A. The objective of the Clean Water Act (CWA) is “to restore and maintain the chemical, physical, and biological integrity of the Nation’s waters”. Toward achievement of this goal, the CWA prohibits the discharge of dredge or fill material into streams, wetlands, and other waters of the United States, unless a permit issued by the Department of Army Corps of Engineers (Corps) or approved State under Section 404 of the CWA authorizes such a discharge.

When there is an approved discharge, all appropriate and practicable steps must first be taken to avoid and minimize impacts to aquatic resources. For unavoidable impacts, compensatory mitigation is required to replace the loss of streams, wetlands, and other aquatic resource functions.

The Corps (or approved State authority) is responsible for determining the appropriate form and amount of compensatory mitigation required. Methods of providing compensatory mitigation include aquatic resource restoration, establishment, enhancement, and in certain circumstances, preservation. 

A. There are three ways compensatory mitigation can typically be accomplished:  Permittee-Responsible Mitigation, In-Lieu Fee Mitigation, and Mitigation Banks.  In-lieu fee and mitigation banks are “third-party” compensation because a third party (the in-lieu fee sponsor or bank) assumes the responsibility from the permittee for the implementation and success of the compensatory mitigation.

Permittee-Responsible Mitigation: 
A permittee may be required to provide compensatory mitigation through an aquatic resource restoration, establishment, enhancement and/or preservation activities.  This compensatory mitigation may be provided at or adjacent to the impact site (on-site mitigation) or at another location, usually within the same watershed as the permitted impact activity (off-site mitigation).  The permittee is responsible for the implementation and success of the approved mitigation project.

In-Lieu Fee Mitigation: 
A permit application may make a payment to an in-lieu fee program that will conduct stream, wetland, or other aquatic resource restoration, creation, enhancement, or preservation activities.  In-lieu fee programs are generally administered by government agencies or non-profit organizations that have established an agreement with the regulatory agencies to use in-lieu fee payments collected form permit applicants.  The in-lieu fee program is responsible for the implementation of the approved mitigation project.

Mitigation Banks:
A permit applicant may obtain “credits” from a mitigation bank.  A mitigation bank is a stream, wetland, or other aquatic resource area that has been restored, established, enhanced, or preserved.  This resource area is then set aside to compensate for future impacts to aquatic resources resulting from permitted activities.  The value of a bank is determined by quantifying the aquatic resource functions restored, established, enhanced, and/or preserved in terms of “credits”.  Permittees, upon approval of regulatory agencies, may acquire these credits to meet their requirements for compensatory mitigation.  The mitigation bank is responsible for the implementation of the approved mitigation project.

A. The new rule improves and consolidates existing regulation and guidance, to establish equivalent standards for all types of mitigation under the Clean Water Act, Section 404 Regulatory Program.  The new rule will also provide one set of regulations for compensatory mitigation, instead of the numerous separate guidance documents that have been in use up to now.  This rule uses improved science and results-oriented standards to increase the quality and effectiveness of stream/wetland restoration and conservation practices.  The rule does not change when compensatory mitigation is required, but it does change where and how it is required.

The rule establishes equivalent sets of standards that are based on better science, increased public participation, and innovative market-based tools.  These equivalent standards take into account the inherent differences among mitigation banks, in-lieu fee programs, and permittee-responsible mitigation, in an effort to maximize the number of ecologically-successful compensatory mitigation projects that project proponents can use to offset their permitted losses of aquatic resources.  It is believed that this rule will substantially improve compensatory mitigation project performance and accountability.

A. The most significant change required by the new rule is that compensation projects provided by all three compensation mechanisms, permittee-responsible mitigation, in-lieu fee program, mitigation banks, must have a mitigation plan(s) which include the same 12 fundamental components, which are

• Objectives
• Site selection criteria
• Site protection instruments (i.e.: conservation easements)
• Baseline information - for both the impact and compensation site(s)
• Credit determination methodology
• Mitigation work plan
• Maintenance plan
• Ecological performance standards
• Monitoring requirements
• A long-term management plan
• An adaptive management plan
• Financial assurances

This important change will dramatically improve the planning,, implementation, and management of all compensation projects and ensures more effective stream and wetland replacement projects.

