Navigating California’s new regulations for wetlands and state waters

The Freeman Diversion Facility in Ventura County (Photo by DWR)

California regulations protecting wetlands and state waters were approved by the State Water Resources Control Board and will take effect on May 28, 2020. These new rules create a more expansive and complex permitting scheme for developers, public agencies and others with projects that may impact waters and wetlands.

In this Best Best & Krieger LLP webinar, Environment Law & Natural Resources Partners Andre Monette and Lowry Crook discussed key components of these new regulations and strategies for navigating them to move projects forward.

WATERS OF THE UNITED STATES (WOTUS)

The Clean Water Act defines the waters that are subject to federal regulation which are called Waters of the US (or WOTUS).  Mr. Monette noted that the broad definition has been subject to interpretation in at least three Supreme Court dating back to the 1980s.  In 2015, the Obama Administration issued a new definition of Waters of the US, which was challenged in several courts across the country.  The question of whether or not a district court or a federal court of appeals had jurisdiction went to the Supreme Court and is now back at the district court level, which was the fourth case involving this issue.

Where things stands today, it’s almost a 50/50 split as to whether the 2015 rule applies or the prior rule which is dated to the 80s that was interpreted by subsequent EPA guidance documents, said Andre Monette.  As of the date of the webinar (October, 2019), California is subject to the 2015 definition of Waters of the US.  Other states that have been involved in court challenges in district courts, such as North Dakota, Texas, and Georgia had issued stays of the 2015 rules so that stay remains in place and the rule does not apply in those states.

Mr. Monette then went over the background.  In 2015, the Obama Administration issued a new rule.  When President Trump took office, one of the first things he did was issue an executive order directing EPA to rescind the 2015 rule and issue a new one that was consistent with Justice Scalia’s rationale in the case of Rapanos v. United States.  EPA has now done that; they issued a draft rule on September 12.  It has not been published in the federal register but this rule would rescind the 2015 rule and replace it with a new definition that is somewhat consistent with the Scalia definition, he said.  It includes elements of the Rapanos decision, but it’s definitely a bridge between the 2015 rule and Scalia’s rationale for the Rapanos case which is important in terms of some of the exemptions and classifications for existing infrastructure, he said.

CALIFORNIA’S RESPONSE

Since the Rapanos decision, the state of California has been struggling with how to define Waters of the State.  The federal Clean Water Act and the state’s water quality legislation, the Porter-Cologne Act, work together.  The Clean Water Act covers federal waters, but doesn’t cover everything, so the state treats its definition of Waters of the State as a backfill.

In fact, the definition of Waters of the State in the water code for Porter Cologne is extremely broad,” said Mr. Monette.  “It is any surface water or groundwater, including saline waters, within the boundaries of the state.  It’s hard to imagine something that doesn’t fit that.   So since about 2008, the State Water Board has been trying to draft a definition of that term that would backfill from what they viewed as the Supreme Court stepping away from the high water mark, but still be workable.”

He then turned it over to Lowry Crook, also a partner at Best Best & Krieger; Mr. Crook worked extensively on the 2015 rule as well as the Dakota Access Pipeline, so he is very familiar with the Clean Water Act, the 404 program, and how it interplays with infrastructure projects.

Lowry Crook began by clarifying the status of the Water of the US.  “In September, the EPA and Army Corps issued their final rule that would rescind the Obama 2015 standard and go back to the pre-Obama guidance and rules and that will be effective in 60 days after it goes in the federal register absent a court challenge,” he said.  “We’re still looking for the final replacement rule with a new standard and the administration documents say that’s what they are expecting to do by December of this year.

The Waters of the State (WOTS) regulations were recently approved by the Office of Administrative Law and will become effective on May 28th of 2020.  The State Water Board staff has said that they plan to spend the time between now and then first doing internal staff training with the regional boards, and then a series of external training events for practitioners where there will be opportunity for some back and forth and some clarification regarding some of the details, he said.

In this presentation, they would be providing an overview of the key features and exemptions of the new rules with a focus on the impacts on municipalities and public water agencies.  Mr. Crook acknowledged that there is a lot of nuances in the provisions as it relates to agriculture that would not be a focus of this presentation.

WHAT’S IN THE NEW RULE?

The new rule does two things:  It provides a new definition of wetlands, and it also requires a new type of permit for discharges considered a dredge or fill into a Waters of the State.

