January 01, 2016

Two Important New Clean Water Act Rulings

Mark Ryan

There were two very important developments in the Clean Water Act (CWA or Act) case law in October—one high profile, the other less so. The Sixth Circuit issued a nationwide stay of the new U.S. Environmental Protection Agency (EPA)/Army Corps of Engineers (Corps) Clean Water Rule that was set to redefine what a water of the United States is for the first time in several decades. And a district court in West Virginia decided to one up the Supreme Court’s decision in Sackett v. EPA, 132 S. Ct. 1367 (2012).

First, let us examine the new rule. (Full disclosure, I helped write the draft “waters of the United States” (WOTUS) rule when I was still with EPA; the final rule was written and issued after I left the agency.) Despite the breadth of the new rule, and the many challenges to it, it is all coming down to adjacency—at least in the Sixth Circuit. The CWA regulates discharges of pollutants from a point source to “navigable waters.” So the billion-dollar question has become what is a “navigable water”? The Mississippi? Of course. The Pacific Ocean? Yes. The small creek in your backyard? Maybe. How about the wetland next to the small creek that dries up in the summer? Or the irrigation ditch?

Congress did not help us when it wrote the CWA. It simply defined the term “navigable waters” as “the waters of the United States, including the territorial seas.” The implementing agencies, EPA and the Corps, promulgated a much more expansive definition of “waters of the United States” in the 1970s, which included, among other things, jurisdiction over streams, rivers and lakes, and their adjacent wetlands. They defined adjacency as “bordering, contiguous or neighboring.” 33 C.F.R. § 328.3(c). But, what is “neighboring?” Six feet? Six yards? Six miles? Or is it tied to the hydrology and biology of the area? If so, how does one know whether the wetland is neighboring enough to fall within the protections of the CWA? The courts grappled with it for decades but did not substantially advance our understanding much of what is in, and what is out, of jurisdiction of the CWA.

So when the agencies recently rewrote the “waters of the United States” definition they included a new, more detailed definition of “adjacency.” (See Christopher Thomas’s article “Defining ‘Waters of the United States’: A Mean-Spirited Guide” in the Summer 2015 issue of NR&E for an interesting overview of the entire rule making.) In an effort to flesh out the ambiguous term “neighboring,” the agencies issued a draft rule that defined it in terms of hydrology, relying on terms such as historical flood plains and shallow subsurface connections. Apparently reacting to significant public comment on that section (the agencies received over 1 million public comments on the draft rule), EPA switched in the final rule from a purely science-based approach to a bright-line distance test. For example, in section 230.3(o)(3)(B), the rule states: “All waters located within the 100-year floodplain of [five categories of waters] and not more than 1,500 feet from the ordinary high water mark of such water.” The agencies obviously were trying to bring clarity to the old definition of “neighboring,” but where did the distance numbers come from? The record is mostly silent on that issue. And therein lies the rub.

Challenges flew fast and furious as soon as the rule went final in June 2015. Seventy-two plaintiffs filed nine complaints in seven district courts. The courts in Georgia and Virginia dismissed their cases on the grounds that they should be in the court of appeals under section 509 of the Act. The court in North Dakota went the other way, and issued a stay of the rule applicable in the states that were plaintiffs in that particular case.

The agencies moved to consolidate all of the district court actions in the D.C. District Court, but on October 13, 2015, the Multidistrict Litigation Panel denied the government’s motion to consolidate. See In re: Clean Water Rule: Definition of “waters of the United States,” MDL No. 2663 (Panel of Multidistrict Litigation Oct. 13, 2015) (ruling that centralization under 28 U.S.C. sec. 1407 was not justified since the cases are all based on review of the administrative record, and because of the complex procedural posture of the cases (contrary rulings by various judges)).

Meanwhile, fourteen petitions for review were filed in a number of the courts of appeals challenging the new rule. The courts of appeals cases were all consolidated in the Sixth Circuit on July 29, 2015. Petitioners immediately filed two motions: (1) to dismiss their petition on the grounds that jurisdiction is more appropriate in the district courts and (2) to stay the final rule until the court hears the arguments on the merits. On October 9, 2015, the Sixth Circuit issued a nationwide stay of the new Clean Water Rule, holding that petitioners had demonstrated a substantial likelihood of success on the merits of their challenge to the rule because the final rule contained bright-line distance requirements that were not in the draft rule and therefore may not be a logical outgrowth of the draft rule. The court was also persuaded that the record did not provide support for the distance rationale. In re Clean Water Rule, Nos. 15-3799/3822/3853/3887 (6th Cir. 2015). The dissent, it is worth noting, argued that the court should not issue a stay until it has determined whether it has jurisdiction to hear the matter (a motion challenging circuit court jurisdiction is pending). The new WOTUS rule covers a lot of things, and many of the challenges to it are based on the Constitution and the prior Supreme Court rulings in Rapanos v. United States, 547 U.S. 715 (2006), and Solid Waste Agency of Northern Cook County (SWANCC) v. U.S. Army Corps of Engineers, 531 U.S. 159 (2001), but its Achilles’ heel may end up being adjacency.

