[Federal Register: April 10, 2008 (Volume 73, Number 70)]
[Rules and Regulations]
[Page 19593-19705]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10ap08-7]
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Part II
Department of Defense
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Department of the Army, Corps of Engineers
33 CFR Parts 325 and 332
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Environmental Protection Agency
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40 CFR Part 230
Compensatory Mitigation for Losses of Aquatic Resources; Final Rule
[[Page 19594]]
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DEPARTMENT OF DEFENSE
Department of the Army, Corps of Engineers
33 CFR Parts 325 and 332
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 230
[EPA-HQ-OW-2006-0020; FRL-8545-4]
RIN 0710-AA55
Compensatory Mitigation for Losses of Aquatic Resources
AGENCIES: U.S. Army Corps of Engineers, DoD; and Environmental
Protection Agency.
ACTION: Final rule.
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SUMMARY: The U.S. Army Corps of Engineers (the Corps) and the
Environmental Protection Agency (EPA) are issuing regulations governing
compensatory mitigation for activities authorized by permits issued by
the Department of the Army. The regulations establish performance
standards and criteria for the use of permittee-responsible
compensatory mitigation, mitigation banks, and in-lieu programs to
improve the quality and success of compensatory mitigation projects for
activities authorized by Department of the Army permits.
This rule improves the planning, implementation and management of
compensatory mitigation projects by emphasizing a watershed approach in
selecting compensatory mitigation project locations, requiring
measurable, enforceable ecological performance standards and regular
monitoring for all types of compensation and specifying the components
of a complete compensatory mitigation plan, including assurances of
long-term protection of compensation sites, financial assurances, and
identification of the parties responsible for specific project tasks.
This rule applies equivalent standards to permittee-responsible
compensatory mitigation, mitigation banks and in-lieu fee mitigation to
the maximum extent practicable. Since a mitigation bank must have an
approved mitigation plan and other assurances in place before any of
its credits can be used to offset permitted impacts, this rule
establishes a preference for the use of mitigation bank credits, which
reduces some of the risks and uncertainties associated with
compensatory mitigation. This rule also significantly revises the
requirements for in-lieu fee programs to address concerns regarding
their past performance and equivalency with the standards for
mitigation banks and permittee-responsible compensatory mitigation.
DATES: The effective date is June 9, 2008.
ADDRESSES: Headquarters, U.S. Army Corps of Engineers, Operations and
Regulatory Community of Practice, 441 G Street, NW., Washington, DC
20314-1000. Headquarters, U.S. Environmental Protection Agency,
Wetlands Division, Mail code 4502T, 1200 Pennsylvania Ave, NW.,
Washington, DC 20460.
The Corps and EPA have established a docket for this action under
Docket ID No. EPA-HQ-OW-2006-0020. All documents in the docket are
listed on the http://www.regulations.gov web site. Although listed in
the index, some information is not publicly available, e.g., CBI or
other information whose disclosure is restricted by statute. Certain
other material, such as copyrighted material, is not placed on the
Internet and will be publicly available only in hard copy form.
Publicly available docket materials are available either electronically
through http://www.regulations.gov or in hard copy at the Water Docket,
EPA/DC, EPA West, Room 3334, 1301 Constitution Ave., NW., Washington,
DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday
through Friday, excluding legal holidays. The telephone number for the
Public Reading Room is (202) 566-1744, and the telephone number for the
Water Docket is (202) 566-2426.
FOR FURTHER INFORMATION CONTACT: Mr. David Olson at 202-761-4922 or by
e-mail at david.b.olson@usace.army.mil, or Mr. Palmer Hough at 202-566-
1374 or by e-mail at hough.palmer@epa.gov. Additional information can
also be found at the Corps Headquarters Regulatory Program webpage at:
http://www.usace.army.mil/cw/cecwo/reg/index.html or the EPA
compensatory mitigation webpage at: http://www.epa.gov/
wetlandsmitigation.
SUPPLEMENTARY INFORMATION:
I. Background
II. General Comments and Responses
A. Overview
B. Most Frequently Raised Issues
1. Section 404(b)(1) Guidelines
2. Compensatory Mitigation Standards for Streams
3. Discretionary Language
4. Watershed Approach
5. In-Lieu Fee Programs
C. Other General Comments
III. In-Lieu Fee Programs
IV. Compliance With Section 314 of the NDAA
V. Organization of the Final Rule
VI. Discussion of Specific Sections of the Final Rule
VII. Administrative Requirements
I. Background
Compensatory mitigation involves actions taken to offset
unavoidable adverse impacts to wetlands, streams and other aquatic
resources authorized by Clean Water Act section 404 permits and other
Department of the Army (DA) permits. As such, compensatory mitigation
is a critical tool in helping the federal government to meet the
longstanding national goal of ``no net loss'' of wetland acreage and
function. For impacts authorized under section 404, compensatory
mitigation is not considered until after all appropriate and
practicable steps have been taken to first avoid and then minimize
adverse impacts to the aquatic ecosystem pursuant to 40 CFR part 230
(i.e., the CWA Section 404(b)(1) Guidelines).
Compensatory mitigation can be carried out through four methods:
the restoration of a previously-existing wetland or other aquatic site,
the enhancement of an existing aquatic site's functions, the
establishment (i.e., creation) of a new aquatic site, or the
preservation of an existing aquatic site. There are three mechanisms
for providing compensatory mitigation: permittee-responsible
compensatory mitigation, mitigation banks and in-lieu fee mitigation.
Permittee-responsible mitigation is the most traditional form of
compensation and continues to represent the majority of compensation
acreage provided each year. As its name implies, the permittee retains
responsibility for ensuring that required compensation activities are
completed and successful. Permittee-responsible mitigation can be
located at or adjacent to the impact site (i.e., on-site compensatory
mitigation) or at another location generally within the same watershed
as the impact site (i.e., off-site compensatory mitigation).
Mitigation banks and in-lieu fee mitigation both involve off-site
compensation activities generally conducted by a third party, a
mitigation bank sponsor or in-lieu fee program sponsor. When a
permittee's compensatory mitigation requirements are satisfied by a
mitigation bank or in-lieu fee program, responsibility for ensuring
that required compensation is completed and successful shifts from the
permittee to the bank or in-lieu fee sponsor. Mitigation banks and in-
lieu fee programs both conduct consolidated aquatic resource
restoration, enhancement, establishment and preservation projects;
however, under
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current practice, there are several important differences between in-
lieu fee programs and mitigation banks.
First, in-lieu fee programs are generally administered by state
governments, local governments, or non-profit non-governmental
organizations while mitigation banks are usually (though not always)
operated for profit by private entities. Second, in-lieu fee programs
rely on fees collected from permittees to initiate compensatory
mitigation projects while mitigation banks usually rely on private
investment for initial financing. Most importantly, mitigation banks
must achieve certain milestones, including site selection, plan
approval, and financial assurances, before they can sell credits, and
generally sell a majority of their credits only after the physical
development of compensation sites has begun. In contrast, in-lieu fee
programs generally initiate compensatory mitigation projects only after
collecting fees, and there has often been a substantial time lag
between permitted impacts and implementation of compensatory mitigation
projects. Additionally, in-lieu fee programs have not generally been
required to provide the same financial assurances as mitigation banks.
For all of these reasons, there is greater risk and uncertainty
associated with in-lieu fee programs regarding the implementation of
the compensatory mitigation project and its adequacy to compensate for
lost functions and services.
As noted in the preamble for the March 2006 proposal, the majority
of the existing guidance regarding compensatory mitigation and the use
of these three mechanisms for providing compensation exists in a number
of national guidance documents released by the Corps and EPA over the
past seventeen years (sometimes in association with other federal
agencies such as the U.S. Fish and Wildlife Service and the National
Marine Fisheries Service). Since these guidance documents were
developed at different times, and in different regulatory contexts,
concerns have been raised regarding the consistent, predictable and
equitable interpretation and application of these guidance documents.
In November 2003, Congress called for the development of regulatory
standards and criteria for the use of compensatory mitigation in the
section 404 program.
Section 314 of the National Defense Authorization Act (NDAA) for
Fiscal Year 2004 (section 314) requires the Secretary of the Army,
acting through the Chief of Engineers, to issue regulations
``establishing performance standards and criteria for the use,
consistent with section 404 of the Federal Water Pollution Control Act
(33 U.S.C. 1344, also known as the Clean Water Act), of on-site, off-
site, and in-lieu fee mitigation and mitigation banking as compensation
for lost wetlands functions in permits issued by the Secretary of the
Army under such section.'' This provision also requires that those
regulations, to the maximum extent practicable, ``maximize available
credits and opportunities for mitigation, provide flexibility for
regional variations in wetland conditions, functions and values, and
apply equivalent standards and criteria to each type of compensatory
mitigation.''
In response to this directive, the U.S. Army Corps of Engineers and
the U.S. Environmental Protection Agency (the agencies) published a
proposed rule in Part II of the March 28, 2006, issue of the Federal
Register (71 FR 15520), with a 60-day public comment period. As a
result of several requests, the Corps and EPA extended the comment
period by an additional 30 days. The comment period ended on June 30,
2006.
In the preamble to the March 2006 proposal, the agencies noted
their decision, in light of their respective statutory roles in the
section 404 program, to pursue this rulemaking as a joint effort
between the Corps and EPA. The preamble also discussed the Corps's
decision to develop these standards for all DA permits which could
potentially require compensatory mitigation. Thus, in addition to Clean
Water Act section 404 permits, these standards also apply to DA permits
issued under sections 9 and 10 of the Rivers and Harbors Act of 1899.
Finally, the preamble also discussed why these standards should apply
to compensatory mitigation for impacts to streams and other open waters
in addition to wetlands.
As discussed in the preamble to the March 2006 proposal, in 2001
the National Research Council (NRC) released a comprehensive evaluation
of the effectiveness of wetlands compensatory mitigation required under
section 404 of the Clean Water Act. This report noted concerns with
some past wetland compensatory mitigation and provided recommendations
for the federal agencies, states, and other parties to improve
compensatory mitigation. This report was an important resource in the
development of today's rule.
II. General Comments and Responses
In response to the proposed rule, approximately 12,000 comments
were received, including about 850 distinct comments and 11,150
additional substantially identical e-mails and letters. Comments were
provided by regulated entities, the scientific community, non-
governmental organizations, mitigation bankers, in-lieu fee program
sponsors, state and local government agencies, and other members of the
public.
A. Overview
Most of the distinct commenters said that this rule is a necessary
addition to regulations for implementing the Corps Regulatory Program
and some expressed appreciation that the rule incorporates stakeholder
feedback and lessons learned. Many commenters expressed general support
for the proposed rule because: (1) It will promote predictability and
consistency in compensatory mitigation; (2) it will further effective
partnerships with private sector mitigation banks; (3) it responds to
concerns raised by those participating in the development of Mitigation
Action Plan products; (4) many provisions of the rule are consistent
with the 2005 Millennium Ecosystem Assessment; (5) it brings greater
technical clarity to the process of determining appropriate mitigation;
(6) it provides greater focus on accountability through measurable and
enforceable ecological performance standards, monitoring, and
management; (7) it fosters incorporation of aquatic ecosystem science
into compensatory mitigation plans; and (8) it increases public
participation in the compensatory mitigation process. Some of these
commenters also suggested modifications to the proposed rule, which are
discussed in more detail below.
Some commenters, including most of the form letters, opposed the
proposed rule or suggested extensive revisions to increase the
protection of aquatic resources. The issues most frequently raised,
considering both the individual and form letters, were: (1) Interaction
of the proposed rule with the existing requirements of the Section 404
(b)(1) Guidelines, (2) compensatory mitigation standards for streams,
(3) the amount of discretionary language in the proposed rule, (4) use
of the watershed approach for identifying mitigation projects, and (5)
the proposed phase-out of in-lieu fee mitigation. These five major
issues and our responses to them are discussed below in part II.B. Many
other general issues were raised as well, and a number of these are
discussed in part II.C. Additional detail, and responses to comments on
specific rule provisions, are provided in part VI.
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B. Most Frequently Raised Issues
1. Section 404(b)(1) Guidelines
Many commenters stated that, consistent with existing regulations
and policy, the rule should emphasize impact avoidance and that
compensatory mitigation should not be considered until all efforts have
been made to first avoid and then minimize impacts to streams and
wetlands. Some commenters also asserted that the proposal would expand
the district engineer's existing level of discretion in determining
that an applicant has taken all appropriate and practicable steps to
first avoid and then minimize impacts to the aquatic ecosystem. Some
further asserted that the proposal could be construed to allow permits
to be issued even if they cause or contribute to significant
degradation of aquatic resources, an action prohibited by the Section
404(b)(1) Guidelines (40 CFR 230.10(c)).
The agencies agree that impacts must be first avoided and then
minimized, and that compensatory mitigation should be used only for
impacts that cannot be avoided or minimized. The agencies disagree that
the rule will weaken or undermine the 404(b)(1) Guidelines, which are
codified in regulation and remain unchanged. These requirements are
essential to meeting the overall objective of the Clean Water Act to
restore and maintain the chemical, physical and biological integrity of
the nation's waters. We have clarified that none of them have changed
by adding a new paragraph at 33 CFR 332.1(c)(1) [40 CFR 230.91(c)(1)]
stating that nothing in these new rules affects the requirement that
all DA permits subject to section 404 of the Clean Water Act comply
with applicable provisions of the Section 404(b)(1) Guidelines. Thus,
this rule does not expand the district engineer's existing level of
discretion in determining that an applicant has taken all appropriate
and practicable steps to first avoid and then minimize impacts to the
aquatic ecosystem. Paragraph (c)(2) of this section has also been
modified to clarify that individual section 404 permits will be issued
only if compliance with all applicable provisions of the 404(b)(1)
Guidelines has been achieved including those which require the permit
applicant to take all appropriate and practicable steps to avoid and
minimize adverse impacts to the aquatic ecosystem. For general permits,
compliance with the Section 404(b)(1) Guidelines is clarified at 40 CFR
230.7.
In addition, a new paragraph at 33 CFR 332.1(f)(2) [40 CFR
230.91(f)(2)] has been added to the final rule which clarifies which
provisions of the 1990 Memorandum of Agreement (MOA) between the
Department of the Army and the Environmental Protection Agency on the
Determination of Mitigation Under the Clean Water Act Section 404(b)(1)
Guidelines have been superseded by this rule and which provisions
remain in effect. Those that remain in effect include the provisions
related to impact avoidance and minimization, evaluation of the least
environmentally damaging practicable alternatives, and circumstances
where the impacts of the proposed project are so significant that
discharges may not be permitted regardless of the compensatory
mitigation proposed.
Today's rule is focused on the compensation component of the
mitigation sequence. Its purpose is to develop a comprehensive set of
standards for compensatory mitigation pursuant to section 314 of the
NDAA. Fulfilling this directive necessitates a detailed treatment of
all critical aspects of compensatory mitigation. This does not affect
compliance with other parts of our regulations, including the 404(b)(1)
Guidelines. Additional discussion of this issue can be found in part VI
of the preamble.
2. Compensatory Mitigation Standards for Streams
Many commenters stated that compensatory mitigation for stream
impacts should not be addressed in this rule. Some stated that there is
no scientific evidence that streams can be established (i.e., stream
creation) or that other approaches taken in this rule such as stream
restoration can compensate for stream losses. They suggested that the
agencies should conduct further research on stream mitigation and
demonstrate its success before including standards for stream
mitigation in the rule. Some also noted that the statutory language in
the NDAA refers only to wetlands.
On the other hand, other commenters expressed support for applying
the rule to streams and other open waters. These commenters believe
that physical alteration of aquatic resources should be mitigated to
the extent practicable to support the objectives of the Clean Water Act
and that because section 404 of the Clean Water Act authorizes
discharges of dredged or fill material into lakes, streams, and
wetlands, mitigation for those impacts should be required (and
addressed in this rule) as well.
As noted in the preamble to the March 2006 proposal, we believe
this rule should apply to compensatory mitigation for all types of
aquatic resources that can be impacted by activities authorized by DA
permits, including streams and other open waters. We recognize that the
scientific literature regarding the issue of stream establishment and
re-establishment is limited and that some past projects have had
limited success (Bernhardt and others 2007).\1\ Accordingly, we have
added a new paragraph at 33 CFR 332.3(e)(3) [40 CFR 230.93(e)(3)] that
specifically notes that there are some aquatic resources types that are
difficult to replace and streams are included among these. It
emphasizes the need to avoid and minimize impacts to these `difficult-
to-replace' resources and requires that any compensation be provided by
in-kind preservation, rehabilitation, or enhancement to the extent
practicable. This language is intended to discourage stream
establishment and re-establishment projects while still requiring
compensation for unavoidable stream impacts in the form of stream
corridor restoration (via rehabilitation), enhancement, and
preservation projects, where practicable. District engineers will
evaluate compensatory mitigation proposals for streams, and assess the
likelihood of success before deciding whether the proposed compensation
should be required.
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\1\ Bernhardt, E.S., E.B. Sudduth, M.A. Palmer, J.D. Allan, J.L.
Meyer, G. Alexander, J. Follastad-Shah, B. Hassett, R. Jenkinson, R.
Lave, J. Rumps, and L. Pagano. 2007. Restoring rivers one reach at a
time: Results from a survey of U.S. river restoration practitioners.
Restoration Ecology 15:482-493.
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We recognize that the science of stream restoration is still
evolving and that more research is needed; however, the lack of a
fully-developed set of tested hypotheses and techniques does not mean
that stream mitigation (particularly via restoration, enhancement and
preservation) cannot be successfully performed or that it should not be
required where avoidance of impacts is not practicable. As noted by
Bernhardt and others (2005),\2\ ``stream and river restoration can lead
to species recovery, improved inland and coastal water quality, and new
areas for wildlife habitat and recreational activities.'' There is a
growing body of research that documents successful outcomes for stream
restoration projects, examines stream restoration techniques and
provides recommendations for effective stream and river restoration.
[[Page 19597]]
Successful outcomes for stream restoration with respect to water
quality, habitat creation, species recovery and recreation, have been
documented by Baron and others (2002); \3\ Buijse and others (2002);
\4\ Muotka and Pekka (2002); \5\ Nakamura and Kunihiko (2006); \6\ and
Petersen (1999).\7\ Criteria and recommendations for ecologically
successful stream restoration have been addressed by Hassett and others
(2005) \8\ Kauffman and others (1997) \9\ Lavendel (2002) \10\ Palmer
and others (2005) \11\ and Whalen and others (2002).\12\ Assessment of
the physical and biological effects of restoration activities has been
performed by Reeves and others (1997); \13\ Slaney and others (1994)
\14\ and Solazzi and others (2000).\15\ The applicability of specific
tools to measure stream restoration success has been investigated by
Paller and others (2000) \16\ and Lester and others (2006).\17\
Somerville and Pruitt (2004) \18\ reviewed existing stream assessment
and mitigation protocols and Roni and others (2002) \19\ reviewed
stream restoration techniques. Shields and others (2003) \20\ discussed
the unique challenges associated with stream restoration research.
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\2\ Bernhardt, E.S., M.A. Palmer, J.D. Allan, G. Alexander, K.
Barnas, S. Brooks, J. Carr, S. Clayton, C. Dahm, J. Follstad-Shah,
D. Galat, S. Gloss, P. Goodwin, D. Hart, B. Hassett, R. Jenkinson,
S. Katz, G.M. Kondolf, P.S. Lake, R. Lave, J.L. Meyer, T.K.
O'Donnell, L. Pagano, B. Powell, and E. Sudduth. 2005. Synthesizing
U.S. river restoration efforts. Science 308: 636-637.
\3\ Baron, J.S. et al. 2002. Meeting ecological and societal
needs for freshwater. Ecological Applications 12: 1247-1260.
\4\ Buijse, A.D. et al. 2002. Restoration strategies for river
floodplains along the large lowland rivers in Europe. Freshwater
Biology 47: 889-907.
\5\ Muotka, T. and P. Laasonen. 2002. Ecosystem recovery in
restored headwater streams: The role of enhanced leaf retention.
Journal of Applied Ecology 39: 145-156.
\6\ Nakamura, K. and K. Amano. 2006. River and wetland
restoration: Lessons from Japan. Bioscience 56(5): 419-129.
\7\ Petersen, M.M. 1999. A natural approach to watershed
planning, restoration and management. Water Science and Technology
39(12): 347-352.
\8\ Hassett, B. et al. 2005. Restoring watersheds project by
project: Trends in Chesapeake Bay tributary restoration. Frontiers
in Ecology and the Environment 3(5): 259-267.
\9\ Kauffman, J. Boone, R.L. Beschta, N.O., and D. Lytjen. 1997.
An ecological perspective of riparian and stream restoration in the
western United States. Fisheries 22(5): 12-24.
\10\ Lavendel, B. 2002. The business of ecological restoration.
Ecological Restoration 20: 173-178.
\11\ Palmer, M.A. et al. 2005. Standards for ecologically
successful river restoration. Journal of Applied Ecology 42: 207-
217.
\12\ Whalen, P.J., L.A. Toth, J.W. Koebel, and P.K. Strayer.
2002. Kissimmee River Restoration: A case study. Water Science and
Technology 45(11): 55-62.
\13\ Reeves, G.H., D.B. Hohler, B.E. Hansen, F.H. Everest, J.R.
Sedell, T.L. Hickman, and D. Shively. 1997. Fish habitat restoration
in the Pacific Northwest: Fish Creek of Oregon. Pages 335-359 in
J.E. Williams, C.A. Wood, and M.P. Dombeck, editors. Watershed
Restoration: Principles and Practices. American Fisheries Society,
Bethesda, Maryland.
\14\ Slaney, P.A., B.O. Rublee, C.J. Perrin, and H. Goldberg.
1994. Debris structure placements and whole-river fertilization for
salmonoids in a large regulated stream in British Columbia. Bulletin
of Marine Science 55: 1160-1180.
\15\ Solazzi, M.F., T.E. Nickelson, S.L. Johnson, and J.D.
Rodgers. 2000. Effects of increasing winter rearing habitat on
abundance of salmonoids in two coastal Oregon streams. Canadian
Journal of Fisheries and Aquatic Sciences. 57: 906-914
\16\ Paller, M.H., M.J.M. Reichert, J.M. Dean, and J.C. Seigle.
2000. Use of fish community data to evaluate restoration success of
a riparian stream. Ecological Engineering 15: 171-187.
\17\ Lester, R., W. Wright, and M. Jones-Lennon. 2006.
Determining Target Loads of Large and Small Wood for Stream
Rehabilitation in High-Rainfall Agricultural Regions of Victoria,
Australia. Ecological Engineering 28: 71-78.
\18\ Somerville, D.E. and B.A. Pruitt. 2004. Physical stream
assessment: A review of selected protocols for use in the Clean
Water Act Section 404 Program. Prepared for the U.S. Environmental
Protection Agency, Office of Wetlands, Oceans, and Watersheds,
Wetlands Division (Order No. 3W-0503-NATX). Washington, DC, 213 pp.
\19\ Roni, P. et al. 2002. A review of stream restoration
techniques and a hierarchical strategy for prioritizing restoration
in Pacific Northwest watersheds. North American Journal of Fisheries
Management 22: 1-20.
\20\ Shields, F. Douglas, C.M. Cooper Jr., Scott S. Knight and
M.T. Moore. 2003. Stream corridor restoration research: A long and
winding road. Ecological Engineering 20: 441-454.
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Under this final rule, mitigation plans for all wetland
compensatory mitigation projects must contain the following twelve
elements: Objectives; site selection criteria; site protection
instruments (e.g., conservation easements); baseline information (for
impact and compensation sites); credit determination methodology;
mitigation work plan; maintenance plan; ecological performance
standards; monitoring requirements; long-term management plan; adaptive
management plan; and financial assurances (see 33 CFR 332.4(c) [40 CFR
230.94(c)]). Existing literature regarding stream restoration, as well
as our experience with past stream mitigation projects supports our
decision to require mitigation plans for stream compensatory mitigation
projects to contain the same twelve fundamental elements. Some
commenters noted that aspects of the mitigation work plan will differ
between stream and wetland mitigation projects. Today's rule highlights
some of these potential differences by noting additional elements that
may be necessary for stream mitigation project work plans. These
elements include planform geometry, channel form, watershed size,
design discharge, and riparian area plantings and can be found at 33
CFR 332.4(c)(7) [40 CFR 230.94(c)(7)].
Another important modification was made to the section of the rule
describing ecological performance standards. Like the proposal, today's
rule requires that every mitigation plan include objective and
verifiable ecological performance standards to assess whether the
compensatory mitigation project is achieving its objectives. Neither
the proposal nor today's rule prescribe the individual variables or
metrics that should be used to evaluate each aquatic resource type
potentially restored, enhanced, established, or preserved in
compensatory mitigation projects. Given the extremely large variation
among the aquatic resource types found across the country, and the
constant advances in the science of aquatic ecosystem restoration,
overly prescriptive requirements would be impractical. However, in
recognition of the need to strengthen this provision and to ensure that
compensatory mitigation project performance standards reflect the
latest advances in the science of stream and wetland restoration, we
have modified the final rule at 33 CFR 332.5(b) [40 CFR 230.95(b)] to
include a requirement that ecological performance standards be based on
the best available science that can be measured or assessed in a
practicable manner.
As stream scientists have noted, the proportion of stream
restoration projects that have been monitored for performance is low
(Bernhardt and others 2005).\21\ Today's rule, however, requires
monitoring of mitigation projects for a minimum of five years with
longer monitoring periods required for aquatic resources with slow
development rates. This monitoring requirement will provide new data on
stream restoration performance that will serve to increase knowledge
and improve stream mitigation over time. (See 33 CFR 332.6 [40 CFR
230.96]). Also, in response to public comment, we removed a provision
from 33 CFR 332.6(a) [40 CFR 230.96(a)] that would have allowed the
district engineer to waive all monitoring requirements if they were
determined not to be practicable.
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\21\ Bernhardt, E.S., M.A. Palmer, J.D. Allan, G. Alexander, K.
Barnas, S. Brooks, J. Carr, S. Clayton, C. Dahm, J. Follstad-Shah,
D. Galat, S. Gloss, P. Goodwin, D. Hart, B. Hassett, R. Jenkinson,
S. Katz, G.M. Kondolf, P.S. Lake, R. Lave, J.L. Meyer, T.K.
O'Donnell, L. Pagano, B. Powell, and E. Sudduth. 2005. Synthesizing
U.S. river restoration efforts. Science 308: 636-637.
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While section 314 of the NDAA refers only to the development of
compensatory mitigation standards for wetlands, we believe that in
order to improve the performance and results of all types of
compensatory mitigation this rule should include compensatory
mitigation standards for all types of aquatic resources that can be
impacted by activities authorized by DA permits, including streams and
other open waters. Section 404(b) of the Clean Water Act authorizes EPA
to develop
[[Page 19598]]
the substantive environmental criteria used by the Corps in making
section 404 permit decisions including those associated with all forms
of compensatory mitigation. Also, section 501(a) of the Clean Water Act
provides EPA with broad authority to conduct any rulemaking necessary
to carry out its functions under the Clean Water Act.
While many stream restoration and rehabilitation activities have
been conducted across the country, we recognize that not all of them
have been successful. Much of the literature suggests that this is due
to a lack of the kinds of comprehensive standards for project planning,
implementation and management included in this rule. Accordingly, we
determined that including stream mitigation in this rule would improve
current standards and practices for compensatory mitigation of streams.
Today's rule, with the addition of the above referenced modifications,
includes the necessary provisions to appropriately treat stream
mitigation. Additional discussion of this issue can be found in part VI
of the preamble.
3. Discretionary Language
Many commenters expressed concern that the proposal leaves too much
discretion to district engineers. Some commenters objected to use of
``may'', ``should'', and ``can'' in some rule provisions, and/or to use
of the qualifier ``appropriate and practicable'' for some requirements.
Commenters were concerned that such discretion might lead to
authorization of inappropriate compensatory mitigation projects,
inadequate enforcement and oversight, or excessive litigation.
In contrast, other commenters suggested even greater flexibility,
to allow cost-effective compensatory mitigation based on case-specific
circumstances.
In response to these comments, we have carefully evaluated all of
the discretionary language in the proposed rule, and replaced it with
binding and/or more clearly articulated requirements where appropriate.
Such modifications were made to a number of key provisions in the rule
including those related to mitigation type, the amount of mitigation
necessary to offset permitted losses, financial assurances, credit
releases, the use of preservation, ecological performance standards,
and long-term site protection and management. Also, a number of
requirements for in-lieu fee programs have been added to the rule, as
part of the decision not to phase them out as originally proposed.
(Note that the preamble to the proposed rule included an extensive
discussion of and request for comment on alternatives to the proposed
phase-out. The new requirements for in-lieu fee programs reflect many
of the comments received.) These specific modifications and additions
are discussed in more detail in part VI of the preamble.
With these modifications, we believe that today's rule achieves a
proper balance of binding requirements and discretion. The rule will
help improve the quality and success of compensatory mitigation, while
providing flexibility necessary to ensure that compensatory mitigation
requirements for a particular DA permit appropriately offset authorized
impacts. Some discretionary language is necessary for this rule because
resource types, project impacts, and compensatory mitigation practices
vary widely across both projects and regions of the country. District
engineers need to take such variations into account, including
variations in state and local requirements that affect the
implementation and long-term management of compensatory mitigation
projects. For example, laws and regulations governing real estate
instrument and financial assurances vary from state to state. In
addition, practices for restoring, establishing, and enhancing aquatic
resources vary by resource type and by region. For these reasons,
discretionary language is used where appropriate to promote both
regulatory efficiency and project success, and to ensure that required
mitigation is practicable.
4. Watershed Approach
Many comments addressed the watershed approach included in the
proposal. A majority of commenters expressed support for the use of a
watershed approach to compensatory mitigation. They noted that use of a
watershed approach would improve the sustainability of compensatory
mitigation projects and ensure that they are better integrated with the
needs of the watershed. However, some commenters believed that
additional specificity in the requirements relating to the use of a
watershed approach was needed. For example, commenters requested
clarification regarding use of the watershed approach in the absence of
a watershed plan, parameters needed to implement a watershed approach,
and the definition of the terms ``watershed,'' ``watershed plan'' and
``watershed approach.''
Other commenters opposed the watershed approach described in the
proposed rule. Some were particularly concerned about use of the
watershed approach in the absence of a detailed watershed plan, arguing
that this could lead to inappropriate compensatory mitigation decisions
and the cumulative loss of wetland functions. Others were more
concerned about the analytical burden on permit applicants of
developing watershed plans or justifying mitigation projects in terms
of wider watershed considerations. Still others thought the concept was
too ambiguous to be included in a regulation.
The agencies continue to believe that the watershed approach
provides the appropriate framework for making compensatory mitigation
decisions, but have made a number of changes to address specific
comments. The primary objective of the watershed approach included in
today's rule is to maintain and improve the quantity and quality of
wetlands and other aquatic resources in watersheds through strategic
selection of compensatory mitigation project sites. The watershed
approach accomplishes this objective by expanding the informational and
analytic basis of mitigation project site selection decisions and
ensuring that both authorized impacts and mitigation are considered on
a watershed scale rather than only project by project. This requires a
degree of flexibility so that district engineers can authorize
mitigation projects that most effectively address the case-specific
circumstances and needs of the watershed, while remaining practicable
for the permittee. In response to the concern about additional burden
on permittees, the agencies recognize that the level of data and
analysis appropriate for implementing the watershed approach must be
commensurate with the scale of the project, and that there will be
situations, particularly for projects with small impacts, where it
would not be cost-effective to utilize a watershed approach. For this
reason, the regulations at Sec. 332.3(c)(1) [Sec. 230.93(c)(1)],
state that the watershed approach is to be used to the extent
appropriate and practicable, and the regulations at Sec.
332.3(c)(3)(iii) [Sec. 230.93(c)(3)(iii)] state that the level of
information and analysis must be commensurate with the scope and scale
of the authorized impacts and functions lost.
We recognize that there are many different types of watershed plans
that have been developed for purposes other than aquatic resource
restoration, establishment, enhancement, and/or preservation activities
and that such plans may be of limited use in making compensatory
mitigation decisions. For example, some watershed plans are conceived
to guide development activities or the placement of storm
[[Page 19599]]
water infrastructure. Therefore, we have modified Sec. 332.3(c)(1)
[Sec. 230.93(c)(1)] to state that the district engineer will determine
whether a given watershed plan is appropriate for use in the watershed
approach for compensatory mitigation.
We further recognize that in many areas, watershed plans
appropriate for use in planning compensatory mitigation activities have
not been developed. Therefore, consistent with the 2001 NRC Report, the
watershed approach described in this final rule does not require a
formal watershed plan. Although it would always be preferable to have
an appropriate watershed plan, we believe that implementing a watershed
approach to the degree practicable, even without a watershed plan, can
improve compensatory mitigation site selection and project
implementation. For example, the use of appropriately sited mitigation
banks can support a watershed approach without using watershed plans.
In the absence of an appropriate watershed plan, the watershed approach
should be based on a structured consideration of watershed needs and
how wetlands and other types of aquatic resources in specific locations
will address those needs. To implement this approach, district
engineers will utilize the considerations specified in Sec.
332.3(c)(2) [Sec. 230.93(c)(2)] and available information on watershed
conditions and needs, as described in Sec. 332.3(c)(3) [Sec.
230.93(c)(3)].
In response to public input, we have revised the definition of
``watershed plan'' to clarify the kinds of plans appropriate for use in
making compensation decisions. We have also added definitions for the
terms ``watershed'' and ``watershed approach'' at Sec. 332.2 [Sec.
230.92]. The appropriate watershed scale to use for the watershed
approach will vary by geographic region, as well as by the particular
aquatic resources under consideration. Since using a watershed approach
is not appropriate in areas without watershed boundaries, such as
marine waters, we have also added a provision (Sec. 332.3(c)(2)(v)
[Sec. 230.93(c)(2)(v)]) to clarify that other types of spatial scales
may be more appropriate in those areas. To enhance the use of the
watershed approach, we have added a sentence to Sec. 332.3(c)(2)(iv)
[Sec. 230.93(c)(2)(iv)] stating that the identification and
prioritization of resource needs should be as specific as possible. We
have also added a provision, stating that a watershed approach may
include on-site compensatory mitigation, off-site compensatory
mitigation, or a combination of on-site and off-site compensatory
mitigation (see Sec. 332.3(c)(2)(iii) [Sec. 230.93(c)(2)(iii)]).
We have revised Sec. 332.3(c)(3) [Sec. 230.93(c)(3)] to clarify
that district engineers will use available information for the
watershed approach. That available information will address watershed
conditions and needs and include potential and/or priority sites for
compensatory mitigation projects. We have also indicated potential
sources of appropriate information, such as wetland maps, soil surveys,
aerial photographs, local ecological reports, etc. Public input on the
watershed approach and our response to this input including the above
mentioned modifications are discussed in more detail in part VI of the
preamble.
5. In-Lieu Fee Programs
Many commenters, including many state officials, opposed the
proposed phase-out of in-lieu programs. These commenters indicated that
in certain areas (especially rural and coastal regions, the West, and
Alaska) there are few mitigation banks and little potential for their
development, and that permittee-responsible compensatory mitigation is
often impractical. In-lieu fee programs are therefore the best (or
only) option for compensatory mitigation in these areas. Some
commenters also argued that in-lieu fee programs provide important
benefits that other types of mitigation do not, such as a more thorough
consideration of the needs of a watershed and the most appropriate
locations and mitigation types to sustain and enhance its long-term
health. Some commenters representing in-lieu fee programs stated that
if they were held to all of the same standards as mitigation banks,
particularly the requirement to secure project sites before selling any
credits, they would have to cease operation and these benefits would be
lost.
Many of these commenters also acknowledged problems in the current
administration and performance of in-lieu fee mitigation, but stated
that these problems were due to existing requirements and policies (or
the lack thereof) rather than the in-lieu fee concept itself. They
suggested that instead of phasing out in-lieu fee programs, the final
rule should include standards that address these problems and ensure
that in-lieu fee programs do in fact deliver mitigation that
compensates for the impacts associated with the credits they sell.
Commenters noted that the NDAA does not require that these standards be
exactly the same as those for mitigation banks but rather
``equivalent'' to the maximum extent practicable. Some standards for
in-lieu fee programs suggested by commenters included: Limiting the
number of credits that in-lieu fee programs can sell before they have
secured sites, limiting the types of organizations that can be in-lieu
fee sponsors, and establishing financial accounting standards to
improve their accountability for credit fulfillment. A number of
commenters acknowledged that even with significant improvements to in-
lieu fee mitigation, mitigation banks would be more likely to minimize
project uncertainties and temporal losses of aquatic resource
functions. They suggested that the final rule should therefore
stipulate that where the service areas of an in-lieu fee program and a
mitigation bank overlap, the mitigation bank should be the preferred
credit provider.
Other commenters supported the phase-out of in-lieu fee programs as
proposed. These commenters pointed out shortfalls associated with
current administration of in-lieu fee programs noting, for example,
that prices for in-lieu fee credits are often too low and fail to cover
all of the costs necessary to deliver the promised mitigation,
including expenses for program administration, long-term maintenance of
projects, and corrective action. This may result in undercutting of
mitigation bank credit prices, since banks, as commercial ventures,
must charge prices based on the full cost of producing compensation
credits or go out of business. Furthermore, in-lieu fee programs often
require fees from multiple permitted projects before they can initiate
compensation projects, resulting in substantial delays between
permitted impacts and compensation. Several commenters further stated
that it was not fair for in-lieu fee programs to be allowed to continue
to operate with lower or looser standards than mitigation banks and
permittee-responsible mitigation. Commenters also noted that because
credit release schedules for mitigation banks are tied to performance,
they have a financial incentive to produce timely, successful
mitigation that is lacking for in-lieu fee programs.
After carefully considering all comments received, the agencies
have decided to retain in-lieu fee programs in today's rule as a
separate and distinct mechanism for providing compensatory mitigation
for DA permits. We believe they can fulfill an important role in
providing effective mitigation in circumstances where mitigation banks
and permittee-responsible mitigation are not practicable. At the same
time, we have included a number of new requirements for in-lieu fee
programs to improve accountability and
[[Page 19600]]
performance, based to a large extent on existing practice at the most
successful currently-operating in-lieu programs. Specifically, we have
added a requirement for a compensation planning framework at Sec.
332.8(c) [Sec. 230.98(c)] which details how the in-lieu fee program
will select and secure project sites and implement mitigation projects
in a watershed context. The framework is essentially a watershed plan
designed to support resource restoration, and must include an analysis
of historic aquatic resource losses and current conditions, a
description of the general amounts, types and locations of aquatic
resources the program will seek to provide and a prioritization
strategy for selecting and implementing compensatory mitigation
activities. This type of advanced planning will ensure that in-lieu fee
programs are guided by a thorough understanding of the needs,
opportunities, and challenges of the areas in which they operate, which
will allow them to select and design more successful projects and
better estimate full project costs.
The final rule also requires that the in-lieu fee program
instrument establish a cap on the number of credits that the program
can sell before securing a compensatory mitigation project site and
conducting aquatic resource restoration, establishment, enhancement,
and/or preservation at that site. These are defined as ``advance
credits'' (see Sec. 332.2 [Sec. 230.92]) and the rules for their
establishment and use are provided at Sec. 332.8(n) [Sec. 230.98(n)].
The rule also limits sponsorship of in-lieu fee programs specifically
to governmental or non-profit natural resource management entities (see
definition of ``in-lieu fee program'' at Sec. 332.2 [Sec. 230.92]).
District engineers and Interagency Review Team (IRT) members should
carefully evaluate the capabilities and demonstrated performance of
these natural resource management entities prior to approving them as
in-lieu fee program sponsors in order to minimize the risks associated
with allowing advance credit sales.
We have added a provision at Sec. 332.8(i) [Sec. 230.98(i)]
requiring in-lieu fee programs to establish a program account,
including criteria for the management of this account. Funds collected
from permittees, including interest on these funds, may only be used
for the selection, design, acquisition, implementation, and management
of in-lieu fee projects, with a small percentage allowed for
administrative costs.
Provisions at Sec. 332.8(d)(6)(iv)(B)-(C) [Sec.
230.98(d)(6)(iv)(B)-(C)] and Sec. 332.8(o)(5)(ii) [Sec.
230.98(o)(5)(ii)] were included to improve the estimation of in-lieu
fee project costs and the establishment of adequate fee schedules.
Today's rule ensures that the review, approval, and oversight of in-
lieu fee programs is subject to the same level of interagency and
public review as mitigation banks (see Sec. 332.8(d) [Sec.
230.98(d)]). Similarly, today's rule requires in-lieu fee projects to
develop mitigation plans that meet the same standards as those
applicable to mitigation banks and permittee-responsible projects (see
Sec. 332.8(j) [Sec. 230.98(j)]).
Properly organized in-lieu fee programs which comply with the new
requirements established by today's rule should actively support a
watershed approach to compensatory mitigation, and will help advance
goals for protecting and restoring aquatic resources within watersheds,
especially in areas where there are no mitigation banks.
We recognize that even with these improvements to in-lieu fee
programs, there will likely be less temporal loss of resources
associated with mitigation provided by banks than with mitigation
provided by in-lieu fee programs. We have therefore established a
hierarchy in Sec. 332.3(b) [Sec. 230.93(b)] for selecting the type
and location of compensatory mitigation with an explicit preference for
mitigation bank credits over advance credits from in-lieu fee programs
when appropriate bank credits are available for use. Public input
regarding in-lieu fee mitigation as well as all of these specific
modifications and additions are discussed in more detail in parts III
and VI of the preamble.
C. Other General Comments
Some commenters stated that the proposed rule should be revised to
incorporate principles of ecological restoration and landscape ecology.
Other commenters said that the proposed rule fails to recognize the
dynamic nature of wetlands and provides disincentives for active
management of wetland resources in ways that would benefit society. A
few commenters remarked that the proposed rule does not adequately
address compensatory mitigation for marine habitats or aquatic species.
We have revised the final rule to better incorporate principles of
ecological restoration and landscape ecology, for example, at Sec.
332.3(d) [Sec. 230.93(d)], which specifies detailed factors for the
district engineer to use in determining ecological suitability for
mitigation project sites. Section 404 directs the Corps to issue
permits for discharges of dredge and fill material, not to promote
``active management'' of wetlands. To the extent that active management
may provide an alternative to permitted discharges, permit applicants
should consider such approaches as part of the avoidance and
minimization mitigation sequencing. Also, both permitted projects and
compensatory mitigation projects may require on-going active management
to protect resources, and conditions for such management may be
incorporated into DA permits where appropriate. Finally, management of
existing wetlands may itself involve discharges requiring DA permits,
and in this case permit conditions will address issues related to the
management and protection of affected resources, in accordance with
applicable regulations, including this rule. We disagree that the rule
does not adequately address marine habitats and species. While the
specific projects needed to mitigate impacts to marine resources may be
different, the procedural and analytical framework established in the
final rule applies equally well to freshwater and marine resources.
Several commenters said that the proposed rule did not address
concerns raised in recent reports on compensatory mitigation in the
Corps Regulatory Program that were issued by the Government
Accountability Office (GAO). Some commenters said that the proposed
rule incorporates some of GAO's recommendations, but expressed
skepticism that the Corps has the resources to implement those
provisions of this rule. These commenters asserted that the Corps needs
to make compensatory mitigation compliance a high priority to ensure
effective replacement of wetland acreage and function lost as a result
of permitted activities.
One GAO report was issued in May 2001, and was entitled ``Wetlands
Protection: Assessments Needed to Determine Effectiveness of In-Lieu
Fee Mitigation.'' Another GAO report, ``Wetlands Protection: Corps of
Engineers Does Not Have an Effective Oversight Approach to Ensure That
Compensatory Mitigation Is Occurring'' was issued in September 2005. We
have incorporated many of the recommendations of these GAO reports into
this rule, by requiring the use of enforceable permit conditions,
performance standards, and third-party agreements. In addition, this
rule states that it supersedes certain agency guidance on compensatory
mitigation, specifically the 1995 mitigation banking guidance, the 2000
in-lieu fee guidance, and Regulatory Guidance Letter (RGL)
[[Page 19601]]
02-02. That RGL provides guidance on compensatory mitigation projects
for aquatic resources impacted by activities authorized by DA permits.
This rule also clarifies the requirements for compensatory mitigation,
as recommended by GAO. We agree that taking actions to determine
compensatory mitigation compliance should be a high priority, and have
provided general principles for establishing ecological performance
standards and criteria. Corps districts and EPA regional offices will
continue to work with other federal and state resource agencies to
develop and refine specific performance standards and criteria to
evaluate and ensure success of compensatory mitigation projects in
their geographic areas of responsibility. These performance standards
and criteria will take into account regional variations in aquatic
resource characteristics, functions, and services.
A number of commenters discussed ad hoc mitigation, which has been
defined in various reports as cash donations made by a permittee to
satisfy their mitigation requirements. The majority of commenters
stated that ad hoc mitigation should not be approved unless it meets
the requirements specified in the rule. One commenter said that ad hoc
mitigation is often unsuccessful because there is no evaluation process
and no oversight for the compensatory mitigation that is to be
completed, and there is no way to track the compensatory mitigation
that was to occur. One commenter proposed that ad hoc mitigation should
be allowed on a one-time basis where a compensatory mitigation
opportunity and need arise concurrently, but are not of such a scale as
to justify going through the review process in Sec. 332.8 [Sec.
230.98]. Two of these commenters discussed ad hoc mitigation
arrangements and stated that the Corps needs to improve record-keeping
for ad hoc mitigation activities.
The May 2001 GAO report defines ad hoc mitigation as involving
``mitigation payments from developers to third parties that are neither
mitigation banks nor considered by the Corps to be in-lieu fee
organizations.'' For the purposes of this rule, ad hoc mitigation is
considered to be a form of permittee-responsible mitigation. For a
mitigation bank or in-lieu fee program to be used to provide
compensatory mitigation for DA permits, and to have the responsibility
for providing the required compensatory mitigation transfer from the
permittee to the mitigation bank sponsor or in-lieu fee sponsor, there
must be a mitigation banking or in-lieu fee program instrument approved
by the district engineer in accordance with the procedures in this
final rule (see Sec. 332.8 [Sec. 230.98]). Any other compensatory
mitigation arrangements are considered to be permittee-responsible
mitigation where the permittee retains responsibility for providing the
required compensatory mitigation, and this will be reflected in the
terms of the DA permit. Permittee-responsible mitigation also includes
any ad hoc payments made to governmental or non-governmental
organizations that are not in accordance with the terms of an approved
in-lieu fee program instrument. When a governmental or non-governmental
organization accepts an ad hoc payment from a permittee, that
organization is in essence acting as a contractor to provide the
compensatory mitigation for that permittee, and the permittee retains
responsibility for any long-term protection and/or management of the
compensatory mitigation project.
We also recognize the importance of record-keeping for compensatory
mitigation projects, and have established procedures for using permit
conditions, instruments, and ledgers to track the implementation and
success of those projects. The Corps will also track permitted impacts
and compensatory mitigation through databases, such as the OMBIL
Regulatory Module (ORM-2), which is the primary automated information
system for the Corps Regulatory Program, and the Regional Internet Bank
Information Tracking System (RIBITS). All 38 Corps districts are now
using ORM-2, which will help standardize data collection in the Corps
Regulatory Program. It will also be used to collect data to assess the
performance of the Regulatory Program. RIBITS is an automated
information system with an interactive Web site. It is currently
designed to track the status of mitigation banks and to provide up-to-
date information to mitigation bank sponsors and customers. We are also
considering modifying RIBITS to track the status of in-lieu fee
programs. Use of RIBITS is currently limited to several districts, but
we are planning to make RIBITS the standard tool for tracking sale and
production of compensatory mitigation credits by third parties.
Several commenters expressed appreciation that the agencies
incorporated many of the recommendations made in the 2001 NRC Report. A
few commenters acknowledged that the proposed rule prioritized the
location and types of compensatory mitigation projects in accordance
with the NRC's recommendations. However, they said that they disagree
with the NRC's recommendations and suggested that the agencies
establish a preference for on-site and in-kind mitigation in the final
rule. They said that a preference for on-site and in-kind compensation
would better support a ``no net loss'' goal for aquatic resources.
