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Wetlands Regulation: A Roadmap Through the Maze

Failing to account for wetlands when planning a project can result in long delays and increased expenses.  What is more, a violation of wetlands law, even if inadvertent, will subject the violator to civil and criminal penalties, as well as the cost of restoring the impacted wetlands.   The regulation of wetlands has grown rapidly over the past few decades, particularly during the past several years.  Recent Supreme Court decisions are contrary to that trend in that they  appear to limit the ability of the federal government to regulate geographically isolated wetlands.  But not everyone in Congress was enamored with those decisions.  Some members of Congress are proposing legislation that will “restore” federal regulatory authority over all wetlands.  They claim that the legislation is necessary because the Supreme Court decisions have confused over 30 years of settled precedent concerning which wetlands are regulated.1  Opponents of the legislation claim that it lays the foundation for a contentious expansion of federal  regulatory authority and will eventually lead to federal regulation of groundwater, man-made ditches, and artificial pools.2 

Businesses and local communities should undertake a four-step review to assess whether and to what extent they might be affected by wetlands laws.  This will then help them chart a course to manage these potential liabilities in an orderly way.  This article lays out a simple roadmap to help businesses and local governments navigate through the wetlands maze. 

 4 Steps to Assess Wetlands Risks

       Does the project area contain a regulated wetland?

When deciding to undertake a project, the first question one should ask is whether the project area contain wetlands.  Both the Environmental Protection Agency (“EPA”) and the U.S. Army Corps of Engineers (“Corps”)3 define wetlands as “those areas that are inundated or saturated by surface or ground water at a frequency and duration sufficient to support, and that under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions.”4  The only sure way to determine whether wetlands are present is to conduct a wetland delineation.  A wetland delineation is an assessment of the property to determine whether there is sufficient hydrology, vegetation, and soils to constitute a wetland.  Wetland delineations should be conducted by a  professional wetlands consultant in accordance with procedures described in the 1987 Corps Wetland Delineation Manual. 

If the project area contains wetlands, the business or local community should then determine whether the wetlands are regulated under the Section 404 program.  Not all wetlands are regulated under Section 404 program and the scope of the program has fluctuated over the course of its history.  This fluctuation is due to differing definitions “navigable waters of the United States”, which is the statutory language that defines the scope of regulatory authority for both EPA and the Corps under Section 404.        

In June 2006, in what was expected to be a landmark wetlands decision, a majority of the Supreme Court in Rapanos v. United States failed to agree on the extent of the Section 404 program’s authority to regulate wetlands.5  In a plurality opinion written by Justice Scalia, four justices suggested restricting Section 404 regulatory authority to relatively permanent bodies of water and to wetlands with a continuous surface connection to water bodies that are themselves waters of the United States.  In a concurring opinion, Justice Kennedy urged that a “significant nexus” between  an individual wetland and traditionally navigable waters must be established for  Section 404 to provide federal regulatory authority over a wetland.  Justice Kennedy said that a mere hydrologic connection should not be enough to establish such regulatory authority.  Commentators on both sides agree that this opinion merely “muddies the water for applying the law” and that the lower courts will have to determine the extent of Section 404’s regulatory reach.6   

After the Rapanos decision, some lower courts applied their own interpretations of what the Supreme Court meant.  Shortly after Rapanos was decided, the Seventh Circuit Court of Appeals remanded a wetlands case and asked the lower court to determine whether federal regulatory authority existed over nonnavigable wetlands that did not abut a navigable river. 7  Before Rapanos, the lower court had held that the Corps could regulate those wetlands.  Even though the wetlands did not abut a navigable river, the lower court felt that the hydrologic connection between the wetlands and a navigable river was sufficient to establish regulatory authority.  But in light of the Rapanos decision, the Seventh Circuit remanded the case stating that the hydrologic connection cited by the lower court is no longer enough – by itself – to establish regulatory authority.  The Ninth Circuit Court of Appeals also tried to interpret what the Supreme Court meant in Rapanos.  The Ninth Circuit ordered a city to obtain a permit to discharge sewage into a man-made pond that was connected to an adjoining river only by a groundwater connection.8   Despite the absence of a surface water connection, the Ninth Circuit  held that regulatory authority existed and a permit was required.  The Court explained that regulatory authority existed because the groundwater connection constituted a “significant nexus” to the river and the river was considered a navigable water of the United States.   

