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News Release from ICSC
November 7, 2011

Supreme Court sides with property owners vs EPA
In a unanimous ruling this week, the Supreme Court sided with property owners against the Environmental Protection Agency in a wetlands regulation case. In Sackett v. EPA, the court declared that the Constitution’s guarantee of due process applies to environmental regulations. The ruling, sought by ICSC, is a victory for commercial property developers and owners, who often spend thousands or hundreds of thousands of dollars to comply with environmental regulations. Simply put, the ruling allows landowners to challenge the EPA before they can be punished for noncompliance.

The case originated with Michael and Chantell Sackett, who own a residential lot near Priest Lake, Idaho, where they had begun site work for a planned home. Though the lot was separated from the lake by existing homes, the EPA declared that they were disturbing wetlands adjacent to navigable waters. Under practices common to enforcement of the Clean Water Act, the EPA simply issued an administrative compliance order demanding that the Sacketts restore the land to its original condition, on pain of up to $75,000 per day in fines and/or prison time.

The Sacketts asked the EPA to reconsider, but the agency refused. The couple tried to contest the decision, but lower courts ruled that the compliance orders are not subject to judicial review. The Sacketts were faced with either abandoning all work on their home or risking ruinous fines and even jail time.

The Supreme Court ruled that citizens are entitled to preliminary judicial review of federal assertions of Clean Water Act jurisdiction (signaled through the compliance order) under the Administrative Procedure Act. That means the Sacketts may dispute the EPA’s assertion of jurisdiction before the EPA can fine them.

“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 review — even judicial review of the question whether the regulated party is within the EPA’s jurisdiction,” wrote Justice Antonin Scalia.

The Sacketts’ dilemma is one often faced by commercial real estate developers that receive a state permit for construction but then may have to wait years for federal permission — even when federal jurisdiction is in doubt. In most cases, developers retain the services of costly consultants (these are often former federal employees) to study the area and provide guidance through the process. In some cases it is a “close call” — is the area truly under federal jurisdiction or is it a purely state and/or local jurisdiction?

If the EPA — or the Army Corps of Engineers, which has joint authority to enforce these aspects of the Clean Water Act — asserts jurisdiction and a developer’s expert says they are wrong, the developer should now be able to mount a challenge in court without fear of fines and/or prison. This is important, because the cost of successfully seeking a federal permit can exceed $250,000 and require years of data-gathering, studies and similar work.

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