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Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans (2017)

Chapter: II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK

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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
×
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
×
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Suggested Citation:"II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK." National Academies of Sciences, Engineering, and Medicine. 2017. Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans. Washington, DC: The National Academies Press. doi: 10.17226/24901.
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4in order to obviate a potential listing and provide an enhancement of survival permit under Section 10(a)(1)(A). • State conservation banking to satisfy state threatened and endangered species laws, and, with federal approval, federal ESA requirements previ- ously noted. All of these compensatory mitigation mechanisms can be carried out in connection with larger-scale conservation planning, which improves their utility, predictability, and effectiveness.12 The Compensatory Mitigation Rule requires use of a “watershed approach,” which invites the entities approving wetland and stream mitigation banks and ILF sites— the federal-state Interagency Review Team (IRT)—to adopt or recognize new or existing watershed plan- ning mechanisms when approving the establishment of banks or ILFs. Recognition of watershed plans includes reference to these when defining the service areas within which banks or ILFs may offer and provide mitigation credits to permit applicants. Corps regulators also consult these plans, where available, when approving use of bank or ILF credits to offset impacts in a particular location, or in deciding to authorize permittee-responsible compensatory miti- gation activities. The species-related offset mecha- nisms also rely heavily on conservation planning at different scales—especially for HCPs and conserva- tion banks that cover multiple species or large areas of potential habitat impact. This report examines the legal issues that affect the ability of state transportation agencies to participate in conservation planning activities, particularly in advance of specific impacts and demands for offsets.13 From a sporadic, ad hoc process of conservation planning and crediting of mitigation a few decades ago, federal laws now firmly authorize participation in planning activities and closely define how credit- ing of mitigation is handled. Key legal documents are the 2008 Compensatory Mitigation Rule issued by the Corps of Engineers and EPA to define mitiga- tion, planning areas, the “watershed approach,” and the mitigation hierarchy for purposes of addressing wetland and stream impacts; the FWS’s 1981 Miti- gation Policy and 2003 Conservation Banking Guid- ance, both of which were updated in 2016 and 2017; and the developments in federal transportation legislation and rules that now firmly support contri- butions to “statewide and regional efforts to conserve, restore, enhance, and create natural habitats and wetlands,” as well as “development of statewide and regional environmental protection plans, including natural habitat and wetland conservation and resto- ration plans.”14 State laws play a relatively minor role in this universe, given the federal funding framework and the federal regulatory interests in waters and species. State transportation agency participation in conservation planning has occurred primarily in places where substantial federal ESA issues have arisen, and, also on the basis of pilot projects and memoranda of agreement using existing laws. II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS—LEGAL FRAMEWORK A. Compensatory Wetland Mitigation Banking and ILF Compensatory Mitigation 1. History of Compensatory Mitigation under the Clean Water Act The federal Clean Water Act, was enacted to restore and maintain the chemical, physical, and biological integrity of the nation’s waters. Section 404 of the Act regulates discharges of “dredged or fill material” to the waters of the United States, includ- ing wetlands and other aquatic resources. It requires dischargers to apply to the Corps for a permit autho- rizing any such discharge. Permitting activities are carried out by the Corps’ 38 district offices. The Corps has authority to issue individual permits or general permits. General permits are issued for categories of activities that are similar in nature and are determined to have only minimal adverse environmental impacts; general permits include a suite of “nationwide permits” that are issued by the Corps every five years to cover common activities. Although the Corps is the permitting authority, the EPA is responsible for establishing the environmen- tal guidelines—(404(b)(1) guidelines)—that the Corps uses to evaluate the impact of a proposed project when considering permit applications and/or adop- tion of general permits. In addition, the EPA has authority under section 404(e) to veto permits 14 23 U.S.C. § 119(g), § 133(b) (14). 12 Jessica B. WilKinson, JaMes M. Mcelfish, ReBecca KihslingeR, RoBeRt BenDicK & BRUce a. McKinney, the next geneRation of Mitigation: linKing cURRent anD fUtURe pRogRaMs With state WilDlife action plans anD otheR state anD Regional plans (Environmental Law Institute, 2009). 13 MaRie venneR, eaRly Mitigation foR net enviRonMen- tal Benefit: MeaningfUl off-setting MeasURes foR UnavoiD- aBle iMpacts (National Cooperative Research Program, Transportation Research Board of the National Academies of Sciences, Engineering, and Medicine, 2005) [hereinafter Venner]; JaiMee leDeRMan & MaRtin Wachs, tRanspoRtation anD haBitat conseRvation plans: iMpRoving planning anD pRoJect DeliveRy While pReseRving enDangeReD species (University of California Transportation Center, UCTC- FR-2014-04, 2014) [hereinafter Lederman & Wachs].

5approved by the Corps. Other agencies, including the FWS, NOAA, and the Natural Resources Conser- vation Service, have the opportunity to review and comment upon Corps permits. EPA, FWS, and NOAA may “elevate” disputes over specific proposed permits and policies under section 404(q). Under the section 404(b)(1) guidelines, all wetlands are considered special aquatic sites, and the Corps is required to engage in a “practicable alternatives anal- ysis” before issuing a section 404 permit. A permit cannot be issued if there is a “practicable alternative to the proposed discharge, which would have less adverse impact on the aquatic ecosystem” so long as that alternative does not itself have other significant adverse environmental consequences.15 The applicant bears the burden of showing that its proposed action is the least environmentally damaging practicable alternative in light of overall project purposes. The guidelines are also intended to support the national policy goal of no net loss of wetlands values and functions and provide for a mitigation “sequence” derived from the Council on Environmental Quality National Environmental Policy Act16 (NEPA) regula- tions, but further explained in a 1990 federal Memo- randum of Agreement (MOA) between the Corps and EPA and further confirmed in the 2008 Compensa- tory Mitigation Rule. The mitigation sequence is: • Avoid impacts (in accordance with the practi- cable alternatives analysis requirements);17 • Minimize impacts that cannot be avoided;18 and finally • Compensate for unavoidable adverse impacts that remain after all appropriate and practicable minimization has been required.19 The Clean Water Act also requires § 404 permits to be in accordance with state water quality stan- dards under section 401, which gives states an oppor- tunity to assert requirements supported in law and regulation with respect to individual 404 permit decisions and with respect to use of nationwide or general permits within their state boundaries.20 States can and have imposed additional conditions or limitations based on their adopted water quality standards when providing or withholding state water quality certifications to the Corps. Compensatory mitigation under 404 has a long history of development. The Corps and EPA have often required mitigation in connection with the issuance of permits. The FWS’s 1981 Mitigation Policy regarded mitigating adverse impacts of land and water development on fish, wildlife habitats, and uses of habitat.21 It governed FWS recommen- dations to other agencies (including the Corps and EPA) for permit conditions as well as the FWS’s implementation of its own authorities to protect habitat. The FWS issued interim Guidance on Miti- gation Banking in 1983, informing its posture on use of banks for offset of damages to wetland habi- tats, even before a formal banking policy had been adopted by the regulatory agencies.22 In 1989, the “no net loss policy” for wetlands led to further development of compensatory mitigation in section 404 permitting. This was embodied in a 1990 Corps-EPA Memorandum of Agreement23 and in the 1995 Federal Guidance for the Establishment, Use and Operation of Mitigation Banks,24 both of which governed compensatory mitigation and wetland banking for the next decade and a half. The 1995 mitigation banking guidance noted that wetland mitigation banking is helpful when on-site compen- sation is not practicable, or in instances when use of a mitigation bank is environmentally preferable. In the transportation context, the Transportation Equity Act for the 21st Century (TEA-21)25 created a preference for mitigation banking over permittee- responsible mitigation in 1998. Over time mitigation banks and ILFs achieved an increasing share of the compensatory mitigation universe. In 2000, the Corps and EPA, together with the FWS and NOAA, issued guidance for ILF programs, to maintain greater parity with the guidance standards in use for banks.26 And in 2002, the Corps issued a Regulatory 15 40 C.F.R. § 230.10(a). 16 Pub. L. No. 91-190, 83 Stat. 852 (1970) (codified at 42 U.S.C. ch. 55). 17 40 C.F.R. § 230.10(a). 18 Id. § 230.10(d); id. 230, Subpart H. 19 Id. 230, Subpart J. 20 33 U.S.C § 1341. 21 U.S. Fish & Wildlife Service, Mitigation Policy, 46 Fed. Reg. 7656 (Jan. 23, 1981). (This policy was revised and updated by a new Mitigation Policy in November 2016, discussed, infra). 22 U.S. Fish & Wildlife Service, Ecological Service Instructional Memorandum No. 80, Interim Guidance on Mitigation Banking (June 1983) (the interim guidance established a hierarchy from wetlands of highest value to those of minor habitat value, and discouraging use of banking for the highest value wetlands and preferring in- kind mitigation for those of lesser value). 23 U.S. Environmental Protection Agency and U.S. Department of the Army, Memorandum of Agreement Con- cerning the Determination of Mitigation under the Clean Water Act Section 404(b)(1) Guidelines (1990). 24 60 Fed. Reg. 58,605 (1995). 25 Pub. L. No. 105-178, 112 Stat. 151 (1998). 26 U.S. Dept. of the Army, U.S. Environmental Protec- tion Agency, U.S. Dept. of Interior, U.S. Dept. of Commerce, Federal Guidance on the Use of In-Lieu Fee Arrangements for Compensatory Mitigation under Section 404 of the Clean Water Act and Section 10 of the Rivers and Harbors Act (2000).

