Landowners, Developers Win Big In Wetlands Case

Building on a 2012 U.S. Supreme Court decision, the Eighth Circuit ruled on April 10th that Clean Water Act jurisdictional determinations made by the U.S. Army Corps of Engineers can be challenged in a “pre-enforcement” context. Hawkes Co., Inc. v. U.S. Army Corps of Engineers, No. 13-3067, __ F.3d __,  (8th Cir. April 10, 2015). The decision will provide project developers and landowners with a powerful tool for ensuring that regulators do not intrude on projects over which they have no jurisdiction.

Section 404 of the Clean Water Act (“CWA”) requires obtaining a permit from the U.S. Army Corps of Engineers (the “Corps”) to discharge dredged or fill materials into “navigable waters.” 33 U.S.C. § 1344. The CWA defines “navigable waters” to mean “waters of the United States.”  33 U.S.C. § 1362(7). The Corps and EPA have broadly construed “waters of the United States”  to apply to many non-navigable waterbodies, including certain wetlands not connected to a surface water. As a result, the scope of “waters of the United States,” and therefore the bounds of federal jurisdiction under the CWA,  has been a highly contentious issue, and the subject of several Supreme Court decisions and ongoing federal rulemaking.

In Hawkes, the affected landowners—owners of a peat mine—contended that the Corps had exceeded its jurisdictional authority by classifying a wetlands as “waters of the United States” subject to the CWA. Such a determination by the Corps can spell the death knell for a proposed project because an “average applicant for an individual Corps permit ‘spends 788 days and $271,596 in completing the process.’” Hawkes, slip op. at 10, quoting Rapanos v. United States, 547 U.S. 715, 721 (2006). In Hawkes, the situation was worse—Corps regulators had “repeatedly made it clear” that a permit to mine peat would ultimately be refused. Hawkes, slip op. at 10.

Previously, persons or businesses seeking to challenge a jurisdictional determination faced a no-win situation: they had to “either to incur substantial compliance costs (the permitting process), forego what they assert is a lawful use of their property, or risk substantial enforcement penalties.” Hawkes, slip op. at 8. The delays inherent in the Corps’ permitting process meant that if the challenger lost the lawsuit disputing the jurisdictional determination, the challenger could be subject to extremely high fines because the CWA authorizes penalties of $37,500 per day per violation.

The Supreme Court’s decision in Sackett v. U.S. Environmental Protection Agency set the stage for the Hawkes decision. In Sackett, the Supreme Court held that a jurisdictional determination is a final agency action subject to judicial review, and that the CWA does not preclude pre-enforcement judicial review of administrative compliance orders issued by the agency to the landowner. 566 U.S. ___, 132 S. Ct. 1367 (2012). The Hawkes decision takes the Sackett decision one step further by holding that the CWA allows these jurisdictional determinations to be challenged even before the agency commences any enforcement action, administrative or otherwise.

Outlook

The Hawkes decision creates a circuit split because a prior Fifth Circuit case determined that jurisdictional determinations are not reviewable in court in a pre-enforcement context. See Belle Co., LLC v. U.S. Army Corps of Eng’rs, 761 F.3d 383 (5th Cir. 2014), cert denied, 83 U.S.L.W. 3291 (Mar. 23, 2015) (No. 14-493). Given the Supreme Court’s decision in Sackett, the circuit split on a topic of significant controversy, and the Court’s consistently strong interest in CWA jurisdiction—see United States v. Riverside Bayview, 474 U.S. 121 (1985), Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, 531 U.S. 159 (2001), and Rapanos v. United States, 547 U.S. 715 (2006)—review by the U.S. Supreme Court is a distinct possibility.

- Josh Bloom and Dave Metres

For more information, contact David Metres at (415) 228-5400 or [email protected].