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Letter Asking the OMB to Return a Clean Water Act Rule to the EPA

Author: Caitlin M Date: September 24, 2013

 September 24, 2013

Office of Information and Regulatory Affairs
Office of Management and Budget
725 17th Street NW
Washington, DC 20503

RE: EPA’s Definition of "Waters of the United States" Under the Clean Water Act Rule

The National Federation of Independent Business (NFIB) and the NFIB Small Business Legal Center submit this letter to voice serious concerns regarding the U.S. Environmental Protection Agency’s (EPA) adherence to certain procedural requirements on its rule, “Definition of “Waters of the United States” Under the Clean Water Act (CWA). This proposed rule was submitted to the Office of Information and Regulatory Affairs (OIRA) at the Office of Management Budget (OMB) for review on September 17.

We believe the EPA has failed to meet its statutory obligations under the Regulatory Flexibility Act (RFA) and its amending law, the Small Business Regulatory Enforcement Fairness Act (SBREFA). Accordingly, we request that OIRA immediately return the proposed rule to the agency so that these critical obligations can be met.

NFIB is the nation’s leading small-business advocacy association, representing members in Washington, D.C., and all 50 state capitals. Founded in 1943 as a nonprofit, nonpartisan organization, NFIB’s mission is to promote and protect the right of its members to own, operate, and grow their businesses. NFIB represents about 350,000 independent-business owners who are located throughout the United States.

The NFIB Small Business Legal Center is a nonprofit, public interest law firm established to provide legal resources and be the voice for small businesses in the nation’s courts through representation on issues of public interest affecting small businesses.  To fulfill its role as the voice for small business, the NFIB Small Business Legal Center frequently files amicus briefs in cases that will impact small businesses.  The NFIB Small Business Legal Center also works to educate small business owners on their rights and of significant developments in the law, while monitoring regulatory developments that concern the small business community.

EPA’s Statutory Obligations

In enacting the RFA in 1980 and SBREFA in 1996, Congress sought to address the disproportionate burden faced by small businesses complying with federal regulations. Under the RFA and SBREFA, if a rule will have a “significant economic impact on a substantial number of small entities” EPA is required to perform an initial regulatory flexibility analysis (IRFA) at the proposed rule stage and, prior to submitting the proposed rule to OIRA for review, must convene a Small Business Advocacy Review (SBAR) panel. These panels involve representatives of EPA, the U.S. Small Business Administration’s Office of Advocacy (Advocacy), OIRA, and small entities. The purpose of the panel process is to collect information and feedback from the small entity representatives on different regulatory approaches being considered by the agency so that the agency can find less onerous ways to regulate small entities while still achieving the goal of its regulation.

In this instance, EPA has submitted a rule to OMB that will have clear significant economic impact on a substantial number of small entities — virtually all small businesses — without conducting an IRFA or convening an SBAR panel. The only way EPA can perform this action is to certify the rule will not have such an effect, and it must provide a factual basis for doing so. Though we expect EPA to make this argument when the proposed rule is published for public comment in the Federal Register, as this letter will explain there is no justifiable way EPA can claim this rule will not have a significant economic impact on a substantial number of small entities.

For this reason, the proposed rule should be returned to EPA immediately so it can conduct the required IRFA and SBAR panel.

The Proposed Rule’s Clear Significant Impact on Many Small Businesses

NFIB believes the proposed rule EPA sent to OIRA is substantially similar to its controversial guidance document that languished at OIRA for more than 18 months before being withdrawn the same day the proposed rule began review. On November 16, 2012, NFIB sent a letter to OIRA detailing at length our concerns that the guidance would have serious negative impacts on the small business community (attached). For brevity’s sake, we will only summarize those concerns below. However, the concerns in that letter make clear that EPA should not have submitted the rule for OIRA review without first conducting an IRFA and SBAR panel. EPA plainly has not met its obligations to understand how this rule will affect small businesses.

