Supreme Court Issues Murky Decision in Wetlands Case

Decision fails to provide a check on federal authority to regulate private property

Last week, the U.S. Supreme Court issued its decision in the Rapanos vs. United States case on the scope of the federal government’s authority to regulate wetlands under the 1970 Clean Water Act. Critics argue that federal agencies have overreached by imposing federal restrictions on every little backyard pond or puddle, rather than-as the Act says they should-limit their reach to navigable waters that cross state boundaries.

But the decision failed to provide the clarity many had hoped for. While the Court found that federal agencies have overstepped their bounds in regulating wetland development under the Clean Water Act (CWA), the Court issued an ambiguous ruling, missing a golden opportunity to clearly define the scope of, and provide a check on the federal government’s authority to regulate private property.

Michigan developer John Rapanos invoked the ire of federal regulators in the late 1980’s when he moved sand around on his property-a mostly dry piece of land 20 miles from the nearest navigable waterway-without a federal wetlands permit from the Army Corps of Engineers. The federal government maintained that his land is subject to federal wetland regulations under the CWA because of a supposed hydrological connection to distant waterways. Rapanos was convicted of criminal charges in 1998, paid hundreds of thousands in fines and served 200 hours of community service and three years of probation. The Justice Department also filed a civil action against Rapanos, seeking almost $15 million in fines and fees and 80 acres of his land. The Sixth Circuit Court of Appeals ruled against Rapanos in the civil suit, and in 2005 the U.S. Supreme Court agreed to review the case.

A plurality of four justices-Scalia, Thomas, Alito, and Roberts-said the government overstepped its reach in wetlands regulation. Justice Scalia wrote that wetlands regulation should only extend to bodies of water with a surface connection to a permanent navigable waterway:

The extensive federal jurisdiction urged by the Government would authorize the Corps to function as a de facto regulator of immense stretches of intrastate land-an authority the agency has shown its willingness to exercise with the scope of discretion that would befit a local zoning board. We ordinarily expect a “clear and manifest” statement from Congress to authorize an unprecedented intrusion into traditional state authority. The phrase “the waters of the United States” hardly qualifies.

[…] In sum, on its only plausible interpretation, the phrase “the waters of the United States” includes only those relatively permanent, standing or continuously flowing bodies of water “forming geographic features” that are described in ordinary parlance as “streams[,] – oceans, rivers, [and] lakes.” The phrase does not include channels through which water flows intermittently or ephemerally, or channels that periodically provide drainage for rainfall.

[…]Therefore, only those wetlands with a continuous surface connection to bodies that are “waters of the United States” in their own right, so that there is no clear demarcation between “waters” and wetlands, are “adjacent to” such waters and covered by the Act.

Justices Stevens, Souter, Ginsburg, and Breyer dissented, upholding the government’s expansive view of regulation-that it could literally regulate any land that held water at some point and could potentially flow into a ditch, creek, stream, or river.

Justice Kennedy, whose tie-breaker opinion will guide the lower courts in future wetlands cases, technically concurred with the plurality, though he rejected the interpretation of the scope of appropriate wetlands regulation offered by Scalia.

According to Kennedy, wetlands fall under federal control only when there exists a “significant nexus” between wetlands and navigable waters. Unfortunately, this is a vague criterion for intervention that will effectively require the government to make such determinations on a case-by-case basis. And given the likelihood that lower courts will often defer to the Corps’ scientific expertise in such matters, it is unclear at this point how far, if any, the Rapanos ruling will rein in the government’s broad exercise of wetlands regulation.

Subjecting wetlands permit decisions to a case-by-case determination of whether federal jurisdiction exists also has the effect of perpetuating the uncertainty inherent in the land development process, creating lengthy delays in development approval and increasing the costs of new development. One study estimated that the wetland permitting process averages more than two years and costs developers roughly $300,000 to complete. These additional costs are passed along to consumers and contribute to reduced housing affordability.

And it is equally troubling that future federal wetlands permit decisions may continue to involve regulating wetlands with little or no clear connection to navigable waterways. It simply is not in the public interest to spend taxpayer resources and increase the costs of development to consumers to advance the “protection” of isolated ponds and drainage ditches on private property. Instead, as the plurality held, federal wetlands regulation should focus squarely on those wetlands that have a direct connection to those waters that clearly fall under the regulatory scope of the CWA.

