U.S. Army Corps of Engineers v. Hawkes Co.

1. Background

Imagine you own a plot of land. You may want to build a house on the site. You may want to sell the property. Or, you may want to develop the parcel for some other purpose. As you begin to move forward with your plans, you realize part of the property contains wetlands or a small creek traverses the site. If the wetlands or creek are considered to be within federal Clean Water Act (CWA) jurisdiction, you will need to obtain permission from the federal government before disturbing your land. 

With other laws it is relatively easy to recognize when you need permission from the government; one needs a driver’s license to operate a vehicle or a liquor license to sell alcohol. When it comes to developing your property, however, the reach of the CWA is “notoriously unclear.”[1] Many “wetlands” that qualify for federal protection are not at all like swamps. A wetland may exist even if it is never wet at the surface; the water table need only rise to within 12 inches of the surface a few days each year.[2] The noticeable boundary of a wetland or small creek will change between seasons and may adjust overnight depending on precipitation. “[T]he transition from water to solid ground is not necessarily or even typically an abrupt one . . . [w]here on [the] continuum to find the limit of ‘waters’ is far from obvious.”[3] 

Even if the land in question has the physical characteristics of wetlands, significant uncertainty exists whether the property meets the legal criteria for CWA regulations. The government and the courts have struggled to promulgate a clear definition of what constitutes CWA waters and the Supreme Court’s most recent CWA jurisdictional cases have rejected the agencies’ expansive theories.[4] Thus, the only way to determine whether your property is subject to the CWA is to obtain an official jurisdictional determination (JD) from the U.S. Army Corps of Engineers (the Corps) describing which areas, if any, are jurisdictional and finalizing whether you need a federal permit to develop your property. But what if the recipient of a JD disagrees with the government’s assessment? What if – as the government has shown over the years – the assertion of jurisdiction is incorrect or unlawful?

On Wednesday, March 30, 2016, in the biggest CWA case in a decade, the Supreme Court will hear oral argument regarding whether JD’s may be challenged in court. In U.S. Army Corps of Engineers v. Hawkes Co., the Corps issued a JD asserting jurisdiction over wetlands on a peat mine in Minnesota. The landowners and company disagree with the government’s assertion that the land is subject to federal regulation. The government says the landowner can’t challenge the JD in court, but instead must either apply for a permit or defend himself in an enforcement action. After an Eighth Circuit Court of Appeals decision supporting judicial review, the government appealed the case to the Supreme Court.

Under the Administrative Procedure Act (APA), enacted by Congress in 1946, citizens who are adversely affected or aggrieved by agency action have a legal right to judicial review of that action if the agency action is “final” and “there is no other adequate remedy in a court.”[5] The government argues JDs are not final agency action and that recipients have other adequate remedies.  The respondents in this case, Hawkes Co., and many amici argue JD’s are final agency action and the only adequate remedy is to allow them to challenge the government’s assertion of jurisdiction in court. Unreviewable authority, they argue, breeds extravagant claims of CWA jurisdiction.

2. Legal Analysis

1. JDs Have Immediate Effects That Directly Impact Their Recipients

Supreme Court cases have consistently held that agency action is “final,” and therefore reviewable, if it is definitive and has a direct, immediate, and practical impact on the parties.[6]  In one of the more analogous cases, Frozen Food Express, motor carriers sought judicial review of an Interstate Commerce Commission (ICC) decision that certain commodities did not qualify for an agricultural exemption. The Court noted:

The determination by the Commission that a commodity is not an exempt agricultural product has an immediate and practical impact . . ..[It] warns every carrier, who does not have authority from the Commission to transport those commodities, that it does so at the risk of incurring criminal penalties . . ..The determination . . . is not therefore abstract, theoretical or academic . . ..[It] is, indeed, the basis for carriers in ordering and arranging their affairs.[7]

 

A JD carries a similar warning, and, like the ICC order, becomes the basis for recipients in ordering their affairs. If recipients were to develop their land without a permit they too would face the risk of incurring substantial penalties ($37,500 per day, per violation[8] and imprisonment for up to three years[9]).

