Justia Federal District Court Opinions

In these consolidated appeals, appellants challenge certain actions of the U.S. Environmental Protection Agency (EPA) in issuing a discharge permit pursuant to the National Pollutant Discharge Elimination System (NPDES) of the Clean Water Act, 33 U.S.C. Sec. 1342. We review EPA's action pursuant to our authority under 33 U.S.C. Sec. 1369(b)(1) and reverse.

OVERVIEW

The city of Fayetteville, Arkansas, applied to EPA for an NPDES permit for a new municipal wastewater treatment plant. Fayetteville proposed to discharge treated wastewater via a split flow into the White River in Arkansas and into Mud Creek, a tributary of the Illinois River, an Arkansas-Oklahoma interstate stream. The State of Oklahoma and a nonprofit group, Save The Illinois River (STIR), requested denial of the permit. The State of Arkansas and the Oklahoma parties requested an evidentiary hearing on EPA's issuance of the permit. A hearing request was granted in part and denied in part by an Administrative Law Judge (ALJ), and the partial denial was upheld by the EPA Administrator acting through his Chief Judicial Officer (CJO). After the evidentiary hearing, the ALJ determined that the permit would not have an undue impact on water quality or violate Oklahoma's water quality standards (WQS). This initial decision was appealed by both Arkansas and Oklahoma. On appeal, the ALJ's decision was affirmed in part and reversed in part and remanded for a determination whether the record showed by a preponderance of the evidence that the permitted discharge would not cause an actual, detectable violation of WQS. On remand the ALJ reviewed the record and made detailed findings. He concluded that the permit could issue as written, finding that it would not result in any measurable violations of Oklahoma's WQS. The ALJ's decision on remand was appealed to the CJO who upheld it in a decision dated December 22, 1988. These petitions for review followed.

Appellants the State of Oklahoma, Oklahoma Scenic Rivers Commission, Oklahoma Pollution Control Coordinating Board, and STIR (the "Oklahoma parties," or Oklahoma) set forth ten issues in their joint brief-in-chief. Essentially they contend that EPA erred in concluding that the permit would not violate Oklahoma's WQS; that EPA did not properly consider the Wild and Scenic Rivers Act, 16 U.S.C. Secs. 1271-1287 (WSRA), as it applies to the upstream portions of the Illinois River; and that EPA erred in denying review of certain issues and in refusing to reopen the evidentiary hearing. The State of Arkansas, Arkansas Department of Pollution Control Ecology, City of Fayetteville, and Beaver Water District (the "Arkansas parties," or Arkansas) challenge EPA's authority to require an Arkansas discharger to comply with Oklahoma water quality standards.

BACKGROUND

The cornerstone of the Clean Water Act, 33 U.S.C. Secs. 1251-1387, is its prohibition of any discharge of pollutants to navigable waters except as permitted by the Act. 33 U.S.C. Sec. 1311(a). Section 101 of the Act, 33 U.S.C. Sec. 1251(a)(1), states that "it is the national goal that the discharge of pollutants into navigable waters be eliminated by 1985." "Discharge of a pollutant" is defined expansively as "any addition of any pollutant to navigable waters from any point source." Sec. 1362(12)(A). "Pollutant" is also broadly defined; it includes "dredged spoil, solid waste, ... sewage, garbage, sewage sludge, ... chemical wastes, ... rock, sand, ... and industrial, municipal, and agricultural waste." Sec. 1362(6). "Point source" encompasses "any discernible, confined and discrete conveyance, including ... any pipe, ditch, channel, tunnel, [or] conduit ... from which pollutants are or may be discharged." Sec. 1362(14). "Navigable waters" means "the waters of the United States." Sec. 1367(7).

Discharges of pollutants must comply with limitations established in and pursuant to the Act. "Effluent limitations," i.e., limits on "quantities, rates, and concentrations of chemical, physical, biological, and other constituents which are discharged from point sources," Sec. 1362(11), may be water quality-based, Secs. 1312, 1313, or technology-based, Secs. 1311(b), 1314(b). EPA is required to establish water-quality based restrictions whenever technology-based limits are inadequate to protect a particular body of water. Sec. 1312(a). The CWA sets minimum requirements for water pollution control; states may devise more stringent measures. Sec. 1370. State standards, once approved by EPA, become the water quality standards for the applicable waters of the State. Sec. 1313.

Federal and state effluent limitations and water quality standards are transformed into individual point source obligations through NPDES discharge permits. Sec. 1342; EPA v. California ex rel. State Water Resources Control Bd., 426 U.S. 200, 205, 96 S.Ct. 2022, 2025, 48 L.Ed.2d 578 (1976). Permits may be issued if the discharge will meet all applicable requirements under the Act. Sec. 1342(a)(1). EPA is responsible for issuing permits, id., but may delegate that authority to qualified states, Sec. 1342(b). In those states, however, it retains oversight authority with respect to individual permits and the permitting programs in general. Sec. 1342(c), (d).

EPA issued Fayetteville's NPDES permit because at the time this proceeding commenced Arkansas had not yet been delegated permitting authority pursuant to Sec. 1342(b). The permit was issued on November 5, 1985, and finally approved on December 22, 1988, following the administrative appeals described above. The treatment plant has been in operation since December 1988.

The permit (NPDES Permit No. AR0020010) specifies that half of the city's treated wastewater will be discharged to the White River in Arkansas (this portion of the discharge is not in contention here), and half will be discharged to the Illinois River basin. Specifically, this latter effluent will be discharged to an unnamed stream in northwestern Arkansas, which flows approximately two miles before joining Mud Creek. Mud Creek flows three miles from that point to its confluence with Clear Creek, thirteen miles upstream from the Illinois River in Arkansas. Twenty-two miles downstream from Clear Creek--and thirty-nine miles from the Fayetteville plant--the Illinois River crosses the state line into northeastern Oklahoma and almost immediately flows into Lake Frances. A segment of the Illinois River (including Lake Frances) from the Oklahoma-Arkansas state line to Tenkiller Ferry Reservoir has been designated an Oklahoma state scenic river and was proposed for study as a potential addition to the National Wild and Scenic Rivers System when the WSRA was enacted in 1970. 16 U.S.C. Sec. 1276(40). To date, this segment, which is approximately sixty miles long, has not been designated a component of the national system. See 16 U.S.C. Sec. 1273.

The Fayetteville permit sets limits on the amounts of certain pollutants that may be discharged and establishes maximum or minimum effluent concentrations of those pollutants and other chemical parameters. Permit, EPA Supp. Addendum at 12-30. The permit prohibits the discharge of any incompletely treated effluent to Mud Creek. Id. at 27. It also includes, inter alia, a provision for modifying the permit to incorporate more stringent limitations if an ongoing study of the Illinois River demonstrates such limitations are needed to ensure compliance with water quality standards. Id.

ANALYSIS

Review of the EPA rulings on appeal here is governed by the Administrative Procedure Act, 5 U.S.C. Secs. 701-706. We must uphold the agency's actions, findings, and conclusions unless they are outside the agency's statutory authority, are not supported by substantial evidence, or are arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. Sec. 706(2)(A), (C), and (E). We may not substitute our judgment for that of the agency. Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 443 (1983).

Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action including a "rational connection between the facts found and the choice made." In reviewing that explanation, we must "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Id. at 43, 103 S.Ct. at 2866 (citations omitted).

Determining the extent of EPA's authority under the Clean Water Act is a question of law that we review de novo. "Our first inquiry is whether 'Congress has directly spoken to the precise question at issue. If the intent of Congress is clear that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.' " Martin Exploration Management Co. v. FERC, 813 F.2d 1059, 1065 (10th Cir.1987) (quoting Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984), rev'd on other grounds, 486 U.S. 204, 108 S.Ct. 1765, 100 L.Ed.2d 238 (1988)). However, where the statute is ambiguous, EPA's construction, as that of the agency charged with administering the statute,¹ is entitled to substantial deference. Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837, 844, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984). If EPA's interpretation of the Clean Water Act is reasonable, we should not disturb it unless it "is contrary to the policies Congress sought to implement in enacting the statute." 813 F.2d at 1065; see also 467 U.S. at 845, 104 S.Ct. at 2783.

As an initial matter we address EPA's argument that Arkansas lacks standing to challenge EPA's interpretation of the Clean Water Act. EPA reasons that

Arkansas, by not challenging any of the terms of the Fayetteville permit, has failed to state a justiciable case or controversy.... Arkansas' claim is purely hypothetical and would not be redressed by a favorable decision of this Court, just as its allegations as to future permit conditions are purely speculative.

