federal coastal programs review a report to the President

[From the U.S. Government Printing Office, www.gpo.gov]

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t Federal Coastal
Programs Review
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December 1985

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392 U.S. DEPARTMENT OF COMMERCE
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.U55 National Oceanic and Atmospheric Administration
National Ocean Service,
Office of Ocean and Coastal Resource Management

Federal Coastal
Programs Review

U.S. DEPARTMENT OF COMMERCE
Malcolm Baldrige, Secretary
National Oceanic and Atmospheric Administration
Anthony J. Calio, Administrator
01@41:'I)
R?FWENT OF P0041

National Ocean Service
Paul M. Wolff, Assistant Administrator
Office of Ocean and Coastal Resource Management
Peter L. Tweedt, Director,

NOAA CZXS'eyrv%is Contw
Libr=7

Federal Coastal Programs Review

December 1985

U. S. Department of Commerce
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National Oceanic and Atmospheric Administration
Office of Ocean and Coastal Resource Management

INTRODUCTION

The Federal investment in coastal areas each year is measured in the

billions of dollars. For example, the Federal Emergency Management Agency's

Federal Insurance Administration (FIA) reports that insurance coverage in

coastal communities along the Atlantic and Gulf coasts alone is over $54

billion. In addition, billions of dollars have been spent by the Army Corps

of En@ineers for port maintenance and construction for the Nation's seaports

and for navigation, flood control and erosion control projects in coasta 1

states; by the Environmental Protection Agency for wastewater treatment

facilities in coastal areas; and by several Federal agencies for disaster

relief.

Federal agencies are charged with administering programs with missions

as diverse as the uses of the coast. In some instances, a unified national

policy guides a wide range of activities and programs; however, in most

cases, agencies are left to fulfill program objectives within the context of

multiple congressional and executive mandates. Given finite coastal resources

and limited Federal budgetary resources, Federal investments in coastal areas

must be sound, effective and consistent.

This report presents the results of a review of Federal programs that

affect coaStdl resources, required by Section 316(c)(1) of the Coastal Zone

Management Improvement Act of 1980. The purpose of the review is to

"[identify] conflicts between the objectives and administration of such

programs and the purposes and policies of this title." The statute requires

the Secretary of Commerce to submit a report to the Congress including

" recommendations for changes necessary to resolve existing conflicts among

Federal laws and programs that affect the uses of coastal resources." In

addition, the statute requires that Federal agencies be notified of any

conflicts identified during the review. Much of this was accomplished

during late 1980, in the course of conducting a si milar review which

resulted in submission of "The Federal Coastal Programs Review--A Report

to the President" in January 1981.

The statutory requirement recognized the vital importance of an

effective state-Federal partnership in the management of coastal resources.

Although state and local @overnments have primary responsibility for resource

management decisions, the Federal Government exercises considerable influence

over coastal resource use through its substantial financial assistance,

planning assistance and regulatory programs as well as its direct actions in

the coastal zone.

The 1981 report addressed a range of issues to improve Lhe administration

of Federal programs and procedures affecting coastal resources and made

detailed recommendations in a number of areas. Since 1981 there have been

Federal accomplishments in many of those areas. Also, in view of the complex

interactions of agencies affecting the coastal zone and competing initiatives

for limited Federal dollars, there is continued interest in examining these

programs. The Administration recognizes that some of the recommendations

that follow may not be achievable immediately due to time and resource

constraints. Nonetheless, they are worthwhile objectives. This report

focuses on three issues related to the Federal coastal management role that

provide opportunities to reduce inappropriate Federal expenditures and to

contribute to the strength of the national economy.

1 Reducing Inappropriate Federal Investment. The Federal Government

spends billions of dollars annually on infrastructure projects (e.y. roads,

water distribution systems, sewage treatment facil ities, port construction

and maintenance) in coastal areas. Hundreds of millions of dollars more are

spent on Federal flood insurance payments and disaster and reconstruction

assistance programs, even in years containing low numbers of disaster events.

This section of the report examines Federal infrastructure investment and

emergency management programs and identifies opportunities to reduce the

long-term commitments of Federal funds through these programs which support

or facilitate development in hazardous coastal areas.

Federal infrastructure and disaster and reconstruction assistance

programs can operate to encourage development and population growth in

hazardous and otherwise unsuitable coastal areas because they do not

discriminate between development in these areas and development in more

economically and environmentally sound locations. Development in these

sensitive areas can be environmentally damaging because it can destroy the

productivity and protective features of natural areas. Such investment can

be economically unsound because it commits funds to support a repetitive

cycle of construction, destruction, and reconstruction in hazardous locations.

In effect, the Federal Government has subsidized development that would

otherwise not be economically feasible. This section examines opportunities

to reduce long-term commitments of Federal funds for unsound development.

2. Increasing the Contribution of America's Ports and Coastal Areas to

Economic Recovery. This section examines the specific issues surrounding

America's ports and coastal areas which illustrate the nationwide conflicts

between development and conservation of coastal resources. Much attention is

currently being given to developing legislative and administrative mechanisms

to alleviate these problems, the resolution of which could contribute

substantially to the economic health of the Nation.

The Nation's seaports are one of the most important economic entiLies

affected by coastal management decisions. The port industry is a major -U.S.

employer and revenue-generdtor as well as vitally important to trade dnd

national security. Resource management decisions which affect port activity

also influence other development in coastal areas. This section explores

issues affecting marine transportation and makes recommendations for

improving intergovernmental cooperation.

3. Reducing Regulatory Delay for Coastal Development Decisions. This

section examines activities that reduce delay and cost of needed economic

development. The CZMA was enacted to address the problem of multiple,

conflicting uses of the coastal zone. One of the successes of the progrom

has been increased streamlining of permit processes through state coastal

zone management (CZM) programs. This allows coastal economic development

while protecting valuable coastal resources.

I. REDUCING INAPPROPRIATE FEDERAL INVESTMENT

A. Introduction

The coastal zone, the area affected by tides Lhat is the junction

of the land and sea and the Great Lakes, has become heavily populated and

increasingly developed. Although comprising only 16 percent of the Nation's
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land area, the coastal zone contains more than 52 percent of its population.-

At the same time, this juncture of land and sea is the site of much of tne

Nation's trade and industry as well as a source of recreation for millions of

people annually.

A portion of this coastal population growth and economic and recreational

activity has occurred within the floodplain-- that is, in low-lying areas and

on barrier islands which are particularly vulnerable to coastal hazards such

as hurricanes and other coastal storms, erosion, land subsidence and flooding.

As a result, hazard-related property damage has climbed steadily upward.

The value of property at risk has risen even more. The Federal Emergency

Management Agency's (FEMA) Federal Insurance Administration (FIA) reports

that insurance coverage in coastal communities along the Atlantic and Gulf

coasts alone is over $54 billion. Those areas Closest to the shoreline and

subject to wave action (V Zones) account for $3.5 billion (or 6 percent uf

the total coverage of these communities). Approximately $4.6 billion in

disaster loans and grants for flood, mudslide, and hurricane losses within

FEMA, Small Business Administration (SBA) and Farmers Home Administration

(FmHA) programs have been reported for calendar years 1975-1984.

(See Table 1. Note that Table I lists more than coastal areas.)

Policymakers now recognize that some Federal subsidies and actions have

facilitated further development and population growth in hazardous and

vulnerable coastal areas. Federal support for development in hazardous areas

varies in nature. The effects of this support are illustrated by examining

three program areas-- i nf rastructure investment programs, the Federal flood

insurance program, and post-disaster reconstruction assistance programs.

These programs can support development in hazardous open ocean and estuarine

areas of mainland coasts and the Great Lakes, and on barrier islands.

Table 1 - Major Declarations Involving Flood, Mudslide, and Hurricane Losses

I SBA
Calendar lAssi stance Individual Assistance Loans* Ff1 HA Total
Years Public Housing IFG Home Business Loans*

1975 128,596,000 8,042,000 24,800,000 33,507,000 33,494,000 34,536,000 262,975,000

1976 106,525,000 14,924,000 3,184,000 47,523,000 50,000,000 13,878,000 236,034,000

1977 175,527,000 124,450,000 31,264,000 86,925,000 126,945,000 4,087,000 549,198,000

1978 210,255,000 22,904,000 20,400,000 135,460,000 69,557,000 466,874,000 925,450,000

1979 290,413,000 24,607,000 133,390,000 185,718,000 133,540,000 141,772,000 9U9,440,000

1980 170,377,000 7,929,000 31,417,300 291,885,000 56,466,000 32,862,000 590,936,300

1981 19,930,000 2,037,000 7,656,500 34,747,000 16,485,000 1,989,000 82,844,500

1982 84,552,000 6,658,800 27,744,500 94,076,000 101,905,OUO 5,378,000 320,314,300

1983 214,997,000 10,258,000 33,135,800 87,484,000 49,563,000 32,781,000 428,218,800

11984 89,131 200 11,334@000 29,778,500 89,061,000 66,068,000 38,393,000 323,765,700

Total 1 490,303,200 233,143,800 342,770,600 1 086,386,000 704,023,000 772,550,000 4,629,176,600

*Data are based on program cost estimates provided to FEMA by SBA and FmHA

Source: FEMA

1. Examples of Infrastructure Investment Programs Affecting Coastal
Areas

Infrastructure programs can provide the basis for large-scale development

of hazardous areas by funding projects which provide access, water supply and

waste-water treatment facilities, navigation, flood control, and erosion

control projects.

