Regulatory Reform

Supreme Court Concludes EPA Property Rights Case

On January 9, the U.S. Supreme Court heard a case involving the unconstrained power of EPA bureaucrats to regulate the use of private property. On March 12, 2012, the Supreme Court overturned a U.S. appeals court ruling that an EPA compliance order was not subject to judicial review. Although this is considered a victory for private property owners, many questions still exist surrounding the reach of the Clean Water Act.

In 2005, Idaho couple Chantell and Michael Sackett purchased a 0.63-acre lot for $23,000 near Priest Lake. They wanted to build their dream home on the lot, and began to do so in 2007 after acquiring the necessary local permits. Then regulators from the EPA showed up and put a stop to the project. They claimed that the Sackett’s lot was a wetland protected under the federal Clean Water Act. By then, the couple had already begun grading the property with rock and soil to prepare for the build. The EPA issued a “compliance order” requiring the Sacketts to remove this material, erect a fence around the property, and to plant and maintain new trees and shrubs that hadn’t been there before. Aside from killing the prospect of their dream home for the near future, this restoration would have cost the Sacketts an estimated $27,000.

While groups on both sides of the issue dispute whether the Sacketts knew they were building on a wetland, the EPA’s use of compliance orders is the true heart of the case. Judges in the past have ruled that such orders cannot be challenged in court, since they are not technically legally binding. They are more like a warning, but if you ignore them you face fines, in this case $37,500 a day. Once enforcement begins, then you can have your day in court. Property owners like the Sacketts aren’t even afforded any sort of hearing by the EPA themselves. The compliance order comes from the bureaucracy through some unknown process, and one can either comply or wait until fines pile up to find out if it was a fair decision or not.

The EPA’s defenders contend that these orders are supposed to be an easy way to reach a resolution without the need for litigation. The problem is that leaving out the courts or any kind of due process severely limits the recourse of property owners. No matter how fair or unfair the compliance order is, property owners would probably find it in their interest to either comply or walk away from the property rather than risk allowing fines to pile up while they seek a fair hearing.

On Monday, the Supreme Court justices ruled that the Clean Water Act does not prevent judicial review of such orders and that the Sacketts may bring a civil lawsuit under the Administrative Procedures Act to challenge the EPA’s order.

Although ultimately deciding with the other justices, Justice Alito had one of the more interesting opinions on the larger issue of the Clean Water Act. Alito claimed the court’s opinion “is better than nothing, but only clarification of the reach of the Clean Water Act can rectify the underlying problem.” Alito’s concurring opinion is telling of the EPA’s expansive powers under the Clean Water Act:

The reach of the Clean Water Act is notoriously unclear. Any piece of land that is wet at least part of the year is in danger of being classified by EPA employees as wetlands covered by the Act, and according to the Federal Government, if property owners begin to construct a home on a lot that the agency thinks possesses the requisite wetness, the property owners are at the agency’s mercy.  The EPA may issue a compliance order demanding that the owners cease construction, engage in expensive remedial measures, and abandon any use of the property.  If the owners do not do the EPA’s bidding, they may be fined up to $75,000 per day ($37,500 for violating the Act and another $37,500 for violating the compliance order).  And if the owners want their day in court to show that their lot does not include covered wetlands, well, as a practical matter, that is just too bad.  Until the EPA sues them, they are blocked from access to the courts, and the EPA may wait as long as it wants before deciding to sue.  By that time, the potential fines may easily have reached the millions.  In a nation that values due process, not to mention private property, such treatment is unthinkable.”

In Depth: Regulatory Reform

In his first inaugural address, Thomas Jefferson said that “the sum of good government” was one “which shall restrain men from injuring one another” and “shall leave them otherwise free to regulate their own pursuits of industry.” Sadly, governments – both federal and state – have ignored this axiom and …

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