Confustion Regarding Wetland Nationwide Permits and Regulatory Freeze

On January 20th, President Trump's Chief of Staff, Reince Priebus issued a Memorandum to the Heads of Executive Departments and Agencies imposing a regulatory freeze. There appears to be a lot of confusion among environmental attorneys and consultants as to whether the freeze applies to the Army Corps of Engineers (ACOE) Nationwide Permits (NWP).  

NWP are authorizations to fill wetlands and/or impact streams for certain projects that have limited impacts.  NWP are general permits that allow projects to bypass more complicated and costly individual permitting.  The NWPs are a key authorization necessary to allow projects to move forward. Without effective NWP a project only alternative was to seek an individual 404 permit which takes months.

The freeze applies to recently enacted regulations that had not taken effect by the date of the memorandum.  The new NWP were published in rule on January 6, 2017 but will not be effective until March 19, 2017.  Based upon the publication date, the NWP regulation would be subject to the freeze.

Federal agencies can petition the Office of Management and Budget (OMB) for a special exemption from the regulatory freeze.  The ACOE filed for and was granted an exemption so the 2017 NWP will go into effect on Marcy 19, 2017 which was the original effective date.  The ACOE issued a notification last week that it was granted an exemption from the freeze.

I have seen e-mails and memorandum circulating indicating NWP may not be available this spring due to the freeze.  That now appears not to be the case.  

[Photo courtesy Junior Libby]

Supreme Court Decides Army Corps JD's Can be Appealed

In a very significant case for property owners and developers, the U.S. Supreme Court issued its decision today that Army Corps Jurisdictional Determinations (JDs) are final agency actions which can be challenged in Court.  In U.S. Army Corps of Engineers v. Hawkes, the Court determined that JDs meet the test for final agency actions:

  1. A JD marks the consummation of the Agency's decision making process; and 
  2. JDs determine rights or obligations from which legal consequences flow

Federal Jurisdiction under the Clean Water Act

It has been well documented on this blog that whether a stream or wetland falls under the jurisdiction of the Clean Water Act (i.e. federally regulated) has been a complex issue.  There have been numerous challenges to the Army's Corps of Engineer's (ACOE) jurisdiction under the Clean Water Act.  

In a prior decision, the Supreme Court in Rapanos created the "Significant Nexus Test" as the means to determine jurisdiction.  The test involves balancing various factors as to how closely related small water bodies are to larger water bodies. Under the test, a waterway or wetland is evaluated to determine whether it impacts the "chemical, physical, and the biological integrity" of a navigable water. If it does impact a navigable water in that manner, then it falls under federal jurisdiction.

The Army Corps has been aggressive in asserting jurisdiction under the Significant Nexus Test.  The Clean Water Rule, currently under appeal before the Sixth Circuit, was the EPA's attempt to define jurisdiction in conformance with prior Supreme Court guidance.  The Rule has been challenged as going well beyond the Supreme Court's guidelines for federal jurisdiction under the Clean Water Act.

Jurisdictional Determinations (JDs)

A Jurisdictional Determination (JD) is issued by the ACOE as its determination whether particular property contains federally protected wetlands or streams.  The JD is the ACOE application of the Significant Nexus Test to the property.  Due to the ACOE aggressiveness in asserting jurisdiction, many property owners and developers have wanted to challenge JDs. 

However, a complicating issue for property owners and developers is that the ACOE had maintained that JDs were not final appealable actions that could be challenged in Court.  This left the property owners and developers with a "Hobson choice:"

  • Administratively appeal the JD which means the ACOE makes the decision as to whether the JD is valid;
  • Assert the ACOE is without jurisdiction, proceed with the development and risk enforcement with criminal sanctions or civil penalties; or
  • Comply by submitting a costly permit application (404 permit)

None of these choices were deemed attractive.  With the Court's decision in Hawkes, Courts can now hear challenges to JDs.  

Due to the subjective nature of the Significant Nexus Test, property owners and developers should be entitled challenge ACOE determinations in court.  Today's decision will likely result in a flood of challenges to JDs in federal courts.

