The U.S. Supreme Court has unanimously held that a U.S. Army Corps of Engineers' ("Corps") "approved jurisdictional determination" ("approved JD") under Section 404 of the Clean Water Act ("CWA") is a final agency action judicially reviewable under the Administrative Procedure Act1 ("APA"). The Court's May 31, 2016 decision in United States Army Corps of Engineers v. Hawkes Co., Inc.,2 upheld the Eighth Circuit's reversal of the district court's finding that a Corps' approved JD is not an appealable final agency action.3 The decision does not apply to the Corps' "preliminary JDs," which are commonly used by permit applicants to save time and money where the extent of jurisdictional Waters of the U.S. is limited or is controversial.4 We provided background on this case in our previous alert.5
Why It Matters: Permit applicants and landowners who dispute the Corps' formal finding on the limits of its regulatory jurisdiction on a particular parcel may now appeal that decision and obtain a judicial ruling on an approved JD without first spending time and money (which can be substantial) going through the permit process or an enforcement action. While this ruling may prompt an increase in judicial appeals of JDs, it may also prompt the Corps to revise its Memorandum of Agreement ("MOA")6 with the U.S. Environmental Protection Agency ("EPA") that provided the two agencies would be bound by approved JDs, which was a key consideration in the Court's decision.
However, many permit applicants may continue to utilize a preliminary JD in situations in which the extent of jurisdictional Waters of the U.S. is not a significant issue (i.e., where Waters of the US are not extensive or the jurisdictional boundaries are not questionable or controversial). Use of approved JDs and judicial appeals may increase in situations where applicants face borderline or controversial jurisdictional determinations, and where substantial portions of properties targeted for development may be subject to CWA jurisdiction.
The Court's Reasoning: Chief Justice Roberts authored the Court's opinion, which agreed with the Eighth Circuit that a Corps-approved JD meets the two-part test for final agency actions established in Bennett v. Spear7 because (1) it is the consummation of the agency's decision-making process on the threshold issue of the agency's statutory authority, and (2) it determines rights or obligations and imposes legal consequences.
The Corps did not dispute that an approved JD satisfies the first Bennett prong. The Court found that an approved JD satisfies the second Bennett prong because it gives rise to direct and appreciable legal consequences. The Court noted, for example, that a negative approved JD (stating that a property does not contain jurisdictional waters), which is binding on both the Corps and EPA as agreed under the MOA, provides a five-year safe harbor from enforcement proceedings by either agency if the landowner "discharges pollutants" (which include placement of clean fill) on the property. While the landowner may still be subject to a citizen suit under the CWA, such a suit cannot impose civil liability for violations. Therefore, a negative JD narrows the field of potential plaintiffs and limits potential liability for discharges without a permit. An affirmative JD represents a denial of the safe harbor that negative JDs provide, and warns the landowner that if they discharge pollutants onto their property without a permit, they do so at the risk of significant civil and criminal penalties. In short, because legal obligations flow from such JDs, they constitute final agency action under Bennett.
The Court also found that forcing landowners to seek a permit or submit to an enforcement action are not adequate alternative remedies to APA review in court. The Court noted that enforcement actions can subject landowners to serious criminal liability and civil penalties, including fines of up to $37,500 per day. "Respondents need not assume such risks while waiting for EPA to ‘drop the hammer' in order to have their day in court."8 Further, the permitting process can be long, arduous, and expensive. The Hawke respondents estimated that the Corps' required permitting analyses would cost more than $100,000, and would add nothing to the JD itself. Some permit applicants spend far in excess of that to fulfill the Corps' permit requirements and to build an adequate record to withstand potential challenges from project opponents.
The Justices' Concurrences Signal Likely Directions in Future CWA Cases: Although the Court's decision was unanimous, the Justices filed three separate concurrences, signaling in each the directions the Justices may take in future CWA cases.
