Wetlands, Environmental, Budget & Tax Discussed

This week’s Roundtable newsletter:

WETLANDS POLICY
Supreme Court Rules in Favor of Property Owners in Highly Watched Sackett Case; Justices Adopt Arguments Advocated by Roundtable in “Friend of the Court” Coalitions

ENVIRONMENTAL POLICY
Coalition Seeks House Bill to Rein in EPA Efforts on Potential Lead Hazards in Commercial Buildings

BUDGET & TAX POLICY
Ryan Proposes Bold Plan to Flatten the Tax System, Slash Federal Spending, Reform Medicare; Reid Says Senate Will Not Take Up a Budget Resolution  

WETLANDS POLICY

Supreme Court Rules in Favor of Property Owners in Highly Watched Sackett Case; Justices Adopt Arguments Advocated by Roundtable in “Friend of the Court” Coalitions  

In a highly publicized case with far-reaching implications for federal regulatory control over private property, the U.S. Supreme Court on Wednesday ruled unanimously that landowners can ask federal courts to review “compliance orders” issued by the U.S. Environmental Protection Agency (EPA) under the Clean Water Act (CWA). The March 21 decision in Sackett v. EPA (U.S. No. 10-162) holds that federal agencies can be subject to litigation initiated by aggrieved landowners, to question government orders that halt development activities due to overly zealous permit requirements over ditches, drains, marginal wetlands, and other similar aquatic features on private lands. 

Sackett Property in Idaho - cropped Washington Post  

View satellite image and graphic of the Sackett property (Washington Post). 

The high court’s decision clearly reflects arguments offered by The Real Estate Roundtable and National Association of Home Builders in a “friend of the court” brief filed this past September. As The Roundtable and NAHB wrote as amici curiae, the Sacketts “deserve their day in court” because they have been “the targets of actual enforcement actions, investigations and conclusions made by EPA.”

Throughout the case, petitioner Mike Sackett claimed he had no reason to believe that his lot contained “waters of the United States” subject to control by EPA and the U.S. Army Corps of Engineers (Corps). As he was quoted in The Washington Post on Jan. 2, “How can you call it a wetland when it’s a lot in an existing subdivision that has a sewer hookup?”

When he sued EPA because the agency issued an order mandating him to restore his property to pre-development conditions, lower federal courts dismissed his suit on the grounds that EPA’s demands were merely “pre-enforcement” and could not (yet) be judicially reviewed. In other words, the Sacketts would have to wait for EPA to initiate a lawsuit before they could mount their own legal challenge against the federal government.

2011_09_30_IMAGE_cover_Sackett_RER-NAHBAmicusBr_SCOTUS 

The Roundtable, NAHB and NAA filed an amicus brief with the U.S. Supreme Court supporting the petitioners in Sackett v. EPA  

The Supreme Court decided that the lower courts ruled incorrectly. Writing for a unanimous panel, Justice Antonin Scalia opined that a legal “presumption” allowing regulated parties to challenge agency actions under federal administrative procedure laws “is a repudiation of the principle that efficiency of regulation conquers all. And there is no reason to think that the Clean Water Act was uniquely designed to enable the strong-arming of regulated parties into ‘voluntary compliance’ without the opportunity for judicial review — even judicial review of the question whether the regulated party is within the EPA’s jurisdiction” (Slip. Op. at pp. 9-10). 

Justice Ruth Bader Ginsburg — typically aligned with the wing of the Court that supports expansive EPA regulations — wrote a separate concurring opinion to confirm that “the Sacketts may immediately litigate their jurisdictional challenge in federal court.” Justice Samuel Alito also filed a concurrence, noting: “The position taken by the Federal Government — a position that the Court now squarely rejects — would have put ordinary Americans entirely at the mercy of [the EPA.]”

Before this week’s decision, most lower federal courts held that a landowner targeted by an EPA order must comply with its terms, restore the property as demanded by the agency, and then litigate the legality of the original EPA order after the fact — even if the agency wrongly issued the order in the first place. The only alternative — for those willing to take the risk — was to defy an order that may have been illegally issued and wait to be sued by EPA, as fines and penalties mounted. The Supreme Court’s rejection of this approach now gives landowners the right to challenge the legality of the agency order in federal court upon issuance — thereby avoiding the “comply or defy” dilemma.

