                    FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

NATURAL RESOURCES DEFENSE                 
COUNCIL,
                                                 No. 06-73217
                      Petitioner,
               v.                                 EPA No.
                                              71 Fed. Reg. 33628
UNITED STATES ENVIRONMENTAL
                                                    OPINION
PROTECTION AGENCY,
                     Respondent.
                                          
          Petition for Review of a Final Rule of the
               Environmental Protection Agency

                   Argued and Submitted
         October 15, 2007—San Francisco, California

                       Filed May 23, 2008

        Before: Jane R. Roth,* Sidney R. Thomas, and
            Consuelo M. Callahan, Circuit Judges

                    Opinion by Judge Roth;
                   Dissent by Judge Callahan




   *The Honorable Jane R. Roth, Senior United States Circuit Judge for
the Third Circuit, sitting by designation.

                                5947
5950                 NRDC v. USEPA


                       COUNSEL

Sharon Buccino, Aaron Colangelo and Margaret Renner, Nat-
ural Resources Defense Council, Washington, D.C., for the
petitioner.

David A. Carson, United States Department of Justice, Envi-
ronmental & Natural Resources Division, Denver, Colorado,
for the respondent.

Thomas C. Jackson, Baker Botts L.L.P., Washington, D.C.,
for amicus curiae American Petroleum Institute.
                          NRDC v. USEPA                           5951
Janet Lynn McQuaid, Fulbright & Jaworski L.L.P., Austin,
Texas, for amicus curiae Independent Petroleum Association
of America.


                             OPINION

ROTH, Circuit Judge:

   The Natural Resources Defense Council (NRDC), along
with the Oil and Gas Accountability Project (OGAP), Amigos
Bravos, and Powder River Basin Resource Council (Powder
River), have challenged aspects of the Environmental Protec-
tion Agency’s (EPA) recent Clean Water Act (CWA) storm
water discharge rule. This rule is entitled “Amendments to the
National Pollutant Discharge Elimination System (NPDES)
Regulations for Storm Water Discharges Associated With Oil
and Gas Exploration, Production, Processing, or Treatment
Operations or Transmission Facilities,” 71 Fed. Reg. 33,628
(Jun. 12, 2006) (codified at 40 C.F.R. § 122.26).1 The rule
exempts from the permitting requirements of the CWA dis-
charges of sediment from oil and gas construction activities
that contribute to violations of water quality standards. Peti-
tioners contend that the rule’s NPDES permitting requirement
exemption for storm water discharges of sediment from oil
and gas construction activities is unlawful under section
402(l)(2) of the CWA, 33 U.S.C. § 1342(l)(2), as amended by
section 323 of the Energy Policy Act of 2005, 33 U.S.C.
§ 1362(24), and under the Administrative Procedure Act
(APA), 5 U.S.C. § 706(2)(A). As such, petitioners ask this
Court to vacate EPA’s rule. For the reasons stated below, we
will grant the petition for review, vacate the rule, and remand
this matter to EPA for further proceedings in accordance with
this opinion.
  1
   We denied the American Petroleum Institute’s motion to intervene, but
granted its alternative motion that its submitted brief be treated as an
amicus brief.
5952                        NRDC v. USEPA
I.       BACKGROUND

     A.   1972 Amendments to the CWA

   In 1972, Congress amended the CWA, codified at 33
U.S.C. §§ 1251-1387, in order “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 pollutant” except in
compliance with the CWA’s provisions.2 Id. § 1311(a). One
such provision is embodied by section 402 of the CWA which
establishes the NPDES — a system requiring permits for any
discharge of pollutants from a point source. Id. § 1342.3

     B. The CWA as Amended by the Water Quality Act of
     1987

  Recognizing the environmental threat posed by storm water
runoff, Congress passed the Water Quality Act of 1987
(WQA). See Pub. L. No. 100-4, 101 Stat. 7 (1987) (codified
as amended in scattered sections of 33 U.S.C.); see also 132
Cong. Rec. 32,381 (1986). The WQA added sections 402(l)
and (p) to the CWA, setting up a new scheme for regulation
of storm water runoff.

  Section 402(l) exempts certain storm water sources from
NPDES permitting. 33 U.S.C. § 1342(l). With respect to
     2
     The “discharge of a pollutant” is defined as “any addition of any pollu-
tant to navigable waters from any point source.” 33 U.S.C. § 1362(12). A
“point source” is “any discernable, confined and discrete conveyance,
including but not limited to any pipe, ditch, channel . . . from which pollu-
tants are or may be discharged.” 33 U.S.C. § 1362(14).
   3
     The CWA empowers EPA or an authorized State to conduct an
NPDES permitting program. 33 U.S.C. § 1342(a)-(b). Under the program,
as long as the permit issued contains conditions that implement the
requirements of the CWA, the EPA may issue a permit for discharge of
any pollutant. 33 U.S.C. § 1342(a)(1).
                             NRDC v. USEPA                              5953
storm water runoff from oil, gas, and mining operations, sec-
tion 402(l)(2) provides that

       The Administrator shall not require a permit under
       this section, nor shall the Administrator directly or
       indirectly require any State to require a permit, for
       discharges or stormwater runoff from mining opera-
       tions or oil and gas exploration, production, process-
       ing, or treatment operations or transmission
       facilities, composed entirely of flows which are from
       conveyances or systems of conveyances (including
       but not limited to pipes, conduits, ditches, and chan-
       nels) used for collecting and conveying precipitation
       runoff and which are not contaminated by contact
       with, or do not come into contact with, any overbur-
       den, raw material, intermediate products, finished
       product, byproduct, or waste products located on the
       site of such operations.

33 U.S.C. § 1342(l)(2) (emphasis added). In administering
this exemption, “the EPA Administrator has discretion to
determine whether or not storm water runoff at an oil, gas or
mining operation is contaminated with . . . overburden, raw
material, product, or process wastes . . . .”4 NRDC v. EPA, 966
  4
   The relevant conference report provides:
      The substitute [final version of the bill] provides that permits are
      not required where stormwater runoff is diverted around mining
      operations or oil and gas operations and does not come in contact
      with over burden, raw material, product, or process waste. In
      addition, where stormwater runoff is not contaminated by contact
      with such materials, as determined by the Administrator, permits
      are also not required. With respect to oil or grease or hazardous
      substances, the determination of whether stormwater is ‘contami-
      nated by contact with’ such materials, as established by the
      Administrator, shall take into consideration runoff in excess of
      reportable quantities under section 311 of the [CWA] or section
      102 of the Comprehensive Environmental Response, Compensa-
      tion, and Liability Act of 1980, or in the case of mining opera-
      tions, above natural background levels.
5954                         NRDC v. USEPA
F.2d 1292, 1307 (9th Cir. 1992); see H.R. Rep. No. 1004,
99th Cong., 2d Sess., at 151.

   Section 402(p) of the CWA provides that the EPA or the
NPDES States could not require a permit for storm water dis-
charges until October 1, 1992, except for storm water dis-
charges listed under section 402(p)(2).5 Section 402(p) then
establishes two separate phases for the regulation of storm
water discharges.6 33 U.S.C. § 1342(p).

