The Fourth Circuit U.S. Court of Appeals Applies the “Significant Nexus” Test in Wetlands Litigation

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March 16, 2015

On March 10, 2015, the United States Court of Appeals for the Fourth Circuit issued an unpublished decision in Precon Development Corporation, Incorporated v. United States Army Corps of Engineers (link to Decision).  Unpublished decisions are not binding in the Fourth Circuit. The decision applies the “significant nexus test” of U.S. Army Corps of Engineers (“Corps”) jurisdiction over wetlands under section 404 of the Clean Water Act (“CWA”) from Justice Kennedy’s opinion concurring in the judgment in Rapanos v. United States, 547 U.S. 715 (2006). 
Application of the test is case specific, and thus fact intensive, in the absence of more specific regulations of wetlands. Presently, the United States Environmental Protection Agency (“EPA”) and the Corps have pending a jointly proposed definition of the “waters of the United States.” Until a new regulatory definition is promulgated, however, the exercise of the Corps’ jurisdiction over wetlands near tributaries of traditionally navigable waters remains a case specific exercise. In this instance, Precon Development Corporation, Incorporated (“Precon”) and the Corps have been battling over issuance of a wetlands permit for about 13 years.
Background
Precon applied to the Corps under section 404 of the CWA for a permit to fill 4.8 acres of wetlands for a proposed mixed-use development, but the Corps denied the permit. Litigation followed at the administrative level, in the federal district court, and in the Fourth Circuit Court of Appeals. The case had reached the Fourth Circuit previously in 2011 (“Precon I”). At that time the Fourth Circuit concluded that the Corps had not provided sufficient evidence to support jurisdiction and it sent the case back to the district court for further proceedings. While the Fourth Circuit held in Precon I that a nexus existed, it was not persuaded at that time that the nexus was significant. When the case made its way back to the Fourth Circuit, it found that the Corps “has now amassed adequate evidence” that the nexus is indeed significant. The Fourth Circuit accordingly affirmed the district court’s grant of summary judgment to the Corps. The effect is that the permit application is denied. It is not known at this time whether Precon will petition for review by the United States Supreme Court.
The “Significant Nexus Test”
The Fourth Circuit succinctly described Justice Kennedy’s articulation of the significant nexus test of jurisdiction under the CWA in Rapanos.
“A significant nexus exists when ‘the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of ‘ traditional navigable waters. . . No significant nexus exists when the ‘wetlands’ effects on water quality [of traditional navigable waters] are speculative or insubstantial.’” [Internal citations omitted.]
The Fourth Circuit further relied on Justice Kennedy’s characterization of the test as a “flexible ecological inquiry” in which quantitative or qualitative evidence may support jurisdiction.  Moreover, the Fourth Circuit recognizes the effects of cumulative impacts.  Quoting the Corps’ brief, to do otherwise, would allow “death by a thousand cuts.”
The Fourth Circuit also pointed out the distinction between a permitting case (in which harm to wetlands has not yet occurred) and a civil enforcement action by the agency against the violator (in which harm has occurred).  The Fourth Circuit emphasizes that the purpose of the CWA is to restore and maintain the chemical, physical, and biological integrity of the Nation’s waters.  A permit is required so as to prevent harm from occurring.  Accordingly, in a permit case it cannot be expected that the Corps would present evidence of actual environmental damage.  Rather, the type of evidence to be expected in a permitting case focuses upon what ecological harm might be prevented by denying the permit.
The Ecological Setting
The relevant geographic region encompasses 448 acres of similarly situated wetlands.  As noted, 4.8 of the wetland acreage is the subject of Precon’s proposed development.  Precon’s 4.8 acres are adjacent to a 2,500-foot long unnamed, man-made drainage ditch.  The unnamed ditch connects to Saint Brides Ditch, which is about 3 miles long.  Saint Brides Ditch connects to an unnamed tributary.  Collectively, the unnamed ditch, Saint Brides Ditch, and the unnamed tributary are characterized as tributaries that form a channel.  The channel connects to the traditionally navigable Northwest River in the vicinity of Chesapeake, Virginia.  The distance from Precon’s 4.8 acres to the Northwest River is about 7 miles.
