How can the cost of habitat conservation planning to landowners and regulated interests be reduced and its conservation effectiveness increased? The testimony that follows offers five suggestions that, I believe, will do so. Three of them require action that the Services (both the US Fish and Wildlife Service and the National Marine Fisheries Service) can take under existing authority. One requires legislative change and the last requires money.
Develop "Mitigation Principles" to Guide HCP Efforts.
What we have come to call "habitat conservation plans" are, in most instances, really mitigation plans. They attempt to mitigate the negative effects of an environmentally harmful, and generally prohibited activity the taking of an endangered species, usually through destruction of its habitat. Mitigation requirements can be developed in either of two ways: as an entirely ad hoc exercise in which the depth of a permit applicant's pockets, or his political connections, often influence how much or how little mitigation will be required; or as a more principled exercise in which mitigation requirements are determined in accordance with preexisting standards or criteria. In practice, the Services have developed such standards or criteria for virtually none of the species, or associations of species, for which they are responsible. As a result, the mitigation requirements in any given HCP often appear to be pulled from the air, inadequately explained, and inconsistent with the requirements imposed in other, seemingly similar, situations. The absence of clear mitigation standards or principles also means that mitigation requirements are negotiated afresh in each new HCP, prolonging (and making more expensive) the planning process and introducing considerable uncertainty into it.
To overcome these problems, the Services ought to develop clear, and clearly explained, mitigation principles that will guide permit applicants, and the Services' own field staffs, when developing subsequent HCPs. Such principles are especially needed for those species, or associations of species, that, because of where they occur, are likely to be the subject of several different HCP efforts. Implementing this recommendation is neither easy nor cheap, but it will make HCPs more predictable, less costly to develop, and better insulated from inappropriate pressures.
Disallow HCP Mitigation on Federal Land Except When No Other Options are Feasible
In a number of HCPs, mitigation takes the form of a payment by a private landowner to a federal land managing agency so that the federal land managing agency can undertake some action beneficial to the affected species. Several HCPs pertaining to the red-cockaded woodpecker are of this variety. The rationale for this type of mitigation appears to be that federal land managing agencies lack sufficient appropriated funds to carry out positive conservation actions for imperiled species, so mitigation payments derived from private parties can help meet the budget shortfall. As a result, beneficial actions that might never have been undertaken, or that would have been significantly delayed, can be carried out quickly.
One of the dangers of this seductive logic is that it is likely to become a self-fulfilling prophecy. Federal land managing agencies have an affirmative duty to further the conservation of endangered and threatened species on their land by carrying out actions and programs that help move those species toward recovery. Congress has placed this affirmative duty squarely on the shoulders of these agencies. The funding to meet this congressionally-imposed duty ought to come from congressional appropriations, not from private parties who have their own, separate duties to mitigate for harmful actions they carry out.
A further reason to question the propriety of this form of mitigation is that it becomes impossible, as a practical matter, to assess the efficacy of HCP mitigation. Mitigation fees are seldom, if ever, segregated from other sources of funding for conservation efforts on federal land. As a practical matter, it is nearly impossible to sort out the contribution of private mitigation payments to the success or failure of conservation efforts undertaken on federal lands.
For all these reasons, HCP mitigation should generally not be allowed on federal land. There may be limited circumstances where such mitigation is the only feasible option. In those limited situations, an exception to the general prohibition may be allowed, but even then special care must be taken to identify and evaluate the efforts funded by such mitigation payments, separate from other efforts being undertaken by the federal land managing agency.
Promulgate a Clear Policy Regarding the Use of Mitigation Banks in HCPs.
Several recently approved or recently proposed HCPs entail the use of "mitigation banks." Mitigation banks are a mechanism under which mitigation "credits" can be earned by preserving, restoring, or enhancing endangered species habitat in advance of any action requiring mitigation. Those credits can then be used by the party whose action created them, or sold to third parties, to meet the mitigation requirements of subsequently approved projects. Mitigation banking is a familiar, though controversial, practice in meeting the requirements of the wetlands program under Section 404 of the Clean Water Act. It is of much more recent vintage under the Endangered Species Act.
