On March 30, the US Supreme Court heard oral argument regarding whether an agency’s jurisdictional determination that a 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.

In 2012, the US Army Corps of Engineers (Corps) issued a jurisdictional determination that 530 acres of land in Minnesota contained waters of the United States, which meant that Hawkes Co., Inc. had to obtain a dredge and fill permit under Section 404 of the CWA in order to conduct mining operations on the land or risk enforcement. Hawkes seeks to challenge the jurisdictional determination in court without undergoing the lengthy permit process. The government claims a jurisdictional determination is not final agency action subject to judicial review under the APA. For further background on the case, see our December 15, 2015 publication.

The oral argument focused on whether the Corps jurisdictional determination meets the second condition of the Supreme Court’s test for identifying final agency action in Bennett v. Spear, 520 U.S. 154 (1997) – namely, whether the agency action determines rights or obligations or gives rise to legal consequences. Malcolm Stewart of the Department of Justice argued that the Corp’s opinion regarding whether certain land contains jurisdictional waters does not constitute final agency action because “it does not order any person to do or refrain from doing anything and does not alter anyone’s legal rights and obligations.” Several members of the Court appeared unconvinced, questioning whether the Corps treats the jurisdictional determination as binding. Mr. Stewart argued the determination is not binding on the landowner, who is free to disregard the Corps’ view and conduct the dredging activities. Chief Justice Roberts noted such course of action would be “a great practical risk.” Mr. Stewart responded that the other alternative is for the landowner to seek a permit. Justice Ginsburg replied that the permit process is “very arduous and very expensive.” Justice Breyer later summed up the alternatives:

One, spend $150,000 to try to get an exception and fail, or two, do nothing, violate it, and possibly go to prison. Those sound like important legal consequences that flow from an order that, in respect to the Agency, is final, for it has nothing left to do about that interpretation. And [] is perfectly suited for review in the courts.

Hawkes’ attorney, M. Reed Hopper, also weighed in regarding the permit process, noting that his client was asked to provide more than $100,000 in additional studies and ultimately determined that the permit process was cost prohibitive.

While the Court appeared supportive of allowing landowners to challenge jurisdictional determinations in court, Justice Kagan expressed concern that the decision would open the door to judicial review of all types of informal agency advice, which could ultimately make it more difficult for private individuals to receive useful guidance.

The decision will have national significance, as the Corps Section 404 permit program impacts both large and small developers and a wide range of industries, in part because the agencies administering the CWA have broadly interpreted the scope of protected waters. Of particular note, the US Environmental Protection Agency and Corps issued a rule in May of 2015, which some see as broadening the scope of the agencies’ CWA jurisdiction even further. The rule was challenged by numerous states and industry and environmental groups, and in October the US Court of Appeals for the Sixth Circuit stayed the rule nationwide. Environmental Protection Agency v. Ohio, No. 15-3751. Although the Sixth Circuit has not reached the merits in that case, the expansive scope of the CWA did not go unnoticed during the Hawkes oral argument. Mr. Hopper stated that the CWA is “so broadly interpreted now that it covers virtually any wet spot in the country.” Justice Kennedy noted that the CWA “is unique in both being quite vague in its reach, arguably unconstitutionally vague, and certainly harsh in the civil and criminal sanctions it puts into practice.”