FEATURE ARTICLE, JULY 2009

MURKY WATERS
Vague laws threaten to dry up development on U.S. wetlands.
Ashley Ball

Confusion surrounding the definition of wetlands has challenged cost-efficient development in the Midwest since the initiation of the Clean Water Act of 1972. While the Environmental Protection Agency (EPA) and the Army Corps of Engineers (Corps) have diligently enforced regulations, vague terminology has made it difficult for developers to build on various types of wetlands.

In 2001, the Supreme Court loosened the government’s grip over wetlands with its decision in a case brought forward by the Solid Waste Agency of Northern Cook County (SWANCC). Essentially, the court agreed that the Corps did not have jurisdiction over certain isolated wetlands without any connection to navigable waters. Although the SWANCC decision had a significant impact, challenges associated with developing on wetlands connected to navigable waters remained intact.

Michigan developer John A. Rapanos waged a 20-plus year battle with the Federal government to seek some clarity. Unfortunately, Rapanos’ campaign, which was resolved in 2006, with damages paid in 2008, simply created more ambiguity regarding wetlands and commercial real estate development.

“In the end, the two decisions did not make a lot of difference in the way that the Corps handles [permits] in our general area,” explains Andy McCord, environmental manager with St. Louis-based consulting firm Midwest Testing. The ultimate outcome of the decisions was to lead to further litigation and further uncertainty on the part of environmental consultants and the Corps. It’s been mutually frustrating.”

According to Midwest Testing, the Rapanos decision has intensified permitting procedures, adding time to an already lengthy consulting and review process. Depending on the amount of wetlands or streams that will be impacted by a development, the Corps requires either a Nationwide Permit or an Individual Permit to begin construction. A Nationwide Permit, which is based on the standard provisions of a general permit, requires that less than half of an acre of wetlands or less than 300 feet of a stream be impacted by a project. Generally, if more than half of an acre or 300 feet will be impacted, the developer must seek an Individual Permit.

While a Nationwide Permit can be executed between 30 to 90 days after being submitted to the agencies, an Individual Permit will typically take between 9 to 12 months to be approved. In an industry where timing is crucial, many developers are willing to make significant changes to their projects to allow them to apply for a Nationwide Permit.

Based on the Clean Water Act, the individual states are also required to address water quality conditions, which can add more time to the permitting process. In Missouri, a project is required to receive a 401 Water Quality Certification from the state before it can get underway. For a development seeking an Individual Permit, the state will review that project’s 401 Certification at the same time the Corps and EPA are evaluating the project. On the other hand, for a project seeking certain Nationwide Permits, the state will typically wait until that permit is secured from the Corps before assessing its 401 certification, which can take up to an additional 60 days to be processed.

“This can be a big deal,” McCord explains. “Even if only a relatively short length of a minor stream would be impacted by a commercial development, in Missouri it may take five months if you include the state’s [permit process]. In Illinois, this can extend to a year or more.”

In addition to timing issues, one of the most costly factors for receiving a permit deals with proper mitigation. As part of the permit process, developers are required to replace or compensate for the amount of wetlands or streams they impact. Although the mitigation does not have to be completed in advance in order to receive a permit, developers must be able to specify exactly how they plan on replacing the acreage.

“Mitigation costs can be an issue,” McCord says. “But the biggest problem in cost to the developer is time delays. [With time delays], you’re not getting your development built and you could lose tenants or the whole deal.”

According to McCord, many developers and consulting firms are looking to the Obama administration to find a happy medium where developments can proceed cost effectively with all the due diligence required to evaluate and mitigate their impact on the environment. Ultimately, that would require bringing some clarity to the boundaries of the Clean Water Act. In securing a standard definition of what should and should not be protected, there is hope that the permitting process will be streamlined.

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