  SEQ CHAPTER \h \r 1 ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 122

[EPA-HQ-OW-2006-0141; FRL-XXXX-X]

RIN A2040-AE86

  SEQ CHAPTER \h \r 1 National Pollutant Discharge Elimination System
(NPDES) Water Transfers Rule

AGENCY:  Environmental Protection Agency (EPA).

ACTION:  Final Rule

SUMMARY:  EPA is issuing a regulation to exclude, as a general matter,
clarify that water transfers from are not subject to regulation under
the National Pollutant Discharge Elimination System (NPDES) permitting
program.  This rule defines water transfers as an activity that conveys
waters of the United States to another water of the United States
without subjecting the water to intervening industrial, municipal, or
commercial use.  This rule provides an exception to the general
exclusion that grants the permitting authority discretion to designate
specific water transfers as subject to NPDES permitting requirements on
a case-by-case basis.  Before the permitting authority can designate
specific water transfers as subject to the NPDES permitting
requirements, the permitting authority must determine that the NPDES
permit is necessary to prevent a significant impairment of a designated
use in the receiving waterbody and that State authorities are not being
implemented to adequately address the impairment.  This rule focuses
exclusively on water transfers and does not affect any other activity
that may be subject to NPDES permitting requirements.

	OnToday’s rule is consistent with EPA’s June 7, 2006, EPA published
a proposed rule, which was based on an August 5, 2005, interpretive
memorandum entitled “Agency Interpretation on Applicability of Section
402 of the Clean Water Act to Water Transfers.”  

DATES: These final regulations are effective on [INSERT DATE 60 days
after publication in the Federal Register].  For judicial review
purposes, this action is considered issued as of 1 p.m. eastern daylight
time (e.d.t.) on [INSERT DATE two (2) weeks after publication in the
Federal Register], as provided in 40 CFR 23.2.  Under section
509(b)(1)(F) of the Clean Water Act, judicial review of the
Administrator's action promulgating a regulation governing the issuance
of NPDES permits can only be had by filing a petition for review in the
United States Court of Appeals within 120 days after the decision is
considered issued for purposes of judicial review.

ADDRESSES: The administrative record is available for inspection and
copying at the Water Docket, located at the EPA Docket Center (EPA/DC),
EPA West 1301 Constitution Ave., NW., Washington DC. The administrative
record is also available via EPA Dockets (Edocket) at   HYPERLINK
"http://www.regulations.gov_"  http://www.regulations.gov  under docket
number EPA-HQ-OW-2006-0141.  The rule and key supporting documents are
also electronically available on the Internet at ******.

FOR FURTHER INFORMATION CONTACT:  For additional information contact
Virginia Garelick, Water Permits Division, Office of Wastewater
Management (4203M), Environmental Protection Agency, 1200 Pennsylvania
Ave., NW., Washington, DC 20460; telephone number: 202-564-2316,; fax:
202-564-6384; e-mail address:  garelick.virginia@epa.gov.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this Action Apply to Me?

B. How Can I Get Copies of This Document and Other Related Information?

C. Under What Legal Authority Is This Final Rule Issued?

D. What is the Comment Response Document?

II. Background and Definition of Water Transfers

III. Rationale for the Final Rule

A. Water transfers generally are not regulated by CWA section 402Legal
Framework 

B. Designation AuthorityStatutory Language and Structure

C. Legislative History

IV. Public Comments

V. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review

B. Paperwork Reduction Act

C. Regulatory Flexibility Act

D. Unfunded Mandates Reform Act

E. Executive Order 13132: Federalism

F. Executive Order 13175: Consultation and Coordination with Indian
Tribal Governments

G. Executive Order 13045: Protection of Children from Environmental
Health and Safety Risks

H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use

I. National Technology Transfer and Advancement Act

J. Executive Order 12898: Actions to Address Environmental Justice in
Minority Populations and Low-Income Populations

K. Congressional Review Act

I.	General Information

A.  Does this Action Apply to Me?

This action applies to those involved in the transfer of waters of the
United States.  The following table provides a list of standard
industrial codes for operations potentially covered under this rule.

	

Table 1. – Entities Potentially Regulated by this Rule

Category	NAICS	Examples of potentially affected entities

Resource management parties (includes state departments of fish and
wildlife, state departments of pesticide regulation, state environmental
agencies, and universities).	924110 Administration of Air and Water
Resource and Solid Waste Management Programs	Government establishments
primarily engaged in the administration, regulation, and enforcement of
water resource programs; the administration and regulation of water
pollution control and prevention programs; the administration and
regulation of flood control programs; the administration and regulation
of drainage development and water resource consumption programs; and
coordination of these activities at intergovernmental levels.

 	924120 Administration of Conservation Programs	Government
establishments primarily engaged in the administration, regulation,
supervision and control of land use, including recreational areas;
conservation and preservation of natural resources; erosion control;
geological survey program administration; weather forecasting program
administration; and the administration and protection of publicly and
privately owned forest lands. Government establishments responsible for
planning, management, regulation and conservation of game, fish, and
wildlife populations, including wildlife management areas and field
stations; and other administrative matters relating to the protection of
fish, game, and wildlife are included in this industry.

	237110 Water and Sewer Line and Related Structures Construction	This
category includes entities primarily engaged in the construction of
water and sewer lines, mains, pumping stations, treatment plants and
storage tanks.

	237990 Other Heavy and Civil Engineering Construction	This category
includes dam Construction and management, flood control structure
construction, drainage canal and ditch construction, flood control
project construction, and spillway, floodwater, construction

Public Water Supply	221310 Water Supply	This category includes entities
engaged in operating water treatment plants and/or operating water
supply systems. The water supply system may include pumping stations,
aqueducts, and/or distribution mains. The water may be used for
drinking, irrigation, or other uses. 



This table is not intended to be exhaustive, but rather provides a guide
for readers regarding entities likely to be affected by this action. 
This table lists the types of entities that EPA is now aware could
potentially be affected by this action.  Other types of entities not
listed in the table could also be affected.  To determine whether your
facility is affected by this action, you should carefully examine the
applicability criteria in 40 CFR 122.3.  If you have questions regarding
the applicability of this action to a particular entity, consult the
person listed in the preceding “FOR FURTHER INFORMATION CONTACT”
section.

B.	How Can I Get Copies of This Document and Other Related Information?

1.	Docket. EPA has established an official public docket for this action
under Docket ID No. EPA-HQ-OW-2006-0041.  The official public docket
consists of the documents specifically referenced in this action, any
public comments received, and other information related to this action. 
Although listed in the index, some information is not publicly
available, e.g., Confidential Business Information (CBI) or other
information whose disclosure is restricted by statute. Certain other
material, such as copyrighted material, will be publicly available only
in hard copy.  Publicly available docket materials are available either
electronically in www.regulations.gov or in hard copy at the Water
Docket in the EPA Docket Center, EPA West, 1301 Constitution Ave., NW.,
Washington, DC.  The Public Reading Room is open from 8:30 a.m. to 4:30
p.m., Monday through Friday, excluding legal holidays.  The telephone
number for the Public Reading Room is (202) 566-1744, and the telephone
number for the Water Docket is (202) 566-2426.

2.	Electronic Access. You may access this Federal Register document
electronically through the EPA website under the "Federal Register"
listings at ****.

C. 	Under What Legal Authority Is this Final Rule Issued?

This final rule is issued under the authority of sections 402 and 501 of
the Clean Water Act., 33 U.S.C. 1342 and 1361.

D. 	What is the Comment Response Document?

EPA received a large number of comments on the proposed rule, including
thousands of form letters from members of environmental groups.  EPA
evaluated all of the comments submitted and prepared a Comment Response
Document containing both the comments received and the Agency's
responses to those comments.  The Comment Response Document complements
and supplements this preamble by providing more detailed explanations of
EPA's final action.  The Comment Response Document is available at the
Water Docket.

II. 	Background and Definition of Water Transfers

	Water transfers occur routinely and in many different contexts across
the United States.  Typically, water transfers route water through
tunnels, channels, and/or natural stream water features, and either pump
or passively direct it for uses such as providing public water supply,
irrigation, power generation, flood control, and environmental
restoration.  Water transfers can be relatively simple, moving a small
quantity of water a short distance, or very complex, transporting
substantial quantities of water over long distances, across both State
and basin boundaries.  Water transfers may be of varying complexities
and sizes; there may be multiple reservoirs, canals, or pumps over the
course of the transfer, or the route may be a more direct connection
between the donor and the receiving waterbody.  There are thousands of
water transfers currently in place in the United States, including
sixteen major diversion projects in the western States alone.  Examples
include the Colorado-Big Thompson Project in Colorado and the Central
Valley Project in California.

	Water transfers are administered by various federal, State, and local
agencies and other entities.  The Bureau of Reclamation administers
significant transfers in western States to provide approximately 140,000
farmers with irrigation water.  With the use of water transfers, the
Army Corps of Engineers keeps thousands of acres of agricultural and
urban land in southern Florida from flooding in former areas of
Everglades wetlands.  Many large cities in the west and the east would
not have adequate sources of water for their citizens were it not for
the continuous redirection of water from outside basins.  For example,
both the cities of New York and Los Angeles depend on water transfers
from distant watersheds to meet their municipal demand.  In short,
numerous States, localities, and residents are dependent upon water
transfers, and these transfers are an integral component of U.S.
infrastructure.

	The question of whether or not an NPDES permit is required for water
transfers arosearises because activities that result in the movement of
waters of the U.S., such as trans-basin transfers of water to serve
municipal, agricultural, and commercial needs, can also typically move
pollutants from one waterbody (donor water) to another (receiving
water).  Although there have been a few isolated instances where
entities responsible for water transfers have been issued NPDES permits,
Pennsylvania is the only NPDES permitting authority that regularly
issues NPDES permits for water transfers.  Pennsylvania began issuing
permits for water transfers in 1986, in response to a State court
decision mandating the issuance of such permits.  See DELAWARE Unlimited
v. DER, 508 A.2d 348 (Pa. Cmwlth, 1986).  In addition, some Courts of
Appeals have required NPDES permits for specific water transfers
associated with the expansion of a ski resort and the supply of drinking
water.  See, e.g., Dubois v. U.S. Dep't of Agriculture, 102 F.3d 1273
(1st Cir. 1996); Catskill Mountains Chapter of Trout Unlimited, Inc. v.
City of New York, 273 F.3d 481 (2nd Cir 2001), aff’d, Catskill
Mountains Chapter of Trout Unlimited, Inc. v. City of New York, 451 F.3d
77 (2nd Cir 2006).  Otherwise, however, water transfers have not
generally been regulated under section 402 of the Clean Water Act (CWA
or the Act).  

The Supreme Court recently addressed the issue of whether an NPDES
permit is necessary for the mere transfer of water in South Fla. Water
Mgmt. Dist. v. Miccosukee Tribe of Indians, 541 U.S. 95 (2004).  The
Supreme Court in Miccosukee vacated a decision by the 11th Circuit,
which had held that a Clean Water Act permit was required for
transferring water from one navigable water into another, a Water
Conservation Area in the Florida Everglades.  The Court remanded the
case for further fact-finding as to whether the two waters in question
were “meaningfully distinct.”  If they were not, an NPDES permit
would not be required.  The Court declined to resolve otherthe question
of whether water transfers require NPDES permits when the waterbodies at
issue are meaningfully distinct.  The Court noted that some legal
arguments made by the parties regarding whether water transfers, as a
general matter, are subject to the NPDES program because the arguments
this question had not been raised in the lower court proceedings and
noted that these arguments would be open to the parties on remand.  Id.
at 109.  