The first endangered species mitigation bank, the Carlsbad Highlands bank in San Diego County, is less than five years old. Until quite recently, nearly all the endangered species mitigation banks were in California, where most were created in response to the state's 1995 formal policy on what California calls "conservation banking." Increasingly, however, mitigation banking is being made a part of HCPs elsewhere. Some recent examples include: the announcement this year by the North Carolina Department of Transportation that it had established a mitigation bank to meet red-cockaded woodpecker mitigation requirements for future road projects; a pending HCP that would establish a mitigation bank for the nightingale reed-warbler on the Island of Saipan; a pending HCP that includes a mitigation bank for future development projects affecting the Delhi Sands flower-loving fly; a pending HCP that calls for both public and private mitigation banks to meet the needs of several different endangered species in San Joaquin County, California; and a recently approved International Paper Company HCP that contemplates the establishment of a mitigation bank for the red-cockaded woodpecker.
Despite the clearly increasing level of interest in the use of mitigation banking under the Endangered Species Act, the Services have no written policies or guidance on this topic. If one lesson can be drawn from the experience with mitigation banking under the Clean Water Act, it is that having a clear, uniform policy on the topic is very important to ensure that mitigation banking proposals are well conceived and properly evaluated. The continued development of endangered species mitigation banks in the total absence of any written policy on the topic runs the risk that poorly conceived banks will be approved, and that those potentially interested in establishing banks will be uncertain of the requirements for approval of them. These problems are especially important in light of the fact that a California bank, intended to meet mitigation requirements under both the California and federal Endangered Species Acts, was recently sidetracked by litigation brought in state court. Therefore, the Services should promptly fill this void by issuing a clear and detailed policy regarding the use of mitigation banks under the Endangered Species Act. Appended to this testimony is a suggested policy that the Environmental Defense Fund, in cooperation with Sustainable Conservation, prepared as part of a project on mitigation banking undertaken with the support of the National Fish and Wildlife Foundation. We commend it to the Subcommittee and to the Services.
Require that Large-Scale and Certain Other HCPs Achieve a Net Improvement in the Prospects for Species Survival.
At present, many HCPs encompass very large areas. Even some smaller ones encompass all or most of the range of the species they address. Like all HCPs, they are being reviewed and approved under standards that allow a species to end up with a reduced likelihood of survival and little realistic prospect of recovery. It is rather surprising to me that the single most controversial aspect of habitat conservation planning appears to be the "no surprises" policy initiated in 1994. Far more important, in my view, is the fact that the standards for approval allow already imperiled species to be left worse off as a result of an HCP than they were without it. Current law allows a species to be made worse off by an HCP, provided only that it not be made so much worse off as to jeopardize its continued existence. So long as an imperiled species is not pushed below this very low floor, an HCP applicant's only duty is to minimize and mitigate the adverse impact to the species "to the maximum extent practicable." In practice, that is a standard that can and does allow an HCP to leave a species considerably worse off than it was originally.
In 1982, when Congress launched its HCP experiment, no one could clearly foresee how these standards would work in practice. With the benefit of seventeen years of experience, it is appropriate that they be reexamined. In doing so it is important to keep in mind that the model on which Congress constructed the HCP idea was a California plan (the San Bruno Mountain HCP) that Congress itself described as improving the chance of survival of the species it affected, even while allowing some of the habitat they occupied to be permanently destroyed. That was possible because the San Bruno plan promised not just to leave a portion of the habitat undeveloped, but to manage that undeveloped portion actively so as to combat invasive, non-native grasses that threatened to render even the undeveloped portion unsuitable as habitat for the rare species. Thus, as both the plan's proponents and Congress characterized it, the San Bruno plan had a net positive impact on the prospects for conservation of the species it covered. While offering this as the model for future HCPs, Congress failed to articulate standards that would assure that future HCPs would have the same net positive impact as the model.
