In my case, I am the local authority where I am building. I'm building in the middle of 50 acres in the country and I'm on my own private well. I checked with the county health department (they generally do the septic system inspections) about my situation and they said since I have >10 acres and meet the minimum setback requirements from the property line, there are no county or state permits or inspections required.

I would think that in the western US where water is limited, that grey water recycling would be encouraged.

In Arizona where I think lbear is planning to build, grey water systems are not only allowed by state law, but also encouraged:

http://www.azdeq.gov/environ/water/permits/download/graybro.pdf

Arkie - thanks for posting the link.
The 13 BMP's sum it up quite nicely.

The reasons are two fold.
First, the grey water stream you mention is not without pathogens, especially if there is youngsters in the house.
Secondly, by removing the grey from the black, the black becomes much hard to digest properly.