Late this spring, President Obama announced the 300-page, controversial “Waters of the U.S.” final rule, which defines the waters and adjoining land that are subject to federal regulation under the Clean Water Act. The rule intended to clarify the regulations governing the release of pollutants into waters of the United States, but the massive tome has muddied the waters, so to speak, creating uncertainty for property owners and developers. As a result, many are bracing for permitting delays and significant cost increases as the rule goes into effect.
Strong environmental protections are without a doubt essential to maintaining water quality. And access to clean water is integral to healthy communities and a strong economy. However, for several decades, there has been uncertainty about exactly where federal jurisdiction over water begins and ends.
The Clean Water Act had traditionally been applied to so-called “navigable waters,” or those used in interstate commerce, and areas directly adjacent to these waters. The rounds of litigation over federal jurisdiction that followed, including several cases that reached the U.S. Supreme Court, have added to the confusion. Congress attempted to clarify its intention regarding the Act’s scope of coverage, but it was unsuccessful in passing legislation.
At the same time, states also share jurisdiction for waters within their borders, and several states have regulations in place that actually exceed the federal requirements.
As a result, the U.S. Environmental Protection Agency (EPA) and Army Corps of Engineers (Corps), the federal agencies that share jurisdiction under the Act, moved to develop a rule to clarify the scope of waters subject to related regulation. While real estate developers have always been required to obtain federal permits for activities that involve wetlands, the new rule will dramatically expand the lands and scope of activities for which costly permits will now be required.
For example, in the past, activities involving isolated wetlands that were not connected to navigable waters were exempt from federal permitting requirements, but they were subject to regulation by the state. The rule now expands this coverage by treating isolated wetlands under the theory of being “similarly situated” as other features of an area of land that includes a river or lake known as a “watershed.” Therefore, those lands are now subject to federal permitting requirements.
A similar debate is ongoing about the final rule’s definition of “tributary,” as all waters and wetlands considered adjacent to a tributary are now considered jurisdictional.
Development projects that have already received federal permits are grandfathered in under the new rule. However, making any changes to the permits may prove difficult. Property owners will also find that they’ll have more difficulty determining whether an area of land requires a federal permit for development to move forward.
Whereas property owners have thus far been able to qualify for what’s known as “general permits,” the government is likely to place more emphasis on issuing “individual” permits as the new rule necessitates more case-by-case, site-specific determinations. The rule also contains provisions that some experts say may make it easier for development opponents to file lawsuits that could slow down development.
The multifamily industry has joined a coalition of real estate groups in filing detailed comments that argue against classifying municipal separate storm sewer systems including ditches as “Waters of the U.S.,” as they are already federally regulated under the Clean Water Act. Such classification of stormwater conveyances would mean that runoff from a property would need to meet certain water-quality standards before going into the sewer system rather than after passing through the sewer system. Concerns that certain stormwater retention features, such as rain gardens, could become subject to federal jurisdiction were also detailed.
The EPA and Corps say the final rule doesn’t change how storm sewer systems will be treated, as long as the ditches were excavated in “dryland,” a term left undefined.
Regardless, owners and developers should prepare to feel the effects of the new rule. There will likely be a squeeze in the pipeline as more developers apply for permits and projects require more individual permits. Increased delays due to permit wait times, as well as greater engineering costs, are also likely to affect the construction market.