post

Sackett v. EPA and the Due Process Deficit in Environmental Law

Last term, in Sackett v. Environmental Protection Agency, a unanimous Supreme Court rejected the EPA’s effort to deny private landowners an opportunity to challenge the agency’s assertion of jurisdiction over their land. The Sacketts wanted to build a home in a subdivision, but the EPA concluded the Sacketts’ land to contain jurisdictional wetlands under the Clean Water Act and issued an order requiring the Sacketts to cease construction of their home and undertake specified restoration efforts. Failure to comply with the order was itself punishable with substantial fines, in addition to any for violating the CWA. The Sacketts sought judicial review of the order, on both statutory and constitutional grounds, to no avail in the lower courts. They prevailed in the Supreme Court, however, completely on statutory grounds, leaving the due process questions to another day.

The Court based its decision on the Administrative Procedure Act’s presumption in favor of judicial review of final agency actions and the CWA’s failure to expressly preclude such review. But what if the CWA had precluded review? Would the Sacketts have been entitled to judicial review under the Due Process Clause? And more broadly, given the uncertainty surrounding the scope of federal wetland regulation, and the lack of fully enforceable jurisdictional regulations, does current CWA enforcement more generally comport with the principles of due process? I explore some of these questions in a forthcoming article in the Cato Supreme Court Review“Wetlands, Property Rights, and the Due Process Deficit in Environmental Law.” The abstract is below.

In Sackett v. Environmental Protection Agency a unanimous Supreme Court held that private landowners could seek judicial review of an Administrative Compliance Order issued by the Environmental Protection Agency alleging that their land contained wetlands subject to regulation under the Clean Water Act. The Court’s decision rested on statutory grounds, but the same result may have been dictated by principles of due process. Under the CWA, federal regulators have asserted authority over waters and dry lands alike and sought to expand federal jurisdiction well beyond constitutional limits. Under existing regulations, landowners have little notice or certainty as to whose lands are covered, under what authority, or with what effect. As a consequence, federal wetlands regulations, as currently practiced, violates important due process principles.

Cross-posted at The Volokh Conspiracy.

post

Saving Patagonian Grasslands with Market Incentives

Meet Carlos Fernandez, PERC Board Member and the Nature Conservancy’s Patagonia Grasslands Manager. The following is an excerpt from our interview with Carlos in Bariloche, Patagonia:

I am the Patagonia Grasslands Argentina Project Manager for the Nature Conservancy and a PERC Board Member. I had my first encounter with PERC in 2005 when I met Don Leal at a workshop in the Galapagos Islands. Don and I started talking about our passion for fly fishing, both in Patagonia and in Montana. I began receiving PERC Reports and sure enough in July 2005 I attend PERC’s Enviropreneur Institute. It was here that I started to think more seriously about how important markets, contracts, and property rights are if we really want to improve environmental quality.

I moved to Patagonia from Washington D.C. in 2008 to launch TNC’s grasslands program. The purpose of this program is to conserve grasslands on a large scale. Given the fact that here in Patagonia about 75 percent of the land is in private hands, our team is doing a lot of work with private land owners aiming to halt or reverse the desertification of grassland ecosystems. We are working with ranchers, businesses, policy makers, universities, and think tanks. TNC and our partners have a pretty big goal, which is to try to bring sustainable conservation to between 30 and 40 million acres in the next 10 to 15 years.

In 2010, I was lucky enough to be invited to become one of PERC’s Board Members — the first board member representing the enviropreneurs and the first international board member, both of which make me very proud. The Patagonia grasslands program is just one venture where free market environmentalism is working on the ground. PERC’s 2012 Enviropreneur Institute will kick off this weekend. Stay tuned for more innovative ideas from the field.

post

Fishy Politics on World Oceans Day

World Oceans Day is meant to bring communities from around the globe together to celebrate the vast environmental, economic and social wealth of our oceans. It is also a day to remember the threats to ocean health and overfishing if we don’t manage our ocean resources accordingly. Apparently some politicians have other intentions. In her latest op-ed, Laura Huggins highlights the political irony of new legislation to protect our ocean resources.

