Amicus Curiae Brief — Bersani v. United States Environmental Protection Agency

MOTION FILED

DEC 20 isag

No. 88-902 6)

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

JOHN A. BERSANI, NEWPORT GALLERIA GROUP,

ROBERT J. CONGEL and the PYRAMID COMPANIES,

Petitioners,

V.

UNITED STATES ENVIRONMENTAL PROTECTION

AGENCY, et al.,

Respondents.

On Petition for Writ of Certiorari to the United

States Court of Appeals For the Second Circuit

NATIONAL ASSOCIATION OF HOME BUILDERS,

NATIONAL ASSOCIATION OF INDUSTRIAL AND

OFFICE PARKS, INTERNATIONAL COUNCIL OF

SHOPPING CENTERS, AMERICAN RESORT &

RESIDENTIAL DEVELOPMENT ASSOCIATION AND

NATIONAL REALTY COMMITTEE MOTION FOR LEAVE

TO FILE A BRIEF AMICI CURIAE AND BRIEF IN

SUPPORT OF THE PETITION

WILLIAM H. ETHIER

NATIONAL HOUSING CENTER

15th & M Streets, N.W.

Washington, D.C. 20005

(202) 822-0359

Counsel for Amici

December 20, 1988

PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203

IN THE

Supreme Court of the Anited States

OCTOBER TERM, 1988

No. 88-902

John A. Bersani, Newport Galleria Group,

Robert J. Congel and the Pyramid Companies,

Petitioners,

v.

United States Environmental Protection Agency, et al.,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals

For the Second Circuit

MOTION OF THE NATIONAL ASSOCIATION OF HOME

BUILDERS, NATIONAL ASSOCIATION OF INDUSTRIAL

AND OFFICE PARKS, INTERNATIONAL COUNCIL OF

SHOPPING CENTERS, AMERICAN RESORT &

RESIDENTIAL DEVELOPMENT ASSOCIATION AND

NATIONAL REALTY COMMITTEE FOR LEAVE TO FILE

THE ATTACHED BRIEF AMICI CURIAE

The above named trade associations respectfully move

this Court for leave to file the accompanying brief amici

curiae in support of Petitioners.

The Associations have received written consent from

petitioners, respondent United States and intervenor-

appellants below, Joseph Robichaud and Citizens in Sup-

port of Attleboro Mall,' to file the brief and have filed

their letters of consent with the Clerk of the Court. In-

tervenor-appellees below, environmental groups listed in

the Certificate of Service filed with the Clerk, have de-

clined to grant consent.

The National Association of Home Builders (NAHB) rep-

resents 155,000 builders and associate members organized

in approximately 800 affiliated state and local associations

in all fifty states, the District of Columbia and Puerto

Rico. Its members include not only people and firms that

construct and supply single-family homes but also apart-

ment, condominium, commercial and industrial builders, as

well as land planners, land developers and remodelers. It

is the voice of the American shelter industry.

The National Association of Industrial and Office Parks

(NAIOP) is a professional organization of more than 7,000

individuals engaged in owning, managing and developing

office and industrial buildings in the United States and

internationally. Its members include not only the nation’s

leading commercial real estate developers but also archi-

tects, brokers, master planners, engineers, property man-

agers, banks, insurance companies and other real estate

financial groups.

The International Council of Shopping Centers (ICSC)

is the trade association of the shopping center industry.

Members of the ICSC, consisting of shopping center de-

velopers, retailers, investors, managers and others having

a professional or business interest in the shopping center

industry, are engaged in the day-to-day activities of de-

signing, planning, constructing, managing, financing, de-

veloping, leasing and owning shopping centers and their

retail stores. ICSC has approximately 27,000 members, and

‘The intervenor-appellarts below have also filed a petition for writ

of certiorari with this Court to review the Second Circuit's opinion.

Joseph Robichaud and Citizens in Support of Attleboro Mall v. United

States Environmental Protection Agency, et al., 88-929. They raise a

separate statutory construction issue not addressed by the petitioners,

Bersani, et al., or these amici.

the approximately 25,000 located in the United States rep-

resent a majority of the shopping centers in this country.

The ICSC is the only United States trade association spe-

cific to shopping centers.

The American Resort & Residential Development As-

sociation (ARRDA) is a trade association whose members

consist of developers, operators and owners of resort and

residential communities located throughout the United

States. Firms that belong to ARRDA also include vacation

exchange companies, lenders, consultants, attorneys and

accountants who provide services to members and con-

sumers. Each year, ARRDA’s members, which include cor-

porate and individually owned large and small businesses,

serve millions of consumers in the United States and

abroad by providing the varied leisure opportunities that

families and individuals want and need in today’s society.

The National Realty Committee (NRC) represents the

nation’s leading developers, owners and financiers of in-

come-producing real property. Its members include indi-

viduals and firms that design, plan, develop, lease, own,

operate and finance income-producing real property, in-

cluding office buildings, shopping centers, industrial build-

ings, warehouses and apartment buildings.

The members of these amici compete with one another

within and among the five associations, vary in their op-

erations and are highly diverse. They range from the small

residential builder that may need to purchase only one

tract of land per year to construct a few homes to the

large, well capitalized company that can acquire and work

on multiple tracts of land. They construct shelter for peo-

ple in all walks of life, as well as the schools, churches,

shopping centers, office buildings and other structures that

are so vital to our communities.

These people and businesses are intimately involved in

the federal government’s wetlands protection program em-

bodied in the Clean Water Act, 33 U.S.C. §1251, et seq.

(1982), popularly known as the §404 program, and the

implementation of the program’s permitting guidelines, 40

C.F.R. §§ 230.1-230.80 (1987Xknown as the §404(b\1)

guidelines). Since much land is affected by the §404 pro-

gram, often they can not function without obtaining per-

mits, which are authorized under §404, to place dredge or

fill material into the ‘waters of the United States’’ or

associated wetlands that come within the Clean Water

Act’s jurisdiction.

