Defenders of Wildlife v. U.S. Environmental

Page 946

420 F.3d 946

DEFENDERS OF WILDLIFE; Center for Biological Diversity; Craig Miller, Petitioners, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Respondent, National Association of Home Builders; State of Arizona; Arizona Chamber of Commerce, Intervenors.

Defenders of Wildlife; Center for Biological Diversity, Plaintiffs-Petitioners, v. Robert B. Flowers, Chief of Engineers and Commander, U.S. Army Corps of Engineers., Defendant-Respondent, Christine Todd Whitman, Administrator U.S. Environmental Protection Agency, Defendant-Respondent, Gale Norton; Steven Williams, Defendants-Respondents, Continental Reserve II, LLC, Defendant-Intervenor/Intervenor,

HB Land Development Company; Stephen A. Owens, State of Arizona, ex-rel, Director Arizona Department of Environmental Quality; Grosvenor Holdings; National Association of Home Builders; Home Builders Association of Central Arizona; Southern Arizona Home Builders Association; Saguaro Ranch Investments LLC; Saguaro Ranch Development Corporation, Defendant-Intervenors/Intervenors.

No. 03-71439.

No. 03-72894.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 1, 2004.

Filed August 22, 2005.

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Michael P. Senatore (argued), Michael P. Senatore, Defenders of Wildlife, Washington, D.C., Eric R. Glitzenstein, Meyer & Glitzenstein, Washington, D.C., Vera S. Kornylak, Arizona Center for Law in the Public Interest, Tucson, AZ (on the brief), for the petitioners.

Robert L. Gulley (argued), Thomas L. Sansonetti, Robert L. Gulley, John M. Lipshultz, Andrew Mergen, U.S. Department of Justice, Washington, D.C. (on the brief), for respondents Environmental Protection Agency and U.S. Fish and Wildlife Service.

James T. Skardon, Office of the Arizona Attorney General, Phoenix, AZ, for intervenor State of Arizona.

Russell S. Frye, Collier Shannon Scott, P.L.L.C., Washington, D.C., for intervenors Arizona Chamber of Commerce, et al.

Norman D. James, Esq. (argued), Norman D. James, Thomas R. Wilmoth, Fennemore Craig, Phoenix, AZ, for intervenors National Association of Home Builders, et al.

On Petition for Review of an Order of the Environmental Protection Agency. EPA No. 67-Reg. 79629, No. CV-02-01195-CKJ.

Before: REINHARDT, THOMPSON, and BERZON, Circuit Judges.

BERZON, Circuit Judge:

Under federal law, a state may take over the Clean Water Act pollution permitting program in its state from the federal Environmental Protection Agency (EPA) if it applies to do so and meets the applicable standards. This case concerns Arizona's application to run the Clean Water Act pollution permitting program in Arizona. When deciding whether to transfer permitting authority, the Fish and Wildlife Service (FWS) issued, and the EPA relied on, a Biological Opinion premised on the proposition that the EPA lacked the authority to take into account the impact of that decision on endangered species and their habitat.

The plaintiffs in this case challenge the EPA's transfer decision, particularly its reliance on the Biological Opinion's proposition regarding the EPA's limited authority. This case thus largely boils down to consideration of one fundamental issue: Does the Endangered Species Act authorize — indeed, require — the EPA to consider the impact on endangered and threatened species and their habitat when it decides whether to transfer water pollution permitting authority to state governments? For the reasons explained below, we hold that the EPA did have the authority to consider jeopardy to listed species in making the transfer decision, and erred in determining otherwise. For that reason among others, the EPA's decision was arbitrary and capricious. Accordingly, we grant the petition and remand to the EPA.

I. Background

A. The National Pollution Discharge Elimination System (NPDES)

The Clean Water Act ("the Act"), passed in 1972, established the National Pollution Discharge Elimination ("pollution permitting") System. That System gave the EPA authority to issue permits for the discharge of pollutants into navigable waters. See 33 U.S.C. § 1342(a). The Act further provides that a state may apply to the EPA to administer the federal pollution permitting program regarding waters within its borders. § 1342(b). The EPA Administrator must determine whether the state has met nine specified criteria and "shall approve" state applications that meet those criteria. Id.

The state transfer provisions of § 1342(b) have proven popular. Arizona was the forty-fifth state to obtain pollution permitting authority from the EPA. See 67 Fed.Reg. 79,629 (Dec. 30, 2002) (announcing approval of Arizona's pollution permitting authority); 65 Fed.Reg. 50,528, 50,529 (Aug. 18, 2000) (listing then-approved states).