For example, two agencies of the Department of Transportation, the

Coa$t Guard and the Federal Highway Administration, play an important role

in pruviding access to barrier islands. The Coast Guard issues permits for

construction of bridges across navigable waters, and the Federal Highway

Administration provides financial assistance for road and bridge construction.
Vehicular access is generally a prerequisite to any large-scale dev'elopment.

In the case of barrier islands, this usually means a bridge or causeway.

The Cost of constructing bridges and causeways, however, has become so high

that without Federal assistance, most local governments and developers cannot

justify the expense. For example, the bridge to Dauphin Island, Alabama, was

destroyed in 1979 by Hurricane Frederick. The original bridge was constructed

in 1955 at a cost of about $1 million per mile. However, contemporary design

standards coupled with inflation have significantly increased the cost of

construction. Bridge replacement costs exceed $10 million per mile.

Shifting such costs from the Federal Government to the private sector wo'uld,

in the words of one developer, "render economically infeasible development of
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any barrier island that does not already have a causeway."

The principal Federal program providing assistance for wastewater

treatment facilities is the Wastewater Treatment Construction Grants Prograin

of the Environmental Protection Agency authorized under Section 201 of the

Federal Water Pollution Control Act. Section 201 grants have covered 75 to

85 percent of the cost of constructing wastewater treatment facilities. In

fiscal years 1980-1984 the Congress appropriated $12.3 billion for the EPA

construction grants program. EPA is unable to confirm what portion went to

coastal area facilities; however, construction of wastewater treatment plants

does facilitate development, and may be an inappropriate expenditure of

Federal funds in some cases, particularly in flood hazard areas or on barrier

islands.

The Army Corps of Engineers (Corps) is charged with a major Federal

program of water resources development, including the improvement of channels

and harbors for navigation and projects for flood and erosion control, which

are the major types of water resources projects in coastal areas. Because of

their outstanding natural features, coastal areas have drawn people and

associated development at a rapid pace. Development too close to the shore

has created a demand for the Corps to "stabilize" these inherently unstable

areas. As a result, numerous coastal areas have been "stabilized" by erosion

control structures such as jetties, groins, bulkheads and seawalls to protect

development in hazardous areas. In the short-term (20 to 30 years), such

structures can be effective. However, their long-term (50 to 150 years)

effects can be seen in "old" shoreline communities of New Jersey such as Sea

Bright, Monmouth Beach, Long Beach and Cape May. The original beaches have

eroded away to the point that there are no beaches except at low tides, and

massive seawalls protect the communities. The equilibrium profile (i.e.,

where the beach wants to be) is tens or hundreds of feet landward and the
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communities have become fortresses. The question becomes should Federal

expenditures continue? What level and type of iirotection are appropriate?

2. Flood Insurance

Under the National Flood Insurance Act of 1968, as amended, the FIA

provides flood insurance to owners of property in floodplains under the

National Flood Insurance Program (NFIP). The program is voluntary, and

communities that choose to participate must agree to adopt and enforce

certain minimum floodplain management regulations (including land use and

building standards) applicable to new and rebuilt construction. Almost all

coastal communities have chosen to participate in the prograill because fdilure

to do so renders the community ineligible for Federal construction and

disaster assistance. During the emergency phase of the program (i.e., the

period of time between a community's entrance into the program and FEMA's

completion of the technical studies necessary to determine actuarial rates),

flood -insurance for existing and new construction is provided at subsidized

rates. Because a number of coastal communities are still in, and many only

recently have moved from, the emergency phase, flood insurance for most

existing construction is provided at the subsidized rates. The regular phase

of the program begins when FEMA has completed the detailed hydrological and

topographical studies necessary to determine the base flood elevation for the

100-year flood levels, and hence, has the data to determine reliable actuarial

rates. (The IOU-yedr flood level represents the flood magnitude that has d

one percent chance probability of being equalled or exceeded annually.)

Since almost all parts of barrier islands are in floodplains, the

availability of inexpensive flood insurance has been another incentive for

development in these areas. The FIA recognized this problem and, since 1981 ,

has made a number of changes in both the rating and coverage of the NFIP.

First, it adopted an optional individual risk rating system aimed at providiny

an economic incentive to build structures to safer standards to reflect

hazards unique to the coastal areas. Second, in 1981, 1982 and 1983,

basic rates for flood insurance were raised, representing 74%, 45% and 12%

increases, respectively. The average premium for the basic rates of flood

insurance rose from $140 in 1980 to almost $400 in late 1983. Finally, in

1981, FIA amended its insurance rating structure for V Zones and offered an

optional $3000 deductible for a reduced rate. This was a way of transferring

some of the risk back to 'the property owner, who was compensated by being

charged a lower premium. FEMA reports that this "shifting of the risk" has

proven to be very popular.

3. Post-disaster Reconstruction Assistance

As residents of low-lying coastal regions know, hurricanes, tropical

storms and "northeasters" present danger to life and property. For example,

see the damages reported in Table 2, Costliest Hurricanes, United States

1900-1982. When disaster strikes, however, the Federal Government has a wide

array of programs available to assist stricken communities and individuals.

Some of the most important of these programs are authorized under the Disaster

Relief Act of 1974. Under this Act, FEMA provides a wide range of emergency

assistance, as well as assistance aimed at the longer-term restoration of

affected areas, including grants to repair or replace infrastructure such as

roads, bridges, water supply facilities, public utilities, and recreational

facilities and parks. Other Federal disaster relief programs are administered

by the SBA and the FmHA. The Federal investment in disaster relief is

substantial--at least $323 million in calendar year 1984 alone.

Table 2. COSTLIEST HURRICANES, UNITED STATES 1900-1982
(More than $300,000,000 damage**)

HURRICANE YEAR DA14AG E ( U.S.)

1. AGNES (Northeast U.S.) 1972 $4,700,000,000
2. BETSY (Fla./La.) 1965 4,670,000,000
3. CAMILLE (Miss./La.) 1969 3,810,000,000
4. DIANE (Northeast U.S.) 1955 3,086,000,OUO
5. New England 1938 2,632,000,000
6. FREDERIC (Ala./Miss.) 1979 2,550,000,000
7. CAROL (Northeast U.S.) 1954 1,733,000,000
8. CARLA (Texas) 1961 1,412,000,000
9. DONNA (1--la./Eastern U.S.) 1960 1,335,000,000
10. CELIA (S. Texas) 197U 1,142,OUO,000
11. HAZEL (S.C./N.C.) 1954 1,057,000,000
12. Florida (Miami) 1926 963,000,000
13. ELOISE (Northwest Fla.) 1975 880,000,000#
14. DORA (Northeast Fla.) 1964 850,000,000
15. Northeast U.S. 1944 677,000,000
16. BEULAH (S. Texas) 1967 608,000,000
17. Southeast (Fla./La.-Miss.) 1947 516,000,000
18. AUDREY (La./Tex.) 1957 510,000,000
19. CLAUDETTE (Texas)* 1979 444,000,000
20. CLEO (Southeast Florida) 1964 437,000,000
21. Southwest and Northeast Fla. 1944 427,000,000
22. HILDA (Louisiana) 1964 425,000,000
23. Southeast Florida 1945 395,000,000
24. DAVID (Fla./Eastern U.S.) 1979 355,OOU,000
25. IONE (N. Carolina) 1955 326,000,000
26. ALLEN (S. Texas) 1980 300,000,000

#Includes $105,000,000 in Puerto Rico.
*Only of Tropical Storm intensity, but included oecause of high damage amount.
"AdJusted to 1980 dollars on basis of U.S. Department of Commerce composite
construction cost indexes.

Adapted from: The Deadliest, Costliest, and Most Intense United States
Hurricane this Century (and other Frequently Requested Hurricane Facts).
(updated January 1983) National Hurricane Center, Miami, Florida. NOAA
Technical Memorandum NWS NHC 18.

B. Federal Accomplishments

A major element in achieving the aim of restoring strength to the

national economy is reducing economic intervention by the Federal

Government that distorts the free market and results in uneconomic

development. The Federal Government has taken several positive steps

in the direction of reducing unnecessary intervention and uneconomic

investment.

1. Coastal Barriers

On October 18, 1982, President Reagan signed the Coastal Barrier

Resources Act (CBRA) into law. This action was the culmination of a number

of executive and legislative actions to limit Federal support of development

on undeveloped coastal barriers. These included the convening of a Task

Force of the President's Cabinet Council on Natural Resources and the

Environment to develop an Administration position on coastal barrier

protection and the passage of a provision in the 1981 Omnibus Budget dnd

Reconciliation Act (OBRA) ending Federally-subsidized flood insurance for

new construction or substantial improvements to existing structures on

designated undeveloped coastal barriers after October 1, 1983.

