Banking on Entrepreneurs: Wetlands, Mitigation Banking, and Takings

Iowa Law Review

Volumn 81, Issue 3, 1996, Pages 527-587

  Gardner, Royal C ^a,b,c  

^a STETSON UNIVERSITY   (United States)

^b BOSTON COLLEGE   (United States)

^c GEORGETOWN UNIVERSITY   (United States)

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[No Author keywords available]

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EID: 0030523963     PISSN: 00210552     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (364)

1. Edward Coke, The First Part of the Institutes of the Lawes of England vol.1, ch. 1, § 1, p. 5 (1628 ed.) (reprinted by Garland Publishing, Inc. 1979).
2. Coke follows his query by providing examples of how one may use his or her land: "[v]esture, herbage, trees, mines." Id. While the latter two uses are self-evident, the first two require some explanation. "Vesture of land" refers to such things as crops of grass or corn, that is, items covering the land's surface, trees excluded. Black's Law Dictionary 1402 (5th ed. 1979). "Herbage" is "the right to pasture cattle." Id. at 653.
3. Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886, 2894 (1992). Of course, not all commentators accept this proposition. See John Christman, The Myth of Property 10 (1994) (rejecting the sovereignty concept of ownership "as the paradigm of individual property rights in a just society"). Others contend that land ownership also includes responsibilities to the community. See, e.g., Eric Freyfogle, Ownership and Ecology, 43 Case W. Res. L. Rev. 1269, 1297 (1993) (stating that community includes the land on which we live).
4. Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886, 2894 (1992). Of course, not all commentators accept this proposition. See John Christman, The Myth of Property 10 (1994) (rejecting the sovereignty concept of ownership "as the paradigm of individual property rights in a just society"). Others contend that land ownership also includes responsibilities to the community. See, e.g., Eric Freyfogle, Ownership and Ecology, 43 Case W. Res. L. Rev. 1269, 1297 (1993) (stating that community includes the land on which we live).
5. Lucas, 112 S. Ct. at 2895.
6. I exclude from this question governmental subsidies paid to farmers (agribusiness) to leave their fields fallow. I also exclude governmental payments to farmers to place permanent or temporary conservation easements over their lands. See, e.g., 16 U.S.C. § 3837 (Supp. V 1993) (Wetlands Reserve Program). Rather, my question concerns whether a person may derive economic benefit from the private sector. Of course, governmental regulations will heavily influence how the private sector reacts to opportunities to maximize profits.
7. Although the government often sets aside large tracts of land for parks, wildlife refuges, and bird sanctuaries, it frequently does not generate a profit from these activities. E.g., California Desert Lands, Parks and Preserve Act, 16 U.S.C. § 410(a) (1995) (setting aside land in various national parks in California). The costs of preserving these areas are spread across the entire taxpaying population. There are proposals to privatize parks, which would enable private entities to realize profits (through entrance fees and concessions). I would not consider privatized parks to be "idle" land, however.
8. The Natural Resources Conservation Service estimates that nonfederal lands have lost 70,000 to 90,000 acres of wetlands per year from 1982 to 1992. See Ralph Heimlich & Jeanne Melanson, Wetlands Lost, Wetlands Gained, 17 Nat'l Wetlands Newsl. 22, 22 (1995). This is an improvement over annual wetland losses between 1974 and 1983. Id. at 25. See also Thomas E. Dahl, U.S. Dep't of the Interior, Wetlands: Status and Trends of Wetlands in the Coterminous United States, Mid-1970s to Mid-1980s 1 (1991) (estimating that 290,000 acres of wetlands were lost each year).
9. The Natural Resources Conservation Service estimates that nonfederal lands have lost 70,000 to 90,000 acres of wetlands per year from 1982 to 1992. See Ralph Heimlich & Jeanne Melanson, Wetlands Lost, Wetlands Gained, 17 Nat'l Wetlands Newsl. 22, 22 (1995). This is an improvement over annual wetland losses between 1974 and 1983. Id. at 25. See also Thomas E. Dahl, U.S. Dep't of the Interior, Wetlands: Status and Trends of Wetlands in the Coterminous United States, Mid-1970s to Mid-1980s 1 (1991) (estimating that 290,000 acres of wetlands were lost each year).
10. William J. Haynes II & Royal C. Gardner, The Value of Wetlands as Wetlands: The Case for Mitigation Banking, 23 Envtl. L. Rep. (Envtl. L. Inst.) 10,261, 10,261 (1993).
11. The Clean Water Act (CWA) provides the federal government with the authority to regulate the discharge of pollutants into wetlands. 33 U.S.C. § 1311(a) (1988). For activities involving the discharge of dredged or fill material into wetlands (or any other water of the United States), one must receive a permit from the U.S. Army Corps of Engineers. Id. § 1344(a). Thirty-one states have wetland protection laws. William L. Want, Law of Wetlands Regulation 13-2 (1995).
12. The Clean Water Act does contain a statutory exemption for certain agricultural activities. 33 U.S.C. § 1344(f) (1988 & Supp. V 1993). The implementing regulations, however, limit this exemption to ongoing farming operations. 33 C.F.R. § 323.4(a) (1994). Accordingly, if a farmer intended to expand operations into an area designated as wetlands, he or she would need to procure a § 404 permit. Moreover, farmers draining wetlands after December 23, 1985 to produce commodity crops are ineligible for certain agricultural subsidies. Food Security Act of 1985, 16 U.S.C. § 3811 (1988 & Supp. V 1993).
