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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
Note: EPA no longer updates this information, but it may be useful as a reference or resource.
[Federal Register: November 7, 2000 (Volume 65, Number 216)]
[Notices]
[Page 66913-66917]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07no00-139]
[[Page 66913]]
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Part IV
Department of Defense
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Department of the Army, Corps of Engineers
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Environmental Protection Agency
Department of the Interior
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Fish and Wildlife Service
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Department of Commerce
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National Oceanic and Atmospheric Administration
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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; Notice
[[Page 66914]]
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DEPARTMENT OF DEFENSE
Department of the Army, Corps of Engineers
ENVIRONMENTAL PROTECTION AGENCY
DEPARTMENT OF THE INTERIOR
Fish and Wildlife Service
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
[FRL-6898-3]
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
AGENCIES: Corps of Engineers, Department of the Army, DOD;
Environmental Protection Agency; Fish and Wildlife Service, Interior;
and National Marine Fisheries Service, National Oceanic and Atmospheric
Administration, Commerce.
ACTION: Notice.
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SUMMARY: The Army Corps of Engineers (Corps), Environmental Protection
Agency (EPA), Fish and Wildlife Service (FWS) and National Marine
Fisheries Service (NMFS) are issuing final policy guidance regarding
the use of in-lieu-fee arrangements for the purpose of providing
compensation for adverse impacts to wetlands and other aquatic
resources. Compensatory mitigation projects are designed to replace
aquatic resource functions and values that are adversely impacted under
the Clean Water Act Section 404 and Rivers and Harbors Act Section 10
regulatory programs. These mitigation objectives are stated in
regulation, the 1990 Memorandum of Agreement on mitigation between
Environmental Protection Agency (EPA) and the Department of the Army,
the November 28, 1995, Federal Guidance on the Establishment, Use and
Operation of Mitigation Banks (``Banking Guidance''), and other
relevant policy. The advent of in-lieu-fee approaches to mitigation has
highlighted the importance of several fundamental objectives that the
agencies established for determining what constitutes appropriate
compensatory mitigation. The purpose of this memorandum is to clarify
the manner in which in-lieu-fee mitigation may serve as an effective
and useful approach to satisfy compensatory mitigation requirements and
meet the Administration's goal of no overall net loss of wetlands. This
in-lieu-fee guidance elaborates on the discussion of in-lieu-fee
mitigation arrangements in the Banking Guidance by outlining the
circumstances where in-lieu-fee mitigation may be used, consistent with
existing regulations and policy.
EFFECTIVE DATE: The effective date is October 31, 2000.
FOR FURTHER INFORMATION CONTACT: Mr. Jack Chowning (Corps) at (202)
761-4614; Ms. Lisa Morales (EPA) at (202) 260-6013; Mr. Mark Matusiak
(FWS) at (703) 358-2183; Ms. Susan-Marie Stedman (NMFS) at (301) 713-
2325.
SUPPLEMENTARY INFORMATION: This notice publishes interagency guidance
regarding the use of in-lieu-fee arrangements for the purpose of
providing compensation for adverse impacts to wetlands and other
aquatic resources. Any comments or questions on the document may be
directed to the persons listed above in the section entitled: FOR
FURTHER INFORMATION CONTACT.
Dated: October 20, 2000.
Michael L. Davis,
Deputy Assistant Secretary (Civil Works), Department of the Army.
Dated: October 20, 2000.
Robert H. Wayland III,
Director, Office of Wetlands, Oceans, and Watersheds, Environmental
Protection Agency.
Dated: October 31, 2000.
Jamie Clark,
Director, Fish and Wildlife Service, Department of the Interior.
Dated: October 25, 2000.
Scott B. Gudes,
Deputy Under Secretary for Oceans and Atmosphere, National Oceanic and
Atmospheric Administration, Department of Commerce.
