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Hello, and welcome to another episode of People, Places, Planet podcast. My name is Dominic Scicutano, and I'm a research associate here at the Environmental Institute or ELI. For every authorized discharge into waters of the United States, the adverse impacts to wetlands, streams, and other aquatic resources must be avoided and minimized to the extent possible. Where these impacts are impossible to circumvent, a practice called compensatory mitigation is required to replace the loss of wetland and aquatic resource functions in the watershed. Compensatory mitigation may restore, preserve, or enhance existing aquatic resources, and might even seek to create an entirely new wetland where one did not exist before.

Mitigation offers a viable way to protect the long term health of the nation's watersheds and its success relies on a robust review and approval process that ensures that the protections and federal regulations are implemented in practice on the ground, and that compensation projects effectively offset permanent impacts. However, the review and approval process can often be lengthy, sometimes greatly exceeding the regulatory timelines. In today's episode we discuss a new ELI research report that aims to identify some of the main impediments to efficiency in compensatory mitigation project review, as well as some best practices to improve the process and ensure timely, ecologically viable mitigation outcomes. This ELI project was funded through an EPA wetlands program development grant. Today we're joined by Doctor.

Rebecca Kisslinger, one of the authors of the new report. Rebecca is a senior science and policy analyst and director of ELI's Wetlands Program. She has led numerous projects and written extensively on a range of topics, including opportunities for wildlife conservation and natural hazard areas, nature friendly land use planning, and local and state wetland protection programs. Thanks, Rebecca, for coming on today to discuss this new report. I'm excited to hear about the research you worked on and any notable findings you'd like to share with me and with our listeners.

Thanks, Dominic. Really happy to be here.

So before we get into the details of this study, do you mind providing a quick introduction to compensatory mitigation for those of us who might not be as familiar with the practice?

Sure. So as you mentioned earlier, section 404 of the federal Clean Water Act requires landowners or developers, to secure a permit from the US Army Corps of Engineers for any activities that would lead to a discharge of dredged or fill material into waters of the United States. So that includes things like wetlands, streams, and other aquatic resources. So, for example, a developer or a landowner, wants to build a neighborhood or a big box store or a transportation agency wants to build a road or a bridge, and that will result in fill or a disturbance to a wetland or stream. He or she must get a permit from the Army Corps to do that project.

So prior to issuing that permit, as you mentioned before, the Corps must make a determination that any of those potential impacts must have been avoided to the maximum extent practicable, and anything that's not avoidable, any impacts that are not avoidable have to be minimized to the mat to the extent appropriate and practicable. So once those impacts have been avoided and minimized, then any remaining impacts have to be offset or compensated for, and that's the process of compensatory mitigation. So then that developer needs to replace those lost acres and functions of wetlands or streams or aquatic resources. So how do they do that? So they can do that through 1 of 4, what are called mitigation methods.

So that's restoration, so they can restore the wetland or stream through either reestablishment, so there's, they restore wetland that used to be there, or rehabilitation, so there's a very degraded wetland, and they restore the hydrology and the vegetation to that wetlanders, or, they do a stream rehabilitation project. They can establish the wetland, as you mentioned earlier, or aquatic resource. So that means creating a resource that wasn't there before, so creating a wetland in a place that never existed. They can enhance the habitat, so that's improving the resource so that it restores a given function. So, like, for example, for wetlands, it may be restoring the important water storage functions or the water quality improvement functions, or the habitat functions of that well, or they can preserve the aquatic resource, so remove the development threat from that resource.

Then there are 3 mitigation mechanisms that are supported by the corn EPA for permittees in order to meet their compensatory mitigation requirements to offset those permitted impacts. The first is permittee responsible mitigation. That's if the permittee does the restoration activity themselves. They find the site for the project, they develop the plan, the mitigation plan, and they implement the project. And oftentimes, that's in a site that may be near the development.

That's permittee responsible. Or they can purchase credits from approved mitigation bank. So that's where a mitigation banker has restored or enhanced, a a site, an aquatic resource, a wetland, or a stream prior to the impacts to generate credits that they can sell to the permittee so that the permittee can offset their required compensatory mitigation. And the final mechanism is making a payment to an approved in lieu fee program. So the in lieu fee program is something like the bank, but the, permittee will pay the in lieu fee program.

The in lieu fee program will collect the money prior to doing the project. So that money for, that the permittee pays goes to the in lieu fee program, and then they use those resources to do a project after. So the difference really between mitigation banking and in lieu fee programs or one of the main differences is the timing of the restoration. For banks, it happens before the impact, often, and for In the Fee Programs, it comes after. So those last two mitigation mechanisms, mitigation banks and In the Fee Programs, are often referred to as 3rd party compensatory mitigation because the responsibility for conducting that actual compensation for doing the project and the liability for making sure that it successfully offsets those impacts is transferred to that 3rd party, the mitigation banker or the in lieu fee program.

