Compensatory Mitigation for Losses of Aquatic Resources, 15520-15556 [06-2969]

Agencies

• DEPARTMENT OF DEFENSE
• ENVIRONMENTAL PROTECTION AGENCY
• Department of the Army, Corps of Engineers
• Engineers Corps

[Federal Register Volume 71, Number 59 (Tuesday, March 28, 2006)]
[Proposed Rules]
[Pages 15520-15556]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-2969]



[[Page 15519]]

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Part II





Department of Defense





Department of the Army, Corps of Engineers



33 CFR Parts 325 and 332



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Environmental Protection Agency

40 CFR Part 230



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Compensatory Mitigation for Losses of Aquatic Resources; Proposed Rule

Federal Register / Vol. 71, No. 59 / Tuesday, March 28, 2006 / 
Proposed Rules

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DEPARTMENT OF DEFENSE

Department of the Army, Corps of Engineers

33 CFR Parts 325 and 332

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 230

[EPA-HQ-OW-2006-0020]
RIN 0710-AA55


Compensatory Mitigation for Losses of Aquatic Resources

AGENCIES: U.S. Army Corps of Engineers, DoD; and Environmental 
Protection Agency.

ACTION: Proposed rule.

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SUMMARY: The U.S. Army Corps of Engineers (the Corps) and the 
Environmental Protection Agency (EPA) are proposing to revise 
regulations governing compensatory mitigation for activities authorized 
by permits issued by the Department of the Army. The proposed 
regulations are intended to establish performance standards and 
criteria for the use of permittee-responsible compensatory mitigation 
and mitigation banks, and to improve the quality and success of 
compensatory mitigation projects for activities authorized by 
Department of the Army permits. The proposed regulations are also 
intended to account for regional variations in aquatic resource types, 
functions, and values, and apply equivalent standards to each type of 
compensatory mitigation to the maximum extent practicable. The proposed 
rule includes a watershed approach to improve the quality and success 
of compensatory mitigation projects in replacing losses of aquatic 
resource functions, services, and values resulting from activities 
authorized by Department of the Army permits. We are proposing to 
require in-lieu fee programs, after a five-year transition period, to 
meet the same standards as mitigation banks.

DATES: Submit comments on or before May 30, 2006.

ADDRESSES: You may submit comments, identified by docket number EPA-HQ-
OW-2006-0020 and/or RIN 0710-AA55, by any of the following methods:
     Federal eRulemaking Portal (recommended method of comment 
submission): https://www.regulations.gov. Follow the on-line 
instructions for submitting comments.
     E-mail: ow-docket@epamail.epa.gov. Include the docket 
number, EPA-HQ-OW-2006-0020, and/or the RIN number, 0710-AA55, in the 
subject line of the message.
     Mail: USEPA Docket Center, Attention Docket Number EPA-HQ-
OW-2006-0020, 1200 Pennsylvania Ave., NW., Washington, DC 20460.
     Hand Delivery: USEPA Docket Center, Room B102, EPA West, 
Attention Docket Number EPA-HQ-OW-2006-0020, 1301 Constitution Ave., 
NW., Washington, DC 20460. Such deliveries are only accepted during the 
Docket's normal hours of operation, and special arrangements should be 
made for deliveries of boxed information.
    Instructions: Direct your comments to docket number EPA-HQ-OW-2006-
0020 and/or RIN 0710-AA55. All comments received will be included in 
the public docket without change and may be made available on-line at 
https://www.regulations.gov, including any personal information 
provided, unless the commenter indicates that the comment includes 
information claimed to be Confidential Business Information (CBI) or 
other information whose disclosure is restricted by statute. Do not 
submit information that you consider to be CBI, or otherwise protected, 
through www.regulations.gov or e-mail. The www.regulations.gov Web site 
is an anonymous access system, which means we will not know your 
identity or contact information unless you provide it in the body of 
your comment. If you send an e-mail directly to EPA without going 
through www.regulations.gov, your e-mail address will be automatically 
captured and included as part of the comment that is placed in the 
public docket and made available on the Internet. If you submit an 
electronic comment, we recommend that you include your name and other 
contact information in the body of your comment and with any disk or 
CD-ROM you submit. If we cannot read your comment because of technical 
difficulties and cannot contact you for clarification, we may not be 
able to consider your comment. Electronic comments should avoid the use 
of any special characters, any form of encryption, and be free of any 
defects or viruses. For additional information about EPA's public 
docket visit the EPA Docket Center homepage at 
https://www.epa.gov/epahome/dockets.htm.
    Docket: For access to the docket to read background documents or 
comments received, go to www.regulations.gov. All documents in the 
docket are listed. Although listed in the index, some information is 
not publicly available, such as CBI or other information whose 
disclosure is restricted by statute. Certain other material, such as 
copyrighted material, is not placed on the Internet and will be 
publicly available only in hard copy form. Publicly available docket 
materials are available either electronically in www.regulations.gov or 
in hard copy at the Water Docket, EPA/DC, EPA West, Room B102, 1301 
Constitution Ave., NW., Washington, DC. The Public Reading Room is open 
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal 
holidays. The telephone number for the Public Reading Room is (202) 
566-1744, and the telephone number for the Water Docket is (202) 566-
2426.
    Consideration will be given to all comments received within 60 days 
of the date of publication of this notice.

FOR FURTHER INFORMATION CONTACT: Mr. David Olson at 202-761-4922 or by 
e-mail at david.b.olson@usace.army.mil, or Mr. Palmer Hough at 202-566-
8323 or by e-mail at mitigationrule@epa.gov. Information can also be 
found at the EPA compensatory mitigation webpage at: 
https://www.epa.gov/wetlandsmitigation.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 314 of the National Defense Authorization Act for Fiscal 
Year 2004 (Pub. L. 108-136) requires the Secretary of the Army, acting 
through the Chief of Engineers, to issue regulations ``establishing 
performance standards and criteria for the use, consistent with section 
404 of the Federal Water Pollution Control Act (33 U.S.C. 1344), of on-
site, off-site, and in-lieu fee mitigation and mitigation banking as 
compensation for lost wetlands functions in permits issued by the 
Secretary of the Army under such section.''
    The statute states that the regulation should address wetlands 
compensatory mitigation. However, we believe that this regulation 
should apply to compensatory mitigation for all types of aquatic 
resources that can be impacted by activities authorized by Department 
of the Army permits, including streams and other open waters. We also 
believe that this regulation should apply to compensatory mitigation 
required for activities in navigable waters of the United States that 
are subject to regulatory jurisdiction under Sections 9 and 10 of the 
Rivers and Harbors Act of 1899. We believe this approach does not 
conflict with the intent of the statute, and will provide the regulated 
public with clear national standards and requirements for all aquatic 
resource compensatory mitigation required by Department of the Army 
permits, while