We disagree that the rule should establish a preference for on-site
compensatory mitigation, because the failure rate for such projects is
quite high. On-site compensatory mitigation activities, especially
wetland restoration or establishment, are particularly sensitive to
land use changes. Land use changes often alter local hydrology.
Establishing appropriate hydrology patterns (i.e., duration and
frequency) to support the desired aquatic habitat type is a key factor
in successfully restoring or establishing those habitats. In many
cases, there are circumstances in which on-site mitigation is neither
practicable nor environmentally preferable. Under the watershed
approach, it may be desirable to require some on-site mitigation
measures to address water quality and quantify functions, and to
require off-site mitigation to compensate for habitat functions.
We do agree that, in general, in-kind mitigation is preferable to
out-of-kind mitigation because it is more likely to compensate for the
functions and services lost at the impact site. The rule states that
the compensatory mitigation should be of a similar type (e.g., Cowardin
and/or hydrogeomorphic class) to the affected aquatic resource, unless
the district engineer determines using the watershed approach described
in the rule (see Sec. 332.3(c) [Sec. 230.93(c)]) that out-of-kind
compensatory mitigation will better serve the aquatic resource needs of
the watershed. The term ``in-kind'' in Sec. 332.2 [Sec. 230.92] is
defined to include similarity in structural and functional type;
therefore, the focus of the in-kind preference is on classes of aquatic
resources (e.g., forested wetlands, perennial streams). However, all
compensatory mitigation projects should provide a high level of
functional capacity, even when compensating for degraded or low-quality
resources. Replacement ratios may be used to adjust for the relative
quality of impact sites and mitigation projects, where appropriate.
With this rule, we are moving towards greater reliance on functional
and condition assessments to quantify credits and debits, instead of
surrogates such as acres and linear feet. We believe that more frequent
use of such assessment methods will help improve the quality of aquatic
resources in the United States.
[[Page 19602]]
For example, in a case where a project proponent is proposing to
fill a degraded three acre wetland that provides one unit of wetland
function per acre (as determined by a rigorous functional assessment
method), the loss of that wetland may in some cases be offset by a
compensatory mitigation project that provides fewer acres of high-
functioning wetlands (as determined by the same functional assessment
method). Conversely, where the impact is to a high-value resource, more
than one-to-one replacement on an acreage basis may be necessary just
to achieve functional equivalence between the impact and mitigation
sites. Note that replacement ratios may also be greater than one-to-one
for other reasons, such as to address uncertainty of success or
temporal losses.
One commenter said that the Corps should be the principal agency
administering the 404 wetlands regulatory program. The commenter stated
that the involvement of multiple agencies in wetlands regulation only
hinders the overall efforts of the Corps Regulatory Program. This
commenter also stated that the Corps should build a stronger, more
predictable compensatory mitigation program to both enhance
environmental protection and provide a measure of certainty to both
regulatory staff and permit applicants.
While we agree that the section 404 regulatory program should be as
streamlined and efficient as possible, we do not agree that the
involvement of other agencies necessarily hinders that efficiency.
Today's rule will foster greater efficiency and predictability in the
interagency process by providing clear deadlines for action on all
types of compensatory mitigation, particularly banking and in-lieu fee
program instruments. We note that the participation of other agencies
in the section 404 permit process is required by various laws,
regulations, and legally-binding agreements. For example, section
404(b) of the Clean Water Act specifically authorizes EPA to develop
guidelines for the identification of disposal sites for dredged or fill
material (the 404(b)(1) Guidelines), which provide substantive
environmental criteria for avoidance, minimization and compensatory
mitigation. The EPA is authorized by section 501(a) of the Clean Water
Act to conduct any rulemaking necessary to carry out their functions
under that act. As another example, the Fish and Wildlife Coordination
Act and other statutes require consultation with the U.S. Fish and
Wildlife Service and the National Marine Fisheries Service for
activities that control or modify waterbodies.
Many commenters stated that the proposed rule is inconsistent with
existing national regulations, and one commenter said that the proposed
rule is inconsistent with regulations at 33 CFR 320.4(r), as well as
the ``Mitigation'' general condition for the nationwide permits and
other compensatory mitigation guidance documents that apply to the
Corps Regulatory Program. This commenter also stated that the 404(b)(1)
Guidelines provide no authority for requiring compensatory mitigation
for unavoidable adverse impacts after all appropriate and practicable
minimization has been required.
The agencies disagree with these comments. The Corps general
mitigation policy at 33 CFR 320.4(r) describes types of mitigation,
including avoiding, minimizing, rectifying, reducing, or compensating
for resource losses. Since that provision was last promulgated in 1986,
there have been policy changes that have resulted in the Corps
requiring compensatory mitigation for more activities, not just those
that result in significant resource losses. For example, when the
nationwide permit regulations were revised in 1991, a provision was
added (33 CFR 330.1(e)(3)) which stated that compensatory mitigation
could be required by a district engineer to ensure that an NWP activity
results in minimal adverse environmental effects. The final rule issued
today also specifically states that it does not alter the regulations
of 33 CFR 320.4(r), and that it supersedes certain guidance documents
on compensatory mitigation. What is generally understood to be
compensatory mitigation today (i.e., the restoration, establishment,
enhancement, and/or preservation of aquatic resources) is in the
404(b)(1) Guidelines as an action to minimize adverse effects on
populations of plants and animals (see 40 CFR 230.75(d)). Compensatory
mitigation may also be required to satisfy other legal requirements, as
a result of the public interest review process, or to compensate for
other resource losses. As indicated in the preamble to this rule,
today's rule does not affect the determination as to when compensatory
mitigation is required, only the requirements for conducting such
mitigation once the district engineer determines that it is necessary.
As stated in the preamble to the March 28, 2006, proposed rule (71 FR
15524-15525), this rule does not change the threshold for determining
when compensatory mitigation is required; instead it focuses on where
and how compensatory mitigation will be provided. The threshold for
determining when compensatory mitigation is required for DA permits is
generally addressed through 33 CFR 320.4(r) and specifically for the
nationwide permits at 33 CFR 330.1(e)(3).
A number of commenters stated that the proposed rule gives
preference to certain groups. One commenter said that the proposed rule
promotes the interests of non-profit organizations, government
agencies, and academics, instead of restoration practitioners and
entrepreneurs. One commenter remarked that wetland mitigation and
market-based approaches have the potential to expand land conservation
practices through private investments and to provide additional
economic incentives to help retain working farms and forests. Another
commenter said that a market-driven approach will help small developers
and allow for increased entrepreneurship in compensatory mitigation.
One commenter said that the proposed rule would damage the economic
viability of wetland mitigation banking and encourage losses of
wetlands in floodplains, which would exacerbate property damage caused
by flooding.
Under this rule, any entity, whether a non-profit group, government
agency or commercial entrepreneur, has the opportunity to develop and
implement compensatory mitigation projects. We believe we have complied
with the statute requiring the promulgation of this rule, by maximizing
available credits while raising requirements and standards to help
ensure ecological performance. When evaluating compensatory mitigation
options, district engineers will consider what would be environmentally
preferable to offset the authorized impacts. In many instances, the
environmentally preferable compensatory mitigation will be in the form
of mitigation banks or in-lieu fee programs because they usually
involve consolidating compensatory mitigation projects and resources,
and providing financial planning and scientific expertise. They may
also reduce temporal losses of functions and reduce uncertainty over
project success. We have added a provision that in-lieu fee sponsors
must be governmental or non-profit organizations. We believe this is
appropriate in light of the fact that only in-lieu fee programs are
allowed to sell advance credits, before a site has been secured or a
specific mitigation project reviewed and approved.
We disagree that the rule will adversely affect the economic
viability of mitigation banks and encourage
[[Page 19603]]
losses of wetlands in floodplains. By further clarifying the
requirements and timelines for mitigation bank approval, and by
establishing a preference for mitigation bank credits we believe the
final rule will in fact enhance the economic viability of mitigation
banks. Since the focus of this rule is on compensatory mitigation,
avoidance and minimization of impacts to wetlands located in
floodplains is more appropriately addressed through the application of
Subpart B of the 404(b)(1) Guidelines, compliance with Executive Order
11988 (Floodplain Management), and compliance with the floodplain
management requirements of the Federal Emergency Management Agency and
state and local governments.
One commenter said that the rule will slow down the permitting
process for new energy projects. Three commenters stated that section
1221 of the Energy Policy Act of 2005 (Pub. L. 109-58), through section
216(h) of the Federal Power Act, requires federal permit decisions
associated with transmission facilities to be made in one year, unless
it is not possible under other laws. These commenters said that the
one-year time frame applies to DA permits.
This final rule will not have an adverse effect on processing times
for DA permits that authorize the construction of transmission
facilities. The rule promotes the development of mitigation banks and
in-lieu fee programs, which can be used to provide compensatory
mitigation for energy projects that require DA permits. Securing
credits from third-party mitigation providers can help shorten permit
processing times, because there is no need to review and approve site-
specific mitigation plans for permittee-responsible mitigation. In
cases where appropriate third-party mitigation credits are not
available, the review and approval of permittee-responsible mitigation
projects should be more timely, because this rule establishes clear
guidelines and requirements for those compensatory mitigation projects.
This rule does not change the circumstances under which compensatory
mitigation is required, so additional compensatory mitigation will not
be required for energy projects.
Wetland Protection
Many commenters said that the proposed rule does not adequately
protect the Nation's wetlands, does not support the goal of ``no net
loss'' of wetlands, does not support the objective of the Clean Water
Act to maintain the chemical, physical, and biological integrity of
wetlands, and will result in a significant loss of wetland acreage
across the country. Several commenters recommended that the final rule
include provisions to make it more difficult to fill wetlands to ensure
no net loss of wetland acreage and functions. However, one commenter
said that although current federal regulations could be improved, those
regulations are sufficient to ensure no net loss of wetlands in
Florida. One commenter stated that over 33,000 acres of wetlands have
been lost last year alone, and, with this much destruction, it is
obvious that the agencies are not requiring enough avoidance of wetland
impacts. Two commenters said that of the three goals stated in the
proposed rule (i.e., to improve quality of mitigation, improve
regulatory efficiency, and ensure opportunities for federal agency
participation in mitigation banks), only one goal is focused on natural
resource protection. These commenters also stated that regulatory
efficiency should not be pursued at the expense of wetland protection.
A primary objective of the Clean Water Act is to restore and
maintain the chemical, physical and biological integrity of the
Nation's waters. Through its permit program, the Corps helps protect
the aquatic environment by requiring project proponents to avoid and
minimize regulated impacts to wetlands and other waters of the United
States to the extent practicable. This rule was specifically
promulgated to address compensatory mitigation. For activities that
require a section 404 permit, avoidance and minimization are addressed
through application of Subparts A through H of the 404(b)(1) Guidelines
at 40 CFR part 230. Prior to issuing a permit, the Corps must evaluate
the proposed work and its impacts on the aquatic environment and other
public interest review factors, and determine whether the proposed work
is in the public interest. Compensatory mitigation may be required to
ensure that the proposed work is not contrary to the public interest
and, if the activity involves discharges of dredged or fill material
into waters of the United States, is in compliance with the 404(b)(1)
Guidelines. The rule does not change or weaken existing regulatory
requirements to avoid and minimize impacts to wetlands.
In fiscal year 2005, the Corps authorized 20,754 acres of wetland
impacts, and required 56,693 acres of compensatory mitigation through
wetland restoration, establishment, enhancement, and preservation to
offset those unavoidable impacts. From fiscal years 2001 to 2005, the
mean annual wetland impacts authorized were 23,000 acres, and the mean
annual wetlands compensatory mitigation required was 50,000 acres.
This rule incorporates many of the recommendations of the 2001 NRC
Report, as well as appropriate recommendations from other evaluations
of wetland compensation, to provide measures to help improve the
success of wetland compensatory mitigation projects. By improving the
success of these projects, the Corps Regulatory Program will help
support the Administration's goal of increasing wetland acreage and
quality. We believe that the rule will both improve the quality and
success of compensatory mitigation and increase predictability and
efficiency in the regulatory program.
Three commenters recommended adding a provision to the rule from
the 1990 mitigation Memorandum of Agreement (MOA) between the Army and
EPA stating that no overall net loss of wetlands may not be achieved
for each and every permit action, but the Corps would achieve this goal
programmatically. One commenter noted that the ``no net loss'' goal for
wetlands is required by statute for the Corps Civil Works Program (see
33 U.S.C. 2317(a)(1)).
That specific provision of the 1990 Mitigation MOA has not been
superseded by this final rule. It is important to understand that the
1990 Mitigation MOA applies only to standard permits. It is not
practicable or appropriate to require compensatory mitigation for every
standard permit, or for every general permit authorization. The
requirements of 33 U.S.C. 2317(a)(1) are more accurately presented as
achieving an interim goal of ``no overall net loss'' of the nation's
remaining wetlands base as measured by acreage and function, with a
long-term goal of increasing the quality and quantity of the nation's
wetlands. That provision of the United States Code applies to water
resource development projects undertaken through Corps Civil Works
program, not to activities authorized by DA permits.
Two commenters stated that developers should not be able to provide
wetlands compensatory mitigation through mitigation banks or in-lieu
fee programs. One commenter said that wetland buffers reduce adverse
impacts of human disturbance on wetland habitats. Two commenters
recommended emphasizing voluntary economic incentives and balancing
economic needs with those of wetlands protection.
Under this rule, developers will be able to provide compensatory
mitigation through mitigation banks, in-lieu fee
[[Page 19604]]
programs, or permittee-responsible mitigation. In many cases, the
environmentally preferable compensatory mitigation will be provided
through mitigation banks or in-lieu fee programs because they typically
involve consolidating compensatory mitigation projects and resources,
and providing financial planning and scientific expertise. For a
particular activity requiring a DA permit, the Corps may consider any
appropriate form of compensatory mitigation, as long as it complies
with these regulations. We agree that wetland buffers often help ensure
the long term viability of wetlands, and the rule promotes the use of
such buffers. There are some federal programs that provide economic
incentives to protect wetlands, but those programs have limited
availability. Section 404 of the Clean Water Act is not structured to
provide voluntary economic incentives for avoiding regulated activities
in wetlands. Instead, it relies on a regulatory approach to wetland
protection.
Aquatic Resource Functions, Services, and Values
A number of commenters discussed the concepts of ``functions,''
``services,'' and ``values'' that were in the proposed rule. Two
commenters suggested removing ``values'' and ``services'' from the
rule. One commenter said there is disagreement on the definitions of
these terms, and the rule should instead require a minimum one-to-one
acreage ratio. One commenter said that functional capacity appears to
represent natural wetland potential better than society-driven values
and services and should be emphasized more. Another commenter said that
the rule should explicitly require replacement of lost ``values,''
because a shift from a broad concept of ``function and value'' to a
narrow concept of function alone ignores social services and values
that are important to the public interest, such as protection from
natural hazards. One commenter said that the phrase ``non-use values
such as biodiversity'' will subject the regulatory agency and the
regulated community to uncertainty and litigation as opponents who
object to a project challenge the details of an impact. One commenter
suggested that functions, values, and services found in a given wetland
can best be measured after the wetland conditions are established using
biological indices, and that a framework or methodology is needed.
The terms ``functions,'' ``services,'' and ``values'' have been
used in various documents to describe the attributes of aquatic
resources that are being replaced through compensatory mitigation. We
included definitions for all three terms in the proposed rule. After
considering the comments received in response to these concepts, we
have eliminated the term ``values'' from the final rule because the
term ``services'' is currently being used in the ecological literature
to relate to the human benefits that are provided by an ecosystem. The
concept of ecosystem services provides a more objective measure than
``values'' of the importance of the functions performed by the
ecosystem to human populations. Ecosystem services is a useful concept
for assessing the public interest, an important consideration in the
Corps Regulatory Program. Consideration of ``services'' provided by
aquatic resources is usually qualitative, and can be accomplished
through evaluations of compensatory mitigation options, including
siting those projects near human populations.
Using the concept of ``services'' also allows us to focus on how
the general population benefits from ecological functions, instead of
whether potentially affected parties may or may not ``value'' a
particular aquatic resource and the functions it provides. The term
``values'' is more subjective, since a particular ecosystem service may
be perceived to be valuable by some individuals but not others. The
term ``values'' can also be read to imply monetary valuation, which is
difficult for most aquatic resource functions and is not generally
practical for most decisions. Therefore, we believe the regulatory
program is appropriately focused on protecting ``functions'' (the
physical, chemical and biological processes that occur in aquatic
resources) and ``services'' (the benefits to humans that result from
these functions). Accordingly, we have eliminated the term ``values''
from the rule, including the reference to ``non-use values such as
biodiversity.'' However, biodiversity is a potential service that some
resources may provide.
The agencies have a long-standing policy of achieving no overall
net loss for wetland acreage and function. Simply requiring one-to-one
acreage replacement may not adequately compensate for the aquatic
resource functions and services lost. Presently, there are methods that
can be used by district engineers to assess aquatic resource functions
or condition, such as hydrogeomorphic assessment methods and indices of
biological integrity. There are efforts being undertaken to develop
methods to assess ecosystem services, such as those that use indices of
wetland function to reflect the services provided by wetlands.
A number of commenters expressed concern that offsite mitigation
can lead to transfer of wetland ecosystem services from urban to rural
areas. However, one commenter said that the rule should not be written
for the purpose of preventing urban wetland values from migrating to
rural areas because local jurisdictions have other means for preventing
this (e.g., zoning ordinances, eminent domain). Another commenter
stated that because of a shortage of suitable sites in populated areas,
it may not be possible to establish ecologically viable mitigation
banks in certain heavily urbanized areas. This commenter said that
mitigation banks in urban areas should be allowed to generate more
credit per unit of restored resource to make these sites financially
feasible.
We recognize that aquatic resources in urban settings can provide
important functions and services, and we believe it is important that
urban areas not become devoid of aquatic resources simply because it is
more difficult to successfully restore or establish aquatic habitat in
developed areas, or to obtain suitable compensatory mitigation project
sites. However, in certain situations self-sustaining and ecologically
successful aquatic resource restoration or establishment projects may
not be feasible in urban areas because of changes in land use and the
resulting impacts to local surface hydrology and groundwater. In these
types of situations, the rule allows compensatory mitigation for
impacts to urban wetlands to be conducted in rural areas if the
applicable requirements of the rule and the Section 404(b)(1)
Guidelines are met. Under the watershed approach adopted in the final
rule, district engineers may require compensatory mitigation at more
than one site. For example, compensatory mitigation may be required on-
site to offset losses of water quality and flood storage functions,
while off-site compensation may be required to offset losses of habitat
functions. The siting of mitigation banks is dependent upon potential
mitigation bank sponsors securing land suitable for compensatory
mitigation projects. Such land may not be available in urban areas at a
price, and a rate of return on that investment, that is acceptable to
the sponsor. Credit valuation must be based on the ecological functions
and services provided by the compensatory mitigation project, not the
difficulty or cost of siting and constructing it. However, where
appropriate, district engineers may consider the relative
[[Page 19605]]
ecological value of scarce aquatic resources in urban areas (at both
the impact and mitigation sites) in determining appropriate
compensation ratios. While preservation may be the most appropriate
form of compensatory mitigation in urban areas in some cases, we
encourage district engineers to look for opportunities to restore or
establish aquatic resources in appropriate areas.
Mitigation Effectiveness
Many commenters stated that compensatory mitigation projects do not
effectively replace natural wetlands, because created wetlands do not
support the variety of native biota found in natural ecosystems, and
there is no guarantee that they will function as natural wetlands. A
large number of commenters also said that the rule fails to address the
fact that many aquatic systems cannot be created. The commenters stated
that there is no scientific data showing that the functions of
headwater streams, and wetlands such as bogs and fens, can be
reproduced, and the proposed rule would weaken protections for these
waters by sanctioning uncertain mitigation practices. Several
commenters stated that the rule does not include major improvements
suggested by the scientific community to improve wetlands compensatory
mitigation.
We have carefully considered reviews and criticisms of compensatory
mitigation projects, especially the 2001 NRC Report, during the
development of this rule. We recognize that there are compensatory
mitigation projects that do not fully succeed in replacing the
functions and services of aquatic resources that are lost or altered as
a result of permitted activities. In an effort to improve compensatory
mitigation practices in the Corps Regulatory Program, we have
incorporated recommendations made in the 2001 NRC Report and other
reports. We believe that this final rule accomplishes that objective
and will help increase the success and quality of aquatic resource
restoration, establishment, and enhancement activities by focusing on
effective site selection at a landscape and watershed scale, requiring
enforceable permit conditions (including ecological performance
standards), requiring monitoring of compensatory mitigation, and
undertaking adaptive management to help ensure success. We recognize
that some types of aquatic resources are difficult to replace, such as
bogs, fens, vernal pools, and streams. In response to these comments,
we have added Sec. 332.3(e)(3) [Sec. 230.93(e)(3)], which emphasizes
avoidance and minimization of impacts to difficult-to-replace
resources, and if such avoidance and minimization is not practicable,
requires that compensatory mitigation be provided through in-kind
preservation, rehabilitation, or enhancement to the extent practical.
Mitigation Mechanisms
Several commenters said that the rule inappropriately treats
permittee-responsible mitigation, mitigation banks, and in-lieu fee
programs as though they are a single vehicle. Two commenters stated
that in cases where a mitigation bank is successfully established, it
should be preferred over permittee-responsible mitigation, but with the
caveat that movement of aquatic resources from urban areas to rural
areas should be monitored and possibly prevented. One commenter
recommended that consolidated mitigation be allowed for linear
facilities such as transmission lines. One commenter suggested the
following clarification be included in the preamble to the final rule:
``This rule is not intended to inhibit market-based opportunities for
trading environmental credits beyond those required for compensatory
wetland mitigation.'' According to that commenter, this would allow
private landowners to sell credits for environmental services gained
beyond those required for compensatory mitigation for DA permits.
This rule establishes, to the extent practicable, equivalent
standards for all types of mitigation, as required by section 314. The
administrative and procedural requirements in the final rule vary,
because there are fundamental differences among mitigation banks, in-
lieu fee programs, and permittee-responsible mitigation. It is not
possible to impose exactly the same requirements on these three sources
of compensatory mitigation, and fulfill the other requirement of
section 314, which is to ``maximize available credits and opportunities
for mitigation.'' To maximize available credits, it is necessary to
recognize the differences among the three sources, and impose
equivalent standards and requirements to the extent practicable. Where
it is not practicable to impose identical requirements, the rule adopts
comparable alternative requirements to help ensure the ecological
success of all types of compensatory mitigation. It is also important
to emphasize that the rule applies equivalent ecological standards to
all three types of compensatory mitigation; the differences are in
procedures and timing of requirements. Site selection for third-party
mitigation should focus on the ecological benefits that the mitigation
banks or in-lieu fee projects will provide to the watershed. This may
or may not result in migration of aquatic resources from urban to rural
areas within that watershed.
For linear projects, such as roads and utility lines, district
engineers may determine that consolidated compensatory mitigation
projects provide appropriate compensation for the authorized impacts,
and are environmentally preferable to requiring numerous small
permittee-responsible compensatory mitigation projects along the linear
project corridor. We do not believe it is necessary to explicitly state
that this rule is not intended to inhibit market-based environmental
credit trading, as the rule only applies to compensatory mitigation
required for DA permits. The ability of private landowners to sell
credits for environmental services gained beyond those required for
compensatory mitigation for DA permits is more appropriately addressed
through other applicable programs.
General Comments on Mitigation Banking
Many general comments were received regarding mitigation banking.
Some commenters encouraged broader use of banks, many others criticized
a perceived preference for mitigation banks in the proposed rule.
Several commenters recommended providing greater incentives for Corps
districts to process commercial mitigation bank requests. One commenter
suggested that this rule include incentives to private landholders to
participate in wetland mitigation banking. Many commenters said the
rule inappropriately promoted the economic needs of the mitigation
banking industry over the needs of watersheds, and that the preference
for mitigation banks over other forms of compensatory mitigation is not
justified.
We recognize that mitigation banking is an important tool for
compensatory mitigation. In this final rule, we have established a
preference for mitigation bank credits, since mitigation banks must
have an approved mitigation plan and other assurances in place before
credits can be provided to permittees (see Sec. 332.3(b)(2) [Sec.
230.93(b)(2)]). Because of the requirements imposed on mitigation
banks, they generally involve less risk and uncertainty than in-lieu
fee programs and permittee-responsible mitigation. This preference is
based on administrative criteria, not ecological criteria. To the best
of our knowledge, there have been few studies by independent parties of
the ecological
[[Page 19606]]
performance of mitigation banks. The studies that we have reviewed have
shown that mitigation banks have experienced many of the same problems
as permittee-responsible mitigation (see the environmental assessment
completed for this rule for summaries of those studies). The ecological
success of mitigation banks, in-lieu fee programs, and permittee-
responsible mitigation is dependent on many of the same factors, such
as selecting appropriate sites and establishing the proper hydrology.
We are not aware of any independent studies on the ecological
performance of in-lieu fee projects. As discussed below, in response to
comments received as a result of the proposed rule, we are retaining
in-lieu fee programs as another form of third-party mitigation, with
robust requirements to help ensure that they provide effective
compensatory mitigation.
The timelines in this rule for processing proposed mitigation banks
and in-lieu fee programs will promote timely decisions on instruments
for these third-party mitigation activities. Participation in
mitigation banks is not limited to entrepreneurs; private landowners
can also submit proposed mitigation banks for consideration. We
recognize that mitigation banks are not currently available in many
areas of the country, or will be able to provide in-kind compensation
for some types of aquatic resources. Therefore, to support a watershed
approach for compensatory mitigation, we are retaining in-lieu fee
programs as a separate form of third-party mitigation in this final
rule, because in-lieu fee programs can provide ecologically beneficial
compensatory mitigation in areas not served by mitigation banks. The
preference for mitigation banks can be overridden by district engineers
on a case-by-case basis if, for example, an approved in-lieu fee
program has released credits available, or the permittee is proposing a
compensatory mitigation project that will restore an outstanding
resource.
Several commenters said that references to economic factors should
be removed from consideration of the mitigation service area and there
should be a greater consideration of the watershed approach, in order
to be more consistent with other forms of compensatory mitigation.
Several commenters stated that overdependence on mitigation banks will
promote less successful compensatory mitigation projects. They cited a
recent study in Ohio that showed that mitigation banks have not
provided successful mitigation for permitted impacts. Several other
commenters noted that there are too many areas in the country that are
underserved by mitigation banks. One commenter recommended non-profit
management of mitigation banking, because non-profit entities can do
more work for the actual cost and their ultimate goal is stream
restoration, not maximizing the amount of profit.
Mitigation banks and in-lieu fee programs must be sited in such a
way as to effectively replace lost aquatic resource functions and
services and address key watershed needs within their service areas.
However, consideration of economic factors is also important in
determining the service area, to make it possible for third-party
mitigation sponsors to develop and implement these projects. If service
areas are too small to support economically viable mitigation banks or
in-lieu fee programs, then we would have to rely on permittee-
responsible mitigation. As discussed in the environmental assessment
for this rule, permittee-responsible mitigation is generally less
likely to be a successful source of compensatory mitigation. However,
to ensure the benefits of third-party mitigation, economic factors
should not supersede ecological considerations in the final service
area determination. The benefits of mitigation banks and in-lieu fee
programs are discussed in Sec. 332.3(a)(1) [Sec. 230.93(a)(1)].
The agencies agree that there are certain advantages to non-profit
and governmental agencies as third-party mitigation sponsors. They do
not need to earn a profit, and are more likely to act in the public
interest. However, commercial banks also have certain advantages. They
have a strong financial incentive to provide effective, timely
mitigation that may be lacking for non-commercial entities. Under
today's final rule, mitigation bank sponsors may be either commercial,
non-profit, or governmental entities, while in-lieu fee program
sponsorship is limited to governmental and non-profit entities.
Some commenters supported the mitigation banking rules, while
others disagreed with the proposal to eliminate in-lieu- fee programs.
Several commenters said that the cost of bank credits should be
established in the context of the marketplace. One commenter stated
that over-promoting mitigation banks could lead to a monopolistic
pricing structure. Numerous commenters asserted that the process of
establishing a mitigation bank should be streamlined. Some commenters
supported the termination of wetland mitigation banks that do not
comply with the Clean Water Act.
In this final rule, we have established criteria and standards for
both mitigation banks and in-lieu fee programs, to maximize the
available credits for use in the Corps regulatory program, as well as
the Corps Civil Works Program and military construction activities.
Credit costs for mitigation banks will be determined by their sponsors.
The rule does attempt to streamline the process for establishing both
mitigation banks and in-lieu fee programs, while recognizing the need
for thorough and effective IRT and public review before credit sales
can begin. To accomplish these goals, the final rule establishes
reasonable deadlines for each step in the review and approval process.
To continue operating, approved mitigation banks and in-lieu fee
programs must comply with the terms of their instruments and these
regulations, and district engineers will take appropriate actions if
credits are not produced in accordance with approved credit release
schedules. This ensures compliance with the Clean Water Act.
Regional Issues
A number of commenters expressed concern about how the rule will be
implemented at the district or regional level, or with regard to
specific issues such as coal mining and port facilities. One commenter
welcomed the improved consistency in Corps implementation of a federal
mitigation regulation with similar standards, timelines, and laws
across states, for administrative reasons rather than biological/
ecological differences. One commenter expressed concern that Corps
districts will develop stricter requirements than those in the rule and
another commenter stated that the rule places too much authority with
the district engineer and not enough with state and local officials who
are more familiar with local needs. Other commenters stated that the
rule could conflict with state or local programs, and if the state
enacts stricter standards for mitigation, the Corps must adopt those
standards into DA permits. Many commenters noted that mitigation
banking is being given preference over other types of mitigation
despite state agency efforts to develop rules to encourage site-
specific in-kind mitigation. In this way, the proposed rule fails to
account for existing state and local regulations. Numerous commenters
stated that coordination between state, local, and federal
administrators is necessary or the rule may undermine functioning state
and local mitigation plans.
[[Page 19607]]
The rule provides district engineers the flexibility to address
permit-specific situations, while ensuring clear and consistent
national standards and requirements. While we expect district engineers
to work closely with their state and local partners, particularly on
Interagency Review Teams, it is essential that this rule is consistent
with Congressional intent as provided by section 314. This rule must
also be consistent with the other Corps regulations at 33 CFR parts 320
through 331, which govern the implementation of the Corps Regulatory
Program. Of course, it would be desirable to have consistent
compensatory mitigation requirements across the various levels of
government that have regulatory authority over a particular project,
but there are usually differences because of variability among agency
authorities, missions, and objectives. State and local governments may
impose different requirements to address local or regional needs or
concerns. Compensatory mitigation decisions made by district engineers
must address federal concerns and authority, and must focus on
compliance with the Clean Water Act and other federal requirements.
There are likely to be cases where the compensatory mitigation
requirements imposed by the Corps are different from those imposed by
state or local governments, but in most cases they are likely to be
similar. All section 404 permits require section 401 water quality
certification by states and tribes. Where states feel that federal
requirements are not stringent enough, they may impose more protective
requirements in accordance with their water quality standards.
In this final rule, preference is given to mitigation banks, if the
authorized impacts occur in the service area of a mitigation bank that
has the appropriate number and resource type of credits available. If
permittee-responsible mitigation is required by a state or local
government with regulatory authorities that are similar to the Corps
under section 404 of the Clean Water Act or sections 9 or 10 of the
Rivers and Harbors Act of 1899, and the mitigation project will
appropriately offset the permitted impacts, then the district engineer
may determine that the permittee-responsible mitigation is acceptable
for the purposes of the DA permit. We encourage coordination among
federal, state, and local governments to avoid duplicate or conflicting
compensatory mitigation requirements, as long as those requirements are
consistent with federal requirements.
Several commenters cited various successful state programs and said
that these programs should not be subject to the additional
administrative burden of IRT review and approval of each separate
mitigation project, and that their success could be disrupted by
application of the rule. A number of commenters discussed the unique
regulatory scheme that applies to mining, stated that the rule does not
recognize the temporary nature of coal mining impacts on streams, and
that the agencies must reconsider application of some of the proposed
requirements, particularly those addressing monitoring and long-term
assurances, in the context of the mining industry's regulatory
environment.
District engineers will continue to work with successful state
programs to streamline the review process to the maximum extent
possible under these regulations. Third-party mitigation projects will
be reviewed by district engineers and other interested members of the
IRT. That interagency review is often helpful in providing different
areas of expertise to evaluate the potential that each compensatory
mitigation project has for successfully offsetting functions lost as a
result of impacts authorized by DA permits. Established relationships
between state programs and their federal counterparts will not be
disrupted by this rule. Corps oversight is necessary to ensure the
continued success of these programs. To help take advantage of
established relationships, we have added a provision to the final rule
that allows the district engineer and any member of the IRT to enter
into a memorandum of agreement to perform some or all review functions
(see Sec. 332.8(b)(5) [Sec. 230.98(b)(5)]). However, the district
engineer cannot delegate his or her authority for final approval of
instruments or other documents.
As for mining activities, this rule does not change how the Corps
will evaluate permit applications or assess the need for compensatory
mitigation for those activities. What constitutes a temporary impact,
and the need for compensatory mitigation, is determined on a case-by-
case basis, depending on the specific circumstances of the project. The
district engineer will determine the appropriate time interval for
distinguishing between temporary and permanent impacts. Monitoring of
compensatory mitigation sites is required and monitoring reports must
be submitted to the district engineer in accordance with the special
conditions of the DA permit or the terms of the mitigation banking or
in-lieu fee program instrument. However, the content and level of
detail of monitoring reports is commensurate with the scale, scope, and
type of the compensatory mitigation project. Requirements relating to
financial assurances and long-term management are determined on a case-
by-case basis, depending on the specific circumstances of the project.
Need for Clarification
Several commenters stated that the proposed rule does not
specifically state whether it applies to general permits. Most of these
commenters argued that the rule should apply solely to individual
permits, and that nationwide and regional general permits should
continue to be governed by 33 CFR part 330, because the requirements of
the proposed rule conflict with the more flexible standards that apply
to the nationwide permits and will greatly limit their utility. Two
commenters stated that the proposed rule should also apply to general
permits. One commenter said that the rule should include provisions
that would eliminate all general permits that do not comply with the
Clean Water Act.
The rule applies to compensatory mitigation required by all DA
permits, including individual and general permits. We have made changes
to this rule to clarify those provisions that are applied differently
to individual permits and general permits. With these modifications,
this rule does not conflict with the regulations at 33 CFR part 330, or
the NWP general condition governing mitigation (i.e., general condition
20 of the 2007 nationwide permits, as published in the March 12, 2007,
issue of the Federal Register (72 FR 11193)). District engineers will
determine specific compensatory mitigation requirements for each
permitted activity based on case-specific considerations, including
whether the activity is being authorized under a general or individual
permit. This rule does not alter the circumstances under which the
district engineers require compensatory mitigation or the threshold for
determining when compensatory mitigation is required for a particular
activity. The compliance of general permits with section 404(e) of the
Clean Water Act is addressed through application of the Corps
regulations governing the issuance of general permits, as well as the
criteria in the 404(b)(1) Guidelines for issuing general permits (40
CFR 230.7) and concerns about those permits that do not relate to
compensatory mitigation are outside the scope of this rule.
One commenter recommended that the rule specify when the term
``project''
[[Page 19608]]
refers to an authorized or permitted activity. One commenter
recommended that the agencies reconsider use of the term
``ecological.'' Many readers may view this only in terms of species
habitat, while in some cases other functions, such as flood control or
water quality improvement, may be as or more important than habitat.
To provide clarity in the final rule, we have used the term
``project'' to refer to compensatory mitigation projects, and used the
terms ``permitted impacts'' and ``authorized impacts'' when referring
to the activities that adversely affect waters of the United States and
may require compensatory mitigation. The term ``ecological,'' as used
in this rule, is intended to be interpreted broadly as dealing with
interrelationships of organisms (including humans) and their
environment. The term ``ecological'' can refer to other features and
functions of aquatic systems besides species habitat. For example,
ecological functions provided by aquatic resources also include
biogeochemical functions, which can help improve water quality. The
agencies agree that water quality and flood control are important
ecological services that should be compensated for when adversely
impacted by permitted activities.
One commenter stated that the proposed rule has implications for
USDA program participants who perform conservation or other activities
in wetlands and for wetland activities conducted on National Forest
System (NFS) lands. The USDA is exploring how it may facilitate its
constituents' involvement in wetland mitigation activities.
This rule specifies compensatory mitigation requirements for DA
permits. Compensatory mitigation projects may be conducted on
agricultural lands and NFS lands. District engineers will consider the
number and type of compensatory mitigation credits that may be provided
through aquatic resource restoration, establishment, enhancement, and/
or preservation activities on these lands, over and above any
environmental improvements that result from USDA programs (see Sec.
332.3(j) [Sec. 230.93(j)]). Resources that are restored, established,
enhanced or preserved to satisfy the requirements of other federal
programs may not also be used for compensatory mitigation for DA
permits, although district engineers may evaluate and approve on a
case-by-case basis situations where a consolidated project is used to
satisfy more that one set of requirements, provided the same resource
is not ``double counted.'' For example, if 10 acres of wetlands were
needed as compensatory mitigation for a DA permit, and 10 acres were
needed for some other federal program, a 20 acre project could be
authorized to fulfill the requirements of both, but the same 10-acre
project could not.
One commenter said that the agencies should use ``District
Commander'' instead of ``district engineer'' when referring to the
person that will implement this rule. The term ``District Commander''
refers to the person in charge of a particular Corps district. The term
``district engineer'' refers to the District Commander and any of his
or her designees (i.e., persons who are authorized to take actions on
his or her behalf). This rule uses the term ``district engineer''
because most day-to-day regulatory decisions are made by the District
Commander's designees.
One commenter stated that subsurface impacts are not addressed,
including subsurface extraction (mining) of oil, gas, ground water, and
the aquifer matrix (e.g., rock, sand, shell). The commenter cited an
example where a Corps permit involved the removal of thousands of acres
(surface area) of aquifer matrix (in that case, limestone), resulting
in greatly increased groundwater flow occurring in the vicinity of
these mine pits despite erroneous assumptions of low flow by the
regulatory agencies.
It is not possible in this preamble to address the details of the
particular case the commenter cites. To the extent that DA
authorization is required for subsurface extraction activities,
district engineers will determine the need for compensatory mitigation
on a case-by-case basis.
Transition to the New Rule
Several commenters recommended that the agencies clarify that the
new regulations apply only to applications submitted after the
effective date of the rules. One commenter added that the rule should
recognize that applicants in the permitting process have expended
substantial resources needed to obtain permits under the current rules,
and those resources have been committed in reliance on the current
rules governing compensatory mitigation. Therefore, the new
requirements should not be applied retroactively to permit applicants
who have invested substantial effort in developing data and plans under
the previous rules and guidance. One commenter requested a clear
statement that the rule does not apply to existing compensatory
mitigation projects under Corps permits.
This final rule will apply to permit applications received after
the effective date of this rule, unless the district engineer has made
a written determination that applying these new rules to a particular
project would result in a substantial hardship to a permit applicant.
In such cases, the district engineer will consider whether the
applicant can fully demonstrate that substantial resources have been
expended or committed in reliance on previous guidance governing
compensatory mitigation for DA permits. Final engineering design work,
contractual commitments for construction, or purchase or long-term
leasing of property will, in most cases, be considered a substantial
commitment of resources. Permit applications received prior to the
effective date will be processed in accordance with the previous
compensatory mitigation guidance.
Need for Additional Guidance
Four commenters requested more detailed guidance on how and when
riparian areas and upland buffers can be used as compensatory
mitigation. Several commenters requested further guidance from agencies
to implement the watershed approach consistently across the nation, on
issues such as determination of watershed boundaries, information
needed in watershed plans, and how to identify the needs of a
particular watershed. Other commenters recommended that the agencies
develop guidance on compensatory mitigation for open and navigable
waters, performance standards, mitigation ratios, financial assurances,
the implementation of adaptive management, and credit determination
methods. Another commenter suggested that the agencies prepare regional
reference manuals that provide guidance on how to best design
compensatory projects appropriate to meet the needs of watershed units
in that region.
Many of these questions, such as how to determine watershed scale
and boundaries, must be answered by district engineers at a regional or
local level, to address landscape variability and other factors. Other
questions must be answered on a case-by-case basis, after considering
the impacts and the compensatory mitigation that may be necessary to
offset those impacts. However, we recognize the need to provide more
information to the public and agency personnel, and we will continue to
develop guidance, as necessary, outside of this rulemaking.
Economic Issues
Two commenters expressed concern over the increase in mitigation
costs that will result from more stringent
[[Page 19609]]
performance standards and the delay of credit releases until
performance is achieved. One commenter stated that the requirements of
the rule will overly complicate the permitting process and ultimately
impact the availability of affordable housing. If the costs of
purchasing credits from a mitigation bank are too high, the district
engineer should take that into account and allow other off-site or out-
of-kind mitigation.
In some cases, the cost of performing compensatory mitigation may
increase as a result of implementation of this rule. Since this rule is
generally based on existing practice, with improvements to enhance
performance and efficiency, we do not believe that it will cause a
substantial increase in compliance costs. We believe that ecological
performance standards and other aspects of this rule are necessary to
improve the success of compensatory mitigation in the Corps Regulatory
Program. District engineers will take costs into account when
evaluating compensatory mitigation options, since practicability is one
consideration when determining compensatory mitigation requirements for
DA permits.
One commenter strongly objected to adding any provision in the
final rule that would require the Corps to ``determine what an adequate
price might be'' of compensatory mitigation credits as suggested in the
discussion section of the proposed regulation.
The Corps will not determine the price of compensatory mitigation
credits. The rule states that the cost of compensatory mitigation
credits is determined by the sponsor of a mitigation bank or in-lieu
fee program. However, the district engineer may evaluate fee schedules
for in-lieu fee programs to determine whether those fees satisfy the
criteria in Sec. 332.8(n)(5)(ii) [Sec. 230.98(n)(5)(ii)], and are
sufficient for providing the required compensatory mitigation.
Implementation Issues
A number of commenters stated that the requirements of the proposed
rule will place an enormous burden on the Corps' staff and resources
and may further delay implementation of projects. Numerous commenters
asserted that additional resources must be allocated to reviewing
monitoring reports, conducting site visits, and taking enforcement
action when permittees and mitigation banks do not perform their
prescribed mitigation requirements. Other commenters stressed the need
to educate potential sponsors on how to operate wetland mitigation
banks. Commenters also stated that the rule would place a
disproportionate burden on permittees. However, another commenter
stated that project proponents must consider mitigation requirements
early in the project planning cycle to implement mitigation in advance
of, or concurrent with, a project.
This rule will not place a large incremental burden on Corps staff
and other resources because it builds on existing requirements and
practices and promotes those that have been successful in the past. To
develop this rule, we have considered the recommendations from the 2001
NRC Report and the 2001 and 2005 GAO reports, as well as other studies
of compensatory mitigation projects, to establish regulations that will
help ensure that compensatory mitigation successfully replaces
functions that are lost as a result of permitted activities.
Monitoring, site visits, and compliance activities are essential
actions for ensuring compensatory mitigation success but they are not
new. What is new is the greater clarity and consistency of requirements
in these areas that the rule provides. The Corps already conducts
compliance inspections on compensatory mitigation projects, including
mitigation banks and in-lieu fee programs, as its resources allow and
will continue to do so.
We believe that the rule will increase regulatory efficiency by
providing clear, consistent requirements, improving the third-party
mitigation review process, and encouraging compensatory mitigation
planning to be performed in advance of permitted activities through the
use of mitigation banks and in-lieu fee programs. We do not believe
that this rule will place a substantial burden on permittees. As more
credits are generated by third-party mitigation providers, burdens on
permittees should be reduced. This rule does not change the
circumstances under which compensatory mitigation is required. As in
the past, the district engineer will require compensatory mitigation to
the extent appropriate and practicable. This rule appropriately
balances the need for consistency with the need for flexibility,
including its requirements for permittee-responsible mitigation.
District engineers will continue to determine on a case-by-case basis
what is required to satisfy the requirements of the 404(b)(1)
Guidelines and other aspects of the Corps Regulatory Program.
One commenter recommended that permit review staff go to each site
before making a decision. Another commenter recommended that the
agencies clearly define their roles ahead of time to reduce interagency
conflicts, and that if such conflicts should occur, the Corps should
work to resolve them rather than the applicant.
Because of resource constraints, site visits cannot be conducted
for each permit application. Districts must prioritize their site
visits to determine which sites require on-site evaluations. The Corps
is the decision-maker for activities that require DA authorization. The
Corps fully considers agency views when making its decisions regarding
whether to issue or deny permits. This rule further clarifies the roles
and responsibilities of the Corps and other agencies, including the
Interagency Review Team, in the review and approval of compensatory
mitigation, and provides realistic deadlines for each step in the
process. The rule also contains a dispute resolution procedure through
which disagreements among Federal agencies regarding third-party
mitigation proposals will be addressed expeditiously.
A number of commenters discussed enforcement and compliance with
mitigation permit conditions and claimed that there are insufficient
staffing levels for these activities. Several commenters recommended
that the Corps and state agencies place a stronger emphasis on staffing
in order to increase permit compliance and enforcement of mitigation
requirements. Several commenters cited the 2005 GAO report's finding
that compliance with mitigation performance standards has been
inadequate, which provides a disincentive for parties to comply with
mitigation requirements. They stated that third-party mitigation
instruments and/or permit conditions often do not adequately specify
the mitigation activities to be performed, the standards to be
achieved, and the time frames for performance. Several commenters
requested clarification of the Corps' compliance authorities related to
mitigation requirements.
The agencies agree that vigorous enforcement and compliance
activities are necessary for the success of the regulatory program,
including compensatory mitigation. The Corps believes that it has
adequate resources in these areas. In the Corps Regulatory Program's
performance measures required by the Administration's Program
Assessment Rating Tool (PART), enforcement and compliance metrics
comprise six of the eight performance measures. These performance
measures relate to compliance inspections on activities authorized by
individual permits and general permits, field inspections of active
mitigation sites, compliance inspections or audits on active
[[Page 19610]]
mitigation banks and in-lieu fee programs, resolution of non-compliance
issues, and resolution of enforcement actions. The inclusion of so many
metrics in the PART reflects the high priority placed on enforcement
and compliance activities by the Corps regulatory program, which will
help address the concerns raised in the two GAO reports. This rule will
also address compliance and enforcement issues by more clearly
specifying the required information for both permittee-responsible
mitigation and third-party mitigation instruments plans. This rule also
includes new requirements related to ecological performance standards,
monitoring and credit release schedules.
We have clarified the language in the rule that addresses non-
compliance with compensatory mitigation permit conditions or third-
party mitigation instruments and plans. Permittees responsible for
mitigation as a permit condition will be subject to the compliance and
enforcement provisions at 33 CFR part 326. If the district engineer
determines that a mitigation bank or in-lieu fee program is not meeting
performance standards or complying with the terms of the instrument,
appropriate actions will be taken, such as requiring adaptive
management, decreasing available credits, suspending credit sales
altogether, and/or directing that financial assurance resources (e.g.,
escrow monies) be used to perform remediation or alternative
mitigation. As a last resort, if a sponsor does not comply with the
terms of its instrument, the district engineer can take appropriate
legal action to compel compliance.
Three commenters suggested emphasizing that compliance with new
mitigation requirements fully meets requirements of section 404 of
Clean Water Act, therefore, there is no need for supplemental
mitigation to address the uncertainty of mitigation outcomes.
Although this rule provides standards and requirements for
compensatory mitigation for DA permits, there are provisions that allow
district engineers to require additional compensatory mitigation when
necessary to address the risk and uncertainty associated with
compensatory mitigation projects. For example, adaptive management may
involve requiring additional compensation if the original compensatory
mitigation project does not perform as well as expected. As another
example, higher amounts of compensatory mitigation may be required if
the aquatic resource restoration, establishment, enhancement, and/or
preservation activity is conducted after the permitted activity, to
account for both temporal losses and the risk of failure associated
with the prospective mitigation.
