So far, 2018 has produced a wave of legal developments in the water arena, each of which could affect when permits are required or how liability may arise for activities impacting US waters. The Supreme Court of the United States determined the proper forum for challenging the Obama-era Waters of the United States (WOTUS) Rule, the US Environmental Protection Agency (EPA) has finalized a two-year delay of the WOTUS Rule, and several appeals courts have significantly expanded the federal government’s regulatory authority over discharges of wastewater. Between these developments and other rulemakings on the horizon, 2018 promises to be a year of significant shifts in federal environmental regulation.

WOTUS Rule in Court

In National Association of Manufacturers v. Department of Defense, the Supreme Court unanimously ruled that opponents could not bring challenges to the WOTUS Rule directly before an appellate court under either Section 1369(b)(1)(E) or Section 1369(b)(1)(F) of the Clean Water Act. The WOTUS Rule reflects the Obama EPA’s interpretation of what constitutes “waters of the United States” under the Clean Water Act, and thus, what related activities require permits. Industry and the majority of states challenged the WOTUS Rule in district and appellate courts. The United States Court of Appeals for the Sixth Circuit, among others, decided to stay—i.e., pause—the rule, and it held that the WOTUS Rule could only be challenged directly before appellate courts, not district courts.

The Supreme Court overturned the Sixth Circuit in its January 22, 2018 decision, reasoning that the WOTUS Rule was not itself an action to approve or promulgate an effluent limitation or to issue a permit; challenges to those actions go directly to an appellate court under the plain language of the Clean Water Act. Instead, the Court held that the WOTUS Rule merely clarified the definition of “waters of the United States,” which establishes the reach of federal regulatory authority. With this distinction, the Court overturned the Sixth Circuit and instead held that the Clean Water Act requires that challenges to the WOTUS Rule be brought in the first instance before a federal district court and not an appellate court.

While litigants now have certainty regarding the proper forum for judicial review of the WOTUS Rule, this ruling leaves open the possibility of inconsistent interpretations across the country. The Court did express some sympathy for the government’s arguments that the interests of judicial efficiency and national uniformity would be better served by requiring direct review at the appellate level. However, in light of the plain language of the Clean Water Act, the burden now shifts to Congress to provide for a more streamlined and consistent judicial review process. A similar scenario arose under the Toxic Substances and Control Act (TSCA), which created a patchwork of requirements from state to state; here, regulated entities fear a patchwork from district to district. Congress addressed the TSCA issue through passing the Frank R. Lautenberg Chemical Safety for the 21st Century Act in June 2016. However, effecting a comparable change under the Clean Water Act would require an act of bipartisanship unlikely at the present moment.

The Supreme Court’s ruling also will end the Sixth Circuit’s order staying the WOTUS Rule nationwide. While the nationwide hold on the WOTUS Rule will shortly disappear, the US District Court for the District of North Dakota had also issued an injunction against the WOTUS Rule in North Dakota and a dozen other states.¹ That injunction presumably would continue to prevent implementation of the rule in those states. Even where allowed to go into effect, it is doubtful that EPA or the US Army Corps of Engineers (Corps) would enforce the rule, particularly in light of current efforts to revise the WOTUS Rule and a recent rulemaking to delay its applicability date for two years, discussed below.

WOTUS Rule, Delayed by EPA

One week following the Supreme Court’s decision, EPA Administrator Scott Pruitt and the Corps signed a final rule to delay the effective date of the WOTUS Rule by two years (the Applicability Date Rule). Formally published in the Federal Register on February 6, 2018, the Applicability Date Rule tolls the effective date of the WOTUS Rule to February 6, 2020. The delay is meant to maintain the status quo and give regulators additional time to develop a replacement for the WOTUS Rule. In testimony before the Senate Environment and Public Works Committee on January 31, Administrator Pruitt noted that EPA plans to publish a new proposal to define "waters of the United States" in April or May 2018.

EPA’s various actions to delay, repeal or replace the WOTUS Rule may give regulatory relief to many, but the expected judicial challenges to these actions may also dampen prospects of any near-term certainty. Many parties are already focusing on future litigation over the repeal and replacement process. The Applicability Date Rule will almost certainly be challenged in court, and any repeal or replacement must be supported by substantial evidence. Additionally, EPA faces a high bar in attempting to overturn its prior rulemaking in the face of the extensive record previously compiled and the agency’s prior rationale. As a result, existing appeals of the 2015 WOTUS Rule itself should not be given short shrift in case the efforts to replace it are unsuccessful.

Ninth Circuit Makes the Connection to Groundwater, Expanding Potential Liability

On February 1, the Ninth Circuit Court of Appeals joined the Second and Fifth Circuits to hold that indirect discharges to waters of the United States are subject to Clean Water Act jurisdiction. Affirming the district court, the Ninth Circuit in Hawaii Wildlife Fund et al. v. County of Maui agreed that wastewater injections impacting US waters through a “fairly traceable” groundwater connection must be permitted. Citing to the plurality opinion in Rapanos v. United States, the court observed that the plain language of the Clean Water Act nowhere requires the discharge to be direct. It bears noting that the hydrological connection between the injection wells and the Pacific Ocean in this case had been well documented through tracer dye studies, leading to estimates that 64% of the treated wastewater was reaching the ocean. Still, allowing that a fairly traceable groundwater connection could give rise to a regulated discharge may influence other litigation in the Fourth and Sixth Circuits and has serious liability implications for a wide range of activities, from underground injection of oil and gas waste to the use of coal-ash ponds and other surface impoundments.

The Year Ahead in Water

Each of these recent developments may significantly affect the scope of federal jurisdiction over private activities impacting water in the United States. Members of the regulated community should assess carefully the impact to current operations and consider what actions a changing risk profile may require. Engagement with legislators, local permitting authorities and/or participation in the rulemaking process will be key.

The Eversheds Sutherland environmental team will continue to monitor and report on further developments regarding the waters of the United States rulemaking and related litigation.

¹ Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, Nevada, New Mexico, South Dakota and Wyoming.

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