In applying its ‘practicable alternatives’ analysis within

the framework of the §404(b\1) guidelines, the EPA’s new

“market entry’ theory significantly and adversely impacts

the land acquisition and finance processes in which these

people and businesses routinely engage. Within this com-

munity of property owners, entrepreneurs and investors,

EPA’s unexpected market entry policy, which is nowhere

found in any regulatory language, has caused a vast

amount of confusion nationwide as to how to proceed with

project ideas. The Second Circuit’s confirmation of this

new policy has engendered widespread dismay because of

the opinion’s complete lack of recognition, and even ex-

press rejection, of basic and real world project planning,

land acquisition and finance principles.

These amici sincerely believe that the accompanying

brief will greatly assist the Court because our concerns

are much broader than those of petitioners. Petitioners

focus their arguments on the illegality of EPA’s market

entry theory and the circumstances of their case, as im-

portant as it is. Our brief addresses public policy and land

development issues not analyzed by petitioners, and relates

those issues to the impracticality of EPA’s new theory.

The protection of valuable wetlands is a laudable goal.

But as with any other societal desire, its method of

achievement should be informed, sound and rational.

“Probably the biggest challenge facing the country is to

make [wetlands protection] programs more effective while

reducing the costs, delays, uncertainties, and frustrations

they impose on wetlands owners, regulators and the many

types of users.”” The Conservation Foundation, Protecting

America’s Wetlands: An Action Agenda, The Final Report

of the National Wetlands Policy Forum 35 (1988). “‘Indeed,

i iaieeinaeterarenennmenimanintmeiiinee ital

the ‘saga of Sweedens Swamp’ heightened rather than

resolved the very difficult issue of how we strike a rea-

sonable balance between private land development inter-

ests and the admitted need to prevent unnecessary

destruction of our valuable wetland resources.” Liebesman,

The ‘Sweedens Swamp’ Controversy - Focusing on EPA’s

Role in the Clean Water Act §404 Program, 9 Nat’] Wet-

lands Newsletter 15, 17 (Nov.-Dec. 1987(Mr. Liebesman

was lead federal counsel in the District Court below, Ber-

sant v. Environmental Protection Agency, 674 F. Supp.

405 (N.D.N.Y. 1987).

The Clean Water Act balances the need to protect the

quality of waters of the United States with society’s need

for economic growth and development. This Court has

noted that where other values outweigh wetland values a

permit can be issued. United States v. Riverside Bayview

Homes, Inc., 474 U.S. 121, 135 n.9 (1985). The United

States Army Corps of Engineers recognizes that “(t]he

economic benefits of many projects [which require a §404

permit] are important to the local community and con-

tribute to needed improvements in the local economic base,

affecting such factors as employment, tax revenues, com-

munity cohesion, community services, and property val-

ues.” 33 C.F.R. §320.4(qX1987). But the EPA has

relinquished any sense of duty to this crucial and difficult

balancing test and the Second Circuit has failed to use its

corrective powers, to the detriment of the members of

these amici and of the whole nation.

For the above reasons, this Motion should be granted.

Respectfully submitted,

WILLIAM H. ETHIER

NATIONAL HOUSING CENTER

15th & M Streets, N.W.

Washington, D.C. 20005

(202) 822-0359

Counsel for Amici

December 20, 1988

sta ceannieeiiniiaei anne

TABLE OF CONTENTS

TABLE OF AUTHORITIES. ....................ssccscssssssssessssees

INTEREST OF THE AMICI CURIAE. ..........0ccc:se0c000es

ee I Te ii cccnscrsatecesemamnnand

A. Wetland Boundaries And The Section 404

B.

a

Project Planning, Land Acquisition And

Real Estate Finance Practices ...............

gE

i Fe I, Salhinteichcciicnncstncnctadscnnsesctinn

Be EE PIII ctiiinstnsessnnistsansubdsoncsen

Oe I siliiienacerstenieteenssiccnncess

REASONS FOR GRANTING THE WRIT .....................

I. THE PETITION FOR CERTIORARI

SHOULD BE GRANTED BECAUSE EPA’S

NEW AND UNREASONABLY BROAD

THEORY OF PRACTICABLE ALTERNA-

TIVES IS MEANINGLESS TO PERMIT

APPLICANTS, IGNORES THE REAL

WORLD AND WILL BE DETRIMENTAL

RUD GRIESE, cscnssitsnsenstanineiececnnaseiistantanteonens

A. The Undefinable Nature Of “Market En-

try” Creates A Likelihood Of Unbridled

Agency Discretion And Fails To Provide

Potential Applicants Any Meaningful

ey To The Conduct Of Their Af-

I caccscamnicesisasctscehceedacesteeieanhiciacinadiitadinciaiaastiiiiies

. The Uncertain —- os The Imple-

mentation Of The Market E ntry Theo

Will Require All Potential Permit Appli-

cants To Prematurely Secure Purc

Options On Multiple ts Of Land, Re-

sulting In Great Increases In The ‘Cost

Of Projects Required By Society ...........

a D> >

ao ss

10

10

I.

Ill.

ii

THE PETITION FOR’ CERTIORARI

SHOULD BE GRANTED BECAUSE THE

MARKET ENTRY THEORY IS FUNDA-

MENTALLY INCOMPATIBLE WITH THE

PRINCIPLES OF COMPREHENSIVE

LAND USE PLANNING AND IN PRAC-

TICE CAN VITIATE A COMMUNITY'S

EXPRESSION OF WHAT DEVELOP-

MENT IT WANTSS .........cccccccsscccccsssecrsesenees

THE PETITION FOR CERTIORARI

SHOULD BE GRANTED BECAUSE THE

MARKET ENTRY THEORY WILL LEAD

TO ILLOGICAL AND INEQUITABLE DE-

CISIONS AND IS UNNECESSARY TO

PROMOTE WETLAND PROTECTION ......

CONCLUSION ...csccsscccoscoocccccsscssosccccscscsescescosossssrsssosssssees

15

| ili

TABLE OF AUTHORITIES

CASES: Page

Bersani v. EPA, 674 F. Supp 405 (N.D.N.Y.

