Regulation:

Former EPA general counsel Martella discusses agency's latest moves on water, air

How legally defensible is U.S. EPA's Waters of the United States proposed rule? As the agency readies its proposal for existing power plants, what are its options for addressing flexibility concerns from the states? During today's OnPoint, Roger Martella, a partner at Sidley Austin and the former general counsel at EPA, discusses EPA's recent action on water regulations and its forthcoming performance standards for existing sources.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Roger Martella, a partner at Sidley Austin and the former general counsel at EPA. Roger, thanks for coming back on the show.

Roger Martella: Thanks for having me back.

Monica Trauzzi: Roger, EPA recently released its clean water rule which seeks to clarify Clean Water Act protection for streams and wetlands, and the reaction was strong from either side. It's a divisive issue. Why is this rule so significant? Sort of give us the broader context of it.

Roger Martella: Sure. Well the definition of the waters of the United States is one of the most important concepts of all environmental law. I think this is probably the most important thing the Obama EPA will do outside the air context because I would think of it as a funnel. And basically all the jurisdiction that EPA and to some extent the Army Corps drives for water issues stem from how they define the scope of the waters of the United States.

So when we think of waters of the United States, we're normally thinking of rivers and the wetlands that are associated with them. EPA is trying to decide a legal definition. How much further can they go than that? Can they include ephemeral streams, intermittent streams, upland ditches, things that water doesn't even run through in terms of how they define the scope of that funnel and how broad their jurisdiction is?

Monica Trauzzi: So when's the last time we saw action on this?

Roger Martella: Well we've seen a little bit towards the beginning of the Obama administration in terms of the guidance. But really the most recent significant development is the 2006 Supreme Court decision called Rapanos. And I have to say this is an area where the Supreme Court has added more confusion than clarity to be fair to both the agency and other people looking at this.

The Rapanos decision I think is one of the most confusing Supreme Court decisions ever on environmental law issues, and the Bush administration interpreted it one way in 2008 with the guidance. The Obama administration came in and kind of said, "We probably can go a little bit broader than that." But this rulemaking, this proposal making is the first time we've seen them define key terms that really are the departure from where the Rapanos decision was going and where the Bush administration guidance was.

Monica Trauzzi: So what are the definitions that you think are interesting?

Roger Martella: I would say there's three takeaway definitions. If you boil down the big rule there's three things you need to know in terms of definitions. The first one is tributary. Everything hinges on what is a tributary because the reach extends from that. Under the ... decision and the Rapanos decision, Justice Scalia said a tributary is something that is relatively permanent, something that water pretty consistently goes through. EPA has changed that definition to say that a tributary is something that has two banks and a bed and a high water mark, which means areas that water doesn't consistently flow through. So they start with a broadened definition of tributary.

The second thing is they build onto that a definition of neighboring so it's not just the tributaries, the things that neighbor tributaries. And here they define it in two ways. One is to include floodplains, and we can think of floodplains, think of the Mississippi River when it flooded. EPA says anything that is sometimes inundated with high or medium waters, so a floodplain is what we think of, so we expand tributaries to include floodplains. And then the second thing they say is also neighboring our riparian areas.

So the third definition I think is really critical here is what are riparian areas? And to me this may end up being the most controversial and confusing part of this. EPA defines riparian areas as of any area that directly influences the ecosystem, the animal or the plant habitat of those tributaries. And so it's very unclear. Where do you draw that line? I think for those people who are very concerned about this, they say that's just entirely expansive and amorphous. A riparian area could almost be anything under that definition.

Monica Trauzzi: OK, so Senator Murkowski says EPA is seeking to dramatically expand its reach under the Clean Water Act, and this could result in serious collateral damage to the economy. What do you see as the economic impacts of what they've done and what the impacts are on energy producers?

Roger Martella: Sure, sure, I think the groups we've heard the most loudly from are the agricultural groups and the land developers, homebuilders and other people who are involved in land development. But the energy groups I think are the ones who could stand to be impacted significantly as well, and ironically this comes at a time where the air regulations are saying we want more creative energy, more gas, more renewable energy.

