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June 01, 2016 Practice Points

Supreme Court Holds Wetlands Jurisdictional Determinations Are Appealable

Landowners with real property in or near a water of the United States are likely to benefit from the Court's recent decision.

By Stewart D. Fried – June 1, 2016

Landowners with real property in or near a water of the United States are likely to benefit from the U.S. Supreme Court’s May 31 decision in U.S. Army Corps of Engineers v. Hawkes Co., Inc. Hawkes resolved whether an approved jurisdictional determination by the Army Corps of Engineers (approved JD) involving wetlands owned by a peat-mining company in Minnesota is an appealable final agency action under the Administrative Procedure Act (APA). In a victory for property rights, the Supreme Court unanimously held that landowners may appeal approved JDs under the APA to federal district court.

During December 2010, Hawkes applied to the Army Corps for a permit under section 404 of the Clean Water Act (CWA), which would permit it to mine high-quality peat for use in golf greens from those portions of a 530-acre tract believed to contain wetlands. Prior to ruling on the permit application, an Army Corps employee advised Hawkes that pursuing it would take years and be very expensive. The Army Corps also advised Hawkes that nine additional information items—likely costing more than $100,000—would be needed, including hydrological and functional resource assessments and an evaluation of upstream potential impacts. In February 2012, the Army Corps issued an approved JD, determining that the tract contained a water of the United States because of its significant nexus with the Red River of the North—about 120 miles away. This significant nexus, according to the Army Corps, was its status as a “Relatively Permanent Water”—a series of culverts and unnamed streams that flowed into the Middle River and then into the Red River of the North.

The landowner appealed the JD under the APA to U.S. District Court for the District of Minnesota which dismissed the case for lack of subject-matter jurisdiction. The district court held that a JD was “not an appealable final agency action for which there is no other adequate remedy in a court.” The Eighth Circuit reversed, holding that the JD was “the consummation of the Corps’ decisionmaking process on the threshold issue of the agency’s statutory authority.” The Eighth Circuit also noted, citing to the Supreme Court’s decision inSackett v. United States, 132 S. Ct. 1367 (2012), that

[t]he prohibitive costs, risk, and delay of these alternatives to immediate judicial review evidence a transparently obvious litigation strategy: by leaving appellants with no immediate judicial review and no adequate alternative remedy, the Corps will achieve the result its local officers desire, abandonment of the peat mining project, without having to test whether its expansive assertion of jurisdiction . . . is consistent with the Supreme Court’s limited decision in Rapanos.

In a unanimous 8–0 decision, the Supreme Court affirmed, concluding that an approved JD is a final agency action under the APA. In an opinion authored by Chief Justice Roberts and joined (in full) by all of the other justices except Justice Ginsburg (who filed an opinion concurring in the judgment and partially concurring in part), the Supreme Court held that an approved JD is not tentative or interlocutory; rather, it is “the consummation of the agency’s decisionmaking process,” and “issued after extensive factfinding by the Corps regarding the physical and hydrological characteristics of the property.” Although the issue was not conceded by the federal government during briefing, the Army Corps’ own regulations note that approved JDs are final agency action. 33 C.F.R. § 320.1(a)(6).

The Supreme Court also determined that an approved JD “gives rise to ‘direct and appreciable legal consequences.’” Jurisdiction determinations generally bind the Army Corps and the EPA in any subsequent federal action or litigation for five years pursuant to a longstanding memorandum of agreement. Negative jurisdictional determinations therefore provide “safe harbor” to landowners from Army Corps and EPA enforcement proceedings. Conversely, affirmative jurisdictional determinations “represent the denial of the safe harbor that negative JDs afford” and also warns landowners that “if they discharge pollutants onto their property without obtaining a permit from the Corps, they do so at the risk of significant criminal and civil penalties.” During 2012, the Supreme Court held that saddling landowners with the Hobson’s choice of risking an EPA enforcement action (and up to $37,500 per day in penalties) or applying for a permit is not an “adequate alternative,” noting that landowners should not need to wait for “EPA to ‘drop the hammer’ in order to have their day in court.” 8-9 (citing Sackett). Similarly, requiring landowners to spend, on average, more than $250,000 and devote more than 2 years, to obtain a permit is not an “adequate alternative to APA review.”

Justice Kennedy, the author of the Rapanos concurrence frequently used by district courts as the appropriate legal yardstick in wetlands cases, crafted a terse concurring opinion joined by Justices Thomas and Alito. Justice Kennedy noted that the Supreme Court previously held that without the right to seek judicial review under the APA following issuances of approved JDs, the “ominous reach” of the “notoriously unclear” Clean Water Act would be “unchecked.” As the swing vote on a heavily divided court, Justice Kennedy’s closing sentence may be indicative of his vote in future wetlands cases: “The Act . . . continues to raise troubling questions regarding the Government’

Stewart D. Fried is with Olsson Frank Weeda Terman Matz PC in Washington, D.C.

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