A few commenters expressed concern that if developers are
responsible for developing watershed plans, and those plans are used by
others to implement a watershed approach, this might create an
incentive to develop a plan that meets future development expansion
needs rather than watershed needs.
This rule does not require prospective permittees to develop
watershed plans. District engineers will determine whether an existing
watershed plan is appropriate for use in determining compensatory
mitigation requirements (see Sec. 332.3(c)(1) [Sec. 230.93(c)(1)]).
In general, watershed plans will be developed by governmental and/or
non-profit resource planners, in consultation with watershed
stakeholders. The purpose of a watershed plan is to maintain and
improve the quality and quantity of aquatic resources within a
watershed, not to facilitate development. District engineers will
ensure that watershed plans used to determine compensatory mitigation
requirements for DA permits have been developed through appropriate
processes to satisfy this purpose.
Transfer of Responsibility
In the proposal, we requested comments on the appropriate legal
mechanism for transferring the responsibility for providing
compensatory mitigation from the permittee to a mitigation bank or an
in-lieu fee program. We proposed an option of using parallel permit
conditions and instrument provisions, that would acknowledge the
transfer of responsibility from the permittee to the sponsor. Another
option we solicited comments on was co-permitting, where the sponsor
would sign the DA permit and assume responsibility for providing
compensatory mitigation credits.
Two commenters expressed support for co-permitting, but several
other commenters said that co-permitting is not an appropriate
mechanism for transferring responsibility. Some commenters said that a
sponsor should only sign documents that deal exclusively with the
credits, debits, and use of a mitigation bank for compensatory
mitigation. Two commenters stated that transfer of responsibility from
the permittee to a mitigation bank is an incentive for using mitigation
banks. Several commenters supported the use of the suggested permit
conditions and instrument provisions provided in the preamble to the
proposed rule, when credits are to be secured from a mitigation bank.
After evaluating these comments, we have determined that the most
effective approach for transferring compensatory mitigation
responsibilities from a permittee to a mitigation bank or in-lieu fee
program sponsor is through the use of permit conditions and instrument
provisions. The rules governing this transfer are provided at Sec.
332.3(l) [Sec. 230.93(l)]. This process requires submittal of
appropriate documentation after the permittee has secured the
appropriate number and resource type of credits from the sponsor. These
requirements are discussed in greater detail in the preamble discussion
of Sec. 332.3(l) [Sec. 230.93(l)].
Other Issues
A couple of commenters submitted questions about the Corps permit
application, other publications, and record-keeping. Commenters
requested better guidance on the information required for permit
applications, such as sample drawings and checklists, and recommended
electronic filing of permit applications.
Many Corps districts have posted information on their web sites to
assist permit applicants. Such information includes tips on providing
complete permit applications, as well as sample drawings and
checklists. The Corps regulations at 33 CFR 325.1(d) discuss what is
required for a complete application for an individual permit. Project
proponents should also review the general conditions for the nationwide
permits and regional general permits to determine what is necessary for
a complete general permit verification request. The Corps is developing
an electronic permit application, which will allow its districts to
accept permit applications through the Internet. As discussed above,
the Corps is implementing a new automated information system to better
track impacts authorized by authorized activities, and any required
compensatory mitigation.
One commenter said that poor record-keeping has made it difficult
to evaluate the successes and failures of individual projects and the
regional and national impacts of the program. Commenters also asked
that the public have easy access to all relevant planning documents
during the public comment period on permits. One commenter recommended
creating a clearinghouse for wetlands funding or information needs with
a single person to track follow-up and successes. This could provide
information to support a watershed approach in specific areas
[[Page 19611]]
and possibly to support in-lieu fee programs. One commenter said the
rule should not apply to ephemeral washes.
Archiving of monitoring reports for compensatory mitigation
projects is done in accordance with district-specific practices and
resources. Monitoring reports are part of the administrative record for
a permit action or third-party mitigation instrument, and are public
information. However, a Corps district may charge reasonable fees for
duplication to provide those reports to interested parties. It is
impractical to make all planning documents available during public
notice comment periods. Typically, not all of this information is
provided to the Corps prior to the public comment period. However, the
rule requires that public notice for DA permits include a discussion of
mitigation plans, including any compensatory mitigation. Public comment
can then help inform the development of detailed planning documents.
The Corps does not intend at this time to create a clearinghouse for
wetlands funding and wetlands-related information; however, the Corps
will provide information to the public on mitigation required and
fulfilled under the section 404 program. This rule only applies to
compensatory mitigation for activities in waters of the United States
authorized by DA permits. It does not alter the definition of ``waters
of the United States'' at 33 CFR part 328 or 40 CFR 230.2(s).
Discharges of dredged of fill material into features that are not
waters of the United States do not require permits under section 404 of
the Clean Water Act, and therefore would not require compensatory
mitigation that would be subject to this rule. In cases where ephemeral
washes are determined to be waters of the U.S., this rule applies;
there are no technical reasons for addressing them differently from
other waters of the U.S.
Several commenters highlighted general concerns regarding climate
change. Some of these commenters cited important ecosystem services
provided by wetlands, streams and other aquatic resources such as
absorbing storm surges, providing drinking water, and sequestering
carbon and noted that these ecosystem services will be of increasing
importance as climate patterns shift. A few commenters wanted to know
how concerns about climate change were considered in the development of
today's rule.
We agree that protecting our Nation's existing aquatic resource
base is an important way to help foster ecological and economic
resilience as climatic patterns shift. Today's rule reaffirms the
existing requirement to avoid and minimize impacts to the nation's
aquatic resources and to require, in cases where it is appropriate and
practicable to do so, compensatory mitigation for impacts that cannot
be avoided or minimized. Compensatory mitigation projects planned and
designed using the watershed approach and the standards provided by
today's rule are likely to provide ecosystem functions and services
that, in addition to offsetting losses resulting from activities
authorized by DA permits, also provide the ecological and economic
resilience needed to address climate change. For example, the
reestablishment of a forested wetland may also provide carbon
sequestration benefits, over the long term, through the growth of
trees. As another example, coastal wetland restoration projects could
be designed to take into account reasonably foreseeable rises in sea
level.
III. In-Lieu Fee Programs
In the proposed rule we proposed to phase out in-lieu fee programs
and require existing in-lieu fee programs to comply with the same
standards and requirements as mitigation banks. In the preamble to the
proposed rule, we also explained the differences between mitigation
banks and in-lieu fee programs, and the agencies expressed concern that
providing less stringent oversight or up-front requirements for in-lieu
fee programs might not ensure that the compensatory mitigation is
performed. Another concern was compliance with section 314 of NDAA,
which directs us to apply equivalent standards and criteria to each
type of compensatory mitigation to the maximum extent practicable. At
the time, the agencies could not find strong grounds for concluding
that meeting the same requirements as mitigation banks is not
appropriate or practicable for in-lieu fee programs. The agencies also
acknowledged that phasing out in-lieu fee programs would pose some
challenges for the ability of the Corps Regulatory Program to support
the objectives of the Clean Water Act and ensure high-quality
mitigation in all parts of the country.
In response to the proposed rule, many commenters, including 29
states, as well as industry groups and environmental organizations,
supported retaining in-lieu fee programs as a separate mechanism for
providing compensatory mitigation for DA permits. These commenters said
that an alternative form of third-party mitigation is needed in areas
not serviced by mitigation banks. Many of these commenters also stated
that the desired performance of in-lieu fee programs can be achieved by
imposing appropriate rules and standards, with Corps oversight. Some
commenters indicated that the proposal to phase out in-lieu fee
programs is contrary to section 314, because it wouldn't comply with
the statutory requirement for the rule to ``maximize available
credits.'' Over 30 commenters described successful in-lieu fee
programs.
After carefully considering all comments, for and against, we have
decided to retain in-lieu fee programs as a distinct third-party
compensation option, subject to equivalent ecological standards as the
other types of compensatory mitigation (mitigation banks and permittee-
responsible mitigation) but somewhat different administrative and
procedural requirements. We agree that in-lieu fee programs are
important sources of compensatory mitigation in areas that do not have
mitigation banks, because they can provide consolidated compensatory
mitigation projects that have greater ecological benefits than small,
geographically separated, permittee-responsible mitigation. We also
agree that in-lieu fee programs can provide important ecological and
societal benefits by focusing primarily on the watershed needs and by
siting multiple compensatory mitigation projects in strategic locations
in a watershed. We believe that this final rule achieves the statutory
mandate of section 314 in that it establishes, to the maximum extent
practicable, equivalent standards for all three types of compensatory
mitigation.
Commenters suggested various approaches to in-lieu fee programs.
One commenter suggested that the agencies delay the effective date of
the final rule until more conclusive data are available to support the
decision of whether to retain or eliminate in-lieu fee programs. One
commenter recommended forming a technical working group to evaluate the
effectiveness of in-lieu fee programs and their role in compensatory
mitigation. Another commenter recommended comparing poorly performing
in-lieu fee programs to more successful programs, to evaluate the
differences in organization, oversight, mitigation approach and quality
of mitigation, and to develop appropriate standards and requirements.
Many commenters proposed rule language to provide accountability and
ensure ecological success for in-lieu fee programs.
We do not believe it is necessary to delay issuing a final rule
until further studies can be done on in-lieu fee programs. We
structured the proposed rule to solicit comment on appropriate
[[Page 19612]]
standards and criteria that could be established to ensure that in-lieu
fee programs provide successful compensatory mitigation in a timely
manner. Many of the requirements that apply to mitigation banks are
applied to in-lieu fee programs, although some requirements will not be
exactly the same, because of the fundamental differences between
mitigation banks and in-lieu fee programs. Where it is necessary to
promulgate different requirements for in-lieu fee programs, we believe
those requirements will ensure the same level of success for in-lieu
fee programs as for the other types of mitigation, and produce
mitigation that meets the same high ecological standards. We have
examined several successful in-lieu fee programs to establish effective
standards and requirements.
In the preamble to the proposed rule, we posed a set of questions
on the proposed phase-out of in-lieu fee programs, and solicited public
comment on retaining in-lieu fee programs as a distinct regulatory
entity. We asked for public comment on 7 specific areas in which
requirements for in-lieu fee programs might differ from mitigation
banks if they were retained: (1) The degree of up-front planning
required before credits could be sold (e.g., in-lieu fee programs might
not be required to identify and secure a site and provide detailed site
plans for the compensatory mitigation project); (2) the level and types
of financial assurances that would be required; (3) the types of
projects for which they could be used (e.g., in-lieu fee programs might
be limited to providing compensatory mitigation only for nationwide
permits and other general permits, or for projects below a specified
acreage cutoff, such as 1 acre); (4) the required compensation ratios
(e.g., these could be higher for in-lieu fee programs than for
mitigation banks); (5) the credit release schedule (e.g., in-lieu fee
programs might be permitted to sell more credits at an earlier point in
the planning process); (6) the specific types of aquatic resources for
which they could be used to compensate (e.g., not allowing in-lieu fee
programs for tidal wetlands or in coastal areas); and (7) the types of
permitted sponsoring entities (i.e., in-lieu fee programs might be
limited to government agencies and/or non-profit land stewardship
entities with proven track records). Comments received in response to
these questions are provided below. We also solicited comments on other
ways in which the requirements for mitigation banks and in-lieu fee
programs might differ.
Degree of up-front planning required before credits can be sold.
Several commenters stated that in-lieu fee programs should be subject
to the same amount of up-front planning as mitigation banks. Other
commenters suggested that instead of identifying a specific site (which
is required for proposed mitigation banks, except for umbrella banks),
in-lieu fee programs should identify specific types of sites (e.g.,
impounded salt marshes) that their program would target. Another
commenter suggested that in-lieu fee programs should submit a full
mitigation plan to the district engineer for approval before the start
of each project. Commenters representing in-lieu fee programs said that
it would be challenging in some cases to identify sites and provide
detailed plans before selling credits, and that such a requirement
might make it impossible for them to operate.
In recognition of these challenges, the final rule does not require
the same level of up-front planning by in-lieu fee programs as it does
for banks before credit sales can occur. However, it does require that
a comprehensive program instrument be submitted to the Corps, reviewed
by the IRT, and approved by the district engineer before any credit
sales take place. Several new requirements have been added to the
provisions for in-lieu fee program instruments, designed to ensure
greater accountability and success in providing mitigation to fulfill
credit sales in a timely manner. First, we have added a requirement in
the rule for in-lieu programs fees to develop a compensation planning
framework that will be used to select, secure, and implement aquatic
resource restoration, establishment, enhancement, and/or preservation
activities within the service area(s) for the in-lieu fee program.
Specific sites may or may not be identified, but selection of the sites
must be consistent with the compensation planning framework. The
comprehensive planning framework is essentially a watershed plan for
the service area of the in-lieu fee program. A mitigation plan that
meets the requirements of Sec. 332.4(c) [Sec. 230.94(c)] and is
consistent with the comprehensive planning framework must subsequently
be submitted and approved by the district engineer, in consultation
with the IRT, for each in-lieu fee project site prior to commencing
work. Second, the instrument will specify a limited number of advance
credit sales that can occur before specific sites are secured and
mitigation plans approved. Once that number of credits is sold, no more
advance credits can be sold until an equivalent number of credits, tied
to a specific site and mitigation plan, has been released in accordance
with an approved credit release schedule. Third, the instrument must
provide for the establishment of an account that will segregate funds
received from credit sales and ensure that these funds, including
interest earned, are used only to provide the required mitigation,
minus a small allowance for administrative costs.
Required level of financial assurances. A number of commenters
stated that in-lieu fee programs should be required to provide the same
level of financial assurances as mitigation banks. Two commenters
asserted that these financial assurances would ensure a more successful
completion of mitigation projects. Other commenters indicated that
providing the same level of financial assurances as banks prior to
beginning credit sales would be challenging for in-lieu fee programs,
which usually do not have up-front investors, and might prevent them
from operating. In addition, government agencies often face legal or
procedural restrictions that prevent them from providing the same types
of financial assurances that are generally required of banks.
The agencies believe that financial assurances are important to
ensure successful initiation and completion of compensatory mitigation
projects, but also recognize the challenges faced by in-lieu fee
programs in this regard. Therefore, the rule states that the district
engineer shall require sufficient financial assurances to ensure a high
level of confidence that the compensatory mitigation project will be
successfully completed, in accordance with applicable performance
standards. There may be cases where financial assurances are not
necessary because an alternate mechanism is available to ensure a high
level of confidence that the compensatory mitigation will be provided
and maintained (e.g., a formal, documented commitment from a government
agency or public authority). Consideration of the sponsor's past
performance in providing ecologically successful mitigation projects
would also influence the district engineer's determination regarding
the level of financial assurances necessary to ensure a high level of
confidence in successful project completion--this is true for banks as
well as in-lieu fee programs.
Types of projects for which in-lieu fee program credits could be
used. Several commenters stated that in-lieu fee programs should be
limited to certain types of projects, such as those resulting in minor
impacts. One commenter suggested limiting in-lieu fee programs
[[Page 19613]]
to activities that have less than 0.25 acre of impacts, and another
commenter recommended restricting in-lieu fee programs to general
permit activities resulting in less than one acre of impacts. Another
commenter suggested that in-lieu fee programs should be available to
provide compensation for impacts from linear transportation projects
because those activities undergo environmental reviews and the
compensatory mitigation is usually identified in advance of the
proposed impacts. One commenter stated that in-lieu fee programs should
not be restricted to a specific type or impact size. Two commenters
said that in-lieu fee programs should only be used for activities
authorized by general permit. A number of commenters stated that use of
in-lieu fee programs should not be limited to a specific project size
or permit type.
In most cases, in-lieu fee programs implement compensatory
mitigation projects after the impacts authorized by DA permits have
occurred. Therefore, the timing of compensatory mitigation projects
provided by in-lieu fee programs results in some risk and uncertainty.
To address that risk and uncertainty, and to reduce temporal losses of
aquatic resource functions, we have established a preference hierarchy
for mitigation options at Sec. 332.3(b) [Sec. 230.93(b)]. This
hierarchy, which is discussed in greater detail elsewhere in this
preamble, generally provides a preference for mitigation bank credits,
when the permitted activity is in the service area of an approved bank
with the appropriate types of credits available. In the absence of an
approved bank, in-lieu fee programs have certain advantages over
permittee-responsible mitigation. They generally involve larger
parcels, have access to appropriate scientific and technical expertise,
may have a proven track record in establishing successful mitigation in
the past, and will generally have a more fully developed watershed
approach, developed through their required comprehensive planning
framework. For these reasons, we do not believe it is appropriate to
limit the use of lieu fee programs to any particular impact type or
size. Rather, we believe the preference hierarchy described above will
ensure that a mitigation option is selected with the highest
probability of delivering successful, high-quality mitigation among the
available choices in a given case.
Required compensation ratios. A number of commenters stated that
in-lieu fee programs should be required to mitigate at a certain ratio
that should take into account temporal loss of wetland functions when
compensatory mitigation is not fully functional at the time the
permitted impacts occur. One commenter asserted that increasing the
required mitigation ratios for in-lieu fee programs unfairly penalizes
applicants in areas that do not have operating mitigation banks. Two
commenters recommended higher mitigation ratios where in-lieu fee
programs funds are used for preservation.
We have added Sec. 332.3(f)(3) [Sec. 230.93(f)(3)] to allow
district engineers to require additional compensatory mitigation in
cases where released credits are not available to provide the
appropriate type of compensatory mitigation. This additional
compensatory mitigation is to account for the higher risk and
uncertainty associated with compensatory mitigation projects that will
be implemented after the permitted impacts have occurred. For all
sources of compensatory mitigation, the amount of required compensation
must be sufficient to replace lost aquatic resource functions. Other
factors to be considered when determining the appropriate amount of
compensatory mitigation to offset permitted impacts are: The method of
compensatory mitigation (i.e., restoration, establishment, enhancement,
preservation), the likelihood of success, differences between the
functions lost at the impact site and the functions expected to be
produced by the compensatory mitigation project, temporal losses of
aquatic resource functions, the difficulty of restoring or establishing
the desired aquatic resource type and functions, and/or the distance
between the affected aquatic resource and the compensation site. The
preference for released credits does not unfairly penalize permittees,
since it is appropriate to require higher amounts of compensatory
mitigation to account for risk and uncertainty. The rationale for the
required compensation ratio must be documented in the administrative
record for the permit action. In cases where preservation is used to
provide compensatory mitigation, district engineers will generally
require higher compensation ratios. While the rule does not explicitly
differentiate between mitigation banks and in-lieu fee programs in the
determination of ratios, the factors to be considered will generally
result in higher ratios for in-lieu fee programs.
Credit release schedule. One commenter stated that fewer credits
should be released to in-lieu fee programs than to mitigation banks. In
contrast, other commenters said that in-lieu fee programs should have
100 percent of their credits released in advance, and/or that they
should have no limit on advance credit sales.
We do not agree that in-lieu fee programs should be allowed
unlimited credit sales prior to providing any mitigation; this would
not provide adequate assurance that credits will be fulfilled in a
timely manner. However, in recognition of the fundamental differences
between mitigation banks and in-lieu fee programs, the final rule does
allow an in-lieu fee program to sell a limited number of credits before
securing a compensatory mitigation project site and conducting aquatic
resource restoration, establishment, enhancement, and/or preservation
at that site. Those credits are called ``advance credits'' and the
sponsor can only sell such credits up to the limit specified in its
approved instrument--under no circumstances may credits be sold prior
to approval of an instrument meeting the requirements of Sec. 332.8
[Sec. 230.98]. The number of advance credits will be determined by the
district engineer, in consultation with the IRT, and will be specified
in the instrument by service area. The amount of available advance
credits will be based on an evaluation of the compensation planning
framework, the size of the service area(s), the resources available to
the program (e.g., an independent funding stream for government
sponsored in-lieu fee programs) and other considerations identified by
the district engineer during consultation with the IRT. If the in-lieu
fee program instrument covers more than one service area, the advance
credit limit will be specified for each service area. In addition, as
each in-lieu fee project is approved by the district engineer (in
consultation with the IRT), it will have an associated credit release
schedule. As in-lieu fee projects are implemented and credits released,
advance credits are converted to released credits and the sponsor can
sell additional advance credits in that service area. In certain
limited cases, such as when there is insufficient permitted activity in
a given service area to support a viable mitigation project within a
reasonable time frame, the district engineer may authorize the use of
released credits from a different service area to fulfill advance
credits sales. This might occur, for example, with a state-wide program
managed by a government agency. In such cases, the district engineer
should ensure that the approved mitigation compensates for the lost
resources to the extent feasible, even though it may be some distance
away, or in a different watershed.
[[Page 19614]]
Limiting the establishment and use of in-lieu fee programs to
specific types of aquatic resources or geographic regions. Three
commenters stated that in-lieu fee programs should be used only to
provide compensatory mitigation for specific aquatic resource types.
One commenter suggested that in-lieu fee programs should be retained
solely for rapidly developing urban watersheds and coastal watersheds,
and two commenters suggested that these programs be used specifically
for stream compensatory mitigation. Two commenters said that use of in-
lieu fee programs should not be restricted by resource type, but
credits from in-lieu fee programs should be accepted only when those
credits are different from the credits provided by a mitigation bank
operating in the same service area.
In this final rule, we have not limited in-lieu fee programs to
providing compensatory mitigation for specific types of aquatic
resources or geographic regions, for much the same reasons that we have
not limited them to specific project types or sizes. Instead, as
discussed above, we have established a preference hierarchy in Sec.
332.3(b) [Sec. 230.93(b)] that will ensure that mitigation options
with the highest likelihood of success and greatest value to the
watershed will be selected from the available choices. This flexibility
is needed because there is great regional variation in aquatic resource
types and watershed needs, and there is also much variability in the
types of credits produced by both mitigation banks and in-lieu fee
programs. We do not agree that in-lieu fee programs should be limited
to certain types of aquatic resources, because in some cases they may
provide the greatest assurance of delivering successful, high-quality
mitigation for the resource in question, especially in areas where
there are no mitigation banks.
Types of sponsoring entities. Several commenters suggested that
only federal or state governmental entities or non-profit land
stewardship organizations be allowed to be in-lieu fee program
sponsors, because they have the capacity to provide permanent
stewardship of compensatory mitigation project sites. However, one
commenter stated that there is no evidence that government agencies or
non-profit organizations provide compensatory mitigation that is
superior to that provided by for-profit entities.
Through the definition of ``in-lieu fee program'' provided in Sec.
332.2 [Sec. 230.92], we have limited sponsorship of in-lieu fee
programs to governmental or non-profit natural resources management
entities. In this rule, we have established different requirements for
mitigation banks and in-lieu fee programs that reflect basic
differences in how those types of compensatory mitigation are provided
and managed. In general, mitigation banks are established at single
sites, to provide compensatory mitigation for pre-determined types of
aquatic resource losses in a single or several neighboring watersheds.
In contrast, in-lieu fee programs often provide compensatory mitigation
at multiple sites within multiple service areas, and may serve areas
where a mitigation bank is not economically viable because there is not
sufficient development activity to ensure that enough credits can be
sold within a reasonable time frame. For these reasons, in-lieu fee
programs have fewer up-front planning requirements than mitigation
banks, and are not expected to be operated as commercial ventures. The
agencies thus believe it is appropriate to limit sponsorship of in-lieu
fee programs to governmental or non-profit land management entities
that operate explicitly in the public interest, rather than to serve
the needs of investors. We are not aware of any independent studies
that have examined the quality and ecological success of compensatory
mitigation projects provided by for-profit entities versus governmental
or non-profit entities, however we believe the rule provides
appropriate safeguards and incentives to ensure that both types of
entities (commercial and non-commercial) will provide successful
compensatory mitigation given their differing organization, purposes,
and constraints.
Preference for ``in-place'' compensatory mitigation. Five
commenters stated that in-lieu fee programs should be retained but that
the rule should contain a preference for in-place compensatory
mitigation. One commenter indicated that in-lieu fee programs and in-
place mitigation should have the same level of preference. One
commenter said that adding such a provision would promote poor
environmental stewardship because in-lieu fee programs would be
excluded from areas where there are high credit demands. Another
commenter said that a preference for in-place compensation would not be
desirable if it led to approved mitigation banks having large service
areas, because the compensatory mitigation could be a substantial
distance from the location of the permitted impacts. This commenter
stated that in-lieu fee programs should be retained in the final rule
to provide ecologically appropriate compensatory mitigation in areas
with thin markets for mitigation bank credits.
In Sec. 332.3(b) [Sec. 230.93(b)] we have established a
preference hierarchy for compensatory mitigation options (i.e.,
mitigation banks, in-lieu fee programs, and permittee-responsible
mitigation). We have established a preference for mitigation bank
credits, because a secured site, an approved mitigation plan and other
assurances must be in place before an initial allocation of credits can
be sold or transferred to permittees. Before additional credits can be
sold, the mitigation bank must achieve appropriate ecological
milestones set out in its credit release schedule. Therefore,
mitigation bank credits are generally more likely to be fulfilled
sooner (or to be already fulfilled), than in-lieu fee program credits.
We recognize, however, that this is not always the case. Some in-lieu
fee programs may have the appropriate number and resource type of
released credits available, and the final rule allows the district
engineer to modify the hierarchy in cases where the reasons underlying
it do not apply (e.g., an in-lieu fee program has available released
credits that are just as certain and close to fulfillment as credits
from a bank). When considering the options in Sec. 332.3(b)(2)-(6)
[Sec. 230.93(b)(2)-(6)], district engineers have the discretion to
modify the hierarchy in order to approve the use of the environmentally
preferable compensatory mitigation. Another example is when a permittee
with a proven track record and access to appropriate scientific
expertise proposes a high-value mitigation project, even though credits
from an approved in-lieu fee program or mitigation bank are available.
Differences between the standards for mitigation banks and in-lieu
fee programs. Several commenters noted that the fundamental difference
between in-lieu fee programs and mitigation banks is timing. Two of
these commenters pointed out that mitigation banks, like in-lieu fee
programs, receive credit before compensatory mitigation projects are
implemented. Another commenter suggested that in-lieu fee programs
should adhere to the same standards as mitigation banks for the
implementation of compensatory mitigation projects, but should be
allowed to collect funds before acquiring a compensatory mitigation
project site. Two commenters stated that the rule should recognize the
inherent differences between mitigation banks and in-lieu fee programs
but that all sources of compensatory mitigation should be held to
standards that assure successful performance. Another
[[Page 19615]]
commenter said that if the standards were the same for mitigation banks
and in-lieu fee programs, private mitigation banks would dominate the
process, resulting in poor geographic distribution of compensatory
mitigation, significantly reduced ecological diversity, and less
protection and restoration of important aquatic resources.
According to the 2001 NRC Report, the principal difference between
mitigation banks and in-lieu fee programs is timing. Mitigation banks
and in-lieu fee programs are financed and planned differently, which
creates the timing difference observed by the NRC. Since commercial
mitigation banks sponsors have up-front financing, they can acquire and
plan their mitigation bank sites before submitting their proposals to
district engineers for consideration. In contrast, in-lieu fee programs
do not generally have this up-front financing available, so they must
obtain funds from permittees (under an in-lieu fee program instrument
or agreement) before they can acquire and plan in-lieu fee project
sites, and implement those projects.
We agree that mitigation banks and in-lieu fee programs should be
held to the same standards, to the maximum extent practicable, as
required by NDAA section 314. We believe the final rule accomplishes
this goal. The standards provided in this rule will help ensure that
the compensatory mitigation provided by mitigation banks and in-lieu
fee programs both offset the impacts incurred by permittees who secure
credits from these third-party mitigation providers. To maximize
compensatory mitigation options, the inherent differences between
mitigation banks and in-lieu fee programs warrant somewhat different
procedural requirements. The most substantial differences relate to
timing and financing. We recognize that in-lieu fee programs are
usually not able to capitalize compensatory mitigation projects up-
front. Instead, they must collect funds from permittees before they can
secure a suitable site and develop and implement a compensatory
mitigation project. For this reason, in-lieu fee programs, but not
banks, are allowed to sell advance credits. Unless an in-lieu fee
program has a surplus of credits available in a service area (i.e.,
released credits), the compensatory mitigation will take place after
the permitted impacts have occurred. To help ensure that the collected
funds are used in a timely manner to initiate compensatory mitigation
projects, we are including a time limit of three growing seasons for
fulfillment of advance credits (see Sec. 332.8(n)(4) [Sec.
230.98(n)(4)]) and requiring in-lieu fee programs to establish accounts
to retain the collected funds. Those funds can only be used for the
selection, design, acquisition, implementation, and management of in-
lieu fee projects, with a small percentage allowed for administrative
costs.
However, the substantive mitigation requirements, as well as many
of the procedural requirements are the same for both banks and in-lieu
fee programs. Both are subject to the same requirements for plan
approval, performance standards, monitoring, adaptive management and
long-term stewardship. Proposed mitigation banks and in-lieu fee
programs will both be required to undergo review by Interagency Review
Teams, both for their instruments and for their specific mitigation
project plans, though in the case of mitigation banks these two steps
are usually accomplished simultaneously, while for in-lieu fee programs
instrument review and approval will usually take place prior to
development of a particular project. Public involvement is required in
the same way for both types of third-party providers as well. By
including equivalent substantive ecological standards while recognizing
certain administrative and procedural differences, the rule will also
help maximize available credits from sponsors willing to provide third-
party mitigation in a range of service areas, from high-development
areas that can support economically-viable banks to remote areas that
cannot, but that still have occasional mitigation needs. We recognize
that in-lieu fee programs have sometimes provided compensatory
mitigation for different types of aquatic resources than mitigation
banks, and this rule does not interfere with that practice.
Proposed in-lieu fee regulatory text. A few commenters proposed in-
lieu fee regulatory text. One commenter suggested that the district
commander may only consider in-lieu fee preservation as the primary
mitigation if no other form of mitigation is available, feasible or
practicable. Another commenter proposed that each in-lieu fee program
should draft a program agreement that is submitted for public review
and comment and the review of the district engineer and the Interagency
Review Team (IRT). Under that agreement, fees paid to each in-lieu fee
program would be determined by the market rate of mitigation bank
credits within a watershed and would be reviewed periodically by the
IRT. One commenter suggested that all in-lieu fee programs should be
required to have an approved operating agreement or instrument. This
commenter said that an in-lieu fee program should have to project the
type and location of impacts and receive advance payments so that the
compensatory mitigation would be implemented in advance of permitted
impacts. Another commenter suggested that each in-lieu fee program be
required to have an approved Memorandum of Understanding and a program
manager responsible for administering the program. This commenter also
said that district engineers should determine acceptable fee amounts
for the required compensatory mitigation and should be the final
approval authority for all proposed expenditures of funds collected for
compensatory mitigation for DA permits.
We have considered the regulatory text proposed by these
commenters. The final rule requires a prospectus, public notice and
comment period, and IRT review of proposed in-lieu fee program
instruments. The use of preservation as compensatory mitigation will be
determined by district engineers on a case-by-case basis in accordance
with Sec. 332.3(h) [Sec. 230.93(h)]. In-lieu fee programs must have
approved instruments before they can be used to provide compensatory
mitigation for DA permits. We do not believe it is practical to require
in-lieu fee programs to receive advance payments so that they could do
compensatory mitigation in advance of permitted impacts. If it were
possible for in-lieu fee programs to fulfill such a requirement, they
could operate as mitigation banks. We do not believe it is appropriate
for district engineers to determine credit costs for in-lieu fee
programs, but they will review the fees set by sponsors to determine
whether they comply with the requirement for full cost accounting to
ensure that the required compensatory mitigation is provided and
maintained.
IV. Compliance With Section 314 of the NDAA
Section 314 of the NDAA requires the issuance of standards and
criteria for compensatory mitigation that, to the maximum extent
practicable, (1) maximize available credits and opportunities for
mitigation, (2) provide flexibility for regional variations in wetland
conditions, functions and values, and (3) apply equivalent standards
and criteria to each type of compensatory mitigation.
With respect to maximizing available credits and opportunities for
mitigation, the preference established in today's rule for the use of
credits provided by
[[Page 19616]]
mitigation banks (see Sec. 332.3(b) [Sec. 230.93(b)]) should
stimulate an increase in the number of mitigation banks and
correspondingly the number of bank credits available for use. Also,
today's rule provides greater efficiency and predictability to the
process of authorizing new mitigation banks and in-lieu fee programs
and associated projects by establishing clear standards and criteria
for instruments and mitigation plans, and setting reasonable timelines
for review and decision-making. These improvements in regulatory
efficiency and predictability should serve to stimulate an increase in
the number of mitigation banks and in-lieu fee programs, and therefore
an overall increase in the number of third-party compensatory
mitigation credits available to offset permitted impacts. Additionally,
our decision to retain and reform in-lieu fee mitigation, rather than
eliminate it, will provide a range of compensation options for permit
applicants, and help to ensure that viable options are available in
areas not served by banks. Thus, consistent with the NDAA, today's rule
maximizes available credits and opportunities for mitigation to the
maximum extent practicable.
With respect to providing flexibility for regional variations in
wetland conditions, functions and values, as previously noted, we
believe that today's rule achieves the proper balance of binding
requirements and flexibility necessary to ensure that compensatory
mitigation decisions are reasonable and based on case-specific
circumstances. An adequate degree of flexibility is necessary for this
rule because practices for restoring, establishing, and enhancing
aquatic resources vary by resource type and by geographic region. For
example, today's rule does not proscribe a one-size-fits-all set of
ecological performance standards to evaluate the success of all
compensation projects. Instead, the rule recognizes that ecological
performance standards will vary depending upon aquatic resource type,
geographic region, and compensation method but requires that they be
based the best available science that can be measured or assessed in a
practicable manner. Thus, consistent with the NDAA, today's rule
provides flexibility for regional variations in wetland and aquatic
resource conditions, functions and values to the maximum extent
practicable.
Additionally, today's rule requires ``equivalent'' standards, to
the maximum extent practicable, for all three mechanisms for providing
compensatory mitigation: permittee-responsible compensatory mitigation,
mitigation banks, and in-lieu fee mitigation. Because there are
fundamental differences in how these three types of compensatory
mitigation are structured and conducted, we do not believe that
Congress intended to require the promulgation of identical standards
for all three methods of compensation. Instead, we interpret
``equivalent'' standards to mean standards which are equal in value,
force, or meaning (See, e.g., The American Heritage Dictionary of the
English Language, Fourth Edition). With that goal in mind, today's rule
requires that compensation projects provided by all three compensation
mechanisms have mitigation plans which include the same 12 fundamental
components: objectives; site selection criteria; site protection
instruments (e.g., conservation easements); baseline information (for
impact and compensation sites); credit determination methodology;
mitigation work plan; maintenance plan; ecological performance
standards; monitoring requirements; long-term management plan; adaptive
management plan; and financial assurances (see 33 CFR 332.4(c) [40 CFR
230.94(c)]). There are minor differences in the specific requirements
for these components in order to accommodate the different nature of
the three mitigation approaches. There are also procedural and timing
differences among the requirements for the three types of mitigation.
For example, in-lieu fee programs are allowed to sell a limited number
of credits before having an approved site and mitigation plan, while
banks are not. However, to compensate for this difference and ensure
that the standards are ``equivalent'' to the maximum extent
practicable, in-lieu fee programs are required to develop a
compensation planning framework and adhere to strict accountability
requirements for all fees collected, requirements which go beyond those
applied to banks. We have also included a preference for bank credits
over advanced credits from in-lieu fee programs, and limited in-lieu
fee program sponsorship to qualified governmental and non-profit
resource management agencies. We thus believe that the final rule
fulfills the statutory directive to provide ``equivalent'' standards
for the three types of mitigation to the maximum extent practicable.
Specific rule provisions that apply to each of the types of
compensatory mitigation, and the reasons for their differences, are
discussed throughout today's preamble.
V. Organization of the Final Rule
The proposed compensatory mitigation regulation in 33 CFR part 332
[40 CFR part 230], is organized into the following sections:
Section 332.1 [230.91], Purpose and general considerations,
describes the basic purpose of the proposed rule and general principles
concerning compensatory mitigation.
Section 332.2 [230.92], Definitions, provides definitions of
important terms relating to compensatory mitigation and the Corps
Regulatory Program.
Section 332.3 [230.93], General compensatory mitigation
requirements, describes general compensatory mitigation requirements
for DA permits, including permit conditions and financial assurances.
This section also describes the watershed approach to compensatory
mitigation.
Section 332.4 [230.94], Planning and documentation, describes the
review of proposed compensatory mitigation activities, as well as
requirements for mitigation plans.
Section 332.5 [230.95], Ecological performance standards, describes
principles for establishing ecological performance standards for
compensatory mitigation projects.
Section 332.6 [230.96], Monitoring, describes general requirements
for monitoring compensatory mitigation projects.
Section 332.7 [230.97], Management, describes general requirements
for site protection, sustainability, adaptive management, and long-term
management of compensatory mitigation projects.
Section 332.8 [230.98], Mitigation banks and in-lieu fee programs,
provides requirements that are specifically applicable to mitigation
banks and in-lieu fee programs.
VI. Discussion of Specific Sections of the Final Rule
The final rule is presented in two parallel sections: Changes to
Corps regulation in 33 CFR and changes to EPA regulation in 40 CFR. The
two sections are almost entirely the same, with minor exceptions. These
include: (1) Corps changes to permit application requirements at 33 CFR
325.1; (2) Conforming changes to EPA's existing mitigation regulations
at 40 CFR part 230, making appropriate citations for the addition of
new Sec. Sec. 230.91 through 230.98; and (3) References to the Rivers
and Harbors Act of 1899, in which the EPA does not have a regulatory
role, have been omitted from the text in 40 CFR part 230.
[[Page 19617]]
33 CFR 325.1 Application for Permits
In the proposed rule, the Corps proposed to modify Sec. 325.1(d)
by adding a new paragraph requiring a mitigation statement for section
404 permit applications. Several commenters supported the proposed
requirement. One commenter said that geographic coordinates and
monitoring data should also be required for this mitigation statement.
A number of commenters objected to the proposed requirement. One
commenter believed requiring this statement is unnecessary because some
impacts to waters of the United States are unavoidable. Another
commenter said that determining whether the proposed avoidance and
minimization is sufficient, appropriate, or practicable is highly
subjective and may invite litigation. This commenter remarked that it
is the Corps' responsibility to determine whether appropriate and
practicable avoidance, minimization, and compensation has been provided
prior to making a decision on a section 404 permit. Several commenters
said that this provision should be modified, to clarify that the
mitigation statement is to be brief, since it is provided at the
beginning of the permit application process and is likely to change as
a result of the evaluation process. One commenter stated that this
paragraph should be modified to allow the permit applicant to explain
why compensatory mitigation should not be required, since many
individual permits are issued under section 404 that do not require
compensatory mitigation.
This requirement has been adopted in the final rule because it will
provide useful information for the permit evaluation process. Section
325.1(d)(7) has been changed to allow permit applicants to explain why
they believe compensatory mitigation should not be required for
particular activities. The mitigation statement should be brief,
because the permit evaluation process is an iterative process, and
district engineers often require additional avoidance and minimization
as they evaluate permit applications. The Corps does not agree that it
would be appropriate to require geographic coordinates or monitoring
data with the mitigation statement. The permit application will
indicate the location of the proposed work. Monitoring data may be
required at a later time, depending on the conditions of the issued
permit. See the discussion of section 332.4(b)(1) below for a
description of public notice requirements for the mitigation statement.
33 CFR 332.1 and 40 CFR 230.91 Purpose and General Considerations
(a) Purpose. Many commenters stated that the proposed rule
restricts flexibility for mitigation options for both the permit
applicant and the Corps, and therefore it is inconsistent with section
314. Many commenters declared that the proposed elimination of in-lieu
fee programs conflicts with this statute, because it reduces mitigation
opportunities available to permittees as well as the quality and
success of compensatory mitigation projects. One commenter said that to
comply with the statutory mandate to maximize available credits and
opportunities for mitigation, the rule should specify that mitigation
banks are the preferred choice when available. A number of commenters
believe that the proposed rule unfairly promotes mitigation banking and
restricts other compensatory mitigation opportunities.
In response to the comments, we have made substantial changes to
this rule to better comply with the statutory mandate. We have retained
in-lieu fee programs as a separate mechanism for providing compensatory
mitigation, with clear and stringent standards to help ensure
performance in replacing aquatic resource functions and services lost
as a result of activities authorized by DA permits. We have also
established a preference for mitigation bank credits, because of the
lower risks associated with mitigation banks. This preference is
discussed in greater detail below. In this final rule, we have applied
equivalent standards to all sources of compensatory mitigation, to the
extent it is practicable to do so, given the fundamental differences
among permittee-responsible mitigation, mitigation banks, and in-lieu
fee programs.
Many commenters said that the rule should apply equivalent
standards and criteria to each type of compensatory mitigation. A
number of commenters expressed concern that the proposed rule does not
accomplish that objective. One commenter suggested establishing
equivalent levels of interagency review for proposed compensatory
mitigation projects. Several commmenters said that the statute should
be interpreted as requiring the establishment of similar levels of
accountability for mitigation banks, in-lieu fee programs, and
permittee-responsible mitigation. This would allow the retention of in-
lieu fee programs as a separate mechanism for providing compensatory
mitigation for DA permits. One commenter remarked that the proposed
rule goes much further than establishing equivalent standards and
criteria by providing a strong preference for the use of mitigation
banks. This commenter said that the proposed rule incorrectly asserts
that mitigation banks are always successful and therefore other forms
of compensatory mitigation should be held to the same standards as
mitigation banks in order to achieve success. One commenter stated that
the objective of this rule should be to effectively mitigate for losses
of aquatic resources, not to level the playing field between mitigation
banks and in-lieu fee programs. Three commenters said that the proposed
rule provides equivalent standards for different types of compensatory
mitigation, but it needs to focus on improving success, regardless of
whether permittee-responsible mitigation, mitigation banks, or in-lieu
fee programs are used.
This final rule applies equivalent standards and criteria to all
sources of compensatory mitigation, to the maximum extent practicable.
It is not practicable to apply exactly the same standards and criteria
to mitigation banks, in-lieu fee programs, and permittee-responsible
mitigation, nor are the agencies required to do so, as discussed above.
There are inherent differences among these sources of compensatory
mitigation. As many commenters pointed out, there are many areas of the
country where there are no mitigation banks or in-lieu fee programs.
Flexibility in compensatory mitigation requirements is needed to
account for regional variations in aquatic resources, as well as state
and local laws and regulations. There also needs to be flexibility
regarding the requirements for permittee-responsible mitigation.
Practicability is an important consideration when determining
compensatory mitigation requirements. We agree that the final rule
should provide similar levels of accountability among the three sources
of compensatory mitigation. We strongly agree that the focus should be
on ecological success of compensatory mitigation projects, not the
source of the compensatory mitigation. The preferences provided in
Sec. 332.3(b) [Sec. 230.93(b)] are based primarily on administrative
criteria that take into account risk and uncertainty in providing the
required compensatory mitigation. This rule provides tools to help
improve ecological success of compensatory mitigation projects, but the
rule itself cannot guarantee that success. Ecological success is
dependent upon effective project planning, site selection, and
implementation.
One commenter said that the agencies should clarify that they may
conduct
[[Page 19618]]
rulemaking without public notice and comment and still comply with the
Administrative Procedure Act.
We acknowledge that, in limited circumstances, agencies can conduct
rulemaking without a public notice and comment process. For example, an
agency may issue a direct final rule for routine and non-controversial
regulations, if the agency believes the rule would not result in
adverse comments. It is unlikely that any rulemaking related to
compensatory mitigation would result in no adverse comments. In the
interest of transparency, the agencies have agreed that any future
changes to this rule will involve notice and comment rulemaking.
Many commenters said that stream compensatory mitigation should not
be included in this rule. A number of commenters stated that there is
no scientific evidence that streams can be created or replaced, or that
other approaches taken in this rule can compensate for stream losses.
Many of these commenters asserted that the agencies should conduct
further research on stream mitigation and demonstrate its success
before including standards for stream mitigation in the rule. Some
commenters noted that the statute requiring the promulgation of this
rule refers only to wetlands. Several commenters expressed support for
applying the rule to streams and other open waters. One commenter said
that physical alteration of the nation's waters should be mitigated to
the extent possible to support the objective of the Clean Water Act.
Since section 404 of the Clean Water Act authorizes discharges of
dredged or fill material into lakes, streams, and wetlands, mitigation
for those impacts should be provided.
We believe that is appropriate to apply this rule to all types of
aquatic resources, not just wetlands. This rule addresses the basic
requirements of compensatory mitigation projects: planning and
documentation, performance standards, monitoring, and management.
Stream compensatory mitigation projects also require these basic
elements. The final rule recognizes the challenges associated with
stream restoration and provides in Sec. 332.3(e)(3) [Sec.
230.93(e)(3)] that compensation for difficult to replace resources,
such as streams, should be provided through in-kind rehabilitation,
enhancement or preservation if practicable. The feasibility and
appropriateness of compensatory mitigation for a particular aquatic
resource type is to be addressed on a case-by-case basis by district
engineers. Effective implementation of this rule, including the
ecological performance of compensatory mitigation projects, is
dependent upon critical thinking by decision-makers to determine
whether a particular compensatory mitigation proposal at a specific
site is technically feasible and capable of providing the desired
aquatic resource functions and services. Stream restoration and
rehabilitation activities have been conducted all across the country,
with varying levels of success. There are areas of the country, such as
the southeastern coastal plain, where it may be possible to
rehabilitate functioning streams if appropriate geologic and hydrologic
conditions are present. Compensatory mitigation required by the Corps
helps support the objective of the Clean Water Act, by offsetting
losses of aquatic resource functions that result from activities
authorized by DA permits.
(b) Applicability. One commenter said that the proposed rule is
inconsistent with 33 CFR 320.4(r), which limits requirements for
compensatory mitigation to ``significant resource losses.''
This final rule does not alter the circumstances when compensatory
mitigation is required. The Corps has required compensatory mitigation
for minor activities, such as activities authorized by nationwide
permits, for many years to ensure that those activities result in
minimal individual and cumulative adverse effects on the aquatic
environment and are in the public interest. Prior to issuing an
individual permit, the Corps determines on a case-by-case basis whether
compensatory mitigation is necessary to ensure that the authorized
activity is in the public interest and, if it involves a discharge of
dredged or fill material, complies with the 404(b)(1) Guidelines.
Several commenters supported the use of areas not subject to
regulatory jurisdiction under the Clean Water Act and/or sections 9 and
10 of the Rivers and Harbors Act of 1899 to provide compensatory
mitigation for DA permits. One commenter said that using non-
jurisdictional areas as compensatory mitigation can support a watershed
approach.
We agree with these comments, and have retained this provision in
the final rule.
A number of commenters believe that the rule should clarify the
Corps' authority to require mitigation in light of the U.S. Supreme
Court Decisions in Solid Waste Agency of Northern Cook County v. Army
Corps of Engineers (2001) and Rapanos et ux., et al. v. United States
(2006) (Rapanos). Some commenters noted that if the Corps cannot
directly regulate discharges of dredged or fill material into a non-
jurisdictional wetland, then the Corps cannot require that particular
wetland to be used to mitigate impacts to other wetlands. Such an
approach would allow the Corps to indirectly regulate non-
jurisdictional wetlands. One commenter stated that the Rapanos decision
should apply not only to determining whether a particular water body or
wetland is jurisdictional under the Clean Water Act, but it should also
guide the development of criteria and standards that inform mitigation
decisions.
This rule is not the appropriate venue for addressing Clean Water
Act jurisdiction. The Corps does not generally require that any
particular wetland or resource be used to provide compensatory
mitigation. Rather, the project sponsor proposes a mitigation option
and the Corps determines whether the proposed option is adequate to
compensate for resource functions and services lost at the impact site.
We believe that non-jurisdictional waters can be used to provide
compensatory mitigation for activities authorized by DA permits, if the
rehabilitation, enhancement, and/or preservation of those waters is
determined to be appropriate compensation for authorized impacts. The
Rapanos decision is limited to the question of Clean Water Act
jurisdiction, not decision-making for compensatory mitigation
(c) Sequencing. Many commenters stated that the rule should
emphasize avoidance and minimization, not just compensatory mitigation.
