Natural Resources Defense Council, Inc. v. U.S. Environmental Protection Agency

Majority - PER CURIAM

1. No, the Clean Water Act does not authorize the EPA to impose permit conditions unrelated to effluent limits, even when conducting NEPA reviews. While NEPA requires agencies to consider all environmental effects of a major federal action, it does not expand the substantive powers an agency is authorized to make decisions on. The CWA explicitly limits EPA's jurisdiction to regulating the discharge of pollutants, not the facilities or plants themselves. Thus, any permit condition imposed by the EPA must relate to the discharge of pollutants, and the agency cannot use NEPA to 'transmogrify' its authority into a broader mandate. Citing NRDC v. EPA, 822 F.2d 104, 129 (D.C.Cir.1987), the court reiterated that NEPA does not expand an agency's substantive powers, and actions taken must fall within the agency's authority under its organic statutes. 2. Yes, the EPA did act arbitrarily and capriciously by eliminating the proposed "upset defense" for water-quality-based permit violations solely on the ground of perceived impracticality without adequate explanation. The court acknowledged that the CWA does not statutorily compel an upset defense for water-quality-based limits, noting the Act's strong emphasis on maintaining water quality regardless of technological limitations, distinguishing it from technology-based limits where such a defense had been required (Marathon Oil Co. v. EPA). However, the EPA's decision to withdraw its proposal, which would have allowed a defense if the permittee could show water quality standards were maintained, was found arbitrary. The agency failed to examine relevant data, measure the practical difficulties, or consider alternative solutions before summarily dismissing the defense as "illusory." This violated the arbitrary-and-capricious standard, which requires a rational connection between facts and choices, citing Motor Vehicles Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co. The court noted that prosecutorial discretion would not adequately substitute for a formal defense, especially in citizen suits. 3. Yes, the EPA's regulations regarding state program requirements (public participation and maximum penalties) and its veto authority over state-issued permits are permissible interpretations of the Clean Water Act. For Public Participation: The CWA requires public participation but does not explicitly mandate that state programs mirror federal citizen suit provisions. The EPA's regulations, which offer options like intervention as of right or a combination of complaint investigation, non-opposition to permissive intervention, and public comment, were deemed a reasonable accommodation of competing policies (uniformity and state autonomy). The court applied Chevron deference, finding no clear congressional intent requiring states to adopt identical federal standards. For Maximum Penalties: The CWA requires states to have "adequate authority" for enforcement. The Water Quality Act of 1987 clarified that states are not required to match federal maximum civil penalties. The EPA's minimum penalty regulations were upheld as a reasonable balance between uniformity and state autonomy, consistent with the Administrator's broad authority. The court found that congressional silence on criminal penalties for states also implied broad discretion. For EPA Veto Authority: The CWA allows the EPA to veto state permits "outside the guidelines and requirements" of the Act. While Industry argued this only applied to formally promulgated effluent guidelines, the court found the statutory language ambiguous under Chevron step one. At step two, the EPA's interpretation—that it could veto permits based on its "best professional judgment" (BPJ) regarding technology-based standards even in the absence of formal national guidelines—was found reasonable. This interpretation ensures that federal goals for water quality are met and prevents states from issuing permits that violate the CWA's fundamental prohibitions, consistent with the Act's overall structure. 4. Yes, the EPA's regulation providing for continuances of expired NPDES permits under Section 558(c) of the APA is consistent with the Clean Water Act and APA. Section 558(c) of the Administrative Procedure Act (APA) automatically extends a license for an activity "of a continuing nature" when a timely and sufficient renewal application is filed and agency action is delayed. Citing Pan-Atlantic Steamship Corp. v. Atlantic Coast Line Railroad Co.*, the court held that this APA provision overrides any lack of independent statutory authority for the EPA to extend permits. This mechanism prevents the cessation of operations due to administrative backlogs, which aligns with congressional intent to protect licensees. The court rejected arguments that "continuing nature" narrowly excludes seasonal activities or that a "sufficient" application requires meeting new substantive standards like Best Available Technology (BAT), instead affirming EPA's view that "sufficient" refers to procedural completeness. The regulation's application is necessary given EPA's permit renewal backlog and the CWA's prohibition on unpermitted discharges.