Source: https://www.martenlaw.com/newsletter/20160420-cwa-jurisdictional-determinations
Timestamp: 2019-04-26 00:07:57+00:00

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The current eight members of the Supreme Court recently heard argument in a case regarding whether a party is entitled to judicial review of a jurisdictional determination (“JD”) by the U.S. Army Corps of Engineers (“Corps”). A JD is the agency’s official position on whether a proposed development requires a permit under the Clean Water Act (“CWA”). The case, United States Army Corps of Engineers v. Hawkes Co., Inc. (“Hawkes”), highlights the practical quandary that parties face after receiving a JD stating that the CWA applies. The uncertainty surrounding the jurisdictional reach of the CWA leaves the JD recipient with costly and risky options.
Hawkes presents an extension of the Supreme Court’s 2012 decision in Sackett v. EPA. Sackett held that a party subject to a compliance order under the CWA could obtain “pre-enforcement review” to challenge that order under the APA. In Hawkes, the Eighth Circuit relied heavily on Sackett to conclude that a JD is final agency action subject to judicial review under the Administrative Procedure Act (“APA”). In doing so, the court disagreed with decisions from the Fifth and Ninth Circuits. Based on the tenor of the questions during oral argument, the Court seems to be attempting to balance the practical (and often costly) effects of the Corps’ determination that a CWA permit is necessary against the benefit of transparent guidance from agencies in the context of the CWA and across a range of other government programs.
The Corps has established a regulatory procedure for an “affected party” to obtain the agency’s official JD—i.e., a written determination from the Corps regarding whether a wetland is subject to CWA jurisdiction. For administrative appeal purposes, an approved JD is a “final Corps agency action.” If an approved JD is upheld at the intra-agency appeal, that decision is the agency’s “last word” on whether the project is subject to CWA jurisdiction.
Before the Eighth Circuit’s Hawkes decision, a landowner that had already exhausted its administrative remedies could not appeal an approved JD. Instead, the landowner (or interested party) could only attempt to apply for a permit (even if they believed that effort to be futile), seek judicial review of that permit process if unsuccessful, and/or proceed with the planned project at the risk of criminal or civil enforcement, either by the Corps or a citizen suit.
In the unanimous 2012 Sackett decision, the Supreme Court held that an EPA administrative compliance order issued under the CWA is “final” for purposes of APA judicial review and the CWA does not bar a party from filing suit to challenge such an order before the government initiates an enforcement action. In Sackett, the Court ruled that the compliance order in that case—requiring the petitioners to restore altered wetlands without a permit, subject to $75,000 in fines for non-compliance—constituted “final agency action” under the APA, because it: (1) “determined” the Sacketts’ “rights or obligations” by requiring them to restore the wetlands on their property; (2) exposed them to legal consequences—specifically stiff penalties for non-compliance; (3) and marked the “consummation” of the agency’s decisionmaking process because no further agency review was available. Likewise, the Court concluded the Sacketts had no adequate remedy to challenge the order, because, as EPA conceded, the Sacketts had to wait until EPA brought an enforcement suit to challenge the significant penalties for non-compliance.
The Hawkes case involved a peat miner in Minnesota who sought to expand its operations to an adjacent property. In 2011, the Corps sent Hawkes a preliminary JD stating that the property fell within CWA jurisdiction due to its connection to Red River of the North located “some 120 miles away.” In 2012, Hawkes won an administrative challenge to the JD, in which the hearing officer concluded that the property did not contain jurisdictional wetlands and remanded to the Corps for reconsideration. On remand, the Corps issued a revised JD affirming CWA jurisdiction over the subject property. Hawkes filed suit challenging the JD in federal district court, and the court granted the Corps’ motion to dismiss for failure to state a claim.
The Eight Circuit reversed, concluding that the JD constituted final agency action that was ripe for review under the APA. The court concluded that the revised JD “clearly” met the first Bennett prong—the JD was “final agency action,” because it was the “consummation of the Corps’ decisionmaking process on the threshold issue of the agency’s statutory authority.” According to the court, judicial review would “not disrupt the orderly process of adjudication,” because a party may seek a JD without seeking a permit and vice versa.
