U.S. Supreme Court Agrees to Decide Important Case Affecting Development in Wetlands
A critical part of the permitting process for many development projects is obtaining federal and state wetland permits. The key wetland authorization is usually a Section 404 permit from the U.S. Army Corps of Engineers (Corps), which is a required Clean Water Act permit for any discharge of dredged or fill material into jurisdictional waters and wetlands of the United States. This authorization is based on an Approved Jurisdictional Determination (JD) that specifies the nature, location and extent of the jurisdictional areas on the development site. After a conflict recently emerged in the federal circuit courts, the U.S. Supreme Court agreed on December 11, 2015 to decide whether an applicant for a Corps 404 permit can immediately challenge in court a Corps JD without first trying to obtain a permit based on an unacceptable delineation or proceeding without a permit (thereby inviting an enforcement action).
It is often important to determine the existence and extent of jurisdictional waters and wetlands on a development site as early as possible. This threshold determination can provide important input into where to site project features and establish whether and to what extent wetland permits will be needed from the Corps or State authorities. A landowner or developer will often retain a wetlands consultant to survey the site, prepare a proposed jurisdictional delineation and submit it to the Corps for verification. The Corps will usually make a site visit, either approve or modify (sometimes substantially) the submitted document, consult with the U.S. Environmental Protection Agency (EPA) if needed, and then approve a JD as valid for a five-year period. The Corps JD can play an important role because it can have the effect of limiting or preventing development or restricting land uses.
Traditionally, a landowner or developer cannot immediately challenge a JD in court. Although the Corps has an administrative appeal process for contesting JDs (33 C.F.R. § 331 (2011)), the Corps’ decision in such appeals cannot be appealed to a court. Rather, to obtain judicial review, an applicant must continue through the lengthy permitting process and obtain a permit based on the unacceptable delineation, or be denied a permit, before contesting Corps JDs. Alternatively, an applicant can take the risky course of filling or excavating potential wetland areas without a permit, which can trigger a Corps or EPA enforcement action for injunctive relief and civil or criminal penalties, but which can also provide a legal platform to challenge the underlying JD.
Several recent decisions in federal circuit courts have addressed whether JDs can be judicially challenged. The settled judicial view for several decades was that a JD is not immediately appealable because it does not constitute a “final agency action” under the Administrative Procedure Act, 5 U.S.C. § 704 (1966). The continued application of this doctrine was called into question by the Supreme Court’s decision in Sackett v. Environmental Protection Agency, 132 S. Ct. 1367 (2012), in which the Court held that the Corps’ issuance of an administrative compliance order was a final agency action subject to immediate judicial review, contrary to several decades of contrary precedent.
Several post-Sackett decisions reaffirmed the parallel long-standing legal precedent denying judicial review of a JD. See, e.g., Belle Co. v. United States Army Corps of Eng’rs, 761 F.3d 383 (5th Cir. 2014). However, in April 2015, the Eighth Circuit adopted a new approach premised on Sackett, holding that JDs that had completed the Corps administrative review process were final agency actions that could be reviewed immediately by a federal district court. Hawkes Co. v. United States Army Corps of Engineers, 782 F.3d 994 (8th Cir. 2015). This case involved a business seeking to expand a peat-mining operation in Minnesota that applied to the Corps for a determination that a new property did not contain jurisdictional wetlands. After several rounds of review and one administrative appeal (in which the Corps officer found the record “does not support the [Corps’] determination that the subject property contained jurisdictional wetlands and waters”), the Corps eventually issued a JD concluding that the property areas slated for peat mining did constitute jurisdictional wetlands.
The Eighth Circuit reversed the trial court’s dismissal of the peat-mining operator’s complaint seeking review of the JD, finding that the Corps’ JD decision met the two final agency action requirements: (1) it marked the consummation of the agency’s decision-making process, and (2) the Corps action was one by which rights or obligations were determined or from which legal consequences would flow. The second condition is the one on which all of the prior JD cases had foundered. However, the Hawkes court found that the applicant had effectively received a final decision and clearly had no adequate remedies: “the Revised JD requires appellants either to incur substantial compliance costs (the permitting process), forego what they assert is lawful use of their property, or risk substantial enforcement penalties.”
The Hawkes court observed that the Corps’ actions were 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 – rejected by one of their own commanding officers on administrative appeal – is consistent with the Supreme Court’s [jurisdictional] limiting decision in Rapanos. * * * “In a nation that values due process, not to mention private property, such treatment is unthinkable.”
The Court concluded that “a properly pragmatic analysis of ripeness and final agency action principles compels the conclusion that an Approved JD is subject to immediate judicial review.” The Supreme Court has now granted certiorari to hear the appeal of the Eighth Circuit decision.
The Supreme Court’s resolution of this issue will have a substantial impact on wetland permitting for development projects and other land uses. If the Court extends immediate judicial review to JDs, this could provide a needed relief valve to parties for permitting issues that can halt or dramatically affect project configurations and the cost, extent and timing of permits. The ability to immediately challenge a JD can resolve critical scope, time and costs issues at the outset of the project. Proponents of retaining the current judicial review principles argue that an affirmance of the Hawkes decision would clog the courts with unnecessary litigation and may result in Corps refusals to provide JDs in advance of receiving permit applications. However, from a practical development viewpoint, such a decision would provide important early certainty regarding the presence and scope of wetlands and avoid unnecessary, time-consuming and costly permitting activities.
The Supreme Court will hold oral argument on Hawkes in early 2016 and is expected to decide the case by June 2016.