The adequacy of the standards for approval of HCPs is especially important now that a policy of providing regulated interests with long-term assurances has been made a part of the HCP program in order to induce their participation. Providing such assurances for plans that have high impacts on the survival prospects of the species they affect, low approval standards, and no assurance that the government will have the resources needed to step in when an unforeseen problem arises puts at risk the very species that the ESA seeks to protect. To address this problem, it is imperative to improve the conservation standards by which HCPs are judged.
Requiring that large scale HCPs achieve a net improvement in the conservation prospects of affected species will not impose a difficult or unreasonable burden. In most cases, it can be accomplished by ensuring that HCPs meaningfully address the many threats to species survival that lie beyond the reach of the ESA's prohibition against taking endangered species. Large scale HCPs that include substantial programs to control exotic species, restore fire or other natural disturbance regimes to protected lands, connect isolated habitat fragments, restore rare species to formerly occupied sites, and otherwise actively manage protected areas should have no difficulty meeting this standard.
Provide the Services with the Resources Necessary to Do the Job You Have Given Them
One of the most frequently heard complaints from landowners and local officials developing HCPs is that the Services lack the resources to participate effectively, and in a timely fashion, in the development of HCPs. Repeatedly, business representatives have said to me that for them, time is money, and that if they could only get decisions more quickly, they could commit more to conservation up front. The Services know this, but are unable to do anything about it, for a simple reason: they lack sufficient resources. Unless Congress recognizes and remedies this problem, the result will be that landowners and regulated interests will continue to suffer the frustration of waiting and bearing the carrying costs of financing for their projects while an underfunded and understaffed Service makes its way through a never-diminishing backlog of permit applications, interagency consultations, listing petitions, recovery plan drafts, and a myriad of other duties Congress has given it. From my vantage point, it has often appeared that some in Congress have sought to keep the Services from having the resources they need to carry out their statutory responsibilities as a way of hamstringing the Services. Ironically, however, they have ended up hamstringing the very landowners and business interests whom they purport to champion.
RECOMMENDED POLICY ON THE ESTABLISHMENT, USE, AND OPERATION OF MITIGATION BANKS UNDER THE ENDANGERED SPECIES ACT
Introduction and Purpose
This draft policy provides guidance for the establishment, use, and operation of mitigation banks for the purpose of mitigating adverse impacts to threatened or endangered species under the Endangered Species Act (ESA). Although Section 9 of the ESA generally prohibits the "taking" of endangered or threatened species, Section 10 authorizes the issuance of permits allowing such species to be taken incidental to the carrying out of otherwise lawful activities. To issue such a permit, the Service (either the U.S. Fish and Wildlife Service or the National Marine Fisheries Service, depending on the species affected) must find, among other things, that the permit applicant has prepared a conservation plan that "will to the maximum extent practicable, minimize and mitigate the impacts of such taking." In implementing this provision, the Service has, on several occasions, allowed the requirement to mitigate the impacts of authorized taking to be met by the purchase of credits from various "mitigation banks." In addition, Section 7 of the ESA requires federal agencies to ensure that their actions are not likely to jeopardize the continued existence of listed species or adversely modify or destroy their critical habitat. To meet this requirement, federal agencies (or those whom such agencies authorize or fund) often include a mitigation component in their proposed activities, and the Service has sometimes encouraged them to establish mitigation banks as a means of anticipating and minimizing the impacts of their future activities.
The interest in, and use of, mitigation banks to meet the ESA's requirements are growing. At present, however, the Service has neither a formal policy nor any official guidance pertaining to the establishment, use, or operation of mitigation banks for endangered species conservation purposes. Without policy or guidance, decisions about mitigation banks have been ad hoc and uncoordinated. To provide better coordination within the Service and more consistent and useful information to parties outside the Service, the Service proposes to adopt the Policy on the Establishment, Use, and Operation of Mitigation Banks Under the Endangered Species Act.
