U.S. Supreme Court Authorizes Pre-Enforcement Review of Clean Water Act Compliance Orders

A unanimous Supreme Court held last Wednesday, March 21, 2012, that parties who receive administrative compliance orders from the U.S. Environmental Protection Agency ("EPA") under the authority of the federal Clean Water Act are entitled to "pre-enforcement review," that is, they may bring lawsuits to challenge the jurisdictional basis for such orders in court.

When EPA determines that a person is discharging a pollutant into the "waters of the United States" without a permit, the Clean Water Act requires EPA either to issue a compliance order or to file a lawsuit to enforce the Act's requirements. Compliance orders have become a preferred tool for EPA to obtain quick remediation through "voluntary compliance." Parties who questioned the government's assertion of federal jurisdiction over their property either had to obey the government's compliance order, thereby losing the benefits of their ownership of their land, or refuse to comply, thereby risking ruinous liability for penalties of up to $75,000 per day if EPA decided to sue and the court decided that the government had properly asserted federal jurisdiction.

Sackett v. EPA , Case No. 10-1062, relieves property owners of this Hobson's choice.

The Facts

In connection with the construction of a new house, the Sacketts planned to import and place fill material at their 2/3-acre lot near Priest Lake in Idaho. The EPA issued a compliance order to the Sacketts, asserting that the property contained wetlands subject to federal jurisdiction, and that by placing fill material on their lot, the Sacketts had engaged and were continuing to engage in the discharge of pollutants into "navigable waters," i.e., waters of the United States, within the meaning of the Clean Water Act. The order required the Sacketts to "restore" their property and to give EPA access to the property and any records or documentation relating to it.

Believing that EPA did not have authority to regulate their land under the Clean Water Act, the Sacketts asked EPA for a hearing, but their request was denied. The Sacketts then brought an action in federal court, arguing that EPA's issuance of the compliance order without allowing a hearing on its validity was "arbitrary and capricious" under the APA and that it deprived them of their right to due process under the Fifth Amendment of the U.S. Constitution. The District Court rejected the Sacketts' arguments, as did the Ninth Circuit, which held that the Clean Water Act "preclude[s] pre-enforcement judicial review of compliance orders."

The Supreme Court's Opinion

The Supreme Court held that Clean Water Act compliance orders are subject to pre-enforcement challenges under the APA, at least where the challenge questions the jurisdiction of the United States. The Court reasoned that the APA allows judicial review of "final agency action" where there is no other remedy at law, that EPA's compliance orders have "all the hallmarks of APA finality," and that regulated parties like the Sacketts have "no other adequate remedy in a court" to challenge them. The Court also observed that nothing in the Clean Water Act prohibits pre-enforcement review.

EPA asserted that pre-enforcement review of Clean Water Act compliance orders should be prohibited in light of Congress' intent, in passing the Act, to create more efficient remedies for water pollution. Allowing judicial review would make the tool less efficient, EPA argued. Justice Scalia, who authored the Court’s opinion, rejected this argument: "[T]here is no reason," he wrote, "to think that the Clean Water Act was uniquely designed to enable the strong-arming of regulated parties into 'voluntary compliance' without the opportunity for judicial review – even judicial review of the question of whether the regulated party is within the EPA's jurisdiction."

The Court did not address the underlying question of whether the Sackett's land did or did not contain "wetlands" subject to federal jurisdiction under the Clean Water Act. On that issue, the Court wrote, the Sacketts have been required, in the words of Chief Justice Roberts a few years ago, "to feel their way on a case-by-case basis" in the wake of the Court's 4-4-1 split in Rapanos v. United States, 547 U.S. 715 (2006). That decision left the scope of federal jurisdiction as unclear as ever. Both Justice Scalia's opinion for the Court, and Justice Samuel Alito's concurring opinion, emphasized the uncertain reach of the federal government's jurisdiction under the Clean Water Act, and hence the unfairness inherent in depriving landowners of pre-enforcement review when they reasonably question EPA's assertion of jurisdiction in a particular case. Justice Alito observed that "[t]he reach of the Clean Water Act is notoriously unclear" and called on Congress "to do what it should have done in the first place: provide a reasonably clear rule regarding the reach of the Clean Water Act."

In a separate concurring opinion, Justice Ruth Bader Ginsburg commented that the reach of the Court's holding should be confined to jurisdictional challenges to compliance orders, and that the Court was not authorizing pre-enforcement review of other issues, such as the propriety of the terms and conditions of compliance orders.

The "Waters" Are Still Murky

Sackett is a landmark decision, and it is likely to prompt landowners to initiate pre-enforcement review. It may also have the effect of moderating EPA's reliance on compliance orders as a principal enforcement tool. Nonetheless, important issues remain open:

• Accumulation of penalties. Although the Court held that the Sacketts could file a lawsuit to challenge EPA's authority to issue a Clean Water Act compliance order under the APA, it did not explain whether the filing of the action would stop the accumulation of daily penalties for noncompliance, or whether penalties would continue to accrue during the pendency of the action. In the case of the Sacketts, for example, that could mean a difference of over a billion dollars in potential maximum civil penalties. The Court also did not decide whether EPA's assertion that double penalties should apply ($37,500 per day maximum for the underlying alleged violation and $37,500 per day maximum for noncompliance with the order) reflected a valid interpretation of the Clean Water Act.
• Impact on non-jurisdictional challenges under the Clean Water Act and challenges to administrative enforcement of other statutes. The reach of the Sackett decision beyond the important but narrow area of federal wetlands jurisdiction is also unclear. As Justice Ginsburg observed in her concurring opinion, the case arose in the context of a jurisdictional challenge, and it remains to be seen whether it will be applied to authorize actions seeking pre-enforcement review of other, non-jurisdictional elements of a compliance order issued under the authority of the Clean Water Act. Additionally, because the Court based its decision on an interpretation of the Clean Water Act and the APA, not of the Due Process Clause of the Fifth Amendment (as the Sacketts invited it to do), the application of the Sackett decision to administrative enforcement of other federal statutes, both within and outside the environmental arena, is uncertain and is likely to be the subject of future litigation. Like the Clean Water Act, for example, other major federal environmental statutes, including the Clean Air Act and Resource Conservation and Recovery Act, do not expressly prohibit pre-enforcement review. Hence the Court's holding in Sackett may apply to administrative compliance orders issued under the authority of such statutes, at least to the extent that the order recipient challenges the issuing agency's assertion of jurisdiction. Because the Court held that the Clean Water Act does not preclude pre-enforcement review, it did not reach the question of whether a ban in some other statute on pre-enforcement review, such as the ban incorporated in the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA," also known as "Superfund"), would violate the constitutional right to due process. Lower federal courts have held that CERCLA's prohibitions on pre-enforcement review do not violate due process, but in the wake of Sackett, the courts may be invited to revisit that issue.