Court Decision to Vacate, Remand State Water Quality 401 Certification Rule Leads to Disruption 

Court Decision to Vacate, Remand State Water Quality 401 Certification Rule Leads to Disruption 

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On October 21, 2021, the U.S. District Court for the Northern District of California vacated and remanded the U.S. Environmental Protection Agency’s 2020 Clean Water Act Section 401 “Certification Rule.”  

In response to the court’s ruling, EPA is implementing the previous water quality certification rule nationwide, which had been in effect since 1971, while it develops a new rule.  

The result? Expect disruption, at least for the short term. 

Two examples: 

  • As an immediate result of the court’s ruling, the U.S. Army Corps of Engineers has halted issuing certain Nationwide Permits, known as NWPs, while the states re-issue water quality certifications under the 1971 rule.  
  • Procedural rights and protections implemented by the Certification Rule—such as the pre-filing meeting with the state water quality certification agency and limitations of state conditioning authority under CWA Section 401—no longer apply. 

 The Deep Dive 

Pursuant to Section 401 of the Clean Water Act (CWA), no federal license or permit that may result in a discharge to waters of the U.S. may be issued unless the state or authorized Tribe where the discharge will originate issues a water quality certification or waives the certification requirement.  

A Section 401 certification must be issued or waived before a license can be issued by the Federal Energy Regulatory Commission (FERC) for hydropower projects and for all permits issued by the Corps.  

As part of the Section 401 certification process, EPA’s regulations provide that states and Tribes must confirm that the federal license or permit provides “reasonable assurance” that state or Tribal water quality requirements will be met (40 C.F.R. § 121.24). Any conditions imposed by a state or Tribe in a Section 401 certification must be incorporated into the federal license or permit. 

The water quality certification process under Section 401 has long been a cause of delay and uncertainty for proposed infrastructure projects. The two primary issues associated with the Section 401 certification process are: 

  1. The one year-time period for issuance/waiver of the certification 
  1. The scope of the certification (whether it can include conditions beyond water quality or conditions beyond those associated with the discharge from the project) 

The Certification Rule was promulgated by the Trump Administration to address these issues, among others. The Certification Rule also codified the D.C. Circuit’s 2019 ruling in Hoopa Valley Tribe v. FERC that states and Tribes have up to one year to act on a request for water quality certification. The Certification Rule also provided that the scope of the water quality certification under Section 401 “must address water quality concerns from the discharge itself, not the proposed activity as a whole.” Under the Certification Rule, Section 401 water quality certifications pertain only to point-source discharges associated with a federally licensed or permitted activity—and not the entire project proposal.  

Shortly after the Certification Rule was finalized, several states and environmental groups challenged the rule in three separate cases (brought in federal district courts in California, Pennsylvania, and South Carolina), arguing that it impeded upon states’ rights and their ability to regulate water quality.  

The National Hydropower Association (NHA) intervened in all three cases in support of the Certification Rule. As the cases progressed, the incoming Biden Administration asked the courts to remand the rule to EPA, but without vacatur—which would leave the Certification Rule in effect while EPA determined how to proceed with its policy priorities. NHA successfully opposed vacatur in the federal district courts in Pennsylvania and South Carolina.  

The California district court did not follow suit and instead vacated the Certification Rule while acknowledging that the caselaw is unsettled surrounding whether the Administrative Procedure Act (APA) allows a court to “set aside” an agency rule without reviewing the merits of whether the rule is defective.  

The Ninth Circuit had previously found that “when equity demands, a flawed rule need not be vacated.”  

Here, the court sided with the decisions of other district courts that have found that vacatur is an equitable remedy similar to a preliminary injunction. Thus, the court applied a familiar test that guides such equitable analyses described in Allied-Signal, Inc. v. U.S. Nuclear Reg. Comm’n, 988 F.2d 146 (D.C. Cir. 1993) (“Allied Signal”), which reviews “[1] the seriousness of the order’s deficiencies (and thus the extent of doubt whether the agency chose correctly) and [2] the disruptive consequences of an interim change that may itself be changed.”  

The court found that the scope of the Certification Rule had taken an “antithetical position” with the U.S. Supreme Court’s view of CWA Section 401 in PUD No. 1 of Jefferson County v. Washington Dep’t of Ecology, 511 U.S. 700, 710 (1994) (“PUD 1”). That case articulated an expansive view of the state’s authority in conditioning projects with water quality certifications. PUD 1 found that Section 401 “is most reasonably read as authorizing additional conditions and limitations on the activity as a whole once the threshold condition, the existence of a discharge, is satisfied.” The court found that EPA did not adequately explain how it reconciled the Certification Rule’s limitation of state certifications to only the “discharge” with the Supreme Court’s finding in PUD 1, and thus its interpretation of the CWA was not afforded deference. Turning to the disruption prong of the test, the court found that EPA’s change in its position after 50 years was more disruptive than the court’s decision to vacate the Certification Rule. 

Short-Term Disruptions Are Expected 

EPA’s website acknowledges the vacatur and explains: “As the Court stated, this order requires a temporary return to EPA’s 1971 rule until EPA finalizes a new certification rule. EPA is reviewing the Court decision and considering next steps.” It appears that EPA considers the vacatur to apply nationwide and that EPA will return to implementing the 1971 certification regulations until it promulgates a new rule.  

As a general matter, vacatur of the Certification Rule does not automatically impair prior actions taken pursuant to the vacated rule. The court’s order does not address the legality of, or purport to invalidate, certifications issued pursuant to the Certification Rule. However, and also mentioned above, the Corps has halted issuing further coverage under 16 NWPs because they received water quality certifications pursuant to the Certification Rule. The Corps is also pausing all decisions on individual permit applications that previously received a certification pursuant to the Certification Rule, but for which a permit has not yet been issued. The Corps states that this is a temporary pause in permitting actions, but even a short-term limbo will no doubt affect thousands of projects awaiting permit coverage. If the Corps will request new certifications for the 16 NWPs or for pending individual permit applications, states that are engaged and quick to react can help mitigate delays.  

More to Come? 

Intervenors that supported the Certification Rule have the opportunity to appeal the court’s decision to the U.S. Court of Appeals for the Ninth Circuit. No appeals have been filed to date. 

EPA’s intent is to now promulgate a new Section 401 rule, and it remains to be seen whether any elements of the Certification Rule will remain in EPA’s next iteration. EPA has not yet announced its plan for issuing the Section 401 rule proposal.