Institutional Reforms for Enhancing Compensatory Mitigation
The committee reviewed wetland restoration and creation projects that were required as a condition of a Clean Water Act (CWA) Section 404 permit. Some sites appear to have met the criteria established for permit compliance and are, or show promise of becoming, functional wetlands in watersheds. However, in some cases, required compensation actions were never initiated or, if initiated, were poorly designed or carelessly implemented. In other cases, the compensation site was placed in a landscape that would not provide the hydrology or associated communities, including uplands, necessary to achieve the desired functions. At some sites, compensation was undertaken and the compliance criteria prescribed by the regulator were being met, but the conditions did not allow for the hydrological variability that is a defining feature of a wetland. At other times the compliance criteria called for the presence of certain plant species without ensuring that site conditions would support them. Meanwhile, at most sites, monitoring was not expected to continue over the longer term, and legal and financial assurances for long-term protection of the site were not present.
Results detailed in previous chapters arise from weaknesses in wetland regulatory institutions. Therefore, on the basis of case studies, the materials provided to the committee, and the available literature, the committee recommends the following goal statement for compensatory mitigation institutions: Institutions (laws, regulations, and guidance) governing
fill permitting and compensatory mitigation should promote compensatory mitigation sites that meet ecological performance criteria and that result in a matrix of protected, restored, and created wetlands in the watershed that contribute to the physical, chemical, and biological integrity of the waters of each watershed.
Wetland management programs should seek to achieve three specific outcomes by ensuring that the following conditions are met:
Individual compensatory mitigation sites should be designed and constructed to maximize the likelihood that they will make an ongoing ecological contribution to the watershed, and this contribution is specified in advance.
Compensatory mitigation (i.e., wetlands created or restored to compensate for wetland damage) should be in place concurrent with, and preferably before, permitted activity.
To ensure the replacement of lost wetlands functions, there should be effective legal and financial assurances for long-term site sustainability of all compensatory wetland projects.
Achieving these results will require modifications to the regulatory program and compensatory mitigation mechanisms described in Chapters 4 and 5. In Chapter 5, permittee-responsible mitigation, on-site, offsite, or at a single-user mitigation bank, was distinguished from third-party mitigation, where some party other than the permit recipient assumes responsibility for the mitigation. This chapter describes institutional reforms governing compensatory mitigation that could move the nation toward the outcomes identified above.
The committee proposes these reforms as a suite of integrated recommendations and urges that they be considered in their entirety and not be selectively implemented. However, for clarity of exposition, the committee first offers an overarching recommendation on the need to move wetland mitigation in the CWA Section 404 program toward a watershed focus and suggests alternative means to move in that direction. Second, because permittee-responsible mitigation will likely continue to be the prevalent form of compensatory mitigation, regulations and guidelines governing this approach should be modified to address its weaknesses. Finally, third-party compensation approaches (mitigation banks, in-lieu fee programs) may offer advantages over permittee-responsible mitigation, especially when compensating for smaller fills, but they also have weaknesses. The committee makes specific suggestions on how to build on the strengths of these compensatory mitigation mechanisms.
Finally, in making all of these recommendations, the committee recognizes that wetland permitting is a decentralized process. In this process, regulators in field offices of federal and state agencies are expected
to evaluate a permit applicants' proposal and issue or deny a permit in an expeditious manner. Individual agencies' staffs are required to make an enormous range of decisions in the regulatory process. The Section 404(b)(1) guidelines require a complicated assessment of the practicability of alternatives, expecting regulators to make decisions about the viability of different development proposals. The guidelines require a broad analysis of the extent to which a project, individually or in combination with other past and foreseeable activities, affects a broad array of issues, ranging from water-quality functions to shellfish. Helping a permit recipient design a compensatory wetland project and then assuring that the project is undertaken as designed is yet another task. In all of this, the wetland science is not fully developed, and many of the science and economic issues that must be addressed are site-specific.
In the end, wetland permitting, and the compensatory mitigation required as a part of this process, will need to rely on regulators making informed judgments at many stages in the permitting process. Each of the recommendations is made with an appreciation of the need to inform and support those judgments toward achieving the goals that are described in recommendation 1 in this chapter.
A WATERSHED-BASED APPROACH TO COMPENSATORY MITIGATION
Many call for a watershed approach to wetland management, including for the Section 404 program. The Unified Federal Policy for Ensuring a Watershed Approach to Federal Land and Resource Management defines a watershed approach as follows:
A framework to guide watershed management that: 1) uses watershed assessments to determine existing and reference conditions; 2) incorporates assessment results into resource management planning; and 3) fosters collaboration with all landowners in the watershed. The framework considers both ground and surface water flow within a hydrologically defined geographical area. (http://cleanwater.gov/ufp/glossary.html)
The 2000 in-lieu fee guidance embraces the watershed approach for in-lieu fee mechanisms, stating,
Local watershed planning efforts, as a general matter, identify wetland and other aquatic resources that have been degraded and usually have established a prioritization list of restoration needs. In-lieu fee mitigation projects should be planned and developed to address the specific resource needs of a particular watershed” (Fed. Regist. 65(Nov. 7):66914– 66917).
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,
as has been recommended by recent guidance, a suite of desired wetland functions may not be secured by strict adherence to a policy of in-kind replacement of the wetland types in the same location as the wetland lost. Stated differently, a preference for in-kind and on-site compensatory wetland would follow from an analytically based watershed assessment to assure that in-kind replacement furthers the watershed goals.
As discussed in Chapter 3, there are many watersheds where existing wetland functions have been degraded, and the mix of wetland types in the watershed is a result of historical development patterns. In such cases, it makes little sense to replicate a degraded system. A watershed approach forces a consideration of this possibility. As a first step in a watershed approach, there is a need to assess what functions would be lost from the permitted activity, and the goal would be to restore the localized functions that had been performed by the impact site (e.g., water quality or storm water).
In some cases, it might be desirable to secure out-of-kind wetland types that have been disproportionately lost from the watershed, if those types would improve watershed functioning. As advocated by Bedford (1999), the mitigation program would achieve greater short-and long-term results by looking at each permitting decision over a broader space and longer time period. Bedford describes this as modifying the boundaries of permit decision-making in time. As a specific example, Magee et al. (1999) found that both natural and mitigation wetlands in Portland, Oregon, had been degraded due to hydroperiod alteration and land-use changes in rapidly urbanizing areas. Mitigation planning that considers the location of projects in relation to larger surface-water and groundwater systems and the extent to which this landscape setting has been or likely will be altered by humans will have a great effect on ecological performance (Bedford 1999). The watershed setting chosen for the compensation wetland should consider the time frame, because ongoing alteration of the landscape could greatly affect projects by affecting groundwater and surface-water patterns.
A watershed perspective provides the context for considering wetland enhancement as mitigation. If the proposed mitigation is to enhance an existing degraded jurisdictional wetland, the result could be a net loss of wetland area in exchange for an increase in wetland functioning. Here, changing the condition of the degraded wetland to some other ecosystem state (enhanced to become a better example of the current type or remodeled to become a more functional/valuable wetland type) at the expense of lost area might be judged a desirable exchange. Whatever the form of mitigation—enhancement, restoration, creation, or preservation—it will rarely be acceptable as mitigation for impacts if the mitigation work is “temporary” in nature, such as simply spraying exotics without address-
ing the site conditions that would continue to foster re-infestation. Specifically, regulatory agencies should consider each permitting decision over broader geographic areas and longer time periods (i.e., by modifying the boundaries of permit decision-making in time and space).
