Whether or not a piece of property is a wetland may have tremendous financial consequences, both from permitting and delay standpoints. Contractors want to know whether they must calculate the costs of obtaining a federal wetlands permit, commonly referred to as a Section 404 permit, as they prepare bids on projects. They will also want to ensure that they have proper contractual and insurance protection for environmental issues that may be encountered during a project.
The threshold question is, "Do I need a Section 404 permit for my project?" The answer is often not clear. Just because a property appears to be isolated from a river or a stream does not mean it is not a jurisdictional wetland and you can build on it without a wetlands permit. And an isolated ditch or culvert that appears to have aquatic vegetation may not be a wetland subject to federal jurisdiction. Is an area that has a hydrological connection to a nonnavigable tributary a wetland? How about a marshy area separated from a river with no hydrological connection to the river? What about a tributary that is dry half of the year but flows into a river the rest of the year? The parties in two recent Supreme Court decisions expected that these questions would be conclusively answered by the nation’s highest Court. Their expectations were not fulfilled.
Federal Jurisdiction over Wetlands
Defining "wetlands," "waters of the United States" and "navigable waters" is a process that has spanned several decades. The evolution (and, some would contend, expansion) of the definitions has taken place through judicial and regulatory interpretation of the Clean Water Act (the Act) by federal courts, the United States Army Corps of Engineers (the Corps) and the United States Environmental Protection Agency (the EPA). The Corps exercises its jurisdiction over dredge and fill activities through Section 404 of the Act, while EPA maintains jurisdiction through Section 401 of the Act, which gives EPA the authority to prohibit an activity, including a construction project, if it will impact water quality or have other unacceptable environmental consequences. In many states, EPA has delegated its wetlands permitting authority to state environmental agencies. Typically, for work in wetlands, the applicant will complete a joint application that is submitted to the Corps and EPA or the state agency. Federal courts and the Supreme Court have agreed that the Clean Water Act requires permits to degrade wetlands along navigable waterways such as lakes and rivers, but the questions faced by the Court in the recent decisions were whether the laws also applied to tributaries of those waters and their adjacent wetlands and, if so, how far upstream.
In June 2006, the United States Supreme Court, in two closely watched decisions, Rapanos v. United States and Carabell v. United States, provided the latest insight, however murky (no pun intended), into federal jurisdiction over wetlands under the Act. Because it overruled the lower federal courts that found in favor of the federal government, at first glance, the Supreme Court appeared to have narrowed the Corps’ rather expansive definition of wetlands. While the Court did have an opportunity to set aside what some saw as growing federal regulation over private property interests and development under the guise of protecting "wetlands," the Court did not define the limits of federal regulatory in a clear and decisive manner. The result is that, at least for the time being, there will still be a great deal of uncertainty as to whether or not something is a wetland within the federal definition of a wetland and, therefore, uncertainty into whether there will be significant environmental regulatory impediments, i.e., time and costs, associated with construction projects.
Why didn’t the Supreme Court nail down this issue? The reason is that the Justices could not agree on just about anything regarding interpretation of the Act. The Court’s opinion lacked the backing of the majority of the Court. And the reasoning in the opinion is at odds with the written opinions of other justices. The prevailing sentiment in the legal and regulated community is that the Court’s plurality opinion will not have the effect of limiting federal jurisdiction at all. Consequently, contractors and environmental groups are struggling with how to interpret the ruling.
The Waters Are Muddied by Rapanos and Carabell
Rapanos and Carabell involved the scope of federal regulatory jurisdiction under the Act. They required the Court to decide whether the term "navigable waters" in the Act extended to wetlands that do not contain and are not adjacent to waters that are navigable in fact. As defined in the Act itself, the Act applies to "navigable waters of the United States." Over time, the federal government has interpreted this language to confer regulatory jurisdiction over waters and wetlands that clearly are not navigable and that in many instances were many miles from any truly navigable waterway. That is why and how some contractors and property owners reacted with disbelief when told that they must obtain a Corps permit in order to develop, or build on, their sites.
