Courtesy of CEB, we are bringing you selected legal developments in areas of California business law that are covered by CEB’s publications. This month’s feature is from the February 2019 update to Advising California Partnerships. References are to the book’s section numbers. The most significant legal developments since the last update include developments in such important topic areas as professional responsibility, federal and state taxation, securities law, and arbitration.
Luke Westerman of the Agribusiness Committee recently drafted an article analyzing how various circuits have addressed the groundwater conduit theory of liability under the Clean Water Act.
There is no doubt that pollution is a hot topic these days, which is why plaintiffs continue to develop novel theories of liability under the Clean Water Act (“CWA”). In fact, one theory that has recently gained traction is referred to as the “groundwater conduit theory.” This theory centers on CWA’s requirement for a National Pollutant Discharge Elimination System (“NPDES”) permit for discharges of pollutants to navigable waters (waters of the U.S., “WOTUS”). While the definition of “WOTUS” has, and continues to be, an area of consternation, the groundwater conduit theory attempts to expand the CWA’s reach by broadening the types of permit-required discharges under the NPDES.
The CWA requires a permit for “any addition of any pollutant to navigable waters from any point source.” 33 U.S.C. § 1362(12). A “point source” under the CWA is a “discernible, confined and discrete conveyance . . . from which pollutants are . . . discharged.” Id. (14). Traditionally, groundwater is regulated by the states because it is not considered a WOTUS. Indeed, such division of jurisdiction supports the federalist structure of the CWA. But now the groundwater conduit theory attempts to bring groundwater into the CWA’s jurisdiction by treating it as a conduit through which pollutants may reach a WOTUS.
The first federal district court to acknowledge and accept the groundwater conduit theory was the United States District Court for the District of Hawaii. The Ninth Circuit Court of Appeals then acknowledged and accepted the groundwater conduit theory when it affirmed the district court’s ruling. Hawai’i Wildlife Fund v. County of Maui, 886 F.3d 737 (9th Cir. 2018). The Fourth Circuit Court of Appeals followed the Ninth Circuit’s lead and accepted the groundwater conduit theory in two later cases. Upstate Forever v. Kinder Morgan Energy Partners, L.P., 887 F.3d 637 (4th Cir. 2018); Sierra Club v. Virginia Elec. & Power Co., 903 F.3d 403 (4th Cir. 2018). In the most recent set of cases, the Sixth Circuit Court of Appeals reached the opposite conclusion and rejected the groundwater conduit theory. Kentucky Waterways Alliance v. Kentucky Utilities Co., 905 F.3d 925 (6th Cir. 2018); Tennessee Clean Water Network v. Tennessee Valley Auth., 905 F.3d 436 (6th Cir. 2018). Finally, the Second Circuit Court of Appeals may soon weigh in on the issue when it rules on an appeal from the United States District Court for the District of Connecticut, which declined to adopt the groundwater conduit theory. 26 Crown Assocs., LLC v. Greater New Haven Reg’l Water Pollution Control Auth., No. 3:15-cv-1439-JAM, 2017 WL 2960506, at *1 (D. Conn. July 11, 2017).
Hawai’i Wildlife Fund involved four wastewater injection wells used by the county wastewater treatment facility. The wells injected treated wastewater into groundwater near the facility. Plaintiffs brought suit alleging that the injection wells required a NPDES permit because they were discharging pollutants into the Pacific Ocean. Relying on a tracer dye study (which showed that dye put into the wells eventually reached the Pacific Ocean), the plaintiffs asserted that the injection well pipes were point sources that discharged pollutants to a WOTUS even though the pollutants first traveled diffusely through groundwater prior to reaching the Pacific Ocean.
The court seemed to be persuaded by a tracer dye study, which concluded that there was “a hydrogeologic connection” between the injection wells and the coastal waters. This conclusion was based on the fact that “[e]ighty-four days after injection, tracer dye introduced to Wells 3 and 4 began to emerge” from the coastal waters near the treatment facility. Hawai’i Wildlife Fund, 886 F.3d at 743. The court made quick thrift of the determination that the injection well pipes were clearly point sources under the CWA. The court then reasoned that a point source need not discharge directly into a WOTUS for CWA liability to attach, as long as the pollutants are “fairly traceable from the point source to a navigable water such that the discharge is the functional equivalent of a discharge into the navigable water . . . .” Id. at 749.
The Ninth Circuit then concluded its discussion of the groundwater conduit theory with the caveat of “leav[ing] for another day the task of determining when, if ever, the connection between a point source and a navigable water is too tenuous to support liability under the CWA.” Id.
The Fourth Circuit first addressed the groundwater conduit theory in Upstate Forever, which involved an underground gasoline pipeline leak. Again, the court made quick thrift of the determination that the leaking pipe was a point source under the CWA. But the contentious issue was whether the gasoline that leaked from the pipe and traveled through the soil and groundwater eventually reaching a WOTUS could constitute a point source discharge of pollutants to navigable waters without a permit.
The court held that a “discharge need not be channeled by a point source until it reaches navigable waters.” Upstate Forever, 887 F.3d at 651. As long as there is a “direct hydrological connection” between the groundwater and navigable water, the CWA requires a permit for the discharge of a pollutant from a point source that travels through such groundwater to reach the navigable water. Id. While a fact-specific inquiry, the court was persuaded by the fact that the navigable waters in this case were 1,000 feet or less from the pipeline.
