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A Divided Duty: The EPA's Dilemma Under the Endangered Species Act and Clean Water Act

Posted on: Tuesday, 19 June 2007, 06:00 CDT

By Gaffney, Brian P

I. INTRODUCTION The Endangered Species Act1 ("ESA") and the Clean Water Act2 ("CWA") are two of the most significant and prominent environmental statutes ever enacted by Congress. Although both statutes concentrate on protecting the environment, they serve very different purposes. The principal objective of the ESA is the conservation of endangered and threatened wildlife and plant species. Similarly, the principal objective of the CWA is to protect human beings and the environment by regulating pollution. Unfortunately, while both seek to protect the environment, the statutes do not always work in harmony. When the statutes collide, these diverging concerns must be reconciled.

Such an encounter recently arose in the American Southwest, where the Ninth Circuit held in Defenders of Wildlife v. EPA3 that the Environmental Protection Agency's ("EPA") delegation of the CWA National Pollutant Discharge Elimination System ("NPDES") was arbitrary and capricious for violating section 7 of the ESA. The Ninth Circuit's decision is important for several reasons. First, the Ninth Circuit's decision incorrectly interprets the statutory and regulatory texts involved regarding the applicability of section 7 to the EPA's delegation of the NPDES to the states. This errant decision has cost the State of Arizona millions of dollars. second, the opinion creates a circuit split; the Fifth Circuit, in 1998, reached an opposite conclusion while analyzing a similar situation in American Forest and Paper Association v. EPA.4 Third, the opinion illustrates the need for Congress to intercede and correct the problem through legislation. Assistance from the United States Supreme Court or the executive branch's administrative agencies5 may also be needed to clarify the applicability of ESA section 7 and the interpretation of 50 C.F.R. [section] 402.03. To date, however, the courts have been unable to adequately resolve the conflict. This need is of critical importance considering the pivotal role section 7 performs in the conservation of species and Congress's increased reliance on federally delegable programs.6 Also, this suggests that Congress may have unearthed a loophole to avoid ESA section 7 by drafting statutes in mandatory language. This conflict places the EPA in a precarious position. Like a child who has been given conflicting instructions from his parents on how to carry out his daily chores, the EPA is ordered to obey the commands of both the ESA and the CWA, but cannot satisfy one without disobeying the other.

This Note attempts to sketch the basic legal arguments describing the conflict between the two statutes and to examine the pertinent court decisions that have come to shape the present day case law. Part I contains a more detailed analysis of the ESA, its language, legislative history, pertinent case law, and effects. Part II provides a more extensive account of the CWA NPDES program, concentrating on the Act's intent, textual language, requirements, legislative history, and case law. Part III briefly summarizes and offers to explain the inherent conflict created by these statutes. Part IV contains a look at how the Fifth Circuit approached this situation in American Forest. Part V investigates the Ninth Circuit's approach in Defenders and its misunderstanding of the current state of the law surrounding section 7 and its applicability to the NPDES. Part VI reviews why the majority opinion in Defenders may be correct in theory but is incorrect in its application of the law that surrounds this subject. Part VII sets out the analysis of Judge Thompson's dissent in Defenders, which offers a better understanding and application of the current law.

The Ninth Circuit's decision in Defenders appears correct when compared to the original intent of the ESA and the U.S. Supreme Court's interpretation of the statute and section 7 in Tennessee Valley Authority v. Hill.1 Since the days of the Hill decision, however, a body of case law interpreting section 7 has developed that has curtailed the applicability of the provision and its protections. The Ninth Circuit's decision fails to follow the current trend in the case law, instead struggling to reach the intent of the ESA statute and the Hill decision. Although this attempt by the Ninth Circuit may be a noble effort to restore the applicability of section 7, it is the court's obligation to follow legal precedentespecially its own-until the U.S. Supreme Court or Congress intervenes.

II. ENDANGERED SPECIES ACT SECTION 7

A. Policy & Congressional Intent

In 1973, Congress enacted the ESA to reverse the trend towards species extinction resulting from "economic growth and development untempered by adequate concern and conservation."8 The U.S. Supreme Court has avowed that the ESA is the "most comprehensive legislation for the preservation of endangered species ever enacted by any nation."9 section 2(b) of the ESA states, "[t]he purposes of this chapter are to provide a means whereby the ecosystem upon which endangered species and threatened species depend may be conserved, [and] to provide a program for the conservation of such endangered species and threatened species . . . ."10 In the ESA, Congress declared that "all federal agencies shall seek to conserve endangered species and threatened species and shall utilize their authorities [to] further the purpose of this [Act]."11 The U.S. Supreme Court has stated that in the ESA, "Congress intended endangered species to be afforded the highest of priorities."12 Additionally, the Supreme Court has stated, "[t]he plain intent of Congress in enacting this statute was to halt and reverse the trend toward extinction, whatever the cost."13 The ESA reflects "an explicit congressional decision to require agencies to afford first priority to the declared national policy of saving endangered species" and "a conscious decision by Congress to give endangered species priority over the 'primary missions' of federal agencies."14 Thus, the ESA's edict imposes substantial and continuing obligations on all federal agencies.

B. Section 7(a) (2)

It has been stated that "the heart of the Endangered Species Act lies in section 7 . . . ."'5 The aim of ESA section 7(a)(2) is "to ensure that the federal government does not undertake actions, such as building a dam or a highway, that incidentally jeopardize the existence of endangered or threatened species."16 section 7(a)(2) states:

Each Federal agency shall, in consultation with and with the assistance of the secretary [of the Interior, Commerce, or Agriculture], insure that any action authorized, funded, or carried out, by such agency is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of habitat of such species . . . . 17

In order to be under the sphere of protection offered by section 7(a)(2), 16 U.S.C. [section] 1536(a)(2), a species must be listed under section 4.18 The ESA defines "endangered species" as "any species which is in danger of extinction throughout all or a significant portion of its range . . . ."19 Similarly, a "threatened species" is defined as any species which is likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range."20

Section 7 applies to "each" federal agency. The significance of this terminology means that section 7 does not apply to nonfederal agencies, states, or individuals.21 In the case of delegable federal programs, such as the NPDES, this suggests that while the program resides with the EPA, section 7 will apply, but once the NPDES is transferred to the state, section 7 will no longer be applicable.

