Wetlands Case Centers on ROR and Amount of Parking

The amount parking that was necessary for a regional mall/mixed-use project was at the heart of a lawsuit involving a wetlands permits issued by the Army Corps of Engineers (Corps).

In Sierra Club v. Van Antwerp, 2011 U.S. App. LEXIS 23736 (D.D.C 11/29/11), the Corps issued a permit in 2007 authorizing the filling 54 acres of wetlands to facilitate construction of a new town center that included regional mall, commercial buildings and residences. Nearly half of the filled wetlands would have been used to build 14,000 parking spaces. As a condition of the permit, the Corps required the developer to perform certain mitigation measures, including the preservation, creation, or enhancement of 13 acres of on-site wetlands and nearly 120 acres offsite wetlands. In issuing the permit, the Corps had performed an Environmental Assessment (EA) but not an Environmental Impact Statement (EIS). The Corps also refused to consult with the Fish and Wildlife Service about potential impacts to listed endangered species.

Three environmental groups challenged the permit, asserting that the Corps had violated the National Environmental Policy Act (NEPA), Clean Water Act (CWA) and Endangered Species Act (ESA). Among other allegations, the plaintiffs argued that the Corps failed to require a practicable alternative to filling in wetlands since the project was not water-based. The plaintiffs also argued that the Corps had acted arbitrarily and capriciously when in concluded there were no significant impacts that would have required an EIS, and when it failed to engage the FWS.

The Corps rejected these claims on the basis that reducing the size of the project was infeasible because the project would not provide an adequate rate of return. The applicant had indicated that an 8% rate of return (ROR) was necessary to maintain the projects economic feasibility and to obtain financial support. As part of this calculation, the Corps utilized the opportunity costs (opportunity to sell the land) based on the fair market value of the land  ($72.3MM) instead of the lower acquisition costs for the raw land ($4.3MM). The plaintiffs also argued that if the developed price should be used, the Corps should have used the recessionary value of 2009 which was 45% lower than the peak value in 2007.

The district court granted summary judgment for the plaintiffs on the NEPA and CWA claims but rejected  ESA claim. The court also ordered the Corps and developer to submit a proposed remediation plan The plaintiffs then sought a permanent injunction precluding further construction of the project and restoration of the wetlands that by the time of the motion had been completely filled. The court declined to require the developers to remove the fill material but did order the developers to implement certain stormwater management measures to minimize impacts to the remaining wetlands.

On appeal, the United States Court of Appeals for the District of Columbia reversed the lower court’s CWA ruling, finding that the Corp use of the market value of the project and an 8% rate of return was reasonable,  and in finding less fewer parking spaces was not a practicable alternative. The court also found that the mitigation requirements adequately addressed concerns about environmental impacts resulting from the loss of wetlands. However, the appeals court agreed that the Corps failed to adequately consider the impact of fragmented habitat on the indigo snake and remanded this issue to the Corps for further analysis.

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