The Eight Circuit also concluded that, under the second Bennett prong, the JD was one in which “rights or obligations had been determined” and from which “legal consequences will flow.” The Court overturned the district court’s conclusion that the JD did not place affirmative obligations on or changes in Hawkes’ rights. The Eighth Circuit concluded that the district court “seriously underestimates” the JD’s potential impact by “exaggerating the distinction between an agency order that compels affirmative action, and an order that prohibits a party from taking otherwise lawful action.” According to the Eighth Circuit, although the JD did not force action, it nonetheless required the applicants to decide between: (1) incurring substantial compliance costs through the CWA permitting process; (2) forgoing the proposed activity, even if it is not subject to CWA jurisdiction; or (3) moving ahead with proposed activities at the risk of substantial enforcement penalties. According to the court, immediate judicial review under the APA is warranted because the JD “alters and adversely affects appellants’ right to use their property in conducting a lawful business activity” and agency action (the JD), not the CWA itself, causes these effects.
Moreover, the Eighth Circuit concluded that Hawkes had no other adequate remedy under the APA. The only options of obtaining judicial review were applying for a permit and lodging an appeal if the permit was inevitably denied or moving forward with mining and challenging the resultant lawsuit. Either option would be time-consuming, costly, and potentially expose Hawkes to criminal penalties for a knowing CWA violation if Hawkes moved forward with the action without a permit. The court decried the Corps’ “transparently obvious litigation strategy”—to force Hawkes to abandon the project “without having to test whether [the Corps’] expansive assertion of jurisdiction … is consistent with the Supreme Court’s limiting decision in Rapanos.” Given the “prohibitive costs, risk, and delay of these alternatives,” the court concluded that immediate judicial review of the JD was warranted under the APA.
The Eight Circuit’s decision squarely conflicts with decisions of the Ninth Circuit, Fairbanks North Star Borough v. U.S. Army Corps of Engineers, and Fifth Circuit, Belle Co. v. U.S. Army Corps of Engineers. In the Ninth and Fifth Circuit cases the courts determined that, although a JD is a final agency action, under the first Bennett prong, a JD is not an action by which rights or obligations have been determined or from which legal consequences will flow, under the second Bennett prong. The Ninth Circuit decision was issued pre-Sackett. The Supreme Court denied review of the Fifth Circuit decision in March 2015, less than one month before the Eighth Circuit decided Hawkes. At the Corps’ request, the Supreme Court granted review of Hawkes on December 11, 2015 to resolve the split in the circuits regarding whether a JD constitutes “final agency action for which there is no other adequate remedy in a court,” and is therefore subject to judicial review under the APA.
In its opening brief, the Corps argued that the CWA does not entitle parties to a JD or require that they receive a JD before applying for a permit or moving forward with their projects without a permit. Instead, the Corps voluntarily responds to jurisdictional inquiries to provide parties with guidance regarding whether the CWA applies to particular projects and provides the receiving parties with the opportunity for administrative appeals. The Corps stressed that the agency issues tens of thousands of approved JDs each year, few are appealed, and the issuance of a JD does not affirmatively compel action or influence the penalties issued against parties that move forward with unpermitted discharges that fall within the CWA. The issuance of JDs, according to the Corps, serves the public by providing additional information that the landowner “may find useful in choosing between” whether to discharge without a permit or move forward with a permit application. According to the Corps, informal agency action provides a net public benefit and allowing judicial challenges would have adverse consequences. The Corps stressed that the compliance orders at issue in Sackett stand in stark contrast to the JD in Hawkes, because compliance orders direct landowners to take particular actions and face penalties for non-compliance.
The Corps also argued that, even if a JD is a final agency action, a recipient of the JD is afforded judicial review of a rejected permit or enforcement action. According to the Corps, Congress envisioned that these avenues for judicial review of a JD were sufficient in light of the fact that Congress did not mandate the Corps to issue JDs. The Corps’ brief reiterated that any quandary a landowner finds itself in is a result of the CWA, not the Corps’ decision to voluntarily provide guidance with JDs. The Corps warned the Court that a ruling affording judicial review of JDs could discourage the Corps from providing JDs and have sweeping effects on other agencies that issue similar advisory opinions.
