Government Affairs

WSC is fully committed to keeping you up-to-date on developments that may impact you and your business. This dedicated page will be updated with new information as it becomes available.
 
Listen to our Virtual Town Hall Meetings with various water well industry members. Click the image below.

WSC Weighs In on Proposed Regulations in Florida and North Carolina  

WSC recently submitted comments on two proposed Florida regulations. The Florida Ground Water Association (FGWA) alerted WSC about the proposed regulations and WSC worked with the FGWA to draft comments on the proposed rules.

The two proposed regulations contain similar prohibitions or restrictions on the construction or use of private residential irrigation wells. Private residential irrigation wells form an important part of the business of many Florida water well contractors.

The Outstanding Florida Springs (OFS) Rulemaking includes a condition that prohibits “new water use authorization for withdrawals from private residential irrigation wells constructed in the Upper Floridian Aquifer” after the effective date of the regulation “where a lower quality water source is available for irrigation, or public supply or reclaimed water is available at or immediately adjacent to the property boundary.”  Under this rule, the private residential irrigation wells may be constructed, but not used, in many cases.

The Recovery Strategy for the Lower Santa Fe and Ichetucknee Rivers and Associated Priority Springs (LSFIR) minimum flows (MFLs) Rulemaking includes a provision that prohibits the construction of any “new private residential irrigation wells used solely for irrigation” in the Floridian Aquifer after the effective date of the rules “where a lower quality water source is available, or public water or reclaimed water is available at or immediately adjacent to the property boundary at the time of the well construction.” Under this rule, private residential irrigation wells may not be constructed in many cases.

Given that lower-quality water sources are likely not available, these provisions equate to a mandatory connection rule. The WSC comments focused on the advantages of decentralized private residential irrigation wells over centralized public water. In addition, the comments detailed regulations in other states that allow private residential irrigation, recognizing the benefits of these systems.

WSC will continue to work with the FGWA to raise awareness about the advantages of private domestic wells and private residential irrigation wells over centralized public water. We will also keep our members informed. The participation of all members of the industry in these processes is important to maintain the viability of decentralized private water systems.

Water Systems Council Engaged in Union County, North Carolina Proposed Rule Changes

Regulators in Union County, North Carolina, surprised water well contractors with proposed changes in the residential construction process. Apparently prompted by a single issue with water well quality, the Environmental Health Director for the county proposed to construct the water well earlier in the building construction process so that water testing could be conducted and the water verified by the county to be potable.

A certificate of occupancy would not be issued until the water testing shows that the water is potable and complies with U.S. Environmental Protection Agency primary drinking water standards. Any water treatment equipment, maintenance, testing, etc., would be the homeowner’s responsibility.

This change in process would create difficulties for the homeowner and water well contractors. Water well contractors are backlogged, so it would take time to get a well installed. Once the well is installed, there would be no electrical power at the site to pull samples. Generators do not work well for pulling samples. Laboratories take 4-6 weeks to get samples analyzed, further delaying construction. If multiple attempts at treatment are needed, the delay could be months. In addition, U.S. Environmental Protection Agency standards are not legally applicable to private water wells. The homeowner makes the determination of what type of treatment, if any, is needed.

WSC Executive Director Margaret Martens attended the first meeting organized by the county and limited to water well contractors in August. A large number of contractors attended, asked a number of questions, and expressed concerns about the impact of the implementation of the proposal.

Questions also arose as to the authority of the county to impose these requirements. A recent letter opinion by the State Office of the Fire Marshal indicates that the local health department can only provide information and recommendations to the private well owner, not mandate treatment. If the well has been constructed or repaired pursuant to state requirements, the local health department must issue a certificate of completion.

WSC will continue to work with the North Carolina Ground Water Association to follow these developments and ensure that government officials are aware of the practical implications of this proposal. We will advise the membership of further developments.

Supreme Court Update: 3 Cases to Watch

In our last newsletter, WSC Legal Advisor Jesse Richardson summarized the United States Supreme Court’s decision in Texas v. New Mexico. That case directly applies to the groundwater industry. However, three other cases decided by the Court this term also potentially impact the industry. This update summarizes those cases.

Loper Bright Enterprises v. Raimondo

In this case, the Court looked at the issue of how much deference courts should give to agency interpretations of regulations that they administer. For the groundwater industry, the most obvious example of this issue involves the definition of Waters of the United States (WOTUS). If the Environmental Protection Agency (EPA) and United States Army Corps of Engineers (Corps) pass a regulation defining WOTUS, should courts defer to the expertise of the agencies?

For 40 years, courts had applied the Chevron test, set out in a United States Supreme Court decision. That test has two steps. In step 1, courts look at whether Congress addressed the issue in passing the original law. If so, Congress’s intention controls. If not, courts go to step 2. Step 2 asks whether the agency’s interpretation is reasonable. Courts may think that the interpretation is not the best, but as long as the interpretation is reasonable, courts must defer to the agency.

However, the United States Supreme Court overturned step 2 of the test in this case. If Congress has not spoken to the issue, courts should now use their independent judgment to determine the best test. The agency interpretation should be given “respect.”

Whether and how much this test will impact interpretations of agency regulations remains to be seen. However, courts now hold much more authority to determine the correct interpretation. The Court made clear, however, that court rulings using Chevron will not be overturned. The new test only applies going forward. Perhaps the new rule will allow a more expedited definition of WOTUS.

Corner Post, Inc. v. The Federal Reserve System

Lawsuits against the United States generally have a six-year statute of limitations. With respect to suits challenging a regulation adopted by a federal agency, the federal government took the position that the six-year time period began to run when the regulation was adopted. According to the government, that interpretation gave certainty that once the regulation was in place for six years, the law was settled and could not be overturned.

The United States Supreme Court disagreed. The Court ruled that the six-year statute of limitations begins to run when the party bringing the lawsuit has been injured. In this case, since Corner Post had begun their business, and begun to be affected by the regulation at issue, less than six years before filing suit, the lawsuit was timely filed. This ruling means that regulations passed by federal agencies may be challenged more than six years after the regulation is passed in certain circumstances.

Connelly v. United States

The final case addressed in this summary relates to family business succession, an important issue in the water well industry. The case involved a family business owned by two brothers, Michael and Thomas. As in many cases, the brothers wanted the business to stay in the family. Consequently, the business agreement included provisions that allowed the surviving brother to buy the shares of the deceased brother. If the surviving brother declined, the corporation was required to buy the shares. The corporation purchased a $3.5 million life insurance policy on each brother’s life to fund a possible purchase. These types of buy-sell agreements are common in family-owned businesses.

Michael died, the corporation received the $3.5 million insurance payment, and Thomas declined to purchase Michael’s shares. Therefore, the corporation was obligated to purchase the shares. An appraiser valued Michael’s shares at $3 million. In calculating the value, the appraiser did not include the $3 million in cash that would be used to purchase Michael’s shares in valuing the corporation, reasoning that the corporation was obligated to purchase the shares.

The Internal Revenue Service disagreed and filed a lawsuit. A unanimous United States Supreme Court found that the $3 million in cash must be included in the value of the corporation, and Michael’s shares. Justice Thomas, writing for the Court, suggested that the brothers should have had a reciprocal buy-sell agreement, with Michael purchasing life insurance on Thomas’ life, and Thomas purchasing life insurance on Michael’s life. With that arrangement in place, the life insurance proceeds would not have increased the value of Michael’s shares. An alternative way to avoid this result would be to utilize a life insurance trust. Because of the incorrect valuation, Michael’s estate owed the IRS an additional $900,000 in estate tax.