The Fourth Circuit also accepted the groundwater conduit theory in Virginia Elec. & Power Company. In that case, the plaintiffs attempted to impose CWA liability for arsenic that leached from coal ash ponds and traveled through groundwater before reaching a WOTUS. While the court accepted the groundwater conduit theory, it did not impose CWA liability because it held that coal ash ponds were not point sources under the CWA. Virginia Elec. & Power Company, 903 F.3d at 413.
The Sixth Circuit was first to reject the groundwater conduit theory. In Kentucky Waterways Alliance and Tennessee Clean Water Network, plaintiffs attempted to impose CWA liability for pollution from coal ash ponds similar to those in Virginia Elec. & Power Company. In rejecting the theory, the court voiced its disagreement with the decisions from the Fourth Circuit and Ninth Circuit. The court utilized the plain language of the CWA along with help from the dictionary to hold that “for a point source to discharge into navigable waters, it must dump directly into those navigable waters–the phrase ‘into’ leaves no room for intermediary mediums to carry the pollutants.” Kentucky Waterways Alliance, 905 F.3d at 934 (emphasis in original).
The court also wrestled with other courts’ reliance on Justice Scalia’s observation in Rapanos that the CWA provision does not contain the word “directly.” The court explained the context for such observation was “to explain that pollutants which travel through multiple point sources before discharging into navigable waters are still covered by the CWA.” Id. at 935 (emphasis in original). Therefore, because groundwater is not a point source, which is generally undisputed, the fact that pollutants travel from a point source through a nonpoint source to reach a WOTUS defeats any potential CWA liability.
The Second Circuit recently heard oral argument in the appeal of 26 Crown Associates, LLC v. Greater New Haven Regional Water Pollution Control Authority, 2017 WL 2960506, at *1 (D. Conn. July 11, 2017). The case involved allegations of discharges from sewer drain pipes due to backflows, which released untreated sewage into the basements of the residential property. Some of these backflow waters would seep into the ground and ultimately into the groundwater. The plaintiffs attempted to use the groundwater conduit theory to impose CWA liability on the water treatment facility for discharges of untreated sewage that eventually reached navigable waters through the groundwater under the residential property.
The district court ultimately rejected the groundwater conduit theory as an overreach of CWA jurisdiction. Importantly, the district court recognized the potential consequences of such a theory by reasoning that “any non-point-source pollution (such as ordinary surface run-off from the land into navigable waters) could invariably be reformulated as point-source pollution by going up the causal chain to identify the initial point sources of the pollutants that eventually ended up through non-point sources to come to rest in navigable waters.” Id. at *8. The Article III standing issues associated with the case may dominate the Second Circuit’s opinion, which means there may be little, if any, discussion of the groundwater conduit theory.
SCOTUS Review and EPA Response
The circuit split on this issue foreshadows the possibility that the Supreme Court will ultimately weigh in on this issue. In the meantime, the EPA requested public comment on the issue in order to determine the reach of its jurisdiction under the CWA. No word from the EPA since the comment period closed on May 21, 2018, and any action based on such rulemaking would likely be challenged regardless.
The expansion of EPA’s jurisdiction based on the groundwater conduit theory has far-reaching implications for many industries, but a more subtle implication relates to evisceration of the agricultural exemptions under the CWA.
The CWA contains multiple exemptions from NPDES permit requirements related to agricultural operations. In fact, the definition of “point source” explicitly excludes “agricultural stormwater discharges and return flows from irrigated agriculture.” 33 U.S.C. § 1362(14). These exemptions are frequently challenged directly through EPA petitions and indirectly through novel liability theories, largely without success. But, the groundwater conduit theory may be a turning point that could effectively eliminate the agricultural exemptions under the CWA, which would have devastating consequences felt through all levels of the agricultural industry.
As the court reasoned in 26 Crown Associates, LLC, the groundwater conduit theory allows non-point-source pollution to be recast as point-source pollution by tracing the pollutant to its original source, which is likely a point-source. In most cases, the application of agricultural chemicals to a field is considered a point source. See Peconic Baykeeper, Inc. v. Suffolk County, 600 F.3d 180, 188 (2d Cir. 2010) (spraying apparatus is a point source); see also League of Wilderness Defenders v. Forsgren, 309 F.3d 1181, 1185 (9th Cir. 2002) (same). But generally CWA liability was triggered only if the applicator sprayed directly into or onto navigable waters. After all, once the agricultural chemicals are applied to the field, any associated runoff, even if to a navigable water, would not trigger NPDES permit requirements because agricultural runoff is exempt from the definition of a point source.
The groundwater conduit theory could present an end-around to the CWA’s agricultural exemptions. For example, the same agricultural chemical application, applied from a point source spraying apparatus, which would be exempt when the residual agricultural chemicals are contained in the surface runoff, could now be permit-required discharges when the residual agricultural chemicals seep into groundwater that is hydrologically connected to a navigable water. Therefore, the surface runoff into the navigable water is exempt from permit requirements under NPDES, but agricultural chemicals leaching into groundwater hydrologically connected to that very same navigable water would trigger NPDES permit requirements.
Not only does the groundwater conduit theory go against the federalist structure of the CWA by implicating a traditionally state-regulated medium, groundwater, it could also eviscerate the agricultural exemptions explicitly contained in the CWA. These consequences should militate against the general acceptance of the groundwater conduit theory, whose ultimate fate may rest with the Supreme Court.
This article was originally prepared by Luke A. Westerman (firstname.lastname@example.org) of Bryan Cave Leighton Paisner.