The respondents’ brief began by stating that the Corps conceded that a JD is the agency’s “final word” on jurisdiction and that the practical consequences of a positive JD meet the test under Bennett. For the five-year period in which the Corps’ JD is effective, Hawkes argued, the JD compelled that Hawkes abandon any use of the property, incur the cost of an individual permit, or proceed with the planned action at risk of fines and criminal liability. Hawkes also argued that there was no adequate remedy in court that would justify delaying judicial review, because requiring Hawkes to go through a permit application process would be costly, nonsensical, punitive, and do nothing to resolve the immediate issue of whether the project falls within CWA jurisdiction. Moreover, doing so would undermine the purpose of challenging a JD—i.e., attempting to avoid the “crippling cost and delay” of a permit that might in fact be unnecessary.
The respondents also emphasized that the risk of tens of thousands of dollars in daily penalties and criminal liability from delaying judicial review until after an enforcement action arises is too high to withstand constitutional challenge.
Fifteen amicus briefs were filed on behalf of approximately fifty parties representing dozens of states, local governments, business groups, agricultural groups, and policy groups. All of the amicus briefs supported the respondents and requested the Court to uphold the Eighth Circuit, thereby providing landowners the opportunity to determine the jurisdictional scope of the CWA. The amici highlighted the practical difficulties that their constituents face under the current regime, where CWA jurisdiction is far from clear and the costs of the uncertainty are substantial.
The questioning during oral argument focused on the tension between the legitimate implications of a JD to specific landowners that receive them and the costs to the public that could result from a ruling that affords judicial review to recipients of final, yet advisory opinions from agencies. The Court seemed troubled that this could arise even outside the CWA context.
Generally, the Court was critical of the assertion by counsel for the Corps that a JD does not constitute a final agency action that orders a recipient to take or refrain from taking action, or otherwise alters the recipient’s rights or obligations. The Justices initially focused on questions directed at why a JD does not constitute agency action, where the agency acknowledges that it appears to regard JDs as binding on the government. Counsel for the Corps, Mr. Stewart, opined that the Corps has no legally binding obligation to issue a JD and that a JD does not protect the recipient from a citizen suit if the landowner moves forward without a permit.
Justice Ginsburg inquired about the arduous and expensive process of attempting to obtain a permit where the landowner does not view its project as within the CWA. Mr. Stewart responded that any adversity on that front is owing to the CWA itself. Justice Breyer opined that the prospect of a landowner that receives a JD then incurring substantial costs in pursuing a potentially futile permit or defending an enforcement action for failing to obtain a permit (with potential criminal penalties) “sound like important legal consequences that flow from an order” that the agency views as final. Mr. Stewart responded by distinguishing cases interpreting the Bennett second prong.
Justice Sotomayor asked about the practical ramifications of a ruling holding that a JD is reviewable, to which Mr. Stewart responded that the Corps would simply issue a new policy clarifying the effect of a JD. That possibility led Justice Kagan to ask how to draw lines in the interest of encouraging agencies to continue issuing informal opinions. Justice Kennedy opined that the CWA is unique in the sense that it is “arguably unconstitutionally vague, and certainly harsh in the civil and criminal sanctions it puts into practice.” Justice Kennedy then asked for examples of statutes that similarly “give the affected party so little guidance at the front end.” Mr. Stewart responded that usually a JD is not contested, because in the vast majority of cases it is not a close call. But he stressed that substantial costs could arise if review were available in every instance.
Questions directed at counsel for the Petitioner, Mr. Hopper, began with Justice Sotomayor pointing out that the Corps could simply redefine the effect of a JD. Justice Kagan emphasized that affirming the Eighth Circuit could incentivize agencies to provide less formal opinions in the future. Mr. Hopper explained that the uncertainty regarding the scope of CWA jurisdiction, which is highly dependent on expert work, necessitates a formal process. Justice Ginsburg and Justice Alito inquired about why immediate judicial review should be available after receiving a JD, while an interim judgment from a court finding jurisdiction would not be appealable until final judgment on the entire permitting decision. Justice Kagan emphasized that the JD process is intended to provide assistance to landowners who hope to avoid going through the entire permitting process if jurisdiction is not implicated and questioned whether a JD is merely additional information versus the creation of legal consequences. Justice Alito inquired whether Hawkes believed that the JD process provides the Corps with expanded enforcement powers, because it creates a process whereby landowners inform the Corps that their actions might require a CWA permit. Mr. Hopper agreed, explaining that the uncertainty underlying CWA jurisdiction is the genesis of the problem. Mr. Kennedy attempted to understand the legal effects, as opposed to practical effects, stemming from a JD. Mr. Hopper stated that the increased risk of enforcement stemming from a JD finding that a permit is required is a clear legal effect. Justice Ginsburg questioned whether the possibility of enforcement under the CWA remained regardless of whether the agency issued a JD and Justice Sotomayor suggested that the “prohibitive” cost of pursuing a permit could depend on the financial capabilities of the permit applicant.
