FEDERAL WETLANDS PERMITTING

by
Reginald L. Bouthillier, Jr., Esquire*
I. Todd Sumner, Esquire†
and
Jeffrey A. Collier, Esquire ‡

I. FEDERAL JURISDICTION OVER WETLANDS

A. Introduction

The Federal Government's authority to regulate wetlands originates from the Rivers and Harbors
Act of 1899, 33 U.S.C. Section 401, et. seq. (“RHA”), and the Federal Water Pollution Control Act
(“FWPCA”) of 1972, as amended by the Clean Water Act (“CWA”) of 1976, specifically 33 U.S.C. §
1344 (“Section 404”). Section 404 carves out from the general United States Environmental Protection
Agency (“EPA”) permit authority a special authority for the United States Army Corps of Engineers
(“COE”) to issue permits for activities involving the discharge of dredge and fill materials into “waters of
the United States.” The COE has primary authority for making jurisdictional determinations and
reviewing "dredge and fill" permit applications. The EPA oversees the COE's administration of the
program. Ultimately, a COE determination may be reviewed by the EPA and is subject to the EPA's
statutory veto power. See 33 U.S.C. § 1344(c).

B. Federal Jurisdiction Under the Rivers and Harbors Act (Section 10)

1. Scope of Section 10: While Section 404 jurisdiction is clearly broader than Section 10 in
its applicability to wetlands, there may be instances when Section 10 applies to a wetland.
See generally 40 C.F.R. § 232, et. seq. Section 10 prohibits the creation of any
obstruction, and prohibits excavation or filling, within the navigable waters of the United
States without prior authorization from the COE. Specifically, it shall be unlawful to
build without a permit any "wharf, pier, dolphin, boom, weir, breakwater, bulkhead, jetty,
or other structure," or "alter or modify the course, location, condition or capacity of" a
navigable water of the United States without a permit. 33 U.S.C. § 1371.

2. Navigable Waters Defined: Navigable waters of the United States “are those waters of
the United States that are subject to the ebb and flow of the tide and/or are presently used,
or have been used in the past, or may be susceptible for use to transport interstate or
foreign commerce.” 33 C.F.R. § 329.4. The definition of “navigable waters of the United
States” is “ultimately dependent upon judicial interpretation and cannot be made
conclusively by the administrative agencies,” 33 C.F.R. § 329.3, however, the courts
should give “substantial weight” to jurisdictional determinations made by federal

*
Mr. Bouthillier is a shareholder with Greenberg Traurig, P.A.’s Tallahassee office.
†
Mr. Sumner is a shareholder with Greenberg Traurig, P.A.’s Tallahassee office.
‡
Mr. Collier is a senior associate with Greenberg Traurig, P.A.’s Tallahassee office.
 agencies. 33 C.F.R. 329.14. Once the COE has determined that a water body is
navigable, that determination “applies laterally over the entire surface of the water body,
and is not extinguished by later actions or events which impede or destroy navigable
capacity.” 33 C.F.R. §329.4. In tidal areas the COE jurisdiction extends laterally to the
mean high water mark, 33 C.F.R. 329.12, and in rivers and lakes the COE jurisdiction
extends to the ordinary water mark. 33 C.F.R. §329.11.

a. Broad Interpretation: Section 10 has consistently been given a broad interpretation

by the courts. See e.g. Wyandotte Transportation Company v. United States, 389
U.S. 191, 88 S. Ct. 379, 19 L.Ed.2d 407 (1967); United States v. Boyden, 696 F.2d
685 (9th Cir. 1983); Goodman v. City of Crystal River, 699 F.Supp. 394 (M.D.Fla.
1987).

b. Examples of Jurisdiction: Navigable waters of the United States include: (1)

intrastate waterways capable of carrying interstate commerce, 33 C.F.R. § 329.7, (2)
artificially created waterbodies, 33 C.F.R. §329.8(a), (3) waterbodies that were
previously navigable (retain their character as navigable in law), 33 C.F.R. §329.9(a),
and (4) waterbodies that may potentially be navigable, 33 C.F.R. §329.9(b).

c. Jurisdictional Determinations: A jurisdictional determination may be made by a

COE division engineer, 33 C.F.R. § 329.14, and each COE district office maintains
tabulated lists of final jurisdictional determinations. 33 C.F.R. § 329.16.

C. Federal Jurisdiction Under Section 404 of the Clean Water Act

The enactment of the CWA broadened federal authority for activities in aquatic areas
involving the “discharge of dredged or fill material” into “waters of the United States.” See
generally 33 C.F.R. Parts 323 and 328. Jurisdiction under Section 404 extends to navigable
waters of the United States. See 33 U.S.C. §1344 & 33 U.S.C. §1362(7). Note, pending federal
legislation (H.R. 1356) would remove the term “navigable waters” from the CWA and replace it
with “waters of the United States.” The purpose of the CWA is “to restore and maintain the
chemical, physical, and biological integrity of the Nation's waters.” 33 U.S.C. §1251(a). When
the CWA was first enacted, the COE did not interpret the phrase “waters of the United States” to
expand its wetlands jurisdiction. The EPA disputed the COE's interpretation of “waters of the
United States.” This conflict was resolved in NRDC v. Callaway, 392 F. Supp. 685 (D.D.C.
1975), in which the court held that the CWA required the COE to amend its regulations to
provide expanded coverage of wetlands. Pursuant to its mandate under NRDC v. Callaway, the
COE promulgated regulations expanding the permit program's coverage.

1. “Waters of the United States” Defined: “Waters of the United States” include those
waters listed in § 328.3(a). See 33 C.F.R. § 328.2. The lateral limits of jurisdiction are
divided into three categories which include the territorial seas, tidal waters, and non-tidal
waters. Id. “Waters of the United States” are defined in 33 C.F.R. §328.3 to include:

a. All waters which are currently used, or were used in the past [See United States v.
Pozsgai, 999 F.2d 719, 731 (3rd Cir. 1993)], or may be susceptible to use in interstate
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 or foreign commerce, including all waters which are subject to the ebb and flow of
the tides;

b. All interstate waters including interstate wetlands;

c. All other waters such as intrastate lakes, rivers, streams (including intermittent
streams), mudflats, sandflats, wetlands, sloughs, prairie potholes, wet meadows,
playa lakes, or natural ponds, the use, degradation or destruction of which could
affect interstate or foreign commerce including any such waters:

(1) which are or could be used by interstate or foreign travelers for recreational or
other purposes; or

(2) from which fish or shellfish are or could be taken and sold in interstate or
foreign commerce; or

(3) which are used or could be used for industrial purposes by industries in
interstate commerce.

d. All impoundments of waters otherwise defined as waters of the United States under
this definition;

e. Tributaries of waters identified above;

f. The territorial seas; and

g. Wetlands adjacent to waters (other than waters that are themselves wetlands) as
identified above.

2. Wetlands Defined: 33 C.F.R. §328.3(b) defines "wetlands" as: "[T]hose areas that are
inundated or saturated by surface or ground water at a frequency and duration sufficient
to support, and that under normal circumstances do support, a prevalence of vegetation
typically adapted for life in saturated soil conditions. Wetlands generally include
swamps, marshes, bogs, and similar areas." The COE's regulatory definitions of "waters
of the United States" and "wetlands" have also been adopted by EPA at 40 C.F.R.
§232.2(q) and (r). The “Federal Wetlands Jurisdictional Act of 2004” was introduced in
the U.S. House of Representatives on July 15, 2004, as a bill to define clearly which
waters would be protected under the CWA. Under this legislation, the definition of
wetlands would be clarified and narrowed to provide more regulatory certainty.
Specifically, protections would be extended to all navigable waters, including the
territorial seas; areas that are connected hydrologically to navigable waters through a
continuous, naturally occurring surface connection, including perennial intermittent
streams; and all wetlands adjacent to these areas. Excluded from CWA protections under
the bill would be isolated wetlands that are not adjacent to actually navigable waters or
non-navigable tributaries; areas covered periodically by sheet flow, which is normal

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 runoff from precipitation; areas connected to jurisdictional waters by ephemeral waters,
ditches or pipelines, and municipal storm-water systems.

3. Federal Wetlands Delineation Manual: Jurisdictional determinations are not only

based on legal criteria within statutes, regulations, and case law, but also require
extensive technical analysis as well. Jurisdictional determinations on wetlands from a
technical standpoint depend on the water, soil, and vegetation. These technical criteria
have been set forth in an approved Federal Wetlands Delineation Manual. The purpose
of the delineation manual is twofold. First, the manual provides technical guidance and
internal procedures for agency field staff for identifying and delineating wetlands. See 58
Fed. Reg.. 49,995-01. Second, the manual "serves to advise the public prospectively of
the manner in which agency personnel will apply the definition of wetlands to particular
sites on a case-by-case basis." Id. The manual operates from the basic premise that
wetlands possess three essential characteristics: hydrophytic vegetation, hydric soils, and
wetland hydrology.

a. Historical Background: The first Federal Wetlands Delineation Manual was issued
in January of 1987 by the COE. [Corps of Engineers Wetlands Delineation Manual
(Jan. 1987)]. A second version was released by the COE, EPA, the United States Fish
and Wildlife Service ("FWS"), and the United States Soil Conservation Service
("SCS") in January 1989 in order to provide a single, consistent approach for
identifying and delineating wetlands from the federal perspective. [Federal Manual
for Identifying and Delineating Jurisdictional Wetlands (1989)]. However, this
manual was widely criticized by regulated interests for not addressing regional
differences, and for too broadly interpreting the three mandatory physical
characteristics (i.e., hydrophytic vegetation, hydric soils, and wetland hydrology).
Subsequently, the third manual was drafted and circulated in 1991, but this version
was never released because of criticism from EPA and FWS biologists,
environmental organizations, and some states (including then-Florida Department of
Environmental Regulation Secretary Carol Browner). Critics argued that the 1991
draft of the manual, if adopted, would have divested federal jurisdiction over millions
of acres of wetlands. Contrast this position with arguments that the 1989 version of
the manual resulted in significant expansion of federal jurisdiction over wetlands.

b. Jurisdictional Determination Memorandum of Agreement: On January 19, 1989,

the COE and EPA signed a Memorandum of Agreement ("JDMOA") which allocated
authority for making wetlands jurisdictional determinations between the two
agencies. The JD MOA was generally consistent with previous policy of the COE in
making jurisdictional determinations. On January 19, 1993, the EPA and COE issued
an amendment to their JD MOA, effective January 4, 1993. ("Amendment"). See 58
Fed. Reg.. 4995-01. The Amendment requires both the COE and the EPA to use the
1987 manual. The Amendment was in response to the enactment of the Energy and
Water Development Appropriations Act of 1992 (Pub.L. 102-580)("EWDA") which
prohibited the COE from using the 1989 manual, as well as the back and forth battle
between environmentalist and regulated interests over the 1989 and 1991 versions of
the manual. According to the Amendment, the EWDA requires the COE to continue
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 using the 1987 manual "until a final wetlands delineation manual is adopted." The
ostensible purpose for the Amendment is to provide "consistency and predictability"
between the EPA and COE in the administration of the section 404 program.

