March 21, 1995
Mr. Richard B. Whisnant, General Counsel North Carolina Department of Environment, Health and Natural Resources Post Office Box 27687 Raleigh, North Carolina 27611-7687
RE: Advisory Opinion: EMC "Wetlands" Rulemaking Authority; N.C.G.S. 143-214.1 and 143215.3(c)
Dear Mr. Whisnant:
You have asked for advice on whether the Environmental Management Commission ("EMC") has authority to promulgate proposed rules related to the classification of wetlands and to state water quality certifications in federal permitting actions under Section 401 of the Clean Water Act. While we researched your inquiry, Senator Beverly Perdue sought an opinion on closely related issues, the EMC has gone to public notice with the rules packet, and Secretary Howes has established a separate Wetlands Task Force to advise him in this area. During discussions in the public comment period for the rules and in the Task Force, additional questions of statutory authority have also been raised. We felt it prudent to listen to those concerns and to address as many of the statutory authority questions as possible in this Advisory Opinion. Thus, it may be more comprehensive than you had anticipated.
The Division of Environmental Management ("DEM") of the Department of Environment, Health and Natural Resources ("DEHNR") has published an "Information Package-Wetland Rules Hearings" that describes in detail the proposed rules and their intended purpose. Thus, a lengthy recitation of the rules is unnecessary. However, for purposes of our response, we have summarized the proposed rules and the DEM’s stated rationale in requesting their adoption.
THE PROPOSED RULES
The Environmental Management Commission ("EMC") has proposed amendments to its water quality protection rules, at 15A NCAC 2B .0100, 2B .0200 and 2H .0500. The stated intent of the rules proposal is twofold: (1) to establish classifications and water quality standards for wetlands as waters of the State; and (2) to establish separately a review process of the DEM in considering requested water quality certifications under Section 401 of the federal Clean Water Act. Section 401 of the federal Clean Water Act requires the State to certify that any federally permitted activity that impacts North Carolina waters, including wetlands, will not result in a violation of state water quality standards. See 33 U.S.C. § 1341(a)(1).
The proposed North Carolina water quality standards for wetlands are set out in rule 15A NCAC 2B .0220. These proposed standards "are designed to protect, preserve, restore and enhance the quality and use of wetlands and other waters of the state influenced by wetlands." (emphasis supplied); 15A NCAC 2B .0220(a).
The proposed Section 401 review process, separately set out in rule 15A NCAC 2H .0506, applies not only to wetlands, but to all North Carolina surface waters. We understand that these review procedures are not intended to be additional water quality standards applicable to certain classes of state waters. Rather, they describe how the DEM will apply the state’s water quality standards, including the proposed standards for wetlands, in making required Section 401 certification decisions. Most of the questions concerning rulemaking authority focus on the proposed procedure for verifying water quality standards in Section 401 certifications.
LEGAL ISSUES RAISED
I. Does the Environmental Management Commission have the requisite statutory authority to adopt the wetland standards proposed in 15A NCAC 2B .0220, and the Section 401 Certification review procedures proposed in 15A NCAC 2H .0506?
II. Do the proposed rules conflict with federal law by operating to place non-water quality related restrictions on projects that require a Section 401 Certification from the State?
III. Do the proposed rules establish a separate, duplicative permitting program without the requisite statutory authority?
IV. Will the proposed rules operate to halt any elimination of wetlands areas, in light of the antidegradation policy of the Environmental Management Commission?
For the reasons which follow, we conclude that (1) the EMC possesses adequate statutory authority for the proposed rules in Chapter 143, Articles 21 and 21A of the General Statutes; (2) the EMC is not attempting to place non-water quality restrictions on activities needing federal permits within the State; (3) the proposed rules do not establish a separate, duplicative, wetlands permitting program; and (4) wetlands use protection under the State’s antidegradation policy does not preclude reasonable quantities of fill in wetlands nor insignificant wetlands degradation.