Thanks, Rebecca. And so how is this all regulated in practice?

So great question. In 2008, after decades, really, of running the compensatory mitigation program and in response to several studies, including that showed that the program might not be, in all cases, successfully offsetting permitted impacts, EPA and the Corps jointly issued the 1st federal regulation governing compensatory mitigation for impacts to wetlands and aquatic resources. We call it the mitigation rule or the 2008 rule. The 2008 rule incorporated a number of new requirements, including requiring that, compensatory mitigation decisions are made within the context context of a watershed approach. So that means, understanding the threats in the watershed, opportunities for restoration, where the impacts are happening so those mitigation decisions can help improve watershed health.

It also established equivalent standards for all three forms of those three mechanisms of mitigation, so, permanently responsible banking and in lieu fee programs. And that includes setting up included setting setting up timelines for review and approval of mitigation banks and in lieu fee programs, which is one of the things that we were really interested in for this project. And, finally, one of the major things the rule did was establish clear hierarchy and the preference for which mitigation mechanism should be used to offset impacts. And the rule gave a clear preference, to mitigation banks where they have the type of mitigation or compensation needed to offset a given impact in that watershed. And then after if there are no credits available at that at a mitigation bank, then the permittee would go to in lieu fee programs, and then permittee responsible.

So the preference went to mitigation banks and Inland fee programs due to some of their perceived advantages, over permittee responsible mitigation. For example, mitigation banking requires that the site, as I mentioned earlier, the site identification happens in advance. There's project specific planning in advance, and there's a significant amount of financial resources that go into those projects in advance of impacts. Mitigation banks and in lieu fee programs also typically involve larger, more ecologically valuable sites, as well as, larger restoration activities, more rigorous scientific and technical analysis and planning, including an interagency, review process known as the interagency review team or the IRT. So the IRT is made up of the core, state agencies, other federal agencies that have experience and expertise with the resources and can provide a robust review of the project in order to ensure that that project is actually gonna be successful over the long term in meeting its objectives, in the mitigation plan.

And the IRT is, one of the reasons that banks and in lieu fee programs have this regulatory preference, in the rule. So compensatory mitigation is a pretty big program. The compensatory mitigation market is a multibillion dollar a year market, so multibillions of dollars go into the restoration of preservation of these resources annually. And the acreage affected can also be pretty significant. Tens of thousands of acres are restored, preserved, enhanced, established under this program every year.

So we at ELI have been studying the compensatory mitigation program for many years, decades in fact, and producing resources designed to help improve the implementation of this program, including this study that we're talking about today.

Thanks, Rebecca. I I think that this sort of regulatory and, you know, broader context is really important if we're to understand, the sort of framework under which these projects are operating. So I really appreciate that. It it seems to me that compensatory mitigation is a pretty effective way, or it sounds like it's an effective way to offset damages to wetlands and other resources that can occur, you know, kind of as a product of development. So what is it about the way that mitigation is currently being carried out that kind of complicates this or makes it less efficient than it could be?

Yeah. Thanks, Dominic. And I think the 2,008 rule went a long way to help, ensure that the compensatory mitigation is an effective way to offset, permitted impacts. And as you noted earlier, the success of these 3rd party, these mitigation banks and in the fee programs, and and really all compensatory mitigation projects, relies on that robust review and approval process. It not only helps ensure that the protections that the federal regulation put in place are implemented on the ground.

Right? And that also that that compensation project is doing what it's supposed to do. It's actually a wetland. It was actually, the project was actually done. And that it's actually providing the acres and functions, that it purported to replace in the mitigation plan.

And we think, and the kind of basis for this project was that there are a number of things we think that that review and approval process should include, things like formalized procedures. And some of those are set up in the mitigation rule. That it should have collaboration among the relevant agencies to ensure that that expertise and experience, as I mentioned, like with the IRT process, is involved. And if there are any state or local substantive issues, like many states have regulatory programs of their own, and that those are considered in this review process is important. And that there's an adherence to the regulatory timelines is another of those components that I think is important of this review and approval process.

And maintaining this efficient process with all these key components can help to ensure that quality compensation projects are available to offset those impacts that are happening and that they're available in a timely fashion. So what we're hearing, though, from the agencies and from providers is that that review and approval process for banks and in the fees, and that's really what we were focused on for this study, it can often be really lengthy. And that that a review and approval process can often greatly exceed the timelines that were set up in the mitigation rule. We know that there are many possible reasons for this. And what we were interested in for this study was really to examine those reasons.

