Rulemaking Imposes Most Stringent Stormwater Retention Requirements in the U.S. and Establishes Novel Stormwater Retention Credit Trading Program
The District Department of the Environment (DDOE) finalized its rulemaking on Stormwater Management, and Soil Erosion and Sediment Control (Stormwater Rules) on July 19, 2013. The Stormwater Rules, which were issued in order to comply with requirements contained in the District's Municipal Separate Storm Sewer System (MS4) permit,1 seek to reduce the runoff of stormwater from impervious surfaces in the District into its waterways. Given its central role in effectuating this new regulatory regime, the development community should expect to face new planning, design and construction requirements, as well as additional operational expenses over the life cycle of new development and renovation projects. Other states and jurisdictions across the country may choose to issue rules similar to those in the District.
The Stormwater Rules will be phased in over the next two years to apply to regulated projects as follows:
Click here to view diagram.
Notable aspects of the Stormwater Rules include:
- requirements for certain new developments and renovation projects to retain substantial volumes of stormwater on-site using a combination of approved best management practices (BMPs); up to half of these retention requirements can be achieved through the payment of an in-lieu fee to DDOE or the purchase of stormwater retention credits
- creation of a novel Stormwater Retention Credit Trading Program, through which credits can be bought and sold on an open market until they are used by regulated projects to comply with applicable retention requirements
- new required practices to minimize soil erosion and sediment runoff at construction sites
- the requirement to designate a certified "responsible person," who will be responsible for inspecting for erosion and sedimentation issues and working with DDOE to resolve those issues as they arise
Stormwater Retention Requirements
The Stormwater Rules will reduce stormwater runoff primarily by requiring major regulated projects to capture and retain substantial volumes of stormwater that would otherwise be diverted into the District's local waterways. Two types of major regulated projects will be subject to these stormwater retention requirements:
- Major Land Disturbing Activities. Sites that disturb 5,000 square feet or more of land will be required to retain the quantity of stormwater that would result from a 1.2 inch rainfall.2
- Major Substantial Improvement Activities. Renovation projects in existing structures with a combined footprint of 5,000 square feet for which the project costs exceed 50 percent of the structure's assessed value, will be required to retain the quantity of stormwater that would result from a 0.8 inch rainfall.3
A given site's stormwater retention requirement is commonly referred to as its stormwater retention volume (SWRv). Sites must achieve at least half of their SWRv using on-site retention infrastructure, while the remainder can be achieved using certain off-site retention mechanisms (described below).
Stormwater may be retained on-site using any combination of 13 approved BMPs. Approved BMPs include green roofs, rainwater harvesting, impervious surface disconnections, permeable pavement, bioretention, infiltration, ponding and wetland development. Each BMP is subject to detailed design, construction and landscaping criteria, which are set forth in the accompanying Stormwater Management Guidebook.4
Although major regulated projects will be able to achieve their applicable SWRv using any combination of these approved BMPs, many of them may not be suitable in certain common development contexts. For example, high-density developments that extend from lot line to lot line will not be able to incorporate surface BMPs, such as ponding or wetland retention. Additionally, major substantial improvement activities may be limited by space and load restrictions that could preclude the use of certain BMPs, such as heavy green roofs or large rainwater harvesting cisterns. However, regardless of which specific BMPs they select, all major regulated projects should expect stormwater retention infrastructure to become an integral component in the building's design, construction and operations.