DISCUSSION
I. Does the Environmental Management Commission Have the Requisite Statutory Authority to Adopt the Wetland Standards Proposed in 15A NCAC 2B .0220, and the Section 401 Certification Review Procedures Proposed in 15A NCAC 2H .0506?
As noted, the proposed wetlands rules fall into two general categories. The first sets out proposed wetlands classifications and the standards applicable to each class of wetlands. The second contains permit review procedures intended to ensure, through the Section 401 water quality certification process, that state surface water quality standards are adequately considered and enforced when federal permitting actions occur.
A. The Federal Clean Water Act Imposes the Responsibility for Developing Water Quality Standards on the States, Subject to Approval by the Environmental Protection Agency.
The federal Clean Water Act, 33 USC §§ 1251 et seq., establishes a water quality program under which both federal and state governments have responsibilities. Section 303 delegates to the states the initial obligation to establish the water quality standards which will be applicable to waters within the state, subject to federal approval: "[a state] water quality standard shall consist of the designated uses of the navigable waters involved and the water quality criteria for such waters based upon such uses." 33 USC § 1313(c)(2)(A). "States establish standards under Section 303 by first designating the uses of the waters they wish to assure; they then adopt water quality standards which will allow the designated uses to be actual uses." Arnold Irrigation District v. DEQ, 717 P. 2d 1274, 1277 (Or. App. 1986). The United States Supreme Court has recently spoken to the meaning of Section 303 in the context of state water quality certifications under Section 401 of the Clean Water Act. The Court stated:
The text [of Section 303(c)(2)(A)] makes it plain that water quality standards contain two components. We think the language of § 303 is most naturally read to require that a project be consistent with both components, namely the designated use and the water quality criteria. Accordingly, under the literal terms of the statute, a project that does not comply with a designated use of the waters does not comply with the applicable water quality standards. (emphasis supplied)
PUD No. 1 at 1910. In explaining its rationale, the Court continued:
Water quality standards, however, apply to an entire class of water, a class which contains numerous individual water bodies….. While enforcement of criteria will in general protect the uses of those diverse waters, a complementary requirement that activities also comport with designated uses enables the States to ensure that each activity–even if not foreseen by the criteria–will be consistent with the specific uses and attributes of a particular body of water…. [C]riteria cannot reasonably be expected to anticipate all the water quality issues arising from every activity which can affect the State’s hundreds of individual water bodies.
Id. at 1911.
Under PUD No. 1, then, it is clear that in performing its water quality classification functions, a state must establish both designated uses of its waters and water quality criteria pertaining to those uses, and ensure that both are adequately protected. Under Section 303, these uses and criteria will be submitted to EPA and, upon approval, will become enforceable under federal law. See, 33 U.S.C. § 1313(c).
B. The Proposed Rules Are Being Promulgated Pursuant to State Law.
The state statutes respecting water quality protection are found in Chapter 143, Articles 21 and 21A of the General Statutes, at N.C.G.S. §§ 143-211 et seq. Under Chapter 143 of the N.C. General Statutes, the EMC has the clear duty to protect state waters, and broad rulemaking authority to achieve that goal. See, N.C.G.S. §§ 143-211; 143-214.1; 143-215.3(a)(1); see also, Art. XIV, Sec. 5, N.C. Constitution. Pursuant to N.C.G.S. § 143-214.1, the EMC has specific statutory authority to develop and adopt classifications of the waters of the State, as well as the statutory authority to develop and adopt water quality standards applicable to each such classification. N.C.G.S. § 143-214.1(a)(1). Moreover, the EMC has the statutory authority to classify all waters of the State pursuant to N.C.G.S. § 143-214.1(a)(2), and under that provision, the EMC has discretion to determine which state waters it deems sufficiently important to classify and regulate.
