Real Estate Coastal Development | Client Update

Real Estate Coastal Development | Client Update
June 2008
Coastal Development Practice Group
Uncertain Conclusion to Coastal Stormwater Rules
Debate by Stanford Baird
The current short session of the General Assembly has seen one of the
more spirited stakeholders debates in recent memory regarding the
Division of Water Quality’s coastal stormwater rules. The coastal
stormwater rules, which control important aspects of the land
development process in the 20 coastal counties, saw significant and
sweeping amendments earlier this year. However, interest groups
including local governments, environmental citizen groups, and real
estate industry groups have been actively involved in discussions in a
legislative stakeholders group, known as the Coastal Stormwater Rules
Working Group. This group has been meeting for several months
attempting to develop solutions to disputed portions of the amended
In This Issue:
Uncertain Conclusion to Coastal
Stormwater Rules Debate
Update on Sandbag Enforcement and
Policy Changes
Proposed Water Management and
Drought Legislation
Bank On It: Will Entrepreneurs Cash
In On New Wetlands Mitigation
In 2005, the Division of Water Quality (“DWQ”) determined that the
coastal stormwater rules were not effective in protecting the water
quality of coastal waters, in particular coastal shellfishing waters.
Generally, the Division of Water Quality took the position that there is
a correlation between development and built upon area and the
degradation of coastal water quality and the closing of shellfishing
waters. Based on this determination, DWQ began the rule making
process to increase development restrictions and improve stormwater
management. The amendments to the coastal stormwater rules were
the end result of the two year process. The Environmental
Management Commission adopted the final rules in January, which
were approved by the Rules Review Commission on March 20, 2008.
Most notably, the adopted amendments:
significantly lowered the threshold for obtaining a coastal
stormwater permit for commercial projects (from one acre
of land disturbance to less than 1/4 acre)
drastically reduced density limits for “low density” projects
(from 25% built upon area to 12% in areas near
shellfishing waters and from 30% to 24% for projects in
other areas)
excluded wetlands from the calculation of impervious
surface for a project
required a 50 foot vegetative buffer for new development
activities (increased from prior 30 foot requirement)
significantly increased requirements for on-site stormwater
did not include any provision for vested rights,
“grandfathering,” or exemptions for previously permitted
Coastal Development Practice Group
Stanford Baird
Eric Braun
Bill Brian
Charlotte Mitchell
Mack Paul
Alan Peterson
Allen Prichard
The amended rules would become effective on August 1, 2008 unless changes are made during the current legislative
session. Bills were introduced earlier this session in both chambers of the General Assembly to disapprove the
amended coastal stormwater rules, and because of the strong interest in the rules throughout the coastal counties,
the Coastal Stormwater Rules Working Group began work in April.
The Working Group has met nearly every two weeks since the short session convened. However, it remains unclear
where the debate will end and any resolution will begin. At the outset of the stakeholder group process, opponents of
the rule spent considerable time criticizing the scientific basis upon which the amendments were based and the
breadth of the application of the amended rules. For example, critics claimed that the amended rules should not
apply to counties with few or no shellfishing waters, if the amended rules were primarily meant to protect such
waters. Throughout the process, opponents of the amended rules have remained steadfast in their criticism, while
DWQ staff and environmental citizen groups have strongly supported the basic assumptions underlying the
Despite the clear difference of opinions among stakeholders, the process has produced some apparent compromises.
Draft modifications to the amendments have been circulated by DWQ staff that may soften some of the hard edges of
the amended rules. For example, DWQ may be willing to exclude only CAMA coastal wetlands (instead of all
jurisdictional wetlands) from impervious surface calculations. Required vegetative buffers would remain 50 feet wide,
but could include wetlands areas, pursuant to circulated draft changes. DWQ has proposed a clarification that the
threshold for a stormwater permit for a commercial project should be the addition of 10,000 square feet of built upon
area, not simply the disturbance of 10,000 square feet of land. Additionally, certain exemptions from the rules have
appeared in recent drafts that would provide relief from the rules for projects with existing Section 401 water quality
certifications, existing coastal stormwater permits, or where statutory or common law vested rights have been
established. Urban waterfront projects may be exempt from the vegetative buffer requirement in draft modifications.
Adding to the regulatory labyrinth, draft modifications would incorporate a 2006 DWQ guidance memorandum
addressing the proper interpretation of the phrase “common plan of development.” Other potential modifications
relate to the amount of stormwater that must be managed on-site and the devices for such management.
At this point, it still remains unclear how the debate will be resolved. Compromise bill language may be debated in
legislative committees in the coming weeks. Language recently added to the governor’s budget bill may complicate
matters as well. This language would require DENR to establish a pilot program that would exempt those projects
from the coastal stormwater requirements that meet certain engineering requirements for stormwater management.
General assembly staffers are confident that some compromise will be worked out, so interested parties should expect
some action by the end of the short session. However, suffice it to say that regardless of how the debate is resolved,
the true meaning of the final rule provisions will be known only to those that participated in the process.
