permits for two pulp mills on the Pacific coast. The EPA Regional Director for Enforcement objected to the proposed permits, however, and vetoed them under § 402(d)(2) of the Act⁹ on the ground that they failed to require compliance with the Agency's national effluent limitations for bleached kraft pulp mills. The mill operators sought direct review of EPA's action in the Ninth Circuit Court of Appeals.

The State Water Resources Control Board subsequently proposed to grant the mills variances from the national effluent limitations¹⁰ and to issue permits embodying the less stringent discharge standards allowed by these variances. This time the EPA Administrator disapproved the variances and objected to the proposed permits under § 402(d)(2) on the ground that they failed to require the permittees to use the best practical control technology currently available.The prospective permittees again sought direct review of the EPA veto in the Ninth Circuit. The court of appeals consolidated the cases and addressed only a single issue: whether it had jurisdiction to review the EPA vetoes or whether jurisdiction instead lay in the district court.

Ninth Circuit Decision

Permitting actions by states that have assumed authority to administer the NPDES program within their borders are reviewable in state court for consistency with the provisions of the state's own permitting program.¹¹ EPA's failure to verto such a permit is reviewable in federal district court under the general federal question statute to assure that the Agency's conclusion that the permit is not inconsistent with the "guidelines and requirements" of the Act was not arbitrary.¹² Where jurisdiction lies to review an EPA veto of a state permit has been the subject of dispute, however.

The mill operators and EPA were in agreement that the Ninth Circuit had jurisdiction to review the Agency's veto of the Crown Simpson permit, though on somewhat different grounds. The petitioners contended that jurisdiction could be established under either § 509(b)(1)(E),¹³ which empowers the courts of appeals to review EPA action approving or promulgating an effluent limitation, or [10 ELR 10074] under § 509(b)(1)(F),¹⁴ which authorized court of appeals review of EPA action denying a permit. EPA asked the court to find jurisdiction only under § 509(b)(1)(E).

Despite the urging of both sides in the litigation, the court of appeals ruled that it lacked jurisdiction to review the petitions.¹⁵ Judge Duniway, writing for the court, first disposed of the claim that jurisdiction for direct review could be based on § 509(b)(1)(E). Effluent limitations, which are generalized standards established by regulation, must be distinguished, he explained, from the two specific permit adjudications at issue. Moreover, even if approval of a variance from the national effluent limitations guidelines could be viewed as the functional equivalent of promulgation of an alternative limitation, EPA here had rejected the state permit and thus had not taken action "approving or promulgating" such a limitation within the meaning of § 509(b)(1)(E).

Turning to the contention that EPA's veto of a state permit is directly reviewable as action "denying" a permit under § 509(b)(1)(F),¹⁶ Judge Duniway recognized that the court of appeals would unquestionably have jurisdiction under this provision to review EPA denial of a permit application if the state had not yet assumed permitting authority. He pointed out, however, that the Ninth Circuit more than a year earlier in Washington v. Environmental Protection Agency (Scott Paper)¹⁷ had expressly held that the jurisdictional grant in § 509(b)(1)(F) "is limited to the Administrator and to his own action in issuing or denying a permit" and does not reach "his objection to a state's action in doing so."¹⁸ Judge Duniway ruled that Scott Paper controlled the outcome in the case before him and declined to recommend that the former decision be reconsidered en banc despite the adoption of a contrary position by the Sixth¹⁹ and Second²⁰ Circuits.

Judge Duniway admitted that under the court's interpretation of the Act, the proper forum for judicial review of EPA permit denials will depend upon whether the state in which the prospective permittee is located has assumed primary permitting authority under § 402(b). Direct denials of permit applications go to the courts of appeals under § 509(b)(1)(F) whereas vetoes of state permits would go to the district courts under their federal question jurisdiction.²¹ This is not incongruous, he insisted, because Congress may reasonably have intended to divide the heavy caseload of challenges to permit actions between the district courts and the courts of appeals. Nor, he asserted, would placing initial jurisdiction in the district courts overcomplicate or unduly lengthen judicial review of EPA vetoes. He had only the dubious suggestion that the courts of appeals could mitigate the delay produced by two-tiered review by discouraging applications for stays pending appeal to offer in support of this final contention, however.

