Central Valley Project Water Supply Contracts Withstand ESA Challenge in Ninth Circuit

On July 17, 2012, the Ninth Circuit, in a 2:1 opinion, affirmed Judge Oliver Wanger’s ruling that the United States Bureau of Reclamation (“Bureau”) did not violate the federal Endangered Species Act (“ESA”) when it renewed 41 water supply contracts in 2005 as part of its operation of the Central Valley Project (“CVP”) in California’s Sacramento-San Joaquin River Delta (“Delta”).

                          

The Ninth Circuit’s decision is the latest chapter in the clash between water supply, water rights and the ESA in the embattled Delta.  Plaintiffs in this case, Natural Resources Defense Council and other environmental groups, alleged that the Bureau failed to comply with Section 7(a)(2) of the ESA, which requires federal agencies to consult with U.S. Fish and Wildlife Service (“Service”) if their actions may affect a listed species or critical habitat, when it renewed the 41 water supply contracts in reliance on inadequate ESA review.  Two sets of water supply contracts were at issue—the “DMC Contracts” and the “Settlement Contracts.”  

First, with respect to the DMC Contracts, the court concluded that plaintiffs could not proceed to the merits of their case because they failed to meet threshold Article III standing requirements.  Specifically, plaintiffs failed to establish the requisite causal connection between the threatened injury—harm to the threatened delta smelt—and the Bureau’s renewal of the DMC Contracts because those contracts contained a “shortage provision” that allowed the Bureau to take actions necessary to comply with the ESA, including restricting water deliveries for the benefit of the delta smelt.

Second, with respect to the “Settlement Contracts,” the court found that although plaintiffs had established requisite Article III standing, their claims nonetheless failed because the Bureau’s renewal of the Settlement Contracts was not a discretionary action subject to the ESA’s Section 7(a)(2) consultation requirements.  The court held that the Bureau’s “hands were tied” insofar as its inability to impose any measures that would restrict water deliveries to these contractors due to requirements imposed by the Reclamation Act, the Central Valley Project Improvement Act, the California Water Resource’s Control Board Decision granting the Bureau rights to operate the CVP, the terms of the Settlement Contracts themselves which resolved senior water rights claims in conjunction with the state’s grant of water rights to the Bureau, and California law governing water rights.  Thus, based on the Supreme Court’s decision in National Association of Home Builders v. Defenders of Wildlife, which held that Section 7(a)(2) of the ESA only applies to discretionary acts by Federal agencies, the Bureau was not required to consult with Service when it renewed the Settlement Contracts.   

Dissenting Judge Richard A. Paez disagreed on both counts, concluding that plaintiffs had established the requisite standing to challenge the DMC contracts because the record supported a finding that ESA compliance by the Bureau could potentially advance plaintiffs’ concrete interest in protecting the delta smelt and its habitat through various measures including providing less water to the contractors and altering the timing of the water deliveries to the benefit of the delta smelt—a showing sufficient to establish standing for the alleged procedural injury.  With respect to the Settlement Contracts, Judge Paez concluded that the Bureau was obligated to consult with the Service pursuant to Section 7(a)(2) of the ESA because it maintained discretion not only in its decision of whether to renew the Settlement Contracts but also in its renegotiation of contract terms, also potentially to the benefit of the delta smelt.   

--Nicole Martin

Supreme Court Allows Pre-Enforcement Challenge to EPA Administrative Order

In a unanimous decision authored by Justice Scalia, the Supreme Court on March 21 ruled that administrative orders issued by EPA are subject to pre-enforcement judicial review under the Administrative Procedure Act.  In that case, Sackett v. Environmental Protection Agency, No. 10-1062, EPA issued a compliance order alleging that landowners had illegally placed fill material in wetlands, without a permit required under section 404 of the Clean Water Act.  The order directed the landowners to restore the property.  The landowners requested a hearing from EPA, taking the position that EPA lacked jurisdiction to regulate the wetlands because the wetlands did not meet the definition of "waters of the United States" under the Clean Water Act.  EPA denied the request, and the landowners sued under the APA.

The Court ruled that the order was a "final agency action" subject to the APA, and that the landowners could therefore challenge the order.  The Court considered it significant that EPA took the position that the landowners could be liable not only for penalties of up to $37,500 per day of violation for violating the statute, but also an additional $37,500 per day for not complying with the compliance order, and took EPA to task for expecting the landowner to wait until EPA files a judicial action as potential penalties continued to pile up.  The Court further noted that the fact that the government had not yet brought a judicial action against the defendants was not a justification to deny the defendants the right to challenge EPA's administrative order.

