Clean-water ruling has business implications

The United States Supreme Court continues to shake up the regulatory environment, this time with a ruling under the 50-year-old Clean Water Act, that has important ramifications for businesses, governmental bodies, and other entities in Colorado and throughout the country. Those in agriculture, mining (including oil and gas), real estate development, and water resource management should pay close attention, particularly to how Colorado responds.

As background, CWA protections extend to “waters of the United States” — also known as “WOTUS.” Generally speaking, work in WOTUS requires a federal permit, which can be expensive and time consuming to obtain. Thus, defining what “waters” constitute WOTUS has remained one of the longest running disputes in environmental law. (For example, do WOTUS include wetlands, irrigation ditches, ephemeral streams, etc.?)

Recently, the Obama, Trump, and Biden administrations each issued their own rules defining the term — the first such efforts since the Reagan administration. Each rule was unique and replaced its predecessor, with the Trump rule paring back the act’s coverage sandwiched between the Obama and Biden rules, which broadened it. The resulting regulatory whiplash, along with the associated judicial challenges to each rule, have kept regulated interests guessing as to whether their projects or activities require a federal permit.

On May 25, the Supreme Court entered the fray for the first time in 17 years. In Sackett v. EPA, a unanimous court ruled that the CWA did not extend to wetlands located on property that Michael and Chantell Sackett purchased near Idaho’s Priest Lake in 2004 to build a family home.

While all nine justices united on the result, only five agreed on why the CWA did not apply to the Sackett property. The reasoning employed by the five-member majority will significantly reduce the reach of the act from what most stakeholders have understood it to be for the past 45 years. So much so, in fact, that conservative justice Brett Kavanaugh wrote a separate opinion, joined by the three liberal justices, criticizing the majority for going too far.

Many in the regulated community have hailed the decision as a proper rejection of federal overreach. Indeed, a main premise underlying the majority opinion is that the federal agencies administering the act (the Army Corps of Engineers and the Environmental Protection Agency) have long applied it in a way that encroaches upon traditional state authority over water and land use decisions. As such, the decision invites — and the CWA allows — states (and even localities) to step in to fill the newly created void.

Most expect the decision to have wide-ranging effects, not only for wetlands (the focus of the case), but other waters as well. Projects and activities impacting waters no longer covered by the act will not require federal permits designed to protect these resources. To the extent these resources merit protection, states must do it. Of additional importance to Colorado, the case’s ramifications are expected to be generally more pronounced in dryer Southwestern states.

The Colorado Water Quality Control Division has indicated its intent to pursue legal authority in the next legislative session to create a program to address the void. Given the economic importance of aquatic resources in the state, and the scope of waters losing federal protection under Sackett, such efforts will likely find ample support.

The water control division has noted that the objective of a new program would be largely to maintain the status quo of pre-Sackett protections. While it is unclear exactly what this portends, it is clear that cutting a controversial (and by some measures, failed) federal program and pasting it into a new state home and expecting success is unrealistic.

Finding the proper path forward will require creative thinking and an open mind. Many difficult issues lie ahead, such as identifying which waters need protection, how to protect them, and how to create a functional permitting process.

Moreover, a fundamental question, which has received no attention to this point, is where to locate this program. WQCD has assumed that it will administer the program, but the underlying challenge is more a matter of resource management than water quality. The Colorado Department of Natural Resources has considerable relevant expertise and could provide a more appropriate fit for the program. Water is, of course, Colorado’s most critical resource.

Efforts to develop Colorado’s program are already underway. Affected Colorado businesses should engage on the issue to help ensure that the resulting program not only adequately protects the resource, but provides a predictable and affordable permitting process for regulated interests. The program that emerges will be one Colorado businesses must live with for years, if not decades to come.

John Kolanz is a partner with Otis & Bedingfield, LLC in Loveland.  He helps businesses and governmental entities with environmental and natural-resource issues and has experience with Clean Water Act matters. He can be reached at 970-663-7300 or JKolanz@nocoattorneys.com.