[[Page 15521]]

allowing district engineers flexibility to address permit-specific 
situations. We also believe this approach will enhance regulatory 
efficiency and improve protection of the aquatic environment.
    The statute states that the regulation should be developed by the 
Department of the Army, with the provision that the standards and 
criteria developed be consistent with Section 404 of the Clean Water 
Act. We believe that the goals of the Clean Water Act and the Defense 
Authorization Act will be more effectively met if this proposed rule is 
issued jointly by the Corps and EPA. A jointly-issued proposed rule 
reflects the important roles played by both agencies in the Section 404 
program, in which the permit program is administered by the Corps, 
while the responsibility for developing the regulations providing the 
environmental criteria for permit issuance is given to EPA. Since the 
proposed rule is in part a clarification of EPA regulations concerning 
Section 404 mitigation, a joint rule helps to ensure maximum 
consistency in the implementation of the section 404 regulatory 
program. Furthermore, CWA Section 501(a) authorizes EPA to conduct any 
rulemaking necessary to carry out EPA's functions under the Clean Water 
Act.
    Joint issuance also provides basic regulatory consistency. 
Environmental criteria for the selection of disposal sites for 
discharges of dredged or fill material are set by EPA regulations at 40 
CFR part 230, and referenced by Corps regulations at 33 CFR part 320. 
Since the proposed rule is in part a clarification of EPA's regulations 
at 40 CFR part 230, EPA must add the proposed rule text to its existing 
regulations in order to maintain consistency between the two linked 
Parts of the CFR. Making the two agencies' additions concurrent will 
avoid any confusion on the part of the regulated community and the 
public. Moreover, the history of a joint EPA/Corps relationship on 
mitigation issues is long. All national guidance on compensatory 
mitigation has been developed and issued jointly by the Corps and EPA, 
including Regulatory Guidance Letter 02-02 (issued on December 24, 
2002); the ``Federal Guidance for the Establishment, Use, and Operation 
of Mitigation Banks'' (as published in the November 27, 1995, issue of 
the Federal Register, 60 FR 58605); 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'' (as published in the November 7, 2000, issue of the Federal 
Register, 65 FR 66914); and the ``Memorandum of Agreement Between the 
Environmental Protection Agency and the Department of the Army 
Concerning the Determination of Mitigation Under the Clean Water Act 
Section 404(b)(1) Guidelines'' (issued on February 6, 1990).
    We also believe the proposed rule establishes, to an extent that is 
feasible and practical, equivalent standards for all forms of 
compensatory mitigation, given the basic differences between the 
current mechanisms for providing compensatory mitigation (i.e., 
permittee-responsible mitigation, mitigation banks, and in-lieu fee 
programs). In many cases, it is not practical to impose all the same 
requirements on permittee-responsible mitigation projects as on 
mitigation banks, so some differences in the requirements for these 
types of mitigation remain. However, we are proposing to require in-
lieu fee program sponsors to modify their programs within five years to 
comply with the same standards and requirements as mitigation banks, to 
provide greater assurances that compensatory mitigation projects 
undertaken by in-lieu fee programs will successfully replace lost 
aquatic resource functions and services. We are also seeking comment on 
alternative approaches that would retain in-lieu fee programs as a 
separate category of mitigation with somewhat different requirements. 
These alternatives are explained in further detail in Section VI of 
this preamble.
    By establishing, to the maximum extent practicable, equivalent 
standards for all forms of compensatory mitigation, we believe success 
rates of compensatory mitigation projects will improve, and 
entrepreneurs and others will be encouraged to develop mitigation 
banks. Improving the processes applicable to the development and 
approval of mitigation banks is expected to result in more mitigation 
banking proposals, which would provide more compensatory mitigation in 
advance of authorized impacts to waters of the United States.
    The proposed rule does not apply to compensatory mitigation that 
may be required for impacts other than to aquatic resources resulting 
from activities authorized by DA permits, such as impacts to historic 
properties. Under appropriate circumstances, a DA permit may require 
compensatory mitigation measures to ensure compliance with the 
Endangered Species Act or the National Historic Preservation Act, or to 
address some other public interest requirement. Those compensatory 
mitigation requirements are addressed through other regulations and 
authorities.
    During the development of the proposed rule, we considered the 
following compensatory mitigation guidance documents and lessons 
learned from their implementation: Regulatory Guidance Letter 02-02 
(issued on December 24, 2002); the ``Federal Guidance for the 
Establishment, Use, and Operation of Mitigation Banks'' (as published 
in the November 27, 1995, issue of the Federal Register, 60 FR 58605); 
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'' (as published in the 
November 7, 2000, issue of the Federal Register, 65 FR 66914); and the 
``Memorandum of Agreement Between the Environmental Protection Agency 
and the Department of the Army Concerning the Determination of 
Mitigation Under the Clean Water Act Section 404(b)(1) Guidelines'' 
(issued on February 6, 1990).
    In preparing the proposed rule, we considered the findings and 
recommendations in the National Research Council's report issued in 
2001 entitled ``Compensating for Wetland Losses Under the Clean Water 
Act'' (NRC Report). We also contemplated other studies and documents 
cited in the draft Environmental Assessment/Regulatory Analysis that 
was prepared by the Corps for this proposed rule. The Environmental 
Assessment/Regulatory Analysis is available at the Corps Headquarters 
Regulatory Home page at: 
https://www.usace.army.mil/inet/functions/cw/cecwo/reg/citizen.htm. 
Hard copies of this document can be obtained by 
contacting Corps Headquarters at the phone number provided in the FOR 
FURTHER INFORMATION CONTACT section, above.
    The proposed rule incorporates many of the recommendations 
suggested in the NRC Report to improve the ecological success and 
sustainability of wetland compensatory mitigation projects. Through the 
standards and requirements in this proposed rule, we intend to improve 
the quality and success of aquatic resource restoration, establishment, 
enhancement, and preservation activities used to provide compensatory 
mitigation for DA permits, and to help maintain and improve the aquatic 
environment within watersheds.
    In the NRC Report, the committee concluded that a watershed 
approach would improve permit decision making, and stated that wetland 
functions must

