THE OHIO ASSOCIATION OF REALTORS
WETLANDS WHITE PAPER

Published by OAR’s Legal Services Group (September, 1990)

Introduction

This white paper is designed to give REALTORS a better understanding of the regulations concerning wetlands, as well as basic information as to the steps which must be taken when considering development in wetlands. For the purposes of this paper, wetlands will be defined as, those areas that are inundated or saturated by surface or groundwater at a frequency of vegetation typically adapted for life in saturated soil conditions. Wetlands generally include swamps, marshes, bogs, and similar areas. This is the definition which is used by the U.S.E.P.A. and the U.S. Army Corps of Engineers. 1*

Laws which regulate the development of wetlands were first promulgated at the federal level under the U.S. Army Corp. of Engineers (Corps). Ohio has no specific wetlands protection program and protects wetlands through an indirect use of her water quality standards permit. Thus, federal laws are the development guidelines in Ohio. Therefore, it is important for a REALTOR or developer in Ohio to understand the federal law and permitting process for wetlands.

There are several federal regulations which deal with wetlands, including the National Environmental Policy Act of 1969 and the Clean Water Act. The Clean Water Act, while essentially legislation which seeks to clean up America’s waters, is also the law which expanded the authority of the Corps to include wetlands regulation. The Corps was originally responsible for keeping the nation’s navigable waters open and running smoothly. The changes implemented under the Clean Water Act and other pieces of legislation have resulted in a much more complicated assignment for the Corps; they must now balance the environmental protection issue with the economic development issue when granting wetland development permits.

The Clean Water Act is the federal law which has the greatest impact on development of wetlands. Under Section 404 of this law, a permitting process is established for use whenever dredge or fill materials are to be used in wetlands. Section 404 has three major sections: 404(a), 404(b), and 404(c). 404(a) gives the Corps the authority to issue permits after notice and opportunity for public hearings. While the act gave the process for information, 404(b) states that the Corps must issue permits in accordance with the guidelines issued by the EPA, also known as B-1 guidelines. This section states that dredge or filling cannot be permitted if there is a practicable alternative to the proposed discharge which would have less adverse impact on the aquatic ecosystem. It also states that no dredge or fill material shall be permitted which will cause or contribute to significant degradation of the waters of the U.S. Section 404(c) allows the EPA to veto a decision made by the Corps.

Section 401 of this act states that any federally permitted activity, including any permitted wetlands fills, must comply with state water-quality standards. A state can veto a federally permitted project that does not meet their standards. While many states do not feel that Section 401 was specifically designed for wetlands protection. Ohio is one of a few states where water quality permits are the only method of protecting wetlands. Legislation is expected in Ohio in the near future which will attempt to regulate wetlands in a much more significant manner.

One can see where the problems begin to arise in the permitting process. While the Corps was determined to be the best administrator for the process, the EPA has oversight. The Corps issues permits, but the EPA sets the guidelines and monitors the program. To add to the complication, the Corps is also required to give consideration to any comments from the U.S, Fish and Wildlife Service (FWS) and the National Marine Fisheries Service (NMFS).

PERMITTING PROCESS

There are two types of permits which can be granted before any development takes place in a wetland. A general permit is granted on a state, regional or national basis for activities that are similar in nature and will cause only minimal and cumulative adverse impacts. Examples of operations which might get a general permit are discharge for bridge construction, back fill for utility lines, minor road crossings or surveying. For a more controversial project an individual permit is required. The following describes the four step process used to receive the individual permit.

Step One – Pre-application Consultation

This is an informal meeting between the Corps district engineer and the applicant. The parties discuss the permit requirements, identify any problems and determine if an Environmental Impact Statement (EIS) is needed. This is an optional step and usually used for large, controversial projects. Often, other federal agencies, state agencies or locally affected groups will participate in this discussion.

Step Two – Formal Project Review

An applicant must submit a formal project application to the Corps which must include the following information. A detailed description of the proposed project, including maps, drawings, and sketches that can be used at the public notice, the purpose of the project, a scheduling of constructing and the type of discharge to be created. The Corps will return any incomplete application.

Within 15 days after receiving the completed application, the district engineer will issue public notice. This notice is sent to the EPA, FWS, NMFS, state and local agencies, organizations, and individuals. There is then a comment period which can last from 15-30 days. While the goal is to issue a decision in 60 days, in reality it usually takes one year.

