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Sugarman: SCOTUS affirms wetland determinations subject to review

September 7, 2016
Sugarman Sugarman

By Bradley R. Sugarman

On May 31, the United States Supreme Court once again unanimously delivered a victory for landowners who wish to challenge wetlands determinations handed down by the federal government. In U.S. Army Corps of Engineers v. Hawkes Co., Inc., 136 S.Ct. 1807, the court held that a “jurisdictional determination” made by the United States Army Corps of Engineers is a “final agency action” subject to judicial review. But before turning to a discussion of Hawkes and its implications, we must revisit an earlier Supreme Court decision, Sackett v. EPA, 132 S.Ct. 1367 (2012).

In Sackett, the court unanimously determined that an Idaho couple, who filled low areas on their residential land in order to build a home, could maintain a federal lawsuit which challenged an “administrative compliance order” issued by the Environmental Protection Agency. EPA’s order had determined that the low areas the Sacketts had filled were federally protected wetlands and then claimed that filling them violated provisions of the Clean Water Act. EPA’s order went on to command the Sacketts to remove the fill or face astronomical fines. Id. at 1369-71.

Despite the clear coercive intent of the order, EPA refused to grant the Sacketts an administrative hearing where they could challenge the agency’s actions, so the Sacketts filed a complaint in federal court seeking judicial review of the agency’s determination. However, the district court dismissed the Sacketts’ complaint reasoning the CWA prohibited “pre-enforcement” judicial review of the order. On intermediate appeal, the 9th Circuit Court of Appeals affirmed the lower court. Id. at 1371. In overturning both courts, the Supreme Court stated, “… there is no reason to think that the [CWA] was uniquely designed to enable the strong-arming of regulated parties into ‘voluntary compliance’ without the opportunity for judicial review — even judicial review of the question whether the regulated party is within EPA’s jurisdiction.” Id. at 1374.

In Hawkes, the Supreme Court has again addressed when an administrative agency’s wetland determination can be subject to judicial scrutiny. This time the wetland determination was issued by the Corps in what the agency calls a “jurisdictional determination.” The opinion centers on 530 acres of Minnesota property owned by the Hawkes Co. close to its existing peat moss mining operations. Seeking to grow its operations, Hawkes planned to expand mining operations onto the 530 acres, but there was a familiar problem — the tract contained wetlands.

A dispute soon arose between Hawkes and the Corps over whether the wetlands were regulated under the CWA. Hawkes believed the wetlands were too isolated from “navigable waters” to be subject to regulation and, in support, relied on another landmark Supreme Court decision, Rapanos v. United States, 126 S.Ct. 2208 (2006). However, the Corps disagreed and issued a jurisdictional determination that cursorily concluded there was a “significant nexus” between the wetlands and a river located some 120 miles away. Hawkes appealed the determination to the Corps, but while the agency issued a revised determination, its conclusion remained the same.

Just as the Sacketts had done with EPA’s compliance order, Hawkes sought to challenge the Corps’ determination in court. Hawkes’ complaint was received with a similar reaction and was dismissed. However, unlike the intermediate appellate court in Sackett, the 8th Circuit Court of Appeals reversed the dismissal and ruled that Hawkes could file a legal challenge to Corps’ determination. Undeterred, the Corps sought certiorari.

On review, the Corps argued that Hawkes must wait to appeal its jurisdictional determination until the end of the permitting process. This was, after all, the normal administrative course. The Corps then argued that the delay did not prejudice Hawkes because the company could ignore the jurisdictional determination and proceed, without a permit, to mine the peat.

The Supreme Court dismissed the Corps’ arguments. It held that waiting until the permitting process was complete was an inadequate alternative to judicial review because the “permitting process can be arduous, expensive, and long.” The court then dismissed the Corps’ roll-the-die argument, finding that the regulated community should not be forced to “assume the risk” and wait for EPA or the Corps to “drop the hammer” in order to have their day in court.

The court’s decision is significant. Prior to Hawkes, a landowner who had received a jurisdictional determination from the Corps with which it disagreed had two unenviable choices. First, they could proceed at their own risk and if later sued by the government could defend and challenge the jurisdictional determination at that time. This choice carried with it, however, substantial criminal and civil penalties of up to $37,500 for each day they violated the CWA.

Second, the landowner could proceed through the permitting process and challenge the permit, or failure to receive the permit, in court after issuance. The problem with this approach, as noted in Hawkes, is that, on average, EPA takes 313 days to issue a “general” permit which costs landowners, on average, $29,000, while an “individual” permit takes 788 days and costs a mind-blowing $272,000. Thus, one could go through the “arduous, expensive and long” permitting process without any assurance the original jurisdictional determination is even correct.

The Supreme Court’s decisions in Sackett and Hawkes have important practical implications. Landowners now have a clear path to challenge an administrative determination that asserts federal jurisdiction over wetlands or other “waters,” no matter how tenuous these claims may be. EPA and the Corps are preparing for these challenges. In a recent memorandum to EPA Regional Administrators and the Corps’ District Engineers, both agencies underscored that “it is essential that the documentation and administrative record developed to support both positive and negative [jurisdiction determinations] be complete and thorough.”•

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Bradley R. Sugarman is a partner and chair of Krieg DeVault’s environmental practice group. A significant area of his practice has been devoted to defending business clients in toxic tort and complex environmental litigation. The opinions expressed are those of the author.

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