EPA withdraws direct final rule after disagreement from Minnesota cities

The U.S. EPA has withdrawn a direct final rule related to permitting for Phase II Municipal Separate Storm Sewer Systems (MS4s) after receiving an adverse comment from the Minnesota Cities Stormwater Coalition (MCSC).

What began as a noncontroversial change in terminology is now host to arguments over a Phase II MS4 policy that has been in effect since 1999.

The direct final rule

The direct final rule in question offered a simple solution to a problem introduced by changing U.S. Census Bureau practices.

The Census used to have two terms for urban areas: one classification called “urban clusters,” for urban areas with populations from 2,500 to 50,000; and a classification called “urbanized areas,” for urban areas with populations of 50,000 or more.

Then the Census decided to change its terminology. In the 2020 Census, it simply lists “urban areas”, with an associated population list for each one. However, when the EPA rule creating the Phase II MS4 program was published in 1999, it relied on the older classification of urbanized area.

“By using that term, they automatically picked up the notion of an urban area that was at least 50,000, because that was the definition of an urbanized area for the census,” said Randy Neprash, a staff member of MCSC.  “Then the census came along and dropped the term — and now EPA had this problem, because they used that term all over the place.”

The solution was fairly simple: EPA could replace the old MS4 program’s term “urbanized area” with new language in the Code of Federal Regulations: “an urban area with a population of 50,000 or more.”

“Which in a sense was no change at all,” said Neprash, “because that was the definition of an urbanized area.”

U.S. agencies have a special procedure for publishing rules that it believes will not be controversial: direct final rulemaking.

Direct final rules are a streamlined procedure to promulgate noncontroversial rules. A direct final rule can be issued without the lengthier notice and comment period of normal rulemaking; it becomes effective immediately after a set comment period, so long as any adverse comments are not received during the comment period.

In a statement to Stormwater Solutions, EPA said that their solution was "limited to clarifying that EPA would retain the existing threshold for automatic designation of small MS4s for regulation under the Phase II stormwater permitting regulations. These actions would have made a narrow set of changes to EPA's regulations in order to clarify that the designation criteria for regulation small municipal separate storm sewer systems (MS4s), which has been used since the promulgation of the regulations in 1999, would remain the same."

EPA published the solution as a direct final rule, titled “NPDES Small MS4 Urbanized Area Clarification,” on Dec. 2, 2022.

MCSC’s adverse comment

MCSC submitted a comment on the rule on Jan. 18, 2023, arguing that some aspects of the rule were inappropriate. The coalition’s submission was the only adverse comment for the proposed revisions.

“The proposed revisions to the Code of Federal Regulations that they wrote into the rule were legitimately noncontroversial,” said Neprash. “EPA had known that this was coming for a while, and they had talked about it with a number of stakeholders.”

However, MCSC objected to two things: the timing of the rule, and a specific portion of the preamble, which recommitted to what the coalition called EPA’s “once in, always in” policy for MS4 permittees.

The “once in, always in” policy

“The problem was in the preamble,” said Neprash. “They included this ‘once in, always in’ policy assertion, and that's what we took exception to. That's what we commented on. In a sense, we didn't comment on the change to the CFR language at all; we only commented on what they did in the preamble.”

Specifically, the direct final rule’s preamble contains references to a policy established by another preamble: the 1999 Phase II Final Rule.

A section of the 1999 preamble stated that, once an MS4 is designated into the NPDES program as an urbanized area through the Census, it does not cease to be regulated if it is no longer in an urbanized area in a future Census.

The direct final rule briefly recommitted to this policy in its preamble, too, stating:

“For those small MS4s already regulated because of their location in an “urbanized area” designated by a previous census, the Phase II regulatory history indicates that a subsequent Census Bureau change to the designation criteria for urbanized areas does not affect their regulatory status. EPA stated in the Phase II rule preamble that even if the Census Bureau were to change its “urbanized area” definition, “a small MS4 that is automatically designated into the NPDES program for storm water under an urbanized area calculation for any given Census year will remain regulated regardless of the results of subsequent urbanized area calculations.” 64 FR 68722, 68751 (December 8, 1999)

As stated in MCSC’s comment letter, this policy does not conform with the selection criteria and process set forth in 40 CFR 122.32(a)(1).

Notably, the “once in, always in” policy would not affect operators that seek an NPDES waiver under 40 CFR 122.32(c).

MCSC, directly affiliated with the League of Minnesota Cities, is comprised of roughly 130 of the MS4-permitted cities in Minnesota. All but two of its member cities are Phase II MS4 permittees, meaning the coalition’s members were invested in the effects of these Phase II policies.

“We essentially didn't address the question of whether the ‘once in, always in’ policy is a good or well-justified policy,” said Neprash. “What we objected to was the fact that it's a significant regulatory policy and EPA has chosen to promulgate this policy only by writing it into the preamble language of associated rules.”

In its comment, MCSC called the policy commitment “an inappropriate and arbitrary exercise of the EPA’s power to set significant regulatory policy.” The coalition argued that EPA did not provide a proper notice-and-comment rulemaking procedure for the original 1999 preamble nor for the direct final rule’s preamble.

MCSC then said that EPA should withdraw its recommitment to the policy and rescind its original 1999 preamble commitment.

“In our view, significant regulatory policy should be done through the rulemaking process, where an explanation is provided as to why the policy is appropriate, that people all over the country have an opportunity to comment on whether it's good regulatory policy or not, and the Agency defends its justification through response to comments,” said Neprash. “And only after that process does it become part of the official regulatory process. They didn't do it this time. They didn't do it in 1999, either. And, in our view, that's inappropriate.”

An issue with timing

MCSC also took issue with the timing of the direct final rule’s comment window.

The group argued that affected parties cannot yet be identified: the latest 2020 Census urban area maps, which would allow municipalities to identify whether this “once in, always in” policy would affect them, have not been published.

“We're basically saying the agency cannot identify who might be who might be in this position of not being regulated,” said Neprash.  “But even the cities themselves can't identify themselves, and so the timing is really inappropriate. If you are going to assert this rule, you should do it only after those maps are available and everybody who might be affected can tell, and then discern whether they are regulated or not.”

EPA’s Withdrawal

On Feb. 22, 2023, EPA announced in the Federal Register that it was withdrawing the direct final rule.

It is a standard practice for EPA to withdraw a direct final rule if the agency receives any adverse comments to the rule.

However, EPA also published a “parallel proposed rule” on the same day as the direct final rule. With the withdrawal of the direct final rule, this parallel proposed rule moves ahead. As part of this process, EPA will respond to the comment.

"The withdrawal was necessitated by the receipt of an adverse comment prior to the close of the comment period," said EPA in a statement. "EPA will respond to the adverse comment received as part of any final action it takes on the parallel proposed rule that the Agency published under the same title on Dec. 2, 2022. As stated in the direct final rule and the parallel proposed rule, EPA will not institute a second comment period on this action."