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Relief for Landowners?

September 22, 2000

Since the early 1970s, landowners have been at the mercy of federal
regulators wielding their power over private property deemed to be
wetlands. But there's also some good news: Federal wetland policies have
suffered setbacks from court decisions limiting regulatory overreach. And a
case now in appeal to the Supreme Court could provide the relief that
property owners have long sought.

The government's claim over wetlands is based on section 404 of the Clean
Water Act of 1972, which regulated the "waters of the United States." At
first, this was not taken to include wetlands. However, in 1975, a
district court concluded that the Act gave the government the authority to
regulate waters "to the maximum extent possible." This included the
regulation of wetlands, and has led to some extreme cases of government
interference of private property.

Consider the case of James J. Wilson, a successful environmentally
friendly developer in Maryland. In addition to the housing he was going to
provide at a development in Charles County, Wilson was also creating 75
acres of wetlands. That, however, was not enough for the Justice
Department, which charged Wilson with the destruction of wetlands for
depositing fill material on his property without a permit. In 1995, the
government indicted Wilson for developing his property without government
approval. Wilson was convicted and sentenced to 21 months in prison and he
and his company were fined $4 million.

Wilson appealed the conviction, arguing that the government had no
jurisdiction over his development, since there is no apparent connection
between his property and "U.S. waters." The property is over ten miles from
Chesapeake Bay and more than six miles from the Potomac River. Therefore,
he argued, the Clean Water Act does not apply to this situation. The
circuit court of appeals agreed that Wilson's property has wetland
characteristics (sometimes, it's wet) but it does not necessarily fall
under the purview of the Act. The court overturned his conviction.

The case is now in the hands of the Supreme Court. Recently, the court has
limited federal jurisdiction in cases where federal power is based on the
commerce clause (most recently, in the case involving the Violence Against
Women Act) as is this case. Given these decisions, if the court decides to
hear the case, it may uphold the decision of the lower court.

Other recent decisions have favored property owners. Initially, the Army
Corps of Engineers banned property owners from adding fill material to
wetlands. However, in 1993, the Corps began enforcing the "Tulloch Rule,"
which prohibits the dredging of wetlands. Any dredging operation also
involves fill material falling back into the wetland. Therefore, according
to the Corps, a dredging operation is equivalent to filling in wetlands.
Obviously, to non-bureaucrats, dredging wetlands does not constitute
filling in wetlands. A federal appeals court agrees and has overturned the
Tulloch Rule, protecting, to a small degree, private property rights.

In addition, property owners have begun to win "takings" claims against
the government. Wetlands regulations are an appropriation of private property and courts are starting to uphold the Fifth Amendment guarantee that
property will not be taken without just compensation.

While court decisions have limited the regulatory reach of the government,
they haven't gone nearly far enough. The federal government's intervention
not only diverts land away from more valuable uses, it also generates few
actual environmental benefits.

Many environmentalists, citing the dramatic loss of wetlands over the last
200 years, argue that federal regulation is needed to preserve wetlands.
However, most of the loss of wetlands in the country occurred before 1950,
and some of the dramatic decreases in wetlands were due to federal policy.
The Swampland Acts of the 1800s, for example, subsidized the destruction of
wetlands, providing wetlands to the states to be drained for agricultural
purposes.

The reduction in wetlands slowed in the 1950s, and more recently there has
been no net loss of wetlands. The development of wetlands into valuable
property has been offset by the creation of other wetlands, and much of
this development is due to private enterprise. In 1994 alone, for example, Ducks Unlimited restored over 50,000 acres of wetlands.

Some of the decrease in wetlands is due to private development. But this
is not something to regret. Indeed, we should be grateful that much swampland has been converted into arable land, generating benefits to
landowners and consumers alike.

The government tramples private property rights when it prevents
landowners from increasing the value of their property by converting
wetlands into land which can be used for agricultural or housing purposes.
Swamps are often considered to be wasted space. Landowners who want to
develop this space should not have to subject themselves to a government
veto.

The government claims that it does not prevent such development since it
only denies a small portion of wetland fill applications. However, the
state prevents development not by denying applications, but by holding them
until they are withdrawn. Over half of the applications are withdrawn
before the government responds to them. In one case, an application to fill
26 square feet of wetland was withdrawn after 450 days of inactivity.

Requiring government approval for land development drives up the costs.
Small landowners are particularly at risk, since they cannot bear the costs
of regulations as easily as wealthy landowners. Private owners have an
advantage in identifying the best use of their property. Landowners are
better suited than bureaucrats at assessing the impact of wetland
conversion. Federal regulators are not in a position to weigh the benefits
and costs of wetland protection or development. Decisions regarding which
wetlands should be saved and where new wetlands could be restored should be left up to private enterprise.

The costs of wetlands restoration via government decree can be exorbitant.
Landowners may be able to get approval for wetland conversion by mitigating
this loss of wetland by funding the creation of new alternate wetland. Part
of the cost of mitigation includes the high failure rate of converted wetlands. Landowners who are converting land to wetland are aiming at satisfying government regulators, not on creating viable wetlands. Naturally, such mitigation has a high failure rate. These costs, accompanied with the legal costs of the application and the costs of the actual mitigation, add up.

According the Jonathan Adler of the Competitive Enterprise Institute, the
total cost of mitigation exceeds $30,000 per acre. Private conservation
efforts, aimed at creating valuable wetlands for water filtration or species conservation, tend to be successful and economical.

But we should not expect the state to implement policies in the public's
interest. Regulators have an incentive to further their agency's power, not
manage wetlands effectively. Claiming that we need to regulate wetlands
allows regulatory agencies to gain power over our property and to expand
their budgets.

We should welcome the trend in recent court decisions strengthening
private property rights. But they do not go far enough. The government
cannot satisfactorily deal with the wetland situation. It has neither the
incentive nor the ability to adequately manage wetlands. Private landowners
are better suited at making these decisions.


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