Archives: March 2012

U.S. Supreme Court Holds That Property Owners Can Sue to Immediately Challenge Environmental Protection Agency Orders Issued Under the Clean Water Act

Sackett v. Environmental Protection Agency (March 21, 2012, No. 10–1062) 566 U.S. ____ 


The Sacketts own a 0.63-acre undeveloped parcel near Priest Lake in Idaho. In 2007, they graded and filled a portion of their property as preparation for building a home. Shortly thereafter, EPA officials served the couple with an administrative compliance order advising them that their parcel constituted wetlands subject to federal permit jurisdiction under section 404 of the Clean Water Act.  The order directed the Sacketts to restore the lot to its original condition without delay; and threatened them with substantial fines of up to $75,000 per day for non-compliance with the CWA and administrative order.

The Sacketts sought a meeting with EPA regulators to address their contention that the property was not wetlands subject to the CWA because it was separated from Priest Lake by several lots containing permanent structures. After they were denied the meeting, the Sacketts filed suit in federal district court to challenge the EPA’s wetlands classification. The district court dismissed their lawsuit, holding that EPA administrative compliance orders issued under the CWA do not constitute final agency action subject to judicial review. The Ninth Circuit affirmed and the U.S. Supreme Court granted certiorari. 

Supreme Court’s Decision

The Supreme Court unanimously reversed the decision and held that the administrative compliance order issued by the EPA constituted a “final agency action” subject to judicial review under the APA, and nothing in the CWA explicitly bars such review.

Beginning with the “final agency action” analysis, the Court explained that the APA provides for judicial review of final agency action for which there is no other adequate remedy in a court and the compliance order here had  “all of the hallmarks of finality.” Citing the “final agency action” rules from Bennett v. Spear (1997) 520 U.S. 154, 178, the court found that the EPA “determined” “rights or obligations” through the compliance order by requiring the Sacketts to restore their property according to an agency-approved plan and to give the EPA access.  Also, the order had legal consequences which exposed the Sacketts to double penalties in future enforcement proceedings and severely limited their ability to obtain a permit for their fill from the Army Corps of Engineers.  Further, the Court held, the order’s issuance marked a “consummation” of the agency’s decision-making process because the EPA’s findings in the compliance order were not subject to further agency review. 

The Sacketts also had no other adequate remedy in a court because a civil action brought by the EPA ordinarily provides judicial review in such cases, but the Sacketts could not initiate that process and each day they had to wait for EPA to bring such an enforcement action, they would accrue additional potential liability.  Applying for a permit and then filing suit under the APA if that permit was denied also would not provide an adequate remedy for the EPA’s action. 

Next, the Court held that there was nothing specific in the CWA that precluded judicial review.  Noting that the presumption in the APA favoring judicial review of administrative action can be overcome by inferences of intent drawn from the statutory scheme as a whole, the Court found that nothing in the Clean Water Act either explicitly or impliedly precludes pre-enforcement review.  As a result, the court held that pre-enforcement review of the EPA’s administrative order was appropriate.

The Court emphasized that that it was not deciding whether the Sacketts would win their court case, but only that they had the right to challenge the compliance order.   Therefore, it remanded the case back to the lower court. 

Justice Ginsberg issued a concurring opinion, noting that although the Court’s decision allowed the Sacketts to “immediately litigate” the question of “EPA’s authority to regulate their land under the Clean Water Act,” it did not resolve the question of whether the Sacketts could challenge the “terms and conditions” of the compliance order.  Justice Alito also wrote a separate concurrence in which he criticized federal wetlands regulators and policy stating that 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.”  He challenged Congress to create a “reasonably clear rule regarding the reach of the Clean Water Act.”


To obtain judicial review of administrative orders issued under the CWA, property owners no longer need to wait until an agency chooses to sue them to enforce the order.  Rather, as Sackett makes clear, they have the right under the APA to sue as soon as they receive the order to which they object.  Although this case specifically addresses an order issued under the CWA, the Court’s holding could arguably apply to other federal environmental statutes as long as they do not explicitly preclude pre-enforcement review. Future cases that address the scope of this decision will determine how big of an impact it will actually have on the power of federal agencies. 


Department of Fish and Game Temporarily Halts Mitigation Banking Program

On March 14, 2012, the California Department of Fish and Game (DFG) announced that budget cuts have made it infeasible for the agency to review and approve new mitigation banking proposals statewide. DFG acknowledges that banking is an important mitigation tool and hopes the pause in banking activities is short-lived. DFG will sign bank agreements that are close to being completed, although it did not state what it considers “close.” DFG will not, however, be approving new banking programs and stated it may not have the capacity to process major amendments to existing agreements. The halt in DFG’s review of new banking programs is temporary and DFG stated that it is open to suggestions from the public for funding options.  Once program funding is secured, DFG hopes to resume banking activities. At this time, DFG does not have a timeline by which it expects to resume its mitigation banking program.

