WOTUS Update: Court Denies Nationwide Injunction; Grants Injunction for TX & ID

Background

As we’ve discussed at length previously on this blog and on the Ag Law in the Field Podcast, Congress passed the Clean Water Act (“the Act”) in 1972, granting federal jurisdiction over “navigable waters,” which it defined as “waters of the United States, including territorial seas (WOTUS).” Congress did not, however, offer any insight into what constitutes a WOTUS. The result has been 50 years of lawsuits and confusion for landowners, businesses, environmental groups, and government agencies.

In 2006, the United States Supreme Court issued an opinion in Raponos v. United States in which Justice Scalia wrote a plurality opinion utilizing a “relatively permanent” test, and Justice Kennedy authored a concurring opinion creating and applying a “significant nexus” test. In 2016, the Obama Administration passed its WOTUS definition, which was eventually repealed and replaced by the Trump administration’s Navigable Waters Protection Rule, which was repealed by the Biden administration.

In January 2023, President Biden’s administration published its final WOTUS definition (“Biden Rule”) with an effective date of March 20, 2023.

While we have a complete summary of the Biden Rule available here, the Biden Rule essentially adopts both Scalia’s relatively permanent test and Kennedy’s significant nexus (which the Rule describes as waters “either alone or in combination with similarly situated waters in the region, significantly affect the chemical, physical, or biological integrity of a traditional navigable water.”) The Biden Rule defines 5 categories of water as being jurisdictionals:

(1) traditional navigable waters, the territorial seas, and interstate waters;

(2) impoundments of WOTUS;

(3) tributaries to traditional navigable waters, territorial seas, or interstate waters or impoundments when the tributaries meet either the relatively permanent test or the significant nexus test;

(4) wetlands adjacent to traditional navigable waters, territorial seas, or interstate waters; wetlands adjacent to and with a continuous surface connection to relatively permanent impoundments; wetlands adjacent to tributaries that meet the relatively permanent standard; and wetlands adjacent to impoundments or jurisdictional tributaries when the wetlands meet the significant nexus test; and

(5) intrastate lakes and ponds, streams, or wetlands not identified above that meet either the relatively permanent standard or the significant nexus test.

Litigation Background

Two lawsuits were filed against the EPA and US Army Corps of Engineers (“Agencies”) in the United States District Court for the Southern District of Texas challenging the Biden Rule and seeking an injunction from it going into effect pending this litigation. The first was filed by the State of Texas and 5 state agencies (Idaho was later added as a plaintiff) seeking an injunction be issued applicable to only Texas and Idaho. The second was filed by 18 national trade associations and seeking a nationwide injunction. The court also allowed the Bayou City Waterkeeper’s to intervene as defendants. The court consolidated the two actions.

Specifically, the lawsuits claimed that the Biden Rule violated the Administrative Procedures Act by being: (a) arbitrary and capricious; (b) contrary to a constitutional right, power, or privilege; (c) beyond the scope of statutory authority; and (4) promulgated without observance of procedure required by law. They also claimed the rule is unconstitutional by violating the: (a) Commerce Clause; (b) 10th Amendment; (c) Due Process Clause; and (d) the Non-Delegation Doctrine. Lastly, the Associations claimed the rule violates the Regulatory Flexibility Act of 1980 and the major questions doctrine.

Opinion

The court granted the preliminary injunction requested by Texas and Idaho but denied the nationwide injunction requested by the Associations.

Standing

Initially, the court addressed standing. The defendants challenged both the States’ and Associations’ standing. The court held that the States have standing and, therefore, did not need to reach the question of Association standing.

States are not required to meet the same standing requirements as private litigants. A state must merely show “some possibility that the requested relief will prompt the injury-causing party to reconsider the decision that allegedly harmed the litigant.” Specifically, a state must show: (1) the state has a procedural right to challenge the action in question; and (2) the challenged action affects one of the state’s quasi-sovereign interests.

