Orchard Hill Bldg. Co. v. U.S. Army Corps of Eng'rs

• Decision Date: 27 June 2018
• Docket Number: No. 17-3403,17-3403
• Citation: 893 F.3d 1017
• Parties: ORCHARD HILL BUILDING COMPANY, doing business as Gallagher & Henry, Plaintiff-Appellant, v. UNITED STATES ARMY CORPS OF ENGINEERS, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

893 F.3d 1017

ORCHARD HILL BUILDING COMPANY, doing business as Gallagher & Henry, Plaintiff-Appellant,

v.UNITED STATES ARMY CORPS OF ENGINEERS, Defendant-Appellee.

No. 17-3403

United States Court of Appeals, Seventh Circuit.

Argued May 29, 2018

Decided June 27, 2018

Theodore Hadzi-Antich, Robert E. Henneke, Chance Weldon, Attorneys, TEXAS PUBLIC POLICY FOUNDATION, Austin, TX, David E. Zajicek, Attorney, HUCK BOUMA, Wheaton, IL, for Plaintiff-Appellant.

Thekla Hansen-Young, Attorney, DEPARTMENT OF JUSTICE, Environment & Natural Resources Division, Washington, DC, for Defendant-Appellee.

Before Bauer, Barrett, and St. Eve, Circuit Judges.

St. Eve, Circuit Judge.

This case concerns just shy of 13 acres of wetlands, which lie in a south-suburban plot of land called the Warmke parcel. Orchard Hill Building Company purchased the Warmke parcel in 1995 with plans for a large-scale residential development. Not wanting to run afoul of the Clean Water Act, Orchard Hill requested a determination from the United States Army Corps of Engineers that the wetlands (or the "Warmke wetlands") were not jurisdictional "waters of the United States." The Corps decided that they were, and Orchard Hill has spent the last 12 years challenging that decision. We find that the Corps has not provided substantial evidence of a significant nexus to navigable-in-fact waters, and therefore vacate and remand with instructions that the Corps reconsider its determination.

I. Background

A braid of regulatory, judicial, and administrative events led to the Corps’ final claim of jurisdiction over the Warmke wetlands. We start at the beginning.

Congress enacted the Clean Water Act in 1972 "to restore and maintain the chemical, physical, and biological integrity of the Nation’s waters." 33 U.S.C. § 1251(a). One of the Act’s primary means to that end is its general prohibition on polluting "navigable waters," which it defines as "waters of the United States." Id. §§ 1311(a), 1362(7), (12). The Act imposes significant criminal and civil penalties for such pollution, id. §§ 1319(c), (d), and obtaining a permit to build on or near such waters can be a lengthy and costly process. Yet the Act does not define what constitutes "waters of the United States." See, e.g. , United States v. Krilich , 209 F.3d 968, 970 (7th Cir. 2000).

That job falls to the Corps of Engineers and the Environmental Protection Agency—and it has proven "a contentious and difficult task." Nat’l Ass’n of Mfrs. v. Dep’t of Def. , ––– U.S. ––––, 138 S.Ct. 617, 624, 199 L.Ed.2d 501 (2018) ; see also 33 C.F.R. § 328.3 (the Corps’ definition of waters of the United States); 40 C.F.R. § 122.2 (the EPA’s definition of waters of the United States). To take a recent example, the agencies’ attempt in 2015 to redefine the statutory phrase resulted in a new administration’s swift overhaul and a slew of litigation. See generally Nat’l Ass’n of Mfrs. , 138 S.Ct. at 625–27 ; Executive Order 13778 : Restoring the Rule of Law, Federalism, and Economic Growth by Reviewing the "Waters of the United States" Rule, 82 Fed. Reg. 12,497 (Feb. 28, 2017) ; Definition of "Waters of the United States"—Addition of an Applicability Date to 2015 Clean Water Rule, 83 Fed. Reg. 5,200 (Feb. 6, 2018) ; James Conrad, Wetlands Jurisdiction , ENV. SCI. DESKBOOK § 9:1 (2018). This case, however, concerns the Corps’ definition of waters of the United States as it existed before 2015. See Schaefer v. Walker Bros. Enters. , 829 F.3d 551, 558 (7th Cir. 2016).

The Corps defined waters of the United States broadly to include waters "subject to the ebb and flow of the tide," "rivers" that could be used for interstate recreation or commerce, "tributaries" of such waters, and—most importantly here—"wetlands adjacent to" other waters of the United States, including tributaries. 33 C.F.R. §§ 328.3(a)(1)–(7) (1994).¹ There was (and is) an exemption, though, for "prior converted cropland." Id. § 328.3(8). The Corps considers "prior converted cropland" to mean wetlands "manipulated ... and cropped" before 1985 (when Congress enacted the "Swamp-buster" program, which denies benefits to farmers who use wetlands for farming), but not abandoned of farming use for five or more years.² See Proposed Rule for the Clean Water Act Regulator Programs of the Army Corps of Engineers and the Environmental Protection Agency (Proposed Rule), 57 Fed. Reg. 26,894, 26,897–26,900 (June 16, 1992) ; Clean Water Act Regulatory Programs (Final Rule), 58 Fed. Reg. 45,008, 45,031–45,034 (Aug. 25, 1993).

