In the
United States Court of Appeals
For the Seventh Circuit

No. 99-2618

State of Wisconsin,

Plaintiff-Appellant,

v.

Environmental Protection Agency
and Christie Whitman,/*

Defendants-Appellees,

and

Sokaogon Chippewa Community,

Intervening Defendant-Appellee.

Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 96-C-90--Charles N. Clevert, Judge.

Argued November 6, 2000--Decided September 21, 2001



 Before Kanne, Diane P. Wood, and Williams,
Circuit Judges.

 Diane P. Wood, Circuit Judge. Although
the general model of sovereignty suggests
that different sovereign states normally
occupy different geographic territories,
see, e.g., Restatement (3d) of the
Foreign Relations Law of the United
States, sec. 201 (1986), the existence of
federations and confederations shows that
overlapping sovereignty is also a common
feature of modern political organization.
In this case, we confront one of the more
complex kinds of overlapping sovereignty
that exists in the United States today:
that between the States and Indian
tribes. The Supreme Court addressed one
aspect of that relationship in its 2000
Term in Nevada v. Hicks, 121 S. Ct. 2304
(2001), which held that tribal
authorities lacked legislative
jurisdiction to regulate the activities
of state officials on reservation land
when those officials were investigating
off-reservation violations of state law.
Id. at 2318. A different aspect of the
same relationship is before us here:
namely, whether the Environmental
Protection Agency (EPA), acting through
authority delegated to it by statute, was
empowered to treat a particular tribe as
a "state" for purposes of certain water
quality rules. Like the district court,
we conclude that the EPA acted properly
in doing so, and we thus affirm the
district court’s judgment rejecting the
challenge Wisconsin has brought to the
EPA’s action.

I

 A.   The Clean Water Act

 The Clean Water Act (the Act) prohibits
the discharge of pollutants into
navigable waters unless the discharge is
sanctioned by a permit or statute. See 33
U.S.C. sec. 1311(a). Permits are issued
by the EPA or by state agencies subject
to EPA review. Id. at sec. 1342. The Act
also gives states the authority to
establish water quality standards for
waters within their boundaries (id. at
sec. 1313), to certify compliance with
those standards (id. at sec. 1341), and
to issue and enforce discharge permits
(id. at secs. 1342, 1319), all under
the watchful eye of the EPA. Like other
states, Wisconsin has enacted its own
federally approved comprehensive water
pollution regulatory system. See Wis.
Adm. Code chapters 33, 280, 281, NR 100-
91, and NR 102-106.

 In 1987, Congress amended the Act to
authorize the EPA to treat Indian tribes
as states under sec. 518 of the Act. Once
a tribe has treatment-as-state (TAS)
status, the statute permits it to
establish water quality standards for
bodies of water within its reservation
and to require permits for any action
that may create a discharge into those
waters. 33 U.S.C. sec. 1377(e). In 1991,
after full notice-and-comment rule-
making, the EPA issued a final rule
implementing this provision and setting
forth the requirements Indian tribes
would have to meet in order to be granted
TAS status:

(1) the tribe must be federally
recognized;

(2) the tribe must have a governing body
carrying out substantial governmental
duties and powers;
(3) the functions to be exercised by the
tribe must pertain to the management and
protection of water resources which are
held by the tribe, held by the United
States in trust for the tribe, or
otherwise within the borders of the
reservation; and

(4) the tribe must be capable of carrying
out the functions of the Act.

40 C.F.R. 131.8(a); see also 33 U.S.C.
secs. 1377(e)(1)-(3).

 Relying heavily on the Supreme Court’s
decision in Montana v. United States, 450
U.S. 544 (1981), the EPA concluded that
this was neither a plenary delegation of
inherent authority to tribes to regulate
all reservation waters, nor was it a
standard that precluded tribal regulation
of any non-member or any off-reservation
activity. See 56 Fed. Reg. at 64877.
Instead, the agency chose a case-by-case
approach under which a tribe attempting
to satisfy element (3) of the regulation
would have to show that it possesses
inherent authority over the waters in
light of evolving case law. See 56 Fed.
Reg. at 64878. There was no question that
tribes could regulate the activities of
tribal members, undertaken on the
reservation, in order to protect the
quality of reservation waters. In
addition, the EPA concluded that "a tribe
may regulate the activities of non-
Indians on fee lands within its
reservations when those activities
threaten or have a direct effect on the
political integrity, the economic
security, or the health or welfare of the
tribe." Id.

