Environmental regulation of real estate creates many conflicts for land development, but few sources of conflict are as unsettled or contentious as the regulation of wetlands. To succeed, real estate development needs reliable schedules and dependable cost estimates. Wetlands regulation is directly at odds with these two criteria.

Wetlands regulation is inherently subjective and painfully time consuming. A 2003 University of California study1 concluded the average time to prepare and submit an application and to obtain an individual permit for activities in a wetland to be 313 days.

Obtaining wetlands permits is also inordinately costly. The same University of California study estimated the average cost of simply preparing and negotiating an individual wetland permit application with the government, before any actual construction activities in the wetlands, to be $271,596.

In the coming months, the United States Supreme Court will consider three cases that concern the fundamental question of how far the government’s reach extends onto private property to regulate wetlands. The Supreme Court’s review of these cases represents a culmination, but unlikely the last chapter, of a nearly five-year evolution of federal case law regarding wetlands following the watershed 2001 case Solid Waste Agency of Northern Cook County v. United States Army Corps of Engineers, 531 U.S. 159 (2001) (“SWANCC”).

This article provides background on governmental regulation of wetlands, insight into the milestone SWANCC case, and the raft of judicial decisions which followed it, and an introduction to the three cases currently pending review before the Supreme Court. Most importantly, this article provides practical information for owners and developers of real estate to understand the changing scope of federal jurisdiction over wetlands on their properties.

A Primer on Wetlands Regulation
Wetlands, and activities in wetlands, can be regulated by the federal, state, and local governments. At the federal level, which is the primary focus of this article, the lead agency with authority to regulate wetlands is the United States Army Corps of Engineers (the “Corps”).

The federal Clean Water Act (“CWA”) (42 U.S.C. 1344 (“Section 404”)) and rules promulgated by the Corps under the CWA provide the overriding framework for wetlands regulation. As set forth in the following paragraphs, landowners and developers have battled the Corps over the extent to which the CWA and the Corps’ regulations apply to their properties and the activities they wish to undertake on their properties.

Under Section 404 of the CWA, with limited exceptions, it is unlawful “to discharge dredged or fill materials” into “navigable waters” without a permit. The following paragraphs provide further detail on these key ingredients of the CWA, and the reason why these terms have spawned thirty years of litigation.

Discharge of Fill
Although there has been continuing dispute over activities that constitute “discharge of dredged or fill material,” it is fairly well accepted that the term contemplates the addition of any pollutant to navigable waters (which includes wetlands) from any point source, including the addition of materials that will adversely affect, or eliminate, the wetland. Therefore, addition of a fill material, like dirt, from a backhoe bucket or a bulldozer into a wetland is a regulated discharge. Developers have argued, however, whether less obvious activities in or affecting wetlands also constitute a discharge, such as the mud and dirt that drops from a backhoe bucket excavating in a wetland (known as “incidental fall back”).

More recently, in a case that did not involve wetlands but which has a direct bearing on Section 404 regulation, the Supreme Court evaluated whether pumping stormwater from one discrete body of water to another body of water constituted a discharge of a pollutant to waters of the United States. The Supreme Court concluded that the pump that sent already polluted stormwater from the originating water body could, in fact, constitute a point source and that this was, therefore, a discharge. (South Florida Water Management District v. Miccosukee Tribe of Indians, 541 U.S. 95 (2004)) The Miccosukee case will be a pivotal precedent in the disposition of one of the cases currently pending before the Supreme Court.

As a general rule, therefore, any activities which change the chemical or physical state of a wetland and which result from the introduction of a substance from a “point source” will be deemed a regulated “discharge of dredged or fill material.”

Navigable Waters
The Corps’ wetlands jurisdiction, or geographical scope and legal authority to regulate, is premised on the Corps’ oversight of “navigable waters.” Therefore, from the inception of the CWA, the reach of the federal government to wetlands was dependent on navigability, or waters that are, have been, or could be used in interstate commerce. Over time, as administered by the Corps, the scope of the CWA wetland program has expanded to be as broad as possible, extending not just to waters capable of being used at interstate commerce but to the pollution of or any discharges to waters capable of affecting interstate commerce.

