Federal Guidance for the Establishment, Use and Operation of Mitigation Banks

DEPARTMENT OF DEFENSE

Department of the Army

Corps of Engineers

ENVIRONMENTAL PROTECTION AGENCY

DEPARTMENT OF AGRICULTURE

Natural Resources Conservation Service

DEPARTMENT OF THE INTERIOR

Fish and Wildlife Service

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric Administration

Federal Guidance for the Establishment, Use and Operation of

Mitigation Banks

AGENCIES: Corps of Engineers, Department of the Army, DOD;

Environmental Protection Agency; Natural Resources Conservation

Service, Agriculture; 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), National Resources Conservation Service (NRCS), Fish and

Wildlife Service (FWS) and National Marine Fisheries Service (NMFS) are

issuing final policy guidance regarding the establishment, use and

operation of mitigation banks for the purpose of providing compensation

for adverse impacts to wetlands and other aquatic resources. The

purpose of this guidance is to clarify the manner in which mitigation

banks may be used to satisfy mitigation requirements of the Clean Water

Act (CWA) Section 404 permit program and the wetland conservation

provisions of the Food Security Act (FSA) (i.e., ``Swampbuster''

provisions). Recognizing the potential benefits mitigation banking

offers for streamlining the permit evaluation process and providing

more effective mitigation for authorized impacts to wetlands, the

agencies encourage the establishment and appropriate use of mitigation

banks in the Section 404 and ``Swampbuster'' programs.

DATES: The effective date of this Memorandum to the Field is December

28, 1995.

FOR FURTHER INFORMATION CONTACT: Mr. Jack Chowning (Corps) at (202)

761-

[[Page 58606]]

1781; Mr. Thomas Kelsch (EPA) at (202) 260-8795; Ms. Sandra Byrd (NRCS)

at (202) 690-3501; Mr. Mark Miller (FWS) at (703) 358-2183; Ms. Susan-

Marie Stedman (NMFS) at (301) 713-2325.

SUPPLEMENTARY INFORMATION: Mitigating the environmental impacts of

necessary development actions on the Nation's wetlands and other

aquatic resources is a central premise of Federal wetlands programs.

The CWA Section 404 permit program relies on the use of compensatory

mitigation to offset unavoidable damage to wetlands and other aquatic

resources through, for example, the restoration or creation of

wetlands. Under the ``Swampbuster'' provisions of the FSA, farmers are

required to provide mitigation to offset certain conversions of

wetlands for agricultural purposes in order to maintain their program

eligibility.

Mitigation banking has been defined as wetland 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. It typically involves the consolidation

of small, fragmented wetland mitigation projects into one large

contiguous site. Units of restored, created, enhanced or preserved

wetlands are expressed as ``credits'' which may subsequently be

withdrawn to offset ``debits'' incurred at a project development site.

Ideally, mitigation banks are constructed and functioning in

advance of development impacts, and are seen as a way of reducing

uncertainty in the CWA Section 404 permit program or the FSA

``Swampbuster'' program by having established compensatory mitigation

credit available to an applicant. By consolidating compensation

requirements, banks can more effectively replace lost wetland functions

within a watershed, as well as provide economies of scale relating to

the planning, implementation, monitoring and management of mitigation

projects.

On August 23, 1993, the Clinton Administration released a

comprehensive package of improvements to Federal wetlands programs

which included support for the use of mitigation banks. At that same

time, EPA and the Department of the Army issued interim guidance

clarifying the role of mitigation banks in the Section 404 permit

program and providing general guidelines for their establishment and

use. In that document it was acknowledged that additional guidance

would be developed, as necessary, following completion of the first

phase of the Corps Institute for Water Resources national study on

mitigation banking.

The Corps, EPA, NRCS, FWS and NMFS provided notice [60 FR 12286;

March 6, 1995] of a proposed guidance on the policy of the Federal

government regarding the establishment, use and operation of mitigation

banks. The proposed guidance was based, in part, on the experiences to

date with mitigation banking, as well as other environmental, economic

and institutional issues identified through the Corps national study.

Over 130 comments were received on the proposed guidance. The final

guidance is based on full and thorough consideration of the public

comments received.

A majority of the letters received supported the proposed guidance

in general, but suggested modifications to one or more parts of the

proposal. In response to these comments, several changes have been made

to further clarify the provisions and make other modifications, as

necessary, to ensure effective establishment and use of mitigation

banks. One key issue on which the agencies received numerous comments

focused on the timing of credit withdrawal. In order to provide

additional clarification of the changes made to the final guidance in

response to comments, the agencies wish to emphasize that it is our

intent to ensure that decisions to allow credits to be withdrawn from a

mitigation bank in advance of bank maturity be make on a case-by-case

basis to best reflect the particular ecological and economic

circumstances of each bank. The percentage of advance credits permitted

for a particular bank may be higher or lower than the 15 percent

example included in the proposed guidance. The final guidance is being

revised to eliminate the reference to a specific percentage in order to

provide needed flexibility. Copies of the comments and the agencies'

response to significant comments are available for public review.

Interested parties should contact the agency representatives for

additional information.

This guidance does not change the substantive requirements of the

Section 404 permit program or the FSA ``Swampbuster'' program. Rather,

it interprets and provides internal guidance and procedures to the

agency field personnel for the establishment, use and operation of

mitigation banks consistent with existing regulations and policies of

each program. The policies set out in this document are not final

agency action, but are intended solely as guidance. The guidance is not

intended, not can it be relied upon, to create any rights enforceable

by any party in litigation with the United States. The 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. The purpose of

the document is to provide policy and technical guidance to encourage

the effective use of mitigation banks as a means of compensating for

the authorized loss of wetlands and other aquatic resources.

John H. Zirschky,

Acting Assistant Secretary (Civil Works), Department of the Army.

