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EPA's New Section 401 Guidance: Will It Limit States' Authority or Just Make Them Mad?

Monday, June 24, 2019

Michael R. Campbell

Partner, Stoel Rives LLP

Barbara D. Craig

Partner, Stoel Rives LLP

Cherise M. Gaffney

Partner, Stoel Rives LLP

Laura Kerr

Associate, Stoel Rives LLP

Frustrated by some states’ use of their Clean Water Act (CWA) §401 authority to oppose or delay energy projects—particularly the transportation of fossil fuels—the Trump Administration issued the second installment in its efforts to restrict that authority on June 7. The U.S. Environmental Protection Agency’s (EPA’s) Clean Water Act Section 401 Guidance for Federal Agencies, States and Authorized Tribes strictly interprets state deadlines under §401 and takes a narrow view of the grounds on which states may deny or condition their approval of projects. The guidance follows an April 10 executive order, and will be followed in August by proposed EPA rules, with final rules by May 2020.

The guidance, executive order, and forthcoming rules will almost certainly be litigated, and the extent to which they can legally—and effectively—restrict state authority under §401 remains to be seen. Moreover, by forcing states to act more quickly, the guidance may unintentionally encourage states to issue more denials or impose more conservative and onerous conditions. As EPA proceeds with rulemaking, entities that must obtain §401 certifications should keep these potential unintended consequences in mind as they evaluate and comment on the proposed rules. Because states will retain their statutory authority to deny or condition projects, many of the changes that the guidance seeks may ultimately require congressional, not administrative, action.


CWA §401(a)(1) prohibits issuing a federal license or permit for an activity that may result in a discharge to “waters of the United States” unless and until the state where the discharge originates certifies that the discharge will comply with specified sections of the CWA, including those concerning water quality standards. A state certification must also include any conditions “necessary to assure” compliance with the specified CWA sections, as well as with “any other appropriate requirement of State law.” Certification conditions must be included in the federal license or permit, and the federal licensing or permitting agency has little or no authority to reject them. If, however, a state “fails or refuses to act on a request for certification, within a reasonable period of time (which shall not exceed one year) after receipt of such request, the certification requirements . . . shall be waived.”

Many federally licensed or permitted activities that require a §401 certification are also regulated under state law. Section 401, then, is generally not essential to the state’s ability to regulate these activities. For example, a CWA §404 permit is required from the U.S. Army Corps of Engineers to fill waters of the United States. Because this is a federal permit for an activity involving a discharge to waters of the United States, the Corps may not issue the permit without a §401 certification from the state. But most states regulate discharges to waterbodies under state law, and they could prohibit or restrict the discharge regardless of their authority under §401 and regardless of the Corps’ willingness to issue a permit for the discharge.

Some federal laws, however, “preempt” state laws on the same subject, perhaps most notably the Federal Power Act and other federal laws that give the Federal Energy Regulatory Commission (FERC) exclusive authority to license hydroelectric projects, natural gas pipelines, and certain other energy facilities. (See, for example, First Iowa Hydro-Electric Coop. v. Federal Power Comm’n, 328 U.S. 152 (1946)). A state’s CWA §401 authority to prohibit the issuance of, or condition, a FERC license for such a project may be the principal or only means for the state to regulate the project. This circumstance dramatically increases the importance of §401 and has led to tension between states, on the one hand, and FERC and project proponents, on the other, as states have used their authority to oppose projects that FERC is inclined to approve, or to impose conditions on projects that FERC believes are unwarranted or exceed the scope of §401. In addition, state requirements that applicants provide extensive supporting information for certification requests have often delayed certification decisions, and thereby federal licenses and permits, well past the maximum of one year allowed by §401.

EPA’s Guidance

The CWA §401 guidance attempts to constrain state §401 authority principally by: (1) strictly interpreting the time within which a state must make a certification decision; (2) limiting the grounds for denying or conditioning a certification to water quality requirements; and (3) asserting that the information included in the application for the federal license or permit should generally be all the information that the state needs to make its certification decision.

Decision Deadlines

Under §401, a state waives its certification authority if it does not act on a certification request within “a reasonable period of time (which shall not exceed one year) after receipt of such request.” The guidance interprets this provision strictly.

  • The guidance emphasizes that one year is the maximum time that §401 allows a state to act on a certification request and that, when this is unreasonably long, a state waives its certification authority if it does not act sooner. Some federal permitting agencies, including EPA and the Corps, have established default deadlines of less than one year, and as little as 60 days. The guidance encourages federal agencies to enforce these shorter deadlines and, citing existing EPA regulations, takes the position that the federal licensing or permitting agency has the authority and discretion to determine how much time is reasonable and when a waiver has occurred.
  • Reversing previous EPA guidance, the guidance interprets the time within which a state must act to begin upon the state’s receipt of the certification request, not its receipt of a “complete” application. The applicant’s failure to provide information required or requested by the state does not extend the time for the state’s decision.
  • The applicant itself may not give the state more time to act. “[T]he timeline does not pause or stop for any reason before action is taken on the certification request.” The federal permitting or licensing agency, however, may extend the time, provided that the extended time is reasonable and that the total time does not exceed one year.