Rapanos is an example of a developer’s misplaced expectations. The petitioners owned three parcels of land on which they wanted to construct a shopping center. One of the sites consisted of 230 acres. In 1988, Mr. Rapanos, seeking to develop the site, asked the Michigan Department of Natural Resources to conduct an inspection. The Department told Rapanos that he could proceed with the project if the wetlands were delineated. Rapanos’s expert found that the site included between 48 to 58 acres of wetlands.
Rapanos apparently did not agree with his own consultant’s wetlands determination and allegedly threatened to "destroy" him unless he eradicated all traces of his wetlands report. Rapanos then ordered land-clearing work that filled in 22 of the wetlands acres on the site. The United States sued Rapanos both civilly and criminally. It was the civil case challenging federal jurisdiction over his property that was before the Supreme Court. Prior to reaching the Supreme Court, the lower court, applying the Corps’ definition of wetlands, found that the site included 28 acres of wetlands and that they had a surface water connection to tributaries of a river which flowed into another river that flowed into Lake Huron. Not a good ruling for Mr. Rapanos.
In Carabell, the issue was a parcel of land shaped like a triangle consisting of 19.6 acres, 15.9 of which were forested wetlands according to the lower court. The property was located about a mile from a large lake. Part of the property was alongside a man-made ditch. The ditch blocked surface water flow from the wetlands into the ditch. Near the northeast corner of the property, the ditch connected to a drain which carried water continuously throughout the year into a creek. The creek emptied into the lake. In 1993, the owners sought a permit hoping to fill in the wetlands and build 130 condominium units. The Corps concluded that the property "provides water storage functions that, if destroyed, could result in an increased risk of erosion and degradation of water quality in the drain, creek and lake." The permit was denied.
The landowners in Rapanos and Carabell argued that even if you use the most expansive definition of wetlands or waters of the United States, their lands should be exempt from federal control because they were too distant or lacked any meaningful hydrological connection to open water. That is, they believed that it was one thing to regulate wetlands adjacent to rivers and streams as "waters of the United States," but quite another thing to regulate wetlands next to drainage ditches that were removed from a navigable waterway. The majority of the Justices of the Supreme Court disagreed with the jurisdictional rationale applied by the lower courts and overturned the ruling for the government. It sent both cases back to the lower court for ruling consistent with their opinion(s). But what is consistent with their opinion? Can we now more easily determine the limits of federal jurisdiction over wetlands?
Where’s the Wetland?
Everyone thought that the decisions would come down to constitutional, or property rights, issues. However, the decisions do not really address constitutional issues raised by the property owners. Instead, they rely on statutory interpretation about the meaning of the Act and the meaning of the Corps’ interpretation of the mandates, wording and definitions of the Act.
One consistent theme in the case is that Congress and the Act didn’t give the Corps the power to regulate any and all bodies of water in the country no matter how small or nonnavigable. Justice Scalia sums up the problem by writing:
In fact, the entire land area of the United States lies in some drainage basin, and an endless network of visible channels furrows the entire surface, containing water ephemerally wherever the rain falls. Any plot of land containing such a channel may potentially be regulated as a "water of the United States." His definition of wetlands is closely connected (no pun intended) to his commonsense definition of waters of the United States. According to the plurality, by its terms the Act only applies to "waters," so only those areas that could potentially be characterized as "waters" are subject to federal control. Regulatory control over waters could extend from actual "open water" to those lands with a "significant nexus" to actual waters, but this would require more than a remote hydrological connection. And, to be within the jurisdiction of the federal government, the wetlands must be adjacent to the navigable water.
In general, it should be difficult to tell where a navigable waterway ends and wetlands begin. That is, there should be a direct surface water connection, or physical flow of water, between the waterway and the wetland. Such an area seems to be the true definition of a wetland and would include a continuous connection to a navigable body of water. This rather generic and elementary approach would reject the Army Corps’ approach most significantly with reference to "waters" that are intermittent and not permanent, standing or continuously flowing. However, the plurality does not command the majority. The other Justices rejected the plurality view and reasoning. They agreed that the cases should be sent back to the lower courts, but not to reject their decisions on the extent of federal jurisdiction. One Justice called for reconsideration, or fine-tuning, of what he called the preexisting "significant nexus" test.
