On September 14, 2023, the EPA announced a final rule to restore the fundamental authority granted by Congress under the Clean Water Act (CWA) to states, territories, and tribes to protect water resources.
“The Agency’s final Clean Water Act Section 401 Water Quality Certification Improvement Rule (Section 401) will support clear, efficient, and focused water quality reviews of infrastructure and development projects that are key to economic growth,” an EPA news release says.
With the U.S. Supreme Court’s (SCOTUS) Sackett decision narrowing the definition of waters of the United States (WOTUS) and, hence, the EPA’s authority, critics see the revised Section 401 rule as the administration’s attempt to give states the ability to block pipeline and other infrastructure projects.
“The [Section 401] final rule is unfortunately just another example of the Biden Administration’s hostility towards completing infrastructure projects. This new rule still allows for states to singlehandedly torpedo crucial development of interstate energy and infrastructure projects for reasons unrelated to the [CWA]. If you want a solution to this problem, look no further than the House-passed H.R. 1, which contains a provision from our committee to ensure that [CWA] water quality standards are the focus of Section 401 reviews, and that bureaucratic activism isn’t allowed to block infrastructure projects. Disappointingly, this rule does not properly address either,” according to a joint statement issued by Transportation and Infrastructure Committee Chairman Sam Graves, R-Mo., and Water Resources and Environment Subcommittee Chairman David Rouzer, R-N.C.
The revised final 2023 401 rule
According to the EPA Fact Sheet on the final rule, it provides stakeholders with a clear and consistent certification process while ensuring protection of vital state, territory, and tribal water resources by:
- Supporting flexible, early coordination with stakeholders
- Clearly defining the contents necessary to start the certification process
- Ensuring actions occur within the 1-year statutory time frame
- Focusing on the water quality-related impacts of federal projects
- Allowing projects to adapt easily and predictably to shifting context
“Section 401 enables states, territories, and authorized Tribes to protect their water quality from adverse impacts of construction or operation of federally permitted projects,” according to the EPA news release. Under this section, “a federal agency may not issue a license or permit to conduct any activity that may result in any discharge into a [WOTUS], unless the appropriate state, territory, or authorized Tribe issues a [401] water quality certification or waives certification. EPA’s 2023 rule realigns the scope of Section 401 certification with decades of established practice and restores and strengthens the role of states, territories, and authorized Tribes.
“The rule enhances certification review and provides regulatory certainty to advance federally permitted projects. For example, the rule establishes a 6-month default timeframe (when the federal agency and certifying authority fail to reach an agreement) and a 1-year maximum timeframe for certification review (the statutory maximum). The rule emphasizes that states, territories, and Tribes may only consider the adverse water quality-impacts from the activity. To limit delays, the rule also provides a clear approach to defining the required contents in a request for certification.”
It's important to note that the 2023 rule doesn’t allow states, territories, and tribes to unilaterally modify certifications. They must collaborate with federal agencies to do so.
“This balances certifying authorities’ needs for flexibility (to protect water quality over the life of a project) and the potential reliance interests of project proponents and federal agencies,” the EPA Fact Sheet adds.
During the Trump administration, streamlining fossil fuel development was a priority. At that time, the 401 rule was modified in a manner that made it harder for local authorities to block federally approved projects.
“The EPA has said states should have authority to look beyond pollution directly discharged into waterways and ‘holistically evaluate’ the impact of a project on local water quality,” notes The Daily Progress. “The new rule gives local regulators more power to ensure they have the information they need before facing deadline pressure to issue or deny a permit, the EPA said.”
Environmental groups such as Earthjustice have applauded the revised regulation because it gives local certifying authorities more certainty in reviewing and potentially rejecting projects that threaten waters under their jurisdiction.
“This rule will help end the regulatory chaos states and tribes have operated under during attempts to coopt Section 401 to serve the interests of the fossil fuel industry,” said Moneen Nasmith, senior attorney at Earthjustice, in the organization’s press release.
Earthjustice represented tribes in Washington state, Nevada, and Alaska in a lawsuit against the Trump-era 2020 rule.
Trump administration Section 401 rule
When President Donald Trump was in office, his administration said states were improperly wielding the Section 401 rule to block needed infrastructure projects. And industry groups predicted that the rule in place at that time would lead to unnecessary delays for a range of infrastructure projects, including pipelines, dams, and bridges.
“New York, for example, has used its review authority to deny certain natural gas pipeline projects. Washington state refused to issue a permit for a coal export terminal in 2017,” The Daily Progress continues. “In 2020, EPA officials said the [CWA] shouldn’t be used to hold infrastructure projects hostage and finalized its rule that curtailed state and tribal power.”
The EPA believes the revised 2023 final Section 401 rule strikes the right balance by allowing case-specific reviews.
“The administration will work closely with states, tribes and territories on implementing the rule, ‘but again, what is jurisdictional and not jurisdictional is determined by these very case-specific reviews’ by the Corps,” said Radhika Fox, EPA assistant administrator for water, in The Daily Progress.
Sackett decision
Because the Section 401 rule embodies the WOTUS decision in its regulatory authority, the recent SCOTUS decision in Sackett v. EPA is relevant.
On May 25, 2023, SCOTUS issued its second opinion in Sackett v. EPA, ruling that the EPA and the U.S. Army Corps of Engineers (Corps) improperly claimed jurisdiction over a private property wetland.
The facts of the case are that the Sacketts purchased a small parcel of land on wetlands 100 yards from Priest Lake in Idaho. Their property is separated from the lake by a roadway. When the Sacketts began filling their property to start construction on their home, the EPA stepped in and said they must apply for a Section 404 permit to fill their “wetland” property. They began battling the EPA in court approximately 20 years ago.
Having a clear and defensible definition of WOTUS is critical for CWA regulations and enforcement.
