Wetlands Challenges and Use of Mitigation Bank Credits


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Wetlands Challenges and Use of Mitigation Bank Credits

  1. 1. Scott D. DeatherageGardere Wynne Sewellsdeagherage@gardere.com/214-999-4979Wetlands Challenges and Use of MitigationBank Credits 1
  2. 2.  Overview of Wetlands Regulation Mitigation and Wetlands Mitigation PermittingProcess Wetlands Mitigation Banking and Credits Planning for Wetlands Mitigation ahead ofConstructionWetlands Challenges and Use of MitigationBank Credits 2
  3. 3.  Section 404 requires that a permit be obtainedprior to dredging or filling “waters of the US” whichincludes “wetlands” The Army Corps of Engineers (ACE) administersSection 404 wetlands dredge and fill permitsWetlands Challenges and Use of MitigationBank Credits 3
  4. 4.  Navigable waters◦ Navigable waters are those waters that are subject to the ebb andflow of the tide and/or are presently used, or have been used inthe past, or may be susceptible for use to transport interstate orforeign commerce. All Waters◦ Ponds, lakes, rivers, and streams – defined by Ordinary HighWater Mark◦ Stream can be ephemeral, intermittent, or perennial◦ Wetlands – Area inundated or saturated by surface or groundwater at a frequency and duration sufficient to support, and undernormal circumstances do support, a prevalence of vegetationtypically adapted for life in saturated soil conditions◦ Soils Vegetation and HydrologyWetlands Challenges and Use of MitigationBank Credits 4
  5. 5.  US Supreme Court SWANCC case◦ Solid Waste Agency of Northern Cook County v. ArmyCorps of Engineers, 531 U.S. 159 (2001)◦ Cities filling gravel mines for landfill◦ “Man-made” wetlands◦ ACE “migratory bird rule” anywhere would land watersof the US—Commerce Clause argument◦ S. Ct—wanted to avoid constitutional question andstruck down migratory bird rule◦ Wetlands have to be adjacent to “open waters”,interpreting Clean Water Act definition of “waters of theUS”Wetlands Challenges and Use of MitigationBank Credits 5
  6. 6.  Rapanos Case◦ Rapanos v. US, 547 U.S. 715 (2006)◦ Rapons filled 22 acres on their property for constructionof a mall◦ 20 miles from any navigable water◦ Convicted of two felonies; and millions of dollars inpenalties in civil caseWetlands Challenges and Use of MitigationBank Credits 6
  7. 7.  Divided court:◦ Justice Scalia wrote opinion, joined by three otherjustices: “Waters of the United States" "includes only those relativelypermanent, standing or continuously flowing bodies of waterforming geographic features that are described in ordinaryparlance as streams[,] ... oceans, rivers, [and] lakes.“ A mere "hydrological connection" is not sufficient to qualify awetland as covered by the CWA; it must have a "continuoussurface connection" with a "water of the United States" thatmakes it "difficult to determine where the water ends andthe wetland begins."Wetlands Challenges and Use of MitigationBank Credits 7
  8. 8.  Justice Stevens in concurrence◦ All waters with a "significant nexus" to "navigable waters"are covered under the CWAWetlands Challenges and Use of MitigationBank Credits 8
  9. 9.  Largely focuses on◦ wetland vegetation◦ wetland soils◦ wetland hydrologyWetlands Challenges and Use of MitigationBank Credits 9
  10. 10.  Standard Department of the Army permitapplications must include (33 CFR 325.1(d)(7)):◦ Statement describing how impacts to waters of the U.S.are Avoided and Minimized◦ Compensatory Mitigation Proposal or Statement describing why compensatorymitigation should not be requiredWetlands Challenges and Use of MitigationBank Credits 10
  11. 11.  Section 401, Clean Water Act Endangered Species Act Coastal Zone Management Act National Environmental Policy Act (NEPA) Fish and Wildlife Coordination Act National Historic Preservation ActWetlands Challenges and Use of MitigationBank Credits 11
  12. 12.  Individual Department of the Army Permit Nationwide Permit General PermitWetlands Challenges and Use of MitigationBank Credits 12
  13. 13.  A Wetlands Permit must be obtained prior todredging or filling wetlands Otherwise enforcement action may be taken,resulting in civil or criminal fines, and remedial andmitigation activitiesWetlands Challenges and Use of MitigationBank Credits 13
