Northwest Environmental Advocates, the Ocean Conservancy, and San Francisco Baykeeper (collectively NWEA) brought suit in federal district court against the United States Environmental Protection Agency (EPA), alleging that a regulation exempting certain marine discharges from the permitting scheme of sections 301(a) and 402 of the Clean Water Act (CWA)[1] was beyond the scope of the Act. The district court concluded EPA exceeded its authority under the CWA in exempting the marine discharges from the permitting requirements and vacated challenged portions of the regulation. On appeal, the Ninth Circuit affirmed the decision of the district court and held that EPA's regulation was invalid as an ultra vires act unauthorized by the CWA.

Section 301 of the CWA provides that, subject to certain exceptions, the discharge of any pollutant by any person is unlawful.[2] One exception to section 301 applies to discharges authorized by a permit granted pursuant to the National Pollutant Discharge Elimination System (NPDES), which is set forth in section 402 of the CWA.[3] The combined effect of sections 301(a) and 402 is that the "CWA prohibits the discharge of any pollutant from a point source into navigable waters of the United States without an NPDES permit."[4]

In 1973, EPA promulgated a regulation exempting several categories of vessel discharges from NPDES permitting requirements.[5] The regulation, 40 C.F.R. § 122.3(a), exempts "any discharge of sewage from vessels, effluent from properly functioning marine engines, laundry, shower, and galley sink wastes from vessels, or any other discharge incidental to the normal operation of a vessel" from the permitting requirements of the NPDES program.[6] The CWA expressly exempts the discharge of vessel sewage from the NPDES permitting process and regulates such discharges by other means. As such, only three categories of discharges exempted by 40 C.F.R. § 122.3(a) were at issue in NWEA's ultra vires claim: 1) marine engine discharges, 2) gray water discharges such as laundry, shower, and galley sink wastes, and 3) any other discharge incidental to the normal operation of a vessel, including ballast water.

NWEA's primary concern with the regulation stemmed from the ballast water exemption. Ballast water is taken in by vessels and used for a number of purposes, including maintaining stability and compensating for changes in a ship's cargo weights. Because ballast water is used primarily to compensate for changes in cargo, it is generally taken in and pumped out at ports along a ship's route. In the process of gaining or releasing ballast water, ships also redistribute the living organisms present in the water. Many of these foreign organisms survive the journey to a new ecosystem and reproduce; these invasive species often have severe impacts on humans, the environment, and the economy.

NWEA had petitioned EPA for repeal of 40 C.F.R. § 122.3(a). After EPA denied NWEA's petition, NWEA brought suit against EPA in federal district court, alleging that 40 C.F.R. § 122.3(a) is not authorized by the CWA and is therefore ultra vires.[7] NWEA's second cause of action claimed, based on the ultra vires argument, that EPA's rejection of its petition was "not in accordance with the law."[8] To preserve subject matter jurisdiction, at the same time as NWEA filed suit in the district court, NWEA also filed a petition for review of EPA's decision in the Ninth Circuit Court of Appeals.

The district court granted summary judgment in favor of NWEA on the first cause of action and ordered EPA to repeal 40 C.F.R. § 122.3(a). Additionally, the district court ordered further proceedings to determine the appropriate remedy.[9] EPA and defendant-intervenor Shipping Industry Ballast Water Coalition appealed the district court's decision to vacate the challenged portions of the regulation and the Ninth Circuit consolidated the appeal with the petition filed directly by NWEA in the Ninth Circuit.

The Ninth Circuit reviews de novo questions involving subject matter jurisdiction,[10] application of a statute of limitations,[11] a district court's grant of summary judgment,[12] and exhaustion of necessary administrative remedies.[13] Issues regarding whether a regulation exceeds the scope of a statute are reviewed by the Ninth Circuit under the Administrative Procedure Act,[14] which requires the court to set aside agency actions that exceed the jurisdiction, authority, or limitations of a statute.[15]

On appeal, EPA argued that the district court lacked subject matter jurisdiction over NWEA's suit and that the Ninth Circuit should order the district court to dismiss the case. In the alternative, assuming the district court had subject matter jurisdiction, EPA claimed the statute of limitations barred NWEA's ultra vires claim, the district court erred in finding that the CWA did not authorize the regulatory exemptions, and the district court abused its discretion in selecting the remedy.

In reviewing the district court's decision, the Ninth Circuit first turned to the threshold question of whether the district court had subject matter jurisdiction over NWEA's suit. The district court possessed subject matter jurisdiction over NWEA's suit under the general federal question statute, 28 U.S.C. § 1331, unless another statute divested the district court of jurisdiction.[16] To determine whether the district court had been divested of jurisdiction, the Ninth Circuit examined section 509(b)(1) of the CWA, which specifies seven categories of agency action where the challenge must be brought in a court of appeals rather than a district court.