Another advantage of a watershed perspective is that it clarifies the place of wetland preservation and/or incorporation of upland areas as compensation. Preservation might not appear to offset the permitted loss to the wetland acreage base in the short-term. However, when the goal of a wetland program is viewed from a watershed perspective over a long period, the purpose is to secure a desired matrix of wetland types and locations to achieve the goals of the CWA in the watershed. If, in the future, certain wetlands deemed central to that goal might be compromised, purchase and protection of those wetlands as a part of compensation package might be warranted (Gardner 2000).
Similarly, uplands might be accepted as compensation for filling a wetland. A watershed perspective recognizes that terrestrial connections are especially critical between small wetlands in a regional landscape, and that is recognized in the federal guidance cited earlier. Terrestrial connectivity is essential to the persistence of some wetland species (Semlitsch and Bodie 1998). Historically, when mitigation projects have incorporated upland areas, the focus has been on buffers. The new nationwide permits follow that pattern by allowing the use of buffers as mitigation, even without the inclusion of wetland (see Chapter 4). In 1995, the banking guidance began to encourage the inclusion of uplands in mitigation banks, “to the degree that such features increase the overall ecological functioning of the bank” because
the presence of upland areas may increase the per-unit value of the aquatic habitat in the bank. If a watershed perspective is taken, some limited acceptance of highly functional uplands [meeting the mitigation obligation] may be given to relatively undisturbed upland areas protected in the bank to reflect the functions inherently provided by such areas (e.g., nutrient and sediment filtration of storm water runoff, wildlife habitat diversity) which directly enhance or maintain the integrity of the aquatic ecosystem and that might otherwise be subject to threat of loss or degradation.
The amount of uplands to be included could be determined by an “appropriate functional assessment methodology…to determine the manner and extent, to which such features augment the functions of restored, created or enhanced wetlands and/or other aquatic resources” (Fed. Regist. 60(Nov. 28):58605). This guidance recognizes that wetlands excised from the functions of their surrounding uplands will function at a reduced level.
A watershed perspective will discourage the tendencies to favor fewer large, charismatic compensatory mitigation wetlands that may not yield the important water-quality and habitat functions of many smaller and less “attractive” wetlands (e.g., open-water lakes instead of several small bogs). Making mitigation decisions from a watershed perspective would explicitly recognize the need for and the desired locations of wetlands of all sizes and types and then proactively assure that these sites are protected and restored. A watershed perspective could help to focus on how the water-quality functions might be replaced and would direct attention to the base of the food web. Watershed-scale assessment could consider the long-term connectivity of wetland and upland habitats. The individual projects that would implement a watershed approach would occur on parcels of varying size, so that while mitigation would often be located off-site, it would be located where it would be likely to secure defined watershed goals.
Finally, it should be noted that by focusing on the functions of wetlands within a landscape mosaic, there is no single watershed scale that should be prescribed. Instead, depending on the function of concern, different scales of watershed might be considered in defining the location and type of desired compensatory mitigation (Poiani et al. 2000).
The committee endorses the watershed approach and finds the automatic preference for in-kind and on-site compensatory mitigation of the 1990 MOA to be inconsistent with that approach. The committee is aware of the concern that a watershed approach might weaken the commitment during the permitting process to protect individual wetlands and the functions they provide, with existing wetlands being too readily traded for compensatory wetlands that might not be ecologically functional. However, if recommendations made elsewhere in this report on avoidance and improvements to compensatory mitigation institutions are incorporated into guideline and regulatory revisions, that concern will be addressed. Therefore, the committee recommends that the regulatory agencies consider each permitting decision over broader geographic areas and longer time periods (i.e., by modifying the boundaries of permit decision-making in time and space).
Implementing a Watershed Approach
One concern expressed about the watershed approach is the impracticality of implementation. However, implementing a watershed approach does not mean writing a plan that is expected to guide future permitting decisions. To call for a watershed approach only is to recognize that management of wetland types, functions, and locations requires structured consideration of watershed needs and how wetland types and location
serve those needs. A watershed approach means that mitigation decisions are made with a regional perspective, involve multiple agencies, citizens, scientists, and nonprofit organizations, and draw upon multiple funding sources (e.g., permittee-responsible, mitigation banks, and in-lieu fees). A watershed approach means that permitting decisions are integrated with other regulatory programs (e.g., storm-water management or habitat conservation) and nonregulatory programs (e.g., conservation easement programs).
The idealized watershed planning process, described in the 1993 Clinton Administration Wetland Plan (August 24, 1993) suggests far more formality than may be possible or required. The interagency plan states,
Typically, decisions affecting wetland[s] are made on a project-by-project, permit-by-permit basis. This often precludes the effective consideration of the cumulative effects of piecemeal wetland loss and degradation. It also hampers the ability of State, Tribal, regional, and local governments to integrate wetland conservation objectives into the planning, management, and regulatory tools they use to make decisions regarding development and other natural resource issues. This can often result in inconsistent and inefficient efforts among agencies at all levels of government, and frustration and confusion among the public.
In contrast, advance planning, particularly comprehensive planning conducted on a watershed basis, offers the opportunity to have strong participation by State, Tribal, and local governments and private citizens in designing and implementing specific solutions to the most pressing environmental problems of that watershed. Advance planning generally involves at least the identification, mapping, and preliminary assessment of relative wetland functions within the planning area. More comprehensive advance planning may identify wetlands that merit a high level of protection and others that may be considered for development, and may also incorporate wetland conservation into overall land use planning at the local level. Advance planning can provide greater predictability and certainty to property owners, developers, project planners, and local governments. (http://www.epa.gov/OWOW/wetland/wwater/wtrshd.html)
Various efforts at structured wetland planning for watersheds have been attempted in many places (e.g., Minnesota, Tennessee, North Carolina, and Tampa Bay, Florida). A recent review of watershed planning for wetlands describes three approaches to wetland planning, where each approach relies on formal analytical processes and primary or secondary data for their execution (White and Shabman 1995). These planning approaches are characterized by the purpose to be served by the planning activity. Management-oriented wetland planning has the broadest objective. These plans are expected to replace case-by-case permitting by employ-
ing a watershed approach for making advance decisions about all matters related to permitting and sequencing, the required compensation for fills in certain areas, and the location and type of compensation that would be required. In making this determination, both regulatory and nonregulatory programs are coordinated. The above quotation from EPA's Interagency Wetland Plan describes management-oriented wetland planning. The high cost and potential for legal and political disagreements suggest that such broad planning may be too ambitious to be implemented in many watersheds, as has proven to be the case in many instances (White and Shabman 1995). While some broad planning efforts have come to fruition (West Eugene, Oregon), others remain controversial years after their initiation (Hackensack Meadowlands, New Jersey).
Protection-oriented wetland planning has the single objective of discouraging wetland-damaging activities (avoidance) by defining and mapping wetlands by their ecological value in advance of any proposed wetland development project. Such planning may be completed under the advanced identification (ADID) process of the CWA or be part of a general land-use planning process (White and Shabman 1995). These plans would then be used to help define areas that should be avoided in the sequencing process.
Compensation wetland planning identifies watershed needs for types, functions, and general locations of wetlands in the landscape in order to establish restoration priorities for both regulatory and nonregulatory programs. However, the written plan will not include specific locations and designs for the restoration and creation sites. This type of planning might link projects undertaken through both regulatory and nonregulatory programs to secure some desired mosaic of wetlands in the landscape. Such a goal is served by the Southern California Wetland Recovery Project (see Box 8–1). North Carolina's developing statewide wetland restoration plan provides advance planning for choosing specific wetland projects (see Box 8–2 and Appendix B). The North Carolina program's formal plans are expected to guide investments in wetland restoration, although the plans do not identify specific sites. Such large, regional programs can combine the efforts of governmental and mitigation funds to achieve the broad goal of no net loss plus a net gain in wetland area and function.
