Wetlands Protection: Corps of Engineers Does Not Have an
Effective Oversight Approach to Ensure That Compensatory
Mitigation Is Occurring (08-SEP-05, GAO-05-898).
Because wetlands provide valuable functions, the administration
set a national goal of no net loss of wetlands in 1989. Section
404 of the Clean Water Act generally prohibits the discharge of
dredged or fill material into waters of the United States, which
include certain wetlands, without a permit from the U.S. Army
Corps of Engineers (Corps). To help achieve the goal of no net
loss, the Corps can require compensatory mitigation, such as
restoring a former wetland, as a condition of a permit when the
loss of wetlands is unavoidable. Permittees can perform the
mitigation or pay a third party--a mitigation bank or an
in-lieu-fee arrangement--to perform the mitigation. GAO was asked
to review the (1) guidance the Corps has issued for overseeing
compensatory mitigation, (2) extent to which the Corps oversees
compensatory mitigation, and (3) enforcement actions the Corps
can take if required mitigation is not performed and the extent
to which it takes these actions.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-898
ACCNO: A36037
TITLE: Wetlands Protection: Corps of Engineers Does Not Have an
Effective Oversight Approach to Ensure That Compensatory
Mitigation Is Occurring
DATE: 09/08/2005
SUBJECT: Conservation
Environmental monitoring
Environmental policies
Federal regulations
Fines (penalties)
Land management
Noncompliance
Policy evaluation
Strategic planning
Wetlands
Army Corps of Engineers Section 404
Program
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GAO-05-898
United States Government Accountability Office
GAO Report to the Ranking Democratic Member, Committee on Transportation
and Infrastructure, House of Representatives
September 2005
WETLANDS PROTECTION
Corps of Engineers Does Not Have an Effective Oversight Approach to Ensure That
Compensatory Mitigation Is Occurring
a
GAO-05-898
[IMG]
September 2005
WETLANDS PROTECTION
Corps of Engineers Does Not Have an Effective Oversight Approach to Ensure That
Compensatory Mitigation Is Occurring
What GAO Found
The Corps has developed guidance that establishes two primary oversight
activities for compensatory mitigation: requiring the parties performing
mitigation to periodically submit monitoring reports to the Corps and
conducting compliance inspections of the mitigation. However, parts of the
guidance are vague or internally inconsistent. For example, the guidance
suggests that the Corps place a high priority on requiring and reviewing
monitoring reports when "substantial mitigation" is required, but it does
not define substantial mitigation. Furthermore, one section of the
guidance directs district officials to conduct compliance inspections of a
relatively high percentage of compensatory mitigation sites, while another
section designates these inspections as a low priority, leading to
confusion by Corps officials.
Overall, the seven Corps districts GAO visited performed limited oversight
to determine the status of compensatory mitigation. The Corps required
monitoring reports for 89 of the 152 permit files reviewed where the
permittee was required to perform compensatory mitigation. However, only
21 of these files contained evidence that the Corps received these
reports. Moreover, only 15 percent of the 152 permit files contained
evidence that the Corps had conducted a compliance inspection. The Corps
districts provided somewhat more oversight for mitigation performed by the
85 mitigation banks and 12 in-lieu-fee arrangements that GAO reviewed. For
the 60 mitigation banks that were required to submit monitoring reports,
70 percent of the files contained evidence that the Corps had received at
least one monitoring report. However, only 36 percent of the mitigation
bank files that GAO reviewed contained evidence that the Corps conducted
an inspection. For the 6 in-lieu-fee arrangements that were required to
submit monitoring reports to the Corps, 5 had submitted at least one
report. In addition, the Corps had conducted inspections of 5 of the 12
arrangements.
The Corps can take a variety of enforcement actions if required
compensatory mitigation is not performed. These actions include issuing
compliance orders, assessing administrative penalties of up to $27,500,
requiring the permittee to forfeit a bond, suspending or revoking a
permit, implementing the enforcement provisions of agreements with third
parties, and recommending legal actions. District officials rarely use
these actions and rely primarily on negotiation to resolve any violations.
In some cases, GAO found district officials may not be able to use
enforcement actions after detecting instances of noncompliance because
they have limited their enforcement capabilities. For example, because
they did not always specify the requirements of compensatory mitigation in
the permits, they had no legal recourse for noncompliance.
United States Government Accountability Office
Contents
Letter 1
Results in Brief 4
Background 7
Corps Guidance for Oversight of Compensatory Mitigation Is
Sometimes Vague or Internally Inconsistent 12
Corps Districts Perform Limited Oversight of Compensatory
Mitigation 17
Corps Districts Can Take a Variety of Enforcement Actions to
Resolve Violations but Rely Primarily on Negotiation 21
Conclusions 26
Recommendations for Executive Action 27
Agency Comments and Our Evaluation 28
Appendixes
Appendix I:
Appendix II:
Appendix III: Appendix IV: Appendix V:
Scope and Methodology 29
Corps of Engineers Federal Guidance for Oversight of Compensatory
Mitigation 33
File Review Results by Corps District 36
Comments from the Department of Defense 39
GAO Contact and Staff Acknowledgments 42
Tables Table 1: Table 2: Table 3: Table 4:
Table 5: Table 6:
Permit Files Reviewed at the Seven Districts, Fiscal Year 2000 30
Mitigation Banks Reviewed at the Seven Districts, November 28, 1995,
through December 2004 31 In-Lieu-Fee Arrangements Reviewed at the Seven
Districts 32 Results of Review of Corps Oversight of Individual Permits
Issued in Fiscal Year 2000 Where Permittees Are Responsible for
Compensatory Mitigation 36 Results of Review of Corps Oversight of
Mitigation Banks Approved from November 1995 through December 2003 37
Results of Review of Corps Oversight of In-Lieu-Fee Arrangements Currently
in Operation at the Time of Our Site Visit 37
Figures Figure 1: Marsh in Michigan 7 Figure 2: Bayou in Louisiana 8
Contents
Figure 3: Wetlands Restoration Project in Washington, D.C. (Before and
After) 11
Abbreviations
Corps U.S. Army Corps of Engineers EPA Environmental Protection Agency
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A
United States Government Accountability Office Washington, D.C. 20548
September 8, 2005
The Honorable James L. Oberstar Ranking Democratic Member Committee on
Transportation and Infrastructure House of Representatives
Dear Mr. Oberstar:
Wetlands such as bogs, swamps, and marshes support a number of valuable
functions-controlling floods, improving water quality, and providing
wildlife habitat, among other things. Given the value of these functions,
the administration set a national goal in 1989 of balancing the losses and
gains of wetlands to achieve no net loss of wetlands. Each subsequent
President has reaffirmed and expanded this goal to achieve net gains of
wetlands in the long term. The U.S. Army Corps of Engineers (Corps) is
responsible for processing permit applications from individuals and
businesses seeking to build driveways, houses, golf courses, or commercial
buildings or perform other activities that could degrade or destroy
wetlands on their property, and each year the Corps approves thousands of
these permit applications. The Corps' decisions are to reflect the
national concern for both the protection and utilization of important
resources.
Under section 404 of the Clean Water Act, the Corps and the Environmental
Protection Agency (EPA) regulate activities affecting wetlands. Under
related regulations and guidance issued by these agencies, a permittee is
expected to avoid deliberate discharge of fill materials into wetlands or
other federally regulated waters and then to minimize discharges that
cannot be avoided. If such discharges are unavoidable, the Corps can
require mitigation to compensate for the loss and/or degradation of
wetlands from permitted activities as a condition of issuing the permit.
Such compensatory mitigation could involve (1) creating a new wetland, (2)
restoring a former wetland, (3) enhancing a degraded wetland, or (4)
preserving an existing wetland. Since 1993, the Corps has required such
mitigation on more than 40,000 acres of land per year. Permittees may
perform their own compensatory mitigation, often on or near the project
site, or they may pay another entity to perform mitigation, usually at a
location away from the project site, but generally within the same
watershed. This kind of mitigation, known as third-party mitigation, is
typically performed by mitigation banks or sponsors of in-lieu-fee
arrangements. Mitigation banks are often private for-profit entities with
land in areas where they believe that they can successfully establish
wetlands.1 These areas include those that have the potential to become
wetlands, previously filled wetlands, wetlands that have been degraded by
invasive plant species,2 or wetlands that are threatened by development.
After the mitigation banks improve these areas as wetlands, permittees
required to perform compensatory mitigation pay fees to the mitigation
bank to fulfill their mitigation requirements. In contrast to mitigation
banks, in-lieu-fee arrangements are often sponsored by public or nonprofit
entities. Under agreements with the Corps, in-lieu-fee sponsors receive
payments from multiple permittees required to perform compensatory
mitigation. Then, at a later date, the sponsors use these funds to
establish wetlands.
The Corps is responsible for ensuring that permittees, mitigation banks,
and in-lieu-fee sponsors perform required compensatory mitigation.
