Third Circuit Requires § 401 Certifications to Resolve Material Monitoring/Adaptive-Management Terms or Condition Dredging on Agency Approval

I. Introduction

In Natural Resources Defense Council Inc v. New Jersey Department of Environmental Protection, the U.S. Court of Appeals for the Third Circuit reviewed a Clean Water Act (“CWA”) § 401 Water Quality Certification (“WQC”) issued by the New Jersey Department of Environmental Protection (“NJDEP”) to Transcontinental Gas Pipe Line Company, LLC (“Transco”) for its Northeast Supply Enhancement Project (“NESE”). NESE would expand an interstate natural gas pipeline system and, critically for this case, would install a new pipeline segment beneath the Raritan Bay, requiring dredging that would resuspend contaminated sediments.

Environmental organizations (NRDC and a coalition led by NY/NJ Baykeeper) petitioned for review under the Natural Gas Act’s exclusive-jurisdiction provision for state § 401 decisions. They argued that NJDEP (1) arbitrarily reversed a prior denial, (2) unlawfully deferred essential monitoring and adaptive-management requirements, (3) failed to explain why NESE would comply with New Jersey water quality standards, and (4) provided inadequate public participation.

The Third Circuit rejected the “arbitrary reversal” theory but vacated the WQC because NJDEP (a) deferred material compliance terms to post-certification plans without making agency approval a prerequisite to dredging, and (b) failed to adequately explain key compliance determinations (including how modeled contaminant results and turbidity monitoring assured compliance with toxic-substance standards and designated uses such as shellfish harvesting).

II. Summary of the Opinion

  • Jurisdiction/standard of review: The court exercised “original and exclusive” jurisdiction under 15 U.S.C. § 717r(d)(1) and applied arbitrary-and-capricious review to state action taken pursuant to federal law, while deferring to NJDEP’s interpretations of New Jersey law as New Jersey courts would.
  • No arbitrary reversal: NJDEP’s 2025 approval did not arbitrarily reverse the 2019 denial because the 2025 record included additional modeling and draft planning materials absent in 2019, and the 2020 denial did not reach water quality merits.
  • Unlawful deferral (core holding): NJDEP acted arbitrarily and capriciously by issuing the WQC while material monitoring and adaptive-management terms remained unresolved and by failing to condition dredging on NJDEP’s approval of the final plans.
  • Inadequate explanation of compliance (independent basis): NJDEP’s decisional documents did not adequately explain (1) why contaminant modeling at 500 feet sufficed (particularly given predicted 4,4’-DDE concentrations above the human-health criterion), (2) how turbidity monitoring assured compliance with toxic-substance criteria, and (3) its shellfish conclusions, which mischaracterized the Marine Resources Administration memorandum.
  • Public participation: The court did not reach the notice/comment issues because vacatur was required on other grounds, but signaled NJDEP could cure participation deficiencies on remand.
  • Remedy: Petitions granted; WQC vacated; remanded to NJDEP for further proceedings.

III. Analysis

A. Precedents Cited

1. The Third Circuit’s “sequencing” cases: Riverkeeper I and Riverkeeper III

NJDEP’s principal defense relied on the Third Circuit’s prior § 401 decisions:

  • Delaware Riverkeeper Network v. Sec'y Pa. Dep't of Env't Prot. (Riverkeeper I), 833 F.3d 360 (3d Cir. 2016): upheld a § 401 certification issued before completion of an assessment required for a separate state permit, because construction could not begin until the agency reviewed the assessment and issued the separate permit. The key concept was permissible “order of operations” where later agency review and approval remained a prerequisite to ground-disturbing work.
  • Delaware Riverkeeper Network v. Sec'y Pennsylvania Dep't of Env't Prot. (Riverkeeper III), 903 F.3d 65 (3d Cir. 2018): similarly upheld certification where later permits and agency approvals were required before construction; PADEP had not abandoned review but staged it.

