The Environmental Protection Agency (EPA) recently published draft guidance on how to apply the “functional equivalent” test created by the Supreme Court in County of Maui v. Hawaii Wildlife Fund, 140 S. Ct. 1462 (2020). The “functional equivalent” test is intended to help determine if a Clean Water Act permit is needed when pollutants are discharged to groundwater before reaching navigable waters. The draft guidance reiterates threshold conditions that must be satisfied to trigger the need for a Clean Water Act permit and introduces a new factor relevant to the “functional equivalent” test: “the design and performance of the system or facility from which the pollutant is released.” Guidance at 7. The draft guidance represents EPA’s response to the most significant Clean Water Act decision in at least ten years, potentially affecting thousands of permit applicants and holders, as well as entities that could be subject to enforcement actions for not having permits in place. Ultimately, EPA’s guidance may only serve to increase the complexity of the test announced in Maui and could fall victim to a major overhaul by the incoming Biden Administration. But any final draft guidance, although not binding, may be given some weight by courts interpreting the issue, and by state regulators who have delegated authority under the Clean Water Act permitting program. So, even though the draft guidance might be revised, for the time being regulated entities should pay attention to it. The draft guidance also provides an example of the challenges that Maui’s multi-factor test may present going forward. Indeed, lower courts already have begun to consider Maui in several contexts. See, e.g., Melton Props., LLC v. Ill. Cent. R.R. Co., 2020 U.S. Dist. LEXIS 178553 (N.D. Miss. Sept. 29, 2020) (finding that Maui did not change the definition of “point source”); United States v. Acquest Transit LLC, 2020 U.S. Dist. LEXIS 97979 (W.D.N.Y. June 4, 2020) (finding that Maui did not clarify the definition of “waters of the United States” but only addressed “whether, or how” permit requirements apply).

Background

In April 2020, the Supreme Court issued its decision in Maui, holding that the Clean Water Act “requires a permit when there is a direct discharge from a point source into navigable waters or when there is the functional equivalent of a direct discharge.” 140 S. Ct. at 1476 (emphasis added). Under this new test, a discharge is “functionally equivalent” to a direct discharge if it “reaches the same result through roughly similar means.” Id. Maui sought to advance the intent of Congress that the Clean Water Act should provide “federal regulation of identifiable sources of pollutants entering navigable waters without undermining the States’ longstanding regulatory authority over land and groundwater.” Id.

As recognized by the Court, the “functional equivalent” test will need to be applied on a case-by-case basis to determine if a National Pollution Discharge Elimination System (NPDES) permit is required. The Court provided a non-exhaustive list of factors to consider in making that determination. The two most important factors, the Court said, are the time and distance that a pollutant travels between the point source and navigable water. 140 S. Ct. at 1476–77. Other relevant factors noted by the Court include:

• the nature of the material through which the pollutant travels;
• the extent to which the pollutant is diluted or chemically changed as it travels;
• the amount of pollutant entering the navigable waters relative to the amount of the pollutant that leaves the point source;
• the manner by or area in which the pollutant enters the navigable waters; and
• the degree to which the pollution (at that point) has maintained its specific identity.

Draft Guidance

On December 10, 2020, EPA published in the Federal Register notice of its draft guidance on applying the “functional equivalent” test.¹ EPA is soliciting public comment on its draft for 30 days (i.e., comments must be received on or before January 11, 2021). Entities with affected interests should consider submitting comments on the draft guidance and monitoring the comments submitted by others.

The draft guidance initially reiterates two threshold conditions that must be satisfied before there can be an obligation to obtain an NPDES permit—baseline requirements that, as EPA notes, Maui did not modify. First, there must be an actual discharge of a pollutant to a navigable water of the United States. The draft guidance asserts that Maui “did not instruct NPDES permitting authorities to assume that discharges to groundwater that occur in the vicinity of a jurisdictional water are the ‘functional equivalent’ of direct discharges to that water.” Guidance at 4. The draft guidance recommends that “where there are indications that there may be a discharge of pollutants through groundwater to waters of the United States,” parties should consider conducting a technical analysis. Guidance at 4. 