The district engineer must determine if an EIS is needed, and may have to consult with other federal and state agencies to see if the proposed project is involved in a coastal management zone, an endangered species area a National Historic Preservation area, or other regulated areas. A state can veto a Corps decision if the project does not meet their coastal zone management program or if it violates water quality standards (as in Ohio).

Step Three – Decision Making

In addition to the public interest review and the 404(b) 1 guidelines which require EPA guideline review, the Corps also looks at the aesthetics, navigation, cultural values, environmental values, economics, water quality, fish and wildlife values, safety, conservation and other areas to make a decision on a permit. Section 404(b) 1 guidelines state, in part, that no permit may be granted if:

1.) There is a practicable alternative that would lessen the negative impact on the aquatic ecosystem.

2.) The project will cause or contribute to significant degradation of U.S. waters or

3.) There have been no appropriate and practical steps taken which would minimize impacts that could have a potentially adverse affect on the aquatic ecosystem.

The definition of practicable alternative is what is important in these guidelines. The applicant must prove that an alternative non-wetland sight is not available for non-wetland dependent activities and that activities in non-wetland areas will not have a less adverse environmental impact than activities in the wetlands.

After weighing all of these items the Corps must make a decision. If it feels that the project has a highly negative impact there are three options it may take. They can deny the permit, modify the plan, or require mitigation. If the applicant does make it through this decision making process, they are not necessarily free to begin. EPA has VETO power, granted under Section 404(c) if they feel that the project would have an unacceptable impact on the environment. The applicant may also have to complete any mitigation that was required, on which both the Corp and the EPA must agree. These parties can disagree on the type of mitigation necessary.

ENFORCEMENT

Both the Corps and the EPA may seek criminal, civil or administrative charges for wetland development for which a permit has not been granted. However, while penalties may be as high as $25,000 per day or imprisonment for 1-5 years, these two agencies do not have the manpower to monitor and enforce the process. When the Corps discover a violation, they tend to negotiate a settlement to remedy the situation. In 1989, the Corps and EPA signed a Memorandum of Agreement (MOA) to establish new priorities for dealing with violations. This agreement made the EPA the main agency for enforcement of cases, which involve a flagrant or repeat violator, for cases requested by the EPA, and if the Corps recommends the EPA issue an administrative penalty. Any other cases for illegal wetland fills or for permit violations are handled by the Corps.

The Water Quality Act of 1987 (WQA) gave the EPA and Corps the ability to levy much harsher penalties. There are now two classes of penalties for illegal fills: Class 1 for minor violations and Class II for major violations. Fines for Class I violations may go as high as $25,000 per violation, and Class II violations can cost $10,000 per day, up to $125,000. The EPA has issued fines ranging from $15,000 to $125,000 and in January 1990, the U.S. Circuit Court of Appeals upheld a $202,000 fine and three years in jail to a developer who illegally filled wetlands.

MITIGATION

Mitigation can be described as any action taken to avoid or minimize wetland damage and to restore, enhance, or create wetlands as well. Mitigation, according to the Corps and the EPA, is defined with the following included:

1.) Avoiding the impact altogether by not taking a certain action;

2.) Minimizing impacts by limiting the degree of the action;

3.) Rectifying the impact by repairing, rehabilitating or restoring the impact over time by preservation and maintenance operations; and

4.) Compensating for their impact by replacing or providing substitute resources. 2*

While they agree on these statements, they did not always agree on how to proceed. The EPA, FWS and NMFS believed this definition should be followed step-by-step. However, the Corps believed that mitigation, in any order, could reduce negative impacts of a project. Finally, in November of 1989, the EPA and Corps agreed that when reviewing permit applications, these steps will be followed in order and the Corps will work to achieve the EPA’s goal of “No Net Loss” of wetlands. However, the White House postponed the implementation of this agreement when opposition from oil companies heated up over the impact this would have on oil collection along Alaska’s North Slope.

MITIGATION TECHNIQUES

There are several techniques that can be used to meet the mitigation requirements which EPA or the Corps might request of a developer. Developers should be ready to deal with any of these when considering development in wetlands. The following are brief descriptions of five ways to mitigate which have been successfully used across the county.

