Testimony of Darrel Seibert
Before the Senate Subcommittee on Clean Air, Wetlands, Private Property, and Nuclear Safety
June 26, 1997

Good morning. My name is Darrel Seibert and I am here to testify today on behalf of the 190,000 member firms of the National Association of Home Builders. The vast majority of NAHB members are small business owners. Approximately 93% of the sales revenues in our industry are derived from companies qualifying as small businesses. I would like to talk about two related but separate issues involving recent regulatory and judicial developments concerning wetlands. The two issues are the regulatory decision by the U.S. Army Corps of Engineers to eliminate Nationwide Permit 26 and the recent court decision overturning the Tulloch Rule. I will address them in that order.

Nationwide Permit 26:

Recently, the U.S. Army Corps of Engineers issued a final rule on the nationwide permit program under section 404 of the Clean Water Act, which regulates the discharge of dredged or fill materials into the waters of the United States. NAHB believes that the Corps acted inappropriately and irresponsibly in its final rulemaking and failed to adequately consider the impact of its decision on small businesses. Specifically, I am here to talk about the economic impact resulting from changes made to Nationwide Permit 26.

Nationwide permits (NWPs) are a type of general permit, authorized under the Clean Water Act. NWPs provide an expedited permitting process for developers performing certain activities in wetlands that, individually or cumulatively, will produce only minimal environmental impacts without the delay that usually accompanies the more extensive individual permit process. For comparison, obtaining a nationwide permit generally takes about a month while an individual permit usually takes more than a year to process and is far more burdensome for the Corps and for small businesses. Unnecessary delays in construction add significantly to the cost of a new home. The most common permits used by builders and developers are NWP 12 for installing utility lines, NWP 14 for minor road crossings, and NWP 26 for discharges into isolated or headwaters wetlands and waters of up to 10 acres (individually or cumulatively).

According to the Clean Water Act, NWPs must be reauthorized by the Corps at least every 5 years. Since it was first authorized in 1977, NWP 26 has remained essentially the same -- allowing impacts of up to 10 acres. Impacts under 1 acre were deemed so minimal those projects could proceed without prior notification to the Corps. However, during the last reauthorization process which began last summer, the Corps proposed three options for changing NWP 26: (1) leaving the threshold limits at 1 acre and 10 acres, (2) reducing the threshold limits to acre and 5 acres, or (3) reducing the threshold limits to acre and 3 acres.

The Corps received over 400 comment letters on these threshold options -- 70 percent of those letters agreed with NAHB's preference for the first option. Likewise, a majority of the local Corps districts who filed comments also supported making no changes to Nationwide Permit 26 and retaining the 1 and 10 acre thresholds.

Nonetheless, the Corps ignored these comments and, on December 13 of last year, issued a final rule that chose the most restrictive option, Option 3, reducing the threshold limits to 1/3 acre and 3 acres. Additionally, the Corps imposed further restrictions that were not even part of the proposed rule, including new restrictions on combining Nationwide Permit 26 with other nationwide permits. Another new limitation, invalidating the use of Nationwide Permit 26 on projects affecting more than 500 linear feet of a streambed, will prevent many projects from being eligible for a Nationwide Permit 26 at all. The impact of this change will be particularly devastating in the West.

Finally, the Corps also decided in its final rule that the new, much more restrictive Nationwide Permit 26 would be gone in 2 years. All other NWPs were reauthorized for 5 additional years. The Corps claims it will have issued up to a dozen new targeted replacement permits to be available when NWP 26 expires, but NAHB has serious doubts the Corps will achieve this goal. The Corps was late in reissuing existing permits and issuing new permits in the last two cycles, when the changes were comparatively simple and there was 5 years to complete them. Accordingly, there is no reason to believe that the Corps will be able to finalize brand new permits in only 2 years. Without these permits, many of our members could be forced out of business while their projects are put on hold waiting either for new permits to be issued or dealing with the more lengthy and expensive individual permitting process.

The Corps decided to make many of these important and substantial changes to NWP 26 without public notice, despite the fact that it has worked well for the last 20 years. There will be minimal if any environmental benefit from the changes. The old Nationwide Permit 26 included numerous environmental safeguards such as water quality certification, permit standards and conditions. The Corps claims that it made the decision to phase out NWP 26 based on comments to the proposed rule expressing concern that the old NWP 26 allowed unacceptable impacts. At the same time, the Corps acknowledges that there was actually a net increase in wetlands under the old Nationwide Permit 26. In place of the 6500 acres of wetlands disturbed under the old Nationwide Permit 26 in 1995, 7800 new acres of wetlands were created or restored -- a ratio of 1 to 1.15. If the old NWP 26 created or restored more wetlands than were impacted, how can the Corps also argue that the permit allowed too great an impact on wetlands?

Significantly, the Corps did not inform the public that it was even considering these fundamental changes to NWP 26. Instead, it made that decision after hearing only one side of the story. NAHB feels strongly that the Corps issued its final rule on NWP 26 without fully considering the impact on small business and without weighing those significant costs against the minimal benefits that may result. The decision will cause a significant increase in time, money, and paperwork required to complete a project. Builders, property owners, municipalities, and first time home buyers will all be impacted.

The Corps admits the rule will increase the number of individual permits it will have to process by 10%, although NAHB believes that number will be far higher, slowing the approval process even more. The data used by the Corps for its estimate of a ten percent increase in individual permit applications only accounted for the reduction in the threshold acreage from 10 acres to 3 acres. The Corps did not adequately consider the potentially significant increase in individual permit applications resulting from the 500 linear feet rule, which will have a significant impact particularly in the west, or from the prohibition on stacking NWP 26 with other NWPs. Neither of these elements were part of their proposed rule and were made without opportunity for public comment, nor was the two year expiration of the reissued permit..