The purpose of the CBRA is to restrict gruwth-inducing Federal

expenditures and financial assistance in remaining undeveloped coastal barrier

areas. The Act establishes the Coastal Barrier Resources System (CBRS),

composed of undeveloped coastal barriers along the Atlantic and Gulf Coasts

that are depicted on a set of maps codified as part of the legislation. The

Act also provides that persons owning or having a controllinj interest in

undeveloped coastal barrier areas not within the original system can elect to

have their areas added within one year of enactment. The CBRA prohibits new

Federal expenditures and financial assistance for development within the

units of the CBRS; financial assistance as defined by the Act specifically

includes Federal flood insurance.

The enactment of the CBRA represents the establishment of d consistent

Federal coastal barriers policy that the important natural values of remaining

undeveloped barrier areas should be conserved, that growth in these areas is

unwise, and that the Federal Government should not continue to subsidize this

growth.

The Act directed the Secretary of the Interior to report to Congress

within three years of passage of CBRA with recommendations for conservation

of natural resources based upon management alternatives as well as recommended

boundary changes for the CBRS. The Coastal Barrier Resources System Drdft

Report to Congress was sent to reviewers May 1, 1985, for public comment

until July 15, 1985 (extended to September 30, 1985). 'rhe Secretary of the

Interior is developing recommendations which will be released for public

comment in February 1986 prior to transmittal of the final report to Congress

.in the spring of 1986.

2. State/Local Cost Sharing Policy in Disaster Relief

FEiAA has established a new policy requiring 25% state/local cost sharing

in disaster relief costs that previously were borne 100% by the Federal
Uovernment. It is estimatedthat this new cost sharing policy will encourage

more cost effective disaster response efforts and that it will provide an

important incentive for increased state and local attention to hazard

mitigation and preparedness measures to reduce future hazards losses and

disaster relief costs.

3. Efforts to Eliminate Flood Insurance Subsidies

The FIA promulgated new regulations on October 1, 1981, for insuring new

construction or substantial improvements to existing structures in high

velocity zones. These "V Zones" are defined technically as those areas which

(because of astronomical tides, storm surge, topography, or other conditions)

will support a three foot or higher wave and therefore, are the areas where

risk of harm or loss are greatest. The intent of the new rate structure

is to approximate actual losses for new construction or substantial

improvements in V Zones. Removing the Federal subsidy for flood insurance in

V Zones will provide an economic incentive to locate development in safer

areas and to build to the highest hazard-resistant construction standards.

Recently, FEMA established an agency goal "to implement a self-supportin,@

nationwide flood insurance program by 1988..." This effort will involve

broadened rate restructuring; trimming coverage; increased marketing of

flood insurance, particularly in the flood fringes; and aggressive efforts

to collect underpayments and pursue subrogation. In addition, FEMA's Office.

of Loss Reduction will be making efforts to ensure compliance with -the land

use and construction standards of the National Flood Insurance Program (NFIP)

and to reduce the subsidy associated with existing development in floodplains

through mitigation. FEMA also has established a goal to convert all remaining

emergency phase communities to the regular phase of NFIP by 1990. These

actions, by shifting more of the risks and costs of floodplain occupancy

from the general taxpayer to the floodplain occupant, will save the government

money as well as increase incentives for individual action to locate and

build more safely.

4. FmHA Regulations

The FmHA in January 1984 issued a comprehensive set of environmental

regulations that address both the Coastal Barrier Resources Act and the

Coastal Zone Management Act (7CFR 1940 .301 - .350). The regulations

establish that the FmHA will not normally participate in any proposal that

would affect a floodplain or wetland. The only exception to this policy is

if FmHA determines (i) there is a demonstrated, significant need for the

project, (ii) there is no practicable alternative that would avoid the impact,

and (iii) all practicable measures are being taken to reduce the adverse

impact.

C. Further Steps To Consider

The following discussion focuses on improvements in Federal programs

that can reduce further economically unsound Federal expenditures in coastal

areas, while conserving the natural resources base which supports long-term

economic growth.

1. ImprovingFederal Infrastructure Investment Policies to Minimize
Hazardous Development.

Althou@h Federal agencies generally have broad statements of policy

to avoid economically unsound investment, very often their policies are too

Vague to ensure consistent and predictable implementation and do not

discriminate adequately between development in hazardous areas and development

in more economically sound locations. As a result, Federal infrastructure

investment can facilitate improperly located development involving substantial

future Federal cost for flood insurance, disaster relief, and flood and

erosion control, as well as increasea risks of loss of life.

. One area where the lack of clear policy is particularly felt is in the

assessment of secondary and cumulative effects of infrastructure projects,

especially gruwth-inducing impacts. Instead, Federal dgency policies and

procedures for avoiding hazardous development and preservin@ the storm

protective and ndtural resource values of hazard-prune Coastal areas tend to

concentrate on avoiding or mitigating the direct impacts of infrastructure

projects.

An unintended effect of this piecemeal approach to development is often

the further expenditure of funds to ameliorate situations that result from an

initial Federal investment or approval. For example, the Monmouth County

Planning Board (New Jersey) reported that the Northeast Monmouth County

Regional Wastewater Treatment Facility made possible development of high

density housing (townhouses, apartments, highrise condominiums) in coastal

towns previously served by small treatment plants. According to the Board,

this secondary development has destroyed wetlands, increased traffic congestion

and local demands for better highways, increased air pollution, and exposed

more people and property to the hazards of coastal storms and flooding, thus

increasing the demand for flood protection. t

In part, the lack of attention to induced and cumulative impacts can be

traced to the difficulty of identifying these impacts with certainty. However,

population forecasting, use of project data collected for other purposes, and

other techniques can be reasonably applied to assess these impacts.

Recommendation:

On August 26, 1982, the President's Task Force on Regulatory Relief

requested that the FEMA review the regulatory burden imposed by Federal

floodplain management policy as established by Executive Order No. 11988,

"Floodplain Management." Due to the success of the Executive Order, the

Office of Management and Budget (OMB) agreed with FEM A's recommendation that

the Executive Order be retained in its current form. At the same time OMB

indicated that "it appear[ed] possible to improve agency implementation of

the Executive Order," noting "several agencies have not yet adopted final

implementing regulations."

Consistent with the principles of Executive Order 11988, Floodplain

Management, and the Interagency Agreement on Hazard Mitigation (1981), the

OCRM encourages the Federal infrastructure agencies participating in the

Interagency Agreement on Hazard Mitigation (discussed on page 21) to

negotiate and implement an Annex to their Agreement containing a common

policy for day-to-day project decisions that incorporates the following

precept:

Actions which permit or encourage new development in
coastal hazard areas should be avoided unless the
proponent of the action can clearly demonstrate that:

(a) there is a publ ic need for the action;

(b) the public need outweighs the future costs
(including environmental costs) and risks of loss
of life and property; and

Within these discussions, consideration should be given to monitoring tire

Annex to the Interagency Ajreement on Hazard Mitigation (i.e. whether

monitoring should be undertaken; and if so, what agency should be

responsible for monitoring).

2. Federal Flood Insurance

New development in flood hazard areas should receive no subsidy, arid

FE11A is moving towards this goal. Two concerns are discussed below along

with the measures that FEMA has taken regarding these concerns.

First, concern exists that many communities remain in the emergency

phase of the NFIP, where there is no distinction in rates for new construction

versus existing construction. While this new construction is subsidized,

FEMA has taken steps to minimize potential losses. FEMA has established an

agency goal and special conversion process to convert remdining emergency

phase communities to the regular program by 1990. FEMA has indicated tnat

for the most part the 700 communities which remain to be converted to the

regular program "represent the lowest national priorities as there is little

development in their floodplain and little, if any, likelihood for any

significant development in the foreseeable future." Thus FEMA states that

their approach, which addresses the most hazardous areas first, brings about

a greater return to the taxpayer.

Second, a concern exists that the Flood Insurdnce Rate Maps completed

for the coastal communities in the regular phase of the program may underestimate

flood risk. Until 1980, these maps were based on stillwater flood elevations

and did not account for wave heights, which are important determinants of

storm-related coastal flood damage. FEMA is in the process of revising tile

Rate Maps to account for wave heights according to a generally accepted

methodology developed in 1978 by the National Academy of Sciences (NAS).

V Zones are 100-year flood areas along the coast, which are subject to wave

action. FIA began its flood elevation mapping which included wave heights in

1980 and expects to complete it in 1985. On October 1, 1981, FIA promulgated

new regulations for insuring new construction in V Zones. Under the new rate

structure established by the regulations, the actuarial rate structure for

new construction in these areas will be based on approximate wave heights

developed using the NAS methodology in areas where true wave height data are

unavailable. FEMA also has begun a map initiative progrdill to improve existing

maps and compress the current 68 flood zones to 8.

FEMA's actions represent important steps forward. However, two problems

remain. The first problem is that the methodology used still does not and

cannot account for snoreline erosion, particularly short term erosion.

Because of this, for example, a technical study completed for FEMA of Ocean

City, Maryland, assumed a shoreline that was several feet underwater.

(FEMA indicates that there is no established methodology for calculating short

term storm-induced erosion; however, long term erosion can be calculated

where there are long term historical records.) The second proL)lem is that

the maps are often locally incorrect because they do not account for the

individual characteristics and dynamics of the shoreline in specific locations.

As a result, even in communities in the regular phase of the program,

inappropriate new development may be subsidized.

