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Goodwin is the regional managing partner of the Princeton office of Philadelphia's Saul Ewing LLP, where she handles environmental and insurance regulatory matters. She currently serves as vice chair of the New Jersey Clean Water Council. Kozinski is an associate in the office. The authors wish to thank summer associate Daniel Giannetto for his assistance in preparing this article.

In a bold new rule proposal, the New Jersey Department of Environmental Protection (DEP) wants to blend the concepts of "smart growth" and holistic watershed management to attain and maintain improved water quality throughout the state.

"We are shooting very high," said Lance Miller, the director of the DEP's Division of Watershed Management. According to Miller, the department is "looking to have these rules put in place as part of a process that will restore water quality where we are not meeting standards." The DEP also wants to "develop plans to maintain or even improve water that is better than standards."

The proposed rules would mark a break from tradition by regulating all sources of pollution -- including nonpoint sources such as runoff from roads, lawns and farms, as well as point sources such as sewage treatment plants and industrial facilities.

The New Jersey Register published the proposal on July 3. 32 N.J. Reg. 2285 (2000). The primary objectives are threefold. First, by addressing nonpoint source pollution, the DEP intends to establish water planning policies and procedures that involve a comprehensive watershed approach. A watershed is a geographic area where all water drains to a particular surface water body.

Second, the proposed rules are intended to ensure that development requiring new sewer and septic service is protective of the environment. If adopted, this part of the proposed rules likely will have a significant effect on real estate development in the state.

Third, the proposed rules would establish total maximum daily loads (TMDLs) of pollutants in currently polluted streams. A TMDL is defined as the maximum amount of a pollutant that can be assimilated in a given surface water body such that the water body will be able to attain and maintain compliance with the applicable surface water quality standards (SWQS) for that pollutant. What this TMDL provision means is that all of the dischargers within a given watershed, either point or nonpoint sources, will have to agree not to exceed a specified discharge limit, the aggregate of which will be the TMDL for the stream in question.

The proposed rules present critical issues that will affect both environmental and land use practitioners. On the environmental side, of crucial importance is the impact that the TMDL requirements may have on clients with either nonpoint or point sources of pollution. "The legal aspects will be as we get into TMDL's and get into pollution trading between point sources and non-point sources and offsets," according to Miller. "How [the DEP is] going to implement these things is where the legal profession will be needed,"

If the rules are adopted, real estate lawyers should also anticipate that the development community will be profoundly affected by the additional hurdles they will have to meet for approval of development plans in nondeveloped areas.

Water Management and Planning

The proposed rules set forth the requirements for three complementary water quality planning documents: water quality management (WQM) plans, watershed management area (WMA) plans and wastewater management plans (WMPs).

WQM plans would be the broadest reaching of the three water management planning documents. Under the proposed rules, existing WQM plans would have to be amended to address the new planning requirements adopted as part of the rules.

As in the existing wastewater management planning rules, WMPs would be intended to address wastewater management needs on a regional basis. Consistent with the overall holistic approach to water quality management, the proposed rules would require WMPs to be developed with the cooperation of all regional water resource management agencies and consistent with their existing plans. (Proposed rules, § 2.18).

A significant new addition to the regional water quality management toolbox would be the watershed management area plan. Under this provision, the DEP would be required to manage water quality and quantity on a watershed-by-watershed basis, rather than political areas. The proposed rule emphasizes public participation in the WMA plan development process, and is designed to include the participation of environmental groups, point and nonpoint source dischargers, local government representatives, a comprehensive list of other interested parties (including developers, water purveyors, business representatives, state and federal government representatives, the academic community) and "the general public". (Proposed rules, § 7:15-2.5(d)).

WMA plans would evaluate existing water issues in the watershed and develop strategies for maintaining, restoring or enhancing water quality, water quantity and ecosystem health in the watershed. (Proposed rules, § 7:15-4.1(b)). The WMA plan would include technical and scientific approaches to maintaining watershed health, such as stream restoration, as well as planning and land use approaches such as open space preservation. Development of WMA plans under the proposed rules likely would be time-consuming and costly as they would involve the development and analysis of a significant volume of scientific and technical data and synthesis of numerous politically charged issues.

Evaluation of WQM Plan Modifications

The proposed rules outline the requirements for determining the consistency of proposed projects with the areawide WQM plan and the proposed water management rules. (Proposed rules, §§ 7:15-9.00 et seq.). Unlike the existing water management rules that focus on consistency with wastewater plans, a consistency analysis under the proposed rules would require an analysis of consistency with WMA plans, TMDLs and other environmental and planning issues.

Under the proposed consistency analysis rules, a variety of projects would be deemed to be consistent with the areawide WQM plan, including, among other things, certain treatment works projects, septic systems serving less than six residential units, developments generating less than 2,000 gallons per day of wastewater and "projects and activities not specifically addressed and not in conflict with adopted areawide WQM Plans". (Proposed rules, § 7.15-9.(f)). The projects included in the "deemed consistent" category could be the subject of some controversy during the public comment period as environmentalists may view the current list as too lenient.

In an effort to simplify the WQM plan modification process, the proposal would identify four categories of plan modifications and establish review procedures that are intended to be commensurate with the complexity of the proposed modification. The simplest plan modifications would be "corrections," which are defined to include corrections of errors and other minor issues. Corrections would not require public comment. (Proposed rules, § 7:15-9.10).

"Registrations" would be another form of simple plan modifications and would be reserved for projects that are not expected to result in significant environmental impacts (such as expansion of sewer service areas to areas previously erroneously identified as wetlands). (Proposed rules, § 7:15-9.9). "Revisions" would include projects that the DEP determines do not have the potential to cause environmental impacts. (Proposed rules, § 7:15-9.8). Under the proposal, revisions would be amendments that are significant enough to warrant public notice and comment, but not the burdensome assessment and analysis required of substantive plan amendments. Id. "Substantive" amendments would include proposed modifications to the WQM plan that the DEP determines to have the potential to result in significant environmental impacts. (Proposed rules, § 7:15-9.7). Substantive amendments would include WMPs, WMA plans, and TMDLs.

