Attorney for Appellant
Attorneys for Appellee
Steve Carter George M. Plews
Attorney General of Indiana Sue A. Shadley
S. Curtis Devoe
Steven D. Griffin
Deputy Attorney General Stephen A. Studer
Indianapolis, Indiana John H. Lloyd, IV
South Bend, Indiana
Attorneys for Amici Curiae
David C. Van Gilder Attorneys for Amici Curiae
Indiana Division, Izaak Walton League Larry J. Kane
of America, Inc.; National Wildlife Indiana Builders Association, Inc.
Federation; Save the Dunes Council, Indianapolis, Indiana
Inc.; Save the Dunes Conservation
Fund, Inc.; Hoosier Environmental Mark J. Thornburg
Council, Inc.; Cedar Creek Wildlife Indiana Farm Bureau, Inc..
Project, Inc. Indianapolis, Indiana
Fort Wayne, Indiana
Indiana Supreme Court
Indiana Department of Environmental
Appellant (Defendant below),
Twin Eagle llc,
Appellee (Plaintiff below).
Appeal from the Marion Superior Court, No. 49F12-0107-CP-002490
The Honorable Michael D. Keele, Judge
On Motion to Transfer Pursuant to Appellate Rule 56(a)
September 23, 2003
The federal Clean Water Act (CWA) prohibits the discharge of any pollutant into
waters of the United States without a permit. Similarly, Indiana state environmental
law generally requires a permit to discharge pollutants into waters of the state.
Ind. Admin. Code tit. 327, r. 5-2-2 (2001). Twin Eagle, the
plaintiff here, seeks to undertake a project that would put dredged and fill
material in certain wetlands and waters on a site in Allen County, Indiana.
This material is a pollutant as the term is used in the
CWA and Indiana environmental regulations. The parties disagree whether a state permit
may be required for those waters that are not waters of the United
States. We hold that the Indiana Department of Environmental Management (IDEM) may
require permits for dredged and fill materials under its existing rules. We
also conclude that discharges into private ponds and isolated waters may be regulated
under some circumstances, and that IDEMs interim process for permitting dredged and fill
material is not the product of invalid rulemaking. Whether the facts justify
the regulation of these waters is an issue for the agency to resolve
in the first instance.
The Regulatory Framework and Factual and Procedural History
The National Pollutant Discharge Elimination System (NPDES) is the centerpiece of CWA permits.
2 William H. Rodgers, Jr., Environmental Law: Air and Water, § 4.26
at 372 (1986). Although most discharges are governed by the NPDES permit
process, the CWA provides for permits for discharges of dredged and fill material
to be issued under a Section 404 Program administered by the Army Corps
of Engineers. 33 U.S.C. § 1344 (2001); 33 C.F.R. 323.6 (2003).
A state may also receive EPA approval to administer its own NPDES program
to issue permits for waters within the state. 33 U.S.C. § 1342(b);
40 C.F.R. §§ 123.1-123.64 (1998). In 1975, the EPA approved Indianas NPDES
program. Although the CWA also allows state administration of a Section 404
program, 33 U.S.C. § 1344(g),
See footnote Indiana has not sought permission to issue permits
under that program.
Until recently, IDEM considered all waters of the state that were regulated through
the federal Clean Water Act Section 404 program to be waters of the
United States su
bject to the CWA. As a result, the federal Section
404 program regulated all dredged and fill material in all waters. For
that reason, IDEM enacted no regulations of its own governing the discharge of
dredged and fill material. In 2001, however, the United States Supreme Court
held, in Solid Waste Agency of N. Cook County v. United States Army
Corps of Engrs, 531 U.S. 159 (2001) (SWANCC), that waters are waters of
the United States for purposes of the CWA only if they are either
navigable or tributaries of or wetlands adjacent to navigable waterways. Id. at
See footnote As a practical matter, construction projects affecting many ponds and
wetlands were no longer subject to federal regulation, and the federal Section 404
program was no longer avai
lable to grant permits that would bring the projects
into compliance with state law. IDEM attempted to fill the resulting gap
in the states regulation of dredged and fill materials by a series of
memoranda stating its intention, until new rules were approved, to regulate waters of
the state no longer subject to federal jurisdiction through an interim regulatory process
whereby it would apply its state NPDES permitting process to applications for permits
for dredged and fill material.