However, the Corps historically has not emphasized oversight of such
mitigation activities. In 1988, we reported that the Corps placed a high
priority on issuing permits and did not routinely inspect project sites to
ensure that permittees were in compliance with their permit conditions,
which include any compensatory mitigation that the permittee was required
to perform.3 More recently, the National Research Council, environmental
groups, and others have raised concerns that the Corps may not spend
sufficient time on oversight to ensure that permittees or third parties
are performing the required compensatory mitigation.
In this context, you asked us to review the (1) guidance the Corps has
established for overseeing compensatory mitigation, (2) extent to which
the Corps oversees compensatory mitigation, and (3) enforcement actions
the Corps can take if it determines that compensatory mitigation
requirements are not being met and the extent to which it takes such
actions.
1According to the Environmental Law Institute, in the early 1990s, most
banks were sponsored by public entities, such as state highway agencies,
but now most mitigation banks are sponsored by private entities.
2Invasive species are nonnative plants, animals, and microorganisms that
are found throughout the United States and that have a devastating effect
on natural areas, where they can take over wetland habitats and strangle
native flora.
3GAO, Wetlands: The Corps of Engineers' Administration of the Section 404
Program, GAO/RCED-88-110 (Washington, D.C.: July 28, 1988).
In conducting our work, we selected 7 of the 38 Corps districts that
implement the section 404 program-Charleston, South Carolina; Galveston,
Texas; Jacksonville, Florida; New Orleans, Louisiana; St. Paul, Minnesota;
Seattle, Washington; and Wilmington, North Carolina. We selected these
districts because they represent different geographic areas of the United
States and collectively accounted for over two-thirds of the compensatory
mitigation required by individual permits issued in fiscal year 2003.4 To
identify the guidance the Corps has established for overseeing
compensatory mitigation, we examined Corps documents and interviewed
officials from Corps headquarters, as well as from Corps' district
offices.
To determine the extent to which the Corps oversees compensatory
mitigation, we reviewed a total of 249 files. We reviewed 152 permit files
issued in fiscal year 2000 where the permittee was responsible for the
mitigation. We selected this time frame because most of the permits we
reviewed were valid for 5 years or less, and sufficient time would have
passed for the permittee to begin work on the permitted project and for
the Corps to have received a monitoring report or conducted a compliance
inspection. We also reviewed files for 85 mitigation banks and 12
in-lieu-fee arrangements.5 The mitigation bank and in-lieu-fee arrangement
files we reviewed usually provided data on the mitigation activities for
multiple permittees, and the mitigation conducted can encompass thousands
of acres. While our results cannot be generalized to all 38 Corps
districts, according to a Corps official responsible for managing the
program nationally, our findings would most likely represent program
4Individual permits are typically issued for projects that may have
substantial environmental impacts. For smaller impacts, Corps officials
generally issue either letters of permission, which are used when the
proposed work is minor and is not expected to receive appreciable
opposition, or general permits, which cover activities that have been
identified as being substantially similar in nature, such as stabilizing
stream banks. The Charleston, Galveston, Jacksonville, New Orleans, St.
Paul, and Wilmington districts were the top six districts nationwide in
terms of mitigation required by individual permits. Seattle was among the
top districts in the western part of the United States.
5In those districts where it was not feasible to review all files, we
selected a random sample of files from the district's database for review.
We reviewed a random sample of permit files in the Jacksonville district
and a random sample of mitigation bank files in the Jacksonville, New
Orleans, and St. Paul districts. Because the New Orleans district was not
able to identify permits requiring the permittee to perform mitigation
from their database, we asked district officials to select these permits,
and we reviewed all of them.
implementation by other Corps districts. We also interviewed district
officials to obtain additional information on how they oversee
compensatory mitigation.
To identify enforcement actions the Corps can take if it determines that
compensatory mitigation requirements are not being met and the extent to
which it takes these actions, we examined agency regulations and documents
that outline available enforcement actions, reviewed agency data on
noncompliance cases, and discussed levels of noncompliance and actions
taken with district officials. In addition, we interviewed several
sponsors of mitigation banks and a sponsor of an in-lieu-fee arrangement
to obtain their perspectives on the Corps' mitigation program. A more
detailed description of the scope and methodology of our review is
presented in appendix I. We performed our work between June 2004 and
September 2005 in accordance with generally accepted government auditing
standards.
Results in Brief The Corps has developed guidance that establishes two
primary oversight activities for compensatory mitigation. First, the Corps
guidance directs district officials to require the parties performing
mitigation to periodically submit monitoring reports to the Corps on the
status of compensatory mitigation. Second, the guidance calls for district
officials to conduct compliance inspections of the mitigation. However, we
found that parts of the guidance are vague or internally inconsistent,
thus limiting their usefulness. For example, the guidance suggests that
requiring and reviewing monitoring reports is a high-priority activity for
the Corps when "substantial mitigation" is required, but it does not
define substantial mitigation. Furthermore, the guidance does not indicate
what actions Corps officials should take if permittees or third parties do
not submit required monitoring reports. The guidance is also internally
inconsistent because, in one section of the guidance, district officials
are directed to conduct compliance inspections on a relatively high
percentage of compensatory mitigation sites to ensure that permit
conditions have been met, while another section designates these
inspections as a low-priority activity, to be conducted only if the goals
for other higher priority work, such as issuing permits, have been
achieved. As a result, district officials told us that they are unsure of
how many resources to allocate to compliance inspections. The Corps is
currently developing new guidance, which it expects to issue by fall of
2005.
Overall, the Corps districts we visited have performed limited oversight
to determine the status of required compensatory mitigation. For the 152
permit files that we reviewed where the individual permittee was required
to perform compensatory mitigation, we found little evidence that required
monitoring reports were submitted or that the Corps conducted compliance
inspections. The Corps required monitoring reports for 89 of the files
that we reviewed, but only 24 percent, or 21 permit files, contained
evidence that the Corps had actually received the report. Only 15 percent
of the files contained evidence that the Corps had conducted a compliance
inspection. Although Corps districts provided somewhat more oversight for
mitigation conducted by the 85 mitigation banks and 12 in-lieu-fee
arrangements that we reviewed, even in these cases oversight was still
limited. For the 60 mitigation banks that were required to submit
monitoring reports, 70 percent of the files showed that the Corps had
received at least one monitoring report. The percentage of the mitigation
bank files with evidence that the Corps conducted an inspection ranged
from a low of 13 percent to a high of 78 percent in the seven districts.
For the 6 in-lieu-fee arrangements that were required to submit monitoring
reports to the Corps, 5 had submitted at least one report. In addition,
the Corps had conducted a compliance inspection for 5 of the 12
arrangements. District officials told us that the Corps' conflicting
guidance, which notes that compliance inspections are crucial yet makes
them a low priority, as well as limited resources contribute to their low
level of oversight of compensatory mitigation. However, because many
projects that we reviewed did not receive oversight, the districts cannot
definitively assess whether compensatory mitigation has been performed on
thousands of acres. Without this information, it is unclear how the Corps
is assessing the effectiveness of its mitigation program or assessing
whether this program is contributing to the national goal of no net loss
of wetlands.
The Corps can take a variety of enforcement actions if required
compensatory mitigation is not performed. These actions include issuing
compliance orders, assessing administrative penalties up to $27,500,
suspending or revoking a permit, implementing the enforcement provisions
of agreements with third parties, and recommending legal actions.6
According to fiscal year 2003 data provided by the Corps, the seven
districts did not take any enforcement actions to obtain compliance with
6Under Corps' regulations, the Corps may refer appropriate cases to the
local U.S. attorney to file a criminal or civil action. Appropriate cases
include, but are not limited to, violations that are willful, repeated, or
of substantial impact. 33 C.F.R S: 326.5.
issued permits. Instead, district officials rely primarily on negotiation
with permittees and third parties, a first step in the enforcement
process, rather than enforcement actions to resolve any violations.
According to district officials, when they find that required compensatory
mitigation has not been performed, they usually first contact the
responsible parties to discuss options and time frames for bringing the
permittee or third-party sponsor into compliance. District officials told
us that typically no further action is necessary because the desired
action is subsequently taken. If district officials are not able to
resolve the noncompliance through negotiation, they told us that they then
notify the responsible party in writing of the noncompliance and lay out
potential enforcement actions and time frames. District officials told us
that they generally resort to enforcement actions only after negotiation
fails because taking enforcement actions is usually more time-consuming
and does not necessarily result in the required mitigation being
completed. For instance, according to Corps district officials, while
monetary penalties are an effective tool that draws attention to
compliance and enforcement, the funds collected from assessing these
penalties are required by law to go into the general fund of the federal
Treasury. We found that, sometimes, district officials wanting to pursue
enforcement actions after detecting instances of noncompliance may be
unable to do so because they have limited their enforcement capabilities
by not specifying the requirements for compensatory mitigation in permits
and by not establishing agreements with third parties. For example, the
Corps does not always specify what mitigation activity should be performed
or the time frame for completing the mitigation in individual permits.
Similarly, some districts have not established agreements called for in
federal guidance with mitigation bank or in-lieu-fee sponsors. Without
such agreements, the Corps and the thirdparty sponsors have not formally
agreed to the penalties that may be imposed and/or corrective actions that
may be required if the mitigation efforts are not performed. Therefore,
the Corps does not have sufficient legal recourse if third parties do not
perform required compensatory mitigation.