Wetlands are defined to include all waters of the US wetlands,” Mr. Crook said.  “Interestingly, they said ‘under the broadest of any historic definition of waters of the US’, so that brings in either the 2015 rule or any prior broader interpretation.  It also includes all natural wetlands, regardless of their proximity to other waters.  Also unlike the federal definition of wetlands which requires wetland vegetation, it includes salt flats and desert playas that lack vegetation.

He acknowledged that it does draw some lines for artificially created wetlands.  “The new rule basically says it’s not a Water of the State if it’s an artificially created wetland that’s less than an acre or if it’s an artificially created wetland that was constructed and is maintained primarily for wastewater, stormwater, water recycling, or groundwater recharge,” he said.

For Waters of the State, it requires a new permit on top of 401 certification from the regional boards that applies to any discharge of dredge or fill to waters of the state with some exceptions.  “It’s basically like a state version of the Army Corps’ federal 404 permitting program, but whereas the Army Corps has a whole host of nationwide permits that exempt you from some requirements or pre-certifies for some requirements, there are narrower exemptions under the state program that they are enacting,” said Mr. Crook.

Mr. Monette pointed out that the intent is to cover a lot of things, acknowledging there are some exclusions.  “Many of us represent agencies or private property owners that have existing infrastructure, and the classification of that is in flux and that’s problematic,” he said.  “If you need to operate something, your standards are changing and that’s something that most people are concerned about.  The exemptions here are fairly narrow and this is very broad rule.”

EXEMPTIONS

Mr. Crook then reviewed the exemptions for Waters of the State (WOTS).  The first exemption is for operations & maintenance.  He noted that this was heavily negotiated and one of the most important for public agencies with existing water infrastructure.

Where it landed is that the permit application exceptions include a class of activities where there is dredge or fill that’s impacting waters of the state and that is one for agricultural activities, irrigation ditch, stock ponds, and farm roads that are exempt from the Clean Water Act under section 404-f,” said Mr. Crook.  He noted there is also an exemption for O&M for certain mining activities that are regulated in the NPDS federal program.

Mr. Crook said that the most important exemption for public water agencies is for routine and emergency O&M activities by public agencies, water utilities, or special districts that result in discharges to artificial Waters of the State if they are primarily for sediment settling, stormwater, surface water treatment, recycled water, or groundwater recharge, or if they are preserving the capacity and the line of grade in the footprint of an existing flood control or stormwater conveyance facility.

There is a second set of much narrower exemptions that anybody can claim for operation and maintenance activities that would apply if those activities would impact an artificial water of the state that’s not either a federal water of the US, that’s not specified in a water quality control plan that was a modified water of the state, or isn’t something that was identified as a compensatory mitigation work.  So if you are impacting this narrow class of Waters of the State, you can be exempted from the permitting requirement if its primarily for wastewater treatment or disposal, sediment settling, stormwater, fire suppression, industrial process and cooling, recycled water, or groundwater recharge, he said.

Mr. Monette gave examples of treatment control or other BMPs on a large privately-owned sites such as a Costco parking lot that might have a constructed wetland or an industrial facility that has a settling pond for process water as the types of facilities that this exemption would likely apply.  Mr. Crook noted that this exclusion was heavily negotiated and it’s very nuanced, so it’s something that you should work through with your lawyers.

Mr. Crook noted that there are some additional exclusions for agricultural activities like rice wetlands, agricultural ditches and stockponds.

If none of the exemptions apply, then the new WDR permit in addition to the 401 certification would be needed.

WHAT’S REQUIRED

The main requirement for the new permit is an alternatives analysis that shows that the chosen alternative is the least environmentally-damaging alternative; compensatory mitigation for any unavoidable environmental impacts is also required.

Mr. Monette said the alternatives analysis is the most ‘biting’ requirement of the rule.  “It’s not just that you need a permit because we’ve defined waters of the state very broadly; it’s that if you’re going to do work that may impact waters of the state, you have to conduct an alternatives analysis,” he said.  “You have to choose the least damaging alternative, and you have to do mitigation potentially, so this is an important piece of this new rule.”

The difference between this new permitting program and the federal 404 program is that under the 404 permit, if one of the nationwide permits covers the activity, then the activity is generally exempted from the alternatives analysis and showing the least environmentally damaging alternative, explained Mr. Crook.  The exemptions are narrower for the state program.

