U.S. Supreme Court Sides with Landowners in Key Clean Water Act Case

Army Corps of Engineers v. Hawkes Co., No. 15-290, 578 U.S. ____ (May 31, 2016) (read the full opinion here)

 

The United States Supreme Court unanimously ruled today that an approved jurisdictional determination from the U.S. Army Corps of Engineers finding that property contains “waters of the United States” is “final agency action” subject to judicial review. This is a big victory for landowners throughout the country.

Background

As we’ve written previously, the landowners in this case purchased wetlands in northern Minnesota, seeking to mine them for peat moss used to improve golf courses. The landowners initially sought a Section 404 permit from the Corps.[i] The Corps, however, strongly discouraged the landowners from pursuing the permit or the project, telling them that the process would be very costly, would require much additional study and data, and would likely not yield a permit in the end. The Corps eventually issued an approved jurisdictional determination (JD),[ii] stating that the landowners’ wetland was a “water of the United States” because of its “significant nexus” to the Red River, which was 120 miles away. The landowners sought judicial review of the JD, but the district court ruled that the JD was not “final agency action” subject to review. The Corps had argued, and the district court agreed, that the landowners had continuing rights. They could move forward with their permit application or launch their dredge and fill operation and see if the Corps took administrative action against them. If the permit was denied or if the agency took enforcement action, the landowners could then challenge what would only then be the “final agency action.”

Supreme Court Opinion

In April of 2015, the United States Court of Appeals for the Eighth Circuit reversed the district court’s judgment, ruling that an approved JD was “final agency action” subject to judicial review. And today, May 31, 2016, the United States Supreme Court unanimously agreed, affirming the Eighth Circuit’s opinion.[iii]

Justice Roberts wrote the opinion for the Court. It was joined by all but Justice Ginsburg, who also concurred in the judgment, but wrote a separate concurring opinion. Justice Kennedy, joined by Justices Thomas and Alito, joined the Court’s opinion in full, but also wrote a separate concurring opinion, as did Justice Kagan.

The Court’s opinion was straightforward. The Court ruled that the JD was (1) final agency action and that (2) there were not adequate alternatives for challenging it in court. These are the prerequisites for judicial review of agency action set forth in 5 U.S.C. § 704 of the Administrative Procedures Act (APA).

To first determine that the JD was final agency action, the Court analyzed the Bennett factors,[iv] finding (1) that the JD marked the consummation of the agency’s decision-making process and (2) that the action was one from which legal consequences will flow.

In making the first determination, Justice Roberts relied on several factors. A JD is only issued after extensive fact-finding by the Corps, it is valid for a period of five years, it will not typically be revisited if the permitting process moves forward, and the agency itself in 33 CFR § 320.1(a)(6) calls an approved JD “final agency action.”

Roberts also noted that under a longstanding memorandum of agreement[v] between the Corps and the EPA, the JD will be “binding on the Government and represent the Government’s position in any subsequent federal action or litigation concerning that final determination.” Thus, a negative JD (finding that a tract of land does not contain jurisdictional waters) represents a five-year safe harbor for landowners wishing to dredge or fill on that tract. Conversely, an affirmative JD deprives landowners of a five-year safe harbor and warns them that if they discharge pollutants into their property without the proper permits, they do so at the risk of significant criminal and civil penalties.

Justice Roberts then found that there were no adequate alternatives to APA review in court. Neither of the Corps’ two suggested alternatives was sufficient in the Court’s opinion: (1) discharge fill without a permit and risk an enforcement action (then argue that a permit was not required) or (2) apply for a permit and seek judicial review if dissatisfied with the results.

The Court noted the risk of serious criminal and/or civil penalties that could flow from the Corps’ posited alternatives. Civil penalties, alone, could rise to $37,500 per day of continuing violation and the permitting process was “arduous, expensive, and long.” Earlier in the opinion, Justice Roberts referenced a study finding that the average applicant for a permit of the type sought by the landowners in this case spent 788 days and $271,596 completing the process, “not counting the costs of mitigation and design changes.” The landowners estimated that the hydrogeologic assessment and functional/resource assessments alone would cost more than $100,000.

