Last week, Chief Justice Roberts wrote a unanimous opinion in the case United States Army Corps of Engineers v. Hawkes, holding that landowners do have the right to challenge jurisdictional determinations by the EPA that water on their lands is governed by the Clean Water Act.  This decision is extremely important for landowners across the country.  [Read full opinion here.]

Background

The full factual background of this case was set forth in this prior blog post.  Essentially, the Corps of Engineers (COE) determined that waters on land owned by Hawkes met the definition of “waters of the United States” (WOTUS) and, therefore, was governed by the Clean Water Act.  The COE issued an “approved jurisdictional determination” finding that 150 of the Hawkes’ 530 acres were governed by the Clean Water Act.  An approved jurisdictional determination is a definitive finding by the EPA or COE on whether a property contains WOTUS and is binding on both the agencies and the parties for 5 years.  In this particular case, the COE based its finding on the fact that the property contained wetlands wetlands having a “significant nexus” to the Red River, which is 120 miles away from the property.

In light of the approved jurisdictional determination, in order for the Hawkes to mine peat on the property as they had planned, they would be required to seek a federal Clean Water Act permit under Section 404 or face fines for violating the Act.

Hawkes filed suit claiming that the approved jurisdictional determination was incorrect in concluding that their property contained WOTUS.  The COE sought to dismiss the lawsuit, arguing that their jurisdictional determination was not a “final agency action” that allowed judicial review.  The trial court agreed with the COE and dismissed the suit.  The United States Court of Appeals for the Eighth Circuit reversed, finding that the jurisdictional determination was a final agency action for which judicial review was allowed.  The United States Supreme Court took the case and heard oral argument on March 30, 2016.

Supreme Court Opinion

The issue before the Court is whether an approved jurisdictional determination constitutes a final agency action for which an appeal to the judicial branch is allowed.  The answer to this question will impact the options available to landowners who receive what they believe to be inaccurate approved jurisdictional determinations from the EPA or COE.

• Is the agency action “final” under the Administrative Procedures Act?

The Supreme Court set forth the analysis known as the Bennett test used to determine if agency action is final for purposes of the Administrative Procedures Act.  First, the action must “mark the consummation of the agency’s decision making process.”  This means it must not be merely tentative or interlocutory.  Second, the action “must be one by which rights or obligations have been determined or from which legal consequences will flow.”

The COE and Hawkes both agreed that the first factor was met in this case because approved jurisdictional determination clearly marks the end of the COE’s inquiry and decision making process of whether a property contains a WOTUS.

The Court found that the second prong of the test was met as well.  An approved jurisdictional determination impacts the parties’ rights and results in legal consequences whether the determination finds a WOTUS or not.  If a jurisdictional determination finds that no WOTUS exists, this is binding on the government for 5 years, barring any new information.  This means that the landowner will not face any legal action on this issue brought by the government during this time frame.  Alternatively, if a jurisdictional determination finds a WOTUS is present, this impacts the parties legal rights as well.  The parties, then, are not protected from agency enforcement of the Clean Water Act and, instead, face fines if proper permits are not obtained.

• Are there adequate alternatives to judicial review?

Even if an agency action is considered to be final, an appeal to the court system is allowed only if there are no adequate alternatives available to the party.  Hawkes argued that it had no alternatives in this situation other than seeking review.  The COE, however, claimed that Hawkes had two options:  (1) go forward with their planned mine and face enforcement action during which they can argue the land is not a WOTUS and no permit was necessary; or (2) apply for a permit and seek judicial review if they are unhappy with the results.

According to the Court, “neither alternative is adequate.”  Under the law, a party does not need to wait for enforcement proceedings to commence before challenging a final agency action if there are serious criminal and civil penalties at stake.  Here, that is exactly what faced the Hawkes.  As the Court explained, “it is often difficult to determine whether a particular piece of property contains waters of the United States, but there are important consequences if it does.”  Had the Hawkes proceeded without a permit, these consequences include possible criminal and civil penalties, including fines of up to $37,500/day.  On the other hand, going through the permitting process is not adequate either.  According to the Court, the costs of obtaining a discharge permit are “significant.”  For a permit similar to the one at issue in this case, the average applicant waits over 2 years and spends over $270,000 completing the permitting process.  Even in less complex situations where a general permit may be obtained, the average wait is nearly 1 year and price tag is over $28,000.

Thus, because the Court found that an approved jurisdictional determination constitutes a final agency action, and because there are no adequate non-judicial alternatives available to the landowner, an approved jurisdictional determination issued by the COE or EPA may be appealed to the judicial system.  The appellate court was affirmed.

Concurring Opinions

Several Justices issued concurring opinions.  A concurring opinion is used when a Justice agrees with the outcome of the case, but may wish to set forth different or additional reasoning than that included in the majority opinion.

• Justices Kennedy, Thomas, and Alito:  These justices agreed with the reasoning in the Court’s majority opinion, but wrote separately to express that “based on the Government’s representations in this case, the reach and systemic consequences of the Clean Water Act remain a cause for concern.”  Further, “The [Clean Water] 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.”
• Justice Kagan:  Justice Kagan joins the majority opinion in full, but noted that the fact that an approved jurisdictional determination is binding on the EPA and COE for 5 years, creating a sort of “safe harbor” for landowners if the determination finds no WOTUS, is critical in satisfying the second prong of the Bennett test.
• Justice Ginsburg:  For Justice Ginsberg, she would find the approved jurisdictional determination to be final, regardless of the binding nature of the memorandum of understanding between the EPA and COA.

Why This Case Matters

1.  It is a United States Supreme Court win for landowners.  I am believer in always celebrating wins for landowners at the United States Supreme Court!
2. It frees landowners from being in a Catch-22 position.  If a landowner was not allowed to challenge an approved jurisdictional determination in Court, he or she would be left with three choices:  (1) abandon the project altogether and do nothing on the land that would discharge dredge and fill or pollutants; (2) ignore the determination and move forward, knowing that extensive fines and potential criminal liability are likely ahead; or (3) spend years and at least tens of thousands of dollars obtaining a permit that the landowner contends is unnecessary.  None of these were good options.  This case allows a fourth option–challenge the approved jurisdictional determination in Court immediately on receipt.  This will allow a landowner to know, for certain, whether the federal permit is required on that property.
3. The Kennedy concurrence language regarding the scope of the Clean Water Act.  In light of the pending legal challenges to the new EPA/COE rule defining “WOTUS,” the concerns expressed by Justices Kennedy, Thomas, and Alito in their dissent will be music to the ears of the challengers’ attorneys.  Concerns over the reach of the Act and the impact on property rights will be critical if (and when) the new WOTUS rule reaches the United States Supreme Court.