In preparing this draft policy, carefully consideration was given to the 1995 interagency Federal Guidance for the Establishment, Use, and Operation of Mitigation Banks under the Clean Water Act and the Food Security Act. The 1995 Guidance addresses the mitigation requirements of those laws with respect to wetlands and other aquatic resources. Also considered was the Policy on the National Wildlife Refuge System and Compensatory Mitigation Under the Section 10/404 Program, published on September 10, 1999. This latter draft policy also pertains only to mitigation requirements relating to wetlands and other aquatic resources. Although the interagency guidance and refuge policy consider many issues common to any form of mitigation banking, their conclusions are not necessarily transferable to endangered species mitigation. There are important differences between wetlands and endangered species and the goals and requirements of the laws pertaining to each, differences that often dictate different policies governing mitigation banking for wetlands and endangered species.
Part 1. Scope of the Policy
This draft policy applies to the use of mitigation banks by nonfederal parties to meet the requirements to minimize, mitigate, or compensate for adverse impacts to listed species of authorized activities under the ESA. Such activities include those authorized by permits under Section 10(a)(1)(B) and those reviewed under Section 7.
Part 2. Mitigation Banks As Distinguished from Other Forms of Mitigation
Mitigation under the ESA has many forms. In some cases, to compensate for adverse impacts to listed species, land (or water) is deeded to a public or nonprofit agency for conservation purposes. In other cases, land remains with its current owner, but its use is restricted in some manner to benefit listed species. In still other cases, mitigation takes the form of monetary payments to a public or nonprofit agency, with the payments used to acquire land for conservation purposes, to manage already acquired land, or to perform some other specific task. Mitigation also can be through the purchase of defined "credits" from an approved "mitigation bank."
Several features distinguish mitigation banks from other forms of endangered species mitigation. Typically, in a mitigation bank, the mitigation is carried out before the action that causes the impact to be mitigated. Mitigation banks are therefore anticipatory, established in anticipation of some future demand for mitigation to compensate for the effects of future actions. Mitigation banks are also typically designed to provide a means of mitigating, at a single, larger site, the impacts of future activities at many smaller sites. Thus, mitigation banks are aggregative; they consolidate at a single site the mitigation for activities that may be widely dispersed. Mitigation banks can be designed to meet the future mitigation needs of either those who establish them or third parties. When mitigation banks have been established to meet the future mitigation needs of third parties, the sale of the bank's credits to third parties is typically at a price dictated by the market and is negotiated between the bank and the third party. Once the Service has approved mitigation through the purchase of bank credits by a third party, the legal responsibility for the mitigation, including the responsibility to remedy any failings of the mitigation efforts, is assumed by the bank.
Some habitat conservation plans have features that superficially resemble mitigation banking but differ in other ways. For example, many habitat conservation plans allow individual landowners to meet their obligations by paying a local government a fixed, per-acre assessment on land they develop, with the proceeds used to finance a conservation program by the local government. These payments are sometimes called "wildlife impact fees." The rationale of these plans is that because the local government has authority over land use within its jurisdiction, it shares the legal responsibility for any incidental taking of endangered species that results from permitted development. In mitigation banking, however, the banker typically has no control over or legal responsibility for the actions of others. Only by selling credits to others does it assume their responsibility for mitigation. In habitat conservation plans financed by special local assessments, mitigation is also typically carried out either concurrently with or after development. The core idea of a mitigation bank is that the mitigation is accomplished first and "banked" for use later. These differences are what set mitigation banks apart from many local or regional habitat conservation plans.
Mitigation banks should also be distinguished from arrangements in which the party carrying out an action that requires mitigation simply pays a set amount into an established fund operated by a natural resources agency or nonprofit conservation organization. These arrangements are commonly referred to as in lieu payment programs, because a payment is made in lieu of actually taking any specific mitigation measures. Payments into such funds are generally intended for future conservation actions by the party administering the fund, not for a specific, identifiable mitigation activity.
