May 31, 2016

US Supreme Court Decides Important Clean Water Act Case and Unanimously Rejects Government Position

Arnold & Porter Advisory

On March 30th, we sent you an Advisory about the oral argument heard that day by the US Supreme Court in United States Army Corps of Engineers v. Hawkes Company, a case raising the issue of whether a Clean Water Act jurisdictional determination (JD) by the US Army Corps of Engineers (Corps) that private property contains "waters of the United States" is subject to judicial review. Following the oral argument, we thought that the Court was likely to decide that such jurisdictional determinations are subject to judicial review, and was likely to do so in a split decision. Well, we were right about the result but not quite the final score, as today the Court unanimously held that jurisdictional determinations are indeed subject to judicial review.

As discussed in our earlier advisory, the determination that a particular parcel of land or water feature is jurisdictional (i.e., contains "waters of the United States") has important, real-world implications and triggers a host of regulatory obligations for land users, including requirements to obtain a permit from the Corps (for discharges of dredged or fill materials) or the US Environmental Protection Agency (EPA) (for discharges of pollutants). These permitting processes can be extremely costly and time-consuming, in some cases prohibitively so. And individuals that opt to use their land without first obtaining a permit risk draconian criminal and civil penalties in government or private enforcement actions.

Rather than risk enforcement action, a landowner may, under existing regulations, ask the Corps for a "jurisdictional determination" – an official Corps' determination as to whether particular land or water features qualify as "waters of the United States." According to the Corps' regulations and guidance, these final jurisdictional determinations constitute "final agency action" for purposes of administrative appeals within the agency, see 33 C.F.R. § 320.1(a)(6), and remain valid for five years. The Corps has historically (until today) taken the position that these jurisdictional determinations are not subject to judicial review. They may take that position no longer.

In a short decision for all eight members of the Court, Chief Justice Roberts explained why an approved JD met the two-prong standard for being "final" agency action under the Administrative Procedures Act (APA), as interpreted in Bennett v. Spear, 520 U.S. 154 (1997). The applicability of the first prong, that "the action must mark the consummation of the agency's decision-making process," had not been disputed by the Corps. The Court found that the second prong – that "the action must be one by which rights or obligations have been determined, or from which legal consequences will flow" – was satisfied as well. The Court focused on the positive effect under a Memorandum of Agreement (MOA) between the Corps and EPA that flows to a landowner from a jurisdictional determination that certain land is not a "water of the United States": "A negative JD . . . binds the two agencies authorized to bring civil enforcement proceedings under the Clean Water Act . . . creating a five-year safe harbor from such proceedings for a property owner." Similarly, "affirmative JDs have legal consequences as well" by denial of the safe harbor.

The Court then considered the argument that "[e]ven if final, an agency action is reviewable under the APA only if there are no adequate alternatives to APA review in court." The Court rejected the Corps' contention that a landowner who did not like the results of a jurisdictional determination could either discharge without a permit or get a permit, finding neither alternative to be adequate. Risking enforcement is simply too risky an alternative: "Respondents need not assume such risks while waiting for EPA to 'drop the hammer' in order to have their day in court." Similarly, the Court concluded that proceeding to obtain a permit was not an adequate alternative because the permitting process is "arduous, expensive, and long."

Finally, the Court rejected the Corps' argument that landowners benefit from the jurisdictional determination process and should not complain (or be able to seek judicial review) of those jurisdictional determinations they do not like because the Government did not have to create the jurisdictional determination procedures in the first place. The Court explained that "such a 'count your blessings' argument is not an adequate rejoinder to the assertion of a right to judicial review under the APA."

There were three short concurrences, by Justices Kagan, Ginsberg and, most interestingly, Kennedy. In the opinion of the Court, Chief Justice Roberts referenced the MOA between the Corps and EPA. The reference to the MOA raises the question of whether EPA and the Corps could simply revoke the MOA so that jurisdictional determinations would then have no formal significance, thereby precluding judicial review. Not so fast, says Justice Kennedy, echoing the remark he made at oral argument questioning whether the Clean Water Act comports with constitutional due process. In his concurrence, Justice Kennedy refers to the Government's statement that the MOA "can be revoked or amended at the Agency's unfettered discretion." But, he responds:

If that were correct, the Act's ominous reach would again be unchecked by the limited relief the Court allows today. Even if, in an ordinary case, an agency's internal agreement with another agency cannot establish that its action is final, the Court is 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.

The Act, especially without the JD procedure were the Government permitted 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.

Whether Justice Kennedy will be able to get five votes to question the constitutionality of the Clean Water Act will likely depend heavily on the identity of the next Justice confirmed to the Supreme Court. But for now, the Court has clearly dealt a heavy blow to EPA, the Corps, and other agencies in their efforts to preclude access to the courts in connection with agency actions that have substantial consequences for regulated parties. With respect to the particular circumstance of jurisdictional determinations, today's decision may encourage Corps officials to reach negotiated resolutions of jurisdictional disputes to avoid the potential burden and cost of judicial review.

How much today's Hawkes decision translates to other environmental scenarios – e.g., challenges to CERCLA administrative orders – may be the next battle looming. A key difference, however, is that CERCLA itself explicitly precludes such "pre-enforcement review" so that challenges seeking such review need to be premised on constitutional rather than statutory grounds. Still, the Court and particularly Justice Kennedy seem concerned about situations in which the government issues edicts with legal and practical ramifications and then resists efforts to have those edicts reviewed by the courts.

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