                           COURT OF APPEALS OF VIRGINIA


Present: Chief Judge Felton, Judge Humphreys and Senior Judge Clements
Argued at Richmond, Virginia


COMMONWEALTH OF VIRGINIA,
 ex rel. VIRGINIA STATE WATER CONTROL BOARD AND
 DAVID K. PAYLOR, DIRECTOR,
 DEPARTMENT OF ENVIRONMENTAL QUALITY

v.     Record No. 2221-09-2

BLUE RIDGE ENVIRONMENTAL
 DEFENSE LEAGUE, INC., PEOPLE’S ALLIANCE
 FOR CLEAN ENERGY, BARBARA J. CRAWFORD,
 GARY MULLER AND ARDEN “TERSH” NORTON              OPINION BY
                                          JUDGE ROBERT J. HUMPHREYS
VIRGINIA ELECTRIC AND POWER COMPANY, D/B/A        JUNE 29, 2010
 DOMINION VIRGINIA POWER

v.     Record No. 2222-09-2

BLUE RIDGE ENVIRONMENTAL
 DEFENSE LEAGUE, INC., PEOPLE’S ALLIANCE
 FOR CLEAN ENERGY, BARBARA J. CRAWFORD,
 GARY MULLER AND ARDEN “TERSH” NORTON


               FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
                            Margaret P. Spencer, Judge

              E. Duncan Getchell, Jr., State Solicitor General (William C. Mims,
              Attorney General; Robert L. Chaffe, Senior Assistant Attorney
              General; David C. Grandis, Assistant Attorney General, on briefs),
              for appellants Commonwealth of Virginia, ex rel. Virginia State
              Water Control Board and David K. Paylor, Director of the
              Department of Environmental Quality.

              J. Tracy Walker (David E. Evans; E. Duncan Getchell, Jr.; Darin K.
              Waylett; Kristy A. Niehaus Bulleit; McGuireWoods LLP; Hunton
              & Williams LLP, on briefs), for appellant Virginia Electric and
              Power Company, d/b/a Dominion Virginia Power.

              James B. Dougherty (Robert L. Wise; Law Office of J.B.
              Dougherty; Bowman and Brooke LLP, on brief), for appellees.
       The Commonwealth and Virginia Electric and Power Company (“appellants”) appeal

from an order of the Circuit Court of the City of Richmond (“circuit court”) setting aside a

portion of the reissuance of a five-year water discharge permit for Dominion Virginia Power’s

North Anna Nuclear Power Station (“NANPS”). Specifically, appellants contend that the circuit

court erred in (1) reversing the Virginia State Water Control Board (“SWCB”) and holding that

the SWCB had not followed federal law as required by a state regulation where the SWCB had

reasonably deferred to the Environmental Protection Agency’s (“EPA”) interpretation of federal

law and its own regulations; (2) reversing the SWCB based upon the circuit court’s own

independent reading of EPA regulations contrary to the EPA comment letter construing its own

regulations and the EPA’s consistent past practice which appellants contend were entitled to, but

not given, great deference by the circuit court; and (3) finding de novo that the waste heat

treatment facility (“WHTF”) is a “cooling lake” or “cooling pond” within the meaning of the

former federal regulations rather than remanding for further factual determinations by the

SWCB. For the following reasons, we agree with appellants and reverse the circuit court.

                                       I. BACKGROUND

       The record in this case is voluminous and complex, but the facts relevant to the issues

before us on appeal are relatively straightforward and are essentially as follows. In 1971, Lake

Anna 1 was formed by the creation of a dam across the main stem of the North Anna River in

Louisa and Spotsylvania counties to provide cooling water to NANPS, a nuclear power station

that produces electricity by steam turbine generators. NANPS went into operation in 1978. The



       1
          While the parties have used different labels to refer to the two impoundments that make
up what the appellees refer to collectively as Lake Anna, for clarity and consistency, we will
refer to them as “Lake Anna” and the “WHTF.” “Lake Anna” is what the parties and the SWCB
have referred to as the “cool side” or “Lake Anna Reservoir,” and “WHTF” is what the parties
and SWCB have referred to as the “Waste Heat Treatment Facility,” “cooling lagoons,” “hot
side,” “or “the Wild West.”
                                                -2-
impounded water is divided into two sections. Lake Anna contains a large 9,600 acre reservoir

that was filled by December 1972. The WHTF is comprised of 3,400 acres subdivided further by

dams into three “lagoons.” The purpose of the WHTF is to allow the heated water condensed

from the steam turbines from NANPS to cool to ambient temperature by flowing from one

“lagoon” to the next prior to its discharge into Lake Anna.

