SCOTUS Affirms “Waters of the United States” Jurisdictional Determination is Final Agency Action Subject to Judicial Review

The United States Supreme Court (SCOTUS) today unanimously (with concurrences) held that in United States Army Corps of Engineers v. Hawkes Co., Inc. that the Armey Corps of Engineers’ decision to assert Clean Water Act (CWA) jurisdiction over a parcel of land is a final agency action subject to judicial review under the Administrative Procedure Act (APA).  Part of SCOTUS’s reasoning rests on the costliness and uncertainty, but part rests on interagency memoranda of agreement and agency guidance that may quickly be changed.

Short History:  In short, the Hawkes Company sought to mine peat in northern Minnesota, but the Engineers decided in an Approved Jurisdictional Determination (AJD) that the Hawkes’ peat bogs were wetlands.  The Engineers concluded that the wetlands significantly affected the Red River of the North (100 miles away), a jurisdictional water of the United States, and, therefore, disturbing the peat bogs required a pollution control permit.  Hawkes sued, but the district court dismissed for want of jurisdiction.  The United States Court of Appeals for the Eighth Circuit reversed and opined, “In our view, 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 Eighth Circuit acknowledged that its decision created in intercircuit conflict with the Fifth Circuit.

The Solicitor General petitioned SCOTUS to review –

Whether the United States Army Corps of Engineers’ determination that the property at issue contains “waters of the United States” [WOTUS] protected by the [CWA] …, constitutes “final agency action for which there is no other adequate remedy in a court,” …, and is therefore subject to judicial review under the [APA] ….

Respondent Hawkes agreed that SCOTUS should review the Eighth Circuit decision because of the high likelihood of recurrence.  SCOTUS granted the petition for certiorari to no one’s surprise.

Decision:  SCOTUS acknowledged the difficulty of the proposition facing Hawkes:

It is often difficult to determine whether a particular piece of property contains waters of the United States, but there are important consequences if it does.  The Clean Water Act imposes substantial criminal and civil penalties for discharging any pollutant into waters covered by the Act without a permit from the Corps.  ….   The costs of obtaining such a permit are significant.  For a specialized “individ­ual” permit of the sort at issue in this case, for example, one study found that the average applicant “spends 788 days and $271,596 in completing the process,” without “counting costs of mitigation or design changes.”  ….  Even more readily available “general” permits took applicants, on average, 313 days and $28,915 to complete.

SCOTUS relied on longstanding SCOTUS precedent defines two conditions for agency action to be “final” under the APA:

1. the action must mark the consummation of the agency’s decisionmaking process, and
2. the action must determine rights or obligations or from which legal consequences flow.

The United States did not dispute that the AJD marked the consummation of the agency process.  The United States argued that legal consequences did not flow from the ADJ but from enforcement of the permit.  SCOTUS disagreed, noting that an AJD does, indeed, have legal consequences:

The definitive nature of approved JDs also gives rise to “direct and appreciable legal consequences,” thereby satis­fying the second prong….  Consider the effect of an approved JD stating that a par­ty’s property does not contain jurisdictional waters—a “negative” JD, in Corps parlance.  As noted, such a JD will generally bind the Corps for five years.  ….  Under a longstand­ing memorandum of agreement between the Corps and EPA, it will also be “binding on the Government and represent the Government’s position in any subsequent Federal action or litigation concerning that final determi­nation.” Memorandum of Agreement ….  A negative JD thus binds the two agencies authorized to bring civil enforcement proceedings under the Clean Wa­ter Act, …, creating a five-year safe harbor from such proceedings for a property owner.

….  It follows that affirmative JDs have legal consequences as well:  They represent the denial of the safe harbor that negative JDs afford.  ….

Even meeting those standards, the APA still requires that no alternative judicial review process be available.   Hawkes, the government argued, could either discharge fill material without a permit at risk of an EPA enforce­ment action during which they could argue that no permit was required or apply for a permit and seek judicial re­view if dissatisfied with the results.  SCOTUS rejected the adequacy of both alternatives – “As we have long held, parties need not await enforcement proceedings before challenging final agency action where such proceedings carry the risk of ‘serious criminal and civil penalties.’”

Had SCOTUS held no more, the value of risk and cost of compliance might come to be a test of when an agency action becomes final.  Unfortunately, SCOTUS decided more and less in its opinion.

Memoranda & Guidance:  SCOTUS premised its reasoning on the Engineers’ statements in something less than the CWA and the Engineers’ regulations.  First, SCOTUS uses an Engineers’ 2005 guidance letter to support the proposition that an AJD has a five-year duration.  Second, SCOTUS uses an interagency memorandum to bind the government.  Those footings raise more administrative law and regulatory issues.

SCOTUS’s brevity and unanimity in result might underscore the potential evanescence of its decision.  The Opinion of the Court and Justice Kagan’s concurrence reinforce the notion that the memorandum between the agencies creates the safe harbor and is binding.  Far more easily than amending regulations, the Engineers and EPA may repudiate their “binding” memorandum, or amend it to remove the specific language cited by SCOTUS.  The Engineers may likewise revise the guidance letter cited by SCOTUS on how long an AJD will remain effective.  The agencies may make these changes at will and without the formalities of the APA.  As Justice Kennedy noted in concurring, the United States was clear “that the memorandum of agreement between the EPA and the Army Corps of Engineers, which today’s opinion relies on, does not have binding effect and can be revoked or amended at the Agency’s unfettered discretion.”  Recognizing that fragility, Justice Ginsburg concurred in the principal opinion “save for its reliance upon the Memorandum of Agreement” and would have held the AJD to be final in any event.

Thus, Hawkes as precedent could have little future use.  Rather, Hawkes may caution agencies against memoranda and guidance without fallback denials of finality, limitation, binding, or reliance.

By treating the memorandum as binding the agencies, SCOTUS may have further muddied the already tenuous, fuzzy, blurred, “enshrouded in considerable smog” and baffling” distinction between legislative and interpretative rules, or created a new forefront in reliance on non-regulatory statements by federal agencies.  Whether a statement “binds” an agency or leaves it no further discretion are hallmarks not of policy statements, but of substantive or legislative rules.

Substantively, Hawkes amplifies the efficacy issues presented in litigation over the EPA and Engineers’ definition of “waters of the United States” (WOTUS) jurisdictional rule currently stayed and pending review before the United States Court of Appeals for the Sixth Circuit.  That rule attempts, but arguably does little, to clarify boundaries, and it too is likely to be reviewed by SCOTUS.  Justice Kennedy, concurring in Hawkes, reiterates the question of whether the CWA poses constitutional problems, not far from SCOTUS’s bench:

The Act, especially without the JD procedure were the Government permitted to foreclose it, continues to raise troubling questions regarding the Government’s power to cast doubt on the full use and enjoyment of private property throughout the Nation.

While SCOTUS settled the Hawkes finality issue, Hawkes finality may be very inconclusive and the regulation of waters of the United States may be very troubled.

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