How We Can Get Better, Faster Environmental Outcomes from the $9+ Billion Water Resources Development Act

By Becca Madsen

Globally, the private sector's interest in investing in the environment and climate is at an all-time high. The private sector invested over $8 billion in conservation over the last decade, but there is an additional $3 billion in capital that’s going unspent. EPIC’s Restoration Economy Center is working to break down barriers in government policies and practice that hinder investments in restoration. The reauthorization of the Water Resources Development Act (WRDA) provides a timely opportunity to adjust language to better allow private investment and focus on restoration outcomes.  

Our suggestions to improve WRDA are:

1.       For the US Army Corps of Engineers (USACE) to follow their own rules and show a preference for using completed restoration projects to mitigate WRDA project impacts,

2.       Provide an ability for the USACE to contract for restoration outcomes, and

3.       Establish a Pilot Pay for Performance program for WRDA mitigation.  

But first, a little background is needed as much of the public is unaware of WRDA and its scale and impact. 

WRDA is a bi-annual bill that comes before Congress to authorize and appropriate funds for US Army Corps of Engineers (USACE) projects like flood control, navigation, and ecosystem restoration. In the 2020 version of WRDA, $9.9 billion was authorized for projects across the country (see p. 172-179). For any WRDA projects that impact streams and wetlands, the USACE must mitigate (i.e., offset impacts) per the USACE’s own 2008 Compensatory Mitigation for Losses of Aquatic Resources Final Rule (‘2008 Rule’).  

The 2008 Rule lays out a preference for in-advance, larger scale wetland and stream restoration and sets performance standards and timetables for action. It is an example of a regulation that focuses on environmental outcomes and allows any sector the ability to create those outcomes. The certainty that the 2008 Rule provided expanded private sector funding in restoration in the niche mitigation banking industry with sales estimated around $3 billion annually. Mitigation moved away from smaller isolated projects created by permittees (the companies or other entities doing the impacting) towards larger scale mitigation created by private mitigation bankers (see analysis by Hough and Harrington, 2019).  

The impacts resulting from the multi-billion dollar WRDA projects are largely mitigated by the USACE itself, according to the Ecological Restoration Business Association (ERBA). So how could WRDA, version 2022 language be adjusted to allow more timely private sector restoration focused on environmental outcomes? 

First, emphasize that the USACE needs to follow their own 2008 Rules when providing stream and wetland mitigation for WRDA projects.  

“In order to reduce risk and uncertainty and help ensure that the required compensation is provided, the rule establishes a preference hierarchy for mitigation options. The most preferred option is mitigation bank credits, which are usually in place before the activity is permitted. In-lieu fee program credits are second in the preference hierarchy, because they may involve larger, more ecologically valuable compensatory mitigation projects as compared to permittee-responsible mitigation. Permittee-responsible mitigation is the third option.” (2008 Rule) 

Year 1 of a wetland restoration project is a muddy mess and it can take years before a restored wetland is fully providing ecological services like flood attenuation, water filtration, and wildlife habitat. That’s why the 2008 Rules explicitly state a preference for in-advance mitigation, and that’s why the USACE should be using in-advance mitigation credits if they are available.  

Second, if in-advance credits are not available, USACE should consider tapping the private sector and pay for restoration outcomes rather than taking on the job themselves. “Pay for performance” is an innovative approach to contracting that allows private investors to finance projects that are designed to meet a goal or target identified as a priority by a government agency (e.g., WRDA project mitigation). The government agency repays the private funder only after certain measurable outcomes are met. This can allow government agencies to engage in projects more effectively, efficiently and through innovative approaches. Before USACE can pay for performance, however, USACE needs the authority to contract for restoration outcomes. WRDA 2022 needs language to allow this. In addition to mitigating impacts of WRDA projects like maintaining shipping channels, USACE can also use the pay for performance approach to achieve environmental restoration goals.  

Finally, ERBA’s proposed Pilot Pay for Performance program for WRDA mitigation would allow the USACE to experiment with a pay for performance approach and discover for themselves how it can cost-effectively deliver mitigation and shift project design and implementation to third-parties better able to execute and handle the risk. The proposed pilot program allows “a non-Federal mitigation provider to carry out and manage the design and construction of one or more mitigation projects using a performance-based contract.”  

EPIC believes these changes will expand funding and improve overall mitigation results, performance, and timeliness while reducing costs. We are hopeful that the Corps will seriously consider adopting these requests.