       Since 1977, Dominion has obtained a series of five-year Virginia Pollutant Discharge

Elimination System (“VPDES”) permits from the SWCB to discharge water from the WHTF

into Lake Anna. The SWCB has consistently taken the position in the permit that a separate

permit was not required for the discharge of heated water from NANPS into the WHTF because

it classified the WHTF as a “waste treatment system” falling under an exception in the federal

Clean Water Act, EPA regulations, and state regulations for waste treatment systems. 2

       On June 28, 2005, Dominion applied for the reissuance of the VPDES permit with the

Virginia Department of Environmental Quality’s (“DEQ”) SWCB staff. In 2007, several

non-profit organizations and individuals (“appellees”) living near Lake Anna and the WHTF

challenged the SWCB’s regulation of NANPS’s thermal discharges in the permit, and

specifically challenged the reissuance of the permit on the grounds that the discharges from

NANPS into the WHTF required a separate permit. 3


       2
         A discharge permit is required under both federal and state regulations for the discharge
of pollutants into “waters of the United States” and “state waters.” 33 U.S.C. § 1342(a); Code
§ 62.1-44.5(A)(1). However, EPA regulations and state regulations include a waste treatment
system exception for discharges into water classified as a “waste treatment system,” thus, not
requiring a separate discharge permit for discharges of pollutants into such waters. 40 C.F.R.
§ 122.2; 9 VAC 25-31-10. In this and all previous permit renewal proceedings, the WHTF has
been considered a “waste treatment system” by the SWCB and EPA.
       3
         Under EPA regulations, hot water is considered a pollutant for the purposes of the Clean
Water Act. 33 U.S.C. § 1362(6) (“The term ‘pollutant’ means . . . heat, . . . and industrial,
municipal, and agricultural waste discharged into water.”). Under Virginia regulations, hot water
is considered a pollutant for the purposes of the State Water Control Law. Code § 62.1-44.3
(“‘Industrial wastes’ means liquid or other wastes resulting from any process of industry,
                                                -3-
       The DEQ requested an official advisory opinion from the Attorney General of Virginia

on this issue in compliance with Code § 2.2-505. 4 The Attorney General’s opinion, which he

released on November 30, 2006, stated that the SWCB did not have “legal authorization to

impose limitations on thermal effluent involved in discharges by [NANPS]” into the WHTF

because the waste treatment system exception in 9 VAC 25-31-10 excludes the WHTF from the

discharge permit regulations. In addition, he noted that the SWCB had historically declined to

regulate the WHTF; and further, if there was any requirement for interpretation of the regulation,

the agency’s interpretation was entitled to “great deference” unless it was arbitrary and

capricious. The Attorney General also noted that the federal waste treatment system exception

specifically excluded “cooling ponds” unlike the state waste treatment system exception, but that

the EPA had approved the SWCB regulations, which did not contain this exclusion.5

       On September 20, 2007, the EPA’s Region III Director of the Water Protection Division

submitted a comment to the proposed VPDES permit by letter (“EPA Letter”) to the DEQ. In

the EPA Letter, the director specifically stated “[f]ollowing this review, and in the exercise of

EPA’s discretion in NPDES permit oversight matters, EPA does not object to []DEQ’s issuance

of the North Anna VPDES permit.” The director also noted the DEQ’s determination that the


manufacture, trade, or business or from the development of any natural resources.”); see also
Code § 62.1-44.5(A)(1) (“[I]t shall be unlawful for any person to . . . [d]ischarge into state waters
. . . industrial wastes . . . .”).
       4
         “The Attorney General shall give his advice and render official advisory opinions in
writing only when requested in writing so to do by . . . the head of a state department, division,
bureau, institution or board.” Code § 2.2-505.
       5
         While the EPA relinquished authority to issue NPDES permits to the Commonwealth as
permitted by the Clean Water Act and federal regulations, 33 U.S.C. § 1342(b) & (c)(1) (2000),
40 C.F.R. § 122.1(a)(2), it still retains supervisory power to respond, object, or make comments
or recommendations to proposed permits as set forth in the Memorandum of Understanding
(“MOU”) between the SWCB and the Regional Administrator of the EPA. Memorandum of
Understanding Regarding Permit and Enforcement Programs Between the State Water Control
Board and the Regional Administrator, Region III, Environmental Protection Agency 3 (Mar. 31,
1975) [hereinafter “Memorandum of Understanding”].
                                                  -4-
WHTF is a “waste heat treatment facility” subject to the waste treatment system exception, the

Attorney General’s confirmation of the DEQ’s determination that the WHTF was subject to the

exception, and the history of the federal regulation and exception. The EPA director then

concluded that the “EPA is not objecting to []DEQ’s determination on the regulatory status of

the [WHTF].” (Emphasis added).