The committee understands that even the more limited form of compensation planning for wetlands can be costly. Both the California and the North Carolina programs have a permanent staff and supporting resources. Such support will not be available in all areas. Therefore, watershed planning for wetlands will need to proceed without a formal written plan. Instead, reliance on the professional judgment of staff from multiple agencies can set watershed priorities and be the form of compensation wetland planning, given current agency time and resource limitations. At
Southern California Wetland Recovery Project (SCWRP)
The SCWRP is a partnership of public agencies that work to acquire, restore, and enhance coastal wetland and watersheds between Point Conception and the U.S.-Mexico border. Federal partners are the Corps, EPA, the Fish and Wildlife Service, the National Marine Fisheries Service, and the Natural Resources Conservation Service. State partners are California's Resources Agency, Environmental Protection Agency, Coastal Commission, Department of Fish and Game, State Coastal Conservancy, State Lands Commission, State Water Resources Control Board, and four Regional Water Quality Control Boards (San Diego, Santa Ana, Los Angeles, and Central Coast). Each of these agencies sends top officials to the SCWRP Governing Board. Advisers to the board come from the Wetland Managers Group, the Public Advisory Committee, and the Science Advisory Panel. Five counties (San Diego, Orange, Los Angeles, Ventura, and Santa Barbara) help to identify critical wetland resources and promote education about wetlands and funding of projects. Nine projects totaling over $25 million have already been funded. For 2000 to 2001, the SCWRP has identified 31 projects totaling over $30 million (www.coastalconservancy.ca.gov/scwrp).
present, in many emerging fee payment programs the selection of projects for funding is made based on a consensus of professional interagency judgment on watershed needs (Scodari and Shabman 2000). Two institutional reforms could be made to increase the technical quality of these regulator judgments.
The North Carolina Wetland Restoration Program
The North Carolina Wetland Restoration Program was created to simplify meeting wetland compensation requirements and to achieve a net gain of wetlands in that state's watersheds. The state is responsible for developing watershed plans to identify areas where restoration actions would be of high priority and of greatest ecological value. Wetland restoration plans for 17 watersheds and their subwatersheds are now finished or are nearing completion. Restoration activities are now under way in a number of watersheds.
To initiate the planning and wetland restoration program, the state provided $6 million to the North Carolina Wetland Restoration Fund, with additional funds to be provided in future years. In addition, the North Carolina Department of Transportation pays $2.5 million each year for a period of 7 years for plan development.
With the fund now in operation, a wetland permit recipient can satisfy compensatory mitigation requirements by paying a fee to the fund. The collected fees are used to repay the wetlands restoration fund (WRF) for wetland restorations that were implemented with the initial state allocation (see Appendix B).
First, the level of scientific expertise in wetland management among the principal staff responsible for the wetland programs must be maintained and allowed to grow as the scientific understanding of watersheds and wetlands continues to advance (see additional discussion later in this chapter). Second, broader-based participation in setting priorities for wetland preservation and restoration projects would be a substitute for complicated and often expensive formal planning efforts and a way to expand limited staff capabilities in any single agency. Absent a formal plan, a watershed approach to compensatory site decisions would be a process that engages community and multiple agency input supported by a panel of wetland experts from the scientific community who are familiar with the watersheds in question. This process could be an addition to an ongoing program, might operate at a state or a substate level, and could be led by federal, state, or local regulatory staff. Such details would vary across the nation.
The Corps itself might take the lead in initiating such watershed processes. Part II of the Corps Standard Operating Procedure (SOP) (USACE 1999a) includes guidelines for incorporating a watershed approach into the regulatory program. It indicates that 0 to 20% of the program 's time should be devoted to this issue. The program could take this policy much further if there were a directive to integrate regulatory decisions into a watershed framework. The Corps mitigation policy, also outlined in the 1999 SOP, supports taking just such an approach:
The aforementioned 1990 EPA/DA MOA establishes a preferred sequence of on-site/in-kind mitigation to off-site/out-of-kind approaches; however, districts should not consider this a required hard and fast policy. Corps field experience has shown ecological value in pursuing practicable and successful mitigation within a broader geographical context. This approach, combined with innovations such as mitigation banks and in-lieu-fee programs, provides proportionately higher ecological gains where the aquatic functions are most needed. The Corps depends on regulators reviewing relevant agency and public comments and applying their best professional judgment in requiring appropriate and practicable mitigation for unavoidable, authorized aquatic resource impacts. The bottom line test for mitigation should be what is best for the overall aquatic environment.
It is not clear that the Corps will take the lead; however, it does appear the agency has the authority to participate fully in watershed-oriented approaches to wetland mitigation. Therefore, the committee encourages the states, with the participation of appropriate federal agencies, to prepare technical plans or to initiate community and interagency consensus processes for setting wetland protection, acquisition, restoration, enhancement, and creation project priorities on an ecoregional (water-
shed) basis. Recommendations to support such efforts, including the use of functional assessment, development of guidelines, research and continuing professional training of regulatory staff necessary to implement this approach, are provided elsewhere in this chapter.
IMPROVEMENTS IN PERMITTEE-RESPONSIBLE MITIGATION
Permittee-responsible mitigation remains the predominant mitigation mechanism. Improvements in permittee-responsible compensatory mitigation are needed to meet the goals listed earlier in this chapter. Changes will need to be made in what is expected of the applicant and the regulatory agency. These two areas for change are discussed separately. While it is recognized that the recommended changes may increase the costs borne by both the applicant and the agencies, the changes are essential for compensatory mitigation projects to achieve their desired results. It is possible that for smaller fills and certain permittees the costs might increase to the point where third-party compensation systems might be preferred to permittee-responsible mitigation. Cost issues and third-party mitigation are discussed later in this chapter.
Expectations for the Permittee
The committee believes that some party must be held responsible for compliance with a specified mitigation requirement (Chapters 4, 5, and 6). These responsible parties do expect some finite time horizon at the end of which they will have to meet their legal obligations. However, the time frame for ecological development of a wetland project (see Chapter 2) is often longer than the time a permittee would be held responsible for the project. In an effort to mesh these two time imperatives, performance standards (e.g., wetness and certain plants) are often written so that the applicant can demonstrate compliance in a relatively short time period. In addition, the short time frames and clearly measurable standards reduce the burden on the regulatory staff to certify compliance. These are powerful incentives to simplistic wetland design. One result that is especially troubling is the frequent use of criteria that do not recognize the need for appropriate hydrological variability in ecologically functional wetlands. The result has often been sites with continuous open water and stable water levels and overly managed wetland vegetation. Another outcome that follows from the effort to shorten the time required to establish compliance is replacement of bottomland hardwoods with emergent wetlands or open water (Brown and Veneman 1998). Incentives for both the agency and responsible party to favor simplistic wetlands performance criteria would be lessened if legal compliance was based on three obligations:
initiate construction no later than concurrent with the permitted activity; construct and monitor to meet performance requirements; and transfer the long-term responsibility for ownership, monitoring, and adaptive management of the site to a certified wetland management entity.
Initiation of Compensatory Mitigation Projects
Permittees' development projects cannot be delayed until compensation sites meet performance standards. Therefore, for permittee-responsible mitigation there needs to be some practical compromise between the goals of securing functional compensatory wetlands and placing realistic requirements on permit recipients. Toward that end, the first obligation of the permittee should be to initiate the required compensatory project no later than concurrently with the permitted activity. If there is a lag, a financial assurance that would be adequate to initiate, complete, and manage a comparable project at another location should be secured. Such an expectation would assure that permittee-responsible mitigation proceeds in the same expeditious time frame that is comparable to third-party mitigation systems.
