## FINAL REPORT

RESULTS OF THE U.S. ENVIRONMENTAL

PROTECTION AGENCY REGION 5

REVIEW OF

MICHIGAN DEPARTMENT OF

ENVIRONMENTAL QUALITY’S

SECTION 404 PROGRAM

May 2008ii Table of Contents

Introduction.......................................

................................................... ......................................... 1

L EGAL S TANDARDS FOR EPA’ S P ROGRAM R EVIEW

................................................... .................. 1

H ISTORY OF M ICHIGAN ’ S CWA S ECTION 404 P ROGRAM

................................................... ......... 2

C ONDUCT OF EPA’ S P ROGRAM R EVIEW

................................................... ................................... 2

R ESULTS OF EPA’ S P ROGRAM R EVIEW

................................................... ..................................... 3

SECTION 1: ANALYSIS OF LEGAL AUTHORITIES .......... ............................................... 5 Legal Authority Concerns

................................................... ................................................... .. 5

J URISDICTION

................................................... ................................................... ..................... 5

P ERMIT E XEMPTIONS

................................................... ................................................... ....... 11

P ERMITTING A UTHORITIES

................................................... .................................................. 1 8

C OMPLIANCE WITH CWA S ECTION 404(b)(1) G UIDELINES

................................................... . 22

E NFORCEMENT C ONCERNS

................................................... .................................................. 2 8

I NDIAN L ANDS

................................................... ................................................... ................. 31

E FFECT OF N EWLY -P ROMULGATED R ULES

................................................... .......................... 32

N OTICE OF WHICH L EGAL P ROVISIONS C ONSTITUTE M ICHIGAN ’ S P ROGRAM ......................... 33 Analysis of Effect of State Takings Law on Program Implementation .................................... 3 4

SECTION 2: ASSESSMENT OF PROGRAM ADMINISTRATION... ............................... 36 Assessment of Program Implementation for Compliance with the State Program Regulations

................................................... ................................................... ........................ 36 Subpart C -Permit Requirements .....................

................................................... .................. 36 Subpart D - Program Operation......................

................................................... .................. 42

S UBPART F

- F

EDERAL O VERSIGHT

................................................... .................................... 51 Summary of Permit File Review......................

................................................... ...................... 53

Conclusions

................................................... ................................................... .................... 56 Comments on Michigan Department of Environmental Qu ality’s Wetland Identification Manual: A Technical Manual for Identifying Wetlands in Michigan ............................... 56 Assessment of Coordination under the Endangered Spe cies Act ....................................... 58 Analysis of Final Agency Permit Decisions in Admini strative Contested Cases..................... 60

S ECTION 404( B )(1) G UIDELINES

- B ACKGROUND D ISCUSSION ............................................... 61

P ROCEDURAL R

ULES AND B URDENS OF P ROOF

................................................... ................... 62

W ATER D EPENDENCY AND F EASIBLE AND P RUDENT A LTERNATIVES .................................... 63

P UBLIC T RUST AND E NVIRONMENTAL I MPACT R EVIEW UNDER P ART 301 ............................. 67

O THER C ONCERNS

................................................... ................................................... ........... 68

C ONCLUSION

................................................... ................................................... .................... 69 Enforcement and Compliance Review

................................................... ............................... 70

R EVIEW OF C ITIZEN C OMPLAINTS

................................................... ....................................... 71

E NFORCEMENT C ASE F ILE R EVIEW

................................................... ..................................... 72

S UMMARY OF C ONCLUSIONS

................................................... ............................................... 75

SECTION 3: RESPONSIVENESS SUMMARY OF COMMENTS..... ................................ 78

Discussion of Public Comments

................................................... .......................................... 78

S UMMARY OF C OMMENTS R ECEIVED FROM THE P UBLIC AND R ESPONSES BY EPA................ 78iii

P ETITION FOR P ROGRAM W ITHDRAWAL AND R ESPONSE

................................................... ..... 87 Summary of Comments from the U.S. Fish and Wildlife Service and Responses by EPA

................................................... ................................................... ............................................ 89 Summary of Comments from the U.S. Forest Service an d Responses by EPA........................ 94

SECTION 4: FINDINGS...............................

................................................... ......................... 95 Summary of Findings and Corrective Actions

................................................... .................. 95 Program Strengths..................................

................................................... ............................ 95 Program Deficiencies and Weaknesses................

................................................... .............. 95 Legal Authority ....................................

................................................... .............................. 96 Findings Related to Administration of the Permittin g Program ........................................ 103 Findings Related to Administration of the Enforceme nt Program ..................................... 106

Other Matters ......................................

................................................... ............................. 107 Appendix A.........................................

................................................... .................................... 1081



### Introduction

This document is the Final Report of the U.S. Envir onmental Protection Agency’s (EPA) review of the State of Michigan’s Clean Water Act (CWA) se ction 404 program within the State’s borders, including the administration of that progr am by the Michigan Department of Environmental Quality (MDEQ).

EPA received a request from the Michigan Environmen tal Council, submitted during February 1997, that EPA either ensure reform of Michigan’s C WA section 404 program or withdraw the State’s authorization to administer the program. E PA treated this request as a petition to withdraw program approval from the state of Michiga n and committed to performing an informal review of the allegations made by the Michigan Envi ronmental Council.

In addition to addressing the issues raised by the Michigan Environmental Council, EPA decided to perform a comprehensive review of the state of M ichigan’s CWA section 404 permitting program, including the state’s statutory and regula tory provisions governing the program as well as the State of Michigan’s administration of the pr ogram. 1

L EGAL S TANDARDS FOR EPA’ S P ROGRAM R EVIEW

According to 40 C.F.R. § 233.16(e), [w]henever the Regional Administrator has reason to believe that circumstances have changed with respec t to a state’s program, he may request and the State shall provide a supplemental Attorney Gen eral’s statement, program description, or

such other documents or information as are necessar y to evaluate the program’s compliance with the requirements of the Act and this part.” The No tice of the preliminary results of EPA’s review

describes how EPA conducted this review and the inf ormation which EPA considered. See 68 Fed. Reg. 772, 773 (Jan. 7, 2003).

In reviewing the updated state program information provided by Michigan in response to EPA’s request, EPA considered whether the program continu es to be consistent with the requirements of CWA section 404 and EPA’s implementing regulations at 40 C.F.R. part 233. These regulations specify certain circumstances in which EPA may deci de to withdraw a state’s authorization to administer the section 404 program if the State fai ls to take corrective action; these circumstances include a state agency’s failure to p roperly administer the section 404 program’s permitting or enforcement provisions and state cour t decisions or state legislative action striking

1 EPA decided to conduct a comprehensive review for a number of reasons, including the fact that there have been many changes to the relevant federal and State stat utes and regulations since 1984, the year that Mich igan assumed the CWA section 404 program. Among these changes w ere promulgation of final section 404 State Program Regulations, modifications to the Corps’ Nationwide Permit Program, adoption of a federal wetland deli neation manual, and changes in the scope of federal jurisdi ction as a result of litigation. In addition, a bo dy of State of Michigan judicial and administrative opinions relev ant to CWA section 404 permitting in Michigan has d eveloped.2

down or limiting State authorities. See 40 C.F.R. § 233.53(b). The regulations describe the procedures EPA will follow in the event that EPA in itiates withdrawal proceedings,. See 40 CFR § 233.53(c). 2

H ISTORY OF M ICHIGAN ’ S CWA S ECTION 404 P ROGRAM

On October 16, 1984, EPA approved the regulatory p ermitting program that the State of Michigan had submitted pursuant to the requirements and guidelines contained in subsections 404(g) and 404(h) of the Clean Water Act. 33 U.S.C . §§ 1344(g) and (h). See 49 Fed. Reg. 38948 (Oct. 2, 1984). The components of that appro ved program are described at 40 C.F.R. §233.70. The Michigan state agency authorized in 1 984 to administer the approved CWA section 404 program was the Department of Natural R esources. Later, the State of Michigan reorganized its agencies and transferred authority to administer the approved CWA section 404 program to MDEQ; EPA approved this transfer on Nove mber 14, 1997. 62 Fed. Reg. 61173. The State of Michigan was the first state in the na tion, and currently is one of only two states, authorized to administer the CWA section 404 permit ting program within its borders.

C ONDUCT OF EPA’ S P ROGRAM R EVIEW

On January 7, 2003, EPA published a Notice in the F ederal Register announcing that EPA had completed its preliminary review and had decided th at formal program withdrawal proceedings should not be initiated at this time, although EPA would request Michigan to take certain corrective actions. 68 Fed. Reg. 772 (Jan. 7, 2003 ). EPA’s detailed findings regarding all aspects of Michigan’s CWA section 404 program, as w ell as the corrective actions which EPA thought were necessary for Michigan to take, were c ontained in a document titled “Results of the U.S. Environmental Protection Agency Region 5 Revie w of Michigan Department of Environmental Quality’s Section 404 Program” (herei nafter, “Preliminary Report”), which is included in the public docket. Due to significant public interest in this matter, EPA provided public notice of and invited public comment on the Notice published on January 7, 2003, and on the Preliminary Report, for a period of 60 days.

EPA has reviewed the submitted public comments, has communicated further with Michigan, and has performed additional analysis both as promp ted by public comments and as otherwise appropriate. (Any additional information received by, and considered by, EPA since the Notice published on January 7, 2003 is contained in the pu blic docket for the current notice, including all public comments; a Responsiveness Summary of Co mments, which contains EPA’s responses to public comments, can be found in Section 3 of th is Final Report.) EPA has completed its review and analysis of all the materials and inform ation mentioned above, and EPA now issues its Final Report on the results of its review of th e State of Michigan’s CWA section 404 program.

2 40 C.F.R. § 233.53(c) provides the procedures for conducting program withdrawal proceedings.3

R ESULTS OF EPA’ S P ROGRAM R EVIEW

EPA concludes that initiation of program withdrawal proceedings is not warranted, at this time. EPA has, however, found deficiencies in the legal a uthorities establishing the approved CWA section 404 program and in the program’s administra tion. These deficiencies are identified in this Final Report, and relevant information is contained in documents located in the public docket that supports this Notice and the Notice published in th e Federal Register on January 7, 2003.

EPA has consulted with the State of Michigan about needed corrective actions. Those identified to date are mentioned throughout this Final Report and are summarized in Section 4 of this Final Report. The nature of these corrective actions inc lude regulatory action by MDEQ and legislative action by the Michigan legislature. EP A and the State of Michigan have agreed on a tentative schedule for implementing the identified corrective actions. As EPA and Michigan work together to effect the corrective actions, EPA may decide that it is appropriate to modify the corrective actions identified in this Final Report, and consequently it may become necessary to change the schedule contained in this Final Report. Any such changes will be documented and included in the public docket. Once MDEQ has compl eted the corrective actions EPA will make a final determination regarding the need to initiat e program withdrawal proceedings.

This Final Report is divided into four major sectio ns. Section 1 and Section 2 contain EPA’s analysis of the adequacy of Michigan’s CWA section 404 program, with Section 1 containing our analysis of the State’s legal authorities for admin istering the program and Section 2 assessing how MDEQ actually is administering and implementing the program. Section 2 includes an assessment of whether all the requirements identifi ed in the federal regulations for state assumption of a CWA section 404 program are being m et, a summary of EPA’s findings based on the permit file review, an assessment of Michiga n’s wetland delineation manual, a review and assessment of Michigan’s enforcement program, and a review of MDEQ’s contested case

decisions. Both Section 1 and Section 2 are more a bbreviated than the same sections found in the Preliminary Report. The Preliminary Report sho uld be consulted for additional background and details of EPA’s analysis. Section 3 summarize s the public comments which EPA received in response to the January 7, 2003, Notice, as well as EPA’s response to those public comments and to the Michigan Environmental Council’s 1997 pe tition for program withdrawal.

Section 4 of this Final Report summarizes EPA’s fin al findings upon completion of the informal program review. Section 4 identifies both strength s and deficiencies in Michigan’s CWA section 404 program. We note that, during the course of th is program review, Michigan took many steps - such as issuing new administrative rules - which effectively addressed several shortcomings that EPA had identified to Michigan. Section 4 ide ntifies corrective actions which the State of Michigan must take in order to ensure that Michigan’s CWA se ction 404 program continues to be consistent with, and no less stringent than, the Clean Water Act and the federal regulations promulgated pursuant to section 404 of the Act. As mentioned, EPA has discussed these corrective actions with Michigan -- as represented by MDEQ and the Michigan Attorney4

General’s Office (“Attorney General’s Office”) - an d has arrived at a schedule for implementing them; that schedule is presented in Section 4, as w ell.5



### SECTION 1: ANALYSI SECTION 1: ANALYSIS OF LEGAL AUTHORITIES S OF LEGAL AUTHORITIES

Legal Authority Concerns

To have an adequate and acceptable program for admi nistering CWA section 404 permits, a state must have authority to perform certain permitting a ctivities: “[t]o issue permits which apply, and assure compliance with, any applicable requirements of [section 404], including, but not limited to, the guidelines established under subsection (b) (1) of [section 404] . . . .” 33 U.S.C. § 1344(h). CWA section 404(h) specifies additional authorities a state must possess, including authorities related to enforcement of violations of the permitt ing program, coordination with federal agencies, and public involvement in the permitting process.

Part 233 of Title 40 of the Code of Federal Regulat ions specifies the criteria that EPA applies in reviewing State submissions during either initial a pproval of a program or a program review. A state must regulate all discharges of dredged mater ial or fill material into waters of the United States which the state regulates under CWA section 404(g)(1). 40 C.F.R. §233.1(b). When EPA is reviewing a state CWA section 404 program that h as been approved and has been operating, EPA examines whether the state is exercising its re levant legal authorities and is properly regulating all discharges. Although a State's CWA section 404 program may have a broader scope than, or may be more stringent than, the fede ral section 404 permitting program, the state program cannot be approved by EPA if that program i s narrower in its scope or less stringent in its requirements. 40 C.F.R. § 233.1(c) and (d).

Michigan relies on two statutes as providing the pr incipal authority for its CWA section 404 program: Part 303 of the Michigan Natural Resources and Environmental Protection Act (NREPA), entitled Wetlands Protection, and Part 301 of the NREPA, entitled Inland Lakes and Streams. Michigan has adopted administrative rules to implement both sections.

J URISDICTION

Fundamental to the issue of whether Michigan has ad equate legal authority for a CWA section 404 program is the jurisdictional scope of Michigan ’s program. The CWA prohibits the “discharge of any pollutant” except in compliance w ith specified sections of the Act. 3 42 U.S.C. § 1311(a). The CWA defines “discharge of a polluta nt” as “any addition of any pollutant to navigable waters from any point source[,]” and defi nes the term “navigable waters” as “the waters of the United States, including the territor ial seas.” 42 U.S.C. §§ 1362(12)(A), 1362(7). Section 404 asserts jurisdiction over “the discharg e of dredged or fill material into navigable

3 The term “pollutant” means “dredged spoil, solid waste, incinerator residue, sewage sludge, munition s, chemical wastes, biological materials, radioactive materials , heat, wrecked or discarded equipment, rock, sand, cellar dirt, and industrial, municipal, and agricultural waste...” 42 U.S.C. § 1362(6).6

waters.” 4 “[W]aters of the United States” is defined identi cally by both Corps and EPA regulations. See 33 C.F.R. § 328.3(a) and 40 C.F.R. § 230.3(s). Wat ers of the United States include waters which are part of a tributary system to navigable or interstate waters and wetlands that are adjacent to such waters. 5 The federal government also asserts that “waters of the United

States” include waters that have a connection with interstate commerce even if the water lies wholly within one state, is not navigable, or is is olated from other waters of the United States. Corps and EPA regulations state that “waters of the United States” include “[a]ll other waters such as intrastate lakes, rivers, streams (includin g intermittent streams), mudflats, sandflats, wetlands, sloughs, prairie potholes, wet meadows, p laya lakes, or natural ponds, the use, degradation, or destruction of which could affect i nterstate or foreign commerce...” 40 C.F.R. § 230.3(s)(3) and 33 C.F.R. §328.3(a)(3).

An application of EPA and Corps’ regulations known as the “Migratory Bird Rule” was put into question by the United States Supreme Court when, o n January 19, 2001, it issued an opinion in Solid Waste Agency of Northern Cook County v. U.S. Army Corps ,531 U.S. 159, 121 S.Ct 675, 148 L. Ed. 2d 576(2001) (“SWANCC”) In SWANCC , the Supreme Court held that the Corps could not rely solely on migratory birds’ use of certain non-navigable wa ters to assert that the Corps had CWA section 404 jurisdiction over those w aters if the waters were isolated from other waters (in SWANCC the waters were non-navigable water-filled gravel pits) and lay wholly within one state. 531 U.S. at 162, 167, 171. The Corps had asserted jurisdiction pursuant to 33 C.F.R. § 328.3(a)(3), because migratory birds used the water-filled gravel pits, so that degradation or destruction of those waters could af fect interstate commerce. In its SWANCC opinion, the Court declared that Congress had not a uthorized the Corps to invoke its “Migratory Bird Rule” to regulate the particular isolated wate rs at issue. SWANCC, 531 U.S. at 162, 167-

171. When the Court issued its decision in SWANCC , it merely struck down the Migratory Bird Rule as a basis for asserting CWA section 404 juris diction, SWANCC , 531,U.S. at 174. The decision did not invalidate the regulation establis hing CWA jurisdiction over “waters ..., the use, degradation, or destruction of which could affect i nterstate or foreign commerce” (40 C.F.R. 230.3(s)(3) and 33 C.F.R. §328.3(a)(3)), but the Co urt’s ruling did create uncertainty about the extent to which the CWA regulates non-navigable iso lated waters.

4 The CWA section 404 program assumed by the State of Michigan does not extend to all “waters of the U nited States” within the State’s borders. Under the CWA, waters over which a state can assume jurisdiction do not include “waters which are presently used, or are susceptibl e to use in their natural condition or by reasonabl e improvement as a means to transport interstate or foreign commerce shoreward to their ordinary high water mark . . . including wetlands adjacent thereto”. 42 U.S.C. §1344(g); 4 0 C.F.R. §233.70. Nor does Michigan's CWA section 404 program extend to waters of the United States locat ed in Indian country, as discussed later in this Fi nal Report. Consequently, this discussion of jurisdiction shoul d be read with recognition that Michigan's program does not over

all waters of the United States that are located wi thin Michigan's borders. 5 Under federal law, wetlands are “adjacent” if the y are “bordering, contiguous, or neighboring,” and adjacent wetlands can be “separated from other waters of the United States by man-made dikes or barriers, natur al river berms, beach dunes and the like”. 40 C.F.R.§ 230.2 (b); 33 C.F.R. §328.3(c).7

Since SWANCC ’s issuance, however, a large body of federal case law developed which narrowly construed SWANCC , holding that the Court only addressed isolated wa ters and did not change CWA jurisdiction over other categories of wa ters, such as tributaries and adjacent wetlands. For example, numerous courts held after SWANCC that the CWA protected waters that had a hydrological connection to a navigable-i n-fact water and thus were part of a tributary system to navigable and interstate waters. These c ourts ruled that a hydrological connection could be formed by man-made or natural ditches or w ater courses, and further held that such a hydrological connection was sufficient to establish CWA jurisdiction even if the distance between the water at issue and the navigable-in-fac t water spanned several miles. EPA consistently adhered to these positions in federal litigation. 6

The “hydrological connection” basis for asserting C WA jurisdiction was reviewed by another Supreme Court decision in June 2006. The definitio n of “waters of the United States” as it relates to jurisdiction under the CWA had been chal lenged in two separate cases, Rapanos v.

United States and Carabell v. United States . These two cases were consolidated for consideration by the Supreme Court. (For ease of r eference these consolidated cases will be referred to as the Rapanos case) In a June 19, 2006, decision, the Supreme Court addressed the issue of what bodies of water are subject to CWA ju risdiction, specifically by determining under what circumstances a non-navigable tributary or its adjacent wetlands can be considered “waters of the United States.” Rapanos v. United States , 126 S.Ct. 2208; 165 L.Ed. 2d 159; 2006 U.S. LEXIS 4887; 74 U.S.L.W. 4365 (2006). In the Rapano s decision, the Supreme Court justices issued five separate opinions, with no single opini on constituting a majority of the Court.

Four justices in a plurality opinion concluded that federal agency regulatory authority should extend only to “relatively permanent, standing or c ontinuously flowing bodies of water” connected to traditionally navigable waters, and to “wetlands with a continuous surface connection to” such relatively permanent waters. R apanos, 126 S.Ct. at 2225, 2226-2227. The plurality opinion also suggested in a footnote that “relatively permanent” waters could include “seasonal rivers, which contain continuous flow dur ing some months of the year but no flow during dry months,” and “streams, rivers, or lakes that might dry up in extraordinary circumstances, such as drought.” Rapanos , 126 S.Ct. at 2221, note 5.

Justice Kennedy did not join the plurality’s opinio n but instead authored his own opinion which found the plurality’s interpretation of the scope o f the CWA to be “inconsistent with the Act’s text, structure, and purpose.” Rapanos , 126 S.Ct. at 2246. Justice Kennedy concluded tha t
wetlands are “waters of the United States” “if the wetlands, either alone or in combination with similarly situated lands in the region, significant ly affect the chemical, physical, and biological integrity of other covered waters more readily unde rstood as ‘navigable.’” Rapanos , 126 S.Ct. at

6 Immediately after SWANCC was issued, EPA and the Corps posited that the decision invalidated only th e Migratory Bird Rule, and left 33 C.F.R. § 328.3(a)( 3) intact. (See January 19, 2001, Memorandum by EP A’s General Counsel and the Corps’ Chief Counsel)8

2248.

In a dissenting opinion, four justices concluded th at EPA’s and Corps’ interpretation of “waters of the United States” was a reasonable interpretati on of the CWA. The dissent also noted that when there is no majority opinion in a Supreme Cour t case, controlling legal principles may be derived from the principles espoused by five or mor e justices. Rapanos, 126 S.Ct. at 2265. In litigation following the Rapanos decision, the U.S. has consistently adopted this approach, arguing that federal regulatory jurisdiction under the CWA exists if either the plurality’s or Justice Kennedy’s standard is met. See, e.g., United States v. Johnson , 467 F.3d 56, 60 (1 st Cir. 2006); ), cert. denied , 76 U.S.L.W. 3009 (U.S. Oct. 9, 2007) (No. 07-9); United States v. Cundiff

, 480 F. Supp. 2d 940, 944 (W. Dist. Ky. 2007) (appea l pending_).

On June 5, 2007, the Corps and EPA issued guidance on the scope of “waters of the U.S.” regulated under the CWA in light of the Rapanos dec ision. This federal guidance discusses waters addressed in Rapanos and their status as wat ers of the United States. This CWA jurisdiction guidance also allows the federal agenc ies to assert jurisdiction over non-navigable, not relatively permanent tributaries and their adja cent wetlands where such tributaries and wetlands have a significant nexus to traditional na vigable waters. The significant nexus test includes consideration of both hydrologic and ecolo gical factors and must document that the waters in question, when considered together, have more than a speculative or insubstantial effect on the chemical, physical, and biological integrity of a traditional navigable water.

EPA considered the CWA , associated regulations, re levant case law and the Rapanos guidance when determining to what extent the laws of the Sta te of Michigan -- particularly Part 303 and Part 301 of the NREPA -- assert jurisdiction over w aters of the United States. EPA’s concerns as to whether Michigan's jurisdiction is at least as c omprehensive as the scope of the federal CWA jurisdiction and the resolution of those concerns r e discussed below.

Part 303 asserts jurisdiction over the following ca tegories of wetlands: wetlands of any size which are contiguous to the Great Lakes or Lake St. Clair, an inland lake, or pond, or a river or and stream § 324.30301(p)(i). How the term “Contig uous” is defined under Michigan law and applied by MDEQ is critical to our analysis. “Cont iguous” is defined by Michigan Admistrative Code, R.281.921(1)(b), as meaning that a wetland mu st have a permanent or intermittent direct surface water connection, or must be located within 500 feet of an inland lake or pond, or a river

or stream or within 1000 feet of a Great lake or La ke St. Clair. The Michigan Administrative Code,R281.921(1)(iii) and R281.924(4)(d) require th at both surface and ground water connections be considered when determining whether a water is “[c]ontiguous.” EPA has determined that Michigan’s treatment of the concept of “[c}ontiguous” is comparable to the concept of “hydrological connection” as explained b y federal case law predating the Rapanos

decision..

Wetlands which are not contiguous to the above list ed water bodies are regulated if the particular9

wetland is larger than 5 acres in size and is eithe r 1) located in a county with a population of at least 100,000, or 2) located in a county with a pop ulation of less than 100,000 and MDEQ has performed a wetland inventory in that county and ce rtified the inventory. Section 324.30301(p)(ii). Michigan acknowledged EPA’s conc ern that the State did not regulate noncontiguous wetlands of any size located in a county with a population under 100,000 and acknowledges tht the State did not perform the wet land inventories that both Michigan and EPA contemplated would be promptly performed by Michiga n after it assumed the CWA section 404 program in 1984. To address this concern, during t he course of this program review, Michigan made the commitment to perform wetland inventories in all counties with less than 100,000 residents. In January 2007, Michigan certified tha t the State had completed the wetland inventories and identified all “non-contiguous” wet lands larger than 5 acres that are located in counties with less than 100,000 residents. These w etlands are now “automatically” under the state’s jurisdiction.

Now that this inventory is complete, the only categ ory of wetlands that MDEQ fails to assert MDEQ “automatic” jurisdiction over under Part 303 i s non-contiguous wetlands that are 5 acres or less in size, located anywhere in Michigan. Due to Michigan’s broad definition of the term “[c]ontiguous,” there is a relatively small sub-setof Michigan’s wetlands, those that are noncontiguous and 5 acres or less, that are not automa tically regulated by MDEQ. EPA was concerned that some of these non-contiguous wetland s may be waters of the U.S. under federal law, but Michigan law failed to assert jurisdiction over these waters.

If a wetland does fall into this category of wetla nds that are not automatically regulated , under Part 303 MDEQ can take steps to assert what the Mic higan Attorney General’s Office calls “regulatory jurisdiction” over that wetland. MDEQ is authorized by Part 303 , §324.3.301(d), to make a determination that the protection of a non-c ontiguous wetland, regardless of size, can be regulated provided MDEQ makes an individual determi nation that protection of the wetland is

“... essential to the preservation of the natural resour ces of the state from pollution, impairment, or destruction...” § 324.30301(d)(iii). The Michigan Administrative Code defines “essential to the preservation of the natural resources of the st ate” to include one or more of the following: 1)the wetland supports state or federal endangered or threatened plants, fish or wildlife specified in § 36501 of the 1994 Mich. Pub. Acts 457; 2) the wetland represents what the state has identified as a rare or unique ecosystem; 3) the we tland supports plants or animals of an identified regional importance; or 4) the wetland p rovides groundwater recharge documented by a public agency. EPA has determined that any wetla nds that would be federally regulated wetlands, but are 5 acres or less and would not aut omatically be regulated under Part 303, may none the less be regulated under the expansive fact ors listed in § 324.30301(d)(iii).

EPA ‘s review of the jurisdictional scope of Michig an’s CWA section 404 program finds that the class of wetlands deemed jurisdictional under the s tate of Michigan’s definition of contiguous is comparable to the scope of wetland that are jurisdi ctional under the federal requirement of a continuous surface connection to a relatively perma nent tributary. The broad definition of10

contiguous would also encompass the majority of adj acent wetlands and all tributaries considered jurisdictional under federal law. Even with the br oad definition of contiguous there may be a small number of wetlands that are not automatically jurisdictional under Michigan law; however, those non-contiguous may be regulated by MDEQ if pa rticular biological or hydrological factors are present at the particular wetland. When consid ered together, the broad definition of “[c]ontiguous” and the expansive factors which can be considered by MDEQ when making a determination regarding whether a wetland is “essen tial to the preservation f the natural resources of the state” result in Michigan’s scope of CWA sec tion 404 jurisdiction being at least a broad in scope as federal CWA jurisdiction.

Now we turn to Part 301, which generally grants MDE Q the authority to regulate discharges of dredged or fill material to inland lakes, ponds, ri vers and streams. EPA had concerns that an exception to jurisdiction arose because Part 301's definition of an “inland lake or stream” does not include any inland “lake or pond that has a sur face area of less than 5 acres.” Section 324.30101(f). We consulted with MDEQ and the Attor ney General's office, and the reach of this exception appears to be limited. If the inland lak e or pond is connected to a river or stream, MDEQ considers the size of the entire interconnecte d water network- not only the size of the lake or pond in determining whether the 5-acre thre shold is met. This practice by MDEQ means that the State treats non-navigable water bodies th at have a hydrological connection to a navigable-in-fact or interstate water body as subje ct to section 404 jurisdiction, consistent with federal law. Part 301, as applied by MDEQ, creates jurisdiction that is at least as broad in scope as federal jurisdiction because for water body comp lexes that do not meet the 5-acre threshold and for sub-5-acre lakes and ponds that are not con tiguous to a river or stream (i.e .isolated), the State has jurisdiction over discharges connected to one of three types of activities described in s§ 324.30102(f) and (g): 1) activity to “[c]onstruc t, dredge, commence, extend, or enlarge an artificial canal, channel, ditch, lagoon, pond, lak e or similar waterway where the purpose is ultimate connection with an existing lake or stream [of more than 5 acres]”; 2) activity to “[c]onstruct, dredge, commence, extend, or enlarge an artificial canal, channel, ditch, lagoon, pond, lake or similar waterway . . . where any part of the artificial waterway is located within 500 feet of the ordinary high-water mark of an existing inland lake or stream [of more than 5 acres]; and 3) activity to [c]onnect any natural or artific ially constructed waterway, canal, channel, ditch, lagoon, pond, lake, or similar water with an existi ng inland lake or stream [of more than 5 acres] for navigation or any other purpose.” For these re asons, EPA concludes that Michigan's jurisdiction over lakes and ponds is at least as br oad in scope as federal CWA section 404 jurisdiction, even in light of the exception provid ed by § 324.30101(f).

EPA also had been concerned that Part 301's jurisdi ction over inland lakes and streams does not extend to streams that flow intermittently. CWA se ction 404 and its regulations explicitly extend jurisdiction over intermittent streams. 40 C.F.R. § 232.2; see also 40 C.F.R. §§ 122.2(c). In addition, the Rapanos guidance highlights that intermittent streams may be jurisdictional under the plurality standard (e.g. seasonal streams) or u nder the Kennedy standard, where they have a significant nexus to a traditional navigable water. MDEQ and the Attorney's General’s Office11

assert that they have interpreted, and will continu e to interpret, Part 301's terms “inland lake or

stream” 7 as encompassing intermittent streams. Section 324 .30101(f). 8 Specifically, the State of Michigan interprets the statutory definition's refe rence to “visible evidence of continued flow or

continued occurrence of water” as including streams that flo w intermittently. As long as a bed

and banks exist within which water can flow and as long as there is visible evidence that flow exists at times even if the flow is interrupted (i. e. flow does not have to be continuous), the State of Michigan will assert jurisdiction. In light of the State of Michigan’s reasonable interpretation of its regulations, EPA concludes that Michigan’s j urisdiction over intermittent streams is consistent with federal jurisdiction.

P ERMIT E XEMPTIONS

Turning to another area bearing on Michigan’s legal authorities, we now address Michigan’s permitting exemptions as compared to the federal pe rmit exemptions of CWA section 404(f)(1); how the exemptions apply is further delineated in t he federal regulations at 40 C.F.R. § 232.3(c).

One difference between federal and Michigan law is that Part 301 and Part 303 do not have provisions that are identical to the CWA’s “recaptu re provision”. Section 404(f)(2) mandates that, even when section 404(f)(1) exempts a dischar ge, a permit must be obtained if the discharge is “incidental to any activity having as its purpos e bringing an area of the navigable waters into a use to which it was not previously subject, where t he flow or circulation of navigable waters may be impaired or the reach of such waters be reduced” . Yet, when we examined Part 301, we found that provisions which seem to be at least as string ent as CWA section 404(f)(2) are contained in § 324.30102(d) and (e); these provisions require th at a Part 301 permit be obtained for activities which “[c]reate, enlarge, or diminish an inland lak e or stream” or “[s]tructurally interfere with

the natural flow of an inland lake or stream.” Par t 303, which concerns wetlands, does not contain similar provisions with respect to altering the flow or circulation of waters in a wetland. In practice, though, as long as MDEQ ensures that o nly activities which truly meet an allowed exemption forego the wetlands permitting process, a nd as long as section 324.30305(2)(e) is changed as discussed later in this Final Report to clarify that discharges which are associated with changing an area from one exempted use to anot her exempted use are themselves not exempt and require a permit, the absence of an explicit recapture provision in P art 303 does not

render the State of Michigan’s CWA section 404 permitting program in adequate. This conclusion is based in part on EPA’s analysis of th e federal government’s use and invocation of the recapture provision in actual permitting situat ions.

7 Part 301 defines the terms “inland lake or stream ” as a water body possessing “definite banks, a bed , and visible

evidence of a continued flow or continued occurrenc e of water.” 8 EPA here notes that Part 303's jurisdiction exten ds to all wetlands that are “contiguous” to an inla nd lake, pond, or stream, and Part 303's administrative rules allow c ontiguity to be established by a wetland's connecti ng to an inland

lake or stream via “a seasonal or intermittent dire ct surface water connection.” R 281.921(1)(b)(ii).12

The first federal exemption is in CWA section 404(f )(1)(A) (it is codified at 40 C.F.R. § 232.3(c), and exempts discharges of dredged or fill material “from normal farming, silviculture, and ranching activities). Michigan’s equivalent is fou nd in Part 303, at § 324.30305(2)(e), and applies to “farming, horticulture, silviculture, lumbering and ranching activities.” EPA asked MDEQ whether the presence of horticulture and lumbering activities in the list of exempted activities expands the universe of section 404-exempted activi ties. MDEQ responded in November 2003. MDEQ stated that the term “horticulture” refers to the production of non-food crops (e.g., flowers), and so encompasses a subset of section 40 4-exempted farming activities. MDEQ stated that the term “lumbering” refers to a subset of sil viculture: it is that part of a forestry operation that involves harvesting the trees to produce lumbe r; moreover, MDEQ asserts that § 324.30305(2)(e) lists the single activity that is exempted by that provision’s reference to “lumbering”: “harvesting for the production of . . . forest products”. At this time, MDEQ does not propose to issue any guidance on these issues or to promulgate any new administrative rules under Part 303. Because MDEQ’s analysis of its regulatio ns is reasonable, and because EPA is not aware of any actual permitting cases involving lumb ering or horticultural operations which have had results inconsistent with 40 C.F.R. § 232.3(c), MDEQ need not take any further administrative action. EPA recommends, however, th at MDEQ incorporate the analyses it provided to EPA into either internal MDEQ procedure s or Part 303 administrative rules, in order to ensure that, in practice, the terms “horticultur e” and “lumbering” are applied in a manner that is consistent with the exemption of certain activities from federal jurisdiction by CWA section 404(f)(1)(A).