The language of section 7 is forceful and casts a wide net because of its phrasing: "Each Federal agency shall . . . insure that any action . . . is not likely to jeopardize . . . endangered species or threatened species."22 As the U.S. Supreme Court has declared:

One would be hard pressed to find a statutory provision whose terms were any plainer than those in section 7 of the Endangered Species Act. Its very words affirmatively command all federal agencies 'to insure that actions authorized, funded, or carried out by them do not jeopardize the continued existence of an endangered species or result in the destruction of habitat of such species . . . .' This language admits of no exception.23

An agency must determine if a proposed action "may affect" either endangered or threatened species or a species' critical habitat.24 If so, the consultation process is triggered and formal consultation must take place with the Fish and Wildlife Service ("FWS") or, for marine species, the National Marine Fishery Service ("NMFS").25 In the course of the consultation, the FWS will issue a Biological Opinion (sometimes referred to as a "BO") analyzing whether the action is likely to jeopardize a listed species or habitat.26 A Biological Opinion must include a "summary of the information on which the opinion is based," a "detailed discussion of the effects of the action on listed species or critical the Service's opinion on whether the action is likely to jeopardize the continued existence of a listed species or result in the destruction or adverse modification of critical habitat."27 The "effects of the action" include "direct and indirect effects . . . together with the effects of other activities that are interrelated or interdependent with that action, that will be added to the environmental baseline . . . including] the past and present impacts of all Federal, State, or private action and other human activities in the action area . . . ."28 Ultimately, the federal agency reaches a final decision regarding whether and how to pursue the proposed action.29 C. Joint Regulations Interpreting section 7

The federal agencies accountable for administering the ESA (such as the EPA, FWS, and NMFS) issue regulations defining statutory terms, providing interpretations of the statute, and describing the consultation and action requirements imposed on agencies. [degrees] For instance, to "^Jeopardize the continued existence of means to engage in an action that reasonably would be expected, directly or indirectly, to reduce appreciably the likelihood of both the survival and recovery of a listed species in the wild by reducing the reproduction, numbers, or distribution of that species."31 The preamble to the section 7 regulations explains that the applicable threshold for triggering formal consultation is low:

The threshold for formal consultation must be set sufficiently low to allow Federal agencies to satisfy their duty to 'insure' under section 7(a)(2). Therefore, the burden is on the Federal agency to show the absence of likely, adverse effects to listed species or critical habitat as a result of its proposed action in order to be expected from the formal consultation obligation . . . . Any possible effect, whether beneficial, benign, or of undetermined characters, triggers the formal consultation requirement . . . .32

Much of the controversy involved in this particular legal battle stems from the regulations issued by the EPA, FWS, and NMFS. In particular, section 402.02 of 50 C.F.R. appears to embrace the sweeping notion of "action" that was articulated in Tennessee Valley Authority v. Hill by defining the term as "all activities or programs of any kind authorized, funded, or carried out, in whole or in part, by Federal Agencies."33 Conversely, regulation section 402.03 takes a narrower approach by stating "section 7 and the requirements of this part apply to all actions in which there is discretionary Federal involvement or control." One commentator suggests that section 402.03's use of the term "discretionary" means that "where a federal agency is under a mandatory duty to undertake an action, neither the substantive nor procedural aspects of section 7 apply to that action."35

D. ESA Section 7 & Regulation Section 402.03's History

Since the decision in Hill, courts have taken various positions concerning the applicability of ESA section 7. For instance, the First Circuit held that the ESA applies "of its own force" and "by its terms" to "all action by the Secretary."36 "Therefore," the court states, "any contract which the Secretary enters into . . . which requires a further action on his part . . . will contain as an implied term a condition that the Secretary will behave lawfully (e.g., not violate the ESA)."37 Correspondingly, the Eighth Circuit has declared "[e]ven though a federal agency may be acting under a different statute, that agency must still comply with the ESA."38

Other circuits have taken opposite positions concerning the applicability of section 7. The Tenth Circuit states "[t]he Endangered Species Act does not, by its terms, enlarge the jurisdiction of the Corps of Engineers under the CWA."39 Furthermore, the D.C. Circuit declares, "[t]he [ESA] directs agencies to 'utilize their authorities' to carry out the ESA's objectives; it does not expand the powers conferred on an agency by its enabling act."40

The plain language of section 7(a)(2), Congress's underlying intent and purpose, the Supreme Court's precedent in Hill, and the Services' definition of "action" suggest that section 7 applicability is far reaching. The only thing that throws a "chink" into this understanding is regulation Section 402.03. As one commentator has stated, "[s]ection 7(a)(2), by its plain language, should apply to this type of program [NPDES]."41 Section 7(a)(2) "reflects Congresses] intent that no federal activity contribute to the extinction of a species."42

Further spurring the present controversy are the regulations that Congress authorized the Services to issue. The initial proposed regulations simply reference the general applicability of section 7, stating that section 7 "appl[ies] to all actions in which there is Federal involvement or control."43 Yet, when the final rule was issued, the regulation contained the term "discretionary" in front of the phrase "Federal involvement or control."44 Unfortunately, neither the regulations nor the preamble explain the meaning of "discretionary Federal involvement or control," nor explain the reasons underlying the additional terminology: "The nondiscretionary element created by [regulation] [section] 402.03 does not appear in the statutory language of the ESA, its legislative history, or any judicial interpretations of the scope of [section] 7(a)(2), other than those relying on section 402.03 itself."45 One commentator has suggested that the "failure on the part of the Service (FWS and NMFS) to provide for notice and comment and to publish a statement of the basis for amending section 402.03 violates the requirements of the Administrative Procedure Act (APA)."46 Nevertheless, the validity of regulation section 402.03 has never been challenged.

There are two primary cases that have specifically held an agency action exempt under section 7(a)(2) because the agency did not possess any discretionary authority in carrying out an action. In Strahan v. United States Coast Guard,47 a Massachusetts District Court held that the Coast Guard's documentation and inspection of vessels is a nondiscretionary activity and, thus, the Coast Guard is not required to consult with the NMFS concerning the effects of those actions. The court reviewed the Coast Guard's organic act and concluded, "the Coast Guard is required to issue Certificates of Documentation and Inspection if the specific statutory and regulatory criteria, which make no reference to environmental concerns, are met."48 The District Court determined that this made the Coast Guard's actions nondiscretionary and, thus, because of regulation section 402.03, ESA section 7(a)(2) was inapplicable.