EPA Brief at 13-14. EPA also rejects Arkansas's argument that it may be collaterally estopped in subsequent proceedings if it does not pursue this argument now by assuring Arkansas that EPA would not contest the justiciability of the claim if raised in the context of future permit decisions. EPA Brief at 14; see Arkansas Reply Brief at 11 n. 18.²

Section 509 of the Clean Water Act provides that "[r]eview of [EPA's] action ... in [, inter alia,] issuing or denying any permit under section 1342 of this title ... may be had by any interested person." 33 U.S.C. Sec. 1369(b) (emphasis added). The legislative history corroborates what the language itself suggests--that the Act intended liberal review of EPA's actions in issuing permits and promulgating rules and standards. The Senate Public Works Committee explained section 509's judicial review provision as follows:

Any person has standing in court to challenge administratively developed standards, rules and regulations under the Act. The courts are increasingly adapting this test to what administrative actions are reviewable.... The Courts have granted this review to those being regulated and to those who seek "to protect the public interest in the proper administration of a regulatory system enacted for their benefit." Since precluding review does not appear to be warranted or desirable, the bill would specifically provide for such review within controlled time periods....

... For review of permits issued under section 402 [33 U.S.C. Sec. 1342] ..., the section places jurisdiction in the U.S. Court of Appeals....

S.Rep. No. 414, 92d Cong.2d Sess., reprinted in 1972 U.S.Code Cong. & Admin.News 3668, 3750-51 (emphasis added; citation omitted); see also Conf.Rep. No. 1236, reprinted in 1972 U.S.Code Cong. & Admin.News 3776, 3825. The Supreme Court reiterated the expansive language of the Senate Report in Middlesex County Sewerage Auth. v. National Sea Clammers Ass'n, 453 U.S. 1, 14 n. 23, 101 S.Ct. 2615, 2623 n. 23, 69 L.Ed.2d 435 (1981) ("review provisions of Sec. 509 are open to '[a]ny person,' S.Rep. No. 92-414, p. 85 (1971)"); cf. Montgomery Envtl. Coalition v. Costle, 646 F.2d 568, 576-78 (D.C.Cir.1981) (Sec. 509 "incorporate[s] the injury in fact rule for standing set out in Sierra Club v. Morton," 405 U.S. 727, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972)).

It would strain the meaning of "any interested person" to exclude from those eligible to obtain review of an EPA permit action the state in which the publicly owned treatment works seeking the permit is located, which partially financed the facility's construction, and which, among other entities, has review and approval authority over the facility's construction and operation. We conclude Arkansas does have standing to challenge EPA's determination that Oklahoma water quality standards apply to the plant.³

Before undertaking a discussion of the merits, we must consider a second procedural issue--whether Arkansas has exhausted its administrative remedies. EPA's regulations provide that a petition "for review of any initial decision ... is, under 5 U.S.C. 704, a prerequisite to the seeking of judicial review of the final decision of the Agency." 40 C.F.R. Sec. 124.91(e). The rule requires EPA to "issue an order either granting or denying the petition for review" within a reasonable time after the petition is filed. Sec. 124.91(c)(1). "Final Agency action" for purposes of judicial review occurs "upon completion of the remanded proceeding, including any appeals to the [EPA] Administrator from the results of the remanded proceeding." Sec. 124.91(f)(3).

Although the parties do not raise this issue, we have detected two arguable procedural deficiencies in Arkansas's appeal in light of Sec. 124.91. First, the Arkansas parties may have failed to comply with the technical requirements of subsection (e). Although they filed a petition for review of the ALJ's decision on remand, R., B-155, it appears they did not file a petition for review of the ALJ's initial decision as required by the rule, but merely filed a response to the Oklahoma parties' petitions for review of that decision. Compare Order on Petitions for Review, R., A-28, at 1, with EPA Brief at 8. Although "[t]he Arkansas parties raised [the statutory interpretation] issue in numerous pleadings filed with EPA," Arkansas Brief at 32 n. 24, Arkansas's argument that Oklahoma WQS should not apply to a discharge located in Arkansas was first asserted to (and rejected by) the ALJ after remand by the CJO.⁴

Secondly, EPA's action in this case was arguably not "complete" with respect to the Arkansas parties because the CJO failed to "issue an order either granting or denying [Arkansas's] petition for review." Sec. 124.91(c)(1). Although all parties petitioned EPA for review of the ALJ's decision on remand, R., B-155-59, the CJO's second order ruled only on the petitions filed by EPA-Region VI and the Oklahoma parties. The order failed even to acknowledge Arkansas's petition. See Second Order on Petitions for Review, R., A-37, at 1-2.

Nevertheless, under the circumstances of this case, we do not view these shortcomings as fatal to Arkansas's appeal. EPA's position on the basic issue raised by the Arkansas parties--whether the Fayetteville discharge must comply with Oklahoma WQS--has been clear since the ALJ's initial decision and is directly at odds with Arkansas's position. In his second and final opinion the CJO clearly affirmed his June 1988 ruling that Oklahoma WQS are applicable to the Fayetteville discharge. In so doing, he implicitly, if not expressly, denied Arkansas's petition for review of the ALJ's decision on remand. Thus, it would be fruitless to remand to the agency for mere technical compliance with subsection (c)(1)'s requirement for "an order ... denying review." Cf. Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976); Koerpel v. Heckler, 797 F.2d 858, 862 (10th Cir.1986); Clonce v. Presley, 640 F.2d 271, 273 (10th Cir.1981) (citing Lewis v. New Mexico, 423 F.2d 1048, 1049 (10th Cir.1970)).

Moreover, no objection to Arkansas's failure to seek review of EPA's initial decision should now be allowed, given that Arkansas participated in the review of the initial decision (by responding to Oklahoma's petition) and the CJO expressly provided that the "parties will have the opportunity to petition for review of the ALJ's decision on remand." Order on Petitions for Review, R., A-28, at 17 (emphasis added). Accordingly, the Arkansas parties' appeal is ripe for our review, and we proceed with our discussion of the merits.

Arkansas poses the fundamental question in this case: Does the Clean Water Act require a point source of pollution to comply with the water quality standards of all affected downstream states? Oklahoma assumes such a requirement in that it challenges EPA's determination that the Fayetteville permit would not result in violations of Oklahoma's water quality standards and argues accordingly that no discharge to Oklahoma's Illinois River system should be allowed.

Oklahoma formulates the issues on appeal as "[w]hether the Chief Judicial Officer erred in denying review" of various ALJ rulings and whether the CJO and ALJ "erred in [refusing] to reopen the evidentiary hearing." Despite this formulation, it seems clear that the Oklahoma parties' chief concerns relate to the substantive issues underlying these procedural questions. The substantive issues are: (1) the adequacy of the treatment technology employed by the Fayetteville plant and the possible superiority of land application methods; (2) the propriety of considering evidence concerning future reductions in the discharges of other Arkansas cities; (3) the propriety of relying on "protective language" in the permit authorizing more stringent discharge limitations if shown to be necessary by an ongoing study of the Illinois River; (4) the correctness of EPA's interpretation and application of Oklahoma's beneficial use limitation, nutrient standard, and anti-degradation policy; (5) the relevance of new information concerning overflows at the old treatment plant; and (6) whether Fayetteville met its burden of proof in showing that a permit should be issued for its treatment plant. Our review of the record convinces us that we need not resolve many of the issues raised by the Oklahoma parties. In the following pages we address first the statutory interpretation question posited by Arkansas and then a significant issue not raised by any party--the significance of evidence of existing degradation of Illinois River water quality.

The full ramifications of Arkansas's formulation of the Clean Water Act issue are exposed once it is realized that an upstream state has the ability (if not the legal right) largely to control the quality of certain of the waters of a downstream state. It can accomplish this simply by setting and enforcing its own water quality standards and releasing water of that quality to the downstream state. If the upstream state's water quality standards are lower than those considered desirable by the downstream state, so will be the actual quality of the interstate waters in the downstream state. In other words, the lowest common denominator will prevail. The ultimate question posed to this court is whose water quality standards take precedence under the Clean Water Act--the upstream state's, the downstream state's, the federal government's, or nobody's. We conclude that no state "imposes" its standards on another state, but rather that the Clean Water Act mandates compliance with federal law, including the federally approved water quality standards of affected states.

