In the NC Chamber Legal Institute’s latest Legal Sidebar, President of the Legal Institute Ray Starling is reviewing a recent Supreme Court decision on wetlands and how a Chamber-backed N.C. Senate bill, championed by Senator Brent Jackson and passed earlier this session notwithstanding a gubernatorial veto, will allow North Carolina to benefit from the ruling.

Some of you may recall a case decided over 10 years ago involving property owned by Mike and Chantell Sackett. The Sacketts purchased a little over a half-acre of land near Priest Lake in Idaho and planned to build a home on it. Shortly after they commenced construction in 2007, EPA determined that the property contained wetlands which were waters of the United States and concluded that construction activities had resulted in the illegal deposition of fill material into those “waters.” In 2007 and 2008, EPA issued orders requiring restoration of the wetlands and threatening the Sacketts with penalties of up to $25,000 per day for the violation.

The Sacketts claimed that the so-called wetlands were not subject to EPA jurisdiction. The wetland did not adjoin any relatively permanent streams and was connected to such a stream only by a ditch that had been dug from the wet area to the stream a considerable distance away. Doesn’t matter, said EPA, the Sacketts were not entitled to challenge the jurisdictional determination until after EPA assessed penalties against them if they chose not to comply with the Orders. It would not be inaccurate to call this regulation by extortion (“you can disagree with our jurisdictional determination if you want, but something really bad might happen here if you do”).

To make a long story a bit shorter, the Sacketts challenged that conclusion, lost in the courts below, and took the appeal to the U.S. Supreme Court (Sackett I). In an opinion authored by the late Justice Scalia in 2012, the Court reversed the Ninth Circuit, ruling that indeed a jurisdictional determination was subject to challenge. The outcome of this momentous case entitled the Sacketts to . . . start over, challenging the wetlands jurisdictional determination on the substance.

Fast forward to 2023, after the Sacketts again took the grueling path of appeals to arrive before the U.S. Supreme Court. This time the question was whether EPA properly asserted jurisdiction over the wet area. Well, faithful readers, justice delayed may not be justice denied after all (but certainly dinged up rather severely). The Sacketts prevailed in a 9-0 decision (Sackett II). The wetlands area that EPA strived so mightily to protect, it turns out, was not subject to federal jurisdiction. The crux of the decision (five justices formed a majority on one opinion, the other four concurred in the result with somewhat different rationales) was something of an anticlimax. The majority said, in essence, the words of the Clean Water Act, in this case, “adjacent” and “navigable,” must be read with their ordinary meaning unless Congress somehow defined them different from those ordinary meanings. So, “adjacent” more or less means “right next to,” and the word “navigable” cannot simply be ignored.

At the end, the Court rebuked the agencies for their Orwellian abuse of the language. So, has EPA been chastened for its overreach? The most optimistic answer might be “perhaps.” Does the Corps of Engineers return to being a public works agency? Well, to a small degree. The more likely upshot is that a large piece of wetlands regulation now shifts to the States.

The Constitution limits the authority of the federal regulatory regime to that specifically granted in the Constitution. No, really. The authority upon which the Clean Water Act rests is the Commerce Clause. Hence the prominence in the Act of the word “navigable,” as it is properly the obligation of Congress to protect commerce relying on navigation on the rivers of the United States. States, however, are not limited in this way by the Constitution. Their authority for regulating rests in their inherent police power. The NC Environmental Management Commission has constructed a regulatory system based on NC statutes. Its rules governing activities in wetlands depend in part on the determinations by EPA and the Corps of Engineers relating to wetlands, but it may have broader authority to regulate than it has used.

You may recall that the U.S. Supreme Court decided, in a case known as SWANCC, that wetlands isolated from navigable waters fell outside the jurisdiction of the Clean Water Act. Panic ensued. Dire predictions were intoned by regulators and environmental advocacy groups. But in a matter of weeks, the EMC had adopted temporary rules, later made permanent, allowing the Department of Environmental Quality to step in to regulate those “isolated wetlands.” You may also recall, a few years before SWANCC, the National Mining Ass’n. case ruled that ditches constructed in wetlands without the deposition of the dredged fill material into the wetlands (known as “Tulloch ditching”) did not require federal permits. A bout of panic and hysteria followed, but in short order the Department of Environmental Quality “discovered” that existing sedimentation rules could be repurposed to restore its view of regulatory order and control.

And, indeed, DEQ got creative again. In 2019, in response to the Trump WOTUS Rule (The Navigable Waters Protection Rule), through the vehicle of the Clean Water Act-mandated triennial review process, NC DEQ and the EMC de-coupled our state definition of wetlands from the federal definition. We call this the “stealth amendment” because the EMC stated that the rule amendments in the triennial review were simply grammatical fixes and technical clarifications, so that there would be no fiscal impact to citizens of North Carolina. Accordingly, no fiscal note was prepared when the rules were published in the State Register. However, when a developer had to recently pay upwards of $300,000 in mitigation costs for a project impacting “state wetlands,” we would argue that is a fiscal impact on business.

The 2019 broad-encompassing definition attempted to give North Carolina regulators the ability to regulate uplands, many of which the EPA had previously considered wetlands under the Obama Rule. Thankfully, the business community and the Chamber got involved, and the resulting permanent rule package for state wetland rules was rejected by the Rules Review Commission in 2022. This year, in Chamber-supported Senate Bill 582 (The North Carolina Farm Act of 2023), the General Assembly required the EMC to change the definition of wetlands back to the pre-2019 definition, effectively restricting state regulatory authority to WOTUS. NC would not have seen the benefit of the Sackett II decision without this definition change. We now wait and see if the EMC will follow the law and start rulemaking to change the definition back to its 27-year precedent of wetland regulation restricted to WOTUS. We will be watching this closely, as we suspect regulators will try and fill their “regulatory gap” (as they and environmental advocacy groups commonly referred to it) after Sackett II and the Farm Act change.

Politicians, the media, and our environmental advocacy group friends will broadly opine that Sackett II has moved us backward and put the environment at risk. These folks seem blithely unconcerned about the costs, property rights, and risks wrought by regulatory overreach. But take heart, with a 9-0 vote the Court properly interpreted the law by reading the statute as if it was intended to be read, that is, in the English language. Those who claim that this Court is damaging the environment ignore the fact that the judicial branch interprets the laws that the legislative branch adopts using the words the statutes use. In too many cases, the executive branch distorts those words to achieve policy goals. As George Orwell so succinctly observed in 1949, “if thought corrupts language, language can also corrupt thought.” It seems some have yet to fully appreciate the truth in that statement.