Does the Clean Water Act authorize the EPA to require that an NPDES permit issued to an upstream point source comply with the water quality standards of a downstream State, and did the EPA lawfully find that the discharge would not cause a detectable violation of Oklahoma's standards, such that the Court of Appeals erred in reversing the permit?

In 1985, the city of Fayetteville, Arkansas applied to the EPA for a National Pollution Discharge Elimination System (NPDES) permit for its new sewage treatment plant. Because Arkansas had not been authorized to issue NPDES permits, the EPA itself issued the permit under section 402(a) of the Clean Water Act. The permit allowed the plant to discharge up to 6.1 million gallons per day of effluent into an unnamed stream. That flow passes through three creeks for about 17 miles and enters the Illinois River 22 miles upstream from the Arkansas-Oklahoma border. The permit set limits on the quantity, content, and character of the discharge and provided that it would be modified if a pending study showed that stricter limits were needed to meet Oklahoma's water quality standards. Oklahoma's standards provide that no degradation shall be allowed in the upper Illinois River, which the State designates a scenic river. Oklahoma and other respondents challenged the permit, alleging that the discharge would violate those standards.

Respondents challenged the permit before the EPA. An Administrative Law Judge held a hearing and applied an "undue impact" standard, affirming issuance of the permit. On review, the EPA's Chief Judicial Officer ruled that the Act requires NPDES permits to comply with applicable state water quality standards and that the permit should be upheld if the record showed by a preponderance of the evidence that the discharges would not cause an actual detectable violation of Oklahoma's standards. On remand, the ALJ made detailed findings that there would be no detectable violation, and the Chief Judicial Officer sustained issuance of the permit. Arkansas and Oklahoma both petitioned for judicial review; the Arkansas petition, filed in the Eighth Circuit, was transferred to the Tenth Circuit and consolidated with Oklahoma's. The Tenth Circuit agreed that the statute required compliance with Oklahoma's standards and did not disagree with the finding of no detectable violation. It nevertheless reversed the permit on a theory neither party had advanced: that the Act bars any new discharge that would contribute to conditions already violating water quality standards. The Supreme Court granted certiorari.

(Stevens, J.)

Yes. The EPA had statutory authority to require compliance with downstream water quality standards, its finding of no detectable violation was proper, and the Court of Appeals erred in reversing the permit.

The Court declines to decide whether the Act itself requires application of downstream standards, because the EPA assumed it did and that assumption was permissible. Whatever the Act requires, it clearly does not limit the Agency's authority to mandate such compliance. Since 1973, EPA regulations (40 CFR § 122.4(d)) have barred issuing a permit when conditions cannot ensure compliance with the water quality requirements of all affected States. Section 402(a)(2) gives the Administrator broad discretion to prescribe permit conditions "as he deems appropriate," and the regulation is consistent with the Act's purpose of restoring the integrity of the Nation's waters and with section 301(b)(1)(C), which makes state water quality standards a central objective. International Paper Co. v. Ouellette's description of affected States as "subordinate" concerned only their input into the permit process and does not limit EPA authority. Section 510 preserves state authority and does not constrain the EPA. The EPA's regulation is reasonable under Chevron.

The Court finds nothing in the Act supporting the Tenth Circuit's categorical ban on any discharge reaching waters that already violate standards. The cited section 402(h) addresses only treatment plants violating permit conditions. The Act instead gives the EPA and the States broad authority to develop area-wide programs to remedy existing pollution and to allocate the burden between existing and new sources, and a ban might block plants that would improve existing conditions.

The EPA reasonably interpreted Oklahoma's "no degradation" standard to require an actually detectable or measurable change in water quality. Because the EPA incorporates state standards into federal law, its interpretation is entitled to substantial deference, and a theoretical-impact test would give downstream States an effective veto over upstream discharges. The ALJ's findings on eutrophication, esthetics, dissolved oxygen, and metals were supported by substantial evidence.

The Court of Appeals erred in three compounding ways: it failed to defer to the EPA's interpretation, it substituted its own factual findings for the ALJ's under the substantial evidence standard (Universal Camera), and it wrongly held the decision arbitrary and capricious for ignoring the river's degraded status, which matters only under the court's erroneous legal theory. The choice among policies belongs to the EPA, and the judgment is reversed.