February 2003

Environmental Update

Jurisdictional Quagmires and Other News

In one of the more interesting balancing acts since 02-2”) on compensatory mitigation projects that are the advent of federal environmental laws, within a required when aquatic resource functions are lost or fortnight the Bush Administration unveiled an adversely affected by authorized activities. Also issued interagency commitment to prevent the net loss of on December 24, this guidance supersedes the Corps’ wetlands while positioning itself to reduce sharply its 2001 mitigation guidance document (RGL No. 01-1, regulatory jurisdiction over certain wetlands. issued on October 31, 2001) but does not modify Additionally, EPA has been active on other Clean Water existing mitigation policies, regulations or guidance. Act fronts - publishing a policy on trading, withdrawing the total maximum daily load rule According to the National Wetlands Mitigation promulgated by the Clinton Administration and Action Plan, RGL 02-2 improves mitigation extending deadlines for Spill Control and implementation provisions. Specifically, as compared Countermeasure Plans. These items are discussed more with its predecessor, RGL 02-2 places more emphasis on fully below. wetland functionality and the science of functional assessments, as opposed to acreage. That said, a New Federal Action Plan for Wetlands minimum one-to-one acreage replacement is allowed as a reasonable surrogate. RGL 02-2 also appears more On December 24, 2002, representatives of the Corps flexible by, for example, acknowledging possible of Engineers, EPA, and the Departments of Commerce, circumstances in which an overall net loss is acceptable Interior, Agriculture and Transportation signed the because compensatory mitigation would be National Wetlands Mitigation Action Plan, affirming the impracticable or would only achieve inconsequential Bush Administration’s commitment to the goal of no net reductions in impacts. Also, RGL 02-2 expands upon the loss of the nation’s wetlands. The plan consists of 17 “functional replacement” concept described in the 2001 specific action items, 14 of which have deadlines spread guidance document by acknowledging that in some over 2003, 2004 and 2005. The action items fall into cases the functions provided by one wetland area can be five general areas: replaced by a smaller area.

· clarifying recent Corps of Engineers mitigation The 2001 mitigation guidance expressed a guidance; commitment toward “fully mitigating authorized impacts · integrating compensatory mitigation into a to all aquatic resources” by using off-site mitigation watershed context; where on-site mitigation was not practicable. Under · improving compensatory mitigation accountability; RGL 02-2 the goal of “no overall net loss of wetlands” · clarifying performance standards; and does not apply to each permit but is to be achieved by · improving data collection and availability. each district on a cumulative basis.

To varying degrees, all these tasks involve interagency RGL 02-2 is silent on how districts will track their discussions leading toward guidance, as distinct from cumulative performance. Although RGL 02-2 expands regulations. upon monitoring, long term management and financial assurance requirements to help ensure that The only item completed thus far is the Corps’ environmental gains are maintained, district-wide issuance of Regulatory Guidance Letter No. 02-2 (“RGL performance measurement will be imperative to non-navigable waters was the actual or potential use of maintain program credibility. the waters as habitat by migratory birds.

