The National Federation of Indepedent Businesses has 6 problems with the Clean Water Rule, and 2 of them aren’t valid.

Dinner table conversations can be challenging and enlightening when an environmental scientist and a businessman sit down to eat, especially when the environmental scientist likes to rant about confusing policy. In this case, said businessman quoted most of his side of the discussion from the National Federation of Independent Businesses’ (NFIB) private review and published opinion on the EPA’s Clean Water Rule (CWR). I know that the NFIB has a relatively powerful and effective political lobby when it comes to issues that influence its members, so figured that it would probably be one of the more useful reports to read as I try to explore the CWR’s pros and cons.

The NFIB’s interactive website on their issues with the CWR can be found here, and their longer published comments can be found here.

In summary, the NFIB’s fundamental problem with the CWR is that they claim that it “creates a presumption of jurisdiction”, and puts the burden of disproof on the landowner. They would argue that the has enough definitions ending with “and like features…” or “etc” to make it effectively impossible to determine some jurisdictional areas without input from an EPA official who has context as to the thought process behind the wording in the ruling. Specifically, the NFIB calls the EPA out on four perceived errors in the construction of the new rule:

  1. The NIFB argues that the CWR act misrepresents the standards for “traditional navigable waters” by expanded that definition from “use for commerce” to “use for recreation”. The NFIB doesn’t include an argument about why “use for recreation” shouldn’t be included; it’s only seeking to point out that the EPA is overstepping the initial boundaries placed on its jurisdictional capacities by Congress.
  2. The NFIB contends that it’s inappropriate to treat all interstate waters as “traditional navigable waters”. I’m not quite sure why interstate waters were singled out in the original CWA. Perhaps because it’s too difficult for state-level agencies to oversee their use?
  3. They also make the point that the CWR deliberately misquotes Judge Kennedy’s “nexus test” from the 2006 Rapanos case, switching out a critical “and” for an “or. They claim that the original passage in question – a significant nexus “must significantly affect chemical, physical, and biological integrity of a downstream navigable water”. (Emphasis mine)The CWR’s definition of a nexus switches out that bolded “and” for an “or”, which makes the statement much less restrictive. However, it seems that the NFIB might have reached a bit far here. I sent a query to the US EPA’s outreach office, which replied:”The preamble of the rule addresses this explicitly.  Justice Kennedy recognizes that the goals of the Act are to protect the chemical, physical AND biological integrity of the nation’s waters.  However, a significant nexus is demonstrated when upstream waters significantly contribute to the chemical, physical, OR biological integrity of downstream waters.  This has been the position of the government since SWANCC – and is articulated in places like the agencies(sic) 1998 Rapanos guidance.  The issue has also been addressed in federal court decisions.” It seems like the NFIB confused Judge Kennedy’s stated goal of the act with his definition of a nexus. Additionally, the CWR states that the nexus test will be satisfied  in the “chemical, physical, and biological effects are more than speculative or insubstantial.” This baffles the NFIB because it implies that any proven (i.e. not speculative) effect is automatically significant. The “significantly” part of the nexus statement is an irritating necessity. It may be vague, but I know we don’t have the science yet to make it specific. In an ideal world we would be able conduct a leisurely and rigorous study including extensive threshold of concern testing, historical sediment loads, and investigation of microbial breakdown processes. We would end up knowing exactly what levels of contaminants would damage each unique ecosystem. In the real world we don’t have the time or the resources to define that, and the “significantly” allows room for expert judgement calls.
  4. Lastly, the NFIB claims that the CWR can be extended to cover all ditches. Superficially this claim seems exaggerated because the CWR has explicit exemptions for certain types of ditches – ones that are not built in tributary, relocating a tributary, or draining a wetland. However, the uncertainty inherent in the new, expanded definition of tributary in the CWR affects the definition of ditch by transposition. We can’t definitely say that the CWR covers all ditches, but in some cases we can’t prove that it doesn’t, either. I can see how this confusion would require landowners to engage a consultant to interpret the ruling for them, which is an additional expense.

