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In Ecological Restoration, High Costs Trump Regulatory Rollbacks

Steve Zwick

The Trump Administration wants to roll back federal protection of wetlands, but it also aims to increase support for water quality trading and bundling of environmental credits. For people who work in ecological restoration, however, the biggest regulatory challenge may be the high cost of compliance – brought on, ironically, by tight regulatory budgets.

29 March 2019 | In the United States, more people earn their living restoring nature than do so mining coal or milling steel, and a good many of those jobs exist because of laws and regulations that require companies to fix any part of nature they break. For that reason, the Trump administration’s myriad environmental policies loomed large over the Ecological Restoration Business Association’s (ERBAs’s) third annual policy conference in Washington, DC, earlier this month.

Most participants, surprisingly, shrugged off the administration’s plan to create new rules for determining what are and are not protected “Waters of the United States” (WOTUS) – a plan that would roll back protection of wetlands that filter water and regulate flooding. That plan, which we covered in a five-part series, as well as in an episode of the Bionic Planet podcast, would impact thousands of miles of downstream waters, and most of the attendees felt that it, like most of the president’s policy initiatives, would fail to hold up in court.

“I think there’s a good chance that they will go through all these iterations, and in the meantime we’ll stay at the status quo,” said Murray Starkel of Ecological Service Partners. “That could be four, five, or six years.”

Of more concern was the high cost of compliance – a cost, ironically, pushed upward by an unwillingness to adequately fund regulators, as we’ll see below.

On the other hand, the administration has floated a handful of new proposals that could, in theory, streamline the tedious process of getting restoration projects approved – but only if those proposals are themselves implemented.

Here’s a rundown of the policy issues that loom largest in the restoration sector this year – issues we hope to revisit in the months ahead in the form of deeper, stand-alone articles and podcasts. For now, we’ll also be rolling out at least three episodes of the Bionic Planet podcast drawn on interviews conducted at the ERBA event. Bionic Planet is available on iTunesRadio PublicStitcher, or directly on this device here:

In Regulation, Cheap is Expensive

Mitigation banks are companies that proactively restore degraded rivers, wetlands, and other patches of nature, with the aim of generating environmental credits. These credits are then sold to developers, such as departments of transportation that want to build roads or private landowners who want to build shopping malls. Developers buy these credits to reduce – or “mitigate” – their impact on nature, and they usually do so to comply with federal, state, or local laws.

At the federal level, the Army Corps of Engineers is responsible for approving mitigation banks that restore rivers, streams, and wetlands, while the Fish and Wildlife Service (FWS) is responsible for approving banks that restore the habitat of endangered species. Both agencies work in cooperation with the Environmental Protection Agency (EPA), as well as local, state, and tribal authorities.

The EPA, Army Corps, and FWS all operate under the executive branch, and all three face a combination of flat budgets and rising costs – austerity measures that have, as I alluded to earlier, made it more expensive for developers to mitigate their impacts. The issue isn’t direct costs, but indirect ones incurred because fewer people are available to inspect and approve mitigation banks, which draws out the time it takes to get banks approved and then to get credits issued.

In the case of the Army Corps of Engineers, for example, bank approvals that should take 225 days often take five years or longer – leaving multi-billion-dollar projects in limbo for years instead of months. When bank approvals and credit release dates are added together, it can take up to 15 years for credits to be approved.

“It is frustrating for all stakeholders – providers, agencies, and permittees – when approvals take longer than necessary,” says ERBA Executive Director Sara Johnson. “But sponsors are working with agencies to speed the process without losing environmental integrity.”

Participants overwhelmingly agreed that increased funding for responsible agencies would shrink approval times and slash the cost of compliance, but they also pointed to improvements that could be achieved without such an increase – many of which could come as part of a massive update to existing rules that the administration is currently undertaking.

Updating the 2008 Wetland Mitigation Rule

In addition to WOTUS, the administration is updating the Compensatory Wetland Mitigation Rule, which the EPA and Army Corps jointly promulgated in 2008 to regulate the establishment of mitigation projects and outline how companies can mitigate for damages.

The Rule, which we covered at its inception, emerged after decades of trial and error and years of consultation. It created a clear preference for mitigation banks over other forms of mitigation, such as less regulated in-lieu fee programs and nearly unregulated permittee-responsible mitigation.

Ten years on, the rule has dramatically slashed the cost of compliance, and the administration says it sees room for improvement – in part by improving interagency cooperation.

Coordination, Clarity, and Acceleration

Ryan Fisher, Principal Deputy Assistant Secretary of the Army (Civil Works), and Lee Forsgren, Deputy Assistant Administrator, Office of Water, EPA, both spoke at the DC event, and both stressed the need for better cooperation among agencies, as well as among divisions within the same agency.

“I know a common complaint is you talk to one Corps district, you get one answer, but you talk to another one, you get a different answer,” said Fisher, who argued that the administration’s effort to rewrite the WOTUS Rule and revise the Compensatory Wetland Mitigation Rule would provide more consistent guidance across districts.

On the water front, the 2008 Rule requires approval by Interagency Review Teams (IRT) that are led by the Corps but include other federal and state agencies who work with the bank sponsor. Earlier this year, the Trump administration proposed eliminating IRTs to accelerate the permitting process, arguing that the public participation process provides a de facto review.

Participants at the ERBA conference, however, pushed back on this proposal, with many arguing that IRTs provide a critical focal point and are needed to generate early coordination, but that the process needs to be improved.

