The impact of Arkansas v. Oklahoma on the NPDES process under the Clean Water Act.

• Author: Holmes, William J.
• Position: National Pollution Discharge Elimination System

1. Introduction

   Under the National Pollution Discharge Elimination System (NPDES)(1) permit process, the Federal Water Pollution Control Act (the Clean Water Act)(2) has maintained a delicate balance of federal power and state sovereignty in interstate disputes involving the discharge of pollutants into downstream state waterways.

   Recently, in Arkansas v. Oklahoma,(3) the U.S. Supreme Court attempted to clarify the extent to which the Clean Water Act preempts state law. The Court reaffirmed its holdings in City of Milwaukee v. Illinois (Milwaukee Il), that the Clean Water Act preempts federal common law,(4) and in International Paper Co. v. Ouellette, that the Act preempts a common law nuisance suit filed in one state under the law of that state, when the source of the alleged injury was in another state.(5) The Arkansas Court held that an upstream discharger may be required by the U.S. Environmental Protection Agency (EPA) to comply with the water quality standards of a downstream state because Congress has vested substantial discretion in the EPA.(6) In addition, the Court held that the Clean Water Act does not require the EPA to ban discharges into an interstate waterway when the waters already violate water quality standards.(7)

   Section II of this Note outlines the relevant statutory framework of the Clean Water Act(8), giving special consideration to its "savings clause(9)," and examines the development of the law in Milwaukee II and International Paper v. Ouellette.(10) Section III discusses the factual setting of Arkansas v. Oklahoma, the procedural history of the case and the U.S. Supreme Court's opinion. Section IV analyzes the implications of the Court's holding with respect to federal preemption of state law, U.S. Department of Energy v. Ohio,(11) and its practical impact upon the NPDES interstate permit process. Section V concludes that the EPA will determine the future of the interstate permit process.

2. Background

   1. The Clean Water Act

      The Clean Water Act establishes national permit requirements for the discharge of pollutants into interstate and navigable waters and directs the EPA to set effluent standards on an industry-by-industry basis.(12) As long as a state's effluent discharge standards are at least as stringent as the federal standards, a state may establish its own permit system.(13) Before issuing a permit to a discharger, the federal government (and the source state where the discharger is located if it has a permit program) must give notice and an opportunity to be heard to those downstream states whose water quality might be affected by the discharger's effluent.(14) After the source state certifies that the permit complies with its own discharge standards, the federal government can issue a permit under the Clean Water Act.(15)

      The Act explicitly preserves a state's authority to regulate water pollution, as long as state standards are at least as stringent as the federal standards they are replacing and provides: "nothing in this chapter shall . . . be construed as impairing or in any manner affecting any right or jurisdiction of the States with respect to the waters (including boundary waters) of such States."(16) This "savings clause" also permits any person to seek enforcement of an effluent standard or limitation, or other relief under statute or common law.(17) In Arkansas v. Oklahoma, the Court was required to interpret the meaning of the "savings clause."(18)

   2. Milwaukee II

      In Illinois v. City of Milwaukee (Milwaukee I),(19), which was decided just before adoption of the 1972 amendments to the Clean Water Act, the Supreme Court created a federal common law of nuisance for interstate water pollution disputes. Illinois petitioned the Supreme Court to assume original jurisdiction so that a complaint could be filed alleging that discharges by Milwaukee and other Wisconsin cities into Lake Michigan constituted a public nuisance.(20) The Court, relying on the pre-1972 statute, held that the federal interest in uniform application of the laws controlling the pollution of interstate or navigable waters required application of federal law and preempted state common law remedies.(21) It then denied the motion to assume original jurisdiction and remitted the action to district court.(22)

      After Illinois refiled the claim, the district court found that the lake was potentially damaged by the dumping of sewage by Wisconsin cities, affecting the quality of water for both drinking and recreational uses.(23) On appeal, the Seventh Circuit affirmed the judgment in part, and held that the Clean Water Act did not preempt the federal common law of nuisance.(24) The district court's order was reversed by the court of appeals to the extent that its effluent limitations were more stringent than those under the permit.(25)

