Vessels Required to Meet State as Well as Federal Permit Conditions for Incidental Wastewater Discharges

Dealing a blow to industry hopes for uniformity, the D.C. Circuit recently denied a challenge to the inclusion of state-specific conditions for “incidental” wastewater discharges, along with nationwide conditions, in EPA’s Vessel General Permit (VGP). EPA finalized the VGP in December 2008. For information regarding the scope and history of the VGP, see Battle of the Bilge: EPA Issues Draft NPDES Permits for Incidental Boat Discharges; EPA General Permit for Ballast Water Discharge Goes Into Effect. The Clean Water Act’s (CWA) § 401 certification process allows states to impose their own requirements for vessels operating within state waters. In Lake Carriers’ Association v. EPA,[1] members of the shipping industry argued that EPA violated procedural laws by including the requirements in its final permit without receiving and considering comments regarding the impact of the requirements on the shipping industry. The court denied the challenge, holding that EPA lacks the ability to alter or reject state certification conditions. As a result, vessels which operate in multiple jurisdictions are forced to comply with potentially conflicting conditions specific to each state that they travel through.

Background

Under the CWA, a National Pollutant Discharge Elimination System (NPDES) permit is required for discharges of any “pollutant” from a “point source,” including a “vessel or floating craft,” into navigable waters of the United States.[2] The term “pollutant” includes “biological materials.”[3] EPA initially excluded “incidental discharges” from boats from the permitting requirements of the NPDES program,[4] but developed the VGP in 2008 under court order.

The term incidental discharges encompasses a range of wastewater discharges from boats during normal operations. For example, “grey water” is water than has been slightly used, such as water from laundry or bathing. “Bilge water” is water that collects on the inside of a vessel and is pumped out. “Black water” is sewage. Also included in the definition is “ballast water,” which has been the focus of the dispute regarding incidental vessel discharges for some time. Ballast water is water that a vessel takes in and/or releases to compensate for changes in the vessel’s weight as cargo is loaded or unloaded, or as fuel and supplies are consumed. As a vessel travels, it can inadvertently bring on board aquatic organisms in ballast water from one port, then release those same organisms at another port, where they are not native and can cause environmental harm. The zebra mussel is probably the most publicized example of an invasive species whose inadvertent introduction to U.S. waters has caused unintended harm. In the Pacific Northwest, fish and wildlife agencies are particularly concerned about the introduction of invasive aquatic species such as smooth cordgrass, Oyster drill, European green crabs, non-native tunicates, and zebra mussels, all passengers in ballast water.

Environmental petitioners and, eventually, intervening states[5] challenged the regulation exempting incidental vessel discharges nearly thirty years after the regulation took effect. The Northern District of California vacated EPA’s exemption for incidental discharges in decisions issued in 2005 and 2006, holding that the exemption exceeded EPA’s authority under the CWA and that a permit is necessary for all vessel discharges that had been exempted by EPA’s regulation, including ballast water, gray water, bilge water, deck runoff, and black water.[6] In 2008, the Ninth Circuit affirmed the district court’s decision.[7] In light of the significant impact of the decision on the national shipping industry and regulatory agencies, the court granted EPA a stay of its decision vacating the regulation until February 6, 2009 to allow EPA time to implement a permit for vessel discharges.

EPA responded by developing the VGP, which it issued in December 2008.[8] Beginning February 6, 2009, all non-exempt vessels operating as a means of transportation that discharge ballast water or other incidental discharges into waters of the United States were required to seek coverage under the VGP.[9] The VGP establishes non-numeric effluent limits and a range of best management practices for twenty-six types of incidental discharges. The permit also incorporates U.S. Coast Guard requirements for ballast water management and exchange, sets specific requirements for ballast water exchanges for certain vessels, and sets training, documentation, and reporting requirements for vessels equipped with ballast water tanks.[10]

The 401 Certification Issue

Under CWA § 401, EPA cannot issue a permit or license for an activity that may result in a discharge to U.S. waters until the state (or tribe/territory) where the discharge would take place has granted or waived § 401 certification. A state may grant, grant with conditions, deny, or waive certification of a federal permit, depending on whether the discharge would comply with applicable requirements of local law.[11] The certification requirements were not included in the draft VGP. When EPA issued the final VGP, vessel owners and operators learned that they would be required to comply with not only the federal conditions, but also approximately 100 state-specific conditions, some of which could potentially conflict.

