In re Stormwater NPDES Petition

Annotate this Case

In re Stormwater NPDES Petition (2004-515); 180 Vt. 261; 910 A.2d 824

2006 VT 91

[Filed 25-Aug-2006]

NOTICE: This opinion is subject to motions for reargument under V.R.A.P.
40 as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
order that corrections may be made before this opinion goes to press.

2006 VT 91

No. 2004-515

In re Stormwater NPDES Petition Supreme Court

On Appeal from
Water Resources Board

November Term, 2005

John F. Nicholls, Chair

William H. Sorrell, Attorney General, and S. Mark Sciarrotta and Kevin O.
Leske, Assistant Attorneys General, Montpelier, for Appellant.

R. Bradford Fawley, William J. Dodge, and Daniel P. Smith of Downs Rachlin
Martin PLLC, Burlington, for Appellants/Intervenors.

Christopher M. Kilian, Conservation Law Foundation, and Mark E. Naud and
Jamey Fidel, Vermont Natural Resources Council, Montpelier, for Appellees.

James W. Barlow, Montpelier, for Amicus Curiae Vermont League of Cities and
Towns.

Bernard D. Lambek of Zalinger Cameron & Lambek, P.C., Montpelier, Richard
S. Davis and Karen M. Hansen of Beveridge & Diamond, P.C. and Thomas Ward,
National Association of Home Builders, Washington, D.C., for Amici Curiae
National Association of Home Builders and Home Builders and Remodelers
Association of Vermont.

Thomas F. Heilmann of Heilmann, Ekman & Associates, Burlington, for Amicus
Curiae Vermont Association of Realtors.

James Murphy, Montpelier, and Patrick A. Parenteau and Julia LeMense Huff,
Environmental and Natural Resources Law Clinic, South Royalton, for Amici
Curiae Honorable Philip Henderson Hoff, Honorable George E. Little, Jr. and
National Wildlife Federation.

PRESENT: Reiber, C.J., Dooley, Johnson, Skoglund and Burgess, JJ.

¶ 1. REIBER, C.J. This appeal arises from a determination by the
Vermont Water Resources Board that existing stormwater discharges into five
brooks located within Chittenden County contribute to violations of Vermont
Water Quality Standards, and therefore require federal discharge permits
under the Clean Water Act, 33 U.S.C. §§ 1251-1387 (2000). Two separate
appeals, one by a group of business organizations and the other by the
Agency of Natural Resources, raise a variety of procedural issues relating
to the Board's decision, as well as a direct challenge to its substantive
ruling requiring the federal permits. We reject the procedural claims, but
conclude that the Board erroneously encroached on the Agency's authority in
assuming that the discharges contribute to violations of water quality
standards, and therefore reverse the judgment and remand for additional
proceedings before the Agency of Natural Resources.

¶ 2. To understand the facts and issues raised by this appeal, a
summary of the regulatory backdrop is useful. Congress enacted the Clean
Water Act (CWA or Act), to "restore and maintain the chemical, physical,
and biological integrity of the Nation's waters." 33 U.S.C. § 1251(a).
In furtherance of this goal, the CWA prohibits the discharge of any
pollutants into navigable waters unless the discharge complies with other
provisions of the Act, including § 402. Id. § 1342. Section 402
authorizes the issuance of National Pollutant Discharge Elimination System
(NPDES) permits for the discharge of pollutants notwithstanding the general
prohibition. Congress empowered the Environmental Protection Agency (EPA),
or a state agency duly certified by EPA, to enforce the NPDES permit
system. Id. § 1342(a), (b). In Vermont, that agency is the Agency of
Natural Resources (Agency or ANR).

¶ 3. In 1987, Congress amended the CWA by enacting the Water
Quality Act. That law added § 402(p), which codified a two-phase
regulatory approach to the discharge of pollutants specifically contained
in stormwater runoff. Under this section, in Phase I, Congress prohibited
EPA or state agencies from requiring NPDES permits for "discharges composed
entirely of stormwater" until October 1994, with four exceptions: (1)
discharges subject to an existing permit; (2) discharges associated with
industrial activity; (3) discharges from an MS4-a "municipal storm sewer
system"-serving a population of 250,000 or more; and (4) discharges from an
MS4 for a municipality with a population greater than 100,000 but less than
250,000. 33 U.S.C. § 1342(p)(2)(A)-(D). Section 402(p)(2) also vested EPA
or the duly authorized state agency with "residual authority" to designate
any other discharge as requiring a NDPES permit if it "contributes to a
violation of a water quality standard or is a significant contributor of
pollutants to waters of the United States." Id. § 1342(p)(2)(E).

