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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3692 Introduced in House (IH)]

104th CONGRESS
  2d Session
                                H. R. 3692

 To promote the restoration, conservation, and enhancement of wetlands 
through the establishment of a responsible wetlands mitigation banking 
                                program.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             June 20, 1996

  Mr. Jones introduced the following bill; which was referred to the 
             Committee on Transportation and Infrastructure

_______________________________________________________________________

                                 A BILL

 
 To promote the restoration, conservation, and enhancement of wetlands 
through the establishment of a responsible wetlands mitigation banking 
                                program.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Wetlands Restoration and Improvement 
Act of 1996''.

SEC. 2. FINDINGS AND DECLARATION OF POLICIES AND GOALS.

    (a) Findings.--Congress finds that--
            (1) half of the Nation's wetlands have been destroyed 
        through a failure to understand and appreciate the important 
        environmental, hydrological, and social functions which 
        wetlands serve, including--
                    (A) essential nesting and feeding habitat for 
                waterfowl and other wildlife, including many rare and 
                endangered species;
                    (B) fish and shellfish habitat;
                    (C) water storage, including natural flood and 
                drought control and aquifer recharge;
                    (D) the enhancement of water quality;
                    (E) the provision of recreational, educational, and 
                research opportunities; and
                    (F) opportunities for aesthetic appreciation;
            (2) much of the Nation's valuable wetlands have been 
        significantly degraded, thus necessitating that activities that 
        destroy wetlands adhere to a strict mitigation policy that 
        involves sequentially avoiding impacts, minimizing impacts, and 
        compensating for unavoidable impacts;
            (3) where impacts are unavoidable, wetlands mitigation 
        banking restores, enhances, and in exceptional cases, preserves 
        and creates ecologically significant wetlands and provides for 
        long-term restoration and enhancement of these vital resources;
            (4) wetlands mitigation banking is not only consistent with 
        the important Federal goal of no net loss of wetlands resources 
        but, when conducted within the parameters of a thoughtfully 
        designed regulatory program, contains the procedural safeguards 
        necessary to greatly increase the overall number and quality of 
        wetland resources;
            (5) wetlands mitigation banks can be particularly effective 
        in restoring, enhancing, creating, and preserving the valuable 
        environmental functions of wetlands;
            (6) mitigation banks often provide greater flexibility, 
        reliability, and effectiveness in meeting mitigation 
        requirements than on-site mitigation can and often have 
        significant environmental advantages over haphazardly placed 
        individual mitigation projects, such as--
                    (A) maintaining the integrity of a larger aquatic 
                ecosystem by consolidating compensatory mitigation into 
                a single large parcel;
                    (B) bringing together financial resources, 
                planning, and scientific expertise not practicable to 
bring to many project-specific compensatory mitigation proposals;
                    (C) reducing permit processing times and providing 
                more cost-effective compensatory mitigation 
                opportunities for projects that qualify;
                    (D) improving regulatory oversight by focusing 
                regulatory agency resources more effectively; and
                    (E) contributing towards attainment of the goal of 
                no net loss of the Nation's wetlands by providing 
                opportunities to compensate for authorized impacts when 
                mitigation might not otherwise be required, 
                appropriate, or practicable;
            (7) wetlands mitigation banking shows considerable promise 
        for preventing and reversing the continuing net loss of 
        wetlands while accommodating desirable economic and community 
        growth and, if implemented on a widespread basis, may result in 
        further progress toward restoring past losses of critical 
        wetlands;
            (8) the absence of Federal enabling legislation impedes the 
        widespread and effective use of wetlands mitigation banking, 
        while encouraging needless regulatory delay, financial 
        uncertainty, and unproductive litigation; and
            (9) the adoption of Federal enabling legislation providing 
        for binding Federal standards governing wetlands mitigation 
        banking will foster economic growth and environmental 
        protection by providing the public, the regulated community, 
        State and local governments, and potential investors reasonable 
        assurance about the technical capabilities, financial soundness 
        and integrity, and overall performance of large-scale wetlands 
        mitigation banks and about the environmental acceptability of 
        desirable projects relying on such banks to mitigate their 
        unavoidable adverse effects on wetlands.