6Guidance Letter27 incorporating some additional practices and approaches that had been recom- mended by a 2001 National Academy of Sciences study to improve the long-term performance and accountability of compensatory mitigation.28 2. The 2008 Compensatory Mitigation Rule In December 2003, Congress included a provision in the Department of Defense appropriations bill requiring the Department of the Army to promul- gate regulations providing fair and efficient stan- dards and procedures for wetland and stream mitigation. The Corps and EPA elected to develop the regulations together, and published proposed regulations in 2006,29 and final regulations in 2008.30 The 2008 Compensatory Mitigation Rule regular- izes the process for the mitigation sequence, and it standardizes the various types of compensatory mitigation (mitigation banks, ILFs, and permittee- responsible) to achieve comparable requirements and promote more environmentally protective and durable compensatory mitigation projects. As a regulation, it has a direct effect on permittees as well as regulators, and it introduced and formalized key practices that matter substantially to conserva- tion planning that includes compensatory mitiga- tion for impacts to aquatic resources. The rule is intended to improve planning, imple- mentation, and management of compensatory mitiga- tion; to create higher standards for compensatory mitigation; and to require, to the extent practicable and appropriate, that all mitigation decisions be made in the context of a “watershed approach.” The Corps has recently summarized the key improvements embodied in the rule as: (1) Use of the watershed approach, which involves “consideration of watershed needs and how locations and types of compensatory mitigation projects address those needs;” (2) Estab- lishment of a mitigation hierarchy that requires each Corps district engineer to consider the prioritization of compensatory mitigation in the following order31— credits from a mitigation bank; credits from an ILF program; permittee-responsible mitigation under a watershed approach; permittee-responsible onsite, in-kind mitigation; permittee-responsible offsite and/ or out-of-kind mitigation; (3) Preparation of a “mitiga- tion plan” with 12 required elements ensuring effec- tiveness and durability; and (4) Clear timelines for decision making.32 The rule contains several provisions that are especially relevant to the use of conservation plans involving wetlands and aquatic resources as the predicate for compensatory mitigation activities. The rule created and defined the role of an IRT in planning and implementing the compensatory mitiga- tion process. The IRT consists of federal, state, tribal, and or local regulatory and resource agency represen- tatives with expertise and/or jurisdiction over natural resources activities in the area of the proposed impacts and the proposed compensatory mitigation activities. The IRT “reviews documentation for, and advises the district engineer on, the establishment and manage- ment of a mitigation bank or an in-lieu fee program.”33 The role of the IRT means that since 2008, conserva- tion planning, siting of compensatory mitigation proj- ects, and integration of section 404 of the Clean Water Act and/or section 10 of the Rivers and Harbors Act (section 404/10) mitigation with state programs and with habitat concerns is surfaced and addressed early in the process of establishing banks and ILFs. Multia- gency objectives may be pursued and tracked as uses of credits and implementation of the watershed approach occurs over time.34 The wetland mitigation bank or ILF program instrument must include key provisions:35 • Definition of the geographic service area for use of credits in compensatory mitigation. This is typically determined by the approved banking in- strument or ILF prospectus, which must demon- strate use of the watershed approach. • Accounting procedures for tracking generation and sale of credits. • Legal responsibility for carrying out compen- satory mitigation obligations and implementing the mitigation plan. • Default and closure procedures and guarantees. • Reporting protocols. • A mitigation plan with the elements required by the rule. • Credit release schedule and milestones for the release and ability of credits (or advance credit allocation, credit and fee methodology, and descrip- tion of program account, for ILFs). 27 Corps of Engineers, Guidance on Compensatory Mitigation Projects for Aquatic Resource Impacts under the Corps Regulatory Program Pursuant to Section 404 of the Clean Water Act and Section 10 of the Rivers and Harbors Act, RGL No. 02-2 (Dec. 24, 2002). 28 national ReseaRch coUncil, coMpensating foR Wet- lanD losses UnDeR the clean WateR act (Washington, D.C., National Academy Press, 2001). 29 Compensatory Mitigation for Losses of Aquatic Resources, 71 Fed. Reg. 15,519 (Mar. 28, 2006). 30 Compensatory Mitigation for Losses of Aquatic Resources, 73 Fed. Reg. 19,594 (Apr. 10, 2008). 31 33 C.F.R. § 332.3(b); 40 C.F.R. § 230.93(b). 32 institUte foR WateR ResoURces, the Mitigation RUle RetRospective: a RevieW of the 2008 RegUlations goveRning coMpensatoRy Mitigation foR losses of aqUatic ResoURces (October 2015) [hereinafter Institute for Water Resources]. 33 33 C.F.R. § 332.2; 40 C.F.R. § 230.92. 34 33 C.F.R. § 332.8(b); 40 C.F.R. § 230.98(b). 35 33 C.F.R. § 332.8(d)(6); 40 C.F.R. § 230.98(d)(6).

7Mitigation banks and ILFs must prepare a miti- gation plan, which must include the following elements, many of which relate to conservation planning and landscape-scale issues:36 a. The mitigation plan must describe the objec- tives for the compensatory mitigation project(s) including resource type, methods of compensa- tion, and relationship to watershed needs. b. Site selection factors must be documented, in- cluding the consideration of watershed needs and practicality of self-sustaining ecological outcomes. c. Legal arrangements for long term site protec- tion must be described and documented to en- sure the legal status of the site in perpetuity. d. Baseline ecological characteristics of the com- pensatory mitigation site must be described, including descriptions of historic and existing plant communities, hydrology, soils, mapped characteristics, and delineation of waters of the U.S. e. The number of credits to be generated by the compensatory mitigation sites must be de- scribed, including the rationale and method- ology used to determine the credits. f. A mitigation work plan must be provided, including engineering specifications, con- struction methods, timing, sequence, source of water, methods for establishing plant com- munities, grading, erosion control and other relevant factors. g. Maintenance activities must be described and a schedule provided to ensure the contin- ued viability of the resources once construc- tion has been completed. h. Ecological performance standards must be established, which will enable the operator and regulators to determine whether the com- pensatory mitigation project is achieving its objectives. i. Monitoring requirements, including descrip- tion of the parameters to be monitored, must be established and a schedule for monitoring and reporting must be supplied. j. A long-term management plan must be es- tablished to ensure continued performance of the site after all performance standards have been met, and must provide for a long-term financing mechanism and identification of the party responsible for long-term management. k. An adaptive management strategy must be provided to address unforeseen changes in site conditions or other components of the project, including identification of the party or parties responsible for implementing adap- tation measures and responses. l. Financial assurances must be documented, in- cluding their type and sufficiency to ensure a “high level of confidence that the compensatory mitigation project will be successfully completed in accordance with its performance standards. ILF programs must also provide a “Compensa- tion Planning Framework” that will guide their selection, securing, and implementing of future sites for compensatory mitigation activities. The compensation planning framework must support a watershed approach.37 The compensation planning framework must contain the following elements: a. Geographic service areas for the ILF, includ- ing a watershed-based rationale for the delin- eation of each service area; b. Description of the threats to aquatic resourc- es in the service area(s), including how the ILF program will help offset impacts result- ing from those threats; c. Analysis of historic aquatic resource losses in the service area(s); d. Analysis of current aquatic resource condi- tions; e. Statement of aquatic resources goals and ob- jectives for each service area, including a de- scription of the general amounts, types, and locations of aquatic resources the program will seek to provide; f. A prioritization strategy for selecting and im- plementing compensatory mitigation activities; g. Explanation of how any preservation objec- tives satisfy criteria limiting the use of pres- ervation as a compensatory mitigation tool; h. Description of public and private stakeholder involvement in the ILF planning and imple- mentation; i. Long-term protection strategies for activities conducted by the ILF sponsor; j. Strategy for periodic evaluation and report- ing on progress, and process for revising the planning framework as necessary.38 The “Watershed Approach” and Its Relevance to Conservation Planning The “Watershed Approach” required by the Compensatory Mitigation Rule applies to all forms of aquatic compensatory mitigation, and especially to the siting and use of wetland banks and ILFs. The purpose of a watershed approach is to “maintain and improve the quality and quantity of aquatic 36 33 C.F.R. § 332.4(c); 40 C.F.R. § 230.94(c). 37 33 C.F.R. § 332.8(c); 40 C.F.R. § 230.98(c). 38 Id.

8resources within watersheds through strategic selec- tion of compensatory mitigation sites.”39 Corps district engineers use existing watershed plans, when avail- able, but they may also use other types of plans and information to guide their decisions. In the absence of a prepared watershed plan, district engineers may use data on trends in habitat conversion and loss, cumulative impacts, presence and needs of sensitive species, site conditions that affect the success of compensatory mitigation, and other information. The “size of watershed addressed using a watershed approach should not be larger than is appropriate to ensure that the aquatic resources provided through compensation activities will effectively compensate for adverse environmental impacts.”40 The watershed approach is designed to enhance the aquatic resource mitigation program rather than diminish the ability of the program to support the no net loss policy. Site selection for mitigation often includes loca- tions that are part of large wetland and aquatic complexes because these are more readily self- sustaining once established. The rule expressly requires consideration of “the practicability of accomplishing ecologically self-sustaining aquatic resource restoration, establishment, enhancement, and/or preservation at the compensatory mitigation project site.”41 Site sustainability includes “appropri- ate siting to ensure that natural hydrology and landscape context” will support the functions of the site over the long term.42 While finding suitable compensatory mitigation sites within the same watershed as the impacts can sometimes be difficult, particularly where land devel- opment has been intensive or where aquatic sites are scarce to begin with, the Compensatory Mitigation Rule helps to address this by strongly encouraging prior identification of sites by wetland mitigation bankers and ILF providers, and the evaluation of such sites by IRTs. The preference for these forms of mitigation also can have the effect of incentivizing advance identification and protection of potential mitigation sites ahead of impacts from state trans- portation agencies and other mitigation users, so that sites will be available when needed. The rule also provides a safety valve, allowing the Corps district engineer to approve other forms of compensatory mitigation, including those that are off-site and out- of-kind, if the preferred mitigation opportunities are not practicable; the watershed approach is required “to the extent appropriate and practicable.”43 39 33 C.F.R. § 332.3(c)(1); 40 C.F.R. § 230.93(c)(1). 40 33 C.F.R. § 332.3(c)(4); 40 C.F.R. § 230.93(c)(4). 41 33 C.F.R. § 332.4(c)(3); 40 C.F.R. § 230.94(c)(3). 42 33 C.F.R. § 332.7(b); 40 C.F.R. § 230.97(b). 43 33 C.F.R. § 332.3(b)(6), (c)(1); 40 C.F.R. § 230.93(b)(6), (c)(1). 44 Institute for Water Resources, supra note 32. 45 33 C.F.R. § 332.3(j)(1), (3); 40 C.F.R. § 230.93(j)(1), (3). 46 33 C.F.R. § 332.4(c)(4); 40 C.F.R. § 230.94(c)(4). In July 2016, the Corps issued a Compensatory Mitigation Site Protection Instrument Handbook to assist its district engi- neers in understanding and approving appropriate site protection instruments, available at https://www.epa.gov/ cwa-404/compensatory-mitigation-site-protection- instrument-handbook-and-fact-sheet. The rigorous provisions of the 2008 Compensatory Mitigation Rule have led to greater emphasis on landscape-scale ecological performance when approv- ing banks and ILFs. At the same time, the number of approved banks has increased dramatically and a substantial number of ILFs (required to meet these more rigorous standards by 2010) have also been approved by the Corps. The Corps has determined that for those permit actions between 2010 and 2014 that required compensatory mitigation, 41 percent were satisfied using mitigation bank credits, 11 percent using ILF credits, 37 percent were on-site permittee-responsible mitigation, and 10 percent were off-site permittee-responsible mitigation.44 Under the rule, compensatory mitigation projects used to satisfy section 404/10 permitting obligations may also be used to provide compensatory mitiga- tion under the ESA, including HCPs under that Act as set forth in this digest in Section II. B. However, under no circumstances may the same credits be used to provide mitigation for more than one permit- ted activity.45 In effect, additional values and func- tions must be provided to holistically address compensatory mitigation needs under different programs. This typically means that aquatic resources compensatory mitigation activities must be combined with additive habitat restoration activ- ities if the same mitigation site is addressing needs under separate regulatory programs. Site Protection and Adaptation Compensatory mitigation sites must be managed under permanent land protection instruments such as deed restrictions and conservation easements. The terms of these for any compensatory mitigation site, bank, or ILF, are set forth by the relevant Corps district in accordance with the Compensatory Miti- gation Rule.46 Elements must include: • Enforceability by appropriate third party (government or nonprofit resource management agency), • Prohibition of incompatible uses of the site, • Notice requirements before actions affecting the site or its ownership • Substitution of other lands if the project is on public lands and management changes, and

