Implementing Section 404: The View From the Justice Department

F. Henry Habicht II

Editors' Summary: The principal federal program for protecting wetlands is found in § 404 of the Federal Water Pollution Control Act. Section 404 prohibits the discharge of dredged or fill material in the waters of the United States without a Corps of Engineers permit and also empowers EPA to set standards to guide the Corps' issuance of permits. The Department of Justice has played an active role in implementing § 404, both in enforcing the permit program requirements and in defending the government's regulations and permit decisions against challenges from environmentalists and regulated landowners. In this article, the Assistant Attorney General for Land and Natural Resources provides an overview of the forces that have shaped the program and the cases that his office has litigated. He sees the source of a number of controversies in the combination in one program of sometimes inconsistent navigation and environmental values. Finally, he analyzes current § 404 issues in light of the program's history and the central Justice Department policy of advocating judicial restraint.

Mr. Habicht is Assistant Attorney General, Land and Natural Resources Division, United States Department of Justice. This article is adapted from the keynote address presented to the ABA Natural Resource Section Workshop on the Federal Water Pollution Control Act § 404 dredge and fill permit program, held in Washington, D.C. on January 10, 1986.

[16 ELR 10073]

Throughout its history, the Clean Water Act¹ § 404 permit program² has been a lightning rod for public concern with environmental and land use issues. The § 404 program regulates the discharge of dredged and fill material into the waters of the United States. An overview of the factors that have shaped the program and its attendant litigation is useful in understanding the basic public policy issues generating many of the current controversies surrounding implementation of § 404.

The Department of Justice's primary roles under § 404 are threefold: we defend the United States when federal agencies are sued over § 404 regulations or decisions made on specific permit applications; we represent the United States in enforcement actions in court when these cases are referred to us by federal agencies, primarily the Corps of Engineers and the Environmental Protection Agency (EPA), for prosecution of violations of permit requirements or for discharging without a permit; and we act as arbiter of legal issues arising from disputes among federal agencies. In our role as trial counsel, we often must reconcile differing viewpoints of various federal agencies so that the United States can speak with one voice to the judiciary.

Based on my perspective at the Department of Justice, I identify two major analytical threads woven through the history of the § 404 program. The first is that there are certain inherent or created tensions that have characterized and made the § 404 program a source of controversy and litigation. Such tensions exist in all major environmental programs, but must be expressly identified so that we can strive for consensus on how the program can work most effectively. The second theme is the need to improve the decisionmaking process in the § 404 program in accordance with fundamental principles of good public administration. These two themes are related. Many of the difficulties of the decisionmaking process can be traced to the program's inherent or created tensions and the way in which those tensions are resolved. On the other hand, some of the tensions inherent in the § 404 program flow from the decisionmaking process. So these themes are really two sides to the same coin.

Much of the controversy in the § 404 program over the past several years arises from its role as a focal point for the struggle of competing legitimate interests in the waters of the United States. On the one hand are the legitimate interests in preservation and protection of important natural resources, such as wetlands, that have vital societal benefits. Wetlands provide spawning grounds for commercial and sport fisheries, wildlife habitat, flood protection, water quality enhancement, and scenic natural beauty. [16 ELR 10074] Former Senator Howard Baker once said that these resources perform the "free service of nature." On the other hand are the legitimate private property rights, including development expectations, of those who own land and provide goods and services we all want and need, such as food, shelter, clothing, and transportation. These products or services also determine the quality of our human environment.

Balancing such interests lies at the heart of the public interest review in the Corps permit regulations. It is a painful balancing because of the depth of feeling on both sides and the program's impact on so many citizens. Of course, the historical roots of the § 404 program are in the Rivers and Harbors Act³ § 10 permit program,⁴ which for many years existed without much controversy, providing for single-purpose review of proposals for work or structures in navigable waters.

The Rivers and Harbors Act was designed to prevent states and private parties from undermining the Federal Waterways Improvement Program. Congress was especially concerned about obstructions to navigation placed in improved waterways. The Act thus prohibits any work or activities in navigable waters without Corps of Engineers authorization. The Corps set up a permit program to review activities planned in navigable waters to ensure that they did not hamper navigation. The only substantial controversy involved defining the waters subject to regulation. The Corps, based on various court decisions, eventually developed a list of specific waters that courts determined to be "navigable."