Specifically, Arkansas alleges an affected downstream state "may advise and make recommendations, but nowhere in the Clean Water Act did Congress authorize affected states such as Oklahoma to impose their water quality standards upon a discharger in another state." Arkansas's Brief at 39. We treat this, the principal issue of this case, as whether the Clean Water Act requires that any discharge permitted under 33 U.S.C. Sec. 1342 comply with all applicable water quality standards, including the EPA-approved regulations of any affected downstream state.⁵ This is an issue of first impression in the circuit courts.⁶

EPA's Chief Judicial Officer, in his first order in this case dated June 28, 1988, stated the law and applied it as follows:

The CWA requires an NPDES permit to impose any effluent limitations necessary to comply with applicable state water quality standards.... The meaning of [33 U.S.C. Sec. 1311(b)(1)(C) ] is plain and straightforward. It requires unequivocal compliance with applicable water quality standards, and does not make any exceptions for cost or technological feasibility....

... In this case, the permit should be upheld if the record shows by a preponderance of the evidence that the authorized discharge would not cause an actual detectable violation of Oklahoma's water quality standards.

Order on Petitions for Review, R., A-28, at 11-13. The CJO explained that in an interstate dispute the "only applicable water quality standards are those that have been approved by EPA under the CWA." Order on Petitions for Review at 11 n. 13 (citing Illinois v. City of Milwaukee, 731 F.2d 403, 413-14 (7th Cir.1984), cert. denied, 469 U.S. 1196, 105 S.Ct. 979, 980, 83 L.Ed.2d 981 (1985)). In noninterstate disputes, however, "the source state may impose more stringent non-EPA-approved water quality standards in NPDES permits under 33 U.S.C.A. Sec. 1370." Order on Petitions for Review at 12 n. 13.

On remand, the ALJ expressed similar views:

It is clear that an out-of-state source must meet the W.Q.S. of another downriver state. See Sec. 401(a)(2) of the CWA [33 U.S.C. Sec. 1341(a)(2) ]; 40 C.F.R. Secs. 122.4(D) and 122.44(d)(4); International Paper Co. v. Ouellette, 479 U.S. 481, 107 S.Ct. 805, 93 L.Ed.2d 883 (1987). Therefore the Fayetteville discharge must meet Oklahoma's W.Q.S. as they exist at the border of the two states....

... To accept [the Arkansas parties' argument that the beneficial use limitations do not apply to Fayetteville] would violate the principals [sic] set out above since it is premised on the notion that such standards only apply to sources located in the State of Oklahoma. There is no factual issue among the parties that the Illinois River at the border of the two states is a Class (A) River and therefore the standards applicable to pollution crossing that border must comply with Oklahoma's W.Q.S. as they exist at that point. Any other interpretation would allow a source to locate its discharge just across the line in Arkansas and freely violate Oklahoma standards. Such a result is contrary to the [Clean Water Act], regulations and Court decisions.

Decision on Remand, R., A-33, at 4-5. The ALJ's interpretations of Oklahoma's WQS, including the Beneficial Use Limitations, were ultimately affirmed by the CJO. The CJO also reiterated the mandate of his first order--that " 'the permit should be upheld if ... the authorized discharges would not cause ... [a] violation of Oklahoma's water quality standards,' "--and accepted the ALJ's conclusion that no violation would occur. Second Order on Petitions for Review, R., A-37, at 7-8.

The Arkansas parties contend we need look no farther than the Clean Water Act to decide this issue because "Congress has clearly manifested its intent [in the CWA] that affected states cannot impose their water quality standards upon dischargers in other states." Arkansas Brief at 42; see id. at 33-40. Alternatively, if we decide congressional intent is ambiguous, they urge us to reject EPA's interpretation as unreasonable. Id. at 42. EPA also claims the CWA is "clear that the terms of an NPDES permit must include compliance with state water quality standards--regardless of the source of a discharge." EPA Brief at 15-16. Therefore, EPA maintains, resort to the legislative history--which EPA contends corroborates EPA's interpretation--is unnecessary. Id. at 20 (citing United States v. Oregon, 366 U.S. 643, 648, 81 S.Ct. 1278, 1280-81, 6 L.Ed.2d 575 (1961)). In the event we conclude congressional intent is ambiguous, EPA alternatively defends the reasonableness of its interpretation of the CWA and argues that, under Chevron, 467 U.S. at 844-45, 104 S.Ct. at 2782-83, it must therefore be upheld. EPA Brief at 13, 15.

We do not find the Clean Water Act, on its face, quite as clear a manifestation of congressional intent on this issue as any of the parties suggests. Significantly, however, EPA's interpretation is not one the agency adopted only, or in the first instance, in the context of this permit proceeding. Rather, EPA's position herein is consistent with its CWA-implementing regulations. For example, 40 C.F.R. Sec. 122.4(d) expressly provides: "No permit may be issued: ... (d) When the imposition of conditions cannot ensure compliance with the applicable water quality requirements of all affected States." (Emphasis added.) Concomitantly, EPA's rules require permits to include, where applicable, "any requirements ... necessary to ... [c]onform to applicable water quality requirements ... when the discharge affects a state other than the certifying State [i.e., the state in which the discharge will be located]." Sec. 122.44(d)(4). See also 40 C.F.R. Sec. 131.10(b) (state "shall ensure that its water quality standards provide for the attainment and maintenance of the water quality standards of downstream waters"). We accord deference to the consistent interpretation of a statute by the agency entrusted with its administration. See 33 U.S.C. Sec. 1251(d); Federal Election Comm'n v. Democratic Senatorial Campaign Comm., 454 U.S. 27, 37, 102 S.Ct. 38, 44, 70 L.Ed.2d 23 (1981); cf. E.I. DuPont De Nemours & Co. v. Train, 430 U.S. 112, 135 n. 25, 97 S.Ct. 965, 978 n. 25, 51 L.Ed.2d 204 (1977) (EPA interpretation entitled to deference, even if not contemporaneous with enactment of CWA, in light of technical nature of statute, agency's expertise, and ambiguous statutory language). After considering the Act as a whole and its legislative history, we conclude EPA's interpretation is reasonable and consistent with Congress's purposes in enacting the CWA.

In defending its construction of the CWA the EPA relies principally on Sec. 301(b)(1)(C) of the Act, 33 U.S.C. Sec. 1311(b)(1)(C), which provides:

In order to carry out the objective of this chapter [i.e., to "restore and maintain the chemical, physical, and biological integrity of the Nation's waters," 33 U.S.C. Sec. 1251] there shall be achieved ... not later than July 1, 1977, any more stringent limitation, including those necessary to meet water quality standards, ... established pursuant to any State law or regulations (under authority preserved by section 1370 of this title) ... or required to implement any applicable water quality standard established pursuant to this chapter.

(Emphasis added.) Section 402(a)(2) and (b)(1)(A) of the CWA, 33 U.S.C. Sec. 1342(a)(2), (b)(1)(A), in turn mandates that any NPDES permit issued under the Act contain terms adequate to insure compliance with Sec. 301 above. See EPA Brief at 16.

EPA rejects Arkansas's argument that these sections are "mere timing provisions." Id. (citing Arkansas Brief at 34-35). On the contrary, EPA argues, these sections establish fundamental requirements of the Act. Moreover, EPA contends that Congress, by making no distinction between the water quality standards of source and affected states in these requirements, "indicated the uniform applicability of such standards." EPA Brief at 16-17.⁷

Arkansas counters that Sec. 1311 does not explain whether the "more stringent limitations" must be achieved by dischargers in other states, but that section 510, 33 U.S.C. Sec. 1370 limits the "reach" of any stricter standards to discharges originating within the state imposing those standards. Arkansas Brief at 35.⁸ This argument relies largely on language in Sec. 1370 preserving "any right or jurisdiction of the States with respect to the waters ... of such States." The argument suffers from at least three flaws, however.

First, Sec. 1370 is a savings clause that merely preserves the preexisting right of the states "to set more restrictive standards than those imposed by [the CWA]." S.Rep. No. 414, reprinted in 1972 U.S.Code Cong. & Admin.News 3668, 3751. See also International Paper Co. v. Ouellette, 479 U.S. 481, 493, 107 S.Ct. 805, 812, 93 L.Ed.2d 883 (1987) (Sec. 1370 savings clause "preserves the authority of a State," but "does not preclude pre-emption" of state law); Milwaukee v. Illinois, 451 U.S. 304, 327-28, 101 S.Ct. 1784, 1797-98, 68 L.Ed.2d 114 (1981). Accordingly, there is no basis for believing that Congress intended Sec. 1370 to limit or define the scope of one of the CWA's crucial provisions. The cases Arkansas cites to the contrary are unavailing for that purpose. See Arkansas Brief at 35-36 n. 28.

