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Waters of the US

Understanding how the federal government regulates wetlands and other waters has long been a complicated, confusing, and often costly issue for landowners and developers. Recent court decisions and regulatory actions on wetlands jurisdiction have only further exacerbated the issue of which waters bodies are under federal protection and control. This section states NAIOP’s position on federal jurisdiction over domestic water bodies and provides recommendations to create a balance between conservation and economic development in the commercial real estate industry.

Issue

Passed in 1972, the Clean Water Act (CWA) governs pollution of the nation’s surface waters. The law protects “waters of the United States” (commonly referred to as “WOTUS”) but does not specifically define this term, instead leaving its interpretation to the U.S. Army Corps of Engineers (USACE) and Environmental Protection Agency (EPA). The scope of WOTUS jurisdiction has been hotly contested for years, and the lack of a clear definition has caused confusion for developers. Because they help determine whether a developer must obtain costly and time-consuming federal permits, for example, the rules are of critical importance to the commercial real estate industry. 

Over the years the EPA and USACE have made numerous attempts to define WOTUS through regulations. But two Supreme Court rulings – Solid Waste Agency of Northern Cook County in 2001, and Rapanos in 2006 – interpreted the scope of WOTUS more narrowly than the agencies had previously.

In 2015 the Obama administration finalized its version of the WOTUS rule, in an attempt to end the ongoing confusion. However, as NAIOP argued in its comments at the time, the rule’s reliance on a “significant nexus” test – a murky term which came about from the 2006 Rapanos ruling – would have led to case-by-case decisions of regulatory authority, and therefore greater confusion. The 2015 rule also represented a considerable expansion of the CWA, and included many ephemeral and intermittent streams. Implementation of the new rule was halted by the courts before it could take effect, but a series of rulings since then have placed the rule back into effect in a number of states, further exacerbating the issue of which waters bodies are under federal protection and control.

Position

NAIOP supports a definition of Waters of the United States, or “WOTUS,” that provides the regulated community with a bright line test that is publically available and definable on the ground. The 2015 WOTUS rule is problematic in that it relied on the concept of “significant nexus” to determine which waters are under federal jurisdiction, an amorphous term largely defined on a case-by-case basis and open to various interpretations. Furthermore, a stable regulatory regime is necessary in order to provide real estate developers the certainty needed to make long-term business decisions. A regulation that is under constant threat of reversal or alteration at any time, and which differs from state to state, is detrimental to both businesses and regulators alike.

In addition, NAIOP supports an approach to the federal wetlands permitting program (Section 404) that provides simplification and efficiency toward the permitting process, while protecting sensitive environmental areas. We strongly support the concept of mitigation banking, which offsets destroyed or degraded wetlands in one area with newly created, enhanced or restored wetlands elsewhere, thereby balancing the needs of developers and the environment. NAIOP opposes attempts to increase the authority of the federal government to regulate wetlands and believes that states have an inherit right to protect and regulate state waters without the federal government imposing additional regulations that often do little to protect waterways.

Status

Under the Obama administration, in 2015 the Army Corps of Engineers and U.S. Environmental Protection Agency issued a final rule to clarify which waters are protected under the Clean Water Act and subject to federal permits (the 2015 WOTUS rule).  Shortly after, the U.S. Court of Appeals for the Sixth Circuit issued a nationwide stay of the rule, temporarily nullifying the new regulation as they consider if the agencies have exceeded their authority granted under the Clean Water Act.

The nationwide stay was, in turn, challenged, and in January 2018 the Supreme Court lifted the stay, causing the 2015 rule to go back into effect. In response, the Trump administration passed a regulation which delayed the Obama-era rule until 2020.

In August 2018, a South Carolina federal judge ruled that the delay regulation violated the Administrative Procedure Act, striking it down and resurrecting the 2015 WOTUS rule once again. Because of previous injunctions issued by district courts in North Dakota and Georgia, the 2015 rule only went into effect in 26 states. Then, in September 2018, a judge blocked implementation of the Obama-era rule in Texas, Louisiana, Iowa, and Mississippi. As things currently stand, the 2015 rule is the law of the land in 22 states. For the remaining 28 states, an earlier version of the rule – which dates back to the late 1980s – is still in place.

The 22 states in which the 2015 WOTUS rule is currently in effect are as follows: California, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia and Washington.

In December 2018 the Trump administration released its proposed WOTUS definition, which would replace the 2015 rule. The EPA and USACE are expected to finalize the rule by September 2019. Formal repeal of the Obama-era rule is also planned for March 2019; once that happens, definitions of WOTUS dating back to the 1980s will be used until the new rule is finalized.

Talking Points

  • We agree that all water is ultimately connected. The reason that the definition of federal waters (Waters of the United States) is so contentious is because regulators use that basic principle as a justification for protecting waters that do not significantly affect or alter traditional navigable waterways.
  • A federal definition of "Waters of the United States" should reflect a balance between environmental protection and economic development. It should also strive to provide the regulated community with a bright line test for determining whether a federal permit is needed.
  • The current permitting process is onerous and too bureaucratic. According to the Supreme Court’s Rapanos decision, the average applicant for an individual permit spends 788 days and $271,596 in completing the process, and for a nationwide permit spends 313 days and $28,915.
  • NAIOP supports targeted changes in the Section 404 program in order to expedite routine permitting, increase flexibility in the program and to provide greater predictability in all cases.

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