On May 31, 2016, the U.S. Supreme Court unanimously upheld the Eighth Circuit’s decision in Army Corps of Engineers v. Hawkes Co., finding that Clean Water Act (CWA) jurisdictional determinations (JDs) by the Army Corps of Engineers (Corps) are subject to immediate judicial review as “final agency action” pursuant to the Administrative Procedure Act (APA). This means that recipients of overreaching JDs are no longer saddled with the difficult choice of either (1) abandoning their projects, (2) incurring tremendous costs/delays to seek permits that may not have been needed (when the JD is later challenged), or (3) risking large fines or imprisonment so that they can seek judicial review of the JD (via challenging the enforcement action).

Background

Hawkes Co. Inc., a Minnesota peat mining firm, applied for a Corps permit to expand its peat mining operations in 2010. The Corps responded by issuing a preliminary determination that the property was a “water of the United States” pursuant to the Clean Water Act (CWA). A final jurisdictional determination was issued in February 2012, making the property subject to regulation by the Corps under Section 404 of the CWA, even though the property is some 120 miles from the nearest navigable waterway (the Red River). Hawkes contested the “unlawful” jurisdictional determination, arguing that it effectively barred peat collection on its property and forced Hawkes to either seek a permit that ultimately may not have been required because the JD was incorrect OR take the unreasonable risk of facing substantial Clean Water Act fines and penalties.

While the Minnesota District Court dismissed the Hawkes appeal for lack of jurisdiction (finding that the JD was not final agency action), the 8th Circuit reversed. The 8th Circuit’s decision that the Hawkes JD was final, appealable agency action created a split among the Circuits, as the 5th Circuit (Belle v. Corps) and 9th Circuit (Fairbanks v. Corps) had previously determined that JDs are not final, appealable agency action because they are merely classifications of property that do not impose legal obligations or consequences beyond those already imposed by the Clean Water Act. The Supreme Court’s decision in Hawkes resolves that split, finding that (1) an approved JD does represent final agency action and (2) there are no adequate alternatives for directly challenging the approved JD itself in court.

Approved Corps JDs Are Final Agency Action

Relying on its 1997 decision in Bennett v. Spear, the Supreme Court held that jurisdictional determinations meet the criteria set out to categorize them as final agency actions. In Bennett, the Court stated that a final agency action must (1) mark the completion of the agency’s decision-making process (i.e., cannot be tentative or interlocutory in nature) and (2) determine rights or obligations, or cause legal consequences. The Court first noted that there are two types of JDs, preliminary and approved. While a preliminary JD is merely advisory in nature, an approved JD marks the consummation of the Corps’ decision-making process. It is issued after extensive fact-finding and is typically not revisited as the permitting process moves forward (unless material facts change). In addition, Corps regulations themselves describe an approved JD as “final agency action” in 33 CFR 320.1(a)(6). Finally, a longstanding Memorandum of Agreement (MOA) between the Corps and EPA expressly states that approved JDs are recognized as “binding on the Government” for a period of five (5) years.

No Adequate Alternative to Direct Challenge of an Approved JD

The Corps argued that, even if an approved JD is final agency action, there are sufficient alternative legal remedies available to landowners such that direct appeal of an approved JD is not necessary. More specifically, the Corps claimed that the landowner may (1) seek a permit and then challenge its terms, or (2) complete its work without a CWA permit and subsequently raise jurisdiction as a defense to any type of enforcement. The Court disagreed on both counts.

First, the Court noted the tremendous costs associated with pursuing an individual CWA permit of the sort issued in this case, citing a study that found that the average applicant “spends 788 days and $271,596 in completing the [permitting] process” without even counting the costs of mitigation or design changes. This is a tremendous price to pay only to later find out that the permit was not even necessary due to a defective JD. Perhaps more importantly, the Court notes that “[t]he permitting process adds nothing to the JD” that would affect “its suitability for judicial review.”

Second, Chief Justice Roberts cites longstanding precedent to support the Court’s conclusion that a property owner need not run the risk of severe punishment in order to challenge an important and final agency decision: “[a]s 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’” (citing the 1967 Abbott Laboratories vs. Gardner decision). Noting the $37,500 civil penalties and potential criminal penalties available under the CWA, Justice Roberts concludes that “[r]espondents need not assume such risks while waiting for EPA to drop the hammer in order to have their day in court.”

What to Expect Going Forward

While the decision is a very favorable milestone for property owners and developers, it leaves open a number of questions:

  • Will the Corps now lean toward issuing more preliminary JDs (which are advisory only) and be more reticent to issue approved JDs early in the permitting process?
  • Can the Corps and EPA circumvent the Hawkes decision by revising their MOA to revoke any “safe harbor” for recipients of an approved JD? (The concurring opinion of Justice Kagan seems to suggest as much.)
  • Does the decision reflect a trend toward increased judicial review of administrative decisions on the heels of other recent decisions, like Sackett v. EPA (a 2012 Supreme Court decision that found an EPA compliance order to be final, appealable agency action even though EPA had not yet sought enforcement of it)?
  • Is the decision a good omen for opponents of EPA’s broad jurisdictional definition of “waters of the U.S.?” (The concurring opinion of Justices Kennedy, Thomas, and Alito states that “the systematic consequences of the Clean Water Act remain a cause for concern” because the Act’s reach is “notoriously unclear.”)