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Supreme Court Allows Challenge to EPA Administrative Order

By Katherine M. Rahill

On March 21, 2012, the United States Supreme Court issued a decision that alters what many have long accepted as the rule with respect to administrative compliance orders issued by the U.S. Environmental Protection Agency ("USEPA"). In Sackett v. Environmental Protection Agency, U.S. No. 10-1062, the Supreme Court was tasked with deciding whether a party may bring an action under the Administrative Procedure Act ("APA") to challenge the issuance of a USEPA administrative order under the Clean Water Act ("CWA"). In a unanimous decision, the Supreme Court held that the answer to that question was a resounding "yes."

This case involved the Sacketts who own a residential lot just north of a lake in Bonner County, Idaho and, as part of a plan to construct a house on the lot, filled in part of their lot with soil and rocks in early 2007. At some point following this activity, the Sacketts received an administrative compliance order from USEPA, finding that they had violated the CWA by illegally filling wetlands on their property, ordering them to halt any further construction, and requiring them to restore the property pursuant to a restoration work plan. After receiving the order, the Sacketts requested a hearing to contest the issuance of the order, a request which was denied by USEPA. The Sacketts then filed suit in the U.S. District Court for the District of Idaho to challenge the order under the APA, arguing that USEPA did not have authority under the CWA over their property. The District Court dismissed their claims based on lack of subject matter jurisdiction and that decision was affirmed by the Ninth Circuit. The Sacketts then appealed to the Supreme Court which granted certiorari

The Sacketts' action was brought under Chapter 7 of the APA, which provides for judicial review of final agency actions. The federal government, however, challenged the Sacketts' ability to bring such an action, arguing that the administrative compliance order issued to the Sacketts was not a final agency action subject to review and that review of such orders was precluded by the CWA. The Supreme Court rejected both of these arguments.

The Court first addressed the issue of whether an administrative order under the CWA was a "final agency action for which there is no other adequate remedy in court" subject to judicial review under ยง704 of the APA. The Court examined the finality of the order and the adequacy of other potential remedies separately. To determine whether the administrative compliance order was a final agency action, the Court applied criteria developed in prior Supreme Court decisions, including whether the order showed a USEPA determination of rights or obligations, whether legal consequences flowed from the issuance of the order, and whether issuance of the order was a conclusion of USEPA's decision-making process. The Court found that each of these criteria was met in that: (1) the requirements that the Sacketts restore their land and provide access to USEPA conferred obligations on the Sacketts; (2) the penalties faced by the Sacketts for violating the order itself as opposed to just the CWA and their limited ability to obtain a permit for the work following the issuance of the order constituted legal consequences; and (3) despite an invitation by USEPA to engage in informal discussion of the terms of the order, the Sacketts had no opportunity for further agency review of the order upon its issuance. With respect to the adequacy of other possible remedies, the Court found that there was no other adequate remedy for the Sacketts to challenge the USEPA action as the Sacketts would either have to wait for USEPA to bring a civil enforcement action against them for violation of the order or apply for a fill permit from a different agency (the Army Corps of Engineers) and challenge that other agency's denial of that permit. The Court found neither option particularly appealing, and therefore, the Court held that the administrative compliance order was a final agency action for which there was no other adequate remedy in court.

The Court next addressed USEPA's argument that, regardless of whether the compliance order was a final agency action, the CWA precluded judicial review under the APA. Because the CWA does not expressly preclude judicial review of an administrative compliance order, the Court examined the intent of the CWA statutory scheme. Although the government offered several arguments in favor of its position that the judicial review was in opposition to the intent of the CWA, the Court again rejected each of them including the government's argument that judicial review of administrative compliance orders would stifle USEPA's ability to issue these orders and obtain what USEPA terms to be "voluntary" compliance.

Both Justice Ginsburg and Justice Alito issued brief concurring opinions. Justice Ginsburg's concurrence emphasized that the decision of the Court concerned the ability of a party to challenge USEPA's authority to issue the compliance order and that the issue of whether a party could challenge the terms of the order at the pre-enforcement stage was not before the Court. Justice Alito's concurrence, however, was more of a call to action to Congress to clear up the confusion that has long plagued regulators and the regulated community alike over the authority of the CWA and the meaning of "waters of the United States."

The true ramifications of this decision are still unknown. The decision is sure to impact USEPA's decision-making process for issuing administrative compliance orders under the CWA. Additionally, it is likely that parties that receive CWA administrative compliance orders will challenge USEPA's jurisdiction where the reach of the CWA is questionable. However, the success of those challenges remains to be seen as does the impact this decision on USEPA administrative orders beyond the Clean Water Act.

A copy of the opinion is available here.