“Before IRTs existed, you’d take your permit to the Corps, and the Corps would say, ‘OK, now take it to the EPA,’ and the EPA would say, ‘OK, now take it to Fish and Wildlife,’” said David Groves, of The Earth Partners, a mitigation banking group. “IRTs are supposed to be a One-Stop shop, but they don’t work that way.”

In an upcoming episode of Bionic Planet, Groves and other participants offer a deeper take on improving IRTs.

Participants also welcomed new Army Corps guidance for banks and in-lieu fee programs to increase credits released before hitting their final performance milestone for restoration of the wetland or stream they’re working on. The guidance to district commanders makes it clear that the accelerated release option is only available if the bank’s sponsor puts up money to buy other credits or otherwise correct performance if the bank fails to deliver.

Johnson added that ERBA would also be announcing a contribution to the efforts.

“ERBA is exploring a set of best project management practices that would improve communication and collaboration between the Corps, IRT members and project sponsors and bring discipline to the approval timelines,” she said.

WOTUS be Unto the States

As for WOTUS, the Obama Administration had overseen the creation of a new rule designed to provide clarity following a muddled 2006 Supreme Court ruling that offered conflicting guidance – one that protected wetlands, and one that didn’t. Every court test since then has upheld federal wetland protection, but the Trump Administration recently proposed a new rule that rolls it back substantially by withdrawing protection for isolated wetlands and intermittent streams.

In defending the Trump proposal, Forsgren argued that any regulatory gaps would be picked up by the states.

“[The Trump administration proposal] rebalances the federal and state relationship by recognizing the importance of section 101(b),” he said, referencing a paragraph in the Clean Water Act that says Congress should “recognize, preserve, and protect the primary responsibilities and rights of States” in matters related to clean water.

The current rules, however, evolved because states did a poor job of regulating interstate waters, while coordination was non-existent.

“When the states had primacy, you ended up having 50 different sets of functional assessment methodologies, or 50 different sets of rules for how you actually do the work,” said Starkel.

Busting Dams and Breaking Bottlenecks

Another issue on the horizon is how to restore streams by breaking up millions of old dams – often called “drowning machines” – that were built roughly a century ago and now serve no purpose other than disrupting waterflows, drowning children, and choking off once-thriving species.

“Most stream restoration is done on farms, but these old abandoned dams are both hazardous and hydrologically disruptive,” says George Howard of Raleigh-based Restoration Systems.

After more than a decade of false starts, the Army Cprps last year issued guidance on how to recognize and quantify improvements generated by removing dams, and Forsgren says the EPA is interested in expanding the practice.

Multi-Credit Banks

Environmental markets have always faced one fundamental flaw: namely, they’re based on payments for distinct ecosystem services, while ecosystems are holistic entities that generate multiple services. A wetland, for example, filters water and controls flooding, but it might also sequester carbon and provide habitat for endangered species.

Regulators have struggled to find ways of letting banks generate multiple credits from the same piece of land without double-counting, but that requires strict rulemaking coupled with intricate mapping, data sharing, and coordination among regulators.

Several states have experimented with multi-credit banking, and Forsgren says the EPA is ramping up efforts to develop practices at the federal level.

Water Quality Trading

Finally, Forsgren said the EPA is ramping up federal support for programs that use water quality trading (WQT) – which is something akin to cap-and-trade, but for water pollution – to address the vexing problem of agricultural runoff.

“The biggest environmental water quality issue that’s facing this country right now is nutrient loading in our waters,” he said. “The only way we’re ever going to address that is to find creative ways to stop the flow of nutrients into the waters.”

Recent Ecosystem Marketplace analysis found pollution flows ripe for WQT in California’s Central Valley, the Greater Chicago region and the Great Lakes, Colorado’s Front Range, Kansas City, and cities along the Gulf Coast, but states have been reticent to move forward without federal guidance, especially on waters that cross jurisdictions.

In December, the Army Corps’ Assistant Secretary for Civil Works, Ricky “PD” James, issued a Corps-wide directive to create guidance on WQT, and Ryan said he expects something by year-end. Both he and Forsgren said the forthcoming guidance is expected to align with EPA’s February 2019 memo on water quality trading promoting market-based approaches to reduce nutrient pollution in the nation’s waterways.

The EPA memo follows a joint letter sent by EPA and USDA to state and tribal regulators in December 2018 which also encouraged market-based strategies for improving water quality.

Both are clear signals from the current administration in support of trading. A federal show of support was one key recommendation made in a recent action agenda for scaling up water quality trading, co-authored by the National Network on Water Quality Trading and Forest Trends’ Ecosystem Marketplace.

But water quality trading faces other barriers: the action agenda also recommends backstopping state agencies with sufficient capacity and resources, simplifying trading program rules, and making trading less risky for buyers.

NOTE: If you want more coverage of the restoration economy and mitigation banking in particular, I’ll be launching a crowdfunding campaign soon to provide deeper coverage of these and other stories. Feel free to e-mail me at SZwick@forest-trends.org, and I’ll be sure to let you know when the campaign launches. 

Steve Zwick is Managing Editor of Ecosystem Marketplace and produces the Bionic Planet podcast. Before joining Ecosystem Marketplace, he covered European business for Time Magazine and Fortune Magazine and produced the award-winning program Money Talks on Deutsche Welle Radio in Bonn, Germany.

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