The 1995 mitigation banking guidance (Fed. Regist. 60(Nov. 28):58605 – 58614) encourages a watershed-based approach as the overall goal of a mitigation bank:

The overall goal of a mitigation bank is to provide economically efficient and flexible mitigation opportunities, while fully compensating for wetland and other aquatic resource losses in a manner that contributes to the long-term ecological functioning of the watershed within which the bank is to be located. The goal will include the need to replace essential aquatic functions that are anticipated to be lost through authorized activities within the bank's service area. In some cases, banks may also be used to address other resource objectives that have been identified in a watershed management plan or other resource assessment.

Implications of the Watershed Approach

The influence of landscape setting on ecological function has been discussed in several chapters of this report. The committee has argued that the ecological functions of a restored and created wetland acreage in a watershed depend on the design (e.g., size and hydroperiod) of the wetland and on its local setting or context. Also, what may need to be addressed at the watershed scale are the desired wetland functions and how the types and locations of the wetland in the landscape can secure them.

One way to set goals for wetland functions is to seek to replace those lost to the Section 404 permit. Such a compensation goal might imply that the watershed was in some desired condition before the permit was issued, and the compensatory wetland will assure a return to that condition. Exact replacement is also warranted if the particular wetland lost to the permitted activity was the type critical to watershed conditions. At least one of these arguments might lie behind the on-site and in-kind compensation preferences in the 1990 Memorandum of Agreement (MOA) between the U.S. Army Corps of Engineers (Corps) and the EPA (as discussed in Chapter 4). That MOA remains in place and is often reinforced as the new program guidance is issued. For example, the new guidance to govern the in-lieu fee form of third-party mitigation includes a number of sections that continue to emphasize the 1990 MOA. Either of these arguments may be valid, but they need to be analytically defended when the compensation for each permit is being considered.

An alternative approach for determining what is desired in a watershed is to begin with a landscape perspective and seek to emphasize the type and location of compensatory wetlands that are revealed by that perspective. If a watershed approach to compensatory mitigation is taken,

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