Ninth Circuit Upholds 'Significant Nexus' Test for Federal Permitting of Wetlands Projects

AUGUST 25, 2021        |   HANSON BRIDGETT WATER LAW PRACTICE GROUP

                                        Key Points
       Ninth Circuit
                                         • Ninth Circuit reaffirms the “significant nexus” test for
           Upholds                         determining whether filling certain wetlands in 2007 violates
'Significant Nexus'                        the Clean Water Act
                                         • The narrower test for determining the Clean Water Act’s
   Test for Federal                        jurisdiction under the 2020 Navigable Waters Protection Rule
                                           did not apply since it postdated the 2007 filling of the
      Permitting of                        wetlands.
Wetlands Projects                        • Wetlands in California are also subject to State Wetlands
                                           Procedures so that, even if the Biden Administration yet
                                           again redefines the Clean Water Act’s jurisdiction, the state
                                           will continue its significant role in regulating wetlands.

                                        For decades, wetlands have plagued regulators. The federal
                                        government can regulate water quality under the Clean Water
                                        Act, while land use regulation is typically a state and local power.
                                        The transition from land to water, however, is not always clear.
                                        Difficulties delineating where the land ends and where the water
                                        begins—as with marshes, swamps, bogs, or wetlands—make it
                                        challenging to know whether you need a federal or state permit,
                                        both, or neither.

                                        The Ninth Circuit recently addressed this challenge in Sackett v.
    by Sean G. Herman & Nathan A.       EPA. There, the court held that construction work that filled in
    Metcalf                             wetlands required a federal permit. This holding may have limited
                                        practical application for future projects in California. But the
                                        court’s analysis provides a helpful reminder about challenges that
                                        landowners and project proponents face when determining
                                        whether projects involving wetlands require a permit.

                                        Background on federal regulation of wetlands

                                        Both the U.S. Environmental Protection Agency and the Army
                                        Corps of Engineers regulate “waters of the United States” under
                                        the Clean Water Act. The Act prohibits, in part, dredging or filling
                                        “waters of the United States” without a “section 404 permit.”

                                        But what is a “water of the United States” has been notoriously
                                        unclear. In its 2006 opinion Rapanos v. United States, the U.S.
                                        Supreme Court weighed in on the issue with a fractured decision
                                        that enjoyed no majority opinion. Justice Scalia’s plurality opinion

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found that “waters of the United States” extend only to relatively permanent, standing, or flowing bodies of
water and to wetlands with a continuous surface connection to those permanent waters. But Justice
Kennedy’s concurring opinion—to which no other justice joined—found that the Clean Water Act also
requires some “significant nexus” between wetlands and traditional navigable waters.

Shortly after Rapanos, the Ninth Circuit held in Northern California River Watch v. City of Healdsburg that
Justice Kennedy’s “significant nexus” test was the controlling law from the fractured Rapanos decision.

The Obama and Trump administrations then spent over a decade playing regulatory volleyball. First, the
Obama Administration followed Justice Kennedy’s “significant nexus” test to define “waters of the United
States” broadly. Then, as we reported, the Trump Administration replaced that definition with a narrower
rule that tracks Justice Scalia’s plurality opinion that requires wetlands to have a continuous surface
connection to permanent waters.

Now, the Biden Administration recently announced that it will again revise the definition of “waters of the
United States.”

Background in California’s Regulation of Wetlands

Recognizing that these ebbs and flows in federal jurisdiction over wetlands created uncertainty and
potential regulatory gaps, California’s State Water Resources Control Board outlined steps for establishing
a statewide wetland permitting program. These efforts led to the State Wetland Definition and Procedures
for Discharges of Dredged or Fill Material to Waters of the State (“State Wetlands Procedures”), which went
into effect on May 28, 2020. The State Wetland Procedures not only intend to fill potential federal regulatory
gaps, but also intend to provide a uniform definition that regional water quality control boards must follow.

