Today’s blog is long….I’m warning you now.
In the last few years, we have seen an increased focus on the regulatory reach of federal jurisdiction over agricultural lands, with the new WOTUS rule and other court decisions. A recent trial court decision from the Eastern District of California should be extremely concerning to landowners across the country. At issue, the federal Clean Water Act and agricultural operations.
In 2012, Duarte Nursery purchased 450 acres land in Tehama County, California with the intent to farm the land, initially by sowing winter wheat. The property, north of Sacramento, consists of rolling grassland. Prior to 1988, the land had been farmed, but from 1988 until the Duarte purchase in 2012, the land had been used for grazing. Due to the clay soil, water collects after rainfall in what are referred to as vernal pools.
Duarte hired a local wheat farmer to plant, care for, and harvest wheat on the property. The farmer was instructed to till the soil 12″ or less, and did so using a Case IH tractor and a Wilcox ripper with 36″ shanks. He was told to avoid vernal pools on the land. The farmer avoided some, but not all, of the vernal pool areas, but none of the pools were destroyed.
In November 2012, an Army Corps of Engineers (“COE”) employee drove by the property and observed farming activities and equipment present. He took photographs of what he believed to be a Clean Water Act violation. He returned again in December and observed tilling of the land. He then contacted the owner of Duarte Nursery to inform him that the tilling activities required a permit under the Clean Water Act. Duarte argued it did not need a permit as it was avoiding areas considered wetlands and, therefore, “waters of the United States.”
In February 2013, the COE sent a cease and desist letter to Duarte. The letter stated that the COE believed Duarte discharged dredged or fill material into waters of the United States without a permit as required by Section 404 of the Clean Water Act. Specifically, the discharge allegedly occurred into “seasonal wetlands, vernal pools, vernal swales, and intermittent and ephemeral drainages.”
In March 2013, Duarte’s counsel responded to the letter, seeking any and all documentation used by the COE to support the allegations that Duarte was in violation of the Clean Water Act. They also pointed out that Section 404 of the Clean Water Act exempted certain agricultural activities.
Eventually, the case was transferred to the Environmental Protection Agency (“EPA”) for enforcement.
In October 2013, Duarte filed suit against the COE, alleging due process violations. In response, the COE filed a counterclaim alleging violation of the Clean Water Act by Duarte.
Clean Water Act
The federal Clean Water Act essentially provides that a landowner may not discharge a point-source pollutant (Section 402) or dredge and fill material (Section 404) into a “water of the United States” without obtaining the proper permit from the Environmental Protection Agency or the Army Corps of Engineers. There are important agricultural exceptions to both Section 402 and 404. To read more on the basics of the Clean Water Act and agriculture, click here.
Trial Court Decision
At the end of June, the trial court issued its opinion in this case. Read full opinion here.
First, the trial court discussed a technical issue of whether this case was properly filed based upon the cease and desist letter, or whether a “final agency action” was required based on the Administrative Procedures Act. The Court sided with Duarte on this issue, finding that no “final agency action” was necessary because the nature of the challenge was constitutional. Regardless, the court reasoned, the plaintiffs had sufficiently shown that a CWA cease and desist letter was sufficient “final agency action” under the APA. Thus, the court had jurisdiction to hear the case. To read more about a recent Supreme Court decision on the issue of final agency action and the Clean Water Act, click here.
Second, the court reviewed Duarte’s due process claim. In order to succeed on a due process case, the plaintiff must show (1) deprivation of a constitutionally protected liberty or property interest, and (2) a denial of adequate procedural protections. Duarte argued it had a protected property interest in the land and its use for wheat farming. The COE argued that a cease and desist letter did not constitute “deprivation” of an interest. The Court sided with the COE on this issue, finding that there was no deprivation based upon the letter. “The Army Corps would have had to request the EPA or the DOJ to bring an enforcement action to actually enforce the CWA. The Army Corps has sought enforcement now by filing its counterclaim to this action. However, enforcement had not occurred at the time the plaintiffs received the C&D letter.” Without actual deprivation of a protected property interest, the due process claim must fail. Summary judgment was entered for the COE on this issue.
Third, the court turned to the COE’s counterclaim, alleging that Duarte violated the Clean Water Act. The court addressed numerous sub-issues in analyzing this counterclaim.
- Individual liability: Even if Duarte Nursery could be held liable for violating the Clean Water Act, Duarte argued that its President, John Duarte, could not be held personally liable, as he did not personally discharge any pollutant. The court sided with the COE on this issue, applying the “Responsible Corporate Officer Doctrine” (“RCOD”). Although the Clean Water Act definition of “person” does not expressly include corporate officers, the trial court determined that the RCOD should apply and that a corporate officer with authority over the allegedly illegal activities should not escape liability merely by delegating tasks to others. Because John Duarte was in charge of the farming activities–even though he did not personally farm the land–he is a responsible corporate officer.
- Discharge of a pollutant: The court held that by plowing the land, Duarte discharged dredge and fill material, which is a “pollutant” into a water of the United States. The court looked to EPA regulations where “fill material” was defined as “rock, sand, soil, and clay” and considered a pollutant. Likewise, regulations define “dredged material” as the addition, including redeposit other than incidental fallback, of dredged material, into water of the US. From these regulations and prior cases, the court held that it “is clear that ‘soil’ is a pollutant.” Thus, because the farmer caused the soil to move during tilling by creating furrows and ridges and the soil was redeposited into a water of the United States, the plowing discharged a pollutant.
