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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. Over the years, conflicting court decisions and regulatory actions regarding the extent of federal jurisdiction over wetlands has exacerbated the issue. 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, and it was subsequently replaced by a regulation issued by the Trump administration. That regulation, in turn, was replaced by a regulation issued by the Biden administration. Court rulings in different federal and state courts have struck down or enjoined these regulations, leading to a patchwork of legal standards across the nation.

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.

Status

On May 25, 2023, the Supreme Court issued a ruling in Sackett v. EPA which replaced the “significant nexus” test which had contributed to much of the unpredictability and costly nature of wetlands reviews with a clearer standard. The new legal test will most likely force changes to the Biden administration’s WOTUS ule issued in December 2022.

Talking Points

  • 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 changes in the federal permitting process to expedite routine permitting, increase flexibility in the program and to provide greater predictability in all cases.

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