Fourth and Sixth Circuit decisions give power plant operators additional defenses to citizen suits pending potential Supreme Court review of “groundwater conduit” theory.

Over the past month, two US Courts of Appeals have rejected Clean Water Act (CWA) citizen suits seeking to hold power companies liable for discharges of pollutants from coal ash disposal facilities “through” groundwater to waters of the US. Although the Fourth Circuit accepted that discharges through groundwater could be the basis for liability, it held that the relevant ash piles and impoundments were not “point sources” for purposes of the CWA. The Sixth Circuit likewise held that the ash disposal facilities at issue were not point sources, but — contrary to the Fourth Circuit — also held that discharges through groundwater were not actionable under the Act. Collectively, these recent decisions stand as a significant new obstacle to citizen suits against owner/operators of coal ash impoundments. At the same time, the decisions deepen a circuit split on the so-called “groundwater conduit” theory of CWA liability, helping to tee the issue up for possible Supreme Court resolution. If the Court does take this question up, the outcome will be critically important for many industry sectors, including electric power, oil and gas, manufacturing, and mining companies, among others. The CWA imposes strict liability, and citizen suits based on groundwater conduit claims can result in extremely costly remedies — including large civil penalties and injunctive relief.

What the Clean Water Act Says

The CWA prohibits the “discharge of any pollutant” to waters of the US unless authorized by a permit. Discharge of a pollutant is defined as “any addition of any pollutant to [waters of the US] from any point source.” Point source means “any discernible, confined and discrete conveyance,” including any pipe, ditch, discrete fissure, or container. The exclusion of groundwater from this CWA regulatory framework is well established. But can a party be held liable for discharging a pollutant from a point source to groundwater, which is then conducted through groundwater to a regulated surface water? That question has become one of the hottest topics in environmental law, and the focus of five different Courts of Appeals decisions in the past year.

Fourth Circuit Accepts Groundwater Conduit Theory, But Rejects Coal Ash Facility As Point Source

In April of this year, the Fourth Circuit decided Upstate Forever v. Kinder Morgan Energy Partners, LP, 887 F.3d 637 (4th Cir. 2018), a case involving a pipeline rupture that resulted in gasoline discharge that seeped through the ground and into a nearby waterway. The court held that a discharge of pollutants through groundwater to waters of the US could violate the CWA if there is a “direct hydrologic connection between ground water and navigable waters.” The defendant in the case has petitioned for Supreme Court review of the decision.

On September 12, 2018, the Fourth Circuit decided Sierra Club v. Virginia Electric Power Co. (VEPCO), a suit involving alleged seepage of contaminants from a coal ash landfill and settling ponds through groundwater to a nearby surface water. On the groundwater conduit issue, the court in VEPCO applied Upstate Forever without significant discussion. The court ruled in favor of the defendant, however, on the ground that the coal ash landfill and settling ponds are not point sources under the CWA. Although pollutants flowed diffusely through soil under the landfill and ponds, the court found that this “simple causal link” did not equate to “discernible, confined and discrete conveyances.” While a conveyance facilitates the measurement of pollutant concentration and rate of discharge, the court concluded “that task is virtually impossible” with the diffuse discharge from the ash facilities. Further, the landfill and settling ponds did not “function as conveyances,” but were “static recipients” of rain and groundwater. Although it rejected plaintiffs’ CWA claims, the court noted that groundwater contamination from coal ash facilities does not “slip[] through the regulatory cracks” because the coal combustion residual (CCR) regulations address this under the Resource Conservation and Recovery Act (RCRA). On September 25, 2018, plaintiffs petitioned the Fourth Circuit for panel rehearing or rehearing en banc. If the Fourth Circuit does not grant the rehearing petition, plaintiffs likely would petition for Supreme Court review.

Sixth Circuit Rejects Groundwater Conduit Theory

Less than two weeks after the VEPCO decision, on September 24, 2018, a divided panel of the Sixth Circuit issued decisions in two separate cases involving CWA citizen suits against owner/operators of coal ash impoundments. In Kentucky Waterways v. Kentucky Utilities Company and Tennessee Clean Water Network v. Tennessee Valley Authority (TVA), the two-judge majority held that suits alleging violation based on a discharge of pollutants through groundwater are precluded as a matter of law. In both cases, the majority relied on the plain text of the CWA to reject plaintiffs’ hydrological connection arguments. The majority found that the CWA contemplates discharge “from” a point source “into” navigable waters — not transport through an intermediary medium, such as the groundwater. In Kentucky Waterways, the majority expressed its disagreement with the two Courts of Appeals (the Fourth and Ninth Circuits) that have held otherwise. In Kentucky Waterways, the majority also relied on a CWA textual argument to reject plaintiffs’ theory that groundwater itself or the karst rock underneath the ash facilities constitute a point source under the CWA. The majority found that groundwater, including groundwater that seeps through karst, is diffuse, “seeps in all directions,” and is not confined, discrete, or discernible. Finally, the majority emphasized in both cases that allowing the suit to proceed under the CWA would disrupt the regulatory framework established by RCRA and the CCR rule, since RCRA exempts pollution subject to regulation under the CWA. Judge Clay dissented in each of the two cases, arguing vigorously that groundwater conduit claims should be decided on a case-by-case basis.

Ninth Circuit Accepts Groundwater Conduit Theory in Another Regulatory Context

The Fourth and Sixth Circuits are not alone in grappling with these issues. In Hawaii Wildlife Fund v. County of Maui, 886 F.3d 737 (9th Cir. 2018) — a case involving underground injection of treated wastewater — the Ninth Circuit held that a discharge through groundwater to the Pacific Ocean was actionable if it was “fairly traceable” to a point source. As in Upstate Forever, the petitioners in County of Maui have petitioned the Supreme Court for certiorari. Another case, involving groundwater conduit claims based on sewage system overflows, is pending in the Second Circuit.

Will EPA Weigh in With Guidance or Rulemaking?

In response to the growth in groundwater conduit litigation, the US Environmental Protection Agency (EPA) in February 2018 issued a notice requesting comment on whether it should clarify its views on this issue, and if so, how and through what mechanism (i.e., rulemaking, guidance, or policy statement). EPA has taken seemingly conflicting positions on this issue over the years. Most recently, in the County of Maui case, the EPA argued in an amicus brief to the Ninth Circuit that discharges through groundwater were actionable if there is a “direct hydrological connection” between the point source and a water of the US. EPA is now expected to reverse course and may be emboldened by the recent Sixth Circuit decisions discussed above. The timing and mechanism for any EPA rulemaking or guidance on this subject remain to be seen, however, and any such action would certainly be subject to legal challenge by environmental groups. In addition, whether EPA takes action or not, the Supreme Court may call upon the Administration to weigh in on pending cases raising these issues.

Next Steps

The Fourth and Sixth Circuit decisions give power plant operators strong additional defenses against pending and future citizen suits. This is a significant development, given the enormous costs that defendants face in these suits. The district court judge in the TVA case had ordered full excavation of 13.8 million cubic yards of coal ash and relocation to a lined facility, a remedy the defendant estimated could cost up to US$2 billion. Plaintiffs in these cases likely will petition the Supreme Court for certiorari, and the Court will have the opportunity to decide whether to review one or more of the decisions described above — and if so, which. Supreme Court review may or may not eliminate risks from citizen claims based on the groundwater conduit theory; industry stakeholders will be watching closely.