The court found the States alleged that the Biden Rule “violates their quasisovereign interests in regulating the land and water within their borders.” Next, the court found that Texas offered detailed declarations outlining the projected mitigation and compliance costs the Biden Rule will impose on the State, including TXDOT estimates of $3 million/year and a substantial increase related to an active highway project in Dallas. Given that the U.S. Court of Appeals for the Fifth Circuit previously said that “big-picture evidence” and “large-scale policy” is amenable to challenge using large-scale statistics and figures, these allegations were sufficient. Thus, the States have constitutional standing.

Preliminary Injunction

In order to obtain a preliminary injunction, plaintiffs must prove: (1) a substantial likelihood that it will prevail on the merits; (2) a substantial threat that it will suffer irreparable injury if the relief is not granted; (3) that the threatened injury outweighs the threatened harm to the party it seeks to enjoin; and (4) granting the injunction is in the public’s interest.

Likelihood of Success on the Merits

The underlying question is whether the Clean Water Act authorizes the Agencies to interpret WOTUS in the manner set forth in the Biden Rule. The court focused its discussion on three main issues. First, the court found Chevron deference inapplicable. Second, the court held the Biden Rule “codifies a modified version of Justice Kennedy’s significant nexus test.” Third, the court found the Biden Rule improperly “imposed jurisdiction on all ‘interstate waters, regardless of their navigability.”

Deference owed

The court held Chevron deference–a framework instructing a court on when to defer to an Agency’s interpretation of a statute–inapplicable for two reasons. First, the court found that Chevron deference was not applicable because the Clean Water Act implicates criminal penalties. The U.S. Court of Appeals for the Fifth Circuit has held that the rule of lenity makes Chevron inapplicable in cases with criminal penalties. Second, the court must interpret the Clean Water Act “as written to avoid the significant constitutional and federalism questions that the Agencies’ interpretation raises concerning the outer limits of Congress’s power.” This is particularly important where the Agencies’ interpretation “alters the federal-state framework by permitting federal encroachment on state power.” The court found the scope of WOTUS concerns the proper application of Congress’ Commerce Clause power. But here, the court notes, the Biden Rule essentially reads “navigability” out of the rule by including all interstate waters in its definition, thereby altering the federal-state framework. “The Agencies’ effort to read navigability out of the statute’s text to permit categorical encroachment on State’s rights raises constitutional questions this court should-if any other reasonable interpretation of the Act exists-avoid.” Thus, the court is not required to defer to the Biden Rule’s interpretation of the Clean Water Act statute.

Significant Nexus Test

The court wrote that the Biden Rule “trades the interstate-commerce test for two new tests, the significant nexus and relatively permanent tests[.]” The court then compared these approaches.

The interstate-commerce test required consideration of “whether the use, degradation, or destruction of…water could affect interstate or foreign commerce” before declaring a water jurisdictional under the Clean Water Act.

The Biden Rule’s significant nexus test asks whether waters “either alone or in combination with similarly situated waters in the region, significantly affect the chemical, physical, or biological integrity of traditional navigable waters, the territorial seas, or interstate waters.”

The Biden Rule’s relatively permanent test allows regulation of “relatively permanent, standing or continuously flowing waters connected to paragraph (a)(1) waters, and waters with a continuous surface connection to such relatively permanent waters or to traditional navigable waters, the territorial seas, or interstate waters.”

The court notes that the Biden Rule draws its two tests from Raponos, but neither the Rapanos plurality nor concurrence advocated adopting both tests. Cases applying Rapanos have either determined that the Kennedy significant nexus test is the controlling opinion or that the agencies can use either the plurality or the concurring test to establish Clean Water Act jurisdiction. The court included a footnote criticizing the application of either of these tests as controlling, but even assuming the plurality and concurring tests were proper, the Biden Rule “is unlikely to withstand judicial review because its version of the significant nexus test is materially different from the standard Justice Kennedy articulated in Rapanos.”

The court compared the two articulations of the significant nexus test:

Kennedy: Jurisdictional if “either alone or in combination with similarly situated lands in the region, significantly affects the chemical, physical, and biological integrity of other covered waters more readily understood as ‘navigable.‘”

Biden Rule: Jurisdictional if “either alone or in combination with similarly situated waters in the region, significantly affect the chemical, physical, or biological integrity of traditional navigable waters, the territorial sees, or interstate waters.”