H.R. Rep. No. 1004, 99th Cong., 2d Sess., at 151. The conference report
gives the EPA administrator “discretion to determine when contamination
has occurred with respect to the substances listed in the statute, i.e., over-
burden, raw materials, waste products, etc.” NRDC, 966 F.2d at 1307
(emphasis added). “The conference report states that the Administrator
shall take certain factors into account, but the report is clear that the deter-
mination of whether storm water is contaminated is within the Administra-
tor’s discretion.” Id. (emphasis added).
   5
     Section 402(p)(2) provided that a permit must be obtained “with
respect to the following stormwater discharges:
    (A) A discharge with respect to which a permit has been issued
    under this section [before February 4, 1987.]
    (B)    A discharge associated with industrial activity.
    (C) A discharge from a municipal separate storm sewer system
    serving a population of 250,000 or more.
    (D) A discharge from a municipal separate storm sewer system
    serving a population of 100,00 or more but less than 250,000.
    (E) A discharge for which the Administrator or the State, as the
    case may be, determines that the stormwater discharge contrib-
    utes to a violation of a water quality standard or is a significant
    contributor of pollutants to waters of the United States.”
33 U.S.C. § 1342(p)(2).
   6
     The purpose of the two-phased approach was to allow EPA and the
States to focus their attention on the most serious problems first. 133
Cong. Rec. 991 (1987). Phase I, embodied in subsections 402(p)(3)
through (4), requires EPA to establish a permit program for certain storm
water discharges, including those associated with industrial activity. 33
U.S.C. § 1342(p)(3)-(4). Phase II, embodied in subsections 402(p)(5)
through (6), requires EPA to investigate other storm water discharges and
to create a comprehensive program to regulate such sources to protect
water quality. 33 U.S.C. § 1342(p)(5)-(6).
                          NRDC v. USEPA                             5955
      1.   Phase I Storm Water Rule

   In 1990, EPA issued its NPDES Phase I storm water rule.
55 Fed. Reg. 47,990 (Nov. 16, 1990). This rule established
permit requirements for certain storm water discharges,
including those discharges associated with construction activi-
ties that disturb five acres or greater (large construction sites).

   First, at 40 C.F.R. § 122.26(c)(1)(iii), the Phase I rule codi-
fied the conditions that would be considered indicative of
“contamination” under the CWA section 402(l)(2) exemption
as follows:

      (iii) The operator of an existing or new discharge
      composed entirely of storm water from an oil or gas
      exploration, production, processing, or treatment
      operation, or transmission facility is not required to
      submit a permit application in accordance with para-
      graph (c)(1)(i)7 of this section, unless the facility:

           (A) Has had a discharge of storm water
           resulting in the discharge of a reportable
           quantity for which notification is or was
           required pursuant to 40 CFR 117.21 or 40
           CFR 302.6 at anytime since November 16,
           1987; or

           (B) Has had a discharge of storm water
           resulting in the discharge of a reportable
           quantity for which notification is or was
           required pursuant to 40 CFR 110.6 at any
           time since November 16, 1987; or

           (C) Contributes to a violation of a water
           quality standard.
  7
   Paragraph (c)(1)(i) applies to “[d]ischargers of storm water associated
with industrial activity and with small construction activity.”
5956                      NRDC v. USEPA
(emphasis added).8 Recognizing the “potential for serious
water quality impacts,” EPA concluded that oil and gas facili-
ties are “likely to discharge storm water runoff that is contam-
inated” and that “[s]uch contamination can include disturbed
soils.” 55 Fed. Reg. at 48029. With regard to permit applica-
bility to oil, gas, and mining facilities, EPA explained:

     “[These] facilities are among those industrial sites
     that are likely to discharge storm water runoff that is
     contaminated by process wastes, toxic pollutants,
     hazardous substances, or oil and grease. Such con-
     tamination can include disturbed soils and process
     wastes containing heavy metals or suspended or dis-
     solved solids, salts, surfactants, or solvents used or
     produced in oil and gas operations. Because they
     have the potential for serious water quality impacts,
     Congress recognized, throughout the development of
     the storm water provisions of the Water Quality Act
     of 1987, the need to control storm water discharges
     from oil, gas, and mining operations, as well as those
     associated with other industrial activities . . . . From
     the standpoint of resource drain on both EPA . . . and
     potential permit applicants, [Congress’s] conclusion
     was that operators that use good management prac-
     tices and make expenditures to prevent contamina-
   8
     Subsequently, in June 2006 when EPA promulgated the final chal-
lenged rule, it clarified that the 1990 Phase I rule “codified, at 40 CFR
122.26(c)(1)(iii), the conditions that would be considered indicative of
contamination by contact with raw material, intermediate products, fin-
ished product, byproduct, or waste products located on a site and would
thus necessitate an NPDES storm water permit application by oil and gas
exploration, production, processing or treatment operations or transmis-
sion facilities.” See 71 Fed. Reg. at 33629 (June 12, 2006). The CWA does
not define the terms “raw material,” “intermediate products,” “finished
product,” “byproduct,” or “waste products.” See 33 U.S.C. § 1362. “Over-
burden” is defined as “any material of any nature, consolidated or uncon-
solidated, that overlies a mineral deposit, excluding topsoil or similar
naturally-occurring surface materials that are not disturbed by mining
operations.” 55 Fed. Reg. at 58033 (codified at 40 C.F.R. § 122.6(b)(10)).
                            NRDC v. USEPA                                5957
      tion must not be burdened with the requirement to
      obtain a permit. Hence, section 402(l)(2) creates a
      statutory exemption from storm water permitting
      requirements for uncontaminated runoff from these
      facilities.”

55 Fed. Reg. at 48029 (emphasis added).

   Thus, EPA’s interpretation of 402(l)(2) was that “section
402(l)(2) creates a statutory exemption from storm water per-
mitting requirements for uncontaminated runoff from these
facilities,” and the Phase I rule merely codified such interpre-
tation. Id. (emphasis added).

   Second, because the statutory exemption was limited to
“operations,” EPA determined that all related construction
activities were ineligible for the exemption and must apply for
a permit in light of the “serious water quality impacts” caused
by construction storm water discharges polluted with sediment.9
55 Fed. Reg. at 48,033-34. After reviewing the findings of
various studies, the EPA provided the underlying rationale for
its belief that storm water permits were appropriate for the
construction industry:

      Construction activity at a high level of intensity is
      comparable to other activity that is traditionally
  9
    EPA concluded that the language in Section 402(l)(2) did not justify
excluding oil and gas construction from permit requirements that applied
to all other types of construction. 71 Fed. Reg. at 33629. A 1992 internal
EPA memorandum clarifying EPA’s administration of the NPDES permit
system confirmed EPA’s interpretation of the Phase I rule that “[a]ll con-
struction operations . . . that disturb five or more acres of land are required
to apply for a NPDES permit . . . regardless of its affiliation with an oil
and gas operation.” (ER 001). The oil and gas industry brought suit to
challenge this internal memorandum as an unauthorized promulgation of
oil and gas permit regulations that contradicted the exemption at 33 U.S.C.
§ 1342(l)(2), but the suit was dismissed for lack of subject matter jurisdic-
tion. Appalachian Energy Grp. v. U.S. EPA, 33 F.3d 319, 322 (4th Cir.
1994).
5958                   NRDC v. USEPA
    viewed as industrial, such as natural resource extrac-
    tion. Construction that disturbs large tracks of land
    will involve the use of heavy equipment such as
    bulldozers, cranes, and dump trucks. Construction
    activity frequently employs dynamite and/or other
    equipment to eliminate trees, bedrock, rockwork,
    and to fill or level land. Such activities also engage
    in installation of haul roads, drainage systems, and
    holding ponds that are typical of the industrial activ-
    ity identified in § 122.26(b)(14)(i-x). EPA cannot
    reasonably place such activity in the same category
    as light commercial or retail business.