Despite, or perhaps because of, those definitions, "[i]t is often difficult to determine whether a particular piece of property contains waters of the United States."

U.S. Army Corps of Eng’rs v. Hawkes Co. , ––– U.S. ––––, 136 S.Ct. 1807, 1812, 195 L.Ed.2d 77 (2016). But concerned landowners need not risk fines or endure the permit-application process before deciding whether to build on or alter their property. They can instead seek a "jurisdictional determination" from the Corps as to whether their property contains waters of the United States. 33 C.F.R. §§ 320.1(a)(6), 325.9, 331.2.

Orchard Hill was such a landowner. In 1995, it completed its purchase of the Warmke parcel, a 100-acre former farm-land located in Tinley Park, Illinois. Orchard Hill then received permits to build a two-phase residential development on the parcel. The first phase started in 1996, and over the next seven years, Orchard Hill constructed more than a hundred homes. Construction altered the area’s water drainage, and about 13 acres pooled with rainwater and grew wetland vegetation. Before starting the second phase and building on those acres—the Warmke wetlands—Orchard Hill sought a jurisdictional determination from the Corps in 2006.

"The history of the Warmke [wetlands] jurisdictional determination can be described as lengthy, contentious and complex," as a Corps district engineer aptly put it.³ The Warmke wetlands, like all of the Warmke parcel, are surrounded by residential development. The closest navigable water (as that phrase is literally understood, meaning navigable-in-fact) is the Little Calumet River, which is 11 miles away. In between the Warmke wetlands and the Little Calumet River are man-made ditches, open-water basins, sewer pipes, and the Midlothian Creek—a tributary of the Little Calumet River. The assigned district engineer determined the Warmke wetlands were adjacent to that tributary, and thus waters of the United States. See 33 C.F.R. §§ 283.3(a)(5), (7). That determination rested on the fact that the Warmke wetlands drained, by way of sewer pipes, to the Midlothian Creek. Orchard Hill appealed that decision, pursuant to its regulatory right. See id. §§ 331.6(a), 331.7(a), 331.3(a)(1).

While that appeal was pending, the Supreme Court issued a landmark decision paring back the Corps’ jurisdictional reach. Rapanos v. United States , 547 U.S. 715, 126 S.Ct. 2208, 165 L.Ed.2d 159 (2006), involved two consolidated appeals from decisions upholding jurisdictional determinations. Both cases posed the question: When do wetlands that are not adjacent to waters that are navigable-in-fact constitute waters of the United States? Rapanos did not produce a majority opinion, and without one to definitively answer the question, we have held that Justice Anthony Kennedy’s concurrence controls. United States v. Gerke Excavating,Inc. , 464 F.3d 723, 724–25 (7th Cir. 2006) (per curiam); see also N. Cal. River Watch v. City of Healdsburg , 496 F.3d 993, 999–1000 (9th Cir. 2007) ; United States v. Robison , 505 F.3d 1208, 1221 (11th Cir. 2007).⁴

Justice Kennedy decided that a wetland’s adjacency to a tributary of a navigable-in-fact water is alone insufficient to make the wetland a water of the United States. Instead, "the Corps’ jurisdiction over [such] wetlands depends upon the existence of a significant nexus between the wetlands in question and navigable waters in the traditional sense." Rapanos , 547 U.S. at 779, 126 S.Ct. 2208. He explained:

[W]etlands possess the requisite nexus, and thus come within the statutory phrase "navigable waters," if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as "navigable." When, in contrast, wetlands’ effects on water quality are speculative or insubstantial, they fall outside the zone fairly encompassed by the statutory term "navigable waters."

Id. at 780, 126 S.Ct. 2208. The Corps, Justice Kennedy wrote, must make this determination "on a case-by-case basis when it seeks to regulate wetlands based on adjacency to nonnavigable tributaries." Id. at 782, 126 S.Ct. 2208.

After Rapanos , the Corps, too, decided to follow Justice Kennedy’s significant-nexus test. In late 2008, it published internal guidance titled Clean Water Act Jurisdiction Following the U.S. Supreme Court’s Decision in Rapanos v. United States & Carabell v. United States (the " Rapanos Guidance"). The Rapanos Guidance interprets "similarly situated lands" in the significant-nexus test to mean all "wetlands adjacent to the same tributary," because "such wetlands are physically located in a like manner." It instructs the Corps to determine first if any such adjacent wetlands exist, and if so, to "consider the flow and functions of the tributary together with the functions performed by all the wetlands adjacent to that tributary in evaluating whether a significant nexus is present."

In light of Rapanos , the Corps’ division engineer remanded the 2006 jurisdictional determination of the Warmke wetlands for further review. Between 2008 and 2010, the district engineer reviewed the wetlands’ soil composition, and in March 2010, he made a site visit. There, the district engineer observed an "intermittent flow" of water from the Warmke wetlands to the Midlothian Creek. The district engineer did not test or sample the Warmke wetlands’...