Northern Plains Resource Council (NPRC) appealed after the district court granted summary judgment to Fidelity Exploration and Development Company (Fidelity). NPRC brought a citizen suit under the Clean Water Act (CWA)[1] against Fidelity alleging illegal discharges into the navigable waters of the United States. The Ninth Circuit reversed the grant of summary judgment to Fidelity and remanded to the district court for entry of summary judgment in favor of NPRC.

Fidelity extracts coal bed methane gas from the Powder River Basin in Montana. The extraction process involves pumping large quantities of groundwater (coal bed methane groundwater, hereinafter CBM water)--groundwater that contains several pollutants listed by Environmental Protection Agency (EPA) regulations[2]--to the surface. CBM water is characterized by high concentrations of minerals, measurable quantities of metals such as arsenic and lead, as well as a Sodium Absorption Rate (SAR) 40 to 60 times greater than that of nearby surface waters.

In 1998, Fidelity contacted the Montana Department of Environmental Quality (MDEQ) about the possibility of discharging CBM water into the Tongue River and Squirrel Creek. MDEQ informed Fidelity by letter that there was no need to seek a Montana Pollution Discharge Elimination System (MPDES) permit. MDEQ cited an exemption in the Montana Code that allowed discharges of unaltered groundwater.[3] However, MDEQ also warned Fidelity that EPA did not agree with this permit exclusion because EPA believed the provision excluded discharges that might otherwise be covered by the CWA. Though Fidelity sought an MPDES permit in 1999 anyway, the company had already begun discharging unaltered CBM water into the Tongue River without a permit.

In 2000, NPRC sent a Notice of Intent to Sue to Fidelity, MDEQ, and EPA, alleging unpermitted discharges. The parties filed cross motions for summary judgment stipulating that out of the five elements necessary to prove a violation of the CWA (discharge, of a pollutant, from a point source, to a navigable water, without a permit), the only element at issue was whether the CBM water constituted a pollutant. The district court held that the CBM groundwater was not a pollutant under the CWA, and alternatively, even if the groundwater was considered a pollutant, that Montana State law exempted Fidelity's discharges for permit requirements. The district court granted summary judgment in favor of Fidelity.

The Ninth Circuit reviewed the grant of summary judgment de novo. The court first addressed the issue of whether CBM water constitutes a "pollutant" under the CWA. Fidelity argued that because "unaltered groundwater" was not specifically listed, their groundwater did not constitute a "pollutant" for the purposes of the CWA.[4] The court rejected this argument based on the plain language of the statute. Referring to the dictionary definitions of both "industry" and "waste," the court found that CBM water falls into the category of industrial waste.[5] Industry is "the commercial production and sale of goods and services" and waste is defined as "any useless byproduct of a process."[6] Thus Fidelity's CBM water constituted "industrial waste" because Fidelity was in the business of producing methane gas for commercial purposes and because their production method created the byproduct of CBM water. As industrial waste, the court held that the CBM water was clearly a pollutant for the purposes of the CWA.

The Ninth Circuit gave two additional reasons for holding that Fidelity's CBM water was a pollutant under the CWA. First, Fidelity's CBM water was "produced water" under EPA regulations. These regulations define "produced water" as "water . . . brought up from the hydrocarbon-bearing strata during the extraction of oil and gas."[7] The court determined that CBM water met this definition because it is pumped up from coal bed seams to extract methane gas. The court then held that the CWA only exempts produced water from permitting requirements where it is disposed of in a well and does not degrade other water bodies.[8] The court decided that Fidelity's discharge did not meet this exemption because it discharged directly into a navigable water rather than a state approved well.

Second, the Ninth Circuit held that the classification of the CBM water as a pollutant would be consistent with the CWA's definition of pollution--"the manmade or man-induced alteration of the chemical, physical, biological, or radiological integrity of water."[9] The court referred to the CWA's antidegredation policy[10] and reasoned that allowing the exemption of "massive pumping of salty, industrial waste water into protected water . . . to the detriment of farmers and ranchers" would contravene the purposes of the CWA.[11] Moreover, the Ninth Circuit repudiated the district court's holding--and Fidelity's arguments--that the discharges did not constitute a pollutant because the CBM water was unaltered. Specifically the Ninth Circuit addressed the reliance of both Fidelity and the district court on Association to Protect Hammersly, Eld, & Totten Inlets v. Taylor Resources, Inc. (APHETI)[12] for the proposition that any discharge of unaltered water would not qualify as a pollutant. The Ninth Circuit clarified that the holding in APHETI dealt only with the meaning of "biological materials."[13] The court explained that APHETI could not be read to require human transformation of every material before it would constitute a pollutant. The court held that the unaltered state of Fidelity's CBM water was inconsequential when the water itself contained contaminants.

The Ninth Circuit then considered whether Montana law exempted Fidelity's CBM water from the permit requirements under the CWA. Fidelity argued, and the district court agreed, that EPA had implicitly approved the CBM water exemption by authorizing the Montana program. The Ninth Circuit held that the CWA did not grant even EPA the authority to create exemptions for discharges "otherwise subject to the CWA."[14] Because EPA has no such exemption power, the court reasoned that EPA could not approve such an exemption through the state authorization process.

The court then examined the issue of whether Montana alone could create an exemption from the permit requirements of the CWA. The court held that Montana state law cannot impose restrictions on the CWA unless the statute clearly provides this authority; and the court did not find such a grant of authority in the CWA.[15] Moreover, the court held that the Supremacy Clause[16] precluded any serious argument that Montana state law could contradict or limit the scope of the CWA. Thus, the court held that the Montana exemption was invalid. The Ninth Circuit reversed the grant of summary judgment to Fidelity, and remanded for an entry of summary judgment for NPRC.