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

[Federal Register Volume 60, Number 43 (Monday, March 6, 1995)]

[Notices]

[Pages 12286-12293]

From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

[FR Doc No: 95-5280]

[[Page 12285]]

_______________________________________________________________________

Part II

Department of Defense

Department of 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; Notice

Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 /

Notices

[[Page 12286]]

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.

-----------------------------------------------------------------------

SUMMARY: The Army Corps of Engineers (Corps), Environmental Protection

Agency (EPA), Natural Resources Conservation Service (NRCS), Fish and

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

proposing guidance regarding the establishment, use and operation of

mitigation banks for the purpose of providing compensatory mitigation

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 associated with

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: Written comments must be submitted on or before April 20, 1995.

ADDRESSES: All comments concerning this proposed document should be

submitted in writing to: Mitigation Banking Docket, Wetlands Division,

Mail Code (4502F), U.S. Environmental Protection Agency, 401 M Street,

SW., Washington, DC 20460.

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

272-1725; Ms. Julie Metz (Corps) at (703) 355-3065; Mr. Thomas Kelsch

(EPA) at (202) 260-8795; Ms. Sandra Byrd (NRCS) at (202) 690-3501; Mr.

Michael Long (FWS) at (703) 358-2183; Ms. Susan-Marie Stedman (NMFS) at

(301) 713-2325.

SUPPLEMENTARY INFORMATION: Mitigating the harmful effects 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 a sequential approach to

mitigating these harmful effects by first avoiding unnecessary impacts,

then minimizing environmental harm, and, finally, compensating for

remaining 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 mitigating unavoidable adverse

wetland losses in advance of development actions, when compensatory

mitigation cannot be achieved at the development site or is not as

environmentally beneficial. It typically involves the consolidation of

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 within

environmentally sound limits as a means for compensating for authorized

wetland impacts. 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.

This notice responds to a need identified in the Corps national

study for more detailed guidance on the policy of the Federal

government regarding the establishment, use and operation of mitigation

banks. The proposed guidance is 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.

The agencies are specifically soliciting public comment on the proposed

guidance and will consider all comments submitted by the public in

developing final guidance. A copy of the proposed guidance is published

with this notice.

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.

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

[[Page 12287]] expressly to assist Federal personnel, bank sponsors,

and others in meeting the purpose and goals 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 (FSA) (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.

The policies and procedures 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 or as excepting such projects from

any applicable requirements.

Mitigation banks 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 for

projects that qualify and provide more cost-effective compensatory

mitigation opportunities;

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. The existence of mitigation banks can contribute towards

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

by providing applicants with opportunities to compensate for authorized

impacts when mitigation might not otherwise be required.

II. Policy Considerations

The following policy considerations provide general guidance for

the establishment, use and operation of mitigation banks. This policy

applies to all 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, the fundamental precepts of this guidance should

apply to all future mitigation banks.

For the purposes of Section 10/404, 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

expressly 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 not establish any

new requirements.

1. Clean Water Act Section 404 (33 USC 1344).

2. Rivers and Harbors Act of 1899 Section 10 (33 USC 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 USC 3801 et seq.).

7. National Environmental Policy Act (42 USC 4321 et seq.),

including the Council on Environmental Quality's implementing

regulations (40 CFR parts 1500-1508).

8. Fish and Wildlife Coordination Act (16 USC 661 et seq.).

9. Fish and Wildlife Service Mitigation Policy (46 FR 7644-7663,

1981).

10. Magnuson Fishery Conservation and Management Act (16 USC 1801

et seq.).

11. National Marine Fisheries Service Habitat Conservation Policy

(48 FR 53142-53147, 1983).

B. Planning Considerations

1. Prospectus

Prospective bank sponsors are encouraged to submit a prospectus to

[[Page 12288]] the Army Corps of Engineers (Corps) or Natural Resources

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

process by the appropriate agencies (e.g., pre-application

coordination). The purpose of the prospectus is to provide information

to the agencies regarding the general need for and technical

feasibility of a bank, as well as its potential for providing

compensatory mitigation within a particular watershed or other

designated geographic area (i.e., bank service area). Formal agency

involvement and review is initiated with submittal of a prospectus. The

submittal of a prospectus and establishment of an approved mitigation

bank in no way guarantees use of a bank to satisfy compensatory

mitigation requirements of any authorized activity.

\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.