The court treated these cases as creating a conditional-approval pathway for § 401 decisions: deferral can be lawful if the certification structure ensures that substantive compliance issues are resolved through later agency action that must occur before work begins.

2. The Second Circuit’s anti-self-regulation principle: Waterkeeper Alliance, Inc. v. EPA

Petitioners invoked Waterkeeper Alliance, Inc. v. EPA, 399 F.3d 486 (2d Cir. 2005), where the Second Circuit invalidated an EPA rule that allowed regulated facilities to develop nutrient management plans without requiring the permitting authority to review them before permit issuance—creating an “impermissible self-regulatory permitting regime.” The Third Circuit found this case “somewhere between” the Riverkeeper line and Waterkeeper: NJDEP did impose certain concrete dredging restrictions, but left material terms to later plans without making NJDEP approval a prerequisite to dredging, thereby losing the key safeguard present in Riverkeeper I and Riverkeeper III.

3. Administrative-law baseline: reasoned decisionmaking and record review

  • Motor Vehicle Manfs. Ass'n v. State Farm Mutual Automobile Ins. Co., 463 U.S. 29 (1983): the canonical requirement that an agency examine relevant data and articulate a satisfactory explanation with a rational connection between facts found and choices made.
  • SEC v. Chenery Corp., 332 U.S. 194 (1947): review must be based on the agency’s stated grounds, not new rationales supplied in litigation.
  • Christ the King Manor, Inc. v. Sec'y U.S. Dep't of Health & Hum. Servs., 730 F.3d 291 (3d Cir. 2013): reinforces record-based review and rejection of post hoc rationalizations.

These cases drove two aspects of the result: (1) the court evaluated the WQC as written—particularly its failure to require “approval” of the final plans—and (2) it refused to credit litigation explanations not clearly adopted by NJDEP in its decisional documents.

4. Clean Water Act authority and conditions

  • PUD No. 1 of Jefferson Cnty. v. Washington Dep't of Ecology, 511 U.S. 700 (1994): confirms that § 401 authorizes states to impose conditions and “limitations” to ensure compliance with state water quality standards, and those conditions become part of the federal license/permit.

5. Additional cited authorities shaping the court’s approach

  • Twp. of Bordentown v. FERC, 903 F.3d 234 (3d Cir. 2018): used as a contrast case where agency oversight mechanisms existed and agency retained authority to require additional measures.
  • Sierra Club v. EPA, 972 F.3d 290 (3d Cir. 2020): supports vacatur where a regime effectively leaves compliance to regulated parties without a discernible enforcement mechanism and requires demonstrable reasoning, not vague appeals to expertise.
  • Ohio v. EPA, 603 U.S. 279 (2024): reinforces that failure to explain assumptions and their effect can be arbitrary.
  • Fla. Power & Light Co. v. Lorion, 470 U.S. 729 (1985): supports remand as the ordinary course when agency explanation is inadequate.
  • Prometheus Radio Project v. F.C.C., 373 F.3d 372 (3d Cir. 2004), as amended: cited regarding remand and procedural correction possibilities.
  • Raritan Baykeeper, Inc. v. N.Y. State Dep't of Env't Conservation, No. 25-2938, 2026 WL 2453538 (2d Cir. Aug. 21, 2026) (summary order): used to illustrate that New York’s WQC contained materially stronger up-front safeguards (pre-construction approval of plans, independent third-party monitor with stop-work authority, toxicity limits in the certification itself) than New Jersey’s.

B. Legal Reasoning

1. Why there was no “arbitrary reversal”

NRDC argued NJDEP reversed its 2019 denial without acknowledging a change. The court rejected that framing because the 2019 denial was principally about insufficient information (absence of modeling and compliance demonstration), not a substantive conclusion that compliance was impossible. Between 2019 and 2025, Transco submitted the NESE Contaminant Transport Modeling Results for New Jersey Waters and a draft monitoring plan; and the 2020 denial was based on New York’s denial and expressly did not resolve remaining technical issues. On that procedural history, the 2025 approval did not contradict a prior merits determination on the same record.