Until the last two decades, § 10 of the Rivers and Harbors Act was limited to navigational considerations, consistent with the Corps' traditional area of responsibility. The scope of § 10, however, was dramatically altered in the late 1960s and early 1970s as the nation's environmental conscience awakened. The Corps permitting decisions began to consider factors other than navigation. The transformation of the Corps permit program was made in regulations promulgated December 18, 1968,⁵ with the listing of additional factors besides navigation that would be considered in the review of permit applications. These included "fish and wildlife; conservation; pollution; aesthetics; ecology; and the general public interest."

Expansion of § 10 review to encompass environmental as well as navigational interests was controversial. However, the legal authority was confirmed in 1980 by the Fifth Circuit in Zabel v. Tabb,⁶ which upheld denial of a § 10 permit by the Corps for reasons entirely unrelated to navigation.

The § 10 permit's broad public interest review, in which environmental and other factors are weighed with considerations related to navigation, was approved by Congress with the passage of the National Environmental Policy Act (NEPA),⁷ and other statutes governing federal agency decisionmaking processes. These statutes require all federal agencies to consider the broader environmental consequences of their decisions. It is against this background and history under § 10 that the 1972 amendments to the Federal Water Pollution Control Act (FWPCA)⁸ were passed giving the Corps expanded authority over discharges of dredged or fill material into waters of the United States.

Unlike most other provisions of the Clean Water Act, which are aimed at controlling continuing discharges of pollutants, § 404 is designed to regulate the addition of solid material into bodies of water. This was a congressional response to scientific evidence in recent decades indicating that solid discharges can destroy aquatic areas of important public value. Wetlands play an important role in the hydrologic cycle; they purify water by holding nutrients and recycling pollutants, they shield upland areas from storm damage, and they provide vital food resources and habitat for fish and wildlife. Covering wetland bottoms with discarded material or filling them completely to create dry land can impair or destroy these useful functions.

The § 404 permit program seeks to minimize adverse impacts of solid material discharges by prohibiting discharges that affect sensitive ecosystems and by requiring the adoption of mitigating management practices for the discharges it does allow. Section 404 requires regulation of the discharge of dredged or fill materials into waters without authorization; it does not protect wetlands from other kinds of activities.

After enactment of the 1972 FWPCA amendments, the Corps consolidated its permit authorities and began to apply the § 10 public interest balancing test to permit applications reviewed under § 404 as well. The Corps permit program does not attempt to maximize one set of interests to the complete exclusion of the other. Instead, it seeks to accommodate both developmental and environmental values by focusing on protection of the resource, that is, the biological and chemical integrity of the nation's waters, rather than regulating development per se. The public has a legitimate expectation in the integrity of private property rights, including at least some element of the right to make reasonable, beneficial use of one's land. Citizens expect that these property rights will be defended against undue or excessive interference, consistent with protection of the common resource that is beneficial to all. Indeed, most people, upon reflection, would agree that this nation would be ill-served by a policy that does not take account of the legitimacy of interests both in environmental protection and economic development.

Although the accommodation of a wide range of interests is important in developing a rational regulatory program, doing so generates friction in each step in the development and administration of the permit program as a whole and in the decisions in individual cases. For example, we have had cases where parties have challenged § 404 or § 10 permit decisions by alleging a failure adequately to consider environmental impacts. Conversely, we have defended cases alleging that permit decisions made in the interest of protecting the environment have resulted in a taking of private property without just compensation. Much of the controversy of the § 404 program and disagreements among governmental agencies are based on differing perceptions of the proper balance to be struck between these competing values.

The current debate over the § 404(b)(1)⁹ guidelines and [16 ELR 10075] their interaction with the Corps public interest review also reflects this tension. For example, the presumption in the guidelines against non-water-dependent projects in special aquatic areas is an attempt to affect the balance between environmental and developmental in terests. Likewise, differences over the meaning of "practicable alternatives" and whether this phrase refers to alternatives that are available to a particular applicant, as opposed to a hypothetical applicant, can also be traced to how one balances competing interests.

