On December 11, the US Supreme Court granted certiorari in a case involving whether an agency’s approved jurisdictional determination that certain property contains “waters of the United States” subject to the Clean Water Act (CWA) is “final agency action” subject to review in federal court under the Administrative Procedure Act (APA).  U.S. Army Corps of Eng’rs v. Hawkes Co., Inc., No. 15-290 (U.S. Dec. 11, 2015).  The decision could resolve a circuit split and determine whether thousands of jurisdictional determinations issued by the US Army Corps of Engineers (Corps) to landowners each year regarding CWA coverage are subject to judicial review.

The action began when Hawkes Co., Inc. sought permission from the Corps to mine peat from 530 acres of land in Marshall County, Minnesota.  In February of 2012 the Corps issued an approved jurisdictional determination that the property contained waters of the United States, meaning that Hawkes would need a dredge and fill permit under Section 404 of the CWA to conduct the mining operations.  Following an administrative appeal, in December of 2012 the Corps issued a revised jurisdictional determination again finding CWA jurisdiction.  Rather than continuing the CWA permit process, Hawkes and two affiliated companies filed an action in federal court seeking review of the Corps’ jurisdictional determination that the property was subject to the CWA.

Under the Supreme Court’s decision in Bennett v. Spear, 520 U.S. 154, 177-78 (1997), to be considered “final” and subject to judicial review under the APA, agency action (1) “must mark the consummation of the agency’s decision making process – it must not be of a merely tentative or interlocutory nature” and (2) “must be one by which rights or obligations have been determined, or from which legal consequences will flow.”  On August 1, 2013, the US District Court for the District of Minnesota granted the government’s motion to dismiss in Hawkes Co., Inc. v. U.S. Army Corps of Eng’rs, 963 F. Supp. 2d 868 (D. Minn. 2013).  The district court concluded that the Corps’ jurisdictional determination met the first condition of Bennett, but not the second: It did not determine the plaintiff-companies’ rights or obligations.

The Eighth Circuit Court of Appeals reversed the district court on April 10, 2015, holding that the jurisdictional determination met both Bennett conditions for final agency action.  Regarding the second condition, the circuit court determined that the jurisdictional determination altered the companies’ legal rights by requiring them “either to incur substantial compliance costs (the permitting process), forego what they assert is lawful use of their property, or risk substantial enforcement penalties.”  Hawkes Co. v. U.S. Army Corps of Eng’rs, 782 F.3d 994, 1000 (8th Cir. 2015).  The circuit court relied on the Supreme Court’s decision in Sackett v. EPA, ––– U.S. ––––, 132 S. Ct. 1367 (2012), which determined that a compliance order issued by the Environmental Protection Agency finding a person had deposited fill material into jurisdictional wetlands without a CWA permit and ordering remedies is final agency action.

The Eighth Circuit’s holding is in tension with decisions of the Fifth and Ninth Circuit Courts of Appeal holding that a Corps’ jurisdictional determination is not final agency action.  Belle Co., LLC v. U.S. Army Corps of Eng'rs, 761 F.3d 383 (5th Cir. 2014); Fairbanks N. Star Borough v. U.S. Army Corps of Eng'rs, 543 F.3d 586 (9th Cir. 2008).  In particular, in Bell the Fifth Circuit Court distinguished Sackett and found that a CWA jurisdictional determination did not satisfy the second condition of Bennett because it did not state that the property owner violated the CWA, require the property owner to take any action, or impose any penalties.  The Supreme Court denied certiorari in that case in March of 2015.  Kent Recycling Servs., LLC v. U.S. Army Corps of Eng’rs, 135 S. Ct. 1548 (2015).  However, the property owner has sought rehearing of the denial of certiorari on the basis of the conflict created by the Eight Circuit’s recent decision and the Supreme Court has yet to rule on the rehearing request.

The Corps’ petition for certiorari filed in September in Hawkes argued that the Supreme Court should resolve the circuit split over whether, in light of Sackett, a Corps jurisdictional determination is judicially reviewable final agency action.  A ruling on this issue is particularly significant in light of the EPA’s final rule regarding the definition of “waters of the United States” subject to CWA, which some view as broadening the scope of the government’s CWA jurisdiction.  See EPA Unveils Final Clean Water Rule.  The practical effect of the Supreme Court’s decision could be to resolve whether landowners can seek review of Corps jurisdictional determinations that properties are covered by the CWA, or instead must either undergo a lengthy and costly 404 permit proceeding, or conduct their activities without a permit and trigger a government enforcement action before obtaining judicial review.