Expansive new mitigation requirements

Depending on how it is implemented, this new policy will have the potential to impose substantive environmental action obligations not just on EPA, but also on agencies such as the Bureau of Land Management (BLM, part of DOI), US Army Corps of Engineers (the Corps, part of DOD), National Park Service (NPS, part of DOI), and US Forest Service (USFS, part of USDA). This would overshadow the current procedural environmental review requirement mandated under the National Environmental Policy Act (NEPA) and significantly expand the costs and obligations associated with permitting and other federal authorizations.

In short, the mitigation policies are intended to "establish a net benefit goal or, at a minimum, a no net loss goal for natural resources the agency manages that are important, scarce, or sensitive, or wherever doing so is consistent with agency mission and established natural resource objectives." This policy essentially takes the current statutorily-mandated and Executive Order-based requirements that the Corps uses for analyzing wetland impacts (these being avoidance, minimization and mitigation, with mitigation seeking a result of no net loss of wetland functions and values) and applies those requirements to all natural resources. This is an expansive additional set of analyses and mitigation obligations and has the potential to significantly expand these agencies' permitting requirements and timelines. If implemented broadly, it could significantly enhance the cost and complexity of many permitting tasks, both on and off federal land.

The resources and activities covered under the policy are broadly described - "harmful effects to land, water, wildlife, and other ecological resources (natural resources) caused by land- or water-disturbing activities." This scope covers a wide array of environmental impacts, covering most of the resources regulated and protected by the environmental laws as a whole. It also applies to almost all of the activities approved by the affected agencies. As to these resources, the agencies are to "each adopt a clear and consistent approach for avoidance and minimization of, and compensatory mitigation for, the impacts of their activities and the projects they approve."

Interestingly, the policy does not appear to limit the regulation of specific resources to the agencies which have the technical expertise with them. For example, while the US Fish and Wildlife Service (part of DOI) regulates endangered species, the Corps regulates wetlands, and the EPA permits projects which increase air emissions, the new policy does not address the jurisdictional limits or expertise of any these agencies when it calls for them to require mitigation. The policy leaves open the possibility that, say, NPS might require mitigation for the impacts to water resources caused by construction of a pipeline over land it administers, or the Corps might require mitigation for the methane emissions caused by emissions at a well pad among wetlands.

Mitigation of these impacts follows the structure established under Section 404 of the Clean Water Act for mitigating wetland impacts. First, impacts are to be avoided if practicable and then minimized to the extent they cannot be avoided. Only once these "easy" impacts have been eliminated are the remaining impacts to be allowed and then mitigated. For these remaining impacts, the "Agencies' mitigation policies should establish a net benefit goal or, at a minimum, a no net loss goal for natural resources the agency manages that are important, scarce, or sensitive, or wherever doing so is consistent with agency mission and established natural resource objectives."

This structure will surely complicate permitting. Agencies are now called upon to introduce a new mitigation analysis into existing permitting procedures, but without recognizing the limits of their jurisdiction and expertise and without a specific legal underpinning that defines the scope of what the agency can require through mitigation as a lever in the permitting process.

The "net benefit" goal carries with it its own set of questions. These include how the benefit is measured and how its achievement is proven by the permittee. Separately, there is the question of the legal rationale the agencies will rely on to require entities to create environmental benefits, since few, if any, of their existing authorizing statutes or regulations require the consideration of - let alone the achievement of - net environmental gains.

The policy also establishes a special category of "irreplaceable natural resources" - those "resources recognized through existing legal authorities as requiring particular protection from impacts and that because of their high value or function and unique character, cannot be restored or replaced." For these resources, "the preferred means of achieving either of these goals is through avoidance...." This is because "minimization and compensation measures, while potentially practicable, may not be adequate or appropriate." As a result, the "agencies [will] design policies to promote avoidance of impacts to these resources."

It is unclear how the agencies will identify these irreplaceable resources, and it begs the question whether the unfettered discretion of the agency in designating and protecting these resources can justify a refusal to grant an authorization that otherwise meets the legal requirements.

Interestingly, the language is again similar to that found in the Clean Water Act's wetland law, which allows the EPA to prohibit the discharge of fill into certain sites upon a determination "that the discharge of such materials into such area will have an unacceptable adverse effect on municipal water supplies, shellfish beds and fishery areas (including spawning and breeding areas), wildlife, or recreational areas."

In addition to the obvious environmental protection rationale, the Administration's policy is motivated in part by the fact that "Federal agencies can. . .face barriers that hinder their ability to use Federal resources for restoration in advance of regulatory approval of development and other activities...."

As a result, "the policy "encourage[s] private investment in restoration and public-private partnerships, and help[s] foster opportunities for businesses or non-profit organizations with relevant expertise to successfully achieve restoration and conservation objectives." Thus, implementation of the policy across a range of agencies is intended to significantly increase the use of conservation banking, encouraging the development and use of banks across a much broader range of resources than currently exists (conservation banks are currently focused primarily on mitigating impacts to wetlands and endangered species). By relying on third parties and the free market to provide mitigation, mitigation costs could vary widely across the country and even from project to project.

The potential for a rise in conservation banking is reinforced by the Administration's concern with the temporal loss of the covered resources (i.e., the time lag between resource impacts and the mitigation of those impacts). As a result of this concern, the "agency policies [will] seek to encourage advance compensation, including mitigation bank-based approaches, in order to provide resource gains before harmful impacts occur." The combination of reliance on third parties and concern about temporal loss means that the Administration will be looking to the private sector to create conservation banking and other similar mitigation efforts across the range of resources sought to be protected by the policy.

The last notable aspect of the policy is that, as it has for the past seven years, the Administration is placing a high value on public involvement. Here, this takes the form of a requirement that the agencies "take action to increase public transparency in the implementation of their mitigation policies and guidance." This could take the form of additional public notice and comment processes, which would further slow permitting timelines. At a minimum, it will involve alerting the public to projects¸ their mitigation requirements, and their success in achieving those requirements - the policy states that "agencies should identify, and make public, locations on Federal land of authorized impacts and their associated mitigation projects, including their type, extent, efficacy of compliance, and success in achieving performance measures."

As to the timing and method of adoption of these new mitigation requirements, the process is to be memorialized at each agency through the creation of a specific manual and handbook guidance. Most of these guidance documents are to be finalized within one year from issuance (which will be just before Election Day, 2016), with the Forest Service to adopt its documents within 180 days. It does not appear that public comment will be taken on most of these guidance documents before they are finalized, although the Forest Service will be adopting a rule within two years which will follow the typical rulemaking process, including public notice and comment.

ABOUT THE AUTHORS

Lowell M. Rothschild is senior counsel in Bracewell & Giuliani LLP's Austin office. His practice focuses on natural resource issues such as wetlands, endangered species, and environmental review. He can be reached at [email protected].

Kevin A. Ewing is a partner in Bracewell's Washington, DC office. He advises chiefly energy and infrastructure companies concerning natural resources and environmental issues arising from new regulations and agency policies, corporate risk management, and major incidents. He can be reached at [email protected].