This tension is heightened by the large number of persons with diverse interests subject to the regulatory program. In many parts of the country, the program affects virtually every aspect of modern life. Most populated areas are located on or near waters, because of the historical function of waters as transportation corridors, and because water serves as a basic resource needed to sustain a productive population. Homes, businesses, industries, farms, ranches, and other facilities often tend to be located near waters of one kind or another. Developing or operating such facilities commonly involves the placement of dredged or fill materials on land that at other times may be inundated or saturated by water. These same waters may be of importance to wildlife, to the fishingindustry, to sporting enthusiasts, and to naturalists, to name but a few.

To strike the appropriate interest balance requires the decisionmaker to be vested with a measure of discretion. But governmental officials vested with that discretion have a corresponding obligation to provide as much certainty and predictability as possible.

The first component of an effort to establish certainty concerns the scope of the § 404 program, which is in large part determined by the waters that are subject to jurisdiction under the Act. Much of the early caselaw under the 1899 Rivers and Harbors Act was devoted to defining the meaning of navigable waters. Likewise, much litigation and controversy has been generated by the Clean Water Act's definition of "navigable waters" as "waters of the United States."

When the Corps first attempted to implement the § 404 program, it rather understandably drew on its experience in defining "navigable waters" under the 1899 Act and interpreted the Clean Water Act accordingly. However, the District Court for the District of Columbia rebuffed that approach in a 1975 decision, Natural Resources Defense Council v. Callaway.¹⁰ that court, as well as subsequent courts confronting this issue, held that Congress intended the jurisdiction under the Clean Water Act to extend to all waters to the maximum extent permissible under the Commerce Clause of the Constitution.

In response to the court's order in Callaway, the Corps promulgated interim final regulations providing for a phased-in expansion of its § 404 jurisdiction. It implemented this expanded jurisdiction in three phases, with phase I regulating traditionally navigable waters and adjacent wetlands; phase II regulating primary tributaries, adjacent wetlands and natural lakes greater that five acres; and phase III regulating all other waters of the United States. Final regulations were promulgated in July of 1977.¹¹

Obviously, with the sweeping increase in scope of the § 404 regulatory program, many, many more persons were affected. Thus, the program now indirectly or directly touches many lives. So the decisions that are made regarding the placement of fill in wetlands or other waters can have a profound effect on a large number of different interests. As a result, the issue of jurisdictional scope has continued to be controversial.

The controversy over jurisdiction reached a climax when Congress considered amendments to the FWPCA in 1977. Many legislative attempts were made to limit jurisdiction, but all failed, although some by quite narrow margins. Concern with preservation and protection of wetlands and smaller lakes and streams had become widespread by that time. Congress perceived that these areas needed protection because of their value as fish and wildlife habitat, as productive nurseries for organisms significant in the food chain, and as flood protection barriers, among other important values. Congress was reluctant to withdraw jurisdiction that would leave these areas completely without protection. As a consequence, the 1977 amendments¹² preserved § 404's broad geographic coverage, but created categorical exemptions for two types of activities: those having minor impacts upon the nation's waters, including wetlands; and certain federally authorized projects.¹³

Of course, the new legislation did not put an end to the challenges over the jurisdictional scope of the law, as our dockets will attest. All courts reached decisions basically upholding the Coprs' regulatory definition of wetlands, that is, until the Sixth Circuit weighed in with a vastly more restrictive approach in United States v. Riverside Bayview Homes,¹⁴ holding that adjacent wetlands not inundated by a navigable waterway were not within Clean Water Act jurisdiction. This decision was at odds with the legislative history and prior decisions, and threatened to undermine severely the certainty of jurisdictional scope that is so important to a regulatory program. At the urging of the Corps of Engineers, we brought the case to the Supreme Court, and recently received a unanimous decision overturning the circuit court and affirming the Corps regulations.¹⁵ Of course, the limits of jurisdiction are not fully defined, so further controversy can be expected.