¶ 4. Under the Water Quality Act, Congress required discharge
permits for all so-called Phase I discharges, established a timetable for
EPA to promulgate implementing regulations, and required EPA to study those
discharges not identified as requiring a permit in Phase I and to issue new
regulations based on the results of that study. Id. § 1342(p)(3)-(6).
In 1990, EPA promulgated the so-called Phase I Rules. National Pollutant
Discharge Elimination System Permit Application Regulation for Storm Water
Discharges, 55 Fed. Reg. 47, 990 (Nov. 16, 1999) (codified at 40 C.F.R.
pts. 122-24). In December 1999, after completing the required study, EPA
issued the so-called Phase II Rules. National Pollutant Discharge
Elimination System: Regulations for Revision of the Water Pollution
Control Program Addressing Storm Water Discharges, 64 Fed. Reg. 68,722
(Dec. 8, 1999) (codified at 40 C.F.R. pts. 9, 122, 123, & 124). In
addition to those discharges previously identified in Phase I, the Phase II
Rules required NPDES permits for stormwater discharges from small municipal
sewer systems and from construction activity disturbing between one and
five acres. 40 C.F.R. § 122.26(a)(9)(i)(A)-(B) (2005).

¶ 5. Notably, the Phase II Rules also retained the residual
designation authority of EPA and certified state agencies to require NDPES
permits for any additional sources of stormwater pollution if they
contribute to a violation of a water quality standard. Id. §
122.26(a)(9)(i)(D); see also 33 U.S.C. § 1342(p)(2)(E) (authorizing a NDPES
permitting authority to designate for regulation "[a] discharge for which
the Administrator or the State, as the case may be, determines that the
stormwater discharge contributes to a violation of a water quality standard
or is a significant contributor of pollutants to waters of the United
States."). Indeed, the Phase II Rules not only preserved, but expanded the
scope of the residual designation authority to include a "category of
discharges within a geographic area" that contributes to the violation of a
water quality standard or is a significant contributor of pollutants. 40
C.F.R. § 122.26(a)(9)(i)(D).

¶ 6. This case arose in June 2003, when the Conservation Law
Foundation, later joined by the Vermont Natural Resources Council
(hereafter jointly CLF), filed a petition with ANR seeking a determination
that existing stormwater discharges into Potash, Englesby, Morehouse,
Centennial, and Bartlett Brooks contribute to violations of the Vermont
Water Quality Standards and therefore require NDPES permits under the CWA.
The petition was filed pursuant to a provision of the federal stormwater
regulations authorizing "[a]ny person [to] petition the Director to require
a NPDES permit for a discharge which is composed entirely of storm water
which contributes to a violation of a water quality standard or is a
significant contributor of pollutants to waters of the United States." 40
C.F.R. § 122.26(f)(2). The petition was premised on findings by the Board
in two earlier decisions involving State discharge permits that the five
brooks in question did not meet Vermont Water Quality Standards; that the
brooks were therefore listed on the federally mandated schedule of
"impaired waters," known as the 303(d) list, 33 U.S.C. § 1313(d); and that
existing discharges within the five watersheds contribute to the
impairments.

¶ 7. In response to the petition, ANR sought guidance from EPA on
the nature and scope of its residual designation authority. EPA, in
response, advised that stormwater discharges, categorical or otherwise,
must be evaluated on a "case-by-case basis" and that a permit "must be
denied if the discharge would cause or contribute to a violation of water
quality standards," but that otherwise "an agency should act reasonably in
its exercise of discretion to designate (or not) sources based on available
information and relevant considerations." EPA noted further that it had
"not defined a threshold level of pollutant contribution" that would
require a NPDES permit, but observed that discharges which contribute more
than "de minimis" levels of pollutants would be a "reasonable" standard.

