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Whatever happened to SO2 trading?

May 22, 2012 By 2 Comments

A decade ago, Dan Benjamin wrote that tradable permits seem to offer the advantages suggested by their proponents: “The total costs of achieving the current SO2 cap are at a minimum—and surely lower than under command-and-control. Perhaps now some serious consideration will be given to environmental protection systems in which there is even less administrative control by the government.”

Indeed, this scheme was considered by most economists to be the poster child of cap and trade. As Terry Anderson and Gary Libecap write in the Daily Caller by 2007 annual SO2 emissions dropped to 8.95 million metric tons at a cost of $747 million, “one-third less than it would have cost had the EPA used standard command-and-control regulation. The system worked beautifully—for a while.”

Today, however, the sulfur dioxide scheme is dead. The cause of death, according to Anderson and Libecap, is regulatory manipulation.

The Clean Air Interstate Rule and subsequent rules from the Obama administration have significantly undermined the sulfur dioxide trading scheme by preventing the use of 12 to 14 million pre-2010 banked allowances for future trading and changing the ratio of allowances per ton of sulfur emissions from 1:1 to 2:1 for 2010–2014 and to 2.86:1 for 2015 and beyond.

Not surprisingly, sulfur dioxide allowance prices began falling in 2005 from $1,600 per allowance and hit an all-time low in April of $0.56 on the spot market and $0.12 on the seven-year future market. For all intents and purposes, the EPA’s taking of banked allowances and manipulation of the trading ratio wiped out billions of dollars worth of assets held in the form of allowances.

The original SO2 trading scheme, according to Benjamin, had some characteristics of property rights; for example, anyone was legally permitted to buy or sell allowances at market-determined prices: “Because the allowances are standardized (each represents the right to emit one ton of SO2) and the major potential traders (electric utilities) are likely to be well-informed, trade should be feasible at low transaction costs, just as we find in stock and bond markets.” But as Anderson and Libecap state, when allowances are not treated as property rights and are “given and taken at the whim of regulators,” the system fails.

Filed Under: air pollution, Regulation, Trade
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Lessons From the Old West: The 150th Anniversary of the Homestead Act

May 18, 2012 By Leave a Comment

On May 20, 1862, Abraham Lincoln signed the Homestead Act, an effort by the U.S. government to make 160 acres available to anyone who would move to unclaimed territory, build a cabin, farm the land, and live there for five years. Eventually 270 million acres were privatized by the process, ushering in the great era of “free land.” Now, 150 years later, we have the opportunity to look at homesteading as it actually worked.

Throughout the nineteenth century the federal government was committed to disposing of the vast acreage that it owned. The privatization process was important for the growth of the market economy. But the homesteading process was a wasteful way of creating private rights, and the land sales that preceded homesteading were a much less wasteful method.

There were several problems with the original Homestead Act and its subsequent alterations. The original provision of 160 acres was insufficient for agriculture in the arid west, and even when it was expanded to 320 acres in 1909 and 640 acres in 1916 it still did not provide enough acreage to support a family in most of the places where people settled. In fact, only 40 percent of those who started the homestead process were able stick it out and finalize their claims.

An even more important lesson is that it is very difficult for the government to give away almost anything for free. In the case of homesteading, much of the land available was beyond the “profitable frontier,” the point at which the lack of a market for agricultural products made settlement unprofitable. But settlers knew the land was going to be valuable at some point in the future so they raced into the West, making their claims as early as they possibly could in order to have secure property rights when the returns from the land turned positive.

People bid for the land not with money but with wasted resources, the time and effort they put into “proving up” their claims in anticipation of future profits. Many families suffered years of deprivation trying to eke out a living until they could make their claim profitable or, once they had established property rights, buying out someone else in order to obtain an operation large enough to survive.

Think of what would happen if your institution announced that it was running a budget surplus and that on June 1st $1000 would be given to the first 20 people who lined up outside the CFO’s office. People would calculate how much time they could spend standing in line in order to get $1000 and, in the limit, $20,000 would leave your organization’s coffers. But almost no benefit would be bestowed on the recipients. People would be quite willing to spend $900 of their time in order to get $1000. Some would spend $999.

The other problem with the homesteading process was that it was so costly and difficult to use that much of the western United States remained as public lands. Today, more than half of the land in the West is under federal ownership. These lands have been subject to environmental and financial mismanagement, as documented by PERC’s Holly Fretwell.