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be understood from a watershed perspective to fulfill the objectives of 
the Clean Water Act. The committee noted that an automatic preference 
for in-kind and on-site compensatory mitigation is inconsistent with a 
watershed approach since there are circumstances in which on-site or 
in-kind mitigation is neither practicable nor environmentally 
preferable. In addition, the committee suggested using an analytical 
process for assessing wetland needs within a watershed and the 
potential for compensatory mitigation projects to persist over time.
    In the proposed rule, we revise compensatory mitigation policies 
and procedures to conform with current principles of ecological 
restoration and landscape ecology. The proposed rule also aims to 
reduce regulatory burdens on mitigation bank sponsors by making the 
mitigation bank approval process more efficient through changes in the 
review and approval process.
    The proposed rule also complements the Corps' and EPA's ongoing 
efforts to implement the National Wetlands Mitigation Action Plan 
(NWMAP). In response to the NRC report and other independent critiques 
of the effectiveness of compensatory mitigation for authorized losses 
of wetlands and other aquatic resources under Section 404 of the Clean 
Water Act, the Corps, EPA, and the Departments of Agriculture, 
Commerce, Interior, and Transportation released the NWMAP on December 
26, 2002. The NWMAP includes 17 tasks designed to improve the 
ecological performance and results of compensatory mitigation. Thus 
far, eight of the tasks called for in the NWMAP have been completed and 
work continues on efforts to improve wetland impact and mitigation data 
collection and tracking. However, work on the remaining guidance 
documents called for in the NWMAP awaits finalization of this proposed 
rule.
    The proposed rule is consistent with Executive Order 13352, 
Facilitation of Cooperative Conservation. The proposed rule includes 
collaborative approaches to decision-making for compensatory mitigation 
required by DA permits consistent with the definition of cooperative 
conservation in the Order. The provisions of the rule will ensure that 
determinations regarding compensatory mitigation requirements take into 
account the interests of landowners and other legally recognized 
interests in land and other natural resources, and accommodate agency 
and local participation in federal decision-making.

II. General Principles in the Proposed Rule

    For the purposes of the Corps Regulatory Program, compensatory 
mitigation is used to replace aquatic resource functions, services, and 
values that are lost to permitted impacts. Compensatory mitigation for 
losses of aquatic resources can help sustain or improve watershed 
functioning, and support the objective of the Clean Water Act, which is 
to ``restore and maintain the chemical, physical, and biological 
integrity of the Nation's waters'' (33 U.S.C. 1251(a)). One intent of 
the proposed rule is to improve the quality of compensatory mitigation 
for DA permits, to satisfy the objective of the Clean Water Act by 
improving the performance of compensatory mitigation projects in 
replacing aquatic resource functions, services, and values. Another 
intent of the proposed rule is to improve regulatory efficiency, 
especially for the review, approval, and implementation of mitigation 
banks. Finally, the proposed rule fulfills the mandate to ensure 
opportunities for federal agency participation in mitigation banking.
    In addition to supporting the objective of the Clean Water Act, the 
proposed rule will support the ``no overall net loss'' goal for wetland 
acreage and functions, through appropriate site selection for wetlands 
compensatory mitigation projects. Locating compensatory mitigation 
projects where they will provide the desired habitat type and functions 
to appropriately offset impacts will support the ``no overall net 
loss'' goal for wetland acreage and function.
    The proposed rule does not alter Corps regulations which address 
the general mitigation requirements for DA permits. In particular, it 
does not alter the circumstances under which compensatory mitigation is 
required. Also, the proposed rule does not alter Corps or EPA 
enforcement authorities for the section 404 program, as specified in 
sections 301(a), 308, 309, 404(n), and 404(s) of the Clean Water Act.
    Site selection is a critical planning step for compensatory 
mitigation projects, and the watershed approach in the proposed rule is 
intended to focus on choosing appropriate locations for compensatory 
mitigation activities. Restoring or establishing a specific aquatic 
habitat type, such as a wetland, requires careful site selection for 
two primary reasons. First, development activities may alter the 
interaction between hydrology, soils, and organisms within a landscape, 
affecting the type of habitat that can be supported by the project 
site. For example, forested wetlands require narrow hydrologic regimes 
because many tree species cannot tolerate long periods of inundation. 
Development activities may change local hydrology, resulting in new 
patterns of inundation and saturation that cannot support forested 
wetlands. Therefore, it is important to find a compensatory mitigation 
project site that will support the appropriate hydrology for the 
desired type of wetland habitat. Second, even if the desired habitat 
type can be restored or established at that site, surrounding 
development may result in an isolated or fragmented habitat that is 
less capable of supporting viable populations of species of import. 
Motile species require corridors to move between different habitats in 
the landscape, and if the surrounding area is occupied by roads and 
buildings, the ability of many species to move between habitats and 
interact with each other is restricted. Therefore, compensatory 
mitigation projects, especially those that are intended to replace 
wetland habitat, need to be planned within larger landscape contexts, 
such as watersheds. In its report on wetland compensatory mitigation, 
the NRC stated that ``[l]andscape position, hydrologic variability, 
species richness, biological dynamics, and hydrologic regime are all 
important factors that affect wetland restoration.''
    For activities authorized by DA permits in coastal and urban areas, 
compensatory mitigation required by district engineers will be located 
in areas where it is appropriate and practicable to conduct aquatic 
resource restoration, establishment, and enhancement activities. It is 
important that coastal and other urban areas do not become devoid of 
aquatic resources simply because it is more difficult to successfully 
restore or establish aquatic habitat in developing areas. In some 
cases, however, preservation may be the most appropriate form of 
compensatory mitigation in coastal and urban areas. In addition to 
providing important ecological functions, wetlands and other aquatic 
resources also perform important services, such as wildlife viewing and 
education, that can only be accomplished when people have opportunities 
to interact with those aquatic resources. The functions and services 
that aquatic resources perform in turn provide the basis for the values 
that society derives from them. These include use values, such as 
recreation, and non-use values such as biodiversity and stewardship for 
future generations. Aquatic resource functions, services, and values 
should be considered when