They said that compensatory mitigation should not be considered until
all efforts have been made to first avoid and then minimize unavoidable
impacts to waters of the United States. Many commenters believe that
the proposed rule grants district engineers too much discretion to
determine that permit applicants have avoided and minimized impacts to
aquatic resources. Two commenters said that the rule needs to be
rewritten to treat compensatory mitigation as a last resort to ensure
protection and enhancement of the nation's streams and wetlands.
This rule addresses only the compensation component of the section
404 mitigation sequence. Avoidance and minimization are addressed
through other regulations, such as the Section 404(b)(1) Guidelines for
activities involving discharges of dredged or fill material into waters
of the United States. Activities involving discharges of dredged or
fill material into waters of the United States must comply with all
[[Page 19619]]
applicable provisions of the 404(b)(1) Guidelines before a section 404
permit can be issued. For activities that require DA permits pursuant
to sections 9 or 10 of the Rivers and Harbors Act of 1899, avoidance
and minimization requirements are provided through application of the
Corps Regulatory Program's mitigation policy at 33 CFR 320.4(r).
A number of commenters said that the proposed rule is inconsistent
with the 404(b)(1) Guidelines as they relate to the consideration of
practicable alternatives. They indicated that allowing permit
applicants to use compensatory mitigation instead of using practicable
alternatives will result in significant adverse impacts to the
environment. Two commenters recommended that the rule include measures
to be used to avoid impacts to wetlands, and limit permit issuance to
those impacts that were truly unavoidable. Several commenters said that
the sequencing provision in the proposed rule fails to recognize
changes that occur to wetlands over time, and it does not take into
account innovative steps in wetland management that can be used to
benefit society.
Consideration of practicable alternatives is provided through
application of the 404(b)(1) Guidelines for activities that involve
discharges of dredged or fill material into waters of the United
States. Using compensatory mitigation to minimize adverse effects to
the aquatic environment is consistent with the 404(b)(1) Guidelines
(see 40 CFR 230.75). Avoidance and minimization are achieved through
application of the 404(b)(1) Guidelines for activities that require
section 404 permits. We have added a new paragraph (c)(1) to this
section to clarify that nothing in this rule affects the requirement
that all section 404 permits comply with applicable provisions of the
404(b)(1) Guidelines. Paragraph (c)(2) of this section has been
modified to clarify that individual section 404 permits will be issued
only when compliance with applicable provisions of the 404(b)(1)
Guidelines has been achieved, including those which require the permit
applicant to take all appropriate and practicable steps to avoid and
minimize adverse impacts to aquatic resources. For general permits,
compliance with the 404(b)(1) Guidelines is addressed through
application of 40 CFR 230.7. There are many reasons why wetlands change
over time, most of which are not under the control of the Corps.
Paragraph (c) of this section can only address those changes that
result from discharges of dredged or fill material into waters of the
United States, including jurisdictional wetlands.
Several commenters said that the final rule should include
exemptions to the mitigation sequencing requirements when the discharge
is necessary to avoid environmental harm or can be reasonably expected
to result in environmental gains or insignificant impacts. Other
commenters expressed concern that strict adherence to mitigation
sequencing will prevent the implementation of large scale compensatory
mitigation projects. Some commenters asserted that rigid rules for on-
site avoidance often result in small areas for compensatory mitigation
projects, which are unlikely to function properly.
Potential exemptions to the mitigation sequence are beyond the
scope of today's rulemaking. However, we do note that these exemptions
to the mitigation sequence are addressed through specific provisions of
the 1990 Mitigation Memorandum of Agreement (MOA) between the U.S. EPA
and the Department of the Army. Those provisions of the 1990 Mitigation
MOA are not affected by this final rule. The 404(b)(1) Guidelines and
the provisions of the 1990 Mitigation MOA that are retained after this
final rule goes into effect provide sufficient flexibility to allow the
development of large scale compensatory mitigation projects. Avoiding
waters of the United States to the maximum extent practicable on the
project site does not result in small areas for compensatory mitigation
that may be required by the district engineer, since this rule does not
require on-site compensatory mitigation. This rule takes a watershed
approach to compensatory mitigation, and emphasizes that compensatory
mitigation projects should be placed in appropriate locations within a
watershed.
One commenter stated that the definition of ``practicable'' should
take into account public safety and maintenance. Another commenter
suggested that the rule should require the district engineer to
consider whether the wetland functions lost as a result of a permitted
activity can be practicably replaced.
The definition of ``practicable'' provides sufficient flexibility
to take into account public safety and maintenance when making
decisions on applications for DA permits. In Sec. 332.3 [Sec.
230.93], there are several provisions that require the district
engineer to consider the likelihood of success when determining
appropriate and practicable compensatory mitigation.
We have also added a new provision at Sec. 332.1(c)(3) [Sec.
230.91(c)(3)] reminding the public that in some cases that district
engineer may determine that a proposed permit cannot be issued because
of the lack of appropriate and practicable mitigation options. While
the Corps envisions that this will be an unusual situation, it is
possible that the impacts at a particular site would be so significant,
and the avoidance, minimization and compensation options are so
limited, that it is simply not possible to adequately mitigate the
project impacts.
(d) Public interest. We received no comments on this provision. In
the proposed rule, this provision was in paragraph (c) of this section,
which discusses the mitigation sequence under the Clean Water Act
Section 404(b)(1) Guidelines. Since the public interest review is a
different process than mitigation sequencing, we have moved this
sentence to a separate paragraph.
(e) Accounting for regional variations. Many commenters said that
the rule should provide flexibility to address regional issues relating
to compensatory mitigation. For example, a number of commenters
discussed implementation of section 404 of the Clean Water Act in the
State of Alaska, where there is a clear understanding that compensatory
mitigation is not always warranted or practicable. Some of these
commenters cited the May 13, 1994, ``Statements on the Mitigation
Sequence and No Net Loss of Wetlands in Alaska'' issued by the U.S. EPA
and the Department of the Army. These commenters said that the final
rule should identify Alaska as a special case in which local
flexibility is needed and will be applied. In Alaska, there are limited
opportunities to create or restore wetlands because of its
environmental conditions.
As discussed elsewhere in this preamble, this rule does not change
the circumstances under which compensatory mitigation is required for
DA permits. Therefore, it does not change the May 13, 1994, Alaska
mitigation statement cited above. We have modified appropriate
provisions of this rule to clarify the flexibility and discretion
available to district engineers when determining compensatory
mitigation requirements for DA permits.
Some commenters cited examples where regional flexibility is needed
to maximize available mitigation credits. An important tool for
regional flexibility is to be able to use all three mechanisms
(permittee-responsible mitigation, mitigation banks, and in-lieu fee
programs) for providing compensatory mitigation. One commenter said
that there is only one small mitigation bank
[[Page 19620]]
in Alaska because of its climate, geography, and limited opportunities
for wetland establishment or restoration. Other commenters stated that
opportunities to develop mitigation banks in southern Nevada and other
areas of the southwest are extremely limited because of the low
availability of water. Another commenter noted that in areas where most
of the land is owned by the federal government, opportunities to
develop mitigation banks are substantially limited.
This rule supports all three mitigation sources used in the Corps
Regulatory Program: permittee-responsible mitigation, mitigation banks,
and in-lieu fee programs. We acknowledge that there are areas where
mitigation banks are unlikely to be established. In such areas, in-lieu
fee programs may be established. Permittee-responsible mitigation may
also be required if there are no third-party mitigation options and the
district engineer determines that compensatory mitigation is necessary
to offset losses of aquatic resource functions.
One commenter suggested that each Corps district establish region-
specific methodologies for calculating compensatory mitigation needs.
According to this commenter, this would allow regional experts to set
regional strategies for compensatory mitigation. One commenter said
that this rule should provide district engineers with operational
standards for regional variations, but only to the extent necessary to
promote ecologically sound and successful restoration of wetland
functions.
Regional methods for determining compensatory mitigation
requirements can be developed by Corps districts and other entities.
District engineers are also encouraged to establish regional strategies
for compensatory mitigation, through watershed planning or other means.
The development of regional methods and watershed plans is a resource-
intensive enterprise, and any Corps district efforts towards developing
such products are dependent on available resources. We do not believe
it would be appropriate to provide operational standards in a national
rule, because regional standards are more effectively developed at the
local level.
(f) Relationship to other guidance documents. Many commenters
recommended adding a provision to the rule that clarifies whether
previously issued guidance documents relating to compensatory
mitigation in the Corps Regulatory Program are superseded by this final
rule. These commenters cited the 1995 Mitigation Banking Guidance, the
2000 In-Lieu Fee Guidance, and the 1990 Mitigation Memorandum of
Agreement between the U.S. EPA and the Department of the Army as
documents about which such clarification is needed.
We agree that such a provision is appropriate to provide clarity
for the regulated public and government agencies. We have added
paragraph (f)(1) to this section, which states that this rule replaces
the mitigation banking guidance issued on November 28, 1995, the in-
lieu fee guidance issued on November 7, 2000, and Regulatory Guidance
Letter 02-02 which was issued on December 24, 2002. Since this rule
does not address all provisions of the 1990 Mitigation MOA that relate
to compensatory mitigation, paragraph (f)(2) discusses which provisions
of this MOA are superseded by the rule. This rule supersedes only those
provisions of the MOA relating to the amount, type, and location of
compensatory mitigation, and the use of preservation as a mitigation
component.
Other Corps guidance documents that relate to compensatory
mitigation for DA permits, such as local guidance issued by Corps
districts, should be revised as necessary so that they are consistent
with this final rule.
33 CFR 332.2 and 40 CFR 230.92 Definitions
Adaptive management. Two commenters supported the proposed
definition of adaptive management. Two commenters suggested that the
definition should require consideration of likely risks to compensatory
mitigation project sites. Other commenters stated that the definition
should clarify that adaptive management involves a strategy that
addresses challenges faced in the restoration of dynamic systems. Two
commenters said that there is potential to use this definition to relax
or modify project-specific performance criteria to account for poor
design or unexpected as-built conditions to achieve project goals.
We have modified this definition to account for two aspects of
adaptive management: (1) Addressing challenges that are likely to occur
with compensatory mitigation projects, and (2) addressing unforeseen
changes to those projects. The likely challenges are those that are
reasonably foreseeable, which may typically occur for the restoration,
establishment, or enhancement of a particular aquatic habitat type in a
specific area. For the purposes of this rule, adaptive management does
not require anticipation of all potential challenges, since that would
be impossible to accomplish. We have also changed this definition to
state that adaptive management requires consideration of the risk,
uncertainty, and dynamic nature of compensatory mitigation projects.
Consideration of those factors can help proponents optimize the
ecological performance of compensatory mitigation projects. The last
sentence of this definition has been modified to clarify that the
adaptive management process involves the selection of appropriate
measures that will provide aquatic resource functions. Another change
to the last sentence acknowledges that analysis of monitoring results
will be used to identify and implement measures to rectify problems.
Advance credits. We have adopted this new definition to define one
of the two types of credits that can be provided by in-lieu fee
programs. Advance credits are compensatory mitigation credits available
for sale by an in-lieu fee program sponsor prior to being fulfilled
through implementation of an approved mitigation plan for an in-lieu
fee project. An approved in-lieu fee project will have a credit release
schedule, and as the milestones in the credit release schedule are
achieved, the credits that are produced will be released to fulfill the
sponsor's obligation for credit production on behalf of the permittees
who secured credits from that sponsor. The number of advance credits
that a sponsor may make available to permittees is specified by service
area in the in-lieu fee program instrument. In-lieu fee programs cannot
sell advance credits until they have an approved instrument specifying
the maximum allowable number of advance credits and a schedule for
fulfilling any advance credit sales. Considerations for determining the
appropriate number of advance credits for a given service area are
discussed elsewhere in this preamble.
Buffer. Two commenters recommended modifying this definition to
include areas providing upland habitat next to aquatic resources, in
addition to protecting those resources from disturbance. Another
commenter said that this definition should include buffers associated
with ephemeral channels. One commenter noted that there is
inconsistency in the proposed rule: in one section the term ``buffer''
includes upland areas, but in another section of the proposed rule it
implies that buffers do not include uplands. This commenter recommended
using this term consistently throughout the rule to eliminate
confusion. One
[[Page 19621]]
commenter said that buffers may include wetlands.
Although upland buffers usually provide habitat next to aquatic
resources, we do not believe it is necessary to explicitly state that
in this definition. Upland buffers can be established and maintained
next to ephemeral channels, but we do not believe such clarification is
needed. We have modified this definition by adding the word ``wetland''
since buffers may be comprised of uplands, wetlands, and/or riparian
areas. Riparian areas may or may not be wetlands.
Compensatory mitigation. Two commenters suggested that this
definition should not be limited to aquatic resources. It should also
acknowledge ecological improvements in uplands. Another commenter said
that the definition should clarify that preservation is always a
required component of compensatory mitigation, and in certain
circumstances it may be the sole component. One commenter stated that
this definition should be expanded to include functional surrogates for
hydrology, such as integrated storm water management facilities.
This rule is limited to compensatory mitigation for impacts to
aquatic resources, since the Corps regulates activities in waters of
the United States, including navigable waters. Mitigation required by
district engineers to address impacts to other resources, such as
endangered species or historic properties, is governed by other
provisions in the Corps regulations. Preservation is not always a
required component of compensatory mitigation, although long-term
protection through real estate instruments or other mechanisms is
usually required for compensatory mitigation project sites.
Preservation is one means of providing compensatory mitigation;
compensation may also be provided through restoration, enhancement, or
establishment, or any combination of those four methods. Preservation
is rarely the sole source of compensatory mitigation for a DA permit;
in most cases, aquatic resource restoration, establishment, and/or
enhancement is required to achieve a minimum of one-to-one replacement
of lost aquatic resources and any required preservation augments that
replacement. Use of various techniques to offset losses of hydrologic
functions, such as integrated storm water management facilities, is
considered to be an action to minimize effects in accordance with 40
CFR part 230, Subpart H. District engineer can consider the use of such
features when determining the appropriate amount of compensatory
mitigation required for DA permits.
Compensatory mitigation project. Two commenters recommended
expanding this definition to include ecological improvements in
uplands, where appropriate. One commenter said it was unclear whether
forms of third-party mitigation other than mitigation banks are
considered to be compensatory mitigation projects. One commenter
suggested adding in-lieu fee programs to this definition.
This definition has been simplified by replacing the phrase ``a
restoration, establishment, enhancement, and/or preservation activity''
with ``compensatory mitigation.'' In this rule, district engineers have
the discretion to include uplands, such as non-wetland riparian areas
and buffers, as part of the overall compensatory mitigation project if
those features are essential to maintaining the ecological viability of
adjoining aquatic resources. We do not believe it is necessary to state
this concept in the definition, since it is addressed in Sec. 332.3(i)
[Sec. 230.93(i)]. We have removed the term ``third-party'' from this
definition, and added the phrase ``or an in-lieu fee program'' to
clarify that compensatory mitigation projects include mitigation banks
and in-lieu fee programs.
Condition. We have adopted this new definition since methods other
than functional assessments can be used to evaluate permitted impacts
and compensatory mitigation projects. This definition is based on
concepts provided in the 2004 report entitled ``Review of Rapid
Assessment Methods for Assessing Wetland Condition'' which was
published by the U.S. EPA (EPA/620/R-04/009).
Credit. One commenter noted that the proposed definition is based
on measures of function. This commenter said that if there are no units
of measure included, measures of function cannot be used to calculate
credits. Another commenter stated that units of measure are needed to
calculate numbers of credits.
We have modified this definition by adding the phrase ``or other
suitable metric'' to the list of examples of potential measures. There
are a variety of methods that can be used to determine the number of
credits provided by a compensatory mitigation project. In some cases,
condition assessments may be used to determine available credits. The
units of measure will depend on the method of determining credits. We
have also inserted the word ``aquatic'' before ``functions'' in the
last sentence, to clarify that credits are to be based on aquatic
functions provided by resource restoration, establishment, enhancement,
or preservation.
For the purposes of this rule, credits from a mitigation bank or an
in-lieu fee project are produced in accordance with a credit release
schedule associated with an approved mitigation plan. For permittee
responsible mitigation, credits are produced when a compensatory
mitigation project is implemented in accordance with the approved
mitigation plan.
DA. There were no comments received on the proposed definition.
This definition is adopted as proposed.
Days. There were no comments received on the proposed definition.
This definition is adopted as proposed.
Debit. One commenter noted that the proposed definition is based on
measures of function. This commenter said that if there are no units of
measure included, measures of function cannot be used to calculate
debits. Another commenter stated that units of measure are needed to
calculate numbers of debits.
For the same reasons provided in the preamble discussion of the
term ``credit,'' we have modified this definition to refer to other
suitable metrics. The units of measure depend on the method of
determining debits.
Enhancement. One commenter expressed support for the proposed
definition. Several commenters requested changes to this definition to
provide clarification. They said that it is difficult to distinguish
between enhancement, restoration, rehabilitation, and re-establishment.
Two commenters suggested that this definition should not be limited to
aquatic resources, since ecological improvements could be made to
uplands. Two commenters stated that the definition should limit
enhancement to increases in function within the normal range of the
particular type of ecosystem. Two commenters disagreed that enhancement
does not result in an increase in aquatic resource area.
Enhancement differs from restoration, rehabilitation, and re-
establishment because the objective of enhancement is usually to
improve one or two functions, which may result in a decrease in the
performance of other functions. Increasing those particular functions
does not change the amount of area occupied by the aquatic resource. In
contrast, re-establishment and rehabilitation (which are forms of
restoration) are intended to return most, if not all, natural and/or
historic functions to a former or degraded aquatic resource. We
acknowledge that ecological functions of uplands can be
[[Page 19622]]
augmented through enhancement activities, but the scope of this rule is
focused on aquatic resources. Enhancement activities are likely to
result in limited changes in functional performance, because of
inherent limits to functional capacity at a particular compensatory
mitigation project site. If a compensatory mitigation activity results
in an increase in aquatic resource area, in addition to increases in
one or more aquatic resource functions, then it would probably be more
appropriately classified as restoration. However, there may be cases
where an increase in aquatic resource area is considered to be an
adverse effect (e.g., impoundment of a forested wetland and adjacent
uplands that kills the trees and changes habitat types). While
enhancement does not result in a gain in aquatic resource area for
purposes of tracking ``not net loss'' of wetlands, this does not mean
that it cannot be used to compensate for a loss in resource area at the
impact site. The district engineer will determine on a case-by-case
basis the appropriate type and amount of mitigation to compensate for
permitted impacts.
Establishment (creation). One commenter said that establishment
should not be used in areas with poor hydrology. Two commenters stated
that this definition should not be limited to aquatic resources, since
ecological improvement can be made to uplands. One commenter
recommended using the term ``creation'' instead of ``establishment''
because the term ``establishment'' does not convey the difficulties and
risks associated with wetland creation. Another commenter said that
deepwater sites are regulated waters and filling those waters to make a
wetland is conversion, not establishment (creation).
District engineers will evaluate proposed establishment (creation)
projects to determine if there is appropriate hydrology to support the
desired aquatic resource. As discussed above, we acknowledge that
ecological functions of uplands can be enhanced, but that is outside
the scope of this rule. The term ``establishment'' is used in this
rule, to be consistent with the terminology developed by the White
House Wetlands Working Group (WHWWG) in 2000 to track wetland gains and
losses. The WHWWG terminology continues to be used for wetland
reporting, such as the Council on Environmental Quality's reports on
implementation of the President's wetlands goals. We acknowledge that
deepwater sites are usually considered to be waters of the United
States and we have struck the phrase ``or deepwater'' from this
definition.
Fulfillment of advance credit sales of an in-lieu fee program. This
definition was developed for use in the regulations governing in-lieu
fee programs. The fulfillment of advance credits from in-lieu fee
programs is accomplished when an approved mitigation plan for an in-
lieu fee project is implemented by the in-lieu fee program sponsor.
Each approved mitigation plan for an in-lieu fee project will have a
credit release schedule. As each milestone of the credit release
schedule is achieved, a number of credits will be produced. The number
of credits produced will fulfill that sponsor's obligations for that
same number of advance credits. Only after all previously sold advance
credits in a service area have been fulfilled can additional released
credits from the project be sold. As advance credits within a service
area are fulfilled through the approved release of credits for an in-
lieu fee project, an equal number of new advance credits in that
service area become available to be provided or transferred (sold) to
permittees.
Functional capacity. There were no comments received on the
proposed definition. This definition is adopted as proposed.
Functions. A few commenters supported the proposed definition. Many
commenters recommended that the agencies provide clarification to this
definition. Several commenters said that this definition should either
identify which functions are to be measured or define standard
protocols for functional assessment methods. One commenter suggested
that the assessed functions should include primary and secondary
production, nutrient uptake and transformation, nutrient and organic
matter input, storage, and export, and organic matter decomposition
rates. Another commenter said that the definition should apply only to
wetlands, not streams.
District engineers will determine appropriate functional
assessments to use for particular permitting situations. We do not
believe it is necessary to specify the type of functions provided by
aquatic resources, since this definition is intended to have general
applicability. We have removed the phrase ``aquatic resources and
other'' from this definition, since the term ``functions'' applies to
physical, chemical, and biological processes that occur in any
ecosystem. Even though the focus of the Corps Regulatory Program is on
functions provided by aquatic resources, we believe this definition
should be based on the general concept of what an ecosystem function
is.
Impact. Two commenters said that the proposed rule incorrectly
assumes that all impacts are adverse, and that the definition should
recognize that some impacts may be beneficial.
We acknowledge that not all impacts authorized by DA permits are
adverse, but the focus of this rule is on providing compensatory
mitigation for losses of waters of the United States. Activities
authorized by DA permits that benefit aquatic resources do not
generally require compensatory mitigation. When determining the
compensatory mitigation requirements for a particular permit, district
engineers should consider environmentally beneficial activities that
are provided by components of the overall project. In cases where
environmentally beneficial activities or mitigation measures related to
the aquatic environment are incorporated into the overall project, a
smaller amount of compensatory mitigation may be required to offset the
authorized adverse impacts to waters of the United States.
In-kind. Several commenters said that the proposed definition is
too vague. Two of these commenters stated that in-kind compensation
should be structurally and functionally similar. One commenter
requested that the definition clarify the difference between
``functionally similar'' and ``structurally similar''. Two commenters
suggested that the final rule adopt the current definition of in-kind
mitigation, which refers to specific ecological types of wetlands.
We have changed the phrase ``and/or'' to ``and'' to define in-kind
mitigation as being of a similar structural and functional type as the
impacted resource. The modification of this definition will also help
clarify that in-kind mitigation should provide similar types of
structure and functions as the impacted resource, while accommodating
high quality compensatory mitigation projects. In-kind mitigation
projects should result in resource structure and functional capacity
that are comparable to reference aquatic resources. In other words, in-
kind mitigation should not consist of replacing a degraded aquatic
resource with a degraded compensation resource. An in-kind compensatory
mitigation project should result in a high quality aquatic resource.
Thus, a mitigation project that was the same class of wetlands as the
impacted resource, but with greater species diversity and habitat
quality, would be considered appropriate in-kind mitigation.
[[Page 19623]]
In-lieu fee program. Many commenters said that the rule should
define the term ``in-lieu fee program.'' Several commenters stated that
such a definition is necessary to clarify which programs would be
subject to new regulations governing in-lieu fee programs.
We have added a definition of this term to the final rule. It is
parallel to the definition of ``mitigation bank'' while recognizing
basic differences between mitigation banks and in-lieu fee programs.
This definition discusses how an in-lieu fee program is similar to a
mitigation bank, but it also clarifies that the rules governing the
operation and use of in-lieu fee programs differ from those that govern
mitigation banks.
In-lieu fee program instrument. We have added a definition of this
term that is parallel to the definition of ``mitigation banking
instrument.''
Instrument. We are adding this new definition to clarify that the
use of the generic term ``instrument'' in this final rule may refer to
either a mitigation banking instrument or an in-lieu fee program
instrument.
Interagency Review Team. One commenter suggested modifying this
definition to clarify that an Interagency Review Team (IRT) can review
documents for more than one mitigation bank. Another commenter said
that the term ``mitigation bank review team'' should be used instead
since in-lieu fee programs would be phased out under the proposed rule.
We do not believe it is necessary to change this definition to
state that an IRT can review more than one proposed mitigation bank at
a time. A different IRT may be established for each proposed mitigation
bank or in-lieu fee program, or the same IRT may be involved in all
proposed mitigation banks or in-lieu fee programs in an area. Since
this final rule provides for both mitigation banks and in-lieu fee
programs, it would be inappropriate to revert to using ``mitigation
bank review team.''
Mitigation bank. Three commenters recommended using the word
``aquatic'' in place of ``similar'' to clarify that the district
engineer can require out-of-kind compensatory mitigation. Two
commenters said that this definition should acknowledge that ecological
improvements to uplands may be provided through a mitigation bank. One
commenter stated that this definition should include language to
reflect the fact that a mitigation bank cannot be used to offset
impacts to aquatic resources unless certain performance standards have
been met.
We have modified the first sentence of this definition by removing
the word ``aquatic'' and adding examples of resource types that could
be used as compensatory mitigation for impacts authorized by DA
permits: wetlands, streams, riparian areas. This change is consistent
with the practice of allowing out-of-kind compensation. Compensatory
mitigation may be provided through the establishment and maintenance of
non-wetland riparian areas, which are not aquatic resources. The
changes to the first sentence also allow recognition that upland areas
may provide important ecological functions within a mitigation bank,
and compensatory mitigation credit can be provided by those functions.
We do not believe it would be accurate to state in this definition that
performance standards must be met before a mitigation bank may be used
to provide compensatory mitigation for authorized impacts to aquatic
resources. When a mitigation bank is approved, and certain
administrative activities are accomplished, a limited number of credits
may be released which can be sold or transferred to permittees to
fulfill their compensatory mitigation requirements.
Mitigation banking instrument. One commenter suggested modifying
this definition to allow federal facility management plans, integrated
natural resource management plans, or other acceptable documentation to
be used as mitigation banking instruments.
Federal facility management plans, integrated natural resource
management plans, and similar documents are more appropriately
considered as site protection instruments, not mitigation banking
instruments. A mitigation banking instrument governs the establishment
and operation of a mitigation bank, which involves more issues than how
the site will be managed.
Off-site. Many commenters requested a more explicit definition of
this term. Several commenters said that the term ``near'' is subjective
and should be more clearly defined. One commenter suggested using
``hydrologically connected'' instead of ``near.'' Two commenters
expressed support for the flexibility provided by the use of the term
``or near'' in this definition. One commenter said that the term
``parcel'' should be defined in measurable units, to establish
reasonable distances and areas for parcels. Another commenter suggested
that the agencies should consider loosening the definition of off-site
mitigation instead of allowing for more opportunities for out-of-kind
mitigation.
We have removed the phrase ``or near'' to simplify this definition
and to remove ambiguity. Off-site compensatory mitigation is located on
a parcel of land other than the parcel containing the impact site or a
parcel contiguous to the impact site. The revised definition does not
establish minimum distances for a compensatory mitigation project to be
considered off-site. The use of in-kind mitigation versus out-of-kind
mitigation is more appropriately addressed by district engineers on a
case-by-case basis in response to project-specific circumstances,
instead of modifying this definition.
On-site. Many commenters requested a more explicit definition of
this term. Several commenters said that the term ``near'' should be
more clearly defined because it is subjective. One commenter stated
that the term ``near'' should be replaced with ``hydrologically
connected.'' Some commenters expressed support for the flexibility
provided by the use of the term ``near'' in this definition. Two
commenters said that the term ``parcel'' should be defined more
clearly.
For the same reasons as provided in the preamble discussion of the
changes to the definition of ``off-site,'' we have modified the
definition of ``on-site'' by removing the phrase ``or near.'' These
changes will help ensure that these two definitions complement each
other.
Out-of-kind. Two commenters said that the word ``or'' should
replace the phrase ``and/or'' in this definition, to state that out-of-
kind mitigation should be structurally or functionally similar. One
commenter remarked that this definition should provide clarification on
what are accepted forms of out-of-kind mitigation. Two commenters
suggested that this definition refer to specific ecological types of
wetlands.
We have removed the phrase ``and/or'' and replaced it with the word
``and'' since out-of-kind mitigation differs from the resources
impacted by the authorized work in both structure and function.
Providing clarification on accepted forms of out-of-kind mitigation is
beyond the scope of this definition. Appropriate out-of-kind mitigation
will be determined by a district engineer on a case-by-case basis in
response to an application for a DA permit. There are a number of
classification systems for the various ecological types of aquatic
resources. For the purposes of a regulatory definition that applies to
a wide variety of aquatic resources, it would not be appropriate to
modify this definition to refer to a particular classification system.
[[Page 19624]]
Performance standards. One commenter requested that the agencies
expand this definition to explain, in greater detail, what performance
standards are.
We do not believe it would be appropriate to provide greater detail
regarding performance standards in this definition. Performance
standards will vary by aquatic resource type, and those standards are
also likely to vary among geographic regions. Performance standards are
also dependent on the techniques used to measure how well a
compensatory mitigation project is meeting its objectives. General
criteria for establishing appropriate ecological performance standards
are provided in Sec. 332.5 [Sec. 230.95].
Permittee-responsible mitigation. There were no comments on this
proposed definition. This definition is adopted as proposed.
Preservation. Some commenters said that this definition should be
clearer, while other commenters stated that the proposed definition is
adequate. Two commenters recommended modifying this definition to
explicitly state that the preserved site will be permanently protected
through appropriate real estate or legal instruments. One of these
commenters noted that making such a change would avoid passive
mitigation that results in little or no mitigation benefits. Two
commenters said that preservation should not be limited to aquatic
resources, but should also include ecological improvements in uplands
when appropriate. One commenter suggested revising this definition to
acknowledge gains in aquatic resource functions, services, and values.
The protection of a compensatory mitigation project site is more
appropriately addressed through the rule provisions for site protection
in Sec. 332.7(a) [Sec. 230.97(a)]. This definition merely explains
what preservation is, in the context of compensatory mitigation for DA
permits. As part of an overall compensatory mitigation project, uplands
such as non-wetland riparian areas may be included with preserved
aquatic resources, if they help protect or sustain those aquatic
resources. Although preservation helps sustain the functions and
services provided by the preserved aquatic resources, by preventing
direct impacts through land use changes, there is no gain in acreage.
There may be a ``passive'' gain in functions and services over the
long-term, if the preservation activity serves to remove or reduce
stressors on the resource, however the main purpose of preservation is
to prevent a future loss of resources, not to provide a gain. For this
reason, higher compensation ratios are generally required.
Release of credits. This definition has been added to describe
actions where the district engineer, in consultation with the IRT,
determines that credits associated with an approved mitigation plan for
a mitigation bank are available for sale, transfer, or debit, or in the
case of an in-lieu fee program, for fulfillment of advance credit
sales. The credit release schedule for an approved mitigation bank or
in-lieu fee project plan will be used to determine the number and
resource type of credits that are released, as long as appropriate
milestones specified in that schedule are achieved. A proportion of
projected credits for a specific mitigation bank or in-lieu fee project
may be released upon approval of the mitigation plan.
Re-establishment. Three commenters said that this definition should
be deleted from this rule. One commenter found this definition useful,
while others remarked that this definition is unclear and difficult to
distinguish from ``restoration'' and ``enhancement.'' Two other
commenters recommended expanding this definition to include ecological
improvements in uplands, instead of limiting it to aquatic resources.
Re-establishment is a form of restoration, where the functions are
returned to the site where an aquatic resource previously existed. The
other form of restoration is rehabilitation, which results in an
improvement in most, if not all, aquatic resource functions at a
degraded site. Re-establishment differs from enhancement because
enhancement is the augmentation of certain functions in an existing
aquatic resource. It is not appropriate to address ecological
improvements to uplands in this definition, since it is focused on
aquatic resource functions. Ecological improvements to uplands that are
conducted as part of a compensatory mitigation project can be
considered by the district engineer when determining the amount of
credits provided by that compensatory mitigation project.
Reference aquatic resources. Three commenters said that the
proposed definition contradicts extensive scientific literature that
describes the use of reference conditions in ecological assessment.
These commenters stated that the range of variability encompassed by
anthropogenic disturbances should not be included in this definition.
One commenter added that the term ``reference condition'' is used to
describe aquatic systems that are stable and highly functional, and
restoration projects should use reference streams and wetlands as
models to establish objectives. Another commenter recommended modifying
this definition to describe the use of reference sites.
We have revised this definition to make it consistent with its
current application in ecological assessment. Reference aquatic
resources represent the full range of variability exhibited by a
regional class of aquatic resources. That variability is due to both
natural processes and anthropogenic disturbances. The term ``reference
standard'' is used for the subset of reference aquatic resources that
are the least disturbed and exhibit the highest levels of functions.
Aquatic resources are not stable; instead, they are dynamic ecosystems
that change over time. For the purposes of compensatory mitigation for
DA permits, reference sites are used to help establish realistic
objectives for compensatory mitigation projects, but these sites have
other uses as well.
Rehabilitation. Many commenters said that the proposed definition
is unclear. One commenter recommended eliminating this definition and
another commenter stated that the term ``enhancement'' should be used
instead. One commenter supported the proposed definition. Two
commenters suggested that this definition should not be limited to
aquatic resources, but should also include ecological improvements to
uplands where applicable. One commenter recommended modifying the
second sentence of this definition to read: ``Restoration of an aquatic
resource can result in an increase in function with or without an
increase in size.''
Rehabilitation differs from enhancement in that rehabilitation is
intended to result in a general improvement in the suite of the
functions performed by a degraded aquatic resource. In contrast,
enhancement activities focus on increasing one or two functions, rather
than all the functions being performed by an existing aquatic resource.
For the purposes of this rule, ecological improvements to uplands are
more appropriately addressed through the crediting of compensatory
mitigation projects. We do not believe it is necessary to add the
suggested sentence to this definition, since rehabilitation does not
include re-establishment, which is the other type of restoration. The
lack of gain in aquatic resource area is already addressed by the last
sentence of the definition of ``rehabilitation.'' We note that, while
rehabilitation does not result in a gain in aquatic resource area for
purposes of tracking ``not net loss'' of wetlands, this does not mean
that it cannot be used to compensate for a loss
[[Page 19625]]
in resource area at the impact site. The district engineer will
determine on a case-by-case basis the appropriate type and amount of
mitigation to compensate for permitted impacts.
Restoration. Several commenters requested clarification of the
proposed definition, and one commenter said that the definition should
explain how restoration differs from enhancement. One commenter said
that rehabilitation should not be considered as a form of restoration
because rehabilitation does not result in an increase in wetland
acreage, even though it improves wetland functions and/or values. Two
commenters stated that this definition should not be limited to aquatic
resources, so it should also include ecological improvements to uplands
when appropriate.
Restoration differs from enhancement in that it results in either
the re-establishment of an aquatic resource or the rehabilitation of a
suite of functions at a degraded aquatic resource. In contrast,
enhancement activities focus on the improvement of a subset of specific
functions of an aquatic resource. Rehabilitation results in a general
improvement in the amount of functions performed by aquatic resources,
and is considered to be a form of restoration. As stated above,
ecological improvements to uplands are more appropriately addressed
through crediting of compensatory mitigation projects.
Riparian areas. One commenter suggested defining this term more
narrowly, to specify the type of vegetation that characterizes riparian
areas. One commenter recommended modifying this definition to limit it
to open waters, since wetlands are also considered to be waterbodies.
We have modified the first sentence of this definition to clarify
that riparian areas are lands adjacent to streams, rivers, lakes, and
marine-estuarine shorelines. To simplify this definition, we have also
removed the second sentence of the proposed definition.
Service area. There were no comments on this proposed definition.
This definition is adopted as proposed.
Services. Several commenters said that the proposed definition of
this term is unclear and too subjective. According to one commenter,
using a subjective measure such as services to assess mitigation
success will hinder the government's administration of the program. In
addition, it will create compliance problems for industry, because they
will not be able to effectively plan future activities as a result of
this uncertain, subjective measure. Two commenters said that the
definitions of services and values should be combined. Other commenters
recommended removing both terms from the final rule. One commenter
stated that the reference to aquatic resources should be deleted
because services are provided by all types of ecosystems, not just
aquatic ecosystems.
This definition has been simplified by deleting the phrase
``aquatic resource and other'' since services may be provided by any
type of ecosystem, including non-aquatic ecosystems. The concept of
ecosystem services is important for considering where compensatory
mitigation projects should be located. The relative locations of
compensatory mitigation projects in the landscape helps address certain
public interest factors, such as water quality, flood hazards, and fish
and wildlife protection.
Sponsor. One commenter suggested that this definition should
include an entity responsible for establishing and operating a
mitigation bank or in-lieu fee program.
We have changed this definition to clarify that the sponsor is
responsible for establishing, and in most cases operating, a mitigation
bank or in-lieu fee program. There may be cases where sponsor turns
over the long-term management (and ownership) of the mitigation bank
site or in-lieu fee project site to another entity, so the word
``operating'' is modified by the phrase ``in most circumstances'' to
reflect those situations.
Standard permit. There were no comments received on the proposed
definition. It is adopted as proposed.
Temporal loss. We have added a definition of temporal loss which
clarifies that temporal loss is the time lag between the loss of
aquatic resource functions caused by the permitted impacts and the
replacement of aquatic resource functions at the compensatory
mitigation site. Temporal loss is one factor that must be considered in
determining compensation ratios. The definition also provides that the
district engineer may determine that compensation for temporal loss is
not necessary when a mitigation project is initiated prior to or
concurrent with the permitted impacts, except for resources with long
development times (e.g., forested wetlands). This is intended to
provide an additional incentive for timely mitigation.
Values. Two commenters said that the definitions of services and
values should be combined. Several commenters said that the proposed
definition of this term is unclear and too subjective, and others
indicated that this definition should be deleted. One commenter stated
that using value as a measure of mitigation success reduces the
predictability and regulatory certainty needed for industry and
government to operate efficiently.
We have deleted this definition, since the term ``services'' is the
current term being used to signify the importance of ecosystem
functions to human populations. The use of the term ``values'' in the
Regulatory Program during the past few decades has been similar to the
way ``services'' is used today in most of the academic environmental
literature, as well as policy documents. The use of the term
``services'' instead of ``values'' will provide a more objective means
of assessing how impacted aquatic resources and compensatory mitigation
projects relate to people.
In addition, ecosystem services can be more easily described than
values. They are usually simply presented in qualitative terms as the
benefits that are being provided to people in the watershed or other
area of interest. The term ``value'' can have different meanings (e.g.,
monetary versus non-monetary values; landowner versus societal values).
The valuation of aquatic resources and their functions is a complicated
issue, and one that is unnecessary to resolve for this rule. Use of the
term ``services'' will assist in program implementation, since agencies
and stakeholders are more likely to reach a common understanding
through descriptions of the ecosystem services being provided by a
particular site.
Watershed. Many commenters recommend adding a definition of
``watershed'' to the rule. One commenter said that the definition
should recognize that watersheds vary from region to region. On the
other hand, another commenter stated that the definition should be
interpreted and applied in a consistent manner regardless of the
geographic location of the compensatory mitigation project. This
commenter also suggested that the rule specifically identify the
watersheds that are eligible for use as locations for compensatory
mitigation projects.
We have adopted a definition for this term, based on the definition
provided in EPA's Watershed Plan Handbook, which was published in
December 2006. District engineers will determine appropriate watershed
scales for compensatory mitigation projects, including services areas
for mitigation banks and in-lieu fee programs. We do not believe it
would be appropriate to identify specific watersheds in which
compensatory mitigation can be conducted. In general, compensatory
mitigation projects should be located in
[[Page 19626]]
the same watershed as the permitted impacts, at a scale determined to
be appropriate by the district engineer based on the factors specified
in the rule.
Watershed approach. Two commenters asked that the final rule
include a definition of this term. We have added a definition of
``watershed approach'' that is based on concepts in this final rule.
Watershed plan. Several commenters said that there should be
opportunities for local watershed groups or non-governmental
organizations to develop watershed plans. Two commenters stated that
this definition should be limited to plans with a specific goal of
aquatic resource restoration and preservation to ensure that the
watershed plan goals are consistent with federal, tribal, and state
regulations. One commenter said that watershed plans should not include
priority sites for aquatic resource restoration. On the other hand,
another commenter stated that a watershed plan should identify priority
sites for restoration and should also have a goal of ecosystem
restoration. One commenter said that the proposed rule implies that any
available watershed plan should be used to identify compensatory
mitigation sites. This commenter stated that such an approach would be
inappropriate unless the watershed plan is developed for the purpose of
compensatory mitigation, including the protection of both natural and
built environments.
We have modified this definition to include appropriate non-
governmental organizations, such as local watershed groups, as
potential developers of watershed plans. We have also changed this
definition to clarify that, for the purposes of this rule, watershed
plans are developed for the specific goal of aquatic resource
restoration, establishment, enhancement, and preservation. This
clarification is necessary because there are many different types of
watershed plans, and those plans may be intended to fulfill a wide
variety of purposes. We believe it is appropriate for watershed plans
to identify priority sites for compensatory mitigation projects. In
addition, we have replaced the word ``ecological'' with the phrase
``aquatic resource'' to clarify that a watershed plan appropriate for
use in implementing this rule should address aquatic resource
conditions in a watershed. In the last sentence of this definition, we
have replaced the phrase ``watershed management plans'' with ``wetland
management plans'' to avoid a circular definition. As discussed below
in Sec. 332.3(c) [Sec. 230.93(c)], district engineers will determine
whether a particular watershed plan is appropriate for use in a
watershed approach to compensatory mitigation.
Several commenters said that key terms in the proposed rule are
either undefined or vaguely defined. A number of commenters suggested
additional terms to define in the final rule. These terms include
``larger projects'' and ``smaller projects.'' We do not believe it
would be appropriate to provide specific definitions to distinguish
between large and small projects. The difference between large and
small is subjective, and should be at the discretion of the district
engineer after considering site-specific and project-specific criteria.
Other requested definitions are discussed in more detail below.
One commenter requested a definition of the term ``aquatic resource
function'' since it is used repeatedly throughout the rule. We have
provided a general definition of the term ``functions'' in this
section, which applies to aquatic resources as well as other types of
ecological resources.
Two commenters asked for a definition of ``aquatic resource type''
since it is used throughout the rule. Three commenters said that the
final rule should define ``aquatic resources.'' We do not believe it is
necessary to define these terms in this rule. Different aquatic
resource types may be distinguished through a variety of classification
systems. What constitutes an aquatic resource is also dependent on the
classification system used. Different regions may have different
thresholds for making distinctions among aquatic, mesic, and xeric
resources.
Two commenters said that the rule should include a definition of
``successful mitigation.'' One commenter proposed a set of criteria to
be used to determine if the mitigation is successful.
Successful compensatory mitigation projects will be identified by
evaluating those projects against their ecological performance
standards. Therefore, successful mitigation will be determined on a
case-by-case basis.
Two commenters asked for a definition of ``mitigation type.'' We
have defined mitigation types in the final rule: restoration (which
includes re-establishment and rehabilitation), establishment,
enhancement, and preservation. We have also defined the terms ``in-
kind'' and ``out-of-kind.''
One commenter said that the rule should have a definition of
``complete prospectus.'' A complete prospectus contains the items
listed at Sec. 332.8(d)(2) [Sec. 230.98(d)(2)].
One commenter requested a definition of ``umbrella mitigation
banking instrument.'' We do not believe it is necessary to define this
term, because it is described at Sec. 332.8(h) [Sec. 230.98(h)].
One commenter said that the final rule should include a definition
of ``unavoidable impacts.'' It is not necessary to define this term,
since unavoidable impacts are identified on a case-by-case basis when a
district engineer evaluates a permit application.
One commenter stated that this rule should provide a definition of
``conversion'' as it relates to man-made changes to aquatic resources.
This commenter also requested that the final rule contain guidelines to
determine when a conversion would be ecologically appropriate.
We do not believe it is necessary to define the term ``conversion''
since it is commonly understood to refer to an action that changes an
area from one resource type to another resource type. Establishing
guidelines for evaluating conversion is beyond the scope of this rule.
For proposed changes to aquatic resources that require DA
authorization, district engineers will determine on a case-by-case
basis whether those activities constitute conversions and whether
proposed conversions are in compliance with applicable regulations.
One commenter suggested adding a definition of ``aggregate
mitigation site,'' to account for cases where a permittee desires to
provide a single compensatory mitigation project for multiple impacts
to waters of the United States. We do not believe it is necessary to
define this term. District engineers can consider compensatory
mitigation that has been provided in advance by permittees when
evaluating compensatory mitigation options (see 33 CFR 332.3(b) and 40
CFR 230.92(b)).
One commenter said that the rule should include a definition of
``degraded.'' It would not be appropriate to define this term, since it
is subjective. Assessment methods can be used to determine whether a
particular resource is degraded, based on a threshold chosen by the
district engineer. Best professional judgment may also be used to
identify degraded resources in situations where appropriate assessment
methods are not available.
One commenter stated that the term ``stream'' should be defined. We
do not believe it is necessary to define this term. District engineers
can determine on a case-by-case basis whether a particular waterbody is
a stream.
One commenter requested a definition of ``ecoregion.'' We do not
believe it is necessary to define this term. There are a number of
classification systems for
[[Page 19627]]
identifying ecoregions. Ecoregions may also be identified through local
criteria. District engineers will use appropriate criteria if
ecoregions are to be used to define service areas for mitigation banks
or in-lieu fee programs.
33 CFR 332.3 and 40 CFR 230.93 General Compensatory Mitigation
Requirements
Three commenters suggested that paragraph (c) of this section
should be put in front of paragraph (b) of this section. Two commenters
proposed that the Corps automated information system used for
compensatory mitigation should include a regional list of rare habitat
types.
We do not agree that paragraph (c) of this section, which discusses
the watershed approach, should be placed in front of paragraph (b),
which presents criteria concerning the type and location of
compensatory mitigation. As discussed below, paragraph (b) has a
preference hierarchy that includes the watershed approach. Although
mitigation banks and in-lieu fee projects should be strategically
located in areas that support a watershed approach to compensatory
mitigation, the preference hierarchy in paragraph (b) will be first
considered when determining the compensatory mitigation required for a
DA permit. If a mitigation bank or in-lieu fee program does not have
the appropriate number and resource type of credits available, then
permittee-responsible mitigation should be determined using the
watershed approach described in paragraph (c) of this section. District
engineers have the discretion to add appropriate data layers to the
Corps automated information system to include information on rare
habitat types, but it is not necessary to make that a requirement in
this rule.
(a) General considerations. One commenter remarked that the
proposed rule does not provide criteria, standards, or meaningful
guidance to ensure that the district engineer will require mitigation
that will protect water quality. Another commenter said that there
should be sufficient flexibility in the final rule to support new
approaches or strategies that meet the standards identified, but do not
fall into one of the existing categories.
Water quality standards are more appropriately addressed through
the water quality certification process under section 401 of the Clean
Water Act. A district engineer can require water quality management
measures as part of the overall compensatory mitigation package
required for a particular DA permit. Even though this rule is focused
on a watershed approach, it provides flexibility for district engineers
to use innovative approaches or strategies for determining more
effective compensatory mitigation requirements that provide greater
benefits for the aquatic environment. We have added to this section a
provision that allows the district engineer, when evaluating
compensatory mitigation options, to consider what would be
environmentally preferable, taking into account the likelihood for
ecological success and sustainability, the location of the compensation
site relative to the impact site and their relative significance within
the watershed, and the costs of the compensatory mitigation project.
One commenter stated that the economic cost of mitigation should
not be a primary consideration when determining the amount, location,
or type of compensatory mitigation required, and that reference to
economic costs should be deleted from this section. Several commenters
said that the district engineer should not be required to consider
economic costs when assessing the success and sustainability of a
mitigation project. Another commenter, however, recommended that the
final rule require the district engineer to consider economic factors
more comprehensively, including not only the economic cost of the
compensatory mitigation, but also the full range of costs and benefits
to society stemming from the loss of aquatic resources.
Economic costs are an important consideration when determining the
practicability of a proposed compensatory mitigation project. In
addition to economic costs, existing technology and logistics must also
be considered. If a particular compensatory mitigation project is cost-
prohibitive, then an alternative compensation project that is more
practicable should be required. District engineers will also consider
impacts to the public interest, including potential losses of aquatic
resource functions and services, when evaluating permit applications
and compensatory mitigation proposals, and determining appropriate and
practicable compensatory mitigation requirements.