       On October 25, 2007, the SWCB reissued the NANPS permit without regulating the

discharge of heated water from NANPS into the WHTF. Appellees then pursued an appeal of

right under the Virginia Administrative Process Act to the circuit court. On February 20, 2009,

the circuit court determined that Virginia law required regulation of the discharges from the

power plant into the WHTF because the waste treatment system exception contained in the EPA

regulations did not apply to the WHTF. The circuit court specifically held that the exception is

inapplicable because the WHTF is a “cooling lake,” which is included in the definition of

“waters of the United States.” 6

       On February 27, 2009, appellants filed a joint motion for reconsideration of the February

20, 2009 ruling in light of Ohio Valley Environmental Coalition v. Aracoma Coal Co., 556 F.3d

177 (4th Cir. 2009), petition for cert. filed, 78 U.S.L.W. 3099 (U.S. Aug. 26, 2009) (No. 09-247),



       6
          The circuit court based this determination on the 1979 EPA definition of “cooling lake”
in the context of technology-based rules for steam electric generating facilities in 40 C.F.R.
§ 423.11(n). The circuit court turned to this definition because the federal “waste treatment
facilities” exception included an “exception to the exception” for “cooling ponds” and referenced
40 C.F.R. § 423.11(m) for definition purposes. The circuit court then held that “[t]he waste
treatment system exception simply does not include cooling ponds or lakes.” However, in any
event, this “exception to the exception” part of the regulation in 40 CFR § 122.2 was suspended
in 1982 and the definitions of “cooling pond” and “cooling lake” in 40 C.F.R. § 423.11 were
removed by the EPA and were not part of the federal regulatory scheme at the time the circuit
court rendered its decision in this case. 47 Fed. Reg. 52,290 (Nov. 19, 1982). Prior to its
removal from the regulations, “cooling lake” was defined as “any manmade water impoundment
which impedes the flow of a navigable stream and which is used to remove waste heat from
heated condenser water prior to recirculating the water to the main condenser.” 39 Fed. Reg.
36,186, 36,199 (Oct. 8, 1974).
                                                -5-
a decision by the United States Court of Appeals for the Fourth Circuit which upheld the

application of the federal waste treatment system exception to systems created in waters of the

United States for salt mining purposes. However, the circuit court disagreed, and in its June 8,

2009 order held that the factual differences between this case and Ohio Valley warranted a

different conclusion. Specifically, the circuit court reasoned that the SWCB’s application of the

waste treatment system exception in this case was inconsistent with federal regulations, and not

entitled to deference because a state agency’s discretion “cannot be exercised in a manner

‘inconsistent with the regulation.’”

        On September 14, 2009, the circuit court entered the final order holding that Virginia law

required state regulation of the WHTF consistent with the circuit court’s interpretation of federal

EPA regulations. Specifically, the circuit court held that the SWCB was required to regulate the

discharge of heated water from NANPS into the WHTF due to the fact that the WHTF is a

“water[] of the United States” as defined by federal regulation; and because the circuit court

classified the WHTF as a “cooling lake,” it held that the WHTF does not fall under the “waste

treatment systems” exemption. 7 Thus, the circuit court held the SWCB erred as a matter of law

in declining regulatory jurisdiction over the WHTF. In declining to regulate the WHTF, the

circuit court held that the SWCB, when it reissued the NANPS permit, violated Virginia State

Water Control Law VPDES regulations, and relevant portions of the Clean Water Act. More

specifically, the circuit court held that “to the extent the state is protecting less than what is




        7
          At oral argument, appellees’ counsel conceded that the circuit court misapplied 40 CFR
§ 122.2 (the federal waste treatment systems exemption) to the present case, but argued for the
first time that it, nonetheless, reached the right result for the wrong reason. Appellees did not
brief this issue, thus we decline to consider it. See Rule 5A:21(b).

                                                  -6-
protected by the C[lean] W[ater] A[ct], the state is violating state law.” The circuit court then

remanded the permit back to the SWCB for further proceedings consistent with its holding.

       This appeal followed.

                                          II. ANALYSIS

       Appellants argue that the circuit court erred in (1) finding the SWCB erred by failing to

conduct an independent assessment of compliance with federal law and in deferring to the EPA

Letter; (2) failing to defer to the EPA’s interpretation of federal law by reaching the merits of the

meaning of federal law and misapprehending that law; (3) failing to accord the appropriate

deference to the EPA’s interpretation of federal regulations by concluding that the federal

exception does not apply; and (4) remanding and directing the SWCB to issue the permit

pursuant to its de novo determinations. Essentially, appellants contend that the circuit court erred

in the standard of review it applied with respect to the SWCB’s interpretation of its own

regulations, and the standard of review it applied to SWCB’s deference to the EPA Letter.