¶ 8. In September 2003, the Agency sent a letter to CLF-together
with a copy of EPA's responsive memorandum-categorically denying the
petition. The Agency indicated that it rejected CLF's claim that all
existing stormwater discharges to impaired waters "irrespective of their
size or character, or existing stormwater management practices require an
NDPES permit solely because they contribute a measurable or detect[a]ble
quantity of the pollutant causing the impairment." CLF appealed the
Agency's denial to the Board under 10 V.S.A. § 1269 ("Any person or party .
. . aggrieved by an act or decision of [ANR] . . . may appeal to the board
within thirty days."). Pomerleau Properties, Inc., Martin's Foods of South
Burlington, Inc., and Greater Burlington Industrial Corp. (herafter
"appellants"), together with ANR, were granted party status in the
proceeding.(FN1)

¶ 9. In April 2004, the Board issued an initial memorandum of
decision resolving a variety of preliminary issues, including appellants'
claim that the petition constituted a request for rulemaking over which the
Board lacked jurisdiction. The Board rejected this and other procedural
objections to its authority, and outlined the remaining issues to be
resolved on appeal. These included the core issue of "whether all
stormwater discharges into stormwater-impaired waters require NPDES
permits, ipso facto, as [CLF] contend[s]" or whether, as ANR claimed, the
decision "may involve other factors, such as the authority of Vermont to
issue and enforce state stormwater permits." Following additional
briefing, the Board issued a second memorandum of decision in October 2004,
rejecting appellants' additional procedural claim that the appeal had been
rendered moot by intervening amendments to the State's separate stormwater
management program, known as Act 140, 10 V.S.A. §§ 1264, 1264a-1264c, and
further concluding that its decisions in two earlier cases had
conclusively established that every discharge of stormwater pollutants into
the five brooks in question contributes to violations of the Vermont Water
Quality Standards. Accordingly, the Board reversed the Agency's decision
denying the petition, but remanded to the Agency for a determination
whether any "de minimis exemption" to the requirement for discharge permits
would be appropriate. These separate appeals by appellants and ANR
followed.

¶ 10. Appellants and ANR raise a number of threshold issues
relating to the Board's authority to address the petition in the first
instance. The Agency claims that CLF's petition was not authorized under
the pertinent federal regulations. It relies on the citizen-petition
provision of the federal rules, which provides: "Any person may petition
the Director [ANR] to require a NPDES permit for a discharge which is
composed entirely of storm water which contributes to a violation of a
water quality standard or is a significant contributor of pollutants to
waters of the United States." 40 C.F.R. § 122.26(f)(2) (emphasis added).
ANR claims that the emphasized language limits citizen petitions to single
discharges. Therefore, it asserts that CLF's request to determine that
permits were required for an entire class of existing discharges within the
enumerated watersheds was overbroad and outside the permissible scope of
the regulations.

¶ 11. The Board was not persuaded by the argument; nor are we. As
the Board noted, the initial Phase I stormwater regulations clothed the
Agency with residual designation authority to require a permit when it
determined that "[a] discharge" contributes to a violation of a water
quality standard. Id. § 122.26(a)(v). As part of its Phase II Rules,
however, the EPA augmented the permitting agency's authority to require a
permit when it "determines that the discharge, or category of discharges
within a geographic area," contributes to a violation. Id. §
122.26(a)(9)(i)(D). The Board reasoned that it would not be logical to
authorize permits for "categories" of storm water discharges within a
general geographic area, yet limit the petition process to single
discharges.

¶ 12. We agree. Whatever the limits of Phase I's regulatory
reach, the Phase II Rules plainly expanded ANR's authority to issue permits
on a significantly broader basis, for wholesale categories of discharges in
a geographic area. EPA's explanatory note to the proposed Phase II
changes stated that the new regulations would allow the permitting
authority to determine the necessity of a discharge permit "on a watershed
or class basis where the permitting authority determines there is a
significant impact or contribution." Amendment to Requirements for
National Pollutant Discharge Elimination System (NPDES) Permits for Storm
Water Discharges Under Section 402(p)(6) of the Clean Water Act, 60 Fed.
Reg. 17,950, 17,953 (April 7, 1995) (codified at 40 C.F.R. pts. 122, 124
(2005)). EPA's explanatory notes to the Phase II Final Rules were the
same, observing that the new regulations would allow discharge-permit
determinations "on a case-by-case basis (or on a categorical basis within
identified geographic areas such as a State or watershed) that regulatory
controls are needed to protect water quality." National Pollutant
Discharge Elimination System: Regulations for Revision of the Water
Pollution Control Program Addressing Storm Water Discharges: Final Rule, 64
Fed. Reg. 68,721, 68,736 (Dec. 8, 1999) (codified at 40 C.F.R. pts. 9,
122, 123, 124). EPA explained that the broader permitting authority would
"facilitate and promote" the overarching goal of coordinated "watershed
planning: " "In promoting the watershed approach to program
administration, EPA believes NPDES general permits can cover a category of
dischargers within a defined geographic area. Areas can be defined very
broadly to include political boundaries (e.g., county), watershed
boundaries, or State or Tribal land." Id. at 68,739.

