12286 Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices

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
Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices 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
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1The 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.

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.

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
Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices 12289

2The 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.

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
12290 Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices

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.

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 projectspecific 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.
Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices 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 onsite 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 viceversa. Decisions regarding out-of-kind

mitigation are typically made on a caseby-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
12292 Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices

3For 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.

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.

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-
Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / Notices 12293

sustaining (in accordance with

performance standards).

F. Other Considerations

1. In-Lieu-Fee Mitigation Arrangements

For purposes of this guidance, in-lieufee, 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 priorconverted 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