It is clear the federal law does not prevent a state from having
a broader or more stringent regulatory program than the CWA imposes. See
e.g. EPA v. California ex rel. State Water Res. Control Bd., 426 U.S.
200, 218 (1976); United States Steel Corp. v. Train, 556 F.2d 822, 830
(7th Cir. 1977); City of Albuquerque v. Browner, 865 F.Supp. 733, 739 (D.
N.M. 1993). Indeed, SWANCC itself referred to the States traditional and primary
power over land and water use. SWANCC, 531 U.S. at 174.
The issues here are whether Indiana statutes authorize IDEM to take its announced
Twin Eagle plans to construct a residential development on approximately 460 acres of
property it owns in Fort Wayne, Indiana. Approximately 21.52 acres of the
property consist of ponds and wetlands. In March 2001, Twin Eagle hired
a private contractor to perform a wetland delineation, a process which identifies the
boundary, size and type of each body of water or wetland on the
property. The delineation, which was approved by the United States Army Corps
of Engineers on June 13, 2001, determined that 14.75 of the 21.52 acres
are wetlands and private ponds that, under SWANCC, are not subject to the
CWA. Twin Eagles plans called for filling in much of these 14.75
acres, and this would require a permit if the state regulatory scheme applies
to these waters.
On July 26, 2001, Twin Eagle sought a declaratory judgment to prevent IDEM
from enforcing state environmental laws against the project. IDEM responded with a
motion to dismiss for lack of subject matter jurisdiction, citing a lack of
case or controversy and the failure of Twin Eagle to exhaust administrative remedies.
Both parties filed motions for summary judgment. The trial court granted
Twin Eagles motion and held: (1) Indiana state environmental laws gave IDEM no
NPDES regulatory authority over private ponds or isolated wetlands that are not waters
of the United States and could not require an NPDES permit for activities
affecting those waters; (2) whether or not IDEM could regulate some waters not
subject to the CWA, Indiana statutes gave IDEM no jurisdiction over private ponds
and isolated wetlands; (3) IDEM could not bring an enforcement action for the
discharge of fill material into waters that are not waters of the United
States; and (4) IDEMs interim regulatory process constitutes an invalid attempt at rulemaking
without complying with required procedures. We granted IDEMs petition to transfer under
Appellate Rule 56(A) and now reverse the courts grant of summary judgment to
I. The Trial Courts Subject Matter Jurisdiction
IDEM asserts that the trial court lacked subject matter jurisdiction because no actual
controversy exists until IDEM resolves whether the waters on the site are subject
to regulation, and also because Twin Eagle has not exhausted its administrative remedies.
Twin Eagle counters that its claims raise pure questions of law challenging
the authority of the agency to regulate the subject matter. Specifically, Twin
Eagle contends these waters are private ponds and isolated wetlands over which Indiana
law gives IDEM no jurisdiction. Twin Eagle also contends that in any
event Indianas jurisdiction over fills regulated by the Section 404 process is coextensive
with CWA jurisdiction which, under SWANCC, does not extend to these waters.
Third, Twin Eagle argues that IDEMs attempt to assume jurisdiction through its interim
process did not follow the statutory requirements for rulemaking by an administrative agency.
A. Ripeness for Declaratory Judgment
The Declaratory Judgments Act is to be liberally construed, Indiana Code section 34-14-1-12
(1998), and allows for an interested party whose rights, status, or other legal
relations are affected by a statute . . . [to] have determined any
question of construction or validity arising under the . . . statute .
. . and obtain a declaration of rights, status, or other legal relations
thereunder. Ind. Code § 34-14-1-2 (1998). IDEM claims that the trial
court lacked subject matter jurisdiction because there was neither an actual controversy nor
the ripening seeds of a controversy. Specifically, IDEM argues that because it
has made no determination concerning whether the waters at issue are within its
regulatory jurisdiction, Twin Eagle presents a hypothetical case inappropriate for a declaratory judgment.
We disagree. Although the Indiana state courts are not subject to
a constitutional requirement of a case or controversy similar to that imposed by
Article III of the federal constitution, Cincinnati Ins. Co. v. Wills, 717 N.E.2d
151, 154 n.2 (Ind. 1999), the Declaratory Judgments Act requires a justiciable controversy
or question. Little Bev. Co. v. DePrez, 777 N.E.2d 74, 83 (Ind.