  14. 14.  Regulation◦ Compensatory Mitigation for Losses of AquaticResources (33 CFR Parts 325 and 332) Regulatory Guidance Letters◦ Monitoring Requirements (REGL 08-03)◦ Financial Assurances (REGL 05-01) Local Guidance Documents◦ Guidelines for Preparing a Compensatory MitigationPlanWetlands Challenges and Use of MitigationBank Credits 14
  15. 15.  All compensatory mitigation plans must complywith the Mitigation Rule (33 CFR Parts 325 and332).Wetlands Challenges and Use of MitigationBank Credits 15
  16. 16.  Lost Type Priority Category Existing Condition Duration Dominant Impact Cumulative ImpactWetlands Challenges and Use of MitigationBank Credits 16
  17. 17.  The national policy is the no net loss of wetlands Thus, more wetlands may need to be preserved orcreated than are actually filledWetlands Challenges and Use of MitigationBank Credits 17
  18. 18.  Historically, the preservation and buffering of theremaining aquatic resources on the impact sitecould generate up to 75% of the mitigation creditsrequired to offset impacts associated with aproposed project.Wetlands Challenges and Use of MitigationBank Credits 18
  19. 19.  All Conceptual Mitigation Plans must includeinformation about the availability of mitigationcredits within the same watershed as theproposed project. This information may beobtained using the interactive map located on theRIBITS website.Wetlands Challenges and Use of MitigationBank Credits 19
  20. 20.  Once the permit applicant has calculated therequired wetland mitigation credits for theproposed project, they should use the RegulatoryIn-Lieu Fee and Bank Information TrackingSystem (RIBITS) athttp:// information about approved mitigationbanks within the same watershed as the proposedproject.Wetlands Challenges and Use of MitigationBank Credits 20
  21. 21.  A mitigation bank is a wetland, stream, or other aquaticresource area that has been restored, established,enhanced, or (in certain circumstances) preserved forthe purpose of providing compensation for unavoidableimpacts to aquatic resources permitted under Section404 or a similar state or local wetland regulation. A mitigation bank may be created when a governmentagency, corporation, nonprofit organization, or otherentity undertakes these activities under a formalagreement with a regulatory agency.Wetlands Challenges and Use of MitigationBank Credits 21
  22. 22.  Mitigation banks have four distinct components:◦ The bank site: the physical acreage restored,established, enhanced, or preserved;◦ The bank instrument: the formal agreement betweenthe bank owners and regulators establishing liability,performance standards, management and monitoringrequirements, and the terms of bank credit approval;◦ The Interagency Review Team (IRT): the interagencyteam that provides regulatory review, approval, andoversight of the bank; and◦ The service area: the geographic area in whichpermitted impacts can be compensated for at a givenbank.Wetlands Challenges and Use of MitigationBank Credits 22
  23. 23.  A banks instrument identifies the number ofcredits available for sale and requires the use ofecological assessment techniques to certify thatthose credits provide the required ecologicalfunctions. Although most mitigation banks are designed tocompensate only for impacts to various wetlandtypes, some banks have been developed tocompensate specifically for impacts to streams(i.e., stream mitigation banks).Wetlands Challenges and Use of MitigationBank Credits 23
  24. 24.  In general, a mitigation bank sells compensatorymitigation credits to permittee’s whose obligationto provide compensatory mitigation is thentransferred to the mitigation bank sponsor. The operation and use of a mitigation bank aregoverned by a mitigation banking instrument.Wetlands Challenges and Use of MitigationBank Credits 24
  25. 25.  Regulations, effective June 9, 2008, seek to promoteone standard for mitigation. “Preference” for mitigationbanking. New web-based posting mechanism for availablecredits- Regional Internet Bank Information TrackingSystem (“RIBITS”). This standardization has spurredinvestment interest with development of equity investorsdedicated to investment in mitigation projects orconservation lands. There are now over 500 mitigation banks in 42 states. Over 70% of mitigation banks are sponsored by privateentrepreneurial companies.Wetlands Challenges and Use of MitigationBank Credits 25