To assess the merits of proposed substantive (as opposed to minor) amendments and to ensure that such proposals are consistent with the state's overall water quality management goals, the proposed rules would impose a strict analysis of each proposed substantive WQM plan amendment. (Proposed rules, §§ 7:15-8.00 et seq.). Proposed substantive WMQ plan amendments would have to consider an extensive list of environmental and planning factors, including environmental and public health needs; population, household and employment projections; wastewater and water supply projections; land use projections; alternatives to the proposed plan amendment; the presence of environmentally constrained lands (e.g., wetlands); antidegradation of stream water quality; impacts on water consumption; coordination with the State Development and Redevelopment Plan; and other environmental, social and institutional factors. Id.

Stream Protection and Water Quality

The proposed rules would establish a program to implement Sec.303(d) of the Federal Clean Water Act. 33 U.S.C. § 1313(d). The purpose of Sec. 303(d) is to identify streams that, despite implementation of technology-based requirements, are not expected to achieve water quality standards, and then to develop TMDLs of pollutants. The ultimate goal is to impose controls on the various point and nonpoint sources of pollution problems.

Similar to the existing water quality management regulations, the proposed rules set forth a procedure by which the DEP identifies impaired and threatened water bodies. (Proposed rules, §§ 7:15-2.0 et seq.) These are referred to as water quality limited segments (WQLS). The purpose of identifying WQLS and establishing TMDLs is to ensure that total amount of pollutants discharged into the water body are no greater than the water body can assimilate. For point source dischargers this means the DEP will assign waste load allocations (WLAs). For nonpoint source dischargers, it means the DEP will assign load allocations (LAs). As noted by Miller, the proposed rule would permit trading of WLAs and LAs in the TMDL project area. (Proposed rules, § 7:15-5.4(c)).

The proposed rules would expand on the current water quality management planning regulations by, for example, expanding the list of criteria used to identify impaired or threatened streams. The state would have to consider not only objective data in identifying WQLS, but also more subjective information, such as reports of fish kills and fish consumption advisories. (Proposed rules, § 7:15-3.2(d)(2)). In addition, the status of existing watershed planning activities, public involvement and the opportunity to combine TMDL development would be factors to consider in ranking impaired or threatened streams. (Proposed rules, § 7:15-3.3(a)).

The DEP is also proposing to use "protective" TMDLs -- namely, TMDLs established for a water body that is not on the WQLS list. Such a TMDL might be established to quantify the amount of a pollutant that can be assimilated in the water body "while still ensuring the attainment and maintenance of the water quality goals set for that water body in the applicable [WMA] Plan adopted into the appropriate area-wide [WQM] Plan or Plans." Water Quality and Watershed Management, 32 N.J. Reg. 2285 (2000).

New to the public participation requirements of the TMDL section of the proposed rules is the involvement of a technical advisory committee (TAC), in addition to the public advisory committee, to represent stakeholder interests in the TMDL development process (Proposed rules, § 7:15-5.2(i)). Since TACs would be composed of stakeholders from all areas affected by the proposed TMDL (e.g., areas downstream and upstream of the WQLS at issue), the TAC would be in a position to assess the impacts of proposed TMDLs on a regional basis.

Point Source Dischargers

Under the proposed rules, "a TMDL may be developed using any appropriate spatial scale that considers all significant point and nonpoint sources of the pollutant of interest." (Proposed rules, § 7:15-5.1(c)). This rule could prove troubling for currently regulated point source dischargers. When looking for the means to meet surface water quality standards, the currently regulated community is fearful that the DEP will look to permitted point source dischargers as the natural target for discharge limitations.

The impact on currently regulated point sources discharges may be somewhat assuaged by the proposed rules that allow for WLA trading.

Developers' Concerns

Real estate developers should take notice of the proposed provisions relating to septic systems. Under the existing wastewater management rules, WMPs may designate certain areas not serviced by a wastewater treatment facility in which the installation of wastewater facilities with a design capacity of less than 20,000 gallons per day to ground water or the installation of small individual residential septic systems would be deemed consistent with the regional WQM plan. Thus, projects in areas designated for septic systems are currently exempt from any type of water management planning analysis.

Under the proposed rules, the DEP would evaluate the impact to the state's water resources of new developments of six or more residential units in areas that are not in approved sewer service areas and that will result in discharges to ground water with a design flow of over 2,000 gallons per day. (Proposed rules, §§ 7:15-6.00 et seq.).

Also of note to developers is the alternative analysis that would be required for projects warranting substantive WQM plan amendments. Before amending a WQM plan to designate a new or expanded sewer service area, a variety of alternatives would have to be evaluated, including individual septic systems, local systems, local systems with regional management and regional systems. (Proposed rules, § 7:15-8.7). In addition, expansion of wastewater conveyance systems into rural areas would require evaluation of alternatives that would lessen the risk of uncontrolled growth (e.g., individual septic systems). (Proposed rules, § 7:15-8.7(c)). The proposed rule would also require consideration of cluster development as an alternative to residential development projects consisting of six or more units in areas outside of existing sewer service. (Proposed rules, § 7:15-8.7(c)).

The proposed rules are subject to public comment for 60 days. Public comment will be held this month and in August. The schedule is published in the New Jersey Register and at the DEP's Web site (www.state.nj.us/dep/watershedmgt/wmp_rule_toc.htm). The department anticipates that the final rules will be published in January 2001.