Compensatory Mitigation for Losses of Aquatic Resources in the CWA Section 404 Program

1. Compensatory Mitigation for Losses of
Aquatic Resources in the CWA
Section 404 Program
Matthew LaCroix
U.S. Environmental Protection Agency
Region 10
October 21, 2011
Juneau, Alaska

2. Putting Compensation in Perspective:
Mitigation policies, frameworks and opportunities
• What mitigation is
• the mitigation sequence
• When and why it is required
– overview of 404 program
• How it is conducted
– the mitigation “Final Rule,”
• Current status in Alaska
– selected myths

3. Alaska District, Regulatory Division-
Mitigation Statement
• All proposed actions will avoid, minimize, and
compensate, commensurate with scope and scale
of the project, for permitted impacts to Alaska’s
aquatic resources. The Regulatory Division shall
implement measurable, enforceable ecological
performance standards based on the best available
science and watershed approach, focusing on
results, with monitoring to assure success.

4. What is Mitigation?
• The appropriate and practicable steps which are
taken to minimize potential adverse impacts of an
activity (discharge) on the aquatic ecosystem.

5. Why Mitigate?
Why protect aquatic resources?
• To achieve the objective of the Clean Water Act
• To comply with the Section 404(b)(1) Guidelines
• To ensure that the project is not contrary to the
public interest
• To achieve “No Net Loss”
• Bottom Line: To maintain aquatic functional
processes (local?)

6. Why protect aquatic resources?
• It is an investment in our quality of life.
• Clean water is critical to the social, economic and
environmental health of our nation. We can’t live without
it. Maintaining natural hydrologic cycles and processes
protects the quantity and quality of water available for use.
• Waters provide essential habitat for fish and wildlife.
• Healthy aquatic habitats support economically important
industries.

7. Why protect wetlands?
• Wetlands are important for water storage. They retain
snowmelt and runoff, recharge groundwater and stabilize
stream flows and lake levels. This helps reduce flood
events and flood damage.
• Wetlands protect water quality. They filter sediment,
nutrients, and toxic pollutants out of surface water. This
helps keep pollutants out of our wells and surface waters.

8. Why protect waters of the U.S.?
• Because sustainability is worth pursuing.
• Because our children are worth it.

9. What is the Mechanism
to protect aquatic resources?
• Clean Water Act (CWA) 33 U.S.C. §1344: passed 1972 in
response to loss of water quality and function (drinkable,
fishable, swimmable).
• The objective of the CWA is to “restore and maintain the
chemical, physical, and biological integrity of the Nation’s
waters.”
• The CWA established permitting programs to regulate the
discharge of pollutants to “waters of the U.S.” and
generally prohibits the discharge of pollutants without a
permit.
• “Except as in compliance with this section and sections
1312, 1316, 1317, 1328, 1342 and 1344 of this title, the
discharge of any pollutant by any person shall be unlawful.”

10. Clean Water Act (1972)
33 U.S.C. §1344
• The “Nation’s waters,” or “waters of the United
States” protected under the CWA include all waters
that are, have been, or could be used in interstate
or foreign commerce, including all tidal waters.
• Other waters, including intrastate waters, are
“waters of the U.S.” if their use, degradation, or
destruction could affect interstate or foreign
commerce. Wetlands are one category of “waters
of the U.S.”

11. Clean Water Act (1972)
33 U.S.C. §1344
• Section 404 of the CWA established a permitting
program for the discharge of dredged or fill
materials into waters of the U.S.
• These are often referred to as “Section 404” or
“Corps” permits.
• The discharge of dredged material includes the
redeposit of material from activities such as
mechanized land clearing, ditching,
channelization, or other excavation.

12. Section 404 – A Joint Program
• The U.S. Army Corps of Engineers (Corps) and the
U.S. EPA co-administer the Section 404 permitting
program.
• §101(d). The Administrator of the EPA shall
administer the Act, except as otherwise expressly
provided in the Act.
• §404(a) Secretary of the Army, acting through the
Chief of Engineers may issue permits. The Corps
is the §404 permitting agency, unless a state has
assumed the program.
• The Final Mitigation Rule was issued jointly by the
Corps and EPA.

13. U.S. Army Corps of Engineers
• “The Secretary may issue permits” [Section 404(a)]
– Administers day-to-day program, including individual
permit decisions
– Conducts or verifies jurisdictional determinations
– Develops policy and guidance
• Issues general permits [Section 404(e)]
• Enforces Section 404 provisions [Section 404(s)]
• The Corps has regulations that specify the
procedures for the issuance of 404 permits (33 CFR
Parts 320-330; November 13, 1986).

