The U.S. Court of Appeals for the Second Circuit recently decided that contractors that process construction debris and waste for recycling may need to obtain permits under the Clean Water Act (“CWA”) for their stormwater runoff.

As the Second Circuit ruled, “not every incident of stormwater runoff is subject to regulation under the CWA. Only stormwater runoff associated with certain enumerated activities in the Act and its implementing regulations is required to be covered by” a CWA permit. For example, permits are required for discharges “associated with industrial activity”, which EPA defined in part as work involved in the recycling of materials, including those classified as Standard Industrial Classification (“SIC”) 5015 and 5093. SIC 5093 encompasses “establishments primarily engaged in assembling, breaking up, sorting, and wholesale distribution of scrap and waste materials.”

In this case, the defendant operated a facility that recycles demolished concrete, asphalt, and other construction products that it then processes and resells on the wholesale market for use by the construction industry. The plaintiff argued that the defendant should have obtained a permit for its activities, which generates a variety of pollutants that are regularly exposed to stormwater.

The Second Circuit agreed with the plaintiff and reversed the District Court’s order granting the defendant’s motion to dismiss. The Second Circuit concluded that “processing construction debris and waste for recycling fits within the definition of activities under SIC 5093.” The defendant needed to obtain a permit, even though the second part of its operations (wholesaling aggregate materials it crushed down from construction waste) would not fit under SIC 5015 or 5093 and would not constitute “industrial activity”. The Second Circuit reasoned that “restricting a business to one [SIC] category would effectively allow an entity to insulate itself from the CWA’s permitting requirement by conducting polluting activities in the backyard while running a clean shop in the front.” Therefore, “even if [defendant’s] business is properly classified under SIC 5032, that does not preclude a finding that it is also properly classified under SIC 5093.”

It is noteworthy that the plaintiff in this case was not an environmental governmental agency; instead, a national environmental organization brought this case as a citizen-suit action. This should be a reminder that, even with the overall reduction of government enforcement actions, environmental groups are prepared to picked up the slack.

You can view a full copy of the Second Circuit’s decision here.