¶ 13. Thus, while ANR may believe that the "multi-prong" analysis
necessary to determine the propriety of NPDES stormwater permits lends
itself to a single, case-by-case approach, the federal regulations
nevertheless plainly authorize a more categorical approach within a broad
geographic setting. See Envtl. Def. Ctr., Inc. v. EPA, 344 F.3d 832, 869
(9th Cir. 2003) ("We treat EPA's judgments with great deference" because of
its expertise in the area).(FN2) Nothing in the regulations, moreover,
would appear to bar a "category" consisting of existing discharges within a
watershed not covered by the more specific provisions of the Phase I and II
Rules relating to industrial activity, construction sites, and municipal
sewer systems. See Christman v. Davis, 2005 VT 119, ¶ 10, 16 Vt. L. Wk.
335, 889 A.2d 746 (we assume drafters' intent was to accord plain, ordinary
meaning to statutory terms); see also Webster's Third New Int'l Dictionary
352 (2002) (broadly defining category as "a class, group, or classification
of any kind"). Indeed, the CLF petition would appear to be consistent
with EPA's stated purpose of broadening the Agency's scope of authority to
promote the goal of "watershed planning."

¶ 14. Although the Phase II Rules failed to amend the original
citizen-petition provision, which continues to refer to "a discharge," 40
C.F.R. §122.26(f)(2), we are not persuaded that the omission was intended
to preclude petitions addressed to a category of discharges in a watershed
or other geographic area. First, we note the general interpretive rule set
forth in 1 U.S.C. § 1, which provides that "[i]n determining the meaning of
any Act of Congress, unless the context indicates otherwise-words importing
the singular include and apply to several persons, parties, or things."
See Envtl. Def. Ctr., 344 F.3d at 874 n.63 (rejecting claim that EPA lacked
authority to designate a "category" of discharges where the residual
designation authority conferred by the CWA in § 402(p)(2)(E) referred only
to "a discharge" in the singular, observing that the CWA tended to "refer[]
to 'discharge' in the singular . . . even in reference to discharges
clearly intended for categorical regulation," and relying on the
interpretive rule set forth in 1 U.S.C. § 1). Moreover, nothing in the
regulations or the EPA's explanatory notes suggests a purpose to limit
citizen petitions to individual discharges, or to place categorical or
regional stormwater planning in the exclusive regulatory domain of ANR, to
be considered solely on its own initiative. In the absence of any such
evidence, we agree with the Board's conclusion that a citizen's prerogative
to request a permit under the regulations is as broad as the Agency's
authority to grant one. See T. Copeland & Sons, Inc. v. Kansa Gen. Ins.
Co., 171 Vt. 189, 193, 762 A.2d 471, 473 (2000) (separate provisions that
are part of an overall statutory scheme should be read and construed
together).

¶ 15. The Agency also claims that even if the petition was
properly before it, the Board lacked authority to issue a decision without
first conducting a de novo evidentiary hearing, as required by 10 V.S.A. §
1269 (persons aggrieved by decision of the secretary may appeal to the
Board, which "shall hold a de novo hearing"). By authorizing a de novo
hearing, the statute plainly empowers the Board "to compel testimony and
evidence by subpoena, examine witnesses and issue written findings." In re
Danforth, 174 Vt. 231, 238, 812 A.2d 845, 851 (2002). Here, however, the
Board-through a series of preliminary conferences and decisions-had
narrowed the issues to be decided on the merits to a set of core legal
questions, the principal being whether, as CLF contended, all stormwater
discharges into impaired waters contribute to water quality violations and
therefore require NPDES permits, or whether, as ANR claimed, such permits
had been rendered largely superfluous through State regulation. The Board's
ultimate decision in favor of CLF turned almost exclusively on its reading
of federal regulatory requirements, rather than contested evidentiary
issues. Accordingly, any technical failure to comply with the
de-novo-hearing requirement was immaterial to the decision, and resulted in
no actual prejudice to appellants or denial of due process. Therefore, we
discern no procedural error warranting reversal of the judgment.(FN3)

