SCOTUS Clean Water Act Test ‘Devastating’ for Industry (3)

Clean Water Act attorneys have a new permitting guidepost after the Supreme Court on Thursday struck a middle ground in a landmark case on federal water protections.

The justices in a 6-3 opinion ruled that polluters must get permits for indirect water contamination that’s the “functional equivalent” of a direct discharge into federal waterways.

The decision narrows an environmentalist-favored standard an appellate court adopted in 2018, but rejects the industry-preferred approach that would have exempted all indirect pollution from Clean Water Act permitting requirements.

Though the Supreme Court remanded the case for lower courts to apply the new standard, environmentalists are celebrating the ruling as an overwhelming victory, and industry lawyers say they’re dismayed about its potential impacts.

“The fact that you had six justices putting down a marker and making it clear that Congress did not intend to create a gaping loophole couldn’t be more important,” Earthjustice attorney David Henkin, who represented Hawaii conservation groups in the case, told Bloomberg Law.

Henkin, based in Hawaii, was up at 4 a.m. local time to monitor Thursday’s decisions from the Supreme Court.

What’s in the Test?

The case centers on a dispute over whether Maui County needed federal permits for injecting wastewater underground, where it migrates to the Pacific Ocean. The county and the Trump administration said the pollution’s indirect path to the ocean put it beyond the scope of the Clean Water Act’s permitting program.

The high court rejected those arguments, but stopped short of affirming the “fairly traceable” test the U.S. Court of Appeals for the Ninth Circuit used when it sided with the Hawai’i Wildlife Fund and other groups against Maui County.

Instead, the lower court will have to consider whether Maui’s actions amount to a Clean Water Act violation under the Supreme Court-blessed functional equivalent test.

Justice Stephen Breyer, who authored the opinion, laid out two key factors for “most cases, but not necessarily every case” in determining whether indirect pollution needs permits: the distance pollution must travel to reach a federal waterway, and the time it takes to get there.

He noted multiple other potential considerations: the nature of material pollution travels through; the extent to which pollution is diluted or chemically changed; the amount that makes it all the way to a federal waterway; and more.

The court’s liberal wing signed on to Breyer’s opinion, joined by Chief Justice John Roberts and Justice Brett Kavanaugh. Justices Neil Gorsuch, Samuel Alito, and Clarence Thomas dissented.

“We are confident the Ninth Circuit will find in our favor on remand,” said Angela Howe, legal director for the Surfrider Foundation, one of the conservation groups involved in the case.

Maui County Mayor Michael Victorino stressed that the court didn’t order the county to get a permit for its wastewater discharges.

“It set up factors for agencies to consider in determining whether a permit is required,” he said in a statement. “We look forward to further clarity from our local regulators and working collaboratively to protect our waters.”

‘Devastating’ for Industry

Lawyers for utilities, energy companies, home builders, and other industries are expected to parse the meaning of the court’s definition for years.

“Here’s a whole cottage industry of litigation going forward to interpret what functional equivalent means,” said Nathan Gardner-Andrews, general counsel for the National Association of Clean Water Agencies.

NACWA represents publicly owned wastewater treatment plants, including the Maui wastewater reclamation plant that was the focus of the Ninth Circuit ruling.

Los Angeles-based industry lawyer Paul Beard called it a “devastating decision” for all sorts of industries that discharge water pollution because they’ll have to apply the court’s multifactor test instead of a clear, bright-line rule.

“One thing’s for certain: This is a veritable boon for CWA lawyers—and their experts—who will engage in even costlier and more time-consuming litigation over questions about whether a discharge is from a point source under the court’s new test,” the FisherBroyles LLP partner said.

Pacific Legal Foundation attorney Glenn Roper agreed, saying it will “make it difficult for regulated parties to predict whether or not they must seek a federal permit.”

Henkin, the Earthjustice lawyer, pushed back on what he called “industry-led hysteria that this is going to open the floodgates of litigation.” Lower courts will be “line-drawing, calling the balls and strikes, which is what courts do all the time.”

The majority opinion acknowledged that its standard leaves gray areas about what’s covered under the Clean Water Act, but concluded “there are too many potentially relevant factors applicable to factually different cases for this Court now to use more specific language.”

Message to the EPA

The decision has big implications for the Environmental Protection Agency, which oversees federal water permitting.

“The Maui decision sends a strong message to the the administration, which is, ‘Don’t go too far in cutting off Clean Water Act protections. You went too far,’” said Steven Miano, a partner with Hangley Aronchick Segal Pudlin & Schiller.

The EPA released a policy last year, in response to the Maui case and related litigation, that said any pollution that moves through groundwater before reaching federal waters isn’t subject to the law’s permitting requirements. The position was a divergence from the agency’s earlier interpretations.

The Supreme Court declined to give any deference to the EPA’s new approach, saying it “would open a loophole allowing easy evasion of the statutory provision’s basic purposes.”

Now the agency will have to rewrite its policy to reflect the Supreme Court’s standard, Miano said.

“If EPA continues to interpret things the way its current interpretation does, then it will lose every court challenge,” he said.

The EPA might have to go through a new public comment process to offer guidance for states and regulated parties studying which types of activities fall under the ‘functional equivalent’ standard, said Larry Liebesman, a former Justice Department environmental lawyer now at the water resources consulting firm Dawson & Associates.

“There will be a clamor to get more meat on the bones to figure out what functional equivalent means,” he said.

The agency said the Supreme Court’s decision adds uncertainty to water permitting and said it’s reviewing “the court’s call for the Agency to provide further guidance.”

“In holding that the Clean Water Act requires a permit for the addition of pollutants to groundwater if it is the ‘functional equivalent’ of a direct discharge, the Court unfortunately leaves some uncertainty for the public, including private property owners,” the EPA said in a statement.

Other Cases

The Supreme Court’s decision affects multiple other cases that raise similar Clean Water Act questions.

One of those, a dispute over petroleum pollution from a pipeline rupture, is still sitting on the high court’s stack of pending petitions.

Southern Environmental Law Center attorney Frank Holleman, representing conservation groups in that case, expects the justices to send it back to lower courts to apply the functional equivalent test, and he’s optimistic about the outcome.

“I think the decision is perfect for our case,” he said.

A series of appellate court decisions in 2018 ruled against environmentalists who argued that power plants needed permits for coal ash impoundments that leak pollution underground and ultimately into nearby waterways.

Harvard Law professor Richard Lazarus noted that power plant operators had argued that the leaks weren’t covered because they traveled through groundwater.

“The Court’s opinion today completely rejects that argument and those lower court rulings,” he said in an email.

Several lawsuits involving wastewater systems and other discharges have been put on hold pending the outcome of the Maui case. Courts are expected to restart those proceedings now and apply the Supreme Court’s test.

Sarah Peterman Bell, partner with Farella Braun + Martel LLP, said she suspected parties in those cases would move to settle the disputes in light of the Supreme Court’s ruling.

And going forward, she said, “I think utilities owning wastewater lagoons and treatment plants will have to be pretty careful about where they are located and where they discharge.”

The Sierra Club’s Maui chapter is involved in the Supreme Court case. The Sierra Club has received funding from Bloomberg Philanthropies, the charitable organization founded by Michael Bloomberg. Bloomberg Law is operated by entities controlled by Michael Bloomberg.

The case is Cty. of Maui v. Hawai’i Wildlife Fund, U.S., No. 18-260, 4/23/20.