Update on Sandbag Enforcement and Policy Changes
by Eric Braun and Charlotte Mitchell
The use of sandbags to protect against coastal erosion is at the center of a long running battle still being waged
among coastal development stakeholders. This discussion has been on-going for years, as the Coastal Resources
Commission (“CRC”) and stakeholders have wrestled with the issue of how long and in what circumstances sandbags
should remain in place, particularly those bags that have been in place since the late 90s.
North Carolina generally prohibits hardened erosion control structures such as seawalls, shoreline hardening, and
sand-trapping devices. The temporary use of sandbags to protect structures threatened by erosion is an exception to
this general prohibition, but the sandbag rule places a time limit on the use of sandbags. When the time limits were
first imposed, the time periods were presumed to be sufficient to allow for the relocation of the threatened structure
or the reversal of a short term erosion event. However, history shows that relocation is simply not a practical
alternative. In addition, many sandbagged properties are located in Inlet Hazard Areas where the erosion
threatening the structures is not related to short term unpredictable events, but rather is severe and commonly
predictable. Finally, and perhaps most significantly, the removal deadlines in the rule do not provide a realistic
length of time for a community to plan and implement a long-term solution to erosion, such as beach nourishment.
Under the current rule, sandbags were to be removed from approximately 150 properties by May 2008. In many
cases, removing sandbags will result in the loss of homes and other buildings to the sea and would deprive property
owners of the reasonable use of their property. Removing sandbags from these properties does not address the
larger issue of shoreline erosion response. Instead, removing the sandbags passes the threat of erosion from one
property owner to the next, as property that was once located inland becomes oceanfront. In fact, conditions along
many areas of the coast suggest that erosion will immediately threaten private and public property if the existing
sandbag line is removed.
In the months leading up to the May 2008 deadline, staff from the Division of Coastal Management (“DCM”)
presented the CRC with information regarding the number of sandbagged properties subject to the May removal
deadline. Until last month, the CRC appeared committed to enforcing the deadline, and DCM staff generally refused
to consider amending the sandbag rule based on the CRC’s steadfast position. In an effort to force the CRC to
reconsider its position, our Firm filed a petition for rulemaking seeking to increase the length of time sandbags may
remain in place and to take into account the realities of the time required to plan and implement a long-term erosion
solution, such as a beach nourishment or inlet relocation. The petition also sought to treat sandbags located in Inlet
Hazard Areas differently from sandbags located elsewhere. DCM staff agreed with several points in the petition,
objected to others, and recommended that the CRC deny the petition. The CRC heard the petition in May and
rejected the petition as a whole. However, the CRC unanimously directed staff to collaborate with Kennedy
Covington to work on amending the sandbag rule to address some of the issues raised in the petition.
At this point, given that the CRC has expressed a willingness to reconsider its sandbag policy, it could be that North
Carolina is moving toward a more reasonable approach that ties the use of sandbags to the implementation of a
community’s long term plan, or at least that reflects the lessons we have learned over the past decade regarding the
realities of coastal erosion processes and implementing projects that respond to these processes in an effort to protect
the property rights at stake. The new rule may buy property owners and the communities in which they live sufficient
time to pursue a solution to their erosion problems. While property owners and their communities must step up and
take control of planning and implementing long-term solutions, the state must also adopt a policy to facilitate the
process. Ultimately, a rule that establishes clear and realistic expectations for the circumstances and timeframes
under which sandbags are permitted and promotes long-range planning is in the best interest of all coastal
Proposed Water Management and Drought Legislation
by Stanford Baird and Charlotte Mitchell
Governor Easley is currently pushing water management and drought legislation that would broadly increase state and
local authority to regulate water use and conservation during periods of drought. Currently pending in both chambers
of the General Assembly are bills that could significantly impact the regulatory regime currently applicable to water
use. The proposed legislation would require the Environmental Management Commission to adopt rules establishing
minimum water conservation measures that would be implemented during periods of “severe,” “extreme” or
“exceptional” drought, as designated by the state’s Drought Management Advisory Council. Because the water
conservation regulations would be triggered by the designation of the Drought Management Advisory Council, the
determination of drought status by the Council could become extremely important and subject to debate.
The minimum water conservation regulations to be adopted by the EMC would then be implemented by local
governments providing water and by large community water systems. Such large systems are defined in the bill as
those systems with 1,000 or more connections or regularly serving more than 3,000 individuals. The bill would
require local governments to implement the conservation measures or to adopt and implement local ordinances that
are at least as stringent as the state measures when such jurisdictions are designated as being in “severe,”
“extreme,” or “exceptional” drought.
Another significant provision in the proposed legislation provides that the water conservation regulations could be
applied not only to water system customers, but also to owners of private water supply wells. To the best of our
knowledge, this is the first attempt by the state to limit the volumes of water drawn from private water supply wells.
While the stated aim of this provision has been to give local governments the authority to regulate private residential
wells used for landscape irrigation, the language of the bill is so broad as to apply to farm wells, dedicated drinking
water wells, and commercial and industrial wells. This could potentially impact the use and value of water supply
wells installed by industry for contingency water supplies.