¶ 16. Appellants further assert that the Agency's decision was,
in effect, a discretionary denial of a request for "rulemaking" beyond the
Board's jurisdiction. In rejecting the claim, the Board acknowledged that
its review authority is limited to "an act or decision" of the Agency, 10
V.S.A. § 1269, which it has construed as requiring a "contested case"
within the meaning of the Administrative Procedure Act, 3 V.S.A. §
801(b)(2), as distinct from a "rulemaking proceeding" under the APA. See
Water Resource Board Rules of Procedure 2.A(4)(a) (defining "contested
case" as a "proceeding in which the legal rights, duties, or privileges of
a party are required by law to be determined by the Board after an
opportunity for a hearing in accordance with" the APA); 3 V.S.A. §
801(b)(9) (defining "rule" as an "agency statement of general applicability
which implements, interprets, or prescribes law or policy and which has
been adopted in the manner provided" by the APA). The Board concluded that
the CLF petition was not-either by design or effect-a request for the
Agency to promulgate policy, but rather a call for the Agency to exercise
existing statutory and regulatory authority to require permits for a class
of stormwater discharges within a number of impaired watersheds.
Accordingly, the Board rejected appellants' claim that the petition was a
request for rulemaking outside its jurisdiction.

¶ 17. Again, we agree with the Board's ruling. "An agency is
not required to adopt rules or regulations to carry out what its
authorizing statute specifically directs it to do." In re Woodford
Packers, Inc, 2003 VT 60, ¶ 13, 175 Vt. 579, 830 A.2d 100; see also State
v. Wuerslin, 174 Vt. 570, 571, 816 A.2d 445, 447 (2002) (holding that
Department of Liquor Control was not required to adopt interpretive rules
or guidelines to implement its general enforcement authority). In its
briefing to this Court, the Agency readily acknowledged that "[u]nder the
states' 'residual designation authority' a NPDES permit is required where
the delegated state agency, here ANR, 'determines that the storm water
discharge contributes to a violation of a water quality standard'" (quoting
33 U.S.C. §1342(p)(2) (emphasis added)). See also 40 C.F.R. §
122.26(a)(9)(i)(D) (operators of stormwater discharges that contribute to a
violation of water quality standards "shall be required to obtain a
permit") (emphasis added). Furthermore, while EPA, in response to ANR's
request for advice, acknowledged the Agency's broad residual-designation
authority, it also underscored its expectation that ANR "would reasonably
exercise the authority to designate additional sources as necessary to
protect water quality . . . based on available information and relevant
considerations."

¶ 18. We are not persuaded, therefore, that the CLF petition
requested or required ANR to "prescribe" a new rule or policy that was "not
otherwise expressly provided by or clearly . . . inferable from the
enabling statutory authorization." In re Diel, 158 Vt. 549, 555, 614 A.2d 1223, 1227 (1992). The Agency's authority and responsibility to designate
stormwaters that contribute to water quality violations was
well-established and enforceable prior to the CLF petition. Nor are we
persuaded by appellants' claim that the potential breadth of the petition,
standing alone, transforms it into a request for rulemaking. As we have
seen, ANR is expressly authorized to consider discharges on a categorical
basis within broad geographic areas, and the Board's authority to review
the granting or denial of discharge permits is necessarily coextensive with
that authority. See 10 V.S.A. § 1269 (Board shall hear appeals and issue
orders affirming, reversing, or modifying any "act or decision" of the
secretary). Accordingly, we discern no merit to the claim that the Board
lacked jurisdiction.

¶ 19. Appellants and ANR next focus on Vermont's separate
stormwater management program. Appellants assert that recent
comprehensive amendments to the State program, known as Act 140, render the
CLF petition moot. The amendments, adopted in 2004, essentially require
ANR to formulate cleanup plans within three years for the
stormwater-impaired waters on the State's 303(d) list (including the five
watersheds at issue here), 10 V.S.A. § 1264(f)(3), and to establish an
interim permitting program for discharges from new, expanded, or
redeveloped impervious surfaces in excess of one acre in order to achieve a
"net zero" discharge goal. Id. § 1264a(b)(1). Appellants claim that Act
140 evinced a legislative intent to subject existing stormwater discharges
such as those at issue here to State regulation, rather than to the NPDES
permitting regime under the residual designation authority of the CWA.