9transportation agencies may encounter either of these requirements when determining how best to structure their activities and to mitigate for impacts.52 In general, mitigation driven either by section 7 or section 10 will lead to the need for thor- ough understanding of impacts and development of ecologically sound conservation measures, often involving conservation plans either developed by the state transportation agency itself, or by a resource agency or conservation bank provider offer- ing to provide the mitigation credits needed. 1. History of ESA and Mitigation Requirements The ESA was passed in recognition of the value of biodiversity and the risk of its loss due to the extinc- tion of plant and animal species. Prior federal wild- life protection laws only required action when “practicable” or lacked firm authority to enforce species protection measures.53 In response to these limitations, the ESA was passed to “halt and reverse the trend of species extinction”54 and declared to be “the most comprehensive legislation for the preser- vation of endangered species ever enacted….”55 The ESA aimed to achieve its plant and wildlife species protection goals through ecosystem conservation, development of a conservation program, and support of international treaties and agreements.56 Further- more, it set forth a general policy for all federal departments and agencies to conserve threatened and endangered species and use their authorities to further the conservation goals of the ESA.57 Congress vested authority to administer the ESA in both the FWS and NOAA’s National Marine Fish- eries Service (NMFS).58 The FWS and the NMFS (collectively, the Services) are responsible for deter- mining which species under their authority will be listed (or removed) as threatened or endangered, designating critical habitat, consulting with or assisting other agencies in species conservation, and overseeing recovery plans for listed species.59 The majority of listed species are terrestrial or freshwa- ter species under the jurisdiction of FWS, while NMFS is generally responsible for overseeing marine life and anadromous fish. Currently, there 47 33 C.F.R. § 332.7(a); 40 C.F.R. § 230.97(a). 48 33 C.F.R. §§ 332.8(a), (t), (u); 40 C.F.R. §§ 230.98(a), (t), (u). 49 33 C.F.R. §§ 332.7(c), (d); 40 C.F.R. 230.97 §§ (c), (d). 50 33 C.F.R. § 332.7(b); 40 C.F.R. § 230.97(b). 51 U.S. DepaRtMent of inteRioR, office of policy analysis, a pReliMinaRy analysis of the conseRvation BanKing pRo- gRaM anD ResUlts foR a sURvey of USFWS staff (Sept. 2013) [hereinafter Interior Sept. 2013a]. • Approval of the site protection instruments by the district engineer in advance of, or concurrent with, the activity causing the impact.47 If more than one Corps district is responsible for permitting the impacts, the mitigation must meet the requirements of each district engineer— although typically the watershed approach means that each impact using permittee-responsible miti- gation will be subject to the same practices and standards used by that district in its administration of the rule. When a mitigation bank or ILF Program is to be used for mitigation, the terms of the relevant land protection covenant(s) will have already been set out with the IRT’s approval of the banking instrument or ILF instrument and will not be revis- ited as credits are drawn.48 Among the other site protection requirements are provisions for changes in condition, including adap- tive management. Long term management plans must also anticipate long term management needs and provide for adequate funding of activities that will be needed for successful operation of the site.49 Site standards may include anticipation of climate change impacts and activities that may be needed to address hydrology, vegetation, and other conditions. Site sustainability must be provided for, including minimization of active engineering features, and site selection to support long term function of the site.50 B. Habitat Conservation Plans and Mitigation Activities under the Endangered Species Act The Endangered Species Act of 1973 (ESA) provides the basis for mitigation activities to protect listed threatened and endangered species and their critical habitats. Two key provisions under the ESA drive habitat conservation activities by state trans- portation agencies. Section 7 requires consultation with the FWS or NOAA (depending on species) when a federal activity (including federal funding activities) may have a direct or indirect adverse impact on a listed species or critical habitat. And section 10 provides an opportunity for a non-federal actor to obtain an “incidental take permit” in connec- tion with activities that may otherwise result in a take of listed species, in exchange for certain affir- mative conservation activities. Mitigation may also occur under a CCA for species not yet listed.51 State 52 Lederman & Wachs, supra note 13. 53 Endangered Species Preservation Act of 1966, Pub. L. No. 89-669, 80 Stat. 926 (1966); Endangered Species Conservation Act of 1969, Pub. L. No. 91-135, 83 Stat. 275 (1969). 54 Tennessee Valley Authority v. Hill, 437 U.S. 153, 184, 98 S. Ct. 2279, 57 L. Ed. 2d 117 (1978). 55 Id. at 180. 56 Pub. L. No 93-205 § 2(b). 57 Id. at § 2(c). 58 50 C.F.R. § 402.01(b) (1986). 59 Pub. L. No. 93-205 § 4(a)(1) - (f)(1).

10 are 1,374 animal species and 906 plant species listed as threatened or endangered under the ESA.60 After the decision is made to list a species as threatened or endangered pursuant to the require- ments of ESA section 4, critical habitat must also, “to the maximum extent prudent and determinable… concurrent with issuing proposed and final listing rules, respectively,” be designated to support its conservation.61 Critical habitat is defined as “the specific areas within the geographical area occupied by the species, at the time it is listed…(I) essential to the conservation of the species and (II) which may require special management considerations or protection” and “specific areas outside the geographi- cal area occupied by the species at the time it is listed…upon a determination by the Secretary that such areas are essential for the conservation of the species.”62 The Services are directed by the ESA to make their critical habitat determinations based on the “best scientific data available,” after taking into consideration its potential impact on the economy, national security, and other relevant issues.63 The designation of critical habitat also carries a significant regulatory impact under the ESA and has been the subject of much litigation over the years. In early 2016, the Services revised the language in the regulations governing this process to clarify certain ambiguities.64 The Services released a final policy regarding their determination to exclude certain areas from critical habitat.65 Through what is known as a “discretionary 4(b)(2) exclusion analysis,” the Services may exclude land that would otherwise be considered critical habitat if the exclusion benefits outweigh the benefits of inclusion. A number of factors may be considered in this analysis and broad discretion is given to the Services in regard to how much weight is applied to any one factor in each situation.66 In particular, land already subject to a conservation plan, agreement, partnership, or other encumbrance may provide other benefits outside those of a critical habitat designation. This latter opportunity provides the basis for conservation activities (by state transpor- tation agencies and others) that can obviate the need for listing, designation of critical habitat, and other procedural factors that may affect the timing and cost of mitigation activities and planning and construction of projects. 2. Section 9—Prohibited Acts ESA section 9 outlines certain acts that are prohibited with respect to listed species. Although most of the prohibitions specifically refer to endan- gered species, the implementing regulations gener- ally apply the section 9 prohibitions uniformly to both threatened and endangered species.67 Addition- ally, the prohibited acts vary among animal and plant species. Pursuant to the ESA, it is unlawful for any person to import, export, take, possess, sell, deliver, carry, transport, ship, or engage in any commercial activities in respect to an endangered wildlife species.68 Similar prohibitions are asserted for endangered plants, but also include the removal or destruction of plants from federal or private land.69 The take provision has the broadest implications of all the prohibited acts under ESA. “Take” is defined by ESA to include: harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempts to engage in any such conduct.70 “Harass” is further defined as “intentional or negligent act or omission which creates the likelihood of injury to wildlife by annoying it to such an extent as to significantly disrupt normal behavioral patterns which include, but are not limited to, breeding, feeding, or sheltering” and harm denotes an “act which actually kills or injures wildlife” or which may cause “significant habitat modification or degradation where it actually kills or injures wild- life by significantly impairing essential behavioral patterns, including breeding, feeding or sheltering.”71 3. Section 7—Conservation and Consultation Requirements ESA section 7 imposes duties on federal agencies with respect to the conservation of listed and proposed species. First, it places an affirmative duty on all federal agencies to “utilize their authorities in furtherance of [the ESA] by carrying out programs for the conserva- tion of [listed species].”72 This will typically take the form of partnerships or a Memorandum of Under- standing with the Services to implement management 60 U.S. Fish & Wildlife Service, Environmental Conserva- tion Online System: Species Reports, available at http://ecos. fws.gov/ecp0/ (last visited Nov. 18, 2016). 61 50 C.F.R. § 424.12. 62 Pub. L. No. 93-205 § 3(5)(A)(i)-(ii). 63 Id. § 4(a)(3)(b). 64 Listing Endangered and Threatened Species and Des- ignating Critical Habitat; Implementing Changes to the Regulations for Designating Critical Habitat, 81 Fed. Reg. 7414 (Feb. 11, 2016); See also 50 C.F.R. § 424.01, .02, .12. 65 Policy Regarding Implementation of Section 4(B)(2) of the Endangered Species Act, 81 Fed. Reg. 7226, 7228 (Feb. 11, 2016). 66 Id. at 7227. 67 50 C.F.R. § 17.31 (a). 68 Pub. L. No. 93-205 § 9(a)(1). 69 Id. § 9(a)(2). 70 Id. § 3(19). 71 50 C.F.R. §17.3. 72 Pub. L. No. 93-205 § 7(a)(1).