Regarding specific provisions of the conservation regulations, the legislation provides that, in areas that have been
designated as in “exceptional” drought for more than sixty (60) days, potable water could not be used for purposes
that could be served by reclaimed or recycled water. Thus, if reclaimed water were available in a given area for
irrigation or non-contact cooling water for example, such reclaimed water would have to be used in lieu of potable
water. Additionally, draft revisions to the bill would expressly permit certain uses of untreated gray water, such as for
watering trees, shrubs, and inedible plants.
The draft legislation also puts additional responsibilities on local governments. Local governments and large
community water systems must have a local water supply plan that is approved by DENR. Previously, plans were
required to be submitted, but were not specifically approved or denied by DENR. New requirements for such plans
would include water audit and leak detection programs and planned interconnection to other water systems. Local
governments also must require separate water meters for new in-ground irrigation systems. Additionally, local water
plans must specify how the water system intends to address future water needs when 80% of the system’s available
water supply has been allocated to current and prospective users. Failure to have an approved plan or failure to
implement a leak detection and repair program could jeopardize eligibility for state water infrastructure funds.
Another noteworthy provision of the proposed legislation would transfer all of the water emergency powers of the EMC
to DENR itself. DENR’s stated motivation for this is to streamline the process in emergency situations.
A drought stakeholder working group has convened to discuss revisions to the proposed legislation, which has the
support of the Governor and key legislators. The Governor has urged the General Assembly to take action in earnest
on the bill this short session, given the persistent drought conditions in the state. We believe that the General
Assembly will take action on a revised bill in the coming weeks.
Bank On It: Will Entrepreneurs Cash In On New Wetlands Mitigation Rules?
by Charlotte Mitchell
In March of this year, the U.S. Army Corps of Engineers (the “Corps”) issued new regulations shifting federal policy on
compensatory mitigation for impacts to wetlands and other surface waters. Most significantly, the new rule
establishes a preference for the use of private mitigation bank credits. Spurring the new policy direction are the
assurances associated with mitigation banks—including approved mitigation plans and certain financial assurances—
that must be in place before any mitigation credits can be sold and the fact that mitigation banking has become a
reliable and verifiable market-based method of wetlands mitigation.
By way of background, the Clean Water Act (“CWA”) prohibits impacts to certain wetlands, streams, and other surface
waters unless authorized by a permit issued by the Corps. The CWA requires that steps must be taken to avoid and
minimize impacts, and for unavoidable impacts, compensatory mitigation is required. Compensatory mitigation is
accomplished through the following three ways: 1) purchase of mitigation credits from mitigation banks, which are
entities that have created mitigation credits through traditional means such as restoration, creation, or preservation of
wetlands, streams, or other aquatic resources; 2) payment to in-lieu fee mitigation programs (usually administered by
a governmental entity) that will conduct restoration activities; and 3) permittee-responsible mitigation, in which
restoration or preservation is provided at the impact site or elsewhere in the same watershed. In North Carolina, the
in-lieu fee program sponsor is the Ecosystem Enhancement Program.
Notwithstanding the new regulations, federal policy remains firm in requiring developers to adhere to the traditional
sequence of avoidance of impacts first, minimization second, and mitigation third. However, federal officials say that
mitigation banking has matured into a viable, and often ecologically preferable, approach to mitigation. The ecological
preference for mitigation banks stems from the fact that these projects typically involve large tracts of wetlands,
whereas project-specific, on-site mitigation results in the creation or protection of smaller, isolated wetlands. The
larger tracts provide habitat for species that would not be supported by smaller wetlands areas and are also more
resistant to storm events that may render ineffective the smaller mitigation projects.
In response to the new rule, a bill—H2502 and S1885—with the short title “Promote Private Compensatory Mitigation”
is currently under consideration by the North Carolina General Assembly. This bill sets forth participation in a private
wetlands mitigation bank as the first option toward fulfilling any compensatory mitigation requirement. Further, the
bill limits participation in the North Carolina in-lieu fee program to those situations where participation in a private
wetlands mitigation bank is not an option.
Although the new federal rule has not yet resulted in a major shift in the wetlands mitigation marketplace, those with
expertise in this area have their collective ear to the ground and say that the rush to establish new mitigation banks
may be coming. The current wetlands mitigation climate presents an opportunity for both existing and prospective
wetland mitigation bank developers, especially when one considers the growth and land development projected in our
state and along the coastal counties in particular.
About Us
Equipped with an experienced team of real estate, environmental and land use attorneys, we can help you navigate the increasingly
complex and contentious world of coastal development regulations. Effective representation requires a thorough knowledge of the
legal, intergovernmental, and political environments in which you operate. We pride ourselves on retaining attorneys who are active
in local governmental and business affairs and have experience serving on various local government boards and commissions,
including boards of adjustment, airport authorities and planning commissions. We have handled development and land use matters
all along the Coastal Carolinas, including recent matters in Brunswick, New Hanover, Carteret, Beaufort, Washington, Currituck and
Dare Counties.
This newsletter is published as a service to clients and others interested in real estate development issues. The information provided
herein is general in nature and should not be relied upon as legal advice as to specific factual situations. Our coastal development
group welcomes your comments or inquiries about this newsletter or about any specific matters you may wish to discuss with us.
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