Memorandum to the Field
Subject: 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
I. Purpose
Compensatory mitigation projects are designed to replace aquatic
resource functions and values that are adversely impacted under the
Clean Water Act Section 404 and Rivers and Harbors Act Section 10
regulatory programs. These mitigation objectives are stated in
regulation, the 1990 Memorandum of Agreement on mitigation between
Environmental Protection Agency (EPA) and the Department of the Army,
the November 28, 1995, Federal Guidance on the Establishment, Use and
Operation of Mitigation Banks (``Banking Guidance''), and other
relevant policy. The advent of in-lieu-fee approaches to mitigation has
highlighted the importance of several fundamental objectives that the
agencies established for determining what constitutes appropriate
compensatory mitigation. The purpose of this memorandum is to clarify
the manner in which in-lieu-fee mitigation may serve as an effective
and useful approach to satisfy compensatory mitigation requirements and
meet the Administration's goal of no overall net loss of wetlands. This
in-lieu-fee guidance elaborates on the discussion of in-lieu-fee
mitigation arrangements in the Banking Guidance by outlining the
circumstances where in-lieu-fee mitigation may be used, consistent with
existing regulations and policy.
II. Background
A. ``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.
B. A fundamental precept of the Section 404(b)(1) Guidelines is
that no discharge of dredged or fill material in waters of the U.S. may
be permitted unless appropriate and practicable steps have been taken
to minimize all adverse impacts associated with the discharge. (40 CFR
230.10(d)) Specifically, the Section 404(b)(1) Guidelines establish a
mitigation sequence, under which compensatory mitigation is required to
offset wetland losses after all appropriate and practicable steps have
been taken to first avoid and then minimize wetland impacts. Compliance
with these mitigation sequencing requirements is an essential
environmental safeguard to ensure that CWA objectives for the
protection of wetlands are achieved. The Section 404 permit program
relies on the use of compensatory mitigation to offset unavoidable
wetlands impacts by replacing lost wetland functions and values.
C. The agencies further clarified their mitigation policies in a
Memorandum of Agreement (MOA) between the EPA and the Department of the
Army Concerning the Determination of Mitigation under the Clean Water
Act Section 404(b)(1) Guidelines (February 6, 1990). That document
reiterates that ``the Clean
[[Page 66915]]
Water Act and the Guidelines set forth a goal of restoring and
maintaining existing aquatic resources. The Corps will strive to avoid
adverse impacts and offset unavoidable adverse impacts to existing
aquatic resources, and for wetlands, will strive to achieve a goal of
no overall net loss of values and functions.'' Moreover, the MOA
clarifies that mitigation ``should be undertaken, when practicable, in
areas adjacent or contiguous to the discharge site,'' and that ``if on-
site compensatory mitigation is not practicable, off-site compensatory
mitigation should be undertaken in the same geographic area if
practicable (i.e., in close proximity and, to the extent possible, the
same watershed).'' As outlined in the MOA, the agencies have also
agreed that ``generally, in-kind compensatory mitigation is preferable
to out-of-kind.'' The MOA further states that mitigation banking may be
an acceptable form of compensatory mitigation. The agencies recognize
the general preference for restoration over other forms of mitigation,
given the increased chance for ecological success.
D. Pursuant to these standards, project-specific mitigation for
authorized impacts has been used by permittees to offset unavoidable
impacts. Project-specific mitigation generally consists of restoration,
creation, or enhancement of aquatic resources that are similar to the
aquatic resources of the impacted area, and is often located on the
project site or adjacent to the impact area. Permittees providing
project specific mitigation have a U.S. Army Corps of Engineers (Corps)
approved mitigation plan detailing the site, source of hydrology, types
of aquatic resource to be restored, success criteria, contingency
measures, and an annual reporting requirement. The mitigation and
monitoring plan becomes part of the Section 404 authorization in the
form of a special condition. The permittee is responsible for complying
with all terms and conditions of the authorization and would be in
violation of their authorization if the mitigation did not comply with
the approved plan.