Two additional concerns with the operation of the NFIP were noted in

the President's "Private Sector Survey on Cost Control" (the Grace Commission

Report). First, the Report cited a General Accounting Office review of

the program which revealed that "an estimated $5 million per year is not

collected because of improper procedures used by private sector underwriters

contracted to administer the program. These underwriters are not liable
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-@or insurance losses which may result from their errors." FEMA indicates

that there are no private sector underwriters contracted to underwrite the

program and that FIA is the sole underwriter of flood insurance under the

NFIP. There is, however, a servicing company that is contracted to service

the flood policies which are sold by licensed insurance agents. FEMA also

indicates that due to efforts begun by FIA during 1983 and 1984, there has

been rigorous pursuit of risk rate verification at loss adjustment time. In

addition, FIA signed a contract in the fall of 1985 to have a private

contractor verify the rates and premiums charged to approximately 100,000

risks. This is similar to standard industry practices and is intended to

become aroutine annual practice.

Second, communities are not required to purchase flood insurance to be

eligible for Federal Disaster Relief assistance until after a flood occurs.

This so called "one-bite" free provision from the Treasury encourages

communities to wait until a flood occurs before joining the flood insurance

program. FEMA has proposed legislation in the past two Congresses to

eliminate this provision but it has not been enacted.

The Grace Commission Report recommended the following remedial actions:

Flood insurance should be limited to those areas that
have instituted appropriate floodplain management
procedures and the after-the-fact provision should be
eliminated. Further, individuals should not receive
disaster assistance for [otherwise] insurable items.
The Federal Emergency Management Agency (FEMA), which
-administers the flood insurance program, should up@rade
underwriting standards to arrive at proper risk ratings.
In addition, FEMA should apply sanctions -- through legal
action where appropriate -- against agents who abuse the
program. [Potential] Savings are estimated at $95 million
over three years.5/

FEIMA appears to be making a good faith effort to comply with these

recommendations. For example, in addition to the above mentioned risk rate

verification measures undertaken, the agency has developed policy guidance

on compliance with the NFIP and has been developing detailed procedures

regarding community program deficiencies and violations. The agency has set

specific goals for cost control and procedures to prevent fraud and abuse.

The Grace Commission Report also noted that "little historical data Lare]

collected by the National Flood Insurance Program (NFIP) to establish a sound

basis for anticipating future needs. Without adequate information, tile NFIP

cannot ensure the accomplishment of its objectives. The Grace Commission

Report estimates that three-year savings of $662 million can be achieved by

increasing premium rates, raising deductibles, and putting the program on
6/
a sound actuarial basis, reducing subsidized rates." As noted earlier in

this document, FEMA has set a major goal to implement a self-supporting flood

insurance program by FY 1988, and has taken a number of initiatives to

accomplish this goal , including raising the basic rates for flood insurance

in 1981 , 1982, and 1983, and providing for an optional increased deductible

for a reduced rate in V Zones.

Recommendations:

a. The FIA should consider imposing an interim rating system for

communities in the emergency phase that differentiates between new and

existing construction. Construction during the emergency phase should not

receive as high a premium subsidy as construction existing prior to the

community's entry into the program. Also construction during the emergency

phase should be required to meet some minimum standards.

b. In conducting its technical studies, FEMA should require its

contractors to make more use of state capabilities. States often have

detailed data and knowledge of their coastlines. This is an important

consideration in adapting the standardized methodology to specific areas of

shoreline. Current FEMA regulations at 44 CFR 60.25(4) and (7) call for

states to cooperate with FEMA by providing relevant technical data and

recommendations for ratemaking studies. FEMA should be encouraged to continue

close cooperation with state and local agencies.

3. Disaster Assistance - Hazard Mitigation Planning

The Disaster Relief Act of 1974 was designed to provide Federal

assistance to supplement the efforts and resources of state and local

governments and voluntary relief organizations. A Presidential declaration

of a "major disaster" authorizes a wide range of assistance under the Disaster

Relief Act, including assistance directed at emergency disaster relief and

assistance for repair and reconstruction. The latter category includes

grants to states and local governments to repair or replace roads, bridges,

water control facilities (i.e., dikes, drainage facilities, levees, etc.),

public buildings and public utilities. Other Federal'disaster relief prograins

include programs of the SBA and the FmHA which provide low interest loans and

other forms of financial assistance to individuals, businesses and farmers.

The Disaster Relief Act contains two important planning requirements.

First, Section 201 of the Act authorizes the development of disaster

preparedness plans involving all appropriate state agencies. Under this

section, financial and technical assistance is provided to states in developing

comprehensive disaster plans and programs, including hazard reduction,

avoidance and mitigation. All states have already received a $250,000

maximum one-time development grant. Remaining funds provide 50/50 matching

grants up to $25,000 annually per state for updating and improving the states,

preparedness plans and capabilities.

Second, Section 406 of the Act which conditions loans and grants made

under the Act on agreement by state or local governments to evaluate the

natural hazards of the area in which the grants or loans are to be applied

and to take appropriate actions to avoid these hazards in the future. Many

of FEMA's hazard mitigation activities are premised on this section because

grants or loans can be withheld until the state or local unit of government

agrees to implement a hazard mitigation program.

The Interagency Agreement on Hazard Mitigation, signed in January 1981,

is an important initiative that could result in significant reductions of

risks to property from hazards during the post-flood recovery effort. The

Agreement was developed in response to an Office of Management and Budget

directive to develop and implement a common policy for flood disaster planning

and post-flood recovery to ensure that Federal financial assistance minimizes

future flood losses. FEMA was designated the lead agency. Other participants

are the Departments of Agriculture, Army, Commerce, Housing and Urban

Development, and the Interior; the Environmental Protection Agency and the

Small Business Administration. Under the Agreement, hazard mitigation teams

are mobilized when major disasters are declared. They recommend dCtions by

Federal agencies and state and local governments to reduce future hazard

losses. Federal agencies have agreed to comply with the recommendations

of the team reports to the maximum extent possible. Under Section 406,

state and local governments can be required to comply with the recommendations

as a prerequisite for obtaining Federal disaster assistance.

Hazard mitigation planning involves two major components:

(1) developing policies for the proper location/construction of development,

and (2) developing policies to guide reconstruction following a disaster.

In part, the policies for proper location and construction of development

are guided by community participation in the NFIP which requires that

communities adopt floodplain management and construction standards in order

to qualify for Federal flood insurance. However, as noted above, many

communities are in the emergency phase of the NFIP, where the requirements

are minimal. Even when communities enter the regular phase, the required

standards have only one locational requirement in that construction must be

located landward of mean high tide, and meet minimal ouilding standards.

This still permits construction in V zones where hazard risks are greatest,

although the insurance rate is higher here than inland, reflecting the gredter

coastal risk. (FEMA notes that an optional rating system for property owners

in V Zones offers the opportunity to construct a safer structure taking into

account all the related flooding risk elements such as structural stability,

dunes, and setbacks, in return for a significantly reduced flood insurdnce

rate. This option encourages less hazardous locationdl construction.)

Reconstruction policies following a disaster are often inadequate.

The post-disaster period is a critical time for hazard mitigation. It is

a time when fundamental decisions are made that will determine the pattern

of development for years to come--or at least until the next disaster.

Sound decisions at this time can substantially reduce Federal costs for

flood insurance, disaster relief, erosion control structures and infrastructure

investment, as well as future exposure of lives and property to hazards

losses. Unfortunately, such planning is usually neglected until a disaster

strikes. At that point, quick action is required and short-term recovery

is emphasized over long-term hazard mitigation.

Section 406, which reflects Congressional recognition of the important

long-term implications of investment decisions in the post-disaster period,

presents a significant opportunity to minimize future losses through sound

hazard management. The promise of Section 406, however, has not been achieved

for two reasons.

First, FEMA's regulations provide neither guidance for preparation

of such plans nor criteria for approving them once prepared. Instead,

considerable discretion is left to the FEMA Regional Director, in consultation

with the Governor and local governments, in applying the requirements of

Section 406. As a consequence, post-disaster hazard mitigation plans typically

have been general in content, particularly with respect to location of

development, and have emphasized warning and evacuation efforts and provision

of emergency assistance rather than prevention of damage to property. FEMA

is attempting to address this problem in two ways: (1) by carrying out the

Section 406 requirements in conjunction with the hazard mitigation team

review under the Interagency Agreement, and (2) by proposing to develop

detailed regulations for Section 406 planning.

Second, and more importantly, Section 406 planning requirements can only

be invoked after a disaster has occurred. On the one hand, the immediate

post-disaster period is the time when community leaders are most aware of,

and concerned about, hazard planning, and are more apt to take action. On

the other hand, it is difficult to develop the mitigation elements of the

plan immediately following a disaster because they involve making hard

decisions about the location of development and rebuilding polices at a

time when there is great sympathy for the victims' wishes to rebuild to the

original state. To withstand this pressure, reconstruction policies need to

be in place to take advantage of mitigation opportunities (be they relocation

of infrastructure and residences, reconstruction of facilities to safer

standards, acquisition of high hazard areas for public open space, etc.)

that occur following a disaster. Unless prudent reconstruction policies ar,e

implemented more widely, hazard losses will be repeated again and again.