       Further, the runoff generated while construction
    activities are occurring has potential for serious
    water quality impacts and reflects an activity that is
    industrial in nature. Where construction activities are
    intensive, the localized impacts of water quality may
    be severe because of high unit loads of pollutants,
    primarily sediments. Construction sites can also gen-
    erate other pollutants such as phosphorus and nitro-
    gen from fertilizer, pesticides, petroleum products,
    construction chemicals and solid wastes. These
    materials can be toxic to aquatic organisms and
    degrade water for drinking and water-contact recre-
    ation. Sediment runoff rates from construction sites
    are typically 10 to 20 times that of agricultural lands,
    with runoff rates as high as 100 times that of agricul-
    tural lands, and typically 1,000 to 2,000 times that of
    forest lands. Even small construction sites may have
    a significant negative impact on water quality in
    localized areas. Over a short period of time, con-
    struction sites can contribute more sediment to
    streams than was previously deposited over several
    decades.

      EPA is convinced that because of the impacts of
    construction discharges that are directly to waters of
                       NRDC v. USEPA                           5959
    the United States, such discharges should be
    addressed by permits issued by Federal or NPDES
    State permitting authorities. It is evident from
    numerous studies and reports submitted under sec-
    tion 319 of the CWA that discharges from construc-
    tion sites continue to be a major source of water
    quality problems and water quality standard viola-
    tions. Accordingly EPA is compelled to address
    these source[s] under these regulations and thereby
    regulate these sources under a nationally consistent
    program with an appropriate level of enforcement
    and oversight.

55 Fed. Reg. at 48033-34.

    2.   Phase II Storm Water Rule

   In 1999, EPA issued the Phase II storm water rule, thereby
expanding the NPDES storm water program to address storm
water discharges from construction sites that disturb one to
five acres (small construction sites). 64 Fed. Reg. 68,722
(Dec. 8, 1999). Under this rule, small construction sites were
required to obtain an NPDES permit by March 10, 2003. 64
Fed. Reg. at 68,840 (codified at 40 C.F.R. § 122.26(e)(8)); see
71 Fed. Reg. at 33,629. Noting various studies that had taken
place both prior and subsequent to the issuance of the Phase
I rule, EPA reiterated its concern over sediment-laden storm
water discharges from construction activities on water quality
impact. 64 Fed. Reg. at 68,728-30. EPA justified extending
the NPDES permit requirements to small construction activi-
ties as follows:

    EPA believes that the water quality impact from
    small construction sites is as high as or higher than
    the impact from larger sites on a per acre basis. The
    concentration of pollutants in the runoff from smal-
    ler sites is similar to the concentrations in the runoff
    from larger sites. The proportion of sediment that
5960                       NRDC v. USEPA
     makes it from the construction site to surface waters
     is likely the same for larger and smaller construction
     sites in urban areas because the runoff from either
     site is usually delivered directly to the storm drain
     network where there is no opportunity for the sedi-
     ment to be filtered out.

64 Fed. Reg. at 68,730.

     3.   Deferral Rules

   In 2002, EPA determined that close to 30,000 oil and gas
sites, annually, could be affected by the Phase II rule.10 67
Fed. Reg. 79,828 (Dec. 30, 2002). In order to take this new
information into account, EPA published a final rule postpon-
ing, until March 10, 2005, the NPDES permit authorization
deadline for storm water discharges from small construction
activity associated with oil and gas sites.11 68 Fed. Reg.
11,325 (Mar. 10, 2003). EPA again postponed the permit
deadline for an additional 15 months until June 12, 2006.12 70
Fed. Reg. 11,560 (Mar. 9, 2005).
   10
      Initially, EPA assumed that few of these sites would incur compliance
costs associated with the Phase II rule because most of them would be less
than one acre. However, based on new information, EPA believed that a
significant number of such sites may exceed one acre. In addition, EPA
had assumed that the oil and gas industry would use best management
practices (BMPs) similar to those in other industrial sectors involved in
construction and development, if affected. EPA planned to gather more
data on the BMPs used by the oil and gas industry to determine if its esti-
mated costs range for BMPs was accurate. 67 Fed. Reg. at 79,829-30.
   11
      EPA issued this deferral rule to further evaluate the economic impact
of the permit requirements on the oil and gas industry, the appropriate
BMPs that might be used to prevent contamination of storm water runoff
associated with oil and gas operations, and the scope and effect of the
CWA section 402(l)(2) exemption and other storm water provisions. 67
Fed. Reg. at 79,828.
   12
      EPA’s preliminary analysis indicated that there could be substantial
economic impact associated with the regulation of oil and gas sites, pri-
                           NRDC v. USEPA                              5961
  C. The CWA as Amended by the Energy Policy Act of
  2005

   Prior to the NPDES permit deadline, Congress addressed
the issue of permit requirements for storm water discharges
from oil and gas construction sites in the Energy Policy Act
of 2005, which was signed into law on August 8, 2005. Sec-
tion 323 of the Energy Policy Act amended section 503 of the
CWA to include the following revised definition:

     (24)    Oil and gas exploration and production:

     The term “oil and gas exploration, production, pro-
     cessing, or treatment operations or transmission
     facilities” means all field activities or operations
     associated with exploration, production, processing,
     or treatment operations, or transmission facilities,
     including activities necessary to prepare a site for
     drilling and for the movement and placement of
     drilling equipment, whether or not such field activi-
     ties or operations may be considered to be construc-
     tion activities.

Pub. L. No. 109-58, § 323, 119 Stat. 694 (codified as
amended at 33 U.S.C. § 1362(24)) (emphasis added). In this
manner, the Energy Policy Act amended the CWA by defin-
ing “oil and gas exploration, production, processing, or treat-
ment operations, or transmission facilities” to specifically
include related construction activities, thereby bringing such
activities within the CWA section 402(l)(2) exemption from

marily due to delays in the permitting process resulting in lost production,
that it had not yet taken into account. 71 Fed. Reg. at 33,630. EPA there-
fore further postponed the NPDES deadline by 15 months for small con-
struction sites associated with oil and gas operations in order to complete
its economic impact, legal, and procedural analyses and continue to evalu-
ate practices and methods operators may employ to control storm water
discharges. 70 Fed. Reg. 11,560.
5962                       NRDC v. USEPA
the NPDES permitting requirement. It is important to note
that, in addition to the newly amended definitional section
503(24), the term “oil and gas exploration, production, pro-
cessing, or treatment operations or transmission facilities”
appears in only one other place in the CWA — in section
402(l)(2). 33 U.S.C. § 1342(l)(2). The Energy Policy Act
amendment of the definition did not, however, change the
statutory language of section 402(l)(2).

       1.   Notice of Proposed Rulemaking

   In January 2006, EPA gave notice of proposed rulemaking
that would modify EPA’s NPDES storm water permit regula-
tions to reflect the Energy Policy Act’s change to the defini-
tion of oil and gas operations and facilities and the related
impact on section 402(l)(2).13 71 Fed. Reg. 894, 897 (Jan. 6,
2006). Based on its interpretation of section 402(l)(2), as
amended by the Energy Policy Act, EPA proposed to clarify
in 40 C.F.R. § 122.26(a)(2)(ii) that a “water quality standard
violation for sediment alone does not trigger a permitting
requirement.” 71 Fed. Reg. at 898. EPA explained that it had
initially codified its interpretation of section 402(l)(2)’s
phrase “contaminated by contact with” at § 122.26(c)(1)(iii)
by providing that oil and gas operations were exempt from
permit requirements except where their discharges (1) con-
tribute reportable quantities of oil, grease, or hazardous sub-
stances to waters of the United States or (2) contributed to a
violation of a water quality standard. 71 Fed. Reg. at 897-98.
However, upon reexamination of the unchanged statutory text
of section 402(l)(2) of the CWA, EPA determined that “a
plain reading of [that section] suggests that oil and gas sites
where runoff is not contaminated by contact with raw mate-
  13
    A second stated purpose for the proposed rulemaking was “to encour-
age voluntary application of best management practices (BMPs) for oil
and gas field activities and operations, including construction, to provide
additional protection of water quality from potential storm discharges.” 71
Fed. Reg. at 897.
                       NRDC v. USEPA                          5963
rial, intermediate products, finished product, byproduct or
waste products located at the site are not required to obtain
NPDES permits, even in situations where the runoff might be
contributing to a violation of water quality standards (the term
overburden is applicable only to mining).” 71 Fed. Reg. at
898. EPA stated that when it promulgated the Phase I rule
(codified at 40 C.F.R. § 122.26(c)(1)(iii)) in 1990, it “believed
it reasonable to presume that causing or contributing to a vio-
lation of water quality standards was an indication of contam-
ination as envisioned under the statute.” 71 Fed. Reg. at 898.
EPA explained, however, that “now that Congress has explic-
itly extended the exemption to construction activities associ-
ated with oil and gas operations, EPA believes this
presumption may no longer be valid in some instances.” 71
Fed. Reg. at 898.