Linking designs to ecological performance can be extremely difficult, because wetland science and restoration and creation efforts are still developing and must be tailored to individual sites. Therefore, while site designs should reflect current mitigation science and emerging scientific understanding, the initial designs may not always result in the exact wetland properties that were the original intent of the design. However, much can be accomplished within the limits of the current science. The committee believes that enough is understood about wetland hydrology, place in the landscape, soils, and other determinants of wetland structure to specify design requirements that will result in a site that will develop into a wetland and provide for a number of wetland functions. However, as was noted in Chapter 2, some wetland types are more difficult to create or restore than others. In short, we can design sites with a high probability of becoming functional wetlands, but whether particular sites will always result in particular functional outcomes is less certain. Based on the difficulty of restoring or creating wetland type, the permit could require more than an acre of replacement for each acre permitted —a mitigation ratio greater than 1:1. This use of mitigation ratios is already common in setting regulatory requirements.
Permit conditions for legal compliance with the mitigation obligation should recognize this reality. First, the permittee and regulators would
work together to design the site according to specified criteria included in the permit. The permittee would then construct by that design and coordinate any changes identified in the field as necessary to meet the performance criteria with the regulator. The mitigation plan review would concentrate on those design factors that will ensure the restoration or implementation of ecological and hydrological processes appropriate to the project. The site should be designed in recognition of hydrological variability and other factors described in other parts of this report. Performance goals in the permit would require that the mitigation project reestablish fundamental wetland processes; attainment of hydrology should be paramount. When societal values are considered in the watershed context, the functions emphasized are likely to be ones that will solve water-quality problems, reduce flooding, and stabilize shorelines. Such goals are usually set in regions where there are existing water-quality problems in the watershed and/or the impact wetlands are of relatively low quality. If the functions to be performed by the mitigation site are not easy to describe, the plan could specify reference sites for comparison with the mitigation site. The degree of similarity to the reference should be similar to the degree of variability among natural sites in the reference set (Brinson and Rheinhardt 1996; White and Walker 1997). Once monitoring shows that specified wetland processes are in place, compliance can be certified.
Monitoring for Performance
The 1990 Corps/EPA mitigation MOA states that, “Monitoring should be directed toward determining whether permit conditions are complied with and whether the purpose intended to be served by the conditions are actually achieved…for projects to be permitted involving mitigation with higher levels of scientific uncertainty, such as some forms of compensatory mitigation, long-term monitoring, reporting and potential remedial action should be required.” The 1995 banking guidance follows the same basic logic as the 1990 MOA and states, “The period for monitoring will typically be five years; however, it may be necessary to extend this period for projects requiring more time to reach a stable condition (e.g., forested wetlands) or where remedial activities were undertaken.” The Corps SOP (USACE 1999b) requires monitoring reports for mitigation banks and “other substantial mitigation,” such as in-lieu fees. The banking guidance states, “Annual monitoring reports should be submitted to the authorizing agency(ies), who is responsible for distribution to the other members of the MBRT, in accordance with the terms specified in the banking instrument.”
The justification for this approach is that the time to meet different
criteria will vary for different attributes and for different projects. Hydrological criteria may be met almost immediately for some restoration projects, while they may take years for creation projects. Vegetative cover and biodiversity criteria may be met within a year in a subtropical climate where topsoil from a donor marsh (often the impact site) is used to “plant” a site versus years when tree seedlings are planted. These are important requirements for ensuring the desired ecological results over time.
Transfer of Long-Term Responsibility
The presumption that once mitigation sites meet their permit criteria they will be self-sustaining in the absence of any management or care is flawed. Once performance criteria have been achieved, some other means to secure long-term monitoring for routine management is needed. Long-term responsibility for a site may require that management actions as adaptations to external forces be taken. Scientists recognize the inherent variability of ecosystems (Pickett and Parker 1994). Also, the likelihood of a major disturbance event at a mitigation site is a matter for concern. A major restoration on the San Diego River complied with permit criteria, but the next flood eliminated the river flow to the site, and the costly transplanted trees were mostly lost to drought. Even if a specific type of wetland has been enhanced, restored, created, or preserved, that type may change subtly or dramatically over time due to such disturbances (Duever et al. 1986; White and Walker 1997). Clearly, mitigation sites have ongoing maintenance and management needs (control of exotics, prescribed fire, and sometimes minor hydrological adjustments); however, individual permittees with no expertise and no long-term interest in a wetland site cannot be expected to manage that site over time.
Long-term management of a site demands that long-term real-estate protection be in place. The 1995 banking guidance states that a bank site should be “protected in perpetuity with appropriate real estate arrangements” and the 2000 in-lieu fee guidance recommends legal arrangements to ensure long-term management. Permittee-responsible mitigation outside single-user mitigation banks has rarely included requirements that the property on which the mitigation is located be legally protected and managed in perpetuity.
For all these reasons, an obligation on the permittee is to transfer the long-term site management and maintenance responsibility, along with a cash endowment for these purposes, to a prescribed management authority (the characteristics for such an authority are discussed elsewhere in this chapter). Such transfer of responsibility has precedent in the Section 404 program. As noted in Chapter 5, the transfer of mitigation responsibility is a defining feature of third-party compensation mechanisms. In
third-party compensation, there are potentially two transfers of responsibility. First, the responsibility transfers from the permittee to an entity responsible for the design and construction of the site. Then there may be a second transfer of the constructed site to an organization responsible for long-term maintenance and protection of the site, along with a cash endowment for site management. These organizations would own the site and manage it as a wetland and have access to financial resources to secure that end. The 1995 banking guidance states that bank sponsors need to provide some sort of financial assurances in the event of bank default or failure as well as throughout or beyond its operational life. Florida's administrative rules on mitigation banking require posting of financial assurances for both mitigation implementation and perpetual management (Florida Administrative Code Rule 62–342.400 & 700). The 2000 in-lieu fee guidance recommends financial arrangements to ensure long-term management. This second transfer of responsibility, with a cash endowment, does not occur in permittee-responsible mitigation. Responsibility for long-term maintenance of the site remains with the permittee.
Permit Compliance Conditions for Permittee-Responsible Mitigation
It is impractical to expect permittee-responsible compensatory mitigation to be in place before a permitted fill can proceed. The suggestion here is for concurrent site construction and mandatory use of financial assurances to ensure that construction is by design. Compliance with a compensation requirement for the permittee is defined by the construction according to an agreed-to site plan that will result in a functional wetland. The design is intended to achieve that endpoint, but practically speaking, there may need to be minor, moderate, or sometimes, major modifications to the implemented design. In short, the mitigation provider has the responsibility to get the project on its way to becoming a relatively self-sustaining wetland (i.e., physical, chemical, and biological processes are in place and will lead to a jurisdictional wetland). At this point, the regulators and the long-term site manager have reasonable assurance that the site has developed the processes necessary to require only maintenance. Then, long-term protection and management of the site will be necessary. Therefore, when the permittee responsible for the construction is released from its legal obligation, it would either commit to undertaking the long-term management or make a one-time payment to an appropriate stewardship entity.