See also PERC’s video “Saving Ocean Fisheries with Property Rights“:

post

Restore to what?

I’m in rainy Seattle to give a speech on the Green Tea Party at an environmental conference. Ads for the hotel boast that it has double shower heads, which had me pondering the following:

We pass laws forcing people to install restricted flow shower heads. The hotel responds by installing a double shower head and posts a sign saying “restore our world” by turning off one of the heads to save water, our “precious resource.” We use time and money — precious resources — to pass the laws; we use capital — a precious resource — to install double shower heads that deliver more water; and we print signs — using precious resources — to restore our world without asking the obvious question: Restore to what? And all of this is to save water which falls from the heavens, runs into lakes and streams, is diverted into pipes delivering water to the shower heads, cleans our bodies, runs down the drain, and returns to the watershed. To be sure, the shower heads, the water purification systems, the delivery systems, and so on use precious resource which might be saved, but how can we save water?

See the Green Tea Party pocket guide [pdf] for some market-based solutions to water allocation.

post

Access Unlimited, Trout Limited

Image by Angus Mackie/Creative Commons via flickr

The May issue of Outdoor Life carried an article entitled “Can I Fish This Stream?” It included a map of the U.S. showing 45 states with “limited stream access,” 4 with “pending access litigation,” and 1 with “liberal stream access.” The one was Montana, about which the article’s author opined, “Anglers in other states should be so fortunate.” Not so fast.

Since the original stream access cases in the early 1980s, landowners have claimed that the court and the legislature took property rights without compensation. Not surprisingly, the conflict has torn the social fabric of landowner-sportsman relations in Montana.

What the author failed to note was the unintended consequences of Montana’s law, namely landowners who cannot prevent access have less incentive to preserve habitat. The now infamous Mitchell Slough case in southwest Montana illustrates what can happen. When anglers took the right to control access from landowners and created public access to the reclaimed irrigation ditch paid for by landowner dollars, owners rightfully shut off the flow leaving fish high and dry. Not only did this reduce spawning habitat for trout that previously migrated freely into the Bitterroot River over which public access has never been questioned, it reduced the incentive of other landowners to invest in such reclamation projects.

The Outdoor Life article concludes that “although Montanans were able to ward off impingement of their access rights last fall, it’s not likely that the assaults on stream and river accessibility are over.” Proponents of unlimited access fail to recognize that their assault on landowner rights is also an assault on trout habitat.

Access unlimited, yes; trout unlimited, no.

post

Lessons From the Old West: Don’t Ban It, Brand It


Last Saturday was roundup and branding day at my ranch in the Madison River Valley, about 20 miles west of Bozeman. Neighbors came to help and I put the P J (my registered brand) on the left side of my calves. As I carefully placed the irons on each calf (yes, they are hot, and yes, there is short term pain but it seems to subside quickly) I was reminded of why branding came to work so well in the West.

In the old West a statewide registration of brands developed rapidly. Often a brand registration system was one of the first pieces of legislation a territory would pass (for more details, see Anderson and Hill’s The Not So Wild, Wild West). Those registrations continue today. You can go to the Montana Brand Registry and find that if a cow has a P on the left rib and a J on the left hip, that cow belongs to the P J Ranch. Or, a PJ on the left shoulder of a horse establishes my clear claim to that horse. I can issue you a bill of sale if you buy one of my horses or cows, and that serves a proof of a legitimate transfer of rights.

This system works well for the people in white hats, my neighbors who want to know who a stray belongs to, and against those in black hats, the rustlers who might want to steal my livestock. The state maintains the registration and enforces ownership claims. And I can use the existing court system to enforce my property rights.

Branding cattle and horses carries important lessons for environmental problems, namely that we should move towards greater branding of transitory resources, particularly air and water. This would help both the white hats, people who behave responsibly, and constrain the black hats, the villains that dump their waste on other people’s property. PERC has outlined how this can be done with marine fisherieswater markets, and other resources, but, unfortunately, environmental regulations have focused more on command and control than on lowering the costs of measuring and monitoring pollution. If only a fraction of the money that is spent on formulating, enforcing, and complying with environmental regulations was devoted to developing branding technology we would be much better off.