In 1977, the Corps promulgated regulations that currently apply to the Section 404 wetlands program. Included in the Corps’ definition of “Waters of the United States” are: “(2) all interstate waters including interstate wetlands; (3) all other waters such as intrastate lakes, rivers, streams (including intermittent streams), mud flats, sand flats, wetlands, sloughs, prairie potholes, wet meadows, playa lakes, or natural ponds, the use, degradation or destruction of which could affect interstate or foreign commerce . . . ; (5) tributaries of waters identified in . . . this section . . . ; (and) (7) wetlands adjacent to waters (other than waters that are themselves wetlands) identified in . . . this section.” 33 CFR §328.3(a) (the “1977 Corps Definition”).

The 1977 Corps Definition created a basis for extensive regulation of wetlands, activities that could damage the interstate commerce link of certain waters, tributaries to these waters, and “adjacent” wetlands. Even today, however, a critical distinction remains between real estate that has the proper characteristics of a wetland, which might be called a “defined wetland,” and wetlands which are subject to federal, regulation, which might be called a “jurisdictional wetland.”

A defined wetland is an area that is inundated or saturated by surface water or groundwater at a sufficient frequency and duration to support hydrophytic, or water dependent, vegetation and which has a soil type which is indicative of wet conditions and which supports hydrophytic vegetation. 33 CFR §328.3(b).

However, a defined wetland is only subject to federal jurisdiction if it falls within the scope of the CWA and the 1977 Corps Definition and if there is a regulated activity (as described in the foregoing sections) in a jurisdictional wetland to trigger federal regulation and required permitting by the Corps. Therefore, not all defined wetlands are jurisdictional wetlands, and not all discharges into defined wetlands come within the reach of the Corps’ jurisdiction. Within ten years of the development of the 1977 Corps Definition, however, the extent of federal authority over all wetlands substantially increased.

The Advent of the Migratory Bird Rule
In 1985, the Supreme Court concluded, in the case United States v. Riverside Bayview Homes, Inc., 474 U.S. 121 (1985), that federal wetlands jurisdiction, as found in the 1977 Corps Definition, expanded the Corps’ control into “adjacent wetlands.”

Relying on the provision of the 1977 Corps definition referring to “wetlands adjacent to waters,” the Court concluded that a wetland does not need to be “navigable in fact” to be regulated by Section 404. As long as the wetland “abuts” the navigable water, it is within the scope of the 1977 Corps Definition.

Emboldened by the Riverside Bayview Homes decision, the next year, the Corps stated in a preamble to certain wetlands regulations that the term “Waters of the United States” also included waters, and therefore wetlands, “which are or would be used as habitat by birds protected by Migratory Bird Treaties or … as habitat by other birds which would cross state lines.” 51 Fed. Reg. 41206, 41217 (1986).

Based upon this standard, which came to be known as the “Migratory Bird Rule,” the Corps began asserting jurisdiction over isolated wetlands, that is, wetlands with no apparent hydrologic connection, or very limited apparent connection, to other navigable waters. To do so, the Corps relied upon a proven or, often, assumed use of the isolated wetland by migratory birds.

Because the language of the Migratory Bird Rule referred to isolated waters that “would be” used by migratory birds, nearly any wetland qualified for federal jurisdiction. The Migratory Bird Rule spawned substantial litigation, with irate developers challenging the constitutional and regulatory validity of the standard. These disputes culminated in the 2001 case known as SWANCC.

SWANCC
The SWANCC case represents one of the more substantial forks in the road for federal wetlands authority. However, while SWANCC did represent the end of the Corps’ Migratory Bird Rule, the Corps’ defeat in SWANCC, in fact, simply opened the door to equally expansive regulation of otherwise “isolated wetlands” through other means.