2. The new operational rule: deferral is only lawful if agency approval remains a precondition to dredging

The opinion’s central doctrinal contribution is a functional test for deferred compliance terms under § 401 in this circuit:

  • Deferral is not per se unlawful (the court expressly declined a categorical ban on post-certification plans and acknowledged field refinement).
  • But deferral becomes arbitrary and capricious when material compliance terms remain unresolved and the certification does not require that the final plans be approved by the agency before the environmentally risky activity begins.

Applying that test, the court focused on the WQC’s text:

  • Condition 9 required Transco to submit a Water Quality Monitoring Plan “for review within 60 days,” but did not require “approval,” did not specify any consequence of non-approval, and did not tie dredging commencement to completion of review.
  • Condition 11 required an Adaptive Management Plan but set no deadline and did not require agency approval before work; it also stated “some or all” measures “may be employed,” which the court read as failing to mandate specific responses.
  • The court contrasted this with other conditions that explicitly required written approval before certain steps (e.g., backfilling and dredging inspector approval), making the omission in Conditions 9 and 11 “stark.”

Critically, NJDEP’s own contemporaneous conduct demonstrated material uncertainty: eight days before certification, it sought clarification on thresholds, reporting deadlines, and whether operations would cease if corrective measures failed. Yet certification issued without resolving those points and without inserting an approval gate before dredging.

The court’s reasoning thus bridges Riverkeeper I/Riverkeeper III and Waterkeeper: New Jersey did not create pure self-regulation, but by failing to preserve an enforceable, pre-dredging approval mechanism for unresolved material terms, it lacked the safeguard that made sequencing permissible in Riverkeeper.

3. Separate, independent flaw: NJDEP did not adequately explain compliance with water quality standards

Even setting aside the deferral problem, the court found NJDEP’s explanation inadequate on three technical/compliance points:

(a) The “500-foot boundary” and 4,4’-DDE

Transco’s contaminant modeling analyzed predicted concentrations at 500 feet from dredging, and both Transco and NJDEP used “mixing zone” terminology in the record, prompting the question whether NJDEP effectively treated 500 feet as a compliance boundary. NJDEP argued litigation interpretations of how the New Dredging Rule (N.J. Admin. Code § 7:7-12.7(c)(10)(iii)-(iv)) interacts with Surface Water Quality Standards, but the court held NJDEP’s decisional documents did not explain whether, or how, temporary exceedances could be permissible given regulatory text that parameters “shall meet” standards at/near the site.

The explanation problem became concrete because modeled 4,4’-DDE at 500 feet was numerically above New Jersey’s human-health criterion, yet the report did not compare predicted 4,4’-DDE to that criterion, and the final WQC imposed dredging restrictions not reflected in recalculated 4,4’-DDE predictions. The court faulted NJDEP for not explaining (for example) why the criterion was inapplicable, why short-term exceedances were allowed under state law, or requiring revised modeling under final conditions.

(b) Turbidity monitoring as a substitute for toxic-substance monitoring

The New Dredging Rule gives NJDEP discretion to require biological/physical/chemical monitoring, so the court did not impose a categorical requirement to monitor every contaminant. But it held NJDEP still had to explain how turbidity monitoring—water cloudiness—could assure compliance with separate numeric and narrative toxic-substance standards (for PCBs, mercury, 4,4’-DDE, etc.) given that contaminants were “at the heart” of the agency’s concerns. If turbidity was used as a proxy, NJDEP had to say so and explain why; it did not.

