SERVICE OIL, INC. v. U.S. EPA: No Rain, No Pain
The Clean Water Act is complex and rule intensive. As such, it is easy to forget the purpose of the Act -- clean water. The Eighth Circuit recently had an opportunity to remind us of that purpose in the case of Service Oil, Inc. v. U.S. EPA.
For those who practice in the area of property development and storm water regulation, the facts were not surprising. Service Oil began construction of a Stamart Travel Plaza on more than five acres of land in Fargo, North Dakota. As soon as earth was turned, the site became a potential “point source” under federal law. The storm water discharges from the site were deposited into Fargo’s storm sewer system which then went into the Red River of the North. As a result of this discharge, the site was required to obtain an NPDES permit. The North Dakota Department of Health was authorized to issue the NPDES permits and required that a Notice of Intent to obtain such a permit had to be submitted at least 30 days prior to the start of construction.
In October of 2002, EPA and the North Dakota Department of Health officials inspected the Stamart site and found that no Notice of Intent had been filed, which was quickly corrected by Stamart. As luck would have it, there was apparently no rain fall that occurred at the site between the time that development commenced and the time Stamart was able to get its Notice of Intent on file. Though the state officials were satisfied, EPA continued its review and determined that Stamart had also failed to conduct site inspections as required by state law.
In bringing its action against Stamart, EPA sought an $80,000 administrative penalty based on two acts: (1) Stamart’s failure to file its Notice of Intent in a timely manner and 2) Stamart’s failure to conduct timely inspections. The majority of the penalty ultimately assessed by the Administrative Law Judge was for the failure to properly file the Notice of Intent. The ALJ found that Section 1318 of the Clean Water Act had record-keeping requirements supported by regulations that required the preconstruction submission of a completed permit application.
On appeal, the Court agreed that the Clean Water Act prohibits discharges without a permit. It also agreed that it is logical that the regulations provide for permit applications to be submitted prior to any initial discharge. The Court focused on the fact that the regulations required that a person who proposes a new discharge must submit its application before the date on which the discharge is to commence. However, the statute’s requirements, by its terms, applies to a point source. In the words of the Court:
Failure to comply with [the requirement of submitting an application before discharge] cannot be a violation of section 1318(a) because that statute’s record-keeping requirements are expressly limited to “the owner or operator of any point source.” Before any discharge, there is no point source. (Emphasis added).
The Eighth Circuit was simply emphasizing that EPA does not regulate “point
sources.” Rather, a point source is just a defined term which determines whether the regulatory scheme might apply to that source. If the source is not deemed to be a point source (such as agricultural runoff), then the regulatory scheme does not apply to it. If it is defined to be a point source (such as a construction site), then the regulations do apply, but only after there has been a discharge. Since the statute gives jurisdiction only over actual water discharges, a developer cannot be penalized for failing to take out a permit, at least not until a discharge event, such as storm water runoff, has actually occurred.
To emphasis this point, the Court quoted an earlier Second Circuit case:
The Clean Water Act gives the EPA jurisdiction to regulate and control only actual discharges—not potential discharges, and certainly not point sources themselves. (Emphasis in original).
So does this mean the developer can avoid filing a Notice of Intent or obtaining a permit? The Court, recognizing that EPA might be concerned that it lacks regulatory authority to assess administrative penalties for failing to submit a timely permit application, offered these words of consolation:
Prudent builders know that permits do not issue over night and that storm water discharges can happen any time after the start of construction makes the site a point source. They will apply and obtain permits before starting construction to avoid penalties for unlawful discharges that may prove to be severe. That is the regulatory regime Congress crafted.
In other words, developers take note -- counting on the Farmer's Almanac is probably not a sound business plan.
allow the conscience of the consumer to choose the environmentally better product. When that didn't work, because most consumers buy the cheapest and/or most effective product (which is not often the environmentally friendliest choice), at least two legislatures came up with an alternative -- ban the product. This same reasoning can be found in the 
U.S. EPA Region 1 (Iowa is in Region 7) has recently issued two rulings relating to stormwater discharge permitting that could have a huge impact on existing businesses. In these two instances, EPA has decided, for the first time, to regulate stormwater runoff from impervious cover (such as parking lots and large buildings) from existing developments, regardless of how long they have been in existence.