ELR Citation: ELR 20950
No(s). s. 90-70671, 91-70200 (9th Cir. Jun 4, 1992)

The court, in granting partial relief to an environmental organization challenging the U.S. Environmental Protection Agency's (EPA's) recent Federal Water Pollution Control Act (FWPCA) storm water discharge rule, holds that EPA's failure to include deadlines for approving or denying point source permits and complying with FWPCA §402(p) is arbitrary and capricious. FWPCA §402(p), as amended in 1987, established deadlines by which certain stormwater dischargers must apply for permits and EPA or states must act on permits, and a moratorium on permitting requirements for most stormwater discharges. In response to the 1987 amendments, which set up a new scheme for regulating stormwater runoff and required EPA to issue permit application requirements for stormwater discharges associated with industrial activities and large municipalities, EPA issued final rules almost two years after the statutory deadline. Further, the rules EPA promulgated set no date for final EPA or state approval or denial of applications from municipal or industrial dischargers, nor for compliance by these regulated entities.

The court first holds that the environmental organization's request for declaratory relief is ripe for review. EPA's regulations are final, and whether EPA is bound by the FWPCA statutory scheme is a legal question. Moreover, no equitable factors militate against awarding declaratory relief. The deadlines Congress set for the agency are not aspirational, and EPA's failure to abide by them is unlawful. However, the court refuses to enjoin EPA from further extensions for permit applications from municipal and industrial dischargers. Courts must operate on the assumption that an agency will follow the dictates of Congress and the courts, and EPA does not have the authority to predicate future rules or deadlines in disagreement with this opinion.

The court next holds that EPA's failure to include deadlines for final approval and compliance in its rules is an arbitrary and capricious exercise of its responsibility to issue regulations pursuant to the FWPCA. EPA, without further delay, must issue such regulations to inform the regulated community of the FWPCA's outside dates for compliance. The court next holds that because the temporary statutory exemption under the amended FWPCA for all stormwater sources does not expire until October 1, 1992, regulation of small stormwater sewer systems (those serving a population of less than 100,000) prior to expiration of the moratorium is not required. Even if EPA is not proceeding so that such regulations will be in place when the moratorium expires, the FWPCA prohibits subjecting small systems to the same permitting schedule applicable to medium systems to assure that they are regulated when the moratorium expires. The court further holds that although EPA's delay in promulgating the deadlines is unlawful, it is not unreasonable for the Agency to require medium municipal system applications to be due six months after the applications for large municipal systems. Congress originally placed medium systems on a staggered permitting schedule to start two years after the large systems and industrial users.

The court next upholds as reasonable EPA's definition of "municipal separate storm sewer system" used in the November 1990 regulations. Although EPA used factors to define large and medium municipal separate storm sewer systems serving a population of a specified size that were not used in the general definition of "municipal separate storm sewer," the Agency took into account many issues and concerns of the regulated community and a rational connection exists between the facts found and the choices made. EPA's use of places that are "incorporated" as one factor is not arbitrary and capricious or inconsistent with the FWPCA. EPA proceeded on the reasonable assumption that cities possess the police powers needed to control effectively land use within their borders. Further, EPA's inclusion of storm sewers in unincorporated urbanized areas of counties with requisite populations, but exclusion of storm sewers in incorporated places with populations under 100,000 within those counties, has a legitimate statutory basis and is reasonable. As amended, the FWPCA prohibits EPA from requiring permits for systems serving under 100,000 prior to expiration of the moratorium. Moreover, EPA's use of 1980 census data, rather than 1990 census data, was not arbitrary and capricious, because the 1980 census data was the most widely available data at the time of rule formulation and promulgation. Finally, the court holds that EPA was reasonable in using agency work load as one factor in arriving at its definition of "municipal separate storm sewer systems serving" a designated population.

The court next holds that EPA's exclusion of various types of "light industry" from the definition of "discharge associated with industrial activity" is impermissible. Under FWPCA §402(p)(2)(B), a "discharge associated with industrial activity" is an exception to the permit moratorium, but EPA's rule distinguishes between light and heavy industry and considers actual exposure to industrial materials. Thus, EPA considers actual exposure to certain materials or stormwater for the light industry categories, but does not consider actual exposure for the other industrial categories. The brief discussion of this issue in the legislative history reveals that Congress intended to exclude only those facilities or parts of a facility that are completely nonindustrial from the permit requirement for discharges that come in contact with industrial materials. However, EPA applies the statutory definition differently depending on the type of industry in question. Thus, for light-industry categories, stormwater must actually be exposed to raw materials, byproducts, or waste before permitting is required. The court holds that to exempt light industries from the normal permitting process based on an unsubstantiated assumption that industrial activity in light industries will take place indoors is arbitrary and capricious. Although the FWPCA set up an "actual exposure" approach for the oil, gas, and mining industries, to require actual exposure in the light-industry category would shift the burden in the permitting scheme and allow light industries to forgo applying for permits unless they report actual exposure, or EPA searches out the sources and shows that exposure is occurring.

The court next holds that EPA's rationale for increasing the acreage limit from one to five acres for construction sites subject to stormwater permitting is arbitrary and capricious. EPA cites no information to support its perception that construction activities on less than five acres are nonindustrial. Moreover, EPA cannot know whether exempting sites of less than five acres will have only a de minimis effect due to the lack of data, and the de minimis claim is contradicted by EPA's admission that even small construction sites can have a significant impact on local water quality. The court also holds that EPA's use of reportable quantities (RQs) as the only test for contamination of runoff from oil and gas stormwater dischargers is not inconsistent with the FWPCA. The legislative history reveals that Congress gave the EPA Administrator discretion to determine when contamination has occurred with respect to overburden, raw materials, waste products, and other substances listed in the statute, and reliance by EPA on RQs in measuring contamination for oil and gas facilities is not arbitrary and capricious.

The court further holds that EPA's stormwater discharge control regulations satisfy the requirements mandated by the 1987 amendments for municipal stormwater discharges. Although the 1987 amendments retained the existing, stricter controls for industrial stormwater dischargers and prescribed new controls for municipal stormwater discharge, Congress did not mandate a minimum-standards approach or specify that EPA develop minimal performance requirements. Finally, the court holds that EPA's two-part group permit application process for industrial dischargers is not invalid because it fails to provide for notice and comment. EPA approval of the first part of a group application for an industrial discharger is not a rule requiring notice and comment. That decision is focused on the specific factual question whether the application adequately designates a representative smaller group subject to the more extensive data-gathering requirements in the second part of the application.

Counsel for Petitioner
Robert W. Alder
1350 New York Ave. NW, Ste. 300, Washington DC 20005
(202) 783-7800

Counsel for Respondent
David S. Goodman
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Before Pregerson and O'Scannlain, JJ.