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Looking Ahead to 2016: Second Circuit to Clarify Scope of NPDES "Water Transfer" Rule

Early this month, the Second Circuit heard oral argument in Catskill Mountains Chapter of Trout Unlimited, Inc. v. United States EPA, No. 14-1823, an appeal from the Southern District of New York’s March 2014 ruling which invalidated the “water transfer” exemption rule from National Pollutant Discharge Elimination System (“NPDES”) permitting requirements.  A decision from the Second Circuit, which will have far reaching effects on public and private entities alike, is expected in 2016.

The water transfer exemption allowed entities to transfer water from one body of water to another, even if the water potentially contained pollutants, without a NPDES permit and without implicating the Clean Water Act’s prohibition against unpermitted discharges of pollutants.  The EPA determined that a “water transfer”—defined as “an activity that conveys or connects waters of the United States without subjecting the transferred water to intervening industrial, municipal, or commercial use,” 40 C.F.R. § 122.3(i)—did not qualify as a “discharge of a pollutant” as defined as “any addition of any pollutant to navigable waters from any point source,” 33 U.S.C. § 1362(12).  The EPA determined that water transfers did not qualify as “additions” of pollutants because, by definition, no pollutants from outside the water being transferred were added during the transfer.  Water transfers were thus exempted from NPDES permitting requirements, as the EPA described in regulations promulgated under the Clean Water Act.  40 C.F.R. § 122.3(i).

A challenge to this exemption pitted diverse groups of intervening interested parties against one another, with environmental groups and state governments challenging the EPA’s interpretation of its authority that created the exemption, and local governments, municipal agencies, and other state governments intervening in favor of the EPA.  

On March 28, 2014 Judge Kenneth M. Karas of the S.D.N.Y. issued a ruling invalidating the exemption on the grounds that the EPA failed to adequately support its statutory interpretation that brought about the exemption with a reasonable explanation.  Catskill Mts. Chapter of Trout Unltd. v. EPA, 8 F. Supp. 3d 500, 567 (S.D.N.Y. 2014).

The EPA appealed Judge Karas’s decision, and presented a similar argument to the Second Circuit as that asserted in the district court – that the statutory direction provided in the Clean Water Act with regard to water transfers is ambiguous and that the EPA’s interpretation of the statute is supported by a reasoned and permissible interpretation that is entitled to Chevron deference.  A decision is expected in 2016 and, as demonstrated by the breadth of participating litigants, may have significant effects on NPDES permitting in the future.