What are the challenges, in the review and approval process that can be sticking points or cause cause that process to go on when it doesn't need to be that lengthy. And propose recommendations to improve the process to make sure not only that it's efficient and that the agencies and the providers are working together in an efficient manner, but also that it produces quality projects that actually provide the compensation that, they're they need to in order to offset those permanent impacts.

So it sounds like with the way things are structured currently, there are a few barriers to efficient third party compensatory mitigation. How how did you go about collecting data for this, research project and this new report to try to get at some of these challenges and how people are solving them?

Yeah. So, we first the first thing that we did was assemble an advisory committee to help us, develop our methodology and implement the project. So our advisory committee was composed of 11 experts, really, in the field from state and federal agencies, from, mitigation banks, so mitigation bank sponsors, in lieu fee program providers, and then we had a staff member from the conservation fund, who's also immersed in this program. That committee provided recommendations that informed our list of interview subjects later, so our main kind of methodology was interview based. Our committee also provided feedback on the draft interview template that we use to conduct the interviews, and then they also responded to the final interview questions themselves so that they contributed to our dataset.

So working with that committee, we identified 30 experienced participants in compensatory mitigation program from across the country. So we had to get, providers from bankers and in the fee programs. We had state agencies who sit on the IRTs and run their state, and in some cases, run their state agency programs. We had other federal agencies, and we also had core district staff.

And so what sorts of topics did you ask folks about during the study?

Sure. We asked the interviewees a number of questions about challenges to the review and approval process, where their sticking points are, not only in the timeline, but whether some of the substantive issues that are some of the main challenges they face. And we also ask them about best practices. What are they doing that's working, and what are some of the opportunities for improvement?

Are there any particular findings you'd like to share regarding, challenges that folks are facing or how they sought to address them?

Yeah. So the challenges really included looking at the timeline. So where along the timeline are, providers really getting stuck? And what we heard was it was this phase called the draft instrument. And that's really the meet the biggest mitigation plan, which is the agreement between the core and the provider.

It's called the draft instrument. And that's really where a lot of the details start to emerge. And that seemed to be the time in the timeline where there was a lot of back and forth and a lot of challenges. Then for the substantive issues, those are the kind of the nitty gritty. What's in the mitigation plan?

What does this project look like. We heard that a lot of the challenges are around site selection, you know, finding a good project site, and what some of the challenges that might go with those project sites, Site protection, how are they gonna protect these sites? Because the rule requires that the sites are protected over the long term, and it also requires that they're managed over the long term. So long term management was another one of the challenges that, our interviewees identified. And then our interviewees identified a number of management challenges.

A lot of them were related to overburdened staff, from the core and from the other IRT agencies and related lay staff turnover. So they'll start with 1, 1 district staff from the core, and then as they get through their project and the staff turns over and they have to, go back a few steps in order to, get that staff member on board with a project. Folks also identified a lack of project management strategies, so scheduling different kinds of tracking systems. And then a lack of standard operating procedures and templates were also cited as challenges. So in terms of opportunity for improvement, we heard a lot about the IRT process.

It was one of the things we're really interested in, and and our interviewees told us that the IRT process is really important. That the expertise and the experience that the IRT agencies bring to bear is is an important part of that review and approval process, and that it's more efficient to have them working together than to run, parallel review processes, we heard is often the case. But we also heard that there are some ways to improve that review by the IRT. So things like improvements in scheduling and organization of meetings, holding meetings remotely, which we're all becoming more and more familiar with during these times, better ways to schedule and hold site visits, and, better project management tracking. That was that project management tracking came up again and again, as you will hear, in our study.

Then we heard outside of that kind of IRT process, we heard a number of other opportunities for improvement of this process. Some folks told us about state regulations. And where state regulations are in place, this often come with some more stringent timelines or other kinds of ways to improve the efficiency of the process. We heard using standard templates for those substantive issues, like sites site protection or long term management can really help set expectations for the provider on what they need to submit to the agencies in in order to have a successful project. Again, process management and management strategies was a big one, setting up really having good schedules that are created by the, providers in the IRT at the outset, and different ways to track the project as well as track document review can really help improve, efficiencies.

Preliminary reviews was another one. Setting up, a time to meet with the IRT be have the provider meet with the IRT before they submit any documents to talk about a project and identify those projects that will most likely get approved as they move through the process. So those preliminary reviews we heard, can often help improve the process. Again, site visits and then other administrative options to shorten the time for review. And we heard from some that maybe even having the agencies come up with some best management practices for providers and what they expect to see in submissions could help, again, set expectations and improve efficiencies.

