• Second Circuit Decision on Water Transfers Containing Pollutants
  • July 1, 2006
  • Law Firm: Nixon Peabody LLP - New York Office
  • On June 13, 2006, the U.S. Court of Appeals for the Second Circuit affirmed the need for the City of New York to obtain a National Pollutant Discharge Elimination System ("NPDES") permit, pursuant to the Clean Water Act (CWA), for one of the tunnels used to transport water from the Catskill Mountains to New York City, but remanded the matter to the lower court for recalculation of the civil penalty amount.1 The decision is the latest in a long-running case that raises interesting questions about the need for CWA permits and the role of the federal government versus the states in CWA matters.

    Case history

    The City of New York operates the 18-mile Shandaken Tunnel (tunnel) as part of its drinking water system which moves water from the Catskills to the city. As it brings water to the city, the tunnel empties into the Esopus Creek (the creek), a "navigable" water for purposes of the CWA. The water discharged from the tunnel contains higher turbidity than the receiving creek. The creek is a trout stream used for fly-fishing and other recreational activities. In March 2000, the Catskill Mountain Chapter of Trout Unlimited and other citizen environmental groups (Trout Unlimited) brought a citizen suit under the CWA, alleging that the city discharge from the tunnel violated 33 USC § 1311 (a), which prohibits the discharge of any pollutant without an NPDES permit.

    After the citizen suit was filed, the District Court for the Northern District of New York dismissed the case, holding that the discharge from the tunnel did not constitute an addition of a pollutant to the creek under the CWA (33 USC § 1362 (12)). The plaintiffs appealed to the Second Circuit. Noting that the CWA’s definition of a "discharge of a pollutant" means "any addition of any pollutant to navigable waters from any point source," the Second Circuit reversed the district court. It found that, under the CWA, "addition" meant the introduction of pollutants into navigable water from the "outside world." In its "Catskill I" decision, the Second Circuit remanded the case to the district court.

    On remand, in October 2001, the district court reversed its initial decision, concluding that the discharge of water containing pollutants from one body of water into another is an addition of a pollutant under the CWA needing a permit. In addition, due to NYC’s untimely delay in applying for a permit after the Catskill I decision, the district court imposed a penalty of $5.749 million. The city subsequently appealed on two grounds: (1) whether discharging natural turbidity into the creek constituted the addition of a pollutant; and (2) whether the penalty assessed was too high. Trout Unlimited, in a cross appeal, said the decision should stand but that the penalty was too low.

    Major legal outcomes

    The city sought reconsideration in light of two intervening legal developments: (1) a Supreme Court decision regarding the need for an NPDES permit under similar circumstances;2 and (2) EPA’s issuance of an agency interpretation addressing the applicability of the NPDES permit requirement to water transfers such as the one in the Catskill case. The city again argued that no addition of pollutants to navigable waters had occurred. The court reiterated its analogy of two separate pots of soup and one ladle. The separate pots of soup represent two individual water bodies. Transferring liquid from one pot to the other using a ladle, or the tunnel, is an interbasin transfer that involves an "addition" of pollutants requiring an NPDES permit. In contrast, the court pointed out, scooping a ladle full of soup from one pot and returning it to that same pot represents an intrabasin transfer that does not require an NPDES permit.

    The Circuit Court also rejected the city’s "unitary water" theory, which posited that all navigable waters of the United States constitute a "single water body." The Second Circuit expressed concern that this type of interpretation could lead to seriously polluted water being discharged into a pristine body of water without a CWA permit.

    The city also presented a "holistic" argument, which was addressed in EPA’s 2005 agency interpretation, arguing that, under the CWA, states control all "quantity-of-water" issues. The city argued that each state can allocate its water resources and allow such resources to be transferred to different areas as it sees fit. Agreeing that the CWA gives each state the right to allocate water "quantity" within its borders, the Second Circuit pointed out, however, that the CWA clearly covered "quality-of-water" discharge issues and rejected this argument.

    Finally, the court stressed that, when states or the EPA issue CWA permits, there is a large degree of flexibility that can be built into such permits. The court stated that this flexibility could allow the city to continue to operate the tunnel. Specifically, it pointed out that, within the permit, the city could be given a schedule through which the turbidity issue could be resolved in an orderly manner.

    The Second Circuit did discover a calculation error in the district court’s penalty assessment. Due to a change in the CWA’s maximum penalty amount during the time the case was pending, the district court’s calculation of the statutory maximum was $524,000 too high. Because there was no way to determine how the district court would have factored the lower maximum penalty into its calculation, the Second Circuit remanded the penalty portion of the district court’s decision.

    Practical implications

    Entities that could be affected by this decision include (1) municipalities that transfer water through CWA navigable waters; (2) property owners who discharge stormwater that may have picked up pollutants on or off their property but which are not covered by a discharge permit; and (3) owners and operators of dams that withdraw water and then discharge some or all of it to another water body. 


    1 Catskill Mountain Chapter of Trout Unlimited, Inc.; Theodore Gordon Flyfishers, Inc.; Catskill-Delaware Natural Water Alliance, Inc.; Federated Sportsmen’s Clubs of Ulster County, Inc.; and Riverkeeper, Inc., vs. City of New York and New York City Department of Environmental Protection, and Joel A. Miele, Sr., Commissioner of the Department of Environmental Protection v. State of New York, New York State Department of Environmental Conservation, and Erin M. Crotty, Commissioner of the New York State Department of Environmental Conservation. U.S. Court of Appeals for the Second Circuit. Docket No. 03-7203(L); 03-7253 (XAP), June 13, 2006.

    2 South Florida Water Management District v. Miccosukee Tribe of Indians, 541 U.S. 95 (2004).