    (b) Declaration of Policies and Goals.--Section 101(a) of the 
Federal Water Pollution Control Act (33 U.S.C. 1251(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (6);
            (2) by striking the period at the end of paragraph (7) and 
        inserting a semicolon; and
            (3) by adding at the end the following:
            ``(8) it is the national policy to achieve, through 
        regulatory and nonregulatory opportunities involving all levels 
        of government and supported by private initiatives, the 
        conservation and restoration of wetlands to increase the 
        quantity and quality of the wetlands resource base of the 
        United States and the policy of no overall net loss for the 
        remaining wetlands resource base of the United States; and
            ``(9) it is the national policy to foster wetlands 
        mitigation banking as a means to mitigate the loss of wetlands 
        and to do so by providing a stable, practical, and workable 
        regulatory framework for the use of mitigation banking, making 
        appropriate use of existing, successful State programs for 
        mitigation banking, and taking into account regional variations 
        in wetlands conditions.''.

SEC. 3. USE OF MITIGATION BANKS.

    Section 404 of the Federal Water Pollution Control Act (33 U.S.C. 
1344) is amended by adding at the end the following:
    ``(u) Use of Mitigation Banks.--
            ``(1) Definitions.--In this subsection, the following 
        definitions apply:
                    ``(A) Creation.--The term `creation', as used with 
                respect to wetlands, means an activity that brings a 
                wetland resource into existence at a site where 
                wetlands did not exist immediately prior to the 
                activity.
                    ``(B) Credit.--The term `credit' means a unit of 
                measure that represents the accrual or attainment of 
                wetland functions at a mitigation bank.
                    ``(C) Debit.--The term `debit' means the loss of 
                wetland functions at an impact or project site. Such 
                losses shall be evaluated using the same scientific 
                criteria as are applied to evaluate wetlands functions 
                for credit purposes.
                    ``(D) Enhancement.--The term `enhancement' means an 
                activity that increases any of the wetland functions of 
                a wetland in existence prior to the date of 
                enhancement.
                    ``(E) Linear utility facility.--The term `linear 
                utility facility' means a road, railroad, pipeline 
                (including gathering or distribution lines), cable, 
                line (including transmission lines) and wire, and 
                appurtenant support equipment such as towers, poles, 
                pumping equipment, switches, signals, signs, and 
                substations.
                    ``(F) Maintenance.--The term `maintenance', as used 
                with respect to wetlands, means an activity undertaken 
                to ensure continuation of a wetland or the 
                accomplishment of a project goal after a wetland 
                restoration, enhancement, creation, or preservation 
                project has been completed, including hydrological 
                manipulation and control of normative plant species.
                    ``(G) Mitigation bank.--The term `mitigation bank' 
                means a person, chartered by the Secretary under this 
                subsection, to conduct a specified wetland resource 
                restoration, enhancement or, in exceptional 
                circumstances, creation and preservation project or 
                projects identified in its charter, each project 
                undertaken for the purpose of providing mitigation 
                credits to offset wetland losses authorized by the 
                terms of permits allowing activities in the waters of 
                the United States.
                    ``(H) Preservation.--The term `preservation' means 
                the protection of ecologically important wetlands in 
                perpetuity through the implementation of appropriate 
                legal and physical mechanisms and may include 
                protection of upland areas adjacent to wetlands as 
                necessary to ensure protection or enhancement of the 
                aquatic ecosystem.
                    ``(I) Restoration.--The term `restoration' means an 
                activity undertaken to return wetlands, former 
                wetlands, or other aquatic resources from a disturbed 
                or altered condition with lesser wetland acreage or 
                fewer wetland functions to a previous condition with 
                greater wetland acreage or wetland functions.
