For the commercial real estate development industry, few issues have been fraught with as much regulatory uncertainty and confusion over the past two decades than the scope of federal jurisdiction of the Clean Water Act (CWA). Determining whether a parcel of land is a wetland for CWA purposes and subject to federal permitting requirements, with the additional time and costs that process entails, is a major consideration for any project developer and a principal factor in deciding whether a project is worth undertaking.
The Biden administration, like the Obama and Trump administrations before it, recently proposed a regulation aiming to address the matter. But that rule may be short-lived, as the United States Supreme Court has accepted a case for consideration in its next term that may set forth a more durable legal test to determine federal jurisdiction over particular bodies of water and adjacent wetlands.
The lack of a controlling legal standard that can be easily and consistently applied is a major source of frustration for both the development community and environmental advocates. The problem has its origins in the vague terminology Congress used when it passed the amendments to the CWA in 1972. The CWA is intended to cover “navigable waters,” which is defined in the statute as “waters of the United States.” The broad term “waters of the United States” (or “WOTUS” as it is commonly referred to) was not further defined in the law, and the task of explaining it was left to the federal agencies responsible for ensuring compliance with the law — the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (USACE).
As a result, the EPA and USACE have attempted to give meaning to the phrase through regulations, supplemented with agency guidance. However, in many instances, EPA and USACE employees and administrators were accused of overreaching either in their regulations or in their application. Ambiguity is an invitation to litigation, and eventually landowners who sued to stop the EPA and USACE from asserting jurisdiction over their property made their way to the Supreme Court.
In two cases, the Supreme Court interpreted the scope of the CWA more narrowly than had the EPA and USACE in their regulations. In the first case, Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers (SWANCC), decided in 2001, the court rejected a claim of federal jurisdiction over isolated ponds that lacked a connection to traditional navigable waters.
However, the ruling in the second case, Rapanos v. United States, decided in 2006, did not clarify or refine an emerging jurisdictional standard, but rather created even more confusion and uncertainty for the public because it did not yield a controlling majority opinion that lower courts would be bound to follow. Instead, Rapanos yielded three different opinions. Justice Antonin Scalia, joined by three other justices and writing for a plurality of the court, set forth a standard that “waters” in “waters of the United States” meant “permanent, standing, or continuously flowing bodies of water” (such as streams, rivers and lakes) and wetlands with a “continuous surface connection” to such waters.
Concurring with Scalia and the three justices, but differing as to the standard to use, Justice Anthony Kennedy offered a different test, reasoning that existence of a “significant nexus” between the water or wetland in question and traditional navigable waters would be sufficient to establish federal jurisdiction.
Because of the 4-1-4 split in the Supreme Court’s Rapanos ruling, federal district and appellate courts have relied on distinct aspects of the opinion, leading to inconsistent application of the CWA depending on which jurisdiction the property was located. EPA and USACE guidance aimed to align their jurisdictional determinations with the Supreme Court opinions but admitted that they had not succeeded in developing guidance that provided the transparency, consistency and predictability in decision-making that the public deserved.
In 2015, the Obama administration, responding to the uncertainty surrounding the WOTUS definition, issued a regulation that relied on Kennedy’s “significant nexus” test and which many claimed broadly expanded the scope of federal jurisdiction far beyond the original intent of the CWA. The Obama administration’s “Clean Water Rule” faced fierce opposition, particularly from agricultural interests, and immediate legal challenges, with some courts upholding the rule and other courts staying its application. The result was a legal patchwork across the country, with some areas subject to the rule and other areas where it was not in effect.
Upon assuming power, the Trump administration promptly moved to repeal the Obama regulation, and subsequently issued its “Navigable Waters Protection Rule” (NWPR). The Trump NWPR, relying primarily on Scalia’s “relatively permanent” test, narrowed the areas subject to the CWA’s jurisdiction. It also faced vocal opposition and legal challenges from environmental advocacy groups and others objecting to its narrower scope.
In June 2021, the Biden administration indicated its intent to replace the Trump NWPR with its own WOTUS regulation, leaving the Trump rule in place until then. But their planned timetable was upset when federal court decisions in Arizona and New Mexico in the early fall of 2021 immediately vacated the Trump rule, upending the legal status of EPA and USACE jurisdictional determinations that were pending or had been reached under that rule. As a result, the Biden administration was forced to issue a draft rule for comment in November 2021.
As could be expected in such a long-running policy dispute that remained unresolved by the courts, the issue has become a political and rhetorical football in Congress. Early this year, before the public comment period for the newly issued Biden WOTUS regulation had concluded, the Supreme Court agreed to consider Sackett v. EPA, and the issues surrounding WOTUS and the extent of federal jurisdiction. Despite the clear impact the decision could have on the legality of its regulation, the Biden administration chose to move forward with its own proposed regulation.
NAIOP, as it has done on the prior WOTUS regulations, submitted comments on the Biden proposed rule on behalf of the commercial real estate industry, focusing primarily on the need for a regulatory framework that increases predictability and consistency in the decision-making process of EPA and USACE regarding jurisdictional determinations. Depending on the outcome of the 2022 midterm congressional elections, if Republicans assume the majority in the House of Representatives or the Senate, the issue may become the subject of disputes over language in EPA or USACE appropriations measures aiming to prohibit enforcement of the Biden WOTUS regulation. But ultimately, it is more likely that the Supreme Court’s decision this fall would finally establish a clear legal standard for WOTUS, possibly upending the Biden administration’s proposal, but at the same time putting an end to the decades-long regulatory back-and-forth that has characterized wetlands regulation in the U.S.