Wetlands Challenges and Use of Mitigation Bank Credits

Scott D. DeatherageGardere Wynne Sewell

[email protected]/214-999-4979

Wetlands Challenges and Use of Mitigation Bank Credits 1

Overview of Wetlands Regulation Mitigation and Wetlands Mitigation

Permitting Process Wetlands Mitigation Banking and Credits Planning for Wetlands Mitigation ahead of

Construction


Section 404 requires that a permit be obtained prior to dredging or filling “waters of the US” which includes “wetlands”

The Army Corps of Engineers (ACE) administers Section 404 wetlands dredge and fill permits


Navigable waters◦ Navigable waters are those waters that are subject to the

ebb and flow of the tide and/or are presently used, or have been used in the past, or may be susceptible for use to transport interstate or foreign commerce.

All Waters◦ Ponds, lakes, rivers, and streams – defined by Ordinary

High Water Mark◦ Stream can be ephemeral, intermittent, or perennial◦ Wetlands – Area inundated or saturated by surface or

ground water at a frequency and duration sufficient to support, and under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions

◦ Soils Vegetation and Hydrology


US Supreme Court SWANCC case◦ Solid Waste Agency of Northern Cook County v.

Army Corps of Engineers, 531 U.S. 159 (2001)◦ Cities filling gravel mines for landfill◦ “Man-made” wetlands◦ ACE “migratory bird rule” anywhere would land

waters of the US—Commerce Clause argument◦ S. Ct—wanted to avoid constitutional question

and struck down migratory bird rule◦ Wetlands have to be adjacent to “open waters”,

interpreting Clean Water Act definition of “waters of the US”


Rapanos Case◦ Rapanos v. US, 547 U.S. 715 (2006)◦ Rapons filled 22 acres on their property for

construction of a mall◦ 20 miles from any navigable water◦ Convicted of two felonies; and millions of dollars

in penalties in civil case


Divided court:◦ Justice Scalia wrote opinion, joined by three other

justices: “Waters of the United States" "includes only those

relatively permanent, standing or continuously flowing bodies of water 'forming geographic features' that are described in ordinary parlance as 'streams[,] ... oceans, rivers, [and] lakes.'“

A mere "hydrological connection" is not sufficient to qualify a wetland as covered by the CWA; it must have a "continuous surface connection" with a "water of the United States" that makes it "difficult to determine where the 'water' ends and the 'wetland' begins."


Justice Stevens in concurrence◦ All waters with a "significant nexus" to "navigable

waters" are covered under the CWA


Largely focuses on ◦ wetland vegetation◦ wetland soils◦ wetland hydrology


Standard Department of the Army permit applications must include (33 CFR 325.1(d)(7)):◦ Statement describing how impacts to waters of

the U.S. are Avoided and Minimized ◦ Compensatory Mitigation Proposal or

Statement describing why compensatory mitigation should not be required


Section 401, Clean Water Act Endangered Species Act Coastal Zone Management Act National Environmental Policy Act (NEPA) Fish and Wildlife Coordination Act National Historic Preservation Act


Individual Department of the Army Permit Nationwide Permit General Permit


A Wetlands Permit must be obtained prior to dredging or filling wetlands

Otherwise enforcement action may be taken, resulting in civil or criminal fines, and remedial and mitigation activities


Regulation◦ Compensatory Mitigation for Losses of Aquatic

Resources (33 CFR Parts 325 and 332) Regulatory Guidance Letters

◦ Monitoring Requirements (REGL 08-03)◦ Financial Assurances (REGL 05-01)

Local Guidance Documents◦ Guidelines for Preparing a Compensatory

Mitigation Plan


All compensatory mitigation plans must comply with the Mitigation Rule (33 CFR Parts 325 and 332).


Lost Type Priority Category Existing Condition Duration Dominant Impact Cumulative Impact


The national policy is the no net loss of wetlands

Thus, more wetlands may need to be preserved or created than are actually filled


Historically, the preservation and buffering of the remaining aquatic resources on the impact site could generate up to 75% of the mitigation credits required to offset impacts associated with a proposed project.


All Conceptual Mitigation Plans must include information about the availability of mitigation credits within the same watershed as the proposed project. This information may be obtained using the interactive map located on the RIBITS website.


Once the permit applicant has calculated the required wetland mitigation credits for the proposed project, they should use the Regulatory In-Lieu Fee and Bank Information Tracking System (RIBITS) at http://216.83.232.125:443/pls/htmldb/f?p=101to obtain information about approved mitigation banks within the same watershed as the proposed project.


A mitigation bank is a wetland, stream, or other aquatic resource area that has been restored, established, enhanced, or (in certain circumstances) preserved for the purpose of providing compensation for unavoidable impacts to aquatic resources permitted under Section 404 or a similar state or local wetland regulation.

A mitigation bank may be created when a government agency, corporation, nonprofit organization, or other entity undertakes these activities under a formal agreement with a regulatory agency.


