FERC Amends Water Quality Certification Requirements

Federal Energy Regulatory Commission (FERC) regulations that took effect on January 6 alter the licensing and exemption process for non-federal hydroelectric projects that may discharge into a “water of the United States” (WOTUS) as defined under the Clean Water Act (CWA).[1] FERC’s final rule[2] makes several changes to its CWA section 401 water quality certification process—one of the key tools held by states and authorized Tribes in the context of FERC licensing. Among FERC’s changes are the adoption of an across-the-board one-year period within which states and Tribes must act on a 401 request, and including FERC exemption, amendment, and surrender applications within the scope of 401 requirements. 

Background: Recent EPA Changes Affecting Section 401

CWA section 401 provides that a federal agency may not issue a permit or license to conduct any activity that may result in a discharge to a WOTUS unless a state or Tribe authorized to implement a water quality program under the CWA either (1) certifies that the activity will comply with applicable water quality requirements, or (2) waives its certification authority.[3] Under section 401, a certifying authority must act on a certification request from an applicant within a “reasonable period of time (which shall not exceed one year)” from receipt of the request.[4]

Federal agencies have differed in how they determine a “reasonable period of time.” A 2023 U.S. Environmental Protection Agency (EPA) rule made significant changes to the 401-certification process, setting six months as the default “reasonable period” but providing federal agencies and the certifying authority may agree to a different period of time up to one year,[5] and that an agency may establish a default one-year period of time without negotiating case-by-case. 

The 2023 EPA rule also expanded the scope of certification authority held by authorized states and Tribes. Under a previous 2020 regulation, certifying authorities only had power to set certification conditions related to the point source discharge to WOTUS associated with the proposed project.[6] The 2023 rule applies the broader “activity” subject to a license.[7] This 2023 change applies to all federal agencies, including FERC.[8]

Key Attributes of the FERC Rule

The new FERC rule sets a categorical one-year “reasonable period of time” in which authorized states and Tribes must act on a certification request or waive their ability to do so. While existing FERC practice has been to apply a one-year reasonable period of time for section 401 certification in hydropower licensing proceedings, the agency’s regulations had been silent as to the default timeline for some types of proceedings.[9] Now, the one-year “reasonable period” will be used across the board in all types of licensing proceedings. 

Additionally, FERC’s new rule for the first time creates an express requirement that applicants for license exemptions, license amendments, and license are subject to section 401 water quality certification requirements if the proposed activity may result in a discharge to WOTUS.[10] By expressly providing that license-exempt hydropower projects are subject to section 401 certification, the rule gives states and authorized Tribes an expanded opportunity to influence the development of what are often small projects compared with those that require FERC licenses. FERC exemptions cover (1) small hydropower projects of 10 megawatts or less to be built on an existing dam or using a natural water feature; and (2) 40 megawatt-or-under projects to be built on existing water conduits such as irrigation canals.[11] As the new FERC rule notes, existing FERC practice has been to incorporate 401 certification requirements into license exemption orders.[12] Previous FERC regulations stated that no 401 certification was required where no license was required under the FPA.[13] The new rule is the first time FERC has incorporated into its regulation the conclusion that a license exemption order is a “federal license or permit subject to Section 401.”[14] 

In addition, the FERC rule also: 

• Amends FERC’s expedited and integrated licensing process regulations to remove language that provided only application amendments that would result in a “material adverse impact” were required to resubmit for a 401 water quality certification.[15] This further solidifies current FERC practice of deferring to certifying authorities regarding whether an amendment requires a 401 certification.[16] In the past, FERC had used the “material adverse impact” standard to claim application amendments it considered minor were not required to resubmit to a certifying authority for 401 certification.[17]
• Requires pumped storage and existing dam project applicants to file a copy of their 401-certification request within 60 days of submitting their application to FERC, rather than requiring those documents to be filed simultaneously.[18] This fixes a conflict with the 2023 EPA rule, which requires a 401-certification request to include a copy of the FERC application.
• Changes the phrase “certifying agency” to “certifying authority” in reference to authorized states and Tribes carrying out section 401 authority to be consistent with EPA usage.[19]
• Adds “express” waiver to the list of ways an authorized Tribe or state may respond to a 401-certification request.[20]

Implications for Hydropower Applicants

FERC’s express inclusion of license exemptions, amendments, and surrenders under the section 401 regulations solidifies FERC’s interpretation of license exemptions as federal permits. Existing FERC practice has been to require proof of 401 certification or waiver for such proceedings, so long as the project may discharge to a WOTUS.[21] The FERC rule does not define the types of license-exempt projects that may or may not discharge to a WOTUS. Accordingly, under the new rule it remains a case-specific determination whether such projects are subject to 401 certification. The FERC rule does not address whether FERC considers hydro facilities built in existing water conduits like irrigation canals, to discharge to a WOTUS or whether the canals are WOTUS. 

FERC rule’s adoption of the one year “reasonable period of time” essentially codifies existing practice. FERC also declined to make significant changes to other aspects of 401 certification timing. This means existing problems stemming from 401 certification-related delays will persist despite the new regulations. 

Section 401 timing issues can be significant hurdles for FERC-licensed (or exempt) projects. In some cases, delays in obtaining certification or waiver have extended beyond a decade.[22] By contrast, when FERC licenses are issued expediently, it may be in part because applicants have resolved section 401 issues quickly. According to a 2017 FERC report on non-powered dams and closed-loop pumped storage projects, every studied hydropower project that was successfully licensed within two years or fewer received a 401 certification or waiver within one year of submitting its application.[23] 

FERC’s new rule does not address the use of 401 delay tactics such as “withdrawal agreements,” in which the certifying authority agrees that rather than issue a denial, the project applicant will withdraw its 401-certification request and resubmit, restarting the clock as the one-year deadline approaches. Such tactics have been extensively litigated in federal courts, though results have been mixed.[24] FERC’s adoption of a standard, one-year “reasonable period of time” does not appear likely to impact the use of similar strategies to postpone action on 401 certifications for hydropower projects.