The impact of the changes in the Corps’ guidance is The ruling in SWANCC prompted numerous tied to the evolving scope of federal regulatory challenges to federal jurisdiction under the CWA jurisdiction discussed below. On one extreme, a generally, not just as to the dredge and fill permit dramatic reduction in the Corps’ authority will probably program administered by the Corps. As of January result in a fairly straightforward mitigation program 2003, four courts of appeals had issued rulings in five because only significant waterbodies will be covered, as cases, appeals involving seven cases were pending in opposed to, say, isolated lake and marsh systems in five circuits, eight district court rulings had not been upstate Pennsylvania. If the Corps’ authority changes appealed, while other cases were pending in district minimally, the enhanced evaluation of impacts and courts. The principal issues have involved the status of proposed mitigation in RGL 02-2 may create substantial tributaries, adjacent wetlands and isolated waters. opportunities for wetland scientists. The ANPR solicits comments on those portions of The National Wetlands Mitigation Action Plan is an the not expressly rejected by the ambitious undertaking. Although the stated deadlines Supreme Court. The Migratory Bird Rule, published on seem reasonable enough, it remains to be seen whether November 13, 1986 at 51 F.R. 41217, mentioned as the various regulatory bodies can coordinate activities bases for federal jurisdiction the use of the water as and agree on the individual components in a timely habitat for birds protected by migratory bird treaties, the fashion. While deliberations continue, there will be use of the water as habitat for federally protected more than the usual level of uncertainty within the endangered or threatened species or the use of the water regulated community, which may have adverse to irrigate crops sold in interstate commerce. repercussions on the Administration’s effort to revive the economy. Comments are also invited on the use of the factors in 33 CFR § 328.3(a)(3)(i)-(iii) and 40 CFR § Federal Jurisdiction under the Clean Water Act 230.3(s)(3)( i)–(iii), which are part of the Corps’ and EPA’s regulatory definition of “waters of the United On January 10, 2003, the Corps of Engineers and States.” These texts reach: EPA issued an advanced notice of proposed rulemaking (“ANPR”) on their definitions of “waters of the United (3) All other waters such as intrastate lakes, rivers, States” in the wake of recent court decisions on scope of streams (including intermittent streams), mudflats, the Corps’ jurisdiction under the Clean Water Act sandflats, wetlands, sloughs, prairie potholes, wet (“CWA”). At the same time, the two agencies issued a meadows, playa lakes, or natural ponds, the use, Joint Memorandum, signed by their general counsel, to degradation or destruction of which could affect provide clarifying guidance on federal jurisdiction. The interstate or foreign commerce including any such ANPR appeared in the Federal Register on January 15, waters: (i) which are or could be used by interstate (68 F.R. 1991), and comments are due March 3. or foreign travelers for recreational or other purposes; or (ii) from which fish or shellfish are or In January 2001, the Supreme Court issued an could be taken and sold in interstate or foreign opinion in Solid Waste Agency of Northern Cook commerce; or (iii) which are County v. U.S. Army Corps of Engineers, 531 U.S. 159, used or could be used for industrial purposes by (“SWANCC”), holding that the Corps of Engineers industries in interstate commerce. lacked CWA jurisdiction over a former strip mining site near Chicago, comprising 533 acres with over 200 In addition, the ANPR solicits comments on permanent and seasonal ponds. The sole basis relied on whether the regulations should define “isolated waters,” by the Corps to regulate activities on these intrastate, and, if so, the factors to be considered in determining