4. Regulatory Guidance Letters: Another important source of information for evaluating

how the agencies interpret wetland jurisdiction are the Regulatory Guidance Letters
("RGLs") published by the COE.

5. Inconsistent Jurisdictional Determinations: The General Accounting Office released a

report on March 4, 2004, stating that the criteria used by the COE to determine whether
wetlands are subject to CWA protections are unevenly interpreted and applied. The
report urged the COE and EPA to come up with a plan for coordinating their
interpretations where differences are found. On March 30, 2004, a House subcommittee
heard further testimony regarding the unevenly applied criteria used in making
jurisdictional determinations. Neither the COE or EPA has officially committed to
revising the jurisdictional guidance at this point. However, the COE has committed to
improving the transparency of their decision-making. To that end, some COE district
offices have begun to post non-jurisdictional determinations on their web-sites. The COE
has issued public statements that the posting of non-jurisdictional determinations
nationwide is actually part of a broader effort by the COE to provide more transparency
in its decision-making process. However, an October, 2005 GAO report found that the
COE has been inconsistent in retaining documents that support its decisions to not assert
jurisdiction over wetlands and other bodies of water. Likewise, the report found that the
COE Districts have not consistently interpreted and applied federal regulations that
define jurisdictional waters, including wetlands. One of the GAO’s recommendations
was that the COE provide detailed rationales for projects over which it decides not to
exert its jurisdiction, as it does for those over which it does.

6. Adjacent Wetlands: Under the COE and EPA regulations, wetlands need only be
"adjacent to waters of the United States" to be subject to jurisdiction. The term
"adjacent" has been defined as "bordering, contiguous, or neighboring." Wetlands
separated from other waters of the United States by man-made dikes or barriers, natural
river berms, beach dunes and the like are all considered "adjacent wetlands." See 33
C.F.R. §328.3(c).

a. Broad Interpretation Upheld: United States v. Riverside Bayview Homes, Inc.:

This broad interpretation of adjacent wetlands has been upheld by the United States
Supreme Court in United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 106
S. Ct. 455, 88 L.Ed.2d 419 (1985). In Riverside Bayview Homes, a developer,
without a permit, filled about 80 acres of wetlands near Lake St. Clair, Michigan.
The COE issued a cease and desist order to the developer and filed suit in United
States District Court to enjoin the continuing non-permitted construction activity.
The District Court sustained the COE's authority and granted the injunction. On
appeal, the Sixth Circuit Court of Appeal reversed concluding that the COE was
without jurisdiction to regulate wetlands that were not subject to flooding or
inundation by adjacent navigable waters, essentially limiting the COE's "adjacent
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 wetlands" jurisdiction to areas which are regularly flooded or inundated by navigable
waters. In an unanimous opinion, the United States Supreme Court reversed the
Sixth Circuit's decision and sustained a broad interpretation of the COE's permit
authority. The Court relied upon the language, policies, and legislative history of the
CWA, and concluded that exercise of the COE's regulatory authority in adjacent
wetlands that were not periodically flooded or inundated by navigable waters was not
in conflict with the intent of Congress. The Court held that deference should be
given to the regulatory expertise of both the COE and the EPA. See also United
States v. Pozsgai, 999 F.2d 719, 731 (3rd Cir. 1993).

b. U.S. Supreme Court Asked to Review Adjacency Rule: On April 11, 2005, a
group of Michigan property developers requested that the U.S. Supreme Court review
a decision from the Sixth Circuit which held that the COE had jurisdiction over their
property under the CWA even though a man-made berm cut off the flow of water
from the property to a ditch that emptied into a tributary of navigable waters. The
Sixth Circuit held that because the wetlands are seperated only by a man-made
barrier they are considered “adjacent wetlands” under the COE regulations and
subject to the CWA. See Carabell v. U.S. Army Corps of Engineers, 391 F.3d 704
(6th Cir. 2004). On October 11, 2005 the U.S. Supreme Court granted certiorari to
decide the following questions: 1) Does the CWA extend to wetlands that are
hydrologically isolated from any waters of the States? And 2) Do the limits on
Congress’ authority to regulate interstate commerce preclude an interpretation of the
CWA that would extend federal authority to wetlands that are hydrologically isolated
from any waters of the States?

7. Artificial Waterbodies: The COE may assert federal wetland jurisdiction over
artificially created waterbodies pursuant to Section 404. See Swanson v. United States,
789 F.2d 1368 (9th Cir. 1986); Bailey v. United States, 647 F.Supp. 44 (D.Idaho 1986);
see also Kaiser Aetna v. United States, 444 U.S. 164, 100 S.Ct. 383, 62 L.Ed.2d 332
(1979); cf. Friends of the Payette v. Horseshoe Bend Hydroelectric Co., 988 F.2d 989
(9th Cir. 1993)("...the Corps does not consider '[a]rtificially irrigated areas which would
revert to upland if the irrigation ceased' as subject to § 404 permit requirements...").

8. Isolated Wetlands and Interstate Commerce: Historically, some COE districts

interpreted 33 C.F.R. § 328.3(a)(3) to require, at a minimum, that their regulation over
wetlands be connected to interstate commerce. These districts maintained this position
despite the fact that some courts liberally applied the interstate commerce requirement to
allow federal jurisdiction. See e.g. State of Utah v. Marsh, 740 F.2d 799 (10th Cir.
1984)(COE maintained jurisdiction over dredging activities in a lake in Utah where the
court found the lake had an economic and recreational effect on interstate commerce).
The EPA defined “waters of the United States” to have a broader meaning than that given
by the COE. See 40 C.F.R. § 230.3

a. The EPA Response & National Wildlife Federation v. Laubscher: In response to

these conservative decisions on the part of some COE districts, on September 12,
1985, the EPA General Counsel issued a memorandum which concluded that federal
6
 jurisdiction over “waters of the United States” extended to those waters that were
used or could be used by migratory birds or endangered species. In addition, on
January 15, 1986, the National Wildlife Federation filed suit against the COE
challenging the COE's determination that they lacked jurisdiction without sufficient
connections to interstate commerce.

b. 51 Fed. Reg. 41,217 (Nov. 13, 1986): Migratory Birds: In response to the position
taken by the EPA and the litigation filed by National Wildlife Federation, the COE
revised its regulations as to the definition of "waters of the United States." While the
text of the regulations remained the same, a preamble was added which stated that
waters of the United States typically include waters: which are or would be used as
habitat by birds protected by Migratory Bird Treaties; or which are or would be used
as habitat by other migratory birds which cross state lines; or which are or would be
used as habitat for endangered species; or which are used to irrigate crops sold in
interstate commerce. 51 Fed. Reg. 41,217 (Nov. 13, 1986).

c. Judicial Decisions Following 1986 Regulation: The mandate set forth in the 1986
regulation essentially allows the COE to regulate isolated wetlands. It appears to
have touched upon the outer limits of the Commerce Clause of the United States
Constitution. See Tabb Lakes, Ltd. v. United States, 885 F.2d 866, 20 Envtl.L.Rep.
20,008 (4th Cir. 1989)(unpublished disposition)(holding that COE lacked jurisdiction
based on possible use of area by migratory birds for failure to comply with
administrative procedure act as to notice and comment procedures); see also United
States v. Larkins, 852 F.2d 189 (6th Cir. 1988), cert. denied, 489 U.S. 1016, 109
S.Ct. 1131, 103 L.Ed.2d 193 (1989)(concurring opinion)("A farmer's low lying
farmland or a homeowner's low lying backyard--adjacent to a small stream or creek
but many miles from any navigable waterway--has apparently been converted into
governmental property no longer subject to control or improvement by the owner
without prior government permission. A statute that does not mention 'wetlands' has
apparently been read to include simply 'moist land adjacent to a creek.'") cf. Leslie
Salt Co. v. United States, 896 F.2d 354 (9th Cir. 1990), cert. denied, 498 U.S. 1126,
111 S.Ct. 1089, 112 L.Ed. 2d 1194 (1991) ("...[t]he commerce clause power, and thus
the Clean Water Act, is broad enough to extend the Corps' jurisdiction to local waters
which may provide habitat to migratory birds and endangered species.").

(1) Hoffman Homes I: In Hoffman Homes, Inc. v. United States Environmental

Protection Agency, 961 F.2d 1310 (7th Cir. 1992), Hoffman owned a 43-acre
parcel of land in Hoffman Estates, Illinois. In preparation for construction,
Hoffman filled and graded parts of the site, including a 0.8 acre, bowl-shaped
depression at the northeast border of the site. The small depression was lined
with impermeable clay so that rain water could not drain off quickly and would
collect at the bottom. The EPA identified this area as an intrastate wetland.
The COE investigated the site, determined that Hoffman illegally filled the
area, and issued a cease and desist order which required Hoffman to stop filling
and to obtain an after-the-fact permit. Hoffman applied for the permit, but due
to objections from EPA, the COE refused to issue a permit. The EPA initiated
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 an administrative action against Hoffman in attempt to enforce the compliance
order and to obtain penalties. The Administrative Law Judge held that the area
was a wetland; however, concluded that the EPA had no authority to regulate
the area because it had no effect on interstate commerce. The EPA appealed
this decision, and the EPA Chief Judicial Officer reversed finding that the EPA
had authority to regulate the area, since there was a "minimal, potential effect"
on interstate commerce (migratory birds could "potentially use" the area).
Hoffman appealed this decision to the Seventh Circuit Court of Appeal. In
reversing the decision of the EPA Chief Judicial Officer, the court held that the
EPA and the COE permitting jurisdiction under Section 404 did not extend to
certain hydrologically isolated wetlands. The Hoffman Homes Court concluded
the EPA's interpretation of Section 404 which extended jurisdiction over
intrastate, isolated wetlands was unreasonable, and that the 0.8 acre
hydrologically isolated bowl-shaped depression at issue was not within the
constitutional reach of the United States Constitution Commerce Clause.