Previously, the Environmental Division of the Attorney General’s Office has advised the DEM that the definition of "waters" of the State, found in N.C.G.S. § 143-212(6), reasonably includes wetlands. Moreover, freshwater wetlands have expressly been treated as waters of the State by the EMC since at least October 1, 1989, when EMC rule 15A NCAC 2B .0109 was adopted. That rule states that in determining whether projects that affect state freshwater wetlands impermissibly degrade the wetlands by removing existing uses, the DEM "will be guided by 40 CFR Part 230, Subparts A through F" (more commonly known as the "Section 404(b)(1) Guidelines"). 15A NCAC 2B .0109. Since wetlands are waters of the State, and since the EMC has the statutory authority to adopt classifications and standards applicable to North Carolina waters, the EMC has the statutory authority to adopt the classifications and standards for wetlands.
The EMC has previously adopted water quality standards for all North Carolina surface waters in 15A NCAC 2B .0200, and in this rulemaking proposes additional standards, specifically pertaining to wetlands, under that section. The wetland standards proposed in rule 15A NCAC 2B .0220 will become part of the water quality standards of the State upon adoption, and will then be submitted to the EPA for approval as required under Section 303 of the federal Clean Water Act. The water quality standards–uses and criteria–contained in those rules are exactly the type of standards required by Section 303(c)(2)(A) of the Clean Water Act, and thus are expressly referenced as appropriate certification denial criteria in Section 401(a) of the Act. As such, we believe there is no valid legal basis for challenging the EMC’s authority to adopt the proposed rule or to challenge the use of the standards contained in the proposed rule in making state Section 401 water quality certifications.
Proposed rule 15A NCAC 2H .0506 sets out the procedures that the DEM will employ in reviewing federally permitted projects affecting state surface waters under Section 401 to ensure that the activities would not violate state water quality standards. North Carolina law authorizes the EMC to specify requirements and procedures for the Section 401 certification process.
N.C.G.S. § 143-215.3(a) gives the EMC the statutory authority to adopt rules implementing the Water and Air Act, and N.C.G.S. § 143-215.3(c) provides the statutory authority for the EMC to administer any federal-related matter in water and air quality. Thus, the EMC has the statutory authority to adopt procedural rules for Section 401 water quality certifications since: (1) the State is required to make Section 401 water quality certifications, (2) the EMC has specific rule making authority in water quality matters, and (3) the EMC is specifically authorized to act as the entity to carry out federal directives under the Clean Water Act. Thus, just as the authority to adopt a wetlands classification and applicable water quality standards is found in state law, the authority to promulgate the rules implementing Section 401 water quality certification review procedures comes from state, rather than federal, law.
II. Do the Proposed Rules Conflict With Federal Law by Placing Non-Water Quality Related Restrictions on Projects That Require a Section 401 Certification From the State?
Under Section 401(a)(1), a state reviewing a proposed, federally permitted project that may result in a discharge into state waters for compliance with its water quality standards must certify "that any such discharge will comply with the applicable provisions of Sections 301, 302, 303, 306, and 307 of [the Clean Water Act]." 33 U.S.C. § 1341(a)(1). If the EMC rules are adopted as proposed, the substantive criteria upon which future Section 401 water quality certification decisions would be made by the Director of the DEM are: (1) in the case of wetlands, those set out in proposed rule 15A NCAC 2B .0220, and existing EMC rule 15A NCAC 2B .0201; and (2) in the case of other classes of state surface waters, those standards found in rules 15A NCAC 2B .0201, 2B .0208, 2B .0211, 2B .0214 and 2B .0216.
A. Appropriate Distinction is Made Within the Proposed Rules Between the Substantive Water Quality Standards to be Applied, and the Review Procedures Used, in Making Section 401 Determinations.
A question has been raised whether the EMC, through rule 15A NCAC 2H .0506, is attempting to apply non-water quality related restrictions to projects during the DEM Section 401 certification review. We agree that state Section 401 certification procedures may be concerned only with water quality considerations.