    2.    The Challenged Final Rule

   In June 2006, EPA promulgated the challenged final rule
— entitled “Amendments to the National Pollutant Discharge
Elimination System (NPDES) Regulations for Storm Water
Discharges Associated With Oil and Gas Exploration, Produc-
tion, Processing, or Treatment Operations or Transmission
Facilities”—codifying changes to the CWA resulting from the
Energy Policy Act of 2005. 71 Fed. Reg. 33,628 (codified at
40 C.F.R. § 122.26(a)(2)(ii)). The final rule added the follow-
ing provision:

    (2) The Director may not require a permit for dis-
    charges of storm water runoff from the following:

    ...

    (ii) All field activities or operations associated with
    oil and gas exploration, production, processing, or
    treatment operations or transmission facilities,
    including activities necessary to prepare a site for
    drilling and for the movement and placement of
5964                  NRDC v. USEPA
    drilling equipment, whether or not such field activi-
    ties or operations may be considered to be construc-
    tion activities, except in accordance with paragraph
    (c)(1)(iii) of this section. Discharges of sediment
    from construction activities associated with oil and
    gas exploration, production, processing, or treat-
    ment operations or transmission facilities are not
    subject to the provisions of paragraph (c)(1)(iii)(C)
    of this section.

40 C.F.R. § 122.26(a)(2)(ii) (emphasis added). Thus, pursuant
to this rule, EPA cannot require permits for storm water dis-
charges comprised solely of sediment from oil and gas con-
struction activities, even if such discharges contribute to a
violation of a water quality standard.

   As it had done in its notice of proposed rulemaking, EPA
provided its rationale for its new interpretation of section
402(l)(2) of the CWA to specifically exclude from NPDES
permitting requirements sediment-laden storm water dis-
charges from construction activities. Noting that the Energy
Policy Act amendment to the CWA does not specifically
address sediment, EPA nevertheless reasoned that sediment,
being the “pollutant most commonly associated with con-
struction activity,” is the “very pollutant being exempted from
permitting by the Energy Policy Act of 2005.” 71 Fed. Reg.
at 33630-31, 33,634. EPA further explained that “discharges
of sediment . . . do not necessarily indicate contamination
through contact with raw material, intermediate products, fin-
ished product, byproduct, or waste products.” 71 Fed. Reg. at
33631. Accordingly, EPA claimed that “exempting storm
water discharges of sediment from oil and gas construction
sites from NPDES permitting requirements reflects a reason-
able (and EPA believes, the best) interpretation of Congres-
sional intent in limiting the 402(l)(2) exemption to discharges
not contaminated by contact with raw material, intermediate
products, finished product, byproduct, or waste products.” 71
Fed. Reg. at 33634.
                       NRDC v. USEPA                       5965
II.   PROCEDURAL POSTURE & ISSUES
      PRESENTED

   On June 23, 2006, NRDC petitioned this Court for direct
review of EPA’s action pursuant to 33 U.S.C. § 1369(b)(1)
and Federal Rule of Appellate Procedure 15. Amigos Bravos,
the Powder River, and OGAP were subsequently joined as
petitioners, having timely filed their motions to intervene. On
appeal, NRDC and the other petitioners contend that EPA’s
final rule and regulation, which exempts from NPDES permit-
ting the runoff of sediment-laden storm water from oil and gas
construction activities, contravenes Congressional intent and
constitutes an impermissible interpretation of section
402(l)(2) of the CWA, as amended by the Energy Policy Act
of 2005.

   EPA claims that the practical effect of the amended statu-
tory language is to exempt from NPDES permitting require-
ments the sediment-laden storm water runoff from
construction activities and that EPA merely codified, at 40
C.F.R. § 122.26(a)(2)(ii), Congress’s unambiguous intent to
specifically exclude such discharges from NPDES permitting
requirements. Alternatively, EPA argues that even if Congres-
sional intent on the issue is not clearly ascertainable, EPA’s
interpretation of the statute that it administers is nonetheless
reasonable and permissible. EPA asserts that it has no discre-
tion to require a permit when storm water runoff is contami-
nated solely by sediment from oil and gas related construction
activities because (1) sediment is the pollutant most closely
associated with construction activities, and (2) Congress has
prohibited EPA from requiring an NPDES storm water permit
for discharges from construction activities at oil and gas sites
unless the discharge is contaminated by at least one of a spe-
cific list of materials that does not include sediment. EPA
does, however, concede that prior to the 2005 amendment to
the CWA, if an oil and gas facility discharged storm water
runoff contaminated only with sediment resulting in a water
quality violation, that facility did not meet the conditions for
5966                   NRDC v. USEPA
permit exemption under 402(l)(2) and, thus, was required to
apply for a permit.

III.   JURISDICTION

  We have jurisdiction to review this petition pursuant to the
CWA, 33 U.S.C. § 1369(b)(1)(F). See NRDC v. EPA, 966
F.2d 1292, 1296-97 (9th Cir. 1992) (recognizing that Section
1369(b)(1)(F) authorizes appellate review of EPA rules gov-
erning underlying permit procedures).

IV.    STANDING

   Any “interested person” may seek review of designated
actions of the EPA Administrator. 33 U.S.C. § 1369(b)(1).
The “injury-in-fact” rule for standing, as articulated in Sierra
Club v. Morton, 405 U.S. 727 (1972), is applicable here.
Trustees for Alaska v. EPA, 749 F.2d 549, 554 (9th Cir.
1984). Under this rule, a petitioner must suffer adverse affects
to his or her economic interests or “[a]esthetic and environ-
mental well-being.” Sierra Club, 405 U.S. at 734. Further-
more, “[a]n association has standing to bring suit on behalf of
its members when its members would otherwise have stand-
ing to sue in their own right, the interests at stake are germane
to the organization’s purpose, and neither the claim asserted
nor the relief requested requires the participation of individual
members of the lawsuit.” Friends of the Earth, Inc. v. Laidlaw
Envtl. Servs. (TOC), Inc., 528 U.S. 167, 181 (2000). NRDC,
Amigos Bravos, and Powder River have demonstrated, to this
Court’s satisfaction, association standing under the broad
standing requirement applicable here. See Leonard v. Clark,
12 F.3d 885, 888 (9th Cir. 1994) (explaining that once the
court determines that one of the plaintiffs has standing, it need
not decide the standing of the others).

