Number range CHAPTER**ENVIRONMENTAL PROTECTION AGENCY**

**40 CFR Part 122**

**\[EPA-HQ-OW-2006-0141; FRL-XXXX-X\]**

**RIN** **2040-AE86**

**Number range CHAPTERNational Pollutant Discharge Elimination System
(NPDES) Water Transfers Rule**

**AGENCY:** Environmental Protection Agency (EPA).

**ACTION:** Final Rule

**SUMMARY:** EPA is issuing a regulation to clarify that water transfers
are not subject to regulation under the National Pollutant Discharge
Elimination System (NPDES) permitting program. This rule defines water
transfers as an activity that conveys waters of the United States to
another water of the United States without subjecting the water to
intervening industrial, municipal, or commercial use. This rule focuses
exclusively on water transfers and does not affect any other activity
that may be subject to NPDES permitting requirements.

Today's rule is consistent with EPA's June 7, 2006, proposed rule, which
was based on an August 5, 2005, interpretive memorandum entitled "Agency
Interpretation on Applicability of Section 402 of the Clean Water Act to
Water Transfers."

**DATES:** These final regulations are effective on \[INSERT DATE 60
days after publication in the Federal Register\]. For judicial review
purposes, this action is considered issued as of 1 p.m. eastern daylight
time (e.d.t.) on \[INSERT DATE two (2) weeks after publication in the
Federal Register\], as provided in 40 CFR 23.2. Under section 509(b)(1)
of the Clean Water Act, judicial review of the Administrator\'s action
can only be had by filing a petition for review in the United States
Court of Appeals within 120 days after the decision is considered issued
for purposes of judicial review.

**ADDRESSES:** The administrative record is available for inspection and
copying at the Water Docket, located at the EPA Docket Center (EPA/DC),
EPA West 1301 Constitution Ave., NW., Washington DC. The administrative
record is also available via EPA Dockets (Edocket) at
[*http://www.regulations.gov*](http://www.regulations.gov_/) under
docket number EPA-HQ-OW-2006-0141. The rule and key supporting documents
are also electronically available on the Internet at \*\*\*\*\*\*.

**FOR FURTHER INFORMATION CONTACT:** For additional information contact
Virginia Garelick, Water Permits Division, Office of Wastewater
Management (4203M), Environmental Protection Agency, 1200 Pennsylvania
Ave., NW., Washington, DC 20460; telephone number: 202-564-2316; fax:
202-564-6384; e-mail address: *garelick.virginia@epa.gov*.

**SUPPLEMENTARY INFORMATION:**

I. General Information

A. Does this Action Apply to Me?

B. How Can I Get Copies of This Document and Other Related Information?

C. Under What Legal Authority Is This Final Rule Issued?

D. What is the Comment Response Document?

II\. Background and Definition of Water Transfers

III\. Rationale for the Final Rule

A. Legal Framework

B. Statutory Language and Structure

C. Legislative History

IV\. Public Comments

V. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

B. Paperwork Reduction Act

C. Regulatory Flexibility Act

D. Unfunded Mandates Reform Act

E. Executive Order 13132: Federalism

F. Executive Order 13175: Consultation and Coordination with Indian
Tribal Governments

G. Executive Order 13045: Protection of Children from Environmental
Health and Safety Risks

H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use

I. National Technology Transfer and Advancement Act

J. Executive Order 12898: Actions to Address Environmental Justice in
Minority Populations and Low-Income Populations

K. Congressional Review Act

**I. General Information**

A. *Does this Action Apply to Me?*

This action applies to those involved in the transfer of waters of the
United States. The following table provides a list of standard
industrial codes for operations potentially covered under this rule.

  ----------------- ---------------- -----------------------------------------
  Table 1. --                        
  Entities                           
  Potentially                        
  Regulated by this                  
  Rule                               

  Category          NAICS            Examples of potentially affected entities

  Resource          924110           Government establishments primarily
  management        Administration   engaged in the administration,
  parties (includes of Air and Water regulation, and enforcement of water
  state departments Resource and     resource programs; the administration and
  of fish and       Solid Waste      regulation of water pollution control and
  wildlife, state   Management       prevention programs; the administration
  departments of    Programs         and regulation of flood control programs;
  pesticide                          the administration and regulation of
  regulation, state                  drainage development and water resource
  environmental                      consumption programs; and coordination of
  agencies, and                      these activities at intergovernmental
  universities).                     levels.

                    924120           Government establishments primarily
                    Administration   engaged in the administration,
                    of Conservation  regulation, supervision and control of
                    Programs         land use, including recreational areas;
                                     conservation and preservation of natural
                                     resources; erosion control; geological
                                     survey program administration; weather
                                     forecasting program administration; and
                                     the administration and protection of
                                     publicly and privately owned forest
                                     lands. Government establishments
                                     responsible for planning, management,
                                     regulation and conservation of game,
                                     fish, and wildlife populations, including
                                     wildlife management areas and field
                                     stations; and other administrative
                                     matters relating to the protection of
                                     fish, game, and wildlife are included in
                                     this industry.

                    237110 Water and This category includes entities primarily
                    Sewer Line and   engaged in the construction of water and
                    Related          sewer lines, mains, pumping stations,
                    Structures       treatment plants and storage tanks.
                    Construction     

                    237990 Other     This category includes dam Construction
                    Heavy and Civil  and management, flood control structure
                    Engineering      construction, drainage canal and ditch
                    Construction     construction, flood control project
                                     construction, and spillway, floodwater,
                                     construction

  Public Water      221310 Water     This category includes entities engaged
  Supply            Supply           in operating water treatment plants
                                     and/or operating water supply systems.
                                     The water supply system may include
                                     pumping stations, aqueducts, and/or
                                     distribution mains. The water may be used
                                     for drinking, irrigation, or other uses.
  ----------------- ---------------- -----------------------------------------

This table is not intended to be exhaustive, but rather provides a guide
for readers regarding entities likely to be affected by this action.
This table lists the types of entities that EPA is now aware could
potentially be affected by this action. Other types of entities not
listed in the table could also be affected. To determine whether your
facility is affected by this action, you should carefully examine the
applicability criteria in 40 CFR 122.3. If you have questions regarding
the applicability of this action to a particular entity, consult the
person listed in the preceding "**FOR FURTHER INFORMATION CONTACT**"
section.

B. *How Can I Get Copies of This Document and Other Related
Information?*

1\. *Docket.* EPA has established an official public docket for this
action under Docket ID No. EPA-HQ-OW-2006-0041. The official public
docket consists of the documents specifically referenced in this action,
any public comments received, and other information related to this
action. Although listed in the index, some information, such as
copyrighted material, will be publicly available only in hard copy.
Publicly available docket materials are available either electronically
in *www.regulations.gov* or in hard copy at the Water Docket in the EPA
Docket Center, EPA West, 1301 Constitution Ave., NW., Washington, DC.
The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday
through Friday, excluding legal holidays. The telephone number for the
Public Reading Room is (202) 566-1744, and the telephone number for the
Water Docket is (202) 566-2426.

2\. *Electronic Access.* You may access this Federal Register document
electronically through the EPA website under the \"Federal Register\"
listings at \*\*\*\*.

C. *Under What Legal Authority Is this Final Rule Issued?*

This final rule is issued under the authority of sections 402 and 501 of
the Clean Water Act., 33 U.S.C. 1342 and 1361.

D. *What is the Comment Response Document?*

EPA received a large number of comments on the proposed rule, including
thousands of form letters. EPA evaluated all of the comments submitted
and prepared a Comment Response Document containing both the comments
received and the Agency\'s responses to those comments. The Comment
Response Document complements and supplements this preamble by providing
more detailed explanations of EPA\'s final action. The Comment Response
Document is available at the Water Docket.

**II. Background and Definition of Water Transfers**

Water transfers occur routinely and in many different contexts across
the United States. Typically, water transfers route water through
tunnels, channels, and/or natural stream water features, and either pump
or passively direct it for uses such as providing public water supply,
irrigation, power generation, flood control, and environmental
restoration. Water transfers can be relatively simple, moving a small
quantity of water a short distance, or very complex, transporting
substantial quantities of water over long distances, across both State
and basin boundaries. Water transfers may be of varying complexities and
sizes; there may be multiple reservoirs, canals, or pumps over the
course of the transfer, or the route may be a more direct connection
between the donor and the receiving waterbody. There are thousands of
water transfers currently in place in the United States, including
sixteen major diversion projects in the western States alone. Examples
include the Colorado-Big Thompson Project in Colorado and the Central
Valley Project in California.