We have added Sec. 332.3(a)(2) [Sec. 230.93(a)(2)] to provide
clarification regarding the potential mechanisms for providing
compensatory mitigation. It states that restoration should be the first
option considered since the likelihood of success is greater.
Restoration also helps reduce impacts to ecologically important
uplands, such as mature forests, where compensatory mitigation
activities may be proposed because of land availability. The 404(b)(1)
Guidelines prohibit discharges in areas where there may be other
significant environmental consequences (see 40 CFR 230.10(a)).
Some commenters recommended that the rule allow compensatory
mitigation projects on federal lands where state wildlife agencies
lease management rights for fish and wildlife purposes. Others
commenters suggested prohibiting compensatory mitigation projects on
existing public conservation lands.
We have added Sec. 332.3(a)(3) [Sec. 230.93(a)(3)], which was
moved from Sec. 332.8(a)(2) [Sec. 230.98(a)(2)] of the proposed rule.
We have modified this paragraph to be generally applicable to all
compensatory mitigation projects, not just mitigation banks.
Compensatory mitigation projects may be located on federal lands, as
long as those projects comply with the provisions of this part,
including the site protection requirements in Sec. 332.7(a)(4) [Sec.
230.97(a)(4)].
(b) Type and location of compensatory mitigation. Several
commenters stated that the established order of preference in the
proposed rule (i.e., mitigation bank credits; permittee-responsible
mitigation in accordance with a watershed plan or watershed approach;
on-site, in-kind permittee-responsible mitigation; and lastly, off-
site, out-of-kind permittee-responsible mitigation) is too limiting and
creates inefficiency. Many commenters stated that the proposed rule
establishes a preference for mitigation banks, and some of these
commenters argued that the preference for mitigation banks over in-lieu
fee programs cannot be justified. One commenter suggested that this
rule stipulate that mitigation banks should not necessarily represent a
``first resort'' to fulfilling mitigation requirements if there are on-
site opportunities that are likely to provide greater ecological
benefits. However, another commenter said that section 314 warrants a
stronger preference for using approved mitigation banks.
We have substantially revised and reorganized this section of the
final rule, and have provided flexibility for district engineers to
make compensatory mitigation decisions based on what is environmentally
preferable and is most likely to successfully provide the required
compensatory mitigation. Sections 332.3(b)(2)-(6) [Sec. 230.93(b)(2)-
(6)] present a preference hierarchy, which was developed through
careful consideration of comments received in response to the proposed
rule, as well as various studies on the different approaches for
providing compensatory mitigation. The hierarchy is based on
[[Page 19628]]
administrative and environmental considerations, to reduce risk and
uncertainty associated with compensatory mitigation projects, as well
as temporal losses of aquatic resource functions and services.
Reduction of risk and uncertainty associated with compensatory
mitigation projects is achieved by favoring compensatory mitigation
that is further along in the planning and approval process or will
better support a watershed approach. Since there are time lags
associated with all sources of compensatory mitigation (see the 2001
NRC Report), our focus is on reducing temporal losses to the extent
practicable. Administrative considerations include the regulations
governing mitigation banks, in-lieu fee programs, and permittee-
responsible mitigation that are provided in this rule, as well as the
timing of actions required for those sources of compensatory
mitigation. Environmental considerations include the expected
ecological benefits of third-party compensatory mitigation as well as
independent studies that have shown that the ecological success of
permittee-responsible mitigation is uneven. There have been few
independent studies of the ecological success of mitigation banks and
in-lieu fee programs, so we have no basis for establishing a preference
based solely on third-party mitigation success.
Section 332.3(b)(1) [Sec. 230.93(b)(1)] discusses general
principles for determining the appropriate type and location for
compensatory mitigation projects. Some of these principles were taken
from Sec. 332.3(b)(4) [Sec. 230.93(b)(4)] of the proposed rule, which
discussed the use of off-site and out-of-kind compensation. Since these
basic principles should be applied earlier in the selection process, we
have moved those provisions to Sec. 332.3(a)(1) [Sec. 230.93(a)(1)]
of the final rule. Paragraph (b)(1) of this section also states that
the compensatory mitigation options provided in paragraphs (b)(2)
through (b)(6) should be applied in the order they are given, to make
it clear that this is a hierarchy from highest to lowest preference. It
is important to understand that this is a preference hierarchy that
does not override a district engineer's judgment as to what constitutes
the most appropriate and practicable compensatory mitigation based on
consideration of case-specific circumstances. In this paragraph, we
have added a provision to address compensating for impacts to marine
resources. This provision states that compensatory mitigation project
sites for marine resources should be located in the same marine
ecological system as the impact site, citing reef complexes and
littoral drift cells as examples of marine ecological systems. We have
also added provisions indicating that compensation for impacts to
aquatic resources in coastal watersheds should be located in a coastal
watershed where practicable, and that mitigation projects should not be
located where they will increase risks to aviation by attracting
wildlife to areas where aircraft-wildlife strikes may occur (e.g., near
airports).
Section 332.3(b)(2) [Sec. 230.93(b)(2)] establishes a preference
for the use of mitigation bank credits if the mitigation bank has the
appropriate number and resource type of credits available. This
preference is based on the requirements in this rule: before credits
can be sold or transferred to permittees the sponsor must have an
approved instrument, as well as an approved mitigation plan and other
assurances in place. Those other assurances are specified in the
mitigation banking instrument and usually include securing the
mitigation bank site, establishing financial assurances, and finalizing
the appropriate site protection mechanisms. Because of these
requirements for mitigation banks, there is generally less risk and
uncertainty (and less temporal loss) than there is with in-lieu fee
programs and permittee-responsibility. Because of the credit release
schedule required for mitigation banks, there is some degree of
demonstrated success in providing the compensatory mitigation. In
addition, the planning and resources involved in developing and
implementing a mitigation bank help provide greater assurance that the
compensatory mitigation project will provide environmental benefits.
However, district engineers can apply these considerations to other
sources of compensatory mitigation to override the preference for
mitigation bank credits. For example, the district engineer may
authorize the use of released credits from an in-lieu fee program since
the requirements for release of these credits are comparable to the
requirements for release of credits from an approved mitigation bank.
In a situation where the permittee has proposed to restore an
outstanding resource, and has provided sufficient scientific and
technical analysis to demonstrate that such a project will be
successful, the district engineer may authorize the use of that
compensatory mitigation project instead of mitigation bank credits.
If the permitted impacts are not in the service area of an approved
mitigation bank, or are in the service area of an approved mitigation
bank, but that mitigation bank does not have the appropriate number and
resource type of credits available, and an approved in-lieu fee program
does not have appropriate released credits available, Sec. 332.3(b)(3)
[Sec. 230.93(b)(3)] establishes a preference for in-lieu fee program
credits. In-lieu fee programs fall into the next level of the hierarchy
because of the levels of planning and review they are required to
perform as a result of this rule. In-lieu fee programs are required to
develop a compensation planning framework that supports a watershed
approach (see Sec. 332.8(c) [Sec. 230.98(c)]). In-lieu fee programs
can also bring substantial expertise to aquatic resource restoration
and protection activities, and many in-lieu fee program sponsors are
conservation organizations with an interest in long-term management of
aquatic resources. This preference may be overridden by a high quality
permittee-responsible mitigation project or one that is likely to meet
performance standards before the in-lieu fee program sponsor fulfills
his or her obligation for advance credits.
If an approved mitigation bank or in-lieu fee program cannot be
used to provide the required compensatory mitigation, Sec. 332.3(b)(4)
establishes a preference for permittee-responsible mitigation conducted
under a watershed approach. In cases where a watershed approach is not
practicable for permittee-responsible mitigation, under Sec.
332.3(b)(5) [Sec. 230.93(b)(5)] the district engineer should consider
options for on-site and/or in-kind compensation to fulfill the
compensatory mitigation requirements. The last option under the
preference hierarchy is for permittee-responsible mitigation through
off-site and/or out-of-kind compensatory mitigation (see Sec.
332.3(b)(6) [Sec. 230.93(b)(6)]).
One commenter said the proposed rule seems excessively rigid, and
the limited funds available to public agencies should be used to
implement mitigation where it will be most cost-effective. One
commenter said that wetland establishment should not be an acceptable
form of wetland compensation, as it is too uncertain and has a bad
track record. One commenter recommended that this section be re-
organized to explain how the watershed approach should be applied to
each mitigation location option.
Cost considerations may be used to evaluate whether the proposed
compensatory mitigation requirement for a DA permit is practicable.
However, the ecological success of the compensatory mitigation project
and its effectiveness at offsetting the permitted impacts are also
important
[[Page 19629]]
considerations. We recognize that wetland establishment may not be
successful in many situations, so we have established a preference for
restoration in Sec. 332.3(a)(2) [Sec. 230.93(a)(2)]. The watershed
approach is discussed in Sec. 332.3(c) [Sec. 230.93(c)]. District
engineers will apply the watershed approach to the extent practicable
when considering compensatory mitigation options, as well as during the
review and approval of instruments for mitigation banks and in-lieu fee
programs.
The final rule states that compensatory mitigation decisions will
be based on what is environmentally preferable, which, in a particular
situation, might be on-site compensation. As discussed above, it
provides a hierarchy of preferences for satisfying compensatory
mitigation requirements for DA permits, starting with mitigation bank
credits.
Many commenters supported eliminating the preference for in-kind
and on-site compensatory mitigation. Most of these commenters said that
compensatory mitigation requirements should be based on ecological
criteria, as well as the likelihood of offsetting the permitted
impacts, not on a preference for on-site mitigation. Some commenters
noted that rigid rules favoring on-site compensation often yield small,
poorly functioning compensatory mitigation projects. One commenter
noted that federal agencies that review permit applications are often
restricted from accepting more environmentally meaningful compensation
proposals because of the preference for in-kind, on-site compensatory
mitigation projects. Several other commenters, however, recommended
that the final rule express a preference for on-site mitigation. Two
commenters said that compensatory mitigation wetlands should be located
as close as possible to the impacted wetlands, and should be the same
wetland type. A few commenters suggested that on-site, in-kind
mitigation should be preferred until substantive watershed-level plans
are developed to guide compensatory mitigation decisions. Several
commenters stated that off-site mitigation should only be considered if
other forms of mitigation are likely to be ineffective, and several
commenters requested clarification of the circumstances under which
off-site or out-of-kind mitigation can be provided. A few commenters
stated that district engineers needed to be provided direction for
considering off-site mitigation.
We believe that compensatory mitigation requirements should be
guided by ecological and practicability considerations, to help ensure
that the required compensation successfully fulfills its objective, to
offset aquatic resource functions lost as a result of the permitted
impacts. The watershed approach, as well as the other considerations
provided in Sec. 332.3 [Sec. 230.93] will help meet these objectives.
Because of its poor record of ecological success, a preference for on-
site mitigation cannot be justified. The final rule is supported by the
findings of the 2001 NRC Report, which indicated that an automatic
preference for on-site, in-kind compensatory mitigation is inconsistent
with a watershed approach, since there are circumstances in which on-
site or in-kind mitigation is neither practicable nor environmentally
preferable. District engineers will use available tools and information
to guide their decision-making regarding where compensatory mitigation
projects should be located. As additional data are gathered, and new
tools are developed, district engineers will use those items as
appropriate.
A number of commenters agreed that it may be appropriate to replace
certain aquatic resource functions on-site and other functions off-site
and that this flexibility is a positive aspect of the rule. However,
several commenters suggested that the rule should not allow a
combination of off-site and on-site mitigation, as it is overly
burdensome and would dilute the overall effectiveness of compensation.
One commenter said that compensating for functions at different
locations may create situations where each site is not fully
functional. Two commenters stated that the rule should allow a single,
permittee-sponsored mitigation project to compensate for the aquatic
impacts of a linear facility, such as a transmission line, which may
affect more than one watershed.
We believe that using a combination of on-site and off-site
compensatory mitigation is often necessary or preferable to
successfully offset the functions lost at the impact site. This is an
important facet of a watershed approach to compensatory mitigation. To
be effective, compensatory mitigation projects must be located in
appropriate landscape settings. The off-site aquatic habitat
restoration or establishment activities should provide the suite of
functions performed by that habitat. The on-site mitigation will likely
focus on effectively replacing specific functions, such as water
quality or water quantity functions. Therefore, from a watershed
perspective, there will likely be a net increase in aquatic resource
functions. In general, off-site compensatory mitigation will be located
in the same watershed as the impact site. District engineers also have
flexibility under this rule to allow compensation for linear projects
to be conducted on one or multiple sites, based on environmentally
preferable and practicable compensatory mitigation options.
A number of commenters expressed concern that an emphasis on off-
site compensatory mitigation can lead to the transfer of wetland
ecosystem services from urban to rural areas. Two commenters argued
that unless the rule requires applicants to include a description of
service values and benefits at the impact site and the compensatory
mitigation project site, rural areas will benefit and urban populations
will incur the costs. One commenter stated that recent and past studies
indicate that the location of mitigation banks is dictated primarily by
land costs rather than by sound scientific watershed principles.
We recognize that aquatic resources in urban settings can provide
important functions and services, and we believe it is important that
urban areas not become devoid of aquatic resources simply because it is
more difficult to successfully restore or establish aquatic habitat in
developed areas. Compensatory mitigation required by district engineers
will be located in areas where it is appropriate and practicable to
conduct successful aquatic resource restoration, establishment, and
enhancement activities. In some cases, this will result in compensatory
mitigation for impacts in urban areas to be conducted in more remote
locations; in other cases, it may be appropriate to replace certain
aquatic resources in urban areas. Site selection is a primary
consideration for compensatory mitigation projects and district
engineers will evaluate proposed mitigation projects, including
mitigation banks, using the watershed approach to ensure that they
contribute to the functions and sustainability of aquatic resources
within a watershed. As discussed above, the use of a combination of on-
site and off-site compensatory mitigation can be effective in retaining
aquatic resource functions and services in urban areas.
(c) Watershed approach to compensatory mitigation. Many commenters
supported use of a watershed approach for compensatory mitigation. One
commenter said that consideration of watershed functions is an orderly,
incremental next step to move section 404 permitting towards a
watershed-based perspective. One
[[Page 19630]]
commenter stated that an ecosystem approach will result in a
comprehensive package that best fits the landscape and its needs.
Several commenters noted that the use of a watershed approach would
increase the flexibility for compensatory mitigation and ensure a
project's sustainability. Four commenters encouraged the Corps to use
its funding to develop a general and flexible framework for
consideration of landscape or watershed needs, rather than formal
watershed plans.
We have retained the watershed approach in the final rule, with
modifications made in response to specific comments. The watershed
approach retains many of the recommendations from the 2001 NRC Report.
While the watershed approach provides flexibility for identifying an
appropriate compensatory mitigation project, as well as its location in
the watershed, a main objective of the watershed approach is to
maintain and improve the quantity and quality of wetlands and other
aquatic resources in watersheds through strategic selection of
compensatory mitigation project sites. As experience is gained in the
use of the watershed approach, Corps districts will use that experience
to improve decision-making for compensatory mitigation requirements.
One commenter suggested that use of a watershed approach be
encouraged, but not required, and a few commenters asserted that the
term ``watershed approach'' is too ambiguous to be a mandatory
requirement. Many commenters recommended that the agencies not require
use of the watershed approach until there is consensus on how
watersheds are defined and the development of planning tools. One
commenter said that a state, district, or county cannot be compelled to
establish a watershed approach. One commenter stated that the language
in Sec. 332.3(c)(3) [Sec. 230.93(c)(3)] suggests that watershed
approach will be taken on a project-by-project basis and contradicts
the entire idea of a watershed approach. This commenter added that
watershed studies should not be project-specific.
The watershed approach described in the proposed rule is intended
to be a general framework for better decision-making for compensatory
mitigation requirements for DA permits. The rule language needs to be
flexible, so that district engineers can adapt the general framework to
more effectively address aquatic resource needs in their regions. We
have added a definition of the term ``watershed'' to Sec. 332.2 [Sec.
230.92], but the appropriate watershed scale to use for the watershed
approach will vary by region, as well as the particular aquatic
resources under consideration. There are a number of planning tools
available for use with a watershed approach, and more will be developed
as this rule is implemented and further experience is gained from using
a watershed perspective. As stated in Sec. 332.3(c)(1) [Sec.
230.93(c)(1)], the watershed approach is to be used to the extent
appropriate and practicable. There will be situations, such as
compensatory mitigation requirements for small impacts, where it would
not be cost-effective to utilize a watershed approach. Since using a
watershed approach is not appropriate in areas without watershed
boundaries, such as marine waters, we have added a provision (Sec.
332.3(c)(2)(v) [Sec. 230.93(c)(2)(v)]) to clarify that other types of
spatial scales may be more appropriate in those areas. This rule does
not require the development of watershed studies on a project-by-
project basis.
Several commenters supported the idea of a watershed and/or
ecosystem approach but said that watershed plans should be prepared
before permitted impacts can occur. A few commenters stated that many
existing watershed plans are not comprehensive. One commenter noted
that it will be difficult to implement the watershed approach in a
meaningful way in the majority of developing watersheds that are
without watershed plans. Several commenters requested that the rule
stipulate that only mitigation banks that conform to approved watershed
plans shall be approved by the district engineer and the IRT. Several
commenters stated that, in the absence of a watershed plan, a watershed
approach will lead to inappropriate mitigation and the cumulative loss
of wetland functions. These commenters also noted that the proposed
rule did not provide an incentive to undertake real watershed planning,
and recommended that the agencies develop criteria and standards for
watershed plans that incorporate the recommendations of the National
Research Council and the elements of watershed plans discussed in the
rule.
As with the 2001 NRC Report, the watershed approach described in
this final rule does not require a formal watershed plan. The watershed
approach may be based on a structured consideration of watershed needs
and how wetlands and other types of aquatic resources in specific
locations will address those needs. We realize that in many areas,
watershed plans appropriate for use in planning compensatory mitigation
activities have not been developed. Although it would be desirable to
have watershed plans designed to more fully support a watershed
approach, we believe that a watershed approach can be effectively
implemented without watershed plans. Mitigation banks can support a
watershed approach without using watershed plans. There are different
types of watershed plans that could be developed for purposes other
than aquatic resource restoration, establishment, enhancement, and/or
preservation activities. For example, some watershed plans are
conceived to guide development activities or the placement of storm
water infrastructure. Therefore, we have modified Sec. 332.3(c)(1)
[Sec. 230.93(c)(1)] to state that the district engineer will determine
whether a watershed plan is appropriate for use in the watershed
approach for compensatory mitigation. The final rule does not provide
disincentives to develop watershed plans. District engineers are
encouraged to work with other government agencies and stakeholders to
develop watershed plans to support decision-making in the Corps
Regulatory Program, but we also recognize that the development of
watershed plans is resource-intensive, and may not be feasible in many
areas. Criteria and standards for developing watershed plans
appropriate for use in the Corps Regulatory Program may be established
at a later time.
Some commenters stated that it is unclear how the watershed
approach will be implemented in the absence of a watershed plan. One
commenter stated that most watershed management plans are relatively
small in scope relative to an economically sustainable service area,
and therefore using such plans can thwart regional water quality needs.
Others argued that the government, not permit applicants, should
develop watershed plans, because most applicants lack the time and
resources needed to develop those plans. One commenter said that
watershed plans vary considerably from region to region and are usually
unable to support evaluations of compensatory mitigation needs. This
commenter recommended that EPA and the Corps establish a certification
process to assure the format and information content of watershed plans
is sufficient to meet the intent of the proposed rule.
To implement a watershed approach in the absence of a watershed
plan, district engineers will utilize the considerations specified in
Sec. 332.3(c)(2) [Sec. 230.93(c)(2)] and available information on
watershed conditions and needs, as discussed in Sec. 332.3(c)(3)
[Sec. 230.93(c)(3)]. Although many of the watershed plans that have
been
[[Page 19631]]
developed in the past focus on small watersheds, water quality
considerations can be effectively addressed through a watershed
approach without relying on watershed plans. Most watershed plans will
be developed through collaboration among federal, tribal, state, and
local government agencies, as well as non-governmental organizations,
landowners, and various other stakeholders. This rule does not require
the development of watershed plans by permit applicants. As discussed
above, the district engineer will determine whether an existing
watershed plan is appropriate for use in a watershed approach for
compensatory mitigation. We do not believe it is necessary to establish
a certification process for appropriate watershed plans.
Commenters requested clarification regarding watershed parameters,
interstate watersheds, the effect the watershed approach will have on
section 404 permitting, and the definitions of watershed and watershed
approach. A few commenters cited the high cost of obtaining data for a
watershed approach and the difficulties in developing watershed plans.
Many commenters recommended additional considerations to be included in
the watershed approach. These considerations include the following: (1)
Potential wetland landscape function; (2) aquatic resources in an
ecosystem context; (3) decisions regarding mitigation for aquatic
resources that take into account the needs of the ecosystem as a whole,
including mitigation priorities for other resources, such as endangered
species; (4) interactions and habitat connectivity; (5) inventory of
historic as well as existing aquatic resources and conditions; (6)
social values; (7) provision of adequate and suitable on-site storm
water management; (8) consideration of aquatic resource problems and
risks, and specific opportunities for addressing those problems and
risks; and (9) evaluation of functions of the current wetland
landscape.
Appropriate watershed parameters for use in a watershed approach
will be determined by district engineers for their regions of
responsibility. District engineers may consult with other agencies and
other interested parties to identify watershed parameters that should
be used. The intended effect of implementing a watershed approach to
compensatory mitigation is to improve the success and effectiveness of
aquatic resource restoration, establishment, enhancement, and/or
preservation required by DA permits, and to maintain and improve
aquatic resource functions and services within watersheds. The terms
``watershed'' and ``watershed approach'' have been defined at Sec.
332.2 [Sec. 230.92]. If an appropriate watershed plan is not
available, district engineers are to use a watershed approach based on
analysis of available information (see Sec. 332.3(c)(3)(i) [Sec.
230.93(c)(3)(i)]). Permit applicants are not required to incur
substantial costs to provide information for the watershed approach.
The nine considerations provided in the previous paragraph are already
addressed through various provisions in this rule. For example, social
values are considered as ecosystem services. We have added a sentence
to Sec. 332.3(c)(2)(iv) [Sec. 230.93(c)(2)(iv)] (Sec.
332.3(c)(2)(ii) [Sec. 230.93(c)(2)(ii)] in the proposed rule) to state
that the identification and prioritization of resource needs should be
as specific as possible, to enhance the use of the watershed approach.
We have also added a provision to this section which states that a
watershed approach may include on-site compensatory mitigation, off-
site compensatory mitigation, or a combination of on-site and off-site
compensatory mitigation (see Sec. 332.3(c)(2)(iii) [Sec.
230.93(c)(2)(iii)]).
Many commenters did not believe that the rule should specify
minimum information requirements for use of the watershed approach to
compensatory mitigation site selection. Several commenters said that
this would place an undue burden on the regulated community and the
agencies, especially if the information is not available, and could
potentially delay the issuance of permits or the implementation of
mitigation plans. Others expressed concern that, because the minimum
information mentioned in the preamble is not currently available in
many areas, a requirement for such information would limit the use of a
watershed approach. Some commenters argued that the rule should not
rely on only the applicants to provide supporting data for a watershed
approach. Several commenters supported the inclusion of minimal
information requirements. One commenter noted that these requirements
are necessary to establish a consistent and scientifically defensible
method of using the watershed approach. One commenter suggested that
the requirements be based on information generally known to be
available for most watersheds. Other commenters argued that all
projects regardless of size should be subject to the requirement for
additional information.
We have revised Sec. 332.3(c)(3) [Sec. 230.93(c)(3)] to clarify
the information that the district engineers should use as the basis for
a watershed approach, and to identify potential sources for such
information. While there is no bright line for the minimum amount of
information needed to support a watershed approach, the final rule
identifies information that is generally needed to implement a
watershed approach effectively. That information will address watershed
conditions and needs, and should include potential sites (as well as
priority sites) for compensatory mitigation projects. We have indicated
that appropriate information may be available from sources such as
wetland maps, soil surveys, aerial photographs, local ecological
reports, etc. In Sec. 332.3(c)(3)(iii) [Sec. 230.93(c)(3)(iii)], we
state that the level of information and analysis must be commensurate
with the scope and scale of the proposed impacts that require a DA
permit, as well as the functions lost as a result of those impacts.
Larger projects will generally warrant greater investment in
information gathering to ensure proper consideration of watershed
factors in the selection of appropriate compensatory mitigation.
(d) Site selection. One commenter stated that the proposed site
selection criteria are well-defined and appropriate. Another commenter
said that the criteria were too broad. One commenter stated that the
rule should require the district engineer to deny the use of
compensatory mitigation project sites that are not ecologically
suitable. Two commenters suggested that site selection criteria should
consider species that should be present or have access to the
compensatory mitigation project site. Another commenter noted that the
proposed rule provides end goals of a site selection process but does
not provide details concerning how these goals would be met. One
commenter stated that requirements that further limit compensatory
mitigation site selection would be overly burdensome. Two commenters
expressed concern that mitigation banks would be prohibited near
airports. One commenter recommended that the agencies discourage
compensatory mitigation projects on public lands as these tend to
result in a loss of wetlands accompanied only by some limited
improvement in lands already set aside for conservation purposes.
This provision provides site criteria that district engineers must
consider, to the extent practicable, to help determine whether a
proposed compensatory mitigation project site will be suitable for
successfully replacing lost aquatic resource functions. They are
general
[[Page 19632]]
considerations, since it is impractical to provide a comprehensive list
that accounts for different regions across the country. If a proposed
compensatory mitigation project site is determined to be unsuitable,
then other sites ought to be considered. Section 332.3(d)(1)(vi) [Sec.
230.93(d)(1)(vi)] includes consideration of habitats for species of
interest. In some cases, selecting an appropriate compensatory
mitigation project site will be an iterative process, so that the most
suitable site for achieving as many objectives as possible can be
found. The intent of Sec. 332.3(d) [Sec. 230.93(d)] is to assist in
site selection that will support ecologically successful and
sustainable compensatory mitigation projects. As discussed in the
preamble to the proposed rule, locating compensatory mitigation
projects (including mitigation banks) near airports is likely to
attract wildlife species and pose hazards to aviation. This does not
mean that no compensatory mitigation projects can be located near any
airport; it means that compatibility with existing facilities must be
considered. We believe it is appropriate, in some instances, to site
compensatory mitigation projects on public lands, where they are
consistent with the use and management of the public land, and the
credits are based solely on aquatic resource functions provided by the
compensatory mitigation project, over and above those provided by
public programs already planned or in place.
(e) Mitigation type. Many commenters recommended that the rule
retain a preference for in-kind mitigation. Several commenters stated
that out-of-kind mitigation does not address the specific functions,
services, or values of the resource being impacted. Several commenters
said that the current preference for on-site, in-kind mitigation should
be continued until substantive watershed-level plans are developed to
guide compensatory mitigation activities, and one commenter noted that
the proposed rule appears to allow the district engineer to accept out-
of-kind mitigation without determining if it serves the needs of the
watershed. One commenter was concerned that the rule has loosened the
definition of in-kind to allow more flexibility, which would lead to a
more relaxed mitigation approach, and other commenters noted that a
broad application of ``out-of-kind'' would allow the replacement of a
wetland with a stream habitat or vice versa.
The final rule retains a preference for in-kind mitigation. As
defined in Sec. 332.2 [Sec. 230.92], the term ``in-kind'' refers to
similar structural and functional types. However, we would like to
clarify that in-kind mitigation does not mean compensating for impacts
to degraded aquatic resources by providing degraded compensatory
mitigation projects. A compensatory mitigation project should result in
high quality aquatic resources that provide optimum functions within
its landscape context, taking into account unavoidable constraints.
We have modified the example in Sec. 332.3(e)(2) [Sec.
230.93(e)(2)] to provide clarification as to what constitutes in-kind
mitigation in terms of aquatic resource type. The revised example
states that tidal wetlands are most likely to compensate for
unavoidable impacts to tidal wetlands. Perennial streams are used as
the other example of in-kind mitigation. Although out-of-kind
mitigation may not offset all aquatic resource functions and services
provided by the aquatic resource being affected by the permitted
activity, out-of-kind mitigation may be important for restoring or
improving watersheds, especially in cases where certain aquatic
resource types have been disproportionately lost from a watershed (see
the 2001 NRC Report). It is not necessary to develop watershed plans to
allow out-of-kind mitigation, but watershed factors need to be
considered. Section 332.3(e)(2) [Sec. 230.93(e)(2)] requires district
engineers to document the basis for requiring out-of-kind mitigation in
the administrative record for the permit action.
Several commenters supported the provision in the proposed rule
that allows for out-of-kind compensation, and one commenter said that
out-of-kind mitigation should be used when it is ``environmentally
preferable'' to in-kind mitigation. A number of commenters requested
further guidance on when out-of-kind mitigation is appropriate and a
more definitive and transparent list of ``factors'' to be considered
when proposing or evaluating out-of-kind mitigation. One commenter
noted that the rule as proposed does not limit the types of projects
that could be authorized as compensatory mitigation for permanent
stream losses. Another commenter suggested that stream mitigation
should only be appropriate compensation for wetland impacts in limited
situations. One commenter expressed concern that the requirements in
the proposed rule will make it difficult to provide in-kind
compensation for losses of ephemeral channels.
The final rule states that district engineers can require the use
of out-of-kind compensatory mitigation when he or she determines that
it will serve the aquatic resource needs of the watershed. In addition,
Sec. 332.3(a)(1) [Sec. 230.93(a)(1)] states that, when evaluating
compensatory mitigation options, the district engineer will consider
what is environmentally preferable. This includes consideration of in-
kind versus out-of-kind mitigation. District engineers will determine
on a case-by-case basis if out-of-kind mitigation would be more
appropriate for offsetting the losses of aquatic resource functions
caused by the permitted impacts. In this rule, it would not be
appropriate to list factors for consideration, since these are likely
to vary by geographic region and by watershed. District engineers will
determine appropriate and practicable compensatory mitigation
requirements for permanent losses of streams. Unless there are case-
specific watershed considerations that warrant out-of-kind mitigation
for stream impacts, district engineers will generally require stream
restoration, enhancement, or preservation activities to provide
required compensatory mitigation for permitted impacts to streams. The
appropriateness and practicability of requiring in-kind compensation
for permitted losses of ephemeral streams will be determined by
district engineers on a case-by-case basis.
One commenter recommended that the rule specify the types of
compensatory mitigation activities that are preferred. This commenter
said that re-establishment should be the preferred method of mitigation
and that establishment should be rarely accepted. Another commenter
stated that the proposal places full discretion with the district
engineer for making determinations of what type of compensatory
mitigation might be most appropriate in any given scenario.
Preferred compensatory mitigation activities in terms of what would
be best for the aquatic environment, including a particular watershed,
will be determined by the district engineer on a case-by-case basis. We
have added a new paragraph at Sec. 332.3(a)(2) [Sec. 230.93(a)(2)],
which states that restoration should be the first option considered for
providing compensatory mitigation. Aquatic resource establishment may
be acceptable after considering the likelihood of success of a
particular compensatory mitigation project, including the suitability
of the proposed site to satisfy the objectives of the compensatory
mitigation project after that project is fully implemented. The final
rule retains the discretion of the district engineer to determine the
appropriateness and practicability of any compensatory mitigation
required for DA permits.
[[Page 19633]]
Three commenters supported adding a provision which states that
district engineers should not permit out-of-kind mitigation for rare or
hard to replace wetlands. Two commenters also stated that such a
provision would eliminate compensatory mitigation for those habitat
types that are not the easiest to recreate or those that would not have
a relatively high likelihood of success. Some commenters objected to
the inclusion of ``relative likelihood of success in establishing
different habitat types'' as it allows impacts to higher quality,
difficult-to-replace wetlands (e.g., fens or forested wetlands),
without requiring their replacement. One commenter added that meeting
ecological needs should take priority over the likelihood of a
compensatory mitigation project's success. One commenter noted that a
strict preference for on-site, in-kind mitigation often results in
compensatory mitigation projects that have relatively little ecological
value, are more difficult to establish, and are less likely to be
sustained over the long term.
To reduce losses of difficult-to-replace aquatic resources, we have
added Sec. 332.3(e)(3) [Sec. 230.93(e)(3)] which states that, in
cases where further avoidance and minimization is not practicable, the
required compensatory mitigation must be provided through in-kind
rehabilitation, enhancement or preservation to the extent practicable.
When evaluating a request for a section 404 permit for an activity that
would result in the loss of a difficult-to-replace aquatic resource,
the district engineer will determine whether the proposed activity
fully complies with the 404(b)(1) Guidelines, including requirements to
avoid and minimize impacts to those resources to the maximum extent
practicable and to consider alternatives. The likelihood of success
must be considered when evaluating compensatory mitigation proposal. If
the potential for successfully satisfying the objectives of a
compensatory mitigation project is low, then an alternative
compensatory mitigation project with a higher likelihood of success
should be required instead. There will always be some risk and
uncertainty associated with compensatory mitigation projects, but risks
and uncertainties need to be minimized as much as possible so that the
objectives of those projects will be achieved.
A few other commenters suggested that the rule specify that the
credit or ratio authorized for out-of-kind mitigation be equivalent
across mitigation providers. Two commenters recommended that stream
credits be treated the same as wetlands credits in the rule.
Appropriate compensation ratios will be determined by district
engineers on a case-by-case basis (see Sec. 332.3(f) [Sec.
230.93(f)]). District engineers will determine the appropriate units of
measure for wetland and stream credits.
(f) Amount of compensatory mitigation. Some commenters agreed with
the minimum mitigation ratio in the proposed rule. Many commenters
argued that the suggested baseline mitigation ratio of one-to-one in
the proposed rule is not conservative enough, and is not scientifically
defensible given the high documented rate of failure or under-
performance of many mitigation sites. A considerable number of these
commenters also argued that mitigation should never be at a ratio that
is less than one-to-one. One commenter suggested that a 1.5 to 1 ratio
would be a better minimum ratio and would reasonably account for
expected failures. One commenter stated that the rule gives the
district engineer too much discretion to decide on the replacement
ratio.
We have modified Sec. 332.3(f)(1) [Sec. 230.93(f)(1)] to clarify
that, in cases where the district engineer determines that compensatory
mitigation is required to offset unavoidable impacts to aquatic
resources, the amount of compensatory mitigation must be, to the extent
appropriate and practicable, sufficient to replace lost aquatic
resource functions. With this rule, we are encouraging the use of
functional and condition assessments to determine the appropriate
amount of compensatory mitigation needed to offset authorized impacts,
instead of relying primarily on surrogate measures such as acres and
linear feet. In the future, there will be more assessment methods
available to quantify impacts and compensatory mitigation. We recognize
that, in some cases, it may not be appropriate and practicable to
require full replacement of aquatic resource functions. This paragraph
also states that in cases where functional or condition assessments or
other suitable metrics are not used, a minimum one-to-one acreage or
linear foot compensation ratio must be used. The latter provision will
help ensure that an equivalent area or length of aquatic habitat will
be used to provide compensatory mitigation, to help offset aquatic
resource losses that will occur as a result of the permitted activity.
When determining the appropriate compensation ratio in the absence of a
functional or condition assessment method, it is necessary to rely on
other metrics, such as area and linear measures. In this rule, a
baseline ratio greater than one-to-one cannot be justified because of
the uncertainties surrounding impact and compensatory mitigation sites.
Those uncertainties must be accounted for on a case-by-case basis by
district engineers. Most aquatic resources likely to be impacted by
activities that require DA permits are degraded to some degree.
District engineers can only require an amount of compensatory
mitigation that is roughly proportional with the permitted impacts, so
that it is sufficient to offset those lost aquatic resource functions.
Only in cases where a functional or condition assessment or other
suitable metric is used can the district engineer require less than
one-to-one compensation on an acreage or linear foot basis. Even in
cases where functional or condition assessment methods are used, these
will not usually result in less than one-to-one ratios, because of the
other factors (uncertainty, temporal loss) that must be considered.
A few commenters noted said there is no scientific basis for a
replacement ratio based on linear feet. According to these commenters,
compensatory mitigation credits and debits must be based on the net
gain or loss of stream functions, not stream length. Several commenters
argued that the use of a required minimum replacement ratio in the
absence of a functional assessment is too inflexible for stream
mitigation. One commenter supported efforts to achieve a one-to-one
replacement ratio in stream mitigation. Another commenter argued that a
one-to-one minimum replacement ratio would be too inflexible and that,
in some instances, stream restoration is better handled by other means
(e.g., rotational grazing and livestock exclusion).
The use of linear feet may be more appropriate for determining
compensatory mitigation amounts for aquatic resources that are more
linear in nature, such as streams. District engineers retain the
discretion to quantify stream impacts and required compensatory
mitigation in terms of area or other appropriate units of measure.
Where they are available and appropriate for use, we encourage the use
of functional and condition assessments to quantify debits and credits
for stream impacts and compensation. The amount of required stream
compensatory mitigation is dependent on the method of providing the
compensation, as well as other factors (see Sec. 332.3(f)(2) [Sec.
230.93(f)(2)]).
Many commenters requested further guidance as to when functional
assessments should be used to determine the required amount of
[[Page 19634]]
compensatory mitigation. A few commenters stated that there could be
situations where a functional assessment is inappropriate or not needed
(e.g., temporary impacts to unvegetated waters). Commenters also
requested clarification as to whether a preferred assessment method
would be specified in the final rule, if the district engineer will
perform these assessments, and how the Corps planned to reconcile
differences in opinion regarding functional assessments. While some
commenters supported the use of functional assessments, others
recommended retaining replacement ratios based on area until there is
an approved model for accurate functional assessment. According to one
commenter, functional assessment methods and mitigation ratios should
be determined with input or consensus from the regulated community. One
commenter said that use of a functional assessment methodology should
never result in less mitigation than the amount of acreage or linear
footage impacted. However, several commenters urged the agencies to
insert language into the rule that would provide district engineers
with explicit guidelines to allow for mitigation ratios of less than
one-to-one where appropriate.
Functional assessments will be used to determine compensatory
mitigation amounts in cases where such methods are available,
appropriate, and practicable for use. There are on-going efforts to
develop and refine functional assessment methods and other science-
based assessment tools. If appropriate functional assessment methods
are not available, or if it is not practicable to use the appropriate
and available functional assessment method for a particular project,
then other appropriate metrics are to be used. We have modified Sec.
332.3(f)(1) [Sec. 230.93(f)(1)] to include the use of condition
assessment methods and other appropriate metrics for determining the
amount of compensatory mitigation that is to be required for DA
permits. Condition assessments are typically based on indices of
biological integrity. District engineers will determine on a case-by-
case basis whether a particular functional or condition assessment
method is appropriate and practicable for calculating compensatory
mitigation amounts for DA permits. District engineers may consult with
the regulated public and other stakeholders on the appropriateness of
using existing functional or condition assessment methods in a
particular region, or for certain types of aquatic resources, but the
district engineer retains responsibility for the final decision as to
how much mitigation will be required and how it is determined.
Since functional assessments typically provide quantitative
measures of specific functions performed by an impact site, and
expected functions to be provided by the compensatory mitigation
project site, there may be cases where the compensatory mitigation
project site is expected to provide higher levels of functions than the
impact site, especially if the impact site is substantially degraded.
Where quantitative measures are used, there needs to be flexibility to
ensure that the required compensatory mitigation is roughly
proportional to the permitted impacts.
In Sec. 332.3(f)(2) [Sec. 230.93(f)(2)], we have added
``likelihood of success'' and ``the distance between the affected
aquatic resource and the compensation site'' to the list of factors to
be considered by district engineers when determining the appropriate
amount of compensatory mitigation for permitted impacts. We have also
added a new Sec. 332.3(f)(3) [Sec. 230.93(f)(3)], to state that in
cases where an in-lieu fee program will be used to provide the required
compensatory mitigation, and advance credits will be used to provide
that compensatory mitigation, the district engineer must require
additional compensatory mitigation to account for the risk and
uncertainty associated with in-lieu fee projects that have not yet been
implemented. Finally we note that, while temporal loss must also be
considered in determining mitigation ratios, the definition of
``temporal loss'' in Sec. 332.2 [Sec. 230.92] specifies that district
engineers may determine that additional compensation for temporal loss
is not required if the mitigation is initiated prior to or concurrent
with the permitted impacts, except for resources with long development
times (e.g., forested wetlands).
(g) Use of mitigation banks and in-lieu fee programs. Two
commenters supported the use of mitigation banks for all DA
authorizations. One commenter requested clarification on whether
mitigation banks could provide compensatory mitigation for all types of
mitigation requirements. A few commenters stated that mitigation banks
should not be used to provide compensation for after-the-fact permits
until all appropriate federal, state and local enforcement conditions
are met, and that compensatory mitigation should not be allowed instead
of restoration if the activity would not have been eligible for a DA
permit. Another commenter suggested that ratios for after-the-fact
permits should be higher. Another commenter said that mitigation banks
should only be used in after-the-fact permits with a debit penalty.
Since the final rule includes in-lieu fee programs as a source of
compensatory mitigation, we have modified this paragraph to include
both mitigation banks and in-lieu fee programs. We have also modified
this paragraph to refer to the preference hierarchy provided in Sec.
332.3(b) [Sec. 230.93(b)]. Mitigation banks and in-lieu fee programs
may be used to compensate for impacts to aquatic resources authorized
by general permits and individual permits, including after-the-fact
permits. Corps enforcement actions will be handled in accordance with
the regulations at 33 CFR part 326, which stipulate when after-the-fact
permit applications will be accepted. If the district engineer
determines that compensatory mitigation is necessary, he will determine
the appropriate ratio based on what is required to compensate for the
aquatic resources.
Two commenters said that the provision stating that mitigation
banks may also be used to satisfy requirements arising out of an
enforcement action, such as supplemental environmental projects, should
be included in 33 CFR 332.3(g). One commenter said that mitigation
banks should be used to resolve violations.
The Corps does not have the authority to require supplemental
environmental projects to resolve Clean Water Act violations. EPA has a
Supplemental Environmental Projects (SEP) Policy that allows the Agency
to consider projects proposed by violators to mitigate the penalties
assessed for violations of the CWA. Mitigation banks and in-lieu fee
programs can qualify as these types of projects if they meet the basic
requirements of the Agency's SEP Policy.
(h) Preservation. Many commenters supported the use of preservation
as a form of compensatory mitigation. Several commenters said that
preservation is needed in urban and coastal areas. Other commenters
stated that preservation is important to sustainable ecosystems and to
protect watershed health. Several commenters recommended that the rule
require the use of a permanent legal instrument to ensure the
protection of the preserved site. Several additional commenters argued
that compensation ratios should be greater than one-to-one for
preservation mitigation projects. Some commenters supported a
requirement that any use of preservation should be the result of a
watershed plan or a
[[Page 19635]]
watershed approach. One commenter said that the requirement for the
preserved resource to ``contribute to the ecological sustainability of
the watershed'' is too vague.
The 2001 NRC Report stated that wetland preservation is an
important tool for maintaining wetland diversity in a watershed, and
achieving the goals of the Clean Water Act in that watershed.
Preservation is particularly valuable for protecting unique, rare, or
difficult-to-replace aquatic resources, such as bogs, fens, and
streams, and may be the most appropriate form of compensatory
mitigation for those resources. We recognize that wetland preservation
does not, in the short term, result in new wetland resources and thus
contribute to the ``no overall net loss'' goal, but over longer time
periods preservation helps reduce wetland losses by removing the
protected wetlands from the pool of wetlands that may be subject to
future development activities that require DA permits. Aquatic resource
preservation, when combined with restoration or establishment
activities, can provide important aquatic services in a watershed.
Section 332.3(h)(1)(v) [Sec. 230.93(h)(1)(v)] requires the site
containing the preserved resources to be permanently protected through
appropriate instruments.
Decisions on whether to allow preservation as part of a
compensatory mitigation package will be made by the district engineer,
based, to the extent appropriate and practicable, on the watershed
approach. We have modified Sec. 332.3(h)(1) [Sec. 230.93(h)(1)] to
clarify that all five criteria must be met for preservation to be used
as compensatory mitigation for DA permits. We have also modified Sec.
332.3(h)(1)(ii) [Sec. 230.93(h)(1)(ii)] to state that the resources to
be preserved must provide a significant contribution to the ecological
sustainability of the watershed. In determining whether this
requirement is met, the district engineer may also consider whether the
resource to be preserved is unique, rare, or hard to replace. To
support compliance with that requirement, this provision also requires
the district engineer to use appropriate quantitative assessment tools,
in cases where such tools are available. The district engineer will
also decide whether a proposed preservation site contributes to
ecological sustainability of the watershed, based on case-specific
factors.
Many commenters stated that preservation alone is not an acceptable
form of compensatory mitigation and preservation does not promote ``no
net loss'' of wetlands. Several commenters said that preservation and
enhancement should only be used to augment aquatic resource restoration
and establishment. Other commenters recommended that only a small
percentage of credits for a particular compensatory mitigation project
should be given for preservation and only when it is used in
conjunction with restoration, enhancement, and/or establishment.
As stated in Sec. 332.3(h)(2) [Sec. 230.93(h)(2)], preservation
will be provided in conjunction with aquatic resource restoration,
establishment, and/or enhancement activities, unless the district
engineer waives this requirement in a situation where preservation has
been identified as a high priority using a watershed approach. If the
district engineer makes such a waiver, a higher compensation ratio
shall be required. For each mitigation bank and in-lieu fee project
involving preservation, the district engineer, in consultation with the
IRT, will determine the number of credits that will result from that
preservation activity.
(i) Buffers. Many commenters agreed that upland buffers and
riparian areas should be used as compensatory mitigation. Several
commenters stated that buffers should be required for all compensatory
mitigation projects. Some commenters noted that uplands and buffers
play important roles in wetland and stream mitigation banks and are an
integral part of a compensatory mitigation project's functions and
values. One commenter said that buffers should not be used to generate
compensatory mitigation credits unless they contribute substantially to
habitat connectivity. A number of commenters said that buffers should
not be used as compensatory mitigation.
Upland buffers and non-wetland riparian areas can provide
substantial contributions to the ecological sustainability of aquatic
resources within watersheds. These areas may also be critical to the
success of aquatic resource restoration, establishment, enhancement,
and preservation activities. It is not feasible to require buffers for
all compensatory mitigation projects; such decisions need to be made by
district engineers on a case-by-case basis. We have added a sentence to
Sec. 332.3(i) [Sec. 230.93(i)] to clarify that buffers may provide
habitat or corridors necessary for the ecological functioning of
aquatic resources.
One commenter said that the final rule should allow credit for
riparian and upland areas that serve as the principal or sole
compensatory mitigation in certain circumstances (e.g., in arid regions
in the western United States). Some commenters suggested that adjacent
upland habitat should not be counted separately for compensatory
mitigation credit, unless a minimum one-to-one ratio of wetland
restoration or establishment is provided. Three commenters requested
guidance that explains how and when buffers could be used to provide
compensatory mitigation credit.
We have added a sentence to Sec. 332.3(i) [Sec. 230.93(i)] to
clarify that in cases where buffers are required by the district
engineer as part of a compensatory mitigation project, compensatory
mitigation credit will be provided for those buffers. In most cases,
the required buffers will supplement aquatic resource restoration,
establishment, enhancement, and/or preservation activities. To qualify
as providing compensatory mitigation credit, adjacent upland habitat
must contribute to the long-term viability of the adjoining aquatic
resources. District engineers will determine on a case-by-case basis
whether buffers are necessary components of compensatory mitigation
projects.
(j) Relationship to other federal, tribal, state, and local
programs. Several commenters requested clarification regarding the
relationship between compensatory mitigation undertaken for purposes of
compensating for losses under the Corps Regulatory Program and
mitigation actions taken under other federal, state, or local programs.
Many commenters said that the same compensatory mitigation project site
or mitigation bank should satisfy all sets of statutory requirements
without the need for additional compensatory mitigation required by the
Corps, as long as the functions provided through compensatory
mitigation under each statute are the same or complementary. One
commenter noted that the rule should recognize that compensatory
mitigation, including compensation provided by mitigation banks, may be
designed to comprehensively address requirements under multiple
programs and authorities for the same activity. Another commenter
stated that this provision is contrary to the intent of the statute
that the regulations should maximize opportunities for mitigation
credits. Other commenters, however, supported this provision of the
proposed rule.
