CHAPTER 4 HOW TO PUT A PRICE ON NATURE

• Jurisdiction: United States

Advanced Public Land Law - The Continuing Challenge of Managing for Multiple Use
(Jan 2017)
CHAPTER 4
HOW TO PUT A PRICE ON NATURE
Kathleen C. Schroder
Partner
Davis Graham & Stubbs LLP
Denver, CO
Nels C. Johnson
North America Energy Program Director, The Nature Conservancy
Bozeman, MT

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KATHLEEN C. SCHRODER is a partner at Davis Graham & Stubbs LLP in Denver where her practice focuses on all aspects of energy development on federal lands. Ms. Schroder counsels clients on oil and gas leasing and development on federal lands and agency compliance with the National Environmental Policy Act and the National Historic Preservation Act. She has extensive experience with the Endangered Species Act, including the process for listing species as threatened or endangered, the process for obtaining permits under section 10 of the Act, and the development of conservation agreements for candidate species. Ms. Schroder is active with the Rocky Mountain Mineral Law Foundation, serving as a trustee to this organization and authoring several papers. She is currently a vice-chair, and former chair, of the Public Land and Resources Committee within the ABA's Section of Environment, Energy, and Resources and sits on the board of directors of Western Energy Alliance. Ms. Schroder began her career as an attorney-advisor in the U.S. Department of the Interior's Office of the Solicitor as part of the Solicitor's Honors Program, where she advised the multiple bureaus within Interior. She then spent 10 years with a boutique law firm in Denver. She holds a B.A. from Rice University and a J.D. from the University of Colorado School of Law. Following law school, she clerked for Justice Alex J. Martinez of the Colorado Supreme Court.

NELS C. JOHNSON is The Nature Conservancy's North America Energy Program Director. In that role, Johnson works with teams across North America to integrate "smart-siting" into energy development, the leading cause of land-use change across much of the continent. During his 25-year career, he has worked on forest management, carbon sequestration, protected areas design, climate adaptation, and incentives to sustain ecosystem services in Asia, Latin America, and North America. He has published over two dozen articles, reports and books on these topics. As Deputy State Director in Pennsylvania between 2002 and 2014, Johnson worked with chapter and regional staff to build innovative programs to maintain ecological water flows, conserve private working forests, restore habitats on public lands, and develop strategies to reduce impacts from shale energy development in the Central Appalachians. He has volunteered for leadership assignments with The Nature Conservancy's programs in Papua New Guinea, Indonesia and at the Worldwide Office. Johnson serves on a variety of public and private boards and advisory committees, most recently including the Shale Roundtable and as board chair for The Pinchot Institute for Conservation. Before joining The Nature Conservancy, he was a senior associate and deputy program director at the World Resources Institute. Johnson has a B.A. from Reed College and an M.S. from the Yale University School of Forestry and Environmental Studies.

I. INTRODUCTION

During the last five years, the public has seen an increased focus on mitigation by federal resource agencies and particularly the Department of the Interior. A 2013 order from the Secretary of the Interior drew the agency's attention to the role of mitigation in landscape-level conservation.¹ A 2015 Presidential Memorandum further sharpened the focus on mitigation and, in particular, compensatory mitigation.² These efforts recognize the role compensatory mitigation can play in improving the status of resources such as wildlife and wildlife habitat, improving the resilience of resources against the effects of climate change, providing certainty for land users, and achieving resource objectives.

"Mitigation" generally refers to a series of steps known as the "mitigation hierarchy": 1) avoidance of impacts to the extent possible or practicable; 2) minimization of unavoidable impacts, including rectifying impacts through restoration and rehabilitation and by reducing or eliminating impacts over time; and 3) compensation for any residual impacts by replacing or providing substitute resources.³

This paper focuses on the third step of the mitigation hierarchy: compensatory mitigation.⁴ This paper examines agencies' methods of assessing the appropriate amount and nature of compensatory mitigation to offset an impact. This determination begins with the purpose that mitigation serves.

Then, agencies identify the goal of mitigation. Next, agencies rely on different methods for valuing impacts and mitigation to examine whether the mitigation goal is met. Finally, agencies and land users utilize a mechanism to obtain or implement the compensatory mitigation.

