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Law & Accounting I n a landmark decision issued May 25, the U.S. Supreme Court jetti- soned a judicial rule on the scope of the Clean Water Act’s applicability that had been used to justify an expansive exercise of authority by fed- eral agencies regulating certain wetlands under the act. The ruling significantly curtails the jurisdiction of the U.S. Envi- ronmental Protection Agency and the U.S. Army Corps of Engineers under the act, pre- cluding their regulation of wet- lands that are not directly con- nected to surface water bod- ies. The ruling addresses what constitutes “the waters of the United States” to which the act applies – a topic that has been the subject of much agency rulemaking, litigation and con- troversy in recent years. The Supreme Court’s much- anticipated decision in the return of Sackett v. Environ- mental Protection Agency (Sacket II) to its docket reject- ed the currently prevailing standard for what constitutes WOTUS and delivered a new test. The court unanimously reversed the ruling of the 9th Circuit Court of Appeals, which had held the subject property in Idaho was a wetland sub- ject to the EPA’s protec- tion because the property had a “signifi- cant nexus” to a nearby lake and tributar- ies. In this part of the ruling, the Supreme Court unani- mously reject- ed the “significant nexus” test for Clean Water Act wetlands jurisdic- tion that Justice Anthony Kennedy articulated in his concurring opinion in the seminal Rapa- nos v. United States decision, a 2006 Supreme Court ruling that was the court’s last word on wetlands as “waters of the United States.” Since Rapanos, the EPA has incorporated the “significant nexus” test into at least two WOTUS rule-making proceedings and into guidance documents. At issue in Sacket II was whether the EPA and the Corps of Engineers can regulate as “adjacent wetlands” those properties that, when taken together with other similarly situated lands, “significantly affect” – but are physically sep- arated from – traditional water bodies such as oceans, lakes, rivers and streams. Although the court’s justices agreed that the “significant nexus” test does not deter- mine whether wetlands are “waters of the United States,” the court sharply divided 5-4 on where the line of demarcation lies for jurisdic- tion for “adjacent” wetlands. The court’s majority held that the Clean Water Act extends only to those wetlands that are contiguous with relatively permanent and standing water bodies such that the wetlands are indistinguishable from those waters, while the concur- ring opinions by Justices Brett Kavanaugh and Elena Kagan would also find jurisdiction lies where wetlands are physi- cally separated from but “near- by” such water bodies. In writing for the majority, Justice Samuel Alito adopted many of the principles set out in Justice Antonin Scalia’s Rapanos plurality opinion. The majority was critical of the EPA’s claim of potentially broad jurisdiction over wet- lands without a continuous surface connection to water bodies and found it difficult to square the EPA’s assertion of expansive jurisdiction with the act’s express policy of protect- ing states’ authority to regulate the development and use of land and water resources. The court’s majority opin- ion also conducts a detailed review of the winding (and some would say, tortured) his- tory of the WOTUS definition over the years, the multiple regulations on this topic, the guidance documents issued by the agencies, and the practi- cal challenges that have faced property owners and project developers in seeking clarity on their ability to develop proj- ects and obtain permits. Although many property owners and project developers will welcome the court’s new restrictions on the agencies’ wetlands jurisdiction, uncer- tainties remain. • The effectiveness of pre- viously issued National Pol- lutant Discharge Elimination System permits and agencies’ authority regarding ephemeral streams. Although the court says jurisdictional wetlands require a surface connection to water bodies, the court also states that such connections may be temporarily severed (for example, during low tide or dry spells). This concession, however, is less significant than what it qualifies – i.e., the water bodies to which these wetlands are appended are only those relatively permanent, standing or continuously flowing water bodies commonly referred to as streams, oceans, rivers and lakes. Not only does this raise the specter that the agencies have no authority to regulate discharges of pollutants to wetlands that are no longer WOTUS under Sackett II, but it also brings into question their authority to regulate discharg- es to arroyos, dry washes, and ephemeral streams. • The effectiveness of the EPA’s regulations defining “waters of the United States.” The EPA promulgated a new set of regulations in January defining WOTUS that uses the “significant nexus” test now rejected by the Supreme Court. While this rule has been enjoined in approximately half of the states, it is final and effective in the rest of the nation. This rule-making essentially codified the “signif- icant nexus” test that the court rejected in Sacket II. Those pro- visions relating to wetlands Supreme Court limits reach of Clean Water Act over wetlands Jim Price Partner, Spencer Fane LLP Coty Hopkins- Baul Of counsel, Spencer Fane LLP Please see Price, Page 45