First District Applies “Unusual Circumstances” Exception to Strike Down Application of Categorical Exemption to Construction of Single-Family Residence

 Berkeley Hillside Preservation et al., v. City of Berkeley et al., (Feb. 15, 2012) __Cal.App.4th__ (Case No. A131254) 

(May 23, 2012, Petition for Review granted; CA Supreme Court Case No. 201116)

On February 15, 2012, the First District Court of Appeal ruled that the City of Berkeley violated CEQA when it approved the construction of a single-family residence based on a determination that the project qualified for a categorical exemption.  Applying the “fair argument” standard to its review of the City and trial court’s contrary conclusion, the court held that an exception to the categorical exemption applied because substantial evidence of a fair argument that the project would have significant environmental impacts had been presented. 

Factual and Procedural Background 

In 2009, a property owner filed an application for a use permit with the City of Berkeley to demolish a single-family dwelling on a 30,000-square-foot lot in Berkeley and replace it with a new home. The application indicated the new dwelling would be a 6,478-square-foot home with an attached 3,394-square-foot garage on a Berkeley hillside. 

Berkeley’s Zoning Adjustment Board approved the project without requiring an EIR because it found that the proposed construction was categorically exempt from CEQA pursuant to CEQA Guidelines sections 15332 (In-Fill Development Projects) and 15303, subdivision (a) (New Construction or Conversion of Small Structures, single-family residence). The board determined that the proposed project did not trigger any of the exceptions to the exemptions under CEQA Guidelines section 15300.2. Specifically, the board concluded that the “unusual circumstances” exception did not apply because the proposed construction would not have any significant effects on the environment due to “unusual circumstances.” 

An appeal was filed with the board, arguing that the unusual circumstances exception should apply because the proposed dwelling would be one of the largest houses in the city.  The city responded to the appeal with its own evidence of comparable sized “dwellings” in the city and the project vicinity. Appellants further challenged the board’s finding that the proposed construction was categorically exempt from CEQA, arguing the project’s unusual size, location, nature and scope may have a significant impact on its surroundings and therefore that an EIR was required to evaluate the proposed construction’s potential impact on noise, air quality and neighborhood safety. 

The city received numerous letters supporting and opposing the appeal. One letter supporting the appeal was submitted by a geotechnical engineer specializing in foundation engineering and construction.  The engineer argued that the project would require significant grading and extensive trucking operations and concluded the project would likely have significant environmental impacts.  A geotechnical engineer for the project proponent disagreed with these findings, noting that the opposing engineer appeared to have relied upon incorrect, outdated project plans and presented evidence that the project would not have a significant impact. 

After receiving a supplemental report and hearing arguments from both sides, the city adopted the findings made by the board, affirmed the decision not to require an EIR, and approved the use permit.  Appellants filed a petition for writ of mandate, which the trial court denied after concluding that there was substantial evidence in the administrative record to support the city’s determination that the infill and new construction categorical exemptions applied to the proposed construction. 

The trial court denied the writ despite finding that the project presented unusual circumstances and finding that the proposed construction would cause significant environmental impacts. The trial court applied a two-part test established in Banker’s Hill, Hillcrest, Park West Community Preservation Group v. City of San Diego (2006) 139 Cal.App.4th 249, 278. Under Banker’s Hill, when considering whether to apply the “unusual circumstances” exception, a court is required to determine: (1) whether the project presents “unusual circumstances” and (2) whether there is a reasonable possibility of a significant effect on the environment due to the unusual circumstances.” (Banker’s Hill, Hillcrest, Park West Community Preservation Group v. City of San Diego, supra, 139 Cal.App.4th 249, 278 (original italics).)  In emphasizing that each step is an independent element, Banker’s Hill stated that, “[a] negative answer to either question means the exception does not apply.” (Id.)  Applying this test, the trial court held that, although there were unusual circumstances were present and the project could have significant impacts, the proposed construction did not trigger the exception to the exemptions because the possible significant impacts were not due to the unusual circumstances. 

Court of Appeal Decision 

On appeal, Appellants conceded that the proposed construction was subject to the two CEQA categorical exemptions. Appellants argued, however, that the “unusual circumstances” exception to the exemptions should apply. CEQA Guidelines section 15300.2, subdivision (c), provides that an activity which would otherwise be categorically exempt is not exempt if there are “unusual circumstances” which create a “reasonable possibility” that the activity will have a significant effect on the environment.  

The Court of Appeal reversed the trial court’s decision denying the writ.  It held that where there is substantial evidence that a proposed activity may have an effect on the environment, an agency is precluded from applying a categorical exemption. “The fact that proposed activity may have an effect on the environment is itself an unusual circumstance, because such action would not fall ‘within the class of activities that does not normally threaten the environment,’ and thus should be subject to further environmental review.” 

The Court of Appeal found Appellants had presented substantial evidence of a fair argument that the proposed construction would have a significant effect on the environment.  This alone was enough for the unusual circumstances exception to apply.  The court relied heavily on the letter submitted by the geotechnical engineer in opposition to the project. The court noted contrary evidence was not adequate to support a decision to dispense with an EIR.  As a result of the substantial evidence in the record supporting a fair argument that the project would have a significant impact, the application of a categorical exemption was inappropriate. The Court of Appeal, therefore, ordered the prior judgment reversed, and directed the trial court to order the preparation of an EIR. 