In Sierra Club v. Babbitt,49 the Ninth Circuit held that the Bureau of Land Management ("BLM") had no discretion to consider the protection of the endangered spotted owl when approving the construction of a logging road pursuant to a right-of-way agreement. The plaintiffs in Sierra Club sought to enjoin the construction of a logging road that was being built pursuant to a right-of-way agreement that had been entered into prior to the passage of the ESA.50 Under the right-of-way agreement, the BLM was to consider only three specific factors in approving the logging road project.51 The Sierra Club complained that the BLM had violated ESA section 7(a)(2) by approving the proposed logging road without first consulting with the FWS to determine whether the action would jeopardize the threatened spotted owl.52 The court framed the issue in the case as, "[t]o what extent does section 7 apply where the BLM granted right-of-way by contract to a private entity before passage of the ESA and the agency's continuing ability to influence the private conduct is limited to three factors unrelated to the conservation of the threatened spotted owl."53 The court concluded, "the regulations supply the answer: '[s]ection 7 and the requirements of this part apply to all actions in which there is discretionary Federal involvement or control.'"54 The court deferred to the "agency's interpretation of the law it administers," and concluded that the Regional Solicitor had reasonably interpreted the language in question.55 As such, the Ninth Circuit held that section 7(a)(2) did not apply and that the BLM was not required to consult with the FWS regarding the construction of the proposed logging road.56

Along with Sierra Club v. Babbitt, the Ninth Circuit has previously interpreted the applicability of section 7 in several other cases. In Turtle Island Restoration Network v. National Marine Fisheries Service, the Ninth Circuit decided, "[t]he discretionary control retained by the federal agency must have the ability to inure to the benefit of a protected species. If no discretion to act is retained, then consultation would be a meaningless exercise." Stated another way, "where there is no agency discretion to act, the ESA does not apply." 57 Furthermore, in Ground Zero Center for NonViolent Action v. United States Department of the Navy, the Ninth Circuit opined that where the agency lacks discretion, to require compliance with section 7 of the ESA "would be an exercise in futility."58

While the Ninth Circuit in both Turtle Island and Ground Zero held that the actions by the federal agencies in question were discretionary, they also specifically pointed out that if the actions were not discretionary, then ESA section 7(a)(2) would not apply.59

III. CLEAN WATER ACT-NATION POLLUTANT DISCHARGE ELIMINATION SYSTEM

A. Basics

In 1972, one year before the enactment of the ESA, Congress passed the CWA60 to "restore and maintain the chemical, physical, and biological integrity of the Nation's waters."61 In order to achieve these aspirations, section 301 (a) of the CWA makes unlawful the discharge of any pollutant into navigable waters except as authorized by specified sections the CWA.62 At the outset, Congress delegated the responsng the provisions of the CWA to the EPA.63 The CWA requires any "person"64 to obtain a permit in order to discharge a pollutant.65 All permitting authority under the NPDES66 was initially vested in the EPA.67 Even though the NPDES was originally placed under federal jurisdiction, Congress intended to "recognize, preserve, and protect the primary responsibilities and rights of [s]tates to prevent, reduce, and eliminate pollution . . . ."68 Additionally, the CWA specifically states, "[i]t is the policy of Congress that the States . . . implement the permit programs under sections [402] and [404]."69 The Federal Pollution Control Act "evidences that the federal program is not intended to preempt authority of the state to issue permits for discharges into waters within a state, but rather to induce cooperation of the states in the establishment of a program to be administered by the states within certain federal guidelines with regard to uniform national standards."70 Furthermore, "Congress clearly intended that the states would eventually assume the major role in the operation of the NPDES program."71 In accordance with Congress's express desire to have the states involved with water pollution control, the CWA provides that a state may apply to the EPA in order to administer the federal pollution permitting program regarding the waters within their borders.72 The CWA instructs the Administrator to promulgate guidelines establishing "the minimum procedural and other elements" of a satisfactory state program.73 The CWA specifies that the governor of the state seeking the transfer is to submit a proposed program together with a statement from the state's head legal officer "that the laws of such state, or the interstate compact, as the case may be, provide adequate authority to carry out the described program." 4

The EPA Administrator must determine whether the state has met nine specific criteria and "shall approve" state applications that satisfy those criteria.75 The current controversy is directly related to the phrase "shall approve," because the terms appear to issue a mandatory duty and suggest that the EPA does not have the discretion to refuse a state the NPDES as long as the state has fulfilled the nine requirements listed in section 402(b).76

The NPDES program is the primary method of regulating the discharge of pollutants into oceans, lakes, rivers, or creeks. The NPDES is also a delegable program under the CWA and authorizes the states to assume control of what would otherwise be a federally operated program. Over the past thirty years, Congress has increasingly relied on delegable programs in environmental regulation. 7 The issue of section 7(a)(2)'s applicability to the NPDES and other delegable federal programs is important because of the critical role that section 7(a)(2) plays in the protection of listed plant and wildlife species. Therefore, if section 7 cannot be applied to the transfer of NPDES programs, endangered and threatened species will lose a key protection.

B. Requirements of section 402(b)

The technical necessities of section 402(b)(l)-(9) are dense and fairly complex, but the section's basic premise is that the requirements cover the spectrum of pollution regulatory powers. First, the state is to issue permits that are in compliance with sections 301, 302, 306, 307, and 403 of the CWA; that are no longer than five years; that can be terminated or modified for violations, misrepresentations, non-disclosures, or for changes in conditions that would require reduction or elimination of the permitted discharge; and control the disposal of pollutants into wells.78

Second, the state must issue permits that are in compliance with 33 U.S.C. [section] 1318 or allow for inspection, monitoring, entry, and reporting to the same extent as required by [section] 1318.79

Third, the Administrator must ensure that the state will issue permits that "insure that the public, and any other State the waters of which may be affected, receive notice of each application for a permit and provide an opportunity for public hearings before a ruling on each such application."80

Fourth, the state must ensure that the EPA Administrator receives notice of each application for a permit and forward a copy to the EPA.81