INTE dc habanndithcelpicistadahadiathsimncsaiididadietiedndidiiennuntaes 7

Bersani v. Robichaud, 850 F.2d 36 (2d Cir.

OIE sideidistidiiiciabagibbintdidabddednissacniiininchjenss 2,12,13,18,19

Citizens For Responsible Environmental Manage-

ment v. Attleboro Mall, Inc., 400 Mass. 658,

BD Fe Be HD Riiekctnenttinnsidcsiccsiccsnsecccses 12

National Wildlife Federation v. Hanson, 623

F.Supp. 1539 (B.D.N.C. 1985) ..........ccccccssseees 2

STATUTES AND REGULATIONS:

Federal Water Pollution Control Act (Clean Water

Act),

33 U.S.C. § 1251 et seq. (1982) ......... 4,8,9,13,17,18

Section 404, 33 U.S.C. § 1344 (1982) ........... passim

FD bcs tieescnsniiatsisispddecrnndsesranbeseseons 11

a I Siiirtcirnccncnenadsccsacnsstonsdsanedisennvas 2

Section 404(bX1) guidelines, 40 C.F.R. § 230.1 -

ee 6,7,12,18

II saticaptiatsccsebonatensiccdasinbencsionansas 18,19

a IE sasiithcictnictsdascnticcdsnnabecntonnessncies 19

a iii cncsetonnenencconnbesdnneianas 2

, Oe I aisritertinicecnescccnerocicserencecnnones 3

45 Fed. Reg. 85,335 (Dec. 24, 1980) «0.0.0... 7

MISCELLANEOUS:

Sr a a, ctaisncnaininnsnonaanen 2,17

EPA Final Determination of the Assistant Admin-

istrator for External Affairs (May 13, 1986) . 10,16

International City Management Association, The

Practice of Local Government Planning (2d Ed.

I sieiniiniaahiadiiaeaditaa eine hein ictal ineineeenpine 15

National Association of Home Builders, Financing

Land Acquisition and Development (1987) ..... 6,7

a

iv

Table of Authorities Continued

Page

National Association of Home Builders, Land

RROOURIIIIES COND cescenccnccccoscaseccenetcnianeasncanese 4,5,6,7

R. Lewis, Land Buying Checklist (8rd ed. 1988) .. 6

The Conservation Foundation, Protecting America’s

Wetlands: An Action Agenda, The Final Re-

port of the National Wetlands Policy Forum

CRITE ‘cincissuiinighesabenrsesaincibiiiapimeniedietbtaiumsnanenne: 3

Lawson, The Corps of Engineers’ Public Interest

Review Under Section 404 Of The Clean Water

Act: Broad Discretion Leaves Wetlands Vul-

nerable To Unnecessary Destruction, 34 J. Ur-

ban & Contemp. L. 203 (1988) ........... cee 11

Liebesman, The ‘Sweedens Swamp’ Controversy -

Focusing on EPA’s Role in the Clean Water

Act §404 Program, 9 Nat’l Wetlands Newslet-

Be 8 A ee 7

Parrish & Morgan, History, Practice and Emerging

Problems of Wetlands Regulation: Reconsider-

ing Section 404 of the Clean Water Act, 17

Land & Water L. Rev. 43 (1982) ................... 2

Steinberg & Dowd, Economic Considerations In The

Section 404 Wetland Permit Process, 7 Va. J.

Nat. Resources L. 277 (1988) ......................... 10,11

United States General Accounting Office, WET-

LANDS, The Corps of Engineers’ Administra-

tion of the Section 404 Program, Report to the

Chairman, Subcomm. on Investigations and Ov-

ersight, Comm. on Public Works and Trans-

portation, House of Representatives

eo D.C.: GAO/RCED-88-110, July,

SUUUED sdcisinannd nd taccendintnaniabhinaabdbdenbascssbhdeacnauiesumnenes 3

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1988

No. 88-902

John A. Bersani, Newport Galleria Group,

Robert J. Congel and the Pyramid Companies,

Petitioners,

v.

United States Environmental Protection Agency, et al.,

Respondents.

BRIEF OF THE NATIONAL ASSOCIATION OF HOME

BUILDERS, NATIONAL ASSOCIATION OF INDUSTRIAL

AND OFFICE PARKS, INTERNATIONAL COUNCIL OF

SHOPPING CENTERS, AMERICAN RESORT &

RESIDENTIAL DEVELOPMENT ASSOCIATION AND

NATIONAL REALTY COMMITTEE AS AMICI CURIAE

IN SUPPORT OF THE PETITIONERS

INTEREST OF THE AMICI CURIAE

The interest of amici curiae is set forth in the preceding

motion for leave to file this brief.

STATEMENT OF THE CASE

A. Wetland Boundaries And The Section 404 Process

These amici adopt the Statement of the Case in the

petition filed by Bersani, et al. However, to fully compre-

hend the mass confusion and unpredictability caused by

EPA’s new market entry theory and the Second Circuit’s

“rationale” supporting EPA, it is important to go beyond

the alternatives analysis and understand the practical ap-

plication of the §404 program. These related §404 program

issues, which the regulated community faces on a daily

basis, highlight why the market entry theory is arbitrary,

unreasonable and impracticable.

In the Bersani case, the alternative site wrongly iden-

tified by the EPA as available to and feasible for Pyramid

Companies, the North Attleboro site, was clearly upland.

Bersani v. Robichaud, 850 F.2d 36, 41 (2d Cir. 1988). This

situation is an anomaly. In most cases, a property owner

does not know if a particular site or potential alternative

sites have wetlands or, if there are obvious wetlands, what

the upland limits of any wetlands may be. See National

Wildlife Federation v. Hanson, 623 F.Supp. 1539, 1546

(E.D.N.C. 1985); Pet. for Cert. at 16; Accord, Parrish &

Morgan, History, Practice and Emerging Problems of Wet-

lands Regulation: Reconsidering Section 404 of the Clean

Water Act, 17 Land & Water L. Rev. 48, 46-47, 59-60

(1982).

