The Supreme Court Limits Federal Authority to Regulate Wetlands

Few five-word phrases have vexed the justices of the United States Supreme Court more than “waters of the United States” as used in the Clean Water Act (CWA or Act). The Court has attempted to define the term, and thereby the scope of the federal government’s jurisdiction to regulate activities that impair the nation’s water quality, in four cases over the past 35 years. The Court’s attempt 17 years ago in Rapanos v. United States, 547 U.S. 715 (2006), produced five opinions but no majority, only a plurality, and no clear guidance for regulators.

In Sackett v. Env’tl Prot. Agency, No. 21-454, 2023 WL 3632751 (U.S. May 25, 2023) (Sackett II), the Court trimmed its number of opinions down to four and, unlike in Rapanos, produced a majority opinion that attempts to define the statutory term and the limit of federal authority to regulate wetlands. However, the Court did not produce effective guidance to assist regulators in implementing the underlying goals of the CWA. Instead, the decision is likely to continue the ongoing debate between the executive branch and the Court over the reach of the wetlands regulatory provisions of the Act. Furthermore, by limiting the reach of the CWA, the Court’s majority opinion will further impact federal environmental review and related litigation that could have significant implications for those planning to execute — or challenge — a myriad of different development projects ranging from mining to pipelines to real estate developments.

Background

Originally enacted in 1972 and amended in 1977, the CWA authorizes the Environmental Protection Agency (EPA) and the Army Corps of Engineers (Army Corps) to regulate the deposit of dredged or fill materials into “navigable waters,” defined as “waters of the United States” and including wetlands that are “adjacent” to such waters. See 33 U.S.C. §§ 1311(a), 1344(a), 1344(g), 1362(7).

In 2007, Michael and Chantell Sackett purchased two-thirds of an acre of property near Priest Lake, Idaho, where they filled in wetlands with dirt without seeking any permits to prepare to build a home. On one side, the Sacketts’ land is across a road from an unnamed tributary that feeds into navigable, intrastate Priest Lake. The EPA determined that the wetlands on the Sacketts’ property are adjacent to waters of the United States and, in late 2007, sent the Sacketts a compliance order ordering them to remove the material and informing them of possible fines under the CWA if they did not. The Sacketts, represented by the Pacific Legal Foundation, a property rights advocacy organization, brought an action in the federal district court in Idaho for declaratory and injunctive relief that the wetlands on their property were not “waters of the United States” under the CWA. After an odyssey resulting in a Supreme Court decision affirming their right to bring the action (Sackett v. Env’tl Prot. Agency, 566 U.S. 120 (2012)), the Idaho district court and Ninth Circuit Court of Appeals concluded that the Sacketts’ property was covered under the CWA and affirmed the EPA’s jurisdiction to regulate the Sacketts’ filling of their wetlands.

The Court’s Opinions

The Supreme Court reversed in Sackett II and achieved the rare feat of getting all nine justices to agree to a judgment in the Sacketts’ favor. In their ruling, all of the justices definitively rejected the “significant nexus” test for determining whether wetlands are adjacent to waters of the United States. This test had been established in a 2023 rule promulgated by the EPA and the Army Corps^[1] and in EPA’s 2007 guidance^[2] developed in response to the Rapanos decision. However, the reasoning for reaching that conclusion in the justices’ separate opinions in Sackett II differed significantly.

Writing for the Court’s majority in an opinion that weaved its way through the history of prior decisions interpreting “navigable waters” and “waters of the United States,” the history of regulation under the CWA, and an attempt to use an algebraic equation to parse congressional intent behind the term “waters of the United States,” Justice Alito settled on a test that echoed language in rules issued by the EPA and the Army Corps in 2019 and 2020 under the Trump administration,^[3] which required a direct hydrologic surface connection between the wetlands and surface water covered under the Act. Citing the plurality opinion in Rapanos, Justice Alito wrote that “[i]n sum, we hold that the CWA extends to only those wetlands with a continuous surface connection to bodies that are waters of the United States in their own right so that they are indistinguishable from those waters.” Sackett, 2023 WL 3632751, at *14 (internal quotations omitted). Justice Alito characterized the CWA as a “potent weapon” that threatens landowners with massive fines and unknowing criminalization of mundane activities. Id. at *5. He further argued that when Congress added the term “adjacent to” waters of the U.S. in the 1977 amendments, it actually meant waters already included within covered waters, not waters near or close to such waters, arguing that Congress did not evidence a “clear and manifest” intent to alter the scope of the waters covered by the Act. Chief Justice Roberts and Justices Thomas, Gorsuch and Barrett joined in Justice Alito’s opinion.