---------------------------------------------------------------------------

2. Goal Setting

The overall goal of a mitigation bank should be the establishment

or reestablishment of a self-sustaining, functioning aquatic system,

which replaces the functions and acreage of wetlands and other aquatic

resources anticipated to be adversely affected within a watershed or

other designated geographic area. It is desirable to set the particular

objectives (i.e., determining the type and character of compensatory

mitigation to be developed) for a mitigation bank in advance of site

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

mitigation need; the site selection should support achieving the goal

and objectives.

3. Site Selection

Consideration should be given to the ecological suitability of a

site for achieving the goal and objectives of a bank, i.e., that it

possess 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 upland resources (e.g., mature forests) or

cultural sites, or threatened and endangered species habitat are not

compromised in the process of establishing a bank. Other factors for

consideration include development trends (i.e., land use changes),

habitat status and trends, local or regional goals for the restoration

or protection of particular habitat types or functions (e.g.,

reestablishment of habitat corridors), water quality and floodplain

management goals, and establishment of habitat for species of concern.

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

must 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, may not be counted toward bank credits.

Federally funded wetland conservation projects undertaken via

separate authority and for other purposes, such as the Wetlands Reserve

Program, Farmers 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.

4. Technical Feasibility

Mitigation banks should be planned and designed to be self-

sustaining over time to the extent possible and pose little risk of

failure. The techniques for restoring and creating wetlands and/or

other aquatic resources must be carefully selected, since restoration/

creation science is constantly evolving. The restoration of historic or

substantially degraded wetlands and/or other aquatic resources

utilizing proven techniques increases the likelihood of mitigation

success and lessens the loss of valuable uplands due to wetland

creation. Thus, restoration should be the first option considered when

siting a bank.

In general, banks which involve complex hydraulic engineering

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

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 be avoided to the extent

possible. 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).

Mitigation techniques should be sufficiently well understood and

reliable to allow the development of detailed construction plans and

specifications for review and approval. 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.

5. 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.

Consistent with existing regulations, policies and guidance, 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 under exceptional circumstances. 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 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

[[Page 12289]] 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 (e.g., by Section 10/404 or the

FSA ``Swampbuster'' provisions). The existence of a demonstrable threat

must 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. 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 generally require a greater number of

acres from a preservation bank than from a bank which is based on

restoration, creation or enhancement.

6. 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. 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. The

presence of upland areas may increase the per-unit value of the aquatic

habitat in the bank, but upland areas are not directly counted as

mitigation credits.

7. Mitigation Banking and Watershed Planning

Mitigation banks should be planned and developed to address

resource needs within a particular watershed. Moreover, decisions

regarding the location and uses of a mitigation bank, as well as the

type of wetlands and/or other aquatic resources to be restored,

created, enhanced or preserved may often be made within the context of

ecological objectives set for the watershed. Watershed planning efforts

often identify categories of activities having minimal adverse effects

on the aquatic ecosystem which could be authorized under a general

permit. In order to reduce 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. Mitigation Banking Instruments

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. 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:

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;

d. Description of baseline conditions;

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.

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 the

Department of the Army (DA) permit. The permit application to establish

a bank will be evaluated by the Corps on its own merits pursuant to

Section 10/404 policies and procedures. As such, preparation of a

banking instrument 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 DA authorization. It

should be noted, however, that a bank sponsor who proceeds in the

absence of a banking instrument does so as 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).

2. 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 comply with the

terms of that instrument.

The Chair of the MBRT will be the Corps, 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. Either agency may delegate that

responsibility to another Federal, state, tribal or local agency, as

appropriate.

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 up front. For this reason, the MBRT will strive to obtain

consensus\2\ on its actions. The MBRT will review and reach consensus

on the banking instrument and final plans for the restoration,

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

aquatic resources. Once the banking instrument has been signed, the

MBRT will not typically be involved in the operation of a bank on a

project-specific basis. Periodically, the MBRT will review monitoring

and accounting reports. In the event a bank [[Page 12290]] sponsor

proposes remedial actions, or an agency on the MBRT considers remedial

actions to be necessary, the MBRT will review and reach consensus on

the specific remedial measures to be implemented at a bank.

\2\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. Under consensus,

agreements or decisions are made without voting. An agreement is

reached through a process of gathering information and viewpoints,

discussion, analysis, persuasion, a combination or synthesis of the

proposals and/or development of totally new solutions that are

acceptable to the group. The goal of consensus is to reach an

agreement or decision with which everyone can agree, but not

necessarily unanimity. A consensus agreement is a recognition by a

group that it has reached the best achievable solution for the

parties involved.