-2- whether a water is or is not isolated for jurisdictional over intermittent streams. The Joint Memorandum purposes. focuses on the impact of SWANCC and does not address possible additional limits on federal authority that the The agencies are also seeking “technical” Supreme Court might impose on constitutional grounds comments on the natural resource implications of using, perhaps, a narrow interpretation of the Commerce SWANCC. The ANPR notes possible impacts on flood Clause. risk, , fish and wildlife habitat and the hydrologic integrity of aquatic ecosystems. The ANPR There is a rapidly growing body of case law points out that at least 15 states have programs that considering, and in some cases rejecting, jurisdictional address isolated wetlands. Comments are invited on the grounds used historically by the Corps and EPA. It is availability and effectiveness of current state programs entirely possible that years of regulatory and judicial and other federal programs. precedent will become unraveled, leaving states as the sole regulators of small waterbodies. SWANCC is The Corps’ and EPA’s Joint Memorandum certain to inspire continuing challenge, which generally adheres to the approach outlined in a legal rulemaking alone is unlikely to diminish. interpretation that the agencies issued on January 22, 2001, in the wake of SWANCC. The Joint Given its predilection toward narrowing federal Memorandum states that neither EPA nor the Corps will jurisdiction, the Bush Administration may abandon assert CWA jurisdiction over isolated, intrastate and traditional federal efforts directed toward broad CWA non-navigable waters where the sole basis available for authority. In that case, the burden of protecting asserting jurisdiction rests on any of the factors listed in particular wetlands will shift to the states or to the “Migratory Bird Rule.” Where federal jurisdiction individuals and groups. States have ridden the Corps’ over isolated, intrastate and non-navigable waters is coattails for years, and some may be unwilling to fill the based on the above-quoted factors in 33 CFR § void left by a federal retreat or judicial diminution of 328.3(a)(3)( i )-(iii), field staff are directed to seek authority. project-specific headquarters approval prior to asserting jurisdiction, including permitting and enforcement Critics of the ANPR predict dire consequences. Press actions. Federal jurisdiction continues over traditionally reports have contained estimates that up to 60 percent of navigable waters and adjacent wetlands. the nation’s waterways will no longer be subject to federal environmental control. If that turns out to be the The Joint Memorandum acknowledges issues case, many will view “no net loss of wetlands” as much associated with wetlands and tributaries. It surveys ado about nothing. numerous cases addressing jurisdictional issues, most of which are post-SWANCC. One pre-SWANCC decision EPA Announces Water Quality Trading Policy mentioned is United States v. Wilson, 133 F. 3d 251, 257 (1997) invalidating 33 CFR § 328.3(a)(3) within the On January 13, 2003, EPA announced a new policy Fourth Circuit. In addition, the Fifth Circuit in Rice v. aimed at achieving water quality standards through Harkin, interpreted “navigable waters” under the Oil creation and trading of pollution control credits. EPA Pollution Act and held that a body of water is subject to considers this approach to be innovative and said that it regulation if it is actually navigable or is adjacent to an will result in effective and economical pollution open body of navigable water. 250 F.3d 264, 269 (2001) reduction. Support was expressed by an array of (rehearing denied). According to the Joint pollution control agency representatives. Predictably, Memorandum, the Harkin decision implies a very environmental groups tended to react negatively. As narrow interpretation of “navigable waters.” Other noted below, the actual program is narrow with regard to potential issues noted in the Joint Memorandum are addressed so that industry is unlikely to be whether jurisdiction is affected when water flows significantly affected. through ditches, culverts, pipes, storm sewers or similar manmade conveyances and whether jurisdiction exists

-3- At least initially, the trading policy only applies to be imposed on a permittee who relied to its detriment on nutrients (e.g., total phosphorus and total nitrogen) and another party. sediment loads. EPA will also allow cross-pollutant trading for oxygen-related pollutants where there is The biggest beneficiaries of the pollutant trading adequate supporting data. By way of example, the policy may be landowners with uncontrolled non-point policy statement describes reducing upstream nutrient source runoff. Even those who have adopted levels to offset a downstream biochemical oxygen management practices for purely self-interested reasons, demand or to improve low dissolved oxygen levels. such as topsoil preservation, may now be able to enter into agreements in which they commit to those practices Trading may not be used to achieve technology- in exchange for credits that are marketable to developers based effluent limitations except in the case of the iron and others needing to reduce pollutant loadings of and steel industry, where intraplant trading between nutrients or sediments. outfalls is permissible under certain circumstances. Municipal or regional sewage authorities may develop It is up to the states to implement the trading policy. trading programs for industrial users, and direct There will no doubt be considerable pressure to dischargers may use intraplant trading between multiple introduce trading programs, and it is quite possible that outfalls that discharge to the same receiving water from states will come up with favorable additional a single facility. innovations. The big question remains whether these changes will indeed result in improvements in the According to EPA, trading should occur within a nation’s waters. watershed or a defined area for which a total maximum daily load has been approved. Trading decisions are Withdrawal of TMDL Rule subject to public notice and an opportunity for hearing. On December 27, 2002, EPA proposed to withdraw Since most NPDES permits are issued by state a package of regulations pertaining to total maximum agencies, the Water Quality Trading Policy essentially daily loads (“TMDLs”) adopted by the Clinton amounts to a statement by EPA about what states may Administration. (67 F. R. 79020). The rule being do within their delegated programs. The EPA policy withdrawn, published on July 13, 2000 (65 F.R. 43586), specifies certain general elements that a trading program amended various regulations to implement the TMDL should have. First and foremost is clear legal authority provisions of the CWA for waters not meeting water although there is no insistence on legislative action. quality standards, typically those facing substantial non- EPA authorizes the use of private contracts between point source pollution or urban runoff. Originally sources or third party contracts where the third party proposed on August 23, 1999 (64 F.R. 46012), the rule provides an indemnification or enforcement function, was intended to resolve issues concerning identification which may create a potential opportunity for insurance of impaired water bodies, improve implementation of carriers. TMDLs by requiring plans containing lists of actions and schedules to reduce pollutant loadings and change Perhaps the most troublesome feature of the policy NPDES permitting regulations to place additional for prospective users is EPA’s statement that in the event emphasis on point source discharges. of default by another source generating credits, an NPDES permittee using those credits is responsible for The July 2000 rule created a huge furor. Congress complying with the effluent limitations that would apply weighed in with a temporary prohibition against EPA if the trade had not occurred. If EPA maintains that spending funds on the rule in Public Law 106-426. That position, facility owners will have to think long and hard move, along with administrative deadline extensions, about whether to entrust to a third party the obligation to had pushed the effective date back to April 30, 2003. perform certain control measures and will have to However, a combination of legal challenges, deficiencies structure their private arrangement to minimize risks. in the rule noted by the National Academy of Sciences’ The policy is silent about the time constraints that might National Research Council and the impending effective