Water transfers are administered by various federal, State, and local
agencies and other entities. The Bureau of Reclamation administers
significant transfers in western States to provide approximately 140,000
farmers with irrigation water. With the use of water transfers, the Army
Corps of Engineers keeps thousands of acres of agricultural and urban
land in southern Florida from flooding in former areas of Everglades
wetlands. Many large cities in the west and the east would not have
adequate sources of water for their citizens were it not for the
continuous redirection of water from outside basins. For example, both
the cities of New York and Los Angeles depend on water transfers from
distant watersheds to meet their municipal demand. In short, numerous
States, localities, and residents are dependent upon water transfers,
and these transfers are an integral component of U.S. infrastructure.

The question of whether or not an NPDES permit is required for water
transfers arises because activities that result in the movement of
waters of the U.S., such as trans-basin transfers of water to serve
municipal, agricultural, and commercial needs, typically move pollutants
from one waterbody (donor water) to another (receiving water). Although
there have been a few isolated instances where entities responsible for
water transfers have been issued NPDES permits, Pennsylvania is the only
NPDES permitting authority that regularly issues NPDES permits for water
transfers. Pennsylvania began issuing permits for water transfers in
1986, in response to a State court decision mandating the issuance of
such permits. See *DELAWARE Unlimited v. DER*, 508 A.2d 348 (Pa. Cmwlth,
1986). In addition, some Courts of Appeals have required NPDES permits
for specific water transfers associated with the expansion of a ski
resort and the supply of drinking water. See, e.g., *Dubois v. U.S.
Dep\'t of Agriculture*, 102 F.3d 1273 (1st Cir. 1996); *Catskill
Mountains Chapter of Trout Unlimited, Inc. v. City of New York*, 273
F.3d 481 (2nd Cir 2001), aff'd, *Catskill Mountains Chapter of Trout
Unlimited, Inc. v. City of New York*, 451 F.3d 77 (2nd Cir 2006).
Otherwise, however, water transfers have not been regulated under
section 402 of the Clean Water Act (CWA or the Act).

The Supreme Court recently addressed the issue of whether an NPDES
permit is necessary for the mere transfer of water in *South Fla. Water
Mgmt. Dist. v. Miccosukee Tribe of Indians*, 541 U.S. 95 (2004). The
Supreme Court in *Miccosukee* vacated a decision by the 11^th^ Circuit,
which had held that a Clean Water Act permit was required for
transferring water from one navigable water into another, a Water
Conservation Area in the Florida Everglades. The Court remanded the case
for further fact-finding as to whether the two waters in question were
"meaningfully distinct."[^1] If they were not, an NPDES permit would not
be required. The Court declined to resolve the question of whether water
transfers require NPDES permits when the waterbodies at issue are
meaningfully distinct. The Court noted that some legal arguments made by
the parties regarding this question had not been raised in the lower
court proceedings and noted that these arguments would be open to the
parties on remand. *Id*. at 109.

On August 5, 2005, EPA issued a legal memorandum entitled "Agency
Interpretation on Applicability of section 402 of the Clean Water Act to
Water Transfers" ("interpretive memorandum"). The principal legal
question addressed in the interpretive memorandum was whether the
movement of pollutants from one water of the U.S. to another by a water
transfer is the "addition" of a pollutant potentially subjecting the
activity to the permitting requirement under section 402 of the Act.
Based on the statute as a whole and consistent with the Agency's
longstanding practice, the interpretive memorandum concluded that
Congress generally expected water transfers would be subject to
oversight by water resource management agencies and State non-NPDES
authorities, rather than the permitting program under section 402 of the
CWA.

On June 7, 2006, EPA proposed regulations based on the analysis
contained in the interpretive memorandum to expressly state that water
transfers are not subject to regulation under section 402 of the CWA.
The Agency proposed to define water transfers as "an activity that
conveys waters of the United States to another water of the United
States without subjecting the water to intervening industrial,
municipal, or commercial use." The Act reserves the ability of States to
regulate water transfers under State law and this proposed rulemaking
was not intended to interfere with this State prerogative. *See* CWA
section 510.

EPA is issuing a final regulation that is nearly identical to the
proposed rule. (Minor changes have been made for clarity.) Through
today's rule, the Agency concludes that water transfers, as defined by
the rule, do not require NPDES permits because they do not result in the
"addition" of a pollutant. Consistent with the proposed rule, EPA
defines water transfers in the following manner: "Water transfer means
an activity that conveys or connects waters of the United States without
subjecting the transferred water to intervening industrial, municipal,
or commercial use." In order to constitute a "water transfer" under this
rule, and, therefore, be exempt from the requirement to obtain an NPDES
permit, the water being conveyed must be a water of the U.S.[^2] prior
to being discharged to the receiving waterbody. If the water that is
being conveyed is not a water of the U.S. prior to being discharged to
the receiving body, then that activity does not constitute a water
transfer under today's rule. Additionally, the water must be conveyed
from one water of the U.S. to another water of the U.S. Conveyances that
remain within the same water of the U.S., therefore, do not constitute
water transfers under this rule, although movements of water within a
single water body are also not subject to NPDES permitting requirements.
As the rule makes clear, in order to be a water transfer under the rule,
the water must be conveyed without being subjected to an intervening
industrial, municipal, or commercial use.

Consider water that is being moved from Reservoir A to Reservoir B in a
different watershed. In order to get from Reservoir A to Reservoir B,
the water must first be released through a dam. The water then travels
down River A, which is considered a water of the U.S. Next, the water is
conveyed from River A to River B through a tunnel. Finally, the water
travels down River B, also a water of the U.S., and flows into Reservoir
B. There are several points in this example where water is conveyed from
one body to another, but not all of those points would themselves
constitute a "water transfer" because they are not the conveyance of
"waters of the United States to another water of the United States." The
first example is the release from Reservoir A to River A. This does not
constitute a water transfer under EPA's definition because the water on
both sides of the dam is part of the same water of the U.S.[^3] The next
movement is the release from River A into River B, through a tunnel.
This release constitutes a water transfer under the scope of this rule
because it conveys water from one water of the U.S. to another water of
the U.S. without subjecting the water to an intervening industrial,
municipal or commercial use. Therefore, unless this conveyance itself
introduces pollutants into the water being conveyed, the release will
not require an NPDES permit under today's rule. River B's subsequent
flow into Reservoir B, which is formed by a dam on Reservoir B, does not
constitute a water transfer because it is merely movement within the
same water of the U.S., and, as discussed above, would not require an
NPDES permit for such movement.

The remainder of the preamble to this final rule is organized as
follows. Section III discusses the rationale for the final rule based on
the language, structure, and legislative history of the Clean Water Act.
Section IV summarizes and responds to the major comments received in
response to the scope of the proposed rule. Section V reviews statutory
provisions and various executive orders.

**III. Rationale for the Final Rule**

On June 7, 2006, EPA published a proposed rule that would exclude from
NPDES permit requirements discharges from water transfers that do not
subject the water to an intervening industrial, municipal, or commercial
use, so long as pollutants are not introduced by the water transfer
activity itself. This proposal, like EPA's August 5, 2005, interpretive
memorandum, explained that no one provision of the Act expressly
addresses whether water transfers are subject to the NPDES program but
described the indicia of Congressional intent that water transfers not
be so regulated. Therefore, today's rule appropriately defers to
congressional concerns that the statute not unnecessarily burden water
quantity management activities and excludes water transfers from the
NPDES program. This section will review the legal framework for
evaluating EPA's interpretation of the CWA, explain the Agency's
interpretation of the CWA, including a brief survey of prior litigation
over the relevant statutory terms, and outline the relevant legislative
history.

A. Legal Framework

Under what is traditionally viewed as *Chevron* analysis, a court
examining the legality of an agency's interpretation of a statute is to
first ask whether the statute speaks clearly to the precise question at
issue and must give effect to the unambiguously expressed intent of
Congress if such unambiguous intent can be discerned. *Chevron* *U.S.A.
Inc. v. NRDC*, 467 U.S. 837, 842-843 (*Chevron*); *National Ass.* *of
Homebuilders, et al. v. Defenders of Wildlife, et al.*, 127 S.Ct. 2518,
2534 (2007) (*NAHB*). To the extent that a statute does not speak
clearly to the specific issue, the Agency interpretation must be upheld
if it is based on a permissible construction of the statute. *Chevron*,
467 U.S. at 843; *NAHB,* 127 S.Ct. at 2534. Courts are required to
accept an agency's reasonable interpretation of a statute, even if this
interpretation differs from what the court believes is the "best"
statutory interpretation. *National Cable and Telecommunications Ass'n,
et al. v. Brand X, et al.*, 545 U.S. 967, 980 (2005) (*Brand X*).

Deference to an agency interpretation of a statute under *Chevron* is
appropriate where Congress has authorized an agency to make rules
carrying the force of law, and such authorization is apparent where the
agency is empowered to make rules or adjudicate issues or there are
other indications of comparable congressional intent. *United States v.
Mead Corp.*, 533 U.S. 218 (2001). Congress has expressly authorized EPA
to prescribe regulations as are necessary to administer the CWA, and
today's rule has been promulgated to address the question whether water
transfers require NPDES permits. CWA § 501(a); 33 U.S.C. § 1361(a); 71
Fed. Reg. 32887 (June 7, 2006).