- Navigable waters: The court then turned to an issue that has been in the news frequently as of late, is the Duarte property a “water of the United States?” The court applied the approach from the plurality and concurrence in Rapanos to determine whether this property was a water of the US. (Note: The court did NOT analyze this under the new EPA rule defining waters of the United States, because that rule has been stayed by the 6th Circuit and is not currently in effect in the United States.) The court applied the “substantial nexus test” stating that if wetlands have a significant effect on the chemical, physical, and biological integrity of the nearby navigable waters, they are a water of the US. Here, investigations showed that the Duarte property “collect and hold water during significant rain events…prior to filtering into downstream waters” and that “the wetlands and water on-site are hydrologically connected…and help to moderate flood flows due to storm events…” Thus, the court explained that because the “wetlands within the Property have physical connections to Coyote Creek, a tributary of the navigable waters of the Sacramento river,” the wetlands on the property constitute a water of the US.
- Point source: Next, the court determined that using a plow to disturb soil constitutes a point source discharge. The Clean Water Act applies only to point source discharges (as opposed to non-point source discharges), which are defined as “any discernible, confined, and discrete conveyance…from which pollutants are or may be discharged.” The court reasoned that that tractor and plow (called a “ripper” by the opinion) constitute a point source.
- Agriculture exemption: Finally, the court analyzed the applicability of the agriculture exemption to this case. Section 404 of the Clean Water Act provides that “normal farming activities such as plowing, seeding, cultivating, minor drainage, and harvesting for the production of food, fiber, and forest products or upland soil and water conservation practices…” are exempt from the Clean Water Act. To fall within this definition, the activities must be part of an “established (i.e. on-going) farming operation.” “An operation ceases to be established when the area on which it was conducted has been converted to another use or has lain idle so long that modifications to the hydrological regime are necessary to resume operations.” Further, “plowing” is defined as “all forms of primary tillage, including moldboard, chisel, or wide-blade plowing, discing, harrowing, and similar physical means used on a farm, forest or ranch land for the breaking up, cutting, turning over, or stirring of soil to prepare it for the planting of crops.” It does not include redistribution of soil which changes a water of the US to dry land. Additionally, a permit is required if the farming practice is part of an activity whose purpose is to convert an area of the waters of the United States into a use to which it was not previously
subject, where the flow or circulation of waters of the United States may be impaired or the reach of such waters reduced.”Applying this exception, the court found that there was no “established” or “ongoing” farming activity. Evidence showed that the land had not been farmed from 1988 to 2012. During that time, the land had been used for grazing. The court stated that it was “not persuaded that, after nearly twenty-four years of no activity that meets the applicable definition of farming, the tillage and planting of wheat by plaintiffs can be considered a continuation of established and ongoing farming activities.” Additionally, the court found that aerial photos showed the wetlands “impacted by the tillage and planting activities,” specifically showing “substantial changes in the hydrological regime” which is prohibited by the exemption. Thus, the agriculture exemption does not apply.
In summary, the court explained that the plowing equipment did not avoid all wetlands on the property, the equipment moved dirt from around and in the wetlands before redepositing it into the wetlands, the wetlands have a “significant nexus” to Coyote Creek, which is a tributary of the navigable Sacramento River, and tillage was not part of an established and ongoing farming operation. Thus, Duarte was required to have a federal permit in order to plow the wetlands and the plowing/ripping without a permit was a violation of the Clean Water Act.
Why Should We Care?
Where should we even start? For the last several years, agriculture has been hearing horror stories of what could happen if the Clean Water Act were to be broadly applied. This case, unfortunately, seems to be an example of several of those concerns coming true.
First, the basic idea that a landowner would be told that he could not plow ground to sow wheat on his own property, alone, is a shocking idea to most farmers and landowners in the United States. Adding more concern to this is the extremely high potential fines for a Clean Water Act violation. Fines can be assessed at as much as $37,500/day.
Second, this case illustrates the reach of the current definition of “waters of the United States,” and many fear the new definition currently stayed pending litigation is even broader. In this case, there was no navigable stream running across or even near the property. Instead, the court found jurisdiction to exist based on intermittent flows and vernal swales that were hydrologically connected to a nearby creek, which in turn eventually dumped into a navigable river. Keep in mind, this was not swampland–the seasonal swales and vernal pools existed only after storms. This type of tangential connection is the exact concern that so many expressed about the new definition of a water of the United States. How far reaching is the Clean Water Act? What about playa lakes in Texas? Where do jurisdictional waters end and privately owned land begin? How can a well-intentioned producer know for sure? These questions remain unanswered.
Third, the extremely narrow application of the agricultural exception to Section 404 is also concerning. Despite the EPA touting the agricultural exceptions as offering protections to farmers and ranchers, when it is narrowly construed, those protections do not apply. In this case, the activity at issue was plowing a field, one of the most basic agricultural activities. Here, despite the fact that the property had been grazed for agricultural purposes for the last 24 years, the exception did not apply because it not had not been plowed and farmed during that time.
Fourth, this case is not likely going away. Although this case is only a trial court decision and is only binding in California, it is certain that the EPA and COE will cite this decision in cases across the nation. Duarte has sought the right to file an immediate appeal to the United States Court of Appeals for the Ninth Circuit. After a decision there, certiori could be sought at the United States Supreme Court. Given the importance of this issue, it is unlikely that we have seen the end of this case.
This decision likely leaves landowners scratching their heads. One of the major difficulties with the Clean Water Act is the lack of clarity for agricultural operators who seek to use and maintain their privately owned and maintained farms and ranches. There are, unfortunately, very few clear answers as to what may or may not be determined to fall under the purview of the Clean Water Act and jurisdiction of the federal government.