Clean Water Act Section 401:
Background and Issues

Claudia Copeland
Specialist in Environmental Policy
Environment and Natural Resources Policy Division

Updated October 4, 1998

97-488 ENR

Summary

Section 401 of the Clean Water Act requires that an applicant for a federal license or permit provide a certification that any discharges from the facility will comply with the Act, including water quality standard requirements. Disputes have arisen over the states' exercise of authority under Section 401. Until recently, much of the debate over the Section 401 certification issue has been between states and hydropower interests. A 1994 Supreme Court decision which upheld the states' authority in this area dismayed development and hydroelectric power interest groups. The dispute between states and industry groups was a legislative issue in the 104th Congress through an amendment to a House-passed Clean Water Act reauthorization bill; the Senate did not act on that bill. It could be an issue again in the 105th Congress because of lingering concern over hydroelectric power licensing, as well as concern over the impact of a federal court ruling which held that Section 401 certification applies to nonpoint sources of pollution.

Background

Under provisions of the Clean Water Act (CWA), an applicant for a federal license or permit to conduct any activity that may result in a discharge to navigable waters must provide the federal agency with a Section 401 certification. The certification, made by the state in which the discharge originates, declares that the discharge will comply with applicable provisions of the Act, including water quality standards requirements.

Section 401 provides states with two distinct powers: one, the power indirectly to deny federal permits or licenses by withholding certification; and two, the power to impose conditions upon federal permits by placing limitations on certification. Generally, Section 401 certification has been applied to hydroelectric projects seeking a license from the Federal Energy Regulatory Commission (FERC) and for dredge-and-fill activities in wetlands and other waters that require permits from the Army Corps of Engineers under Section 404 of the CWA and Sections 9 and 10 of the Rivers and Harbors Act. It also is applied to permit requirements for industrial and municipal point source discharges under Section 402 of the CWA. In addition, it has the potential to be applied to a range of other activities that could affect water quality, a point that has increasingly become an issue.

Because participation by states in Section 401 certification is optional (they may waive the authority if they choose to do so), state implementation has varied. In recent years, however, some states have come to view Section 401 as an important tool in their overall programs to protect the physical and biological, in addition to the chemical, integrity of their waters. Some have begun using Section 401 to address a wide range of impacts to the quality of their waters, including impacts to aquatic habitat such as wetlands where issues of non-chemical impacts arise. Through Section 401, some states have addressed such impacts of a project as inadequate river flow, inundation of habitat, dissolved oxygen levels, and impacts on fish and other wildlife.

This expanded use of Section 401 has, in turn, led to tensions between state and federal agencies over the scope of the states' Section 401 authority, particularly the extent to which states can legally address water flow requirements in water quality standards. Some state courts have placed limitations on the use of Section 401 authority (at least for hydropower projects) to address only chemical impacts of projects (such as dissolved oxygen or numeric chemical criteria) and not physical impacts (filling of aquatic habitat in a streambed as a result of the project) or biological impacts (effects on fish migration, for example). Other courts have adopted a broader view and allowed states to condition certification on compliance with all applicable water quality-related laws. A 1990 Supreme Court case (California V. FERC, 495 U.S. 490, known as the Rock Creek Case) addressed the issue of whether hydropower projects must comply with any aspect of state water law and held that the Federal Power Act preempts state regulation of water rights for federally licensed hydropower facilities.

Recent Concerns and Legislative Issues

Until recently, much of the debate over the Section 401 certification issue was between states and hydropower interests. States have favored clarifying the CWA to confirm their broad authority to impose conditions on federally permitted activities (some also favor amending the Federal Power Act to clarify that it does not preempt state regulation of water uses). This position was described in testimony at a Senate subcommittee hearing in 1991.¹

An overly narrow reading of section 401 would deprive the States of the ability to maintain the very beneficial uses that the Clean Water Act was designed to protect. Federal agencies could permit activities that would undermine a State's investment in pollution control efforts and impose a double standard for different activities affecting the same in-stream values. It makes no sense to authorize States to implement Clean Water Act programs designed to protect beneficial uses and yet leave them powerless to prevent a federally permitted activity from impairing those values.