 The EPA acknowledged that this will
usually be an easy showing, based on
"generalized findings" that water quality
is related to human health and welfare.
See id. Although the EPA stated that it
would make a case-specific determination
with regard to the scope of each tribe’s
authority, once a tribe has shown that
impairment of the waters on the
reservation would have a serious and
substantial effect on the health and
welfare of the tribe, the EPA presumes
that there has been an adequate showing
of inherent authority. Id. at 64879.
 B. The Mole Lake Band and its Application
For TAS Status

 The waters at issue in this case are
lakes and streams adjacent to or
surrounded by the reservation of the
Sokaogon Chippewa Community, also known
as the Mole Lake Band of Lake Superior
Chippewa Indians (the Band), located in
northeastern Wisconsin. The Mole Lake
reservation is unusual in two respects.
First, the Band is heavily reliant on the
availability of the water resources
within the reservation for food, fresh
water, medicines, and raw materials. In
particular, Rice Lake, the largest body
of water on the reservation, is a prime
source of wild rice, which serves as a
significant dietary and economic resource
for the Band. Second, all of the 1,850
acres within the reservation are held in
trust by the United States for the tribe.
None of the land within the reservation
is controlled or owned in fee by non-
members of the tribe.

 In August 1994, the Band applied for TAS
status under the Act. Wisconsin opposed
the application, arguing that it was
sovereign over all of the navigable
waters in the state, including those on
the reservation, and that its sovereignty
precluded any tribal regulation.
Nevertheless, after elaborate
administrative proceedings, on September
29, 1995, the EPA approved the Band’s
application, finding that the tribe had
satisfied all of the requirements of 40
C.F.R. sec. 131.8, including the
necessary demonstration of its inherent
authority over all water resources on the
reservation. In keeping with its earlier
positions, the EPA noted that the
inherent authority question did not turn
on who had title to the land underneath
the waters.

 This grant of TAS status alarmed the
State of Wisconsin, which saw it as both
an affront to the state’s sovereignty
and, more pragmatically, as an action
with the potential to throw a wrench into
the state’s planned construction of a
huge zinc-copper sulfide mine on the Wolf
River, upstream from Rice Lake. Concerned
about its loss of authority over certain
territory within its outer boundaries and
worried that the tribal water standards
might limit the activities of the mine by
prohibiting some or all of the discharge
from the mine, Wisconsin filed this
action in district court on January 25,
1996, reiterating its challenge to the
EPA’s grant of TAS status to the Band.
(The United States and the EPA waived
immunity under 5 U.S.C. sec. 702.) The
state’s case raises a fundamental
challenge to the TAS grant; the relief it
seeks is outright revocation of the
grant, rather than mere accommodation for
any particular project. We are therefore
satisfied that the issue is ripe now and
need not await the Band’s promulgation of
specific water quality standards. If
Wisconsin is right, it is entitled to
have the EPA’s creation of a state-like
entity within its borders voided--an
action that lies within the power of the
court. See Community Trend Service, Inc.
v. Commodity Futures Trading Comm’n, 233
F.3d 981 (7th Cir. 2000). Similarly, it
is one in which a failure to review the
issue now would cause hardship to the
parties. Id.

 In April 1999, the district court upheld
the TAS grant, finding that the EPA’s
determination that a tribe could regulate
all water within the reservation,
regardless of ownership, was a reasonable
interpretation of the relevant statutes
and regulations. Wisconsin now appeals.

II

 We review a grant of summary judgment de
novo, Doe v. Howe Military Sch., 227 F.3d
981, 990 (7th Cir. 2000), applying the
same standards as the district court: we
will set aside an agency determination
only if it is "procedurally defective,
arbitrary or capricious in substance, or
manifestly contrary to the statute." See
United States v. Mead Corp., 121 S.Ct.
2164, 2171 (2001); see also the
Administrative Procedure Act, 5 U.S.C.
sec. 706(2)(A) (set aside agency decision
if arbitrary, capricious, an abuse of
discretion, or otherwise not in
accordance with law). We should uphold
the agency’s determination as long as it
considered relevant data under the
correct legal standards and offered a
satisfactory explanation for its actions.
See Howard Young Med. Ctr., Inc. v.
Shalala, 207 F.3d 437, 441 (7th Cir.
2000). Moreover, the EPA here has
interpreted the statute by promulgating
formal regulations, using plenary notice-
and-comment procedures, and then
implementing its rule with respect to the
Band through a formal process in which
the state was entitled to be heard. Its
regulations and subsequent decision are
therefore entitled to deference under
Mead, 121 S. Ct. at 2171, and Chevron
U.S.A. Inc. v. Natural Res. Def. Council,
Inc., 467 U.S. 837, 843 (1994).

