2016 Water Outlook

January 27, 2016

There are several significant regulatory and legal actions involving water issues that are expected to unfold in 2016. Each has the potential to significantly impact the regulated community and all bear watching in 2016.

2nd Circuit Expected to Rule on Water Transfers Rule

In 2008, the Environmental Protection Agency (EPA) promulgated its Water Transfers Rule that exempted water transfers from National Pollutant Discharge Elimination System (NPDES) permitting requirements if the transfers were between different waterbodies and there was no intervening commercial, industrial or municipal use. Under EPA’s interpretation, transfers such as interbasin water transfers between different waterbodies do not involve the discharge of pollutants and do not require NPDES permitting. In 2014, the District Court for the Southern District of New York declined to uphold the Water Transfers Rule and remanded it to EPA for further consideration. The government appealed the District Court decision and the Court of Appeals for the 2nd Circuit heard oral arguments in early December. A ruling is expected this year. If the court does not defer to EPA’s interpretation of the Clean Water Act and vacates the rule, then there may be water supply implications because so many water providers transfer water from one waterbody to another as part of their overall systems. If they must obtain NPDES permits for these transfers, the cost, timing and litigation risk will increase. (Catskill Mountains Chapter of Trout Unlimited, Inc. v. EPA NO. 08-CV-5606)

Safe Drinking Water Act

EPA published a draft of the fourth drinking water contaminant candidate list (CCL-4) in the Federal Register on February 4, 2015. CCL-4 is a long-awaited list of microbial and chemical contaminants that are known or anticipated to occur in public water systems, but that are not subject to any proposed or promulgated national primary drinking water regulations. The draft CCL 4 includes 100 chemicals and 12 microbes. The public comment period ended April 6, 2015. EPA has indicated that it will evaluate the comments received during the public comment period and, after consultation with EPA’s Science Advisory Board, will publish the final list. Whether the list will be finalized in 2016 is unclear. Upon finalization, though, EPA is required to make determinations for at least five contaminants from CCL-4 as to whether they should be regulated under the Safe Drinking Water Act (SDWA). Those subject to regulation under SDWA should monitor EPA for finalization of CCL-4 and the contaminants selected for regulatory determinations.

Supreme Court to Decide Whether a Jurisdictional Determination is a Final Agency Action

A split in the Circuit Courts has prompted the Supreme Court to hear a case to answer the question of whether a Corps of Engineers jurisdictional determination (JD) as to the existence of wetlands, or other Clean Water Act jurisdictional waters, constitutes a final agency action that is subject to judicial review. (U.S. Army Corps of Engineers v. Hawkes Co. Inc., U.S. No. 15-290) Currently, if the Corps issues a JD indicating that it believes wetlands are present on a property, a landowner may appeal through the Corps’ administration appeal process, abandon the proposed use, go through the lengthy and time-consuming permitting process or take the risk of developing the property without a permit. Hawkes had planned to expand its peat mining operation until the Corps of Engineers issued a jurisdictional determination that the property to be mined qualified as “waters of the United States.” After exhausting its administrative appeals, the mining company challenged the agency determination in the U. S. District Court for the District of Minnesota, which dismissed the case for lack of final agency action. If the Supreme Court determines that JDs are final agency action, then landowners would have the right to an immediate appeal of the decision if the Corps declares portions of a property to be jurisdictional waters.

Does the Clean Water Act Cover Groundwater? For years, most courts have ruled that the Clean Water Act does not apply to groundwater, leaving regulation to the states and barring citizen suits based solely on groundwater contamination. However, late last year two federal courts in Virginia and North Carolina in cases dealing with coal ash disposal sites ruled that the Clean Water Act does apply to contaminated groundwater that discharges to surface water, a decision directly at odds with a 2014 decision by a different North Carolina federal court in another coal ash case. Both Dominion Virginia Power and Duke Energy are seeking an immediate appeal of these decisions to the Fourth Circuit. If upheld, the decisions could greatly expand the reach of the NPDES permitting program, forcing currently unpermitted facilities to seek discharge permits when it is known that or uncertain whether groundwater releases are reaching surface waters. Such rulings would also impact longstanding state regulations and programs setting standards for the protection of groundwater. Environmental groups that brought the cases contend that immediate review by the appeals court is procedurally improper. A ruling on Duke and Dominion’s request for an interlocutory appeal is expected early this year.

Power Plant Effluent Limits Challenge. In November of last year, EPA published its final effluent limit guidelines for coal-fired power plants, the first changes to those guidelines in over 30 years. The guidelines, among other things, set strict treatment technology standards and adopted voluntary incentives to encourage zero liquid discharge for some operations. Implementation dates are still to be determined as EPA works to coordinate the guidelines with the implementation schedule of the new coal ash rule. However, legal challenges by industry have already been filed, with all challenges consolidated in the 5th Circuit Court of Appeals. The regulated community is especially concerned that EPA has underestimated the cost of compliance. A decision on these legal challenges is not expected until late this year or early 2017.

WOTUS Rule Remains a Work in Process

The extent of EPA and Army Corps of Engineers jurisdiction over “waters of the United States” (WOTUS) under the Clean Water Act will continue to be a moving target in 2016. The agencies attempted to clarify their post-Rapanos jurisdiction by issuing a new rule in June 2015. The Clean Water Rule came under legal attack immediately, from both private interests and state governments. The challenges were filed in both United States District Courts and in Courts of Appeals, due to uncertainty about the appropriate forum under the Clean Water Act. The District Court cases have not been consolidated, but the Circuit Court cases were consolidated in the Sixth Circuit. That court heard oral argument in December, but had already in October issued a nationwide stay of the Clean Water Rule. When the Sixth Circuit will rule, and how the litigation over the regulation will play out, are unanswered questions.

EPA and the Corps issued a joint memorandum in November stating their intention to defend the new rule vigorously but in the meantime to abide by the stay. They also advised that agencies should for now follow a joint guidance document issued in June 2007, and a clarifying memorandum issued by the Corps in January 2008, when making jurisdictional determinations.

Proposed Phase II MS4 Rule Published

Municipal Separate Storm Sewer System Communities (MS4) should be aware of possible regulations requiring revision of permits. The United States Environmental Protection Agency (EPA) and the Natural Resources Defense Council (NRDC), and the Environmental Defense Center, Inc., settled a Ninth Circuit Case in September 2015 that requires the EPA to revise permits for communities with populations of less than 100,000 (MS4 Phase II permits) and to determine if the EPA will regulate storm water from forest roads. EPA’s proposed rule was published in the Federal Register on Jan. 6, for public comment to conclude on March 21 (75 days).