¶ 20. The Board properly rejected this claim. While observing
that Act 140 represents a substantial commitment to addressing the problem
of stormwater discharges in Vermont, the Board correctly concluded that the
legislative goal was plainly to establish a State stormwater permitting
program to supplement the federal NPDES program, not to supplant it. See
10 V.S.A. § 1264(a) (defining ANR's responsibility to "implement two
stormwater programs," the NPDES permit program and a state program to
govern "regulated stormwater runoff"). Nothing in the State stormwater law
evinces an intent to supersede ANR's residual designation authority to
require a federal permit when it determines that an existing discharge
contributes to a water quality violation.(FN4)

¶ 21. While disavowing any claim that Act 140 "supplants" its
federal residual designation authority, ANR advances the related argument
that Act 140's cleanup and remedial programs are nevertheless relevant to
its decision whether federal permits may be required for existing
discharges in the watersheds in question. The Board rejected the argument
to the extent that it was premised on the same theory advanced by
appellants, to wit, that ANR may virtually decline to exercise its residual
designation authority based on "state policy preferences" allegedly set
forth in Act 140. As noted, we agree with the Board's conclusion that
"[r]esidual designation [authority] is not optional." We agree with ANR,
however, to the extent that its argument is limited to the principle that
it may consider cleanup efforts under Act 140 in determining whether
existing stormwater discharges contribute to water quality violations
within the streams in question. As noted, EPA has advised-with the CLF
petition expressly in mind-that the Agency enjoys broad discretion in the
exercise of its residual designation authority "based on available
information and relevant considerations." Thus, in ANR's determination of
whether stormwaters "contribute to a water quality violation" under the
CWA, we find nothing in the federal scheme or regulations that would
exclude from the category of "relevant considerations" any stormwater
evaluation and control standards, state permits, remediation efforts, or
other conditions established under Act 140 within the relevant watersheds,
to the extent that they affect the level of stormwater pollutant
discharges. As noted earlier, however, neither federal nor state law
contemplates that Act 140 will serve as a substitute for the exercise of
residual designation authority under the CWA.(FN5)

II.

¶ 22. Our conclusion in this regard anticipates the broader
question, and the core substantive issue of this appeal, relating to the
Board's ruling that-subject to any "de minimis" exception identified by
ANR-existing stormwater discharges into the five streams in question
require federal NPDES discharge permits. The Board's ruling was grounded on
the critical assumption that existing discharges "contribute to a violation
of a water quality standard" within the meaning of the federal regulations.
40 C.F.R. § 122.26(a)(v). This assumption was based, in turn, on two
earlier Board decisions that collectively concerned the same impaired
streams, In re Hannaford Bros. Co. and Lowes Home Centers, Inc., No.
WQ-01-01 (Water Resources Board Order, Jan. 18, 2002) and In re Morehouse
Brook, Englesby Brook, Centennial Brook, and Bartlett Brook, No. WQ-02-04
(Water Resources Board Order, June 2, 2003). The Board characterized these
decisions as conclusively holding, for purposes of federal law, "that every
discharge of stormwater pollutants into these stormwater-impaired urbanized
waters contributes to the impairment" and therefore requires a NPDES
permit, subject to any "de minimis" exemption established by ANR on remand.

¶ 23. The parties here agree that the Board implicitly applied
the doctrine of collateral estoppel in concluding that the issue of whether
existing discharges contributed to water quality violations under federal
law had been conclusively determined in the Hannaford and Morehouse Brook
decisions. They emphatically disagree, however, on whether the Board was
correct in doing so. The doctrine of collateral estoppel, or issue
preclusion, bars relitigation of an issue actually litigated by the parties
in a prior case, and applies when: (1) it is asserted against one who was a
party in the prior action; (2) the same issue was raised in the prior
action; (3) the issue was resolved by a final judgment on the merits; (4)
there was a full and fair opportunity to litigate the issue in the prior
action; and (5) its application is fair. Trickett v. Ochs, 2003 VT 91, ¶
10, 176 Vt. 89, 838 A.2d 66. We have recognized that collateral estoppel
may apply in administrative as well as judicial proceedings if the
elements are satisfied. In re Central Vt. Pub. Serv. Corp., 172 Vt. 14,
21, 769 A.2d 668, 674 (2001).