Compensatory mitigation projects used to fulfill the compensation
requirements for DA permits may be used to satisfy the environmental
requirements for other programs, such as wetlands regulatory programs
administered by tribal, state, and local
[[Page 19636]]
governments. In cases where tribal, state, or local governments
regulate similar activities to those regulated by the Corps,
compensatory mitigation projects may be designed to fulfill all
applicable compensation requirements. For example, a surface coal
mining activity that requires authorization under section 404 of the
Clean Water Act and the Surface Mining Control and Reclamation Act
(SMCRA) may offset environmental losses through a compensatory
mitigation project that is designed to satisfy the requirements of both
statutes. Also, mitigation banks and in-lieu fee programs that are
developed for the purposes of providing compensatory mitigation under
the Corps Regulatory Program may also be used to provide compensatory
mitigation for Corps Civil Works projects (see section 2036(c) of the
2007 Water Resources Development Act) or activities conducted on
military installations (see 10 U.S.C. 2694b).
We have revised Sec. 332.3(j) [Sec. 230.93(j)] by subdividing it
into several paragraphs to make it easier to read. In Sec. 332.3(j)(1)
[Sec. 239.93(j)(1)], we have replaced the phrase ``compensate for
environmental impacts authorized under'' with the phrase ``satisfy the
environmental requirements of'' to clarify that a single compensatory
mitigation project can be used to satisfy the requirements of more than
one law. We have replaced the reference to the National Pollutant
Discharge Elimination System Program (NPDES) with the phrase ``other
federal programs such as the Surface Mining Control and Reclamation
Act'' since activities authorized under the NPDES do not generally
require compensatory mitigation. A coal mining project that requires
authorization under both section 404 of the Clean Water Act and SMCRA
can often satisfy the compensatory mitigation requirements for both
authorizations through a single compensatory mitigation project.
Section 332.3(j) [Sec. 230.93(j)] is not contrary to section 314.
It requires accounting for the use of compensatory mitigation credits.
It does not limit production of compensatory mitigation credits;
instead, it prevents the same credits from being used for different
projects.
In Sec. 332.3(j)(1)(i) [Sec. 230.93(j)(1)(i)], we have modified
the rule language to state that the compensatory mitigation project
must include appropriate compensation required by the DA permit. This
is intended to address situations where a compensatory mitigation
project may be designed to address the environmental requirements of
both the DA permit and other permits issued by other federal, tribal,
state, or local agencies. In such cases, the additional environmental
benefits required through those other permits could be satisfied by
other components of the compensation project.
In the revisions to Sec. 332.3(j)(1)(ii) [Sec. 230.93(j)(1)(ii)],
we are clarifying that the same credits can not be used to provide
mitigation for more than one permitted activity. We are also clarifying
that in-lieu fee programs can be designed to holistically address
requirements under multiple programs and authorities. We have added
Sec. 332.3(j)(3) [Sec. 230.93(j)(3)] to clarify that compensatory
mitigation projects can also be designed to satisfy the mitigation
requirements of the Endangered Species Act, as long as they comply with
the requirements of this section.
One commenter noted that the proposed rule does not recognize the
inherent ability of many of these programs to provide the necessary
financial incentives for landowners to restore and enhance their
wetlands and wildlife habitat as part of a larger resource management
plan for their lands in the hopes of garnering future compensatory
mitigation credits. Two commenters agreed with the provision in the
proposed rule that stipulates that projects undertaken with federal
funds should not be used to generate mitigation credits. Two commenters
disagreed with this proposed provision. One commenter stated that the
agencies should retain flexibility in managing these landscapes and
promote creativity in assigning credits for large-scale mitigation
banks that offer a variety of ecosystem services beyond wetlands
replacement.
Section 332.3(j)(2) [Sec. 230.93(j)(2)] has been made into a
separate paragraph to address situations where federal funding is
provided for wetland conservation projects. In cases where a landowner
has taken advantage of financial incentives to restore or enhance
wetlands on their property, that landowner can also produce
compensatory mitigation credits that can be used for DA permits, as
long as those credits are the result of supplemental ecological
improvements. In other words, the ecological improvements that result
from the financial incentives provided to the landowner cannot be used
to satisfy compensatory mitigation requirements of DA permits, but
additional ecological improvements involving aquatic resource
restoration, establishment, enhancement, and/or preservation may be
used as compensatory mitigation for DA permits, provided these
additional improvements were not part of the requirements for obtaining
the financial incentives. For example, if a federal program has a 50%
landowner match requirement, neither the federally funded portion of
the project, nor the landowner's 50% match, which is part of the
requirements for obtaining federal funding, may be used for
compensatory mitigation credits. However, if the landowner provides a
greater than 50% match, any improvements provided by the landowner over
and above those required for federal funding could be used as
compensatory mitigation credits. Note however that in order to sell
credits to a third party, a landowner must have an approved mitigation
banking instrument. The final rule provides flexibility for managing
landscapes to produce a variety of ecological functions and services,
but the rule also requires careful accounting of any credits that are
produced.
(k) Permit conditions. Many commenters supported the provision in
the proposed rule that calls for compensatory mitigation requirements
to be included as enforceable conditions of DA permits. One commenter
stated that performance standards should be mandatory and enforceable
permit components. One commenter stated that financial assurances
should be included in the DA permit. Another commenter requested
clarification of whether the term ``describe'' means to provide an
overview of the proposed mechanism for financing a compensatory
mitigation project or whether the intent is to give Corps the right to
review and/or approve a final draft legal instrument.
We have substantially revised this section to clarify the
requirements for special conditions for individual permits requiring
permittee-responsible mitigation (Sec. 332.3(k)(2) [Sec.
230.93(k)(2)]), requirements for special conditions for general permits
requiring permittee-responsible mitigation (Sec. 332.3(k)(3) [Sec.
230.93(k)(3)]), and the use of mitigation banks and in-lieu fee
programs (Sec. 332.3(k)(4) [Sec. 230.93(k)(4)]). For individual
permits that require permittee-responsible mitigation, the special
conditions must identify who is responsible for providing the
compensatory mitigation, incorporate by reference the approved
mitigation plan, state the objectives and substantive requirements of
the compensatory mitigation project, and describe any required
financial assurances or long-term management. For general permit
authorizations that require permittee-responsible mitigation, the
special conditions must describe the compensatory mitigation proposal,
[[Page 19637]]
require district engineer approval of a final mitigation plan before
commencing work in waters of the United States (unless exceptions are
granted), and address, as appropriate, the requirements of Sec.
332.3(k)(2) [Sec. 230.93(k)(2)]. Examples of situations where the
district engineer may waive the requirement to approve a final
mitigation plan before the permittee commences work in waters of the
United States include after-the-fact permits and cases where the
authorized work must be completed immediately (e.g., emergency
situations).
If a mitigation bank or in-lieu fee program will be used to provide
the required compensatory mitigation, Sec. 332.3(k)(4) [Sec.
230.93(k)(4)] describes requirements for permit conditions. For
individual permits and general permits, the special conditions must
specify the number and resource type of third-party mitigation credits
the permittee is required to secure. For individual permits (i.e.,
standard individual permits and letters of permission), the special
conditions must specify the particular mitigation bank or in-lieu fee
program that will be used to provide the compensatory mitigation. For
general permits, there is more flexibility because of the timeframes
that must be met, such as the 45-day pre-construction notification
review period for nationwide permits. For general permit verifications,
the special conditions must specify either the mitigation bank or in-
lieu fee program that will be used, or state that the use of a
mitigation bank or in-lieu fee program will be identified at a later
time, once the permittee has negotiated the terms of securing the
appropriate number and resource type of credits from the sponsor, and
the district engineer has approved the use of those credits. In the
latter case, once the district engineer has approved the use of those
credits, the permittee would then secure the credits from the sponsor
in order to fulfill his or her compensatory mitigation requirements.
Once the permittee has secured credits from the sponsor, and provided
the appropriate documentation to the district engineer (see Sec.
332.3(l) [Sec. 230.93(l)]), the responsibility for providing the
required compensatory mitigation is transferred from the permittee to
the third-party mitigation sponsor.
The provision requiring a description of any required financial
assurances is intended to ensure that the provisions regarding those
financial assurances are addressed as enforceable conditions of the DA
permit. The regulations relating to financial assurances at Sec.
332.3(n) [Sec. 230.93(n)] should be used as a guide for writing those
conditions.
Several commenters argued that compensatory mitigation plans should
not be included in permits, and some commenters said that this
provision would delay the permitting process. Two commenters
recommended flexibility in this section so the district engineer can
accept a preliminary compensatory mitigation plan prior to permit
issuance and an approved final mitigation plan prior to the start of
construction.
The approved mitigation plans must be linked to the individual
permit or to the general permit verification through special
conditions, so that the Corps has a legal basis for ensuring compliance
with the terms and conditions of its permits. For individual permits,
the mitigation plan must be approved before the permit can be issued
(see Sec. 332.4(c)(1) [Sec. 230.93(c)(1)]. Approval of a final
mitigation plan prior to issuance of an individual permit is necessary
to ensure that the approved compensatory mitigation project provides
appropriate compensation for the permitted impacts. For general permits
that require compensatory mitigation, the district engineer may approve
a conceptual or detailed mitigation plan in order to meet applicable
timeframes for general permit verifications. However, the permittee
cannot begin work in waters of the United States authorized by general
permit until a final mitigation plan has been approved by the district
engineer.
Two commenters said that both the permittee and the mitigation bank
must be required to comply with the permit conditions relating to
compensatory mitigation and be subject to enforcement for failure to
meet their obligations. One commenter stated that if an in-lieu fee
program is approved by the district engineer to provide required
compensatory mitigation for a DA permit, the special conditions of that
DA permit must indicate which in-lieu fee program will be used to
provide that compensatory mitigation. One commenter asked whether the
Corps has the authority to specify in a permit condition that the
permittee must purchase credits at a specific bank, which could
restrict the permittee's ability to negotiate, and would prevent the
permittee from purchasing credits from a given bank because they were
the least expensive rather than the most environmentally beneficial.
In cases where the district engineer has determined that the use of
a mitigation bank or in-lieu fee program is appropriate to satisfy some
or all of the compensatory mitigation requirements for a DA permit, the
responsibility for providing the compensatory mitigation is transferred
to the third-party mitigation sponsor once the permittee has secured
the appropriate number and resource type of credits and the necessary
documentation has been provided to the district engineer in accordance
with Sec. 332.3(l) [Sec. 230.93(l)]. The Corps has the authority to
impose conditions on a DA permit that specify which mitigation bank or
in-lieu fee program will be used to provide the required compensatory
mitigation. Permittees are free to negotiate with mitigation banks or
in-lieu fee programs before the permit is issued. Once they have made
arrangements to purchase the appropriate number of credits, the name of
the third-party provider and the number and resource type of credits
must be approved by the district engineer, and in the case of an
individual permit, included as a special condition in the permit. If
the permittee later finds an alternative source of third-party
mitigation, then he or she can request a permit modification to change
the special conditions to use that alternative compensatory mitigation,
contingent upon approval by the district engineer. The district
engineer will determine whether the modified compensatory mitigation
proposal is sufficient for offsetting the permitted losses of aquatic
resources. For general permits, the district engineer has the option of
specifying the mitigation bank or in-lieu fee program in the special
conditions, or stating that the use of a mitigation bank or in-lieu fee
program is contingent upon approval by the district engineer.
Three commenters supported the inclusion of long-term management
provisions in the permit conditions. According to one commenter,
requiring adequate arrangements for long-term management funds prior to
permit issuance will help ensure mitigation project success and provide
a significant incentive for the permit applicant to supply adequate
financing acceptable to the resources agencies. One commenter argued
that it would be difficult to enforce this permit condition until a
proven tool for control of invasive species is found. Another commenter
was unclear if the intent was to describe the long-term management
provisions or give the Corps the right to review and/or approve the
legal instrument.
The control of invasive species is an implementation issue that is
more appropriately addressed on a case-by-case basis. For the purposes
of Sec. 332.3(k) [Sec. 230.93(k)], the special conditions should
address, to the extent appropriate, how the provisions at Sec.
332.7(d) [Sec. 230.97(d)] will be satisfied. That section discusses
long-term
[[Page 19638]]
management for compensatory mitigation projects. District engineers
will evaluate proposals for long-term management to determine whether
they are sufficient for the purposes of compensatory mitigation for DA
permits. The requirements for long-term management plans will be
specified through enforceable special conditions.
(l) Party responsible for compensatory mitigation. One commenter
stated that when a mitigation bank or in-lieu fee program is cited as a
responsible party in the permit, responsibility should be transferred
from the permittee to the sponsor once the permittee has completed the
payment transaction. One commenter, however, said that the
responsibility for compensatory mitigation should remain with the
project proponent. If a project proponent has the responsibility to
provide successful mitigation, that person has an incentive to avoid
and minimize impacts.
In this rule, when a permittee has secured the required number and
resource type of credits from an approved mitigation bank or in-lieu
fee program, and the district engineer receives the documentation
specified in Sec. 332.3(l)(3) [Sec. 230.93(l)(3)], the responsibility
for providing the required compensatory mitigation is transferred to
the sponsor. As indicated in Sec. Sec. 332.3(l)(2) and 332.8(d)(8)
[Sec. Sec. 230.93(l)(2) and 230.98(d)(8)], a mitigation banking
instrument and an in-lieu fee program instrument must have a provision
stating that the legal responsibility for providing compensatory
mitigation lies with the sponsor once a permittee has secured credits
from that sponsor (see Sec. 332.8(d)(6)(ii)(C) [Sec.
230.98(d)(6)(ii)(C)]). The combination of the third-party instrument
and the documentation demonstrating that the permittee has secured the
appropriate number and resource type of credits, establishes a legally
enforceable transfer of responsibility. If the sponsor fails to provide
the required compensatory mitigation, the district engineer will take
appropriate action to achieve compliance with the terms of the
instrument. Such actions may include suspending credit sales, use of
the financial assurances to provide alternative compensation, referring
the non-compliance with the terms of the instrument to the Department
of Justice, or using in-lieu fee program account funds to secure
credits from another source of third-party mitigation.
We have modified Sec. 332.3(l)(2) [Sec. 230.93(l)(2)] to include
in-lieu fee programs. This provision states that mitigation banking
instruments and in-lieu fee program instruments must contain a
provision expressing the sponsor's agreement to assume responsibility
for providing the required compensatory mitigation once the credits
have been secured by the permittee and the district engineer receives
the appropriate documentation.
In addition, we have modified Sec. 332.3(l)(3) [Sec.
230.93(l)(3)] to explain what documentation is required to confirm that
the appropriate number and resource type of credits have been secured
from the sponsor. This paragraph also states that the district engineer
may pursue measures against the sponsor to ensure compliance if that
entity fails to provide the required compensatory mitigation in a
timely manner.
(m) Timing. Several commenters said that all temporal losses should
be considered in mitigation ratios. Some commenters recommended that
the rule require additional compensatory mitigation if functions have
not been restored in a certain time frame, and this should not be left
to the discretion of the district engineer. These commenters stated
that many functions are likely to require more than one year to become
restored or established. Three commenters requested more flexibility in
timing requirements. One commenter said that the final rule should not
require permanent mitigation, particularly at a ratio greater than one-
to-one, for temporary losses of wetland functions.
District engineers can require additional compensatory mitigation
to offset temporary losses of aquatic resource functions if the
compensatory mitigation project cannot be implemented in advance of, or
concurrent with, the permitted impacts. Factors to be considered in
determining appropriate compensatory mitigation ratios are provided at
Sec. 332.3(f)(2) [Sec. 230.93(f)(2)]. We understand that different
functions often develop at different rates after aquatic resource
restoration, establishment, or enhancement activities are implemented,
because of the ecosystem development processes that occur. However, it
is usually not feasible to require full functionality of a compensatory
mitigation project to be achieved before the permitted impacts occur.
The provisions in this rule are intended to minimize temporal losses of
aquatic resource functions, to the extent practicable. There is
sufficient flexibility in the timing requirements provided by this
rule. District engineers will determine appropriate compensatory
mitigation requirements for temporary impacts. It is important to
understand that temporary impacts may result in permanent changes to,
or losses of, specific functions. As an incentive for timely
mitigation, district engineers may determine that additional
compensation for temporal losses is not necessary if the mitigation
project is initiated prior to or concurrent with the permitted impacts,
except in the case of resources with long development times (e.g.,
forested wetlands).
One commenter noted that it is virtually impossible to implement a
compensatory mitigation project in advance of, or concurrently with,
permitted impacts on large, multi-phased, linear transportation
projects that are constructed over several years. Another commenter
stated that the proposed rule is silent on how it would be applied to
projects that occur in phases, where the amount of compensatory
mitigation should be timed to correspond to each phase of development.
This commenter said that the rule ought to provide the flexibility to
allow applicants to build phased mitigation that tracks the project
phases.
For linear transportation projects, district engineers will
considered the practicability of requiring advance or concurrent
compensatory mitigation. Depending on the specific circumstances
surrounding a phased development project, compensatory mitigation may
be required up-front as the first phase of the development project is
constructed. Or there could be separate compensatory mitigation
projects required for each phase. The appropriate approach for phased
construction projects is at the discretion of the district engineer.
(n) Financial assurances. Most commenters supported the provision
in the proposed rule that requires mitigation providers to secure
financial assurances to ensure project completion and long-term
management. Other commenters did not agree with the financial
assurances provisions. Some commenters said that the financial
assurance provisions should be strengthened. One commenter suggested
that financial assurances should only be required for larger, more
critical projects comprising several acres, large-scale preservation
and protection, or wetland banking projects. One commenter stated that
financial assurances should not be required for projects authorized by
nationwide permits.
We have modified Sec. 332.3(n) [Sec. 230.93(n)] to address the
comments received on the proposed financial assurance provisions. The
district engineer shall require sufficient financial assurances to
ensure a high level of confidence that the
[[Page 19639]]
compensatory mitigation project will be successfully completed, in
accordance with applicable performance standards. In cases where an
alternate mechanism is available to ensure a high level of confidence
that the compensatory mitigation will be provided and maintained (e.g.,
a formal, documented commitment from a government agency or public
authority) the district engineer may determine that financial
assurances are not necessary for that compensatory mitigation project.
Decisions regarding the appropriate type and amount of financial
assurances should not be based solely on the size of the compensatory
mitigation project, or whether it is a mitigation bank. The risk and
uncertainty associated with a specific compensatory mitigation project
should be considered. For small losses of waters of the United States
authorized by nationwide permits and regional general permits, it may
not be practicable to require financial assurances, and permit
conditions may be all that is necessary to provide a high level of
confidence that the required compensatory mitigation is provided.
Two commenters stated that compensatory mitigation providers who
have substantial assets and can demonstrate a continuing ability to
cover expenses associated with compensatory mitigation requirements
should not have to provide financial assurances. Two commenters said
that the use of financial instruments, such as those proposed in the
rule, is inconsistent with other EPA programs with potentially much
greater financial liability.
Section 332.3(n)(2) [Sec. 230.93(n)(2)] identifies a number of
different mechanisms that can be used to address financial assurance
requirements at the discretion of the district engineer.
Three commenters said that the financial assurance requirements
should not be duplicative of the financial assurances that a permittee
may be required to give under state or local law to secure the
performance of the same activities.
District engineers can consider whether financial assurances
required for compensatory mitigation projects under state or local laws
are sufficient for the purposes of achieving compliance with
compensatory mitigation requirements for DA permits. State or local
requirements for financial assurances may be adequate in cases where
the same compensatory mitigation project will be used to satisfy the
requirements of the Corps Regulatory Program, as well as similar state
or local regulatory programs.
Two commenters said that, because a mitigation bank sponsor is not
allowed 100 percent immediate credit release, the sponsor should only
have to post financial assurances for the percentage of the mitigation
bank site that has been debited for use and that has not met final or
interim performance standards.
The initial debiting (release of credits) for mitigation banks
provided at Sec. 332.8(m) [Sec. 230.93(m)] provides some capital to
the mitigation bank sponsor once the instrument has been approved and
certain tasks are achieved. That capital is intended to support the
success of the mitigation bank during its early stages of development.
Since the ecological success of a mitigation bank is usually dependent
upon having sufficient funds available to do the tasks necessary for
aquatic resource restoration, establishment, and/or enhancement
activities, the amount of any required financial assurances must
reflect the costs of doing those necessary activities. The district
engineer, in consultation with the sponsor and the IRT, will determine
the appropriate amount for the required financial assurances.
Three commenters stated that financial assurances should not be
required for government agencies. One commenter said that government
agencies should be required to provide financial assurances if adequate
funding cannot be assured.
This rule does provide flexibility for government agencies in
meeting financial assurance requirements. In cases where a formal,
documented commitment from a government agency is provided, the
district engineer may determine that financial assurances are not
necessary for that compensatory mitigation project. This flexibility is
afforded since government agencies tend to be relatively stable
entities, and operate in the public interest.
Two commenters stated that financial assurances should include all
construction and monitoring costs.
We have added a new sentence to Sec. 332.3(n)(2) [Sec.
230.93(n)(2)] to clarify that district engineers will consider
construction and monitoring costs, as well as costs for land
acquisition, planning and engineering, legal fees, mobilization, and
long-term stewardship when determining amounts of required financial
assurances. In addition, we have modified this paragraph to require
documentation of the basis for the financial assurance amount in the
administrative record for either the DA permit or the third-party
mitigation instrument. We have also added a new paragraph (3) to Sec.
332.3(n) [Sec. 230.93(n)], which states that if financial assurances
are required, the DA permit must include a special condition requiring
those assurances to be in place before commencing the permitted
activity.
Several commenters recommended that the final rule explicitly state
that financial assurances are only to be released upon the full
completion of all compensatory mitigation requirements. In contrast,
some commenters said that financial assurance should be phased out as
phases of compensatory mitigation projects are completed. A few
commenters stated that a portion of the financial assurance should be
retained until the end of the monitoring period, after the compensatory
mitigation project has met all legal and performance standards.
Section 332.3(n)(4) [Sec. 230.93(n)(4)] states that financial
assurances shall be phased out once the compensatory mitigation project
has been determined by the district engineer to be successful in
accordance with its performance standards. The DA permit or third-party
mitigation instrument has to clearly specify the conditions under which
the financial assurances will be released. Financial assurances should
not be phased out until the district engineer decides that the
compensatory mitigation project has met its performance standards.
Phasing out financial assurances in increments before compliance with
performance standards has been achieved would increase the risk that
insufficient financial assurances would be available if the
compensatory mitigation project were to fail at a later date.
One commenter said that the proposed rules for financial assurance
will consume critical federal and state staff resources in managing,
tracking, and enforcing these new requirements, and it could result in
considerable expenses for many permittees with little value added.
Financial assurances are important to ensure that a compensatory
mitigation project will be implemented and maintained. Requiring
financial assurances is not a new practice, so we do not expect there
to be substantial changes in staff resources for managing, tracking,
and enforcing this rule.
A number of commenters supported the suggestion requiring advance
notice to the district engineer before financial assurances are
canceled or allowed to lapse. Several commenters said that a minimum of
120 days should be the standard for notification and a few commenters
indicated that 30 days should be the minimum. Other commenters
recommended minimum time periods of 45, 60, and 90 days. One
[[Page 19640]]
commenter suggested that the Corps suspend or revoke a permit if the
financial assurance has lapsed. Another commenter stated that, in order
to perform this function adequately, the Corps district would need
additional staff.
We have added paragraph (5) to Sec. 332.3(n) [Sec. 230.93(n)] to
require financial assurances to be in a form that ensures that the
district engineer receives notification at least 120 days in advance of
any termination or revocation. District engineers will determine, on a
case-by-case basis, the appropriate action to take if notified that the
financial assurances will lapse. We do not believe that this provision
would impose additional burdens on Corps staff, since it simply
provides notice in cases where a requirement for a compensatory
mitigation project is not being fulfilled.
One commenter suggested that the financial assurances should be
structured to ensure that in the event of a failure of a compensatory
mitigation project, the Corps can easily obtain funds to pay for
project correction by a third party, if needed.
The Corps lacks statutory authority to accept directly, retain, and
draw upon financial assurances, such as performance bonds, to ensure
compliance with permit conditions. These limitations are a result of
the Miscellaneous Receipts Statute (31 U.S.C. Sec. 3302(b)). If the
Corps were to directly, retain, and draw upon those funds, the monies
would be categorized as a ``miscellaneous receipt'' under the
Miscellaneous Receipts Statute and would be deposited in the U.S.
Treasury without being used to ensure permit compliance.
District engineers have the authority to condition the approval of
a permit to require the posting and execution of financial assurances
by a third-party mitigation sponsor or a permittee, as long as the
Corps is not positioned to accept directly, retain, or draw upon those
funds in the event of a default. Financial assurances should be
executed with the signatures of an additional governmental or non-
governmental environmental management entity or entities as a bond
``surety'' or ``sureties,'' who agree to ensure performance if the
Corps should determine that the sponsor or permittee, as the bond
``principal,'' has defaulted on any of his or her responsibilities. The
third-party instrument or permit conditions should also specify that
the Corps stands as a third-party ``obligee'' to the principal and
surety(ies) of the bond, possessing the full and final authority to
determine the penal sum amount, and to determine whether the principal
and the surety(ies) have specifically performed some or all of the
obligations, covenants, terms, conditions, and agreements of the
financial assurance. Finally, the financial assurance should specify
that if both the principal and the surety(ies) default in their
responsibilities, the Corps retains the full and final discretionary
authority to identify new parties as additional surety(ies) to the
bond.
We have added a new paragraph (6) to Sec. 332.3(n) [Sec.
230.93(n)] to state that financial assurance are to be payable at the
direction of the district engineer to his designee or to a standby
trust agreement. In cases where a standby trust is used, all amounts
paid by the financial assurance provider are to be directly deposited
into the standby trust fund for distribution by the trustee in
accordance with the district engineer's instructions. Still, the
district engineer cannot accept directly, retain, or draw upon those
funds.
Several commenters recommended that each Corps district be required
to develop consistent requirements for financial assurances, so that
there will be a level playing field among mitigation providers for all
types of compensatory mitigation. One commenter requested that Corps
project managers and attorneys receive training on how to evaluate the
appropriateness of a proposed financial assurance. One commenter
suggested that the agencies incorporate an appeals or arbitration
process into the rule in case a district engineer imposes excessive or
other unreasonable requirements.
Additional guidance for financial assurances is provided by
Regulatory Guidance Letter 05-01, which is available at: http://
www.usace.army.mil/cw/cecwo/reg/rgls/rgl05_01.pdf. For individual
permits, prospective permittees can utilize the Corps administrative
appeal process. The administrative appeal process can be used in cases
where a district engineer proffers an individual permit, and the
prospective permittee does not agree with the terms and conditions of
that permit. The regulations governing the Corps administrative appeal
process are found at 33 CFR part 331.
(o) Compliance with applicable law. No comments were received on
this subsection. In the second sentence, we have added ``in-lieu fee
program'' instrument, since this final rule includes in-lieu fee
programs as another source of compensatory mitigation for DA permits.
33 CFR 332.4 and 40 CFR 230.94 Planning and Documentation
(a) Pre-application consultations. Several commenters supported the
provision for pre-application consultations, as they would save time
and reduce misunderstandings. Some commenters expressed concern that
pre-application meetings would stretch district staff resources. A few
commenters said that discussing compensatory mitigation before the
public review and comment period is at odds with sequencing
requirements, which require consideration of avoidance and minimization
prior to consideration of compensatory mitigation.
We believe that pre-application coordination is an important tool
that provides prospective permit applicants an opportunity to address
important issues in early planning stages. The Corps current
regulations already include pre-application consultations (see 33 CFR
325.1(b)), so we do not believe this provision would place additional
burdens on district resources. We have removed the word
``compensatory'' from this paragraph to clarify that all potential
mitigation measures, including avoidance, minimization, and
compensation, should be discussed during pre-application consultations.
(b) Public review and comment. Many commenters supported the
proposed requirement that public notices include a statement describing
how impacts to aquatic resources will be avoided, minimized, and
compensated for. These commenters stated that the requirement would
result in better up-front planning and design and would allow for more
meaningful public participation. There were many other commenters,
however, who did not support this proposed provision. Several of these
commenters recommended that only a brief statement of avoidance,
minimization, and compensation, or conceptual mitigation plan, be
included in the public notice. Several commenters suggested that this
subsection should be reworded to ensure that the public and the
agencies are aware that any mitigation options described in a public
notice are preliminary measures that the applicant has proposed, and
may be changed during the evaluation process. Some commenters requested
that the final rule specify that this provision is required of all
permits, instead of limiting it to individual permits.
We have clarified in the final rule that the mitigation statement
in the public notice is to be based on the information submitted by the
applicant, in
[[Page 19641]]
accordance with the new requirement at 33 CFR 325.1(d)(7). As discussed
in the section of this preamble that addresses Sec. 325.1(d)(7), this
should be a brief statement because this occurs in the early stages of
the evaluation process, and the evaluation of mitigation options is an
iterative process. As district engineers conduct their evaluations in
accordance with applicable Corps regulations, the 404(b)(1) Guidelines,
and regulations governing other applicable laws (e.g., section 7 of the
Endangered Species Act), additional avoidance and minimization may be
required, and compensatory mitigation requirements will be determined
in greater detail to offset the permitted impacts to the extent
appropriate and practicable. We have also modified Sec. 332.4(b)(1)
[Sec. 230.94(b)(1)] to allow prospective permittees to indicate an
intention to use an approved in-lieu fee program. In the last sentence
of Sec. 332.4(b)(1) [Sec. 230.94(b)(1)] we have replaced the word
``project'' with impacts, since the impacts that require DA
authorization often comprise a small proportion of the overall project.
The Corps can only require appropriate and practicable compensatory
mitigation to offset the permitted impacts to waters of the United
States (see 33 CFR 320.4(r)(2)).
We do not believe it is necessary to reword this subsection to
clarify that the mitigation statement contains preliminary mitigation
measures proposed by the permit applicant. It is understood that these
preliminary measures may be revised in response to public comment and
other input to the permit process. It would not be appropriate to
expand the requirements of Sec. 332.4(b) [Sec. 230.94(b)] to letters
of permission and general permits because those forms of authorization
do not require project-specific public notices. Public notices are
required only for standard permits.
We have added Sec. 332.4(b)(2) [Sec. 230.94(b)(2)] to require
district engineers to consider any timely comments and recommendations
received from other federal agencies, tribal, state, or local
governments, and the public. We have modified Sec. 332.4(b)(3) [Sec.
230.94(b)(3)] to state that, for activities authorized by letters of
permission and general permits, district engineers must comply with
review and approval processes for compensatory mitigation proposals and
plans that are applicable to those forms of DA authorization. We have
also modified Sec. 332.4(b)(1) [Sec. 230.94(b)(1)] to provide that
certain information may be kept confidential for business purposes. For
example, permittees may not want to reveal the exact parcel of land
that they are considering for a compensatory mitigation project if they
have not yet secured the site, since revealing this information may
adversely affect their ability to do so. The district engineer must
agree that any information withheld is legitimately confidential for
business purposes, and must ensure that adequate information is
included in the public notice to enable the public to provide
meaningful comment.
(c) Mitigation plan. Many commenters supported the provision that
requires a permit applicant to prepare a detailed draft mitigation plan
and submit it to the district engineer for review and approval.
Commenters noted that this requirement emphasizes the need for up-front
planning for compensatory mitigation, and provides a level of assurance
that the compensatory mitigation project will be completed. Three
commenters recommended that an applicant also be required to submit a
draft mitigation plan to other appropriate federal, state, or local
government agencies. One commenter supported the provision but also
suggested that the final rule should provide a time frame for the Corps
to review and approve the mitigation plan to ensure that the permit
process is not delayed by this requirement. Another commenter said that
it was unclear if this provision applies to general permits. One
commenter indicated that National Environmental Policy Act case law
does not establish a requirement for a complete mitigation plan to be
provided at the time of permit issuance.
We have revised Sec. 332.4(c) [Sec. 230.94(c)] to clarify the
different requirements for mitigation plans for individual permits,
general permits, and third-party mitigation. Section 332.4(c)(1)(i)
[Sec. 230.94(c)(1)(i)] describes mitigation plan requirements for
individual permits. Before an individual permit can be issued, a final
mitigation plan must be approved by the district engineer. This will
help ensure that the required compensatory mitigation is appropriate
for the authorized impacts. The final mitigation plan must include the
items listed in Sec. 332.4(c)(2) through (c)(14) [Sec. 230.94(c)(2)
through (c)(14)], but the level of detail should be commensurate with
the scale and scope of the impacts that will be authorized by the
individual permit. We have also added language to this paragraph that
allows district engineers to utilize permit conditions to address any
of the items listed in paragraphs (c)(2) through (c)(14). Paragraph
(c)(1)(i) does not require the prospective permittee to provide
contract-ready mitigation plans. However, the mitigation plans need to
be sufficiently detailed to demonstrate that the items listed in
paragraphs (c)(2) through (c)(14) have been appropriately addressed.
District engineers must also ensure that the final mitigation plans
have the appropriate level of detail necessary for compliance under the
Corps regulatory authorities. If the prospective permittee intends to
use a mitigation bank or in-lieu fee program to provide the required
compensatory mitigation, he or she needs to provide the name of the
mitigation bank or in-lieu fee program, as well as baseline information
and a description of the number of credits to be provided.
For activities authorized by individual permits, district engineers
may coordinate draft mitigation plans with commenting agencies during
the permit application evaluation process. We do not agree that it is
necessary to impose a requirement for district engineers to approve a
final mitigation plan within a specific number of days.
To address requirements for mitigation plans for activities
authorized by general permits, we have added Sec. 332.4(c)(1)(ii)
[Sec. 230.94(c)(1)(ii)]. If compensatory mitigation is required for an
activity authorized by a general permit, the district engineer may
approve a conceptual or detailed mitigation plan to meet required
timeframes for general permit verifications. A final mitigation plan
must be approved by the district engineer before the permittee
commences work in waters of the United States. If third-party
mitigation will be used, the mitigation plan must include information
on the baseline conditions and the credits to be provided, and either
the name of the specific mitigation bank or in-lieu fee program to be
used, or a statement that a mitigation bank or in-lieu fee program will
be used, contingent upon approval of the district engineer. The latter
provision will allow permittees to seek the appropriate number and
resource type of credits from a third-party mitigation sponsor and
negotiate the terms of securing those credits. However, the number and
resource type of credits must be approved by the district engineer
before those credits are secured by the permittee (see Sec.
332.3(k)(4) [Sec. 230.93(k)(4)]).
For mitigation banks and in-lieu fee programs, we have added Sec.
332.4(c)(1)(iii) [Sec. 230.94(c)(1)(iii)], which states that the
mitigation plans must include the items listed in paragraphs (c)(2)
through (c)(14) of this section. Mitigation plans must be prepared for
each separate compensatory mitigation project site. The review and
approval process for
[[Page 19642]]
mitigation plans for third-party mitigation is provided at Sec. 332.8
[Sec. 230.98].
Three commenters supported the proposed list of items to be
included in mitigation plans. One commenter stated that requiring these
items would improve the efficiency of permit reviews and the success of
compensatory mitigation projects. There were also many commenters who
disagreed with these requirements. Several commenters said that
requiring these items to be included in mitigation plans would delay
compensatory mitigation projects. One commenter stated that the content
of a mitigation plan should not be left to the discretion of the
district engineer. In contrast, another commenter stated that the final
rule needs to provide flexibility for the district engineer to decide,
on a case-by-case basis, what needs to be included in a mitigation
plan; such considerations should be based on the size and nature of the
compensatory mitigation project. One commenter recommended that in-lieu
fee programs should be required to submit a draft mitigation strategy,
in place of the mitigation plan.
The items listed in Sec. 332.4(c)(2) through (c)(14) [Sec.
230.94(c)(2) through (c)(14)] are necessary to help ensure that
mitigation plans for DA permits contain the appropriate types of
information for the purposes of developing successful compensatory
mitigation projects and facilitating effective compliance measures.
Because of the potential variability among compensatory mitigation
project types, as well as differences in compensatory mitigation
practices among regions, the rule provides flexibility in the level of
detail required for the content of mitigation plans. It specifies that
while all required items must be addressed, the level of detail should
be commensurate with the scope and scale of the impacts. This is up to
the district engineer to determine. Under the regulations governing in-
lieu fee programs, a sponsor will be required to develop a compensation
planning framework (see Sec. 332.8(c) [Sec. 230.98(c)]), as well as
mitigation plans for each in-lieu fee project (see Sec. 332.8(j)
[Sec. 230.98(j)]).
One commenter objected to the proposed language stating that the
level of detail in the mitigation plan would be commensurate with the
scale and scope of the project, because that language is vague and
would result in mitigation plans of varied thoroughness and quality.
Another commenter said that the level of detail should take the nature
of the impacted resource into account. One commenter stated that the
level of detail should not be related to the size and scale of the
project; instead, the level of detail should be sufficient to evaluate
the water quality benefits and to ensure that the compensatory
mitigation project offsets the impacts.
Flexibility in the level of detail required for mitigation plans is
necessary to account for differences in compensatory mitigation
projects. It would be impractical to require the same level of detail
for all mitigation plans developed for individual permits, general
permits, and third-party mitigation. Rather, projects with significant
impacts will necessarily need to devote more effort and resources to
mitigation planning than projects with minor impacts. We have modified
Sec. 332.4(c)(1)(i) [Sec. 230.94(c)(1)(i)] to state that, for
individual permits, the level of detail of the mitigation plan should
be commensurate with the scale and scope of the impacts. The same
principle applies to general permits. Compensatory mitigation projects
required for DA permits rarely focus solely on water quality benefits.
These projects usually result in the restoration, establishment, and/or
enhancement of other aquatic resource functions, such as habitat and
water quantity storage.
(2) Objectives. We added ``physiographic province'' to the list of
types of geographic areas that may be served by the objectives of a
compensatory mitigation project.
(3) Site selection. We have added a reference to Sec. 332.3(d)
[Sec. 230.93(d)] to this paragraph.
(4) Site protection instrument. One commenter recommended that
every parcel of land set aside for compensatory mitigation have a
recorded conservation easement held by a third-party governmental
agency or non-profit organization. Another commenter suggested that the
site protection instrument should ensure the permanent protection of
the mitigation site.
Specific requirements for site protection are provided in Sec.
332.7(a) [Sec. 230.97(a)]. In some cases, it is not practicable to
require execution of a conservation easement that would be held by a
third party. For example, it may not be possible to find a third-party
willing to hold the conservation easement. While the goal of the rule
is to ensure permanent protection of all compensatory mitigation
project sites, we recognize that the degree of long-term protection
afforded by real estate instruments varies from state to state.
(5) Baseline information. One commenter recommended the addition of
stream-oriented baseline information requirements. Other commenters
recommended requiring additional baseline information, including
geographic coordinates of all impact and mitigation sites, planned
alterations to lands or waters adjacent to the proposed site, flooding
frequency of a proposed mitigation site, and a delineation of waters of
the United States, including jurisdictional wetlands (if any
unavoidable impacts to jurisdictional waters will occur on the proposed
mitigation site).
We have modified this paragraph to add several more examples of
information that may be required as baseline information. A map showing
the locations of the impact and mitigation site(s) or the geographic
coordinates for those site(s) should be provided. Also, information
concerning other site characteristics appropriate to the type of
resource proposed as compensation may also be included in the baseline
information. We have added a sentence stating that the baseline
information should also include a delineation of waters of the United
States on the proposed compensatory mitigation project site. We have
added a reference to in-lieu fee programs to the last sentence of this
paragraph, since we are including in-lieu fee programs in this rule.
(6) Determination of credits. One commenter recommended that the
explanation of the rationale for determining credits should be detailed
and should include results of a functional assessment of the impacted
habitat.
We believe that the level of detail of the mitigation plan,
including the rationale for determining credits, should be commensurate
with the scale and scope of the impacts. Appropriate functional or
condition assessments may not be available in some regions, and for
some activities that require DA authorization, it may not be
practicable to use functional or condition assessments. We have added a
reference to Sec. 332.3(f) [Sec. 230.93(f)] since credit
determinations are related to the amount of compensatory mitigation
required. In Sec. 332.4(c)(6)(i) [Sec. 230.94(c)(6)(i)], we are
clarifying that the determination of credits relates to the required
permittee-responsible mitigation. Section 332.4(c)(6)(ii) [Sec.
230.94(c)(6)(ii)] applies to permittees intending to secure credits
from mitigation banks or in-lieu fee programs.
(7) Mitigation work plan. One commenter suggested that the
mitigation work plan should specify whether the wetland to be used to
provide compensatory mitigation will be permanent, temporary, or
ephemeral.
The mitigation work plan is to provide written specifications and
work
[[Continued on page 19643]]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
]
[[pp. 19643-19692]] Compensatory Mitigation for Losses of Aquatic Resources
[[Continued from page 19642]]
[[Page 19643]]
descriptions for compensatory mitigation projects. If wetlands
compensatory mitigation is to be provided, the objectives are the most
appropriate place to describe the wetland type. We have modified this
paragraph by replacing ``plant species to be planted at the site'' with
``methods for establishing the desired plant community'' since the
means for establishing a particular plant community is not limited to
planting certain species at the compensatory mitigation project site.
We have also added ``soil management'' since soil amendments and other
techniques may be needed for the project. Also, we added information on
elements that might be needed for stream mitigation project work plans,
such as planform geometry, channel form, watershed size, design
discharge, and riparian area plantings.
(8) Maintenance plan. We received no comments and made no changes
to this paragraph.
(9) Performance standards. One commenter expressed concern that the
requirement to include ecologically based performance standards in a
mitigation plan for impacts to ephemeral channels will create a
significant burden for permit applicants. This commenter also said that
such requirements will put local Corps staff in a difficult position in
terms of evaluating such standards, when no widely available metrics
exist.
Ecological performance standards are necessary to assess whether
the project is achieving its objectives. Performance standards will
vary by aquatic resource type and geographic region. This rule provides
the district engineer with flexibility to require standards that are
appropriate for compensatory mitigation projects that involve ephemeral
streams. Since ecological performance standards are discussed in more
detail in Sec. 332.5 [Sec. 230.95], we have added a reference to that
subsection.
(10) Monitoring requirements. One commenter suggested replacing
``adaptive management'' with ``remedial measures'' in this paragraph.
Since this rule utilizes adaptive management to address
deficiencies in compensatory mitigation projects, it would not be
appropriate to make the suggested change. Since monitoring is discussed
in more detail at Sec. 332.6 [Sec. 230.96], we have added a reference
to that subsection.
(11) Long-term management plan. Several commenters supported the
inclusion of a long-term management plan in the mitigation plan. One
commenter recommended that the long-term management plan also include a
description of long-term management needs and detailed annual cost
estimates for these needs, and identify the funding mechanism that will
be used to meet those needs. Two commenters said that there should be
no requirement for long-term management other than for structural
components that may have been constructed as part of the compensatory
mitigation project, once monitoring requirements have been fulfilled
and the compensatory mitigation project has been determined to be
successful.
In order for compensatory mitigation to offset permitted losses,
compensation projects need to be sustainable for the long-term.
Accordingly, the rule requires that provisions necessary for long-term
management be provided as permit conditions or as stipulations in a
mitigation banking or in-lieu fee program instrument. Specific
requirements for long-term management plans are provided in Sec.
332.7(d) [Sec. 230.97(d)]. In response to these comments, we have
added a new Sec. 332.7(d)(2) [Sec. 230.97(d)(2)] to state that a
long-term management plan should include a description of long-term
management needs, annual cost estimates for these needs, and identify
the funding mechanism that will be used to meet those needs. Since
long-term management is discussed in more detail in Sec. 332.7(d)
[Sec. 230.97(d)], we have added a reference to that subsection.
(12) Adaptive management plan. We have modified this paragraph to
reflect changes to the definition of adaptive management at Sec. 332.2
[Sec. 230.92] and the regulations governing adaptive management at
Sec. 332.7(c) [Sec. 230.97(c)]. We have also added a reference to
Sec. 332.7(c) [Sec. 230.97(c)], since the rules governing adaptive
management are provided in that subsection.
(13) Financial assurances. One commenter requested further
clarification of the term ``high level of confidence.'' Another
commenter noted that requiring financial assurances would cause a
workload burden on Corps districts.
Financial assurances are intended to provide a pool of funds that
would be available to implement a compensatory mitigation project. The
term ``high level of confidence'' is used because having sufficient
funding is often a critical element for successfully providing the
required compensation. The funds available from financial assurances
can be used to correct deficiencies in a compensatory mitigation
project or to provide alternative compensation. Requiring financial
assurances for compensatory mitigation projects is not a new practice,
so it will not cause substantial increases in the Corps workload. Since
financial assurances are discussed in more detail in Sec. 332.3(n)
[Sec. 230.93(n)], we have added a reference to that subsection.
(14) Other information. Two commenters recommended that the
mitigation plan include a discussion of the alternative mitigation
options considered and a full explanation of why the chosen option will
best replace the functions and values of the impacted aquatic resource.
Alternative compensatory mitigation options are more appropriately
discussed prior to submittal of a mitigation plan. Once the district
engineer has determined the appropriate and practicable compensatory
mitigation option for a particular DA permit, the prospective permittee
will prepare the mitigation plan.
33 CFR 332.5 and 40 CFR 230.95 Ecological Performance Standards
A number of commenters supported the use of ecological performance
standards because they are based on objective and verifiable
characteristics that can be measured with a ``reasonable amount of
effort.'' Three commenters supported establishing criteria and metrics
based on aquatic functions rather than type and amount of wetlands or
streams. Several commenters stated that the proposed rule focuses on
process and procedure, but lacks explicit ecological performance
measures. However, a number of commenters supported the lack of
specifics in the proposed rule so that ecological performance standards
are tailored to each site.
We have modified Sec. 332.5 [Sec. 230.95] by splitting it into
two paragraphs. Paragraph (a) states that the approved mitigation plan
must contain performance standards to assess whether the compensatory
mitigation project is achieving its objectives. The last sentence of
Sec. 332.5(a) [Sec. 230.95(a)] has been modified to clarify that
other applicable metrics, such as acres, could be used to evaluate
compensatory mitigation projects. In Sec. 332.5(b) [Sec. 230.95(b)]
we have modified the first sentence to state that performance standards
must be objective and verifiable. We have also added a sentence to
paragraph (b), to require ecological performance standards to be based
on the best available science that can be measured or assessed in a
practicable manner. This will help ensure that performance standards
for compensatory mitigation projects are based on ecological outcomes,
not construction tasks or administrative
[[Page 19644]]
milestones that may not reflect gains in aquatic resource functions or
services.
This rule cannot provide specific ecological performance standards
for use in compensatory mitigation projects. Instead, it must focus on
the general principles for ecological performance standards.
Performance standards must be developed on a project-by-project basis,
to address the objectives of a compensatory mitigation project.
District engineers can develop templates for ecological performance
standards, to provide consistent standards for the types of aquatic
resources found in their areas of responsibility.
Some commenters noted that the proposed rule emphasizes functional
standards instead of area-based performance standards, and said that it
will be difficult for the Corps to move to a functional approach
because simple functional assessment methods do not exist for many
types of wetlands, and regulators are much more comfortable with
measuring acres and linear feet. A few commenters contended that
nowhere in the rule is compensatory mitigation required to actually
replace the functions of the aquatic habitat destroyed.
Functional standards are necessary to demonstrate that compensatory
mitigation projects offset losses of aquatic resource functions
resulting from activities authorized by DA permits. Area-based
performance standards tied to functions can also be used, to determine
the functional capacity of a compensatory mitigation project. However,
area or linear measures alone would not constitute ecological
performance standards. Functional or condition assessments should be
used where appropriate and practicable to better describe how
compensatory mitigation projects offset losses of aquatic resource
functions. We are continuing to develop and refine functional
assessment methods and other science-based assessment tools, but where
such tools are not available, the performance standards must still
attempt to describe a successful project in ecological terms that can
be measured (e.g., the project has established an appropriate
hydrologic regime or has an appropriate number of acres of specific
types of plant communities at specified levels of development,
including particular species, etc). The purpose of compensatory
mitigation is discussed in Sec. 332.3(a)(1) [Sec. 230.93(a)(1)]. This
paragraph states that the ``fundamental objective of compensatory
mitigation is to offset unavoidable impacts to waters of the United
States authorized by DA permits.''
