Tag Archives: 401 Certification

Regulatory Reform 2015: A New NC Senate Proposal

July 13, 2015. Before leaving for the Fourth of July holiday, the N.C. Senate turned a minor House bill into a vehicle for major changes to environmental rules.  The Senate had already proposed changes to environmental standards in a regulatory reform bill (Senate Bill 453) that has not yet passed the Senate; in individual Senate environmental bills; and in the Senate budget bill.  The House has not yet voted on many of the earlier Senate proposals. The Senate version of House Bill 765  may be the most aggressive regulatory reform legislation to date —  putting constraints on air quality rules; creating new immunity from environmental enforcement actions; reducing air quality monitoring; changing laws on remediation of contaminated property; and  proposing outright repeal of the state’s electronics recycling law. In response to DENR concerns, the Senate delayed some proposed changes to stormwater and environmental permitting requirements to allow for study.  Reportedly, the floor amendments adopted by the Senate eliminated DENR objections to the remainder of the bill which continues to have far-reaching implications for state environmental policy:

Sec. 1.4 allows a state agency to automatically recover attorneys fees from a person who unsuccessfully challenges a state action on environmental grounds. A citizen or organization challenging a state construction project or an environmental permitting decision could be at significant financial risk —  a risk that would not be shared by citizens challenging state actions for other reasons.

Sec. 4.2 repeals the state law requiring computer and television manufacturers  to pay fees that support local electronics recycling programs. It isn’t clear that all of the city and county electronics recycling programs could survive the loss of state recycling fee revenue. State law would continue to prohibit disposal of discarded televisions and computers in landfills; the question is whether there would continue to be electronics recycling programs in all 100 counties.

Sec. 4.7 makes changes to state laws allowing risk-based remediation of environmental contamination. A risk-based remediation allows the person responsible for the contamination (the “responsible party”) to do a partial cleanup of  groundwater and soil contamination by relying on land-use controls to limit future exposure to contaminated soils or groundwater remaining on the site.  The biggest changes:

1. Sites where contamination has already migrated onto adjacent properties would become eligible for a risk-based cleanup.  Existing law  does not allow a risk-based cleanup if contamination has migrated off the property where it originated  because of the additional complication of managing exposure on property the responsible party does not control. The Senate provision allows a  responsible party  to do a risk-based cleanup on adjacent property with the property owner’s permission. The provision does not require land use controls on the adjacent property to prevent future exposure to remaining contamination — normally a necessary condition of a risk-based cleanup. Existing remediation standards may allow DENR to disapprove a risk-based cleanup unless the entire area has appropriate land use controls, but the new Senate provision on risk-based cleanup of adjacent property is silent on the issue.

2. The bill removes existing statute language that limits risk-based remediation to contaminated sites reported to DENR  before the risk-based remediation law went into effect in 2011, allowing   lower-cost, risk-based remediation as an alternative for future pollution events.

Sec. 4.9 changes a state law providing incentives for redevelopment of contaminated property (or “brownfields”).  The state Brownfields Redevelopment Act uses the term “prospective developer” to describe a person eligible for liability protection and economic incentives under the law.  The term excludes anyone who caused or contributed to the contamination. The Senate proposes to redefine the term to cover a  “bona fide prospective purchaser”, a “contiguous landowner” and an “innocent landowner” as defined in the federal Small Business Liability Relief and Brownfields Redevelopment Act (amending the Comprehensive Environmental Response, Compensation and Liability Act or “CERCLA”). In CERCLA, the terms describe categories of landowners who have acquired  property contaminated by hazardous substances, but have no legal liability for the contamination. Generally, the definitions cover landowners who acquired the property after the contamination occurred and have no relationship to a person (or company) responsible for the contamination.

All of the federal definitions referenced in the Senate provision concern liability for “hazardous substance” contamination as defined in CERCLA. CERCLA defines “hazardous substance” to include a specific list of compounds and unlisted substances with similar characteristics.  The definition also excludes some substances  — most notably petroleum and natural gas products — with similar health and environmental risk. (Other federal laws address contamination caused by petroleum spills and leaks.)

In  redefining  “prospective developer” based on CERCLA terms, the Senate provision also eliminates language in the existing definition that excludes a person who caused or contributed to contamination on the site. The question is whether those changes, in combination,  could give a property owner responsible for contamination unrelated to a CERCLA  “hazardous substance”   liability protection and other benefits under the state Brownfields law. That result would be inconsistent with the original intent of the Brownfields Redevelopment Act and undermine the state’s ability to require cleanup of environmental contamination.