These conditions should be placed into the Section 404 permit. Mitigation permits would specify the acreage of jurisdictional wetlands required, implementation and design standards, performance criteria, requirements for monitoring and reporting on performance, a long-term
management plan, and documentation and quality-assurance requirements for the financial assurance and property protection mechanisms needed to implement management of the site in perpetuity. In summary, the committee recommends that the Corps and other responsible regulatory authorities establish and enforce clear compliance requirements for permittee-responsible compensation to assure that (1) projects are initiated no later than concurrent with fill activity; (2) projects are implemented and constructed according to established design criteria and use an adaptive management approach specified in the permit; (3) the performance standards are specified in the permit and attained before permit compliance is achieved; and (4) the permittee provides a stewardship organization with an easement on, or title to, the compensatory wetland site and a cash contribution appropriate for the long-term monitoring, management, and maintenance of the site.
EXPECTATIONS FOR THE REGULATORY AGENCY
A permittee's mitigation compliance requirements are established by the permitting agency. The agency also is responsible for assuring the permit conditions are met. This section includes discussion and recommendations directed toward the responsibilities of the regulatory agency.
Recognize Watershed Needs
It is often impossible and, with a watershed perspective, may not be necessary for a compensatory wetland to perform the same wetland functions as those of the wetlands at the impact site on a permit-by-permit basis. A watershed perspective demands that the functions expected to be lost because of the cumulative effect of permitting decisions be understood, to ensure that the resulting ecosystems within the watershed function at the highest level attainable. On a specific permitting decision, the functions that would be lost must be quantified and a determination must be made on whether there needs to be an exact replacement of those functions and which aspect of the watershed plan would yield the greatest offset for those functions. If a wetland permit is of a significant size or type, a quantitative functional assessment tool would be used (Chapter 7). For smaller or degraded sites, a more rapid assessment, which is related to the local or regional functional assessment method, could be completed.
As has been noted, conducting an assessment does not mean that functional equivalency must be secured between the compensatory wetland and the impact site. Functional trade-offs might be considered in the context of the needs of the watershed. Such trade-offs should be made the
responsibility of the multiagency watershed approach described earlier. Additions to the wetland assessment procedures that recognize the relative value of different functions in a watershed have recently been proposed and might be used to inform those who are engaged in implementing the watershed approach (Wainger et al. 2000).
Therefore, the committee recommends that the Corps and other responsible regulatory authorities use a functional assessment protocol that recognizes the watershed perspective, described in Chapters 3 and 7, to establish permittee compensation requirements. This recommendation applies whether the compensation is made by the permittee or by a third-party.
Recognition of Temporal Lag
Unless the replacement wetlands functions are in place before the permitted impacts occur, there will be some temporal loss of wetland function in the watershed until the replacement wetland is functioning at the same level that the impact site had been. The logic for a compensation ratio greater then 1:1 to compensate for the temporal loss of wetland function (lag time) was developed 10 years ago by King et al. (1993). The authors provided a formula-based system which uses a discount rate for setting the ratios. This approach provides a useful conceptual starting point for determining the lag in offsetting permitted losses of wetland function. The use of the temporal lag concept can be used in either a ratiobased or functional assessment approach to determining the appropriate mitigation requirements. Considering lag time for permittee-responsible mitigation, mitigation banks and in-lieu fees will require a somewhat different approach, based on the timing of the impacts, relative to mitigation performance.
Ratios also have been used for other purposes. For example, ratios have been used to reflect the functional values of the impact site, i.e., the ratio would be higher for a pristine wetland than for a severely degraded wetland; require more acres when preservation is required as a permit condition instead of restoration; reflect scientific uncertainties in replicating certain wetland types; and address time lag. Depending on these various factors, the appropriate ratio may either be higher or lower than 1:1. Because these factors address important issues in assuring adequate compensation of permitted impacts, the committee believes that these are all important in setting mitigation requirements. Looking toward the future, development of quantitatively based rapid assessment methods that could replace ratios might help regulators ensure the functions lost due to permitted impacts are adequately offset (Redmond 2000).
Compliance Inspection and Enforcement
The desire to enforce permit conditions is reflected in the Corps SOPs:
Districts will inspect a relatively high percentage of compensatory mitigation, to ensure compliance with permit conditions. This includes SPs [standard permits] and GPs [general permits]. This is important because many of the Corps permit decisions require (and presume the success of) compensatory mitigation to offset project impacts. To minimize field visits and the associated expenditure of resources, SPs and GPs with compensatory mitigation requirements should require applicants to provide periodic monitoring reports and certify that the mitigation is in accordance with permit conditions. Districts should review all monitoring reports.
Adequate staff and budget must be dedicated to inspection and enforcement of the permitting and compensatory mitigation elements of the program, but resources are limited. The pending changes to the general permit program may spread resources more thinly, with adverse consequences for mitigation compliance and enforcement, unless there is as much as a 15% increase in staff budget (Institute for Water Resources 2000). Although recent court rulings (discussed elsewhere in this report) may restrict the regulatory scope of the federal permitting program and reduce federal staff workloads, the regulatory burden then may fall on limited state resources to fill in gaps created by the court rulings. At present, it appears that the Corps's field staff focuses principally on reviewing permits and dedicates limited time and attention to inspection and enforcement. This is evidenced by the SOPs issued as guidance for regulatory staff (USACE 1999a). Inspection and enforcement of compensatory mitigation requirements are not given priority. Although it is reported that about 20 to 25% of the annual budget is spent on enforcement of all types (presentation given by John Studt, U.S. Army Corps of Engineers, at first meeting of the committee), studies have shown that the Corps does not make sufficient visits to mitigation sites to determine if mitigation projects were constructed as proposed or to evaluate compliance of mitigation efforts (Sudol 1996).
The budget blueprint from President George W.Bush calls for more funds for the Section 404 program. Dedicating these funds to more staff resources for inspection of mitigation sites would improve compliance (Allen and Feddema 1996). However, even if such resources are not forthcoming, agencies could make better use of available resources. First, staff specialization might be considered. Some districts now have specialized permitting and mitigation staff; such specialization should be considered for all field units to make better use of limited staff. Second, monitoring and enforcement resources will go farther if structural changes are made
in the program. At present (for permittee-responsible compensation), there is a limited incentive for permittee to perform the mitigation in a responsible way. The likelihood of being cited for poorly completed mitigation is low. Penalties can be as much as $25,000 per violation for each day of noncompliance with a mitigation condition. However, significant fines are ineffective if detection of violations is not a priority.
Compliance must be given higher priority (Allen and Feddema 1996; FDER 1991a). The responsible party should conduct an approved monitoring program and provide monitoring results to the appropriate agency, certifying how the conditions of the mitigation site continue to meet the goals of the mitigation project. Supplementing the current self-reporting requirement to be sure there is a common format required for each permittee could increase detection probability. A record-keeping system for the reports would need to be developed. Randomized auditing of the reports would then allow for more efficient use of limited compliance and enforcement resources. The committee recommends that the Corps and other responsible regulatory authorities take actions to improve effectiveness of compliance monitoring before and after project construction. This recommendation applies to both permittee-responsible and third-party mitigation.
Long-Term Stewardship and Management
It was suggested earlier that when the design is completed and performance standards have been achieved, long-term adaptive management responsibility would be shifted to an organization. Whether a wetland is created or restored, the type of wetland, the surrounding watershed condition, and uncertainties in the science all mean that different mitigation projects will require different amounts of time to become functional wetlands. Once these wetlands have attained their permit-specified performance criteria, long-term stewardship is critical to achieving the goals of the CWA. “Long-term stewardship” implies a time frame typically accorded to other publicly valued natural assets, like parks. This time frame emphasizes the importance of developing mitigation wetlands that are self-sustaining so that the long-term costs are not unmanageable.
