(1) Upon receipt of a timely application, the department will determine whether to grant or deny the extension based on the applicant's diligence in attempting to complete the project and the reasons which prevented project completion as documented in the application for extension of time. The department may gather additional information from the applicant and conduct a field investigation.

(2) When the department determines the applicant has proceeded with diligence and has established that the reasons stated in the application justify an extension based on a consideration of the cost and magnitude of the project, the engineering and physical features encountered during development of the project, and the time reasonably necessary for the project, an extension shall be granted. The extension of time must state the new project completion due date and any conditions to ensure completion.

(3) When the department determines there has been no diligence and a lack of good cause for the extension, the application must be denied. The department shall notify the applicant of its decision and reasons, and shall provide the applicant opportunity to be heard. An applicant must request a hearing in writing, within 30 days after the date of the notice. When an applicant requests a hearing, it shall be the applicant's burden to show cause why the application should not be denied.