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

Chapter: III. OPERATIONAL ISSUES FOR CONSERVATION PLANNING/BANKING

« Previous: II. ADVANCE MITIGATION FOR WETLAND AND HABITAT IMPACTS LEGAL FRAMEWORK
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Suggested Citation:"III. OPERATIONAL ISSUES FOR CONSERVATION PLANNING/BANKING." 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:"III. OPERATIONAL ISSUES FOR CONSERVATION PLANNING/BANKING." 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:"III. OPERATIONAL ISSUES FOR CONSERVATION PLANNING/BANKING." 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.
×
Page 24
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Suggested Citation:"III. OPERATIONAL ISSUES FOR CONSERVATION PLANNING/BANKING." 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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22 principles, measures and metrics, and credit release schedules.199 The FWS estimates that up to ten states may choose to participate in the first three years of the program; however, the Order itself expires by its own terms in 18 months unless amended, superseded, or revoked. Those previously enrolled in CCAA projects will be able to market any excess conservation improvements to others need- ing to offset unavoidable impacts. Presidential Executive Order on Promoting Energy Independence and Economic Growth (2017) Executive Order 13783,200 signed on March 28, 2017, expressly revoked the Presidential Memoran- dum on Mitigating Impacts on Natural Resources from Development and Encouraging Related Private Investment.201 The Executive Order further directed all agencies to “identify existing agency actions relat- ing to or arising from” the revoked Presidential Memo- randum, and to “as soon as practicable, suspend, revise, or rescind, or publish for notice and comment proposed rules suspending, revising, or rescinding any such actions” as appropriate and consistent with the policies set forth in the new Executive Order.202 On March 29, 2017, Interior Secretarial Order No. 3349 was issued carrying out these directives and launching reviews and rescissions.203 The Order revoked Secretarial Order No. 3330, issued in Octo- ber 2013. Secretarial Order 3330 had established a comprehensive “landscape-scale approach” to habi- tat mitigation, and had directed updates of mitiga- tion policies by Interior Department agencies including the U.S. Fish & Wildlife Service.204 Secre- tarial Order 3349 directed that all Department of Interior actions taken to implement the prior approach must be “reviewed for possible reconsider- ation, modification, or rescission, as appropriate.”205 These actions were to be identified and a determina- tion made within 30 days whether to proceed with their reconsideration, modification, or rescission. 7. Mitigation Under the National Environmental Policy Act (NEPA) The National Environmental Policy Act provides an additional statutory and regulatory foundation for many of these mitigation policies. In general, it requires the identification of environmental impacts for major federal actions that may have a significant effect on the human environment, evaluation of alter- natives, and identification of mitigation measures.206 The NEPA regulations define mitigation as: • Avoiding the impact altogether by not taking a certain action or parts of an action. • Minimizing impacts by limiting the degree or magnitude of the action and its implementation. • Rectifying the impact by repairing, rehabilitating, or restoring the affected environment. • Reducing or eliminating the impact over time by preser- vation and maintenance operations during the life of the action. • Compensating for the impact by replacing or providing substitute resources or environments.207 Mitigation is important in many contexts of envi- ronmental impact review, both as a way of address- ing impacts and as a way of mitigating activities to below the threshold of “significance” when the action is covered by an “Environmental Assessment” resulting in a Finding of No Significant Impact (FONSI). In many cases, actions taken to mitigate potential impacts will allow USDOT or state trans- portation agencies to issue a “mitigated FONSI” for the proposed action rather than undertake prepara- tion of an Environmental Impact Statement.208 III. OPERATIONAL ISSUES FOR CONSERVATION PLANNING/BANKING A. Conservation Planning at Landscape Scale Conservation planning at a larger scale offers substantial advantages over case-by-case mitigation of impacts to waters and wetlands and to actions potentially affecting threatened or endangered species and their habitats.209 These advantages are 206 42 U.S.C. §§ 4321-4345. Discussion of the environ- ment impact analysis provisions of NEPA, as affected by successive transportation laws providing for streamlining and state performance of functions is outside the scope of this report, which is focused on authority to engage in con- servation planning. 207 40 C.F.R. § 1508.21. 208 alBeRt M. feRlo, KaRin p. shelDon, & MaRK sqUil- lace, the nepa litigation gUiDe (American Bar Assn. 2d ed. 2012). 209 Venner, supra note 13. 199 FWS, Directors Order No. 218, Policy Regarding Vol- untary Prelisting Conservation Actions (Jan. 18, 2017). 200 Promoting Energy Independence and Economic Growth, 82 Fed. Reg. 16,093 (Mar. 31, 2017). 201 Presidential Executive Order on Promoting Energy Independence and Economic Growth, available at https:// www.whitehouse.gov/the-press-office/2017/03/28/ presidential-executive-order-promoting-energy- independence-and-economi-1, at § 3(a)(iii). 202 Id. at § 3(d). 203 Department of Interior, Secretarial Order No. 3349, American Energy Independence (March 29, 2017). 204 Department of Interior, Secretarial Order No. 3330, Improving Mitigation Policies and Practices of the Depart- ment of the Interior (October 31, 2013). 205 Department of Interior, Secretarial Order No. 3349, American Energy Independence (March 29, 2017), at §§ 4, 5.

