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Environmental Protection Agency v. Defenders of Wildlife (06-549); Natl. Assoc. of Home Builders v. Defenders of Wildlife (06-340)

Oral argument: April 17, 2007

Appealed from: United States Court of Appeals, Ninth Circuit

Environmental Protection Agency, Clean Water Act, Endangered Species Act, Arizona, Pollution, Water rights, Federalism, Proximate Cause

This case involves the intersection of two landmark environmental statutes, the Clean Water Act and the Endangered Species Act. Under the Clean Water Act, the EPA issues permits for discharging pollutants into the water. The statute provides for the transfer of permitting authority to a state when certain requirements are met. Section 7 of the Endangered Species Act imposes an obligation on agencies to insure that their actions do not cause harm to endangered species and to consult with other federal services to achieve this end. However states are not bound by Section 7’s obligations. Defenders of Wildlife challenge the EPA’s decision to transfer to Arizona permitting authority under the Clean Water Act. Because the EPA must determine that issuing any particular permit would not harm endangered species, but Arizona would not be required to do so, Defenders of Wildlife contend that the EPA’s decision to transfer authority has a negative impact on endangered species and thus violates Section 7. The EPA counters that under the Clean Water Act it does not have the authority to consider the impact on endangered species in determining whether to transfer permitting authority. The Court of Appeals for the Ninth Circuit disagreed, holding that the EPA was not only allowed to consider it but was required to do so. For that reason and others, the Ninth Circuit held the agency’s decision to be arbitrary and capricious. Several issues have been presented for decision by the Supreme Court. In addition to settling legal questions centered on the relation between the Clean Water Act and the Endangered Species Act, the case will have numerous practical implications for the arid Western states where both environmental concerns and disputes about water rights are particularly acute.

Questions presented

EPA v. Defenders of Wildlife

Whether Section 7(a)(2) of the Endangered Species Act of 1973, 16 U.S.C. 1536(a)(2), which requires each federal agency to insure that its actions do not jeopardize the continued existence of a listed species or modify its critical habitat, overrides statutory mandates or constraints placed on an agency’s discretion by other Acts of Congress.

Whether the Court of Appeals correctly held that the Environmental Protection Agency’s decision to transfer pollution permitting authority to Arizona under the Clean Water Act, see 33 U.S.C. § 1342(b), was arbitrary and capricious because it was based on inconsistent interpretations of Section 7(a)(2) of the Endangered Species Act of 1973, 16 U.S.C. § 1536(a)(2); and if so whether the Court of Appeals should have remanded to the environmental Protection Agency for further Proceedings without ruling on the interpretation of Section 7(a)(2).

Natl. Assoc. of Home Builders v. Defenders of Wildlife

1. Can a court append additional criteria to Section 402(b) of the Clean Water Act that require state NPDES programs to include protections for endangered species?

2. Does Section 7(a)(2) of the Endangered Species Act constitute an independent source of authority, requiring federal agencies to take affirmative action to benefit endangered species even when an agency’s enabling statutes preclude such action?

3. Did the Ninth Circuit incorrectly apply the holding of Department of Transp. v. Public Citizen, 541 U.S. 752 (2004), in concluding that EPA’s approval of Arizona’s NPDES permitting program was the legally relevant cause of impacts to endangered species resulting from future private land use activities?

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Issues

Is Section 7(a)(2)’s requirement that agencies insure their actions do not jeopardize the continued existence or habitat of an endangered species an independent source of authority which overrides other federal statutes which constrain an agency or lay out an agency’s congressional mandate?

Can a court require that state pollution permitting programs include protections for endangered species when such a requirement is not one of the ones listed in Section 402(b) of the Clean Water Act?

Was the Ninth Circuit correct in holding that the future impact endangered species by private land development would be legally caused by the EPA’s transfer of authority to Arizona for pollution permitting?

Was the Ninth Circuit correct in holding that the decision to transfer pollution permitting authority to Arizona was based on inconsistent interpretations of the Endangered Species Act § 7 and thus arbitrary and capricious? If so, should the Ninth Circuit have remanded for further agency proceedings instead of interpreting Section 7?

