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EPA Issues Final Water Transfers Rule: No NPDES Permit For Now, But Litigation Looms


06/23/08

On June 13, 2008, the Environmental Protection Agency ("EPA"), after years of anticipation by water suppliers, states and conservation organizations alike, published the Final Water Transfers Rule ("Water Transfers Rule") in the federal register.  The Water Transfers Rule generally exempts water transfers from the requirement to obtain a Clean Water Act ("CWA") National Pollution Discharge Elimination System ("NPDES") permit.   The rule is highly significant because it exempts thousands of "water transfers," which EPA defines as "an activity that conveys or connects waters of the United States without subjecting the transferred water to intervening industrial, municipal or commercial uses," from the NPDES permitting process.

Requirements of the CWA:


The CWA requires "dischargers" of "pollutants" to "waters of the United States" to obtain a NPDES permit from state or federal officials prior to commencing a "discharge."  Conservation organizations, and some states, have asserted that the process of moving polluted waters from one waterbody to a less polluted water body constitutes the "discharge" of pollutants—thereby triggering the NPDES requirement.  However, in the Water Transfers Rule the EPA rejected this reading of the CWA.  Relying upon a 2005 EPA Policy Memo 2005 EPA Policy Memo the EPA concluded that there is no "addition of a pollutant," a prerequisite for a finding a CWA regulated discharge, when water is simply moved from one watershed to another (or within the same watershed).  The Water Transfers Rule exclusion takes effect August 12, 2008 and will be codified at 40 C.F.R. § 122.3(i).


Types of Transfers Affected:

Under the Water Transfers Rule, transfers of water from one distinct watershed to another are exempt from obtaining a permit unless the "conveyance itself introduces pollutants into the water being conveyed."   According to EPA, a water transfer through impoundments used to settle out mining wastes would constitute a conveyance that  "introduces pollutants," but there is ambiguity on what other more subtle uses might trigger the permitting requirement (e.g., trace amounts of copper added by transfer through pipeline).  EPA also notes that conveyances of water within the same waterbody, although not within the scope of the Rule, do not require permits because of the Supreme Court's treatment of the issue in South Fla. Water Mgmt. Dist. v. Miccosukee Tribe of Indians, 541 U.S. 95 (2004).

Litigation Likely:

The Water Transfers Rule arguably conflicts with previous decisions of the United States Circuit Courts of Appeal for the First, Second and Eleventh Circuits—which all held that inter-basin transfers of water generally trigger the NPDES requirement where the transferred water contains higher pollution levels than the receiving waters.  EPA distinguished those court decisions in the Final Rule, reasoning that the CWA is ambiguous as to Congress' intent, and under such circumstances, courts must defer to EPA's reasonable interpretation of the CWA.  However, there are indications that several environmental groups, and at least two states, are contemplating a direct legal challenge to the Rule.  Also, at least one federal district court has rejected the approach taken by EPA in the Water Transfers Rule, see Friends of the Everglades, Inc. v. S. Florida Water Management District, No. 02-80309 (S.D. Fla. 2006), though that decision considered only EPA's Proposed Water Transfers Rule (which is presumably not entitled to the same level of agency deference as a final rule).

The Water Transfers Rule and associated litigation, however ultimately resolved, will significantly affect state agencies, water districts, local governments, and their customers—throughout the United States.  The implementation of the rule, and any challenge thereto, will be particularly important in the Western United States where large percentages of the water supply arrive via inter-basin transfer.

Mary Lynn K. Coffee is a partner in Nossaman's Irvine office. She has extensive experience in compliance with, and permitting and approvals for development projects under local, state and federal resource protection laws, including the federal Clean Water Act (Sections 401, 402 and 404), the California Porter-Cologne Water Quality Act and the state streambed alteration provisions of the California Fish and Game Code. In this role, she has particular expertise in the development of construction and post-construction surface water quality compliance programs for existing and new real estate developments. She can be reached at (949) 833-7800 or mlcoffee@nossamam.com.

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