MITIGATION BANKING

This is a technique which is supported by NAR. It involves the purchase of a degraded wetland which is then restored by an individual party such as a government agency. This party could also create a totally new wetland. This wetland then becomes the “bank”. The restored or created wetland is then valued in credits. These credits can be withdrawn at a price by developers when they are faced with a wetland fill somewhere else. For example, if a developer fills two acres of wetland in a residential project, he would have to buy credits representing two acres from the wetland bank. The cost of each credit would cover the cost of acquisition, restoration and operation of the wetland bank.

The bank could also work as a depository, too. A developer could restore a wetland, receive credits for the restoration, and later draw on these credits if they fill wetlands in another project.

Proponents for this technique feel that the creation of a large wetland to compensate for a number of smaller wetlands makes sense because larger wetlands are more valuable for the aquatic ecosystem and wildlife, and easier to maintain. They also feel that developers who do not have the experience or desire to create their own wetland could use this technique easily. They also feel that if a governmental agency would create a bank, they could do a better job of monitoring and maintaining the wetland and would have an interest in its success.

However, proponents feel that any restored or created wetland has a high failure rate and are of lower quality in most instances than the wetlands they were developed to replace. They also feel they could lead developers to not care as much about the wetlands they are destroying if they can simply buy credits from a bank rather than having to come up with a plan that might lessen the wetland impact.

AVOIDANCE/MINIMIZATION

Wetlands can cost from $20,000 to $75,000 an acre to build and can use up valuable real estate in the process. Therefore, developers have used minimization and avoidance as an alternative to creation or restoration of a new wetland. These techniques are quite simple and can cut costs, while adding to the value of a project. Avoidance/minimization means that the developer works around or “avoids” any wetlands. The popular way is to minimize the cluster buildings in one area while keeping the rest of the land, including the wetland, undisturbed. Another way is to use wetland-friendly construction techniques and materials such as low-impact roads and low ground pressure grading and support equipment.

RESTORATION

Many states prefer developers restore rather than create a new wetland as it involves less risk of failure. Restoration of wetlands is popular in areas where all of the prime land has been developed and all that is left are wetlands. These wetlands have usually been dumped on or diked. Restoration can be as easy as removing a dike of fill, or as complicated as having to put in elaborate water-control systems.

CREATION

This strategy is usually considered last and involves the creation of wetlands from scratch. Environmental groups, resource agencies and biologists oppose this as an uncertain and risky method. They argue that a wetland depends on too many different environmental factors, and not all of them can be duplicated to the extent necessary for the survival of a wetland. This strategy also results in the creation of a wetland which can be significantly different than the kind that is being destroyed, thus not really creating that which was lost. However, the creation method is supported by the Corps, developers and some environmental consultants. They stress that better wetlands can be created than those being lost. A lesson that has been learned by developers over the years is that the simpler you make the wetland, the more chance it has at success. The most success has been had with the creation of salt marches.

SIGNIFICANT LEGAL OPINIONS

While many developers have gone to court with claims of taking of land when they have been denied a 404 permit, most are unsuccessful. Most state and federal courts have said it is not taking if the economic use of the property is not eliminated. The following legal opinions are evidence that the courts have seemed to come full circle on the takings issue. From the Morris case to the Just decision, and the most recent Nollan case, decisions dealing with takings have changed drastically. However, what is important to keep in mind is that no developer should count on favorable “takings” rulings by a court. All developers should be prepared to make concessions up front and should be prepared to do some sort of mitigation. The applicant carries the burden to prove to regulatory agencies that they have taken all steps to minimize any adverse impact and that their project may actually enhance the environment.

