In April, 2020, the United States Supreme Court held that, in certain situations, the Clean Water Act requires Section 402 permits for point source discharges that travel through groundwater to reach navigable waters. According to the Court, a permit is required if the discharge is the “functional equivalent of a direct discharge from the point source into navigable waters.” This month, the EPA issued a draft memorandum to help apply the Maui decision and clarify what is required for a “functional equivalent” analysis. What does this draft guidance cover and is it consistent with the Maui decision? Is the guidance helpful to regulated entities and what changes should be considered? Join us as we discuss this critical new guidance that seeks to help to make sense of the Maui decision.
Damien Schiff, Senior Attorney, Pacific Legal Foundation
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Dean Reuter: Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I'm Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at fedsoc.org.
Nick Marr: Welcome, everyone, to The Federalist Society's Teleforum Conference Call as, this afternoon, December 18, 2020, we're having a Teleforum episode on “Analyzing the EPA's Draft Memorandum on Maui v. Hawaii Wildlife Fund.” I'm Nick Marr, Assistant Director of Practice Groups at The Federalist Society.
As always, please note that expressions of opinion on today's call are those of our expert.
We're very pleased to be joined this afternoon by Mr. Damien Schiff. He's a Senior Attorney at the Pacific Legal Foundation. Damien's going to cover this topic and give some opening remarks. After that, we'll be looking to you, the audience, for questions, so have those in mind for when we get to that portion of the call.
With that, thanks for being with us, Damien. The floor is yours.
Damien Schiff: Hi. Thanks, Nick, and thank you to The Federalist Society for hosting today's discussion of the EPA's recently released draft guidance on County of Maui v. Hawaii Wildlife Fund.
The Clean Water Act generally requires a federal permit for the discharge of pollutants into navigable waters from "any point source." It's undisputed that permits are required for discharges of pollutants from point sources that proceed directly to regulated waters. But there's been quite a lot of disagreement in the lower courts over the extent to which indirect point-source discharges are regulated.
In an attempt to clarify, the U.S. Supreme Court, in County of Maui, ruled that permits are required not just for direct point-source discharges, but also for any point-source discharge that is a functional equivalent of a direct point-source discharge. Unfortunately, the Court didn't define the term "functional equivalent," and, other than to offer a non-exhaustive list of seven factors to consider and to admonish lower courts to respect states' traditional authority over water pollution and to be mindful of avoiding decisions that would encourage evasion of the Act's permitting requirements, the Court didn't offer much else.
The Court did suggest, however, that additional direction could be provided by EPA. Taking the cue, EPA earlier this month released a draft guidance document interpreting County of Maui's functional equivalent test. The guidance reemphasizes several limitations of the Clean Water Act's permitting requirement. It also construes the functional equivalent standard, and it suggests another factor in addition to the Court's seven that can be considered when conducting a functional equivalent analysis.
So first, the guidance underscores that only discharges of pollutants that actually reach a regulated water are subject to the Clean Water Act's permitting requirement. This point is particularly important for existing indirect dischargers who are concerned about being subject to a citizen enforcement suit. Because of this statutory limitation, it would not be enough, for example, that an environmental group prove that a landowner's septic tank was discharging to ground water and that septic pollutants had been found in a nearby surface water. Rather, the group would have to show that any such pollutants actually came from the landowner's septic tank. Thus, in a community where such septic tanks are common, it may be impossible, given current technological limits on chemical tracing, for liability to be pinned on any one discharger.
Second, the guidance emphasizes that only discharges of pollutants from point sources are regulated. Given how broadly the term "point source" is defined in the statute, one might think this limitation isn't really much of a limitation. But, in fact, it does have relevance in the County of Maui context. Starting off, recall that the non-point-source pollution is not regulated. Hence, to the extent that a given pollutant could just as easily have come from non-point sources as point sources — for example, sediment — it follows that the mere fact that such a pollutant is found in the surface water doesn't mean that a nearby point source is regulated, even if it's the only point source around.
This point-source limitation is also relevant in the County of Maui context given one court of appeals holding that coal ash heaps, which sometimes discharge to surface waters via ground water and which have been targeted in a number of Clean Water Act citizen suits, are not point sources.