EPA also had concerns that Michigan’s permitting ex emptions at § 324.30305(2)(e) are broader in scope than the CWA section 404(f)(1)(A) federal exemptions because Michigan law does not expressly limit the lands where the exemptions appl y to areas where the exempted farming, silviculture, and ranching activities were establis hed prior to the occurrence of the discharges at issue. In delineating the scope of these federal s tatutory exemptions, the federal regulations explain that “to fall under this exemption” the nor mal farming, silvicultural, and ranching activities “must be part of an established (i.e., o ngoing) farming, silvicultural, or ranching operation, @

which can include fallow land. Federal regulation further explains that “[a]ctivities which bring an area into farming, silviculture or r anching use are not part of an established operation. An operation ceases to be established w hen the area in which it was conducted has

been converted to another use or has lain idle so l ong that modifications to the hydrological regime are necessary to resume operation.” 40 C.F. R. § 232.3(c)(1)(ii).

During this program review, MDEQ and the Attorney G eneral’s Office informed EPA that they interpret the § 324.30305(2)(e) exemptions so that, in reality, the exemptions apply only to areas where an exempt use already has been established an d is ongoing. MDEQ and the Attorney General’s Office had relied on a Michigan Court of Appeals decision in Huggett v. Dep’t of

Natural Resources ,(“Huggett”) 232 Mich. App 188, 590 N.W.2d 747 (199 8), as support for their position; the Huggett appellate court had looked to the legislature’s pu rpose in enacting Part 303, which was “to enable the state to assume authority to administer the federal Clean Water Act,”13

and on that basis had found that §324.30305(2)(e) “ must be enforced in accordance with, and be just as or more stringent than its federal counterp art.” Id. at 194-95. Thus, the Michigan Court of Appeals held that §324.30305(2)(e) only applied to areas already in established farming use. The Michigan Supreme Court in Huggett v. Dep’t of N atural Resources , 464 Mich. 711, 629 N.W.2d 915 (2001) affirmed the Court of Appeals’ co nclusion that the exemption did not apply

to activities undertaken to convert land to cranber ry production, but it did not accept the lower court’s rationale that Michigan’s wetland law had t o be interpreted to be no less stringent than the Clean Water Act. Of special concern to EPA is the Michigan Supreme Court’s ruling that the “farming exemption” contained in § 324.30305(2)(e) did not apply only in locations where there was an ongoing established farming (or ranching or silvicultural) operation. Id . at 721-22. While acknowledging this part of the Huggett decision, MDEQ and the Attorney General’s Office maintain that the basis for the Michigan Supreme Co urt’s holding in Huggett - that only the activities listed at § 324.30305(2)(e), such as plo wing and cultivating, and farming activities of “the same kind, class, character or nature,” are ex empted from permitting, id . at 722 - has the same effect as if the Michigan Supreme Court had he ld that § 324.30305(2)(e) explicitly imposed an ongoing and established use condition. That is because such typical farming (or ranching or silviculture) activities could not feasibly take pl ace anywhere but on an established farming area

and would not facilitate conversion of a wetland to a non-wetland.

While EPA finds that the specific holding of Hugget t , as pointed to by MDEQ and the Attorney General’s Office, does narrow the impact of the Hug gett court’s conclusion that § 324.3035(2)(e) exemptions are not restricted only to areas that ar e in established and ongoing use for farming (or ranching or silviculture), EPA still concludes that this exemption is broader than the comparable federal exemption. Thus, the State of Michigan mus t take corrective action by amending Part 303, pursuant to 40 C.F.R. § 233.53(b). And, in fa ct, MDEQ has agreed that it will seek such an amendment to limit the exemption of § 324.30305(2)( e) to areas of established agricultural operations. EPA thinks that the statutory amendmen t should specify that all § 324.30305(2)(e) exemptions apply only to discharges that occur in a n area which, at the time of the discharge, already is part of an established and ongoing farmi ng, silvicultural, or ranching operation, consistent with the CWA, applicable federal regulat ions, and relevant federal case law. To ensure that this new statutory provision is interpr eted consistently with the comparable section 404 exemption, a new administrative rule should cla rify that the “area” at issue is the specific area where the discharge is to occur; the bounds of the “area” where the exempted use must be ongoing and established should be consistent with r ulings on this subject of federal courts such as the Third Circuit Court of Appeals in United Sta tes v. Brace , 41 F.3d 117, 125-26 (3rd Cir. 1994) and cases cited therein.

In connection with these same state law exemptions, as compared to the federal exemptions of CWA section 404(f)(1)(A), EPA thinks that Michigan’ s current exemption is not sufficiently clear in barring discharges that will allow a chang e in use from one exempted use to another exempted use: § 324.30305(2)(e) provides “wetland a ltered under this subdivision shall not be used for a purpose other than a purpose described i n this section without a permit.” Federal law14

requires that for a discharge to be exempt it must be connected with the specific exempted use, must occur in an area where that specific use is on going and established, and must be related to an activity that is a normal activity for that spec ific use. The discharge cannot be in furtherance of trying to change from one use to another use, an d cannot be in furtherance of changing a

wetland to a non-wetland. See 40 C.F.R. § 232.3(d)(3)(ii) (stating that “minor drai nage” associated with farming, silviculture, and ranching “does not include drainage associated with the . . . conversion from one wetland use to another (f or example, silviculture to farming)”); see also 33 C.F.R. § 323.4 and Brace at 127-28.

The statutory amendment of § 324.30305(2)(e) which MDEQ will seek, as mentioned above, should explicitly remedy the language quoted in the preceding paragraph, so that the statute clearly proscribes discharges that would be connect ed with an exempted use which is not a use that is ongoing and established in the particular a rea of concern. In addition, it would be helpful to have the Attorney General’s Office issue an Atto rney General’s opinion stating that the § 324.30305(2)(e) exemptions, as amended, as well a s the other exemptions established by Michigan law (whether by Part 303, Part 301, or ano ther statute), shall be interpreted and applied by MDEQ to be as stringent as the comparable federa l exemptions. 9

9 It is EPA’s understanding that such an Attorney G eneral’s opinion would bind MDEQ, including MDEQ’s Office of Administrative Law Judges, to apply this legal i nterpretation in all permitting situations and in a ll enforcement

matters. Part 303 contains another exemption which appears t o exempt discharges that CWA section 404 does not exempt. Section 324.30305(2)(j) exempts f rom permitting requirements “[d]rainage necessary for the production and harvesting of agri cultural products if the wetland is owned by a person who is engaged in commercial farming and the land is to be used for the production and harvesting of agricultural products.” (Emphasis ad ded.) This provision could be read to exempt discharges associated with bringing a wetland into farming because the land being drained need not be in an established farming use, it merely nee ds to be owned by a commercial farmer who plans to begin farming it. Although the destructiv e impact on intact wetlands is limited by this exemption’s application only to wetlands that are n ot contiguous to a lake or stream and that have not been identified by MDEQ by “clear and conv incing evidence to be . . . necessary to be preserved for the public interest”, EPA still views this exemption as being broader than the CWA section 404 farming exemptions.

To address this drainage exemption issue, EPA belie ves Michigan must amend the statute to delete the exemption at § 324.30305(2)(j). MDEQ ha s agreed to seek the deletion of the exemption at § 324.30305(2)(j) by the Michigan leg islature.15

Section 404(f)(1) of the CWA contains another exemp tion for discharges conducted specifically “for the purpose of . . . maintenance of drainage d itches”. 33 U.S.C. § 1344(f)(1)(C). Federal regulation strictly limits this exemption to ditch maintenance activities, excluding ditch

construction activities. See 40 C.F.R. § 232.3(c)(3) and § 232.3(d)(3)(ii). Fu rthermore, the Corps has interpreted the concept of ditch maintena nce under section 404(f)(1)(C) as allowing the removal of accumulated sediment, debris, and ot her obstructions that, over time, have appeared in a drainage ditch, providing that such r emoval is not to alter a ditch’s original, asbuilt, contours and configuration. (Regulatory Gui dance Letter 07-02 issued by the Corps on July, 4. 2007)

. Discharges of dredged material associated with de epening and widening a drainage ditch beyond its original dimensions are n ot exempt from section 404 permitting requirements. See United States v. Sargent County Water Resource Dis t. , 876 F. Supp. 1090, 1098-99 (D. N.D. 1994) (evidence showed drainage di tch was merely “cleaned out” and maintained; because work did not constitute “improv ement” it was exempt from permitting.

Under Michigan law, three separate permit exemption s address drainage ditches. The exemptions are found at § 324.30305(2)(h), § 324.30 103(g), and § 324.30103(d). Section 324.30305(2)(h) exempts from permitting “[m]aintena nce, operation or improvement which includes straightening, widening, or deepening [pri vate agricultural drains and certain public drains] necessary for the production or harvesting of agricultural products.” Section 324.30103(g) exempts from permitting “[m]aintenance and improvement of all drains legally established or constructed prior to January 1, 1973 pursuant to the drain code of 1956 . . . except those . . . drains constituting mainstream portions of certain natural watercourses . . . .” Section 324.30103(d) exempts from permitting the “[c]onstru ction and maintenance of a private agricultural drain regardless of outlet.” On their face, each of these drainage ditch exemptions seem to be less stringent than CWA section 404(f)(1 )(C)’s drainage ditch exemption. While the Michigan drainage ditch exemptions are narrow in sc ope because they are limited to agriculturerelated drainage ditches and public drains, by appe aring to allow discharges associated with drainage ditch construction, operation, improvement , straightening, deepening, and widening, these exemptions give EPA concern that they render Michigan law less stringent than, and not consistent with, the CWA and regulations at 40 C.F. R. § 232.3(c)(3) and (d)(3)(i).

Turning first to the Part 303 exemption, § 324.3030 5(2)(h) exempts discharges associated with “[m]aintenance, operation or improvement which incl udes straightening, widening, or deepening” of identified drainage ditches, whereas CWA section 404(f)(1)(C) and its implementing regulations (33 C.F.R. § 323.4(a)(3) a nd 40 C.F.R. § 232.3(c)(3)) exempts discharges associated only with true “maintenance” of drainage ditches. Federal law clearly prohibits discharges which result from altering the original contours of a drainage ditch, as this is deemed an improvement to the drainage ditch or, in effect, a construction, rather than maintenance of the ditch that previously existed. See United States v. Sargent County Water

Resource Dist. , 876 F. Supp. 1090, 1098-99 (D. N.D. 1994); United States v. Sargent County

Water Resource Dist. , 876 F. Supp. 1081, 1087-88 (D. N.D. 1992); Regula tory Guidance Letter 87-7 issued by the Corps Aug. 17, 1987; see also Un ited States v. Huebner , 752 F.2d 1235, 1242-16

43 (7 th Cir. 1985). By authorizing drain “improvement” an d “straightening, widening, or deepening” of drains, Part 303 appears to allow alt eration of both the bottom elevations and widths of existing drains, which would render this statutory provision less stringent than CWA section 404 and its regulations.

MDEQ understands EPA’s concern on this point and ha s proposed to seek amendment of §324.30305(2)(h) to delete its reference to “straig htening, widening, or deepening”and clarify that the exemption is limited to true drain mainten ance activities. Additionally, MDEQ has proposed to promulgate rules under Part 301 that wi ll define the terms “maintenance” and “improvement” in a manner consistent with the feder al definition of the term maintenance. EPA also requests an Attorney General’s opinion address ing these same issues, and asks that such an opinion discuss the interrelationship of this Part 303 exemption with Michigan’s Drain Code.

As stated above, Part 301 appears to contain two ex emptions for discharges related to work on drainage ditches: one at § 324.30103(d) -- “a perm it is not required for . . . [c]onstruction or maintenance of a private agricultural drain regardl ess of outlet”, and one at § 324.30103(g) -- discharges associated with “[m]aintenance and impro vement of” identified drainage ditches. The Attorney General’s Office and MDEQ explain, how ever, that these provisions do not create permit exemptions for discharges to waters of the U nited States which are associated with construction of private agricultural drains or alte ring the original dimensions of public drains; rather, both provisions apply to the construction a nd improvement of drains that exist in uplands, and thus exempt only associated discharges that are made to uplands. This view is grounded in

the doctrine of in pari materia , which can be invoked when the language of a statu te is ambiguous, Tyler v. Livonia Public Schools , 459 Mich. 382, 392 (1999), and which directs that when two statutes relate to the same subject matter or share a common purpose they should be harmonized -- read together -- if they do not conta in unavoidable conflicting provisions, People

v. Webb , 458 Mich. 265, 274 (1998); see also Michigan Oil Co. v. Natural Resources Comm’n

, 406 Mich. 1, 33 (1979). Applying the doctrine to §324.30103(d), the Attorney General’s Office explains that because Part 303 does not exempt the actual discharge to wetlands of materials dredged during the construction of a private drain, and because Part 303 establishes permitting rules for discharges to wetlands, § 324.30103(d) mu st be read to exempt only the construction of private drains on uplands (and the discharge of ass ociated dredged materials to uplands). Similar reasoning applies with respect to the language of § 324.30103(g). Furthermore, MDEQ has agreed to promulgate a rule under Part 301 which wi ll define the term “improvement” so that it is limited to true maintenance. To fully satisfy EPA’ s concerns on these points, EPA requests that the Attorney General’s Office issue a written Attor ney General’s opinion setting forth how the

doctrine of in pari materia applies so that these apparent discharge exemption s in Part 301 do not, in fact, exempt discharges to waters of the Un ited States in situations other than drain maintenance which would be exempted by CWA section 404(f)(1)(C).

Part 303 contains an exemption for discharges neces sitated by the “maintenance or improvement” of public roads. MDEQ now proposes to issue new administrative rules17

applicable to this exemption, in order to express M DEQ’s historic interpretation of the exemption, which is consistent with a similar feder al law exemption. The Michigan statutory road work exemption restricts coverage as follows: the work must occur within the existing rightof-way; the work cannot entail increasing the right -of-way, adding extra lanes, or deviating from the road’s existing location; and the work should b e done in a manner that minimizes harm to wetlands. § 324.30305(2)(k). By comparison, the c orresponding federal exemption explicitly allows only maintenance of roads 10 and excludes any discharges which would change “th e character, scope or size of the original fill desig n”. 40 C.F.R. § 232.3(c)(2). Although MDEQ asserts that it always has interpreted § 324.30305( 2)(k) to not exempt work that would widen a road, a late 2000 decision by a state circuit court held otherwise; the circuit court ruled that a project which raised a roadbed and widened it by as much as 13 feet, causing discharges to adjacent wetlands, fit within the plain language of § 324.30305(2)(k). 11 MDEQ’s immediate response to this decision was to issue interim guid ance reiterating its position that road widening is not exempt. MDEQ has notified EPA that it inten ds to issue a new administrative rule interpreting the exemption along those same lines; EPA will work with MDEQ to ensure consistency with federal law. 12

EPA also is concerned about the permitting exemptio ns at § 324.30305(2)(l) and (m) for activities, including discharges, in connection wit h maintenance, repair, operation, and construction of utility lines and gas and oil pipel ines on condition that the discharger “assure that any adverse effect on the wetland will be minimized .” Although Michigan notes that the Corps’ Nationwide Permit 12 allows similar utility mainten ance activities without an individual permit, Michigan’s permit exemptions are not equivalent to Nationwide Permit 12 because a discharger must give advance notice to the Corps if the work e ntails a certain aerial extent and because Nationwide Permit 12 establishes specific limitatio ns on the manner of the work’s performance (such as allowing only temporary placement of sidec ast materials into wetlands). Moreover, there is a legal and functional difference between statutorily exempting an activity from permitting -- as Michigan law does for these discha rges -- and allowing that activity to be covered by a general permit.

In the Preliminary Report (see page 14), EPA stated its preference that this issue be addressed by

10 Specifically, the federal exemption mentions not “roads” but “bridge abutments or approaches, and t ransportation

structures”. 11 In its written opinion, the Oceana County Circui t Court noted the parties’stipulation that the cent er line of the road was not changed, the right-of-way was not incr eased, and a standard-size extra lane was not added . On this factual basis, the Circuit Court held that there wa s no deviation from the road’s existing location, a nd, after refusing to consider the scope of the comparable federal exe mption, the court found the project to be exempt un der state law. Oceana County Bd. of Road Comm’rs v. Michigan Dep’ t of Env’tal Quality, No. 00-1520-CE (Dec. 22, 2000 ) (unpublished). MDEQ disagrees with various conclus ions by the Circuit Court, including: that widening a road by up to 13 feet was not a deviation from the road’s e xisting location, and that a functional extra lane was not added. MDEQ also notes that the decision was highly fact-s pecific and is not precedential. 12 This issue was not discussed in the Preliminary Report.18

deletion of § 324.30305(2)(l) and (m). At that tim e, MDEQ agreed to implement an acceptable alternative of promulgating administrative rules pr escribing best management practices to be followed by persons engaging in these activities an d discharges and requiring that those persons give advance notice to MDEQ of their proposed activ ities. Since the Preliminary Report was issued, however, MDEQ has agreed to seek to have Pa rt 303 amended so that § 324.30305(2)(l) and (m) explicitly exempt only those activities tha t are exempted by the CWA; MDEQ also has agreed to issue best management practices for those activities that are exempted from permitting and to require advance notice to MDEQ that is simil ar to the notice required by Nationwide

Permit 12.

The final exemption of concern to EPA is the exempt ion for the construction of iron and copper mining tailings basins and water storage areas, fou nd in Michigan wetlands permitting law at § 324.30305(2)(o). Federal law has no equivalent. In response to EPA’s request that this permit exemption for tailings basins and water storage are as be removed from Part 303, MDEQ agreed, in Spring 2002, to seek the deletion of § 324.30305 (2)(o) by the Michigan legislature. 13

P ERMITTING A UTHORITIES

Directing our attention next to the process of a St ate agency’s issuance of permits under the authority of CWA section 404, we look at the federa l regulations promulgated at 40 C.F.R. §§

233.20 and 233.34. Section 233.20 mandates that th e authorized State agency will not issue a CWA section 404 permit in certain circumstances, in cluding when the permit would not comply with the requirements of the CWA, its regulations, or the section 404(b)(1) Guidelines and when objections to issuance of a permit have been made b y EPA Regional Administrator but have not been resolved. The prohibitions in 40 C.F.R. § 233 .20 were designed to ensure that state section 404 programs comply with certain minimum conditions and contain procedures which prevent the issuance of permits that do not meet those mini mum conditions. Section 233.34(a) of 40 C.F.R. requires that a Director of a state agenc y implementing a CWA section 404 program review all permit applications for compliance with the section 404(b)(1) Guidelines or equivalent State environmental guidelines. The Director is to render a decision on a permit application, according to 40 C.F.R. § 233.34(c), only when revie w of the application is complete and all comments have been considered; the Director’s permi t decision shall be a written determination, in accordance with the record and applicable permit -issuance regulations, and shall state a

rationale for the decision.

In general, Michigan’s laws and regulations ensure compliance with 40 C.F.R. §§ 233.20 and

13 MDEQ and the Attorney General’s Office also prov ided reasons why, in practice, this exemption rarel y can be invoked (implicitly relying on the doctrine of in pari materia). First, tailings basins almost always create an area of open water greater than 5 acres, thus requi ring a permit under Part 301. If by chance a taili ngs basin had a surface area of less than 5 acres, it likely would be part of a larger complex of waters and wetlands and thus still subject to Part 301's permitting requirements.19

233.34. EPA discusses its few concerns below.

Section 324.30307(2) had provided that a Part 303 p ermit will issue if MDEQ “does not approve or disapprove the permit application within the tim e provided by this subsection [90 days from hearing or 90 days from filing of complete permit a pplication], the permit application shall be considered approved, and the department shall be co nsidered to have made the determinations required by section 30311.” 14 Effective September 10, 2004, the Michigan legisl ature removed

this constraint from Part 303 and inserted it in Pa rt 13 of the NREPA. See §§ 324.1301(f)(viii) and 324.1307(1) and (4). 15 Despite these changes by the Michigan legislatur e, EPA’s analysis of

this issue remains the same as it was in the Prelim inary Report. In the past, EPA has been concerned that when such permit processing time pro visions cause a permit to issue automatically MDEQ would not have made a written pe rmit determination with a written rationale documenting how the permit will comply wi th the requirements of the CWA and the section 404(b)(1) Guidelines, as required by 40 C.F .R. § 233.34(c). But MDEQ and the Attorney General’s Office are of the opinion that when the t erms of former § 324.30307(2) (and of recently effective §§ 324.1301(f)(viii) and 324.130 7(1) and (4)) were triggered, a “state-only Part 303 permit is issued: and no CWA section 404 permi t is issued. They assert that in § 324.30307(2)’s language the department shall be c onsidered to have made the determinations required by section 30311" cannot be interpreted to mean that MDEQ also shall be considered to have made the determinations required by federal la w. EPA will defer to MDEQ and the Attorney General’s Office’s reasonable interpretati on of Michigan law. In addition, EPA and MDEQ have agreed to include a statement to this eff ect in the interagency Memorandum of Agreement (EPA-MDEQ MOA). EPA also requests that a ny “state-only” permit issued under Part 303 contain a statement which notifies the per mittee that authorization under section 404 of the CWA is not being granted.

14 See also Admin. Rules for Wetland Protection, R 281.923(3), and cases such as Harkins v. Dep’t of Natural Resources, 206 Mich. App. 317 (1994), which indicate that MDEQ’s deadline for making a permit decision within 90 days of receiving a complete application is firm. 15 While the Michigan legislature also imposed a ne w and even shorter processing time of 60 days for P art 301 permits applications, if MDEQ does not make a d ecision within those 60 days the result is that MDE Q owes the applicant money; a Part 301 permit is not deemed to issue. §§ 324.1301(f)(vi) and 324.1307(1) and (3)

.20

EPA has told MDEQ of its concern that Part 301's pr ovisions for “minor permits” (which operate similarly to “general permits” under the federal re gulations) do not ensure that MDEQ determines or has a procedure for determining that each minor permit category “will cause only minimal adverse environmental effects when performe d separately and will have only minimal

cumulative adverse effects on the environment” as d irected by 40 C.F.R. § 233.21(b). MDEQ has agreed to implement an administrative rule chan ge ensuring that the potential for cumulative adverse effects will be considered before any new m inor permit category is established.

Whereas CWA section 404(h)(1)(A)(ii) dictates that a state may not issue a permit with a term that exceeds five years, this time limitation is no t currently expressed in Michigan law. MDEQ has agreed to promulgate administrative rules under Part 301 and Part 303 that document the five-year limit on the term of section 404 permits it issues. 16

EPA has noted that Part 301 and Part 303 and their implementing rules do not reference all of the permit conditions that 40 C.F.R. § 233.23 states sh ould be included in any State-issued section 404 permit (for example, the conditions stated in 4 0 C.F.R. § 233.23(c)(5), (c)(7), and (c)(8)). EPA and MDEQ will work together to ensure that such permit conditions become incorporated into future permits which MDEQ issues jointly under CWA section 404 and either Part 301 or Part 303. Similarly, EPA and MDEQ will work togeth er to ensure that procedures exist so that, within an adequate time period before MDEQ makes a permit decision (including decisions to modify and revoke permits), all interested parties receive notice of permit applications and are given adequate time to review the application, to s ubmit meaningful comment, and to request a public hearing see Section 2; Subpart D - Program Operation -of this F inal Report, pages 41-42 (discussion of timing of public notices).. This wil l include working to ensure that members of the general public have an opportunity to learn about t he permit application and determine if they would like to submit comments. These changes shoul d allay EPA’s concerns that occasionally in the past a sufficient notice period may not have be en provided for the public to submit meaningful comments on Part 301 and Part 303 permit applications, and sufficient guidance may not have been provided as to the criteria that MDEQ would apply when making a permit

decision.

The actual date that a permit is issued can become important in particular permit matters. The federal regulations at 40 C.F.R. § 233.35(b)(1) sta te that a section 404 permit issued by an authorized State agency shall be effective on the d ate when both the State agency Director and the applicant shall have signed the permit. Neithe r Part 301, Part 303, nor their administrative rules clearly specify the effective date of permits . To remedy this, MDEQ has agreed to amend

the administrative rules under both statutes to cla rify that a permit becomes effective on the date when the permit has been signed by both the applica nt and MDEQ Director.

16 MDEQ reports that permits are issued for terms o f no more than five years.21

An authorized State must have authority to modify o r terminate (revoke) for cause a section 404 permit which that State has issued. 33 U.S.C. § 40 4(h)(1)(A)(iii). The CWA provides a noninclusive list of three grounds that qualify as “ca use” for modifying or revoking a section 404 permit. EPA promulgated regulations on this same s ubject, at 40 C.F.R. § 233.36, which added the option for a state agency to suspend a permit. That federal regulation also listed additional grounds for permit modification, revocation, or sus pension, at 40 C.F.R. § 233.36(a), and it required a State agency to develop procedures to ef fect permit modification, revocation, or suspension if the grounds listed at § 233.36(a) are found to exist. 40 C.F.R. § 233.36(c). 17

In the Preliminary Report, we found that MDEQ had n o authority under Part 301 or its administrative rules to modify permits. We then te ntatively concluded that the CWA requires that a state agency administering a section 404 per mitting program have authority to modify permits. We urged MDEQ either to seek Part 301's a mendment to authorize permit modifications or, at a minimum, to promulgate admin istrative rules to this effect. (See Preliminary Report, page 18). Upon further conside ration of the text of the CWA and 40 C.F.R. § 233.36(c), however, we now withdraw that tentativ e conclusion. CWA section 404(h)(1)(A)(iii), uses the word “or” in the phrase “[t]o issue permits which . . . can be

terminated or

modified for cause”. See also 40 C.F.R. § 233.36(c) (“[t]he Director shall devel op procedures to modify, suspend or revoke permits . . . .”) Consequently, as long as Part 301 has adequate procedures to revoke permits, there is no inconsistency with the CWA.

With respect to MDEQ’s authority to revoke Part 301 permits for cause, § 324.30107 states “[a] permit is effective until revoked for cause,” and g oes on to state that “[a] permit may be revoked after a hearing for violation of any of its provisi ons, any provisions of this part, any rule promulgated under this part, or any misrepresentati on in [sic] application.” Part 301

administrative rules do not address what constitute s “cause” to revoke a CWA section 404 permit that is issued pursuant to Part 301's procedures. Consequently, EPA remains concerned that Michigan law could be read as limiting MDEQ’s abili ty to revoke a Part 301 permit (issued as a joint CWA section 404 permit) only in the three sit uations mentioned by § 324.30107. Although EPA, in the Preliminary Report, stated its preferen ce that this perceived problem be addressed by the Michigan legislature’s amending § 324.30107 to add all of the grounds for revoking a permit

17 The grounds for permit modification or revocatio n set forth in CWA section 404(h)(1)(A)(iii) are: violating a permit condition; obtaining a permit by misrepresentation or after failing to disclose all relevant facts; a change in conditions requiring a temporary or perma nent reduction or elimination of discharges. In th e State Program Regulations, EPA addresses a state’s author ity to modify or revoke permits in 40 C.F.R. § 233. 36, and lists the “factors to [be] consider[ed]” by the state age ncy when it decides whether or not to modify or rev oke a permit;

this list includes two more “factors to consider” t hat are not included in CWA section 404(h)(1)(A)(ii i): receipt of significant information relating to the activity au thorized unavailable when a permit was issued but w hich would have justified denial of the application or additio nal permit conditions; and revisions to statutory o r regulatory authority. 40 C.F.R. § 233.36(a). Section 233.36( c) then provides that the state agency “Director sh all develop procedures to modify, suspend, or revoke permits if he determines cause exists for such action (§ 23 3.36(a)).”22

provided by the CWA and its regulations, MDEQ has p roposed promulgating a new administrative rule. EPA agrees that this is an ap propriate corrective action and will monitor MDEQ’s successful application of the new rule.

Turning to Part 303, we find that it authorizes MDE Q to modify or revoke permits on the three grounds listed by CWA § 404(h)(1)(A)(iii), and reit erated by 40 C.F.R. § 233.36(a), but Part 303 at § 324.30313(2) does not list the two additional “factors to consider” that are listed in 40 C.F.R. § 233.36(a) See footnote 19). As Michigan law contains the three grounds listed in CWA section 404(h)(1)(A)(iii), however, the absence of two “factors to consider” that are listed in the federal regulation does not render Michigan law less stringent than federal law on this subject. Moreover, § 324.30313(2) clearly seems to give MDEQ the authority to identify

additional situations in which “cause” will exist t o revoke or modify a permit, in that it provides “[a] permit may be terminated or modified for cause , including . . . .”

C OMPLIANCE WITH CWA S ECTION 404(b)(1) G UIDELINES

During April 2000, MDEQ promulgated a new administr ative rule under Part 303:

R 281.922a is entitled “Permit application review c riteria.” This rule addresses many of the issues that EPA believes were unclear or worrying w hen this program review began. Perhaps the most important aspect of R 281.922a for this progra m review is that the rule provides standards for the wetland dependency test and feasible and pr udent alternatives analysis which largely

reflect how those criteria are established in the s ection 404(b)(1) Guidelines. EPA also appreciates that -- through R281.922a -- MDEQ pro vided standards and prescriptions on issues which include who bears the burden of establishing whether a feasible and prudent alternative to a proposed discharge exists, and who bears the burd en of proving that particular facts and circumstances support issuance of a permit. 18 Also during April 2000, MDEQ amended R 281.925 to provide more detailed standards as to wh at may be acceptable mitigation of adverse impacts to wetland values which would result from p ermitted discharges that otherwise have been designed to minimize adverse impacts to the gr eatest extent possible. MDEQ's efforts respond to many of EPA’s concerns regarding MDEQ’s authority “[t]o issue permits which “ (i) apply, and assure compliance with, any applicable r equirements of this section, including . . . guidelines established under subsection (b)(1) of t his section . . . .”, as required by 33 U.S.C. § 1344(h)(1)(A). 19 In the Preliminary Report, however, we stated our view that MDEQ needed

18 During January 2003, MDEQ promulgated new rules for contested case proceedings, R 324.1-324.85. One of these rules states that the petitioner “has the burden of proof and of moving forward unless ot herwise required by law”. R 324.64(1). 19 Federal regulations promulgated for approval of State programs reiterate that a fundamental prerequ isite for approval is the legal assurance that a State ag ency will not issue a section 404 permit that “does not comply with the requirements of the Act or regulations thereund er, including the section 404(b)(1) Guidelines (par t 230 of this chapter).” 40 C.F.R. § 233.20(a). At § 233.34, EP A explains that while a State may have its own envi ronmental review criteria, that criteria must be “equivalent” to the section 404(b)(1) Guidelines.23

to promulgate equivalent Part 301 rules. This view was due to the fact that MDEQ issues CWA section 404 permits pursuant to Part 301 for projec ts involving types of waters other than

wetlands. 20

We now agreeably note that, since the Preliminary R eport was issued, MDEQ has stated its intent to incorporate by reference the section 404(b)(1) G uidelines not only in the administrative rules for Part 301, but also in the administrative rules for Part 303. This corrective action will effectively address all of our remaining concerns a bout State law’s consistency with CWA section 404(h)(1)(A) and with the section 404(b)(1) Guidelines, which EPA promulgated in response. These rule changes will effectively requ ire that both permit writers and MDEQ ’s Administrative Law Judges (ALJs) apply the federal 404(b)(1) Guidelines as part of the Michigan permitting standards. Nonetheless, EPA wi ll remain alert to any permitting matters that develop in which balancing criteria override e xplicit bans on permits which are specified in the section 404(b)(1) Guidelines.

EPA is aware that MDEQ also is developing other new administrative rules and guidance to clarify other parts of the permitting process and t o guide applicants, reviewers, and decision makers in applying the statutory criteria and requi rements. For example, MDEQ Director has instructed MDEQ staff to develop guidance as to wha t geographical area must be considered when the criteria of feasible and prudent alternati ve locations for a project is applied. In re

Ocedek , No. 00-05-40 (Feb. 27, 2004).

Here, we wish to document current concerns that we have as to whether Michigan law is

20 Currently, the provision of Part 301 that is som ewhat comparable to the section 404(b)(1) Guideline s is found in Part 301's administrative rule R 281.814, entitled “Environmental Assessment”. R 281.814 sta tes that MDEQ shall not issue a permit unless MDEQ finds bot h that all existing and potential adverse impacts t o the

environment will be minimal and that no feasible an d prudent alternative exists. MDEQ staff and decis ion makers appear to utilize R 281.814 to implement the enviro nmental impact and pollution considerations set for th in § 324.30106; to determine the potential effects a p roject will have on all waters of the state and the uses of those waters; and to determine whether a project will cau se unlawful pollution or impair or destroy waters o r other natural resources of the state. While R 281.814 provides e nvironmental review standards that are similar to t hose in the section 404(b)(1) Guidelines, they are not quite th e same. One important shortcoming is that, althoug h R 281.814(2)(b) states that a specific project will n ot be permitted unless a feasible and prudent alter native is determined to be unavailable, no guidelines are pro vided for conducting an analysis of potential alter natives (or for making a decision as to whether a party did not bea r its burden of proof in establishing the availabil ity - or lack thereof - of acceptable alternatives). We note here, too, that in many contested case deci sions over the years the Office of Administrative H earings has interpreted R 281.814 as not requiring a feasible a nd prudent alternatives analysis if it is found tha t a project will have no environmental impact or a “minimal” environ mental impact; the rationale for this approach is t hat if a project would have no environmental impact there is no need to search for a less-environmentally harmf ul project that also is feasible and prudent. By contrast, 40 C.F.R. § 230.10(a)(1) requires that an analysis of practicable alternatives to a discharge into an aquatic site al ways occur. Provided that MDEQ forego the alternat ives analysis only in situations where there truly is no, or high ly minimal, adverse impacts to the environment, EPA does not find the different approach under Part 301 to be inconsi stent with federal law.24

consistent with the requirements of the section 404 (b)(1) Guidelines. Although MDEQ’s incorporation by rule of the section 404(b)(1) Guid elines should remedy all of these concerns, it seems advisable to document the fact that, in the p ast and to date, they have undermined Michigan law’s consistency with the federal CWA sec tion 404 program.