                                      A. Standard of Review

       Code § 2.2-4027 of the Virginia Administrative Process Act (“VAPA”) authorizes

judicial review of an agency decision. Under VAPA, the circuit court reviews an agency’s

action in a manner ‘“equivalent to an appellate court’s role in an appeal from a trial court.’” J.P.

v. Carter, 24 Va. App. 707, 721, 485 S.E.2d 162, 169 (1997) (quoting Sch. Bd. v. Nicely, 12

Va. App. 1051, 1061-62, 408 S.E.2d 545, 551 (1991)). “In this sense, the General Assembly has

provided that a circuit court acts as an appellate tribunal.” Gordon v. Allen, 24 Va. App. 272,

277, 482 S.E.2d 66, 68 (1997) (citation omitted). “The burden is upon the party complaining of

the agency action to demonstrate an error of law subject to review.” Johnston-Willis, Ltd. v.

Kenley, 6 Va. App. 231, 241, 369 S.E.2d 1, 6 (1988) (citing Code § 9-6.14:17; Roanoke

Memorial Hospitals v. Kenley, 3 Va. App. 599, 603, 352 S.E.2d 525, 527 (1987)).

                                                -7-
          Judicial review of an agency decision is limited to determining “1. [w]hether the agency

acted in accordance with law; 2. [w]hether the agency made a procedural error which was not

harmless error; and 3. [w]hether the agency had sufficient evidential support for its findings of

fact.” Id. On reviewing the claims of error, an agency’s factual determination is given

substantial judicial deference, and is reviewed “only for whether they have support in substantial

evidence.” Mazloumi v. Dep’t of Envtl. Quality, 55 Va. App. 204, 208, 684 S.E.2d 852, 854

(2009).

          On appeal of an agency’s determination of law, the deference accorded depends on the

law being interpreted.

                 [W]here the question involves an interpretation which is within the
                 specialized competence of the agency and the agency has been
                 entrusted with wide discretion by the General Assembly, the
                 agenc’s decision is entitled to special weight in the courts. “The
                 rationale of the statutory scheme is that the [administrative agency]
                 shall apply expert discretion to matters coming within its
                 cognizance, and judicial interference is permissible only for relief
                 against the arbitrary or capricious action that constitutes a clear
                 abuse of the delegated discretion. The reviewing judicial authority
                 may not exercise anew the jurisdiction of the administrative
                 agency and merely substitute its own independent judgment for
                 that of the body entrusted by the Legislature with the
                 administrative function.” Va. Alcoholic Beverage Control
                 Comm’n v. York St. Inn, Inc., 220 Va. 310, 315, 257 S.E.2d 851,
                 855 (1979).

Johnston-Willis, Ltd., 6 Va. App. at 243-44, 369 S.E.2d at 8 (emphasis added). “‘A decision is

arbitrary and capricious only if there is no credible evidence in the record to support the finding

and the agency arbitrarily disregarded uncontradicted evidence.’” Mazloumi, 55 Va. App. at

209, 684 S.E.2d at 855 (quoting Palmer v. Commonwealth Marine Res. Comm’n, 48 Va. App.

78, 87, 628 S.E.2d 84, 89 (2006)). Under this deference, “[c]ourts generally defer to an agency’s

interpretation of its own regulations.” Id.




                                                 -8-
       However, courts do not defer to an agency’s interpretation “‘[i]f the issue falls outside the

area generally entrusted to the agency, and is one in which the courts have a special competence,

i.e., the common law or constitutional law . . . .’” Johnston-Willis, Ltd., 6 Va. App. at 243, 369

S.E.2d at 8 (quoting Hi-Craft Clothing Co. v. NLRB, 660 F.2d 910, 914-15 (3d Cir. 1981) (citing

Piper v. Chris Craft Industries, 430 U.S. 41 n.27 (1977))). An agency’s “legal interpretations of

statutes” is accorded no deference because “[w]e have long held that ‘pure statutory

interpretation is the prerogative of the judiciary,’ and thus, Virginia courts ‘do not delegate that

task to executive agencies.’” The Mattaponi Indian Tribe v. Commonwealth Dep’t of Envt’l

Quality, 43 Va. App. 690, 707, 601 S.E.2d 667, 676 (2004) (quoting Finnerty v. Thornton Hall,

Inc., 42 Va. App. 628, 634-35, 593 S.E.2d 568, 571 (2004)), aff’d in part, rev’d in part sub nom.