¶ 24. We conclude that the Board erred in applying the
collateral estoppel doctrine for the simple reason that the issue is not
the same as that raised in the earlier decisions on which it relied.
Hannaford concerned an application for a discharge permit for a proposed
development under the State's stormwater management program. In resolving
that issue, the Board found that every discharge of stormwater that
increases the mass loading of pollutants into impaired streams "contributes
to the existing impairment." Hannaford, No. WQ-01-01 at 12. In an earlier
ruling in the same case, however, the Board made clear that federal
permitting requirements were not at issue, stating explicitly that it
"declines to decide whether and under what circumstances the permit
complies with the federal NPDES permitting program." In re Hannaford Bros.
and Lowes Homes Centers, Inc., No. WQ-01-01 (Water Resources Board Order,
June 29, 2001) at 14.

¶ 25. Similarly, in Morehouse Brook, the Board considered the
propriety of ANR's issuance of four watershed improvement permits under the
State's pre-Act 140 stormwater management program. The Board invalidated
the permits in part because they failed to ensure that new or increased
stormwater discharges could be assimilated into the impaired waters without
increasing their pollutant loads. Morehouse Brook, No. WQ-02-04 at 29.
Again, however, the Board expressly declined to address whether the
discharges "comply with federal law." Id. at 30.

¶ 26. Thus, in the context of construing and applying the
State's stormwater management program, the Board in Hannaford and Morehouse
Brook made factual findings that existing stormwater discharges to impaired
streams necessarily contribute to the existing impairments. The issue
here, while superficially similar, is quite distinct. The question before
the Board in this case was whether, under the federal NPDES permitting
program, the Agency was compelled to exercise its residual designation
authority to require federal discharge permits. Resolution of this issue,
which the Board was careful to avoid in both earlier decisions, involves a
particularized, fact-specific determination on a case-by-case basis as to
whether certain discharges or categories of discharges "contribute[] to a
violation of a water quality standard." 40 C.F.R. § 122.26(a)(9)(i)(D).
It is manifestly not a decision that can be grounded on a single factual
finding, in a separate legal setting, that all existing stormwater
discharges contribute to the impairment of impaired waters.

¶ 27. That the NDPES permitting issue under federal law requires a
particularized, fact-specific analysis is readily apparent from the
regulatory record. In its comments to the Phase II Final Rules, EPA
explained that the residual designation authority had not only been
retained, but expanded, for the very purpose of affording permitting
agencies the flexibility to address local discharges that do not fit
"neatly" within general categories in order to facilitate effective local
planning:

Under today's rule, EPA and authorized States continue to
exercise the authority to designate remaining unregulated
discharges composed entirely of storm water for regulation on
a case-by-case basis. . . . EPA believes, as Congress did in
drafting [§] 402(p)(2)(E), that individual instances of storm
water discharge might warrant special regulatory attention,
but do not fall neatly into a discrete, predetermined
category. Today's rule preserves the regulatory authority to
subsequently address a source (or category of sources) of
storm water discharges of concern on a localized or regional
basis.

Regulations for Revision of the Water Pollution Control Program Addressing
Stormwater Discharge, 64 Fed. Reg. at 68,781. In rejecting a claim that
EPA's broadly defined residual designation authority exceeded the scope of
the CWA, a federal appeals court also emphasized the contextualized nature
of the residual designation authority: "EPA reasonably determined that,
although it lacked sufficient data to support nationwide, categorical
designation of these [nonspecific] sources, particularized data might
support their designations on a more localized basis." Envtl. Def. Ctr.,
344 F.3d at 875-76.

¶ 28. Thus, while the Agency's residual designation authority is not
optional, its discretion in exercising that authority is broad and
necessarily focused on particular local and regional conditions, including,
as noted, any stormwater-discharge data at its disposal and local or
regional remedial efforts. The Agency may not-consistent with this
approach-be confined to a single factual finding, in a separate legal
context, that existing stormwater discharges contribute to the impairment
of the impaired streams at issue. Indeed, in responding to ANR's inquiry,
EPA made it clear that it "does not interpret the regulations to require
designation (for NDPES permits) of every storm water discharge to an
impaired water with a measurable and detectable amount of the pollutant
causing the impairment," nor, indeed, had it even "defined a threshold
level of pollutant contribution that would trigger" a federal permit
requirement.(FN6) Plainly, whether a stormwater discharge "contributes" to
a violation of water quality standards under federal law is a distinct,
multi-layered issue that was neither considered nor resolved in the Board's
earlier decisions.