The NFIB’s comments close with two comments about price. First, that the extended definitions and increased uncertainty will have a chilling effect on development. The CWR mentions several times that that this new rule is intended to reduce the number of case-by-case, more expensive permit processes as well as reduce uncertainty by adding more detailed definitions, but that might not work out. Judging by the initial feedback, the increased number of arguments in the definitions is just creating more topics for people to be confused about. Secondly, the NFIB claims that states and businesses would file lawsuits against what they pursue to be an overstepping of jurisdictional boundaries. We’re already seeing this with the injunction issued in South Dakota.

David Sunding and David Zilberman of UC Berkeley wrote an economic viewpoint on financial ramifications of the expanded jurisdiction of wetlands, which the NFIB quotes to justify their concern about the case-by-case national permitting process costing $270,000. The authors performed a detailed analysis of the effects of the 2002 metamorphosis of National Wetland Permit 26 into several sub-permits with broader definitions of wetlands; it not only calculates the price, but also the efficacy of the changed legislation  as opposed to other wetland protection measures. Even though this article precedes the CWR, it seems to me that many of the same economic thought processes could be applied.

However, the NFIB trips up and claims that “As of 2002, the average CWA permit cost over $270,000”. In actuality the Sunding and Zilberman paper states that the average cost for the less-common individual (case-by-case) permits is $271,596, but the cost of the more common NWP permit (equivalent to the EPA “general” permit) is $28,915. Both of those sums are large and possibly prohibitive outlays of money for small businesses. I just thought it inappropriate that the NFIB didn’t also mention that lower price; it seems like cherry-picking facts.

Sunding and Zilberman calculated these average prices by surveying 103 public and private sector projects in 1999, and asking them to include:

historical data on employee time spent preparing and negotiating the permit and expenditures on outside experts such as biologists and engineers (these experts are more frequently employed to help prepare individual rather than nationwide permits). Information was collected on the parameters of the project (i.e., project description, project size in acres, acres of waters of the United States in the project area, acres of waters of the United States impacted by the proposed activity, wetland acres impacted). Data were also collected on the parameters of the regulatory process (i.e., individual or nationwide permit, dates of regulatory milestones, final decision, amount and type of mitigation required).”

Their calculations of cost did not include “the cost of mitigation, design changes, costs of carrying capital, and other costs”, which explicitly shut downs some comments I’ve heard about this cost estimate that implied that it must be including intangible factors.

In addition, Sunding and Zilberman go through impressively detailed calculations of exactly how the ratio of individual:general permits would change in favor of individual permits under the increased regulation and how many more man-hours of work at the Army Corps of Engineers would be required to address that permit load without increase the wait time. If all goes according to plan the CWR will shift the overall balance in the opposite direction – towards the cheaper and quicker general permits – but its increase in jurisdiction might mean an increase in both types of permits. In any case, the tightening of definitions in the CWR would also require a similar calculation of required staff increases.

In conclusion, I sympathize with the NFIB’s concern about the consequences of the clarification of the Clean Water Act. All legislation is subject to the law of unintended consequences; good intentions can usher in a host of complications. However, I don’t believe that the NFIB report can be read as an unbiased analysis of the CWR. Whether you want to call their inaccurate arguments on prices and the and/or switch in the nexus statement errors or deliberate misstatements, it seems to me that the NFIB is trying to scrape together any and all arguments to convince its members to block the legislation.

The NFIB seems to have focused its efforts here on exposing flaws in the CWR, but I would be genuinely curious to hear of solutions they could offer to the conundrum of how to protect water resources in a economically optimal fashion.

P.S. If you were as confused as I was about the continued references to Rapanos vs. U.S. 2006, here’s the Wikipedia entry, as well as the EPA’s internal bulletin on what the case’s result would mean for the CWA.

P.P.S. I would be really curious to learn more about how a “nexus” can affect navigable waters from the viewpoint of someone who studies wetland and headwater effects – I’m by no means an expert on that part! Please get in touch with me if you have the time and inclination to let me pick your brains on that subject.

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