Administrative Procedure Act

By Amanda Howard Lowe

In a decision of first impression interpreting the meaning of “operating” under the Oil Pollution Act of 1990 (“OPA,” 33 U.S.C. §§2701 et seq.), the U.S. Fifth Circuit held the owner and operator of a tugboat liable as the “responsible party” for a spill emanating from a tank barge in its tow, and consequently found the owner ineligible for reimbursement for the cleanup costs. See U.S. v. Nature’s Way Marine, LLC, 904 F.3d 416 (5th Cir. 2018).

The underlying incident occurred in January 2013 when a tug owned by Nature’s Way was moving two oil carrying tank barges owned by Third Coast Towing, LLC (“TCT”), down the Mississippi River. The barges allided with a bridge over the Mississippi River, resulting in a release of over 7,000 gallons of oil into the river. The Coast Guard designated both Nature’s Way and TCT as “responsible parties” under OPA §2702(a). Nature’s Way and its insurers spent nearly $3 million in clean-up costs and the federal government incurred another $792,000.

Following settlement of auxiliary disputes between Nature’s Way and TCT, in May 2015, Nature’s Way submitted a claim to the National Pollution Funds Center (“NPFC”)[1] seeking reimbursement of over $2.13 million it spent in clean-up on the grounds that its liability (if any) should be limited to the tonnage of the tug alone, and not the tonnage of the barges. OPA limits liability of a “responsible party” based on tonnage of the vessel it was operating. While Nature’s Way admitted it operated the tugboat, it contested its status as operator of the oil-discharging barge. The NPFC rejected the request to decrease the limit of liability, concluding instead that Nature’s Way was the “operator” of the barges under §2702(a) and thus both barges were properly included in the limitation assessment.

In light of the NPFC dispute, the United States sued Nature’s Way and TCT in the Southern District of Mississippi to recover the $792,000 in cleanup costs directly funded by the federal government. Nature’s Way denied liability, and counterclaimed against the government asserting that the NPFC’s “operator” determination was wrong and violated the Administrative Procedure Act (“APA”) by erroneously applying §2702(a).

The U.S. moved for partial summary judgment on the sole question of whether the NPFC violated the APA by declaring that Nature’s Way was the “operator” of the barge. In opposition, Nature’s Way argued that TCT was actually the “operator” of the barge as it was responsible for instructing when the barge would be loaded, unloaded, and moved.  The district court disagreed with Nature’s Way, holding that a “common sense” interpretation of “operator” as used in the statute supports the conclusion that a “dominant mind” tug moving “dumb” barges (lacking the ability for self-propulsion or navigation) through the water is “operating” those barges. Nature’s Way appealed.

The Court focused on the express language of the statute, which defines an “operator” as “any person … operating” a vessel and a “responsible party” as “any person owing, operating, or demise chartering the vessel.” Though both terms use the word “operating,” the Fifth Circuit noted that “operating” is not defined within the statute. The Fifth Circuit also relied on Supreme Court jurisprudence construing the definition of “operator” in the Comprehensive Environmental Response Compensation and Liability Act of 1980 (“CERCLA”) as any person “who directs the workings of, manages, or conducts the affairs of” the facility/equipment in question.” U.S. v. Bestfoods, 524 U.S. 51, 66 (1998). Given that OPA and CERCLA have common purposes and a shared history, the Court found the parallel language between the statutes significant. The Fifth Circuit concluded that the ordinary and natural meaning of “operating” a vessel under OPA would thereby include the act of piloting or moving a “dumb” vessel like the TCT tank barges. The Court held that because “Nature’s Way had exclusive navigational control over the barge at the time of the collision, and, as such… was a party whose direction (or lack thereof) caused the barge to collide with the bridge,” Nature’s Way was the “operator” of the barges under OPA.

Significantly, the Fifth Circuit has now recognized the potential increased liability for negligent vessel operators who cause spills subject to OPA, as the Court has very plainly held that a tug pushing loaded “dumb” barges can only limit its liability to the full value of the entire flotilla. With the potential for increased exposure, this decision will obviously impact vessel operators and the oil and gas industry, as well as their respective insurers. Additionally, the ruling does not appear to foreclose the argument that the barge owner might also be considered an operator under OPA 90, if its actions also rise to the level of “operating.”

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[1] The National Pollution Funds Center oversees the Oil Spill Liability Trust Fund, 26 U.S.C.§9509, an OPA-created mechanism, funded by inter alia OPA civil penalties, from which faultless or partially at-fault “responsible parties” can recoup, to the extent of their non-fault, clean-up costs paid out pursuant to their strict OPA liability, see 33 U.S.C. §2708(a), 26 U.S.C. §9509)

wet

By Sam O. Lumpkin

On May 31, 2016, the US Supreme Court ruled in United States Army Corps of Engineers v. Hawkes Co., Inc. that a jurisdictional determination issued by the Corps of Engineers under the Clean Water Act constitutes a final agency action that is judicially reviewable under the Administrative Procedure Act.  Justice Roberts wrote the decision of the Court, to which all other justices joined or concurred in the result.