The EPA is pursuing a significant expansion of federal jurisdiction that will necessarily exert more government control over private landowners, which includes small business owners. As a result, it will have severe practical and financial implications for many. If a portion of a property is deemed a jurisdictional wetland, the owner cannot make use of that segment of his or her property. Indeed, the owner will face devastating fines of up to $37,500 per day if he or she begins to develop that section of the property.

Consequently, most landowners — especially small businesses — will be forced into keeping their properties undeveloped. If the purported jurisdictional wetland covers the entire property, the owner may well be denied the opportunity to make any productive or economically beneficial use of the property. In some cases, it may be possible for the owner to obtain a permit to allow for development; however, there is no guarantee a permit will be issued. Moreover, for small business owners and individuals of modest means, such a permit is usually cost prohibitive. As of 2002, the average CWA permit cost over $270,000.
 
While multinational corporations with tremendous capital resources might be able to afford such costs, most small businesses are without recourse. Usually, their only option is to swallow their losses and forgo any development plans. Unfortunately, these small businesses suffer greatly because they have usually tied up much of their assets into their real estate investments and they can neither afford necessary permits nor legal representation to challenge improper jurisdictional assertions.

Even in the absence of an affirmative assertion of CWA jurisdiction, landowners will be more hesitant to engage in development projects or to make other economically beneficial uses of their properties if the proposed rule is approved. Landowners are already aware that federal agencies have taken an aggressive posture in making jurisdictional assertions in recent years; however, the regulated community is greatly concerned that EPA aims for a dramatic shift toward an even more aggressive jurisdictional reach. As a result, landowners are understandably concerned about the potential for EPA to use the proposed rule to justify jurisdictional assertions.

NFIB already receives questions and concerns from small business owners who are worried about whether EPA has jurisdiction over their properties. And we expect to hear from many more concerned individuals if the proposed rule is eventually promulgated and grants EPA vast new authority. Indeed, if any amount of water rests or flows over a property — at any point during the year — the owner may have cause for concern that the agency might assert CWA jurisdiction.

Unfortunately the proposed rule will likely do nothing to make CWA jurisdiction more clear for these property owners, but will instead only raise new concerns for them. If they want real counsel as to whether it is advisable to develop or make use of these sections of their property, they will have to pay for expert advice, which can be expensive and cost prohibitive. But, the only way to have definitive clarity is to seek a formal jurisdictional determination from the EPA and the Army Corps, which costs more money and further delays development plans.

In the absence of a formal jurisdictional assessment, property owners proceed at their own risk if they wish to use portions of their property that might be viewed as jurisdictional. And that is a risk most reasonable individuals would be unwilling to take. Indeed, they face ruinous fines of up to $37,500 per day if they are mistaken. And for this reason any property that might be viewed as containing a jurisdictional wetland will be greatly devalued.

OIRA Should Return the Proposed Rule to EPA Immediately


For these reasons, we ask that OIRA return the rule to EPA so that the agency can perform the required actions. Under SBREFA, an agency’s failure to meet its obligations under the RFA is judicially reviewable. Therefore, EPA is jeopardizing this entire rulemaking by falsely certifying that this rule will have no significant economic impact on a substantial number of small entities.

NFIB is not asking EPA to abandon this rulemaking. We simply request that the agency study this proposed rule’s impact on small businesses as required by law.

NFIB appreciates OIRA’s time and consideration of this letter. For further information please contact Daniel Bosch, NFIB’s manager of regulatory policy at 202-314-2052 or dan.bosch@nfib.org, or Karen Harned, executive director of the NFIB Small Business Legal Center at 202-314-2061 or karen.harned@nfib.org.

Sincerely,
 
Susan Eckerly
Senior Vice President
Public Policy

 

November 16, 2012

Office of Information and Regulatory Affairs
Office of Management and Budget
725 17th Street NW
Washington, DC 20503

RE: Guidance on Identifying Waters Protected by the Clean Water Act

The National Federation of Independent Business (NFIB) submits this letter to voice concerns, over the proposed guidance from the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers on identifying waters protected by the Clean Water Act (“guidance”). The guidance is currently pending final approval at the Office of Information and Regulatory Affairs (OIRA) at the Office of Management Budget (OMB). We write here to strongly caution against approving the guidance in its current form because it will adversely impact the small business community.

