Three Steps Forward for Species Mitigation in 2023
When you look up news about endangered species, you usually find stories about charismatic species getting new protections under the Endangered Species Act (ESA). I’ve never seen a single story about species mitigation policy in the headlines, but it’s a crucial element in ensuring that impacts to species are avoided, minimized, and offset. On May 10, 2023, the US Fish and Wildlife Service (FWS) published their FWS Mitigation Policy, and Endangered Species Act Compensatory Mitigation Policy.
These are mostly a comeback of policies established in 2016 and later rescinded by the Trump Administration in 2018, but they also create three giant steps forward for durability of the policy, the ability for Tribes to participate, and the quality of mitigation due to increased emphasis on equivalent standards. We highlight these steps forward, along with other changes like added detail about mitigation on public lands, clarification about credit stacking, and language on “nexus and proportionality.” We also see a few steps back in the policies, but operational details in future guidance could steer implementation towards the right direction.
3 Steps Forward
1. “Net Gain” was Fightin’ Words, “No Net Loss” is a Keeper
The pendulum swing of politics in recent years has led to policies that are untenable from one political party to the next. In the Obama administration, mitigation policies were published with an agency goal of “...a net gain or, at minimum, to maintain (ie., no net loss) the current status of affected resources.” This was interpreted by some as raising the bar on mitigation under the ESA, and thus the policies were rescinded (for more detail, see “Improving Mitigation Under the Endangered Species Act,” Li and Male, 2021). Therefore, setting the goal of “no net loss” establishes a standard that we hope will resist political swings.
2. New Language Strengthens the Ability of Tribes to Participate
EPIC has developed a body of research to break the barriers to Tribal participation in compensatory mitigation. Revisions to the ESA and FWS mitigation policies are proof that agencies are listening and we applaud this as a big step forward. First, the ESA policy states “The Service recognizes that Tribes are sovereign nations and will consider them as governmental entities when we consider the eligibility of Tribal lands for compensatory mitigation.” Next, a serious problem in previous mitigation policy was that regulators did not understand that requiring Tribes to enter into a conservation easement was akin to asking a nation to give up rights to their lands - something particularly problematic because the US government has a history of treaties that “...often included coercive agreements to cede some of all of [Tribal] land” (Wade, 2021). The 2023 ESA policy now states:
“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.”
Tribes are also included in other parts of the policy, including in the definition of a mitigation sponsor (“...any public, tribal, or private entity…”) and denoted as a potential recipient of mitigation lands: “Mitigation providers may transfer private mitigation lands to public agencies with a conservation mission or Tribes if allowed by applicable laws, regulations, and policies.”
3. Equivalent Standards Raises the Bar for All Forms of Mitigation
In the parallel universe of wetland and stream mitigation, the 2008 Rule (aka “Compensatory Mitigation for Losses of Aquatic Resources under CWA Section 404”) created a preference for mitigation created in advance of impacts and required equivalent standards to ensure that all forms of mitigation were held to the highest standards. These policy ingredients led to the largest supply of successful in advance mitigation in the world. While the 2016 species mitigation policies included equivalent standards, the 2023 versions emphasize this even more. Equivalent standards are now included in the 10 ‘fundamental principles’ in the FWS mitigation policy. In the FWS policy section that describes types of mitigation, the policy notes “Like all compensatory mitigation measures, proponent-responsible mitigation should be delivered in accordance with Service defined or Service-approved standards and should address the factors listed in the section Equivalent Standards.”
Other Changes in the 2023 Policies
Along with the previous three big steps forward, the 2023 mitigation policies include added detail about mitigation on public lands. This includes new text requiring project proponents to “have established a financing mechanism to cover the costs of implementation and long-term management.” There is also greater discussion of mechanisms to assure durability of mitigation created on public lands.
We’re glad to see clarification about credit stacking (TLDR, you can’t sell twice). As with previous implementation of mitigation policies, a single unit of a mitigation site could “provide compensation for two or more spatially overlapping ecosystem functions or services that are grouped together into a single credit type and used as a single commodity to compensate for a single permitted action.” However, there are two key things that are prohibited under the ESA mitigation policy. First, “the project proponent cannot unstack the stacked credits to provide mitigation for more than one permitted impact action even if all resources included in the stacked credit are not needed for that action.” The ESA policy further clarifies that a species credit cannot be sold once to mitigate for a permit and sold again as a carbon credit:
“The loss of species habitat at the first impact site included all functions and services associated with that habitat, including carbon sequestration, so selling that same unit of compensatory mitigation again for carbon sequestration results in no carbon offset for the loss of carbon sequestration at the second impact location.”