The government tries to downplay the importance of JDs in their brief as a “salutary administrative practice” voluntarily undertaken for the benefit of the public. But JDs have significant practical effects. By drawing lines distinguishing jurisdictional areas from non-jurisdictional areas, they drastically alter site development plans. Affirmative JDs generally decrease property value. In one case the appraisal value of land in the Mid-Atlantic was reduced from over $32 million to about $1 million when the Corps determined the land contained jurisdictional waters. Many state and local agencies also rely on JDs to implement their own programs. For example, some states require JDs before issuing water quality certifications and base their fees on the extent of impacts to jurisdictional waters. Therefore, the immediate impact on a landowner is real, and the court should recognize that these effects are sufficient to find final agency action. Moreover, if a landowner believes the JD is incorrect it is important to get it corrected promptly to determine how the property may be used.

2. Judicial Review is the Only Adequate Remedy for an Unlawful JD

The government contends there are two adequate paths to dispute the government’s assertion of CWA jurisdiction. First, the government suggests that the permitting process itself is a remedy. In other words, a landowner who disagrees with the Corps’s JD should apply for a permit, then sue on the permit decision, and litigate the validity of the JD through judicial review of the permit. Second, as an alternative remedy, the government proposes that the recipient of an incorrect JD start construction without a permit, trigger an enforcement action, and then litigate jurisdiction as a defense in an enforcement action. To accept the government’s argument, the Supreme Court would have to redefine the word “adequate.”

The government’s first remedy – pursuing a permit and then challenging the permit in court – assumes that everybody who seeks a JD wants to develop their property immediately. Just go ahead, the government suggests, apply for a permit and see what happens. If the recipient can work with the permit, then nobody will need to address the jurisdictional issue. Aside from the bland indifference to the substantial costs and time associated with the permitting process, this concept makes no sense for a person who seeks a JD, for example, before purchasing a piece of property. Furthermore, the federal permit process is no walk in the park. According to Supreme Court in 2006[10] (and the declaration filed with our brief ), it takes the typical project developer over 788 days to prepare and negotiate an individual permit and costs, on average, $386,392.

The second proposed remedy the government offers is to initiate development without a permit and challenge the JD once an enforcement action is brought. There is a lot wrong with this argument. Primarily, allowing oneself to become the defendant in an enforcement case brings with it the possibility of substantial penalties and will likely tarnish one’s reputation. Also, this argument assumes that the government will initiate an enforcement action that allows for judicial review, but this is entirely within the government’s discretion. As of late, the government has turned to other administrative enforcement tools to elude judicial review.

3. Predictions

In a similar case in 2012, the Court voted 9-0 holding an EPA compliance order was “final agency action.”[11] This bodes well for Hawkes Co., but the facts of this case are different. The compliance order in Sackett directed the recipient to conduct mitigation and open their records to inspection, whereas, here a JD does not direct the recipient to do anything. The government will likely focus on this aspect of a JD, arguing that after receiving a JD the public still has three choices: (1) obtain a permit and continue with the project, (2) move forward with the project without a permit, or (3) abandon the project. The Justices, though, will not be satisfied with this argument. First, it “seems very strange . . . for a party to apply for a permit on . . . the ground that they don’t need a permit at all.”[12] Also, what if the landowner has no current plans to develop the property but rather wants to assess the legal contours of the land to determine its value. Obtaining a permit under these circumstances is nonsensical. Finally, asking the Supreme Court to embrace a remedy that requires a citizen to risk violating the CWA is preposterous and contrary to the rule of law.

Considering the serious, immediate, and practical impacts on the recipient, the Court will likely affirm the Eighth Circuit’s opinion and allow JDs to be challenged in court. This will promote consistency within the agency and hold agency personnel accountable for any misguided determinations. A favorable decision by the Supreme Court would give Hawkes Co. an adequate remedy to challenge the JD in court and would establish an important check nationwide on government assertions of CWA jurisdiction.

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Brian R. Levey is an Associate[13] in the Washington, D.C. office of Hunton & Williams LLP, which filed an amicus brief in support of Hawkes Co. on behalf of the Foundation for Environmental and Economic Progress (FEEP) and the Utility Water Act Group (UWAG).