On August 5, 2005, EPA issued a legal memorandum entitled “Agency
Interpretation on Applicability of section 402 of the Clean Water Act to
Water Transfers” (“interpretive memorandum”).  The
preciseprincipal legal question addressed in the interpretive memorandum
was whether the movement of pollutants from one water of the U.S. to
another by a water transfer is the “addition” of a pollutant
potentially subjecting the activity to the permitting requirement under
section 402 of the Act.  Based on the statute as a whole and consistent
with the Agency’s longstanding practice, the interpretive memorandum
concluded that Congress generally expected water transfers would be
subject to oversight by water resource management agencies and State
non-NPDES authorities, rather than the permitting program under section
402 of the CWA.

On June 7, 2006, EPA proposed regulations based on the analysis
contained in the interpretive memorandum to expressly exclude state that
water transfers from are not subject to regulation under section 402 of
the CWA.  The Agency proposed to define water transfers as “an
activity that conveys waters of the United States to another water of
the United States without subjecting the water to intervening
industrial, municipal, or commercial use.”  The Act reserves the
ability of States to regulate water transfers under State law and this
proposed rulemaking was not intended to interfere with this State
prerogative.  See CWA section 510.  The proposal also specifically
requested comment on whether the final rule should include a provision
that would allow a permitting authority to designate a water transfer as
needing an NPDES permit under certain conditions. 

EPA is issuing a final regulation that is substantially similarnearly
identical to the proposed rule except for additional regulatory language
that grants the permitting authority discretion to designate water
transfers as needing a permit on a case-by-case basis, provided that
certain conditions are met.  Today’s rule .  (Minor changes have been
made for clarity.)  Through today’s rule, the Agency concludes that
water transfers, as defined by the rule, generally do not require NPDES
permits because they generally do not result in the “addition” of a
pollutant.  As inConsistent with the proposed rule, EPA defines water
transfers in the following manner: “Water transfer means an activity
that conveys or connects waters of the United States to another water of
the United States without subjecting the transferred water to
intervening industrial, municipal, or commercial use.”  In order to
constitute a “water transfer” under this rule, and, therefore,
generally be exempt from the requirement to obtain an NPDES permit, the
water being conveyed must be a water of the U.S.  prior to being
discharged to the receiving waterbody.  If the water that is being
conveyed is not a water of the U.S. prior to being discharged to the
receiving body, then that activity does not constitute a water transfer
under today’s rule.  Additionally, the water must be conveyed from one
water of the U.S. to another water of the U.S.  Conveyances that remain
within the same water of the U.S., therefore, do not constitute water
transfers under this rule, although movements of water within a single
water body are also not subject to NPDES permitting requirements.  As
the rule makes clear, in order to be a water transfer under the rule,
the water must be conveyed without being subjected to an intervening
industrial, municipal, or commercial use.   

	Consider water that is being moved from Reservoir A to Reservoir B in a
different watershed.  In order to get from Reservoir A to Reservoir B,
the water must first be released through a dam.  The water then travels
down River A, which is considered a water of the U.S.  Next, the water
is conveyed from River A to River B through a tunnel.  Finally, the
water travels down River B, also a water of the U.S., and flows into
Reservoir B.  There are several points in this example where water is
conveyed from one body to another, but not all of those points would
themselves constitute a “water transfer” because they are not the
conveyance of “waters of the United States to another water of the
United States.”   The first example is the release from Reservoir A to
River A.  This does not constitute a water transfer under EPA’s
definition because the water on both sides of the dam is part of the
same water of the U.S.  (It should be noted, however, that this release
would still not require an NPDES permit because EPA and the Federal
courts have determined that a discharge from a dam does not result in an
“addition” of a pollutant unless the dam itself discharges a
pollutant such as grease into the water passing through the dam.  See
National Wildlife Fed’n v. Gorsuch, 693 F.2d 156 (D.C. Cir. 1982);
National Wildlife Fed’n v. Consumers Power Company, 862 F.2d 580 (6th
Cir. 1988).  EPA notes, however, that such a discharge will generally
fall within the meaning of CWA section 401 and will, therefore, require
certification under that section.  See S.D. Warren Co. v. Amine Board of
Environmental Protection, 126 S.Ct. 1843 (2006).).  The next movement in
the example is the release from River A into River B, through a tunnel. 
This release constitutes a water transfer under the scope of this rule
because it does conveyconveys water from one water of the U.S. to
another water of the U.S. without subjecting the water to an intervening
industrial, municipal or commercial use.  Therefore, unless this
conveyance itself introduces pollutants into the water being conveyed,
the release was designated as requiringwill not require an NPDES permit,
it would be exempt under today’s rule.  River B’s subsequent flow
into Reservoir B, which is formed by a dam on Reservoir B, does not
constitute a water transfer because it is merely movement within the
same water of the U.S., and, as discussed above, would not require an
NPDES permit for the transfer itself.    

This final rule includes a provision that allows the relevant permitting
authority, in certain situations, to designate a particular water
transfer as requiring an NPDES permit.  Specifically, the permitting
authority could make such a designation when it “determine[s] that an
NPDES permit for a discharge from a water transfer is necessary to
prevent significant impairment of a designated use in the receiving
waterbody, and no State authorities are being implemented to adequately
address the impairment.”  As explained more fully below, based on
EPA’s 30-year history administering the NPDES program, the Agency
expects that use of this designation authority will be exceedingly rare,
but that having the authority available helps achieve the balance
between management of water quantity and management of water quality
that Congress sought to strike in the Clean Water Act.movement.  

The remainder of the preamble to this final rule is organized as
follows.  Section III discusses the rationale for the final rule based
on the language, structure, and legislative history of the Clean Water
Act and explains EPA’s decision to include, through this rule,
authority to designate particular water transfers as needing an NPDES
permit.  Section IV summarizes and responds to the major comments
received in response to the scope of the proposed rule.  Section V
reviews statutory provisions and various executive orders. 

III. 	Rationale for the Final Rule

	 On June 7, 2006, EPA published a proposed rule that would exclude from
NPDES permit requirements discharges from water transfers that do not
subject the water to an intervening industrial, municipal, or commercial
use, so long as pollutants are not addedintroduced by the water transfer
activity itself.  This proposal, like EPA’s August 5, 2005,
interpretive memorandum, explained that the CWA is ambiguous onno one
provision of the Act expressly addresses whether Congress intended for
water transfers are subject to be regulated under the NPDES program and
but described the indicia of Congressional intent that water transfers
generally not be so regulated.  Therefore, EPA proposed a today’s rule
that would appropriately deferdefers to congressional concerns that the
statute not unnecessarily burden water quantity management activities
and excludedexcludes water transfers from the NPDES program.  This
section will review the legal framework for evaluating EPA’s
interpretation of the CWA, explain the Agency’s interpretation of the
CWA, including a brief survey of prior litigation over the relevant
statutory terms, and outline the relevant legislative history.  

	Many commenters suggested that EPA had not adequately taken into
account another of the CWA’s explicit objectives: to protect water
quality.  EPA has concluded that the Agency’s attempt through the
proposed rule to interpret the statutory term “addition” did not
strike the best balance between competing congressional objectives.  The
Agency continues to believe that Congress’s overriding concern here
was to defer to state and local authorities.  However, EPA is concerned
that doing so at the expense of protecting water quality in all
circumstances does not sufficiently heed the congressional goals with
respect to water quality.  

	The Agency concludes that it is appropriate to both respect state and
local authorities’ predominant role in managing water quantity issues
while ensuring that the CWA’s underlying water quality goals can be
met.  Accordingly, the final rule includes a narrow designation
authority where a significant impairment of a water body’s designated
use would result from the water transfer and no state authorities are
being implemented to adequately address this impairment.  By placing
this designation authority in the hands of the NPDES authority, most
states will be able to control its use to protect water quality in the
rare circumstances where necessary.

	Below in section A, EPA first reviews the reasons supporting the
Agency’s continued view that water transfers are generally (i.e.,
except where exercise of the designation authority is warranted) not
subject to the NPDES program.  Section B explains why including the
designation authority is appropriate under the statutory scheme.     

A.	Water transfers generally are not regulated by CWA section 402

As stated in EPA’s August 5th interpretive memorandum (available at
Docket No. EPA-HQ-OW-2006-0141), based on the CWA as a whole, the Agency
concludes that Congress generally intended to leave the oversight of
water transfers to authorities other than the NPDES program.  This rule
is based largely on the legal analysis contained in the interpretive
memorandum and explained below

A.  Legal Framework

Under what is traditionally viewed as Chevron analysis, a court
examining the legality of an agency’s interpretation of a statute is
to first ask whether the statute speaks clearly to the precise question
at issue and must give effect to the unambiguously expressed intent of
Congress if such unambiguous intent can be discerned.  Chevron U.S.A.
Inc. v. NRDC, 467 U.S. 837, 842-843 (Chevron); National Ass. of
Homebuilders, et al. v. Defenders of Wildlife, et al., 127 S.Ct. 2518,
2534 (2007) (NAHB).  To the extent that a statute does not speak clearly
to the specific issue, the Agency interpretation must be upheld if it is
based on a permissible construction of the statute. Chevron, 467 U.S. at
843; NAHB, 127 S.Ct. at 2534.  Courts are required to accept an
agency’s reasonable interpretation of a statute, even if this
interpretation differs from what the court believes is the “best”
statutory interpretation.  National Cable and Telecommunications
Ass’n, et al. v. Brand X, et al., 545 U.S. 967, 980 (2005) (Brand X). 


	Deference to an agency interpretation of a statute under Chevron is
appropriate where Congress has authorized an agency to make rules
carrying the force of law, and such authorization is apparent where the
agency is empowered to make rules or adjudicate issues or there are
other indications of comparable congressional intent.  United States v.
Mead Corp., 533 U.S. 218 (2001).  Congress has expressly authorized EPA
to prescribe regulations as are necessary to administer the CWA, and
today’s rule has been promulgated to address the question whether
water transfers require NPDES permits.  CWA § 501(a); 33 U.S.C. §
1361(a); 71 Fed. Reg. 32887 (June 7, 2006). 

	As discussed below, EPA has reviewed the language, structure and
legislative history of the CWA and concludes that today’s rule, which
clarifies that NPDES permits are not required for transfers of waters of
the United States from one water body to another, is a permissible
construction of the statute.  Taken as a whole, the statutory language
and scheme support the conclusion that permits are not required for
water transfers.  

B.  Statutory Language and Structure

The Clean Water Act prohibits the discharge of a pollutant by any person
except in compliance with specified statutory sections, including
section 402.  CWA section 301(a).  The term “discharge of a
pollutant” is defined as “any addition of any pollutant to navigable
waters from any point source.”  CWA section 502(12).  The legal
question addressed by today’s rule is whether a water transfer as
defined in the new regulation constitutes an “addition” within the
meaning of section 502(12).

The term “addition” has been interpreted by courts in a variety of
contexts that are relevant here.  Several courts of appeals have
determined that water flowing through dams and hydroelectric facilities
does not constitute an addition of a pollutant under the CWA. 
Specifically, the Court of Appeals for the D.C. Circuit agreed with EPA
that the term “addition” may reasonably be limited to situations in
which “the point source itself physically introduces a pollutant into
a water from the outside world.”  National Wildlife Fed’n v.
Gorsuch, 693 F.2d 156, 175 (D.C. Cir. 1982) (Gorsuch) (accepting EPA’s
view that the requirement for an NPDES “is established when the
pollutant first enters the navigable water, and does not change when the
polluted water later passes through the dam from one body of navigable
water (the reservoir) to another (the downstream river).”)  The Court
of Appeals for the Sixth Circuit reached the same conclusion with regard
to a hydropower facilities operating on Lake Michigan.  National
Wildlife Fed’n v. Consumers Power Co. 862 F.2d 580, 584 (6th Cir.
1988) (Consumers Power) (agreeing with the Gorsuch Court’s conclusion
that EPA’s construction of “addition” is a permissible one).  Both
the Gorsuch and Consumers Power courts accorded deference to EPA’s
interpretation of the CWA, and specifically to its interpretation of the
term “addition.”  Gorsuch, 693 F.2d at 166-167; Consumers Power, 862
F.2d at 584.  