(2) Hoffman Homes II: On September 4, 1992, the Hoffman Homes Court
granted the EPA's motion for rehearing and vacated the Court's prior opinion.
In an unusual move, the Court referred the case to a Court staff attorney for
mediation between Hoffman Homes and the EPA. After six months of
negotiations Hoffman Homes and EPA were unable to reach a settlement. On
July 19, 1993, the Hoffman Homes Court issued a new order which reversed its
prior opinion. See Hoffman Homes, Inc. v. United States Environmental
Protection Agency, 999 F.2d 256 (7th Cir. 1993). In particular, the Hoffman
Homes Court affirmed EPA's use of migratory birds to establish a sufficient
"nexus" between an isolated wetland and interstate commerce to exercise
jurisdiction over such areas under Section 404. The Court noted that an
isolated wetlands "connection to interstate commerce may be potential rather
than actual, minimal rather than substantial."

(3) Insufficient Nexus: The Hoffman Homes Court concluded that EPA failed to
prove that the isolated wetland at issue had a sufficient "nexus" with interstate
commerce to exercise Section 404 jurisdiction over the area. The Court held
that to extend jurisdiction over an isolated wetland based upon its potential for
use by migratory birds, EPA must establish by a preponderance of the evidence
that the isolated wetland has "characteristics whose use by and value to
migratory birds is well established and that it is likely that it will be used by
migratory birds." Apparently, the record in Hoffman Homes contained EPA
witness testimony that the isolated wetland was suitable habitat for migratory
birds, that there was a good possibility migratory birds would use the area and
it was moderately suitable as a migratory bird resting place. However, it
appears there was no evidence in the record that migratory birds actually used
the isolated wetland. Noting that the evidence did not support a conclusion that
the isolated wetland had characteristics whose use by and value to migratory
birds was well established, the Court concluded: "The migratory birds are
better judges of what is suitable for their welfare than are we. . . . Having
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 avoided [the isolated wetland] the migratory birds have thus spoken and
submitted their own evidence. We see no need to argue with them." Thus,
while Hoffman Homes confirms federal jurisdiction over isolated wetlands, it
also holds that there are isolated wetlands which are not subject to EPA or
COE jurisdiction under the Section 404 Program. Although the potential use
of an isolated wetland by migratory birds may be sufficient to establish such
jurisdiction, the jurisdiction may not be sustained unless EPA can affirmatively
demonstrate that the isolated wetland has characteristics whose use by and
value to migratory birds is well established, and that it is likely the area will be
used by migratory birds.

(4) Rueth v. United States Environmental Protection Agency and Review of

COE's Compliance Orders: The Seventh Circuit Court of Appeal in Rueth v.
United States Environmental Protection Agency, 13 F.3d. 227 (7th Cir. 1993),
upheld the Hoffman Homes decision in affirming the district court's dismissal
of a complaint challenging a COE's compliance order for lack of subject matter
jurisdiction. The court held that the Hoffman Homes decision gives full effect
to Congress's intent to make the CWA as far-reaching as the Commerce Clause
permits. In dicta, the court emphasized that "it is not inconceivable that the
EPA or the Corps of Engineers might completely overextend their authority."
The court stated that "[i]n such a case, we suggest to those agencies that we will
not hesitate to intervene in pre-enforcement activity..."

(5) United States v. Wilson: In United States v. Wilson, 133 F.3d 251 (4th Cir.
1997), the Fourth Circuit Court of Appeals overturned the felony convictions
of several defendants who were determined by the jury to have violated the
CWA by knowingly discharging fill and excavated material into wetlands of
the United States without a permit. The Fourth Circuit reversed this decision
concluding that 33 C.F.R. § 328.3(a)(3) (defining “waters of the United States”
to include those waters whose degradation “could affect” interstate commerce)
is unauthorized by the CWA as limited by the Commerce Clause. On May 29,
1998, the EPA and COE issued Guidance for Corps and EPA Field Offices
Regarding Clean Water Act Section 404 Jurisdiction Over Isolated Waters in
Light of United States v. James J. Wilson (“Wilson Guidance”) which provided
joint clarification by EPA and the COE for determining jurisdiction over
isolated wetlands within and outside the 4th Circuit’s jurisdiction. The Wilson
Guidance limits the application of U.S. v. Wilson to just the Fourth Circuit
Court of Appeals jurisdictional area.

d. Solid Waste Agency of Northern Cook County v. United States Army Corps of
Engineers: On January 9, 2001, the United States Supreme Court in the narrowly
divided decision of Solid Waste Agency of Northern Cook County v. United States
Army Corps of Engineers, 531 U.S. 159 (2001) (the “SWANCC Case”), concluded
that the COE lacks authority under the CWA to regulate isolated intrastate wetlands.
The pivotal issue in this landmark case was founded upon the premise that the

9
potential use of habitat by migratory birds fails to provide a sufficient connection to
interstate commerce.

In the SWANCC Case, the Solid Waste Agency of Northern Cook County
(“SWANCC”), a consortium of suburban Chicago municipalities, purchased 533
acres of abandoned sand and gravel mines to create a solid waste disposal site. The
old mining site’s remnant excavation trenches evolved into scattered permanent and
seasonal ponds of varying size (from under one-tenth of an acre to several acres).
After passing various permitting and land use approval hurdles, including approval
from the local zoning board, Cook County, the Illinois Department of Conservation,
and the Illinois Environmental Protection Agency, the SWANCC requested a ruling
from the COE to determine whether a permit under Section 404 would be needed for
the filling of approximately 17 acres. After the Illinois Nature Preserves Commission
informed the COE that migratory birds had been observed on the property, the COE
concluded that the isolated, intrastate strip-mining depressions were “navigable”
waters of the United States because they “are or could be used as habitat by
migratory birds which cross state lines.” In addition, the COE determined that
SWANCC put the public’s drinking water supply at risk by setting aside insufficient
funds to remediate leaks and failed to establish that the proposal was the “least
environmentally damaging, most practicable alternative.” According to the COE, the
impact upon area-sensitive species could not be mitigated since “a landfill surface
cannot be redeveloped into a forested habitat.” Ultimately, the COE denied the
permit because of the possible impact on migratory birds.

According to the SWANCC, the doubt about whether the migratory bird rule
comports with the Commerce Clause mandated rejection of the COE’s broad
interpretation of its CWA powers. However, both the District Court and Seventh
Circuit Court of Appeal disagreed, prompting the Supreme Court to agree to review
the case. In the 5-4 decision written by Chief Justice William Rehnquist, the Court
found that the COE’s efforts to assert jurisdiction over the abandoned gravel pit used
as habitat by migratory birds would “result in a significant impingement of the
States’ traditional and primary power over land and water use.” The Court also
concluded that the text of the statute would not allow the COE to extend its
jurisdiction to isolated ponds that are not adjacent to open water. If an administrative
interpretation of a statute, such as the Migratory Bird Rule, invokes the outer limits
of Congress’ power, the Court stated that it expects a clear indication that Congress
intended that result. The Court failed to find clear evidence that Congress intended
§404(a) to reach an abandoned sand and gravel pit.

On January 19, 2001, Corps and EPA General Counsel released a memorandum
clarifying the scope of Section 404 regulatory jurisdiction following the SWANCC
decision. On May 11, 2001, the Corps’ DCA headquarters issued a memorandum
which prohibits all Division and District Commands from developing any new
criteria for redefining the “tributary” status of waters and the “adjacent” status of
wetlands until after EPA and Corps headquarters have jointly established a national
policy. To date, representatives of the COE and EPA have indicated that both
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 agencies have been working with each other to formulate a national guidance
document along with a notice of proposed rule making that will provide clarification
of the scope of CWA § 404 regulatory jurisdiction in light of the SWANCC decision.
As a side note, on June 12, 2002, the United States Fish and Wildlife Service (FWS)
released a report entitled Geographically Isolated Wetlands: A Preliminary
Assessment of their Characteristics and Status in Selected Areas of the United States.
The FWS report only focused on the benefits and functions provided by isolated
wetlands, but did not provide comments concerning the regulation of them.

Since the U.S. Supreme Court’s 2001 SWANCC decision, environmental groups and
governmental agencies, including the EPA, have issued reports indicating that the
SWANCC decision has resulted in more than 11,000 acres of wetlands and one-third
of species on isolated wetlands losing protection under the CWA.

e. Post SWANCC Cases, Judicial Split, Proposed Rulemaking, Jacksonville

District Policy Statement, and Pending Legislation: Since the U.S. Supreme
Court’s SWANCC decision, several federal circuit court decisions have addressed the
issue of whether the COE has the authority to regulate tributaries that are neither
themselves navigable nor truly adjacent to navigable waters. As these cases were
being decided by the circuits, the EPA and COE published an advance notice of
proposed rulemaking to clarify the definition of “waters of the United States,”
particularly as it applies to isolated wetlands. As discussed below, the proposed
rulemaking has recently been dropped. Finally, post-SWANCC, the COE’s
Jacksonville District published a written statement of the District’s approach to
identifying adjacent wetlands and isolated waters.

(1) Post SWANCC Cases/Judicial Split: As originally expressed in Rice v. Harken

Exploration Co., 250 F.3d 264 (5th Cir. 2001), the Fifth Circuit recently
reasserted in In the Matter of Needham, 2003 WL 22953383 (5th Cir. 2003), its
position that the CWA is not so broad as to permit the federal government to
impose regulations over tributaries that are neither themselves navigable nor truly
adjacent to navigable waters. This position rejects the U.S. v. Newdunn
Associates, 344 F. 3d 407 (4th Cir. 2003), U.S. v. Deaton, 332 F.3d 698 (4th Cir.
2003), and U.S. v. Rapanos, 339 F. 3d 447 (6th Cir. 2003) decisions. All three of
those decisions upheld the authority of the COE and EPA to regulate wetlands
located next to non-navigable ditches or drains. On April 5, 2004, the U.S.
Supreme Court declined to review Newdunn Deaton and Rapanos, leaving the
split amongst the Circuits intact. On January 28, 2005, Mr. Rapanos asked the
U.S. Supreme Court to review a decision by the Sixth Circuit affirming a
judgment finding him civilly liable for violating the CWA. As set forth above,
the U.S. Supreme Court already declined to review Mr. Rapanos’ criminal case
in which he was sentenced to three years probation, 200 hours of community
service, and a $185,000 fine. On October 11, 2005 the U.S. Supreme Court
granted certiorari to decide the following issues: 1) Does the CWA prohibition
on unpermitted discharges to “navigable waters” extend to nonnavigable
wetlands that do not even abut a navigable water? And 2) Does extension of
11
 CWA jurisdiction to every intrastate wetland with any sort of hydrological
connection to navigable waters, no matter how tenuous or remote the connection,
exceed Congress’ constitutional power to regulate commerce amongst the states?