 Wisconsin is challenging the EPA’s
findings only with respect to the third
requirement for TAS status--the
demonstration of the tribe’s inherent
authority to regulate water quality
within the borders of the reservation.
Wisconsin gives three reasons why the
EPA’s determination that the tribe had
established such authority was
unreasonable.


 1.   Not "Within the Borders"

 For the first time on appeal, Wisconsin
contends that Rice Lake is not "within
the borders" of the reservation because
the legal description of the reservation
runs only to the Lake’s highwater mark.
This argument is waived, however, because
Wisconsin did not present it to the EPA.
See Vermont Nuclear Power Corp. v.
Natural Res. Def. Council, Inc., 435 U.S.
519, 553-54 (1978). Furthermore, even if
we could overlook this waiver and
considered the argument on its merits, we
would reject it. As the map attached to
the Stipulated Joint Appendix
illustrates, Rice Lake is almost
completely surrounded by reservation land
(and the small percentage that is not
abuts off-reservation trust lands). If
the EPA had been given a chance to
consider this point, it would have been
completely reasonable for it to interpret
the phrase "within the borders" to
include such a body of water.


 2.   No Authority Because No Title

 Second, Wisconsin argues that the tribe
does not have authority over the water
resources on the reservation because the
state has ownership of the underlying
lake beds. We will assume for the
purposes of this appeal that, pursuant to
the Equal Footing Doctrine, the state
does indeed have title to the lake beds
within the reservation. See Idaho v.
Coeur d’Alene Tribe of Idaho, 521 U.S.
261, 283-88 (1997); Utah Div. of State
Lands v. United States, 482 U.S. 193,
195-96 (1987).

 This court has indeed held that, in some
situations, state ownership of lake beds
may restrict a tribe’s authority to
regulate the waters running over those
beds. In Wisconsin v. Baker, 698 F.2d
1323, 1335 (7th Cir. 1983), we found
that, because the state of Wisconsin held
title to the underlying lake beds in a
reservation, the Chippewa Band was
precluded from restricting hunting and
fishing in the reservation waters.

 But contrary to Wisconsin’s assertions,
Baker does not dispose of this case. Most
importantly, Baker did not involve a
particular statute under which Congress
specified that tribes would be entitled
to be treated as states under particular
circumstances, and both Congress and the
responsible agency outlined the
regulatory authority tribes were to
exercise. The legal structure governing
Baker involved only the treaty that
created the reservation, and that treaty
did not contain any language regarding
the tribe’s power to regulate reservation
waters. The Clean Water Act, by contrast,
explicitly gives authority over waters
within the borders of the reservation to
the tribe and does not even discuss
ownership rights. Secondly, the Baker
court explicitly stated that the
"defendants do not contend that public
fishing and hunting pose an imminent
threat to the ’political integrity, the
economic security, or the health or
welfare’ of the Band." Id. at 1335. Thus,
the Baker court left open the possibility
that state ownership of lake beds may not
preclude tribal authority over the waters
if tribal regulation was necessary to
protect the "political integrity, the
economic security, or the health or
welfare" of the Band, as both parties
concede is the case here. Thirdly, Baker
was about hunting and fishing rights,
which have traditionally been the subject
of state regulation, while the ultimate
authority for the water quality standards
lies with the federal EPA, not the state
of Wisconsin (which itself has acted only
pursuant to federal delegation).

 Baker therefore has little or no
application to the case before us. We
find pertinent instead a number of legal
principles all of which support the EPA’s
determination that a state’s title to a
lake bed does not in itself exempt the
waters from all outside regulation.
First, "the power of Congress to regulate
commerce among the states involves the
control of the navigable waters of the
United States." Coyle v. Smith, 221 U.S.
559, 573 (1911). This power has not been
eroded in any way by the Equal Footing
Doctrine cases, which "involved only the
shores of and lands beneath navigable
waters. [The doctrine] cannot be accepted
as limiting the broad powers of the
United States to regulate navigable
waters under the Commerce Clause."
Arizona v. California, 373 U.S. 546, 597-
98 (1963). Unlike the situation in Solid
Waste Agency of Northern Cook County v.
U.S. Army Corps of Engineers, 531 U.S.
159 (2001), here no one disputes that the
waters at issue are "navigable waters"
for purposes of either the Clean Water
Act or the Commerce Clause.