Fifth, the Administrator must ensure that any state downstream of the state issuing the permit is able to submit recommendations to the permitting state and, if those recommendations are not accepted, the permitting state will notify the affected state of its refusal to accept and its justifications for rejecting their recommendations.82

Sixth, the state must not issue a permit if the secretary of the Army determines that the anchorage and navigation of any United States navigable waters would be substantially impaired by the discharge.83

Seventh, the state must be able to abate violations of a permit or the permit program by civil and criminal penalties, or other means of enforcement.8

Eighth, the state must "insure that any permit for a discharge from a publicly owned treatment works includes conditions to require the identification"85 of any pollutant that would be subject to CWA section 307(b)'s pretreatment standards. Furthermore, the permit must require notice to the permitting agency of new source pollutants under section 306, new introductions of pollutants under section 301, or a substantial change in the pollutants being introduced under the permit at its issuance.86

Ninth, and finally, the state must "insure that any industrial user of any publicly owned treatment works will comply with" CWA sections 204(b), 307, and 308.87

None of the nine elements of the NPDES require either the state or the EPA Administrator to insist that the state comply with the ESA or any other federal statute.88 Because ESA section 7 does not apply to state agencies, the EPA Administrator has no authority to require state permitting programs to comply with this provision. The nine enumerated requirements appear mandatory and exclusive, suggesting that no other federal statute may be considered in its application. The only source of discretion allotted to the Administrator appears to be involved in reviewing whether the state has adequately fulfilled the nine enumerated requirements.

Once the EPA has delegated the permitting program to a state's government, the EPA maintains oversight to ensure state compliance with the CWA standards.89 If the EPA determines that the state is not abiding bv the CWA standards, the agency must demand corrective action.9 If the state fails to take such action, the EPA shall withdraw approval of the state pollution permitting program.91 However, "[t]he Administrator shall not withdraw approval of any such program unless he or she shall first have notified the State, and made public, in writing, the reasons for withdrawal."92

C. Legislative & Case Law History of CWA Section 402(b)

Courts have generally "favored a 'whole act' interpretive approach to the CWA, looking at all the sections of the statute together to achieve a sensible interpretation."93 One of the methods courts utilize to determine the intent of Congress is to look to the stated goals of the Act. The CWA was enacted to "restore and maintain the chemical, physical, and biological integrity of the Nation's waters."94 In order to effectuate these goals, Congress developed the NPDES to regulate the discharge of pollutants into U.S. waters. It was Congress's intent to "recognize, preserve, and protect the primary responsibilities and rights of States to prevent, reduce, and eliminate pollution .... "95 As one representative stated during the congressional debates, "[t]he States must play a prominent part in making the water pollution law work. Why should we believe their conviction is any less than ours?"96

Based on Congress's announced intent, section 402(b) states, "[t]he Administrator shall approve each submitted program unless he determines that adequate authority does not exist."97 This section was written in mandatory language: unless the state fails to fulfill one of the nine enumerated criteria, the Administrator must approve the transfer application. The legislative history supports this interpretation. Testifying before the House of Representatives, Minnesota Governor Wendell R. Anderson stated, "I support the mandatory language in both the House and Senate bills that directs the EPA to turn the permit programs over to the states if they meet acceptable criteria." It was well understood by Congress that section 402(b) created a mandatory obligation for the Administrator to approve the transfer application as long as the enumerated requirements were satisfied: "[a]fter the guidelines are issued, if the State submits an acceptable program, the Administrator would approve it and the State would take over administration of their permit program in that state. In States which fail to meet the guidelines, the Administrator would carry on the program."99

Even the U.S. Supreme Court has recognized the mandatory nature of the state program approval under section 402(b) by stating:

The EPA may require modification or revision of a submitted program but when a plan is in compliance with the EPA's guidelines . . . and is supported by adequate authority to achieve the ends of sections 402(b)(1-9) . . . and to administer the described program, the EPA shall approve the program and "suspend the issuance of permits under [section 402(a)] as to those navigable waters subject to such program."100

Furthermore, in 1978 the Ninth Circuit itself noted the limited discretion of the EPA to refuse to approve a state application to administer the NPDES:

Under [section] [402](b), a state may submit to the EPA a proposed permit program governing discharges into navigable waters within its borders. If the state can demonstrate that it will apply the effluent limitations and the amendments' other requirements in thethat it will monitor and enforce the terms of those permits, then, unless the Administrator of the EPA determines that a state program does not meet these requirements, he must approve the proposal.101 Since the power to issue permits and collect fees is important to the states, the transfer provisions of section 402 have been overwhelmingly popular. At this time, forty-four states have applied for and been granted control of the NPDES by the EPA.102 Arizona was to be the forty-fifth state to assume the NPDES before it ran into a buzz-saw in the Ninth Circuit.103

IV. INHERENT CONFLICT

The EPA is in an especially problematic position. On the one hand, the EPA, as a federal agency, is subject to section 7 of the ESA and must ensure that any action it authorizes, controls, or funds is not likely to jeopardize endangered or threatened species.104 On the other hand, Congress has specifically entrusted to the EPA the administration of the NPDES, along with the mandatory language, enumerated requirements, and the stated desire to delegate the programs to complying states.

A useful and illustrative analogy would be that of a child who is assigned household chores, but is under the authority of both his mother and father. Imagine that the mother gives her son specific directions on how to carry out his chores ("double bag the trash before you take it out,""wash the inside of the windows before you wash the outside") while at the same time, the child's father gives him conflicting directions pertaining to his chores ("do not waste garbage bags, just throw the single one out,""wash the outside windows first, then the inside windows"). What is the child to do? Whose directions is he supposed to follow?105

This simple analogy well illustrates the situation the EPA faces in carrying out its "chores" (administering the NPDES transfer) under the ESA and CWA. While both statutes have authority over the EPA, they specifically direct the agency to take contradictory action regarding the NPDES. The answer, however, to the EPA's dilemma lays in 50 C.F.R. [section] 402.03 and the CWA section 402(b)'s mandatory language. Unfortunately for the EPA, the courts have taken inconsistent positions on how to apply section 7 to the NPDES program. Furthermore, even though the ESA was written after the CWA, the ESA provides no guidance on whether it amends or overrides the provisions of section 402(b). After reviewing the pertinent statues, regulations, legislative history, and case law, it is clear that the Ninth Circuit erred in its decision in Defenders of Wildlife and that section 7 should not apply to the NPDES program transfer from the federal to the state level.

