Last week, the United States Supreme Court held that federal courts can review the Army Corps of Engineers’ determinations that a landowner’s property contains “waters of the United States” and is therefore subject to the Clean Water Act’s regulations and permitting process.  Remarkably, the decision was unanimous in affirming the Eighth Circuit’s decision that such determinations are considered final agency actions under the Administrative Procedures Act and are therefore reviewable by the courts.  The majority opinion in the case, United States Army Corps of Eng'rs v. Hawkes Co., No. 15-290 (U.S. May 31, 2016), was authored by Chief Justice Roberts while Justices Kennedy, Kagan, and Ginsberg each authored separate concurring opinions.  

The Clean Water Act regulates the discharge of pollutants into the “waters of the United States,” which has been defined to include all wetlands which could affect interstate or foreign commerce.  In order to assist landowners in determining whether their property includes “waters of the United States” and is therefore subject to the Clean Water Act, landowners can request a jurisdictional determination (“JD”) from the Army Corps as to whether the property contains such waters.  A JD can be either “preliminary” or “approved.” A “preliminary” JD simply advises whether the Army Corps believes that  such waters “may” be present while an “approved” JD definitively states whether the Army Corps has determined that such waters are present. 

In the instant case, the landowner respondents are three companies engaged in mining peat, an organic material that forms in wetland areas and is used for soil improvement and also burned as fuel.  The landowners sought a Section 404 permit under the Clean Water Act, which authorizes the discharge of dredged or fill material into waters of the United States.  In connection with the permitting process, the Army Corps issued an approved JD stating that the property contained “waters of the United States” because of their “significant nexus” to the Red River of the North, located approximately 120 miles away.

The landowners sought judicial review of the approved JD, but the District Court dismissed the suit after finding the JD did not constitute a “final agency action for which there [was] no other adequate remedy in a court,” as required by the Administrative Procedures Act (APA) for judicial review.  The Eighth Circuit reversed the District Court, and the Supreme Court took up the specific question of whether an approved JD is a final agency action that is judicially reviewable under the APA.     

In its analysis, the Court followed the two-prong test for determining whether an agency action if a “final action” set forth in the 1997 Supreme Court decision, Bennett v. Spear, 520 U.S. 154 (1997).  Under the test, the action must first “mark the consummation of the agency’s decision-making process.”  Second, the action must be one by which “rights or obligations have been determined, or from which legal consequences will flow.”  While the parties agreed that an approved JD satisfies the first prong of the test, the Army Corps argued that a JD is non-binding advice that carries no legal consequences on its own, but simply assists landowners in understanding the existing law. The Court disagreed. 

The Court found an approved JD satisfies the second prong because its practical implications give rise to “direct and appreciable legal consequences.”  The Court noted that if an approved JD finds that a landowner’s property does not contain jurisdictional waters – a “negative” JD – then the Army Corps is bound to that decision for five years.  The Court then referenced a longstanding Memorandum of Agreement (MOA) between the Army Corps and the Environmental Protection Agency, which share authority to enforce the Clean Water Act.  The MOA states that an approved JD is binding on the two agencies authorized to bring enforcement actions under the Clean Water Act, thereby creating a five-year “safe harbor” from such actions for landowners.  Conversely, then, an “affirmative” approved JD effectively represents a denial of this safe harbor provision.    

In addition, the Court determined that there were no other adequate alternatives to review, as required under the APA.  The Court rejected the Army Corp’s argument that the landowners had two such alternatives: either act without a permit and then argue that a permit was not necessary if an enforcement action is brought, or apply for a permit and seek judicial review if dissatisfied with the result.  The Court noted that under longstanding precedent, parties need not await enforcement actions before challenging final agency action where such actions carry the risk of “serious criminal and civil penalties.”  Indeed, if the landowners continued operations under the mistaken belief that they did not need a permit, they would expose themselves to civil penalties of up to $37,500 each day they violated the Act as well as potential criminal penalties.  And, as the Army Corps had already indicated in their discussions with the landowners, the permitting process can be “arduous, expensive, and long.”  Thus, the Court found that neither of the alleged alternatives to review in federal court were adequate.

The Court’s decision, while unanimous and seemingly straightforward, highlights some of the continued debate surrounding the reach of the Clean Water Act and agency interpretation.  Most notably, the majority opinion dismissed in a footnote the Army Corps’ argument that the MOA addressed only “special case” JDs and did not apply to the type of case at issue.  In dismissing this argument, the Court did not discuss at all the possibility of providing deference to the Army Corps’ interpretation of its own MOA.  And the concurrences by Justices Kennedy (joined by Justices Thomas and Alito), Kagan, and Ginsburg all discussed their reliance on the MOA to some extent.  

Justice Kagan wrote that the MOA was “central to the disposition of the case” for her because it established that JDs are binding on the agencies and represent their position in any Federal action or litigation.  Conversely, Justice Ginsburg said did not rely on the MOA because the Army Corps did not share the Court’s reading of it.  Rather, she relied on the “immediate and practical impact” of the approved JD. 

Justice Kennedy wrote primarily to voice his concern about the Clean Water Act, stating that it’s “reach and systematic consequences” remain a “cause for concern,” and even raised due process issues.  He noted that even if an internal agency agreement such as the MOA didn’t establish that an action was final, a JD should still be construed as binding because, in many instances, it would have a significant bearing on whether the Clean Water Act comports with due process.  The Court’s varied reliance on the MOA and general concern over the reach of the Clean Water Act will almost certainly continue to play out in subsequent decisions regarding the Clean Water Act as well as other areas implicating administrative law.

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