Thus the Homestead Acts had two unfortunate results: 1) the process was an unduly costly way to dispose of federal lands and 2) because of the unworkability of homesteading much of the land was never privatized.

Filed Under: Agriculture, History, Law, Public Lands Tagged With:
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The Lacey Act, Certification, and Gibson Guitar: Why Trade in Forest Products Protects Forests

May 17, 2012 By Leave a Comment

by Todd Myers

As a board member of Rainforest Alliance, Gibson Guitar CEO Henry Juszkiewicz didn’t expect to find himself accused of supporting illegal logging. A supporter of Forest Stewardship Council certification, Juszkiewicz is committed to doing what he believes is best for the environment and the world’s forests.

“About 80 percent of our wood is FSC certified,” Juszkiewicz explained to me when we spoke.

Given that experience, he is not the kind of person you would expect to run afoul of the chain of custody challenges that are part of the Lacey Act, a law designed to prevent trade in illegally harvested wood.

Ultimately, his complaints about the Lacey Act’s difficult chain of custody provide some insight into the challenges faced by those looking to comply with certification systems. Indeed, FSC offers itself as a way to meet the requirements of the Lacey Act. After the passage of the recent amendments to the Lacey Act covering illegal harvesting, FSC-US noted, “Forest Stewardship Council certification of wood products promises to be a pivotal tool in providing credible verification of legality for companies importing wood.”

Juszkiewicz’s primary complaint about the current structure of the Lacey Act is simple: There is “no prescription for actually obeying the law.” Gibson Guitar believed they were following the law. They found out, however, that proving it was virtually impossible.

In order to show that wood was harvested and traded legally, the Lacey Act “requires consumers to have knowledge of every piece of wood transferred across country lines,” he says. “That’s not possible for consumers to know.” He laments that even if he has certification that the wood is legal, if those certifications turn out to be inaccurate, the certifiers are not on the hook – the company is.

Juszkiewicz believes the ambiguity of the rules isn’t an accident. He argues that rather than protecting forests, the primary goal of the act is “to protect domestic jobs,” noting, “If you make things risky enough, you are effectively outlawing importation by making it ambiguous and risky.”

The combination of unclear rules and a lack of protection from supply chain certifiers means that even someone committed to sound stewardship of forests can find himself afoul of the law.

It doesn’t have to be like that, however, and Juzkiewicz told me he is working to change the law so it truly helps protect forests. Critical to that effort is providing an economic incentive to grow new forests.

“Underlying most of the positions of the greens is a belief that prohibition will solve the problems,” he laments. “[They believe] punitive laws that prevent cutting any trees will save the rainforest. I think that is poppycock. You have to understand the economic basis of the way societies work. Trees are de facto a sustainable commodity and they can be managed to be sustainable, even in the short run.”

Rather than being an enemy of the forest, international trade in wood is a force to preserve those forests.

“There is no necessity to preclude business. In fact if you understand it, the vast majority of clear cutting forests is for alternative uses, not forestry and cutting trees for guitar guys. As long as the economic benefit of an acre of forested land is higher for alternative use — conversion for agriculture or real estate — people are going to cut that forest down. No amount of armies is going to prevent that from happening. So the best thing to preserve and protect the forests is to make it valuable from an economic standpoint. As a producer of a sustainable, valuable product, the forest can compete. That can make the world better.”

And Juszkiewicz is committed to making the world’s forests better.

When I pointed out that some of the concerns he had with the Lacey Act echoed complaints about FSC certification, he acknowledged it but argued that rather than throw them out, we need to get the Lacey Act and FSC certification “right.”

Speaking of FSC, he says, “I’ve seen the impact on indigenous peoples that has been very positive.” One reason he continues to support certification systems is his belief that non-government organizations have to be part of the effort.

After his experience with the Lacey Act and the Justice Department, it shouldn’t be surprising when he says “I frankly don’t think government does a great job.” He doubts the ability of business to “police itself,” and believes an independent assessment can be useful. That’s why he supported FSC in the first place.

But he wants any system, whether it is certification by an NGO or a law like the Lacey Act, to be clear and to promote good forestry practices rather than punish first. “I want to see a carrot.”

Over the next several months, Juszkiewicz says will be working with Congress to clarify the law and ensure it achieves its intended goal. Whatever the outcome, he believes any system that looks to protect forests must protect the value of forest products.