 The breadth of federal authority over
Indian affairs is equally well-
established: "The Constitution vests the
Federal Government with exclusive
authority over relations with Indian
tribes." Montana v. Blackfeet Tribe, 471
U.S. 759, 764 (1985); United States v.
Wheeler, 435 U.S. 313, 319 (1978)
("Congress has plenary authority to
legislate for the Indian tribes in all
matters."); U.S. Const., Art. I, sec. 8,
cl. 3. In fact, in the absence of tribal
TAS status, the EPA and not the state of
Wisconsin might well be the proper
authority to administer Clean Water Act
programs for the reservation, because
state laws may usually be applied to
Indians on their reservations only if
Congress so expressly provides. See
California v. Cabazon Band of Mission
Indians, 480 U.S. 202, 207 (1987).

 Because the state does not contend that
its ownership of the beds would preclude
the federal government from regulating
the waters within the reservation, it
cannot now complain about the federal
government allowing tribes to do so. It
was reasonable for the EPA to determine
that ownership of the waterbeds did not
preclude federally approved regulation of
the quality of the water, and we uphold
that determination.

 3.   No Inherent Authority over Off-
Reservation Activities

 Finally, Wisconsin argues that the Band
did not make the required showing of
authority over those activities
potentially affected by its imposition of
water quality standards. Because the EPA
has determined that, unlike the Clean Air
Act, the Clean Water Act is not an
express delegation of power to tribes,
see 56 Fed. Reg. at 64880, the EPA
requires tribes to show that they already
possessed inherent authority over the
activities undoubtedly affected by the
water regulations. EPA regulations allow
a tribe to establish this authority by
showing that impairment of the
reservation’s waters would affect "the
political integrity, the economic
security, or the health or welfare of the
tribe." 56 Fed. Reg. at 64877.

 This regulatory language tracks the
Supreme Court’s decision in Montana v.
United States, supra, in which the Court
recognized the general rule that "the
inherent sovereign powers of an Indian
tribe do not extend to the activities of
nonmembers of the tribe," 450 U.S. at
565, but went on to hold that "[a] tribe
may also retain inherent power to
exercise civil authority over the conduct
of non-Indians on fee lands within its
reservation when that conduct threatens
or has some direct effect on the
political integrity, the economic
security, or the health or welfare of the
tribe." Id. at 566. See also Atkinson
Trading Co., Inc. v. Shirley, 121 S. Ct.
1825 (2001). The regulations also track
the more recent Supreme Court language in
Strate v. A-1 Contractors, 520 U.S. 438
(1997), by noting that authority is
usually proper because "water quality
management serves the purpose of
protecting public health and safety,
which is a core governmental function,
whose exercise is critical to self-
government." 56 Fed. Reg. at 64879. (We
note too that this case does not involve
any question of the tribe’s ability to
restrict activities of state law
enforcement authorities on the
reservation, when those officials are
investigating off-reservation crimes, and
thus the rule of Hicks, 121 S. Ct. 2304,
is not implicated.)

 Once a tribe is given TAS status, it has
the power to require upstream off-
reservation dischargers, conducting
activities that may be economically
valuable to the state (e.g., zinc and
copper mining), to make sure that their
activities do not result in contamination
of the downstream on-reservation waters
(assuming for the sake of argument that
the reservation standards are more
stringent than those the state is
imposing on the upstream entity). See
Albuquerque v. Browner, 97 F.3d 415 (10th
Cir. 1996). Such compliance may impose
higher compliance costs on the upstream
company, or in the extreme case it might
have the effect of prohibiting the
discharge or the activities altogether.
This is a classic extraterritorial
effect, which Wisconsin argues is
impermissible and takes this case beyond
the scope of Montana, which concerned
only tribal authority over non-member
activities on reservation fee lands.

 But this is not the only situation where
upstream and downstream users may have
different standards and some
accommodation is necessary. Wisconsin’s
argument could be made equally if the
downstream regulator were Illinois, yet
in that case the need for the two states
to coordinate their standards, or for the
upstream company to comply with the more
stringent rules, would be clear. In fact,
Congress anticipated this very problem in
the statute, and it had the following to
say about it:

The Administrator shall, in promulgating
such regulations [for TAS status],
consult affected States sharing common
water bodies and provide a mechanism for
the resolution of any unreasonable
consequences that may arise as a result
of differing water quality standards that
may be set by States and Indian tribes
located on common bodies of water. Such
mechanism shall provide for explicit
consideration of relevant factors
including, but not limited to, the
effects of differing water quality permit
requirements on upstream and downstream
dischargers, economic impacts, and
present and historical uses and quality
of the waters subject to such standards.
Such mechanism should provide for the
avoidance of such unreasonable
consequences in a manner consistent with
the objective of this chapter.