Sec. 4.14  would allow private engineers to self-permit onsite wastewater systems (such as septic systems), eliminating the need for a local health department permit.  (The provision does not affect wastewater systems that discharge to the land surface or to rivers, lakes and streams; those systems require permits from DENR.)  The property owner’s engineer would have to give the local health department a notice of intent to construct the wastewater system and a final post-construction report, but the engineer would be completely responsible for design and installation.  The provision also allows the engineer to use wastewater system technology that has not been approved by the State “at the engineer’s discretion”.

In place of health department enforcement of on-site wastewater standards, the bill puts the burden on the property owner to sue the engineer or soil scientist if the wastewater system fails.  The risk to the property owner is that problems may develop several years after installation, leading to an expensive fight over the  cause of the failure  — bad engineering; inappropriate siting; improper installation; or lack of maintenance. Treating a failed wastewater system as a problem strictly between the engineer or soil scientist and property owner also overlooks the possible impact on other property owners and the public.  A septic system located too close to a water supply well may contaminate the well; a failing wastewater system can contribute pollutants to already stressed streams and lakes. Although the bill requires the engineer to give notice of the proposed construction to the local health department,  it isn’t clear that the provision allows the health department to prevent installation of an engineer-approved system however poorly designed or improperly sited.

Sec.4.15 changes state review of applications for innovative or experimental onsite wastewater systems. For the most part,  the bill  seems to replace state approval of experimental waste treatment systems with reliance on national certification of the technology.

Sec. 4.18 reduces  state protection of isolated wetlands by limiting the application of state water quality permitting rules  to basin wetlands and bogs — excluding other isolated wetlands from environmental protection. DENR has identified seven other categories of isolated wetlands: Coastal Isolated Wetlands, Seep, Hardwood Flat, Non-Riverine Swamp Forest, Pocosin, Pine Savanna, and Pine Flats.  Note: “isolated wetlands” are wetlands that do not have any connection to surface waters that fall under federal Clean Water Act jurisdiction.

Sec. 4.19 allows more development to be considered “low density” under coastal stormwater rules, raising the low density limit from 12% built-upon area to 24% built-upon area. The significance of the change is that low density projects do not require engineered stormwater controls. The bill also eliminates one trigger for compliance with coastal stormwater rules — the addition of 10,000 square feet or more of built-upon area as part of a non-residential development.  The Senate provision would trigger coastal stormwater standards for both residential and non-residential projects based on the need for a sedimentation plan (required for disturbance of one acre or more) or a Coastal Area Management Act permit. Before adoption, the Senate amended the effective date for Sec. 4.19 in response to DENR concerns about the coastal stormwater changes. The provision would go into effect on July 1 2016 to allow for study in the interim.

Sec. 4.24 requires repeal of the state’s heavy duty vehicle idling rules. The rule, 15A NCAC 2D.1010, limits excessive idling of heavy duty vehicles as another way to reduce the impact of vehicle emissions on air quality.

Sec. 4.25 requires the state Division of Air Quality to remove air quality monitors that are not specifically required by the U.S. Environmental Protection Agency. The provision would significantly reduce the number of air quality monitors used to assess air quality and demonstrate compliance with federal ambient air quality standards.

Sec. 4.30 deals with mitigation of stream impacts  permitted under Sec. 404 of the Clean Water Act. Under Sec. 404,  many projects involving deposition of fill material in surface waters  require a federal permit. In most states,  the U.S. Army Corps of Engineers issues the 404 permits. The Clean Water Act requires an applicant for a  404 permit to provide the Corps with a certification (under Sec. 401 of the Act) that the project will be consistent with state water quality standards.  The Senate provision affects state issuance of the 401 Certification in two ways. First, it prevents DENR from using the 401 Certification to put stream mitigation conditions on a project impacting less than 300 feet of stream without making specific findings — even if the mitigation requirement simply matches mitigation required under the federal 404 permit. The provision also limits state requirements for stream mitigation to a 1:1 ratio of stream impact to mitigation provided; in some cases, that will result in less mitigation than the Corps will require for the 404 permit. Since the permit applicant will have to meet federal mitigation conditions in any case, the reason for these new restrictions on parallel state mitigation conditions isn’t clear.