      In Milwaukee II, the Supreme Court held that the Clean Water Act preempted federal common law quits for abatement of water pollution and vacated the order of the district court.(26) The Court found that the 1972 "total restructuring" and "complete rewriting" of the Clean Water Act created federal "occup[ation of] the field through the establishment of a comprehensive regulatory program supervised by an expert administrative agency."(27) The Court remanded the case to the Seventh Circuit.(28)

      At the Seventh Circuit, in Illinois v. City of Milwaukee (Milwaukee III), the court held that the Clean Water Act precluded a suit under the common law of any state, except that in which the point source polluter was located.(29) The court stated that uniformity of the federal scheme prohibited application of state common law to out-of-state dischargers, unless the common law cause of action was specifically preserved under the statute.(30) While a state can regulate discharges into its own waters, the statute does not allow the state to exercise jurisdiction over activities occurring outside its boundaries.(31) The court held that the "savings clause" did not confer a right on a citizen of a foreign state to seek a limit on pollution sources by applying the law of the foreign state, because this would lead to a "chaotic confrontation" between the states.(32)

   3. International Paper Co. v. Ouellette(33)

      The Supreme Court in Ouellette held that the Clean Water Act preempts a common law nuisance suit filed in a Vermont court under Vermont law when the source of the alleged injury was located in New York.(34) This dispute began when Vermont filed an action in the Supreme Court alleging that discharge by International Paper Company (IPC) constituted a nuisance to Vermont residents. The original action was dismissed after a settlement was reached by the EPA, IPC, Vermont, and New York.(35) But, property owners on the Vermont shore filed a class action suit in Vermont State superior Court alleging a "continuing nuisance" from discharge of effluent by IPC on the New York side of Lake Champlain.(36) After removal of the case to federal district court, the plaintiffs moved for judgment on the pleadings, based on preemption of the lawsuit by the Clean Water Act.(37)

      The district court, relying on the Milwaukie III decision, determined that the issue was not whether legislation preempted state common law with respect to water pollution, but whether legislation expressly or implicitly authorized a state common law remedy.(38) The court analyzed three interpretations of the Clean Water Act's state authority and private suits.(39) The court rejected the most restrictive view that the only state common lawsuits preserved were those involving waters not covered by the Clean Water Act.(40) It also rejected a view, articulated in Milwaukee III, that the Clean Water Act preserved state nuisance law only with respect to discharges within the state.(41) The district court adopted the most liberal view and held that the nuisance law of the state where the injury occurred is preserved by the Clean Water Act.(42)

      The Supreme Court agreed that a private nuisance suit could be maintained in federal court in Vermont against a water pollution source in New York but held the nuisance law of the source state of New York must be applied.(43) The Court inferred that Congress intended to leave no room to the states; the Act preempted state regulation of water pollution.(44) The Court relied upon the analysis in Milwaukee II that the 1972 amendments to the Clean Water Act are "an all-encompassing program of water pollution regulation"(45) in which federal law is primary.(46) As a result, the "savings clause" does not preclude preemption of state law based upon the goals and policies of the Clean Water Act.(47) The nuisance law of Vermont, is applied to the source state of New York, stood as an obstacle to the full implementation of the Clean Water Act.(48) Applying the forum state's common law would circumvent the NPDES system and upset the balance between public and private interests by compelling the source state to adopt a different compliance schedule than that approved by the EPA.(49) The Court, in finding primacy of federal law, chose efficiency and predictability in the permit system over the potential chaos that could result from conflicts between state laws.

      Nonetheless, the Court held that the Clean Water Act does not preclude an affected state from bringing a nuisance action in the source state,(50) because the "savings clause" preserved that remedy.(51) The Court relied on Milwaukee II and interpreted the Clean Water Act to permit a source state to impose higher restrictions on its own point sources.(52) The Court's conclusion does not upset the balance among the interests of the source states, affected states, and federal interests because it does not disrupt the regulatory scheme of the Clean Water Act. Further, restricting lawsuits to those brought under source-state nuisance law provides a limit on potential regulations.(53)

      Justice Brennan, joined by Justices Blackmun and Marshall, concurred in...