April 11, 2012

Christine Paulson
Department of Natural Resources, Air Quality Bureau
7900 Hickman Road, Suite 1
Windsor Heights, Iowa 50324

Re: Notice of Intended Action ARC 0051C, Chapter 17 of Iowa Administrative Code 567

Dear Ms. Paulson:

I am filing these comments on my own behalf as an environmental litigation attorney with BrownWinick Law Firm. These comments pertain to the proposed addition of a new Chapter 17 to the Iowa Department of Natural Resources’ rules. My comment is generally that the proposed rule, as currently drafted, does not appear to address the constitutional issues raised in the United States Supreme Court’s recent unanimous ruling in Sackett v. Environmental Protection Agency (2012) which was decided on March 21, 2012, the same day that the proposed rule was published for comment.
It might be helpful to provide some background of the Sackett case. The Sacketts owned .63 acres of Idaho property. In 2007 they started development and filled in most of the property with dirt and rock in preparation for building a house. The Environmental Protection Agency (“EPA”) filed a compliance order against the Sacketts, alleging that the property was a wetland subject to the Clean Water Act. The order required the Sacketts to restore the property. The Sacketts asked for a hearing, which the EPA refused. The Sacketts filed an action in the District Court asking for injunctive and declaratory relief, arguing that EPA’s action was arbitrary and capricious under the Administrative Procedure Act, 5 U.S.C. §706(2)(A), that they had the right to judicial review of final agency action for which there was no other adequate remedy in a court, 5 U.S.C. § 704, and that the refusal to grant the right to review violated their procedural due process rights under the Fifth Amendment.

Under the Clean Water Act, 33 U.S.C. 1319(a)(3), (“CWA”) the EPA can either issue a compliance order “on the basis of any information available,” or file a civil action in federal court seeking compliance under § 1319(b). Administrative penalties can also be issued under § 1319(g). Those penalties can accrue at the rate of $32,500 per day in fines or administrative penalties of $11,000 per day for each violation. The EPA maintains that the first enforcement option, compliance orders, are enforceable through a subsequent district court action. The EPA argued before the district court that if it issued a simple compliance order under § 1319(a)(3) in lieu of either an administrative penalty or a civil action in district court that the respondent had no right to an appeal under the Administrative Procedures Act (“APA”) and the CWA. In response, the Sacketts argued that the APA makes agency action reviewable when there is no other adequate remedy.

The district court dismissed the lawsuit and the Ninth Circuit affirmed the dismissal. Sackett v. United States Environmental Protection Agency, 622 F.3d 1139 (9th Cir. 2010) rev’d Sackett v. United States Environmental Protection Agency __ U.S. __ (2012). Both the district court and the Ninth Circuit found that uniform case law holds that the CWA does not grant a right to appeal a compliance order, citing decisions from the Tenth, Sixth and Seventh Circuit Courts of Appeal. The basis for these decisions is that the compliance order does not by itself impose monetary sanctions; that the EPA must resort to the district courts first; and that the denial of pre-enforcement judicial review does not violate the Fifth Amendment’s due process guarantee. The United States Supreme Court granted a writ of certiorari and the matter was argued on January 9, 2012. A decision was issued on March 21, 2012.

The unanimous decision was authored by Justice Scalia. The reasoning in the order was straightforward and to the point. The court started with Chapter 7 of the Administrative Procedures Act, 5 U.S.C. § 704, which provides for judicial review of agency action.

The court began its analysis by addressing the legal issue of whether the compliance order was agency action. The court found that there was “no doubt” that the order was “agency action” under the APA as the APA even defines a “failure to act” as agency action §§551(13), 701(b)(2).