Robert Perciasepe,

Assistant Administrator for Water, Environmental Protection Agency.

James R. Lyons,

Assistant Secretary, Natural Resources and Environment, Department of

Agriculture.

George T. Frampton, Jr.,

Assistant Secretary for Fish and Wildlife and Parks, Department of the

Interior.

Douglas K. Hall,

Assistant Secretary for Oceans and Atmosphere, Department of Commerce.

Memorandum to the Field

Subject: Federal Guidance for the Establishment, Use and Operation of

Mitigation Banks

I. Introduction

A. Purpose and Scope of Guidance

This document provides policy guidance for the establishment, use

and operation of mitigation banks for the purpose of providing

compensatory mitigation for authorized adverse impacts to wetlands and

other aquatic resources. This guidance is provided expressly to assist

Federal personnel, bank sponsors, and others in meeting the

requirements of Section 404 of the Clean Water Act (CWA), Section 10 of

the Rivers and Harbors Act, the wetland conservation provisions of the

Food Security Act (FS) (i.e., ``Swampbuster''), and other applicable

Federal statutes and regulations. The policies and procedures discussed

herein are consistent with current requirements of the Section 10/404

regulatory program and ``Swampbuster'' provisions and are intended only

to clarify the applicability of existing requirements to mitigation

banking.

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The policies and procedures discussed herein are applicable to the

establishment, use and operation of public mitigation banks, as well as

privately-sponsored mitigation banks, including third party banks (e.g.

entrepreneurial banks).

B. Background

For purposes of this guidance, mitigation banking means the

restoration, creation, enhancement and, in exceptional circumstances,

preservation of wetlands and/or other aquatic resources expressly for

the purpose of providing compensatory mitigation in advance of

authorized impacts to similar resources.

The objective of a mitigation bank is to provide for the

replacement of the chemical, physical and biological functions of

wetlands and other aquatic resources which are lost as a result of

authorized impacts. Using appropriate methods, the newly established

functions are quantified as mitigation ``credits'' which are available

for use by the bank sponsor or by other parties to compensate for

adverse impacts (i.e., ``debits''). Consistent with mitigation policies

established under the Council on Environmental Quality Implementing

Regulations (CEQ regulations) (40 CFR Part 1508.20), and the Section

404(b)(1) Guidelines (Guidelines) (40 CFR Part 230), the use of credits

may only be authorized for purposes of complying with Section 10/404

when adverse impacts are unavoidable. In addition, for both the Section

10/404 and ``Swampbuster'' programs, credits may only be authorized

when on-site compensation is either not practicable or use of a

mitigation bank is environmentally preferable to on-site compensation.

Prospective bank sponsors should not construe or anticipate

participation in the establishment of a mitigation bank as ultimate

authorization for specific projects, as excepting such projects from

any applicable requirements, or as preauthorizing the use of credits

from that bank for any particular project.

Mitigation banks provide greater flexibility to applicants needing

to comply with mitigation requirements and can have several advantages

over individual mitigation projects, some of which are listed below:

1. It may be more advantageous for maintaining the integrity of the

aquatic ecosystem to consolidate compensatory mitigation into a single

large parcel or contiguous parcels when ecologically appropriate;

2. Establishment of a mitigation bank can bring together financial

resources, planning and scientific expertise not practicable to many

project-specific compensatory mitigation proposals. This consolidation

of resources can increase the potential for the establishment and long-

term management of successful mitigation that maximizes opportunities

for contributing to biodiversity and/or watershed function;

3. Use of mitigation banks may reduce permit processing times and

provide more cost-effective compensatory mitigation opportunities for

projects that qualify;

4. Compensatory mitigation is typically implemented and functioning

in advance of project impacts, thereby reducing temporal losses of

aquatic functions and uncertainty over whether the mitigation will be

successful in offsetting project impacts;

5. Consolidation of compensatory mitigation within a mitigation

bank increases the efficiency of limited agency resources in the review

and compliance monitoring of mitigation projects, and thus improves the

reliability of efforts to restore, create or enhance wetlands for

mitigation purposes.

6. The existence of mitigation banks can contribute towards

attainment of the goal for no overall net loss of the Nation's wetlands

by providing opportunities to compensate for authorized impacts when

mitigation might not otherwise be appropriate or practicable.

II. Policy Considerations

The following policy considerations provide general guidance for

the establishment, use and operation of mitigation banks. It is the

agencies' intent that this guidance be applied to mitigation bank

proposals submitted for approval on or after the effective date of this

guidance and to those in early stages of planning or development. It is

not intended that this policy be retroactive for mitigation banks that

have already received agency approval. While it is recognized that

individual mitigation banking proposals may vary, it is the intent of

this guidance that the fundamental precepts be applicable to future

mitigation banks.

For the purposes of Section 10/104, and consistent with the CEQ

regulations, the Guidelines, and the Memorandum of Agreement Between

the Environmental Protection Agency (EPA) and the Department of the

Army Concerning the Determination of Mitigation under the Clean Water

Act Section 404(b)(1) Guidelines, mitigation means sequentially

avoiding impacts, minimizing impacts, and compensating for remaining

unavoidable impacts. 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. A site

where wetlands and/or other aquatic resources are restored, created,

enhanced, or in exceptional circumstances, preserved expressly for the

purpose of providing compensatory mitigation in advance of authorized

impacts to similar resources is a mitigation bank.

A. Authorities

This guidance is established in accordance with the following

statutes, regulations, and policies. It is intended to clarify

provisions within these existing authorities and does to establish any

new requirements.

1. Clean Water Act Section 404 (33 U.S.C. 1344).

2. Rivers and Harbors Act of 1899 Section 10 (33 U.S.C. 403 et

seq.)

3. Environmental Protection Agency, Section 404(b)(1) Guidelines

(40 CFR Part 230). Guidelines for Specification of Disposal Sites for

Dredged or Fill Material.

