‘Waters of the United States’ Rule from EPA, Corps May Make Real Estate Development More Easily Achievable and Less Costly

‘Waters of the United States’ Rule from EPA, Corps May Make Real Estate Development More Easily Achievable and Less Costly

This article explains how clarifying rules may be a game changer for developers of sites in or around traditionally non-navigable waterways.

Paul Sonderegger and Spenser Owens

On December 11, 2018, the United States Environmental Protection Agency (EPA) and United States Department of the Army, Corps of Engineers (Corps) released for publication a new proposed “Waters of the United States” rule (WOTUS Rule) pursuant to their respective authorities under the Federal Water Pollution Control Act, 33 U.S.C. § 1251, et seq., also known as the Clean Water Act (CWA). If finalized in its current form, the new WOTUS Rule may have a profound effect on real estate developers, open new areas for development and construction, and reduce project costs.

Background

Under the CWA, “the discharge of any pollutant by any person shall be unlawful.” 33 U. S. C. § 1311(a). “The discharge of a pollutant” is defined broadly to include “any addition of any pollutant to navigable waters from any point source.” 33 U.S.C. § 1362(12). Particularly relevant to real estate developers in projects involving creeks, ditches, ponds, and wetlands, “[t]he Secretary [of the Corps] may issue permits, after notice and opportunity for public hearings, for the discharge of dredged or fill material into the navigable waters at specified disposal sites.” 33 U.S.C. § 1344. “Navigable waters” are defined as “the waters of the United States, including the territorial seas.” 33 U.S.C. §1362(7). While “navigable waters” is defined, therefore, “waters of the United States” is not defined, leaving presidential administrations from Nixon to Regan, and then Obama to Trump, to wrestle with the scope and jurisdiction of the EPA and Corps in interpreting the meaning of “waters of the United States.

 

In 2015, under the Obama Administration, the EPA and the Corps re-wrote and expanded the WOTUS Rule rule to include: (1) tributaries that have physical signs of flowing water, even if they don’t run all year round, and ditches that “look and act” like tributaries; (2) expanded EPA oversight to any body of water within 1,500 feet of another water body already covered by the rule; and (3) extended protections to regional water features, such as prairie potholes and coastal bays. This proved controversial, because the agricultural, manufacturing, and real estate development industries found the 2015 rule to be a massive expansion of EPA and Corps regulatory oversight.

In fact, 28 states successfully sought injunctions to block enforcement of the 2015 WOTUS Rule in federal courts around the country, reverting those states to pre-2015 WOTUS interpretations during the pendency of the lawsuits and leaving the remaining states subject to 2015 WOTUS Rule. See North Dakota v. EPA, 127 F. Supp. 3d 1047, 1051 (D.N.D. 2015); Texas v. EPA, 2018 U.S. Dist. LEXIS 160443, at *4 (S.D. Tex. Sept. 12, 2018); Georgia v. Pruitt, 326 F. Supp. 3d 1356 (S.D. Ga. 2018).

The proposed rule

The new proposed 2018 WOTUS Rule seeks to clarify the uncertainty surrounding the existing 2015 WOTUS Rule, reduce the scope and oversight of the EPA and Corps in traditionally non-navigable waterways, and open areas to new development opportunities. To that end, the EPA and Corps propose to clarify that:

  1. “Waters of the United States” are waters within the ordinary meaning of the term, such as oceans, rivers, streams, lakes, ponds, and wetlands, and that not all waters are “waters of the United States.”
  2. A tributary is defined as a river, stream, or similar naturally occurring surface water channel that contributes perennial or intermittent flow to a traditional navigable water or territorial sea in a typical year either directly or indirectly through other tributaries, jurisdictional ditches, jurisdictional lakes and ponds, jurisdictional impoundments, and adjacent wetlands or through water features.
  3. Ditches are generally proposed not to be “waters of the United States” unless they meet certain criteria, such as functioning as traditional navigable waters, if they are constructed in a tributary and also satisfy the conditions of the proposed “tributary” definition, or if they are constructed in an adjacent wetland.
  4. Define “adjacent wetlands” as wetlands that abut or have a direct hydrological surface connection to other “waters of the United States” in a typical year.
    1. A “direct hydrologic surface connection” occurs as a result of inundation from a jurisdictional water to a wetland or via perennial or intermittent flow between a wetland and jurisdictional water. Wetlands physically separated from other waters of the United States by upland or by dikes, barriers, or similar structures and also lacking a direct hydrologic surface connection to such waters are not adjacent.
  5. waters of the United States” do not include features that flow only in      response to precipitation; groundwater, including groundwater drained        through subsurface drainage systems; prior converted cropland; artificially irrigated areas that would revert to upland if artificial irrigation ceases; certain artificial lakes and ponds constructed in upland; water-filled depressions; and  waste treatment systems.

Future implications

The new WOTUS is not yet in effect, the mandatory sixty (60) day comment period has not yet begun, and the process may be delayed further as the partial government shutdown continues. Developers with projects near possible “waters of the United States” will be greatly served by exercising caution and engaging qualified environmental and real estate attorneys who can help them address (a) whether their projects affect “waters of the United States” under the applicable rule and future rule, and (b) if they do, what permits and approvals are necessary from appropriate regulatory authorities.

However, if the new proposed 2018 WOTUS Rule becomes final, real estate developers and the construction industry should be enthusiastic, as it may be easier to: (1) obtain concurrence from the Corps that a project will not impact a jurisdictional waterways or wetlands; and (2) that projects in certain wetlands and along ditches and intermittent creeks may no longer need a) certain permits, b) expensive mitigation credits, and c) approvals from the Corps, EPA, and delegated state environmental authorities. That will open new opportunities for development, save project development costs, and provide routes for previously stalled projects to move forward and become reality.

 

[1] Paul Sonderegger is a Partner at Thompson Coburn LLP in its St. Louis office and practices in the area of environmental litigation and regulatory compliance as well as real estate litigation. His professional website is at https://www.thompsoncoburn.com/people/paul-sonderegger.

[2] Spenser Owens is an Associate at Thompson Coburn LLP in its St. Louis office and practices in the area of real estate finance and development. His professional website is at https://www.thompsoncoburn.com/people/spenser-owens.