(c) Shellfish designated use and mischaracterization of the record

NJDEP’s response to comments stated that the New Jersey Marine Resources Administration concluded impacts would be temporary and that habitat would return to baseline within one to three years. The court found the memorandum did not make that finding for surf clams; rather, it warned of direct and indirect impacts and distinguished surf clams as more susceptible to turbidity and smothering, while “temporary” findings concerned hard clams. This “runs counter to the evidence” and was arbitrary under State Farm.

C. Impact

1. Practical implications for § 401 certifications in the Third Circuit

The decision establishes a clear compliance-architecture expectation for state agencies issuing § 401 certifications for dredging and similar construction activities:

  • If an agency relies on monitoring and adaptive management to reach its “will comply” determination, it must either (a) include material triggers, thresholds, reporting, and mandatory responses within the certification (or otherwise clearly settle them), or (b) condition commencement of the relevant work on agency approval of the final plans, creating an enforceable pre-construction checkpoint.
  • “Review” without an expressed approval requirement, deadline, and linkage to work authorization is unlikely to suffice where unresolved terms are material to compliance.

2. Increased emphasis on explanatory adequacy for technical judgments

The opinion underscores that “expertise” does not substitute for explanation. Where an agency:

  • anchors compliance on a modeling boundary (e.g., 500 feet),
  • relies on proxies (turbidity for contaminants), or
  • invokes designated uses (shellfish harvesting) while discussing biological impacts,

it must connect the record evidence, the operative legal standards, and the chosen compliance mechanisms in a way a court can follow—consistent with State Farm, Chenery, and Ohio v. EPA.

3. Likely effects on project planning and agency drafting

  • More front-loaded plan finality: Applicants and agencies may finalize monitoring and adaptive-management triggers earlier to avoid vacatur risk.
  • Stronger “stop-work”/approval gates: Agencies may emulate features highlighted in the comparison to New York’s NESE certification (e.g., independent monitors, explicit stop-work authority, pre-approval of compliance plans).
  • More explicit treatment of mixing-zone concepts: Even where not formally invoked, agencies will likely need to explain why a chosen modeling distance is legally and scientifically meaningful under state standards.

IV. Complex Concepts Simplified

  • Clean Water Act § 401 Water Quality Certification: A state’s confirmation (often with conditions) that a project needing a federal approval will comply with state water quality standards. The state’s conditions become enforceable terms of the federal authorization.
  • Arbitrary and capricious review: A court does not redo the agency’s science, but it requires the agency to explain its decision using the record and to show a rational connection between evidence and outcome.
  • Monitoring plan vs. adaptive management plan: A monitoring plan describes what will be measured, where, how often, and how results are reported. An adaptive management plan specifies what the operator must do if measurements show problems (e.g., slow or stop dredging, change equipment, add controls).
  • Mixing zone: A defined area around a discharge where criteria may be exceeded temporarily, provided standards are met at the edge. Whether and when mixing zones are allowed depends on state law; the court here focused on NJDEP’s failure to explain how its approach fit New Jersey’s rules.
  • Designated uses and antidegradation: Water bodies are assigned protected uses (e.g., shellfish harvesting, recreation). Standards and policies require agencies to maintain and protect those uses and prevent degradation inconsistent with them.

V. Conclusion

The Third Circuit’s decision vacating NJDEP’s NESE WQC rests on two reinforcing administrative-law failures: (1) NJDEP left material monitoring and adaptive-management terms unresolved while failing to require NJDEP approval of final plans as a condition precedent to dredging, and (2) NJDEP did not adequately explain how its modeling boundary, turbidity-only monitoring approach, and shellfish-impact conclusions demonstrated compliance with New Jersey’s water quality standards.

Doctrinally, the opinion clarifies that § 401 “sequencing” is permissible only when the certification’s structure preserves an enforceable agency-approval checkpoint before environmentally consequential work begins. Practically, it signals that state agencies must draft § 401 conditions with clear approvals, triggers, and enforceable responses—and must clearly explain how technical tools used (models, proxies, and biological assessments) demonstrate compliance with state criteria and designated uses.