 

Challenging Jurisdictional Stream and Wetland Determinations Proves Difficult

Under the Clean Water Act (CWA), you cannot impact a federally protected stream or wetland unless you obtain a 404 permit from the Army Corps of Engineers (ACOE).  The key issue- what is a "federally protected stream or wetland?"

As discussed previously on this blog, which streams and wetlands are protected under the CWA has been in a state of flux ever since the Supreme Court issued its decisions in Rapanos and SWANCC. Whether a wetland or stream are protected by the CWA depends on the legal standard known as the "Significant Nexus Test."  

Under the test, a waterway is evaluated to determine whether impacts to it could affect the chemical, physical, and the biological integrity of a navigable water.  If the answer is "yes," then the waterway falls under the federal jurisdiction pursuant to CWA.

Making the determination is not a simple exercise.  It involves a complex evaluation of various factors.  Two experts could come to two different conclusions regarding whether a waterway falls under federal jurisdiction.

Due to the grey area surrounding this regulatory area, many businesses and developers want a preliminary determination as to whether proposed wetland or stream impacts would require a Section 404 permit.  

Under applicable regulations, the ACOE can consult with potential permit applicants prior to processing the permit application.  See, 33 CFR 325.1(b).  The regulations also authorize the ACOE to "issue formal determinations concerning the applicability of the Clean Water Act..."  See, 33 CFR 320.1(a)(6).  These "formal determinations" are called "Jurisdictional Determinations" or "JDs."   

The ACOE currently uses a form to make its Jurisdictional Determinations

 

 

 

 

 

 

 

 

 

What if you disagree with the ACOE's JD?

Due to the complexities involved in determining whether a stream or wetland is federally protected, developers and businesses will seek a JD to determine whether regulators consider the waterway protected by the CWA.  However, what happens if you want to challenge the regulators determination that the waterway meets the Significant Nexus test?

The first step in the process is the ACOE's administrative appeal process. See, 33 CFR 331. However, if you obtain an unfavorable result through the administrative appeal process, it appears you have little recourse in the courts to challenge the JD.

Courts have consistently ruled that JDs are not agency final actions that can be legally challenged. Many had hoped that U.S. Supreme Court ruling in Sackett may have opened up JDs to legal challenge.

Sackett Decision

In Sackett, a homeowner filled wetlands to build a residence.  U.S. EPA issued a compliance order that contained a finding that the property contained federally protected wetlands.  The order required the homeowner to restore the property or face penalties for noncompliance.  

EPA argued that the homeowner could not challenge the administrative order because it did not constitute a final agency action.  The Supreme Court disagreed, and ruled the order was a final action and could be challenged.

JDs and Sackett

After Sackett, new legal actions were brought in attempt to challenge JDs as final agency actions. However, based upon a recent case,  it appears Sackett did not change the outcome.  In Belle v. United State Army Corps of Engineers, Case No. 13-30262, the Court distinguished the enforcement order at issue in Sackett versus a JD.  

The Court held a JD is not a final action for the following reasons:

  • A JD is a notification that the property contains federally protects wetlands or streams, but it does not prevent the property owner from doing anything to its property.  The order in Sackett required restoration of the property;
  • The administrative order in Sackett imposed coercive consequences for its violation (i.e. penalties for noncompliance).  A JD does not impose any penalties;
  • The compliance order made it more difficult for a homeowner to obtain a 404 permit because there is a policy against after-the-fact permits.  The Court held that the "JD operates oppositely informing the [property owner] of the necessity of a 404 permit to avoid an enforcement action."

While the Court's analysis of the difference between the Sackett administrative enforcement order and a JD is logical, the practical reality is that JDs do have dramatic impacts on the property owner.

The Court suggests that the ability to challenge the JD would "disrupt the regulatory review system already in place."  Namely, the property owner should file for a 404 permit and if denied, it will have legal recourse post-denial.

However, the Court's analysis ignores the fact that a JD places the property owner into the regulatory system.  Once in the regulatory system, negative consequences result.  For example:

  1. The owner must spend significant amounts of money on a 404 permit application;
  2. The owner must wait for the ACOE to rule on the 404 permit application, which could takes months if not a year or more to obtain a determination;  
  3. After exhausting administrative appeal rights and filing a judicial action, it may be years before the owner can get a court to review whether the JD in the 404 permit decision was correct;
  4. The owner's development plans are put on hold while the permitting and legal process unfolds;  
  5. Or, the owner can proceed with the impacts and face a potential enforcement action that includes penalties and the possibility they will never obtain an after-the-fact permit.  

