Build Conservation Banking Back Better
EPIC’s draft comments on the Advanced Notice of Proposed Rulemaking (ANPR) on Compensatory Mitigation Mechanisms
Approved and sold-out conservation banks as of September 2022
The image above shows where in-advance compensatory mitigation is happening for endangered species from the federal RIBITS tracking database (green are approved conservation banks, blue are sold out).
Clearly, in-advance compensatory mitigation is happening at different magnitudes in different parts of the country, and it’s not because there are zero impacts to species in areas without conservation banks. The core issue is that regulators routinely allow negotiated compensation that is not held to the same standards as conservation banks, leading to smaller, lower quality and unconsolidated compensatory actions that harms rather than protects species.
To put things into perspective, there are roughly 10x more wetland and stream banks than conservation banks. One reason for this is that wetland and stream banks are explicitly preferred in the ‘2008 Rule’ for Compensatory Mitigation for Losses of Aquatic Resources. Research presented in May of 2022 is showing that the regulator is largely upholding this preference (Beaudet, 2022). The 2008 Rule also established equivalent standards for all forms of compensatory mitigation–whether carried out by the permittee (called permittee responsible mitigation, or PRM), banks, or in lieu fee programs (ILFs). This leads to better outcomes for species.
If timelines are any indication, conservation banks are being held to a much higher standard. Even in the state that has had the longest history of conservation banking (California), the state agency is meeting its review deadlines only 28% of the time due to lack of funding and staffing. We have heard that conservation bank proposals in California are sitting in a queue for over a year before even being opened, and once in the process take over two years to approve. Banks in other parts of the country are also taking a long time to approve: the average approval time from five non-California banks was 2.5 years (personal communication). It should be easier, not harder, to get approval of conservation banks. All of this undercuts the development of banks and demand for in-advance credits that already exist.
The Fish and Wildlife Service (FWS) wants ideas to build a better conservation banking rule. Comments for the Advanced Notice of Proposed Rulemaking (ANPR) on Compensatory Mitigation Mechanisms are due September 26.
EPIC’s priority recommendations for this ANPR include:
Upholding equivalent standards
Creating a timeline for a review process of conservation banks
Not requiring financial assurances until credits are released
For preservation-based mitigation, releasing the majority of credits when the site is legally protected
Creating a timely process for reviewing and approving new credit quantification methods
Creating a preference for using existing credits in Section 7 Habitat Conservation Plans
Increasing opportunities for tribal participation in compensatory mitigation
Creating accountability within the Rule for equivalent standards, preference for in-advance mitigation, and other preferences or requirements of the Rule
These actions would create a demand driver for higher quality species mitigation while speeding approval. Imagine 10x more conservation banks providing permanent protections for our most at-risk species. This is desperately needed as the world faces accelerating rates of species extinction.
Last month, we provided initial reactions on the following ANPR themes: equivalent standards, mitigation on public lands, tribal participation in compensatory mitigation, data transparency, and guidance on quantifying impacts and conservation benefits. Today, we’re expanding on the themes of equivalent standards, durability and additionality, monitoring, financial assurances, hurdles to species banking, incorporating aspects of the 2008 Rule, banking on tribal lands, and other recommendations. Many of our suggestions reference the good ideas that were already incorporated in 2016 FWS and Endangered Species Act (ESA) mitigation policies that are expected to return soon. Those 2016 policies were well vetted and aligned with widely accepted offset policy principles and our assumption is that they will return in close to their original form. We also have created a ‘cheat sheet’ of sections of the 2016 policies relevant to the questions posed in the ANPR.
Contents
(1) Equivalent standards
(2) Durability and Additionality
(3) Monitoring, Financial Assurances, Publicly Accessible Mitigation Data Tracking Systems
(4) Other Hurdles to Species Bank Establishment
(5) Alignment with the 2008 Rule
(6) Banking on Federal and Tribal Lands
(7) Other Recommendations
(1) Equivalent standards
“What level of detail should be in the proposed rule to ensure equivalent standards are consistently applied to all forms of compensatory mitigation, including equivalence in covering the costs of mitigation whether they are on public or private lands?” (ANPR)
First, a simple example to show why equivalent standards are important: imagine two freshwater wetlands, restored as compensatory mitigation sites to enhance the endangered turtle populations they host. One of them has a permanent endowment set up in an investment fund that allows the fund to grow and provide revenue to pay for for periodic maintenance of the wetland. The other doesn’t. The first project will be more expensive to set up and more expensive to buy credits from, but when invasive plants take over the wetland, it's the one that will still be providing benefits to the turtle because the endowment will pay for the maintenance to keep invasive plants under control.