If property owners suspect that there are covered wet-

lands on a site, they must hire a wetland scientist to

perform a wetland boundary study and submit this data

to the Corps and possibly the EPA for a formal jurisdic-

tional determination. A jurisdictional determination is the

process by which the federal government determines the

actual boundary of the wetlands or waters of the United

States covered by their regulatory jurisdiction. However,

the Corps and EPA have failed to articulate a uniform

method by which a property owner can know whether its

property contains covered wetlands. The Corps and EPA

have agreed on a “definition” of wetlands,! but that def-

inition leaves so many questions unanswered that it does

not much advance matters in terms of providing an in-

dividual a useful and knowable guide to the conduct of its

‘ Wetlands consist of ‘‘areas that are inundated or saturated by sur-

face or ground water at a frequency and duration sufficient to support,

and that under normal circumstances do support, a prevalence of veg-

etation typically adapted for life in saturated soil conditions.”’ 33 C.F.R.

§328.3(b) (1987); 40 C.F.R. §230.41(aX1) (1987).

affairs. For example, the regulatory “‘definition’’ does not

define key terms such as “inundated or saturated,” ‘‘fre-

quency and duration,” ‘normal circumstances” and “‘prev-

alence of vegetation.”” Even EPA recognizes the extreme

difficulty of discerning a wetland, stating that the margins

of wetlands ‘“‘can best be established by specialists.’’ 40

C.F.R. §230.41(aX2\1987).

The property owner’s uncertainty only begins with the

definition. The National Wetlands Policy Forum stated:

Another source of inconsistency is the difficulty

of applying a wetlands definition to an on-the-

ground determination of a regulatory boundary.

... Different individuals or agencies may also use

different boundary delineation methodologies,

even with the same definition, and in some cases

they may apply the same delineation methodology

differently.

The Conservation Foundation, Protecting America’s Wet-

lands: An Action Agenda, The Final Report of the National

Wetlands Policy Forum 37 (1988). This is precisely the

problem with the Corps’ and EPA’s implementation of the

§404 program. They have not agreed on a test method

for determining the existence and extent of wetlands de-

spite the fact that they use the same regulatory definition.

A recent study by the General Accounting Office char-

acterizes the differences in the delineation methods of the

Corps, EPA and other agencies as “fundamental” and fur-

ther notes that the different approaches ‘“‘can result in

wetlands determinations that vary by thousands of acres”

for the same area.? After a property owner receives a

jurisdictional determination or otherwise knows with as-

surance that the property is covered by the Clean Water

2 United States General Accounting Office, WETLANDS, The Corps

of Engineers’ Administration of the Section 404 Program, Report to

the Chairman, Subcomm. on Investigations and Oversight, Comm. on

Public Works and Transportation, House of Representatives (Washing-

ton, D.C.: GAO/RCED-88-110, July, 1988) at 23, 33.

Act (“CWA’’), 33 U,S.C. §§1251 et seq. (1982), the property

owner must then apply for a §404 permit.

B. Project Planning, Land Acquisition And Real Estate

Finance Practices

A basic understanding of project planning, land acqui-

sition and real estate finance practices is required to com-

prehend the mass confusion created within the diverse

community of potential §404 applicants by EPA’s new mar-

ket entry theory. These practices are required of the reg-

ulated community by lenders and other project investors

as well as the pressures of free market forces and com-

petition.

The project planning, land acquisition and finance proc-

ess is complex and risky. Although the “‘industry’”’ that

these amici represent is comprised of diverse businesses

that operate in distinctly varied economic and market set-

tings, every member shares the need for reasonable pre-

dictability. Predictability is the key to profitability. The

ability to accurately assess all of the economic and market

forces as well as the applicability and effect of regulations

that dictate project planning and design separates the suc-

cessful and profitable enterprise from the unsuccessful.

1. Preliminary Steps

Potential §404 applicants do not use a single process

for planning projects, acquiring land and financing these

activities. However, some generalized stages of these proc-

esses can be outlined.

As a first step, many potential §404 applicants conduct

a market study. Market research and analysis provide a

framework that helps determine the anticipated absorption

of the applicant’s product. “The absorption period refers

to the amount of time it will take to sell out or lease up

a real estate project.”” NAHB, Land Development 26 (1987)

(hereinafter cited as Land Development). Conducting mar-

ket studies before project planning is necessary to maxi-

mize the opportunities to increase site-specific absorption,

otherwise known as market capture. This market capture

occurs only “when a project is designed specifically for its

given marketplace,” Jd. at 17, which necessarily cuts down

on potential locations where the specific product can be

placed.

Market research identifies the characteristics of various

products already on the market, characteristics of the local

population, economic forces and consumer information, and

is also used to conduct a competitive audit that will yield

information on what competitors in the market place are

or will be doing. The project proponent will use this anal-

ysis of the market to narrow down the geographic area

where the project can be placed.

Once a business identifies a market that it believes it

can capture, it can then proceed to the next stage in the

planning process and evaluate project feasibility. The fea-

sibility analysis determines whether threshold conditions

can be met and the cost of meeting those conditions. Con-

siderations here include the availability of infrastructure

needed to support the project, comparability of the existing

and prospective zoning and other ordinances with possible

plans, site and project relationship to existing neighbor-

hoods, land improvement time and site sensitive features

(e.g., drainage, soils, stability problems, topography re-

quiring extensive earth moving and obvious wetlands) that

can be mapped from available data such as tax maps,

zoning maps and United States Geological Survey and Soil

Conservation Service maps. Jd. at 30-39. This information

leads to the creation of a schematic plan (not a site plan)

that determines lot yields, profitability and a decision on

whether to proceed further with planning.

Everything up to this point must be done with discre-

tion. The premature disclosure of plans for a project may

either alarm surrounding landowners before an opportunity

arises to present the project’s advantages, or it may raise

surrounding land prices high enough to prohibit purchase.

Id. at 32-33. It would also inform competitors, who may

be conducting similar efforts to meet the same market

demand, of the potential applicant’s plans. The objective

at this point is to determine whether a potential site is

feasible enough to warrant further, detailed investigation

of a site and the preparation of a site plan.