23 important to state transportation agencies, and to state and federal regulatory agencies.210 • Advance planning allows better compensation for impacts. The use of conservation planning means that mitigation actions are not one-off deci- sions, but contribute to the function of ecosystems, the recovery of species, or the hydrological, chemi- cal, and biological integrity of watersheds. • Larger-scale plans also provide a broader context for conserving and restoring ecological function. The Compensatory Mitigation Rule ex- pressly states that mitigation banks “typically involve large, more ecologically valuable parcels, and more rigorous scientific and technical analy- sis, planning and implementation than permittee- responsible mitigation.”211 The same observation is made with respect to ILF programs. And the rule further notes that they also “devote significant re- sources to identifying and addressing high-priority resource needs on a watershed scale, as reflected in their compensation planning framework.”212 Simi- lar considerations apply to conservation banking and conservation plans.213 • Planning at these scales also contributes to the durability of mitigation by improving the pros- pect for long-term management of conserved sites and restored habitat, including monitoring, fund- ing, and adaptive management. • Increased regularity and predictability of mitigation improves the timeliness of project deliv- ery and cost management for state transportation agencies seeking to mitigate for impacts.214 Satisfaction of regulatory requirements can address both ESA section 7 and section 10, which helps trans- portation planners focus on conservation and mitiga- tion outcomes rather than solely on process.215 As noted above, there can be a regulatory choice as to whether a project falls under section 7 or section 10, depending on the planning and funding, and portion of the project currently seeking approval. In many instances, conservation planning and conservation banking at scale can address both eventualities. Many HCPS have chosen to include transportation projects having a federal nexus so as to streamline the Section 7 consultation process. Although these projects will ulti- mately be subject to a Sec. 7 consultation, they have been included as a covered activity in most area-wide HCPs. The analysis done for an HCP provides the biological data necessary for the Sec. 7 consultation, reducing the time consumed by the Sec. 7 process. Furthermore, since the project was included in an HCP plan, time has already been spent negotiating with the FWS over what is acceptable mitigation, and that mitigation has been approved with the issuance of an ITP for the HCP.216 Conservation planning at scale can also obviate ESA issues prior to the listing of species as threat- ened or endangered. In 2015, the FWS and Bureau of Land Management approved land use plans to provide for sage grouse habitat restoration and recovery, thus supporting a decision not to list the greater sage grouse. Adherence to these manage- ment plans can save infrastructure projects from needing to undergoing section 7 consultations and development of new mitigation. Timing can be an issue, however, as development of HCPs can take long periods of time. At the same time, however, having such plans in place makes it possible to abbreviate the time needed to approve mitigation.217 Approval of conservation banks can also take time, with average planning times of up to one year, and an FWS approval taking an additional year and a half on average.218 In the waters and wetlands context, planning at scale has substantially improved permitting timing and predictability. Timing for wetland mitigation banks and ILFs has become more streamlined since the adoption of the 2008 Compensatory Mitigation Rule, although it has taken some time to get exist- ing ILF programs into conformance with the regula- tory requirements.219 1. State Transportation Agencies and Support for Advance Conservation Planning State transportation agencies can support fund- ing of advance conservation planning. Especially in California, where a robust habitat planning process has existed, Caltrans has on occasion chosen to participate in development of multi-species HCPs. 210 enviRonMental laW institUte, natUReseRve, inR, ResoURces foR the fUtURe, a pRactitioneR’s hanDBooK: optiMizing conseRvation anD iMpRoving Mitigation thRoUgh the Use of pRogRessive appRoaches (Presented by Cam- bridge Systematics to the NCHRP 25-25, Task 67), 2011 [hereinafter ELI, NatureServe]. 211 33 C.F.R. § 332.3(b)(2); 40 C.F.R. 230.93(b)(2). 212 33 C.F.R. § 332.3(b)(3); 40 C.F.R. 230.93(b)(3). 213 Memorandum from the FWS on Guidance for the Establishment, Use, and Operation of Conservation Banks (May 8, 2003) [hereinafter FWS Guidance], 68 Fed. Reg. 24,753 (May 8, 2003). 214 Venner, supra note 13; ELI, NatureServe, supra note 210. 215 Venner, supra note 13. 216 Lederman & Wachs, supra note 13 at 26. 217 Lederman & Wachs, supra note at 13, 12-14, 46-48. 218 Interior Sept. 2016, supra note 139. 219 institUte foR WateR ResoURces, the Mitigation Ret- Rospective: a RevieW of the 2008 hanDBooK: optiMizing conseRvation anD iMpRoving Mitigation thRoUgh the Use of pRogRessive appRoaches, 2015-R-03, 2015. [hereinafter Institute for Water Resources Handbook].

