Citizen Suit Watch – Stormwater Report: Supreme Court Holds That Stormwater Discharges From Logging Roads Do Not Require Clean Water Act Permits; Federal District Court Rejects a Similar Stormwater Citizen Suit Against A Utility
On March 20, 2013, the Supreme Court held, in Decker v. Northwest Environmental Defense Center,1 that the Clean Water Act and the industrial stormwater regulations from the U.S. Environmental Protection Agency (EPA) did not subject stormwater discharges from logging roads to a mandatory permit requirement. In reaching this conclusion, the Court deferred to EPA's interpretation that the regulations did not treat timber harvesting as an "industrial activity." Justice Scalia, dissenting, argued that such deference was not warranted and would have reached the opposite conclusion.
Earlier that month, a federal district court in California granted summary judgment for a defendant in a similar citizen suit, Ecological Rights Foundation v. Pacific Gas & Electric Company, No. C 10-0121 (N.D. Cal. Mar. 1, 2013). In that case, the plaintiff argued that EPA's industrial stormwater regulations require permits for stormwater discharges from facilities used to store vehicles, equipment, materials and supplies, and to conduct various activities in support of providing electricity and natural gas. The court found that plaintiff was attempting to change or invalidate a longstanding agency interpretation through an otherwise plausible reading of the stormwater regulations. In contrast to Decker, the court held that plaintiff's theory could only be tested in litigation involving EPA and not in a citizen enforcement suit.
I. Decker v. Northwest Environmental Defense Center
A. Regulatory Background
This case involved the intersection of two EPA regulations governing National Pollution Discharge Elimination System (NPDES) permits for discharges from certain forestry activities.
The first relevant regulation, known as the "Silvicultural Rule," defines the "silvicultural point sources" that are subject to the NPDES permit program. "Silvicultural point sources" include "any discernible, confined and discrete conveyance related to rock crushing, gravel washing, log sorting, or log storage facilities which are operated in connection with silvicultural activities and from which pollutants are discharged into waters of the United States."2 The regulation clarifies that the definition of silvicultural point source "does not include non-point source silvicultural activities such as . . . harvesting operations, . . . or road construction and maintenance from which there is natural runoff."3
The second regulation, known as the "Industrial Stormwater Rule," implements the Clean Water Act's stormwater discharge program. After many years of regulatory attempts to address stormwater discharges, Congress amended the Clean Water Act in 1987 to state that NPDES permits "shall not [be] require[d] . . . for discharges composed entirely of stormwater" prior to October 1, 1994, with the exception of five categories, most pertinently, discharges "associated with industrial activity."4 Congress did not define the phrase "associated with industrial activity" in the 1987 amendments. In implementing this requirement, however, EPA promulgated the Industrial Stormwater Rule, which defines discharges "associated with industrial activity" to include a discharge "that is directly related to manufacturing, processing or raw materials storage areas at an industrial plant."5 The definition encompassed activities at facilities in certain "categories of industries," including activities at "facilities classified as Standard Industrial Classification 24." Standard Industrial Classification (SIC) 24 ("Lumber and Wood Products") includes the subcategory industry group 241, which is "Logging."
B. Procedural Background
Respondent Northwest Environmental Defense Center (NEDC) filed a Clean Water Act citizen suit in 2006 against timber purchasers in an Oregon state forest, and also against the Oregon state and local governments (collectively, "Petitioners"), alleging the Petitioners caused discharges of stormwater from logging roads, through a system of ditches and culverts, without NPDES permits. NEDC argued that the Clean Water Act and EPA's Industrial Stormwater Rule required NPDES permits for such discharges. The district court dismissed NEDC's lawsuit for failure to state a claim because the ditches and culverts were not "silvicultural point sources" as defined in the Silvicultural Rule. On appeal, the Ninth Circuit reversed, holding that logging road control measures were "point sources" as defined by the Clean Water Act, and that EPA's Industrial Stormwater Rule unambiguously included logging in industrial activity and imposed a mandatory permit requirement for immediate access roads.