The consequences outlined above seem more than significant enough, from a policy perspective, to allow challenges to JDs.  Unfortunately, the Courts don't see it that way.

 

Army Corps Wetland Jurisdictional Determinations Are Not Reviewable

According to the 5th Circuit in Belle v. Army Corps of Engineers, nothing has changed with regard to the inability of a property owner to challenge an Army Corps of Engineers (ACOE) decision that federally protected wetlands exist on the owner's property.  

The initial step in the federal wetland permitting process is the ACOE's determination whether federally protected wetlands are present on a property- called the Jurisdictional Determination or JD.  The ACOE must use the "significant nexus" test to determine whether wetlands are isolated or connected to a federally protected waterway.

The "significant nexus" test arose from the Supreme Court's determination in Rapanos v. U.S. The "significant nexus" test involves a complex evaluation of whether the wetlands significantly affect the chemical, physical and biological integrity of federally protected streams and rivers.

In the years since the Rapanos decision, the EPA and ACOE have been unable to develop clear technical guidance for the application of the "significant nexus" test.  The lack of clear guidance have left property owners with uncertainty in regards to the cost and time it would take to develop properties that contain wetlands.

A JD that concludes federally protected wetlands exist means a property owner will be required to obtain a 404 permit from the ACOE and a 401 permit from the State EPA to fill the wetlands.  The 404/401 permitting process can be long and costly.  Therefore, property owners have a strong incentive to challenge JDs if they believe the determination lacks technical support.

Nevertheless, Courts have held that JDs are not reviewable. Many had hope the Supreme Court's determination in Sackett may serve as a basis to allow challenges to JDs.

Sackett- Compliance Order can be Challenged

In Sackett, the Supreme Court revisited the issue of what constitutes final agency actions under the Clean Water Act.  The Sacketts had filled a portion of their undeveloped property with dirt and rocks in preparation for building a house.  The U.S. EPA issued a compliance order that contained findings that the property contained wetlands with the Sackett's had filled.  The EPA order directed the Sacketts to restore the wetlands or face penalties.

The Sacketts tried to challenge the EPA order, but EPA denied their request for hearing stating it was a non-appellable administrative order.  Both the District Court and Ninth Circuit agreed with EPA.

The Supreme Court reversed, finding the order constituted a final agency action under the Administrative Procedures Act (APA) and could be challenged.  The Court said the order was appeallable because it determined the rights and obligations of the property owner.  The Court focused on the fact the Sacketts had to restore the wetlands or face penalties for failure to comply.

The Sackett Case and Jurisdictional Determinations

In Belle v. U.S. Army Corps of Engineers, Belle Company and Kent Recycling (hereinafter "Belle") challenged the ACOE jurisdictional determination that their property contained wetlands subject to regulation under the Clean Water Act (CWA).  The District Court dismissed the suit, concluding the JD was not " final agency action" and is not reviewable.

Belle's argued the Sackett case required the Court to determine the JD was reviewable.  The 5th Circuit agreed a JD met the first prong of the test for determining an reviewable action- consummation of the Agency's decision making process.  However, the 5th Circuit determined a JD fails to meet the second prong-  an action "by which rights or obligations have been determined, or form which legal consequences will flow."

The 5th Circuit distinguish the JD from the Sackett Order on the following grounds:

  • The Sackett Order imposed legal obligations because it ordered the Sacketts to promptly restore their property.  The JD does not require Belle to do or refrain from doing anything on its property;
  • The Sackett Order contained coercive consequences for violating the order because the Sacketts were exposed to penalties for non-compliance.  The JD contains no such penalty scheme.
  • The Sackett Order prevented the submission of a 404 permit.  The JD, by contrast, elicits a permit application.
  • The Sackett Order determined a violation of the CWA had occurred.  A JD makes no such determination.