This isn’t just a hypothetical example - most government-established compensatory mitigation sites lack permanent endowments, as do many other species compensatory mitigation projects, and many of them will fail to benefit species in the long run because of it, or will require expensive taxpayer bailouts to fund the maintenance. The current conservation banking policy (FWS, 2003) requires conservation banks to have endowments, but doesn’t require this for ILFs or PRM.
The conservation banking Rule should include additional detail to ensure that equivalent standards are defined and upheld. Endowments for the upkeep of compensatory mitigation lands should be required. This has been a requirement for aquatic compensatory mitigation under the 2008 Rule (Compensatory Mitigation for Losses of Aquatic Resources; Final Rule), but it’s only recently that the US Army Corps of Engineers (USACE) has applied endowment standards. Enforceable transfer of liability should also be equivalent for banks and in-lieu fee programs. This is noted in the 2016 FWS mitigation policy and 2016 ESA mitigation policy that both essentially say responsibility for successfully completed compensatory mitigation is transferred to the bank or ILF at the time of credit purchase (FWS mitigation policy: Sections 5.6.3.b. Mitigation/Conservation Banks and 5.6.3.c. In-Lieu Fee; ESA mitigation policy: Sections 7.1.2. Conservation Bank Program and 7.1.3. In-Lieu Fee Program). This language should be likewise adopted in the Rule.
Finally, we think there should be detail in the Rule that creates accountability for adherence to equivalent standards. The Rule could adopt a mitigation standards checklist that would be used to evaluate all forms of compensatory mitigation, using the 2016 FWS mitigation policy, Section 5.6.3.1 a - l as a basis for the checklist. A checklist would allow the regulator to ensure equivalence or record a reason for deviation from equivalent standards requirements. Recording this detail could also allow for unbiased evaluation, similar to USACE’s recent analysis of its adherence to the mitigation preference hierarchy (Beaudet, 2022 - presentation at NMEBC conference). Adhering to equivalence and recording deviations is consistent with the 2016 FWS mitigation policy, Section 4.e. “Ensure consistency and transparency.”
With regards to equivalence in covering the costs of mitigation whether they are on public or private lands, we suggest that the Rule requires land costs (highest and best use appraisal cost) incorporated in credit price regardless of land ownership type when mitigation is for impacts on private lands. For example, this Pierce County (WA) wetland ILF provides a detailed breakout of their credit pricing calculations that includes land price as well as other costs. If land costs are not incorporated, as could be the case with species mitigation on public lands, mitigation prices will be artificially cheap because past taxpayer investments in owning and managing the land basically subsidize the credits. If species mitigation banks are developed on public lands for impacts on public lands, incorporating land cost is not necessary. If species mitigation credits developed on public lands are sold for impacts on private lands, the portion of the credit price that represents land costs (i.e., a portion of the revenue to the public sector) should be used for conservation-focused land acquisition to ensure a net growth in conserved lands.
(2) Durability and Additionality
“What level of detail should be in the proposed rule regarding durability and additionality standards to both achieve equivalent standards across mitigation mechanisms and provide species conservation?”(ANPR)
Equivalent standards for durability would require banks, ILFs, and PRM to ensure the success of the mitigation for the duration of the associated impacts with a site protection instrument and financial assurances (see 2016 ESA mitigation policy, Section 5.6).
Note: see our discussion on ensuring durability on tribal lands in section 6.
With regards to additionality, we generally think additionality is not difficult to prove. It’s only difficult when the argument is weak - as is the case with proving additionality on public lands. There is quite a bit of text dedicated to additionality in the 2016 mitigation policies.
We agree with the 2016 FWS and ESA mitigation policies that mitigation developed on public lands should be used to offset impacts on public lands, not private lands. Note: The Rule should not conflate tribal lands as public lands. It is entirely appropriate to mitigate impacts from private lands on tribal lands. In Section 6 below, we discuss the distinction between additionality on public lands and additionality on tribal lands.