To address the concerns we have identified, we are recommending that the
Secretary of the Army direct the Corps of Engineers to establish an
effective oversight approach that will ensure that permittees and third
parties are performing required compensatory mitigation. In commenting on
our report, the Department of Defense generally agreed with our
recommendations.
Background Wetlands include swamps, marshes, bogs, and similar areas. They
are characterized by three factors: (1) frequent or prolonged presence of
water at or near the soil surface, (2) hydric soils that form under
flooded or saturated conditions, and (3) plants that are adapted to live
in these types of soils. Wetlands are found throughout the United States.
They may differ greatly in their physical characteristics; for example,
water may not be present on the wetland for part of the year or it may be
present year-round. Figures 1 and 2 show two different types of wetlands-a
marsh and a bayou.
Figure 1: Marsh in Michigan
Source: U.S. Fish and Wildlife Service.
Figure 2: Bayou in Louisiana
Source: U.S. Fish and Wildlife Service.
Wetlands provide many important functions for the environment and for
society. For example, wetlands
o improve water quality by removing excess nutrients from sources such as
fertilizer applied to agricultural land and municipal sewage and by
trapping other pollutants in soil particles;
o reduce the harmful effects of weather events by storing flood waters
and buffering roads and houses from the storm surges caused by hurricanes;
and
o provide important habitat for plants and wildlife-more than one-third
of threatened and endangered species, such as the whooping crane and
Florida panther, live in wetlands.
Over half of the estimated 220 million acres of wetlands in the contiguous
United States during colonial times have disappeared, and many of the
remaining wetlands have been degraded. This loss in wetlands was primarily
caused by agricultural activities and development; significant wetland
loss continued through the mid-1970s. While the economic pressure to
develop wetlands continues today, according to the U.S. Fish and Wildlife
Service, the rate of wetland loss has decreased significantly over the
past 30 years.7
The decrease in the rate of wetlands loss stems from executive actions and
legislation, prompted by an increased recognition of the benefits of
wetlands. In 1977, the first executive order for the protection of
wetlands directed federal agencies to take action to minimize the
destruction of wetlands and to preserve and enhance wetlands' benefits
when carrying out responsibilities such as managing federal lands and
facilities or providing federally financed construction.8 Subsequently, in
1989, the administration set a national goal of no net loss of wetlands to
ensure that these valuable resources are protected.
The Clean Water Act provides the primary legislative authority for federal
efforts to regulate wetlands and other waters of the United States.9 The
act's objective is to restore and maintain the chemical, physical, and
biological integrity of the nation's waters. The section 404 program under
the Clean Water Act is the principal federal program that provides
regulatory protection for wetlands. Section 404 generally prohibits the
discharge of dredged or fill material in waters of the United States,
which
7The Emergency Wetlands Resources Act of 1986, as amended, requires the
Fish and Wildlife Service to, among other things, assess the status of
wetlands in the United States and trends in wetland gains or losses and to
report the results to Congress each decade. 16 U.S.C. S: 3931.
8Exec. Order No. 11990 (May 24, 1977).
9Other federal laws and programs regulating activities in wetlands include
the Swampbuster Provision of the Food Security Act of 1985, as amended,
which denies benefits to farmers who drain wetlands on their property; the
Wetlands Reserve Program, which offers payments to farmers to restore and
protect wetlands on their property; and the Coastal Wetlands Planning,
Protection and Restoration Act, which authorized spending for coastal
wetlands conservation and restoration projects and created a task force to
develop a comprehensive approach for protecting and restoring coastal
wetlands in Louisiana.
include certain wetlands, without a permit from the Corps.10
Responsibility for issuing these permits is delegated to 38 Corps district
offices. The Corps requires the permittee to first avoid discharges of
dredged or fill materials into wetlands and then to minimize discharges
that cannot be avoided. To replace lost wetland functions, the Corps can
require compensatory mitigation as a condition of issuing a permit when
damage or degradation of wetlands is unavoidable.
Compensatory mitigation can consist of creating a new wetland, restoring a
former wetland, enhancing a degraded wetland, or preserving an existing
wetland. According to Corps guidance, compensatory mitigation should
generally provide, at a minimum, one-to-one functional replacement for a
lost wetland.11 When determining the type, size, and nature of
compensatory mitigation to be performed, district officials may consider
factors such as the wetland's location, the rarity of the ecosystem, water
levels, vegetation, wildlife usage, and the presence of endangered
species. In some cases, the loss of the functions of a certain wetland
area may be offset by either a larger or a smaller wetland area. For
example, on an acreage basis, the ratio should be greater than one-to-one
when the lost wetland functions are high and the replacement wetlands
provide lower functions.
In the absence of information about the functions of a certain site,
acreage may be used instead to determine the amount of compensatory
mitigation to help achieve the national goal of no net loss. Figure 3
shows land before and after a wetland restoration project.
10These discharges result from activities such as construction or mining
and may include soil, rock, sand, or other materials. Section 404(g) of
the Clean Water Act authorizes EPAapproved states to assume responsibility
for issuing section 404 permits in certain waters under their jurisdiction
(other than waters used to transport interstate or foreign commerce); only
Michigan and New Jersey have assumed this responsibility.
11Even an acre for acre replacement of lost wetlands may not translate
into maintaining equal functionality. Questions remain about whether
created wetlands function as effectively as natural wetlands.
Figure 3: Wetlands Restoration Project in Washington, D.C. (Before and
After)
Source: U.S. Geological Survey. Source: U.S. Geological Survey. Before
After
Compensatory mitigation may be performed by permittees or third parties.
Third-party mitigation is typically performed by mitigation banks, which
are generally private for-profit entities that establish wetlands under
agreements with the Corps, or under in-lieu-fee arrangements, which are
often sponsored by public or nonprofit entities. Under mitigation banking
guidance issued in 1995 and in-lieu-fee guidance issued in 2000,
mitigation bank and in-lieu-fee sponsors should have formal, written
agreements with the Corps, developed in consultation with EPA and other
resource agencies such as the U.S. Fish and Wildlife Service, to provide
frameworks for how the mitigation bank or in-lieu-fee arrangement will
operate. According to Corps guidance, these written agreements should
include information on
o the mitigation site, including the types of wetlands to be developed,
the conditions of any existing wetlands, and the geographic area; and
o site management, such as
o monitoring plans and reporting protocols on the progress of the
mitigation,
o remedial actions and the parties responsible for performing them if the
mitigation is not successful,
o accounting procedures for tracking payments received from permittees,
o performance standards for determining ecological success of the site,
and
o provisions for long-term management and maintenance.
The Corps and EPA, which have joint enforcement authorities for the
section 404 program, established a memorandum of agreement allocating
enforcement responsibilities between the two agencies. According to this
agreement, the Corps is the lead enforcement agency for all violations of
Corps-issued permits, while EPA is the lead enforcement agency when
unpermitted activities occur in wetlands.12 Historically, the Corps has
not emphasized enforcement activities. In 1988, we reported that many
Corps permits were not monitored for compliance with permit conditions,
the Corps districts we visited at that time did not place a high priority
on detecting unauthorized impacts to wetlands, and the frequent lack of
monitoring could result in the loss of valuable wetland resources.
Subsequently, in 1993, we reported that the Corps continued to emphasize
permit processing over compliance and enforcement and that funding and
staffing shortfalls had inhibited the Corps' and EPA's compliance and
enforcement activities.13 More recently, the National Research Council,
environmental groups, and others have noted the same lack of emphasis on
monitoring and enforcement.
Corps Guidance for Oversight of Compensatory Mitigation Is Sometimes Vague
or Internally Inconsistent
The Corps has developed guidance that establishes two primary activities
for oversight of compensatory mitigation performed by permittees or third
parties. The guidance directs Corps districts to require that permittees
performing compensatory mitigation periodically submit monitoring reports
that provide information on the status of their mitigation efforts. For
mitigation banks and in-lieu-fee arrangements, the guidance directs Corps
districts to require sponsors to submit annual monitoring reports. The
guidance also suggests that district staff conduct annual on-site
inspections of mitigation bank activities but does not specify a frequency
for inspections of mitigation activities performed by permittees and
in-lieu
12The Corps refers to its actions in response to activities not in
compliance with issued permits as "compliance actions," as distinct from
EPA's "enforcement actions" in response to unauthorized activities
performed without required permits.
13GAO, Wetlands Protection: The Scope of the Section 404 Program Remains
Uncertain, GAO/RCED-93-26 (Washington, D.C.: Apr. 6, 1993).
fee sponsors. However, we found that parts of the guidance are vague or
internally inconsistent, thus limiting their usefulness.
