WASHINGTON—The chief of the Environmental Protection Agency is trying to limit one of the agency’s most powerful tools to manage or block mining, real-estate and other developments by removing the effective veto power it has over permits to dump waste into waterways.

The move, described in a memo reviewed by The Wall Street Journal, would limit the agency’s power to pre-emptively or retroactively block U.S. Army Corps of Engineers approval of the waste dumping, hindering or potentially killing large development projects.

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