In light of the Sixth Circuit’s finding of a substantial likelihood of success on the merits, it will be interesting to see if EPA and Corps now take a voluntary remand of the rule. Given the challenges to issuing a new rule, the agencies may decide to forge ahead. If the agencies do withdraw the rule, it will likely kill the effort some for at least a couple of years, assuming the next administration does not stop the rule all together. Putting out a rule of this sort is a massive undertaking. Given the upcoming election season, and the time needed to rewrite, build a record, and repromulgate a new draft rule, the odds of seeing a new rule before 2017 are low. One thing is clear, the rule needs to be updated. The mess created by Rapanos is bad for everyone. There is far too much confusion over what is covered by the Act. Jurisdictional determinations take too long and consume too many resources. A fix is badly needed, but when will it happen? (I will be posting updates to this litigation on my CWA Blog at markryanlaw.com.)

Now, for a case that is possibly just as interesting. I am calling it Son of Sackett. The case is Foster v. EPA, 2015 WL 319452 (S.D.W. Va. 2015), and it is the next step in the Sackett progression. (Second full disclosure: when I was with the EPA, I was the attorney in charge of the Sackett case after the Supreme Court remanded it to the district court.)

Section 309(a) of the CWA allows EPA to issue administrative orders requiring persons who have violated the Act to stop polluting or, as is frequently the case, to clean up what they have done. EPA frequently uses these orders in the cases of unauthorized wetlands fills. Prior to 2012, all of the Circuit Courts that had looked at the issue, had decided that there was no pre-enforcement review. They reasoned that Congress gave the EPA the administrative authority to order cleanups because cleanups are time critical activities, and judicial review would thwart that goal.

In a 9–0 decision, the Supreme Court in the now infamous Sackett case, held that it was a violation of the order recipients’ due-process rights to forbid them from challenging the order prior to enforcement by the agency. Since failure to comply with the order carries significant penalties, the Court reasoned that one could not be forced to pile up huge penalties in order to get one’s day in court. The Sackett Court ruled that recipients of such orders are entitled to challenge them as final agency action under the Administrative Procedures Act (APA).

The judge in Foster took that rationale one step further. In ruling on a motion to dismiss the developer’s challenge to an EPA section 309(a) compliance order to restore numerous streams filled by the developer, the judge held that the order violated the developer’s procedural due-process rights because APA review would potentially cause the developer to rack up substantial penalties while the APA case was being litigated. The judge relied heavily on Justice Alito’s dicta from the Sackett case. He dismissed the developers’ equal-protection claim on grounds that the complaint contained no evidence of unequal treatment, and he dismissed the substantive due-process claims because the complaint contained no allegations of conduct that “shocks the conscious.” But the procedural due-process ruling is very significant.

Plaintiff in this case has successfully done an end-run on the APA, and one-upped Sackett. If this case is affirmed on appeal or picked up by other courts, it could become a game changer. If this court is correct that an EPA section 309(a) order per se violates the respondent’s due-process rights, then it is hard to envision the EPA continuing to exercise the compliance order authority given to it by Congress. Since EPA ALJ’s do not have injunctive relief authority under the CWA, EPA’s only recourse may be to file in federal court instead of issuing administrative orders. The advantage to the regulated community is fewer administrative orders. EPA has to refer federal court cases to DOJ for enforcement, and those referrals are very resource and time intensive, so fewer orders would be issued. The net effect, however, might be that EPA will simply sue violators in federal court, where penalties are larger and litigation costs are much higher than in administrative cases.

Section 309(a) has been an important part of EPA’s enforcement program for decades. Foster has the potential to reduce, if not eliminate, the ability of EPA to issue administrative orders with penalties attached to them for noncompliance. The Sackett case forced EPA to build a formal administrative record before issuing any orders in order to survive APA review if a challenge came. But this ruling would make even APA review too much to pass constitutional muster. I predict an appeal.

Mark Ryan

Mr. Ryan is a member of the editorial board of Natural Resources & Environment and may be reached at mr@ryankuehler.com.