E. In 1995, the agencies issued the Banking Guidance. Consistent
with that guidance, permittees may purchase mitigation credits from an
approved bank. Mitigation banks will generally be functioning in
advance of project impacts and thereby reduce the temporal losses of
aquatic functions and values and reduce uncertainty over the ecological
success of the mitigation. Mitigation banking instruments are reviewed
and approved by an interagency Mitigation Banking Review Team (MBRT).
The MBRT ensures that the banking instrument appropriately addresses
the physical and legal characteristics of the bank and how the bank
will be established and operated (e.g., classes of wetlands and/or
other aquatic resources proposed for inclusion in the bank, geographic
service area where credits may be sold, wetland classes or other
aquatic resource impacts suitable for compensation, methods for
determining credits and debits). The bank sponsor is responsible for
the operation and maintenance of the bank during its operational life,
as well as the long-term management and ecological success of the
wetlands and/or other aquatic resources, and must provide financial
assurances.
F. The Banking Guidance describes in-lieu-fee mitigation as
follows: ``. . . in-lieu-fee, fee mitigation, or other similar
arrangements, wherein funds are paid to a natural resource management
entity for implementation of either specific or general wetland or
other aquatic resource development project, are not considered to meet
the definition of mitigation banking because they do not typically
provide compensatory mitigation in advance of project impacts.
Moreover, such arrangements do not typically provide a clear timetable
for the initiation of mitigation efforts. The Corps, in consultation
with the other agencies, may find circumstances where such arrangements
are appropriate so long as they meet the requirements that would
otherwise apply to an offsite, prospective mitigation effort and
provides adequate assurances of success and timely implementation. In
such cases, a formal agreement between the sponsor and the agencies,
similar to a banking instrument, is necessary to define the conditions
under which its use is considered appropriate.''
III. Use of In-Lieu-Fee Mitigation in the Regulatory Program
In light of the above considerations and in order to ensure that
decisions regarding the use of in-lieu-fee mitigation are made more
consistently with existing provisions of agency regulations and permit
policies, the following clarification is provided. It is organized in a
tiered manner to reflect and incorporate the agencies' broader
mitigation policies, and is based on relative assurances of ecological
success.
A. Impacts Authorized Under Individual Permit: In-lieu-fee
agreements may be used to compensate for impacts authorized by
individual permit if the in-lieu-fee arrangement is developed (or
revised, if an existing agreement), reviewed, and approved using the
process established for mitigation banks in the Banking Guidance. MBRTs
should review applications from such in-lieu-fee sponsors to ensure
that such agreements are consistent with the Banking Guidance.
B. Impacts Authorized Under General Permit: As a general matter,
in-lieu-fee mitigation should only be used to compensate for impacts to
waters of the U.S. authorized by a Section 404 general permit, as
described below:
1. Where ``On-site'' Mitigation Is Available and Practicable: As
a general matter, compensatory mitigation that is completed on or
adjacent to the site of the impacts it is designed to offset (i.e.,
project-specific mitigation done by permittees consistent with Corps
approved mitigation plans) is preferable to mitigation conducted
off-site (i.e., mitigation bank or in-lieu-fee mitigation). The
agencies' preference for on-site mitigation, indicated in the 1990
Memorandum of Agreement on mitigation between the EPA and the
Department of the Army, should not preclude the use of a mitigation
bank or in-lieu-fee mitigation when there is no practicable
opportunity for on-site compensation, or when use of a bank or in-
lieu-fee mitigation is environmentally preferable to on-site
compensation, consistent with the provisions in paragraph 2 below.
