In a mixed victory for the Environmental Protection Agency (EPA) a panel of the Fifth Circuit Court of Appeals on April 7 in Gulf Restoration Network v. McCarthy1 ruled (i) that an Agency decision not to render a determination that water quality standards are "necessary" for a water body is subject to judicial review; and (ii) EPA is not required by law to make a determination of necessity in responding to a petition that it do so.2  This second holding reversed a decision by the Louisiana Eastern District Court, which had concluded that EPA is required, based on the structure of Clean Water Act and the holding Massachusetts v. EPA, to render some decision on "necessity" in response to a citizen petition.3  While the Fifth Circuit remanded the case to the District Court to assess whether EPA adequately justified not reaching the issue of necessity, the Fifth Circuit went out of its way to stress that this should be a very easy threshold for EPA to meet.4    

Background

Gulf Restoration Network stemmed from a petition by environmental groups to EPA requesting that EPA set numeric nutrient criteria (NNC)for waterbodies in the states of the Mississippi River basin.5  The environmental group petitioners argued that these waters faced massive nutrient pollution issues and that the states were not adequately addressing these nutrient issues.6 They urged EPA to use its authority under section 303(c)(4)(B) of the federal Clean Water Act to make a finding that federal numeric nutrient water quality criteria were therefore "necessary" for these waters.7 Under Section 303(c)(4)(B), such a finding of necessity (also known as a "necessity determination") would trigger a requirement that EPA initiate rulemaking to establish NNC for all of the affected waters.8  EPA rejected the petition, but declined to take a position on the legally significant question of whether NNC were "necessary" for these waters.9  Rather, EPA asserted that for a variety of reasons -- cost, administrative burden, the collaborative federalism framework of the Clean Water Act, the progress states were making in addressing nutrient issues without establishing NNC, the technical complexity of setting NNC due to the complex relationship between nutrient levels and biological impacts to a water body -- the Agency would not use its Section 303(c)(4)(B) authority to set NNC.10

EPA's rejection of the petition prompted the environmental group petitioners to file suit against EPA, asserting (among other things) that EPA was legally obligated to make a finding that NNC are necessary for the waters of the Mississippi River basin.11 Under the Clean Water Act, a finding of necessity would require EPA to propose rules establishing NNC for the several states.  Conversely, a finding of absence of necessity would constitute a final agency action subject to challenge under the Administrative Procedures Act.

The District Court found that EPA did have an obligation to address the issue of necessity, but that EPA could properly consider non-technical factors, such as cost, feasibility and the administrative burden of setting NNC for many states (possibly as many as 34, under the environmental groups' imprecise petition), in making a determination of necessity.12  While the District Court decision was, on paper, something of a victory for the environmental groups -- since the decision required EPA to make a necessity determination for NNC in the Mississippi River basin waters -- the fact that the Court expressly stated that EPA could determine the necessity question based on cost, administrative burden, or feasibility -- the very factors EPA relied upon in deciding not to determine the question of necessity -- made it a paper-thin, if not hollow victory, as the Court signaled that the Agency could rely on those same factors in rendering a determination of no necessity. 

Fifth Circuit Proceedings

The Agency appealed the District Court decision, making two basic arguments before the Fifth Circuit: (i) that the Court lacked jurisdiction to review EPA's response to the petition because determining whether there is or is not necessity is a matter subject to the unreviewable discretion of EPA; and (ii) if the Court has jurisdiction, it must allow EPA the opportunity to demonstrate that it has a reasonable basis to choose not to determine the issue of necessity.13  EPA argued that under Massachusetts v. EPA,14 an agency can decline to make a finding of necessity if it can demonstrate it has a reasonable basis for declining to find necessity, and that the District Court did not evaluate whether EPA had provided such a reasonable basis.