4. Department of the Army, Section 404 Permit Regulations (33 CFR

Parts 320-330). Policies for evaluating permit applications to

discharge dredged or fill material.

5. Memorandum of Agreement between the Environmental Protection

Agency and the Department of the Army Concerning the Determination of

Mitigation under the Clean Water Act Section 404(b)(1) Guidelines

(February 6, 1990).

6. Title XII Food Security Act of 1985 as amended by the Food,

Agriculture, Conservation and Trade Act of 1990 (16 U.S.C. 3801 et

seq.).

7. National Environmental Policy Act (42 U.S.C. 4321 et seq.),

including the Council on Environmental Quality's implementing

regulations (40 CFR Parts 1500-1508).

8. Fish and Wildlife Coordination Act (16 U.S.C. 661 et seq.).

9. Fish and Wildlife Service Mitigation Policy (46 FR pages 7644-

7663, 1981).

10. Magnuson Fishery Conservation and Management Act (16 U.S.C.

1801 et seq.).

11. National Marine Fisheries Service Habitat Conservation Policy

(48 FR pages 53142-53147, 1983).

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

[[Page 58608]]

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. Planning Considerations

1. Goal Setting

The overall goal of a mitigation bank is to provide economically

efficient and flexible mitigation opportunities, while fully

compensating for wetland and other aquatic resource losses in a manner

that contributes to the long-term ecological functioning of the

watershed within which the bank is to be located. The goal will include

the need to replace essential aquatic functions which are anticipated

to be lost through authorized activities within the bank's service

area. In some cases, banks may also be used to address other resource

objectives that have been identified in a watershed management plan or

other resource assessment. It is desirable to set the particular

objectives for a mitigation bank (i.e., the type and character of

wetlands and/or aquatic resources to be established) in advance of site

selection. The goal and objectives should be driven by the anticipated

mitigation need; the site selected should support achieving the goal

and objectives.

2. Site Selection

The agencies will give careful consideration to the ecological

suitability of a site for achieving the goal and objectives of a bank,

i.e., that it posses the physical, chemical and biological

characteristics to support establishment of the desired aquatic

resources and functions. Size and location of the site relative to

other ecological features, hydrologic sources (including the

availability of water rights), and compatibility with adjacent land

uses and watershed management plans are important factors for

consideration. It also is important that ecologically significant

aquatic or upland resources (e.g., shallow sub-tidal habitat, mature

forests), cultural sites, or habitat for Federally or State-listed

threatened and endangered species are not compromised in the process of

establishing a bank. Other significant factors for consideration

include, but are not limited to, development trends (i.e., anticipated

land use changes), habitat status and trends, local or regional goals

for the restoration or protection of particular habitat types or

functions (e.g., re-establishment of habitat corridors or habitat for

species of concern), water quality and floodplain management goals, and

the relative potential for chemical contamination of the wetlands and/

or other aquatic resources.

Banks may be sited on public or private lands. Cooperative

arrangements between public and private entities to use public lands

for mitigation banks may be acceptable. In some circumstances, it may

be appropriate to site banks on Federal, state, tribal or locally-owned

resource management areas (e.g., wildlife management areas, national or

state forests, public parks, recreation areas). The siting of banks on

such lands may be acceptable if the internal policies of the public

agency allow use of its land for such purposes, and the public agency

grants approval. Mitigation credits generated by banks of this nature

should be based solely on those values in the bank that are

supplemental to the public program(s) already planned or in place, that

is, baseline values represented by existing or already planned public

programs, including preservation value, should not be counted toward

bank credits.

Similarly, Federally-funded wetland conservation projects

undertaken via separate authority and for other purposes, such as the

Wetlands Reserve Program, Farmer's Home Administration fee title

transfers or conservation easements, and Partners for Wildlife Program,

cannot be used for the purpose of generating credits within a

mitigation bank. However, mitigation credit may be given for activities

undertaken in conjunction with, but supplemental to, such programs in

order to maximize the overall ecological benefit of the conservation

project.

3. Technical Feasibility

Mitigation banks should be planned and designed to be self-

sustaining over time to the extent possible. The techniques for

establishing wetlands and/or other aquatic resources must be carefully

selected, since this science is constantly evolving. The restoration of

historic or substantially-degraded wetlands and/or other 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 when siting a bank.

Because of the difficulty in establishing the correct hydrologic

conditions associated with many creation projects and the tradeoff in

wetland functions involved with certain enhancement activities, these

methods should only be considered where there are adequate assurances

to ensure success and that the project will result in an overall

environmental benefit.

In general, banks which involve complex hydraulic engineering

features and/or questionable water sources (e.g., pumped) are most

costly to develop, operate and maintain, and have a higher risk of

failure than banks designed to function with little or no human

intervention. The former situations should only be considered where

there are adequate assurances to ensure success. This guidance

recognizes that in some circumstances wetlands must be actively managed

to ensure their viability and sustainability. Furthermore, long-term

maintenance requirements may be necessary and appropriate in some cases

(e.g., to maintain fire-dependent plant 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 (e.g.,

financial assurances, contingency plans, additional monitoring

requirements) should be in place to increase the likelihood of success.

Such arrangements may be phased-out or reduced once the attainment of

prescribed performance standards is demonstrated.

4. Role of Preservation

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. Such augmentation may be reflected in the

total number of credits available from the bank.

In addition, the preservation of existing wetlands and/or other

aquatic resources in perpetuity may be authorized as the sole basis for

generating credits in mitigation banks only in exceptional

circumstances, consistent with existing regulations, policies and

guidance. Under such circumstances, preservation may be accomplished

through the implementation of appropriate legal mechanisms (e.g.,

transfer of deed, deed restrictions, conservation easement) to protect

wetlands and/or other aquatic resources, accompanied by

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implementation of appropriate changes in land use or other physical

changes as necessary (e.g., installation of restrictive fencing).