2. Where ``On-site'' Mitigation Is Not Available or Practicable:
Except as noted below in a. or b., where on-site mitigation is not
available, practicable, or determined to be less environmentally
desirable, use of a mitigation bank is preferable to in-lieu-fee
mitigation where permitted impacts are within the service area of a
mitigation bank approved to sell mitigation credits, and those
credits are available. Use of a mitigation bank is also preferable
over in-lieu-fee mitigation where both the available in-lieu-fee
arrangement and the service area of an approved mitigation bank are
outside of the watershed of the permitted project impacts, unless
the mitigation bank is determined on a case by case basis to not be
practicable and environmentally desirable.
a. Where Mitigation Bank Does Not Provide ``In-kind''
Mitigation: In those circumstances where wetlands impacts proposed
for general permit authorization are within the service area of an
approved mitigation bank with available credits, but the impacted
wetland type is not identified by the Mitigation Banking Instrument
for compensation within such bank, then the authorized impact may be
compensated through an in-lieu-fee arrangement, subject to the
considerations described in Section IV below, if the in-lieu-fee
arrangement would provide in-kind restoration as mitigation.
b. Where Mitigation Bank Does Not Provide Restoration, Creation,
or Enhancement Mitigation: In those circumstances where wetlands
impacts proposed for general permit authorization are within the
service area of an approved mitigation bank, but the only available
credits are through preservation, then the authorized impact may
[[Page 66916]]
be compensated through an in-lieu-fee arrangement subject to the
considerations described in Section IV below, if the in-lieu-fee
arrangement would provide in kind restoration as mitigation.
IV. Planning, Establishment, and Use of In-lieu-fee Mitigation
Arrangements
This section describes the basic considerations that should be
addressed for any proposed use of in-lieu-fee mitigation to offset
unavoidable impacts associated with a discharge authorized under a
general permit described in Section III above.
A. Planning Considerations
1. Qualified Organizations: Given the goal to ensure long-term
mitigation success, the Corps, in consultation with the other Federal
agencies, should carefully evaluate the demonstrated performance of
natural resource management organizations (e.g., governmental
organizations, land trusts) prior to approving them to manage in-lieu-
fee arrangements. In fact, given the unique strengths and specialties
of such organizations, it may be useful for the Corps, in consultation
with other Federal resource agencies, to establish formal arrangements
with several natural resource management organizations to ensure there
are sufficient options to effectively replace lost functions and
values. In any event, in-lieu-fee arrangements and subsequent
modifications should be made in consultation with the other Federal
agencies and only after an opportunity for public notice and comment
has been afforded.
2. Operational Information: Those organizations considered
qualified to implement formal in-lieu-fee arrangements should work in
advance with the Corps to ensure that authorized impacts will be offset
fully on a project-by-project basis consistent with Section 10/404
permit requirements. As detailed in the paragraphs that follow,
organizations should supply the Corps with information in advance on
(1) potential sites where specific restoration projects or types of
restoration projects are planned, (2) the schedule for implementation,
(3) the type of mitigation that is most ecologically appropriate on a
particular parcel, and (4) the financial, technical, and legal
mechanisms to ensure long-term mitigation success. The Corps should
ensure that the formal in-lieu-fee arrangements and project
authorizations contain distinct provisions that clearly state that the
legal responsibility for ensuring mitigation terms are satisfied fully
rests with the organization accepting the in-lieu-fee. In-lieu-fee
sponsors should be able to demonstrate approval of all necessary State
and local permits and authorizations. In-lieu-fee sponsors (e.g.,
State) should notify the Corps and MBRT if the service area of any
mitigation bank overlaps the jurisdiction in which their in-lieu-fees
may be spent.
3. Watershed Planning: Local watershed planning efforts, as a
general matter, identify wetlands and other aquatic resources that have
been degraded and usually have established a prioritization list of
restoration needs. In-lieu-fee mitigation projects should be planned
and developed to address the specific resource needs of a particular
watershed.
4. Site Selection: The Federal agencies and in-lieu-fee sponsor
should give careful consideration to the ecological suitability of a
site for achieving the goal and objectives of compensatory mitigation
(e.g., posses the physical, chemical and biological characteristics to
support the desired aquatic resources and functions, preferably in-kind
restoration or creation of impacted aquatic resources). The location of
the site relative to other ecological features, hydrologic sources, and
compatibility with adjacent land uses and watershed management plans
shall be considered by the Federal agencies during the evaluation
process.