-4- date led EPA to conclude that the rule was unworkable This Environmental Update was written by Carl B. and that withdrawal was the best course. Everett, Esq., a partner in Saul Ewing’s Environmental Department. Mr. Everett can be contacted at (215) 972- The original regulations governing TMDLs in 40 7171 or [email protected]. The statements contained in CFR §§ 130.2 and 130.7 remain in effect. The former this Update are intended for general information and do consists of definitions, including the definition of total not constitute legal advice. maximum daily load. The fundamental requirements related to TMDL development are in § 130.7.

EPA claims that withdrawal of the rule will not adversely affect the increasing momentum of state TMDL programs across the country, but EPA’s decision is likely to have highly variable impacts in different states. Many states, including Pennsylvania, have been diligently adopting TMDLs for streams within their jurisdiction. Others have been less aggressive, which should work to the benefit of their regulated communities albeit at the cost of continued poor surface water quality as compared with those states that have been more aggressive.

-5- Saul Ewing Attorneys

Virginia G. White, Chair (609) 452-3101 [email protected] Joel R. Burcat (717) 257-7506 [email protected] Daniel R. Chemers (410) 332-8951 [email protected] Carl B. Everett (215) 972-7171 [email protected] Pamela S. Goodwin (609) 452-3109 [email protected] Thomas J. Jennings (215) 972-7103 [email protected] Jennifer M. Kelly (609) 514-3722 [email protected] Gretchen L. Klebasko (410) 332-8742 [email protected] Jane Kozinski (609) 452-3108 [email protected] Joseph F. O’Dea, Jr. (215) 972-7109 [email protected] James O’Toole, Jr. (215) 972-7121 [email protected] David Raphael (717) 238-7654 [email protected] Linda Richenderfer (302) 421-6804 [email protected] John F. Stoviak (215) 972-1095 [email protected] William W. Warren, Jr. (717) 257-7698 [email protected] Lynanne B. Wescott (215) 972-7104 [email protected]

Saul Ewing’s Offices

Baltimore Chesterbrook Harrisburg 100 South Charles Street 1200 Liberty Ridge Drive, Penn National Insurance Tower Baltimore, MD 21201-2773 Suite 200 2 North Second Street, 7th Fl. (410) 332-8600 Wayne, PA 19087-5055 Harrisburg, PA 17101-1604 fax: (410) 332-8862 (610) 251-5050 (717) 257-7500 fax: (610) 651-5930 fax: (717) 238-4622

Philadelphia Princeton Centre Square West 214 Carnegie Center Wilmington P.O. Box 1266 1500 Market Street, 38th Fl. Suite 202 Wilmington, DE 19899-1266 Philadelphia, PA 19102-2186 Princeton, NJ 08540-6237 (302) 421-6800 (215) 972-7777 (609) 452-3100 fax: (302) 421-6813 fax: (215) 972-7725 fax: (609) 452-3122

-6-