The ruling removes a significant source of uncertainty for landowners who have previously been forced to decide whether to comply with an EPA administrative order, or to refuse to comply and run the risk of substantial penalties if the order was later determined to be valid.  However, Justice Ginsburg, in a noteworthy concurrence, pointed out that the Court's ruling allowing pre-enforcement review applied only to the landowners' challenge to EPA's authority to regulate their land under the Clean Water Act, but did not address whether pre-enforcement review would be allowed to challenge the terms and conditions of EPA's administrative order.

--Josh Bloom

EPA Releases Final Health Assessment for Tetrachloroethylene (PERC)

On February 10, 2012, the U.S. Environmental Protection Agency (EPA) posted the agency’s final toxicological review of tetrachloroethylene. Tetrachloroethylene – also known as PERC, or PCE – is a solvent widely used in the dry cleaning industry. The review characterizes PERC as a “likely human carcinogen” and provides estimates for both cancer and non-cancer effects of exposure to the chemical. EPA's new calculated cancer risks for PCE are lower than the current values used by EPA, while non-cancer risks are higher by an order of magnitude or more.  Thus, risk-based screening levels based on EPA's newly-calculated cancer risks may increase, resulting in less stringent cleanup standards at PCE-contaminated sites.

Many states, including California, already have stricter risk-based cleanup standards for PCE, and will not be immediately affected by the new federal standards.  The new standard will be used to develop a revised Maximum Contaminant Level (MCL, the federal drinking water standard) for PCE, but it is too early to predict whether that standard will be lower than the current MCL.

-Chris Jensen and Morgan Gilhuly

Ninth Circuit Invalidates State Implementation Plan

California's Central Valley is once again without an approved State Implementation Plan for ozone. On Friday, January 20, the Ninth Circuit held, in Sierra Club v. US EPA, that EPA had acted arbitrarily and capriciously in approving the 2004 plan.

The Valley is an extreme non-attainment area for ozone, and has been a non-attainment area since 1991. California proposed a SIP for the Valley in 2004, but amendments to the plan and EPA's review took so long that by the time EPA approved the plan, which was based on 2004 data, in 2010 there was more current data that EPA chose not to consider in approving the SIP. The Ninth Circuit held that the SIP was required to be based on "current" and "accurate" data, and although that standard doesn't require constant updating, EPA could not ignore data that was collected in 2007 and in EPA's possession when it approved the SIP.

US Supreme Court decides AEP

On Monday, June 20, 2011, the US Supreme Court issued its decision in American Electric Power Co., Inc. v. Connecticut. The Supreme Court reversed the Second Circuit Court of Appeals and held that the Clean Air Act displaces any potential claim under federal common law to restrain emissions of greenhouse gases. The Supreme Court remanded the case back to the lower courts to decide whether the plaintiffs (a group of states and private land trusts) could sue for the same relief -- a cap on GHG emissions by large power companies -- under state nuisance law. The opinion did not take any position on that issue, but it was clear that at least some members, and perhaps all, of the Court would be skeptical of any claim that judges should determine GHG emissions. The decision was unanimous, with Justice Sotomayor recusing herself because she had participated in the Second Circuit decision below.

The upshot of this opinion is that it will increase the impetus for EPA to pursue comprehensive GHG regulation, even in the absence of further federal legislation. The Court made it clear that EPA is the agency charged under current federal law with regulation of GHGs, and that "[i]t is altogether fitting that Congress designated an expert agency . . . as best suited to serve as primary regulator" of GHG emissions. The Court explained that any EPA decision not to regulate GHG emissions would be subject to judicial review, and ultimately would end up back in the Supreme Court.

--Morgan

More on Judge Goldsmith's ruling and its impact

As the New York Times notes in this article, Judge Goldsmith's ruling is just part of a national retreat from a cap-and-trade approach.

--Morgan

GHG Regs

The most effective enemy of the California Cap-and-Trade regulations is turning out to be the environmental community. First, environmental groups sued to stop the California Air Resources Board from promulgating the cap-and-trade regulation without a further CEQA analysis -- and won. Now, the Sierra Club has asked Governor Brown to re-assess cap-and-trade. So many cliches come to mind, it's hard to know where to start: with friends like these, who needs enemies, don't let the perfect be the enemy of the good, don't throw the baby out with the bath water, etc., etc. Whatever one's view of cap-and-trade, it seems obvious that without a successful AB 32 program in California, national action on climate change is far less likely. Thus, it's strange to see environmentalists lining up in opposition.