U.S. Supreme Court Expands Judicial Review of Clean Water Act Enforcement Orders

On March 21, 2012, the U.S. Supreme Court issued an important ruling addressing the enforcement authority of the U.S. Environmental Protection Agency (“EPA”) under the federal Clean Water Act.  Sackett v. U.S. Environmental Protection Agency, 2012 WL 932018 (March 21, 2012).  In a case involving an Idaho couple starting to construct a home on a small lot, the Court unanimously held that they were entitled to obtain early federal court review of an EPA compliance order asserting that they had illegally filled wetlands on their property.  The ruling supersedes several decades of contrary lower-court precedent.

The Sacketts own a residential lot near Priest Lake, Idaho and, after receiving a county permit, placed dirt and rock on the property to build a house.  They were then served with a compliance order from EPA, which asserted that they had filled jurisdictional wetlands on their property and ordered them to immediately restore the site pursuant to an approved work plan.  EPA denied the Sacketts a hearing on this order and the Sacketts sued in federal court for review of the order claiming that EPA’s action was arbitrary and capricious and denied them due process.  The trial court dismissed the case for lack of jurisdiction, ruling that a compliance order was not judicially reviewable because of the “no pre-enforcement review” doctrine; this ruling was affirmed by the United States Court of Appeals for the Ninth Circuit. 

EPA and the U.S. Army Corps of Engineers (“Corps”) have a robust menu of enforcement options under the Clean Water Act.  EPA often utilizes a section 309(a) compliance order, which usually asserts that an illegal fill of a jurisdictional water or wetland has occurred and which may direct the recipient to stop all activity in such areas, to remove the fill or to take certain specified (and often expensive) actions in response.  The Clean Water Act does not explicitly address judicial review of a compliance order, but federal courts have uniformly adopted the federal government position that such orders are not reviewable by the courts unless or until an enforcement action is filed.  Thus, a recipient of the order is often in the untenable position of either complying with a federal government order that it believes is factually or legally incorrect or refusing to comply and then waiting for EPA to file a judicial enforcement action in which it is exposed to large penalties.

As a result, a Clean Water Act compliance order has become a powerful EPA enforcement tool.  Since many order recipients do not have significant resources and/or do not want to provoke a federal court enforcement action (which can be expensive to defend and in which the agencies may try to seek daily penalties of up to $75,000 per day for the original violation and the refusal to comply with the order), they often have no practical choice but to voluntarily comply with the compliance order without ever having the opportunity to contest the underlying violation.  According to the Sacketts, the cost of complying with the order would have cost more than they paid to purchase the land.

The Supreme Court Justices often take fragmented positions in their environmental case decisions.  They issued a unanimous opinion here, however, which strongly criticized the government’s “no pre-enforcement review” approach.  In his opinion for the Court, Justice Scalia wrote, “there is no reason to think that the Clean Water Act was uniquely designed to enable the strong-arming of regulated parties into ‘voluntary compliance’ without the opportunity for judicial review. . . .” 

The Court unanimously found that the compliance order qualified as a “final agency action” subject to judicial review and that the Clean Water Act does not preclude that review.  The Court also wanted to preserve judicial review in the wetlands enforcement arena because of the well-known problems in determining exactly what constitutes a jurisdictional wetland.  Thus, Justice Alito observed in a concurring opinion that “[t]he reach of the Clean Water Act is notoriously unclear” and that “[a]llowing aggrieved property owners to sue under the Administrative Procedure Act is better than nothing, but only clarification of the reach of the Clean Water Act can rectify the underlying problem.”

The Sackett decision certainly has its limitations.  The Court did not address the question of whether, at this pre-enforcement stage, the Sacketts could challenge not only EPA's authority to regulate their land under the Clean Water Act but also the actual terms and conditions of the compliance order.  It also did not determine whether the Sacketts had discharged material into waters of the United States – rather, it remanded the case to the lower courts to address this jurisdictional question.  The Court also did not reach the issue of whether there is a constitutional due process right to such pre-enforcement judicial review. 

This ruling will have serious ramifications for Clean Water Act enforcement.  EPA will likely place less reliance on compliance orders because it will need to conduct a more extensive investigation to support them and prepare a thorough administrative record on which it can defend the order in litigation.  The ruling is also likely to change the “dynamics” surrounding alleged violations because EPA and the Corps will probably rely more on less coercive tools for notifying parties of alleged violations, which could lead to early and more collaborative discussions and accompanying resolutions.  Although the recipient will have the ability to challenge compliance orders in court, EPA and the Corps may file enforcement counterclaims that “up the ante” in such litigation, thereby creating an additional litigation risk for compliance order recipients who choose the judicial review route. 

One important open question is whether parallel compliance order provisions in other federal environmental statutes that do not have explicit pre-enforcement bars – such as the Resource Conservation and Recovery Act and Clean Air Act – will also be similarly interpreted by the Courts to be judicially reviewable.  The Sackett decision provides an excellent legal basis for such an argument.

Nonetheless, in the short term, the Sackett ruling represents a resounding ruling in favor of granting access to the courts for judicial review of Clean Water Act compliance orders.