Our partner, Jimmy Kirkland, prepared the below summary of an important United States Supreme Court decision and Mike and I wanted to share it with the readers of our blog.

On May 31, 2016, in a unanimous ruling, the U.S. Supreme Court held in USACE v. Hawkes Co. that approved jurisdictional determinations (“JD”) are final actions which can be reviewed by the courts. Under the Clean Water Act a permit is required to discharge pollutants into waters of the United States. Due to the complexity of the statute and implementing regulations and guidance documents it is often very difficult to determine if a particular piece of property contains wasters of the United States. Prior to Hawkes, if a landowner disagreed with a JD they faced potentially significant enforcement action, both civil and criminal, for discharging without a permit or they were required to spend hundreds of thousands of dollars and years to obtain a wetland permit from the Army Corps of Engineers before they could appeal the Corp’s determination that the property was a “water of the United States.”

Hawkes involved three companies in the business of mining peat in Minnesota. In 2010 the Hawkes companies applied for a Section 404 permit to conduct mining operations on a 530-acre tract near their existing operations. The U.S. Army Corps of Engineers (“Corps”) advised that the permitting process would be very expensive and take years to complete. The Corps also advised that if Hawkes wanted to proceed with their application they needed to submit various assessments which would cost an estimated $100,000. In 2012 the Corps issued an approved JD stating the property contained “water of the United States” due to a “significant nexus” to the Red River located 120 miles away. Hawkes sought judicial review but the District Court dismissed holding the JD was not “final agency action.” In 2015, the Eighth Circuit Court of Appeals reversed. In July 2014 the Fifth Circuit Court of Appeals decided that the Corps JDs are not final agency actions subject to judicial review since they did not determine legal rights or consequences.

The Corps’ argued to the Supreme Court that the JD was not “final agency action” and that even if it were there are adequate alternatives for challenging in court. The Corps contended that if Hawkes disagrees with the Corps’ JD, Hawkes can either discharge fill material without a permit, risking EPA enforcement action and can argue that no permit was required during the enforcement process or apply for a permit and then seek judicial review if dissatisfied with the permit. The Supreme Court ruled that neither alternative is adequate. Regarding the enforcement risks, the Court ruled that respondents need not assume such risks while waiting for EPA to “drop the hammer” in order to have their day in count. The Court also rejected the apply for a permit and then appeal by stating “the permitting process adds nothing the JD.”

To constitute “final agency Action, two conditions must be satisfied: First the action must mark the consummation of the agency’s decision making process. The Corps’ agreed this condition was satisfied since an approved JD will remain valid for a period of five years. The second requirement is the action must be one by which rights or obligations have been determined, or from which legal consequences will follow. The Court held the second condition is also met since the approved JD gives rise to “direct and appreciable legal consequences.” The Court noted under an agreement with the EPA, that a “negative” JD stating that a property does not contain jurisdictional waters will generally bind the Corps and the EPA for five years. The Court stated that it follows that affirmative JDs have legal consequences as well.

This is a very important decision for project developers and landowners. Many projects have not gone forward due to the time and costs associated with obtaining a Section 404 permit from the Corps. The Hawkes decision will now provide opportunities for addressing disputes with the Corps regarding Section 404 permitting issues.