  26. 26.  Net Improvement = Moderate (2.0) Enhancehydrology within an existing wetland system and re-establish natural hardwood canopy. T Upland Buffer = Minimum width necessary for theadjacent land use (0.5) and only protects 80% of therestoration area (0.5*0.8 = 0.4) Credit Schedule = Concurrent Temporal Loss = Over 20 years Kind = In-Kind, Bottomland hardwood will be impactedon the project site and Headwater Forest will be restoredat the mitigation site. Location = 8-Digit HUC.Wetlands Challenges and Use of MitigationBank Credits 26
  27. 27.  The mitigation bank site must be protected using aconservation easement or a Memorandum ofAgreement between the Corps and an appropriateFederal, State, or Local Government Agency.Wetlands Challenges and Use of MitigationBank Credits 27
  28. 28.  Financial Assurance in the form of performancebonds, escrow accounts, casualty insurance,letters of credit, legislative appropriations forgovernment sponsored projects, or otherappropriate instruments, must be in place prior tobeginning work.Wetlands Challenges and Use of MitigationBank Credits 28
  29. 29.  For mitigation banks, the instrument mustcontain a provision requiring the sponsor toestablish and maintain a ledger to account for allcredit transactions. Each time an approvedcredit transaction occurs, the sponsor mustnotify the district engineer (33 CFR 332.8(p)). The bank sponsor will ultimately be required toenter all new transactions in RIBITS.Wetlands Challenges and Use of MitigationBank Credits 29
  30. 30.  Parties implementing a mitigtion plan that includesthe purchase of Mitigation Credits must purchasethe credits from a Mitigation Bank within the samewatershed Credits cannot be purchased and applied fromanother watershedWetlands Challenges and Use of MitigationBank Credits 30
  31. 31.  What exactly are the “credits”? How are they sold and assigned? How do you get credit from the Army Corps ofEngineers? Due diligence on mitigation bank and sponsor-owner/operator? Different types of wetland mitigation credits?Wetlands Challenges and Use of MitigationBank Credits 31
  32. 32.  Prices for Mitigation Credits will vary fromwatershed to watershed depending on availabilityof banks and credits and demand for those credits Different types of Mitigation Credits may vary inprices, e.g., stream creditsWetlands Challenges and Use of MitigationBank Credits 32
  33. 33.  Amount and type of credits and price per credit and totalprice Deposit rather than full payment up front to reservecredits◦ Until the permit is issued, credits should not be fullypaid and acquired Ensure you are contracting with the right party, who hasownership and ability to sell credits Ensure credits available and not encumbered with liensor other restrictions Agreement seller will maintain credit bank and particularcredits so credits remain validWetlands Challenges and Use of MitigationBank Credits 33
  34. 34.  Representations by seller◦ Ownership of credits◦ Specific type of credits being purchase and available◦ Bank is fully developed and approved under CleanWater Act and by Army Corps of Engineers Extensions of right to obtain credits, if permit is notissued in a set period of time◦ Possible additional deposit to allow for additional time Deposits to be credited to purchase price Return of deposit if credits are not purchasedWetlands Challenges and Use of MitigationBank Credits 34
  35. 35.  Have qualified biological consultant conductwetlands mitigation survey early in constructionand development process Identify wetlands Consult with ACE as appropriate regardingwetlands determinations Developing Plan Early for Mitigation and Role ofWetlands Mitigation CreditsWetlands Challenges and Use of MitigationBank Credits 35
  36. 36.  Apply for any needed wetlands permits Seek Nationwide or General Permit if necessaryas process is streamlined and less timeconsuming Early identification and planning to deal withwetlands will reduce costs and delay inconstruction and avoid potential enforcementactions and potential fines and penaltiesWetlands Challenges and Use of MitigationBank Credits 36
  37. 37. Scott D. DeatheragePartnerGardere Wynne SewellDallas, Texas 75201214-999-4979sdeatherage@gardere.comEnergy and environmental lawyer with experiencein compliance auditing, environmental corporategovernance, enforcement actions and litigation,permitting, environmental and climate changedisclosures under SEC and voluntary programs.Areas of experience include air emissions,wastewater, welands, solid and hazardous waste,contaminated soil and groundwater, and healthand safety.Wetlands Challenges and Use of MitigationBank Credits 37