At issue in SWANCC was a proposal by a solid waste management agency to construct a waste transfer and disposal site on a former sand and gravel strip mine in northern Illinois consisting of over 500 acres. The former mining and quarrying activities had left behind a pockmarked landscape with multiple trenches, pits and depressions. Over time, these depressions had filled with water and water-loving plants. In other words, the landscape was dotted with isolated pockets of “defined wetlands,” as that term was used above. When the proponent for the project consulted with the Corps regarding its jurisdiction over the SWANCC property, the Corps asserted jurisdiction, based upon the presence of isolated wetlands that were or could be used by migratory birds.

In front of the Supreme Court, the landowners/project applicants challenged the constitutionality of the Migratory Bird Rule as exceeding the Corps’ delegated authority under the CWA. A 5-4 majority of the Supreme Court agreed with the landowners, concluding that the Corps did not have the power to deny a permit for activities in this sort of isolated wetland. The Supreme Court rejected the Corps’ argument that Congress had implicitly blessed the Migratory Bird Rule during an earlier consideration of amendments to the CWA.

The Court also concluded that the Corps’ broad interpretation of its jurisdiction under the CWA was not a reasonable act by the agency, stating that “Congress does not casually authorize administrative agencies to interpret a statute to push the limit of Congressional authority,” especially where such authority would divest the state and local governments over a matter traditionally within their purview, including land and water use issues. On these grounds, the SWANCC decision effectively brought an end to the Migratory Bird Rule.  

With the death of the Migratory Bird Rule, the Corps began to retool its authority over isolated wetlands. However, although the Supreme Court had struck down the Migratory Bird Rule as improperly promulgated and as exceeding the authority granted by the CWA, it did not discard the jurisdictional basis over wetlands articulated in the prior Riverside Bayview Homes decision. Therefore, the Court left intact the Corps’ jurisdiction to wetlands that were otherwise isolated and non-navigable, but which could be considered “adjacent to, or tributaries and impoundments of, other waters.”

As the SWANCC Court stated, referring to Riverside Bayview Homes, “some waters that would not be deemed ‘navigable’ under the classical understanding of that term” remained within the regulatory scope of the Corps’ wetlands program – “it was the significant nexus between the wetlands and ‘navigable waters’” that allowed Section 404 jurisdiction to reach such isolated wetlands.

Case Law since SWANCC
Beginning in 2001, a procession of federal courts concluded, with some limited exceptions, that any hydrologic connection between a wetland and a traditional navigable water sufficed to establish the requisite “significant nexus” and, therefore, federal jurisdiction over the wetland. For example, federal jurisdiction was established in the following sampling of post-SWANCC cases, based upon the briefly summarized facts:
    • United States v. Buday, 138 F. Supp 2d 1282 (D. Mont. 2001): wetlands on non-navigable creek separated from navigable waters by over 235 miles of non-navigable ditches deemed jurisdictional because of tributary relationship;
    • United States v. Lamplight Equestrian Center, Inc., 2002 WL 360652 (N.D. Ill. 2002): wetland that drained to manmade ditch, through 50 foot delta, then into a non-navigable stream and then into navigable river deemed to be adjacent;
    • Baccarat Fremont Developers v. U.S. Army Corps of Engineers, 327 F. Supp. 2d 1121 (N.D. Cal. 2003): wetlands separated by man-made berms and without any surface hydrologic connection to flood control channels linked to San Francisco Bay deemed adjacent;
    • United States v. Rueth Development Co., 335 F.3d 598 (7th Cir. 2003), cert. denied, 540 U.S. 1050 (2003): wetland connected to navigable river though miles of manmade ditches deemed adjacent;
    • Northern California River Watch v. City of Healdsburg, 2004 WL 201502 (N.D. Ca. 2004): wetlands with no surface connection to navigable river deemed adjacent because of apparent groundwater influence;
    • United States v. Deaton, 332 F.3d 698 (4th Cir. 2003), cert. denied, 541 U.S. 972 (2004): wetland draining to roadside ditch and through eight miles of additional ditches, five culverts three ponds and five dams, over a twenty-five mile stretch, deemed adjacent through “tributary” connection;
• United States v. Rapanos, 339 F.3d 447 (6th Cir. 2003), cert. denied, 541 U.S. 972 (2004): wetlands connected to navigable river, as much as twenty miles away, through 100-year-old drain and two non-navigable rivers, deemed adjacent;
• Treacy v. Newdunn Associates, LLP, 344 F.3d 407 (4th Cir. 2003), cert. denied, 541 U.S. 972 (2004): wetlands connected to navigable water by 2.4 miles of natural streams and manmade ditches deemed adjacent;
• Carabell v. U.S. Army Corps of Engineers, 391 F.3d 704 (6th Cir. 2004): wetlands separated from manmade ditch by manmade berm, but which court concluded was connected to navigable water “one way or the other,” deemed adjacent;
• United States v. Gerke Excavating, Inc., 412 F.3d 804 (7th Cir. 2005): wetlands separated from navigable water by stretch of non-navigable creeks and rivers deemed adjacent.

