Confronting Regulatory Fluidity in the Post-Maui and Post-Sackett World of Water Regulation

Pillsbury Winthrop Shaw Pittman LLP

Pillsbury Winthrop Shaw Pittman LLP

Both regulators and the regulated community must remain alert to accommodate the constantly changing regulatory scheme created in the post-Sackett world.


  • The application of Maui and Sackett in recent months confirms the rift in water jurisprudence.
  • Sackett represents a significant shift of federal regulatory oversight of wetlands to state and local authorities.
  • Maui appears to increase the complexity of the National Pollutant Discharge Elimination System (NPDES) program.

The year 2023 will go down as a landmark year for water regulation—not because certainty was achieved with the ever-elusive, indefinable “waters of the U.S.” (WOTUS), but rather because of the regulatory whiplash that occurred within that 12-month period. In its wake, 2024 promises to be a year of dealing with the fallout—continued legal challenges, uncertain and inconsistent application of regulations, testing the limits of Supreme Court decisions—which have created a “regulatory fluidity” in whether and to what degree waters may be treated as jurisdictional under the Clean Water Act (CWA) and what regulations may apply.

The continued uncertainty around the scope of the CWA’s reach is fueled by the recent rulings on two controversial issues: the extent to which discharges into groundwater can be regulated under the National Pollutant Discharge Elimination System (NPDES) program following the Supreme Court’s 2020 decision in County of Maui, Hawaii v. Hawaii Wildlife Fund, 140 S Ct 1462 (2020), and whether there are clear and discernible limits to federal jurisdiction under the CWA as decided in Sackett v. EPA, 140 S Ct.1322 (2023). Simultaneously, regulations and guidance on how to apply the Supreme Court’s tests for what constitutes a CWA jurisdictional water, as well as revisions to CWA Section 401 certifications, have exacerbated challenges to EPA’s and the U.S. Army Corps of Engineers’ efforts to interpret the reach of the CWA, a law which has rarely been amended or revised by Congress since its enactment in 1972.

The County of Maui’s “Functional Equivalent” Test
At issue in Maui, decided on April 23, 2020, was EPA’s statutory authority to regulate the discharge of “pollutants” into “navigable waters” when the initial discharge was to groundwater, which eventually provided the means by which the pollutants were conveyed to indisputable navigable waters (in this case, the Pacific Ocean). Maui argued that under the CWA, an NPDES permit was only required by law when its pollutants were directly discharged into navigable waters and not through groundwater. The U.S. Solicitor General agreed with this position, which was consistent with EPA’s recent regulatory interpretations. (See for example, a statement in the preamble to the 2015 rules published at 80 FR 37073 (2015).) Nevertheless, the Supreme Court held, in a 6-to-3 decision, that a NPDES permit was required when there was a “functional equivalent” of a direct discharge, and the Court listed seven factors which should be considered by the permitting authority when at least some conveyance by groundwater was involved. Justice Breyer determined that this resolution was consistent with the stated goals of the CWA and the powers reserved by law to the States to regulate land use and groundwater. The CWA authorizes EPA to regulate—and permit—a discharge depositing pollutants into navigable waters “through roughly similar means” as a direct discharge from a point source. The Court suggested that there were several factors to consider when deciding whether a particular discharge was regulated under the CWA, including transit time, the distance involved and the nature of the material through which the pollutant travels.

On November 27, 2023, EPA published a notice in the Federal Register that it was developing agency guidance on how EPA and its permit writers interpreted the Maui ruling and the factors described and discussed by the Court. (See 88 Fed. Reg. 82,891, which also requested comments from the public on the draft guidance the agency had developed.) Some early comments suggested that EPA was departing from the limited scope of these factors and turning a guidance document into the functional equivalent of a new rule. The regulated community eagerly awaits the publication of the final EPA guidelines.

In recent months, two federal courts of appeal have addressed Maui’s evidentiary standards. In a Ninth Circuit case, Cottonwood Environmental Law Center v. Edwards, 86F. 4th 1255 (2023), decided on November 21, 2023, the court reviewed the lower Court’s determination that a Montana water and sewer district need not obtain a NPDES permit to authorize the use of lined storage ponds to store treated effluent for irrigation purposes when those ponds release treated wastewater into the groundwater that reaches navigable waters. Specifically, the water district operates lined holding ponds to store treated effluent; underdrains not connected directly to the ponds collect groundwater leaking from the ponds and diverts the water to a wetland, which then enters the West Fork of the Gallatin River. However, such leaking water will reach the West Fork even absent the underdrains. On summary judgment, the lower court ruled that plaintiffs, Cottonwood Environmental Law Center, could advance the argument that there was an indirect discharge to navigable waters as Maui allowed, but not a theory of a direct discharge because the underdrains were not point sources as they did not transport pollutants between “meaningfully distinct water bodies.” The jury returned a verdict in favor of the water district, finding it did not violate the CWA for operating the ponds and underdrain without an NPDES permit. On appeal, the Ninth Circuit affirmed that the indirect discharge theory under Maui was the correct legal framework, thus upholding the ruling.

