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Split Second Circuit Panel Invokes Chevron Doctrine, Reverses Southern District and Reinstates EPA's Water Transfers Rule

In a 2-1 ruling, the Second Circuit reversed Southern District Judge Kenneth Karas, who had found that the U.S. Environmental Protection Agency's (EPA) "Water Transfers Rule" was an unreasonable interpretation of the Clean Water Act. Writing for the majority and leaning on the EPA's reasoning, Circuit Judge Robert Sack wrote that the "Water Transfers Rule is based on a reasonable interpretation of the Clean Water Act and therefore entitled to Chevron deference."

A "water transfer" is an activity that "conveys or connects waters of the United States without subjecting those waters to any intervening industrial, municipal or commercial use." Judge Sack noted, for example, that New York City's water supply system, which moves water to the City from various upstate reservoirs, is considered a "water transfer." The EPA's Water Transfers Rule, which was promulgated in 2008, allows water to be transferred between basins without a National Pollutant Discharge Elimination System (NPDES) permit, even if the water being transferred is polluted. In taking this position, the EPA noted in an August 2005 legal memorandum that Congress "did not intend for water transfers to be subject to the NPDES permitting program." To that end, the Rule provides that water transfers "do not require NPDES permits because they do not result in the 'addition' of a pollutant." The EPA reasoned that even if water is transferred in which pollutants are present, "it does not result in an 'addition' to 'the waters of the United States,' because the pollutant is already present in 'the waters of the United States.'"

Plaintiffs in Catskills Mountains Chapter of Trout Unlimited et al. v. Environmental Protection Agency (Catskill III), case no. 14-1823, consist of various states and environmental groups who unsuccessfully argued that the Water Transfers Rule "is not the interpretation best designed to achieve the [Clean Water] Act's overall goal of restoring and protecting the quality of the nation's water." Judge Sack conceded that the EPA's interpretation of the Clean Water Act in promulgating the "Water Transfers Rule" might not be entirely "consistent with what appears to us to be the most prominent goals of the Clean Water Act." Nevertheless, the Second Circuit panel invoked the Chevron Doctrine and determined that as long as the EPA's "statutory interpretation is reasonable, what we might prefer is irrelevant."

In concluding that the EPA's interpretation of the Clean Water Act was reasonable, Judge Sack noted that "the Rule is supported by several valid arguments - interpretive, theoretical, and practical." The Second Circuit majority found that the EPA's justification for the Rule was also supported by a statutory purpose because, according to the EPA, "Congress intended to leave primary oversight of water transfers to state authorities in cooperation with Federal authorities." One observation made by the EPA, which Judge Sack found reasonable, was that "subjecting water transfers to NPDES permitting could affect states' ability to effectively allocate water and water rights."

Dissenting Judge Denny Chin agreed with the district court, noting that the Rule and majority's decision to defer to the EPA is "incompatible with the goal of the [Clean Water] Act to protect our waters...because" it could "lead to the absurd result that the transfer of water from a heavily polluted, even toxic water body to one that was pristine via a point source would not constitute an 'addition' of pollutants and would not be subject to the [Act]'s NPDES permit requirements."

Catskills Mountains Chapter of Trout Unlimited et al. v. Environmental Protection Agency, Case No. 14-1823, U.S. Court of Appeals for the Second Circuit.

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