Decision allows landowners to challenge in court a US Army Corps of Engineers’ determination that a property is subject to regulation under the Clean Water Act.

On May 31, the US Supreme Court unanimously held in Army Corps of Engineers v. Hawkes Co.[1]that US Army Corps of Engineers (Army Corps) jurisdictional determinations under the Clean Water Act are final agency actions subject to judicial review. The Court relied in part on the significant legal consequences of those determinations, such as the five-year “safe harbor” from government enforcement provided by a negative jurisdictional determination. The Court also noted the absence of other pathways for judicial review, rejecting the Government’s contention that applying for a permit or proceeding without a permit and risking an enforcement action were adequate alternatives.

BACKGROUND

The Clean Water Act and its associated regulatory programs apply to the “waters of the United States.” What constitutes the “waters of the United States” has long been the subject of confusion and litigation. The Army Corps and the US Environmental Protection Agency (EPA), which share jurisdiction under the Clean Water Act, have undertaken multiple efforts to define the scope of the Act, and the Supreme Court has weighed in on the issue three times. The most recent regulatory definition promulgated by EPA and the Army Corps is currently being challenged in the US Court of Appeals for the Sixth Circuit.

Because it is often not readily apparent whether a specific property contains waters of the United States, the Army Corps issues “jurisdictional determinations” on a case-by-case basis to decide whether individual properties are subject to the Clean Water Act. These determinations are important because the Clean Water Act requires a permit from the Army Corps before anyone may discharge any pollutant into waters of the United States. Obtaining a permit can cost hundreds of thousands of dollars, and the permit may impose costly limitations on the permit holder. A landowner who chooses to discharge a pollutant without a permit onto a property the Army Corps has designated as containing waters of the United States (often referred to as a “jurisdictional” property) is subject to substantial civil and criminal penalties. If the Army Corps determines that a property is not covered by the Clean Water Act, that jurisdictional determination gives a landowner a measure of comfort by ensuring that neither the Army Corps nor EPA may bring any enforcement action with respect to that property for five years.

Hawkes Co. and two other companies (collectively “Hawkes”) sought to mine peat on a private property in Minnesota. Mining peat involves discharging “fill material” in the parlance of the Clean Water Act, and thus would require a permit under Section 404 of the Act if the property contained waters of the United States. In February 2012, the Army Corps issued a jurisdictional determination finding that the property contained waters of the United States because wetlands on the property had a “significant nexus” to traditionally navigable waters. After exhausting its administrative remedies, Hawkes sought review of that determination in federal district court under the Administrative Procedure Act (APA). The district court concluded that the jurisdictional determination was not a final agency action and was therefore not reviewable. On appeal, the US Court of Appeals for the Eighth Circuit reversed, and the Supreme Court granted certiorari.

THE SUPREME COURT’S DECISION

In a unanimous opinion authored by the Chief Justice, the Supreme Court began by applying the framework of Bennett v. Spear[2]to determine that the Army Corps jurisdictional determination was a final agency action. The Army Corps did not dispute that its determination met the first requirement of Bennett—that the action not be tentative or interlocutory. As the Court explained, an “approved jurisdictional determination” is issued only after extensive fact finding by the Army Corps and is binding on both the Army Corps and EPA for five years. The Court also held that the jurisdictional determination met Bennett’s second requirement—that an agency action give rise to “direct and appreciable legal consequences.” The Court determined the five-year “safe harbor” provided by a negative jurisdictional determination (and denied by a positive jurisdictional determination) is a significant legal consequence because a negative jurisdictional determination bars both the Army Corps and EPA from bringing an enforcement action during the five-year period. And while environmental groups or individuals still could bring a citizen suit under the Clean Water Act, such a suit would lack the civil liability for wholly past violations available in a government enforcement action.

The Court went on to conclude that there were no adequate alternatives to APA review of a jurisdictional determination. The Army Corps contended that Hawkes could obtain judicial review by either

  • applying for a permit and challenging that permit if it was dissatisfied with the terms, or
  • discharging fill material without a permit and contending in any enforcement action that no permit was required.