                    ``(J) Service area.--The term `service area', as 
                used with respect to a mitigation bank, means the 
                designated area, typically a watershed or hydrologic 
                unit within a State (or watershed crossing State 
                lines), wherein the bank can reasonably be expected to 
                provide appropriate compensation for impacts to 
                wetlands resources.
                    ``(K) Wetland function.--The term `wetland 
                function' means an environmental or hydrological role 
                that the wetland serves, including flood water storage, 
                flood water conveyance, ground water discharge or 
                recharge, erosion control, wave attenuation, water 
                quality protection, scenic and aesthetic use, food 
                chain support, fisheries, wetland plant habitat, 
                aquatic habitat, and habitat for wetland-dependent 
                wildlife.
            ``(2) Charter of mitigation banks.--
                    ``(A) Issuance.--The Secretary shall issue a 
                mitigation bank charter to a person whose application 
                satisfies the criteria set forth in this subsection.
                    ``(B) Application.--An applicant for a mitigation 
                bank charter shall submit an application and supporting 
                materials signed by a responsible official acting on 
                behalf of the applicant certifying the accuracy of the 
                information contained in the application and materials. 
                The application shall show, at a minimum, the 
                following:
                            ``(i) The proposed restoration, 
                        enhancement, creation, or preservation project 
                        or projects which are proposed to be included 
                        in the scope of the mitigation banking charter.
                            ``(ii) The proposed service area for each 
                        proposed restoration, enhancement, creation, or 
                        preservation project. The geographic 
                        designation of the service area should be based 
                        upon the cataloging unit of the `Hydrologic 
                        Unit Map of the United States' (United States 
                        Geological Survey 1980). Each such service area 
                        shall be within a single State, unless the 
                        watershed or hydrologic unit in which the 
                        service area is located crosses State lines, in 
                        which case the service area shall be within the 
                        same watershed. If the watershed crosses State 
                        lines, the Secretary is strongly encouraged to 
                        resolve any interstate disagreement.
                            ``(iii) Reliable assurances of an adequate 
                        source of water to support the wetland.
                            ``(iv) Adequate legal control over the real 
                        property (including necessary uplands) in the 
                        proposed project to carry out the proposed 
                        work.
                            ``(v) Adequate financial assurances to 
                        carry out the proposed project, including the 
                        operation and maintenance plan. Such financial 
                        assurances shall be in the form of irrevocable 
                        letters of credit, performance bonds, surety 
                        bonds, trust funds, corporate guarantees by 
                        guarantors which meet financial criteria set by 
                        regulations issued by the Secretary, or a 
                        combination of such instruments and other 
                        financial undertakings. Such financial 
                        assurances shall entitle the Secretary to draw 
                        upon them in the event of a substantial failure 
                        to perform the work provided in the mitigation 
                        bank charter where mitigation credits based on 
                        such work have already been used or sold.
                            ``(vi) An adequate operations and 
                        maintenance plan to assure continued viability 
                        of the proposed project after completion of 
                        construction of the project.
                            ``(vii) Adequate legal protection, 
                        including easements, covenants running with 
                        land, or other appropriate, legally binding 
                        undertakings, to assure permanent protection of 
                        the wetlands in the mitigation bank that are 
                        used as the basis for selling credits. Such 
                        legal protections shall be in place at the time 
                        that the credits are withdrawn.
                    ``(C) Annual reports.--Persons holding a mitigation 
                bank charter shall report annually to the Secretary. 
                The report shall include--
                            ``(i) an independent audit of the financial 
                        assurances on which the charter is based and a 
                        demonstration of continued compliance with 
                        financial assurance requirements;
                            ``(ii) a demonstration of a continued 
                        adequate long-term source of water to support 
                        the wetland;
                            ``(iii) a progress report in accomplishing 
                        the construction and operation and maintenance 
                        plan provided in the charter; and
                            ``(iv) a reconciliation of the number of 
                        credits sold during the previous years, the 
                        number of credits remaining, and any credits 
                        added in accordance with the requirements of 
                        this subsection and implementing regulations.