But, in contrast, a few post-SWANCC federal courts have found that such a “tributary” relationship between wetlands and navigable waters is not sufficient to establish the presence of “adjacent wetlands” subject to federal jurisdiction. For example:
    • D. E. Rice v. Harken Exploration Company, 250 F.3d 264 (5th Cir. 2001): discharge of pollutants to creek, tributaries and ground and surface waters which later appeared in navigable waters failed to establish jurisdiction over upstream waters as adjacent;
    • United States v. RGM Corps., 222 F.Supp.2d 780 (E.D. Va. 2002): surface drainage from wetlands to manmade ditches and, ultimately, navigable waters failed to create “adjacent wetland” status;
    • United States v. Needham, 2002 WL 1162790 (W.D. La. 2002), reversed by In re Needham, 354 F.3d 340 (5th Cir. 2003): spill of oil into one body of water after which oil was found 10-12 miles away failed to establish jurisdiction over upstream waters (this holding was reversed, on appeal, by the higher court).

What lessons can a landowner or developer derive from these cases? For one thing, words like “navigable” and “adjacent” don’t always mean what they would seem to. More specifically, in many ways, pending the outcome of the Supreme Court’s upcoming consideration of the three cases it recently accepted for review, the federal jurisdictional reach over isolated wetlands is currently as broad as it ever was in the heyday of the Migratory Bird Rule. The presence of non-navigable wetlands does not preclude federal jurisdiction. Indeed, a landowner or developer who encounters wetlands on a development site practically needs to rebut the presumed existence of a surface or groundwater hydrologic connection between the wetland and any non-navigable and, ultimately, navigable body of water, since water from the wetland, like most water, flows downhill.

The Future of Federal Jurisdiction Over Isolated Wetlands
On October 11, 2005, the United States Supreme Court agreed to accept four cases for review — the first four under new Chief Justice John Roberts’ tenure — three of which will squarely address the question of the geographic reach of federal jurisdiction to waters of the United States, including isolated wetlands. The three cases to be reviewed are:
    • Carabell v. United States Army Corp of Engineers, 391 F.3d 704 (6th Cir. 2004), cert. granted, 2005 WL 2493859 (2005).