Alliance to Save the Mattaponi v. Commonwealth Dep’t of Envt’l Quality ex rel. State Water

Control Board, 270 Va. 423, 621 S.E.2d 78 (2005).

               [W]here the issue involves a legal determination or statutory
               interpretation, this Court does a de novo review, especially if the
               statutory language is clear. “We are required to construe the law
               as it is written. ‘An erroneous construction by those charged with
               its administration cannot be permitted to override the clear
               mandates of a statute.’ Hurt v. Caldwell, 222 Va. 91, 97, 279
               S.E.2d 138, 142 (1981). When an agency’s statutory interpretation
               conflicts with the language of the statute or when the interpretation
               has not been consistently and regularly applied, the usual deference
               to an agency’s interpretation should be withheld. University of
               Richmond v. Bell, 543 F. Supp. 321, 327 (E.D. Va. 1982).”
               Commonwealth, Dep’t of Mines, Minerals & Energy v. May Bros.,
               Inc., 11 Va. App. 115, 119, 396 S.E.2d 695, 697 (1990).

Shippers’ Choice of Va., Inc. v. Smith, 52 Va. App. 34, 37-38, 660 S.E.2d 695, 696-97 (2008),

rev’d on other grounds, 277 Va. 593, 674 S.E.2d 695 (2009).

                         B. The Circuit Court’s Deference to the SWCB

       Appellants contend that the circuit court erred in finding the SWCB erred in relying on

the EPA Letter and had a duty under state law to independently construe the EPA’s regulations,


                                                -9-
thus creating an obligation for the SWCB that is not in federal or state law. Specifically,

appellants contend that the SWCB had no duty to make an independent assessment of the federal

Clean Water Act and its attendant regulations, since neither state nor federal law give the SWCB

the right, power, or obligation to make such an independent assessment. Appellants further

contend that the SWCB’s deference to the EPA Letter construing the EPA’s own regulations is

not arbitrary, capricious, or contrary to law. Finally, appellants maintain that even assuming the

circuit court properly reached the merits of the meaning of federal law, it misapprehended

federal law without giving proper deference to the EPA’s interpretation when it determined that

“cooling lakes” and “cooling ponds” are excluded from the federal waste treatment system

exception. Furthermore, appellants allege the circuit court did not give proper deference to the

EPA’s interpretation of the federal regulation when it held that the exception does not apply to

“cooling lakes” or “cooling ponds.” 8

       First, we note that the requirement that a VPDES permit be “issued by the [SWCB]

pursuant to the Clean Water Act and the State Water Control Law” is a regulatory requirement

and not a statutory one. 9 VAC 25-31-20. Thus, reviewing courts must give special weight to

the agency’s interpretation of its own regulation, and interfere only if its interpretation is



       8
          Appellants cite Ohio Valley to support their contention that an agency’s interpretation
of its own regulation is compelling when the agency has consistently maintained that
interpretation. 556 F.3d at 213-15 (Fourth Circuit holdings are not controlling on this Court, but
can be turned to as persuasive authority. See Steffel v. Thompson, 415 U.S. 452, 485 n.3 (1974)
(Rehnquist, J. concurring)). In Ohio Valley, the Fourth Circuit upheld the EPA’s decision that
“waters of the United States,” as used in the Clean Water Act, does not require instream waste
treatment systems to be classified by permit writers as “waters of the United States” in every
instance. 556 F.3d at 213-15.
         While the Fourth Circuit decision is not binding on us but can be persuasive, we do not
find it so with respect to the facts of this case. In Ohio Valley, the federal court reviewed
permits issued by the U.S. Army Corps of Engineers involving strip mining and analyzed them
under the federal Clean Water Act. In this case we are reviewing a permit issued by the SWCB
and analyzing it in light of state regulations and the MOU. Thus, we do not find Ohio Valley
applicable based on the facts in this case.
                                                - 10 -
arbitrary or capricious constituting a clear abuse of its delegated discretion. Johnston-Willis,

Ltd., 6 Va. App. at 243-44, 369 S.E.2d at 8.