Atrazine is a common chemical used to control broad leaf weeds. Its widespread application in the Midwest has caused concern over its presence in drinking water. Should atrazine be banned, as it has been in most of Europe? Used correctly, atrazine is a cheap way of lowering the cost of food production. Instead of banning it, why not brand it? One could require every user to of atrazine to have, at the time of purchase, a particular tracer placed in his or her container of pesticide. A registration of users would be maintained by the state. Then if levels of atrazine in drinking water exceed a specified level, those harmed (and proof of harm is an important part of common law remedies) could take those responsible to court.

Of course the use of tracers must be coupled with a common-sense understanding that “the dose makes the poison.” We now have the ability to measure extremely minute amounts of potentially harmful chemicals in our air and water. The fact that atrazine may be measured in ground water doesn’t necessarily mean harm has been done. If one of my cows sticks her head through the fence and eats a mouthful of grass, I may owe my neighbor a couple of pennies. But my neighbor shouldn’t be able to shut down my entire ranching operation.

Notice that branding doesn’t remove the state from the scene, but instead focuses its coercive power on the definition and enforcement of property rights, which penalizes those who act irresponsibly and rewards those who don’t infringe on the property rights of others. Having my cattle branded reduces the transaction costs of running a responsible ranching operation. Branding pesticides and herbicides would have the same positive effect on environmental quality.

post

Tapping Water Markets

When the washing machine is running, the sprinklers are on, and the kids are filling the bathtub, few Americans are thinking about how much water they are consuming. Under the current subsidized system of water allocation, Americans only spend approximately $474 a year on water, a price that does not reflect its true scarcity value.

In PERC’s latest video production Director of Applied Programs Reed Watson and Research Fellow Brandon Scarborough discuss the dynamic power of water markets. In contrast to the often acrimonious allocation of water, markets rely on prices and entrepreneurial action to reflect the true  value of water. PERC scholars propose voluntary water exchange, conservation, and cooperation in lieu of water wars and bureaucratic water allocation.

Flexible price signals will thus encourage consumers to conserve water by bearing the full cost of their consumption. For example, as water becomes scarcer, the prices will go up and people will respond to those prices by conserving more water.

Watson and Scarborough’s new book, Tapping Water Markets, written with PERC Executive Director Terry Anderson, covers a wide range of topics including surface water allocation, groundwater management, environmental flows, and water quality trading. It concludes with predictions about the future of water scarcity and the ability of water markets to shape that future more positively.

Copies are available direct from the publisher and at Amazon.com.

post

Why The Sackett Case Is Far From Over

Mike and Chantell Sackett were stuck. Complying with EPA demands meant paying to throw away their property. If they ignored the EPA they would be liable for massive fines that would obviously bankrupt them and they could be subject to criminal liability.

The Sacketts bought a lot near Priest Lake in northern Idaho in 2005 for $23,000. They planned to build a home on the site pictured above in an area with many houses already. Homes and a road existed between their lot and the lake, which is 500 feet away. They rounded up needed permits and began work in the subdivision.

The EPA uncovered this assault on a bit of dirt and in 2007 declared their lot was a wetland. The Sacketts were ordered to cease construction on the half-acre parcel. EPA told them the area was a wetland that could not be changed without its permission. It ordered them to remove the gravel that had been dumped on the lot (at a cost of $27,000), to restore the vegetation to what existed previously, to fence off the property, and to file annual reports about the condition of the property. The Sacketts were threatened with fines up to $32,500 per day until they were in compliance and ceased the wanton environmental destruction. (EPA also claims the right to double the fine to $75,000 per day when it prevails—and it declared that it had prevailed because it said it had prevailed.)

