United States: PipelineLaw: During Oral Argument, D.C. Circuit Suggests Waiver Period For State Water Quality Certification May Be Less Than One Year

In recent litigation involving the development of interstate natural gas pipelines, one of the key issues has been whether the state has waived its authority under Clean Water Act (CWA) section 401 by exceeding the one-year time period.1 In a separate case involving a series of hydroelectric facilities, the waiver period was again directly at issue. On October 1, at oral argument before the U.S. Court of Appeals for the D.C. Circuit, the parties addressed whether California and Oregon had waived their water quality certification authority by having the applicant withdraw and resubmit its request for certification over a number of years. Notably, the judges seemed to agree that the Federal Energy Regulatory Commission (FERC) could make a waiver determination before the end of the one-year time limit and that withdrawing and resubmitting an application may not always restart the clock.

The case, Hoopa Valley Tribe v. FERC, No. 14-1271 (D.C. Cir. 2018), involves a dispute over the operation of the Klamath Hydroelectric Project (KHP), a series of dams and reservoirs on both sides of the California-Oregon border. The project obtained its original 50-year operating license in the 1950s. Set to expire in 2006, PacifiCorp (KHP's operator) submitted its relicense application to FERC in 2004. In 2007, FERC completed its environmental review and concluded that a new license would likely need to incorporate costly fish passage requirements for the protection of local salmon species. In 2010, PacifiCorp negotiated and signed an agreement with 48 interested parties (e.g., the Governors of Oregon and California, local tribes and counties, farmers, conservation groups, etc.) to decommission and remove the dams by 2020. As part of the agreement, PacifiCorp agreed to withdraw and resubmit its CWA section 401 requests every year to avoid waiver.

In 2012, the Hoopa Valley Tribe petitioned FERC for a declaratory order that California and Oregon had waived their 401 authority, and argued that FERC had violated its statutory duties for failing to act on the KHP relicense application. FERC found that, while the circumstances are "far from ideal," PacifiCorp's withdrawals and re-submission of its requests for certification (from 2008-2014) restarted the one-year deadline each year.2 Hoopa Valley appealed FERC's determination to the D.C. Circuit.

Under the CWA, a state waives its authority if the agency "fails or refuses to act on a request for certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request." 33 U.S.C. § 1341(a)(1) (emphasis added). During oral argument, the attorney for the Hoopa Valley Tribe argued that FERC had misinterpreted the CWA by finding that it must wait a full year before determining whether a state has waived its authority. One of the issues raised by the judges was whether FERC regulations had already defined a "reasonable period of time" as one year. FERC regulations state "a certifying agency is deemed to have waived ... if the certifying agency has not denied or granted certification by one year after the date the certifying agency received a written request for certification." 18 C.F.R. § 4.34(b)(5)(iii). The attorney responded by stating that he does not read this regulation to preclude FERC from making a determination that the state has not acted within a reasonable period of time and that waiver has occurred before the one year is up.

FERC's attorney argued that the Commission interprets the CWA and its own regulations to provide states with the maximum of one year because it provides early certainty to all parties as to what will be considered reasonable. In a quick back and forth with Judge Pillard, the attorney cited the Second Circuit's Millennium Pipeline decision to support the notion that California and Oregon acted appropriately in requesting that PacifiCorp withdraw and resubmit its request for certification. In that case, in response to New York's concern that a strict one-year period would require premature decisions by state agencies, the Second Circuit explained that the state agency could deny the application without prejudice or "request that the applicant withdraw and resubmit the application." Judge Pillard correctly noted that this language is dictum and that the issue of whether a state and applicant can agree to annually withdraw and resubmit its request for certification to avoid waiver was not squarely before the Second Circuit. Judge Pillard also expressed skepticism that the statute allows an applicant to restart the one-year clock by withdrawing and resubmitting a request. The statute, Judge Pillard noted, provides that waiver occurs if the state does not act within an appropriate period of time after receipt of such request, and the original request "has not changed."

Significantly, Judge Sentelle made the point that the language of section 401 implies that the licensing agency has the authority to deem a time period unreasonable or "find its effect" unreasonable and find waiver before the one-year clock runs out. In response, the FERC attorney pointed to an EPA regulation providing that the licensing or permitting agency determines what is reasonable, see 40 C.F.R. § 121.16(b), and that if FERC started to make determinations case by case it would create uncertainty. Judge Sentelle responded by stating that agencies apply the term "reasonable" all the time to the facts of a particular case, and FERC should have no difficulty doing so here.

The judges' criticism of FERC's strict adherence to the one-year deadline, and their implication that the statute allows FERC to make a waiver determination before the end of the one-year period, suggests that we are likely to see the judges take a similar position in the forthcoming opinion. According to recent statistics,3 the D.C. Circuit, on average, issues an opinion approximately three months after oral argument. Thus, the Court is likely to issue its opinion at the end of the calendar year.

Footnote

1 See, e.g., Clare Ellis, Second Circuit Upholds State Veto of Constitution Pipeline Project Via Denial of Water Quality Certification, PipelineLaw.com (Aug. 31, 2017); George P. Sibley, III, FERC Rules on State Waiver of Section 401 Water Quality Certification, PipelineLaw.com (Jan. 17, 2018); Clare Ellis, FERC: Water Quality Certification Waiver Period for Pipeline Projects Begins Upon Receipt of a Written Request for Certification, PipelineLaw.com (Sept. 18, 2017); Brian R. Levey and Deidre G. Duncan, Second Circuit Affirms Waiver Period for State Water Quality Certification Begins Upon Receipt of Request for Certification, PipelineLaw.com (Mar. 16, 2018).

2 KHP is not unique in this regard. Over 15 other hydroelectric projects have been delayed by pending water quality certifications. The average delay is over seven years. See FERC, Hydroelectric Projects Delayed by Water Quality Certifications and Endangered Species Act Consultation.

3 U.S. Courts, Table B-4A – U.S. Courts of Appeals Judicial Business (Sept. 30, 2017).

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