Second, the "waters ... of such States" language, which Arkansas deems significant, occurs in and applies only to the second of two principal provisions of Sec. 1370. That provision (subparagraph (2)) refers broadly to "any right or jurisdiction of the States." In contrast, the first provision (subparagraph (1)) specifically addresses the rights of states and their subdivisions to regulate pollution. Subparagraph (1) says nothing about the boundaries within which such rights may be exercised. Thus, "waters ... of such states" cannot be construed as a limitation on the rights to regulate pollution preserved in the first part of this section.⁹

Third, thoughtful consideration of the language of Sec. 1311(b)(1)(C)--

there shall be achieved ... any more stringent limitation, including those necessary to meet water quality standards ... established pursuant to any State law or regulations ... or required to implement any applicable water quality standard established pursuant to this chapter

(emphasis added)--exposes the irrationality of Arkansas's argument. In order to ensure that the EPA-approved water quality standards in all states are "met" or "implemented," it is "necessary" to require dischargers to meet the applicable requirements of other affected states as well as those of the source state. There could be no assurance of achieving a state's more stringent WQS if an upstream, out-of-state discharger were not required to comply with those standards.

EPA concludes and we agree that Arkansas's construction of the Act would make achieving downstream water quality standards "impossible in many circumstances or ... possible ... only by imposing a disproportionate burden on dischargers located in the downstream state." EPA Brief at 21.¹⁰ Moreover, rewarding sources for locating in states with less stringent water quality requirements (by relieving them from complying with more stringent downstream WQS) would also result in "pollution shopping," contrary to Congress's intent in passing the 1972 CWA amendments.¹¹

Arkansas counters that EPA's construction of the Act would have "chaotic" consequences because any downstream state could impose its requirements on proposed sources in any upstream state. Arkansas Brief at 46-47. Thus, Arkansas hypothesizes, a permit authorizing a discharge to the Mississippi River in Minnesota would be subject to challenge based on the water quality standards of each of the nine downstream states. Id. at 46 (citing Ouellette, 479 U.S. at 496 n. 17, 107 S.Ct. at 814 n. 17). Arkansas's purported concern is that this would undercut the CWA's "orderly regulatory scheme," making it " 'virtually impossible to predict the standard for a lawful discharge into an interstate body of water.' " Arkansas Brief at 47 (quoting Illinois v. Milwaukee, 731 F.2d at 414).

We find little practical merit in Arkansas's argument. The ability, as well as the authority, to require compliance with the WQS of downstream states is necessarily limited by the ability to measure a source's impact on the water quality of the receiving waters. At some point downstream, the impact on water quality of a particular pollution source becomes so attenuated as to be undetectable. Assuming the quality of the receiving waters currently meets or exceeds standards, there can be no violation of standards if the impact of the proposed source on the water quality could not be measured.¹² Nor is it "impossible to predict the standard[s]" applicable to a new discharge, as Arkansas claims. First, EPA approval of state WQS determines the potentially applicable rules. Furthermore, the permitting system established in the 1972 and 1977 amendments to the CWA clearly provides for consultation with and input by states that may be affected. Finally, computer modeling (such as that performed for the Fayetteville plant) can predict the extent of a new source's potential impact, thus demonstrating which states' WQS must be met.

Arkansas cites International Paper Co. v. Ouellette and Illinois v. Milwaukee in support of its statutory construction argument, but that reliance is misplaced. In each of those cases an affected state was seeking to enjoin an ongoing discharge in another state by resort to its own state law nuisance remedies. 479 U.S. at 483, 107 S.Ct. at 807; 731 F.2d at 404. In contrast, this case is a permitting, rather than an enforcement, action wherein Oklahoma seeks to ensure compliance with federal law, i.e., its EPA-approved WQS. The Seventh Circuit in Illinois v. Milwaukee recognized this distinction when it pointed out that

Illinois' basic grievance is that the permits issued to Milwaukee pursuant to the [CWA] do not impose stringent enough controls on the discharges. Nevertheless, Illinois failed to participate in the permit issuing process when the Milwaukee permits were issued.... [T]hat process seems now to be the appropriate federal forum for adjusting the competing claims of states in the environmental quality of interstate waters.

731 F.2d at 412-13 n. 5. The court found that Illinois had "not sought to enforce an effluent limitation under Wisconsin [law] nor sought to enforce federal limitations as provided for under the 1972 [CWA]" and concluded that the CWA "preclude[s] the type of application of state law sought by Illinois." 731 F.2d at 414.

The Supreme Court's decision in Ouellette is somewhat more problematic, even though, like Illinois v. Milwaukee, it is not factually or procedurally similar to this case. The specific issue in Ouellette was whether the CWA preempted a common law nuisance suit filed in a Vermont court under Vermont law against a New York discharger, which was the source of the alleged injury in Vermont. The Court concluded that "Vermont nuisance law is inapplicable to a New York point source," 479 U.S. at 497, 107 S.Ct. at 814; however, it chose to express its holding more broadly. The Court stated: "We hold that when a court considers a state-law claim concerning interstate water pollution that is subject to the CWA, the court must apply the law of the State in which the point source is located," id. at 487, 107 S.Ct. at 809, and "we conclude that the CWA precludes a court from applying the law of an affected State against an out-of-state source," id. at 494, 107 S.Ct. at 813. The Ouellette Court's discussion of the CWA includes statements that Arkansas concedes "may be dicta." Arkansas Reply Brief at 18. But it is these statements concerning the regulatory framework of the CWA and the relative roles of source and affected states which Arkansas embraces. In particular, Arkansas asks us to give weight to the following discussion:

While source States have a strong voice in regulating their own pollution, the CWA contemplates a much lesser role for States that share an interstate waterway with the source (the affected States). Even though it may be harmed by the discharges, an affected State only has an advisory role in regulating pollution that originates beyond its borders.... Significantly, however, an affected State does not have the authority to block the issuance of the permit if it is dissatisfied with the proposed standards. An affected State's only recourse is to apply to the EPA Administrator, who then has the discretion to disapprove the permit if he concludes that the discharges will have an undue impact on interstate waters.

Ouellette, 479 U.S. at 490-91, 107 S.Ct. at 810-11, quoted in Arkansas Brief at 41.

While we agree these statements seem to undercut EPA's position, it is beyond dispute that they are dicta and not controlling here. Ouellette was an enforcement action in which the issue was the availability of a nuisance remedy under the common law of an affected state against an out-of-state discharger. Even the Court's broadly stated holdings were expressed in terms of "a state-law claim concerning interstate water pollution," 479 U.S. at 487, 107 S.Ct. at 809 (emphasis added), and "applying the law of an affected State," id. at 494, 107 S.Ct. at 813 (emphasis added). In contrast, the case before us poses the question of the applicability of the federally approved water quality standards of an affected downstream state in permitting a discharge in an upstream state.¹³

Moreover, Ouellette contains other dicta that mitigate the apparent impact of the language quoted above. For instance, the Court noted that nothing in its decision affected the plaintiffs' right to "pursue remedies that may be provided by the Act." 479 U.S. at 498 n. 18, 107 S.Ct. at 814-15 n. 18. The Court pointed out, as examples, that the plaintiffs had the opportunity to protect their interests before permit issuance by commenting on and objecting to the proposed permit conditions, and that they still were entitled to bring a citizen suit to compel compliance with the permit. Id.

Ouellette also suggested that what the plaintiffs there sought to do was akin to establishing a second permit system, which the Court held is disallowed by 33 U.S.C. Sec. 1342(b). See id. at 491, 496-97, 107 S.Ct. at 811, 814. That Sec. 1342(b) limits a state's permitissuing authority to "discharges ... within its jurisdiction" is beyond dispute. But this provision must not be construed to imply anything concerning the applicability of an affected state's EPA-approved WQS to the process of permitting a discharge in an upstream state. The Act contains several provisions for considering and protecting the water quality of downstream states (including provisions authorizing the actions taken by EPA here). Those provisions are not inconsistent with the Act's implicit prohibition of dual permitting systems. Indeed, if properly implemented, they negate any need for separate permits issued by source and affected states.

The Court's opinion in Ouellette corroborates this reasoning. As the Court observed:

Nothing in the Act gives each affected State this power to regulate discharges. The CWA carefully defines the role of both the source and affected States, and specifically provides for a process whereby their interests will be considered and balanced by the source State and the EPA. This delineation of authority represents Congress' considered judgment as to the best method of serving the public interest and reconciling the often competing concerns of those affected by the pollution. It would be extraordinary for Congress, after devising an elaborate permit system that sets clear standards, to tolerate common-law suits that have the potential to undermine this regulatory structure.