EPA claimed that NWEA's ultra vires challenge fell within two categories under the CWA's jurisdiction-divesting provisions, sections 509(b)(1)(E) and 509(b)(1)(F). In reviewing EPA's allegations, the Ninth Circuit concluded the district court had subject matter jurisdiction over NWEA's lawsuit because the agency action did not fall under either of these subsections. In reaching its decision, the Ninth Circuit looked first to section 509(b)(1)(E), which provides for review by the court of appeals of EPA actions in approving or promulgating effluent limitations under sections 301, 302, 306, and 405 of the CWA.[17] The court reasoned that because section 40 C.F.R. § 122.3(a) does not involve the approval or promulgation of an effluent limitation, but instead creates a categorical exception for three types of discharges, section 509(b)(1)(E) did not divest the district court of jurisdiction over NWEA's challenge.

Second, the Ninth Circuit examined section 509(b)(1)(F), which provides for review of EPA actions in a court of appeals if the action involves issuing or denying a permit under section 402 of the CWA.[18] The court reasoned that because the three exemptions provided in the regulation were not explicitly contained in section 402 of the CWA, the case did not involve the issuing or denying of a permit, or a functionally similar action, under section 402. The Ninth Circuit determined that section 509(b)(1)(F) did not authorize original jurisdiction in the court of appeals for NWEA's challenge because section 122.3(a) involves permanent categorical exemptions for three types of discharges from the permitting requirements-not the issuance or denial of a permit. Ultimately, the Ninth Circuit concluded that NWEA's challenge did not fall under section 509(b)(1) of the CWA; consequently the district court had subject matter jurisdiction over the case.

The Ninth Circuit next turned to the issue of whether the statute of limitations barred the lawsuit. Under the applicable statute of limitations, civil actions commenced against the United States are barred unless the complaint is filed six years after the right of action first accrues.[19] The determination of whether the statute of limitations barred NWEA's first cause of action depended on whether the right of action accrued in the 1970s, when EPA promulgated the regulation, or in 2003, when EPA denied NWEA's petition. EPA conceded that the statute of limitations would not bar the suit if the right of action accrued in 2003. Looking to indistinguishable Ninth Circuit case law, the court determined that the date of the 2003 denial was the date of first accrual under the statute of limitations.[20] Therefore, NWEA timely filed their suit in the district court.

Next, the court addressed NWEA's substantive ultra vires claim. NWEA's first cause of action asserted the CWA does not authorize the exemption of vessel discharges found in 40 C.F.R. § 122.3(a) and that EPA acted ultra vires in promulgating the regulation. In its second cause of action, NWEA claimed that EPA did not act in accordance with the law when the agency denied its petition for rulemaking.

EPA countered with three arguments. First, because NWEA's petition for rulemaking in 1999 challenged only the exclusion for ballast water provided in 40 C.F.R. § 122.3(a), the court should limit NWEA's challenge to the ballast water exemption. Second, EPA argued that the CWA authorized EPA to promulgate section 122.3(a) or, alternatively, the statute is ambiguous and the court should defer to the agency's interpretation. Third, EPA claimed that even if the CWA did not authorize the promulgation of section 122.3(a), Congress acquiesced to the regulation in post-1973 statutes.

In reviewing EPA's first argument, the Ninth Circuit affirmed the decision of the district court to consider all three of the disputed exemptions in the regulation. Although NWEA was primarily concerned with the environmental effects of ballast water discharges, the court noted that NWEA consistently indicated that their overall goal was the repeal of all three exemptions. Additionally, EPA's denial of NWEA's petition explicitly noted that plaintiffs sought repeal of the entire regulation. As a result, the Ninth Circuit concluded the record contained sufficient evidence to show NWEA's claim was not limited to ballast water discharges.

Second, the court examined the text of the CWA to determine whether section 122.3(a) was valid. When reviewing an agency's construction of a statute, the court's inquiry is guided by Chevron.[21] Under Chevron, the court first addresses whether Congress has spoken directly on the precise issue.[22] If the intent of Congress is clear, the court ends its inquiry and gives effect to Congress' unambiguously expressed intent.[23]

Looking at the text of the CWA, the court first concluded that the plain meaning of the statute covers discharges from marine vessels. Under the CWA, the discharge of any pollutant from a point source into waters of the United States without a permit is unlawful.[24] Noting the definitions of point source, pollutant, and navigable waters, the court determined that vessel discharges clearly fall within the broad language of the CWA.

