Ohio Appeals Court Rules that State §401 Waiver Divested it of All Enforcement Authority Over Rover Pipeline
February 3, 2020
The State of Ohio has failed in its efforts to enforce water laws against a FERC-approved natural gas transmission line because the State waived its right to certify the facility under §401 of the Clean Water Act. See State of Ohio ex rel. Yost v. Rover Pipeline, LLC, Ohio Ct. App. (Stark County Dec. 9, 2019). There, both a trial and appeals court have ruled that a state’s waiver of its authority to impose water quality conditions on a federal project pursuant to § 401 of the Clean Water Act (33 U.S.C. § 1341) prohibited the State from later taking enforcement action for unpermitted discharges of drilling mud, failure to obtain a construction stormwater permit and violations of water quality standards. The opinions are stunning in their breadth because they prohibit the State not only from adding permit conditions when they waive rights to “certify” projects, but also from enforcing water laws that are otherwise nearly uniformly enforceable.
Section 401 of the Clean Water Act requires applicants for federal licenses and permits for activities that may discharge to navigable waters to provide the “licensing or permitting agency [with] a certification from the state in which the discharge originates … that any … discharge will comply with [§§ 301–303 and 306–307] of [the CWA].” Additionally, a state’s failure to respond to a request for a § 401 water quality certification within a “reasonable period of time (which shall not exceed one year)” results in a waiver of the state’s authority to impose § 401 conditions on the permit or license. 33 U.S.C. § 1341(a).
Section 401(d) provides further that when a state does timely issue its certification, then it “shall set forth any effluent [or other] limitations … necessary to assure that [the] applicant for [the] Federal license or permit will comply with any applicable effluent or other limitations … and shall become a condition of [the] Federal license or permit….” 33 U.S.C. § 1341(d).
The CWA also exempts the oil and gas industry from the need to obtain NPDES permits for stormwater discharges associated with construction of oil and gas facilities; but does not prohibit states from requiring similar permits. See 33 U.S.C. § 1342(l)(2). Nonetheless, for Natural Gas Act regulated facilities, FERC requires developers of pipelines to prepare extensive erosion and sediment control plans and many pipeline projects obtain some sort of state permit to control construction-related sediment to ensure cooperation with state authorities who also hold the authority to grant or deny a § 401 certification.
The Rover Pipeline sought FERC approval for a gas transmission line in Ohio. It also sought a § 401 certification from the State for the federal certificate. Working with the State and other environmental organizations, FERC issued a certificate approving the pipeline. The FERC certificate and accompanying environmental reviews included detailed plans for dealing with “inadvertent returns”—situations in which drilling “mud” used to lubricate directional drilling under streams finds a geologic weak spot and discharges onto the ground or surface waters. The FERC certificate apparently did not require that Rover obtain a construction stormwater permit from the State—likely because FERC itself has developed erosion and sediment control requirements. The State then purported to issue a § 401 certification, but not until over 15 months had passed from the initial application—three months past the statutory maximum of 12 months that it had to act.
During the construction process, Rover reportedly encountered some significant “inadvertent returns,” including one in a protected wetland. See “Feds Halt New Drilling on Rover Pipeline After Spill Into Ohio Wetland” (May 2017, “Ohio EPA Says Rover Pipeline Caused More Wetland Spills” (Nov. 2017), and “Ohio EPA troubled by HDD problems on Rover Pipeline” (Jan. 2018). Eventually, the State sued Rover and the drilling companies involved in the inadvertent returns under Ohio’s water laws, arguing that:
1. Rover discharged drilling fluids to waters of the State without a valid NPDES permit;
2. Rover failed to obtain a construction stormwater permit which it was obligated to obtain since some of its discharges of sediment were violating water quality standards;
3. Rover’s unpermitted discharges of drilling fluids and sediment carried violations of State water quality standards;
4. Rover violated State orders to obtain coverage under the State’s General Permit for construction-related stormwater;
5. Rover violated an NPDES permit for hydrostatic testing of its pipeline; and
6. Rover engaged in activities without a § 401 certification.
In response, Rover moved to dismiss the case. It advanced two arguments. First, that CWA § 401 provides Ohio with the opportunity and obligation to impose any conditions on the FERC certificate necessary to ensure compliance with “state water quality standards and other requirements of state law.” Having “waived” that right, however, Rover argued that Ohio also waived its right to require additional water permits or conditions and thereby ceded its enforcement authority over water quality standards and inadvertent returns to FERC.
Second, Rover argued that, even if Ohio had timely acted on the § 401 certification, any effort to require a stormwater permit or impose other requirements not expressly required by the FERC certificate were preempted by the Natural Gas Act.
In March 2019, a State trial court judge granted Rover’s motion to dismiss. The trial court ruled that Ohio had waived its § 401 certification authority by waiting more than 12 months to act on Rover’s request. It ruled that the waiver not only prevents Ohio from adding additional permit conditions, but also from taking enforcement actions not expressly included in a § 401 condition. Thus, the State waived its authority to enforce all of the State’s water-related laws. The court also observed in a footnote that it concurred with Rover’s preemption argument as well. The State appealed.
On December 9, 2019, the Ohio Court of Appeals affirmed the trial court’s disposition that the State had waived its § 401 authority and thereby ceded its authority to enforce water protections to FERC. Its rationale is that § 401(d) requires the State to impose as a condition of § 401 certification any water-related obligations that it seeks to impose on a permittee. The Court held that the obligation extended to requiring compliance with existing laws that would ordinarily apply to any project even if no § 401 certification was required (such as those requiring discharge permits and compliance with water quality standards). When a state fails to do so, it waives not only its right to add specific conditions designed to protect water quality, but also its right to enforce water laws altogether. The Court declined to rule on the preemption argument.