This case raises the important issue of who should own life insurance policies and who should be named the beneficiary. In general, if a person owns a life insurance policy on their own life, the payout from that policy is included in that person’s estate at the time of death. Since the law presently exempts the first $13.61 million in estate value from the federal estate tax in 2024, very few people need to be concerned about the issue. However, the federal estate tax exemption amount is set to decrease to about $7 million in 2026 unless Congress takes action. At that level, a $3 million or $5 million life insurance policy could easily push the value of the estate above $7 million. Federal estate tax rates are high, so the liability increases rapidly. Add to that state taxes, and the importance of ensuring that the life insurance policy is owned by the appropriate party becomes clear.

This decision provides an important reminder for individuals and businesses to carefully consider various life insurance options. An attorney and financial planner can provide assistance.

U.S. Supreme Court Decides Texas v. New Mexico

On June 21, 2024, the United States Supreme Court issued an opinion in Texas v. New Mexico that seemed to surprise the participants and observers. In a 5-4 decision, the Court held that the federal government could block an agreement between Texas and New Mexico to resolve their dispute over the 1938 Rio Grande Compact.

Although the compact relates to a river, the dispute centers on groundwater pumping. The decision threatens to give the federal government rights to allocate groundwater or, at a minimum, veto state decisions on groundwater allocation. Since states clearly hold the right to allocate groundwater within their borders and agree to compacts allocating groundwater between states, the decision disrupts the present balance of powers between state governments and the federal government.

Texas filed suit against New Mexico in 2013, alleging that excessive groundwater pumping in New Mexico deprived Texas of its fair share of Rio Grande water under the compact. Note that lawsuits between states originate in the United States Supreme Court. The Court appoints a Special Master to hold hearings and make recommendations to the Court, which ultimately decides the issues.

Unlike most compacts, the Rio Grande Compact requires New Mexico to deliver water not to the New Mexico/Texas border, but to Elephant Butte Reservoir, a federal project about 100 miles north of the border. Texas alleged that groundwater pumping along the river between the Elephant Butte Reservoir and the state line took water from the river that rightfully belonged to Texas.

The federal government filed a motion to intervene in the litigation in 2014, alleging that its interest in the federal project at Elephant Butte allowed intervention to protect the government’s rights and obligations. The federal government, through Downstream Contracts, was required to deliver water to an irrigation district in New Mexico, and one in Texas. The Court allowed the federal government to intervene, a relatively rare occurrence, because of the unique circumstances of the case and the fact that its interests aligned with those of Texas.

Texas’ lawsuit focused on increased groundwater pumping between the Elephant Butte Reservoir and the state line. While the federal government had operated the reservoir based on data from 1951 to 1978 (“D2 data”), a time period where groundwater pumping increased significantly in New Mexico, Texas asked for allocations to be based on 1938 data, when there was much less groundwater pumping in New Mexico. The United States, which had operated based on the latter for decades, did not request a change.

After 10 years of hearings and litigation, Texas and New Mexico agreed on a consent decree, settling the issues between the states. The agreement continued water allocations based on the D2 period, which favors New Mexico, but measured the water delivery at El Paso, which favors Texas. Complex accounting measures in the agreement ensured that Texas would receive the state’s fair share of water.

However, the federal government objected to the agreement, claiming that its interests in administering the water project were threatened. In addition, for the first time, the federal government claimed that the water allocation should be based on 1938 levels of groundwater withdrawals. New Mexico estimates that a forced reduction in groundwater withdrawals to 1938 levels would mean a loss of 50,000 jobs and 10% of the state’s gross domestic product.

Justice Jackson, joined by Chief Justice Roberts and Justices Sotomayor, Kagan, and Kavanaugh, wrote the majority opinion. The majority found that the federal government had independent claims that would be resolved by the agreement. Given that the government was now a party, the agreement could not resolve the government’s interests without its consent. Since the government’s interests were aligned with those of Texas, and Texas had requested a 1938 baseline, the government was deemed to make a similar request. Given the close connection between the compact, the federal project and the irrigation contracts, the government must agree to any resolution of the case.

Justice Gorsuch wrote the dissenting opinion and was joined by Justices Thomas, Alito, and Barrett. The dissenters summarized their position as follows:

The Court’s decision … defies 100 years of this Court’s water law jurisprudence. And it represents a serious assault on the power of States to govern, as they always have, the water rights of users in their jurisdictions. The Special Master issued a detailed 115-page report laying all this out. His views were wise, his recommendations sound, and, respectfully, we should have done as he suggested.

The dissenting opinion opines that the Court denied the entry of the consent decree “[b]ecause the federal government demands as much.“ The dissenters point out that the federal government could not assert these claims alone in the Court but would file a lawsuit in the lower court.

Given the number of federal water projects in the United States, and increasing disputes between surface water and groundwater users, this decision could allow the federal government to take control of groundwater allocations in a large number of situations. Groundwater users generally lose these disputes because groundwater withdrawals generally begin after surface water withdrawals. Since the surface water users have seniority, surface water withdrawals receive priority. The decision may cause large cuts in groundwater withdrawals in New Mexico, as well as put groundwater users in jeopardy wherever federal water projects exist. New Mexico and Texas will now have to start back at square one.

Farm Bill Includes WSC Priorities for Rural Decentralized Water Systems

WSC and its members scored a huge victory last month when Senator Debbie Stabenow (D-MI), Chairwoman of the Senate Agriculture Committee, included all of WSC’s suggested improvements to the Rural Decentralized Water System in the Rural Prosperity and Food Security Act – also known as the Farm Bill. The 94-page bill released by Chairwoman Stabenow explicitly outlines the inclusion of WSC’s priorities in Sec. 6413, Rural Decentralized Water Systems.

Specifically, the Rural Prosperity and Food Security Act includes the following provisions advocated by WSC over the past year and at our most recent Fly-In:

• Allows Sub-grants (loans) to individuals of up to $25,000 –we are currently limited to sub-grants (loans) of $15,000.
• Includes WSC-recommended adjustments to eligibility requirements based on percentage of nonmetropolitan household income.
• Allows eligible entities to use up to 10% of the grant to provide technical assistance and support relating to the maintenance and support of household decentralized water systems. This represents critical Federal investment in WSC’s future work. For example, a $2M grant to the Water Well Trust from the USDA through this program would allow up to $200,000 of the grant to be used for our technical assistance functions. We will pursue at least a $2M grant under the Rural Decentralized Water Systems Program annually.
• Authorizes $100M ($20M annually) over the next five years for the Rural Decentralized Water Systems Program. 

WSC is well-positioned to have our rural drinking water provisions included in the Farm Bill that ultimately reaches the President’s desk later this year. Thank you to all those who knocked on the doors of Congress with these asks during our 2024 WSC Spring Fly-In!

EPA and Corps Issue Revised Definition of “Waters of the United States”

On May 25, 2023, the United States Supreme Court released its much-awaited decision in Sackett v. United States. The case addresses how to determine whether a wetland is “waters of the United States” (WOTUS) under Section 404 of the Clean Water Act (CWA).

All nine of the Justices rejected the open-ended “substantial nexus” test to determine whether wetlands and other waters are WOTUS. All nine Justices also appeared to agree that the term “waters” in “waters of the United States” refers only to “geographic[al] features that are described in ordinary parlance as ‘streams, oceans, rivers, and lakes.’”

However, the Justices were split on the question of when wetlands should be considered as WOTUS. The dispute centered, in large part, on the meaning of “adjacent”. The five Justice majority found that adjacent wetlands that are “indistinguishable” from waters of the United States due to a continuous surface connection constitute WOTUS. A “continuous surface connection” under the majority opinion means that the wetland abuts the “waters.”

After this decision, the Biden Administration announced that it would quickly (by September 1) issue a revised definition and that this definition would be issued without public comment or notice. The revised definition was issued on August 29, 2023 and appears to be limited to make changes mandated by the Court. However, some omissions raise more questions and continue the long period of uncertainty over the definition of “waters of the United States.”

