Environmental Banc & Exchange

New Mitigation Rule Analysis

1. Watershed Focus
2. In-lieu Requirements
3. Mitigation Hierarchy
4. Timeline
5. Regulations Replacing Guidance

Analysis of Final Rule on Compensatory Mitigation for Losses of Aquatic Resources

The Army Corps of Engineers and EPA have issued a Final Rule on Compensatory Mitigation for Losses of Aquatic Resources. The Rule is published in the April 4, 2008 Federal Register and in effect as of June 3, 2008.

To help you navigate the new Rule (242 pages of regulatory language and public comments), we have summarized some key points and provided references for your convenience. All citations refer to 33 CFR, Part 332.

The 1-Minute Run-Down

What’s in	What’s out
Regulations	Guidance
Mitigation banks & newly certified in-lieu fee programs	Permittee-responsible mitigation (it’s down, but not completely out)
Watershed-scale	Practicing random acts of mitigation
Playing field more level	Super-easy approval of in-lieu/permittee-responsible mitigation
Streamlined approval process	Ad-hoc approval process

Implications of Official Regulation
Before the Rules, there were no rules.  In the past, the Army Corps of Engineers (ACOE) used its discretion in applying non-binding guidance documents. Regulations, such as the new Rule, have the force of law while guidance is non-binding. The release of this Final Rule provides more clearly articulated requirements for the ACOE, while still providing them discretion in how to apply these regulations. However, now the burden of proof for using discretion resides with the ACOE District Engineer, in the event a variance from the Rule is implemented.

Watershed Focus
Large-scale mitigation located strategically in a landscape is emphasized throughout the Rule, with a stated preference for mitigation banks and in-lieu fee programs. On-site preference is out. Existing watershed plans will be consulted and if no plan exists, mitigation will still be considered in light of available watershed information.

• Watershed approach definition: § 332.2
• Watershed approach to compensatory mitigation: § 332.3 (c)
• Preference to mitigation banks and in-lieu fee programs: § 332.3 (b)(2)

Change in Preference of Mitigation Types
Previous guidance favored mitigation in proximity of impacts, but the new Rule states the following hierarchy of mitigation types: first mitigation banks, then in-lieu fee programs, and in the event neither of the previous two options exist, then permittee-responsible mitigation.  The emphasis is on mitigation in the large-scale, watershed context; a reduction in the number of individual mitigation projects; greater financial and ecological assurances; and a minimization of temporal losses of wetland functions.

• Hierarchy of preference: §332.3(b)(1-6)

In-Lieu Program Requirements
The Rules create a framework for in-lieu fee programs to continue to operate. However, the new Rules provide drastically different requirements for the planning and operation of in-lieu fee programs. Only a small amount of “advance credits” will be allowed to be sold before mitigation work has been initiated.  Going forward, in-lieu fee programs will be held to standards equivalent to mitigation banks and must have an approved mitigation plan, financial assurances (including a program account), ecologically-based performance standards, and at least 5 years of monitoring. The Rules provide existing in-lieu fee programs 2-5 years in which to transition to new requirements.

• Grandfathering in-lieu fee programs: § 332.8(v)(2)
• Requirements for all types of mitigation: § 332.3(k)(2)(i-iv)
• Requirement for a mitigation plan: § 332.4(c)(1)(iii)
• Financial assurances, general: § 332.3(n)
• Financial assurances, as required in the mitigation plan: § 332.4(c)(13)
• Financial assurances, in relation to long-term management: § 332.7(d)(3)
• In-lieu program account: § 332.8(i)
• Ecological performance standards: § 332.5(a)
• Monitoring requirement: § 332.6(b)
• In-lieu advance credits, general: § 332.8(n)
• In-lieu advance credits, three growing season requirement: § 332.8(n)(4)
• In-lieu credit release schedule: § 332.8(o)(8)(iii)
• Higher compensatory mitigation ratio for credits not yet released: § 332.2(f)(3)
• Public comment period: § 332.8(d)(4)
• Approval process § 332.8

Timelines in the Approval Process
For the first time, there are mandatory timelines embedded in the approval process. For a mitigation bank or in-lieu fee program approval, the clock starts ticking when a complete prospectus or instrument modification request is submitted to the district engineer. The entire approval process may take around 255 days of required federal agency review time. Deadlines may be extended at the district engineer’s discretion for reasons outlined in § 332.8(f). The Rules consider a credit release one of several types of “modifications of instruments”, which may be approved by a streamlined process that could grant approval in about 75 days.

• 90-120 days for total prospectus approval process: § 332.8(d)(2-5)
• 120 days for draft instrument approval: § 332.8(d)(6-7)
• 45 days for final instrument approval: § 332.8(d)(8)
• Dispute resolution process: § 332.8(e)
• Description of “streamlined modification review process”: § 332.8(g)(2)
• 75 days for credit release: § 332.8(g)(2)
• Credit release based on milestones: § 332.8(d)(6)(iii)(B)

Link to Final Rule: http://www.epa.gov/wetlandsmitigation

Aside from the actual regulations, the most useful document we’ve found is a Final Rule Q&A sheet: http://www.epa.gov/owow/wetlands/pdf/Mit_rule_QA.pdf.

Analysis by Rebecca Madsen Rebecca Madsen is a Presidential Management Fellow with the USDA Forest service, working with Environmental Banc & Exchange to gain insights into private eco-markets. Madsen previously worked as an environmental specialist for a municipality in north Texas, and as a business development volunteer with the Peace Corps in Mali, West Africa. While completing a Master's in Environmental Management at Duke University, Becca was selected as a Doris Duke Conservation Fellow.