This feature is a part of “The Dotted Line” series, which takes an in-depth look at the complex legal landscape of the construction industry. To view the entire series, click here.
In late December, as much of the country was on a holiday break, the Environmental Protection Agency quietly issued a new, final rule defining what constitutes the “waters of the United States,” or WOTUS, which are protected under the Clean Water Act.
The debate surrounding that rule has been anything but quiet since.
In January, 16 industry associations, including the American Road & Transportation Builders Association, the Associated General Contractors of America and the National Multifamily Housing Council, filed suit to block the rule. They argue it’s unconstitutionally broad and encompasses a “staggering range of dry land and water features.”
The rule applies to both large navigable waters and other adjacent waterways — think the Mississippi River— but would also cover small and intermittent streams, wetlands and ponds that might only hold water seasonally or after a heavy rain. In other words, the kinds of bodies of water that are often present on development sites.
Stephen E. Sandherr, CEO of the AGC, for example, took issue with the intermittent aspect of the rule.
“Just because a piece of land occasionally gets wet doesn’t make it a navigable waterway,” Sandherr said in a release. “Try as it might, the administration cannot redefine the reality of existing law or constitutional limits on executive power.”
For its part, ARTBA said the rule would slow delivery of transportation projects and “threatens to nullify the benefits of the 2021 federal infrastructure law.”
The outcome of the industry groups’ litigation, filed in the U.S. District Court for the Southern District of Texas, is still unknown. A pending decision from the U.S. Supreme Court in a separate case related to WOTUS that’s due out this summer could also further impact the issue.
But environmental and construction attorneys say the new rule, if it stands, could add up to $1 million per acre to development projects that are adjacent to or have a connection with waters of the United States. It is set to go into effect March 30.
“All in, you’re talking consultant preparatory work, barriers for a new buffer zone and maybe doing mitigation work to enhance a wetland somewhere else,” said attorney Jim Kosch, a partner in the construction group at Newark, New Jersey-based law firm McCarter & English. “It’s really only limited by how demanding the regulators want to be, and how far the developer is willing to go to accommodate them.”
The definition of what constitutes WOTUS, and is thus subject to regulation and permitting by EPA and the U.S. Army Corps of Engineers, has ebbed and flowed for years.
Both the Obama and Trump Administrations issued their own rules to define WOTUS, but they were ultimately blocked in federal courts. That prompted the current administration to seek a more “durable” solution that would give guidance to both regulators and covered stakeholders.
The new final rule largely revives the definition of WOTUS from the Reagan era, while splitting the difference between the two previous administrations.
“The Biden Administration’s version of the rule should be considered a middle ground between the Obama and Trump-era WOTUS rules,” said attorney Taylor Holcomb, a partner in the Austin, Texas, office of law firm Jackson Walker.
But there’s also enough wiggle room in the new rule, Holcomb says, to expand what kind of waterways are covered. That’s because a new test of whether a project “significantly affects” a covered body of water will come into play as well.
“That will likely result in an increased number of water features, including wetlands, being subjected to government oversight,” Holcomb said.
That means project sites that would not have triggered WOTUS permitting requirements previously might fall within EPA’s jurisdiction now.
“The government here is focused on whether the upstream is adversely impacting the downstream,” said Carol Sigmond, a partner at New York City-based Greenspoon Marder. “They've obviously reached a conclusion, and they’re trying to reverse the impact by forcing the upstream to be cleaner.”
And while this iteration is labeled as a “final” rule by EPA, history shows that like the streams it covers, this version of WOTUS could be ephemeral, too.
“It’s the final rule for this administration,” said Buddy Cox, an environmental lawyer and partner at Bradley Arant Boult Cummings in Birmingham, Alabama. “But no, it’s not going to be the last we hear about it.”
More permitting required
As the new rule for WOTUS stands now, however, lawyers say additional costs, permitting and mitigation could come into play for developers and the general contractors who work for them.
“These new standards will be interpreted more broadly, and so now you’re going to be subject to the cost and delay of getting a permit that you hadn’t planned for,” said Frances Stella, an environmental and land use attorney at Roseland, New Jersey-based Brach Eichler. “If you're digging right now on wetlands, finish your digging.”
One saving grace could be for projects that have already gotten an approved jurisdictional determination from the U.S. Army Corps of Engineers, which are typically good for five years.
“That document maps out the identifying the jurisdictional limits of WOTUS on a given parcel,” Holcomb said. “With few exceptions, this new rule shouldn’t invalidate pre-existing AJDs.”
But other projects that are pending may need to be revisited, especially if active work hasn’t yet kicked off.
“It’s really a guessing game at this point,” said Kosch. “What we’re telling our folks right now is let’s get a really good hydrologist, let’s get a really good wetlands consultant to take a look.”
For projects that may fall under the jurisdiction of the rule, attorneys say developers and contractors will often try to see if a different layout or design can increase the distance to any water in question, and thus mitigate the need for potential permitting.
Where the buck — and the water — stop
Who is responsible for making sure a project is compliant with the new rules could also be ambiguous, depending on how the contract is set up between an owner or developer and GC.
Attorneys say that in general, it’s on an owner to ensure a project site meets all governing regulations. But a contract could assign the actual filing for permits back to the GC, too, an aspect that could set up additional disputes.
“Does the owner say that when it comes to permit obligation compliance, it’s on the GC?” Kosch said. “Then, the contractor could come back and say this is a changed condition. Relationships between owners and contractors are never easy. This could aggravate it.”
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