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

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

Background

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.”

Conclusion

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

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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

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 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. 

Conclusion 

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

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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. 

Background

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. 

Sixth District Court of Appeal Holds that an EIR Need Not Consider All Possible Future Uses for Property Sold Under the Surplus Lands Act

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The Flanders Foundation v. City of Carmel-by-the-Sea, et al. (2012) 202 Cal.App.4th 603

On January 4, 2012, the Sixth District Court of Appeal held that the City of Carmel-by-the-Sea did not violate CEQA by failing to analyze in its EIR all potential uses of a property that was to be sold under the Surplus Lands Act (the Act), even though the uses were specifically mentioned in the Act. Continue reading →

Third District Rejects Negative Declaration for Oak Woodland Fee Program Despite County’s Attempt to Tier from Prior Program EIR

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Center for Sierra Nevada Conservation, et al., v. County of El Dorado (Jan. 20, 2012) __Cal.App.4th___ (Case No. C064875)

 On January 20, 2012, the Third District Court of Appeal ruled that the County of El Dorado violated CEQA by adopting a negative declaration for an oak woodland management plan and impact fee program.  The court decided the county could not “tier” its review of the fee program from an earlier program EIR prepared for the county’s 2004 general plan. Continue reading →

Save the Plastic Bag Coalition v. City of Manhattan Beach

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(2011) 52 Cal.4th 155

The California Supreme Court upheld the City of Manhattan Beach’s decision to ban plastic bags on the basis of a negative declaration. In its opinion, the court dealt with two issues arising under the California Environmental Quality Act (CEQA): (1) standing and (2) the fair argument standard of review. Petitioner, a coalition of plastic bag manufacturers and distributors, claimed standing to maintain a citizen suit under CEQA. On the merits of the case, Petitioner argued that the evidence in the record supported a fair argument that the ban would increase environmental damage, so that an EIR was required. The Court ruled for Petitioner on the procedural issue and against Petitioner on the merits. The Court rejected a heightened standard to maintain standing for corporations, following the trend in the United States Supreme Court, seeming to place corporations and natural persons on equal footing.

The Court’s decision on the merits was more narrowly tailored, reversing the lower courts which had held the city had to prepare an EIR before implementing a ban on plastic bags. The Court found that the evidence cited by Petitioner regarding the “life cycle” analysis of paper and plastic bags was not substantial evidence, even supporting a fair argument, that the City’s actions would result in significant impacts. The Court held that what was relevant were not the impacts of paper or plastic bags on a global scale, but on “the actual scale of the environmental impacts that might follow from increased paper bag use in Manhattan Beach [a city of 40,000 people].” In reaching its conclusions, the court repeatedly emphasized that in CEQA, the analysis should focus on the local environment, citing Public Resources Code section 21151, subd. (b) (“any significant effect on the environment shall be limited to substantial, or potentially substantial, adverse changes in physical conditions which exist within the area as defined in Section 21060.5”) and section 21060.5 (the physical conditions which exist within the area which will be affected by a proposed project, including land, air, water, minerals, flora, fauna, noise, [and] objects of historic or aesthetic significance”). While the court stressed that the focus and depth of the analysis must be on local impacts, CEQA does require a consideration of impacts outside the boundaries of the project area, if such impacts will occur, but “[t]his does not mean, however, that an agency is required to conduct an exhaustive analysis of all conceivable impacts a project may have in areas outside its geographical boundaries. ‘[T]hat the effects will be felt outside of the project area . . . is one of the factors that determines the amount of detail required in any discussion. Less detail, for example, would be required where those effects are more indirect than effects felt within the project area, or where it [would] be difficult to predict them with any accuracy.”’ Here, because the City was not expecting a huge increase in the use of paper bags for a variety of reasons, “the city could evaluate the broader environmental impacts of the ordinance at a reasonably high level of generality.” [RMM Partner James G. Moose and Senior Counsel Jennifer S. Holman filed a brief for Californians Against Waste as Amici Curiae on behalf of the City of Manhattan Beach. Mr. Moose also presented the arguments on the merits of the CEQA suit on behalf of amicus and in support of the City’s position.]