Because the US Army Corps of Engineers chose to significantly modify and eliminate Nationwide Permit 26 without proper public notice, comment, or review period, NAHB filed suit against the Corps on March 6 for violations of the Administrative Procedures Act and the Clean Water Act. NAHB further believes that Congress has a responsibility to ensure that the Corps meets the requirements of the Regulatory Flexibility Act as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) last year. NAHB feels strongly that the Corps has not, and NAHB has provided testimony to the House Small Business Committee to that effect.

In addition to our lawsuit against the Army Corps, NAHB is strongly supporting legislation introduced in the House by Representative Mark Neumann, HR , which would restore Nationwide Permit 26 to the original thresholds before the Corps illegally modified them on December 13. The Corps should have to provide evidence for the need for change before changing a permit which has been so effective at protecting and increasing wetlands while providing regulatory flexibility for builders. Congress has a responsibility to ensure that Federal agencies abide by the rules when making significant regulatory decisions. Again, this issue is about playing fair, not protecting the environment. NAHB's members have a strong interest in protecting the environment, including wetlands, in a way that makes sense.

Tulloch Rule:

The second issue I would like to address is the recent court opinion that invalidated the Army Corps regulation commonly known as the "Tulloch rule." This rule required developers to get permits for the incidental fallback that accompanies dredging and landclearing activities in wetlands under the theory that this incidental fallback should be considered a "discharge" under the Clean Water Act. In other words, the Tulloch rule attempted to make "taking out" material the same as "filling in." Five trade associations -- NAHB, the National Mining Congress (formerly known as the American Mining Congress), the American Road and Transportation Builders Association, the National Aggregates Association, and the American Forest & Paper Association -- sued the Corps and the EPA arguing that this regulation went beyond the authority granted to the Corps by Congress under the Clean Water Act. In January, Judge Harris of the United States District Court for the District of Columbia ruled that the Tulloch rule was inconsistent with the intent of the CWA and the legislative history and he invalidated that regulation.

In response, the Justice Department, representing the Corps and the EPA, attempted to have the District Court's ruling limited -- in a creative, but highly questionable motion to the court-- asking that the ruling only apply to the litigants in the case. In other words, the Justice Department argued that the rule was only invalid for members of the trade associations that sued them, but the District Court's ruling did not apply to everyone else. Although that argument could be considered a great recruiting tool for NAHB, it flies in the face of justice. The Justice Department's argument essentially was that the Army Corps of Engineers could continue to enforce an illegal regulation against a citizen until and unless he brought a successful suit against the Corps. As you might expect, the Justice Department's attempt to limit the ruling was soundly rejected by the court.

NAHB is very concerned with the fact that District Court invalidated the Tulloch rule in January of this year, but local Corps districts continue to try to avoid and ignore the ruling. First, the Justice Department argued that the Corps should not have to issue guidance to local districts about how to comply with the ruling until its attempt to limit the District Court's decision to the members of the trade associations was ruled on. This was clearly a stall tactic, since the District Court's ruling was effective immediately and the Corps should have been complying with it. Because there was no guidance from the Corps to the local districts to tell them how to comply with the court's ruling, there was significant confusion and false information around the country. We have reports from our members that local Corps officials made such statements as, "the Court's decision only applies in the District of Columbia," "the decision does not apply to applications already in process at the time of the decision," and "the decision had been stayed." All of these statements were patently false.

Furthermore, Corps personnel "encouraged" builders and developers to apply for permits for incidental fallback anyway, even though the Tulloch rule had been overturned. The Corps suggested builders apply for the permits "just in case" warning that if the District Court's opinion were later overturned on appeal, any excavation done without a permit would be subject to vigorous enforcement actions applied retroactively. For 2 months after the Court's ruling, the Corps failed to give formal guidance to local Corps districts on compliance with the invalidation of the Tulloch rule. NAHB reported all of these problems to the Corps with little result.

Finally, with all other options exhausted, NAHB and the other plaintiffs filed a motion on April 8 asking the court to compel the Corps to issue guidance. The Corps issued its formal guidance on April 11.

The 2 month delay in obtaining formal guidance from the Corps and EPA strongly illuminates the problem of having a program run by two different agencies. The Corps did draft interim guidance within the first few weeks following the Court's ruling, but the formal guidance -- which had to be issued by both the EPA and the Corps was not finalized until last week. The Corps and the EPA failed to effectively coordinate their activities, leading to confusion, delay, and error. For the record, I have submitted a number of documents showing the lengthy and laborious efforts by NAHB and the other plaintiffs to get the Corps and EPA to follow the Court's ruling and to issue formal guidance.

In short, the recent pattern of decisions by the Corps and the EPA demonstrates either a lack of willingness or the inability to follow the instructions of Congress or of the Federal Courts. By significantly changing the nationwide permit program without proper notice or input from small businesses; by enforcing regulations beyond the authority granted to them by Congress; by failing to provide clear and timely guidance on a federal court ruling; and by attempting to enforce a rule, clearly invalidated by the courts, for those members of the public who did not sue them directly for relief -- the Corps and the EPA have behaved inappropriately and irresponsibly. On behalf of the 190,000 member firms of NAHB, thank you for this opportunity to address these very serious concerns.