Appeals Court Ruling Challenges Federal Wetlands Authority

On December 23, 1997, a three-judge panel of the United States Court of Appeals for the Fourth Circuit overturned the criminal convictions of Maryland developer, James J. Wilson, Interstate General Company and St. Charles Associates. United States v. Wilson, No. 96-4498, 1997 WL 785530 (4th Cir.). The three defendants had been convicted on four felony counts of knowingly discharging fill material into wetlands without a permit under the Clean Water Act (CWA). Wilson had been sentenced to 21 months in prison and fined $1 million and the corporate defendants had been fined $3 million apiece. In overturning the conviction, the court limited the jurisdiction of the Army Corps of Engineers over isolated wetlands and the types of activities regulated under Section 404 of the CWA, 33 U.S.C. 1344, and remanded the case for a new trial.

While the decision to reverse and remand was concurred in by all three judges, their reasoning differed on several key issues. Nonetheless, this decision could have immediate ramifications for activities undertaken in wetlands in the states covered by the Fourth Circuit (Maryland, Virginia, West Virginia, North Carolina, and South Carolina), and has the potential to have collateral impact in circuits that have not yet reached the question of the Corps' jurisdiction.

In 1996, during a seven-week jury trial, the government introduced evidence that Wilson oversaw a development project that involved digging ditches, draining, and then depositing a substantial amount of fill on four parcels of land that contained physical characteristics that identified them as wetlands. The government charged that the defendants were aware that these parcels contained the physical characteristics of wetlands and were in fact warned by private consultants and local zoning authorities that their stabilization efforts required permits. The jury rejected the defendants' contradictory evidence on the Corps' jurisdiction and convicted all defendants on four felony counts of knowingly discharging a pollutant into the waters of the United States. On appeal, the defendants challenged the authority of the Corps to regulate the four parcels in question. The Fourth Circuit appeals court reversed the district court's decision and remanded the case for a new trial on the basis of several important holdings.

Writing for the majority, Judge Niemeyer struck down the Corps' regulation defining the term "waters of the United States" to include those waters (including wetlands) whose use or degradation "could affect" interstate commerce. See 33 CFR 328.3(a)(3) (1993). Niemeyer relied on a recent Supreme Court decision interpreting the Commerce Clause of the Constitution, United States v. Lopez, 514 U.S. 549 (1995), in holding that the regulation is far too broad by allowing the Corps to assert jurisdiction in a way that expands the term "waters of the United States" beyond its definitional limit. The majority opinion stated that:

The regulation requires neither that the regulated activity have a substantial affect on interstate commerce, nor that the covered waters have any sort of nexus with navigable waters or even interstate waters. Were the regulation a statute, duly enacted by Congress, it would present serious constitutional difficulties because, at least at first blush, it would appear to exceed Congressional authority under the Commerce Clause.

Building upon his Commerce Clause argument, Judge Niemeyer found that the trial judge had improperly instructed the jury that the filled wetlands were properly within the Corps' jurisdiction over waters that are adjacent to waters of the United States. He concluded that the instruction "intolerably stretches" the Corps jurisdiction "to include wetlands remote from any in- terstate or navigable water," noting that "the wetlands at issue were more than ten miles from the Chesapeake Bay, more than six miles from the Potomac River, and hundreds of yards from the nearest creeks." Therefore, "[i]t was error for the district judge to have instructed the jury to extend the jurisdiction of the Clean Water Act to wetlands that lack any direct or indirect surface connection to interstate waters, navigable waters, or interstate commerce."

In so holding, Judge Niemeyer distinguished this case from the Supreme Court's 1985 decision United States v. Riverside Bayview Homes, Inc., 474 U.S. 121,133 (1985), where the Court determined that Congress intended the Clean Water Act to allow for regulation of adjacent wetlands that would not be deemed navigable' in the traditional sense. Although conceding that Riverside Bayview permits the regulation of non-navigable wetlands that are adjacent to waters of the United States, Judge Niemeyer noted that this does not do away with the requirement that there be a nexus with interstate commerce.