“If you can’t use the product from an acre of forest, owning that forest as forestland becomes zero value and any alternative use becomes better.” That, he believes, is the worst thing any system of forest rules can do for the forests that provide wood for the plant and his legendary guitars.

Originally posted at Forest Certification Audit.
Filed Under: Forestry, Regulation Tagged With: , ,
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Aquanomics: Water Markets and the Environment

May 8, 2012 By Leave a Comment

The increasing scarcity of water around the world prompts heated debate over the effectiveness of conservation efforts and policy initiatives.

Is water becoming increasingly scarce? If recent usage trends continue, many people believe that shortages are inevitable. Aquanomics, edited by B. Delworth Gardner and  PERC Senior Fellow Randy Simmons, comprehensively examines a full range of water problems. Authors, including PERC Fellows Brandon Scarborough and P.J. Hill, reveal measures that should be implemented to avoid the onset of possible “water crises.” These policies include establishing secure and transferable private water rights and extending these rights to uses that traditionally have not been allowed, including altering in-stream flows and ecosystem operations. The authors argue that such policies will help maximize water quantity and quality even if water becomes scarcer and more valuable.

Mark Twain once quipped, “Whiskey is for drinkin’, water is for fightin’ over.” However, the authors of Aquanomics now provide proven solutions to such potential conflicts by establishing the validity of market-based approaches.

Buy Aquanomics here from The Independent Institute.

Filed Under: Uncategorized
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Celebrating Humanity in the Environment

April 30, 2012 By 3 Comments

A curious model for conservation is taking the stage. It is grounded in protecting landscapes and species but adds humans to the mix. Though not a new idea, it is often dismissed, even discouraged, by environmental thinkers. This conservation ethic has the power to enhance resource stewardship and environmental quality.

The new paradigm acknowledges humans as an important part of nature and is grounded in a realistic view of the state of the world. The resilience of nature is recognized with an understanding that some places are more fragile than others. The idea concedes that increased conservation will come when people personally recognize the benefits. This ethic has been supported by three iconic conservation players.

Patrick Moore, a co-founder of Greenpeace, was raised in a logging community and earned a PhD in resource ecology and forestry. “The central teaching of ecology is that we are part of nature and interdependent with it,” writes Moore in his 1995 book, Pacific Spirit. He believes that both protected forests and managed forests involve human action, which can enhance the benefits provided to society.

Fifteen years after its founding, Moore parted with Greenpeace. He was disturbed by the misinformation that was being disseminated and the unwillingness of organization leaders to compromise to work toward realistic solutions. Abject opposition to logging is one case in point. Stiff regulations can make forests a liability by decreasing permissible harvest and increasing management costs. Moore sees the forest and the trees that provide habitat, ecosystem services, and wood products. Trees are renewable and through proper forest management we can harvest timber while enhancing environmental quality.

Using statistical information Bjorn Lomborg, a statistician, has systematically analyzed global environmental issues. As a student, Lomborg was pessimistic about the future of the environment. He also was once a Greenpeace supporter. Following years of data collection and analysis, Lomborg changed his tune. “We are not overexploiting our renewable resources,” he writes in his 2001 book, The Skeptical Environmentalist. Though we often hear otherwise, his analysis shows that global forest coverage has not changed much in the last 50 years. He also believes that “there do not seem to be any serious problems with the nonrenewable resources.” Although some regions are better cared for than others, there are more reasons for optimism than pessimism. Lomborg concludes that we are living in a healthier, wealthier, and cleaner environment than ever before thanks to human innovation.

Similar to Lomborg and Moore, Peter Kareiva puts humans at the center of conservation. Kareiva is the chief scientist for The Nature Conservancy, the world’s largest conservation organization. He sees a global landscape that has been touched by humans. The only conservation that makes sense to Kareiva is one that considers human needs and desires. “Protecting biodiversity for its own sake has not worked,” he co-writes in the Fall 2011 issue of Breakthrough Journal. To enhance conservation in today’s world requires us to “embrace human development” and “to integrate the value of nature’s benefits into [corporations] operations and cultures.”

It is time for conservationists from all walks to shed old paradigms of doom and gloom and look at the world as it really is. Though humans have touched nearly every place on earth, our increased prosperity has brought enhanced environmental quality. We are all a part of nature and nature will be as we steward it. Therefore, incentives for conservation must be aligned with human needs and good stewardship.