The Flexible Ecological Inquiry
While the Fourth Circuit had recognized water storage capacity and potential flow rates in Precon I, it felt that actual flow data was lacking.  And while it had noted that tributaries trap sediment and nitrogen and perform flood control functions, it found the evidentiary record silent as to whether the Northwest River actually has high levels of nitrogen or sediment and whether that river is prone to flooding.
On remand to the district court, the Corps produced flow data compiled by the City of Chesapeake for storm water management purposes.  In addition, the Corps produced its own documentation and photographic evidence of flow.  In contrast, Precon’s expert witness, who visited the site biweekly from mid-September to mid-December testified to an absence of measurable flow.  That expert admitted that precipitation during that particular season of the year would be below normal.  The Corps found its own evidence of flow more persuasive than that of Precon’s expert, and the Fourth Circuit recognized that in doing so the Corps had exercised its discretion and had not acted arbitrarily or capriciously.
As for downstream impacts on the traditionally navigable water, the Corps presented three scientific studies:  “Total Maximum Daily Load Development for the Northwest River Watershed, A Total Phosphorus TMDL Due to Low Dissolved Oxygen Impairment”; “City of Chesapeake: A Plan for the Northwest River Watershed (March 2010)”; and, the Virginia Department of Environmental Quality’s “Final 2010 305(b)/303(d) Water Quality Assessment Integrated Report.”  The Fourth Circuit recognized that phosphorus and nitrogen are both nutrients too much of which cause low levels of dissolved oxygen.  The record demonstrates that the Northwest River indeed suffers from low oxygen.  The Fourth Circuit recognized that filling the wetlands would prevent the trapping of nutrients, which in turn would worsen the low oxygen levels in the Northwest River.
The Fourth Circuit also recognized that a subdivision across the Saint Brides Ditch from Precon’s 4.8 acres had been flooded twice within the past 15 years.  The Fourth Circuit found that the wetlands’ functions of storing water and slowing flow are significant.
The Fourth Circuit also recognized new evidence in the record of carbon sequestration in the form of the photosynthetic process, biomass accumulation, and feeding by the bottom level of the food chain on organic matter, which supports the food chain and wildlife.  The Corps again rejected the contrary opinion of Precon’s expert; the Fourth Circuit found that doing so lay within the Corps’ discretion.  The Corps documented the presence of “deer, squirrels, songbirds, reptiles, and amphibians” and an endangered species of rattlesnake.  Precon’s expert testified that he did not observe “any fish, wading birds, fish-eating birds, water fowl, or aquatic mammals” when he visited the area.  That visit, however, was made on February 4, 2012.  The Fourth Circuit observed that “[t]he Corps’ decision to reject Dr. Cahoon’s finding was within its discretion, especially given that cold temperatures and low rainfall in February 2012 made the region unappealing to fish.”
Summary
The effect of Rapanos, which was decided in 2006, is to make Corps’ jurisdiction over wetlands a case-specific, fact-intensive ecological study in the absence of more specific regulations to define the “waters of the United States” under the Clean Water Act.  Ecological studies of this nature are scientific studies to determine whether the wetlands hold a significant nexus to the chemical, physical, and biological integrity of the Nation’s waters, as articulated by Justice Kennedy in his opinion concurring in the result of that case.  The process can be protracted, costly, and uncertain, as seen in Precon’s 13-year permit quest.  In judging the scientific rigor and validity of such ecological studies, the Corps is entitled to exercise its discretion and judgment so long as its decisions are not arbitrary or capricious.
The EPA and the Corps have proposed a regulatory definition of the “waters of the United States” that would simplify this process in response to Justice Kennedy’s opinion concurring in the result in Rapanos.

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