Background

The Clean Water Act covers discharges into “navigable waters”. Congress defined “navigable waters” as “waters of the United States” (WOTUS), leaving the rest to the Environmental Protection Agency (EPA) and Corps of Engineers (Corps), who jointly administer the permitting program. Waters that are in fact navigable are clearly WOTUS. The regulations (developed by the EPA and Corps) also define tributaries of navigable waters and “adjacent wetlands” as WOTUS. If the “water” or wetland is determined to be WOTUS, no pollutants or dredge and fill material can be discharged without a permit.

Disputes have arisen over what constitutes “waters”, particularly whether intermittent and ephemeral streams, ditches and the like are included. The United States Supreme Court had come up with two different definitions, with one group of justices focusing on “relatively permanent, standing, or continually flowing bod[ies] of water, and Justice Kennedy developing the now discarded “substantial nexus” test. The Biden Administration rule, finalized in January of 2023, defined waters falling under either category as WOTUS.

Revised Rule

The revised rule first deletes all references to the substantial nexus test, leaving only waters that are relatively permanent, standing, or continually bodies of water as potentially included as WOTUS. Second, the revised rule redefines “adjacent” as “having a continuous surface connection.” In addition, “interstate wetlands” are deleted from the definition, leaving “interstate waters.” So far, so good. The changes remain true to the Sackett decision.

However, the fact that the revisions stop there raises questions. First, the drafters inexplicably failed to define “waters”. The Sackett decision clearly dictates a definition of waters as “relatively permanent, standing, or continually flowing bod[ies] of water.” The failure to include that definition means that “interstate waters” could include intermittent or ephemeral streams that cross state lines. The Sackett court clearly did not intend that result.

Second, the revised rule fails to define “continuous surface connection.” Although the short time period and lack of public comment period may foreshadow this omission, the Sackett decision included some clear signals. A continuous surface connection exists where the wetland is “indistinguishable” from the adjacent water, “making it difficult to determine where the ‘water’ ends, and the ‘wetland’ begins.

Finally, and perhaps understandably, we still are left wondering about what water bodies constitute “tributaries.” Although the revised definition makes clear that a tributary must be a relatively permanent, standing or continually flowing body of water, uncertainty remains. Since the Court failed to address that issue in Sackett, the agencies’ circumspection is appropriate.

Takeaways from the Revised Rule

(1) Groundwater is clearly not WOTUS. No argument can be made that includes groundwater as WOTUS.
(2) However, the Maui County backdoor remains open, allowing the federal regulation of contaminants deposited into groundwater that eventually make their way to WOTUS. Many attorneys and scholars are discussing the use of Maui County to mitigate the narrowing of the definition of WOTUS.
(3) Litigation will continue to characterize the battle over the definition of WOTUS. Whether existing litigation will continue with a different frame of reference, or whether advocacy groups will have to start all over, the legal fights will continue.
(4) Tributaries remain an area ripe for litigation. Expect disputes over whether wetlands adjacent to water bodies that eventually find their way to navigable waters constitute WOTUS.
(5) Interstate intermittent and ephemeral streams may be another legal battleground.
(6) The definition of “continuous surface connection” and “relatively permanent” remain uncertain, leaving it to the courts to decide.
(7) Although Congress could, theoretically, resolve many of the uncertainties, that body likely remains paralyzed, making the Courts the sole avenue of resolving disputes.
(8) The states, who clearly possess the authority to regulate wetlands, will increasingly take a leadership role in clean water regulation.
(9) The rollercoaster ride continues.

Update on Waters of the United States

On June 26, 2023, the Biden administration announced that it is revising the regulation defining “waters of the United States” to comply with the United States Supreme Court decision in Sackett v. Environmental Protection Agency.

The Environmental Protection Agency (EPA) and the United States Army Corps of Engineers (Corps) intend to issue a new final rule by September 1. This rule will replace the one promulgated in January, which is inconsistent with the United States Supreme Court ruling.

In a related step, and on the same day, the federal government filed a motion to stay pending North Dakota litigation challenging the January rule. The motion states that the new rule may resolve all or some of the issues in the litigation. The North Dakota case, along with cases from Texas and the Sixth Circuit, has halted enforcement of the January rule in 27 states.

Two Potential PFAS Settlements Provide Some Relief to Water Utilities

A number of PFAS settlements and potential settlements have been announced in June. Most provide relief to public water supply systems, but at least one settlement also provides funds to remediate private wells. In addition, pending litigation involves both public water supply and private wells.

In early June, chemical companies offered the two largest proposed settlements of cases involving polyfluoroalkyl substances (PFAS). These cases, part of a multidistrict PFAS litigation, involve city, town, and local water agencies seeking money to treat water for PFAS contamination and to recover money already spent to treat water for PFAS.

On June 2, DuPont de Nemours Inc., Chemours Co., and Corteva Inc. announced a $1.9 billion proposed settlement of contamination treatment cost claims. A few days later, on June 5, the United States District Court for the District of South Carolina entered an order delaying the first trial in the multidistrict litigation based on a potential $10 billion settlement by 3M Co. The plaintiff public water operators must agree to the settlement offers and the details need to be worked out. The first trial was only delayed by 21 days, so the parties had little time to structure this enormous settlement.

However, on June 22, the attorneys representing the public water systems announced that a $12.5 billion deal had been reached with 3M Co. The settlement resolves the claims from firefighting foam contamination. The money will be paid out over 13 years, with more details to be disclosed in 3M Co.’s forthcoming filings with the United States Securities and Exchange Commission.

The settlement and potential settlement do not cover state attorney general claims for pollution of rivers and streams, or any federal claims. Small water providers that haven’t detected PFAS or are not required to monitor for the chemicals are also excluded. Instead, these settlements apply to past and future costs to treat public water. A number of other lawsuits are still pending, including some lawsuits that allege contamination of private water wells. These settlements, if finalized, may impact other PFAS litigation that alleges a variety of other claims.

Although the settlements would represent the largest PFAS settlements ever, some attorneys have called the money a “drop in the bucket” with respect to the huge costs of treating PFAS contamination. These developments could spur other defendants in the litigation, including BASF Corp., Honeywell International, Inc., and Raytheon Technologies Corp. to propose settlements.

The potential settlements represent a start for public water utilities, which will need much more money to meet the estimated $2.5 billion to $3.2 billion annual costs to remove PFAS from public water supplies. Whether the settlements would spur the resolution of outstanding claims with respect to private water wells remains to be seen.

However, on June 28, the New Jersey Attorney General announced a $393 million proposed settlement with the American arm of Belgian chemical company Solvay that would cover a broad range of damages, including damages to private water wells. The proposed settlement addresses the remediation of PFAS contamination and natural resource damages in the area of Solvay Polymers USA LLC’s southern New Jersey facility. $214 million of the proposed settlement would be posted to ensure adequate funds are available if Solvay fails to meet its remediation obligations, while $100 million will be paid to the state’s Department of Environmental Protection (DEP) to address impacts to public water supply and potable drinking water wells. Finally, the DEP would receive $75 million to compensate for natural resources damages and $3.7 million for its costs in addressing contamination.

Litigation is pending across the country to remediate damages to private drinking water wells and public water systems. In Elkton, Maryland, for example, the manufacturer of Gore-Tex fabric has been sued in a federal class action lawsuit for contamination from the company’s Cherry Hill plant in Elkton. Plaintiffs include the users of private water wells in the area.

PFAS contamination has prompted some states to propose heightened regulation of private water wells. For example, Massachusetts has introduced a bill to develop minimum requirements for private water wells. PFAS bills in that state include provisions for private water wells, including one that would allow owners of private water wells to access money from a PFAS trust fund that would be formed under the bill.

These settlements are likely to impact pending litigation and bills proposed in state legislatures. PFAS contamination adds another dimension to private water well regulation at the state level. The industry and state associations must remain up-to-date on these developments to ensure that water well contractors have input into new regulations and that private water well owners receive compensation for PFAS contamination.

