In Victory for Regulated Community, U.S. Supreme Court Allows Review of Clean Water Act Jurisdictional Determinations

In U.S. Army Corps of Engineers v. Hawkes Co., No. 15-290 (U.S. May 31, 2016), the Supreme Court ruled, 8-0, that parties can immediately challenge Corps determinations of federal Clean Water Act (CWA) jurisdiction under the Administrative Procedure Act (APA). Read narrowly, the Court’s decision simply makes it easier for landowners to achieve regulatory certainty and allows them to challenge adverse affirmative jurisdictional determinations without having to undergo an “arduous, expensive, and long” permitting process. Read more broadly, however, the decision may also signal recognition by the Court that practical impacts may justify judicial review of some agency decisions that have their own legal consequences and serious practical effects, although they are but intermediate steps in a longer administrative process.

Background

The CWA governs discharges of pollutants into “waters of the United States.” 33 U.S.C. §§ 1131(a), 1362(7), (12). Generally, any entity that creates or allows discharges of dredged or fill material must obtain a permit under CWA § 404. Discharging without the required permit can lead to severe civil or criminal penalties; the civil penalties alone can be up to $37,500 per day per violation. But obtaining that permit can itself be daunting and costly. According to one survey cited by the Court, the average cost of obtaining an individual “dredged or fill” permit is $271,596 (excluding the cost of any required pollution mitigation measures), and the average time from application to issuance is a jaw-dropping 788 days.

Determining whether a given area contains “waters of the United States” and, thus, is subject to these regulatory requirements is often difficult. During the time period at issue in Hawkes, the Corps defined “waters of the United States” as areas that are occasionally or regularly saturated with water, the “use, degradation, or destruction of which could affect interstate or foreign commerce.” 33 C.F.R. § 328.2(a)(3) (2012). To aid landowners in determining whether their land is subject to CWA jurisdiction, by regulation the Corps issues “jurisdictional determinations (“JDs”). 33 C.F.R. § 331.2 and pt. 331 App. C (2015). An approved JD states the Corps’ view on whether the land contains waters of the United States. An approved JD is binding on the government for a period of five years.¹

In Hawkes, three peat-farming operations in Minnesota requested a JD from the Corps related to a potential CWA § 404 permit. The Corps determined that the land in question contained waters of the United States and that the companies would, therefore, have to obtain a permit before proceeding with their peat-farming operations. The companies challenged the Corps’ approved JD under the APA. The district court dismissed the case for lack of subject matter jurisdiction, holding that the approved JD was not final agency action and therefore not reviewable. 963 F. Supp. 2d 868, 872, 878 (D. Minn. 2013). The Eighth Circuit reversed, 782 F.2d 994, 1002 (2015), and the Supreme Court granted certiorari.

The Supreme Court Decision

The Supreme Court unanimously affirmed the Eighth Circuit’s decision, holding that the JD constitutes final agency action and is, therefore, reviewable under the APA. The Court also rejected the Corps’ argument that, because alternative means of review are available at a later time, the plaintiffs could not immediately challenge the JD under the APA.

Only “final” agency actions may be challenged under the APA. In Bennett v. Spear, 520 U.S. 154 (1997), the Court held that the finality requirement is satisfied if the agency action meets a two-pronged test:

1. The challenged action marks the consummation of the agency’s decision-making process.
2. The challenged action determines rights or obligations, or legal consequences flow from it.

In Hawkes, the Corps conceded the first prong: that an approved JD marks the consummation of its decision-making process, but argued that it is still not final for purposes of judicial review because it does not determine any rights or obligations, and because no legal consequences flow from it. The Corps also argued that APA review is not available for an approved JD because there are two adequate alternatives to such review in court: Plaintiffs could (i) apply for a permit and then challenge the permit conditions in court under the CWA, or (ii) proceed with operations without a permit and wait to challenge the Corps’ or EPA’s attempts to levy civil or criminal penalties against them.