MORRIS LAND IMPROVEMENT CO. v. TOWNSHIP OF PARSIPPANY TROY HILL (193 A.2d 232 (N.J. 1963))
“BENEFIT/HARM THEORY”

This is one of the first cases dealing with wetlands that revolved around a taking claim. The court held that a municipal ordinance that restricted, through zoning, a privately owned wetland equaled a taking. This decision revolved around the benefit/harm theory, which states that land can be regulated to prevent a public harm, but not to confer a public benefit. If it does, it becomes a taking. The court stated in their decision that because the ordinance promoted a public benefit (flood protection in this case) and did not prevent public harm, it was a taking without compensation. This case was later substantially qualified and in 1972, the Just v. Marinette County case turned the tables on this decision. (see next case)

JUST v. MARINETTE COUNTY (201 N.W. 2d 761 (WIS. 1972))
“BENEFIT/HARM REVERSAL”

This case dealt with a statute which required all counties to adopt a shoreline zoning ordinance. Marinette County’s ordinance required a permit to fill wetlands located within a certain distance from navigable waters. The Just family, owners of land in a wetland area, went to court based on the claim that this ordinance was a taking because it diminished the economic value of their land. The court decided that the ordinance prevented harm to environmental resources. It did not improve a public condition but did preserve the natural environment from being destroyed by unregulated activities. Thus, not taking occurred.

PENN CENTRAL TRANSPORTATION v. NEW YORK CITY (438 U.S. 104 (1978))
“WHOLE PARCEL RULE”

In this case, the court used a “whole parcel” rule rather than the harm/benefit rule to decide a taking case. The court held that Penn Central could not construct a high rise office building in the airspace above Grand Central Station, upholding a historic landmark designation. Penn Central argued that the landmark designation was a taking because it prevented development. The court accepted that it was a severe restriction of use, but stated that the designation benefited all citizens of New York City by “improving the quality of life as a whole” and that Penn Central received benefits from this. The court did not split the property in distinct parcels under this decision, thus the whole parcel designation.

DELTONA CORPORATION v. U.S. (657 F. 2d 1184 (Ct. C1. 1981))
“VIABLE ECONOMIC USE”

Many courts have found that if an owner is left with some viable economic use of some remaining portion of their property, it is not a taking. In Deltona, a taking occurs if a regulation does not substantially advance a legitimate government interest OR if a regulator leaves a landowner with no economically viable use of the property. Deltona received permits to develop a residential community in 1964 and 1969. In 1973, they applied for permits to develop three remaining tracts. The Corps jurisdiction had expanded by then and they only granted one permit. Deltona sued, but the court ruled that the Corps regulations advanced important and legitimate government interests and did not deny Deltona of TOTAL economic use because Deltona received one permit and owned 11 acres upland which it could develop without a permit.

FLORIDA ROCK INDUSTRY, INC. v. U.S. (8 Cl. Ct. 160 (1985))
“DENIAL = TAKING”

In contrast to the Deltona case, in this case the court reached the opposite result. In Florida Rock, the court stated that the denial of a permit by the Corps to mine phosphate rock in wetlands was a taking because it was the only economical use of the land. Florida Rock bought the land for the express purpose to mine phosphate, and the denial was viewed as a taking. This is a significant case as it was the first time a denial of a 404 permit was found to be a taking. A federal circuit court upheld this ruling but found a court error when they failed to consider other speculative uses and remanded the case to claims court, although the court did feel a substantial possibility existed that a taking had occurred.

NOLLAN v. CALIFORNIA COASTAL COMMISSION (107 S. Ct. 3141 (1987))
“TURNING POINT IN TAKINGS DECISIONS”

In this case, Nollan applied to the California Coastal Commission for a permit to expand his beach-front house. The Commission conditioned their approval on Nollan granting an easement to allow public access to the beach. Nollan sued for a taking and the U.S. Supreme Court found that the connection between the Commission’s goal of preserving beach address and the burden on Nollan to provide an easement was unequal, and it ruled a taking.

This case resulted in an executive order in March 1988 by President Reagan. It directed federal agencies to evaluate carefully the effect of their actions in order to prevent unnecessary takings. In this order he included the 404 Permit Program.

Significant information was taken for this white paper from the Urban Land Institute’s book, WETLANDS Mitigating and Regulating Development Impact. For more detailed information on mitigation techniques and case studies, as well as a comprehensive guide to wetlands, OAR recommends REALTORS obtain a copy of the book. It is available from the Urban Land Institute, 625 Indiana Avenue, NW., Suite 400, Washington, D.C. 20004-2930. Phone (202) 624-7000.

1* Davis Salvesen, Mitigating and Regulating Development Impacts
(Washington, D.C., ULI-the Urban Land Institute, 1990)
2* 40CFR Section 1508.20