Arizona v. Navajo Nation: Raising More Questions About Allocation of Water from the Colorado River

On June 22, 2023, the United States Supreme Court decided another important water case. However, like many recent United States Supreme Court decisions, the case seems to generate more questions than answers. The 5-4 majority held that the 1868 peace treaty between the United States and the Navajo Tribe reserved the right to use water sufficient to support the reservation. However, the treaty did not require the United States to take “affirmative steps” to secure that water for the Tribe. Affirmative steps would include assessing the Tribe’s water needs, developing a plan to secure the needed water, and potentially building pipelines, pumps, wells, or other water infrastructure.

The four dissenting justices answered a different question. Interpreting the Tribe’s request as “more modest”, the four dissenting justices start by summarizing what everyone seems to agree upon. The Tribe received reserved water rights under the treaty. The United States holds some of those rights in trust for the Tribe. The Tribe’s water rights have never been quantified. The dissenters would grant the more modest request of the Tribe- to have the water rights the United States holds for them identified and to ensure that the water is appropriated to the Tribe and not to others.

Since the Navajo reservation abuts the Colorado River, and the rights to water in the river are hotly contested today, the impact of this decision will be felt across the western United States. The decision will likely prompt the Navajo Nation to aggressively pursue quantification of its water rights through either an agreement with the affected states, or through more litigation.

Today as many as 91% of Navajo households lack access to water in some parts of the reservation. Members of the Navajo Nation use around 7 gallons of water per day for their household needs- less than 1/10 of the amount the average American household uses.

Background

In 1868 the United States and the Navajos entered into a peace treaty. The Navajos agreed to cease further war in exchange for the United States setting aside certain land as a reservation for the Navajo. The reservation spans more than 17 million acres in the States of Arizona, New Mexico, and Utah, and lies almost entirely within the Colorado River Basin. The Colorado River, the Little Colorado River, and the San Juan River border the reservation.

Division of the water from the Colorado River basin has been a contentious issue for many years. Decreasing supply and increasing demands have made the division even more contentious in recent years. The Upper Basin states include Colorado, New Mexico, Utah, and Wyoming. The Lower Basin states of Arizona, California, and Nevada recently reached an agreement on the division of the waters of the Lower Basin.

This case involves federal reserved water rights. When the United States sets aside land as a federal park, reserve, or reservation, the water rights to accomplish the purposes of the reservation are implicitly reserved. The amount of water rights reserved is limited to the amount necessary to accomplish the purposes of the reservation. In this case, as in most cases, those water rights have not been quantified. A main point of contention in this dispute centers on the amount of water in the Colorado River Basin reserved to the Navajo reservation.

The Majority Opinion

The majority opinion was written by Justice Kavanaugh, who was joined by Chief Justice Roberts and Justices Thomas, Alito, and Barrett. Justice Thomas wrote a concurring opinion that joined the majority opinion in full that will not be discussed in this summary. The majority framed the issue as the Navajos contending that the treaty requires the United States to take affirmative steps to secure water for the Navajos.

The Court noted that everyone in the western United States faces water scarcity problems today. The Federal Government has assisted the Tribe and others in the West by securing water and authorizing billions of dollars for infrastructure. Examining the specific language of the treaty, the Court found no specific language imposing a duty on the Federal Government to take affirmative steps to secure water for the Tribe. The majority appeared to be troubled by the prospect that finding such a duty would mean that the Federal Government would have to farm the land, mine the minerals, and harvest the timber on the reservation, as well as build roads and bridges on the reservation.

The Dissenting Opinion

The dissenting opinion was drafted by Justice Gorsuch, an authority on Indian law. Justice Gorsuch was joined by Justices Sotomayor, Kagan, and Jackson. The dissent reframes the question. Noting an agreement by all nine justices that the Navajos hold federal reserved water rights, that the United States holds some of those rights in trust, and that the water rights have never been quantified, the dissenters limit the question to the identification of the Navajo water rights held by the United States. Once identified, those water rights should be appropriated to the Tribe.

Justice Gorsuch reviewed the history of the interactions between the Navajo and the United States, and the important role that water played in that history. Taken from their homeland and forced to live in a barren land with little water, and with the limited supplies often contaminated, the treaty was negotiated to, in part, return the Navajos to their homeland where water was relatively plentiful and of high quality. The Navajos would reasonably assume that the treaty included rights to sufficient high-quality water to serve the needs of the reservation.

In addition, in the extensive litigation over the Colorado River water rights, from the 1960s into the early 2000s, the United States opposed the intervention of the Navajos. The United States maintained that they controlled the water and would represent the Navajo interests. In this context, the modest request that the Navajo water rights held in trust by the United States be quantified and protected should be granted.

Justice Gorsuch aptly summarized the situation:

Where do the Navajo go from here? To date, their efforts to find out what water rights the United States holds for them have produced an experience familiar to any Ameri­can who has spent time at the Department of Motor Vehi­cles. The Navajo have waited patiently for someone, any­one, to help them, only to be told (repeatedly) that they have been standing in the wrong line and must try another…When this routine first began in earnest, Elvis was still making his rounds on The Ed Sullivan Show.

Conclusions

The Navajo Nation has already announced its intentions to aggressively pursue negotiations with the Colorado River Basin states to quantify their water rights. Justice Gorsuch also pointed out a “silver lining” in the majority opinion. While rejecting this litigation, the majority recognizes that the Tribe may be able to assert its interests in water rights litigation, including by intervention in cases that affect the Tribe’s reserved water rights. The United States would be hard-pressed to oppose intervention given their position in this case. The Navajos are likely to test this silver lining. Indeed, the interests of all parties, the states, the Tribes, and water users, would seem to support the quantification of the water rights held by the parties.

Given the dire lack of access to water on the Navajo reservation, as well as reservations across the country, the water well industry should assess its role. The industry likely has an important part to play in addressing this issue.

U.S. Supreme Court Decision in Sackett v. EPA: Some Clarity, But More Uncertainty

On May 25, 2023, the United States Supreme Court released its much-awaited decision in Sackett v. United States. The case addresses how to determine whether a wetland is “waters of the United States” (WOTUS) under Section 404 of the Clean Water Act (CWA). After a somewhat bizarre oral argument in October, no one knew what to expect from the Court.

All nine of the Justices rejected the open-ended “substantial nexus” test to determine whether wetlands and other waters are WOTUS. All nine Justices also appeared to agree that the term “waters” in “waters of the United States” refers only to “geographic[al] features that are described in ordinary parlance as ‘streams, oceans, rivers, and lakes.’”

However, the Justices were split on the question of when wetlands should be considered as WOTUS. The dispute centered, in large part, on the meaning of “adjacent”. The five Justice majority found that adjacent wetlands that are “indistinguishable” from waters of the United States due to a continuous surface connection constitute WOTUS. A “continuous surface connection” under the majority opinion means that the wetland abuts the “waters.”

The four Justices in the minority would include wetlands “adjacent” to WOTUS as WOTUS. These four Justices distinguish “adjacent” from “abutting” or “adjoining” and adopted the EPA and Corps definition of “adjacent”- (1) those wetlands contiguous to or bordering a covered water, and (2) wetlands separated from a covered water only by a man-made dike or barrier, natural river berm, beach dune, or the like. This long, expensive, contentious litigation appears to have determined one issue- “adjacent” means “abutting” or “adjoining.”

Background

The Clean Water Act covers discharges into “navigable waters”. Congress defined “navigable waters” as “waters of the United States” (WOTUS), leaving the rest to the Environmental Protection Agency (EPA) and Corps of Engineers (Corps), who jointly administer the permitting program. Waters that are in fact navigable are clearly WOTUS. The regulations (developed by the EPA and Corps) also define tributaries of navigable waters and “adjacent wetlands” as WOTUS. If the “water” or wetland is determined to be WOTUS, no pollutants or dredge and fill material can be discharged without a permit.

