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The Role of in Lieu Fee Programs in Wetland/Stream Mitigation Credit Trading: Illustrations from Virginia and Georgia

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Abstract

In 2008 U.S. regulatory agencies established new rules and priorities for offsetting unavoidable wetland and stream impacts. The rule establishes a clear preference for off-site compensatory mitigation over on-site mitigation and compensatory mitigation in advance of permitted impacts by commercial mitigation banks. The rule, however, recognizes that commercial banks may not always be able to feasibly provide mitigation credits and allows in lieu fee (ILF) programs to serve as a secondary compensatory mitigation option. ILF programs accept fees for permitted impacts and then construct compensatory mitigation projects after sufficient fee revenue has been collected. Some stakeholders remain skeptical of ILF programs, charging that the regulatory preference for commercial mitigation banks is not being followed. This paper examines the extent to which regulatory officials adhere to compensatory mitigation preferences in Virginia and Georgia and whether ILF programs provide compensatory mitigation within the confines of the new rule. Examination of ILF transactions indicate that regulatory authorities closely follow compensatory mitigation preferences. Case study evidence also suggests that ILF programs experience some challenges in meeting compensatory mitigation time requirements given the financial and regulatory constraints in which they must operate.

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Notes

  1. In contrast, commercial mitigation banks cannot sell credits until a mitigation site and financial assurances have been secured. Regulatory officials, however, can authorize commercial banks to sell a limited number of credits prior to actual construction and release additional credits before all mitigation bank performance criteria are met (fully functional). The timing of commercial bank credit releases could also create temporal lags between impact and compensation (Robertson and Hayden 2008).

  2. One other ILF program, the Living River Restoration Trust, has been approved in Virginia. This ILF program was initially approved in 2004 and serves a small watershed (Elizabeth River) in southeastern Virginia (ELI 2016). Two other in lieu fee programs are under review, the Department of Environmental Quality Wetland and Stream Replacement Fund and the Southwest Virginia In Lieu Fee Program.

  3. The Nature Conservancy elected not offer advanced credits in the Big Sandy due to the challenges of locating and gaining approval for appropriate mitigation sites in the region. The region largely forested and impacted by coal mining. The land and mineral rights in the region complicates securing mitigation sites.

  4. Project design work, however, is contracted out.

  5. The VARTF program instrument authorizes such flexibility when cumulative impacts from advance credits are small (defined as 3 acres of wetland impacts and 2, 000 linear feet of stream impacts in a given year).

  6. The guidelines do not cover in lieu fee purchases.

  7. An advanced credit transaction is defined as any impact that required mitigation to offset either a wetland, stream, or tidal wetland impact. In some cases, a permittee and operating under single permit would have multiple advance credit purchases for multiple impacts under a single permit. These are recorded as separate “transactions”

  8. Note that Georgia and Virginia credits are not directly comparable since the states use different stream and wetland crediting methods.

  9. Note the Big Sandy mitigation liabilities predate the 2011 instrument and in some cases are quite old. The VARTF has made several past attempts to meet these obligations but have been confronted with a variety of challenges in finding acceptable projects.

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Acknowledgements

This research was supported by a cooperative agreement with the USDA, Office of Environmental Markets.

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Authors and Affiliations

  1. Department of Ag & Applied Economics, Virginia Tech, Blacksburg, VA, 24060, USA

    Kurt Stephenson

  2. Virginia, VA, USA

    Benjamin Tutko

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  1. Kurt Stephenson
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Correspondence to Kurt Stephenson.

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Stephenson, K., Tutko, B. The Role of in Lieu Fee Programs in Wetland/Stream Mitigation Credit Trading: Illustrations from Virginia and Georgia. Wetlands 38, 1211–1221 (2018). https://doi.org/10.1007/s13157-018-1057-y

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