Supreme Court to hear case of dream home quashed by EPA

The US Supreme Court on Monday is set to hear a case involving the Environmental Protection Agency that some property-rights advocates and business groups say is an example of how onerous federal regulations are spreading throughout the country.

The case examines whether an Idaho couple may seek the help of a federal judge to decide a dispute with the EPA over whether the lot they purchased for a planned dream home is a federally-regulated wetland.

Environmental groups say the couple could have avoided the agency action by working with government officials rather than fighting them.

Chantell and Michael Sackett purchased a 0.63-acre lot for $23,000 in 2005 to build a home near scenic Priest Lake in Idaho. After obtaining local permits in 2007, the couple began grading the property with soil and rock in preparation for construction of a three-bedroom house.

But the project came to a halt after EPA officials arrived at the site and informed the Sacketts that the property was a wetland. The regulators said the couple’s efforts to grade the land constituted a form of pollution under the federal Clean Water Act.

The Sacketts disagreed with the “wetlands” designation, noting that a road ran between their property and Priest Lake and that their lot was in a residentially zoned subdivision containing other homes.

The EPA responded by issuing a “compliance order,” requiring them to take immediate action to remove all deposited fill material and restore the lot to its original condition. The order required them to plant new trees and shrubs and to maintain a fence around the lot for three growing seasons.

Fine of $37,500 a day

The restoration would cost an estimated $27,000, according to the Sacketts. The EPA added a potent incentive – the Sacketts would be fined $37,500 each day the couple failed to bring the property within compliance of the EPA order.

The Sacketts asked the EPA to conduct an administrative hearing to examine whether the property really was a “wetland” subject to federal regulation. The agency refused.

That’s when the Sacketts took their case to federal court, hoping a district judge would conduct a hearing to determine whether the EPA had jurisdiction over their land.

The judge threw the case out. A panel of the Ninth US Circuit Court of Appeals also dismissed the case.

The courts ruled that since the EPA action was merely an administrative order, and not final action by the agency, the Sacketts could not file a federal lawsuit until the agency took enforcement action against them.

The case is important because it raises a question about the scope of federal regulation under the Clean Water Act and what recourse, if any, land owners have once they are threatened with potentially bankrupting administrative orders.

Lawyers for the Sacketts are asking the court to decide whether they are entitled to take their dispute to a federal judge, and if not, whether the agency action violates the Sacketts’ constitutional right to due process.

A $200,000 solution?

One solution suggested by the appeals court was that the Sacketts could apply for a federal permit. If the permit was denied, they could then appeal the denial in federal court.

But lawyers for the Sacketts say this would only allow the Sacketts to challenge the permit determination, not the underlying compliance order. The regulations require the Sacketts to resolve the compliance order before applying for a permit.

Estimates are the permit process could take years and cost as much as $200,000.

“The compliance order has deprived the Sacketts of the only permitted economically viable use of their property,” wrote Damien Schiff, a lawyer with the Pacific Legal Foundation, a conservative public-interest law firm that is representing the Sacketts.

“The Sacketts have been afforded no review of the compliance order, but instead have been kept in a state of limbo and uncertainty, never knowing if or when EPA will bring an enforcement action or whether they will ever obtain meaningful review of the compliance order,” Mr. Schiff said in his brief.

Solicitor General Donald Verrilli, representing the EPA and the Obama administration, said EPA administrative orders are not subject to judicial review.

Why a compliance order is different

A compliance order is a way for federal officials to give regulatory guidance to a property owner and encourage voluntary compliance with the agency’s request, he said.

“Courts have widely recognized that, when agencies issue such communications, a recipient who disagrees with the government’s legal or factual assessments generally has no right to immediate judicial resolution of the disagreement,” Mr. Verrilli wrote.

If they had sought a permit before filling the land, then they could have obtained judicial review of the EPA’s permit determination without facing the risk of fines, the government brief says.

For their part, the Sacketts maintain that there are no wetlands on their lot and that the EPA lacks jurisdiction to file its administrative order against them.

“In this case, the original compliance order was issued in November 2007, and since that time the Sacketts have been afforded no review. There is no post-issuance administrative process and no judicial process that the Sacketts can initiate,” Schiff said in his brief.

“The process that produces the order is entirely secret, with no notice given to property owners like the Sacketts,” he added. “There is not even a ‘probable cause’-type hearing.”

No one else to blame?

Government lawyers say the Sacketts have no constitutional right to an immediate judicial review of an EPA compliance order. They say that despite government threats, no penalties are actually assessed against a noncompliant party until a federal judge determines that a violation has occurred.

In a recent blog, Larry Levine of the Natural Resources Defense Council said the Sacketts had only themselves to blame for their administrative troubles. “They chose to cut corners, and when they got caught, they blamed the EPA,” Mr. Levine wrote.

“The [Sacketts say] they had no reason to believe their property included a wetland and, therefore, never sought a wetland permit,” Levine said. “Yet, in documents secured through the Freedom of Information Act, Chantell Sackett herself described her property as including wetlands and being surrounded by wetlands on three sides.”

The case is Sackett v. EPA (10-1062). A decision is expected by next summer.