In a decision issued last week, the Supreme Court of the United States held that the United States Environmental Protection Agency (EPA) exceeded its authority by including “receiving water limitations” in a National Pollutant Discharge Elimination System (NPDES) permit, siding with the City and County of San Francisco in City & County of San Francisco v. United States EPA. The Court expressed concern that allowing receiving water limitations in the permit (which it called “end-result” requirements) would undermine the “permit shield” defense found in the Clean Water Act (CWA), which shields permit holders from liability if they are in compliance with the terms of their permit.

The dispute over the permit began in 2019, when EPA and the San Francisco Regional Water Quality Control Board included for the first time two narrative receiving water limitations in San Francisco’s wastewater and stormwater permit renewal; namely, that discharges from San Francisco’s treatment facility could not “cause or contribute” to a violation of any applicable water quality standard for receiving waters and that such discharges cannot “create pollution, contamination, or nuisance” as defined in California’s Water Code. Of interest to municipalities facing challenges in complying with these undefined narrative standards and related enforcement actions, San Francisco contended at the Ninth Circuit that such permit conditions were “arbitrary and capricious” because they fail to provide sufficiently clear direction on how to achieve compliance with water quality standards; however, it abandoned the argument at the Supreme Court. New York, Boston, the District of Columbia, Buffalo, and several wastewater and stormwater agencies filed amici curiae briefs with the Supreme Court similarly contending (in part) that narrative permit standards imposed by EPA were impermissibly vague—thus, making permit compliance uncertain and liability exposure high. Notably, the dissenting opinion in the Court’s 5-4 decision left open the possibility that if narrative permit provisions are vague or unreasonable, the terms could be challenged under the arbitrary and capricious standard.

The Supreme Court rejected San Francisco’s broad argument that only effluent standards are authorized by CWA section 1311(b)(1)(C); however, the Court agreed with San Francisco’s narrower argument that EPA had exceeded its authority under section 1311(b)(1)(C) by including in the permit certain receiving water limitations, i.e., those based on ambient water conditions. In addition to textual analysis, the Court emphasized the historical context of the pre-1972 Water Pollution Control Act, which exposed permittees to liability if the receiving water failed to meet water quality standards, regardless of the number of dischargers to the same body of water. In the Court’s view, Congress intended to scrap this approach when it overhauled the CWA. The Court also stated it was EPA’s responsibility—rather than a permittee’s—to determine what should be done to protect the quality of the receiving water.

This important decision could have significant impacts on NPDES permit conditions and negotiations, regulatory enforcement proceedings, and citizen suits under the CWA. It is also likely to impose additional strains on regulatory agencies like EPA and state water agencies at a time when they face severe budget cuts and staffing restrictions.

If you have questions about such matters, please contact Bill Marsh, Nate Hunt, Polly Jessen, or Tom Bloomfield at Kaplan Kirsch.