Major regulated projects may apply for relief from the applicable on-site SWRv requirement based on the existence of extraordinarily difficult site conditions that make achieving the SWRv technically infeasible or environmentally harmful.5 Evidence of such extraordinarily difficult site conditions could include:
- soil and groundwater contamination
- data from percolation testing
- the presence of utilities requiring impermeable protections or a setback
- restrictions having the force of law that affect the site,
- evidence that installation of a BMP would conflict, in certain circumstances, with the terms of (1) a concept review by the Historic Preservation Review Board, (2) a concept review by the Commission on Fine Arts, (3) a design submission by the National Capital Planning Commission, (4) a variance or special exception from the Board of Zoning Adjustment, or (5) a large tract review by the District Office of Planning
Regulated projects located in certain areas are subject to unique stormwater retention requirements:
- Major Land Disturbing Activities in the PROW. Major land disturbing activities consisting of bridge, roadway and streetscape projects located in the existing public right of way (PROW) are subject to applicable stormwater retention requirements only to the maximum extent practicable (MEP). This is achieved when each opportunity for installing stormwater retention capacity has been exhausted.6
- Anacostia Waterfront Development Zone Sites. Sites located in the Anacostia Waterfront Development Zone that are publicly owned or publicly financed (AWDZ sites) are required to treat a water quality treatment volume (WQTv) equal to the difference between the stormwater runoff that would result from a 1.7 inch rainfall and the applicable SWRv. Additionally, the SWRv for major substantial improvement activities in the AWDZ is 1 inch, rather than the 0.8 inches applicable elsewhere in the District.7
Off-Site Stormwater Retention
In possibly the most novel aspect of the Stormwater Rules, DDOE will allow major regulated projects to achieve up to half of their applicable SWRv through off-site retention, either by payment of an in-lieu fee or purchase and submission of stormwater retention credits (SRCs, or credits).
- Payment of In-Lieu Fees. The in-lieu fee represents the full life cycle cost of retaining one gallon of stormwater for one year.8 The in-lieu fee will initially be set at $3.50/gallon/year, and will be adjusted for inflation annually, based on the Urban Consumer Price Index.9 All in-lieu fees are to be deposited into a special purpose revenue fund administered by DDOE and shall be used solely to fund the design, development and maintenance of stormwater retention facilities within the District, among other related costs.10
- Purchase and Submission of Stormwater Retention Credits. Stormwater retention credits enable regulated sites to offset a given volume of on-site retention capacity with an equal volume of off-site retention capacity, to be located elsewhere in the District. Each credit represents the offset of one gallon of retention capacity for a period of one year.11 Credits can be based on (1) new stormwater retention capacity developed after the Stormwater Rules were finalized, or (2) existing stormwater retention capacity developed since May 1, 2009.12 This capacity must not otherwise be required for compliance with other stormwater management obligations or the facility's applicable SWRv requirement. Facilities can only generate credits based on their initial 1.7 inches-worth of retention capacity. Upon certification by DDOE, credits can be sold to any interested buyer through the SRC Trading Program. Credits do not expire and there is no limit on how long credits can be banked or how frequently they can be bought and sold. By purchasing credits and submitting them to DDOE, major regulated projects can satisfy a portion of their applicable SWRv.
Stormwater Retention Credit Trading Program
DDOE has indicated that the SRC Trading Program will be structured as a modified over-the-counter (OTC) market, whereby buyers and sellers will negotiate individual transactions directly with each other; however, DDOE does have authority to review and approve proposed transactions.13 DDOE has indicated that it will make a registry of current credit owners publicly available to prospective purchasers, as well as certain transactional data, including the credit volumes and prices of completed transactions. DDOE has also indicated that it will facilitate transactions hosting periodic meetings of prospective purchasers and sellers.14
Throughout this rulemaking, DDOE has touted the use of credits and the associated trading program as a highly innovative solution to the problem of stormwater retention. However, with innovation comes great uncertainty, and indeed, many questions remain unanswered, including the following:
- First, it remains unclear how large the credit market is likely to be. DDOE has indicated that there is sufficient existing eligible retention capacity to provide an initial supply of 4 million credits. However, this estimate is dependent on DDOE conducting substantial outreach to eligible buildings — an effort that, to date, it has not yet started.
- Second, even by DDOE's own estimates, the anticipated demand for credits is highly uncertain. Indeed, DDOE's most recent public estimates are that potential demand for credits will be between 0.5 and 10.4 million in 2015, between 1 million and 15.6 million in 2016, and between 1.5 and 21 million in 2017.15
- Third, without estimates of likely supply and demand, it is impossible to forecast credit prices with any degree of accuracy. DDOE has estimated that credit prices are likely to be no less than the cost to develop and maintain the underlying retention capacity and no more than the in-lieu fee — an initial range that DDOE estimates to be between $.94 and $3.50. However, it remains to be seen how high — and how volatile — prices will actually be.