Ct. App. 2002). The controversy requirement is met when a case presents
the ripening seeds of a controversy. Id. We have long taken
the view that where . . . the claims of the several parties
in interest, while not having reached that active stage, are nevertheless present, and
indicative of threatened litigation in the immediate future, which seems unavoidable, the ripening
seeds of a controversy appear. Owen v. Fletcher Sav. & Trust Bldg.
Co., 189 N.E. 173, 177, 99 Ind. App. 365, 374 (1934) (citations omitted).
Twin Eagle has challenged the validity of a process which affects its
ability to discharge dredged and fill materials on its property. The validity
of the interim process, not merely its ultimate outcome, is one major issue
in this litigation, and in Twin Eagles ability to use its property as
it wishes. Even if the administrative process may be resolved in favor
of Twin Eagle, Twin Eagles claim, if valid, could obviate the need to
go through the process. As such, the claim presents a genuine controversy
that was properly brought to the trial court. Therefore, Twin Eagles challenge
of the validity of the interim process was proper under the Declaratory Judgments
B. The General Requirement to Exhaust Administrative Remedies
We have repeatedly emphasized the value of completing administrative proceedings before resorting to
judicial review. State Bd. of Tax Commrs v. Montgomery, 730 N.E.2d 680,
684 (Ind. 2000) (quoting State v. Sproles, 672 N.E.2d 1353, 1358 (Ind. 1996)).
The reasons for this requirement are well established: (1) premature litigation may
be avoided; (2) an adequate record for judicial review may be compiled; and
(3) agencies retain the opportunity and autonomy to correct their own errors.
Even if the ground of the complaint is the unconstitutionality of the statute,
which may be beyond the agencys power to resolve, exhaustion of administrative remedies
may still be required because administrative action may resolve the case on other
grounds without confronting broader legal issues. Turner v. City of Evansville, 740
N.E.2d 860, 862 (Ind. 2001); Austin Lakes Joint Venture v. Avon Utils., Inc.,
648 N.E.2d 641, 644 (Ind. 1995); Sproles, 672 N.E.2d at 1358. Ordinarily,
an administrative agency must resolve factual issues before the trial court acquires subject
matter jurisdiction. Turner, 740 N.E.2d at 862. But exhaustion of administrative
remedies is not required if a statute is void on its face, and
it may not be appropriate if an agencys action is challenged as being
ultra vires and void. Id. More generally, if an action is
brought upon the theory that the agency lacks the jurisdiction to act in
a particular area, exhaustion of remedies is not required. Frank E. Cooper,
State Administrative Law 577 (1965). To the extent the issue turns on
statutory construction, whether an agency possesses jurisdiction over a matter is a question
of law for the courts. State ex rel. Paynter v. Marion County
Superior Court, Room No. 5, 264 Ind. 345, 350, 344 N.E.2d 846, 849
The issues presented by this case can be summarized as: (1) does
IDEM have the authority to regulate waters of the state previously regulated by
the Section 404 program; (2) if IDEM is so authorized, can it properly
exercise that authority through the NPDES permitting process; (3) if IDEM does have
the authority to prohibit a discharge without an NPDES permit as to some
waters, does that authority extend to discharges into private ponds and isolated wetlands
in general and these waters in particular.
We agree with Twin Eagle that its challenge to IDEMs authority to apply
the NPDES program to dredged and fill permits does not require exhaustion of
remedies because at least the first two of these issues turn on issues
of law. IDEM either does or does not have the legislative authority
to regulate introduction of dredged and fill materials into waters that are not
waters of the United States. Similarly, if the waters are subject to
regulation, IDEM either is or is not authorized to apply the NPDES permitting
system. Whether ponds and isolated wetlands are subject to regulation is a
matter of construction of a statutory exemption from the grant of regulatory authority
over waters. Finally, Twin Eagle claims the absence of an approved state
administered Section 404 program precludes IDEM from acting. All of these issues
are pure issues of law.