The comprehensive nature of State management of water quality and water quantity means that the States are best situated to determine whether a federally permitted activity will fully protect beneficial uses. The States have lead responsibility for protecting water quality under the Clean Water Act and for administering laws governing allocation of water quantity. Water quality and quantity are inextricably linked; both are essential to maintaining the integrity of the ration's waters.

Hydropower interests, who also testified at the 1991 Senate hearing, favor allowing federal agencies such as FERC to determine what conditions on a project are necessary for protection of water quality or to satisfy other criteria, in light of the important purposes directed by Congress in other laws, specifically the Federal Power Act.²

The current limitation on the role of the States in the [federal hydropower] licensing process is that ultimately the FERC must make the decision balancing the multitude of resource Interests affected by the project. The expansive reading of Section 401 water quality certification being used in some States crosses this barrier, using this mandatory water quality review to effectively take control of all aspects of the project. ....Expansion of 4Ol certification places authority for an energy resource in the effective control of a State water quality agency, that is not responsible for utility rate stabilization, assuring adequate water supplies, promoting clean air technology, or controlling floods.

In the 103rd Congress, interest in clarifying the scope of Section 401 certification authority led to several legislative proposals. The Senate Environment and Public Works Committee included a provision in S. 2093, a CWA reauthorization bill (S. Rept. 103-257). Section 602 of S. 2093 would have amended Section 401 to clarify that applicants for a federal license or permit, including applicants for a FERC license to operate hydroelectric generating facilities, must obtain state certification that the project will comply with water quality standards and will allow for attainment and maintenance of language was identical to that in S. 448. The Senate did not act on S. 2093.

The Supreme Court again considered the Section 401 issue in a case decided after S. 2093 was reported in 1994. In PUD No. I of Jefferson County and City of Tacoma V. Washington Department ofEcology, 511 U.S. 700 (1994), the Court held that a state may impose minimum stream flow requirements as a condition in a Section 401 certification issued for a proposed hydroelectric facility because the CWA allows states to condition certification upon any effluent limitation or other appropriate state law requirement, to ensure that the facility will not violate State water quality standards. Imposition of the condition in question as part of the Section 401 certification did not conflict with FERC's authority to issue a license under the Federal Power Act, the Court said. (For additional information, see CRS Report 94-601 A, PUD No.1 of Jefferson County V. Washington Department of Ecology: An Expansive Interpretation of State Authority under the Clean Water Act.)

This decision supported the position of states, which had sought confirmation of their power to impose minimum stream flow and other requirements of state water quality standards. Environmentalists, who have supported states' use of Section 401 to address aquatic habitat alteration and biological diversity of the Nation's waters, also were pleased with the ruling. Development and hydropower interests, on the other hand, were said to be dismayed by the City of Tacoma decision, saying that it would make licensing of hydroelectric facilities more difficult and costly, at a time when more than 300 hydro projects are seeking FERC relicensing. Utility industry representatives were said to be concerned that water quality agencies reflect a narrow viewpoint under their mandates and could bias licensing policies by not adequately addressing power needs.

Following the Supreme Court's decision, disputes over Section 401 became a legislative issue. At the end of the 103rd Congress, legislation was introduced to amend the Clean Water Act and overturn the City of Tacoma decision. The sponsor of the bill, Senator Wallop, said that the decision threatened state water law (by limiting the amount of water that could be used for the project in question and, thus, interfering with state water rights systems) and the integrity of the FERC hydroelectric licensing process (Cong. Rec., daily ed., Nov.30, 1994, 515237).

In the 104th Congress the issue was addressed in H.R. 961, a bill to reauthorize the Clean Water Act passed by the House May 16, 1995. Section 507, adopted as an amendment during House debate, would make Section 401 inapplicable to hydropower projects if FERC determines that the state's certification is inconsistent with the Federal Power Act. The bill also set up a mechanism, to be administered by FERC, to resolve differences that might arise between the state and FERC on questions relating to the consistency of the 401 certification to a hydropower project. That is, in the event of a dispute between FERC and a state over 401 certification of a hydropower project, the federal agency with licensing authority under the Federal Power Act also would oversee resolving the dispute between itself and an individual state.