NFIB is the nation’s leading small-business advocacy association, representing members in Washington, D.C., and all 50 state capitals. Founded in 1943 as a nonprofit, nonpartisan organization, NFIB’s mission is to promote and protect the right of its members to own, operate, and grow their businesses. NFIB represents about 350,000 independent-business owners who are located throughout the United States.

The guidance purports to expand federal jurisdiction under the Clean Water Act (CWA). This should raise serious concerns for OIRA for three reasons: (1) the guidance will require the EPA and the Army Corps to assert CWA jurisdiction over many thousands of properties, which will therein impose heavy economic costs on property owners seeking to develop their properties, or will entirely discourage economic development; (2) the guidance—in expanding CWA jurisdiction—will place a cloud upon the title of countless other properties, therein chilling economic development and greatly devaluing properties as the regulated community struggles to determine whether federal agencies will allow development; and (3) federal implementation of the guidance will result in tremendous new liabilities for the federal government and the national budget. 

The Guidance Expands Federal Jurisdiction

Though we fully recognize the importance of the CWA’s goal of eliminating pollutant discharges into the waters of the United States, we have serious objections to the proposed guidance because it will expand CWA jurisdiction—beyond the constitutional limits recognized in Rapanos v. United States, 547 U.S. 715 (2006). Under the new guidance the EPA and the Army Corps will assert newly expanded jurisdiction over properties all across the country. As we will explain in further detail, the economic impact from this will be severe. And landowners of modest mean—especially small business owners and ordinary individuals—will be hardest hit because they lack the financial resources to challenge jurisdictional assessments and or to seek necessary permits.

As Justice Alito recently noted in Sackett v. EPA,132 S.Ct. 1367 (2012), the “reach of the Clean Water Act is notoriously unclear.” This is undoubtedly true. The Supreme Court has addressed CWA jurisdictional questions on three different occasions. See United States v. Riverside Homes, Inc., 474 U.S. 121 (1985); Solid Waste Agency v. United States Army Corps of Engineers, 531 U.S. 159 (2001); Rapanos, 547 U.S. 715. But the exact reach of the CWA remains a murky question—so much so that some legal scholars contend that the CWA is unconstitutionally vague because the regulated community cannot readily determine whether a given property is, or is not, a jurisdictional wetland. See Jonathan Adler, Wetlands, Property Rights, and the Due Process Deficit, Cato Supreme Court Review, 141 (2012). Yet we contend here that the guidance does nothing to offer predictability in jurisdictional assessments and—more fundamentally—contravenes Supreme Court precedent.

CWA Jurisdiction Under Rapanos
The CWA prohibits the discharge of pollutants into “navigable waters” and defines those waters as the “waters of the United States.” But, the Supreme Court has repeatedly rebuffed overly expansive interpretations of “waters of the United States.” Most recently in Rapanos, the Supreme Court made clear that jurisdictional wetlands must have some connection or nexus to “traditional navigable waters.”

Unfortunately, the Court offered two distinct tests for determining whether there is a sufficient connection or nexus to satisfy the constitutional requirement that CWA regulation bear some connection to interstate commerce. Under the plurality’s test, CWA jurisdiction may only be established where there is a continuous surface connection from traditional navigable waters, such that it is difficult to determine where the water body ends and the wetland begins. Rapanos, 547 U.S. at 742. By contrast, Justice Kennedy’s test would instead extend CWA jurisdiction to any wetland with a significant nexus to navigable waters. According to Justice Kennedy:

[W]etlands possess the requisite nexus, and thus come within the statutory phrase “navigable waters,” if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as “navigable.”
Id. at 780.