11 or recovery plans or conservation agreements concern- ing listed species.73 It is preferable to enter into this type of relationship with the Services as opposed to addressing conflicts after they arise, but the extent of this responsibility has been shaped by case law over the years. While agencies are obligated to take some action toward the conservation of listed species, it has generally been held to be a minimal requirement, with agencies being granted wide discretion in how they exercise their authority in this regard.74 Second, all federal agencies are required to ensure their actions will “not jeopardize” the continued survival of any listed species or result in the destruc- tion or adverse modification of critical habitat.75 This section is triggered any time a prospective action “authorized, funded, or carried out, in whole or in part, by Federal agencies” may have a direct or indirect adverse impact on any listed species or crit- ical habitat.76 Potentially qualifying actions include, but are not limited to: • actions intended to conserve listed species or their habitat; • the promulgation of regulations; • the granting of licenses, contracts, leases, ease- ments, rights-of-way, permits, or grants-in-aid; or • actions directly or indirectly causing modifica- tion to the land, water, or air.77 For all such actions, agencies are required to consult with the Services to avoid any ESA violations.78 It is important to note that the acting agency is ultimately responsible for remedying any adverse impacts to listed species or critical habitat.79 The Services play the critical advisory role in assisting other agencies in the process of complying with the ESA.80 The definition of “destruction or adverse modifica- tion” of critical habitat is an important term in the ESA and has been modified over the years. A recent amendment revised the definition to mean, “a direct or indirect alteration that appreciably diminishes the value of critical habitat for the conservation of a listed species. Such alterations may include, but are not limited to, those that alter the physical or biological features essential to the conservation of a species or that preclude or significantly delay development.”81 Informal Consultation An agency’s consultation with the Services may begin as either an informal or formal process. An infor- mal consultation is defined as “an optional process that includes all discussions and correspondence between the Services and a Federal agency or designated non- Federal representative, prior to formal consultation, to determine whether a proposed Federal action may affect listed species or critical habitat.”82 In most situa- tions, an informal consultation is recommended and sufficient to discover and resolve potential ESA viola- tions. Informal consultations allow agencies, or a desig- nated non-federal representative, to: • clarify whether and what listed, proposed, and candidate species or designated or proposed criti- cal habitats may be in the action area; • determine what effect the action may have on these species or critical habitats; • explore ways to modify the action to reduce or remove adverse effects to the species or critical habitats; • determine the need to enter into formal con- sultation for listed species or designated critical habitats, or conference for proposed species or pro- posed critical habitats; and • explore the design or modification of an action to benefit the species.83 If adverse impacts are not likely to occur, or the proposed action is modified to avoid adverse impacts, the consultation process concludes.84 In the alterna- tive, if adverse impacts are likely, a biological assess- ment must be conducted to further evaluate the potential effects and determine if a formal consulta- tion is necessary.85 Upon request, the Services will provide agencies with information regarding the presence of any 81 Management of Non-Federal Oil and Gas Rights, 81 Fed. Reg. 7212 (Feb. 11, 2016). Courts had previously found the prior definition to be invalid or inconsistent with the conservation goals of ESA, and the revision better reflects the standard that conservation includes more than mere survival of a species. Sierra Club v. U.S. Fish & Wildlife Ser- vice, 245 F.3d 434 (5th Cir. 2001); Gifford Pinchot Task Force v. U.S. Fish & Wildlife Service, 378 F.3d 1059 (9th Cir. 2004). 82 50 C.F.R. § 402.13; see also Consultation Handbook, supra note 73, at xv. 83 Consultation Handbook, supra note 73, at 3-1. 84 50 C.F.R. § 402.13. 85 Pub. L. No. 93-205 § 7(c)(1). 73 U.S. fish & WilDlife seRvice & national MaRine fish- eRies seRvice, consUltation hanDBooK: pRoceDURes foR conDUcting consUltation anD confeRence activities UnDeR section 7 of the enDangeReD species act 1-1 (1998) [hereinafter Consultation Handbook], available at https:// www.fws.gov/endangered/esa-library/pdf/esa_section7_ handbook.pdf. 74 See Pyramid Lake Paiute Tribe of Indians v. Dep’t of the Navy 898 F.2d 1416 (9th Cir. 1990); Sierra Club v. Glickman, 156 F.3d 606 (5th Cir. 1998). 75 Pub. L. No. 93-205 § 7(a)(2). 76 50 C.F.R. § 402.02. (Definition of “Action”) 77 Id. § 402.02. (Definition of “Effects of Action”) 78 Pub. L. No. 93-205 § 7(a)(2). 79 Interagency Cooperation-Endangered Species Act of 1973, as amended: Final Rule, 51 Fed. Reg. 19,926, 19,949 (June 3, 1986). 80 Id. at 19,950.

12 listed species or critical habitat in the action area.86 The action agency may also present a preliminary list of species and critical habitat identified in the action area for the Services to confirm.87 The Services have 90 days to respond, using the best available science and commercial data, by confirming, revising, or providing a list of species and critical habitats to the acting agency.88 Thereafter, the action agency must conduct the biological assessment within 180 days or within a mutual agreed upon timeframe.89 This is also required for any federal action that involves “major construction activities,” such as building roads or water resource development projects, and prior to any permanent exemptions granted from ESA section 7(a) (2).90 Biological assessments vary based on the nature of the action and its expected impact, but may include: • results of an on-site inspection of the area affected by the action to determine if listed or pro- posed species are present or occur seasonally; • views of recognized experts on the species at issue; • review of the literature and other information; • analysis of the effects of the action on the species and habitat, including consideration of cumulative effects, and the results of any related studies; and • analysis of alternate actions considered by the federal agency for the proposed action.91 Formal Consultation A formal consultation must occur if adverse impacts from a proposed federal action are likely or if deemed to be necessary after an informal consul- tation and preparation of a biological assessment.92 A written initiation of a formal consultation is required of the action agency. It must describe: • the action to be considered; • the specific area that may be affected by the action; • any listed species or critical habitat that may be affected by the action; • the manner in which the action may affect any listed species or critical habitat and an analysis of any cumulative effects; • relevant reports, including any environmental impact statement, environmental assessment, or biological assessment prepared; and • any other relevant available information on the action, the affected listed species, or critical habitat.93 After a formal consultation has been initiated, the ESA prohibits agencies from making “any irrevers- ible or irretrievable commitment of resources with respect to the agency action” which may prevent reasonable and prudent alternative actions.94 During the formal consultation, the Services will review all the information available or provided by the acting agency to evaluate the current status of the listed species and critical habitat and both the direct and cumulative impacts of the action.95 Unless an exten- sion has been granted, the formal consultation will typically conclude within 90 days of its initiation, at which time the Services have an additional 45 days to issue a biological opinion on the proposed action.96 Biological Opinions The biological opinion is the product of a formal consultation and will outline the Services’ finding of “jeopardy” or “no jeopardy” in regards to the concerned listed species or critical habitat.97 It will include a summary of the information upon which the opinion is based, a description of the effects on listed species or critical habitat, and the determina- tion by the Services on whether or not the action is likely to jeopardize the continued existence of the listed species or result in the destruction or adverse modification of crucial habitat.98 If a “jeopardy” opin- ion is issued by the Services, it will also include reasonable and prudent alternatives based on “the best scientific and commercial data available,” or an explanation of why alternatives are not available for the particular action.99 If relevant, a “no jeopardy” opinion may also include an incidental take statement for actions that will result in some level of a taking or adverse modification or destruction of critical habitat.100 Similar to the exemptions provided by section 10 (discussed below), the Services may grant federal agencies an exception from the prohibited acts listed in section 9, under the condition that the action, or proposed reasonable and prudent alternative, and the incidental take will not result in a section 7 violation. The incidental take statement will include details about the impact of the incidental take, spec- ify reasonable and prudent measures to minimize the impact, and set forth conditions of the “permit” that acting agency must comply with.101 86 50 C.F.R. § 402.12(c). 87 Id. 88 Id. § 402.12(d). 89 Pub. L. No. 93-205 § 7(c)(1). 90 50 C.F.R. § 402.12(b). 91 Id. § 402.12(f). 92 Id. § 402.14 (a). 93 Id. § 402.14(c). 94 Pub. L. No. 93-205 §7(d). 95 50 C.F.R. § 402.14 (g)(1)-(3). 96 Id. § 402.14 (e); see also Consultation Handbook, supra note 73, at 4-6. 97 50 C.F.R. § 402.14 (h) (3). 98 Id. § 402.14 (h)(1)-(3). 99 Id. 100 Pub. L. No. 93-205 § 7(b)(4); 50 C.F.R § 402.14(i). 101 50 C.F.R § 402.14(i)(1).