Justice Kennedy,9 joined by Justices Thomas and Alito, filed a concurring opinion indicating great concern for "the reach and systemic consequences of the Clean Water Act," noting that the Act "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." Justice Kennedy felt compelled to respond to the Corps' assertion that the MOA between the Corps and EPA, upon which the Court's decision relies, can be revoked or amended at the agencies' unfettered discretion, thus obviating the effect of the Court's ruling. Providing an alternative ground for the Court's ruling, Justice Kennedy noted that the Court was right to "construe a JD as binding in light of the fact that in many instances it will have a significant bearing on whether the Clean Water Act comports with due process." Future Clean Water Act cases may see these justices continue to find grounds to limit and make more predictable the "notoriously unclear" reach of this Act, whose consequences for landowners can be "crushing."
Justice Kagan indicated in her concurrence that, for her, the agencies' MOA and its creation of a safe harbor was central to the disposition of the case by creating direct and appreciable legal consequences that satisfy Bennett's second prong. In the event the Corps and EPA withdraw or amend the MOA to remove the agreement to be bound by approved JDs, Justice Kagan may decide a similar future case differently.
Justice Ginsburg disagreed that the decision relied on the MOA, noting that the agencies appear not to agree on its applicability. Further, Justice Ginsburg found that the JD at issue was definitive, was not informal or tentative, and had an immediate and practical impact, and thus met the finality standards set in cases prior to and not displaced by Bennett.10
The Justices' divergent views set the stage for additional contentious arguments and decisions on this key environmental statute whose reach is both extensive and uncertain.
What the Corps and EPA Might Do Now: The agencies signaled in their briefs and oral argument that they may attempt to vitiate the effect of the MOA, and the Court's decision, by withdrawing or amending the MOA to eliminate the agreement to be bound by approved JDs. They may also consider eliminating the offer to approve standalone JDs, which is not compelled by the statute itself.11
What Landowners and Permit Applicants Should Consider: Applicants and landowners should first consider whether it makes sense to pursue an approved JD in order to bind the Corps and retain appellate rights, or whether proceeding with a preliminary JD is acceptable. The answer will likely depend on a number of factors, including the timing for and potential gain from project development, the extent and uncertainty of occurrence of Waters of the U.S. on the property in question, and the difference in extent of CWA jurisdiction under an approved JD versus a preliminary JD. In many cases, using a preliminary JD will result in obtaining a permit faster and with less cost. An approved JD may be preferable where the extent of CWA jurisdiction may influence project viability, or if the property raises complex or uncertain hydrologic questions under the Court's prior decisions on CWA jurisdiction or the Corps' instructional manuals.
These are issues that landowners and permit applicants should discuss with their legal counsel and regulatory consultants. We are happy to provide advice on these and other permitting considerations.
5 U.S.C. § 704.
2 U.S. S.Ct. No. 13-3067 (filed Sept. 8, 2014).
4 "Approved" JDs are jurisdictional determinations which have been prepared by or formally reviewed and approved by the Corps. Approved JDs may be administratively appealed, and are binding on the Corps for five years. "Preliminary" JDs are advisory in nature, and merely indicate the outer boundaries of what may be jurisdictional Waters of the US based on applicant input without the Corps' express verification. Preliminary JDs are not subject to administrative appeal and are not binding on the agency.
6 Memorandum of Agreement between the Department of the Army and the Environmental Protection Agency Concerning the Determination of the Section 404 Program and the Application of Exemptions Under Section 404(f) of the Clean Water Act (January 19, 1989), available at: https://www.epa.gov/cwa-404/memorandum-agreement-exemptions-under-section-404f-clean-water-act.
7 520 U.S. 154, 178 (1997).
8 Hawkes, Slip. Op. at 9.
9 Justice Kennedy was the author of the plurality opinion in Rapanos v. United States, 547 U.S. 715 (2006), which established the predominant "significant nexus" standard for determining the extent of jurisdictional waters in tributaries and adjacent wetlands.
10 E.g., Abbot Laboratories v. Gardner, 387 U.S. 136, 151 (1967) and Frozen Food Express v. United States, 351 U.S. 40, 44 (1956).
11 The Corps' Regulatory Guidance Letters RGL 08-02 and RGL 07-01 regarding approved and preliminary JDs are available here.