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Environmental Permitting Bottlenecks for Land Developers

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Environmental Permitting Bottlenecks

What is Environmental Permitting and Why is it Important?

We created environmental permitting to protect a way of life that we saw was at risk of irreversible harm. Rachael Carson did not write Silent Springs because there was vast scientific knowledge that chemicals were causing environmental damage. She and other ordinary citizens made observations that our everyday actions were harming the environment.

Our environmental law attempts to create similar observable outcomes. Environmental regulations should produce results we can see or measure. In their most basic form, environmental regulations are a way to practice ecological conservation. When we realize we are damaging the environment, we should take steps to slow that down – but we need to see the impact of those steps to be incentivized to sustain them.

Of course, the United States government should strive to provide clean air and water. Clean air and water are necessary for people, businesses, and communities to thrive

What does that mean for environmental permitting on a practical level? What land use projects are regulated by environmental laws and regulations? These are complicated questions and have quite a few variables. But environmental regulations are not there to inhibit land development. The regulations ensure that projects that can impact our environment receive the necessary amount of oversight to protect life. Put even more simply, large projects have more stringent environmental permitting, and smaller projects have less arduous permitting if any at all. Thus, the intensity and impact of regulations on a project are designed to be proportional to the project’s impact on the surrounding environment.

 

How are Environmental Regulations Created? 

Most environmental regulations that apply nationally began as bills at the federal level and are enforced by state or federal agencies. Many states and even several cities have reasonably complex environmental regulations. For the most far-reaching laws, such as the Clean Air Act and the Clean Water Act, the federal government has delegated the authority for a large portion of the enforcement and compliance to the state authorities.

This part of the environmental process is the ultimate exercise of a federalist society. There is a federal framework, but the states have autonomy to tailor regulations to their political and environmental needs. To date, the courts have typically allowed the federal government to prescribe a minimum standard and states are free to require more stringent regulations if it suits their political or environmental needs. California, for example, has implemented fuel efficiency standards at a higher bar than the national requirement. There is disagreement across the political divide as to the ideal balance between competing priorities of business development and environmental safety.

This balancing of state and federal authority is what makes the United States have some of the strongest environmental laws in the world. This directly reflects the value we place on ecological conservation and fosters a business climate with consistent standards across the nation. The burden of doing environmental work in Texas is not orders of magnitude easier than New Mexico or vice versa; they are similar at the core but have varying paths to achieve the same outcomes.

In the United States, the primary environmental regulations include the Clean Air Act, Clean Water Act, and the Endangered Species Act. These laws have had tremendous impact on American lives. The Endangered Species Act is a global rarity in that it specifically places value on non-human life. Americans have been leaders and pioneers in environmental conservation.

In a nutshell, what do these regulations do?

  • Clean Water Act: Ensures clean waterways and cover runoff from point and non-point sources

  • Clean Air Act: Minimizes smog by eliminating lead from gasoline and setting standards for CO2 emissions from vehicles

  • Endangered Species Act: Protects the lives and habitats of animals whose populations in the wild are threatened with extinction

  • National Environmental Policy Act (NEPA): Compels federal agencies to consider the effects to the environment of any action they fund, authorize, or carry out. Projects on federal lands or projects using federal funds are subject to a rigorous environmental review process under the guidelines of the Act.

Before the Clean Air Act, smog was so bad in the 1950s that it would sometimes shut down air travel or drive children indoors. Before the Clean Water Act, rivers were so polluted that Ohio's Cuyahoga River caught on fire twice. The Environmental Protection Agency (EPA) oversees the Clean Air Act and the Clean Water Act, but they have deferred or delegated most of that enforcement to the states.

The Endangered Species act is like no other piece of legislation ever created. It is responsible for saving flagship species like the Grizzly Bear, California Condor, Grey Wolves, and the Whooping Crane, as well as thousands of lesser-known species that warrant protection.

The US Fish and Wildlife Service oversees the Endangered Species Act. As most endangered species are on private land, the enforcement of this law can create rancor with property owners, who perceive the law as infringing on their personal property rights.

As recovering environmental consultants, we have seen clients who want to "fix" a discovered ecological issue. In environmental consulting, an ounce of prevention is worth a pound of cure. One can almost always see environmental risks and issues before the land development project starts. Doing due diligence before investing in development allows developers to choose projects that minimize regulatory obstacles, as opposed to being confronted with regulations that significantly impair building projects that are already underway.

Permitting Bottlenecks for Land Developers

Why is Environmental Due Diligence Important for Land Developers? 