II. PURPOSE OF COMPENSATORY MITIGATION

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Compensatory mitigation can be utilized for a variety of public policy reasons. First, compensatory mitigation can be used to affect the status of resources. Most frequently, compensatory mitigation is used to replace or restore resources and their functions that are lost or impacted by a land use decision. The U.S. Army Corps of Engineers (USACE) and Environmental Protection Agency's (EPA) wetlands mitigation program under section 404 of the Clean Water Act reflects how compensatory mitigation can be used to replace or restore impacted wetlands.⁵ Compensatory mitigation also can be used to improve the status of resources on a landscape, particularly when resources are scarce or have been compromised due to historical uses.⁶ Second, compensatory mitigation can be used to compensate the public for the economic value of lost resources.⁷ Statutes such as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA),⁸ the Oil Pollution Act (OPA),⁹ and the Clean Water Act¹⁰ allow the assessment of natural resource damages, both to restore impacted resources and to compensate for the lost use of resources.¹¹ Finally, compensatory mitigation can be used to influence behavior when making land use decisions such as infrastructure siting. Compensatory mitigation requirements can create incentives to avoid or minimize impacts to resources.¹² The use of compensatory mitigation may also result in regulatory benefits, such as streamlined review under the National Environmental Policy Act (NEPA) when mitigation reduces an impact to insignificance.¹³

The purpose of compensatory mitigation often drives how it is implemented because the purpose influences the mitigation goal, the method of valuing impacts and mitigation benefits, and the appropriate mitigation mechanism. For example, if the purpose of compensatory mitigation is to recover an imperiled species, then the mitigation goal may be to improve conditions above baseline. Similarly, if the purpose of compensatory mitigation is to deter future impacts, then a compensatory mitigation program may have a higher mitigation goal. If the purpose of mitigation is to restore damaged resources, then close attention should be paid to the method of valuing impacts. Thus, the purpose of compensatory mitigation should be established at the outset of any compensatory mitigation structure to facilitate decisionmaking as to the goals, methods of valuation, and mitigation mechanisms.

III. MITIGATION GOALS

The recent focus on compensatory mitigation has been accompanied by a focus on mitigation goals, which are specified targets that mitigation is intended to accomplish in relation to impacts. Historically,

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agencies have utilized compensatory mitigation without defining a specific goal. For example, the Council on Environmental Quality (CEQ) regulations implementing NEPA require that agencies consider mitigation in environmental impact statements, but the regulations do not prescribe any goal, objective, or standard that such mitigation must achieve in relation to the impacts of a federal action.¹⁴ As a result, agencies often utilized mitigation without establishing a benchmark of how mitigation must offset the impacts of an authorized action.¹⁵ With the national goal of "no net loss" of wetlands,¹⁶ however, the USACE and EPA heightened the emphasis on evaluating mitigation in relation to a specified goal. More recently, agencies have focused on improving resources through a net positive goal rather than simply offsetting impacts.

No Net Loss Goal. A "no net loss" mitigation goal strives to replace impacted resources with resources of similar quantity and character of those impacted. "No net loss" has been defined with respect to biodiversity as the point at which gains from mitigation measures match resource losses "so that there is no net reduction overall in the type, amount and condition (or quality)" of the resource "over space and time."¹⁷ The most notable "no net loss" standard is that implemented by the national wetlands policy and the USACE and EPA regulations implementing section 404 of the Clean Water Act.¹⁸ These regulations expressly require compensatory mitigation in an amount sufficient to replace the aquatic physical, chemical, and biological processes that are lost by issuance of a 404 permit.¹⁹

In 2015, President Barack Obama issued a Presidential Memorandum directing the Secretaries of Defense, Interior, and Agriculture and the Administrators of the EPA and the National Oceanic and Atmospheric Administration (NOAA) to develop mitigation policies that establish a minimum mitigation goal of "no net loss" of "important, scarce, or sensitive" resources.²⁰ In response, the Secretary of the Interior, the United States Fish & Wildlife Service (FWS), and the United States Bureau of Land Management (BLM) have established policies that they should recommend or require a minimum mitigation goal of "no net loss" of resources they oversee.²¹...