Under Part 303, there is no mandate that wetland de pendent projects be designed and implemented to have the least damaging impact on th e aquatic environment. Under federal law, not only must a practicable alternative project be performed if it exists, but whatever discharges are permitted - be they the discharges of the origi nal project or of a practicable alternative project - the potential adverse impacts of those discharges must be minimized. 40 C.F.R. § 230.10(d). We note that one criteria in § 324.30311(2)’s pub lic interest balance is the availability of

alternative locations and methods. 21 In many situations the existence of this criteria will compel an applicant with a wetland dependent project to fa shion the project so as to minimize adverse impacts on the environment, but there is no mandate that the applicant do so. If a contested case is pursued, the ALJ or MDEQ Director, likewise, may consider alternative locations and methods as part of § 324.30311(2)’s public interest balance and may even modify the project based on

those considerations. See Huggett , No. 90-09-257W (Mar. 31, 2005) (Director signific antly modified proposed project, largely based on determi nation that a feasible and prudent location was available, see pages 11-15); yet, again, nothin g in Part 303 requires that the project be modified to effectively minimize adverse impacts, as long as the proposed project - or even a modified project - when weighed in § 324.30311(2)’s public interest balance, is found to be in the public interest. Consequently, if an applicant chooses not to use an alternative location or method, this criteria will weigh against the projec t in the public interest review but will not alone determine the result of that review, nor will the p roject’s adverse environmental impact be minimized, as would occur if federal law alone was applied. As stated above, MDEQ proposes to incorporate the federal section 404(b)(1) Guidel ines - which contain this adverse impact minimization mandate into Part 303 by promulgating a new administrative rule. EPA believes that the most effective method of dealing with this issue of minimization would be to have Part 303 amended; we will, however, monitor how this par ticular matter is handled by MDEQ after the section 404(b)(1) Guidelines are adopted by rul e and we will seek an amendment to Part 303 only if adverse impacts of a permitted discharge ar e not minimized, as 40 C.F.R. § 230.10(d) requires.

Under both statutes, there also is a need to clarif y MDEQ's obligation to examine the cumulative effects of permitting a proposed activity when view ed in the light of the possibility that a number

21 Section 324.30311(4)(b) requires an applicant to show either that a project is wetland dependent or that a feasible and prudent alternative exists; if the f irst is shown, the second need not be. As a result , for a wetland dependent project, there need be no determination t hat a feasible and prudent alternative exists, see In re: Huggett, No. 90-09-257W (Mar. 31, 2005) (p. 39); rather, onl y § 324.30311(2)’s direction that feasible and prud ent
alternative locations and methods be considered in the public interest balance is applicable to wetlan d dependent projects25

of additional, similar activities will be, or may b e, performed in the future, consistent with 40 C.F.R. § 230.11(g). Under Part 303, considerati on of cumulative effects appears to be part of the “public interest” balancing to be conducted pur suant to § 324.30311(2). Yet, even when the Office of Administrative Hearings has discussed thi s criteria, 22 it often has discounted it or given it no weight. See e.g. , In re Taylor , No. 01-10-0049-P (Apr. 2, 2004) (ALJ concluded pr oject did not have “great” cumulative impact because there cu rrently was not heavy development of wetlands in area, despite testimony that wetland fi lling pressures were mounting); compare In re

Thomas , No. 99-10-1118-P, Mar. 15, 2004 (in light of MDEQ staff testimony that 75% of area wetlands had been lost and that MDEQ had concern th at the project could set precedent for future similar projects, the ALJ found no significa nt potential for cumulative impacts because no witness was aware of pending wetland filling propos als). Contested case decisions also have expressed the view that each project must be review ed on its own merits, leading an ALJ to conclude that MDEQ cannot properly deny one permit application out of a concern that new applications for similar projects will be submitted . E.g. , id .; In re Swies , No. 97-12-72 (Sept. 28, 1998). On the other hand, sometimes an ALJ will fi nd that a proposed project will have a negative cumulative impact due to evidence of other wetland fills in an area and the potential for setting a bad precedent if a specific discharge pro ject is permitted when an upland alternative is available (most recently, these concerns supported a permit denial in In re: Zielinski , No. 01-66- 0072-P (July 29, 2004); see also In re: Wagner , No. 96-1-67 (Apr. 14, 1997)). EPA contends that an administrative rule guiding application of the c umulative effects criteria, in a manner consistent with 40 C.F.R. § 230.11(g), would help M DEQ staff and decision makers to apply the criteria in a consistent fashion in all Part 303 pe rmitting matters, ameliorating any potential for arbitrary application of this criteria. A similar rule is needed for Part 301 because neither the statute nor existing administrative rules explicitl y reference the cumulative impact criteria; therefore, it is not a required element of Part 301 permitting analysis. See In re: Schenden , No. 94-10-733 (Mar. 31, 1998)).

Our final two substantial concerns as to whether Pa rt 301 and Part 303 and their administrative rules ensure that MDEQ-issued section 404 permits a lways will comply with the section 404(b)(1) Guidelines spring from the mandates of 40 C.F.R. § 230.10(b) and (c). The first federal regulation states that no discharge of dred ged or fill material shall be permitted if the discharge jeopardizes the continued existence of a species that is listed as federally threatened or endangered or if the discharge results in likely de struction or adverse modification of a listed species’ critical habitat. Subsection 230.10(c) ba rs the issuance of section 404 permits when the proposed discharge of dredged or fill material “wil l cause or contribute to significant degradation of the waters of the United States.” 40 C.F.R. § 2 30.10(c). The permitting authority’s determination of whether significant degradation wi ll result is to be based on factual considerations outlined at 40 C.F.R. part 230, subp arts B through G; the permitting authority is to consider whether significant degradation will be ca used either by individual or collective effects

22 EPA did not review particularly how MDEQ permitt ing staff apply this criteria26

of the activity.

Part 301 does not mention the specific concepts of jeopardy to federally threatened or endangered species and critical habitat, or significant degrad ation, and therefore does not state that these are grounds for denying a permit. The relevant provisi on is § 324.30106, which states, in part:

“In passing upon an application, the department sha ll consider the possible effects of the proposed action upon the inland lake or stream and upon waters from which or into which its waters flow and the uses of all such waters, in cluding uses for recreation, fish and wildlife, aesthetics, local government, agriculture , commerce, and industry. The department shall not grant a permit if the proposed project or structure will unlawfully impair or destroy any of the waters or other natura l resources of the state.”

To implement the environmental review criteria crea ted in § 324.30106, MDEQ promulgated administrative rule R 281.814, which requires that all existing and potential adverse effects of a project be determined, and which bars issuance of a Part 301 permit unless MDEQ finds both

that adverse effects to the environment will be min imal and that no feasible and prudent

alternative exists. 23 After reviewing MDEQ’s permitting activity and MD EQ Office of Administrative Hearing’s contested case decisions, it appears that R 281.814 is applied so that Part 301 permits are granted only if a project’s en vironmental harm is expected to be minimal. To date, this standard appears to have effectively ensured that MDEQ will not issue section 404 permits for non-wetland discharges pursuant to Par t 301 - that would contribute to the significant degradation of waters of the United Sta tes or that would jeopardize endangered or threatened species and their critical habitat. As of this writing, however, MDEQ is drafting new rules addressing the subject of how endangered spec ies are considered during Part 301 permitting. EPA welcomes this, and requests that t he rules clearly prohibit issuance of Part 301 permits which jeopardize both endangered and threat ened species and their critical habitat.

Turning to Part 303, EPA thinks that the statute an d its rules fail to bar the issuance of permits that jeopardize endangered species and their critic al habitats. We understand Michigan’s position to be that the language of § 324.30311 eff ectively ensures that no such permits are issued because subsection (1) says that a permit sh all not be issued unless an activity is “otherwise lawful” and because subsection (4) says that a permit shall not be issued unless it is shown that an unacceptable disruption will not resu lt to aquatic resources. Yet neither provision is equivalent to the strict protection for threaten ed and endangered species and their critical habitat that is provided by section 404(h)(1)(A)(i) and the section 404(b)(1) Guidelines: permits are barred if they would jeopardize threatened and endangered species or their critical habitats (whether or not those species are “aquatic”). In p articular, the “otherwise unlawful” language is

23 MDEQ contested case decisions have repeatedly he ld that if a project poses no environmental harm - or minimal harm - then R 281.814 is not to be applied when passing on a Part 301 permit application and t here is no

need to review alternatives.27

imprecise, and past pronouncements by MDEQ’s Office of Administrative Hearings construing this term gives no assurance that MDEQ’s proposed v iew - that the project would violate the federal (ESA) -- would be adopted. 24 With respect to any protection afforded by § 324.30311(4), not only is its scope limited to un acceptable disruption of “aquatic” resources, but in determining whether the disruption is “unacc eptable” the statute requires application of the balancing of public interest factors listed at § 32 4.30311(2). As mentioned above, MDEQ has committed to promulgating a new Part 303 rule which will incorporate the federal section 404(b)(1) Guidelines, including the bar to issuing permits which jeopardize the continued existence of a federally threatened or endangered s pecies or which likely would adversely impact critical habitat, 40 C.F.R. § 230.10(b)(3). This c orrective action may address EPA’s concerns on this point, but we will need to see how the new rul e is applied in practice, in combination with the public interest balancing mandated by § 324.303 11(2). If we observe that Michigan is issuing permits that would be barred under 40 C.F.R. § 230.10(b)(3) , then we will request that Michigan take additional corrective action (i.e., a mend Part 303).

With respect to whether Part 303 comports with the 40 C.F.R. § 230.10(c)’s bar on issuing permits when discharges of dredged or fill material “will cause or contribute to significant degradation of the waters of the United States”, EP A’s concern stems from the balancing criteria contained in § 324.30311 and the inclusion of the e conomic value of the proposed project to the applicant, the community (e.g., increased tax reven ue), and other individuals. Under

Part 303 a permit cannot issue if a project is not in the “public interest” or if a project will have an “unacceptable adverse impact on aquatic resource s”, but it is possible that the economic value of a proposed project would be so great that signif icant harm to the aquatic environment is outweighed, causing MDEQ to find that the project i s in the public interest and that the disruption to aquatic resources is not unacceptable . Disagreeing with EPA, MDEQ and the Attorney General’s Office have averred that MDEQ ha s adequate legal authority to choose not to issue permits that will cause or contribute to sign ificant degradation of aquatic resources, and that MDEQ exercises this authority.

In the Preliminary Report, we stated our opinion th at both Part 301 and Part 303 themselves should clearly prohibit permit issuance in the circ umstances described in the previous paragraph.

24 The State also asserts that the otherwise unlawf ul” language invokes provisions of the MEPA and Par t
365 of the NREPA. But Part 365 does not establish protection for critical habitat. As for the MEPA, it provides that “[i]n administrative, licensing, or other proceedin gs, and in any judicial review of such a proceeding , the alleged . . . destruction of the air, water, or other natural res ources . . . shall be determined, and conduct shall not be authorized or approved that has or is likely to have such an e ffect if there is a feasible and prudent alternativ e consistent with the reasonable requirements of the public health, safet y, or welfare.” While invoking this language throu gh the “otherwise lawful” language of § 324.30311(a) might bar issuance of some permits that jeopardize feder ally endangered species and their critical habitat, the underlined language and the lack of a clearly-worde d prohibition on issuing such permits does not eliminate the potenti al for Part 303/section 404 permits being issued th at violate 40 C.F.R. § 230.10(b).28

In the past, the State of Michigan’s position has b een that those statutes and their administrative rules provide adequate assurance that permits will not be issued in these circumstances; in the Preliminary Report, we were critical of the State’s position. (See Preliminary Report, at page 20.) Regardless of whether it still holds that pos ition, the Michigan has now committed to incorporating into its applicable rules 40 C.F.R. § 230.10(c), as well as the remainder of the section 404(b)(1) Guidelines. As with the issue of whether Michigan’s adoption by rule of the section 404(b)(1) Guidelines will provide the equiv alent protection for federally endangered species that is provided by federal law, EPA will m onitor whether this action of Michigan’s effectively bars issuance of section 404 permits in situations where significant degradation of waters of the United States otherwise would result, or whether the mandate of 40 C.F.R. § 230.10(c) is weakened, in practice, by other prov isions of Part 301 or Part 303 and their implementing rules.

A discussion as to whether the section 404(b)(1) Gu idelines are applied and satisfied when permits are issued as a result of contested case pr oceedings can be found in the Analysis of Final Agency Permit Decisions in Administrative Contested Cases subsection of Section 2 of this Final Report.

E NFORCEMENT C ONCERNS

An opportunity for public participation in the stat e of Michigan’s enforcement process for section 404 matters shall be provided through one of two al ternative routes, according to 40 C.F.R. § 233.41(e). Michigan elects to follow the public participation procedures set forth in § 233.41(e)(2), which contains three requirements. EPA believes that MDEQ is adequately authorized to, and is observing, the first of these requirements (investigation of, and written response to, citizen complaints). As to the second and third requirements, it is not clear that either requirement is embodied in Michigan law or r egulation. To remedy this situation, MDEQ has agreed to include in EPA-MDEQ MOA commitments t hat it will not oppose intervention by any citizen when permissive intervention in a State enforcement action is authorized by Michigan law, and that it will publish notice of, and provid e a 30-day public comment period for, all proposed settlements of enforcement actions filed i n State court. EPA considers these measures to be adequate.

In the Preliminary Report (at page 22), EPA raised concerns as to whether Part 303’s provisions authorizing MDEQ to seek criminal fines for violati ons of permits were consistent with those of the CWA and with EPA’s state program requirements. The concerns related to the standard of proof of intent or knowledge for criminal liability to be imposed and the amount of penalties that could be sought. As a part of our program review E PA has examined the criminal enforcement provisions of both Part 301 (regulating discharges of dredged or fill material into inland lakes and streams) and 303 for comportment with the CWA 4 04 criminal enforcement provisions and with the requirements imposed on state programs by CWA section 404(h). As discussed below, EPA has concluded that Michigan’s criminal enforcem ent provisions contain sufficient intent29

standards to satisfy the federal program requiremen ts. We also conclude that the lower criminal penalty amounts authorized under Michigan law do no t warrant a finding that the program is

deficient.

Section 404(h)(1)(G) of the CWA merely requires tha t a state seeking to administer a section 404 program have the authority “[t]o abate violations o f the permit or the permit program, including civil and criminal penalties and other ways and mea ns of enforcement.” 33 U.S.C. § 1344(h)(1)(G). Thus, the CWA itself does not req uire that state law create any particular criminal violations which are subject to any partic ular types of fines or punishments. The State Program Regulations, however, are more detailed. 4 0 C.F.R. § 233.41(a)(3)(i) requires that a state agency have the authority to assess civil pen alties and to seek criminal fines against persons who perform “discharges of dredged or fill material without a required permit or in violation of any section 404 permit condition in an amount of at least $5000 per day

of such violation.” A state is required to have authority to seek a crimi nal fine “in the amount of at least $10,000 per day of violation” against any person who willfully or with criminal negligence discharges dredged or fill material without a required permit or violates any permit condition issued under section 404.” 40 C.F.R. § 233.41(a)(3)(ii). In a separate provision, the federal regulations specify that “[t]he burden of proof and degree of k nowledge or intent required under state law for establishing violations under paragraph (a)(3) of t his section shall be no greater than the burden of proof or degree of knowledge or intent EPA must bear when it brings an action under the Act.” 40 C.F.R. § 233.41(b)(2).

We turn first to 40 C.F.R. § 233.41(b)(2) and its m andate that state law not establish a degree of knowledge or intent greater than the degree of know ledge or intent that EPA must bear when it brings a criminal enforcement action under the CWA. Federal case law has supported EPA’s position that, under the CWA, EPA can criminally pr osecute acts of “ordinary negligence” which violate the CWA, pursuant to 33 U.S.C. § 1319(c)(1) . See United States v. Ortiz , 427 F.3d 1278, 1282-83 (10 th Cir. 2005) (“Under the [CWA]'s plain language, an i ndividual violates the CWA by failing to exercise the degree of care that some one of ordinary prudence would have exercised in the same circumstance, and, in so doing, dischar ges any pollutant into United States waters without an NPDES permit. . . . the CWA does not req uire proof that a defendant knew that a discharge would enter United States waters.”); Unit ed States v. Hanousek , 176 F.3d 1116 (9 th
Cir. 1999) (finding that CWA section 1319(c)(1) doe s allow a person to be criminally prosecuted

for a violation of the CWA that results from ordina ry or simple negligence, and finding that due process is not thereby violated because the CWA is a public welfare statute). Criminal “negligence” is generally divided into two types: o rdinary/ simple negligence and gross negligence. Gross negligence, as opposed to simple negligence, generally requires proof that a person acted with reckless disregard of the consequ ences for the safety or property of another-- a greater degree of knowledge or intent than a [a mer e failure to exercise reasonable care] [simple carelessness or neglect].

There are two relevant provisions of Part 303: §324 .30316(3) establishes that a person who30

“willfully or recklessly violates a condition or li mitation in a permit issued by [MDEQ] . . . is guilty of a misdemeanor, punishable by a fine of no t less than $2500.00 nor more than $25,000.00 per day of violation”; thus the burden o f proof and level of knowledge set by § 324.30316(3) appears on its face to be gross negl igence. By contrast, §324.30316(2) establishes that a person who merely violates Part 303 “is guilty of a misdemeanor, punishable by a fine of not more than $2500.00.” This latter pro vision does not on its face require a showing of any degree of knowledge or intent, i.e., not even s imple negligence, to impose criminal liability. Section 324.30316(3) would apply to any violation o f Part 303, which would include both discharges into wetlands without a permit and viola tions of permits issued pursuant to Part 303.

Section 324.30112 also has two provisions imposing misdemeanor criminal liability for violations of Part 301 permits and discharges of d redged or fill material into lakes and streams without a permit (See § 324.30112(3) and (4)). Neither of these provisi ons on their face specify any level of intent or knowledge required to impose liability. Section 324.30112(3) states that “a person who violates this part or a permit issued un der this part is guilty of a misdemeanor, punishable by a fine of not more than $10,000.00 pe r day for each day of violation.” Section 324.30112(4) provides that a “person who commits a minor offense is guilty of a misdemeanor, punishable by a fine of not more than $500.00 for e ach violation.”

Because Sections 324.30316(3) and 324.30112(3) and (4) do not specify any intent standard, EPA requested the Michigan Attorney General’s offic e to provide its interpretation of what standard of proof is required to establish criminal misdemeanor liability under Parts 301 and 303. (EPA was aware that a Michigan Supreme Court decis ion, People v. Datema , 448 Mich. 585, 605 (1995) equated “criminal negligence” under Mich igan law with “gross negligence”). The response from the Chief of the Attorney General’s N atural Resources and Agriculture Division, stated “that the relevant provisions of Parts 303 a nd 301 impose strict criminal liability and require no showing of a specific intent to violate those statutes in order to impose criminal penalties.” Strict liability generally means that liability for violation of a statute may be impose d purely if the actor committed the actions in questi on regardless of his state of mind. Thus, a strict liability standard is a lesser standard of p roof than simple negligence, the standard held to apply to prove criminal violations under Section 13 19(c)(1) of the CWA. The Attorney General’s response identified Michigan case law rec ognizing the State’s ability to create strict criminal liability offenses, citing in particular t o People v. Quinn, 440 Mich 178; 487 N.W. 2d 194 (1992) and People v. Lardie, 452 Mich 231, 240- 41, 551 N.W. 2d 656 (1996). The author of the response further stated that he had discussed t he question of what intent standard is applied

with the head of the office’s Criminal Division and with the Office of Criminal Investigations of the MDEQ, who both concurred with the analysis and confirmed that they successfully bring criminal cases under Sections 303 and 301 without p resenting proof of intent, i.e., as strict liability crimes.

The criminal fine levels authorized by Part 303 are less than the minimums required by 40 C.F.R. § 233.41(a)(3)(ii) ($10,000 minimum). However, MCL §750.504, governing punishment for31

misdemeanors, sets out a maximum jail time of 90 da ys for such offenses. 40 C.F.R. §233.41(d)(1) allows a Regional Administrator to ap prove a state program even where the state lacks the authority to set these minimum fine level s, as long as the Regional Administrator can

determine that the state has an alternative enforce ment program that is demonstrably effective in ensuring compliance and deterring violations of sec tion 404 of the CWA. We have found that Michigan’s enforcement program does meet that thres hold. EPA has determined that §§ 324.30112(3) and 324.30316(2), in conjunction with MCL § 750.504, provide an adequate 404 criminal enforcement program.

The preliminary report had noted one additional con cern with Part 303—that it failed to include authority to seek criminal fines for knowingly maki ng false statements in a permit application or who tampers with or falsifies a permit-required mon itoring device. Authority to seek criminal fines up to $5,000.00 for each such violation is re quired by the State Program Regulations. See 40 C.F.R. § 233.41(a)(3)(iii). EPA was given simil ar authority by Congress. 33 U.S.C. § 1319(c)(4). While such a provision was included in Part 301 (at § 324.30112(5)), Part 303 did not include such authority. MDEQ has explained to EPA that Michigan has adequate authority to address and penalize false statements under Sect ion 750.248 of the Michigan Penal Code. This statute has been used to prosecute persons who file false public documents, according to the Michigan Attorney General’s office. The statute ma kes an offense punishable by imprisonment for up to 14 years. An example of the use of this statute to prosecute individuals who made false statements in a wetland permit application was prov ided by the Attorney General’s office. Although §750.248 does not authorize the attorney g eneral to obtain a monetary fine, EPA considers the authority to impose a substantial pri son term as a sufficient alternative enforcement scheme for deterring persons from falsifying inform ation in permit applications or monitoring
reports.

I NDIAN L ANDS

The draft Attorney General’s Statement submitted to EPA during this program review includes a statement that the State of Michigan will not seek approval of section 404 state program authority

over ‘Indian lands’.” See 40 C.F.R. § 233.12(b). That draft Attorney Genera l’s Statement, though, explains that “this decision is based on MD EQ’s understanding of the term ‘Indian lands’ as constituting lands owned by or on behalf of a federally recognized Indian tribe or a tribal member and located within ‘Indian country’ a s that term is defined by 18 U.S.C. § 1151 and applicable case law.” The state of Michigan c onsiders “Indian lands” to be a subset of “Indian country.” In essence, the draft Attorney G eneral’s Statement says that the state of Michigan is seeking approval to administer the section 404 p rogram in those portions of “Indian country” which the State felt were not also “Indian lands”. EPA disagrees with MDEQ’s understanding of the term “Indian lands.” EPA defi nes the term “Indian lands” to be the same as the term “Indian country,” which is defined by stat ute (18 U.S.C. § 1151) to include, among other types of lands, all land within the limits of an In dian Reservation regardless of whether that land is owned by an Indian or a non-Indian.32

During the course of this program review, the two a gencies made their views on this issue known to each other. We note that the final Attorney Gen eral’s Statement, which was signed on March 23, 2006, makes no mention of “Indian lands” or whether the state of Michigan is making any claim that it has authority to exercise the CWA section 404 program in “Indian lands”,

however that term is defined.

EPA’s determination that the term "Indian lands" ha s the same meaning as the term "Indian country" has been explicitly approved by the Ninth Circuit Court of Appeals in State of Washington Dep’t of Ecology v. U.S. Environmental P rotection Agency , 752 F.2d 1465, 1467, n.1 (9th Cir. 1985). Moreover, EPA has consistentl y interpreted the term "Indian lands" to be the same as "Indian country." For example, this interp retation is contained in EPA regulations implementing RCRA Subtitle D. 40 C.F.R. § 258.2; s ee also 40 C.F.R. § 144.3 (Safe Drinking Water Act regulations defining "Indian lands" to be same as "Indian country”). In addition, it is clear that EPA has used the terms "Indian country" and "Indian lands" interchangeably in many situations, such as when authorizing a state program under RCRA Subtitle C. See , e.g., 71 Fed. Reg. 12141, 12144 (March 9, 2006) (Michigan); 67 Fe d. Reg. 49617 (July 31, 2002) (Michigan); 65 Fed. Reg. 29973, 29978 (May 10, 2000) (West Virg inia); 65 Fed. Reg. 46606, 46610 (July 31, 2000) (Virginia). EPA notes that, although the defi nition of Indian country appears in a criminal code, it has been extended to civil judicial and re gulatory jurisdiction. DeCoteau v. District County Court , 420 U.S. 425, 427 n.2 (1975).

When, on October 16, 1984, EPA first approved the S tate of Michigan to administer the section 404 program, Michigan did not seek authority over I ndian lands; consequently, at that time, EPA stated that “the Corps [of Engineers would] continu e to operate its 404 program on any Indian lands or reservations.” 49 Fed. Reg. 38947, 38947. As EPA has not found that the State of Michigan has authority within Indian country (which has the same meaning as Indian lands), and as EPA has not approved any exercise by the State o f Michigan of such authority, Michigan’s approved section 404 program does not, and has not, applied in Indian country within the state of Michigan

Despite this disagreement, EPA does not conclude th at Michigan’s iteration, in the draft Attorney General’s Statement, of its legal theory as to what are “Indian lands” creates a basis for withdrawal of the approved section 404 program. EP A maintains that the agency’s interpretation that the terms “Indian lands” and “I ndian country” have the same meaning is the correct and valid interpretation. EPA will review, however, any materials or documents subsequently submitted by Michigan in accordance wi th applicable law

E FFECT OF N EWLY -P ROMULGATED R ULES

As discussed throughout this Final Report, to resol ve many of EPA’s concerns about MDEQ’s legal authority in the permitting and enforcement r ealm, MDEQ already has promulgated new rules under Part 301 and Part 303. In addition, as a result of this program review EPA is33

requesting that MDEQ promulgate additional rules, a s outlined in this Final Report.

During spring 2002, MDEQ proposed procedures to mak e future administrative rules issued under Part 301 and Part 303 effective immediately o n promulgation. The public, including permit applicants and petitioners in contested perm it cases, would be kept on notice of the development of such rules, and would be notified of each rule’s final, effective date. EPA approves of this proposal by MDEQ as being effectiv e, efficient, and fair.

EPA requests that the Attorney General’s Office iss ue a written opinion analyzing whether MDEQ has authority to make all new rules effective immediately and applicable even to permit applications which are being processed and to permi t decisions which already have been made by MDEQ staff at the time that the rule is issued. The opinion also should analyze the extent to which such newly-effective rules must be considered by MDEQ’s ALJ’s and Director during contested case proceedings.

N OTICE OF WHICH L EGAL P ROVISIONS C ONSTITUTE M ICHIGAN ’ S P ROGRAM

MDEQ should request that the Attorney General’s Off ice prepare an updated statement identifying the State laws and regulations constitu ting Michigan’s approved CWA section 404 program, to then be promulgated by EPA as revisions to 40 C.F.R. § 233.70.34



### Analysis of Effect of State Takings Law on Program Implementation

The Attorney General’s Statement that a State submi ts in order to obtain initial approval to administer a CWA section 404 program shall “contain a legal analysis of the effect of State law regarding the prohibition on taking private propert y without just compensation on the successful implementation of the State’s program.” 40 C.F.R. § 233.12(c). In its letter to MDEQ initiating this program review, EPA requested that the Michiga n Attorney General's Office submit a Statement including such a takings law analysis. T hat office did so, with its submittal consisting of three separate documents: a Takings Analysis wit h an attached 1998 Takings Assessment Guidelines, which are drafted and regularly updated by the Attorney General for use by State agencies (Tab B of Attorney General’s Statement); a nd a legal analysis and review of relevant Michigan state court decisions that the Michigan At torney General had provided to EPA’s Office of Regional Counsel in a letter dated August 27, 19 96, in connection with the litigation National Wildlife Federation v. Adamkus. The Attorney Gener al's Office concludes, in the Takings Analysis document, that “Michigan’s takings jurispr udence does not present a legal impediment to the successful implementation of the State of Mi chigan’s § 404 program.” The Attorney General's Office also reports that “to date there h ave been no successful takings cases brought against the State based on wetland regulation”. (T akings Analysis, pp. 5-6,12.)

During EPA’s analysis of whether Michigan state cou rt decisions regarding takings law affected the successful implementation of the section 404 pr ogram, EPA reviewed the current federal takings law and its principles as announced by the United States Supreme Court and lower federal courts, as well as Michigan case law. EPA needed to determine whether Michigan state courts have ruled that government application of CW A-related regulations cause regulatory takings in situations where federal takings law jur isprudence would not so conclude. (Actual, physical takings are not implicated in wetlands reg ulation.)

EPA agrees with the Attorney General's Office that decisions by the Michigan state courts in takings actions do not impede the implementation of the section 404 program.

In this Final Report, EPA will not engage in a deta iled analysis of current federal takings law nor engage in a comparison of the relevant Michigan tak ings law decisions. The former is available from numerous scholarly sources, and the Michigan A ttorney General has provided a good analysis of Michigan takings law decisions. We fin d it sufficient to state here that Michigan case law on this issue to date has properly announced an d applied the major principles of regulatory takings jurisprudence, including principles concern ing when a categorical taking has occurred, the balancing test to be applied when a categorical takings does not exist (including determining a landowner’s reasonable, investment-backed expecta tions), the “parcel as a whole” delineation, burdens of proof, and the ripeness of a takings cla im.

However, this is not necessarily the end of the inq uiry. The relevant federal regulation, by calling for “a legal analysis of the effect of stat e law regarding the prohibition on taking private35

property without just compensation on the successfu l implementation of the state’s program”, 40 C.F.R. § 233.12(c), suggests that the analysis should go beyond a review of the legal content of state court takings decisions; the analysis shou ld consider whether and how the state agency’s implementation of the CWA section 404 program has b een affected by the existence of State law takings provisions and the assertion of takings cla ims by landowners. A state’s implementation of a CWA section 404 program, in both the permittin g and enforcement realms, may be affected by state decision makers’ worries that potential ta kings claims may be filed and ultimately may be successful. Such fear of takings claims and the risk of a state incurring significant monetary costs from successful claims could permeate the imp lementation of a CWA section 404

program. 25

EPA has not found, however, that Michigan's section 404 program is being operated incorrectly, or unsuccessfully, due to a concern for takings cla ims. EPA has conducted an extensive review of both MDEQ’s permitting program and enforcement p rogram. In doing so, EPA did not find that a concern for potential takings claims was cau sing MDEQ either to permit activities that should not be permitted, nor to fail to engage in e nforcement. There has been only one situation, within EPA’s knowledge, in which takings law concer ns appeared to affect MDEQ’s decision making. 26 A single instance in which MDEQ chose to evade its responsibility to make and adhere to a CWA section 404 permit decision does not impai r Michigan’s implementation of the section 404 program to the extent that EPA finds that takin gs law issues create a basis for commencing, or further investigating the need for, program with drawal proceedings.

25 EPA previously made this point in responding to a petition to withdraw the CWA section 404 program from the State of Michigan (see July 2, 1997, lette r from D. Ullrich, EPA, to National Wildlife Federa tion and Michigan United Conservation Clubs, pp. 2-3, where EPA identified the key issue as being whether the S tate agency is continuing to issue permits and to enforce viola tions appropriately under section 404 and the State Program Regulations, not whether written State takings juri sprudence is consistent with federal takings jurisp rudence). 26 That situation was MDEQ’s issuance of a state-on ly permit to Michigan Peat for its peat removal activities at the Minden Bog near Minden, Michigan. MDEQ had proffered a joint section 404/Part 303 p ermit but, after being sued by the company for a taking, MDEQ chose to issue a state-only permit which allowed mo re discharges and had less restrictive conditions than did the earlier joint permit.36



### SECTION 2: ASSESSMENT OF PROGRAM ADMINISTRATION

Assessment of Program Implementation for Compliance with the State Program Regulations

The information which follows is EPA’s assessment o f MDEQ’s administration of the wetland permitting program. This section focuses on the St ate Program Regulations found at

40 C.F.R. part 233. A legal analysis of the State of Michigan’s statutes as they relate to the State Program Regulations can be found in Section 1 of th is Final Report.



### Subpart C -Permit Requirements

§ 233.20 - Prohibitions

This section of the regulations states that no perm it shall be issued by the state in the following circumstances:

• When the permit does not comply with the requiremen ts of the CWA or the regulations thereunder, including the section 404(b )(1) Guidelines;

• When the Regional Administrator has objected to the issuance of the permit and the objection has not been resolved;

• When the proposed discharges would be in an area wh ich has been prohibited as a disposal site by the Administrator under section 404(c) of the CWA; or

• If the Secretary of the Army determines that anchor age and navigation of any of the navigable waters would be substantially impaire d

The file review found that in almost all cases, app lications which resulted in a permit being issued included documentation of compliance with th e section 404(b)(1) Guidelines as part of the permit decision. This documentation was generally in the form of the Project Review Report (PRR). However, in the majority of the files revi ewed, the assessment of compliance with the section 404(b)(1) Guidelines and/or State of Michig an wetland law was only documented by the checking of a box on the PRR forms. Interviews wit h the staff indicated that they did consider the factors outlined in the section 404(b)(1) Guide lines relating to both the alternatives analysis and project impacts to the aquatic environment. Th e PRR form was revised by MDEQ in 2000,

and the new guidance for completing the PRR was included in MDEQ's updated program description materials submitted to EPA in 2002. Th e new PRR forms have been in use since 2001. The new forms do a good job of documenting c ompliance or non-compliance with the 404(b)(1) Guidelines. When utilized by MDEQ staff, these new and revised materials will result37

in improved documentation of the factors staff cons ider when making a particular permit

decision.

In our review of contested cases, we found several instances where an ALJ either reversed a permit denial decision or authorized an increase in the scope of a project without documentation of compliance with either the section 404(b)(1) Gui delines or with Michigan statutes other than a statement that the permitted project would meet the Michigan statutes. These decisions rarely mentioned any new information or documented why the ALJ found the initial permit decision regarding compliance with the State statutes to be incorrect. See Preliminary Report, Section 2, Analysis of Final Agency Permit Decisions in Admini strative Contested Cases. We recommend that, in cases where the original permit decision i s overturned or modified through a contested case proceeding, MDEQ provide documentation which s upports the final permit decision and demonstrates compliance with the section 404(b)(1) Guidelines, and therefore § 233.20(a), as well as the appropriate Michigan statutes.