13 After a biological opinion has been issued, the consultation process concludes and the acting agency must determine “whether and in what manner to proceed with the action,” considering its obligation under section 7 and the recommendations provided in the biological opinion.102 The consultation process and its outcomes drive the preparation of conservation plans and mitigation activities for transportation projects that are subject to section 7. Many state transportation agency proj- ects fall under section 7 because of the extent of federal funding (the “federal nexus”). Also, where Federal Highway Administration (FHWA) has dele- gated its ESA functions to a state transportation agency, projects are evaluated under section 7.103 In the context of section 7 consultation, the FWS has recognized the use of “recovery crediting systems” as ways for federal agencies to offset harm to listed species and advance their recovery by activ- ities on non-federal lands. In a 2008 guidance docu- ment the FWS explained, “In a recovery crediting system (RCS), the action agency would present cred- its as part of its project description. A pledge repre- sented by a credit must be a legally binding commitment such as a contract with a private land- owner.”104 Under the guidance, the combined effects of the adverse and beneficial actions “must provide a net benefit to the recovery of the species.”105 If a “jeopardy” opinion is issued, the action agency has the option to apply for an exemption within 90 days, a very rarely invoked process.106 The agency must submit a writing to the Endangered Species Committee that includes a description of consulta- tion process and reasons for why the action cannot be altered or modified to avoid a section 7(2) violation.107 The committee will make a decision within 30 days and only grant the exemption if it determines that there are no reasonable and prudent alternatives; the benefits of the action clearly outweigh alternatives and are in the public interest; the action is of regional or national significance; and neither the applicant nor the federal agency concerned made any prohib- ited irreversible or irretrievable commitments of resources.108 This exemption must include reasonable mitigation and enhancement measures necessary and appropriate to minimize the adverse effects on the listed species or critical habitat.109 Reinitiation of a formal consultation may be trig- gered for an action where “discretionary federal involvement or control has been retained or is authorized by law”110 if one of the following occurs: • the amount or extent of taking specified in the incidental take statement is exceeded; • new information reveals effects of the action that may affect listed species or critical habitat in a manner or to an extent not previously considered; • the identified action is subsequently modified in a manner that causes an effect to the listed species or critical habitat that was not considered in the biological opinion; or new species are listed or critical habitat des- ignated that may be affected by the identified action. 4. Section 10—Exemptions and Incidental Take Permits Changes to the ESA were enacted in 1982 to provide an avenue for non-federal projects to move forward with appropriate mitigation and conserva- tion activities.112 The amendments were based on experience with development in the San Bruno Mountains of California that would have affected endangered butterflies.113 In order to proceed with development, the first HCP was drafted and became a model for the 1982 ESA amendments.114 The permitting system that subsequently emerged under ESA section 10 allows non-federal or private landowners to apply for exemption from ESA section 9 prohibitions and, under certain circumstances, to receive economic and regulatory assurances.115 Permits may be issued for scientific purposes or for actions that aid in the “propagation or survival” of a listed species.116 Under this provision, “enhancement of survival” permits may be issued, with Safe Harbor Agreements (SHAs) and Candidate Conservation Agreements with Assurances (CCAAs) authorizing ESA section 9 violations that might occur in connec- tion with the conservation measures implemented through these agreements.117 Under these agreements, 102 Id. § 402.15. 103 Lederman & Wachs, supra note 13. 104 Endangered and Threatened Wildlife and Plants; Recovery Crediting Guidance, 73 Fed. Reg. 44,761, 44,768 (July 31, 2008). 105 Id. 106 Pub. L. No. 93-205 § 7(g). 107 Id. § 7(f). 108 Id. § 7(h). 109 Id. § 7(h)(1)(B). 110 50 C.F.R. § 402.16. 111 Id. 112 Al Donner, Where it all Began—San Bruno Moun- tain, enDangeReD species BUlletin (Fall 2010), available at https://www.fws.gov/pollinators/pdfs/fall2010-p26.pdf. 113 Friends of Endangered Species v. Jantzen, 760 F.2d 976 (9th Cir. 1985). 114 aleJanDRo e. caMacho. elizaBeth M. tayloR, & Melissa l. Kelly, lessons fRoM aRea-WiDe, MUlti-agency haBitat conseRvation plans in califoRnia (University of California, Irvine, School of Law, Center for Land, Environ- ment, & Natural Resources, 2016) [hereinafter Camacho]. 115 Endangered Species Act Amendments of 1982, Pub. L. No. 97-304, 96 Stat. 1411. 116 Pub. L. No. 93-205 § 10 (a)(1)(A). 117 Safe Harbor Agreements and Candidate Conserva- tion Agreements with Assurances, 64 Fed. Reg. 32,706; 50 C.F.R. §§ 17.22(c)-(d) and 32(c)-(d).

14 non-federal landowners voluntarily undertake conser- vation measures in exchange for assurances that no further land-use restrictions or regulation will be imposed beyond what is contained in the original agreement. SHAs are initiated by non-federal parties to voluntarily enhance their land for the benefit of listed species.118 CCAAs are similar except that they must benefit a candidate species or critical habitat that has been identified for possible future listing. Participants in a CCAA receive an enhancement of survival permit that protects the permittee in the event that activi- ties covered by the permit subsequently result in “take” of the species should it subsequently be listed.119 In contrast, Candidate Conservation Agree- ments (CCAs) provide no assurances in limiting future liability or regulation of land and have primarily been used by federal agencies to assist the Services in protecting proposed or candidate species to avoiding future listings.120 HCPs serve as the major conservation/mitigation approach used for listed species by non-federal actors who are not covered by the section 7 duty to consult but are subject to the section 9 take provisions. Under the 1982 amendments, an exception may be granted from the take prohibition if the taking is “incidental to, and not the purpose of, the carrying out of an otherwise lawful activity.”121 A requisite for an inci- dental take permit (ITP) is the preparation of an HCP, which must include details on the impacts that will likely occur, steps to be taken to minimize and/or mitigate the impacts, funding sources, and possible alternative actions.122 ITP applicants must show that the taking will be incidental, impacts will be mini- mized and mitigated to the maximum extent possi- ble, the applicant will ensure adequate funding for the plan, the taking will not reduce the survival or recovery of a listed species in the wild, and that other measures required by the Secretary will be met.123 The Services later implemented a “No Surprises” rule to provide ITP applicants and landowners with long-term assurances regarding the future regulation of their property due to “unforeseen circumstances” arising in connection with the HCP.124 Although HCPs must contain flexibility, the rule provides that no significant additional mitigation requirements will be imposed beyond what is already contained in the HCP. Procedures and Requirements for HCPs The Habitat Conservation Planning and Incidental Take Permit Processing Handbook (HCP Handbook) was jointly released by the Services in 1996.125 The HCP Handbook was developed to assist the Services in administering the ITP program by: ensuring that the goals and intent of the conservation planning process under the Endangered Species Act are realized; estab- lishing clear standards that ensure consistent imple- mentation of the section 10 program nationwide; and ensuring that FWS and NMFS offices retain the flexi- bility needed to respond to specific local and regional conditions and a wide array of circumstances.126 The Habitat Conservation Planning Handbook Addendum,127 also known as the “Five-Point Policy,” provided updates and guidance in five key areas for both existing and developing HCPs. 1. Biological Goals and Objectives: Biological goals and objectives have always been considered an implied component of the HPC development process, and the addendum further emphasized its impor- tance by making it an explicit requirement in future HCPs. Clearly defined goals and objectives ensure communication among the permit applicants, federal agencies, and the scientific community. Biological 118 U.S. Fish & Wildlife Service, For Landowners – Safe Harbor Agreements, https://www.fws.gov/endangered/ landowners/safe-harbor-agreements.html (last updated on Aug. 18, 2016). 119 U.S. Fish & Wildlife Service, Candidate Conservation Agreements (March 2011), https://www.fws.gov/endangered/ esa-library/pdf/CCAs.pdf; Candidate Conservation Agree- ments with Assurances were defined by rule and policy, Safe Harbor Agreements and Candidate Conservation Agree- ments with Assurances, 64 Fed. Reg. 32,706 (June 17, 1999); Announcement of Final Policy for Candidate Conservation Agreements with Assurances, 64 Fed. Reg. 32,726 (June 17, 1999), and the rule was revised in 2004; Safe Harbor Agree- ments and Candidate Conservation Agreements with Assurances; Revisions to the Regulations, 69 Fed. Reg. 24,084 (May 3, 2004). Revisions to both the rule and the policy were proposed and finalized in 2016, Candidate Con- servation Agreements with Assurance Policies, 81 Fed. Reg. 95,164 (December 27, 2016). The new rule and policy require a “net conservation benefit” to the covered species; however, the effective dates of both the rule and policy were deferred pending internal review, Candidate Conservation Agree- ments with Assurances Policy (announcement of revised policy; delay of effective date), 82 Fed. Reg. 8540 (Jan. 26, 2017). Although the deferral ran out March 21, 2017, it is very likely that the revised rule and policy will be reconsid- ered in a comprehensive review of mitigation policies as dis- cussed below in the Section II.B.6. 120 Using Existing Tools to Expand Cooperative Con- servation for Candidate Species Across Federal and Non- Federal Lands (Sept. 2008), available at https://www.fws. gov/endangered/esa-library/pdf/CCA-CCAA%20%20 final%20guidance%20signed%208Sept08.PDF 121 Pub. L. No. 93-205 § 10 (a)(1)(B). 122 Id. § 10(a)(2)(A). 123 Id. § 10(a)(2)(B). 124 Habitat Conservation Plan Assurances Rule, 63 Fed. Reg. 8859 (Feb. 23, 1998). 125 U.S. DepaRtMent of the inteRioR & U.s. DepaRtMent of coMMeRce, haBitat conseRvation planning anD inciDen- tal taKe peRMit pRocessing hanDBooK (1996), http://www. nmfs.noaa.gov/pr/pdfs/laws/hcp_handbook.pdf. 126 Id. 127 HCP Handbook Addendum, 65 Fed. Reg. 35,242 (June 1, 2000).

