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"Are You Minding Your Section 404 Permits?"
Energy, Environment & Natural Resources
November 30, 2011

It should come as no surprise to the wetlands regulated community that violations of Section 404 of the Clean Water Act regarding wetlands are subject to civil and criminal enforcement. Civil penalties for violations of Section 404 of the Clean Water Act may be as high as $37,500 per day of violation. Traditionally, most of the regulated community realizes that under a 1989 memorandum of understanding between EPA and the Corps, most wetlands violations are either handled by EPA administratively, or by its referral of the case to the Department of Justice for judicial enforcement. However, Section 309(g) of the Clean Water Act allows the Corps of Engineers itself to enforce violations of §404 permits. Otherwise, it is EPA that normally has the lead §404 enforcement, when it wishes to or when flagrant or repeat violations of §404 exist, but before the existence of a permit.

Section 404 permits have numerous conditions, including precise areas of wetlands that may be impacted, buffer zones, wetland mitigation conditions, and others. These conditions, if violated by permittees, can lead to an enforcement led by the Corps of Engineers. Examples include new fill impacts after a permit work authorization time period ended (without an extension), wetland fill impacts outside of permit limits, failure to maintain wetland mitigation areas, and failure to submit required mitigation monitoring reports, contrary to permit conditions. (To see, e.g., Public Notice SAJ-1995-6663-TMF, September 22, 2011, click here.) Traditionally, most such permit violations are handled in a non-adversarial manner by the Corps of Engineers, being discovered by field inspectors and negotiated and worked out with the permittees over time. However, the Corps has reportedly seen an increase in §404 permit violations, and various districts (e.g., Jacksonville) have or are initiating enforcement actions pursuant to Section 309(g) (2) (A) of the Act under Corps regulations at 33 C.F.R. Part 326.6.

Section 326.6 of the regulations and Section 309(g) (2) (A) of the Act allow the Corps to administer Class 1 administrative penalties for wetland permit violations. Although judicial action remains an option, the Class 1 administrative penalties alone are now $16,000.00 per violation up to a maximum of $37,500.00 for post-January12, 2009 violations. See 40 C.F.R. Part 19.4, for penalties for other time periods. This amount is still an extensive sanction.

The Corps’ process on Class 1 administrative penalties is initiated by the issuance of a proposed order by the district engineer of the Corps district at which the violation arose. The permittee receives notice of the order and of its rights. A proposed penalty is stated in the order. The permittee has 30 calendar days from receipt of notice to request an agency hearing on the order. Notice is also given by the Corps to the appropriate state agencies and to the public, which are entitled to a comment period. An administrative record is compiled on the violations. The permittee must specify in summary form the factual and legal issues which are in dispute and specific factual legal defenses in its hearing request. The right to hearing is waived if the permittee does not submit the request in writing to the Corps within the allowed 30 day time period.

The Class 1 penalty hearing is an administrative hearing, but not a formal adjudication, normally held in the same Corps district where the violation occurred. (Similar, but more serious Class II violations with maximum penalties of $177,500 require a formal adjudicatory hearing conducted by an administrative law judge.) The permittee has the opportunity to present evidence, cross-examine witnesses, and to be represented by counsel. The presiding officer is selected by the district engineer. The selectee must have exercised no responsibility for the investigation or enforcement of any case before the district engineer. This means counsel from outside Corps districts are usually chosen as presiding officers. The presiding officer may subpoena witnesses and provide interested parties a reasonable opportunity to be heard and to present evidence. The permittee, although it may present a defense, may not challenge the permit conditions or limitations which are the subject matter of the penalty order. The presiding officer is not bound by the rules of evidence. Rebuttal evidence may be presented. A record is maintained of the hearing. Soon after the hearing, the presiding officer makes a recommended decision to the district engineer. The recommended decision can include the recommendation for the district engineer to withdraw the proposed order, or to issue or modify the proposed order as the final order. The district engineer’s decision shall be based on a preponderance of the evidence in the administrative record. The district engineer provides written notice of the issuance, modification or withdrawal of the proposed order to the permittee, and to every person who submitted comments thereon.

A commenter may ask the district engineer that any final order be set aside (and for a hearing, if no hearing was held before the final order) within 30 days of notice. There is no further administrative appeal from the district engineer’s final order, rather, the permittee or commenter, within 30 days, must, if it wishes, seek judicial review from the final order under the Administrative Procedures Act in a federal district court. The standard of judicial review under Section 309(a) (8) is the substantial evidence or abuse of discretion tests.

Care must be exercised when talking with Corps surveillance inspectors about permit compliance and in timely raising all appropriate issues in writing if a hearing is requested. Basic fairness or due process concerns may also arise in the Corps selection of cases for enforcement and in the limited hearing rights provided for Class 1 penalties. And, don’t forget, the Corps may also initiate administrative action to suspend, modify or revoke a permit if circumstances warrant. So be guarded in complying with all permit conditions.

The New Orleans District is reportedly among those districts that are interested in utilizing these historically under-utilized Class I procedures for enforcement of §404 permits.

Please contact Louis E. Buatt or Stanley A. Millan for further information.