The Impact of the Sackett Case on Real Estate Development and Environmental Law

By Brook Boyd 1

As discussed in greater detail in this article, the SCOTUS decision in the Sackett case has narrowed wetlands subject to regulation by the U.S. Environmental Protect Agency and the Army Corps of Engineers.

The recent decision by the U.S. Supreme Court in Sackett v. Environmental Protection Agency2 substantially restricts the power of the U.S. EPA and the Army Corps of Engineers to regulate wet- lands. In 2004, Michael and Chantell Sackett paid $23,000 for a 2/3 acre residential lot in a subdivision where they planned to build a modest three-bedroom family home. This lot is located about 500 feet from landlocked Priest Lake in Idaho. More than 20 of their neighbors, in this subdivision, have already built homes that are closer to Priest Lake than the Sacketts’ lot is. The Sacketts’ lot is located on one side of a road that is 30 feet wide. On the other side of the road, there is a ditch that drains into a creek, that in turn flows into Priest Lake, which is a navigable intrastate lake.3

In 2007, the Sacketts dumped dirt and rocks in wet portions of the lot in order to make these areas habitable.4 A few months later, the U.S. Environmental Protection Agency (“EPA”) sent a compliance order to the Sacketts, alleging that that their lot contained navigable “waters of the United States,” and that the work by the Sacketts violated the Clean Water Act.5 The EPA threatened the Sacketts with penalties of more than $37,500 a day unless all portions of their property were restored to their original condition in accordance with an EPA “Restoration Work Plan.” The EPA further threatened to double the penalties against the Sacketts, since the EPA issued a compliance order to the Sacketts, but they had failed to comply with it.6

However, on May 25, 2023, the U. S. Supreme Court majority in Sackett ruled that the Sacketts’ property is not subject to the Clean Water Act. Generally, the majority ruled that wetlands are subject to the Clean Water Act only if such wetlands are “as a practical matter indistinguishable from waters of the United States.” Therefore, the party asserting that wetlands are subject to the Clean Water Act must demonstrate (1) “that the adjacent [body of water constitutes] . . . ‘water[s] of the United States,’ (i.e., a relatively permanent body of water connected to traditional interstate navigable waters); and (2) “the wetland has a continuous surface connection with [that adjacent body of water,] making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.”7 However, the EPA failed to meet this burden of proof.

Also, all nine Supreme Court judges agreed to reverse the judgment of the lower court8 (which had upheld the EPA’s legal right to require the Sacketts to restore their property to its original natural state, and to prevent them from building their new home). This unanimous action by the U.S. Supreme Court may have reflected their sympathy with the Sacketts and their 16year legal battle to build their new home. However, only 5 of the 9 U.S. Supreme Court judges agreed on the legal justification for the Supreme Court’s ruling. In any event, the opinions by the “5 judge” majority in the Sackett case merely reflect their interpretation of the current Clean Water Act. The U.S. Congress has the power to enact amendments to the Clean Water Act that could, in effect, make the Sackett case moot.

Can You Get An Advance Determination of Whether Government Agencies Will Approve Your Project?

Obviously, no one wants to buy a property, but then spend 16 years litigating (like the Sacketts) the right to develop it. The Sacketts sought declaratory and injunctive relief against the EPA, but the district court dismissed their claims for lack of subject-matter jurisdiction. When the Sacketts appealed to the Ninth Circuit, it affirmed the district court’s dismissal of the Sackett’s complaint, on the ground that the Clean Water Act precluded pre-enforcement judicial review of compliance orders. However, the U.S. Supreme Court then ruled, in a 2012 decision, that the EPA compliance order issued to the Sacketts was “final agency action for which there is no adequate remedy” other than an appeal pursuant to the federal Administrative Procedure Act.9

Another alternative is that a lender or property owner may request a “Approved Jurisdictional Determination” (“AJD”) from the Army Corps of Engineers (“Corps”) as to whether jurisdictional waters of the United States are present on the owner’s property. AJDs are reviewable in the federal courts.10 Alternatively, an owner or lender can request the Corps to issue a “Preliminary Jurisdictional Determination” (“PJD”) whether there are waters of the United States at a certain location, but PJDs are merely advisory and may not be appealed.11

Political Stalemate Over WOTUS and Wetlands May Cause Delays or Denials of Wetland Approvals

During the last decade, there has been no national political consensus with respect to how “Waters of the United States” (“WOTUS”) and wetlands should be federally regulated. During this period, the definition of WOTUS changed, based on whether the Democratic party or the Republican party controlled the White House. The following summarizes a few of the highlights relating to the efforts made by various U.S. Presidents to establish administrative regulations for WOTUS and wetlands.

In 2015, the WOTUS that were protected under the Clean Water Act were described in “Clean Water Rule: Definition of ‘Waters of the United States,’” 80 Fed. Reg. 37054 (June 29, 2015) (issued during the Obama administration). The U.S. Supreme Court then ruled that any challenges to the WOTUS rule must be first be filed in a U.S. District Court.12 The Environmental Protection Agency and the Army Corps of Engineers then issued a final rule (issued during the Trump administration) that repealed the above 2015 WOTUS rule.13 This rule became effective in every state except Colorado, on June 22, 2020, subject to various appeals, after a California federal court denied a motion brought by several states to stay such rule.14 A federal judge then ordered that the Trump administration’s WOTUS rule be vacated and remanded for reconsideration to the U.S. EPA and the U.S. Army Corps of Engineers.15 Similarly, District Judge Alsup issued an order remanding the Trump WOTUS rule to the U.S. EPA and vacating it.16 However, the U.S. Supreme Court then stayed Judge Alsup’s vacatur of the Trump WOTUS rule, pending the decision of the 9th Circuit.17 A new final WOTUS rule (issued by the Biden administration) became effective on March 20, 2023.18 However, a North Dakota federal judge issued a temporary injunction (in 24 states) against the Biden administration’s new WOTUS rule.19

