For 50 years, states have held veto power over pipelines, dams, and power plants that cross their waterways. Now EPA wants to take it back. The agency proposed a rule on January 14, 2026, that would prevent states and tribes from blocking federally permitted energy projects based on anything beyond direct water pollution—eliminating the broader environmental reviews that have stopped projects like the Constitution Pipeline in New York.
The fight is the third swing of a regulatory pendulum since 2020. Trump's first administration narrowed state authority; Biden restored it; now Trump's EPA is narrowing it again. The stakes extend beyond fossil fuels: data centers consuming gigawatts of power are waiting in permitting queues, and the administration has made their rapid deployment a national priority.
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Key Indicators
3
Rule Versions Since 2020
EPA has rewritten Section 401 regulations three times in six years.
$7.2B
Mountain Valley Pipeline Final Cost
A decade of permitting delays more than doubled the project's original budget.
47 GW
Data Center Capacity Under Construction
Over $550 billion in AI infrastructure awaits grid connections and permits.
1 Year
Statutory Certification Deadline
States must approve or deny within one year or lose certification rights.
People Involved
Lee Zeldin
EPA Administrator (Leading the agency's deregulatory agenda)
JK
Jess Kramer
EPA Assistant Administrator for Water (Overseeing Section 401 rulemaking)
Shelley Moore Capito
Chair, Senate Environment and Public Works Committee (Supporting proposed rule)
Organizations Involved
EP
EPA Office of Water
Federal Agency
Status: Drafting proposed rule
Implements Clean Water Act programs including Section 401 certification oversight.
NE
New York State Department of Environmental Conservation
State Agency
Status: Has blocked multiple pipeline projects using Section 401
State agency that has used Section 401 to deny certification to major pipelines including Constitution and Northern Access.
NA
Natural Resources Defense Council (NRDC)
Environmental Advocacy Organization
Status: Opposing proposed rule
Environmental group that has defended state Section 401 authority and expects to challenge the new rule.
Timeline
EPA Proposes Rule Limiting State Authority
Regulation
Agency proposed reversing Biden's 2023 rule, restricting state certification reviews to direct water quality impacts only.
Constitution Pipeline Withdraws Application
Project Cancellation
After nearly a decade of litigation, the pipeline company abandoned its permit application in New York.
Jess Kramer Confirmed for Water Office
Personnel
After seven-month wait, Senate confirmed Kramer to lead Office of Water and oversee Section 401 rulemaking.
EPA Issues Section 401 Clarifying Memo
Guidance
Agency signaled intent to narrow state authority by clarifying 'specific roles of states and authorized tribes.'
Lee Zeldin Confirmed as EPA Administrator
Personnel
Former NY congressman confirmed with mandate to pursue deregulation and permitting reform.
Bipartisan Permitting Reform Bill Introduced
Legislative
Senators Manchin and Barrasso introduced the Energy Permitting Reform Act, addressing Section 401 among other permitting issues.
Mountain Valley Pipeline Enters Service
Project Milestone
After a decade of delays and $7.2 billion in costs, the 303-mile pipeline began commercial operation.
Biden Section 401 Rule Published
Regulation
EPA finalized rule restoring broad state authority to evaluate 'holistic' impacts of projects on water quality.
Mountain Valley Pipeline Gets Congressional Fast-Track
Legislative
Fiscal Responsibility Act required expedited approval for MVP and blocked judicial review of its permits.
Supreme Court Reinstates Trump Rule Temporarily
Legal
In a 5-4 shadow docket decision, the Court stayed the district court order, allowing the 2020 rule to remain in effect.
District Court Vacates Trump Rule
Legal
Federal court struck down the 2020 rule, finding it arbitrarily limited state authority.
First Trump Section 401 Rule Finalized
Regulation
EPA narrowed state authority to consider only direct discharges, not broader project impacts.
Trump Issues Executive Order on Energy Infrastructure
Executive Action
Executive Order 13868 directed agencies to streamline regulations and reduce barriers to energy development.
New York Blocks Northern Access Pipeline
Permitting Decision
NY DEC denied certification to the $500 million, 99-mile pipeline citing threats to 192 streams and 17 acres of wetlands.
New York Blocks Constitution Pipeline
Permitting Decision
NY DEC denied Section 401 certification for the 124-mile natural gas pipeline, citing threats to 250 streams and 85 trout streams.