The Sackett decision stated, “Wetlands that are separate from traditional navigable waters cannot be considered part of those waters, even if they are located nearby.”
The decision also held that the CWA’s WOTUS definition must “refer only to geographic[al] features that are described in ordinary parlance as streams, oceans, rivers and lakes and to adjacent wetlands that are indistinguishable from those bodies of water due to a continuous surface connection.”
The ruling means the EPA can only regulate federal streams, rivers, oceans, and lakes and wetlands with a “continuous surface connection to those bodies.”
“We have worked with EPA to expeditiously develop a rule to incorporate changes required as a result of [SCOTUS’s] decision in Sackett,” said Michael L. Connor, assistant secretary of the Army for Civil Works, in the EPA news release. “With this final rule, the Corps can resume issuing approved jurisdictional determinations that were paused [due to] the Sackett decision. Moving forward, the Corps will continue to protect and restore the nation’s waters in support of jobs and healthy communities.”
Development opportunities?
The revised final WOTUS rule issued by the EPA and the Corps in August 2023 removes the significant nexus test from consideration when identifying tributaries and other waters as federally protected. It also revises the adjacency test when identifying federally jurisdictional wetlands, clarifies that interstate wetlands don’t fall within the interstate waters category, and clarifies the types of features that can be considered under the “additional waters” category.
“The new rule appears to restrict the apparent regulatory overreach that existed prior to the Sackett ruling,” a JD Supra article by Burr & Forman LLP says. “This is good news for developers seeking to develop workforce housing and community projects in communities located near the coast, the Savannah River, or the Great Lakes.
“One developer has already voiced to Burr & Forman that the EPA’s new rules will allow the developer to enjoy a 30% increase in housing density to develop an affordable townhome community in South Carolina. Similar doors to development are likely to open throughout the Southeast, which will likely alleviate the [U.S.] housing shortage. In its popular show, All Things Considered, NPR predicts that the EPA’s new [CWA] rules will open development to more than 50% of the real property in the United States previously defined as undevelopable wetlands.”
Remaining WOTUS gaps
Other analysts state that the latest “final” WOTUS rule still leaves much uncertainty because it merely removed the “significant nexus test.”
Rather than seeking to provide a holistic, legal standard in light of the Court’s ruling, however, the Agencies moved forward with their rulemaking process by merely cutting the “significant nexus” provision nullified by the Supreme Court.
The new rule fails to provide a definition for a “relatively permanent” body of water and also doesn’t exclude all “ephemeral features” that only hold water following rainfall from federal jurisdiction.
“In their haste to issue a new rule — and in rejecting any public input processes post-Sackett — the Agencies missed an opportunity to once and for all provide the regulatory clarity that so many have been seeking for the past several decades,” according to an opinion piece published by Capital Press.
“And so, the uncertainty and jurisdictional murkiness continues. … The federal agencies had an opportunity to work collaboratively and within the law to provide a comprehensive rule that provides clarity and certainty. Instead, they continued down the path taken by the Obama administration in its 2015 WOTUS rule and will leave far too many farmers, homebuilders, energy producers, small businesses, and local communities in limbo.”
Legal battles predicted
As with most promulgated regulations, legal challenges can be certain. Several analysts believe the latest Section 401 rule has significant gaps that will leave it vulnerable to legal challenges.
“The two aspects of EPA’s rule which I think will be of most interest to the current Supreme Court are what was formerly proposed as the ‘activity as a whole’ provision and the ‘potential’ for a discharge provision,” Jeffrey R. Porter, member and chair of the environmental law practice at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., says in a JD Supra article.
The Section 401 rule now allows local regulators to “deny” a federal permit for a discharge to WOTUS if the local authorities determine the “activity” from the discharge will adversely impact local water quality even if the water impacted isn’t defined as WOTUS.
“People are going to be watching for the application of the water quality-related language,” said Laura Williams, an associate at Morgan, Lewis & Bockius LLP in Houston, according to Bloomberg Law.
In the proposed rule, the EPA said states could object to project-related activity “as a whole” that could negatively impact water quality. The final version removed the “as a whole” phrase.
In dropping the phrase, the EPA states that “[t]his does not represent a change in substance from proposal. The Agency does not interpret the terms ‘activity’ and ‘activity as a whole’ as having different meanings.”
The “EPA is saying that a State or Tribe can effectively prohibit an activity under the Federal [CWA] that the Federal Government could not prohibit under the same Act,” the Porter JD Supra article adds. “… I think it likely that same Sackett majority is going to have trouble with EPA’s suggestion that the [CWA] allows for this exercise of ‘cooperative federalism.’
“The other element of EPA's rule that I think [SCOTUS] may find problematic has to do with the requirement that a State or Tribal certification is required if there is the ‘potential’ for a discharge to [WOTUS]. EPA explicitly rejected suggestions that it should define what ‘potential’ or, more specifically, ‘may result,’ means. There can be no doubt that ‘potential’ means different things to different people and that, sooner rather than later, someone responsible for a State or Tribal certification is going to apply ‘potential’ in a way that a Court finds unsustainable.
“What is certain is more uncertainty for the regulated community and more litigation as the longest running controversy in environmental law plays out in our courts until Congress decides to resolve it,” Porter continued.
However, other experts have pointed out that the new Section 401 rule basically just reverted the law back to the way it was before the Trump administration.
“The rule does clarify that only water quality impacts are covered,” said Pat Parenteau, emeritus law professor at Vermont Law School, in Bloomberg Law. “This means that climate change impacts of fossil fuels projects like pipelines cannot be considered by states and tribes when considering whether to certify or condition the federal license or permit required for construction.
“EPA struck a ‘fair balance’ between expediting project permitting and respecting state authority to protect their water quality, Parenteau said.”