INSIGHT: New high court ruling could chill environmental enforcement

22 March 2012 18:01  [Source: ICIS news]

By Joe Kamalick

US High Court rules for property rights over EPAWASHINGTON (ICIS)--The US Supreme Court this week delivered an opinion that could have a profound effect on federal environmental law enforcement, a unanimous decision that many see as a major roll-back of Environmental Protection Agency (EPA) authority.

In Sacketts v Environmental Protection Agency (Case No.10-1062), the US high court was asked to determine whether those targeted by an EPA enforcement action are entitled to a third-party hearing on the merits of the case before the agency imposes a fine, restoration order or some other penalty.

In 2005 Michael and Chantell Sackett purchased a half-acre (0.2ha) lot in a suburban development near Priest Lake, Idaho, where they planned to build a vacation home.

The Sacketts, who operate a contracting and excavation business, began work on the property by bringing in fill material (such as earth and gravel) to level the lot.

Three days later, an EPA official arrived at the lot, told a worker to stop excavating immediately, and issued the Sacketts with an administrative compliance order (ACO). The order said that the lot was “wetlands” protected under the Clean Water Act (CWA), and that the Sacketts would have to remove the fill material from the lot or face high daily fines until they complied with the order.

The Sacketts argued that their lot was not wetlands and sought a hearing before EPA officials to contest the agency’s jurisdiction. 

The EPA refused, so the Sacketts filed a suit in federal court to challenge the agency’s jurisdiction and its enforcement process.

The district court and a federal appellate court found in favour of  the EPA, and the Sacketts sought remedy from the Supreme Court, which agreed to hear their appeal.

In reaching their unanimous decision on Wednesday, the nine justices of the high court held that those subject to EPA enforcement actions are indeed entitled to an administrative court review – a low-level and fairly prompt proceeding – before the agency can begin imposing fines for noncompliance, which can run as high as $37,500 a day (€28,500 a day) while the matter is subject to litigation, perhaps for years.

Prior to this ruling by the Supreme Court, anyone wanting to contest an EPA order would have had to file a suit in federal court, which could take years, while the daily $37,000 fines mounted into millions of dollars. 

Faced with that prospect, most US companies and individuals typically comply with an EPA order and abandon whatever plans or projects had been envisaged for their property.

Wednesday’s ruling by the Supreme Court, said Senator Lisa Murkowski (Republican, Alaska), is “a validation of the concerns voiced by so many that EPA has overstepped its authorities”.

“The Sacketts’ story exemplifies the impact of EPA overreach on the personal property rights of Americans,” she said, adding: “the Supreme Court’s unanimous decision upholds the right of landowners to have a court review attempts to regulate use of their private property by the EPA.”

Murkowski and others have long argued that what they regard as EPA’s overreaching authority has placed unwarranted bans and restrictions on energy development in her home state of Alaska and elsewhere in the US.

Barry Rutenberg, chairman of the National Association of Home Builders (NAHB), said that “this ruling provides a check on [the] EPA’s capricious expansion of its regulatory authority”.

“Finally, homeowners and home builders have a way of challenging EPA compliance orders before they face big fines,” he added.

The property rights and judicial review rights upheld by the high court on Wednesday also apply to business owners of property.

The Supreme Court justices, said Karen Harned, of the National Federation of Independent Business (NFIB), “have assured landowners that their constitutional right to seek judicial review of government orders is inalienable”.

“The extraordinary costs, administrative burdens and other punitive measures that can cripple businesses are no longer an inevitability for the men and women of Main Street,” she said.

The case could open a floodgate of consequences for US property rights and federal environmental enforcement.

A measure of how far-reaching this high court ruling might be is seen in the crowd of stakeholders that joined the Sacketts in their challenge to the EPA.

A wide range of trade groups and business interests and 10 state governments filed amicus curiae (or “friend-of-the-court”) briefs with the Supreme Court in support of the Sacketts. 

Among them were the American Petroleum Institute (API), CropLife America (agrochemicals), the Fertilizer Institute, the National Mining Institute (NMI), manufacturers, electric utilities, commercial and residential real estate groups and a building owners’ group.

The Sacketts ruling is also likely to have broad implications for the US refining and petrochemicals industries, which are heavily regulated by the EPA under various statutes.

The US Chamber of Commerce filed a separate amicus brief in support of the Sacketts.

A clutch of environmental groups also chimed in with amicus briefs, arguing that the EPA was right.

If the EPA was required to go into a pre-enforcement hearing, the NRDC said, “such a rule would create a perverse incentive for [the] EPA to remain silent in situations where it believes violations exist unless it is prepared to immediately litigate in federal court”.

That is exactly the point, according to the Chamber of Commerce.

In its brief, the Chamber of Commerce alleged that the EPA slaps enforcement actions by the thousand on people or companies in a capricious manner, all too often without sufficient jurisdiction or evidence of wrongdoing.

“This is a problem of staggering proportions,” the chamber said.

“Unable to resist the temptation to bypass traditional remedies, [the] EPA issues numerous unilateral orders every day, in routine, non-exigent [non-emergency] circumstances. And it does so under a wide variety of environmental statutes for the very purpose of evading the need to prove its case before a neutral decision-maker.”

“This practice leaves recipients with no realistic choice but to comply with its [EPA’s] orders,” the chamber argued.

“No matter how wrong an administrative order may be, individuals, families and small businesses simply cannot risk bankruptcy as the price of seeking judicial review,” the chamber said, adding that even major corporations are reluctant to risk that level of fines and the potential for years of negative effects on their stock prices.

“Holding [the] EPA to the bedrock constitutional due process requirement would hardly bring the modern administrative state to its knees,” the chamber contends.

But it would, according to the NRDC.

The environmentalists warned that it is unrealistic to think that EPA could grant formal hearings as a matter of routine every time it issues an administrative order.

Both the environmentalist and business briefs noted that, under various environmental statutes, the EPA issues as many as 6,000 orders annually.

If the EPA were required to grant oral hearings in even a fraction of its thousands of orders, the environmentalists argued, there would be serious financial and staffing questions about the agency’s ability to administer those statutes.

No-one can say for sure how broadly EPA enforcement activity will now be affected in the wake of the high court’s ruling in Sacketts, but the decision is almost certain to make EPA enforcement more complex, costly and time-consuming for the agency.

The EPA said in a statement that it would comply fully with the Supreme Court’s decision, “which the agency is still reviewing”.

($1 = €0.76)

Paul Hodges studies key influences shaping the chemical industry in his Chemicals and the Economy blog

By: Joe Kamalick
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