Part 3. Definitions
For purposes of this policy, the following terms have the following meanings:
a. Bank sponsor. A bank sponsor is any public or private entity responsible for establishing a mitigation bank.
b. Creation. Creation refers to the establishment of habitat for an endangered or threatened species where no such habitat previously existed.
c. Credit. A credit is a unit of measure representing the accrual of conservation benefits for an endangered or threatened species at a mitigation bank.
d. Debit. A debit is a unit of measure representing the loss of conservation benefits at an impact or project site.
e. Mitigation bank. A mitigation bank is a site where habitat for endangered or threatened species is preserved, created, or restored for the purpose of providing compensatory mitigation in advance of authorized impacts to similar resources elsewhere.
f. Preservation. Preservation refers to the protection, usually in perpetuity, of habitat for an endangered or threatened species through the implementation of appropriate legal and physical mechanisms.
g. Restoration. Restoration includes activities designed to restore habitat for an endangered or threatened species at a site where it formerly existed, as well as activities designed to improve the quality of degraded habitat for such species.
h. Service. Service refers to either the U.S. Fish and Wildlife Service or the National Marine Fisheries Service, or both.
i. Service area. Service area refers to the designated geographic area or areas within which the credits associated with a particular mitigation bank can be used to compensate for authorized impacts on endangered or threatened species.
Part 4. Planning Considerations
Carefully designed and appropriately sited mitigation banks can contribute to the conservation of threatened or endangered species. Threatened or endangered species often face a wide array of threats, only some of which fall within the scope of the ESA's prohibition against taking such species. Conservation prospects can be improved by securing management commitments that effectively address those other threats (e.g., invasive exotic species, disruption of natural disturbance regimes, cowbird parasitism), increasing the likelihood that sites currently occupied by threatened or endangered species will remain occupied. Currently occupied sites may be too small or too distant from other occupied sites for listed species to be likely to survive in them over time. Mitigation banks that effectively enlarge such sites or buffer them from external threats thus can improve conservation prospects. Mitigation banks can also protect sites that are not currently occupied by listed or threatened species but that may be important to the future recovery of such species.
Two issues of paramount importance in planning any mitigation bank are the siting of the bank and its management program. Persons contemplating the establishment of a mitigation bank should confer in advance with the Service about both. Although recovery plans for individual species will rarely, if ever, identify particular parcels as desirable sites for mitigation banks or other conservation actions, they often identify broader areas within which recovery efforts will be focused. By siting mitigation banks in these areas, banks can create mitigation opportunities that both increase the options available to regulated interests and contribute to the conservation of the species. For species without recovery plans, or with plans that do not clearly identify those areas where recovery efforts will be primarily focused, conferral with the Service is especially important, to identify those areas it regards as of particular value in conserving the species.
For many species, individual mitigation banks are seldom large enough, by themselves, to support a viable population of a threatened or endangered species over the long term. But if the bank is located next to an existing area managed for the conservation of that species, even a small mitigation bank may increase the likelihood that a viable population can be maintained there. Similarly, if banks are sited to encourage dispersal between two areas managed for the conservation of the species, the bank may increase the likelihood of the species surviving at both locations. In some instances, banks may be able to provide replacement habitat for species currently occupying nearby unmanaged habitats at risk of becoming unsuitable because of succession. Sites that otherwise appear to be good locations for mitigation banks may turn out, on closer examination, to be inappropriate because of anticipated land-use changes in the surrounding area. These and other considerations relevant to the siting of a mitigation bank should be taken into account at the outset and discussed with the Service to ensure that the would-be banker's objectives and the Service's objectives for the species are compatible.
No less important than siting is the bank's management program. This, too, should be the focus of early discussion with the Service. Seldom will the needs of a threatened or endangered species be met on a completely unmanaged piece of property. More commonly, an active management program--to control invasive exotic species, replicate natural disturbance regimes; prevent an area's use by off-road vehicles, illegal garbage dumpers or others; and address myriad other threats--is essential to ensure that the potential conservation value of a particular property is realized and maintained. These management needs should be anticipated and provided for in any mitigation banking agreement.
As with siting considerations, recovery plans provide a logical starting place for identifying needed management measures for a proposed mitigation bank. Because actual management needs at any site depend on its particular circumstances, early conferral with the Service to identify appropriate management measures at that site is advisable.
