In re Cities of Annandale and Maple Lake, A04-2033.

• Decision Date: 17 May 2007
• Docket Number: No. A04-2033.,A04-2033.
• Citation: 731 N.W.2d 502
• Parties: In the Matter of the CITIES OF ANNANDALE AND MAPLE LAKE NPDES/SDS PERMIT ISSUANCE FOR THE DISCHARGE OF TREATED WASTEWATER, and Request for Contested Case Hearing.
• Court: Minnesota Supreme Court

731 N.W.2d 502

In the Matter of the CITIES OF ANNANDALE AND MAPLE LAKE NPDES/SDS PERMIT ISSUANCE FOR THE DISCHARGE OF TREATED WASTEWATER, and Request for Contested Case Hearing.

No. A04-2033.

Supreme Court of Minnesota.

May 17, 2007.

Heard, considered, and decided by the court en banc.

OPINION

ANDERSON, PAUL H., Justice.

This appeal results from the issuance of a National Pollutant Discharge Elimination System (NPDES) permit by the Minnesota Pollution Control Agency (MPCA) for a wastewater treatment plant jointly proposed by the City of Annandale and the City of Maple Lake (the Cities). The MPCA found that the proposed plant—when operating at capacity—would increase phosphorus discharge to the North Fork of the Crow River by approximately 2,200 pounds per year over that which is discharged by the Cities' existing facilities, but the MPCA concluded that, under 40 C.F.R. § 122.4(i) (2006), this increase would not contribute to the violation of water quality standards in the Lake Pepin watershed. The MPCA reached this conclusion and issued a permit on the basis that the increased discharge would be offset by an approximate 53,500-pound annual reduction in phosphorus discharge due to an upgrade of a wastewater treatment plant in nearby Litchfield.

A divided Minnesota Court of Appeals reversed the MPCA, concluding that the phosphorus discharge from the proposed facility would violate water quality standards, and therefore issuing a permit violated 40 C.F.R. § 122.4(i). The Cities and the MPCA petitioned for review of the following issues: (1) whether a state agency's interpretation of a federal regulation that the agency is charged with enforcing and administering is entitled to deference by the courts; and (2) whether the MPCA may consider offsets from another source in determining whether a discharge causes or contributes to the violation of water quality standards under 40 C.F.R. § 122.4(i). We reverse.

The cities of Annandale and Maple Lake (the Cities) are located in Wright County, Minnesota, approximately 125 miles northwest of Lake Pepin. Annandale and Maple Lake experienced population increases of 27 percent and 44 percent respectively between 1980 and 2000. Wright County as a whole is projecting a 54 percent population increase between 2000 and 2030.

Maple Lake currently utilizes a mechanical plant for its wastewater treatment, which plant is nearing capacity. The plant discharges approximately 1,400 pounds of phosphorus annually into Mud Lake, which flows into the North Fork of the Crow River (North Fork), then into the Mississippi River, and ultimately into Lake Pepin. Lake Pepin is a naturally-occurring lake on the Mississippi River and has been identified by the Minnesota Pollution Control Agency (MPCA)¹ as impaired under the Clean Water Act. See 33 U.S.C. §§ 1251-1387 (2000). For its wastewater treatment, Annandale utilizes a pond system with spray irrigation; this system does not discharge into the North Fork or any other surface water. The existing Annandale facility is operating at capacity. The Cities' current wastewater treatment facilities are both over 40 years old. Annandale's last National Pollutant Discharge Elimination System (NPDES) permit expired on March 31, 2004. Maple Lake's last NPDES permit expired on August 31, 2005.

In late 2002, the Cities jointly developed plans for a new wastewater treatment plant. In 2003, the Cities applied to the MPCA for an NPDES permit for a single joint plant that would discharge into an unnamed tributary of the North Fork. Based on a condition imposed by the Wright County Planning Commission, which required discharge directly into the North Fork rather than the unnamed tributary, the Cities submitted an amendment to their permit application in March 2004.

The MPCA placed a draft proposed permit "on public notice" on May 10, 2004, and held a public hearing on May 27, 2004. The draft permit placed specific limits on the proposed plant's discharge, including a maximum concentration level of 1 mg/L for phosphorus and a minimum level of 6 mg/L for dissolved oxygen, as well as limits on carbonaceous biochemical oxygen demand, ammonia nitrogen, mercury, fecal coliform, pH, and suspended solids. With these limits in place, the proposed plant would discharge 3,600 pounds of phosphorus annually when it reached capacity by the year 2024. The MPCA received comments from respondent Minnesota Center for Environmental Advocacy (MCEA) and others, and responded in writing to the comments. On September 28, 2004, the MPCA held a meeting at which MPCA staff members, MCEA representatives, and members of the public discussed the draft proposed permit and the MPCA's proposed findings of fact, conclusions of law, and order.