(2) 2003 Guidance/Proposed Rulemaking: In January, 2003, the EPA and COE
issued new guidance and published an advance notice of proposed rulemaking ,
soliciting comment on the CWA definition of “waters of the United States” in
order to determine the reach of federal jurisdiction over isolated, intrastate, non-
navigable bodies of water. In December, 2003, the agencies announced that the
rulemaking will not proceed. This announcement was made a few weeks after a
draft proposal of the rule was leaked and more than 200 members of Congress
wrote the Administration asking that it cease its efforts to revise the regulations.
The draft rule was criticized as the first step in a long-term effort to rewrite the
CWA regulations to exclude streams and wetlands that are not directly tied to
waters that are actually navigable. The advance notice generated about 133,000
comments, most of them negative. Although the rulemaking did not proceed, the
Bush administration’s guidance regarding the regulation of isolated wetlands post
SWANCC has remained in effect. Among other things, the guidance instructed
EPA field offices to elevate questions of whether isolated wetlands are covered
under the CWA to agency headquarters, where decisions would be made based
on how a federal court with jurisdiction over that EPA region has ruled.
Environmental groups have criticized the 2003 guidance for leaving thousands of
acres of wetlands without CWA protections. Industry groups have also criticized
the 2003 guidance, arguing that it does not do enough to clarify which wetlands
are covered by the CWA.

(3) Jacksonville District Policy Statement: In July, 2003, the COE’s Jacksonville
District published a written statement of the District’s approach to identifying
adjacent wetlands and isolated waters under the COE’s CWA regulatory
program. The statement directs the District to use the approach that they did
prior to the “migratory bird rule” to make determinations of tributary systems,
adjacent wetlands and isolated waters.

(4) Pending Legislation: The “Isolated Wetlands Bill” (H.R. 2658), introduced on
May 26, 2005, seeks to clarify the reach of the CWA post-SWANCC. If it
passes, this legislation will clarify that isolated wetlands and other bodies of
water with no significant connection to traditional navigable rivers and lakes
should be regulated by the states and not by the federal government.

9. Landclearing, Ditching, Channelization, and other Excavation Activities:

a. Tulloch Rule: The so-called Tulloch Rule originated from the settlement of
litigation concerning the excavation activities of a North Carolina developer. See
North Carolina Wildlife Federation v. Tulloch, Civil No. C90-713-CIV-5-BO
(E.D.N.C. 1992). On August 25, 1993, the COE issued a final regulation (which
became effective on September 24, 1993) amending 33 C.F.R. Part 323 ("Tulloch
12
 Rule") to extend the COE permitting jurisdiction over mechanized landclearing,
ditching, channelization, and other excavation activities conducted in "waters of the
United States" (which includes wetlands). Under Section 404, the discharge of
dredged or fill material into "waters of the United States" requires COE authorization
in the form of either an individual or general permit. However, the Tulloch Rule
amends the regulatory definition of "discharge of dredged material" at 33 C.F.R. §
323.2(d)(1) to include the redeposit of dredged material into "waters of the United
States" that is incidental to any activity, "...including mechanized landclearing,
ditching, channelization or other excavation."

b. Tulloch Rule Declared Invalid: On January 23, 1997, in American Mining

Congress v. U.S. Army Corps of Engineers, 951 F.Supp. 267 (D.D.C. 1997), aff’d,
145 F.3d 1399 (D.C. Circuit 1998), Judge Stanley S. Harris invalidated the Tulloch
Rule based on the finding that both the COE and EPA were unauthorized under the
CWA to regulate incidental fallback activities. On May 10, 1999, the COE and EPA
published a Final Rule (64 Fed. Reg. 25,119) which revised the definition of
“discharged of dredged material” to exclude “incidental fallback” consistent with the
American Mining Congress decision. On January 17, 2001, the COE and EPA
redefined again the definition of the discharge of dredged materials. See 65-Fed.
Reg.4, 550. The new rule defines the term to mean materials which results from “the
use of mechanized earth-moving equipment to conduct landclearing, ditching,
channelization, in-stream mining or other earth-moving activity in waters of the
U.S.…unless project-specific evidence shows that the activity results in only
incidental fallback.” The new rule also defines the term “incidental fallback” to
mean “small volumes of dredge material that is incidental to excavation activity in
waters of the United States when such material falls back to substantially the same
place as the initial removal.” On February 6, 2001, the National Association of
Homebuilders filed a lawsuit seeking to overturn the revised Tulloch Rule alleging in
part that the federal government has defined “incidental fallback” too narrowly. See
National Association of Homebuilders v. U.S. Army Corp of Engineers, D.D.C.,
1:01CV00-274. Settlement talks between the parties were pursued but reached an
impasse. The NAHB held off on proceeding with the suit because of a wetland
excavation case pending before the U.S. Supreme Court. On December 16, 2002, the
U.S. Supreme Court affirmed a Ninth Circuit decision which ruled that a deep-
plowing technique, commonly referred to as “deep-ripping” required a CWA § 404
permit. See Borden Ranch Partnership v. United States, U.S., No. 01-1243. Deep-
ripping involves the use of metal shanks to turn packed soil. At the Borden Ranch
oral arguments, the justices inquired about whether the dragging of a plow through
packed soil resulted in the movement of material to another location to the extent that
a discharge or fill would be created. However, the Supreme Court’s one sentence
opinion in Borden Ranch did not clarify or elaborate on the incidental fallback
aspects of the case. In October, 2005, the NAHB argued to the D.C. Circuit that
2001 revised rule should be overturned because the rule’s definition of “discharge of
dredged material” is a “broad interpretation” and that it oversteps the COE’s
authority.

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10. Regulation of Ditches: Conflicting policies by the federal government and court
decisions have sparked debate about whether drainage ditches should be regulated as
point sources or as waters of the United States under the CWA. The NAHB argues that
drainage ditches are point sources and should be regulated as such under the National
Pollutant Discharge Elimination System (“NPDES”) permit program under Section 402
of the CWA. The COE Office of Counsel has responded that drainage ditches should be
classified as waters of the United States because the NPDES program only regulates
discharges from point sources, not releases of pollutants into a ditch that can ultimately
be carried into a river or a stream.

11. COE and EPA Adopt Uniform Definition of Fill Material and Discharge of Fill
Material: Recently the COE and EPA jointly promulgated a final rule amending their
respective regulatory definitions of “fill material” and “discharge of fill material.” See 67
Fed. Reg. 31129 (May 9, 2002). Now both agencies will rely on uniform definitions of
these terms. See 33 C.F.R. 323.2(e)(f) for the amended COE regulations and 40 C.F.R.
232.2 for the amended EPA regulations. The term fill material is defined now to mean
“material placed in waters of the United States where the material has the effect of (i)
replacing any portion of the water of the United States with dry land or (ii) changing the
bottom elevation of any portion of the water of the United States.” Under the new joint
rule, some examples of fill material contemplated include rock, sand, soil, clay, plastics,
construction debris, wood chips, overburden from mining or other excavation activities
and materials used to create any structure or infrastructure in waters of the United States.
An exception excludes trash or garbage from being considered fill material under the
joint rule. The term “discharge of fill material” is also being restructured to encompass
activities associated with the construction of solid waste land fills and mining-related
materials. As a side note, a U.S. District Court in West Virginia has ruled that the
disposal of coal mining excess soil (overfill) into streams called valley fills were not
authorized under the CWA § 404 Program as such overfill constituted waste instead of
fill. See Kentuckians for the Commonwealth v. Rivenburgh, S.D. W.Va., No. 2:01-0770.
The District Court also ruled that the COE-EPA revised rule definition of fill material to
encompass mining overfill waste was invalid.

12. Draining: In Save Our Community v. United States Environmental Protection Agency,
971 F.2d 1155 (5th Cir. 1992), Save Our Community (“SOC”) brought an action seeking
to enjoin Trinity Valley Reclamation, Inc.’s (“Trinity”) draining on several man-made
ponds located on the site of a 73-acre landfill. The COE and EPA determined that the
man-made ponds were “waters of the United States”, and, as such, were regulated under
the CWA. Therefore, Trinity would be required to obtain a permit for any discharge into
the ponds. To avoid a CWA violation, Trinity drained the ponds with a mechanical pump
in order to utilize the water extracted for irrigation of the sold covering areas of the
landfill. Trinity intended to drain the ponds so that the ponds would lose their wetland
characteristics, and therefore not be subject to CWA jurisdiction. Trinity would then fill
the area to expand the landfill. Both the EPA and the COE assured Trinity that if no
discharges were involved, then the removal of the water from the ponds did not constitute
a regulated activity under the CWA, and thus did not require a Section 404 permit. The
lower court entered an order granting SOC’s motion for summary judgment and
14
 enjoining the Trinity’s activity. The Fifth Circuit Court of Appeals dissolved the lower
court’s injunction and reversed the order granting summary judgment, holding that a
wetland draining activity per se is not subject to Section 404 permit requirements. Id. at
1167. Section 404 only regulates activities involving discharges into the waters of the
United States.

13. Agricultural Lands: Although the EPA retains ultimate authority to determine the
scope of “waters of the United States” subject to CWA jurisdiction, EPA, COE, FWS and
the U. S. Department of Agriculture ("USDA") entered into Interagency Memorandum of
Agreement Concerning Wetlands Delineation for Purposes of Section 404 of the Clean
Water Act and Subtitle B of the Food Security Act ("1994 MOA"), which governs
wetland delineations for agricultural lands. See 59 Fed. Reg. 2920 (January 19, 1994).
"Agricultural lands" are defined by the 1994 MOA as "those lands intensively used and
managed for the production of food or fiber to the extent that the natural vegetation has
been removed and cannot be used to determine whether the area meets applicable
hydrophytic vegetation criteria in making a wetland delineation."

Under the 1994 MOA, wetland delineations made by the USDA Natural Resources
Conservation Service (“NRCS”) on agricultural lands were accepted by the EPA and the
COE for determining Section 404 wetland jurisdiction.

On January 24, 2005, the USDA and the COE withdrew from the 1994 MOA because
1996 and 2002 Food Security Act amendments changed the wetland conservation
provisions, producing inconsistencies between them and the CWA.

