Legal Alert: U.S. Supreme Court Rules Wetland Determinations are Appealable

On May 31, 2016, in United States Army Corps of Engineers v. Hawkes Co., Inc. et al., the U.S. Supreme Court unanimously ruled that approved wetland jurisdictional determinations (JDs) by the U.S. Army Corps of Engineers (USACE) are appealable final actions. This decision enables landowners to appeal JDs that they believe are unlawful soon after the determinations are made. The Court’s decision eliminates the Corps prior requirement that a JD could only be challenged after the landowner applies for and is denied a permit or after the landowner proceeds with development without a permit and faces an enforcement action. The direct appeal of a JD will save landowners wishing to challenge a JD considerable time, effort, and expense.

Background
Under the federal Clean Water Act (CWA), a permit is needed to engage in dredge or fill activities or to discharge pollutants in waters of the United States. “Waters of the United States” may include rivers, streams, lakes, wetlands, etc. Determining what are “waters of the United States” can be difficult and complex. Because of this difficulty, the USACE allows property owners to obtain a JD as to whether the impacted property contains “waters of the United States.” JDs can either be “preliminary” or “approved.” The preliminary JD advises the landowner that CWA jurisdictional waters may be present while the approved JD definitely states whether jurisdictional waters are present and is binding for five years.

Hawkes sought an approved JD from the USACE that the property it owned and wanted to mine peat on did not contain jurisdictional wetlands. However, the USACE determined the property contained jurisdictional wetlands because the wetlands had a ‘significant nexus’ to the Red River, even though the river was 120 miles away. Hawkes appealed the USACE’s approved JD to the federal district court which dismissed the appeal on the basis the JD was not a final agency action. On appeal, the court of Appeals for the Eight Circuit reversed the district court. The USACE appealed to the Supreme Court.

Historically, the USACE and various federal courts took the position JDs were not appealable final agency actions under the federal Administrative Procedures Act (APA) and to have an appealable final action the aggrieved landowner would either need to: 1) apply for and obtain or be denied a permit from the USACE and appeal it; or 2) challenge an enforcement action by the USACE or the U.S. Environmental Protection Agency against the landowner for proceeding without a permit.

Discussion
The Court held an approved JD is a final agency action subject to judicial review under the APA. For an agency action to be final under the APA:1) the action must mark the consummation of the agency’s decision-making process; and 2) the action must be one by which rights or obligations have been determined, or from which legal obligations will flow. The Court found the USACE’s approved JD marked the consummation of the Corps’ decision on whether the property contains “waters of the United States” and the definitive nature of the approved JD gave rise to direct and appreciable legal consequences. A ‘negative’ JD, i.e. a JD that states the property does not contain jurisdictional waters, creates a five-year safe harbor that provides protection from civil enforcement proceedings and from liability for violation of the CWA. Similarly, the Court determined an ‘affirmative’ JD, i.e. a JD that states the property does contain jurisdictional wetlands, has legal consequences in that it deprives the landowner of the five-year safe harbor that the negative JD provides.

A final agency action is only reviewable by a court under the APA if there are no adequate alternatives. The Corps contended the property owners’ alternatives are to proceed without a permit and risk an enforcement action or they may complete the permitting process and then seek judicial review. The Court found neither alternative identified by the Corps to be adequate since parties should not need to await enforcement proceedings before challenging the final agency action when such proceedings carry the risk of serious criminal and civil penalties, and that undertaking a lengthy and costly permitting process is irrelevant to the finality of the approved JD.

Conclusion
Landowners who are subject to an approved JD from the USACE now have the right to seek judicial review of the decision without first incurring the risk of enforcement or expensive permitting.

What remains to be seen is whether the USACE will continue to issue approved JDs, or be more selective in which JDs it issues. The proposed federal rules expanding the definition of “waters of the United States,” which rules have been stayed and are being litigated in federal courts, may affect the future use of approved JDs by the USACE. 

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