Three other Courts of Appeals, however, have concluded that where a
water transfer involves distinct waters of the United States, the
transfer constitutes an “addition” of pollutants.  Dubois v. U.S.
Dept. of Agriculture, et al., 102 F.3d 1273, 1298-1300 (1st Cir. 1996);
Catskill Mountains Chapter of Trout Unlimited, Inc. v. City of New York,
273 F.3d 481, 491-93 (2nd Cir. 2001) (Catskill I); Miccosukee Tribe of
Indians v. South Florida Water Management District, 280 F.3d 1364 (11th
Cir. 2002), vacated by Miccosukee, 541 U.S. at 112.  These three Courts
of Appeals construed the term “addition” so as to include transfers
of water from one body to another distinct body (Catskill I, 273 F.3d at
491 (“EPA’s position . . . is that for there to be an
‘addition,’ a ‘point source must introduce the pollutant into
navigable water from the outside world.’  We agree with this view
provided that ‘outside world’ is construed as any place outside the
particular water body to which pollutants are introduced.”) (internal
citations omitted, emphasis added); Catskill II, 451 F.3d at 82-85) or
transfers that cause water to move in a direction it would not
ordinarily flow (DuBois, 102 F.3d at 1297; Catskill I, 273 at 493-94
(explaining DuBois); Miccosukee, 280 F.3d at 1368-69).

  SEQ CHAPTER \h \r 1 	In pending litigation, on the other hand, the
United States has taken the position that the Clean Water Act generally
does not subject water transfers to the NPDES program:

The statute defines “‘discharge of a pollutant’” as “any
addition of any pollutant to navigable waters from any point source.” 
33 U.S.C. § 1362(12).  When the statutory definition of
“‘navigable waters’” – i.e., “the waters of the United
States,” 33 U.S.C. § 1362(7) – is inserted in place of
“navigable waters,” the statute provides that NPDES applies only to
the “addition of any pollutant to the waters of the United States.” 
Given the broad definition of “pollutant,” transferred (and
receiving) water will always contain intrinsic pollutants, but the
pollutants in transferred water are already in “the waters of the
United States” before, during, and after the water transfer.  Thus,
there is no “addition”; nothing is being added “to” “the
waters of the United States” by virtue of the water transfer, because
the pollutant at issue is already part of “the waters of the United
States” to begin with.  Stated differently, when a pollutant is
conveyed along with, and already subsumed entirely within, navigable
waters and the water is not diverted for an intervening use, the water
never loses its status as “waters of the United States,” and thus
nothing is added to those waters from the outside world.

Brief for the United States in Friends of the Everglades v. South
Florida Water Management Dist., No. 07-13829-H (11th Cir.).  

The Agency has concluded that, taken as a whole, the statutory language
and structure of the Clean Water Act indicate that Congress generally
did not intend to subject water transfers to the NPDES program. 
Interpreting the term “addition” in that context, EPA concludes that
water transfers, as defined by today’s rule, do not constitute an
“addition” to navigable waters to be regulated under the NPDES
program.  Instead, Congress intended to leave primary oversight of water
transfers to state authorities in cooperation with Federal authorities. 

In interpreting the term “addition” in section 502(12) of the
statute, EPA is guided by several principles.  “Addition” is a
general term, undefined by the statute.  Partly for this reason, the
courts have accorded substantial discretion to EPA in interpreting the
term in the context of the “dams” cases.  Gorsuch, 693 F.2d at 175
(finding the statute capable of supporting multiple interpretations, the
legislative history unhelpful, and concluding that Congress would have
given EPA discretion to define “addition” had it expected the
meaning of the term to be disputed); Consumers Power, 862 F.2d at 584-85
(agreeing with the analysis in Gorsuch).  Moreover, several alternative
ways of interpreting the term “addition” have been proposed in the
context of water transfers.  As noted above, EPA’s longstanding
position is that an NPDES pollutant is “added” when it is introduced
into a water from the “outside world” by a point source.  Gorsuch,
693 F.2d at 174-175.  Under one interpretation, advanced by the 2nd
Circuit in Catskill Mountain,“the outside world” means anywhere
outside the particular waterbody receiving the pollutant, and so a
permit in that case was required for movement of pollutants between
distinct waterbodies.  Catskill I, 273 F.3d at 491.  EPA does not agree
with this understanding of the term “outside world” as evinced by
its long-standing practice of generally not requiring NPDES permits for
transfers between water bodies, which it has defended against court
challenges asserting that such transfers do require such permits. 
Rather, EPA believes that an addition of a pollutant under the Act
occurs when pollutants are introduced from outside the waters being
transferred.     

As noted above, various courts have reached different conclusions in
determining when movement of waters of the United States containing
pollutants constitutes an “addition” of a pollutant.  To resolve the
confusion created by these conflicting approaches, the Agency has looked
to the statute as a whole for textual and structural indices of
Congressional intent on the question whether water transfers that do not
themselves introduce new pollutants require an NPDES permit.  

Statutory construction principles instruct that the Clean Water Act
should be interpreted by analyzing the statute as a whole.  United
States v. Boisdore’s Heirs, 49 U.S. 113, 122 (1850).  The Supreme
Court has long explained “in expounding a statute, we must not be
guided by a single sentence or member of a sentence, but look to the
provisions of the whole law, and its object and policy.”  Id See also,
Gustafond v. Alloyd Co., Inc., 513 U.S. 561, 570 (1995), Smith v. United
States, 508 U.S. 223, 233 (1993), United States Nat’l Bank of Or. v.
Independent Ins. Agents of Am., Inc., 508 U.S. 439, 455 (1993).  In
general, the “whole statute” interpretation analysis means that “a
statute is passed as a whole and not in parts or sections and is
animated by one general purpose and intent.  Consequently, each part or
section should be construed in connection with every other part or
section so as to produce a harmonious whole.”   Norman J. Singer,
Statutes and Statutory Construction vol. 2A § 46:05, 154 (6th ed., West
Group 2000).  As the Second Circuit has explained with regard to the
CWA:

Although the canons of statutory interpretation provide a court with
numerous avenues for supplementing and narrowing the possible meaning of
ambiguous text, most helpful to our interpretation of the CWA in this
case are two rules.  First, when determining which reasonable meaning
should prevail, the text should be placed in the context of the entire
statutory structure [quoting United States v. Dauray, 215 F.3d 257, 262
(2d Cir. 2000)].  Second, “absurd results are to be avoided and
internal inconsistencies in the statute must be dealt with.” United
States v. Turkette, 452 U.S. 576, 580 (1981). 

Natural Res. Def. Council v. Muszynski, 268 F.3d 91, 98 (2d Cir. 2001).
See also, Singer, vol. 3B § 77:4, at 256-258.

	A holistic approach to the text of the CWA is needed here in particular
because the heart of this matter is the balance Congress created between
federal and State oversight of activities affecting the nation’s
waters.  The purpose of the CWA is to protect water quality.  Congress
nonetheless recognized that programs already existed at the State and
local levels for managing water quantity, and it recognized the delicate
relationship between the CWA and State and local programs.  Looking at
the statute as a whole is necessary to ensure that the analysis herein
is consonant with Congress’s overall policies and objectives in the
management and regulation of the nation’s water resources.  The
analysis below addresses in turn the statutory language and structure
and the legislative history.

1.  Statutory Language and Structure

The Clean Water Act prohibits the discharge of a pollutant by any person
except in compliance with specified statutory sections, including
section 402.  CWA section 301(a).  The term “discharge of a
pollutant” is defined as “any addition of any pollutant to navigable
waters from any point source.”  CWA section 502(12).  While the
statute does not define “addition,” sections 101(g), 102(b), 304(f),
and 510(2) provide a strong indication that the term “addition”
should be interpreted in accordance with those the text of the more
specific sections of the statute.  In light of Congress’ clearly
expressed policy not to unnecessarily interfere with water resource
allocation and its discussion of changes in the movement, flow or
circulation of any navigable waters as sources of pollutants that would
not be subject to regulation under section 402, it is reasonable to
interpret “addition” as not generally including the mere transfer of
navigable waters.  

	While no single provision of the Act expressly addresses whether water
transfers are subject to the NPDES program, the 	The specific statutory
provisions addressing the management of water resources – coupled with
the overall statutory structure – provide textual support for the
conclusion that Congress generally did not intend for water transfers to
be regulated under section 402.  The Act establishes a variety of
programs and regulatory initiatives in addition to the NPDES permitting
program.  It also recognizes that the States have primary
responsibilities with respect to the “development and use (including
restoration, preservation, and enhancement) of land and water
resources.”  CWA section 101(b).

Congress also made clear that the Clean Water Act is to be construed in
a manner that does not unduly interfere with the ability of States to
allocate water within their boundaries, stating: 

It is the policy of Congress that the authority of each State to
allocate quantities of water within its jurisdiction shall not be
superseded, abrogated or otherwise impaired by [the Act].  It is the
further policy of Congress that nothing in this chapter shall be
construed to supersede or abrogate rights to quantities of water which
have been established by any State.  Federal agencies shall co-operate
with State and local agencies to develop comprehensive solutions to
prevent, reduce and eliminate pollution in concert with programs for
managing water sources. 

CWA section 101(g).   While section 101(g) does not prohibit EPA from
taking actions under the CWA that it determines are needed to protect
water quality, it nonetheless establishes in the text of the Act
Congress’s general direction against unnecessary Federal interference
with State allocations of water rights.  

Water transfers are an essential component of the nation’s
infrastructure for delivering water that users are entitled to receive
under State law.  Because subjecting water transfers to a federal
permitting scheme could unnecessarily interfere with State decisions on
allocations of water rights, this section provides additional support
for the Agency’s interpretation that, absent a clear Congressional
intent to the contrary, it is reasonable to read the statute as
generally not requiring NPDES permits for water transfers.  See United
States v. Bass, 404 U.S. 336, 349 (1971)(“unless Congress conveys its
purpose clearly, it will not be deemed to have significantly changed the
federal-state balance.”)

	A second	An additional statutory provision, section 510(2), similarly
provides:

Except as expressly provided in this Act, nothing in this Act shall . .
. be construed as impairing or in any manner affecting any right or
jurisdiction of the States with respect to the waters (including
boundary waters) of such States.

Like section 101(g), this provision supports the notion that Congress
did not intend administration of the CWA to unduly interfere with water
resource allocation.  

	Finally, one section of the Act – 304(f) – expressly addresses
water management activities.  Mere mention of an activity in section
304(f) does not mean it is exclusively nonpoint source in nature.  See
Miccosukee 541 U.S. at 106 (noting that section 304(f)(2)(F) does not
explicitly exempt nonpoint sources if they also fall within the
definition of point source).  Nonetheless, section 304(f) is focused
primarily on addressing pollution sources outside the scope of the NPDES
program.  See H.R. Rep. No. 92- 911, at 109 (1972), reprinted in
Legislative History of the Water Pollution Control Act Amendments of
1972, Vol. 1 at 796 (Comm. Print 1973)(“[t]his section . . . on . .
.nonpoint sources is among the most important in the 1972 Amendments”)
(emphasis added)).  This section directed EPA to issue guidelines for
identifying and evaluating the nature and extent of nonpoint sources of
pollution, as well as processes, procedures and methods to control
pollution from, among other things, “changes in the movement, flow or
circulation of any navigable waters or ground waters, including changes
caused by the construction of dams, levees, channels, causeways, or flow
diversion facilities.”  CWA 304(f)(2)(F) (emphasis added).  