On February 25, 2005, the NRCS and COE issued Joint Guidance concerning wetland
determinations for the CWA and Food Security Act of 1985. The Joint Guidance was
issued to replace coordination procedures made obsolete upon withdrawal of the agencies
from the 1994 MOA. In conjunction with the Joint Guidance, on August 8, 2005 and
September 2, 2005, the NRCS of Florida and the COE Jacksonville District, respectively,
entered into a Local Operating Agreement which sets forth the agencies’ commitment to
coordinate “to the extent appropriate and allowable under federal law in cases where an
agricultural tract farmed by a USDA program participant is subject to CWA regulations.

In September, 2005, USDA Secretary Mike Johanns announced plans to extend

“stewardship contracts” with farmers and ranchers who preserve wetlands and other
environmentally sensitive lands. Contracts over approximately 28 million acres of lands
protected under the “Conservation Reserve Program” are set to expire between 2007 and
2010. The USDA is currently seeking early re-enrollment of those contracts. The
program provides annual rental payments to farmers and ranchers who conserve
environmentally sensitive lands.

14. Prior Converted Croplands Excluded From Jurisdiction: 33 C.F.R. §328.3(a)(8)

excludes from jurisdiction prior converted cropland. While EPA has the final
jurisdictional authority on prior converted cropland, the August 25, 1993 preamble to the
regulations states that EPA will continue to rely on the SCS’s wetland determinations for
15
 prior converted cropland. 58 Fed. Reg. 45,033. The preamble defines prior converted
cropland as “areas that, prior to December 23, 1985, were drained or otherwise
manipulated for the purpose, or having the effect, of making production of a commodity
crop possible.” Id. A prior converted cropland is one which is inundated for no more
than 14 consecutive days during the growing season.

15. Groundwaters: Recently, the courts have begun to address the question of whether
waterbodies or wetlands that are connected with navigable waterways through
groundwater, rather than surface waters, are subject to Clean Water Act jurisdiction. See
United States v. Riverside Bayview Homes, Inc., 474 U.S. 121 (1985). In United States v.
Banks, 873 F.Supp. 650 (S.D. Fla. 1995), the court found that the existence of a
groundwater connection through caprock (a porous limestone) established a hydrological
connection to a neighboring navigable waterway. This groundwater connection was cited
by the court as supporting a finding that the defendant's property was an adjacent
wetland, even though the only surface water connection occurred in times of severe
storms. Similarly, in May, 2005, after examining a dye test, the COE concluded that a
hydrologic connection through underground limestone caverns exists between the Falling
Water River in Tennessee and otherwise “isolated wetlands.” However, in Village of
Oconomowoc Lake v. Dayton Hudson Corporation, 24 F.3d 962 (7th Cir.1994), cert.
denied 115 S.Ct. 322 (1994), the court found that although the possibility of a
hydrological groundwater connection could not be denied, "neither the statute nor the
regulations makes such a possibility a sufficient ground of regulation." Id. at 965. Thus,
an artificial retention pond would not be considered part of the "waters of the United
States," even if the pond drained into groundwaters. Although it is uncertain whether a
groundwater connection can render an isolated waterbody part of the waters of the United
States, discharges of pollutants into such isolated waterbodies which migrate through
groundwater into navigable waters may still fall within the National Pollution Discharge
Elimination System. See Washington Wilderness Coalition v. Hecla Mining Company,
870 F.Supp. 983 (E.D. Wash. 1994); Sierra Club v. Colorado Refining Company, 838
F.Supp. 1428 (D. Colo. 1993).

16. Treatment Ponds Excluded from Jurisdiction: 33 C.F.R. §328.3(a)(8) states that
“[w]aste treatment systems, including treatment ponds or lagoons designed to meet the
requirements of the CWA (other than cooling ponds as defined in 40 CFR 123.11(m)
which also meet the criteria of this definition) are not waters of the United States.” It is
unclear whether the “treatment pond exemption” applies to dual purpose ponds (e.g.
ponds with treatment and attenuation functions).

17. Other Areas Excluded From Jurisdiction: The COE published Final Rule for
Regulatory Programs of the Corps of Engineers on November 13, 1986 at 51 Fed. Reg.
41,206. The preamble provides that, absent a case-by-case determination by the COE or
EPA, the following waters are not “waters of the United States”:

a. Non-tidal drainage and irrigation ditches excavated on dry land.

b. Artificially irrigated areas which would revert to upland if the irrigation ceased.

16
 c. Artificial lakes or ponds created by excavating or diking dry land to collect and retain
water which are used exclusively for purposes such as stock watering, irrigation,
settling basins, or rice growing.
d. Artificial reflecting or swimming pools or other small ornamental bodies of water
created by excavating or diking dry land to retain water for primarily aesthetic
reasons.
e. Water-filled depressions created in dry land incidental to construction activity and
pits excavated in dry land for the purpose of obtaining fill, sand, or gravel unless and
until the construction or excavation operation is abandoned and the resulting body of
water meets the definition of waters of the United States. (51 Fed. Reg. 41,217).

18. Florida Legislation: During the 2005 Legislative session, the Senate and House
passed HB 759, which was signed by the Governor on June 20, 2005. If fully
implemented, HB 759 would transfer authority over projects with up to 10 acres of
wetland impacts from the COE to the State. Section 3 of the Bill required that by
October 1, 2005, FDEP report on the federal and state statutory changes that would be
required to consolidate, “to the maximum extent practicable,” federal and state wetland
permitting programs.

II. FEDERAL WETLANDS PERMITTING PROGRAM

A. Types of Permits: Individual Permit (Standard Permits and Letters of Permission),

General Permits (Regional, Nationwide, and Programmatic), and Exemptions from
Permitting

1. Introduction: After areas within a project are determined to be subject to COE/EPA

jurisdiction as “waters of the United States,” and impacts are proposed to those areas, the
next step in the Federal wetlands permitting process is assessing whether the proposed
activity is subject to a permitting exemption. If no permitting exemption is applicable,
then the next step is determining which permit is required to authorize the proposed
activity. These permits range from Individual Permits (the most extensive review
process), which include Standard Permits and Letters of Permission, to General Permits,
which include Regional, Nationwide and Programmatic Permits.

2. Permitting Exemptions: 33 U.S.C. §1344(f) provides the following permitting

exemptions, which are further detailed at 33 C.F.R. §323.4.

a. Normal farming, silviculture and ranching activities such as plowing, seeding,

cultivating, minor drainage, and harvesting for the production of food, fiber, and
forest products, or upland soil and water conservation practices. See also 33 C.F.R.
§323.4(1).

b. Maintenance, including emergency reconstruction of recently damaged parts, of

currently serviceable structures such as dikes, dams, levees, groins, riprap,
17
 breakwaters, causeways, and bridge abutments or approaches, and transportation
structures. See also 33 C.F.R. §323.4(2). Maintenance does not include any
modification that changes the character, scope, or size of the original fill design.

c. Construction or maintenance of farm or stock ponds or irrigation ditches, or the

maintenance of drainage ditches. See also 33 C.F.R. §323.4(3).

d. Construction of temporary sedimentation basins on a construction site which does not

include the placement of fill material into the navigable waters. See also 33 C.F.R.
§323.4(4).

e. Construction or maintenance of farm roads or forest roads, or temporary roads for

moving mining equipment, where such roads are constructed and maintained, in
accordance with best management practices, to assure that the flow and circulation
patterns and chemical and biological characteristics of the navigable waters are not
impaired, that the reach of the navigable waters is not reduced, and that any adverse
effect on the aquatic environment will otherwise be minimized. See also 33 C.F.R.
§323.4(6).

f. Any activity with respect to which a State has an approved program under 33 U.S.C.
§1288(b)(4) which meets the requirements of subparagraphs (B) and (C) of such
section. See also 33 C.F.R. §323.4(5).

3. General Permits: The term “general permit” means a COE authorization “that is issued
on a nationwide or regional basis for a category or categories when: (1) Those activities
are substantially similar in nature and cause only minimal individual and cumulative
environmental impacts; or (2) The general permit would result in avoiding unnecessary
duplication of regulatory control exercised by another Federal, state, or local agency
provided it has been determined that the environmental consequences of the action are
individually and cumulatively minimal.” 33 C.F.R. §323.2(h).

a. Regional and Programmatic General Permits: There are numerous General

Permits available in Florida as outlined in the COE’s State Programmatic General
Permit (SPGP) State of Florida issued on September 24, 1997, as supplemented on
January 9, 1998. These General Permits pertain to activities such as shoreline
stabilization, boat ramps and boat launch areas and associated structures, docks,
piers, marinas and associated facilities, and maintenance dredging of canals and
channels.

SPGP III-R1 is a permit for a variety of minor activities in waters of the United
States in Florida. The permit was due to expire on December 17, 2003 so the COE
Jacksonville District administratively extended it until June 17, 2004 or until it is
reauthorized, whichever comes first.

b. Nationwide Permits (NWP’s): NWP’s are a form of general permit issued by the
COE pursuant to 33 U.S.C. §1344(e). The COE headquarters in Washington, D.C.
18
issues NWP’s which are adopted after undergoing a publication and notice process in
the Federal Register and an analysis of information generated during commenting
periods. On November 22, 1991, the COE published 36 NWP’s at 33 C.F.R. Part
330, Appendix A, which became effective on January 21, 1992. See 56 Fed. Reg.
59,110. NWP 29, known as the single-family housing NWP, was published on July
27, 1995 and became effective on September 25, 1995. See 60 Fed. Reg. 38,650. All
37 NWP’s were reissued by the COE on December 13, 1996, some of which were
modified significantly. See 61 Fed. Reg. 65,874.

In addition to the reissuance of the previous 37 NWP’s, the COE issued two new
NWP’s and one new NWP General Condition. NWP 30 - Moist Soil Management
for Wildlife, authorizes discharges of dredged or fill material for activities related to
moist soil management for wildlife habitat conducted within non-tidal federal or
state-owned or managed properties. NWP 31 - Maintenance of Existing Flood
Control Facilities, authorizes discharges associated with the maintenance of flood
control facilities already in existence which were permitted by or constructed by the
COE and subsequently transferred to an operation and maintenance entity. The new
condition required every NWP permittee receiving a verification from the COE to
submit a signed certification stating that the work was conducted pursuant to the
COE’s authorization (including general and specific conditions), and that any
required mitigation was implemented pursuant to the NWP conditions.

