On May 31, 2016, the U.S. Supreme Court, in U.S. Army Corps of Engineers v. Hawkes Co., 136 S. Ct. 1807 (2016), unanimously held that a jurisdictional determination (JD) issued by the U.S. Army Corps of Engineers (Corps) identifying the extent of “waters of the United States” (WOTUS) under the Clean Water Act (CWA or Act) may be judicially challenged. This is an important decision for public and private sector entities engaged in land use and development. The Hawkes decision, combined with the Court’s earlier decision in Sackett v. EPA, 132 S. Ct. 1367 (2012), allow entities to challenge claims of CWA jurisdiction by the Corps and the U.S. Environmental Protection Agency (EPA). Hawkes is also a shot across the bow that should give EPA pause on continuing efforts to expand the scope of CWA jurisdiction via the WOTUS rule and claimed CWA regulatory authority over pollutants entering groundwater.
The CWA prohibits “the discharge of any pollutant” without a permit into “navigable waters,” which it defines, in turn, as WOTUS. See 33 U.S.C. §§ 1311(a), 1362(7), (12). The government has expanded this definition, via administrative rules and guidance, to extend to numerous features including ponds, swamps, ephemeral washes, and wetlands. In order to comply with the CWA, project proponents must determine whether a site includes WOTUS and, if so, obtain a CWA § 404 permit. See 33 U.S.C. § 1344. It is often difficult to determine whether WOTUS are present but, if so, there can be severe consequences if a permit is not obtained. Consequences can include injunctive relief requiring restoration and/or mitigation, penalties up to $37,500 per day, per violation, and criminal penalties. See U.S.C. § 1319(b)–(d), (g).
The Supreme Court has recognized that the scope of the CWA is “notoriously unclear.” Sackett, 132 S. Ct. at 1375 (Alito, J., concurring). This is especially true for the scope of WOTUS and the CWA § 404 regulatory program. See e.g., Solid Waste Agency of N. Cook Cnty. v. U.S. Army Corps of Engineers, 531 U.S. 159 (2001); Rapanos v. United States, 547 U.S. 715 (2006). Features the government may claim are “wetlands” may not appear to be features subject to CWA jurisdiction to the untrained eye. As the Supreme Court has noted, “the 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.” United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 132 (1985).
Because it can be difficult to identify WOTUS, project proponents can ask the Corps to issue JDs. See 33 C.F.R. § 331.2. There are two types of JDs: a preliminary JD (PJD), which is a nonbinding determination, and an approved JD (AJD). An AJD is an “official determination that there are, or that there are not, jurisdictional [WOTUS] on a site . . . [and] precisely identifies the limits of those waters . . . [and] can be relied upon by a landowner, permit applicant, or other ‘affected party’ . . . for five years.” Corps, Regulatory Guidance Letter No. 08-02 (June 26, 2008) at 1, 2, 5. Because an AJD is an “official determination,” it is “binding on the Government and represent[s] the Government’s position in any subsequent Federal action or litigation.” Memorandum of Agreement Between the Dep’t of the Army and EPA § VI-A (Jan. 19, 1989).
In Hawkes, the Corps issued an AJD finding the property contained WOTUS because its wetlands had a “significant nexus” to a navigable water located 120 miles away. Hawkes Company, the owner of the property, disagreed and sought judicial review of the AJD under the Administrative Procedure Act (APA). See 5 U.S.C. §§ 500 et seq. The district court dismissed the claim, finding no “final agency action,” but the U.S. Court of Appeals for the Eighth Circuit reversed, setting up a split in the circuits. See, e.g., Fairbanks N. Star Borough v. U.S. Army Corps of Eng’rs, 543 F.3d 586 (9th Cir. 2008).
Agency action is reviewable by a court under the APA if the action is “final” and there are no adequate alternatives to APA review. See 5 U.S.C. § 704. In Bennett v. Spear, the Supreme Court set out two conditions that generally must be met for an agency action to be “final.” 520 U.S. 154, 177–78 (1997). The action must (1) “mark the consummation of the agency’s decisionmaking process” and (2) “must be one by which rights or obligations have been determined, or from which legal consequences will flow.” Id.
In Hawkes, the Supreme Court concluded that AJDs satisfy the APA “finality” requirement, because AJDs are definitive and give “rise to ‘direct and appreciable legal consequences’” by binding the Corps and EPA and warning of significant penalties for disturbing jurisdictional areas. See Hawkes, 136 S. Ct. at 1810, 1812, 1814–15. Further, the Supreme Court rejected as inadequate the alternatives to APA review that the Corps advocated (i.e., either discharge material without a permit, risking an enforcement action, or apply for a permit and seek judicial review). Id. at 1815–16. The Court noted that the permitting process can be “arduous, expensive, and long,” id. at 1815, taking, on average, over two years and costing almost $300,000. Id. at 1812. In addition, the Court concluded that CWA penalties are “serious” and a landowner “need not assume such risks while waiting for EPA to ‘drop the hammer’ in order to have their day in court.” Id. at 1815.
