When it comes to legal definitions, only a few have been as controversial for the real estate sector as what constitutes “the waters of the United States.” 33 U.S.C. 1362(7). Also known by the now-infamous acronym “WOTUS,” challenges to the regulatory framework behind it have created one of the most protracted regulatory battles on record—all the while leaving the fate of those seeking real estate permits in a state of great ambiguity where each situation requires a case-by-case assessment as opposed to adherence to a set of standard rules.
Section 401(a) of the Clean Water Act, 33 U.S.C. §1311(a), makes the “discharge of a pollutant” unlawful and subjects any person who does so to significant civil and even criminal penalties under §309. 33 U.S.C. §1319. The term “discharge of a pollutant” is broadly defined as “any addition of any pollutant to navigable waters from any point source.” Clean Water Act §502(12), 33 U.S.C. §1362(12). “Pollutant” is also broadly defined and includes sand, dredge spills, rocks and other materials. Id. Section 404 of the Clean Water Act authorizes the Army Corp of Engineers (ACOE) to issue permits allowing the discharge of dredged or fill materials into the “navigable waters” of the United States. “Navigable Waters” are further defined in the Act as “the waters of the United States.” 33 U.S.C. 1362(7).
Because a determination whether the site of a proposed development or other activity requiring dredging or filling affects the “waters of the United States” is the driving force in whether a permit is required or whether discharges made without benefit of a permit violate the Act, the definition of that term is of a great deal of importance. Attempts by the ACOE and the U.S. Environmental Protection Agency (EPA) to provide a regulatory guidance as to what bodies of water or areas constitute “waters of the United States” have generated significant controversy, which has played out in all three branches of the federal government and has involved state governments as well as the environmental and business communities. Despite more than a decade of rulemaking, legislation, executive orders and litigation, there is no clear rule and thus no guidance to the regulated and environmental communities.
This article describes several recent developments in this controversy—executive order of the president (POTUS), regulatory actions by EPA, a decision by the U.S. Supreme Court (SCOTUS), a lawsuit by several attorneys general and a threatened lawsuit by several environmental groups. It does not deal with the merits of the proposed rule (which have not yet been the subject of any of the many judicial decisions issued in connection with this controversy) or discuss the procedural minutia of the legal arguments and numerous cases. To do so would require an article of even greater length that only legal scholars would enjoy. Rather, what follows attempts to describe the great lengths to which many levels of government have gone to (depending on your point of view) clarify or muddy the waters (of the United States).
The ‘Waters of the United States’ Rule
The current controversy was precipitated by a 2006 SCOTUS decision in U.S. v. Rapanos, 547 U.S. 715 (2006). In Rapanos, the court invalidated a 2004 iteration of the definition of the term waters of the United States (33 C.F.R. 328.2(a)(1)) as being overly broad and beyond the scope of the agencies’ statutory authority. This triggered a process undertaken by EPA and the ACOE to create a new rule that would meet the requirements laid down by SCOTUS in Rapanos. This process was complicated in part because there was no majority opinion in Rapanos. Rather, there was a plurality opinion by Justice Antonin Scalia, which struck the rule and stated that a proper definition could include areas with relatively permanent and or continuously flowing water. In a concurring opinion, Justice Anthony Kennedy called for a “substantial nexus” between an area defined as a wetland subject to jurisdiction and a body of water.
After a few false starts, the EPA published a proposed rule in the Federal Register in April 2014. The proposed rule sought to follow the suggestions in Justice Kennedy’s opinion. Congressional attempts to defeat the rule followed its publication. The House of Representatives passed H.R. 1732, directing EPA to re-write the rule. Hearings took place at which numerous interested parties from the business community gave testimony on the potential economic impact of the rule. Despite these attempts, the White House approved the final version of the WOTUS rule and it was published as a final rule on June 29, 2015. (For a description of the WOTUS rule, see “Clean Water Rule: A Dispute Playing Out in all Government Branches,” N.Y.L.J. (April 15, 2016)).
Litigation, Congressional Action and an Obama Veto
Lawsuits challenging the WOTUS rule were filed in several jurisdictions by 18 state attorneys general, representing what are generally considered “red states”—Ohio, Michigan, Tennessee, Oklahoma, Texas, Louisiana, Mississippi, Georgia, West Virginia, Alabama, Florida, Indiana, Kentucky, North Carolina, South Carolina, Utah and Wisconsin. Other cases were brought by, among others, the National Association of Manufacturers. The cases were filed in district courts throughout the nation, including North Dakota, Georgia and West Virginia. A motion by the government to consolidate these cases to a single district court was denied by the Judicial Panel on Multidistrict Litigation. In re Clean Water Rule, MDL No. 2663, Doc. 163 (Oct. 13, 2015).
Because there was some question as to whether the district courts or the circuit courts had jurisdiction over the challenges, some of the plaintiffs, including the 18 state attorneys general, filed protective petitions in circuit courts. These cases were consolidated and transferred to the U.S. Court of Appeals for the Sixth Circuit as In Re Environmental Protection Agency and Department of Defense Final Rule; Clean Water Rule; Definition of waters of the United States. On Oct. 9, 2015, the Sixth Circuit issued a nationwide stay of the implementation of the WOTUS rule, pending a determination of its jurisdiction over the challenges. In re EPA, 803 F.3d 804 (6th Cir. 2015).
