The U.S. District Court for the Southern District of Texas recently found that the U.S. Environmental Protection Agency (EPA) and the U.S. Army Corp of Engineers (Corps) violated the Administrative Procedure Act’s (APA) notice and comment provisions in the 2015 “waters of the U.S.” rulemaking. The court remanded the rulemaking to the EPA and the Corps so the agencies could resolve the notice and comment defects. The court also dismissed plaintiffs’ federal Clean Water Act (CWA), Commerce Clause, and Tenth Amendment claims as moot because they were premature. [Texas v. U.S. Environmental Protection Agency, 389 F.Supp.3d 497 (S.D. Tex. 2019).]

Background

In 1972, Congress passed the CWA to restore and maintain the chemical, physical, and biological integrity of the nation’s waters. The CWA made it unlawful to discharge any pollutant into “navigable waters” which were defined as “the waters of the United States.” The term “waters of the U.S.” defines the geographic scope of the CWA, however, the definition has been unclear. The Supreme Court has wrestled with providing a precise definition and the Circuits have disagreed as to how the phrase should be interpreted.

In 2014, the EPA and the Corps attempted to make the process of identifying “waters of the U.S.” less complicated. That year, the agencies came out with a Proposed Rule that defined the “waters of the U.S” in terms of three jurisdictional categories: categorically covered waters, categorically excluded waters, and waters that required a case-specific inquiry to determine their coverage. Waters “adjacent” to the categorically covered waters were included in CWA jurisdiction. In the Proposed Rule, the term “adjacent,” meant “bordering, contiguous or neighboring.” In turn, “neighboring” was defined using ecologic and hydrologic connectivity criteria.

In 2015, after the notice and comment period for the Proposed Rule had closed, the EPA and the Corps released a Final Connectivity Report without providing opportunity for further notice and comment. Later in 2015 the EPA and the Corps released the Final Rule. The Final Rule differed from the Proposed Rule in defining “adjacent” waters using distance-based criteria (e.g. feet and inches), instead of the ecologic and hydrologic criteria (e.g. examining water flows) from the Proposed Rule. The issuance of the Final Rule was the first time the EPA and the Corps gave notice that they intended to define adjacency by distance-based criteria.

Plaintiffs, on motions for summary judgment, asked the court to vacate the Final Rule because of APA, CWA, Commerce Clause, and Tenth Amendment violations. Plaintiffs asserted that the Final Rule violated the APA’s notice and comment requirements because: 1) the Final Rule’s definition of “adjacent” was not a logical outgrowth of the Proposed Rule’s definition, and 2) the agencies denied interested parties an opportunity to comment on the Final Connectivity Report.

The District Court’s Decision

The ‘Logical Outgrowth’ Inquiry

The court began by analyzing whether the Final Rule’s definition of “adjacent” was a logical outgrowth of the Proposed Rule’s definition. Under the APA, agencies must publish notice of the proposed rulemaking, provide the substance of the proposed rule, and allow interested persons an opportunity to participate in the rulemaking by submitting comments. The court pointed out that an agency can promulgate a final rule that differs from the proposed rule, but the final rule must be a “logical outgrowth” of the proposed rule so that affected parties will not have been deprived of notice and an opportunity to respond.

The court found that the Final Rule violated the APA’s notice and comment requirements because it deviated from the Proposed Rule in a way that the interested parties could not have reasonably anticipated. The court noted that the test of:

“. . .[w]hether a final rule is a ‘logical outgrowth’ of a proposed rule will turn on whether the interested parties ‘should have anticipated’ the final rule from the proposed rule.”

Because the Final Rule abandoned the ecologic and hydrologic criteria to define “adjacent” in favor of distance-based criteria, the court found it “different in kind and degree” such that it violated APA notice and comment requirements. The court rejected the agencies’ argument that the Proposed Rule’s definition necessarily implied elements of reasonable proximity and put the interested parties on notice. In order to fulfill the APA requirements, the agencies needed to inform the interested parties with greater specificity that the agencies were considering distance-based criteria to alter the CWA’s jurisdictional scope.

Opportunity to Comment on the Final Connectivity Report

The court then analyzed whether the Final Rule violated the APA by preventing interested parties from commenting on the studies that served as the technical basis for the rule. An agency commits a serious procedural error when it fails to reveal portions of its technical basis for a proposed rule in time to allow for meaningful commentary. Here, the court found that the EPA and the Corps failed to give interested parties an opportunity to refute the most critical factual material used to support the Final Rule.

Because the agencies decided not to reopen the Proposed Rule for comment after issuing the Final Connectivity Report, the court found that the agencies prejudiced the interested parties. The parties were unable to provide meaningful comments and mount a credible challenge to the Final Rule. The court noted that the prejudice was especially severe given the changes made to the Final Connectivity Report.

The Remand Order

The court found that remand to the EPA and the Corps was the appropriate remedy. It rejected plaintiffs’ argument that vacatur was appropriate because vacatur would be too disruptive when there is a serious possibility the agencies will resolve the notice and comment defects with the opportunity to do so. The court asserted that it takes “rare circumstances” to require any remedy other than remand for agency reconsideration. All other claims were dismissed as moot because they were premature.

Conclusion and Implications

This case clarifies that the APA notice and comment “logical outgrowth” test is not satisfied when agencies merely give interested parties generalized or vague references to the agencies’ regulatory intent regarding significant changes to a rule. Practically, this case stalls the EPA and the Corps implementation of the 2015 “waters of the U.S.” Final Rule in Texas, Louisiana, and Mississippi, pending further notice and comment. However, the EPA recently released a final rule repealing the 2015 Rule, indicating that no further notice or comment period is likely for the 2015 Rule.

(William Shepherd, Rebecca Andrews)