24 At the same time, state agency participation in conservation planning across the nation has been ad hoc and sporadic for the most part, and even in Cali- fornia, the decision to engage or not has depended on subjective factors like personal relationships or the timing of particular planning processes.220 The availability of state transportation agencies funding also does not always match the need for development of large-scale conservation plans. In particular, funding practices are often closely tied to project plans such that there is limited ability to accommodate acquisition of habitat not needed for current mitigation, but that will be needed in the future. In general, the issue is not one of legal authority, but of anticipating needs and of the exis- tence of willing conservation partners. The linking of research and mapping to state transportation improvement planning can help facilitate taking the longer view. In some instances, this can be facilitated with state or local funding or dedicated tax revenues, as in the case of the Envi- ronmental Mitigation Program (EMP) of the San Diego Association of Governments (SANDAG), which uses proceeds of a county-wide sales tax to support habitat conservation and restoration to offset impact of regional and local transportation projects. These activities have included conservation activities on about 3,600 acres since 2008.221 Advance planning and funding for mitigation activities at scale is authorized by federal transpor- tation legislation.222 Large-scale, area-wide HCPs usually cover multiple species and habitats. They typically consist of: • A geographically focused habitat conservation plan collaboratively prepared by a group of affected local, state and federal agencies and, in some cas- es, interests; • An implementation agreement; and • Ongoing conservation as contemplated by the conservation plan. In general, these plans offer substantial opportu- nities to state transportation agencies who may engage in their initial preparation, or may join subse- quently as participants. Programmatic conservation in coordination with infrastructure development means that long-term projects can be accommodated. For example, in California, Caltrans provided funding for development of both the East Contra Costa County HCP and the Butte County HCP, which were large-scale, multi-species efforts intended to accommodate a variety of species mitigation needs under state law and the federal ESA. Caltrans acted as a “paying permittee” in connection with the large- scale Western Riverside County and Coachella Valley HCPs, committing to purchases of conservation lands and other actions supporting the ITP.223 2. Credit Valuation and Issuance Concerns In general, the units used for habitat credits, wetland credits, or stream credits are determined by the approved banking instruments. The Compensa- tory Mitigation Rule has eliminated confusion in this area by assigning the approval role to the IRT in each state. For ILF credits, the rule also requires review to ensure that the credit prices reflect actual costs of production. For wetland and stream banks, the credit prices are entirely market driven.224 For conservation banking, the banking approvals have defined the credits. The proposed ESA guidance should place the process on a clearer footing. Markets determine the prices of conservation credits; which will ordinarily also reflect the costs of production. In both wetland and habitat settings the state and federal regulatory agencies determine what will constitute suitable mitigation for the permitted activities. These decisions can be made up front in terms of a watershed approach or HCP, or can be approached permit-by-permit. Key issues common to wetland mitigation banks, ILFs, and conservation banks include how to address crediting for different resource values, and how to assure and attain net gains (or at least no net loss) in functions and values when the same activity produces multiple benefits for habitat, water qual- ity, connectivity, greenhouse gas mitigation, etc. Key issues involve when and whether multiple credits can be generated from or by the same parcel of land and conservation activities thereon, and whether they can be used by different permittees for mitiga- tion. Credit stacking is the idea that multiple conser- vation values (carbon offset, wetland mitigation) can be supplied by the same activity. But under both aquatic mitigation and habitat mitigation, federal regulations and policies are in place to prevent double counting (or sale of the same thing twice), which would result in a net loss.225220 Lederman & Wachs, supra note 13. 221 Camacho, supra note 114 at 36-37; See e.g. Ellen Wright, SANDAG buys 50 Acres in Batiquitos Lagoon, the coast neWs gRoUp, April 7, 2015, http://www. thecoastnews.com/2015/04/07/sandag-buys-50-acres-in- batiquitos-lagoon/. 222 See next section (Section, III.A.2 “Credit Valuation and Issuance Concerns”). 223 Camacho, supra note 114 at 37; Lederman & Wachs, supra note 13 at 37. 224 Institute for Water Resources Handbook, supra note 219. 225 Carroll, supra note 141.

