CEQ Proposes Paradigm Shift for Funding Federal Water Investments

May 9, 2013

The Council on Environmental Quality (CEQ) recently released proposed guidance documents that would establish a new “framework for analyzing” federal investment in water resources projects. Released in March 2013, the Principles and Requirements for Federal Investments in Water Resources and Interagency Guidelines (collectively “Proposed Guidance”) instruct Federal agencies to develop and implement regulations under an “ecosystems services approach,” prior to approving investments in water-related projects such as dam or levee construction or funding grant programs. This new approach is controversial and expands the scope of factors Federal agencies are required to consider when determining whether to fund water resources projects. The Proposed Guidance is in final draft form and the CEQ is seeking comments on the documents until May 28, 2013.

It seems apparent that this new framework represents a significant departure and perhaps a policy shift from the prior approach. The new instructions would redefine the criteria for Federal funding of water projects. Prior guidance instructed Federal agencies to focus on economic factors when deciding whether to fund water resources projects. The Proposed Guidance places a much greater emphasis on environmental factors under the “ecosystem services approach.” The Proposed Guidance recognizes that:

“[a] narrow focus on monetized or monetizable effects is no longer reflective of our national needs, and from this point forward, both quantified and unquantified information will form the basis for evaluating and comparing potential Federal investments in water resources to the Federal Objective.”

In response, Congressional critics have attempted to block a key water management agency––the Army Corps of Engineers (Corps)––from implementing the Proposed Guidance. This prohibition was included in the Fiscal Year 2013 Continuing Resolution (CR). Whether such a prohibition will expire at the end of this Fiscal Year, September 2013, or will continue in the future, will depend upon Congressional action later this spring or summer.

BACKGROUND

In 1983, the Federal government issued the Principles and Guidelines for Water and Land Related Resources Implementation Studies (1983 Guidance). The 1983 Guidance adopted the “single Federal objective” that Federal water and related land projects, should “contribute to national economic development consistent with protecting the Nation’s environment.” Under the 1983 Guidance, which is currently in effect, planners are directed to select project plans that produce the greatest national economic benefit, but also ensure that “damage to the environment is eliminated or avoided and important cultural and natural aspects of our nation’s heritage are preserved.” The 1983 Guidance calls for mitigation of a project’s adverse environmental effects, including effects on fish and wildlife and their habitat.

In response to Hurricane Katrina and growing concern that levees and dams worsen floods and exacerbate environmental damage, Congress passed the Water Resources Development Act (WRDA) of 2007. WRDA instructed the Secretary of the Army to revise the 1983 Guidance. Specifically, Congress mandated that the guidance be revised to reflect a new “Federal Objective” whereby Federal water resources investments should: (1) reflect national priorities; (2) encourage economic development; and (3) protect the environment by (i) maximizing sustainable economic development; (ii) avoiding the unwise use of floodplains and flood-prone areas and minimizing adverse impacts and vulnerability in any case in which a floodplain or flood-prone area must be used; and (iii) protecting and restoring the functions of natural systems and mitigating any unavoidable damage to natural systems.

Although WRDA specifically instructed the Secretary of the Army to revise Corps-specific guidance, in 2009, the Obama Administration instructed CEQ to update the 1983 Guidance for Federal agencies engaged in water resources planning to promote consistency between the agencies. The recently released final drafts of the Proposed Guidance are an outgrowth of this effort.

SUMMARY OF THE PROPOSED GUIDANCE

Scope. CEQ proposes to enlarge the group of Federal agencies that use the guidance documents. The 1983 Guidance applies to only four agencies: the Corps, Bureau of Reclamation, Tennessee Valley Authority and Natural Resources Conservation Service. As proposed, the guidance would also direct the Environmental Protection Agency, and the Departments of Commerce, the Interior, Agriculture, and Homeland Security (Federal Emergency Management Agency) to evaluate certain threshold criteria when selecting, locating or designing water projects. The Proposed Guidance places an emphasis on healthy ecosystems and nonstructural project options, such as expanding wetlands to mitigate flooding as opposed to constructing levees.