The situation that the EPA faces is somewhat analogous to the applicability of the National Environmental Policy Act (NEPA) to the EPA. However, the analogy is not directly on point. In regard to NEPA, the courts have created a "functional equivalent exemption" that exempts the EPA from following the provisions of NEPA when carrying out certain tasks.106 The functional equivalent exemption is court-created, not a legislative exemption from NEPA. The ESA and CWA do not contain any functional equivalency exemptions, which is one of the reasons why the EPA is placed in this difficult position of having to abide by both statutes. Furthermore, the case law to date has not attempted to create an exemption from the ESA for the NPDES, but has simply held that the ESA does not apply because the NPDES delegation is nondiscretionary.107

V. AMERICAN FOREST AND PAPER ASSOCIATION v. EPA

In 1998, the Fifth Circuit Court of Appeals became one of the first courts to consider the conflict between ESA section 7 and the EPA's transfer of the NPDES. In American Forest, the court held that the EPA had exceeded its statutory authority under the CWA by requiring agencies from Louisiana to consult with the NMFS and FWS before approving the state's pollution permitting application.108

A. Facts & Claim

Pursuant to section 402(b) of the CWA, 33 U.S.C. [section] 1342(b), the State of Louisiana applied to the EPA to assume control over the NPDES program. Even though Louisiana satisfied the nine requirements of section 402(b),109 the EPA conditioned their approval of the transfer upon the condition that Louisiana subject itself to mandatory consultation with the FWS and NMFS before issuing permits.110 Under the EPA's scheme, after the transfer the FWS and the NMFS would still have the power to determine whether Louisiana's proposed permits threatened endangered species. If the FWS or the NMFS determined that the issuance of the permit did indeed threaten an endangered species, the EPA would be able to veto the permit pursuant to the agency's continuing oversight authority under section 402(c).lu The American Forest and Paper Association challenged the rule as "exceeding the EPA's authority under the CWA."112

B. Analysis of the Majority Opinion

In the Fifth Circuit, the EPA argued that section 304(i)"3 of the CWA and section 7(a)(2) of the ESA authorized the agency to require state agencies "to submit proposed permits to the FWS and the NMFS to avoid jeopardizing endangered species."114 The EPA contended that the rule was valid under CWA section 304(i), "which directs EPA to promulgate guidelines governing state permitting programs under CWA section 402(b)."115 The EPA also argued that its decision was "compelled" by ESA section 7(a)(2).116

1. Adding Requirements to section 402(b)

The court unequivocally rejected the EPA's arguments that either the CWA or the ESA authorized the agency to add requirements to the NPDES transfer application. The court stated, "EPA does not enjoy wide latitude in deciding whether to approve or reject a state's proposed permit program. 'Unless the Administrator of EPA determines that the proposed state program does not meet [the specified] requirements, he must approve the proposal.'"117

The court stated that "the key question is whether EPA may deny a state's proposed program based on a criterion-the protection of endangered species-that is not enumerated in section 402(b)."118 The court began its analysis by determining whether the EPA's interpretation of the CWA deserved Chevron deference.119 The Chevron test entails answering two questions:

(1) Did Congress directly speak to the precise question at issue? If so, the court and the agency must defer to the clearly expressed congressional intent; (2) If Congress did not speak on the question, the court asks whether the agency's interpretation is based on a permissible construction of the statute.120

If so, the court defers to the agency's interpretation. In an effort to satisfy the Chevron test, the EPA argued that the nine requirements in section 402(b) were "minimum, not exhaustive, criteria."121 Furthermore, the EPA argued that "because nothing in [section] 402(b) prohibits EPA from adding additional criteria, its interpretation of the statute is reasonable and worthy of deference under Chevron "122

The Fifth Circuit found neither of the EPA's arguments persuasive. The court interpreted section 402(b) narrowly stating, "[t]he language of section 402(b) is firm: it provides that EPA 'shall' approve submitted programs unless they fail to meet one of the nine listed requirements."12 The court affirmed its decision in Save the Bay, Inc. v. EPA where section 402(b) was interpreted to be nondiscretionary.124

The Fifth Circuit also rejected the EPA's argument based on "CWA [section] 402(b)(6) [33 U.S.C. [section] 1342(b)(6)] . . . which grants EPA veto power over a proposed permit if the secretary of the Army concludes that the discharge contemplated by the permit would substantially impair anchorage and navigation."125 The court found this particularly persuasive because "Congress could have, but did not, grant EPA an analogous veto power to protect endangered species."126 The court further concluded:

There is no hint that Congress intended to grant EPA authority to erect additional hurdles to the permitting process beyond those expressly noted in [section] 402(b). Moreover, neither section even mentions endangered species or the ESA. The statute's plain language directs EPA to approve proposed state programs that meet the enumerated criteria; particularly in light of the command 'shall approve,' [section] 304(i) cannot be construed to allow EPA to expand the list of permitting requirements.127

Thus, the court determined that the EPA failed the Chevron deference test because Congress "has spoken directly on the precise question: EPA's discretion lies not in modifying the list of enumerated criteria, but simply in ensuring that those criteria are met."128

2. ESA Section 7(a)(2)

The Fifth Circuit also rejected the EPA's argument that section 7(a)(2), construed in conjunction with the U.S. Supreme Court's reading of the statute in Hill, "compels the EPA to do everything reasonably within its power to protect endangered species."129 The court stated, "[t]he flaw in this argument is that if EPA lacks the power to add additional criteria to CWA section 402(b), nothing in the ESA grants the agency the authority to do so."130 The court reasoned that section 7 "merely requires EPA to consult with FWS and NMFS before undertaking agency action; it confers no substantive power." In reaching this determination, the Fifth Circuit relied on the D.C. Circuit's decision in Plait River Whooping Crane Critical Habitat Maintenance Trust v. FERC. In Plait River, the D.C. Circuit held that section 7 '"does not expand the powers conferred on an agency by its enabling act,' but rather directs the agencies to 'utilize' their existing powers to protect endangered species."131 Therefore, the court concluded:

[T]he ESA serves not as a font of new authority, but as something far more modest: a directive to agencies to channel their existing authority in a particular direction. The upshot is that EPA cannot invoke the Et are not authorized by the CWA.132 It is interesting, and a bit confusing, to note that the Fifth Circuit's opinion does not make reference to regulation section 402.03 where section 7's applicability is defined. While the court was willing to state that section 402(b) is nondiscretionary, the court failed to take the next step and state that section 7 does not apply to nondiscretionary actions.