Moving on to the focus of the majority opinion in County of Maui, the draft guidance next reiterates that not all point-source discharges of pollutants that reach regulated waters are regulated — rather, only direct discharges and their functional equivalent.
In discussing this key holding, the guidance suggests how one might distinguish among direct discharges, indirect discharges that are the functional equivalent of direct discharges, and indirect discharges that are not the functional equivalent of direct discharges. For example, as the guidance offers, if the composition or concentration of the discharge when it reaches a regulated water is different from when it was discharged — because of, for example, dilution or attenuation — the guidance suggests that such a change would argue against functional equivalence. In contrast, if there is no change in composition or concentration, that fact would support a conclusion that the discharge is functionally equivalent to a direct discharge.
Finally, the draft guidance offers another factor to be considered in a functional equivalent analysis: namely, the design and performance of the system or facility from which the pollutant is released. Although this factor is not expressly identified in the County of Maui majority opinion, the guidance argues that the Court's ruling allows EPA to suggest additional factors, especially given the ambiguities within the statutory phrase "from any point source." The guidance then goes on to explain how this factor should be applied. A point source could, for example, be intended to discharge to ground water and not directly to surface water precisely because doing so will reduce the harmfulness of the pollutants once they reach a surface water. Such a design would make the discharge less like a direct discharge in the guidance's estimation.
Also, consideration of the point-source design could help in determining the likelihood that discharge pollutants would be different in composition or concentration by the time they reach regulated surface waters, which is another consideration in determining functional equivalence.
Although not discussed in the guidance, County of Maui's statutory purpose analysis supports EPA design factor, in my opinion. To inform application of the functional equivalence test, the court in Maui County identified two statutory purposes to be kept in mind: preserving states' traditional authority, especially over ground water, and avoiding the encouragement of law evasion. This latter purpose is closely related to EPA's point-source design factor. Septic tanks, for example, are designed to discharge to ground water, not surface water, in part to reduce the harmful effects of wastewater on a watershed. Subjecting such discharges to Clean Water Act regulation would not thwart law evasion. Put another way, exempting such discharges would not provide any incentives for existing surface dischargers to reconfigure their direct discharges to ground water. The Agency's proposed design factor is therefore consistent with County of Maui's approach to functional equivalence.
Now, what more could the guidance do? My PLF colleague Glenn Roper and I have written an article soon to be published in the Pace Environmental Law journal which argues for what we call the "hallmarks interpretation" of County of Maui. According to this approach, a pollutant discharge is the functional equivalent of a direct discharge if it bears the hallmarks of a direct discharge — in other words, if the discharge pollutants still betray the traces of having been emitted from a discernable, confined, and discrete conveyance. That is the statutory definition of point source. In contrast, if the pollutants lack those hallmarks and thus are indistinguishable from pollutants added by non-point sources, then their discharge is not a regulated functional equivalent.
EPA's proposed guidance is not inconsistent with this interpretation, and its discussion of how to distinguish regulated from nonregulated indirect discharges shares a good deal with the hallmarks approach. But an explicit and fuller adoption, in my view, would make the outcome of a functional equivalent analysis more predictable and thus would provide the regulated public with an even greater degree of guidance.
That represents my review of the draft guidance, and I'm happy to turn it over to questions. Back to you, Nick.
Nick Marr: And, Damien, since we don't have any questions just yet, I'll ask the first one. I wonder: Is this guidance limited to just ground water, or are there other applications?
Damien Schiff: The document itself suggests that it is focused just on ground water. And that's perhaps not surprising given both the factual context of County of Maui, which concerned groundwater pollution that ultimately reached the Pacific Ocean, and also given that EPA's own experience in regulating — rarely — but in regulating discharges from point sources that reach navigable waters through ground water had been limited to groundwater and it hasn't been applied in other circumstances.
That being said, I don't see any reason why the rule that County of Maui articulates for distinguishing regulated from unregulated discharges is limited to the groundwater context. I think, certainly, you could apply it, in theory, to any discharge that doesn't directly end up in a regulated water. So, for example — and this, in fact, I think, came up during the oral argument in County of Maui — for an aerial discharge. Does that fall under the Clean Water Act's direct regulation regime, or is that an indirect, non-functionally equivalent discharge?