During the 20 years since the State of Michigan ass umed the federal wetland program, there have

been 7 cases in which the State was not able to res olve objections raised by EPA. In each of these cases MDEQ issued a “state-only” permit which authorized work only under State law, and

was not an authorization under section 404 of the C WA. In general, MDEQ has done a good job of addressing concerns raised by the federal agenci es and taking appropriate action, usually by reducing the project scope, adding conditions to a project, or permit denial.

The Administrator has not identified any areas in M ichigan which are prohibited for use as a disposal site. Therefore, the State of Michigan ha s not issued any permits for prohibited areas.

MDEQ does not have section 404 permitting authority over Section 10 (of the River and Harbors Act) waters. This authority is retained by the Corps; t herefore, no permits have been issued by the State which have resulted in the impairment of anchorage or navigation of any Section 10

waters.



### § 233.21 - General permits

The regulations at § 233.21 allow for the state to administer and enforce general permits previously issued by the Secretary of the Army. Th e State also may issue general permits for categories of similar activities if it determin es that the regulated activities will cause only minimal adverse environmental effects when per formed separately and only minimal cumulative adverse effects on the environment. Any general permit issued must comply with the section 404(b)(1) Guidelines.

In addition to the conditions specified in § 233.23 , the regulations – at 40 CFR 223.21(c) require that each general permit contain:

• A specific description of the types of activities a uthorized, including limits for38 any single operation;

• A precise description of the geographic area to whi ch the general permit applies, including limitations on the types of waters where operations may be conducted;

• Pre-discharge notification or other reporting may b e required by the State; and

• The State may require any person authorized under a general permit to apply for a general permit, this discretionary authority will be based on concerns for the aquatic environment including compliance with the section 404(b)(1)Guidelines.

The State of Michigan has issued general permits fo r a number of categories of activities. Activities covered by general permits include:

• construction of small ponds;

• boardwalks or elevated platforms;

• walkways, driveways;

• utility lines;

• oil, gas, and mineral well access roads;

• stormwater outfalls;

• culverts;

• emergency drain maintenance;

• septic tank replacement;

• repairs to structures;

• completed enforcement actions;

• spill clean-up;

• hazardous substance clean-up;

• maintenance dredging of artificial treatment ponds and lagoons;

• road maintenance projects;

• minor fills;

• restoration of altered wetland areas;

Our review of these categories of activities finds that most are equivalent in scope and effect to activities authorized under the nationwide permits of the federal program. The activities authorized by the Corps under the Federal Nationwid e Permit Program have been found by the Corps to cause not more than minimal adverse enviro nmental effects on the aquatic environment

and to be in compliance with the section 404(b)(1) Guidelines.

The State of Michigan’s general permit program requires any p erson interested in receiving authorization for work under a general permit to su bmit an application to MDEQ prior to initiation of work. If the project qualifies for a general permit, MDEQ reviews each permit application using expedited general permit processi ng procedures. Each category of activity which can be authorized by a general permit has spe cific conditions, including size limitations which must be met in order to be processed under th e general permit procedures.39

MDEQ has placed restrictions on the use of general permits. Projects are not considered minor, and do not qualify for a general permit, if they ar e proposed for wetlands associated with waters which have significant features associated with the m. These would include having a federal or state designation as a wild and scenic river, ident ification as having federally threatened or endangered species, or identification as being uniq ue from an ecological perspective. MDEQ also reserves the right to require processing as a major (individual) permit if the determination is made that public input would benefit the review of the application, or if MDEQ determines that a specific activity would lead to adverse cumulative impacts to the aquatic environment. During our review of MDEQ permit files, we did not encount er any files in which MDEQ had processed a permit as an individual permit due to one of the restrictions listed above. The program description materials submitted did not include any guidance regarding how MDEQ might make the determination as to when public input would ben efit the review of a proposed project.

We find that MDEQ’s general permit program is consi stent with the requirements outlined in 40 C.F.R. § 233.21. MDEQ staff review each proposa l and complete a PRR for each project documenting compliance with Michigan statutes and c ompliance with the conditions of the general permit. Based on a limited review of minor project files during EPA’s visits to MDEQ field offices, we found that MDEQ staff conducted s ite visits and confirmed that the proposed project did qualify for a minor permit.

Although we found the general permits in effect in Michigan cover activities which are similar in scope and effect to many of the activities covered by the Corps’ nationwide permits, some activities subject to permitting under the federal program are exempt under the Michigan program. EPA also has concerns that MDEQ does not have a procedure for assessing the cumulative impacts of minor permits. A more detail ed discussion of these two issues can be found in the Permit Exemptions and Compliance with CWA section 404(b)(1) Guidelines sections of Section 1 of this Final Report.



### § 233.23 - Permit Conditions

Each section 404 permit shall include conditions me eting or implementing the following requirements:

For each permit the Director shall establish condit ions which assure compliance with all applicable statutory and regulatory requir ements including the 404(b)(1) Guidelines, applicable section 303 water quality st andards, and applicable section 307 effluent standards and prohibitions.

MDEQ staff frequently placed conditions on permits to assure that the authorized activity would be in compliance with the section 404(b)(1) Guideli nes. Conditions were variable but typically

included:

• Best Management Practices such as use of erosion co ntrol measures to ensure that40

sediment did not enter undisturbed portions of wetl ands or other waters of the state

• requirements to maintain existing hydrology in area s not directly impacted by a project

• requirements to restore or create wetlands as mitig ation for project related impacts

• requirements for monitoring wetland mitigation site s and reporting requirements associated with the monitoring

(1) A specific identification and complete descrip tion of the authorized activity, including name and address of the permittee, locati on and purpose of the discharge, and type and quantity of the material to be dischar ged.

All issued permits that EPA reviewed did include a specific identification and complete description of the authorized activity, name and ad dress of the permittee, and location and purpose of the permitted activity. Often permits r eferred to specific dated materials or plans from the permit file in order to provide detailed descri ptions of the approved activities and/or special conditions such as wetland mitigation required as p art of the permit.

(2) Only the activities specifically described in the permit are authorized.

MDEQ permits do not specifically state that only th e activities described in the permit are authorized, however, they do specifically describe the activities for which permission is granted.

(3) The permittee shall comply with all conditions of the permit even if that requires halting or reducing the permitted activity to maint ain compliance. Any permit

violations constitute a violation of the CWA as wel l as a violation of State statute or regulation.

MDEQ permits include a condition which states that failure to comply with conditions of the permit may subject the permittee to revocation of t he permit and criminal and/or civil action as cited by the specific State Act, Federal Act, or ru le under which the permit is granted.

(4) The permittee shall take all reasonable steps to minimize or prevent any discharge in violation of the permit.

The first standard condition of MDEQ permits states that initiation of any work on the permitted project confirms the permittee’s acceptance and agr eement to comply with all terms and conditions of the permit. Failure to comply with t he conditions of the permit may subject the permittee to revocation of the permit, as stated in the permit limitations.

(5) The permittee shall inform the Director of any expected or known actual noncompliance.

There does not appear to be any general state requi rement, or condition inserted in individual permits, that the permittee inform the Director of any expected or known noncompliance with the permit terms and conditions.41

(6) The permittee shall provide such information t o the Director, as the Director requests, to determine compliance status, or to det ermine whether cause exists for permit modification, revocation or termination.

Part 303, at § 324.30314, authorizes MDEQ to requir e the holder of a permit to provide information the Department reasonably requires in o rder to assess compliance with Part 303. This section gives MDEQ the authority to obtain inf ormation necessary to assess permit compliance. We are not aware of any instances in w hich MDEQ has exercised this authority. There is no similar provision in Part 301.

(7) Monitoring, reporting and record keeping requi rements as needed to safeguard the aquatic environment.

The standard permit conditions for MDEQ Section 404 permits do not require any specific monitoring or reporting requirements specifically t argeted toward safeguarding the aquatic environment. Permit conditions do require the appl icant to notify MDEQ with in one week of completion of the permitted activity in writing and the permittee cannot transfer the permit without written approval from MDEQ. Additional m onitoring and reporting requirements are required on a case-by-case basis. The most common reporting required on a case-by-case basis was monitoring of progress toward meeting the perfo rmance standards for mitigation wetlands. In our initial review of project files, we did not find project specific monitoring requirements included as permit conditions. However, since the promulgation of the mitigation rule by Michigan in 2001, specific monitoring requirements are now routinely included as permit

conditions.

(8) Inspection and entry. The permittee shall all ow the Director, or his authorized representative, upon presentation of proper identif ication, at reasonable times to:

(i) Enter upon the permittee’s premises where a re gulated activity is located or where records must be kept under the conditions of the permit (ii) Have access to and copy any records that must be kept under the conditions of the permit, (iii) Inspect operations regulated or required und er the permit, and (iv) Sample or monitor for the purposes of assurin g permit compliance or as otherwise authorized by the Act, any substances or parameters at any

location.

MDEQ permits do not include a condition which gives the Director or his authorized representative right of entry, access to records or right to conduct sampling or monitoring at a project site. During our file review we found very few files which indicated that MDEQ staff had visited a project site to assess compliance wit h the permit conditions. Due to time constraints, staff typically do not make such inspe ctions. We did not find any files in which MDEQ staff had done any sampling or monitoring at e ither a project site or a mitigation site.42

(9) Conditions assuring that the discharge will be conducted in a manner which minimizes adverse impacts upon the physical, chemic al and biological integrity of the waters of the United States, such as requiremen ts for restoration or mitigation.

Twenty-five of the permit files that EPA reviewed i ncluded a mitigation requirement to either create or restore wetland acreage. Many of the per mits we reviewed included conditions which would minimize impacts to the aquatic environment. These conditions usually included best management practices designed to minimize impacts t o aquatic resources remaining on a project

site. Practices included use of erosion control me asures on site and taking steps to maintain existing hydrology on site. In addition, the Admini strative Rules for Wetland Protection, specifically R 281.925 (which was promulgated under Part 303 and was amended in April 2000), allow MDEQ to consider mitigation proposed by an ap plicant to off-set project related impacts to

wetlands.



### Subpart D - Program Operation

§ 233.30 -Application for a permit

This section of the State Program Regulations outli nes when a permit application is required and what information must be found in an a pplication for it to be considered complete. The information required in an applicati on includes:

• Name, address, phone number of applicant and names and addresses of adjoining property owners complete description of the proposed project;

• Description of the type, composition, source and qu ality of the material to be discharged, the method of discharge, the site, and plans for disposal of the dredged or fill material;

• A certification that all information in the applica tion is true and accurate; and

• The applicant will be required to furnish additiona l information on alternate methods and sites as necessary for preparation of e nvironmental documentation.

The application form used by MDEQ is a joint form w hich is also used by the Corps. This application form does require the applicant to prov ide all the information listed above with one exception. The application form only requires the names and addresses of adjoining riparian owners, not adjoining property owners as required i n the federal regulations. The applicant must sign the application acknowledging that all the inf ormation provided is accurate. In addition, the applicant acknowledges that they must obtain a perm it prior to commencing the project. Section 30306 of Part 303 does provide for the applicant to supply an environmental assessment which will include assessment of the effects of the proje ct on wetland functions and values and effects on water quality, flow and levels, and the effects on wildlife, fish and vegetation within a contiguous lake river or stream. In general, none of the files we reviewed included a request from MDEQ to the applicant for additional environme ntal information.43



### § 233.31 - Coordination requirements

This section of the regulations requires the Direct or to provide an opportunity to any State to provide written comments on any project which in volves a proposed discharge which may affect the biological, chemical or physical int egrity of that State’s waters. If the recommendations of the affected State are not accep ted by the Director, he shall notify the Regional Administrator prior to permit issuance, in writing, of the Department’s failure to accept the recommendations.

The current EPA-MDEQ MOA requires federal review of any project which may affect the waters of another State. This MOA provision gives the Regional Administrator with the opportunity to review and comment on such projects.

It is not clear from MDEQ program submittal that pr ocedures are in place which would ensure that an adjacent State would be notified if a proje ct had the potential to affect that State’s waters. Our file review did not encounter any projects whi ch impacted the waters of another State -- nor is EPA aware of any instances in which another stat e has been notified of potential project impacts or commented on a proposed project.

MDEQ needs to develop guidelines for determining wh en a proposed project will impact waters of an adjacent state and a process for notifying th at State of the pending permit. There should be a specific process which provides affected States w ith an opportunity to comment on the proposed project, and the process should include no tification of EPA.



### § 233.32 - Public notice

The regulations under this section require MDEQ to give public notice of the following

actions:

• Receipt of a permit application;

• Preparation of a draft general permit;

• Consideration of a major modification to an issue d permit;

• Scheduling of a public hearing; or

• Issuance of an emergency permit

Our review of the files found that MDEQ is giving p ublic notice of the actions outlined above. MDEQ permit processing procedures require the prepa ration of a public notice for all projects which do not fall in the minor (or general) permit category. Not requiring a public notice for projects in the minor or general permit category is consistent with the federal program. In almost all cases, our file review found that files which d id not fall in the minor or general permit categories did have a public notice in the file. M DEQ has issued public notices for all general permits proposed under Part 303. General permits ar e public noticed and reissued every 5 years. Our file review did not encounter any projects for which MDEQ had decided re-noticing was44

needed due to a major modification of a permit that had been issued. In June 27, 2002, MDEQ issued interim guidance regarding revisions to perm its. The guidance states that if the requested revisions are not minor as defined in the guidance, then the permittee must submit a new application for the proposed additional work. MDEQ does issue a public notice whenever a public hearing has been scheduled

Timing and Distribution

The regulations at 40 C.F.R. § 233.32 require that the public notice provide a reasonable period of time, normally 30 days, within which interested parties may express their views concerning a permit application. In addition, notice for a publ ic hearing shall be given at least 30 days before the hearing. The Regional Administrator may approv e a program with a shorter public notice period if the Regional Administrator determines tha t sufficient public notice is provided for.

The current MDEQ public comment period is 20 days. During EPA’s initial review of Michigan’s program, the Regional Administrator dete rmined that a 20-day comment period was sufficient and approved the program. Our current r eview finds that a 20-day comment period is sufficient. EPA expects that all interested parties will receive notification of the public comment period as soon as the comment period is opened. Un der MDEQ’s current system, the applicant, adjacent property owners, and agencies with jurisdi ction over the activity do receive the public notices in a timely fashion; yet interested parties which may depend on the subscribers list for notification of pending projects may not receive a requested public notice in time to provide comments within the comment period. The subscriber s list is discussed in more detail below.

The regulations at 40 C.F.R. § 233.32(c) require th e state agency to provide public notice by mail to the applicant, any agency with jurisdiction over an activity or disposal site, adjacent property owners, and all persons who have specifically reque sted copies of public notices, as well as any State whose waters may be affected by the proposed discharge. In addition, the state agency must provide notice in at least one other way reaso nably calculated to cover the area affected by the activity (such as publication in a newspaper of sufficient circulation).



### 40 C.F.R. § 233.32(c)(2).

MDEQ public notice mailing lists included an extens ive list of agencies and a list of adjacent landowners who received the public notices. While the State Program Regulations require notification of owners of property adjoining the pr operty where the regulated activity will occur,

it was difficult to tell from the files reviewed if all adjacent property owners received a public notice. The permit application form asks the appli cant to list only adjacent riparian owners, which would not include adjacent landowners who did not own waterfront property. Yet the federal regulation does not limit notification of a djacent landowners to waterfront property45

owners.

MDEQ has updated its public notice procedures. The revised procedures were provided to EPA in an April 26, 2004 submittal. In its revised pub lic notice procedures, adjacent property owners and those whose property is affected by a project a re sent a public notice automatically. MDEQ has taken additional steps to increase access to pu blic notice information and to expedite distribution of public notices. In August 2002, MD EQ implemented an on-line system via the Internet that publishes all public notices and noti ces of public hearings. The system is linked to the Coastal and Inland Waters Permit Information Sy stem (CIWPIS) database, and public notices

are available as soon as the notice is issued. Com ments may be submitted electronically through the CIWPIS system as well. Under MDEQ’s revised pu blic notice procedures, citizens requesting a full copy of a public notice now have three options for receiving the public notice. They may access the public notice and provide comme nt on the public notice on-line using the CIWPIS system, they may request MDEQ staff to e-mai l a copy of the public notice to them, or, if a hard copy of the notice is requested, the noti ce is mailed to the requestor within one business day of the request.

MDEQ continues to mail a bi-weekly list of public n otices to those who subscribe to this service.

The subscriber list is now also available on-line. The on-line version is updated on a daily basis and includes all public notices issued over the pas t six weeks. There is no fee for using the online service. Every public notice is now available as an electronic file that can be e-mailed, and a draft procedure for e-mailing public notices has been developed. Most state and local agencies in Michigan have chosen to receive copies of public notices via e-mail rather than surface mail.

The changes that MDEQ has made to its public notice distribution procedures have resolved EPA’s concerns that not all interested persons were receiving public notices with sufficient time to submit comments to MDEQ.

Information in public notices

The State Program Regulations at § 233.32(d) requir e that the following information be contained in a public notice:

• Name and address of the applicant and the location of the proposed activity;

• Name and address of the person to contact for furth er information;

• A brief description of the proposed activity, it pu rpose and intended use;

• A plan and elevation drawing showing the general an d specific site location and character of all proposed activities, including siz e relationship of the proposed structures to the impacted waterway and depth of wa ter in the area;

• A paragraph describing the various evaluation crite ria on which decisions are based;

• Any other information which would significantly ass ist interested parties in evaluating the likely impact of the proposed activi ty; and46

• A description of comment procedures and public hear ing request procedures

Notice of a public hearing shall contain the follow ing information:

• Time, date and place of hearing;

• Reference to the date of any previous public notice s relating to the permit; and

• Brief description of the nature and purpose of the hearing

The public notices issued by MDEQ for permit applic ations and public hearings include all the information listed above with the exception of a paragraph which describes the evaluation criteria considered, including the section 404(b)(1 ) Guidelines. While the public notices do not list a specific contact person, they do list th e address and phone number of MDEQ district office handling the permit application.

§ 233.33 - Public hearing

(a) Any interested person may request a public hea ring during the public comment period as specified in § 233.32. Requests shall be in writing and shall state the nature of the issues proposed to be raised at the h earing.

(b) The Director shall hold a public hearing whene ver he determines there is a significant degree of public interest in a permit a pplication or a draft general permit. He may also hold a hearing, at his discret ion, whenever he determines a hearing may be useful to a decision on the permit a pplication.

Part 303 section 30307 provides for holding public hearings on applications currently under consideration by MDEQ. The Department may hold a p ublic hearing either on its own initiative or at the request of an interested party. The inte rested party must submit its request for a public hearing in writing to the Department within 20 days after the mailing of notification of the permit application. If any interested party requests a pu blic hearing, the Department will hold a public hearing in the county were the activity is to take place. Our review of MDEQ permit files indicates that MDEQ has held public hearings for pr ojects proposed under Part 301 or Part 303 whenever a hearing is requested in writing. In add ition, MDEQ has held public hearings on its own initiative after determining that the permit ap plication is of significant impact and so warrants a public hearing. Based on our review of p ermit files for this program review and our ongoing oversight of MDEQ wetland program we have f ound MDEQ to be very responsive to requests for public hearings on proposed projects. 27

(c) At a hearing any person may submit oral or wri tten statements or data concerning the

27 Our primary concern is that all interested perso ns receive sufficient notice of the proposed projec t so that such persons can submit a request for a public hear ing. See discussion in this Section 2 of this Fina l Report on the State’s compliance with 40 C.F.R. § 233.32 requirem ents (pages 42-43), as well as comment at page 18 i n Section 1 of this Final Report.47

permit application or draft general permit. The pu blic comment period shall automatically be extended to the close of any public hearing unde r this section. The presiding officer may also extend the comment period at the hearing.

The procedure for changes to the public comment per iod after a public hearing is held are not described in the program description provided by MD EQ. Discussions with MDEQ’s 404 program coordinator indicate that the public commen t period is extended until the close of any public hearing, and often is extended for an additional time period after a public hearing is held. The updated program submittal should include a desc ription of how the public comment period is affected when a public hearing is held.

(d) All public hearings shall be reported verbatim. Co pies of the record of proceedings may be purchased by any person from the Director or the reporter of such hearing. A copy of the transcript (or if none is prepared, a tape o f the proceedings) shall be made available for public inspection at an appropriate State offic e.

All public hearings are taped. The tapes are avail able to the public. Transcripts of the tapes can be obtained by any person upon request, providing t hat person pays for the transcription.



### § 233.34 - Making a decision on the permit applicat ions

The Director will review all applications for compl iance with the section 404(b)(1) Guidelines and/or compliance with equivalent State environmental criteria as well as other applicable State laws.

MDEQ uses the PRR form for documentation of complia nce with the section 404(b)(1) Guidelines and with Michigan statutes, and for docu menting the final permit decision. The amount of information provided in completed PRRs wa s somewhat variable. In general, for projects with larger impacts there was more informa tion in the PRR. The more detailed information usually consisted of detailed notes des cribing the resource to be impacted. During our file review, we looked at 353 permit files and found PRRs in 78% of those files; therefore, 78% of those files had documented compliance with t he section 404(b)(1) Guidelines as required by the Federal State Program Regulations.

Projects for which a permit was being denied, or fo r which a modified permit of smaller scope was proposed, usually had good written documentatio n which explained why the originally proposed project did not comply with Michigan statu tes and could not be authorized. In many cases, the PRRs had a box checked which indicated t hat some of the factors evaluated under the section 404(b)(1) Guidelines had been considered. For example, the PRR would indicate that alternatives had been considered, but neither the P RR nor the permit file contained specific

information as to what alternatives had been consid ered or how they were evaluated. Other PRRs included a written description of the site and a statement that the project impact area was48

the least damaging alternative available.

Although we found PRRs in the majority of files, it was often difficult to tell what factors had been considered when staff made decisions on projec t compliance with the section 404(b)(1)

Guidelines and the environmental criteria contained in relevant Michigan statutes. A check mark in a box was usually the only information available . Interviews with district staff during our file reviews indicated that, in general, staff were cons idering most of the factors which need to be evaluated in order to determine compliance with the 404(b)(1) Guidelines, but there was no

written documentation of the factors evaluated. Th e updated program materials submitted by MDEQ for this program review include a revised PRR form and detailed instructions for completing the form. The revised form should ensur e that MDEQ staff do a better job of providing documentation of the factors considered w hen evaluating a project for compliance with

the Guidelines.

Detailed information on the factors considered duri ng the evaluation of projects for compliance with the Guidelines was lacking from most of the PR Rs that EPA reviewed, in most files, however, there was some documentation in the files that indicated compliance with the 404(b)(1)Guidelines and the environmental factors i n Michigan statutes had been evaluated prior to making a permit decision. Based on our file rev iews and interviews with MDEQ staff, we found that MDEQ staff were adequately completing th e required review of applications as outlined in § 233.34.

One concern we have about MDEQ compliance with this section of the State Program Regulations relates to the documentation of complia nce with the section 404(b)(1) Guidelines and/or the State statutes for permits issued in fin al decisions through the contested case hearing process. In several contested cases we reviewed, t he ALJ reversed a MDEQ staff decision to deny a permit for a project, yet there did not appe ar to be any new documentation supporting the finding that the project was now in compliance with the section 404(b)(1) Guidelines and the applicable State statutes. For a more detailed dis cussion of this issue, see the discussion of 40 C.F.R. § 233.20(a) above.

We recommend that in cases where a project was init ially found not to be in compliance with the section 404(b)(1) Guidelines and/or with Michigan s tatutes, but after a contested case hearing was found to be in compliance with the necessary le gal and environmental standards imposed by law, MDEQ ensure that the final permit decision, as embodied by the final contested case decision, document the evaluation process for compl iance with those legal standards.

The Director shall consider all public comments rec eived on an application.

The majority of files we reviewed did not have any public comments. In those cases where public comments were received, either in response t o the public notice or at a public hearing, the comments were part of the file and issues raised we re addressed by MDEQ staff prior to making a permit decision.49

The Director shall prepare a written determination on each application outlining his

decision and rationale for his decision. The deter mination shall be dated and signed prior to the final action on the application. The official record shall be open to the public.

In most cases, the files we reviewed contained a si gned and dated PRR which contained the written rationale for the permit decision. In some cases, there would be little or no decision rationale included in the PRR, however, the letter to the applicant informing them of the permit decision typically included documentation outlining why the permit had been issued. If a permit was denied or modified, a detailed written analysis of the project, usually in the form of a letter to the applicant, was included in the file and was the basis for the permit decision. For small projects, the amount of written documentation as to the reasons for the permit decision was often

minimal.

Since the PRR form contains the determination for m any permit decisions, during the file review we checked to see that the PRRs were signed and dat ed. Although we often found that a PRR had been filled out, they were not always signed an d dated; thus, it was difficult to assess

whether or not the determination - or the PRR - had been dated and signed prior to MDEQ taking final action on the application. Still, in general it appeared from our file review that PRRs usually were completed before a decision letter was sent to an applicant.

The new PRR form includes a section which will expl ain the reviewer’s findings and document the final permit decision. Making sure that this s ection of the PRR is always filled out, signed, and dated, or that other written documentation of t he rationale for the permit decision is made part of every file, including contested case files, will ensure that the Michigan wetland program meets § 233.43(c) of the State Program Regulations. The PRR serves as the documentation for the permit decision.

The official record for each file is open to the pu blic unless the permit is going through the contested case process or is subject to some other legal challenge. For these cases, once the legal proceedings are completed, the file is opened to th e public for review.50



### § 233.35 - Issuance and effective date of permit

This section of the State Program Regulations outli nes the procedures to be followed by the Director when a permit is either issued or denied. If a Regional Administrator comments on a permit application or a draft general permit, the D irector shall follow the procedures outlined in section 233.50 when issuing a permit. If the Regi onal Administrator does not comment on a permit application, the Director shall make a final permit decision and notify the applicant. If the decision is to deny the permit, the Director will n otify the applicant in writing of the reasons for

denial.

We found that MDEQ was in compliance with this sect ion of the State Program Regulations. In all cases when EPA provided federal comments on pro posed projects, MDEQ has followed the procedures outlined in § 233.50. There have been n o cases of MDEQ issuing a CWA section 404 permit over EPA’s objection. In the seven case s where the federal objection was not resolved, MDEQ issued a state-only permit, and the applicants had to apply to the Corps for a CWA section 404 permit.

Further discussion regarding the effective date of permits under Michigan law can be found in Section 1 of this Final Report, Analysis of Legal A uthorities (page 19).



### § 233.36 - Modification, suspension or revocation o f permits

This section of the regulations outlines the condit ions under which the State may modify, suspend or revoke a permit. These regulations list six factors to be considered, which

include:

• The permittee’s noncompliance with any term or con dition of the permit;

• The permittee’s failure to disclose all relevant i nformation during the permit

process;

• Information that indicates that an activity author ized by a general permit will have more than a minimal effect on the environment;

• Circumstances relating to the authorized activity have changed since the permit was issued and justify changed permit conditions;

• Availability of significant new information which would have justified different permit conditions at the time of issuance; and

• Revisions to statutory or regulatory authority

Our file review did not encounter any instances in which MDEQ has suspended, revoked or modified a permit.51

The Director shall develop procedures to modify, su spend or revoke permits if a determination is made that just cause exists.

When MDEQ proposes to revoke a Part 301 permit, or proposes to revoke or to modify a Part 303 permit, the permittee may initiate a contested case proceeding. §§ 324.30110, 30313(1). The procedures that apply to a contested case proce eding are set forth in Michigan’s Administrative Procedures Act, found at Michigan Co mpiled Laws § 24.271 et seq ., and in the rules promulgated therefore, R. 324.1, et seq . In addition, before MDEQ acts to modify or to revoke such permits, MDEQ informs the permittee of the factual and legal bases for MDEQ’s intended action, and MDEQ provides a permittee with an informal process to present information to MDEQ which might influence MDEQ’s decision. Mic h. Comp. L. § 24.292; See Rogers v. State Board of Cosmetology , 68 Mich. App. 751 (1976). Additional discussion regarding MDEQ’s legal authority to modify, revoke, or suspen d Part 301 and 303 permits, and whether this legal authority is consistent with the CWA and 40 C.F.R. § 233.36, can be found in Section 1 of this Final Report, Analysis of Legal Authorities (pp. 19-20).



### S UBPART 

### F

- F EDERAL 

### O VERSIGHT



### § 233.50 - Review of, and objection to, State-propo sed permits

Section 233.50 of the State Program Regulations out lines the process and time line to be followed during federal review of, and objection to , permit applications and proposed Stateissued section 404 permits. MDEQ has done an excel lent job of providing EPA with public notices that are subject to federal review in a tim ely manner. MDEQ also provides copies of these public notices to the other commenting federa l agencies (Corps and the U.S. Fish and Wildlife Service). EPA has 30 days from receipt of the public notice to notify MDEQ whether or not the Regional Administrator intends to comment o n a particular project, and to request any additional information deemed necessary to review t he project for compliance with the section 404(b)(1) Guidelines, the Clean Water Act, and the State Program Regulations. Once EPA notifies MDEQ of our intent to comment, EPA has 90 days from the date we receive the public notice to provide comments to MDEQ. If EPA objects to a permit application, or requires that one or more conditions be imposed in a permit, MDEQ cannot issue a permit until the objection is resolved or the requested condition is incorpora ted into the permit. MDEQ has 90 days from the date of EPA objection letter to either resolve the objection to EPA’s satisfaction or to deny the permit. In the event that the federal objectio n is not resolved within that 90-day period, authority to process the permit transfers to the Co rps.

The time line detailed in the State Program Regulat ions does not mesh easily with Part 303's requirement that a permit decision be made within 9 0 days of MDEQ's receiving a complete application (see pages 17-18 of this Final Report). In practice, though, EPA and MDEQ usually are able to work with applicants to ensure that any problems are resolved within the required time period. Although it is possible that the 90-d ay time period imposed by Part 303 may expire52

before federal comments are received and/or objecti ons can be resolved, in practice this rarely occurs. In most cases, EPA is able to provide comm ents to MDEQ within the 90-day time frame and MDEQ is able to work with the applicant to reso lve any federal objections and then issue the permit. If EPA has significant concerns with a pro ject that MDEQ cannot resolve before Part 303's 90-day deadline, MDEQ either denies the permi t or the applicant withdraws the application.

We are aware of only one or two cases where a MDEQ permit was issued by “operation of law” due to the fact that Part 303's 90-day time limit h ad expired. MDEQ has never issued a Part 303/section 404 permit by “operation of law” for a project which had an unresolved federal objection.

In summary, although the Part 303 90-day time line does not mesh well with the time lines set in the State Program Regulations, to date MDEQ staff h ave done a good job of working with EPA staff to ensure that problems with specific project s are resolved in a manner which meets the time requirements of both Michigan and federal law. In spite of the fact that Part 303 does allow a permit to be issued by “operation of law” after 90 days have passed from MDEQ’s receipt of a complete application -- regardless of whether or no t the permit meets the requirements of the section 404(b)(1) Guidelines, the CWA, and the Stat e Program Regulations -- MDEQ rarely has issued a permit as a result of this 90-day deadline . Where a Part 303 permit has issued by “operation of law”, MDEQ and the Attorney General’s Office assert that the permit issued is issued under Michigan state law alone: such a permi t is not a section 404 permit, but a “stateonly” permit. See discussion of this subject at pp . 16-17 of this Final Report.



### § 233.52 - Program Reporting

The State Program Regulations require the State to report to EPA on an annual basis. EPAMDEQ MOA establishes the end of the calendar year a s the end of the annual reporting period for MDEQ. Within 60 days of the end of December, M DEQ is to submit to EPA an annual report which evaluates MDEQ’s administration of its program. Items to be addressed in the annual report are listed at 233.52(b). EPA-MDEQ MO A provides for annual reporting from Michigan to EPA on the following items:

• The number and nature of individual and general per mits issued, reissued, modified, revoked and denied by MDEQ during the yea r;

• The number of acres of each of the categories of st ate regulated waters which were filled either by authorized or unauthorized ac tivities (over one acre in size);

• The number of permits issued under emergency condit ions; and

• The number of persons in the State discharging dred ged or fill material under general permits and an estimate of the cumulative i mpacts of these activities.

EPA-MDEQ MOA does not require MDEQ to report agains t all of the items listed in 233.52(b), but only the items listed above. MDEQ has submitted the annual reports, including the53

information mentioned in EPA-MDEQ MOA. All of these reports have been revie wed by EPA, and receipt of these reports is acknowledged by EPA . However, Michigan has not always been timely in submitting its reports. The reports for the years 1994 through 1999 were a year or more

late. The issue of timeliness of submission of ann ual reports was raised with MDEQ in the past, and after MDEQ updated its permit tracking system t he 2000 annual report was received in a timely manner. However, since 2001 MDEQ has again been late in submitting annual reports. We have recently raised this issue with MDEQ and MD EQ indicated that it will be more timely in the future. EPA will continue to work with MDEQ staff to ensure that annual reporting is submitted in a timely manner.



### Summary of Permit File Review

During the spring of 1999, staff from EPA visited a ll MDEQ district and field offices in order to conduct a review of files. The number of permit fi les reviewed at each office varied depending

on the number of reviewers and the amount of time a vailable for review in each office. Files from the years 1995 through 1999 were selected for review. The files to be reviewed were selected by picking a number between 0 and 9 and th en looking at files which ended with that number. In addition, some files were selected rand omly from the file cabinets. Files for projects which would not be regulated under the federal sect ion 404 program were not reviewed. The

files were reviewed to determine if decisions were documented and were consistent with the section 404(b)(1) Guidelines. A total of 353 permi t files were reviewed.