Determining whether preservation is appropriate as the sole basis

for generating credits at a mitigation bank requires careful judgment

regarding a number of factors. Consideration must be given to whether

wetlands and/or other aquatic resources proposed for preservation (1)

perform physical or biological functions, the preservation of which is

important to the region in which the aquatic resources are located, and

(2) are under demonstrable threat of loss or substantial degradation

due to human activities that might not otherwise be expected to be

restricted. The existence of a demonstrable threat will be based on

clear evidence of destructive land use changes which are consistent

with local and regional land use trends and are not the consequence of

actions under the control of the bank sponsor. Wetlands and other

aquatic resources restored under the Conservation Reserve Program or

similar programs requiring only temporary conservation easements may be

eligible for banking credit upon termination of the original easement

if the wetlands are provided permanent protection and it would

otherwise be expected that the resources would be converted upon

termination of the easement. The number of mitigation credits available

from a bank that is based solely on preservation should be based on the

functions that would otherwise be lost or degraded if the aquatic

resources were not preserved, and the timing of such loss or

degradation. As such, compensation for aquatic resource impacts will

typically require a greater number of acres from a preservation bank

than from a bank which is based on restoration, creation or

enhancement.

5. Inclusion of Upland Areas

Credit may be given for the inclusion of upland areas occurring

within a bank only to the degree that such features increase the

overall ecological functioning of the bank. If such features are

included as part of a bank, it is important that they receive the same

protected status as the rest of the bank and be subject to the same

operational procedures and requirements. The presence of upland areas

may increase the per-unit value of the aquatic habitat in the bank.

Alternatively, limited credit may be given to upland areas protected

within the bank to reflect the functions inherently provided by such

areas (e.g., nutrient and sediment filtration of stormwater runoff,

wildlife habitat diversity) which directly enhance or maintain the

integrity of the aquatic ecosystem and that might otherwise be subject

to threat of loss or degradation. An appropriate functional assessment

methodology should be used to determine the manner and extent to which

such features augment the functions of restored, created or enhanced

wetlands and/or other aquatic resources.

6. Mitigation Banking and Watershed Planning

Mitigation banks should be planned and developed to address the

specific resource needs of a particular watershed. Furthermore,

decisions regarding the location, type of wetlands and/or other aquatic

resources to be established, and proposed uses of a mitigation bank are

most appropriately made within the context of a comprehensive watershed

plan. Such watershed planning efforts often identify categories of

activities having minimal adverse effects on the aquatic ecosystem and

that, therefore, could be authorized under a general permit. In order

to reduce the potential cumulative effects of such activities, it may

be appropriate to offset these types of impacts through the use of a

mitigation bank established in conjunction with a watershed plan.

C. Establishment of Mitigation Banks

1. Prospectus

Prospective bank sponsors should first submit a prospectus to the

Army Corps of Engineers (Corps) or Natural Resources Conservation

Service (NRCS)\1\ to initiate the planning and review process by the

appropriate agencies. Prior to submitting a prospectus, bank sponsors

are encouraged to discuss their proposal with the appropriate agencies

(e.g., pre-application coordination).

\1\ The Corps will typically serve as the lead agency for the

establishment of mitigation banks. Bank sponsors proposing

establishment of mitigation banks solely for the purpose of

complying with the ``Swampbuster'' provisions of FSA should submit

their prospectus to the NRCS.

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It is the intent of the agencies to provide practical comments to

the bank sponsors regarding the general need for and technical

feasibility of proposed banks. Therefore, bank sponsors are encouraged

to include in the prospectus sufficient information concerning the

objectives for the bank and how it will be established and operated to

allow the agencies to provide such feedback. Formal agency involvement

and review is initiated with submittal of a prospectus.

2. Mitigation Banking Instruments

Information provided in the prospectus will serve as the basis for

establishing the mitigation banking instrument. All mitigation banks

need to have a banking instrument as documentation of agency

concurrence on the objectives and administration of the bank. The

banking instrument should describe in detail the physical and legal

characteristics of the bank, and how the bank will be established and

operated. For regional banking programs sponsored by a single entity

(e.g., a state transportation agency), it may be appropriate to

establish an ``umbrella'' instrument for the establishment and

operation of multiple bank sites. In such circumstances, the need for

supplemental site-specific information (e.g., individual site plans)

should be addressed in the banking instrument. The banking instrument

will be signed by the bank sponsor and the concurring regulatory and

resource agencies represented on the Mitigation Bank Review Team

(section II.C.2). The following information should be addressed, as

appropriate, within the banking instrument:

a. Bank goals and objectives;

b. Ownership of bank lands;

c. Bank size and classes of wetlands and/or other aquatic resources

proposed for inclusion in the bank, including a site plan and

specifications;

d. Description of baseline conditions at the bank site;

e. Geographic service area;

f. Wetland classes or other aquatic resource impacts suitable for

compensation;

g. Methods for determining credits and debits;

h. accounting procedures;

i. Performance standards for determining credit availability and

bank success;

j. Reporting protocols and monitoring plan;

k. Contingency and remedial actions and responsibilities;

l. Financial assurances;

m. Compensation ratios;

n. Provisions for long-term management and maintenance.

The terms and conditions of the banking instrument may be amended,

in accordance with the procedures used to establish the instrument and

subject to agreement by the signatories.

In cases where initial establishment of the mitigation bank

involves a discharge into waters of the United States requiring Section

10/404 authorization, the banking instrument will be made part of a

Department of the Army permit for that discharge. Submittal of an

[[Page 58610]]

individual permit application should be accompanied by a sufficiently-

detailed prospectus to allow for concurrent processing of each.

Preparation of a banking instrument, however, should not alter the

normal permit evaluation process timeframes. A bank sponsor may proceed

with activities for the construction of a bank subsequent to receiving

the Department of the Army authorization. It should be noted, however,

that a bank sponsor who proceeds in the absence of a banking instrument

does so at his/her own risk.