Sec. 4.31 completely eliminates state mitigation requirements for isolated streams (that is, streams that fall outside federal Clean Water Act permitting jurisdiction).

Sec. 4.37 makes changes to riparian buffer rules. The provision requires the buffer on an intermittent stream to be measured from the center of the stream rather than normal high water level. The most significant change allows unlimited development in a riparian buffer as long as the project complies with state stormwater requirements. The change appears as an amendment to a stormwater statute and does not directly refer to riparian buffer rules adopted by the Environmental Management Commission. Other bills that propose changes to riparian buffer requirements specifically list the rules affected — such as the Neuse River and Jordan Lake rules.  Since this provision makes no reference to the riparian buffer rules, it may be intended to apply only to buffers required under the state’s minimum stormwater standards and local stormwater ordinances. It isn’t clear.

The bill also includes several provisions that appeared earlier in other Senate bills. Sec. 4.1 makes another run at putting environmental audit/self-disclosure immunity into state law. The Senate had included those same provisions in Senate Bill 453; see an earlier  post for more detail. Sec. 4.3 and Sec. 4.4 repeat limitations on state adoption and enforcement of federal air quality standards already approved by the Senate in Senate Bill 303; see previous posts  here and here.

The extensive Senate changes to House Bill 765 mean the bill now goes back to the House for a vote on concurrence. If the House refuses to accept all of the Senate changes, the bill goes to a conference committee. The General Assembly will be back in session this week, but it isn’t clear what priority the House will give H 765.

The Direction of the State’s Water Quality Program

September 19, 2013.  Earlier posts talked about two unusual recent  decisions by the Department of Environment and Natural Resources (DENR) on Section 401 water quality certifications  under the Clean Water Act — one concerning  Cleveland County’s proposal to build a new dam on the First Broad River to create a reservoir and the other for federal relicensing of Alcoa’s existing hydroelectric power dams on the Yadkin River.  You can find the Cleveland County  post here and the Alcoa post here.  The question is what those two decisions  say about the current direction of the water quality program.

The  decision to waive the water quality certification for the proposed Cleveland County reservoir — the first deliberate waiver in the history of the N.C. water quality program — cited  a state rule requiring  a decision on a 401 application within 60 days. But  the Cleveland County application was not complete and DENR made no effort to go through the review process (which would have  required an environmental impact statement and a public notice).  As reported in the Charlotte Observer, Division of Water Resources Director Tom Reeder gave a different explanation of the waiver: “The state of North Carolina looked at all of this and said there’s really no value added to us getting involved in this whole thing. Cleveland County would have had to spend more money that would not go to any good purpose.”  The implication was that a state water quality review would add more time and cost when the U.S. Army Corps of Engineers (as the federal permitting agency) opposed the project — even though the state water quality review and the federal permit review usually go hand in hand and rely on the same environmental studies.

Where the Cleveland County project  proposed construction of a new dam;  Alcoa applied for a state water quality certification to cover continued operation of four existing dams on the Yadkin River that were built between 50 and 100 years ago to generate power for the now-closed Alcoa aluminum smelting plant. After nearly a year of review and a public hearing, DENR suddenly denied the Alcoa 401 Certification. The denial letter cited a state rule requiring the  applicant to have title to the project site, the permission of the property owner or the  ability to acquire the property by condemnation.  DENR relied on a lawsuit (filed the same day) claiming state public trust ownership of  the bed of the Yadkin River under the Alcoa dams to conclude that Alcoa  could not show title to the land  under the dams. According to the letter, the lack of either title or permission from the state would make it difficult to assure that Alcoa could meet water quality conditions on operation of the dams.

The earlier posts talked about a number of questions raised by the two decisions. There are also a few things to take away:

DENR has waived a 401 Certification without clearly explaining the reason for the waiver or how waiver decisions will be made in the future.   The decision letter suggests the waiver resulted from DENR’s inability to make a decision within 60 days, but the record shows no attempt to get the additional information needed to make the application complete, provide a public notice of the application or do a complete review.  The  Division of Water Resources director later suggested that  state review would have served no purpose given the Corps of Engineers’ objections to the project. Either reason could also easily apply to other 401 applications.