Corps Guidance Establishes Two Primary Oversight Activities for
Compensatory Mitigation
The Corps has three primary guidance documents that establish requirements
for overseeing compensatory mitigation performed by permittees, mitigation
banks, or in-lieu-fee arrangements: (1) The 1999 Army Corps of Engineers
Standard Operating Procedures for the Regulatory Program; (2) The Federal
Guidance for the Establishment, Use and Operation of Mitigation Banks; and
(3) The Federal Guidance on the Use of In-Lieu-Fee Arrangements for
Compensatory Mitigation Under Section 404 of the Clean Water Act and
Section 10 of the Rivers and Harbors Act. The two primary oversight
activities these guidance documents establish are (1) Corps review of
monitoring reports submitted by permittees or third parties and (2) the
conduct of compliance inspections (field visits) that provide firsthand
knowledge of the status of the mitigation.14 The guidance documents lay
out the following requirements:
o 1999 Standard Operating Procedures for the Regulatory Program. This
document, which highlights current Corps policies and procedures and
provides guidance to the districts for setting priorities for their
regulatory program activities, calls for Corps districts to require
permittees to submit periodic monitoring reports and states that the
districts should review all monitoring reports. It also states that
compliance inspections are essential to ensure that compensatory
mitigation is performed and directs Corps districts to inspect a
relatively high percentage of compensatory mitigation performed by
permittees to ensure compliance with permit conditions. Districts are to
inspect all mitigation banks to ensure compliance with the banking
agreement.
o Federal Guidance for the Establishment, Use and Operation of Mitigation
Banks. Developed to provide guidance for establishing, using, and
operating mitigation banks, this federal guidance directs the Corps to
require that mitigation bank sponsors submit annual monitoring reports to
the Corps and other authorizing agencies, which can include the EPA and
the U.S. Fish and Wildlife Service, among others. Typically, mitigation
banks are to be monitored for 5 years;
14See appendix II for a summary of these guidance documents.
however, according to the guidance, it may be necessary to extend this
period for mitigation banks that require more time to reach a stable
condition or that have undertaken remedial activities. In addition, the
guidance encourages members of the mitigation banking review team, which
the Corps chairs, to conduct regular (e.g., annual) on-site inspections,
as appropriate, to monitor bank performance.15
o Federal Guidance on the Use of In-Lieu-Fee Arrangements for
Compensatory Mitigation Under Section 404 of the Clean Water Act and
Section 10 of the Rivers and Harbors Act. This federal guidance was
developed to ensure that in-lieu-fee arrangements can serve as an
effective and useful mitigation approach. The guidance specifies that
there should be appropriate schedules established for regular (e.g.,
annual) monitoring reports to document funds received, impacts permitted,
funds disbursed, types of projects funded, and the success of projects
conducted. Furthermore, the guidance calls for the Corps in conjunction
with other federal and state agencies to evaluate these reports and
conduct regular reviews to ensure that the arrangement is operating
effectively and is consistent with agency policy and the specific
agreement.
Corps Guidance Is Sometimes Vague or Internally Inconsistent
Although Corps guidance documents establish monitoring reports and
compliance inspections as the two primary oversight activities for
compensatory mitigation, these guidance documents are sometimes vague or
internally inconsistent. Specifically, the guidance is vague on the
following key points:
o The circumstances under which monitoring reports should be required.
Although the Corps' standard operating procedures call for district
officials to require and review monitoring reports for mitigation banks
and "other substantial mitigation," it does not define substantial
mitigation. We found that Corps districts differed in how they defined
"substantial mitigation." For example, two districts require mitigation
reports when the mitigation involves restoring, enhancing, or creating a
wetland but not when the mitigation involves preserving a wetland.
15A mitigation banking review team is an interagency group of federal,
state, tribal, and/or local regulatory and resource agency representatives
which are signatories to the mitigation banking agreement and oversee the
establishment, use, and operation of the mitigation bank.
Another district interpreted "substantial" mitigation to include
mitigation projects that generally involved more than one-half acre.
o The actions district officials should take if reports are not submitted
as required. Corps guidance does not address the issue of noncompliance if
monitoring reports are not submitted for review. For the files that we
reviewed, we found that monitoring reports were provided for 44 percent,
or 68 of the 155 cases in which these reports were required. District
officials told us that, because of budget constraints, little time is
spent on compliance activities, including following up on the submission
of monitoring reports. While three districts that we visited have
established a process for tracking due dates for monitoring reports from
either permittees or third parties, none of the districts had a system for
tracking reports from both.16 Without such tracking systems, a district
official told us that Corps officials may not realize when monitoring
reports are due or that the reports were not submitted as required.
o The information that should be included in a monitoring report. The
guidance does not specify what information should be included in
monitoring reports submitted by permittees and mitigation banks, despite
the importance of these reports as a primary means of overseeing
compliance with mitigation requirements. We found that some monitoring
reports were only a few pages in length and provided limited information
about the site, while other reports were over 50 pages in length, were
more comprehensive, and included data on the water levels at the
mitigation site, the plants growing at the site, methods for monitoring
both the water levels and plant growth, documentation of animals present
at the site, and photographs of the site. The Chief of the Regulatory
Branch acknowledged that the information submitted in monitoring reports
varies significantly and may not always provide the details needed to
assess the status of the compensatory mitigation.
16The Jacksonville district office has a tracking system for permits and
is modifying the system to include mitigation banks. The New Orleans
district only has a system for tracking reports for mitigation banks. The
Seattle district has a system for tracking reports from permittees, and
officials stated that it does not currently need such a system for
mitigation banks because it has not had a problem with receiving the
reports since there are only two banks currently approved by the district.
Furthermore, the guidance is internally inconsistent about the emphasis
districts should place on compliance inspections. The Corps' standard
operating procedures state that compliance inspections are essential, and
districts should inspect a relatively high percentage of compensatory
mitigation sites to ensure compliance with permit conditions, although
they do not define what high means. The mitigation banking guidance states
that districts should inspect all mitigation performed by banks annually
to ensure compliance with the banking agreement.17 The in-lieufee guidance
does not specify how often compliance inspections should be conducted.
However, the standard operating procedures also designate all compliance
inspections as a low-priority activity, to be performed only if the goals
for other higher-priority work, such as issuing permits, have been
achieved. Furthermore, the guidance states that the degree to which
districts perform lower priority work would affect whether districts
received additional resources. District officials told us that in the past
they were instructed that if they spent too many resources on low-priority
activities, their budget would be reduced. Consequently, a number of
district officials told us that they are unsure of how much time to spend
on compliance inspections. According to officials in one district we
visited, for instance, the number of sites they were inspecting was based
on a target set in the 1991 guidance because the current guidance is not
as specific.18 Other districts do not have a specific goal for the number
of inspections that district officials will conduct for mitigation
activities. The Corps is revising its standard operating procedures to
include specific performance goals for compliance inspections. Corps
officials told us they expect to finalize the revised standard operating
procedures by fall of 2005.
17This agreement is referred to as the mitigation banking instrument in
the federal mitigation banking guidance.
18In 1991, the Corps' numerical inspection goal was equivalent to 25
percent of the individual permits issued in the prior year. Permits with
required mitigation, including general permits if applicable, were a high
priority to inspect.
Corps Districts Perform Limited Oversight of Compensatory Mitigation
Overall, the Corps districts we visited have performed only limited
oversight of compensatory mitigation undertaken by permittees and third
parties. For the 152 individual permit files that we reviewed, we
frequently found little evidence that the required monitoring reports were
submitted or that the Corps conducted compliance inspections. Although
Corps districts provided somewhat more oversight for mitigation performed
by the 85 mitigation banks and 12 in-lieu-fee arrangements that we
reviewed, we found that oversight was still limited even in these cases.
Detailed results of our file review by district are presented in appendix
III.
Corps Districts Provide Little Oversight of Mitigation Performed by
Permittees
According to our review of 152 permit files where the permittee was
responsible for performing the compensatory mitigation, the Corps
districts generally provided little oversight either through a monitoring
report or a compliance inspection.19 The Corps required permittees to
submit monitoring reports for 89 of the 152 permit files that we reviewed.
This ranged from a low of zero in Charleston to a high of 100 percent in
Seattle. However, we found only 21 files contained evidence that the Corps
actually received these required reports, ranging from a low of zero in
two districts to a high of 69 percent in Jacksonville.20 Furthermore, only
15 percent, or 23 of the 152 permit files, showed that the Corps had
conducted a compliance inspection. The actual proportion of permits
receiving oversight may be less because several districts could not locate
some of the permit files that we requested for review.
The following cases illustrate situations in which the Corps required
compensatory mitigation as a condition of permit issuance, but the files
contained no evidence that the Corps had conducted oversight:
o In November 1999, the Corps issued a permit authorizing a permittee to
install two boat slips and dredge approximately 5,270 feet of a canal in
Louisiana, which would affect marsh and other wetland areas. As a
19The permit files in the Wilmington district contained evidence that
district officials had more consistently conducted oversight of mitigation
performed by permittees. There was evidence that district officials had
either received a monitoring report or conducted a compliance inspection
for 14 of 21 permit files, or 67 percent, that we reviewed. See appendix
III.