For the reasons explained below, we resolve these abstract issues of law in
favor of IDEMs abi
lity to apply the interim process to waters of the
state no longer subject to federal regulation. Assuming any waters on Twin
Eagles land are indeed private ponds and isolated wetlands, as explained below, if
a discharge from a pond threatens to cause pollution of other waters, IDEM
may regulate even a private pond. I.C. § 13-11-2-265 (2002). Twin
Eagle may be correct that the particular waters at issue are not subject
to regulation, but the proper forum to address this fact sensitive issue is
through the administrative process. We therefore defer to the administrative process to
determine whether potentially dispositive factual circumstances exist here. I.C. § 13-11-2-265(a); Turner,
740 N.E.2d at 862.
II. IDEMs Authority to Regulate the Waters at Issue
IDEM seeks to apply the states NPDES permit process to discharges previously regulated
by the federal Section 404 program. This presents at least these issues:
(1) whether IDEM has statutory authority to regulate waters that are not
waters of the United States; (2) whether Indiana law gives IDEM regulatory powers
over private ponds or isolated wetlands or both; and (3) if so, whether
the NPDES permitting system is authorized to be employed.
A. Waters of the State That Are Not Waters of the United
Indiana environmental laws give IDEM the power to regulate discharges into waters of
the state. I.C. § 13-18-4-3 (1998). This statutory authority does not
derive from federal legislation and no federal law purports to restrict the states
regulation of the type of waters at issue here. Nor, by its
terms, does the Indiana statute limit its reach to waters within the scope
of the CWA. Indeed, long before the enactment of the CWA, IDEM
and its predecessors had jurisdiction over all the waters of the state except
those specifically excluded by statute. 1935 Ind. Acts 537 (the agency had
jurisdiction to control and prevent pollution in the waters of this state .
. . .).
IDEMs current statutory authority can be traced back to 1935, when the General
Assembly authorized the Indiana Department of Commerce and Industry to regulate waters.
Id. The state also has a long history of regulating waters through
the Water Pollution Control Board (the Board). Created in 1943 through its
predecessor, the Stream Pollution Control Board, the Boards primary purpose is to adopt
rules regarding water pollution. I.C. §§ 13-18-4-3 and -4 (1998). In
1972, the federal Clean Water Act was passed. 33 U.S.C. §§ 1251
et seq. The Indiana legislature later created IDEM, and constituted it as
the Indiana state agency to implement the CWA. I.C. § 13-13-5-1.
The Board is now one of six agencies that operate under IDEMs umbrella
but with separate and distinct statutory authority. The Water Pollution Control Board
in particular is assigned the duties of adopting rules for the control and
prevention of pollution in Indianas waters. I.C. § 13-18-3-1.
Twin Eagle cites what is now codified at Indiana Code section 13-18-3-2(a) (2002),
which authorizes IDEM to adopt rules necessary to the implementation of the CWA,
and contends that only waters subject to the federal law are within IDEMs
rulemaking power. We do not regard this as a jurisdictional confinement of
the waters to be regulated to those subject to the CWA. In
any event, it is not the only authorizing statute. Several other provisions
of Indiana law authorize IDEM to issue regulations without regard to the CWA
or any other federal law. Specifically, [t]he board may adopt rules restricting
the polluting content of any waste material and polluting substances discharged or sought
to be discharged into any of the streams or waters of Indiana.
I.C. § 13-18-4-3 (1998). In addition, the Board shall adopt rules for
the control and prevention of pollution . . . that is deleterious to
the public health . . . or by which . . . any
fish life or beneficial animal or vegetable life may be destroyed . .
. . I.C. § 13-18-3-1. And IDEMs commissioner may take appropriate
steps to prevent any pollution that is determined to be unreasonable and against
public interests . . . . I.C. § 13-18-4-4. That is
what IDEM has done by issuing the interim regulations. Twin Eagle notes
the more recently added authority under Indiana state law to adopt regulations to
implement the CWA. I.C. § 13-18-3-2 . We think this was
intended to make clear the state agency was empowered to proceed under federal
law, but in no way curtailed its preexisting authority.
Among the rules adopted pursuant to these authorizations is the requirement that [a]ny
discharge of pollutants into waters of the state requires an NPDES permit unless
it is specifically excluded. 327 I.A.C. 5-2-2. The reach of the
rule is unaffected by the choice of Congress to limit federal legislation or
by any constitutional constraints on federal jurisdiction. Thus, when SWANCC curbed previously
expansive views of the reach of the CWA, IDEMs scope of authority did
not shrink. To the contrary, as the Supreme Court expressly noted, SWANCC
had no effect whatever on the scope of waters subject to state regulation.
