This has been an active year so far for Clean Water Act (CWA) and associated Administrative Procedure Act (APA) litigation. Federal courts have clarified—but also raised new questions about—the Environmental Protection Agency's (EPA) permitting authority and the scope of review of agency decisions under the APA in the CWA section 404 dredge-and-fill context. Two cases in particular merit analysis.

United States Army Corps of Engineers v. Hawkes

In United States Army Corps of Engineers v. Hawkes, 136 S. Ct. 1807 (2016), the Supreme Court unanimously held that an approved jurisdictional determination (JD) under the CWA is a final agency action subject to judicial review under the APA. Under Hawkes, property owners with grounds to challenge an agency determination that their property is subject to the CWA, can now do so in federal court before engaging in the long and often expensive CWA permitting process or risking a CWA enforcement action. This decision has broad implications for permitting under the CWA section 404 program and will almost certainly generate more judicial review of substantive decisions regarding the jurisdictional scope of the CWA. However, although Hawkes expands pre-enforcement challenges under the CWA, the Court's decision is narrowly tailored and, as a result, may not be applied to expand pre-enforcement review in matters beyond the CWA.

The CWA prohibits the discharge of any pollutants, including dredge-and-fill material, into "waters of the United States" without a permit. See 33 U.S.C. §§ 1311(a), 1342, 1344, 1362(6)–(7), (12). Determining which waters and wetlands constitute "waters of the United States" can be a complicated process, and the scope of the CWA's jurisdiction over such waters has long been the subject of litigation. See, e.g., Rapanos v. United States, 547 U.S. 715 (2015). Property owners obtain JDs from the Corps to determine whether land is subject to CWA jurisdiction. An owner can obtain either a "preliminary" JD, which states that waters "may" be present on the property, or an "approved" JD, which states definitively "the presence or absence of such waters." Id. at 1812. A preliminary JD is a non-binding determination that jurisdictional waters may be present or absent on a property, and an owner may elect to proceed with permitting without a formal determination if the owner does not intend to contest jurisdiction.

In Hawkes, three peat-mining companies sought judicial review of an approved JD concluding that portions of their properties constituted "waters of the United States." Hawkes, 136 S. Ct. at 1809–10. The Court of Appeals for the Eighth Circuit held that the agency decision was a final agency action reviewable under the APA. Hawkes Co. v. Army Corp of Eng'rs, 782 F.3d 994, 1000 (8th Cir. 2015). The Supreme Court unanimously affirmed the Eighth Circuit's decision, resolving a circuit split between the Eighth Circuit's Hawkes decision and the Fifth Circuit's conclusion in Belle Co. v. United States Army Corps of Engineers, 716 F.3d 383, 397 (5th Cir. 2014) (holding that a "JD is not reviewable final agency action"). The Supreme Court determined that the approved JD at issue satisfied the two-part test for finality under the APA, see Bennett v. Spear, 520 U.S. 154 (1997), by (1) "mark[ing] the consummation of the agency's decision-making process," and (2) yielding "legal consequences." Hawkes, 136 S. Ct. at 1815–16 (quoting Bennett, 520 U.S. at 178).

The Corps did not dispute that a JD satisfies Bennett's first prong as the consummation of the agency's decision-making process, but the question remained whether sufficient "legal consequences" flowed from a JD to constitute finality. Hawkes, 136 S. Ct. at 1815–16. The Supreme Court focused on the five-year "safe harbor" from CWA implementation that is effectively either granted or denied in a JD pursuant to a Memorandum of Agreement (MOA) between the Corps and EPA, concluding that the "legal consequences" prong was also met. See U.S. EPA, Memorandum of Agreement: Exemptions Under Section 404(f) of the Clean Water Act § VI(A), (D) (1989).

Hawkes applies to review of approved JDs only. The Court noted that "[u]nlike preliminary JDs, approved JDs can be administratively appealed and are defined by regulation to constitute a Corps final agency action." Hawkes, 136 S. Ct. at 1812 (citation and internal quotation marks omitted). Accordingly, property owners seeking APA review of a JD must exercise their option to obtain an approved JD if they want to have their day in court. It is also possible that Hawkes may not be the last word on the issue. Although the MOA between the Corps and EPA received little attention in the briefing, during oral argument, the Government suggested that it could simply issue a new MOA clarifying a JD's effect and potentially modify the five-year safe harbor. Justice Kennedy's concurring opinion criticizes the Government's position and expresses concern about the agencies' use of the CWA to "cast doubt on the full use and enjoyment of private property throughout the Nation." Id. at 1816–17. Nevertheless, the Court's decision does not expressly foreclose future amendments to the MOA, and it is possible that the agencies could attempt to further narrow the Court's decision with future administrative action.

For additional analysis of the Hawkes decision, click here.

