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Fourth Circuit Backs Developer in Dispute Over Clean Water Act Jurisdiction; Signals Less Deference Given to Agency Guidance

By Jeff Kray
March 11, 2011

In the latest significant decision on the reach of the Clean Water Act (“CWA”)[1], the Fourth Circuit has remanded for further factual findings a Corps of Engineers decision to require a developer to obtain a permit to fill weltands located nearby, but not abutting, the nearest arguably “navigable” water, a ditch in an agricultural area in Virginia. The case, Precon Development Corp., Inc. v. Army Corps of Engineers (Precon)[2] is a victory for the developer, and continues a trend among lower courts to closely scrutinize the Corps’ authority to require permits under Section 404 of the CWA.

The Precon decision is also significant in that it gives less deference to agency “guidance” documents than to agency rules and regulations, continuing a trend seen mostly recently in National Mining Ass’n v. EPA.[3] See also, R. Prugh, District Court Says EPA Cannot Shortcut Rulemaking Process by Issuing Interpretative Guidance, (February 3, 2011). The Precon court held that the Corps’ interpretation of the U. S. Supreme Court’s Rapanos[4] decision in a guidance document is entitled to less deference by the courts than agency rules adopted after notice-and-comment.[5] The deference – or lack of it – given to agency guidance will likely become even more important as EPA finalizes draft new guidance on determining CWA jurisdiction post-Rapanos. The EPA’s 2011 Draft Guidance is discussed in the companion story to this article and in our recent article, J. Kray, Five Years After Rapanos – EPA Prepares New Clean Water Act Jurisdictional Guidance, (February 3, 2011).

Background

The Precon appeal arose out of a determination by the Corps that it has jurisdiction under the CWA over 4.8 acres of wetlands located on Precon Development Corporation’s property approximately seven miles from the nearest navigable water.[6] Precon is building a 658-acre Planned Unit Development known as Edinburgh (the “Edinburgh PUD”), located in Chesapeake, Virginia. The city of Chesapeake is in southeastern Virginia, a region historically comprised of forested wetlands. Many of these wetlands ultimately drain into the Northwest River, which flows south through the region, passing within five to ten miles of the Edinburgh PUD. Between 2004 and 2006, the Corps granted Precon permits under CWA Section 404 to fill 77 acres of based in part on an understanding that this was the totality of the development planned for the Edinburgh PUD.[7]

In 2006, Precon announced a plan to develop ten additional residential lots in the Edinburgh PUD. Precon limited its proposed design so that it would only impact 4.8 acres of wetlands (the “Site Wetlands”). Precon argued that the Corps had no jurisdiction over those 4.8 acres. The Corps disagreed. The Site Wetlands sit adjacent to a man-made drainage ditch approximately 2,500 feet long (the “2,500-foot Ditch”). The Site Wetlands do not, however, abut the 2,500-foot Ditch, because when the 2,500-foot Ditch was excavated through the surrounding wetlands in 1977, “[m]aterial excavated … was side-cast on the east bank and therefore creates a berm between the [Site Wetlands] and the ditch.”[8]

The 2,500-foot Ditch, which flows seasonally – i.e. from late winter to early spring – joins a larger, perennial drainage ditch, the Saint Brides Ditch, approximately 900 feet downstream of the Site Wetlands. The Saint Brides Ditch runs along the western boundary of the PUD for approximately 3,000 feet before continuing to meet a second perennial tributary about two and one-half to three miles south of the Edinburgh PUD. These merged tributaries flow into the Northwest River approximately three to four miles downstream.

The Corps initially determined that it had jurisdiction over the Site Wetlands on the ground that the wetlands sat adjacent to a ditch which qualified as “waters the United States.”[9] In June 2007, the Corps and EPA issued a joint guidance memorandum (“2007 Rapanos Guidance”) instructing agency staff on how to make jurisdictional determinations that comply with the Supreme Court’s decision in Rapanos. After the 2007 Rapanos Guidance came out the Corps reviewed its jurisdictional determination of Precon’s project and upheld its finding of jurisdiction over the Site Wetlands.[10] Because the Site Wetlands do not abut – but only sit adjacent to – the 2,500-foot Ditch, the Corps did not treat them as automatically subject to jurisdiction, but instead, as instructed by the 2007 Rapanos Guidance, attempted to explain its rationale for upholding jurisdiction through a “Significant Nexus Determination.”

First, the Corps’ Significant Nexus Determination identified the relevant reach as the 2,500-foot Ditch and the Saint Brides Ditch, collectively.[11] The Corps then determined that the relevant reach of this tributary extended to the point, downstream 3.11 miles, where the Saint Brides Ditch joined the Pleasant Grove Swamp. The Corps next took up the task of identifying “similarly situated wetlands.” It identified all 166 acres of wetlands located within the Edinburgh PUD and the Northwest River watershed as similarly situated. The Corps then identified 282 more acres of “similarly situated wetlands” adjacent to the relevant reach but not on Precon’s property.