A. In order to reduce risk, uncertainty, and to help ensure that the required compensation is provided the rule establishes a preference hierarchy for mitigation options.  The most preferred option is mitigation bank credits, which are usually in place before the activity is permitted.  In-lieu fee program credits are second in the preference hierarchy because they involve larger, more ecologically valuable compensatory mitigation projects, compared to permittee-responsible mitigation.  The third option is the permittee-responsible mitigation with three possible circumstances:

1. Conducted under a watershed approach
2. On-site/in-kind
3. Off-site/out-of-kind

While on-site/in-kind mitigation approaches will continue to be evaluated, the rule acknowledges that there are circumstances where off-site/out-of-kind compensatory mitigation may be more beneficial for a watershed.

A. The primary goals of this rule are to:

• Implement environmentally effective standards for compensatory mitigation that are based on best available science and incorporate key National Research Council (NRC) recommendations for improving the success of compensatory mitigation;
• Create a “level playing field” among the three compensatory mitigation mechanisms, through equivalent standards and greater accountability, so that providers of timely, high-quality mitigation are preferred, because there is greater assurance that the compensatory mitigation will be successful;
• Increase the efficiency and predictability of the process of proposing compensatory mitigation and approving new mitigation banks and in-lieu fee programs; and
• Enhance public participation in compensatory mitigation decision-making

A. The 2004 National Defense Authorization Act (PL 108-136) calls for the development of regulations, consisten with Section 404 of the Clean Water Act, that establish equivalent standards and criteria for mitigation banks, in-lieu fee programs, and permittee-responsible mitigation.

A. The Mitigation banks are a “performance-based” form of stream and wetland replacement because, unlike in-lieu fee mitigation and permittee-responsible mitigation, the tradable aquatic resource restoration credits generated by mitigation banks are tied to demonstrated achievement of project goals.  The new rule establishes a preference for the use of credits from mitigation banks when appropriate credits are available.  The new rule encourages the use of mitigation banks and in-lieu fee programs over use of permittee-responsible mitigation because mitigation banks and in-lieu fee programs usually provide consolidated compensatory mitigation projects that have less risk and uncertainty.  In its 2001 critique of wetland replacement practices, the NRC highlighted advantages of third-party compensation, such as mitigation banks and in-lieu fee programs, noting that:

• Mitigation banks and in-lieu fee programs use a multi-recourse agency process that brings more expertise and collaboration into the planning, approval, and oversight of wetland restoration and protection projects; and
• Mitigation banks and in-lieu fee programs have less risk than permittee-responsible mitigation projects to achieve desired long-term outcomes and to provide wetlands, streams, and other aquatic habitats that are protected in perpetuity by organizations dedicated to resource conservation.

A. The rule revises and improves the requirements for in-lieu fee programs in order to address concerns regarding their past performance and equivalency with the standards imposed on mitigation banks and permittee-responsible mitigation.  These reforms are based to a large extent on existing practices of the most successful in-lieu fee programs currently operating.  The reforms to improve accountability and performance include:

1. An advanced planning requirement
2. A cap on the umber of advance credits that can be released for sale before an in-lieu fee project site is secured and a mitigation plan is approved
3. Improved financial accounting requirements
4. The same interagency/public review and ecological/administrative requirements as mitigation banks and
5. Limiting in-lieu fee sponsors to government agencies and non-profit organizations

A. The rule is specifically designed to improve our ability to ensure no net loss of wetlands by addressing key recommendations associated with compensatory planning, monitoring, and long-term maintenance raised by the NRC in its 2001 report evaluating compensatory mitigation.  The nRC report summarized many studies which suggested that compensatory mitigation practices were falling short of providing for “no net loss” of wetland quality and quantity.