Practical Consequences of Non-Reviewable JDs

While there may be a sound legal rationale for the holding that JDs are not reviewable, this decision has significant practical consequences for property owners.  If an owner believes the ACOE issued a JD without proper technical support or misapplied the "significant nexus" test, the owner has little legal recourse to challenge the ACOE determination.

If the owner doesn't believe the wetlands are protected under the Clean Water Act, they are left with the false choice of either:

  1. Filling the wetland and face significant penalties and a requirement to restore the wetlands if ACOE's determination is upheld; or
  2. Proceed with securing 404/401 permits for the filling activity which in many cases will be very costly and slow development.

 

Ohio EPA Budget Testimony Sheds Light on New Initiatives

On April 5th, Ohio EPA Director Nally testified on the Agency's proposed budget before the House Finance and Appropriations – Agriculture and Natural Resources Subcommittee.  According to the Director's Testimony, Ohio EPA is not asking for any fee increases.  Ohio EPA's proposed budget calls for a reduction of 11.8% for fiscal year 2012 and 13.8% for fiscal year 2013.  To meet these budget reductions, the Agency is planning on reducing 53 current positions through attrition.

The Director also mentioned the consolidation of the Division of Hazardous Waste Management  (DHWM) into the Division of Solid & Infectious Waste (DSIWM) along with other components in the Division of Emergency Remedial Response (DERR).  DHWM's permitting and inspection activities will be in DSIWM and clean up will be with DERR.

In addition to budget reductions and the consolidation of DHWM, Director Nally also hinted at other initiatives the Agency is planning to undertake in the near future. 

New Ohio EPA Initiatives

“In-lieu Fee” Program –  The Director signaled potential significant change on wetland and stream mitigation requirements.  Typically the 404/401 permit applicant must find appropriate mitigation projects and include those proposals in their permit application.  With an “in-lieu fee" program, the applicant is relieved of the burden of finding a mitigation project .  Rather, the applicant pays a few based on the acreage of wetlands or feet of stream impacted by the project.  The Director has recently announced a "listening session" to hear from the regulated community and others regarding the proposal.

Permitting efficiencies/Permitting Backlog – Most every Ohio EPA Director faces the pressure to get permits out the door faster.  Director Nally is no different.  Upon taking office, he announced this would be a top priority of his administration.  His testimony suggests he will be re-looking at permit-by-rule and general permits to streamline permit approvals.  While the Agency has utilized these tools in the past, business complain that the terms and requirements are too onerous.  Modifying air permitting requirements can present unforeseen issues, as the business community learned after the Courts stepped in blocking major changes adopted in Senate Bill 265.

IT initiatives and Compliance Assistance –  Ohio EPA has moved toward allowing more reports and permitting to be performed using the web or through special electronic systems.  These systems provide flexibility, but businesses complain they can be difficult to use.  The Director announced training sessions to assist businesses with understanding how to use these systems better. 

Brownfields redevelopment – The Director testimony contained a vague reference to a new initiative with brownfield redevelopment.  The current structure has the Ohio Dept. of Development passing out the grant money and Ohio EPA monitoring the clean up.  It will be interesting to watch whether Ohio EPA announces new initiatives in this area to accelerate re-use of  brownfields.

Marcellus and Utica Shale – ODNR has the lead with regard to permitting for gas exploration.  However, U.S. EPA has indicated it will be closely watching and may exercise enforcement authority at sites where drilling has gone wrong or resulted in polluted groundwater.  The Director intends to support ODNR's efforts in light of U.S. EPA's scrutiny.

Expedited Settlement Program (ESP) -- No details were given regarding this new concept to accelerate resolution of enforcement actions.  Here was the Director's testimony...Given my priority of compliance first, I am initiating modifications to the current enforcement process to help drive quicker compliance.  Historically, the existing enforcement options have been time consuming and resource intensive for both the agency and the regulated entity. By developing new steps to be used early in the enforcement process, I hope to resolve uncomplicated cases
expeditiously, putting a facility on notice of a problem, and quickly achieving compliance. 

Perhaps Ohio EPA intends to make modifications at the Notice of Violation (NOV) stage.  The Agency could improve tracking of NOVs and notify businesses more quickly when issues have been resolved.

The Director's testimony did provide a good insight into his early priorities.  Details were not provided so we will need to watch closely as they are released.