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Forecast for the “Waters of the US” Rule? Very Muddy

Resembling more of a Shakespearean tragedy than a mundane federal regulatory dispute, efforts by the U.S. Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps) to finally craft a regulation clarifying the reach of the Clean Water Act (CWA) and re-define “waters of the United States” have been thrown into complete disarray.  Regulated entities, and even the regulators themselves, have no real practical guidance following a series of court rulings staying a new rule issued by the EPA and the Corps, a jurisdictional dispute up for Supreme Court review regarding which court can review challenges to the new rule, and now President Trump’s February 28th Executive Order instructing the EPA and the Corps to go back to the drawing board.

The CWA provides federal authority to regulate “navigable waters,” defined in the statute as “waters of the United States.”  However, “waters of the United States” is not defined in the statute, and has been the subject of a triad of U.S. Supreme Court decisions establishing the parameters of the scope of the federal government’s authority to regulate under the CWA.  From the enactment of the modern CWA in 1972, up through 2001, courts, including the Supreme Court in United States v. Riverside Bayview, 474 U.S. 121 (1985), tended to support broad authority under the statute, ruling that the agencies’ powers extended to the reaches of the federal government’s authority under the Constitution’s Commerce Clause.  That expansive view was curtailed by the Supreme Court in 2001, in Solid Waste Agency of Northern Cook County v. Army Corps of Engineers (SWANCC), 531 U.S. 159 (2001).  In SWANCC, the Supreme Court struck down the government’s interpretation that its CWA jurisdiction extended to non-navigable-in-fact intrastate ponds that supported migratory bird populations.

The Supreme Court continued its contraction of the EPA’s and the Corps’ authority under the CWA in Rapanos v. United States, 547 U.S. 715 (2006).  An ideologically fragmented 4-4-1 plurality decision authored by the late Justice Scalia took a very narrow view of the breadth of the CWA, holding that federal jurisdiction could extend over non-navigable waters only if they exhibit a relatively permanent flow or, in the case of wetlands, where there is a continuous surface water connection between the wetland and a relatively permanent waterbody.  The four-justice dissent, authored by Justice John Paul Stevens, took a much broader, pre-SWANCC view of jurisdiction.  However, it was Justice Anthony Kennedy’s concurring opinion establishing that non-navigable-in-fact waters could be regulated if there was a “significant nexus” between those waters and a traditionally navigable waterway that seemed to win the day. The majority of lower courts view Justice Kennedy’s concurrence in Rapanos as controlling law, following the test established by the Supreme Court in Marks v. United States, 430 U.S. 188, 193 (1977), in which the Court provided that in plurality decisions, “the holding of the Court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds.”  Most, but not all, of the federal district and circuit courts considering the scope of CWA jurisdiction have concluded that Justice Kennedy’s significant nexus test fits that description.

Subsequent to the Rapanos decision, and acting on Chief Justice Robert’s admonition in his concurrence in Rapanos that the EPA and the Corps had been repeatedly warned to clarify and revise the regulatory definition of “waters of the United States,” the agencies finalized the revised regulation in 2015 (“Rule”) after a lengthy rulemaking process that garnered more than 1 million public comments.  The Rule is in large part based on the “significant nexus” test, more broadly defines the scope of water bodies that are subject to the CWA, and provides specific guidance with respect to riparian areas, floodplains and tributaries. Please click here for a Meyers Nave Client Alert that summarizes the Rule.

Not surprisingly, there was significant opposition to the Rule from states and industry, as well as from environmental groups.  More than two dozen lawsuits challenging the Rule were quickly filed in federal district and circuit courts.  Apart from the substantive challenges to the Rule, a significant issue surfaced as to whether the challenges needed to be filed first in federal district court or circuit court.  In the midst of that controversy, the circuit court cases were consolidated in the 6th U.S. Circuit Court of Appeals, and that court stayed the Rule even before deciding whether it had jurisdiction to hear the direct challenge.

With the stay still in place, and in a fragmented 2-1 decision, the Sixth Circuit held that federal appellate courts retained jurisdiction over the controversy, holding that the CWA “authorizes direct circuit court review not only of actions issuing or denying particular permits, but also regulations governing the issuance of permits.”  In the waning days of the Obama Administration, the Supreme Court agreed to resolve the jurisdictional dispute and that is where things stood until President Trump’s February 28, 2017 Executive Order.

Described by President Trump as “one of the worst examples of federal regulation,” the Executive Order instructs the agencies to interpret the term “navigable waters” in a manner “consistent with the opinion of the late Justice Antonin Scalia in Rapanos v. United States…”  However, any change to the Rule would be subject to the rulemaking procedures of the Administrative Procedure Act (APA), including notice and comment, and any new rule would thereafter be subject to judicial review if challenged.  If the EPA and the Corps revise the Rule consistent with the Executive Order, it is more than likely to generate challenges from two directions. First, a substantive legal challenge would focus on whether the applicable law following Rapanos is Justice Scalia’s plurality opinion or Justice Kennedy’s “significant nexus” concurrence.  Second, if any aspect of the regulation is revised in a way that could be viewed as retracting federal authority, then such revision will be challenged under APA Section 706(2)(A), which states that the “reviewing court shall … set aside agency action … found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”

With the fate of the final Rule up in the air, the regulated community remains in a state of suspended animation as it awaits the Supreme Court’s pending decision on the jurisdictional question (and the Trump Administration requested, on March 9, that the Supreme Court hold the briefing schedule in abeyance while a new rule is being crafted), a stayed lower court decision on the substantive challenges to the Rule, and the effect of the February 28th Executive Order.  In the meantime, some states are taking matters into their own hands.  In California, for example, Senate Bill 49 (“California Environmental, Public Health, and Workers Defense Act of 2017”) was recently introduced in an effort to counter the Trump Administration’s rejection of Obama-era federal environmental regulations.  SB 49, if enacted, could prohibit state and local agencies from amending or revising their environmental rules and regulations to be less stringent than applicable federal standards as they existed as of January 1, 2016, or January 1, 2017 (whichever are more stringent).

When the dust settles, there is little doubt that the Supreme Court will yet again rule on the scope of the CWA and the boundaries of “waters of the United States.”  If history is any guide, it will not be the final word.  Stay tuned.