Mingo Logan Coal Co. v. EPA

In Mingo Logan Coal Co. v. EPA, Mingo Logan IV, No. 14-5305, 2016 WL 3902663 (D.C. Cir. July 19, 2016), the Court of Appeals for the D.C. Circuit held that EPA did not violate the APA in exercising its CWA section 404(c) veto authority to revoke approval of dredge-and-fill disposal sites four years after the Corps had authorized those sites under the section 404 dredge-and-fill program and after the permittee had incurred reliance costs on the specification of the disposal sites. This decision follows a prior decision by the D.C. Circuit in 2013, upholding EPA's revocation of the two approved disposal sites under the CWA, supporting a very expansive view of EPA's veto authority under Section 404(c). See Mingo Logan Coal Co. v. EPA, 714 F.3d 608 (D.C. Cir. 2013).

While this most recent decision concerns only APA claims and addresses unique factual circumstances, it is a cautionary tale for permittees in building a robust administrative record to support future claims. It also leaves uncertainty regarding how reliance costs figure into judicial review under the APA and what standard applies to after-the-fact permit revocations.

In 1997, Mingo Logan's predecessor in interest began permitting a large-scale mountaintop-mining operation. Mingo Logan, 2016 WL 3902663, at *3. Mingo Logan proposed three sites for disposal of the spoil, resulting in the burial of 7.48 miles of three streams. Mingo Logan secured the NDPES permit from the State of West Virginia in 1999 and the section 404 permit from the Corps in 2007, allowing spoil to be disposed into the three streams. Id. Environmental groups immediately challenged Mingo Logan's 404 permit, and pursuant to an agreement it reached with plaintiffs, Mingo Logan began operations in 2007 but limited its operations to a single disposal site, leaving the two other sites unused. In 2009, EPA requested the Corps to use its discretionary authority to suspend, revoke, or modify the 404 permit based on "new information and circumstances" that justified "reconsideration of the permit." Id. at *4. After the Corps declined, EPA invoked its 404(c) veto authority and withdrew the two unused disposal sites, which together amounted to approximately 88 percent of the originally permitted area. The two bases for EPA's veto were: (1) "unacceptable adverse impacts" to wildlife and the wildlife habitat in the fill footprint; and (2) "unacceptable adverse impacts" on wildlife occurring "downstream of the footprint of the fills and sediment ponds."

Mingo Logan challenged EPA's decision in district court contending: (1) that EPA lacked statutory authority under the CWA to revoke a valid 404 permit after the Corps had issued it; and (2) that EPA's decision to veto was arbitrary and capricious under the APA. The D.C. Circuit upheld EPA's veto authority under the CWA in 2013. Mingo Logan Coal Co. v. EPA, Mingo Logan II, 715 F.3d 608 (D.C. Cir. 2013). The D.C. Circuit remanded the APA question to the district court, which upheld EPA's decision. Mingo Logan Coal Co. v. EPA, Mingo Logan III, 70 F. Supp.3d 151 (D. D.C. 2014).

On appeal, Mingo Logan's primary argument was that EPA failed to consider the costs that Mingo Logan incurred in relying on the validly issued permit and its history of compliance with the permit conditions. Mingo Logan IV, at *6. Mingo Logan argued that EPA may revoke a permit only after balancing resulting environmental effects against a permitee's sunk costs and record of permit compliance. Id. EPA conceded that it did not consider Mingo Logan's reliance costs or compliance history, but argued that it was not required to do so under the CWA or the APA. Id. The Court declined to even address this question because it held Mingo Logan failed to preserve the issue before the agency or before the district court, despite having several opportunities to do so. Id. at 6–9. The Court's decision should strongly caution litigants challenging agency decisions to provide detailed support for all arguments at the both the agency and district court stages of a challenge.

Mingo Logan also contended that EPA's consideration of water quality downstream of the valley fill improperly intruded on West Virginia's delegated regulatory authority over water quality. Id. at *10. The Court rejected this argument, primarily on the ground that while West Virginia sets conditions on discharges to manage the flow of pollutants into the waters of its jurisdiction, EPA "does not intrude on West Virginia's authority to regulate water under 402[,] because the EPA is not regulating the discharge of pollutants into West Virginia's waters downstream from the fill." Id. at *11. Finally, Mingo Logan contended that that EPA's decision to revoke the permit four years later was subject to a heightened regulatory burden for changes in policy and that EPA failed to meet this burden. The Court of Appeals declined to resolve the question whether the more heightened standard applied because, even assuming it did, EPA would have satisfied it by relying on extensive new information since permit issuance, including information collected by Mingo Logan itself. Id. at *15.

Although the D.C. Circuit's decisions upholding EPA's ability to revoke a permit four years after it was issued are certainly disconcerting to companies currently operating under Corps-issued 404 permits, the Mingo Logan case involved the notable environmental impacts and unique circumstances that are not common to all projects.