There are a few exceptions to these requirements: if you have an ecological restoration project that’s under a binding agreement with a relevant agency or environmental group; an approved watershed plan; or a discharge of fill that has no permanent impacts, which is defined as less than one year of impacts.

There are some exceptions that apply if the activity is covered by an Army Corps nationwide permit.  There is an exemption if the activity is covered by one of the 14 Army Corps nationwide permits that have been pre-certified by the State Water Board under the 401 certification process, but Mr. Crook said those nationwide permits are focused more on vessels, navigation, utility lines, living shorelines – the type of permits not generally used by water agencies or municipalities constructing roads or infrastructure.  The most likely exemption is for discharges that are less than 2/10ths of an acre or 300 linear feet that only impact Waters of the US and that are covered by one of the 40 other nationwide permits.

You may fall into this exemption because you’re covered by a nationwide permit for maintenance for outfall structures, intake structures, bank stabilization, maintaining flood control, stormwater management facilities – those sorts of activities that are covered by nationwide permits,” said Mr. Crook.

With the exception for approved watershed plans, the idea is that if the activity is part of a broader watershed plan, then you may be relieved from these requirements, he said.  Those plans include special area management plans, advanced identification programs, wetland management plans, habitat conservation plans if they substantially meet the US FWS standards, natural community conservation plans if they substantially meet the DFW standards, and then municipal stormwater permit watershed management plans if it substantially meets the relevant standards.  Mr. Crook noted that if the habitat conservation plan or a natural communities conservation plan is approved in this next year, then the Board is going to presume that it qualifies and exempt you from this alternatives analysis.

Mr. Monette pointed out that the exception for a watershed plan is a large benefit, because the alternatives analysis is costly and time-consuming.  “If you’re conducting maintenance or your client is building something new, it’s very important to look at whether or not the activity is consistent with one of these plans,” he said.  “In many of the developed areas of California, the water boards have moved to requiring watershed management plans within the last five years, and a lot of them have BMPs built in for new development.  Habitat conservation plans can be a great source of opportunity to rely on doing things that are consistent with an already established plan; that saves a lot of time on a project, whether it’s maintenance to existing infrastructure or building new infrastructure.”

Mr. Crook said that they are recommending that before the rule goes into effect on May 28, people survey what plans are applicable in their area and look at them and decide if they satisfy the requirements to relieve them of the alternatives analysis and other regulations, or if the activity or project needs to be tweaked or updated so that they can use an existing plan.

An artificial Water of the State is anything man-made that would fit the definition of wetlands under the state rule.

The state has been very clear that just because something is man-made, doesn’t mean it isn’t going to be regulated as waters of the state, and in fact, it probably will be,” said Mr. Monette.  “They are starting with ‘yes it is’ and you have to find one of these exclusions to take it out.”

Regarding artificial wetlands created for wastewater and stormwater and whether or not they need to comply with the new rule or if there is an exemption, by and large, it looks like there is an exception for maintenance to those things, but it’s not a sure fit,” he continued.  “It looks like there are some exemptions, but it’s not going to fit every scenario.”

The first question for a lot of these is were they created in dry land or whether they are modifying some existing surface water, because the exemptions that apply generally are for wetlands that were dry land versus wetlands that were created from existing surface water that’s considered Waters of the State,” added Mr. Crook.

In terms of the alternatives analysis, the rule itself actually provides some guidance and standards for alternatives analysis.  The rule refers back to the federal 404 requirements as well as CEQA, and there are some specific requirements set forth in the new rule.

The goal of the alternatives analysis is to demonstrate that your project is the least environmentally damaging alternative, which is a term of art in both state and federal regulation,” said Mr. Crook.  “Then where you have unavoidable impacts to a water of the state, it requires a minimum of a 1:1 ratio of compensatory mitigation for those impacts.”

POSSIBLE IMPLICATIONS OF THE NEW RULE ON INFRASTRUCTURE

Mr. Monette and Mr. Crook then ran through different types of common infrastructure and gave their thoughts on how the new rule may apply and some questions that may need to be resolved going forward.

Groundwater recharge, settling basins, and constructed wetlands

In terms of groundwater recharge basins, the slide shows a picture of groundwater recharge basins that are adjacent to the Santa Ana River.  There are two types shown: some appear to be off-stream and some are built adjacent to the river.

Under federal law, the first question would be whether the recharge basin was constructed off-stream in dry land or whether they were constructed in existing Waters of the US; this will largely determine whether there is federal jurisdiction or not.  Similarly under the new state standard, the question will be whether it was constructed in an existing surface water of the state or modifying a surface water of the state, or whether it was in dry land.

