Supreme Court Allows Challenge to EPA Power Grab, Cites CEI Brief in Sackett v. EPA; But Property Rights Still In Jeopardy

by Hans Bader on March 22, 2012

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In recent years, the EPA has sought to block land from being used by claiming that vast tracts of seemingly dry land are actually “wetlands.”  The Clean Water Act gives it the power to regulate “waters of the United States.”  The EPA has interpreted that expansively to effectively mean “moistures of the United States,” treating perfectly ordinarily land as a “wetland” simply because water happens to occasionally flow downhill from it into a ditch or creek.  The four liberal Supreme Court justices largely bought this argument in the 2006 Rapanos case, so the Supreme Court is just one vote away from accepting this interpretation, which would render much of America a restricted “wetland” and financially ruin countless families.  Thus, property rights in America are hanging by a thread.

But yesterday, the flickering flame of property rights temporarily grew brighter. Rejecting the Obama Administration’s arguments, the Supreme Court held that EPA “compliance orders” restricting land use can be challenged in court if they are arbitrary and capricious — for example, if they are based on an erroneous bureaucratic interpretation of what a “wetland” is, that results in dry land improperly being declared an unusable wetland. In his concurring opinion, Justice Samuel Alito explained why such judicial review is essential: the EPA uses vague, inconsistent standards when it declares seemingly-dry land to be a wetland. As Justice Alito pointed out, “far from providing clarity and predictabil­ity, the agency’s latest informal guidance advises property owners that many jurisdictional determinations concern­ing wetlands can only be made on a case-by-case basis by EPA field staff. See Brief for Competitive Enterprise Institute as Amicus Curiae 7–13.”  (Justice Alito was relying on an amicus brief submitted on behalf of a Washington think-tank, the Competitive Enterprise Institute (CEI), by environmental lawyer Theodore Garrett of Covington & Burling).

The E.P.A. has a practice of issuing “compliance orders” to property owners telling them to stop using their land and restore it to its prior condition, under penalty of $75,000 a day in fines, and declaring in such orders that such land is a federally protected wetland. It then waits months or years before actually suing the property owner to collect the fines, which accrue daily, potentially adding up to millions in fines. But in the meantime, it insists that the property owners can’t challenge its claim that their property is a non-usable wetland in court. If they want to take issue with its claim that their property is a “wetland,” they have to wait until the EPA sues them later on to collect the fines, after they’ve racked up potentially millions in fines under the compliance order.  The order doubles the fines that a judge can impose on the property owners when the EPA ultimately sues them, although if the judge later finds the land was not in fact a “wetland,” he can refuse to impose the fines. (In the absence of a “compliance order,” the maximum fine for developing a wetland is $37,500 a day; the compliance order adds another $37,500 per day, bringing the total to $75,000 per day.  Federal law has a broad and counterintuitive notion of what is a “wetland”: for example, in one court ruling, the government was allowed to declare a property to be a “wetland” even though it appeared dry, since water occasionally passed from it into a roadside ditch that in turn flowed into another ditch that flowed into a creek).

There is no clear legal definition of what a wetland is, since the last time the Supreme Court tried to come up with a definition in the Rapanos case, the judges split 4-1-4 on how to define it, splitting three ways in three different opinions each of which had a different test for what a wetland is. The EPA has seemingly flouted even the few principles shared among a majority of the Supreme Court justices (the four-justice plurality and Justice Kennedy’s concurrence), in its vague and manipulable guidance as to what is a wetland.  In light of the huge fines that can be imposed on property owners, and the breadth and ambiguity of the EPA’s concept of “wetland,” which includes much land that seems like dry land to an ordinary person, denying property owners the right to immediately challenge an EPA “compliance order” effectively forces them to do whatever the EPA says, even if the EPA’s position was arbitrary and capricious. But that’s what federal appeals courts, at the urging of the EPA and the Obama administration, did: they denied property owners any right to challenge the EPA upon receiving a compliance order.

Even after yesterday’s decision allowing court challenges to EPA “wetlands” designations, “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,” noted Justice Alito.  “Allowing aggrieved property owners to sue” the EPA “is better than nothing, but only” legislative “clarification of the reach of the Clean Water Act can rectify the underlying problem.”

The case, Sackett v. E.P.A., involved the Sacketts, a family who had purchased land for a home in a residential subdivision in Idaho:

In 2005, Chantell and Michael Sackett purchased less than two-thirds of an acre of land near Priest Lake in northern Idaho for the modest sum of $23,000. They were nearby small-business owners and wanted to become homeowners. They planned to build a three-bedroom home. The property was located in a platted residential subdivision with water and sewer hookups and was bordered on either side by existing homes. There were community roads in both the front and back of the property.

The couple was savvy enough to have conducted regulatory due diligence before they purchased the land. The previous owner informed them he had consulted the U.S. Army Corps of Engineers regarding any building restrictions. There were none. After buying the property, the Sacketts applied for and received all of the pertinent local permits to build a residential dwelling as local zoning ordinances permit. In the spring of 2007, they began preparing the lot for construction. After buying the property, the Sacketts applied for and received all of the pertinent local permits to build a residential dwelling . . .

While gravel was being laid in preparation for pouring the concrete foundation, the work was interrupted by three EPA agents who told the Sacketts the property was a federally protected “wetlands.” They were served with a compliance order to immediately restore the property to its prior condition. It would cost $27,000 to remove the just-laid gravel, which was more than the property’s purchase price. Yet, the EPA compliance order made further demands. The Sacketts were ordered to plant new vegetation. The EPA specified what to plant (“native scrub-shrub, broad-leaved deciduous wetlands plants and seeded with native herbaceous plants”) and how to plant (“approximately 10 feet apart”). Additionally, they were ordered to fence the property, monitor plant growth for three growing seasons and to permit unfettered access to the property by EPA agents. Most significantly, the compliance order enjoined the Sacketts from the only permissible and practical use of the residential lot.

The EPA’s order not only shattered their homeowner dreams but, it also saddled the couple with exorbitant financial costs. They were hit with astronomical daily fines of $37,500 if they failed to comply with the order. The EPA has levied more than $40 million in fines against the Sacketts.

The Sacketts knew this had to be a colossal mistake. . . It made sense that the EPA should set aside its compliance order. They requested the EPA do so. However, the agency refused and informed the Sacketts they were not permitted to question the EPA decision. It would have cost the Sacketts more money to comply with the EPA order than the original purchase price of the property. So, the Sacketts offered to surrender the property to the EPA, but the agency refused . . .  The Sacketts filed a federal lawsuit challenging the EPA’s compliance order, claiming the EPA had no jurisdiction over their property and the compliance order violated their due process rights. . .The EPA argued the Sacketts did not have the right to judicial review of the agency’s orders as this would “disserve” the interest of the government. . .The [lower] courts . . . ruled against the Idaho couple.

As Justice Alito noted in his concurring opinion, the EPA’s argument would gut constitutional due process protections:  under the Obama Administration’s position, “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.”

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