                    ``(D) Decision deadline.--The Secretary, in 
                consultation with the Environmental Protection Agency, 
                and Federal and State authorities, as appropriate, 
                shall decide whether to issue a mitigation banking 
                charter within 180 days of the filing of a completed 
                charter application. Prior to the issuance of 
                implementing regulations, the Secretary shall do so on 
                the basis of best professional judgment concerning 
                compliance of the charter application with the 
                requirements of this subsection.
                    ``(E) Procedure with respect to applicant and other 
                agencies.--The Secretary shall advise the applicant 
                within 30 days of filing whether the application is 
                complete and advise the applicant in writing at that 
                time of any additional materials which must be 
                submitted in order to complete the application. The 
                Secretary shall also transmit a copy of the complete 
                charter application to the affected State, and to the 
                Fish and Wildlife Service, the Environmental Protection 
                Agency, the National Resources Conservation Service, 
                and the National Marine Fisheries Service, each of 
                which shall have 90 days, to run concurrently, in which 
                to file written comments, which shall be part of the 
                record. If no comments are filed within 90 days, these 
                entities shall be presumed not to object to the 
                charter.
                    ``(F) Notice.--
                            ``(i) Publication.--The Secretary shall 
                        publish notice of the charter application in 
                        the Federal Register and in a newspaper of 
                        general circulation in the proposed service 
                        area in which the mitigation bank is to operate 
                        (including the county in which the project is 
                        to be located), and shall make copies of the 
                        charter application and supporting materials 
                        available for public review at appropriate 
                        convenient locations in the service area.
                            ``(ii) Contents.--The notice shall describe 
                        the project or projects provided in the charter 
                        application, explain where supporting materials 
                        may be reviewed, and provide 30 days for the 
                        submission of comments on the compliance of the 
                        proposed application with this subsection. Upon 
                        request, the time for comment may be extended 
                        once for 30 days.
                    ``(G) Determination.--After a review of public 
                comments and any reply by the applicant and a 
                determination of whether the application complies with 
                this subsection, the Secretary may issue the charter, 
                deny the charter, or issue the charter with 
                modifications. The Secretary's decision shall be based 
                on the entire public record, including all public 
                comments.
                    ``(H) Public hearing.--Upon a showing of a material 
                contested factual issue about the compliance of the 
                proposed application with this subsection, the 
                Secretary shall provide notice and opportunity for a 
                public hearing on the record with respect to the 
                application.
                    ``(I) Extension of deadline.--The Secretary may 
                extend the time for review once for 90 days, if 
                additional time is needed to file comments, to provide 
                for a hearing, to provide for further review of 
                comments, or to provide for a reply to adverse 
                comments.
                    ``(J) Reimbursement to expedite review.--The 
                Secretary is authorized to accept reimbursement from a 
                charter applicant for the direct salary and benefit 
                costs of additional government or contract personnel 
                necessary to expedite review of a charter application.
                    ``(K) Amendments.--Additional projects may be added 
                to a mitigation bank charter by amendment. Amendment 
                applications shall be processed in the same fashion as 
                charter applications, but the Secretary may treat the 
                facts established in support of the charter and 
                confirmed by the most recent annual report as 
                established for the purpose of the amendment 
                application process.
                    ``(L) State approvals.--The Secretary shall give 
                substantial weight to State approvals of mitigation 
                bank projects if the State programs under which such 
                projects are approved require a careful review of the 
                long-term operation and maintenance of the project, 
                including provision of an adequate long-term source of 
                water to support the wetlands and legal control over 
                the real property in question and otherwise require 
                similar conditions to those in this section.
                    ``(M) Coordination.--The Secretary shall coordinate 
                the processing of a mitigation bank application under 
                this subsection with the processing of applications by 
                such applicant for other permits and authorities under 
                this Act and under the National Environmental Policy 
                Act of 1969 so that determinations with respect to such 
                other permits and authorities may be made concurrently 
                with the final decision on the bank charter.
