COVER STORY, NOVEMBER 2006

THE WORD ON WETLANDS
New wetlands ruling has significant impact on real estate remediation and development.
J. Gregory Smith

If you are a developer, you probably know by experience that the presence of wetlands on your property can seriously affect the configuration and timing of your development. If you’ve been in the business for at least 5 years, you should be aware of the role the United States Supreme Court has played in shaping the federal government’s jurisdiction over wetlands. This past June, the Supreme Court issued its much-anticipated decision, Rapanos vs. United States¹, that many expected would narrow the scope of Section 404 of the Clean Water Act (Section 404) as it has been applied to wetlands by the U.S. Army Corps of Engineers (Army Corps). In a 5-4 decision, the Court found that the current Army Corps interpretation of the scope of Section 404 as applied to wetlands is too broad; however, the majority could not agree on the appropriate standard for determining whether wetlands have a “significant nexus” to navigable waters and, therefore, constitute “waters of the United States” under Section 404.

The Rapanos decision follows a couple of seminal cases dealing with the scope of the federal government’s jurisdiction under Section 404. In its 1985 decision in Riverside Bayview², the Supreme Court approved the Army Corps’ interpretation that “waters of the United States” includes wetlands that abut traditional navigable waters.³  In its 2001 decision in Solid Waste Agency of Northern Cook County (SWANCC)⁴, the Court found that the abandoned sand and gravel pit at issue was an isolated, intrastate water not regulated under Section 404 as “water of the United States.” Interpreting its prior decision in Riverside Bayview, the Court in SWANCC reasoned that there must be a “significant nexus” between wetlands and a navigable water.⁵ 

Since 2001, lower courts have split on how to interpret the “significant nexus” test when trying to determine whether water bodies, both wetlands and other surface water conveyances, are “waters of the United States” covered by Section 404. The Supreme Court accepted for review two cases from the Sixth Circuit Court of Appeals, Rapanos v. United States and Carabell v. United States, which deal with wetlands located in Michigan. Both cases deal with wetlands that were or are connected to a ditch or man-made conveyance that eventually flow into a navigable water. In both cases, the Sixth Circuit found a significant nexus between the wetlands and a navigable water and concluded the wetlands were “waters of the United States” regulated under Section 404.

In Rapanos, the Supreme Court vacated the decisions of the Sixth Circuit in both cases and remanded the cases for further proceedings. However, the Sixth Circuit is faced with no easy task because, although the majority of the Court agreed the Sixth Circuit’s interpretation of “significant nexus” was not supported by Section 404, they could not agree on the proper interpretation of “significant nexus.” Justice Antonin Scalia, with the support of Chief Justice John Roberts and Justices Samuel Alito and Clarence Thomas, proposes a strict construction requiring that the wetland possess a continuous surface connection with an adjacent water body and that the adjacent water body contain a relatively continuous flow of water.⁶ Justice Anthony Kennedy, on the other hand, would require that the wetland “significantly affect the chemical, physical and biological integrity of other covered waters more readily understood as ‘navigable.’”⁷ Suffice it to say that Justice Kennedy’s interpretation would provide for federal jurisdiction over far more wetlands than Justice Scalia’s strict interpretation.

Since the Rapanos decision was issued in June, the Army Corps and the Environmental Protection Agency have promised to issue guidance on how jurisdiction over wetlands will be determined post-Rapanos. We are still waiting. In the meantime, as many know all too well, the Army Corps has suspended issuance of jurisdiction determinations until the guidance is issued. Nevertheless, one can expect that the guidance will not establish a bright line test, but rather will require scrutiny on a wetland-by-wetland basis. Also, one can expect that the federal agencies will embrace Justice Kennedy’s interpretation of “significant nexus.”

The bigger question actually relates to ditches and other surface water conveyances that are not wetlands. Rapanos raises serious questions about whether certain surface water conveyances that do not contain a continuous flow of water are “waters of the United States” regulated under Section 404. Although wetlands were the focus of the two cases in Rapanos, the Court, in particular the plurality joining with Justice Scalia, provided ample fodder for continued challenges to the Army Corps’ interpretation of Section 404 as it applies to ditches and other surface water conveyances.

So what does Rapanos mean for developers and other land owners? Rapanos will likely result in some wetlands being determined by the Army Corps to be isolated and not subject to regulation under Section 404. In states that do not have a program for regulating isolated wetlands, wetlands not regulated under Section 404 will be unregulated. In states with an isolated wetland program, for example Ohio, wetlands that fall outside of federal regulation post-Rapanos will continue to be regulated under state law. The concept of “isolated” ditches or streams will put states in the same predicament as they were with isolated wetlands following the SWANCC decision. Each state will have to determine whether to regulate the discharge of dredge or fill material to isolated ditches or streams, and if so, how to structure the regulatory program.

While there will certainly be some changes after Rapanos, certain practice tips remain the same. First, obtain from the Army Corps a jurisdiction determination for your property before you get too far along in your development plans. This will allow you to make critical decisions based upon actual knowledge of which wetlands and/or streams are regulated, by whom, and under what standards. Second, if you are considering purchasing property that contains wetlands and/or streams, obtain as part of your due diligence a delineation of all wetlands and water conveyances on the property by a qualified professional. Bear in mind that while a proper delineation will give you a good idea of what may be regulated and by whom, you should not rely on its findings until they are confirmed by the Army Corps through the issuance of a jurisdiction determination. Third, retain a qualified professional to determine the quality of the wetlands and/or streams based upon the state water quality standards. This is important information because it will influence the level of scrutiny that will be applied to your request to fill. For example, in Ohio, it is very difficult to obtain authorization to fill Category 3 wetlands, the highest quality wetlands, so you want to know very early in the process whether the property includes such high-quality wetlands.

We will have to wait to see how the federal agencies will interpret Rapanos in their guidance, how they will apply their guidance in the field, and, ultimately, how the federal courts will apply Rapanos. In the meantime, continue to follow the practice tips discussed above. And as always, try to plan around development situations that can leave you mired in the regulatory process.

J. Gregory Smith is an attorney, senior counsel, with Columbus, Ohio-based Ulmer Berne LLP. His provides counsel on environmental due diligence for real estate and business transactions, regulatory permitting and compliance, and civil and administrative litigation.

©2006 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.