Supreme Court Preview: Ownership of Navigable Riverways and Due Process Challenge to Enforcement Orders to be Decided in 2011-12 Term

Introduction

The U.S. Supreme Court’s new term is set to begin in approximately three weeks. There are two environmental cases on the Court’s docket. The first, PPL Montana, LLC v. State of Montana,[1] presents the question of who owns the beds and banks of three Montana rivers that play a prominent role in the history of the American West and the economy of modern Montana. The second case, Sackett, et al., v. EPA, et al,[2] presents the question of whether defendants have a right to contest a compliance order issued by EPA under the Clean Water Act. The government contends that such challenges are limited by the agency’s pre-enforcement review policy, even though the statute contains no express pre-enforcement bar.

Montana

The PPL Montana case has to do with ten federally-licensed hydroelectric dams on the Missouri, Madison, and Clark Fork rivers. In 2003, parents of Montana schoolchildren sued the dams’ owner, PPL, arguing that PPL owed the State compensation because the riverbeds underlying its dams were part of Montana’s “school trust lands.” The State joined the suit in 2004, asserting that PPL also owed the State compensation pursuant to Montana’s Hydroelectric Resources Act (“HRA”).[3] After the suit was dismissed by the district court for lack of diversity, PPL filed suit in state court seeking a declaration that the Federal Power Act preempted the State’s claims under the HRA.

The State counterclaimed, maintaining that it had acquired title to the relevant streambeds at the time of statehood pursuant to the “equal footing doctrine.” The equal footing doctrine is the constitutional theory that each new state admitted to the Union possessed the same “rights of sovereignty, jurisdiction, and eminent domain” as the original thirteen colonies.[4] One of these “rights of sovereignty” is title to the lands beneath “navigable waters” within state boundaries. Under the equal footing doctrine, on the date that each new state was admitted to the Union, the federal government passed trust ownership of the navigable waters and the underlying riverbeds to the state.

The trial court dismissed PPL’s affirmative defenses, held that the State obtained title to the riverbeds based on the fact that the rivers were navigable at the time of statehood, and concluded that the State was entitled to retroactive lease payments under the HRA. Following a bench trial to determine damages, the court imposed approximately $40 million in back lease payments, as well as future lease payments imposed by the State.

PPL appealed, arguing that the State did not own the riverbeds beneath PPL’s dams, and that even if it did the State’s claims for compensation were preempted by federal law. The Supreme Court had previously addressed the issue of a State’s claim of title flowing from navigability in the case of United States v. Utah:

The rule long since approved by this court in applying the Constitution and laws of the United States is that streams or lakes which are navigable in fact must be regarded as navigable in law; that they are navigable in fact when they are used, or are susceptible of being used, in their natural and ordinary condition, as highways for commerce, over which trade and travel are or may be conducted in the customary modes of trade and travel on water; and further that navigability does not depend on the particular mode in which such use is or may be had-whether by steamboats, sailing vessels or flatboats-nor on an absence of occasional difficulties in navigation, but on the fact, if it be a fact, that the stream in its natural and ordinary condition affords a channel for useful commerce.[5]

Relying on this rule, Montana presented evidence that the rivers in question were in fact used, or were susceptible of being used, as highways of commerce at the time of statehood. PPL presented expert testimony that the dams were located on stretches of river, such as the Great Falls Reach on the Missouri, where navigation was impossible. PPL also argued that evidence of present-day usage was irrelevant, presenting expert testimony to show that the flow of the rivers had changed since statehood.[6]

The Montana Supreme Court upheld the summary judgment against PPL, rejecting PPL’s assertion that certain portions or segments of an otherwise navigable stretch of river could be rendered unnaviagable due to the presence of falls or rapids, such as those found on Great Falls Reach. Although the court acknowledged that the Supreme Court’s Utah decision assessed navigability on a “section-by-section basis,” the court interpreted the test to evaluate whether there were “long reaches of non-navigability” and not “short interruptions” in an otherwise navigable stretch.[7] The Montana Supreme Court concluded that PPL’s evidence of “relatively short interruptions of navigability” in the rivers in question was insufficient as a matter of law to declare portions of the rivers non-navigable and that evidence of the present-day usage of the rivers demonstrated that the rivers were susceptible of being used for commerce in 1889.

The preemption issue focuses on whether the FPA, which authorizes the Federal Energy Regulatory Commission (“FERC”) to grant licenses for the construction, operation, and maintenance of hydroelectric dams, preempted Montana’s HRA, which addresses the use of state-owned lands for hydroelectric projects. The trial court concluded that the FPA established a “dual system” of control between the states and the federal government regarding hydroelectric dams. The Montana Supreme Court found that the core of the HRA was compensatory rather than regulatory, and therefore not preempted by the FPA’s reach.[8]

The Solicitor General initially opposed certiorari, a position that was reviewed in this newsletter. See R. Prugh, Supreme Court Invites Solicitor General’s Comment on Montana Rent-for-Riverbeds Case, Marten Law Environmental News (January 26, 2011). However, in an amicus brief filed last week, the Solicitor General argued against the position advanced by the State and accepted by the Montana Supreme Court, maintaining that the case should be remanded back to the lower court for “intensive factual inquiry” on the navigability question. The Solicitor General claimed that the lower court failed to consider each river’s navigability using a segment-by-segment analysis. The court held that every part of all three rivers in questions – the Madison, the Clark Fork and the Missouri – were navigable, even though it conceded that certain sections were not at the time Montana was admitted to the union. The Solicitor General also maintained that evidence of navigation from after Montana became a state was largely irrelevant.