Part 5. Development of a Mitigation Banking Agreement
A mitigation banking agreement between the bank sponsor and the Service documents the agency's agreement with the objectives, proposed administration, and management of the bank. The agreement should describe in detail the physical and legal characteristics of the bank and how the bank will be established and operated. In general, the following information should be included:
a. The bank's goals and objectives, including identification of the species for which the bank is to be primarily operated.
b. An accurate legal description and map of the bank property and identification of the bank's owners and managers.
c. A detailed description of existing conditions at the bank site, including the nature and extent of its use by the species for which it is to be primarily operated.
d. A description of the specific management measures to be carried out at the site for the conservation of the species for which it is to be primarily operated.
e. The methods for determining credits within the bank and debits outside the bank, setting performance standards to calculate the availability of credits, and devising accounting procedures to track the creation and use of such credits.
f. The geographic service area within which credits from the bank can be used to mitigate the impacts of other activities.
g. Provisions for long-term management and maintenance.
h. Monitoring, inspection, and reporting requirements.
i. Contingency and remedial action responsibilities in the event that the sponsor does not fulfill the obligations of the agreement or the bank is transferred to another entity.
j. Financial assurances.
k. Provisions for amending the banking agreement.
Part 6. Coordination with Other Levels of Government
Mitigation banks covered by this policy are those established to meet the requirements of the ESA. State or local laws may also impose requirements that can be met by the measures provided for in a mitigation bank. When that is the case, the Service requires that the relevant state or local government entity be given an opportunity to participate in the development of a mitigation banking agreement and to become a party to it. The Service will endeavor to coordinate its requirements with those of state or local government entities to the extent possible in order to minimize expenses, burdens, or duplicative requirements for bank sponsors, project proponents, and other governmental agencies. Although the Service will encourage the appropriate state and local governmental agencies to participate in the development of mitigation banking agreements and to become parties to them, the failure of such other agencies to participate in developing, or to sign an agreement that otherwise meets the requirements of this policy and of the ESA, shall not preclude the Service from entering into such an agreement.
Part 7. Public Review and Comment
Section 10 of the ESA requires that for applications for permits authorizing the taking of listed species, notice must be published in the Federal Register and an opportunity for public comment provided. Establishing a mitigation bank will not ordinarily necessitate an application for a permit. However, the use of credits from an established bank to mitigate subsequently approved actions will require a permit application, notice, and opportunity for public comment, if done pursuant to Section 10. If there are significant public concerns about the design or operation of a mitigation bank, it is better to discover them before approving a banking agreement than afterward. Therefore, before entering into a mitigation banking agreement under this policy, the Service will publish in the Federal Register advance notice of its intent to do so and invite public comment on the proposed agreement in the same manner as it does with respect to applications for permits under Section 10. In some instances, a mitigation banking agreement may be considered at the same time as a related permit application. When that is the case, the notice and comment requirements for each may be combined.
Part 8. Service Areas
Every mitigation banking agreement must specify the geographic area within which credits earned by the bank can be used to mitigate the effects on listed species of actions authorized by the ESA. Service areas should be determined with a view to using mitigation banks to advance the conservation of the affected species. Thus, banks generally should be located within areas designated in recovery plans as focal areas for recovery efforts, and their service areas should correspond to the recovery areas in which they are located. If there is no applicable recovery plan, banks should be sited, and service areas should be designated, to serve a comparable purpose.
Two exceptions to the preceding general guidance should be noted. First, some projects may be located outside a designated focal area for recovery. Banks located within areas designated as focal areas for recovery efforts should be able to provide credits for such projects. In such situations, the project to be mitigated will have little or no detrimental impact on recovery prospects, and the mitigation bank will aid those prospects.
A second exception to the general guidance regarding service areas concerns projects located in focal areas for recovery efforts and undertaken after the recovery objectives for those areas have been achieved. Such projects should be able to buy mitigation credits from banks located in other recovery focal areas. Allowing such projects to do so will help achieve the recovery objectives in the focal area where the bank is located, without hurting these objectives in the area of the project requiring mitigation.