This case involves forested wetland in Michigan separated by a manmade earthen barrier from a drainage ditch that connects to a tributary of navigable waters. The property owners had sought to construct a condominium development on the property, but were barred when the Corps asserted jurisdiction over the wetlands. The Sixth Circuit Court concluded that the wetlands were adjacent, jurisdictional wetlands based upon the hydrologic connection and the significant nexus to the adjacent drainage ditch. The landowner appealing the case has asked the Supreme Court to consider (a) whether the CWA jurisdiction extends to wetlands that are hydrologically isolated from waters of the United States and (b) whether limits on Congress’ authority to regulate interstate Commerce preclude interpretation of the CWA to extend federal authority to wetlands that are hydrologically isolated from other waters of the United States;

    • Rapanos v. United States, 376 F.3d 629 (6th Cir. 2004) , cert. granted, 2005 WL 2493858 (2005).
This case involves a claim by property owners in Michigan that wetlands on their property do not directly abut navigable waters to allow federal jurisdiction. The appealing parties have asked the Supreme Court to determine (a) whether the CWA prohibition on unpermitted discharges to navigable waters extends to non-navigable wetlands that do not abut navigable waters and (b) whether the extension of CWA jurisdiction into every intrastate wetland, without any sort of hydrological connection to navigable waters, no matter how tenuous or remote, exceeds Congress’ constitutional power to regulate commerce among states. The landowner, John Rapanos, currently faces $10 million in fines and $3 million in wetland restoration fees because he failed to get a permit before he began grading his property and filling wetlands on his property;

    • S.D. Warren Co. v. Maine Board of Environmental Protection, 868 A.2d 210 (2005) , cert. granted, 2005 WL 2493860 (2005).
This non-wetland case concerns a challenge by the operator of five hydroelectric dams on a river in Maine to a requirement imposed by the State Board of Environmental Protection, together with the federal government, that the owner obtains “water quality certification” in order to secure permits to operate the dam. The state’s contention is that the water flowing through the dam constitutes a “discharge,” or an “addition of any pollutant from any point source.” The owner of the dams is relying on the prior Supreme Court decision in the South Florida Water Management District v. Miccosukee Tribe of Indians case, which held that in order to be found a discharge, there must be an addition from a distinct body of water.

Conclusion
The focus of the three cases currently before the Supreme Court on “what is an ‘adjacent wetland’” (Carabell and Rapanos) and “what constitutes a ‘discharge’” (Warren) distinguishes the cases from SWANCC, which looked at the scope of authority delegated to and assumed by the Corps in developing the Migratory Bird Rule. There are, however, common threads to all four cases.

In SWANCC, a majority of the Supreme Court came down on the side of protection of property rights and deference to local (and state) control of real estate and real estate development. The constitutional “hook” was the extent to which the Corps interpreted and exercised the authority it had under the CWA. While the validity of the concepts of “adjacent wetlands” and what is a “discharge” are far more established and recognized than the Migratory Bird Rule was, what is not different is the degree to which the Supreme Court could conclude that the Corps exceeded its authority in implementing and interpreting authorities in the field. Together with the philosophical leaning toward protecting property rights, particularly in a court with a new Chief Justice and, potentially, another appointee of the current administration, it is not beyond comprehension that this Court could reach a decision at odds with the majority of the post-SWANCC interpretations of navigable waters, adjacent wetlands, and regulated activities in these wetlands.

To reach such a result, however, the Supreme Court will need to turn back the clock to the very early days of the CWA, to assess the intended breadth of the original authority granted to the Corps over “navigable waters,” and whether the tie to navigability was intended to limit, or intended to expand, that authority.

The Supreme Court will also likely hear arguments that its consideration needs to balance the constitutional authorities with the policies behind environmental laws such as the CWA.

A fundamental grounding for wetlands protection is flood storage and flood absorption – characteristics that were tested in the hurricane ravaged Gulf Coast in 2005, with questions arising over wetland losses that have occurred over the years, and that will occur if “adjacent wetland” jurisdiction is reduced.

Once again, therefore, wetlands regulation has brought to the forefront, and to the Supreme Court, the challenging crossroads of environmental regulation and land development. The Supreme Court’s conclusion will influence continuing land development pressures for many years to come.  SLDT

1 David L. Sunding and David Ziberman, University of California, Berkeley, Non-Federal and Non-Regulatory Approaches to Wetland Conservation – A Post-SWANCC Exploration of Conservation Alternatives, (January, 2003).