As discussed below, EPA has reviewed the language, structure and
legislative history of the CWA and concludes that today's rule, which
clarifies that NPDES permits are not required for transfers of waters of
the United States from one water body to another, is a permissible
construction of the statute. Taken as a whole, the statutory language
and scheme support the conclusion that permits are not required for
water transfers.

B**.** *Statutory Language and Structure*

The Clean Water Act prohibits the discharge of a pollutant by any person
except in compliance with specified statutory sections, including
section 402. CWA section 301(a). The term "discharge of a pollutant" is
defined as "any addition of any pollutant to navigable waters from any
point source." CWA section 502(12). The legal question addressed by
today's rule is whether a water transfer as defined in the new
regulation constitutes an "addition" within the meaning of section
502(12).

The term "addition" has been interpreted by courts in a variety of
contexts that are relevant here. Several courts of appeals have
determined that water flowing through dams and hydroelectric facilities
does not constitute an addition of a pollutant under the CWA.
Specifically, the Court of Appeals for the D.C. Circuit agreed with EPA
that the term "addition" may reasonably be limited to situations in
which "the point source itself physically introduces a pollutant into a
water from the outside world." *National Wildlife Fed'n v. Gorsuch,* 693
F.2d 156, 175 (D.C. Cir. 1982) (*Gorsuch*) (accepting EPA's view that
the requirement for an NPDES "is established when the pollutant first
enters the navigable water, and does not change when the polluted water
later passes through the dam from one body of navigable water (the
reservoir) to another (the downstream river).") The Court of Appeals for
the Sixth Circuit reached the same conclusion with regard to a
hydropower facilities operating on Lake Michigan. *National Wildlife
Fed'n v. Consumers Power Co.* 862 F.2d 580, 584 (6^th^ Cir. 1988)
(*Consumers Power*) (agreeing with the *Gorsuch* Court's conclusion that
EPA's construction of "addition" is a permissible one). Both the
*Gorsuch* and *Consumers Power* courts accorded deference to EPA's
interpretation of the CWA, and specifically to its interpretation of the
term "addition." *Gorsuch*, 693 F.2d at 166-167; *Consumers Power*, 862
F.2d at 584.

Three other Courts of Appeals, however, have concluded that where a
water transfer involves distinct waters of the United States, the
transfer constitutes an "addition" of pollutants. *Dubois v. U.S. Dept.
of Agriculture, et al.*, 102 F.3d 1273, 1298-1300 (1^st^ Cir. 1996);
*Catskill Mountains Chapter of Trout Unlimited, Inc. v. City of New
York*, 273 F.3d 481, 491-93 (2^nd^ Cir. 2001) (*Catskill I*);
*Miccosukee Tribe of Indians v. South Florida Water Management
District*, 280 F.3d 1364 (11^th^ Cir. 2002), *vacated* by *Miccosukee*,
541 U.S. at 112.[^4] These three Courts of Appeals construed the term
"addition" so as to include transfers of water from one body to another
distinct body (*Catskill I*, 273 F.3d at 491 ("EPA's position . . . is
that for there to be an 'addition,' a 'point source must introduce the
pollutant into navigable water from the outside world.' We agree with
this view *provided that 'outside world' is construed as any place
outside the particular water body to which pollutants are introduced*.")
(internal citations omitted, emphasis added); *Catskill II*, 451 F.3d at
82-85) or transfers that cause water to move in a direction it would not
ordinarily flow (*DuBois*, 102 F.3d at 1297; *Catskill I*, 273 at 493-94
(explaining *DuBois*); *Miccosukee*, 280 F.3d at 1368-69).

Number range CHAPTER In pending litigation, on the other hand, the
United States has taken the position that the Clean Water Act generally
does not subject water transfers to the NPDES program:

> The statute defines "'discharge of a pollutant'" as "any addition of
> any pollutant to navigable waters from any point source." 33 U.S.C.
> § 1362(12). When the statutory definition of "'navigable waters'" --
> *i.e.*, "the waters of the United States," 33 U.S.C. § 1362(7) -- is
> inserted in place of "navigable waters," the statute provides that
> NPDES applies only to the "*addition* of any pollutant *to the waters*
> of the United States." Given the broad definition of "pollutant,"
> transferred (and receiving) water will always contain intrinsic
> pollutants, but the pollutants in transferred water are already *in*
> "the waters of the United States" before, during, and after the water
> transfer. Thus, there is no "addition"; nothing is being added "*to*"
> "the waters of the United States" by virtue of the water transfer,
> because the pollutant at issue is already part of "the waters of the
> United States" to begin with. Stated differently, when a pollutant is
> conveyed along with, and already subsumed entirely within, navigable
> waters and the water is not diverted for an intervening use, the water
> never loses its status as "waters of the United States," and thus
> nothing is added to those waters from the outside world.

Brief for the United States in *Friends of the Everglades v. South
Florida Water Management Dist.*, No. 07-13829-H (11th Cir.).

The Agency has concluded that, taken as a whole, the statutory language
and structure of the Clean Water Act indicate that Congress generally
did not intend to subject water transfers to the NPDES program.
Interpreting the term "addition" in that context, EPA concludes that
water transfers, as defined by today's rule, do not constitute an
"addition" to navigable waters to be regulated under the NPDES program.
Instead, Congress intended to leave primary oversight of water transfers
to state authorities in cooperation with Federal authorities.

In interpreting the term "addition" in section 502(12) of the statute,
EPA is guided by several principles. "Addition" is a general term,
undefined by the statute. Partly for this reason, the courts have
accorded substantial discretion to EPA in interpreting the term in the
context of the "dams" cases. *Gorsuch*, 693 F.2d at 175 (finding the
statute capable of supporting multiple interpretations, the legislative
history unhelpful, and concluding that Congress would have given EPA
discretion to define "addition" had it expected the meaning of the term
to be disputed); *Consumers Power*, 862 F.2d at 584-85 (agreeing with
the analysis in *Gorsuch*). Moreover, several alternative ways of
interpreting the term "addition" have been proposed in the context of
water transfers. As noted above, EPA's longstanding position is that an
NPDES pollutant is "added" when it is introduced into a water from the
"outside world" by a point source. *Gorsuch*, 693 F.2d at 174-175. Under
one interpretation, advanced by the 2^nd^ Circuit in *Catskill
Mountain,*"the outside world" means anywhere outside the particular
waterbody receiving the pollutant, and so a permit in that case was
required for movement of pollutants between distinct waterbodies.
*Catskill I*, 273 F.3d at 491. EPA does not agree with this
understanding of the term "outside world" as evinced by its
long-standing practice of generally not requiring NPDES permits for
transfers between water bodies, which it has defended against court
challenges asserting that such transfers do require such permits.
Rather, EPA believes that an addition of a pollutant under the Act
occurs when pollutants are introduced from outside the waters being
transferred.

As noted above, various courts have reached different conclusions in
determining when movement of waters of the United States containing
pollutants constitutes an "addition" of a pollutant. To resolve the
confusion created by these conflicting approaches, the Agency has looked
to the statute as a whole for textual and structural indices of
Congressional intent on the question whether water transfers that do not
themselves introduce new pollutants require an NPDES permit.

Statutory construction principles instruct that the Clean Water Act
should be interpreted by analyzing the statute as a whole. *United
States v. Boisdore's Heirs*, 49 U.S. 113, 122 (1850). The Supreme Court
has long explained "in expounding a statute, we must not be guided by a
single sentence or member of a sentence, but look to the provisions of
the whole law, and its object and policy." *Id See also*, *Gustafond v.
Alloyd Co., Inc*., 513 U.S. 561, 570 (1995), *Smith v. United States*,
508 U.S. 223, 233 (1993), *United States Nat'l Bank of Or. v.
Independent Ins. Agents of Am., Inc*., 508 U.S. 439, 455 (1993). In
general, the "whole statute" interpretation analysis means that "a
statute is passed as a whole and not in parts or sections and is
animated by one general purpose and intent. Consequently, each part or
section should be construed in connection with every other part or
section so as to produce a harmonious whole." Norman J. Singer,
*Statutes and Statutory Construction* vol. 2A § 46:05, 154 (6th ed.,
West Group 2000). As the Second Circuit has explained with regard to the
CWA:

> Although the canons of statutory interpretation provide a court with
> numerous avenues for supplementing and narrowing the possible meaning
> of ambiguous text, most helpful to our interpretation of the CWA in
> this case are two rules. First, when determining which reasonable
> meaning should prevail, the text should be placed in the context of
> the entire statutory structure \[quoting *United States v. Dauray*,
> 215 F.3d 257, 262 (2d Cir. 2000)\]. Second, "absurd results are to be
> avoided and internal inconsistencies in the statute must be dealt
> with." *United States v. Turkette*, 452 U.S. 576, 580 (1981).