In cases where the mitigation bank is established pursuant to the

FSA, the banking instrument will be included in the plan developed or

approved by NRCS and the Fish and Wildlife Service (FWS).

3. Agency Roles and Coordination

Collectively, the signatory agencies to the banking instrument will

comprise the Mitigation Bank Review Team (MBRT). Representatives from

the Corps, EPA, FWS, National Marine Fisheries Service (NMFS) and NRCS,

as appropriate given the projected use for the bank, should typically

comprise the MBRT. In addition, it is appropriate for representatives

from state, tribal and local regulatory and resource agencies to

participate where an agency has authorities and/or mandates directly

affecting or affected by the establishment, use or operation of a bank.

No agency is required to sign a banking instrument; however, in signing

a banking instrument, an agency agrees to the terms of that instrument.

The Corps will serve as Chair of the MBRT, except in cases where

the bank is proposed solely for the purpose of complying with the FSA,

in which case NRCS will be the MBRT Chair. In addition, where a bank is

proposed to satisfy the requirements of another Federal, state, tribal

or local program, it may be appropriate for the administering agency to

serve as co-Chair of the MBRT.

The primary role of the MBRT is to facilitate the establishment of

mitigation banks through the development of mitigation banking

instruments. Because of the different authorities and responsibilities

of each agency represented on the MBRT, there is a benefit in achieving

agreement on the banking instrument. For this reason, the MBRT will

strive to obtain consensus on its actions. The Chair of the MBRT will

have the responsibility for making final decisions regarding the terms

and conditions of the banking instrument where consensus cannot

otherwise be reached within a reasonable timeframe (e.g., 90 days from

the date of submittal of a complete prospectus). The MBRT will review

and seek consensus on the banking instrument and final plans for the

restoration, creation, enhancement, and/or preservation of wetlands and

other aquatic resources.

Consistent with its authorities under Section 10/404, the Corps is

responsible for authorizing use of a particular mitigation bank on a

project-specific basis and determining the number and availability of

credits required to compensate for proposed impacts in accordance with

the terms of the banking instrument. Decisions rendered by the Corps

must fully consider review agency comments submitted as part of the

permit evaluation process. Similarly, the NRCS, in consultation with

the FWS, will make the final decision pertaining to the withdrawal of

credits from banks as appropriate mitigation pursuant to FSA.

4. Role of the Bank Sponsor

The bank sponsor is responsible for the preparation of the banking

instrument in consultation with the MBRT. The bank sponsor should,

therefore, have sufficient opportunity to discuss the content of the

banking instrument with the MBRT. The bank sponsor is also responsible

for the overall operation and management of the bank in accordance with

the terms of the banking instrument, including the preparation and

distribution of monitoring reports and accounting statements/ledger, as

necessary.

5. Public Review and Comment

The public should be notified of and have an opportunity to comment

on all bank proposals. For banks which require authorization under an

individual Section 10/404 permit or a state, tribal or local program

that involves a similar public notice and comment process, this

condition will typically be satisfied through such standard procedures.

For other proposals, the Corps or NRCS, upon receipt of a complete

banking prospectus, should provide notification of the availability of

the prospectus for a minimum 21-day public comment period. Notification

procedures will be similar to those used by the Corps in the standard

permit review process. Copies of all public comments received will be

distributed to the other members of the MBRT and the bank sponsor for

full consideration in the development of the final banking instrument.

6. Dispute Resolution Procedure

The MBRT will work to reach consensus on its actions in accordance

with this guidance. It is anticipated that all issues will be resolved

by the MBRT in this manner.

a. Development of the Banking Instrument

During the development of the banking instrument, if any agency

representative considers that a particular decision raises concern

regarding the application of existing policy or procedures, an agency

may request, through written notification, that the issue be reviewed

by the Corps District Engineer, or NRCS State Conservationist, as

appropriate. Said notification will describe the issue in sufficient

detail and provide recommendations for resolution. Within 20 days, the

District Engineer or State Conservationist (as appropriate) will

consult with the notifying agency(ies) and will resolve the issue. The

resolution will be forwarded to the other MBRT member agencies. The

bank sponsor may also request the District Engineer or State

Conservationist review actions taken to develop the banking instrument

if the sponsor believes that inadequate progress has been made on the

instrument by the MBRT.

b. Application of the Banking Instrument

As previously stated, the Corps and NRCS are responsible for making

final decisions on a project-specific basis regarding the use of a

mitigation bank for purposes of Section 10/404 and FSA, respectively.

In the event an agency on the MBRT is concerned that a proposed use may

be inconsistent with the terms of the banking instrument, that agency

may raise the issue to the attention of the Corps or NRCS through the

permit evaluaiton process. In order to facilitate timely and effective

consideration of agency comments, the Corps or NRCS, as appropriate,

will advise the MBRT agencies of a proposed use of a bank. The Corps

will fully consider comments provided by the review agencies regarding

mitigation as part of the permit evaluation process. The NCRS will

consult with FWA is making its decisions pertaining to mitigation.

If, in the view of an agency on the MBRT, an issued permit or

series of permits reflects a pattern of concern regarding the

application of the terms of the banking instrument, that agency may

initiate review of the concern by the full MBRT through written

notification to the MBRT Chair. The MBRT Chair will convene a meeting

of the MBRT, or initiate another appropriate forum for communication,

typically within 20 days of receipt of notification, to resolve

concerns. Any such effort to address concerns

[[Page 58611]]

regarding the application of a banking instrument will not delay any

decision pending before the authorizing agency (e.g., Corps or NRCS).

