With Congress in gridlock and partisanship reaching new heights, it was encouraging to see the U.S. Supreme Court’s recent unanimous decision in U.S. Army Corps of Engineers v. Hawkes Co. Inc., where the court held that an approved jurisdictional determination by the U.S. Army Corps under the Clean Water Act was a final agency action subject to judicial review. Although the scope of the court’s decision will likely be litigated in the future, it appears to provide for the first time an avenue for real estate developers, farmers and other property owners to determine with certainty if they must obtain a permit under the Clean Water Act when working in wetlands and other waters.

When a property owner is interested in developing a site, it is often necessary to determine whether any wetlands or other waters will be impacted by the project and, if so, what permits are required. Under federal law, the Clean Water Act regulates "waters of the United States," and Section 404 of the Act requires a permit for "the discharge of dredged or fill material into [such] waters . . . ."  33 U. S. C. §1344(a). The meaning of "waters of the U.S." has been the subject of significant litigation, and the U.S. EPA and Corps recently issued a rule further defining the term that was appealed and has been stayed by the 6th Circuit. In re EPA, 803 F. 3d 804, 807–809 (6th Cir. 2015). Given the uncertainty surrounding the meaning of "waters of the U.S.," parties often request an approved "jurisdictional determination" from the Army Corps. An approved jurisdictional determination represents the Corps’ final decision about whether the water at issue is subject to federal jurisdiction, and the decision lasts for five years.

There can be serious consequences for property owners that proceed with projects in waters of the U.S. without the required permits, including civil and even criminal penalties. But the process of obtaining the required permits can be very expensive and time-consuming. As the court noted in Hawkes,

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.

Hawkes at 2 (citations omitted).

In the Hawkes case, three peat mining companies in Minnesota challenged an approved jurisdictional determination. The Army Corps had concluded that certain wetlands owned by the peat mining companies had a “significant nexus” to the Red River of the North and that dredging any peat from those wetlands would require a permit under Section 404 of the Act. After exhausting their administrative remedies through the Army Corps’ appeal process, the peat mining companies filed an action in federal court challenging the jurisdictional determination under the Administrative Procedure Act (“APA”).

The district court dismissed the lawsuit, saying it lacked subject matter jurisdiction because the jurisdictional determination was not a "'final agency action for which there is no other adequate remedy in a court,' as required by the APA." Hawkes at 4. The 8th Circuit reversed, and the U.S. Supreme Court then granted review.

The Corps argued that obtaining a §404 permit constituted final agency action but merely obtaining a jurisdictional determination did not. The Corps further reasoned that because landowners could appeal a §404 permit, there existed a separate and adequate remedy to judicial review of a jurisdictional determination. The Corps also argued that a landowner could simply ignore a jurisdictional determination and the issue could be adjudicated as part of an enforcement action for violating the Clean Water Act. But the Corps’ first option could potentially require a landowner to spend hundreds of thousands of dollars on a permit they do not need, and the second option requires the landowner to commit potentially criminal actions. Ultimately the court disagreed with the Corps and held "[n]either alternative is adequate."

In reaching its decision, the court also focused on agency guidance, including a Memorandum of Agreement between the Army Corps and the U.S. EPA that described jurisdictional determinations as "final determinations" that are "binding on the Government." The Army Corps argued that the memorandum only applied to a narrow class of jurisdictional determinations, but the court, without so much as mentioning agency deference, concluded that the memorandum confirms that a jurisdictional determination is a final agency action.

There were three concurrences in the case, including one by Justice Kennedy that noted “the Act’s reach is ‘notoriously unclear’ and the consequences to landowners even for inadvertent violations can be crushing.” Hawkes at 1 (J. Kennedy concurring). While the statement is apt, it is particularly interesting coming from Justice Kennedy because his opinion Rapanos v. United States established the “significant nexus” test that is currently used to make jurisdictional determinations and is the basis for the U.S. EPA’s recent Waters of the U.S. rule. Perhaps Justice Kennedy’s statement signals some discontent with how the “significant nexus” test has been implemented, but it remains to be seen whether the court can un-muddy the waters when the issue is next before it.