*Natural Res. Def. Council v. Muszynski*, 268 F.3d 91, 98 (2d Cir.
2001). *See also*, Singer, vol. 3B § 77:4, at 256-258.

A holistic approach to the text of the CWA is needed here in particular
because the heart of this matter is the balance Congress created between
federal and State oversight of activities affecting the nation's waters.
The purpose of the CWA is to protect water quality. Congress nonetheless
recognized that programs already existed at the State and local levels
for managing water quantity, and it recognized the delicate relationship
between the CWA and State and local programs. Looking at the statute as
a whole is necessary to ensure that the analysis herein is consonant
with Congress's overall policies and objectives in the management and
regulation of the nation's water resources.

While the statute does not define "addition," sections 101(g), 102(b),
304(f), and 510(2) provide a strong indication that the term "addition"
should be interpreted in accordance with the text of the more specific
sections of the statute. In light of Congress' clearly expressed policy
not to unnecessarily interfere with water resource allocation and its
discussion of changes in the movement, flow or circulation of any
navigable waters as sources of pollutants that would not be subject to
regulation under section 402, it is reasonable to interpret "addition"
as not including the mere transfer of navigable waters.

The specific statutory provisions addressing the management of water
resources -- coupled with the overall statutory structure -- provide
textual support for the conclusion that Congress generally did not
intend for water transfers to be regulated under section 402. The Act
establishes a variety of programs and regulatory initiatives in addition
to the NPDES permitting program. It also recognizes that the States have
primary responsibilities with respect to the "development and use
(including restoration, preservation, and enhancement) of land and water
resources." CWA section 101(b).

Congress also made clear that the Clean Water Act is to be construed in
a manner that does not unduly interfere with the ability of States to
allocate water within their boundaries, stating:

> It is the policy of Congress that the authority of each State to
> allocate quantities of water within its jurisdiction shall not be
> superseded, abrogated or otherwise impaired by \[the Act\]. It is the
> further policy of Congress that nothing in this chapter shall be
> construed to supersede or abrogate rights to quantities of water which
> have been established by any State. Federal agencies shall co-operate
> with State and local agencies to develop comprehensive solutions to
> prevent, reduce and eliminate pollution in concert with programs for
> managing water sources.

CWA section 101(g). While section 101(g) does not prohibit EPA from
taking actions under the CWA that it determines are needed to protect
water quality,[^5] it nonetheless establishes in the text of the Act
Congress's general direction against unnecessary Federal interference
with State allocations of water rights.

Water transfers are an essential component of the nation's
infrastructure for delivering water that users are entitled to receive
under State law. Because subjecting water transfers to a federal
permitting scheme could unnecessarily interfere with State decisions on
allocations of water rights, this section provides additional support
for the Agency's interpretation that, absent a clear Congressional
intent to the contrary, it is reasonable to read the statute as not
requiring NPDES permits for water transfers. *See United States v.
Bass*, 404 U.S. 336, 349 (1971)("unless Congress conveys its purpose
clearly, it will not be deemed to have significantly changed the
federal-state balance.")

An additional statutory provision, section 510(2), similarly provides:

> Except as expressly provided in this Act, nothing in this Act 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.

Like section 101(g), this provision supports the notion that Congress
did not intend administration of the CWA to unduly interfere with water
resource allocation.

Finally, one section of the Act -- 304(f) -- expressly addresses water
management activities. Mere mention of an activity in section 304(f)
does not mean it is exclusively nonpoint source in nature. *See
Miccosukee* 541 U.S. at 106 (noting that section 304(f)(2)(F) does not
explicitly exempt nonpoint sources if they also fall within the
definition of point source). Nonetheless, section 304(f) is focused
primarily on addressing pollution sources outside the scope of the NPDES
program. *See* H.R. Rep. No. 92- 911, at 109 (1972),
[reprinted]{.underline} [in]{.underline} Legislative History of the
Water Pollution Control Act Amendments of 1972, Vol. 1 at 796 (Comm.
Print 1973)("\[t\]his section . . . on . . .*nonpoint sources* is among
the most important in the 1972 Amendments") (emphasis added)). This
section directed EPA to issue guidelines for identifying and evaluating
the nature and extent of [nonpoint]{.underline} sources of
pollution,[^6] as well as processes, procedures and methods to control
pollution from, among other things, "changes in the *movement, flow or
circulation of any navigable waters* or ground waters, including changes
caused by the construction of *dams, levees, channels, causeways, or
flow diversion facilities*." CWA 304(f)(2)(F) (emphasis added).

While section 304(f) does not exclusively address nonpoint sources of
pollution, it nonetheless "concerns nonpoint sources" (*Miccosukee*, 541
U.S. at 106) and reflects an understanding by Congress that water
movement could result in pollution, and that such pollution would be
managed by States under their nonpoint source program authorities,
rather than the NPDES program. Today's rule accords with the direction
to EPA and other federal agencies in section 101(g) to work with State
and local agencies to develop "comprehensive solutions" to water
pollution problems "in concert with programs for managing water
resources."

The text of these sections of the Act together demonstrate that Congress
was aware that there might be pollution associated with water management
activities, but chose to defer to comprehensive solutions developed by
State and local agencies for controlling such pollution. Because the
NPDES program focuses on discharges from point sources of *pollutants*,
it is not the kind of comprehensive program that Congress believed was
best suited to addressing *pollution,* which is the term used for the
nonpoint source program. It is this type of non-point source pollution
that may be associated with water transfers.

In several important ways, water transfers are unlike the types of
discharges that were the primary focus of Congressional attention in
1972. Discharges of pollutants covered by section 402 are subject to
"effluent" limitations. Water transfers, however, are not like effluent
from an industrial, commercial or municipal operation. Rather than
discharge effluent, water transfers convey one water of the U.S. into
another. Additionally, the operators of water control facilities are
generally not responsible for the presence of pollutants in the waters
they transport. Rather, those pollutants often enter "the waters of the
United States" through point and nonpoint sources unassociated with
those facilities and beyond control of the project operators. Congress
generally intended that pollutants be controlled at the source whenever
possible. *See* S. Rep. No. 92-414, p. 77 (1972) (justifying the broad
definition of navigable waters because it is "essential that discharge
of pollutants be controlled at the source").[^7] The pollution from
transferred waters is more sensibly addressed through water resource
planning and land use regulations, which attack the problem at its
source. *See, e.g*., CWA section 102(b) (reservoir planning); CWA
section 208(b)(2)(F) (land use planning to reduce agricultural nonpoint
sources of pollution); CWA section 319 (nonpoint source management
programs); and CWA section 401 (state certification of federally
licensed projects). Congress acknowledged this when it directed Federal
agencies to co-operate with State and local agencies to develop
comprehensive solutions to prevent, reduce, and eliminate pollution in
concert with programs for managing water sources.

The Agency, therefore, concludes that, taken as a whole, the statutory
language and structure of the Clean Water Act indicate that Congress
generally did not intend to subject water transfers to the NPDES
program. Interpreting the term "addition" in that context, EPA concludes
that water transfers, as defined by today's rule, do not constitute an
"addition" to navigable waters to be regulated under the NPDES program.
Rather, Congress intended to leave primary oversight of water transfers
to state authorities in cooperation with Federal authorities.

C**.** *Legislative History*

The legislative history of the Clean Water Act also supports the
conclusion that Congress generally did not intend to subject water
transfers to the NPDES program. First, the legislative history of
section 101(g) reveals that "\[i\]t is the purpose of this \[provision\]
to insure that State \[water\] allocation systems are not subverted." 3
Congressional Research Serv., U.S. Library of Congress, Serial No.
95-14, A Legislative History of the Clean Water Act of 1977, at 532
(1978); *see PUD No. 1 of Jefferson County v. Washington Dep't of
Ecology*, 511 U.S. 700, 721 (1994).

Notably, the legislative history of the Act discusses water flow
management activities in the context of the nonpoint source program
only. In discussing section 304(f), the House Committee Report
specifically mentioned water flow management as an area where EPA would
provide technical guidance to States for their nonpoint source programs,
rather than an area to be regulated under section 402.

> This section and the information on such nonpoint sources is among the
> most important in the 1972 Amendments. . . . The Committee, therefore,
> expects the Administrator to be most diligent in gathering and
> distribution of the guidelines for the identification of nonpoint
> sources and the information on processes, procedures, and methods for
> control of pollution from such nonpoint sources as . . . *natural and
> manmade changes in the normal flow of surface and ground waters*.

H.R. Rep. No. 92-911, at 109 (1972)(emphasis added).

