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May 31 — Developers and landowners can ask a court to review a federal finding that a wetland or waterway on their property falls under the Clean Water Act, under a unanimous U.S. Supreme Court ruling issued May 31 ( U.S. Army Corps of Eng'rs v. Hawkes Co. Inc. , U.S., 15-00290, 5/31/16 ).
In a 8-0 decision, the Supreme Court held that Clean Water Act jurisdictional determinations issued by the U.S. Army Corps of Engineers, often referred to as JDs, are final agency actions subject to judicial review under the Administrative Procedure Act.
Chief Justice John Roberts wrote the opinion.
Minnesota peat producer Hawkes Co. Inc. challenged a 2012 corps determination that wetlands on its property can be regulated under the Clean Water Act, which would require the company to obtain a Section 404 permit prior to extracting peat from the property.
The principal question presented by the corps at the Supreme Court's March 30 oral arguments was whether an approved jurisdictional determination is a final agency action that can be reviewed by a court. The U.S. Court of Appeals for the Eighth Circuit held in Hawkes that such a determination is final agency action; the Fifth and Ninth circuits ruled it is not ( Hawkes Co. v. U.S. Army Corps of Eng'rs, 782 F.3d 994, 80 ERC 1265, 2015 BL 101976 (8th Cir. 2015); 70 DEN A-1, 4/13/15) 70 DEN A-1, 4/13/15).
Although the Clean Water Act doesn't require jurisdictional determinations, the approval of one indicates that the corps will require the landowner to obtain a Section 404 dredge-and-fill permit for activities that may affect any wetlands or waters on the property, as was the case with Hawkes Co.
Roberts said he disagreed with the corps' assertion that a jurisdictional determination wasn't a final agency action. Under the Administrative Procedure Act, a final agency action is reviewable only if there are no adequate alternatives.
The corps had argued that “adequate alternatives” are available for challenging JDs in court, namely, a property owner can discharge without a permit or obtain a permit and then challenge it in court.
Roberts noted the difficulty property owners face in determining whether a particular piece of property contains federally protected waters, “but there are important consequences if it does.”
“The clean water act imposes substantial criminal and civil penalties for discharging any pollutant into waters covered by the Act without a permit from the corps,” Roberts said.
Roberts relied on the two-pronged test articulated by the Supreme Court in 1987 to determine whether an approved jurisdictional determination represents the consummation of an agency’s decision making process and that rights and obligations stem from that decision ( Bennet v. Spear, 520 U.S. 154, 44 ERC 1161 (1997)).
The corps issues an approved jurisdictional determination after extensive fact finding about a given property's physical and hydrological characteristics, he wrote.
Pointing to the corps' brief, Roberts said the government never disputed that an approved determination represented the consummation of the agency’s decision making process. Moreover, he noted that a finding of a jurisdictional water and wetland can have “direct and substantial legal consequences,” meaning a denial of a safe harbor from enforcement.
The opinion also pointed to corps arguments emphasizing that “seeking review in an enforcement action or at the end of the permitting process would be the only available avenues for obtaining review `[if] the corps had never adopted its practice of issuing standalone jurisdictional determinations upon request.' ”
“True enough,” Roberts wrote. “But such a `count your blessings' argument is not an adequate rejoinder to the assertion of a right to judicial review under the APA.”
Justices Anthony Kennedy, Samuel Alito and Clarence Thomas issued their own concurring opinion in which they expressed their concern about “the reach and systemic consequences of the Clean Water Act.”
The three justices said they were concerned that the memorandum of understanding that spells out the legally binding effect of the jurisdictional determination could be revoked or amended at the agencies' “unfettered discretion.”
“If that were correct, the Act's ominous reach would again be unchecked by the limited relief the Court allows today,” the justices wrote.
However, the Supreme Court justices stopped short of clarifying what would happen if the memo were amended to remove the legally binding status of the jurisdictional determinations, according to William Jay, co-chair of the U.S. Supreme Court practice in the Washington D.C. office of Goodwin Procter LLP.
Reed Hopper, principal attorney for the Pacific Legal Foundation that represented the Minnesota peat farming company, said the Supreme Court's ruling finally puts an end to the more than four decades of corps authority to “federalize” any parcel of land with standing or flowing water without any accountability.
“It is hard to conceive a regulatory regime with greater potential for abuse,” Hopper wrote in a blog on the foundation's website.
Hopper and other attorneys expected the Supreme Court to rule favorably in Hawkes based on its unanimous 2012 ruling in Sackett v. EPA (132 S.Ct. 1367, 182 L. Ed. 2d 367, 73 ERC 2121 (U.S. 2012)).
In Sackett, which the Pacific Legal Foundation also successfully argued, the court also held unanimously that an administrative compliance order issued by the EPA prior to its filing of a civil enforcement action is a final agency action subject to judicial review. In that case as well as in Hawkes, the justices expressed their concern over the ability of landowners to have legal redress.
Also lauding the decision were home builders, contractors and manufacturing groups that have often been at odds with the corps' jurisdictional findings.
Ed Brady, chairman of the National Association of Home Builders, said the organization's members have been championing the cause for making jurisdictional determinations to be reviewable in courts.
“Previously, the only way to contest such a ruling in court was to obtain a federal wetlands permit, which is costly and time-consuming, or proceed without a permit and risk ruinous Clean Water Act penalties,” Brady said in a May 31 statement. “Today's ruling will allow property owners to be able to dispute a jurisdictional determination in court without first seeking a permit that they believe is not required in the first place.”