Another area in which FERC declined to make changes is the timing of 401 certifications relative to other environmental reviews. In comments on FERC’s proposed rule, the Hydropower Reform Coalition (an association of conservation groups) requested that FERC regulations should provide that applicants must wait to submit 401 certification requests until after draft National Environmental Policy Act (NEPA) documents are issued.[25] FERC declined to change its regulations in this respect. Other environmental review requirements beyond 401, particularly those under NEPA and state laws like the California Environmental Quality Act, are often a source of delay in obtaining a 401 certification, as certifying authorities have postponed acting on a 401 request until such other reviews are complete.[26]

Marten’s hydropower practice group has decades of experience navigating 401 certifications and all aspects of FERC licensing and exemptions. For more information, please contact Al Barker, Steve Odell, John Simpson, Travis Thompson, or Aidan Freeman
 

[1] 33 U.S.C. § 1362(7); see U.S. Department of the Army, Corps of Eng’rs & U.S. Env’t Prot. Agency, Revised Definition of “Waters of the United States,” 88 Fed. Reg. 3004 (Jan. 18, 2023) (codified at 40 C.F.R. Part 120, 33 C.F.R. Part 328) (outlining current interpretation of the statutory definition of WOTUS).

[2] 189 FERC ¶ 61,130 (Nov. 21, 2024) (codified at 18 C.F.R. Parts 4, 5, 6, and 7), available at https://www.ferc.gov/media/h-1-rm24-5-000-0.

[3] 33 U.S.C. § 1341(a)(1); 40 C.F.R. § 121.2.

[4] 33 U.S.C. § 1341(a)(1).

[5] See Env’t Prot. Agency, Clean Water Act Section 401 Water Quality Certification Improvement Rule, 88 Fed. Reg. 66593 (Sep. 27, 2023).

[6] Env’t Prot. Agency, Clean Water Act Section 401 Certification Rule, 85 Fed. Reg. 42210, 42221 (Sep. 11, 2020).

[7] 88 Fed. Reg. 66593, 66598 (codified at 40 C.F.R. § 121.3).

[8] It is possible that the new administration will amend the 2023 EPA rule and return to the narrower 401 certification scope set out in the 2020 regulation. For a discussion of this potential change, see Daniel Markind, This Policy Shift Might Be President Donald Trump’s First Energy Move, Forbes (Nov. 11, 2024), https://www.forbes.com/sites/danielmarkind/2024/11/11/this-policy-shift-might-be-president-donald-trumps-first-energy-move/ (last visited Jan. 27, 2025).

[9] See Federal Energy Regulatory Comm., 89 Fed. Reg. 48351, 48352 (June 6, 2024).

[10] 189 FERC ¶ 61,130 at 5-6.

[11] 16 U.S.C. §§ 823A, 2705, 2708.

[12] See 189 FERC ¶ 61,130 at 5.

[13] FERC Stats. & Regs. ¶ 30,204 at 31,368 (1980).

[14] 189 FERC ¶ 61,130 at 5.

[15] Id. at 17; 18 C.F.R. §§ 5.23(b)(3), 7.7(a)(1)).

[16] See 137 FERC ¶ 61,032 at n.2 (2012) (removing a similar requirement from a different part of FERC’s regulations). 

[17] See, e.g., Alabama Rivers All. v. FERC, 325 F.3d 290, 300 (D.C. Cir. 2003) (rejecting this argument from FERC).

[18] 189 FERC ¶ 61,130 at 30.

[19] Id. at 21, 10-11. 

[20] Id.

[21] FERC discusses this practice in its final rule. See id. at 5-6, n. 17.

[22] See Hoopa Valley Tribe v. FERC, 913 F.3d 1099, 1104 (D.C. Cir.), cert. denied, 140 S. Ct. 650 (2019) (at time of decision, four of the 43 FERC licensing applications awaiting 401 certifications had been pending for more than 10 years).

[23] See National Renewable Energy Laboratory, An Examination of the Hydropower Licensing and Federal Authorization Process at 95 (Oct. 2021) (citing FERC, Report on the Pilot Two-Year Hydroelectric Licensing Process for Non-Powered Dams and Closed-Loop Pumped Storage Projects and Recommendations Pursuant to Section 6 of the Hydropower Regulatory Efficiency Act of 2013 at 36 (May 2017)), available at https://www.nrel.gov/docs/fy22osti/79242.pdf.

[24] See California State Water Res. Control Bd. v. FERC, 43 F.4th 920, 932-36 (9th Cir. 2022) (holding delay tactic did not constitute waiver of 401 authority); North Carolina Dept. of Env’t Qual. v. FERC, 3 F.4th 655 (4th Cir. 2021) (same); Turlock Irrigation Dist. v. FERC, 36 F. 4th 1179, 1183 (D.C. Cir. 2022)(same); but see Hoopa Valley Tribe, 913 F.3d at 1104-05 (finding a written agreement by the relevant state agency not to act on the 401 request did waive section 401).

[25] See 189 FERC ¶ 61,130 at 12-13.

[26] See, e.g., California State Water Res. Control Bd., 43 F.4th at 924–25 (“The main cause of delay appears to be California's requirement, pursuant to [CEQA], that the State Board receive and consider an analysis of a project's environmental impact before granting a certification request.”).