V.     STANDARD OF REVIEW

   We review EPA’s final storm water rule under the Admin-
istrative Procedure Act (APA), codified at 5 U.S.C. §§ 701-
                        NRDC v. USEPA                          5967
06. See American Mining Congress v. U.S. E.P.A., 965 F.2d
759, 763 (9th Cir. 1992). Under the APA, this Court is autho-
rized to “set aside agency action . . . found to be . . . arbitrary,
capricious, an abuse of discretion, or otherwise not in accor-
dance with law.” 5 U.S.C. § 706(2)(A). An agency action is
arbitrary and capricious “if the agency has relied on factors
which Congress has not intended it to consider, entirely failed
to consider an important aspect of the problem, offered an
explanation for its decision that runs counter to the evidence
before the agency, or is so implausible that it could not be
ascribed to a difference in view or the product of agency
expertise.” Motor Vehicle Mfrs. Ass’n v. State Farm Mut.
Auto Ins. Co., 463 U.S. 29, 43 (1983).

   In reviewing EPA’s interpretation of a statute that it admin-
isters, we follow the two step approach set out in Chevron
U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837, 842-44 (1984). See Defenders of Wildlife v.
Browner, 191 F.3d 1159, 1163 (9th Cir. 1999); see also Bicy-
cle Trails Council of Marin v. Babbitt, 82 F.3d 1445, 1452
(9th Cir. 1996). At the first step, we use “traditional tools of
statutory construction” to determine whether Congress has
unambiguously expressed its intent on the issue before the
court. Chevron, 467 U.S. at 843 n. 9. “If the intent of Con-
gress is clear, that is the end of the matter; for the court, as
well as the agency, must give effect to the unambiguously
expressed intent of Congress.” Id. at 842-43. However, if a
statute is “silent or ambiguous with respect to a specific
issue,” we move on to step two where “the question for the
court is whether the agency’s answer is based on a permissi-
ble construction of the statute.” Id. at 843. Congress may
leave an explicit gap, thereby expressly delegating legislative
authority to the agency subject to the arbitrary and capricious
standard. Id. at 843-44. If legislative delegation is implicit, we
must defer to an agency’s statutory interpretation so long as
it is reasonable. Id. at 844. As a component of whether an
agency’s interpretation is permissible, we will take into
account the consistency of the agency’s position over time.
5968                    NRDC v. USEPA
See Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 417
(1993) (explaining that “the consistency of an agency’s posi-
tion is a factor in assessing the weight that position is due”);
see also INS v. Cardoza-Fonseca, 480 U.S. 421, 447 n.30
(1987) (“An agency interpretation of a relevant provision
which conflicts with the agency’s earlier interpretation is
‘entitled to considerably less deference’ than a consistently
held agency view.”) (quoting Watt v. Alaska, 451 U.S. 259,
273 (1981)).

VI.    DISCUSSION

  A.    Chevron Step One: Congressional Intent

   [1] Because this case presents an issue of an agency’s statu-
tory interpretation, Chevron applies. First, then, we must
determine whether Congress, when it amended section
503(24) of the CWA, through section 323 of the Energy Pol-
icy Act, unambiguously intended to exempt from NPDES per-
mitting requirements for oil and gas construction activities the
discharge of storm water runoff contaminated solely with sed-
iment. An examination of the statutory language and its legis-
lative history assists us in this inquiry. See Defenders of
Wildlife, 191 F.3d at 1164-65; see also American Mining
Congress, 965 F.2d at 764-65.

  Section 402(l)(2) of the CWA provides as follows:

      The Administrator shall not require a permit under
      this section, nor shall the Administrator directly or
      indirectly require any State to require a permit, for
      discharges of stormwater runoff from mining opera-
      tions or oil and gas exploration, production, process-
      ing, or treatment operations or transmission
      facilities, composed entirely of flows which are from
      conveyances or systems of conveyances (including
      but not limited to pipes, conduits, ditches, and chan-
      nels) used for collecting and conveying precipitation
                      NRDC v. USEPA                         5969
    runoff and which are not contaminated by contact
    with, or do not come into contact with, any overbur-
    den, raw material, intermediate products, finished
    product, byproduct, or waste products located on the
    site of such operations.

33 U.S.C. § 1342(l)(2) (emphasis added).

   Section 323 of the Energy Policy Act affected section
402(l)(2) of the CWA by adding construction activities to the
definition of oil and gas exploration and production opera-
tions or facilities:

    (24)   Oil and gas exploration and production:

    The term “oil and gas exploration, production, pro-
    cessing, or treatment operations or transmission
    facilities” means all field activities or operations
    associated with exploration, production, processing,
    or treatment operations, or transmission facilities,
    including activities necessary to prepare a site for
    drilling and for the movement and placement of
    drilling equipment, whether or not such field activi-
    ties or operations may be considered to be construc-
    tion activities.

Pub. L. No. 109-58, § 323, 119 Stat. 694 (codified as
amended at 33 U.S.C. § 1362(24)) (emphasis added).

   [2] The plain language of section 402(l)(2) of the CWA, as
affected by the Energy Policy Act, does not indicate whether
or not Congress intended that the NPDES permit exemption
cover storm water discharges contaminated solely with sedi-
ment. Neither CWA section 402(l)(2) nor section 323 of the
Energy Policy Act of 2005 mention the term “sediment.” The
statutory language of section 402(l)(2) merely indicates that
oil and gas operations or facilities, which now include con-
struction activities, are exempt from NPDES permitting
5970                       NRDC v. USEPA
requirements so long as the storm water runoff from those
activities is not contaminated with, or does not come in con-
tact with, certain statutorily undefined contaminants: overbur-
den, raw material, intermediate products, finished product,
byproduct, or waste products.14 Furthermore, even if we were
to accept NRDC’s argument that sediment can be construed
as a “waste product,” that term is still ambiguous in the con-
text of gas and oil related construction activities. There is no
single, plain meaning for this term.15

   [3] Nor does the limited legislative history of CWA section
402(l)(2), both prior to and as amended by section 323 of the
Energy Policy Act, indicate that Congress unambiguously
intended to exempt (or not exempt) from NPDES permitting
requirements discharges of storm water runoff contaminated
solely with “sediment.” NRDC contends that, in passing sec-
tion 402(l)(2) in 1987, Congress merely intended to avoid
unnecessary administrative burdens without allowing any pol-
lution. See 133 Cong. Rec. H168-03 (Jan. 8, 1987) (Section
402(l)(2) aims to avoid “unnecessary paperwork restrictions”
  14
      The CWA does not define the terms “raw material,” “intermediate
products,” “finished product,” “byproduct,” or “waste products.” See 33
U.S.C. § 1362. “Overburden” has been defined by EPA as “any material
of any nature, consolidated or unconsolidated, that overlies a mineral
deposit, excluding topsoil or similar naturally-occurring surface materials
that are not disturbed by mining operations.” 40 C.F.R. § 122.26(b)(10).
   15
      NRDC relies on N. Plains Res. Council v. Fidelity Exploration & Dev.
Co., 325 F.3d 1155 (9th Cir. 2003) to support its argument that sediment
is a “waste product” under section 402(l)(2) of the CWA. In Northern
Plains, we held that the unaltered but “salty” groundwater produced in
association with methane gas extraction and discharged into the river is a
pollutant within the meaning of the CWA. Id. at 1163. We found that the
“salty” groundwater is a “pollutant” under the CWA because it is “indus-
trial waste.” Id. at 1160. In particular, we defined “waste” as “any useless
or worthless byproduct of a process or the like; refuse or excess material.”
Id. at 1161 (quoting American Heritage Dictionary (1979)). Accordingly,
NRDC argues that sediment is essentially a useless or worthless byproduct
of construction activities and is a contaminant—namely “waste product”
— for purposes of the § 402(l)(2) permit exemption.
                       NRDC v. USEPA                       5971
while still keeping environmental protection “at a premium”)
(statement of Rep. Hammerschmidt); 131 Cong. Rec. E3476-
02 (July 22, 1985) (“[A]ny stormwater which has come into
contact with any potential pollutant would not be eligible for
the stormwater runoff exemption.”) (statement of Sen.
Breaux).