	While section 304(f) does not exclusively address nonpoint sources of
pollution, it nonetheless “concerns nonpoint sources” (Miccosukee,
541 U.S. at 106) and reflects an understanding by Congress that water
movement could result in pollution, and that such pollution would be
managed by States under their nonpoint source program authorities,
rather than the NPDES program.  This proposedToday’s rule accords with
the direction to EPA and other federal agencies in section 101(g) to
work with State and local agencies to develop “comprehensive
solutions” to water pollution problems “in concert with programs for
managing water resources.”

	These	The text of these sections of the Act together demonstrate that
Congress was aware that there might be pollution associated with water
management activities, but chose to defer to comprehensive solutions
developed by State and local agencies for controlling such pollution. 
Because the NPDES program focuses on discharges from point sources of
pollutants, it is not the kind of comprehensive program that Congress
believed was best suited to addressing pollution, which is the term used
for the nonpoint source program and  .  It is this type of non-point
source pollution that may be associated with water transfers.

In several important ways, water transfers are unlike the types of
discharges that were the primary focus of Congressional attention in
1972.  Discharges of pollutants covered by section 402 are subject to
“effluent” limitations.  Water transfers, however, are not like
effluent from an industrial, commercial or municipal operation.  Rather
than discharge effluent, water transfers releaseconvey one water of the
U.S. into another.  Additionally, the operators of water control
facilities are generally not responsible for the presence of pollutants
in the waters they transport.  Rather, those pollutants often enter
“the waters of the United States” through point and nonpoint sources
unassociated with those facilities and beyond control of the project
operators.  Congress generally intended that pollutants be controlled at
the source whenever possible.  See S. Rep. No. 92-414, p. 77 (1972)
(justifying the broad definition of navigable waters because it is
“essential that discharge of pollutants be controlled at the
source”).  The pollution from transferred waters areis more sensibly
addressed through water resource planning and land use regulations,
which attack the problem at its source.  See, e.g., CWA section 102(b)
(reservoir planning); CWA section 208(b)(2)(F) (land use planning to
reduce agricultural nonpoint sources of pollution); CWA section 319
(nonpoint source management programs); and CWA section 401 (state
certification of federally licensed projects).  Congress acknowledged
this when it directed Federal agencies to co-operate with State and
local agencies to develop comprehensive solutions to prevent, reduce,
and eliminate pollution in concert with programs for managing water
sources.

	Although the statute as a whole indicates that Congress generally did
not intend to regulate water transfers through the NPDES program, EPA
has consistently noted that no single provision of the Act expressly
addresses this question.  See, Interpretive Statement at 5.  EPA has
also indicated that the question of how best to address water transfers
under the CWA touches on a “delicate balance” between management of
water quality and management of water resources; twin goals of the Act. 
In light of those twin goals, EPA’s decision to finalize a rule that
generally does not require an NPDES permit for a water transfer – but
that provides permitting authorities with the ability to designate a
particular water transfer as needing an NPDES permit under certain
circumstances thereby giving appropriate deference to state water
management authorities – is consistent with the statutory language and
structure.  The Agency, therefore, concludes that, taken as a whole, the
statutory language and structure of the Clean Water Act indicate that
Congress generally did not intend to subject water transfers to the
NPDES program.  Interpreting the term “addition” in that context,
EPA concludes that water transfers, as defined by today’s rule, do not
constitute an “addition” to navigable waters to be regulated under
the NPDES program.  Rather, Congress intended to leave primary oversight
of water transfers to state authorities in cooperation with Federal
authorities.  

2.C.  Legislative History

	The legislative history of the Clean Water Act also supports the
conclusion that Congress generally did not intend to subject water
transfers to the NPDES program.  First, the legislative history of
section 101(g) reveals that “[i]t is the purpose of this [provision]
to insure that State [water] allocation systems are not subverted.”  3
Congressional Research Serv., U.S. Library of Congress, Serial No.
95-14, A Legislative History of the Clean Water Act of 1977, at 532
(1978); see PUD No. 1 of Jefferson County v. Washington Dep’t of
Ecology, 511 U.S. 700, 721 (1994).   

	Notably, the legislative history of the Act discusses water flow
management activities in the context of the nonpoint source program
only.  In discussing section 304(f), the House Committee Report
specifically mentioned water flow management as an area where EPA would
provide technical guidance to States for their nonpoint source programs,
rather than an area to be regulated under section 402.

This section and the information on such nonpoint sources is among the
most important in the 1972 Amendments. . . . The Committee, therefore,
expects the Administrator to be most diligent in gathering and
distribution of the guidelines for the identification of nonpoint
sources and the information on processes, procedures, and methods for
control of pollution from such nonpoint sources as . . . natural and
manmade changes in the normal flow of surface and ground waters.

H.R. Rep. No. 92-911, at 109 (1972)(emphasis added).  

	In the legislative history of section 208 of the Act, the House
Committee report noted that in some States, water resource management
agencies allocating stream flows are required to consider water quality
impacts.  The Report stated:

[I]n some States water resource development agencies are responsible for
allocation of stream flow and are required to give full consideration to
the effects on water quality.  To avoid duplication, the Committee
believes that a State which has an approved program for the handling of
permits under section 402, and which has a program for water resource
allocation should continue to exercise the primary responsibility in
both of these areas and thus provide a balanced management control
system.

H.R. Rep. No. 92-911, at 96 (1972).

	Thus, Congress recognized that the new section 402 permitting program
was not the only viable approach for addressing water quality issues
associated with State water resource management.  The legislative
history makes clear that Congress generally did not intend a wholesale
transfer of responsibility for water quality away from water resource
agencies to the NPDES authority.  Rather, Congress encouraged States to
obtain approval of authority to administer the NPDES program under
section 402(b) so that the NPDES program could work in concert with
water resource agencies’ oversight of water management activities to
ensure a “balanced management control system.”  Id .  Again,
however, although the legislative history indicates that water transfers
should not generally be regulated under the NPDES program, the
legislative history does not preclude the Agency’s decision to
finalize today’s rule with a designation authority included.  This
final rule is consistent with the command in the legislative history for
section 101(g) – State water allocation systems are not to be
subverted – while recognizing the portions of the legislative history
that call for water quality management.   

	In sum, the language, structure, and legislative history of the statute
all support the conclusion that Congress generally did not intend to
subject water transfers to the NPDES program.  Water transfers are an
integral part of water resource management; they embody how States and
resource agencies manage the nation’s water resources and balance
competing needs for water.  Water transfers also physically implement
State regimes for allocating water rights, many of which existed long
before enactment of the Clean Water Act.  Congress was aware of those
regimes, and did not want to impair the ability of these agencies to
carry them out.  EPA’s conclusion that the NPDES program needdoes not
apply to all water transfers respects Congressional intent, comports
with the structure of the Clean Water Act, and gives meaning to sections
101(g) and 304(f) of the Act.

B.  Designation Authority

Today’s rule provides that the chief administrative officer of any
state agency operating an approved NPDES program – or, if the state is
not authorized to administer the NPDES program, the EPA official with
permitting authority – to determine on a case-by-case basis that an
NPDES permit is necessary for a discharge from a water transfer.  This
designation authority may be exercised if it is necessary to prevent a
significant impairment of the receiving water body’s designated use
and there are no state authorities being implemented to adequately
address the impairment.  

Statutory Basis for the Designation Authority:

Under the CWA, express authority to administer the Act and issue
regulations to implement the Act are provided in section 101(d),
“[e]xcept as otherwise expressly provided in this Act, the
Administrator of the Environmental Protection Agency (hereinafter in
this Act called ‘Administrator’) shall administer this Act,” and
under section 501(a), “[t]he Administrator is authorized to prescribe
such regulations as are necessary to carry out his functions under this
chapter.  33 U.S.C. §§ 1251(d), 1361(a).  The United States Supreme
Court has long recognized that “[t]he power of an administrative
agency to administer a congressionally created . . . program necessarily
requires the formulation of policy and the making of rules to fill any
gap left, implicitly or explicitly, by Congress.”  Morton v. Ruiz, 415
U.S. 199, 231 (1974).  In this case, as noted above, although the CWA
evinces Congressional intent to generally not require an NPDES permit
for water transfers, EPA has recognized that no specific statutory
provision speaks expressly to this question.  Therefore, Congress has
left EPA discretion to interpret the statute in accordance with its
language, goals and objectives.  EPA concludes that in certain
circumstances – those water transfers whose effect on water quality is
so substantial and the effect is inadequately addressed by other state
authorities – that it tips the balance toward management of water
quality.  Through today’s final rule, which allows the permitting
authority to designate certain water transfers as requiring an NPDES
permit in certain narrow circumstances, EPA is appropriately filling the
gap left by Congress. 

	In Chevron v. NRDC, the Supreme Court held that when Congress has
implicitly delegated authority to an agency to address an issue, “a
court may not substitute its own construction of a statutory provision
for a reasonable interpretation made by the administrator of an
agency.”  467 U.S. 837, 844 (1984).  The Supreme Court has long
recognized that “considerable weight should be accorded to an
executive department’s construction of a statutory scheme it is
entrusted to administer, and the principle of deference to
administrative interpretations ‘has been consistently followed by this
Court whenever a decision as to the meaning or reach of a statute has
involved reconciling conflicting policies, and a full understanding of
the force of the statutory policy in the given situation has depended
upon more than ordinary knowledge respecting the matters subjected to
agency regulations.’”  Chevron, 467 U.S. at 844.  In this case, EPA
is exercising the authority given to it by Congress, based on its
30-plus years of experience implementing the CWA, including the NPDES
program, in determining how best to regulate water transfers.  As noted
several times above, this question implicates twin goals of the CWA –
precisely the type of reconciliation of conflicting policies that the
Supreme Court has determined is best left to the expert Agency.  As
such, inclusion of the designation authority, as well as the remainder
of the rule, falls squarely within EPA’s authority.

The Designation Authority is Consistent with the Text of the CWA

	As explained above and in the Interpretive Statement, EPA’s
conclusion that water transfers generally do not require an NPDES permit
is based on its conclusion that water transfers generally do not result
in the “addition” of a pollutant.  However, based on consideration
of that term in the context of the statute as a whole – including the
gap left by Congress identified above – the term “addition” is
ambiguous with respect to whether it includes the discharge of pollution
from a water transfer whose effect on water quality is so substantial
that it would cause significant impairment of a designated use and which
is not being addressed adequately by other state authorities.  

	At the heart of this ambiguity is the balance Congress created between
protecting water quality and appropriately deferring to agencies in
charge of water management.  On the one hand, Congress expressed that
the “objective of this Act is to restore and maintain the chemical,
physical, and biological integrity of the Nation’s waters,” CWA
section 101(a), while on the other hand Congress also expressed that
“It is the policy of Congress that the authority of each State to
allocate quantities of water within its jurisdiction shall not be
superseded, abrogated or otherwise impaired by this Act,” CWA section
101(g).  With regard to the objective stated in section 101(a), Congress
created, inter alia, a comprehensive permitting scheme in the NPDES
program.  With regard to the policy articulated in 101(g), Congress
turned to other provisions of the Act such as section 304(f) and
recognized that programs already existed at the State and local levels
for managing water quantity.  Congress further recognized the delicate
relationship between the CWA and these state and local programs. 
Finally, Congress did not explicitly reconcile these goals in the
context of whether an “addition” occurs for purposes of section 402
of the CWA when one water of the U.S. is conveyed into another.  

	The tension between these two CWA objectives and the programs
established to meet the objectives was explicitly recognized by the
Supreme Court in South Fla. Water Mgmt. Dist. V. Miccosukee Tribe of
Indians, 541 U.S. 95 (2004):

If we read the Act to require an NPDES permit for every engineered
diversion of one navigable water into another, thousands of new permits
might have to be issued, particularly by western States, whose water
supply networks often rely on engineered transfers among various natural
water bodies.   See Brief for Colorado et al. as Amici Curiae 2-4.  
Many of those diversions might also require expensive treatment to meet
water quality criteria.   It may be that construing the NPDES program to
cover such transfers would therefore raise the costs of water
distribution prohibitively, and violate Congress' specific instruction
that “the authority of each State to allocate quantities of water
within its jurisdiction shall not be superseded, abrogated or otherwise
impaired” by the Act.  HYPERLINK
"http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1000546&DocN
ame=33USCAS1251&FindType=L"  § 1251(g) .  On the other hand, it may be
that such permitting authority is necessary to protect water quality,
and that the States or EPA could control regulatory costs by issuing
general permits to point sources associated with water distribution
programs.

