This is the fourth in a five-part series. For part one, click here
By the late 1990s, the Clean Water Act had slashed pollution from factories and refineries, revived near-dead lakes, and sparked financing for massive upgrades to urban sewage systems.
Beyond cities and industrial areas, however, things were murky. Country streams, for example, were carrying more sediment and fertilizer than ever before, while wet weather was bringing more floods, and dry weather left more parched riverbeds.
So in 2001, on the eve of the CWA’s 30th anniversary, Congress asked the National Academy of Sciences (NAS), and then later the General Accounting Office (GAO), to evaluate the mechanisms for ensuring “no net loss” of wetland functions, and they found a disturbing glitch in the system.
Specifically, they found that developers who damaged wetlands weren’t always fixing them the way policymakers had expected.
Too Much Flexibility?
As we saw in Part Two of this series, wetland protection had come to rely on a concept of “no net loss”, and the key word is “net”.
The policy acknowledged that some wetlands would expand while others contracted, but the goal was to make sure that, on balance, wetlands filtered and serviced just as much water as they had before, and maybe even more. The CWA offered leeway for real estate developers to damage protected wetlands, but only if they promised to clean up their mess, fix what they broke, or restore wetlands of equal or greater hydrological value impacting the same waterways.
Over time, three mechanisms evolved for achieving this: first, developers could fix their own messes; second, they could pay “in-lieu-fees” to environmental groups or others who promised to handle it in the future; and third, they could buy “credits” from green entrepreneurs who proactively restore degraded wetlands and create “mitigation banks”.
But when the NAS and GAO delivered their findings, they showed that only one of those three methods was consistently delivering good results: mitigation banking.
What is Mitigation Banking?
The EPA and Army Corps define a mitigation bank as “a site where wetlands and/or other aquatic resources are restored, created, enhanced, or in exceptional circumstances, preserved expressly for the purpose of providing compensatory mitigation in advance of authorized impacts to similar resources.”
In simple terms, mitigation bankers are green entrepreneurs who make their living looking for degraded streams and wetlands near rapidly-expanding cities or other areas where mining and development might take place, and they proactively restore these areas to a stable state that performs ecosystem services like flood control or water purification. If all goes according to plan, they make money by selling credits to real estate developers who need to offset their environmental impacts.
Of the three no-net-loss options available under the Clean Water Act, mitigation banking worked in part because it operated under clear quality guidelines, and it was the only option that required mitigation before damage – meaning bankers couldn’t sell credits until they had already restored an area of stream or wetland. On top of that, developers had to buy credits at higher ratios than they destroyed, so a developer who damaged 20 acres of wetland had to buy credits for 40, 60, or more, depending on the circumstances.
But when the NAS took stock of the activities, they found that mitigation banking accounted for just 33 percent of the no-net-loss-related restoration activity, with developers trying to handle 60 percent of the work themselves and the remainder going to in-lieu programs. When companies did the work themselves, the researchers found, the costs were often higher than buying from a mitigation bank, while the results were more aesthetic than functional.
“You’d have companies destroying hydrologic wetlands and replacing them with decorative ponds and pools,” says one Army Corps inspector. “These were construction guys, not water guys, and they didn’t really understand hydrology at a landscape level.”
The GAO later investigated in-lieu fee programs, and found a high-percentage of the restoration activities never took place at all.
Fixing the Fix
In 2003, North Carolina Congressman Walter Jones (R, 3rd District) started the process of authorizing an overhaul of the rules around no-net-loss, and in May of 2006 – three months before the Supreme Court handed down its split opinion on the Rapanos case – the two agencies released the first draft of what eventually became their new compensatory mitigation rule for ensuring no net loss of wetlands.
After a two-month commenting period, the agencies began incorporating feedback into a final compensatory mitigation rule while also trying to develop new rules for determining what was and was not protected water in the wake of the Rapanos decision.
In 2008, they published both their final guidance on no-net-loss and their interim guidance for determining what was and was not part of the waters of the United States. Under the new no-net-loss rule, all compensatory mitigation mechanisms were held to the same high standards, and mitigation banking was clearly preferred over the other two.
With the “waters of the United States” guidance, however, too much was left to interpretation, and hundreds of cases ended up in court.
Science, Finance, and Administrative Procedures
In 2011, after three years of constant complaints from environmentalists and industrialists alike, the Obama administration asked the EPA and Army Corps to begin the process of creating a science-based rule for determining what are and are not the waters of the United States.
Such rules, however, don’t just pop out overnight, because administrative agencies aren’t given carte blanche to create them. Instead, they follow something called the Administrative Procedures Act, which President Harry Truman signed into law in 1946. The APA requires, among other things, that agencies have clear reasons for creating new rules, that they invite public consultation and scientific reviews, and that they carry out a certain degree of cost/benefit analysis.
Floating the New Rule
To create what came to be called the “Waters of the United States” rule – often abbreviated as “WOTUS” and colloquially referred to as the “Clean Water Rule”, the Environmental Protection Agency first asked hydrologists and wetland scientists from across the United States to gather all of the known science on the interconnectedness of American waterways. Two years later, in late 2013, the EPA published the first draft of its scientific compendium and invited people to review it.
Drawing on that research, the EPA and the Army Corps jointly developed the first draft of the Clean Water Rule, which they published on April 21, 2014, opening 200 days of public comment that drew over one million responses that were divided into 17 topics and answered individually.
Most of the comments – 87 percent, according to the EPA – were positive, although critics accused the agency of jacking up the positives by encouraging support among environmentalists. Some environmentalists said the law was too lax, while several regulated companies called for “bright line” guidance, meaning simpler rules that they could use to know at a glance when they would and would not need permits.