When comparing the two highlighted portions, the court found the Biden test “ebbs beyond the already uncertain boundaries Justice Kennedy established for it” by extending the significant nexus to all interstate waters and not just waters understood as navigable. This, the court held, greatly expands the breadth beyond what Justice Kennedy envisioned. This “compels the court to question its legitimacy–and persuades the court that the plaintiffs will likely succeed on the merits.”

Categorial extension to all interstate waters

Lastly, the court noted that the Biden rule allows regulation of all interstate waters, regardless of navigability and without applicability of either the significant nexus or relatively permanent test. In other words, if there is an interstate water, it is automatically jurisdictional. Defendants argued this is consistent with the Clean Water Act’s history, text, and purpose. Plaintiffs claimed this extends the scope of the Clean Water Act beyond what Congress intended in three areas: (1) nonnavigable interstate waters; (2) impoundments and wetlands with no hydrologic connection to navigable waters; and (3) isolated ponds and mudflats.

The court agreed with defendants that the scope of the Act goes beyond traditional navigable waters but notes that navigability is an important limiting principle on the scope. The court agreed there is a need to regulate some interstate waters but is not convinced the Act supports “unrestrained federal jurisdiction over all interstate waters.” “The Agencies’ interpretation of the Act to include all interstate waters irrespective of any limiting principle raises seriously federalism questions[.]” The court cited to a prior lawsuit challenging the Obama Rule, which found the attempt to include all interstate waters overly broad. Thus, the court held, the Biden Rule is unlikely to withstand judicial review.

Irreparable Harm

The plaintiffs offered two types of irreparable harm: (1) intrusion into state’s sovereignty; and (2) unrecoverable compliance costs that will unnecessarily burden plaintiffs despite the improbability that the Biden Rule will survive judicial review.

The court found that the States satisfied the burden of showing irreparable harm, but the Associations did not.

Irreparable harm is generally satisfied when there are compliance costs that are nonrecoverable because the government-defendant enjoys sovereign immunity from monetary damages. Further, the U.S. Court of Appeals for the Fifth Circuit previously noted that “complying with a regulation later held invalid almost always produces the irreparable harm of nonrecoverable compliance costs.” The States provided numerous declarations and detailed specific anticipated compliance costs totaling millions of dollars in just the first year.

Courts are stricter with regard to private sector plaintiffs proving irreparable harm, generally requiring more specificity and more urgency to the consequences of a challenged action. The “conclusory and speculative allegations” from the Associations failed to meet this standard. Alleging potential increased development costs, additional legal risks, and likely permitting delays did not satisfy this requirement.

Equities and Public Interest

Interestingly, the two defendants took opposite approaches to this issue. The Agencies argued that the Biden Rule merely codifies the regulatory “status quo.” Assuming this is accurate, the court found it is difficult to see how an injunction while the lawsuit is pending would harm the Agencies. Conversely, the intervenor defendant argued there are currently intrastate waters in Texas and Idaho that the states are not adequately regulating that would fall under the Biden Rule jurisdiction and, thus, be protected. The court stated, however, that “even the most admirable aspirations” like protecting wetlands “do not permit agencies to act unlawfully.”

Further, the court said there was little public interest or efficiency gained in implementing a rule containing a significant nexus test when the United States Supreme Court is mere away from releasing its opinion in Sackett v. EPA, a case determining whether applying the Rapanos significant nexus test is the proper way to analyze the scope of WOTUS.

Thus, this factor weighs in the States’ favor.

Scope of the Injunction

“Principles of judicial restraint control when deciding a motion for preliminary injunction.” While this case involved only two states as plaintiffs, there are other cases around the country involving 25 other states. “The judicial process will benefit from the reasoning and conclusions of other courts weighing in.” Additionally, the court wrote, states that have not challenged this rule may welcome it. In light of that, the court said it was “reluctant to deprive states that embrace the Rule from exercising their sovereign rights to conform their conduct accordingly” until the Biden Rule’s validity has been determined.

Thus, the injunction entered was limited to Texas and Idaho, preventing the Agencies from implementing or enforcing the Biden Rule in these states.