In the legislative history of section 208 of the Act, the House
Committee report noted that in some States, water resource management
agencies allocating stream flows are required to consider water quality
impacts. The Report stated:

> \[I\]n some States water resource development agencies are responsible
> for allocation of stream flow and are required to give full
> consideration to the effects on water quality. To avoid duplication,
> the Committee believes that a State which has an approved program for
> the handling of permits under section 402, and which has a program for
> water resource allocation should continue to exercise the primary
> responsibility in both of these areas and thus provide a balanced
> management control system.

H.R. Rep. No. 92-911, at 96 (1972).

Thus, Congress recognized that the new section 402 permitting program
was not the only viable approach for addressing water quality issues
associated with State water resource management. The legislative history
makes clear that Congress generally did not intend a wholesale transfer
of responsibility for water quality away from water resource agencies to
the NPDES authority. Rather, Congress encouraged States to obtain
approval of authority to administer the NPDES program under section
402(b) so that the NPDES program could work in concert with water
resource agencies' oversight of water management activities to ensure a
"balanced management control system." *Id .*

In sum, the language, structure, and legislative history of the statute
all support the conclusion that Congress generally did not intend to
subject water transfers to the NPDES program. Water transfers are an
integral part of water resource management; they embody how States and
resource agencies manage the nation's water resources and balance
competing needs for water. Water transfers also physically implement
State regimes for allocating water rights, many of which existed long
before enactment of the Clean Water Act. Congress was aware of those
regimes, and did not want to impair the ability of these agencies to
carry them out. EPA's conclusion that the NPDES program does not apply
to water transfers respects Congressional intent, comports with the
structure of the Clean Water Act, and gives meaning to sections 101(g)
and 304(f) of the Act.

Based on these reasons, today's rule is within EPA's authority and
consistent with the CWA.

**IV. Public Comments on the Proposed Rule**

EPA received many comments from the public and a number of states
stating that the Agency does not have authority to exclude from the
requirement to obtain NPDES permits, a specific class of dischargers (in
this case, water transfers). These commenters were concerned that the
proposed rule could jeopardize the NPDES and water quality standards
(WQS) programs. In particular, they feared that point source regulation
of discharges from impoundments used to settle mining wastes might fall
outside the scope of Section 402 if the proposed rule were finalized. In
response to these comments, the Agency believes that impoundments used
to settle mining process water or waste water would generally constitute
"waste treatment systems" designed to meet the requirements of the CWA
and would be excluded from the definition of "waters of the United
States." See 40 C.F.R. §122.2 (definition of "Waters of the United
States"). The addition of pollutants from a waste treatment system to a
water of the United States triggers the permitting requirement, and
today's rule therefore does not affect the permitting of such
facilities.

Some commenters argued that the proposed rule is inconsistent with
Section 404 of the CWA (permits for dredged or fill material). They
stated that dredged material is listed as a pollutant under Section 502
of the CWA and that the proposed rule implies that dredged material
never requires a permit unless the dredged material originates from a
waterbody that is not a water of the U.S. EPA believes that today's
final rule will not have an effect on the 404 program. The statutory
definition of "pollutant" includes "dredged spoil," which by its very
nature comes from a waterbody. 33 U.S.C. §1362(6); 40 C.F.R. §232.2;
*United States v. Hubenka*, 438 F.3d 1026, 1035 (10^th^ Cir. 2006);
*United States v. Deaton*, 209 F.3d 331, 335-336 (4^th^ Cir. 2000);
*Borden Ranch Partnership v. United States*, 261 F.3d 810, 814 (9^th^
Cir. 2001). Because Congress explicitly forbade discharges of dredged
material except as in compliance with the provisions cited in CWA
Section 301, today's rule has no effect on the 404 permit program, under
which discharges of dredged or fill material may be authorized by a
permit. 33 U.S.C. §1344.

As explained above, EPA disagrees that Congress generally intended water
transfers to obtain NPDES permits. EPA believes that this action will
add clarity to an area in which judicial decision have created
uncertainty, and for reasons previously described in Section III of this
preamble, concludes that Congress generally intended to leave the
oversight of water transfers to authorities other than the NPDES
program. Congress made clear that the CWA is to be construed in a manner
that does not unduly interfere with the ability of States to allocate
water within their boundaries. Specific statutory provisions in the CWA
addressing the management of water resources denote that Congress
generally did not intend for water transfers to be regulated under
section 402 of the CWA. Rather, sections 101(b), 208, and 304(f), in
particular, establish a variety of programs and regulatory initiatives
that more appropriately address water transfers. EPA's conclusion that
the NPDES program does not apply to water transfers respects
Congressional intent and comports with the structure of the CWA.

*Definition of a Water Transfer*

In the proposed rule, EPA specifically requested comment on whether the
proposed definition of a water transfer properly achieves the Agency's
objective. Many commenters supported the Agency's proposed definition,
either generally or explicitly. On the other hand, some commenters found
the proposed definition too narrow and suggested that the Agency defer
to state law. Others found the definition overly broad and suggested
that it may encompass too many activities. These concerns, among others,
are addressed in the following discussions.

In response to the comment suggesting that the proposed definition of a
water transfer is too narrow and should also include transfers between
waterbodies defined as waters of the State, even where they do not
constitute waters of the United States under the CWA, EPA believes that
making such a change would not be appropriate because the NPDES program
only applies to waters of the U.S. The same commenter also suggested
that EPA defer to state law in defining a water transfer. In response,
the Agency finds that a definition applicable nationwide is important to
provide consistency in the application of this rule. However, nothing in
this rule precludes a State, under State law, from regulating water
transfers that are not subject to Section 402 of the Clean Water Act.
States may not exclude from NPDES permit requirements sources that are
point sources under Federal law, including those that do not meet the
definition of a water transfer in today's rule. For example, a point
source that subjects waters of the United States to an intervening
industrial, municipal or commercial use could not be exempted from NPDES
permitting requirements under State law.

This rule expressly states that "discharges from a water transfer" is
not subject to NPDES permitting. The Agency defines a water transfer as
"an activity that conveys or connects waters of the United States
without subjecting the transferred water to intervening industrial,
municipal, or commercial use." A water transfer is an engineered
activity that diverts a water of the U.S. to a second water of the U.S.
Thus, commenters who read the natural convergence of two rivers as being
a water transfer are incorrect, though such natural convergences also do
not require NPDES permits.

Some commenters sought clarification of certain elements of the term
"water transfer" while others suggested changes they believed would
either clarify or improve the scope of the term. Commenters suggested
that EPA change the use of the term "activity" to either "occasion,"
"instance," or "occurrence," such that the definition would read: "water
transfer means an *instance in which* waters of the U.S. are
conveyed..." The commenters' concern is that the term "activities"
narrows the rule to only human directed or controlled events rather than
any instance in which water supplies are moved. The Agency disagrees
that the change is necessary. By "activity," the Agency means any system
of pumping stations, canals, aqueducts, tunnels, pipes, or other such
conveyances constructed to transport water from one water of the U.S. to
another water of the U.S. Such a system may consist of a single tunnel
or pumping station or it may require the use of multiple facilities
along the course of the transfer to reach the second water of the U.S.

*Intervening industrial, municipal, or commercial use*

A discharge of a pollutant associated with a water transfer resulting
from an intervening commercial, municipal, or industrial use, or
otherwise introduced to the water by a water transfer facility itself
would require an NPDES permit as any discharge of a pollutant from a
point source into a water of the U.S. would. The most frequent comment
on the proposed definition was that the phrase "intervening industrial,
municipal, or commercial use" was unclear or overbroad.[^8] EPA
disagrees that this phrase is unclear or overbroad, and provides
clarification and examples of intervening uses below.

For example, if the water is withdrawn to be used as cooling water,
drinking water, irrigation, or any other use such that it is no longer a
water of the U.S. before being returned to a water of the U.S., the
water has been subjected to an intervening use.[^9] In contrast, a water
pumping station, pipe, canal, or other structure used solely to
facilitate the transfer of the water is not an intervening use.

The reintroduction of the intake water and associated pollutants from an
intervening use through a point source is an "addition" and has long
been subject to NPDES permitting requirements. *See*, *e.g*., 40 CFR
122.2 (definition of process wastewater); 40 CFR 125.80-125.89
(regulation of cooling towers); 40 CFR 122.45(g) (regulations governing
intake pollutants for technology-based permitting); 40 CFR Part 132,
Appendix F, Procedure 5-D (containing regulations governing water
quality-based permitting for intake pollutants in the Great Lakes).
Moreover, a discharge from a waste treatment system, for example, to a
water of the United States, would not constitute a water transfer and
would require an NPDES permit. *See* 40 CFR 122.2. In these situations,
the reintroduction of water and that water's associated pollutants
physically introduces pollutants from the outside world and, therefore,
is an "addition" subject to NPDES permitting requirements. The fact that
some of the pollutants in the discharge from an intervening use may have
been present in the source water does not remove the need for a permit,
although, under some circumstances, permittees may receive "credit" in
their effluent limitations for such pollutants. See, 40 CFR 122.45(g)
(regulations governing intake pollutants for technology-based
permitting); 40 CFR Part 132, Appendix F, Procedure 5-D (containing
regulations governing water quality-based permitting for intake
pollutants in the Great Lakes).

