In a decision that will have significant ramifications for landowners and project proponents across the country, the US Court of Appeals for the Eighth Circuit has confirmed that US Army Corps of Engineers’ assertions of Clean Water Act (“CWA”) jurisdiction are subject to judicial review. Hawkes v. US Army Corps of Engr’s, No. 13-3067 (8th Cir. Apr. 10, 2015) (“Slip Op.”). The case concerned whether judicial review is available when the government makes a final decision that it has CWA jurisdiction over a particular parcel of land. This is especially important now as the Corps and EPA move towards finalizing a rule that defines “waters of the US” under the CWA that would broadly regulate new features and applies to all CWA programs.
A positive finding of CWA jurisdiction strongly influences how and where a landowner can use his or her land, alters development choices, decreases land values, affects investments, imposes delays and other costs, and results in other regulatory requirements should the landowner or project proponent seek a permit, including avoidance, minimization, and mitigation requirements. A finding of CWA jurisdiction also changes the legal position of a recipient. Thus, a Corps Approved Jurisdictional Determination (“AJD”) has significant real-world effects and legal consequences for a landowner and the agencies alike.
Hawkes Company sought to mine peat from a property in northwestern Minnesota for use in landscaping. The Corps issued an AJD concluding that the property was a “water of the United States” subject to the Corps’ jurisdiction. Hawkes filed suit challenging the Corps’ assertion of jurisdiction. Pursuant to the Administrative Procedure Act (“APA”), “final agency action for which there is no other adequate remedy in a court [is] subject to judicial review.” 5 USC. § 704. Courts generally look at two factors in determining whether there is “final agency action.” First is finality: the action must “consummat[e]” the agency’s decisionmaking process. Bennett, 520 US at 177–78. Second is effect: the action must have an “effect on the day-to-day business of the party challenging it.” Nat’l Ass’n of Home Builders v. US Army Corps of Eng’rs, 417 F.3d 1272, 1278 (D.C. Cir. 2005).
The district court dismissed the case, finding that while an AJD represented the consummation of the Corps’ decisionmaking process, it was not an action “by which rights or obligations have been determined,” or one from which “legal consequences will flow.” Hawkes Co. v. US Army Corps of Eng’rs, 2013 US Dist. LEXIS 107858 (Aug. 1, 2013), at *14-*16 (quoting Bennett v. Spear, 520 US 154, 177-78 (1997)).
On appeal, the Eighth Circuit reversed. The court framed the issue as whether the “flexible final agency action standard in Sackett” should also apply where appellants seek judicial review of an adverse JD without either completing the CWA permit process or risking enforcement by proceeding without a permit. Slip. Op. at 4. Quickly finding that the AJD represented the consummation of the agency’s decisionmaking, the panel moved on to analyze the second prong of the Bennett test, whether an AJD is an agency action “by which ‘rights or obligations have been determined,’ or from which ‘legal consequences will flow.’ ” The panel rejected the district court’s contrary finding, noting that its “analysis seriously understates the impact of the regulatory action at issue.” Id. at 8. The panel further stated that the district court had erred by “exaggerating the distinction between an agency order that compels affirmative action,” e.g., the compliance order at issue in Sackett, and “an order that prohibits a party from taking otherwise lawful action,” such as an AJD. Id.
The panel recognized that an AJD “requires appellants either to incur substantial compliance costs (the permitting process), forego what they assert is lawful use of their property, or risk substantial enforcement penalties.” Slip Op. at 8. The Eighth Circuit rejected the Corps’ claims that appellants had other adequate remedies. The panel concluded that such a contention ignores the prohibitive costs, time, and delays associated with applying for a CWA permit, and the substantial potential civil and criminal exposure appellants would risk if they commenced mining without a permit: “The prohibitive costs, risk, and delay of these alternatives to immediate judicial review evidence a transparently obvious litigation strategy: by leaving appellants with no immediate judicial review and no adequate alternative remedy, the Corps will achieve the result its local officers desire, abandonment of the peat mining project, without having to test whether its expansive assertion of jurisdiction … is consistent with the Supreme Court’s limiting language in Rapanos.” Slip Op. at 11. Quoting Bennett, the court concluded that an AJD has a “powerful coercive effect,” and is final agency action ripe for judicial review under the APA.
The consequences of this holding are significant. As the panel recognized, the precise boundaries of federal CWA jurisdiction are unclear. The government’s view of its CWA jurisdiction has expanded over time, and this regulatory creep has been compounded by the absence of judicial review. Prior to the Eighth Circuit’s decision, property owners had little choice but to abide by the government’s aggressive assertions of jurisdiction or risk the strict liability penalties associated with the CWA. This had the result of forcing landowners to endure the heavy burden of the CWA permitting process, even where the Corps may have had no lawful jurisdiction. Now, landowners and project proponents will be able to immediately test the validity of the government’s oftentimes questionable jurisdictional claims. We expect that judicial review will clarify the proper limits of the Corps’ CWA jurisdiction and provide necessary judicial oversight.