To date the federal appellate courts are split as to which test is controlling. The Seventh, Ninth and Eleventh Circuits hold that Justice Kennedy’s “significant nexus” test controls. United States v. Gerke, 464 F.3d 723 (7th Cir. 2006); Northern California River Watch v. City of Healdsburg, 496 F.3d 993 (9th Cir. 2007); United States v. Robinson, 521 F.3d 1319 (11th Cir. 2008). Whereas the First and Eighth Circuit hold that jurisdiction may be established under either test. United States v. Johnson, 467 F.3d 56 (1st Cir. 2006); United States v. Baily, 571 F.3d 791 (8th Cir. 2009). And at least one district court has held that the plurality’s “continuous surface connection” test is controlling. United States v. Chevron Pipe Line Co., 437 F. Supp. 2d 605, 613 (N.D. Tex. 2006).

The Federal Response to Rapanos
In the wake of Rapanos, the regulated community, and regulators alike, struggled to make sense of the fact intensive “essential nexus” and “continuous surface connection” tests. To assist regulators in making jurisdictional assessments, the EPA and the Army Corps released a guidance document in December of 2008. Now, the EPA and the Army Corps seek approval of a new guidance—less than five years later.

By comparison, the 2008 guidance was much more conservative than the newly proposed 2012 guidance. Whereas the 2008 guidance was mostly faithful in defining the contours of CWA jurisdiction in accordance with the Rapanos tests, the new 2012 guidance liberally mischaracterizes the Rapanos tests in order to justify more expansive jurisdictional assertions. Accordingly NFIB opposes the 2012 guidance because it exceeds federal authority.

The 2012 Guidance Exceeds Federal Authority 
For the foregoing reasons NFIB contends that the guidance exceeds federal authority by encouraging expansive assertions of CWA jurisdiction. The following is a non-exclusive list of our legal objections to the proposed guidance:
(1)    The guidance misrepresents the standard for “traditional navigable waters”
The guidance defines “traditional navigable waters” as any waters that are used for commerce or that could be used for commerce in the future. But the guidance would effectively expand CWA jurisdiction by lowering the threshold for demonstrating the potential for navigable use in commerce. Specifically, the guidance provides that the potential for commercial navigation “can be demonstrated by current boating or canoe trips for recreation or other purposes.”
Yet, the courts have made clear that the test for “traditional navigable waters” must consider both the “physical characteristics” of the water body and “experimentation” with watercraft or other demonstrated “uses to which the [waters] have been put.” FLP Energy Marine Hydro LLC v. FERC, 287 F.3d 1151, 1157 (D.C. Cir. 2002) (citing United States v. Utah, 283 U.S. 64, 83 (1931)). Most fundamentally, the guidance fails to make clear that “traditional navigable waters” must be conducive to interstate or foreign commerce. This omission—in conjunction with the guidance’s liberal suggestion that navigability may be established without regard to the physical characteristics of the water body—suggests that the guidance will lead to expansive jurisdictional assessments, without regard to the question of whether in fact the water body is susceptible to interstate or foreign commerce.   
(2)    The guidance inappropriately treats all interstate waters as “traditional navigable waters”
The guidance expands CWA jurisdiction by inappropriately instructing agencies to treat interstate waters as “traditional navigable waters.” But, the Supreme Court has made clear that jurisdiction may not be assumed in this manner. To assert jurisdiction, an agency must demonstrate that there is a connection to traditional interstate navigable waters. And the potential for commercial navigation must be proven in fact. Rapanos, 547 U.S. at 739.
(3)    The guidance misstates, misconstrues and changes the “significant nexus test”
As stated by Justice Kennedy in Rapanos, waters have the “requisite significant nexus, and thus come within the statutory phrase ‘navigable waters,’ if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical and biological integrity of other covered waters more readily understood as ‘navigable.’” Id. at 780 (emphasis added). But, the guidance expands CWA jurisdiction by distorting Justice Kennedy’s “significant nexus test,” such that it will liberally justify jurisdictional assertions beyond what the test would allow for if properly applied. The result will be an expansion of CWA jurisdiction.