As to the first explanation,  DENR denied the Alcoa 401 application one month later  after nearly a year of review  with no suggestion that water quality rules required a waiver.  The second reason offered for the waiver (U.S. Army Corps of Engineers opposition) also applies to other projects. The Corps of Engineers often presses federal permit  applicants to look at other alternatives with fewer environmental impacts.   The Corps expressed similar skepticism about the City of Raleigh’s  proposal to build a reservoir on the Little River, but in that case DENR has continued to work with  Raleigh and the Corps of Engineers to look at alternatives and  address the Corps’ concerns.  The same has been true for other large commercial development projects.

DENR treated the Cleveland County reservoir project differently, but has not provided a consistent explanation of the decision or criteria for future 401 Certification waivers.

Denial of  a 401 Certification based on an unresolved claim of public trust ownership of the river bed under the project has implications well beyond Alcoa.   If there is a case to be made for public trust ownership of the upper reaches of the Yadkin River,  the same will be true for  many of the state’s inland rivers. The decision may have implications for  dam  sites proposed by Cleveland County and the City of Raleigh (on the First Broad River and the Little River respectively).

Title to the bed of the Yadkin River under the Alcoa dams  has not yet been determined by the courts, but DENR issues both Individual and general 401 Certifications for a wide range of projects  known to be on state-owned  public trust lands — including mining activities, utility and energy infrastructure, marinas, aquaculture operations, shoreline stabilization projects, water intakes, and dams.  The justification for denial of the Alcoa 401 Certification — that lack of ownership or permission from the state to apply  calls into question the applicant’s ability to comply with water quality conditions — would apply equally to those projects.

DENR has not explained what evidence of title will be required of applicants proposing to construct a project in navigable waters.    A deed to submerged lands may or may not be valid. See the earlier post on public trust doctrine for more explanation of public trust ownership and the way title to state-owned public trust lands can be transferred.   But the existence — or absence — of a state lawsuit claiming title under the public trust doctrine cannot be the deciding factor either.  Public trust ownership does not arise because of a state lawsuit; it is not negated by the absence of one.  Having made public trust ownership a factor in the issuance of 401 Certifications, DENR needs a clear and consistent approach to resolving questions of title to lands under coastal waters and navigable rivers; otherwise the outcomes will be arbitrary and subject to political influence.

The Alcoa denial letter suggests that Alcoa needs specific state permission to apply for a 401 Certification to continue operating the Yadkin hydropower dams, but does not indicate what form that permission must take. Some  activities on state-owned public trust lands have individual submerged lands leases from the State Property Office, but many do not. The state has often relied on environmental permits as the permission to develop on state-owned submerged lands.  It isn’t even clear whether a previous  lease to construct on state-owned public trust lands would be sufficient, since the state’s lawsuit claiming ownership of the Yadkin river admits that Alcoa had permission to build the four dams.

The precedent set by the Alcoa denial could apply to a number of  ongoing commercial activities in coastal waters and state rivers.  One of the (several) interesting things about the Alcoa decision is that it dealt with renewal of an operating license for dams built decades ago with state permission. The DENR denial letter suggests that the state must give express permission for the renewal of licenses and permits for ongoing operations on state-owned public trust lands — activities that could include aquaculture, marina operations, sand mining and other commercial activities. The criteria for granting or denying permission will be another question.

The troubling thing about the Cleveland County and Alcoa decisions is the reliance on rule interpretations that not only break with past practice, but are inconsistent with each other.  With respect to the waiver of a 401 Certification under the 60-day rule, DENR needs to reconcile the Cleveland County and Alcoa decisions. If opposition by the Corps of Engineers was the real reason for the Cleveland County waiver, DENR should explain the criteria for waiver in situation where the Corps has pressed an applicant for alternatives. DENR also needs to  provide  guidance to applicants proposing projects in coastal waters and inland rivers.  Otherwise,  applicants will have little assurance of a clear, consistent and predictable water quality review.

The Uses of a Water Quality Certification: Alcoa

September 9, 2013.   On August 2, 2013, DENR’s Division of Water Resources denied a Section 401 water quality certification for the relicensing of Alcoa’s four hydroelectric dams on the Yadkin River.   (See an  earlier post  for background on  401 Certifications.) The denial letter did not cite any water quality basis for denying the 401 Certification. Instead, the letter  referred to a lawsuit filed the same day by the N.C. Department of Administration  that: 1.  claimed title to the bed of the Yadkin River under the Alcoa dams as public trust land;  and 2. asked the court to   recognized State ownership of the Alcoa dams  based on public trust ownership of the riverbed under the dams.  The significance of the Alcoa 401 Certification denial is that  many projects requiring 401 Certifications are located  in waters that may be covered by the public trust doctrine. The Alcoa  denial raises  some interesting questions about   issuance of  401 Certifications for  activities in rivers and streams in particular.   First, some history on Alcoa’s dams and  the public trust doctrine.