5. Technical Feasibility: In-lieu-fee mitigation should be planned
and designed to be self-sustaining over time to the extent possible.
The techniques for establishing aquatic resources must be carefully
selected. The restoration of historic or substantially degraded aquatic
resources (e.g., prior-converted cropland, farmed wetlands) utilizing
proven techniques increases the likelihood of success and typically
does not result in the loss of other valuable resources. Thus,
restoration should be the first option considered for siting in-lieu-
fee mitigation. This guidance recognizes that in some circumstances
aquatic resources must be actively managed to ensure their
sustainability. Furthermore, long-term maintenance requirements may be
necessary and appropriate in some cases (e.g., to maintain fire
dependent habitat communities in the absence of natural fire, to
control invasive exotic plant species). Proposed mitigation techniques
should be well-understood and reliable. When uncertainties surrounding
the technical feasibility of a proposed mitigation technique exist,
appropriate arrangements may be phased-out or reduced once the
attainment of prescribed performance standards is demonstrated. In any
event, a plan detailing specific performance standards should be
submitted to ensure the technical success of the project can be
evaluated.
6. Role of Preservation: As described in the Banking Guidance,
simple purchase or ``preservation'' of existing wetlands may be
accepted as compensatory mitigation only in exceptional circumstances.
Mitigation credit may be given when existing wetlands and/or other
aquatic resources are preserved in conjunction with restoration,
creation or enhancement activities, and when it is demonstrated that
the preservation will augment the functions of the restored, created or
enhanced aquatic resource.
7. Collection of Funds: Funds collected under any in-lieu-fee
arrangement should be used for replacing wetlands functions and values
and not to finance non-mitigation programs and priorities (e.g.,
education projects, research). Funds collected should be based upon a
reasonable cost estimate of all funds needed to compensate for the
impacts to wetlands or other waters that each permit is authorized to
offset. Funds collected should ensure a minimum of one-for-one acreage
replacement, consistent with existing regulation and permit conditions.
Land acquisition and initial physical and biological improvements
should be completed by the first full growing season following
collection of the initial funds. However, because site improvements
associated with in-lieu-fee mitigation may take longer to initiate,
initial physical and biological improvements may be completed no later
than the second full growing season where (1) initiation by the first
full growing season is not practicable, (2) mitigation ratios are
raised to account for increased temporal losses of aquatic resource
functions and values, and (3) the delay is approved in advance by the
Corps.
8. Monitoring and Management: The in-lieu-fee sponsor is
responsible for securing adequate funds for the operation and
maintenance of the mitigation sites. The wetlands and/or other aquatic
resources in the mitigation site should be protected in perpetuity with
appropriate real estate arrangements (e.g., conservation easements,
transfer of title to Federal or State resource agency or non-profit
conservation agency). Such arrangements should effectively restrict
harmful activities (e.g., incompatible uses) that might otherwise
jeopardize the purpose of the compensatory mitigation. In addition,
there should be appropriate schedules for regular (e.g., annual)
monitoring reports to document funds received, impacts permitted, how
[[Page 66917]]
funds were disbursed, types of projects funded, and the success of
projects conducted under the in-lieu-fee arrangement. The Corps, in
conjunction with other Federal and State agencies, should evaluate the
reports and conduct regular reviews to ensure that the arrangement is
operating effectively and consistent with agency policy and the
specific agreement. The Corps will track all uses of in-lieu-fee
arrangements and report those figures by public notice on an annual
basis.