One thing that the state rule does make clear is that if it’s off stream but it’s connected through a diversion from an existing water, that doesn’t make it a modification of an existing water,” said Mr. Crook.  “That’s considered in dry land and if it meets one of the purposes set forth in the new rule like water recharge, recycling, then it is exempted from being covered as a Waters of the State.”

If the recharge basin was located in the channel, then the question would be if you are subject to one of the exemptions for operation and maintenance.  “That’s going to largely turn on whether the primary purpose is for one of these lists of exempted activities like groundwater recharge or water recycling or stormwater management,” said Mr. Crook.

If you are constructing a recharge basin that is in a Water of the US or a Water of the State, then the first question under federal law is going to be is this an activity covered by one of the 404 program’s nationwide permit.

For this type of infrastructure, you’d look to the nationwide permit for either stormwater management or outfalls or intakes, or there’s some general catch-alls that you would look at,” he said.  “If you are covered by one of those nationwide permits, then you’re still now going have to do an alternatives analysis unless the size of the impact is less than 0.2 acres or 300 feet.  So for all but the small projects, if you are in existing Waters of the US or Waters of the State, this new alternatives analysis is going to apply to you.”

Mr. Monette asked, if you’re getting the 404 permit because you’re in waters of the US, what does that mean for the alternatives analysis and what does it mean for the California permit?  Do you still have to do alternatives analysis, do you still have to get a WDR, or is it just a 401 certification?

If you’re having to do a 404 permit, that means you’re in waters of the US, and the nationwide permits that you’d look to for this type of infrastructure are not pre-certified under the 401 program, so if it’s bigger than 2 tenths of an acre, you will have to get this new WDR permit unless you can find one of the exemptions that apply, then you’re also going to have to do this alternatives analysis and show that your project is the least environmentally damaging alternative,” said Mr. Crook.

Reservoirs and storage ponds

There are a number of reservoirs across California that are built on dry canyons.  Some have a stream on the bottom that might be ephemeral, perennial, or just intermittent.  There’s a lot of other water supply infrastructure such as ornamental ponds or other things that are large and artificial but meet the definition of wetland under the state rule.  Under the federal definition from 2015 and even in the new proposed definition these would arguably qualify as waters of the US, so how would the new rules apply here?

Mr. Monette noted that the issue of how to classify large infrastructure that holds water but is not built on a navigable waterway has been ongoing since the EPA started working on the 2015 rule.  There have been several court decisions involving the reach of the Clean Water Act, the most recent one being the Rapanos case and whether to follow the significant nexus analysis that was put forward by Justice Kennedy or to follow the continuous surface connection analysis that was put forward by Justice Scalia.

Those cases were all written in terms of or considered in terms of impacts to greenfields and didn’t really consider the built environment, and that’s been something that’s still left the definition of some of these waters a little bit in flux,” he said.  “Nonetheless, the 2015 rule and even the proposed new rule would classify waters like these impoundments of water as Waters of the US; the question is what is that underlying stream?  And I think the bigger question is what is the definition of navigability and what was the intent of the facility when it was built?  All of those remain in flux but by and large, these types of waters are considered Waters of the US and it’s kind of an uphill battle to change that.”

As for Waters of the State, Mr. Crook noted that it does not provide a new definition of surface waters of the state that are not wetlands.  “I think generally because of the broad statutory definition of waters of the state, a reservoir like this would be considered a Water of the State, unless you make an argument that under this new reg, it’s a wetland that’s primarily for recycled water or groundwater recharge or something like this, but most of the time, it’s going to be a Waters of the State.  So if you’re doing work in the reservoir, you may be able to look to some of the O&M exceptions for flood control projects or other types of water infrastructure.”

Mr. Monette noted that there are some important differences between the federal Clean Water Act and the state’s Porter Cologne Act.  The Clean Water Act has very strict regulations involving discharges into waters of the US that requires actual limits to be included in an NPDES permit, but they can be hard to comply with depending on the operations that need to be conducted.  The Porter Cologne Act doesn’t have those kinds of hard requirements in a WDR, so if something is a water of the state and its subject to WDRs, there still has to be requirements to implement a basin plan, but more flexibility as to what kinds of effluent limits and other permit terms.

