ELR Citation: ELR 21185
No(s). 1:92:CV:325 (W.D. Mich. Jun 23, 1992)

The court holds that the U.S. Environmental Protection Agency (EPA or the Agency) unlawfully attempted to revoke the U.S. Army Corps of Engineers' (the Corps') statutory authority under Federal Water Pollution Control Act (FWPCA) §404(j) to process a developer's application for a §404 dredge and fill permit for a proposed golf course in Michigan, and permanently enjoins the issuance of a federal §404 wetlands permit for the project by the Michigan Department of Natural Resources (MDNR). Michigan is the only state authorized under §404(g) and (h) to assume administration of the §404 federal dredge and fill wetlands permit program, with permit issuance subject only to federal approval. The golf course developer submitted an initial wetland permit application to the MDNR, and the Corps, EPA, and the U.S. Fish and Wildlife Service submitted letters to the MDNR requesting that the state agency deny the permit, based on environmental concerns. After receiving written denial from the MDNR, the developer requested a contested case hearing, at which the administrative law judge (ALJ) recommended issuing the previously denied permit subject to certain conditions. Subsequently, the MDNR, in the face of continuing EPA objections, adopted the ALJ's recommendation of issuance of the permit with conditions. EPA notified the MDNR that because the state agency had neither resolved EPA's objections nor denied the permit, EPA had transferred the processing of the permit to the Corps pursuant to federal regulations at 40 C.F.R. §233.50(j). In response to requests from Michigan's governor, EPA set up an expert advisory panel to review the dispute, whose conclusions generally supported EPA's concerns regarding the short- and long-term impacts on the wetlands and water quality that EPA had previously expressed. In addition, the EPA regional administrator notified EPA's assistant administrator for water that the minimal modification proposed by Michigan and the developer to the planned project are inadequate to address the concerns raised. Thereafter, the EPA Administrator transferred supervisory authority from the regional director to the assistant administrator for water, who issued a "Decision Document" withdrawing EPA's objections to the MDNR issuing a wetlands permit to the developer for construction of the golf course. Subsequently, a group of environmental organizations challenged EPA's authority to return to the MDNR the power to issue a §404 permit.

The court holds that the FWPCA does not preclude judicial review of the EPA's "Decision Document," because §509(b)(1)(F), which requires review of the Administrator's action taken in issuing or denying a permit only in the appropriate court of appeals, does not apply. EPA's action of transferring authority from the Corps back to the MDNR was taken under §404(j), and the action was not in relation to EPA's issuance or denial of the permit. Rather, the action was in relation to EPA's authority to delegate to another the power to issue the permit. If the court declined to exercise jurisdiction over the environmental organizations' challenge until after the state issued the permit, the organizations would likely only have a state cause of action. Moreover, the state courts would have no jurisdiction over EPA to directly challenge the Agency's procedural action.

The court holds that even if there were a statutory provision precluding judicial review, the U.S. Supreme Court's decision in Leedom v. Kyne, 358 U.S. 184 (1958), provides a limited exception to statutory preclusion of judicial review. The Court in Leedom ruled that where plaintiffs claim that an agency acted beyond its delegable powers by denying a statutorily created right and where plaintiffs have no other means to protect or enforce that right, the statute's finality provision does not apply. The court holds that EPA's decision conditionally withdrawing EPA objection to the MDNR's issuance of a §404 permit for the golf course project evidences a patent violation of the FWPCA mandate, which transfers permitting authority from the state to the Corps if the state has failed to take action within 90 days of receipt of EPA's objections. The MDNR never requested a hearing or submitted a proposed permit revised to satisfy EPA's objections. In addition, Congress did not provide a scheme for reviewing alleged violations of §404(j). Without review, the environmental organizations would have no other means to directly challenge EPA's alleged ultra vires conduct, because the Agency has not waived its immunity to suit in the state court action. Contrary to the statutory delegation of power in §404(j), which transfers the authority to grant a permit to the Corps if a state does not request a public hearing or submit a revised permit within 90 days, EPA's assistant administrator for water, under the EPA Administrator's authority, attempted to withdraw EPA's objections, revoke the Corps' authority to decide whether to issue the permit, and transfer the permitting authority back to Michigan. Nothing in the FWPCA implies an authorization for EPA to revoke the Corps' permitting authority and delegate it back to the state once it has been vested in the Corps. EPA's action violates its statutorily delegated authority and nothing indicates that this court should not have jurisdiction to review EPA's action.

The court holds that judicial review of the environmental organizations' claims is not barred by the exhaustion requirement, which requires plaintiffs to exhaust agency remedies before seeking judicial review. Insofar as EPA's decision is alleged to have been issued in direct violation of the explicit statutory procedures governing the Agency's authority under §404, the environmental organizations have no forum in which to directly challenge EPA except in court. The court finds that EPA's "Decision Document" is final agency action. Case law holding that agency action is not complete until actual issuance of a permit is not applicable to the environmental organizations' claim, which challenges EPA's decision to delegate to another the authority whether to issue the permit. The court holds that the environmental organizations' claims are ripe for review because they present legal issues, the Agency's action constitutes final agency action, and judicial review will not undermine EPA's authority or functions. Moreover, the hardship to the environmental organizations from denying review outweighs any interest the federal defendants might have in precluding review at this time. The fact that there exist pending state court proceedings is irrelevant to the claims before the court, because the state court has ruled that it will only review the permit process under Michigan law. In addition, the federal defendants have presented no evidence that federal claims have been asserted in the state court or that the state court has exercised jurisdiction over any federal claims. The court holds that the environmental organizations have standing to bring this challenge because an injury alleged to be threatened or caused by a violation of the procedural provisions of the FWPCA confers standing.

The court holds that the abstention doctrine does not preclude judicial review of this case, because there is no evidence that the state court has exercised jurisdiction over any federal claims. Moreover, because EPA has indicated no intention to waive its immunity to being named as a defendant in state court, the state proceeding may not be adequate to protect the parties' rights.

Finally, the court holds that EPA has violated its statutory power to transfer permitting authority from the Corps to Michigan. FWPCA §404(q) provides the only exception where EPA can veto or prevail over the Corps after the permitting power has been transferred to the Corps, and that section applies to only preventing delay, duplication, or needless paperwork, none of which are applicable here. If Congress had intended that EPA could transfer power back to the state after statutory transfer to the Corps, it would have provided for public notice and an opportunity for public hearings before authorizing the state to issue the permit.

Counsel for Plaintiffs
Thomas A. Baird
White, Beekman, Przybylowicz, Schneider & Baird
2300 Jolly Oak Rd., Okemos MI 48864
(517) 349-7744

Counsel for Defendants
Thomas H. Pacheco
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000