At its core, the jurisdictional issue was whether the circuit court or the district courts had jurisdiction over the challenges. It arose in a peculiar manner; the plaintiffs moved to dismiss their own cases without prejudice on the ground that §509 (b)(1) of the Clean Water Act, 33 U.S.C. §1369(b)(1), required the cases first be heard in the district courts. The Sixth Circuit, in 2-1 decision, held that jurisdiction was properly in the circuit court, not in the district court and directed the parties to proceed on the merits of the challenge to the rule. The decision was unusual, in that the two judges who constituted the majority each wrote separate opinions and based their votes on separate theories. In re Dept. of Defense, 817 F.3d 261 (2016). A motion for rehearing en banc was denied.
Congress stepped into the fray while the litigations were pending. In January 2016, it passed a Joint Resolution, S.J. Res 22, disapproving the rule pursuant to 5 U.S.C. §§801 et seq. and declaring the rule of no force and effect. President Obama promptly vetoed that resolution (Congressional Record-Senate, Jan. 20, 2016). Thus, the status of the rule at the election of the next president was that the rule was technically in effect (although stayed by order of the Sixth Circuit) and the Sixth Circuit was the court lined up to hear the challenges to the rule on the merits.
POTUS and SCOTUS
On Feb. 28, 2017, President Trump issued the “Presidential Executive Order on Restoring the Rule of Law, Federalism, and Economic Growth by Reviewing the ‘Waters of the United States’ Rule.” In his order, POTUS directed EPA and ACOE to review the WOTUS rule and propose a new rule in which they shall, “consider interpreting the term ‘navigable waters’ as defined in 33 U.S.C. 1362(7), in a manner consistent with the opinion of Justice Antonin Scalia in [Rapanos].” This signaled a desire on the part of the administration to eliminate the “substantial nexus” theory espoused by Justice Kennedy. That order did not, in and of itself, reverse or undo the WOTUS rule, nor did it affect the stay issued by the Sixth Circuit.
In response to the executive order, on July 17, 2017, the EPA and ACOE published a proposed rule to rescind the WOTUS Rule and replace it with the definition contained in regulations promulgated in the 1980s. Proposed Rule, Definition of “Waters of the United States”—Recodification of Pre-Existing Rules, 82 Fed. Reg. 34,899 (July 27, 2017). This was described as the first part of a two-step process by which a new rule would be proposed and finalized through the process mandated by the Administrative Procedure Act. 5 U.S.C. §551 et seq.
The next step in the tortuous journey of the WOTUS rule was a unanimous U.S. Supreme Court decision in National Association of Manufacturers v. Department of Defense (No. 16-299, decided Jan. 22, 2018) in which SCOTUS ruled that challenges to the WOTUS rule were to be heard in the district courts, not in the Sixth Circuit.
That ruling, once implemented by the issuance of a mandate by the Sixth Circuit, would vacate the stay on the enforcement of the WOTUS previously issued by that court. Several states, in an action originally filed in the District Court for the Southern District of Georgia, now titled State of Georgia, et al. v. E .Scott Pruitt, et al., moved before the Eleventh Circuit Court of Appeals for the issuance of a mandate directing that case back to the district court so that court would be able to rule on a motion for a preliminary injunction blocking the rule before the Sixth Circuit stay was officially lifted. (Mr. Pruitt, who is named in his capacity as the Administrator of the EPA, was one of the state attorneys general who filed the original cases challenging the rule.)
As if the procedural battle in the courts—none of which had written one sentence on or made a single decision on the actual merits of the WOTUS rule—weren’t prolix and complicated enough, the EPA and the ACOE got back in the act by issuing a “Suspension Rule” effectively blocking the WOTUS rule by suspending it for a period of two years. Proposed Rule, Definition of “Waters of the United States”—Addition of Applicability date to 2015 Clean Water Rule, 82 Fed. Reg. 55,542 (Nov. 22, 2017).
Not to be outdone by their red state counterparts, the attorneys general of 10 “blue states” and the District of Columbia on Feb. 6, 2018 also filed a lawsuit in the U.S. District Court for the Southern District of New York, challenging the Suspension Rule as being violative of the Administrative Procedure Act. States of New York, et al v. E. Scott Pruitt, etc., et al (S.D.N.Y. Index No. 1:18-cv-1030). A little more than a week later, the Center for Biological Diversity and other environmental groups filed a formal notice of intent to sue EPA and the ACOE, alleging that the Suspension Rule was passed in violation of the Endangered Species Act. To quote Sonny and Cher, “The Beat Goes On.”
It has now been more than 16 years since Rapanos was argued and almost 16 years since it was decided. Regulations that were aimed at following SCOTUS’ ruling, which took almost nine years to issue, were issued almost three years ago. Thousands of pages of pleadings, briefs, executive orders, proposed rules, comments to rule and court decisions have been written. No doubt, millions of dollars of legal fees have been expended. Yet, despite all the litigation and regulatory wrangling, there is no clear rule and the agencies and the public are left to struggle with the determination of the need for a permit on a case-by-case basis with little hope for predictability and consistency. Is this any way to run a legal system?
Richard G. Leland is a partner in the real estate practice group in the New York office of Akerman LLP and an adjunct professor at the Graduate School of Architecture, Planning and Preservation at Columbia University.