The Sacketts sued, seeking a declaration that the property was not a wetland. It is not on the lakeshore and has no creek running through it. It gets wet only when it rains. The federal district court and Ninth Circuit Court of Appeals held that the Sacketts could not go to court until the EPA requested a federal court to enforce their order. The courts held that courts could not review compliance orders of the EPA and that there was no violation of the Sacketts’ due process rights.

The Pacific Legal Foundation took the case to the Supreme Court for them, arguing that they had the right to have the matter heard in federal court. Reversing another decision from the Ninth Circuit, the Court held unanimously for the Sacketts. The Court did not address the wetland issue. The point of the case is one of administrative procedure.

The Court held that the Sacketts had the right to contest the EPA order as “arbitrary” and “capricious” under the Administrative Procedure Act. The EPA deprived them of their due process right. Since the EPA order was a “final agency action” the Sacketts had the right to go to court to challenge the agency. There was no other remedy. Courts can review the actions of agencies under the Administrative Procedure Act to ensure that its requirements have been followed properly by the agency. The agency cannot simply declare victory, impose fines, and the party subject to the ruling have no chance to appeal to the courts.

While the Sacketts gained satisfaction and a bit of fame from a Supreme Court win, don’t bet they ever get to build their house. Unless EPA rolls over, the Sacketts have merely won an administrative point. It may be back to the same agency and courts that spit on them before.

Some years ago beachfront property owners in California and South Carolina won noteworthy victories against state agencies that basically took their property via the regulatory process. The agencies were not pleased that mere citizens embarrassed them before the high court and then drug the parties through the administrative mud for years after the high court decisions. The final results were not the “victories” for the abused citizens that we tend to presume. Agencies have the taxpayer purse to finance their proceedings and more litigation. Homeowners such as the Sacketts have pockets a bit less deep.

As Justice Alito noted in this case [PDF], “real relief” must come from Congress. The Clean Water Act does not contain clear rules regarding procedure. No one really knows what is a wetland. The EPA takes advantage of the lack of clarity and, like any bureaucracy, grabs power. This is the 40th anniversary of the Clean Water Act. As Congress has not seen fit to clean it up over the decades, it is unlikely to do so now.

post

Trading Sheep for Grass and Fish in Patagonia

The big brown trout I was fishing for yesterday on the Limay River in Patagonia was nowhere to be found but I did manage to come across an old hang out of Butch Cassidy.

Being from Montana, where the Hole-in-the-Wall Gang pulled off their last job—a holdup of a Union Pacific train—before fleeing to South America, I was happy with this historical catch.

Legend has it that Butch became friends with Jarred Jones who ventured down to Argentina from Texas in 1887 to make his fortune. Jones didn’t find gold but he did manage to open a general store at the mouth of the Limay. The old store, which is now a friendly restaurant, still holds the shops books, old photos, and a frontier atmosphere of a century ago.

Jones earned enough money at the store to purchase two big ranches, which he fenced off with barbed wire—the first to be seen around these parts. Today, barbed wire is strung across much of the 98 million hectares of the Patagonian Steppe to enclose vast quantities of sheep.

Unfortunately, a flock of sheep can gobble up great expanses of native grasses, and in southern Argentina, they’re clearing some serious vegetation. In addition to vegetation loss, overgrazing equates to lost habitat for other animals, and damages waterways with runoff and silt from erosion, which affects the fish, which affects tourism.

Paradoxically, sheep—the slayers of grasslands—could become the saviors of the same landscapes and in turn protect fish and other species. It turns out that because the plants of the grasslands co-evolved with herbivores, such as guanacos, a little munching is good (and necessary) for the flora. It is also true that companies that have environmental components to their business plans and seek to create goods from natural products, including merino wool, would like to see grasslands flourish for the long term. And tourists like me who want to fish and recreate in Patagonia would be willing to pay a price premium for this outcome.

Enter The Nature Conservancy, Patagonia, Inc. and Ovis XXI. Armed with scientific knowledge and market tools, this trilogy is working to conserve more than 15 million acres of land in Patagonia by 2016. Ovis XXI works directly with the woolgrowers. These consultants know the industry, and how to raise sheep without destroying grasslands. The Nature Conservancy brings its science-based knowledge and environmental credibility to help build the sustainable grazing standard through planning and subsequent monitoring of conservation outcomes. And Patagonia Inc. brings the market perspective—buying the wool, networking with others in the supply chain, creating the final products, and using its brand strength to help publicize Patagonian wool.