   On the other hand, EPA asserts that the most relevant legis-
lative history is that of the Energy Policy Act of 2005 because
it was through that legislation that Congress enacted the
amendment to the CWA that EPA codified in the final rule
challenged here. EPA notes that several members of Congress
indicated their intention to vote against the Energy Policy Act
of 2005 in part because it exempted storm water discharges
from oil and gas construction activities from regulation under
the CWA. EPA suggests that such opposition confirms that
Congress intended to exempt storm water discharges from oil
and gas related construction activities, regardless of sedi-
ment’s impact on water quality. 151 Cong. Rec. S9262 (daily
ed. July 28, 2005) (remarks of Sen. Kerry); id. at S9342 (daily
ed. July 29, 2005) (remarks of Sen. Feinstein); id. at S9346
(remarks of Sen. Clinton); id. at S9346-47 (remarks of Sen.
Jeffords ); id. at E1726 (remarks of Rep. Udall). EPA relies
specifically on comments made by Senator Jeffords where he
explained that storm water discharges typically contain “pol-
lutants such as oil and grease, chemicals, nutrients, metals,
bacteria, and particulates”—which EPA claims is synony-
mous with sediment—and that the amendment would roll
back the then-existing requirement that construction activities
larger than five acres at oil and gas sites must obtain NPDES
permits. 151 Cong. Rec. S9347 (daily ed. July 29, 2005).

   [4] EPA’s multiple citations to the remarks of senators
opposed to the Energy Policy Act are particularly unavailing.
In the hierarchy of legislative history sources, statements by
opponents are among the least authoritative, as they are meant
to defeat the bill in question and do not “represent the consid-
ered and collective understanding of those Congressmen”
5972                   NRDC v. USEPA
who passed the bill into law. Zuber v. Allan, 396 U.S. 168,
186 (1969). Accordingly, using standard tools of statutory
construction, we can not conclude that Congress, when it
amended section 402(l)(2) of the CWA to expand the NPDES
permitting exemption to construction activities, vis-a-vis Sec-
tion 323 of the Energy Policy Act, unambiguously intended
to exempt from NPDES permitting requirements discharges
of storm water runoff contaminated solely with sediment.
Because we conclude that Congress was silent on the issue,
we move to Chevron step two.

  B. Chevron Step Two: Permissibility of Statutory
  Interpretation

   [5] At Chevron step two, we must determine whether
EPA’s interpretation is permissible. We need not find that
EPA’s interpretation is the only permissible construction of
amended section 402(l)(2) or even the reading this Court
would have reached, but only that EPA’s interpretation is not
arbitrary and capricious. See Chevron, 467 U.S. at 843, n.11.
To determine whether the EPA’s interpretation of section
402(l)(2) of the CWA, as amended by the Energy Policy Act,
is permissible, “we look to the plain and sensible meaning of
the statute, the statutory provision in the context of the whole
statute and case law, and to the legislative purpose and
intent.” Cuevas-Gaspar v. Gonzales, 430 F.3d 1013, 1022
(9th Cir. 2005). Additionally, we will take into account the
consistency of the agency’s position over time. See Good
Samaritan Hosp. v. Shalala, 508 U.S. 402, 417 (1993); see
also INS v. Cardoza-Fonseca, 480 U.S. 421, 447 n.30 (1987);
see also Watt v. Alaska, 451 U.S. 259, 273 (1981).

   An administrative agency is “not estopped from changing
a view [it] believes to have been grounded upon a mistaken
legal interpretation.” Good Samaritan Hosp., 508 U.S. at 417
(citations omitted). In particular, an agency “is not disquali-
fied from changing its mind; and when it does, the courts still
sit in review of the administrative decision and should not
                       NRDC v. USEPA                         5973
approach the statutory construction issue de novo and without
regard to the administrative understanding of the statutes.” Id.
(quoting NLRB v. Iron Workers, 434 U.S. 335, 351 (1978)).
“On the other hand, the consistency of an agency’s position
is a factor in assessing the weight that position is due.” Id. As
the Supreme Court has stated: “An agency interpretation of a
relevant provision which conflicts with the agency’s earlier
interpretation is ‘entitled to considerably less deference’ than
a consistently held agency view.” Cardoza-Fonseca, 408 U.S.
at 447 n.30 (quoting Watt, 451 U.S. at 273).

   EPA interpreted section 402(l)(2) of the CWA, as amended
by the Energy Policy Act, to provide that a “water quality
standard violation for sediment alone does not trigger a per-
mitting requirement.” 71 Fed. Reg. at 898. EPA justified the
challenged final rule, see 71 Fed. Reg. 33628, and regulation,
see 40 C.F.R. § 122.26(a)(2)(ii), as follows:

    [N]ow that Congress has broadened the 402(l)(2)
    exemption to include construction activities at oil
    and gas field operations, EPA believes that dis-
    charges of sediment are not necessarily indicative of
    such contact [with raw material, intermediate prod-
    ucts, finished product, byproduct or waste products].
    Sediment is the pollutant most commonly associated
    with construction activity. Hence, exempting storm
    water discharges of sediment from oil and gas con-
    struction sites from NPDES permitting requirements
    reflects a reasonable (and EPA believes, the best)
    interpretation of Congressional intent in limiting the
    402(l)(2) exemption to discharges not contaminated
    by contact with raw material, intermediate products,
    finished product, byproduct or waste products, in the
    context of the new definition for oil and gas explora-
    tion, production, processing or treatment operations
    or transmission facilities included in the Energy Pol-
    icy Act of 2005.
5974                       NRDC v. USEPA
71 Fed. Reg. at 33634; see also 40 C.F.R. § 122.26(a)(2)(ii)
(“Discharges of sediment from construction activities associ-
ated with oil and gas exploration, production, processing, or
treatment operations or transmission facilities are not subject
to the provisions of paragraph (c)(1)(iii)(C) of this section.);
see also 40 C.F.R. § 122.26(c)(1)(iii)(C) (“The operator of an
existing or new discharge composed entirely of storm water
from an oil or gas exploration, production, processing, or
treatment operation, or transmission facility is not required to
submit a permit application in accordance with paragraph
(c)(1)(i)16 of this section, unless the facility . . . [c]ontributes
to a violation of a water quality standard”).

   [6] Thus, EPA argues that, because “sediment is the pollu-
tant most commonly associated with construction activities,”
Congress must have meant to exempt all construction-related
sediment when it made construction activities eligible for the
exemption, or else the amendment would be effectively mean-
ingless. See 71 Fed. Reg. at 33634. We conclude, however,
that EPA’s interpretation of the CWA section 402(l)(2), as
amended by the Energy Policy Act, is arbitrary and capricious
because of the agency’s changed position on what constitutes
“contamination” under that section. See Good Samaritan
Hosp., 508 U.S. 402, 417 (1993); see also Cardoza-Fonseca,
480 U.S. 421, 447 n.30 (1987); see also Watt, 451 U.S. 259,
273 (1981)).