In a concurring opinion, Judge Renfrew²² agreed with the majority's conclusion that the question of the court's jurisdiction under § 509(b)(1)(F) was governed by Scott Paper. Having obliged stare decisis, however, Judge Renfrew mounted an assault against Scott Paper, arguing that the case had been wrongly decided and that the court should take the present case en banc to consider overruling it.

Judge Renfrew attacked Scott Paper's view of § 509(b)(1)(F) on a number of fronts. In his view, interpretation of this provision to vest initial jurisdiction over EPA vetoes in the courts of appeals would facilitate realization of the legislative goal of prompt resolution of disputes regarding permits. Moreover, the distinction between EPA denial of a permit application and an EPA veto of a state-proposed permit is one of form rather than substance. Both actions have the functional effect of denying the requested permit. In addition, there is no practical barrier to direct court of appeals review because an EPA veto must be supported by a written statement of reasons and thus presents a sufficient administrative record for appellate review. Finally, the view that § 509(b)(1)(F) does not encompass EPA objections to state permit issuance is at variance not only with the case law in two other circuits²³ but also with dicta in the Ninth Circuit's earlier decision in Shell Oil Co. v. Train.²⁴ He concluded that these reasons compelled the court to consider the present case en banc, overrule Scott Paper, and proceed with review of the mill operators' petitions on the merits.

EPA surprised no one with its motion for rehearing, which was subsequently denied. Fearing that the hardening split among the circuits regarding jurisdiction over EPA permit vetoes would create jurisdictional uncertainty and judicial inefficiency but concerned even more that the Ninth Circuit's reading of the FWPCA would delay and thereby undermine implementation of the NPDES program, the Agency then petitioned the United States Supreme Court for certiorari.²⁵

The Supreme Court's Decision

The Supreme Court granted certiorari and summarily reversed the Ninth Circuit's decision without oral argument.²⁶ In a per curiam opinion, the unanimous Court sided with the views of Judge Renfrew and ruled that the [10 ELR 10075] Ninth Circuit had erred in finding itself without jurisdiction to review EPA's permit vetoes.

The Court's opinion is less than a sophisticated treatment of this issue in contrast to the exhaustive and sometimes strained circuit court decisions on the topic. Applying a functional analysis, the Court held that when EPA objects to effluent limitations contained in a state-issued permit, the precise effect of its action is to deny a permit within the meaning of § 509(b)(1)(F). This construction of the statute, the Court emphasized, is the only way to avoid attributing to Congress an intent to create an absurdly bifurcated system for judicial review. Under the Ninth Circuit's contrary interpretation, the Court pointed out, such actions would be reviewable at different levels of the federal court system depending upon the "fortuitous circumstance" of whether the state in which the source is located has assumed primary permit issuing authority from EPA under § 402(b). The additional layer of judicial review in states with such authority would, moreover, delay the resolution of permit disputes under the Act. Having found that the court of appeals had jurisdiction under § 509(b)(1)(F), the Court declined to decide whether jurisdiction also existed under § 509(b)(1)(E).

The Court noted further that its holding was consistent with the approach taken by the Sixth Circuit²⁷ and with dicta both in a Second Circuit opinion²⁸ and in the Ninth Circuit's own decision in Shell Oil Co. v. Train.²⁹ The court of appeals had relied in contrast on two rulings³⁰ that EPA's failure to object to a state-issued permit is not directly reviewable under § 509. These cases might be distinguished, the Court explained, because a failure to object, as compared to an affirmative veto of state permit issuance, would not necessarily constitute EPA "action" within the meaning of § 509(b)(1). The Court concluded by reversing the Ninth Circuit's judgment and remanding the case to the court of appeals for further proceedings.

Analysis

The Supreme Court's decision in Crown Simpson has resolved the conflict among the lower courts concerning the proper forum for judicial review of EPA vetoes of state-issued NPDES permits. The Court's ruling that such vetoes are directly reviewable in the courts of appeals comports with the statutory language and the predominant and indeed more persuasive position that emerges from the case law. The opinion in addition seems to support the established view³¹ that EPA's failure to veto state permit issuance is not reviewable in the court of appeals because passive acquiesence does not amount to "action" "issuing" a permit within the meaning of § 509(b)(1)(F).