The Court rejected the first alternative as inadequate because applying for a permit and potentially challenging it would not give any opportunity to contest the jurisdictional determination. It also noted the significant expense of applying for a permit, both in terms of money and time. The Court likewise found that discharging without a permit and risking an enforcement action was not a true alternative given the $37,500 per day civil penalties and further criminal penalties available under the Clean Water Act.

Three justices concurred separately, but none significantly departed from the Court’s opinion. Justice Ginsburg was the only justice not to join the Court’s opinion in full, and she disagreed only in the Court’s reliance on the memorandum of understanding between the Army Corps and EPA. Justice Kagan wrote separately to explain her disagreement with Justice Ginsberg on the memorandum of understanding issue. Justice Kennedy’s concurrence highlighted his broader concerns with the scope of the Clean Water Act.

IMPLICATIONS

The Supreme Court’s decision is a victory for landowners and project proponents who will be able to immediately challenge an Army Corps jurisdictional determination. Before the Court’s decision, landowners who received a positive jurisdictional determination faced the unpleasant options of applying for a costly permit, proceeding without a permit and risking civil and criminal penalties, or simply scrapping a project. Indeed, before the Eighth Circuit’s decision in Hawkes, the US Court of Appeals for the Fifth Circuit had reinforced the Army Corps’ view that jurisdictional determinations are not reviewable in Belle Co. v. U.S. Army Corps of Engineers.[3] While challenging a jurisdictional determination in court is not without cost, many landowners will likely find it preferable to the alternatives. As the Supreme Court noted, the average applicant for an individual permit in 2002 spent 788 days and $271,596 to complete the application process. That cost has likely increased in the intervening years and does not account for the cost of mitigation projects or design changes required as part of the permit. Discharging without a permit may be an even less attractive option, as the Clean Water Act authorizes civil penalties of $37,500 per day and potential additional criminal penalties.

The ability to challenge jurisdictional determinations will likely lead to more litigation over the scope of the Clean Water Act. In addition to legal challenges by landowners to positive jurisdictional determinations, environmental groups or others might seek judicial review of negative jurisdictional determinations. Such challenges could, in turn, lead to further judicial definition of the Clean Water Act’s reach. The Supreme Court’s opinion in Hawkes suggests that at least several justices would be willing to revisit the Court’s previous opinions on Clean Water Act jurisdiction. Justice Kennedy, whose concurrence in Rapanos v. United States[4]is typically regarded as the controlling legal test on the limits of the Clean Water Act, stated in Hawkes that the Act is “notoriously unclear” and observed that 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.” Chief Justice Roberts also appeared skeptical of the Army Corps’ interpretation of the limits of the Clean Water Act, stating that the Army Corps found Hawkes’ property contained waters of the United States because “its wetlands had a ‘significant nexus’ to the Red River of the North, located some 120 miles away.” Thus, it is quite possible that a challenge to an Army Corps’ jurisdictional determination, or the challenge to the Army Corps and EPA’s jurisdictional rule currently being litigated in the Sixth Circuit, will make its way onto the Supreme Court’s docket in the near future.

It will also be interesting to see how the Army Corps and EPA respond to the Supreme Court’s decision. As the Government noted in its briefing before the Supreme Court, the Clean Water Act does not require the Army Corps to issue standalone jurisdictional determinations. Thus, the Army Corps could potentially modify the timing of its jurisdictional determinations or even choose to not make them independent of permitting decisions. The Government also noted that it could modify or revoke the memorandum of understanding between the Army Corps and EPA that makes jurisdictional determinations binding on both agencies. If litigation of jurisdictional determinations proves burdensome for the agencies, they may choose to change how the jurisdictional determination process works in some way.

Finally, the Supreme Court’s decision may have broader implications for the Government’s use of informal orders or authorities in administrative matters. The Court’s ruling, particularly when combined with its previous holding in Sackett v. EPA[5] that EPA compliance orders under the Clean Water Act are reviewable, evidences the Court’s strong allegiance to the longstanding principle favoring review of agency action. Some environmental statutes, such as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), explicitly foreclose judicial review of certain orders. But where the US Congress has not spoken to the issue, agencies may increasingly find their orders, guidance, or other informal decisions susceptible to challenges in court.