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evaluating sites in developed areas as options for providing 
compensatory mitigation. Mitigation projects for impacts authorized by 
DA permits should compensate for lost functions and services. While 
values are also considered as part of the public interest review, it is 
not always possible to fully compensate for lost values, as these are 
often dependent on proximity to population centers. Replacing aquatic 
resources at more remote locations may enhance some values (e.g., 
preservation of species) while decreasing others (e.g., recreational 
enjoyment).
    Within a watershed context, it may be more appropriate to replace 
certain aquatic resource functions on-site, whereas it may be more 
appropriate to replace other functions off-site. For example, it may be 
environmentally preferable, to replace hydrologic and water quality 
functions at the impact site with a mitigation project that performs 
these functions, and to replace habitat functions at an off-site 
location, such as a mitigation bank or a compensatory mitigation 
project site near a park or nature reserve.
    Through the watershed approach in the proposed rule, we intend to 
improve environmental outcomes of compensatory mitigation required for 
DA permits, including the effectiveness of compensatory mitigation in 
replacing impacted aquatic resource functions. The watershed approach 
uses a landscape perspective that places primary emphasis on site 
selection, through consideration of landscape attributes that will help 
provide the desired aquatic resource types and ensure they are self-
sustaining. The watershed approach also considers how other landscape 
elements (e.g., other natural resources and developments) interact with 
compensatory mitigation project sites and affect the functions they are 
intended to provide.
    In the proposed rule, the district engineer determines whether the 
compensatory mitigation option or proposal submitted by the permit 
applicant is adequate to offset unavoidable impacts, based on what is 
practicable and what will appropriately compensate for the aquatic 
resource functions and services that will be impacted as a result of 
the permitted activity. In pre-application consultation, the Corps may 
also provide information on existing watershed plans or watershed 
needs.
    The proposed rule also establishes that the district engineer makes 
decisions regarding the approval of mitigation banking instruments, 
after coordinating a review of the prospectus for the proposed 
mitigation bank and the draft mitigation banking instrument with an 
Interagency Review Team (IRT). We are proposing to establish clearly 
defined time frames for this review and a dispute resolution process 
whereby members of the IRT can expeditiously elevate issues associated 
with proposed mitigation banks for higher level review where necessary.

III. Watershed Approach

    In the NRC Report, the committee recommended that the Corps adopt a 
watershed-based approach to compensatory mitigation. The committee 
stated that the ecological functions of a restored or established 
wetland are dependent on its design and its setting or context within a 
watershed. The committee also said that the types and locations of 
wetlands in the landscape are important for providing desired 
functions.
    Ideally, the watershed approach is based on a formal watershed 
plan, developed by Federal, state, and/or local environmental managers 
in consultation with affected stakeholders. Currently, there are many 
areas where no watershed plan exists. The Corps and EPA are committed 
to working with our counterparts at other levels of government to 
develop watershed plans, especially for areas facing significant 
development pressure. In the meantime, the watershed approach described 
in the NRC Report does not require a formal watershed plan. Instead, 
the watershed approach may be based on a structured consideration of 
watershed needs and how wetland types in specific locations can fulfill 
those needs.
    The use of a watershed approach is based on analysis of information 
regarding watershed conditions and needs. Where an applicable watershed 
plan exists, such information will generally already have been 
considered in the development of the plan. Where no such plan exists, 
project sponsors may propose compensatory mitigation based on the 
watershed approach using appropriate information from other sources. 
Such information includes: Current trends in habitat loss or 
conversion, cumulative impacts of past development activities, current 
development trends, the presence and needs of sensitive species, site 
conditions that favor or hinder the success of mitigation projects, 
chronic environmental problems such as flooding or poor water quality, 
and local watershed goals and priorities. Project sponsors should make 
a reasonable effort, commensurate with the scope and scale of the 
project and impacts, to obtain as much of this information as possible 
as they design the compensatory mitigation projects. Project sponsors 
may consult with the Corps to see if such information has been 
developed in the past in association with other projects in the 
watershed. For smaller projects requiring DA authorization, all of the 
types of information listed above may not be available, but that 
information should generally be available (or developed) for larger 
projects.
    The agencies request comment on whether the rule should specify 
minimal information requirements for use of the watershed approach. 
Commenters should bear in mind that specifying minimum information 
requirements will likely limit the areas where a watershed approach can 
be used, at least in the medium term, as much of the above information 
is currently not available for many areas. This problem was recognized 
by the NRC, which recommended that in such situations watershed based 
decision-making should rely on the scientific expertise of wetlands 
program staff (i.e., Corps permit writers and other Federal agency 
review staff) and broad-based stakeholder participation. As discussed 
below, the proposed rule includes a requirement that information on how 
a prospective permittee plans to address avoidance, minimization, and 
compensatory mitigation requirements be included in the permit 
application and published by the Corps in the public notice for the 
permit application. This requirement is intended to promote the kind of 
broad-based stakeholder involvement in watershed based mitigation 
decisions envisioned by the NRC Report.
    A watershed approach to compensatory mitigation involves a regional 
or landscape perspective, and should involve consideration of Federal, 
Tribal, state, community, and private interests, including the 
requirements of other programs and objectives, such as habitat 
conservation, storm water management, flood control, pollution 
prevention, and economic development when determining compensatory 
mitigation requirements for DA permits.
    The agencies note that the term ``watershed approach'' is now used 
by a variety of Federal, State, and local agencies, as well as by 
private parties, but a consensus definition of this term has not yet 
emerged. The watershed approach presented in this proposed rule is a 
framework being proposed for use in determining compensatory mitigation 
requirements for DA permits. The watershed approach described in the 
proposed rule does not supersede or replace other uses of the term 
``watershed approach'' in natural

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resource management programs conducted by other government agencies. We 
are soliciting comments on whether, and if so, how, the watershed 
approach in the proposed rule differs from the watershed approaches 
used in other natural resource management programs, and how any such 
differences may affect implementation of the watershed approach for 
determining compensatory mitigation requirements for DA permits.
    The watershed approach in the proposed rule will be implemented by 
district engineers with available information to determine the types 
and locations of compensatory mitigation activities that would best 
serve the watershed. Available information used by district engineers 
includes current trends in habitat loss or conversion, cumulative 
impacts of past development activities, current development trends, the 
presence and needs of sensitive species, site conditions that favor or 
hinder the success of mitigation projects, chronic environmental 
problems such as flooding or poor water quality, local watershed goals 
and priorities, assessments of watershed conditions, best professional 
judgment, and site conditions, as well as other relevant data.
    The watershed approach in the proposed rule will help support the 
objective of Clean Water Act, and is intended to result in more 
effective replacement of aquatic resource functions impacted by 
activities authorized by DA permits. The level of detail used in the 
watershed approach for a specific activity is dependent on the 
availability of information and on the scope and scale of that 
activity.