We empathize with public agencies lacking resources to properly manage their lands, and realize that baseline conditions may be degraded due to lack of resources. The solution to this problem, however, is not funding through environmental credit sales, but rather increased appropriations for agency budgets. In what should be extremely rare exceptions when the FWS accepts mitigation on public lands for impacts on private lands, we recommend that the Rule create accountability for additionality on public lands through the following measures:
Require proof that public lands can meet the requirements for all forms of mitigation (financial assurances, alternative site protection instrument, etc.) (see example of requirements in the 2008 Rule, § 332.4 (c) 2-14).
Require proof that “Private lands suitable for compensatory mitigation are unavailable or are available but cannot provide an equivalent or greater contribution towards offsetting the impacts to meet the mitigation planning goal for the species”(required in the 2016 ESA mitigation policy, Section 6.2.2.)
Require explanation &/or quantification of “additional conservation benefits above and beyond measures the public agency is foreseeably expected to implement absent the mitigation” (required in the 2016 ESA mitigation policy, Section 6.2.2.)
As noted above, we would ask that land costs (highest and best use appraisal cost) be incorporated in credit price when public lands mitigation is for impacts on private lands.
This information should be made publicly available, to assure the public of the appropriate use of mitigation from public lands.
Finally, with regards to additionality when Federal funding unrelated to mitigation partly supports a project, the 2016 FWS mitigation policy includes a lengthy Appendix C on Compensatory Mitigation in Financial Assistance Awards Approved or Administered by the U.S. Fish and Wildlife Service that describes the circumstances in which a project that touches Federal grant funds could provide compensatory mitigation. We wish the guidance were simpler. The Rule should make it very clear that the only appropriate crediting is for the non-Federally funded portion of a project.
(3) Monitoring, Financial Assurances, Publicly Accessible Mitigation Data Tracking Systems
“How should the proposed rule incorporate monitoring, financial assurances, and publicly accessible mitigation data tracking systems to ensure a compensatory mitigation mechanism is meeting its performance standards?” (ANPR)
The 2016 FWS and ESA mitigation policies noted that the FWS would use timely and transparent processes, and would share information on compensatory mitigation. In addition to providing banking and in-lieu fee program information on RIBITS, we would ask that permittee-responsible compensatory mitigation also be included. All compensatory mitigation information should include geographic data of the location of the centroid and footprint of the compensatory mitigation area, and the location of the impact. This information can help the public evaluate the performance of mitigation measures and identify lapses in implementation. We also recommend that the Rule require data transparency in FWS processes to provide accountability to equivalent standards (see above in equivalent standards), ensure that mitigation on public lands is used only in rare exceptions and with justification (see above in additionality on public lands), and ensure timely decisions (see timeline recommendation below). The USACE tracks some of this data in their ORM permit database, but only provides that data upon receipt of a FOIA request. We recommend the FWS similarly track permit data, but make all non-proprietary information publicly available from the outset. Data standardization may be a necessary step to ensure record-keeping is consistent across districts and field offices.
The Rule should not require more monitoring data than what is relevant and will be used for evaluation (e.g., for identifying when ecological performance standards are met, or effectiveness monitoring that could indicate a need for adaptive management). The Rule could explicitly note that acceptable monitoring data could include effective conservation technology such as satellite imagery, automated change detection, and environmental DNA (eDNA) as alternatives to traditional monitoring, where appropriate. Even if the Service does not yet know exactly when and how such technologies might be applied, it is worth giving permission now to use such technologies in the future, because application of such technologies is expanding rapidly. FWS could consider regular meetings to share best practices with new monitoring technologies.
Financial assurances should not be required until credits are released. The public and the permittees relying on compensatory mitigation are not at risk of a conservation bank failure until the point at which a credit becomes compensatory mitigation for an impact. Until then, the risk is only to the conservation banking developer. Bonding, insurance, or any other financial assurance should not be required until the first credits are released for sale. The Rule could also adopt operational details about financial assurances. The 2016 FWS and ESA mitigation policies scarcely mention financial assurances, whereas the 2008 Rule dedicates about 8 paragraphs in a specific “(n) Financial Assurances” section within § 332.3 General compensatory mitigation requirements.
(4) Other Hurdles to Species Bank Establishment
“What are the hurdles to species bank establishment that are within the Service’s authority to address through regulation?” (ANPR)
The Rule should establish clear guidance for bank approval. The 2003 conservation banking policy was vague and guidance was not aggregated in one specific section. Section 332.4 of the 2008 Rule is a good framework, as it includes all the pieces necessary for bank application and approval, with references back to other sections for additional detail.