History.  Alcoa operates four dams on the Yadkin River to generate electricity.  Alcoa bought an  unfinished aluminum smelting plant in the town of Badin from a French company in 1915, completed the plant and began operation in 1917 powered by the newly constructed Narrows Dam on the Yadkin River.  As power demand increased, Alcoa  built three more hydroelectric dams on the Yadkin  —  at the Falls (1919),  High Rock (1927)  and Tuckertown (1962).   After Congress strengthened the federal role in permitting hydroelectric power projects,  Alcoa received  a 50-year federal  license to operate the dams (together  known as the “Yadkin Project”) in 1958.  In 2002, Alcoa  began the process of renewing the federal license.

For two years, a group  of North Carolina local governments, state agencies (including DENR), federal  agencies, lakefront homeowners associations, and environmental organizations met  to develop recommended license conditions for the Yadkin Project.  The   group  reached agreement on measures to protect water quality and habitat; provide public access; maintain lake levels and adequate  downstream flows; and create a drought management system for the area affected by the Yadkin Project.  The group submitted the proposed conditions to the Federal Energy Regulatory Commission (FERC) in 2007.  You can find a description of the 2007  relicensing settlement agreement  here.

Shortly after the settlement agreement had been signed,  Alcoa stopped all production at the Badin aluminum works and eliminated the last 30 jobs at the plant.  At its height, the Badin aluminum works employed about 1,000 people, but production had declined over a ten-year period.  As the demand for power at the Badin works lessened, Alcoa  started selling electricity from the Yadkin Project on the wholesale market.  Complete shutdown of the Badin plant set off a backlash. Stanly County, which  did  not sign the relicensing settlement agreement, demanded that Alcoa compensate the county for jobs lost  in the  shut down of the  Badin works and raised concerns about industrial contamination in the area of Alcoa’s Badin plant.  Stanly County  and others opposed to  renewal of Alcoa’s  FERC license  persuaded Gov. Beverly Perdue to intervene in the FERC relicensing and  request transfer of the  Alcoa  license to the State of North Carolina. FERC’s decision on relicensing of the Yadkin Project has now been on hold for several years waiting for the state to make a decision on issuance of a  401 Certification for operation of the dams.

In 2009, DENR   issued a  401 Certification for the Yadkin Project. The certification required   Alcoa to upgrade the hydroelectric generation facilities and make operational changes to improve downstream water quality and  restore flow to streams affected by operation of the dams.  DWQ revoked that  401 Certification in late 2010 after discovering that  information submitted by  Alcoa during the application review  may have been misleading.  After resolving DWQ’s  concerns, Alcoa reapplied for a 401 Certification last  year.   DWQ was  moving toward issuing a new 401 Certification  for the Alcoa dams — there was  a public hearing on a draft 401 Certification  in  May  — when DENR suddenly reversed direction and denied the 401 Certification on August 2, 2013 citing the McCrory administration lawsuit filed the same day. You can find documents related to Alcoa’s recent 401 application (including the denial letter and the complaint in the McCrory administration lawsuit) here.

Public Trust Doctrine. Under ancient law brought to the American colonies from England,  lands under navigable waters are owned by the sovereign and held in trust for the public.  The “public trust doctrine” protects the right of  the public to use the  waters for navigation, fishing, and recreation.  After independence, the states acquired title to public trust lands previously held by the King. Since the state holds lands under navigable waters in trust for the use of the public,  the state rarely transfers ownership of  those lands  outright.  On the other hand, the state  allows many private activities on  state-owned public trust lands — both commercial and non-commercial. Most of the docks, piers, marinas, and fish houses in  coastal waters have been built on state-owned public trust lands.   You will  find  other commercial activities in  coastal waters, rivers and streams including  aquaculture operations,  mining,  commercial recreation facilities,  and  dams (used for various purposes).