20Four permit files contained evidence that the Corps received monitoring
reports although the Corps did not require submission of these reports.
condition of issuing this permit, the Corps required the permittee to use
the dredge material and establish wetland plants to create a 710-acre
intertidal marsh. The Corps also required the permittee to submit annual
monitoring reports for 5 years. The file contained no evidence that the
Corps had received any monitoring reports or conducted compliance
inspections to determine the status of the required mitigation.
o In May 2000, the Corps issued a permit authorizing a developer to fill
over 430 acres of wetlands to build a residential golf community in
Florida. As a condition of issuing this permit, the Corps required the
permittee to enhance over 1,000 acres of wetlands and to create 13 acres
of wetlands. The Corps also required the permittee to submit annual
monitoring reports for 5 years. The file contained no evidence that the
Corps had conducted any compliance inspections or received any monitoring
reports to determine the status of the required mitigation.
o In May 2000, the Corps issued a permit authorizing a permittee to fill
77 acres for a landfill in Texas. As a condition of issuing this permit,
the Corps required the permittee to create 122 acres of prairie wetlands
and to preserve 58 acres of wetlands on-site. The preservation area also
included lakes and uplands that were to be managed for wildlife habitat.
The Corps required the permittee to submit monitoring reports after 6
months and annually for 5 years. The file contained no evidence that the
Corps had conducted any compliance inspections or received any monitoring
reports to determine the status of the required mitigation.
Moreover, even when Corps officials conducted oversight, they did not
always perform suggested follow-up. For example, in one permit file we
reviewed, the Corps issued a permit in December 1999 that authorized the
excavation of an approximately 15-acre sand and gravel mining project in a
wetland area. The Corps required the permittee to restore the mining area
to a wetland plant community as the excavation occurred and to submit
annual monitoring reports on the progress of this restoration effort. The
permittee submitted one report to the Corps in March 2000, which stated
that the work authorized by the permit had begun but that compensatory
mitigation activities could not be completed until excavation was
completed. No other monitoring reports were in the file, and the file did
not contain any evidence that Corps officials had followed up to determine
if the compensatory mitigation was performed. Another file indicated that,
in December 2000, a Corps official had inspected a project site to assess
the status of the required compensatory mitigation for a permit issued in
August 2000. This permit authorized filling about 6 acres of wetlands to
build a retail facility. The official's inspection indicated that
construction was almost finished, but the mitigation to enhance 4 acres of
wetlands was still under way. The official recommended that the site be
revisited at a later date. However, the file contained no evidence that
the Corps conducted a follow-up compliance inspection or contacted the
permittee to determine the status of the mitigation.
Corps Districts Perform Somewhat Greater Oversight of Mitigation Performed
by Mitigation Banks and In-Lieu-Fee Sponsors
Corps districts provided somewhat more oversight for mitigation conducted
by third parties, although even in these cases oversight was limited. Of
the 85 mitigation banks that we reviewed, the Corps required that 71
percent, or 60 of the 85 mitigation bank sponsors, submit monitoring
reports and 70 percent, or 42 mitigation bank files, contained evidence
that at least one monitoring report had been received.21 However, only 31
of the 85 mitigation bank files contained evidence that the Corps
conducted a compliance inspection.22 This ranged from a low of 13 percent
in the St. Paul district to a high of 78 percent in the Wilmington
district. The following cases illustrate situations where files contained
no evidence that the Corps had conducted oversight of the mitigation bank:
o In February 1999, the Corps approved a mitigation bank in Texas that
preserved and protected about 540 acres of swamp. The agreement between
the Corps and the mitigation bank sponsor included a requirement that the
sponsor submit an annual report on the mitigation bank's status of
operation and maintenance. The file contained no evidence of any
monitoring reports submitted by the sponsor or compliance inspections
conducted by the Corps.
o In August 1999, the Corps approved an approximately 360-acre mitigation
bank in Louisiana to reestablish a productive, coastal, forested wetland
ecosystem on previously converted agricultural lands. The agreement
between the Corps and the mitigation bank sponsor included a requirement
that the sponsor provide the Corps with annual
21Only one district did not conduct oversight for a majority of the
mitigation banks that we reviewed. We reviewed an additional 10 mitigation
bank files for banks approved during calendar year 2004. We did not
include these banks in our overall totals because monitoring reports are
typically required on a yearly basis and not enough time had elapsed
during our review to determine if the banks submitted monitoring reports.
22One mitigation bank file contained evidence that the Corps received a
monitoring report even though the Corps did not require the sponsor to
submit monitoring reports.
monitoring reports for at least 5 years and then reports once every 5
years. The file contained no evidence of any monitoring reports submitted
by the sponsor or compliance inspections conducted by the Corps.
o In December 2001, the Corps approved a 2,100-acre mitigation bank in
Florida to restore native tree species and enhance the site's hydrology.
The agreement between the Corps and the mitigation bank sponsor required
the sponsor to submit annual monitoring reports to the Corps for 4 years.
The file contained no evidence of any monitoring reports submitted by the
sponsor or compliance inspections conducted by the Corps.
For in-lieu-fee arrangements, the Corps required the sponsors of 6 of the
12 in-lieu-fee arrangements that we reviewed to submit monitoring reports.
We found that five of the six files contained evidence that the sponsor
had submitted at least one report. We also found that the Corps had
received monitoring reports from one in-lieu-fee sponsor who was not
required to submit a report. In addition, the files contained evidence
that the Corps had conducted at least one compliance inspection for 5 of
the 12 arrangements.
Conflicting Guidance and Limited Resources Contribute to the Corps' Low
Level of Oversight of Compensatory Mitigation
District officials told us that the Corps' conflicting guidance, which
notes that compliance inspections are crucial but makes them a low
priority, as well as limited resources contribute to their low level of
oversight of compensatory mitigation activities. According to the Chief of
the Regulatory Branch, historically, districts were to issue permits
within specified time frames. If those time frames were not met, work in
other areas, including compliance, was not to be performed. In addition,
funds were allocated primarily for permit processing, with little
remaining for other activities. However, Corps headquarters and district
officials recognize the importance of oversight. They stated that without
a comprehensive oversight program the Corps cannot ensure that
compensatory mitigation will occur. In the absence of additional national
guidance and resources, some of the districts we visited have decided to
take their own steps to improve oversight. For example, Jacksonville
district officials increased their compliance inspections of compensatory
mitigation performed by permittees; the number of inspections more than
tripled from 2003 to 2004 after several years of decline. In addition, New
Orleans district officials told us that, in 2003, they began tracking
monitoring reports and compliance inspections for mitigation banks, more
aggressively followed up to ensure that the mitigation banks submit
required monitoring reports, and increased the number of compliance
inspections of the mitigation banks.
Corps Districts Can Take a Variety of Enforcement Actions to Resolve
Violations but Rely Primarily on Negotiation
The Corps can take a variety of enforcement actions if required
compensatory mitigation is not performed.23 Possible enforcement actions
include issuing compliance orders and assessing administrative penalties,
requiring the permittee to forfeit a bond, suspending or revoking a
permit, and implementing the enforcement provisions of agreements with
third parties to perform mitigation on permittees' behalf. In addition,
the Corps may refer a case to the Department of Justice to bring legal
action in federal district court. However, district officials rarely use
these enforcement actions, relying primarily on negotiation with
permittees or third parties as a first step in the enforcement process to
resolve any noncompliance cases they detect. In some cases, district
officials want to pursue enforcement actions after detecting instances of
noncompliance, but they may not be able to do so because they have limited
their enforcement capabilities by not including specific requirements in
the permits or third-party agreements.
A Variety of Enforcement Actions Are Available to Corps Districts
When the Corps determines that required compensatory mitigation has not
been performed, the type of enforcement action taken would depend on,
among other things, whether mitigation is to be carried out by the
permittee or by a third party.
In cases where the permittee was to perform the mitigation, the Corps may
issue a compliance order, assess administrative penalties, require the
permittee to forfeit a bond, suspend or revoke a permit, and/or refer the
case to the Department of Justice for legal action. Under section 404 of
the Clean Water Act and Corps regulations, the Corps may take the
following actions:
o Issue compliance orders to permittees who violate any condition of
their permits. Each order must specify the nature of the violation,
23The Corps refers to its actions in response to noncompliance as
"compliance actions," as distinct from EPA's "enforcement actions" in
response to unauthorized activities performed without required permits.
which could include failure to implement mitigation requirements, and
specify a time by which the permittee must come into compliance.24
o Assess administrative penalties, in an amount of up to $27,500.25
o Require the permittee to forfeit a bond, if such a bond was a condition
of the permit. The Corps has the authority to require permittees to post a
financial bond to assure that they will fulfill all obligations required
by the permit, which could include compensatory mitigation.26
o Suspend a permit for, among other things, a permittee's failure to
comply with the terms and conditions of the permit. 27 A suspension
requires the permittee to stop the activities previously authorized by the
suspended permit. Following the suspension, the Corps may take action to
reinstate, modify, or revoke the permit.28
o Refer the case to the Department of Justice to bring an action in
federal district court seeking an injunction and civil penalties. 29 Cases
that are appropriate for judicial actions include violations that are
willful, repeated, flagrant, or of substantial impact.30 Civil penalties
may be awarded by the court in an amount of up to $25,000 per day for each
violation.31
2433 U.S.C. S: 1344(s); 33 C.F.R. S: 326.4(d).
25The Corps has authority to assess Class I administrative penalties in an
amount of up to $11,000 per violation, not to exceed $27,500. 33 U.S.C. S:
1319(g) and 33 C.F.R. S: 326.6(a)(1). The current penalty amounts were
effective July 26, 2004. 69 Fed. Reg. 35518 (June 25, 2004). However,
under the Corps' policy, once the Corps decides to proceed with an
administrative penalty, it cannot subsequently refer the case to the
Department of Justice for legal action. 33 C.F.R. S: 326.6(a)(2).