2. Site Analysis

The project planning process begins long before a po-

tential §404 applicant can evaluate the applicability of the

§404(bX1) guidelines. Frequently the potential applicant

considers more than one site during the feasibility analysis.

However, the possible future applicant will not have pre-

pared any plans in sufficient detail to determine precisely

where land grading and other work will occur and thus

whether jurisdictional wetlands, if any, will need to be

touched.

Only after a feasibility analysis determines that a site

is reasonably compatible with a proposed project and the

possible applicant has a general idea of the site, does a

project planner initiate a detailed site analysis. Jd. at 39.

This is the stage where natural and man-made environ-

mental conditions on or affecting the site are examined.

As much information as possible must be gathered before

approaching the owner or a real estate agent to avoid

premature disclosure of plans, but if all information ob-

tained warrants further action acquisition plans may need

to be revealed.

At this point the site may have to be controlled, by

obtaining an option to purchase or some other method, to

conduct the necessary detailed engineering and on-site

analyses, including an accurate determination of wetland

boundaries, required to produce a functionally, environ-

mentally and socially appropriate physical site plan. Also,

‘{ajn option permits the latitude to secure the necessary

zoning and other approvals.” Jd. at 97. See NAHB, Fi-

nancing Land Acquisition and Development 57-58 (1987)

(hereinafter cited as Financing Land Acquisition); R. Lewis,

Land Buying Checklist viii (8rd ed. 1988). It is at this

stage where the project proponent conducts the planning

process at the level of detail needed to evaluate the appl-

icability of the §404(bX1) requirements.

ee ren eee

3. Project Financing

Once all of these studies have been completed, the proj-

ect proponent must still be willing to incur the substantial

risk involved in proceeding with its project. If the decision

is made to proceed, all the data must be submitted in

appropriate form to lenders, joint venture partners or other

investors. These people and institutions need assurance

that the project is physically and financially viable. They

often require an independent market analysis that provides

an objective third-party opinion of the project’s feasibility.

It can be extremely difficult to obtain financing for land

acquisition and development because of the high degree of

risk. A loan application must be put together that meets

the project’s financial needs and is attractive to lenders.

Financing Land Acquisition, supra at 59; Land Develop-

ment, supra at 99.

4. Market Entry

This general outline of project planning, land acquisition

and finance practices is a very simplified model. In most

situations, it will be impossible to define a precise point in

time when a project proponent enters a market. In dis-

cussing the questions left unanswered by EPA’s market

entry theory and this case, the lead federal counsel in the

District Court, Bersani v. EPA, 674 F. Supp. 405 (N.D.N.Y.

1987), noted that “[mJany projects go through extensive

changes in purpose, size, design, and location. It may be

quite difficult to define the purpose of a project which may

have gone through many changes. Similarly, the complex

nature of land transactions makes it very difficult to know

what is an alternative site and when it can be acquired.”

Liebesman, The ‘Sweedens Swamp’ Controversy - Focusing

on EPA’s Role in the Clean Water Act §404 Program, 9

Nat’l Wetlands Newsletter 15, 17 (Nov.-Dec. 1987).

Even the simplified model above does not apply to many

potential §404 applicants. Some potential applicants have

owned land since before promulgation of the final §404(b\1)

guidelines in 1980, 45 F.R. 85,335 - 57 (Dec. 24, 1980),

or even before enactment of the Federal Water Pollution

Control Act in 1972, Pub. L. No. 92-500, 86 Stat. 816,884

(1972) (codified as amended at 33 U.S.C. §§1251 et seg.

(1982). Also, most applicants, who are entrepreneurs prop-

erly functioning in our free enterprise system, are always

in the market for project sites and have not left the market

since the creation of their businesses.

Some potential applicants will buy or hold property for

long range business planning purposes but without any

notion of what projects they will propose for a particular

site at some indefinite point in the future. Other prospec-

tive builders and possible §404 applicants speculate about

the project potential of property and buy land when the

costs are relatively low, creating the opportunity to pro-

vide a lower cost product to consumers, and increasing

the chances of building a profitabie project.

REASONS FOR GRANTING THE WRIT

The EPA’s view of the law, as presented by its ‘market

entry” theory, is unworkable and unreasonable. The at-

tainment of worthwhile goals should not violate economic

reality and common sense. The ends should not justify the

means. Moreover, EPA’s short-sighted, albeit zealous, at-

tempt to protect wetlands is inconsistent with the impor-

tant goals of the Clean Water Act.

Most home building and light construction in this coun-

try is performed by builders who may have no staff or

employees. The vast majority of builders are small busi-

nesses. Most are not equipped to deal with such a stand-

ardless and vague regulation as represented by EPA’s

market entry theory. But even a well staffed large de-

veloper with substantial financial resources could reason-

ably miscalculate the supposed time of entry into a market.

When a §404 permit application is filed two, three or more

years after the applicant reasonably thought it “entered

into the market” the EPA or the Corps could assert that

the relevant market was really entered into a few months

before the applicant assumed it did, and further assert

that within those few months an alternative site was avail-

able and feasible. The applicant must somehow turn back

the clock in its attempt to rebut the presumption of avail-

ability and gather often evaporated evidence to establish

that the alternative site was not feasible for its intended

project.

Even if an applicant could “enter a market’ at some

defined point in time, the market entry theory will force

potential applicants to prematurely exert control over pos-

sibly many potential alternative sites in order to ade-

quately evaluate them. This will expose an applicant’s plans

to competitors and to sellers, resulting in great increases

in the cost of land and projects. The market entry theory

throws all existing and often required practices of project

planning, land acquisition and real estate financing into a

black hole of absurdity.

This type of regulatory interpretation exceeds what could

be reasonably expected as part of the cost of doing busi-

ness in a regulated society. Compliance with this new reg-

ulatory policy is much more than just onerous. Compliance

is impossible given the difficulty in establishing wetland

boundaries and the necessary project planning processes

that lead to the preparation of a physical site plan. An

alternative and reasonable regulatory interpretation can

provide a clear point in time to judge whether there are

practicable alternatives and do justice to the Clean Water

Act. The time a party files a permit application or, in the

alternative, the time a potential applicant receives a ju-

risdictional determination that a proposed site has wet-

lands (whether before or after land acquisition) provides

a definite point in time by which all concerned parties can

evaluate practicable alternatives to potential adverse im-

pacts on the wetlands.