So based on these findings, we had a couple of conclusions. First, I think we heard from folks that the elements of the 2,008 rule are useful, and that they've really improved the review and approval process from before the rule, and that they've led to better outcomes on the ground. But that the review and approval of banks and in lieu fee programs and projects still often exceeds the regulatory time frame, as I mentioned earlier. But that the delays are in large part due to some of those known causes. Some of those causes, like a lack of templates or maybe some data gaps or this project management strategies again, might be able to be addressed with some management improvements or process improvements.

But there are others of those challenges, like this overburdened regulatory staff, the high levels of staff turnover, a lack of training, of members of the IRT may be really challenging, especially in times when budgets are tight and tightening. We also heard again that the IRT is important. It's important to the effective and timely evaluation of compensatory mitigation actions. Again, we heard efficiencies in the review process could be gained via application of project management tools. So using those, project management strategies could really help, make the process more efficient.

And then also, having thoughtfully designed standard operating procedures and templates could also help address those delays that are due to substantive issues. So we're really hoping that our conclusions and the findings of our report are useful, information to the agencies as they look for improvements, and evaluate their program and how they can work with their providers to make it a more efficient and successful program.

Thanks, Rebecca, for sharing some of, the challenges that I guess are inherent to the mitigation process and, some of the ways that core districts, state agencies, and I suppose the providers themselves are attempting to kind of address them. And I imagine that there is a lot more detail about this, in the report itself for those of our listeners that are interested in checking that out. Before we wrap up here today, I think I'd like to broaden our lens a little bit beyond this new report and talk a little bit about some of the recent environmental regulatory developments, that might be expected to impact compensatory mitigation. It it seems like we're constantly learning about rollbacks or other changes to long standing environmental regs under the current administration. And though it might be too soon to predict the specific effects that some of these might have, what rulemaking do you have your eye on, and do you kind of see as having a big impact in the compensatory mitigation world?

Sure. Good question. Thanks, Dominic. So I think maybe, you know, we can't not talk about the navigable waters protection rule, which was the rule that came out, this year, defining waters of the US. The navigable water protection rule defines waters of the US, so what's jurisdictional under the Clean Water Act.

So this new, definition of waters of the US that was, finalized by the Trump administration this year, will affect the types of resources that will require permits under the section 404 permit, and thus, how much compensatory mitigation is required, for projects. The rules the new rules economic analysis estimates that somewhere between a 100 and $500,000,000 annually in cost savings for mitigation, so that means that much less mitigation may be required, under this new rule. And that depends though on what states the role states will play in regulating wetlands. So right now, about half of the states have some kind of regulatory program that covers these waters. So wetland protection programs, or protection programs that cover wetlands or streams or other aquatic resources.

Some of these programs, many of them include compensatory mitigation requirements. So, it's like you said, maybe a little bit unclear right now as we are, it's only a few months old, how this regulation will affect, kind of the scope of compensatory mitigation required. It's likely to have an impact. We're not, you know, quite sure yet how it will be implemented on the ground. So we're not quite sure, which resources may be now left out of federal, the federal regulatory program.

And that may, you know, there's some estimates that that's a pretty sizable, pretty significant amount of, percentage of the wetlands, freshwater wetlands. But we're not, you know, at this point not quite sure what that looks like. And there's also a number of challenges in the court to this rule. So that will also, the outcome of those court challenges will really affect how this rule is implemented, obviously. So we'll see on that one what happens.

But, it could have a major effect on the mitigation program at the federal level. The other program at the federal level. The other, regulatory implication and the one we're looking at is, the, changes possible changes to the 2,008 rules. So the agencies have indicated that they're going to be releasing a proposed rule for changes, updates to the 2,008 compensation rule. And that's likely to come before the end of the year.

The and those changes could include, major changes to the IRT process with putting putting that IRT process. How do I wanna say it? Maybe I'll just say. That that could include major changes to the IRT process. So, kind of removing, removing the importance of the IRT process to review and approval of third party mitigation.

There are also a number of other, changes that the agencies are talking about that will clarify other kinds of, requirements for banks and embassy programs. This change these major changes to the IRT process could have a real impact on the review and approval process for banks and in lieu fee programs. So we're waiting to see what the agencies propose when that comes out later this year.

Well, thank you, Rebecca, for coming on today to discuss both this new research report and, some of your own insights on the regulatory context for the mitigation program.

Yeah. Thanks for having me, Dominic.

And before we sign off, ELI's new research report on improving compensatory mitigation project review is available now on our website and via the link in the description.

Thank you for tuning in to People, Places, Planet pod, brought to you by the Environmental Law Institute. We would like to hear from you. So please send us your questions, comments, and ideas to podcast at eli.org. And if you're interested in learning more about our work, attending one of our events, reading our publications, or becoming a member, please visit our website at www.eoli.org.