While the case was pending before the Supreme Court, EPA initiated a rulemaking to amend the Industrial Stormwater Rule and clarify that discharges from logging roads are not "associated with industrial activity" and, thus, are not subject to a mandatory NPDES permit. EPA articulated the same interpretation in its amicus curiae brief submitted in support of Petitioners' principal briefs.
EPA finalized the amendment to the Industrial Stormwater Rule on November 30, 2012,6 the Friday before the case was argued in the Supreme Court (on December 3). The amended regulation specified that only "logging" facilities connected with point source activities identified in the Silvicultural Rule are deemed to have activities "associated with industrial activity," thus excluding stormwater from forest roads from NPDES permitting requirements.7
C. Supreme Court Opinion
The Court began its analysis by addressing two jurisdictional questions. First, the Court ruled that jurisdiction over NEDC's lawsuit was proper under the Clean Water Act's citizen suit provision, 33 U.S.C. § 1365(a). Although another provision in the Act, 33 U.S.C. § 1369(b), provides exclusive jurisdiction for challenging certain agency actions, including certain rulemakings, the Court did not view NEDC's case as directly challenging or seeking the invalidation of EPA's rules. Instead, NEDC sought to enforce "what is at least a permissible reading" of the Silvicultural Rule. In so holding, the Supreme Court agreed with the Ninth Circuit that the rule is ambiguous and that 33 U.S.C. § 1369(b) did not bar NEDC's private enforcement action.
Second, the Court determined that the case was not rendered moot by EPA's recent amendment to the Industrial Stormwater Rule. The Supreme Court determined that the amendment did not resolve the live controversy about "whether [P]etitioners may be held liable for unlawful discharges of the earlier version of the Industrial Stormwater Rule." Specifically, if Petitioners were required to have NPDES permits under the previous regulation, the district court could still order a penalty or remedy based on Petitioners' failure to obtain such a permit. That the previous version of the Industrial Stormwater Rule was no longer in effect did not moot the cases.
Turning to the merits, the Court deferred to EPA's interpretation of its Industrial Stormwater Rule and did not address the Ninth Circuit's analysis of the Silvicultural Rule and holding that the discharges are from a point source.8 First, the Court explained that the statutory phrase "discharge associated with industrial activity" did not unambiguously include discharges from logging activities. The statutory words "industry" and "industrial" have broad and multiple meanings, allowing EPA to adopt a "more specific definition" of that phrase.
The Court also determined that EPA's pre-amendment Industrial Stormwater Rule did not require NPDES permitting for stormwater discharges from logging roads. EPA, participating as amicus curiae, argued that the Rule's reference to SIC 24 brought only "traditional industrial sources" within the scope of the Rule. The context provided by the rest of the Rule supported this position. First, the Rule's reference to "facilities" and "establishments" "suggest[ed] industrial sites more fixed and permanent than outdoor timber-harvesting operations." Also, the pre-amendment regulation defined "discharges associated with industrial activity" as discharges "from any conveyance that is used for collecting and conveying storm water and that is directly related to manufacturing." The Court deemed it reasonable for EPA to conclude that the logging roads were not "directly related" to "manufacturing," "processing," "raw materials storage," or an "industrial plant," and that the regulation did not cover such "temporary, outdoor logging installations." Because EPA's position was not "plainly erroneous or inconsistent with the regulation," and because it did not reflect a change from prior practice or a post hoc justification, the Court deferred to EPA's interpretation appropriate under Auer v. Robbins.9
Notably, the Court recognized EPA's interpretation as promoting cooperative and efficient stormwater management. The State of Oregon, the Court observed, has expertise in managing its forest roads and has invested in developing regulations and best practices for addressing stormwater runoff from logging roads. EPA's regulatory interpretations avoiding "duplicative or counterproductive" federal regulation could be viewed as advancing the Clean Water Act's mandate that EPA cooperate with State and local officials in developing stormwater management practices.
