Big stake in wetlands case
By Shikha Dalmia February 20,
2006
Landowners with so much as a puddle on their
property should prepare for a showdown: Tomorrow
the U.S. Supreme Court is going to hear two cases
that might settle once and for all whether the
1970 Clean Water Act allows federal bureaucrats to
regulate any wetland anywhere -- as they are
effectively claiming -- or if there are some
constitutional limits to their reach.
No doubt the bureaucrats will rattle off a
litany of supposed environmental benefits to
justify their ever-extending tentacles to the
court. But what the justices won't hear from them
is the cost to the economy.
The more egregious of the two cases involves
John Rapanos, a pugnacious developer, who has
become something of a cause celeb among property
rights advocates. Federal bureaucrats began
harassing him 20 years ago when he moved some dirt
on his property without first obtaining a wetland
permit.
Despite repeated lawsuits, he refused to cave
in to their demands on grounds that their
jurisdiction ended 20 miles away from his property
-- where the nearest navigable waters were
located. What's more, apart from two little wet
spots that he was not planning to touch, his
property was bone dry, thanks to its sandy soil.
Indeed, if he needs a federal permit, then
potentially every property owner housing the
smallest pond or puddle needs one. (It costs on
average $300,000 to obtain this permit). This
surely can't be the intention of the Clean Water
Act, he argues. But if it is, Mr. Rapanos
maintains, then the act itself violates the
Constitution's Commerce Clause, which limits Uncle
Sam's reach only to areas abutting navigable
waters.
Setting aside the serious constitutional
issues involved, what are the economic costs of
such federal mandates?
Existing federal wetland regulations already
cover 111.5 million acres of land -- an area that
is bigger than the state of California. According
to the United States Department of Agriculture, if
the government were to compensate landowners
(which, of course, it doesn't) for the development
potential they have lost or stand to lose on just
this land, it would have to cough up $162.6
billion.
This is equal to the combined 2005 profits of
the top 15 Fortune 500 companies. It is also more
than three times the value of the total exports of
India's information technology industry, much
reviled in recent years for "stealing" American
jobs due to outsourcing.
It is not possible to wipe out this kind of
value and not have ripple effects throughout the
economy.
The most direct effect is on housing prices,
notes Harvard University economist Edward Glaeser.
In a study released last month, he found that
housing prices in the Greater Boston area have
doubled in the last 25 years -- in a large part
because the environmental regulations imposed by
area cities restricting permits for new homes at a
time when housing demand was exploding. Wetland
regulations alone, the study found, contributed to
a 10 percent drop in new construction in the area.
But new home buyers are not the only ones who
feel the pinch of rising prices. Businesses too
get caught in the housing affordability crisis
because they are forced to pay higher wages.
"There is very strong evidence that few things are
as strongly correlated to rising housing prices
and wage increases as environmental laws," Mr.
Glaeser maintains.
Nor does Mr. Glaeser buy the claim that
wetlands produce other offsetting economic
benefits. If they did, environmentalists would not
be resisting attempts to tie new regulations to a
cost-benefit analysis.