B. Establishment of In-Lieu-Fee Agreements
A formal in-lieu-fee agreement, consistent with the planning
provisions above, should be established by the sponsor with the Corps,
in consultation with the other agencies. It may be appropriate to
establish an ``umbrella'' arrangement for the establishment and
operation of multiple sites. In such circumstances, the need for
supplemental information (e.g., site specific plans) should be
addressed in specific in-lieu-fee agreements. The in-lieu-fee agreement
should contain:
1. a description of the sponsor's experience and qualifications
with respect to providing compensatory mitigation;
2. potential site locations, baseline conditions at the sites, and
general plans that indicate what kind of wetland compensation can be
provided (e.g., wetland type, restoration or other activity, proposed
time line, etc.);
3. geographic service area;
4. accounting procedures;
5. methods for determining fees and credits;
6. a schedule for conducting the activities that will provide
compensatory mitigation or a requirement that projects will be started
within a specified time after impacts occur;
7. performance standards for determining ecological success of
mitigation sites;
8. reporting protocols and monitoring plans;
9. financial, technical and legal provisions for remedial actions
and responsibilities (e.g., contingency fund);
10. financial, technical and legal provisions for long-term
management and maintenance (e.g., trust); and
11. provision that clearly states that the legal responsibility for
ensuring mitigation terms are fully satisfied rests with the
organization accepting the fee.
In cases where initial establishment of in-lieu-fee compensatory
mitigation involves a discharge into waters of the United States
requiring Section 10/404 authorization, submittal of a Section 10/404
application should be accompanied by the in-lieu-fee agreement.
V. General
A. Effect of Guidance. This guidance does not change the
substantive requirements of the Section 10/404 regulatory program.
Rather, it interprets and provides guidance and procedures for the use
of in-lieu fee mitigation consistent with existing regulations. The
policies set out in this document are not final agency action, but are
intended solely as guidance. The guidance is not intended, nor can it
be relied upon, to create any rights enforceable by any party in
litigation with the United States. This guidance does not establish or
affect legal rights or obligations, establish a binding norm on any
party and it is not finally determinative of the issues addressed. Any
regulatory decisions made by the agencies in any particular matter
addressed by this guidance will be made by applying the governing law
and regulations to the relevant facts.
B. Definitions. Unless otherwise noted, the terms used in this
guidance have the same definitions as those terms in the Banking
Guidance. Note that as part of the Administration's Clean Water Action
Plan, the Federal agencies have proposed a tracking system to more
accurately account for wetland losses and gains that includes
definitions of terms such as restoration used in wetland programs.
Future notice will be given when these definitions will be applied to
Section 10/404 regulatory program.
C. Effective Date. This guidance is effective immediately on the
date of the last signature below. Therefore, existing in-lieu-fee
arrangements or agreements should be reviewed and modified as necessary
in light of the above.
D. Conversion to Banks: If requested by the in-lieu-fee sponsor,
the Corps, in conjunction with the other Federal agencies, will provide
assistance and recommendations on the steps necessary to convert
individual in-lieu-fee arrangements to mitigation banks, consistent
with the Banking Guidance.
E. Future Revisions. The agencies are supporting a comprehensive,
independent evaluation of the effectiveness of compensatory mitigation
by the National Academy of Sciences. The technical results of this
evaluation are expected to be used by the public to improve the quality
of wetlands and aquatic resource restoration, creation, and
enhancement. The agencies will take note of the results of this
evaluation and other relevant information to make any necessary
revisions to guidance on compensatory mitigation, to ensure the
greatest opportunity for ecological success of restored, created, and
enhanced wetlands and other aquatic resources. At a minimum, a review
of the use of this guidance will be initiated no later than 12 months
after the effective date.
Michael L. Davis,
Deputy Assistant Secretary (Civil Works), Department of the Army.
Robert H. Wayland III,
Director, Office of Wetlands, Oceans, and Watersheds Environmental
Protection Agency.
Jamie Clark,
Director, Fish and Wildlife Service, Department of the Interior.
Scott B. Gudes,
Deputy Under Secretary for Oceans and Atmosphere, National Oceanic
and Atmospheric Administration, Department of Commerce.
[FR Doc. 00-28516 Filed 11-6-00; 8:45 am]
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