D. Criteria for Use of a Mitigation Bank

1. Project Applicability

All activities regulated under Section 10/404 may be eligible to

use a mitigation bank as compensation for unavoidable impacts to

wetlands and/or other aquatic resources. Mitigation banks established

for FSA purposes may be debited only in accordance with the mitigation

and replacement provisions of 7 CFR Part 12.

Credits from mitigation banks may also be used to compensate for

environmental impacts authorized under other programs (e.g., state or

local wetland regulatory programs, NPDES program, Corps civil works

projects, Superfund removal and remedial actions). In no case may the

same credits be used to compensate for more than one activity; however,

the same credits may be used to compensate for an activity which

requires authorization udner more than one program.

2. Relationship to Mitigation Requirements

Under the existing requirements of Section 10/404, all appropriate

and practicable steps must be undertaken by the applicant to first

avoid and then minimize adverse impacts to aquatic resources, prior to

authorization to use a particular mitigation bank. Remaining

unavoidable impacts must be compensated to the extent appropriate and

practicable. For both the Section 10/404 and ``Swampbuster'' programs,

requirements for compensatory mitigation may be satisfied through the

use of mitigation banks when either on-site compensation is not

practicable or use of the mitigation bank is environmentally preferable

to on-site compensation.

It is important to emphasize that applicants should not expect that

establishment of, or purchasing credits from, a mitigation bank will

necessarily lead to a determination of compliance with applicable

mitigation requirements (i.e., Section 404(b)(1) Guidelines or FSA

Manual), or as excepting projects from any applicable requirements.

3. Geographic Limits of Applicability

The service area of a mitigation bank is the area (e.g., watershed,

county) wherein a bank can reasonably be expected to provide

appropriate compensation for impacts to wetlands and/or other aquatic

resources. This area should be designated in the banking instrument.

Designation of the service area should be based on consideration of

hydrologic and biotic criteria, and be stipulated in the banking

instrument. Use of a mitigation bank to compensate for impacts beyond

the designated service area may be authorized, on a case-by-case basis,

where it is determined to be practicable and environmentally desirable.

The geographic extent of a service area should, to the extent

environmentally desirable, be guided by the cataloging unit of the

``Hydrologic Unit map of the United States'' (USGS, 1980) and the

ecoregion of the ``Ecoregions of the United States'' (James M. Omernik,

EPA, 1986) or section of the ``Descriptions of the Ecoregions of the

United States'' (Robert G. Bailey, USDA, 1980). It may be appropriate

to use other classification systems developed at the state or regional

level for the purpose of specifying bank service areas, when such

systems compare favorably in their objectives and level of detail. In

the interest of the integrating banks with other resource management

objectives, bank service areas may encompass larger watershed areas if

the designation of such areas is supported by local or regional

management plans (e.g., Special Area Management Plans, Advance

Identification), State Wetland Conservation Plans or other Federally

sponsored or recognized resource management plans. Furthermore,

designation of a more inclusive service area may be appropriate for

mitigation banks whose primary purpose is to compensate for linear

projects that typically involve numerous small impacts in several

different watersheds.

4. Use of a Mitigation Bank vs. On-Site 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 when there is no practicable opportunity for on-site compensation,

or when use of a bank is environmentally preferable to on-site

compensation. On-site mitigation may be preferable where there is a

practicable opportunity to compensate for important local functions

including local flood control functions, habitat for a species or

population with a very limited geographic range or narrow environmental

requirements, or where local water quality concerns dominate.

In choosing between on-site mitigation and use of a mitigation

bank, careful consideration should be given to the likelihood for

successfully establishing the desired habitat type, the compatibility

of the mitigation project with adjacent land uses, and the

practicability of long-term monitoring and maintenance to determine

whether the effort will be ecologically sustainable, as well as the

relative cost of mitigation alternatives. In general, use of a

mitigation bank to compensate for minor aquatic resource impacts (e.g.,

numerous, small impacts associated with linear projects; impacts

authorized under nationwide permits) is preferable to on-site

mitigation. With respect to larger aquatic resource impacts, use of a

bank may be appropriate if it is capable of replacing essential

physical and/or biological functions of the aquatic resources which are

expected to be lost or degraded. Finally, there may be circumstances

warranting a combination of on-site and off-site mitigation to

compensate for losses.

5. In-kind vs. Out-of-kind Mitigation Determinations

In the interest of achieving functional replacement, in-kind

compensation of aquatic resource impacts should generally be required.

Out-of-kind compensation may be acceptable if it is determined to be

practicable and environmentally preferable to in-kind compensation

(e.g., of greater ecological value to a particular region). However,

non-tidal wetlands should typically not be used to compensate for the

loss or degradation of tidal wetlands. Decisions regarding out-of-kind

mitigation are typically made on a case-by-case basis during the permit

evaluation process. The banking instrument may identify circumstances

in which it is environmentally desirable to allow out-of-kind

compensation within the context of a particular mitigation bank (e.g.,

for banks restoring a complex of associated wetland types). Mitigation

banks developed as part of an area-wide management plan to address a

specific resource objective (e.g., restoration of a particularly

vulnerable or valuable wetland habitat type) may be such an example.

6. Timing of Credit Withdrawal

The number of credits available for withdrawal (i.e., debiting)

should generally be commensurate with the level of aquatic functions

attained at a bank at the time of debiting. The level of function may

be determined through the application of performance standards tailored

to the specific restoration, creation or enhancement activity at the

bank site or through the use of an appropriate functional assessment

methodology.

[[Page 58612]]

The success of a mitigation bank with regard to its capacity to

establish a healthy and fully functional aquatic system relates

directly to both the ecological and financial stability of the bank.

Since financial considerations are particularly critical in early

stages of bank development, it is generally appropriate, in cases where

there is adequate financial assurance and where the likelihood of the

success of the bank is high, to allow limited debiting of a percentage

of the total credits projected for the bank at maturity. Such

determinations should take into consideration the initial capital costs

needed to establish the bank, and the likelihood of its success.