       In turning to the permit program and the requirements of the SWCB, we note this case is

one of first impression in Virginia, and, thus, we must look closely at the interplay between the

SWCB and the EPA, and the “delicate partnership” between the two in eliminating water

pollution. Chesapeake Bay Found., Inc. v. Va. State Water Control Board, 495 F. Supp. 1229,

1232 (E.D. Va. 1980) (“The [Clean Water Act], in general, and the NPDES program, in

particular, thus join the state and federal governments in a ‘delicate partnership’ endeavoring to

control and eventually eliminate water pollution.” (quoting Save the Bay, Inc. v. Administrator

of EPA, 556 F.2d 1282, 1284 (5th Cir.), reh’g den., 560 F.2d 1023 (1977))). Since the enactment

of the federal Clean Water Act, 33 U.S.C. § 1251 et seq., in 1972, a National Pollutant Discharge

Elimination System (“NPDES”) permit is required under federal law for discharges into

navigable “waters of the United States.” 33 U.S.C. § 1342(a). 9 Similarly, Virginia State Water

Control Law, Code §§ 62.1-44.2 to -44.34:28, requires a VPDES permit for the discharge of

pollutants into “state waters.” Code § 62.1-44.5(A)(1). However, both federal and state law

include a “waste treatment system” exception which, if applicable, eliminates the need for an




       9
           Specifically,

                 the Clean Water Act prohibits the discharge of pollutants except
                 pursuant to an NPDES permit issued by the EPA. The “discharge
                 of pollutants” is defined as “any addition of any pollutant to
                 navigable waters from any point source.” 33 U.S.C.
                 § 1362(12)(A). “Navigable waters” are defined as “the waters of
                 the United States, including the territorial seas.” 33 U.S.C.
                 § 1362(7).

West Virginia Coal Assoc. v. Reilly, 728 F. Supp. 1276, 1288 (S.D. W. Va. 1989).


                                               - 11 -
additional permit for discharge of pollutants into either “waters of the United States” or “state

waters.” 40 C.F.R. § 122.2 10 ; 9 VAC 25-31-10. 11

       The Clean Water Act and federal regulations allow states to administer their own NPDES

program in place of the federal program once the state program is approved by the EPA,

authorized under state law, and has standards that are at least as stringent as federal standards.

33 U.S.C. § 1342(b) & (c)(1) (2000); 40 C.F.R. § 122.1(a)(2). In 1975, the EPA approved

Virginia’s program. Consequently, the federal NPDES was suspended, and the SWCB now

administers Virginia’s pollutant discharge elimination system program. Virginia: State Program

for Control of Discharges of Pollutants to Navigable Waters, 40 Fed. Reg. 20,129 (May 1, 1975).

“Under this statutory scheme, a permit issued by Virginia serves as both a VPDES and a NPDES


       10
            40 C.F.R. § 122.2:

                 Waste treatment systems, including treatment ponds or lagoons
                 designed to meet the requirements of [the] C[lean] W[ater] A[ct]
                 (other than cooling ponds as defined in 40 CFR § 423.11(m) which
                 also meet the criteria of this definition) are not waters of the United
                 States. This [exception] applies only to manmade bodies of water
                 which neither were originally created in waters of the United States
                 (such as disposal area in wetlands) nor resulted from the
                 impoundment of waters of the United States. [See Note 1 of this
                 section.]

                 [Note 1. -- At 45 FR 48620, July 21, 1980, the [EPA] suspended
                 until further notice in § 122.2, the last sentence beginning “This
                 [exception] applies . . .” in the definition of “Waters of the United
                 States.” This revision continues that suspension.].

       11
            9 VAC 25-31-10:

                 Waste treatment systems, including treatment ponds or lagoons
                 designed to meet the requirements of the [Clean Water Act] and
                 the law, are not surface waters. Surface waters do not include prior
                 converted cropland. Notwithstanding the determination of an
                 area’s status as prior converted cropland by any other agency, for
                 the purposes of the Clean Water Act, the final authority regarding
                 the Clean Water Act jurisdiction remains with the EPA.
                                                 - 12 -
permit.” State Water Control Board v. Smithfield Foods, Inc., 261 Va. 209, 212, 542 S.E.2d

766, 768 (2001).

       The Virginia State Water Control Law permits the SWCB to “adopt rules governing the

procedure of the [SWCB] with respect to: . . . (c) the issuance of certificates . . . .” Code

§ 62.1-44.15(7). Pursuant to this power, the SWCB adopted the VPDES Permit Regulations,

which “delineate[] the procedures and requirements to be followed in connection with VPDES

permits issued by the [SWCB] pursuant to the Clean Water Act and the State Water Control

Law.” 9 VAC 25-31-20. Under these regulations, a permit cannot be issued if “the conditions of

the permit do not provide for compliance with the applicable requirements of the C[lean] W[ater]

A[ct] or the law, or regulations promulgated under the C[lean] W[ater] A[ct] or the law.” 9 VAC

25-31-50(C).