For those keeping track of credit stacking, this means under US law and policy, you can’t sell carbon off a species credit used for compliance under the ESA per this 2023 ESA Mitigation Policy, you can’t sell carbon off a wetland or stream credit used for compliance under CWA 404(d) per the 2008 Rule, and you can’t sell a wetland or stream credit and later sell a species credit off the same land (or vice versa). As we’ve said before in “Getting Biodiversity Credits Right”, “Credit stacking is a nice idea on paper ...but additionality for stacked credits has been wickedly hard to prove in both regulated and voluntary credit markets around the world.”
There is also more detail in the new ESA mitigation policy about implementing a landscape approach to siting effective species mitigation. Coordination with agencies, Tribes, and local communities to create equitable offsets is emphasized more than it has been in the past.
Finally, the Service added language about “nexus and proportionality” to the FWS mitigation policy (under General Policy and Principles): “All appropriate mitigation measures must have a clear connection (i.e., nexus) with the anticipated effects of the action and be commensurate (i.e., proportional) with the scale and nature of those effects.” This text was added in response to two court case opinions. There is also text about proportionality in discussion of reasonable and prudent measures in the ESA mitigation policy.
A Few Steps Back / What to Improve in Future Guidance
The policies frequently mentioned there would be “specific operational details in upcoming implementation guidance” where we hope some missing elements might be included.
First, there was a notable removal of text discussing timelines for approvals of mitigation in the ESA mitigation policy. Although the previous text in the 2016 ESA mitigation policy’s section 6.5 on Timelines stated that “The Service does not have mandated timelines for the review of [mitigation],” it at least noted “this does not mean that compensatory mitigation programs and projects are not a priority for the Service.” The 2023 mitigation policies have no text about timelines, creating massive uncertainty and financial risk for the development of in advance mitigation. In operational guidance, the Service should at the minimum adopt target timeframes for approval of mitigation along with tracking and reporting to create accountability and the ability to identify and address bottlenecks.
The new policies also include text that erodes equivalent standards. For example, the new ESA mitigation policy requires an endowment to pay for management and stewardship of the mitigation property in the sections on Habitat-based mitigation methods (7.1), Proponent-responsible compensatory mitigation (7.2), Conservation bank program (7.3), but strangely not in the In-lieu fee program section (7.4). We hope that was an oversight because one form of mitigation not being required to create an endowment would not be equivalent standards. We also think that the new policies do not properly address the concept of full cost accounting for ILFs which will lead to underpriced ILF credits and potentially insufficient funds to implement mitigation and management under an ILF. We disagree with the italicized part of this statement in the ESA policy, section 6.4 on Crediting and debiting: “Pricing of credits in conservation banks and in-lieu fee programs is solely at the discretion of the mitigation provider.” In fact, an interagency review team reviews the pricing of ILF credits to assure that the ILF can sufficiently cover all of its costs. We wish the new policies would have emphasized that ILFs, particularly on public lands, should incorporate land costs (highest and best use appraisal cost) be incorporated in credit price when mitigation is for impacts on private lands.
As we mentioned in a previous comment letter (/blog piece), a good example of incorporating full costs can be found in this Pierce County (WA) wetland ILF, which 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.
There should also 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.” Finally, operational guidance should include step-down guidance on quantifying impacts and conservation benefits. We’re starting to see signs of this.
For example, on July 26, 2023, FWS Assistant Director of Ecological Services Gary Frazer circulated a Memorandum to Regional Directors on the topic “Research as a Mitigation Option for Wind Power HCPs Affecting White-note Syndrome-impacted Bats.” To help determine credit from research or any other activity to mitigate impact to species, the Services should also develop a timely process for reviewing and approving new credit quantification methods. See additional detail on these ideas here.
We’ll keep an eye out for a related Conservation Banking policy (or guidance) that is expected to hit the Federal Register next year.
The Restoration Economy Center, housed in the national nonprofit Environmental Policy Innovation Center (EPIC), aims to increase the scale and speed of high-quality, equitable restoration outcomes through policy change. Email becca[at]policyinnovation.org if interested in learning more, sign up for our newsletter, or consider supporting us!