The Court's decision indicates an appreciation of the practical obstacles to expeditious implementation of the NPDES program that would result from a contrary ruling. Further, the opinion reflects an awareness of the fundamental importance to the program's success of speedy judicial resolution of challenges to EPA's actions. The Court clearly wished to avoid drawing out or complicating the judicial process concerning EPA permit actions whenever possible. Although the Court did not cite the legislative history for support on this point, its conclusion that the veto mechanism was not intended to be encumbered with two levels of judicial review is reinforced by the Senate report's expression of concern that EPA had in the past been insufficiently vigorous in overseeing state permitting determinations.³²

Effect of the 1977 Amendments

While the Supreme Court decision lays to rest a basic jurisdictional issue regarding pre-1978 EPA permit vetoes, its leaves unaddressed important questions concerning the review of vetoes of state permits proposed after enactment of the Clean Water Act of 1977.³³ In 1977 Congress added § 402(d)(4)³⁴ to the Act and thereby empowered EPA, once it has vetoed a state-proposed permit, to issue a final permit for the affected source if the state refuses to revise its proposal to accommodate EPA's objections. The addition of this mechanism to § 402(d) was intended to ease impasses that might result when EPA vetoed a state permit as contrary to the provisions of the Act and the state, unwilling to accede to the Agency's view of the statutory requirements, simply declined to submit a revised permit. Because the pre-1978 provisions of the Act gave EPA no authority to issue a permit under these circumstances, Congress feared that an intergovenmental stalemate could result that would leave the source with no permit at all to cover its discharges and thus subject to an enforcement action.³⁵

The EPA vetoes of the two California pulp mill permits at issue in Crown Simpson predated enactment of the 1977 amendments. In recognition of this fact, the Supreme Court cautioned in a footnote to its opinion that it had no occasion to consider whether the new power given EPA by those provisions would affect the jurisdictional issue. Since EPA now has the power to issue a permit itself if the state refuses to yield to its objections, however, an argument can be made that such a veto can no longer be viewed as final agency action or a final permit "denial" under § 509(b)(1)(F).The Agency has in fact taken the position³⁶ that post-1977 vetoes are interlocutory determinations which are judicially reviewable only in the context of a later proceeding challenging the permit that is ultimately issued by the Agency.EPA's claim that the legislative history of the 1977 amendments "clearly indicates" that EPA permit issuance is the only reviewable action associated with an EPA objection seems a bit [10 ELR 10076] optimistic. The excerpt³⁷ from the conference report which the Agency cites to support its position can at least arguably be read as aimed at forestalling challenges to the Agency's veto arising as defenses in an enforcement action in federal district court rather than preventing immediate review of an EPA veto in the court of appeals.The Agency's position is strongly supported by considerations of judicial and administrative economy, however. Use of a single proceeding for review of both the final permit issued by EPA and the propriety of the veto would be preferable to a two-stage process in which separate challenges to the veto and the subsequent permit may be made.

Conclusion

The Supreme Court's Crown Simpson decision eliminates the prospect of at least one significant obstacle to speedy resolution of challenges to EPA actions in supervising state administration of the NPDES permit program. While the Court's ruling resolves the uncertainty as to where to file a petition to review an EPA veto of a state permit, it leaves unanswered several questions regarding the mechanics of obtaining judicial review of vetoes under the amended statutory regime currently in force. Further judicial exploration of these additional issues will undoubtedly be necessary and, needless to say, probably not long in coming.

1. 33 U.S.C. §§ 1251-1376, ELR STAT. & REG. 42101.

2. 33 U.S.C. §§ 1311(a), 1342, ELR STAT. & REG. 42123, 42141.

3. 33 U.S.C. §§ 1342(a), 1342(b), & 1342(c), ELR STAT. & REG. 42141.

4. 33 U.S.C. § 1342(d)(2), ELR STAT. & REG. 42141.

5. 48 U.S.L.W. 3599, 10 ELR 20230 (Mar. 17, 1980).

6. 33 U.S.C. §§ 1342(b) and 1342(c), ELR STAT. & REG. 42141.

7. 39 Fed. Reg. 26061 (1973).

8. The nine regional water resources boards in California are subsidiaries of the State Water Resources Control Board and exercise specific powers delegated to them by the state board.

9. 33 U.S.C. § 1342(d)(2), ELR STAT. & REG. 42141.

10. The EPA regulations establishing national effluent limitations guidelines for bleached kraft pulp mills contained a clause allowing the state to grant a variance upon a finding that the discharger is beset by technical and economic factors "fundamentally different" from those considered in the establishment of the national guidelines, subject to approval by the EPA administrator. 40 C.F.R. § 430.72 (1977).