The Fifth Circuit rejected EPA's jurisdictional argument, holding that EPA did not have unreviewable discretion to decide whether water quality standards are or are not necessary.15  The Court was unpersuaded by EPA's argument that the Agency's rejection of the environmental groups' petition to set NNC was akin to a "refusal to engage in enforcement activities" (which would be entirely with the discretion of the agency), finding instead that EPA's denial of the petition was more similar to "denial of a rulemaking petition", where EPA's decision not to engage in rulemaking is subject to judicial review (albeit deferential review, in most instances).16  However, the Court agreed with EPA that the Clean Water Act does not obligate the Agency to make a finding on necessity, provided EPA can provide a reasonable explanation as to why it did not make such a finding.17  The Fifth Circuit remanded to the District Court to determine whether EPA had indeed provided such a "reasonable explanation," and whether the Agency's explanation was legally sufficient.18  While leaving the ultimate decision to the District Court, the Fifth circuit took pains to point out that the District Court's review of EPA's basis for not reaching the issue of necessity is "extremely limited" and "highly deferential," provided its explanation for not reaching the necessity issue is grounded in the Clean Water Act.19

Implications

The Fifth Circuit decision is only the latest development in EPA's long-running efforts to  address nutrient pollution in rivers and streams nationwide.  While EPA has for decades advised states that action to address nutrients is an urgent priority, EPA has -- for the most part -- in practice recognized that nutrient pollution issues cannot be resolved simply by commanding states to establish NNC, or by threatening to do so itself.  While excessive nutrients can under some circumstances cause harmful impacts on the biota of streams, lakes and coastal waters, the relationship between nutrient levels and biological impacts is complex, and varies based on a range of physical and other factors.  The same level of nutrients harmful to a waterbody in one part of a state may cause no significant biological impact to other waters elsewhere in the state.  EPA's recent effort to use its Section 303(c)(4)(B) authority to impose NNC on the State of Florida prompted a years-long litigation, a partial defeat for EPA in the district court, and an ultimate withdrawal by EPA from nutrient regulation in Florida in favor of a State-developed nutrient rule. Post-Florida, EPA appears to be continuing to struggle to strike the right balance of regulatory carrots and sticks that will nudge the states to take more actions to address nutrients and their potential impacts on water quality.

EPA's likely path forward following the District Court order was widely expected to be to respond to the petitioners by explaining why it did not find NNC to be necessary for the waters that were the subject of their petition, relying on the same factors it advanced previously for making no determination one way or another, since the District Court stated these were valid factors.  EPA also could have cited the progress some Mississippi River basin states are making in addressing nutrient issues without utilizing NNC.  Now, following the Fifth Circuit decision, EPA need not make a finding that NNC are not necessary to avoid promulgating NNC.  Thus, the Fifth Circuit decision plainly broadens EPA's flexibility in responding to petitions such as those at the center of this litigation.  One would expect that the Agency, on remand, will simply maintain its earlier denial of the petition, and argue to the District Court that the Agency has advanced an adequate justification for choosing not to make any finding on the question of necessity.

Whether or not this judicial enlargement of EPA's discretion leads EPA to feel less pressured to require States to develop NNC or to make other progress in addressing nutrients, the one thing the Fifth Circuit decision does not address, nor resolve, is EPA's fundamental challenge of how to regulate nutrients.  For the foreseeable future, EPA is likely to avoid using its Section 303(c)(4)(B) hammer, particularly given its experience in Florida.  But if the states and EPA cannot demonstrate adequate progress in addressing nutrient issues, EPA may yet again, in the not too distant future, face demands by environmental groups to take action.  In Gulf Restoration Network v. McCarthy, the Court in essence told EPA that its actions are subject to review, but to extreme deference.  EPA has likely not bumped against the limit of that deference, at least not yet.  But the Fifth Circuit also held that EPA's decision not to set water quality standards are not unreviewable.  Neither the challenge of addressing nutrient issues, nor judicial review of how EPA responds to this challenge, is a tale yet fully told.