Appropriate stewardship entities can include a public agency, a nongovernmental organization, or a private land manager. The entity assumes responsibility for a portfolio of wetland sites (preserved and compensation) in a watershed or some other defined area. As needed, such organizations need to be identified for each watershed. These organizations would be the repositories for the land encumbrance unless it was already held by a conservation entity that would prefer that the stewardship entity undertake the long-term management responsibilities. In ad-
dition, there may need to be a cash payment adequate for monitoring the site or for periodic assessment, as appropriate to the site' s self-sustainability. The precise process for certifying such an organization would vary by area. In addition, the amount of payment for the endowment should be appropriately linked to a reasonable expectation of future costs. While there would be some administrative cost for simply making inspections of the site, the need for funds for active management and possible repairs after construction will vary by the condition of the site when it is assumed, the location in the watershed, and other factors. If the site has been constructed to meet the design requirements, the required cash payment might be limited to an annual administrative charge and be based on a sliding scale with the payment in inverse proportion to the self-maintenance capability of the site.
Different mechanisms are available to provide legal and real-estate protection. Donation to a land management agency or qualified land trust and placement of conservation easement or deed restrictions are among the more commonly used mechanisms. Generally, deed restrictions are less desirable because a judge may vacate them. Conservation easements are much stronger mechanisms for this purpose, although each state's laws should be reviewed for potential weaknesses. For example, Florida statutes (§704.06) allow a grantee to give an easement back to the grantor at the grantee's discretion. For this reason, Florida's mitigation banking rule requires that conservation easements be granted to two entities. Deeding of the property's fee to an appropriate conservation land manager, whether public or private, is often the most desirable method of legal protection. However, many of these organizations will only accept lands that are financially endowed and that make strategic additions to their portfolio of landholdings. If donation to such entities is contemplated, it would be wise to work with them during the mitigation planning phase to ensure that they will accept property.
The committee recommends that the Corps, in cooperation with states, encourage the establishment of watershed organizations responsible for tracking, monitoring, and managing all preserved and compensatory wetlands in public ownership or under easement. This recommendation applies for both permittee-responsible and third-party mitigation.
Agency Technical Capacity
Corps regulatory staff should receive continuing training on ecological and hydrological principles necessary to analyze a mitigation design so that there is a reasonable expectation that mitigation projects will meet target functions. In addition, Corps staff could become mitigation specialists who would review mitigation designs. Recommendations obtained
by the mitigation specialist would be discussed with the applicant and Corps regulatory staff and ultimately be incorporated into the site location and design requirements of a permit. Once a project is in the ground, it may become evident that aspects of the permitted plan need to be modified. An agency mitigation specialist would have the expertise to troubleshoot the implementation and coordinate adjustments to the plan, the primary goal being that the fundamental ecological and hydrological processes are established.
To move in this direction, the Corps regulatory staff and other responsible agencies must be given opportunity to draw on the ecological and hydrological principles necessary for implementing a watershed approach and developing the site-specific compliance criteria to be placed in permits. Corps and other agency staff must have opportunities for continuing education to ensure that they fully understand the application of these principles in the execution of their permitting and planning responsibilities. Agencies should commit to annual time set aside for each staff member for participation in educational programs, over and above normal regulatory training, including attendance at technical conferences. Therefore, the committee recommends that the Corps commit funds to allow staff participation in professional activities and in technical training programs that include the opportunity to share mitigation experiences across districts.
The committee noted instances where compensatory mitigation was having a positive result in watersheds and other cases that have problems. However, there is insufficient feedback to Corps regulatory staff on whether the performance standards developed for a given project produced the expected results. As a result, the same performance standards are used repeatedly with uncertain results (Streever 1999b). Designing restoration sites to help in learning which approaches work and why (cf. Zedler 2001) can greatly accelerate the learning curve. Unfortunately, there is no mechanism in place to build an experimental design or adaptive management process into mitigation projects in order to learn from these real-world tests of mitigation project design. Therefore, the committee recommends that the Corps establish a research program to study mitigation sites to determine what practices achieve long-term performance for creation, enhancement, and restoration of wetlands.
All of the preceding recommendations increase the likelihood that the mitigation plan will be undertaken as designed and that there will be long-term attention to the site. However, while scientists have developed tools for assessing wetland condition, there is no dependable tool for predicting outcomes of restoration or creation efforts. As an example, hydrogeomorphic (HGM) approach can assist in comparing (a) the system that is lost with (b) a reference site, or (c) the system that is provided
through wetland restoration and construction, but HGM cannot predict the ability of a selected restoration or creation site to become similar to a. Thus, the committee has proposed that mitigation wetlands be designed and built to meet the performance criteria stated in the permit by following an adaptive management process.
The committee has described how all wetlands types are difficult to restore and create, but a subset of wetlands types is harder to replicate (see Chapter 2). It also notes that there are some basic principles that will increase the likelihood of ecological performance (Chapter 7). To help design the wetland and to set the cash payment for the long-term site maintenance in the face of long-term uncertainty regarding performance, those who write and review permits will benefit from the training and professional development. In addition, to assist permit writers and others in making compensatory mitigation decisions, a reference manual should be developed to help design projects that will most likely achieve mitigation requirements. The manual should be organized around the themes developed in Chapter 7. The committee recommends that the Corps develop such a manual for each region, based in part on the careful enumeration of wetland functions in the 404(b)(1) guidelines and in part on local and national expertise on the difficulty of restoring different wetland types, hydrological conditions, and functions in alternative restoration or creation contexts. Third, these manuals should be updated and improved on a regular basis to reflect the emerging science and the Corps research recommended in recommendation 10 in this chapter.
A taxonomy of the forms of third-party mitigation was suggested in Chapter 5. A third party might be a commercial mitigation bank that is authorized by a mitigation banking review team (MBRT) process (Chapter 5) to offer wetland credits, measured as acres of wetland type or by functional indices. Private firms are typically the providers of MBRT-certified credits to permittees. The Corps also has the authority to approve compensation offered by third-party mitigation sellers who have not had an MBRT review. The North Carolina program described in Box 8–2 is an example of such a program. Also, the Corps might agree that the compensatory mitigation requirement is met if a fee payment is made to a fee administrator who has a Memorandum of Understanding (MOU) with the Corps. This is defined as an in-lieu fee program in Chapter 5 and comports with the general understanding of such systems in the federal guidance. Finally, the Corps may approve a cash payment to a conservation program on a case-by-case basis as compensatory mitigation. This is termed a cash donation program in Chapter 5.
Private firms began producing wetland credits for sale to permit recipients in the early 1990s (Tabatabai and Brumbaugh 1998). For a comprehensive discussion of the economics of private mitigation sales, see Scodari et al. (1995) and Shabman et al. (1994). As the number of private-sector bankers began to expand, the federal agencies responded by issuing the 1995 mitigation banking guidelines under which an interagency MBRT approves wetland credits for sale to permittees. The MBRT establishes performance criteria that must be achieved by the proposed compensatory wetlands and the number of credits that will be produced by the wetlands and that can be used for compensatory mitigation. Monitoring and repair requirements, performance bonds if credits are sold prior to meeting performance criteria, and assurances for long-term site protection also may be required. Commercial mitigation bankers provide the capital to initiate compensation projects “in advance” of permitted activities, and they provide project development and management expertise. They also readily assume legal responsibility for the mitigation project to comply with permit conditions. For these reasons, credits from commercial mitigation bankers are of potentially high ecological quality, and because of the credit release schedules imposed upon mitigation banks, the credits will be used after some degree of ecological performance has been achieved. These are all important attributes if compensatory mitigation is going to meet the goals listed earlier in this chapter.
