Lakewood Associates, Robert G. Moore, Tax Matters Partner - Page 5

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                  The Elbow Lake property is bordered by a swamp and contains                         
            wetlands that are protected from development by Federal law.                              
            Protected wetlands are subject to the jurisdiction of the                                 
            Environmental Protection Agency (EPA) and the U.S. Army Corps of                          
            Engineers (Corps).  To develop protected wetlands, a real estate                          
            developer must obtain a permit from the local division of the                             
            Corps under the Clean Water Act of 1977, Pub. L. 95-217, sec.                             
            67(a) (commonly called a section 404 permit), 91 Stat. 1566,                              
            1600, 33 U.S.C. sec. 1344 (1994), before commencing any                                   
            construction that causes discharge of dredge or fill material on                          
            wetlands.4  See 33 U.S.C. sec. 1344 (1994).  In 1987, the Corps                           
            published a manual defining protected wetlands, Federal Manual                            
            for Identifying and Delineating Jurisdictional Wetlands (1987                             
            Manual).  The Norfolk Division of the Corps, which has local                              
            oversight of the Chesapeake, Virginia, area, followed the 1987                            
            Manual to identify wetlands and to process section 404 permit                             
            applications.  Use of the 1987 Manual by a local division of the                          
            Corps was not mandatory.                                                                  
                  In late 1987 through 1988, Lakewood employed Douglas S.                             
            Davis, a wetlands scientist and consultant, to determine the                              

                  4People associated with environmental wetlands issues                               
            popularly refer to the required permit as a sec. 404 permit.                              
            Sec. 404 refers to the section of the Federal Water Pollution                             
            Control Act Amendments of 1972, Pub. L. 92-500, sec. 404, 86                              
            Stat. 816, 884, that previously provided for the permit                                   
            requirement and was replaced by sec. 67(a) of the Clean Water Act                         
            of 1977, Pub. L. 95-217, sec. 67(a), 91 Stat. 1566, 1600.                                 

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