Court of Appeals Ruling Seen as Significant Stride Forward in Long March toward Licensing Reform

By Michael A. Swiger, Partner, Van Ness Feldman LLP

A ruling earlier this month by a U.S. Court of Appeals re-affirms that “one year means one year” for states to act upon water quality certification requests from the date of their receipt, as required under Clean Water Act section 401. 

Why It Matters 

The case is a significant win not only for the natural gas pipeline industry, but for the hydropower industry in that two U.S. courts of appeal have now issued decisions confirming that “one year means one year” for states to act upon water quality certification requests under section 401.  (In 2019, the U.S. Court of Appeals for the D.C. Circuit held that an applicant and certifying agency cannot avoid the one-year timeline by agreeing that the applicant would withdraw its certification request prior to the end of the one-year review period and then re-file it to trigger a new one-year review.)

The Second Circuit’s holding also validates the Environmental Protection Agency’s new section 401 rule, which also interprets the statute as imposing a bright-line, one-year review period.   

While the re-affirmation of “one year means one year” may affect different hydro project license applicants differently, the one-year rule is critical to ensuring timely hydropower relicensings. This recent ruling moves one step closer toward the Federal Energy Regulatory Commission’s re-establishment of control over licensing timelines for hydroelectric projects that have been delayed, in some cases for many years, awaiting state water quality certification. 

Deep Dive 

On March 23, 2021, the U.S. Court of Appeals for the Second Circuit affirmed the Federal Energy Regulatory Commission’s (FERC) orders finding waiver of Clean Water Act section 401 certification in connection with FERC’s approval of a natural gas pipeline project.  

The National Hydropower Association and the Northwest Hydroelectric Association, along with asset owners Grand River Dam Authority, Merced Irrigation District, Pacific Gas and Electric Company, Snohomish County Public Utility District, South Feather Water and Power Agency, and Yuba Water Agency participated in the industry amicus brief filed in the Second Circuit by Van Ness Feldman, LLP and Troutman Sanders, LLP. 

Reading the entire brief gives helpful background on why FERC-licensed hydro projects are subject to section 401 of the Clean Water Act and provides useful and thorough insight into why this case has far-reaching and serious impacts on the U.S. hydropower industry and supply of electric power. 

In New York State Dep’t of Env’t Conservation et al. v. FERC, the court found that the New York Department of Environmental Conservation (NYDEC) waived certification when it entered into an agreement with the pipeline to change the date on which the agency received the pipeline’s certification request in an “attempt to finesse the one-year deadline” for state action under the Clean Water Act. According to the court, the state agency’s action violated the “bright-line rule” in section 401 regarding when the one-year clock starts ticking.   

In response to the NYDEC’s argument that the one-year rule was meant to benefit applicants and therefore applicants should be permitted to extend the deadline, the court held that the intent of Congress in enacting section 401’s time limit was not to benefit applicants, but to prevent states from holding federal permitting agencies hostage to the certification process since certification is required in order for a federal agency to grant a license or permit.  Accordingly, the court stated, the one-year limit “is not the applicant’s right to waive or modify.”   

In ruling that section 401 prohibits a certifying agency from entering into an agreement or otherwise coordinating with an applicant to alter the beginning of the review period, the court also cited the D.C. Circuit’s 2019 Hoopa Valley Tribe decision, which held that an applicant and certifying agency cannot avoid the one-year timeline by agreeing that the applicant would withdraw its certification request prior to the end of the one-year review period and then refile it to trigger a new one-year review. The court further acknowledged FERC’s decisions, holding that a prohibited agreement between the applicant and certifying agency need not be an express written agreement, but can be a “functional agreement.”   

A Word of Caution about Workarounds 

The court did suggest two workarounds to the one-year deadline.   

  • First, the court stated the certifying agency could deny a section 401 request “without prejudice” if it believed the applicant had provided insufficient information, prompting the applicant to submit a new request with the additional material.   
  • Second, the court pointed to FERC’s decision rejecting a waiver petition in City of Morrisville, Vermont. In that case, FERC held that the applicant unilaterally withdrew and refiled its application to avoid a bad result, suggesting that an applicant could avoid the one-year deadline if holding the certifying agency to the deadline would not be in the applicant’s interest.   

What’s Next? 

Similar challenges to FERC waiver orders remain pending in the Fourth and Ninth Circuits, with oral argument in the Fourth Circuit scheduled for May 6, 2021. The same organizations who participated in the industry amicus brief for the Second Circuit case (listed above) also participated in the brief filed in the Fourth Circuit. 

If FERC’s orders in these two pending cases are upheld as well, it will solidify FERC’s reestablishment of control over licensing timelines for hydroelectric projects that have been delayed, in some cases for many years, awaiting state water quality certification.   

How will states adjust to the court rulings? Time, of course, will tell. During the upcoming Waterpower Week virtual event, Julia Anastasio, executive director and general counsel for The Association of Clean Water Administrators (ACWA) will share views of how the states are adjusting to the decisions by FERC and the courts. Julia is one of 70-plus speakers scheduled for the 3-day virtual event 

Waterpower Week registration details are available here.