Pre-disaster preparedness planning under Section 201 also has not

filled the void. Although Section 201 lists as one of the purposes of such

planning the reduction of the effects of hazards through sound location and

construction practices, state disaster preparedness plans again have typically

focused on warning, evacuation, and emergency relief procedures rather than

hazard mitigation (reduction of property loss).

These considerations argue strongly that the difficult decisions required

for an effective hazard mitigation plan should be made, at least in broad

scope, before a disaster occurs, and that post-disaster investments should be

made in conformance with that plan.

Many state coastal management programs already contain an active coastal

hazard element, and the 1980 amendments to the CZMA require that state

programs devote greater attention to this issue. In its statement of policy,

Congress declared that "... it is the national policy to encourage and assist

the state to exercise effectively their responsibilities in the coastal zone

through the development and implementation of management programs ... which

should at least provide for ...the management of coastal development to minimize

the loss of life and property caused by improper development in flood-prone

[sic], storm surge, geological hazard, and erosion-prone areas and in areas of

subsidence and saltwater intrusion, and by the destruction of natural

protective features such as beaches, dunes, wetlands, and barrier islands

Section 303(2)(B).

An example of the improvements envisioned under this national policy is

North Carolina's requirement that all local Land Use Plans incorporated into

the North Carolina Coastal Management Program include storm hazard mitigation

policies. These must identify local hazardous areas, and provide a post-

disaster reconstruction plan based on a risk analysis of people and structures

within the hazardous areas, This new requirement will improve local abilities

to respond to problems and take advantage of mitigation opportunities following

coastal storms.

FEMA's regulations thus could rely on state planning through the coastal

zone program to satisfy at least part of Section 406 requirements. However,

pre-disaster hazard mitigation plans must be coordinated with the recommenda-

tions of the hazard mitigation teams mobilized under the Interagency Agreement

to assure that other Federal assistance in the post-disaster period is

consistent with the plans.

Recommendations:

a. A task force should be convened to develop hazard mitigation policies

on which to base detailed requirements for hazard planning under Section 406

of the Disaster Relief Act in concert with existing Executive Order No. 11988,

Floodplain Management, and Executive Order No. 11990, Protection of Wetlands.

These policies should deal with when and whether to rebuild infrastructure,

and how to compensate communities and individuals for hazards losses without

subsidizing rebuilding in the same hazardous locations. The policies should

limit future Federal costs for flood insurance, disaster relief and

reconstruction, and flood and erosion control.

b. FEMA should amend its regulations to set forth detailed requirements

for approval of hazard mitigation plans under Section 406, includin@

requirements for reconstruction policies to limit future Federal costs. FEMA

and NOAA should take action to encourage that planning to satisfy such

requirements take place under Section 201 of the Disaster Relief Act and

through approved state coastal management programs before a disaster occurs,

and to strengthen the long-term mitigation component of planning under

Section 201 and under the Coastal Zone Management Act.

c. FENA should ensure that hazard mitigation teams mobilized under the

Interagency Agreement coordinate their recommendations with any pre-disaster

hazard mitigation plan which meets the requirements of Section 406 of the

Disaster Relief Act.

4. Community Development Block Grant (CDBG) Program and Rental
Rehabilitation Program

The Department of Housing and Urban Development (HUD) administers the

State Community Development Block Grant (CDBG) program and Rental Rehabilitation

program. The States' CDBG program is authorized under Title I of the Housing

and Community Development Act of 1974 (42 U.S.C. �5301-5317); the Rental

Rehabiltation program is authorized under Section 17 of the United States

Housing Act of 1937 (42 U.S.C. �1437-1437j).

Section 102 of the Flood Disaster Protection Act of 1973 (the 1973 Act)

provides that no Federal financial assistance for acquisition or construction

purposes for use in any identified flood-prone area shall be approved, if

Federal flood insurance has been made available for that area, unless the

structure in question and any personal property to which the financial

assistance relates is covered by flood insurance in amounts specified by the

statute (42 U.S.C. �4012a). In addition, section 202(a) of the 1973 Act

(42 U.S.C. �4106(a)) provides that no Federal financial assistance may be

approved for acquisition or construction purposes for use in any identified

flood-prone area, unless the community in which the area is located is

participating in the National Flood Insurance Program. For purposes of both

provisions, section 3(a)(3) of the 1973 Act (42 U.S.C. �4003(a)(3)) defines

"financial assistance" as follows:

"financial assistance" means any form of loan, grant, guaranty,
insurance, payment, rebate, subsidy, disaster assistance loan
or grant, or any other form of direct or indirect Federal
assistance, other than general or special revenue sharing or
formula granTs made to States. [emphasis added]

Thus, formula grants to states are exempted from the 1973 Act. HUD

has determined that the State CDBG program and the State portion of the

Rental Rehabilitation program are "formula grants made to States," and,

therefore, exempt from the 1973 Act's coverage. The effect of the exemption

is that physical development activities under these programs can be carried

out in flood-prone and other coastal areas without regard to Federal flood

insurance requirements--a result in clear conflict with Federal floodplain

and coastal resource policies and the National Flood Insurance Program

objective of encouraging community participation in the program.

While maintaining the State formula grant exemption would be consistent

with the flexibility and local control philosophy underlying the State CDBG

program and the State-run part of the Rental Rehabilitation program, this

consideration does not outweigh the desirability of a consistent approach

to Federal floodplain and coastal resource policies.

-Recommendation:

Congress should eliminate the current exemption of the State Community

Development Block Grant (CDBG) program and the State administered portion of

the Rental Rehabilitation pro@ram from the Flood Disaster Protection Act of

1973.

5. -Evacuation Planning

In spite of improvements in severe storm forecasting, the potential for

catastrophic loss of life in a major disaster is greater now than at any time

in the past. This is because the rapid growth of many population centers has

outstripped their evacuation infrastructure. Bridges, ferries, and exposed

coastal highways that allow adequate transportation in normal times can

become clogged during an attempted emergency evacuation. Rising tides and

rainfall can disrupt transportation routes many hours before a storm strikes,

trapping people to become potential victims of high winds and storm surge.

In addition, because of unusually low severe storm activity along the Atlantic

and Gulf Coasts during the last 20 years, most visitors and residents have

never experienced a major disaster. As a result, they have not been sensitized

to the need to plan ahead for evacuation routes and to react quickly when

warnings are issued.

Although FEAA's regulations require communities to prepare evacuation

plans that include alternate access and escape routes for mobile home parks

and subdivisions, the regulations do not require a link between such plans

and decisions on the pattern of community development, nor do they require

preparation of evacuation plans for other areas of flood-prone communities

such as commercial or office areas. Unfortunately, many high risk communities

have not made adequate provisions for public awareness and emergency evacuation

in response to natural disasters.

-Recommendation:

FEMA should continue to work with local governments and other

Federal and state agencies to adopt storm warning and evacuation plans for the

entire population at risk and to encourage reporting annually to FEMA on the

adequacy of their evacuation plans and measures taken to overcome identified

deficiencies.

6. Technical Assistance

State and local planning processes ultimately determine the amount dnd

nature of development in coastal hazard areas. Technical and financial

assistance has been made available to communities for developing emergency

preparedness plans under Section 201 of the Disaster Relief Act. However,

funding for and the availability of technical assistance for pre- and post-

disaster planning efforts have been limited, intermittent, and not

comprehensive.

If prepared correctly, a single plan could satisfy the requirements of

Sections 201 and 406 of the Disaster Relief Act, satisfy the floodplain

management requirements for flood insurance eligibility, and meet the

requirements of the 1980 amendments to the CZMA. (In fact, some states,

such as South Carolina, have chosen to address these issues through their

CZM program in coordination with State and Federal emergency preparedness

agencies.) Preparing such a coordinated plan, however, requires coordinated

technical assistance and funding. Agencies involved in providing flood

disaster assistance should develop procedures to coordinate technical assistance

to encourage preparation of pre-disaster hazard mitigation plans. In addition,

stronger incentives are needed for pre-disaster planning.

Recommendation:

Existing funding under Section 201 of the Disaster Relief Act should be

provided to state and local governments specifically for prepdration of

pre-disaster flood hazard mitigation plans that will satisfy the detailed

criteria of Section 406.

II. INCREASING THE CONTRIBUTION OF AMERICA'S PORTS AND COASTAL AREAS TO
ECONOMIC FE-COVERY

A. Introduction

Among the most important economic activities affected by coastal

management decisions are the Nation's seaports. In 1980, U.S. ports

generated $66 billion in gross revenues; provided over one million jobs;

contributed personal and business income of $23 billion; and paid

$12 billion in Federal taxes and $5 billion in state and local taxes.

Maritime Administration (MARAD) studies show that in 1980 deepwater

ports and terminal facilities handled nearly two billion short tons of

cargo. Total waterborne commerce by U.S. ports is expected to increase

32 percent between 1980 and 1990.-

America's ports could further increase their contribution to local,

state, regional, and national economic growth through improved coastal

management mechanisms and intergovernmental cooperation. Many issues

surrounding port development and expansion also affect general economic

growth in coastal areas. For example, governmental decisionmaking

can be improved through CZMA mechanisms to provide appropriate planning

and management for marine transportation facilities.