Further, Scalia’s observation that the federal government’s overly broad reach amounts to a de facto federal usurpation of local land use decisionmaking authority is particularly salient. The federal government has effectively arrogated to itself the right to invalidate local planning and development decisions, with otherwise legally permissible development plans potentially vetoed through the Corps’ permitting process. A landowner could spend tens or hundreds of thousands of dollars on legal and permit fees and environmental analyses over several years to secure development approval from local and state agencies, only to be thwarted by a distant federal agency enforcing an ambiguous set of rules. This has undermined the authority of state and local governments in regulating land use, and the Court failed to rectify the situation by establishing a clear delineation of the federal government’s ability to supersede local land use and development decisions.

Finally, while some property rights activists viewed the Rapanos decision as a qualified victory, the ruling did little to substantively advance the protection of private property rights. With its failure to offer strong guidance on the permissible bounds of federal wetlands regulation, the Court has punted the issue back to lower courts which, environmental law expert Jonathan Adler notes, give agencies “substantial leeway to define the scope of their activities, particularly in technical areas such as environmental regulation.” This is likely to place private landowners at a considerable disadvantage in legal proceedings. Property owners with little expertise or knowledge of land use law or hydrology will be required to demonstrate the lack of a “significant nexus” between wetlands in question and CWA-protected waterways. Given the high costs associated with expert analysis and testimony, many developers will likely be forced to accept Corps’ permit decisions based on tenuous scientific evidence at best.

With the Court’s vague Rapanos ruling, as well as the Corps’ lack of inclination to scale back its interpretation of its regulatory mandate over the years, property rights advocates now must hope that Congress steps in to limit the scope of federal wetlands regulation. A congressional subcommittee is currently evaluating bills on both ends of the spectrum. For example, H.R. 2658 (the Federal Wetlands Jurisdiction Act) would limit the federal jurisdiction over wetlands in the manner Scalia outlined, while H.R. 1356 (the Clean Water Authority Restoration Act) would do the opposite, validating the current broad interpretation of the CWA’s reach. Given the unclear direction of future legislative activity, it is premature to speculate on the likelihood of any meaningful scale-back of the CWA.

Hence, the Court has basically left us with the status quo: citizens nationwide will continue to have their property rights whittled away by unelected and unaccountable regulators, and property owners and consumers will continue to bear the massive costs of unchecked wetlands regulation.

Leonard Gilroy is a certified planner and policy analyst at the Reason Foundation. An archive of Gilroy’s research and commentary is here, and Reason Foundation’s environment research is available here.

Leonard Gilroy is Senior Managing Director of the Pension Integrity Project at Reason Foundation, a nonprofit think tank advancing free minds and free markets. The Pension Integrity Project assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.

The project aims to promote solvent, sustainable retirement systems that provide retirement security for government workers while reducing taxpayer and pension system exposure to financial risk and reducing long-term costs for employers/taxpayers and employees. The project team provides education, reform policy options, and actuarial analysis for policymakers and stakeholders to help them design reform proposals that are practical and viable.

In 2016 and 2017, Reason's Pension Integrity Project helped design, negotiate and draft pension reforms for the state of Arizona's Public Safety Personnel Retirement System and Corrections Officer Retirement Plan, which both passed with overwhelming bipartisan support in the state legislature and were signed into law by Gov. Doug Ducey.

Gilroy is also the Director of Government Reform at Reason Foundation, researching privatization, public-private partnerships, infrastructure and urban policy issues.

Gilroy has a diversified background in policy research and implementation, with particular emphases on competition, government efficiency, transparency, accountability, and government performance. Gilroy has worked closely with legislators and elected officials in Texas, Arizona, Louisiana, New Jersey, Utah, Virginia, California and several other states and local governments in efforts to design and implement market-based policy approaches, improve government performance, enhance accountability in government programs, and reduce government spending.

In 2010 and 2011, Gilroy served as a gubernatorial appointee to the Arizona Commission on Privatization and Efficiency, and in 2010 he served as an advisor to the New Jersey Privatization Task Force, created by Gov. Chris Christie.

Gilroy is the editor of the widely-read Annual Privatization Report, which examines trends and chronicles the experiences of local, state, and federal governments in bringing competition to public services. Gilroy also edits Reason's Innovators in Action interview series, which profiles public sector innovators in their own words, including former U.S. Transportation Secretary Mary Peters, former Florida Gov. Jeb Bush, former Indiana Gov. Mitch Daniels, former New York City Mayor Rudy Guiliani and more.

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Prior to joining Reason, Gilroy was a senior planner at a Louisiana-based urban planning consulting firm. He also worked as a research assistant at the Virginia Center for Coal and Energy Research at Virginia Tech. Gilroy earned a B.A. and M.A. in Urban and Regional Planning from Virginia Tech.