479 U.S. at 497, 107 S.Ct. at 814. Plainly, Ouellette was concerned not with the CWA's provisions for incorporating a downstream's water quality criteria in the permitting process, but with preventing a downstream state from circumventing or superseding that process by imposing on an already-permitted source additional requirements based on its own state law. So viewed, Ouellette is entirely consistent with EPA's interpretation of the applicability of Oklahoma's WQS. Cf. Champion, 652 F.Supp. at 1400 (concluding that nothing in Ouellette required a modification of the decision at 648 F.Supp. 1390 that a North Carolina discharge permit must require compliance with an applicable Tennessee WQS).

The erroneous interpretation of Ouellette, which Arkansas advocates, runs aground when the Clean Water Act is considered as a whole. The Act contains several mechanisms for ensuring that minimum water quality and pollution criteria will apply to all navigable waters of the United States; for example, prohibiting the discharge of pollutants except pursuant to a permit, 33 U.S.C. Secs. 1311, 1342; requiring EPA to establish effluent limitations for point source discharges, Secs. 1311-1312; providing for EPA's approval of water quality standards, Sec. 1313, and state permit programs, Sec. 1342(b); and establishing minimum procedural requirements for state permit programs, Sec. 1314(i). As discussed above, however, states are not precluded from imposing pollution limitations more stringent than those promulgated by EPA. 33 U.S.C. Sec. 1370; 40 C.F.R. Sec. 122.1(f); Milwaukee v. Illinois, 451 U.S. at 327-28, 101 S.Ct. at 1797-98. Moreover, the CWA requires the application of best available control technology or best practicable treatment to discharges of pollutants, 33 U.S.C. Sec. 1311, and the Act's legislative history reveals that Congress intended the CWA to be "technology-forcing." S.Rep. No. 414, reprinted in 1972 U.S.Code Cong. & Admin.News 3668, 3709 (Act contains a "mandate to press technology and economics" to achieve practicable and attainable levels of effluent reduction; thus, "increasingly tougher controls on industry" will be required); see also Natural Resources Defense Council, Inc. v. EPA, 822 F.2d 104, 123-24 (D.C.Cir.1987). Any standard or limitation adopted by a state and approved by EPA becomes the "water quality standard for the applicable waters of that State," and thus is federally enforceable. 33 U.S.C. Sec. 1313(c)(3). See also Secs. 1319, 1342; S.Rep. 414, reprinted in 1972 U.S.Code Cong. & Admin.News 3668, 3672; Order on Petitions for Review, R., A-28, at 11-12 n. 13.

a. 33 U.S.C. Sec. 1341

EPA finds support for its action here in certain of the foregoing sections. In addition, we consider 33 U.S.C. Sec. 1341 particularly persuasive. It provides that no NPDES permit may be granted until a "certification" is obtained from the state in which the discharge originates (or from EPA where no state agency possesses such authority, Sec. 1341(a)(1); 40 C.F.R. Sec. 121.21(b)), stating that the discharge will comply with, among other things, Sec. 1311 water quality requirements. Section 1341(a)(2) provides:

Whenever such a discharge may affect, as determined by the [EPA] Administrator, the quality of the waters of any other State, the Administrator ... shall so notify such other State.... If ... such other State determines that such discharge will affect the quality of its waters so as to violate any water quality requirement in such State, and ... notifies the Administrator ... and requests a public hearing ..., the licensing or permitting agency shall hold such a hearing.... [The licensing or permitting] agency, based upon the recommendations of such State, ... shall condition such license or permit in such manner as may be necessary to insure compliance with applicable water quality requirements. If the imposition of conditions cannot insure such compliance such agency shall not issue such license or permit.

" '[T]he purpose of the [Sec. 1341(a)(2) ] notice requirement is to enable a state whose water qualities may be affected by the proposed federal activity an opportunity to insure that its standards will be complied with.' " EPA Brief at 17-18 (emphasis added) (quoting Lake Erie Alliance for the Protection of the Coastal Corridor v. U.S. Army Corps of Eng'rs, 526 F.Supp. 1063, 1075 (W.D.Pa.1981), aff'd without opinion, 707 F.2d 1392 (3d Cir.), cert. denied, 464 U.S. 915, 104 S.Ct. 277, 78 L.Ed.2d 257 (1983)). EPA's regulations reaffirm this view, see 40 C.F.R. Secs. 121.1-.30,¹⁴ as does the limited case law, see, e.g., United States v. Commonwealth of Puerto Rico, 721 F.2d 832, 833-34 (1st Cir.1983) (certification is a "condition precedent to the EPA's issuance of a NPDES permit"; "state decision denying certification, or one imposing conditions or restrictions, is not reviewable administratively by the EPA" and is "exempt from review in federal court").

Arkansas disputes that "applicable water quality requirements" in Sec. 1341(a)(2) refers to the WQS of the affected state.¹⁵ Based on its plain language, however, we agree with EPA that the purpose of this provision must be to enable affected states to ensure that their water quality will not be jeopardized by a discharge in another state. Only a strained interpretation of the statute could produce the result Arkansas seeks--that "applicable water quality requirements" refers to the WQS of only the source state. Moreover, there would be no reason for Sec. (a)(2) to refer to the effect on the quality of the affected state's waters in terms of "violat[ing] any water quality requirement in such State" if the affected state's water quality requirements were irrelevant in the permitting process. Given that this subsection of the statute deals expressly with effects on states other than the source state, it is much more likely that "applicable" refers simply to those federally approved water quality requirements of affected states that would be violated if the permit were not appropriately conditioned. We reject Arkansas's argument to the contrary.

The legislative history of the certification statute sheds additional light on this matter. In 1977 Congress amended the statute

to add section 303 [33 U.S.C. Sec. 1313, "water quality standards and implementation plans"] to the list of the act's provisions for which a State must certify compliance.... This means that a federally licensed or permitted activity, including a discharge permit under section 402, must be certified to comply with State water quality standards adopted under section 303.

S.Rep. No. 370, at 72, reprinted in 1977 U.S.Code Cong. & Admin.News 4326, 4397; H.Conf.Rep. No. 830, at 96, reprinted in 1977 U.S.Code Cong. & Admin.News 4424, 4471.¹⁶ According to the committees, the amendment was not meant to change the law but to follow and clarify the original congressional intent that "State water quality standards would be imposed through Section 301, and thus certification by the State would include consideration of water quality standards." 1977 U.S.Code Cong. & Admin.News at 4397. The conference committee added that "[s]ection 303 is always included by reference where section 301 is listed." H.Conf.Rep. No. 830, at 96, reprinted in 1977 U.S.Code Cong. & Admin.News 4424, 4471. The Senate committee offered this further explanation of the amendment:

[A]ll States have approved water quality standards. Thus, it is reasonable to require that Federal permits and licenses should take into account State water quality plans, standards and requirements adopted under section 303 to assure maintenance of water quality in the respective States.

Id. at 4398. Neither the statute as amended nor the committee reports concerning the bills distinguish between source and affected states. Thus, EPA's view that sources subject to NPDES permits must comply with all approved state water quality standards is a reasonable interpretation in light of this history.

b. 33 U.S.C. Sec. 1342

Also germane to EPA's construction of the CWA is the fact that, in those states authorized to issue NPDES permits, the EPA Administrator retains authority to veto any proposed permit if he objects to its issuance. 33 U.S.C. Sec. 1342(d)(2).¹⁷ EPA may object on the basis of either of two grounds: (1) that a permitting state failed to accept recommendations from another state whose waters may be affected by permit issuance; or (2) that the permit is " 'outside [i.e., inconsistent with] the guidelines and requirements' of the Act." EPA Brief at 18-19 (quoting 33 U.S.C. Sec. 1342(d)(2)).¹⁸ The statute mandates that "[n]o permit shall issue" if EPA objects for either reason. Sec. 1342(d)(2). If the source state does not revise the proposed permit to satisfy EPA's objection, EPA may issue a discharge permit, Sec. 1342(d)(4), but it may not issue a permit less stringent than that required by any state's effluent limitations and water quality criteria. H.R.Conf.Rep. No. 830, 95th Cong., 1st Sess. 97, reprinted in 1977 U.S.Code Cong. & Admin.News 4424, 4472. Given that a permit program administered by EPA is subject to the same requirements as apply to an approved state program, Sec. 1342(a)(3), no reasonable argument would justify invalidating a state-issued permit that fails to account for the WQS of another state, yet allowing EPA to issue a permit objectionable on the same ground.¹⁹

Although several of the CWA terms discussed in the foregoing paragraphs have no direct application to the permit in this case (because EPA, not Arkansas, is the permitting agency), they reflect the objectives and policies behind the Act and the statutory framework established for implementing them. Because nothing in the Act suggests that permits issued by states are subject to more stringent requirements than those issued by EPA--indeed, Sec. 1342(a)(3) mandates that permits issued by EPA and the states "shall be subject to the same terms, conditions and requirements" --any term of the Act directed to state permitting agencies is instructive as to EPA's permitting responsibilities and authority as well.