These interpretations of §401 will undoubtedly cause states to act more quickly on certification requests. But if a state continues to have concerns about a project or needs more information, its decision is apt to be a “denial without prejudice” that invites the applicant to resubmit its request with a modified project or additional information. Or the state may certify the project with conservative, onerous conditions and invite the applicant to request a modification of the conditions based on additional information. In either case, the ultimate issuance of a certification with conditions acceptable to the applicant could take as much time as before, with the added risk that the federal licensing or permitting agency might choose to deny or issue the federal license or permit based on the state’s initial decision. On the other hand, if the state is opposed to a project for reasons that the applicant believes are illegitimate or insufficient, and if the applicant simply wants a decision that it can challenge, then the strict interpretation of §401 deadlines described in the guidance is likely to facilitate that.

Scope of §401

The certification required by §401 is a certification that the discharge associated with a federally licensed or permitted activity “will comply with the applicable provisions of” CWA §§301, 302, 303, 306, and 307. These sections concern water quality standards and discharge limits for industrial and municipal facilities. A certification must also include any conditions “necessary to assure” that the applicant will comply with these sections, as well as with “any other appropriate requirement of state law.” Based on the scope of the five specified CWA sections, the guidance “recommends” that any decision to issue or deny a requested certification “be limited to an evaluation of potential water quality impacts.” Similarly, the guidance construes a state’s authority to impose certification conditions to be limited to “ensuring compliance with the enumerated provisions of the CWA and other appropriate state or tribal water quality requirements.” (Emphasis added.)

Perhaps recognizing its limited ability to make policy through guidance, EPA has made only “recommendations” in this portion of its guidance. EPA also does not explain what it means by “water quality requirements.” But the guidance is foreshadowing EPA’s forthcoming §401 implementation rules, which are likely to limit the grounds for denying or conditioning a certification to narrowly defined water quality concerns.

Moreover, the guidance floats an argument that, if a state denies or conditions a certification based on reasons that exceed the scope of §401, the federal licensing or permitting agency may decide that the state has entirely waived its §401 authority. In other words, if the state denied a certification based on an impermissible reason unrelated to water quality, the state would waive its certification authority; it would not get a second chance to deny the certification based on a permissible reason. Similarly, if a certification included a condition that exceeded the state’s authority, the federal licensing or permitting agency could deem a waiver to have occurred and could thereby ignore all the certification conditions, not just the condition that exceeded its authority. If EPA were to include such a provision in its forthcoming rules, and if that provision survived the inevitable legal challenges to it, it would make states extremely cautious about basing their certification decisions on any concerns that might exceed the scope of their §401 authority.

Supporting Information

Although the guidance acknowledges that a state needs sufficient information to issue a§401 certification, it argues that “[t]o evaluate a certification request, a state or tribe should only need the application materials submitted for the federal permit or license.” It also notes that §401 does not require that any specific information be submitted in support of a certification request, and it emphasizes again that the time for a state to act on a certification request is not paused by a state’s request for additional information or the applicant’s failure to provide a timely response.

The guidance’s belief that the federal license or permit application should include all the information needed to support the state’s certification decision is consistent with EPA’s narrow view of the scope of §401, as well as its position that a state can reasonably make its decision in a year or less. But a state must also be able to defend its certification decision if it is challenged, and, in the absence of sufficient information, a state will almost always find it easier to defend a decision to deny a certification than to issue it. In this respect, too, the guidance could have the unintended consequence of encouraging states to deny certification requests to force applicants to submit new requests with more information. Apparently recognizing this potential, the guidance suggests that EPA may provide “additional clarity during its rulemaking process” on what information is needed to support a certification request.


So long as states have the authority to deny or condition §401 certifications, it will be difficult to force them to issue certifications quickly and based on only a narrow scope of considerations—particularly for projects that federal law otherwise prohibits them from regulating. Requiring a state to make a quick decision based on information that it deems to be insufficient may only encourage the state to deny certification or to issue the certification with onerous, conservative conditions. EPA’s forthcoming rulemaking to narrow the scope of issues that states may consider under §401 may be more successful if the courts find that the narrower scope is consistent with the statute. But even so, states that have unresolved concerns about a project that cannot be addressed through §401 may be creative in finding ways to use their discretion to deny certification on other grounds that are within the scope of §401. It will be important for entities that must obtain §401 certifications to keep these potential unintended consequences in mind as they evaluate and comment on the proposed rules that EPA intends to issue in August. Ultimately, rules or other mechanisms that encourage favorable and timely state decisions by addressing and accommodating their legitimate concerns may be more fruitful than rules that seek to force favorable state decisions, but that cannot change the fundamental statutory authority of states to deny or place conditions on projects.

Editor's Note: This blog originally appeared in Stoel Rives’ Legal Insights on June 14, 2019.

All blog posts are the opinion of its author(s) and do not necessarily reflect the views of ELI the organization or its members.