However, it is the intent of this policy to ensure that those actions

necessary for the long-term viability of a mitigation bank be

accomplished prior to any debiting of the bank. In this regard, the

following minimum requirements should be satisfied prior to debiting:

(1) banking instrument and mitigation plans have been approved; (2)

bank site has been secured; and (3) appropriate financial assurances

have been established. In addition, initial physical and biological

improvements should be completed no later than the first full growing

season following initial debiting of a bank. The temporal loss of

functions associated with the debiting of projected credits may justify

the need for requiring higher compensation ratios in such cases. For

mitigation banks which propose multiple-phased construction, similar

conditions should be established for each phase.

Credits attributed to the preservation of existing aquatic

resources may become available for debiting immediately upon

implementation of appropriate legal protection accompanied by

appropriate changes in land use or other physical changes, as

necessary.

7. Crediting/Debiting/Accounting Procedures

Credits and debits are the terms used to designate the units of

trade (i.e., currency) in mitigation banking. Credits represent the

accrual or attainment of aquatic functions at a bank; debits represent

the loss of aquatic functions at an impact or project site. Credits are

debited from a bank when they are used to offset aquatic resource

impacts (e.g. for the purpose of satisfying Section 10/404 permit or

FSA requirements).

An appropriate functional assessment methodology (e.g., Habitat

Evaluation Procedures, hydrogeomorphic approach to wetlands functional

assessment, other regional assessment methodology) acceptable to all

signatories should be used to assess wetland and/or other aquatic

resource restoration, creation and enhancement activities within a

mitigation bank, and to quantify the amount of available credits. The

range of functions to be assessed will depend upon the assessment

methodology identified in the banking instrument. The same methodology

should be used to assess both credits and debits. If an appropriate

functional assessment methodology is impractical to employ, acreage may

be used as a surrogate for measuring function. Regardless of the method

employed, the number of credits should reflect the difference between

site conditions under the with-and without-bank scenarios.

The bank sponsor should be responsible for assessing the

development of the bank and submitting appropriate documentation of

such assessments to the authorizing agency(ies), who will distribute

the documents to the other members of the MBRT for review. Members of

the MBRT are encouraged to conduct regular (e.g., annual) on-site

inspections, as appropriate, to monitor bank performance.

Alternatively, functional assessments may be conducted by a team

representing involved resources and regularly agencies and other

appropriate parties. The number of available credits in a mitigation

bank may need to be adjusted to reflect actual conditions.

The banking instrument should require that bank sponsors establish

and maintain an accounting system (i.e., ledger) which documents the

activity of all mitigation bank accounts. Each time an approved debit/

credit transaction occurs at a given bank, the bank sponsor should

submit a statement to the authorizing agency(ies). The bank sponsor

should also generate an annual ledger report for all mitigation bank

accounts to be submitted to the MBRT Chair for distribution to each

member of the MBRT.

Credits may be sold to third parties. The cost of mitigation

credits to a third party is determined by the bank sponsor.

Party Responsible for Bank Success

The bank sponsor is responsible for assuring the success of the

debited restoration, creation, enhancement and preservation activities

at the mitigation bank, and it is therefore extremely important that an

enforceable mechanism be adopted establishing the responsibility of the

bank sponsor to develop and operate the bank properly. Where

authorization under Section 10/404 and/or FSA is necessary to establish

the bank, the Department of the Army permit or NRCS plan should be

conditioned to ensure that provisions of the banking instrument are

enforceable by the appropriate agency(ies). In circumstances where

establishment of a bank does not require such authorization, the

details of the bank sponsor's responsibilities should be delineated by

the relevant authorizing agency (e.g., the Corps in the case of Section

10/404 permits) in any permit in which the permittee's mitigation

obligations are met through use of the bank. In addition, the bank

sponsor should sign such permits for the limited purpose of meeting

those mitigation responsibilities, thus confirming that those

responsibilities are enforceable against the bank sponsor if necessary.

E. Long-Term Management, Monitoring and Remediation

1. Bank Operational Life

The operational life of a bank refers to the period during which

the terms and conditions of the banking instrument are in effect. With

the exception of arrangements for the long-term management and

protection in perpetuity of the wetlands and/or other aquatic

resources, the operational life of a mitigation bank terminates at the

point when (1) Compensatory mitigation credits have been exhausted or

banking activity is voluntarily terminated with written notice by the

bank sponsor provided to the Corps or NRCS and other members of the

MBRT, and (2) it has been determined that the debited bank is

functionally mature and/or self-sustaining to the degree specified in

the banking instrument.

2. Long-term Management and Protection

The wetlands and/or other aquatic resources in a mitigation bank

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

organization). Such arrangements should effectively restrict harmful

activities (i.e., incompatible uses \2\) that might otherwise

jeopardize the purpose of the bank. In exceptional circumstances, real

estate arrangements may be approved which dictate finite protection for

a bank (e.g., for coastal protection projects which prolong the

ecological viability of

[[Page 58613]]

the aquatic system). However, in no case should finite protection

extend for a lesser time than the duration of project impacts for which

the bank is being used to provide compensation.

\2\ For example, certain silvicultural practices (e.g. clear

cutting and/or harvests on short-term rotations) may be incompatible

with the objectives of a mitigation bank. In contrast, silvicultural

practices such as long-term rotations, selective cutting,

maintenance of vegetation diversity, and undisturbed buffers are

more likely to be considered a compatible use.

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The bank sponsor is responsible for securing adequate funds for the

operation and maintenance of the bank during its operational life, as

well as for the long-term management of the wetlands and/or other

aquatic resources, as necessary. The banking instrument should identify

the entity responsible for the ownership and long-term management of

the wetlands and/or other aquatic resources. Where needed, the

acquisition and protection of water rights should be secured by the

bank sponsor and documented in the banking instrument.