Once the EPA transfers a permitting program to a state government, the EPA Administrator maintains an oversight role to assure that the state follows Clean Water Act standards. 33 U.S.C. § 1342(c)(2). If the Administrator determines that the state is not following those standards, the Administrator must demand corrective action. If the state does not take such action, the Administrator must withdraw approval of the state program. § 1342(c)(3).

B. The Endangered Species Act

In 1973, one year after the enactment of the Clean Water Act, Congress passed the Endangered Species Act, "the most comprehensive legislation for the preservation of endangered species ever enacted by any nation." Tenn. Valley Auth. v. Hill, 437 U.S. 153, 180, 98 S.Ct. 2279, 57 L.Ed.2d 117 (1978). The present case focuses on section 7 of the Endangered Species Act, 16 U.S.C. § 1536.

Section 7(a)(2) imposes substantive and procedural requirements on "each Federal agency" with regard to "any action authorized, funded, or carried out by such agency." 16 U.S.C. § 1536(a)(2). Each agency must "insure" that such actions are "not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of [critical] habitat of such species." Id. Agencies must use the "best scientific and commercial data available" to make such decisions, and must do so "in consultation with and with the assistance of the Secretary [of the Interior]." Id.

Endangered Species Act regulations¹ describe the consultation and action requirements imposed on agencies. Section 7's requirements apply "to all actions in which there is discretionary Federal involvement or control." 50 C.F.R. § 402.03. An agency must determine if a proposed action "may affect" either endangered or threatened species (denominated "listed species," § 402.02) or those species' critical habitat, and, if so, must seek formal consultation with the FWS, or, for marine species, the National Marine Fisheries Service. § 402.14(a). During such consultations, the FWS issues a Biological Opinion analyzing whether the action is likely to jeopardize any listed species or its habitat. § 402.14(h). The federal agency then makes a final decision regarding whether and how to pursue the proposed action. § 402.15(a).

A Biological Opinion must include a "summary of the information on which the opinion is based," a "detailed discussion of the effects of the action on listed species or critical habitat," and "[t]he Service's opinion on whether the action is likely to jeopardize the continued existence of a listed species or result in the destruction or adverse modification of critical habitat." § 402.14(h).

The "effects of the action" include "direct and indirect effects. . . together with the effects of other activities that are interrelated or interdependent with that action, that will be added to the environmental baseline[, which] includes the past and present impacts of all Federal, State, or private actions and other human activities in the action area." § 402.02. "Indirect effects are those that are caused by the proposed action and are later in time, but still are reasonably certain to occur." Id.

By its terms, section 7(a)(2) applies only to "federal agenc[ies]," not to state governmental bodies. Accordingly, the EPA's pollution permitting decisions are subject to section 7(a)(2), but state pollution permitting decisions are not.

Noting that the "EPA now consults with the [FWS and National Marine Fisheries Service] under section 7 of the [Endangered Species Act] on . . . approval of State National Pollutant Discharge Elimination (NPDES) permitting programs" but recognizing that after transfer, section 7 will not apply to the state's permitting decisions, the EPA signed a Memorandum of Agreement with the FWS governing the two agencies' involvement with transferred pollution permitting programs. See 66 Fed.Reg. 11,202, 11,202, 11,207 (Feb. 22, 2001). Asserting that the "EPA's oversight includes consideration of the impact of permitted discharges on waters and species that depend on those waters," id. at 11,215, the Memorandum lists several procedures that the EPA and FWS will establish to ensure that they communicate federal endangered species concerns to state water pollution permitting agencies.² Id. at 11,216. The Memorandum is not, however, binding on states. Id. at 11,206 ("[T]he MOA . . . does not impose any requirements on States."). Rather, the EPA will "encourage the State . . . to facilitate the involvement of permittees" in the described processes. Id. at 11,216 (emphasis added).

C. The EPA's approval of Arizona's pollution permitting transfer application

The State of Arizona (Arizona) applied on January 14, 2002 for transfer of pollution permitting authority regarding Arizona waterways (except those on Indian land). 67 Fed.Reg. 49,916, 49,917 (Aug. 1, 2002). Under that proposal, the Arizona Department of Environmental Quality (ADEQ) was to be responsible for issuing water pollution permits. The EPA's regional office in San Francisco determined that the transfer could affect listed species in Arizona and so initiated...