Today, commercial mitigation banks are an accepted mitigation option. However, for reasons explained in the literature, growth has been concentrated in a few watersheds (Tabatabai and Brumbaugh 1998), and credit prices may be quite high (Shabman et al. 1998; Rolband et al. 2001). In addition, the MBRT process may call for compensatory wetlands that replace lost wetlands in-kind rather than credits to address watershed priorities.
The goals listed earlier in this chapter allow for few exceptions from compensation requirements for fills of any size or activity. In recent years the Corps has been seeking compensation for fills allowed under general permits. However, the poor ecological performance of permittee-responsible compensation, especially for small fills, suggested a need for third-party mitigation. In fact, many of the first commercial mitigation banks were compensation for losses from general permits. Nonetheless, the absence of commercial mitigation bankers of affordable credits in all watersheds motivated the Corps to rely on cash donations, in-lieu fee payments, and other programs to secure compensatory mitigation (Scodari and Shabman 2000).
An increasing number of the Corps districts have or are developing in-lieu fee agreements (Scodari and Shabman 2000). As described in Chapter 5, in-lieu fee programs are established when a nongovernmental orga-
nization or a nonfederal agency is certified by an MOU with the Corps to accept payments from Section 404 permit recipients. This certified fee administrator is responsible for the fees until a decision is made to spend the collected receipts on one or more wetland projects. Because the fee programs are administered by nonprofits and agencies with a wetland protection and restoration mission, there is an expectation by the regulatory agencies that compensatory actions will be undertaken, perform well, and receive long-term stewardship. Banks and, at times, larger permittee-responsible compensation may address watershed goals. Nonetheless, often no formal watershed planning process guides in-lieu fee program expenditures. Instead, a consensus of professional judgments governs the expenditure of the collected fees.
In-lieu fee programs have been subject to criticism (EPA1999; Gardner 2000). In response, guidance governing in-lieu fee programs was issued in October 2000 by the federal agencies (Fed. Regist. 65(Nov. 7):66914 –66917). Also, the General Accounting Office (GAO) is studying the Corps's authorities and uses of fee programs (letter to D.M.Walker, GAO, from Committee on Transportation and Infrastructure, 1999). Two criticisms were that in-lieu fee programs were allowing compensation outside impacted watersheds and that funds were being used for activities other than compensatory wetlands, although it is not clear that these practices are widespread (Scodari and Shabman 2000). The 2000 guidance cautions against these kinds of expenditures (Fed. Regist. 65(Nov. 7):66914–66917). Another criticism is that in-lieu fee programs result in out-of-kind compensation and allow preservation as a compensatory action. In the context of a watershed approach, such decisions may be preferable. However, few programs have a formal watershed plan; instead, best professional judgment is used to ascertain whether a particular restoration or preservation expenditure best serves the watershed (Scodari and Shabman 2000). Because many of these relatively new organizations will be managed by public agencies and/or nongovernmental organizations, there will need to be more attention to cost-based fee setting and accountability rules and procedures to ensure site-level mitigation compliance (Scodari and Shabman 2000; Gardner 2000).
Lag times between the permitted impact and compensation have been a concern for a number of years for all forms of mitigation (King et al. 1993). Lag times result in a temporal loss of wetland function, but more important, it increases the uncertainty that the compensation action will prove ecologically viable. In the fourth recommendation of this chapter, the committee has suggested a way to reduce lag times and increase the certainty of site-level viability for permittee-responsible compensation. However, lag time is further reduced when an MBRT-approved (usually private-sector) mitigation banker finances the initial investment in credit
development. Private sector involvement is a source of capital for initiating wetland projects that are, to some extent, developed in advance of permitted activities, a desirable attribute of a compensation system, even though fully functional wetlands are not always in place before credits are purchased and the permitted activity proceeds. In-lieu fee programs have been criticized for not initiating compensatory mitigation in a timely manner, although this criticism cannot be uniformly applied to all operating programs (Scodari and Shabman 2000). Therefore, it appears that all forms of third-party mitigation have some lag time. However, in many cases permittees delay or never initiate compensation projects (Chapter 6), and the time delays with third-party systems should be viewed in that context.
For third-party mitigation there is less uncertainty about long-term outcomes than with permittee-responsible compensatory mitigation. MBRT-certified commercial mitigation banks offer project management expertise, assume responsibility for meeting defined performance criteria, and bring an entrepreneurial desire to seek out improved and lower-cost approaches to securing compensatory mitigation. Once all regulator-approved credits have been sold, the wetland site is either managed by the same third party or transferred to a conservation authority, usually an entity quite similar to those that now enter into MOUs with the Corps to accept fee payments or offer credits that have not been MBRT-approved. Therefore, a common feature of all third-party mitigation is that all compensation sites become the responsibility of a conservation entity with a responsibility for, or organizational mission of, wetland and watershed management. This is a desirable stewardship outcome of all third-party compensatory mitigation systems and was a recommendation the committee made (above) for permittee-responsible mitigation.
The committee understands that the best way to have confidence that compensatory mitigation will serve watershed goals is to have mitigation projects initially designed, implemented, and managed by reliable mitigation experts who are held accountable for certain results. These projects would be of varying wetland types, sizes, and locations to secure priority functions identified by the watershed planning process. Once these results are secured, sites would be transferred to a long-term stewardship entity. Preferably, all of this would occur before the wetlands are used for compensatory mitigation. In addition, the supply of available credits must be large enough and the price of credits must be low enough so that all permits issued can have a compensation requirement that will address the cumulative and secondary consequences of permitted activities. An institutional system to secure these goals may be in reach whenever there is a public funding commitment. The outline of such a system can be described.
A state could create a compensatory wetland fund generally modeled after the North Carolina program (see Box 8–2). Initial capital for the fund could be secured from general revenue sources, such as the federally funded State Revolving Loan Fund (EPA 2000). The funds would be repaid at a later time with fees collected from future permit recipients. The fund, once capitalized, would invest in wetland restoration in watersheds. Wetland projects would meet priorities established in formally developed wetland plans or in plans developed by a consensus of agency regulators and wetland scientists.
Although not the practice in North Carolina, one possibility is that the actual restoration and creation work would be contracted out using a competitive bidding process, drawing in the expertise of the private-sector commercial mitigation bankers. To win contracts, private-sector bidders would need to offer sites that conform to design criteria (see earlier discussion). The winner of each contract award would be paid upon completion of the project after meeting design criteria, although as is now the case with the MBRT process, some small amount of credit may be certified and payment received after the project is initiated. Once design or performance criteria are met, the sites would be transferred to a responsible land management entity for long-term stewardship. This parallels the committee's recommendation for permittee-responsible mitigation. However, note that unlike permittee-responsible mitigation, these compensation wetlands can be constructed before permitted activities proceed. The new fund would take responsibility for quantifying (using a functional assessment protocol) and then selling the credits created by the program to the recipients of permits. The payments required of the permit applicants (the “fee”) would be tied to the costs of securing the restoration or creation. As fees are collected, the fund is repaid and new projects can be initiated.
In previous sections of this chapter, the committee offered recommendations to improve permittee-responsible mitigation. Even with those improvements, watershed goals may often be best served by placing compensatory wetlands “off-site.” Reliance on third parties for off-site compensation will be necessary. A new institutional mechanism for third-party compensation can be created that draws on the best features of the existing mechanisms. Therefore, the committee recommends that institutional systems be modified to provide third-party compensatory mitigation with all of the following attributes: timely and assured compensation for all permitted activities, watershed integration, and assurances of long-term sustainability and stewardship for the compensatory wetlands.