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Facts

This case involves the Environmental Protection Agency’s (EPA) transfer to Arizona of authority to issue permits for the discharge of pollutants into water. Under the Clean Water Act (CWA), the EPA is responsible for issuing these permits as part of the National Pollutant Discharge Elimination System (NPDES). See 33 U.S.C. § 1342(a); see also National Pollutant Discharge Elimination System homepage. The statute states that the EPA “shall approve” a transfer of authority to a state seeking to administer the program when the proposed program meets certain requirements listed in the statute. 33 U.S.C. § 1342(b) Under Section 7 of the Endangered Species Act (ESA), the EPA is also obligated to insure that its actions do not threaten the continued existence or result in destruction or modification of the habitat of an endangered species. 16 U.S.C. § 1536(a)(2); 50 C.F.R. § 402.01(b). This is referred to as the “no-jeopardy” requirement. See Brief for Petitioner EPA (EPA brief), at 19. As part of this obligation, the EPA must consult with the U.S. Fish and Wildlife Service (FWS) or the National Marine Fisheries Service (NMFS) about potential impacts on endangered species when it considers taking any action which might run afoul of Section 7. 16 U.S.C. § 1536; 50 C.F.R. § 402.01(b) The consulted Service will then issue a Biological Opinion about what impact, if any, the EPA’s proposed action will have on endangered species, and any proposed alternatives if it finds that the agency’s proposed action will likely cause a negative impact. 50 C.F.R. 402.14.

Prior to 1993, the EPA never engaged in outside consultations about the impact on endangered species incident to transferring CWA permit authority to the states, but it has done so in every post-1993 determination of an NPDES program, including Arizona’s. Defenders of Wildlife v. EPA, 420 F.3d 946, 952 (9th Cir. 2005). Arizona applied to administer the NPDES program in January of 2002. Id. Under the program, the Arizona Department of Environmental Quality (ADEQ) would process the applications and issue the permits. Id. It was undisputed that Arizona met all nine of the requirements listed in the CWA for transferring authority. Brief for Petitioner National Home Builders Association, (Home Builders’ Brief) at 2. The EPA initiated Section 7 consultation with the FWS, stating that it was required to do so. Id. During the course of these consultations, the FWS expressed concern that transferring authority to Arizona would have a detrimental impact on endangered species because unlike the EPA, Arizona would not be required to consider the effect of issuing a particular permit on endangered species. Id. The EPA responded that, in its opinion, it was not legally allowed to consider this point in determining whether to transfer authority to Arizona because it was not related to the water quality requirements of the CWA. Id. at 952-53. Ultimately, the FWS issued a Biological Opinion which stated that transferring authority would eliminate Section 7 consultation which had in the past benefited endangered species; despite this finding, however, the FWS recommended approval of Arizona’s program. Id. at 953. It reasoned that the loss of Section 7 benefits was due to Congress’s decision not to make states subject to Section 7 and that therefore this loss was not an indirect effect of the EPA’s authorization, despite its previous opinion to the contrary. Id.

Arizona’s NPDES program was approved in December of 2002; it was the forty-fifth state to have its program approved. Id. Arizona currently has the eleventh highest number of species on the endangered list, with fifty-five plants and animals so designated; the other ten states which are ahead of it already have been approved to administer their own NPDES programs. See Threatened and Endangered Species System, U.S. Fish and Wildlife Service; 65 Fed.Reg. 50,528, 50,529 (Aug. 18, 2000). After the transfer, the Defenders of Wildlife filed suit against the EPA claiming that the agency’s reliance on the Biological Opinion was arbitrary and capricious and that it did not comply with the Endangered Species Act. See Defenders of Wildlife, 420 F.3d at 954-55. The National Association of Home Builders, whose members include businesses which are required to obtain CWA permits, intervened against the Defenders of Wildlife. See Petition for Writ of Certiorari, National Association of Home Builders et al v. Defenders of Wildlife, et al., at 5-6. While the case is pending before the Supreme Court, Arizona continues to administer the NPDES program. See ADEQ Permits: AZDEPS.

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Discussion

This administrative law case involves the difficult question of how to balance environmental concerns with human interests in resources. It is no accident that the underlying dispute centers around authorization of water usage; water rights in the arid western states have long been a source of conflict. See Joe Gelt, Sharing Colorado River Water: History, Public Policy, and the Colorado River Compact, Water Resources Research Center.

Currently water in the west is allocated according to various state and federal laws as well as by interstate agreements and contracts. See Western Water Law and Policy. A ruling that the Endangered Species Act (ESA) trumps the Clean Water Act (CWA) could affect these long standing water allocations, thus disrupting water supplies across the West and having a ripple effect on economic development. See Brief of Amici Curiae Arizona Power Authority, et al. at 2; Brief of Western Urban Water Coalition as Amicus Curiae at 1-2, 20. This is particularly true since the ruling in this case has the potential to cause the EPA to reconsider its 44 previous decisions to authorize state NPDES programs as well as Arizona’s. See Brief of Amici Curiae States of Nebraska, et al. in Support of Petitioners at 26-28. Moreover, it could increase litigation in the already highly contested area of western water rights. For example, the Federal Court of Claims has already held in at least one case that the reduction of water usage rights to protect endangered species constituted a Fifth Amendment taking and therefore had to be compensated. See Tulare Lake Basin Water Storage District, et al. v. United States, 49 Fed. Cl. 313 (2001). If the imposition of the ESA’s restrictions reduces existing water rights, more such litigation is possible.