B. Current Marine Transportation Issues

Current marine transportation issues and recommended roles for CZM

agencies to play in resolving these issues are elaborated upon below.

1. Financing Deep Draft Vessels and Ocean Incineration Ships - There

has been no national policy on deep draft (i.e. over 45-foot) ports,

although resolution of cost-sharing and financing issues is expected in the

99th Congress based on recent agreements between the Administration and

Senate. The past lack of agreement has contributed to: (1) the conflict

between competing ports, and (2) potentially unwise Federal investment. Fo r

example, criticism has been levied upon the Mari time Administration (MARAD)

for providing financing of deep-draft vessels. Critics claim that HARAD has

financed ships with over a 45-foot draft without consulting the Corps to

determine associated Federal costs and benefits of dredging to accommodate

these snips. MARAD indicates that where the Maritime Administration has

provided assistance in the construction of vessels with drafts in excess of

45 feet, the intended operation of the vessel was between deep-draft ports

such as the Alaska oil trade or voyages in international trade. MARAD indicates

that the agency does not provide such assistance if dredging is required to

accommodate the proposed vessel at ports on its intended trade route. Also

MARAD indicates that the agency coordinates on a continuing basis with other

Federal agencies interested in port matters, such as the Corps.

While MARAD is financing deep-draft vessels for existing deep-draft
ports, other ports want to be expanded to accommodate deep-draft vessels.

The issue of where those deep-draft ports should be and who should pay for

them is currently a matter of national debate. Senate bill No. S.366 (99th

Congress lst Session) would authorize two deep-draft channels. These are

the Mississippi River-Gulf to Baton Rouge, and Hampton Roads, Virginia.

Baltimore Harbor currently is authorized to 50-feet but appropriations are

awaiting resolution of the cost sharing issue.

In addition to deep draft vessels, MARAD is involved in financing ocean

incineration ships. (MARAD-financed ships are not the only ocean incineration

vessels. According to EPA, as of August 1985, two other vessels are eligible

for EPA ocean incineration permits.) The Maritime Administration granted

Title XI loan guarantees for two incinerator ships in April 1982, after an

examination of the liquid hazardous waste problem in the United States.

There has been cooperation between the Maritime Administration and EPA. On

February 28, 1985, EPA issued proposed ocean incineration regulations for

public comment. The proposed regulations contain several major provisions,

including: permit categories; permit processing procedures; incinerator and

environmental performance standards; prohibited and restricted wastes; required

waste analyses; emissions and environmental monitoring; contingency plans;

financial responsibility requirements; permit reporting requirements; and

designation and management of ocean incineration sites.

Recommendation:

In evaluating the effects of their policies, Federal agencies should

consult affected state coastal zone management agencies in iorder to ensure

consistency in planning activities and to avoid unnecessary or duplicative

activity. Coordination between Federal agencies should be continued.

2. Costs of Port and Harbor Expansion and Maintenance - The Corps

historically has been responsible for dredging U.S. harbors for the purpose

of navigation. Natural forces of runoff and erosion cause waterways to silt

up over time. Currently, the Federal Government bears almost all of the

cost of such harbor maintenance activities. Economic competition among

ports for the larger vessels with greater cargo value has put political

pressure on the Corps and the Congress to expand this number although current

trade patterns, such as the slower expansion of oil imports, do not indicate

the economic feasibility of many deepwater ports. In fact, the only current

operational U.S. offshore deepwater port, the Louisiana Offshore Oil Port,

has experienced financial difficulties because decreased oil consumption has

lessened demand for oil.

Congress recently has moved forward in negotiations with the Administration

on legislation that comprehensively addresses issues related to port and

harbor development and operations and maintenance. A negotiated agreement

was reached between the Senate and the Administration (Congressional Record

S8631-33, June 21, 1985), and amendments in S.1567 incorporate this

agreement. The bill provides for nonfederal interests to share the costs of

developing, operating, and maintaining ports and harbors, including the

costs of dredging. This policy may discourage projects where they are not

economically feasible.

The act of dredging produces both contaminated and uncontaminated

dredged material which then requires disposal. In many port areas, appropriate

coastal spoil disposal sites are at a premium if they exist at all. Suitable

disposal sites, while also scarce in many urban areas, create controversy

because oftentimes the residents of the disposal site area do not directly

benefit from the activity of the port. Often the alternative to restricting

port commerce is ocean dumping of dredged material , which also can be

controversial. Also, dredging itself must be conducted in an environmentally

sound way so as not to destroy or alter substantially the habitat of living

marine resources or upset the ecological balance.

Recommendations:

a. State CZM programs can assist Federal agencies such as the Corps in

addressing port and harbor expansion and maintenance issues. State policies

developed through CZM program activities should continue to guide the Corps

in making decisions on appropriate port/harbor development in the coastal

zone.

b. The Congress should expeditiously enact a water resources

development authorization bill, including user fees, which is consistent

with the negotiated agreement between the Senate and the Administration.

3. Winter and Polar Navigation -The extent of ice cover and

forecasting of the movement of ice are extremely important to the marine

transportation industry in Alaska, and during the winter in the Great Lakes

and the North Atlantic. Better forecasting of ice and research on the

effects of ice on oil and gas structures is inore important now due to

increased oil exploration in the Arctic.

North Atlantic marine transportation ice issues primarily concern the

effective forecasting of icebergs and ice islands. Great Lakes issues are

more complex and reflect the need to forecast both the freezing and thawinv of

lake waters, as well as the desire expressed by some lake interests to

conduct year rouna navigation through the use of icebreakers. The freeze-

thaw concern was most recently apparent in the Spring of 1985 when more than

25 ships were trapped in the St. Clair River. Most Great Lakes states oppose

ice-breaking because of effects on shoreline erosion and other natural resources.

Domestic ice-breaking on request and provisions of more comprehensive ice data

have been proposed as candidates for user fees.

-Recommendation:

Affected state CZM agencies should be consulted by Federal agencies

involved in ice breaking activities in balancing economic development concerns

with appropriate resource management needs.

4. Port Facility Siting - Economic competition among ports is fierce.

Every major port wants to have the most up-to-date technology and facilities,

regardless of the region's ability to support duplication of such facilities

and regardless of the area's ability to economically accommodate the

infrastructure required by the facilities. Recently, such facilities include

expanded coal export facilities and container handling fdCilities and those

for intermodal containers (ship-rail, ship-truck).

New technological and economic developments have created or will

create the need to site deep seabed mining processing facilities and liquefied

natural gas (LNG) facilities in or near port areas. The demand for marine

shipping, particularly in the Great Lakes area, is often dependent on

competitive rates for rail or truck transportation to the same location.

This factor affects the need for port facilities and shoreside space and

raises the issue of excess capacity when the rates shift either way. Use

conflicts for available shoreside land occur among port facilities, energy

facilities, docking space for commercial fishing and recreational boating,

and other coastal recreational, commercial and residential activities. The

scarcity of available coastal land suggests the need for advance planning

and regional economic evaluation of Federal financing of port facilities.

Recommendation:

The CZMA declares that siting of water-dependent facilities is a national

objective of the CZM program as is providing for public access to the coast.

As the goal of the CZMA is providing balanced coastal activity, state CZM

programs can provide information to Federal agencies which will assist them

in the accommodation of coastal interests and the wise use of limited coastal

resources and Federal funds.

III. REDUCING REGULATORY DELAY FOR COASTAL DEVELOPMENT DECISIONS

A. Introduction

Coastal wetlands are critical natural areas that provide habitat and

spawning grounds for most commercial fish and shellfish species, shelter

and food for many forms of wildlife, and nesting places for migratory birds.

Coastal wetlands also serve as natural barriers against wave action,

absorbing energy that could otherwise damage adjacent property by erosion

or flooding; are natural pollution control devices; and provide recreational

opportunities for naturalists, hikers, and hunters.

On the other hand, wetlands often are located in key areas of economic

expansion. Balancing of interests is needed to ensure the continuance of

both wetland productivity and economic growth.

To balance the use of wetlands, the Federal and state governments have

adopted policies and procedures for their management. Section 404 of the

Clean Water Act provides the major avenue of Federal involvement in

controlling the use of wetlands by regulating discharges of dredged or fill

material into wetlands.

The Army Corps of Engineers (Corps) and the Environmental Protection

Agency (EPA) co-administer Section 404 of the Clean Water Act, which regulates

the discharge of dredged and fill material into the waters of the United

States, including coastal waters and adjacent wetlands. The Corps is the

permitting authority under the Section 404 program; without a permit from

the Corps such discharges are prohibited. The Corps' 404 permit program is

administered in concert with its permitting program under Section 10 of the

River and Harbor Act of 1899.

In December 1980, EPA, as required by Section 404(b)(1) issued

environmental guidelines for use by the Corps in reviewing permit requests.

(40 CFR 230, December 24, 1980). Under Section 404(b)(2) of the Clean Water

Act, the Corps may issue permits 11 ... in any case where [404(b)(1)] Guidelines

alone would prohibit the specification of the site, through the application

additionally of the economic impact of the site on navigation and anchorage."