First, the guidance misstates the significant nexus test, by replacing the conjunctive word “and” with the disjunctive word “or,” when listing the different factors to be considered in determining whether the subject wetland has a sufficient nexus to traditional navigable waters. This misstatement is significant because it effectively lowers the standard for establishing jurisdiction. Under the guidance, agencies will assert jurisdiction if they can demonstrate either that the subject wetland—and similarly situated lands in the region—significantly affect the chemical and physical integrity of other jurisdictional waters or that they affect the biological integrity of those waters. But, Justice Kennedy’s jurisdictional test was not an either or proposition. To satisfy the “significant nexus test,” one must demonstrate all three factors: The subject wetland, and similarly situated lands, must have a significant affect on the (1) chemical, (2) physical and (3) biological integrity of other jurisdictional waters.

Second, the guidance misconstrues the significant nexus test by stating that the test will be satisfied if it can be demonstrated that the chemical, physical or biological effect on jurisdictional waters is more than “speculative or insubstantial.” This enables the agencies to assert CWA jurisdiction without proving that the subject wetlands are in fact having a significant impact on other jurisdictional waters. This incorrectly shifts the burden of proof from the agency asserting jurisdiction to the property owner.  Under the guidance, the agencies will now presume jurisdiction unless proven otherwise. But, Justice Kennedy made clear that the agency must bear the burden of demonstrating substantial effects on other jurisdictional waters. Rapanos, 547 U.S. at 784 (Kennedy, J., concurring).

Third, the guidance changes the significant nexus test by expanding the definition of “region.” This is significant because Justice Kennedy provided that the test should consider the affect that the wetland—“either alone or in combination with similarly situated lands in the region”—has on other jurisdictional waters. Id. at 780 (emphasis added). Logically, a narrow understanding of the relevant “region” will cabin relevant considerations, whereas a broad understanding of the relevant “region” will allow the agencies to more readily assert jurisdiction. And the new guidance stretches the term far beyond the localized concerns that Justice Kennedy had in mind and far beyond the definition provided in the 2008 guidance document. In fact, this is probably the most radical aspect of the new guidance because it defines the relevant region as the entire “watershed,” which would entail more than a million square miles—or 41% of the lower 48 states—in the Mississippi watershed alone. 

(4)     The guidance inappropriately asserts jurisdiction over almost any ditch
The guidance provides that any “natural, man-altered, or man-made water body” with an ordinary high water market will be considered a tributary, and encourages agencies to assert jurisdiction over practically any land over which water occasionally flows by applying either the “continuous surface connection” or “nexus” tests. But, both Rapanos tests reject such an expansive interpretation of CWA jurisdiction. Id. at 731-732. Justice Kennedy’s “significant nexus test” was not intended to apply beyond wetlands to tributaries. And the plurality’s “continuous surface connection” test was intended to strictly limit CWA jurisdiction over tributaries, and would not justify assertions of jurisdiction over “ditches, channels and conduits.” Rapanos, 547 U.S. at 737-39.

(5)    The guidance erroneously bootstraps the CWA’s regulatory reach over adjacent wetlands
Under the Rapanos plurality opinion, the EPA and the Army Corps may be able to assert jurisdiction over wetlands that are adjacent to a traditional navigable waters.  But in order to do so, they must demonstrate that there is a continuous surface connection between such “traditional navigable waters” and the wetland, such that it is difficult to discern where the water ends and the wetland begins. Rapanos, 547 U.S. at 742. Yet the guidance erroneously restates the plurality’s test to assert jurisdiction over wetlands that are adjacent to relatively permanent, non-navigable tributaries that are connected downstream to “traditional navigable water.”

The Guidance Will Impose Heavy Economic Costs on Development for Newly Regulated Properties All Across the Nation
As explained more fully in the previous section, the proposed guidance should be rejected because it improperly encourages expansive jurisdictional assessments, which contravene Supreme Court precedent. But, our concern is over the real-world impacts that the guidance will have on countless landowners across the country. Because the guidance so greatly expands CWA jurisdiction, it will have severe practical and financial implications for many affected landowners.

If a portion of a property is deemed a jurisdictional wetland, the owner cannot make use of that segment of his or her property. Indeed, the owner will face devastating fines of up to $37,500 per day if he or she begins to develop that section of the property. See Sackett v. EPA, 132 S.Ct. 1367, 1370 (2012). As a result, most landowners—especially individuals of modest means and average small businesses—will be forced into keeping their properties undeveloped. If the purported jurisdictional wetland covers the entire property, the owner may well be denied the opportunity to make any productive or economically beneficial use of the property.