The Sacketts’ Wetlands Project
While Sackett v. EPA did not
involve California property, the
Ninth Circuit case still has
implications for California
properties. The Sacketts’
property is 300 feet from the
navigable Priest Lake, one of
Idaho’s largest lakes. Across
the street is a large wetlands
complex that drains into a
tributary, which feeds a creek
that empties into Priest Lake.
After the Sacketts bought their
property, they obtained
building permits and began
backfilling wetlands on their
property with sand and gravel.
The EPA then inspected and
took photographs of the
property.1

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The EPA issued a compliance order in 2007 requiring the Sacketts to immediately restore the wetlands,
otherwise risk over $40,000 in civil penalties per day.

The Clean Water Act Can Regulate Wetlands On the Sacketts’ Property

The Sacketts challenged the compliance order in 2008, and the case has wound through the courts ever
since. This journey includes a trip to the Supreme Court in 2012, which held that the compliance order was
a “final agency action” subject to judicial review.2

The case then made its way back to the Ninth Circuit. After the district court affirmed the EPA’s authority to
issue the compliance order, the EPA withdrew the order. Still, the Sacketts maintained their appeal. The
Ninth Circuit then found in the EPA’s favor for three reasons.

First, the EPA withdrawing the compliance order did not moot the case. Unless the EPA would disavow the
prior jurisdictional determination of the Sackett’s property, the EPA could later return with another
compliance order. Thus the parties’ dispute remained “alive and well.”

Second, the court rejected the Sacketts’ argument that Justice Scalia’s narrow plurality opinion in Rapanos
controlled. The court instead reaffirmed its holding in Healdsburg that, at least in the Ninth Circuit, Justice
Kennedy’s “significant nexus” test controls.

Third, the court applied the regulations in effect when the EPA issued its 2007 compliance order. While the
2020 Navigable Waters Protection Rule later narrowed the Clean Water Act’s scope, that regulatory change
was not retroactive. So the new rule could not affect the Sacketts’ case.

For these reasons, the Ninth Circuit applied the “significant nexus” test. It then found that the wetlands on
the Sacketts’ property were adjacent to and could significantly affect the integrity of navigable water (Priest
Lake). The court thus found that the Clean Water Act can regulate the Sacketts’ property.

Takeaways from Sackett for California properties

Given Sackett, developers and public agencies in California should consider these four takeaways:
1.   The 2020 Navigable Waters Protection Rule currently regulates federal permitting of dredging or filling
     wetlands, which follows Justice Scalia’s test that wetlands have a continuous surface connection to a
     relatively permanent body of water.
2.   But if a project fills wetlands before June 22, 2020, then the Navigable Waters Protection Rule does
     not apply and may be subject to Justice Kennedy’s significant nexus test.
3.   As the Biden Administration considers revising the Navigable Waters Protection Rule, we can expect
     the Clean Water Act’s regulation of wetlands to change again soon.
4.   Whatever changes may come from the federal government, you should consider whether your
     projects require a waste discharge requirement or similar authorization under California’s State
     Wetlands Procedures.

Unfortunately, knowing whether and how federal or state laws regulate wetlands is complicated. You often
may need a wetlands scientist or a lawyer to assist. But whomever you enlist to delineate wetlands on your
property, be sure they consult the State Wetlands Procedures.

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For more information about how these laws may affect you, please watch the August 31, 2021 “Rules on
Projects Impacting Wetlands and Other Waters,” presented to the Bar Association of San Francisco and
featuring Hanson Bridgett attorney, Sean Herman.

Should you have any further questions or concerns about how these laws affect you,contact our Water Law
attorneys.

1   The photographs can be found in the appendix of the Ninth Circuit’s Sackett opinion

2 Sackett   v. EPA, 566 U.S. 120 (2012)

For more information, please contact:

Sean G. Herman, Associate
415-995-5899
SHerman@hansonbridgett.com

Nathan A. Metcalf, Partner
415-995-5838
nmetcalf@hansonbridgett.com