3. Monitoring Requirements

The bank sponsor is responsible for monitoring the mitigation bank

in accordance with monitoring provisions identified in the banking

instrument to determine the level of success and identify problems

requiring remedial action. Monitoring provisions should be set forth in

the banking instrument and based on scientifically sound performance

standards prescribed for the bank. monitoring should be conducted at

time intervals appropriate for the particular project type and until

such time that the authorizing agency(ies), in consultation with the

MBRT, are confident that success is being achieved (i.e., performance

standards are attained). The period for monitoring will typically be

five years; however, it may be necessary to extend this period for

projects requiring more time to reach a stable condition (e.g.,

forested wetlands) or where remedial activities were undertaken. Annual

monitoring reports should be submitted to the authorizing agency(ies),

who is responsible for distribution to the other members of the MBRT,

in accordance with the terms specified in the banking instrument.

4. Remedial Action

The banking instrument should stipulate the general procedures for

identifying and implementing remedial measures at a bank, or any

portion thereof. Remedial measures should be based on information

contained in the monitoring reports (i.e., the attainment of prescribed

performance standards), as well as agency site inspections. The need

for remediation will be determined by the authorizing agency(ies) in

consultation with the MBRT and bank sponsor.

5. Financial Assurances

The bank sponsor is responsible for securing sufficient funds or

other financial assurances to cover contingency actions in the event of

bank default or failure. Accordingly, banks posing a greater risk of

failure and where credits have been debited, should have comparatively

higher financial sureties in place, than those where the likelihood of

success is more certain. In addition, the bank sponsor is responsible

for securing adequate funding to monitor and maintain the bank

throughout its operational life, as well as beyond the operational life

if not self-sustaining. Total funding requirements should reflect

realistic cost estimates for monitoring, long-term maintenance,

contingency and remedial actions.

Financial assurances may be in the form of performance bonds,

irrevocable trusts, escrow accounts, casualty insurance, letters of

credit, legislatively-enacted dedicated funds for government operate

banks or other approved instruments. Such assurances may be phased-out

or reduced, once it has been demonstrated that the bank is functionally

mature and/or self-sustaining (in accordance with performance

standards).

F. Other Considerations

1. In-lieu-fee Mitigation Arrangements

For purposes of this guidance, 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 projects, 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 there are 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.

2. Special Considerations for ``Swampbuster''

Current FSA legislation limits the extent to which mitigation

banking can be used for FSA purposes. Therefore, if a mitigation bank

is to be used for FSA purposes, it must meet the requirements of FSA.

III. Definitions

For the purposes of this guidance document the following terms are

defined:

A. Authorizing agency. Any Federal, state, tribal or local agency

that has authorized a particular use of a mitigation bank as

compensation for an authorized activity; the authorizing agency will

typically have the enforcement authority to ensure that the terms and

conditions of the banking instrument are satisfied.

B. Bank sponsor. Any public or private entity responsible for

establishing and, in most circumstances, operating a mitigation bank.

C. Compensatory mitigation. For purposes of Section 10/404,

compensatory mitigation 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 which remain after all appropriate and practicable

avoidance and minimization has been achieved.

D. Consensus. The term consensus, as defined herein, is a process

by which a group synthesizes its concerns and ideas to form a common

collaborative agreement acceptable to all members. While the primary

goal of consensus is to reach agreement on an issue by all parties,

unanimity may not always be possible.

E. Creation. The establishment of a wetland or other aquatic

resource where one did not formerly exist.

F. Credit. A unit of measure representing the accrual or attainment

of aquatic functions at a mitigation bank; the measure of function is

typically indexed to the number of wetland acres restored, created,

enhanced or preserved.

G. Debit. A unit of measure representing the loss of aquatic

functions at an impact or project site.

H. Enhancement. Activities conducted in existing wetlands or other

aquatic resources which increase one or more aquatic functions.

I. Mitigation. For purposes of Section 10/404 and consistent with

the Council on Environmental Quality regulations, the Section 404(b)(1)

Guidelines and the Memorandum of Agreement Between

[[Page 58614]]

the Environmental Protection Agency and the Department of the Army

Concerning the Determination of Mitigation under the Clean Water Act

Section 404(b)(1) Guidelines, mitigation means sequentially avoiding

impacts, minimizing impacts, and compensating for remaining unavoidable

impacts.

J. Mitigation bank. A mitigation bank is a site where wetlands and/

or other aquatic resources are restored, created, enhanced, or in

exceptional circumstances, preserved expressly for the purpose of

providing compensatory mitigation in advance of authorized impacts to

similar resources. For purposes of Section 10/404, use of a mitigation

bank may only be authorized when impacts are unavoidable.

K. Mitigation Bank Review Team (MBRT). An interagency group of

Federal, state, tribal and/or local regulatory and resource agency

representatives which are signatory to a banking instrument and oversee

the establishment, use and operation of a mitigation bank.

L. Practicable. Available and capable of being done after taking

into consideration cost, existing technology, and logistics in light of

overall project purposes.

M. 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.

N. 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 a substantially degraded state.

O. Service area. The service area of a mitigation bank is the

designated area (e.g., watershed, county) wherein a bank can reasonably

be expected to provide appropriate compensation for impacts to wetlands

and/or other aquatic resources.

John H. Zirschky,

Acting Assistant Secretary (Civil Works), Department of the Army.

Robert Perciasepe,

Assistant Administrator for Water, Environmental Protection Agency.

Thomas R. Hebert,

Acting Undersecretary for Natural Resources and Environment,

Department of Agriculture.

Robert P. Davison,

Acting Assistant Secretary for Fish and Wildlife and Parks,

Department of the Interior.

Douglas K. Hall,

Assistant Secretary for Oceans and Atmosphere, Department of

Commerce.

[FR Doc. 95-28907 Filed 11-27-95; 8:45 am]

BILLING CODE 3710-92-M