By Nathan Jones and Cori Badgley

In Fairbanks North Star Borough v. U.S. Army Corps of Engineers (2008) 543 F.3d 586, the United States Court of Appeals, Ninth Circuit held that the U.S. Army Corps of Engineers; (“USACE”) determination that a Clean Water Act section 404 wetlands permit would be required is not a final agency decision. Consequently, the USACE’s jurisdictional determination (“JD”) cannot be reviewed by the courts under the Administrative Procedures Act (“APA”) (5 U.S.C. § 704), if the JD concludes waters are present.

By regulation, the USACE has established a formal procedure to appeal a jurisdictional determination (33 C.F.R. § 331.2). A preliminary JD is a written determination by the district engineer on whether a wetland is subject to regulatory jurisdiction under the Clean Water Act (“CWA”). An approved JD, which can be subject to an internal appeal to the regional engineer, is an official determination that jurisdictional waters are either present or absent on the property. After the district engineer’s JD has been upheld by the division engineer as a final JD, no further administrative appeal is possible. (33 C.F.R. § 331.9). At that point, the approved JD is deemed to be a final decision for administrative purposes. (33 C.F.R. § 320.1(a)(2)). No further agency decision making on that issue can occur. Notably, JDs do not include determinations that a particular activity requires a permit. (33 C.F.R. § 331.2). An approved JD informs applicants that the USACE is asserting that the property contains waters of the United States. If the applicant chooses to undertake a project that could affect those waters, the USACE requires that a permit application be filed.

The City of Fairbanks, Alaska (“City”) began construction plans to develop 2.1 acres of property for a community park (“Property”). In October, 2005, the city wrote to the USACE to ask for its review and determination that it could place fill material on the Property without a permit. It asked the USACE to provide a detailed, scale drawing showing the wetlands in relation to the lot boundaries. The USACE district engineer thereafter issued a preliminary JD finding that the city’s entire parcel contained wetlands.  The city then requested that the USACE provide a final JD which asserted jurisdiction. An appeal occurred to the division engineer. In December 2005, the USACE division engineer obliged: “this approved jurisdictional determination is valid for a period of five years.” The city took a timely administrative appeal, which the USACE rejected in May 2006. In August 2006, the city filed suit to set aside the approved JD by arguing that the USACE could not, under its existing regulations, find that the property was a wetland. The USACE filed a motion for judgment on the pleadings, alleging that, under the APA, an approved JD is not, in and of itself, a final decision from which an appeal can be taken. The trial court agreed with the USACE, and dismissed the complaint on the grounds that the case was not yet justifiable under the APA. The instant appeal to the Ninth Circuit followed.

The Ninth Circuit, recognizing that this is a matter of first impression, first laid out the decisional test for examining what constitutes final agency action, not under USACE regulations, but under the APA:

First, the action must mark the consummation of the agency’s decisionmaking process—it must not be of a tentative or interlocutory nature. Second, the action must be one by which rights or obligations have been determined, or from which legal consequences will flow. (citing Bennet v. Spear (1997) 520 U.S. 154, 177-178.).

Using this framework for analysis, the circuit court agreed with the city that the Army Corps’ jurisdictional determination constituted a final agency decision on the jurisdictional subject matter, but under the Bennet two-part analysis, it did not impose an obligation, deny a right, or fix some legal relationship. The circuit court reasoned that because the city did not yet suffer some definitive legal injury until it went through with the permit process; there was no final agency decision sufficient for judicial review. Citing to Bennet and other supporting case law, the circuit court explained that the USACE’s JD was not an “action…by which ‘rights or obligations have been determined,’ or from which legal consequences will flow.” (Bennett, 520 U.S. at 178.). The circuit court stated:

Whether Fairbanks’ property is a jurisdictional wetland (i.e., contains waters of the United States) depends on its “vegetation, soil and hydrology” — the land is what and where it is. The Corps does not alter that physical reality or the legal standards used to assess that reality simply by opining that a particular site contains waters of the United States. See Nat’l Ass’n of Home Builders v. Norton, 415 F.3d 8, 16 (D.C. Cir. 2005) (agency action that “left the world just as it found it . . . cannot be fairly described as implementing, interpreting, or prescribing law or policy”) (internal quotation marks omitted).

The city countered by pointing to situations in which the determination has consequences: first, it prevents the city from claiming in mitigation that it acted in good faith if it gets penalized for construction without a permit by the USACE; second, that it requires the city to obtain a permit before proceeding with the project; third, it deprives the city of a JD that no waters of the United States were on the property, which would have protected the city from a later enforcement action by the USACE (referred to in the case as a ‘negative’ JD). The circuit court analyzed each of these arguments in turn, explaining that the “legal” consequences, referred to by the city, were actually factual risks involved in following the permit process. While the approved JD makes future contentious issues within the permit process more likely, the determination does not fix the legal status between the parties. The approved JD by the USACE only informs the city that the USACE both believes a permit application is necessary for the project if the city decides to go through with the project, and that it has jurisdiction over the property under the CWA.  “Because finality is a jurisdictional requirement to obtaining judicial review under the APA, the district court correctly dismissed Fairbanks’ action.” An applicant’s legal obligations arise directly and solely from the CWA, and not from the USACE’s issuance of an approved jurisdictional determination.

This case importantly holds that while some final agency actions are appealable, exhaustion of the administrative process in the context of 404(a) permits does not occur when the USACE’s final decision-making process determines that it will exercise jurisdiction over particular waters.

Cori Badgley is an associate with Abbott & Kindermann, LLP, and Nathan Jones is a law clerk with the firm. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.