The Arkansas parties construct a similar argument (based on the relation between EPA's and the states' permitting responsibilities) to urge an opposite result, however. They contend:

Section 1342(b)(5) very clearly indicates that an affected state can only be an advisor to the source state in the permitting process when that process has been delegated to a state to administer.... Thus, it makes little sense to suggest ... that a source state discharger must comply with affected state water quality standards when the permitting authority is the EPA rather than a delegated state.

Arkansas Brief at 38-39.²⁰ Arkansas correctly suggests it would make "little sense" if the applicability of a downstream state's water quality standards depended on what entity (EPA or the source state) issues the permit. However, Arkansas's argument that affected states are limited to an advisory role contains several fatal flaws.

First, in arguing, in effect, "an affected state may not require a source state to comply with the former's WQS; therefore, EPA may not require such compliance," Arkansas's fundamental premise is faulty. The fact that an affected state may have only an "advisory role" under Sec. 1342(b)(5) does not mean compliance with that state's approved water quality standards is discretionary. Moreover, Sec. 1342(b)(5) merely describes part of the procedures a state permit program must provide for insuring communications among the source state, an affected state, and EPA concerning the permitting of a new discharge in the source (permitting) state. See also Sec. (b)(3)-(4). Standing alone, the subsection says nothing about whether compliance with affected states' WQS is optional or obligatory.

Second, Arkansas's argument focuses on one paragraph in isolation, rather than in the context of the entire Act, or even in the context of Sec. 1342 as a whole. Section 1342(b) provides that the EPA Administrator shall approve any program submitted by a state desiring to administer its own permit program unless he determines, essentially, that the state proposal does not ensure adequate authority to administer the NPDES permit program properly. Subsection (b)(5), upon which Arkansas relies, is only one of nine specific grounds upon which EPA may refuse permitting authority to a state. Sec. 1342(b)(1)-(9). Subsection (b)(1)(A), for example, requires adequate state authority to "issue permits which ... apply, and insure compliance with, any applicable requirements of sections 1311, 1312, 1316, 1317, and 1343 of this title."²¹ Sec. 1342(b)(1)(A).

Arkansas's argument also overlooks the fact that Sec. 1342(b)(5) derives from Sec. 1341, the certification statute. As discussed earlier in this opinion, Sec. 1341 not only provides for notice to potentially affected states, it requires that permits be conditioned so as to insure compliance with all applicable water quality requirements, and it prohibits issuing any permit that cannot insure such compliance. Sec. 1341(a)(2).

Finally, Arkansas's argument must fail in the face of other CWA provisions heretofore discussed--in particular, EPA's authority to veto permits and to suspend state programs if they do not meet the requirements of the Act, Sec. 1342(c)-(d), and the proviso that state and EPA permit programs be subject to the same terms and conditions, Sec. 1342(a)(3).

c. EPA's "Upset" Regulation

We find still further support for EPA's construction of the CWA in the views the agency expressed in an earlier rulemaking proceeding. In the course of promulgating final regulations providing dischargers with a defense to violating effluent limits during unavoidable source "upset" conditions, EPA stated that "the CWA requires strict compliance with water quality standards"; thus, "water quality standards are ... legally required to be met at all times." 49 Fed.Reg. 37,998, 38,038 (1984), quoted in Sierra Club v. Union Oil Co., 813 F.2d 1480, 1489 (9th Cir.1987), judgment vacated, 485 U.S. 931, 108 S.Ct. 1102, 99 L.Ed.2d 264 (1988); see 40 C.F.R. Secs. 122.41(n), -.4(d).

The final "upset" rule provides that in certain narrowly defined circumstances technology-based effluent limitations may be exceeded (i.e., failure of pollution controls may be allowed). 40 C.F.R. Sec. 122.41(n). Significantly, an industry-proposed defense for violation of water quality-based permit limits²² was deleted in the final rule. EPA reasoned that, because water quality standards must be met at all times, even during "upset" conditions, "permittees would need to do continuous monitoring on all stream segments that may be affected " to ensure that water quality standards were not violated in order to establish the defense. 49 Fed.Reg. at 38,038 (emphasis added). The impracticality of such a requirement led EPA to reject the industry proposal. 49 Fed.Reg. at 38,038. Id.²³

This view that all potentially affected stream segments would have to be monitored reflects EPA's conviction that an upstream source whose effluent might affect the water quality of downstream states must comply with the WQS of those states. It is also consistent with EPA's belief that "strict compliance" with water quality standards is required by the CWA, because such compliance would be impossible if sources could disregard the WQS of states other than the source state.

According to EPA, the requirement of strict compliance with WQS derives from 33 U.S.C. Sec. 1311(b)(1)(C), which mandates that "there shall be achieved ... not later than July 1, 1977, any more stringent limitation ... necessary to meet water quality standards." (Recall that all NPDES permits must ensure compliance with Sec. 1311. Sec. 1342(a)(1), (b)(1).) The legislative history of the section bears out EPA's interpretation. See S.Rep. No. 414, reprinted in 1972 U.S.Code Cong. & Admin.News 3668, 3710 (EPA "is under a specific obligation to require that level of effluent control which is needed to implement existing water quality standards without regard to the limits of practicability"). Even in 1977 when Congress "relaxed" the best available technology requirements in certain circumstances, the amended statute and the legislative history leave no doubt that water quality standards still must be maintained.²⁴ In explaining the amendment the Senate committee cautioned:[T]he gains made as a result of the 1977 requirements could evaporate in the middle of the next decade if only the 1977 [effluent limitations] and new source performance standards are applied. Thus, for many riverways ..., pressure must be maintained to assure improved water quality and to avoid slipping back.

....

The Committee intends that current effluent limitations ... should represent a "floor" or minimum requirement of the modifications authorized by this section. Current levels of discharge must not be relaxed by this provision because that would imply additional treatment requirements on other point or nonpoint source dischargers.

Id. at 42, 44, reprinted in 1977 U.S.Code Cong. & Admin.News at 4367, 4369 (emphasis added).²⁵ The Committee also stated: "There is nothing in these new provisions which in any way preempts the rights of States to have more stringent water quality standards or associated effluent limitations...." Id. at 43, U.S.Code Cong. & Admin.News at 4368.

d. 33 U.S.C. Sec. 1365

One final provision of the CWA deserves mention in our discussion of the statutory interpretation issue. Section 505(h), 33 U.S.C. Sec. 1365(h), authorizes the governor of a state to sue EPA to enforce an "effluent standard or limitation under this chapter," the violation of which is occurring in another state and is "causing a violation of any water quality requirement in his state." Subsection (f) defines "effluent limitation or standard under this chapter" as including, for purposes of this section, certification under Sec. 1341 and permits or conditions thereof issued under Sec. 1342.

Clearly, the injury sustained by a state for which Sec. 1365 provides a remedy is the impact on that state's water quality, not the violation of the "effluent standard or limitation" per se. This interpretation is dictated by common sense and congressional intent. See S.Rep. No. 414, reprinted in 1972 U.S.Code Cong. & Admin.News 3668, 3675 ("[T]he basis of pollution prevention and elimination will be the application of effluent limitations. Water quality will be a measure of program effectiveness and performance."). Arkansas's view that discharge permits are not required to ensure compliance with the applicable WQS of all affected states cannot be reconciled with Sec. 1365(h)'s express remedy for the violation of "any water quality requirement" in one state, which results from the violation of an "effluent limitation" (defined to include a permit condition) in another state.

Section 1365 reminds us that, under the CWA, effluent limitations are not an end in themselves, but simply a means to an end--the desired water quality. The plainest evidence of this can be found in 33 U.S.C. Sec. 1311(b)(1)(C) (discussed at pages 604-605 of this opinion) and in Sec. 1312, each of which reveals that the purpose of effluent limitations is to achieve a desired level of water quality. Section 1312, "Water quality related effluent limitations," provides:

Whenever, in the judgment of the [EPA] Administrator, discharges of pollutants from a point source or a group of point sources, with the application of effluent limitations required under section 1311(b)(2) of this title, would interfere with the attainment or maintenance of that water quality in a specific portion of the navigable waters which shall assure protection of public water supplies, agricultural and industrial uses, and the protection and propagation of a balanced population of shellfish, fish and wildlife, and allow recreational activities in and on the water, effluent limitations (including alternative effluent control strategies) for such point source or sources shall be established which can reasonably be expected to contribute to the attainment or maintenance of such water quality.