The EPA’s imposition of its market entry theory on

§404 permit applicants has very serious consequences for

project planning, land acquisition and finance practices, the

provision of affordable housing and other structures and

products required by society, and the necessity of good

comprehensive land use planning by local and state gov-

10

ernments. Some degree of common sense is now desper-

ately needed in the national wetland protection effort. The

seriousness and immediacy of this new problem concerning

an important question of federal law warrant the exercise

of this Court’s power of supervision.

I. THE PETITION FOR CERTIORARI SHOULD BE

GRANTED BECAUSE EPA’S NEW AND UNREASONA-

BLY BROAD THEORY OF PRACTICABLE ALTERNA-

TIVES IS MEANINGLESS TO PERMIT APPLICANTS,

IGNORES THE REAL WORLD AND WILL BE DETRI-

MENTAL TO SOCIETY

A. The Undefinable Nature Of ‘‘Market Entry’’ Cre-

ates A Likelihood Of Unbridled Agency Discretion

And Fails To Provide Potential Applicants Any

Meaningful Guidance To The Conduct Of Their

Affairs

The unreasonably broad agency discretion that the mar-

ket entry theory creates has caused widespread confusion

within the regulated community. Despite EPA’s inept at-

tempt at restricting the future use of its market entry

theory,’ the vast community of possible §404 applicants

does not know how to conduct its affairs and meet its

regulatory obligations because it has no idea what market

entry means. Also, by establishing this market entry the-

ory, the “EPA likely will exercise its section 404(c) veto

authority with greater frequency than it has in the past.”

Steinberg and Dowd, Economic Considerations In The Sec-

tion 404 Wetland Permit Process, 7 Va. J. Nat. Resources

L. 277, 297 (1988). Of course, we do not contend that

there is anything wrong with EPA exercising its authority,

if it sustains its burden of proof, to prohibit unacceptable

adverse impacts to the aquatic environment. But with

“market entry” at its side, “it will become more difficult

for applicants to predict in the initial planning stages of

a project what EPA, in subsequent years and with the

* EPA Final Determination of the Assistant Administrator for Ex-

ternal Affairs, n.14 and accompanying text (May 13, 1986), reprinted

in the Pet. for Cert. at 93a (hereinafter cited as Final Determination).

ll

benefit of hindsight, might consider to be practicable al-

ternatives in a section 404(c) veto proceeding.” Jd.

Considering that the time period over which a project’s

evaluation and planning is conducted can vary from days

to years, the EPA has created a theory that allows itself

(or any Corps district or division engineer)‘ to fix market

entry at virtually any point it chooses. The time of entry

into a market for a particular project is an undefinable

; concept. At best, the time of entry into a market could

| spread over several years, depending on the way a par-

ticular property owner conducts its affairs, the various

constraints and requirements of market forces, lenders and

investors and the wide range of possible yet reasonable

interpretations of ‘“‘market entry.” Market entry could rea-

sonably mean anytime between a project’s initial concep-

tion in an individual’s imagination to the filing of a §404

permit application. This market entry “window” could be

extended even further forward in time up to the point of

a final decision on alternatives by the EPA pursuant to

its §404(c) veto authority or further back in time to the

point of creation of the applicant’s business. The members

of these amici looking for guidance on how to conduct

their affairs peer through this market entry window and

see a meaningless panorama.

‘The Corps is composed of four levels of authority: dis-

trict engineers, division engineers, the chief of engineers,

and the Secretary of the Army.

The Corps is ‘highly decentralized.’ Throughout the United

States, there are thirty-six district engineers and eleven

division engineers. The applicant may not appeal a permit

decision made by the district or division engineer. See [33

C.F.R.] §320.1(aX2\ 1987).

Lawson, The Corps Of Engineers’ Public Interest Review Under Section

404 Of The Clean Water Act: Broad Discretion Leaves Wetlands Vul-

nerable To Unnecessary Destruction, 34 J. Urban & Contemp. L. 203,

212 n.50 (1988).

ee

12

The very real possibility of EPA choosing an initial mar-

ket analysis as the point of market entry makes no sense

in the regulated community since at that planning stage

the applicant had not decided nor was it capable of de-

ciding whether it would acquire land in the community or

even if the project could be built profitably. But EPA could

hold the applicant accountable for having evaluated the

practicability of each and every possible site in some un-

defined ‘“‘alternatives’’ region where the project might be

constructed.

The confusion is compounded for those potential appli-

cants who have owned property for years or who buy

property on speculation without a specific project in mind.

Also, since the Second Circuit stated, following EPA’s ar-

gument, that Pyramid Companies “should be held to stand

in its predecessor’s shoes,’ Bersani, 850 F.2d at 41, the

applicant’s window of “‘opportunity’’ to look for practicable

alternatives can be extended indefinitely into the past. Why

did the Second Circuit or EPA stop with Pyramid’s im-

mediate predecessor, DeBartolo? DeBartolo had a prede-

cessor as well. In fact, “{e]fforts to build on Sweeden’s

swamp began in February, 1979,” Citizens For Responsible

Environmental Management v. Attleboro Mall, Inc., 400

Mass. 658, 660, 511 N.E.2d 562, 564 (1987), which was

before the promulgation of the final §404(bX1) guidelines

in 1980. Does this mean that all permit applicants must

look at what practicable alternatives existed in 1980 for

their current projects? Or will EPA require even a further

retroactive application of its new theory and look to the

1970’s or beyond? How, by any notion of common sense,

can this type of standard be “specific enough to put a

developer on notice of when it should be considering al-

ternative sites[?]’’ Bersani, 850 F.2d at 46.

