More on NAHB v. Def. of Wildlife

The following is by Joe Vuckovich, a summer associate at Akin Gump and a student at NYU Law School.

If a state hopes to take over administration of water pollution permits within its jurisdiction, and if it meets the nine criteria specified by the Clean Water Act (CWA) for doing so, may the EPA nonetheless hold back its permission if it concludes that the state will not adequately protect endangered and threatened species?

When the core question in National Association of Home Builders v. Defenders of Wildlife is stated this way, it isn’t hard to see why other opinions from the Court’s most recent term have garnered greater attention. Yet the case presents complex problems of statutory interpretation and administrative law, and it has profound implications for our ongoing effort to balance the interests of developers, homeowners, conservationists, and wildlife. In upholding EPA’s transfer of authority over water pollution to Arizona regardless of possible effects on endangered species, the Court today has limited the reach of the Endangered Species Act (ESA) and eliminated a major regulatory hurdle for developers.

Under CWA, the EPA may issue permits that allow discharge of identified pollutants into waterways. This program, known as the National Pollution Discharge Elimination System (NPDES), represents the most important administrative implementation of the CWA’s standards for water safety and quality. Under the statute, states are free to adopt their own equivalents of NPDES, and indeed most have already done so. CWA provides that the EPA “shall” transfer permit-issuing authority to a state if it meets nine statutory criteria which, taken together, establish that the state has authority under its own laws to administer an NPDES-type system. Unfortunately for Arizona, whose application for permit authority gave rise to this litigation, Section 7(a)(2) of another landmark environmental statute, the ESA, mandates that each federal agency “shall,” through consultation with the Secretary of the Interior, “insure that any action authorized, funded or carried out by such agency…is not likely to jeopardize” an endangered or threatened species, or the species’ habitat. Accordingly, EPA checked with the Fish and Wildlife Service, which raised concerns about possible harm to endangered species following permit authority transfer to Arizona. EPA then took the position that it could use only the nine CWA criteria to decide whether to transfer permitting authority. On this view, if EPA finds that all nine criteria are satisfied, authority transfer becomes entirely non-discretionary. EPA reasoned (and the FWS eventually agreed) that, following an authority transfer that it had no discretion to deny, it could not be found a legally relevant cause of any harm to endangered species.

Defenders of Wildlife petitioned the Ninth Circuit for review. Faulting EPA for its seemingly inconsistent stances on its ESA obligations and for adopting what was, in the court’s view, an incorrect reading of the species statute, the Ninth Circuit held that EPA’s actions were arbitrary and capricious. Both EPA and the National Association of Homebuilders filed petitions for certiorari, which the Supreme Court granted and consolidated for argument.

Depending on how you read the statutes, their two “shalls” may well conflict, and the EPA and Defenders of Wildlife have taken different positions on how the conflict should be resolved. In its brief and at oral argument, EPA asserted that the ESA’s so-called “no-jeopardy” provision only applies to discretionary actions. The agency reads CWA to mandate approval of a state’s application if the state has met only CWA’s nine criteria – without regard to any further restrictions imposed by the ESA, including the “no-jeopardy” requirement. At this point, consultation with the relevant Interior agency either becomes a formality or simply isn’t required. EPA took the latter position in its brief and conceded the former at oral argument, agreeing with Chief Justice Roberts that the agency has characterized ESA consultation as, in the Chief’s words, “a waste of time.”

That’s one way to avoid a conflict between these two federal statutes. But according to Defenders of Wildlife – and, more importantly, to the Ninth Circuit – it’s not the correct way. The Ninth Circuit held that EPA’s need to “authorize” Arizona’s application was, by itself, sufficient to trigger the no-jeopardy requirement from the ESA. As the Ninth Circuit put it, “compliance with a ‘complementary’ statute cannot relieve the EPA of its obligations” under the ESA. In its brief and at oral argument, Defenders of Wildlife brought out a more forceful version of this same point, characterizing the ESA provision at issue as a “flat ban” on agency action that could harm endangered species or their habitats and noting that the ESA creates a process for resolving conflicts between this ban and agency action under other statutes. (For more on these and other facts and issues, see our previous coverage here).

The Court granted certiorari with respect to the two issues at the heart of the Ninth Circuit opinion. The first is whether EPA’s apparently inconsistent reasoning — that 7(a)(2) consultation is required but that authority transfer is based only on CWA criteria — makes its decision to transfer arbitrary and capricious. The second concerns the correct interpretation of § 7(a)(2): does it apply even to otherwise non-discretionary agency actions?