25 3. Legal Treatment of Conservation Credits Created or Purchased by State Transportation Agencies In general, mitigation credits are treated as personal property rather than as interests in real property.226 Given the release of liability related to purchase of credits from a third party, they may not be cancelled or revoked once regulatory approval has been granted for the impact mitigated by use of the credits. However, the creation of credits is subject to cancellation, revocation, or modification in accordance with the instruments under which the mitigation bank, ILF, or conservation bank has been approved. And the credit producer must continue to maintain the site in accordance with the approved instrument. Production or acquisition of conservation and wetland credits are allowable expenditures under government rules, and these credit activities are treated like typical allowable on-site mitigation expenditures. In general, if procurement of mitiga- tion is project-by-project, the acquisition of wetlands or habitat credits must follow procurement regula- tions, including competitive procedures. For example, the Washington State Department of Transportation (WSDOT) guidelines provide that, “mitigation credits must be acquired using a competi- tive bid process.”227 These require preparation of a scope of work which defines requirements including certified mitigation banks, location of approved service area in relation to the project impact areas, and the availability of suitable bank credits. Where there is only one qualified provider, the state can negotiate an option to purchase agreement, including establishing prices for future acquisitions to meet future projected impacts.228 However, competition is required if additional certified providers subse- quently emerge in the area. WSDOT also has experi- ence with operation of its own wetland mitigation banking sites, and has used those based on agree- ments and approvals. The FHWA has long acknowl- edged that credits obtained from third-party private mitigation banks should ordinarily be accomplished using competitive bidding “unless sole source procure- ment in this case is justified under state law.”229 Long-term agreements between state transporta- tion and natural resource agencies and/or other mitigation providers have reduced the need for each transaction to be a new competitive procurement, particularly in states where there is an umbrella bank or where the DOT has pre-funded mitigation programs to meet anticipated needs. In 2003, the North Carolina Department of Trans- portation (NCDOT) entered into a long-term Memo- randum of Agreement with the state environmental agency (then known as the Department of Environ- ment and Natural Resources), establishing the Ecosystem Enhancement Program (EEP). The EEP was an innovative version of an ILF wetland and aquatic mitigation program. It provided advance mitigation of impacts from transportation projects on aquatic resources, using a programmatic approach. The EEP conducted basin-wide and local watershed planning to identify high-quality mitigation sites, and provide the basis for the selection and provision of mitigation. NCDOT provided advance funding based on anticipated mitigation needs to facilitate planning and siting. EEP was recognized by FHWA as an exemplary ecosystem initiative.230 The EEP built on prior agreements to facilitate identification and provision of suitable mitigation, but was far more sophisticated because of the level of watershed plan- ning and the advance of dollars to support planning, site identification, project acquisition, and mitigation design. NCDOT funding was provided under a bien- nial budget and directed toward watershed planning and mitigation. The EEP was subsequently altered by a 2008 MOA, and superseded by the current 2016 MOA between NCDOT and the North Carolina Department of Environmental Quality’s Division of Mitigation Services (DMS).231 The NCDOT now provides funding to DMS to deliver stream and wetland mitigation as described in the North Carolina ILF (now operated in confor- mity with the 2008 federal Compensatory Mitiga- tion Rule). NCDOT agrees to use the DMS program as its preferred mitigation source for all offsite miti- gation; and DMS planning uses the “watershed approach” as described in the federal Compensatory Mitigation Rule. Orders for mitigation are delivered annually. According to the 2016 MOA, “All impacts to wetlands and streams will be estimated for NCDOT transportation projects that are prioritized for funding and expected to be let over the next 7 years, including those impacts for which the NCDOT has identified other sources of mitigation.”232 A 2:1 226 Michael D. Minton & chRistine l. WeingaRt, legal anD tax issUes of caRBon cReDit tRaDing, (Envt. Services Inc., 2016). 227 WSDOT, Procurement of Wetland Mitigation Cred- its from Third-Party Sources, (Directional Memo ESO- 2010-01) (March 2010). 228 Id. 229 FHWA, Use of pRivate WetlanD Mitigation BanKs as coMpensatoRy Mitigation foR highWay pRoJect iMpacts (July 5, 1995). 230 ReBecca KihslingeR & JaMes Mcelfish, natURe fRienDly: lanD Use pRactices at MUltiple scales (Envi- ronmental Law Institute, 2009) [hereinafter Kihslinger]. 231 Memorandum of Agreement between the North Carolina Department of Environmental Quality and the North Carolina Department of Transportation (June 14, 2016). 232 Id. at 3.4.

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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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