Compounding these uncertainties, DDOE has not clarified exactly how heavily it intends to regulate the credit market. The development community has emphasized that DDOE's imposition of excessive regulatory burdens or delays would be harmful to the market's function; however, the exact degree to which DDOE will interfere with the free flow of credits in the market is still unknown.
The process by which the stormwater management regulations are to be implemented have been notably controversial throughout the rulemaking process. Under the District's MS4 permit, the Stormwater Rules were required to be finalized no later than July 22, 2013. Environmental advocates have argued that the stormwater management regulations should be implemented in full immediately upon finalization. By contrast, the development community cautioned that such hasty implementation would be detrimental to numerous regulated projects currently under development, since forcing them to effectively restart the planning and design phases would impose significant additional costs that could scuttle the entire project. Recognizing that much of the planned stormwater retention will depend upon supporting continued development subject to the more stringent regulations, DDOE will implement the stormwater management regulations according to a two-year transition plan, to proceed in the following phases:16
- Transition Period 1. During the first transition period, major regulated projects will be grandfathered under the old regulations. This transition period will extend from July 19, 2013, until January 15, 2014.
- Transition Period 2. During the second transition period, major regulated projects will be subject to the new stormwater management regulations, except for the 50 percent minimum on-site retention requirement, such that they will be able to achieve their entire SWRv using off-site retention through a combination of in-lieu fee payments and SRCs. Also during this period, projects subject to a conflicting regulatory approval can apply for relief from extraordinarily difficult site conditions. This period will extend from January 15, 2014, until January 15, 2015, for major land disturbing activities and until July 14, 2015, for major substantial improvement activities.
- Full Implementation. After the conclusion of the second transition period, the new stormwater management regulations will become fully effective for all regulated projects.
Throughout this phased implementation, major regulated projects will qualify for each phase based on the timing of the submission of a stormwater management plan as part of a complete building permit application.17
Soil Erosion and Sediment Control
All sites disturbing more than 5,000 square feet of land area shall designate a "responsible person," who shall ensure that all activities at the site are in compliance with the soil erosion and sediment control regulations, inspect the site periodically and after rainfall events for potential or actual instances of erosion, and be available to respond to potential or actual erosion issues and speak on site with DDOE staff as necessary.18 Individuals licensed in the District as a geotechnical engineer, land surveyor, or architect can serve as responsible personnel without any additional certification. Other individuals can serve as responsible personnel upon certification by an approved course on erosion control.19 However, to date, DDOE has not approved any such courses. It thus remains to be seen how difficult obtaining certification will be.
Soil Erosion and Sediment Control Restrictions
The Stormwater Rules contain a range of new restrictions on a variety of projects to reduce the soil erosion and sediment runoff that could ultimately flow to the District’s waterways:
- Land-Disturbing Sites Over 5,000 Square Feet. every project involving land-disturbing activities must submit a soil erosion and sediment control (SESC) plan to DDOE for approval.20 SESC plans must address a variety of considerations, including (1) the existing and proposed topography of the site, (2) proposed grading activities, (3) provisions for storm drainage, (4) provisions to minimize on-site erosion and prevent offsite sedimentation, (5) the planned sequence of construction, and (6) recommendations of a professional engineer regarding areas with unstable soils, among other issues.21 Additionally, sites disturbing more than 5,000 square feet of land area shall also adhere to the Stormwater Pollution Prevention Plan that is provided in the Stormwater Management Guidebook.22
- Roadway Projects. Roadway projects awaiting installation of utilities and pavement shall install interceptor dikes and other controls at regular intervals along the roadway, as well as diversion infrastructure to carry runoff down cut-and-fill slopes to an approved outlet. Roadway projects must also install permanent drainage infrastructure upon completion of rough grading.23
- Demolition Projects. Projects involving demolition, razing, or other activities likely to result in the escape of dust, debris, and other sediments from the site must adopt measures to minimize stormwater erosion, maximize the preservation of natural vegetation and install perimeter dikes, as necessary. Notably, such projects near District waterways must avoid disturbing land within a 25-foot buffer of the waterway, subject to certain limited exceptions.24
- Underground Utility Projects. Underground utility projects will be prohibited from exposing more than 500 linear feet of open trench at any one time, restrict the placement of excavated material during the project, and mandate the installation of interim and permanent stabilization upon completion of the project and refilling of the trench.25
As DDOE now transitions to implementation of the Stormwater Rules, it will have to address a number of crucial issues that remain unresolved or may prove to be infeasible once they are put into practice. A few specific issues that will have to be addressed during the initial implementation phases include:
- Selection of Approved BMPs. Although DDOE has approved 13 distinct BMPs, it is not clear how many of these choices will be effectively available to any given project. Some projects may be subject to space and load bearing limitations, while others may face economic constraints that restrict the use of costly technologies. Other BMPs simply remain untested as to their utility, durability and maintenance costs, thus they are likely to be avoided by planners and builders. If major regulated projects are unable to achieve the applicable SWRv using the currently approved BMPs, DDOE will have to work with the development community to identify and approve additional retention technologies.