   [7] EPA concedes that, prior to the Energy Policy Act
amendment to the CWA, if a gas and oil facility discharged
storm water runoff contaminated only with sediment resulting
in a water quality violation, that facility did not meet the con-
ditions for permit exemption under 402(l)(2) and thus was
required to apply for a permit. See also 40 C.F.R. § 122.26(c)
(1)(iii)(C) (1990) (requiring permits for discharges from oil
and gas activities that contribute to a violation of a water
  16
    Paragraph (c)(1)(i) applies to “[d]ischargers of storm water associated
with industrial activity and with small construction activity.”
                       NRDC v. USEPA                        5975
quality standard). During oral argument before this Court,
EPA admitted that, before the 2005 amendment, a permit was
required for discharge of sediment-laden runoff resulting in a
water quality violation even if such runoff was otherwise
uncontaminated. Therefore, EPA had previously recognized
that oil and gas exploration, production, processing or treat-
ment operations or transmission facilities had an obligation to
apply for an NPDES permit for storm water runoff contami-
nated only with sediment.

   [8] Now, EPA has changed its interpretation of what consti-
tutes “contamination” under section 402(l)(2) based exclu-
sively on a legislative amendment that does not mention (1)
sediment or (2) EPA’s long-standing position that discharges
of storm water runoff from oil and gas activities, contami-
nated solely with sediment and which contribute to a violation
of a water quality standard, require a NPDES permit. In order
to minimize and justify its earlier stance, EPA first argues that
its previous NPDES permit requirement for such discharges
was merely a “rule of administrative convenience” because it
assumed that runoff contaminated solely with sediment was
likely contaminated with overburden, raw material, intermedi-
ate products, finished product, byproduct, or waste products.
EPA also argues that it never previously considered, until the
2005 amendment, how sediment alone should be treated
under existing regulations.

   We find EPA’s arguments to be unpersuasive in light of
EPA’s own statements during its rule-making process prior to
the passage of the Energy Policy Act of 2005. See 55 Fed.
Reg. at 48033-34; see also 64 Fed. Reg. at 68,728-30. EPA
long recognized that oil and gas construction sites were prime
candidates for NPDES permitting in light of what EPA
referred to as “serious water quality impacts” caused by con-
struction storm water discharges polluted with sediment. 55
Fed. Reg. at 48,033 34. For example, as we have set out
above, in its Phase I storm water rule, EPA stated that con-
struction activities are “industrial in nature;” that “localized
5976                   NRDC v. USEPA
impacts of water quality may be severe because of high unit
loads of pollutants, primarily sediments;” that “[s]ediment
runoff rates from construction sites are typically 10 to 20
times that of agricultural lands . . . with runoff rates as high
as 100 times that of agricultural lands, and typically 1,000 to
2,000 times that of forest lands;” that “[e]ven small construc-
tion sites may have a significant negative impact on water
quality in localized areas;” that “[o]ver a short period of time,
construction sites can contribute more sediment to streams
than was previously deposited over several decades;” that “[i]t
is evident from numerous studies and reports submitted under
. . . the CWA that discharges from construction sites continue
to be a major source of water quality problems and water
quality standard violations;” and that “EPA is compelled to
. . . regulate these sources.” Id. Moreover, after considering
additional environmental studies and reports that had been
submitted subsequent to the Phase I storm water rule, EPA
reiterated in the Phase II rule its concerns about the impact on
water quality of sediment-laden storm water discharges from
construction activities. See 64 Fed. Reg. at 68,728-30. Fur-
thermore, in its notice of proposed rulemaking in January
2006, EPA stated that, when it promulgated the Phase I rule
in 1990, it “believed it reasonable to presume that causing or
contributing to a violation of water quality standards was an
indication of contamination as envisioned under the statute.”
71 Fed. Reg. at 898.

   [9] In light of EPA’s prior statements, it can hardly be said
that EPA’s previous stance was merely a “rule of administra-
tive convenience” or that EPA never considered how sedi-
ment alone should be treated prior to the Energy Policy Act
of 2005. Clearly, EPA’s June 12, 2006, storm water discharge
rule, codified at 40 C.F.R. § 122.26, represents a complete
departure from its previous interpretation of what constitutes
“contamination” under section 402(l)(2). As such, we con-
clude that EPA’s inconsistent and conflicting position regard-
ing the discharge of sediment-laden storm water from oil and
gas construction sites causes its interpretation of amended
                        NRDC v. USEPA                        5977
section 402(l)(2), as reflected in the storm water discharge
rule, 40 C.F.R. § 122.26, to be an arbitrary and capricious
one. See Good Samaritan Hosp., 508 U.S. at 417; see also
Cardoza-Fonseca, 480 U.S. at 447 n.30; see also Watt, 451
U.S. at 273. This conclusion is reinforced by the fact that nei-
ther the amending statute (section 323), the statutory defini-
tion (section 503(24)), nor the statutory exemption (402(l)(2))
make any mention at all of “sediment” — or of whether it is
covered or not.

   Based on the foregoing, we hold that the promulgated rule,
including the corresponding regulation, is arbitrary and capri-
cious and constitutes an impermissible construction of
402(l)(2) of the CWA. Accordingly, we VACATE the rule,
and REMAND THIS MATTER FOR FURTHER PRO-
CEEDINGS consistent with this opinion.

 GRANT PETITION FOR REVIEW, VACATE RULE
AND REMAND FOR FURTHER PROCEEDINGS.



CALLAHAN, Circuit Judge, dissenting:

   I agree with the majority that at step one of the analysis
under Chevron v. Natural Resources Defense Council, Inc.,
467 U.S. 837 (1984), the plain language of section 402(l)(2)
of the Clean Water Act (“section 402(l)(2)”), 33 U.S.C.
§ 1342(l)(2), as amended by the Energy Policy Act of 2005,
does not unambiguously indicate whether Congress intended
the exemption from National Pollutant Discharge Elimination
System (“NPDES”) permitting to cover storm water dis-
charges contaminated solely with sediment. I further agree
that the scant legislative histories for section 402(l)(2) and the
relevant portions of the Energy Policy Act do not elucidate
Congress’s clear intent. Therefore, as the majority correctly
concludes, this dispute must be resolved at step two of the
Chevron analysis, with the question of whether the Environ-
5978                    NRDC v. USEPA
mental Protection Agency (“EPA”) provided a—not the only
or the best—permissible interpretation of section 402(l)(2). It
is at this point that I respectfully part course with the majority
and accord EPA’s permissible interpretation appropriate def-
erence.

   The majority opinion holds that “EPA’s interpretation of
the [Clean Water Act] section 402(l)(2), as amended by the
Energy Policy Act, is arbitrary and capricious because of the
agency’s changed position on what constitutes ‘contamina-
tion’ under that section.” Maj. Opinion at 5974 (emphasis in
original). The main thrust of its reasoning is that before enact-
ment of the Energy Policy Act, EPA required that an oil and
gas facility that discharged storm water runoff contaminated
only with sediment and resulting in a water quality violation
apply for a NPDES permit. After enactment of the Energy
Policy Act, EPA’s storm water rule exempts such dischargers
from seeking a permit. Therefore, the majority concludes that
EPA’s “inconsistent and conflicting position regarding the
discharge of sediment-laden storm water from oil and gas
construction sites” renders its interpretation of section
402(l)(2) arbitrary and capricious. Maj. Opinion at 5976.

