March 23, 2020

Clean Water Act Section 401: Hoopa Valley Tribe and Emerging Developments

Charles R. Sensiba, Misha Tseytlin, and Morgan M. Gerard

On December 9, 2019, the U.S. Supreme Court decided not to revisit the U.S. Court of Appeals for D.C. Circuit’s decision in Hoopa Valley Tribe v. FERC, 913 F.3d 1099 (2019). The Court’s denial of certiorari means that the D.C. Circuit’s opinion—holding that states have an “absolute maximum” of one year to render a decision on requests for water quality certification under section 401 of the Clean Water Act (CWA), 33 U.S.C. § 1341—will stand. The disposition of the case means that the D.C. Circuit’s holding is now final and unappealable and is expected to continue to have far-reaching effects for federal licensing and permitting activities that require state water quality certification under CWA section 401.

Section 401 certification is one of the most significant tools available to states to control federally permitted activities that may involve a discharge into navigable waters. Section 401(a) provides an opportunity for the state to determine whether the discharge will comply with applicable aspects of the state’s approved water quality program. Section 401(d), in turn, authorizes the state to include in its certification any effluent limitations, other limitation, standards of performance, or prohibition, effluent standard, or pretreatment standard, “and [ ] any other appropriate requirement of State law.” 33 U.S.C. § 1341(d). The U.S. Supreme Court has interpreted CWA section 401 as a broad delegation of conditioning authority to the states, Pub. Util. Dist. No. 1 of Jefferson County v. Wash. Dep’t of Ecology, 511 U.S. 700 (1994), and the permitting agency has no authority to reject or modify the conditions included in a water quality certification. Am. Rivers v. FERC, 201 F.3d 1186 (9th Cir. 1999).

The key holding in Hoopa Valley Tribe, which concerns the ongoing Federal Energy Regulatory Commission (FERC) relicensing of the Klamath Hydroelectric Project in California and Oregon, is that the two states waived their authorities under CWA section 401 by failing to rule on the applicant’s submitted applications for water quality certification within one year from when they were initially filed in 2006. The applicant for many years had followed, in coordination with the two states, the common industry practice to “withdraw-and-resubmit” its water quality certification applications in an attempt to annually reset the one-year time period for the states to act. The D.C. Circuit in Hoopa Valley Tribe invalidated this practice as a means of resetting the statutory clock, instead holding that the clear text of CWA establishes that “a full year is the absolute maximum” time for a state to decide on a water quality certification application.

Since the D.C. Circuit’s ruling in January 2019, FERC has applied Hoopa Valley Tribe numerous times in both the natural gas and hydropower contexts—each time determining that the state had waived certification in the pending FERC process. See Placer Cty. Water Agency, 167 FERC ¶ 61,056, reh’g denied, 169 FERC ¶ 61,046 (2019); Empire Pipeline, Inc., 164 FERC ¶ 61,084 (2018), reh’g denied, 167 FERC ¶ 61,007 (2019), appeal docketed N.Y. Dep’t of Env’t Conservation v. FERC, No. 19-1610 (2nd Cir. June 28, 2019); Constitution Pipeline Co., LLC, 168 FERC ¶ 61,129 (2019); McMahan Hydroelectric, LLC, 168 FERC 61,185 (2019); Southern Cal. Edison. Co., 170 FERC ¶ 61,135 (2020). As FERC continues to apply Hoopa Valley Tribe to different fact patterns, it is expected that states may challenge waiver determinations on a case-by-case basis. Recently, the New York Department of Environmental Conservation (NYDEC) appealed FERC’s waiver determination in Empire Pipeline to the Second Circuit, arguing that it did not violate section 401 or inappropriately seek to extend the statutory time limit by entering an agreement with the water quality certification applicant to specify a commencement date for the one year period (a date after the certification request was received).

Going forward, Hoopa Valley Tribe and its progeny are expected to place additional pressure on both applicants and states to ensure that the state has sufficient information to meet its statutory deadline, and for the state to place sufficient resources into such requests such that it can meet the one-year maximum time allotted under CWA section 401. The emphasis on early coordination is reinforced by the recent rule proposal by the U.S. Environmental Protection Agency (EPA), the agency charged with the responsibility for implementing the CWA. If finalized and adopted as proposed, EPA’s new CWA section 401 regulations would codify the D.C. Circuit’s interpretation that one-year is the absolute maximum time period for a state to act on a request for certification, and that this deadline cannot be tolled or extended, 84 FR 44,080. The proposed rule also clarifies that a state has “failed or refused” to act when it actually or constructively fails to grant or deny certification, or waive the certification requirement, within a reasonable period of time. Id. According to the Office of Management and Budget, the Final Rule is expected to be published in May 2020. 

Charles R. Sensiba, Misha Tseytlin, and Morgan M. Gerard

Charles R. Sensiba is a partner with Troutman Sanders and a leading authority in the hydropower industry. Chuck handles a full spectrum of matters, including complex licensing and relicensing, as well as natural resources and environmental issues, related to the regulation of hydropower operation and development. His work includes successful representation in scores of hydroelectric relicensing proceedings before the Federal Energy Regulatory Commission (FERC), as well as matters pertaining to license implementation and compliance; administrative and appellate litigation before the U.S. Courts of Appeal on hydropower licensing and administrative matters; and policy work before the U.S. Congress.

Misha Tseytlin is a partner with Troutman Sanders and leads the firm’s national appellate and Supreme Court practice. Misha has been one of the leaders in high-profile challenges to environmental regulations, including playing a critical role in the Clean Power Plan litigation by securing a historic stay from the U.S. Supreme Court and arguing the case before the en banc D.C. Circuit. Misha played a similar leading role in the multistate challenges to the Waters of the United States (WOTUS) Rule and multiple challenges to the Environmental Protection Agency’s ozone rules.

Morgan M. Gerard is an associate in Troutman Sanders’ Environmental and Natural Resources practice group. She has counseled clients engaging in the hydropower licensing and relicensing process before FERC and on the related range of issues affecting hydropower licensees, including considerations arising under the National Environmental Policy Act, the Clean Water Act, and the Endangered Species Act.