33 U.S.C. Sec. 1312(a) (emphasis added). In other words, effluent limits more stringent than those required by 33 U.S.C. Sec. 1311(b)(2) must, if feasible, be established by EPA and imposed on any sources responsible for interfering with the desired water quality in a specific stream segment.²⁶ In the words of the Senate committee:

The limitations necessary to achieve a given level of water quality in one reach of a waterway may require more control of effluents than that attainable through application of the best available technology. Where that is desirable to implement the policies of the Act, and feasible, [this section] provides the authority to impose controls based on water quality.

....

The concept of "alternative effluent control strategies" is necessary to account for [certain] difficulties in simply setting more stringent effluent limitations.... [F]urther reduction of the level of effluent entering the affected waters may not be possible through control technology, yet essential to water quality. Alternative effluent control strategies, such as the transportation of effluents to other less affected waters or the control of in-plant processes would have to be developed.

S.Rep. No. 414, reprinted in 1972 U.S.Code Cong. & Admin.News 3668, 3712-13 (emphasis added).

This section and its legislative history reveal the preeminent importance of water quality--actual and desired--in the framework of the CWA. Significantly, they lack evidence of any intent to limit the scope of Sec. 1312 to the intrastate water quality effects of discharges. Indeed, the statute's use of the term "specific portion of the navigable waters" (like the Senate report's use of "one reach of a waterway" and "affected waters"), rather than language specifying waters of the source or permitting state, suggests that the section contemplates regulation of water quality without regard to state boundaries. Vesting authority in EPA, instead of in individual states, arguably suggests a similar intent.²⁷

Considered together, all of the provisions of the CWA discussed above (Secs. 1311, 1312, 1313, 1314, 1341, 1342, 1365, and 1370), as well as the legislative history and EPA's implementing regulations, evidence the reasonableness of EPA's interpretation of the Act. Accordingly, we hold that no discharge to a navigable water, such as the Illinois River, may be permitted unless compliance with all applicable water quality requirements, including the federally approved standards of affected downstream states, is assured.

B. Significance of Existing Violations of Illinois River Water Quality Standards

There is substantial evidence in the record of ongoing violations of Illinois River water quality standards, yet neither of the EPA judicial officers nor any of the parties addresses whether, or how, this is relevant to Fayetteville's application to discharge to the Illinois River. We believe this situation poses an issue of critical importance --whether a new discharge may be permitted when the applicable water quality standards are already being violated.²⁸ Guided by the Supreme Court's pronouncement that an agency decision is arbitrary and capricious if the agency "entirely failed to consider an important aspect of the problem [or] offered an explanation for its decision that runs counter to the evidence before the agency," Motor Vehicle Mfrs., 463 U.S. at 43, 103 S.Ct. at 2856, we conclude EPA's decision to issue the Fayetteville permit was arbitrary and capricious. The agency's decision is also flawed by misinterpretation and misapplication of two important Oklahoma water quality regulations and by arbitrary disregard for certain expert testimony. For these reasons, discussed more fully below, we hold that the Clean Water Act prohibits granting an NPDES permit under the circumstances of this case (i.e., where applicable water quality standards have already been violated) and reverse EPA's decision to permit Fayetteville to discharge any part of its effluent to the Illinois River Basin.

The Upper Illinois River, including Lake Frances, from the Arkansas state line down to the 650-foot elevation level of Tenkiller Ferry Reservoir, is designated an Oklahoma state scenic river. Okla.Stat. tit. 82, Sec. 1452(b)(1) (1990). As such, certain water quality standards apply to these waters. See Oklahoma Water Quality Standards (OWQS) Sec. 4 & App. A (1982).²⁹ Water quality standards consist of two parts: a designated use or uses for the identified waters and water quality criteria for such waters based on those uses. 40 C.F.R. Sec. 130.2(c); Okla.Stat. tit. 82 Sec. 904(f); OWQS Sec. 4. Of greatest interest for purposes of this discussion are the Illinois River's "fish and wildlife propagation" (primary warmwater fishery), "aesthetics," and "smallmouth bass" designated "beneficial uses." Within the latter two use categories, the following water quality criteria are particularly significant: turbidity (OWQS Sec. 4.10(b)), nutrients (OWQS Sec. 4.10(c)), and dissolved oxygen (OWQS Sec. 4.11(a)). The occurrence of phosphorus and nitrogen in Fayetteville's effluent necessitates the consideration of these criteria.³⁰

As a preliminary matter, Oklahoma contends and we agree that EPA's judicial officers erred in concluding that Oklahoma's nutrients standard, Sec. 4.10(c), applies only to lakes, not to streams. Decision on Remand, R., A-33, at 6; Second Order on Petitions for Review, R., A-37, at 8. Section 4.10(c) provides: "The total phosphorus concentration and the nitrogen/phosphorus concentration ratio shall not be increased to levels which result in man-induced eutrophication problems." The source of the agency's confusion is the definition of "eutrophication (natural)" (included in Appendix C of the OWQS), which refers only to lakes.³¹ An Oklahoma witness at the administrative hearing explained that the definitions in the appendix are "scientific definitions," provided merely for clarification purposes, and that "the state does apply the eutrophication principle ... to rivers." Tr. at 578. Apparently no one scrutinized the OWQS carefully enough to discover that the regulations themselves define the scope of the nutrient standard's application. Section 4, "Standards for Water Quality," unequivocally states: "Narrative standards [[including] Section ... 4.10(c) ...' shall be maintained at all times and apply to all perennial and intermittent streams." (Emphasis added.) In addition, the preface to Appendix A of the OWQS states that Sec. 4.10(c) applies even to those stream segments not listed in the appendix (i.e., stream segments for which beneficial uses have not been designated). Accordingly, we reject EPA's ruling that the nutrients standard applies only to Lake Frances and Tenkiller Reservoir and hold that it applies to the entire reach of the Illinois River in Oklahoma.

In addition to the nutrients standard, Oklahoma's "Anti-Degradation Policy," OWQS Sec. 3, and "Beneficial Use Limitations," id. Sec. 5, also protect the Upper Illinois River.³² The Oklahoma parties assert that EPA also misinterpreted and misapplied these regulations. Their argument is rather unfocused, but they basically claim that "any increase in any 'wastes' ... which may pollute or tend to pollute " the waters of a scenic river violates these rules. Oklahoma Brief at 32 (emphasis in original); see generally id. at 30-38.

The Beneficial Use Limitations regulation provides that scenic rivers "are protected by prohibition of any new point source discharge of wastes ... except under conditions described in Section 3 [the Anti-Degradation Policy]." OWQS Sec. 5. The relevant provision of Sec. 3 states: "No degradation shall be allowed in high quality waters ... includ[ing] water bodies ... designated 'Scenic Rivers.' " The Oklahoma courts apparently have not interpreted these provisions.³³ Nevertheless, we believe the plain language of the regulations manifests a clear intent to allow no degradation of the water quality of scenic rivers. More specifically, the regulations disallow any additional discharge of pollution (either a new point source or an increase from an existing source) to a scenic river if its water quality has been degraded or if the new source would degrade it.

Closer examination of the language and structure of the Anti-Degradation Policy, guided by the minimum requirements for such policies set forth in EPA's regulation, confirms our plain language construction.³⁴ The Oklahoma regulation allows "no degradation" of water quality in designated scenic rivers. "Limited degradation" is permitted limited only in other "high quality waters" where the existing water quality "exceeds those levels necessary to support propagation of fish, shellfish, wildlife, and recreation." OWQS Sec. 3, para. 2. Even if the Upper Illinois were not a scenic river, it would not be eligible for the limited degradation exception because its waters in their present condition do not qualify as such "high quality waters." See infra part B.2. Clearly, then, the Oklahoma Anti-Degradation Policy prohibits any further degradation of the Illinois scenic river.

We conclude the requirements of the Beneficial Use Limitations/Anti-Degradation Policy are violated when the water quality of a scenic river undergoes any human-caused, detectable change. By "detectable change" we mean any detectable change in a water quality parameter such as turbidity or phosphorus (with the perhaps unnecessary qualification that an improvement in water quality is excepted). We do not mean a detectable change that violates a numeric criterion for that parameter (e.g., 25 NTUs for turbidity), which criterion would otherwise apply if the Beneficial Use Limitations were not applicable (i.e., if the receiving waters were not designated as a scenic river or otherwise as "(a)" in Appendix A).³⁵ The Beneficial Use Limitations/Anti-Degradation Policy are designed to provide additional protection beyond that conferred by the numeric limits of other water quality standards. Interpreting these regulations as merely prohibiting violations of otherwise applicable WQS would render them a nullity because, as we have seen, WQS may not be contravened in any waters, regardless of whether these additional regulations apply.