While the jurisdictional scope of the § 404 program has been a lightning rod of sorts, the decisionmaking process itself actually has been the source of many of the concerns associated with the § 404 program. As the program affected more persons with more divergent interests, the process for making choices involving those interests became more crucial. Congress is supposed to make decisions balancing competing interests, which is the essence of the political process. In this case, Congress recognized the difficulty of striking a precise balance among the various interests, and so delegated that responsibility to an executive agency. However, unlike its delegation of most programs, Congress apparently was unable to agree on an executive branch agency that it would entrust with making these decisions. Instead, Congress created a decisionmaking process that divides authority.

Because the Rivers and Harbors Act granted the Corps of Engineers longstanding jurisdiction over work and structures in navigable waters, Congress maintained permitting [16 ELR 10076] authority under § 404 with that agency. However, the Environmental Protection Agency has primary responsibility for the administration of the remainder of the Clean Water Act, so EPA was also given an important role in the § 404 program.

The Corps issues the § 404 permits, but applications for § 404 permits are reviewed under guidelines developed pursuant to § 404(b)(1) by the Administrator of EPA "in conjunction with" the Secretary of the Army. The Chief of Engineers may take a decision to issue a permit that is inconsistent with those guidelines if the interests of navigation require. Section 404(c),¹⁶ however, gives the Administrator of EPA further authority, subject to certain procedures, to veto any permit or fill site if discharge at that site may cause an unacceptable adverse effect on municipal water supplies, shellfish beds and fishery areas (including spawning and breeding areas), wildlife, or recreational areas. The § 404 portion of the Corps permit program (not § 10) may be delegated to states by EPA under agency regulations.

The fish and wildlife agencies, under the Fish and Wildlife Coordination Act, are also given important responsibility. The Act generally provides that wildlife conservation shall receive equal consideration in federal decisionmaking, and the Act specifically directs each federal agency, including the Corps, to consult with the Fish and Wildlife Service (FWS) before it grants a permit for the modification of any water body. The review responsibilities of the United States Fish and Wildlife Service and National Marine Fisheries Service (NMFS) are contained in Memoranda of Agreement with the Corps.

Failure to have a § 404 permit is a violation of § 301¹⁷ of the Clean Water Act, which is enforceable through case referrals to the Justice Department by the Corps, EPA, or the fishery agencies, and which is prosecuted by the Lands Division. The Corps, and all interested agencies are extremely committed to enforcing the law, and have enjoyed success in judicial enforcement actions. We have sought and obtained both civil penalties and restoration orders in a number of cases. For example, we obtained a $100,000 civil penalty for a willful violation in United States v. Conrad,¹⁸ and a $75,000 penalty in United States v. Tull.¹⁹ In the latter case, Tull also was required to pay an additional $250,000 if he failed to restore a canal he illegally filled. We also obtained civil penalties and a restoration order in the recent Florida case of United States v. Lambert.²⁰ A regulatory program, however constituted, cannot function credibly or well without an effective enforcement program, and the staffs, particularly the field staff of the corps, as well as those of EPA, NMFS, and FWS, have shown great dedication in thousands of controversial cases.

Admittedly, there sometimes are disagreements among our client agencies in enforcement cases and other matters. This can be traced to the division of administrative responsibility resulting from the political compromise between the House and Senate, between those who wanted exclusive jurisdiction vested in either the Corps or EPA. The controversy continues in Congress as well, as witnessed by the varying approaches of the House and Senate over administrative penalty authority in the recent bills²¹ to reauthorize the Clean Water Act. Ultimately, we are one executive branch that can and should resolve such matters, but lines of authority are important practical determinants of the facility with which the administrative process moves forward.

As a result of all these factors — the balancing of competing interests, the vast scope of the program, and the division of responsibility for administering the program — the decisionmaking process that has evolved is quite complex. Those subject to the § 404 or § 10 programs have complained of lengthy delays and burdensome and unpredictable requirements as individual permit decisions have become forums for replaying basic policy disputes. The multilevel appeal process within the Corps and each coordinating agency has been singled out as a particular cause for delay. Some have complained that delays in the coordination process in effect have vetoed projects based on consideration of only one interest.