¶ 29. We conclude, therefore, that the Board erred in relying on its
earlier decisions to reverse the Agency's ruling. It is equally apparent,
however, that the Agency erred in summarily denying the petition rather
than undertaking the requisite fact-specific analysis under its residual
designation authority to determine whether NDPES permits were necessary for
the discharges in question. Accordingly, we hold that the Board's decision
must be reversed, and the matter remanded for further consideration in
light of the views expressed herein.

¶ 30. We further conclude that the matter should be remanded
to the Agency, rather than the Board, to undertake the requisite analysis.
We recognize that the Board's review on appeal from Agency decisions is de
novo, 10 V.S.A. § 1269, but we believe that it is appropriate-in view of
the Agency's particular expertise and experience in the area of stormwater
permits-to afford it the opportunity to address these issues in the first
instance. We recognize, as well, that recent comprehensive amendments to
Vermont's land use and environmental laws have repealed the Board's former
jurisdiction over such matters, but note that the legislation in question
contained "transition" provisions to allow the Board to complete its
consideration of any action still pending before it as of January 31, 2005.
2003, No. 115 (Adj. Sess.), § 121.

The decision of the Water Resource Board is reversed, and the case is
remanded to the Agency of Natural Resources with directions to reconsider
the petition consistent with the views expressed herein.

FOR THE COURT:

_______________________________________
Chief Justice

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Footnotes

FN1. Under recent, comprehensive amendments to Vermont's land use and
environmental protection laws, Agency decisions granting or denying NPDES
permits are now appealable to the environmental court. 2003, No. 115
(Adj. Sess.), § 29.

FN2. Although the parties dispute whether deference is due to the Board's
or the Agency's rulings, we defer to neither in construing federal law and
regulations. Jacobus v. Dep't of PATH, 2004 VT 70, ¶ 23, 177 Vt. 496,
857 A.2d 785. MCI Telecomms. Corp. v. Dep't of Telecomms. & Energy, on
which ANR relies, held that it was appropriate to defer to a state agency's
discretionary ruling on payphone rates under regulations promulgated by the
Federal Communications Commission where the FCC had specifically determined
that the decision "was best left to State regulatory authorities." 755 N.E.2d 730, 736 (Mass. 2001). As the certified NDPES permitting authority,
ANR's discretionary ruling on whether to grant or deny a permit might thus
be entitled to deference, but that deference does not extend to
interpretations of the scope and purpose of provisions of the CWA and
implementing EPA regulations.

FN3. As discussed in more detail in Part II, the Board's legal conclusion
was grounded on the assumption, derived from earlier Board rulings, that
stormwater discharges in the affected watersheds "contribute" to water
quality violations. As we explain, that assumption was unwarranted.
Resolution of the issue requires the consideration of factors within the
Agency's discretion examined in light of information in its area of
expertise to determine whether NPDES permits are actually required.

FN4. In its explanatory comments to the Phase II Final Rules, EPA noted
that it had considered and rejected suggestions from several state
representatives that it approve "an approach whereby States develop an
alternative program that EPA would approve or disapprove based on
identified criteria." 60 Fed. Reg. at 68,740, 68,741 (emphasis added).
EPA emphasized, however, that it remained committed to encouraging state
"flexibility" and the avoidance of "duplication" between state and federal
programs, and to this end stressed that the NPDES permit may be developed
"in coordination with state standards." Id. at 68,740.

FN5. As noted in footnote 2, supra, this approach is fully consistent with
EPA's recognition that NPDES permits may be developed "in coordination with
State standards." Regulations for Revision of the Water Pollution Control
Program Addressing Stormwater Discharges, 64 Fed. Reg. at 68,740. Contrary
to ANR's assertion, we do not read the Board decision as precluding it from
considering any State-imposed clean-up plans or remedial efforts in
applying its residual designation authority, nor, as noted, would such a
limitation be consistent with the federal rules.

FN6. While the "de minimis" standard was mentioned by EPA as one that the
Agency could "reasonably" adopt, it was not advanced as an exclusive
standard.

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