Two key points are fundamental to environmental permitting and environmental risk management for land development:

  1. Violations of environmental regulations are avoidable.
  2. Ecological issues rarely kill a deal by themselves.

Understanding these two fundamentals about environmental risk determines how land developers approach their development process. There is an art to developing on sites with more environmental issues. The environmental risk must be tolerated regardless (such as transmission lines that will have to cross at least one regulated wetland). Land developers will, at times, take on some unknown and considerable environmental risk because the potential rewards are so great.

High-Risk Projects

Some of the most environmentally controversial projects have very robust financial underwriting. Some examples include midstream projects and offshore wind farms. A high capital cost project team that has to be regulated even to sell their assets will understand they are embarking on a project fraught with environmental impact and regulation. But this heavily regulated process is usually worth the potential financial windfalls.

Moderate/Normal Risk Projects

If someone wants to develop on a piece of traditional land, the process is usually based on the type of developer and their development stage. One of the most significant factors is where their money is coming from, as the funding dictates most of the risk tolerance. When the financial impact is spread among many investors, as with publicly traded companies, banks, or other financial lenders, there seems to be less environmental risk tolerance. Often these groups have some standard they are trying to meet and have a proper fiduciary duty to protect assets or limit liabilities. This includes the natural resources on the land that may be disturbed.

Biggest Bottlenecks in the Environmental Permitting Process 

Environmental regulations are designed for easy regulatory compliance. Regulators did not set out to create rules that were impossible to satisfy. These pieces of environmental regulation are vast and complex, but they also have carve-outs to simplify the most basic of activities.

Since most projects have a permitting path, only the most complex and large-scale projects will experience environmental bottlenecks. This is quite variable based on the physical location of your project. Overall, in more regulated areas the law will continue to provide off-ramps for compliance with rules that still have the potential to pollute air or water or threaten endangered species.

The most significant bottleneck we see is the rule making process itself and the uncertainty it creates. Even though the legislation does not often change, the interpretation and implementation of the rules are ever-changing, as various administrations attempt to put their stamp on the process.

What Regulatory Changes Can Improve the Environmental Permitting Process?

One narrative is that there is only one way to improve bottlenecks in this process: to reduce the number of environmental regulations. However, this is not the typical path regulations take. The rules are constantly changing and ever-expanding, just as our knowledge of the world and science in general is. So that solution (make less regulation or rules) is counter to human nature. We suggest this is neither a good or bad thing nor a reflection of our political environment (liberals do one thing and conservatives do another). Simply put, as information is learned and we find more “kinks” in the armor, we set about to repair or fill them.

People are trying to torpedo the actual intent of the rules and desired political outcomes, and that is fine. Still, we know that Congress and the Judicial branch attempts to ensure that laws are not random and entirely political, so why are we on this rule-making treadmill?

Focusing on the rule making process would be a simple and non-political way to achieve efficiency. For the most part, this is a pure bureaucracy that all political parties should be willing to address. The specifics of what needs to change are very complex but, here are some simple options to improve the rule making:

  • Option 1: Create a Stand Down Period- making rules that last past the next administration and finding ways to prevent subsequent administrations from reversing rules immediately would allow for more consistency and regulatory stability.

  • Option 2: Make the rules more durable – make rules so robust and clear that the courts or regulators cannot quickly challenge them. When possible, codify these rules with the federal legislature.

  • Option 3: Make a carveout for federal environmental regulations – rule making for all federal legislative matters follows the same rule making process. Environmental rules could follow an independent decision-making process based on and rooted in science. Take this process out of the political realm.

The current rule making process creates confusion and conflict. When rules change based on an administration's political party, businesses and land developers work to influence these rules rather than find the fastest and most cost-effective way to follow them.

Land Developers Can Mitigate Risk Earlier 

Whether you are developing solar projects or natural gas pipelines, you can mitigate risk more effectively and efficiently if done earlier. Since most environmental risk can be assessed early in the process, identifying that risk early and quantifying it from a time and monetary perspective will give your proposed project the best chance for success and regulatory approval.

The issue is, when is the right time to to assess this risk? Should developers be getting an environmental assessment before the purchase or lease of land? We think so.

Typically, environmental due diligence is done sometime between the purchase or lease of land and the shovel hitting the dirt. But what if the environmental risk could be identified and assessed quickly before the purchasing/leasing occurs? We believe this is one place where land developers can significantly mitigate risk and go into a project clear-eyed and armed with the information that they need to underwrite their project accurately. You may not need to know every detailed risk to your project but knowing the larger buckets of environmental risk and the potential permit application you will need can allow you to anticipate future obstacles or avoid them altogether.

Environmental Permitting bottlenecks cause headaches for Land Developers, but the solution isn’t to throw out the regulations altogether, nor will that realistically happen. Both lawmakers and land developers themselves have a role in making this process more streamlined.


New software tools, such as Transect, allow Land Developers to identify and evaluate risk earlier, speeding up their process and allowing for better land purchasing decisions.

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