As a result of these criticisms, the Presidential Task Force on Regulatory Relief in 1981 gave a high priority to regulatory reform of the § 404 permit program. The task force reaffirmed the Administration's strong commitment to protecting the nation's important wetlands, but noted in its final recommendations that the purpose of the Clean Water Act was not to restrict development per se, but to restore and maintain the chemical, physical, and biological integrity of the nation's waters. The task force sought ways to implement that goal while eliminating unnecessary delays, easing burdensome requirements, and reducing uncertainties in the regulatory program.

The Corps, in response to these regulatory reform recommendations, revised its Memoranda of Agreement with other federal agencies and in 1982 issued new interim final regulations modifying its entire permit program under both § 10 and § 404.²² The revised Memoranda of Agreement reflect the effort to strike a balance between accelerating the decisionmaking process and ensuring adequate consideration of the views of other agencies. The regulations were challenged in court²³ by groups who believed that, for reasons of administrative simplicity, the regulations compromised important environmental values and protections built into the statute. The challenge eventually resulted in a consent decree,²⁴ a good problem-solving and negotiation effort, in which the Corps agreed to propose certain changes in its regulations and acknowledged the binding effect of the EPA § 404(b)(1) guideline regulations.

The structural complexity and inherent tensions of the program have produced real challenges in governmental administration and have produced a number of important court cases. It has been difficult to achieve a fundamental goal of all governmental regulatory programs, to apprise [16 ELR 10077] citizens plainly what is expected by the federal government before they have invested considerable time and money in a given course of action. It has been difficult to make the process predictable and to spell out clearly in advance the criteria that will be used in making decisions, whether to subject given activities to regulation, or to grant permits in individual cases. It has been difficult to achieve prompt decisions while still considering relevant factors. It has been difficult to avoid interagency disputes that frustrate those who must deal with the federal government. Finally, it has been difficult to assure that a proper balancing of competing interests is made in a fair and rational way.

I spport the program agencies in their efforts to make the decisionmaking process more efficient and effective at the administrative level and to set policy direction to the extent feasible outside the context of individual cases, but I view the closely related jurisprudential issue of judicial restraint and deference to the administrative agencies as critical to the ultimate success of any effective regulatory program. As a result, we have diligently advocated the principle of judicial restraint in litigation over regulatory decisions.

Judicial restraint is simply good legal policy. Its absence breeds litigation, because courts are repeatedly asked to decide vital issues of basic policy. Where there is excessive judicial activism, the judicial branch will jeopardize its own independence and popular respect by being drawn more into the political arena.

Judicial restraint is a principle of particular value and importance in the § 404 program, which is such a complex area of law and public policy. Here Congress has set up a full administrative process, which is characterized by elaborate rules, an administrative record, and full public participation. As in other programs with well-developed administrative procedures, Congress intended that the controversies should play out in the administrative arena and that courts should not then second-guess the decisions made in that forum by going beyond the administrative record or by substituting their own judgments on the merits for those of the administrative agency. Otherwise, the administrative process is diminished in importance and instead of improving the balancing of interests, administrative review would only prolong the decisionmaking process and make it even more unpredictable and fragmented.

We have successfully advocated judicial restraint in a number of recent cases, such as generally in the Supreme Court in the "bubble" case²⁵ under the Clean Air Act.²⁶ More specifically, in the § 404 program, we have been successful in cases such as Louisiana Wildlife Federation v. York,²⁷ where the court recognized that its role was limited to ensuring that the agency adequately considered and disclosed the environmental impact of its action and that the agency's decision was not arbitrary or capricious; and Avoyelles Sportsmen's League, Inc. v. Marsh,²⁸ which expressly held that review of a § 404 jurisdictional determination is limited to the administrative record. The unanimous Riverside Bayview decision reaffirmed the principle of deference. I view the success of our efforts to further the principles of judicial restraint and deference to the administrative agencies as critical to the ultimate success of any effective regulatory program.

There are a number of difficult issues facing the § 404 program at present or in the near future, and it is critical for all interested persons to focus on these issues and seek their resolution out of court, to the extent feasible. The problem of clearly defining jurisdiction will continue to be with us, as we deal with issues such as isolated wetlands. It is vital that people know what activities and what geographic areas are subject to jurisdiction, and we have to continue to move in that direction.