VI. DEFENDERS OF WILDLIFE v. EPA

The Ninth Circuit was the most recent court to attempt reconciliation of section 7 of the ESA and the CWA NPDES. In Defenders, the Ninth Circuit reached a conclusion opposite to that of the Fifth Circuit in American Forest. The Ninth Circuit held that section 7 did apply to the NPDES and that the EPA must consider the loss of section 7 protection when reviewing a pollution permitting system transfer application.

A. Facts & Claims

In accordance with section 402(b), on January 14, 2002, the State of Arizona applied to the EPA in order to takeover the NPDES.133 Once the transfer had taken place, the Arizona Department of Environmental Quality (ADEQ) would assume responsibility for issuing all water pollution permits for Arizona waterways. The EPA's regional office, based out of San Francisco, California, believed that the transfer of the NPDES to Arizona could potentially affect listed species in the state, and thus initiated formal section 7 consultation with the FWS.135 In announcing the decision to begin formal consultation, the EPA stated "section 7(a)(2) of the [Endangered Species Act] places a statutory requirement (separate and distinct from [402](b)) for EPA to 'insure that any action authorized, funded or carried out [by EPA]'"136 is unlikely to jeopardize listed species or adversely modify their critical habitat, and that the EPA is therefore "required" to be consulted regarding the transfer decision.137

Interestingly, every pollutant-permitting transfer decision since 1993 has involved some form of EPA consultation with the FWS concerning endangered or threatened species.138 Yet, before 1993, pollution-permitting transfers do not appear to have been subjected to section 7 consultations.139 During the consultations, the FWS field office in Arizona "expressed serious reservations concerning the proposed transfer."140 The Arizona FWS office observed that section 7 consultations regarding past pollution permits in Arizona, which were issued while the program was administered by the EPA, resulted in permits being issued with mitigating measures in order to protect species and their critical habitat. The field office concluded, "the transfer program from the EPA to the State causes the loss of protections to species resulting from the section 7 process, and the impact of this loss must be taken into account in the effects analysis in the biological opinion."141 Despite this conclusion by the Arizona FWS field office, the EPA staff issued a biological opinion that determined:

[T]hat the EPA lacked the legal authority to base its transfer decision on these concerns, because the agency does "not have the legal authority to regulate the non-water-quality-related impacts associated with State NPDES-permitted projects that are of a concern to FWS, including the authority to object to such permits based on non-water-quality-related impacts to listed species."142

The Biological Opinion also included several other important points that aided the Ninth Circuit in ruling that the EPA had acted arbitrarily and capriciously in violating section 7. First, "[n]oting the loss of section 7 consultation, the Biological Opinion recognized that, after the transfer, no federal agency would have the authority to consult with developers concerning the potential impact on listed species of any pollution permits."173 Second, "[a]lthough Arizona could voluntarily consult with FWS regarding pollution permits, neither the EPA nor FWS could require Arizona to act on behalf of listed species."144 Third:

[L]oss of any conservation benefit is not caused by EPA's decision to approve the State of Arizona's program. Rather the absence of the section 7 process that exists with respect to Federal [Clean Water Act] permits reflects Congress' decision to grant states the right to administer these programs under state law provided the State's program meets the requirements of [section] 402(b) of the Clean Water Act.145

Fourth:

We have stated our belief that the loss of section 7 conservation benefits is an indirect effect of the authorization. Furthermore, we have stated that this loss of conservation benefits will appreciably reduce the conservation status of the cactus ferruginous pygmy-owl and the Pima pineapple cactus. Notwithstanding this, our final opinion is that the loss of section 7-related conservation benefits, which would otherwise be provided by section 7, is not an indirect effect of the authorization.146

Fifth:

In changing from a federal permitting program to a State permitting program, the permit-related section 7 process for consultation will no longer apply. Essentially, there will be no substantive change in the permit program, but there will be a reduction in the number of mechanisms available to both our agencies to protect federally-listed species and their critical habitat in Arizona.147

After concluding the consultation process, the EPA Administrator approved the NPDES transfer application.

Defenders of Wildlife148 is an environmental conservation group that alleges that the EPA has failed to consider the NPDES transfer's impact on endangered and threatened species, as well as their habitat, and that the EPA has violated the ESA section 7 by relying on a faulty Biological Opinion issued by the FWS. Defenders contends that the EPA has failed to satisfy the obligations of section 7 to "insure" that any action the agency takes is "not likely to jeopardize" listed species or their critical habitat.149 Defenders also claims that because the EPA has failed to satisfy its section 7 obligations they therefore acted arbitrarily and capriciously in approving the transfer application in violation of the APA.150 In particular, Defenders alleges that the EPA's reliance on the FWS Biological Opinion was arbitrary and capricious, because the Biological Opinion was itself invalid.

B. Analysis of the Majority Opinion

The Ninth Circuit held that the EPA's approval of Arizona's NDPES transfer application was invalid for several reasons. First, the court found that the transfer could not survive arbitrary and capricious review because the EPA relied on legally contradictory positions regarding its section 7 obligations. In particular the court held:

Section 7(a)(2) makes no legal distinction between the trigger for its requirement that agencies consult with FWS and the trigger for its requirement that agencies shape their actions so as not to jeopardize endangered species. Instead, in one, integrated provision, the statute provides that agencies "shall, in consultation with and with the assistance of the [FWS], insure that any action authorized, funded, or carried out by such agency . . . is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of [critical] habitat of such species. . . ." An agency's obligation to consult is thus in aid of its obligation to shape its own actions so as not to jeopardize listed species, not independent of it. Both the consultation obligation and the obligation to 'insure' against jeopardizing listed species are triggered by 'any action authorized, funded, or carried out by such agency,' and both apply if such an 'action' is under consideration . . . . This being the case, the two propositions that underlie the EPA's action-that (1) it must, under the Endangered Species Act, consult concerning transfers of CWA permitting authority, but (2) it is not permitted, as a matter of law, to take into account the impact on listed species in making the transfer decision-cannot both be true.151