The COE will no longer publish the NWP’s in the Code of Federal Regulations (i.e.,
CFRs), but will instead publish the NWP’s in the Federal Register. The COE’s
position with regard to this issue is that the NWP’s are not regulations at all, but
rather are permits, and therefore, it is inappropriate to continue to have them
published in the CFR.

Since December 13, 1996, the COE has proposed to, and did, phase out the NWP 26
and replaced it with a series of new activity-based NWP’s which were published in
the Federal Register on March 9, 2000. 65 Fed. Reg.. 12,818. The previous NWP
26 authorized the discharge of dredge and fill material into wetlands situated either
above the head waters or within isolated waters. Prior to reissuance, the NWP 26
acreage threshold extended up to 10 acres to “waters of the United States.” An NWP
26 applicant was only required to notify the COE for those discharges which would
impact areas greater than one acre. The reissued NWP 26 only extended up to three
acres for impacts to “waters of the United States” and a pre-construction notification
(“PCN”) to the COE was required for impacts greater than one-third acre. In
addition, the COE processing time for PCN was increased from 30 to 45 days.

On December 15, 1999, the COE published a notice extending the expiration date of
the NWP 26 until April 14, 2000, with limited exceptions. The COE stated that it
would process all PCNs for NWP 26 activities submitted to the COE on or before the
publication date of the final new and modified NWP’s in the Federal Register (then
scheduled for February 14, 2000). If the COE determined that the NWP 26 PCN met
the terms and conditions, the verification would remain in effect until February 11,
19
2002. As of December 15, 1999, the COE suspended the 45 day period in paragraph
(a)(3) of General Condition 13.

On March 9, 2000, the COE published its Final Notice of Issuance and Modification
of Nationwide Permits. See 65 Fed. Reg. 12,818. The COE issued five new NWP’s
(NWP’s 39, 41, 42, 43, and 44) and modified six existing NWP’s (NWP’s 3, 7, 12,
14, 27, and 40) to replace NWP 26 which expired on June 5, 2000. The COE also
modified six NWP General Conditions and added two new NWP General Conditions.
The five new NWP’s and six modified NWP’s went into effect June 7, 2000 and are
to expire June 7, 2005. The maximum acreage limit of most of the new and modified
NWP’s is one-half acre. Most of the new and modified NWP’s require notification to
the District Engineer for activities that result in the loss of greater than one-tenth acre
of “waters of the United States.”

Relative to the NWP 26, the COE extended the expiration date to June 5, 2000.
NWP 26 PCNs submitted on or before March 9, 2000 (whether required or not) will
be reviewed under the existing terms and conditions of the NWP’s. If those activities
are authorized by NWP 26, their authorizations will be valid until February 11, 2002.
If the activity is under construction or under contract prior to February 11, 2002, the
permittee will have 12 additional months to complete the authorized activity. NWP
26 PCNs for activities that require notification which are submitted after March 9,
2000, will be reviewed under the new and modified NWP’s, or other COE permit
authorizations (e.g., Individual Permit - see below).

On August 9, 2001, the COE published a proposal to reissue all the NWP’s including
those NWP’s set to expire February 11, 2002 and those NWP’s set to expire June 7,
2005 so that all NWP’s will become effective and also expire on the same date. See
66 FR 42070-42100. In addition to reissuing all of the NWP’s, the COE proposed to
modify certain NWP’s (14, 21, 27, 31, 37, 39, 40, 42, and 43), modify certain NWP
General Conditions (4, 9, 13, 19, 21, and 26), and to create a new NWP General
Condition No. 27 that specifies by what time work authorized under a NWP must be
completed. On January 15, 2002, the COE published a final rule which reissued all
NWPs . See 67 FR 2020-2095. All of the reissued NWPs became effective on
March 18, 2002 and are due to expire on March 18, 2007. An NWP grandfather (see
33 C.F.R. 330.6) is available for activities authorized under those NWPs previously
issued by the Corp on December 13, 1996 (except NWPs 3, 7, 12, 14, 27, 39, 40, 41,
42, 43 and 44) provided that the authorized activity was either commenced or under
contract to commence by February 11, 2002. Those activities that qualified for the
NWP grandfather will have until February 11, 2003 to complete the activity. For
activities authorized under NWPs 3,7,12,14,27,39,40,41,42, 43 and 44 that were
issued on March 9, 2000 and if such activities were either commenced or were under
contract to commence by March 18, 2002, then under the NWP grandfather, NWP
permitees will have until March 18, 2003 to complete the authorized activity.

In response to the COE’s publication of the new and modified NWPs, the National
Association of Home Builders filed a complaint on March 9, 2000, in the U.S.
20
 District Court for the District of Colombia (National Association of Home Builders v.
U.S. Army Corps of Engineers, D.D.C., Civ. No. 00-379). In November, 2003, the
Federal District Court dismissed the lawsuit for lack of jurisdiction, finding that the
issuance of the package of permits did not constitute a final agency action that could
be reviewed.

4. Individual Permits: The term “individual permit” means “a Department of Army

authorization that is issued following a case-by-case evaluation of a specific project
involving the proposed discharge(s) in accordance with the procedures of this part and 33
CFR Part 325 and a determination that the proposed discharge is in the public interest
pursuant to 33 CFR Part 320.” 33 C.F.R. §323.2(g). Individual Permits consist of
Standard Permits and Letters of Permission.

a. Letters of Permission (“LOP”): An LOP will be issued where the procedures of

§325.2(e)(1) have been followed. 33 C.F.R. §325.5(b)(2). LOPs are a type of permit
issued through an abbreviated processing procedure which includes coordination with
Federal and state fish and wildlife agencies, as required by the Fish and Wildlife
Coordination Act, and a public interest evaluation, but without publishing of an
individual public notice. 33 C.F.R. §325.2(e)(1). LOPs may be used: (1) in those
cases subject to Section 10 “…when, in the opinion of the district engineer, the
proposed work would be minor, would not have significant individual or cumulative
impacts on the environmental values, and should encounter no appreciable
opposition.” 33 C.F.R. §325.2(e)(1)(i); and (2) in those cases subject to the CWA
after the District Engineer develops a list of LOP categories, consults with various
state and Federal agencies, issues a public notice advertising the proposed list
(requesting comments and offering an opportunity for a public hearing), and a 401
certification has been issued or waived and, if appropriate, a Coastal Zone
Management consistency concurrence is obtained or presumed either on a generic or
individual basis. 33 C.F.R. §325.2(e)(1)(ii). On March 22, 1994, the COE
Jacksonville District issued a public notice in accordance with § 325.2(e)(1) therein
listing the proposed changes and additions to the LOP categories for the Jacksonville
District. The Jacksonville District issued a second public notice on May 21, 1996
which implemented additional changes for LOP evaluation within the Jacksonville
District.

b. Standard Permits: A Standard Permit is one which is processed through the public
interest review procedures, including public notice and receipt of comments. 33
C.F.R. §325.5(b)(1).

(1) Joint State/Federal Application: Permit applications may be made by filing

a joint application with the Florida Department of Environmental Protection or
water management district.

21
(2) Time for Processing Standard Applications:

(a) District Engineer reviews the application for completeness and must
request additional information within 15 days of receipt of the
application. 33 C.F.R. §325.2(a)(2).

(b) Within 15 days of receipt of all information, the District Engineer will
issue a public notice. The comment period should not be more than 30
days nor less than 15 days from the date of the public notice and may be
extended up to an additional 30 days if warranted. 33 C.F.R.
§325.2(d)(1)-(2).

(c) The District Engineer must decide on all applications no later than 60
days after receipt of a complete application, unless it is precluded as a
matter of law, or other procedures required by law, the case is referred to
a higher authority, the comment period is extended, a timely rebuttal or
resolution of objections is not received from the applicant, or information
needed by the District Engineer for decision on the application cannot
reasonably be obtained within the 60 day period. 33 C.F.R.
§325.2(d)(3).

(d) No sanctions are provided for District Engineers who fail to meet the
above time limitations.

(3) Project Purpose: The COE will determine the project purpose prior to
issuing public notice. The COE claims this is necessary to obtain valid
comments on practicable alternatives. In determining project purpose, the
COE must ensure the purpose is legitimate and the components of the project
are not merely incidental to the basic purpose.

(4) Public Interest Review: The COE criteria, referred to as the “Public Interest
Review”, under Section 10 of the RHA and Section 404 of the CWA is set
forth at 33 C.F.R. §320.4. The decision whether to issue a permit will be
based on an evaluation of the probable impacts, including cumulative impacts,
of the proposed activity and its intended use on the public interest. 33 C.F.R.
§320.4(a)(1). Evaluation of the probable impact which the proposed activity
may have on the public interest requires careful weighing of all those factors
which become relevant in each particular case - benefits are weighed against
detriments. Id. Factors (including their cumulative effects) to be considered
include: conservation, economics, aesthetics, general environmental concerns,
wetlands, historic properties, fish and wildlife values, flood hazards,
floodplain values, land use, navigation, shore erosion and accretion,
recreation, water supply and conservation, water quality, energy needs, safety,
food and fiber production, mineral needs, considerations of property
ownership and, in general, the needs and welfare of the people. Id.

22
 The following are the four key factors considered by the COE Jacksonville
District Office in the public interest review: (a) effects on general navigation;
(b) effects on wetland areas; (c) effects on water quality; and (d) effects on
fish and wildlife. 33 C.F.R. §320.4(a)(1).

A permit will be granted unless the district engineer determines that it would
be contrary to the public interest. Permits involving Section 404 activities
will be denied if the discharge that would otherwise be authorized would not
comply with the EPA’s 404(b)(1) Guidelines at 40 C.F.R. Part 230. 33 C.F.R.
§320.4(a)(1) [“404(b)(1) Guidelines”].