In a concurring opinion, Justice Thomas (joined by Justice Gorsuch) adopted the reasoning of the Court but argued that it should have gone further by reading “waters of the United States” to mean only “navigable” waters of the United States (as opposed to navigable waters of the states) as that phrase was interpreted in The Daniel Ball, 10 Wall. 557 (1871), a 19th-century case involving a paddleboat and reflecting a pre-New Deal interpretation of the reach of Congress’ powers under the Constitution’s commerce clause.

In a concurrence with the judgment only, Justice Kavanaugh (joined by the three liberal justices: Sotomayor, Kagan and Jackson) disagreed sharply with the majority opinion’s interpretation of the term “adjacent” and rejected the need for any “clear and manifest” congressional intent beyond the plain language of the statute. He would have defined “adjacent wetlands” as “both (i) those wetlands contiguous to or bordering a covered water, and (ii) wetlands separated from a covered water only by a man-made dike or barrier, natural river berm, beach dune, or the like.” Id. at *31. In applying this test to the facts before the Court, Justice Kavanaugh agreed that the Sacketts’ wetlands were not adjacent to the covered waters of Priest Lake.

In a strongly worded separate concurrence in the judgment only, Justice Kagan (joined by Justices Sotomayor and Jackson) referenced her dissent in West Virginia. v. Env’tl Prot. Agency, 142 S. Ct. 894 (2022) (Sackett, 2023 WL 3632751, at *30, 31), and criticized the Court for simply substituting its policy judgment for that of Congress to limit the reach of the regulatory jurisdiction of the CWA. Id.at *31.

Analysis and Implications

The Court’s opinion in Sackett II will likely have more impact than the plurality opinion in Rapanos because of its clarity and status as a majority opinion. The Sackett II opinion echoes themes that this Court has articulated in other cases, such as the importance of property rights and the need for what the Court sees as an explicit grant of specific authority to justify agency regulation. The Court did not address where this leaves the deference due to agency interpretations of ambiguous statutory provisions as defined in Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984), but the Court’s insistence in both West Virginia and Sackett II on the need for a specific grant of authority to justify agency action does not bode well for the continuation of Chevron deference.^[4]

The Court’s new interpretation of the CWA will likely have significant real-world consequences, most notably excluding from regulation under the CWA wetlands that are separated from covered waters by berms, dikes, levees, roads or other impediments but are still connected to such water hydrologically below the surface. These wetlands have been regulated by the federal government for years and, often in conjunction with covered waters, serve important purposes, such as flood control, storm surge mitigation and pollutant removal, that are necessary to achieve the core policy objectives of the CWA.

Furthermore, the narrowing of federal regulatory jurisdiction over wetlands could also have implications for environmental review of projects, such as mining, pipeline and real estate developments, well beyond the regulation of wetlands. For many of these projects, the only applicable federal requirements are wetland regulations under the CWA, triggering the need for federal environmental review under the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. §§ 4321 et seq.) and allowing project opponents to challenge both the NEPA review and wetlands determinations in the federal courts. NEPA reviews and federal court challenges allow project opponents their day in court, but they can be exceptionally time-consuming and expensive.

Although clearer, the interpretation of “waters of the United States” in the majority opinion in Sackett II is far from the final word on the matter. The majority’s formulation does not address key questions that will need to be answered when implementing regulatory programs under the CWA. Many of these are listed in Justice Kavanaugh’s concurrence, including whether wetlands that have periodic surface connections to water are covered, how much of an interruption in connection is necessary to mean that wetlands are no longer covered, whether wetlands bounce back and forth between being covered and not covered as their connection to covered waters is severed and rejoined, and whether a surface connection can be established by a ditch, pipe or swale. Sackett, 2023 WL 3632751, at *37. Ultimately, regulators in the executive branch will need to answer these and other questions in the form of rules and guidance for permit writers, as they have historically done. These prospective rules will likely be challenged in court, as they have been in the past.

Conclusion

Project developers and lenders should work with counsel and consultants to evaluate the impact of proposed projects on wetlands potentially under federal jurisdiction and to consider those impacts in project design and implementation.

^[1] _{See 88 Fed. Reg. 3004, 3006 (2023).}

^[2] _{Clean Water Act Jurisdiction Following the U.S. Supreme Court’s Decision in Rapanos v. United States & Carabell v. United States, U.S. EPA, 7-11 (2007), https://19january2017snapshot.epa.gov/sites/production/files/2016-04/documents/rapanosguidance6507.pdf.}

^[3] _{See 85 Fed. Reg. 22338, 22340 (2020).}

^[4] _{The Court will likely address this issue this term. On May 1, 2023, the Court granted certiorari to a case specifically to address whether the Court should limit or overrule Chevron. See Loper Bright Enterprises. v. Raimondo, 45 F.4th 359 (D.C. Cir. 2022), cert. granted, ____ U.S. ____, 2023 WL 3158352 (U.S. May 1, 2023).}