Videoswatch Fox News’ interview with Mike and Chantell Sackett or The Wall Street Journal’s analysis with Competitive Enterprise Institute’s General Counsel Sam Kazman. 

2011_09_07_IMAGE_final_PPL AC Brief -- SCOTUS 

A related amicus filing on PPL v. Montana 

Sackett follows on the heels of another unanimous Supreme Court decision on water-related issues that was decided last month: PPL v. Montana (No. 10-218, Feb. 22, 2012). The PPL case has not received as much attention as Sackett, but has broad ramifications for EPA and Corps administration of water-related regulatory programs.

In deciding whether a hydroelectric dam operator owed the State of Montana rent for use of the state’s water beds, Justice Anthony Kennedy’sPPL opinion for the entire Court made clear that the “test” for whether a water body is “navigable” — a fundamental question that girds the extent of federal agency authority over wetlands and ditches on private property — “is not applied in the same way” for all purposes.

Rather, the “navigable waters” inquiry varies based on the particular statute and legal issues presented to a court. The opinion followed the position urged by The Roundtable and our coalition partners in a Sept. 7 amicus brief, that the “legal standards for ‘navigable waters’ are different depending on the statute at issue and the purpose of the determination.” Accordingly, under PPL’s reasoning, EPA and the Army Corps should not use broad interpretations of the phrase “navigable waters” for admiralty and riverbed title purposes as an excuse to stretch their land use permitting authority beyond reason under the Clean Water Act.

Roundtable members must frequently obtain CWA permit coverage when developing or building their projects, under both Section 402 (for discharges of stormwater) and Section 404 (discharges of fill material). While developers and builders will continue to confront excessive regulatory positions of EPA and the Corps, the unanimous decisions in Sackett and PPL provide persuasive arguments for property owners, their consultants, and attorneys to push back against broad assertions of CWA jurisdiction on privately held lands.   

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ENVIRONMENTAL POLICY

Coalition Seeks House Bill to Rein in EPA Efforts on Potential Lead Hazards in Commercial Buildings  

Writing to key members of the House Energy and Commerce Committee on Tuesday, a coalition of real estate and construction related organizations (including The Roundtable) urged reform of a 2010 Environmental Protection Agency (EPA) rule covering lead dust and paint hazards in “target housing”— a rule that EPA appears intent on extending to the commercial real estate sector. In its March 20 letter, the coalition said it seeks to ease compliance burdens imposed by the “overreaching” rule, “while protecting pregnant women and children under age six from renovation and remodeling activities that create lead-based paint hazards.”

2012_03_20 IMAGE Lead letter  

March 20, 2012 coalition letter to key members of the House Energy and Commerce Committee urging reform of a 2010 Environmental Protection Agency (EPA) rule covering lead dust and paint hazards. 

EPA’s final “Lead: Renovation, Repair and Painting” (LRRP) rule, which took effect in April 2010, requires remodeling and renovation firms that perform work on pre-1978 housing and child-occupied facilities (such as daycare centers in office buildings) to be certified by the EPA and to follow rigorous, costly work practices supervised by an EPA-certified renovator when painted surfaces will be disturbed. Several months after the rule was put in place, the agency removed language that would have allowed homeowners to “opt out” of the lead-safe work requirements if there were no young children or pregnant women living in the home.

The coalition suggested that House legislation to reform the EPA rule could be modeled after a recent Senate bill (S. 2148) offered by Sen. Jim Inhofe (R-OK), with co-sponsors Roy Blunt (R-MO), John Boozman (R-AR), Tom Coburn (R-OK), Michael Enzi (R-WY), Chuck Grassley (R-IA), and David Vitter (R-LA). 