By taking this approach, the Court of Appeal essentially rejected the two-part Banker’s Hill test.  Interestingly, however, the court did not expressly state that it was rejecting the Banker’s Hill test.  To the contrary, it proclaimed in the decision that “[the] conclusion that the unusual circumstances exception applies whenever there is substantial evidence of a fair argument of a significant environmental impact is [] not inconsistent with Banker’s Hill.”  (A previous error in this statement was corrected by a modification issued by the Court of Appeals on March 7, 2012.) 

Despite the Court of Appeal’s statement otherwise, the decision is not consistent with Banker’s Hill.  The court’s holding that the unusual circumstances exception will apply whenever there is substantial evidence of a fair argument that a proposed project will have a significant effect on the environment is contrary to Banker’s Hill and significantly limits the availability of categorical exemptions under CEQA. The apparent split in authority creates substantial uncertainty for the future application of categorical exemptions.

U.S. Army Corps of Engineers Issues New Procedures for Determining Compensatory Mitigation Ratios

On February 20, 2012, the U.S. Army Corps of Engineers, South Pacific Division, announced new procedures for determining compensatory mitigation requirements for processing permits under section 404 of the Clean Water Act, section 10 of the Rivers and Harbors Act, and section 103 of the Marine Protection, Research and Sanctuaries Act. 


Compensatory mitigation involves actions that must be taken to offset adverse impacts to wetlands, streams and other aquatic resources authorized by Clean Water Act section 404 permits and other Department of the Army permits. It is the restoration, establishment, enhancement and/or, in certain circumstances, preservation of aquatic resources for the purpose of offsetting unavoidable, adverse impacts that remain after all appropriate and practicable avoidance and minimization of adverse effect has been achieved. The purpose of compensatory mitigation is to develop long-term self-sustaining wetlands and other waters that offset project impacts. As such, compensatory mitigation is a critical tool in helping the federal government to meet the longstanding national goal of “no net loss” of wetland acreage and function.  

Historically, the Corps has determined the required acreage ratio for mitigation (compensatory mitigation ratio) after receiving recommendations from the applicant and the appropriate resource agencies. The Corps would consider the functions and values of the wetlands that might be eliminated or degraded, the functions and values of the proposed mitigation site, and the likelihood of success of the proposed mitigation. Based on all of that information, the Corps would establish the mitigation ratio. 

Until now, the South Pacific Division Regulatory Program has not had procedures or other guidance for determining the mitigation ratios. There were only some general guidelines that required that the rationale used by the Corps to determine the ratio to be documented in the administrative record for the permit action. 

To address this need, a multi-district team was assembled to develop regional procedures for determining and documenting mitigation ratios. 

The New Mitigation Ratio Procedures

The main component of the new procedures is a mitigation ratio checklist that project managers are required to fill out using an applicant’s compensatory mitigation proposal. Project managers then use the checklist to evaluate the applicant’s proposed mitigation for each impact site or type. 

The checklist requires the consideration of several factors, including:

(1)   Qualitative impact-mitigation comparison – This factor is considered if a Corps-approved functional/condition assessment has been obtained.  The quantitative assessment of functional loss at the impact site versus expected functional gain at the mitigation site may warrant a lower or higher ratio. 

(2)   Quantitative impact-mitigation comparison – If a Corps-approved functional/condition assessment has not been obtained, the project manager must use a Before-After-Mitigation-Impact (BAMI) spreadsheet to determine the appropriate mitigation ratio adjustment. Project managers must consider either qualitative or quantitative factors, but not both as they are mutually exclusive. 

(3)   Mitigation site location – The ratio will be increased for mitigation located outside the impacted watershed.

(4)   Net loss of aquatic resource area – The ratio will be increased for mitigation measures that result in rehabilitation, enhancement, or preservation, as opposed to establishment.

(5)   Type conversion – Out-of-kind mitigation generally warrants a higher ratio. 

(6)   Uncertainty – Project managers must consider the inherent uncertainty of mitigation when determining a ratio.  Greater levels of uncertainty will result in a higher ratio. 

(7)   Temporal Loss – Under this factor, project managers consider the amount of time between when the authorized impacts occur and when constructed mitigation is expected to replace lost functions.  A longer delay will warrant a higher ratio. 

A copy of the checklist must be included in the administrative record. 

The procedures apply to the Regulatory Program within the South Pacific Division of the U.S. Army Corps of Engineers which includes Sacramento, San Francisco and Los Angeles, and are applicable for all permit applications that the Corps receives after April 20, 2011, that require compensatory mitigation. 

Conclusion and Implications

The new procedures address a long-standing need in the permitting process and incorporate the most current scientific understanding of mitigation concepts. The Corps intends that they will benefit both the regulated community and the environment by eliminating uncertainty and creating more consistency between different project managers, offices and districts. Because the procedures have a lot of flexibility, however, and the Corps must still make judgment calls throughout the process, it is unclear whether the Corps’ goals will be achieved. The amount of discretion permitted by the procedures could result in continuing inconsistency and uncertainty.