Filed Under: Conservation, Environmental Education
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Lessons From the Old West: Don’t Ban It, Brand It

April 24, 2012 By 1 Comment


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 fisheries, water 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.

Filed Under: Agriculture, History, Law, Regulation, Water Tagged With: , , , ,
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Tapping Water Markets

April 24, 2012 By Leave a Comment

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.

Filed Under: Water
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Earth Day Reflections

April 23, 2012 By Leave a Comment

Many would argue the modern environmental movement was catapulted into fame 50 years ago by Rachel Carson’s seminal book Silent Spring. Although it is now rarely read outside of the classroom, it remains one the most highly cited works of environmental writing. However, in Silent Spring at 50: Reflections on an Environmental Classic, Roger E. Meiners and Andrew P. Morriss reanalyze Carson’s science and question its influence on environmental thought.

As Laura Huggins notes in an op-ed in The Washington Times, “[Carson’s] caution that we should be wary of misuse of pesticides is praiseworthy, but there were major oversights in her work – errors that have played a role in shaping environmental policies that have cost millions of lives and dollars.”

In Forbes, Stanford University’s Hoover Institution Fellow Henry Miller remarks that Carson exploited her reputation as a popular nature writer to legitimize an unfounded scientific treatise. “Carson’s proselytizing and advocacy led to the virtual banning of DDT and to restrictions on other chemical pesticides in spite of the fact that Silent Spring was replete with gross misrepresentations and scholarship so atrocious that if Carson were an academic, she would be guilty of egregious academic misconduct.”

Soon after Silent Spring was released, Carson was accused of alarmism and ignoring the science of the day. These facets, of course, have been forgotten in the Earth Day craze. Meiners and Morriss, on the other hand, offer a clear perspective on her work and conclude that Carson’s celebrated scholarship was, at best, sloppy, and, at worst, an intentional deceit. As Huggins suggests, “Thanks to human ingenuity, we are much healthier and wealthier in 2012 than in 1962, and the birds are still singing – all real reasons to celebrate.”

As the United States celebrates another Earth Day, PERC Scholars call for science and reason, not more emotionally charged rhetoric.

Filed Under: Uncategorized
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Silent Spring at 50: Reexamining Rachel Carson’s Classic

April 19, 2012 By 3 Comments

After 50 years, Silent Spring is rarely read, but it is routinely cited as a canonical work in environmentalism. Rachel Carson is hailed as a near saint in the environmental movement. There is no doubt the book played a major role helping to spur the environmental movement in the 1960s.

A careful reading of Silent Spring, however, will leave one dismayed at the relentless negative view Rachel Carson had of a time of unprecedented prosperity and improved health standards. We joined a group of authors from various disciplines who looked at different aspects of the book in historical context. That book, Silent Spring at 50, will be published in September. PERC’s latest publication, “Silent Spring at 50: Reflections on an Environmental Classic,” gives a sample of the full work.

Among the issues discussed in the book are the following:

1. Pesticides often benefit both human well-being and the environment. When discussing the effects of pesticides, Carson was entirely negative, failing to consider how these products greatly expand agricultural output, thereby allowing less land to be dedicated to cultivation, as well as having saved millions from starvation in the decade before her book was published. Her claims, such as that one might die from exposure to one molecule of a pesticide, are presented as if scientific fact. Carson ignored the reductions in habitat loss, increased no-till farming, reduced erosion and agricultural runoff that can be attributed to increased use of pesticides.

2. Bird populations were not decreasing.  Silent Spring is most famous for what its title evokes—a spring with no birds, as they have all died due to pesticides. Yet Carson ignored well-known Audubon Society data that indicated increasing, not declining, bird populations in some locations she identified (see brown thrasher chart below). Could she have been unaware of the data? Not likely, since she was a long-time active member of Audubon.

3. There was no cancer epidemic. Carson asserted that one person in four in the United States would die of cancer, and that cancer was becoming epidemic in children, despite public health data to the contrary. American life expectancy had risen more than 20 years in the 20th century when Carson was writing, but she only discussed impending doom. It is true that more Americans were dying of cancer when her book was published than had in previous decades, but that was because Americans no longer died of other diseases. They were lucky enough, as we are now, to have lived long enough to die of cancer and other diseases that mostly afflict the old. Despite the furor in those days of the impending Surgeon General report on tobacco, Carson ignored the role of smoking in cancer. She never mentioned the widely-available evidence about tobacco, preferring to blame man-made chemicals for cancer.