15 goals establish the guiding principle for the conser- vation program of an HCP. Biological objectives can be used in more complex situations to further break- down the goals into manageable steps. Both may be gradually refined as the HCP is implemented. 2. Adaptive Management: The addendum encour- ages the use of adaptive management to address uncertainty in an HCP. Adaptive management is defined as “a method for examining alternative strate- gies for meeting measurable biological goals and objec- tives, and then, if necessary, adjusting future conservation management actions according to what is learned.”128 This planning strategy entails identifying uncertainty and listing possible adjustments and circumstances that could trigger changes to an HCP. It is required when significant biological uncertainty exists for a listed species and should incorporate a mechanism to respond to new or changing information. An adaptive management strategy should be able to: • identify the uncertainty and the questions that need to be addressed to resolve the uncertainty; • develop alternative strategies and determine which experimental strategies to implement; • integrate a monitoring program that is able to detect the necessary information for strategy evaluation; and • incorporate feedback loops that link implemen- tation and monitoring to a decision-making process (which may be similar to a dispute-resolution process) that result in appropriate changes in management. 3. Monitoring: No new monitoring requirements were imposed by the addendum. Instead it provided further guidance and clarification. Monitoring of HCPs must be able to: evaluate compliance with terms of the permit, HCP, or implementing agree- ment; determine if biological goals and objectives are being met; and provide feedback for an adaptive management strategy. The scope of monitoring should be comparable to the extent of the impacts and conser- vation program implemented by the HCP. Both the Services and permittees have a responsibility in over- seeing the implementation of an HCP: Services are responsible for ensuring compliance with the agreed upon terms, whereas the permittee is generally responsible for monitoring the effects and effective- ness of the mitigation. Typically, monitoring reports must be submitted annually to the Services and should include a description of the effects on the species or habitat, location of sampling sites, methods for data collection and variables measured, and details about the data analysis and progression towards achieving goals and objectives. Permittees are required to provide adequate funding mechanisms to support monitoring prior to approval of the HCP. 4. Permit Duration: After receiving a permit application, the Services consider numerous factors when making a determination on permit duration.129 The duration and nature of the impacts, such as if it will be a one-time action or a recurring activity, will be a significant factor in this decision. Also consid- ered is an analysis of the HCP implementation timeframe and anticipated achievement of benefits. The HCP’s ability to adequately address biological uncertainty and incorporate adaptive management techniques also affects the permit duration. HCPs that can show a significant reduction of risk through these strategies may justify a longer permit term. 5. Public Participation: The ESA and its imple- menting regulations imposed a 30-day public comment period for HCP applications.130 The adden- dum extended this requirement to 60 days for most HCP applications and further expanded it to 90 days for large-scale, regional, or extremely complex HCPs. Exceptions are granted for low-effect HCPs and indi- vidual permits under a programmatic HCP, which are still held to the 30-day minimum. The Services publicly post HCP applications in the Federal Regis- ter for public comment and in some cases may announce applications online or in local newspapers. In June 2016, the Services released proposed revi- sions to the HCP Handbook.131 The entire handbook was reorganized to better reflect the step-by-step progression of ITP issuance and HCP development, and many of the revisions attempt to streamline these processes. It introduces the new concept of “start slow to go fast” to emphasize the benefit of pre-planning prior to the development of a full HCP, particularly with respect to complex or landscape-scale HCPs. Other significant revisions or updates include: • Clarification of the concept of “maximum extent possible” • Ensuring consistency with other related poli- cies currently being revised or updated. • Updating and further clarification of the permit duration policy. • Guidance on complying with section 106 of the National Historic Preservation Act. • Guidance on addressing climate change. • Clarification on the difference between adaptive management and foreseen/unforeseen circumstances. 5. Conservation Banking Conservation banking is the practice of restoring, enhancing, or preserving habitat in perpetuity to 128 Id. at 35,245. 129 E.g., 50 C.F.R. § 17.32; 50 C.R.F. § 222.307 (e). 130 Pub. L. No. 93-205 § 10(c); 50 C.F.R. § 17.32. 131 Notice of Availability and Request for Public Com- ments on the Joint U.S. Fish & Wildlife Service and National Marine Fisheries Service Habitat Conservation Handbook, 81 Fed. Reg. 41,986 (June 28, 2016).

16 compensate for adverse impacts to listed species or their habitats. The concept was first formally intro- duced at the state level in California, which released its policy on conservation banking in conjunction with the first official conservation bank, the Carls- bad Highlands Conservation Bank.132 The FWS soon recognized the value of conservation banking, and developed guidance documents to allow the recogni- tion of conservation banks to meet section 7 and section 10 mitigation commitments. The first conservation bank was developed in conjunction with a regional planning effort in Cali- fornia. In response to public concern over rapid development and habitat loss, the state legislature passed the Natural Community Conservation Plan- ning Act of 1991 (NCCPA),133 which was revised in 2003.134 The NCCPA implemented a large-scale regional planning process to protect entire biological communities, as opposed to focusing on a single species.135 Similar to HCPs, but on a larger scale, the development of Natural Community Conservation Plans (NCCPs) are required under NCCPA in order to authorize incidental take permits under Califor- nia’s Endangered Species Act.136 While California continues to lead the country in the number of conservation banks established, other states have made progress in this regard. A total of 142 conservation banks have been approved by the FWS in 14 states (Arizona, California, Colorado, Florida, Kansas, Maryland, Mississippi, Oklahoma, Oregon, South Carolina, Texas, Utah, Washington, and Wyoming) and Saipan.137 The Department of the Inte- rior reviewed the sponsors of all conservation banks in a 2013 study, and found that private commercial and nonprofit sponsors accounted for 75 percent of all extant banks, while five percent were public commer- cial banks. State transportation agencies could purchase credits from these. Ten percent were public- private banks (which could include state agency cosponsors), ten percent were single-client banks (some of which were state transportation agency banks).138 Conservation banking is continuing to increase in popularity and usage,139 and as described below, is subject to an evolving set of norms, practices, and regulatory standards. Federal Guidance on Conservation Banking The first federal policy on conservation banking was issued in the 2003 FWS memorandum, Guid- ance for the Establishment, Use, and Operation of Conservation Banks. This document was intended to guide FWS and applicants through the conservation bank development, management, and monitoring processes.140 It incorporates lessons learned from the prior development and monitoring of conservation banks and state policies with the goals of encourag- ing future consistency, compliance, and success in conserving threatened or endangered species.141 Generally, conservation banks are used to mitigate for activities regulated under the ESA section 7 and section 10, but they can also be used to satisfy state and local programs.142 They are created through the acquisition or protection of existing habitat, restora- tion or enhancement of disturbed habitat, creation of new habitat, or the management of habitat for specific biological characteristics.143 After the value of the land is calculated, a set number of credits are gener- ated to be sold or traded to offset impacts occurring within the service area of the conservation bank. Once a bank releases credits they may only be used once, however, the same credit could satisfy more than one authorizing program for the same activity. To establish a conservation bank, a legally bind- ing agreement is required between the property owner and the participating regulatory agencies. The conservation bank agreement includes specific information on the property, management activities, funding sources, and long-term stewardship of the bank. It also governs the responsibilities and dura- tion of involvement for all concerned parties. Although each conservation bank agreement is unique to the specific property and species covered and some may require additional information, the main components of a bank agreement include: • Conservation bank name, property location, legal description, and GPS coordinates. 132 Consultation Handbook, supra note 73, at 9. 133 cal. fish anD gaMe coDe §§ 2800-2840. 134 paUl cylinDeR et al., UnDeRstanDing the haBitat consecRation planning pRocess in califoRnia: a gUiDeBooK foR pRoJect anD Regional conseRvation planning, 3, (2004), http://www.ca-ilg.org/sites/main/files/file-attachments/ resources__HCP_book_2004_final.pdf. 135 See cal. fish anD gaMe coDe, § 2801 (2003). 136 cal. fish anD gaMe coDe §§ 2050-2069. 137 Regulatory In-lieu Fee and Bank Information Track- ing System (RIBITS) (Reports on approved conservation banks), available at https://ribits.usace.army.mil/ribits_ apex/f?p=107:61:8565811771389 (last visited Dec 12, 2016). 138 U.S. DepaRtMent of inteRioR, office of policy analy- sis, conseRvation BanKing oveRvieW anD sUggesteD aReas foR fUtURe analysis (Sept. 2013) [hereinafter Interior Sept. 2013b]. 139 U.S. DepaRtMent of inteRioR, office of policy analysis, ResUlts fRoM a sURvey of conseRvation BanKing sponsoRs anD ManageRs (Sept. 2016) [hereinafter Interior Sept. 2016]. 140 FWS Guidance for the Establishment, Use, and Operation of Conservation Banks (May 8, 2003), 68 Fed. Reg. 24,753 (May 8, 2003) [hereinafter Guidance]. 141 eaRthscan, conseRvation & BioDiveRsity BanKing: a gUiDe to setting Up anD RUnning BioDiveRsity cReDit tRaDing systeMs, (Ricardo Bayon, Jessica Fox, & Nathaniel Carroll eds., 2008) [hereinafter Carroll]. 142 Guidance, supra note 140, at 8. 143 Id. at 16-17.

17 • A map of the property on a minimum scale of seven minutes, a U.S. Geological Survey quad map or finer scale if available. • Name of the person(s)/organization(s) to hold fee title to the conservation bank. • Name of the person(s)/organization(s) to hold conservation easement. • Name of the person(s)/organization(s) to hold those who will have management responsibilities and timeframe of management. • A preliminary title report on any pre-existing easements or encumbrances on the property, in- cluding any mineral, water, hunting, or prescrip- tive rights associated with the property. • A list of compatible activities or land uses pos- sible on the property, such as public access. • A description of the biological value of the prop- erty, including information on the types of habitats and species present on the land. • The number and types of credits to be gener- ated by the conservation bank and the methodol- ogy used in this determination. • Accounting system to track credits, funding, and reporting requirements. • A description of the conservation bank’s ser- vice area, to be determined in conjunction with the Services. • The performance standards that must be achieved. • If the conservation bank will be implemented in phases, a description and delineation of each phase is required, in addition to an explanation for the use of phases and the process for terminating the bank prior to implementation of all the phases. • Explanation of compliance with any applicable state and federal laws. • Results of Phase I Hazardous Materials sur- vey for the property and any plans to remove trash, structures, or other items that reduce the conser- vation value of the property. • Provisions allowing the regulatory agency to enter the property for inspections, assurances, or other duties. • Contingency plans and a dispute resolution process to be used if the conservation bank owner/ manager fails to comply with the provisions out- lined in the agreement.144 A management plan is also a required element in a conservation bank agreement.145 It provides a more in-depth description of the property and its management requirements. The bank manager is responsible for meeting the obligations outlined in the plan, which should be updated to reflect any changes as they occur. At a minimum, a manage- ment plan should contain details about the follow- ing information: • Property description, biological resources, cul- tural/historical features, surrounding land uses, and proximity to open spaces or conservation lands. • Identification of biological goals and objectives and how to implement them. • Authorized and prohibited activities on the property. • Management needs of the property, including control of public access/use, restoration and enhance- ment of habitats, and maintenance of facilities. • Budget and necessary endowment funds. • Monitoring schedule and reporting requirements. • Adaptive management practices, decision trees, or other future management structures.146 This guidance document has served as the template for the 144 federally recognized conserva- tion banks to date, but it provides far less detail and certainty of requirements than the comparable Compensatory Mitigation Rule does for wetland and aquatic impacts. The Department of the Interior conducted a detailed evaluation of existing conser- vation banks in 2013 to identify opportunities and needs for regularizing conservation banking.147 6. Recent Developments in Habitat Mitigation and Conservation Banking A number of recent developments substantially affect habitat mitigation goals, the practice of compensatory mitigation for species and habitats, and the standards for conservation banking. However, updates and actions taken from 2013 through early 2017 are now in flux because of subse- quent actions as described below. Presidential Mitigation Memorandum (2015) On November 3, 2015, a Presidential Memoran- dum was released entitled Mitigating Impacts on Natural Resources from Development and Encourag- ing Related Private Investment.148 The Presidential Memorandum established as a policy that federal agencies and departments tasked with managing natural resources must “avoid and then minimize harmful effects to land, water, wildlife, and other 146 Id. 147 Interior Sept. 2013a, supra note 51; Interior Sept. 2013b, supra note 138; Interior Sept. 2016, supra note 139. 148 Presidential Memorandum: Mitigating Impacts on Natural Resources from Development and Encouraging Related Private Investment, available at https://www. whitehouse.gov/the-press-office/2015/11/03/mitigating- impacts-natural-resources-development-and-encouraging- related; 80 Fed. Reg. 68,743 (Nov. 3, 2015).144 Id. 145 Id. at 15.