Also, any other surface discharge that doesn't immediately wash into a regulated water but rather takes some time — maybe it has to go through a series of channels or ditches, conduits, or just simply through stormwater sheet flow before it will ever reach a regulated water — is that a regulated indirect but functionally equivalent discharge or, instead, is that not a regulated discharge?
I think the answers aren't clear. However, I don't see any reason why, at least as a starting point, one shouldn't apply the County of Maui framework. But again, at least for purposes of the draft guidance, it seems to be — on its face, at least — limited to resolving questions that County of Maui raises would apply to groundwater pollution.
Nick Marr: Got it. One question just popped up, so we'll go to it now.
Daren Bakst: Hi. This is Daren Bakst from Heritage Foundation. Can you hear me okay?
Damien Schiff: Yes, I can.
Daren Bakst: All right. Great. Hey, Damien, I have a question: What is -- some of the people that might be criticizing this guidance, what are they saying? What's some of the resistance that they have to how the EPA has decided to address the Maui case? Is there anything specific?
Damien Schiff: Well, that's a good question. I haven't seen any opposition although I suspect you could certainly conceive of critiques from both sides. I mean, from the environmentalist perspective, I think you might find a critique in the EPA's addition of this point-source design factor as one thing to consider whether something is functionally equivalent because that seems to be written as a way to conclude that something that might otherwise be regulated under County of Maui is now not going to be regulated because the intent of the discharge is to minimize the environmental effects of the pollutants that are being released. So I could see how some of the environmental community might be concerned about that.
From the other side, as I noted in my opening remarks, I think the critique would be that perhaps the guidance doesn't provide enough guidance for the regulated public. I mean, two thirds of the draft is focused on limitations to the Clean Water Act that are really separate and apart from County of Maui and that County of Maui just sort of takes as a given — those being the limitations to discharges from point sources that actually reach regulated waters.
Now, that might be a strategic move on the part of EPA to ensure that lower courts don't take the somewhat open-ended aspect of the functional equivalent test and then use that almost inadvertently to override what should be clear limitations on the scope of the Act that are separate and apart from County of Maui. And I think that that certainly is a risk because, again, the biggest criticism against County of Maui itself is that it doesn't really offer a clear standard for resolving middle instances, and that's a fact that the majority opinion in County of Maui itself admits that it's guilty of. And the Court said, "That's really a problem, though, that's inherent in the statute; that's not our problem."
That being said, because there is this ambiguity as to these middle instances, there's an even greater need for some sort of regulatory guidance. And, to the extent that the guidance document focuses mainly on things apart from the precise issue of County of Maui, to that extent, it might be a little disappointing. But I do think, as I mentioned at top of the call, that the guidance document is certainly consistent with both the Court's expectation that the EPA would provide guidance and consistent with the actual test -- or standard that the Court articulated. And, in particular, EPA's focus on point-source design, I think, is an appropriate one because that certainly would address the so-called septic tank problem which, I think, was driving a lot of the concern of these cases and in County of Maui in particular, and which, as far as I know, the environmental community has stated is not the intent of the litigation that has been conducted so far concerning these indirect discharges — that it's not about trying to create a federal rule for septic tanks but, rather, trying to attack certain other types of water pollution, in particular from coal-fired power plants and their coal ash that they have to deal with after the energy generation.
So, given all that, I think the guidance is in the right direction and can be improved simply by making it clearer when are those middle instances going to be regulated and when are they not.
Daren Bakst: Thanks. I don't know if you have any other questions. Is it okay if I ask another question?
Nick Marr: Go ahead, Darren. No other questions are in the queue right now.
Daren Bakst: Thanks. Just a quick question, Damien: How prevalent is this issue in terms of these indirect point-source discharges to groundwater? I mean, why is this issue really important? I just want to hear your take on that.
Damien Schiff: Yes. I would say the issue has come up in litigation principally in the context of power plants or wastewater treatment plants that, either by design or by accident, cause pollutants to enter the groundwater beneath the property where they're located, and that groundwater eventually conveys the pollutants to regulated surface waters, and that in turn causes an appreciable decrease in water quality. Certainly, that is the factual scenario that is prominent in the half dozen or so district court cases that were going on before County of Maui was accepted by the Supreme Court.