In addition, we will probably see the need to define more precisely what is meant by "practicable alternatives" in the § 404 (b)(1) guidelines, and to determine the appropriate role of mitigation in meeting responsibilities under § 404. Mitigation has the potential to make the balancing of competing interests more than simply a zero sum game in which advantage to one must occur at the expense of another. We must determine whether environmental and developmental interests can be furthered simultaneously in a way that results in greater overall benefit to society.

I believe that the valuation of various protected areas will become a significant issue, as ways are sought to make distinctions among wetlands that allow a more precise balancing of interests. Most people recognize that not all areas that are within § 404 jurisdiction are necessarily equal in terms of their environmental importance, but the regulatory significance of that fact must still be worked out.

A key issue we recently faced in Riverside Irrigation District v. Andrews²⁹ is the scope of project review and how far one goes in reviewing and considering secondary impacts. Section 404 primarily involves the construction phase of a project. How far should the review go in examining secondary impacts resulting from the operational phase of a project? What is the NEPA-Clean Water Act interface? With regard to water projects, how would this kind of review affect water allocation rights, which are not supposed to be interfered with by the Clean Water Act? This is a particularly far-reaching and significant issue.

The takings issue will be litigated in the context of § 404 permitting, in part, because the program involves land use issues. The Supreme Court is most interested in the subject, but much remains to be clarified. Because of land use implications, I believe that the role of the states in the § 404 program will increase in importance, and that the definition of that role will be a hot issue in the coming months. The relationship among federal agencies will continue to entail some friction. Finally, the advent of administrative penalties under the § 404 program, which is likely to occur next year, presents new challenges.

1. Formally titled the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251-1376, ELR STAT. 42101. The Act is commonly referred to now as the Clean Water Act.

2. 33 U.S.C. § 1344, ELR STAT. 42142.

3. 33 U.S.C. §§ 401-466n, ELR STAT. 41141.

4. 33 U.S.C. § 407, ELR STAT. 41142.

5. 33 Fed. Reg. 18670.

6. 430 F.2d 199, ELR 20035 (5th Cir. 1970).

7. 42 U.S.C. §§ 4321-4361, ELR STAT. 41009.

8. Pub. L. No. 92-500, 86 Stat. 816.

9. 33 U.S.C. § 1344(b)(1), ELR STAT. 42142.

10. 392 F. Supp. 685, 5 ELR 20285 (D.D.C. 1975).

11. 42 Fed. Reg. 37161.

12. Pub. L. No. 95-217, 91 Stat. 1567.

13. 33 U.S.C. § 1344(f), ELR STAT. 21423.

14. 729 F.2d 391, 14 ELR 20365 (6th Cir. 1984).

15. __ U.S. __, 16 ELR 20086 (1985).

16. 33 U.S.C. § 1344(c), ELR STAT. 42143.

17. 33 U.S.C. § 1311, ELR STAT. 42123.

18. 13 ELR 20532 (M.D. Dla. March 22, 1983), aff'd per curiam, 745 F.2d 20 (11th Cir. 1984).

19. 769 F.2d 182, 15 ELR 21061 (4th Cir. 1985).

20. 589 F. Supp. 36, 14 ELR 20588 (M.D. Fla. 1984).

21. S. 1128 passed the Senate on June 13, 131 CONG. REC. S8080 (daily ed. June 13, 1985), 15 ELR 10188, and H.R. 8 passed the House on July 23, 131 CONG. REC. H6025 (daily ed. July 23, 1985), 15 ELR 10264.

22. 47 Fed. Reg. 31793.

23. National Wildlife Federation v. Marsh, ELR PEND. LIT. 65775 (D.D.C. 1982).

24. 14 ELR 20262 (Feb. 10, 1984).

25. Chevron U.S.A., Inc. v. Natural Resources Defense Council, 104 S. Ct. 2778, 14 ELR 20507 (1984).

26. 42 U.S.C. §§ 7401-7642, ELR STAT. 42201.

27. 761 F.2d 1044, 14 ELR 20614 (5th Cir. 1985).

28. 715 F.2d 897, 13 ELR 20942 (5th Cir. 1983).

29. 758 F.2d 508, 15 ELR 20333 (10th Cir. 1985).