Part 9. Credits, Debits, and Accounting Procedures
Credits and debits are the terms used to designate the units of trade (i.e., the currency) in mitigation banking. Every mitigation banking agreement should specify the methods for determining credits within the bank and debits outside the bank, setting performance standards to calculate credit availability, and devising accounting procedures to track the creation and use of such credits. If several mitigation banks are created for the same species, the Service will use a consistent methodology for determining credits in each of them and make that methodology publicly available. That methodology should also be consistent with the methodology used to determine mitigation requirements for activities mitigated by means other than the purchase of credits from mitigation banks.
Credits associated with a mitigation activity (as well as debits associated with an activity requiring mitigation) should reflect an assessment of the degree of beneficial (or detrimental) impact of the activity on the prospects for the affected species' survival. In theory, population viability analyses could be used to quantify the degree of impact on survival prospects. In practice, however, the information needed for rigorous population viability analyses is often unavailable. As a result, the units of currency may take the form of surrogates for the extent of impact on population viability, such as occupied acres or nesting pairs beneficially or detrimentally affected. In determining credits or debits, the same types of activities may be weighted differently depending on where they occur (e.g., nearby or far from existing protected areas), or other factors (e.g., quality of habitat at the affected site). The rationale for any differential weighting schemes should be clearly articulated in the mitigation agreement or elsewhere.
In some instances, banks may be designed to conserve habitat types that are typically used by several listed species. In such cases, it usually is necessary to determine that the species of concern generally associated with the habitat type do in fact use the mitigation bank site. If some of the species typically associated with a particular habitat type do not actually use the mitigation bank site, it may be inappropriate to mitigate the impacts of activities affecting that habitat type elsewhere by using credits from the mitigation bank.
In general, three types of activities of mitigation banks can generate credits: (1) habitat preservation (the preservation of specified, existing habitat through a conservation easement, transfer of fee title ownership to a conservation entity, or other appropriate means); (2) habitat restoration (the restoration of habitat for an endangered or threatened species at a site where it formerly existed or the restoration of a degraded habitat to an improved condition); and (3) habitat creation (the creation of a specified habitat where it did not previously exist). When deciding whether the preservation of existing habitat is appropriate as the sole basis for generating credits at a mitigation bank, consideration should be given to whether that habitat is under a demonstrable threat of loss or substantial degradation due to activities not otherwise likely to be effectively controlled (such as invasion by exotic species or ecological succession due to the absence of natural disturbance regimes). Typically, mitigation banks involving either habitat creation or restoration activities also require preservation of the restored or created habitat. Some mitigation banks encompass all three types of activities. The mitigation banking agreement should identify both the activities that will produce the credits and the methodology for quantifying them. In the case of habitat creation and restoration activities, the banking agreement should specify the performance standards that, when met, will result in credits being created at the bank site.
Credits "mature" and become available for use at different times, depending on the nature of the activity producing the credits. In general, credits for preserving existing habitat are available for use as soon as an easement, title transfer, or other satisfactory mechanism ensuring dedication of the site to conservation and management in accordance with a particular plan is in place. Credits for creating or restoring habitat are available for use only after the creation or restoration activities have been successfully implemented and an easement, title transfer, or other satisfactory mechanism ensuring dedication of the restored or created habitat has been put in place.
The price of credits sold to a third party shall be agreed on by the bank sponsor and the third party; the Service will play no role in setting the price of credits. The mitigation banking agreement should require that the bank sponsor establish and maintain an accounting system (i.e., a ledger) to document all transactions involving bank credits. Each time a bank makes an approved credit/debit transaction, the bank sponsor should submit a statement to the ServiceThe bank sponsor should also submit to the Service an annual ledger report for all mitigation bank transactions.
Part 10. Provisions for Long-Term Management and Maintenance
In general, mitigation banking agreements should provide that the habitat resources in such banks will be conserved and appropriately managed in perpetuity through mechanisms such as conservation easements or transfer of title to a governmental resource agency or nonprofit conservation organization, accompanied by an adequate endowment for long-term management. When conservation easements are used to ensure permanent protection, they should effectively restrict harmful activities that could jeopardize the purpose of the bank, but they need not restrict activities or uses that are compatible with the bank's purposes. In appropriate circumstances, real estate arrangements may be approved that provide for less than permanent protection of the habitat resources in a bank (such as when the adverse effects of the project requiring mitigation are temporary or the habitat resources at the site of the project requiring mitigation are unlikely to remain there for long, with or without the project). An alternative and generally preferable way of dealing with these latter circumstances is to adjust the amount of credits required to compensate for the anticipated adverse effects (i.e., the mitigation ratio) in light of the expected duration of those effects.
