The Supreme Court last Tuesday ruled in favor of landowners seeking the right to challenge the U.S. Army Corps of Engineers’ (the Corps) wetlands determinations in federal courts. In U.S. Army Corps of Engineers v. Hawkes Co., Inc., 578 U.S. ____ (2016), the owner of a peat mining company in North Dakota, Hawkes, sought to expand its operations to wetlands in northwest Minnesota and sell the peat for golf courses, sports turf, landscaping, and gardening. Unfortunately for Hawkes, the Corps issued a “jurisdictional determination” (JD), which stated that the wetlands on its property were “waters of the U.S.” under the Clean Water Act (CWA) and thus Hawkes would be subject to costly CWA Section 404 permitting requirements. The Corps argued that its determination could not be challenged in federal courts because it was not a final agency action. The Supreme Court disagreed, upholding the Eighth Circuit ruling that the JD, as issued by the Corps, constituted a final agency action and could be challenged in federal court.

This case echoes recent rulings on final agency actions and prefaces a larger dispute about what type of wetlands and other water bodies are subject to CWA requirements. In 2012, the Supreme Court ruled in Sackett v. EPA, 566 U.S. ____ (2012), that an agency compliance order prohibiting development near a wetland was a final agency action that could be challenged in federal courts. In an ongoing case, the U.S. Court of Appeals for the Sixth Circuit has stayed the Environmental Protection Agency (EPA) waters of the U.S. rule, under which certain wetlands, ephemeral streams, intermittent tributaries, and similar bodies of water are defined to be “waters of the U.S.” and subject to regulation under the CWA. Order of Stay, Ohio v. U.S. Army Corps of Engineers (Nos. 15-3799/ 3822/ 3853/ 3887, Oct. 9 2015).

The substantive law created by these cases affects a large number of property owners, including developers, mine owners, retailers, home-builders, and others whose activities may impact streams and wetlands. Environmentalists argue that extending CWA protections to these water bodies is essential to the health of America’s waterways, as a vast proportion of all water bodies fall into these categories of non-navigable waters. Conversely, businesses like Hawkes oppose permitting requirements that can indefinitely delay projects and related economic development. In this context, the meaning of a final agency action, and subsequently who can bring their case in federal courts, has great significance. Thus, Hawkes argued that the Corps’ determinations in this regard should not be insulated from judicial review. The Court agreed, with Chief Justice Roberts’ opinion citing average costs of $271,596 for individual permits and $28,915 for general permits and delays of 788 days and 313 days, respectively.

In its analysis, the Court nodded to, but did not adopt, a reconsideration of what constitutes a final agency action as laid out in the 1997 Supreme Court case Bennett v. Spear, 520 U.S. 154. In that case, the Court stated that a final agency action was determined by two factors: (1) whether the action was the consummation of agency decision making and (2) whether the action was one by which rights or obligations had been determined, or from which legal consequences would follow. The second factor is influenced by how much of a penalty is at stake in any future enforcement action. Although particular rights, obligations, or consequences may not be certain until enforcement, if the possible penalties are steep enough, Bennett says that legal consequences may be sufficiently certain to treat the action as final, because private decisions will be made with potential penalties in mind. This “pragmatic approach” towards finality blends with a secondary analysis, stated in Abbott Laboratories v. Gardner, 387 U.S. 136 (1967), of whether adequate alternatives exist to judicial review under the Administrative Procedure Act. Finding both requirements met in Hawkes, the Court ruled that finality was reached without making cognizable changes to substantive administrative law.

In Hawkes, the decision had a narrow factual basis. It turned on a particular memorandum of agreement (MOA) between EPA and the Corps. The MOA stated that the Corps would treat JDs as binding on the government. It said that JDs will “represent the Government’s position in any subsequent Federal action or litigation concerning the final determination.” This language suggests a clear consummation of agency action. Additionally, the size of the potential enforcement penalty – up to $37,500 per day – may significantly impact any business decision to comply with or challenge a JD’s assessment of wetlands. Thus, both Bennett factors – finality and legal consequences – were satisfied in the Court’s opinion. However, the narrow factual grounds on which this determination was made – specifically the provision in the MOA – provide room for doubt about the long-term significance of this opinion. For example, it is unclear if the MOA could be changed such that JDs would not constitute a final agency action at a future date. Accordingly, the Court’s ruling in Hawkes was a narrower victory for challengers than it might seem at first glance.

Furthermore, while the case at hand was decided unanimously, other Clean Water Act cases are hotly contested. The Sixth Circuit case evaluating the merits of the waters of the U.S. rule will likely see a much more closely divided Supreme Court if it is heard by the Roberts Court. The 2006 decision in Rapanos v. United States, 547 U.S. 715, on the same subject matter drew a 4-1-4 plurality decision, leading to the current rule, but offering ambiguous legal guidance. Similarly, the 2001 case that led to Rapanos, SWANCC v. U.S. Army Corps of Engineers, 531 U.S. 159, drew a close 5-4 decision, but with much less ambiguous consequences. SWANCC struck down the “migratory bird rule,” which granted EPA and the Corps jurisdiction over isolated waters not connected to any navigable stream, provided that they were visited by migratory birds.

The unanimous opinion in the Hawkes case means that, for the time being, federal courts can hear challenges to JDs made by the Corps. However, if the Corps issues a revised MOU changing the binding nature of JDs, courts may reevaluate the “final” nature of such agency actions. Until such a time, landowners challenging Corps JDs will enjoy greater access to courts, but uncertainty will remain in the law of peatlands, muddy waters, and their connecting, sometimes ephemeral streams.

A copy of the Court’s opinion in Hawkes is available here.

Matt Ampleman