One commenter suggested that the Corps welcome partnerships with
local and state agencies and quickly approve performance standards in
watersheds with extensive wetland inventory and functional data. A few
commenters recommended that the agencies provide detail on aquatic
resource characteristics to be considered (e.g., vegetation, soil and
hydrology), specification of wetland factors that might require
remediation to meet performance standards, and development of a pre-
planning simulation for adaptive management. Several commenters said
that the proposed rule fails to provide guidance as to how proposed
performance-based standards will be interpreted and applied, and that
ecological success criteria are vague and not likely to include
meaningful criteria that will account for all wetland functions.
District engineers are encouraged to work with federal, state, and
local resource agencies to develop ecological performance standards
that are appropriate for the types of aquatic resources found in their
areas of responsibility. District engineers are responsible for
developing ecological performance standards that are objective and
verifiable. Such performance standards must be clearly written, so that
independent parties can assess whether compensatory mitigation projects
are meeting their performance standards. Ecological performance
standards may be based on specific wetland characteristics. We have
added a new sentence to Sec. 332.5(b) [Sec. 230.95(b)] to clarify
that reference aquatic resources can be used to establish performance
standards that are reasonably achievable, by reflecting the range of
variability exhibited by the regional class of aquatic resources.
R 332.6 and 40 CFR 230.96 Monitoring
(a) General. Commenters generally supported the emphasis on
compensatory mitigation project site management and monitoring. Several
commenters said that the agencies must strengthen compliance monitoring
and enforcement activities. Three commenters said that Corps guidance
states that monitoring reports are a high priority when ``substantial
mitigation'' is required, but it does not define substantial
mitigation.
Compliance activities are dependent upon available resources, and
the Corps is placing greater emphasis on compensatory mitigation
project compliance through its performance standards developed under
the Program Assessment Rating Tool for the President's ``Budget and
Performance Integration'' management initiative. The Corps guidance
relating to ``substantial mitigation'' is not part of this rulemaking,
and therefore does not need to be defined. That guidance appeared in
the Corps Regulatory Program's Standard Operating Procedure dated
October 15, 1999, which is in the process of being revised. Under this
final rule, monitoring reports are required for all mitigation project
sites, but the content and level of detail of the reports must be
commensurate with the scale and scope of the mitigation project.
We have added Sec. 332.6(a)(2) [Sec. 230.96(a)(2)] to clarify
that district engineers may conduct site inspections on a regular basis
during the monitoring period to evaluate the performance of
compensatory mitigation project sites. These site visits will be used
to verify the findings of monitoring reports. We have modified the
language that was in Sec. 332.6(c)(2) [Sec. 230.96(c)(2)] of the
proposed rule, since only the district engineer has the authority to
conduct site visits to assess compliance with the conditions of a DA
authorization. Representatives of federal, tribal, state, or local
resources agencies may be asked to participate in these site visits, at
the invitation of the district engineer and with the express consent of
the landowner.
(b) Monitoring period. There was no consensus among commenters
regarding the appropriate length for monitoring periods. One commenter
said that compensatory mitigation in coral reef habitats should be
monitored for more than five years. Another commenter suggested that
monitoring be required for seven to ten years. Several commenters
stated that monitoring periods should be flexible and site specific. A
number of commenters supported the proposed five year monitoring
period. One commenter said that longer monitoring periods are needed to
account for the development of certain aquatic resource types, or for
natural events, such as drought or floods, that may affect the
development of plant communities. This commenter also said that longer
monitoring periods are necessary to develop realistic objectives and
performance standards.
We believe that five years is an appropriate starting point for
determining the required monitoring period. The final rule states that
the mitigation plan must provide for a monitoring period that is
sufficient to demonstrate that the compensatory mitigation project has
met performance standards, but not less than five years, and a longer
monitoring period must be required for aquatic resources with slow
[[Page 19645]]
development rates (e.g., forested wetlands, bogs). The rule also allows
the district engineer to reduce or waive remaining monitoring
requirements upon a determination that the compensatory mitigation
project has achieved its performance standards. To reduce or waive the
remaining monitoring requirements before the five year period ends,
there should be at least two consecutive monitoring reports issued
where the success criteria are met. This will help account for
variability in environmental conditions, to ensure that the
compensatory mitigation project is truly meeting its performance
standards. Performance standards should be designed, to the extent
practicable, to account for the ecological characteristics of early
developmental stages of aquatic ecosystems, so that a determination of
ecological success can be made within five years. For aquatic habitat
types where five years is insufficient to determine ecological success
through performance standards that satisfy the criteria at Sec. 332.5
[Sec. 230.95], longer monitoring periods may be required. We have
modified the last sentence of Sec. 332.6(b) [Sec. 230.96(b)] to
include adaptive management as a reason for revising monitoring
requirements.
(c) Monitoring reports. Many commenters stated that monitoring
reports should be standardized to expedite the Corps review and that
minimum monitoring requirements and performance standards should be
provided in the rule. A number of commenters said that the Corps should
specify the minimum required reporting elements for each habitat type.
Some commenters recommended that monitoring reports include sufficient
detail to facilitate scientific comparison between the functions of
filled wetlands and the functions of mitigation bank credits used to
compensate for those filled wetlands. One commenter stated that the
rule should require inspections and brief progress or status reports
for all compensatory mitigation projects that require monitoring, to
facilitate adaptive management.
We have modified Sec. 332.6(a)(1) [Sec. 230.96(a)(1)] to clarify
that the content and level of detail for monitoring reports must be
commensurate with the scale and scope of the compensatory mitigation
project, as well as the compensatory mitigation project type. The
information to be included in a monitoring report is at the discretion
of the district engineer, who should take into account the
characteristics of the compensatory mitigation project when determining
those requirements. The content of monitoring reports will also depend
on the ecological performance standards for the compensatory mitigation
project, since the purpose of the monitoring report is to demonstrate
how the project is progressing towards achieving those standards. If
the performance standards require the use of functional assessments to
assess the performance of the compensatory mitigation project, then the
results of those assessments should be provided in the monitoring
reports. We do not believe it is appropriate to require monitoring
reports to include scientific comparisons of wetland functions between
mitigation and impact sites, because the tools necessary to conduct
such comparisons are not available in many areas, or they may not be
practicable for certain types of projects, such as small compensatory
mitigation projects provided for activities authorized by general
permits. Furthermore, the appropriateness of the required mitigation to
replace aquatic functions and services lost at the impact site is
evaluated at the time the mitigation plan is approved, including the
identification of appropriate ecological performance standards for the
mitigation project. After this point, monitoring is needed to ensure
that the mitigation project is developing as planned and progressing
satisfactorily towards meeting the performance standards. District
engineers will determine, on a case-by-case basis, the need for site
inspections to assess compensatory mitigation project sites.
We have modified Sec. 332.6(c)(1) [Sec. 230.96(c)(1)] to state
that as-built plans may be provided in monitoring reports. We have also
modified Sec. 332.6(c)(1) [Sec. 230.96(c)(1)] to stipulate that
monitoring reports may include the results of condition assessments or
other types of assessments.
Two commenters stated that Corps guidance does not instruct
district engineers on what actions to take if permittees or third-party
mitigation providers fail to submit required mitigation reports.
Several commenters recommended that mitigation plans and mitigation
banking instruments include built-in, agreed-upon penalties for failure
to submit accurate, timely, and complete monitoring reports that are
required by the permit or instrument.
We have added Sec. 332.6(c)(2) [Sec. 230.96(c)(2)] to stipulate
that the permittee or sponsor is responsible for submitting monitoring
reports as required by the special conditions of the DA permit or the
terms of the third-party mitigation instrument. If permittees or third-
party mitigation sponsors do not provide the required monitoring
reports, they are not in compliance with the terms and conditions of
their permits or instruments, respectively. In such cases, district
engineers will take appropriate compliance actions in accordance with
the Corps regulations at 33 CFR part 326. Failure to comply with the
conditions of a DA permit issued under section 404 of the Clean Water
Act could result in the assessment of Class I administrative penalties.
Therefore, it is important that monitoring report requirements be
specified as conditions in DA permits.
Some commenters said that monitoring reports should be made
available to the public, but other commenters indicated that they
should not be made public.
Since monitoring reports are public information, Sec. 332.6(c)(3)
[Sec. 230.96(c)(3)] has been changed to clarify that monitoring
reports must be provided to interested federal, tribal, state, and
local resource agencies, and the public upon request. District
engineers may establish policies and procedures for how to fulfill
these requests for monitoring reports and other public information,
including establishing time frames for responding to the requests and
recouping nominal costs for filling those requests (e.g., duplication
costs). As discussed above, we have moved the language regarding site
inspections that was in Sec. 332.6(c)(2) [Sec. 230.96(c)(2)] of the
proposed rule to Sec. 332.6(a)(2) [Sec. 230.96(a)(2)], since it is a
general issue relating to monitoring.
33 CFR 332.7 and 40 CFR 230.97 Management
(a) Site protection. Several commenters supported the flexibility
regarding the use of real estate and legal instruments for long-term
site protection. A number of commenters stated that compensatory
mitigation project sites should be protected in perpetuity through
conservation easements, rather than deed restrictions or other legal
instruments. A few commenters said that conservation easements are an
overly restrictive and unnecessary requirement for stream mitigation.
One commenter said that when a compensatory mitigation project is
located within a right-of-way owned by a public agency, requiring a
real estate instrument is unnecessary. Several commenters said that the
proposed rule ignores the jurisdiction of federal and state regulatory
programs, and compromises private property rights. These commenters
believe that the rule exceeds the authority of the agencies to regulate
activities under section 404 of the Clean Water Act.
[[Page 19646]]
The goal of the rule is to ensure permanent protection of all
compensatory mitigation project sites. Specifically the rule states
that the aquatic habitats, riparian areas, buffers, and uplands that
comprise the overall compensatory mitigation project must be provided
long-term protection through real estate instruments or other available
mechanisms. However, we recognize that the terms of real estate or
legal instruments used to protect compensatory mitigation project sites
will differ, because of the variability in real estate laws among
states and local jurisdictions. For example, in some states perpetual
protection cannot be required, because the real estate or legal
instruments may be in effect for a limited number of years. Therefore,
we cannot require specific terms for real estate instruments in this
rule. The terms for conservation easements, restrictive covenants, and
other mechanisms are more appropriately addressed by district engineers
on a case-by-case basis. However, we have added a provision which
states that, where practicable, a conservation easement or restrictive
covenant should establish in an appropriate third party (e.g.,
governmental or non-profit resource management agency) the right to
enforce site protections and provide the third party the resources
necessary to monitor and enforce these site protections. For stream
compensatory mitigation projects, appropriate means of site protection
will be determined by district engineers, after considering the
characteristics of the compensation activities and the real estate
interests of the project proponent. For example, in-stream
rehabilitation measures may not warrant long-term protection. Specific
requirements for site protection are at the discretion of the district
engineer. There are other examples of situations where it may not be
feasible to require site protection through real estate or legal
instruments for compensatory mitigation projects. One potential
situation is the construction of oyster habitat or the restoration of
sea grass beds in state-owned tidal waters, where the project proponent
does not have a real estate interest, but may obtain authorization to
conduct those environmentally beneficial activities. Another example
may be the restoration of tidal marshes or other coastal resources,
since the long-term sustainability of those projects in the dynamic
coastal environment cannot be assured because of the natural littoral
processes that occur in those areas.
This rule does not exceed the agencies' authority under the Clean
Water Act. The Corps has the authority to add special conditions to its
permits, when such conditions are necessary to satisfy legal
requirements such as compliance with the 404(b)(1) Guidelines or to
satisfy the public interest (see 33 CFR 325.4(a)). For example,
compensatory mitigation may be required to comply with the 404(b)(1)
Guidelines and to support the objective of the Clean Water Act, which
is to restore and maintain the chemical, physical, and biological
integrity of the Nation's waters. This final rule addresses
compensatory mitigation that may be required for DA permits issued
under the Corps jurisdictional authority under section 404 of the Clean
Water Act and sections 9 and 10 the Rivers and Harbors Act of 1899.
Compensatory mitigation requirements that may be imposed by state
regulatory programs are to be addressed through applicable state
regulations. While compensatory mitigation requirements may affect how
private property is used, such permit conditions do not necessarily
result in a taking of private property.
If a compensatory mitigation project is located in a right-of-way
owned by a public agency, then alternative mechanisms may be used to
provide site protection. This rule does not compromise private property
rights. Permittees can propose alternative compensatory mitigation
projects in cases where a particular parcel of land is needed for uses
other than compensatory mitigation.
One commenter asked for clarification as to why there is a
preference for non-profit conservation organizations versus for-profit
conservation organizations. Some commenters requested a definition of
the phrase ``long-term protection.''
We do not state a preference for non-profit conservation
organizations. Section 332.7(a)(1) [Sec. 230.97(a)(1)] provides
examples of suitable land managers, and does not limit potential land
managers. Long-term protection refers to measures taken to sustain and
preserve the compensatory mitigation project after performance
standards are met and monitoring requirements have been fulfilled.
Several commenters asserted that in addition to fishing and grazing
rights, compatible uses of compensatory mitigation projects on public
lands should include non-motorized public recreation, including
development of multi-use trails. They said that the agencies should
recognize that any trails or other features or activities that would
impact jurisdictional waters of the United States would require DA
permits and compensatory mitigation. Other commenters recommended
restricting incompatible uses. One commenter stated that a mitigation
bank needs to be preserved in perpetuity and protected from negative
impacts. This commenter said that the phrase ``restrict or'' should be
removed from Sec. 332.7(a) [Sec. 230.97(a)] of the proposed rule,
because incompatible uses must not be allowed.
To the extent appropriate and practicable, incompatible uses that
might jeopardize the objectives of the compensatory mitigation project
will be prohibited. District engineers will determine which uses are
compatible and incompatible on a case-by-case basis. We have added
mineral extraction to Sec. 332.7(a)(2) [Sec. 230.97(a)(2)] as an
example of an incompatible use. We have removed the phrase ``restrict
or'' from this provision (now designated as Sec. 332.7(a)(2) [Sec.
230.97(a)(2)]).
To address potential alterations to compensatory mitigation
projects on public lands, including federal facilities, that may result
from changes in statutes, regulations, or agency needs or mission, we
have also added Sec. 332.7(a)(4) [Sec. 230.97(a)(4)]. This provision
requires the public agency authorizing the incompatible use to provide
alternative compensatory mitigation acceptable to the district engineer
for any loss in functions resulting from the incompatible use.
Several commenters said that in cases where a third party is the
holder of the conservation easement, the easement should contain a
requirement that the regulating agency be notified should there be any
action taken to void the easement (e.g., in legal actions related to
bankruptcy, tax reversion, or similar circumstances). In the event that
a third party holder defaults on an easement or is no longer authorized
to hold an easement, then that easement should revert to the regulating
agency.
We have added Sec. 332.7(a)(3) [Sec. 230.97(a)(3)] to require
long-term protection mechanisms to include provisions requiring 60-day
advance notification to the district engineer if any action is taken to
void or modify the mechanism. The Corps, however, does not have
authority to hold easements for compensatory mitigation projects.
(b) Sustainability. A number of commenters agreed that compensatory
mitigation projects should be designed to be self-sustaining once
performance standards have been achieved. One commenter expressed a
preference for self-sustaining mitigation projects to those requiring
on-going human intervention, such as irrigation, but acknowledged that
in arid regions, surface water supplies may be severely limited or
unavailable because of
[[Page 19647]]
established water rights. This commenter said that pumped groundwater
may be the only practicable solution.
This rule requires compensatory mitigation projects to be designed,
to the maximum extent practicable, to be self-sustaining once
performance standards have been achieved. Where use of active
structures such as pumps cannot be avoided, it is permitted, however
the project sponsor should carefully evaluate the project design to
ensure that it is self-sustaining to the maximum extent practicable. At
the end of Sec. 332.7(b) [Sec. 230.97(b)], we have added a provision
requiring the acquisition and protection of water rights where needed.
That provision also requires documentation in the permit conditions or
the third-party mitigation instrument.
Several commenters stated that monitoring will be required to make
sure that mitigation projects are self-sustaining. One commenter
recommended denying compensatory mitigation credit for projects
requiring active engineering features or excessive management such as
pumps or manipulated impoundments except in exceptional circumstances.
Another commenter said that language supporting active management and
maintenance, as well as adaptive management, should be included.
Commenters also stated that when an existing, human-created wetland is
being impacted, it may be appropriate to develop mitigation features
with shorter life expectancies.
Determining whether an implemented compensatory mitigation project
is self-sustaining should occur during the original monitoring period.
In general, compensatory mitigation should not require active
engineering features such as pumps, but should be appropriately sited
to ensure that natural hydrology and landscape position will support
long-term sustainability. If this is not possible in some areas,
district engineers may decide that active engineering features or
active management may be necessary for a compensatory mitigation
project to meet its objectives. Adaptive management and long-term
management are addressed in paragraphs (c) and (d) of this section,
respectively. Appropriate compensatory mitigation project design,
objectives, and life expectancies are most appropriately determined by
district engineers on a case-by-case basis.
(c) Adaptive management. A number of commenters supported the use
of adaptive management to address unforeseen changes in aquatic
resource functions of compensatory mitigation projects. Several
commenters recommended the use of legal instruments to protect
compensatory mitigation sites instead of relying on adaptive management
strategies. One commenter suggested that if a permittee has made a
``good faith effort'' to meet performance standards, no additional
compensatory mitigation requirements should be imposed other than an
extension of the monitoring period. Several commenters said that
requiring adaptive management efforts beyond what is currently required
as remediation or contingency actions will impose additional financial
and resource burdens on mitigation providers. One commenter requested
that the final rule clarify that ``monitoring and adaptive management''
will not be used as a substitute for developing a mitigation site plan.
We have modified Sec. 332.7(c) [Sec. 230.97(c)] to be consistent
with the changes to the definition of adaptive management made in Sec.
332.2 [Sec. 230.92]. The protection of compensatory mitigation
projects sites through real estate instruments and other mechanisms
will not address poor performance that could be remedied through
adaptive management measures. The focus of adaptive management should
be on taking measures to achieve performance and satisfy the objectives
of the compensatory mitigation project. Extending the monitoring period
may not be an appropriate adaptive management approach to achieve the
desired performance, however, if the district engineer determines that
the project is progressing towards meeting performance standards and
that more time is all that is needed, he may determined that extension
of the monitoring period is an appropriate adaptive management
response. We recognize that there may be additional costs associated
with an adaptive management approach, but we believe that such an
approach is necessary to achieve compensatory mitigation project
objectives, or to provide comparable or superior ecological benefits.
An adaptive management plan is part of a mitigation plan (see Sec.
332.4(c)(12) [Sec. 230.94(c)(12)]), not a substitute for a complete
mitigation plan.
We have added Sec. 332.7(c)(1) [Sec. 230.97(c)(1)] to require
permittees or third-party mitigation sponsors to notify the district
engineer if a permittee-responsible mitigation project or a mitigation
bank or in-lieu fee project cannot be constructed in accordance with
the approved mitigation plans. Any significant modification of a
compensatory mitigation project requires the approval of the district
engineer, and must comply with the conditions of the permit or the
third-party mitigation instrument. If a change is necessary that does
not comply with the permit or instrument as approved, the permit or
instrument must be modified.
Several commenters stated that an adaptive management plan should
describe a technical approach to dealing with performance issues such
as invasive species, but should not depend on agency review and
approval of specific management decisions. One commenter said that
requiring applicants to develop up-front adaptive management plans
would allow flexibility and responsiveness on the part of the applicant
while preserving final agency approval or disapproval of the results.
Several commenters recommended allowing responsible parties to
determine remediation actions and report on those actions and the
results to the district engineer. A number of commenters said that the
proposed rule leaves the district engineer too much discretion to
dismiss remediation measures as not being ``appropriate and
practicable.''
Management decisions that deviate from the approved mitigation
plans require approval from the district engineer. However, a certain
amount of responsiveness to conditions on the ground may be built in to
the mitigation plan itself. In such cases, as long as the project
sponsor is operating in accordance with the approved mitigation plan,
no special notification or additional approval is required, although
monitoring reports should include appropriate information to allow the
district engineer to assess how the project is progressing. In Sec.
332.7(c)(2) [Sec. 230.97(c)(2)] of the final rule, we have modified
this paragraph to require the responsible party to notify the district
engineer as soon as possible if the compensatory mitigation project is
not achieving its performance standards as anticipated. The district
engineer may determine that modification of the approved mitigation
plans is necessary to ensure compliance with the DA permit or third-
party instrument. District engineers will evaluate proposed measures to
determine if they will address deficiencies in the compensatory
mitigation project and/or require modification of the approved
mitigation plans. It is necessary to provide the district engineer with
the authority to determine whether remediation measures are appropriate
and practicable. If the proposed remediation measures do not meet those
two criteria, the district engineer may
[[Page 19648]]
determine that it is necessary for the responsible party to provide
alternative compensatory mitigation. In Sec. 332.7(c) [Sec. 230.7(c)]
we have replaced the phrase ``remediation measures'' with ``measures''
since appropriate measures may involve activities other than
remediation.
One commenter agreed that the performance standards may need to be
revised, but only if performance and conditions at the compensatory
mitigation project site warrant revision of the objectives. Another
commenter stated that Sec. 332.7(c)(3) [Sec. 230.97(c)(3)] of the
proposed rule should be modified to clarify that performance standards
will not be lowered simply because the compensatory mitigation project
has not been able to meet those standards.
The last sentence of Sec. 332.7(c)(2) [Sec. 230.97(c)(2)] states
that district engineers will consider whether compensatory mitigation
projects are providing comparable ecological benefits to the original
objectives, when determining whether it is necessary to require
adaptive management. This will not result in a lowering of performance
standards. Alternative compensatory mitigation may be required to
offset a shortfall in aquatic resource functions. District engineers
will also consider whether the compensatory mitigation project is
providing ecological benefits that are comparable or superior to the
approved compensatory mitigation project (see Sec. 332.7(c)(4) [Sec.
230.97(c)(4)]).
Several commenters agreed with statements in the preamble of the
proposed rule indicating that district engineers will not require
additional monitoring or corrective actions for compensatory mitigation
projects that have not developed as intended due to natural
catastrophes. A number of commenters suggested that flooding issues
should be further explained in the final rule, or references to those
issues eliminated. Several commenters said that the final rule should
avoid creating a loophole in those cases where diseased vegetation
results from poor stock or contractor error, and not a natural
catastrophe. A few commenters recognized that, at certain stages of
restoration projects, those activities may not be able to withstand a
natural disaster; in such cases the district engineer should have
discretion to extend deadlines for completion. One commenter stated
that the discussion of natural disasters should be part of the adaptive
management plan. Another commenter asked for guidance on using
financial assurances to address damage caused by a natural disaster.
In Sec. 332.7(c)(4) [Sec. 230.97(c)(4)], we address adaptive
management as it relates to natural disasters. Except in the case of
natural disasters, this rule does not allow revisions to performance
standards unless they reflect ecological benefits that are comparable
or superior to the originally approved objectives. If a natural
disaster causes deficiencies in a compensatory mitigation project, the
district engineer will evaluate the circumstances and determine whether
it would be appropriate and practicable to require measures to address
those deficiencies. Additional monitoring may be required to assess how
a compensatory mitigation project is responding to a natural disaster.
District engineers will determine on a case-by-case basis whether flood
events warrant taking action to repair compensatory mitigation
projects. In cases where diseased plant stock may have been used at a
compensatory mitigation project site, it may be appropriate either to
require replanting, or to allow natural revegetation. It is appropriate
for adaptive management plans to consider potential natural disasters
that may occur, to the extent that they can be reasonably foreseen.
Financial assurances may be used to provide alternative compensatory
mitigation if the compensatory mitigation project fails as a result of
a natural disaster that occurs before the monitoring period has ended.
(d) Long-term management. One commenter suggested that Sec.
332.7(d) [Sec. 230.97(d)] conflicts with Sec. 332.7(b) [Sec.
230.97(b)], which states that compensatory mitigation projects should
be designed to be self-sustaining. Many commenters supported the
proposed requirement to identify the party responsible for the long-
term management of the compensatory mitigation project site. Several
commenters agreed that the mitigation bank sponsor should maintain
management responsibilities unless they are formally transferred to
another party. Several commenters stated that funding for the long-term
management of mitigated projects must be arranged prior to the issuance
of any permits.
Although compensatory mitigation projects should, to the extent it
is practicable to do so, be self-sustaining, active long-term
management and maintenance are often necessary for a compensatory
mitigation project to fulfill its objectives. In such cases, provisions
for long-term management need to be provided as permit conditions or as
stipulations in a mitigation banking or in-lieu fee program instrument.
Such permit conditions or instrument stipulations should identify the
party responsible for long-term management, and if another party agrees
to assume that responsibility at a later date, the permit or instrument
can be modified by the district engineer to transfer that
responsibility. For permittee-responsible mitigation, Sec. 332.7(d)(4)
[Sec. 230.97(d)(4)] has been added to require approval of any required
long-term financing mechanisms before the permitted impacts occur.
We have added Sec. 332.7(d)(2) [Sec. 230.97(d)(2)], which states
that a long-term management plan should include a description of long-
term management needs for the compensatory mitigation project and
annual cost estimates for those needs, and identify the funding
mechanism that will support the long-term management activities. In
Sec. 332.7(d)(3) [Sec. 230.97(d)(3)], which was Sec. 332.7(d)(2)
[Sec. 230.97(d)(2)] of the proposed rule, we have added a sentence to
allow the district engineer to impose, where appropriate, provisions to
address inflationary adjustments and other contingencies.
One commenter supported the requirement for a long-term management
plan that identifies the responsible entity and addresses ``long-term
funding mechanisms'' as specified in the proposed Sec. 332.4(c)(11)
[Sec. 230.94(c)(11)], but believed that this requirement conflicts
with the proposed Sec. 332.3(n)(3) [Sec. 230.93(n)(3)], which states
that financial assurances would be phased out once performance
standards have been met. Instead, this commenter suggests that the rule
be clarified by describing the two required types of financial
assurances: (1) Financial assurances for the construction and
establishment of the compensatory mitigation project, which would be
phased out incrementally as performance standards are met, and (2)
funding for long-term management of the compensatory mitigation
project. Several commenters said that the rule should more explicitly
recognize that funding of long-term management can be ``phased-out'' or
reduced over time.
In this rule, financial assurances are used to provide a high level
of confidence that compensatory mitigation projects will be completed,
whereas long-term management measures are used to help ensure the long-
term sustainability of compensatory mitigation projects. Funding for
financial assurances is handled differently than funding for long-term
management. The final rule clearly differentiates between financial
assurances for construction and establishment of compensatory
mitigation projects and funding
[[Page 19649]]
mechanisms for long-term management of those projects. In general,
funding for long-term management should not be phased out over time,
since those activities usually need to be conducted for substantial
periods of time. There may be occasions where long-term management is
no longer necessary because a compensatory mitigation project has
developed to the point where active management measures are no longer
needed to fulfill the objectives of that project. In such cases, the
responsible party should contact the district engineer and request that
the long-term management provisions be modified to release those
obligations.
Several commenters said that long-term management for compensatory
mitigation projects on public land should not be required, or at the
very least should be privately funded. Several commenters stated that
the proposed rule is ambiguous and could result in different standards
applying to compensatory mitigation sites on public lands versus
private lands because it allows district engineers flexibility in
determining requirements for long-term management on public lands on a
case-specific basis. One commenter said that adequate financing of
long-term stewardship of a compensatory mitigation site should be
demonstrated for the public or private authority accepting stewardship
responsibility, because this will ensure consistency of site
maintenance whether the responsible party is a private or public
entity.
In cases where compensatory mitigation project sites are owned by
public entities, it may not be necessary to include provisions for the
financing of any required long-term management if, for example, a
formal, documented commitment from a government agency is provided
(i.e., stewardship commitment). For public agencies, identifying
adequate financing at the time of permit issuance may be problematic
since agency funding can vary from year-to-year with budget cycles,
thus underscoring the need for a formal, documented commitment. In
cases of non-governmental organizations or private land managers
accepting responsibility for long-term management of compensatory
mitigation projects, including mitigation bank sites or in-lieu fee
project sites, it will be necessary for those entities to demonstrate
that there will be adequate funds available for the long-term
management activities. It is important to note that many public and
private land managers are no longer accepting the long-term stewardship
responsibilities of compensatory mitigation sites unless an endowment
or other source of long-term funding is provided by the permittee or
sponsor.
Although not included in the text of the proposed rule, in the
preamble we requested comments on including a provision that would
require that the arrangements for adequate capitalization of long-term
management funds be finalized prior to permit issuance. Several
commenters disagreed with adding such a provision. They said that
finalization of long-term management funds should not be required prior
to permit issuance because it is often difficult to locate and
establish a long-term management entity. These commenters also
indicated it may take substantial time to arrange adequate
capitalization of long-term management funds. However, several other
commenters said that capitalization should take place prior to the
permit issuance in order to ensure that compensatory mitigation project
sites will be maintained in the long-term. An alternative solution
offered by several commenters would be to require mitigation banks to
provide incremental long-term management funding as credits are
released. These commenters also suggested that an endowment fund be
created in order to aid in the establishment of mitigation banks.
We have added Sec. 332.7(d)(4) [Sec. 230.97(d)(4)] to require
approval of any required long-term financing mechanisms before the
activity authorized by the DA permit is initiated. This does not mean
that the long-term management measures need to be established and fully
funded, but they do need to be described and approved. This provision
applies to permittee-responsible mitigation projects. For third-party
mitigation, provisions necessary for long-term management must be
addressed in the instrument (see Sec. 332.7(d)(3) [Sec.
230.97(d)(3)]). For mitigation banks and in-lieu fee programs, long-
term management is also addressed in Sec. 332.8(u) [Sec. 230.98(u)].
For in-lieu fee programs, costs per unit credit are explicitly required
to take into account long-term management and protection of in-lieu fee
project sites (see Sec. 332.8(o)(5)(ii) [Sec. 230.98(o)(5)(ii)]). For
banks, this will be taken care of by market pricing of credits, since
the bank sponsor is responsible for long-term management and must
ensure that revenues are adequate to cover this responsibility.
In cases where long-term financing for long-term management of
compensatory mitigation projects is necessary, district engineers
should consider the need to make inflationary adjustments and certain
financial assumptions. For example, district engineers may consider
total return assumptions and capitalization rates in the case of
endowments, or Consumer Price Index adjustments in the case of annual
payments.
33 CFR 332.8 and 40 CFR 230.98 Mitigation Banks and In-Lieu Fee
Programs
(a) General considerations. Four commenters supported the provision
in the proposed rule that stipulates mitigation banks can be sited on
public or private land. There were several commenters, however, who
opposed locating mitigation banks on public land. One commenter stated
that public lands are to be protected, held in public trust, and
managed for their natural resources, ecosystem services, and the
recreational and aesthetic values. This commenter said that when
private lands are impacted and those impacts are mitigated on public
lands, the public gains nothing and more natural habitat is lost.
Commenters also stated that it is not appropriate for private
developers to profit from compensatory mitigation projects conducted on
lands purchased with public funds. One commenter said that, given the
current demands for management on public lands, that use of public
lands cannot be adequately controlled to assure long-term success of
the mitigation bank. Four commenters noted that the statement that
credits are based solely on aquatic resource functions may be
interpreted as limiting credits to only those activities in wetlands
and other aquatic resources, and not activities in uplands that support
and enhance those functions.
We have moved Sec. 332.8(a)(2) [Sec. 230.98(a)(2)] of the
proposed rule to Sec. 332.3(a)(3) [Sec. 230.93(a)(3)], since the
principles in this paragraph should apply to all compensatory
mitigation projects, including permittee-responsible mitigation. Public
entities should be allowed to establish mitigation banks or in-lieu fee
projects on their lands. Public entities are often prospective
permittees who may need to provide compensatory mitigation for their
projects. As long as mitigation banks or in-lieu fee projects
established on public lands provide environmental benefits over and
above what normal management activities provide, there should be no
conflict. Credits secured by private developers can provide a source of
income for public entities to conduct aquatic resource restoration,
establishment, enhancement, and/or preservation activities that could
not be done under their current budgets. Credits provided by mitigation
banks and in-lieu fee projects include
[[Page 19650]]
environmental benefits resulting from riparian areas, buffers, and
uplands (see Sec. 332.8(o)(7) [Sec. 230.98(o)(7)]).
Several commenters said that mitigation bank site selection should
be tied to watershed analyses, and should, to the extent possible,
dovetail with existing regional watershed plans, many of which identify
or prioritize regional restoration needs. One commenter noted that the
mitigation bank approval process does not require a watershed
assessment, and said that such an assessment is essential for
determining the ecological functions that the mitigation bank is likely
to achieve.
The selection of mitigation bank sites should, to the extent
practicable, follow a watershed approach. As stated in Sec.
332.8(b)(3) [Sec. 230.98(b)(3)], the district engineer and the IRT are
to use a watershed approach when evaluating proposed mitigation banks
and in-lieu fee programs. For in-lieu fee programs, the required
compensation planning framework must support a watershed approach to
compensatory mitigation (see Sec. 332.8(c)(1) [Sec. 230.98(c)(1)]).
We have modified Sec. 332.8(a) [Sec. 230.98(a)] by adding in-lieu
fee programs, since Sec. 332.8 [Sec. 230.98] contains regulations
governing both forms of third-party mitigation: mitigation banks and
in-lieu fee programs. We have divided Sec. 332.8(a)(1) [Sec.
230.98(a)(1) of the proposed rule into two paragraphs. Section
332.8(a)(1) [Sec. 230.98(a)(1)] states that all mitigation banks and
in-lieu fee programs must have an approved instrument signed by the
sponsor and the district engineer before being used to provide
compensatory mitigation for DA permits. This provision facilitates
compliance with terms of a mitigation banking instrument or an in-lieu
fee program instrument. So called ``ad hoc'' third-party mitigation
providers cannot operate as banks or in-lieu fee programs without an
approved instrument. While a permittee-responsible mitigation project
is free to use a third party to provide some or all of the design,
construction and management services required for project
implementation, liability for project success cannot be transferred to
a third party except where there is an approved instrument. Section
332.8(a)(2) [Sec. 230.98(a)(2)] stipulates that mitigation bank sites
and in-lieu fee project sites must be planned and designed to be self-
sustaining, but may also require some active management to ensure their
long-term viability and sustainability.
(b) Interagency Review Team. Three commenters supported the
establishment of the Interagency Review Team (IRT). Several commenters,
however, stated that the IRT impedes the process. Those commenters
recommended streamlining the review process by eliminating the IRT and
using public notices instead. One commenter said that it is unclear
whether an IRT is a standing committee or whether a new one is formed
for each mitigation bank proposal. One commenter asked who will fund
IRT activities. Several commenters asked for clarification on the role
of the IRT. One commenter said that the team should retain the name
``mitigation bank review team.''
The participation of the IRT is necessary to provide expertise and
advice to district engineers who are evaluating third-party mitigation
proposals from potential mitigation bank sponsors and in-lieu fee
program sponsors. Because of our experience with the 1995 mitigation
banking guidance, we believe that the IRT review process is more
effective than a simple public notice process for determining the
potential success and usefulness of a proposed mitigation bank. With
this rule, we are extending the IRT review process to all in-lieu fee
programs, with the hope of achieving the same benefits.
District engineers have the flexibility to establish standing IRTs
in their geographic areas of responsibility, or to establish a new IRT
for each proposed mitigation bank or in-lieu fee program. Participation
in an IRT will be funded through that agency's budget. Since the IRT
concept will be used for both mitigation banks and in-lieu fee
programs, we are retaining ``interagency review team.''
Many commenters stated that state, local, or tribal entities should
be included in the IRT. Some commenters also recommended that the IRT
have a state co-chair whenever the mitigation bank is being implemented
under both state and federal mitigation banking programs, rather than
allowing the district engineer discretion to make that determination.
Some commenters said that the proposed rule diminishes the advisory
role of state and federal resource agencies. Many commenters stressed
the need for collaboration with state and local agency personnel. One
commenter stated that the rule must establish strong, uniform standards
so as not to undermine states that currently employ more stringent and
protective mitigation standards for aquatic resources. This commenter
also said that the rule should prompt those states with weak programs
to raise their standards, and to ensure that state and local agencies
have a more equal role with their federal counterparts.
Representatives of the U.S. EPA, National Marine Fisheries Service,
and U.S. Fish and Wildlife Service will automatically be included on
the IRT if they choose to participate. Beyond this, the district
engineer determines the composition of the IRT. Section 332.8(b)(2)
[Sec. 230.98(b)(2)] states that the district engineer will seek to
include in the IRT all public agencies with a substantive interest in
the establishment of a mitigation bank or in-lieu fee program. This
includes state, local, or tribal entities. As stated in Sec.
332.8(b)(1) [Sec. 230.98(b)(1)], other federal, tribal, state, or
local agencies may serve as co-chairs of an IRT, if the mitigation bank
or in-lieu fee program will also be used to satisfy their requirements.
Since this rule is focused on compensatory mitigation for DA permits,
we believe it is appropriate for the district engineer to be the
primary authority to administer these regulations. There are states
that have developed their own regulations governing mitigation banks or
in-lieu fee programs. This rule merely addresses the federal concerns
regarding compensatory mitigation required by DA permits under section
404 of the Clean Water Act and/or sections 9 and 10 of the Rivers and
Harbors Act of 1899. Therefore, it reflects the decision-making
responsibilities of the U.S. Army Corps of Engineers. It does not
affect state or local government aquatic resource regulatory programs.
State or local governments can issue their own regulations governing
compensatory mitigation required under their environmental statutes or
regulations.
A number of commenters recommended that the district engineer
exercise the ultimate authority for approvals granted under this rule
following due consideration of the IRT recommendations. However,
several commenters said that decisions should not rest solely with
district engineers. Numerous respondents requested the elimination of
the requirement in the rule that the resource agencies be signatories
to the mitigation banking document. One commenter said that the rule
should be expanded to accommodate additional review processes.
As stated in Sec. 332.8(b)(4) [Sec. 230.98(b)(4)], the district
engineer retains the final authority for approving mitigation banking
instruments or in-lieu fee program instruments, since these third-party
mitigation sources will be used to satisfy compensatory mitigation
requirements for DA permits. If there is a co-chair, that co-chair will
decide whether the proposed mitigation bank or in-lieu fee program can
be used to provide compensatory mitigation
[[Page 19651]]
under the other federal, tribal, state, or local program. We believe
that allowing IRT members to sign mitigation banking instruments or in-
lieu fee program instruments is beneficial, and helps demonstrate their
support of approved instruments; however, under today's rule they are
not required to do so and the district engineer may approve an
instrument regardless of whether or not other IRT member agencies sign
it. In Sec. 332.8(b)(3) [Sec. 230.98(b)(3)] we have added a sentence
that allows IRT members the option of submitting letters of
concurrence, instead of signing an instrument. We do not agree that
this rule should be expanded to other review processes. This rule was
promulgated in response to the congressional mandate in section 314 of
the National Defense Authorization Act for Fiscal Year 2004, which only
directed the development of standards and criteria for compensatory
mitigation for CWA section 404 permits. For program efficiency, we have
included requirements for RHA section 9 and 10 permits as well, but we
do not believe it is efficient or appropriate to cover review processes
for requirements under other statutes in these regulations.
Since the final rule contains in-lieu fee programs, in Sec.
332.8(b)(3) [Sec. 230.98(b)(3)] we have modified the second sentence
to clarify that the IRT will review the prospectus, instrument, and
other appropriate documents and provide comments to the district
engineer. Examples of ``other appropriate documents'' include
mitigation plans for mitigation banks and in-lieu fee project sites, as
well as monitoring reports, proposed adaptive management measures, and
documents supporting proposed credit releases. Also included are the
compensation planning frameworks required of all in-lieu fee programs,
which are included as part of their instruments. At the end of Sec.
332.8(b)(3) [Sec. 230.98(b)(3)], we have added two sentences. One
sentence stipulates that comments from IRT members must be received
within specified time limits, to ensure timely processing of
instruments. The other sentence states that IRT comments received after
specified deadlines will only be considered at the discretion of the
district engineer to the extent doing so does not jeopardize the
deadlines for the district engineer's actions.
We have also added Sec. 332.8(b)(5) [Sec. 230.98(b)(5)], which
allows district engineers and IRT members to enter into memoranda of
agreement with other agencies to perform some or all of the IRT
functions described in Sec. 332.8 [Sec. 230.98]. This may be
particularly appropriate in states with robust programmatic general
permits for the section 404 program. However, the district engineer
retains sole authority for approving instruments and other
documentation.
(c) Compensation planning framework for in-lieu fee programs. We
have added this section to the final rule to provide a level of
watershed planning for in-lieu fee programs that goes beyond the
watershed planning typically conducted by mitigation banks. The
compensation planning framework is also intended to help reduce some of
the risk and uncertainty surrounding in-lieu fee programs, since those
programs will be able to sell a limited number of credits before
selecting and implementing compensatory mitigation projects. The
compensation planning framework will be used to select, secure, and
implement aquatic resource restoration, establishment, enhancement,
and/or preservation activities.
In the proposed rule, the agencies proposed to phase out the use of
in-lieu fee programs within 5 years. We also asked for comment on this
provision, and asked that commenters who supported continued
authorization of in-lieu fee programs as third-party mitigation
providers explain their rationale for allowing two different types of
providers (banks and in-lieu fee programs) to operate under different
requirements. We also asked for comment on how to ensure that in-lieu
fee programs achieve the same level of success and certainty in
providing compensation for permitted impacts as mitigation banks. One
response we received to this request was that many in-lieu fee programs
conduct more extensive and intensive watershed-based resource planning
prior to securing sites and developing mitigation plans for specific
projects. These commenters argued that in-lieu fee programs were better
positioned to identify and provide resources that best meet the needs
of the watershed, even when these resources are not the ``easiest'' to
provide, or appropriate sites are more expensive or difficult to
secure. The agencies have determined that this may be a legitimate
advantage of in-lieu fee programs, and this consideration was part of
the basis for our determination to allow continued authorization of in-
lieu programs in this final rule. To ensure that this benefit is
realized, we have formalized this comprehensive planning process in the
requirement for in-lieu fee programs to include a compensation planning
framework in their instrument.
The compensation planning framework will include the following
information: One or more geographic service areas; a general
description of the threats to aquatic resources in the service area(s),
including how the in-lieu fee program would help offset impacts
resulting from those threats; an analysis of historic aquatic resource
loss in the service area(s); an analysis of current aquatic resource
conditions in the service area(s), supported by an appropriate level of
field documentation; a statement of aquatic resource goals and
objectives for each service area, including general amounts, types, and
locations of aquatic resources the proposed in-lieu fee program will
seek to provide; a prioritization strategy for selecting and
implementing compensatory mitigation activities; an explanation of any
preservation objectives, including how those preservation activities
would satisfy the criteria at Sec. 332.3(h); a description of any
public or private stakeholder involvement in the development of the
framework; a description of the long-term protection and management
strategies for activities; a strategy for periodic evaluation and
reporting on the in-lieu fee program's progress in achieving its goals
and objectives; and other information determined by the district
engineer to be necessary for effective compensation planning by in-lieu
fee programs.
The level of detail necessary for the compensation planning
framework is at the discretion of the district engineer, and will take
into account the characteristics of the service area(s) and the scope
of the in-lieu fee program. Once the planning framework is approved as
part of the in-lieu fee program instrument, all specific mitigation
projects developed by the in-lieu fee program to provide compensation
for DA permits must be consistent with it. Any modification to the
framework must be approved as a significant modification to the
instrument by the district engineer, after consultation with the IRT.
(d)(1) Review process. Many commenters supported the proposed
timeframes for the review of mitigation banking instruments. Several
commenters said that the time frames should be shorter. Several
commenters stated that the proposed time frames are inadequate to allow
all agencies time to receive, review, and comment on proposed
mitigation banks. One commenter stated that setting unrealistic
deadlines will only serve to weaken the process and discourage any
substantive review of third-party mitigation proposals. Some commenters
expressed concern that the proposed time frames may be unachievable due
to
[[Page 19652]]
the workloads of the Corps and the IRT. Several commenters said that
the IRT process would result in delays in implementation and increased
costs for mitigation banks, as well as increased risk of failure or
environmental deterioration of mitigation bank sites resulting from
time-consuming modifications of instruments. Two commenters stated that
the Corps should place deadlines on its own actions, such as
establishing a time frame for a district engineer to approve or deny a
final mitigation banking instrument.
In response to comments, we have modified a number of time frames
in the final rule to provide sufficient time to complete specific
tasks. For instance, we have changed Sec. 332.8(d)(8) [Sec.
230.98(d)(8)] to increase, from 15 days to 30 days, the period by which
the district engineer must notify the IRT whether or not he intends to
approve the instrument or amendment. We have also added time frames to
certain provisions to make the review process more effective. For
example, we have added a requirement for a district engineer to notify
the sponsor within 30 days whether a draft instrument or amendment is
complete (see Sec. 332.8(d)(6)(i) [Sec. 230.98(d)(6)(i)]).
We believe that the time frames in the final rule will provide
efficiency to the review and approval process for third-party
mitigation, while taking into account the workload of the agencies. We
do not agree that these timeframes would adversely affect an agency's
ability to provide substantive comments. It is important to consider
the savings on time and resources that third-party mitigation can
provide in comparison to permittee-responsible mitigation, where
individual mitigation plans must be reviewed and approved in accordance
with the regulations in this part. We also believe that the time frames
provided in this rule will result in fewer delays for mitigation banks
and in-lieu fee programs, since the 1995 mitigation banking guidance
and the 2000 in-lieu fee guidance did not establish time frames for
review and approval. The reduced delays, as well as the required time
frames for project implementation, will help protect the environment
through timely implementation of compensatory mitigation projects. This
rule imposes appropriate time frames for the Corps to complete its
decisions, to ensure timely responses to requests to approve third-
party mitigation instruments or amendments to previously approved
instruments.
Several commenters recommended that the rule provide flexibility
for Corps districts to take advantage of state procedures to the extent
practicable to make it easier for sponsors to go through the permit
process and to avoid unnecessary duplication of effort.
In areas where DA permits are needed to construct mitigation banks
or in-lieu fee projects, and programmatic general permits are available
to authorize such activities, district engineers are encouraged to use
those programmatic general permits to provide the required
authorization. District engineers have the discretion to determine that
use of programmatic general permits may not be appropriate for
authorizing the construction of mitigation banks, to ensure adequate
coordination of instrument approval and any required DA authorization.
District engineers are also free to enter into MOAs with state agencies
administering programmatic general permits to perform some or all of
the review functions associated with mitigation bank and in-lieu fee
program approval; however, the district engineer retains the final
responsibility and authority for ensuring that the requirements of the
CWA and this part are met.
One commenter noted that the proposed rule does not require that
permits be issued or denied within a fixed amount of time and
mitigation banks should not categorically be accorded a higher priority
than permit decisions.
The procedures for issuing DA permits are provided at 33 CFR part
325, and are outside the scope of today's rule. The regulations
governing the timing for processing DA permit applications are provided
at 33 CFR 325.2(d).
Since the final rule includes in-lieu fee programs as a source of
compensatory mitigation for DA permits, we have revised Sec.
332.8(d)(1) [Sec. 230.98(d)(1)] to include in-lieu fee programs. Since
in-lieu fee programs usually cannot secure compensatory mitigation
project sites until a period of time after the in-lieu fee program
instrument is approved and the in-lieu fee program becomes operational,
we have added a provision that stipulates that mitigation plans for in-
lieu fee project sites will be prepared as those sites are identified.
The sentence stating that a mitigation banking instrument must include
the mitigation plan by reference has been moved to Sec. 332.8(l)(2)
[Sec. 230.98(l)(2)] and modified to include in-lieu fee projects.