However, the potential negative impact on endangered species of transferring permitting authority to Arizona is very real as well. The Colorado River is a primary source of water for the human populations of seven western states. Lower Colorado River Multi-Species Conservation Program, Final Biological Assessment, Vol. III, U.S. Dept. of the Interior, p. 1-1 (Dec. 17, 2004). Over the past 150 years, human development and changing water uses have drastically altered the Colorado River’s ecosystem, making it difficult for some native plants and species to thrive. Id. at 4-2 to 4-6. In considering previous permit applications, Section 7 consultation had led to the adoption of measures to mitigate the detrimental effect of new human water uses on endangered species. See Defenders of Wildlife, 420 F.3d at 952. Since state decisions on permit applications are not subject to Section 7’s consultation and no-jeopardy requirements, an important mechanism for ensuring the continued protection of endangered species in the face of pressures for development will be lost. Id. at 953.

The implications of holding that the ESA “trumps” the CWA could extend beyond the statutes and parties involved in the present dispute, however. As Judge Kozinski stated in his dissent in the Court of Appeals for the Ninth Circuit, “[i]f the ESA were as powerful as the majority contends, it would modify not only EPA’s obligation under the CWA, but every categorical mandate applicable to every federal agency.” Defenders of Wildlife v. EPA, 450 F.3d 394, 399 (9th Cir. 2005) (Kozinski dissenting from denial of rehearing en banc). Thus the ESA would become what many amici have termed a “super statute” which could override numerous statutes and agency actions. See Brief of Amici Curiae Arizona Power Authority, et al. at 7; Brief of Amici Curiae the Am. Road and Transp. Builders Assoc., at 6; Brief of Washington Legal Foundation et al as Amici Curiae, at 2. In particular, such a ruling might disrupt other public works, such as the provision of hydroelectric power and the building of public infrastructures like highways, by increasing licensing restrictions and processing times in order to fulfill ESA Section 7 obligations. See Brief of Amici Curiae The Am. Road and Transp. Builders Assoc. at 23-24; Brief of Amici Curiae National Hydropower Assoc. et al. at 7-8.

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Analysis

The Court of Appeals for the Ninth Circuit ruled that the Environmental Protection Agency's (EPA) decision to transfer permitting authority under the Clean Water Act (CWA) to Arizona was arbitrary and capricious. Defenders of Wildlife, 420 F.3d. at 950. Agency action can be held arbitrary and capricious for a number of reasons, including 1) relying on factors Congress intended to not be considered, 2) failing to consider an important factor 3) offering an explanation that runs counter to the evidence, and 4) being based on an implausible explanation or contradictory reasoning. Id. at 959.

Incoherent Reasoning and Remand Issues

The lower court first found that the EPA’s justifications for its decision were internally contradictory. Defenders of Wildlife, 420 F.3d at 959. During the decision making process, the EPA considered itself to be obliged to engage in Section 7 consultation about the effects of the transfer on endangered species. Id. at 960. The Ninth Circuit found this position to be inconsistent with the EPA’s view that in making the transfer decision it did not have the authority to take into consideration the negative effects that such consultation might reveal. Id. It concluded that Congress could not have intended such a “nonsensical” regime. Id. The Ninth Circuit supported this argument by pointing out that the obligation to consult and the no-jeopardy requirement arise from the same sentence of the same provision of the ESA, and both are triggered by the same event. Id. at 961. Therefore it was contradictory to hold that the consultation obligation arose but that the no-jeopardy requirement did not. Id.

The EPA concedes that conduct which would require consultation would also trigger the no-jeopardy requirement. EPA brief at 42. However, it contends that whatever mistaken opinion it might have held at earlier stages of the dispute, in fact no Section 7 consultation was required in this case. Id. at 42-43. As an alternative, the EPA argues that permissive consultation may help determine whether agency action will be the legally relevant cause of any negative impact. Id. at 44. Because in this case the EPA and the U.S. Fish and Wildlife Service (FWS) ultimately determined that the EPA’s action would not be the legally relevant cause, ultimately consultation was not inconsistent with the transfer of authority to Arizona in the view of the EPA. Id. The EPA further argues that its earlier mistaken view on the consultation point was a harmless error which did not affect the outcome of the case nor obscure the agency’s reasoning. Id. at 45-46. Therefore in its view remand would be inappropriate. Id.