Having determined that vessel discharges are covered by the CWA, the court next examined whether the CWA authorized EPA to promulgate a regulatory exemption. Looking at section 402 of the CWA, the only possible source of authority for the exemption, the court determined that Congress did not give EPA authority to exempt entire categories of point source discharges from the permitting requirement. Section 402 of the CWA provides that the EPA Administrator "may, after opportunity for public hearing, issue a permit for the discharge of any pollutant, . . . notwithstanding section 301(a), upon condition that such discharge" will meet either all applicable requirements under the CWA or the conditions the Administrator determines are necessary to carry out the Act.[25] The Ninth Circuit reasoned that because section 402 uses the word "may," but only in the context of issuing a permit for the discharge of any pollutant, Congress only intended to give the Administrator discretion to either issue a NPDES permit or apply the total prohibition on discharges found under section 301(a)-not to develop categorical exemptions from the permitting process. Therefore, Congress' plain intent on the face of the Act requires permits in any situation that involves the discharge of pollutants from a point source into waters of the United States.

Next, the court turned to EPA's contention that even if the CWA did not authorize EPA to develop three categorical exemptions for marine discharges, Congress subsequently acquiesced to EPA's interpretation of the statute. Absent "overwhelming evidence" of congressional acquiescence, courts are extremely reluctant to replace the plain text and original understanding of a statute with a different agency interpretation.[26] Because the Ninth Circuit was unable to find overwhelming evidence of congressional acquiescence to section 122.3(a)'s exemptions in the statutes or legislative history discussed by EPA, it held that there was insufficient evidence to show Congress acquiesced to EPA's ultra vires interpretation of the CWA.

EPA relied primarily on two statutes when arguing that Congress acquiesced to the regulation-the National Defense Authorization Act of 1996 (NDAA)[27] and the Deep Seabed Hard Mineral Resources Act of 1980 (DSHMRA).[28] In the NDAA, Congress expressly exempted discharges from the normal operation of military vessels from the permitting requirements of the CWA. A Senate report on the NDAA explained that section 122.3(a) was the regulatory basis for the exemption of most non-sewage discharges from vessels.[29] However, the Ninth Circuit concluded that the report did not endorse regulatory exemptions for categories of marine discharges. Instead, the court determined that, except for the statutory exemption provided in the NDAA, Congress intended that CWA's permitting requirements would apply to military vessels.[30] As such, the Ninth Circuit concluded that the NDAA did not endorse section 122.3(a) and did not provide evidence that Congress intended to acquiesce to the regulation.

The Ninth Circuit next turned to DSHMRA, which requires vessels engaged in deep sea mining and drilling to comply with the CWA. Under section 122.3(a), marine vessels that are not engaged in transportation-related activities are not exempt from the permitting requirements of the CWA.[31] In examining the legislative history of DSHMRA, the court determined that Congress, at most, was aware of section 122.3(a) and explicitly approved of EPA's decision not to exempt non-transportation marine vessels from the permitting process,[32] but that there was insufficient evidence to show Congress acquiesced to section 122.3(a).

EPA also relied on four additional statutes to show congressional acquiescence to the regulation: the Nonindigenous Aquatic Nuisance Prevention and Control Act of 1990 (NANPCA),[33] the National Invasive Species Act of 1996 (NISA),[34] the Act to Prevent Pollution from Ships (APPS),[35] and a statute regulating discharges by Alaskan cruise ships.[36] NANPCA and NISA address the problem of invasive species in ballast water discharges. However, the court concluded that the statutes merely indicated Congress' desire to address the national problem of ballast water discharges of invasive species on multiple fronts. The statutes, therefore, did not provide overwhelming evidence of congressional acquiescence to EPA's regulation. The Ninth Circuit also determined that the APPS, which implemented the International Convention for the Prevention of Pollution from Ships of 1973 and the Protocol of 1978 (known collectively as MARPOL 73/78), and the Alaskan cruise ship legislation, which regulates sewage and gray water discharges from cruise ships in Alaskan waters, both provide clauses that indicate nothing in the law should be construed as altering any other statute. Therefore, neither the APPS, nor the Alaskan cruise ship legislation, provided any indication of congressional intent to acquiesce to EPA's regulation.

Lastly, the court affirmed the decision of the district court to vacate the challenged portions of the regulation and remand for further proceedings. The Ninth Circuit concluded that the district court's remedy, which provided EPA with a two-year period in which to promulgate a new regulation, was a valid exercise of the court's remedial powers. Additionally, having found the district court had jurisdiction over NWEA's lawsuit, the Ninth Circuit dismissed the petition filed by NWEA in the court of appeals for lack of subject matter jurisdiction.

In summary, the Ninth Circuit held that EPA acted ultra vires in exempting certain vessel discharges under 40 C.F.R. § 122.3(a) and that EPA's denial of the petition requesting repeal of the regulation was not in accordance with the law.