Id. at 108 (internal footnote omitted).  Through this discussion, the
Supreme Court has recognized both the competing statutory objectives and
the different tools Congress provided under the CWA to address those
objectives.  EPA agrees with the Supreme Court’s observation of this
tension.   

Finally, a long history of litigation over the meaning of “addition”
has already demonstrated that the term can be considered ambiguous in
some circumstances.  For example: movement of water (National Wildlife
Federation, et al. v. Gorsuch, et al., 693 F.2d 156, 166 (D.C. Cir.
1982), National Wildlife Federation  v. Consumers Power Co., 862 F.2d
580, 584-586 (6th Cir. 1988) (dams cases); water transfers (South Fla.
Water Mgmt. Dist. v. Miccosukee Tribe of Indians, 541 U.S. 95, 105-110
(2004).  

	In such circumstances, as described above, EPA has the authority to
fill this gap.  With respect to water transfers, EPA is finalizing this
rule to fill in the gap left by Congress and reconcile the sometimes
competing policy goals of the CWA.  This rule will ensure that, as a
general matter, water transfers are subject solely to oversight by water
resource management agencies and State non-NPDES authorities while also
allowing NPDES authorities to designate as subject to the section 402
permitting program water transfers in the narrow case where a transfer
would cause a significant impairment of a designated use that is not
adequately addressed by other state authorities.  In this manner, the
rule fulfills Congress’s water quality goals without unduly impeding
the States’ primary role in water management.  Thus, while EPA
interprets the CWA generally not to subject water transfers to section
402's permitting requirements, the Agency is aware that there may be
some fact-specific circumstances in which a water transfer itself might
cause a significant impairment of a designated use of a water body and
the State may not have, or may not be implementing, other authorities
that address the water quality impacts.  In such a case, EPA is
balancing the CWA’s policy goals by authorizing the permitting
authority to designate a particular water transfer as subject to the
NPDES program under certain carefully defined circumstances.  The Agency
expects this authority will rarely need to be exercised, but believes it
is a reasonable means of implementing the CWA’s multiple objectives. 

Here, EPA is interpreting a statute for which it is responsible by
identifying that point at which Congress’s goals for accommodation of
State water management activities and for protecting water quality are
most likely to conflict and providing a tool to resolve any such
conflicts.  The designation authority provided in this final rule is
modeled on similar authorities provided by Congress for stormwater
discharges in section 402(p)(2)(E).  That provision allows NPDES
permitting authorities to designate as requiring an NPDES permit for a
particular stormwater discharge that would not otherwise require one
based upon a determination that the discharge contributes to a violation
of a water quality standard or is a significant contributor of
pollutants to waters of the U.S.  Such discretionary authority has been
upheld.  See Conservation Law Foundation v. Hannaford Bros., 327
F.Supp.2d 325, 334 (2004), and Morris v. City of Santa Cruz, 1994 WL
514032, at 2 (1994).  

While, unlike section 402(p), the CWA does not expressly provide for the
designation authority contained in today’s rule, EPA believes that a
mechanism like that contained in section 402(p) provides the type of
regulatory structure well-suited to addressing water transfers.  As
explained elsewhere, EPA has concluded that determining the appropriate
regulatory approach to addressing water transfers requires the Agency to
balance varying statutory provisions and Congressional objectives. 
Moreover, the multi-faceted issues of water quality and federal-state
authority posed by water transfers are most appropriately addressed by a
nuanced approach that takes into account site-specific water quality
information and an evaluation of how federal-state authorities are
and/or should be used in a particular case.  In EPA’s view, a
designation authority like that created by Congress for stormwater in
section 402(p) is the best means for ensuring the appropriate weighing
of these considerations.  In the unique context of water transfers,
which are at the heart of the federal-state balance crafted in the
statute, the Agency believes that explicit statutory authority is not a
prerequisite to establishing the designation authority in today’s
rule.  Rather, the Agency, in the exercise of its “gap-filling”
rulemaking authority under the statute, is appropriately choosing to
adopt an approach that can most effectively meet statutory objectives
and requirements..  Likewise, similar authority exists in the
concentrated animal feeding operation (CAFO) regulations which require
CAFOs to obtain NPDES permits.  Pursuant to 40 CFR 122.23(c), an animal
feeding operation (that is not defined as a CAFO under section
122.23(b)) may be designated as a CAFO requiring compliance with the
CAFO rule if it is a significant contributor of pollutants to waters of
the U.S.  

As in the stormwater program, sources regulated under this designation
authority would be regulated under a federally approved State NPDES
program, or by EPA where the Agency retains NPDES permitting authority. 
Under EPA’s existing NPDES State program regulations, State programs
may be “greater in scope of coverage than required by Federal law,”
but any such additional coverage provided by a State program would not
be considered part of the federally-approved program.  40 CFR
123.1(i)(2).  By contrast, any State regulation of water transfers under
the authority articulated in today’s rule will be considered to be
within the scope of the federally-approved program because the rule
recognizes such designations.  Moreover, NPDES permits issued under the
designation authority promulgated today will be subject to the
substantive and procedural requirements of any other NPDES permit.  

Finally, although the Agency’s Interpretive Statement did not mention
a designation authority, EPA’s final rule is consistent with the
interpretation contained in that memorandum.  For example, the
memorandum described Congress’s intent not to “unnecessarily
interfere with water resource allocation” and that it was
“reasonable to interpret ‘addition’ as not generally including the
mere transfer of navigable waters.”  Interpretive Statement at 7
(emphasis added), see also id. at 8 (“The Agency, therefore concludes
that, taken as a whole, the statutory language and structure of the
Clean Water Act indicate that Congress did not generally intend to
subject water transfers to the NPDES program.”).  

	Any differences between the Interpretive Statement and today’s rule
derive from the different legal status and procedures used in issuing
the two documents.  The Agency was exercising its authority to interpret
the CWA when it issued the Agency Interpretation.  Here, the Agency is
exercising its considerably broader legislative rulemaking authority to
not only interpret statutory terms, but to affirmatively fill the gaps
in the legislative scheme.  In fact, in the Agency Interpretation, the
Agency deliberately preserved its flexibility to reasonably interpret
the statute through notice and comment rulemaking.  As commentators have
noted, unlike “interpretative rules,” a legislative rule can not
only adopt a construction of a statute, but can impose new obligations
through exercise of legislative authority delegated by statute.  Davis
and Pierce, § 6.3, “Distinguishing Between Legislative Rules and
Interpretative Rules.”  

Based on these reasons, today’s rule is within EPA’s authority and
consistent with the CWA.

	  

IV.	Public Comments on the Proposed Rule

	EPA received many comments from the public and a number of states
stating that the Agency does not have authority to exclude from the
requirement to obtain NPDES permits, a specific class of dischargers (in
this case, water transfers).  These commenters were concerned that the
proposed rule could jeopardize the NPDES and water quality standards
(WQS) programs.  In particular, they feared that point source regulation
of discharges from impoundments used to settle mining wastes might fall
outside the scope of Section 402 if the proposed rule were finalized. 
In response to these comments, the Agency believes that impoundments
used to settle mining process water or waste water would generally
constitute “waste treatment systems” designed to meet the
requirements of the CWA and would be excluded from the definition of
“waters of the United States.”  See 40 C.F.R. §122.2 (definition of
“Waters of the United States”).  The addition of pollutants from a
waste treatment system to a water of the United States triggers the
permitting requirement, and today’s rule therefore does not affect the
permitting of such facilities.    

	Some commenters argued that the proposed rule is inconsistent with
Section 404 of the CWA (permits for dredged or fill material).  They
stated that dredged material is listed as a pollutant under Section 502
of the CWA and that the proposed rule implies that dredged material
never requires a permit unless the dredged material originates from a
waterbody that is not a water of the U.S.  EPA believes that today’s
final rule will not have an effect on the 404 program.  The statutory
definition of “pollutant” includes “dredged spoil,” which by its
very nature comes from a waterbody.  33 U.S.C. §1362(6); 40 C.F.R.
§232.2;  United States v. Hubenka, 438 F.3d 1026, 1035 (10th Cir.
2006); United States v. Deaton, 209 F.3d 331, 335-336 (4th Cir. 2000);
Borden Ranch Partnership v. United States, 261 F.3d 810, 814 (9th Cir.
2001).  Because Congress explicitly forbade discharges of  dredged
material except as in compliance with the provisions cited in CWA
Section 301, today’s rule has no effect on the 404 permit program,
under which discharges of dredged or fill material may be authorized by
a permit.  33 U.S.C. §1344.   

	As explained above, EPA disagrees that Congress generally intended
water transfers to obtain NPDES permits.  EPA believes that this action
will add clarity to an area left ambiguous in the CWAin which judicial
decision have created uncertainty, and for reasons previously described
in Section III of this preamble, concludes that Congress generally
intended to leave the oversight of water transfers to authorities other
than the NPDES program.  Congress made clear that the CWA is to be
construed in a manner that does not unduly interfere with the ability of
States to allocate water within their boundaries.  Specific statutory
provisions in the CWA addressing the management of water resources
denote that Congress generally did not intend for water transfers to be
regulated under section 402 of the CWA. Rather, sections 101(b), 208,
and 304(f), in particular, establish a variety of programs and
regulatory initiatives that more appropriately address water transfers. 
However, in order to balance the dual goals of the CWA, EPA is, in this
final rule, adding a designation authority to determine on a
case-by-case basis if an NPDES permit is necessary for a discharge from
a water transfer.  EPA’s conclusion that the NPDES program needdoes
not apply to all water transfers respects Congressional intent and
comports with the structure of the CWA.    

Definition of a Water Transfer

	In the proposed rule, EPA specifically requested comment on whether the
proposed definition of a water transfer properly achieves the Agency’s
objective.  Many commenters supported the Agency’s proposed
definition, either generally or explicitly.  On the other hand, some
commenters found the proposed definition too narrow and suggested that
the Agency defer to state law.  Others found the definition overly broad
and suggested that it may encompass too many activities.  These
concerns, among others, are addressed in the following discussions.  The
Agency is finalizing the proposed definition of a water transfer without
any modifications.  

	In response to the comment suggesting that the proposed definition of a
water transfer is too narrow and should also include transfers between
waterbodies defined as waters of the State, even where they do not
constitute waters of the United States under the CWA. , EPA believes
that making such a change would not be appropriate, as EPA’s  because
the NPDES program only applies to waters of the U.S.  The same commenter
also suggested that EPA defer to state law in defining a water transfer.
 In response, the Agency finds that a definition applicable nationwide
is important to provide consistency in the application of this rule. 
However, nothing in this rule precludes a State, under State law, from
regulating water transfers that are not subject to Section 402 of the
Clean Water Act.  States may not exclude from NPDES permit requirements
sources that are point sources under Federal law, including those that
do not meet the definition of a water transfer in today’s rule.  For
example, a point source that subjects waters of the United States to an
intervening industrial, municipal or commercial use could not be
exempted from NPDES permitting requirements under State law.    

	This rule expressly excludes states that “discharges from a water
transfer” fromis not subject to NPDES permitting.  The Agency defines
a water transfer as “an activity that conveys or connects waters of
the United States to another water of the United States without
subjecting the transferred water to intervening industrial, municipal,
or commercial use.”  A water transfer is an engineered activity that
diverts a water of the U.S. to a second water of the U.S.  Thus,
commenters who read the natural convergence of two rivers as being a
water transfer are incorrect, though such natural convergences also do
not require NPDES permits.    