Justice Roberts easily discounted the Corps’ final argument: If the Corps had never adopted its practice of issuing standalone jurisdictional determinations, upon request, judicial review at the end of the permitting process would be the only judicial review available to a landowner. “Such a ‘count your blessings’ argument is not an adequate rejoinder to the assertion of a right to judicial review under the APA,” Roberts quipped. APA offers a “presumption of reviewability for all final agency action.”

In his separate concurrence, Justice Kennedy (joined by Alito and Thomas) wrote to stress that the “reach and systemic consequences of the Clean Water Act remain a cause for concern.” The Justices expressed concern over the Government’s representations in this case that the memorandum of agreement between the EPA and the Corps was not binding and could be revoked in the Agency’s unfettered discretion. Justice Kennedy stated that the Act, “especially without the JD procedure were the Government permitted to foreclose it, continues to raise troubling questions regarding the Government’s power to cast doubt on the full use and enjoyment of private property throughout the Nation.”

Conclusion

That statement foreshadows those Justices’ likely thoughts on the Clean Water Rule, which is currently stayed nationwide pending litigation challenging the Agencies’ rulemaking as arbitrary, capricious, and contrary to the law. The United States Court of Appeals for the Sixth Circuit will make the first determination of the validity of the Rule (and the U.S. Supreme Court may ultimately hear the case). Briefing will begin soon.[vi]

But, after today, landowners are assured that they do have the right to challenge a final JD without having to obtain a permit decision first, whether or not the agencies' Clean Water Rule ultimately remains on the books.

 

 

[i] Under the Clean Water Act, a landowner cannot discharge dredged or fill material into “waters of the United States” without obtaining a permit from the Corps. These Section 404 permits are costly and time consuming. In fact, Justice Scalia once stated that the average applicant for an individual Corps permit “spends 788 days and $271,596 in completing the process.”[ii] The permit, however, is necessary, to avoid substantial monetary penalties and perhaps jail sentences for dredging and filling a known “waters of the United States.” If a landowner knowingly conducts prohibited activity on wetlands meeting the arguably ambiguous definition of a “waters of the United States,” he could face penalties in excess of $75,000 per day. These fines and penalties are possible even if the landowner did not believe the wetland to be jurisdictional. At the very least, the Corps will issue a compliance order. The landowner could also give up his fight and cede his wetlands to a reserve program.

[ii] Corps regulations allow a landowner to request a JD from the agency. Once such a determination is requested, the Corps offers its opinion as to whether a wetland (or other waterbody) is a “waters of the United States.” A JD is not required before a landowner can discharge dredged or fill material into a wetland. And, according to the Corps, if a landowner is later found to have violated the CWA, the prior existence of a JD does not expose the landowner to additional penalties.

[iii] In contrast to the Eighth Circuit, two other Courts of Appeals earlier ruled that JDs were not subject to judicial review. Belle Co., LLC v. U.S. Army Corps of Eng'rs, 761 F.3d 383 (5th Cir.2014), cert. denied, 83 U.S.L.W. 3291 (U.S. Mar. 23, 2015); Fairbanks N. Star Borough v. U.S. Army Corps of Eng'rs, 543 F.3d 586 (9th Cir.2008).

[iv] Bennett v. Spear, 520 U.S. 154 (1997).

[v] In her short concurring opinion, Justice Ginsburg (while concurring in the judgment) expressed her disagreement with relying on this memorandum of agreement. She pointed out that the Government did not share the Court’s reading of the memorandum, stating in oral argument that it was not current governmental policy that JDs had a binding effect in litigation. On the other hand, Justice Kagan, in her short concurrence, wrote separately to express that for her, the memorandum of agreement between the Corps and the EPA was central to the disposition of the case.

[vi] Clean Water Rule: Definition of “Waters of the United States,” 80 Fed. Reg. 37054, 37055-37056.

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