The courts are not the only entities trying to clarify Section 404’s regulatory reach after Rapanos.  On June 5, 2007, EPA and the Corps issued a new joint wetlands guidance with the express purpose of “implementing the Supreme Court’s decision in . . . Rapanos v. United States.”9  The guidance states that the agencies will assert jurisdiction over: (1) traditional navigable waters; (2) wetlands adjacent to traditional navigable waters; (3) non-navigable tributaries of traditional navigable waters that are relatively permanent where the tributaries typically flow year-round or have continuous flow at least seasonally; and (4) wetlands that directly abut such tributaries.10  The guidance also states that the agencies will decide jurisdiction over the following waters based on a fact-specific analysis to determine whether they have a “significant nexus” to a traditional navigable water: (1) non-navigable tributaries that are not relatively permanent; (2) wetlands adjacent to non-navigable tributaries that are not relatively permanent; (3) wetlands adjacent to but that do not directly abut a relatively permanent non-navigable tributary.11

Furthermore, the guidance states that the agencies generally will not assert jurisdiction over: (1) swales or erosional features; (2) ditches excavated wholly in and draining only uplands and that do not carry a relatively permanent water flow.12  Finally, the guidance states that the agencies will apply the significant nexus standard by assessing the flow characteristics and functions of the tributary and the functions of all wetlands adjacent to the tributary to determine if they significantly affect the chemical, physical and biological integrity of downstream traditional navigable waters.  The analysis will include consideration of hydrologic and ecologic factors.13

            Is the project activity a “regulated activity”?

If the project area includes regulated wetlands, the next step is to determine if the project activity is regulated under Section 404.  Just because the wetlands are regulated does not mean that the activity taking place in the wetland is regulated.  Section 404 lists a number of activities that are exempt from regulation, even if they take place in a wetland.  The first and most significant exemption includes normal farming, silviculture, and ranching activities.  Other exemptions include the maintenance and temporary construction of farm ponds and sedimentation basins.  The latter exemptions do not apply, however, if the proposed activity has as its purpose bringing an area of the navigable waters into a use to which it was not previously subject.

Even if no exemption applies to the activity, the activity is not regulated under Section 404 unless it constitutes a “discharge of dredged or fill material” into “waters of the United States”.  Such a discharge is normally  undertaken to convert wet areas into sites suitable for agriculture or for commercial, residential or other forms of development.  “Dredged material” is material that is excavated or dredged from waters of the United States.  “Fill material” has been recently redefined by the Corps as material placed in waters of the United States that has the effect of replacing any portion of a water of the United States with dry land or changing the bottom elevation of any water of the United States.  Fill material can include rock, sand, soil, clay, plastics, construction debris and woodchips.14 

One activity that does not constitute a discharge, and therefore does not require a permit, is the “incidental fallback” of material into waters of the United States.  In what has become known as the “Tulloch Rule”, the Corps initially defined “incidental fallback” as “the redeposit of small volumes of dredged material that is incidental to the excavation activity. . . when such material falls back into substantially the same place as the initial removal.”15  Just this year, however, the Tulloch Rule was struck down by the federal district court in the District of Columbia.16  The Court said that the rule was invalid because a discharge should not be regulated based on the quantity of material, but on the length of time the material is held before being dropped back to earth and the distance from the place it was collected and where it was dropped.  The Court also invalidated the portion of the rule stating that the use of mechanized earth-moving equipment is presumed to be a discharge unless project-specific evidence shows otherwise.  The Court said that this constituted an unlawful shift of the burden to the landowner to show that its activities constituted “incidental fallback”.17 

            Is a permit necessary, and if so, how do I get one?     

If both the wetland and the activity are regulated, a permit is required.   The permit can either be an individual permit or a more expedited “regulatory” permit.  All of these permits are issued or managed by the Corps.  The Corps considers over 80,000 permit applications per year, with the vast majority of these permits being “regulatory” permits, such as Nationwide Permits (“NWPs”), general permits, or letters of permission.   Although these permits are essentially permit-by-rule, many of them require the applicant to notify the Corps before any discharge into a wetland occurs.  These permits may also require that the applicant provide compensatory mitigation for any adverse environmental impacts to the wetlands due to the project.  One of the more frequently utilized regulatory permits, the NWP, authorizes activities that are similar in nature and cause only minimal adverse environmental impacts.  Activities range from work associated with aids to navigation and utility lines to cleanup of hazardous and toxic wastes.  NWPs must be renewed every five years, and the new NWPs were renewed on March 19, 2007.18  If the project does not qualify for expedited review under one of the “regulatory” permits, then the applicant must obtain an individual permit.  Individual permits involve a more intensive review by the agencies and take a much longer time to obtain.  The average processing time for an individual permit is 144 days, as compared to 27 days for an NWP.  One reason for the longer processing time is that the Corps must first determine that the proposed activity is in compliance with EPA’s Section 404(b)(1) Guidelines before it can issue an individual permit. These Guidelines prohibit the discharge of dredged or fill material (1) if a practicable alternative with less adverse impact is available; (2) if such discharge would cause or contribute to violations of various related laws, including state water quality; (3) if such discharge would cause or contribute to significant degradation of the waters of the United States; or (4) unless appropriate and practicable steps have been taken which will minimize potential adverse impacts of the discharge on the aquatic ecosystem.19

