Opinion ID: 3052091
Heading Depth: 3
Heading Rank: 2

Heading: Chevron Step Two: Permissibility of Statutory

Text: Interpretation [5] At Chevron step two, we must determine whether EPA’s interpretation is permissible. We need not find that EPA’s interpretation is the only permissible construction of amended section 402(l)(2) or even the reading this Court would have reached, but only that EPA’s interpretation is not arbitrary and capricious. See Chevron, 467 U.S. at 843, n.11. To determine whether the EPA’s interpretation of section 402(l)(2) of the CWA, as amended by the Energy Policy Act, is permissible, “we look to the plain and sensible meaning of the statute, the statutory provision in the context of the whole statute and case law, and to the legislative purpose and intent.” Cuevas-Gaspar v. Gonzales, 430 F.3d 1013, 1022 (9th Cir. 2005). Additionally, we will take into account the consistency of the agency’s position over time. See Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417 (1993); see also INS v. Cardoza-Fonseca, 480 U.S. 421, 447 n.30 (1987); see also Watt v. Alaska, 451 U.S. 259, 273 (1981). An administrative agency is “not estopped from changing a view [it] believes to have been grounded upon a mistaken legal interpretation.” Good Samaritan Hosp., 508 U.S. at 417 (citations omitted). In particular, an agency “is not disqualified from changing its mind; and when it does, the courts still sit in review of the administrative decision and should not NRDC v. USEPA 5973 approach the statutory construction issue de novo and without regard to the administrative understanding of the statutes.” Id. (quoting NLRB v. Iron Workers, 434 U.S. 335, 351 (1978)). “On the other hand, the consistency of an agency’s position is a factor in assessing the weight that position is due.” Id. As the Supreme Court has stated: “An agency interpretation of a relevant provision which conflicts with the agency’s earlier interpretation is ‘entitled to considerably less deference’ than a consistently held agency view.” Cardoza-Fonseca, 408 U.S. at 447 n.30 (quoting Watt, 451 U.S. at 273). EPA interpreted section 402(l)(2) of the CWA, as amended by the Energy Policy Act, to provide that a “water quality standard violation for sediment alone does not trigger a permitting requirement.” 71 Fed. Reg. at 898. EPA justified the challenged final rule, see 71 Fed. Reg. 33628, and regulation, see 40 C.F.R. § 122.26(a)(2)(ii), as follows: [N]ow that Congress has broadened the 402(l)(2) exemption to include construction activities at oil and gas field operations, EPA believes that dis- charges of sediment are not necessarily indicative of such contact [with raw material, intermediate products, finished product, byproduct or waste products]. Sediment is the pollutant most commonly associated with construction activity. Hence, exempting storm water discharges of sediment from oil and gas con- struction sites from NPDES permitting requirements reflects a reasonable (and EPA believes, the best) interpretation of Congressional intent in limiting the 402(l)(2) exemption to discharges not contaminated by contact with raw material, intermediate products, finished product, byproduct or waste products, in the context of the new definition for oil and gas exploration, production, processing or treatment operations or transmission facilities included in the Energy Policy Act of 2005. 5974 NRDC v. USEPA 71 Fed. Reg. at 33634; see also 40 C.F.R. § 122.26(a)(2)(ii) (“Discharges of sediment from construction activities associated with oil and gas exploration, production, processing, or treatment operations or transmission facilities are not subject to the provisions of paragraph (c)(1)(iii)(C) of this section.); see also 40 C.F.R. § 122.26(c)(1)(iii)(C) (“The operator of an existing or new discharge composed entirely of storm water from an oil or gas exploration, production, processing, or treatment operation, or transmission facility is not required to submit a permit application in accordance with paragraph (c)(1)(i)16 of this section, unless the facility . . . [c]ontributes to a violation of a water quality standard”). [6] Thus, EPA argues that, because “sediment is the pollutant most commonly associated with construction activities,” Congress must have meant to exempt all construction-related sediment when it made construction activities eligible for the exemption, or else the amendment would be effectively meaningless. See 71 Fed. Reg. at 33634. We conclude, however, that EPA’s interpretation of the CWA section 402(l)(2), as amended by the Energy Policy Act, is arbitrary and capricious because of the agency’s changed position on what constitutes “contamination” under that section. See Good Samaritan Hosp., 508 U.S. 402, 417 (1993); see also Cardoza-Fonseca, 480 U.S. 421, 447 n.30 (1987); see also Watt, 451 U.S. 259, 273 (1981)). [7] EPA concedes that, prior to the Energy Policy Act amendment to the CWA, if a gas and oil facility discharged storm water runoff contaminated only with sediment resulting in a water quality violation, that facility did not meet the conditions for permit exemption under 402(l)(2) and thus was required to apply for a permit. See also 40 C.F.R. § 122.26(c) (1)(iii)(C) (1990) (requiring permits for discharges from oil and gas activities that contribute to a violation of a water 