711 F.3d 844 (8th Cir. 2013), 11-3412, Iowa League of Cities v. Environmental Protection Agency

Docket Nº:11-3412.
Citation:711 F.3d 844
Opinion Judge:GRUENDER, Circuit Judge.
Attorney:John C. Hall, argued, Gary B. Cohen, Philip D. Rosenman, on the brief, Washington, DC, for Petitioner. Adam J. Katz, argued, USDOJ, Environmental and Natural Resources Division, Environmental Defense Section, Washington, DC, for Respondent.
Judge Panel:Before SMITH, BEAM, and GRUENDER, Circuit Judges.
Case Date:March 25, 2013
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

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711 F.3d 844 (8th Cir. 2013)




No. 11-3412.

United States Court of Appeals, Eighth Circuit.

March 25, 2013

Submitted: Nov. 13, 2012.

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John C. Hall, argued, Gary B. Cohen, Philip D. Rosenman, on the brief, Washington, DC, for Petitioner.

Adam J. Katz, argued, USDOJ, Environmental and Natural Resources Division, Environmental Defense Section, Washington, DC, for Respondent.

Before SMITH, BEAM, and GRUENDER, Circuit Judges.

GRUENDER, Circuit Judge.

The Iowa League of Cities (" League" ) seeks direct appellate review of two letters sent by the Environmental Protection Agency (" EPA" ) to Senator Charles Grassley. The League argues that these letters effectively set forth new regulatory requirements with respect to water treatment processes at municipally owned sewer systems. According to the League, the EPA not only lacks the statutory authority to impose these regulations, but it violated the Administrative Procedures Act (" APA" ), 5 U.S.C. § 500 et seq., by implementing them without first proceeding through the notice and comment procedures for agency rulemaking. We find that we have subject matter jurisdiction over the claims, and we vacate under APA section 706(2)(C), (D).

I. Background

The League previously sought our review in 2010 of six EPA documents, consisting of letters, internal memoranda, and a Federal Register notice, that allegedly constituted new regulatory requirements for water treatment processes. The EPA moved to dismiss, arguing that judicial review was premature because the documents were part of an ongoing agency decisionmaking process. An administrative panel of this court granted the EPA's motion to dismiss for lack of subject matter jurisdiction.

The League continued to perceive a conflict between the agency's official written policies and the expectations it was transmitting to the state entities that served as liaisons between the EPA and municipal wastewater treatment facilities. Consequently, the League enlisted the assistance of Senator Charles Grassley to obtain clarification from the EPA. The EPA sent two letters (" June 2011 letter" and " September 2011 letter" ) in response to Senator Grassley's inquiries. According to the EPA, these guidance letters merely discuss existing regulatory requirements. The League disagrees, viewing the letters as contradicting both the Clean Water Act (" CWA" ), 33 U.S.C. § 1251 et seq., and the EPA's lawfully promulgated regulations. As it did in 2010, the EPA moved to dismiss for lack of subject matter jurisdiction. This time an administrative panel denied the motion but requested that the parties address the merits of all relevant jurisdictional and substantive arguments.1

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The APA " empowers federal courts to ‘ hold unlawful and set aside agency action, findings, and conclusions' if they fail to conform with any of six specified standards." Marsh v. Or. Natural Res. Council, 490 U.S. 360, 375, 109 S.Ct. 1851, 104 L.Ed.2d 377 (1989) (quoting 5 U.S.C. § 706(2)). Inter alia, a reviewing court may set aside agency action that has failed to observe those " procedure[s] required by law." § 706(2)(D). Agencies must conduct " rule making" in accord with the APA's notice and comment procedures. 5 U.S.C. § 553(b), (c). However, only new " legislative" rules are required to be created pursuant to notice and comment rulemaking. See id.; see also Minnesota v. Ctrs. for Medicare & Medicaid Servs., 495 F.3d 991, 996 (8th Cir.2007). " Interpretative rules" 2 and " general statements of policy" are statutorily exempt from the procedural requirements applicable to " rule making." See § 553(b)(3)(A); see also Shalala v. Guernsey Mem'l Hosp., 514 U.S. 87, 99, 115 S.Ct. 1232, 131 L.Ed.2d 106 (1995). The crux of the League's procedural claim is that the EPA's letters announced new legislative rules for water treatment processes at municipally owned sewer systems, thereby modifying the EPA's existing legislative rules. The EPA admits it did not engage in notice and comment procedures, but it insists there has been no procedural impropriety because the letters should be considered general policy statements or, at most, interpretative rules.