13

B. The Uncertainty Enveloping The Implementation Of

The Market Entry Theory Will Require All Poten-

tial Permit Applicants To Prematurely Secure Pur-

chase Options On Multiple Tracts Of Land,

Resulting In Great Increases In The Cost Of Proj-

ects Required By Society

Assuming an applicant could “enter a market’ at a

specific point in time for a potential site that will satisfy

the needs and purpose of the applicant’s proposed project,

EPA still has a blind view, endorsed by the Second Circuit,

of project planning, land acquisition and real estate finance

practices. The various elements of these practices are nec-

essary to deliver quality products at the lowest possible

price to society. By abandoning an understanding of this

reality, the EPA has failed to consider relevant factors in

applying the alternatives analysis. The inequities in this

theory must be corrected if the balance between environ-

mental and economic values envisioned in the CWA is to

have any meaning.

The market entry theory would have the applicant com-

bine its initial narrowing search for a feasible site with

application of the alternatives test. This forces the poten-

tial applicant to obtain options on or otherwise tie-up the

sites that will be the subject of the permit application and

the alternatives analysis in order to adequately evaluate

whether all sites are truly alternatives (i.e., to determine

actual wetland boundaries and preserve the true availa-

bility of the site) . Under the Second Circuit’s rationale,

all property, presumably within a given radius of the ap-

plicant’s proposed site or region surrounding that site,

would be “arguably available’ for purposes of the regu-

lation. Bersani, 850 F.2d at 41. This is so because in

EPA’s view an applicant could have simply bought the

rights to a prime alternative site from a competitor, re-

gardless of whether the site is actually on the real estate

market. The EPA has expanded the commonly accepted

and understood meaning of available property into a realm

of irrational thought.

The cost of all the options or similar controls over the

sites would have substantial and adverse financial impacts

14

on the project. However, the actual cost of all the options

to purchase would only be the beginning of the financial

impact on §404 applicants. Since it would be impossible

to conceal the potential applicant’s activities from com-

petitors or the current owners of the potential sites, the

recognition of a demand in the market would drive up

land prices, possibly beyond the project’s feasibility, but

definitely at the expense of needlessly adding to the cost

of delivering the project to the public.

The market entry theory forces the applicant to make

commitments and take a substantial financial risk by pur-

chasing an option for a site far too early in the project

planning process and well before the applicant or its inves-

tors are ready to take that risk. Under the theory, ap-

plicants must evaluate sites well before they have

developed or could develop any type of physical site plan.

Without making a significant investment in the preparation

of a physical site plan, and preparing one for each possible

site, an applicant does not know if the project will even

require a permitted fill. Although EPA would assert that

the Corps’ and its own boundary delineation methodologies

are not binding, that merely adds to the uncertainties for

potential applicants. The market entry theory forces ap-

plicants to prematurely look for other sites when, after

receiving a jurisdictional determination, the applicant could

simply avoid adverse impacts on the aquatic environment

by redesigning its site plan.

This new ‘market entry’’ theory also significantly de-

creases the predictability of project and land acquisition

plans and thereby greatly increases the financial risk to

the 404 applicant. Without any guidance from the agencies

or the courts, how is an applicant to know if the Corps

engineer or EPA Regional Administrator will agree on the

applicant’s guess about the particular site it finally chooses

for its project? The increased financial risk will exclude

access to lenders and investors for all project proponents

except those few with the very best track records or those

with very small projects.

15

In order to do justice to the practicable alternatives

analysis and particularly the question of availability of al-

ternative sites, two watershed events must occur. First,

an applicant needs to reach the stage of physical site plan

preparation for the intended project and, second, must

acquire definitive knowledge about wetland boundaries. The

market entry theory requires an alternatives analysis well

before the confluence of these two common sense prereq-

uisites.

II. THE PETITION FOR CERTIORARI SHOULD BE

GRANTED BECAUSE THE MARKET ENTRY THEORY

IS FUNDAMENTALLY INCOMPATIBLE WITH THE

PRINCIPLES OF COMPREHENSIVE LAND USE PLAN-

NING AND IN PRACTICE CAN VITIATE A COMMU-

NITY’S EXPRESSION OF WHAT DEVELOPMENT IT

WANTS

Land use planning and land use and environmental con-

trols are inextricably intertwined, and are necessarily so

if rational provision is to be made for the use of land on

a basis that benefits the community as a whole and is

consistent with the reasonable interests of individual prop-

erty owners. However, EPA’s market entry theory clashes

with the practice of land use and urban planning because

it fails to recognize that the comprehensive planning proc-

ess looks toward the future.

One of the principal objectives of a community’s com-

prehensive plan is to express what the community wants

to be at some specified point, typically five, ten or twenty

years, in the future. Fundamentally, it is a physical plan

and statement of community policy that ‘‘translates values

into a scheme that describes how, why, when, and where

to build, rebuild, or preserve the community.”’ Interna-

tional City Management Association, The Practice Of Local

Government Planning 60 (2d Ed. 1988). The vision of the

plan is pursued through a variety of implementing zoning

ordinances, subdivision regulations and numerous other or-

dinances that regulate such issues as stormwater runoff,

the provision and construction of infrastructure and nat-

ural resource protection.

16

A comprehensive plan provides both the public and pri-

vate sectors a rational basis from which to judge a pro-

posed project’s appropriateness and feasibility. A project

proponent’s ability to obtain state and local approvals and

permits is determined by the project’s compliance with the

existing plan and its current implementing ordinances, re-

gardless of when land was acquired.

In contrast, the conditions EPA looks at concern when

a particular permit applicant entered the market for its

project. When an applicant purchased a site, took an option

on a site, hired a market analyst or performed some other

similar but as yet undefined factor, are factors wholly

unrelated to whether a particular project will fit the com-

munity’s plan. These conditions are irrelevant from a land

use planning perspective. The market entry theory runs

counter to land use planning goals when land use and

environmental regulations should work to effectuate those

goals.