IV. Organization of the Proposed Rule

    The proposed compensatory mitigation regulation in 33 CFR part 332 
[40 CFR part 230], is organized into the following sections:
    Section 332.1 [230.91], Purpose and general considerations, 
describes the basic purpose of the proposed rule and general principles 
concerning compensatory mitigation.
    Section 332.2 [230.92], Definitions, provides definitions of 
important terms relating to compensatory mitigation and the Corps 
Regulatory Program.
    Section 332.3 [230.93], General compensatory mitigation 
requirements, describes general compensatory mitigation requirements 
for DA permits, including permit conditions and financial assurances. 
This section also describes the watershed approach to compensatory 
mitigation.
    Section 332.4 [230.94], Planning and documentation, describes the 
review of proposed compensatory mitigation activities, as well as 
requirements for mitigation plans.
    Section 332.5 [230.95], Ecological performance standards, describes 
principles for establishing ecological performance standards for 
compensatory mitigation projects.
    Section 332.6 [230.96], Monitoring, describes general requirements 
for monitoring compensatory mitigation projects.
    Section 332.7 [230.97], Management, describes general requirements 
for site protection, sustainability, adaptive management, and long-term 
management of compensatory mitigation projects.
    Section 332.8 [230.98], Mitigation banks, provides requirements and 
standards that are applicable to mitigation banks.
    Section 332.9 [230.99], In-lieu fee programs, establishes deadlines 
for existing in-lieu fee programs to modify their current agreements to 
comply with the requirements of this rule.
    It is important to note that Sec. Sec.  332.1 to 332.7 apply to all 
new compensatory mitigation projects, including mitigation banks, while 
Sec. Sec.  332.8 and 332.9 contain special provisions for new 
mitigation banks and existing in-lieu fee programs, respectively. 
Existing mitigation banks may continue operating under the terms of 
their approved instruments, but any modifications to such instruments, 
including the addition of new sites for umbrella instruments, would be 
subject to the requirements in this rule. New in-lieu-fee programs 
would not be approved once the rule goes into effect. Existing in-lieu-
fee programs may continue to operate under the terms of their approved 
instrument for up to five years after the effective date of the rule.

V. Discussion of Specific Sections of the Proposed Rule

    The proposed rule is presented in two parallel sections: changes to 
Corps regulation in 33 CFR and changes to EPA regulation in 40 CFR. The 
two sections are almost entirely the same, with minor exceptions. These 
include: (1) Corps changes to permit application requirements at 33 CFR 
325.1; (2) Conforming changes to EPA's existing mitigation regulations 
at 40 CFR part 230, making appropriate citations for the addition of 
new Sec. Sec.  230.91 through 230.99; and (3) References to the Rivers 
and Harbors Act of 1899, in which the EPA does not have a regulatory 
role, have been omitted from the text in part 230.

33 CFR 325.1 Application for Permits

    Since Sec.  332.4(b)(1) of the proposed rule requires applicants 
for standard section 404 permits to submit a statement explaining how 
impacts to waters of the United States are to be avoided, minimized, 
and compensated, we are also proposing to modify Sec.  325.1(d) by 
adding a new paragraph (paragraph (d)(7)). This new paragraph would 
further clarify the information required for a complete standard permit 
application for activities that involve discharges of dredged or fill 
material into waters of the United States, so that we can describe the 
proposed avoidance, minimization, and compensation in the public 
notice. The remaining paragraphs in this section would be renumbered, 
but the text of those paragraphs would remain the same.

40 CFR 230.12 Findings of Compliance or Non-Compliance With the 
Restrictions on Discharge

    Section 230.12(a)(2) specifies that permits may only be issued if 
certain conditions are met that avoid, minimize, and compensate for 
impacts to aquatic resources. The proposed change would indicate that 
requirements for compensation for impacts can be found in Subpart J as 
well as Subpart H.

40 CFR Part 230 Subpart H--Actions To Minimize Adverse Effects

    We propose to add a sentence to the introductory ``Note'' of 
Subpart H indicating that Subpart J also contains requirements 
regarding compensating for impacts to aquatic resources. At Sec.  
230.75(d), we propose to add a similar reference to Subpart J following 
the second sentence of the paragraph.
    Other than the inclusion of the citations described above noting 
the addition of Subpart J, we are not seeking comment on the existing 
text or provisions in Subparts B or H.

33 CFR 332.1 and 40 CFR 230.91 Purpose and General Considerations

    The proposed rule will not alter the circumstances under which the 
district engineers require compensatory mitigation. In other words, the 
threshold for determining when compensatory mitigation is required for 
a particular activity that needs a DA permit is unchanged by the 
proposed rule. For example, district engineers will continue to use the 
criteria at 33 CFR 320.4(r) and 33 CFR 330.1(e)(3) to determine when 
compensatory mitigation should be required. The proposed rule will not 
increase compensatory mitigation requirements, but it focuses instead 
on where and how

[[Page 15525]]

compensatory mitigation will be provided.
    The proposed rule also does not affect regulatory jurisdiction 
under Section 404 of the Clean Water Act or Sections 9 and 10 of the 
Rivers and Harbors Act of 1899. However, areas not subject to 
regulatory jurisdiction under these statutes may be used as 
compensatory mitigation, if the creation, restoration, enhancement, or 
preservation of aquatic resources in those areas will compensate for 
ecosystem functions lost at the impact site.