- Major Substantial Improvement Activities. The Stormwater Rules do not address a variety of issues specifically applicable to major substantial improvement activities, which are expected to face particular difficulties in complying with the stormwater management requirements. For example, it is not clear how renovations on multi-building campuses, such as the District's hospitals and universities, are to be calculated. It is also not clear the extent to which buildings undergoing major substantial improvement activities will have to conduct otherwise unnecessary renovations simply to accommodate the required stormwater retention capacity. Overly onerous requirements could deter property owners from improving their buildings, and DDOE may need to provide additional accommodations if the Stormwater Rules prove to be infeasible or counterproductive.
- Use of In-Lieu Fee Funds. Although the Stormwater Rules clearly require DDOE to use in-lieu fees solely for the development and maintenance of additional stormwater retention capacity in the District, it is not clear where those facilities will be located, and whether they will compete for space with other facilities that would otherwise be used to generate credits. Excessive competition between credit-generating facilities and those maintained using in-lieu fees could inadvertently sabotage the Credit Trading Program entirely, and it will be DDOE's responsibility to find a balanced approach.
- Size and Liquidity of the Credit Market. Numerous issues that will substantially affect the Credit Trading Program's overall success remain unresolved. Specific issues relate to the initial supply of credits, the actual cost to develop and maintain stormwater retention facilities to generate credits, and the overall size and volatility of the credit market. These issues will likely remain unresolved until the Credit Trading Program is fully operational.
- Structure of Credit Transactions. Because the Credit Trading Program will be structured as an over-the-counter market, there is substantial uncertainty surrounding how easily prospective credit purchasers and sellers will find each other and what terms their credit sales contracts will contain. DDOE has indicated that it will publicize a register of current credit owners and convene a working group to develop model sales contracts. Moreover, the degree to which DDOE will impose onerous and lengthy credit certifications and transaction approvals remains to be seen.
- Relationship with Other Stormwater Initiatives. The Stormwater Rules represent just one of the District's ongoing efforts to address the quality of its waterways. In February 2013, Mayor Gray issued the Sustainable DC Plan, under which all of the District's waterways are intended to be suitable for fishing and swimming, and 75 percent of the District's land area is intended to be capable of capturing or filtering stormwater for reuse by 2032.26 More recently, DDOE has also promulgated rules for its new Stormwater Fee Discount Program.27 Managing these programs and initiatives will require careful coordination by DDOE over the coming months.
Despite the many uncertainties surrounding the implementation of the Stormwater Rules, it is increasingly clear that stormwater management is an issue of growing concern for many jurisdictions and one that members of the development community will have to seriously consider in future projects. Multiple states in the Chesapeake Bay watershed have established formal programs to reduce runoff, some of which include nutrient credit trading programs.28 Other states and local jurisdictions have begun imposing stormwater fees based on the extent of impervious areas.29 Planners, designers and other members of the development community should therefore expect stormwater management considerations to become an increasingly prominent aspect of their work on new development and major renovation projects for the foreseeable future.