Those cases which have interpreted the scope and breadth of … authority that was divested to the states by Section 401 … have construed the divestiture narrowly and have consistently held that a [state’s] authority extends only to consideration of the proposed project’s impact on the applicable water quality standards implemented by the State, in conformity with the Act.
Fourth Branch Ass’n. v. New York Dep’t. of Envtl. Conservation, 550 N.Y.. S. 2d 769, 773 (N.Y. Sup. Ct. 1989). We do not find that the procedural rules proposed at 15 NCAC 2H .0506 violate this principle.
Consistent with Fourth Branch, the EMC proposes to authorize the DEM todetermine a project’s impact on the applicable state surface water quality standards through the use of the review procedures found at 15A NCAC 2H .0506. As discussed previously, state surface water quality standards are found in rules 15A 2B .0201, 2B .0208, 2B .0211, 2B .0214, 2B. 0216; and proposed rule 15A NCAC 2B .0220. These standards are the substantive criteria for Section 401 certifications. The water quality certification review procedures set out in proposed rule 15A NCAC 2H .0506 are certification review procedures. They are not substantive Section 401 decision-making criteria.
Specifically, proposed rule 15A NCAC 2H .0506 describes a sequencing process by which an applicant whose project would not normally be allowed under applicable state water quality standards may obtain state certification by demonstrating that the project: (1) has no practical siting alternative; (2) will minimize adverse project environmental impacts that may result in water quality degradation, so that the activity will not result in unacceptable degradation of state waters either considered alone or in conjunction with other activities affecting the water body under consideration; and (3) provides for replacement of lost or degraded uses of state waters through mitigation. The EMC proposes, through this evaluative process, to balance these three demonstrations against wetlands elimination to achieve an overall water quality goal, while allowing reasonable development affecting state waters. To achieve this goal, the EMC must be guided by water quality considerations. However, it is the EMC’s responsibility to determine the manner and method by which the State performs this balancing function.
Further, proposed rule 15A NCAC 2H .0506 permits a proposed project that is determined not to violate any applicable state water quality standard either because (1) the activity is covered by a general certification under 15A NCAC 2H .0501(c)(2), or (2) the Director’s initial review of the project indicates that it "would not remove or degrade existing uses," to go forward without meeting the full sequencing requirements set out in the rule. See, 15A NCAC 2H .0506(a). Other projects would undergo a full analysis according to rule review procedures. In essence, as discussed further in Section IV., by enacting the rule 15A NCAC 2H .0506 review process, the EMC is proposing to establish as state policy that projects that can make the showings required by the applicable Section 401 water quality certification review procedures will be deemed to comport with state water quality standards, including state antidegradation requirements.
B. North Carolina Wetlands are Waters Within the Meaning of the Clean Water Act, and are Thus Appropriately Considered for Section 401 Water Quality Certifications.
Some rule commenters have sought to distinguish between wetlands and other state surface waters in terms of the ability of North Carolina to make a Section 401 water quality certification determination for projects that would affect wetlands. The question is whether, under federal law, the Section 401 certification process may only be used to protect existing water quality in streams or other flowing state waters. Those taking this view rely on the language of the EPA regulation codified at 40 CFR. § 131.12 (1982) as a portion of that agency’s antidegradation policy implementing regulations, which states, in pertinent part: "[e]xisting instream water uses and the level of water quality necessary to protect the existing uses shall be maintained and protected" (emphasis supplied). We believe a state’s 401 certification responsibilities are not limited to protecting instream water uses for two reasons.