Second, the draft guidance reiterates that to trigger NPDES permitting requirements, the discharge of pollutants that reaches a navigable water must be from a point source. “If the pollutant travels through groundwater first, the same point source requirement applies.” Guidance at 5.

The draft guidance next explains that “only a subset” of discharges that reach navigable waters via groundwater qualify as the “functional equivalent” of a direct discharge under Maui. Indeed, EPA states that its “experience suggests that science (e.g., characteristics of the pollutant itself and the nature of the subsurface aquifer and hydrogeology) informs the effect of time and distance traveled on a discharge, and thus whether that discharge is ultimately the functional equivalent of a direct discharge.” Guidance at 6. A “discharge via groundwater that reaches a water of the United States in the same or nearly the same chemical composition and concentration,” the draft guidance explains, “may be more like a direct discharge to the jurisdictional water,” whereas one in which the “pollutant composition or concentration that ultimately reaches the water of the United States is different from the composition or concentration of the pollutant as initially discharged” may not. Guidance at 6. EPA’s expectation is that the issuance of permits under the “functional equivalent” test will be a “small percentage” of the overall number of NPDES permits. Guidance at 6. 

Finally, the draft guidance announces that EPA has identified an additional factor—beyond the initial seven set forth in Maui—that should be considered when performing a “functional equivalent” analysis: “the design and performance of the system or facility from which the pollutant is released.” Guidance at 7. EPA maintains that this factor is relevant to the analysis because the “composition and concentration of discharges of pollutants directly from a pipe or other discrete or discernible conveyance into a water of the United States with little or no intervening treatment or attenuation often differ significantly from the composition and concentration of discharges of pollutants into a system that is engineered, designed, and operated to treat or attenuate pollutants or uses the surface or subsurface to treat, provide uptake of, or retain water or pollutants.” Guidance at 7. 

The draft guidance defends the addition of this factor with three arguments. First, it argues that EPA has the discretion to identify a relevant factor beyond those the Court identified in Maui because EPA “remains the authoritative interpreter of the statutes it administers.” Guidance at 7 (quoting National Cable & Telecomm. Ass’n v. Brand X Internet Serv., 545 U.S. 967, 982 (2005)). Second, it notes that “inquiries concerning design and performance are … routinely considered by permitting agencies.” Guidance at 7. Third, it states that, regardless, “design and performance of a system or facility can affect or inform all seven factors identified in Maui.” Guidance at 7. The point of these arguments seems to be that even if a regulated entity’s discharge actually reaches a water of the United States, a regulated entity could still do an end run around the “functional equivalent” test—and avoid regulation—by adding components to its systems (such as settling ponds and infiltration systems) that add steps in the discharge’s path to jurisdictional waters. 

Implications

EPA’s brief draft guidance on applying Maui seems unlikely to materially reduce the complexity regulated entities face. Instead, the draft introduces an eighth factor on top of the seven laid out in Maui. This addition of yet another variable to the “functional equivalent” calculus could increase ambiguity as to the application of the test and could be interpreted to narrow Maui’s reach. Environmental advocates might question the relevance of EPA’s new factor to the “functional equivalent” analysis and could object to agencies’ reliance on it in future permit decisions. For instance, critics might argue that what occurs at a facility is a separate issue from the “functional equivalent” test, which focuses on what occurs after a discharge leaves the facility. Maui sought to avoid a loophole by which releases of pollutants to navigable waters via mere yards of groundwater are categorically excluded from the scope of the permitting program, and advocates might assert that a new factor focused on facility design could reopen such a loophole.

The issuance of the draft guidance unfolds against the backdrop of the transition to the Biden Administration. The new administration could decide to revoke or modify any prior guidance on applying Maui. And it could add to the analysis of the “functional equivalent” test by looking to jurisprudence in the water rights context, i.e., the law governing the transformation from groundwater to surface water. Further, many states already have well-developed groundwater discharge permit programs, and it would seem efficient to account for such programs in any EPA guidance. In light of these contingencies, regulated entities, states, and courts must navigate an uncertain path on a case-by-case basis.