In his dissent, Justice Scalia argued that the Court should reconsider Auer deference10 and should not defer to EPA's interpretation of the pre-amendment Industrial Stormwater Rule. Arguing that there is no justification for deferring to an agency interpretation that is not the "fairest" reading, Justice Scalia warned that Auer deference may incentivize agencies to craft ambiguous rules to ensure maximum enforcement flexibility and authority.
Justice Scalia determined that the "fairest" interpretation of the Clean Water Act and EPA's regulations required NPDES permits for stormwater discharges from logging roads. First, in his view, ditches and culverts that were part of the logging roads drainage system fall within the definition of "point source" in the Clean Water Act and, thus, stormwater discharges that flow from those structures are not "natural runoff" excluded from the definition of "point source" under EPA's Silvicultural Rule. Further, EPA's Industrial Stormwater Rule, through its invocation of SIC 24, clearly included "logging" as an industrial activity. Justice Scalia concluded that the Ninth Circuit's judgment should be affirmed because "the fairest reading of the agency's rules proscribes the conduct at issue[.]"
II. Ecological Rights Foundation v. Pacific Gas & Electric Company
This Clean Water Act citizen suit, which pre-dated the Supreme Court's opinion in Decker by a few weeks, also involved allegations that the defendant was discharging without a permit in violation of the Clean Water Act and the Industrial Stormwater Rule. Plaintiff Ecological Rights Foundation (ERF) filed this suit in the U.S. District Court for the Northern District of California against Pacific Gas & Electric Company (PG&E) alleging unpermitted discharges of stormwater at thirty-one "corporation yards and service centers" used in support of PG&E's provision of electricity and natural gas services.
According to ERF, PG&E used these facilities to store vehicles, equipment, materials, and supplies, and to carry out various activities. ERF alleged that these items and activities contaminate stormwater which is discharged from the sites. Although the Court acknowledged that ERF made a plausible argument that the Clean Water Act and EPA's Industrial Stormwater Rule should be read to require permits for the challenged facilities, the Court found that: (i) EPA and the California Water Resources Board (Board) do not interpret the Act and the rule in this way; and (ii) more importantly, ERF's citizen suit—to which neither EPA nor the Board was a party—is not an appropriate vehicle to obtain the requested relief of compelling EPA and/or the Board to change their interpretations of the applicable laws.
As stated above, the Clean Water Act does not define "associated with industrial activity," but EPA's Industrial Stormwater Rule sets forth a detailed definition of that phrase, which refers to several specified SIC codes.11 SIC code 49, which "includes establishments engaged in the generation, transmission, and/or distribution of electricity or gas or steam" and which ERF agreed covers PG&E, is not among the various SIC codes listed in EPA's regulation. Although ERF acknowledged that SIC code 49 is not referenced in the regulation, it nevertheless argued that the activities carried out at the PG&E sites in question are "industrial" in nature and that, therefore, a number of other SIC codes in EPA's regulation "can and should be applied" to those facilities.
The court, for its part, noted that "the issue is no longer how the facilities might be classified in the abstract, looking only to the statute, the regulation, and the [SIC] manual, but also how the regulatory authorities view the matter." Upon considering the parties' positions, the court agreed with PG&E and found no EPA or Board support for ERF's position that NPDES permits are required for the facilities in question. Among other things, the court noted that state regulators had "affirmatively and explicitly stated" that two of PG&E's facilities do not require stormwater permits during their inspections of those facilities.
Because ERF was unable to refute the specific evidence presented by PG&E, the court was left to consider only ERF's "general argument" that EPA and the Board cannot adopt rules that are contrary to the Clean Water Act. In addressing that argument, the court emphasized that Congress left EPA with discretion to define "associated with industrial activity" and that deference is "mandated" under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.12 and Auer. In any event, the court did not consider whether EPA and the Board had acted in a manner "so inconsistent with the Clean Water Act as to override the deference due" under these cases because neither of the agencies was a party to this suit, nor had either agency even participated as an amicus. The court noted that citizen suits are intended to enforce the applicable regulations, not to alter them or change how the agencies apply them.