   The Supreme Court has recognized that “the mere fact that
an agency interpretation contradicts a prior agency position is
not fatal.” Smiley v. Citibank (South Dakota), N.A., 517 U.S.
735, 742 (1996). In fact, the seminal decision in this context,
Chevron, itself accorded deference to EPA’s revised interpre-
tation of statutory language. 467 U.S. at 863-64. For this rea-
son, the Court “has rejected the argument that an agency’s
interpretation ‘is not entitled to deference because it repre-
sents a sharp break with prior interpretations’ of the statute in
question.” Rust v. Sullivan, 500 U.S. 173, 186 (1991) (quoting
Chevron, 467 U.S. at 862). “An initial agency interpretation
is not instantly carved in stone.” Chevron, 467 U.S. at 863.
Nor should it be, because “an agency, to engage in informed
rulemaking, must consider varying interpretations and the
wisdom of its policy on a continuing basis.” Id. at 863-64.
                        NRDC v. USEPA                         5979
Courts will accord Chevron deference to an agency’s revised
interpretation of a statute if the agency justifies that revision
with “reasoned analysis.” Rust, 500 U.S. at 187; see Nat.
Cable & Telecomm. Ass’n v. Brand X Internet Servs., 545
U.S. 967, 981, 1001 (2005) (stating that the agency “is free
within the limits of reasoned interpretation to change course
if it adequately justifies the change”); see also Smiley, 517
U.S. at 742 (noting that Chevron deference is warranted
despite a change in position so long as the agency avoids the
“pitfalls” of a “[s]udden and unexplained change,” or “change
that does not take account of legitimate reliance on prior inter-
pretations”); Good Samaritan Hosp. v. Shalala, 508 U.S. 402,
417 (1993) (stating that “where the agency’s interpretation of
a statute is at least as plausible as competing ones, there is lit-
tle, if any, reason not to defer to its construction”); New Edge
Network, Inc. v. FCC, 461 F.3d 1105, 1112-13 (9th Cir. 2006)
(rejecting an argument that “an agency changing its course by
rescinding a rule is obligated to supply a reasoned analysis for
the change beyond that which may be required when an
agency does not act in the first instance”). Acknowledging
language from INS v. Cardoza-Fonseca, 480 U.S. 421, 446
n.30 (1987), that an agency’s statutory interpretation that con-
flicts with an earlier interpretation is entitled to “considerably
less deference,” this court has still held that “an agency’s
‘new’ position is entitled to deference ‘so long as the agency
acknowledges and explains the departure from its prior
views.’ ” Resident Council of Wash. v. Leavitt, 500 F.3d 1025,
1036 (9th Cir. 2007) (quoting Seldovia Native Ass’n v. Lujan,
904 F.2d 1335, 1346 (9th Cir. 1990)).

   Here, EPA provided a reasoned analysis that adequately
explains its revised interpretation of section 402(l)(2). Con-
gress enacted section 402(l)(2) to exempt from NPDES per-
mitting storm water runoff from oil and gas activities—
namely, oil and gas exploration, production, processing, or
treatment operations or transmission facilities—unless that
runoff was contaminated by, or came into contact with, statu-
torily enumerated substances consisting of “raw material,
5980                   NRDC v. USEPA
intermediate product, finished product, byproduct, or waste
products located on the site.” Prior to passage of the Energy
Policy Act, EPA treated all oil and gas construction activities
as falling outside this exemption. 71 Fed. Reg. 33,628,
33,629-33,630 (June 12, 2006). The Energy Policy Act made
oil and gas construction activities eligible for exemption
under section 402(l)(2), however, which then required EPA to
conduct a fresh analysis of how construction activities relate
to the permit exemption. See id. at 33,631.

   Although EPA noted that the Energy Policy Act did not
specifically mention sediment, it reasoned that “that pollutant
naturally falls within the newly created exemption from
NPDES permitting.” 71 Fed. Reg. at 33,630-33,631. The
agency determined that “[t]he presence of sediment in a dis-
charge from a construction site is not itself indicative of con-
tact with” the materials listed in the exemption provision (i.e.,
raw materials, intermediate product, final product, byproduct,
and waste products). Id. at 33,631. EPA further stated that
sediment is the pollutant most commonly associated with con-
struction activities. Id. (citing 69 Fed. Reg. 22,475 (Apr. 26,
2004), and 67 Fed. Reg. 42,654 (June 24, 2004)). As an
example of the association of sediment discharge and con-
struction, EPA pointed to its 2003 construction general per-
mit, which focused “primarily on limiting discharges of
sediment.” Id. It concluded that it would be inconsistent with
the Energy Policy Act’s amendments to the Clean Water Act
to codify a permit exemption for oil and gas construction
activities but not to exempt discharges of sediment, the pollu-
tant most commonly associated with construction. Id. Once
Congress included construction activities within the exemp-
tion, EPA promulgated the rule at issue here based on what
it perceived to be Congress’s intent.

   Additionally, EPA had signaled before passage of the
Energy Policy Act that it had not committed to a rigid posi-
tion regarding sediment discharges related to oil and gas con-
struction activities. EPA indicated during the two “deferral”
                        NRDC v. USEPA                         5981
periods that it intended to further consider the effect of its reg-
ulations on the oil and gas industry, that it needed to further
consider the effect of the section 402(l)(2) exemption on other
Clean Water Act provisions, and that it still needed to deter-
mine the “appropriate NPDES requirements, if any, for small
construction of oil and gas exploration and production facili-
ties.” 68 Fed. Reg. 11,325, 11,326, 11,328 (Mar. 10, 2003);
71 Fed. Reg. at 33,629-33,630. The Clean Water Act autho-
rized EPA to consider all of these factors in creating a com-
prehensive NPDES permit system. See 33 U.S.C.
§ 1342(p)(5), (6). Under these circumstances, EPA made a
reasonable policy choice within its authority, and, therefore,
the court should defer to that choice. See Brand X Internet
Servs., 545 U.S. at 986 (citing Chevron, at 467 U.S. at 845).

   The majority opinion contends that EPA’s explanation is
weakened by the fact that the Energy Policy Act does not
mention the word “sediment,” and that EPA had taken a
“long-standing position that discharges of storm water runoff
from oil and gas activities, contaminated with sediment and
which contribute to a violation of a water quality standard,
require a NPDES permit.” Maj. Opinion at 5975 (emphasis in
original.) First, there appears to be no authority that would
compel EPA to stay its hand until Congress specifically
amended the ambiguous exemption at section 402(l)(2) to
include the word “sediment.” Second, the mere fact that EPA
revisited the exemption after passage of the Energy Policy
Act does not render the results of its analysis arbitrary. See
Brand X Internet Servs., 545 U.S. at 1001-02 (finding that the
FCC’s “fresh analysis” of its treatment of cable providers in
light of changed market conditions was not arbitrary). In
Chevron, the Supreme Court took no issue with the fact that
EPA had promulgated a rule after a new administration “initi-
ated a ‘Government-wide reexamination of regulatory bur-
dens and complexities.’ ” See 467 U.S. at 857 (quoting 46
Fed. Reg. 16,281). In Rust, the Court found that the Secretary
of Health and Human Services permissibly revised the agen-
cy’s interpretation of a statute in order to provide clear and
5982                   NRDC v. USEPA
operational guidance to recipients of government family plan-
ning grants consistent with the original intent of the statute.
500 U.S. at 179, 187. In New Edge Network, this court
deferred to an agency’s revised interpretation of an ambigu-
ous statutory provision where the revision was prompted by
review of the practical function and results of the previous
interpretation. 461 F.3d at 1109. Here, EPA acted within its
authority to revisit its interpretation of section 402(l)(2). Not
only was EPA’s interpretation in flux at the time it promul-
gated the storm water discharge rule, but it was guided by its
interpretation of Congress’s intent in the Energy Policy Act to
provide greater exemptions with regard to the discharge of
sediment from oil and gas construction activities. Therefore,
because EPA’s “interpretation is at least as plausible as com-
peting ones,” this court should defer to its construction. Good
Samaritan Hosp., 508 U.S. at 417.

  Accordingly, I respectfully dissent and would deny the
petition.