(5) 404(b)(1) Guidelines: According to the consolidated final regulations, most

wetlands constitute a productive and valuable public resource, the unnecessary
alteration or destruction of which should be discouraged as contrary to the
public interest. 33 C.F.R. 320.4(b)(1). No permit will be granted which
involves the alteration of wetlands identified as important by 33 C.F.R.
320.4(b)(2), or because of the reasoning outlined in §320.4(b)(3), unless the
District Engineer determines that the benefits of the proposed alteration
outweigh the damage to the wetlands resource. 33 C.F.R. 320.4(b)(4). In
making this determination, the District Engineer must apply the 404(b)(1)
Guidelines. The 404(b)(1) Guidelines establish, according to the COE, the
following four basically equal restrictions on Section 404 activities in
wetlands:

(a) Practicable Alternatives: No discharge of dredge or fill material will

be permitted if there is a practicable alternative to the proposed discharge
which will have less adverse impact on the aquatic ecosystem (e.g.,
wetland). 40 C.F.R. §230.10(a). Where there is no significant or easily
identifiable difference in impact, the alternative need not be considered
to have “less adverse” impact. 45 Fed. Reg. 85,339. Alternatives which
have significant adverse consequences to other ecosystems may not be a
practicable alternative. 45 Fed. Reg. 85,340.

i. An alternative is practicable if it is available and capable of being

done after considering cost, existing technology, and logistics in light
of overall project purposes. Areas not owned by the applicant which
could be reasonably obtained, utilized, expanded or managed to
fulfill the proposed activities purpose may be considered. 40 C.F.R.
§230.10(a)(2).

ii. If there is a practicable alternative available at the time the applicant

entered the market for the project, the permit may be denied.
Bersani v. Robichaud, 850 F.2d 36 (2nd Cir. 1988).

iii. Practicable alternatives include (i) activities which do not involve the
discharge of dredged or fill material to “waters of the United States”,
23
 or (ii) the discharge to other locations in “waters of the United
States.” 40 C.F.R. §230.10(a)(1).

iv. Any practicable alternative which does not involve the discharge to
wetlands is presumed to have less adverse impact on the aquatic
ecosystem. 40 C.F.R. §230.10(a)(3).

v. For “non-water dependent” activities associated with a proposed

discharge to a wetland, practicable alternatives that do not involve
wetland sites are presumed to be available. 40 C.F.R. §230.10(a)(3).

(b) Water Quality, Federally Listed Species and Their Habitat, and
Federal Marine Sanctuaries: The proposed discharge may not cause or
contribute to any applicable State water quality standard or applicable
toxic effluent standard or prohibition under Section 307, CWA,
jeopardize the existence of any federally listed endangered or threatened
species or their critical habitat, or violate any requirement of any federal
marine sanctuary. 40 C.F.R. §230.10(b).

(c) Significant Degradation: The proposed discharge may not cause or

contribute to any significant degradation of “waters of the United
States.” 40 C.F.R. §230.10(c).

(d) Aquatic Ecosystems: The proposed discharge will not be permitted

unless appropriate and practicable steps are taken to minimize potential
adverse impacts of the discharge on the aquatic ecosystem. 40 C.F.R.
§230.10(d).

(6) Agency Coordination - Memorandum of Agreement: There are

numerous memorandums of agreements between the COE with other
agencies. By example, the EPA and COE entered into Memorandum of
Agreement Between the Environmental Protection Agency and the
Department of Army, dated August 11, 1992, and the FWS and COE entered
into Memorandum of Agreement Between the Department of Interior and the
Department of Army, dated December 21, 1992, which establish the exclusive
protocol for FWS and EPA, respectively, to elevate to the Assistant Secretary
of the Army, Civil Works, proposed COE Individual Permit decisions by the
COE which are determined by FWS or EPA to have substantial and
unacceptable impacts to aquatic resources of national importance. These
agencies also have separately established local procedures in the COE
Jacksonville District.

(7) Endangered Species Act: The FWS is the federal agency primarily
responsible for protecting the nation’s fish and wildlife resources through the
implementation of the Endangered Species Act of 1973, as amended, 16
U.S.C. § 1531-1543 (“ESA”). The FWS has responsibility for terrestrial and
24
 fresh water species and the Department of Commerce, National Marine
Fisheries Services (“NMFS”) has responsibility for marine and estuarine
species. Section 2(c) of the ESA provides that it is the policy of the U.S.
Congress that all federal departments and agencies shall seek to conserve
endangered and threatened species and utilize their authorities in furtherance
of the purpose of the ESA.

(a) Section 7 Consultation: Section 7(a)(1) of the ESA requires all federal
agencies, in consultation with, and with the assistance of the Secretary, to
utilize their authorities in furtherance of the purpose of the ESA by
carrying out programs for the conservation of endangered and threatened
species listed pursuant to Section 4 of the ESA. Section 7(a)(2) states
that all federal agencies shall, in consultation with, and with the
assistance of the Secretary, insure that any action authorized, funded or
carried out by such agency is not likely to jeopardize the continued
existence of any endangered or threatened species which is determined
by the Secretary, after consultation as appropriate with affected states, to
be critical, unless such agency has been granted an exemption for such
action.

i. Procedures: A Section 7 Consultation is initiated when a federal

agency (e.g., COE) determines an action it is conducting, permitting,
authorizing, etc. “may affect” a listed species or critical habitat.
Requests for consultation, along with a biological opinion of the
issue, are forwarded to the FWS or NMFS. The FWS or NMFS has
90 days to complete the consultation. Biological opinions must be
issued within 45 days of the close of the consultation period. There
are provisions for extending the consultation period. Results of a
consultation are set forth in a biological opinion that must find either:
“The action is not likely to jeopardize the continued existence of the
listed species or destroy or adversely modify critical habitat, or the
action is likely to jeopardize the continued existence of a listed
species or destroy or adversely modify critical habitat.”

When jeopardy biological opinions are given, the FWS or NMFS

must provide reasonable and prudent alternatives that would avoid a
jeopardy situation, be consistent with the intended purposes of the
action, be economically and technologically feasible, and be
consistent with the agency’s legal authority and jurisdiction. The
COE will decide what, if any, proposed permit conditions and/or
reasonable prudent alternatives will be included in the COE permit.
Reasonable prudent alternatives will be required by the COE only to
the extent that they are necessary for the COE to make its
determination that the authorized activity is not likely to jeopardize
the continued existence of a federally listed species or result in the
destruction or adverse modification of critical habitat. If the COE
25
 decides to issue a permit without including the reasonable prudent
alternatives, the permit decision document must explain why the
species will not be jeopardized.

ii. Conflict Resolution Process: On November 18, 1999, the COE

issued Memorandum for Major Subordinate Commands and District
Commands regarding Endangered Species Act compliance. The
memorandum, in part, provides for a conflict resolution process to
address disagreements between the agencies on how to apply the
ESA. The conflict resolution process commenced as of the date of
the memorandum (i.e., 11/18/99) and will be used for one year, at the
end of which time additional national guidance will be developed, if
necessary.

(8) Mitigation: On March 12, 1990, the EPA and COE issued Memorandum of
Agreement Between the Environmental Protection Agency and the
Department of Army Concerning the Determination of Mitigation Under the
Clean Water Act Section 404(b)(1) Guidelines (“Mitigation MOA”). The
Mitigation MOA attempts to articulate the policy and procedures used by the
COE in determining the type and level of mitigation necessary to demonstrate
compliance with the 404(b)(1) Guidelines. Wetland mitigation is required for
virtually all projects which require an Individual Permit. Mitigation is
typically not required for certain projects which are authorized by a General
Permit or a Nationwide Permit. The Mitigation MOA establishes a three-step
sequential process to be utilized by the COE when determining compliance
with Section 230.10(a) and (d) of the 404(b)(1) Guidelines.: (1) avoidance
(reviewing alternatives), (2) minimization (reducing impacts); and (3)
compensatory mitigation (compensating for unavoidable losses). See Section
II C. of the Mitigation MOA. (The COE first determines that potential
impacts have been avoided to the maximum extent practicable; remaining
unavoidable impacts will then be mitigated to the extent appropriate and
practicable by requiring steps to minimize impacts, and, finally, compensate
for aquatic resource values).

(a) Avoidance: According to the 404(b)(1) Guidelines, the COE will only
issue a permit to the least environmentally damaging practicable
alternative. See Section II C. 1. The Mitigation MOA requires that the
COE seek avoidance first to the extent “practicable.” The alternative
must be available, capable of being done, and satisfy project purpose
when considering costs, existing technology and logistics to be
considered “practicable.” Compensatory mitigation will not be used to
reduce environmental impacts in selecting the least environmentally
damaging practicable alternative.

(b) Minimization: The COE may also seek to minimize adverse impacts to
the extent “appropriate” and “practicable” through project modifications
26
 and permit conditions. 40 C.F.R. §230.10(d). Minimization of adverse
impacts will be based on values and functions of the aquatic resource that
will be impacted (appropriate) and must be available, capable of being
done, and satisfy project purpose when considering costs, existing
technology and logistics (practicable). Compensatory mitigation will not
be used to reduce impacts to satisfy the minimization of impacts
requirement in 40 U.S.C. §230.10(d).

(c) Compensatory Mitigation: Appropriate and practicable compensatory

mitigation is required for all remaining unavoidable adverse impacts.

i. Appropriate: Compensatory mitigation must be based on the

remaining adverse impacts considering only the functional values of
the aquatic resource that will be impacted. To the extent appropriate
and practicable, compensatory mitigation should provide, at a
minimum, one for one functional replacement (i.e., no net loss of
values), with an adequate degree of margin to reflect expected degree
of success for the mitigation plan. According to the Mitigation
MOA, “[f]unctional values should be assessed by applying aquatic
site assessment techniques generally recognized by experts in the
field and/or the best professional judgment of Federal and State
agency representatives, provided such assessments fully consider
ecological functions included in the Guidelines.” Examples of these
techniques are the Hydrogeomorphic Approach for Assessing
Wetland Functions (HGM) (see National Action Plan to Develop the
Hydrogeomorphic Approach for Assessing Wetland Functions, dated
August 16, 1996 at 61 Fed. Reg. 42,593-04) and the Modified
Wetland Rapid Assessment Procedure (MWRAP). HGM has not
reached the stage of development where it is commonly used. The
Jacksonville District COE generally requires the application of
WRAP on almost every project with proposed federally regulated
wetland impacts greater than three (3) acres. However, the
Jacksonville District is currently evaluating the “Uniform Mitigation
Assessment Method” (“UMAM”), which was adopted by the State of
Florida on February 2, 2004.

ii. Practicable: The compensatory mitigation must be available,

capable of being done, and satisfy project purpose when considering
costs, existing technology and logistics. Compensatory mitigation
may not be practicable where there is a high portion of land which is
wetlands.

iii. On-site in-kind; On-site out-of-kind; Off-site in-kind; Off-site

out-of-kind: Compensatory mitigation should occur, when
practicable, in areas adjacent or contiguous to the discharge site. If
on-site compensatory mitigation is not practicable, off-site mitigation
27
 should be undertaken in the same geographic area if practicable.
However, in October, 2004, the COE released a statement that its
emphasis now is on “environmentally preferable mitigation,” as
opposed to on-site mitigation. In-kind mitigation is preferable to
out-of-kind. Restoration should be the first mitigation option
considered. In the April 23, 2004 Federal Register, the EPA
published Notice of the availability of draft guidance on the use of
off-site, out-of-kind compensatory mitigation under § 404 of the
CWA.