The Authority Issue

The Ninth Circuit also found that the EPA was not only authorized to consider the impact on endangered species, but in fact was required to consider it. See Defenders of Wildlife, 420 F.3d at 962, 971. Therefore, the decision was arbitrary and capricious essentially because the EPA failed to consider an important factor. In support of its contention that the EPA was authorized to consider this impact in its transfer decision, the Ninth Circuit relied on Tennessee Valley Authority v. Hill, 437 U.S. 153 (1978), to interpret the ESA as affirmatively commanding the EPA to make certain its actions do not harm endangered species. Defenders of Wildlife, 420 F.3d at 963-964. It reasoned that this command also granted authority, because otherwise the Congress would be forcing agencies to either violate the limitations on their authority or violate their Section 7 obligation. Id. In concluding that the EPA was required to consider the impact on endangered species, the court found that the transfer was the type of agency action subject to Section 7—i.e., a decision in which the agency had discretionary authority. Id. at 967-68. It characterized the transfer decision as discretionary because the agency had “continuing decision making authority” over it and because it deemed the word “discretionary” (which appears only in the regulations and not the statute) to simply be a restatement of Section 7’s descriptive phrase “authorized, funded, or carried out.” Id.

The National Association of Home Builders (“Home Builders”) and the EPA disagree, claiming that the ESA neither required nor authorized them to consider that potential impact. EPA brief at 17. In fact, on their view, approval of Arizona’s program was compelled under the CWA because the state met the nine requirements listed in that statute. Id. at 17-18. The EPA contends that while it had some discretion in determining whether Arizona met those factors, once it determined Arizona had met the factors, the EPA had no discretion to deny the application. Id. The Home Builders and the EPA argue this interpretation is the most consistent with the opening section of the CWA that declares, “[i]t is the policy of the Congress to recognize, preserve, and protect the primary responsibilities and rights of States to prevent, reduce, and eliminate pollution . . .” See 33 U.S.C. § 1251(b). Therefore transferring permitting authority was not a discretionary activity and Section 7 of the ESA does not apply. See EPA brief at 13-14, 15. The Home Builders and the EPA argue that the ESA did not in effect add a tenth criteria which must be considered, because that would amount to a repeal by implication which is disfavored. See id. at 19-20. The FWS and National Marine Fisheries Service confirmed that they shared this interpretation of the statutory scheme during the decision making process. See id. at 14. The Home Builders argue that the Ninth Circuit failed to give appropriate deference to these interpretations. See Home Builders’ Brief at 30, 32, 34. Finally, the Home Builders and the EPA distinguish Tennessee Valley Authority by characterizing the relevant agency activity in that case as authorized but not required, and thus a discretionary decision rather than a mandate imposed by another statute like in this case. See EPA brief at 39.

The Debate on the Legally Relevant Cause

Because in their view the EPA had no control over whether to transfer authority once it determined Arizona met the nine factors of the CWA, the Home Builders and the EPA contend that under Department of Transp. v. Public Citizen, 541 U.S. 752 (2004), the agency’s decision was not the legally relevant cause of any impact on endangered species. EPA brief at 25. Therefore, the EPA has not violated Section 7’s no jeopardy requirement. The Biological Opinion issued by the FWS reflected this view that the transfer of permitting authority would not have an indirect effect on endangered species. Defenders of Wildlife, 420 F.3d at 961.The FWS reasoned that any future impact on endangered species would be caused by private development, not by the transfer of authority, and that the transfer of authority would not cause new development. Id.The EPA points out that in order to “jeopardize” endangered species, the EPA must cause the harm. EPA brief at 25. Consequently, because, in their view, the transfer decision is not the cause of any potential harm, the EPA did nothing wrong. Id.

The Ninth Circuit held that the Biological Opinion’s conclusion was an implausible explanation. Defenders of Wildlife, 420 F.3d at 953, 961. The Ninth Circuit reasoned that the effect of private development would be different depending on whether Arizona or the EPA was issuing permits because unlike the EPA, Arizona would not be obligated to insure that issuing a permit would not harm endangered species. Id.at 961-62. Therefore the EPA’s transfer decision was part of the but-for causal chain and thus the explanation was implausible. Id. Since, in the court’s view, the EPA had the authority to prevent this harm by denying Arizona’s application, the EPA could be considered the legally relevant cause of harm under Public Citizen’s “ability to prevent” test, and thus violated Section 7 by negatively affecting endangered species. Id. at 963, 967.

The Home Builders and the EPA counter that Public Citizen required proximate cause, not the mere but-for causation which they contend the Ninth Circuit applied. Home Builders’ Brief at 42-44. Because the causal link between the transfer of authority is too attenuated, the transfer cannot be the legal cause. EPA brief at 8. Since private development is influenced by a number of factors, only one of which may be CWA permitting, the link is too attenuated for proximate causation. Home Builders’ Brief at 44.

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Conclusion

The legal and the real world issues involved in this case are as challenging as they are voluminous. The issues presented to the Court, while analytically distinct, in the end all substantively turn on how broadly the Endangered Species Act sweeps. The Court’s answer to this question may guide future actions by all federal agencies, not merely the EPA, and could have many practical consequences on private development in the water-poor West.

Authors

Prepared by: Cecelia Sander

Additional Sources

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