The  McCrory administration lawsuit admits  that  Alcoa had state permission to build hydroelectric dams on the Yadkin River. In the late 18th and early 20th century,  the General Assembly allowed a number of companies to build hydroelectric dams and mill dams on state rivers by  special legislation.  It is not clear that the state claimed ownership of the bed of the Yadkin River at the time.  Some early laws authorizing construction of dams on the Yadkin  refer to construction on “non-navigable” sections of the  Yadkin River  and a number of  state court decisions  recognized private ownership  of the bed of the Yadkin River  at  specific locations.   In Rose v. Franklin, 216 N.C. 289, 4 S.E.2d 876 (N.C., 1939), the N.C. Supreme Court noted that the parties to a title dispute admitted that the Yadkin River was a non-navigable stream as it passed through the town of Elkin and found that the plaintiff owned to the center of the river.

Until the 1990s,  court decisions recognized state ownership of lands under: 1. tidal waters (like the waters of the Atlantic Ocean and the coastal bays and sounds); and 2.   other waters that were navigable by sea-going vessels. The second category covered rivers that were below the fall line and deep enough to  be navigated  by large boats.    The public trust cases  appeared to allow private ownership of  the beds of  other rivers and streams,  but recognized a public trust easement on those that could be navigated by  shallow-draft boats or used to float logs downstream.   Decisions like Rose v. Franklin  fit this understanding of the law.

A  1995 N.C. Supreme Court decision, Gwathmey v. State, 464 S.E.2d 674, 342 N.C. 287,   abandoned the use of tidal influence as a factor and stated a simple rule: the public trust doctrine applies to any water body that, in its natural condition, can be navigated by “useful vessels, including small craft used for pleasure”.   It isn’t clear whether  Gwathmey completely abandons the old distinction between waters navigable by sea-going vessels and those  floatable by canoe for purposes of state ownership of the bed. One  problem with the Gwathmey case is that it  involved tidal  waters and marsh where public trust ownership had historically been recognized. The court just substituted one grounds for public trust ownership (navigability) for another (tidal influence).  The decision never  addressed the  impact of the  new rule  on  inland rivers where state courts had  recognized  private ownership of the river bed.  The McCrory administration lawsuit claiming title to the Alcoa dams may require the court to explain how the Gwathmey decision  applies to  interior rivers and streams.

The 401 Certification Decision.  The letter denying the Alcoa 401 Certification offers only one grounds for the denial — the state’s claim of ownership of the Yadkin River bed and the Alcoa dams built there. Citing a water quality rule, 15A NCAC 02H.0502 (f),  the letter says that “signature on the [401] application ‘certifies that the applicant has title to the property, has been authorized by the owner to apply for certification or is a public entity and has the power of eminent domain’. The required ownership certification ensures that the applicant owns the project’s dams and powerhouses and is fully capable of implementing all protections of water quality that may be imposed as conditions in a 401 Certification.”

The  rule applies to  all 401 applicants, raising the question of what will  now be required of applicants proposing development in public trust waters or in rivers and streams where public trust ownership may be in question.   It  is not a standard that seems to have been applied before to projects  on rivers and streams– even in the very recent past.  Just one month earlier, DENR waived a 401 Certification for the proposed Cleveland County dam without requiring the county to  show ownership of the bed of the First Broad River or obtain state permission to apply for a federal Clean Water Act permit  to build a dam.  Beyond dam construction,   a  401 Certification may be required for other commercial activities like in-stream mining; aquaculture;  construction of recreation facilities;  and  water intake structures for industry or agriculture.  Having invoked the requirement for Alcoa’s hydroelectric dams, DENR will need to  explain how the requirement applies to other applicants and permit holders:

— Does the standard set in the Alcoa denial letter apply to all  projects  in navigable  waters that require a 401 Certification?  This is not a trick question;  the letter indicates that  ownership  or  some form of state permission  will be necessary to satisfy DENR that  the applicant  has  sufficient control over  a project  on public trust lands  to  meet water quality conditions on a 401 Certification.

— What  will an applicant have to do to show  private ownership of land under a river or stream? Deciding whether a river or stream is navigable can require a boat trip — literally.  Answering the question of public trust ownership  will be  further complicated by uncertainty about how  the Gwathmey decision  applies to  rivers (or parts of rivers)  that  had  never been considered navigable by sea-going vessels.  In the past, many of those riverbeds had been recognized as  private property subject to a public trust easement for  navigation.

