Background on Compensatory Mitigation, Wetland Mitigation Banking, and In-Lieu-Fee Mitigation
Compensatory Mitigation
Land development activities may adversely impact wetlands that are protected under federal, state, and local regulatory programs. Wetlands receive legal protection because they are a significant ecological resource and because they provide a variety of functions that are of value to humans, including water purification, flood storage, sediment trapping, wildlife habitat and groundwater recharge.[1]
Methods of Compensatory Mitigation
Restoration: Re-establishment of wetland and/or other aquatic resource characteristics and function(s) at a site where they have ceased to exist, or exist in substantially degraded state.
Creation: The establishment of a wetland or other aquatic resources where one did not formerly exist.
Enhancement: Activities conducted in existing wetlands or other aquatic resources that increase one or more aquatic functions.
Preservation: The protection of ecologically important wetlands or other aquatic resources in perpetuity through the implementation of appropriate legal and physical mechanisms. Preservation may include protection of upland areas adjacent to wetlands as necessary to ensure protection and/or enhancement of the aquatic ecosystem.
Source: Federal Guidance for the Establishment, Use and Operation of Mitigation Banks. Federal Register, Vol. 60, No. 228. 58605-58614. Tuesday, November 28, 1995.
Most conversions of wetlands through development activities require a federal or state government permit. Permits authorizing impacts to wetlands reflect a public policy that attempts to balance wetland protection with alternative land uses. Under several regulatory programs, including §404 of the federal Clean Water Act,[2] a regulatory agency may impose conditions upon its approval for the activities that would destroy or impact a wetland. The agency may require the permittee to replace the lost wetland and its functions by substituting replacement wetlands. This process is called compensatory mitigation. Compensatory mitigation may be accomplished through the restoration, creation, enhancement, or preservation of wetlands. Compensatory mitigation performed on or adjacent to the development site is referred to as on-site mitigation.
Permittee-responsible mitigation remains the dominant form of compensatory mitigation. In these cases, the permittee compensates for its own impacts either on- or off-site in a manner approved by the regulatory agency on a case-by-case basis. In the past 20 years, several alternatives to on-site mitigation have arisen, including wetland mitigation banking, in-lieu-fee mitigation, and project-specific off-site mitigation. These are often referred to as off-site or consolidated mitigation programs.
Compensatory mitigation, “under Section 10/404, is the restoration, creation, enhancement, or in exceptional circumstances, preservation of wetlands and/or other aquatic resources for the purpose of compensating for unavoidable adverse impacts.”
Source:Â Federal Guidance for the Establishment, Use and Operation of Mitigation Banks. 60 Fed. Reg. 228, 58605-58614. Tuesday, November 28, 1995.
Wetland Mitigation Banking
Wetland mitigation banking is the practice of restoring, creating, enhancing, or preserving off-site wetland areas to provide compensatory mitigation for authorized impacts to wetlands.[3] In the past ten years, wetland mitigation banking has thrived as a compensatory mitigation technique to mitigate for wetland impacts in the United States.[4] With wetland mitigation banking, an agency or organization, often not the permittee, establishes larger off-site wetland areas that are used to mitigate for a number of smaller independently permitted wetland conversions. The permittees are released of their obligations to produce the compensatory wetland functions and instead can purchase them from the entity that, in most cases, has produced and “banked” them for this purpose. The banked “compensation credits” are recognized by the regulatory agency as providing suitable compensation for wetland impacts. Because, in theory, banks are established prior to the occurrence of permitted impacts, there is a reduced temporal loss of wetland acreage or functions.
For the most part, the U.S. Army Corps of Engineers (Corps) oversees wetland mitigation banking for federal Clean Water Act purposes in conjunction with other federal, state, and local regulatory programs. In some circumstances, state or local agencies oversee wetland mitigation banking programs directly with little or no oversight by the Corps.
Mitigation banking is “wetlands restoration, creation, enhancement, and in exceptional circumstances, preservation undertaken expressly for the purpose of compensating for unavoidable wetland losses in advance of development actions, when such compensation cannot be achieved at the development site or would not be as environmentally beneficial.”
Source:Â Federal Guidance for the Establishment, Use and Operation of Mitigation Banks. 60 Fed. Reg. 228, 58605-58614. 1995.
In-Lieu-Fee Mitigation
In-lieu-fee mitigation is a method for satisfying compensatory wetland mitigation requirements. With in-lieu-fee programs, project applicants agree to contribute mitigation fees to an approved third party that will use these funds to implement the required compensation. In-lieu-fee mitigation is similar to wetland mitigation banking in that they both provide consolidated, off-site mitigation for multiple permit recipients. Although in theory, wetland mitigation banking provides compensatory mitigation in advance of authorized impacts, in-lieu-fee mitigation does not offer this benefit. Mitigation funds are collected in advance of permitted impacts, but the funds may not be used to compensate for permitted losses for some time. In-lieu-fee mitigation can, however, be used to restore a variety of wetland types of varying sizes at a number of locations, while mitigation banks frequently consolidate numerous wetland impacts into one large site. Until 2001, there were no standards governing approval or use of in-lieu-fee programs.
In-lieu-fee mitigation “occurs in circumstances where a permittee provides funds to an in-lieu-fee sponsor instead of either completing project-specific mitigation or purchasing credits from a mitigation bank approved under the Banking Guidance.”
Source:Â U.S. Department of the Army, U.S. Environmental Protection Agency, U.S. Department of Interior, and U.S. Department of Commerce. Federal Guidance on the Use of In-Lieu-Fee Arrangements for Compensatory Mitigation under Section 404 of the Clean Water Act and Section 10 of the Rivers and Harbors Act. 2000.
Last updated July 2002.
[1] For a thorough discussion of wetland functions and values, see: Mitsch, William J. and James G. Gosselink. Wetlands. New York: Van Nostrand Reinhold, 1993. 507-540.
[2] 42 U.S.C. §1344.
[3] Federal Guidance for the Establishment, Use and Operation of Mitigation Banks. 60 Fed. Reg. 228, 58605-58614. 1995.
[4]Â National Academy of Sciences. Compensating for Wetland Losses Under the Clean Water Act. Washington, D.C.: National Academy Press, 2001. 83.
Cite: Environmental Law Institute. 2002. “Banks and Fees: The Status of Off-Site Wetland Mitigation In the United States” Washington, DC: Environmental Law Institute. <www2.eli.org/wmb>. July 2002.
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