No Net Loss? The Past, Present, and Future of Wetlands Mitigation Banking.

• Author: Ruhl, J.B.

CONTENTS INTRODUCTION I. HISTORY OF SECTION 404 AND NO NET LOSS II. THE RISE OF MITIGATION BANKING III. CRITIQUES OF MITIGATION BANKING A. Currency Choice B. Who Cares About Quality? C. Migration IV. 2008 CORPS REGULATIONS A. Adding an Ecosystem Services Impact Assessment Mandate B. How Has the Ecosystem Services Mandate Been Implemented? 1. The U.S. Forest Service 2. The U.S. Army Corps of Engineers V. GOING FORWARD WITH URBAN ECOSYSTEM SERVICES CONCLUSION INTRODUCTION

The U.S. Supreme Court proclaimed just over a century ago that "[i]f there is any fact which may be supposed to be known by everybody, and, therefore by courts, it is that swamps and stagnant waters are the cause of malarial and malignant fevers, and that the police power is never more legitimately exercised than in removing such nuisances." (1) This dismal portrayal of what we today call wetlands reflected the view of many federal and state courts, which supported an unfettered property right to drain and fill wetlands at will. (2) Yet, a century later, a Rhode Island court declared that filling a wetland area to make room for residential development would constitute a "predictable (anticipatory) nuisance" and thus was subject to regulatory prohibition. (3) The Supreme Court had changed its mind even earlier, upholding federal restrictions on filling wetlands. (4) Suffice it to say that no court today would endorse the judicial practices of the past when it comes to wetlands.

What explains the about-face in judicial perception of wetlands from "they are nuisances that must be removed" to "removing them causes a nuisance"? As Justice Scalia once famously observed, the doctrine of nuisance and other background principles of property law evolve over time based on "changed circumstances or new knowledge." (5) The wetlands story is just such a case study. New knowledge from wetlands science increasingly revealed the ecological importance of wetlands, as well as their economic importance in delivering benefits to humans. (6) The Rhode Island court, for example, observed that the wetland in question "filters and cleans runoff," (7) and in upholding the federal wetland regulations the Supreme Court explained that wetlands "play a key role in protecting and enhancing water quality." (8)

The courts of the past and in modern times were following the lead of legislatures both in condemning wetlands and in making the turn in wetlands policy based on the revelations from wetlands science. In the eighteenth century, for example, the Swamp Act of 1849 (9) transferred to Louisiana "the whole of those swamp and overflowed lands, which may be found unfit for cultivation." (10) Draining of wetlands to open up agricultural development continued for many decades, but concern over declining waterfowl populations led to a legislative initiative to protect wetlands through statutes such as the Migratory Bird Treaty Act. (11) The tide continued to shift in favor of wetlands conservation, and today it would be unthinkable that Congress or a state legislature would enact legislation designed to systematically destroy wetlands. Instead, a multitude of federal and state statutory regimes protect and conserve wetlands by restricting the kind of land development that led to litigation disputes in which courts, like those mentioned above, have embraced wetlands conservation. (12)

In this Article we examine the last fifty years of that history through the lens of the workhorse of federal wetlands protection legislation, section 404 of the Clean Water Act, (13) and the benefits wetlands provide to human communities in the form of what is now referred to in environmental science and policy as "ecosystem services." (14) Part I traces the origins and early history of section 404, showing that Congress had primarily water quality, not wetlands conservation, in mind for the purposes of the statutory program. Only after the statute was enacted and its two implementing agencies, the U.S. Army Corps of Engineers ("Corps") and Environmental Protection Agency (EPA), began their administration did wetlands conservation creep into the scope of section 404, eventually becoming its sine qua non. Part I focuses in particular on the emergence in the late 1980s of the federal policy of "no net loss" of wetlands and the concept of "compensatory mitigation" as the release valve that, in theory, would allow land development to proceed while not violating the no net loss goal.