— Without proof of private ownership of the river or stream bed, what  kind of  state permission will be needed?  In the 19th and early 20th century, the General Assembly  often authorized activities in rivers and streams by special legislation  — as it did for  construction of  hydroelectric dams on the Yadkin River.  The state issues leases and easements in public trust lands for some purposes, but  those   programs developed fairly late in the 20th century and have been used for the most part in coastal waters.  The easement criteria in G.S. 146-12  lend themselves more readily to piers and docks  than to more intensive uses such as mining or dam construction.

In something of a reverse of the Alcoa 401 denial,  the state has   often relied on environmental permits as the vehicle for approving  activities in public trust waters.  Under G.S. 146-12, issuance of a  Coastal Area Management Act (CAMA) permit for development in  coastal waters  also  gives  the applicant a state  easement.  (The State Property Office  has an opportunity to review those CAMA applications.)   Outside the coastal counties, it is hard to find consistent application of the easement requirement.  For projects that don’t require a CAMA permit,  there will likely be more uncertainty about  public trust ownership and a less well-trod  path to state approval if the state does own the submerged lands.

— What standards will be applied in granting or denying state permission for activities on public trust lands?  The McCrory administration lawsuit suggests an intent to tie Alcoa’s operation of the Yadkin dams to generate electricity for sale on the wholesale market to compensation for use of the public trust resources.  Outside of leases to mine on  submerged lands, state law has not generally taxed  revenue from commercial  use of public trust resources.

— What happens when Congress has given a federal agency authority  to permit an  activity in navigable waters?  Under the Federal Power Act, FERC  has the authority to license hydroelectric projects in navigable waters of the United States. The U.S. Army Corps of Engineers has authority to permit other types of structures in navigable waters under the  Rivers and Harbors Act of 1899 and  issues Clean Water Act permits to fill navigable waters.  The Section 401 Certification has generally served as the state approval for  federally permitted projects in navigable waters. I don’t know that  the state has previously required a separate easement or lease. I also don’t know whether the federal  agencies believe any other state approval is needed given  Congressional authority  to permit these activities in navigable waters.

Many questions. The answers will be interesting.

The Uses of a Water Quality Certification: Cleveland County Reservoir

September 3, 2013.  First a disclaimer: This post will be the first of  a series  on two recent decisions by the Department of Environment and Natural Resources (DENR)  on water quality certifications requested under  Section 401 of the Clean Water Act.   Both  decisions  have been appealed; these posts should not be taken as legal advice to  parties  in these or other cases.

This post explains  how  Section 401  of the Clean Water Act works  and describes DENR’s decision to waive the 401 Certification for a Cleveland County reservoir project. The next  post will cover DENR’s denial of a 401 Certification for Alcoa’s hydroelectric dams on the Yadkin River. The last  post in the series will  talk about the implications of the  Cleveland County and Alcoa decisions for  DENR’s water quality certification program.  Individually, the decisions are unprecedented; together, the decisions send a very confusing message about DENR’s implementation of Section 401 of the  Clean Water Act.

First, a little background on water quality certifications. Under Section 401 of the Clean Water Act, an applicant for a federal license or permit that involves any discharge to navigable waters   must  provide the federal  agency with a certification that the activity  will comply with the water quality standards of the state where the project will be built.  Examples of a “discharge” include piping  wastewater  to a stream or river;  putting fill material in the water to build a structure like a dam or bulkhead; and releasing water through a hydroelectric dam.  A number of  federal permits can trigger the need for a “401 Certification”; the most common may be permits under Section 404 of the Clean Water Act to  fill navigable waters;  permits issued under Section 10 of  the Rivers and Harbors Act of 1899  for structures in navigable waters; and Federal Energy Regulatory Commission (FERC) licenses  to build or operate  hydroelectric dams.

One important thing to know about a 401 Certification: the state water quality  review does not simply duplicate the federal  permitting process.  The federal  permit decision often focuses on one part of the  project and may or may not include consideration of water quality impacts.  Under Section 401 of the Clean Water Act,   the state is charged to look at all of the  activity’s   water quality impacts — including impacts beyond the scope of the federal permit — in deciding whether  the activity will meet water quality standards.  The U.S. Supreme Court  confirmed  the broad scope of a state  401 Certification  in  PUD #1 of Jefferson County v. Washington State Dept. of Environmental Quality, 114 S.Ct. 1900, 128 L.Ed.2d 716 (1994).    The state rarely stamps a 401 application “approved” as submitted. More often, the  state’s 401 Certification identifies operating conditions and mitigation measures needed to prevent  a water quality violation. The federal permit then incorporates  the state’s water quality conditions and mitigation requirements.