Specific Application to Federal Investments. The Proposed Guidance will apply to a wide range of Federal investments that have the potential to affect or alter, either directly or indirectly, water quality or quantity. Examples of the types of Federal investments mentioned in the Proposed Guidance include: (1) grant programs; (2) funding programs— including the Clean Water Act (CWA) and Safe Drinking Water Act state revolving funds; (3) studies or investigations leading to construction of infrastructure; and (4) proposals and plans that affect the management of Federal assets. The Proposed Guidance also excludes three categories of Federal investments from consideration: (1) regulatory actions (permitting activities that fall under sections 402 and 404 of the CWA or Endangered Species Act consultations; (2) research and monitoring activities; and (3) emergency actions. Additionally, there may be instances where projects and programs fall outside the scope of the Proposed Guidance’s threshold criteria.

Guiding Principles. The Proposed Guidance includes a list of guiding principles and aspirational goals for national water infrastructure development. These principles include: healthy and resilient ecosystems, sustainable economic development, floodplain management, public safety, promotion of environmental justice, and the utilization of a holistic watershed management approach. The CEQ views the principles as “overarching concepts that the Federal government seeks to achieve through policy implementation.”

General Requirements. The Proposed Guidance also includes a list of general requirements that Federal agencies should use in crafting their own procedures to implement the Proposed Requirements (the process agencies should use to develop agency-specific procedures is outlined below). They are intended to supplement, not replace, other environmental law requirements (i.e., the National Environmental Policy Act), and direct Federal agencies to, among other things: (1) evaluate Federal investments using a common framework; (2) use best available science and a commensurate level of detail when analyzing Federal investments; (3) develop collaborative measures between Federal agencies; (4) analyze risk and uncertainty (with a focus on climate change and future land use); (5) consider water availability and competing demands for water resources; (6) incorporate nonstructural approaches to solving water resources issues; (7) consider international water resources issues; (8) develop alternative designs or strategies; (9) emphasize agency transparency in decision making; and (10) document and explain recommendations for Federal investments in water resources.

Federal Agency Guidance. The Proposed Guidance directs the listed Federal agencies to develop procedures for analyzing potential Federal investments. Federal agencies are tasked with developing both project-level procedures and program-level procedures. The Proposed Guidance includes threshold criteria agencies should use in determining whether to undertake a full analysis, a simplified analysis, or whether the project may be excluded from analysis.

Project-Level Procedures. Project-level procedures must include the following steps: (1) define the water resources challenge(s) to be addressed; (2) define the decision context (watershed/ecosystem/area); (3) identify existing conditions; (4) forecast future conditions of the study area; (5) formulate a range of alternative investments; (6) evaluate alternatives; (7) display the effects/compare the alternatives; (8) select criteria that conform to the Proposed Guidance and any agency-specific requirements; and (9) iteration within the process.

Program-Level Procedures. Program-level procedures may have more flexibility, but must: (1) incorporate the project-level elements; (2) account for “outlier” projects; (3) encourage collaboration between other agencies or third parties; and (4) include a written systematic and structured approach upon which to base decisions. The Proposed Guidance also provides examples of appropriate approaches to structuring a program-level procedure. Finally, the Proposed Guidance includes a flow chart to aid the Federal agency’s determination of the Proposed Guidance’s applicability to a potential project or activity.

CONGRESSIONAL ACTIVITY

CEQ has moved forward with the revised Proposed Guidance despite Congressional efforts to block their implementation. The massive fiscal 2012 omnibus appropriations package prohibited the Corps from spending money to implement any revisions to the Proposed Guidance. Instead, Congress directed the Corps to continue its reliance on the 1983 Guidance. The CR signed by President Obama in March 2012 keyed off spending levels set by the 2012 appropriations bill and carried forward its policy provisions.

Since the current CR only funds the government through September 2013, it is unclear whether Congress’s 2012 prohibition will be included in future appropriations bills. Moreover, because each agency is required to develop specific procedures to implement the Proposed Guidance, it is unclear whether the CR would constrain any agency from developing such procedures.

IMPLICATIONS

The Proposed Guidance employs a new analytical framework for assessing which Federal water infrastructure projects and programs merit funding and which private projects affecting Federal water resources should be approved. By supplementing a traditional cost/benefit analysis with considerations for healthy and resilient ecosystems, the Obama Administration has announced a dramatic policy shift from previous administrations. Significant questions remain, however, regarding CEQ’s timeline for finalizing the Proposed Guidance, whether CEQ’s efforts will trigger litigation, and how the Proposed Guidance will be implemented by Federal agencies.

FOR ADDITIONAL INFORMATION

Van Ness Feldman closely monitors and counsels clients on water, air, and other environmental developments. If you would like more information about CEQ’s Proposed Guidance please contact Adam Gravley in Seattle (206) 623-9372, or any member of our Water Resources practice.