2633 C.F.R. S: 325.4(d).
2733 C.F.R. S: 325.7(c).
2833 C.F.R. S: 325.7(d).
2933 U.S.C. S: 1344(s); 33 C.F.R. S: 326.5.
3033 C.F.R. S: 326.5(a).
3133 U.S.C. S: 1344(s)(4).
The enforcement actions available to the Corps for a mitigation bank or
inlieu-fee sponsor's failure to carry out mitigation would depend on the
provisions that are incorporated into each permit (if applicable) and
mitigation bank agreement or in-lieu-fee agreement and would be governed
by the terms of the agreement with the Corps. For example, once the Corps
has agreed that a permittee's mitigation requirements will be satisfied by
a mitigation bank or in-lieu-fee arrangement, the permittee satisfies
these mitigation requirements by submitting the required payment to the
thirdparty sponsor. Federal guidance for mitigation banks states, "it is
extremely important that an enforceable mechanism be adopted establishing
the responsibility of the bank sponsor to develop and operate the bank
properly."32 The guidance states that the bank sponsor is responsible for
securing sufficient funds or other financial assurances in the form of,
among other things, performance bonds, irrevocable trusts, escrow
accounts, and letters of credit. In addition, "the banking agreement
should stipulate the general procedures for identifying and implementing
remedial measures at a bank." Similarly, federal guidance states that an
in-lieu-fee agreement should contain, among other things, "financial,
technical and legal provisions for remedial actions and responsibilities
(e.g., contingency fund)"; "financial, technical and legal provisions for
long-term management and maintenance (e.g., trust)"; and a "provision that
clearly states that the legal responsibility for ensuring mitigation terms
are fully satisfied rests with the organization accepting the fee."33
Corps Districts Rely Primarily on Negotiation
While the Corps may take a variety of enforcement actions, the seven
districts did not take any enforcement actions in fiscal year 2003, the
latest year for which data is available.34 Instead, district officials
primarily rely on negotiation, a first step in the Corps' enforcement
process, to resolve noncompliance issues. In keeping with Corps
regulations, district officials told us that, when they find that required
compensatory mitigation has not been performed, they first notify the
responsible party and gather relevant information to better understand the
noncompliance case. They then
3260 Fed. Reg. 58605 (Nov. 28, 1995).
3365 Fed. Reg. 66914 (Nov. 7, 2000).
34The fiscal year 2003 data provided by the Corps includes information
about litigation and penalties but does not provide information on permit
suspensions or revocations. According to a headquarters senior project
manager, the Corps rarely uses these actions to obtain compliance.
attempt to negotiate by discussing with the permittees or third parties
available corrective actions and time frames for voluntarily bringing the
work into compliance. For example, at one district, officials told us that
corrective actions by responsible parties could include working with an
environmental organization such as The Nature Conservancy to improve
wetlands or developing a traveling exhibit for local schools to educate
children about the value of protecting wetlands. According to Corps
officials, no additional action is needed generally because responsible
parties are willing to work with the Corps to get back into compliance.
If district officials do not succeed in voluntarily bringing the
responsible party into compliance, they notify the responsible party in
writing, laying out potential enforcement actions available to the Corps
and time frames for the party to respond to the letter-the next step
toward achieving compliance. District officials told us they generally
resort to such actions to achieve compliance only after negotiation has
failed because such actions usually take more time to implement. For
example, one district official estimated that when the Corps refers a
noncompliance case to the Department of Justice, district officials may be
occupied for several months. Similarly, according to Corps officials,
developers prefer to negotiate with the Corps because it is less
time-consuming than pursuing legal solutions. In addition, use of
enforcement actions does not always ensure that the required compensatory
mitigation will be completed. For instance, Corps district officials told
us, while monetary penalties are an effective tool that draws attention to
compliance and enforcement, the funds collected from assessing these
penalties are required by law to go into the general fund of the federal
Treasury.35
Corps Sometimes Limits Its On occasion, district officials wanting to
pursue enforcement actions after
Own Enforcement Ability detecting instances of noncompliance may not be
able to do so because they have limited their enforcement capabilities;
that is, they have not specified the requirements for compensatory
mitigation in permits and failed to establish agreements with third
parties. In our file review, we identified several permits that lacked
this crucial information about
3531 U.S.C. S: 3302(b), known as the miscellaneous receipts statute,
requires that, unless otherwise provided, a government agency must deposit
any funds received from sources other than appropriations into the general
fund of the Treasury.
required mitigation.36 Both the Chief of the Regulatory Branch and
district officials stress the importance of including specific mitigation
information in permits so that the Corps can take actions necessary to
ensure required compensatory mitigation occurs. However, some of the
districts we visited acknowledged that the lack of enforceable conditions
included within a permit has been a problem and they have efforts under
way, such as permit reviews and standardized permit conditions, to ensure
that future permits are issued with the conditions needed to ensure
enforceability. Although a review process for permit conditions may be a
good idea, we found that, even when a review process was in place in some
of the districts we visited, they still had issued permits with
unenforceable conditions.
In addition, we found that three districts had not established formal
agreements with third parties to document the objectives and
implementation of mitigation banks or in-lieu-fee arrangements, as called
for in federal guidance. Of the 85 mitigation bank files we reviewed, 21
did not have agreements with the Corps. These mitigation banks were all
located in Minnesota, one of two states with mitigation banks that fall
under the jurisdiction of the St. Paul District Office. According to
district officials, Minnesota had developed state mitigation banking
guidelines before the federal guidelines. Many of the banks in Minnesota
were approved by the state program and partially developed before
requesting Corps approval. Corps officials told us they had decided not to
take additional steps to develop agreements with these mitigation banks.
Currently, district officials issue a letter approving all or a portion of
the state bank for use in the Corps compensatory mitigation program but do
not develop a banking agreement with the bank sponsor. At the time of our
review, district officials realized that the lack of mitigation banking
agreements limited their enforcement ability and, therefore, were
developing banking guidelines to provide more structure for the
establishment of mitigation banks in Minnesota. However, they had not yet
begun to consistently develop such agreements.
For the in-lieu-fee arrangements we reviewed, the Galveston and New
Orleans districts have not established formal agreements with in-lieu-fee
sponsors. Without such agreements, district officials may not know how
36A National Research Council report also has noted that it is important
for permit requirements to contain clear and comprehensive information
about compensatory mitigation and that without such information Corps
officials may not be able to ensure that mitigation replaces the functions
and values of lost wetlands.
many permittees are using these arrangements to fulfill their compensatory
mitigation requirements. For example, for the arrangements that he was
responsible for monitoring, a Galveston district official could not
provide us with information about the number of permittees using the
arrangement to perform compensatory mitigation, the total amount of
payments the inlieu-fee sponsor had received, or any oversight activities
conducted by the Corps to ensure that the sponsor was performing the
required compensatory mitigation. Before our visit, Galveston district
officials were unaware that their four in-lieu-fee arrangements were not
in compliance with federal guidance and are now attempting to restructure
these arrangements. In addition, a Galveston district official told us the
district will develop such agreements with the sponsors of future
arrangements. With regard to the in-lieu-fee arrangement in New Orleans
that did not have an agreement, officials told us that resource
constraints and other priorities had prevented them from establishing a
formal agreement with the in-lieu-fee sponsor. This arrangement has
collected approximately $1 million since its inception in 1994, but
district officials could provide no other information regarding oversight
of the arrangement.37
Until the districts establish formal agreements with third-party sponsors,
the Corps does not have sufficient legal recourse if third parties do not
perform required compensatory mitigation because the sponsors have not
reached agreement with the Corps on what penalties and/or corrective
actions will be required to address any problems if the mitigation efforts
are not performed. The Corps' Chief of the Regulatory Branch noted that he
would encourage the districts to cease using these in-lieu-fee
arrangements to provide compensatory mitigation until such agreements are
established.
Conclusions The Corps' section 404 program is crucial to the nation's
efforts to protect wetlands and achieve the national goal of no net loss.
Although Corps officials acknowledge that compensatory mitigation is a key
component of this program, the Corps has consistently neglected to ensure
that the mitigation it has required as a condition of obtaining a permit
has been completed. The Corps' priority has been and continues to be
processing permit applications. In 1988 and 1993, we reported that the
Corps was placing little emphasis on its compliance efforts, including
compensatory
37According to a New Orleans official, although the majority of the total
is the result of compensatory mitigation requirements, some of the monies
were collected as a result of penalty assessments from the state's coastal
program.
mitigation, and little has changed. The Corps continues to provide limited
oversight of compensatory mitigation, largely relying on the good faith of
permittees to comply with compensatory mitigation requirements. The Corps'
oversight efforts have been further hampered by vague and inconsistent
guidance that does not (1) define key terms, (2) specify the actions Corps
staff should take if required monitoring reports are not received, or (3)
set clear expectations for oversight of compensatory mitigation.
