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.