The U.S. Supreme Court's decision in National Association of Homebuilders v. Defenders of Wildlife, addressed "a problem of conflicting 'shalls.'" Clean Water Act § 402(b) provides that the EPA “shall approve” transfer of National Pollution Discharge Elimination System (NPDES) permitting authority to a state upon application and a showing that the state has met nine specified criteria. Section 7(a)(2) of the Endangered Species Act requires federal agencies to consult with other designated agencies (such as the Fish and Wildlife Service) to “insure” that a proposed agency action is unlikely to jeopardize an endangered or threatened species. Thus, the case presented a question as to whether EPA, in reviewing an application for the transfer of permitting authority which met the nine specified criteria, must also consult with designated agencies regarding the transfer’s effect on endangered and threatened species.
The Supreme Court interpreted the language of CWA § 402(b) as establishing “a ceiling as well as a floor.” A literal interpretation of § 7(a)(2) “raises that floor and alters § 402(b)’s statutory command.” The Court resolved the conflict by looking to the implementing regulations for § 7(a)(2) promulgated by the Fish and Wildlife Service and National Marine Fisheries Service. The Court noted that the regulations stated that § 7 applied to “all actions in which there is discretionary Federal involvement or control” (emphasis added by Court). The Court concluded that this interpretation of the statute meant that the consultation requirements would not apply to “actions (like the NPDES permitting transfer authorization) that an agency is required by statute to undertake once certain specified triggering events have occurred.”
Justice Stevens filed a dissent, in which he argued that in TVA v. Hill, 437 U.S. 153 (1978), the Supreme Court had found that protection of endangered species was to be given “priority over the primary missions of federal agencies,” and that § 7 “admits of no exception.” In any case, the dissent argued that a determination to transfer authority under the CWA was the type of discretionary action to which § 7 applied. The majority’s decision, argued Justice Stevens, “fails to give the [ESA] its intended effect.”