Environmental and Legislative Updates

U.S. Supreme Court “Waters of the United States” Ruling May Lead to Confusion and Uncertainty in Waters and Wetlands Regulatory RegimeThe United States Supreme Court ruled unanimously in National Association of Manufacturers v. Department of Defense that legal challenges to an Obama Administration regulation defining “waters of the United States” (WOTUS) must be initially heard in federal district courts – and not federal courts of appeals. The decision resolves a long-standing ambiguity in the Clean Water Act and will have long-term consequences – e.g., relatively more resources will be necessary to litigate similar future cases and a six-year statute of limitations will apply (vs. 120 days).  In the near term, a key impact of the decision could be that the Obama-era WOTUS rule goes into effect in 37 states. This could lead to uncertainty and confusion – and delays – in certain permitting regimes, including the U.S. Army Corps of Engineers’ (Corps) issuance of Clean Water Act 404 permits.

An enduring controversy in environmental law is the scope of the term “waters of the Unites States” as set forth in the Clean Water Act. The issue rests on statutory and constitutional interpretation, with a key practical impact being the scope of the federal government’s jurisdiction over waters and wetlands. The conventional wisdom is that broader federal jurisdiction results in, among other things, a more complex and expensive permitting process (and, conversely, narrower jurisdiction means fewer regulatory burdens).

In 2015, the Corps and U.S. EPA promulgated the Obama WOTUS rule, which re-defined “waters of the United States,” generally providing for broader federal jurisdiction under the Clean Water Act. Unsurprisingly, this led to a bevy of lawsuits. Due in part to the aforementioned ambiguity as to where jurisdiction lies, a range of groups and states challenged the Obama WOTUS rule in several federal district courts and courts of appeals. Two of these lawsuits resulted in key decisions. First, the District Court of North Dakota issued an injunction halting implementation of the Obama WOTUS rule in 13 states (North Dakota, Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, Nevada, South Dakota, Wyoming and New Mexico). Subsequently, in a separate proceeding, the Sixth Circuit Court of Appeals issued a nationwide stay of the Obama WOTUS rule. Staying the Obama WOTUS rule resulted in the continued effectiveness of the “waters of the United States” definition “promulgated in 1986/1988, implemented consistent with subsequent Supreme Court decisions and guidance documents.” (Additional details regarding the recent history of WOTUS rulemakings and court challenges are set forth in Section II.B of the Corps’ and U.S. EPA’s recent Proposed Rule, Definition of “Waters of the United States – Addition of an Applicability Date to 2015 Clean Water Rule.)

An important consequence of National Association of Manufacturers is that the Sixth Circuit will likely conclude that its nationwide stay may not remain in effect because that court lacks jurisdiction to hear the case. The only other limit on the Obama WOTUS rule currently in effect is the injunction issued by the District Court of North Dakota – which only applies to the 13 states listed above. As to the other 37 states, the Obama WOTUS rule could go into effect in the very near future – potentially creating significant concerns for the regulated community. As noted by U.S. EPA:

The Supreme Court’s resolution of the question as to which courts have original jurisdiction over challenges to the 2015 Rule [i.e., the Obama WOTUS rule] could impact the Sixth Circuit’s exercise of jurisdiction and its stay. If, for example, the Supreme Court were to decide that the Sixth Circuit lacks original jurisdiction over challenges to the 2015 Rule, the Sixth Circuit case would be dismissed and its nationwide stay would expire, leading to possible inconsistencies, uncertainty, and confusion as to the regulatory regime that could be in effect pending substantive rulemaking under the Executive Order. (Emphasis added).

To be sure, ongoing efforts under the Trump Administration could very well result in the delay of the Obama WOTUS Rule’s implementation and, ultimately, its rescission and replacement. Furthermore, parties in the District of North Dakota litigation discussed above may seek to expand the applicability of the injunction from 13 states to nationwide. Additionally, litigation in several federal district courts challenging the Obama WOTUS rule that had previously been dismissed could proceed separately and result in additional injunctions beyond those currently in effect for the 13 states. That said, a wide range of entities – including contractors and others in building and construction – may experience confusion, delays, and inconsistent approaches in their dealings with Corps offices across the country.  These concerns are particularly heightened in the 37 states where the Obama WOTUS rule may go into effect as Corps officials may lack sufficient legal clarity to finalize proposed 404 permits, issue jurisdictional determinations, and take other regulatory actions.  Entities with active issues in front of the Corps should carefully evaluate the impacts of National Association of Manufacturers on their ongoing projects.

*The original article has been edited and modified with permission from the Bradley firm website.

water treatmentOn January 10, 2017, the U.S. Environmental Protection Agency (EPA) announced the availability of $1 billion in credit assistance for water infrastructure projects under the new Water Infrastructure Finance and Innovation Act (WIFIA) program. See 82 Fed. Reg. 2933 (Jan. 10, 2017).  Congress enacted WIFIA in order to provide low-cost, long-term credit assistance through direct loans or loan guarantees. The program supplements other traditional forms of water infrastructure financing such as State Revolving Fund (SRF) programs and bonds.