(d)(2) Prospectus. A number of commenters requested clarification
on the definition of what constitutes a ``complete'' prospectus, and
who determines whether a prospectus is complete. Other commenters
stated that the proposed time period of 15 days for the district
engineer to notify a potential sponsor whether the prospectus is
complete is too short. One commenter stated that the proposed rule may
force trained scientists to quickly become de facto financiers who are
expected to understand prospectus preparation.
We have modified Sec. 332.8(d)(2) [Sec. 230.98(d)(2)] to include
in-lieu fee programs. We have also modified this paragraph to clarify
that the review process for a proposed mitigation bank or in-lieu fee
program begins when the sponsor submits a complete prospectus to the
district engineer. We have changed the time period for the district
engineer to notify the sponsor whether the prospectus is complete to 30
days, to allow adequate time for this review to occur. An entity who
wants to develop a mitigation bank or in-lieu fee program must be able
to provide a complete prospectus. We believe that the requirements for
a complete prospectus constitute basic information that is necessary
for district engineers, IRT members, and the public to effectively
evaluate the potential for the proposed mitigation bank or in-lieu fee
program to provide successful and sustainable compensatory mitigation
projects. As with any business venture, knowledge in financial matters
is often a requisite for success.
For a proposed mitigation bank, a complete prospectus includes the
following information: The objectives of the proposed mitigation bank;
how the mitigation bank will be established and operated; the proposed
service area; the general need for and technical feasibility of the
proposed mitigation bank; the proposed ownership arrangements and long-
term management strategy for the mitigation bank; the qualifications of
the sponsor to successfully complete the type(s) of mitigation
project(s) proposed, including information describing any past such
activities by the sponsor; the ecological suitability of the site to
achieve the objectives of the proposed mitigation bank, including the
physical, chemical, and biological characteristics of the bank site and
how that site will support the planned types of aquatic resources and
functions; and assurance of sufficient water rights to support the
long-term sustainability of the mitigation bank.
For a proposed in-lieu fee program, a complete prospectus includes
the following information: The objectives of the proposed in-lieu fee
program; how the in-lieu fee program will be established and operated;
the proposed service area(s); the general need for and
[[Page 19653]]
technical feasibility of the proposed in-lieu fee program; the proposed
ownership arrangements and long-term management strategy for the in-
lieu fee project sites; the qualifications of the sponsor to
successfully complete the type(s) of mitigation project(s) proposed,
including information describing any past such activities by the
sponsor; the compensation planning framework; and a description of the
in-lieu fee program account.
To clarify that a sponsor does not need to submit a new prospectus
to request modification of an approved instrument, we have added a
sentence stating that the sponsor needs to submit a written request for
instrument modification, with appropriate documentation. What
constitutes appropriate documentation for an instrument modification is
at the discretion of the district engineer, and is dependent on the
type of modification.
(d)(3) Preliminary review of prospectus. A few commenters asked why
site visits are not mentioned within the preliminary review process.
A district engineer may conduct site visits as necessary to provide
feedback on a draft prospectus.
(d)(4) Public review and comment. Several commenters said that
issuing the public notice when a mitigation bank prospectus is received
is inefficient because the mitigation plan may only be preliminary. A
number of commenters agree with the proposed length of the public
comment period, others suggested extending it to 60 or 90 days. Some
commenters opposed any public comment period, contending that it will
complicate the process. On the other hand, several commenters said that
the public comment period is required by the National Environmental
Policy Act. Several commenters suggested that there be public notice
and comment for draft mitigation banking instruments.
The public notice is an important means of assisting district
engineers in making informed decisions on proposed mitigation banks and
in-lieu fee programs, as well as modifications of third-party
mitigation instruments. Comments submitted in response to a public
notice can help ensure that a proposed third-party mitigation operation
is in the public interest and complies with applicable laws and
regulations. We have modified Sec. 332.8(d)(4) [Sec. 230.98(d)(4)] to
specify that the public notice will be 30 days, unless the district
engineer determines that more time is necessary to solicit meaningful
comment. We do not believe it would be appropriate to have comment
periods of less than 30 days for third-party mitigation operations. We
have also added a sentence to this paragraph to require, for proposed
modifications of approved instruments, a public notice that includes a
summary of the proposed modification and any appropriate documentation.
We do not believe it is necessary to subject draft mitigation banking
instruments to a public notice and comment process, because these
documents are essentially contractual in nature. The principle aspects
of a proposed mitigation bank or in-lieu fee program that would benefit
from the public notice and comment process are covered by the
prospectus.
Several commenters said that there should be public notices
announcing final mitigation banking instruments. Some commenters asked
whether the resulting mitigation bank instrument and the alternatives
analysis will be available to the public. A number of commenters said
that the Corps must be required to make mitigation plans, instruments,
and monitoring reports easily accessible to resource agencies and the
public so that they may assist in holding permittees and banks
accountable for mitigation compliance.
District engineers may announce the approval of a mitigation
banking instrument or an in-lieu fee program instrument by issuing a
public notice. Approved third-party mitigation instruments are public
information that will be provided to interested parties upon request.
Alternatives analyses are not typically conducted for third-party
mitigation activities. If a permit is required to construct a
mitigation bank or in-lieu fee project, and an alternatives analysis
was required to issue that permit, then the documentation of the
alternatives analysis would be in the administrative record for the
permit action. The last sentence of Sec. 332.8(d)(8) [Sec.
230.98(d)(8)] states that final mitigation banking and in-lieu fee
program instruments must be made available to the public upon request.
(d)(5) Initial evaluation. We have added this provision to the
final rule, to allow district engineers to provide prospective third-
party mitigation sponsors with an initial evaluation of the potential
for the proposed mitigation bank or in-lieu fee program to provide
compensatory mitigation for DA permits. Initial evaluation letters will
be provided to sponsors within 30 days of the end of the public notice
comment period. A sponsor may either submit a draft instrument or
revise the prospectus, depending on the district engineer's initial
evaluation.
This provision will add efficiency to the review and approval
process, because potentially unsuitable proposals for third-party
mitigation will not proceed to draft instruments that are unlikely to
be approved. This initial evaluation allows for feedback from the
district engineer, so that a sponsor can revise the prospectus to
address any deficiencies. The initial evaluation process does not apply
to modifications of previously approved instruments.
(d)(6) Draft instrument. In Sec. 332.8(d)(6)(i) [Sec.
230.98(d)(6)(i)] we added a requirement that the district engineer
determine, within 30 days of receipt of a draft instrument, whether
that draft instrument is complete. If the draft instrument is
incomplete, the district engineer will notify the sponsor to request
the information necessary to make the draft instrument complete and
notify the sponsor as soon as he receives the additional information
and determines that the instrument is complete.
We also added a sentence to Sec. 332.8(d)(6)(i) [Sec.
230.98(d)(6)(i)], which states that in the case of an instrument
modification, the sponsor must prepare a draft amendment and submit it
to the district engineer. This clarifies that, for instrument
modifications, the sponsor is not required to submit a new draft
instrument. A draft amendment may consist of a specific instrument
provision or a new or modified mitigation plan.
In Sec. 332.8(d)(6)(i) [Sec. 230.98(d)(6)(i)], we also explained
the required content of draft mitigation banking or in-lieu fee program
instruments. For mitigation banks, a draft instrument must include: a
description of the proposed geographic service area of the mitigation
bank; accounting procedures; a provision stating that legal
responsibility for providing the compensatory mitigation lies with the
sponsor once a permittee secures credits from the sponsor; default and
closure provisions; reporting protocols; mitigation plans that include
all applicable items listed in Sec. 332.4(c)(2) through (14); a credit
release schedule; and any other information deemed necessary by the
district engineer.
For in-lieu fee programs, the draft instrument must include: A
description of the proposed geographic service area(s) of the in-lieu
fee program; accounting procedures; a provision stating that legal
responsibility for providing the compensatory mitigation lies with the
sponsor once a permittee secures credits from the sponsor; default and
closure provisions; reporting protocols; the compensation planning
framework; specification of the initial allocation of advance credits
and a draft fee schedule for these credits, by service area, including
an explanation of the
[[Page 19654]]
basis for the allocation and draft fee schedule; a methodology for
determining future project-specific credits and fees; a description of
the in-lieu fee program account required by Sec. 332.8(i); and any
other information deemed necessary by the district engineer.
Several commenters requested that the rule define ``service area''
more clearly. One commenter supported the increased flexibility in
defining the service areas that can be served by mitigation banks, but
another commenter said that the proposed definition is too restrictive.
A number of commenters stated that service areas should be determined
solely on the basis of its suitability to restore functions for
impacted resources within a watershed, without regard to whether there
are sufficient mitigation needs to support an economically viable bank.
A few commenters agreed with the proposed rule that economic viability
should be included in the determination of mitigation bank service
areas. One commenter said that the service areas of mitigation banks
should be based on watershed plans or, in the absence of a plan, the
service area should be limited to the area and types of wetlands for
which they can reasonably be expected to compensate functionally.
Several commenters supported the provision that the district engineer,
with input from the IRT, will determine a mitigation bank's service
area.
The criteria for establishing service areas for mitigation banks
and in-lieu fee programs is provided in Sec. 332.8(d)(6)(ii)(A) [Sec.
230.98(d)(6)(ii)(A)] of the final rule. The service area may be based
on watersheds, ecoregions, physiogeographic regions, or other types of
geographic area deemed appropriate by the district engineer, after
consulting with the IRT. The service area must be appropriately sized
to ensure that the aquatic resources provided will effectively
compensate for adverse environmental impacts across the entire service
area. In addition, the economic viability of the bank or in-lieu fee
program may also be considered in determining the size of the service
area. We believe it is necessary to allow economic factors to be taken
into account, so that the environmental benefits of third-party
mitigation discussed in Sec. Sec. 332.3(a) and (b) [Sec. Sec.
230.93(a) and (b)] can be realized. Banks will only be established if
the prospective sponsor believes that there will be enough business to
justify the initial investment of time and financial resources. And in-
lieu fee programs will only be successful if they can collect enough
fees to finance viable mitigation projects. We do not believe it is
practical to require watershed plans prior to establishing service
areas for mitigation banks. There are few watershed plans available
that would provide concrete information for establishing service areas
for mitigation banks. The Corps believes that ecologically-suitable
service area sizes can be established through the review processes
required for mitigation banks even in the absence of a formal watershed
plan, though district engineers must use a watershed approach in making
this determination to the extent practicable. As for in-lieu fee
programs, the compensation planning framework is itself a type of
watershed plan, specifically tailored to the types of information
needed to define an appropriate service area for the in-lieu fee
program and guide site and project selection within that area.
Several commenters stated that the size of the mitigation bank
service area specified in the proposed rule is too large. One commenter
said that a 6- or 8-digit HUC is too large to guide appropriate
ecological replacement of lost functions. Two commenters argued that
the size of a mitigation bank's service area should be based on the
local watershed area. Several other commenters, however, believed that
the service areas suggested in the proposed rule are too small. Some of
these commenters noted that certain states have over 50 (e.g., North
Dakota) or 100 (e.g., Alaska) 8-digit HUCs, and that developing a
mitigation bank for each HUC would be difficult. One commenter noted
that the size of a service area should be driven by environmental
factors, and that there should not be different sizes for urban areas
versus rural areas. Three commenters agreed that, as proposed in the
preamble, single-user mitigation banks (e.g., those sponsored by state
departments of transportation) should be given additional flexibility
for the size of the service area. Two commenters, however, disagreed
with this provision and argued that the size of the service area should
not be based on the characteristics of the bank sponsor.
In the final rule, we have retained the examples of service area
based on 8-or 6-digit hydrologic unit codes for urban and rural areas.
It is important to remember that these are examples, and that the
district engineer, in consultation with the IRT, will determine the
appropriate service area(s) for mitigation banks and in-lieu fee
programs. District engineers can take into account the sponsor's needs
and capabilities (as well as relevant statutory or regulatory
authorities if the sponsor is a government agency) when determining
service areas for a third-party mitigation operation.
Two commenters said that Sec. 332.8(c)(5)(iii) [Sec.
230.98(c)(5)(iii)] of the proposed rule is inconsistent with the
proposed Sec. 332.8(j) [Sec. 230.98(j)]. One commenter stated that
this provision should address that fact that most mitigation banks will
need to sell some initial credits to fund site acquisition and
construction associated with starting a new mitigation bank. Another
commenter suggested that the agencies provide a credit release schedule
template in the final rule.
The two provisions cited in the previous paragraph are not
inconsistent with each other. The provision concerning the credit
release schedule for a mitigation bank is at Sec. 332.8(d)(6)(iii)(B)
[Sec. 230.98(d)(6)(iii)(B)] of the final rule. This provision requires
the achievement of specific milestones for credit releases to occur.
The initial credit release (initial debiting) for mitigation banks
provided by Sec. 332.8(m) [Sec. 230.98(m)] of the final rule requires
achievement of appropriate milestones, such as approval of the
mitigation banking instrument mitigation plan, securing the mitigation
bank site, and establishing appropriate financial assurances. The
initial debiting allows the mitigation bank sponsor to obtain some
capital that will be used to fund subsequent operations at the
mitigation bank. We do not believe it would be appropriate to provide a
credit release schedule template in the final rule, because credit
release schedules are likely to vary from project to project.
Two commenters asked whether the requirement to include accounting
procedures in a mitigation banking instrument is linked to the ledger
account in Sec. 332.8(l)(1) [Sec. 230.98(l)(1)] of the proposed rule,
or to the financial assurance requirements of mitigation plans in
general.
The requirements for a ledger account are stipulated in Sec.
332.8(q)(1) [Sec. 230.98(q)(1)] of the final rule. Ledger reports are
required for both mitigation banks and in-lieu fee programs. The draft
instrument must describe the accounting procedures that will be used
for the mitigation bank or in-lieu fee program. Additional requirements
for mitigation bank or in-lieu fee program accounting procedures are
provided in Sec. 332.8(p) [Sec. 230.98(p)] of the final rule. In
Sec. 332.8(q)(3) [Sec. 230.98(q)(3)] of the final rule, we have added
a requirement for an annual report showing the activities for any
financial assurances accounts and long-term management funding
accounts.
[[Page 19655]]
One commenter said that the agencies should provide more guidance
on mitigation bank closure procedures.
Default and closure provisions for the mitigation bank or in-lieu
fee program must be described in the instrument (see Sec.
332.8(d)(ii)(D) [Sec. 230.98(d)(ii)(D)]). The instrument must also
describe the site protection and long-term management for the
mitigation bank. For umbrella mitigation bank sites or in-lieu fee
project sites, the site protection and long-term management will
normally be addressed in the approved mitigation plans. Specific
closure procedures for mitigation banks are at the discretion of the
district engineer.
(d)(7) IRT review. One commenter recommended that the IRT's review
of the draft prospectus and mitigation banking instrument be concurrent
with the Corps review to help streamline the approval process. One
commenter noted that the rule does not provide a funding mechanism for
Corps staff to spend more time in the review of mitigation banking
proposals. Several commenters suggested that the rule establish a
method earlier in the review process for rejecting poor mitigation
banking proposals. One commenter said that the rule should clarify that
the Corps has the authority to reject reviewing agency suggestions that
exceed the Corps' statutory authority, are insufficiently related to
the purposes of the mitigation bank, or are excessive in scope or
scale.
The preliminary review of a draft prospectus provided in Sec.
332.8(d)(3) [Sec. 230.98(d)(3)] will be conducted concurrently by the
Corps and the IRT. As for the review of draft instruments, we believe
it is more efficient for the district engineer to evaluate whether the
draft instrument is complete before providing copies to the IRT members
for their review. Funding for the Corps review of third-party
mitigation instruments will be provided through Regulatory Program
appropriations. We have added Sec. 332.8(d)(5) [Sec. 230.98(d)(5)] to
provide for an initial evaluation of proposed mitigation banks or in-
lieu fee programs, to allow early notification to sponsors of proposed
third-party mitigation operations that are unlikely to be acceptable
for providing compensatory mitigation for DA permits. As stated in
Sec. 332.8(b)(4) [Sec. 230.98(b)(4)], the district engineer will give
full consideration to any timely comments and advice provided by the
IRT, but the district engineer alone retains final authority for
approval of instruments for mitigation banks or in-lieu fee programs
used to provide compensatory mitigation for DA permits.
To facilitate IRT review of draft instruments or amendments, Sec.
332.8(d)(7) [Sec. 230.98(d)(7)] of the final rule states that the
sponsor must provide the district engineer with a sufficient number of
copies of those documents. The district engineer will promptly
distribute copies of those documents to the IRT members for a 30-day
comment period, which will begin five days later. The five day waiting
period will ensure that the IRT members will have a full 30 days to
review the draft instrument or amendment. This paragraph was also
changed, where appropriate, to include amendments of approved
instruments.
We have also modified this paragraph to make it clear that the
district engineer will seek to resolve concerns raised by IRT members
using a consensus based approach, to the extent practicable, but that
this cannot be allowed to jeopardize meeting the time frames in the
rule. The rule provides 90 days from the time the complete draft
instrument is distributed to IRT members for the district engineer to
notify the sponsor whether it is generally acceptable, and if so, what
changes are needed for the final instrument. Alternately, within this
same time frame (90 days), the district engineer must notify the
sponsor if there are significant unresolved concerns that may lead to
disapproval of the final instrument, or to a formal objection by one or
more IRT members. Use of a consensus-based approach does not alter the
responsibility of the district engineer to make a final determination
regarding the draft instrument within the specified time frames.
(d)(8) Final instrument. Many commenters supported the proposed
process for mitigation bank approval. Two commenters specifically
supported the provision that gives the district engineer the final
authority to approve a mitigation banking instrument. One commenter
said that the final rule should require the sponsor to address any
comments provided as a result of the IRT review process. One commenter
said that if the district engineer does not make a decision on a final
mitigation banking instrument as provided, the instrument should be
considered to be approved by default. Two commenters encouraged the
agencies to establish a process to appeal a district engineer's
decision not to approve a mitigation banking instrument.
We have modified this paragraph to require the sponsor to submit
supporting documentation with the final instrument. This supporting
documentation must explain how the final instrument addresses the
comments provided by the IRT. As stated in Sec. 332.8(a)(1) [Sec.
230.98(a)(1)], for a mitigation bank or in-lieu fee program to be able
to provide compensatory mitigation for DA permits, it must have an
instrument approved by the district engineer. Allowing approval by
default would be inappropriate as there would be no assurance that
compensatory mitigation provided by the bank or in-lieu fee program
would meet the requirements of the Clean Water Act and this part.
Therefore, this final rule does not include a default approval
provision. We do not believe it is necessary to establish an appeal
process for third-party mitigation instruments. District engineers have
the discretion to determine whether a proposed mitigation bank or in-
lieu fee program will be suitable for providing compensatory mitigation
for DA permits. When the district engineer disapproves an instrument,
he must provide comments to the sponsor indicating the deficiencies
that formed the basis for the disapproval. If a proposed mitigation
bank or in-lieu fee program is not approved, a prospective sponsor can
modify that proposal to correct these deficiencies and resubmit it for
consideration.
(e) Dispute resolution process. Three commenters supported the
dispute resolution process as outlined in the proposed rule. Two
commenters asserted that the dispute resolution process will slow
mitigation bank development. Two commenters said that resource agency
staff should be granted full involvement in decision-making over the
development of mitigation banking instruments, instead of elevating
their concerns over proposed instruments to headquarters. One commenter
recommended that each district develop a mitigation bank template in
coordination with federal and state agencies, and that the use of this
template will reduce the need to go through a dispute resolution
process. One commenter stated that the higher level review in this
process may only drive it farther away from any perceived watershed or
biologically-based approach.
We have modified Sec. 332.8(e) [Sec. 230.98(e)] to include
amendments of approved mitigation banking instruments and in-lieu fee
program instruments. We do not agree that the dispute resolution
process will slow the decision-making process for third-party
mitigation instruments. On the contrary, the dispute resolution process
will facilitate decision-making through the involvement of higher level
agency personnel. The decision to approve a mitigation bank or in-lieu
fee program to
[[Page 19656]]
provide compensatory mitigation for DA permits lies solely with the
district engineer. As explained in Sec. 332.8(b) [Sec. 230.98(b)],
the role of the IRT is to provide comments and advice on the
establishment and use of mitigation banks and in-lieu fee programs.
Although district engineers are encouraged to develop templates for
mitigation banking and in-lieu fee program instruments, the development
of such templates does not need to be addressed in this rule. The
dispute resolution process is not expected to conflict with a watershed
approach, since it is an administrative process intended to resolve
objections to proposed instruments.
One commenter said that the milestones and time frames established
in the proposed rule are adequate to move the process along, while
giving time for appropriate comment. One commenter expressed concern
that 15 days for the Interagency Review Team to initiate the dispute
resolution process is too short.
We have retained the time frames in the dispute resolution process.
We believe that 15 days is sufficient for a member agency of the IRT to
initiate the dispute resolution process. The IRT members will have
already thoroughly reviewed the draft instrument, and had the proposed
final instrument for 30 days before this 15-day time period begins. Any
remaining issues should already have been identified by that time and
evaluated to determine whether they warrant elevation to the agency's
headquarters. In Sec. 332.8(e)(3) [Sec. 230.98(e)(3)], we have added
electronic mail as an acceptable means for notifying district engineers
that an issue has been forwarded to Headquarters for review.
Two commenters recommended that the dispute resolution process
include procedures to address disputes when they are with a co-chair
from a tribal, state, or local program. One commenter said a mitigation
banking instrument should not be approved over the objections of the
state in which the mitigation bank is located. Another commenter
suggested that the rule should allow for coordination with states that
have separate appeals procedures.
This process is intended to resolve disputes that are within the
purview of the Corps to address. If there is a co-chair involved in the
approval process, and there is an IRT objection that is solely under
the authority of the tribal, state, or local co-chair to address, then
the co-chair should address those objections. The co-chair also has the
option of not approving the instrument, so that the mitigation bank or
in-lieu fee program cannot be used to provide compensatory mitigation
for tribal, state, or local authorizations. District engineers should
try to address state objections to proposed mitigation banks and in-
lieu fee programs, but final decisions must be based on federal
interests, including applicable federal laws, regulations, and
executive orders. State appeals procedures do not apply to federal
decisions regarding mitigation banks and in-lieu fee programs. A state
can choose not to approve a mitigation bank or in-lieu fee program to
provide compensatory mitigation for its authorizations.
(f) Extension of deadlines. One commenter said that deadlines
should be established for review and response, but that these deadlines
should have built-in flexibility for extenuating circumstances.
We have revised this paragraph to account for the potential issues
that may warrant allowing additional time to reach decisions on third-
party mitigation instruments. In Sec. 332.8(f)(1)(i) [Sec.
230.98(f)(1)(i)], we have added consultation under section 7 of the
Endangered Species Act or section 106 of the National Historic
Preservation Act as potential reasons for needing more time to process
mitigation banking or in-lieu fee program instrument proposals. We have
added Sec. 332.8(f)(1)(ii) [Sec. 230.98(f)(1)(ii)] to include
government-to-government consultation with Indian tribes, since it may
be necessary to conduct such consultation if a proposed mitigation bank
or in-lieu fee program may affect an Indian tribe's interests, such as
protected tribal resources, tribal rights, or Indian lands. In Sec.
332.8(f)(1)(ii) [Sec. 230.98(f)(1)(ii)], in-lieu fee programs and
proposed instrument modifications have been added to include these
actions as potentially needed deadline extensions.
(g) Modification of instruments. Two commenters stated that the
proposed mechanism for modifying mitigation banking instruments is a
fair and effective way of addressing the grandfathering of operational
mitigation banks. Another commenter suggested that the Corps establish
an administrative appeal process for mitigation banking instrument
modifications.
Since in-lieu fee programs have been added to this rule, we have
included the modification of in-lieu fee program instruments in Sec.
332.8(g) [Sec. 230.98(g)]. We do not believe it is necessary to
establish an administrative appeal process for modifications of third-
party mitigation instruments.
Several commenters supported the streamlined mitigation bank permit
modification process proposed in the rule. One commenter said that the
process will not sufficiently reduce permitting burdens and time frames
to justify elimination of in-lieu fee programs. One commenter believed
that the time frame for IRT review in this process is too long and has
the potential to delay decision-making for simple changes to an
instrument. One commenter requested that the agencies provide examples
of ``non-significant'' changes that would allow use of the streamlined
review process to modify an instrument.
We have retained in-lieu fee programs in this final rule, and the
streamlined review process for instrument modifications also applies to
certain actions pertaining to in-lieu fee programs. Examples of such
actions include adaptive management, credit releases, and changes in
credit release schedules. We believe that IRT review of proposed
instrument modifications is necessary, and that the time frames are
sufficient to ensure that substantive comments can be provided in a
timely manner. District engineers have the discretion to determine what
changes that are not listed in Sec. 332.8(g) [Sec. 230.98(g)] warrant
use of the streamlined review process. Examples might include minor
changes to a mitigation project plan that do not substantively change
the character of the project or its ability to provide appropriate
mitigation for DA permits. The addition and approval of umbrella
mitigation bank sites and in-lieu fee project sites, or the expansion
of previously approved mitigation bank or in-lieu fee project sites,
must be evaluated through the full instrument amendment process in
Sec. 332.8(d) [Sec. 230.98(d)].
(h) Umbrella mitigation banking instruments. Four commenters
supported development of umbrella mitigation banking instruments. One
commenter did not support the authorization of umbrella mitigation
banking instruments, because they usually cover sites that are in
different geographic locations and have different site conditions.
Several commenters suggested that the rule require the entity proposing
an umbrella agreement have at least one site in place, and limit credit
releases to sites that have been reviewed and permitted. Several
commenters opposed the provision in the rule that requires a major
modification to the instrument for additional umbrella mitigation bank
sites. These commenters said that this requirement will impede project
[[Page 19657]]
development schedules. One commenter stated that the sponsor of an
umbrella mitigation banking instrument should not be able to sell
credits until the site has been acquired, the mitigation plan approved,
and the financial assurances are in place.
In this paragraph, we have clarified that adding more mitigation
bank sites to an umbrella mitigation banking instrument requires
following the procedures at Sec. 332.8(g)(1) [Sec. 230.98(g)(1)] for
amending an approved instrument. In response to a proposal to add a new
site to an umbrella mitigation banking instrument, the district
engineer and the IRT will review the proposed mitigation plan. The
district engineer, in consultation with the IRT, will determine whether
the proposed site is acceptable for providing compensatory mitigation
for DA permits within the service area governed by that instrument. The
proposed rule, as well as the final rule, requires a mitigation bank
site to be included in the initial mitigation banking instrument. The
mitigation banking instrument becomes an umbrella instrument when
additional compensatory mitigation project sites are added (see Sec.
332.8(h) [Sec. 230.98(h)]). We have added a sentence to this paragraph
that requires credit withdrawal from umbrella mitigation bank sites to
be consistent with Sec. 332.8(m) [Sec. 230.98(m)]. In particular, any
additional projects must have an approved plan, a secured site, and
appropriate financial assurances in place before any credits can be
sold or transferred. After the initial credit release, further releases
are tied to achievement of milestones and performance standards in
accordance with an approved credit release schedule.
(i) In-lieu fee project account. We have added this provision to
require in-lieu fee program sponsors to establish program accounts at
financial institutions that are a member of the Federal Deposit
Insurance Corporation (FDIC). The purpose of the program account is to
ensure that the funds collected from permittees by the in-lieu fee
program sponsor are used within a reasonable time period to provide
compensatory mitigation for DA permits, instead of other activities.
Requiring the sponsor to establish the account with a member of the
FDIC is intended to protect those funds from being lost through
default. The interest and other earnings accruing to the account must
remain in the account, to fund in-lieu fee projects. The funds placed
into the in-lieu fee program account may only be used for the
selection, design, acquisition, implementation, and management of in-
lieu fee projects, with a small percentage being allowed for
administrative costs. The percentage that can be used for
administrative costs will be determined by the district engineer, in
consultation with the IRT. If the sponsor conducts activities, such as
educational programs, in addition to aquatic resource restoration,
establishment, enhancement, and/or preservation activities that are
used to provide compensatory mitigation for DA permits, the in-lieu fee
program account must be separate from the accounts that fund those
supplemental activities.
Section 332.8(i)(2) [Sec. 230.98(i)(2)] requires in-lieu fee
program sponsors to submit proposed in-lieu fee projects to the
district engineer for funding approval. Disbursements from the in-lieu
fee program account can only be made after the district engineer
provides written approval of a proposed in-lieu fee project. The
district engineer's decision will occur after consultation with the
IRT. The district engineer does not need to authorize each individual
disbursement from the account, but must provide written approval for
the project, based on a review of the project mitigation plan, which
will include a description of activities and projected costs. Once the
project is authorized, funds disbursed from the account must be spent
for the project in a manner consistent with the approved project
mitigation plan. The terms of the in-lieu fee program account must
specify that the district engineer has the authority to direct those
funds to alternative compensatory mitigation projects if the sponsor
does not provide the compensatory mitigation in accordance with
required time frames. As with financial assurances, the Corps lacks
statutory authority to accept directly, retain, and draw upon funds
that are in the in-lieu fee program account, because of the
requirements of the Miscellaneous Receipts Statute (31 U.S.C. 3302(b)).
Therefore, the terms of the in-lieu fee program instrument must be
carefully crafted to ensure that the district engineer can direct the
funds deposited in the in-lieu fee program account to be used for
providing compensatory mitigation for DA permits, without the Corps
directly accepting or disbursing the funds.
The in-lieu fee program sponsor is also required to provide annual
reports to the district engineer and the IRT regarding the in-lieu fee
program account (see Sec. 332.8(i)(3) [Sec. 230.98(i)(3)]). The
district engineer may audit the records for the in-lieu fee program
account, to ensure compliance with this rule.
(j) In-lieu fee project approval. We added Sec. 332.8(j) [Sec.
230.98(j)] to provide a process for the review and approval of in-lieu
fee projects. The mitigation plans for in-lieu fee projects must
include the information required by Sec. 332.4(c)(2) through (c)(14)
[Sec. 230.94(c)(2) through (c)(14)]. The mitigation plan must also
include a credit release schedule, which is similar to the credit
release schedule required for mitigation banks. The review and approval
of in-lieu fee projects will be conducted as instrument modifications
in accordance with the procedures at Sec. 332.8(g)(1) [Sec.
230.98(g)(1)]. In-lieu fee projects may be conducted by other parties
on behalf of the in-lieu fee program sponsor, but the project must
still be approved by the district engineer and the sponsor remains
responsible for compliance with the terms of the instrument and the
approved mitigation plan.
Section 332.8(j)(2) [Sec. 230.98(j)(2)] states that if a DA permit
is required for the in-lieu fee project, then the permit should not be
issued until the relevant provisions of the mitigation plan have been
substantively determined. This will help ensure that the special
conditions of the DA permit reflect the provisions of the mitigation
plan, including the ecological performance standards, site protection
mechanisms, and financial assurances.
(k) Coordination of mitigation banking instruments and DA permit
issuance. Two commenters supported the provision in the rule that
prohibits district engineers from issuing a permit authorizing the
construction of a mitigation bank until all relevant provisions of the
mitigation banking instrument have been substantively determined. One
commenter suggested that this provision be modified so that the section
404 permit process could be concurrent with the review of the
mitigation banking instrument. Another commenter said that delaying
construction of mitigation banks would exacerbate financial problems
that often occur shortly after the mitigation banking instrument is
approved.
We have revised this paragraph to include the development of new
compensatory mitigation project sites under an umbrella mitigation
banking instrument. We have also modified this paragraph to state that
the DA permit should not be issued until all relevant provisions of the
mitigation plan have been substantively determined, including the
ecological performance standards. District engineers are encouraged to
conduct the evaluation for a DA permit to construct a mitigation
[[Page 19658]]
bank concurrently with the review process for the mitigation banking
instrument. Delaying issuance of the DA permit until the content of the
mitigation plan has been determined should help reduce costs by
avoiding the need to modify the permit and its special conditions to
accurately reflect the approved mitigation plan.
(l) Project implementation. We added a new Sec. 332.8(l)(1) [Sec.
230.98(l)(1)] to clarify that a third-party mitigation sponsor must
have an approved instrument before collecting funds from permittees to
satisfy compensatory mitigation requirements for DA permits.
Section 332.8(l)(2) [Sec. 230.98(l)(2)] contains the text from the
proposed rule, and it has been modified to include in-lieu fee
programs. We have added Sec. 332.8(l)(3) [Sec. 230.98(l)(3)] to
stipulate that in-lieu fee program sponsors are responsible for the
implementation, long-term management, and any required remediation of
in-lieu fee projects, even in cases where those projects are conducted
by other parties through requests for proposals or other contracting
mechanisms.
(m) Credit withdrawal from mitigation banks. One commenter said
that the rule should make it clear that for initial debiting of a
percentage of the mitigation bank credits to occur, the mitigation bank
needs to be constructed within a short time frame. Another commenter
stated that if the rule allows mitigation banks to pre-sell credits
with appropriate financial securities in place, the mitigation banks
will be able to produce more environmental benefits. One commenter
recommended adding a provision to limit the number of credits provided
through establishment (creation) to no more than 25 percent of the
total credits that will be produced by the mitigation bank, because
establishment activities are less likely to succeed.
We have added a provision requiring initial implementation of the
approved mitigation plan no later than the first full growing season
after the date the first credit transaction occurs, to ensure timely
construction of the mitigation bank. A purpose of the initial debiting
is to provide a source of funds for conducting activities that support
the continued development of the mitigation bank. We do not believe it
would be appropriate to place a limit on the percentage of credits that
can be produced through aquatic resource establishment activities. Such
decisions should be made on a case by case basis by the district
engineer, after consulting with the IRT. Likelihood of success is one
of the factors that the district engineer and the IRT will consider in
making such decisions.
(n) Advance credits for in-lieu fee programs. We have added Sec.
332.8(n) [Sec. 230.98(n)] to provide an analogous standard to the
initial debiting for mitigation banks that is provided by Sec.
332.8(m) [Sec. 230.98(m)]. The limitations in Sec. 332.8(n) [Sec.
230.98(n)] are also intended to reduce risk and uncertainty for in-lieu
fee programs and to ensure timely implementation of in-lieu fee
projects. The goal of the requirements in this paragraph is not to
place an arbitrary limit on the availability of advance credits within
a service area, but rather to ensure that in-lieu fee programs do not
sell more advance credits than they can reasonably deliver in the time
frame specified in Sec. 332.8(n)(4) [Sec. 230.98(n)(4)], generally 3
years.
This does not mean that the number of advance credits will
necessarily be small. The number of advance credits authorized for an
in-lieu fee program will be limited by service area, and specified in
the in-lieu fee program instrument. District engineers will determine
the number of advance credits allowed per service area, after
consulting with the IRT in accordance with the procedures in Sec.
332.8(d) [Sec. 230.98(d)]. The number of advance credits will be based
on an evaluation of the compensation planning framework; the sponsor's
past performance for implementing aquatic resource restoration,
establishment, enhancement, and/or preservation activities in the
proposed service area or other areas; and the projected financing
necessary to begin planning and implementation of in-lieu fee projects.
For example, in service areas with larger numbers of permitted impacts,
and where a sponsor with demonstrated past successes is likely to
produce a substantial amount of compensatory mitigation within the time
frame specified in Sec. 332.8(n)(4) [Sec. 230.98(n)(4)], district
engineers can authorize a higher number of advance credits. As another
example, if an in-lieu fee program is being established by a sponsor
that does not have a history of successfully implementing aquatic
resource restoration, establishment, enhancement, and/or preservation
projects, the district engineer may authorize a smaller number of
advance credits to address potential risks. If an in-lieu fee program
sells all of its advance credits and it appears likely that it can
fulfill a higher number of advance credits within the required time
frame, it may apply for an instrument modification to increase the
number of available advance credits.
Section 332.8(n)(2) [Sec. 230.98(n)(2)] allows the district
engineer to require the sponsor to provide confidential supporting
information to determine an appropriate limit for advance credits. Such
confidential supporting information may include locations of potential
in-lieu fee project sites that have been identified by the sponsor. It
may be necessary to keep this information confidential to lessen the
risk of land speculation activities that could drive up the price of
prospective in-lieu fee project sites before the sponsor can collect
sufficient fees to secure those sites.
Each approved in-lieu fee project will have an approved mitigation
plan, with a credit release schedule. As in-lieu fee projects are
implemented by the in-lieu fee sponsor in accordance with approved
mitigation plans, credits will be released as milestones in the credit
release schedule are achieved. As released credits are produced, these
must first be used to fulfill any advance credits that have been sold
in the service area, after which any remaining released credits may
also be sold. Once advance credits are fulfilled, an equivalent number
of new advance credits will become available, which the sponsor may
sell as advance credits. Therefore, the advance credit account is a
rolling account, and when released credits are produced and previously
sold advance credits are fulfilled, the advance credit account will
have new advance credits available for sale, but not more than the
advance credit limit specified in the instrument (see Sec. 332.8(n)(3)
[Sec. 230.98(n)(3)]).
Within a particular service area, Sec. 332.8(n)(4) [Sec.
230.98(n)(4)] requires in-lieu fee program sponsors to secure in-lieu
fee project sites and conduct the initial physical and biological
improvements (e.g., grading and planting) by the third full growing
season after the first advance credit for that service area is secured
by a permittee. District engineers have the discretion to allow more
time to plan and initiate in-lieu fee projects. An example of where
this discretion may be appropriate would be a service area where credit
demand is lower than expected, and the in-lieu fee program has not been
able to collect enough funds to secure an in-lieu fee project site and
plan and implement the compensatory mitigation project within the three
growing season time period. The district engineer also has the
discretion to direct the sponsor to use the funds in the in-lieu fee
program account required by Sec. 332.8(i) [Sec. 230.98(i)] to provide
alternative compensatory mitigation to fulfill the
[[Page 19659]]
obligations created through the sale or transfer of advance credits. In
rare circumstances, the district engineer may allow an in-lieu fee
program to fulfill advance credits sold in one service area with
released credits from a different service area. This should only occur
in situations where the number of unfulfilled advance credits is small,
the prospects for collecting more fees in the service area are poor,
and the district engineer determines that fulfilling the advance
credits in another service area will provide adequate compensation for
the previously authorized impacts represented by the advance credits.
This may happen in the case of state-wide in-lieu fee programs that
have some remote service areas with very small numbers of authorized
impacts.
We have added Sec. 332.8(n)(5) [Sec. 230.98(n)(5)] to address
compliance with in-lieu fee program instruments. District engineers
will review the operations of approved in-lieu fee programs, to assess
their performance. If an in-lieu fee program is not complying with the
terms of its instrument, the district engineer may suspend credit sales
or take other appropriate action until the sponsor complies with the
terms of the instrument. This paragraph also makes it clear that
permittees who secure credits from in-lieu fee programs are not
responsible for in-lieu fee program compliance.
(o) Determining credits. (1) Units of measure. Several commenters
said that credits should not be expressed as acres or linear feet,
because those units do not adequately account for functions and values.
Several commenters suggested that the agencies revise this section to
relate back to the functional approach provided by the definition of
``credit'' in Sec. 332.2 [Sec. 230.92]. Two commenters recommended
that the agencies develop appropriate means for quantifying debits for
stream impacts and compensatory mitigation credits for stream
mitigation. One commenter suggested that the rule establish specific
alternative quantitative measures other than acres or stream length
units, and provide methods for tracking each of the wetland functions
and values that result in credits or debits. Another commenter said
that all mitigation bank credit transactions should be based on the
accrual of functions, not on areal measures. One commenter stated that
all functional assessment studies should be standardized within a
watershed, and preferably across regions, districts, or states.
It is not always possible to quantify credits by functional or
condition assessments, so there is a need to use other metrics, such as
acres or linear feet. The requirements in Sec. 332.8(o) [Sec.
230.98(o)] are consistent with the definition of credit in Sec. 332.2
[Sec. 230.92]. We have modified Sec. 332.8(o)(1) [Sec. 230.98(o)(1)]
to include ``other suitable metrics'' as potential units for
quantifying credits or debits. Appropriate units for quantifying
credits and debits will be determined by district engineers on a case-
by-case basis. District engineers are encouraged to use science-based
assessment methods for determining aquatic habitat condition, such as
the index of biological integrity, where practicable. District
engineers and other entities, such as scientists, may develop
assessment methods for stream impacts and compensatory mitigation that
could be used to quantify debits and credits. Stream assessment methods
are likely to vary by geographic region, and may be developed locally.
The development of an automated information system to track specific
aquatic resource functions that are lost as a result of permitted
activities, or are produced by compensatory mitigation projects, is
outside the scope of this rule, however the Corps is working to improve
its tracking of permitted impacts and compensatory mitigation. In many
areas of the country, and for certain types of wetlands, there may not
be functional or condition assessment methods available, so other
measures such as acres, may need to be used to quantify credits and
debits. We do not agree that functional assessment methods should be
standardized within watershed, districts, or states. Functional
assessment methods will vary among resource type, and sometimes by
regional categories, such as ecoregion or physiographic region.
(o)(2) Assessment. Several commenters supported the use of
functional assessments to determine credits. One commenter recommended
that functional assessments should be required for all mitigation
banks. Another commenter said that functional assessments are just one
tool that could be used. Two commenters recommended that the rule
prescribe specific methods for conducting functional assessments. One
commenter supported the use of functional assessments for both credits
and debits. According to one commenter, the agencies have had
considerable difficulty successfully tracking compensatory mitigation
by type and location (e.g., in-kind, on-site), and functional
assessments would greatly increase the complexity of this process. One
commenter stated that the district engineer should incorporate the most
current information on restoration and creation techniques and success
rates, functional assessment, and other relevant factors when
determining the number of credits a mitigation bank will provide.
Another commenter recommended that value or socio-economic services
should be included in mitigation crediting.
We have modified this paragraph by changing the heading to refer to
``assessment'' since we have amended the rule to include the use of
other suitable metrics, such as condition assessments. The term
``condition'' is defined in Sec. 332.2 [Sec. 230.92]. An index of
biological integrity is an example of another type of assessment method
that can be used to assess and describe the aquatic resource types that
will be restored, established, enhanced, and/or preserved by mitigation
banks or in-lieu fee programs.
We cannot revise this rule to require the use of functional
assessments for all mitigation banks or in-lieu fee programs. In some
areas of the country, appropriate functional assessments are not
available. Condition assessments or other types of assessment methods
may be more appropriate in some regions. The new automated information
system being used in the Corps Regulatory Program (ORM 2.0) will help
improve the tracking of compensatory mitigation projects by type and
location. This automated information system is a spatially-enabled
system that will allow tracking of the locations of impact sites and
compensatory mitigation sites, as well as the aquatic resource types
that are present at impact sites or are required as compensatory
mitigation. District engineers, in consultation with the IRT, will
evaluate compensatory mitigation proposals for mitigation banks and in-
lieu fee programs, to determine the number of credits that are likely
to be provided. This evaluation should include the type of compensatory
mitigation being conducted (e.g., reestablishment, rehabilitation), the
potential for success, the type of aquatic resource being provided, and
other relevant aspects of the mitigation bank or in-lieu fee project.
Although the services provided by aquatic resource functions are
important to consider when determining the type and location of
compensatory mitigation projects, there are few methods available for
assessing services. Therefore, in most cases consideration of services
will be conducted through best professional judgment. As discussed
elsewhere in this preamble, there are numerous difficulties in
assessing aquatic resource values, and
[[Page 19660]]
this rule focuses on functions and services.
(o)(3) Credit production. We have modified this paragraph to refer
to pre- and post-compensatory mitigation project site conditions, since
this section applies to mitigation banks and in-lieu fee projects. We
have also changed this paragraph to require the use of functional or
condition assessments, or other suitable metrics, to determine the
number of credits produced by a mitigation bank or in-lieu fee project.
In areas where appropriate assessment methods are not available, or
practicable to use, other suitable metrics such as acres or linear feet
may be used. We have removed the last two sentences of the proposed
text of this paragraph, which stated that, for enhancement activities,
the number of credits should only reflect those enhancements produced
by the construction of the mitigation bank. These two sentences are no
longer necessary, because of the other changes to this paragraph.
However, it is still the case that credits for enhancement activities
should only include the ``functional lift'' generated by the activity.
(o)(4) Credit value. We have not changed this paragraph in the
final rule.
(o)(5) Credit costs. We added this provision to clarify that the
cost of compensatory mitigation credits provided by a mitigation bank
or an in-lieu fee program shall be determined by the sponsor. Section
332.8(o)(5)(ii) [Sec. 230.98(o)(5)(ii)] requires in-lieu fee programs
to use full cost accounting methods, so that the cost per unit credit
includes the expected costs associated with the restoration,
establishment, enhancement, and/or preservation of aquatic resources in
the service area. This paragraph also states that the cost per unit
credit for in-lieu fee programs should factor in contingency costs, to
address uncertainties in construction and real estate expenses. The
cost per unit credit must also reflect resources needed for long-term
management and protection of the in-lieu fee project site, as well as
any financial assurances that may be necessary to ensure successful
completion of those projects. District engineers can evaluate the fee
structure of an in-lieu fee program to determine whether the sponsor is
complying with this provision. Compliance with these requirements is
necessary to ensure that an in-lieu fee program generates sufficient
funds so that it can select and implement compensatory mitigation
projects in a timely manner. One concern raised about in-lieu fee
programs in the past is that they have sometimes underpriced credits,
with the result that they may not be able to deliver the required
mitigation. This provision is intended to ensure that in-lieu fee
programs develop realistic price schedules, while still leaving
determination of credit prices to the program sponsor, rather than the
Corps.
(o)(6) Credits provided by preservation. One commenter said that
preservation and/or enhancement should only be considered in
combination with restoration, to ensure no net loss on an acreage
basis. A commenter said that credits associated with preservation
should be released as soon as possible, since functional capacity is
not an issue. One commenter stated that preservation credits should be
sparingly granted and should never allow preservation of landscape
features of a different type than those adversely affected by the
permitted activity.
The regulations governing the use of preservation as compensatory
mitigation are provided in Sec. 332.3(h) [Sec. 230.93(h)]. The use of
aquatic resource preservation to provide compensatory mitigation will
be determined by the district engineer in accordance with Sec. 332.3
[Sec. 230.93]. When evaluating the Corps Regulatory Program's
contribution to the Administration's wetlands goals, it is important to
consider the compensatory mitigation requirements imposed on
permittees, since the compensatory mitigation requirements for a
specific DA permit may consist of a package of compensation activities.
In other words, a permittee could provide the required compensatory
mitigation through more than one compensation type. When a permittee
proposes to use preservation to provide compensatory mitigation, Sec.
332.3(h)(2) [Sec. 230.98(h)(2)] requires that the preservation be
done, to the extent appropriate and practicable, in conjunction with
aquatic resource restoration, establishment, and/or enhancement
activities. For example, a permittee may provide some of the required
compensatory mitigation through a permittee-responsible restoration
project, and provide the remaining compensatory mitigation by securing
preservation credits from an in-lieu fee program or a mitigation bank.
Preservation may also be used as the only form of compensatory
mitigation, at the discretion of the district engineer, but this should
only be allowed where preservation of specific resources has been
identified as a high priority using a watershed approach, and in this
case higher compensation ratios should be required.
When using a watershed approach, the district engineer may
determine that preservation of out-of-kind aquatic resources is an
appropriate means of providing compensatory mitigation.
Two commenters said that the proposed rule is unclear whether
preservation is to be applied to an entire mitigation bank, above and
beyond any establishment, enhancement, or restoration that is conducted
to produce credits at that mitigation bank, or whether it only applies
to those areas of the mitigation bank where preservation of existing
aquatic resources will occur.
The long-term protection of compensatory mitigation project sites,
including mitigation banks and in-lieu fee programs is addressed in
Sec. 332.7(a) [Sec. 230.97(a)]. This is a different issue that the
use of preservation as compensatory mitigation. As defined in Sec.
332.2 [Sec. 230.92], preservation is the removal of a threat to, or
preventing the decline of, aquatic resources by an action in or near
those aquatic resources. If there are existing aquatic resources on a
mitigation bank site or an in-lieu fee project site, and those aquatic
resources will not be enhanced or rehabilitated to produce enhancement
or restoration credits, then the district engineer may determine that
there are preservation credits being provided, once the appropriate
site protection