The federal Clean Water Act (CWA) requires that states review all federal permits involving water discharges to certify that those permits do not conflict with state water quality standards (WQS). 33 U.S.C. § 1341. The statute further provides that if a State “fails or refuses to act on a request for certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request, the certification requirements of this subsection shall be waived with respect to such Federal application.” Id. For pipeline projects, this ‘Section 401’ authority was not historically a significant issue, as most federal permits already anticipated and ensured compliance with state WQS. In recent years, however, opponents of new or expanded pipeline projects have sought to use Section 401 as an additional point of challenge, seeking to stop or delay pipeline project permitting. In a decision issued just last week – although not in a pipeline case – the D.C. Circuit provided the most recent clarification on the issue, admonishing states that the one year timeframe is “absolute.” Hoopa Valley Tribe v. FERC, No. 14-1271 (D.C. Cir., Jan. 25, 2019).
In some of the prior Section 401 cases, states intentionally delayed their review of Section 401 applications, or claimed they needed more information. Constitution Pipeline Co., LLC v. New York State Dep’t of Envtl. Conservation, 868 F.3d 87 (2d Cir. 2017). In other cases, states simply failed to act in a timely manner. In all such cases, representatives of all sides sought judicial relief on how to properly interpret the Section 401 obligation. New natural gas pipelines must obtain a Certificate of Public Necessity from the Federal Energy Regulatory Commission (FERC), which entails having FERC confirm that required Section 401 certifications have been issued. Thus, where gas pipeline projects are concerned – or hydroelectric licensing, which also requires FERC approval – Courts have required FERC to rule on the validity of a Section 401 certificate before undertaking further judicial review. Millenium Pipeline Co. v. Seggos, 860 F. 3d 696 (D.C. Cir. 2017) and Constitution.
In order to provide more time for review (or delay), some states have encouraged Section 401 applicants to ‘withdraw and re-submit’ their application every year. This practice allows the state more time to decide, usually stating as rationale the need for more information. The practice has allowed applicants in some circumstances to avoid an adverse decision by a state. On January 25, 2019, the D.C. Circuit ruled in Hoopa Valley Tribe that the practice of ‘withdraw and re-submit’ Section 401 applications every year is not permissible under the CWA. The Court based its decision on the plain language of the statute, requiring states to make decisions on Section 401 applications “within a reasonable period of time (which shall not exceed one year).” 33 U.S.C. § 1341(a)(1).
Although this decision involved hydroelectric project licensing under FERC, the decision affects other cases requiring Section 401 certification, including pipeline projects. The decision also serves as another reminder by the courts of the statutory requirement that if states fail to rule on 401 Water Quality Certificates within a year from receipt of an application, they have waived their authority to do so. See, e.g., Millenium Pipeline Co. v. Seggos, 860 F. 3d 696 (D.C. Cir. 2017); Constitution Pipeline Co., LLC v. New York State Dep’t of Envtl. Conservation, 868 F.3d 87 (2d Cir. 2017). The Court in Hoopa Valley Tribe emphasized that it “has repeatedly recognized that the waiver provision was created ‘to prevent a State from indefinitely delaying a federal licensing proceeding.’” Hoopa Valley Tribe at 12 (citing Alcoa Power Generating Inc. v. FERC, 643 F.3d 963, 972-73 (D.C. Cir. 2011); Millenium Pipeline, 860 F.3d at 701-02).
Section 401 has created considerable controversy for oil and natural gas pipeline projects in recent years. This most recent case may add more clarity, while other issues remain undecided including the meaning of waiver and when an application is considered “complete.” The Administration is suggesting it may issue an Executive Order to address the issue, however, and Congress may consider an amendment regarding Section 401 and other CWA issues this session. In short, it is prudent to continue to monitor Section 401 issues.