Following the 2007 Rapanos Guidance, the Corps’ Significant Nexus Determination analyzed the functions and flow of the Saint Brides Ditch and the 2,500-foot Ditch.[12] The Corps found that the Saint Brides Ditch “greatly moderates the effect of flood flows” on the Northwest River due to its large storage capacity and slow release.[13] With respect to the 2,500-foot Ditch, the Corps found that its 93,750 cubic feet of water storage capacity and substantial accumulation of woody debris allowed it to slow water velocities to 1.13 feet per second, providing “significant flood flow benefits to downstream traditionally navigable waters.”[14] The Corps then analyzed the 448 of similarly situated wetlands and found that they contributed to flood control, reduced erosion, helped maintain water quality, and served as wildlife habitat, including habitat for endangered species. On the basis of this evidence, the Corps’ Significant Nexus Determination concluded that the tributaries and their adjacent wetlands have “a significant nexus that has more than a speculative or insubstantial effect on the Northwest River,” and that loss of these wetlands “would have a substantial negative impact on water quality and biological communities of the river’s ecosystem.”[15]

Accordingly, the Corps reaffirmed its previous conclusion that it had jurisdiction over the Site Wetlands, such that Precon would be required to obtain a CWA permit before filling them. Precon appealed the Corp’s determinations to the United States District Court for the Eastern District of Virginia under the Administrative Procedure Act (“APA”), 5 U.S.C § 702, and the parties filed cross motions cross-motions for summary judgment.[16] The district court granted summary judgment to the Corps, upholding both its jurisdictional determination and its permit denial. Precon appealed to the Fourth Circuit triggering another review of the Corps’ application of the Supreme Court’s decision in Rapanos.

The Rapanos Decision

The CWA’s primary objective is to “restore and maintain the chemical, physical and biological integrity of the Nation’s waters.”[17] To achieve this express statutory objective, the CWA strictly prohibits discharging pollutants into the “navigable waters of the United States” without an NPDES permit from the EPA or authorized state environmental authority.[18] After Congress passed the CWA, an issue arose concerning the extent to which wetlands adjacent to navigable waters constitute “waters of the United States.” The Supreme Court subsequently confirmed in United States v. Riverside Bayview Homes[19] that waters of the United States subject to federal regulation include tributaries of traditionally navigable waters and wetlands adjacent to navigable waters and their tributaries.

Rapanos v. United States is one of the leading Supreme Court cases, and the most recent, interpreting the scope of CWA jurisdiction.[20] In Rapanos, the Supreme Court, by a 4:4:1 plurality, remanded to the Sixth Circuit the issue of whether the Corps exceeded its statutory authority under the CWA by requiring property owners to acquire permits before dredging and filling certain wetlands.[21] The case presented the Court with the opportunity to determine whether the wetlands at issue were subject to the United States’ CWA jurisdiction. Rapanos also presented the Court with the opportunity to clarify its holding in Solid Waste Agency of Northern Cook County v. U.S. (SWANCC),[22] which had caused uncertainty among regulators, courts, and the regulated community about the breadth of the CWA’s jurisdiction. Unfortunately, the Court’s decision in Rapanos did little to clarify CWA jurisdiction and, in fact, advanced conflicting tests for determining whether wetlands are protected by federal law.

Justice Scalia’s plurality decision in Rapanos narrowly interpreted “waters of the United States,” and would remove many wetlands from federal jurisdiction by requiring a continuous surface water connection.[23] Justice Scalia’s approach failed, however, to command a majority, and was specifically rejected in Justice Kennedy’s concurrence. Justice Kennedy found that the plurality interpretation of “waters of the United States” was inconsistent with the CWA’s text and purpose, and he advanced a test that would require the federal government to establish a “significant nexus” between wetlands and navigable waters on a case-by-case basis.[24] For further analysis of the Rapanos decision, see J. Kray Long Anticipated Supreme Court Wetlands Decision Leaves Much to be Decided, Marten Law Group Environmental News (June 21, 2006).

The Precon Decision

Unlike many other recent cases applying Rapanos, the Fourth Circuit’s decision in Precon did not address whether to apply the Scalia or Kennedy tests because the parties agreed that Justice Kennedy’s significant test governed and provided the formula for determining whether the Corps had jurisdiction over the Site Wetlands.

On appeal, Precon challenged only the Corps’ jurisdictional determination and argued that there are two major flaws in the Corps’ jurisdictional determination. First, Precon contended that the Corps impermissibly aggregated 448 acres of surrounding wetlands to determine jurisdiction.[25] Second, Precon argued that the Corps did not provide sufficient evidence that the connection between those wetlands and the Northwest River amounted to a significant nexus.[26]

Recognizing the Corps’ expertise in administering the CWA, and the resulting deference due the Corps’ factual findings and interpretation of the phrase “similarly situated” from the significant nexus test the Fourth Circuit upheld the Corps’ finding that 448 acres of wetlands were “similarly situated” to the Site Wetlands.[27] The court found that the Corps appropriately applied the significant nexus test in aggregating wetlands abutting waters of the United States and other adjacent wetlands. The court further found that the Corps gave a reasonable explanation for its actions and, therefore, found no error in the Corps’ decision to aggregate both the abutting and adjacent wetlands in its significant nexus determination.