The majority of the land targeted by the Patagonian Grasslands Conservation Project is privately owned, and remains in large and undivided properties of intact native grasslands. Because most landowners face ongoing political and economic challenges that affect their ability to stay in business, an incentive is needed to gain commitment from landowners to manage resources sustainably. In this case, the carrot comes in the form of a payment to ranchers for grazing less sheep and or for using more modern and environmentally friendly grazing practices.

In November 2011, the first shipment of sustainable wool (29 tons) left Patagonia for Asia to be turned into socks for Patagonia, Inc. So far this scheme has worked to place two million acres under sustainable grazing agreements. Time will tell if the environmental protection purchased by conservationists from sheep ranchers will protect grasslands and associated waterways in the future, but signs look promising. Stay tuned…

post

Thoughts on Sackett v. EPA

The regulators lost to the regulated yesterday in Sackett v. Environmental Protection Agency. As Ilya Somin notes, the Supreme Court’s unanimous opinion held that property owners and other regulated parties may challenge administrative compliance orders issued by the Environmental Protection Agency under the Clean Water Act. This is a small, yet significant, victory guaranteeing a modicum of procedural protection for those subject to regulation under the CWA.

In this case, the EPA issued an ACO to the Sacketts alleging they had filled wetlands without a federal permit and directing them to take remedial action or face civil penalties. The Sacketts had sought an agency hearing on the matter, but the EPA declined. So the Sacketts went to court. The federal government maintained that judicial review of the ACO was unavailable unless and until the EPA filed a civil enforcement action against them. The U.S. Court of Appeals for the Ninth Circuit concurred, only to be reversed by the Supreme Court.

Writing for the Court, Justice Antonin Scalia explained that an ACO can be challenged as a final agency action under the Administrative Procedure Act, as the order represents the conclusion of the agency’s consideration of the question and is, itself, the source of a binding obligation on the regulated party. The order “has all of the hallmarks of APA finality” and is thus presumptively subject to judicial review. As the CWA does not expressly or impliedly preclude judicial review, and there is no other adequate remedy in court, the Sacketts can have their day in court.

Justice Scalia’s opinion for the Court is quite narrow, and lacks the rhetorical flourishes we’ve come to expect in his environmental opinions. The Court had no occasion to reach the due process issues lurking below the surface of the case – specifically whether the Sacketts would be entitled to some opportunity to be heard, if not in court then before the agency, before they could be subject to fines for violating the administrative compliance order. Although Justice Scalia noted the continuing uncertainty over the scope of federal regulatory jurisdiction under the CWA, particularly with regard to wetlands, his opinion made clear the Court was expressing no opinion as to whether the EPA properly asserted jurisdiction over the Sacketts’ land. Solely at issue was whether the Sackett’s could challenge the EPA’s assertion of jurisdiction and claim that the Sacketts had violated federal law by filling jurisdictional wetlands on their property without first obtaining a federal permit. Justice Ginsburg wrote a brief concurring opinion stressing this point.

Justice Alito’s concurring opinion stressed the continuing regulatory uncertainty to which private landowners are subject under the Clean Water Act. The statute’s reach is “notoriously unclear,” and yet landowners can face substantial fines if they fail to obtain the requisite federal permits before modifying wetlands on their land. According to Alito, the Court’s decision in Sackett offers landowners “ a modest measure of relief” in that it now ensures that landowners may seek judicial review of an agency order directing them to cure CWA violations or face additional fines. Yet according to Alito, the burden on landowners remains substantial.

the combination of the uncertain reach of the Clean Water Act and the draconian penalties imposed for the sort of violations alleged in this case still leaves most property owners with little practical alternative but to dance to the EPA’s tune.

