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Contractor Liability: Wetland Drainage and Pollutant Discharge

Having a solid understanding of the federal and state wetland laws that impact a land improvement contractor’s clients adds an immense amount of value to the contractor’s services. Equally as important, a good understanding of wetland laws helps minimize or eliminate the liability risk faced by a contractor’s business operation when working in or near wetlands subject to protection or regulation.

Whether a contractor working on behalf of a landowner or client can be held liable for draining, filling, impacting, or discharging a pollutant into a wetland depends on whether the wetland is subject to one of several state and federal laws that protect and regulation wetlands.

There are three federal wetland laws that a land improvement contractor should always be cognizant of:  (1) Clean Water Act; (2) National Wildlife Refuge System Administration Act; and (3) the Food Security Act of 1985.

Clean Water Act:  The Clean Water Act (33 U.S.C. §§ 1251, et seq.) states that, except for actions for which a person has a permit or the action is exempt under the Act, “the discharge of any pollutant by any person shall be unlawful.”  Pollutants are defined to include “dredged spoil . . . discharged into water.”  In our article published in the Feb./Mar. 2014 edition of this newsletter, we discussed the federal agencies recent efforts to require a Section 404 permit from the Army Corps to install drain tile of any-size in a wetland subject to the Act’s jurisdiction. Likewise, the EPA is bringing civil enforcement actions against contractors and landowners who install drainage tile in a jurisdictional wetland without the necessary permit. Because the Clean Water Act statute prohibits “any person” from discharging a pollutant, a contractor working on behalf of a landowner client is subject to the same civil and criminal enforcement penalties as the landowner. Civil penalties under the Clean Water Act can reach up to $75,000 per day: $37,500 per day of violation of the Clean Water Act, and an additional $37,500 per day that the contractor and landowner do not comply with the Administrative Compliance Order.

As discussed in our other article in this newsletter, the EPA and Army Corps have recently taken efforts to expand the wetlands which they claim are under the Clean Water Act’s jurisdiction. A recent statement by the St. Paul District Regulatory Branch Chief for the Army Corps informed wetland delineators that all wetlands in the prairie pothole region are “jurisdictional” under the new agency rules. Land improvement contracts should carefully analyze the potential that their project includes a discharge of a dredged or fill material, or other pollutant, into a jurisdictional wetland and consider going through the tedious, formal permitting process to protect themselves from significant Clean Water Act liability.

U.S. Fish and Wildlife Service Easements:  Another federal law of concern for land improvement contractors installing drain tile on agricultural lands is the National Wildlife Refuge System Administration Act (16 U.S.C. §§ 668dd–668ee). The Act states that all lands and waters administered by the Secretary of the Interior as wildlife refuges, areas for the protection and conservation of fish and wildlife threatened with extinction, wildlife ranges, game ranges, wildlife management areas, or waterfowl production areas are referred to collectively as the “National Wildlife Refuge System.”  This includes all wetlands covered on agricultural ground by a federal U.S. Fish and Wildlife Service easement.

The Act states that “no person shall knowingly disturb, injure, cut, burn, remove, destroy, or possess any real or personal property of the United States, including natural growth, in any area of the System.” Most property owners will know if their land is subject to a Fish and Wildlife Service easement, but to be certain, a contractor or landowner can check whether a conservation easement is recorded at the county recorder’s office. Fish and Wildlife Service easements can be recorded as far back as 1964. In our experience, enforcement actions by the Fish and Wildlife Service for draining wetlands covered by an easement is typically brought against the current landowner. However, similar to the Clean Water Act language, the federal law states that “no person” shall injure wetlands protected by the Act; therefore, contractors could potentially be criminally liable for installing drain tile that violates the Fish and Wildlife Service easement agreement.

Swampbuster:  Another federal law, familiar to land improvement contractors working with landowners and farm operators enrolled in the federal farm program, is the Swampbuster provisions of the Food Security Act of 1985 (16 U.S.C. §§ 3801 et seq.), most recently amended by the Agricultural Act of 2014 (“2014 farm bill”). Unlike the Clean Water Act or U.S. Fish and Wildlife Service easements, violations of this law only impact the landowner and farm operator.

Swampbuster conditions the receipt of farm program benefits and, under the 2014 farm bill, federal crop insurance premium subsidies, on compliance with two key provisions:  a participant is ineligible for farm program benefits and crop insurance subsidies (1) in any year in which he or she produces an agricultural commodity on a wetland converted after December 23, 1985; or (2) by converting a wetland after November 28, 1990 to make production of an agricultural commodity possible. While the land improvement contractor’s business might not be liable for violating these provisions, a contractor can add great value to his or her services by understanding the Swampbuster provisions and ensuring the agricultural clients have followed the Swampbuster requirements. For more information on Swampbuster compliance, see our article in the Oct./Nov. 2013 edition of this newsletter.

Public Waters Wetlands and Wetland Conservation Act:  Minnesota has two state laws that are aimed at protecting Minnesota’s wetlands and have a policy objective of ensuring no net loss of wetlands within this state. Minnesota’s public waters law (Minn. Stat. § 103G.221) prohibits draining wetlands designated as “public waters” without a permit authoring its drainage, which is conditioned on replacing the wetland with wetlands that will have equal or greater public value. A permit is also needed from the Minnesota Department of Natural Resources for any work in a public waters wetland that will change or diminish the course, current, or cross section of any public waters by any means, including filling, excavating, or placing of materials in or on the beds of public waters. Similarly, the Wetland Conservation Act (Minn. Stat. §§ 103G.222-.2372) requires a project proponent to submit a replacement plan to the applicable local government unit for any wetland draining, excavation, or filling activity that is not exempt from the Act under Minnesota Rules Chapter 8420.0420.

Minnesota Statutes section 103G.2212 specifically prohibits an agent or employee of another, which includes land improvement contractors, from draining or filling a wetland unless the agent or employee has obtained a signed statement from the property owner stating that the wetland replacement plan required for the work has been obtained or that a replacement plan is not required.  The statute also requires the agent, employee, or contractor to mail or email the statement to the local government unit with jurisdiction over the wetland.

The Minnesota Board of Water and Soil Resources developed a form titled Landowner Statement and Contractor Responsibility for Work in Wetlands or Public Waters which can be used to comply with the requirements in 103G.2212. A contractor who follows the procedure set out above and completes the applicable form will be protected from liability for violating the public waters law or the Wetland Conservation Act. Failure to comply with this requirement can subject a contractor to criminal penalties for failing to obtain the property signed statement, in addition to subjecting that contractor to liability for violating the State public waters law and Wetland Conservation Act.

It is important to remember that there are multiple agencies, both in state and federal government, with jurisdiction to protect or at least regulate draining, filling, impacting, or discharging pollutants into wetlands. Understanding the permitting and procedural requirements for compliance with each law can help expedite the project process and minimize liability to both your business and your client.

© 2014 Rinke Noonan