In a decision cheered by environmental groups, the U.S. Supreme Court on April 23 established a new test for Clean Water Act jurisdiction by finding the statute applies to groundwater pollution when a source discharges into nearby surface waters.

The 6-3 ruling rejected a legal interpretation advanced by the U.S. Environmental Protection Agency that the court's majority said would create a "large and obvious loophole" in one of the key regulatory elements of the Clean Water Act.

At issue was a set of circuit court decisions that offered split opinions on whether pollution carried from a "point source," such as wells or coal ash ponds, via groundwater to nearby surface waters should be subject to the Clean Water Act's national pollutant discharge elimination, or NPDES, scheme.

Clean Water Act jurisdiction is of significant concern for coal-fired power plant operators, which have faced a wave of citizen suits brought under the statute in recent years by environmental groups seeking to hold utilities responsible for pollution leaking from coal ash ponds into nearby rivers and lakes.

In the case before the Supreme Court, County of Maui, Hawaii v. Hawaii Wildlife Fund, the U.S. Court of Appeals for the 9th Circuit ruled for environmental groups in a citizen's Clean Water Act lawsuit, finding that wastewater discharges from Maui's wells into nearby groundwater was "functionally" a release into the ocean.

There, the 9th Circuit established a "fairly traceable" test that conflicted with a separate ruling by the U.S. Court of Appeals for the 6th Circuit where a divided panel of judges adopted a "direct hydrological connection" theory. In doing so, the 6th Circuit rejected an environmental group's efforts to force the Tennessee Valley Authority and Kentucky Utilities Co. to clean up leaking coal ash ponds pursuant to the Clean Water Act.

Recognizing the circuit court split, the Supreme Court in February 2019 agreed to hear an appeal by the County of Maui.

As the justices considered the briefs submitted in the matter, the EPA in April 2019 released an interpretive statement adopting a new position that pollution traveling through groundwater is not subject to the Clean Water Acts' NPDES permitting requirements. The EPA's interpretation, later embraced by the U.S. Solicitor General in oral arguments, specifically argued that "any release" of pollution into groundwater is not covered by the Clean Water Act because Congress intended to leave groundwater regulation to the states.

The court's 6-3 majority disagreed.

The court's opinion

The EPA's "narrow interpretation would risk serious interference with EPA's ability to regulate point source discharges, and Congress would not have intended to create such a large and obvious loophole in one of the Clean Water Act’s key regulatory innovations," Justice Stephen Breyer wrote for the majority. Joining him in the opinion were Chief Justice John Roberts and Justices Ruth Bader Ginsburg, Sonya Sotomayor and Elena Kagan.

However, the court also found the 9th Circuit's "fairly traceable" test could allow the EPA to assert permitting authority over pollutants that eventually reach surface waters "many years after their release" and in "highly diluted forms."

The court, therefore, developed a new "functional equivalent" test under which an NPDES permit is required when the "functional equivalent" of direct discharge from a point source to surface waters would occur. Providing further guidance, the court said that "time and distance" are the most important factors for lower courts to consider, but it did not set any time or distance limits except to observe that a permit "is needed where the discharge is a few feet away from navigable waters and that a permit is not required where the discharge is far away and it takes 'many years' for the pollutants to complete the journey."

In ruling for the Hawaii Wildlife Fund, the Supreme Court remanded the case back to the 9th Circuit for further proceedings consistent with the majority's opinion.

Justice Brett Kavanaugh joined the opinion in full but penned a concurrence calling attention to the late Justice Antonin Scalia's plurality opinion in Rapanos v. United States, a 2006 decision widely cited in lawsuits dealing with Clean Water Act jurisdiction.

"Under Justice Scalia's interpretation in Rapanos, the fact that the pollutants from Maui's wastewater facility reach the ocean via an indirect route does not itself exempt Maui's facility from the Clean Water Act's permitting requirement for point sources," Kavanaugh said.

Conversely, Justices Clarence Thomas and Neil Gorsuch argued in a dissent that the majority's opinion defies congressional intent by requiring courts to weigh "which factors are the most important" in determining whether pollutants that enter navigable waters come from a point source, adding the EPA could provide more clarification through "administrative guidance."

Justice Samuel Alito in a separate dissent called the majority's test "a concoction" lacking a clear explanation.

While the court framed its opinion as a step back from the 9th Circuit's ruling, Earthjustice Attorney David Henkin said he did not view the two decisions as inconsistent. The 9th Circuit also used the phrase "functional equivalent," he noted.

"In my view, there's no daylight between the two," Henkin, who argued the case before the court on behalf of the Hawaii Wildlife Fund, said in an interview. "There's nothing about what the Supreme Court said today in its test that concerns me. I think it reaffirmed the common-sense understanding of the Clean Water Act as it applies to these types of situations that has prevailed for three decades."

An EPA spokeswoman said the agency is reviewing the decision and "the call for the agency to provide further guidance," referring to the dissent by Thomas and Gorsuch.

"Moving forward, we will respect the court's finding that 'as to groundwater pollution and non-point source pollution, Congress intended to leave substantial responsibility and autonomy to the states,'" the spokesperson said. "In holding that the Clean Water Act requires a permit for the addition of pollutants to groundwater if it is the 'functional equivalent' of a direct discharge, the court unfortunately leaves some uncertainty for the public, including private property owners."

Mark Ryan, a former EPA attorney who specialized in Clean Water Act litigation, said in an interview that he expects the EPA to ultimately withdraw the interpretation rejected by the court. The majority's ruling "is a reasonable one and it resoundingly rejects the Trump administration's interpretation of the Clean Water Act," Ryan maintained.