On May 31, the US Supreme Court issued a decision that a US Army Corps of Engineers (Corps) determination that a property contains waters subject to Clean Water Act (CWA) jurisdiction is final agency action subject to review under the Administrative Procedure Act. U.S. Army Corps of Eng’rs v. Hawkes Co., Inc., No. 15-290, 578 U.S. ______ (2016). Chief Justice Roberts authored the opinion of the Court, in which Justices Kennedy, Thomas, Breyer, Alito, Sotomayor, and Kagan joined. Justice Kennedy filed a concurring opinion, in which Justices Thomas and Alito joined. Justices Kagan and Ginsburg also both filed separate concurring opinions.

In 2012, the Corps issued a jurisdictional determination that a property in Minnesota contained waters of the United States, which meant that Hawkes Co., Inc. had to obtain a permit under Section 404 of the CWA in order to conduct peat mining operations on the property. Hawkes challenged the jurisdictional determination in court. The government argued a jurisdictional determination is not final agency action subject to judicial review. The Eighth Circuit ultimately found that jurisdictional determinations were subject to judicial review. For further background on the case, see our December 15, 2015 and April 1, 2016 publications.

The Supreme Court affirmed that the Corps’ jurisdictional determination meets the Court’s test for final agency action set forth in Bennett v. Spear, 520 U.S. 154 (1997) – including that it determines rights or obligations or gives rise to legal consequences. The Court noted that the US Environmental Protection Agency (EPA) and Corps treat the jurisdictional determination as binding, citing an interagency memorandum of agreement.

The government contended that applicants have adequate alternatives without judicial review: they can either discharge fill material without a permit, risking enforcement, or apply for a permit and seek judicial review if the permit is denied. The Supreme Court found that neither alternative is adequate:

As we have long held, parties need not await enforcement proceedings before challenging final agency action where such proceedings carry the risk of serious criminal and civil penalties. If respondents discharged fill material without a permit, in the mistaken belief that their property did not contain jurisdictional waters, they would expose themselves to civil penalties of up to $37,500 for each day they violated the Act, to say nothing of potential criminal liability. Respondents need not assume such risks while waiting for EPA to drop the hammer in order to have their day in court. (Internal citations and quotations omitted.)

The Court also found requiring a landowner to apply for a permit and then seek judicial review in the event of an unfavorable decision was not an adequate alternative, noting that the permitting process can be “arduous, expensive, and long.”

The Court’s decision is of particular significance given the on-going litigation over the scope of protected waters under the CWA. The EPA and Corps issued a rule in May of 2015, which some see as broadening the scope of the agencies’ CWA jurisdiction. The rule was challenged by numerous states and industry and environmental groups, and in October 2015 the US Court of Appeals for the Sixth Circuit stayed the rule nationwide. Environmental Protection Agency v. Ohio, No. 15-3751. Although the Sixth Circuit has not reached the merits in that case, the expansive scope of the CWA did not go unnoticed in the Hawkes case. Justice Kennedy noted in his concurrence that “the reach and systematic consequences of the Clean Water Act remain a cause for concern.” The practical effect of the Supreme Court’s decision is that landowners can now seek judicial review of whether the Corps properly determined that their property is within the “reach” of the CWA, potentially avoiding a lengthy and costly 404 permit proceeding.