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In a major victory for NAHB, builders, developers and property owners, the Supreme Court on May 25 issued a unanimous decision in Sackett v. Environmental Protection Agency that will force the Biden administration to overhaul its “waters of the U.S.” (WOTUS) rule and ultimately provide builders and developers more certainty in the federal permitting process.

“The decision represents a victory against federal overreach and a win for common-sense regulations and housing affordability,” said NAHB Chairman Alicia Huey.

The Sackett case revolved around the government regulation of a wetland near a roadside ditch. The government believed that it had Clean Water Act (CWA) authority over the wetland because the government claimed that this wetland, in combination with other nearby wetlands, had a “significant nexus” to Priest Lake, Idaho.

The significant nexus test that establishes federal jurisdiction over minor waterbodies such as isolated wetlands or human-made ditches is a critical part of the Biden administration WOTUS rule.

The Supreme Court essentially rejected the significant nexus test and the EPA’s reasoning. Five justices joined the opinion of the court, which began its analysis by explaining that the CWA’s use of the term “waters” encompasses only relatively permanent, standing or continuously flowing bodies of water that form geographic features that are ordinarily described as streams, oceans, rivers and lakes.

With respect to wetlands, the Supreme Court explained that in order for a wetland to be regulated under the Clean Water Act, it must have “a continuous surface connection to bodies that are ‘waters of the United States’ in their own right, so that there is no clear demarcation between ‘waters’ and wetlands.” As a practical matter, the court found only wetlands that are indistinguishable from waters of the United States are covered by the CWA.

NAHB had filed a friend-of-the-court brief in the Sackett case, arguing that it does not make sense for isolated wetlands, isolated ponds or human-made ditches on private property to be subject to federal jurisdiction.

Although the Sackett case did not directly address the Biden administration’s newest rule defining “waters of the United States,” this decision has an enormous impact on that rule. The current Biden WOTUS rule is based on the significant nexus analysis the Supreme Court has clearly rejected. Therefore, the administration will have to make extensive changes to the rule.

It should also be noted that the Biden WOTUS rule is now in effect in only 23 states because three U.S. district courts (North Dakota, Kentucky and Texas) have decided that the rule cannot be implemented in 27 states as a result of legal challenges. NAHB was involved in the Texas and North Dakota cases, which covered 26 of the 27 states affected.

As a result, the WOTUS rule has reverted to a pre-2015 regulation in those 27 states. But the pre-2015 rule also relies on the significant nexus test.

What this means going forward is that EPA and the U.S. Army Corps of Engineers will most likely need to go back to the drawing board to craft a revised regulation applicable to all 50 states. This process is expected to take several months.

As the government moves to revamp its WOTUS rule, NAHB will be urging the federal agencies to implement a durable and practical definition of WOTUS that will truly protect our nation’s water resources without infringing on states’ authority and triggering additional expensive, time-consuming permitting and compliance requirements.