The Sackett case focuses on when wetlands are WOTUS and really starts in 2006, when the United States Supreme Court decided Rapanos v. United States. Prior to the Rapanos case, the Court had decided that decision of the Corps to regulate “adjacent” wetlands as WOTUS was reasonable (1985). The wetland in that case abutted the navigable water and the Court used “abut”, “adjoin”, and “adjacent” interchangeably. However, the Corps and EPA defined, and still define, “adjacent” in this context as “bordering, contiguous, or neighboring”.

The Court had also decided that “isolated” waters or wetlands are not WOTUS (2001). The cases since 2001 tend to look at the question of whether a wetland that is “adjacent” to a tributary of a navigable water is WOTUS. Often these cases involve very attenuated connections where the wetland is adjacent to a ditch or non-navigable stream that flows to different ditches and streams, sometimes for miles, before reaching a navigable water.

The Rapanos case involved one of these cases and ended with a 4-4-1 decision. Justice Scalia wrote for the plurality that only wetlands “with a continuous surface connection to bodies that are ‘waters of the United States’ in their own right, so that there is no clear demarcation between ‘waters’ and wetlands, are ‘adjacent to’ such waters and covered by the Clean Water Act [CWA]”. This test limits adjacent wetlands to wetlands that abut navigable waters or their tributaries. Tributaries do not include, according to this test, waters with intermittent, physically remote hydrologic connections to WOTUS.

Justice Kennedy wrote the solo opinion in Rapanos. Since both Justice Kennedy and the four justices signing off on the plurality opinion would vacate the lower court opinion and send the case back for further consideration, that result garnered a majority of votes. But Justice Kennedy had a different test. Justice Kennedy said that if the wetland is “adjacent” to waters that are not navigable-in-fact, the wetlands must have a “significant nexus” to the navigable water. A significant nexus exists where the wetlands “either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity” of navigable waters.

Sackett

The Sacketts purchased property that was later determined to contain a wetland. Across the road from the Sackett property is another large wetland that is connected to a navigable lake. The Sackett property is about 300 feet from the lake. The Ninth Circuit Court of Appeals found that the Kennedy “significant nexus” test should apply and that the wetland on the Sackett property has a significant nexus to the lake. The Sacketts appealed and the United States Supreme Court accepted the appeal and stated that the question to be answered was “Whether the Ninth Circuit set forth the proper test for determining whether wetlands are “waters of the United States” under the Clean Water Act…” This case is important to the groundwater industry because at least one court has found that groundwater can have a significant nexus to navigable waters and thus be WOTUS, with permit requirements attaching.

A large number of groups filed amicus briefs in support of each side. Oral arguments were held on October 3, 2022.

United States Supreme Court Decision in Sackett

The United States Supreme Court issued a decision in the case on May 25, 2023. The case resulted in four different opinions. The majority opinion was written by Justice Alito, with Chief Justice Roberts, and Justices Thomas, Gorsuch, and Barrett joining. Justice Thomas wrote a concurring opinion, in which Justice Gorsuch joined. Justice Kagan also filed a concurring opinion, joined by Justices Sotomayor and Jackson. Finally, Justice Kavanaugh filed a concurring opinion, joined by Justices Sotomayor, Kagan, and Jackson.

The Kagan and Kavanaugh opinions resemble dissenting opinions given the nature of the holding. All nine Justices agreed that the “substantial nexus” test is not the appropriate test, so all nine reversed the Ninth Circuit decision and remanded the case for further consideration. However, the Justices split on the appropriate test to determine when wetlands constitute waters of the United States.

The five Justice majority affirmed the test from Justice Scalia’s plurality opinion in Rapanos (2006). Namely, that the term “waters” in “waters of the United States” refers only to (1) “geographic[al] features that are described in ordinary parlance as ‘streams, oceans, rivers, and lakes’”, and to (2) adjacent wetlands that are “indistinguishable” from those bodies of water due to a continuous surface connection. A “continuous surface connection” under the majority opinion means that the wetland abuts the “waters.”

The four other Justices (Justices Sotomayor, Kagan, Kavanaugh, and Jackson) voiced no objection to the definition of “waters” but argued for a different test for the inclusion of wetlands as WOTUS. These four Justices would include wetlands “adjacent” to WOTUS. Under this test, “adjacent” differs from “abutting” or “adjoining”, and the EPA and Corps definition of “adjacent” would govern. Under that definition, adjacent wetlands include (1) those wetlands contiguous or bordering a covered water, and (2) wetlands separated from a covered water only by a man-made dike or barrier, natural river berm, beach dune, or the like. Justice Kavanaugh’s opinion asserted that “adjacent” is “unambiguously” broader than “adjoining”, finding that there can be “no debate” on that issue.

Justice Thomas’ concurring opinion would significantly narrow the scope of “waters.” His analysis ties the discussion back to the commerce clause and limitations on federal regulation of commerce. The influence of this opinion remains to be seen.

Takeaways from the Decision

• Groundwater is clearly not WOTUS. After this decision, no argument can be made that includes groundwater as WOTUS. However, the Maui County backdoor remains open, allowing the federal regulation of contaminants deposited into groundwater that eventually make their way to WOTUS.

• WOTUS only includes those wetlands that abut WOTUS.

• The breadth of WOTUS remains unclear given the differences between the majority opinion and the Thomas concurring opinion. In any case, however, intermittent streams and ephemeral streams are not WOTUS. Ditches and other similar water channels are also not included. Only traditional types of waters, like streams, rivers, and lakes fall within the definition.

• The Sackett decision case does not resolve the definition of “tributary.” Cases where a wetland abuts a water that eventually makes its way to a navigable water may still be considered WOTUS. However, the abutting waterway and all waters between the abutting waters and the navigable water must be perennial streams, rivers, lakes, etc. Ditches and intermittent streams now break the chain.

• The Biden Administration WOTUS Rule, already invalidated in a number of states, will now have to be rewritten. The EPA will essentially have to start from scratch. Of the recent WOTUS rules, the Trump Administration rule comes closest to meeting the parameters of the Sackett decision.

• Although the Sackett decision brings some clarity to WOTUS, much uncertainty still exists. The legal battles will now likely shift to the definition of tributary and whether wetlands that abut a water connects to other waters that eventually make their way to navigable water are included as WOTUS. The definition of tributary remains uncertain. The other legal battleground will focus on the Maui County case and the determination of what situations where contaminants in groundwater eventually make their way to WOTUS are covered by the CWA.

Texas v. New Mexico Proposed Final Decree

Jesse J. Richardson, Jr.

Introduction

Texas, New Mexico, and Colorado entered into the Rio Grande Compact in 1938 to divide the waters of the Rio Grande. Congress ratified the compact in 1939. In 2013, Texas asked the United States Supreme Court to grant it leave to file a bill of complaint alleging that New Mexico is violating the compact by failing to deliver adequate volumes of water to Texas. The United States Supreme Court granted leave in 2014. The United States immediately filed a motion for leave to intervene, as a federal water project plays a key role in managing the Rio Grande. In 2018, the United States Supreme Court granted the United States’ motion for leave, making it a party to the litigation.

In November of 2022, Texas, New Mexico, and Colorado filed a motion asking the Court to enter a consent decree that the three states had crafted that settles the issues between the states and sets out a plan for managing the apportionment of the waters of the river. The United States objected to the motion. Arguments are now scheduled with respect to the Proposed Consent Decree and the United States Supreme Court will ultimately rule on whether the decree will be entered.

This article focuses on the proposed settlement of the dispute and omits details of the dispute itself. Colorado is a defendant in the suit only because it is a signatory to the agreement. The decree will first be summarized. Then the particular provisions of the decree will be explained.