The Clean Water Act prohibits the unpermitted discharge of any pollutant into “the waters of the United States,” including wetlands, without a permit.  However, only wetlands with a “significant nexus” to other waters of the United States are within Corps and EPA Clean Water Act jurisdiction.   Rapanos v. United States, 547 U.S. 715 (2006).  Dredging and filling activities are considered to be the discharge of a pollutant.   As a result, any dredging or filling activities involving a waters of the US within Corps jurisdiction must be approved beforehand by the US Army Corps of Engineers, which is responsible for issuing permits for discharges that would otherwise be forbidden by the Clean Water Act. The Clean Water Act allows imposition of potentially massive criminal or civil penalties for discharging any pollutant without a permit.

Determination of what constitutes a “wetland” or “other waters” of the US often involves expert determinations.  Further, the process for obtaining a Corps permit can itself be time-consuming and expensive – the Court noted that the average applicant for the type of permit at issue in Hawkes spends “788 days and $271,596 in completing the process,” and “[e]ven more readily available ‘general’ permits took applicants, on average, 313 days and $28,915 to complete.” To aid applicants, the Corps issues “jurisdictional determinations” (“JDs”) on a case-by-case basis. JDs are either “preliminary” – advising that there may be waters of the United States on a piece of land – or “approved,” which definitively states the presence or absence and extent of such waters.  The JDs provide some certainty for a landowner or developer as to whether they are required to endure the permitting process. The approved JDs are administratively appealable to the Corps; however, until the Hawkes decision, it was unclear as to whether judicial review of the Corp decision was available.

In Hawkes, the applicant sought a jurisdictional determination and was granted an approved JD stating that the property contained “water of the United States,”with a delineation of where those waters were located. Central to the case was whether the wetlands had a close enough nexus to a major river 120 miles away such that they were within the Corps’ jurisdiction. The applicants administratively appealed the JD under 33 C.F.R. Part 331, and the Corps reaffirmed its decision with revisions to the extent of the wetlands. Not satisfied, the applicants sought review of the JD in a federal district court under the Administrative Procedure Act (APA), which allows district courts to review “final agency actions.” 5 U.S.C.A. § 704. The Corps argued that judicial review was available only at the time of the final permitting decision or on an enforcement action commenced for dredge or fill activity without a permit. The district court agreed with the Corps and dismissed for lack of jurisdiction, holding that a JD is not a “final agency action.” 963 F.Supp.2d 868 (Minn. 2013). The applicants then appealed to the US Court of Appeals for the Eighth Circuit, which reversed. 782 F.3d 994 (2015).

The Supreme Court agreed with the Eight Circuit, holding not only that an “approved” JD is a final agency action, but also that there are no adequate alternatives to the APA for challenging a Corps JD in court. On the issue of finality, the Court noted that  JDs give rise to “direct and appreciable legal consequences,” and they are also binding on the Corps and the EPA for five years following the determination.[1] Unlike other possible agency actions which are merely advisory, such as informal advice from an agency or a preliminary JD, an approved JD follows extensive fact-finding, marks “the consummation of the agency’s decision-making process” and constitutes a final determination of rights and obligations “from which legal consequences will flow.” The Court further held that there are no adequate alternatives to an APA challenge to the Corps’ JD, noting that the only alternatives available were to forego a permit altogether or proceed with the permitting process. Without a permit, the applicant could either proceed with its proposed activity and be exposed to the civil and criminal penalties of the Clean Water Act, or abandon its proposed activity altogether. But the permitting process also poses a highly expensive, time-consuming, and uncertain proposition, for which judicial review would only be available when complete. As a result, the Court held that an approved JD is reviewable in federal district court under the APA.

The Hawkes ruling is a narrow one, and applies only to approved JDs. However, because JDs are literally determinations of the extent of the Corps’ jurisdiction, the scope of the Corps’ authority will likely be subjected to many more challenges than in the past, when such objections would have to wait until the permitting process was complete. As a result, in the future the Corps’ jurisdiction may face additional restraints imposed by federal courts.

Because an adverse ruling on an approved JD is appealable beyond the Corps after Hawkes, a thorough record in the initial JD proceeding is more important than ever. Ordinarily, a consultant will prepare a draft JD for submission to the Corps, which may or may not visit the site in question; the Corps then issues its decision on the record. This process, however, does not offer the applicant any further opportunity to develop the record. Any administrative appeal and subsequent judicial review is limited to the administrative record before the Corps, unless good cause is demonstrated as to why additional information should be admitted. As a result, applicants should ensure that their consultant’s initial submittal is thoroughly documented and, possibly, subjected to legal review prior to submission. Because federal district courts do not possess the same expertise as the Corps, a well-documented and clearly explained initial proposal will aid a district court with the information it needs to review the Corps’ decisions.

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[1]  There were three concurring opinions taking differing positions on whether a Memorandum of Agreement between the Corps and EPA makes the JDs binding on EPA. This aspect could bear further review.