16 Paragraph (c)(1)(i) applies to “[d]ischargers of storm water associated with industrial activity and with small construction activity.” NRDC v. USEPA 5975 quality standard). During oral argument before this Court, EPA admitted that, before the 2005 amendment, a permit was required for discharge of sediment-laden runoff resulting in a water quality violation even if such runoff was otherwise uncontaminated. Therefore, EPA had previously recognized that oil and gas exploration, production, processing or treatment operations or transmission facilities had an obligation to apply for an NPDES permit for storm water runoff contaminated only with sediment. [8] Now, EPA has changed its interpretation of what constitutes “contamination” under section 402(l)(2) based exclusively on a legislative amendment that does not mention (1) sediment or (2) EPA’s long-standing position that discharges of storm water runoff from oil and gas activities, contaminated solely with sediment and which contribute to a violation of a water quality standard, require a NPDES permit. In order to minimize and justify its earlier stance, EPA first argues that its previous NPDES permit requirement for such discharges was merely a “rule of administrative convenience” because it assumed that runoff contaminated solely with sediment was likely contaminated with overburden, raw material, intermediate products, finished product, byproduct, or waste products. EPA also argues that it never previously considered, until the 2005 amendment, how sediment alone should be treated under existing regulations. We find EPA’s arguments to be unpersuasive in light of EPA’s own statements during its rule-making process prior to the passage of the Energy Policy Act of 2005. See 55 Fed. Reg. at 48033-34; see also 64 Fed. Reg. at 68,728-30. EPA long recognized that oil and gas construction sites were prime candidates for NPDES permitting in light of what EPA referred to as “serious water quality impacts” caused by construction storm water discharges polluted with sediment. 55 Fed. Reg. at 48,033 34. For example, as we have set out above, in its Phase I storm water rule, EPA stated that construction activities are “industrial in nature;” that “localized 5976 NRDC v. USEPA impacts of water quality may be severe because of high unit loads of pollutants, primarily sediments;” that “[s]ediment runoff rates from construction sites are typically 10 to 20 times that of agricultural lands . . . with runoff rates as high as 100 times that of agricultural lands, and typically 1,000 to 2,000 times that of forest lands;” that “[e]ven small construction sites may have a significant negative impact on water quality in localized areas;” that “[o]ver a short period of time, construction sites can contribute more sediment to streams than was previously deposited over several decades;” that “[i]t is evident from numerous studies and reports submitted under . . . the CWA that discharges from construction sites continue to be a major source of water quality problems and water quality standard violations;” and that “EPA is compelled to . . . regulate these sources.” Id. Moreover, after considering additional environmental studies and reports that had been submitted subsequent to the Phase I storm water rule, EPA reiterated in the Phase II rule its concerns about the impact on water quality of sediment-laden storm water discharges from construction activities. See 64 Fed. Reg. at 68,728-30. Furthermore, in its notice of proposed rulemaking in January 2006, EPA stated that, when it promulgated the Phase I rule in 1990, it “believed it reasonable to presume that causing or contributing to a violation of water quality standards was an indication of contamination as envisioned under the statute.” 71 Fed. Reg. at 898. [9] In light of EPA’s prior statements, it can hardly be said that EPA’s previous stance was merely a “rule of administrative convenience” or that EPA never considered how sediment alone should be treated prior to the Energy Policy Act of 2005. Clearly, EPA’s June 12, 2006, storm water discharge rule, codified at 40 C.F.R. § 122.26, represents a complete departure from its previous interpretation of what constitutes “contamination” under section 402(l)(2). As such, we conclude that EPA’s inconsistent and conflicting position regarding the discharge of sediment-laden storm water from oil and gas construction sites causes its interpretation of amended NRDC v. USEPA 5977 section 402(l)(2), as reflected in the storm water discharge rule, 40 C.F.R. § 122.26, to be an arbitrary and capricious one. See Good Samaritan Hosp., 508 U.S. at 417; see also Cardoza-Fonseca, 480 U.S. at 447 n.30; see also Watt, 451 U.S. at 273. This conclusion is reinforced by the fact that neither the amending statute (section 323), the statutory definition (section 503(24)), nor the statutory exemption (402(l)(2)) make any mention at all of “sediment” — or of whether it is covered or not. Based on the foregoing, we hold that the promulgated rule, including the corresponding regulation, is arbitrary and capricious and constitutes an impermissible construction of 402(l)(2) of the CWA. Accordingly, we VACATE the rule, and REMAND THIS MATTER FOR FURTHER PRO- CEEDINGS consistent with this opinion. GRANT PETITION FOR REVIEW, VACATE RULE AND REMAND FOR FURTHER PROCEEDINGS.