The League asks us to find not only that the EPA's actions are procedurally invalid but also to go one step further and set aside the rules as imposing regulatory requirements that surpass the EPA's statutory authority. See § 706(2)(C) (authorizing federal courts to set aside agency action that is " in excess of statutory jurisdiction, authority, or limitations, or short of statutory right" ).

The two areas of regulation addressed in the challenged EPA letters are " mixing zones" and " blending." Our analysis first requires a discussion of the CWA's regulatory scheme and the water treatment processes at issue.

A. The Clean Water Act

The CWA forbids the " discharge of any pollutant" — defined as the " addition of any pollutant to navigable waters from any point source" 3— unless executed in compliance with the Act's provisions. 33 U.S.C. §§ 1311(a), 1362(12). A permit program called the National Pollution Discharge Elimination System (" NPDES" ) plays a central role in federal authorization of permissible discharges. See 33 U.S.C. § 1342. The EPA may issue an NPDES permit, but states also are authorized to administer their own NPDES programs. § 1342(b). The vast majority elect to do so.4 If a state chooses to operate its own permit program, it first must obtain EPA permission and then ensure that it issues discharge permits in accord with the same

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federal rules that govern permits issued by the EPA. § 1342(a); 40 C.F.R. § 122.41.

Many of these rules are in the form of " effluent limitations," which " restrict the quantities, rates, and concentrations of specified substances which are discharged from point sources." Arkansas v. Oklahoma, 503 U.S. 91, 101, 112 S.Ct. 1046, 117 L.Ed.2d 239 (1992) (citing §§ 1311, 1314). The NPDES permit system " serves to transform generally applicable effluent limitations ... into the obligations ... of the individual discharger." EPA v. California ex rel. State Water Res. Control Bd., 426 U.S. 200, 205, 96 S.Ct. 2022, 48 L.Ed.2d 578 (1976). The EPA applies effluent limitations at the point of discharge into navigable waters, known as " end-of-the-pipe," unless monitoring at the discharge point would be " impractical or infeasible." 40 C.F.R. § 122.45(a), (h). The baseline effluent limitations are " technology-based," § 1311(b); 40 C.F.R. § 125.3(a), in that they set " a minimum level of effluent quality that is attainable using demonstrated technologies." EPA, NPDES Permit Writers' Manual 5-1 (2010).5 The EPA has interpreted this regime as " preclud[ing] [it] from imposing any particular technology on a discharger." In re Borden, Inc., Decision of the General Counsel on Matters of Law Pursuant to 40 C.F.R. § 125.36(m), No. 78 (Feb. 19, 1980), at *2; see also NPDES Permit Writers' Manual 5-14, 5-15 (" Therefore, each facility has the discretion to select any technology design and process changes necessary to meet the performance-based discharge limitations and standards specified by the effluent guidelines." ). The technology-based effluent limitations applicable to publicly-owned treatment works (" POTWs" ),6 such as municipal sewer authorities, are based on a special set of rules known as the " secondary treatment" regulations. § 1311(b)(1)(B); 40 C.F.R. § 125.3(a)(1); see generally 40 C.F.R. § 133.102 (describing average monthly and weekly " minimum level[s] of effluent quality attainable by secondary treatment" ). The secondary treatment regulations also do not mandate the use of any specific type of technology to achieve their requisite levels of effluent quality. See 48 Fed.Reg. 52,258, 52,259 (Nov. 16, 1983). When technology-based effluent limitations would fall short of achieving desired water quality levels, the EPA is authorized to devise additional, more stringent water quality-based effluent limitations for those particular point sources. 33 U.S.C. § 1312(a).

Thus, the CWA is a program of state and federal cooperation, but state discretion is exercised against a backdrop of significant EPA authority over state-run NPDES programs. The EPA dictates the effluent limitations applicable to all permits, while states are in charge of categorizing their waterways in terms of designated uses and setting forth " water quality standard[s]" for each type of waterway. 33 U.S.C. § 1313(c)(2). These standards supplement effluent limitations to ensure that overall water quality remains at an acceptable level. Arkansas, 503 U.S. at 101, 112 S.Ct. 1046. A major component of a state's water quality standards is " the set of water quality criteria sufficient to support the designated uses of each waterbody." 7 NPDES Permit Writers' Manual

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6-4. At least every three years, states must submit their water quality standards to the EPA for approval. § 1313(c)(1). The EPA must approve the standards within sixty days or disapprove them within ninety days. 66 Fed.Reg. 11,202, 11,215 (Feb. 22, 2001). States are also required to forward a copy of each permit application they receive to the EPA, which is afforded an opportunity to block the issuance of the permit. § 1342(d); 40 C.F.R. § 123.29. In sum, states...

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