---------------------------------------------------------------------------

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.

3. 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 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.

4. 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 the agency representatives on the MBRT

cannot reach consensus on the content of the banking instrument within

a reasonable timeframe, or if an agency representative considers that a

particular decision raises concern regarding the application of

existing policy or procedures, an agency may request the issue be

reviewed by a higher level within each agency. If resolution is still

not achieved, any agency(ies) may initiate interagency review through

written notification to, as appropriate, the Corps District Engineer,

EPA Regional Wetlands Division Director, FWS Field Supervisor, NMFS

Habitat Coordinator, NRCS State Conservationist and corresponding

management levels within other agencies represented on the MBRT. 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), or an appropriate designee,

will lead necessary discussions to achieve interagency concurrence on

the issue of concern, and forward documentation of the resolution to

the MBRT Chair for distribution 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 not comply with the terms of

the banking instrument, that agency may raise the issue to the

attention of the Corps or NRCS through the permit evaluation 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 and initiate discussion as

necessary. The Corps will fully consider comments provided by the

review agencies regarding mitigation as part of the permit evaluation

process. The NRCS will consult with FWS in 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 10 days upon receipt of notification, to resolve

concerns. If resolution is not reached, an agency may request that the

issue be reviewed by higher levels within each agency consistent with

the procedures described in the preceding paragraph. Invoking this

dispute resolution procedure to address concerns regarding the

application of a banking instrument will not delay any permit decision

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

This guidance does not affect in any way the Corps statutory

authorities and responsibilities under Section 404 of the Clean Water

Act or Section 10 of the Rivers and Harbors Act. The ability of an

agency to elevate a particular permit or policy issue in accordance

with the Section 404(q) Memoranda of Agreement between the Department

of the Army and the Federal advisory agencies will not be limited in

any way by this guidance. Similarly, EPA's authority to deny or

restrict authorization of a CWA permit in accordance with Section

404(c) will not be limited in any way by this guidance.

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 in so far as the use complies

with the terms of the banking instrument. Mitigation banks established

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

and replacement provisions of 7 CFR part 12.

Mitigation banks may also be used to compensate for adverse impacts

to wetlands and/or other aquatic resources authorized under other

resource protection programs such as state regulatory programs. 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 under more than one program.

2. Relationship to Mitigation Requirements

For purposes 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 participation in, a mitigation bank will

ultimately 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. [[Page 12291]]

3. Geographic Limits of Applicability

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. Designation of the service area should be based on

consideration of hydrologic, edaphic and biotic criteria, and be

stipulated in the banking instrument.

The geographic extent of a service area should be guided by the

cataloging unit of the ``Hydrologic Unit Map of the United States''

(USGS, 1980) and 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 hydrologic and biotic classification

and mapping 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

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 watershed

management plans.

4. Use of a Mitigation Bank vs. On-Site Mitigation

As indicated in 1990 Memorandum of Agreement on mitigation between

the EPA and DA, compensatory mitigation should be undertaken in areas

adjacent or contiguous to the site of the aquatic resource impacts when

practicable and environmentally preferable. This preference for on-site

mitigation is established because on-site mitigation often has greater

potential for compensating for particular aquatic functions. For

example, on-site mitigation may be the most appropriate option for

compensating for 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.

The preference for on-site mitigation, however, 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. In making the latter determination,

careful consideration must be given to wetland functions, landscape

position, affected species populations at the impact and mitigation

bank sites, and potential on-site compensation areas. In general, it

may be desirable to provide compensation for minor aquatic resource

impacts through consolidation in a well-managed bank. There may also be

circumstances warranting a combination of on-site and off-site (i.e.,

bank) mitigation to compensate for losses.

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 and is environmentally preferable to on-site

compensatory mitigation. Moreover, for projects that might otherwise

cause or contribute to significant degradation (40 CFR part 230.10(c)),

a bank may only be used when it is demonstrated that use of the bank

will prevent or replace the lost functions that give rise to the

significant degradation finding, and where a reasonable assurance of

success is provided.

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, nor vice-versa. 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. 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.

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 may be appropriate to allow limited

debiting based upon a projected level of aquatic functions at a bank

(e.g. 15% of the total credits projected for the bank at maturity).

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 requirements should be satisfied prior to debiting: (1)

Banking instrument and final 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 within the first full growing season

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

associated with the debiting of projected credits may require higher

compensation ratios. Further debiting of the bank should not occur

until the allocated projected credits have accrued and additional

credits have accrued to match proposed debiting.