33 CFR 332.2 and 40 CFR 230.92 Definitions

    The definitions provided in this section of the draft rule are 
intended to provide clarity to the regulated public, and promote 
consistency in the implementation of this rule. The definitions were 
adapted from several sources, including the Federal guidance documents 
listed in the ``Background'' section in this preamble.
    We are proposing a definition of the term ``adaptive management'' 
as follows. Adaptive management means the development of a management 
strategy that anticipates the challenges associated with likely future 
impacts to the aquatic resource functions of the mitigation site. It 
acknowledges the risk and uncertainty of compensatory mitigation 
projects and allows modification of those projects to optimize 
performance. The process will provide guidance on the selection of 
appropriate remedial measures that will ensure the continued adequate 
provision of aquatic resource function and involves analysis of 
monitoring results to identify potential problems of a compensatory 
project and identification of measures to rectify those problems.
    In the September 2003 report of the National Environmental Policy 
Act (NEPA) Task Force, which is entitled ``Modernizing NEPA 
Implementation,'' the NEPA Task Force recommended that the NEPA 
workgroup consider establishing a definition of adaptive management 
that would be promulgated in the NEPA regulations at 40 CFR part 1508. 
If a definition of ``adaptive management'' is promulgated by the 
Council on Environmental Quality (CEQ), we will evaluate our proposed 
definition of this term to determine if any changes are necessary to 
conform with CEQ's final definition. If such changes are necessary, we 
will propose those changes in a future Federal Register notice.
    In the proposed definitions of ``on-site,'' we are proposing to add 
the phrase ``or near'' after the phrase ``parcel of land contiguous 
to'' to include lands near the impact site as ``on-site'' lands. We are 
also proposing a corresponding change to the definition of ``off-site'' 
so that these definitions are parallel to each other.
    We are also proposing definitions of the terms ``functions'', 
``services'', and ``values.'' All three of these terms have been used 
by various documents in the past to describe the attributes of aquatic 
resources that are being replaced through compensatory mitigation. The 
agencies believe it is important to articulate the differences among 
these terms and the appropriate role of each within the Section 404 
Program.
    We are proposing the following definition of ``functions.'' 
Functions means the physical, chemical, and biological processes that 
occur in aquatic resources and other ecosystems. The primary purpose of 
compensatory mitigation is to replace lost aquatic resource functions 
at the impact site. The agencies have a long standing policy of 
achieving no overall net loss for wetland acreage and functions. 
Services means the benefits that human populations receive from 
functions that occur in aquatic resources and other ecosystems. For 
example, providing habitat for birds is a biological function of some 
aquatic habitat types, which in turn provides bird watching services to 
humans. In general, compensatory mitigation projects, in replacing lost 
functions at the impact site, should also replace the lost services 
associated with these functions.
    Values means the utility or satisfaction that humans derive from 
aquatic resource services. Values can be described in monetary terms or 
in qualitative terms, although many of the values associated with 
aquatic resources cannot be easily monetized. Values can be either use 
values (e.g., recreational enjoyment) or non-use values (e.g., 
stewardship ethic). Values are considered by the District Engineer as 
part of the public interest review of a proposed project. However, the 
values associated with compensatory mitigation projects may not fully 
mirror those lost at the impact site. For example, replacing a resource 
in a more remote area may reduce use values (because the area is less 
accessible) while enhancing non-use values (because people may value 
resources on stewardship grounds more when they are in more pristine 
areas). We are seeking comment on the definitions in this proposed 
rule, including the proposed definitions of ``on-site'', ``off-site'', 
``functions'', ``services'' and ``values.''

33 CFR 332.3 and 40 CFR 230.93 General Compensatory Mitigation 
Requirements

    This section of the proposed rule establishes criteria for 
determining the location and type of compensatory mitigation and 
describes the watershed approach to compensatory mitigation for losses 
of aquatic resources. When project impacts are located in the service 
area of an approved mitigation bank, and the mitigation bank has 
credits available for the type of resource impacted, the project's 
mitigation requirements may be met by the purchase of an appropriate 
number of credits from the mitigation bank. The use of a watershed plan 
is the most preferable option when evaluating permittee-responsible 
compensatory mitigation proposals and draft mitigation banking 
instruments. If a watershed plan is not available, the watershed 
approach described in Sec.  332.3(c) should be used. If it is not 
practicable to use a watershed approach, then the district engineer 
will consider the practicability of on-site compensatory mitigation, as 
well as the compatibility of on-site mitigation with the proposed 
project. The watershed approach will identify resource types and 
locations for compensatory mitigation projects within the watershed. It 
is important to understand that a watershed approach may include on-
site compensatory mitigation, off-site compensatory mitigation 
(including mitigation banks), or a combination of on-site and off-site 
mitigation. Also, the identified compensatory mitigation projects may 
be in-kind, out-of-kind, or a mixture of in-kind and out-of-kind 
compensatory mitigation.
    The information used to conduct a watershed approach is listed in 
Sec.  332.3(c)(3). Where a watershed plan exists, all or most of this 
information will have been considered in the development of that plan. 
Where no formal watershed plan exists, project sponsors should make a 
reasonable effort, commensurate with the scope and scale of the 
project, to obtain as much of this information as possible as they 
design the compensatory mitigation projects. Project sponsors may 
consult with the Corps to see if such information has been developed in 
the past in association with other projects in the watershed. For 
smaller projects requiring DA authorization, all of the types of 
information listed in this paragraph may not be available, but that 
information should generally be available (or developed) for larger 
projects.

[[Page 15526]]