Timothy Bishop, a partner in the Chicago office of Mayer Brown LLP, who filed an amicus brief on behalf of a coalition led by the American Farm Bureau Federation to support Hawkes, also lauded the ruling.
“The Hawkes ruling is a powerful rebuke to the government’s position that a waters-of-the-United-States jurisdictional determination is `no big deal' for the landowner,” he said.
As Justices Kennedy, Thomas, and Alito point out in concurrence, Bishop said, “the option of an immediate judicial challenge is all the more important because the scope of the Clean Water Act, as EPA and the Corps have interpreted it, is so astoundingly vague.”
He pointed to Kennedy's concurring opinion.
“The Act’s reach is ‘ominous' indeed, as Justice Kennedy says, when the consequences of being wrong about whether your land includes covered waters are massive penalties and a potential jail sentence,” Bishop said.
Some uncertainty remains, Jay, of Goodwin Procter LLP, told Bloomberg BNA in a May 31 telephone interview.
“One thing the decision left uncertain was whether the corps and the EPA could restructure their memorandum of understanding to cut back on the right of judicial review that the Supreme Court recognized today,” he said.
However, Jay said he expects cases to be brought before courts that question whether the corps correctly claimed jurisdiction.
Virginia Albrecht, special counsel with the Washington D.C. office of Hunton & Williams LLP, told Bloomberg BNA the opinion, like Sackett, was unanimous irrespective of “whether you are a Republican or a Democrat, a conservative or a liberal.”
“Regardless they all agree that a key component of the American compact is that citizens must be able to have a means to hold the government accountable for its actions,” said Albrecht who filed an amicus brief in Hawkes on behalf of the Utility Water Act Group and the Foundation for Environmental and Economic Progress.
The other attorneys interviewed by Bloomberg BNA agreed that the Supreme Court's unanimous ruling displays the concern justices have over the government's authority to claim federal jurisdiction over private property.
Jay said the ruling is “relevant” to the myriad challenges facing the Clean Water Rule that all attorneys expect will reach the Supreme Court eventually.
“The agencies' assertion of power over particular alleged bodies of water is squarely at issue in the challenge to the rulemaking,” Jay told Bloomberg BNA in a May 31 telephone interview. “Now that individual property owners can challenge individual jurisdictional determinations, the scope of agencies' power may also be at issue in many more individual cases around the country.”
John Rumpler, an attorney with the nonprofit Environment America, was of the view that the Supreme Court's decision underscores the need for the Clean Water Rule because of the confusion surrounding the jurisdictional status of wetlands, which was at the heart of the whole dispute.
“The Court’s decision today underscores the need for the Clean Water Rule. By clarifying which wetlands are automatically protected under the Clean Water Act, the Clean Water Rule avoids costly lawsuits for both landowners and the public,” Rumpler said in a May 31 statement.
Richard Stoll, a partner in the Washington and Milwaukee offices of Foley and Lardner LLP, alluded to the concurring opinion by Kennedy, Alito and Thomas, saying that a few of the justices expressed serious concerns about “the unbounded reach of the Act and whether that makes it unconstitutional.”
“This concern came out in Sackett, and it came out in the Hawkes oral argument with Justice Kennedy explicitly mentioning the constitutional issue,” Stoll said.
Hopper, of the Pacific Legal Foundation, found the Kennedy-Alito-Thomas concurrence opinion to be ironic, especially since Kennedy's “significant nexus” test is what the government used to claim jurisdiction over the wetlands in Minnesota by claiming linkage with the Red River that is located 150 miles away.
“The Corps and EPA have relied on that test to justify their grossly overbroad redefinition of ‘waters of the United States' that is now being challenged nationwide. It is clear that Justices Kennedy, Alito and Thomas believe the Clean Water Act is pushing the limits on constitutional authority and perhaps the courts should reexamine the statute and its implementing regulations,” Hopper told Bloomberg BNA in a May 31 e-mail.
On Capitol Hill, Rep. Bob Gibbs (R-Ohio) lauded the Supreme Court's “common-sense” decision in upholding the right of property owners to challenge government decisions.
“Americans have been forced to spend tens of thousands of dollars or more in permit applications before they can challenge the Army Corps in court on a Waters of the United States determination,” Gibbs said in a May 31 statement.
Sen. John Barrasso (R-Wyo.), a critic of the Obama administration, said the government's “regulatory overreach” was delivered “another blow.”
“The Obama administration may think it’s above the law, but the Supreme Court confirmed today it certainly is not,” Barrasso said in a May 31 statement. Barrasso said that families and small businesses across the country shouldn’t have to fight Washington just to use their own property.
He called on the Supreme Court to take the next step in undoing the Clean Water Rule “before more Americans are strangled by this unprecedented Washington water grab.”
The Clean Water Rule (RIN:2040-AF30), which the EPA and the corps jointly promulgated in June 2015, is mired in more than two dozen challenges in federal appeals and district courts. The rule attempts to clarify the scope of Clean Water Act jurisdiction over waters and wetlands irrespective of whether they are found on public or private property.
Neither the corps nor the Environmental Protection Agency had an immediate comment on the ruling's impact to their operations.
“The U.S. Army Corps of Engineers is reviewing today's Supreme Court decision and its potential impacts, and we will discuss the decision with the Department of the Army and our federal partners,” Doug Garman, corps spokesman, told Bloomberg BNA in a May 31 e-mail.
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