18 ecological resources (natural resources) caused by land- or water-disturbing activities, and ensure that any remaining harmful effects are effectively addressed, consistent with existing mission and legal authorities.”149 It emphasized the adoption of clear and consistent policies, the use of landscape-scale plans to inform decision making, and the importance of private investment in natural resource restora- tion. It also encouraged federal agencies to incorpo- rate into their mitigation plans and approvals a “net benefit goal” or, at a minimum, no net loss of natural resources.150 It concluded with specific directives for certain agencies and departments to update or create their policies and guidelines to meet the goals set forth in the memorandum.151 Revised FWS Mitigation Policy (2016) In response to evolving conservation challenges and the 2015 Presidential Memorandum, FWS revised its 1981 Mitigation Policy in November 2016 following an extensive notice-and-comment process.152 The updated policy applies to actions under all authorities by which FWS can recommend or require mitigation, such as the Clean Water Act, the Fish and Wildlife Coordination Act, and NEPA, and it now expressly includes ESA-related mitiga- tion under its umbrella.153 The updated policy allows agencies and the public working with FWS to antici- pate recommendations and plan for mitigation requirements. It also provides for variations from the framework when appropriate to the action or natural resources involved.154 The policy sets forth several overarching mitigation principles: • Achieve a net conservation gain, or at a mini- mum, no net loss. • Observe the mitigation sequence (avoid, mini- mize, and then compensate for remaining impacts), but recognize that some situations may warrant deviations. • Avoid all impacts to high-value habitats. • Use a landscape approach to inform mitigation. • Ensure consistency and transparency in the mitigation process. • Use best available science to formulate and monitor mitigation. • Aim for long-lasting mitigation benefits that last at least as long as the impacts. • Ensure effective mitigation that is in place at the time of the impacts and additional to any other planned or foreseeable conservation benefits.155 The policy also outlines nine components of the mitigation framework.156 This framework provides the means by which FWS can assess the effects of an action, formulate appropriate mitigation measures, and implement the mitigation principles. • Integrating Mitigation with Conservation Planning: Miti- gation and conservation planning will be integrated when- ever possible to better protect biodiversity and the ecological function of habitats. Proactive mitigation planning, which is developed before an impacting action is proposed, should complement pre-existing conservation and land-use plans. Large-scale planning at the landscape level is particularly important when multiple impacts to the same resources are possible, and it will allow for the best mitigation opportuni- ties to be identified.157 • Collaboration and Coordination: FWS will collaborate and coordinate with action proponents and federal, state, local, and tribal conservation agencies or stakeholders in the mitigation process to conserve natural resources.158 • Assessment: FWS will consider the risk and uncertainty associated with both the predicted impacts of the action and the expected result of the mitigation measures. Action proponents should provide reasonable predictions about the environmental condition of the action and mitigation areas that includes comparisons to baseline conditions and cumu- lative impacts in a landscape context. Assessment method- ologies should consider future conditions and changes over time, incorporate new information as needed, and have equivalent metrics for both adverse and beneficial impacts.159 • Evaluation Species: FWS will identify one or more evalu- ation species (fish, wildlife, or plant resources within or relevant to the affected area) to provide analysis and develop mitigation measures for a proposed action. Selected evaluation species should represent the smallest selection necessary in preparation of biological opinions, permits, or other mitigation documents.160 • Habitat Valuation: Assessing the value of habitats based on their scarcity, suitability, and importance to conservation goals will allows FWS to prioritize locations when making determinations about avoiding, minimizing, and compen- sating for impacts.161 • Means and Measures: To achieve the policy goals, five types of mitigation are considered in this policy: (1) avoid; (2) minimize; (3) rectify; (4) reduce over time; and (5) compensate. In certain actions, such as permitting under the Clean Water Act, the third and fourth types of mitiga- tion are combined with minimization. Equivalent ecologi- cal, procedural, and administrative standards will be 149 Id. at § 1. 150 Id. at § 3(b). 151 Id. at § 4. 152 U.S. Fish & Wildlife Service Mitigation Policy, 81 Fed. Reg. 83,440 (Nov. 21, 2016) [hereinafter Mitigation Policy]. 153 Id. at § 2. 154 Id. at § 1. 155 Id. at § 4. 156 Id. at § 5. 157 Id. at § 5.1. 158 Id. at § 5.2. 159 Id. at § 5.3. 160 Id. at § 5.4. 161 Id. at § 5.5.

19 applied to all mechanisms of mitigation, regardless of who is implementing it or where it is located.162 • Recommendations: Mitigation recommendations will be developed by FWS in cooperation with the action propo- nent, based on best scientific information, and will be provided at the earliest stage practicable to allow for full consideration. Advance compensatory mitigation that is implemented prior to the impacts to resources is preferred. It is also preferred that the location of the compensatory mitigation be within existing conservation networks or landscape conservation plans.163 • Documentation: FWS analysis of a proposed action will be documented and provided to agencies and other action proponents at each stage of the planning process (early planning, effects assessment, and final recommendations). Documentation should be provided by FWS early enough to inform decision makers at each stage and be at a compara- ble level of scope and detail relevant to the severity of the potential impacts to resources.164 • Follow-up: To ensure implementation and effectiveness of mitigation, post-action monitoring studies and evaluations will be carried out or supported to the extent it is practica- ble and within the authority of FWS. Corrective action or assurance measures will be requested or initiated by FWS when necessary.165 Final ESA Compensatory Mitigation Policy (2016) and Interim Guidance (2017) In addition to updating its general mitigation policy, FWS also issued a final Endangered Species Act Compensatory Mitigation Policy [hereinafter Compensatory Mitigation Policy] on December 27, 2016, after notice and comment.166 The Compensa- tory Mitigation Policy establishes compensatory mitigation standards for threatened and endangered species and critical habitats, implements the land- scape-based mitigation principles established in the 2016 FWS Mitigation Policy, and clarifies previous guidance documents on mitigation mechanisms and conservation banking under the ESA.167 Three weeks later, the FWS issued its Interim Guidance on Imple- menting the Final Endangered Species Act Compen- satory Mitigation Policy, providing additional detail and procedures.168 The Compensatory Mitigation Policy’s stated goals are to provide greater clarity, to improve consistency and predictability of compensatory miti- gation actions, and to promote landscape-scale approaches to mitigation. Additionally, through programmatic approaches and planning, it seeks to achieve a “net conservation gain”, to reduce the cost of compensatory mitigation, and to improve regula- tory procedural efficiency.169 The preamble to the Policy states that it aims to encourage “strategic planning at the landscape level” as well as to set “standards that mitigation programs and projects must meet.”170 The Compensatory Mitigation Policy, as further elaborated by the FWS Interim Guidance, makes the FWS framework for conservation banking under the ESA much more like the frameworks for wetland mitigation banking and ILFs established by the Corps-EPA Compensatory Mitigation Rule under the Clean Water Act. The Compensatory Mitigation Policy sets forth nine compensatory mitigation standards: 1. Siting Sustainable Compensatory Mitigation: Mitigation should be located in areas identified in a landscape-scale conservation plan or mitigation strategy that will provide the greatest long-term benefits to affected resources.171 2. In-Kind for Species: While compensatory mitigation for adversely impact species must be in-kind, the habitat type does not necessarily need to be the same as the type affected. Depending upon the needs of the affected species, the best conservation outcome may be achieved by offsetting a different type of habitat for the affected species, such as in the varying needs of migratory species.172 162 Id. § 5.6. Compare mitigation under the NEPA regu- lations [Section II.B.7]. 163 Id. at § 5.7. 164 Id. at § 5.8. 165 Id. at § 5.9. 166 Endangered and Threatened Wildlife and Plants: Endangered Species Act Compensatory Mitigation Pol- icy, 81 Fed. Reg. 95,316 (Dec. 27, 2016). [hereinafter Com- pensatory Mitigation Policy]. See Endangered and Threatened Wildlife and Plants: Endangered Species Act Compensatory Mitigation Policy; Notice, 81 Fed. Reg. 61,032 (Sept. 2, 2016). 167 Compensatory Mitigation Policy § 1, § 3. The policy does not apply retroactively. It “clarifies” guidance given in the 2003 Conservation Banking Guidance and the 2008 Recovery Crediting Guidance, 81 Fed. Reg. 95,316. However, both of these influential guidance documents were expressly “replaced” just three weeks later by the FWS “Interim Guidance on Implementing the Final Endangered Species Act Compensatory Mitigation Policy (Jan. 17, 2017) [hereinafter Interim Guidance]. 168 Interim Guidance. The Interim Guidance was issued without its own notice and comment but was constructed in large part from detailed provisions that had been in the proposed Compensatory Mitigation Policy in September 2016 that were moved to the Interim Guidance when the final Compensatory Mitigation Policy was adopted. See Endangered and Threatened Wildlife and Plants: Endan- gered Species Act Compensatory Mitigation Policy; Notice, 81 Fed. Reg. 95,316, 95,319-95,320 (“We have removed these elements from this policy and will address them in the implementation guidance”). 169 Compensatory Mitigation Policy § 1. 170 See Endangered and Threatened Wildlife and Plants: Endangered Species Act Compensatory Mitigation Policy; Notice, 81 Fed. Reg. 95,316 (Dec. 27, 2016). This approach was expressly based on the 2015 Presidential Mitigation Memorandum and the 2013 Department of Interior mitigation policy. 171 Compensatory Mitigation Policy § 5.1. 172 Id. § 5.2.

