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Questioning Your EPA Compliance Orders? A recent Supreme Court decision could allow pre-enforcement review

Administrative compliance orders are one enforcement tool utilized by the Environmental Protection Agency to obtain compliance and, until a recent U.S. Supreme Court decision, could not be challenged unless and until the EPA brought an enforcement action in federal district court. The Supreme Court, in its Sackett v. EPA decision, has ruled that a regulated entity can immediately challenge an administrative compliance order under the Clean Water Act (CWA) issued by the EPA because such orders are final agency action for which there is no adequate remedy other than Administrative Procedure Act (APA) review. The CWA does not preclude judicial review, thereby clearing the way for this unanimous decision.

The story behind Sackett v. EPA

Michael and Chantell Sackett own residential property in Bonner County, Idaho. Though the property is near Lake Priest, it is separated from the lake by several lots containing permanent structures. The Sacketts filled in part of their lot with dirt and rock prior to construction of a home. The EPA issued a compliance order that included findings that the Sackett property contains wetlands that are adjacent to Priest Lake, that Priest Lake is a navigable U.S. waterway, and that by adding fill material to wetlands on their property the Sacketts were discharging pollutants into U.S. waters without a permit, placing them in violation of the CWA. The compliance order directed the Sacketts to restore the site in accordance with an EPA Restoration Work Plan and to provide to the EPA access to the site and all documentation related to conditions at the site. The Sacketts also faced civil penalties of up to $37,500 per day for the alleged violation and $37,500 per day for violation of the compliance order.

Seeking judicial review of agency administrative orders

The Sacketts disagreed that their property contained wetlands and asked the EPA for a hearing. When the EPA denied their request for a hearing, the Sacketts filed suit in federal district court under the APA. The district court dismissed the action and the Ninth Circuit Court of Appeals affirmed, finding that the CWA precludes pre-enforcement judicial reviews of compliance orders. The Supreme Court examined Chapter 7 of the APA which allows for judicial review of “final agency action for which there is no other adequate remedy in a court” except when other statutes preclude judicial review.

The court found that the compliance order was a final agency action since it established legal obligations for mandated restoration activities, it contained legal consequences in the form of civil penalties and it “marked the consummation of the agency’s decisionmaking process” because it was not subject to further agency review. The court further found no other adequate judicial remedy because only the EPA could initiate enforcement action, and the Sacketts accrue civil penalties while waiting on the EPA’s action. Finally, the court found that the CWA does not preclude judicial review of agency action. Thus, the compliance order was subject to pre-enforcement judicial review.

In response to the government’s warning that the EPA would be less likely to use compliance orders if they are subject to judicial review, the court stated that “the APA’s presumption of judicial review is a repudiation of the principle that efficiency of regulation conquers all. And there is no reason 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 whether the regulated party is within the EPA’s jurisdiction. Compliance orders will remain an effective means of securing prompt voluntary compliance in those many cases where there is no substantial basis to question their validity.”

The court’s holding dealt only with the ability to seek judicial review of agency administrative orders and did not address whether the wetland in question was subject to CWA jurisdiction. Justice Alito, in his concurring opinion, criticized the “notoriously unclear” reach of the CWA to wetlands and specifically called on Congress to provide clarity by stating that “allowing aggrieved property owners to sue under the Administrative Procedure Act is better than nothing, but only clarification of the reach of the Clean Water Act can rectify the underlying problem.”

What does this mean for other regulated entities?

While this case addresses compliance orders issued pursuant to the CWA, programs such as the Resource Conservation and Recovery Act and the Clean Air Act also provide the EPA with authority to issue administrative compliance orders. The reasoning in Sackett v. EPA has the potential to be applied to compliance orders issued pursuant to other statutes, which could ultimately affect regulated entities across a spectrum of industries and locations.

If you have questions about this case and its implications for you or your business, please contact someone in the Bingham Greenebaum Doll LLP Enivronment and Natural Resources practice group.

DISCLOSURE REQUIRED BY CIRCULAR 230.  This Disclosure may be required by Circular 230 issued by the Department of Treasury and the Internal Revenue Service.  If this article, including any attachments, contains any federal tax advice, such advice is not intended or written by the practitioner to be used, and it may not be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer.  Furthermore, any federal tax advice herein (including any attachment hereto) may not be used or referred to in promoting, marketing or recommending a transaction or arrangement to another party.  Further information concerning this disclosure, and the reasons for such disclosure, may be obtained upon request from the author of this article. Thank you.

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