Burdensome rule changes move forward despite tough economy
While a lot of people eagerly await the next big-ticket summer blockbuster, the movie I am most looking forward to this year is director Oliver Stone's follow-up to his 1987 classic, "Wall Street," called, "Wall Street: Money Never Sleeps," to be released later this year.
The title of the sequel got me thinking about a critical area affecting the construction and development industry: regulations, which like money, also never sleeps.
As we are finishing Year Three of the worst real estate markets in history, it may come as a surprise to learn that regulations continually get updated regardless of the economic realities faced in the marketplace.
Two areas of regulation that deserve particular attention are new nationwide regulations governing stormwater at construction sites and efforts to regulate greenhouse gas emissions. Changes to stormwater regulations are the most tangible and familiar to those in the construction industry, so it should come as no surprise that the U.S. Environmental Protection Agency proposed and passed a nationwide standard for construction sites of 10 acres or more in December 2009. The new standard would require strict and costly monitoring and reporting requirements in order to ensure compliance with the turbidity standards. It would first be implemented on sites of 20 acres or more in 2011 and then apply to 10 acre sites by 2014.
Believing that the new standard would be cost prohibitive, the EPA stated during the rulemaking that the new standard would add $937 million annually to construction costs, whereas the U.S. Small Business Administration released its own estimate totaling almost $10 billion. A coalition of the National Association of the Homebuilders, SBA and the Association of General Contractors filed various legal challenges. including appeals and motions for reconsideration of the changes. On Aug. 13, the EPA requested the court's permission to void its new regulations and let the EPA return to the drawing board. We can expect the new nationwide stormwater guidance to be adopted sometime over the next 18 months if the court grants the request – precisely the moment the construction and development industry should be in recovery.
While the changes to stormwater regulations may be dramatic, it is the specter of having a completely new regulatory arena that should give those of us in the development and construction industry pause. The Western Climate Initiative is a movement by various states in the Western U.S. and Canada to come together with a regional regulatory framework to combat greenhouse gas emissions and thus global warming. Numerous legislative actions, executive orders and regulatory rules continue to pass to ensure the integrity of this movement despite the recession's impact on the industry.
Over the past several years, local projects have been bombarded with requests by protection opponents under the State Environmental Policy Act to require mitigation for projects that increase greenhouse gases. The requests stem not only from the gases released during construction, but also the continual impact of automobile traffic and the energy used to heat and cool buildings. Mitigation for these impacts will become the norm in the Pacific Northwest in a couple of years. Seattle and King County already require mitigation on some projects.
So despite the great recession's impact on real estate, regulations continue to cascade forward, clouding the future of a development industry trying to claw its way to recovery.
James Howsley is a partner in Miller Nash LLP's Vancouver office. His practice focuses on land use, and government affairs. He can be reached at james.howsley@millernash.com or 360.699.4771.
