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Over the past few years, certain states have relied on ambiguities in the Clean Water Act (CWA) Section 401 water quality certification process to block the construction of significant energy infrastructure projects (e.g., oil and gas pipelines, coal export facilities, and liquid natural gas [LNG] terminals) determined by federal agencies to be in the public interest of individual states, regions, and the nation as a whole. Consistent with the cooperative federalism structure of the CWA—and the important role of states in protecting water quality within their borders—Section 401 requires applicants for a federal license or permit anticipated to result in discharges to navigable waters to obtain a certification from the relevant state that the discharge will comply with applicable state water quality standards. States can waive this requirement, and if they do not act within “a reasonable period of time (which shall not exceed one year) after receipt” of the request for the certification, waiver is automatic. 33 U.S.C. § 1341(a).

Contrary to the plain language of the CWA, projects have been derailed or significantly delayed when states exceed the statutory one-year time limit for certification or deny certification for reasons unrelated to water quality, such as a project’s potential downstream greenhouse gas emissions. Some recent examples include the following:

• New York denied certification for the Constitution natural gas pipeline project nearly three years after receiving the project’s initial application and after Constitution withdrew and resubmitted its request for certification twice.
• New York also denied certification for the Millennium Valley Lateral natural gas pipeline project based on downstream greenhouse gas emissions.
• The State of Washington denied certification for the Millennium Bulk Terminal, a coal export facility, over five years after the applicant’s initial request and just three days after the company submitted 240 pages of additional information.
• After receiving numerous responses to requests for additional information, the State of Oregon denied certification for the Jordan Cove LNG export terminal and Pacific Connector Pipeline.

With these scenarios in mind, on April 10, 2019, President Trump issued Executive Order (EO) 13868, Promoting Energy Infrastructure and Economic Growth, which directs EPA to clarify the certification process and revise its outdated regulations. EPA’s existing regulations were promulgated in 1971 and designed to implement an earlier version of the certification requirement that was included in the pre-1972 version of the CWA. On August 22, 2019, in accordance with the EO, EPA published a proposed rule updating and clarifying its regulations to ensure that Section 401 is implemented consistent with the statutory principles and purpose of the CWA. See 84 Fed. Reg. 44,080. The proposed rule seeks to establish important limits on the state role in the certification process, allowing state regulatory experts to focus their time and efforts on the limits of their expertise—preservation of state water quality—and not on extraneous factors outside of their domain and beyond that intended by the CWA. The proposed regulatory changes, if finalized, would provide additional regulatory certainty for project proponents and state certifying agencies, reducing costs and delays, saving taxpayer dollars and allowing states to more effectively deploy their resources.

Key Aspects of EPA’s Proposed Rule

The proposed rule would make a number of key clarifications, including:

• The time period for state review begins with receipt of a “certification request”—a term defined by the proposed rule—and not when a state deems the request valid or complete.
• The CWA does not guarantee that a state or tribe may take a full year to act on a request for certification; a state must act within a reasonable period of time (which may be established by the federal permitting authority on a case-specific basis).
• If the state does not act within the established reasonable timeframe, federal permitting agencies may determine that the certification requirement has been waived and issue the federal permit or license.
• The scope of the state’s review and the scope of the certification is limited to assuring that the “discharge” from the permitted activity will comply with water quality requirements, an analysis that does not include matters unrelated to water quality or consideration of other aspects of the applicant’s activity as a whole.
• To deny certification, a state must identify the specific water quality requirement with which the project will not comply, explain why the proposed project will not comply, and specify what data are needed to assure the discharge would comply.
• The federal permitting agency may review certification conditions and exclude any condition that exceeds the scope of certification or does not meet the proposed justification requirements.

Proposed Water Quality Certification Process

Under EPA’s proposed changes, the water quality certification process would follow the sequence outlined in the flow chart, below.

[caption id="attachment_1853" align="aligncenter" width="607"] Proposed 401 WQC Review Process Flowchart[/caption]

Next Steps

Public comments on EPA’s proposed rule were due October 21. According to regulations.gov, as of October 30, over 100,000 comments have been received, and, each day, EPA continues to upload additional comments to the online docket. In accordance with the Administrative Procedure Act,

EPA is required to review and respond to such comments in issuing the final rule. Pursuant to EO 13868, EPA is directed to issue a final rule by May 2020. This is an ambitious timeline; however, EPA has met the other deadlines established by the EO and is likely to invest significant resources in reviewing public comments, preparing a robust response to those comments, and issuing final regulations by the deadline.