Will EPA water grab tip US back into recession?

Quietly last month -- in the midst of Ukraine, the search for flight MH 370, David Letterman’s retirement and the final hours of March Madness -- Washington witnessed a ruling that will affect all of our lives:  the redefinition of water under the Clean Water Act.

The redefinition – formally a Proposed Rule issued by the EPA -- is momentous not because water is the essence of life (according to Google, it is), but because of the profound consequences for America’s economic growth, or lack thereof, as a result of the new rule.

As is so often the case with government powers, large matters turn on small shadings of meaning in phrases written decades ago by legislators long since gone.  Consider the bureaucratic meaning of the term “waters of the United States,” which is the rubric under which the U.S. federal government establishes jurisdiction under the Clean Water Act.  For more than 40 years, the issue of what waters fell under federal scrutiny turned on whether they were “navigable” or near an adjacent wetland.

Enter the EPA, casting its new action as an effort to “clarify” the definition of “waters of the United States,” muddied by recent federal court rulings.

While Websters may only need 85 words to do the job – and even the Clean Water Act’s author, Edmund Muskie, needed only 88 pages for the entire bill – EPA’s definition of water runs 370 pages.  And that’s leaving aside appendices, one of which is a hefty 300 pages in its own right.

The new catchphrase is “connectivity:”  Forget whether waters are navigable; what matters now for EPA’s would-be rulemakers is that disparate bodies of water are connected ecologically, demonstrating a “significant nexus.”  This includes “ephemeral waterways” – translation:  ditches and even potholes that sometimes collect rainwater or storm runoff will now fall under EPA authority.

And the new water rule is only the latest in a series of EPA actions unilaterally redefining its authority and extending its regulatory reach.

Take the EPA’s “dredge and fill” authority, under the Clean Water Act’s Section 404.  In recent years, EPA has cited its 404 authority to apply to projects after permits have been issued, and even before a mine plan is introduced.

Case in point:  The Spuce Mine in West Virginia.  After a 10 year-long process, the U.S. Army Corps issued their permit for this coal project in early 2007.  Along the way – with EPA oversight – the footprint of the proposed mine was reduced more than 25%, a development that might, in less fraught times, point to the responsiveness of the federal process to expert opinion and community input.

No matter.  Two years later, the EPA rescinded Spruce’s permit.  Since then, the battle over the Spruce Mine has shifted into the U.S. courts, with split decisions rising last week to the Supreme Court, which returned the case to lower courts for adjudication on the merits.  In other words, 17 years after Spruce entered -- and completed -- the federal permitting process, it’s still not clear if the mine can be built.

If EPA’s ex post facto execution of Spruce stands, no mining company can ever be confident that the permits it receives after years of effort and hundreds of millions of expense – will be worth the paper they’re written on.

EPA’s expanding its reach at the front-end of the permitting process as well.  Witness Alaska’s Pebble project, a copper and multi-metal deposit.  For Pebble, EPA created a special process inviting experts to create a hypothetical mine to assess its potential impacts.  Under the EPA’s pressure, the Pebble project lost its major partner, and just this week, a minority investor – both major multi-national mining companies.  If EPA finishes Pebble off, a new precedent will be set, whereby projects must navigate an ad hoc “pre-process” in order to earn the right to apply for mining permits.

Other pending mines are twisting in EPA limbo:  The Rosemont copper project in Arizona, where regional EPA regulators are deciding whether a gulch or wash – a sluice through which rainwater passes but is otherwise dry as desert – triggers a clean water review.  Then there’s the Eagle Mine in Michigan – the only mine in the country that would extract nickel as its primary product, an ingredient essential to stainless steel, batteries, magnets and ceramics.  EPA initially ruled that Eagle would need a wastewater discharge permit, but dropped the requirement after the company revised its mine plan.  Eagle got its permit in 2006.  Now EPA has flipped the bureaucratic switch – Eagle will need a wastewater discharge permit after all.

Is this what Congress intended?  Placing a magic wand in the hands of a single federal agency, with a welter of rules it can interpret to its own taste, leaving citizens and companies no option but expensive litigation?

And the issue isn’t just mining.  Couple the expansive new water rule to EPA’s unilateral extension of its “dredge and fill” powers, and there’s no reason that oil and gas projects won’t be next.  Ditto major construction, transportation routes, and manufacturing plants.

Even the American farmer is now in EPA’s cross-hairs.  Witness the focus on “prairie potholes” – depressions in the land that may occasionally fill with rain or snowmelt -- as part of the system of waters of the United States.  It’s not that EPA will classify all prairie potholes as falling under its authority – just that determining which pothole is subject to federal rules will likely require a case-by-case analysis.

According to estimates by the U.S. Army Corps of Engineers, more than $220 billion in economic development runs through Section 404 every year.  With the U.S. economy growing around 3 percent annually, that’s more than half the projected GDP increase for 2014.  And that’s before the EPA’s expanded definition of water.  With more and more of U.S. economic development falling under its purview, EPA’s endless appetite for project delays could push the U.S. economy back intro recession.

In sharp contrast to its legislative mandate, EPA’s understanding of its own authority seems to have overflowed its banks.  Members of Congress on both sides of the partisan divide have reacted with alarm at the new water rule.  Let’s see whether Congress as a co-equal branch decides to revisit the EPA’s water grab before the puddles around the Capitol Hill fountain are declared wetlands.