On rebuttal, Mr. Stewart reiterated that each year the Corps issues over 50,000 CWA general permits and 3,000 CWA individual permits, the vast majority of which are not unduly costly, and that the unavailability of immediate appeal of a JD is not materially different from the “fundamental precept of our legal system”—i.e., avoiding piecemeal litigation.
Like Sackett before it, Hawkes has the potential to dramatically change the regulatory enforcement landscape under the CWA and ease the regulatory burden for parties seeking permits under CWA § 404. If the Supreme Court affirms the Eighth Circuit, parties outside that circuit will be able immediately to challenge the Corps’ assertion of CWA jurisdiction over their properties, thereby determining the exact scope of CWA jurisdiction before applying for a permit or undertaking development.
For more information, contact any member of our Water Quality or Environmental Litigation practice groups.
 U.S. Army Corps of Eng’rs v. Hawkes Co., Inc., Supreme Court Case No. 15-290.
 Sackett v. E.P.A., 132 S. Ct. 1367 (2012).
 33 U.S.C. §§ 1311(a), 1344; Leslie Salt Co. v. United States, 55 F.3d 1388, 1391 (9th Cir. 1995); United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 123, 106 S. Ct. 455 (1985).
 80 Fed. Reg. 37,054 (June 29, 2015); see also Jeff Kray, Clean Water Act: “Waters of the United States” Rule Faces Political, Legislative, and Legal Challenges, Marten Law Environmental News (June 3, 2015).
 In re E.P.A., 803 F.3d 804 (6th Cir. 2015).
 See, e.g., EPA, Clean Water Rule Litigation Statement, http://www.epa.gov/cleanwaterrule/clean-water-rule-litigation-statement (last visited Jan. 22, 2016).
 33 C.F.R. § 328.3(a)(7)). “The term wetlands means those areas that are inundated or saturated by surface or ground water at a frequency and duration sufficient to support, and that under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions. Wetlands generally include swamps, marshes, bogs, and similar areas.” 33 C.F.R. § 328.3(b).
 33 C.F.R. §§ 320.1(a)(6), 325.9. An “affected party” is “a permit applicant; landowner; lease, easement or option holder (i.e., an individual who has an identifiable and substantial legal interest in the property) who has received an approved JD; permit denial; or has declined a proffered individual permit.” 33 C.F.R. § 331.2; see also JDs, Corps Regulatory Guidance Letter 08-02, at 1 (June 26, 2008).
 33 C.F.R. § 320.1(a)(2), -(a)(6); 33 C.F.R. § 331.2.
 Fairbanks N. Star Borough v. U.S. Army Corps of Eng'rs, 543 F.3d 586, 593 (9th Cir. 2008); see also 33 C.F.R. § 331.
 Bennett v. Spear, 520 U.S. 154, 177-78 (1997).
 Sackett, 132 S. Ct. at 1367.
 Hawkes Co. v. U.S. Army Corps of Eng’rs, 782 F.3d 994, 998 (8th Cir.) cert. granted sub nom. U.S. Army Corp of Eng’rs v. Hawkes Co., 136 S. Ct. 615 (2015).
 Id. (citing Columbia Broad. Sys. v. United States, 316 U.S. 407, 422 (1942)).
 Id. at 1001 (citing 33 U.S.C. § 1319(c)).
 543 F.3d 586 (9th Cir. 2008). See also Jessica Ferrell, Ninth Circuit Limits Judicial Review of Wetlands Determinations by Corps of Engineers, Marten Law Environmental News (Oct. 29, 2008).
 761 F.3d 383, 392 (5th Cir. 2014) cert. denied sub nom. Kent Recycling Servs., LLC v. U.S. Army Corps of Eng’rs, 135 S. Ct. 1548 (2015).
 See Kent Recycling Services, LLC v. U.S. Army Corps of Eng’rs,135 S. Ct. 1548 (cert. denied Mar 23, 2015).

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