The concern, though, I think, was that, in the Ninth Circuit's decision in County of Maui, the rule that was articulated for determining whether the treated sewage discharge at issue there would be regulated under the Clean Water Act -- the concern was that the rule articulated by the Ninth Circuit arguably would resolve not just that instance, but could resolve in terms of extending federal regulation to a host of relatively minor discharges that have frankly never been the subject of federal regulation, most prominent among them being septic tanks.
So I think the Supreme Court took the case in part to make sure that that never really happened and to adopt a rule that was certainly not as broad as what the Ninth Circuit was offering and, ideally, one that really could never be stretched to reach your typical septic tank owner. And so it's a controversy that's in a sense nascent because I understood, of course, the environmental community as saying that that was never really their goal anyway, and yet you had a lower court ruling that could justify that result. And so I think the Supreme Court was hoping to avoid that from ever happening. And the question is: Is the rule that's been articulated by the majority opinion — the functional equivalence standard — is it up to the task? And I think it's fair to say that it's not, just on its own. That's in part, too, why I think the majority opinion says that, you know, "We're going to need to add some flesh to the bones here, and we can rely upon lower courts to do that and also EPA."
So here's EPA's attempt to do that. And I think it has done that somewhat, although there is more than can be done. But it remains to be seen whether the guidance plus the Supreme Court's majority opinion effectively ends the nascent controversy and keeps litigation where it has been so far — that is, challenging wastewater treatment discharges or challenging coal ash, arsenic pollutants that are leached into groundwater — whether it's limited to that, and to determine whether any particular plant would be regulated, as opposed to whether it would move on to a more ambitious litigation campaign to capture a lot of small, otherwise-innocuous discharges.
Daren Bakst: Thank you very much. That's great.
Nick Marr: Thanks, Darren. So, Damien, we don't have any questions in the queue right now, but, otherwise, I'll send the floor back to you if you have anything you didn't cover. Or, if you want to offer closing remarks, we can wrap up a bit early this afternoon. I leave it up to you.
Damien Schiff: Thank you, Nick. Yeah, we'll go ahead and close it up. I want to thank everyone for joining the call and to remind everyone that the comment period is open for a few more weeks on the draft guidance memo.
And just to underscore again that, as guidance, this is something that, on its face, doesn't have any legally binding effect, but it is important because it reflects at least EPA's current thinking about how to deal with County of Maui. And I think the next step is how will the lower courts start dealing with them. I think many were expecting to have an example of how the lower courts would deal with it in the Kinder Morgan case, which was petitioned for certiorari at the same time as County of Maui out of the Fourth Circuit. It was granted, vacated, and remanded in light of County of Maui. However, my understanding is that the parties settled it before the Fourth Circuit could reach the merits, and so we won't have a decision there.
In County of Maui itself, the Ninth Circuit panel just peremptorily remanded the whole thing back to the district court. And so it will be some time before I think we have -- potentially some time before we have the court of appeals' rulings on what County of Maui means. But that, I think, will be the next thing to watch carefully, is how do the lower courts start to put more flesh on the bone of the functional equivalence standard.
As I noted earlier in the call, I think the best approach is to focus on the pollutants themselves and how, if at all, they have changed from the time they were discharged to the time they arrived at the regulated water. Looking at it that way, I think, provides a certain amount of predictability and also ensures that you don't have a radical expansion of the Act's permitting requirement. I think that that is an approach that is consistent with EPA's draft but is one that goes a little bit beyond that draft. And to that extent, I think, I would recommend that the guidance -- if EPA has interest in providing more guidance, that it be focused on precisely that area, focusing on how the pollutants look when they reach the regulated water. Can they be characterized as point-source pollution as opposed to non-point-source? That, I think, will give the regulated public a lot more confidence in predictability.
Nick Marr: Great. Thanks very much, Damien.
On behalf of The Federalist Society, I want to thank you for the benefit of your valuable time and expertise this afternoon, and to our audience for calling in and your good questions, and we welcome your feedback on these programs and others by email at firstname.lastname@example.org.
So, to close out, keep an eye on your emails and on our website for announcements about upcoming teleforum calls. We have a pretty quiet week next week, so everyone have a wonderful weekend and holiday season.
Thank you all for joining us today. We are adjourned.
Dean Reuter: Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society's practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.