SUPPORT FOR INCREASED STATE RESPONSIBILITIES
The Clean Water Act was not expressly designed to be a wetland protection act. However, as a result of administrative interpretations (regulations and more informal guidance documents), the CWA has evolved into a principal means for the federal government to protect wetlands. Ambiguous statutory support for a comprehensive wetland protection scheme has proven controversial and has led to litigation. Some judicial decisions have broadened the scope of the CWA Section 404 program (Natural Resources Defense Council v. Callaway, 392 F. Supp. 685 D.D.C. (1975)), and some have affirmed aspects of the Corps's jurisdiction (United States v. Riverside Bayview Homes, Inc., 474 U.S. 121 (1985)). Other cases have called the Corps's authority into question, as was the case in Wilson, in which the Fourth Circuit Court limited the Corps's ability to regulate activities affecting certain isolated waters (United States v. Wilson, 133 F.3d 251 (4th Cir. 1997)). Similarly, the D.C. Circuit's Court's decision in the National Mining Association v. U.S. Army Corps of Engineers case invalidated the Corps's so-called Tulloch rule, which sought to regulate incidental discharges associated with excavation activities (National Mining Association v. U.S. Army Corps of Engineers, 145 F.3d 1399 (D.C. Cir. 1998)). Some issues, such as whether the CWA applies to isolated waters unconnected to traditionally navigable waters, have been ruled on only recently by the U.S. Supreme Court. In the Solid Waste Agency of Northern Cook County (SWANCC) case, the CWA was interpreted narrowly, when the Court held that the Corps exceeded congressional intent when it relied on the presence of migratory birds to assert jurisdiction over isolated waters. These judicial decisions and regulatory responses have contributed to shifting standards of jurisdiction in terms of waters and activities subject to regulation under the CWA. In short, the federal Section 404 program is subject to continuing reinterpretations of the jurisdictional scope of the wetland program, reinterpretations of the activities requiring permits, reinterpretations of the requirements for sequencing, and reinterpretations of the need for compensation if permits are issued. In Chapter 1 and elsewhere in this report, it is suggested that the Section 404 program has increased its effectiveness, although significant improvements can be made, for achieving no net loss of wetland acres and function. Recent court rulings raise the question of whether this momentum can be maintained by national reliance on the Section 404 program alone.
In this setting the committee commends the actions of many states that have expanded their roles and responsibilities for wetland management beyond the review role called for in the Section 401 water-quality certification requirement on Section 404 permits and, in some cases, in statements of coastal zone management consistency. States and regional
Virginia's New Wetland Permitting Program
Many states have created permitting programs with a scope that exceeds the federal Section 404 program. Recent experience in Virginia demonstrates the need for such programs. Nontidal wetlands in Virginia have not been without some protection. Prior to 1992, a Virginia certification was required for a Section 404 permit. However, as court actions limited the scope of the federal program, the state recognized the urgency of taking legislative action. The Virginia General Assembly passed legislation in 2000 to require a state permit for wetland filling and alteration even if a Section 404 permit is not required. The commonwealth's program will apply to activities of less than 0.5 acres, activities of utility and public service companies, linear transportation projects, activities covered by Corps general permits, and mining activities. In addition, compensatory mitigation will be required under the state program.
entities can, and have, taken the lead in expanding permitting authorities in the face of limitations in the federal program (see Box 8–3 for a recent example). The committee recognizes the limits of the Section 404 program as a wetland management tool, but expanded state programs could ensure that wetlands within their territories remain protected regardless of where the federal courts decide to demarcate the boundaries of federal jurisdiction. However, the committee also recognizes that the capacities of states may be limited by statute and by staff and budget support. One possible path for federal agencies and for Congress would be to support expanded state capabilities as a response to the contracting of federal authority. The federal agencies could work with Congress to enhance technical assistance to states that wish to expand their permitting authorities, and to increase funding to states that take such actions or that have programs in place. Therefore, the committee encourages the Corps and the EPA to work with states to expand their permitting and watershed planning programs to fill gaps in the wetlands program.
The committee recommends the following goal statement for compensatory mitigation institutions:
Institutions (laws, regulations, and guidance) governing wetland permitting and compensatory mitigation should promote compensatory mitigation sites that meet ecological performance criteria and that result in a
matrix of protected, restored, and created wetlands in the watershed that contribute to the physical, chemical, and biological integrity of the waters of each watershed.
Wetland management programs should seek to achieve three specific outcomes by ensuring that the following conditions are met:
Individual compensatory mitigation sites should be designed and constructed to maximize the likelihood that they will make an ongoing ecological contribution to the watershed, and this contribution is specified in advance.
Compensatory mitigation (i.e., wetlands created or restored to compensate for wetland damage) should be in place concurrent with, and preferably before, a permitted activity.
To ensure the replacement of lost wetlands functions, there should be effective legal and financial assurances for long-term site sustainability of all compensatory wetland projects.
The committee recommends that the regulatory agencies consider each permitting decision over broader geographic and longer time periods (i.e., by modifying the boundaries of permit decision-making in time and space).
The committee encourages states, with the participation of appropriate federal agencies, to prepare technical plans or to initiate interagency consensus processes for setting wetland protection, acquisition, restoration, enhancement, and creation project priorities on an ecoregional (watershed) basis.
The committee recommends that the Corps and other responsible regulatory authorities establish and enforce clear compliance requirements for permittee-responsible compensation to assure that (1) projects are initiated no later than concurrent with permitted activity, (2) projects are implemented and constructed according to established design criteria and use an adaptive management approach specified in the permit, (3) the performance standards are specified in the permit and attained before permit compliance is achieved, and (4) the permittee provides a stewardship organization with an easement on, or title to, the compensatory wetland site and a cash contribution appropriate for the long-term monitoring, management, and maintenance of the site. The committee's conclusions reached in Chapter 6 are relevant to the implementation of the recommendation.
The committee recommends that the Corps and other responsible regulatory authorities use a functional assessment protocol that recognizes the watershed perspective, described in Chapters 3 and 7, to establish permittee compensation requirements.
The committee recommends that the Corps and other responsible regulatory authorities take actions to improve the effectiveness of compliance monitoring before and after project construction.
“Long-term stewardship” implies a time frame typically accorded to other publicly valued natural assets, such as parks. This time frame emphasizes the importance of developing mitigation wetlands that are self-sustaining, so that the long-term costs are not unmanageable.
The committee recommends that the Corps, in cooperation with states, encourage the establishment of watershed organizations responsible for tracking, monitoring, and managing wetlands in public ownership or under easement.
The committee recommends that the Corps and other responsible regulatory authorities commit funds to allow staff participation in professional activities and in technical training programs that include the opportunity to share experiences across districts.
The committee recommends that the Corps and other responsible regulatory authorities establish a research program to study mitigation sites to determine what practices achieve long-term performance for creation, enhancement, and restoration of wetland.
To assist permit writers and others in making compensatory mitigation decisions, a reference manual should be developed to help design projects that will be most likely to achieve permit requirements. The manual should be organized around the themes developed in Chapter 7. The committee recommends that the Corps develop such a manual for each region, based in part on the careful enumeration of wetland functions in the 404(b)(1) guidelines and in part on local and national expertise on the difficulty of restoring different wetland types, hydrological conditions, and functions in alternative restoration or creation contexts.
The committee recommends that institutional systems be modified to provide third-party compensatory mitigation with all of the following attributes: timely and assured compensation for all permitted activities, watershed integration, and assurances of long-term sustainability and stewardship for the compensatory wetlands. The committee encourages the Corps and the EPA to work with the states to expand their permitting and watershed planning programs to fill gaps in the federal wetlands program.