New 'Waters of the U.S.' Rule on Hold: Enduring Debate Creates Uncertainty for Developers

Author: Susan Hori

In 1985, the U.S. Supreme Court issued the first of three key decisions interpreting the phrase "waters of the U.S." to define the scope of federal permitting jurisdiction under the Clean Water Act. Thirty years, three Supreme Court decisions, and one million comments later, the U.S. Army Corps of Engineers (the Corps) and the Environmental Protection Agency (EPA) issued their new definition of "waters of the U.S." (or WOTUS) on June 29, 2015. Even before it could take effect, the rule was suspended nationwide creating confusion and uncertainty regarding Clean Water Act permit requirements.

When the Clean Water Act was enacted in 1972, Section 404 required permits for the discharge of dredged or fill material into "navigable waters." The Act defined navigable waters as "waters of the U.S., including the territorial seas." When the Section 404 regulations were ultimately adopted in 1984, a wide range of aquatic areas, many of which were clearly never subject to navigation, were included under the WOTUS umbrella. As a result, much of the controversy over the Section 404 program involves the long regulatory reach to require permits for activities in "waters of the U.S." that are neither navigable nor contain water.

The tension between the regulated and the regulators over WOTUS was first addressed by the Supreme Court in United States v. Riverside Bayview Homes, Inc. In that 1985 decision, permits for the discharge of fill material into wetlands adjacent to WOTUS were upheld. In 2001, however, the Supreme Court rejected the Corps' assertion of jurisdiction over isolated ponds in its decision in Solid Waste Agency of Northern Cook County v. US Army Corps of Engineers or SWANCC as it has come to be known. In that case, the Corps—citing the Commerce Clause—required permits to fill an old sand and gravel mine for a municipal landfill because rainwater ponded in isolated pits and migratory birds flying interstate used those pits. Clearly, ponded rainwater with no connection to a "navigable water" should not be subject to federal regulation merely because a duck landed there. While the federal agencies stopped regulating isolated waters after the SWANCC decision, the Court did allow that these "waters" could be subject to state regulation. California very quickly issued a memorandum confirming that it had the authority to require permits for isolated waters.

SWANCC was followed in 2006 by Rapanos v. United States in which the Court, in a plurality decision, held that the Corps exceeded its authority by requiring a Section 404 permit to fill wetlands adjacent to non-navigable tributaries. In reaching its decision, several justices articulated their definitions of WOTUS, ranging from Justice Stevens' opinion fully supporting the government's theory that any connection to a navigable water supported jurisdiction, to Justice Scalia's reliance on Webster's Dictionary to articulate a definition that required waters to be relatively permanent and wetlands to have a continuous surface connection to navigable waters. Justice Kennedy's plurality opinion, which described the need for non-navigable waters to have a "significant nexus" to traditional navigable waters, prevailed, and the term "significant nexus" became an integral part of the Section 404 permit process.

Against the background of these three decisions, the Corps and EPA began the process of developing a new rule to define WOTUS. In April 2014, the agencies published a draft rule and received over one million public comments over a 200 day period. The final rule was formally published in the Federal Register on June 29, 2015, and would become effective 60 days later.

Instead of clarifying the confusion, the new WOTUS rule created greater uncertainty. If understanding when "adjacent" waters would be subject to Section 404 jurisdiction was not difficult enough, the rule added a new concept of "neighboring" to determine when areas "adjacent" to WOTUS require permits. The rule also established distance criteria of 1,500 feet and 4,000 feet as a basis for determining "significant nexus." Waters within 4,000 feet of a traditional navigable water must be examined on a case specific basis to determine if they bear a "significant nexus" to that water, and, if so, require a permit.

Under the new WOTUS rule, physical breaks in a drainage would not necessarily limit jurisdiction. In a seemingly direct contradiction to the SWANCC holding, the new rule also included isolated waters such as "western vernal pools in California" and Prairie potholes as WOTUS and required case specific significant nexus analysis.

Challenges were filed immediately by states, industry groups and environmental interests alleging that the rule either went too far or not far enough. In August, the U.S. District Court in North Dakota issued a preliminary injunction suspending the rule in the 13 states that filed the suit. This action was followed by the decision of the Sixth Circuit Court of Appeals issued on October 9, 2015, in a consolidated action brought by 18 states to stay implementation of the new WOTUS rule nationwide.

Both courts concluded that the petitioners demonstrated a substantial possibility of success on the merits due to, among a number of arguments, a lack of support to conclude that the distance criteria (1,500 and 4,000 feet) were harmonious with Justice Kennedy's "significant nexus" test, and a lack of substantial evidence to support these distance criteria. The courts also cited potential procedural due process concerns as the distance criteria were not in the draft rule and the public had no opportunity to comment on them.

In a joint memorandum issued November 16, 2015, EPA and the Corps announced that they would comply with the stay and resume use of the prior WOTUS definition adopted in 1984. Until these issues are sorted out in what may be years of litigation and additional rule-making, agencies, landowners and developers will continue to use the current (1984) WOTUS definition and apply the "significant nexus" guidance documents. Nevertheless, the fact that the agencies are casting their regulatory eyes on previously unregulated waters like vernal pools or looking well beyond "adjacent" waters should raise concerns for those seeking Section 404 permits. Should the stay be lifted while the challenges proceed, jurisdictional delineations may require application of both rules until a final resolution is reached.

This article was originally published in Environmental Leader, December 14, 2015.