The Lake Carriers’ Decision

The Lake Carriers’ case involved consolidated claims of trade associations representing commercial ship owners and operators challenging the approximately 100 certification conditions included in the final VGP. The petitioners argued that EPA’s process for finalizing the VGP with the certification procedures violated the Administrative Procedure Act (APA) and related procedural law. The court rejected these claims, holding that the petitioners waived several of their arguments by failing to object properly during the notice and comment period on the draft VGP and that they failed to establish that additional agency procedures “would have had any effect on the final permit.”[12]

The petitioners raised three primary challenges, all of which the court dismissed for similar reasons. First, the petitioners argued that EPA failed to provide notice and an opportunity to comment on the state certification procedures. Although EPA opened up the draft VGP for public comment, it did not contain the multiple substantive certification requirements appended to the final permit. This omission, the petitioners argued, “deprived [them] of the opportunity to comment regarding the potential conflicts and burdens created by the cumulative effects of the state conditions.”[13]

The court initially rejected EPA’s argument that it need not provide notice and comment on the certifications, because the public comment provisions in CWA § 401 are specific to state procedures. The APA, according to the court, provides the floor for the public process of federal agencies. However, the court agreed with EPA that the petitioners failed to show that additional notice and comment “would have served any purpose,” because EPA lacked authority to amend or reject the state certifications.[14] The court rejected the petitioners’ argument that CWA § 401 requires EPA to handle certifications for permits covering mobile point sources with discharges in multiple states as an inaccurate interpretation of the statutory language. The court seemed initially persuaded by EPA’s response that the statutory language refers to discharges in multiple states, as opposed to here where the certifications only apply to discharges in a particular state’s waters, despite the fact that vessels frequently move across state lines. However, the court declined to address the merits of this issue, holding that the petitioners waived the argument by failing to raise it with EPA in the administrative process.

In response to EPA’s assertion that it lacked authority to amend or reject the state certifications, the petitioners raised various constitutional challenges, touching on due process and the dormant commerce clause, that EPA allegedly failed to consider before finalizing the VGP. The court rejected these claims, noting that the petitioners failed to argue that the CWA itself is unconstitutional, show that compliance with the certification conditions is literally impossible, or that EPA did anything other than carry out its obligations under CWA § 401 to implement state certification conditions. Concluding that EPA accurately recognized its inability to “amend or reject conditions in a [state’s] CWA 401 certification,” the court stated that “providing notice and an opportunity for comment on the state certifications would have served no purpose, and we decline to remand to require EPA to do a futile thing.”[15]

Second, the petitioners argued that EPA violated the APA by failing to consider the likely “serious problems” that the state certification procedures would present for vessel operators that move from state to state. In the court’s view, EPA adequately responded to these comments by stating, as it argued before the court, that the CWA does not allow EPA to create a “single nationwide system” that fails to “accommodate the states’ ability to include state-specific requirements to implement their own water quality standards.”[16] Having concluded that EPA correctly acknowledged and expressed its inability to change or reject the certification conditions despite potential challenges that the conditions would present to operators, the court held that further consideration of the certification conditions or response to the comments was unnecessary.

Finally, the petitioners argued that EPA violated the Regulatory Flexibility Act (RFA) by failing to consider the costs that small businesses would face by attempting to comply with the certification conditions in the VGP. In its federal register notice, EPA certified under the RFA that the VGP “is not likely to have a significant economic impact on a substantial number of small entities.”[17] This analysis, according to the petitioners, was arbitrary and capricious, because it failed to consider the costs of complying with the state certification conditions. Although the court agreed that EPA did not consider these costs, the court held that the petitioners waived this argument by failing to raise the issue in its comments on the draft VGP, where EPA made clear that it did not intend to consider such costs.

In recognition of the practical and financial concerns that the petitioners likely face given the range and number of certification conditions, the court opined on the remaining options available to the petitioners:

If they believe that the certification conditions imposed by any particular state pose an inordinate burden on their operations, they may challenge those conditions in that state’s courts. If they believe that a particular state’s law imposes an unconstitutional burden on interstate commerce, they may challenge that law in federal (or state) court. And if neither of these avenues proves adequate, they are free to ask Congress to amend the CWA, perhaps by reimposing the exemption for incidental vessel discharges.[18]

It remains to be seen whether regulated parties will pursue any of these options. For now, parties will be required to design their vessels and manage their operations in a way that encompasses the specific requirements for each jurisdiction in which they travel.

For more information regarding this article, please contact Meline MacCurdy or any member of Marten Law’s Water Quality practice group.