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New In-Lieu Fee Compensatory Mitigation Option Available for Adverse Impacts to Wetlands
Wednesday, December 17, 2014

A new option to mitigate unavoidable adverse impacts to wetland resources in Wisconsin is now available to wetland permittees. On November 21, 2014, the Wisconsin Department of Natural Resources (WDNR) signed an agreement with the U.S. Army Corps of Engineers (the Corps) to create the Wisconsin Wetland Conservation Trust (WWCT), a WDNR administered in-lieu fee wetland mitigation program.

The in-lieu fee program creates a third option for individual wetland permit holders who are required to mitigate adverse impacts to wetlands under Wisconsin’s revised wetland protection and permitting law signed by Governor Walker in 2012. Our previous client alerts have described the wetland reform bill as well as recent changes to WDNR wetland enforcement authority. The adoption of an in-lieu fee program for Wisconsin was authorized in the wetland reform bill, and is the result of negotiations between the Corps and WDNR.

Why an in-lieu fee program?

Anyone who wishes to drain or fill a wetland must first receive an individual wetland permit.  WDNR administers the wetland permit program under Wis. Stat. § 281.36 as the state counterpart to the Corps permitting program under § 404 of the Clean Water Act. There are two types of wetland permits in Wisconsin: general permits which apply to a category of activities that meet certain criteria; and individual permits which are tailored specifically to a given project.  All individual wetland permits must include some form of wetland mitigation.

To receive a permit, the applicant must show: 1) there are no other practical alternatives for the proposed project; 2) the proposed project minimizes impacts to wetlands; and 3) any unavoidable impacts to wetlands are offset through mitigation. 

Permittees may offset the filling of the wetland through three mitigation options: 1) permittee-responsible offsets (the applicant generates offsets by creating or enhancing wetlands on or off the property); 2) mitigation banking (purchasing a credit from a wetland mitigation bank); or 3) in-lieu-fee programs. 

Until now, permittees in Wisconsin have only been able to satisfy mitigation requirements of wetland permits through the first two options, but these options are not ideal or available in all situations. Permittee-responsible offsets are expensive and burdensome for permittees who have little experience creating wetland mitigation projects, and wetland mitigation bank credits are not always available in the same watershed as the adversely impacted wetlands. The limited mitigation options have created economically inefficient projects, and have resulted in mitigation efforts located far from the impacted resource. The WWCT is designed to provide a more consistent supply of compensatory mitigation credits for permittees in the same watershed as the adversely impacted wetland. 

How does it work?

In exchange for payment of the applicable fee, WDNR takes on the permittee’s legal responsibility to provide compensatory mitigation under §404 of the Clean Water Act, much like a mitigation bank. However, with the WWCT, WDNR is not required to construct wetlands before the credits are sold. If an approved in-lieu fee project suitable for offsetting adverse impacts to wetlands exists, WDNR may release available credits to the permit applicant submitting the in-lieu fees (“Released Credits”). If a suitable wetland project does not yet exist, WDNR may accept the fees in lieu and begin constructing a mitigation project anytime within three growing seasons of accepting payment for the mitigation credits. These are known as “Advanced Credits.”

The Corps has agreed to twelve “service areas” similar to those generally used for approving mitigation banking or permittee-responsible mitigation. These service areas are based on watershed boundaries and help to determine the areas in which credits can be generated by WDNR through the WWCT and used by project applicants. It is preferred that the adversely impacted wetland and corresponding credits are in the same service area, but there is some flexibility if local credits are not readily available or likely to be created.

Once WDNR constructs a mitigation project, it accepts responsibility to use legal tools, such as conservation easements, to preserve the wetland resource in perpetuity and maintain the functionality of the wetland. An inter-agency review team (Corps and WDNR) provides regulatory review and oversight of each project funded through the WWCT.

Access to the in-lieu fee program is not guaranteed. First, there are a limited number of credits available in each service area. Second, WDNR and the Corps have discretion to approve or deny the use of credits from the in-lieu program to offset the impacts of an approved wetland permit. The two agencies will consider comments submitted by the public and applicant before approving the use of credits.

A permittee may only purchase a credit if it has a legal duty to mitigate an adverse impact to a wetland pursuant to a wetland permit. A permittee must include its wetland permit number in the credit transaction documents to verify it has a current need to perform wetland mitigation. Once a credit is sold by WDNR, it cannot be used again to provide mitigation for any other purpose or project. The purchaser of the credit may not stockpile, resell, or transfer the credit to another entity. In the event an entity no longer requires a credit because, for example, a transaction fails, the credit may be returned with approval from WDNR and the Corps, provided the permitted adverse wetland impacts have not occurred. 

Can I purchase credits?

Mitigation credits are currently available through the program. For a detailed outline of the purchase process and available credits, consult WDNR’s resource on the topic.  Generally, the use of credits from the WWCT program must be approved by WDNR and the Corps.

Credits in the WCCT program are currently priced at $58,000-$61,000 depending on the service area. The number of credits that must be purchased by a permittee will vary depending on the size and quality of the impacted resource, as well as the characteristics of available mitigation projects. WDNR set this price based on recent market trends at in-state mitigation banks and land values, among other factors.

The agreement between WDNR and the Corps which facilitates the program can be found  here .

More resources from WDNR on the topic can be found on the WDNR web page.

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