	Some commenters sought clarification of certain elements of the term
“water transfer” while others suggested changes they believed would
either clarify or improve the scope of the term.  Commenters suggested 
that EPA change the use of the term “activity” to either
“occasion,” “instance,” or “occurrence,” such that the
definition would read: “water transfer means an instance in which
waters of the U.S. are conveyed…”  The commenters’ concern is that
the term “activities” narrows the rule to only human directed or
controlled events rather than any instance in which water supplies are
moved.  The Agency disagrees that the change is necessary.  By
“activity,,” the Agency means any system of pumping stations,
canals, aqueducts, tunnels, pipes, or other such conveyances constructed
to transport water from one water of the U.S. to another water of the
U.S.  Such a system may consist of a single tunnel or pumping station or
it may require the use of multiple facilities along the course of the
transfer to reach the second water of the U.S.   

Intervening industrial, municipal, or commercial use

	A discharge of a pollutant associated with a water transfer resulting
from an intervening commercial, municipal, or industrial use, or
otherwise addedintroduced to the water by a water transfer facility
itself would require an NPDES permit as any discharge of a pollutant
from a point source into a water of the U.S. would.  The most frequent
comment on the proposed definition was that the phrase “intervening
industrial, municipal, or commercial use” was unclear or overbroad. 
EPA disagrees that this phrase is unclear or overbroad, and provides the
following clarification and examples of intervening uses below.  

	For example, if the water is withdrawn to be used as cooling water,
drinking water, irrigation, or any other use such that it is no longer a
water of the U.S. before being returned to a water of the U.S., the
water has been subjected to an intervening use.  In contrast, a water
pumping station, pipe, canal, or other structure used solely to
facilitate the transfer of the water is not an intervening use. 

	The reintroduction of the intake water and associated pollutants from
an intervening use through a point source is an “addition” and has
long been subject to NPDES permitting requirements.  See, e.g., 40 CFR
122.2 (definition of process wastewater); 40 CFR 125.80-125.89
(regulation of cooling towers); 40 CFR 122.45(g) (regulations governing
intake pollutants for technology-based permitting); 40 CFR Part 132,
Appendix F, Procedure 5-D (containing regulations governing water
quality-based permitting for intake pollutants in the Great Lakes). 
Moreover, a discharge from a waste treatment system, for example, to a
water of the United States, would not constitute a water transfer and
would require an NPDES permit.  See 40 CFR 122.2.  In these situations,
the reintroduction of water and that water’s associated pollutants
physically introduces pollutants from the outside world and, therefore,
is an “addition” subject to NPDES permitting requirements.  The fact
that some of the pollutants in the discharge from an intervening use may
have been present in the source water does not remove the need for a
permit, although, under some circumstances, permittees may receive
“credit” in their effluent limitations for such pollutants.  See, 40
CFR 122.45(g) (regulations governing intake pollutants for
technology-based permitting); 40 CFR Part 132, Appendix F, Procedure 5-D
(containing regulations governing water quality-based permitting for
intake pollutants in the Great Lakes). 

	Similarly, an NPDES permit is normally required if a facility withdraws
water from a water of the U.S., removes preexisting pollutants to purify
the water, and then discharges the removed pollutants (perhaps in
concentrated form) back into the water of the U.S. while retaining the
purified water for use in the facility.  An example of this situation is
a drinking water treatment facility which withdraws water from streams,
rivers, and lakes.  The withdrawn water typically contains suspended
solids, which are removed to make the water potable.  The removed solids
are a waste material from the treatment process and, if discharged into
waters of the U.S., are subject to NPDES permitting requirements, even
though that waste material originated in the withdrawn water.  See,
e.g., In re City of Phoenix, Arizona Squaw Peak & Deer Valley Water
Treatment Plants, 9 E.A.D. 515, 2000 WL 1664964 (EPA Envtl. App. Bd.
Nov. 1, 2000) (rejecting, on procedural grounds, challenges to NPDES
permits for two drinking water treatment plants that draw raw water from
the Arizona Canal, remove suspended solids to purify the water, and
discharge the solids back into the Canal); Final NPDES General Permits
for Water Treatment Facility Discharges in the State of Massachusetts
and New Hampshire, 65 FR 69,000 (2000) (NPDES permits for discharges of
process wastewaters from drinking water treatment plants).

	Return flows from irrigated agriculture are exempt from NPDES
permitting requirements.  See section 402(l)(1)(“The Administrator
shall not require a permit under this section for discharges composed
entirely of return flows from irrigated agriculture); section
502(14)(“This term [point source] does not include return flows from
irrigated agriculture”).  Today’s rule does not affect this
exemption	

	The Clean Water Act also clearly imposes permitting requirements on
publicly owned treatment works, and large and medium municipal separate
storm sewer systems.  See CWA sections 402(a), 402(p)(1)-(4).  Congress
amended the Clean Water Act in 1987 specifically to add new section
402(p) to better regulate stormwater discharges from point sources. 
Water Quality Act of 1987, Pub. L. No. 100-4, 101 Stat. 7 (1987). 
Again, this interpretation does not affect EPA’s longstanding
regulation of such discharges.  Thus, theThese examples aboveare
mentioned to illustrate what is meant by “intervening industrial,
municipal, or commercial use,” and are situations not associated with
water transfers.

Hydroelectric operations

	Some commenters, including State agencies with hydroelectric resources,
utilities, and water districts expressed concern that if hydroelectric
operations incidental to a water transfer were considered an intervening
use, the water transfer would be disqualified from the exemption. 
Utilities often take advantage of the change in elevation over the
course of a water transfer by installing hydroelectric facilities.  The
California State Water Resources Control Board highlighted in their
comment that the Central Valley Project includes eleven power plants and
that the State Water Project, the Los Angeles Aqueduct, and the All
American Canal also contain hydroelectric power plants. 

Today’s rule does not affect the longstanding position of EPA and the
Courts that hydroelectric dams do not generally require NPDES permits. 
See National Wildlife Fed’n v. Gorsuch, 693 F.2d 156 (D.C. Cir. 1982);
National Wildlife Fed’n v.; Consumers Power Co. 862 F.2d 580 (6th Cir.
1988).  EPA agrees that the transfers described in California are
excluded from NPDES permitting requirements unless, as discussed
abovebelow, the hydroelectric facility itself dischargesintroduces a
pollutant such as grease into the water passing though the dam or unless
the NPDES permitting authority designates such transfers as needing such
a permit under today’s rule.

When Water Transfers AddIntroduce Pollutants

	Comments were also submitted regarding pollutants that were added by
the water transfer.  Commenters expressed concern that water transfers
may have significant impacts on the environment, including (1) the
introduction of invasive species, toxic blue-green algae, chemical
pollutants, and excess nutrients; (2) increased turbidity; and (3)
alteration of habitat (e.g., warm water into cold water or salt water
into fresh water).  In response to these comments, EPA notes that
today’s rule does not interfere with any of the states’ rights or
authorities to regulate the movement of waters within their borders. 
Rather, this rule merely clarifies that NPDES permits are not required
for water transfers.  States currently have the ability to address
potential in-stream and/or downstream effects of water transfers through
their WQS and TMDL programs.  Nothing in today’s rule affects the
ability for states to establish WQS appropriate to individual
waterbodies or waterbody segments.

	The final rule, likeconsistent with the proposed rule, would require
NPDES permits for “pollutants addedintroduced by the water transfer
activity itself to the water being transferred.”  Water transfers
should be able to be operated and maintained in a manner that ensures
they do not themselves add pollutants to the water being transferred. 
However, just like dams, where water transfers addintroduce pollutants
to water passing through the structure into the downstream receiving
water, NPDES permits are required.  Consumers Power, 862 F.2d at 588;
Gorsuch, 693 F.2d at 165, n. 22. 

 	In those instances where a water transfer facility does itself
introduce pollutants into the water being transferred, the scope of the
required NPDES permit would only be for those added pollutants.  In the
absence of designation under this rule, theSuch permit would not require
the water transfer facility to address pollutants that may have been in
the donor waterbody and are being transferred.   Furthermore, EPA
expects these additions will probably be rare.  EPA considers that the
likelihood of such additions to be similar to the frequency of those
made byadditions of leaks of oil from the turbines at hydroelectric
dams.  In a review of the NPDES permits issued to dams, EPA was able to
identify only a minimal number of permits issued to address this
concern.

Pollutants incidental to water transfers 

	Many utilities and water districts commented that it was unclear
whether naturally occurring changes to the water would require a permit.
 For example, as water moves through dams or sits in reservoirs along
the transfer, chemical and physical factors such as water temperature,
pH, BOD, and dissolved oxygen may change.  The Agency views these
changes the same way it views changes to water quality caused by water
moving through dams (National Wildlife Fed’n v. Gorsuch, 693 F.2d 156
(D.C. Cir. 1982)); they do not constitute an “addition” of pollutant
subject to the permitting requirements of section 402 of the Act.

	EPA would also like to make clear that this rule does not change the
Agency’s position regarding the application of pesticides directly to
waters of the United States. See 71 FR 68483; 40 CFR §122.3(h). 
Ditches and canals are commonly treated with pesticides to control pest
species such as algae to facilitate flow, and today’s rule has no
effect on whether the exclusion provided to such activities require
anfrom NPDES permit for the application of such pesticides, which will
continue to be governed by the regulation cited aboverequirements set
forth in 40 C.F.R. §122.3(h).

Designation Authority

	In the preamble to the proposed water transfers rule, EPA solicited
public comment on an option that would provide an additional provision
allowing the NPDES authority to designate particular water transfers as
subject to NPDES permit requirements on a case-by-case basis.  Under
this approach, the permitting authority would have the discretion to
require an NPDES permit on a case-by-case basis if a water transfer
would cause a significant impairment of a designated use, and no State
authorities are being implemented to adequately address the problem.  A
significant impairment would occur when, as a result of the water
transfer, the designated use of the receiving water could no longer be
maintained.  EPA received nearly sixty comments from states,
municipalities, environmental groups, water districts, industry and
others regarding EPA’s consideration of this “designation
authority” approach.  Comments addressing EPA’s discussion of such
designation authority were mixed regarding their opposition to, or
agreement with, this approach.  The following paragraphs provide
additional details regarding comments the Agency received on this
option.  

Commenters who opposed the designation option generally believed that
this provision would be legally unsupportable and practically
unworkable.  The most frequently cited reason for opposing this approach
was a belief that the Clean Water Act provides no authority to regulate
water transfers on a case-by-case basis.  Other commenters were
concerned that designating some water transfers, but not others, as
subject to NPDES permit requirements would result in states treating
water transfers in an inconsistent manner.  Several commenters stated
that the existence of an impairment is not an appropriate or relevant
test for determining whether or not an activity should be subject to the
NPDES program.  Some commenters also stated that EPA already has
regulations in place with regard to use impairments, at 40 CFR section
131.10, which afford flexibility in responding to unique factual
circumstances where uses may be impacted by pollutants not subject to
NPDES permitting under section 402.  

	Other commenters supported inclusion of the designation authority
provision in the final rule.  Some of these commenters thought this
approach would be importanthelpful in instances where the transfer
involves interstate waters because NPDES permits would provide a good
tool to protect receiving water quality – especially in situations in
which water quality standards differed in the two relevant states.  In
addition, several states indicated that being allowed the option of
designating water transfers as requiring an NPDES permit on a
case-by-case basis was important to them and cited the following three
reasons for supporting this approach: (1) the designation option is
consistent with Congress's general direction against unnecessary federal
interference with state allocation of water rights and states
flexibility on handling water transfers; (2) states would be unable to
require NPDES permits for water transfers on a case-by-case basis in the
absence of the designation option; and (3) some water transfers should
be considered discharges of pollutants, so it is important to retain
NPDES authority in these cases. 