He held the nexus should "be assessed in terms of the statute’s goals and purposes." This is a huge distinction from the plurality opinion because Justice Kennedy’s view of the Act’s goals and purposes is to "restore and maintain the chemical, physical, and biological integrity of the Nation’s waters." Here’s Kennedy’s test, which many believe will be the applicable test going forward ALIGN="JUSTIFY">Accordingly, wetlands possess the requisite nexus, and thus come within the statutory phrase "navigable waters," if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as "navigable." When, in contrast, wetlands’ effects on water quality are speculative or insubstantial, they fall outside the zone fairly encompassed by the statutory term "navigable waters." So, does this mean that as long as the federal government asserts that regulating a given wetland serves the "goals and purposes" of maintaining water quality, biological integrity, etc., regulatory jurisdiction may be upheld?
Kennedy also makes it very clear that the plurality opinion will have no effect on the Corps’ regulatory definition. He states that wetlands need not have a "continuous surface connection" because they can still have "significant effects" on water quality and the ecosystem in the absence of such a physical connection. He dismisses the plurality’s requirement of permanent standing water or continuous flow as making little practical sense in a statute concerned with downstream water quality, distinguishing between a continuous trickle (presumably having no effect on downstream water quality) with intermittent torrents of water, which, presumably, can have a tremendous effect on downstream water quality.
Like the plurality, though, Kennedy was concerned about overreaching by the Corps, particularly with respect to isolated, nonnavigable tributaries. When regulating wetlands adjacent to navigable-in-fact waters, though, Kennedy indicates that the Corps may rely on adjacency to establish its jurisdiction—almost like a presumption of jurisdiction for such adjacent wetlands. But absent more specific regulations, the Corps must establish a significant nexus on a case-by-case basis when it "seeks to regulate wetlands based on adjacency to nonnavigable tributaries." In determining whether there is a significant nexus, he says the Corps can take into account the status of other comparable wetlands in the region (e.g., empirical information).
Conclusion: Confusion— but Maintenance of the Status Quo?
Did the government win here? Or has the federal government’s jurisdiction over wetlands been curtailed? If the plurality opinion had been the majority opinion, there is little doubt that Rapanos and Carabell would be reversed by the lower courts and that there would be a significant drying up of federal jurisdiction over wetlands. However, the plurality is not the majority and Justice Kennedy stated that the record below contained evidence suggesting the possible existence of a significant nexus in the two cases. He even recognized that result, and the results of many others to be considered by the Corps, may be the same as that suggested by the dissent — namely, that the Corps assertion of jurisdiction is valid.
Therefore, the bottom line is that the diversity of opinions appears to be more of a win for those seeking maintenance or expansion of federal oversight than for industry and developers who were hoping for a substantial curtailment of federal jurisdiction over wetlands. The Corps will still be allowed to make a "holistic," or ecological, evaluation when deciding if there is a "significant nexus" between the property in question and "navigable waters," considering a variety of physical, chemical and biological factors in assessing the significance of a wetland to downstream water quality.
From a practical perspective, though, the burden will be on the Corps to prove that something is a wetland. That effort will be resource intensive and will likely slow down the permitting process as the Corps is stretched thin. Enforcement over the last seven years has already been cut in half. The Corps will be hard pressed to keep up with the permit applications, enforcement and interpretive litigation that is sure to result from the recent decisions. There will now be more pressure on the Corps to develop rules to clarify the scope of federal jurisdiction over navigable waters, but the rule-making process is bound to be divisive and protracted. Only time will tell if the recent Supreme Court decisions have any net effect on the amount of wetlands in the country or development in wetlands areas.
It is our understanding that EPA and Corps officials told a Senate hearing on August 1st that they are working on "guidance" to clarify federal wetlands authority. Some in the regulated community want the agencies to go further and develop a formal rule. Also last month, the Bush administration indicated that it was preparing instructions for regulators puzzling over which wetlands are covered by the Act. EPA representatives have stated that "our overarching goal is to continue to protect wetlands and the Clean Water Act to the maximum extent allowable.
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