Yesterday we reviewed a case in which the defendant in a wetlands settlement was required to perform compensatory mitigation projects. The cost of the wetlands mitigation was more than twice the amount of the civil penalty the defendant incurred. What is involved should you find yourself required to perform a wetlands compensatory mitigation project, either as a condition of your permit or as a penalty in an enforcement case?
Three Steps in the Mitigation Process
If you are involved in a project that has the potential to impact wetlands, the U.S. Environmental Protection Agency (EPA) and the Army Corps of Engineers (Corps) have outlined a 3-step process you should follow to offset the effects on aquatic resources:
- Avoid any adverse effects on and discharges to aquatic resources by finding practical alternatives to impacting a wetlands area. The first step in avoidance is recognizing wetlands on your site. In addition, understand which activities are exempt from federal wetlands permitting.
- If you cannot avoid adverse impacts, you must take appropriate and practical steps to minimize any adverse effects on the wetlands.
- If you cannot avoid and adequately minimize adverse impacts, you must perform appropriate compensatory mitigation. Compensatory mitigation is intended to replace the loss of wetland and aquatic resource functions in the watershed.
Types of Mitigation
There are three mechanisms that the EPA and the Corps recognize for compensatory wetlands mitigation.
Permittee-responsible mitigation is the restoration, establishment, enhancement, or preservation of wetlands undertaken by a permittee to compensate for wetland impacts resulting from a specific project. The permittee performs the mitigation after the permit is issued and is ultimately responsible for implementation and success of the mitigation. Permittee-responsible mitigation can occur at the site of the permitted impacts or at an off-site location within the same watershed.
A wetlands mitigation bank is a wetlands area that has been restored, established, enhanced, or preserved, which is then set aside to compensate for future conversions of wetlands for development activities. Permittees, upon approval of regulatory agencies, can purchase credits from a mitigation bank to meet their requirements for compensatory mitigation. The value of these credits is determined by quantifying the wetlands functions or acres restored or created. The bank sponsor is ultimately responsible for the success of the project. Mitigation banking is performed off-site, meaning it is at a location not on or immediately adjacent to the site of impacts, but within the same watershed.
In-lieu fee mitigation is mitigation that occurs when a permittee provides funds to an in-lieu fee sponsor, typically a public agency or a nonprofit organization. Usually, the sponsor collects funds from multiple permittees in order to pool the financial resources necessary to build and maintain the mitigation site. The in-lieu fee sponsor is responsible for the success of the mitigation. Like mitigation banking, in-lieu fee mitigation is also off-site, but unlike mitigation banking, it typically occurs after the permitted impacts.
Note: According to the EPA, federal regulations establish a flexible preference for using credits from a mitigation bank over the other compensation mechanisms.
Check tomorrow’s Advisor for some tips on determining the cost of a wetlands mitigation project.