	Some commenters suggested additional programs and authorities that
states can use as an alternative to NPDES permitting such as the 401
water quality certification program or a memorandum of understanding or
agreement. 

	After considering these comments, EPA has decided not to include a
mechanism in section 123.3 for the permitting authority to designate
water transfers on a case-by-case basis as needing an NPDES permit. 
While EPA interprets the CWA as generally This conclusion is consistent
with EPA’s interpretation of the CWA as not subjecting water transfers
to the permitting requirements of section 402, the Agency understands
there may be some site-specific circumstances in which a water transfer
might cause a significant impairment of a designated use of a waterbody
and the State may not have, or may not be implementing, other
authorities to adequately address the water quality impacts on the
receiving water.  

	In order to exercise the designation authority, therefore, a permitting
authority would need to make two determinations.  First, the permitting
authority would need to determine that permitting the water transfer was
necessary to prevent significant impairment of a designated use.  A
significant impairment would occur when, as a result of the water
transfer, the designated use of the receiving water could no longer be
maintained.  For example, a permitting authority could use an NPDES
permit to address a water transfer that would cause waters designated
for fishing to become unsuitable for fishing (as long as the permitting
authority also makes the second required determination about that
particular water transfer).  Additionally, a significant impairment
would occur when a transfer of water containing chlorides or ecoli
impacts a drinking water supply.

	The second determination a permitting authority would be required to
make is that the State is not implementing any other authorities that
would adequately address this problem.  In order for a permitting
authority to designate a water transfer, it must be the case that the
State lacks or is otherwise not implementing existing authorities to
adequately prevent an impairment.  As was explained in the August 5,
2005, interpretive memorandum, Congress was aware that there might be
pollution associated with water management activities, but chose to
defer to comprehensive solutions developed by State and local agencies
for controlling such pollution.  In those rare instances where the State
programs are not addressing the water quality impacts to the receiving
waterbody, this designation authority offers an additional tool in the
protection of water quality.  

	As explained above in section III, EPA believes that today’s rule is
an appropriate exercise of EPA’s gap-filling authority.  The CWA does
not require NPDES permits generally for water transfers.  EPA believes,
however, that allowing the NPDES authority discretion to impose such
requirements where a significant impairment of a designated use would
result from a transfer that is not being addressed adequately by other
State authorities represents an appropriate approach to filling the gap
in the CWA in a way that balances the statute’s twin goals of
protecting water quality and the states’ primary role in regulating
water management.  In answer to the suggestion that water quality
impairment is an inappropriate consideration for triggering NPDES
requirements in today’s rule, EPA responds that because protecting
water quality is one of the goals the Agency is balancing, impairment of
a water body’s designated use is an entirely appropriate trigger for
the Agency to choose when balancing the conflicting goals of protecting
water quality and preserving the States’ prerogatives with respect to
regulating water management.  A designated use is a critical component
of the water quality standard applicable to any given water body.  See,
CWA section 303(c)(2)(A); 40 C.F.R. §131.3(f), (i).  To be clear, EPA
does not mean to imply through this rule that NPDES permits are not
required for the discharge of a pollutant into a water of the United
States unless the designated use of the receiving water is impaired. 
The conditions established today that must be met to support use of the
designation authority are intended to be used solely within the context
of water transfers in light of the unique attributes of this activity in
the water management scheme of the CWA  

	By imposing the same strictures on use of the designation authority on
all states (and on EPA, where the Agency remains the NPDES authority),
EPA expects that this authority will be used in a reasonably consistent
manner across the country.  To the extent states may choose to implement
this authority differently from one another in those rare cases for
which it is available, EPA expects these differences will not differ
substantially from similar flexibility that states exercise under their
authorities under other provisions in the Act.  For example, comments
pointed out that EPA’s regulations governing water quality standards
provide flexibility with respect to unique factual circumstances.  The
fact that EPA’s regulations may provide for some flexibility does not
detract from the legitimacy or utility of providing states the option to
choose a regulatory tool – NPDES permits – for certain water
transfers that is not otherwise generally required by the CWA.  Rather,
it serves to support the Agency’s view that the flexible approach
adopted by today’s rule is reasonable.  

EPA notes that the impairment associated with this designation authority
must occur within the receiving waterbody, as that is the waterbody into
which there will be a discharge.  Some State authorities address
reduction in flows downstream of the water transfer intake in the donor
waterbody, and some commenters requested that EPA require permits to
address those effects.  Such consequences of a water transfer are beyond
the scope of the designation authority because the NPDES program applies
to discharges to a water of the U.S.  

.  Moreover, as discussed elsewhere in this preamble, states currently
have the ability to address potential in-stream and/or downstream
effects of water transfers through their WQS and TMDL programs and
pursuant to state authorities preserved by section 510 and today’s
final rule does not have an effect on these state programs and
authorities.	

V.	Statutory and Executive Order Reviews

Executive Order 12866: Regulatory Planning and Review

	Under Executive Order (EO) 12866   SEQ CHAPTER \h \r 1 (58 FR 51735,
October 4, 1993), this action is a "significant regulatory action”
.”  SEQ CHAPTER \h \r 1  because it raises novel legal issues. 
Accordingly, EPA submitted this action to the Office of Management and
Budget (OMB) for review under EO 12866 and any changes made in response
to OMB recommendations have been documented in the docket for this
action.

	Paperwork Reduction Act

This action does not impose any new information collection burden. 
because this  SEQ CHAPTER \h \r 1 This final rule generally excludes
discharges from water transfers from requiring an NPDES permit.  It also
provides an exception that grants the permitting authority discretion to
designate specific water transfers as subject to NPDES permitting
requirements on a case-by-case basis  The Office of Management and
Budget (OMB) has previously approved the information collection
requirements contained in the existing regulations 40 CFR part 122.21
and 123.25 under the provisions of the Paperwork Reduction Act, 44
U.S.C. 3501 et seq. and has assigned OMB control number 2040-0086, EPA
ICR number 0226.18.   A copy of the OMB approved Information Collection
Request (ICR) may be obtained from Susan Auby, Collection Strategies
Division; U.S. Environmental Protection Agency (2822T); 1200
Pennsylvania Ave., NW, Washington, DC 20460 or by calling (202)
566-1672. 

Burden means the total time, effort, or financial resources expended by
persons to generate, maintain, retain, or disclose or provide
information to or for a Federal agency. This includes the time needed to
review instructions; develop, acquire, install, and utilize technology
and systems for the purposes of collecting, validating, and verifying
information, processing and maintaining information, and disclosing and
providing information; adjust the existing ways to comply with any
previously applicable instructions and requirements; train personnel to
be able to respond to a collection of information; search data sources;
complete and review the collection of information; and transmit or
otherwise disclose the information. 

An agency may not conduct or sponsor, and a person is not required to
respond to a collection of information unless it displays a currently
valid OMB control number.  The OMB control numbers for EPA's regulations
in 40 CFR are listed in 40 CFR Part 9.

C. 	Regulatory Flexibility Act

	The Regulatory Flexibility Act (RFA) generally requires an agency to
prepare a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements under the Administrative Procedure
Act or any other statute unless the agency certifies that the rule will
not have a significant economic impact on a substantial number of small
entities.  Small entities include small businesses, small organizations,
and small governmental jurisdictions.

	For purposes of assessing the impacts of today’s final rule on small
entities, small entity is defined as: (1) A small business as defined by
the Small Business Administration’s (SBA) regulations at 13 CFR
121.201; (2) a small governmental jurisdiction that is a government of a
city, county, town, school district or special district with a
population of less than 50,000; and (3) a small organization that is any
not-for-profit enterprise which is independently owned and operated and
is not dominant in its field.

	After considering the economic impacts of today’s proposedfinal rule
on small entities, I certify that this action will not have a
significant adverse economic impact on a substantial number of small
entities.  Because EPA is simply codifying the Agency’s longtime
position that Congress did not generally intend for the NPDES program to
regulate the transfer of watersone water of the United States into
another water of the United States, this action will not impose any
requirement on small entities.

D. 	Unfunded Mandates Reform Act

 	Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, EPA
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with “Federal mandates” that
may result in expenditures to State, local, and tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
one year.  Before promulgating an EPA rule for which a written statement
is needed, section 205 of UMRA generally requires EPA to identify and
consider a reasonable number of regulatory alternatives and adopt the
least costly, most cost-effective, or least burdensome alternative that
achieves the objectives of the rule.  The provisions of section 205 do
not apply when they are inconsistent with applicable law.  Moreover,
section 205 allows EPA to adopt an alternative other than the least
costly, most cost-effective, or least burdensome alternative if the
Administrator publishes with the final rule an explanation why that
alternative was not adopted.  Before EPA establishes any regulatory
requirements that may significantly or uniquely affect small
governments, including tribal governments, it must have developed under
section 203 of the UMRA a small government agency plan.  The plan must
provide for notifying potentially affected small governments, enabling
officials of affected small governments to have meaningful and timely
input in the development of EPA regulatory proposals with significant
Federal intergovernmental mandates, and informing, educating, and
advising small governments on compliance with the regulatory
requirements.

	EPA has determined that this rule does not contain a Federal mandate
that may result in expenditures of $100 million or more for State,
local, and tribal governments, in the aggregate, or the private sector
in any one year.  EPA is simply codifying the Agency’s longtime
position that Congress did not generally intend for the NPDES program to
regulate the transfer of a water of the United States into another water
of the United States.  Thus, today's rule is not subject to the
requirements of sections 202 and 205 of the UMRA.  For the same reason,
EPA has determined that this rule contains no regulatory requirements
that might significantly or uniquely affect small governments.  Thus,
today's rule is not subject to the requirements of section 203 of UMRA.

E. 	Executive Order 13132: Federalism

	Executive Order 13132, entitled “Federalism” (64 FR 43255, August
10, 1999), requires EPA to develop an accountable process to ensure
“meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.”
 “Policies that have federalism implications” is defined in the
Executive Order to include regulations that have “substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government.”  

	Under section 6(b) of Executive Order 13132, EPA may not issue a
regulation that has federalism implications, that imposes substantial
direct compliance costs, and that is not required by statute, unless the
Federal government provides the funds necessary to pay the direct
compliance costs incurred by State and local governments, or EPA
consults with State and local officials early in the process of
developing the proposed regulation.  Under section 6(c) of Executive
Order 13132, EPA may not issue a regulation that has federalism
implications and that preempts State law, unless the Agency consults
with State and local officials early in the process of developing the
proposed regulation.

	This final rule does not have Federalism implications.  It will not
have substantial direct effects on the States, on the relationship
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government, as
specified in Executive Order 13132.  Today’s rule does not change the
relationship between the government and the States or change their roles
and responsibilities.  Rather, this rule confirms the Agency’s EPA’s
longstanding practice consistent with the Agency’s understanding that
Congress generally intended for water transfers to be subject to
oversight by water resource management agencies and State non-NPDES
authorities, rather than the permitting program under section 402 of the
CWA.  In addition, EPA does not expect this rule to have any impact on
local governments.

	Further, the revised regulations would not alter the basic
State-Federal scheme established in the Clean Water Act under which EPA
authorizes States to carry out the NPDES permitting program.  EPA
expects the revised regulations to have little effect on the
relationship between, or the distribution of power and responsibilities
among, the Federal and State governments.  Thus, Executive Order 13132
does not apply to this rule.	

	In the spirit of Executive Order 13132, and consistent with EPA policy
to promote communications between EPA and State and local governments,
EPA specifically solicited comment on the proposed rule from State and
local officials.  EPA received comments from States that favored and
opposed the rule.  States that favored the rule were primarily drier,
Western states.  These States argued that their State laws provide
adequate and appropriate authority to address the impacts from water
transfers and that permitting would negatively impact State water rights
allocations.  This latter point was also raised by water districts,
which are quasi-governmental entities, and by local governments.  States
that were opposed to the rule argued that they had an interest in using
their NPDES authority to prevent potential water quality impairments
caused by water transfers and disagreed with EPA’s analysis of the
Clean Water Act.