11. Shell Oil Co. v. Train, 415 F. Supp. 70, 77-78 n.15, aff'd, 585 F.2d 408, 411, 9 ELR 20023, 20025 (9th Cir. 1978) (state agency's denial of permit application is reviewable in state administrative and judicial tribunals, not in federal district court). See also, e.g., Save the Bay, Inc. v. Mississippi Air & Water Pollution Control Comm'n, 341 So. 2d 98 (Miss. 1976).

12. Save the Bay, Inc. v. Administrator, 556 F.2d 1282, 1292-96, 7 ELR 20674, 20679-81 (5th Cir. 1977).

13. 33 U.S.C. § 1369(b)(1)(E), ELR STAT. & REG. 42128.

14. 33 U.S.C. § 1369(b)(1)(F), ELR STAT. & REG. 42128.

15. Crown Simpson Pulp Co. v. Costle, 599 F.2d 897, 9 ELR 20603 (9th Cir. 1979).

16. Review of the Administrator's action … in issuing or denying any permit under section 1342 of this title, may be had by any interested person in the Circuit Court of Appeals ….

33 U.S.C. § 1369(b)(1)(F).

17. 573 F.2d 583, 8 ELR 20314 (9th Cir. 1978).

18. 573 F.2d at 586, 8 ELR at 20314.

19. Republic Steel Corp. v. Costle, 581 F.2d 1228, 8 ELR 20686 (6th Cir. 1978), cert. denied, 440 U.S. 909 (1979); Ford Motor Co. v. EPA, 597 F.2d 661, 8 ELR 20082 (6th Cir. 1977).

20. Mianus River Preservation Committee v. EPA, 541 F.2d 899, 909, 6 ELR 20597 (2d Cir. 1976) (dictum).

21. 28 U.S.C. § 133(a).

22. U.S. District Judge for the Northern District of California, sitting by designation.

23. See cases cited in notes 19 and 20, supra.

24. 585 F.2d 408, 412, 9 ELR 20023, 20025 (9th Cir. 1978) (EPA Administrator's veto of state issuance of a variance-based permit is reviewable in the court of appeals under § 509(b)(1)).

25. 48 U.S.L.W. 3374, 9 ELR 10228 (Nov. 21, 1979).

26. Crown Simpson Pulp Co. v. Costle, 48 U.S.L.W. 3599, 10 ELR 20230 (Mar. 17, 1980).

27. Republic Steel Corp. v. Costle, 581 F.2d 1228, 8 ELR 20686 (6th Cir. 1978), cert. denied, 440 U.S. 909 (1979); Ford Motor Co. v. EPA, 567 F.2d 662, 8 ELR 20082 (6th Cir. 1977).

28. Mianus River Preservation Committee v. EPA, 541 F.2d 899, 909, 6 ELR 20597 (2d Cir. 1976) (dictum).

29. 585 F.2d 408, 412, 9 ELR 20023, 20025 (9th Cir. 1978) (dictum).

30. Save the Bay, Inc. v. Administrator, 556 F.2d 1282, 7 ELR 20674 (5th Cir. 1977); Mianus River Preservation Committee v. EPA, 541 F.2d 899, 6 ELR 20597 (2d Cir. 1976).

31. See cases cited in note 30, supra.

32. S. REP. NO. 95-370, 95th Cong., 1st Sess. 73 (1977).

33. Pub. L. 95-217, 91 Stat. 1566 (Dec. 15, 1977), codified at 33 U.S.C. §§ 1251-1376, ELR STAT. & REG. 42101.

34. 33 U.S.C. § 1342(d)(4), ELR STAT. & REG. 42142.

35. See S. REP. NO. 95-370, 95th Cong., 1st Sess. 73 (1977); H.R. REP. NO. 95-830, 95th Cong., 1st Sess. 97 (1977).

36. 44 Fed. Reg. 32878, ELR STAT. & REG. 46449 (June 7, 1979).

37. [T]he Administrator is expected to use the authority given by this amendment to issue a permit after objection to a State issued permit. Thus any litigation over the degree of effluent reduction required for a source should take place in the context of judicial review of the permit, rather than in the context of an enforcement action ….

Judicial review arising out of this provision would be in the same manner as judicial review of any EPA issued 402 permit.

H.R. REP. NO. 95-830, 95th Cong., 1st Sess. 97 (1977).