United States: The Nickel Report BLOG: Act Or Waive: DC Circuit Construes CWA § 401's One-Year Deadline For State Action Applications

"According to FERC, it is now commonplace for states to use Section 401 to hold federal licensing hostage."

These are the words the DC Circuit used in Hoopa Valley Tribe v. Federal Energy Regulatory Commission, No. 14-1271, p. 10 (D.C. Cir., Jan. 25, 2019), to describe the state of play on § 401 certifications affecting hydroelectric facility licensing or re-licensing applications. CWA § 401(a)(1) requires, as a prerequisite for federal permits for activities that may result in a discharge into the navigable waters, that affected states certify that any such discharge will comply with applicable, enumerated provisions of the Clean Water Act. But, if a state 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," the statute deems the certification requirements waived.

As the Hoopa Valley decision recognizes, Congress intended the waiver provision in § 401 to "'prevent a State from indefinitely delaying a federal licensing proceeding.'" Id. at 12. But that has not stopped such a delay from occurring, as the court noted. Id. at 10 (citing FERC statements that more than half of the licenses pending before FERC in 2015 were awaiting § 401 certifications, and 4 of those had been pending for more than a decade). Delays are not limited to hydroelectric licensing; other critical infrastructure projects, such as natural gas pipelines, fuel export terminals, and new electricity transmission and distribution facilities, have experienced delays as they await § 401 certifications. (See my colleague's post, FERC Rules on State Waiver of Section 401 Certification.) This has led to calls for EPA clarification of § 401's scope and deadlines, as well as the introduction of a Senate bill to amend § 401. See Letter from Senators John Barrasso, M.D., et al. to Andrew R. Wheeler, Acting Administrator, US EPA ( Oct. 4, 2018). On the other hand, many states have argued that § 401 abuses are isolated and do not warrant any administrative or legislative clarification. Letter from Western Governor's Ass'n et al. to David Ross, Assistant Administrator, Office of Water, US EPA (Dec. 3, 2018).

Now the DC Circuit has weighed in on one important aspect of the deadline question: may an applicant extend the deadline for state action by withdrawing and re-submitting its request for certification? In Hoopa Valley Tribe, the court held that withdrawal and refiling of essentially the same request does not turn back the clock, and states that put their water quality certification proceedings on hold in reliance on such an approach have failed or refused to certify within the requisite deadline. Hoopa Valley Tribe at 11-12.

In Hoopa Valley, the license-holder for a series of dams on the Klamath River filed a FERC application to relicense dams on the upper river and decommission dams on the lower river, and requested 401 certifications from California and Oregon. Negotiations among the applicant, the two states, and a cavalcade of stakeholders ensued, albeit outside the FERC licensing process. The parties agreed to a novel scheme for deferring § 401's one-year deadline during the negotiations: the states would hold their water quality certification and other permitting reviews in abeyance, and the applicant would withdraw and refile its application for 401 certifications "as necessary to avoid the certifications being deemed waived under the CWA..." Hoopa Valley at 5-6. In the meantime, the dams continued to operate under annual licenses.

After eight years, the Hoopa Valley Tribe petitioned FERC for a declaratory order that the states had waived their § 401 authority and, as a result, that the applicant had failed to diligently prosecute its licensing application. FERC denied the petition, reasoning that each resubmission was an independent request subject to its own one-year deadline.

The DC Circuit rejected FERC's reasoning, finding it arbitrary and capricious given that each resubmission was virtually identical to its predecessor. Id. at 11. The court found that FERC's interpretation violated the letter and undermined the purpose of § 401's waiver provision, usurping FERC's regulatory jurisdiction. Id. at 11-13. (Notably, the court declined to determine how different § 401 requests would have to be to qualify as new, independent requests.) The court also concluded that the states' agreement to defer any water quality certification proceedings qualified as the failure or refusal to certify within the statutory deadline. Id. at 11. And the court rejected FERC arguments that treating the water quality certification as waived would precipitate FERC proceedings on decommissioning, which would involve activities requiring 401 certification, leading to further delays. Appeals to practicality did not trump clear statutory language and, in any case, the court viewed the FERC licensing process as offering a venue for reaching agreement among stakeholders and informing the water quality certification process in a timely manner. Id. at 13-14.

It remains to be seen what impact the Hoopa Valley Tribe decision will have on the pace of federal permitting. The decision may incentivize states to actively deny certification if issues are not resolved within the one-year period. Or applicants, fearing denial of certification, could become more creative about recasting prior requests before resubmitting them. Whatever the long-term effects, in the short term, one might expect to see FERC receive more petitions requesting declaratory orders on state waiver.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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