Other Unresolved Issues Relating to WOTUS and Wetlands

It could be argued that the 2023 Sackett decision’s requirement that “the wetland has a continuous surface [emphasis added] connection with [the adjacent body of water,]” represents a tradeoff between reality and practicality. On the one hand, there are clearly many situations where underground springs and other subsurface water sources are connected to navigable “waters of the United States,” even though this is not apparent on the surface. Justice Kavanaugh discusses at length the possibility of such “subsurface” connections.20 On the other hand, it may be burdensome and expensive for a property owner, or the EPA, to spend the time and money required to prove whether or not a property has subsurface connections with “waters of the United States.”

Nonetheless, recent scientific research may tip the current balance on whether subsurface water issues will be acknowledged. For example, large areas in Corcoran, California (where many agricultural companies are based) have sunk almost 12 feet in a decade as the result of farmers extracting groundwater for farming, but not replenishing it.21 Scientists now believe that the global depletion of groundwater is the second most important factor (after global warming causing the melting of polar ice) in a recent change of the Earth’s axis (away from the North Pole and heading east).22 Obviously, if Mother Earth is at risk, we will all be much more interested in groundwater.

Endnotes

1. Brook Boyd is Counsel to Meister, Seelig & Fein, LLP in their New York office. He is a member of the Connecticut, Florida, New Jersey and New York bars. He is the author of Real Estate Finance (Law Journal Press, 52nd ed.) and has published many articles in legal and professional journals.

2. 598 U.S. ____, No. 21-454, slip op. at 22 (May 25, 2023) (hereinafter called the “Sackett” case).

3. In order to appreciate the distance between the Sacketts’ lot, other neighbors in their subdivision, and Priest Lake, you can go to Google Maps (https://www.google.com/maps) and search for the Sacketts’ property, which is located at 1604 Kalispell Bay Rd, Priest River, ID 83856.

4. Sackett, 598 U.S. ____, No. 21-454, slip op. § 1(B) at 4-5.

5. 33 U.S.C. §1362(7). The Clean Water Act prohibits “the discharge of any pollutant by any person” (33 U.S.C. § 1311), without a permit, into “navigable waters” (33 U.S.C. § 1344). If there has been such a violation of the Clean Water Act, then the EPA may either issue a compliance order or commence a civil enforcement action (33 U.S.C. § 1319(a)(3)).

6. Sackett v. Environmental Protection Agency, 566 U.S. 120, 132 S. Ct. 1367, 1370 (2012).

7. Sackett v. Environmental Protection Agency, No. 21-454, § III(B), slip op. at 22 (May 25, 2023).

8. Sackett v. U.S. Environmental Protection Agency, 8 F. 4th 1075, 1091–1093 (9th Cir. 2021).

9. Sackett v. Environmental Protection Agency, 566 U.S. 120, 132 S.Ct. 1367, 1374 (2012). See also U.S. Army Corps of Engineers v. Hawkes Co , 578 U.S. 590, 136 S. Ct. 1807, 195 L.Ed.2d 77 (2016) (the U.S. Supreme Court ruled that the Corps of Engineers’ determination as to whether a property contains “waters of the United States”, that are protected by the Clean Water Act, constitutes “final agency action.”

10. U.S. Army Corps, Regulatory Guidance Letter No. 16–01, at 1 (2016) (RGL 16–01); 33 CFR §§320.1(a)(6), 331.2. But the Corps maintains that it has no obligation to provide jurisdictional determinations, RGL 16–01, at 2.

11. 33 CFR § 331.2.

12. National Ass’n of Manufacturers v. Department of Defense, 583 U.S. ___, 138 S. Ct. 617, 199 L.Ed.2d 501 (2018).

13. “The Navigable Waters Protection Rule: ‘Waters of the United States,’” 85 Fed. Reg. 22250 (April 21, 2020).

14. “Federal Court Denies Nationwide Stay of Navigable Waters Protection Rule,” Latham & Watkins LLP (June 22, 2020), available at https://www.globalelr.com/2020/06/federal-court-denies-nationwide-stay-of-navigable-waters-protection-rule/ (last visited Apr. 21, 2023).

15. Pasqua Yaqui Tribe v. United States Environmental Protection Agency, CV-20-00266-TUC-RM, 2021 U.S. Dist. LEXIS 163921 (D. Ariz. Aug. 30, 2021).

16. In re Clean Water Act Rulemaking, Nos. C 20-04636, C 20-04869 & C 20-06137 (N.D. Cal. Oct. 21, 2021).

17. Louisiana v. American Rivers, 2022 U.S. LEXIS 1902 (April 6, 2022).

18. ‘Revised Definition of “Waters of the United States,”’ 88 Fed. Reg. 3004 (Jan. 18, 2023).

19. West Virginia v. U.S. Environmental Protection Agency, Case No. 3:23-cv-032 (D. N. Dakota Apr. 12, 2023), available at https://storage.courtlistener.com/recap/gov.uscourts.ndd.57922/gov.uscourts. ndd.57922.131.0.pdf (last visited Apr. 21, 2023).

20. Sackett, 598 U.S. ____, No. 21-454, slip op., at § IV, pps. 12-14, of the separate dissent of Justice Kavanaugh.

21. “The Central California Town That Keeps Sinking,” N.Y. Times, May 27, 2021, Section A, page 14.

22. “The Earth’s Axis Is Shifting, and We’re the Reason,” N.Y. Times, June 29, 2023, Section A, page 1.