As to whether the Order constituted “final” agency action, the court stated:

It has all of the hallmarks of APA finality that our opinions establish. Through the order, the EPA “‘determined’” “‘rights or obligations.’” Bennett v. Spear, 520 U. S. 154, 178 (1997) (quoting Port of Boston Marine Terminal Assn. v. Rederiaktiebolaget Transatlantic, 400 U. S. 62, 71 (1970)).By reason of the order, the Sacketts have the legal obligation to “restore” their property according to an agency approved Restoration Work Plan, and must give the EPA access to their property and to “records and documentation related to the conditions at the Site.” App. 22, ¶2.7. Also, “‘legal consequences . . . flow’” from issuance of the order. Bennett, supra, at 178 (quoting Marine Terminal, supra,at 71). For one, according to the Government’s current litigating position, the order exposes the Sacketts to double penalties in a future enforcement proceeding. It also severely limits the Sacketts’ ability to obtain a permit for their fill from the Army Corps of Engineers, see 33 U. S. C.§1344. The Corps’ regulations provide that, once the EPA has issued a compliance order with respect to certain property, the Corps will not process a permit application for that property unless doing so “is clearly appropriate.”33 CFR §326.3(e)(1)(iv) (2011).

Id. at __. (footnotes omitted). The court next addressed the question of whether there was any other adequate remedy. Justice Scalia held that although the CWA allows the EPA to seek enforcement of the compliance order, “each day that [the Sacketts] wait for the agency to drop the hammer, they accrue, by the Government’s telling, an additional $75,000 in potential liability.” Id. at __. The court next addressed the EPA’s argument that the CWA prohibits an appeal. The court first found that nothing in the CWA expressly precludes judicial review. The court next addressed the Government’s argument that because the CWA grants the EPA a choice of a compliance order or a judicial proceeding that it would undermine the Act to allow judicial review. This is the argument that the various circuits that had reviewed previous challenged relied upon. The court rejected this argument as resting on a question-begging premise that the relevant difference between a compliance order and an enforcement proceeding is that only the latter is subject to judicial review. The court suggested that there were other reasons that the EPA could want to issue a compliance order, other than just avoiding court. The court went on to reject all of the other arguments offered by the Government, including the final argument that subjecting compliance orders to judicial review would make it less likely that the EPA would use orders. In rejecting this argument, the court held that this “may be true—but it will be true for all agency actions subjected to judicial review. The APA’s presumption of judicial review is a repudiation of the principle that efficiency of regulation conquers all.” Id. at __. The court concluded by noting that “And there is no reason to think that the Clean Water Act was uniquely designed to enable the strong-arming of regulated parties into “voluntary compliance” without the opportunity for judicial review—even judicial review of the question whether the regulated party is within the EPA’s jurisdiction.” Id. at __.

The rule change proposed by the IDNR is functionally identical to the practice invalidated by the Sackett decision. In both instances the government proposes to issue a document in which a violation of the law is alleged. In both instances the rules do not specifically state that a party has no right to appeal from a Letter of Inquiry, Letter of Noncompliance, or Notice of Violation. In both instances it is the practice of the agency to deny a party the right to an appeal. In both cases the rules governing the imposition of penalties specifically allow for the consideration of whether there have been previous violations. See, 567 IAC 10.2(2)(e). Read broadly, a previously issued, but non-appealable, Notice of Violation for the same matter could be used to enhance penalties. In the words of Justice Alito in his concurring opinion in the Sackett case, “In a nation that values due process, not to mention private property, such treatment is unthinkable.”
One way to perhaps bring the proposed rule into compliance is to formally state that none of the measures set out in Chapter 17 can be used or referenced in any subsequent proceeding or in any follow-up assessment of a penalty under Chapter 10. The alternative is to provide the right to a contested case under Iowa Code Chapter 17A. That was the alternative suggested by the United States Supreme Court in the Sackett case.
In order to comply with due process requirements there is really no other middle ground that I can suggest. Either the action by the IDNR is not “administrative action” because it is not coupled with any ability to sanction the alleged violator or it is in fact administrative action which is intended to impose a real or threatened sanction due to its use in a subsequent enforcement action by the IDNR.

Sincerely,

James L. Pray

JLP:hs