Cleveland County Reservoir.   Cleveland County has been  trying to get a  Section 404 permit from the U.S. Army Corps of Engineers to  dam the First Broad River and create a reservoir since at least 2005.  To  issue a  Section 404 permit,   the Corps of Engineers has to find that there is no less environmentally damaging alternative that can  meet the project’s intended purpose. Cleveland County has  argued that the reservoir project is necessary to supply drinking water for the county, but the  Corps of Engineers has not been persuaded that a reservoir is the least environmentally damaging alternative.  There appear to be other drinking water sources available to Cleveland County —  including the purchase of water from existing water systems with excess supply.

The Corps expressed  concerns about the Cleveland County reservoir project from the beginning, but entered into an agreement with the county describing how a  federal permit application would be processed.  An early step would have to be preparation of an Environmental Impact  Statement (EIS) in consultation with the Corps of Engineers to satisfy  the National Environmental Policy Act (NEPA).  Since 2005,  little progress has been made on the federal permit application and EIS, but in late April Cleveland County sent DENR’s Division of Water Quality an application for a 401 Certification for the reservoir project.

Soon after receiving the Cleveland County  application on May 2, DENR’s water quality  staff  concluded that the application was incomplete; among other things, the application  did not identify mitigation  for stream and wetland impacts.  The state also has an  environmental  law  similar to NEPA.   The state Environmental Policy Act (SEPA)  requires an  EIS before  a state agency approves a project involving: 1. expenditure of public money or use of public land; and 2. the potential for significant impacts on the environment.  See N.C.G.S. 113A-4.  Although the Cleveland County reservoir project met all of the SEPA triggers,  the county did not submit an EIS with the permit application –another reason to find the application incomplete.  (Usually,  the state and federal reviews  are  coordinated so a single  EIS can be used for both. )

Although water quality staff  decided that the Cleveland County application was incomplete,  DENR  did not notify  Cleveland County of deficiencies in the application. On the other hand, DENR    did not  acknowledge the application as complete and  publish  notice of the application as required under federal law. After the  early  exchange  of emails among DENR staff about the incomplete application,  radio silence (at least in terms of email communication) for several weeks. Then, on  July 2, 2013 the new  director of DENR’s reorganized water programs, Tom Reeder,  sent a letter  to Cleveland County  waiving the requirement for a 401 Certification on the reservoir project. The letter gave one reason: under state rules, DENR  must act on an application for a  401 Certification within 60 days or the certification is waived. (See 15A NCAC 02H.0507.

You can find  DENR documents on the Cleveland County reservoir project, including the waiver letter,   here. (Be prepared to try  the link more than once; the connection sometimes sends an error message.)

Several things about DENR’s decision on the Cleveland County 401 Certification:

—  DENR has always interpreted the  60-day time period in state rules as  starting when DENR receives a complete application for the 401 Certification and in this case it seems clear that the Cleveland County application was not complete.

— The Clean Water Act  only assumes the 401 Certification has been waived if the state fails to act within  one year after receiving a 401 application.

— Starting the review time based on an incomplete application is inconsistent with DENR’s past interpretation of the rule and inconsistent with DENR’s  application of the rule to other projects currently under review.

— Given the inconsistency with past interpretation, current practice  and the absence of any effort to put the Cleveland County application through a normal 401 Certification review,  DENR seems to have made a deliberate decision to waive the state’s 401 authority for this particular project. The waiver did not happen by operation of  either state or federal law.

—  A deliberate waiver of a 401 Certification appears to have  no precedent in the N.C. water quality program and means the state has  forfeited the opportunity to influence permit conditions and  mitigation requirements for the Cleveland County reservoir project to protect water quality.

—  Other applicants will  question the  criteria for  a state waiver of the 401 Certification.  (The City of Raleigh, which has also proposed a controversial reservoir project, has already asked for a copy of the Cleveland County waiver letter.) Unfortunately, the waiver letter raises more questions than it answers, since it cites the 60-day rule to waive the 401 Certification for an incomplete application.

On August 21, 2013, Southern Environmental Law Center (SELC) sent a letter asking the U.S. Environmental Protection Agency  to designate the  area  of the First Broad River in Cleveland County proposed for reservoir construction as unsuitable under Section 404(c) of the Clean Water Act. Since then, SELC has filed an appeal of the state’s waiver of the 401 Certification on behalf of American Rivers.