The amount of information found in the files was hi ghly variable, but generally corresponded to the significance of a project’s potential impact on the aquatic resource. In the majority of the files reviewed, the only form of documentation supp orting the permit decision was the PRR. The

PRRs in those files had a box which was checked if the project was determined to meet the section 404(b)(1) Guidelines, with little or no oth er information documenting why the project was found to comply with the Guidelines. Interview s with MDEQ staff during the file reviews indicated that the majority of staff were consideri ng most of the appropriate factors when making a decision on compliance with the section 404(b)(1) Guidelines. Staff indicated that factors they considered during the decision making process inclu ded avoidance and minimization of impacts, project effects on plant and wildlife communities, changes to hydrology, riparian rights, adjacent land use, and water quality impacts. Most files h ad little or no information from the applicant to document that an alternatives analysis had been com pleted. Since the majority of the files reviewed were for projects with fairly minor impact s, a detailed alternatives analysis may not have been appropriate. Some files indicated that a lternatives had been considered, but there was no documentation of exactly what alternatives were considered during the analysis. In many files

it was evident from the field notes that staff were doing a good job of getting applicants to avoid and minimize project impacts, resulting in the perm itted project impacting a smaller area of wetland than was originally proposed in the applica tion.

MDEQ staff did a good job of making site inspection s on almost all permit applications. The54

majority of sites were inspected by MDEQ staff prio r to making a permit decision. In some files comments made by MDEQ staff indicated that site vis its had been made, but there was no specific documentation in the file to verify the si te visit. Files for projects which had been field inspected often had photographs in them which were presumably taken during a site inspection, yet few of the photographs had basic information at tached to them, such as when and were the photos were taken and who took the photos. Documen tation of conditions on site was variable. Many PRRs included a brief description of site cond itions including plant communities present, notes on soils, and observations on water depth and circulation patterns. The site descriptions often included notes or diagrams illustrating proje ct alternatives which would result in less impact to the resource than the originally proposed project.

Very few of the files reviewed contained wetland de lineations. Interviews with staff indicated that staff typically check the delineation during t he site inspection. In cases where the wetland boundary had been flagged by a consultant, MDEQ sta ff verify the delineation and make adjustments as required. These changes are usually noted and drawn on the project plans by MDEQ staff. For many small projects, MDEQ staff wa lk the site and verify the information provided in the application. MDEQ staff were not c onsistent in making notes for the file or on a PRR regarding whether the delineation in an applic ation was accurate. There were one or two cases where a wetland delineation had been complete d previously and was on file under a wetland assessment number different from the permit file number, but was not included in the permit file (when a delineation already exists, thi s information should be included in a permit file).

It was not clear from either the file review or the program submittal what steps would be taken if a significant change in delineation was necessary, specifically for cases where the amount of wetland impact was significantly greater than that reported in the application and public notice.

We could not determine if the file would be returne d to the Permit Consolidation Unit for a corrected public notice or if the permit process wo uld proceed without a new public notice. In

cases where a wetland delineation is found to be in correct and/or the amount of wetland impacted is significantly under-estimated, MDEQ should have a procedure to ensure that such projects are public noticed a second time.

A total of 44 of the files reviewed required wetlan d mitigation to offset project impacts. In most cases, the mitigation ratio was at least 1.5:1 and, in some cases, higher. The information provided in the mitigation plans was variable. Som e information was as simple as a description of the acreage, location and type of wetland to be established, while other plans included detailed grading and planting plans and descriptions of how hydrology was to be restored on the site. Few of the mitigation plans included performance st andards. Consequently, it would be difficult to assess compliance with the mitigation requiremen ts of the permit, as well as difficult to enforce them. Although monitoring was required for some permits, few monitoring reports were found in the permit files. MDEQ staff indicated th at they did not have the time to follow up on the monitoring requirements and often did not check to see if mitigation had been completed,55

unless they were in the project area while making a nother site inspection.

The PRR form is usually the only information in the file which documents why a permit decision was made. Of the 35328 files reviewed, 74, or 22%, did not have PRRs in the file. The PRRs contained in the files we reviewed did not provide very detailed documentation of how the determination was made that a project met the requi rements of the section 404(b)(1) Guidelines and the applicable Michigan statutes. Based on the file review and our discussions with staff, we found that approved projects seemed to be in compli ance with the Guidelines. Yet the level of documentation and completeness of the PRRs was extr emely variable and may not have been enough to support the decision had the decision bee n challenged. Typically, when a permit was denied, more extensive documentation of the reason for the permit decision was included in the

denial letter.

The PRRs found in the files we reviewed had only a box to check to indicate that the section 404(b)(1) Guidelines had been met. This fact, coup led with the fact that the PRRs sometimes were not completely filled out, made assessing the appropriateness of the permit decision difficult in some cases. MDEQ has developed and no w uses a new PRR form (dated April 2000). If filled out completely, this new PRR form will do a better job of documenting the factors considered when determining a project's com pliance with the section 404(b)(1)

Guidelines. The new PRR form asks the decision mak er to explain the findings and the final recommendation concerning issuance or denial of the permit. Additionally, the new PRR form includes a section to be completed during field rev iew in order to document the plants at a site and the soils at a site, to describe the hydrology, and to make other notes or comments. This information will better document the existing wetla nd conditions at a site.

Interviews with staff during the file reviews revea led that some field offices have a walk-in permit program. Applicants seeking permits for cer tain minor activities were able to apply directly to those field offices rather than the Per mit Consolidation Unit (PCU) processing system. No guidance outlines when an applicant may apply fo r a permit by “walking in” to a field office and when a permit application must be processed thr ough the PCU. There was no consistency among the field offices with regard to whether or n ot they accepted walk-in applications.

An additional concern with walk-in applications is that they do not seem to be screened for impacts to federally threatened and endangered spec ies or critical habitat. Following EPA’s issuance of the Preliminary Report, MDEQ management has made it clear to all staff that all applications regardless of whether they are receive d at the District Office or are processed through the PCU, are to be screened for potential i mpacts to federally threatened and endangered species and their critical habitat.

28 19 files reviewed were not checked for presence of the PRR form.56



### Conclusions

In general, MDEQ is doing a good job with administe ring its permit program. MDEQ staff are following agency procedures when processing permits ; however, they need to do a better job of ensuring that the PRRs are completed and included i n every permit file for which a permit decision is made. Staff also need to be sure they clearly document site visits and the findings of the site visits, including verification of wetland delineations and documentation of any changes made to the applicant’s delineation. Also, all pho tographs taken during site visits and included in

the file should be labeled.

The majority of files reviewed were complete and in cluded documentation of the permit

decision. Based on information in the files and in terviews with MDEQ staff, we found permits issued were consistent with the section 404(b)(1) G uidelines. Our file review found that MDEQ staff visit the majority of project sites before a permit decision is made. The files also document that staff are often successful in working with app licants to avoid or minimize the project impacts to wetlands or other aquatic resources.



### Comments on Michigan Department of Environmental Qu ality’s Wetland

Identification Manual: A Technical Manual for Ident ifying Wetlands in Michigan

In March 2001, MDEQ finalized its Wetland Identific ation Manual. This manual provides background information and field methods for identi fying and evaluating site characteristics necessary for determining whether or not a site is a wetland as defined by Part 303. MDEQ has adopted administrative rules stating that, under no rmal circumstances, a two parameter approach

shall be used to make a wetland determination. The two parameters used are hydrology and vegetation. This is a departure from the 1987 Fede ral Wetland Delineation Manual, which uses a three parameter approach, considering vegetation, h ydrology and soils to make wetland delineations. MDEQ Wetland Identification Manual d oes, however, state that in situations where there is a predominance of wetland vegetation and n o direct visible evidence of water at or near the surface, the person conducting the determinatio n may use the physical and chemical

characteristics of the soil as an indicator of curr ent or recent inundation or saturation. Although MDEQ manual does not require the use of all three p arameters to establish presence of a wetland, extensive information is provided in the manual for using presence of hydric soils as an indicator of hydrology. This makes MDEQ manual functionally equivalent to the 1987 Federal Wetland

Delineation Manual.

MDEQ manual uses methods to evaluate dominant veget ation, presence of wetland hydrology, and presence of hydric soils which are similar to t he methods used in the 1987 federal manual. The procedures for evaluating presence of wetland o n disturbed or problem sites are very similar to the 1987 federal manual as well. In summary, we have found that MDEQ Wetland Identification Manual is comparable to, and would r esult in the same delineation on a site as57

would, the 1987 Federal Wetland Delineation Manual.58



### Assessment of Coordination under the Endangered Spe cies Act

There are currently 23 federally-listed threatened or endangered (T & E) species that occur in Michigan. In order to screen incoming applications for the potential to affect T & E species, MDEQ relies on their CIWPIS. The CIWPIS database i s tied into the Michigan Natural Features Inventory (MNFI) database which contains the most u p-to-date information on documented occurrences of T & E species. MDEQ staff run a sea rch of the CIWPIS database which checks the township, range and section in which the projec t is located as well as the surrounding eight sections to determine if T & E species have been do cumented in any of the sections in or adjacent to the project. If CIWPIS shows that a T & E speci es has been documented as present at the project site or in the surrounding sections, the fi le is sent to the Michigan Department of Natural Resources (MDNR) Natural Heritage staff who determi ne whether there is reasonable potential for the project to affect T & E species. If there is a potential for an impact, MDEQ staff are notified that the permit application meets the crit eria for federal review, it becomes a “red file”, is put out on public notice and sent to the federal agencies for review.

This process gives the United States Fish and Wildl ife Service (USFWS) an opportunity to review the project and provide comments. With resp ect to T & E species impacts, the USFWS typically recommends denial of the permit, modifica tion of the project, or the addition of permit conditions that will ensure the project will not je opardize a federally listed species or adversely modify or destroy designated critical habitat. The USFWS’s comments are included in the federal comment letter provided to MDEQ by EPA. If EPA objects to the issuance of a permit MDEQ either denies the permit, or works with the ap plicant to resolve the federal issues, including any T & E concerns. The USFWS has found MDEQ to be responsive to comments made by the federal agencies, and that MDEQ takes t he steps necessary to either ensure that a project is modified or that the permit is condition ed in such a way that the potential for impacts to T & E species are removed or minimized (USFWS pe rsonal communication).

While this procedure is working for permit applicat ions that require public noticing, projects which meet the criteria for processing as minor or general permits29 were not always being screened for T & E impacts. The USFWS identified t his as a concern in their October 4, 1999 and April 9, 2003 letters regarding this program re view. In order to address this concern MDEQ, the USFWS, and EPA have been working to develop a p rocedure for reviewing general/minor permit applications for the potential to impact fed erally listed species. The procedure that has been developed by the agencies requires that all pe rmit applications -- including those meeting the criteria for minor/general permits and any “wal k-in” permit applications -- be screened using the CIWPIS system as outlined above. If the screen ing indicates that the proposed project is in the proximity of a known occurrence of a federally listed species, a copy of the application is

29 Under Part 301, activities that are similar in n ature and have minimal potential for causing harmfu l interference can be authorized using a Minor Permit . In Part 303, activities that are similar in natu re, will cause only minimal adverse environmental effects, and will hav e only minimal cumulative adverse environmental eff ects can be authorized using a General Permit.59

forwarded to the MDNR and to the MNFI for additiona l screening. If the MDNR or the MNFI find there is likely to be no impact, the applicati on can be processed as a minor/general permit. If the MDNR or the MNFI determine, based on the nature and scope of the proposed activity, that there is the general likelihood of an impact to a l isted species, MDEQ field staff make a site visit. Depending on the results of the site visit, MDEQ m ay initiate informal coordination (as outlined in the procedures) with the USFWS or, if the MDNR m akes a definite statement that there will be an impact to a T & E species, the application no longer meets the criteria for a minor/general permit and will be processed as a “red” file. Unde r the new procedure, all minor/general permit files resulting in a “hit” in CIWPIS for T & E impa cts must include a worksheet documenting that the project was evaluated for impacts to feder ally listed species.

This draft procedure was distributed to MDEQ field staff in March 2005, and currently is being implemented. MDEQ will be coordinating with the US FWS and EPA regarding the effectiveness of the procedure and has committed to finalizing the procedure by July 2008. With the implementation of this procedure for screening minor/general permits, one of the major

concerns of the USFWS with the State’s section 404 program has been addressed. In order to formally document these procedures, EPA is committe d to working with MDEQ and the USFWS to develop an interagency agreement that outlines e ach agency’s responsibilities regarding such things as notifying the other agencies of the poten tial for impact to T & E species, gathering and providing necessary information, communicating with the other agencies, and methods for resolving differences among the agencies. EPA find s that with the new minor/general permit review procedures in place, MDEQ is doing a good jo b of assessing T & E species impacts under the section 404 program. The development of an interagency agreement and the finalization of MDEQ’s review procedures will forma lly document each agency’s role in the T & E review process.60



### Analysis of Final Agency Permit Decisions in Admini strative Contested Cases

After MDEQ staff in the Land and Water Management D ivision (LWMD) decide whether to grant a permit application, grant a permit for a mo dified project, or deny a permit application, the applicant may seek further review of that decis ion within MDEQ. The applicant does so by filing a petition for a contested case. A conteste d case hearing then is conducted by an ALJ with MDEQ’s Office of Administrative Hearings who, following the hearing, writes a Proposal for Decision. If either MDEQ staff or the applican t file exceptions to a Proposal for Decision,

the decision is then reviewed and the reviewer issu es MDEQ’s Final Decision on the permit application. For a period of time, Final Decisions were made by MDEQ’s Chief Administrative Law Judge; during 1999 the Director of MDEQ withdrew this authority from the Chief ALJ, and now either the Director or his d esignee reviews Proposals for Decision and issues Final Decisions. A Final Decision may embod y one of three possible permitting actions: the decision by MDEQ staff to deny a permit may be affirmed; the decision by MDEQ staff to deny a permit may be overturned and the decision ma ker may order MDEQ staff to issue a permit for a project as described in the applicatio n; or the decision maker may outline the terms of a modified permit which will contain terms and c onditions different than had been contemplated by MDEQ staff, and then order MDEQ sta ff to issue such a modified permit.

Because MDEQ’s Office of Administrative Hearings an d MDEQ Director review decisions of MDEQ permitting staff and render final agency permi t decisions, EPA is analyzing these decisions as part of its section 404 program review . EPA already has identified some weaknesses in Michigan law that render the law as w ritten less stringent than required by CWA section 404 and EPA-promulgated State Program Regul ations. EPA now analyzes whether -- through its final contested case decisions - MDEQ a pplies Michigan legal provisions so as to be consistent with, and as stringent as, federal se ction 404 law. This analysis also considers whether contested case decisions, by applying Michi gan law as written to reach certain factual and legal conclusions, demonstrate ways in which Mi chigan law is less stringent than federal wetlands law (or, alternatively, if the decisions i nterpret the law in a manner consistent with the CWA and regulations).

In EPA’s Preliminary Report, an analysis of contest ed case decisions issued between 1994 and 2000 identified a number of serious concerns regard ing how MDEQ’s Proposals for Decision and Final Decisions were applying important legal c oncepts such as what is a feasible and prudent alternative, what is a wetland dependent pr oject, and who bears burdens of proof and persuasion during contested cases. Please refer to the Preliminary Report for that discussion.

In preparing this Final Report, EPA reviewed final contested case decisions made during 2004.

Almost all of the concerns identified in the Preli minary Report have fallen away. This change is in large part due to a new administrative rule u nder Part 303 that MDEQ issued in April

2000 - R 281.922a - as well as to the ALJs’ and MDE Q Director’s interpretation and application of this new rule (and pre-existing stat utory and rule requirements of Part 301 and Part 303). One issue which continued to concern EP A - despite the fact that R 281.922a addressed the issue - was how the feasible and prud ent alternatives analysis mandated by61

§324.30311(4) was to be undertaken. For a few year s, MDEQ contested case decisions continued to interpret § 324.30311(4) so that a per mit was barred if a feasible and prudent alternative to a project could be affected at the s ubject property, but not if a feasible and prudent alternative could be affected off-site. In early 2004, however, MDEQ Director issued a

Final Decision In re Ocedek , No. 00-05-0040 (Feb. 27, 2004) which, in EPA’s vi ew, interpreted Michigan state law in a manner that was both correct and consistent with federal

law on this issue.

Below we briefly review the current status of conce rns we raised in the Preliminary Report. A

discussion of additional rules which EPA thinks wou ld be beneficial for MDEQ to promulgate under Part 301, as well as Part 303, can be found i n Section 1: Analysis of Legal Authorities, at pages 10-26 of this Final Report.

S ECTION 404( B )(1) G UIDELINES

- B ACKGROUND D ISCUSSION

The underlying question we asked during our analysi s of contested case decisions was whether MDEQ’s Office of Administrative Hearings is assurin g compliance with CWA section 404(h)’s mandate that a State program issue permits which “a pply, and assure compliance with, any applicable requirements of [section 404], including . . . the guidelines established under subsection (b)(1) of this section . . . . 33 U.S.C . §1344(h). A State's obligation to apply the section 404(b)(1) Guidelines is imposed a number of times in the State Program Regulations. For example, 40 C.F.R. § 233.34(a) mandates that be fore each permit is issued the Director of a State agency implementing that State's EPA-approved section 404 program “review all applications for compliance with the 404(b)(1) Guid elines and/or equivalent State environmental criteria as well as any other applicable State laws or regulations.” See also 40 C.F.R. §§ 233.20(a) and 233.23(a) (the former bars a Direc tor from issuing a section 404 permit if it does not comply with the Guidelines; the latter req uires conditions be placed in each permit that will ensure the project's compliance with the Guide lines). Michigan specifically agreed in 1983 (in the MOA signed by EPA and MDEQ's predecessor, t he MDNR) to administer and enforce the 404 program in accordance with the State Section 40 4 Program Assumption Regulations [and] the 404(b)(1) Guidelines . This obligation to ensu re that all permits are consistent with the 404(b)(1) Guidelines applies to all of MDEQ, includ ing the Office of Administrative Hearings; and the obligation exists whether or not a permit d ecision was issued as a consequence of contested case proceedings. A State’s failure to c omply with the section 404 program MOA can be a basis for program withdrawal. 40 C.F.R. § 233 .53(b)(4).

As explained earlier, the Attorney General asserts in general terms that environmental criteria contained in Part 301, Part 303, and their administ rative rules are roughly equivalent to the section 404(b)(1) Guidelines. As described elsewhe re in this Final Report, the manner in which MDEQ staff applies Michigan’s environmental criteri a -- such as through using the PRR form when examining a proposed project -- seems to be en suring that when MDEQ staff make initial permit decisions, they are actually applying enviro nmental criteria that is equivalent to, and as stringent as, the section 404(b)(1) Guidelines.

By contrast, at the time EPA issued its Preliminary Report, it was clear that MDEQ’s Office of62

Administrative Hearings had repeatedly failed to ap ply Michigan’s environmental criteria in a manner that was consistent with the section 404(b)( 1) Guidelines; in some contested case decisions, the decision maker indicated that he aff irmatively had decided to not apply the section 404(b)(1) Guidelines 30 , despite the urging of MDEQ's representatives both broadly to apply the Guidelines, and specifically to apply section 404-c onsistent positions 31 on issues such as a proposed activity’s wetland dependency and whether feasible and prudent alternatives existed. These decisions were undermining the State of Michi gan’s ability to administer a program that meets the terms of CWA section 404(h) and the State Program Regulations.

P ROCEDURAL R

ULES AND B URDENS OF P ROOF

In the Preliminary Report, EPA recommended that MDE Q promulgate administrative rules that specifically would apply to the conduct of MDEQ per mitting contested cases, and the legal standards which apply in deciding whether a Part 30 1 or Part 303 permit must be issued by MDEQ.

One reason for this recommendation was EPA’s concer n that an ALJ would accept information and evidence which had not been before MDEQ staff w hen staff considered a permit application,

and that an ALJ would use that new information to f ashion a new project and order MDEQ staff to issue a permit for that new project; such a prac tice created a real risk that the public would not

have been able to submit comments as to the new sco pe and impact of the project. Recent MDEQ decisions, however, do not embody this practic e and seem to eliminate our concern. See

e.g. , In re Dubuc , No. 02-40-0016-P (Oct. 8, 2004) (applicant cannot change nature of proposed activity during the contested case hearing process and argue a different project is a feasible and prudent alternative); In re Scheer , No. 01-20-0005-P (Apr. 13, 2004) (ALJ found appli cant failed to rebut regulatory presumption that building on up land would have less adverse impact and failed to bear burden of proving a feasible and pru dent alternative did not exist, but the ALJ gave the applicant a chance to file a new application wi th acceptable plan for the alternative identified during proceedings). Accord In re Jurries , No. 02-70-0063-P (Aug. 24, 2004).

30 See In re Carabell, No. 93-14-602 (Sept. 30, 199 8) (in Final Decision, Chief ALJ stated only issue before him was whether applicant should be given St ate permit; the Chief ALJ ordered MDEQ staff to iss ue a Part 303 permit despite awareness that federal agencies’ objections were unresolved and applicant would hav e to seek a section 404 permit from the Corps). See also In re CCMS Assocs., Inc., No. 97-04-0138 (Oct. 10, 2000) (in Final Decision MDEQ Director endorsed ALJ’s refusal to co nsider project’s compliance with section 404 or the Guidelines, and ordered issuance of “State-only” Pa rt 303 permit in light of EPA’s outstanding objecti ons, reaching conclusion of law that “issuance of a Part 303 perm it does not negate the requirement for the Petition er to obtain all other necessary permits” such as a section 404 perm it from the Corps; In re Prado, Inc., No. 96-08-008 8 (Mar. 1, 1999) (Final Decision ordered issuance of “State-on ly” Part 303 permit). Cf. In re Schultz, No. 91-5- 160W (Nov. 25, 1996) (ALJ did not let MDEQ staff testify about section 404(b)(1) Guidelines). 31 Again, section 404(h) and the State Program Regu lations does not require a State to apply the Guide lines themselves, rather, it merely requires that State p ermit decisions be consistent with section 404 law. MDEQ ALJs and final decision makers could apply Michigan laws and regulations in ways that are consistent with f ederal section 404 law. In Section 1, we explain that MDEQ has ag reed not only to make certain specific amendments t o applicable administrative rules, but also to incorp orate, by reference, the section 404(b)(1) Guidelin es.63

Another reason for our recommendation was that, in a number of pre-2004 contested case decisions, the ALJ made no explicit finding that th e applicant had met its burden of proving that unacceptable adverse environmental impacts wou ld not result, and it was unclear whether the applicant actually had borne the necessary burd en of proof. In fact, in many pre-2004 contested case decisions, it seemed clear that the ALJ placed the burden of proof on MDEQ staff, demanding that they prove facts such as whet her a proposed activity would cause unacceptable adverse environmental impacts, or that there was a

feasible and prudent alternative. Not only did these decisions misplace the burden of proof, but they failed to demonstrate that the facts in a particular situatio n were such that issuing a permit would comply with the section 404(b)(1) Guidelines or equ ivalent State environmental criteria. This occurred despite the direction in both Part 301 and Part 303 that MDEQ not issue a permit unless it finds that the applicant has established certain facts, including that unacceptable adverse environmental impacts will not result from a discharge.

Effective January 28, 2003, MDEQ now has administra tive rules establishing contested case procedures. R 324.1-324.75. These rules should en sure that final permit decisions made by the Office of Administrative Hearings apply either the section 404(b)(1) Guidelines or equivalent State environmental criteria in such a way that the principles of the Guidelines are respected. See particularly R 324.64 (burden of proof) and R 3 24.74 (standards for final decision maker).

W ATER D EPENDENCY AND F EASIBLE AND P RUDENT A LTERNATIVES

In determining whether to issue a dredge and fill p ermit, two major issues that must be resolved are whether a proposed activity is “wetland depend ent” (water dependent, under federal law) and whether there are feasible and prudent alternat ives to a project as proposed (practicable alternatives, under federal law). As discussed in EPA’s Preliminary Report (see pages 58-65), many contested case decisions contain erroneous fin dings and conclusions on both of these

issues. Yet the contested case decisions issued du ring 2004 - both Proposals for Decision and

Final Decisions - do not contain such erroneous fin dings and conclusions. Therefore, MDEQ’s CWA section 404 permit decisions issued as a result of contested case proceedings no longer reflect substantial inconsistency with federal law on these two issues. Following is a brief

discussion of the issues.

The federal legal standards on these two issues are established by 40 C.F.R. § 230.10(a). Michigan’s parallel standards are set forth in Part 303: “[a] permit shall not be issued unless the applicant also shows either . . . : (a) The proposed activity is primarily dependent upon being

located in the wetland . (b) A feasible and prudent alternative does not exist.” § 324.30311(4).

In many contested case decisions that were issued d uring the 1990s, ALJs and MDEQ’s final decision makers repeatedly found that, if an applic ant’s proposed activity could not be built on the applicant’s chosen parcel without necessitating discharges to, and filling of, “the wetland” located at the chosen parcel, then the project was wetland dependent. There are numerous decisions concluding that building a house or other structure is wetland dependent -- meeting the permit criteria of § 324.30311(4) -- because the p arcel chosen by the applicant is largely wetland and the project chosen by the applicant is designed such that it can only be constructed on that64

parcel if wetlands are filled. See the Preliminary Report, pages 60-61, for case analyses.

It appears that this view of the wetland dependency test began with the 1992 contested case

decision In re Brammer , Nos. 88-6-500 and 90-6-159W (Sept. 28, 1992). Th e presiding officer

in Brammer

rejected MDEQ staff’s (correct) argument that an a ctivity is wetland dependent if it is the type that can be performed only in a wetland . The conclusion in Brammer , and its perpetuation by presiding and reviewing officers fo r years afterward, was rooted in the flawed wording of the wetland dependency provision at § 32 4.30311(4). As explained by the Chief ALJ in another contested case: “The operative term in [ § 324.30311](4)(a) is ‘being located in the wetland’. The plain and unambiguous meaning of thi s term is whether the activity must extend into the portion of the parcel which is wetland. I f the entire parcel is wetland, the activity must occur in it so as to allow a use of the parcel. If , as in this case, the existing upland is not large enough to accommodate the feasible and prudent alte rnative, impact on the wetland is unavoidable. Therefore, the proposed activity is p rimarily dependent on being located in the

wetland.” In re Carabell , No. 93-14-602 (Sept. 30, 1998).

During 2004, by contrast, not a single Final Decisi on issued by MDEQ contained an incorrect

conclusion - or a conclusion inconsistent with fede ral law -- as to whether a proposed activity was wetland dependent. See , e.g. , In re Owens , No. 002-46-0072-P (Oct. 12, 2004) (residential development is not wetland dependent); see also , In re Thomas , No. 99-10-1118-P (Mar. 15, 2004) (in Final Decision, Director corrected ALJ’s conclusion that building a home was wetland dependent, noting that interpretation was common pr ior to promulgation of R 281.922a, even though statute’s wording always has been plain and unambiguous).

Nonetheless, EPA still has a tangential concern abo ut Michigan’s wetland dependency test. On its face, Part 303 seems to preclude a feasible and prudent alternatives analysis if the primary purpose of a proposed activity is deemed to be wetl and dependent; in a recent Final Decision, MDEQ Director confirmed that this is the correct re ading of Part 303's § 324.30311(4): after the Director found that cranberry farming is a wetland dependent activity, he concluded, given this, it is unnecessary to reach the question of whether the Applicant has shown a feasible and prudent alternative [under 30311(4)(b)] does not exist. In re Huggett , No. 90-09-257W (Mar. 31, 2005) (page 39). By contrast, under federal law, even pr ojects deemed water dependent must undergo an alternatives analysis to determine if there exis ts a less-environmentally damaging alternative (a feasible and prudent alternative under Michigan law). 40 C.F.R. § 230.10(a)(3). An acceptable alternative may eliminate discharge to w aters of the United States, or it may entail discharges which cause less harm to the aquatic eco system and the environment as a whole, as long as the alternative also is technically and fin ancially feasible and consistent with overall project purposes. This Final Report already has su bstantially discussed this issue, when it discussed the need to minimize the impacts of even wetland-dependent discharges, see pages 22-23. We reach the same conclusion regarding the need for a corrective action as we did at the end of that discussion: although we would prefer th at Part 303 be amended, we will monitor MDEQ’s administration of the program to see whether , after the section 404(b)(1) Guidelines are incorporated by rule into MDEQ’s permit decision ma king process and criteria, wetland dependent discharges are examined for the availabil ity of feasible and prudent alternatives,65

despite the wording of § 324.30311(4). 32

We now turn to the treatment of the feasible and pr udent alternatives analysis in the contested

case decisions. The reader will recall that federa l law requires that if an alternative to a project as proposed in a permit application is practicable (fe asible and prudent), is consistent with overall project purposes, and will cause less harm to the a quatic ecosystem without creating other significantly adverse environment effects, the disc harges associated with the proposed project shall not be permitted. EPA observed, in the Preli minary Report (see page 61), that ALJs from the Office of Administrative Hearings and the final MDEQ decision maker had correctly applied this principle in most contested cases. See , e.g. , Prado , No. 96-08-0088 (Mar. 1, 1999) and In re

Charfoos and Co. , No. 87-14-824W (Aug. 29, 1996) (both decisions he ld that an alternative need be economically feasible only; an alternative can b e feasible without maximizing applicant’s profit). See also In re Testolin , No. 98-08-0064 (Mar. 19, 1999) (explaining that t he alternatives analysis must objectively examine whether a particu lar alternative is economically achievable; it is not to examine the subjective matter of an appli cant’s financial resources and ability to perform the alternative). Contested case decisions issued during 2004 continue to adhere to these section 404-consistent principles. See e.g. , In re Dubuc , No. 02-40-0016-P (Oct. 8, 2004) (denied application because MDEQ staff had identifi ed alternative parcels where project could occur, and, despite applicant’s stated desire to on ly develop the chosen parcel; fact that applicant might realize a lower profit if it used an alternat ive was not determinative under R 281.922a); cf

. In re Zielinski , No. 01-66-0072-P (July 29, 2004). In cases where a permit is granted, the final decisions issued during 2004 appear to make an hone st effort to minimize environmental impacts by making project modifications (but see pages 22 and 61-62 of this Final Report, regarding minimizing impacts of wetland-dependent projects). The Huggett Final Decision already referenced, which was issued during March 2005, tre ated this issue consistent with the 2004 contested case decisions; in Huggett , the Director found that a significant reduction i n the acreage of a cranberry farming operation was pruden t (as well as feasible) because an operation of that size was commercially viable, even though i t would not achieve applicant’s profit goals. In re Huggett , No. 90-09-257W (see pages 14-15).

In the Preliminary Report, EPA also discussed MDEQ Director’s Final Decision in In re

Knowles , No. 98-06-0210 (Mar. 14, 2000) (Preliminary Repor t, pages 64-65). In Knowles

, MDEQ Director determined that the feasible and prud ent alternatives analysis imposed by § 324.30311(4) - as opposed to the feasible and pru dent alternatives analysis imposed by § 324.30311(2) - should be applied only to the site chosen by the applicant; the effect of this

32 In the Huggett Final Decision, MDEQ Director ext ensively analyzed whether a feasible and prudent alternative location - including a substantially re duced footprint for the project and discharges - ex isted as compared to the discharges that would occur as proposed in t he Part 303 permit application. The Director enter ed into this analysis, ultimately authorizing a permit for a sub stantially reduced project, pursuant to S 324.30311 (2), before his analysis had reached the mandates of S 324.30311(4) . While the result of this analysis in Huggett may have been that feasible and prudent alternatives for a wetlan d dependent project were considered the same as the y would have been under federal law alone, such is not the inevi table result of applying the statutory mandates of S 324.30311(4) in combination with S 324.30311(2). See our discus sion of this issue at pages 22-23 and note 25 of th is Final Report.66

interpretation of how the alternatives analysis/ana lyses under § 324.30311 is/are to be conducted is that even if a project could feasibly and pruden tly be performed at an alternative location, a Part 303 permit is not absolutely unobtainable; rat her, the existence of a feasible and prudent alternative location will be one of many factors to be considered by MDEQ during the balancing it is to perform in determining, under § 324.30311( 2), if a project will cause an unacceptable disruption to aquatic resources. By contrast, the availability of any other type of a feasible and prudent alternative (e.g., an alternative method, c hanging the scope of the project) would be a basis for denying a Part 303 permit for any non-wet land dependent project, pursuant to § 324.30311(4). In the Preliminary Report, EPA not ed that this ruling was directly contrary both to the Guidelines' alternatives analysis - which ca ll for minimizing a project’s reasonably foreseeable adverse impacts to the aquatic environm ent, 40 C.F.R. § 230.10(a) - and the Guidelines's requirement that no permit be issued i f it will cause a significant degradation of the waters of the United States, 40 C.F.R. § 230.10(c). See 40 C.F.R. § 233.20(a). The Knowles ruling also seemed to be unsupported by Part 303 it self. (EPA also noted that Knowles may have been the first time that MDEQ had announced, or app lied, this interpretation of § 324.30311.)

Two years after the Knowles decision, in September 2002, MDEQ Director issued a Final

Decision that re-announced the conclusion that the feasible and prudent alternatives test of § 324.30311(4) did not apply to alternative project locations, but was to analyze only the availability of on site alternatives. That Final D ecision was issued in In re James , No. 00-38- 0027-P (Sept. 25, 2002), and it specifically made clear that this interpretation of § 324.30311 applied despite the promulgation of a new administr ative rule, R 281.922a. 33 The James decision engendered serious concern within EPA, for awhile. But that decision was overturned by MDEQ Director on February 27, 2004, in the contested cas e of In re Ocedek , No. 00-05-0040. In Ocdek, the Director held that “§ 30311(4)(b) unambiguously requires that any alternative, whether it is on site or off-site, be utilized if it is > feasible and prudent’", and directed MDEQ staff to consider off-site alternatives when applying the mandates of § 324.30311(4) to a permit application. This specific ruling of Ocedek was repeatedly applied to Part 303 contested cases decided during

2004. Due to the fact that the Ocedek ruling now represents current Michigan law, and th e fact that the ruling is consistent with federal CWA sect ion 404 law, EPA concludes that, with regard to this subject, Michigan’s section 404 program is satisfactory under CWA section 404(h) and 40 C.F.R. part 233. Furthermore, as a body, the 20 04 decisions reflect a more careful and thoughtful approach to analyzing not only project a lternatives, but also all of the criteria in § 324.30311. EPA, of course, will review future co ntested case and state court decisions to see if

the Ocedek

ruling continues to be applied.

Another aspect of the alternatives analysis that we should briefly revisit, as it was discussed in the Preliminary Report, is the misconception hel d by ALJs that a feasible and prudent alternative to a proposed activity cannot be “no ac tion” (Preliminary Report, page 64). We

33 The Director, as support for his conclusion, cit ed to the decision in Brammer, Nos. 88-6-500 and 9 0-6- 159W (Sept. 28, 1992), while the ALJ, who had come to the same conclusion, had cited to the decision i n Knowles, No. 98-06-0210 (Mar. 14, 2000).67

observe that this misconception has not been applie d in any recent contested case decision; consequently, it does not seem to be a current prob lem in MDEQ’s administration of the section 404 program.