       Although Virginia issues the permits, as noted above, the EPA retains supervisory power

to respond, object, or make comments or recommendations to proposed permits as set forth in

the MOU. 12 33 U.S.C. § 1342(c)(3), (d); Memorandum of Understanding 3. In compliance with

the EPA’s supervisory power, the SWCB submits all proposed permits to which the EPA has not

waived its right of review to the Regional Administrator of EPA’s Region III, and the EPA has

thirty days under the MOU, Memorandum of Understanding 5-6, and ninety days under the

Clean Water Act, 33 U.S.C. § 1342(d), from receipt of the proposed permit to take any of the

above mentioned actions. If the EPA objects, the state permit cannot be issued unless it makes

revisions satisfactory to the EPA. 33 U.S.C. § 1342(d)(2)-(4).




       12
          The MOU’s purpose is “to develop an understanding concerning the implementation of
[SWCB’s and the Regional Administrator, Region III, U.S. EPA’s] respective responsibilities in
the area of water quality control within the Commonwealth of Virginia.” Memorandum of
Understanding 1.

                                               - 13 -
       In 1980, the United States District Court for the Eastern District of Virginia analyzed the

role that the EPA has within Virginia’s state administered NPDES program. Chesapeake Bay

Found., Inc., 495 F. Supp. 1229. 13 The district court noted the following:

               Once a state has assumed NPDES authority, the EPA’s role is
               largely supervisory. The EPA has a review function in that the state
               must submit NPDES permit applications to the Administrator for his
               consideration. The Administrator may, within ninety days prevent
               the issuance of a permit by exercising his veto, 33 U.S.C. § 1342(d);
               or, the Administrator may acquiesce in a permit’s issuance; which
               decision is totally discretionary and unreviewable. Mianus River
               Preservation Committee v. EPA, 541 F.2d 899, 907 (2d Cir. 1976);
               Chesapeake Bay Foundation, Inc. v. United States, 445 F. Supp.
               1349, 1353 (E.D. Va. 1978). EPA may, however, waive the
               notification requirement and its right to object to particular
               categories of permits. 33 U.S.C. § 1342 (e) and (f). The EPA’s
               oversight function refers to its continued supervision of a state
               program to insure compliance with the [Clean Water] Act’s
               requirements. If a state program proves to be inadequate or poorly
               administered, etc., the EPA may withdraw its earlier certification.
               33 U.S.C. § 1342 (c)(3).

               The [Clean Water] Act, in general, and the NPDES program, in
               particular, thus join the state and federal governments in a “delicate
               partnership” endeavoring to control and eventually eliminate water
               pollution. Save the Bay, supra at 1284. The permitting process
               under § 402(b) is, for the most part, undeniably a state program.
               District of Columbia v. Schramm, No. 78-2209 (D.C. Cir. 1980).
               The state character of an approved NPDES program is so strong,
               moreover, that the state’s assumption of that responsibility is not
               viewed as a delegation of federal authority. H.R.Rep.No.95-830,




       13
          In Chesapeake Bay Found., Inc., the district court analyzed whether there was an
implied federal cause of action under the Clean Water Act, and in doing so determined the scope
of the EPA’s involvement in a state executed NPDES program. In determining that an implied
federal cause of action would be inconsistent with Congress’s intent, the Clean Water Act’s
statutory scheme, and ignorant of the spirit of federalism within the Clean Water Act, the district
court held that the Clean Water Act recognized that water pollution control has historically been
a state matter and found that “[a]n implied federal cause of action would disturb the ‘proper
Federal-State relationships needed to carry out this [Clean Water A]ct effectively.’” Chesapeake
Bay Found., Inc., 495 F. Supp. at 1238 (quoting 118 Cong. Rec. 33761 (remarks of Rep.
Wright)).

                                               - 14 -
                 95th Cong., 1st Sess. 3 (1977), reprinted in U.S.Code Cong. &
                 Admin.News, pp. 4424, 4479 (1977) (“House Report”).

Id. at 1232 (emphasis added).

          The district court further noted that “[t]he [Clean Water] Act necessarily requires that the

state program be administered in accordance with the federal requirements. Indeed, that is the

subject of the EPA’s oversight function.” Id. at 1234 (citing 33 U.S.C. § 1342(d)(2)) (emphasis

added).

                 [F]ederal involvement with a state-administered NPDES program is
                 limited to that role expressly provided for in the [Clean Water] Act:
                 Review of the permit applications submitted to the EPA and
                 oversight to insure compliance with the [Clean Water] Act subject to
                 decertification of the program. . . . “By requiring states to maintain
                 or create sufficient legal and equitable rights and remedies to deal
                 with violations of state permits in order to exercise permit-granting
                 powers under the [Clean Water] Act, Congress must have intended
                 that states apply their own law in deciding controversies involving
                 state permits.”