The Rule should create timelines for a review process. The 2016 ESA mitigation policy notes: 6.5. Timelines “The Service does not have mandated timelines for review of conservation banks, in-lieu fee programs, or other compensatory mitigation projects that are not part of a consultation or permit decision. However, this does not mean that compensatory mitigation programs and projects are not a priority for the Service.” This statement just doesn’t cut it in terms of accountability. We recommend the Rule create timelines for approval processes and record a ‘timestamp’ for each stage, similar to current USACE practices. See 2008 Rule, § 332.8(d)(2-8) for general review process timelines, (e)(1-7) for dispute resolution, and (g)(2) for modification of instruments.
The Rule should create accountability for preference for in-advance consolidated mitigation. We agree with the preference for in-advance, consolidated mitigation per Sections 6.1.2 and 6.1.3 of the 2016 ESA mitigation policy, but accountability needs to be built into policy by, for example, requiring FWS staff to record a justification for deviation from use of in-advance, consolidated mitigation when it is available, just as the USACE tracks this to analyze their adherence to the 2008 Rule’s mitigation type preference (Beaudet, 2022).
The Rule should confirm that conservation bank credits can be used in Section 7 consultations. The latest version (1998) of the FWS’ Section 7 Consultation Handbook indicates that “Section 7 requires minimization of the level of take. It is not appropriate to require mitigation for the impacts of incidental take.” We recommend that the Rule confirms that compensatory mitigation may indeed be used in Section 7 consultations. This conforms with the 2016 ESA mitigation policy, which notes: “The Service will consider conservation measures, including compensatory mitigation, as appropriate, proposed by the action agency or applicant as part of the proposed action when developing a biological opinion addressing the effects of the proposed action on listed species and critical habitat. This consideration of beneficial actions (i.e., compensatory mitigation) is consistent with our implementing regulations at 50 CFR 402.14(g)(8).” We recommend that the Section 7 Consultation Handbook be updated.
Section 10 Habitat Conservation Plans should give priority to using available consolidated mitigation credits if they are available within the geography of the HCP at a fair price. We advocate for this prioritization because of the benefits of eliminating both the risk of failure (the conservation measure has already been in place) and the temporal loss of species habitat.
The FWS should develop step-down guidance on quantifying impacts and conservation benefits. The 2016 ESA mitigation policy reasonably noted (in the preamble) that “Details about how to develop and apply assessment methodologies that are quantitative and transparent were not included in the draft, or this final, policy, because these details are species-specific and too complex to describe adequately within the framework of the policy.” Additional step-down guidance is needed to institutionalize a process for the agency to review and approve metrics and make them readily available to permittees and mitigation providers. The FWS should also have a timely process for reviewing and approving new credit quantification methods whether they are developed internally or by a third party. For example, a document describing a workable methodology, backed up by credible research, with examples of where the method has been used before, and the appropriate geography for its application, could be reviewed by the FWS within a reasonable timeframe. The approval process could break down a major barrier to conservation banks and additionally be valuable within the context of Section 7 and Section 10. The FWS should know which species are likely to have a high volume of permit applications (e.g., species likely to be impacted by renewable energy development). Predictable, repeatable credit and debit quantification methods for these species &/or landscapes is important and should not take ten years to figure out. Predictability is also important to incentivize conservation banks or other consolidated, in-advance mitigation. One mitigation banker noted that 30-40% of their banks had experienced significant changes in credit methodology between the beginning and end of the approval process. This unpredictability can “mean that a promising proposed project is no longer viable” (Kihslinger et al., 2020).
With regards to credit release schedules, the 2016 ESA mitigation policy notes that “Credits are available for use as mitigation once they are verified and released by the Service. Credits are released in proportion to administrative and ecological milestones.” When preservation is the method for credit creation, a large portion of credits should be released when the site is legally protected.