In the Preliminary Report, EPA expressed concern as to a rule of interpretation utilized in contested case decisions for Part 301 permits (Prel iminary Report, page 62). Specifically, if a Part 301 permit application for a proposed activity which the decision maker finds would have no environmental impact, or would have a de minimis environmental impact, then a feasible and prudent alternatives analysis is not t o be performed. 34 (It appears that MDEQ permitting staff applies this same rule when proces sing a Part 301 permit.) This “rule” is rooted in a Part 301 administrative rule, R 281.814 , with the rationale that, if a discharge will have no adverse environmental impact, then a feasib le and prudent alternative which would cause less impact cannot exist; conducting a feasib le and prudent alternatives analysis would serve no end. After examining decisions that apply this “rule”, EPA now concludes that it seemingly has not been applied to factual situation s other than those where there was actually no environmental impact expected to be caused by a proposed activity (or a very minor impact). So, although there is no federal counterp art to this MDEQ “rule” of interpretation - federal law provides that any discharge to waters o f the United States shall not be permitted unless the permitting agency determines that no les s harmful alternative exists - as applied, EPA cannot find that it renders the Michigan sectio n 404 program less stringent than federal

law. 35

P UBLIC T RUST AND E NVIRONMENTAL I MPACT R EVIEW UNDER P ART 301

Although EPA did not discuss, in the Preliminary Re port, the issue of how review of environmental impacts from projects to be permitted under Part 301 is mixed up with the concept of adverse effects to the “public trust” as referen ced in § 324.30106, we would like to briefly discuss the issue in this Final Report. Section 32 4.30106 is worded in a way that makes its interpretation somewhat difficult. The first sente nce of the section states that [MDEQ] shall issue a permit if it finds that the structure or pr oject will not adversely affect the public trust or riparian rights. While this sentence does not seem to reference an environmental impact review, other wording in § 324.30106 - particularly the se ntence “[MDEQ] shall not grant a permit if the proposed project or structure will unlawfully impai r or destroy any of the waters or other natural resources of the state” - has been construed by Mic higan to require just such an environmental impact review. Furthermore, MDEQ final decision ma kers turn to administrative rule R 281.814 as providing the framework for that review; R 281.8 14 bars issuance of a Part 301 permit unless impacts to the environment are found to be minimal and no feasible and prudent alternative to a project is available. These legal constructions of the requirements of § 324.30106 and R 281.814

have been utilized in a number of contested cases d ecisions issued through 2004. See , e.g. , In re

34 This “rule” appears to first have been pronounce d in the contested case decisions In re Kreeger, No . 90- 9-409 (Feb. 10, 1994), and In re Schenden, No. 94-1 0-733 (Mar. 31, 1998). 35 EPA does ask MDEQ to consider whether providing some guidance (perhaps even a new administrative rule) on the issue of what is a “minimal” adverse i mpact to the environment under R 281.814 would be b eneficial.68

Taylor , No. 01-10-0049-P (Apr. 2, 2004). Finally, MDEQ h as defined the public trust as including the paramount concern of the public in pr otecting, and the duty of the State to protect, “the air, water, and other natural resources of [th e State] against pollution, impairment, and destruction. R 281.811(g).”

Notably, MDEQ continues to apply this approach when reviewing applications for Part 301 permits, despite a 2001 State court decision which held that once the first sentence of § 324.30106 was satisfied - and MDEQ finds that a p roject will not adversely effect either the common law concept of the “public trust” or riparia n rights - then MDEQ must issue a

Part 301 permit, without any consideration of other environmental effects of the project. Oceana County Bd. of Road Comm’rs v. Dep’t of Env’tal Qual ity , 2001 WL 1585291 (Dec. 11, 2001) (per curiam). Another significant aspect of this S tate court’s reference to the common law concept of “public trust” is that only navigable-in -fact waters (i.e., waters on which logs are capable of floating) are impressed with the public trust; consequently, under this court’s reasoning, a Part 301 permit would always issue for projects in non-navigable lakes and streams as long as riparian rights were not adversely affec ted. 36

As long as MDEQ contested case decisions continue t o apply the environmental review analysis under Part 301 as they have in the past, and as lon g as no other State court adopts the reasoning of the nonprecedential and unreported Oceana decision, EPA does not find this public trust issu e to be in any way rendering Michigan’s section 404 p rogram inconsistent with federal law. We will, however, keep close watch on future administr ative and civil decisions on this subject. Lastly, while we realize that MDEQ and the Attorney General’s Office are aware of this issue and have attempted to deal with it, it may be appro priate for MDEQ to issue further guidance or perhaps a rule on how environmental impacts of a pr oject are to be considered as part of any trust analysis, or request that the Attorney General issu e an opinion on this issue.

O THER C ONCERNS

Here we briefly mention a few continuing concerns t hat EPA has with Michigan law which, perhaps, are made most visible to the public throug h contested case decisions interpreting that law. One such concern is the confused and varying approach to the cumulative effects which a proposed project may have; this concern is discusse d in greater detail in the Legal Authority Concerns section of this Final Report, at pages 23- 24.

Another concern is how MDEQ addresses permit applic ations which have been made after unauthorized discharges already have occurred; in m any contested case decisions over the years, MDEQ has repeatedly held that such unauthorized dis charges cannot be considered under the “unlawful” language of Part 303. EPA’s proposal fo r how MDEQ might effectively deal with

36 Although contested case decisions likewise state that only navigable-in-fact waters are impressed w ith the public trust, in applying the first sentence of § 324.30106, those decisions go on to perform an e nvironmental impact review, using R 281.814.69

unauthorized discharges at the permit application s tage is mentioned in the Enforcement and Compliance Review section of this Final Report, at page 75.

C ONCLUSION

In general, the proposals for decision developed by MDEQ ALJs, as well as the Final Decisions issued by MDEQ Director, during 2004 reflect better adherence to state statutory and regulatory requirements and standards, properly apply rules pr omulgated in the last few years, and show a greater thoughtfulness in following procedures and considering the evidence presented - or lack of evidence - in a contested case proceeding. One result has been MDEQ permit decisions which are consistent with section 404 and provide protect ion of waters and wetlands that is equivalent to the protection provided by section 404 and its G uidelines. Moreover, MDEQ is continuing efforts to develop rules, guidance, and procedures that will address potential issues that still exist (for example, identifying the geographic area to be considered when MDEQ determines if a feasible and prudent alternative location exists, s ee Ocedek

.

Based on the corrective actions already taken by MD EQ, the improved character of MDEQ’s contested case decisions as briefly discussed above , and the corrective actions which MDEQ has committed to take in the future, EPA finds no basis to conclude that the contested case process is undermining Michigan’s administration and enforceme nt of its CWA section 404 program or provides grounds for EPA to initiate program withdr awal proceedings. EPA will examine

contested case decisions issued in the future to mo nitor whether this continues to be true.70



### Enforcement and Compliance Review

A central part of EPA’s review of MDEQ’s section 40 4 program was the evaluation of their enforcement and compliance program. The purpose of the review was to identify and evaluate the strengths and weaknesses of MDEQ program. Our evaluation also will provide an “informal” determination regarding whether Michigan has mainta ined an effective program that initiates “timely and appropriate” enforcement actions, which results in wetland restoration and

deterrence of wetland violations.

The scope of the evaluation consisted of a review o f 327 citizen complaints received by MDEQ reporting wetlands filled without permits. With re spect to these citizen complaints, our review focused upon whether MDEQ investigated the complain t and whether an appropriate response was completed. In addition, our review examined 55 enforcement actions pursued by MDEQ to obtain injunctive relief. The types of injunctive relief obtained by MDEQ were: (a) issuing cease and desist orders to stop the violation; (b) reques ting information on the project activity; (c) ordering removal of the discharged materials and re storation of the wetlands; (d) referring the violation for criminal or civil prosecution; and (e ) mitigating environmental impacts.

EPA-MDEQ MOA requires that MDEQ take “timely and ap propriate” enforcement actions against persons violating permit conditions and aga inst persons conducting unauthorized discharges of dredged or fill materials into waters of the United States. Although EPA-MDEQ MOA does not explicitly define the parameters for “ timely and appropriate” action, for purposes of our review we have relied upon guidance which EP A prepared regarding enforcement management systems (EMS) authorized under section 4 02 37 of the CWA. That EMS guidance provides that the process of determining whether an alleged violation is actionable, i.e., an enforcement action is warranted, should not exceed 45 days. It also notes that violation of an order issued by a State is a serious violation; a v iolation of a State enforcement order should be treated as a significant noncompliance issue when t he violator fails to provide required reports more than 30 days after the compliance date, fails to initiate construction or attain final compliance within 90 days of the compliance date, o r fails to comply with the order for two months during two consecutive quarters.

In addition, the timeliness and appropriateness of MDEQ enforcement responses, federal regulatory requirements at 40 C.F.R. part 233 provi de that MDEQ will maintain minimum specifications for a State-assumed program. These specifications include the following:

1) Maintain a program designed to identify persons who have failed to obtain a permit or who have failed to comply with conditions of an iss ued permit; 2) Have the legal authority to enter any site to perfo rm an inspection and otherwise to investigate compliance with EPA-approved program; 3) Provide for inspections to be conducted, samples to be taken, and other information to be gathered, in a manner that allows their use in enfo rcement proceedings;

37 The Enforcement Management System for the Nation al Pollutant Discharge Elimination System, 1989.71

4) Maintain a program to receive information from the public regarding alleged violations and ensure that the information is properly conside red; 5) Have authority to restrain any person from engaging in unauthorized activities; 6) Sue to enjoin any threatened or continuing violatio ns and assess or sue to recover civil penalties and criminal remedies; 7) Investigate and provide written responses to all ci tizen complaints submitted pursuant to State procedures, and 8) Provide public notice of and at least 30 days for p ublic comment on any proposed

settlement of a State enforcement action.



### R EVIEW OF 

### C ITIZEN 

### C OMPLAINTS

EPA's review of citizen complaints reporting wetlan d filling to MDEQ was completed over a five-month period. Each MDEQ district field office was evaluated between April 1999 through August 1999. EPA randomly selected 327 complaint f iles.

MDEQ district field offices receive a significant v olume of citizen complaints. Annual reports prepared by MDEQ suggest that MDEQ investigated an average of 800 citizen complaints each year from 1990 through 1997. Based upon the number of citizen complaints reviewed by EPA,

our evaluation finds that the extent and number of complaints have remained constant. The

district field offices make a concerted effort to a ddress these complaints.

According to the minimum requirements, we conclude that MDEQ has maintained a program designed to identify persons who have failed to obt ain a permit or to comply with conditions of an issued permit. In accordance with the 2001 MDEQ Co mpliance and Enforcement Guidance Manual (2001 Manual), each district field office ma intains a uniform citizen complaint file dedicated solely to recording violations reported b y the public. When the district field office receives a complaint, the complaint is assigned a u niform docket number which indicates the year, a county number, and the file number for the compla int. MDEQ tracks the complaint through the docket system. The district field office then assi gns the complaint to an inspector who decides whether to inspect the site.

In the 327 complaint files which EPA reviewed, mostcitizen complaints were routinely followedup by inspections. Generally, we found some type o f documentation in the complaint file, such as handwritten notes, a topographic map or township ma p of the site, site photographs, schematic drawings, or a partially completed Project Review R eport (PRR), showing that an inspector had

visited the site. Because the district field offic es are close to the violations, our review found th at MDEQ has been responsive to citizen complaints by c onducting inspections within 60 days -- and routinely within two weeks. Delays in the complain t investigation were rare, and when delays occurred, they generally were due to weather condit ions or other workload priorities, such as permit reviews.

Our 1999 review of citizen complaint files found se veral issues that needed to be resolved. We routinely found that the file documentation was def icient in accurately recording when MDEQ staff had conducted inspections and the findings of each inspection. The draft procedure manual72

specified that upon completion of an inspection, a Complaint Investigation Report (CIR) was to

be filed. Our file review found that often the CIR was not filled out, and that site visit documentation was poorly recorded and often include d unsigned and undated field reports and undated photographs. Our review also found that in about 50% of the citizen complaint files, PRRs were used to document the observations made by the inspector during the site inspection. While the PRR may have some practicality in documen ting inspections, a completed PRR does not contain the information necessary to record the technical and scientific information to document site conditions of a potential violation. An additional concern was that complaint files were often transferred to the permit processing gro up, processed as after-the-fact permits, and the complaint file closed without any documentation in the complaint file that the complaint had been resolved by issuance of an after-the-fact permit.

The 2001 Manual outlines how initial enforcement re views are to be conducted. If staff determine that a site visit is necessary, the 2001 Manual ide ntifies the minimum information that must be gathered during a site inspection and requires the completion of a CIR form. The new procedures also require all complaints received be logged into the Compliance Tracking Database and tracked

until a final action is taken. In cases where an unauthorized activity is determined to be an activity that may have been permitted, the 2001 Man ual outlines the procedures for sending an after-the-fact letter advising the violator that w ork may be permittable, but that a permit application must be submitted for processing. The use of the Compliance Tracking Database will track the final action taken on the violation, incl uding whether an after-the-fact permit was issued. We find that the procedures outlined in the 2001 M anual, if followed, will address our concerns regarding processing of citizen complaint files.



### E NFORCEMENT 

### C ASE 

### F ILE 

### R EVIEW

In January 1999, EPA notified MDEQ of its intent to initiate an informal review of the section 404 program, including the enforcement program. As part of the review, EPA requested that MDEQ provide a cumulative list of enforcement files between 1990 and 1998. The goal was to obtain a list of enforcement actions, including cas es initiated both by the MDNR before the 1995 reorganization and by MDEQ after the reorganization , from which EPA randomly could select

cases for review.

MDEQ could not fulfill our request. MDEQ explained that at the time it was transferring the requested enforcement data from manual data files t o CIWPIS, its new automated information system. However, using annual reports prepared by MDEQ pursuant to the reporting requirements of EPA-MDEQ MOA, EPA requested 87 enfo rcement files be available for our review. During our district field office visits, o nly 23 of the requested files were available. MDEQ explained that most of the enforcement files w ere not in the district field offices, and

either had been closed or had been archived.

EPA scheduled a second enforcement file review in M arch 2000 to supplement the cases it had

reviewed with more recent enforcement actions. MDE Q provided a recommended list of cases in February 2000.73

Overall, our review concludes that MDEQ has maintai ned a satisfactory enforcement program. Michigan has designed the enforcement program to id entify un-permitted activities, initiate timely enforcement responses to violations and, most impor tant, correct violations through either restoration of wetlands or mitigation of a project' s environmental impacts.

Before MDEQ makes a final enforcement recommendatio n, our review found that the district field offices routinely check a computer database, i.e., CIWPIS, to determine whether MDEQ has previously investigated a violation at a site. Aft er determining whether the activity may be a repeat violation, the site inspection and an inspec tion report are routinely completed. Information from the inspection is used to prepare an initial N otice of Violation (NOV). Typically, within one week following completion of the inspection MDEQ is sues a NOV and a request for information about the project activity. The NOVs and informati on requests properly communicate the nature of the violation and require compliance within 30 d ays. Follow-up inspections are conducted by district field offices to determine compliance. St atus follow-up to the information request

included a written record that notified the violato r of noncompliance for failure to submit the required information. Enforcement response was esc alated in an appropriate manner if noncompliance continued. Our review concludes that MDEQ is taking appropriate enforcement actions within acceptable time frames.

One concern that we asked MDEQ to address pertained to the delegation of authority to issue

administrative NOVs and orders to restore wetlands. The draft enforcement guidance had delegated this authority for dual signature by the LWMD and the Law Enforcement Division. Our review noted MDEQ did not consistently follow this procedure in the district field offices. In older enforcement files, we found the District Supe rvisor and the Law Enforcement Division sometimes issued NOVs (according to the guidance do cument), but sometimes NOVs were issued by the field investigator. Conversely, in enforcem ent cases initiated after 1995, our review found that MDEQ issued NOVs under dual signatures of the site investigator and the District Supervisor. We recommended that MDEQ designate MDE Q staff as signatories of NOV letters in order to ensure timely enforcement actions are t aken. In the final 2001 Manual, MDEQ has delegated signature authority for NOV letters to MD EQ professional staff, unless the violation is substantial in which case the District supervisor m ust be the signatory.

MDEQ has made very good use of seeking voluntary co mpliance before undertaking escalated and more formal enforcement. Many violations revie wed consisted of minor wetland fills, covering such activities as driveway access, road e xpansion, or pond excavations. Following issuance of a NOV, the district field offices have been very successful in obtaining either full restoration or partial restoration and appropriate mitigation. In situations where MDEQ recommended mitigation, we did not find mitigation to be less than 1.5:1 (acres mitigated:acres lost). EPA considers this mitigation ratio to be a ppropriate.

An enforcement tool that MDEQ has used occasionally are settlements through administrative consent agreements. EPA's review identified three specific violations pursued by MDEQ and resolved by consent agreements signed by the defend ant and the Chief of the LWMD. In each case, MDEQ expended significant time and effort to negotiate on site restoration, on site74

mitigation, avoidance of future impacts, and specia l environmental projects that included conservation of the resource through deed restricti ons. The negotiated consent agreements generally provided for additional mitigation fundin g through an independent nonprofit organization for resource management assistance. W e believe these types of negotiated agreements provide a reasonable alternative to more formal enforcement and recommend greater

use of this tool.

More formal enforcement cases are referred by MDEQ to the Attorney General's Office for civil prosecution, or to a local county prosecutor for cr iminal prosecution. A number of the cases reviewed by EPA were active at the time. Due to th e sensitive nature of active enforcement cases and MDEQ requests, this Report does not relate spec ific information pertaining to these cases. However, EPA's review did focus upon processes and procedures followed by the district field offices in referring cases for additional enforceme nt.

The process MDEQ follows in referring cases is outl ined in the 2001 Manual. It requires that a memorandum be prepared and transmitted to the Law E nforcement Division. It requires submission of an Office of Criminal Investigation ( OCI) Criminal Complaint Investigation Request, a supplemental information form for OCI re ferrals, the case file, a chronology of events leading to the referral, and other pertinent inform ation including related files or cases, witness names, proof of ownership, and local agency finding s.

We found that referred enforcement cases typically included those violations where the State had not obtained compliance through its administrative process or where a violation was considered repeat or continuing in nature. Each case file tha t we reviewed contained many inspections by the district field offices showing the nature and exten t of the violations. Referrals typically contained very good photo documentation and contemporaneous r eports of the inspector's observations. The inspection reports, including diagrams of the site, a list of vegetation, notes on hydrology and frequent use of photographic logs (dated and signed by the inspector) were routinely complete.

Including two additional elements in the referral d ocument can strengthen MDEQ's enforcement referral. First, to supplement the documentation pr ovided in the State wetland determination and delineation, MDEQ should provide information showin g the nature and extent of environmental harm. The referrals provided good descriptions of the aerial extent of filled wetlands, but also should describe the environmental damage to wetland functions and values. MDEQ should clearly explain when cumulative environmental impac ts support the need for immediate corrective actions. MDEQ has addressed this concern and the 2 001 Manual requires MDEQ staff to highlight impacts to public health, safety, and nat ural resources when referring a case.

A second element that would strengthen the referral process is to include preliminary cost estimates with the restoration plan. This prelimin ary cost estimate would be an analysis of the cost the violator might incur for site restoration and would allow for the consideration of this expense versus mitigation. This element also would be beneficial in determining if the cost of

restoration is within the violator's financial mean s. Where the restoration costs would be reasonable, inclusion of such information in the re ferral would clearly show the feasibility of immediate corrective measures. Finally, a reasonab le cost estimate of required restoration will75

show that sequencing of alternatives for the projec t is impracticable, as required under section 404(b)(1) Guidelines.



### S UMMARY OF 

### C ONCLUSIONS

In response to citizen complaints and follow-up to those complaints, we find that the district field offices did respond to the complaints with a timely site inspection and recommended an initial course of action. MDEQ has finalized its Complianc e and Enforcement Guidance Manual, and in early 2002 training was provided on the manual to a ll district offices. Part of the training included stressing the expectation that all field staff woul d follow the procedures outlined in the 2001 Manual. Although some discretion and variation in investigation and enforcement process should be allowed at the district level, depending on spec ific circumstances, we expect that the majority of actions will follow the procedures established i n the 2001 Manual.

Interviews with district field offices confirmed so me shortcomings, especially the fact that site inspection reports are frequently not fully complet ed and finalized. Consistently, personnel in the

field offices indicated their desire to commit more effort to responding to citizen complaints and developing enforcement actions. Based on the numbe r of citizen complaints reported, timely follow-up on all violations cannot be expected by d istrict staff that also are responsible for issuing permits within short time frames (e.g., 90 days for Part 303 permits). Many district field office staff expressed frustration and communicated a perc eption that MDEQ management would not support enforcement case development; therefore, st aff was reluctant to pursue violations.

During EPA's initial review, we could not determine the extent to which MDEQ management supports development of enforcement cases and respo nse to citizen complaints. EPA notes, however, that during the period of this program rev iew, MDEQ added staff targeted for enforcement and compliance work to several field of fices; the volume of citizen complaints investigated and the number of initial cease and de sist orders issued shows that district field offices are responsive to citizen complaints. More over, since we issued our Preliminary Report, MDEQ has committed to building its enforcement prog ram; it has applied for and received grant funding from EPA to develop an enforcement unit and to hire additional enforcement staff.

Our review concludes that, overall, MDEQ has mainta ined an effective enforcement program that initiates timely and appropriate enforcement action s and, as importantly, provides appropriate injunctive relief through wetlands restoration, wet lands mitigation, and penalties. There is a need to revise EPA-MDEQ MOA to define what is a “timely and appropriate” enforcement action by the State, and to outline a process of referring to EPA repeat and flagrant violations.

Recommendations:

1. In the Preliminary Report, EPA recommended that MDEQ revise and finalize its draft compliance manual, addressing certain components of its program which needed to be strengthened. As of December 2001, MDEQ finalized its Compliance and Enforcement Guidance Manual. EPA has reviewed the 2001 Manual, and we find that MDEQ has addressed the majority of the issues which we raised earlier, and which are summarized below:76

a. Require that a complaint investigation report b e routinely completed following an inspection. Our review found that inspection reports are not ro utinely completed, and that inspectors did not routinely date and initial photographs of violation sites.

●The 2001 Manual requires that a Complaint Site Inv estigation Report be completely filled out for every site visit.

b. Provide that, in cases initiated by citizen com plaints, when inspectors recommend an afterthe-fact-permit, the citizen complaint file be clos ed with a completed PRR, a copy of the public notice, and a copy of the issued permit. Our revie w found no clear reference to complaints closed with recommendations for State permit author ization. The PRR is to be used by MDEQ to show that potential fills will not cause more th an minimal environmental impacts.

●The 2001 Manual requires all complaint files be tr acked through the compliance tracking database, this will ensure that the outcome of all complaints can be tracked. For complaints resolved through the after-the-fact permit process, the violator is required to apply for a permit and the application is then processed according to standard permit processing procedures which include the completion of a PRR form.

c. Support expanded use of administrative consent agreements entered into between MDEQ’s

LWMD Division Chief and the violator to resolve vio lations. In all cases reviewed, EPA found MDEQ’s process in negotiating these consent agreeme nts effectively resolved the violation and

resulted in additional environmental restorations a nd conservation of wetlands.

d. Add a procedure, consistent with a recommendati on from an assistant Attorney General, to ensure that once MDEQ elects to pursue enforcement of a violation the violator is not entitled to pursue other administrative remedies, such as an af ter-the-fact permit or a contested case hearing,

until the enforcement case is resolved. We believe these procedures are critical to sustain appropriate enforcement by MDEQ. Adopting such pro cedures appears to be within the discretion which the Michigan legislature granted t o MDEQ to accept or deny permit applications where discharge activities were conduc ted in violation of Part 301 or Part 303. See § 324.30104(4) and § 324.30306(5).

e. In instances when a violator is allowed to seek an after-the-fact permit, establish procedures for determining when MDEQ should assess whether enf orcement action against the violator has become warranted. For example, if a certain number of months or years have passed and the after-the-fact permit is still being processed, it may be appropriate to conclude that the violator's participation in the permit process has not been in good faith and that an enforcement action

should be commenced.

●Although the 2001 Manual does not identify a speci fic time frame for taking an enforcement action against a violator who has been allowed to s eek an after-the-fact permit, the 2001 Manual does require MDEQ staff to track complaints until t hey are resolved. Use of the complaint tracking system will help staff track cases where a n after-the-fact permit has not been applied for, or where the violator has not expeditiously worked with MDEQ in order to attain after-the-fact77

authorization; thus, the complaint tracking system should facilitate more timely follow up on

these cases.

f. Standardize and provide in the 2001 Manual unif orm guidance to district and field office personnel. The draft enforcement Manual was not co nsistently applied by all district offices and field staff. Consequently, MDEQ staff appeared to be using their own discretion regarding the use of complaint investigation reports and PRRs, a s well as discretion in issuing NOVs, cease and desist orders, etc.

●With the 2001 Manual now in effect, staff have bee n directed to follow the procedures outlined

in the 2001 Manual.

The above-listed issues have been addressed in the 2001 Manual.

2. MDEQ should take affirmative steps to strengthe n its enforcement program. EPA's recommendations in its Preliminary Report were:

a. Complete the transition from manual reporting o f information to an updated and automated

information database.

●MDEQ completed its compliance tracking database du ring 2000.

b. Update and revise EPA-MDEQ MOA to define “timel y and appropriate" enforcement actions by the State, as well as to describe a referral pro cess to EPA for repeat and flagrant violations of

the CWA.

●As MDEQ has agreed to revise EPA-MDEQ MOA, this is sue will be addressed.

c. Include provisions to describe environmental im pacts and environmental harm from violations that MDEQ refers to State attorneys for criminal or civil enforcement. Prior to 2001, the referral procedures had focused on the extent of wetlands im pacted and the extent of culpability

exhibited. Additional documentation of environment al harm should help in getting more cases

filed for criminal or civil enforcement.

●The 2001 Manual requires staff to address environm ental harm issues as part of the case

referral. .

Based upon the interviews which EPA conducted at MD EQ district and field offices, we note that, in the past, staff perceived that MDEQ manage ment did not treat enforcement actions as a priority, and had even discouraged enforcement case development. In the Preliminary Report, based upon our review of the enforcement case files that MDEQ provided, we concluded that MDEQ had pursued enforcement sufficiently to achiev e satisfactory results. We did recommend, however, that MDEQ managers address the issue of en forcement’s priority during in-service training.

●Since the Preliminary Report was issued, MDEQ mana gement has addressed this issue more78

forcefully by committing to the development of an e nforcement unit and to further increasing enforcement staff. In addition, the 2001 Manual pr ovides guidance on rating a violation as being high, medium or low priority



### SECTION 3: RESPONSIVENESS SUMMARY OF COMMENTS

Discussion of Public Comments

In response to the January 7, 2003, Federal Registe r notice, EPA received 26 comment letters or e-mail responses. Commenters included two federal agencies (USFWS and the U.S. Forest

Service 38 ), the Grand Traverse Band of Ottawa and Chippewa I ndians, two county drain commissioners, two representatives of the Michigan Drain Code Coalition, a member of the Indian Mission Conservation Club, and 19 individual citizens. In addition, the Michigan Wetland Action Coalition (MWAC) representing 52 conservatio n organizations provided extensive

comments.

S UMMARY OF C OMMENTS R ECEIVED FROM THE P UBLIC AND R ESPONSES BY EPA

The majority of commenters agreed with the findings of EPA’s review and were supportive of the proposed corrective actions, with several commenter s requesting that the corrective actions be implemented as soon as possible.

Four comments were received stating that Michigan s hould continue to administer the section 404 program. These commenters felt that since the Stat e of Michigan’s program is more stringent than the federal program, Michigan was doing a bett er job of protecting the Great Lakes than would the federal government if it administered the program using federal law.

One commenter requested MDEQ to require permits for draining any wetlands regardless of size. EPA agrees that such an action would provide better protection for wetlands. Because section 404 does not regulate the draining of wetlands, however , such a requirement would be more stringent than the federal program. Therefore, Michigan’s fa ilure to do so does not render its program inconsistent with the requirements of the CWA and E PA’s regulations. EPA can only require the State’s program to be as stringent as the federal program. Therefore, the State must decide whether to require permits for the draining of all wetlands under state law.

Two commenters cited failure of wetland compensator y mitigation as a problem with Michigan’s section 404 permitting program. While EPA acknowle dges that there is a problem with the success of compensatory mitigation developed for th e State’s section 404 program, the National Academy of Sciences (NAS) report “Compensating for Wetland Losses under the Clean Water Act” (2001) identified compensatory mitigation succ ess as a problem on a national level. The

38 We address the comments of these federal agencie s in the next two subsections.79

Corps and EPA have issued a draft regulation to add ress the issues raised in the NAS report regarding compensatory mitigation under the CWA sec tion 404 program. 71 Fed. Reg. 15,520 (March 28, 2005). This regulation should address t he problems at a national level. Region 5 is committed to working with MDEQ to improve compensat ory mitigation performance and to ensure that the State of Michigan remains consisten t with the federal program once federal compensatory mitigation rules are finalized.

Five commenters wanted MDEQ’s enforcement program s trengthened. We received a number of comments desiring that MDEQ receive more funding fo r enforcement, that MDEQ devote more resources to it, and that MDEQ prioritize enforceme nt. One commenter stated that commercial developers often receive after-the-fact permits for unauthorized fill, while private citizens often

receive Notices of Violation rather than after-the- fact permits. EPA’s review of Michigan’s program found enforcement to be adequate, as descri bed in more detail in this document. In addition, Michigan is working to strengthen its enf orcement program and has committed to the development of an enforcement unit and the addition of several enforcement positions. During EPA’s review of the enforcement actions taken by MD EQ, we did not find that private individuals were receiving notices of violation more frequently than developers.

One commenter expressed the concern that MDEQ does not allow enough public participation in the permit process. The commenter indicated that i t had requested a public hearing on a permit application and had been told, by MDEQ staff, that a public hearing was not needed. EPA’s review of MDEQ’s public noticing process found it t o be consistent with the federal requirements. EPA found that, overall, MDEQ was very responsive to requests for public hearings, and that MDEQ held public hearings with much greater frequen cy than does the Corps for projects being

considered for federal authorization under section 404. At least one commenter said that the public is not given an opportunity to comment on re vised applications. The federal regulations, at 40 C.F.R. § 233.32, require that MDEQ provide a pub lic notice when it is considering a major modification to an issued permit, but does not addr ess explicitly whether a new public notice should be issued if a project is significantly modi fied after a public notice is issued and before a final permit decision is made; nonetheless, we inte nd to discuss with MDEQ whether issuing a second public notice in such cases is advisable.

Several commenters requested that the State of Mich igan’s inventory of wetlands in counties with populations below 100,000 expedited so that more we tlands would be protected. As noted earlier in this report, the wetland inventory was completed in 2006.

The MWAC submitted many comments. One comment addr essed the issue of Michigan’s lack of regulatory jurisdiction over isolated wetlands that are located in counties of less than 100,000 people 39 , criticizing the proposed corrective action that M DEQ perform wetland inventories in each such county as Michigan law currently provides as a prerequisite to MDEQ’s having

39 As discussed earlier in this Final Report, CWA j urisdiction extends to isolated Michigan wetlands o nly if the wetlands also were navigable or had a connectio n with interstate commerce other than use by migrat ory birds. Thus, Michigan law may extend jurisdiction over iso lated wetlands which are not subject to CWA jurisdi ction.80

jurisdiction over such wetlands. Other comments ex pressed a desire for greater protection of

small and isolated wetlands. The MWAC asserted tha t having MDEQ perform the wetland inventories was an inadequate and impractical actio n. One drain commissioner made a similar comment. One ground for this comment was skepticis m that the inventories actually would be completed within the five-year time period, conside ring that they had not been performed since 1979 when the Michigan law in question was first en acted. Another ground for this comment was that, to complete the inventories, MDEQ had to noti fy each property owner via the tax rolls, and this would be a costly action that also would requi re the cooperation of local units of government. These commenters also thought that the resulting i nventories would be of little value, as much of the information is available elsewhere. Finally, t he MWAC suggested that a more timely and cost effective action would be amending the Michigan sta tute and addressing jurisdictional issues in the State’s legal definition of wetlands. In respo nse, EPA acknowledges that changing the Michigan statute may be a more timely and cost effe ctive corrective action for the jurisdiction issue - yet, there is no certainty that the Michiga n legislature would amend the statute, nor that the

amendment would be effective at an earlier date tha n the date of completion of the wetland inventories. As indicated in the jurisdiction sect ion of this report, MDEQ has now completed and certified their wetland inventory and EPA considers this action adequate in resolving this scope of jurisdiction issue.

Many commenters agreed with the finding that the St ate’s permitting program included permit exemptions that are not consistent with the federal section 404 program. A number of commenters cited the drainage exemptions as a probl em and four comments were received that supported the elimination of the exemptions for min ing tailings basins under Part 303. A number of commenters concurred with EPA’s findings that Mi chigan’s exemptions for drainage, farming, and construction of tailings basins were less strin gent than the federal regulations and supported EPA’s position that the statute needs to be changed . One commenter suggested that, once the exemptions are remedied, MDEQ consider allowing min or permits for some projects that no longer will be exempt. Commenters also supported t he recommendation that MDEQ seek a formal opinion from the Michigan Attorney General’s Office regarding the effect of drainage ditch exemptions on the administration of Parts 301 and 303. Commenters also supported the development of new rules that prescribe best manage ment practices for utility and pipeline work

in wetlands. The commenters also stated that if MD EQ could not provide assurance of the enforceability of the best management practices, th en the exemption found at § 324.30305(l) and (m) should be deleted. EPA agrees that if Michigan does not provide assurance that it will impose best management practices for the installation of u tilities and pipelines in wetlands, the exemption

will have to be deleted.