Furthermore, district officials have failed to establish agreements with
third-party sponsors that would ensure the agency has legal recourse if
compensatory mitigation is not performed. Until the Corps takes its
oversight responsibilities more seriously, it will not know if thousands
of acres of compensatory mitigation have been performed and will be unable
to ensure that the section 404 program is contributing to the national
goal of no net loss of wetlands.
Recommendations for Executive Action
Given the importance of compensatory mitigation to the section 404 program
and its contribution to achieving the national goal of no net loss of
wetlands, we recommend that the Secretary of the Army direct the Corps of
Engineers to establish an oversight approach that ensures required
mitigation is being performed throughout the nation. As part of this
oversight approach, the Corps should
o develop more specific guidance for overseeing compensatory mitigation
performed by permittees, mitigation banks, and in-lieu-fee sponsors; in
particular, the guidance should define key terms such as "substantial
mitigation" and specify the actions Corps officials should take if
required monitoring reports are not received;
o clarify expectations for oversight of mitigation, including
establishing goals for the number of monitoring reports that should be
reviewed and the number of compliance inspections that should be
conducted; and
o review existing mitigation banks and in-lieu-fee arrangements to ensure
that the sponsor has an approved agreement with the Corps, as called for
in federal guidance; if such agreements are not in place, they should be
developed and the Corps should ensure that future mitigation banks and
in-lieu-fee arrangements have these approved agreements.
Agency Comments and Our Evaluation
We provided a draft of this report to the Secretary of the Department of
Defense for review and comment. The Department of Defense concurred with
the report's findings and recommendations. In its written comments, the
Department of Defense stated that the Corps is currently revising its
standard operating procedures. According to the department, the revised
guidance will provide details on mitigation requirements as well as
compliance and enforcement procedures. The department also indicated that
the Corps will issue a Regulatory Guidance Letter that will clarify
monitoring requirements for compensatory mitigation and include an outline
for standardized monitoring reports. In addition, the Department of
Defense provided technical comments and clarifications that we
incorporated, as appropriate. The Department of Defense's written comments
are presented in appendix IV.
As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from
the report date. At that time, we will send copies of this report to
interested congressional committees and Members of Congress; the Secretary
of Defense; the Secretary of the U.S. Army; and the Chief of Engineers and
Commander, U.S. Army Corps of Engineers. We also will make copies
available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at http://www.gao.gov.
If you have any questions about this report, please contact me at (202)
5123841 or [email protected]. Contact points for our Offices of
Congressional Relations and of Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this report
are listed in appendix V.
Sincerely yours,
Anu K. Mittal Director, Natural Resources
and Environment
Appendix I
Scope and Methodology
Our review focused on the compensatory mitigation activities at 7 of the
U.S. Army Corps of Engineers' (Corps) 38 districts that implement the
section 404 program: Charleston, South Carolina; Galveston, Texas;
Jacksonville, Florida; New Orleans, Louisiana; St. Paul, Minnesota;
Seattle, Washington; and Wilmington, North Carolina. We selected these
districts because they represent different geographic areas of the United
States, and they comprised over two-thirds of the compensatory mitigation
required by individual permits issued in fiscal year 2003.1 The
Charleston, Galveston, Jacksonville, New Orleans, St. Paul, and Wilmington
districts were the top districts nationwide in terms of mitigation
required by individual permits. While the Seattle district is not one of
the top 7 districts nationwide, it is one of the top districts in the
western region in terms of required individual permit mitigation, and we
included it to provide geographic coverage. To determine how much
compensatory mitigation was required by permits issued by each of the 38
districts, we used the Quarterly Permit Data System data, which we
examined and determined to be suitably reliable for selecting the
districts to be included in our review.
To identify the guidance the Corps has established for overseeing
compensatory mitigation, we examined legislation, federal guidance on
mitigation banks and in-lieu-fee arrangements, Corps regulations, Corps
guidance, and supplemental guidance developed by the districts. We also
met with responsible Corps headquarters and district officials to discuss
the Corps' guidance on oversight of compensatory mitigation.
To determine the extent to which the Corps oversees compensatory
mitigation, we reviewed a total of 249 files. We reviewed 152 permit files
issued in fiscal year 2000 where the permittee was responsible for the
mitigation. We selected this time frame because sufficient time would have
passed for the permittee to begin work on the permitted project, as most
of the permits we reviewed were valid for 5 years or less, and for the
Corps to have received a monitoring report or conducted a compliance
inspection. We also reviewed files for 95 mitigation banks (including 10
mitigation banks approved in 2004), and 12 in-lieu-fee arrangements. The
mitigation banks we reviewed had been approved since the mitigation
banking guidance was established on November 28, 1995. For in-lieu-fee
1Individual permits are typically issued for projects that may have
substantial environmental impacts. For smaller impacts, Corps officials
generally issue either letters of permission, which are used when the
proposed work is minor and is not expected to receive appreciable
opposition, or general permits, which cover activities that have been
identified as being substantially similar in nature, such as stabilizing
stream banks.
Appendix I Scope and Methodology
arrangements, we reviewed the arrangements currently operating at the
seven districts at the time of our site visit. These mitigation bank and
inlieu-fee arrangement files usually provided data on the mitigation
activities for multiple permittees, and the mitigation conducted can
encompass thousands of acres. Owing to the large number of permits and
mitigation banks at some of the districts, we selected a random sample of
permit files at Jacksonville and of mitigation banks at the Jacksonville,
New Orleans, and St. Paul districts. These samples were drawn so that the
estimates from the samples would have a precision margin of about plus or
minus 15 percentage points at the 95 percent confidence level. However, we
decided not to project our estimates to the population of permits in the
seven districts because some districts were unable to find information for
our sampled units, and another district was unable to provide a list of
permits within the scope of our sample. Since we had no information on the
missing permits, we are only presenting estimates for the permits and
banks that we reviewed.
While our results are not representative of the activities of the 38
district offices nationwide, the Corps' Chief of the Regulatory Branch
told us that our findings would likely indicate program implementation at
the other districts not included in the scope of our review. Tables 1
through 3 detail the permit files, mitigation banks, and in-lieu-fee
arrangements reviewed at each of the districts.
Table 1: Permit Files Reviewed at the Seven Districts, Fiscal Year 2000
District Number of permits reviewed
Charleston
Galveston
Jacksonville
New Orleans
St. Paul 31
Seattle 7
Wilmington 21
Total 152
Source: GAO analysis of Corps data.
As listed in table 1, we reviewed all permits that met our criteria
(individual permits where the permittee was responsible for performing
mitigation issued in fiscal year 2000) with the following exceptions:
Appendix I Scope and Methodology
o Charleston. The district could not locate three permit files.
o Jacksonville. We selected a random sample of 55 the 167 individual
permits identified by Jacksonville officials. The district could not
locate complete permit files for 13 of the permits we requested. In
addition, 18 of the permits we requested did not meet our criteria; for
example, some permits were modified in fiscal year 2000 but were not
issued in that year.
o New Orleans. District officials could not identify the permits that met
our criteria from the district database. Therefore, we asked district
officials to select the permits issued in fiscal year 2000 where the
permittee was responsible for performing compensatory mitigation and
reviewed all of the permits they identified.
o St. Paul. The district could not locate one permit file.
Table 2: Mitigation Banks Reviewed at the Seven Districts, November 28,
1995, through December 2004
District Number of banks reviewed
Charleston
Galveston
Jacksonvillea
New Orleansa, b
St. Paula
Seattle
Wilmington
Total 95c
Source: GAO analysis of Corps data.
aWe randomly selected mitigation bank files for review at this district.
bNew Orleans could not locate files for two of the mitigation banks that
we requested for review.
cThis total includes the 10 mitigation bank agreements that were approved
during 2004: Jacksonville 4, New Orleans - 1, and St. Paul - 5.
Appendix I Scope and Methodology
Table 3: In-Lieu-Fee Arrangements Reviewed at the Seven Districts
District Number of arrangements
Charleston
Galveston
Jacksonville
New Orleans
St. Paul
Seattle
Wilmington
Total
Source: GAO analysis of Corps data.
Note: At the Galveston and New Orleans districts, we asked for
documentation of the in-lieu-fee arrangements. Because neither of these
districts has formal agreements for its arrangements, as called for by
federal guidance, the districts did not provide any documentation for us
to review. Therefore, any information about these districts' in-lieu-fee
arrangements was obtained through interviews with district officials.
In addition to the file reviews, we spoke with district officials and
reviewed relevant documentation to gain a better understanding of the
districts' oversight programs and to gather any information that may not
have been available during our file reviews.
To identify the enforcement actions the Corps can take if it determines
that compensatory mitigation requirements are not being met and the extent
to which it takes these actions, we analyzed Corps data on how the
district offices resolved instances of noncompliance during fiscal year
2003. In addition, we reviewed relevant regulations and documentation
obtained either from Corps officials or identified during our file
reviews. We also discussed with headquarters and district officials the
enforcement actions available to the Corps and the frequency with which
the districts used these actions.