A. Yes.  The mitigation sequence established by the Clean Water Act, Section 404 (b)(1) guidelines have been retained in this rule.  Proposed impacts must be avoided to the maximum extent practicable; remaining unavoidable impacts must then be minimized, and finally compensated for to the extent appropriate and practicable.  The final rule affirms the mitigation sequence and clarifies for appropriate measures to compensate for unavoidable losses.

A. Yes.  The new rule clarifies the consideration of watershed-scale factors in the selection of appropriate mitigation sites.  This clarification may increase the practical viability of mitigation proposals involving off-site or out-of kind replacement that still provide appropriate aquatic resource replacement in ways that are beneficial to the watershed.
Compensatory mitigation options available to permittees include on-site mitigation, off-site mitigation, or a combination of on-site and off-site mitigation within the watershed.  Off-site mitigation may be provided by mitigation banks or in-lieu fee programs, or through permittee-responsible mitigation.  The Corps is the final decision-make regarding whether a proposed compensatory mitigation option provides appropriate compensation for a Department of the Army permit.

A. Since 1990, there has been a general and flexible preference that mitigation should occur on-site and in-kind.  This new rule retains a flexible preference for in-kind mitigation; however it replaces the on-site preference with a hierarchy that considers compensation options in the following order:

1. Use of credits from a mitigation bank
2. Use of credits from an in-lieu fee program
3. Permittee-responsible compensatory mitigation developed using a watershed approach
4. On-site/in-kind permittee-responsible mitigation
5. off-site/out-of-kind permittee-responsible mitigation

A. Yes.  This new rule states that, where appropriate and practicable, compensatory mitigation decisions should be made from a watershed perspective in which the type and location of compensatory mitigation follows from an analytically-based watershed assessment to assure that the proposed compensation furthers watershed goals.  This assessment may take the form of a watershed plan, which typically involves an intensive regional planning effort involving many stakeholders.  It may also be a less formal “watershed approach” involving the analysis of data concerning regional environmental issues, efforts to inventory historic trends in aquatic resource condition, and the prioritization of aquatic resource restoration opportunities.  Such an approach involves consultation with stakeholders, resource agencies, and environmental experts, as appropriate.

A. The final rule goes into effect 60 days following publication in the Federal Register.

A. There will be a transition period from the current mitigation practices and procedures to those of the new rule.  Permit applications received prior to the effective date will be processed in accordance with existing regulations and guidance.  Permit applications received after the effective date of this rule will be subject to the new rule, unless the district engineer has made a written determination that applying these new rules to a particular project would result in a substantial hardship to a permit application.  In such cases, the district engineer will consider whether the applicant can fully demonstrate that substantial resources have been expended or committed in reliance on previous guidance governing compensatory mitigation for DA permits.

A. Existing mitigation banks that were approved 90 days prior to publication of the rule in the Federal Register may continue to operate under the terms of their existing instruments for a two-year period, but the Corps may grant an extension for up to three additional years. 

Any revisions made to the in-lieu fee program instrument must be consistent with the new rule.  An in-lieu fee project constructed under the terms of a pervious instrument may continue to operate under the terms of that instrument indefinitely, as long as the Corps determines that the project is providing appropriate compensatory mitigation consistent with the terms of the rule.

A. A significant change in the new rule is the establishment of specific evaluation and decision-making time frames for proposed new mitigation banks and in-lieu fee programs.  The Corps is the final decision-maker for approving proposed mitigation banking or in-lieu fee program instruments, although it will receive input from Interagency Review Teams comprised of other federal, state, tribal, and local agencies. 

It is expected that decision on most mitigation banks and in-lieu fee programs would be made within 225 days or so of required federal agency review time, unless substantial concerns are raised or there is a need to address other issues, such as endangered species, historic properties, and/or tribal concerns.  In cases where dispute resolution amongst the Corps and team members is necessary, the review time is expected to take 330 days or so of required federal agency review time.  The Corps can suspend or terminate instruments in cases of poor mitigation bank or in-lieu fee program performance.

A. You can find the new Final Compensatory Mitigation Rule in the Federal Register or on-line at http://www.usace.army.mil/cw/cecwo/reg/citizen.htm or at http://www.epa.gov/wetlandsmitigation.