On March 15, 2011, the Fifth Circuit issued a unanimous decision in National Pork Producers Council v. EPA, holding that the Environmental Protection Agency (EPA) cannot require concentrated animal feedings operations (CAFOs) to apply for discharge permits under the Clean Water Act (CWA) unless the CAFOs are actually discharging pollutants into the waters of the United States.   The ruling, and the limits on the EPA's jurisdiction it acknowledges, is a significant victory for the livestock industry, which has been fighting since 2003 to ensure EPA does not exceed its CWA authority when regulating CAFOs.

Background: EPA's Increased Regulation of CAFOs

For the past decade, EPA has sought to expand the National Pollutant Discharge Elimination System (NPDES) program to reach not only CAFOs that actually discharge but broader categories of CAFOs that may have the potential to discharge at some time in the future.  In 2003, EPA promulgated a rule that would have imposed a "duty to apply" for an NPDES permit on virtually all CAFOs regardless of whether they discharge to waters of the United States.  That rule was rejected by the U.S. Court of Appeals for the Second Circuit in 2005, following a challenge by the livestock industry.   According to the Second Circuit, "the Clean Water Act gives the EPA jurisdiction to regulate and control only actual discharges—not potential discharges and certainly not point sources themselves."  For this reason, EPA was barred from imposing a duty to apply on potential dischargers.

EPA responded to the Second Circuit's ruling by promulgating a new rule in 2008.  Like its predecessor, the 2008 rule imposed on CAFO operators an enforceable duty to apply for permit coverage.  This time, however, the duty to apply was limited to CAFOs that discharge or "propose to discharge" because they are "designed, constructed, operated, or maintained such that a discharge will occur."  Under the 2008 rule, if a CAFO failed to seek a permit and subsequently discharged, the operator could be liable both for failing to apply for a permit and for the unpermitted discharge itself. 

The National Pork Producers Council v. EPA Litigation

EPA's 2008 rule promptly drew challenges from industry and environmental groups, which were consolidated in the U.S. Court of Appeals for the Fifth Circuit.  The industry petitioners asserted that even though the 2008 rule did not explicitly violate the Second Circuit's ban on the regulation of CAFOs with only the potential to discharge, in reality it had the same effect.  By contrast, a consortium of environmental groups argued that the 2008 rule did not go far enough, because it did not define categories of CAFOs required to attain permit coverage in all instances.

Before the Fifth Circuit could reach the merits of the case, the environmental groups and EPA reached a voluntary settlement of the environmental petitioners' claims.  Under the agreement, EPA committed to, among other things, publishing guidance regarding the "kinds of obligations and factual circumstances EPA anticipates may trigger the duty to apply for permits as discharging or proposing to discharge."  EPA fulfilled this obligation on May 28, 2010, publishing a document that clarifies what actions the agency believes constitute a proposal to discharge.

After hearing arguments on the merits of the remaining claims, the Fifth Circuit agreed with industry petitioners and held that the 2008 rule violated EPA's statutory authority under the CWA.  In the opinion issued earlier this week, the court reaffirmed the Second Circuit's holding that the CWA only allows EPA to regulate actual discharges to waters of the United States.  Regulation of potential discharges, proposed discharges, and the point sources themselves all fall outside EPA's statutory authority.  Therefore, to the extent that the 2008 rule imposed a duty to apply for an NPDES permit on facilities that only "proposed" to discharge, the Fifth Circuit held that the regulation exceeded the agency's statutory authority.  By extension, the guidance document EPA published to fulfill its settlement obligations is also invalid insofar as it suggests a mere proposal to discharge is sufficient to trigger a duty to apply.

The court also invalidated the provisions of the 2008 rule that sought to impose liability for failure to apply for a permit (as opposed to liability for discharging without a permit).  The Clean Water Act specifically lists the violations for which the EPA may impose liability, for example EPA is authorized to fine regulated entities for violations of certain water-quality based effluent limitations and violations of provisions governing the disposal or use of sewer sludge.  Liability for failure to apply for an NPDES permit, however, is "[n]otably absent" from the Clean Water Act's list. 

Conclusion

The National Pork Producers Council decision is important for CAFOs in that it recognizes clear limits on EPA's ability to regulate CAFOs under the Clean Water Act.  Many industry members currently seek to eliminate their discharges entirely, and the National Pork Producers Council decision reaffirms that facilities that successfully eliminate discharges cannot be required to apply for a permit or penalized for their failure to apply if an unintended discharge occurs.  CAFOs should carefully review the Fifth Circuit ruling to determine how it affects their NPDES permitting obligations.  Read the complete text of the Fifth Circuit opinion in National Pork Producers v. EPA.