Credits based solely on 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) acceptable to all signatories should be used to assess

wetland and/or other aquatic resource restoration, creation

[[Page 12292]] and enhancement efforts 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, credits and debits can be based on simple

indices (e.g. acres) of various classes of wetlands and/or other

aquatic resources (e.g., Cowardin et al, 1979, as modified for National

Wetland Inventory mapping conventions). Regardless of the method

employed, credits should be based on 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) and members of the MBRT

for review. Alternatively, functional assessments may be conducted by a

team representing involved resource and regulatory agencies and other

appropriate parties.

Bank sponsors will 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 will submit a statement to each member

agency of the MBRT. The bank sponsor will also generate an annual

ledger report for all mitigation bank accounts for similar

distribution.

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

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

8. Party Responsible for Bank Success

The bank sponsor is responsible for assuring the success of the

restoration, creation, enhancement and preservation activities at the

mitigation bank. This responsibility must be clearly documented in the

banking instrument and in any authorization approving the use of the

bank as compensatory mitigation. Where authorization under Section 10/

404 and/or FSA is necessary to establish the bank, the DA permit or

NRCS plan should be conditioned accordingly to ensure that provisions

of the banking instrument are enforceable. In circumstances where

establishment of a bank does not require such authorization, adequate

mechanisms (i.e., legal and financial assurances) need to be in place

to ensure that provisions of the banking instrument are enforceable.

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 applicable, and

signatories of the instrument are responsible for carrying out its

provisions. With the exception of arrangements for the long-term

management and protection in perpetuity of the bank, 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

Mitigation banks should be protected in perpetuity with appropriate

real estate arrangements. In exceptional circumstances, real estate

arrangements may be approved which dictate finite protection for a

bank. 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.

All banks must be protected by legal instruments which effectively

prevent harmful activities (i.e., incompatible uses\3\) that would

jeopardize their continued conservation purpose. Acceptable instruments

are deed restrictions, conservation easements or other enforceable

legal mechanisms.

\3\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.

---------------------------------------------------------------------------

Banking instruments should identify the entity responsible for the

management of the bank beyond its operational life as a means to assure

the conservation purpose of the bank. 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 management of the bank

beyond its operational life, as necessary. 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 need to 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). Annual monitoring reports should be submitted

to the authorizing agency(ies) and members of the MBRT.

4. Remedial Action

The banking instrument should stipulate the 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 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 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, 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- [[Page 12293]] 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 leaving the

potential for project impacts to go unmitigated for a significant time

period. The Corps, in consultation with the other agencies, may find

there are some exceptional circumstances where such arrangements are

appropriate. In such cases, a formal agreement between the sponsor and

the agencies, similar to a banking instrument, is necessary to define

the limited circumstances and conditions under which its use is

considered appropriate.

2. Special Considerations for ``Swampbuster''

Note to readers: Current FSA legislation limits the extent to

which mitigation banking can be used for FSA purposes. FSA requires

that mitigation be conducted on prior-converted cropland as opposed

to farmed wetlands or other degraded wetland systems. If this

legislation is not modified to be consistent with the mitigation

provisions commonly used by other wetland regulatory programs,

including the Section 10/404 program, then the final mitigation

banking guidance will be appropriately annotated to identify the FSA

constraints.

III. Definitions

For the purposes of this guidance document the following terms are

defined:

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

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

B. 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 expressly for the purpose of compensating for

unavoidable adverse impacts which remain after all appropriate and

practicable avoidable and minimization has been achieved.

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

resource where one did not formerly exist.

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

of aquatic functions at a mitigation bank.

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

functions at an impact or project site.

F. Enhancement. Activities conducted in existing wetlands or other

aquatic resources to achieve specific management objectives or provide

conditions which previously did not exist, and which increase one or

more aquatic functions. Enhancement may involve trade-offs between

aquatic resource structure, functions, and values; a positive change in

one function may result in negative effects to other functions.

G. 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 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.

H. 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.

I. 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.

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

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

overall project purposes.

K. 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.

L. Restoration. Re-establishment of previously existing wetland or

other aquatic resource character and function(s) at a site where they

have ceased to exist, or exist only in a substantially degraded state.

M. 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.

[FR Doc. 95-5280 Filed 3-3-95; 8:45 am]

BILLING CODE 3710-92-M