In its submitted comments, the MWAC disagreed with EPA’s finding that the absence of an explicit recapture provision does not render the pe rmitting program inadequate. It felt that the absence in Michigan law of an explicit recapture pr ovision does render the permitting program inadequate; it stated that there are several instan ces where the current statutory ambiguity resulted in impacts to water resources, however, they provid ed no examples. MWAC also stated that Michigan would avoid future litigation by adding a recapture provision clarifying that anything not listed as an exemption is not an exemption. Fo r the reasons stated in the Final Report, EPA’s81

position is that Part 301 appears to have provision s that are at least as stringent as the recapture clause of CWA section 404(f)(2), and that the absen ce of an explicit recapture provision in Part 303 does not render the State of Michigan’s CWA sec tion 404 permitting program inadequate because the strict application of exemption provisi ons in Part 303 should prevent the need to rely on any type of recapture provision.

With regard to permitting authority issues, the MWA C concurred with EPA’s concerns regarding Part 301 provisions for minor permits and agreed th at rule changes were needed to ensure that

cumulative adverse effects will be considered befor e general permit categories are established.

The MWAC also agreed with our finding that Parts 30 1 and 303 do not reference all parts of permit conditions that should be included in State- issued section 404 permits, but it felt that EPA’s proposed corrective action was too vague; it proposed that the permit conditions be integrated into the statutes or administrative rule s. In our Final Report we state that we have committed to work with MDEQ to ensure that these co nditions are included in all future permits. It may turn out that the agencies will conclude tha t the only effective way to achieve the goal is to change administrative rules or the statutes, rather than for MDEQ merely to change its internal procedures. Thus, we will keep this public comment in mind. If MDEQ first makes only procedural changes and EPA’s future oversight of th e program finds that MDEQ is not including all conditions mandated by 40 C.F.R. § 233.23 in fu ture permits, then EPA will revisit the need for formally integrating the conditions into rule o r statute.

The MWAC also agreed with EPA’s position that the d ate when a permit becomes effective

should be clarified in administrative rules. It al so agreed with EPA’s finding that Parts 301 and 303 and their administrative rules do not provide M DEQ with full and express authority to modify and revoke permits as is provided in the CWA and it s regulations, and it agreed with EPA’s selected corrective action of requiring MDEQ to pro mulgate administrative rules ensuring that MDEQ has proper authority to modify or revoke a per mit. 40

In its comments, the MWAC specifically requested th at EPA require MDEQ to develop administrative rules that provide authority to expl icitly revoke jurisdictional determinations based on the availability of new information or a change in statutory or regulatory authority. To support its request for this change, the MWAC discussed one situation in which a wetland was filled after MDEQ had determined it was non-jurisdictional; MDEQ later determined that the wetland in fact was jurisdictional, but took no further action with respect to the fill. We think that the corrective actions selected in the Final Report with respect t o permit modification and revocation should provide MDEQ with the authority to revoke a permit based on an incorrect wetland determination if new information becomes available revealing that MDEQ erred. EPA seemingly cannot require any more explicit change in Michigan law than incor porating the bases for permit modification/revocation contained at 40 C.F.R. § 23 3.36(a).

40 In this Final Report EPA has modified its prelim inary conclusions on this issue; still, we conclude that

new administrative rules under Parts 301 and 303 ne ed to be promulgated. See pages 19-20.82

The MWAC agreed with the finding that there is a ne ed to make sure that the Michigan permitting program is consistent with the section 404(b)(1) Gu idelines. One proposed corrective action was to have MDEQ adopt by reference the section 404(b)( 1) Guidelines. MDEQ has committed to taking this corrective action.

The MWAC was concerned about EPA and MDEQ’s content ion that MDEQ can issue a stateonly permit which may not adhere to the section 404 (b)(1) Guidelines. The MWAC said it understood the legal argument, yet felt that the is suance of a state-only permit was confusing to the public and supports the notion that Michigan we tland permits are governed solely by Michigan state law. It must be noted that Michigan permits are based on Michigan state law. In order for a State to assume the CWA section 404 program it, mus t demonstrate that the State’s laws provide the authority specified in CWA section 404(h)(1). E PA agrees that, in the rare instances when MDEQ issues a state-only permit, over EPA’s objecti on, there can be confusion in light of the fact that the Michigan program is supposed to be consist ent with the federal permitting program.

Once the corrective actions outlined in EPA’s revie w of the Michigan section 404 program are implemented, the Michigan program will comply with the requirements of federal law and it is EPA’s expectation that situations will no longer ar ise in which MDEQ decides to issue a stateonly permit. In fact, the federal regulations gove rning State assumption of a section 404 program (40 C.F.R. part 233) recognize that there may be in stances when a state cannot resolve federal objections to a proposed permit; in those instances , the federal regulations provide that the Corps processes the section 404 permit application and ma ke the final section 404 permit decision. 40 C.F.R. § 233.50(j). The situation of a state is suing state-only permits as a widespread practice, potentially undermining the State’s implementation of the section 404 program, does not exist with respect to the State of Michigan’s program

In this same discussion of state-only permits, the MWAC stated that the concept that an MDEQ permit issuance constitutes a state-only action has the unintended effect of reducing the opportunity for citizens to seek judicial remedies when citizens think MDEQ has erred; its most pressing example of this unintended effect is what the MWAC claims is the inability of citizens to seek redress in federal court when federally threat ened or endangered species may be adversely affected by a MDEQ permit decision because that dec ision is considered “state only”. 41 Our response is twofold: first, the MWAC does not provi de any legal research to support its claim that citizens of Michigan have been denied access to fed eral courts to challenge MDEQ permit decisions, and we have declined to perform our own research to confirm the claim; second, if this situation exists, it must be remedied, we think, ei ther by Congress or by the courts, and not by EPA through this program review; indeed, the MWAC d oes not ask that EPA take any specific corrective action, such as mandating a change to Mi chigan law, to effect such a remedy.

The MWAC made a few comments regarding MDEQ’s conte sted case process. While heartily agreeing with EPA that MDEQ - as represented by ALJ s and the Director -- have rendered permit

41 The MWAC does not claim that citizens cannot see k redress in state courts. It is likely that a fed erally listed species also would be a protected species un der State law, and a citizen should be able to brin g a claim under the State’s MEPA statute against MDEQ for failure t o protect that species.83

decisions in contested cases that interpret Michiga n law in a manner inconsistent with federal law, the MWAC critiqued EPA’s proposed corrective action s of promulgating administrative rules to explicate the correct legal standards; the MWAC com plained that promulgating such rules would take too much time, and might not ever become effec tive due to the Michigan legislature’s ability to intervene. The MWAC went on to suggest that EPA take a number of actions that would insert EPA lawyers into MDEQ’s contested case proceedings, including having EPA review all draft contested case decisions. The MWAC agreed with EPA , though, that in contested cases where the original permit decision is overturned or modified, MDEQ provide documentation which supports the final permit decision and demonstrates complian ce with the section 404(b)(1) Guidelines, and therefore 40 C.F.R. § 233.20(a), and Michigan statu tes.

In response to these comments, we note that, since we published our Preliminary Report, almost

all of the concerns we had identified in this area have fallen away. This has transpired in large part due to MDEQ’s enactment of a number of signifi cant rule changes which address such issues as feasible and prudent alternatives and wetland de pendency, and which assigns to the petitioner the burden of proof in contested case proceedings; it also is due to the ALJs’ and MDEQ Director’s interpretation and application of this n ew rule (and pre-existing statutory and rule requirements of Part 301 and Part 303). In general, proposals for decision and final decisi ons issued by MDEQ during 2004 reflect better adherence to Michigan statutory and regulatory requirements and standards, properly apply rules pr omulgated in the last few years, and show a greater thoughtfulness in following procedures and considering the evidence presented in a contested case proceeding. Consequently, during 20 04, these permit decisions were not inconsistent with section 404 and did not provide l ess protection of waters and wetlands than does section 404 and its Guidelines. Moreover, MDEQ is continuing efforts to develop rules, guidance, and procedures that will address troubles ome matters that still exist. A more detailed discussion of the rule changes can be found at the “Analysis of Final Agency Permit Decisions” section of the Final Report. At this time, we thin k MDEQ’s recently-promulgated rules should ensure that final permit decisions made by ALJs and MDEQ Director apply either the section 404(b)(1) Guidelines or equivalent State environmen tal criteria in such a way that the principles of the Guidelines are respected. To ensure that th e new rules are applied in a manner that is consistent with federal law, as is MDEQ’s current i ntent, EPA will monitor future contested case decisions by MDEQ. Such an action was also suggest ed by MWAC..

The MWAC also commented that EPA’s Preliminary Repo rt seemed to ignore citizens’ concerns that they are unable to participate in contested ca se proceedings, specifically because MDEQ ALJs have issued opinions which deny legal standing to t hird parties, thus preventing interested citizens from becoming parties to contested case proceedings , or filing contested cases themselves. These recent ALJ opinions, the MWAC stated, did not compo rt with decisions by the U.S. Supreme Court or the Michigan Supreme Court as to the stand ing requirements for a citizen or group. The MWAC supported its comment with a report by the Mic higan Environmental Law Center (MELC). The MWAC was particularly concerned that c itizens have access to the administrative contested case process because it is a more cost-ef fective way for citizens to be involved in the judicial review of a permit decision, as compared t o filing a case in State court. The MWAC said that it had considered that the contested case proc ess was to provide, at the State level, the84

equivalent of a federally-filed citizen suit under the CWA. The MWAC concluded by asking EPA to recommend that MDEQ promulgate a rule allowing a ny citizen who can meet the standing requirements of Michigan civil law to file a contes ted case and challenge a permit decision.

Our official response to this comment of the MWAC i s that the issue of standing in permit matter adjudications is not identified by CWA section 404( h) or by the State Program Assumption regulations as a component of an acceptable state C WA program. In fact, neither CWA section 404(h) nor EPA regulations require State section 40 4 permit programs to provide for administrative appeals of permits. Consequently, t his issue is beyond the proper scope of our program review, and it is inappropriate for EPA to require, or even to recommend, that Michigan take any corrective action on this issue

.

For the benefit of the MWAC and the readers of this Final Report, however, we provide a brief analysis of the issue of standing in administrative ly-filed cases. We have reviewed a copy of the MELC’s report. The MWAC is correct that recent MDE Q ALJ decisions hold that a person has standing to file a contested case only if that pers on has suffered an actual or threatened injury to an economic or substantial interest, and then go on to find that a “substantial” interest must involve a property or economic interest. Since the MWAC submitted its comments a Michigan appellate court has issued a ruling similar to the contested case decisions of which the MWAC complains: the court ruled that a person who had submitted to MDEQ an application for an afterthe-fact wetland permit did not have standing to fi le a contested case when MDEQ refused to process the application. The court ruled that a pe rson could file a contested case only if he was “aggrieved” as provided by the relevant provision o f Part 303, and that only a person who has suffered harm to a legal interest or a pecuniary or property interest is “aggrieved”. Maxwell v. MDEQ , 264 Mich. App. 567 (2004). The reason for this d isparity in the requirements for “standing” is due to the different nature and quali ty of administratively-filed cases challenging an agency’s permit action and of civil actions challen ging final agency actions on the grounds that the action violates a specific statutory provision that imposes a non-discretionary duty on an agency. In fact, Michigan’s contested case process is not the equivalent of a CWA citizen’s suit; rather, it is comparable to the administrative perm it appeals process administered by the Corps for the federal section 404 program, under 33 C.F.R. pa rt 331. The Corps’ appeals process also allows an affected party to pursue an administrativ e appeal of certain Corps decisions. But at 33 C.F.R. § 331.2, the Corps defines who is an “affect ed party”: “a permit applicant, landowner, a lease, easement or option holder (i.e., an individu al who has an identifiable and substantial legal interest in the property) who has received an appro ved [jurisdictional determination], permit denial, or has declined a proffered individual perm it.” This definition is functionally the same as the standard for who is an “aggrieved party” and ma y petition for a contested case under Part 303 of Michigan law.

The MWAC and other commenters disagreed with EPA’s finding that MDEQ is adequately authorized to, and is observing, the federal requir ements with regard to investigation of citizen complaints. One commenter asserted that MDEQ was s low to investigate citizen complaints, which often resulted in a wetland being degraded be fore MDEQ investigated. As stated in the Review of Citizen Complaints subsection of Section 2 of this Final Report, our review of 32785

complaint files, which included minor complaints, f ound that the State was doing a reasonable job of responding to complaints in a timely fashion.

We received a number of comments criticizing MDEQ’s enforcement efforts, in general. Commenters disagreed with EPA’s finding that MDEQ c onducts an adequate wetland enforcement program, with some complaining that MDE Q issued ATF permits too often, instead of taking enforcement action, and complaining that penalties which were imposed were too low. The MWAC and others urged EPA to require an increas e in enforcement activity.

Commenters also stated that they did not think that MDEQ was adequately monitoring permittees’ compliance with permit conditions. The MWAC sugges ted that MDEQ perform compliance inspections for every large project and for a subse t of small projects. EPA agrees that an increase in monitoring of compliance with permit conditions by MDEQ staff would be beneficial to the resource and would strengthen Michigan’s permitting program; however, we have not found that a specific corrective action was necessary to address this problem.

The MWAC cited concerns with EPA’s methodology for conducting the enforcement file review. Since the enforcement files reviewed by EPA were ch iefly major violations, the MWAC did not feel the review was representative of MDEQ’s enforc ement program as a whole. It is EPA’s position that the enforcement files reviewed were r epresentative of enforcement actions taken by MDEQ because the files reviewed were chosen randoml y from a list compiled from MDEQ’s annual reports. In addition, EPA reviewed 327 rando mly selected citizen complaints - many of

which were minor violations - and found that the ma jority of the complaints were routinely followed up with site inspections by MDEQ staff, wi th MDEQ staff taking appropriate follow-up

action.

The MWAC did, however, agree with EPA’s recommendations that EPA-MDEQ MOA be changed to ensure that MDEQ will not oppose interve ntion by any citizen when permissive intervention is authorized by Michigan law. The MW AC also agreed with our finding that Michigan’s laws regarding what constitutes a crimin al violation should be amended to be

consistent with federal law.

Both the MWAC and the Grand Traverse Band of Ottawa and Chippewa Indians provided comments on EPA discussion of the State of Michigan ’s jurisdiction over Indian lands. The Grand Traverse Band agreed with EPA’s finding that MDEQ did not have legal jurisdiction to issue section 404 permits on Indian lands. Yet the Grand Traverse Band criticized EPA’s failure to identify a concrete corrective action to remedy the situation of Michigan’s asserting jurisdiction over a portion of “Indian lands” due to Michigan’s different interpretation of that term. While the MWAC also agreed with EPA’s analysis of this issue, it felt the wetland resource would suffer if MDEQ withdrew its permitting program from Indian la nds. The MWAC stated that there were much broader issues with respect to cooperation bet ween Michigan and the tribes, and it encouraged MDEQ and Native American communities to work together to protect wetland resources. EPA would be supportive of any partners hip formed between Native American communities and the State of Michigan to protect we tland resources. In response to the Grand Traverse Band’s comment, we note that the issue of Michigan asserting jurisdiction over Indian86

lands is an issue that exists in contexts other tha n that of CWA section 404 authority, and we agree that this issue cannot be resolved as part of this program review alone. As discussed earlier, EPA has not found or approved authority by the Stat e of Michigan within Indian country (a term with the same meaning as Indian lands), and thus Mi chigan’s approved section 404 program does not, and has not, applied in Indian Country within the State of Michigan.

The MWAC agreed with EPA’s finding that MDEQ is not currently providing public notices to interested persons in a timely manner and is not ac ting consistent with the requirements of 40 C.F.R. §233.32(c)(1). In April 2004, MDEQ provi ded additional information regarding its public notice procedures for the CWA section 404 pr ogram. We have reviewed this information, and we find that MDEQ now is currently providing pu blic notices to interested parties either by mail or electronically in a timely fashion, and in a manner that is consistent with the federal regulations. For a more detailed discussion of the revised MDEQ procedures, see the public notice discussion in Section 2's Assessment of Prog ram Administration subsection.

Five commenters requested that the provisions to pr otect Endangered Species be made as strong as possible and supported the proposed actions. A number of commenters expressed generalized concern with the protection that the Michigan permi t program afforded federally threatened and endangered species, in part due to perceptions that MDEQ was not performing an adequate review of projects to determine whether T & E species woul d be affected. The MWAC complained that

Section 7 of the federal ESA - which directs the le vel of consultation that a permitting agency must have with the USFWS to determine whether a pro ject seeking a permit might affect any T & E species - was not being complied with during MDEQ ’s processing of section 404 permits; consequently, T & E species within Michigan were no t receiving the same protection as were T & E species in other States. The MWAC went on to sta te that it agreed that there is a need for the development of formal procedures which MDEQ would f ollow in screening all permit applications for impacts to federally listed specie s, with the USFWS being involved at an earlier stage than currently; the MWAC also thought that MD EQ needed to use an improved informational infrastructure to determine when impa cts might occur. In response to the comment about the applicability of Section 7 consultation, we refer to the discussion of that issue in our response to the comments of the USFWS. In response to the other comments by the MWAC on this issue, we refer to our discussion in Section 2 , “Assessment of Coordination under the Endangered Species Act.” The USFWS has felt that e xisting procedures used by MDEQ to screen for potential endangered species impacts by “standa rd” permits is adequate, including MDEQ’s

use of the MNFI database. To address the USFWS’ co ncern that potential impacts from minor permit projects were not being adequately screened, MDEQ has developed, in cooperation with EPA and USFWS, screening procedures to be used for minor and walk-in permit applications (similar to the existing screening procedures for “ standard” permits). These procedures, in draft form, are currently being applied by MDEQ staff and are expected to be finalized during 2008.

The MWAC and other commenters also raised concerns regarding the issue of enforcement of mitigation; the MWAC cited a study which indicated the majority of mitigation sites were not in compliance with permit conditions. With regard to the issue of enforcement of mitigation, mitigation success is a nationwide issue. In a 200 1 report the National Academy of Sciences87

found mitigation projects often fail to meet permit conditions, if they are undertaken at all. MDEQ report on mitigation did document that mitigat ion success is low in Michigan as well. EPA acknowledges that poor mitigation performance i s an issue in Michigan, as well as the rest of the nation. EPA is committed to working with MDEQ to ensure that better mitigation plans are developed and that mitigation performance standards are included as conditions of permits. MDEQ is actively working to ensure that staff inclu de mitigation site design plans and performance standards as permit conditions, and has issued guidance addressing wetland conditions in permits. EPA anticipates that this a ction will help MDEQ in future permit condition compliance efforts.

One commenter stated that EPA needed to require MDE Q adhere to specific deadlines in taking corrective action, and should commence program with drawal proceedings if those deadlines are not met. EPA has already discussed time frames wit hin which the different categories of corrective actions (e.g., promulgating new rules or seeking statutory amendments) are to be

achieved.

P ETITION FOR P ROGRAM W ITHDRAWAL AND R ESPONSE

In Section 3 of the Preliminary Report, EPA explain ed how, during February 1997, the Regional Administrator of EPA Region 5 received a letter and report from the Michigan Environmental Council and the Lone Tree Council; the letter and r eport identified what those organizations perceived to be “serious deficiencies in Michigan’s wetland protection program” which they “believe[d] nullify assurances [Michigan] has made that it can successfully administer section 404 of the Clean Water Act in lieu of the federal gover nment.” These organizations asked EPA to

review their claims and then either insist that Mic higan take specific remedial measures or withdraw the section 404 program. In a February 26 , 1997, response letter EPA told the two organizations that it would consider their submissi on as a petition to withdraw program approval from the State of Michigan; EPA stated that it woul d perform an informal review of the deficiency allegations, as provided for by 40 C.F.R. § 233.53( c)(1), and would determine if cause existed to commence program withdrawal proceedings.

In the Preliminary Report, EPA set forth the reason s why we proposed denying the petition to withdraw program approval. We did so after first d iscussing each of the petition’s deficiency allegations (see pages 89-91 of Preliminary Report). Some of the d eficiency allegations were not appropriate for EPA to consider within its role of federal overseer of Michigan’s administration of the section 404 program. Certain other allegations , though, EPA did consider and EPA is requiring corrective actions which are responsive to those al legations. We note that EPA’s own program review extended to the entire section 404 program, and while we found deficiencies we have not concluded that the program should be withdrawn befo re Michigan has an opportunity to implement certain prescribed corrective actions. Consistent with that conclusion, we determined that the petition of the Michigan Environmental Council and the Lone Tree Council - which mention fewer issues than EPA’s own program review encompassed - did not justify commencing program withdrawal proceedings at this time.

In this final report EPA has now completed its revi ew of the Michigan Section 404 program. In88

this report EPA identified several deficiencies in the Michigan Program that need to be addressed in order to keep the Michigan program comparable to the federal Section 404. The MDEQ has agreed to under take certain corrective actions to address these deficiencies. These actions are summarized in Appendix A. The MDEQ has committed t o completing the corrective actions with in 36 months of the date of the publication of this report. At this time, EPA is not taking a final action on the petition to withdraw the program. Wh en Michigan has completed all of the corrective actions or 36 months have passed, EPA wi ll review the corrective actions taken by Michigan and make a final decision regarding the pe tition to withdraw the program.89



### Summary of Comments from the U.S. Fish and Wildlife Service and Responses by EPA

The U.S. Fish and Wildlife Service submitted to EPA a letter dated April 9, 2003, which

contained its official comments and recommendations on the Preliminary Report and the notice published in the Federal Register on January 7, 200 3. Many of the concerns raised by USFWS

have been addressed either in the Assessment of Coo rdination under the ESA section or in the Legal Authority Concerns section of this Final Repo rt. The comments provided by USFWS are summarized below. Following each summarized commen t, EPA provides its response.

Regarding the scope of jurisdiction provided by Mic higan law over wetlands, the USFWS acknowledges the difficulty that the SWANCC decision created in assessing whether Michigan’s jurisdiction is co-extensive with federal jurisdict ion (that is, the jurisdiction that the Corps could assert in Michigan if the State was not administeri ng the section 404 permit program). The USFWS also understands EPA’s reluctance in seeking any changes to State statutes until the Corps and EPA develop guidance on the jurisdictiona l issues raised by SWANCC and its progeny.

The USFWS notes that the five-acre restriction in Part 303 prevents State jurisdiction from being technically equivalent to federal jurisdiction. To remedy this situation, the USFWS not only supports the State’s commitment to complete the wet land inventories - thus ultimately nullifying the five-acre restriction - but also urges the Stat e to utilize its existing Part 303 authority to ass ert jurisdiction over sub-five-acre wetlands by making the preservation determinations specified at § 324.30301(p)(iii). Notwithstanding the above, th e USFWS expresses concern over the lack of a mechanism to ensure that the State’s program will r emain as rigorous as any program the Corps would administer, even as changes occur to federal section 404 jurisdiction over time. The USFWS does not propose a remedy. The only workable mechanism that EPA can identify to achieve the USFWS’ desired end, or to ensure that M ichigan’s section 404 permit program remains in compliance with the standards set forth at 40 C.F.R. § 233.1, is EPA’s periodic future review of the program, as well as EPA’s ongoing rev iew of individual permits and cases.

The USFWS supports MDEQ’s stated intention of incor porating the federal section 404(b)(1) Guidelines into Michigan law, although the USFWS ur ges that EPA ensure that, if the Guidelines are incorporated only through MDEQ administrative rules, this effectively requires Michiganissued permits to be in compliance with the Guideli nes, as required by CWA section 404(h)(1)(A)(i). EPA agrees with the USFWS.

On a related matter, the USFWS recommends that MDEQ revisit its April 2000 version of MDEQ’s PRR to ensure that it provides for full docu mentation of a project’s compliance with the section 404(b)(1) Guidelines (as well as full docum entation of any determination that the project does not comply with the Guidelines). The USFWS re commends that EPA explicitly require that MDEQ permit files fully document these determinatio ns of compliance or non-compliance with the Guidelines. EPA agrees with the spirit of the USFWS’s comments on this subject; although EPA thinks that the April 2000 version of the PRR d oes call for the documentation that the USFWS seeks - if the PRR is completed by MDEQ staff . EPA will revisit this issue with MDEQ during future corrective action discussions.90

The USFWS remains critical of the inclusion, in Mic higan’s Part 303, of § 324.30307(2) 42 , which provides that if MDEQ “does not approve or disappro ve the permit application within the time provided by this subsection [90 days after a comple te permit application is filed with MDEQ, or 90 days after a hearing], the permit application sh all be considered approved . . . .” The USFWS criticizes this provision of Michigan law because i ts 90-day time frame is inconsistent with the timelines provided for federal review by 40 C.F.R. § 233.50. More substantially, the USFWS asserts that § 324.30307(2)’s 90-day time frame und uly limits the amount of time that federal agencies (including the USFWS) have to review proje cts. The USFWS would prefer either that the 90-day time frame be deleted from § 324.30307(2 ), or that the Michigan legislature amend § 324.30307(2) to make it explicit that if a wetlan ds permit is issued by MDEQ pursuant to the constraints of the 90-day time frame, that wetland permit is considered to have been issued under State law only: it is not a CWA section 404 permit.

We discussed this issue in the subsection on “Subpa rt F - Federal Oversight” of Section 2 of the Final Report, as well as in the “Permitting Authori ties” subsection of Section 1. To summarize, 40 C.F.R. § 233.50 gives EPA 90 days after it recei ves a public notice to provide any comments to the State agency, and the State agency has another 90 days after that to either resolve the proposed project with the permit or to deny the permit. Thu s, if a particular permit application file is deemed by MDEQ to be complete on the same day that the public notice is issued, under section 233.50, EPA and other federal agencies would have 9 0 days to review the permit application with a subsequent 90-day period for MDEQ to resolve any comments made by the Federal agencies. Section 324.30307(2)’s 90-day time frame cuts in ha lf section 233.50's total review and resolution period.

We agree that the 90-day time frame does not mesh w ell with the time frames allowed at

40 C.F.R. § 233.50. But we have concluded that, to date MDEQ, EPA, and other reviewing federal agencies have been able to work together to ensure that -- before the state’s 90-day deadline is reached and a wetland permit issues by operation of law -- either any problems with specific projects are resolved appropriately or MDE Q denies the permit or has the applicant withdraw the application. We appreciate the USFWS’ concern that Michigan’s § 324.30307(2) pressures the USFWS and other federal agencies to r eview wetland permit applications more quickly than does the federal State Program Regulat ions, and we appreciate that this can disrupt the USFWS’ other work commitments. We also agree t hat the optimal situation would be for the Michigan legislature to remove the 90-day time fram e from Michigan law. Consequently, we will again raise this issue with MDEQ. But given the fa ct during in the past 20 years almost no wetland permits have been issued by MDEQ without fe deral objections having been resolved, and considering that MDEQ and the Attorney General’s Of fice assert that they will ensure that any future wetland permit issued by operation of law pu rsuant to § 324.30307(2) > s 90-day time frame will be legally considered to be a “state-only” pe rmit and not a CWA section 404 permit, we do not feel that we can demand that Michigan amend § 3 24.30307(2) to eliminate the 90-day time

42 The statutory authority for this 90-day permit p rocessing deadline was moved by the Michigan legislature effective September 10, 2004. See p. 1 8 of this Final Report.91

frame. If in the future, the 90-day permit applica tion processing time frame causes significant problems with Michigan’s proper issuance of CWA sec tion 404 permits, we will revisit this issue.

The USFWS recommends that MDEQ require that a confi rmed wetland delineation be submitted to MDEQ before a permit application is considered t o be complete. If MDEQ changed its procedures to require that a delineation be submitt ed as part of the application, the USFWS asserts that MDEQ staff would have adequate time to confirm that delineation (presumably, the USFWS is suggesting that, under current practices, applic ants are allowed to submit wetland delineations some time after having submitted a “complete” appli cation, and that MDEQ staff often do not

have sufficient time to confirm those delineations before the deadlines in § 324.30307(2) or federal regulations are reached). Moreover, MDEQ ( and reviewing federal agencies) would be able to better assess the potential impacts of the proposed project, and more information could be contained in public notices. Also, it would be mor e likely that those projects which should be subject to federal review are identified. While we agree that the USFWS’ proposal would be optimal, in our experience wetland delineations usu ally are included in permit applications.

The USFWS comments that EPA needs to submit this in formal program review and EPA's review and potential approval of the State’s corrective ac tions to the consultation requirements of section

7 of the ESA. 43 The USFWS argues that EPA is taking federal actio n which imposes on EPA the obligation to formally consult with the USFWS pursu ant to section 7(a)(2) of the ESA, in order to ensure that these actions are “not likely to jeopar dize the continued existence of a listed species or

result in the destruction or adverse modification o f designated critical habitat.”

EPA disagrees with the USFWS’ positions on this iss ue. We do not intend to enter into formal consultation with the USFWS pursuant to section 7(a )(2) of the ESA regarding the conclusions that we reach in the Final Report, including EPA’s agreement with Michigan about corrective actions. The reason for this position is that EPA does not think that its conduct of this informal program review and its agreements with Michigan on corrective actions which should be taken by Michigan qualify as a “federal action” implicating ESA section 7(a)(2). Once a State section 404 program is approved by EPA, the Clean Water Act ide ntifies a “withdrawal of approval” as the only subsequent formal action by EPA. See 33 U.S.C. § 1344(i). Nor do the State Program Regulations at 40 C.F.R. Part 233 identify our acti ons here as “federal action”; in fact, the conduct of an informal review by EPA sua sponte is not recognized by those regulations. 44

EPA conducted an informal review of MDEQ’s administ ration of the CWA section 404 program and, based upon Region 5's review of both Michigan’ s proposals for future corrective actions and those actions already taken by Michigan, EPA has de cided against initiating formal withdrawal

43 The USFWS also asserts that Michigan’s original assumption, during 1984, of the CWA section 404 permit program should have been subjected to formal consultation with the USFWS, pursuant to Section 7 of the ESA (reiterating positions that the USFWS had state d in letters dated April 8, 1983, and August 19, 19 83). At that time, EPA had determined that approval of Michigan’ s section 404 program was not a “federal action” an d, therefore, EPA did not invoke Section 7's consultat ion requirement. 44 33 C.F.R. § 233.53(c) does note that the Adminis trator can informally review allegations in a withd rawal petition submitted by a third party.92

proceedings at this time. EPA is not “approving” M ichigan’s proposed corrective actions. Consequently, EPA is not taking any federal action with respect to Michigan’s CWA section 404 program; rather, EPA has specifically decided not t o initiate a formal, federal action.

During March 2004, EPA shared its legal conclusions regarding the ESA section 7 consultation issue with the East Lansing Field Office of the USF WS. At that time, the USFWS did not present any additional arguments. EPA emphasized that we h oped to get the USFWS and MDEQ to work together to resolve concerns (which also were expre ssed in citizens’ comments) about whether MDEQ’s administration of the program is potentially jeopardizing threatened and endangered species or their critical habitat (see the subsecti on “Assessment of Coordination under the Endangered Species Act ” of Section 2 of the Final Report). EPA Region 5 will participate in

those future discussions.

The USFWS goes on to express its concerns that, as MDEQ currently conducts its permit program, its process for screening proposed project s to ensure that they will not jeopardize threatened or endangered species, or critical habit at, is inadequate. A major concern is that Michigan (both MDEQ and the MDNR) does not have acc ess to databases with sufficient, accurate information about the presence of species and habitat. The USFWS offers its cooperation to remedy these shortcomings and to wor k with Michigan and EPA to ensure that the USFWS has full opportunity to exercise its role in determining the potential for jeopardy to E & T species or impacts to designated critical habitat. The USFWS would like the Michiganadministered program to functionally provide the sa me level of protection as is provided by the CWA section 404 permit program that is administered by the Corps in 48 states. The USFWS supports the implementation of improved procedures to be followed by Michigan in screening all permit applications (including those for minor and “walk-in” permits and including the establishment of minor permit categories) for poten tial jeopardy effects. The USFWS also supports improved practices for communication among it, Michigan, and EPA on these issues. The USFWS suggests that we develop a new Memorandum of Agreement addressing these subjects, to be signed by Michigan, EPA, and the US FWS.

While EPA disagrees with the USFWS’ legal conclusio ns regarding ESA section 7 consultation, we fully support, and have participated in the deve lopment of T & E review procedures for minor/general permit applications. We trust the st ate and federal agencies will be able to effectively work together and improve procedures an d communication in order to achieve a high level of protection for T & E species and designat ed critical habitat.

As part of its discussion of this issue, the USFWS notes that section 9 of the ESA prohibits the unauthorized “take” of an individual of a T & E spe cies, regardless of whether or not that “take” would jeopardize the species as a whole. The USFWS also notes that the section 404(b)(1) Guidelines do not address the subject of “take”, an d that MDEQ’s issuance of a CWA section 404 permit is not a legal authorization to effect a “ta ke”. Rather, such a “take” may only be authorized by the USFWS’ issuance of an incidental take statem ent, by the USFWS’ issuance of an ESA section 10 permit, or by an exemption from the Enda ngered Species Committee. We agree with the USFWS’ statements on this point: we caution tho se who receive permits from MDEQ that93

those permits should not be considered to be author izations to “take” federal T & E species..

Other than the subjects discussed above, the USFWS states that it commends EPA’s review of Michigan’s CWA section 404 program and Michigan’s c ooperation during the review and the development of corrective actions. The USFWS state s its support for EPA’s other conclusions in the Preliminary Report. Finally, it urges adherenc e to time frames for implementing the corrective

actions and recommends the use of benchmarks to mea sure progress.94



### Summary of Comments from the U.S. Forest Service an d Responses by EPA

The U.S. Forest Service (USFS) indicated that it ha d some concerns with how MDEQ is handling permitting on Wild and Scenic Rivers in Michigan. The USFS indicated that Michigan’s assumption of the CWA section 404 program did not w aive the need for federal review of applications involving discharges within critical a reas established under federal law, including components of the National Wild and Scenic River Sy stem. The USFS indicated that there have been some instances of MDEQ staff either issuing a permit for activities for which the USFS has made an adverse finding due to Wild and Scenic Rive r concerns, or issuing modifications to permits after a Section 7 determination was made by the USFS without coordinating with the USFS on the proposed modifications. The USFS has r equested EPA’s support in improving coordination between the USFS, MDEQ, the USFWS and the Corps. The USFS has requested that EPA work to develop a procedure outlining how the agencies will coordinate when a project may have some effect on Wild and Scenic Rivers.