According to Alito, real relief will only come when Congress or the agencies provide a “reasonably clear” jurisdictional rule defining what constitute “waters” subject to federal regulatory control.

For 40 years, Congress has done nothing to resolve this critical ambiguity, and the EPA has not seen fit to promulgate a rule providing a clear and sufficiently limited definition of the phrase. Instead, the agency has relied on informal guidance. But far from providing clarity and predictability, the agency’s latest informal guidance advises property owners that many jurisdictional determinations concerning wetlands can only be made on a case-by-case basis by EPA field staff.

Despite repeated losses in the Supreme Court, the EPA and U.S. Army Corps of Engineers have yet to make any serious effort to delineate the scope of their regulatory jurisdiction. The latest guidance, issued in response to Rapanos, is no exception. This virtually assures the question of CWA regulatory jurisdiction will come before the Supreme Court yet again, and the ability of the Sacketts and other regulated landowners to challenge ACOs should only accelerate the process.

Here are my prior posts on the Sackett case:

UPDATE: At Legal Planet, Richard Frank assesses the case.  His conclusion:

Some will argue that the availability of judicial review to contest administrative orders issued by EPA under the Clean Water Act will hamper federal enforcement efforts in the future.  That’s due in significant part to the fact that the vast majority of federal actions to enforce the CWA take the form of such orders, rather than formal administrative hearings or federal litigation that are more costly, resource-intensive and time-consuming for EPA.

Be that as it may, my own opinion is that Scalia and the Court got this one right.  The Sackett decision’s statutory analysis seems compelling, and the equities of this particular David-and-Goliath saga fall rather strikingly in favor of the Sacketts.  I don’t often find myself in agreement with Justice Scalia, but I confess that I do here.  One of Scalia’s closing observations in Sackett particularly resonated with me: “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.”

Originally posted at The Volokh Conspiracy.

post

New book by PERC researchers: Tapping Water Markets

Now available from RFF Press, Tapping Water Markets explores the past, present, and future of water marketing. Written by PERC Executive Director Terry Anderson and research fellows Brandon Scarborough and Reed Watson, the book provides up-to-date information of where and why water shortages are occurring and where and why markets are emerging to resolve water conflicts.

Unlike other books that portray water wars as an inescapable reality of a crowded planet, Tapping Water Markets proposes institutional reforms aimed at fostering voluntary water exchange, conservation, and cooperation. The book contains case studies from the United States and other parts of the world demonstrating the importance of clearly defined, secure and transferable water rights.

Intended for professional and lay audiences, the book covers a range of topics including surface water allocation, groundwater management, environmental flows, and water quality trading. It concludes with predictions about the future of water scarcity and the ability of water markets to shape that future more positively.

Copies are available direct from the publisher and at Amazon.com.

post

Bringing market-based solutions underwater

A lot has been written about PERC’s Enviropreneur Institute lately – and for good reason. While many alarmists tout the demise of clean air, protected forests, and endangered animals, enviropreneurs work to find viable market solutions for improving environmental quality. As Co-Director of PEI Reed Watson notes:

What distinguishes enviropreneurs from other environmentalists? One answer is their vision; enviropreneurs see the world in a unique way. They see the prospect for cooperation where others see unsolvable conflict. They see unwritten contracts where others see unwritten regulations. They see new frontiers for free market environmentalism where others see only market failures.

One such enviropreneur, Brett Howell, has taken a dive off Florida’s coast and is bringing market-based solutions underwater. Florida’s coral reefs stretch more than 350 miles and support hundreds of different species of coral and fish.

It turns out, however, that 70 to 80 percent of Florida’s coral habitat has been destroyed over the past 40 years. Staghorn and Elkhorn coral, two species found off Florida’s coast, are even listed under the Endangered Species Act.

In February, Howell and PERC hosted a workshop in Key Largo exploring the question of whether contracts can help save coral reefs.  Howell is working to develop a market for coral reef restoration by identifying who benefits from a coral reef and who is willing to pay for its restoration. Read more about their conclusions and Howell’s next steps here in the latest issue of PERC Reports.