National Association of Homebuilders v. U.S. Army Corps of Engineers, 01-274 JR (D. D.C. Jan. 30, 2007)

By Robert J. Uram and Stephanie J. Helfrich

On January 30, 2007, U.S. District Judge James Robertson ruled in favor of several major trade associations when he held that a rule jointly issued by the Army Corps of Engineers and the Environmental Protection Agency defining whether “incidental fallback” that can result from activities such as ditch digging and excavation, and subjecting the activity to Section 404 jurisdiction, was invalid.  Judge Robertson held that the rule does not properly address issues raised by a 1998 D.C. Circuit Court of Appeals Decision (National Mining Association v. United States Army Corps of Engineers, 145 F.3d 1399 (D.C. Cir. 1998)) and that the rule violates the Clean Water Act.  This decision coupled with the Supreme Court’s ruling in the Carabell and Rapanos cases leaves the Section 404 program awash with uncertainty.

The “Tulloch II” rule provides that the Corps will “regard the use of mechanized earth-moving equipment” in streams and wetlands as resulting in “a discharge” of pollutants, thereby requiring a permit under the federal Clean Water Act (“CWA”) unless “project-specific evidence” shows that the dredging results in “only incidental fallback.”  (33 C.F.R. § 323.2(d)(2)(I) and 40 C.F.R. § 232.2(2)(I).)  The regulation defines incidental fallback as the “redeposit of small volumes of dredged material incidental to excavation activity” if the material “falls back to substantially the same place as the initial removal.”  (33 C.F.R. § 323.2(d)(2)(ii) and 40 C.F.R. § 232.2(2)(ii).)

The plaintiff associations, including the National Stone, Sand, and Gravel Association and the National Association of Home Builders, challenged the validity of the Tulloch II rule.  The associations had originally argued that the definition of incidental fallback, which includes a volume determinant with no measurable criteria, exceeds the scope of the Corps’ authority under CWA § 404.  Judge Robertson had initially dismissed the challenge as not “ripe” for review until a project proponent either went through the permit process or was subject to an enforcement action. (Nat’l Ass’n of Home Builders v. U.S. Army Corps of Eng’rs, 311 F.Supp.2d 91 (D. D.C. 2004).)  However, the D.C. Circuit Court of Appeals remanded the challenge to Judge Robertson for a ruling on the merits, concluding that “it is obvious that Industry will face hardship” if review is denied, because of the ongoing application of the Tulloch II rule’s “allegedly unlawful framework and volume determinant.” (National Association of Homebuilders v. U.S. Army Corps of Engineers, 440 F.3d 459 (D.C. Cir. 2006).)

Judge Robertson’s decision reprimands the failure of the Corps and EPA to respond to earlier court rulings when finalizing the Tulloch II rule.  Regarding the issue of volume in the Tulloch II rule’s definition of incidental fallback, Judge Robertson pointed out that “[a]lthough the decisions of this court and the Court of Appeals have described incidental fallback in terms of volume, neither court has gone so far as to require that the volume of fallback be small.”  Judge Robertson further stated that, “[i]n determining whether fallback is incidental — i.e., not an addition within the meaning of the Clean Water Act — the volume of material being handled is irrelevant.”  Judge Robertson noted that, if the Corps insisted on using volume as a factor in distinguishing incidental fallback from redeposit, a more accurate interpretation of the prior decisions on the issue would have revealed that incidental fallback is repeatedly described in relative, not absolute, terms.  The associations had argued, and Judge Robertson agreed, that volume is relative in the dredging context, referring to the example raised by the Court of Appeals involving the attempted removal of 100 tons of material where only 99 tons was actually taken away.  Judge Robertson concluded that because the Tulloch II rule used the absolute term “small volume,” it lacked “any indication that the volume of the fallback should be proportionally small.”

Beyond the volume determinant issue, Judge Robertson repeated the significant characteristics necessary to determine “incidental fallback” raised by the earlier case law, including: “(1) the time the material is held before being dropped to earth and (2) the distance between the place where the material is collected and the place where it is dropped.”  Judge Robertson acknowledged that the Corps addressed the “geographic” characteristics of incidental fallback by requiring that material must fall back to “substantially the same place as the initial removal,” but pointed out that the revised rule makes no reference to the amount of time that the material is held before it is dropped, and held that “[f]or that reason, and because it improperly includes a volume requirement, the rule must be rewritten.”

Judge Robertson also required the Corps and EPA to reconsider their statement in the rule that discharges are regulated unless project-specific information shows otherwise while also maintaining that this statement did not shift any regulatory burdens.  He stated that this aspect of the regulation “reflects a degree of official recalcitrance that is unworthy of the Corps” and that the Corps cannot require “‘project-specific evidence’ from projects over which they have no regulatory authority.”

The challenged regulations primarily affect activities such as ditch digging, channelization and excavation, activities the plaintiff associations had argued do not involve adding pollutants to waters of the U.S.  The practical effect of the ruling is to reduce the ability of the Corps and EPA to regulate those activities.  This could lead to an increase in activities that result in the loss of wetlands.  The extent of the effect is likely to vary state-by-state depending on the degree to which these kinds of activities are independently regulated under state law.

For further information please contact Robert Uram and Stephanie Helfrich.  Robert J. Uram is a partner in the Real Estate, Land Use and Environmental Practice Group in the firm’s San Francisco office.  Stephanie Helfrich is an associate in the Real Estate, Land Use and Environmental Practice Group in the firm’s San Francisco Office.