Part 11. Use of a Mitigation Bank Versus On-Site Mitigation
This policy does not presume that the use of a mitigation bank is generally preferable to on-site mitigation, or vice versa. Rather, the purpose of the policy is to ensure that mitigation banks are sited and managed so as to contribute to the conservation of the affected species. Unless mitigation opportunities at the site of the proposed project are also likely to improve the conservation prospects of the species, a mitigation bank should be preferred to on-site mitigation.
Part 12. Use of Public Lands as a Mitigation Bank
Federal land management agencies, like all other federal agencies, have an affirmative responsibility, under Section 7(a)(1) of the ESA, to use their various authorities to advance the ESA's purposes by carrying out programs for the conservation of listed species. This affirmative duty is independent of any separate duty of nonfederal persons to mitigate the adverse effects on listed species of activities that they carry out. Accordingly, mitigation of the adverse effects of nonfederal actions should, whenever possible, be carried out on nonfederal lands, and mitigation banks should not be sited on federal lands. Mitigation banks may be sited on other public lands (such as state or local government lands). Mitigation credits generated by banks of this nature should be based solely on those values in the bank that are supplemental to the public program already planned or in place. Existing values represented by ongoing or already planned public programs, including preservation value, should not be counted toward bank credits.
Similarly, federally funded conservation projects undertaken by a separate authority and for other purposes, such as the Wildlife Habitat Improvement Program or the Partners for Fish and Wildlife Program, cannot be used for generating credits in a mitigation bank, at least during the period that the landowner is required to maintain the projects. However, these other authorities typically allow a landowner to remove restored or created habitat at the end of a specified period. If a landowner agrees to preserve such areas beyond the term of the original agreement, mitigation credits may be issued for doing so. Similarly, a landowner's agreement to protect in perpetuity habitats originally created or restored pursuant to endangered species safe harbor agreements can serve as the basis for credits in a mitigation bank.
Part 13. Monitoring Requirements
The bank sponsor is responsible for monitoring mitigation banks based in whole or in part on habitat restoration or habitat creation activities, in accordance with the monitoring provisions in the mitigation banking agreement to determine the level of success and any problems requiring remedial attention. Monitoring provisions should be specifically described in the banking agreement and be based on scientifically sound performance standards prescribed for the bank. Monitoring should be conducted at time intervals suitable for the particular project type and until such time as the Service has decided that it has been successful. The bank sponsor should submit annual monitoring reports to the Service.
In addition to the monitoring activities required of the bank sponsor, the mitigation banking agreement must allow for the Service's right to enter bank lands in order to evaluate compliance with the banking agreement, the results of habitat creation or restoration activities, and the implementation of required management activities.
Part 14. Remedial Actions
The mitigation banking agreement should stipulate the general procedures for identifying and implementing remedial measures at a bank. These remedial measures should be based on both information in the monitoring reports and the Service's inspections. The Service, in consultation with the bank sponsor, will decide on the need for remediation.
Part 15. Financial Assurances
The bank sponsor is responsible for securing sufficient funds or other financial assurances to cover contingency actions in the event of the bank's default or failure. In addition, the bank sponsor is responsible for securing adequate funding to monitor and maintain the bank during its operational life and to endow its proper management thereafter. The total funding requirements should reflect realistic cost estimates for monitoring, long-term management, and contingency and remedial actions.
Financial assurances may be in the form of performance bonds, irrevocable trusts, escrow accounts, casualty insurance, letters of credit, or other approved instruments. Such assurances may be phased out or reduced once the bank has demonstrated that it has met its performance requirements as described in the banking agreement.