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    Document Summary
    - Report Published -

    House Document No. 2
    PUBLICATION YEAR 2013

    Document Title
    Study of the Costs and Benefits of State Assumption of the Federal § 404 Clean Water Act Permitting Program (HJR 243, 2012)

    Author
    Department of Environmental Quality

    Enabling Authority
    HJR 243 (Regular Session, 2012)

    Executive Summary
    Introduction

    This report was prepared by the Virginia Department of Environmental Quality (DEQ) pursuant to House Joint Resolution 243 (HJ 243) passed during the General Assembly’s 2012 Session. This report sets forth the potential costs and benefits of the Commonwealth seeking authority from the U.S. Environmental Protection Agency (EPA) to administer the § 404 permitting program under the federal Clean Water Act (CWA).

    Executive Summary

    The CWA’s § 404 State assumption process provides the mechanism for individual States to realize enhanced water resource protection while providing a streamlined regulatory program with a single point of contact. Currently, only two States have assumed the § 404 program within their borders and this is due mainly to the prohibitive costs and complexities involved with the assumption process.

    If the Commonwealth were to decide to seek assumption of the § 404 program, it would enter into a complex and lengthy process that could last up to two years with no certainty that EPA would approve the request. Section 404 assumption would require new funding for additional staff, training, and database improvements in advance of the Commonwealth requesting the program from EPA. Virginia’s laws and regulations would need to be amended to provide the authorities to implement the CWA and ensure consistency with implementation requirements under the CWA, including potentially requiring changes or elimination of existing State regulatory exemptions for activities that are not authorized under the Federal program (e.g., the exemption for septic tank placement).

    The potential benefits of § 404 assumption include improved efficiency, timeliness, certainty, consistency in permitting and improved accountability with a single point of contact for the regulated community.

    The potential costs of § 404 assumption include among other things, the expense of acquiring the staff, administrative resources and information technology infrastructure needed to handle the expanded workload at the State level and in the short-term also include a potential loss of the knowledge and technical expertise of the existing Corps staff .

    DEQ’s cost and benefits analysis included internal research, input from stakeholders in the Commonwealth’s regulated community and comments from natural resource organizations. DEQ also referenced research provided by the Environmental Council of States (ECOS) and the Association of State Wetland Managers (ASWM) summarizing the experiences of States that have previously studied § 404 assumption, or have actually assumed the program like Michigan and New Jersey. Reference materials from ECOS and ASWM are provided in Appendix E and at http://www.aswm.org/wetland-programs/s-404-assumption. From this broad range of data sources, a list of recurring benefits and costs associated with assuming the § 404 program has emerged:

    Benefits:

    • Regulatory streamlining and increased efficiency:

    State program assumption may significantly reduce duplicative State and Federal permitting requirements, resulting in reduced time for review of regulated activities.

    • Increased consistency in permit decisions:

    A State run § 404 program provides a single point of contact for the regulated community and can eliminate potentially conflicting permit decisions and conditions.

    •·Increased regulatory program stability and certainty:

    During times of jurisdictional uncertainty at the federal level, such as in the wake of an individual federal legal decision, State governments are able to maintain a consistent and predictable definition of the waters they regulate.

    •·State-specific resource policies and procedures tailored to address specific conditions and needs of the State:

    A State run § 404 program can be designed in accordance with the individual State’s unique water resources, geographic features and water protection goals.

    Costs & Barriers

    •·High financial cost:

    The initial cost of program assumption includes development of an application to EPA, modification of State statutes and regulations and development of procedures for coordinating with federal agencies. The yearly costs to administer the program include hiring and retaining 40 new full time employees, providing ongoing training and expanding administrative and information technology resources. DEQ estimates that assumption will cost 18 million dollars over the first 5 years, and 3.4 million dollars annually thereafter.

    •·Lack of dedicated federal funding for 404 program operation and administration:

    Funding is not currently available from the federal government for implementation of the Section 404 program. While there are federal funds potentially available for a State’s development of the 404 program, it is the implementation phase that is financially challenging.

    •·Difficulty in meeting the program requirements:

    In order to be approved to administer the federal program at the State level, a State must demonstrate that it has equivalent authority in all areas of the program. This can be difficult because the basis for State authority is different than the basis for federal authority.

    •·Lack of a partial assumption option:

    The Section 404 program does not include an option for partial assumption by States. States cannot seek to assume the 404 program for only specific geographic areas or certain types of activities; they must assume the entire program.

    •·Section 10 Navigable Waters that remain under Corps jurisdiction:

    Pursuant to § 10 of the River and Harbors Act, even if Virginia assumes the § 404 program, the Corps will retain authority over the Commonwealth’s waters that have been defined by the Corps as navigable, including the wetlands adjacent to the navigable waters. In coastal States like Virginia a greater geographical extent of waters are defined as navigable, and the Corps would retain jurisdiction over those waters and their adjacent wetlands.

    •·Loss of Corps’ knowledge base:

    State assumption of the federal program may potentially result in the loss of the knowledge and technical expertise of the existing Corps staff, especially with respect to wetlands delineation confirmations.

    Pursuant to HJ 243, DEQ convened a group of stakeholders to advise DEQ on the costs and benefits of assuming the program. The Stakeholder Group provided many valuable comments and expressed concerns regarding assumption. Notes from the Stakeholder Group meetings are provided as Appendix A in this report. Two overarching themes emerged from the Stakeholder Group meetings. One theme is that the regulated community is largely content with the existing federal and State wetland programmatic structure, aside from some minor improvements that were suggested. Secondly, when polled, the majority of the members of the Stakeholder Group believed that the costs of assuming the § 404 program outweigh the potential benefits of assumption. Some of the Stakeholder Group members suggested that the only acceptable assumption scenario would be one that ensures significant improvements in every category to the level of service that is currently being provided by the dual programs. DEQ believes these goals could be met with an adequately funded State program.

    The regulated community has expressed concern about the potential for DEQ to charge higher permit fees to help finance the costs of assuming the § 404 program. The Corps of Engineers does not charge a permit fee and DEQ charges no fee for a General Permit authorizing less than 1/10 acre of wetland impacts. For wetland impacts above 1/10 of an acre, DEQ assesses fees on a sliding scale based on the size of the wetland impact. This fee structure allows the regulated community to pursue projects involving minimal wetland impacts without an additional financial burden from permit fees. The percentage of the current program costs covered by permit fees has ranged from 25% in 2010 to 10% in 2012, a fluctuation due primarily to the effect of the economic slowdown on the construction industry. Under an assumed federal program DEQ would adjust the fee structure to preserve the fee exemption for the smaller, less complex projects. DEQ’s costs analysis determined that financing the assumed program through fee funding above the current level is not viable as it would likely require fees for all permit authorizations and would disproportionately affect the proponents of smaller projects that are currently authorized under Nationwide Permits or DEQ’s General Permits.

    Virginia’s current State Programmatic General Permit (SPGP) has helped to reduce duplicative permitting processes. Virginia’s SPGP has reduced regulatory duplication for projects that qualify for the SPGP, but there is still a “two-stop shopping” experience for the regulated community for projects that are beyond the SPGP thresholds of 1.0 acre of wetland impacts and 2000 linear feet of stream impacts. Given the concerns expressed by the Stakeholder Group regarding § 404 assumption and, in the absence of a viable funding source, renegotiation and expansion of the SPGP may provide a viable alternative to § 404 assumption that would protect Virginia’s wetland resources and improve consistency, timeliness and certainty for a broader range of projects.