Precon prevailed, however, in its second argument. The Fourth Circuit found the Corps’ administrative record inadequate to support a finding that it had jurisdiction over Precon’s wetlands, vacated the district court’s grant of summary judgment and remanded the case to the district court with instructions to remand to the Corps for reconsideration of its jurisdiction over the wetlands in question.[28] Precon’s challenge to the adequacy of the Corps’ record provided the Fourth Circuit with its first opportunity to consider the evidentiary requirements of Justice Kennedy’s significant nexus test. Following the Sixth Circuit’s decision in United States v. Cundiff[29], the Fourth Circuit held that the test does not require laboratory tests or any particular quantitative measurements in order to establish significance.[30] The Corps must, however, find some evidence that the wetlands and other water bodies at issue perform functions that are “significant” for it to find that they are related to a navigable water.

Furthermore, although the court recognized the Corps’ expertise in administering the CWA and stated that it would give deference to its interpretation and application of Justice Kennedy’s “significant nexus” test where appropriate that deference is limited by the fact that the Corps has not enacted a rule applying the test. The court, therefore, does not “review the Corps’ interpretation of the phrase “significant nexus” under the greater deference accorded some agency interpretations under Chevron U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), because – although it could – the Corps has not adopted an interpretation of “navigable waters” that incorporates this concept” through a rule and has only relied on a non-binding guidance document.[31]

In Precon, the Fourth Circuit held that the Corps’ record contained no documentation that would allow the court to review the Corps’ assertion that functions the Site Wetlands perform are significant for the Northwest River. Accordingly, the court concluded that the Corps’ record did not support its determination that the nexus that exists between the 448 acres of similarly situated wetlands and the River is “significant.”[32] For these reasons, the Fourth Circuit reversed the district court’s holding that the Corps’ administrative record adequately demonstrated that a significant nexus existed and remanded to the Corps for reconsideration.[33]

In this regard, the Precon decision highlights the difficulty that the Corps, businesses, developers, and other parties face in determining when a CWA permit is required for work that involves wetlands. The Precon decision does, however, provide some additional guidance. In conclusion, the Fourth Circuit wrote that it did not intend to place an unreasonable burden on the Corps. The Court asked only that in cases like Precon, involving wetlands running alongside a ditch miles from any navigable water, the Corps pay particular attention to documenting why such wetlands significantly, rather than insubstantially, affect the integrity of navigable waters. Finally, such documentation need not take the form of any particular measurements, but should include some comparative information that allows the courts to meaningfully review the significance of the wetlands’ impacts on downstream water quality.

For more information about Marten Law’s water quality and wetlands practice please contact Jeff Kray.

[1] 33 U.S.C. § 1251 et seq.

[2] Slip Opinion, ___ F.3d ___, Dkt. No. 09-2239 (4th Cir. 2011).

[3] Slip Opinion, ___ F.3d ___, Dkt. No. 10-1220 (RBW) (D.C. Cir. 2011).

[4] 126 S. Ct. 2208 (2006).

[5] Slip Opinion at p. 18, fn. 10, ___ F.3d ___, Dkt. No. 09-2239 (4th Cir. 2011).

[6] Id. at p. 3.

[7] Id.

[8] Id. at p. 4.

[9] Id. at p. 5.

[10] For more on the 2007 Rapanos Guidance see J. Kray “Post-Rapanos Guidance on Clean Water Act Jurisdiction Issued by EPA and Corps” Marten Law Group Environmental News (June 6, 2007).

[11] Slip Opinion at p. 7, ___ F.3d ___, Dkt. No. 09-2239 (4th Cir. 2011).

[12] Id. at p. 9.

[13] Id.

[14] Id.

[15] Id. at p. 12.

[16] Id.

[17] 33 U.S.C. § 1251(a).

[18] 33 U.S.C. § 1311(a).

[19] 474 U.S. 121 (1985).

[20] 126 S. Ct. 2208.

[21] Id.

[22] 531 U.S. 159 (2001).

[23] Id. at 2225.

[24] Id. at 2249.

[25] Id. at p. 18.

[26] Id. at p. 23.

[27] Id.

[28] Id. at pp. 25-26.

[29] 555 F.3d 200 (6th Cir. 2009).

[30] Slip Opinion at p. 24, ___ F.3d ___, Dkt. No. 09-2239 (4th Cir. 2011).

[31] Slip Opinion at p. 18, fn. 10, ___ F.3d ___, Dkt. No. 09-2239 (4th Cir. 2011).

[32] Id. at pp. 29-30.

[33] Id. at p. 30.

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