33 U.S.C. sec. 1377(e).
 The EPA has developed the mechanism
called for by the statute, which allows
it to mediate conflicting interests when
a tribe’s standards differ from those of
a state. See also 33 U.S.C. sec. 1341(a).
In addition, once a tribe is given TAS
status, the Act gives it the same right
as that given to states to object to
permits issued for upstream off-
reservation activities. See 56 Fed. Reg.
at 64887. In deciding whether to issue a
permit for discharge within a state that
may violate the water quality standards
of a downstream tribe, the EPA may ask
the parties to engage in mediation or
arbitration, in which the decision-maker
and the EPA administrator, who has the
final authority over the issuance of the
permit, will consider such factors as
"the effects of differing water quality
permit requirements on upstream and
downstream dischargers, economic impacts,
and present and historical uses and
quality of the waters subject to such
standards." 33 U.S.C. sec. 1377(e). The
EPA may then ask the tribe to issue a
temporary variance from its standards for
the particular discharge or may ask the
state to provide additional water
pollution controls. See 54 Fed. Reg. at
39099-101; 56 Fed. Reg. at 64885-89; 40
C.F.R. secs. 121.11 through 121.16.
This mechanism, rather than a futile
effort to avoid extraterritorial effects,
is the way both Congress and the agency
sought to accommodate the inevitable
differences that would arise.

 We say "inevitable" because activities
located outside the regulating entity
(here the reservation), and the resulting
discharges to which those activities can
lead, can and often will have "serious
and substantial" effects on the health
and welfare of the downstream state or
reservation. There is no case that
expressly rejects an application of
Montana to off-reservation activities
that have significant effects within the
reservation, and it would be exceedingly
hard to say that the EPA’s interpretation
is contrary to law in the face of the
express recognition of this issue and the
choice of a solution in the statute
itself. It was reasonable for the EPA to
determine that, since the Supreme Court
has held that a tribe has inherent
authority over activities having a
serious effect on the health of the
tribe, this authority is not defeated
even if it exerts some regulatory force
on off-reservation activities.

 Finally, we think Wisconsin exaggerates
the power of the tribe to veto upstream
discharge activities. The tribe cannot
impose any water quality standards or
take any action that goes beyond the
federal statute or the EPA’s power. To
the contrary, the EPA supervises all
standards and permits. Far from allowing
a tribe to veto a state permit, granting
TAS status to tribes simply allows the
tribes some say regarding those standards
and permits. It is quite possible that,
in particular cases, perhaps through the
vehicle of the statutory mediation
mechanism, the EPA may require the
tribe’s more stringent standards to give
way to upstream discharge and
development. Whether the tribe or the
state ultimately "wins" in the dispute,
it is the EPA, not the tribe or the
state, that has the ultimate authority to
decide whether or not to issue a permit.

 Because the Band has demonstrated that
its water resources are essential to its
survival, it was reasonable for the EPA,
in line with the purposes of the Clean
Water Act and the principles of Montana,
to allow the tribe to regulate water
quality on the reservation, even though
that power entails some authority over
off-reservation activities. Since a state
has the power to require upstream states
to comply with its water quality
standards, to interpret the statutes to
deny that power to tribes because of some
kind of formal view of authority or
sovereignty would treat tribes as second-
class citizens. Nothing in sec. 1377(e)
indicates that Congress authorized any
such hierarchy. Particularly in light of
the deference we owe to the EPA’s
decisions here, we see nothing that would
justify our setting aside the agency’s
action.

III

 We conclude that the EPA’s grant of TAS
status to the Band is not arbitrary,
unreasonable, or contrary to law and we
therefore AFFIRM the district court’s
judgment. We note once again in closing
that the EPA’s decision in each case
seeking TAS status is fact-specific. In
this case, both parties conceded that the
waters within the Band’s reservation are
very important to the Band’s economic and
physical existence. Additionally, the
reservation here is unusual in that there
are no parcels of fee land within the
reservation owned by non-members of the
tribe. We have no occasion to say
whether, on a different set of facts, the
EPA might extend the notion of a tribe’s
"inherent authority" to affect off-
reservation activities so far as to go
beyond the standards of the statute or
the regulations. If it ever arises, that
will be another case, for another day.

FOOTNOTE

/* Pursuant to Fed. R. App. P. 43(c), Christie
Whitman is substituted as a party for Carol M.
Browner.
