Just as EPA Was Fixing Wetlands Rules, Along Come the Sacketts . . . Again

Real Estate and Land Use

The Idaho family that upended the Obama administration’s wetlands regime in the Supreme Court is back, much to the dismay of the Biden administration. On Monday, the Supreme Court issued a surprise order agreeing to review, for a second time, the Environmental Protection Agency’s (EPA) decadelong effort to regulate one family’s half-acre subdivision lot in Idaho. The high court classified its grant of review as “limited” to a single question. That limited question, however, dominates the debate over the permissible breadth of regulatory review of “waters of the United States” (WOTUS), including wetlands, under the federal Clean Water Act (CWA). The case could have a sweeping impact on the breadth of permissible regulatory enforcement by the federal government.

In round two of the Sackett dispute, EPA determined that features on the Sacketts’ lot were jurisdictional wetlands, requiring them to obtain a permit before placing any “fill” on the property to solidify it for construction. (An enforcement action by EPA against the Sacketts for prior placement of sand and gravel fill on the lot was the basis for round one of the saga.) Critical to EPA’s exertion of jurisdiction was its finding that the aquatic features on the Sacketts’ lot had a “significant nexus” to an adjacent lake. EPA’s selection of the so-called significant nexus test is what the Supreme Court has agreed to review.

Wetlands regulation has been muddy for decades. And in 2006, the Supreme Court made it more so than ever. In Rapanos v. United States, 547 U.S. 715 (2006), the third major Supreme Court consideration of the breadth of federal regulatory authority over WOTUS, the Court fractured, with no single analytical approach garnering a majority of five. A conservative foursome, led by Justice Scalia, held that for a feature to be subject to CWA jurisdiction, its flows of water had to be “relatively permanent.” This approach would significantly narrow the breadth of jurisdiction, leaving many features subject to regulation at the state level, but not by the feds. The liberal foursome, led by Justice Stevens, would have largely deferred to the federal agencies’ determination that a feature warranted regulation.

The lone holdout, Justice Kennedy, sided with the Scalia plurality as to the ultimate disposition of the case, but not the rationale. Kennedy would allow exertion of jurisdiction to a feature where the record demonstrated that the feature at issue had a significant nexus to an undisputedly jurisdictional navigable waterway. (In the Sackett case, that other navigable waterway, according to EPA, is the nearby lake.) Although Rapanos ended with no precedential majority holding as to the proper test to determine WOTUS, most courts throughout the country have held the significant nexus test — embraced by only one of nine justices and rejected by the other eight — to be the operative test.

Thus, after the Supreme Court remanded the Sackett/EPA dispute following round one, EPA affirmed its assertion of jurisdiction based on the significant nexus test from Rapanos. The Sacketts sued to invalidate the exertion of jurisdiction. The U.S. Court of Appeals, Ninth Circuit, sided with EPA and upheld based on the finding of a significant nexus between the lot and the lake. Now the Supreme Court is welcoming the Sacketts back, and it is Rapanos and Kennedy’s solo test that hang in the balance.

And the high court is a very different place than it was in 2006. Three of the four justices comprising the Scalia foursome in Rapanos remain on the Court — Justices Thomas and Alito and Chief Justice Roberts. A proven and demonstrable conservative, Justice Gorsuch, replaced Scalia. Additionally, President Trump appointed Justice Kavanaugh to replace Kennedy, and when he was on the U.S. Court of Appeals, Kavanaugh indicated he supported the Scalia opinion in Rapanos. Finally, Justice Ginsberg, a member of the liberal foursome in Rapanos, was succeeded by another conservative and a former law clerk to Scalia, Justice Coney Barrett. Thus, it would appear that at least five, if not six, justices would embrace the Scalia opinion in Rapanos.

Given the present composition of the Court relative to the alignments in Rapanos, should the Court revisit the appropriate test for defining jurisdictional WOTUS, it appears likely that the significant nexus test would be discarded, support for a test more akin to the Scalia "relatively permanent water" standard could emerge, and EPA's exertion of jurisdiction over the Sackett's lot would likely be thrown back to the drawing board for consideration under that new standard.

This development comes at a very inopportune time for the Biden administration. All too predictably, one of the Biden administration’s first actions was undoing the Trump administration’s efforts on WOTUS. Those efforts were largely designed to undo the Obama administration’s efforts. The Kennedy significant nexus test has been at the core of all the regulatory ping-pong. Recently, to try to stabilize the regulatory landscape, the Biden administration readopted Reagan-era regulations that predated Rapanos. EPA says it is working to craft a new rule that it assures the regulated community will be “enduring” and based on broad input from all sectors. Based on this pending rulemaking, the Biden administration strongly requested the Supreme Court to reject the Sacketts’ bid for a second round. Apparently, the Supreme Court does not want to wait.

A ruling on Sackett 2.0 is expected in 2023. Should you have any questions regarding this or any related entitlement or regulatory matters, please contact David Smith at dcsmith@manatt.com.

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