But at the same time EPA's regulations are going to fall square at exactly where those activities are supposed to take place. Hydraulic fracturing for example, renewable wind and solar facilities in the West all happen on these lands that are controversial and kind of at stake in this ... so I think we're going to have this tension here between air policies on the one hand and water policies clashing a bit.

Monica Trauzzi: And how legally defensible does this seem to you?

Roger Martella: I would call this an aggressive interpretation. If we go back to the Rapanos decision, which again we're starting with a decision that is really among the most confusing we've seen from the Supreme Court. There are two things to look at. One was a four-member plurality decision. I think EPA is basically ignoring that. They're saying, "We're not even going to pay attention to that." That would have limited them to this notion of relative permanence in terms of streams. What they're hinging on is Justice Kenney wrote a concurring decision where he said, "EPA can regulate waters that have a significant nexus back to traditional water."

So EPA is hinging everything on the significant nexus test. Whether they say that or not, that's what they seem to be doing. But I think the challenge they're going to have is even Justice Kennedy in that Rapanos decision expressed skepticism for the position that a tributary can be defined simply by a bed, a bank and a high water mark. So I do think this is legally an aggressive interpretation. My guess is that they're probably knowing when they get another shot at the Supreme Court, perhaps they're going to take a broader look at it than they did in Rapanos.

Monica Trauzzi: Let's talk about EPA's power plant regulations. The agency has sent its existing source rule to the Office of Management and Budget for review. Administrator McCarthy has said the rule will be flexible. Just how flexible can they be in terms of the authority that's given to states?

Roger Martella: So in terms of what we're hearing they do seem to want to give states primacy and flexibility. It sounds like you know anything could change between now and June 2nd when it will come out. But it sounds like what they're saying is they really want to give states the first opportunity to choose from a menu of options on how to achieve significant greenhouse gas reduction. So what we're anticipating on seeing on June 2nd won't even be a rule. It will be something that looks more like a guidance. We'll have a menu of options for the states to pick from and the states will have a year to comment. Not a year to comment but a year to work with EPA in terms of what that final menu of options will look like.

And so I do think EPA is being sincere in terms of them saying, "We want the states to take the lead." But the biggest unanswered question we don't know is to what extent are they going to require greenhouse gas reductions? How are they going to compare California and Texas and set a benchmark to make sure they're being relatively as stringent as each other? So while they're being flexible in offering a menu of options, we don't know the details yet in terms of how they plan to implement that.

Monica Trauzzi: McCarthy has said that the rule is legally solid. What does that mean? Is that the same as legally defensible?

Roger Martella: I would think that she would feel strongly that whatever they're going to do is going to be very legally defensible. We've talked about the 111(b) rule in terms of new sources and we've raised concerns on that that they conclude the carbon capture and sequestration's adequately demonstrated. That's been the subject of several Hill hearings, and I think there are some real concerns that that conclusion is legally defensible.

I think on the existing source rule, if EPA tends to go with the notion with giving states lots of flexibility and sticking more to a guidance than a rule, they may have stronger arguments regarding defensibility, but without knowing the details we can't judge that yet.

Monica Trauzzi: So taking a bird's eye view of what's happening at EPA right now in terms of the pace and significance of the regulations we see coming out of the agency, purely from a logistical standpoint can they meet all these markers and can they sort of handle the workload that comes along with all of these aggressive regulations? Especially considering the buyouts that we saw offered recently.

Roger Martella: Sure, sure, and we have 2 ½ years left in the administration and someone might say, "Well, that's a lot of time. We're not even halfway through the second term." But from a regulatory perspective, that's what we call the home stretch that the clock is really ticking, and at this point they really have to have their agenda out there because in the best of circumstances they have to go through proposed rules, comment final rules, two years is already very short. So if something is not out there in the next six months, they're going to be running out of time to do it.

With what they already have on the plate and the resources which seem to be not growing but getting more stringent in the agency, I think they're going to have to put all their energy into these couple big-ticket issues -- the climate change issues, ozone acts and waters of the United States. That's going to probably be those three topics, the priority to put a full force effort to getting done for the end of the administration.

Monica Trauzzi: All right, we'll end it there. Thank you for coming on the show again.

Roger Martella: Thanks, Monica.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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