    We are seeking comment on the watershed approach proposed in this 
rule, as well as the proposed criteria regarding the location of 
compensatory mitigation projects.
    The amount of required compensatory mitigation is dependent upon 
the functions (or area when functions cannot be readily assessed) lost 
as a result of the impacts authorized by the DA permit and the 
functions (or area) provided by the compensatory mitigation project. In 
some cases, replacing the functions provided by the impacted aquatic 
resource may be achieved by a compensatory mitigation project smaller 
in area than the impact site. In other cases, a larger compensatory 
mitigation project may be needed to replace the functions provided by 
the impacted aquatic resource.
    To determine the amount of compensatory mitigation required for a 
specific activity, acres or similar units of measure are likely to be 
the principal units for determining credits and debits. However, in 
cases where functional assessment methods are available, appropriate, 
and practical to use, district engineers should use those functional 
assessment methods to determine how much compensatory mitigation should 
be required. For activities authorized by general permits, it may not 
be practical to conduct functional assessments for each general permit 
activity. For certain types of aquatic resources, such as streams, it 
may be more appropriate to quantify credits and debits by using linear 
feet. The value of a credit or debit is dependent upon the amount of 
aquatic resource functions provided per acre (or linear foot).
    In the proposed rule, site selection is a primary consideration for 
compensatory mitigation projects. The watershed approach provides an 
analytical approach similar to the approach recommended by the NRC 
committee. A watershed approach to compensatory mitigation considers 
the importance of landscape position and resource type for the 
ecological functions and sustainability of aquatic resources within the 
watershed. A watershed approach also considers the services provided by 
aquatic resources, as well as the values derived from aquatic resource 
functions and services. Such an approach considers how the types and 
locations of compensatory mitigation projects will provide the desired 
aquatic resource functions, and will continue to function over time in 
a changing landscape. It also considers the habitat requirements of 
important species, habitat loss or conversion trends, sources of 
watershed impairment, and current development trends, as well as the 
requirements of other regulatory and non-regulatory programs that 
affect the watershed, such as storm water management or habitat 
conservation programs.
    Another site selection factor is the compatibility of compensatory 
mitigation projects with proposed or existing facilities or projects. 
For example, it is not appropriate to locate compensatory mitigation 
projects designed to attract wildlife species that are known to be 
hazardous to aviation near airports. The Federal Aviation 
Administration issued Advisory Circular 150/5200-33, ``Hazardous 
Wildlife Attractants on or Near Airports,'' In addition, the 
``Memorandum of Agreement Between the Federal Aviation Administration, 
U.S. Air Force, U.S. Army, U.S. Environmental Protection Agency, and 
U.S. Department of Agriculture to Address Aircraft Wildlife Strikes, 
which became effective in July 2003, also addresses this particular 
issue. District engineers need to consider these types of issues when 
determining compensatory mitigation requirements for DA permits (see 
Sec.  332.3(b) of the proposed rule).
    If the district engineer determines that all of the aquatic 
resource functions cannot be effectively replaced at a single site, 
then more than one site may be used to provide the desired aquatic 
resource functions. Therefore, to maintain aquatic resource functions 
in a watershed, the district engineer may require a combination of on-
site and off-site compensatory mitigation. For example, on-site 
compensation may be required to provide water quality, water storage, 
and flood protection functions and services, while off-site 
compensation may be required for losses of habitat functions. In 
general, the proposed rule requires off-site compensatory mitigation to 
be located in the same watershed as the impact site.
    The proposed rule generally requires wetland compensatory 
mitigation for wetland losses, and stream compensatory mitigation for 
stream losses. However, the proposed rule provides flexibility for 
district engineers to require compensatory mitigation that is best for 
the watershed. For example, out-of-kind compensatory mitigation may 
involve the restoration or establishment of an aquatic habitat type 
that is now rare, because of disproportionate impacts to that habitat 
type in the past. Restoring or establishing rare habitat types may help 
restore valuable ecological functions and services to the watershed. In 
the watershed approach in the proposed rule, district engineers will 
first consider in-kind compensatory mitigation, but if the watershed 
approach determines that out-of-kind compensatory mitigation would 
result in greater benefits to the aquatic environment within the 
watershed, then out-of-kind compensation may be authorized.
    The NRC Report stated that the preservation of wetlands is 
appropriate in a watershed approach to compensatory mitigation, because 
it helps support the objective of the Clean Water Act. Preservation of 
aquatic resources helps secure desired wetland types in a watershed and 
maintain wetland diversity in that watershed. The preservation of 
aquatic resources through appropriate real estate and legal instruments 
helps provide long-term maintenance of the aquatic environment in 
watersheds.
    Both wetland and non-wetland riparian areas are also important for 
maintaining the aquatic resource functions and services of watersheds. 
Riparian areas are important for stream restoration activities, as well 
as the restoration of other open waters. Riparian areas are important 
to streams and other open waters, and help augment aquatic resource 
functions by moderating temperature changes, removing excess nutrients 
and pollutants, providing a source of detritus for aquatic food webs, 
providing aquatic habitat heterogeneity, storing flood waters, 
stabilizing sediments, and providing habitat for a variety of aquatic 
and terrestrial species.
    Restoration or establishment of non-aquatic riparian areas normally 
would be used in conjunction with aquatic resource restoration, 
establishment, enhancement, and/or preservation activities, as part of 
an overall compensatory mitigation project to offset losses of aquatic 
resources. With the watershed approach, we are looking at combinations 
of different habitats as components of a functioning landscape, instead 
of habitat units in isolation from one another.
    The NRC Report also acknowledged the importance of upland areas as 
part of the watershed approach to compensatory mitigation. The proposed 
rule also requires consideration of the establishment and maintenance 
of upland buffers around the restored, established, enhanced, or 
protected aquatic habitats to ensure the sustainability of those 
habitats. Buffers may augment aquatic resource functions, and help 
increase the overall ecological functions of the

[[Page 15527]]

compensatory mitigation project site. Under limited circumstances, the 
district engineer may grant compensatory mitigation credit for upland 
areas within a compensatory mitigation project, if those uplands 
increase the overall ecological functioning of the compensatory 
mitigation site or other aquatic resources in the watershed or 
ecoregion. For example, uplands may provide connections between aquatic 
habitats that are essential for the preservation of certain species, 
such as amphibians. When determining the amount of compensatory 
mitigation credit provided by uplands, the district engineer must 
consider whether the uplands perform ecological functions that are 
important to the watershed and are under threat of loss or substantial 
degradation.
    The proposed rule requires that mitigation providers secure 
sufficient financial assurances to assure completion of the 
compensatory mitigation project consistent with an approved mitigation 
plan. Government agencies may use other mechanisms to provide 
reasonable assurances that compensatory mitigation projects will be 
completed, such as partnerships established in accordance with the 
Economy Act. In cases where alternative mechanisms are used to provide 
reasonable assurances that compensatory mitigation projects will be 
completed, financial assurances may not be necessary or appropriate. 
The district engineer will determine appropriate financial assurances 
on a case-by-case basis. Financial assurances may take a number of 
forms including letters of credit, performance bonds, or other 
sureties. In some circumstances in the past, mitigation providers have 
allowed their financial assurance arrangements to lapse before the 
mitigation project was completed leaving the Corps without the 
necessary funds to ensure completion of the mitigation project should 
the mitigation provider default. The proposed rule does not 
specifically address this issue. We are soliciting comment on whether 
to include a regulatory provision to require that the providers of 
these financial assurances obtain permission from, or alternatively, 
notify the district engineer prior to canceling them or allowing them 
to lapse. We are also soliciting comment on the appropriate time frame 
(e.g., 120 days) for any such advance notification.
    If failure of a compensatory mitigation project is due to natural 
catastrophes, such as floods, droughts, diseases, or pest infestations, 
that occur during the monitoring period, the district engineer normally 
would require the responsible party to implement appropriate remedial 
measures, unless the compensatory mitigation project is expected to 
respond to the event in a similar manner as comparable types of aquatic 
resources in the watershed. After the monitoring period has ended, the 
district engineer would normally not require remediation if he 
determines that the failure is due to a natural catastrophe that was 
beyond the control of the responsible party to prevent or mitigate. In 
such cases, the provisions of the conservation easement (or other legal 
mechanism for long-term protection of the site) will remain in effect 
so that the compensatory mitigation project site will be allowed to 
continue to evolve through natural ecosystem development processes. 
This approach to addressing natural catastrophes acknowledges the 
dynamic nature of the environment.
    We are seeking comment on the provisions in this section.