14. U.S. EPA
• “Guidelines developed by the Administrator”
[Section 404(b)]
– Develops and interprets policy, guidance and
environmental criteria used in evaluating permit
applications (404(b)(1) Guidelines)
• Has authority to prohibit, deny, or restrict the use
of any defined area as a disposal site [Section
404(c)]
– Reviews and comments on individual permit
applications
– Evaluates compliance with the Guidelines, including
the type and level of necessary mitigation

15. U.S. EPA, continued
• Determines scope of geographic jurisdiction and
applicability of exemptions [Section 404(f)]
• Approves and oversees State and Tribal assumptions
[Section 404(h-j)]
• Can elevate specific cases [Section 404(q)]
– "The Corps will fully consider EPA's comments when determining
compliance with the National Environmental Policy Act, the
404(b)(1) Guidelines, and other relevant statutes, regulations, and
policies. The Corps will also fully consider the EPA's views when
determining whether to issue the permit, to issue the permit with
conditions, and/or mitigation, or to deny the permit." (404(q)
MOA)
• Enforces Section 404 provisions [Section 404(n)]

16. Section 404(b)(1) Guidelines
• (b) Specification for disposal sites
“Subject to subsection (c) of this section, each
such disposal site shall be specified for each such
permit by the Secretary (1) through the application
of guidelines developed by the Administrator, in
conjunction with the Secretary, which guidelines
shall be based upon criteria applicable to the
territorial seas, the contiguous zone, and the ocean
under section 1343(c) of this title,”

17. Section 404(b)(1) Guidelines
• The Guidelines are regulations (40 CFR Part 230;
December 24, 1980).
• The Guidelines are substantive environmental criteria
(patterned after the ocean discharge criteria).
• Compliance with the Guidelines is required; demonstrating
compliance is applicant’s responsibility.
• The Guidelines prohibit issuance of a permit that would
cause an avoidable or significant adverse impact to
wetlands or other special aquatic sites.
• The Guidelines contain four requirements for compliance.

18. Section 404(b)(1) Guidelines
• Four requirements for compliance
– (a) Evaluation of practicable alternatives
– (b) Compliance with other standards
– (c) Significant degradation
– (d) Minimizing adverse impacts

19. Section 404(b)(1) Guidelines
§ 230.10 Restrictions on discharge
• (d) Minimizing adverse impacts
– “no discharge of dredged or fill material shall be
permitted unless appropriate and practicable steps have
been taken which will minimize potential adverse
impacts of the discharge on the aquatic ecosystem.
Subpart H identifies such possible steps.”
– Subpart H (230.70-.77) identifies 40 categories of
possible steps to avoid, minimize, and compensate for
adverse impacts. The term “minimize” includes
avoidance and compensation.

20. Section 404(b)(1) Guidelines
§ 230.70 - .77 Actions to minimize adverse effects
• “Using planning and construction practices to institute
habitat development and restoration to produce a new or
modified environmental state of higher ecological value by
displacement of some or all of the existing environmental
characteristics. Habitat development and restoration
techniques can be used to minimize adverse impacts and to
compensate for destroyed habitat. Use techniques that
have been demonstrated to be effective in circumstances
similar to those under consideration whenever possible.”
– Displacement: 2. to take the place of: supplant, supersede, to
replace.

21. The Mitigation Sequence
• Mitigation is a sequence of actions that must be
followed to offset impacts to aquatic resources. The 1990
MOA between Corps and EPA formalized the three-part
process known as the mitigation sequence.
• Step 1. Avoid ; Step 2. Minimize; Step 3. Compensate
• The entire sequence is obligatory and necessary to achieve
compliance with the Guidelines.
• Compensatory mitigation may not substitute for avoiding
and minimizing impacts.

22. Guidance on Mitigation
• Regulations
– 33 CFR 320.4(r), 404(b)(1) Guidelines, & 33 CFR 332
– Mitigation Final Rule
• Regulatory Guidance Letters
– 08-03 & 09-01
• Executive Order 11990

23. Mitigation Final Rule:
Improving Compensation
• Previous mitigation efforts were often unsuccessful
• “Site-by-site mitigation has had a cumulative unhelpful, to
even detrimental, effect in maintaining wetland functions
and values for the watershed.” NatureServe
• “The Stone Age did not end because humans ran out of
stones.” William McDonough
• We can adapt and improve our practices
• The Final Rule set new standards for where and how
compensation is conducted. Did not change when required

