The Ninth Circuit denied a petition from the United States Environmental Protection Agency (EPA) for en banc reconsideration of the Ninth Circuit's 2005 decision in Defenders of Wildlife v. EPA (Defenders).[1] Defenders concerned EPA's decision to transfer to Arizona the authority to issue National Pollution Discharge Elimination System (NPDES) permits under the Clean Water Act (CWA).[2] The precise issue was whether EPA's decision to transfer authority, for which the CWA only requires fulfillment of nine criteria, was also subject to the requirements of the Endangered Species Act (ESA).[3] The court held that transferring NPDES authority to a state required ESA compliance, and EPA's finding to the contrary was arbitrary and capricious.[4] EPA petitioned for en banc reconsideration and the court denied the request, but an impassioned and divided court memorialized its rationale in a concurrence from Judge Berzon and dissents from Judges Kozinski and Kleinfeld.

Arizona applied to take over permitting authority of NPDES permits from EPA. The CWA states that EPA "shall" transfer permitting authority to a state, if the state's application meets nine exclusive criteria, none of which relate to the ESA.[5] There was no question that Arizona's application fulfilled the nine criteria, but EPA's regional and local offices became concerned that the transfer decision might implicate section 7 of the ESA. Section 7 mandates that federal agencies insure their actions do not jeopardize endangered species or critical habitats.[6] Section 7 does not, however, apply to state actions or to non-discretionary actions.

The regional EPA office publicly stated that section 7 applied to the transfer decision, and the national office took control of the matter and complied with the ESA's requirements. Pursuant to Section 7, the regional EPA office consulted with the United States Fish and Wildlife Service (FWS). [7] The issue was then elevated to the national level and FWS subsequently issued a Biological Opinion (BiOp) on whether the transfer would jeopardize any endangered species or critical habitats. The BiOp concluded that any impacts the transfer decision would have on endangered species were unavoidable because EPA had no authority to consider section 7 in a CWA transfer decision. EPA relied on the finding of no jeopardy in FWS' BiOp and transferred permitting authority to Arizona.

Defenders of Wildlife filed suit, and the Ninth Circuit held that EPA's decision to transfer CWA permitting authority to Arizona was in error.[8] The court reasoned that it was "internally inconsistent"[9] for the EPA to first fulfill section 7's requirements by consulting with FWS and to later decide, based on the BiOp that resulted from its consultations with FWS, that it had no authority to consider the ESA. The court vacated EPA's transfer decision and remanded the case to the district court for consideration consistent with the court's holding.

EPA petitioned for en banc reconsideration, but the court denied the request. Judge Berzon, who wrote the opinion for the majority in Defenders, wrote a concurrence for the denial of reconsideration, and Judge Kozinski wrote for the dissent.[10] Kozinski, arguing that reconsideration was warranted, took issue with five particular points of the majority's opinion in Defenders. His lengthy dissent appears to have led Berzon to write a concurrence in anticipation of Supreme Court review, as she began her concurrence with a statement of purpose, saying "[a] practice has developed in this court of writing dissents from denial of rehearing en banc reconsideration as a matter of routine. Those dissents sometimes read more like petitions for writ of certiori than judicial opinions of any stripe." [11] She explains that such dissents "pose a dilemma for those who believe the original opinion correct, as they may raise issues not addressed by that opinion because not articulated by the parties before the petition for rehearing stage--or ever."[12]

Judge Kozinski's first issue with the majority opinion in Defenders was "that it mis[took] EPA's internal deliberations for analytical inconsistency."[13] Kozinski argued that what the majority opinion saw as internal inconsistencies were merely steps in the decision-making process. He explained that the only "inconsistency"[14] was between the regional EPA office's interpretation of the ESA and the national office's interpretation, and this seeming inconsistency was, in actuality, "EPA chang[ing] its mind upon further reflection at a higher level."[15] According to Kozinski, "[t]here [wa]s no inconsistency in the agency's final action, which is the only one . . . entitled to review."[16] "Berzon argued Kozinski denied EPA had ever maintained that the ESA required consultation for transfer decisions, while Kozinski saw EPA's change in position as part of EPA's deliberations. Berzon further argued that the law does not provide an agency two chances to consider a factual or legal question . . . , only one.'" [17] Kozinski's second argument for reconsideration was that Defenders had not given "appropriate deference to FWS's interpretation of the ESA."[18] Kozinski argued that FWS's BiOp finding that EPA's transfer of NPDES permitting authority to Arizona would not cause jeopardy to endangered species because EPA could not consider the ESA in the decision was entitled to deference. Berzon countered that FWS's interpretation of the ESA required an interpretation of the CWA, and, because FWS has no regulatory power over the CWA, its interpretation was not entitled to deference.