                    ``(N) Revocation.--A mitigation banking charter may 
                be revoked by the Secretary at any time (i) for 
                substantial failure to comply with financial assurance, 
                long-term water source, or other critical operating 
                requirements, (ii) for a criminal conviction for making 
                material false statements in the charter application or 
                annual report, or (iii) for other substantial 
                violations of law which demonstrate the unfitness of 
                the holder of the charter to operate the mitigation 
                bank. The charter may only be revoked after an 
                opportunity for a public hearing on the record within 
                the meaning of chapter 5 of title 5, United States 
                Code.
            ``(3) Credits.--
                    ``(A) Offering credits for sale.--Upon receipt of 
                its charter, a mitigation bank may offer mitigation 
                credits for sale. The maximum number of credits which a 
                mitigation bank may offer for sale shall not exceed the 
                number to which it is entitled based on--
                            ``(i) the number of acres of wetlands the 
                        bank has completed restoring, enhancing, and in 
                        exceptional circumstances, preserving or 
                        creating and provided financial assurance for 
                        their long-term operation and maintenance; plus
                            ``(ii) a limited number of the additional 
                        acres of wetlands for which the bank has 
                        provided adequate financial assurance that it 
                        will--
                                    ``(I) create, restore, enhance, or 
                                preserve, and
                                    ``(II) provide long-term operation 
                                and maintenance if the Secretary has 
                                approved the plans for such work, 
                                including a schedule for construction 
                                and there is adequate legal control 
                                over the real property to carry out the 
                                proposed work; minus
                            ``(iii) the number of credits it has 
                        previously sold based on the acreage described 
                        in clauses (i) and (ii).
                    ``(B) Number of credits.--The number of credits to 
                which a chartered mitigation bank is entitled based on 
                its acreage and the wetlands functions served by that 
                acreage shall be determined according to objective 
                criteria set by regulation or, if a completed charter 
                application is filed before regulations are issued, 
                according to objective criteria applied by the 
                Secretary, using best professional judgment as part of 
                the charter decision. The application of the objective 
                criteria applied shall be set forth in detail in the 
charter decision. The Secretary shall apply the same criteria to each 
mitigation bank in the same State and to mitigation banks in 
neighboring States which have overlapping service areas.
                    ``(C) Reduction of credits.--The number of 
                mitigation credits to which a mitigation bank is 
                entitled shall not be decreased except by sale or upon 
                a showing by the Secretary, after notice and 
                opportunity for a public hearing, of the bank's failure 
                to comply with charter conditions resulting in the 
                Secretary's decision to draw on the mitigation bank's 
                financial assurances for the acreage on which such 
                credits are based. If the Secretary draws on the 
                mitigation bank's financial assurances for all or part 
                of its acreage, the Secretary may suspend the sale of 
                credits based on that acreage in order to prevent 
                irreparable harm, provided that notice and opportunity 
                for a hearing to review the suspension decision is 
                provided promptly thereafter.
                    ``(D) Increase in credits.--The number of 
                mitigation credits to which a mitigation bank is 
                entitled may only be increased if the bank makes a 
                factual showing in its charter application, or in an 
                amendment application, that it is entitled to more 
                credits under the objective criteria set by the 
                Secretary by regulation or used by the Secretary in the 
                exercise of best professional judgment in chartering or 
                amending the charter of another mitigation bank in the 
                same State or a neighboring State.
                    ``(E) Debits.--If a permit issued by the Secretary 
                to conduct activities in waters of the United States 
                authorizes unavoidable impacts on wetlands and relies 
                on a mitigation bank to offset such impacts, the 
                Secretary shall use the same objective criteria to 
                determine the wetlands mitigation debits from such 
                permitted activity as is used to determine the wetlands 
                mitigation credits at the relevant mitigation bank. 
                Until the issuance or regulations, however, in no case 
                shall a ratio of less than 1.5 credits for every debit 
                be allowed.
                    ``(F) No regulation of price.--The Secretary shall 
                not regulate the price charged for the sale of 
                mitigation credits.