The amendment adopted to HR. 961 (by recorded vote of 309-100) was one of several proposed to address the issue. Some Members favored simply exempting hydropower projects from Clean Water Act regulation, since FERC project review is intended to consider inputs of state and federal agencies, Indian tribes, and the public in connection with licensing and relicensing decisions. Others argued that states should continue to have authority to regulate matters related to water quality concerns, and the amendment attempted to balance those concerns. No futher action occurred on H.R. 961 during the 104th Congress, leaving the issue unresolved.

Section 401 and Land Runoff

In September 1996, a federal district court in Oregon ruled that Section 401 "applies to all federally permitted activities that may result in a discharge, including discharges from nonpoint sources." (Oregon Natural Desert Association V. Thomas, 940 F.Supp. 1534, D.Or. 1996) The case, brought by environmental groups in Oregon, sought to have the U.S. Forest Service obtain Section 401 certification from the state that cattle grazing would not violate state water quality standards before issuing a grazing permit. The Forest Service argued in response that, under the CWA, only discharges from a point source or nonpoint source with a conveyance (i.e., a pipe or channel outlet) are regulated by the Act and, while cattle grazing may cause water pollution, it is not a regulated discharge under the Act. However, in its ruling, the court distinguished the definition of "discharge" from "discharge of a pollutant" from a point source and said that "pollution caused by cattle grazing constitutes a discharge into navigable waters within the meaning of section 401 of the Clean Water Act. Therefore, state certification under section 401 was required before the U.S. Forest Service issued a cattle grazing permit."

The ruling, if upheld, would give states new regulatory power over federal licenses or permits that affect water quality by clarifying that Section 401 applies to nonpoint source discharges of water pollution, in addition to point source discharges. Nonpoint source pollution includes rainfall and snowmelt runoff from farmlands, ranches, city streets, and simil& areas. The ruling could also give states a stronger hand in determining how federal lands should be managed. The impact on states could be significant, since cattle grazing is a common activity on millions of acres of western lands managed by the Forest Service and the U.S. Bureau of Land Management, and states could face a substantial workload in processing Section 401 certifications for hundreds of grazing permits annually.

Additional impacts could occur if Section 401 were held to apply to other types of federally permitted activities generally categorized as nonpoint sources, such as timber harvesting or logging. However, the legal issues are unsettled, because a federal district court in Idaho reached opposite conclusions from the Oregon Natural Desert court in a case that dealt with road building associated with forestry (Idaho Conservation Leaguev. Caswell, DC Idaho, No. 95-394-S-MHW, Aug.12, 1996).

Further, the extent to which the Oregon federal court's interpretation of Section 401 may affect federal land management cannot be fully determined at this time. First, whether the decision will be upheld is unknown. A second unknown is how states will respond to a requirement to apply Section 401 certification to nonpoint source discharges. Some states might, for example, waive 401 certification for some or all categories of activities (as the law allows). States and EPA also might develop general permits or other similar means of minimizing the workload and impact of such a requirement.

Federal agencies disagreed over how to respond to the Oregon district court's ruling. EPA officials urged the Administration to let the decision stand, on the basis that nonpoint source pollution is the most significant contributor to water pollution in many states, and the decision would give states more power to manage it. The Agriculture Department (parent of the Forest Service), on the other hand, urged the Department of Justice to support an industry group that has appealed the case. In January, the Justice Department filed a "protective filing" with the court, preserving the right to appeal the decision in the next few months, while discussions of legal strategy continue.

So far, Congress has not responded to these recent court rulings, nor has legislation been introduced in the l05th Congress concerning licensing of hydroelectric facilities and the 1994 City of Tacoma case. Legislative interest in Section 401 could increase if the Oregon Natural Desert ruling were upheld on appeal and if states or EPA were unable to develop approaches for state certification of nonpoint sources that would minimize impacts on states and permit applicants.

^1. Strong, Clive J. Statement on behalf of the National Association of Attorneys General, in U.S. Congress Senate. Committee on Environment and Public Works. Subcommittee on Environmental Protection. Water Pollution Prevention and Control Act of 1991. Hearings on S.1081. l02nd Congress, 1^st session. Washington, U.S. Govt. Print. Off., 1991. (S. Hrg. 102-335) p 805 (Hereinafter, 1991 Senate Hearing)

^2. Gail Ann. Statement on behalf of the National Hydropower Association, in, 1991 Senate Hearing. P.810.