SWANCC, 531 U.S. at 174. In short, Twin Eagle would have
been required to get state water approval through the water certification process before
SWANCC, albeit pursuant to a federal, not a state, law. The contraction
of federal authority did nothing to limit state power.
B. Private Ponds and Wetlands
Although Indiana is not precluded from regulating waters beyond federal regulatory reach, the
issue remains whether the legislature has given IDEM authority over the waters at
issue. To do that, it is not sufficient that IDEM have the
authority to regulate some waters beyond the post-SWANCC reach of the CWA.
It must also have the statutory authority to regulate private ponds or isolated
wetlands or both, and must be able to reach the particular waters at
issue here. Indiana Code section 13-11-2-265 defines waters as:
(1) the accumulations of water, surface and underground, natural and artificial, public and
(2) a part of the accumulations of water;
that are wholly or partially within, flow through, or border upon Indiana.
I.C. § 13-11-2-265 (2002). However, the term waters does not include a
private pond . . . unless the discharge from the pond . .
. causes or threatens to cause water pollution. Id. A private
pond is a body of water wholly upon the land of a single
owner or group of owners and not connected with any public waters of
the state. Trowbridge v. Tarabi, 693 N.E.2d 622, 627 (Ind. Ct. App.
1998); I.C. § 13-11-2-265. Whether Twin Eagles project involves ponds within this
definition, and if so whether their discharge causes or threatens pollution are fact
issues for administrative determination in the first instance.
Wetlands also raise factual issues. The term has no statutory definition and
the only definition of that term applicable to the Water Pollution Control Board
in the statutes and rules defines wetlands as those areas that are inundated
or saturated by surface water or ground water at a frequency and duration
to support and that, under normal circumstances, do support a prevalence of vegetation
typically adapted for life in saturated soil conditions. Wetlands generally include the
following: (1) Swamps. (2) Marshes. (3) Bogs. (4) Similar areas. 327 I.A.C.
6.1-2-62 (dealing with industrial waste).
See also Family Dev. Ltd. v. Steuben
County, 749 N.E.2d 1243 (Ind. Ct. App. 2001) (dealing with regulation of pre-SWANCC
federal wetlands). Moreover, wetlands by their very nature vary in the amount
of water they contain at a given time, and their boundaries can change
depending on the season and the weather. But their outer boundaries are
ascertainable, so the mere difficulty in determining what constitutes a wetland does not
remove it from IDEMs jurisdiction. Nor do the characteristics of wetlands automatically
remove them from of waters of the state if the statutory definition of
waters, includes the accumulations of water . . . or . . .
a part of the accumulations. I.C. § 13-11-2-265 . So defined,
at least some wetlands can be waters of the state.
Finally, presumably in response to the regulatory gap created by SWANCC, in March
2002 the General Assembly enacted Public Law 183, which states that a state
agency may not adopt or amend an administrative rule . . .
that concerns the definition of wetlands or isolated wetlands . . . .
2002 Ind. Acts 183 Sec. 2. In the absence of any
general definition of isolated wetland, it remains for case-by-case determination whether a particular
site does or does not include waters of the state within the general
regulatory power of IDEM under I.C. § 13-18-4-4, - 5 (1998). Whether
the wetlands on Twin Eagles project meet that definition is again a question
for the administrative process to resolve. Twin Eagle has at least two
options if it believes its project will not affect regulated waters. It
can apply for an NPDES permit, and challenge the finding if it believes
it to be erroneous. Or, if Twin Eagle is sufficiently confident that
its project will not violate the Act, it may proceed and risk an
enforcement action by IDEM. This may leave a somewhat unsatisfactory legal framework,
but we see no alternative to individualized determinations of IDEMs jurisdiction given the
statutory prohibition against rulemaking.