The ALJ, on remand, did not explicitly address the Anti-Degradation Policy but did construe the Beneficial Use Limitations. The 1985 version of the Beneficial Use Limitations, which the ALJ deemed applicable, provides: " 'All streams and bodies of water designated as (a) ... are protected by prohibition of any new point source discharge which increases pollutant loading or increased load from an existing point source.' " Decision on Remand, R., A-33, at 4. Construing this regulation in light of the OWQS definition of "pollution,"³⁶ he concluded: "[T]he Oklahoma parties must show by substantial evidence that the City's discharge will create a nuisance or render the Illinois River in Oklahoma harmful, detremental [sic] or injurious to any beneficial use of the river." Decision on Remand, R., A-33, at 5. The CJO upheld this interpretation with minimal discussion. Second Order on Petitions for Review, R., A-37, at 8. He excused the ALJ's failure to discuss the Anti-Degradation Policy by explaining that the ALJ "implicitly addressed the policy in his detailed analysis of the discharge's potential impact on all relevant water quality parameters." Id. at 9; see id. at 10 (if ALJ erred in this regard, it was "harmless error"). The CJO reasoned that "if the Fayetteville discharge will not cause a detectible change in any of the relevant water quality parameters [as the ALJ found], it logically follows that there will not be a 'quality degradation.' " Id. at 9-10.

We have considerable difficulty with the agency's treatment of these crucial Oklahoma regulations. First, and most importantly, the ALJ's interpretation defies the plain language of the Beneficial Use Limitations and the Anti-Degradation Policy that it references.³⁷ Secondly, the CJO ruled that the ALJ erred in applying the 1985, rather that the 1982, OWQS. Second Order on Petitions for Review, R., A-37, at 5-6. The CJO deemed this error harmless, but we disagree.³⁸ The 1985 version of the Beneficial Use Limitations, which the ALJ improperly applied, states: "All streams ... designated as (a) in Appendix A are protected by prohibition of any new point source discharge which increases pollutant loading...." OWQS Sec. 7.11 (1985) (emphasis added), quoted in Decision on Remand, R., A-33, at 4. Finding no definition of "pollutant loading" in the 1985 rule, the ALJ consulted the statutory definition of "pollution," Okla.Stat. tit. 82 Sec. 926.1.1., to construct his interpretation of the regulation. The applicable 1982 rule, however, prohibits simply "any new point source discharge of wastes " (emphasis added). Oklahoma law defines "wastes" as "industrial waste and all other liquid, gaseous or solid substances which may pollute or tend to pollute any waters of the state." Sec. 926.1.2. We do not know whether Oklahoma intended to significantly change the import of the Beneficial Use Limitation by this minor language revision, but we cannot approve a construction of the regulation based on the definition of a term ("pollution") not even contained in the applicable rule.

Finally, the agency's construction of the Beneficial Use Limitation is further flawed by the ALJ's imposition of the burden on Oklahoma to prove that the discharge would "create a nuisance" or "render the Illinois River ... harmful ... or injurious to any beneficial use." Decision on Remand at 5. Granted, the opponent of a permit has the "burden of going forward to present an affirmative case at the conclusion of the Agency case on the challenged requirement." 40 C.F.R. Sec. 124.85(a)(3)(ii). However, the "Agency has the burden of going forward to present an affirmative case in support of any challenged condition of a final permit," id. Sec. (a)(2), and more importantly, the "permit applicant always bears the burden of persuading the Agency that a permit ... should be issued and not denied," id. Sec. (a)(1). By requiring Oklahoma to "show by substantial evidence that the City's discharge will create a nuisance," the ALJ improperly transformed Fayetteville's burden of showing the permit should be issued into a burden on Oklahoma to show that it should be denied.

As for the Anti-Degradation Policy, the CJO concluded there could be no violation of the policy if there would be no detectable change in water quality. However, it is not clear whether the CJO interpreted the policy as requiring that there be no detectable change in water quality, or whether he was merely reporting the legal significance of the facts found by the ALJ. Although the CJO determined in his first order that the applicable legal standard is "whether [Fayetteville's] discharges under the permit will result in a detectable violation of the applicable water quality standards," Order on Petitions for Review, R. A-28, at 2, 12-13, his subsequent affirmation of the ALJ's erroneous construction of the Beneficial Use Limitations casts doubt on whether he intended the "no detectable change" test to apply to violations of the Beneficial Use Limitations/Anti-Degradation Policy as well. Because of this ambiguity and the errors in interpreting the Beneficial Use Limitations, we agree with the Oklahoma parties that the agency incorrectly construed and applied both Oklahoma regulations.

2. Existing Degradation of Illinois Scenic River

Under other circumstances, the errors described above might necessitate remanding to the agency with instructions to apply Oklahoma law as we have construed it. However, given the facts in this record, even proper interpretation and application of Oklahoma water quality standards cannot save this permit. The record contains substantial evidence from which the ALJ could have found that the water quality of the Illinois scenic river has been degraded and that water quality standards were being violated prior to the onset of Fayetteville's discharge to the river (see subpart a. below). We believe that, where a proposed source would discharge effluents that would contribute to conditions currently constituting a violation of applicable water quality standards, such proposed source may not be permitted.³⁹ The ALJ and the CJO erred in failing to consider whether or how the river's existing degraded condition is relevant to the decision whether to permit a new source discharge.⁴⁰

Three factual subissues are essential to our determination that the Fayetteville discharge to the Illinois River may not be permitted: (1) whether the Illinois scenic river is already degraded (i.e., whether its quality has deteriorated since the river's designation in 1970); (2) whether Fayetteville's effluent will reach the scenic river; and (3) whether and how the components of Fayetteville's discharge would contribute to conditions in the Illinois River. Although it is difficult to summarize a record that consists of five boxes and four years of briefs, orders, transcripts, prepared testimony, correspondence, technical reports and miscellaneous other documents, in the following few pages we attempt to capsulize the evidence relevant to these three issues.

a. Evidence of existing degradation. First, we address the subject of the degradation of the Illinois scenic river's historically pristine water quality. Our review of the record before the ALJ revealed ample evidence from which the ALJ could have concluded that the river's condition has deteriorated since its designation as a scenic river and that water quality standards are being violated. Examples of this evidence follow.

Myron Knudson, Director of the Water Management Division, EPA-Region 6, testified at the administrative hearing: "There has [sic] been many conversations as related to what could be done in order to clean up the Illinois River." Tr. at 221. The Attorney General of Oklahoma Robert Henry, in a prepared statement delivered at the hearing, described the Illinois River as "degraded," Tr. at 232, and stated that "the river cannot handle the existing load" of municipal wastewater treatment plant discharges, Tr. at 233. Dr. Stephen Threlkeld, witness for the Oklahoma Wildlife Federation and author of the EPA-funded "Clean Lakes" report on Lake Frances,⁴¹ summarized the results of the "Clean Lakes" study, stating: "Water quality violations of the Oklahoma Water Quality Standards in Lake Frances ... are in terms of bacteria and in terms of turbidity...." Tr. at 356. He explained that EPA funded the study "because they wanted to know what the problems were in Lake Frances." Tr. at 359; see id. at 374.

Mike Schornick, Oklahoma witness and principal of Schornick/Roberts & Associates, consulting engineers, testified that significant degradation trends are and have been occurring in the Illinois scenic river, including Lake Frances. Tr. at 398-400 (citing prefiled testimony, R., OK-2, at 3-4). He stated that certain figures in his prefiled testimony, which reflect data obtained from regular water quality monitoring conducted by Oklahoma at several points along the Illinois River, illustrate the degradation trends. Tr. at 414, 439. He claimed dissolved oxygen concentrations are reaching levels that violate OWQS. OK-2 at 4. He also stated that Arkansas and Oklahoma monitor phosphorus in their regular 305(b) trend analysis reports⁴² to EPA, Tr. at 486, and that all of those reports (1976-81 and 1984) show increasing phosphorus concentrations, Tr. at 489-90. Accounting for the addition of Fayetteville's effluent, Schornick said phosphorus loading and concentrations in Lake Frances will have increased by 106 percent and 76 percent, respectively, over 1974-75 background levels. Tr. at 454-56 (citing prefiled testimony, OK-2, at 4).

Lawrence Edmison, Director, Oklahoma Department of Pollution Control, testified that his department has received "many complaints about