Supreme Court Steps Into a Fight Over State Permitting Power

A battle over states' authority to permit or deny oil and gas pipelines and other energy infrastructure took another twist on Wednesday, as the U.S. Supreme Court reinstated—for now at least—a Trump-era rule opposed by environmental advocates and some states.

How the sparring over the rule is settled will have important implications for the ability states have to either green light, or stop, projects that could harm rivers, lakes and wetlands within their borders. And it could factor into whether major oil, gas and coal projects get built in the years ahead. What's happening with the rules is also an example of the kind of regulatory seesawing that can occur when the party in control of the White House changes.

The Supreme Court action doesn't mean that the Environmental Protection Agency rule adopted during the Trump years will become permanent. In fact, it is poised to soon change again with another rewrite by the Biden administration pending. But critics of the high court's order said that it further muddies an already messy situation with the guidelines.

"It really creates a lot of confusion and chaos," said Moneen Nasmith, a senior attorney with Earthjustice, a group representing tribes and environmental organizations challenging the rule.

"It makes it even worse in some ways to know, well, it's all going to change all over again when EPA issues its new rule," she added.

Nasmith predicted even more litigation around the rule given the shifts with it, with industry testing the authority of states and tribes.

Regulatory Roller Coaster

The long-standing controversy hinges on what's known as Section 401 of the Clean Water Act, and rule making revisions that the EPA made related to it in 2020. Oil and gas industry groups and states with economies that depend on the sector, as well as coal mining, have supported the changes. They have argued that other states misused the power they had under the law to unfairly block major projects.

But opponents of the overhauled rule said that it undermined authority states held for decades over approvals for projects that, along with pipelines, include facilities like terminals used for shipping coal, dams and mines. The result, according to those in this camp, was a win for industry and greater permitting clout for the feds. 

The 2020 update to the rule sought to narrow how states could scrutinize projects under Section 401. As a Congressional Research Service report from last year explains, the rule limited states to looking at direct, or "point source", discharges into certain water, as opposed to considering other factors, like groundwater pollution, erosion and other damage to ecosystems. This also means climate change would be an out of bounds consideration.

In addition, EPA sought to tighten the time states could take to make decisions about whether to approve, or "certify," projects, clarifying that it is restricted to one year from the time a state receives a request that meets conditions outlined in the rule.

Under the Biden administration, EPA is working to revamp the rule yet again in a way that would likely reverse changes made under former President Trump. Wednesday's court order overturns decisions by a federal district court and the 9th U.S. Circuit Court of Appeals that would have put the old Section 401 rules back in place and tossed the 2020 changes as the agency carries out its rewrite process.

EPA spokesperson Timothy Carroll said by email Wednesday that the agency is reviewing the Supreme Court order and, in the meantime, "moving forward with rulemaking to restore state and Tribal authority to protect water resources that are essential to public health, ecosystems, and economic opportunity."

Carroll noted that EPA on March 25 sent a proposed revision of the rule to the White House Office of Management and Budget for review. When that review is finished, the draft rule will appear in the Federal Register, and a public comment period will begin.

Nasmith said it's expected EPA will issue the final version of the updated rule sometime next spring. "In the meantime, what the heck is a state or tribal regulator to do? It is really not clear," she said.

She said the Trump-era rules had caused headaches for state regulators by raising questions about issues such as what projects were covered by Section 401, what information states could or could not ask for from applicants seeking approvals, and what conditions states could impose on projects that they decided to certify.

"We saw examples of the Army Corps of Engineers just wholesale veto conditions that states had put into 401 certifications," she added. "Suddenly, you've got a new process in place where federal regulators get to second guess the states."

Supreme Court Wades in via 'Shadow Docket'

The 2020 rules drew legal challenges that year in three federal district courts, including one brought by 20 states and the District of Columbia. Eight states with Republican attorneys general and three industry groups intervened to defend the rule. 

After President Biden took office, EPA asked the courts to send the rule back to them, leaving the 2020 version in effect while the agency reevaluated it. Two courts did this. But one in California went further and entirely vacated the rule nationwide.

The states and industry groups backing the Trump-era rules asked the 9th Circuit to block that district court order, pending their appeal in the case. But the appeals court declined to do so. They next turned to the Supreme Court for emergency relief, asking them to scrap the district court ruling that vacated the rule while the appeal plays out.

On Wednesday, the high court granted that request. The order does nothing to weigh in on the merits of the 2020 rule, or of the Clean Water Act guidelines that preceded it. But it allows the 2020 rule to remain in effect as court proceedings continue.

Justice Elena Kagan, joined by Chief Justice John Roberts and Justices Stephen Breyer and Sonia Sotomayor, issued a dissent. Kagan wrote that the case didn't rise to the sort of "extraordinary circumstances" that called for the high court to step in and override the lower courts via what's often referred to as its "shadow docket," where the justices can weigh in on disputes without cases being fully briefed and argued.

"The applicants here have not met our standard because they have failed to substantiate their assertions of irreparable harm. The Court therefore has no warrant to grant emergency relief," Kagan wrote, noting that they, "have not identified a single project that a State has obstructed in the five months since the District Court’s decision."

"Still more, they have not cited a single project that the court’s ruling threatens, or is likely to threaten, in the time before the appellate process concludes," she added. "The application fails to show that proper implementation of the reinstated regulatory regime—which existed for 50 years before the vacated rule came into effect—is incapable of countering whatever state overreach may (but may not) occur."

But state officials and groups that opposed the lower courts' moves vacating the rule, applauded the ruling. And American Petroleum Institute senior vice president and general counsel Ryan Meyers said (without providing specific examples) that because the rule was vacated, permits had been delayed and denied, stalling projects.

The group, he added, was "pleased that the Supreme Court has decided to remand the Section 401 permitting rule until a new rule is adopted."

Louisiana Attorney General Jeff Landry, who is among the Republican officials defending the 2020 rule, responded by saying that he remains "committed to upholding the Trump pro-business, pro-job legacy of regulation reduction and reform."

"My office will continue fighting Biden's overreach, and his woke agenda," he added in a statement.

Environmental groups fighting the rule, knocked the court order. "The Supreme Court’s unexplained decision to reinstate the flawed Trump rule undermines local authority," Nathan Matthews, a staff attorney with the Sierra Club said in a statement. "Regardless of the ultimate outcome of this litigation, EPA must act quickly to finalize a substitute rule that restores states’ and Tribes’ authority.”

Examples of projects derailed by the Section 401 process in recent years include a coal export terminal along the Columbia River that Washington state rejected in 2017, and a $683 million, 124-mile natural gas pipeline that failed to win approval from New York state regulators during the 2014-16 timeframe.