First, in interpreting its own rules, EPA treats wetlands and other United States waters synonymously, expressly stating that the federal antidegradation policy applies to wetlands, just as it does to the other waters of the nation: …EPA interprets § 131.12(a)(1) of the antidegradation policy to be satisfied with regard to fills in wetlands if the discharge did not result in "significant degradation" to the aquatic ecosystem as defined under … the Section 404(b)(1) guidelines. If any wetlands were found to have better water quality than "fishable/ swimmable", the State would be allowed to lower water quality to the no significant degradation level as long as the requirements of Section 131.12(a)(2) were followed. As for the ONRW provision of antidegradation …., there is no difference in the way it applies to wetlands and other water bodies (emphasis supplied). EPA Questions & Answers on: Antidegradation 5 (1983). This interpretation of regulations must be accorded deference by a reviewing court. See, e.g., PUD No. 1, supra, 114 S.Ct. at 1909.
Secondly, the United States Supreme Court has previously held that wetlands, even if flooded by groundwater and not by adjacent flowing waters, are navigable waters within the regulatory purview of Section 404 of the Clean Water Act. U.S. v. Riverside Bayview Homes, 474 U.S. 121 (1985). Consequently, since (1) wetlands are navigable waters under Section 404 jurisdiction, (2) the EMC’s proposed wetlands water quality standards are expressly applicable to these Section 404 jurisdictional wetlands, and (3) Section 401 requires that a state certify that any project requiring a Section 404 permit meets the state’s water quality standards, it is clear that the Section 401 certification process anticipates that federally permitted activities occurring in wetlands must undergo the Section 401 certification process. Consequently, we believe that there can be no serious question that the Section 401 certification process would lawfully include the wetland water quality standards and uses established under the proposed EMC rules.
III. Do the Proposed Rules Establish a Separate, Duplicative Permitting Program Without the Requisite Statutory Authority?
The EMC has, at least since the 1989 adoption of rule 15A NCAC 2B .0109, used the federal Section 404(b)(1) Guidelines to determine whether a federally permitted activity in wetlands will result in a violation of state water quality standards. During the public hearing process, the issue has been raised whether the use of the Guidelines in making water quality certification decisions for projects that affect wetlands would operate to establish an unauthorized "Section 404 permitting program" for the State. As discussed below, adoption of the proposed rules would not necessarily result in a duplication of the Corps’ Section 404 review process, and would not constitute de facto assumption of the federal Section 404 dredge-and-fill permitting process by the DEM. As the Environmental Division has previously advised the DEHNR, there would need to be additional statutory authority from the General Assembly for assumption of the Section 404 permitting program.
The Section 404(b)(1) Guidelines have been used by the U.S. Army Corps of Engineers ("Corps") and the EPA for more than a decade in reviewing the impact of proposed activities on wetlands. The Section 401 review procedures proposed to be adopted by the EMC in rule 15A NCAC 2H .0506 are very similar to the federal Guidelines. Despite that similarity, our analysis of the rule leads to the conclusion that they will not necessarily be duplicative of federal review. Further, we know of no provision in state or federal law that automatically precludes the potential application of similar review procedures by state and federal permitting agencies contemplating the same project.
Where the purposes of the state and federal agencies in applying similar procedures differ substantially, as the DEM has indicated is the case here, the review process is likely to also differ significantly. The Corps’ use of the Section 404(b)(1) Guidelines is aimed at preventing net loss of the nation’s wetlands under federal policy directives. However, Corps’ regulations provide that in the case of proposed projects that will affect isolated and headwater wetlands, the Section 404(b)(1) Guidelines will not be applied across the board in project evaluation, but will be applied, if at all, only on a case-by-case basis. DEM has stated its primary goal in applying proposed rule 15A NCAC .0506 is to ensure that all projects affecting state wetlands, especially those such as isolated and headwater wetlands, which are not evaluated by the Corps under the federal Guidelines, are thoroughly examined for their effects on state water quality. Consequently, it is unlikely that any actual duplication in permit analysis will result. In addition, the State and the Corps could, through a State Programmatic General Permit, provide for analysis of federally permitted projects in such a way as to preclude even any potential duplication of process.