Stockton Citizens for Sensible Planning v. City of Stockton

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(2010) 48 Cal.4th 481

The California Supreme Court reversed a Court of Appeal decision holding that, despite alleged flaws in the decision-making process, a facially valid and properly filed notice of exemption (NOE) triggered the 35-day statute of limitation period for filing a lawsuit to challenge the city’s determination that it had approved a project exempt from CEQA. The Supreme Court held that a petition filed nearly six months after the City of Stockton had filed an NOE for approval of a Wal-Mart retail center that was consistent with a previously approved master development plan was untimely. The Court held that the posting of the NOE triggered the 35-day statute of limitations period under Public Resources Code section 21167, subdivision (d), regardless of whether the exemption determination was properly made.

The petitioners argued that the filing of an NOE could only have force or effect to trigger the 35-day limitations period if the underlying project approval were valid. The Court found that the petitioners’ argument ran contrary to the principle that limitations periods apply regardless of the merits of the claims asserted. Section 21167, subdivision (d), clearly requires suits claiming that an agency has “improperly determined” a project to be exempt from CEQA to be brought within 35 days after the filing of an NOE that complies with CEQA requirements. The Court also looked to the legislative intent of the statutory limitations periods and found that the approach argued for by the petitioners would circumvent CEQA’s unusually shortened statute of limitations for challenges where the agency has given public notice.

The Court also rejected petitioners’ argument that the NOE itself was defective, concluding that it demonstrated minimal compliance with CEQA in that it described the project in question, including its location, set forth the action taken, and detailed the reasons for the exemption finding. The NOE thus alerted the public that the statute of limitations for bringing a CEQA challenge to the noticed action had begun to run. Because petitioners had not filed their challenge within the 35-day limitations period, their claims were time-barred. [RMM Partner Whitman F. Manley filed a brief for League of California Cities and California State Association of Counties as Amici Curiae on behalf of Real Parties in Interest and Appellants.]

Committee for Green Foothills v. Santa Clara County Board of Supervisors

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(2010) 48 Cal.4th 32

The California Supreme Court held that the filing of a notice of determination (NOD) triggers the 30-day statute of limitations for all CEQA challenges to the decision announced in the notice, regardless of the nature of the CEQA violation alleged. The petitioners alleged that Santa Clara County had failed to determine whether review was required for an approval of a trail alignment for a countywide trail master plan, and therefore argued that the 180-day statute of limitations under Public Resources Code Section 21167, subdivision (d) should apply. The county had, however, filed an NOD.

Noting that Section 21167 does not specifically define the limitations period that applies to such a scenario, the Court found that the determinative question in identifying the appropriate statute of limitations was not the type of violation alleged, but whether the action complained of was disclosed in a public notice. According to the Court, when an agency gives the public notice of its decision under CEQA, the public can be expected to act promptly in challenging this decision. In contrast, when an agency does not give the statutorily required notice and the public is held to constructive notice based on the start of the project, a longer limitations period applies. Regardless of the type of violation alleged by petitioners, they had notice of the county’s action when the NOD was filed, and the Court concluded the petitioners thereafter had 30 days to file suit challenging that action.  The court also rejected the petitioners’ contention that the NOD was defective, and thus did not trigger a 30-day limitations period. The record supported the trial court’s finding that both the initial and the revised NODs were, at a minimum, in substantial compliance with CEQA guidelines. Of particular concern to the Court seemed to be the unusually short limitations periods set forth in CEQA, which are meant to ensure finality and predictability in land use planning decisions.  [RMM Partner Sabrina V. Teller filed a brief for League of California Cities and California State Association of Counties as Amici Curiae on behalf of the Respondent county.]

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