Federal Agencies Move to Redefine Waters of the U.S.

The U.S. Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers have released a proposed rule narrowing the definition of “Waters of the United States” (WOTUS) under the Clean Water Act to align with the Supreme Court’s 2023 Sackett decision.

The revised definition would limit federal jurisdiction to relatively permanent waters such as rivers, lakes and streams, as well as wetlands that have a continuous surface connection to those waters. Intermittent, isolated, or seasonally connected wetlands would generally fall outside federal oversight, shifting more responsibility to states and tribes. The agencies emphasize that while federal permitting may narrow, state and local environmental protections remain fully in force.

For retail real estate developers, owners and investors, this proposal could meaningfully reshape permitting timelines, due-diligence practices and redevelopment planning. A narrower federal definition could reduce the number of projects requiring federal dredge-and-fill permits, offering potential cost and schedule predictability. However, the change adds complexity at the state level, where requirements may vary widely—and in some regions, become more stringent.

ICSC members should closely monitor how their jurisdictions respond, as the rule could influence site selection, stormwater design, wetlands mitigation strategies and redevelopment feasibility. The proposal will undergo a public comment period and is expected to face legal challenges, meaning regulatory uncertainty will continue in the near term.

Looking ahead, ICSC will continue engaging with federal regulators and monitoring state-level responses to ensure the retail real estate sector has a clear, predictable framework for responsible development. Members should expect increased variability between jurisdictions, making early coordination with environmental consultants, land-use attorneys and local regulators more important than ever.

As redevelopment of underutilized properties accelerates, particularly in infill and mixed-use markets, understanding whether a site’s wetlands or drainage features fall under federal, state or local oversight will be essential to avoiding delays and unexpected costs. ICSC will provide updates as the rule moves through the comment period and potential litigation, helping members stay aligned with evolving water regulations that directly affect project feasibility and long-term investment planning.

For more information, contact Abby Jagoda at ajagoda@icsc.com.