Entities interested in applying for WIFIA funding must act fast. In order to be considered in the current round of funding, prospective borrowers must submit formal letters of interest to EPA no later than April 10, 2017. EPA will host informational webinars explaining the process of submitting and evaluating letters of interest on February 9 and March 7, 2017.

WIFIA Overview

  • Eligible Borrowers
    • Local, state, tribal, and federal government entities and instrumentalities
    • Partnerships and joint ventures
    • Corporations and trusts
    • State infrastructure financing authorities
  • Eligible Projects
    • Wastewater conveyance and treatment
    • Drinking water treatment and distribution
    • Enhanced energy efficiency projects at drinking water and wastewater facilities
    • Brackish or seawater desalination, aquifer recharge, alternative water supply, and water recycling
    • Drought prevention, reduction, or mitigation
    • Acquisition of property if it is integral to the project or will mitigate the environmental impact of a project
    • A combination of projects secured by a common security pledge or submitted under one application by an SRF program
  • Key Program Features
    • $20 million – Minimum project size for large communities
    • $5 million – Minimum project size for small communities (population of 25,000 or less); WIFIA requires EPA to set aside 15 percent of its budget authority for small communities.
    • 49 percent – Maximum portion of eligible project costs that WIFIA can fund
    • Total federal assistance may not exceed 80 percent of a project’s eligible costs
    • 35 years – Maximum final maturity date from substantial completion
    • Five years – Maximum time that repayment may be deferred after substantial completion of the project
    • Interest rate will be equal to or greater than the U.S. Treasury rate of a similar maturity at the date of closing
    • Projects must be creditworthy and have a dedicated source of revenue

Letters of Interest and Applications for Funding

Prospective borrowers must first submit a letter of interest to EPA by April 10, 2017. The primary purpose of the letter of interest is to: (i) validate the eligibility of the prospective borrower and the prospective project; (ii) perform a preliminary creditworthiness assessment; (iii) perform a preliminary engineering feasibility assessment; and (iv) evaluate the project against the selection criteria and identify which projects EPA will invite to submit applications.

EPA will invite selected prospective borrowers to submit an application based on preliminary engineering feasibility findings, a preliminary creditworthiness assessment, the amount of budget authority necessary to provide credit assistance, and the scoring of the eligibility criteria. EPA expects that it “will only invite projects to apply if it anticipates that those projects are able to obtain WIFIA credit assistance.”

Eligibility Criteria

EPA has identified the following project priorities, in addition to geographic and project diversity:

  • Adaptation to extreme weather and climate change including enhanced infrastructure resiliency, water recycling and reuse, and managed aquifer recovery;
  • Enhanced energy efficiency of treatment works, public water systems, and conveyance systems, including innovative, energy-efficient nutrient treatment;
  • Green infrastructure; and
  • Repair, rehabilitation, and replacement of infrastructure and conveyance systems.

Within the priorities, selection criteria (and relative weight) for this round of funding include:

  • National or regional significance with respect to the generation of economic and public health benefits – 10 percent
  • The likelihood that WIFIA assistance would enable the project to proceed at an earlier date than without – 5 percent
  • Use of new or innovative approaches (energy-efficient parts and systems, renewable or alternate sources of energy, green infrastructure and alternate sources of drinking water through desalination, aquifer recharge or water recycling) – 10 percent
  • Protection against extreme weather events, such as floods or hurricanes, as well as the impacts of climate change – 10 percent
  • Maintenance or protection of the environment or public health – 10 percent
  • Service of regions with significant energy exploration, development, or production areas – 5 percent
  • Service of regions with significant water resource challenges, including water quality concerns, significant flood risk, issues identified in existing regional, state, or multistate agreements, and water resources with exceptional recreational value or ecological importance – 10 percent
  • Responds to identified municipal, state, or regional priorities – 5 percent
  • Readiness of the project to proceed toward development, including a reasonable expectation that the construction of the project can commence no later than 90 days after the date on which a federal credit instrument is obligated – 5 percent
  • Inclusion of public or private financing in addition to assistance under WIFIA – 5 percent
  • Reduction of other federal assistance to the project – 5 percent
  • The needs for repair, rehabilitation, or replacement of a treatment works, community water system, or aging water distribution or wastewater collection system – 10 percent
  • Service to economically stressed communities, or pockets of economically stressed rate payers within otherwise non-stressed communities – 10 percent

Conclusion

Letters of interest must be submitted no later than April 10, 2017. Prospective borrowers should take action immediately to evaluate their potential WIFIA eligibility and to begin preparing a letter of interest. Developers, designers, program managers, and contractors may want to help identify eligible cities and projects.

 

Bart Kempf is a member of Bradley’s environmental and government relations teams.