On January 3, 2024, the Tenth Circuit reversed and remanded the lower court’s assessment of civil penalty of $500,000 against the operator of a gold mine whose operation, the lower court held, resulted in the unpermitted discharge of processed wastewater into navigable waters. See Stone v. High Mountain Mining Company, 89F. 4th 1255 (2023). A Colorado district court held in 2022 that High Mountain Mining Company’s wastewater discharges from holding ponds at its gold mine were polluting the Middle Fork of the South Platte River after traveling through groundwater, and a large fine was imposed, applying the Maui factors. However, the appeals court unanimously reversed, indicating the Maui analysis fell short. The Tenth Circuit explained that the Supreme Court’s decision in Maui held that in certain circumstances, such a discharge into groundwater could be the functional equivalent of a direct discharge into navigable waters, but the lower court misapplied the evidentiary factors the Supreme Court had employed, relying on only four of the seven factors despite evidence some of the remaining factors were relevant to the analysis. The judges said that the complex topography and the “complicated and overlapping regulatory regimes” of Colorado’s mining laws require “a more comprehensive and rigorous application of the competing Maui factors.” Notably, the panel clarified that “[r]ather than holding plaintiffs accountable for failing to put on evidence of all the geology that would establish the functional equivalent of a direct discharge to the Middle Fork, the court effectively shifted the burden to High Mountain to prove its settling ponds were not the functional equivalent of a direct discharge.”

Sackett v. EPA
The legal battle over EPA’s definition of WOTUS is as fierce as ever. To start 2023, the Biden Administration’s EPA and U.S. Corps of Engineers rolled out an amended, expansive WOTUS definition to include traditional navigable waters, territorial seas, interstate waters, impoundments, tributaries, adjacent wetlands and other waters satisfying either the “relatively permanent” or “significant nexus” tests. The 2023 rules were published in the Federal Register at 88 FR 3004. Opposition to the rule was immediate, with the rule being enjoined in approximately half of the states.

Then came Sackett et ux. v. Environmental Protection Agency, decided on May 25, 2023. (See 143 S. Ct. 1322 (2023).) Justice Alito, writing for the Court, describes this case as answering a “nagging question” about the outer limits of the reach of the CWA, the principal federal law regulating water pollution in the United States. Justice Alito observed that the Act has been “a great success,” but it is also a potent weapon, subjecting miscreants to both severe civil and criminal penalties. Nevertheless, the limits of federal power contained in the statutory definition of “navigable waters” as the linchpin of federal jurisdiction has been controversial for many years, as exemplified by several opinions of the Supreme Court, which have struggled to produce regulatory clarity. In the celebrated Rapanos case, decided in 2006, Justice Kenndy’s concurring opinion provided the decisive fifth vote which held that wetlands could be considered waters of the United States if there existed a “significant nexus” between certain wetlands and a traditional body of water. EPA and the U.S. Corps of Engineers quickly amended their existing regulations to include a definition of “significant nexus” in the rules, which became an important component of several regulatory requirements enforced by these agencies. (See 347 U.S. 715 (2006).) However, all the Justices sitting on the Sackett appeal agreed that the significant nexus factor was difficult to apply and could not be squared with the text of the CWA. Indeed, EPA conceded that almost all bodies of water in the United States could be subject to federal jurisdiction on the basis of the new “significant nexus” standard and its case-by case application. Justice Scalia, writing for the Rapanos four-Justice plurality in 2006, subjected the CWA to a textual analysis and concluded that “waters of the United States” only extends to those wetlands that are indistinguishable from waters of the United States as properly understood, and the Sackett majority agreed with this approach. Further, and perhaps more impactful, is that the Sackett court clarified that WOTUS also includes tributaries, intrastate lakes and ponds, but only if they are “relatively permanent, standing or continuously flowing bodies of water” with a continuous surface connection to jurisdictional waters, effectively eliminating coverage of ephemeral streams, lakes and ponds. It is estimated that the Sackett ruling eliminated CWA coverage for over half of the nation’s wetlands.