The 2016 FWS mitigation policy acknowledges that “In rare circumstances, research or education that is directly linked to reducing threats, or that provides a quantifiable benefit to the species, may be included as part of a mitigation package” (Section 5.6.3.2 Research and Education). We agree that these activities should only be used in rare circumstances as compensatory mitigation, and we support research as an appropriate mitigation option when “(a) The major threat to a resource is something other than habitat loss; (b) the Service can reasonably expect the outcome of research or education to more than offset the impacts; (c) the proponent commits to using the results/recommendations of the research to mitigate action impacts; or (d) no other reasonable options for mitigation are available” (Section 5.6.3.2). For example, promising research that may help bat species survive the devastating white nosed syndrome may be more appropriate than protecting suitable habitat. We ask that the USFWS develop step-down guidance for determining if and how much conservation benefit could derive from research or other activities like crediting wildlife crossings. Crediting research could be discounted at a high rate to account for the unknown beneficial effect.
(5) Alignment with the 2008 Rule
“How should the proposed rule align with 2008 Rule provisions to maintain compatibility between mitigation banks and species banks where appropriate?” (ANPR)
Almost all of the factors used to evaluate mitigation in the 2016 FWS mitigation policy (Section 5.6.3.1 a - l ) align with the factors needed for bank application and approval in the 2008 Rule (Section 332.4). The only documents that might differ are requirements for a species management plan, and the crediting formula. It could be as easy as submitting a 404 ILF or bank mitigation plan with species-specific appendices.
(6) Banking on Federal and Tribal Lands
“How should the Service address potential bank projects on Federal and Tribal lands or on other lands with unique ownership considerations and/ or some degree of existing protection?” (ANPR)
Tribes deserve a clearer role to provide mitigation credits than past policy has allowed. Past policies have given little attention to tribal participation. For example, tribes are sovereign governments, but potential banks on tribal lands would previously have had to meet private land protection standards instead of state or federal governmental ones - that is inappropriate.
We would like to see the Rule provide detail about ensuring durability and site protection on tribal lands. As was noted in the 2016 ESA mitigation policy (Section 6.2.5 Compensatory Mitigation on Tribal Lands), “Ensuring durability, particularly site protection, is usually a sensitive issue for a tribal nation because a conservation easement entrusts the land to another entity (Terzi 2012).” It should be crystal clear in policy that a tribe does not have to put a conservation easement on their lands. We would suggest adding the following text about alternative site protection mechanisms in both the proposed conservation banking Rule and also a future ESA mitigation policy: “Alternative site protection mechanisms are allowable for tribal lands including but not limited to, intergovernmental agreements, tribal integrated natural resource management plans, memorandums of agreements, or other long-term contracts that ensure tribal sovereignty and governmental status is upheld.”
The Rule should also make a distinction between additionality on public lands and additionality on tribal lands. Although we think it’s inappropriate for public lands to mitigate impacts on private lands, we don’t want the Rule to conflate public lands with tribal lands. After all, taxpayers aren’t paying for conservation and management on tribal lands - it’s a distinctly different situation than public lands. Tribal lands are governed under their own sovereignty with the capability of independently demonstrating additionality within the tribal territory.
Finally, the Rule could also address the following:
Include tribal lands when describing lands eligible for compensatory mitigation.
Consider more opportunities for both tribal co-management of the species and long-term management of the mitigated species. For example, right now 0.006% of the 201,000+ conservation easements in the US are held by tribes (National Conservation Easement Database, 2022, data dated 6/23/2022). Unlike our argument earlier that it is inappropriate for tribes to be forced to put a conservation easement on their own sovereign lands to participate in conservation banking, it is entirely appropriate for a tribe to be entrusted with the lands and long-term stewardship responsibility of conservation banks (e.g., for a tribe to hold an easement). The Rule should include tribes in descriptions of options for transfer of mitigation lands and include tribes as conservation bank sponsors, as stand-alone tribal governments.
(7) Other Recommendations
At the end of the day, preservation of species habitat as compensatory mitigation leads to net loss. The Rule should put an emphasis on restoration as opposed to preservation.
The Rule could document that it could be appropriate for a public agency to purchase and retire species credits for the benefit of species recovery. In particular, when credits have been created but a species is later delisted, the habitat restoration or preservation is still valid and credits could be purchased as part of ensuring maintained recovery.
Finally, when a policy is put in place, supply often lags demand. We support incentives to help expand supply for a limited time. For example, it could be appropriate for publicly-supported loan or loan guarantee programs to support investments in credit development, provided that any loans are paid back prior to credit release (i.e., not from proceeds of credit sales). Investing in advance mitigation projects would help ensure that a supply of credits is available to meet demand as the new Rule and reinstated policies roll out.