EPA is not aware of any instances where MDEQ has is sued or modified permits after a Section 7 determination was made by the USFS, without first c oordinating with the USFS. EPA points out that MDEQ public notice procedures currently requir e all projects proposed on Wild and Scenic Rivers be sent to the federal agencies, including t he USFS, when appropriate, for comment. With regard to the USFS request to develop procedures ou tlining how EPA, USFS and MDEQ will coordinate when a project may effect a Wild and Sce nic River, procedures for federal oversight and federal comment on state public notices are alr eady laid out in 40 C.F.R. §233.50. Although these regulations only require coordination with th e USFWS and the USACE, EPA has indicated to the USFS that it is willing to include in the co mbined federal comment letter, any USFS comments that pertain to CWA Section 404(b)(1) Guid eline related issues, providing the time frames outlined in the federal regulations are met. Although the USFS has not provided any

comments to EPA for inclusion in a federal comment letter, EPA has indicated to the USFS that it is willing to do so and it is EPA’s position that t his existing process would provide adequate opportunity for coordination between the agencies.95



### SECTION 4: FINDINGS

Summary of Findings and Corrective Actions

The program review was divided into two parts: an a nalysis of the State of Michigan’s legal authority to administer the CWA section 404 program , and an assessment of how MDEQ actually is implementing the program. The review f ound a number of strengths and weaknesses in the program. This section of the Final Report su mmarizes these findings and identifies necessary corrective actions.

EPA’s preliminary finding is that formal program wi thdrawal proceedings under 40 C.F.R. §233.53, should not be initiated at this time. Sti ll, EPA has identified several significant deficiencies in Michigan’s legal authorities that e stablish EPA-approved section 404 program. EPA also has identified several problems with MDEQ’ s administration of its section 404 program. In a November 7, 2003, letter to EPA, MDE Q proposed a series of corrective actions in response to the results of EPA’s program review, as presented in the Preliminary Report. MDEQ also proposed a schedule for the completion of the corrective actions. In a December 22, 2004, letter to MDEQ, EPA stated that the proposed corrective actions and the proposed implementation timeline were acceptable to EPA. Th e proposed corrective actions and implementation schedule are included below. If the deficiencies identified in this Final Report 45

are not corrected within the time frame established by EPA and MDEQ, EPA then will reconsider whether withdrawal proceedings should be initiated.

Program Strengths

Program strengths include the fact that MDEQ not on ly regulates filling activities in wetlands and other waters, but also has jurisdiction over ac tivities not currently regulated by the federal section 404 program. Such MDEQ-regulated activitie s include wetland excavation/dredging and some drainage activities. MDEQ field staff are doi ng a good job of administering the permitting program. Staff are able to make visits to the majo rity of project sites before making a permit

decision. Our file review indicated that staff wor k effectively with applicants to ensure that all possible steps are taken to avoid and minimize impa cts to wetlands and other aquatic resources. Often as the result of a site visit, MDEQ staff are able to work with the applicant to reduce or eliminate project impacts to the State’s waters. F inally, the permit file review found that in the majority of cases, MDEQ staff are doing a good job of evaluating and documenting whether or not proposed projects will comply with the section 404(b)(1) Guidelines.

Program Deficiencies and Weaknesses

This program review identified some problems with t he State of Michigan’s legal authorities and with program implementation. These problems and th e necessary corrective actions are

45 We are not using the term “deficiencies” in the manner that it is used in 40 C.F.R. § 233.53(c)(8)( iii).96

summarized below. More detailed discussion of the issues presented here can be found in the previous sections of this Final Report.

Legal Authority

Jurisdiction Issues

The scope of jurisdiction provided by Michigan law is problematic in that Michigan law does not give MDEQ jurisdiction over waters as extensive as is the jurisdiction established by section 404 of the CWA and the federal regulations promulgated pursuant to section 404. In particular, Michigan's section 404 program does not extend juri sdiction over isolated wetlands in counties which have a population of less than 100,000 people , and MDEQ will be unable to do so, under State law, until a state-wide wetland inventory is completed (see § 324.30301(p)). Nor does MDEQ have jurisdiction over any noncontiguous wetla nds which are smaller than 5 acres, or over noncontiguous lakes or ponds with surface areas of less than 5 acres.

Corrective Actions :

MDEQ has now completed the statewide wetland invent ory. As a result, the jurisdictional prerequisite established in § 324.30301(p) has been fulfilled throughout Michigan, and EPA’s primary concern about the extent of Michigan’s juri sdiction over wetlands will be equivalent to federal CWA jurisdiction has been resolved. With r espect to EPA’s concerns that Michigan law does not extend regulatory jurisdiction to non-cont iguous wetlands, lakes, or other water bodies which are less than 5 acres in size, we have determ ined that despite the specific language in Parts 301 and 303 that impose these limitations, in pract ice, the scope of jurisdiction provided by Michigan law is at least as broad in scope as is f ederal CWA section 404 jurisdiction, and we do not find that Michigan's jurisdiction over lakes an d ponds has a narrower scope. See pages 5-10 of this Final Report.

Exemption Issues

1) State exemptions for farming and other activiti es (horticulture, silviculture, or ranching) are broader in scope than the exemptions in the federal regulations. Part 303 of the NREPA does not explicitly require that the farming or other operat ion be ongoing and established, as is required in the federal regulations. And while the State statu te exempts discharges associated with drainage

or other activities in a wetland that allow the wet land area to be changed from one exempted use to another exempted use (e.g., from farming to silv iculture), federal law explicitly does not exempt such discharges.

Also, State regulations relating to agricultural dr ainage, at § 324.30305(2)(j), appear to exempt discharges associated with bringing a wetland into farming use as long as the wetland is owned by a person engaged in farming.97

Corrective Actions :

EPA has determined that Michigan needs to amend the statute to explicitly state that § 324.30305(2)(e) exemptions apply only to discharg es that occur in an area which, at the time of the discharge, already is part of an established an d ongoing farming, silvicultural, or ranching operation, consistent with the CWA, applicable fede ral regulations, and relevant federal case law.

The statute should make clear that the “area” at is sue is the specific area where the discharge will be occurring. MDEQ has agreed to seek such a Part 303 amendment f rom the Michigan legislature. MDEQ agrees to initiate this process within 6 months of the date of the publication of this Final Report in the Federal Register. See pag es 11-12 of this Final Report.

The Michigan legislature also needs to amend § 324. 30305(2)(e) to correct its apparent authorization of discharges which would allow an ar ea to be converted from one exempted use to another exempted use; Michigan law should make clea r that any such discharges are subject to Part 303's permitting requirements. See pages 12-1 3 of this Final Report. MDEQ is to initiate the statutory amendment process within 6 months of the date of the publication of this Final Report in the Federal Register.

With respect to EPA’s concern about the permit exem ption provided by § 324.30305(2)(j), MDEQ has agreed to seek the deletion of the exemption at §324.30305(2)(j) by the Michigan legislature. See page 13 of this Final Report. MDEQ is to initi ate the statutory amendment process within 6 months of the date of the publication of this Final Report in the Federal Register.

Finally, it would be helpful to have the Attorney G eneral’s Office issue an Attorney General’s opinion stating that the § 324.30305(2)(e) exemptio ns, as amended, as well as the other exemptions established by Michigan law (whether by Part 303, Part 301, or another statute), shall be interpreted and applied by MDEQ to be as stringe nt as the comparable federal exemptions. See pages 12-13 of this Final Report.

2) The drainage permit exemptions contained in Par ts 301 and 303 are less stringent than the federal regulations for discharges associated with improvements of drains and the construction of some types of drains - are exempted. The most envi ronmentally damaging provisions of Michigan law regarding drainage ditches may be the exemption for discharges associated with the improvement (meaning altering the dimensions of an existing drain and straightening its course) of all public drains that were established prior to 1973, as well as all public and private drains tha t are used for agricultural purposes.

Corrective Actions :

MDEQ has proposed seeking amendment of § 324.30305( 2)(h) (which exempts discharges associated with maintenance, operation, or improvem ent [of certain drains] which includes straightening, widening, or deepening) to delete t hat provision’s mention of “straightening, widening, or deepening” and to clarify that the exe mption is limited to true drain maintenance activities,. MDEQ is to initiate the statutory am endment process within 6 months of the date of the publication of this Final Report in the Federal Register. Additionally, MDEQ proposes to98

promulgate rules under Part 301 that will define th e terms “maintenance, operation or improvement” in a manner consistent with the federa l definition of the term “maintenance.” Such

a rule amendment is to be effected within 24 months of the publication of this Final Report in the Federal Register. Finally, EPA requests that the A ttorney General's Office issue written opinions regarding the effect of the drainage ditch exemptio ns provided in Parts 301 and 303. See page 14 of this Final Report.

MDEQ also has agreed to clarify the scope of exempt ed drainage activities at § 324.30103 and to define “maintenance and improvement”, as used in th at provision, in a limited manner that is

consistent with the federal definition of the term “maintenance”. The Attorney General’s Office and MDEQ explain, however, that these provisions do not create permit exemptions for discharges to waters of the United States which are associated with construction of private agricultural drains or altering the original dimens ions of public drains; rather, both provisions apply to the construction and improvement of drains that exist in uplands, and thus exempt only associated discharges that are made to uplands.

EPA has identified concerns with exemptions contain ed in §§ 324.30103(d) and (g) for discharges associated with construction, maintenance and impro vement of certain private and public drains. Since we issued the Preliminary Report, however, th e Attorney General’s Office and MDEQ have argued that these provisions do not create permit e xemptions for discharges to waters of the

United States which are associated with constructio n of private agricultural drains or altering the original dimensions of public drains; rather, both provisions apply to the construction and improvement of drains that exist in uplands, and th us exempt only associated discharges that are made to uplands. To fully satisfy EPA’s concerns on these points, EPA requests that the Attorney General’s Office issue a written Attorney General’s opinion setting forth how the doctrine of in pari materia applies so that these apparent discharge exemption s in Part 301 do not, in fact, exempt discharges to waters of the United States in situations other than drain maintenance which would be exempted by CWA section 404(f)(1)(C). See page 15 of this Final Report.

3) While federal law exempts discharges made for t he maintenance of roads only, exclusive of any discharges which would change “the character, s cope or size of the original fill design”, 40 C.F.R. § 232.3(c)(2), Michigan law has a provisi on, § 324.30305(2)(k), which can be read to exempt discharges which would widen a road.

Corrective Actions :

While MDEQ asserts that it has always interpreted a nd applied § 324.30305(2)(k) in a manner that is as restrictive as the comparable federal ex emptions for road maintenance discharges, a recent state court ruling has prompted MDEQ to deve lop a new administrative rule interpreting this exemption. See pages 15-16 of this Final Repo rt. MDEQ is to promulgate this new Part 303 rule within 24 months of the publication of this Fi nal Report in the Federal Register.

4) Michigan’s legal exemptions for the constructio n of tailings basins and water storage areas associated with iron and copper mining has no equiv alent in federal law. Nor does the exemptions in §§ 324.30305(2)(l)and (m) for utility maintenance activities.99

Corrective Actions :

EPA has requested that MDEQ seek deletion of the pe rmit exemptions found at §§ 324.30305(2)(l), (m) and (o). MDEQ has agreed t o seek the legislative deletion of § 324.30305(2)(o). MDEQ also has agreed to seek to have Part 303 amended so that §§ 324.30305(2)(l) and (m) explicitly exempt only t hose activities that are exempted by the CWA. MDEQ also proposes to issue rules that establ ish best management practices for those activities that are exempted from permitting and re quire that dischargers give advance notice to MDEQ that is similar to the notice required by Nati onwide Permit 12. See page 16 of this Final Report. MDEQ is to initiate the statutory amendmen t process within 6 months of the date of the publication of this Final Report in the Federal Reg ister, and is to amend the Part 303 rules within 24 months of the publication of this Final Report i n the Federal Register.

Permitting Authority Issues

1) EPA has concerns that Part 301's provisions for minor permits do not ensure that MDEQ determines or has a procedure to determine whether each minor permit category “will cause only minimal adverse environmental effects when performe d separately and will have only minimal

cumulative adverse effects on the environment” as r equired under federal regulations.

Corrective Actions :

MDEQ has agreed to promulgate a new Part 301 rule r equiring the consideration of cumulative impacts before new minor permit categories are esta blished. Rules will be promulgated within

24 months of the publication of this Final Report i n the Federal Register. See page 18 of this Final Report.

2) The federal regulations dictate that a State ma y not issue a permit with a term limit that exceeds five years. Michigan law does not have suc h a time limit on MDEQ-issued 404 permits.

Corrective Action s:

MDEQ has agreed to develop administrative rules und er Parts 301 and 303 that set a five-year permit term limit. See page 18 of this Final Repor t. This action will be taken within 24 months of the publication of this Final Report in the Fede ral Register.

3) Parts 301 and 303 and their implementing rules do not reference all of the permit conditions that 40 C.F.R. § 233.23 directs be included in Stat e-issued section 404 permits.

Corrective Actions :

EPA and MDEQ will work together to ensure that such permit conditions are incorporated into future permits which MDEQ issues jointly under CWA section 404 and either Part 301 or 303. Those efforts are ongoing. See pages 18, 37-39, and 81 of this Final Report.100

4) The federal regulations provide that a section 404 permit issued by an authorized State agency

shall be effective on the date when both the State agency Director and the applicant shall have signed the permit. Michigan law does not have a co mparable provision, potentially creating problems when a permit must be enforced.

Corrective Actions :

MDEQ has agreed to amend the administrative rules u nder both Parts 301 and 303 to clarify that a permit becomes effective on the date when the permi t has been signed by both the applicant and MDEQ Director. See page 19 of this Final Report. This rule change will be promulgated within 24 months of the publication of the Final Report in the Federal Register.

5) Part 301 and its administrative rules do not se em to provide MDEQ with full and express authority to revoke permits, as outlined by the CWA and its regulations.

Corrective Actions :

Under Part 301, MDEQ proposes to promulgate a new a dministrative rule which will list all of the bases on which MDEQ can revoke a Part 301 permit an d will include all of the bases which are listed in the CWA and its implementing federal regu lations. While EPA has stated its preference that this issue be dealt with by the Michigan legis lature’s amending § 324.30107 to add all of the grounds for revoking a permit provided by the CWA a nd its regulations, we accede to MDEQ’s proposal and intend to monitor the situation to see if the rule promulgation is an effective

corrective action. See page 20 of this Final Report.

MDEQ will promulgate these new rules for Part 301 t o be effective within 24 months of the publication of this Final Report in the Federal Reg ister.

Compliance with CWA section 404(b)(1) Guidelines

1) MDEQ needs to demonstrate that it can incorpora te the CWA section 404 requirements, including the section 404(b)(1) Guidelines, into it s permit decisions. During this program

review, MDEQ developed administrative rules under P art 303 to address some EPA concerns regarding application of principles under the secti on 404(b)(1) Guidelines, such as water dependency, burdens of proof, and feasible and prud ent alternatives.

Corrective Actions :

Recently, MDEQ has proposed to address EPA’s ongoin g concerns about whether, during Part 301 and Part 303 permit processing, proper consider ation is given to the criteria contained in the section 404(b)(1) Guidelines by promulgating future administrative rules under both Part 301 and Part 303 that incorporate the Guidelines by referen ce. In this manner, the criteria contained in the Guidelines will be considered during MDEQ’s decisio n making process. See pages

22-26 of this Final Report. MDEQ will promulgate t hese rules within 24 months of the101

publication of this Final Report in the Federal Reg ister.

In addition, EPA will continue to monitor whether p roposed and final permit decisions issued as part of contested case proceedings apply MDEQ's rec ently-issued administrative rules and otherwise apply the 404(b)(1) Guidelines and princi ples and criteria consistent with the

Guidelines.

2) EPA is concerned that Michigan law does not cle arly prohibit the issuance of permits that will either jeopardize the continued existence of T&E sp ecies and designated critical habitat or will result in significant degradation of waters of the United States.

Corrective Actions :

MDEQ has agreed to promulgate administrative rules for Parts 301 and 303 that will incorporate the federal section 404(b)(1) Guidelines by referen ce. MDEQ believes that since 40 C.F.R. § 230.10(b) of the Guidelines prohibits the dischar ge of fill material if it jeopardizes the continued existence of a T&E species or results in the destruction or adverse modification of critical habitat, such rule changes will effectivel y allow MDEQ to deny section 404 permit applications that would have such effects. In addi tion, MDEQ has agreed to promulgate

administrative rules for Parts 301 and 303 that wou ld specifically direct staff to consider impacts to T &E species during the permit review process. MDEQ is proposing to promulgate these rules within 24 months of the publication of this Final R eport in the Federal Register.

EPA will review the administrative rule changes pro posed by MDEQ on this issue and will consider MDEQ’s legal arguments that these rule cha nges provide MDEQ with sufficient authority to ensure that MDEQ will not issue sectio n 404 permits that will jeopardize the continued existence of a threatened or endangered s pecies or will result in the destruction or adverse modification of critical habitat (including section 404 permits that are issued by MDEQ after contested case proceeding are conducted). Si milarly, EPA will consider whether such administrative rule changes are adequate to ensure that permits are not issued that will result in significant degradation of regulated waters includi ng wetlands. Once MDEQ has promulgated its new rules incorporating the federal section 404(b)( 1) Guidelines, EPA will monitor whether Michigan law, in practice, does give protection to T & E species and their designated critical habitat which is equivalent to the protection exten ded by federal law. If not, EPA will discuss with Michigan the need for future statutory amendme nts. See pages 24-26 of this Final Report.

Permitting through Contested Case Proceedings

MDEQ's ALJs and MDEQ’s final decision maker in cont ested case proceedings 46 often have not interpreted and applied Michigan law in a manner co nsistent with the mandates of section 404(b),

46 Previously, the final contested case decision ma ker was the MDNR’s Natural Resources Commission, fo llowed by the Chief ALJ of the MDNR and then by of MDEQ be ginning in 1995. Since 2000, the final decision ma ker has been MDEQ Director.102

section 404(h), the State Program Regulations, EPA- MDEQ MOA, and, most critically, the section 404(b)(1) Guidelines. Earlier in this Fina l Report (as well as in the Preliminary Report), EPA reviewed the types of erroneous analyses and le gal conclusions made in some proposed and final contested case decisions. See pages 57-66 of this Final Report.

Corrective Actions :

In the past few years, MDEQ has promulgated new rul es under Part 303 addressing such issues such as the proper way to conduct a feasible and pr udent alternatives analysis and the proper test for wetland dependency. Our review of contested ca se decisions issued during 2004 shows that conclusions on many issues now are consistent with, and no less stringent than, federal section 404 law and regulation; these changes in administra tive decision making seem largely due to the promulgation of the new administrative rules. As d iscussed elsewhere in this Final Report, EPA has requested - and MDEQ has proposed - that additi onal rules under Part 303 and Part 301 be promulgated to address other section 404-related co ncerns. EPA will review future contested case

decisions to evaluate the effect which the new rule s have on contested case decisions.

Enforcement

1) An opportunity for public participation in the State’s enforcement process for section 404 matters shall be provided through one of two altern ate routes, according to 40 C.F.R. § 233.41(e). EPA has determined that MDEQ is adequately authoriz ed to, and is observing, the first of three requirements under the chosen alternative, but it i s not clear whether the second and third requirements are being met.

Corrective Actions :

MDEQ has agreed to revise EPA-MDEQ MOA to make the commitment that MDEQ will not oppose intervention by any citizen when permissive intervention in a State enforcement action is authorized by Michigan law. The revisedEPA-MDEQ MO A also will bind MDEQ to publish notice of, and to provide a 30-day public comment p eriod for, all proposed settlements of enforcement actions filed in State court. See page 27 of this Final Report.

Indian Lands

EPA and MDEQ differ on the definition of the term “ Indian lands”. MDEQ asserts that it has section 404 jurisdiction over properties that EPA c onsiders to be“Indian Lands.” EPA, by contrast, is of the view that the State of Michigan has never had the authority to issue section 404 permits in “Indian lands” (which EPA defines to be the same as “Indian country”). The conduct of this program review does not alter EPA’s view of this issue. See pages 29-30 of this Final Report.

Corrective Actions :

EPA will continue its dialogue with the State on th is issue, but at this time EPA does not consider103

the difference in definition of the term Indian Lan ds to be a basis for program withdrawal.

Findings Related to Administration of the Permittin g Program

1) In general, MDEQ is doing a good job of adminis tering its permit program. MDEQ staff are following agency procedures when processing permits . The majority of files reviewed (72%) contained the Project Review Report (PRR) form, whi ch serves as documentation of the permit

decision. Since the PRR form serves as the document ation for compliance or non-compliance with the section 404(b)(1) Guidelines, MDEQ staff m ust make sure that the completed form is present in every file including contested case file s. See pages 44-46 and 50-52 of this Final Report.

Corrective Actions :

Improve the documentation of the basis for each per mit decision. Staff must ensure that documentation for the permit decision is included i n every permit file, in the form of a completed

PRR.

2) The public notice procedure which MDEQ was usin g since it assumed the section 404 program through the first years of this program review was problematic for four reasons. First, that system did not always ensure that interested persons recei ved the public notice with sufficent time to provide comment to MDEQ. A second problem with the public notice system was that it was not clear to EPA that all adjacent property owners wer e always receiving copies of the public notice, as the federal regulations require. Third, the fed eral regulations require that the guidelines or criteria on which permit decisions are based be inc luded in the public notice. MDEQ's public notices have not been reciting, and currently do no t recite, all such criteria. Finally, the federal regulations require that a state agency provide not ice to all interested parties by mail and in at lea st one other way reasonably calculated to cover the ar ea affected by the activity (such as advertisement in a newspaper of sufficient circulat ion). For some years prior to, and during, this program review, MDEQ did not provide notice to the extent required.

Corrective Actions :

To address the first problem identified above, MDEQ has developed an Internet-based system that makes public notices available to the public. We h ave determined that MDEQ’s use of this Internet-based system meets the federal requirement of providing notice in at least one way in addition to mail. As for the second problem, MDEQ is now providing public notices to all adjacent property owners. MDEQ will address the th ird problem - its past failure to include all criteria used in permit decision making in each pub lic notice - by, simply, doing so.

Regarding providing notices to all interested perso ns, the final problem identified above, MDEQ is now following procedures which, if consistently implemented, will ensure that each person who requests a copy of a public notice receives the not ice in a timely manner (via the requester’s

chosen communication route of mail or internet acce ss) so that the requester has sufficient time to submit comments. See pages 42-43 of this Final Rep ort.104

The actions taken by MDEQ as of the date of this Fi nal Report, and the actions which MDEQ commits to taking in the near future, resolve our v arious concerns regarding MDEQ’s issuance of public notices.

3) EPA's program review found that coordination un der the federal ESA is effective for larger projects. The system currently in place to screen projects for potential to impact a T or E species is doing a good job of identifying projects which m ay affect a T or E species. These projects are all forwarded to the federal agencies for review an d coordination if needed. Minor permits are more difficult to screen for potential T & E impact s. This review identified a need to develop formal guidelines to help MDEQ staff identify proje cts needing T & E coordination. Finally, it is not clear when permits are issued out of the distri ct offices on a walk-in basis, they are being screened for potential T & E impacts.

Corrective Actions :

In the Preliminary Report, we stated that MDEQ, the USFWS, and EPA needed to develop a procedure and/or memorandum of agreement regarding how coordination on T&E species issues would proceed when a project may affect a T & E spe cies; we also stated that MDEQ needed to work with EPA and the USFWS to develop procedures f or screening minor and “walk-in” permits for the potential to impact threatened and endanger ed species and their critical habitat. Work on the first item -- an interagency agreement setting forth the agencies' mutual obligations to communicate, provide information, and resolve diffe rences -- is ongoing. As for the second item, the agencies have developed draft procedures for sc reening minor/general permit and “walk-in” permits for the potential to impact federally T & E species; these procedures are similar to the existing procedures that MDEQ uses to screen standa rd permit applications

. Recently these procedures have been implemented on a trial basis. The procedures are scheduled to be finalized by 2008. See pages 55-56 of this Final Report.

4) The State Program Regulations require that the state permitting agency provide another state whose waters may be affected by a discharge with th e opportunity to comment on the relevant project. During the program review, we did not dis cover that Michigan had any procedures providing for notification of an adjacent state if a proposed discharge or project had the potential to affect that State’s waters. (Nor are we aware o f any projects in Michigan which actually impacted the waters of another State.)

Corrective Actions :

While this is a minor issue because it seems to ari se rarely, MDEQ needs to develop guidelines for determining when a proposed project will impact waters and needs to develop a process for notifying an adjacent State (and EPA) and allowing that State to comment on the proposed project. See pages 40-41 of this Final Report.

5) EPA’s review found some final agency permit dec isions made as the result of contested case proceedings to be problematic. In a number of cont ested cases, MDEQ’s Office of Administrative Hearings made rulings without applying the section 404(b)(1) Guidelines or without interpreting105

State laws and rules in a manner that is consistent with the section 404(b)(1) Guidelines. In addition, the contested case files did not include a completed PRR supporting the final agency

action.

Corrective Actions:

MDEQ recently has promulgated rules under Part 303 which require both the alternatives analysis and water dependency tests to be conducted in a man ner consistent with the section 404(b)(1) Guidelines. See pages 20-21 of this Final Report. In addition, MDEQ has agreed to promulgate

administrative rules for Parts 303 and 301 which wi ll incorporate the section 404(b)(1) Guidelines by reference. See page 22 of this Final Report. A more detailed discussion of the proposed rule changes to address this issue can be found in the C orrective Actions - Permitting Authority

subsection of this Section 4.

Documentation, such as a PRR form, supporting the f inal permit decision must be included in every permit file, including cases which go through the administrative hearing process. See pages 46 and 52 of this Final Report.

MDEQ also has agreed to issue a new public notice f or any Proposal for Decision or Final Decision that authorizes a project and attendant di scharges that are substantially different than the project as described in the original permit applica tion and public notice (i.e., would have substantially greater adverse impacts to natural re sources).106

Findings Related to Administration of the Enforceme nt Program

Finally, EPA summarizes its findings regarding Mich igan's enforcement of section 404. Here, EPA does not specify any essential corrective actio ns which MDEQ must take, but recommends changes that EPA believes will enhance the effectiv eness of MDEQ's enforcement program. MDEQ could strengthen their enforcement program, an d this was one comment repeatedly made by those persons who submitted comments to EPA on t his program review. See pages 84-85 of this Final Report. For example, MDEQ could enhance its monitoring of permittees’ compliance with permit terms and conditions (including conditi ons requiring performance of wetland mitigation projects). See page 87 of this Final Report.

EPA commends the level-of-effort by the district fi eld offices in responding to citizen complaints with a timely site inspection and recommended initi al course of action. As mentioned previously, during the course of this program review, MDEQ fin alized the 2001 Manual and has provided training on the 2001 Manual for MDEQ staff. Prior to the publication of the 2001 Manual EPA found that MDEQ had not set priorities for enforcem ent response or developed clear procedures.

See pages 76-77 of this Final Report. In the past, th e draft guidance manual allowed district field offices much discretion in responding to violations , maintaining records through photo documentation, completing inspection reports, and r ecommending after-the-fact permit applications without completion of PRRs. EPA’s rev iew of the 2001 Manual finds that the issues listed above have been addressed adequately in the manual.

Interviews with district field offices acknowledged some of these shortcomings, especially the issue that site inspection reports frequently are n ot fully completed and finalized. Consistently,

the field offices indicated a desire to commit more effort to responding to citizen complaints and developing enforcement actions, but identified the number of citizen complaints reported, and the statutory responsibility to make Part 303 permit de cisions within a 90 period, as limiting factors. See page 74 of this Final Report.

For the enforcement program, EPA's review concludes that MDEQ has maintained an effective enforcement program that, in the vast majority of c ases, initiates timely and appropriate enforcement actions and, more importantly, provides appropriate injunctive relief through wetlands restoration, wetlands mitigation, and pena lties. See page 74 of this Final Report. One area for improvement is that MDEQ must notify the p ublic upon resolution of enforcement actions. Another area for improvement is the handl ing of “after-the-fact” permits. Prior to accepting an application for an after-the-fact perm it, MDEQ should decide whether or not to take

enforcement action. If the decision is made to bri ng an enforcement action, EPA recommends that MDEQ not accept the application for processing until the enforcement action is resolved. See page 75 of this Final Report. If the decision is m ade not to bring an enforcement action and to process the after-the-fact application, EPA recomme nds that, if the processing of that application exceeds some reasonable time period, MDEQ reassess its enforcement options; otherwise, violators may manipulate the application process to their benefit. See page 76 of this Final Report.107

Additionally, our review found that public notices proposing after-the-fact permit authorizations often did not explain that the proposed permit resu lted from the resolution of a State administrative enforcement action. MDEQ has agreed to public notice all proposed settlements of

enforcement actions. See page 27 of this Final Report.

We recommend that Michigan expand its use of admini strative consent agreements - made between MDEQ Division Chief and the violator -- to resolve violations. In all cases reviewed, we found that MDEQ’s process of negotiating these cons ent agreements effectively resolved the violation and resulted in additional restorations, reclamations, and conservation of wetlands. See page 72 of this Final Report. In addition, we recom mend that, once MDEQ elects to pursue enforcement against a violator, the violator should not be entitled to pursue other administrative remedies - such as seeking an after-the-fact permit or a contested case hearing - until the

enforcement action is resolved. See page 75 of this Final Report. We believe these pr ocedures are critical to sustain appropriate enforcement. W e further recommend that MDEQ develop procedures to refer cases to EPA. Finally, MDEQ sh ould define what a “timely and appropriate” enforcement action is (the current EPA-MDEQ MOA req uires the State to take timely and appropriate enforcement action against persons viol ating permit conditions or conducting unauthorized discharges of dredged or fill material s); this definition then will be inserted into a revised EPA-MDEQ MOA. See page 76 of this Final Re port.

Other Matters

The current EPA-MDEQ MOA will be revised to impleme nt any relevant corrective actions discussed in this Final Report, including but not l imited to: 1) the issue of Part 303 permits which are issued by operation of law as a consequence of the 90-day permit application processing deadline imposed by §§ 324.1301(f)(viii) and 1307(1 ) and (4), being state-only permits and not CWA section 404 permits (see page 18 of this Final Report); 2) define what is a “timely and appropriate enforcement action by the State (see page 75 of this Final Report); 3) establish a process for referring to EPA repeat and flagrant vi olators of the CWA (see page 76 of this Final Report). The MOA will be revised within 6 months o f the date of the Federal Register Notice for this report.

The current EPA-MDEQ MOA also will be generally rev ised to improve procedures.108



### Append Appendix A ix A

Summary Time Table for Corrective Action Completion

CORRECTIVE

ACTION DUE DATE STATUS

1. Complete wetland

inventories in all counties December 31, 2006 Completed Dec, 2006

2. Amend Part 303 of the NREPA to explicitly state exemptions apply only to discharges that occur in areas of on going farming, silvicultural or ranching operations Initiate within 6 months of date of Federal Register Notice (FRN); complete

within 36 months of date of

FRN

3. Amend § 324.30305(2)(e) to require a permit for discharges which allow an

area to be converted from one exempted use to another Initiate within 6 months of date of FRN; complete within

36 months of date of FRN

4. Amend § 324.30305(2)(h)

to delete mention of straightening, widening, or deepening. Clarify that exemption is limited to true

drain maintenance activities Initiate within 6 months of date of FRN; complete within

36 months of date of FRN

5. Promulgate rules under

Part 301 that will define maintenance, operation or improvement consistent with

the federal definition of

“maintenance” Rules to be promulgated

within 24 months of FRN

date Rule development initiated109



### CORRECTIVE

ACTION DUE DATE STATUS

6.Clarify exemption for road

maintenance at§ 324.30305(2)(k) to be

consistent with federal exemption Initiate within 6 months of FRN date; rules to be promulgated within 24

months of date of FRN

7. Eliminate exemptions for agricultural drainage and tailings basins associated with iron and copper mining found at §§ 24.30305(2)(j) and (o). Initiate within 6 months of date of FRN; complete within

36 months of date of FRN

8. Limit exemptions at §§ 24.30305(2)(l) and (m) to activities that are exempted by the CWA Initiate within 6 months of date of FRN and complete

within 36 months of date of

FRN

9. Promulgate new Part 301 rule requiring consideration of cumulative impacts before new minor permit categories

are established Promulgate rules within 24

months of date of FRN Initiated

10. MDEQ will develop

administrative rules under

Parts 301 and 303 to set a 5 year permit term limit. Initiate within 6 months of date of FRN; rules promulgated within 24

months of date of FRN Initiated for 301 rules

11. Amend rules under Parts 303 and 301 to clarify a permit becomes effective on the date when signed by both parties Initiate promulgation within 6 months of FRN; promulgate

rules with in 24 months of

date of FRN Initiated for 301 rules

12. Promulgate rules under

Part 301 that are consistent with the federal regulations with respect to MDEQ’s authority to revoke a permit Rule development underway for Part 301; promulgate

rules with in 24 months of

date of FRN Initiated for 301 rules110



### CORRECTIVE

ACTION DUE DATE STATUS

13. MDEQ will promulgate

rules under Parts 303 and 301 that incorporate the 404(b)(1) Guidelines by reference Initiate promulgation within 6 months of date of FRN; promulgate rules with in 24

months of date of FRN Initiated for 301 rules

14. MDEQ will promulgate

rules under Parts 303 and 301 that require staff to consider impacts to threatened or endangered species during permit review Initiate promulgation within 6 months of FRN ; promulgate

rules with in 24 months of

date of FRN Initiated for 301 rules

15. Promulgate rules under Part 303 regarding proper use of feasible and prudent alternatives analysis and water dependency test Rules promulgated in 2000 Completed

16. Revise EPA-MDEQ MOA to ensure MDEQ will provide notice of and provide 30 -day public comment period on enforcement

settlements and ensure that MDEQ will not oppose intervention by any citizen when permissive intervention

in a State action is authorized by Michigan Law Initiate work on MOA within 6 months of FRN date;

execute a revised MOA within 1 year of date of FRN

17. Ensure field staff include documentation for permit decision in every file. Division management have required staff to complete a PRR form for every permit file. Memo dated February 9,

1999. Completed111



### CORRECTIVE

ACTION DUE DATE STATUS

18. MDEQ must provide public notices to all interested parties by mail and by one

other method. MDEQ now makes public

notices available on their internet site as well providing copies by mail to interested parties Completed

19. MDEQ will develop a

method to screen minor and “walk in” permits for Threatened and Endangered species impacts Procedures to be finalized by

2008 Procedures drafted

20. MDEQ will develop a method for notifying and allowing comment by another State whose waters may be affected by a discharge. Develop procedure within one year of date of FRN