Part II explains how growing discontent with early compensatory mitigation practices, which generally relied on small, one-off wetland preservation or enhancement projects to offset losses at development sites, led in the 1990s to the Corps' adoption of "wetlands mitigation banking," which uses large wetland restoration projects to serve as centralized sources of compensatory mitigation for development projects. Portrayed by both the Corps and EPA as ecologically superior to the "postage stamp" mitigation siting approach, banking became the dominant and preferred form of compensatory mitigation.

Notwithstanding wetland mitigation banking's prominent policy status, Part III surveys the mounting scientific and policy research, including ours, questioning the implementation of banking and, in particular, its effect on the distribution of wetland ecosystem services. Responding to a congressional directive to pull together the compensatory mitigation program into a coherent regulatory regime, the Corps and EPA promulgated a rule in 2008 ("2008 Rule" or "2008 Mitigation Rule") that included a provision recognizing the importance of ecosystem services and committed the Corps to assessing impacts to their distribution. We wrote soon after with great hope that this provision would lead to robust ecosystem services impact assessments as standard Corps practice when making compensatory mitigation decisions. (15)

Part IV gets to the primary contribution of this Article--describing and evaluating how the Corps and EPA have followed through on the ecosystem services component of the 2008 Rule. Given recent scientific research emphasizing the importance of urban wetland services, we argue that urban communities should be able to easily access Corps decision documents providing ecosystem services impact assessments. We conclude, however, that the Corps has lagged behind other federal agencies in developing policies to guide how ecosystem services factor into regulatory decisions, and that access to Corps decision documents is overly and unnecessarily cumbersome and complicated.

In Part V we step back to assess the importance of urban ecosystem services and the ability of communities to evaluate how Corps and other regulators are managing their "balance sheet." We argue that community access to such information is vital to fulfilling goals of environmental justice, particularly given the looming threat climate change poses to urban ecosystem services.

1. HISTORY OF SECTION 404 AND NO NET LOSS

   The law popularly known as the Clean Water Act (CWA or the Act) is actually a set of 1972 amendments to the Federal Water Pollution Control Act, (16) a law originally passed in 1948 with a focus on funding municipal water treatment works. (17) The CWA transformed what had primarily been a funding mechanism for infrastructure into a pollution-focused regulatory mandate. Most of the CWA's legislative history focused on the permit requirements for pollution. Section 311 of the CWA broadly prohibits the discharge of any pollutant by any person into navigable waters. (18) The origins of mitigation banking lie in a different section of the Act later known as section 404. (19) Despite its potential impact, that provision received remarkably little attention during congressional hearings.

   Section 404 regulates the discharge of dredged or fill material into navigable waters. It authorizes the Secretary of the Army, through the Corps, to "issue permits, after notice and opportunity for public hearings for the discharge of dredged or fill material into navigable waters at specified disposal sites." (20) These permits are known as "404 permits," "wetland permits," or "Corps permits" and form the cornerstone of federal efforts to encourage protection of wetland resources through market-based means. But the focus of section 404 didn't start out that way. Reading the legislative history of the CWA reveals two important issues, one obvious and one unstated.

   The obvious debate turned on who should run the permitting program--the Corps or the recently created EPA. The Corps' claim rested on the fact that it already administered a water resource permitting program under the Rivers and Harbors Act of 1899 (21) and had only a few years before added robust environmental impact review and protection standards to the program. (22) As James J. Reynolds, President of the American Institute of Merchant Shipping, testified:

   [U]nder existing regulations, the disposal of dredge spoil, resulting from the deepening of our Nation's channels, is controlled by the Chief of the Corps of Engineers under authority delegated to him by the Secretary of the Army. This authority has been in existence since it was first so delegated 83 years ago by the act of June 29, 1888. Following the enactment of the Fish and Wildlife Coordination Act of 1956, the Corps has included in its careful consideration of disposal sites the impact of its decisions on fish and wildlife. They also presently include within their consideration matters of water quality, conservation, esthetics, ecology, all the important environmental factors. (23) Thus, early proposals for the CWA contained provisions that would allow the Corps to govern federal dredge and fill projects by regulations rather than permits, not subject to any EPA review of specific projects. The proposal by Senator Allen Ellender of Louisiana, for example, would have required only "cooperation" with the EPA Administrator. (24)

   Senator...