24. Mitigation Final Rule:
Overview
• Authority: National Defense Authorization Act FY04
• References: NRC, GAO reports, aspects of existig
regulations and guidance
• Goals:
– Equivalent standards for all forms of mitigation
– Improved performance of mitigation projects
– Improved mitigation planning and site selection
– Greater transparency and accountability

25. Mitigation Final Rule:
Overview
• Methods: Achieved by restoration, establishment,
enhancement, and /or preservation of aquatic
resources
• 3 Forms of Compensatory Mitigation
– Mitigation Bank
– In-Lieu Fee
– Permittee Responsible

26. Mitigation Bank
• Sponsored by a commercial entity or a single user
• One or more sites where compensatory mitigation
projects are done in advance of permitted impacts
• Permittees purchase credits from the bank
• Bank sponsor assumes responsibility for providing
the mitigation

27. In-Lieu Fee Program
• Government or non-profit natural resource
management entity
• Sell credits in advance of conducting
compensatory mitigation projects (temporal loss)
• Credit fees often pooled to conduct larger,
strategic projects
• ILF program sponsor assumes responsibility for
providing mitigation

28. Permittee-Responsible Mitigation
• Compensatory mitigation activity undertaken by
permittee or contractor
• Methods of compensation are the same:
restoration, establishment, enhancement, and/or
preservation

29. Mitigation Final Rule:
Most Frequently Raised Issues:
• Section 404(b)(1) Guidelines
• Compensatory mitigation standards for
streams
• Discretionary language
• Watershed approach
• In-lieu fee programs

30. 1. Section 404(b)(1) Guidelines
• Sequencing (avoid, minimize, compensate)
remains
• 1990 MOA between DA and EPA on Mitigation
– Certain provisions remain in effect:
• Impact avoidance and minimization
• Evaluation of LEDPA
• Significant degradation may not be authorized
regardless of compensatory mitigation

31. 2. Compensatory Mitigation Standards
for Streams
• Streams recognized as “difficult to replace”
• Emphasis on preservation, rehabilitation, or
enhancement
• Discourage establishment and re-establishment
• Additional elements for stream mitigation:
planform geometry, channel form, riparian
plantings, etc.
• Ecological performance standards
• Minimum 5 years monitoring

32. 3. Discretionary Language
• Strengthened (binding/more clearly articulated
requirements):
– Mitigation type
– Mitigation amount
– Financial assurances
– Credit releases
– Use of preservation
– Ecological performance standards
– Long-term site protection and management

33. 4. Watershed Approach
• Appropriate framework to consider both impacts
and mitigation on watershed scale rather than
project by project
• Strategic site selection to improve or maintain
watershed function
• “Used to the extent appropriate and practicable”
– Doesn’t require a formal watershed plan, use available
watershed information
– Commensurate with scope/scale of impacts
• Allows preservation, riparian areas, buffers

34. 5. In-Lieu Fee Programs
• ILF programs retained as a separate and distinct
mechanism, but with new requirements:
– Limited to governmental or non-profit natural resource
management entities
– Compensation Planning Framework (i.e., watershed
plan)
– “Advance credits” limited
– Program account
– Same interagency/public review as mitigation banks
– Same standards as other mitigation

35. Section 1 - Purpose and general
considerations [§332.1 / §230.91]
• Establish standards and criteria for the use of all types of
compensatory mitigation, including permittee-responsible
mitigation, mitigation banks, and in-lieu fee mitigation
• Supersedes:
– Federal Guidance for the Establishment, Use and Operation of
Mitigation Banks, issued November 28, 1995
– Federal Guidance on the Use of In-Lieu Fee Arrangements issued
October 31, 2000
– Regulatory Guidance Letter 02-02: Guidance on Compensatory
Mitigation Projects for Aquatic Resource Impacts, issued
December 24, 2002

36. Section 2 – Definitions [§332.2 / §230.92]
• 43 terms (most been in use for 10 - 15 years)
• New terms:
– Adaptive management
– Functions and Services
– Advance credits, Fulfillment of advance credit sales of
an in-lieu-fee program, and Release of credits
– Temporal loss
– Watershed approach and Watershed plan

37. Section 3 - General compensatory mitigation
requirements [§332.3 / §230.93]
• Type and Location of Compensatory Mitigation:
– Flexible preference for the use of mitigation bank
– “Hierarchy” of compensatory mitigation options:
• Mitigation bank credits
• In-lieu fee program credits
• Permittee-responsible mitigation under a watershed
approach
• Permittee-responsible mitigation through on-site and
in-kind mitigation
• Permittee-responsible mitigation through off-site
and/or out-of-kind mitigation

