New Rule Could Change Landscape Regarding Protected Waters
By: John Bryant, senior director for federal affairs, NAIOP
The question of who has control over our nation’s bodies of water has been debated among landowners, the federal government, and state and local authorities for years. Developers attempting to clarify which bodies of water receive federal protection, which are under the control of the states and which are unregulated have frequently been baffled. On numerous occasions, the U.S. Supreme Court has weighed in, but confusion remains. In many circumstances, the court has left the problem to be decided in a piecemeal fashion that often results in even more uncertainty.
The Clean Water Act requires landowners who have federally protected waters on their sites to obtain a federal permit (known in the industry as a 404 permit) any time they disturb, dredge or attempt to fill in a body of water. While these bodies of water often are considered wetlands, sometimes they are nothing more than man-made ditches or dry streams that only flow during certain parts of the year.
Obtaining a permit is costly and may delay development activities for years. A typical 404 permit can cost between $13,000 and $32,000. The price can soar even higher when one takes into account the mitigation efforts required to ensure that the impacts of development on the body of water are minimized.
Most recently, the U.S. Environmental Protection Agency (EPA) and the Army Corps of Engineers have sought to define which streams, lakes, ditches and ponds are under federal control with an administrative procedure known as a rulemaking, which has the force of law. The proposed rule, which was unveiled in April, is now the source of considerable controversy, as affected parties try to discern which types of waters will need federal permits and which will not.
The EPA is touting the 88-page “Waters of the U.S.” proposed rule as providing more certainty to those affected by the Clean Water Act by clarifying which waters are federally protected. The agency estimates that it will only affect about 1,300 acres across the nation and require about a 2 to 3 percent increase in federal permits. While that number is admittedly small when taken as a whole, there are some overriding concerns about unintended consequences that could make the affected acreage much larger.
The issue has become extremely politicized. Republicans and some Democrats in both the House and Senate have raised the visibility of the rule by holding numerous hearings on the topic, sending blistering emails to the Obama administration and characterizing the proposed policy change as a federal power grab over virtually all wet areas in the U.S. In response, EPA has engaged in numerous town hall meetings and initiated conference calls with potentially affected communities and interest groups, in an attempt to reassure the public that the new rule is a clarification rather than a dramatic expansion, as critics suggest.
Of particular concern to NAIOP members is a new definition of “tributaries” to federal waters. The rule defines a tributary as “a water physically characterized by the presence of a bed and banks and ordinary high water mark, … which contributes flow” to a “water of the United States.” Tributaries can be natural, man-altered or man-made and include rivers, streams, lakes, impoundments, canals and ditches. The rule would require federal permits for any activity that affects these waters.
NAIOP has actively engaged in discussions and negotiations with senior staff at EPA to determine their intent regarding stormwater control ditches, to ensure that these types of waters are not considered tributaries. EPA’s response is that stormwater control features — including ditches, retention ponds and lakes, rain gardens and other green infrastructure features — will not require federal permits under the rule. They also have stated that water-filled depressions created incidental to construction activity, even if a construction project is abandoned, will not require 404 permits.
While these assurances are welcome, there is still some apprehension in the industry that the tributary definition is too broad and could have unintended consequences despite the EPA’s stated intent. The proposed rule currently includes some exemptions related to upland ditches; NAIOP would like to see these exemptions expanded with further clarifying language before the regulation is finalized.
EPA and the Corps have extended the public comment period for this rule until October 20, 2014. To ensure that the agency understands and considers the interests of the commercial real estate industry, NAIOP will remain actively engaged with EPA on this issue, and will work to insert language in the final rule that codifies the agency’s intent over tributaries and provides more certainty to our members.
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Congress must ensure that capital markets and financial institutions are able to address the current and future credit needs of the commercial real estate industry. Strong oversight is needed to ensure that the actions of various financial regulators do not have an unintended cumulative impact on lending to the industry.