Agency proposes report on direct discharges, sewer‑loan eligibility and wetlands rule changes in housing bill

Julie Moore, Secretary of Natural Resources, presented three related proposals to the Natural Resources & Energy committee on May 13 intended for inclusion in the committee’s housing bill: (1) a report on permitting and financing options for new direct discharges to surface waters, (2) adjustments to the state revolving loan fund rules to allow sewer‑extension loans for eligible housing projects outside designated centers, and (3) targeted wetlands permitting changes and guidance for designated centers and industrial parks.

Why it matters: permitting and financing rules for wastewater and wetlands affect where housing can be built, how sewer infrastructure is funded, and whether projects can proceed in locations that avoid flood hazards or allow compact development. Changes could speed affordable housing projects that are currently blocked by siting and financing constraints.

Proposal 1 — report on new direct discharges

Moore said Vermont’s water‑quality rules effectively prohibit new direct discharges from domestic wastewater unless no soil‑based disposal alternative exists. The agency requests authority to prepare a report by the end of the calendar year that would summarize current permitting processes, funding sources (noting ARPA was a recent exceptional source), and options for streamlining or improving processes for a limited set of projects. Moore cited the village water and wastewater initiative (ARPA‑funded) and Montgomery as examples where large soil‑based systems were costly, time‑consuming and sometimes infeasible.

Proposal 2 — sewer‑extension loan eligibility for housing projects

The agency proposed adjusting the revolving loan fund eligibility so the state can make loans for sewer line extensions that support eligible housing projects outside formally designated centers when criteria are met. Moore said the change would not automatically guarantee funding but would permit such housing projects to compete in the ranking and prioritization process for limited loan dollars; the agency noted current demand for funds exceeds supply by roughly two‑to‑three dollars of application requests per dollar available.

Committee members pressed for details about what qualifies as an "eligible housing project" and requested the specific priority and eligibility criteria used by the revolving loan fund; staff committed to providing those details for follow‑up.

Proposal 3 — wetlands permitting changes and guidance in designated centers

The agency proposes three targeted changes for designated centers and industrial parks: reduce required buffers around mapped Class II wetlands in those areas from ~50 feet to 25 feet; focus jurisdiction on Class II wetlands identified in the state’s updated wetland maps (reducing the need for field delineation at project start); and reduce the mitigation ratio for unavoidable impacts in these centers from 2:1 to 1:1. The agency also proposes publishing formal guidance on the wetlands mitigation sequence (avoid, mitigate, then in‑lieu fee) to clarify expectations for developers.

Moore said updated wetland mapping (an ongoing multi‑year program) has improved map quality and that focusing jurisdiction on mapped wetlands would let developers design with more certainty earlier in the process. She noted that the state’s conservation/restoration work has, in recent years, resulted in more wetland creation/restoration acreage than the regulatory impacts recorded by the permits program.

Committee concerns and follow‑up

Members asked for data and for agency staff from the wetlands and clean water programs to explain apparent variances in reported impacts versus restoration acreage; Moore suggested the wetlands team and Fish & Wildlife restoration staff could present follow‑up detail. Members also asked about guardrails (environmental protections and specific eligibility definitions) for allowing sewer‑extension loans outside designated centers; staff said statutory criteria for prioritization exist and would be provided for committee review.

Next steps and formal action

The agency will provide draft statutory language and additional documentation for the committee to review. No formal vote occurred; Moore said the report on direct discharges could be done by the end of the calendar year and that she would share draft language for the other two amendments for consideration in the committee housing bill.

Ending

Members requested follow‑up presentations from the wetlands program and Fish & Wildlife on impact/restoration accounting, and asked for the revolving loan fund’s priority criteria to evaluate the sewer‑extension eligibility change.