DEPT. OF ENVIRON. MAN. v. Twin Eagle LLC, 49S00-0204-CV-237.

• Decision Date: 23 September 2003
• Docket Number: No. 49S00-0204-CV-237.,49S00-0204-CV-237.
• Citation: 798 N.E.2d 839
• Parties: INDIANA DEPARTMENT OF ENVIRONMENTAL MANAGEMENT, Appellant (Defendant below), v. TWIN EAGLE LLC, Appellee (Plaintiff below).
• Court: Indiana Supreme Court

798 N.E.2d 839

INDIANA DEPARTMENT OF ENVIRONMENTAL MANAGEMENT, Appellant (Defendant below), v. TWIN EAGLE LLC, Appellee (Plaintiff below).

No. 49S00-0204-CV-237.

Supreme Court of Indiana.

September 23, 2003.

Steve Carter, Attorney General of Indiana, Steven D. Griffin, Deputy Attorney General, Indianapolis, IN, Attorney for Appellant.

David C. Van Gilder, Indiana Division, Izaak Walton League of America, Inc.; National Wildlife Federation; Save the Dunes Council, Inc.; Save the Dunes Conservation Fund, Inc.; Hoosier Environmental Council, Inc.; Cedar Creek Wildlife Project, Inc. Fort Wayne, IN, Attorneys for Amici Curiae.

George M. Plews, Sue A. Shadley, S. Curtis Devoe, Stephen A. Studer, John H. Lloyd, IV, South Bend, IN, Attorneys for Appellee.

Larry J. Kane, Indiana Builders Association, Inc., Mark J. Thornburg, Indiana Farm Bureau, Inc., Indianapolis, IN, Attorneys for Amici Curiae.

ON MOTION TO TRANSFER PURSUANT TO APPELLATE RULE 56(a)

BOEHM, Justice.

The federal Clean Water Act ("CWA") prohibits "the discharge of any pollutant" into "waters of the United States" without a permit. Similarly, Indiana state environmental law generally requires a permit to discharge pollutants into "waters of the state." Ind. Admin. Code tit. 327, r. 5-2-2 (2001). Twin Eagle, the plaintiff here, seeks to undertake a project that would put dredged and fill material in certain wetlands and waters on a site in Allen County, Indiana. This material is a "pollutant" as the term is used in the CWA and Indiana environmental regulations. The parties disagree whether a state permit may be required for those waters that are not waters of the United States. We hold that the Indiana Department of Environmental Management ("IDEM") may require permits for dredged and fill materials under its existing rules. We also conclude that discharges into private ponds and isolated waters may be regulated under some circumstances, and that IDEM's interim process for permitting dredged and fill material is not the product of invalid rulemaking. Whether the facts justify the regulation of these waters is an issue for the agency to resolve in the first instance.

The Regulatory Framework and Factual and Procedural History

The National Pollutant Discharge Elimination System ("NPDES") is the centerpiece of CWA permits. 2 William H. Rodgers, Jr., Environmental Law: Air and Water, § 4.26 at 372 (1986). Although most discharges are governed by the NPDES permit process, the CWA provides for permits for discharges of dredged and fill material to be issued under a "Section 404 Program" administered by the Army Corps of Engineers. 33 U.S.C. § 1344 (2001); 33 C.F.R. 323.6 (2003). A state may also receive EPA approval to administer its own NPDES program to issue permits for waters within the state. 33 U.S.C. § 1342(b); 40 C.F.R. §§ 123.1-123.64 (1998). In 1975, the EPA approved Indiana's NPDES program. Although the CWA also allows state administration of a Section 404 program, 33 U.S.C. § 1344(g),¹ Indiana has not sought permission to issue permits under that program.

Until recently, IDEM considered all waters of the state that were regulated through the federal Clean Water Act Section 404 program to be "waters of the United States" subject to the CWA. As a result, the federal Section 404 program regulated all dredged and fill material in all waters. For that reason, IDEM enacted no regulations of its own governing the discharge of dredged and fill material. In 2001, however, the United States Supreme Court held, in Solid Waste Agency of N. Cook County v. United States Army Corps of Eng'rs, 531 U.S. 159, 121 S.Ct. 675, 148 L.Ed.2d 576 (2001) ("SWANCC"), that waters are "waters of the United States" for purposes of the CWA only if they are either navigable or tributaries of or wetlands adjacent to navigable waterways. Id. at 171, 174, 121 S.Ct. 675.² As a practical matter, construction projects affecting many ponds and wetlands were no longer subject to federal regulation, and the federal Section 404 program was no longer available to grant permits that would bring the projects into compliance with state law. IDEM attempted to fill the resulting gap in the state's regulation of dredged and fill materials by a series of memoranda stating its intention, until new rules were approved, to regulate waters of the state no longer subject to federal jurisdiction through an "interim regulatory process" whereby it would apply its state NPDES permitting process to applications for permits for dredged and fill material.