After pausing briefly to scold the Ninth Circuit for deciding the merits of the statutory interpretation issue rather than remanding to EPA for clarification, the Court, in an opinion written by Justice Alito and joined by the Chief Justice and Justices Scalia, Kennedy, and Thomas, held that EPA’s decision was not arbitrary and capricious. The Court noted that apparently inconsistent reasoning is not, by itself, enough to invalidate agency action under the “arbitrary and capricious” standard. Moreover, EPA’s “stray statement” that consultation was required could not, in itself, have had any effect on the challenged action. The error, if there was one, was harmless.

On the statutory interpretation issue, the Court held that authority transfer is non-discretionary if the CWA criteria are met and that a regulation promulgated by the relevant agencies appropriately harmonizes the two environmental laws. “By its terms,” the Court explained, “the statutory language is mandatory and the list exclusive; if the nine specified criteria are satisfied, the EPA does not have the discretion to deny a transfer application.” Three key points drove the Court’s reasoning. First, the interpretation of § 7(a)(2) advanced by Defenders of Wildlife would amount to an implied repeal of CWA insofar as it withdraws the water statute’s mandate of approval if the nine factors are met and substitutes a new regime in which species conservation effectively becomes a tenth criterion. As the Court pointed out, its current jurisprudence strongly disfavors implied repeals. Second, echoing a concern raised by Chief Justice Roberts at oral argument, the Court reasoned that a contrary reading would override or modify every other federal law. By representing a decision to avoid “the implicit repeal of many additional otherwise categorical statutory commands,” this point is really a corollary of the first. Third, 50 CFR § 402.03, a regulation promulgated by the FWS and the National Marine Fisheries Service, is a reasonable clarification of the relationship between the ESA and CWA and, as such, should receive Chevron deference. The regulation declares § 7(a)(2) of the ESA to be applicable to all “actions in which there is discretionary Federal involvement or control” (emphasis added). This, the Court reasoned, resolves an apparent conflict between the two statutes by giving effect to the broad ESA mandate when – but only when – no other statute makes agency action mandatory. Moreover, the regulation is a “permissible construction” of the statutes at issue because it implements both while avoiding an implied repeal of the CWA. To support what it described as “the reasonableness of the FWS’s interpretation of § 7(a)(2) as reaching only discretionary agency actions,” the Court also cited its holding in Department of Transportation v. Public Citizen: an agency is not the legal cause of an action it was required to take, Finally, the Court distinguished TVA v. Hill, the famous “snail darter” case in which it held that there are no exceptions to § 7(a)(2); in the majority’s view, Hill applies only to discretionary agency actions and left unresolved the relationship between non-discretionary actions and § 7(a)(2) mandates.

In dissent, Justice Stevens, joined by Justices Souter, Ginsburg, and Breyer, flatly rejected the Court’s attempt to limit § 7(a)(2) to discretionary agency action. In his view, TVA v. Hill provided the framework for ESA interpretation and controlled the outcome of this case. According to TVA, § 7 “admits of no exception”; moreover, Congress considered and rejected qualifying language before passing § 7 in its current form. Based on TVA and on the statutory text, Justice Stevens argued that the majority erroneously read an exception for discretionary actions into § 7(a)(2). Justice Stevens also sharply criticized the majority’s reading of 50 CFR § 402.03. Whereas the Court construed § 402.03 as applying only to discretionary agency actions, Justice Stevens noted that “the word ‘only’ is the Court’s addition to the text, not the agency’s…If the drafters of the regulation had intended such a far-reaching change in the law, surely they would have said so by using language similar to that which the Court uses today.” Finally, he takes issue with the majority’s according Chevron deference to EPA’s interpretation. In Justice Stevens’s view, Chevron applies only to agency interpretations of the statutes they administer; here, the Departments of the Interior and of Commerce, not EPA, administer the ESA.

Justice Breyer also dissented separately, observing that many statutes provide apparently exhaustive criteria to guide agency decision making and that it was precisely for this reason that Congress had to pass the ESA. On his view, the ESA provides agencies with authority to cite species conservation as a reason for actions which they had no power to take under the pre-ESA statutory regime. Thus the CWA’s “shall” language and enumeration of factors do not remove EPA’s discretion to deny permit authority on species survival grounds. Justice Breyer’s analysis does not suggest a limiting principle and thus remains open to the majority’s concerns about the scope of the ESA.

In the end, and although the dissenters score some good points, Justice Alito’s opinion is tightly reasoned and enjoys the unqualified support of four other justices. For the foreseeable future, National Association of Home Builders will thus govern apparent conflicts between Section 7 of the ESA and other federal statutes.