In response, the newly minted WOTUS rules became general rules when the Biden Administration published, without notice and comment, a new updated rule to conform to the Sackett decision on September 8, 2023. (See 88 Fed. Reg. 61964).) The revised rule eliminated the “significant nexus” test, eliminating “interstate wetlands” from CWA jurisdiction, and revised the earlier rule’s conception of “adjacent,” redefining it as “having a continuous surface connection.” Before, coverage would extend to wetlands separated from other WOTUS by, for example, man-made dikes, berms and barriers, natural river berms and beach dunes. This rulemaking, too, is being challenged. The 24 states that challenged and successfully enjoined the March 2023 rulemaking continued their legal battle in the Northern District of North Dakota, now also joined by Kentucky in a separate suit in Kentucky, and Idaho and Texas in a case in the Southern District of Texas.

The force of the reasoning in Sackett persuaded the Fifth Circuit in a recent case, Lewis, et al. v. United States, et al., 88F. 4th 1073 (2023), decided on December 18, 2023, to terminate, post haste, the U.S. Army Corps of Engineers’ prolonged administrative proceedings regarding the Lewis landowners who have been ‘“caught in the coils” of the U.S. Army Corps of Engineers’ assertion of jurisdiction over wetlands contained on their property. The court concluded that the Supreme Court’s decision in Sackett “controls the undisputed facts here and mandates that the Appellants’ property lacks” wetlands clear demarcation between waters and wetlands. Indeed, “Sackett has cleared the air both legally and factually.” Moreover, “the USACE has kept Lewis in regulatory no-man’s land for over ten years by repeatedly reaching uncertain and unsustainable jurisdictional determinations” and another remand to the agency was clearly unwarranted. The lower court was instructed to enter judgment in favor of the Plaintiffs that the tracts in question are not WOTUS.

Impact of EPA’s Revised Clean Water Act Section 401 Water Quality Certification Rules
At the same time that Sackett was winding its way through the U.S. Corps of Engineers’ administrative processes, EPA was revising the Section 401 rules that govern the CWA’s 401 “certification process,” which controls the procedures by which states and Tribes can protect the water quality of their waters from adverse impacts “resulting from the construction of operation of federally licensed or permitted projects that involve any discharge into waters of the United States” in areas subject to the control of states or Tribes. The revised Section 401 rules were promulgated on September 27, 2023, and became effective on November 27, 2023. (See 88 Fed. Reg. 66558.) These rules have been challenged in the federal courts, with opponents alleging that the States will now have an obligation to evaluate the entire facility and not only its impact on water quality. Clearly, litigants are concerned that EPA believes that Section 401 is triggered by the potential for any unqualified discharge, rather than by a discharge or addition of pollutants alone. EPA states that the types of federal permits that trigger the Section 401 procedures are Section 402 NPDES permits, U.S. Army Corps of Engineers Section 404 dredge and fill permits, River and Harbors Act permits, and hydropower and pipeline permits issued by the Federal Energy Regulatory Commission (FERC).

What’s Ahead in 2024
The application of Maui and Sackett in recent months confirms the rift in water jurisprudence. Given the flood of regulatory changes afoot, 2024 will prove to be another significant year for water regulation. For example, Sackett represents a significant shift of federal regulatory oversight of wetlands to state and local authorities. Given that this has largely been a federal issue, it has been overlooked that many states lack robust regulatory frameworks addressing wetlands. There are indications that some states are already considering what steps they can take to fill the gaps left by Sackett to protect state waters now that the Sackett ruling removes and reduces regulatory protection for wetlands and other waters. States such as California, Colorado and Oregon have state laws in place requiring permits for discharges irrespective of the definition of WOTUS that may mitigate the huge shifts in regulatory coverage experienced elsewhere in the country. Other states, such as Nebraska and Alaska, have seemingly abandoned efforts to take over permitting for WOTUS in the wake of Sackett, creating a regulatory vacuum for local waters. In any event, leaving regulation up to the states creates regulatory uncertainty as states have disparate frameworks for regulating waters. On the other hand, Maui appears to increase the complexity of the NPDES program.

Some observers have also suggested the possibility of using the Endangered Species Act (ESA) as a tool to protect wetlands where there are gaps in the post-Sackett world. The ESA is effective at preserving habitat for threatened and endangered species. In theory, if there is a wetland- or ephemeral-stream-dependent species, the ESA could be used to protect those resources as a means of protecting those species. Of course, such protections would be narrow in scope rather than sea change to undo the significant narrowing of protected waters effectuated by Sackett. Moreover, the Supreme Court may require a clear congressional mandate before ESA jurisdiction is enhanced as it held in West Virginia v. EPA, decided on June 30, 2022.

The only thing that is certain is that both regulators and the regulated community must remain alert to accommodate the constantly changing regulatory scheme created in the post-Sackett world, and the looming Supreme Court rulings on “Chevron Deference,” which may upend all kinds of federal administrative practice.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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