38. Mitigation Considerations I
• Watershed approach
• Site selection
• Mitigation type including difficult to replace
resources (e.g. bogs, fens, springs, streams, etc.)
• Amount of compensatory mitigation
• Preservation - 5 criteria must be met
• Buffers

39. Mitigation Considerations II
• Relationship to other federal, state, tribal, and local
programs
• Permit conditions
• Party responsible for compensatory mitigation
• Timing (temporal loss)
• Financial assurances

40. Section 4 - Planning and documentation
[§332.4 / §230.94]
• Pre-application consultations
• Public review and comment - Public notices for
standard permit applications must now include information
explaining how impacts associated with the proposed
activity are to be avoided, minimized, as well as the
amount, type and location of any proposed compensatory
mitigation, including any out-of-kind compensation or an
indication of the intention to use an approved mitigation
bank or in-lieu-fee program

41. Mitigation Work Plan
• Mitigation plan - identifies 13 items which must be
included in the permittee’s final mitigation plan, or
as permit conditions, and must be approved by the
DE before a permit is issued

42. Requirements for
Permittee-Responsible Mitigation
• Site selection based on a watershed approach, or on-site / in-kind
mitigation, or off-site / out-of-kind
• Provide draft mitigation plan including, where necessary:
– Objective(s)
– Site selection information
– Site protection instrument to be used
– Baseline information (impact site and mitigation project site)
– How the project will mitigate for lost functions and values
– Work plan (specifications and work descriptions)
– Maintenance plan (ensuring continued viability)
– Performance standards (ecologically-based)
– Monitoring requirements
– Long-term management plan (post-monitoring management)
– Adaptive management plan (address unforeseen changes)
– Financial assurances (ensure high level of confidence of successful completion)
• Level of information must be commensurate with the scope and scale of the
impacts

43. Section 5 - Ecological performance standards
[§332.5 / §230.95]
• Mitigation plans must contain performance
standards that will be used to assess whether the
project is achieving its objectives.
– “Ecological performance standards must be based on
the best available science that can be measured or
assessed in a practicable manner.”

44. Section 6 – Monitoring [§332.6 / §230.96]
• General requirement: Monitoring reports must be
submitted to assess the development and
condition of the compensation project
• Monitoring period: Monitoring periods must not
be less than five years
• Monitoring reports: Must be provided to interested
agencies and the public upon request
• RGL 08-03 issued to provide guidance on
monitoring

45. Section 7 – Management [§332.7 /
§230.97]
• Site protection - must be provided long-term
protection through real estate instruments or other
available mechanisms, as appropriate (Some
flexibility in appropriate site protection
mechanisms is afforded to government property)
• Sustainability
• Adaptive management
• Long-term management with plan and funding

46. Section 8 - Mitigation banks and in-lieu fee
programs [§332.8 / §230.98]
• First seven sections of the rule are applicable to all
compensatory mitigation projects
• Section 8 includes provisions that are unique to
mitigation banks and in-lieu fee programs

47. Requirements for Mitigation Banks and
In-Lieu Fee Programs
– Prospectus
– Public notice and comment process
– IRT review with dispute resolution process
– Approved instrument required
– Approved mitigation plans with credit release schedules
– Ledgers for all credit transactions
– DE approval required to release credits
– Suspension and/or termination of instrument if poor
performance

48. Additional Requirements for
In-Lieu Fee Mitigation
• Only non-profits or governments
• Compensation planning framework required to identify, plan, and
implement ILF projects, support watershed approach, and justify
advance credits
• Limited number of advance credits that can be sold before ILF projects
are established and meeting performance standards
• ILF funds collected for compensation may only be used for
compensation projects minus small percentage for overhead
• Credit costs must include all costs to implement projects, including
financial assurances and long-term management
• ILF projects as modifications of ILF program instrument (public
review process)
• Individual ledgers to track credit production by each in-lieu fee project
• Transfer liability to ILF up front, enforce against ILF

49. Determining Compensation Ratios
Impacted Wetland or Preservation Restoration or NOTE:
Other Waters of the U.S. Enhancement Each project is
different, the
LOW 1.5:1 1:1 impacts are
MODERATE 2:1 1:1 different, and
the requirements
HIGH 3:1 2:1 may be different
•Impacts to ponds, lakes, rivers, and streams should be mitigated for in the
HIGH category due to inherent high level of functions and services
•Most ratios will be greater than 1:1 because of risk of failure associated
with many forms of compensation, temporal loss, and preservation and
enhancement results in net loss
•If using a Mitigation Bank, rules and ratios specific to the bank will be
used
•If using an ILF, ratios will depend how ILF spends the funds, i.e. The
Conservation Fund sets up conservation easements, which is preservation,
and therefore the ratio starts at 1.5:1