            ``(4) Standards to be established.--
                    ``(A) Deadlines for regulations.--Within 1 year 
                after the date of the enactment of this subsection, the 
                Secretary shall propose regulations implementing this 
                subsection and shall promulgate such regulations not 
                later than 18 months after such date of enactment.
                    ``(B) Criteria for credits.--Such regulations shall 
                set forth objective criteria by which the number of 
                credits to be yielded by a mitigation banking project 
                may be determined and shall take into account the 
                wetlands functions served by the wetlands restored, 
                enhanced, created, or preserved by such project, as 
                well as the environmental benefits served by the 
                adjacent uplands included in such mitigation banking 
                project. Such objective criteria shall also establish a 
                preference for restoration or enhancement of degraded 
                wetlands but also provide for the preservation of high 
                quality wetlands if such preservation results in a 
                demonstrable benefit to the watershed and there is a 
                demonstrable threat to the wetlands and creation of 
                wetlands where there is a high likelihood for 
                ecological success with adequate financial 
                undertakings, long-term source of water, and 
                appropriate legal control of the realty to assure their 
                long-term maintenance and viability.
                    ``(C) Criteria for service areas.--Such regulations 
                shall set objective criteria by which mitigation bank 
                service areas are to be determined, taking into account 
                the need to set service areas at a size providing a 
                reasonable prospect of vigorous market competition 
                among large scale mitigation banks while ensuring that 
                the bank effectively mitigates for unavoidable wetland 
                impacts. Such regulations shall provide that an 
                activity in waters of the United States permitted under 
                this section which activity is a linear utility 
                facility and is otherwise partially within a service 
                area shall be eligible to purchase mitigation credits 
                from a mitigation bank within the same State. Such 
                regulations shall establish a preference for using a 
                mitigation bank to mitigate an activity which is part 
                of a single and complete project which disturbs less 
                than 5 acres of wetland in a mitigation bank.
                    ``(D) Preference for in-kind compensation.--Such 
                regulations shall establish a preference for in-kind 
                compensation of wetland impacts. Out-of-kind 
                compensation may be acceptable only if there is clear 
                demonstration that it is environmentally preferable to 
                in-kind compensation.
                    ``(E) Implementation strategy.--
                            ``(i) Development.--The Secretary shall 
                        develop a State-by-State implementation 
                        strategy and report its findings and 
                        conclusions to Congress and the public within 1 
                        year after the date of the enactment of this 
                        subsection. Such strategy shall be used, in 
                        part, to assist the Secretary in proposing and 
                        promulgating regulations under this subsection.
                            ``(ii) Review.--In developing the strategy, 
                        the Secretary shall examine the progress of 
                        pending applications to establish mitigation 
                        banks under prior guidance documents, identify 
                        reasons for delay of any such application 
                        pending for more than 6 months, and report 
                        alternatives to streamline the processing of 
                        future applications.
                            ``(iii) Identification of wetlands.--In 
                        developing the strategy, the Secretary shall 
                        seek to identify, in consultation with the 
                        appropriate agency of each State, substantial 
                        acreage of degraded wetlands which need 
                        significant physical alteration to the current 
                        hydrology in order to substantially recover 
                        their natural wetlands functions. Of the tracts 
                        of wetlands so identified, the study shall 
                        identify those where physical restoration work 
                        through private mitigation banking could begin 
                        in the next 3, 5, and 10 years.
                            ``(iv) Triennial reports to congress.--Not 
                        later than 4 years after the date of the 
                        enactment of this subsection, and every 3 years 
                        thereafter, the Secretary shall make a written 
                        report to Congress about the progress of 
                        restoring the tracts of degraded wetlands 
                        identified in the initial report. The progress 
                        report shall first be issued in draft form, and 
                        the Secretary shall receive comments from the 
                        public about the accuracy of the information 
                        contained in the draft progress report, for 60 
                        days. The final version of the progress report 
                        shall be revised after consideration of the 
                        public comments and submitted to Congress not 
                        later than 90 days after the close of the 
                        comment period.''.
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