(See also EPA regulations at 45 FR 85336 and Corps regulations at

33 CFR 323.6(a), October 5, 1984 and 49 FR 3947&) The Corps' authority

under Section 404(b) is subject to EPA's authority under 404(c). Under

Section 404(c) EPA has the authority to deny or restrict discharges of dredged

or fill material at a specific site after notice and opportunity for public

hearings if the activity "will have an adverse environmental effect on

municipal water supplies, shellfish beds, and fishery areas (including spawning

and breeding areas), wildlife, or recreational areas." Final rules regarding

Section 404(c) procedures were issued in October 1979. EPA also has the

authority to define the geographic extent of waters of the United States,

including wetlands, under the Clean Water Act and is responsible for defining

those activities exempt from regulation under Section 404(f) of the Act.

Additionally, EPA is responsible for approval and oversight of state assumption

of the 404 program in certain waters.

Under the Clean Water Act and other statutes, a number of Federal and

state agencies, including EPA, the Fish and Wildlife Service (FWS) and the

National Marine Fisheries Service (NMFS) are authorized to review and comment

on permit applications. EPA is the only Federal agency having veto power

over a proposed Corps permit. EPA has exercised its veto authority three

times to date. FWS and NMFS as well as EPA may object to a Corps decision

and request that the decision be elevated to higher levels within the Corps,

although Corps' statistics indicate that less than one percent of the 18,000

applications processed annually by the Corps are controversial enough to

require elevation.

There are two principal considerations in Corps permit decisions. A

discharge must comply with the Section 404(b)(1) Guidelines issued by EPA.

Also, the Corps considers whether issuance of the proposed permit is in the

public i nteres't. In determining the public interest, the Corps considers

benefits and detriments to the human environment such as property ownership,

energy conservation and development, job creation, housing, and economic

growth, as well as its reasonably foreseeable beneficial and detrimental

effects to the natural environment such as impacts on fish and wildlife

values, flood damage, water supply, water quality, navigation, and food

production.

State coastal management programs,'both those federally approved pursuant

to the CZMA, and some without Federal approval, have systems to reg ulate

coastal wetlands. For example, Delaware requires a permit for any dredging,

draining, filling, bulkheading, construction of any kind, mining, or excavation

in tidal wetlands. North Carolina prohibits dredging or filling in marshlands,

estuarine waters, or tidelands which result in a significant adverse effect

on (among others) wildlife or freshwater, estuarine, or marine fisheries

unless an overriding public benefit will result. Both Georgia and Minnesota,

states without Federally approved coastal zone management programs, exercise

regulatory authority over wetlands.

B. Mechanisms to Reduce Regulatory Delay for Coastal Development Decisions

A frequent complaint about parallel Federal and state regulatory systems

is that they result in duplication of effort and therefore needlessly delay

economic development projects and add nonproductive costs to state and Federal

programs and the private sector. This complaint has resulted in Federal and

state activity aimed at reducing permitting costs and processing times by

streamlining the permitting process to eliminate redundancy. Responsible

resource management means that these goals should be attained in ways that

are not detrimental to the underlying national interest in wetlands protection.

The following is a description of mechanisms that are being used to

reduce regulatory delay for coastal development decisions. Some of these

have been adopted by revisions to Corps regulations; others are being pursued

informally by state and Federal agencies. In any event, appropriate use of

these mechanisms will expedite governmental decisionmaking and reduce

nonproductive costs of development. These mechanisms include:

1. Corps General Permits - Blanket authorization for specific types of

activities in certain geographic areas are issued by the Corps for "categories

of activities when (1) the activities are substantially similar in nature

and cause only minimal individual and cumulative environmental impacts; or

(2) the general permit would result in avoiding unnecessary duplication of

regulatory control exercised by another Federal, state or local agency

provided it has been determined that the environmental consequences of the
action are individually and cumulatively minimal." (33 CFR'323.2(n).)

Either category of permits can be developed at the Chiefs Office, division

office or district level of the Corps and may be applicable on a nationwide,

regional or state-local basis respectively. Both categories of general

permits can serve as a means of reducing the regulatory burden on the public

while protecting the public interest. Each general perTnit establishes criteria

that must be met for work authorized by the permit. If the proposed work

meets these criteria, usually an individual permit need not be obtained.

"The expanded use of general permits has reduced the number of permit

41
applications by an estimated 90,000 cases annually- 11 2/ For comparison, note

that the Corps processes an average of 18,000 permit applications per year

under the current program. (Note that these numbers include the entire U.S.

and are not limited to coastal areas.)

Corps general permits in the first category discussed above are issued

on a nationwide ("nationwide permit" or "W") or regional ("regional permit")

basis. (33 CFR 325.5(c), July 22, 1982). Nationwide permits may apply

throughout the country. Regional permits apply to a smaller geographic

area, generally along Corps district or division boundaries or state

boundaries. As authorized by interim final regulations published July 22,

1982, and modified by the October 5, 1984, final regulations, there are

currently 26 NWPs in effect.* Each NWP expires after five years, unless it

is modified or reissued upon review.

Regional permits may be issued by an individual Corps district in

response to local needs. For example, the Alaska District, on October 9,

1981, issued a series of general permits authorizing the construction of

facilities needed to support oil and gas development on North Slope wet

tundra area. The regional permitting authority has also been used to

accommodate concerns that individual states had with particular nationwide

permits; thus a regional permit may replace a nationwide permit in a particular

state.

General permits which build on existing regulatory programs at the state

or local level when they are substantially similar to the Corps' regul-@Cory

*Note that according to the C@T-ps, final rule October 5, 1984 (49 FR 39481)
"authorization for [NWPs which have been denied 401 certification and/or CZM
consistency concurrence] is denied without prejudice in those States pursuant
11
to 33 CFR 320.4(j)(1) . Since some states have denied certification/
consistency concurrence for one or more nationwide permits, those particular
nationwide permits are not available in those states.

program are referred to as "state program general permits" or "SPGPs". They

are included under the second category of general permits discussed above.

More specific guidance is contained in the Corps' Regulatory Guidance

Letter No. 83-7. SPGPs reduce duplication of effort and make available

limited resources for review of major permit cases. SPGPs may evolve from

either state or Federal initiative.

As of 1982, North Carolina has had an operational state program general

permit for certain activities in coastal wetlands which may result in a joint

permit, the equivalent of both the state CAMA permit and the Federal Corps

Section 404/10 authorization. Under this joint general permit system,
applications are made only to the State '@ and the State forwards a copy to the

Corps. The Corps in turn solicits and receives other Federal agencies comments,

synthesizes comments and sends the Corps' recommendation to the State. The

State meanwhile receives comments from other State agencies and consolidates

a State position. If the Corps and the State are in agreement a joint general

permit is issued. If the terms of the joint general permit have conditions,

the applicant may either accept or reject the conditions. If the applicant

rejects the conditions, no permit is issued. If the Corps and the State

disagree on the decision, either may issue its own agency permit. Several

other states have, or are in the process of, negotiating SPGPs with

corresponding Corps districts.

2. Joint Interagency Processing Joint processing is a mechanism whereby

Federal and state officials meet regularly to discuss projects submitted for

Federal and state permits. For example, the Corps' Baltimore District holds

monthly meetings with representatives from the EPA, FWS, NMFS, and the State

of Maryland's regulatory and advisory agencies to discuss project impacts and

alternatives. Although decisions made at these meetings are not binding,

the Corps reports that these meetings have reduced processing time by 50 percent

on non-controversial projects and by 20-30 percent on controversial projects.

A similar process occurs in the Philadelphia area through a local/state/Federal

Urban Waterfront Action Group (UWAG).

3. Permit Consolidation - A few state and local governments have

consolidated various permits under one application. In 1978, the Virgin

Islands consolidated four state permits into one permit, thereby substantially

reducing permit processing time. In North Carolina, all individual and

general state permits were consolidated into a unified review process within

the state. The time required to process permits under this new system has

been reduced by more than 55 days for major actions and 17 days for minor

projects, compared to the time that was required under the old system.

4. Mandatory Deadlines - Mandatory time limits are established by law

for permitting by states as well as by the Corps. In Mississippi, action on

wetlands or state permits must be taken within 90 days or approval is presumed.

In the Virgin Islands, action on coastal zone permits must be taken within

60 days on minor permits and within 90 days on major permits.

On July 22, 1982, the Corps issued interim final rules for its regulatory

program. The major changes were provisions for the "reduction in time and

expansion of the nationwide permit program" (47 FR 31794). The Corps interim

final regulations implement a 60-day decision deadline coupled with a public

notice and review deadline of 15 to 30 days, unless precluded by law or

procedures required by law. (The deadline may be extended in limited

circumstances.) According to the Army since the 1982 regulatory reform

"average processing time for individual permits has been reduced from over
4/
120 to about 70 days".

5. Pre-Application Consultation - Potential applicants for proposed

projects meet with the regulatory agencies to identify and resolve likely

conflicts before submission of a permit application. The activity usually

shortens permit processing time. New Jersey encourages pre-application

conferences with potential developers of major projects to discuss their

choice of site, type of project, and project design at an early stage when

plans are relatively flexible. These conferences often enable the staff to

guide applicants toward changes in their proposals which increase both the

likelihood of permit approval and the speed with which a decision can be made.