Judge Payne disagreed with Judge Niemeyer's focus on the necessity of finding a surface connection to prove adjacency. He noted that a hydrologic connection could exist where for ex- ample, a "berm separated the other waters . . . from the wetlands" or where an intermittent stream provides "a surface connection only at certain times." In his view, it was not error to instruct the jury that "[a] wetland may be adjacent even without a direct or indirect surface connection to other waters of the United States." Judge Payne disagreed with Judge Niemeyer's interpretation of Riverside Bayview, noting that the Court's "opinion as a whole refutes the idea that there must be a surface connection to establish adjacency." Judge Luttig voiced no opinion on this issue. Thus, the issue of what hydrologic connection is necessary to establish adjacency remains open to debate.

Judge Niemeyer also addressed the types of activities covered by the Section 404 prohibition on "discharge" of a "pollutant." He concluded that the defendants' act of draining the wetlands by ditching and redepositing the soil next to the ditch (known as "sidecasting"), could not be regulated because it did not constitute an "addition" of a pollutant. He reasoned that "[w]hile sidecasting moves excavated dirt from one particular locus in the wetland to another, it does not involve the addition of any material to a wetland."

Judge Payne disagreed, reasoning that a pollutant does not have to originate from the outside world in order to be an "addition." He supported this argument by tracing the Corps' historic regulation of sidecasting and discussing at length the polluting effect of redepositing dredged material into the water column.

Again, Judge Luttig voiced no opinion on this issue. Interestingly, the court never discussed the recent "Tulloch" decision, National Mining Assoc. v. U.S. Army Corps of Engineers, 951 F. Supp. 276 (D.D.C. 1997), which struck down the Corps and EPA's regulation of excavation, dredging and landclearing activities that result in de minimis incidental fallback. In that case, which is on appeal to the D.C. Circuit, the district court drew a distinction between "redeposit" of dredged material as regulated under the CWA and incidental fallback, which it held is not regulated.

Finally, the court was unanimous in ruling that in order for the government to convict a defendant of "knowingly" discharging a pollutant, it must prove that the defendant had knowledge of the facts of each of the elements constituting the violation, even if unaware of their legal significance. The other circuits are split on this issue. See, e.g., United States v. Ahmad, 101 F.3d 386 (5th Cir. 1996); United States v. Hopkins, 53 F.3d. 533 (2nd Cir. 1995); United States v. Weitzenhoff, 35 F.3d 1275 (9th Cir. 1994).

The final impact of Wilson is far from clear. The case raises fundamental constitutional issues that go to the heart of federal jurisdiction under the Clean Water Act. The government's request for a rehearing before the same three judges was denied on January 29, 1998, and the only recourse now is to seek Supreme Court review. Therefore, at present the Corps may not assert jurisdiction over isolated wetlands and waters based on the "could affect commerce" test of the invalidated regulation for wetlands and waters in states covered by the Fourth Circuit. Thus, in these states, isolated ponds, wetlands, and intermittent and ephemeral streams that have no discernible surface connection to navigable and interstate waters are arguably beyond the reach of the Corps' jurisdiction under the Commerce Clause.

However, the government will likely require very solid evidence of no groundwater or surface water hydrological connection before it will be convinced that a wetland is isolated. Clearly, the Corps does not want to relinquish jurisdiction over potentially hundreds of thousands of acres of land. The government will also likely try to limit the Fourth Circuit's interpretation in future "as applied" jurisdictional challenges.

The impact of the ruling on the waters and wetlands programs of the various states within the Fourth Circuit is also unclear. In many states, such as Maryland, the definition of "waters" is broader than the Clean Water Act and includes groundwater. However, a number of states, including Maryland, operate under a Corps Statewide Programmatic General Permit whereby many wetlands permitting decisions are delegated to the state level. Wilson will likely affect the relationship between the states and the Corps under these Programmatic General Permits because these programs are designed to promote consistency and avoid unnecessary duplication between federal and state law.

In sum, while the final impact of the Wilson decision is still uncertain, the decision could ultimately lead to a significant retraction of the ever-expanding reach of the Corps in regulating wetlands under the CWA.