The court also held that the EPA's first explanation for its no impact conclusion-"that the loss of section 7 consultation was not an effect of its transfer decision because the agency had no authority to base its transfer decision on the loss of consultation"- was also without merit. The court determined that there were three statutory concepts governing the reach of section 7(a)(2): "[1] the nexus to any impact on listed species; [2] the nature of the obligation to 'insure' against jeopardizing listed species; and [3] the actions covered."1"

In regard to the nexus of any impact on listed species, the Ninth Circuit adopted the standard of nexus from the U.S. Supreme Court's decision in Department of Transportation v. Public Citizen, "where an agency has no ability to prevent a certain effect due to its limited statutory authority over the relevant actions, the agency cannot be considered a legally relevant cause of the effect."153 The Ninth Circuit reframed the issue as "whether the Biological Opinion followed the ESA regulations defining 'indirect effects' requires [the court] to determine whether the EPA can consider the act upon the loss of section 7 consultation benefits in deciding whether" to approve Arizona's NPDES transfer application.154 If the answer to that question is yes, then "the EPA's transfer decision can be a cause of the loss of section 7 consultation benefits," and that loss should have been considered in the Biological Opinion "as an indirect effect to the potential transfer decision; and the loss of those benefits should have been considered and acted upon by the EPA."155

Pertaining to the second statutory concept governing the reach of section 7(a)(2)-the nature of the obligation to "insure" against jeopardizing listed species-the court began by exploring the meaning of the word "insure." Unfortunately, regulation section 402.02 fails to define "insure," and thus the court was forced to define the term. The court determined that "[t]he ordinary meaning of 'insure' as used in this context requires agencies to take action, as dictionary definitions make clear. To 'insure' is 'to make (a person) sure (of a thing); and 'to make certain, to secure, to guarantee (something, an event, etc.).'"156 The court stated unequivocally, "[u]nless an agency has the authority to take measures necessary to prevent harm to endangered species, it is impossible for the agency to 'make certain' that its actions are not likely to jeopardize those species. Otherwise, agencies would be forced to choose between violating section 7's prohibition on agency actions that are likely to jeopardize listed species and acting beyond their powers to protect such species."157 In support of its analysis, the court cited to the U.S. Supreme Court's foremost section 7 case Tennessee Valley Authority v. Hill, which definitively declared the importance and authority that is contained within section 7. Chief Justice Burger, writing for the majority, had stated:

One would be hard pressed to find a statutory provision whose terms were any plainer than those in [section] 7 of the Endangered Species Act. Its very words affirmatively command all federal agencies "to insure that action authorized, funded, or carried out by them do not jeopardize the continued existence" of an endangered species or "result in the destruction or modification of habitat of such species" . . . This language admits no exception.159

Furthermore, the court cited Representative Dingell's comments concerning the final bill: "[t]he agencies of Government can no longer plead that they can do nothing about [harm to threatened or endangered species]. They can, and they must. The law is clear."160

In connection with the third statutory concept governing section 7(a)(2)-actions covered-the court stated that they interpreted the ESA to confer authority and responsibilities on agencies to protect listed species when the agency engages in an affirmative action that is both within its decision-making authority and unconstrained by earlier agency commitments. The court held that the EPA's decision to approve Arizona's pollution permitting transfer application satisfied the requirements of this standard and thus was the sort of action to which section 7(a)(2) applied.161 The court reasoned that section 7(a)(2) does not apply only to those actions that are not authorized, not funded, or not carried out by the agency.162

C. Ninth Circuit's Interpretation of American Forest

The Ninth Circuit specifically addressed the Fifth Circuit's decision in American Forest. First, the Ninth Circuit dismissed the Fifth Circuit's holding because the court believed that the Fifth Circuit's reliance upon Platte River Whooping Crane Critical Habitat Trust was erroneous.163 The court attacked the D.C. Circuit's decision in Platte River by stating that the opinion "did not recognize the obvious differences between section 7(a)(1) and 7(a)(2) in both language and purpose."164 The court continued by listing the apparent faults of the D.C. Circuit's determination including that the court did not: (1) discuss the term "insure"; (2) "notice the difference between affirmative agency attempts to protect species and a do-no-harm directive pertaining to affirmative agency actions with likely adverse impact on listed species"; and (3) mention the "availability of exemptions from section 7(a)(2) under the 1978 amendments or the repeated decision of Congress not to approve proposed amendments that would have limited the reach of section 7(a)(2)."165

The Ninth Circuit dismissed the decision in American Forest because the case had relied upon Platte River, and because the decision:

rested on a fundamental misconception concerning section 7(a)(2): The Fifth Circuit stated that it is "largely beside the point" whether the EPA's transfer decision is an "agency action," because "even if EPA were required to consult with the agencies . . . EPA lacks authority to" require states to protect listed species.166

Noteworthy in the Ninth Circuit's opinion is the fact that the court briefly references regulation section 402.03 in its background discussion of the NPDES, but fails to cite the regulation in its analysis.

D. Holdings

In a dramatic step, a two-to-one majority of the Ninth Circuit's panel vacated the EPA's approval of Arizona's transfer application and the transfer of the NPDES.167 Although the court noted that Arizona had spent a significant amount of funds on the program and had issued a number of permits pursuant to its authority and that transferring the NPDES back to the EPA would create a large number of administrative difficulties, the court felt compelled to vacate the EPA's action. The court was specifically concerned over the lack of "assurances that harm to listed species would not occur."169

VII. THE ERRANT MAJORITY OPINION IN DEFENDERS

Why does the majority opinion embrace an incorrect interpretation of the applicability of section 7 on the NPDES? First, the court overlooks regulation section 402.03 in its analysis of the applicability of section 7. Second, the court discounted its own precedent concerning the applicability of section 7, which was promulgated in Sierra Club v. Babbitt, Turtle Island170 and Ground Zero Center.171 Third, the court did not discuss the fact that CWA section 402(b) creates a mandatory duty to which section 7 does not pertain.

After reading the applicable statutes, regulations, legislative history, and case law, it is clear that section 7 should not apply to the NPDES program. Congress has spoken in mandatory language and has stated that the Administrator is only to consider the nine enumerated requirements of section 402(b) when reviewing the transfer application. On the other hand, section 7(a)(2) has not been interpreted to be a distinct mandatory obligation on federal agencies.

