On Monday, the 7th Circuit issued an opinion in Texas Independent Producers and Royalty Owners Association v. EPA. The interesting part of the case involved a challenge by the Natural Resources Defense Council (NRDC) to a General Permit issued by the Environmental Protection Agency (EPA) under the Clean Water Act (CWA) for dealing with stormwater dischargers resulting from construction activities.

The EPA has increasingly relied on General Permits for dealing with the permitting process required by the CWA for discharges of pollutants into waterways. Under a General Permit, the EPA sets out specific rules for specific types of activities that will qualify as being in compliance with the permit. Then, instead of applying for an individual permit as usually required to comply with the CWA, a discharger can file a notice of intent (NOI) to undertake the activity in compliance with the standards set forth by the General Permit and go on about their business without having to file for an individual permit. The process helps the EPA regulate lots more activities and industries without having to undergo the process of an individualized inquiry in each case. It also streamlines the process for industry. Many environmental groups, however, prefer a more burdensome process that makes it more costly and harder for industry to discharge at all.

This inspired NRDC's lawsuit. (The oil producers are the named party in the appeal because NRDC's lawsuit was consolidated with suits brought by the oil and gas producers, who claim their activities should not be rolled in with other construction activities, but rather are exempt when it comes to stormwater discharges.)

NRDC challenged 1) the ability of EPA to issue General Permits under the Clean Water Act, 2) the failure to require public notice and hearing in reviewing each NOI, and 3) claimed that the General Permits were violating the Endangered Species Act (ESA) because there was no consultation with the Fish and Wildlife Service as required by § 7 of the ESA when federal agency action could jeopardize an endangered or threatened species.

The 7th Circuit declined to follow the route taken in the 2nd and 9th Circuits and found that NRDC actually lacked standing to challenge the General Permits, because they had failed to sufficiently establish a causal link between the agency action and any harm to NRDC members. In challenges to General Permits involving Concentrated Animal Feeding Operations in the 2nd Circuit (Waterkeeper Alliance v. EPA) and municipal storm water discharges in the 9th (Environmental Defense Center v. EPA), those courts found no problem with standing regarding the environmental groups challenging General Permits. The 2nd Circuit didn't even address the issue. The 7th Circuit, in contrast, decided that NRDC had pointed out potential harms, but simply failed to link real harms to the General Permit issued by the EPA.

On NRDC's latter two claims, however, the court did find standing, as violations of procedural rights had occurred. The failure to provide the proper procedure, i.e. notice and hearing or to consult with the Fish and Wildlife Service as required by the ESA, were the harms themselves and it was clear that EPA's failure to uphold these procedural rights had caused those harms.

The merits on these latter two issues are rather pivotal to the future of General Permits. Given that much of the benefit of a General Permit lies in its relative lack of red tape and functional ease, the use of these permits in the future could turn on whether notice and hearing or Fish and Wildlife Service consultation are required. Both requirements would add to the burden and cost of General Permits and reduce their value as an administrative cost-saving device. With the decision of the 7th Circuit handed down on Monday, there is now a circuit split regarding at least the first issue.

Regarding notice and hearing, the court turned to Chevron analysis to see whether or not the Clean Water Act would consider the NOIs subject to the CWA's requirements for notice and public hearing under 1342 (j) and 1342(a)(1) of the CWA or whether the court could defer to the EPA's interpretation of the CWA. Basically, the court had to ask whether these NOIs were the equivalents of permits and permit applications.

The 9th Circuit had already found NOIs were the equivalent of permits and permit applications in applying its own Chevron analysis. It stopped at Chevron step one, "whether Congress has directly spoken to the precise question at issue," and found that the clear text of the Clean Water Act mandated the agency provide notice and hearing. But the 7th Circuit found that the language of the Clean Water Act was ambiguous and thus proceeded to the second step of Chevron to ask whether the interpretation by the EPA was based on a permissible interpretation of the statute. The 7th Circuit determined the EPA's interpretation was permissible and deferred to the EPA's decision that notice and hearing is not necessary for General Permits. Thus, the 7th Circuit created a split in the circuits. The ultimate resolution of this issue will have a rather significant impact on the feasibility of General Permits as a bureaucratic tool.

Finally, on the ESA issue, the court found that no federal action was involved in NOIs, as they were filed by private actors and required no agency approval, so § 7 of the ESA did not apply.