Executive Order 13175: Consultation and Coordination with Indian Tribal
Governments

	Executive Order 13175, entitled, “Consultation and Coordination with
Indian Tribal Governments” (65 FR 67249, November 9, 2000), requires
EPA to develop an accountable process to ensure “meaningful and timely
input by tribal officials in the development of regulatory policies that
have tribal implications.”    SEQ CHAPTER \h \r 1 

This final rule does not have tribal implications, as specified in
Executive Order 13175.  It will neither impose substantial direct
compliance costs on tribal governments, nor preempt Tribal law. 
Today’s rule clarifies that Congress did not generally intend for the
NPDES program to regulate the transfer of waters of the United States
into another water of the United States.  Nothing in this rule prevents
an Indian Tribe from exercising its own authority to deal with such
matters.  Thus, Executive Order 13175 does not apply to this rule.

	  SEQ CHAPTER \h \r 1 In the spirit of Executive Order 13175, and
consistent with EPA policy to promote communications between EPA and
tribal governments, EPA specifically solicited additional comment on the
proposed rule from tribal officials.  Comments from tribal governments
were considered in the development of this final rule.  Since the issues
identified by tribal governments were not unique to their concerns, EPA
has addressed these issues generally in its response to comments.  	

	

G.	 Executive Order 13045: Protection of Children from Environmental 

Health and Safety Risks

	Executive Order 13045: “Protection of Children from Environmental
Health Risks and Safety Risks” (62 FR 19885, April 23, 1997) applies
to any rule that: (1) is determined to be “economically significant”
as defined under E.O. 12866, and (2) concerns an environmental health or
safety risk that EPA has reason to believe may have a disproportionate
effect on children.  If the regulatory action meets both criteria, the
Agency must evaluate the environmental health or safety effects of the
planned rule on children, and explain why the planned regulation is
preferable to other potentially effective and reasonably feasible
alternatives considered by the Agency.  

	This regulation is not subject to Executive Order 13045 because it is
not economically significant as defined under E.O. 12866, and because
the Agency does not have reason to believe that it addresses
environmental health and safety risks that present a disproportionate
risk to children.  Today’s rule would simply clarify Congress’s
intent that water transfers generally be subject to oversight by water
resource management agencies and State non-NPDES authorities, rather
than the permitting program under section 402 of the CWA.

H. 	Executive Order 13211: Actions Concerning Regulations That
Significantly Affect 

Energy Supply, Distribution, or Use

This rule is not a “significant energy action” as defined in
Executive Order 13211, “Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355
(May 22, 2001)) because it is not likely to have a significant adverse
effect on the supply, distribution, or use of energy.  Further, EPA has
concluded that this rule is not likely to have any adverse energy
effects.	

I.	 National Technology Transfer and Advancement Act

	Section 12(d) of the National Technology Transfer and Advancement Act
of 1995 (“NTTAA”), Pub. L. 104-113, section 12(d) (15 U.S.C. 272
note) directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical.  Voluntary consensus standards are technical
standards (e.g., materials specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by
voluntary consensus standard bodies.  The NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards.  This rule does
not involve technical standards.  Therefore, EPA did not consider the
use of any voluntary consensus standards. 

J.	Executive Order 12898:  Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations.

Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes
federal executive policy on environmental justice.  Its main provision
directs federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission by
identifying and addressing, as appropriate, disproportionately high and
adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the United States.  

		EPA has determined that this final rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because it may increase
the level of environmental protection for all affected populations
without having any disproportionately high and adverse human health or
environmental effects on any population, including any minority or
low-income population.   Today’s rule would simply clarify Congress’
intent that water transfers generally be subject to oversight by water
resource management agencies and State non-NPDES authorities, rather
than the permitting program under section 402 of the CWA. 

K.  Congressional Review Act

The Congressional Review Act, 5 U.S.C. section 801 et seq., as added by
the Small Business Regulatory Enforcement Fairness Act of 1996,
generally provides that before a rule may take effect, the agency
promulgating the rule must submit a rule report, which includes a copy
of the rule, to each House of the Congress and to the Comptroller
General of the United States.  EPA will submit a report containing this
rule and other required information to the U.S. Senate, the U.S. House
of Representatives, and the Comptroller General of the United States
prior to publication of the rule in the Federal Register.  A major rule
cannot take effect until 60 days after it is published in the Federal
Register.  This action is not a “major rule” as defined by 5 U.S.C.
section 804(2).  This rule will be effective ___________

List of Subjects in 40 CFR Part 122

	

	Environmental protection, Administrative practice and procedure,
Confidential business information, Hazardous substances, Reporting and
recordkeeping requirements, Water pollution control.

Dated:

____________________________________

Stephen L. Johnson, AdministratorFor the reasons set forth in the
preamble, chapter I of title 40 of the Code of Federal Regulations is to
be amended as follows:

PART 122 – EPA ADMINISTERED PERMIT PROGRAMS: THE NATIONAL POLLUTANT
DISCHARGE ELIMINATION SYSTEM

    1. The authority citation for part 122 continues to read as follows:

    Authority: The Clean Water Act, 33 U.S.C. 1251 et seq.

    2. Section 122.3 is amended by adding paragraph (i) to read as
follows: 

§122.3  Exclusions.

*  *  *  *  *

(i) Discharges from a water transfer.  Water transfer means an activity
that conveys or connects waters of the United States to another water of
the United States without subjecting the transferred water to
intervening industrial, municipal, or commercial use. This exclusion
does not apply to pollutants addedintroduced by the water transfer
activity itself to the water being transferred.

(ii) The exclusion in paragraph (i) does not apply where the Director
determines that an NPDES permit for a discharge from a water transfer is
necessary to prevent significant impairment of a designated use in the
receiving waterbody and no State authorities are being implemented to
adequately address the impairment.

 At the time of this rulemaking, the District Court has stayed its
proceedings until resolution of a similar case in the same District
Court, Friends of the Everglades v. South Florida Water Management
District.

 Waters of the U.S. are defined for purposes of the NPDES program in 40
CFR 122.2 and this rulemaking does not seek to address what is within
the scope of that term.  

  It should be noted, however, that this release would still not require
an NPDES permit because EPA and the Federal courts have determined that
a discharge from a dam does not result in an “addition” of a
pollutant unless the dam itself discharges a pollutant such as grease
into the water passing through the dam.  See National Wildlife Fed’n
v. Gorsuch, 693 F.2d 156 (D.C. Cir. 1982); National Wildlife Fed’n v.
Consumers Power Company, 862 F.2d 580 (6th Cir. 1988).  Cf. S.D. Warren
Co. v. Maine Board of Environmental Protection, 126 S.Ct. 1843 (2006)
(Certification under CWA section 401 may be needed in some instances).

   EPA recognizes that the approach adopted by these three courts is at
odds with today’s rule.  None of these three courts, however, viewed
the question of statutory interpretation through the lens of Chevron
deference.  DuBois, 102 F.3d at 1285, n. 15 (Chevron does not apply
because the court “was not reviewing an agency’s interpretation of
the statute that it was directed to enforce.”); Catskill Mountains
Chapter of Trout Unlimited, Inc. v. City of New York, 451 F.3d 77, 82
(2nd Cir. 2006) (Catskill II) (“The City concedes that this EPA
interpretation is not entitled to Chevron deference.”); Catskill I,
273 F.3d at 490 (Declining to apply Chevron deference, but acknowledging
that “[i]f the EPA’s position had been adopted in a rulemaking or
other formal proceeding, deference of the sort applied by the Gorsuch
and Consumers Power courts might be appropriate.”);  Miccosukee, 280
F.3d at 1367, n. 4 (“The EPA is no party to this case; we can
ascertain no EPA position applicable to [the water transfer at issue) to
which to give any deference, much less Chevron deference.”). 
Moreover, the approaches adopted by the Gorsuch and Consumers Power
courts is compatible with today’s rule.  

 PUD No. 1 of Jefferson County. v. Wash. State Dep’t. of Ecology, 511
U.S. 700, 720 (1994)(“Sections 101(g) and 510(2) preserve the
authority of each State to allocate water quantity as between users;
they do not limit the scope of water pollution controls that may be
imposed on users who have obtained, pursuant to state law, a water
allocation.”).

 Sources not regulated under sections 402 or 404 are generically
referred to as “nonpoint sources.” See National Wildlife Fed’n v
.Consumers Power Co., 862 F.2d 580,at 582 (6th Cir. 1988)
(“‘nonpoint source’ is shorthand for and ‘includes all water
quality problems not subject to section 402’”)(quoting National
Wildlife Fed’n v. Gorsuch, 693 F.2d 156at,166) (D.C. Cir.
1982)(internal quotation marks omitted)).  

 Recognition of a general intent to control pollutants at the source
does not mean that dischargers are responsible only for pollutants that
they generate; rather, point sources need only convey pollutants into
navigable waters to be subject to the Act.  See Miccosukee at 105. 
Municipal separate storm sewer systems, for example, are clearly subject
to regulation under the Act.  CWA section 402(p).

  EPA’s discussion of intervening uses is not intended to address or
exclude any other activity that is currently subject to NPDES
permitting.  For example, this rule does not affect EPA’s longstanding
position that, if water is withdrawn from waters of the U.S. for an
intervening industrial, municipal or commercial use, the reintroduction
of the intake water and associated pollutants is an “addition”
subject to NPDES permitting requirements.  Nor does this rule change
EPA’s position, upheld by the Supreme Court in Miccosukee, that the
definition of “discharge of a pollutant” in the CWA includes
coverage of point sources that do not themselves generate pollutants. 
The Supreme Court stated, “A point source is, by definition, a
‘discernible, confined, and discrete conveyance’ section 1362(14)
(emphasis added).  That definition makes plain that a point source need
not be the original source of the pollutant; it need only convey the
pollutant to ‘navigable waters,’ which are, in turn, defined as
‘the waters of the United States.’  section 1362(7).”  Miccosukee,
541 U.S. at 105. 

 Note that return flows from irrigated agriculture are exempt from the
requirement to obtain a NPDES permit under both the Act itself and 40
C.F.R. § 122.3.  Today’s rule does not impactaffect that exemption.
[this point is made later in the text]

 Because water transfers simply change the flow, direction or
circulation of navigable waters, they would not themselves cause the
waters being moved to lose their status as waters of the United States. 
See National Wildlife Federation v. Consumers Power Co., 862 F.2d at
589.  Hence, pollutants moved from the donor water into the receiving
water, which are contained in thenavigable waters of the U.S. throughout
the transfer, would not be “added” by the facility and would
therefore not be subject to NPDES permitting unless the permitting
authority exercises its designation authority.  Similarly, unless the
permitting authority employs its designation authority, only those
pollutants added by virtue of the transfer itself (e.g., oil and grease
from the turbines) would require permit authorization.requirements. 
This differs from a situation in which, for example, an industrial
facility takes in water for the purpose of cooling some part of the
facility itself.  In such cases, the water used for cooling loses its
status as a water of the United States when it is used forsubjected to
an intervening industrial use and, therefore, is subject to NPDES permit
requirements for all the pollutants it contains when it is discharged
back into a navigable water, generally including those that were in the
source water originally.  See, National Wildlife Federation v. Consumers
Power Co., 862 F.2d at 589.     Likewise, discharges from a concentrated
aquatic animal production facility, such as excess food provided to
animals in net pens (e.g., food that was added to water but not eaten by
the fish) would require a NPDES permit because the uneaten, waste food
would be considered an “addition” of a pollutant from the facility. 

10/18/20074/4/2008	EPA Internal Deliberative Draft Document – Do Not
Distribute- Do Not Cite Or Quote

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