John, you're both right and wrong
Under federal law enacted in 1977 (CRF 40 140.3), all non-navigable freshwater inland lakes, all inland fresh water rivers incapable of supporting commercial traffic, and any impoundments on navigable rivers designated as municipal water sources were designated "no discharge." The EPA didn't even exist when those regulations were written, nor does it have any jurisdiction over such waters contained entirely within the boundaries of a state. In fact, it's entirely up to the state to enact legislation enforcing the federal regulations set forth in CFR 40 140.3...the EPA isn't even in that loop. Even though the federal law was enacted in 1977, none of the states paid any attention to it until the mid-late 80s...and there are still a few states who haven't done it. GA was among the first, and our own deadline for installing holding tanks on all vessels on Lake Lanier was 1991! (All new boats delivered into the state had to have 'em by 1987). Even when it comes to declaring areas of navigable waters "no discharge," the operative phrase in your post is "...and must apply to the EPA for the designation." The state (or political subdivision thereof) is the one who decides whether a body of water contained entirely within its own boundaries should be "no discharge"...not the EPA. The EPA only approves (or not) the application. The EPA cannot demand such an application, nor originate one on its own. It's entirely at the discretion of the state, and enforcement is also 100% the responsibility of the state. The "no discharge" regulations on Lakes George and Winnipesaukee predate the Federal Water Pollution Act ("Clean Water Act") of 1977 by so many decades that the EPA is entirely out of those loops--and so are the feds. But there are other lakes that are also entirely out of the EPA, federal, AND state loops: those owned by power companies. Even though they may be on public land, the power companies built the dams and own the water rights...they're considered "private property" and the owners of private property can make any rules they want to. I know of several that don't even allow boats with toilets--with OR without holding tanks--on them. And it's perfectly legal.So while you're right that states must apply to the EPA for approval to change the status of a body of NAVIGABLE water, the EPA doesn't have any jurisdiction over any NON-navigable body of water contained entirely within the boundaries of a state. The state has full jurisdiction. Furthermore, even when it comes to navigable waters, the EPA makes no laws, nor does it even bother to determine whether the state's application is in fact accurate. If whatever the state puts in its application meets the federal guidelines, the EPA just rubber stamps it "approved" and that's the end of their involvement with that body of water.