According to Fitch Ratings, the potential repeal of, or change to, the Waters of the United States rule (WOTUS) would be largely neutral for Fitch-rated public utilities in the near- to mid-term as they are already subject to water regulations outlined by the Clean Water Act (CWA) and their capital improvement programs typically incorporate costs to meet federal water quality standards.
However, WOTUS was created in part to mitigate potential long-term water pollution risks by expanding the scope of water bodies that could be subject to CWA regulations, many of which are upstream from public fresh water sources. Thus, utilities could see eventual and costly pollution abatement and treatment programs should upstream pollution compromise these resources.
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President Trump called for the U.S. Environmental Protection Agency (EPA) to review WOTUS. The president’s order does not repeal the rule, but effectively stops it in its current form, as the administration would not support it in the courts. The Sixth U.S. Circuit Court of Appeals stayed it immediately after it was implemented, and therefore, the rule has been in limbo since its creation in June 2015 by the EPA and the U.S. Army Corps of Engineers.
The rule was formed in order to broaden federal oversight of bodies of water subject to CWA regulation whose treatment could have an impact on adjacent bodies of water. The 43-year-old CWA covers navigable waters such as the Mississippi River and Lake Erie, but is vague on how far upstream protections must go. Environmentalists and the EPA argued that the contamination of water bodies, no matter how small, upstream from larger water bodies could have a direct and adverse impact on downstream drinking water sources. WOTUS established whether antipollution laws are triggered if, for example, a farmer blocks a stream to make a pond for livestock (whose waste could pollute the pond), a developer fills in part of a wetland on which to build a house, or an oil pipeline has to cross a creek and/or has a spill.
Supporters argued WOTUS was integral to secure safe drinking water, among other environmental concerns. Opponents, including farmers, developers and owners of golf courses that tend to have man-made retention or collection ponds on site, strictly in place for aesthetic or functional business purposes, said it went too far, and the administrative costs of CWA compliance would hurt their bottom line.