Although the Corps had not contested satisfaction of the first prong of the Bennett test, the Court’s opinion, authored by Chief Justice Roberts, gave some helpful explanation of what made that action the consummation of an agency’s decision-making process. He noted that the JD’s issuance followed extensive fact finding, that the Corps does not typically revisit an approved JD once made, and that the Corps’ own regulations describe an approved JD as a “final agency action.”

Addressing the second prong, the Court held that an approved JD gives rise to “direct and appreciable legal consequences.” The Court reasoned that if the JD had found that the plaintiffs’ land was not subject to the CWA (a “negative JD” in Corps parlance) the Corps would have been barred by its own regulations from changing its position for five years, absent new information. And, under a memorandum of understanding (MOU) between the Corps and EPA, EPA would also be bound by the determination.² Indeed, the recipient of a negative JD enjoys a five-year safe harbor from government enforcement under the CWA, which the Court found to be an obvious legal consequence flowing from the JD. It follows, the Court held, that a positive JD – such as the one at issue in Hawkes – has the legal consequence of depriving the applicant of that safe harbor. The Court emphasized that its conclusion that legal consequences flow from an approved JD tracks the “pragmatic” approach to finality that the Supreme Court has long taken. In her concurring opinion, Justice Ginsburg further emphasized that an approved JD meets the second Bennett factor because it has an “immediate and practical impact.”

As to the Corps’ argument that the plaintiffs could challenge the jurisdictional determination by either applying for a permit and then suing to challenge the permit conditions under the CWA’s judicial review provisions, or by proceeding to discharge and then defend themselves against an enforcement action in court, the Court found neither to be adequate. The permitting process is, in the Court’s words, “arduous, expensive, and long” and “adds nothing to the JD.” Waiting for an enforcement action, on the other hand, would expose plaintiffs to serious civil and criminal risk they need not assume to get their day in court, following the holding in Abbott Laboratories v. Gardner, 387 U.S. 136, 153 (1967). The APA includes a presumption of reviewability, the Court wrote, which the two review options identified by the Corps do not overcome.

In a concurring opinion, Justice Kennedy, joined by Justices Thomas and Alito, emphasized their concern with the vagueness and “systemic consequences” of the CWA and stated that the CWA, especially without the JD procedure if the Government decides to foreclose it, “continues to raise troubling questions regarding the Government’s power to cast doubt on the full use and enjoyment of private property throughout the Nation.”

Implications

The Court’s decision in Hawkes bolsters the JD process’s utility in providing regulatory clarity to landowners and others who may otherwise risk government CWA enforcement. It ensures that such parties can seek and then challenge an approved JD, without first spending the time and money on a permit application or taking the risky course of discharging without a permit and then awaiting potential enforcement action. The avenue for immediate review provided by Hawkes may prove even more important should the government’s new, more expansive jurisdictional regulations (the “Clean Water Rule” or “WOTUS Rule”) – currently stayed while under court review – go into effect.

Justice Kennedy’s concurring opinion may also signal that several of the justices harbor doubts about the legality of the “Clean Water Rule,” because it fails to provide landowners with adequate notice or clarity as to whether they are violating the CWA.

Finally, beyond the CWA, the Supreme Court’s emphasis on a pragmatic approach to the finality doctrine could bolster claims by litigants seeking to review a broad array of agency actions undertaken without notice-and-comment rulemaking. As courts seek to define the limits of the “practical consequences” that yield finality under the second Bennett factor, future litigants will surely cite to the real-world results of agency decisions preceding action forcing orders or penalties. Hawkes’ pragmatic view of these consequences may well expand judicial review of actions under the CWA and, perhaps, increase availability of judicial review under other federal statutes.

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¹ The Corps also issues preliminary JDs, which advise landowners that there may be waters of the United States on their property. Unlike approved JDs, preliminary JDs are not binding on the government.

² In a concurring opinion, Justice Kagan wrote that the MOU between the Corps and EPA was crucial to her analysis as it bound the only two entities authorized to take enforcement action, thereby creating a true safe harbor. In her own concurring opinion, Justice Ginsburg wrote that the MOU was not necessary to the holding.

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