The 404(b)(1) Guidelines also require what is known as “sequencing”.  “Sequencing” requires that (1) all adverse environmental impacts first be avoided to the maximum extent practicable; (2) any unavoidable impacts be minimized; and (3) compensatory mitigation be provided for any remaining adverse impacts.20 A variety of mitigation methods are available to an applicant, including on-site mitigation, mitigation banks, and in-lieu-fee arrangements.  On March 27, 2006, EPA and the Corps proposed a new wetlands mitigation rule.  The proposed rule encourages the use of mitigation banking as a form of compensatory mitigation, claiming that it is more reliable and verifiable than in-lieu fee arrangements.21

Even if the proposed activity complies with the 404(b)(1) Guidelines, the Corps must also conduct a “public interest” review.  To this end, the Corps undertakes an evaluation of the probable impacts (including cumulative impacts) of the proposed activity on the public interest.  Public interest factors considered by the Corps include conservation, economics, aesthetics, wetlands, navigation, shore erosion, floodplain values, historic properties, fish and wildlife values, water quality, energy needs, safety, property ownership, and needs and welfare of the people.  A permit will be granted unless the Corps finds that granting the permit would be contrary to the public interest.22

A variety of other statutes, such as the Endangered Species Act, National Historic Preservation Act, and the National Environmental Policy Act impose additional requirements on an  applicant.  The applicant may be required to consult with other state and federal agencies and complete other required review procedures. In addition, the applicant may be required to obtain certifications from state authorities.  Section 401 of the CWA grants states authority to certify, condition or deny licenses and permits issued by federal agencies, including Section 404 permits, depending on the effects that the licensed or permitted activity may have on state water resources and water quality. 

In addition to the Corps, EPA plays an important role in the Section 404 permitting process.  Section 404(c) grants EPA the authority to “veto” a Corps decision to issue a permit.  Such a veto requires a determination by EPA that the proposed discharge “will have an unacceptable adverse effect on municipal water supplies, shellfish beds and fishery areas (including spawning and breeding areas), wildlife or recreational areas.”  These vetoes are normally reserved for projects of national significance, and only a handful of these vetoes have been exercised since the start of the Section 404 program.

            What appellate rights are available? 

Applicants who are dissatisfied with a Corps decision regarding a permit have a number of ways to challenge that decision.  An applicant may bring an administrative appeal, mount a substantive or procedural challenge in federal court, or bring a challenge pursuant to the Takings Clause of the U.S. Constitution.  An applicant can appeal a permit decision to one of eight regional Corps offices.23 In some circumstances, the appeal is a prerequisite to a legal challenge in federal court.  An applicant may also bring suit in federal court, provided that certain requirements are met.  First, there must be a final agency decision.  Final Corps decisions are defined as “the initial decision to issue or deny a permit”.24 Typical litigation also requires that standing, exhaustion of administrative remedies, ripeness and mootness issues are addressed.  The CWA does not have a specific statute of limitations, but some courts have applied the six-year general statute of limitations for civil actions commenced against the United States.  Agency decisions challenged by permit applicants will only be set aside if they are found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”25 An applicant may also make a claim in federal court that an EPA or Corps decision so restricts the use of private property that the agency action amounts to a “taking” in violation of the Fifth Amendment of the U.S. Constitution.   Because most wetlands are in private hands and the Section 404 program can impose significant costs on landowners and developers, many of the “takings” claims involve a collision between wetland protection and the rights and expectations of property owners.    

1 Environment Reporter, Vol. 38, No. 19, May 11, 2007.

2 Id.

3 The federal wetland program is jointly administered by the EPA and the Corps and is manifested in the Clean Water Act’s (“CWA”) Section 404 program. 

4 33 CFR 328.3(a)(3)(2001).

5 Rapanos v. United States, 125 S. Ct. 2208 (2006). 

6 Environment Reporter, Vol. 37, No. 25, June 23, 2006.

7 U.S. v. Gehrke Excavating Inc., 464 F.3d 723 (7th Cir. 2006)

8 Northern California River Watch v. Healdsburg, _F.3d_,2007 WL2230816 (9th Cir.)

9 Clean Water Act Jurisdiction Following the U.S. Supreme Court’s Decision in Rapanos v. United States & Carabell v. United States,  June 5, 2007.

10 Id.

11 Id.

12 Id.

13 Id.

14 40 CFR 232.2

15 33 CFR 323.2(d)

16 National Association of Home Builders v. U.S. Army Corps of Engineers, 2007 WL259944 (D.D.C.).

17 Id.

18 47 Fed. Reg. 11091, 11092 (Mar. 12, 2007). 

1940 CFR 230.10

20 Id.

21 71 Fed.Reg.15520 (March 28, 2006).

22 33 CFR 320.4(a)

23 33 CFR Part 331

24 Id.

25 5 U.S.C. 706(2).