6. Joint Applications and Public Notices - For some states, Federal

and state permits are applied for simultaneously, and one public notification

serves both permits. In this process the State often determines the

completeness of the application and -issues the public notice. In Michigan,

the coastal management program and the Corps have implemented a joint application

process to prevent duplication of paperwork and to ensure coordination of

decisions made by the two agencies on each permit. As a result of the state

CZM efforts, routine permit processing time has been reduced from 150 days to

20 days. Oregon also has implemented a joint application process between the

state permitting agency (the Division of State Lands) and the Corps. Perini t

processing generally takes approximately 30-40 days. In August 1983, Louisiana

established a Joint Application and Joint Public Notice System with the New

Orleans District Corps of Engineers. This joint application and notification

system reduces duplication of effort for the permitting agencies and the

applicant and reduces permit processing time by providing a coordinated

public notice.

7. Assumption of Section 404 Permitting by States - Section 404(h)

of the Clean Water Act allows EPA to transfer administration of the

Section 404 program for discharges into certain waters of the United

States to qualified states. Section 404(g) prov ides, however, that the

Corps would continue to administer the permit program for discharges of

dredged or fill material into navigable waters...

which are presently used, or are susceptible to use in their
natural condition or by reasonable improvement as a means to
transport interstate or foreign commerce shoreward to their
ordinary high water mark, including all waters which are
subject to the ebb and flow of the tide shoreward to their
mean high water mark, or mean higher high water mark on the
west coast, including wetlands adjacent thereto. [i.e. waters
under Corps' jurisdiction since 1899, Section 10 waters,
including wetlands].

It has been estimated that those navigable waters represent approximately

60% of all waters regulated by the Section 404 program, and 85 percent of

all wetlands; thus only about 40 percent of all waters and 15 percent of

all wetlands regulated by the program are available for state assumption
5/
nationally. - The percentage of waters available for state assumption is

generally lower in coastal states because more of the coastal waters are

11navigable". Since authorized in 1977, only one state has requested permitting

authority under the state assumption program. Michigan became the first

state to assume the program in August 1984.

The reluctance of States to seek responsibility for administering the

Federal 404 program is based on several factors, some of which may also

affect issuance of state program general permits (SPGPs). Some states are

relucant to make what may be viewed as politically controversial decisions.

Also, some states may have not have sought state assumption due to the

complexity of the EPA regulations; EPA is currently working to simplify

these regulations and in October 1984 proposed to modify regulations governing

their review and approval of State applications for assumption of the

Section 404 program. Another contributing factor to the reluctance of states

to assume the 404 program is that some Federal control remains after state

assumption. Since the Corps would continue to regulate Section 10 waters

"navigable in fact"), after state assumption and many major activities

would continue to be regulated by the Corps, states' incentive to seek

permitting authority under the state assumption program is reduced. This is

particularly true of coastal states in which state jurisdiction would not

include most coastal waters and wetlands. Other Federal control remains even

in state assumed waters, since other Federal agencies such as EPA, the FWS

and the NMFS would continue their involvement after state assumption.

8. -Advance Identification of Disposal Sites.- Section 404(c) of the

CWA authorizes the EPA to identify sites not suitable for disposal of dredged

and fill material because of "unacceptable adverse effects on municipal water

supplies, shellfish beds and fishery areas (including spawning and breeding

areas), wildlife, or recreation areas". To date, this has not been used in

advance of a permit application; however, EPA's 404(b)(1) Guidelines issued in

December 1980 (40 CFR 230.80) authorize the EPA to work with the Corps (or

the State in state-assumed waters) to identify possible future disposal

sites as well as sites not suitable for disposal. Such identification does

not constitute a permit for the discharge of dredged or fill material within

the identified area; it constitutes information to facilitate individual and

general permit,application and processing.

Predesignation of areas unsuitable or suitable for disposal when used

in conjunction with special area management planning (SAMP) can be an effective

mechanism for reducing permitting delays. To succeed it will require all

agencies involved in the Section 404 process to participate in the identification

process. The EPA has yet to exercise this authority, although EPA indicates

that it may be exercised under the Grays Harbor SAMP.

9. Mitigating Wetlands Losses - "According to the U.S. Army Corps of

Engineers estimates for 1980-81, Corps districts (excluding Alaska) processed

permits for projects that if completed as requested, would have resulted in

direct and indirect conversion of approximately 100,000 acres of wetlands per

year. The Corps authorized projects that, if completed in accordance with the

conditions of the permits, would involve conversion of approximately 50,000
6/
acres of wetland or about half the acreage applied for".- Although project

modifications and mitigating measures are often controversial and costly,

the Corps reports that in certain projects these measures actually reduce
7/
costs (estimated at an annual amount of $135.5 to $271 million - ).

Perhaps the most controversial aspect of mitigation is the determination

of what constitutes acceptable mitigation. In some instances an applicant

may be required to provide "in-kind" replacement of affected wetlands; in

other cases, the applicant may be required to preserve or enhance existing

wetlands. Where possible mitigation requirements result in accommodation

between development and preservation interests. Wetland creation is most

useful when the created wetland can perform the same biological function at

the same level of that which was destroyed, and when efforts are made to

ensure that the "created" wetland is preserved over time by long-term

agreements regarding ownership and maintenance. Too often permit conditions

require the creation of wetlands but are silent with respect to follow-up

activities to ensure their survival. Wetlands exchange, although it may

result in a net loss of wetlands or wetland values, if properly enforced, can

assist in saving valuable wetland habitat. Whether mitigation is by creation

or exchange, permitting delays can be reduced if mitigation preceeds the

permit application. This is the concept of mitigation banking (i.e.

credit for environmental enhancement). Some states are experimenting

with mitigation banking.

C. Recommendations

1. The States and the Corps should continue to examine the use of

general permits. This includes nationwide permits, regional permits, and

state program general permits. The state CZM programs should continue to

review the appropriateness of such permits in managing their coastal resources.

2. The EPA should continue to encourage state assumption of the CWA

404 program.

3. The EPA should implement its advance designation of dredge spoil

disposal sites policy, and state CZM programs should take an active role in

using such designations through Special Area Management Plans (SAMP) and

other planning mechanisms.

4. State and Federal agencies should use other permit simplification

mechanisms, as appropriate. Possible mechanisms include general permits,

joint processing, permit consolidation, mandatory deadlines, pre-application

consultation, joint applications, joint public notices, and mitigation banking.

FOOTNOTES

Reducing Inappropriate Federal Investment

1. U.S. Department of Commerce, Bureau of the Census, "Population
Deconcentration in the United States," Washington, D.C., November 1981,
p. 54.

2. Sheaffer & Roland, Inc., "Barrier Island Development Near Four National
Seashores," Washington, D.C., April 1981, p. 30.

3. Pilkey, Orrin H., "Geologists, Engineers, and A Rising Sea Level,"
Northeastern Geology. Vol. 3, No. :3 and 4 1984.

4. President's Private Sector Survey on Cost Control (The Grace Commission),
"A Report to the President," Washington, D.C., January, 1984, Vol. 1,
p. 111-234.

5. President's Private Sector Survey on Cost Control (The Grace Commission),
p. 111-234.

6. Ibid., p. 111-24.

Increasing the Contributions of America's Ports and Coastal Areas to Economic
Recovery

1. Figures from this section are quoted directly or have been compiled from the
following sources and refer to the statistics in order of their appearance in
the text. (NOTE: Figures for foreign cargo movement do not include cargo
shipped between the U.S. Virgin Islands and foreign countries nor shipments
to the U.S. Armed Forces for their use, and merchandise shipped in transit
through U.S. ports from one foreign country to another).

U.S. Department of Transportation, Maritime Administration (MARAD): A Report
to Congress on the Status of the Public Ports of the United States for 1981,
August, 1982; p.9.

MARAD, Office of Port and Intermodal Development; National Port
Assessment 1980/1990 (An Analysis of U.S. Port Requirements);
June 1980; p. 3.

Greene, Peter F. , "A New Year - Wi 11 It Be a Happy One fo r Expo rters
Worl d Wide Shi ppi ng (Worl d Ports) ; December/ Ja nua ry, 1982
Vol. 44, No. 7; p. 11.

Reducing Regulatory Delay for Coastal Development Decisions

1. Congressional Research Service (CRS). Updated 4/11/85. Clean Water:
Section 404 Dredge and Fill Permit Program. p. 2.

2 Pacific Legal Foundation as quoted by the Office of Technology Assessment
(OTA), Congress of the United States. March 1984. Wetlands: Their Use and
Regulation OTA-0-206. p. 143.

3. Corps statistics, as reported by CRS, p. 8.

4. OTA p. 16.

5. These estimates are taken from "Impact Analysis of the Corps Regulatory
Program. A Report submitted to the Regulatory Functions Branch, Office
of the Chief of Engineers." Prepared by the Institute for Water Resources.
November 1981. Page B-10. The Corps indicates that there are a number of
inaccuracies in the draft report and that they have not issued this report
in final form. The Corps indicates that they do not consider these numbers
to be accurate. They do not have any estimates of assumable waters and
wetlands, in comparison to those governed by the program currently.

6. OTA, p. 141.

7. OTA p. 155.

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