This agreement is important for the groundwater industry across the United States. One of main arguments in this case centered on the impact of water wells on the river. Many states are now examining the groundwater-surface water connection and restricting private water wells as a result.

Executive Summary

The proposed consent decree utilizes an agreed upon calculation, the Effective El Paso Index (EEPI) to determine the amount of water that New Mexico must deliver each year. Departures from that amount are recorded in the Texas Escrow Account. Where New Mexico delivers less than the required amount of water, a Negative Departure is recorded. Where New Mexico delivers more than the required water, a Positive Departure is recorded.

The decree contains triggers that require action by the states. If an annual Negative Departure exceeds a certain amount, New Mexico must transfer allotted water to Texas until the deficiency is cured. When the Accrued Index Departure reaches a certain negative amount, New Mexico must take “water management actions” to attempt to reduce the departures to a designated maximum within three years New Mexico holds discretion to determine what particular water management actions to take. If the water management actions prove inadequate, New Mexico must transfer allocated water to Texas to solve the deficiency. The decree fails to define water management actions.

The states have reached agreement on the decree. However, the United States objects. The objection appears to be based on the fact that the decree usurps some of the federal authority to manage the Rio Grande Project. If the United States Supreme Court approves the decree, the provisions could provide a model for implementation of other water compacts and equitable apportionment decisions of the United States Supreme Court.

For the groundwater industry, the undefined water management actions could prove problematic. Much of the arguments between the states focused on water wells near the Rio Grande River. These water wells allegedly take water from the river and impede compliance with the compact. If New Mexico decides to place limits on water wells to comply with the decree, the water well industry may be negatively impacted.

Details of the Decree

Under the Rio Grande Compact, which divides water between Colorado, New Mexico, and Texas, requires New Mexico to deliver certain amounts of water measured at Elephant Butte Reservoir. New Mexico is entitled to 57% of the water, while Texas is entitled to 43%.

The required deliveries are based on flows at the stream gaging station located at Otowi Bridge near San Ildefonso. Elephant Butte Reservoir is a storage reservoir for the Rio Grande Project, a federal reclamation project. The water apportioned between Texas and New Mexico is delivered via the reservoir.

The Effective El Paso Index (EEPI)

Under the proposed decree, the Effective El Paso Index (EEPI) calculates the amount of water to be delivered to Texas. New Mexico is entitled to use the remainder of the water. The EEPI is calculated annually based on an analysis of releases from the Rio Grande Project and the amount of water reaching the El Paso Gage, plus historical depletions to the river, reduced by the amount of water delivered to Mexico.

The EEPI shall not apply in years in which the annual Caballo Releases are less than 200,000 acre-feet. In those years, allocations will be made without reference to the Index and no departures from the Index will be recorded. In years in which the annual Caballo Releases are 790,000 acre-feet or more, the Index shall use 790,000 acre-feet in the calculations.

The Index is adjusted annually for estimated changes in aridity between the base period and the present. In any year in which a spill occurs, accrued Index Departures will be extinguished.

The federal Rio Grande Project must be managed pursuant to the decree. Implementation of the decree may not interfere with administration of the Rio Grande Compact.

Departures from the Index Amount

Negative Departures occur where New Mexico’s deliveries of water at Elephant Butte are less than the EEPI calculated obligation, while Positive Departures occur where the amount of water delivered exceeds the Index Obligation. Departures will be calculated for each calendar year and accrued departures will aggregated as Accrued Index Departures. (I,. p. 2) Annual Positive Departures are capped at 67,500 acre-feet. Any annual Positive Departure above 67,500 acre-feet will be recorded as 67,500 acre-feet.

Accrued Negative Departures are capped at 150,000 acre-feet for the first five years of the agreement, and 120,000 acre-feet thereafter. Maximum Annual Index Departures added to the Accrued Negative Departures are capped at 112,500 acre-feet per year for the first five years of the agreement, and 90,000 acre-feet per year thereafter.

Remedies for Excessive Departures

If New Mexico exceeds the accrued Negative Departure maximum of for three consecutive years, News Mexico must provide 12,000 acre-feet of water in excess of the Index Obligation for each year that the maximum was exceeded. New Mexico has three years to transfer the 36,000 acre-feet total and may, with the consent of Texas, convey water from the New Mexico irrigation district to the Texas irrigation district to satisfy the obligation. The penalty for exceeding the accrued Negative Departure maximum a fourth consecutive year is 15,000 acre-feet for each year that the maximum is exceeded beyond the first three years. In any year where the three-year rolling average of Project Carryover Water exceeds 180,000 acre-feet, all accrued Negative Departures are extinguished.

When accrued Negative Departures exceed 80,000 at the end of any calendar year, New Mexico must take water management actions to reduce the departures to less than 16,000 acre-feet within three years. New Mexico holds discretion to determine the water management actions and, with the consent of Texas, may transfer water from the New Mexico irrigation district to the Texas irrigation district to reduce the accrued departures.

If New Mexico fails to reduce the accrued departures to 16,000 acre-feet within three calendar years, then part of the water apportioned to New Mexico shall be transferred to Texas over the next three years.  The amounts transferred shall reduce the accrued departures to less than 16,000 acre-feet by the end of the three-year period. Transfers of apportioned water shall reduce the accrued Negative Departures by the same amount. The Department of Interior, Bureau of Reclamation shall implement the transfers of apportioned water. The transferred allocated water must be used within three years.

The agreement also accounts for positive departures. If accrued Positive Departures exceed 30,000 acre-feet for two consecutive calendar years, part of the water apportioned to Texas shall be transferred to New Mexico to reduce the accrued Positive Departures to less than 16,000 acre-feet within three calendar years. Transfers of allocated water shall reduce Positive Departures by the same amount. The Bureau of Reclamation shall implement the transfers of apportioned water. The transferred allocated water must be used within three years.

Conclusions

The proposed consent decree in Texas v. Colorado provides an innovative mechanism for ensuring compliance with the Rio Grande Compact. Incentives and Penalties encourage New Mexico to deliver required amounts of water. If New Mexico fails to comply, transfers of allotted water remedy the noncompliance. The states agree to these provisions. However, the United States objects, seemingly due to the fact that the decree usurps some federal authority in managing the Rio Grande Project. This proposed decree, if approved by the United States Supreme Court, could provide a model for ensuring compliance with apportionments of water between states, whether by compact or by equitable apportionment by the Court.

The most important part of the decree for the water well industry is the undefined term water management actions. New Mexico decides what actions to take to remedy inadequate deliveries of water to Texas. The litigation has focused on water wells near the Rio Grande as a potential cause of failure to comply with the compact. If New Mexico decides to restrict water wells to remedy inadequate deliveries, the water well industry could be negatively impacted. Other states may also begin to restrict water wells to prevent surface water impacts, even though such restricts may have little or no real impact.

New Waters of the United States (WOTUS) Rule Muddies the Groundwater

January 11, 2023

The United States Environmental Protection Agency (EPA) and the United States Army Corps of Engineers (Corps) released the final rule for the definition of “Waters of the United States” (WOTUS) under the Clean Water Act (CWA) on December 30, 2022. The rule and supporting information cover 514 pages. Note that the supporting information is not part of the rule. Thousands of pages will be written to attempt to explain these rules. This report, however, focuses on the impacts to groundwater and groundwater industry of this rule.

In summary, the rule does not, like prior rules, explicitly exclude groundwater. The supporting information asserts that the EPA and Corps have never considered groundwater as WOTUS. However, the Maui County case is cited to show how discharges to groundwater may be covered by the Clean Water Act in certain circumstances. I conclude that the final rule raises uncertainty as to the status of groundwater as WOTUS. If deemed WOTUS, permitting and other requirements under the CWA apply.