Supreme Court Affirms Broad State Authority
Legal
In PUD No. 1 of Jefferson County v. Washington, the Court ruled 7-2 that states can impose conditions on entire projects, not just individual discharges.
Clean Water Act Enacted with Section 401
Legislative
Congress passed the Federal Water Pollution Control Act Amendments, creating Section 401 requiring state certification for federally permitted projects that may discharge into waterways.
Scenarios
1
Rule Finalized, Immediately Challenged in Court
Discussed by: Legal analysts at Harvard Environmental Law Program, NRDC, National Wildlife Federation
EPA finalizes the rule in spring 2026 as planned, but environmental groups and state attorneys general file suit in the Ninth or D.C. Circuit. Given the Supreme Court's 2022 willingness to reinstate Trump's first rule via shadow docket, challengers face an uphill battle. However, a new district court could issue a preliminary injunction, creating months of uncertainty before appellate resolution. The Biden rule would remain in effect during litigation.
The Energy Permitting Reform Act or similar legislation passes in late 2026, codifying Section 401 limits into statute and rendering the EPA rule moot. This would create more durable constraints on state authority than a regulation alone, which future administrations could reverse. However, Senate passage requires 60 votes, and environmental opposition remains intense. Analysts suggest Q2 2026 at earliest for potential enactment.
3
States Develop New Blocking Mechanisms
Discussed by: State environmental agencies, legal scholars tracking cooperative federalism
Even if EPA narrows Section 401, states retain other tools: state-level environmental review (like New York's SEQRA), air quality permits, and land-use authority. Projects might clear federal 401 certification only to face new state-level obstacles. California's recent data center legislation discussions suggest states are already exploring alternative regulatory levers. The permitting bottleneck shifts rather than dissolves.
Courts find that EPA's narrow interpretation conflicts with Supreme Court precedent affirming broad state authority under Section 401. The 1994 PUD No. 1 decision explicitly allowed states to consider 'activities as a whole,' and the 2006 S.D. Warren decision emphasized preserving 'state authority to address the broad range of pollution.' A circuit court could rule the proposed rule contradicts these holdings.
Historical Context
Supreme Court Affirms State Water Authority (1994)
May 1994
What Happened
Washington State required the city of Tacoma to maintain minimum stream flows as a condition for relicensing a hydroelectric dam. The dam operator argued the state could only regulate actual discharges, not water levels. In PUD No. 1 of Jefferson County v. Washington Department of Ecology, the Supreme Court ruled 7-2 that states could impose conditions on entire 'activities,' not just point-source pollution.
Outcome
Short Term
Washington's flow requirements stood, and the dam had to release more water downstream.
Long Term
Established the legal foundation for states to consider broad environmental impacts when certifying federal permits—the very authority EPA now seeks to narrow.
Why It's Relevant Today
The proposed rule attempts to reverse 30 years of precedent. Legal challenges will likely cite this decision as evidence that Congress intended states to have expansive certification authority.
Keystone XL Pipeline Cancellation (2008-2021)
September 2008 - June 2021
What Happened
TransCanada proposed a 1,179-mile pipeline to carry Canadian tar sands oil to Gulf Coast refineries. The project faced 13 years of federal reviews, state-level opposition (particularly in Nebraska), and two presidential permit denials. President Obama rejected it in 2015; Trump approved it in 2017; Biden revoked the permit on his first day in office.
Outcome
Short Term
TransCanada abandoned the project in June 2021 after spending over $1 billion on pre-construction.
Long Term
Demonstrated that permitting uncertainty—not just outright denial—can kill major energy projects. The phrase 'pipeline politics' entered the lexicon.
Why It's Relevant Today
Keystone's fate illustrates the administration's core argument: that permitting delays alone can block projects regardless of final approval. However, Keystone's obstacles were primarily federal and presidential, not state Section 401 certifications.
Reagan-Era Clean Water Act Amendments (1987)
February 1987
What Happened
Congress overrode President Reagan's veto to pass the Water Quality Act of 1987, strengthening state authority over water pollution. The override vote was 401-26 in the House and 86-14 in the Senate—one of the most lopsided veto overrides in history.
Outcome
Short Term
Established nonpoint source pollution programs and expanded state grant funding.
Long Term
Cemented bipartisan consensus that states are essential partners in water quality protection—a principle now contested by the proposed rule.
Why It's Relevant Today
The massive bipartisan majority suggests that federalism in water policy was once a shared value across parties. The current rule represents a departure from that consensus, prioritizing energy development over state environmental authority.