In addition, we met with several sponsors of mitigation banks and
in-lieufee arrangements, as well as subject area experts, such as members
of the National Research Council, to gain their views on the Corps'
mitigation program. We conducted our review from June 2004 through
September 2005 in accordance with generally accepted government auditing
standards.
Appendix II
Corps of Engineers Federal Guidance for Oversight of Compensatory
Mitigation
As noted earlier, the Corps has three primary guidance documents for
overseeing compensatory mitigation performed by permittees, mitigation
banks, and in-lieu-fee arrangements: (1) The 1999 Army Corps of Engineers
Standard Operating Procedures for the Regulatory Program (Parts I and II);
(2) The Federal Guidance for the Establishment, Use and Operation of
Mitigation Banks; and (3) The Federal Guidance on the Use of In-Lieu-Fee
Arrangements for Compensatory Mitigation Under Section 404 of the Clean
Water Act and Section 10 of the Rivers and Harbors Act. These documents
provide guidance for overseeing compensatory mitigation as described in
this appendix.
Standard Operating Procedures for the Regulatory Program (Parts I and II)
The Corps' 1999 Standard Operating Procedures for the Regulatory Program
(Part I) highlights critical policies and procedures that are major
factors in administering a consistent program nationwide. It specifies the
following:
o For all compensatory mitigation,
o Compliance inspections are essential.
o For individual permitees,
o
o
o
Districts will inspect a relatively high percentage of compensatory
mitigation to ensure compliance with permit conditions. This is important
because many of the Corps permit decisions require compensatory mitigation
to offset project impacts.
To minimize field visits and the associated expenditures of resources,
permits with compensatory mitigation requirements should require
applicants to provide periodic monitoring reports and certify that the
mitigation is in accordance with permit conditions. Districts should
review all monitoring reports.
Districts will require all permittees to submit a self-certification
statement of compliance. Districts should not be expending funds on
surveillance as a discrete activity. Surveillance should be performed in
conjunction with other activities such as permit or enforcement actions.
o For mitigation banks,
Appendix II
Corps of Engineers Federal Guidance for
Oversight of Compensatory Mitigation
o Districts will inspect all mitigation banks to ensure compliance with
the banking agreement.
o For in-lieu-fee arrangements,
o These are not mentioned in Part I of the standard operating procedures.
The Corps' Standard Operating Procedures for the Regulatory Program (Part
II) lists the work that should be prioritized. Part II states that it is
not intended to dissuade districts from doing lower priority work;
however, all districts should perform the high priority work before
expending resources on the lower priority work. Part II specifies the
following for mitigation:
o High priority work consists of:
o requiring and reviewing monitoring reports on mitigation banks and
other substantial mitigation, including in-lieu-fee approaches to assure
success; and
o Low priority work consists of:
o compliance inspections for all mitigation and multiple site visits to a
mitigation site.
Federal Guidance for the Establishment, Use and Operation of Mitigation
Banks
The Federal Guidance for the Establishment, Use and Operation of
Mitigation Banks, issued in November 1995, provides policy guidance for
the establishment, use, and operation of mitigation banks for the purpose
of providing compensatory mitigation. Oversight guidance in this document
is as follows:
o Members of the mitigation banking review team, which the Corps chairs,
are encouraged to conduct regular (e.g., annual) on-site inspections, as
appropriate, to monitor bank performance.
o Annual monitoring reports should be submitted to the authorizing
agencies, which include the Corps. The period for monitoring will
typically be 5 years; however, it may be necessary to extend this period
for projects requiring more time to reach a stable condition or where
remedial activities were undertaken.
Appendix II
Corps of Engineers Federal Guidance for
Oversight of Compensatory Mitigation
Federal Guidance on the Use of In-Lieu-Fee Arrangements for Compensatory
Mitigation Under Section 404 of the Clean Water Act and Section 10 of the
Rivers and Harbors Act
The Federal Guidance on the Use of In-Lieu-Fee Arrangements for
Compensatory Mitigation Under Section 404 of the Clean Water Act and
Section 10 of the Rivers and Harbors Act, issued in November 2000,
clarifies the manner in which in-lieu-fee mitigation may serve as an
effective and useful approach to satisfy compensatory mitigation
requirements and meet the administration goal of no net loss of wetlands.
Related to oversight, it specifies the following:
o There should be appropriate schedules for regular (e.g., annual)
monitoring reports to document funds received, impacts permitted, how
funds were disbursed, types of projects funded, and the success of
projects conducted, among other aspects of the arrangement.
o The Corps should evaluate the reports and conduct regular reviews to
ensure that the arrangement is operating effectively and is consistent
with agency policy and the specific agreement.
Appendix III
File Review Results by Corps District
This appendix presents the results of our file review at seven Corps
districts-Charleston, South Carolina; Galveston, Texas; Jacksonville,
Florida; New Orleans, Louisiana; St. Paul, Minnesota; Seattle, Washington;
and Wilmington, North Carolina. Results of our review for individual
permits issued in fiscal year 2000 where permittees were responsible for
the mitigation are presented in table 4. Results for mitigation banks
approved between the date of the mitigation bank federal guidance
(November 28, 1995) and December 31, 2003, are in table 5 and in-lieu-fee
arrangements currently operating at the districts at the time of our site
visits are in table 6.
Table 4: Results of Review of Corps Oversight of Individual Permits Issued
in Fiscal Year 2000 Where Permittees Are Responsible for Compensatory
Mitigation
Charleston Galveston Jacksonville New St. Seattle Wilmington
Orleans Paul
Number of
permit 25 18 24 26 31 7
files
reviewed
Permits
requiring 0 11 16 19 19 7
monitoring
reports
Permit
files with
evidence of
at least
one
monitoring 1a 1a 11 0 2 2 8b
report
Permit
files with
evidence of
at least
one
compliance 3 3 4 0 1 2
inspection
Permit
files with
evidence of
either
monitoring
reports or
compliance
inspections 4 3 13 0 3 2
Source: GAO analysis of Corps data.
aMonitoring report was received, but the Corps did not require the
permittee to submit it.
bOf the eight permit files with evidence of at least one monitoring report
in Wilmington, two of the permits did not require these reports.
Appendix III File Review Results by Corps District
Table 5: Results of Review of Corps Oversight of Mitigation Banks Approved from
November 1995 through December 2003
Charleston Galveston Jacksonvillea New St. Seattle Wilmington
Orleansa Paula
Number of
mitigation
bank files
reviewed 10 4 15b 22c 23d 2
Mitigation
banking
agreements
requiring
monitoring 5 4 14 22 4 2
reports
Mitigation
bank files
with
evidence of
at least
one 4 3 7e 16 2 2
monitoring
report
Mitigation
bank files
with
evidence of
at least
one 5 1 5 9 3 1
compliance
inspection
Mitigation
bank files
with
evidence of
either
monitoring
reports or
compliance 7 3 8 18 5 2
inspections
Source: GAO analysis of Corps data.
aGAO reviewed a random sample of mitigation bank files at this district.
bFour additional banks were approved in 2004. All of the banking
agreements require the sponsor to provide monitoring reports to the Corps.
cOne additional bank was approved in 2004. The banking agreement requires
the sponsor to provide monitoring reports to the Corps.
dFive additional banks were approved in 2004. Of these, one of the banking
agreements required the sponsor to provide monitoring reports to the
Corps.
e For one bank, a monitoring report was received, but the Corps did not
require the bank to submit it.
Table 6: Results of Review of Corps Oversight of In-Lieu-Fee Arrangements
Currently in Operation at the Time of Our Site Visit
Charleston Galvestona Jacksonville New Orleans a St. Paul Seattle
Wilmington
Number of in-lieu-fee arrangements
reviewed 24 4 100
Arrangements with agreements
requiring monitoring reports 2 0 3 0 N/A N/A
Arrangements with evidence of at
least one monitoring report 1 0 4b 0 N/A N/A 1
Arrangements with evidence of at
least one compliance inspection 0 0 4 0 N/A N/A 1
Arrangements with evidence of
either monitoring reports or
compliance inspections 1 0 4 0 N/A N/A 1
Source: GAO analysis of Corps data.
aThe Galveston and New Orleans districts do not have any formal agreements
or documentation regarding oversight for their in-lieu-fee arrangements.
As a result, district officials did not have any monitoring requirements
or provide files for us to review.
Appendix III File Review Results by Corps District
bFor one arrangement, a monitoring report was received, but the Corps did
not require the arrangement to submit it.
Appendix IV
Comments from the Department of Defense
Appendix IV
Comments from the Department of Defense
Appendix IV
Comments from the Department of Defense
Appendix V
GAO Contact and Staff Acknowledgments
GAO Contact Anu K. Mittal (202) 512-3841 ([email protected])
Staff Acknowledgments
(360490)
In addition to the individual named above, Sherry McDonald, Assistant
Director; Diane Caves; Jonathan Dent; Doreen Feldman; Janet Frisch;
Natalie Herzog; Cynthia Norris; Karen O'Conor; Anne Rhodes-Kline; Jerry
Sandau; Carol Herrnstadt Shulman; Lisa Vojta; and Daniel Wade Zeno made
key contributions to this report.
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