C. The Interim Process
Even if IDEM has statutory authority to regulate the waters at issue, the
issue remains whether the interim process is lawfully imposed. It is well
established that administrative agencies may make reasonable rules and regulations to apply and
enforce legislative enactments. Ind. Dept of Envtl. Mgmt. v. AMAX, Inc., 529
N.E.2d 1209, 1212 (Ind. 1988);
Podgor v. Ind. Univ. 178 Ind. App. 245,
250, 381 N.E.2d 1274, 1278 (1978). But IDEM may regulate by a
new rule only if the proper rulemaking procedures have been followed. Thus,
in establishing rules, the agency must comply with the Indiana Administrative Orders and
Procedures Act, Indiana Code chapter 4-22-2, which includes provisions for public hearings and
review by executive branch officials. By contrast, agency actions that result in
resolutions or directives that relate solely to internal policy, procedure, or organization, and
do not have the effect of law, are not subject to the same
equirements. I.C. § 4-22-2-13(c)(1) (1998); AMAX, Inc., 529 N.E.2d at 1212.
The validity of the interim regulatory process turns on whether it constituted a
new rule when IDEM applied the NPDES permit process to waters of the
state previously, but no longer, subject to the federal Section 404 program.
IDEM does not assert that it followed rulemaking procedures in announcing the interim
process. Rather it contends that requiring state NPDES permits for dredge and
fill after SWANCC is not a new rule at all and is therefore
not subject to the statutory requirements for adopting new rules. A rule
is defined by Indiana Code section 4-22-2-3 as:
[T]he whole or any part of an agency statement of general applicability that:
(1) [H]as or is designed to have the effect of law; and
(2) [I]mplements, interprets, or prescribes:
(A) Law or policy; or
(B) The organization, procedure, or practice requirements of an agency.
I.C. § 4-22-2-3.
We conclude that Twin Eagles claim that a new rulemaking procedure was required
turns on an incorrect view of Indianas regulatory framework. Indiana Administrative Code
title 327 rule 5-2-2 requires an NPDES permit to be issued for [a]ny
discharge of pollutants into waters of the state, subject to certain exceptions.
The exception relevant here is found at 327 I.A.C. 5-2-4, which provides an
exemption from the permitting process for:
(2) Discharges of dredged or fill material into waters of the state and
regulated under Section 404 of the
CWA, except where the commissioner determines, on
a case-by-case basis that such a di
scharge threatens to violate state water quality
standards concerning toxic pollutants.
327 I.A.C. 5-2-4 (2). The effect of withdrawal of the federal program
from these waters is to remove Twin Eagles from those regulated under Section
404 of the CWA. Thus, by its terms, this regulation no longer
provides an exception and leaves Twin Eagle subject to the general prohibition against
discharge without an NPDES permit. The interim process is simply the application
of a preexisting process to transactions that were previously thought to be exempt,
but are no longer exempt because they no longer meet the federal requirements
for the exemption.
Twin Eagle also challenges IDEMs authority to regulate its waters because it reads
this rule as allowing the commissioner to make case-by-case decisions only when toxic
pollutants are at issue. Twin Eagle asserts that the exclusion concerns only
situations where a discharge of pollutants into CWA waters is threatened. We
do not agree. The effect of the cited language is to permit
the state to add requirements to a federally permitted project, not to exempt
it. The section is labeled exclusions and lists those activities that do
not require a permit. The first sentence of section 2 excepts state
waters regulated under the CWA. Because the waters at issue are, for
purposes of this case in its current procedural posture, state waters outside the
scope of the CWA, they do not meet this exception and require an
NPDES permit under the rule. Therefore this rule would encompass the exact
situation we have here: regulation of waters potentially within IDEMs jurisdiction but
outside the boundaries of the CWA. The effect of SWANCC was thus
to remove Twin Eagles project from eligibility for the exception provided by Indiana
Administrative Code title 327 rule 5-2-4(2). As such, no rulemaking is involved
by applying the previously existing NPDES process to the no longer exempt discharge.
Twin Eagle notes that IDEM announced an intent to adopt a new rule
to deal with post-SWANCC permits for isolated wetlands. Twin Eagle reasons from
this that the interim process required a rulemaking exercise. But IDEMs desire
to adopt a new rule does not imply that there is no regulatory
scheme in place after the evaporation of the exemption for Section 404 permits.
Adopting a new rule is fully consistent with the notion that, like
the Section 404 program for waters of the United States, a different program
may be appropriate for isolated wetlands that are waters of the state.