In some cases, it may be possible for the owner to obtain a permit to allow for development; however, there is no guarantee a permit will be issued.  Moreover, for small business owners and individuals of modest means, such a permit is usually cost prohibitive. As of 2002, the average CWA permit cost over $270,000. See Rapanos, 547  U.S. at 720 (plurality opinion) (citing Sunding & Zilberman, The Economics of Environmental Regulation and licensing: An Assessment of Recent Changes to Wetland Permitting Process, 42 Nat. Res. J. 59, 74-76 (2002)).

While multinational corporations with tremendous capital resources might be able to afford such costs, most small businesses and individuals of modest means are without recourse. Usually, their only option is to swallow their losses and forgo any development plans. Unfortunately, these small businesses and individuals suffer greatly because they have usually tied up much of their assets into their real estate investments and they can neither afford necessary permits or legal representation to challenge improper jurisdictional assertions.

The Guidance Will Chill Development and Devalue Countless Other Properties
Even in the absence of an affirmative assertion of CWA jurisdiction, landowners will be more hesitant to engage in development projects or to make other economically beneficial uses of their properties if the guidance is approved. Landowners are already aware that the EPA and the Army Corps have taken an aggressive posture in making jurisdictional assertions in recent years; however, the regulated community is greatly concerned that the guidance—if approved—signals a dramatic shift toward an even more aggressive jurisdictional reach. As a result, landowners are understandably concerned about the potential for EPA to use the guidance to justify jurisdictional assertions.

The NFIB already receives questions and concerns from small business owners who are worried about whether the EPA and the Army Corps have jurisdiction over their properties. And we expect to hear from many more concerned individuals if the guidance is approved in its current form. Indeed, if any amount of water rests or flows over a property—at any point during the year—the owner may have cause for concern that the agencies might assert CWA jurisdiction.

Unfortunately the new guidance will do nothing to make CWA jurisdiction more clear for these property owners, but will instead only raise new concerns for them. If they want real counsel as to whether it is advisable to develop or make use of these sections of their property, they will have to pay for expert advice, which can be expensive and cost prohibitive. But, the only way to have definitive clarity is to seek a formal jurisdictional determination from the EPA and the Army Corps, which costs more money and further delays development plans.

In the absence of a formal jurisdictional assessment, property owners proceed at their own risk if they wish to use portions of their property that might be viewed as jurisdictional. And that is a risk most reasonable individuals would be unwilling to take. Indeed, they face ruinous fines of up to $37,500 per day if they are mistaken. And for this reason any property that might be viewed as containing a jurisdictional wetland will be greatly devalued.

Implementation of the Guidance Will Result in New Federal Liabilities
Finally, as we near the “fiscal cliff” dilemma, we must stress the importance of avoiding unnecessary liabilities. We submit that the budgetary needs of the United States would be better served if EPA and Army Corps continued to rely on the 2008 wetlands guidance. While the current debate in Congress centers upon the propriety of different proposals to cut spending and or to raise taxes, it should be abundantly clear that the federal government cannot afford to exacerbate its budgetary problems by adopting a new guidance document that will predictably result in incalculable litigation costs and inverse condemnation liabilities.
Not only will the guidance result in lost economic opportunities, for the reasons explained in the previous section, but it will result in a tremendous amount of litigation. Since the guidance encourages the agencies to make expansive assertions of jurisdiction, litigants will predictably challenge the EPA and Army Corps in their determinations. Moreover, these expansive jurisdictional assessments will take away the right of many landowners to make any economically beneficial use of their properties. And the federal government will therein incur takings liability under the Fifth Amendment for these properties.
For all of these reasons, we encourage the OIRA to reject the proposed guidance. We appreciate OIRA’s time and consideration of this letter.

Sincerely,
 

Susan Eckerly
Senior Vice President
Public Policy

Download a PDF of this letter.

 

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