Similarly, some comments on the proposed rules have suggested that consideration of matters reflected in the Section 404(b)(1) Guidelines are exclusively within the purview of the Corps and the EPA in making decisions related to Section 404 of the Clean Water Act, because the Guidelines are aimed at protecting against wetlands loss, and have little to do with protecting water quality per se. It should be noted, perhaps, that one purpose of the Section 404(b)(1) guidelines is to "maintain the chemical, physical, and biological integrity of waters of the United States…." 40 CFR § 230.1(a). Proposed rule 15A 2B.0506 articulates a policy of (1) avoidance of impacts to state waters, (2) minimization of impacts that do occur, and (3) requiring mitigation for degradation of state waters, and the EMC has determined that policy is related to a goal of protecting state water quality. Moreover, in the case of projects proposed for Indian tribal lands, the EPA itself uses the Section 404(b)(1) Guidelines to make the required Section 401 water quality certification compliance determination in lieu of a state water quality certification. See, 20 January 1995 memorandum from Thomas C. Welborn, Chief, Wetlands Protection Section, EPA, Region IV, entitled "401 Application to EPA for Section 404 Tribal Projects". For those reasons, we believe that the proposed use of Section 401 water quality certification review procedures similar to the federal Section 404(b)(1) Guidelines is entirely lawful.
IV. Will the Proposed Rules Operate to Halt any Elimination of Wetlands Areas, in Light of the Antidegradation Policy of the Environmental Management Commission?
An additional concern has been expressed that in light of the EMC’s antidegradation policy, found in 15A NCAC 2B .0201, proposed rule 15A NCAC 2B .0220 would prohibit any development of wetlands. The concern is whether any wetland fill project would be permitted since the wetland area itself would be eliminated and the wetland use could no longer exist.
This issue also arises under the language of the Clean Water Act, and has been resolved nationally by the EPA’s reading Sections 303, 402 and 404 of the Act together, recognizing that permitting fill under the federal regulations promulgated pursuant to Section 404 is the statutorily authorized method for determining that significant uses of wetlands are not impaired. See, EPA Questions & Answers on: Antidegradation 5 (1983). North Carolina takes a similar approach in the current EMC water quality classification rules at 15A NCAC 2B .0109:
Projects that alter the reach and extent of a freshwater wetland will not be considered as removing existing uses of the wetland in violation of the Antidegradation Policy [pursuant to 15A NCAC 2B .0201(b)] if the alteration protects all existing and designated uses of all waters of the State. In making this determination, the Director will be guided by 40 CFR Part 230, Subparts A through F.
We believe this is a lawful regulatory construction of the classification and use protection requirements in North Carolina. The interpretation is specifically supported by several provisions of the North Carolina statutes found in N.C.G.S. § 143-214.1. The context of those provisions relating to classification, uses of waters and assignments is that a variety of factors must be considered by the EMC to implement the policy and purposes of Chapter 143, Article 21.
The proposed rules are consistent with the existing EMC policy of reasonable accommodation of projects affecting wetlands while protecting overall state water quality. Specifically, application of proposed rule 15A NCAC 2H .0506 under the existing policy of reasonable accommodation means that projects that make the required showings under the certification review procedures are deemed to comport with state water quality standards, including state antidegradation requirements. We believe this approach is a lawful application of EMC rules. To make clear its intent to continue to apply a policy of reasonable accommodation, we recommend that the EMC retain the relevant provision of 15A NCAC 2B .0109, or one equally explicit, in the new rules.
CONCLUSION
For the above reasons, it is our opinion that the wetland standards and the Section 401 water quality certification review procedures proposed for rule adoption by the EMC are adequately authorized by the North Carolina General Statutes and consistent with federal law. We will be happy to continue to assist you, the EMC, the regulated community and interested commentators to assure that any proposed rules relating to state water quality are authorized by state law, and clearly understood.
John R. McArthur Chief Counsel Daniel C. Oakley Senior Deputy Attorney General Kathryn Jones Cooper Special Deputy Attorney General Timothy D. Nifong Assistant Attorney General