One of the reasons that the court's decision is interesting is because-in theory-it appears to be a proper reading of the applicability of section 7. In light of the legislative history of the ESA and the U.S. Supreme Court's interpretation in Hill, section 7 should seemingly apply to all federal agency actions. The majority's decision is wrong in that it sharply breaks with the interpretation of section 7 that has built up over the years. The court's decision may be a noble attempt to force Congress or the Services to reevaluate the applicability of section 7 and regulation section 402.03, but this is not within the judiciary's role. The court is obligated to apply the laws and the legal precedent, which the Ninth Circuit in this instance failed to carry out.

An initial criticism of the majority's opinion in Defenders is that the analysis utterly ignores section 402.03. While regulations certainly do not trump statutes, Congress has specifically delegated to the Services the power and authority to interpret and issue regulation for the ESA. Regulations are often afforded great deference by the courts and usually receive the Chevron test. The regulation section 402.03 clearly states: "section 7 and the requirements of this part apply to all actions in which there is discretionary Federal involvement or control." No one, including Defenders, has posed a challenge to the validity of regulation 50 C.F.R. [section] 402.03, but the court apparently deemed it unimportant and omitted it from its analysis of the case.172 This is especially surprising given Congress's express delegation of authority to the Services to build on the basic statute and the courts' normal deference in cases involving regulations.

As previously stated, the majority's opinion fails to take into account the legal precedent (including its own in Sierra Club v. Babbitt) concerning the applicability of section 7; instead of distinguishing or outright overruling these decisions, the opinion entirely fails to address them.

VIII. judge thompson's dissent

Senior Circuit Judge Thompson's dissent in Defenders sets forth a better analysis of the conflicts in this case. Judge Thompson also noted that the majority's opinion ignored Ninth Circuit precedents in Sierra Club v. Babbitt, Ground Zero Center for NonViolent Action v. U.S. Department of the Navy, and Turtle Island Restoration Network v. National Marine Fisheries Service. Judge Thompson also noted how the majority failed to take into account regulation section 402.03 and suggested that the majority incorrectly "interprets the 'discretionary involvement language . . . to be 'coterminous with' all actions 'authorized, funded, or carried out' by a federal agency.'"173 The judge disputes this analysis: "[r]ather, we have consistently recognized that an agency may have decisionmaking authority and yet not be empowered, either as an initial matter or in conjunction with some continuing authority, to act to protect endangered or threatened species."174 Judge Thompson concludes that the EPA did not have the discretion to deny the transfer of the pollution permitting program to Arizona and that, therefore, the EPA's decision was not an "agency action" within the meaning of section 7.175 "The Clean Water Act, by its very terms, permits the EPA to consider only the nine specified factors. If a state's proposed permitting program meets the enumerated requirements, the EPA administrator 'shall approve' the program. This congressional directive does not permit the EPA to impose additional conditions."176 Furthermore, Judge Thompson wrote, "[t]o impose the additional requirement of consultation under section 7 would be inconsistent both with the EPA's statutory obligation to consider only the requirements enumerated in [section] [402](b) and with the [CWA]'s clearly expressed objectives."177

IX. CONCLUSION & RECOMMENDATION

The child who faces two different orders from his parents will ultimately just have to pick only one tt have such a luxury because the impact of its decisions can cost millions of dollars and affect the survival of countless species. As the previous analysis has shown, it is clear that section 7 of the ESA does not apply to the CWA section 402(b) and that the EPA should abide by the commands of the CWA to the exclusion of the ESA when dealing with the NDPES program. Nevertheless, it is unclear why the Ninth Circuit reached its errant conclusion. The common law foundations of America are built on the courts following legal precedents. Within the bounds set by the U.S. Supreme Court and Congress, the federal courts of appeal have limited authority and power and are restricted to affirming, distinguishing, or overruling their own circuit's precedents. Surprisingly, the Ninth Circuit failed to rationalize its own precedents in Sierra Club, Ground Zero, and Turtle Island. Even more of an anomaly is the fact that these decisions are not even considered in the court's analysis of the problem.178 It is important to note that over thirty years have elapsed since the U.S. Supreme Court decided Hill. As this Note has sketched out, over the decades numerous decisions have been handed down by the courts curtailing the applicability of section 7. The Court has allowed this body of decisions to build up and has not stepped in to clarify or alter the development of the law. Until the Court or Congress intercedes and clarifies the applicability of section 7, future courts should continue to apply, or look for guidance in, the legal precedents such as American Forest and Sierra Club that provide a curtailed version of section 7's applicability.

Ultimately, Congress will probably have to intercede and correct this conflict through legislation. The courts have been unable to discover a satisfactory resolution, as can be seen by the preceding analysis. Furthermore, if the Services were to amend 50 C.F.R. [section] 402.03 and remove the term "discretionary," a whole new bundle of conflicts and issues would arise that would result in years of litigation. Congress could resolve this problem by simply adding a tenth criterion to the CWA NPDES that requires the EPA to consider the ESA as one of the standards imposed on the transfer application or it could explicitly exempt the NPDES program from the ESA.

Unless Congress intercedes, now is the time for the U.S. Supreme Court to intervene and provide its guidance. The circuit split created by the decisions in Defenders and American Forest provides an opportunity for the Court to accept certiorari and provide its interpretation on this important issue. The applicability of section 7 is of great importance because it stands as one of the major protections for endangered and threatened species. Congress's increased reliance on federally delegable programs only increases the need to clarify what falls under section 7. Tragedy could result if Congress could circumvent the ESA requirements of section 7 by drafting laws in mandatory language and delegating environmental programs to the states. The power of the protections endowed by the ESA would be usurped and conservation efforts around the country would be greatly hindered. Now that the U.S. Supreme Court has accepted certiorari,179 it must attempt to resolve this problem until Congress can intercede and clarify the applicability of ESA section 7 to the CWA NPDES through legislation.

Brian P. Gaffney*

* J.D. Candidate, The University of Texas School of Law. M.A., Sociology, Stanford University. B.A., Political Science with Honors, Stanford Univ

Copyright University of Texas, Austin, School of Law Publications, Inc. Spring 2007

Source: Review of Litigation, The

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