One focus of the discussion at the MPCA meeting was the MCEA's concern that issuance of the NPDES permit would violate 40 C.F.R. § 122.4(i), which provides in part that a state may not issue an NPDES permit "[t]o a new source or a new discharger, if the discharge from its construction or operation will cause or contribute to the violation of water quality standards." The MCEA asserted that the proposed plant's increase of phosphorus discharge would necessarily cause or contribute to the violation of water quality standards in Lake Pepin. The MCEA also expressed concern that the discharge from the proposed plant would negatively affect dissolved oxygen levels in the North Fork in violation of water quality standards.²

The MPCA recommended approval of the draft NPDES permit and issued findings, including a finding that, when operated at capacity, the proposed plant would increase phosphorus discharge to the North Fork by approximately 2,200 pounds annually over that which is discharged by Maple Lake's existing plant. But the MPCA found that this increase in phosphorus discharge would be offset by an approximate 53,500-pound reduction in phosphorus discharge to the North Fork due to upgrades to the Litchfield wastewater treatment plant. Accordingly, the MPCA concluded that "[b]ecause of the net reduction in the watershed, the proposed joint Annandale/Maple Lake facility will not contribute to water quality standards violations in Lake Pepin."

Additionally, the MPCA concluded that the dissolved oxygen effect from the proposed plant would not contribute to the violation of water quality standards in the North Fork. The MPCA reached this conclusion because the section of the North Fork that is impaired for dissolved oxygen is 17.9 miles downstream from the discharge point of the proposed plant and the impairment to dissolved oxygen in a shallow river is greatest one to three miles downstream from a discharge point. On September 30, 2004, the MPCA issued the NPDES permit to the Cities.

By writ of certiorari to the court of appeals, the MCEA challenged the MPCA's decision to issue the NPDES permit. The MCEA argued to the court of appeals that (1) no deference should be given to the MPCA's interpretation of 40 C.F.R. § 122.4(i); (2) 40 C.F.R. § 122.4(i) prohibits the issuance of a NPDES permit before a total maximum daily load (TMDL)³ is established; (3) the MPCA's conclusion that the proposed plant would not contribute to violation of water quality standards in Lake Pepin was erroneous; and (4) the MPCA's finding that increased carbonaceous biochemical oxygen demand and phosphorus from the proposed plant would not contribute to the North Fork's dissolved oxygen impairment is not supported by substantial evidence.

A divided court of appeals reversed in a published opinion. In re Cities of Annandale & Maple Lake NPDES/SDS Permit Issuance (Cities of Annandale & Maple Lake), 702 N.W.2d 768, 770 (Minn.App. 2005). The court concluded that no deference is given to a state agency's interpretation of a federal regulation because the interpretation of a federal regulation is a question of law that is reviewed de novo. Id. at 771. The court then rejected the MCEA's argument that 40 C.F.R. § 122.4(i) precludes issuance of an NPDES permit before a TMDL is completed, concluding that the absence of a TMDL does not necessarily prevent the issuance of a permit even though a TMDL has not been established.⁴ 702 N.W.2d at 773. The court further concluded that the MPCA "was not barred as a matter of law from issuing a permit because of the impact of the Cities' proposed plant on dissolved-oxygen levels in the North Fork." Id. at 773-74. But the court of appeals held that "[b]ecause the discharge from the Cities' proposed plant would contribute to the impairment of Section 303(d) waters," the MPCA "erred by issuing a permit in violation of 40 C.F.R. § 122.4(i)." 702 N.W.2d at 776. In reaching its holding, the court apparently used "the impairment of Section 303(d) waters" interchangeably with "violation of water quality standards." It also appears that the court concluded that the proposed 2,200-pound increase in phosphorus discharge over what is currently discharged by the Maple Lake plant would necessarily "contribute to the impairment of" impaired waters, regardless of significant reductions in phosphorus discharge elsewhere in the watershed.⁵

The court of appeals' dissent concluded that "when reviewed with the deference properly accorded agency actions on review by this court, the [M]PCA's interpretation of the regulation and its decision to grant the permit were reasonable and consistent with the purposes and principles of the [Clean Water Act]." 702 N.W.2d at 776 (Schumacher, J., dissenting). The dissent concluded that "judicial deference, rooted in the separation of powers doctrine, is extended to an agency decision-maker in the interpretation of statutes that the agency is charged with administering and enforcing." Id. at 777 (citations omitted). The dissent further concluded that a "reasonableness" standard should be applied by a court reviewing the MPCA's decision to issue an NPDES permit, and that the MPCA's decision was reasonable and should have been...