Similarly, an NPDES permit is normally required if a facility withdraws
water from a water of the U.S., removes preexisting pollutants to purify
the water, and then discharges the removed pollutants (perhaps in
concentrated form) back into the water of the U.S. while retaining the
purified water for use in the facility. An example of this situation is
a drinking water treatment facility which withdraws water from streams,
rivers, and lakes. The withdrawn water typically contains suspended
solids, which are removed to make the water potable. The removed solids
are a waste material from the treatment process and, if discharged into
waters of the U.S., are subject to NPDES permitting requirements, even
though that waste material originated in the withdrawn water. *See*,
*e.g.*, *In re City of Phoenix, Arizona Squaw Peak & Deer Valley Water
Treatment Plants*, 9 E.A.D. 515, 2000 WL 1664964 (EPA Envtl. App. Bd.
Nov. 1, 2000) (rejecting, on procedural grounds, challenges to NPDES
permits for two drinking water treatment plants that draw raw water from
the Arizona Canal, remove suspended solids to purify the water, and
discharge the solids back into the Canal); *Final NPDES General Permits
for Water Treatment Facility Discharges in the State of Massachusetts
and New Hampshire*, 65 FR 69,000 (2000) (NPDES permits for discharges of
process wastewaters from drinking water treatment plants).

The Clean Water Act also clearly imposes permitting requirements on
publicly owned treatment works, and large and medium municipal separate
storm sewer systems. *See* CWA sections 402(a), 402(p)(1)-(4). Congress
amended the Clean Water Act in 1987 specifically to add new section
402(p) to better regulate stormwater discharges from point sources.
Water Quality Act of 1987, Pub. L. No. 100-4, 101 Stat. 7 (1987). Again,
this interpretation does not affect EPA's longstanding regulation of
such discharges. These examples are mentioned to illustrate what is
meant by "intervening industrial, municipal, or commercial use," and are
situations not associated with water transfers.

*Hydroelectric operations*

Some commenters, including State agencies with hydroelectric resources,
utilities, and water districts expressed concern that if hydroelectric
operations incidental to a water transfer were considered an intervening
use, the water transfer would be disqualified from the exemption.
Utilities often take advantage of the change in elevation over the
course of a water transfer by installing hydroelectric facilities. The
California State Water Resources Control Board highlighted in their
comment that the Central Valley Project includes eleven power plants and
that the State Water Project, the Los Angeles Aqueduct, and the All
American Canal also contain hydroelectric power plants.

Today's rule does not affect the longstanding position of EPA and the
Courts that hydroelectric dams do not generally require NPDES permits.
See *Gorsuch,* 693 F.2d 156; *Consumers Power* 862 F.2d 580. EPA agrees
that the transfers described in California are excluded from NPDES
permitting requirements unless, as discussed below, the hydroelectric
facility itself introduces a pollutant such as grease into the water
passing though the dam.

*When Water Transfers* *Introduce Pollutants*

Comments were also submitted regarding pollutants that were added by the
water transfer. Commenters expressed concern that water transfers may
have significant impacts on the environment, including (1) the
introduction of invasive species, toxic blue-green algae, chemical
pollutants, and excess nutrients; (2) increased turbidity; and (3)
alteration of habitat (e.g., warm water into cold water or salt water
into fresh water). In response to these comments, EPA notes that today's
rule does not interfere with any of the states' rights or authorities to
regulate the movement of waters within their borders. Rather, this rule
merely clarifies that NPDES permits are not required for water
transfers. States currently have the ability to address potential
in-stream and/or downstream effects of water transfers through their WQS
and TMDL programs. Nothing in today's rule affects the ability for
states to establish WQS appropriate to individual waterbodies or
waterbody segments.

The final rule, consistent with the proposed rule, would require NPDES
permits for "pollutants introduced by the water transfer activity itself
to the water being transferred." Water transfers should be able to be
operated and maintained in a manner that ensures they do not themselves
add pollutants to the water being transferred. However, where water
transfers introduce pollutants to water passing through the structure
into the receiving water, NPDES permits are required. *Consumers Power*,
862 F.2d at 588; *Gorsuch*, 693 F.2d at 165, n. 22.

In those instances where a water transfer facility does itself introduce
pollutants into the water being transferred, the scope of the required
NPDES permit would only be for those added pollutants. Such permit would
not require the water transfer facility to address pollutants that may
have been in the donor waterbody and are being transferred.[^10]
Furthermore, EPA expects these additions will probably be rare. EPA
considers the likelihood of such additions to be similar to the
frequency of additions of leaks of oil from the turbines at
hydroelectric dams. In a review of the NPDES permits issued to dams, EPA
was able to identify only a minimal number of permits issued to address
this concern.

*Pollutants incidental to water transfers*

Many utilities and water districts commented that it was unclear whether
naturally occurring changes to the water would require a permit. For
example, as water moves through dams or sits in reservoirs along the
transfer, chemical and physical factors such as water temperature, pH,
BOD, and dissolved oxygen may change. The Agency views these changes the
same way it views changes to water quality caused by water moving
through dams (*National Wildlife Fed'n v. Gorsuch*, 693 F.2d 156 (D.C.
Cir. 1982)); they do not constitute an "addition" of pollutant subject
to the permitting requirements of section 402 of the Act.

EPA would also like to make clear that this rule does not change the
Agency's position regarding the application of pesticides directly to
waters of the United States. See 71 FR 68483; 40 CFR §122.3(h). Ditches
and canals are commonly treated with pesticides to control pest species
such as algae to facilitate flow, and today's rule has no effect on the
exclusion provided to such activities from NPDES permit requirements set
forth in 40 C.F.R. §122.3(h).

*Designation Authority*

In the preamble to the proposed water transfers rule, EPA solicited
public comment on an option that would provide an additional provision
allowing the NPDES authority to designate particular water transfers as
subject to NPDES permit requirements on a case-by-case basis. EPA
received nearly sixty comments from states, municipalities,
environmental groups, water districts, industry and others regarding
EPA's consideration of this "designation authority" approach. Comments
addressing EPA's discussion of such designation authority were mixed
regarding their opposition to, or agreement with, this approach. The
following paragraphs provide additional details regarding comments the
Agency received on this option.

Commenters who opposed the designation option generally believed that
this provision would be legally unsupportable and practically
unworkable. The most frequently cited reason for opposing this approach
was a belief that the Clean Water Act provides no authority to regulate
water transfers on a case-by-case basis. Other commenters were concerned
that designating some water transfers, but not others, as subject to
NPDES permit requirements would result in states treating water
transfers in an inconsistent manner. Several commenters stated that the
existence of an impairment is not an appropriate or relevant test for
determining whether or not an activity should be subject to the NPDES
program. Some commenters also stated that EPA already has regulations in
place with regard to use impairments, at 40 CFR section 131.10, which
afford flexibility in responding to unique factual circumstances where
uses may be impacted by pollutants not subject to NPDES permitting under
section 402.

Other commenters supported inclusion of the designation authority
provision in the final rule. Some of these commenters thought this
approach would be helpful in instances where the transfer involves
interstate waters because NPDES permits would provide a tool to protect
receiving water quality -- especially in situations in which water
quality standards differed in the two relevant states. In addition,
several states indicated that being allowed the option of designating
water transfers as requiring an NPDES permit on a case-by-case basis was
important to them and cited the following three reasons for supporting
this approach: (1) the designation option is consistent with Congress\'s
general direction against unnecessary federal interference with state
allocation of water rights and states flexibility on handling water
transfers; (2) states would be unable to require NPDES permits for water
transfers on a case-by-case basis in the absence of the designation
option; and (3) some water transfers should be considered discharges of
pollutants, so it is important to retain NPDES authority in these cases.

Some commenters suggested additional programs and authorities that
states can use as an alternative to NPDES permitting such as the 401
water quality certification program or a memorandum of understanding or
agreement.

After considering these comments, EPA has decided not to include a
mechanism in section 123.3 for the permitting authority to designate
water transfers on a case-by-case basis as needing an NPDES permit. This
conclusion is consistent with EPA's interpretation of the CWA as not
subjecting water transfers to the permitting requirements of section 402
. Moreover, as discussed elsewhere in this preamble, states currently
have the ability to address potential in-stream and/or downstream
effects of water transfers through their WQS and TMDL programs and
pursuant to state authorities preserved by section 510 and today's final
rule does not have an effect on these state programs and authorities.

