The U.S. Supreme Court unanimously reversed and remanded a rule the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers rolled out in 2015 that asserts federal authority over small bodies of water with a broader definition of the statutory term, “waters of the U.S.” (WOTUS).

In a ruling for National Association of Manufacturers v. Department of Defense et al., written by Justice Sonia Sotomayor and issued on January 22, the court reversed judgment by the Sixth Circuit and remanded the case with instructions to dismiss petitions for review of the rule for lack of jurisdiction. The decision effectively lifts a stay placed on the rule by the federal court. However, the court also held that because the definition of the statutory term fell outside of Section 1369(b)(1) of the Clean Water Act, challenges to the rule must be filed in federal district courts—not in federal courts of appeal.

Industry experts said that while the ruling is unsurprising, it leaves open several questions about the future of the rule, even as the EPA and Army Corps work toward rescinding and recodifying the definition of WOTUS.

A Watery Definition

The final Obama-era rule, also known as the “Clean Water Rule,” was promulgated by the EPA and the U.S. Army Corps of Engineers in June 2015 in a bid to protect streams and wetlands from pollution and degradation.

The federal entities reasoned that while the Clean Water Act, enacted in 1972, granted the federal government broad powers to limit pollution in so-called “navigable” waterways such as the Great Lakes, and the Ohio and Mississippi rivers, a pair of Supreme Court decisions in 2001 and 2006 made it unclear whether the act also covered smaller bodies such as groundwater, headwaters, streams, and wetlands that feed those larger waterways. Meanwhile, the EPA said that for more than a decade, it had received requests—from members of Congress, state and local officials, industry, agriculture, environmental groups, scientists, and the public—for a rulemaking that would clearly define and protect tributaries that impact the health of downstream waters.

However, once finalized, the rule quickly drew ire, amassing legal challenges by at least 31 states and 52 non-state parties, which argued that it violates the 10th Amendment’s federalism principles and that it exceeds the Constitution’s commerce clause.

Among challengers were a number of electric utilities, which expressed concerns that water near plants, such as water drainage ditches and cooling ponds, may be considered U.S. waters. According to the Nuclear Energy Institute, the rule would create “significant practical problems” for companies operating nuclear power plants and planning new facilities. Similarly, the American Public Power Association suggested the final rule is problematic because it would drastically expand the WOTUS jurisdiction of EPA and the Corps, “which would subject more utility projects and activities to Clean Water Act jurisdiction.”

Within months of the final rule’s issuance, challengers rapidly gained a series of victories. Significantly, the Sixth Circuit stayed the rule on October 9, 2015, ruling that petitioners had demonstrated a “substantial possibility of success on the merits of their claims.” The Supreme Court in February 2016, meanwhile, also agreed to review the Sixth Circuit’s decision of that month on jurisdictional matters related to the case—which led to the court’s issuing its unanimous ruling on Monday.

The Trump administration, too, pushed back against the rule. In February 2017, President Trump signed an executive order authorizing the EPA to rewrite the rule. And in June 2017, EPA Administrator Scott Pruitt, who led legal challenges to the rule as Oklahoma’s attorney general, announced that the EPA, Department of the Army, and Army Corps would work to scrap the rule, and issued a proposed rule to serve as the first step toward rescinding the WOTUS final rule. In November 2017, in a bid to give the agencies more time to reconsider the definition of WOTUS, they proposed to delay the effective date of the 2015 rule by two years.

Navigating Legal Channels

However, according to Thaddeus Lightfoot, a partner at international law firm Dorsey & Whitney, the Supreme Court’s ruling in National Association of Manufacturers v. Dept. of Defense et al. now opens many more unknowns about the future of the rule.

After the EPA promulgated the rule, it was subject to challenges filed to both district courts and courts of appeal, he explained. In October 2015, the Judicial Panel on Multidistrict Litigation (JPML) denied the government’s request to consolidate and transfer the legal actions to a single district court, though it consolidated “protective” petitions (filed by various parties in appellate courts in case their district court lawsuits were dismissed for lack of jurisdiction) and transferred them to the Sixth Circuit—which issued a nationwide stay of the WOTUS rule pending further proceedings.

However, as the Sixth Circuit acted, parallel actions continued in the district courts, and NAM intervened as a respondent in the Sixth Circuit and, along with other parties, moved to dismiss for lack of jurisdiction. The EPA and Army Corps opposed those motions, arguing that the challenges must first be brought in a federal court of appeals because the WOTUS rule fell within certain subparagraphs (E and F) of Section 1369(b)(1) of the Clean Water Act. The Sixth Circuit denied the motions.

Falling Outside the Clean Water Act Ambit  

But in its ruling on January 22, the Supreme Court ruled that the WOTUS rule fell outside the ambit of the subparagraphs in question and held that challenges to the rule must be filed in federal district court.

“Justice Sotomayor relied upon the express language of the Clean Water Act, which vests all challenges under the Clean Water Act in federal district courts subject to seven exceptions, [not all] of which were at issue here,” Lightfoot explained.

The court held that the first exception, which places jurisdiction to challenge effluent limitations in the court of appeals, was not applicable because the WOTUS rule does not establish an effluent limitation—which the Clean Water Act defines as “any restriction … on quantities, rates, and concentrations” of certain pollutants “which are discharged from point sources into navigable waters.” Similarly, the exception allowing for court of appeals jurisdiction in “issuing or denying permits” under the Clean Water Act’s Section 402 did not apply because the WOTUS rule does not issue or deny a permit.

The court also observed that two of its recent cases, Hawkes and Sackett, which addressed Section 404 permits, arose in the district court, not in the court of appeals. Justice Sotomayor also observed that Congress could have funneled all challenges to Clean Water Act national rules to the court of appeals but did not, Lightfoot noted.

“The Supreme Court remanded the case to the Sixth Circuit with orders to dismiss the WOTUS petitions for review for lack of jurisdiction,” Lightfoot said.  “Presumably, that means the Sixth Circuit will also lift its stay, since it has no jurisdiction over the rule challenge.”

What the Ruling Could Mean

Yet, much remains unclear. “Will the JPML consolidate the substantive challenges to the WOTUS rule in a single district court? Will a district court issue a stay of the rule pending adjudication of the rule’s merits? And what effect on the litigation will the Trump Administration’s efforts to reconsider the WOTUS rule have on the underlying litigation regarding the merits of the rule?” he asked.

Lightfoot noted that the EPA has proposed the first step in a two-step process to revise the WOTUS definition consistent with an earlier executive order issued by the Trump administration. “The proposed first step is to rescind WOTUS rule and re-codify the pre-rule definition. The second step is to undertake notice and comment rulemaking to [substantively] re-evaluate the WOTUS definition in the [Clean Water Act]. Public comment on the Trump Administration’s proposal closed on Sept. 27,” he said.

One outcome could be that courts will treat the WOTUS rule as it has the Clean Power Plan, which remains suspended in legal limbo in the D.C. Circuit until the EPA can complete is re-evaluation. “District courts considering the substantive challenge to the WOTUS rule may well stay such litigation pending the Trump Administration’s re-evaluation, just as the DC Circuit has stayed the substantive challenge the [Clean Power Plan],” Lightfoot said.

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)