On May 31, 2016, the Supreme Court ruled in favor of landowners seeking the right to challenge the U.S. Army Corps of Engineers’ (the Corps) wetlands determinations in federal courts. In U.S. Army Corps of Engineers v. Hawkes Co., Inc., 136 S. Ct. 1807 (2016) (No. 15-290), the owner of a peat mining company in North Dakota, Hawkes, sought to expand its operations to wetlands in northwest Minnesota and sell the peat for golf courses, sports turf, landscaping, and gardening. The Corps issued a “jurisdictional determination” (JD), which stated that the wetlands on the Hawkes property were “waters of the U.S.” under the Clean Water Act (CWA) and thus would be subject to costly CWA Section 404 permitting requirements. The Corps argued that its determination could not be challenged in federal courts because it was not a final agency action. The Supreme Court disagreed, upholding the Eighth Circuit ruling that the JD, as issued by the Corps, constituted a final agency action and could be challenged in federal court.
In its analysis, the Court considered two factors to determine whether the JD was a final agency action: (1) whether the action was the consummation of agency decision making and (2) whether the action was one by which rights or obligations had been determined, or from which legal consequences would follow. In applying these factors from Bennett v. Spear, 520 U.S. 154, (1997), the Court focused on a memorandum of agreement (MOA) between EPA and the Corps, which stated that the Corps would treat JDs as binding on the government and that JDs will “represent the Government’s position in any subsequent Federal action or litigation concerning the final determination.” The Court held that, per this language, the JD in this case was a clear consummation of agency action. Additionally, the size of the potential enforcement penalty – up to $37,500 per day – would have legal consequences, because it would significantly impact any business decision to comply with or challenge a JD’s assessment of wetlands. Thus, both factors – consummation of agency decision making and legal consequences – were satisfied in the Court’s opinion. However, the narrow factual grounds on which this determination was made – specifically the provision in the MOA – provide room for doubt about the long-term significance of this opinion. For example, it is unclear if the MOA could be changed such that JDs would not constitute a final agency action at a future date. Accordingly, the Court’s ruling in Hawkes was a narrower victory for challengers than it might seem at first glance. Nevertheless, until such time as the Corp revises its MOA, landowners challenging JDs will enjoy greater access to courts and be able to challenge wetlands determinations earlier in the development process.