The ERF court's analysis stands in sharp contrast to both the Ninth Circuit in NEDC v. Brown and the subsequent Supreme Court opinion in Decker, which both blessed citizen suit jurisdiction in cases involving ambiguous regulations where the citizen plaintiff is offering an arguably plausible reading that differs from the agency's longstanding practice. Neither the Ninth Circuit nor the Supreme Court addressed the issue that was critical to the ERF court – whether the agency was a party to the litigation. Perhaps EPA's presence as an amicus in NEDC/Decker alleviated any concern for those Courts, or perhaps they did not view the issue through the same prism as ERF. In any event, ERF opens a new line of defense to citizen suits that seek to impose new regulatory interpretations rather than merely enforce existing agency positions.
While the Supreme Court and EPA's recent rulemaking resolved the question of whether permits are required for stormwater discharges from logging roads, both actions left unaddressed the threshold question of the applicability of the Silvicultural Rule and whether the discharges are from point or nonpoint sources. Thus, discharges from logging roads may still be subject to future potential regulation under Phase II of EPA stormwater program and continue the regulatory uncertainty for forest landowners. To further complicate matters, NEDC filed a motion with the Ninth Circuit on April 22 requesting that the Court reverse the district court's judgment and remand "for further proceedings with instructions reaffirming that stormwater discharges from pipes, ditches, and channels along logging roads are point source discharges subject to Section 402 of the Clean Water Act." Responses to that motion are due in early May.
Further, the Decker decision viewed in conjunction with ERF frames potential new battlegrounds in future citizen suit litigation over whether novel interpretations of ambiguous regulations can be properly subject to citizen enforcement.
C&M attorneys Cliff Elgarten, Kirsten Nathanson, and David Chung represented the National Alliance of Forest Owners and other forestry associations as amici in Decker.
1 133 S. Ct. 1326 (2013). This case was consolidated with Georgia-Pacific West, Inc. v. Northwest Environmental Defense Center. Additional background information on this case is set forth in prior alerts.
2 40 C.F.R. § 122.27(b)(1).
4 33 U.S.C. § 1342(p)(2)(B). The 1987 amendments employed what is referred to as a Phase I and Phase II regulatory structure. In Phase I, EPA developed regulations, including the Industrial Stormwater Rule, governing the five categories of stormwater discharges specified in the statute. Congress further directed EPA to consider, in Phase II, whether other types of stormwater discharges should also be subject to regulation, given the "nature and extent of pollutants in such discharges." Id. § 1342(p)(5)-(6).
5 40 C.F.R. § 122.26(b)(14) (2006). The rule further clarifies that the term "storm water discharge associated with industrial activity" includes discharges from "immediate access roads and rail lines used or traveled by carriers of raw materials, manufactured products, waste material, or by-products used or created by the facility."
6 The final rule was published in the Federal Register (77 Fed. Reg. 72,790) on December 7, 2012.
7 Specifically, the amended regulation limits covered stormwater discharges to "[f]acilities classified within Standard Industrial Classification 24, Industry Group 241 that are rock crushing, gravel washing, log sorting or log storage facilities operated in connection with silvicultural activities defined in [the Silvicultural Rule]."
8 The Court did not address the merits of the Silvicultural Rule.
9 519 U.S. 452 (1997).
10 Chief Justice Roberts, joined by Justice Alito, filed a short concurring opinion declaring that "[i]t may be appropriate to reconsider" Auer deference "in an appropriate case," but concluded that this "is not that case."
11 See 40 C.F.R. § 122.26(b)(14).
12 467 U.S. 837 (1984).
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