20 3. Reliable and Consistent Metric: To the extent possible, the metrics used to calculate both conservation credits and debits must be consistent and reliable. Any deviations or uncertainties should be transparent, explained, and based on the best available science.173 4. Judicious Use of Additionality: The benefits of compensa- tory mitigation must be additional to those that would normally have occurred in the course of routine practices or mandates. A mitigation measure is considered “additional” if the “benefits of the measure improve upon the baseline conditions of the impacted resources and their values, services, and functions in a manner that is demonstrably new and would not have occurred without the compensa- tory mitigation measure.”174 5. Timing and Duration: The timing and duration of proj- ects are also important components to successful mitiga- tion. Conservation objects must be achieved in a reasonable timeframe and must at a minimum continue for the dura- tion of the impacts.175 6. Ensure Durability: As most mitigation measures must be maintained in perpetuity, adequate legal and financial protec- tion must be in place to ensure long-term viability. Long-term management needs and compatible activities or land uses allowed on the site must be carefully considered.176 7. Effective Conservation Outcomes and Accountability: Assessment of mitigation will ensure that conservation goals and objectives are being achieved.177 8. Encourage Collaboration: Landscape scale mitigation planning requires coordination at all levels of government with the affected community and stakeholders. FWS will solicit input at all stages of the mitigation process.178 9. Maintain Transparency and Predictability: The policy emphasizes the need to maintain transparency and regula- tory predictability for all parties involved in mitigation. Information such as mitigation instruments, plans, and other documents will be shared publicly and timely via RIBITS maintained by the Corps of Engineers, or other online systems available to the public.179 Compensatory mitigation mechanisms are divided into two categories: habitat-based and non- habitat-based programs or projects.180 Habitat- based mitigation includes restoration of damaged or degraded habitat, enhancement or preservation of existing habitat, establishment of new habitat, or any combination of these habitat protection measures. There are four potential habitat-based mechanisms available to applicants:181 • Permittee-Responsible Compensatory Mitigation • Conservation Bank Program • In-Lieu Fee Program • Habitat Credit Exchange Non-habitat-based mitigation consists of actions that are closely connected to conservation measures identified in species recovery plans, five-year reviews, or based on the best available science.182 Potential mitigation of this type may include the transfer or retirement of property rights (i.e., timber, mineral, or water), captive breeding or reintroduction of species to impacted areas; creation of wildlife corridors or underpasses, or the restriction of human access, land uses, or future development in certain areas. Credit stacking and bundling may be used to leverage conservation efforts generated from a single activity, but are limited under the policy. Stacking occurs when more than one credit type is generated on the same area of land.183 The Compen- satory Mitigation Policy makes it clear, however, that stacked credits can only be used to mitigate the impacts of one permitted action: [T]he stacked credits cannot be used to provide mitigation for more than one permitted impact action even if all the resources included in the stacked credit are not needed for that action. To do so would result in a net loss of resources in most cases because using a species credit separately from the functions and services that accompany its habitat, such as carbon sequestration or pollination services, would result in double counting (i.e., double dipping).184 Similarly, bundled credits (combined credits from a single mitigation site that are grouped into a single credit type, such as providing both stream mitigation and satisfaction of a habitat obligation) can only be used for a single permitted action. “A bundled credit may be used to compensate for all or a subset of the functions or services included in the credit type but may only be used once.”185 Tracking of projects is required to ensure compli- ance with operating instruments and performance criteria.186 The Compensatory Mitigation Policy outlines minimum requirements necessary to establish and operate a compensatory mitigation program under the ESA. However, the details for establishing such programs and projects are laid out in the Interim Guidance. The Interim Guidance expressly replaces both the 2003 Conservation Banking Guidance and 173 Id. § 5.3. 174 Id. § 5.4. 175 Id. § 5.5. 176 Id. § 5.6. 177 Id. § 5.7. 178 Id. § 5.8. 179 Id. § 5.9. 180 Id. §§ 7.1, 7.3. 181 Id. §§ 7.1.1-7.1.4. 182 Id. § 7.3. 183 Carroll, supra note 141. 184 Compensatory Mitigation Policy § 8.3. 185 Id. § 8.3, Appendix B. 186 Id. § 9.

21 the 2008 Recovery Crediting Guidance. Under the Interim Guidance: • All habitat-based mitigation projects “must be sited on ecologically appropriate habitat for the proposed covered species. Advance planning for mitigation projects will include the use of landscape-scale conservation plans and mitigation strategies where such plans exist.”187 • Habitat-based mitigation projects must be of sufficient size to “ensure the maintenance of ecological integrity in perpetuity” and will be determined case-by-case.188 • Mitigation project boundaries must include appropriate buffers against effects from adjacent lands.189 Developed areas should be excluded, and mineral split-estate lands acquired where possible to protect conservation values of the project.190 • The FWS will review each stage of mitigation planning when it involves only FWS-administered resources. However, if a mitigation program is intended to address impacts under other authorities or generates credits to be sold, the FWS will serve on an Interagency Mitigation Review Team, which may be the Interagency Review Team (IRT) created under the Clean Water Act Compensatory Mitigation Rule when the mitigation includes wetlands and waters of the United States.191 • Prospective mitigation sponsors must submit draft miti- gation proposals with required elements, followed by a complete mitigation proposal with information about the site, qualifications of the mitigation provider, objectives of the project, site selection considerations, baseline informa- tion, credit evaluation methods, a mitigation work plan, ownership arrangements and a long-term management strategy, title report, environmental risk assessment, and assurances of water rights.192 • For conservation banks, ILF programs, or habitat credit exchange193 programs the mitigation proposal must also include determination of need for the project, proposed service areas, and proposed types and number of conserva- tion credits to be generated.194 • A long-term management plan is required, along with short-term and long-term financial assurances, and a closure plan that describes at what point a mitigation proj- ect or program is closed and what responsibilities remain.195 • Compliance monitoring and reporting are required.196 If the Mitigation Policy, the Compensatory Miti- gation Policy, and the Interim Guidance, or any of them, are ultimately rescinded, the terms of the rescission should indicate whether the previous FWS Policies and Guidance documents from 1981, 2003, and 2008 are reinstated. Candidate Conservation Agreements with Assurances Revised Rule and Policy (2016) In December 2016, the FWS also updated its regu- lations and its policy that governs its approval of CCAAs: conservation agreements under which it provides assurances to applicants who undertake voluntary conservation actions for species that are eligible for listing as threatened or endangered but not yet listed.197 CCAAs provide assurances and a permit providing incidental take protection should the prop- erty owner’s agreed-upon conservation actions and routine property actions result in take of the covered species. These new amendments and revised policy differ from prior rules and policy by requiring a “net conservation benefit” to the covered species and defin- ing how such benefit will be determined.198 Policy Regarding Voluntary Prelisting Conservation Actions (2017). The FWS issued Director’s Order No. 218 on January 18, 2017, “effective immediately.” This Order provides that landowners can generate miti- gation credits for declining species that are not listed as threatened or endangered, if they partici- pate in a “qualifying State-administered species conservation program.” Unlike CCAAs, the new policy can be used by federal agencies as well as non-federal entities. It allows states to use federal funds to monitor species and the impacts of these voluntary conservation actions. If the species is later listed, the credits can be “redeemed to offset or miti- gate actions that are detrimental to a species,” and allows credits to be traded or sold to a third party for use. The Order is intended to incentivize voluntary conservation and implement well-crafted species conservation strategies, using a landscape approach and setting action priorities, site selection 197 50 C.F.R. §§ 17.22, 17.32. 198 Candidate Conservation Agreements with Assur- ances Policy, 81 Fed. Reg. 95,164 (Dec. 27, 2016). The effective dates were deferred until March 21, 2017. See Endan- gered and Threatened Wildlife and Plants; Revisions to the Regulations for Candidate Conservation Agreements with Assurances, 82 Fed. Reg. 8499, 8501, (Jan. 26, 2017) (Final Rule; delay of effective date) and Candidate Con- servation Agreements with Assurances Policy, 82 Fed. Reg. 8540 (Jan. 26, 2017) (Announcement of revised pol- icy; delay of effective date). Although the deferral ran out March 21, 2017, it is likely that these actions will be reviewed under Secretarial Order 3349. 187 Interim Guidance § 4.1. 188 Id. § 4.1.1. 189 Id. § 4.1.1.1. 190- Id. §§ 4.1.2, 4.1.3. 191 Id. § 5.1.2. 192 Id. § 5.2.2. 193 Habitat Credit Exchanges (HCEs) are a relatively new approach consisting of an “environmental market oper- ating as a clearinghouse” to match compensatory mitigation providers with permittees who need habitat or species con- servation credits. HCEs are subject to FWS approval and are required to meet all the same standards and elements as other forms of compensatory mitigation. Id. § 3.1. 194 Id. § 5.2.2. 195 Id. §§ 5.2.3.4.2, 5.2.3.6, 5.2.3.8. 196 Id. § 9.1, 9.2.

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TRB's National Cooperative Highway Research Program (NCHRP) Legal Research Digest 75: Legal Requirements for State Departments of Transportation Agency Participation in Conservation Plans describes Habitat Conservation Plans (HCPs) and their relation to wetland mitigation banking, regional planning, and the National Environmental Policy Act (NEPA).

Purchase and sale of wetland banks, habitat, and stream credits may be characterized as real property or personal property transactions. This digest covers mechanisms used in California, Wisconsin, and other states to set up, monitor, and maintain HCPs on private or public property through endowment funds and the use of conservation easements. It also includes recent updates to related federal regulations and policies.

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