Id. at 1235 (quoting Schramm, No. 78-2209).

          Turning to the facts of this case, the record clearly shows that the SWCB did not reach its

decision to reissue the permit, and decline to regulate the discharge of heated water from NANPS

into the WHTF without regard to the permit’s compliance with the Commonwealth’s statutory

scheme, SWCB regulations, the Clean Water Act, and federal EPA regulations. In making its

final determination, the SWCB had before it voluminous information from the DEQ staff as well

as the materials and comments presented at the public hearing. The SWCB also had the legal

opinion it requested from the Attorney General in which he concluded that the SWCB was

without jurisdiction to separately regulate the WHTF; and it had the EPA Letter noting the issue

of the WHTF’s regulatory status, the previous history of its treatment under federal regulations

and the EPA, and the EPA’s ultimately not objecting to the reissuance of the permit. In addition,

the SWCB had the benefit of the past twenty years’ history of the SWCB holding the WHTF as


                                                 - 15 -
falling under the waste heat treatment system exception under EPA regulations and state

regulations, and the recommendation of the DEQ to reissue the permit without regulating the

WHTF.

       Further, to the extent that the SWCB relied on the EPA Letter in determining compliance

with the Clean Water Act and federal regulations implementing it, its reliance was not arbitrary

or capricious in light of the “delicate partnership” and the EPA’s interpretation of its own

regulations. As noted above, the EPA plays a supervisory role in the VPDES/NPDES permit

process that is limited to “[r]eview of the permit applications submitted to the EPA and oversight

to insure compliance with the [Clean Water] Act subject to decertification of the program.” Id.

In the EPA Letter, the EPA went through the regulatory history of the federal waste treatment

system exemption and noted

               To date, there has been no additional federal rulemaking to clarify
               whether, or under what circumstances, the “waste treatment
               system” [exception] may include cooling ponds, lakes, or lagoons
               that are created in waters of the United States, or that result from
               the impoundment of waters of the United States. Thus, NPDES
               permitting authorities, both EPA and approved states, have some
               discretion in determining whether particular cooling water
               impoundments qualify for the “waste treatment system”
               [exception] from the definition of “waters of the United States.”
               EPA recognizes that this regulatory background may present
               difficult, case-specific issues in applying the “waste treatment
               system” [exception] to cooling water impoundments. However,
               given the above-recited permitting and regulatory history, and
               circumstances of the creation and continuing use of the cooling
               lagoons to treat the thermal discharge from [NANPS], EPA is not
               objecting to VaDEQ’s determination on the regulatory status of the
               cooling lagoons/WHTF.

In light of the EPA’s oversight requirement to ensure state compliance with the Clean Water Act,

and the interplay between the EPA and the SWCB as set forth in the MOU, the SWCB did not

err to the extent it deferred to the federal agency’s determination of the permit’s compliance with




                                               - 16 -
federal law to support its conclusion that the permit was issued “pursuant to the Clean Water

Act.” 14

           Therefore, we hold that the SWCB’s decision not to regulate the WHTF based on its

determination that it fell under the “waste heat treatment system” exemption was not arbitrary or

capricious constituting an abuse of its delegated discretion, and, thus, the circuit court erred in

not according deference to the SWCB in its construction of its own regulations and erred further

in not permitting the SWCB to defer to the EPA’s construction of federal regulations.

Accordingly, we reverse the circuit court on that basis. Because we hold that the SWCB’s

interpretation of its regulations was not arbitrary or capricious, we need not reach the merits of

appellants’ alternative argument that if the SWCB erred, the circuit court should have remanded

the case back to the SWCB for it to independently apply the federal regulations to the record

before it.

                                          III. CONCLUSION

           For the foregoing reasons, we reverse the decision of the circuit court and remand for

further proceedings consistent with this opinion.

                                                                            Reversed and remanded.




           14
          Appellees contend that the EPA Letter is not a legal determination that is owed
deference by the SWCB, the circuit court or this Court based on (1) United States v. Mead Corp.,
533 U.S. 218 (2001), in which the Supreme Court of the United States set forth the degree of
deference a court is to give an agency’s interpretation of law; and (2) the fact that the EPA Letter
is inconsistent with the EPA’s long standing position that “cooling lakes” fall under the
federal/state regulations. However, neither the circuit court nor this Court is reviewing the
EPA’s determination in this case and indeed have no authority to do so. However, based upon
the MOU, the SWCB was entitled to rely upon the EPA Letter and defer to its conclusions.
                                               - 17 -