EPA apparently does not recognize as a relevant factor

the zoning on an alternative site at the time EPA deter-

mines that an applicant entered the market. Only through

hindsight could EPA know that the zoning on the North

Attleboro site would change due to the efforts of New

England Development. See Final Determination, supra, re-

printed in Pet. for Cert. at 90a. The market entry policy

could then require an applicant to seek rezonings, zoning

variances, special permits or exceptions or other changes

to the comprehensive plan. If a community needs the par-

ticular project for economic development, housing or other

purpose to promote the public health, safety and welfare

it will be forced to rewrite its comprehensive plan and

implementing ordinances to accommodate EPA’s view of

where a project should go. By doing this, the EPA has

potentially destroyed the hope of local communities of ef-

fectively implementing their comprehensive plans and as-

sociated land use controls. The ramifications of this type

of federal second guessing could be disastrous.

While at times it will be necessary for the federal gov-

ernment to override local and state plans because of im-

17

a

portant~national concerns, such as_ environmental

preservation, the wholesale detraction of a community’s

land use ideals on irrelevant grounds should be prohibited

by this Court.

III. THE PETITION FOR CERTIORARI SHOULD BE

GRANTED BECAUSE THE MARKET ENTRY THEORY

WILL LEAD TO ILLOGICAL AND INEQUITABLE DE-

CISIONS AND IS UNNECESSARY TO PROMOTE WET-

LAND PROTECTION

The EPA claims that the market entry approach is nec-

essary to carry out the purpose of the CWA. That is, it

will force property owners to make decisions to protect

wetlands before they commit to a particular site. Assuming

for argument’s sake that a definite time could be estab-

lished for entry into a relevant market, an analysis of

alternative sites at that time could show that there are

no alternatives (i.e., the applicant expends substantial re-

sources in evaluating and proving that other sites are either

not available or not feasible, rebutting the presumption of

practicable alternatives). However, by the time the appli-

cant is ready to apply for a §404 permit an alternative

site could become available or feasible for the project.

In the real world, alternatives come and go all the time.

The boundaries of wetlands change over time as well. There

may actually be more alternative sites at the time of per-

mit application. Presumably, EPA would then argue that

it can also use the time of permit application to analyze

practicable alternatives, Pet. for Cert. at 22 n.16, forcing

the applicant to again perform an expensive feasibility

analysis of the new potential alternative site.

The whole purpose of an applicant’s elaborate market

analyses, feasibility studies and site analyses is to reduce

the inherent risk in the real estate development business.

Market forces and competition impose a substantial finan-

cial incentive on applicants to limit risk. Anyone that does

not heed those natural incentives will shortly go out of

business. Avoidance, if possible, of either economic or en-

vironmental conditions adverse to a project will always be

18

an applicant’s preferred course. But the Second Circuit

says, ‘[w]hether most real-life developers would take such

a risk is irrelevant.’’ Bersani, 850 F.2d at 44. How can

a reading of the Clean Water Act and the §404(b\(1) guide-

lines meet the requirements of common sense when that

interpretation expressly ignores reality?

The market entry theory also creates anomalous results,

as demonstrated by a slightly revised hypothetical factual

setting. Here, according to EPA the North Attleboro site

was available to Pyramid before New England Develop-

ment (NED) bought it. However, if Pyramid had bought

it first, as EPA’s market entry theory requires, and NED

then pursued a project on Sweedens Swamp, would EPA’s

theory then submit to an assertion by NED that the Swee-

dens Swamp site has no practicable alternative and, there-

fore, let NED proceed to the next step in the permitting

process? Presumably not. EPA would assert that the North

Attleboro site was available to and feasible for NED when

it entered into the market. The paradox for Pyramid, NED

or any other latecomer who could build a viable project is

glaring. How can one site be a practicable alternative to

two competing businesses at the same time? Before this

case, denying a §404 permit on this basis was beyond

plausible argument.

The imposition of this unreasonable market entry theory

is unnecessary to protect wetlands and further the pur-

poses of the CWA. If the applicant rebuts the presumption

that there are practicable alternatives, the Corps still can

deny a permit if the discharge of dredge or fill material

‘will cause or contribute to significant degradation of the

waters of the United States.”’ 40 C.F.R. §230.10(c) (1987).

If the Corps issues a permit after its extensive review

process, the EPA then can, under its §404(c) veto au-

thority, prohibit a permit by asserting that the proposed

dredge or fill activity “will have an unacceptable adverse

effect on municipal water supplies, shellfish beds and fish-

ery areas (including spawning and breeding areas), wildlife,

or recreational areas.”’ 33 U.S.C. §1344(c\ 1982).

19

Of course, EPA when acting under §404(c) has the bur-

den of proving ‘“‘unacceptable adverse impacts,” Bersani,

850 F.2d at 40, a burden EPA abrogated in this case by

asserting that EPA has proven its position on unacceptable

impacts because the applicant has failed to prove its po-

sition, pursuant to §404(b), on alternatives. The EPA’s

argument presents a striking incongruity. If the existence

of an alternative makes the environmental impact on a

site unacceptable, does the lack of an alternative transform

the impact into an acceptable one? How can the agency

measure the actual environmental impact on a wetland

environment by examining what someone could do on an

unrelated upland site?

Section 404(c) is intended to protect environmental in-

terests. It acts as an environmental safety check on the

permitting process. Therefore, EPA under §404(c) could

properly consider the Corps’ environmental judgments re-

lated to “significant degradation,” 40 C.F.R.

§230.10(c1987), or on “appropriate and practicable steps”

to mitigate potential adverse impacts. 40 C.F.R.

§230.10(dX 1987). But §404(c) does not authorize reconsi-

deration of fundamentally nonenvironmental judgments

made by the Corps, as was done by EPA in this case.

The EPA is an environmental agency and has little or no

expertise in the economic matters that are impinged by

its market entry theory.

CONCLUSION

For the reasons stated above and in the Petition for

Certiorari filed by Bersani, et al., this Court should issue

a writ of certiorari to review the judgment and opinion

of the Second Circuit.

Respectfully submitted,

WILLIAM H. ETHIER

NATIONAL HOUSING CENTER

15th & M Streets, N.W.

Washington, D.C. 20005

(202) 822-0359

Counsel for Amici

December 20, 1988