Background

This rule follows attempts by both the Obama administration and the Trump administration to present rules that would pass court scrutiny in the aftermath of the United States Supreme Court’s decision in Rapanos v. United States in 2006. The Court split 4-4-1 in Rapanos, creating confusion as to the definition of “waters of the United States” (WOTUS). Any waters determined to be WOTUS fall under the jurisdiction of the Corps and the EPA, meaning that any discharges to or alterations of those waters are subject to federal permitting requirements.

Justice Kennedy’s concurring opinion (the “1” in the split) created the “significant nexus” standard to determine whether adjacent wetlands or waters are WOTUS. Wetlands or other waters have a “significant nexus” to navigable waters when “either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity” of those navigable waters. This test is a fact-specific, case-by-case analysis and creates significant uncertainty as to the reach of federal jurisdiction. At least one court found a significant nexus between groundwater and navigable waters, making that groundwater WOTUS.

Justice Scalia’s plurality opinion (one of the “3”s) concluded that wetlands and other waters constitute WOTUS only if those waters have a “continuous surface connection” to navigable waters. This test is more clear and definite than the significant nexus test but has generated opposition due to the tendency to exclude waters from federal coverage that would be covered under the significant nexus test.

Due to complicated legal reasons, courts have most often applied the “significant nexus” test. A case presently before the Court, Sackett v. EPA, presents the question of which test is appropriate for adjacent waters. A decision in this case is expected in the next few months.

The Obama administration’s rule generally adopted Justice Kennedy’s significant nexus test. The Trump administration’s rule generally adopted Justice Scalia’s approach. Both rules specifically excluded groundwater from the definition of WOTUS.

Groundwater Under the “Biden Rule”

The Biden administration’s rule attempts to find middle ground between the Obama administration’s rule and the Trump administration’s rule. The rule includes both Justice Scalia’s test and Justice Kennedy’s test. Generally, this is the rule that applied immediately after Rapanos was decided – the same rule that created so much confusion that two prior administrations felt compelled to intervene. Some of the Biden administration’s efforts to incorporate both tests into the rule appear to be incorrect, but that discussion is beyond the scope of this report.

Unlike the prior two rules, the Biden administration’s rule does not explicitly exclude groundwater water from WOTUS. The supporting information to the rule explains that some commenters to the draft rule requested that the agencies explicitly exclude groundwater, while other commentators requested that the agencies not exclude groundwater from jurisdiction under this rule. The agencies decided not to explicitly exclude groundwater from the definition “because groundwater is not surface water and therefore does not fall within the possible scope of “navigable waters.” Shallow groundwater, deep groundwater, and groundwater drained through subsurface drainage systems were all listed as not jurisdictional. The agencies cite the Maui County case as support for the proposition that groundwater is not WOTUS.

The Maui County case involved “indirect discharges” or “groundwater as a conduit”. The Court considered in that case whether a permit is required where contaminants make their way to groundwater and the groundwater carries the contaminants to navigable waters. The Court developed a multi-factor test to determine when those situations require a permit. The factors include distance from the where the contaminants enter the groundwater to the navigable waters and the time that it takes the contaminants to travel to the navigable water. This multi-factor test has generally resulted in confusion and more uncertainty.

The Impact of Sackett

Adding to the complexity and uncertainty is the fact that the Court is expected to rule on the Sackett case in the next few months. Sackett involves a wetland that lies across the road from a navigable lake. The question for the Court is whether Justice Scalia’s “continuous surface connection” test, Justice Kennedy’s “significant nexus” test, or some other test, applies. Oral arguments led many, including this writer, to conclude that the Court may rule that a test similar to the Maui County test will apply.

In any case, the fact that the Biden administration released a rule weeks or months before the Court may rule in a way that may upend that rule seems odd. Depending on the Court’s ruling in Sackett, the Biden administration rule may become obsolete in record time.

Conclusions

The fact that the Biden administration’s rule does not explicitly exclude groundwater from the definition of WOTUS is troubling. Although the supporting information states that groundwater cannot be WOTUS, the administration immediately references the Maui County case, which raises uncertainties about the place of groundwater in the CWA. In addition, the Biden administration’s rule includes the “significant nexus” test. This test is so fact-specific that it injects further uncertainty into an already uncertain area of law. At least one court has found groundwater to be WOTUS under the significant nexus test. Finally, the Court’s forthcoming ruling in the Sackett case could render the Biden administration’s rule void before any efforts to apply the rule have matured. In summary, the roller coaster ride known as WOTUS continues.

Legal Update: SCOTUS Hears Oral Arguments in Sackett v. EPA

Oct 12, 2022

Oral arguments in Sackett v. EPA were held before the United States Supreme Court on Monday, October 3, 2022. The case is another foray into the difficult question of what constitutes “waters of the United States” (WOTUS) under the Clean Water Act. For those of you who have seen my presentations on WOTUS and the pictures of rollercoasters that I use to represent the way the law has evolved, after reading the transcript of the arguments, I feel like I just got off of one of those rollercoasters. Buckle up and I will try to make this as painless as possible.

Background

The Clean Water Act (CWA) covers discharges into “navigable waters”. Congress defined “navigable waters” as WOTUS, leaving the rest to the Environmental Protection Agency (EPA) and Corps of Engineers (Corps), who jointly administer the permitting program. Waters that are in fact navigable are clearly WOTUS. The regulations (developed by the EPA and Corps) also define tributaries of navigable waters and “adjacent wetlands” as WOTUS. If the “water” or wetland is determined to be WOTUS, no pollutants or dredge and fill material can be discharged without a permit.

The Sackett case focuses on when wetlands are WOTUS and really starts in 2006, when the United States Supreme Court decided Rapanos v. United States. Prior to the Rapanos case, the Court had decided that decision of the Corps to regulate “adjacent” wetlands as WOTUS was reasonable (1985). The Corps and EPA defined, and still define, “adjacent” in this context as “bordering, contiguous, or neighboring”. However, the case did not focus on the adjacency issue since this particular wetland actually abutted the navigable water. The Court had also decided that “isolated” waters or wetlands are not WOTUS (2001). The cases since 2001 tend to look at the question of whether a wetland that is “adjacent” to a tributary of a navigable water is WOTUS. Often these cases involve very attenuated connections where the wetland is adjacent to a ditch or non-navigable stream that flows to different ditches and streams, sometimes for miles, before reaching a navigable water.

The Rapanos case involved one of these cases and ended with a 4-4-1 decision. Justice Scalia wrote for the plurality that only wetlands “with a continuous surface connection to bodies that are ‘waters of the United States’ in their own right, so that there is no clear demarcation between ‘waters’ and wetlands, are ‘adjacent to’ such waters and covered by the [CWA]”. This test limits adjacent wetlands to wetlands that abut navigable waters or their tributaries. Tributaries do not include, according to this test, waters with intermittent, physically remote hydrologic connections to WOTUS.

Justice Kennedy wrote the solo opinion in Rapanos. Since both Justice Kennedy and the four justices signing off on the plurality opinion would vacate the lower court opinion and send the case back for further consideration, that result garnered a majority of votes. But Justice Kennedy had a different test. Justice Kennedy said that if the wetland is “adjacent” to waters that are not navigable-in-fact, the wetlands must have a “significant nexus” to the navigable water. A significant nexus exists where the wetlands “either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity” of navigable waters.

Sackett

The Sacketts purchased property that was later determined to contain a wetland. Across the road from the Sackett property is another large wetland that is connected to a navigable lake. The Sackett property is about 300 feet from the lake. The Ninth Circuit Court of Appeals found that the Kennedy “significant nexus” test should apply and that the wetland on the Sackett property has a significant nexus to the lake. The Sacketts appealed and the United States Supreme Court accepted the appeal and stated that the question to be answered was “Whether the Ninth Circuit set forth the proper test for determining whether wetlands are “waters of the United States” under the Clean Water Act…” This case is important to the groundwater industry because at least one court has found that groundwater can have a significant nexus to navigable waters and thus be WOTUS, with permit requirements attaching.