50. The Mitigation Sequence
Compensation
• §332.3(f)(1) Amount of compensatory mitigation
• “the amount of required compensatory mitigation must be,
to the extent practicable, sufficient to replace lost aquatic
resource functions.”
• “where appropriate functional or condition assessment
methods or other suitable metrics are available, these
methods should be used where practicable to determine
how much compensatory mitigation is required.”
• “If a functional or condition assessment or other suitable
metric is not used, a minimum one-to-one acreage or linear
foot compensation ratio must be used.”

51. Alaska Mitigation Banks
• Natzuhini Bay: sponsored by Sealaska Corporation
– HUC 1901 (Southeast Alaska)
• Su-Knik Bank: sponsored by Mat-Su Borough &
Sustainable Environments
– HUC 19020505 (lower Susitna River watershed)
• Harmony Ranch: Private sponsor
– (Municipality of Anchorage)
• Anchorage Heritage Land Bank: Sponsored by MOA
– (Municipality of Anchorage)
• Pioneer Reserve: Private sponsor
– (Upper Little Susitna watershed)

52. Alaska In-Lieu Fee Program Sponsors
• Southeast Alaska Land Trust (certified instrument)
– Southeast Alaska
• Great Land Trust (certified instrument)
– Municipality of Anchorage, Mat-Su Borough
• The Conservation Fund (PN prospectus)
– Statewide with 5 service areas
• Salcha-Delta Soil & Water Conservation District (draft
prospectus)
– Central Tanana River watershed
• Interior Alaska Land Trust (draft prospectus)
– Fairbanks North Star Borough
• Southeast Alaska Watershed Coalition (draft prospectus)
– Southeast Alaska

53. Special Considerations in Alaska
• Alaska is all wetlands - no opportunities to avoid wetland
impacts
• Alaska is totally pristine – no opportunities for restoration
• Compensation is not necessary - Alaska has so many
wetlands that loss does not cause impact
• Compensation is not practicable – its too costly & we
cannot create peat or permafrost wetlands
• They’re only hatchery pinks/forested, permafrost wetlands
– not important/ valuable

54. Special Considerations in Alaska
Bottom Line:
• Alaska is a place where natural systems and
processes are still able to support cultures and
communities.
• Whether this will remain true in the future is up to
us.

55. Questions?
• Matthew LaCroix
• 907-271-1480
• lacroix.matthew@epa.gov

56. What About “No Net Loss?”
• “No Net Loss” of wetlands is a programmatic and
National policy goal, i.e. it incorporates more than
just the Section 404 permitting program.
• The “No Net Loss” goal will not be achieved with
every permitting action, even when compensation
is required.
• Preservation always results in a net loss of wetland
acreage and function.

57. Additional Resources
• http://www.conservationfund.org/irt_mitigation_training

58. Section 404(b)(1) Guidelines
Searching for the LEDPA
• What about cost?
• The purpose of consideration of cost is not to compare the
cost of the applicant’s proposed project against the costs of
alternatives but to determine whether or not the costs of an
alternative are so prohibitively high (beyond industry
standard) that the alternative cannot reasonably be
considered practicable.
• “The consideration of cost is not an economic analysis. The
intent of the Guidelines is to consider whether an alternative is
reasonable in terms of the overall scope and cost of the proposed
project, or conversely, whether an alternative is unreasonably
expensive. The mere fact that an alternative may cost somewhat
more does not necessarily mean it is unreasonably expensive and
therefore not practicable.” (45 FR 85339)

59. When is Mitigation Required?
• Always! You must always avoid and minimize
• If 404, to ensure project is compliant with the
404(b)(1) Guidelines
• To ensure that the project is not contrary to the
public interest
• For impacts to wetlands, streams, or other open
waters
• When there is a specifically identifiable resource
loss of importance to the human or aquatic
environment – i.e. rare wetlands or wetlands in an
area where there is already a high degree of
development

60. Mitigation Ratio Considerations
• Assess likelihood for ecological success and
sustainability
• Location of impact site in relation to compensation
site
• Costs, logistics, technical feasibility
• What is “environmentally preferable”
• Projects may be sited on public and private lands