**V. Statutory and Executive Order Reviews**

A.  *Executive Order 12866: Regulatory Planning and Review*

Under Executive Order (EO) 12866 Number range CHAPTER(58 FR 51735,
October 4, 1993), this action is a \"significant regulatory
action."Number range CHAPTER Accordingly, EPA submitted this action to
the Office of Management and Budget (OMB) for review under EO 12866 and
any changes made in response to OMB recommendations have been documented
in the docket for this action.

B.  *Paperwork Reduction Act*

This action does not impose any new information collection burden
because thisNumber range CHAPTER final rule generally excludes water
transfers from requiring an NPDES permit. The Office of Management and
Budget (OMB) has previously approved the information collection
requirements contained in the existing regulations 40 CFR part 122.21
and 123.25 under the provisions of the Paperwork Reduction Act, 44
U.S.C. 3501 [et]{.underline} [seq]{.underline}. and has assigned OMB
control number 2040-0086, EPA ICR number 0226.18. A copy of the OMB
approved Information Collection Request (ICR) may be obtained from Susan
Auby, Collection Strategies Division; U.S. Environmental Protection
Agency (2822T); 1200 Pennsylvania Ave., NW, Washington, DC 20460 or by
calling (202) 566-1672.

Burden means the total time, effort, or financial resources expended by
persons to generate, maintain, retain, or disclose or provide
information to or for a Federal agency. This includes the time needed to
review instructions; develop, acquire, install, and utilize technology
and systems for the purposes of collecting, validating, and verifying
information, processing and maintaining information, and disclosing and
providing information; adjust the existing ways to comply with any
previously applicable instructions and requirements; train personnel to
be able to respond to a collection of information; search data sources;
complete and review the collection of information; and transmit or
otherwise disclose the information.

An agency may not conduct or sponsor, and a person is not required to
respond to a collection of information unless it displays a currently
valid OMB control number. The OMB control numbers for EPA\'s regulations
in 40 CFR are listed in 40 CFR Part 9.

C. *Regulatory Flexibility Act*

The Regulatory Flexibility Act (RFA) generally requires an agency to
prepare a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements under the Administrative Procedure
Act or any other statute unless the agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities. Small entities include small businesses, small organizations,
and small governmental jurisdictions.

For purposes of assessing the impacts of today's final rule on small
entities, small entity is defined as: (1) A small business as defined by
the Small Business Administration's (SBA) regulations at 13 CFR 121.201;
(2) a small governmental jurisdiction that is a government of a city,
county, town, school district or special district with a population of
less than 50,000; and (3) a small organization that is any
not-for-profit enterprise which is independently owned and operated and
is not dominant in its field.

After considering the economic impacts of today's final rule on small
entities, I certify that this action will not have a significant adverse
economic impact on a substantial number of small entities. Because EPA
is simply codifying the Agency's longtime position that Congress did not
generally intend for the NPDES program to regulate the transfer of one
water of the United States into another water of the United States, this
action will not impose any requirement on small entities.

D. *Unfunded Mandates Reform Act*

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law
104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with "Federal mandates" that may
result in expenditures to State, local, and tribal governments, in the
aggregate, or to the private sector, of \$100 million or more in any one
year. Before promulgating an EPA rule for which a written statement is
needed, section 205 of UMRA generally requires EPA to identify and
consider a reasonable number of regulatory alternatives and adopt the
least costly, most cost-effective, or least burdensome alternative that
achieves the objectives of the rule. The provisions of section 205 do
not apply when they are inconsistent with applicable law. Moreover,
section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective, or least burdensome alternative if the
Administrator publishes with the final rule an explanation why that
alternative was not adopted. Before EPA establishes any regulatory
requirements that may significantly or uniquely affect small
governments, including tribal governments, it must have developed under
section 203 of the UMRA a small government agency plan. The plan must
provide for notifying potentially affected small governments, enabling
officials of affected small governments to have meaningful and timely
input in the development of EPA regulatory proposals with significant
Federal intergovernmental mandates, and informing, educating, and
advising small governments on compliance with the regulatory
requirements.

EPA has determined that this rule does not contain a Federal mandate
that may result in expenditures of \$100 million or more for State,
local, and tribal governments, in the aggregate, or the private sector
in any one year. EPA is simply codifying the Agency's longtime position
that Congress did not generally intend for the NPDES program to regulate
the transfer of a water of the United States into another water of the
United States. Thus, today\'s rule is not subject to the requirements of
sections 202 and 205 of the UMRA. For the same reason, EPA has
determined that this rule contains no regulatory requirements that might
significantly or uniquely affect small governments. Thus, today\'s rule
is not subject to the requirements of section 203 of UMRA.

E. *Executive Order 13132: Federalism*

Executive Order 13132, entitled "Federalism" (64 FR 43255, August 10,
1999), requires EPA to develop an accountable process to ensure
"meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications."
"Policies that have federalism implications" is defined in the Executive
Order to include regulations that have "substantial direct effects on
the States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government."

Under section 6(b) of Executive Order 13132, EPA may not issue a
regulation that has federalism implications, that imposes substantial
direct compliance costs, and that is not required by statute, unless the
Federal government provides the funds necessary to pay the direct
compliance costs incurred by State and local governments, or EPA
consults with State and local officials early in the process of
developing the proposed regulation. Under section 6(c) of Executive
Order 13132, EPA may not issue a regulation that has federalism
implications and that preempts State law, unless the Agency consults
with State and local officials early in the process of developing the
proposed regulation.

This final rule does not have Federalism implications. It will not have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132. Today's rule does not change the
relationship between the government and the States or change their roles
and responsibilities. Rather, this rule confirms EPA's longstanding
practice consistent with the Agency's understanding that Congress
generally intended for water transfers to be subject to oversight by
water resource management agencies and State non-NPDES authorities,
rather than the permitting program under section 402 of the CWA. In
addition, EPA does not expect this rule to have any impact on local
governments.

Further, the revised regulations would not alter the basic State-Federal
scheme established in the Clean Water Act under which EPA authorizes
States to carry out the NPDES permitting program. EPA expects the
revised regulations to have little effect on the relationship between,
or the distribution of power and responsibilities among, the Federal and
State governments. Thus, Executive Order 13132 does not apply to this
rule.

In the spirit of Executive Order 13132, and consistent with EPA policy
to promote communications between EPA and State and local governments,
EPA specifically solicited comment on the proposed rule from State and
local officials. EPA received comments from States that favored and
opposed the rule. States that favored the rule were primarily drier,
Western states. These States argued that their State laws provide
adequate and appropriate authority to address the impacts from water
transfers and that permitting would negatively impact State water rights
allocations. This latter point was also raised by water districts, which
are quasi-governmental entities, and by local governments. States that
were opposed to the rule argued that they had an interest in using their
NPDES authority to prevent potential water quality impairments caused by
water transfers and disagreed with EPA's analysis of the Clean Water
Act.

F.  *Executive Order 13175: Consultation and Coordination with Indian
    Tribal Governments*

Executive Order 13175, entitled, "Consultation and Coordination with
Indian Tribal Governments" (65 FR 67249, November 9, 2000), requires EPA
to develop an accountable process to ensure "meaningful and timely input
by tribal officials in the development of regulatory policies that have
tribal implications." Number range CHAPTER

This final rule does not have tribal implications, as specified in
Executive Order 13175. It will neither impose substantial direct
compliance costs on tribal governments, nor preempt Tribal law. Today's
rule clarifies that Congress did not generally intend for the NPDES
program to regulate the transfer of waters of the United States into
another water of the United States. Nothing in this rule prevents an
Indian Tribe from exercising its own authority to deal with such
matters. Thus, Executive Order 13175 does not apply to this rule.

Number range CHAPTERIn the spirit of Executive Order 13175, and
consistent with EPA policy to promote communications between EPA and
tribal governments, EPA specifically solicited additional comment on the
proposed rule from tribal officials. Comments from tribal governments
were considered in the development of this final rule. Since the issues
identified by tribal governments were not unique to their concerns, EPA
has addressed these issues generally in its response to comments.

G. *Executive Order 13045: Protection of Children from Environmental*

*Health and Safety Risks*

Executive Order 13045: "Protection of Children from Environmental Health
Risks and Safety Risks" (62 FR 19885, April 23, 1997) applies to any
rule that: (1) is determined to be "economically significant" as defined
under E.O. 12866, and (2) concerns an environmental health or safety
risk that EPA has reason to believe may have a disproportionate effect
on children. If the regulatory action meets both criteria, the Agency
must evaluate the environmental health or safety effects of the planned
rule on children, and explain why the planned regulation is preferable
to other potentially effective and reasonably feasible alternatives
considered by the Agency.

This regulation is not subject to Executive Order 13045 because it is
not economically significant as defined under E.O. 12866, and because
the Agency does not have reason to believe that it addresses
environmental health and safety risks that present a disproportionate
risk to children. Today's rule would simply clarify Congress's intent
that water transfers generally be subject to oversight by water resource
management agencies and State non-NPDES authorities, rather than the
permitting program under section 402 of the CWA.