A large number of groups filed amicus briefs in support of each side. Oral arguments were held on October 3, 2022.

Mysteriously, the oral arguments centered on a question not before the Court: whether the wetland on the Sacketts’ property is “adjacent” to the lake across the road. If so, the wetland is subject to the Clean Water Act and the Sacketts must get a permit. Everyone agrees on that issue. The question is the meaning of “adjacent”. The regulations define adjacent as “bordering, contiguous, or neighboring” but a majority of the Court in Rapanos rejected that definition.

However, in the oral arguments, 5 (Kagan, Sotomayor, Jackson, Barrett, and Chief Justice Roberts) or 6 (Kavanaugh) seemed ready to rule that the wetland on the Sackett property was adjacent, accepting the definition in the regulation. That issue was not the issue before the Court and was not briefed by the parties. Unfortunately, the issue of which test should apply- the Scalia test, the Kennedy significant nexus test, or a different test made up by a majority of the Court, was not addressed in the oral arguments.

With respect to the groundwater industry, a few portions of the argument are particularly relevant. First, Justice Sotomayor and the attorney for the Sacketts engaged in a rather strange discussion on whether subflow and groundwater are the same thing. The attorney for the Sacketts explained the water cycle and argued that if any subsurface connection made the wetland WOTUS, every wetland and puddle of water is likely WOTUS.

Secondly, and perhaps related, a number of Justices raised the Maui County case and seemed to think that the “functionally equivalent” test from Maui County was the same or very similar to the significant nexus test. Recall that the Maui County case addressed when contaminants traveling through groundwater to navigable waters amounted to a “discharge” requiring a permit under the CWA. Sackett addresses a very different issue- what is WOTUS- so it is strange to have the Court connect the two. This line of questioning is troubling because the Maui County test appears to make groundwater, at least in some cases, the equivalent of WOTUS, since a permit would be required for discharges to groundwater.

Third, and perhaps most importantly, the EPA attorney represented to the Court that the EPA does not believe that groundwater is WOTUS. The EPA expects to release a rule defining WOTUS “by the end of the year.” Perhaps that rule will specifically exclude groundwater, unlike the draft rule released in 2021?

Predictions and Important Points for the Groundwater Industry

It is always difficult to predict results based on oral arguments, but even more difficult in this case where the oral arguments were totally different than what was expected. The Court could ignore the issue before the Court and rule, as a majority of Justices seemed inclined to, that the Sackett wetland is “adjacent” to the lake and thus WOTUS. This ruling would not move the ball forward much, if at all, and would not clarify any issues important to the groundwater industry.

The Court could adopt the significant nexus test and define it in a way that is very similar to the Maui County functionally equivalent test. This ruling would mean that groundwater may become the equivalent of WOTUS where groundwater eventually makes its way to navigable water.

Finally, the Court could surprise everyone again by choosing Justice Scalia’s test or making up its own test. The result is very much in doubt. For the groundwater industry, the fact that the EPA has stated in oral arguments that groundwater is not WOTUS is encouraging. Perhaps the rule released in the next few weeks will explicitly exempt groundwater. However, the inclination of some Justices to lump the significant nexus test with the Maui County functionally equivalent test could foreshadow more uncertainty around groundwater as WOTUS.

The only thing that can be predicted with any certainty is that the uncertainty, and the wild roller coaster ride, are likely to continue. Where this ride stops is anyone’s guess.

EPA Issues Memo on Allocation of Bipartisan Infrastructure Bill Funds

March 8, 2022

EPA Outlines Infrastructure Plans

December 6, 2021

EPA Administrator Michael Regan sent a letter to all state governors outlining how the EPA plans to utilize the $55B investment in water infrastructure that was recently created by the $1.2T Infrastructure Investment & Jobs Act. Note that a big priority aligns with WSC’s goals in serving disadvantaged communities. Read the letter.

Infrastructure Investment and Jobs Act

November 15, 2021

President Biden has signed into law the bipartisan $1.2T Infrastructure Investment and Jobs Act. This landmark infrastructure funding legislation includes $55B in new guaranteed funding for water and wastewater infrastructure plus $8B for Western water infrastructure. This is in addition to the $15B already funded, resulting in a historic level of funding for water infrastructure.

Here are the highlights of the water-related funding priorities:

Water

• $11.7 billion over five years – Drinking Water SRF. This would follow the below allocations per year:
  • $2.4 billion in fiscal year 2022
  • $2.7 billion in fiscal year 2023
  • $3.0 billion in fiscal year 2024
  • $3.2 billion in fiscal year 2025
  • $3.2 billion in fiscal year 2026
• $4 billion – Drinking Water SRF for emerging contaminants, including per- and polyfluoroalkyl substances (PFAS).
• $15 billion – Drinking Water SRF for lead in drinking water.
• $125 million over five years – Alternative Source Water Pilot Program.

Wastewater

• $11.7 billion over five years – Clean Water SRF. This follows the same allocation formula as drinking water as seen above.
  • $2.4 billion in fiscal year 2022
  • $2.7 billion in fiscal year 2023
  • $3.0 billion in fiscal year 2024
  • $3.2 billion in fiscal year 2025
  • $3.2 billion in fiscal year 2026
• $1 billion – Clean Water SRF for emerging contaminants, including per- and polyfluoroalkyl substances (PFAS).
• $100 million over five years – Wastewater Energy Efficiency Grant Pilot Program.
• $125 million over five years – Clean Water Infrastructure Resiliency and Sustainability Grant Program.

Storm Water

• $1.4 billion over five years -EPA Sewer Overflow & Stormwater Reuse Municipal Grant Program of which, no less than 25% will go to rural and financially disadvantaged communities.
• Reauthorizing the Sewer Overflow and Stormwater Reuse Grants program at increased funding levels.
• $25 million – Stormwater Infrastructure Technology Program to create five Stormwater Centers of Excellence.
• $50 million for stormwater infrastructure planning/development and implementation grants.

Programs Across Sectors

• $250 million over five years – Water Infrastructure Finance and Innovation Act (WIFIA).
• $25 million over five years – The Water Infrastructure and Workforce Investment Grant Program.
• $200 million over five years – Publicly Owned Treatment Works Grant Program, which connects homes to POTWs.
• $25 million per year to improve access to running water in Tribal nations and disadvantaged communities.
• Small Publicly Owned Treatment Works Efficiency Grant Program to be established with funding levels to be determined.
• The Rural and Low-Income Water Assistance Pilot Program will establish a new U.S. EPA program to provide 40 grants per year to utilities to assist low-income ratepayers.

Western Water Infrastructure

• $8 billion over five years – Ongoing drought conditions in the western half of the country will be addressed through investments in water treatment, storage, and reuse facilities.

This historic funding bill was supported by 19 Republican Senators including Senator McConnell. The bill also enjoyed the strong support of the U.S. Chamber of Commerce, the National Association of Manufacturers, the American Farm Bureau, and the Water Systems Council.

American Rescue Plan Act of 2021

March 11, 2021

President Biden has signed into law the historic American Rescue Plan Act of 2021, a $1.9 trillion bill that includes significant resources to fund important drinking water projects, including:

• $350 billion for states and local governments, which will allow those entities to implement water, wastewater, and broadband projects as an eligible use of these funds.
• $500 million for the Low-Income Household Drinking Water and Wastewater Emergency Assistance Program to support critical water and sewer investments.

In addition, the ARPA provides the following assistance for small business:

• $7.25 billion in additional funding for the Paycheck Protection Program (PPP), which provides forgivable loans to small businesses. The application deadline is March 31, 2021.
• $15 billion for targeted Economic Injury Disaster Loan (EIDL) advance payments. Provides funds to businesses located in low-income communities that have no more than 300 employees and that have suffered an economic loss of more than 30%.