Costs and Benefits
As the agencies worked on the new rule, it became clear that some protected waterways would lose their status, while some unprotected waterways would gain protection. If the new rule expanded protection, that expansion would come with costs and benefits that the EPA and Army Corps had to address in their economic impact assessment.
To estimate costs, the agencies looked into the Army Corps database, which showed how much money developers already spent to do business in protected areas. They found, not surprisingly, that it varied widely based on how much damage needed to be offset.
To estimate benefits, they had to use a different method, because there are no market prices for clean and consistent flows of water, abundant wildlife, and natural beauty.
One option was “hedonic pricing”, which looks for proxy prices, such as the amount people pay for bottled water or to buy houses with marshland views, but no one had studied these on a national level at the scale and comparability needed, so the agencies looked for studies based on “contingent valuation”, which is a survey-based tool that economists use to value resources that don’t have a market price.
“With contingent valuation, you bring a group of people together who are supposed to be representative of the public, and you ask them questions about their valuation of wetlands,” explains Jeff Shrader, an Economic Fellow at the New York University School of Law’s Institute for Policy Integrity.
The agencies found ten studies that provided 22 estimates of what people were willing to pay for conservation projects that had been developed across the country – from projects that preserved vernal pools in California to those that conserved prairie potholes in Iowa, flyways in Nebraska, and wetlands of all types across Kentucky, Wisconsin, and elsewhere.
In the end, they constructed two scenarios based on different expansions of coverage. For costs, they used a range of actual costs from their data base, and for benefits they used an average extrapolated from the surveys. For the low-expansion scenario, the agencies estimated the costs of compensatory mitigation – or the costs of meeting the no-net-loss wetland requirements – at between $83.1 million and $201.4 million per year, with benefits pegged at $306.1 million. On the high-expansion scenario, they estimated the costs at between $136.0 million and 329.7 million, with the benefits at $501.1 million.
More on the Bionic Planet Podcast
The story continues below, but I’ll also be editing audio from the interviews I conducted with Shrader and others for this series into episode 32 of the Bionic Planet podcast, which which I hope to have ready later this week. You can access Bionic Planet via iTunes, TuneIn, Stitcher, and pretty much anywhere you access podcasts, as well as on this device here:
The Fuzzy Nexus
The final scientific review, entitled “Connectivity of Streams and Wetlands to Downstream Waters: A Review and Synthesis of the Scientific Evidence”, is a 400-page tome that opens with a surprisingly clear and accessible introduction to the challenges of creating a simple rule for determining what is and is not a “significant nexus” between waters.
Specifically, the report points out, landscape often matters more than structure – and a structure that provides a nexus in one setting might provide nothing of the sort in another.
Seemingly “dry” wetlands can – under some circumstances – act like giant sponges that mop up pollution from farms or cities before it gets to a river, while streams that are left unprotected because they lie dormant for most of the year can become giant torrents of goo when rains come; and individual creeks that dribble negligible bits of pollution into larger bodies can wreak havoc if there are enough of them. Even prairie potholes, which are marshes that were carved into the northern plains during the last ice age, can absorb and release contaminants into rivers and streams, depending on where they’re located.
The first draft of the Clean Water Rule divided waterways into those that could unequivocally be categorized as waters of the United States – such as rivers, streams, and wetlands adjacent to them – and those that needed to be evaluated on a case-by-case basis, such as prairie potholes. It also provided detailed scientific criteria for differentiating between the categories.
The New Rule
When the final rule was released in 2015, it stuck to that plot: describing six different categories of waterway that were “jurisdictional by rule” and two that needed “case-by-case” evaluation.
In an effort to meet requests for “bright line” guidance, however, the EPA added a filter to the “jurisdictional by rule” categories, eliminating waters that were more than 4000 feet away from a stream’s ordinary high-water mark or high-tide line.
The Army Corps cried foul, arguing that the distance was arbitrary and would leave important waters unprotected.
“Shorn of CWA protection, those lakes, ponds, and wetlands can be polluted, filled, drained, and degraded at will,” wrote Army Corps attorney Lance Woods in an inta-agency memo released by the House Oversight and Government Reform Committee. “Pollutants dumped into no-longer-jurisdictional water bodies would flow downstream to the navigable waters, polluting drinking water supplies and killing or harming fish, shellfish, and wildlife and harming human populations.”
The EPA countered that important waters outside the 4000-foot limit would be picked up on a “case-by-case” if they impacted navigable waters, but Woods argued that the arbitrary nature of the cutoff would leave the rule susceptible to legal challenges from environmental groups. Ironically, his memo did become the basis for a legal challenge, but not by environmentalists.
Within hours of the new rule’s posting on the federal register, 13 states filed suit to prevent it being rolled out across the West – arguing essentially that the rule overstepped the agencies’ authority, and that the bright-light boundaries were arbitrary and capricious. A federal judge in North Dakota saw enough merit in the argument to issue a preliminary injunction against a rule in those states, effective August 27, 2015: the day before the rule was scheduled to take effect. That prompted other suits, leading to a nationwide stay in October, 2015.
The Obama administration was digging in to defend (and possibly amend) the rule when Donald Trump won first the Republican nomination for President, and then the Presidency itself.
One of the new president’s first acts was to issue an executive order instructing the EPA to scrap the WOTUS rule and “consider interpreting the term ‘navigable waters’…in a manner consistent with the opinion of Justice Antonin Scalia in Rapanos v. United States.”
If implemented, that interpretation would leave 80 percent of protected waters outside federal jurisdiction.