iv. Preservation: Simple purchase or preservation of existing wetlands

will be accepted as compensatory mitigation in only “exceptional
circumstances” (e.g., the threat that the wetland may be impacted by
unregulated activities).

v. Mitigation banking: Mitigation banking may be an acceptable form

of compensatory mitigation under specific criteria designed to ensure
an environmentally successful bank. Where a mitigation bank has
been approved by EPA and the COE for purposes of providing
compensatory mitigation for specific identified projects, use of that
bank for those respective projects meets the objectives of Section
II.C.3 of the Mitigation MOA regardless of the practicability of other
forms of compensatory mitigation. On November 28, 1995, the
EPA, COE, USDA, and FWS issued guidelines (Federal Guidelines
for the Establishment, Use, and Operation of Mitigation Banks) for
the establishment, use and operation of mitigation banks. 60 Fed.
Reg. 58,605-02.

vi. Deviation to Mitigation Sequence: Deviation from sequential

mitigation may occur when EPA and the COE agree that the
proposed discharge can reasonably be expected to result in
environmental gain or insignificant environmental losses. In
addition, avoidance, minimization, and compensatory mitigation may
not be practicable where there is a high proportion of land which is
wetlands.

vii. COE Compensatory Mitigation Guidance: On November 1,

2001, the COE released Regulatory Guidance Letter (RGL) No. 01-1
dated October 31, 2001 which provides for more stringent COE
permitting and compliance enforcement requirements for the
establishment and maintenance of compensatory mitigation projects.
Among other directives, the mitigation RGL incorporates a credit
and debit system for quantifying the mitigation success for a project.
The RGL also requires that COE approvals of mitigation consider
any regional aquatic resource requirements and that all COE
commands now begin to focus more on utilizing off-site mitigation
28
 areas to offset a development’s wetland impacts. The RGL also
provides that COE permits will impose mandatory monitoring
conditions of a set duration (five to ten years) to evaluate the success
of a mitigation project. The COE’s RGL has recently been criticized
by other Federal agencies including EPA for not seeking comments
from those federal agencies which share mitigation responsibilities
with the COE before issuing the RGL. General comments regarding
RGL included that it lacked consistency with a 1995 EPA-COE joint
guidance concerning the preference of in-kind and on-site mitigation
over out-of-kind and off-site mitigation, the RGL does not
emphasize limitation on the use of preservation and does not
promote the off-setting of wetland impacts with habitat that replaces
not only acreage but also lost wetland functions.

viii. Draft Mitigation and Monitoring Guidelines: As part of

implementation of the action items in the National Mitigation Action
Plan, the Corps Districts were directed to publish Special Public
Notices for new or revised Mitigation and Monitoring Guidelines by
December 15, 2003 with a 30-day comment period. Some Corps
Districts already have guidelines available to the public, other Corps
Districts have guidelines that are used internally, but are not
published, and other Corps Districts do not have any written
guidelines. The Jacksonville District took public comments on its
“mitigation checklist” from December 12, 2003 through January 12,
2004. The Mitigation Checklist was implemented in July, 2004,
after the COE made minor revisions based on public comments it
received. According to the Mitigation and Monitoring Guidelines,
the Mitigation Checklist is intended as a technical guide for CWA
Section 404 permit applicants preparing compensatory mitigation
plans.

ix. 2002 National Mitigation Action Plan: In December, 2002, the

COE, EPA, NOAA, USFWS, DOT, and Commerce Department
prepared this interagency technical resource document with the goal
of “no net loss of wetlands,” and outlined specific action items that
address the concerns detailed in independent evaluations. One of the
priority action items that was recently finalized was the Stream
Mitigation Compendium which is used to devise stream assessment
methods appropriate for impact assessment and mitigation of fluvial
resources.

x. Proposed COE and EPA Rule: The COE and EPA are currently
drafting a rule to provide guidance on compensatory mitigation for
wetlands lost to development and agriculture. Mark Sudol, Chief of
the COEs’ Regulatory Branch, said the goal of the rulemaking is to
provide a more level playing field for mitigation projects and to
29
 ensure more projects are successful in replacing or restoring the
functions of destroyed or degraded wetlands.

xi. COE Oversight of Compensatory Mitigation: An October,

2005 GAO report found that the COE does not have an effective
oversight approach to ensure that compensatory mitigation is
occurring. The report states that “the Corps has consistently
neglected to ensure that the mitigation it has required as a condition
of obtaining a permit has been completed. In response to the GAO’s
comments and recommendations, the COE promised additional
guidance to address compensatory mitigation.

(9) Administrative Appeals Process: On March 9, 1999, the COE issued a final
(rule at 64 Fed. Reg. 11,708, establishing an administrative appeal process for
permit denials and declined individual permits. Due to budget constraints, the
COE delayed publication of an administrative appeal process for jurisdictional
determinations. However, after necessary appropriations were secured, the COE
issued a final rule on March 28, 2000 establishing a one-step administrative
appeal process for jurisdictional determinations (“JD”) and revising the
previously adopted March 9th rule to make specific clarifications (“Revised AAP
Rule”). See 65 Fed. Reg. 16,484.

The Revised AAP Rule became effective on March 28, 2000. The Revised AAP
Rule provides for the administrative appeal, within the COE, of an approved JD,
a denial with prejudice by the district engineer of a COE permit application,
and/or a declined individual permit (i.e., an individual permit refused by the
applicant because of an objection to the terms or special conditions of the
proffered permit). 33 C.F.R. §331.12 provides that no affected party may file
a legal action in the Federal Courts based on a permit denial or declined
individual permit until after a final COE decision has been made and the
appellant has exhausted all applicable administrative remedies under Part 331.
An appellant is considered to have exhausted all administrative remedies when a
final COE decision is made pursuant to 33 C.F.R. §331.10.

The term “permit denial” is defined by §331.2 to mean “…a written denial with
prejudice (see 33 C.F.R. 320.4(j)) of an individual permit application as defined
in 33 C.F.R. 325.5(b).” A “declined permit” “…means a proffered individual
permit, including a letter of permission, that an applicant has refused to accept,
because he has objections to the terms and conditions therein.” “Approved
jurisdictional determination” means “a COE document stating the presence or
absence of waters of the United States on a parcel or a written statement and map
identifying the limits of waters of the United States on a parcel.”

The COE has outlined the administrative appeal process in four flow charts
attached to the Revised AAP Rule as Appendices A through D entitled
Administrative Appeal Process for Permit Denials and Proffered Permits
30
(Appendix A), Applicant Options with Initial Proffered Permit (Appendix B),
Administrative Appeal Process for Approved Jurisdictional Determinations
(Appendix C), and Process for Unacceptable Request for Appeal (Appendix D) -
these flow charts are attached hereto. An appeal under the Revised AAP Rule
commences when an appellant files a Request for Appeal (“RFA”) to the
Division Engineer within 60 days of Notification of Appeal Process (“NAP”).
An appellant has 60 days from the date of the NAP to file an RFA to the Division
Engineer. The appeal process will normally be conducted by a Review Officer
appointed by the Division Engineer. The Review Officer will document the
appeal process, and assist the Division Engineer to make a decision on the merits
of the appeal. The Division Engineer may participate in the appeal process as he
or she deems appropriate. The Division Engineer will make the decision on the
merits of the appeal, and provide any instructions, as appropriate, to the District
Engineer.

The Review Officer has 30 days from the receipt of the RFA to notify appellant
in writing that RFA is acceptable. An RFA must include grounds for the appeal
which may include criteria such as procedural errors; an improper application of
law, regulation or promulgated policy; an omission of material fact; incorrect
application of 404(b)(1) Guidelines; or reliance on incorrect data. The specific
criteria for a RFA is outlined in 33 C.F.R. §331.5. If the RFA meets this criteria,
then the Review Officer shall notify the appellant in writing within 30 days of the
receipt of the RFA. If the Review Officer believes the RFA does not meet the
criteria for appeal, the Review Officer will make a recommendation on the RFA
to the Division Engineer. If the Division Engineer finds the RFA unacceptable,
he or she will notify appellant by certified letter explaining why the criteria was
not met. No further administrative appeal is available until the appellant revises
the RFA and corrects the noted deficiencies. A revised RFA must be received
within 30 days of the date of the certified letter refusing the initial RFA. If the
Division Engineer determines that the revised RFA is still not acceptable, then
the Division Engineer will notify the appellant of this determination by a certified
letter within 30 days of the date of the receipt of the revised RFA, and will advise
the appellant that the matter is not eligible for appeal. No further RFA will be
acceptable after this point.

With regard to permit denials and declined permits, once a RFA is accepted, an
appeal conference is scheduled within 60 days, unless the Review Officer
determines that unforeseen or unusual circumstances require scheduling the
conference for a later date. The appeal conference is informal in nature. The
purpose of the appeal conference is to provide a forum that allows the
participants to discuss freely all relevant issues and material facts associated with
the appeal. The procedures for the appeal conference are set forth at 33 C.F.R.
§331.7(d).

For an appeal from an approved JD, the Review Officer may schedule an
informal meeting moderated by the Review Officer or a conference call with the
31
 appellant, his authorized agent, or both, and appropriate COE staff to review and
discuss issues directly related to the appeal for the purpose of clarifying the
administrative record.

The Division Engineer “will normally” make a final decision on the merits of the
appeal within 90 days of the receipt of the complete RAF which will conclude
the administrative appeal process. The final COE decision on a permit
application is the initial decision to issue or deny a permit, unless the permittee
submits an RFA, and the Division Engineer accepts the request. The final
decision on an appealed action is as follows:

a. If the Division Engineer determines the appeal is without merit, the final
COE decision is the District Engineer’s letter advising the applicant that
the appeal is without merit and confirming the District Engineer’s initial
permit decision; or

b. If the Division Engineer determines the appeal has merit, the final COE
decision is the District Engineer’s decision made pursuant to the Division
Engineer’s remand of the appealed action.

B. Watershed Management: On November 29, 2004, the EPA and COE signed a partnership
agreement to ensure the effective management of the Nation’s watersheds. Through the
partnership agreement, the EPA and COE will collaboratively identify initiatives or pilot projects
to support watershed restoration, stewardship, and management efforts.

32