Mitigation banks have four distinct components: ◦ The bank site: the physical acreage restored,

established, enhanced, or preserved; ◦ The bank instrument: the formal agreement

between the bank owners and regulators establishing liability, performance standards, management and monitoring requirements, and the terms of bank credit approval;

◦ The Interagency Review Team (IRT): the interagency team that provides regulatory review, approval, and oversight of the bank; and

◦ The service area: the geographic area in which permitted impacts can be compensated for at a given bank.


A bank's instrument identifies the number of credits available for sale and requires the use of ecological assessment techniques to certify that those credits provide the required ecological functions.

Although most mitigation banks are designed to compensate only for impacts to various wetland types, some banks have been developed to compensate specifically for impacts to streams (i.e., stream mitigation banks).


In general, a mitigation bank sells compensatory mitigation credits to permittee’s whose obligation to provide compensatory mitigation is then transferred to the mitigation bank sponsor.

The operation and use of a mitigation bank are governed by a mitigation banking instrument.


Regulations, effective June 9, 2008, seek to promote one standard for mitigation. “Preference” for mitigation banking.

New web-based posting mechanism for available credits- Regional Internet Bank Information Tracking System (“RIBITS”). This standardization has spurred investment interest with development of equity investors dedicated to investment in mitigation projects or conservation lands.

There are now over 500 mitigation banks in 42 states.

Over 70% of mitigation banks are sponsored by private entrepreneurial companies.


Net Improvement = Moderate (2.0) Enhance hydrology within an existing wetland system and re-establish natural hardwood canopy. T

Upland Buffer = Minimum width necessary for the adjacent land use (0.5) and only protects 80% of the restoration area (0.5*0.8 = 0.4)

Credit Schedule = Concurrent Temporal Loss = Over 20 years Kind = In-Kind, Bottomland hardwood will be

impacted on the project site and Headwater Forest will be restored at the mitigation site.

Location = 8-Digit HUC.


The mitigation bank site must be protected using a conservation easement or a Memorandum of Agreement between the Corps and an appropriate Federal, State, or Local Government Agency.


Financial Assurance in the form of performance bonds, escrow accounts, casualty insurance, letters of credit, legislative appropriations for government sponsored projects, or other appropriate instruments, must be in place prior to beginning work.


For mitigation banks, the instrument must contain a provision requiring the sponsor to establish and maintain a ledger to account for all credit transactions. Each time an approved credit transaction occurs, the sponsor must notify the district engineer (33 CFR 332.8(p)).

The bank sponsor will ultimately be required to enter all new transactions in RIBITS.


Parties implementing a mitigtion plan that includes the purchase of Mitigation Credits must purchase the credits from a Mitigation Bank within the same watershed

Credits cannot be purchased and applied from another watershed


What exactly are the “credits”? How are they sold and assigned? How do you get credit from the Army Corps

of Engineers? Due diligence on mitigation bank and

sponsor-owner/operator? Different types of wetland mitigation

credits?


Prices for Mitigation Credits will vary from watershed to watershed depending on availability of banks and credits and demand for those credits

Different types of Mitigation Credits may vary in prices, e.g., stream credits


Amount and type of credits and price per credit and total price

Deposit rather than full payment up front to reserve credits◦ Until the permit is issued, credits should not be

fully paid and acquired Ensure you are contracting with the right party,

who has ownership and ability to sell credits Ensure credits available and not encumbered

with liens or other restrictions Agreement seller will maintain credit bank and

particular credits so credits remain validWetlands Challenges and Use of

Mitigation Bank Credits 33

Representations by seller◦ Ownership of credits◦ Specific type of credits being purchase and

available◦ Bank is fully developed and approved under

Clean Water Act and by Army Corps of Engineers

Extensions of right to obtain credits, if permit is not issued in a set period of time◦ Possible additional deposit to allow for

additional time Deposits to be credited to purchase price Return of deposit if credits are not purchased


Have qualified biological consultant conduct wetlands mitigation survey early in construction and development process

Identify wetlands Consult with ACE as appropriate regarding

wetlands determinations Developing Plan Early for Mitigation and

Role of Wetlands Mitigation Credits


Apply for any needed wetlands permits Seek Nationwide or General Permit if

necessary as process is streamlined and less time consuming

Early identification and planning to deal with wetlands will reduce costs and delay in construction and avoid potential enforcement actions and potential fines and penalties


Scott D. DeatheragePartnerGardere Wynne SewellDallas, Texas [email protected]

Energy and environmental lawyer with experience in compliance auditing, environmental corporate governance, enforcement actions and litigation, permitting, environmental and climate change disclosures under SEC and voluntary programs. Areas of experience include air emissions, wastewater, welands, solid and hazardous waste, contaminated soil and groundwater, and health and safety.


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Wetlands Challenges and Use of Mitigation Bank Credits