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The United States Supreme Court Deals A Major Blow to EPA’s Strong-Arm Enforcement Tactics
March 29, 2012
On Wednesday, March 22, the United States Supreme Court ruled that a compliance order issued under EPA’s Clean Water Act enforcement authority to individuals for allegedly filling part of their property without the necessary “dredge and fill” permit could be challenged in federal district court. The ruling marks a major loss for EPA’s enforcement practices under the Clean Water Act. Judge Alito also authored a concurring opinion, discussed below, that was extremely critical of EPA and Congress’ failure to clearly define “waters of the United States” after 40 years of uncertainty.

Historically, EPA has used its compliance order enforcement authority under § 309 of the Clean Water Act to “encourage” – read coerce – entities into “compliance” with alleged violations by threatening penalties of up to $75,000 per day of violation – $37,500 for the underlying alleged violation and an additional $37,500 for violating the compliance order. The challenging part for anyone in receipt of a compliance order is that EPA has always taken the position that the compliance orders are not final agency action and therefore not reviewable in court. EPA’s approach upped the ante for anyone considering ignoring the compliance order and testing EPA’s resolve to take the more resource-intensive and time-consuming path of bringing a civil action in court (EPA’s other enforcement option under § 309).

The plaintiffs, the Sacketts, own a 2/3 acre lot in Bonner County, Idaho and in preparation to build a home, filled in part of their lot with dirt and rocks. Some months later EPA issued a compliance order that, among other things, required the Sacketts to restore the site to its original condition pursuant to EPA’s “Restoration Work Plan” and “’to provide and/or obtain access to the Site . . . [and] access to all records and documentation related to the conditions at the Site . . . to EPA employees and/or their designated representatives.’” Slip op. at 4. The Sacketts challenged the compliance order in the United States District Court in Idaho – contending that the compliance order was arbitrary and capricious under the Administrative Procedure Act (“APA”) and in violation of the Fifth Amendment – depriving them of life, liberty or property without due process of law. The District Court dismissed the case for lack of subject matter jurisdiction and the Court of Appeals for the Ninth Circuit affirmed – concluding that the Clean Water Act precludes “‘pre-enforcement judicial review of compliance orders.’”

The Supreme Court, in an opinion authored by Justice Scalia, first dismissed EPA’s contention that compliance orders are not “final agency action.” The Court found that EPA’s order “determined rights or obligations” and that “‘legal consequences . . . flow’ from issuance of the order.” Slip op. at 5. The Court also found that issuance of the order marked the “consummation” of the EPA’s decision-making process, in part because EPA had earlier denied the Sacketts’ request for a hearing and stating that the “Findings and Conclusions” in the order were not subject to further review or discussion. EPA’s argument that the order “invited the Sacketts to ‘engage in informal discussion of the terms and requirements’” demonstrated the order was not “final” was rejected by the Court. In the context of evaluating whether the Sacketts had any other adequate remedy, the Court found uncompelling EPA’s argument that the Sacketts could apply for a 404 permit and then appeal the Corps of Engineers’ denial of the permit (because the Corps won’t issue a 404 permit if there is an outstanding compliance order).

The Supreme Court then addressed EPA’s argument that the Clean Water Act precludes judicial review under the APA. Initially the Court noted that in their opinion, the APA creates a presumption in favor of judicial review. The Court did not accept EPA’s argument that because Congress gave EPA the discretion under § 309 to bring either a judicial proceeding or an administrative action, “it would undermine the Act to allow judicial review of the latter.” Slip op. at 7. Since compliance orders are not “self-executing” and must be enforced by the agency, EPA argued that “Congress therefore viewed a compliance order ‘as a step in the deliberative process[,] . . . rather than as a coercive sanction that itself must be subject to judicial review.’” Slip op. at 8. The Court rejected this argument as well, stating that “the APA provides for judicial review of all final agency actions, not just those that impose a self-executing sanction.” Id. The Court concluded that the “compliance order in this case is final agency action for which there is no adequate remedy other than APA review, and that the Clean Water Act does not preclude that review.” Slip op. at 10.

Justice Alito’s Concurring Opinion
Justice Alito, in a concurring opinion provided a very succinct and critical view of the facts in this case. He stated:

The position taken in this case by the Federal Government—a position that the Court now squarely rejects—would have put the property rights of ordinary Americans entirely at the mercy of Environmental Protection Agency (EPA) employees.

The reach of the Clean Water Act is notoriously unclear. Any piece of land that is wet at least part of the year is in danger of being classified by EPA employees as wetlands covered by the Act, and according to the Federal Govern¬ment, if property owners begin to construct a home on a lot that the agency thinks possesses the requisite wetness, the property owners are at the agency’s mercy. The EPA may issue a compliance order demanding that the own¬ers cease construction, engage in expensive remedial measures, and abandon any use of the property. If the owners do not do the EPA’s bidding, they may be fined up to $75,000 per day ($37,500 for violating the Act and another $37,500 for violating the compliance order). And if the owners want their day in court to show that their lot does not include covered wetlands, well, as a practical matter, that is just too bad. Until the EPA sues them, they are blocked from access to the courts, and the EPA may wait as long as it wants before deciding to sue. By that time, the potential fines may easily have reached the millions. In a nation that values due process, not to mention private property, such treatment is unthinkable.

Justice Alito goes on to criticize Congress for its failure to provide a “reasonable clear rule regarding the reach of the Clean Water Act” and characterizing EPA’s latest informal guidance regarding when marginal wetlands and surrounding lands are subject to Clean Water Act jurisdiction as “far from providing clarity and predictability.” Concurring Slip Opinion at 2. Expressing his clear frustration with EPA and Congress, Justice Alito stated, “[f]or 40 years, Congress has done nothing to resolve this critical ambiguity, and the EPA has not seen fit to promulgate a rule providing a clear and sufficiently limited definition of the phrase.” Id. Although Justice Alito praised the Court’s majority opinion as providing a “modest measure of relief,” he also stated that “the combination of the uncertain reach of the Clean Water Act and the draconian penalties imposed for the sort of violations alleged in this case still leaves most property owners with little practical alternative but to dance to the EPA’s tune.” Id. It is unclear whether Alito’s opinion will cause EPA to revise its guidance or move more quickly to promulgate regulations consistent with the guidance as it currently exists.

Environmental Law James D. Elliott