In the meantime, however, the NPDES program is in place and there is
Finally, Twin Eagle points out that the Water Pollution Control Board, not IDEMs
commissioner, has the authority under Indiana Code sections 13-14-8-1, -2 to adopt rules
regarding the waters at issue and that, even if the interim regulatory process
is otherwise valid, IDEM usurped this authority. This contention proceeds from the
assumption that the interim process involved a rulemaking exercise. Because we reject
that premise, the argument falls with it.
The trial court had subject matter jurisdiction over the declaratory judgment action.
IDEM is within its statutory authority to require NPDES permits for the
discharge of fill material into waters of the state previously regulated under the
Section 404 program. Private ponds, when the discharges from these ponds cause
or threaten to cause water pollution, and some isolated wetlands are waters of
the state. We leave it to the regulatory process to determine in
the first instance whether permits are required and, if so, should be issued
in this case. We remand to the trial court with directions to
enter a declaratory judgment consistent with this opinion.
Dickson and Rucker, JJ., concur.
Sullivan, J., concurs in result with separate opinion in which Shepard, C.J., joins.
Sullivan, Justice, concurring in result.
In this case, IDEM asks us not to reach the merits on the
ground that Twin Eagle has not exhausted its administrative remedies. Indeed, IDEM
has not even determined whether the waters on Twin Eagles property are subject
to regulation. I agree with IDEMs position and would hold that the
trial court should have dismissed Twin Eagles complaint for lack of subject matter
The Court rejects IDEMs argument and proceeds to the merits. But Twin
ctory on this issue turns out to be Pyrrhic because the Court
resolves the merits in IDEMs favor.
Given this result, Twin Eagle might well second-guess its decision to litigate first.
If Twin Eagle had successfully persuaded IDEM not to regulate (or if
IDEM had decided not to prosecute had Twin Eagle proceeded without applying for
a permit), Twin Eagle would not have received the unwelcome news the Court
delivers to it today. One can envision a wide range of other
mpromises between IDEM and Twin Eagle more favorable to Twin Eagle than todays
Our decisions are replete with reasons supporting the doctrine of exhaustion of remedies.
See, e.g., State Bd. of Tax Comm'rs v. Ispat Inland, Inc., 784
N.E.2d 477, 482-83 (Ind. 2003); Fratus v. Marion Cmty. Schs. Bd. of Trs.,
749 N.E.2d 40, 46-47 (Ind. 2001); Town Council of New Harmony v. Parker,
726 N.E.2d 1217, 1224 (Ind. 2000), am. on rehg on other grounds, 737
N.E.2d 719 (Ind. 2000); Austin Lakes Joint Venture v. Avon Utils., Inc., 648
N.E.2d 641, 644-45 (Ind. 1995). The result of todays case illustrates one
not often given the doctrines benefit to the party (arguably) subject to
a regulatory agencys jurisdiction. Running the administrative gauntlet first provides such a
party a much greater range of options and compromises than does litigation alone.
Shepard, C.J., joins.
The process begins with a wetland delineation by the Corps of Engineers
which identifies the waters subject to the jurisdiction of the CWA. If
the waters are subject to federal regulation the Corps then determines whether the
permit itself should be granted. The state still must certify the permit
to ensure that the activity complies with state water quality standards. 33
U.S.C. § 1341(d) (2001). In essence, this gives the state the power
to veto any Section 404 permit.
There is some disagreement as to the sweep of
SWANCCs contraction of
federal jurisdiction. Most federal courts have found it as described above in
the text of this opinion, but some have concluded that any hydrological connection
to navigable waters is sufficient for federal jurisdiction. See generally FD&P Enters.,
Inc. v. United States Army Corps of Engrs, 239 F. Supp 2d 509,
513-15 (D. N.J. 2003) (discussing federal cases). This issue is irrelevant for
our purposes because to the extent Twin Eagles property remains subject to federal
jurisdiction after SWANCC, it remains subject to the Indiana permitting process.
Neither party argues that the effect of an invalid permitting process would
be to leave Twin Eagle with a proposal prohibited by the general prohibition
against discharge but no means of obtaining a permit. We assume, without
deciding, that a valid permitting process is required for IDEM to assert regulatory
wers over the proposal.
Other definitions relate to Solid Waste Disposal, flood plain management, and lake
ities, and some seem to assume a pre-SWANCC view of federal jurisdiction.
See 312 I.A.C. 10-2-44 (Supp. 2002), 312 I.A.C. 11-2-24, and 329 I.A.C.