33 CFR 332.4 and 40 CFR 230.94 Planning and Documentation

    In paragraph (b) of this section, we are proposing to require 
applicants for standard permits involving discharges of dredged or fill 
material into waters of the United States to submit a statement 
explaining how impacts to waters of the United States will be avoided, 
minimized, and compensated. Information from that statement will be 
provided in the public notice for the proposed permit. This requirement 
will necessitate changing the standard permit application form (ENG 
Form 4345), and compliance with the requirements of the Paperwork 
Reduction Act of 1995. Compliance with the Paperwork Reduction Act is 
discussed in more detail in Section VII, Administrative Requirements, 
below.
    The agencies recognize that government agencies sponsoring projects 
that require National Environmental Policy Act (NEPA) compliance 
generally try to coordinate their NEPA review with their DA permit 
review. This may mean submitting a permit application while the draft 
Environmental Impact Statement (EIS), including analysis of 
compensatory mitigation options, is still undergoing public review and 
comment. We believe that the requirements of paragraph (b) of this 
section are fully consistent with such efforts. In such cases, the 
information provided with the permit application should provide a 
conceptual discussion of the proposed compensatory mitigation, and 
reference the more detailed description of options in the draft EIS. 
This should further facilitate public participation in both the permit 
application and NEPA review process. The purpose of the new permit 
application requirements is to inform the public of the sponsor's 
compensatory mitigation plans, as of the time the application is filed, 
and most importantly, to solicit informed public comment on those 
plans, in whatever stage of development they may be. It is not 
necessary for the final compensatory mitigation option to have been 
selected prior to submitting a DA permit application.
    Paragraph (c) of this section of the proposed rule requires 
permittees or mitigation bank sponsors to submit draft and final 
mitigation plans to district engineers. In the proposed rule, there is 
a requirement for the district engineer to approve the final mitigation 
plan prior to issuing the DA permit or approving the mitigation banking 
instrument.
    This section also lists the types of information to be provided in 
draft and final mitigation plans. Permittees proposing to use a 
mitigation bank to provide required compensatory mitigation would be 
required to submit only information concerning the mitigation bank they 
plan to use, project baseline information, and credit determinations.
    We are seeking comment on the provisions in this section.

33 CFR 332.5 and 40 CFR 230.95 Ecological Performance Standards

    This section discusses, in general terms, ecological performance 
standards that will be used to assess whether compensatory mitigation 
projects, including mitigation banks, are achieving their objectives. 
Since ecological performance standards usually vary by aquatic type and 
geographic region, this section provides only general considerations 
for establishing those standards.
    We are seeking comment on the provisions in this section.

33 CFR 332.6 and 40 CFR 230.96 Monitoring

    This proposed rule provides general standards for monitoring 
compensatory mitigation projects, including mitigation banks. 
Monitoring reports are used for assessing how well the compensatory 
mitigation project is satisfying its objectives. We are proposing a 
minimum required monitoring period of five years, with flexibility for 
district engineers to stop requiring monitoring reports if compensatory 
mitigation projects, such as those involving the establishment of open 
water habitats, meet their performance standards in a shorter period of 
time. Longer

[[Page 15528]]

monitoring periods may be required for compensatory mitigation 
activities, such as the establishment of forested wetlands, that 
develop slowly, or that require remediation.
    We are seeking comment on the provisions in this section. We are 
also requesting comment on examples of specific types of compensatory 
mitigation projects (e.g., specific habitat types) where monitoring 
periods of less than five years may be appropriate.

33 CFR 332.7 and 40 CFR 230.97 Management

    This section of the proposed rule establishes criteria and 
standards for the management of compensatory mitigation projects, 
including mitigation banks. Some compensatory mitigation projects may 
require active management and maintenance, as well as adaptive 
management. For some aquatic resources, such as fringe wetlands in 
coastal areas, long-term management may not be feasible or desirable 
because of the dynamic nature of the environment.
    The various real estate or legal instruments that can be used to 
protect compensatory mitigation project sites may differ from state to 
state, or among other government jurisdictions. Therefore, we are not 
proposing detailed requirements for real estate instruments used for 
long-term protection of compensatory mitigation project sites. We 
believe those instruments are best addressed by district engineers on a 
case-by-case basis.
    For compensatory mitigation projects on public lands, other long-
term protection mechanisms may be more appropriate, such as Federal 
facility management plans or integrated natural resources management 
plans. Therefore, this section of the proposed rule has flexibility for 
district engineers to determine requirements for site protection on a 
case-by-case basis. The agencies recognize that changes in statute, 
regulation or agency needs or mission may sometimes necessitate 
authorization of an incompatible use on public lands originally set 
aside for compensatory mitigation. In such cases, the public agency 
authorizing the incompatible use would be responsible for providing 
alternative compensatory mitigation for any loss in functions resulting 
from the incompatible use.
    Paragraph (c) of this section discusses remediation requirements if 
a compensatory mitigation project is not progressing towards meeting 
its performance standards. In addition to consulting with the 
responsible party to determine appropriate remediation requirements, 
the district engineer should also consult with any other Federal, 
Tribal, state, or local agency ``where appropriate.'' In general, such 
consultation would be appropriate if the other agency was involved 
earlier in the review of the compensatory mitigation requirements in 
the DA permit.
    The proposed rule requires that the permit conditions or mitigation 
banking instrument identify the party responsible for the ownership and 
long-term management of the compensatory mitigation project. The 
permittee or mitigation bank sponsor must provide long-term financing 
as necessary to ensure that funds are available for the long-term 
management of the project site once the monitoring period is over. This 
can be accomplished in a number of ways, but in the past problems have 
arisen when arrangements for the capitalization of long-term management 
funds have not taken place in a timely fashion. Although the rule text 
does not address this deficiency, we are soliciting comments on the 
inclusion of a provision that would require that the arrangements for 
the adequate capitalization of long-term management funds be finalized 
prior to permit issuance.
    If the entity responsible for long-term management is a government 
agency or public authority, and that entity is willing to accept the 
stewardship responsibilities for the compensatory mitigation project 
site, the district engineer may accept the stewardship commitment by 
the government agency or public authority in lieu of imposing long-term 
financing requirements in the DA permit or mitigation banking 
instrument. Such acceptance of stewardship responsibilities will 
generally involve a formal transaction of some type (e.g., transfer of 
title, designation as a protected area, etc). We are aware of 
situations where government agencies have accepted stewardship 
responsibilities without adequately considering long-term financial 
needs for the management of a site, and strongly encourage agencies to 
plan for such needs before accepting stewardship responsibilities. Such 
planning may include requiring a financial commitment from the original 
responsible party as a condition of accepting long-term stewardship 
responsibilities.
    We a