H. *Executive Order 13211: Actions Concerning Regulations That
Significantly Affect*

*Energy Supply, Distribution, or Use*

This rule is not a "significant energy action" as defined in Executive
Order 13211, "Actions Concerning Regulations That Significantly Affect
Energy Supply, Distribution, or Use" (66 FR 28355 (May 22, 2001))
because it is not likely to have a significant adverse effect on the
supply, distribution, or use of energy. Further, EPA has concluded that
this rule is not likely to have any adverse energy effects.

I. *National Technology Transfer and Advancement Act*

Section 12(d) of the National Technology Transfer and Advancement Act of
1995 ("NTTAA"), Pub. L. 104-113, section 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., materials specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by
voluntary consensus standard bodies. The NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards. This rule does
not involve technical standards. Therefore, EPA did not consider the use
of any voluntary consensus standards.

J. *Executive Order 12898: Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations.*

Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes
federal executive policy on environmental justice. Its main provision
directs federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission by
identifying and addressing, as appropriate, disproportionately high and
adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the United States.

EPA has determined that this final rule will not have disproportionately
high and adverse human health or environmental effects on minority or
low-income populations***.*** Today's rule would simply clarify
Congress' intent that water transfers generally be subject to oversight
by water resource management agencies and State non-NPDES authorities,
rather than the permitting program under section 402 of the CWA.

*K. Congressional Review Act*

The Congressional Review Act, 5 U.S.C. section 801 et seq., as added by
the Small Business Regulatory Enforcement Fairness Act of 1996,
generally provides that before a rule may take effect, the agency
promulgating the rule must submit a rule report, which includes a copy
of the rule, to each House of the Congress and to the Comptroller
General of the United States. EPA will submit a report containing this
rule and other required information to the U.S. Senate, the U.S. House
of Representatives, and the Comptroller General of the United States
prior to publication of the rule in the Federal Register. A major rule
cannot take effect until 60 days after it is published in the Federal
Register. This action is not a "major rule" as defined by 5 U.S.C.
section 804(2). This rule will be effective \_\_\_\_\_\_\_\_\_\_\_

List of Subjects in 40 CFR Part 122

Environmental protection, Administrative practice and procedure,
Confidential business information, Hazardous substances, Reporting and
recordkeeping requirements, Water pollution control.

Dated:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Stephen L. Johnson, Administrator

For the reasons set forth in the preamble, chapter I of title 40 of the
Code of Federal Regulations is to be amended as follows:

**PART 122 -- EPA ADMINISTERED PERMIT PROGRAMS: THE NATIONAL POLLUTANT
DISCHARGE ELIMINATION SYSTEM**

1\. The authority citation for part 122 continues to read as follows:

**Authority:** The Clean Water Act, 33 U.S.C. 1251 *et seq*.

2\. Section 122.3 is amended by adding paragraph (i) to read as follows:

**§122.3 Exclusions.**

\* \* \* \* \*

\(i\) Discharges from a water transfer. Water transfer means an activity
that conveys or connects waters of the United States without subjecting
the transferred water to intervening industrial, municipal, or
commercial use. This exclusion does not apply to pollutants introduced
by the water transfer activity itself to the water being transferred.

[^1]: At the time of this rulemaking, the District Court has stayed its
    proceedings until resolution of a similar case in the same District
    Court, *Friends of the Everglades v. South Florida Water Management
    District*.

[^2]: Waters of the U.S. are defined for purposes of the NPDES program
    in 40 CFR 122.2 and this rulemaking does not seek to address what is
    within the scope of that term.

[^3]: It should be noted, however, that this release would still not
    require an NPDES permit because EPA and the Federal courts have
    determined that a discharge from a dam does not result in an
    "addition" of a pollutant unless the dam itself discharges a
    pollutant such as grease into the water passing through the dam. See
    *National Wildlife Fed'n v. Gorsuch*, 693 F.2d 156 (D.C. Cir. 1982);
    *National Wildlife Fed'n v. Consumers Power Company*, 862 F.2d 580
    (6^th^ Cir. 1988). Cf. *S.D. Warren Co. v. Maine Board of
    Environmental Protection*, 126 S.Ct. 1843 (2006) (Certification
    under CWA section 401 may be needed in some instances).

[^4]: EPA recognizes that the approach adopted by these three courts is
    at odds with today's rule. None of these three courts, however,
    viewed the question of statutory interpretation through the lens of
    *Chevron* deference. *DuBois*, 102 F.3d at 1285, n. 15 (*Chevron*
    does not apply because the court "was not reviewing an agency's
    interpretation of the statute that it was directed to enforce.");
    *Catskill Mountains Chapter of Trout Unlimited, Inc. v. City of New
    York*, 451 F.3d 77, 82 (2^nd^ Cir. 2006) (*Catskill II*) ("The City
    concedes that this EPA interpretation is not entitled to *Chevron*
    deference."); *Catskill I*, 273 F.3d at 490 (Declining to apply
    Chevron deference, but acknowledging that "\[i\]f the EPA's position
    had been adopted in a rulemaking or other formal proceeding,
    deference of the sort applied by the *Gorsuch* and *Consumers Power*
    courts might be appropriate."); *Miccosukee*, 280 F.3d at 1367, n. 4
    ("The EPA is no party to this case; we can ascertain no EPA position
    applicable to \[the water transfer at issue) to which to give any
    deference, much less *Chevron* deference."). Moreover, the
    approaches adopted by the *Gorsuch* and *Consumers Power* courts is
    compatible with today's rule.

[^5]: *PUD No. 1 of Jefferson County. v. Wash. State Dep't. of Ecology*,
    511 U.S. 700, 720 (1994)("Sections 101(g) and 510(2) preserve the
    authority of each State to allocate water quantity as between users;
    they do not limit the scope of water pollution controls that may be
    imposed on users who have obtained, pursuant to state law, a water
    allocation.").

[^6]: Sources not regulated under sections 402 or 404 are generically
    referred to as "nonpoint sources." *See* *Consumers Power*, 862 F.2d
    at 582 ("'nonpoint source' is shorthand for and 'includes all water
    quality problems not subject to section 402'")(quoting *Gorsuch*,
    693 F.2d at,166) (internal quotation marks omitted).

[^7]: Recognition of a general intent to control pollutants at the
    source does not mean that dischargers are responsible only for
    pollutants that they generate; rather, point sources need only
    convey pollutants into navigable waters to be subject to the Act.
    *See Miccosukee* at 105. Municipal separate storm sewer systems, for
    example, are clearly subject to regulation under the Act. CWA
    section 402(p).

[^8]: EPA's discussion of intervening uses is not intended to address or
    exclude any other activity that is currently subject to NPDES
    permitting. For example, this rule does not affect EPA's
    longstanding position that, if water is withdrawn from waters of the
    U.S. for an intervening industrial, municipal or commercial use, the
    reintroduction of the intake water and associated pollutants is an
    "addition" subject to NPDES permitting requirements. Nor does this
    rule change EPA's position, upheld by the Supreme Court in
    *Miccosukee*, that the definition of "discharge of a pollutant" in
    the CWA includes coverage of point sources that do not themselves
    generate pollutants. The Supreme Court stated, "A point source is,
    by definition, a 'discernible, confined, and discrete *conveyance'*
    section 1362(14) (emphasis added). That definition makes plain that
    a point source need not be the original source of the pollutant; it
    need only convey the pollutant to 'navigable waters,' which are, in
    turn, defined as 'the waters of the United States.' section
    1362(7)." *Miccosukee*, 541 U.S. at 105.

[^9]: Note that return flows from irrigated agriculture are exempt from
    the requirement to obtain a NPDES permit under both the Act itself
    and 40 C.F.R. § 122.3. Today's rule does not affect that exemption.

[^10]: Because water transfers simply change the flow, direction or
    circulation of navigable waters, they would not themselves cause the
    waters being moved to lose their status as waters of the United
    States. See *Consumers Power*, 862 F.2d at 589. Hence, pollutants
    moved from the donor water into the receiving water, which are
    contained in navigable waters throughout the transfer, would not be
    "added" by the facility and would therefore not be subject to NPDES
    permitting requirements. This differs from a situation in which, for
    example, an industrial facility takes in water for the purpose of
    cooling some part of the facility itself. In such cases, the water
    used for cooling loses its status as a water of the United States
    when subjected to an intervening industrial use and, therefore, is
    subject to NPDES permit requirements for all the pollutants it
    contains when it is discharged back into a navigable water,
    generally including those that were in the source water originally.
    See, *Consumers Power*, 862 F.2d at 589. Likewise, discharges from a
    concentrated aquatic animal production facility, such as excess food
    provided to animals in net pens (e.g., food that was added to water
    but not eaten by the fish) would require a NPDES permit because the
    uneaten, waste food would be considered an "addition" of a pollutant
    from the facility.