Supporting the legislation enacted by Congress are the rules and regulations developed by the agencies responsible for administering the law and very often they come under legal attack. Such is the current situation relative to wetland protection. Two cases in particular have been decided within the last five years that have and will continue to result in a dramatic increase in wetland losses.

The Tulloch Rule

Recognizing a loophole in the CWA, in that it specifically references “the discharge of dredged or fill material into the navigable waters”, developers in the 1980’s began to drain and destroy wetlands by utilizing special equipment that limited the amount of dredged material that was re-deposited (discharged) into the “waters of the U.S.” during ditching, mining and channelizing operations. By redepositing little if any of the material they effectively eliminated the need for Section 404 permitting.

Recognizing the loophole (but only after lawsuits from the National and North Carolina Wildlife Federations), the EPA and Corps issued the “Tulloch Rule” in 1993 to close it. Essentially, the Tulloch Rule required CWA Section 404 permits for most projects that involved dredging whether the equipment used limited the redeposit of material or not.

The Tulloch Rule was challenged and in National Mining Association v. United States Army Corps of Engineers (1998), the Circuit Courts upheld the decision of a lower court to strike it down. Effectively, the loophole was open again and EPA estimates that 20,000 acres of wetlands were destroyed as a result between 1998 and 2000. To make matters worse, they acknowledge that their estimates may be grossly low since developers are no longer required to report such activities to the Corps.

In an attempt to rectify the situation, a new rule (66 Fed. Reg. 4549; 74 DEN AA-1,4/17/01) was issued by the Corps in April of 2001 after being held up by the Bush Administration for four months. Even prior to its official adaptation, the new rule was challenged by the National Association of Home Builders and that case is currently pending. Should the courts find against the Corps, the onslaught against the nation’s wetlands can be expected to begin once again.

The Migratory Bird Rule

As was discussed earlier, the Corps got inventive with the Commerce Clause of the Constitution and ruled that they had regulatory authority over isolated wetlands. Their argument was based on the position that the migratory birds that frequented such habitats were of significant value economically (birdwatching is a multi-billion dollar industry) and that value transcended state borders as the birds in question paid little attention to them.

This position was challenged in SOLID WASTE AGENCY OF NORTHERN COOK COUNTY v. UNITED STATES ARMY CORPS OF ENGINEERS et al (SWANCC v. USACE) and in January of 2001, the United States Supreme Court overturned the ruling of the Seventh Circuit and found against the Corps. This is an extremely important case and its overall impact has yet to be fully realized.

There is a justifiable concern in the environmental community that thousands of acres of isolated wetlands will be destroyed now that the Court has ruled that they are not subject to regulation. Unfortunately, the true impact on the ecosystem will be difficult to quantify as it is now recognized that many bird and animal species move frequently from one wetland resource to others and the loss of isolated wetlands will alter and/or endanger their life patterns.

As of January 2003, the EPA and Corps were still in the process of reviewing and preparing new rules to comply with the SWANCC ruling. However, from an initial review of the proposed rules it is a foregone conclusion that they will leave many formerly regulated wetlands without any protection.

The Takings Issue

The Fifth Amendment to the United States Constitution states that “...nor shall private property be taken for public use without just compensation." This basic right seems quite straightforward but it in reality, it is an extremely complex legal issue that has produced both confusion and an enormous body of case law. While virtually everyone would agree that a property owner whose land is “taken” under the concept of eminent domain for a school or highway should be compensated, there is substantial debate as to whether the Fifth Amendment offers protection to those whose property is reduced in value as a result of a government regulation.

The concept of regulatory takings is a primary issue relative to wetlands specifically and environmental issues in general. Property rights advocates maintain the position that if a property is devalued as the result of a regulatory action, for example, if the enforcement of wetlands restrictions authorized by the CWA render portions of the property unbuildable, then the government should compensate the property owner for that loss of value. Legislation has been proposed in Congress in recent years that would codify this concept into law and although it has failed passage so far, support for the proposal seems to be gaining, much to the chagrin of many environmentalists.

On its face, the argument made by property rights advocates may appear to be logical. However, there is a major counterpoint that is often overlooked in the heat of debate. That is, nearly every action of a government body, be it local (especially local), state or federal has the potential to impact property values. Two examples will serve to illustrate this point.

On a local level, zoning laws, in large part, determine the value of property and any change in zoning may have an enormous impact on that value. Zoning is obviously regulatory and thus by logic, an action that would be subject to redress under the theories advanced by property rights advocates. On a federal level, changes in interest rates, a regulatory action by the Federal Reserve, have an enormous impact on the property and housing markets. Lower interest rates almost always encourage more people to enter the housing/property market which translates into higher property values because of the change in the supply/demand balance.

In both of the cases above (as well as by virtually any other regulatory actions), the value of a property can be either increased or decreased. Those supporting the various “Takings” legislation would have the government compensate those whose property was devalued but would not require the property owner to compensate the government if an action increased the value of their property. It is sort of a one way street and effectively it would preclude the government from taking any action on virtually any issue. Consider, for example, the enormity of the claims that could be filed as a result of an increase in interest rates.

Obviously, regulatory takings are an issue that requires a common sense approach, but since that is as “common” as flying pigs, the whole issue ended up in the courts. One of the dominant cases regarding regulatory takings is Lucas v. South Carolina Coastal Council that was decided by the Supreme Court (1992) in a 6-3 decision. This case is critical because the Court established a boundary between compensable and non compensable land-use regulations by drawing a clear distinction between total and partial regulatory takings. Writing for the majority, Justice Scalia held that compensation was only required if the regulatory restrictions deprived a property owner of “all economically beneficial uses" of property. Thus, unless the property was rendered valueless, no “taking” has occurred.

Lucas is, in large measure, the driving force behind the continued efforts to construct new legislation regarding legislative takings. Property rights advocates point to the fact that Lucas virtually provides a blueprint for legislators and rule makers to construct regulations that avoid the need to compensate for the taking of private property. Whether they have a valid argument or not depends on your perspective. However, what is not subject to debate is that the issue is not going to go away any time soon and that it is of critical importance, especially regarding environmental regulations.

FYI... As a starting point to learning more about this issue you may want to access a very informative document called REGULATORY TAKINGS AND PROPOSALS FOR CHANGE that was prepared by the Congressional Budget Office in 1998.