[Federal Register Volume 60, Number 43 (Monday, March 6, 1995)]
[Notices]
[Pages 12286-12293]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-5280]




[[Page 12285]]

_______________________________________________________________________

Part II

Department of Defense
Department of 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; Notice

  Federal Register / Vol. 60, No. 43 / Monday, March 6, 1995 / 
Notices   
[[Page 12286]] 

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.

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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 
[[Page 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 
[[Page 12288]] 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.

    \1\The 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.
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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 
[[Page 12289]] 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 [[Page 12290]] 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.

    \2\The 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.
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    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 project-
specific 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. [[Page 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 on-site 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 vice-versa. Decisions 
regarding out-of-kind mitigation are typically made on a case-by-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 
[[Page 12292]] 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.

    \3\For 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.
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    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- [[Page 12293]] sustaining (in accordance with performance 
standards).

F. Other Considerations

1. In-Lieu-Fee Mitigation Arrangements
    For purposes of this guidance, in-lieu-fee, 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 prior-converted 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