Another important difference is that under the Clean Water Act, there is a very clear pathway for environmental groups or other interested parties to file lawsuits alleging that a project is violating the Act, but there is no similar provision in the Porter-Cologne Act.

So if a water is just a waters of the state and not a waters of the US, private parties just can’t file a lawsuit and allege that you’re violating your permit or you’re doing something in violation of the law,” Mr. Monette said.  “They have to take some sort of creative means – maybe sue the regional board for not enforcing against you or something like that.  It’s important to keep those differences in mind.”

Groundwater from road cuts and ditches

The picture on the right is a storm channel.  “It may have been a stream that’s been realigned or it may just be draining surface water off the streets and it’s probably doing both, but under the 2015 rule and even under the new proposed rule from EPA on Waters of the US, that would be jurisdictional unless you can demonstrate that it was built in upland or in dry land,” said Mr. Monette.  “That can be difficult because a lot of times, things like that are built at natural low points, and that might have been an ephemeral stream at one point. … It’s difficult to classify these things as having been built in upland or not because the history of an area might be difficult.”

The picture on the left is a road cut; for transportation agencies that have road cuts that are perennially creating springs and are perennially wet, and that runs into an open channel storm drain, that could create a jurisdictional issue, he said.

Mr. Crook said that for both of these, the question of Waters of the State and Waters of the US will be similar, unlike some of the other types of infrastructure.  “Because they have the exemptions for stormwater, the question for Waters of the State and Waters of the US will be if it was an existing water or was it in dry land,” he said.  “If it was constructed by modifying an existing waters of the state, then it’s going to be jurisdictional.  You can still look to the O&M exceptions, but for a project, it’s going to be jurisdictional.  If it’s in dry land and if its primary purpose is for stormwater management, then it’s not going to be regulated as a Waters of the State.”

CONCLUSIONS

New categories of wetlands will require permits.  The new regulations will take effect on May 28.  Water Boards will have more work, even longer permitting and certification delays: This means that the already over-worked water board staff will have more to do so you can expect and need to build in longer permitting and certification timelines.  Areas of remaining uncertainty need to be resolved in implementation guidance and training sessions.

When the rules were issued back in April, there was some discussion of potential implementation guidance that would answer some of these questions,” said Mr. Crook.  “We have heard less about that recently and more from the staff that they anticipate to answer some of this through the training sessions, which may or may not provide us opportunity for robust public comment and feedback as implementation guidance would have.”

Where possible, submit applications before Rule goes into effect on May 28, 2020.  “If you submit an application before that date for a 401 certification, then these new rules don’t apply to you as long as it is a substantially complete,” said Mr. Crook.

Examine your existing types of watershed or habitat plans to see if they can qualify as a watershed plan that will cover your activity and exempt you from these requirements for your project.  For those that are working on habitat conservation plans and natural community conservation plans, try your best to get those approved in the next calendar year 2020 because that will give you a presumption that they qualify and you can use them to meet these requirements, they advised.

Mr. Crook said that moving forward, we should look to whether there are categories of additional general permits or analogs to the federal nationwide permits that we should be speaking to the water board about creating to make these requirements less onerous for projects that don’t have a large impact and tend to be repetitious.

Mr. Monette pointed out that the State Water Board is promising to issue guidance for level of detail of the alternatives analysis or what happens to wetlands that have been dredged and then returning to their own on nature, so there is more to come.

TIMELINES …

One of the questions received was what about timeframes.  Under the 401 programs, the regional boards have a set amount of time to approve the 401 application or it’s deemed approved; they’ve gotten around that in the past by denying them and asking them to reapply.  There are no specified timelines in this new regulation; it would be similar to the existing 401 certification timeframes, said Mr. Crook.  Federal permitting has short timelines for things covered by nationwide permits, but we can expect the state and regional process to take longer than that.

Mr. Monette agreed; if you’re working on a project, you need to leave some lead time for the regional boards to get to this.  “If any of you have worked on 401 certifications, you know that they can take a long time and they often fall lower on the priority list for the board staff when they have a lot of things going on, and so our concern that that will become the norm for these too,” he said.  “We just have to work with the system that we have, so keep that in mind.”

He also noted that at the federal level, there certainly is a push to create more of those timelines that deem applications approved if the federal government can’t address your application in time.  “I think the more we see that from the federal government, it almost gives California an incentive to put the brakes on and say we’ll be the ones to review, so I think that’s another dynamic to keep an eye on.”

FOR MORE INFORMATION …

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