The merits briefing and the amicus briefs may all be found at the SCOTUS Blog site by following this link. A date for oral argument in the case has not yet been set.

Sackett: Pre-Enforcement Review

The second environmental case to have been accepted for review is Sackett, et al. v. EPA. The opinion being reviewed came from the Ninth Circuit,[9] whose opinions have not fared well at the Supreme Court in the past few years. The case was reviewed in this newsletter at the time certiorari was granted. See R. Prugh, U.S. Supreme Court to Hear Challenge to Clean Water Act Bar on Pre-Enforcement Review, Marten Law Environmental News (July 13, 2011).

Sackett is a case arising under the Clean Water Act (“CWA”). Among other things, the CWA prohibits the discharge of fill material into wetlands without a permit under § 404 of the Act. Administration of the § 404 permit program is conducted by the United States Army Corps of Engineers, but the Corps shares enforcement authority with EPA. When EPA determines that an unauthorized discharge has occurred, it has three enforcement options: (1) assess an administrative penalty[10] (2) initiate a civil enforcement action in U.S. district court;[11] or (3) issue an administrative compliance order directing the violator to remove the discharged material[12]

Chantell and Michael Sackett own a 0.63 acre undeveloped parcel in Idaho. In 2007, the Sacketts filled a portion of their property without a CWA permit. EPA determined that the fill violated the CWA because the parcel contained a jurisdictional wetland and issued an administrative compliance order requiring the Sacketts to remove the fill and restore the parcel to its original condition. The Sacketts petitioned EPA for a hearing to challenge the wetland determination and, after EPA refused, filed suit in district court. EPA argued that review of an agency order was barred, unless the agency first sued (which it had not) and insisted that the Sacketts comply, threatening penalties if they did not. The district court agreed, and dismissed the Sackett’s suit for lack of jurisdiction. The Sacketts appealed to the Ninth Circuit, where they raised two arguments: (1) that the APA allows pre-enforcement review of CWA compliance orders; and (2) that due process requires EPA to allow pre-enforcement review.

The Ninth Circuit rejected the APA argument, finding that judicial review is unavailable under the APA if the agency acts according to a statute that “preclude[s] judicial review.”[13] The CWA does not provide for review of EPA administrative compliance orders. On the other hand, it contains no bar against pre-enforcement review. By contrast, CERCLA § 113(h) bars pre-enforcement review, stating that “[n]o Federal court shall have jurisdiction … to review any order issued under section 9606 (a) of this title.” 42 U.S.C. § 9613(h).

The Ninth Circuit held that where, as here, the statute is silent on the issue, the presumption in favor of judicial review may be overcome where “the congressional intent to preclude judicial review is fairly discernible in the statutory scheme.”[14] The court held that that the CWA’s administrative-order scheme sought to remedy environmental problems quickly, without the delay of litigation. It held that pre-enforcement review would not only frustrate this goal, but would also negate EPA’s statutory choice between filing an initial suit in district court and acting unilaterally through an administrative order.[15]

The Ninth Circuit also rejected the Sacketts’ due process arguments, finding that due process was satisfied because: (1) judicial review of the order was available once EPA brought an enforcement action; (2) nothing barred the Sacketts from seeking a § 404 permit to fill their property (the denial of which would could be reviewable in district court); and (3) the CWA authorizes the court, not EPA, to impose penalties based on a “wide range of case-specific equitable factors.”[16]

In their petition for certiorari, the Sacketts argued that while a delay in judicial review does not automatically violate due process, the “practical effect” of the CWA’s coercive penalties for non-compliance violates due process because it “foreclose[s] all access to the courts.”[17] The Sacketts pointed to the CWA’s “frightening penalties” for each day of non-compliance: just one month of non-compliance subjects the violator to $750,000, while one year could result in up to $9,000,000 in penalties.[18] The petition challenged the Ninth Circuit’s solution of applying for a § 404 permit, explaining that “in many instances the agencies will not entertain a permit application until the compliance order has been resolved.” The Sacketts argued that the Ninth Circuit decision “ignore[d] the realities” of the Sacketts’ circumstances by assuming that they can “afford to defy an order, backed by threats of severe financial penalty, issued by the United States government, and simply await an action for sanctions.”[19]

The Supreme Court granted certiorari on the following questions: (1) may petitioners seek pre-enforcement judicial review of the administrative compliance order under the APA; and (2) if not, does petitioners’ inability to seek pre-enforcement judicial review of the administrative compliance order violate their rights under the Due Process Clause?

With certiorari having been granted on June 28, the merits briefing has not yet been filed in the case. However, the petition for certiorari, response, petitioners’ reply and amicus briefing on certiorari can be viewed at this link. No date for oral argument has been set as of this writing.

Conclusion

In past terms, the Court has granted certiorari for additional environmental cases during the pendency of the term. We will continue to monitor both the Court’s docket and the Montana and Sackett cases and will provide reviews of the decisions in those cases and any others accepted for certiorari as they are issued.

For more information, contact Steve Jones or any other member of our Environmental Litigation practice group.