Hawkes provides the public with an avenue to contest CWA jurisdiction short of completing the arduous permitting process. Whether it makes strategic sense to pursue this option will be influenced by the context in which the AJD is issued. If no work has yet been performed and an AJD is issued finding CWA jurisdiction, the decision may be straightforward: either accept the claimed scope of jurisdiction and apply for a permit, or challenge the AJD. Even if the assertion of jurisdiction is questionable, a project proponent may seek a permit because completing that process may be faster, cost less and provide more certainty. Further, the Corps may try to minimize its exposure by steering project proponents towards the use of PJDs or deciding to not issue AJDs. If the project proponent does challenge an AJD, the downsides include the expense and time required to exhaust administrative remedies and seek judicial review. In addition, the Corps will likely receive deference on technical conclusions and interpretations of its regulations. If the challenge is only partially successful (i.e., the court only reduces the scope of jurisdictional wetlands), the proponent may still need to obtain a permit to proceed. If the challenge fails, the proponent is back to square one and must apply for a permit.
If the government alleges a CWA violation where work has already started, the proponent’s strategic calculation over whether to request an AJD may be complex. Issuance of an AJD confirming jurisdiction will force the project proponent to decide whether to challenge the AJD or wait for an enforcement action. Challenging an AJD takes time, and delaying resolution may increase the proponent’s risk because the government takes the position that every day dredged or fill material remains in place is a continuing violation (i.e., one day of discharge could result in hundreds of days of violations). This may not be a concern if the allegations are small in scope and the matter is ultimately resolved through an administrative settlement. Challenging the AJD risks forcing the hand of the government and prompting enforcement by the U.S. Department of Justice. This could expose a project proponent to injunctive relief and higher penalties than would have been levied if the matter had been settled administratively.
The substantive implication of Hawkes—AJDs are final agency action subject to judicial review—is straightforward. However, the long-term importance of the case may not be in the holding but in Justice Kennedy’s concurring opinion. Justice Kennedy wrote, “[B]ased on the Government’s representations in this case, the reach and systemic consequences of the Clean Water Act remain a cause for concern.” Hawkes, 136 S. Ct. at 1816. Justice Kennedy notes that “the Act’s reach is ‘notoriously unclear’ and the consequences to landowners even for inadvertent violations can be crushing.” Id. Kennedy goes on to say that “[t]he 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.” Id. at 1817.
Justice Kennedy’s concurring opinion in Hawkes raises significant concerns about the breadth of CWA jurisdiction claimed by the government and may be a warning that the government has overplayed its hand. The most obvious example is the WOTUS rule. See 80 Fed. Reg. 37,054 (June 29, 2015). The preamble to the rule is littered with citations to Justice Kennedy’s opinion in Rapanos justifying the more controversial aspects of the rule (e.g., the definition of “adjacent waters” and waters with a “significant nexus”). See 80 Fed. Reg. at 37,084, 37,093. The implications of Justice Kennedy’s warning in Hawkes may be apparent when the Sixth Circuit addresses the merits of the WOTUS rule. The Sixth Circuit’s stay in In re EPA, 803 F.3d 804 (6th Cir. 2015), issued prior to Justice’s Kennedy’s Hawkes concurrence, already states that “it is far from clear that the new Rule’s distance limitations [associated with adjacent waters] are harmonious with the instruction” from Justice Kennedy in Rapanos. Id. at 807.
The WOTUS rule is not the only proposed expansion of CWA jurisdiction that may run afoul of Justice Kennedy’s warning in Hawkes. EPA is now arguing that discharges to groundwater can be subject to CWA jurisdiction. EPA stated in a recent Ninth Circuit amicus curiae brief that “a discharge from a point source to jurisdictional surface waters that moves through groundwater with a direct hydrological connection comes under the purview of the CWA’s permitting requirements.” Brief for the United States as Amicus Curiae in Support of Plaintiffs-Appellees at 5, County of Maui v. Hawai’i Wildlife Fund, No. 15-17447 (9th Cir. appeal docketed Dec. 15, 2015). EPA has gone so far as to say that residential septic systems may be subject to NPDES permitting requirements. See Memorandum in Support of Defendant’s Motion for Summary Judgment at 19, Conservation Law Found. v. EPA, No. 10-11455, 964 F. Supp. 2d 175 (D. Mass. 2013). This is the type of expansive jurisdictional claim that Justice Kennedy appears to be warning about in Hawkes. The next time the federal government is before the Supreme Court defending its claim of CWA jurisdiction it may find an unreceptive bench.