The “Lead Exposure Reduction Act” (S. 2148) would, among other things, require EPA to carefully study lead-based paint hazards in residential and commercial buildings — and submit its findings to Congress for review — before proposing lead paint or dust regulations covering the commercial real estate sector. The Senate bill also would require EPA to ensure that on-site “test kits” are available to contractors, in order to ensure accurate readings of purported lead-based paint hazards that may arise from renovation and remodeling activities, but which do not require expensive laboratory analysis. (Roundtable Weekly, March 9)

Additionally, the coalition explained in this week’s letter to the House lawmakers, S. 2148 would restore the “Opt-Out” language stripped from of the LRRP rule in 2010; suspend the rule if the agency failed to approve one or more test kits meeting the regulation’s requirements; allow a de minimis exemption for certified contractors who fail to comply with necessary paperwork on their first attempt; and provide an exemption for renovations after a natural disaster. 

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BUDGET & TAX POLICY

Ryan Proposes Bold Plan to Flatten the Tax System, Slash Federal Spending, Reform Medicare; Reid Says Senate Will Not Take Up a Budget Resolution  

The House Budget Committee on Wednesday voted along partisan lines to approve Committee Chair Paul Ryan’s (R-WI) bold budget plan for FY2013, which would reshuffle the tax code by condensing six tax brackets into two; permanently extending the Bush tax cuts; slashing the top corporate tax rate to 25 percent; abolishing the AMT; and nearly eliminating taxes on U.S. corporations’ overseas earnings, among other things.

Ryan budget FY2013 

The House Budget Committee voted along partisan lines to approve Committee Chair Paul Ryan’s (R-WI) bold budget plan for FY2013. 

With Republicans struggling to agree on a presidential nominee and a campaign theme, party leaders are hoping the easy-to-understand tax-cut proposal will give Republican candidates a clear and popular message. For his part, Ryan said he hopes to jumpstart debate about “reforming the broken tax code to spur job creation and economic opportunity, by lowering rates, closing loopholes, and putting hardworking taxpayers ahead of special interests.”

On the spending side, the Ryan plan proposes to rein in escalating Medicare costs by introducing multiple levels of coverage for seniors and providing a mix of defined benefits and defined contributions. And, instead of the across-the-board — “sequestration — spending cuts scheduled to take place under last year’s debt ceiling agreement, Ryan’s plan instructs six House committees to come up with $261 billion in net savings over 10 years, and would cut federal spending from 12.5 percent of GDP in 2011 to 3.75 percent by 2050.

A Washington Post opinion piece yesterday concluded that Ryan’s new flatter tax brackets would require a “jaw-dropping $4.6 trillion in loophole-closing over the 10-year period to meet his goal of breaking even, according to calculations by the nonpartisan Tax Policy Center.” But without touching highly popular tax “expenditures” such as deductions for charitable contributions or home mortgage interest (estimated at $12 trillion over 10 years), or tax-free employer-sponsored health insurance (amounting to about $2 trillion over 10 years in lost tax revenue), Ryan’s budget goals will be exceedingly difficult, if not impossible, to meet, suggests the WP writer.

Sen. Harry Reid 

Senate Majority Leader Harry Reid (D-NV) has already indicated his chamber will not be taking up a budget resolution.

While the plan is expected to clear the House next week — again, along partisan lines — it is considered a non-starter in the Democrat-controlled Senate, where Majority Leader Harry Reid (D-NV) has already indicated his chamber will not be taking up a budget resolution.

The Roundtable welcomes tax restructuring proposals that seek to promote economic growth across all sectors of the economy. Additionally, we cannot overemphasize the importance of addressing corporate and individual taxes in tandem. While we agree that the 35 percent corporate tax rate is too high — and hurts U.S. competitiveness — this area of taxation must not be “de-coupled” from issues of individual taxation, which apply to millions of small business owners (including many in commercial real estate).

With the House expected to vote on Ryan’s budget next week and the Obama Administration offering a corporate tax “framework” (which proposes “loophole closers” such as a tax hike on carried interest), budget and tax issues will be front and center at the upcoming Spring Roundtable Meeting in Washington on April 17-18. Among the confirmed guests is TIME magazine’s senior political analyst, Mark Halperin, who will offer commentary on the political landscape, public opinion, and a look ahead at the fall elections.  

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Source:  The Real Estate Roundtable

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