It is clear the federal law does not prevent a state from having a broader or more stringent regulatory program than the CWA imposes. See e.g. EPA v. California ex rel. State Water Res. Control Bd., 426 U.S. 200, 218, 96 S.Ct. 2022, 48 L.Ed.2d 578 (1976)

; United States Steel Corp. v. Train, 556 F.2d 822, 830 (7th Cir.1977); City of Albuquerque v. Browner, 865 F.Supp. 733, 739 (D.N.M.1993). Indeed, SWANCC itself referred to "the State's traditional and primary power over land and water use." SWANCC,

531 U.S. at 174,

121 S.Ct. 675. The issues here are whether Indiana statutes authorize IDEM to take its announced steps.

Twin Eagle plans to construct a residential development on approximately 460 acres of property it owns in Fort Wayne, Indiana. Approximately 21.52 acres of the property consist of ponds and wetlands. In March 2001, Twin Eagle hired a private contractor to perform a wetland delineation, a process which identifies the boundary, size and type of each body of water or wetland on the property. The delineation, which was approved by the United States Army Corps of Engineers on June 13, 2001, determined that 14.75 of the 21.52 acres are wetlands and private ponds that, under SWANCC, are not subject to the CWA. Twin Eagle's plans called for filling in much of these 14.75 acres, and this would require a permit if the state regulatory scheme applies to these waters.

On July 26, 2001, Twin Eagle sought a declaratory judgment to prevent IDEM from enforcing state environmental laws against the project. IDEM responded with a motion to dismiss for lack of subject matter jurisdiction, citing a lack of case or controversy and the failure of Twin Eagle to exhaust administrative remedies. Both parties filed motions for summary judgment. The trial court granted Twin Eagle's motion and held: (1) Indiana state environmental laws gave IDEM no NPDES regulatory authority over private ponds or isolated wetlands that are not "waters of the United States" and could not require an NPDES permit for activities affecting those waters; (2) whether or not IDEM could regulate some waters not subject to the CWA, Indiana statutes gave IDEM no jurisdiction over private ponds and isolated wetlands; (3) IDEM could not bring an enforcement action for the discharge of fill material into waters that are not waters of the United States; and (4) IDEM's interim regulatory process constitutes an invalid attempt at rulemaking without complying with required procedures. We granted IDEM's petition to transfer under Appellate Rule 56(A) and now reverse the court's grant of summary judgment to Twin Eagle.

I. The Trial Court's Subject Matter Jurisdiction

IDEM asserts that the trial court lacked subject matter jurisdiction because no actual controversy exists until IDEM resolves whether the waters on the site are subject to regulation, and also because Twin Eagle has not exhausted its administrative remedies. Twin Eagle counters that its claims raise pure questions of law challenging the authority of the agency to regulate the subject matter. Specifically, Twin Eagle contends these waters are private ponds and isolated wetlands over which Indiana law gives IDEM no jurisdiction. Twin Eagle also contends that in any event Indiana's jurisdiction over fills regulated by the Section 404 process is coextensive with CWA jurisdiction which, under SWANCC, does not extend to these waters. Third, Twin Eagle argues that IDEM's attempt to assume jurisdiction through its interim process did not follow the statutory requirements for rulemaking by an administrative agency.

A. Ripeness for Declaratory Judgment

The Declaratory Judgments Act is to be "liberally construed," Indiana Code section 34-14-1-12 (1998), and allows for an interested party "whose rights, status, or other legal relations are affected by a statute . . . [to] have determined any question of construction or validity arising under the . . . statute . . . and obtain a declaration of rights, status, or other legal relations thereunder." Ind.Code § 34-14-1-2 (1998). IDEM claims that the trial court lacked subject matter jurisdiction because there was neither an actual controversy nor the ripening seeds of a controversy. Specifically, IDEM argues that because it has made no determination concerning whether the waters at issue are within its regulatory jurisdiction, Twin Eagle presents a "hypothetical case" inappropriate for a declaratory judgment. We disagree. Although the Indiana state courts are not subject to a constitutional requirement of a case or controversy similar to that imposed by Article III of the federal constitution, Cincinnati Ins. Co. v. Wills, 717 N.E.2d 151, 154 n. 2 (Ind.1999), the Declaratory Judgments Act requires a justiciable controversy or question. Little Bev. Co. v. DePrez, 777 N.E.2d 74, 83 (Ind. Ct.App.2002). The controversy requirement is met when a case presents the "ripening seeds" of a controversy. Id. We have long taken the view that "where . . . the claims of the several parties in interest, while not having reached that active stage, are nevertheless present, and indicative of threatened litigation in the immediate future, which seems unavoidable, the ripening seeds of a controversy appear." Owen v. Fletcher Sav. & Trust Bldg. Co., 189 N.E. 173, 177, 99 Ind.App. 365, 374 (1934) (citations omitted). Twin Eagle has challenged the validity of a process which affects its ability to discharge...