ESA Law Alert: Federal District Court in Oregon Rejects Argument that ESA Consultation is Required For Issuance of NPDES Permit by the State

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Oregon Natural Resources Council v. Hallock, No. 02-1650-CO, (D.Or.) has been closely watched by permittees, state environmental agencies, and environmental groups because of its potential to upend the permitting process. ONRC brought this action against Stephanie Hallock, Director of the Oregon Department of Environmental Quality (DEQ), and Stephen Johnson, Administrator of the Environmental Protection Agency (EPA), alleging that they violated the Endangered Species Act (ESA) for failing to consult with the U.S. Fish and Wildlife Service in connection with issuing a National Pollutant Discharge Elimination System (NPDES) permit. The NPDES permit in question was issued to the Klamath Irrigation District (KID) to allow use of the aquatic herbicide acrolein to keep its irrigation system free of weeds. The KID administers a series of canals and waterways which contain shortnose and Lost River sucker fish, listed as endangered and thus protected under the ESA. On Nov. 29, 2006, the Court issued its order dismissing the case and granting the summary judgment motions by defendants Hallock and Johnson.

The heart of the issue presented by ONRC’s challenge relates to the hybrid nature of Oregon’s NPDES program and, indeed, any state permit program approved by EPA under federal law. Under the federal Clean Water Act (CWA), EPA is authorized to approve state NPDES permit and CWA enforcement programs if EPA determines that such programs have adequate authority to ensure consistency with the CWA. EPA approval requires that the state give EPA notice of each permit application and every action proposed by the state with regard to an individual permit. EPA has the authority to object to a state’s issuance of an NPDES permit if it determines that the permit is not consistent with the CWA, but may waive its right to review an individual permit in a particular circumstance. In Oregon, DEQ is the authorized permitting entity and issues NPDES permits under state law, with the assistance of substantial EPA funding.

Under the section 7 of the ESA, federal agencies are required to consult with federal wildlife and fisheries agencies to ensure that action “authorized, funded or carried out by such agency . . . is not likely to jeopardize the continued existence of any threatened or endangered species” or destruction or modification of critical habitat. 16 U.S.C. § 1536(a)(2). ONRC argued that DEQ had an obligation to commence an ESA section 7 consultation when it issued the KID NPDES permit because DEQ’s actions were somehow “federalized.”

In addition, ONRC maintained that because EPA has the ability to oversee DEQ’s permitting decisions in Oregon, and because of the general federal funding that DEQ receives from EPA in administering the state CWA program in Oregon, EPA and DEQ had a joint obligation to initiate consultation before they issued the KID NPDES permit. While EPA did not take any formal action on the KID permit, ONRC argued that EPA’s review of the KID permit and its decision not to object to its issuance constituted the requisite “federal action” requiring consultation under the ESA.

The court summarily rejected these arguments, concluding that neither EPA’s review of the KID NPDES permit nor EPA’s failure to object to the permit’s issuance constitute “federal action” sufficient to trigger the ESA consultation requirement. The court based this finding on the fact that EPA does not have a statutory duty to review all NPDES permits issued by the authorized states. However, the court added that the ESA consultation requirement would not be triggered even if EPA had such a duty. The court similarly rejected ONRC’s argument that DEQ’s permit program was somehow “federalized” by virtue of receiving funding from EPA. “Defendant Hallock in her individual or official capacity is not a federal agency and as such she cannot be required to comply with the EPA consultation requirements.” Order at 13.

Magistrate Judge Cooney’s decision joins the chorus of decisions across the country rejecting the expansive interpretation of ESA section 7 advanced by ONRC in this case. The case is consistent with case law holding that state agencies are not subject to the ESA consultation requirements. See, e.g., Defenders of Wildlife v. U.S. Environmental Protection Agency, 420 F3d 946, 951, 971 (9th Cir 2005) (Stating in dicta that an authorized state agency is not subject to ESA consultation requirement when issuing NPDES permits.); American Forest and Paper Ass’n v. U.S. Environmental Protection Agency, 137 F3d 291, 2299 (5th Cir 1998) (Court rejected an EPA attempt to require Louisiana, as a condition to approval of the state’s NPDES program, to engage in ESA consultation before issuing NPDES permits.). The magistrate’s decision in ORNC v. Hallock also is consistent with the Ninth Circuit’s recent opinion in Western Watersheds Project v. Matieko, 2006 WL 2042825 (9th Cir 2006), where the court held that the duty to consult under Section 7 of the ESA only applies to affirmative actions by a federal agency and not to an agency’s “failure to exercise discretion.” Id. at 6-8. Under the reasoning adopted in this opinion, state issued permits—whether under the CWA, as in this case, or the Clean Air Act, or any other federally approved state program that may enjoy the benefits of federal funding—will not require an ESA consultation merely because of the federalized or hybrid nature of the permitting process.

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