Kozinski next argued that Defenders had mistakenly treated the ESA as if it trumped the CWA, and he argued that the ESA's regulations limit its application to only "discretionary Federal involvement or control."[19] Kozinski stated that the language of the CWA transfer provision, which uses "shall," contemplates a non-discretionary decision and the ESA therefore did not apply. Berzon concentrated on the plain language of the ESA, which says that it applies to any "action authorized, funded, or carried out by the agency."[20] Berzon argued that, under Chevron U.S.A. v. Natural Resources Defense Counsel,[21] an interpretative regulation may not contravene a "perfectly clear statutory requirement."[22] Berzon also pointed out that because Congress enacted the ESA after the CWA, the CWA should be subject to later-enacted legislation.

Kozinski's fourth argument was that the Supreme Court's unanimous decision in Department of Transportation v. Public Citizen[23] directly contradicted the majority's holding in Defenders. Public Citizen presented the issue of whether the Federal Motor Carrier Safety Administration (FMCSA), which regulates motor carriers, must follow the procedural requirements of the National Environmental Protection Act (NEPA)[24] in deciding whether to grant registration to Mexican trucks that enter the United States. "FMCSA's governing statute, like the CWA, instructs that the agency 'shall' grant registration to any carrier meeting certain criteria, none of which involves environmental concerns."[25] The Supreme Court held that FMCSA's decision to grant registration to Mexican trucks was not subject to NEPA because it was a non-discretionary decision and the procedural requirements of NEPA could not affect the decision. The Supreme Court said that "where an agency has no ability to prevent a certain effect due to its limited statutory authority over the relevant actions, the agency cannot be considered a legally relevant 'cause' of the effect."[26] Thus, because FMCSA's decision was non-discretionary, the procedural requirements of NEPA could not affect the outcome and thus did not apply.

Kozinski argued that Defenders was indistinguishable from Public Citizen because the ESA says EPA "shall" transfer authority if a state's application fulfills the CWA's nine criteria; therefore the transfer decision was non-discretionary and the requirements of the ESA did not apply. Berzon, on the other hand, argued that Kozinski misunderstood Public Citizen. She determined that Public Citizen did not control the disposition of Defenders, because Defenders involved the ESA and not NEPA. She noted that NEPA contains no requirement that its procedural requirements actually influence an agency's actions, while the ESA contains substantive requirements as well as procedural requirements. Thus, Berzon concluded that because the ESA, unlike NEPA, is "a partially substantive statute"[27] Public Citizen is distinguishable from Defenders and did not control the court's decision in Defenders.

Berzon also argued that Kozinski ignored Defenders' reliance on Tennessee Valley Authority v. Hill (TVA v. Hill),[28] which, she believed indicates that the ESA, "affirmatively command[s] all federal agencies 'to insure that actions authorized, funded,or carried out by them do not jeopardize the continued existence' of an endangered species."[29]

Kozinksi's final point of contention was that the majority's opinion in Defenders created a conflict between the Ninth Circuit and the Fifth and D.C. Circuits. He pointed to American Forest & Paper Ass'n v. U.S. Environmental Protection Agency (American Forest)[30] from the Fifth Circuit and the D.C. Circuit case on which it relied, Platte River Whooping Crane Critical Habitat Maintenance Trust v. Federal Energy Regulatory Commission.[31] Kozinski argued that American Forest presented the same question as Defenders: whether the CWA's nine criteria for transferring NPDES permitting authority to a state are exclusive, or whether the ESA is an additional tenth criterion. American Forest held that the EPA lacked the authority to add additional requirements not already contained in the CWA. Berzon argued that those cases are inapposite because they relied on sections 7(a)(1) of the ESA, while Defenders concerned section 7(a)(2).[32] Berzon also pointed out that a conflict between circuits had already existed, and the Ninth Circuit was merely taking sides with the circuits[33] that hold "that agencies do have to comply with the [ESA] as well as their own governing statutes . . . . "[34]

Judge Kleinfeld joined in Kozinski's dissent but also dissented separately to note the simplicity of the case. Kleinfeld stated that the CWA mandates the EPA to transfer permitting authority if the transfer application fulfills nine criteria, and the court does not have the authority to add a tenth criterion.

The court's denial of en banc reconsideration means that the original Defenders opinion remains the law for the Ninth Circuit. Defenders held that EPA's decision to transfer permitting authority to Arizona was in error because it was based upon a BiOp that said the ESA did not apply to the transfer decision. Thus, decisions concerning the transfer of NPDES permitting authority must comply with the ESA, and the CWA's nine criteria for such decisions are not exclusive.