Downtown Houston and Bayou


Last month, the contentious battle over Judge Neil Gorsuch’s appointment to the Supreme Court was finally put to rest, fulfilling a key campaign promise made by President Donald Trump. Ironically though, in confirming Judge Gorsuch, the GOP may have fast-tracked the implementation of former President Barack Obama’s WOTUS rule – which is especially loathed by the Trump administration – and unwittingly kicked off a race against the clock.

Explaining this dynamic means going back to 1972, when then-President Richard Nixon signed the Clean Water Act (CWA) into law. The purpose of the CWA was clear – to address water pollution – but the bill’s language was anything but, and has led to decades of tension between regulators and the business community.

The main point of contention has been the CWA’s repeated use of the term “navigable waters” to describe areas protected by the law. While many take the term to mean a body of water wide and deep enough to allow a boat to pass (particularly with regards to commerce and transportation), the Environmental Protection Agency (EPA) and Army Corps of Engineers (ACE), which share CWA jurisdiction and regulatory responsibilities, have instead adopted a definition best described as “virtually any area over which water flows.”

Unsurprisingly, these disparate interpretations of the CWA – by both regulators and the regulated – have led to a number of court battles over the years. The most notable was a 2006 case involving a commercial developer named John Rapanos, who was fined, and ultimately jailed, for initiating construction on a plot of wetland. He sued, arguing that the wetlands were more than 20 miles from the nearest “navigable” waterway, but the EPA and Army Corps disagreed. Rapanos took his case all the way to the Supreme Court, which ultimately shot down the lower court’s decision, as well as the agencies’ broad interpretation of the law.

Though the five conservative justices joined together in overruling the lower court, their reasons for doing so differed, producing a rare 4-1-4 decision. The rift was between Justice Antonin Scalia – who argued that “navigable waters” referred to “relatively permanent, standing or flowing bodies of water” – and Justice Anthony Kennedy, who introduced a new concept of “significant nexus” to determine which adjacent waters were covered by the law. This point of disagreement added yet another wrinkle in a long and tumultuous history for the CWA.

Though the Rapanos decision found that the federal government had overstepped its bounds (Justice Scalia famously remarked that the Army Corps exercised “the discretion of an enlightened despot”), its analysis was largely confined to the specifics of the case. The justices therefore urged regulators to establish clear regulations in accordance with their ruling.

President Obama ultimately heeded their advice, and in 2014 the EPA released a draft version of a new rule, defining which “waters of the United States” were covered by the CWA (hence the name “WOTUS rule”). The proposal largely relied on Justice Kennedy’s “significant nexus” definition, and used it to broaden the reach of the CWA. At the time, NAIOP submitted comments for the record which made clear that the concept of significant nexus cannot be precisely defined, and therefore eliminates the possibility of a predictable and consistent regulatory program. In May 2015, however, the rule was finalized and put into effect. Within hours the first lawsuit was filed; several more followed, and by October the U.S. Court of Appeals for the Sixth Circuit issued a temporary nationwide injunction, halting the WOTUS rule.

Enter President Trump, who after just eight days in office ordered a review of the WOTUS rule, with the clear intent of eliminating it. Though Trump is prohibited from unilaterally abolishing the rule on his own, EPA Administrator Scott Pruitt – the former Oklahoma Attorney General who joined in a lawsuit against the Obama administration to block the WOTUS rule – is already working to do so.

For Pruitt and the rest of the administration, however, time is of the essence. That’s because the U.S. Supreme Court (SCOTUS) in March agreed to hear arguments as to whether the lower court had jurisdiction when it halted implementation of the rule in October 2015. If SCOTUS were to overturn the decision, the stay would be nullified and the WOTUS rule would immediately go into effect. In other words, the same judicial system that halted WOTUS could just as quickly deem it the law of the land. If SCOTUS instead backs the lower court’s decision to issue the stay, the EPA would effectively be off the hook, and could take its time in repealing WOTUS and replacing it with a new rule, if desired. Finally, if the EPA moves quickly and repeals WOTUS first, then it doesn’t matter what SCOTUS does; at that point, the EPA will have already “won the race.”

In public remarks, Pruitt has expressed confidence in his agency’s ability to both rescind WOTUS and replace it with a new rule. But the rulemaking process is not known for its expeditiousness, and the time crunch is only made worse by the current staff shortage at the agency; the EPA is even reportedly considering outsourcing the task of rewriting the rule.

Adding to the uncertainty is whether the EPA will in fact attempt to replace the WOTUS rule, and what the new rule would look like. Some contend that Pruitt is interested in pursuing a “Scalia-inspired” regulation, while others argue that he may just leave the current standards in place.

The one guarantee is that NAIOP will continue to weigh in to ensure that the final rule does not harm commercial real estate development. NAIOP opposes attempts to increase the authority of the federal government to regulate wetlands unnecessarily, and will stress this point throughout the rulemaking process.

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