How the Waters of the U.S. (WOTUS) Rule Would Have a Costly Impact on Small Business

This month, a new rule called the Waters of the United States (WOTUS) rule, issued by the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers, is scheduled to take effect. The rule changes what activities are subject to federal jurisdiction and thus will require federal permits for farmers, home builders, and other landowners and businesses who have plans to use their property.

The details: The WOTUS rule expands the agencies’ authority, using vague terms to define millions of acres of water and land features including ponds, farms, and backyards. As a result, landowners, businesses, and farmers will be forced to hire expensive consultants and experts to figure out whether they need permits to use their land. If wrong, they may face severe penalties.

The state of play: The WOTUS rule is scheduled to take effect on March 20, 2023. It is the latest iteration of several changes to WOTUS regulations that different Administrations have promulgated over the past decade or so.

• In the courts:  Last month, the U.S. Chamber of Commerce, the Kentucky Chamber of Commerce, and other associations filed a lawsuit in the U.S. District Court for the Eastern District of Kentucky against the WOTUS rule. The Kentucky federal court held a hearing on March 10. The rule is also being challenged in a number of other lawsuits brought by states, farmers and landowners, and business groups. 
• In Congress: The House Committee on Transportation and Infrastructure announced that a resolution to overturn WOTUS rule will receive a floor vote. The U.S. Chamber issued Key Vote! alert letters to the House and Senate urging lawmakers to vote “yes” when the resolution to block WOTUS comes to the floor. The committee held a hearing on Feb. 8 to gain perspectives from industry stakeholders about the effects of the rule. The House Small Business Committee held a hearing on the rule’s small business impact on March 8.

Why it matters: The new WOTUS rule could affect projects in the pipeline for businesses large and small that work in agriculture, property development, mining, construction, energy, utilities, forestry, transportation, and landscaping.

It is a step backwards for promoting certainty and clarity in these regulations. By introducing new, vaguely described terms to describe the scope of the agencies’ regulatory jurisdiction, the 2023 rule will cause companies and property owners to delay or change plans completely. This is costly for all companies, but especially for small businesses that do not have consultants or regulatory experts on staff and do not have large budgets to hire such consultants. Any major adjustments needed due to the new WOTUS rule could lead to projects becoming unprofitable or not going forward at all.

The U.S. Chamber’s lawsuit pending in Kentucky specifically challenges how agencies ignored the U.S. Chamber’s advice to appropriately consider impacts on small businesses while developing the WOTUS rule. A study from the U.S. Chamber of Commerce Foundation shows that U.S. businesses shoulder $1.9 trillion in annual regulatory compliance costs. For small businesses with 50 or fewer employees, the costs are nearly 20% higher than the average for all firms.  

Our take: The WOTUS rule is unlawful, and the U.S. Chamber supports the resolution that was recently introduced in the House to invalidate the rule. At a time when we need to rebuild our nation’s infrastructure, new regulations that make permitting slower and more expensive will be detrimental to the investments that the government has made in improving our roads and bridges.

“While the Administration has laid out ambitious climate and infrastructure goals, they will not be achievable with this Waters of the United States rule, which creates needless uncertainty and endless red tape and requires businesses of all sizes to navigate an expensive and time-consuming permitting process,” said Marty Durbin, Senior Vice President of Policy at the U.S. Chamber.

Additionally, the agencies chose to move forward with the new rule despite an impending Supreme Court ruling in the Sackett v. EPA case, which is expected to provide crucial guidance on the meaning of “waters of the United States.” The Administration should have waited to hear from the Supreme Court before issuing confusing, burdensome new regulations that are likely to be rendered out of date by the Court’s impending decision.

Natalie Kaddas, Chair of the U.S. Chamber’s Small Business Council, sent a letter to House Committee on Small Business Chairman Roger Williams and Ranking Member Nydia Velázquez explaining how the WOTUS rule does not comply with important legal requirements that require small business input on regulations of this kind. The letter included specific recommendations on how to prevent federal agencies from ignoring small business in future rulemakings.

The bottom line: This regulation is an example of how federal agencies ignore their obligation to consider and act on recommendations and information from small businesses when issuing federal regulations. 

About the authors

Thomas M. Sullivan

Vice President, Small Business Policy, U.S. Chamber of Commerce

Thomas M. Sullivan is vice president of small business policy at the U.S. Chamber of Commerce. Working with chambers of commerce and the U.S. Chamber’s nationwide network, Sullivan harnesses the views of small businesses and translates that grassroots power into federal policies that bolster free enterprise and reward entrepreneurship. He runs the U.S.

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