Like her successors who consistently forecast doom for the planet and its inhabitants, Silent Spring is alarmist and suffers from technophobia. It resolutely refused to recognize the billions of people, us among them, whose lives have been so greatly improved by the blessings of modern technology.

Filed Under: Agriculture, Conservation, Economic Growth, Regulation, Science, Wildlife Tagged With: , , , ,
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Scourge: Illegal Aliens in our Midst

April 16, 2012 By 1 Comment

Federal and local government spending on invasive flora and fauna amounts to almost $3 billion annually. That’s over three times the $830 million in actual damages caused by these non-natives. As the battle against invasive species mounts, PERC Enviropreneur Institute alum Paul Schwennesen, asks, “might our fascination with biotic menace be somewhat overblown?”

As a rancher in the Southwest, Schwennesen has seen his fair share of invasive species. Instead of upsetting the “delicate” natural balance of his land, however, he argues the Salt Cedar and Buffelgrass, amongst other non-natives, are a part of a fluid and dynamic equilibrium defined by competing and cooperating species.

Schwennesen notes that the helicopter-borne chemical raids employed to fight the intruders may be worse than the disease and calls for a reevaluation of nature’s natural processes:

Ralph Waldo Emerson famously declared weeds to be “plants whose virtues had yet to be discovered.” I have to agree. The frantic hand-wringing that accompanies most descriptions of “invasives” betrays a glaring lack of faith in the resilience of our natural world. More to point, perhaps, is the curiously rare recognition that life, in its perennial pursuit to fill vacuums, generally creates abundance and profusion. Attempts to artificially prevent this usually cost more than the supposed damage to be mitigated.

Read the full article here in the Huffington Post.

Filed Under: Uncategorized
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No New Coal: New Source Performance Standards Don’t Clear the Air

April 13, 2012 By 8 Comments

The current administration continues to push for cleaner air. That means reducing carbon emissions according to the 2009 EPA ruling that defines carbon dioxide as an air pollutant. It should be no surprise then, that the New Source Performance Standards (NSPS) on newly constructed power utilities reduces allowable carbon emissions.

The new emission levels, however, are below what is technologically feasible for coal burning plants. This effectively means that no new coal power plant can be constructed until new technology is developed and economically feasible. That is estimated to be ten or more years away. “[I]t is odd that they [the EPA] think it’s a good idea to ban new coal-fired power plants,” says Jeff Holmstead, former EPA air chief.

There are multiple consequences from this ruling. Whether they are good, bad, or otherwise depends on your perspective.

1. Increased power demand will have to be satisfied from alternative fuels. Coal currently provides about half of all US electricity consumption.

2. Natural gas is presently the most cost effective substitute for coal. Gas powered plants already meet the new emission standard. An increase in demand for electricity will increase the demand for natural gas. (Natural gas providers have an interest in this ruling.

3. Renewable energies, such as wind and solar, are more than twice as expensive as gas and coal and we do not have the technological capability to store the power during down times. These renewable energies require backup power sources.

4. Natural gas, similar to coal, is a fossil fuel that must be ‘mined’ from underground. Each has their own environmental consequences.

5. Unless new supply meets increasing demand, electrical rates will rise. (At present the slow economy has kept demand relatively low and natural gas production has been booming.)

6. The rule impacts only new emission sources. Existing coal fired plants remain regulated under the old rules; they can continue to produce at current emission levels.

7. Because new plants cannot be built to meet the standards, existing plants with older technology, hence more emissions, will stay online longer.

8. The fastest growing countries continue to build new coal powered electric utilities to energize manufacturing at the lowest cost and compete at the global level.

The new emission standards are similar to previous regulations in a couple of ways. First, there are some “strange bedfellows” lobbying for the new air regulations. Alternative power providers benefit from reduced competition, regardless of environmental consequences. Second, by discouraging new coal burning facilities, the rule discourages investment in cleaner coal and keeps existing utilities online longer.

Originally posted at Environmental Trends.

Filed Under: air pollution, Energy, Regulation
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Why The Sackett Case Is Far From Over

April 12, 2012 By Leave a Comment

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.

Filed Under: Law, Regulation, Water Tagged With: , , , , , , ,
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