13. Landclearing operations that involve the discharge of dredged or fill material also trigger permit requirements. Avoyelles Sportmen's League v. Marsh, 715 F.2d 897, 918-27 (5th Cir. 1983). For a number of years, the Corps of Engineers regulated, as a matter of policy, "mechanized landclearing, using equipment such as backhoes or bulldozers, in wetlands [that] results in a redeposition of soil." Regulatory Guidance Letter 90-05, 57 Fed. Reg. 6589, 6591 (Feb. 26, 1992). As a result of a settlement in North Carolina Wildlife Fed'n v. Tulloch, Civil No. C90-713-CIV-5-80 (E.D.N.C. 1992), this policy has now been codified in regulation. 33 C.F.R. § 323.2(d) (1994). A broad contingent of industrial and development groups have challenged the validity of this regulation. See American Mining Congress v. U.S. Army Corps of Eng'rs, No. 93-1754 (D.D.C.), Envtl. L. Rep. Pending Litig. (Envtl. L. Inst.) 66344 No. 93-1754 (D.D.C. plaintiffs' brief filed Jan. 25, 1994) (supporting motion for summary judgment).
14. The Tulloch rule makes clear that excavation activities in wetlands, including mining, require federal authorization. See 58 Fed. Reg. 45008, 45013 (Aug. 25, 1993) (explaining why mining activities in waters of the United States require permits). Some mining activities, however, are grandfathered for a limited period of time. 33 C.F.R. § 323.2(d)(S)(iii) (1994).
15. See supra note 2 (suggesting that the value of land is tied to the ability to exploit its resources).
16. See 40 C.F.R. §§ 230.10(d), 230.12(a) (1995). 40 C.F.R § 230 is known as the § 404(b)(1) Guidelines and specifies the criteria for issuing Clean Water Act § 404 permits. See 33 U.S.C. 1344(b) (1995) (authorizing promulgation of guidelines). State permit programs also contain mitigation requirements.
17. See infra notes 72-95 and accompanying text (explaining why compensatory wetland mitigation fails).
18. E.g., Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13, 39-40 (1993) (criticizing the present regulatory system). See also Hope Babcock, Federal Wetlands Regulatory Policy. Up to its Ears in Alligators, 8 Pace Envtl. L. Rev. 307, 307 (1991) (describing the Clean Water Act § 404 program as an "'an open wound across the body of environmental law'").
19. E.g., Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13, 39-40 (1993) (criticizing the present regulatory system). See also Hope Babcock, Federal Wetlands Regulatory Policy. Up to its Ears in Alligators, 8 Pace Envtl. L. Rev. 307, 307 (1991) (describing the Clean Water Act § 404 program as an "'an open wound across the body of environmental law'").
20. See generally Virginia S. Albrecht & Bernard N. Goode, Wetland Regulation in the Real World (1994) (examining whether the costs of the federal wetland regulatory program are justified by the environmental results).
21. Haynes & Gardner, supra note 8, at 10,261.
22. Id.
23. Id. at 10,262. The analogy does not fit precisely, of course. In the case of a draft, Party B is a bank. See U.C.C. § 3-104 (1994) (defining and explaining negotiable instruments). In the case of a wetland mitigation bank, Party A is usually considered the "bank sponsor."
24. See infra notes 198-210 and accompanying text (discussing the advantages of wetland mitigation banking to the environment).
25. See infra notes 211-13 and accompanying text (discussing the advantages of wetland mitigation banking to landowners).
26. See infra notes 206-10 and accompanying text (discussing three ways in which wetland mitigation banking insulates regulatory agencies from takings claims).
27. See infra notes 216-51 and accompanying text (discussing mitigation banking in the context of federal regulation).
28. See infra notes 252-312 and accompanying text (discussing mitigation banking in the context of state regulation).
29. See infra note 254 (describing state efforts to implement banking systems).
30. See Virginia G. Veltman, Comment, Banking on the Future of Wetlands Using Federal Law, 89 Nw. U. L. Rev. 654 (1995) (calling for comprehensive Federal law to spur development of mitigation banks); William W. Sapp, Mitigation Banking: Panacea or Poison for Wetlands Protection, 1 Envtl. Law. 100 (1994) (encouraging use of mitigation banks, but with constraints on use of preservation); Jonathan Silverstein, Comment, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. Envtl. Aff. L. Rev. 129 (1994) (examining use of mitigation banks in watershed planning); Robert D. Sokolove & P. Robert Thompson, From the Environment The Future of Wetland Regulation is Here, 23 Real Est. L.J. 78, 85 (1994) (contending that wetland mitigation banking is a "win-win situation" and "the recognized future approach to wetland protection by environmentalists, scientists, and the regulated community"); Michael G. Le Desma, A Sound of Thunder: Problems and Prospects in Wetland Mitigation Banking 19 Colum. J. Envtl. L. 497 (1994) (concluding that mitigation banking system will retain elements of command and control regime); Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74 (1993) (arguing that mitigation banks would be useful in resolving problems with agricultural run-off); Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13 (1992-93) (proposing that mitigation banks be an integral part of a watershed approach to wetland protection); Zygmunt J.B. Plater et al., Environmental Law and Policy: Nature, Law, and Society 966 (1992) (expressing environmentalists' skepticism about mitigation banking because of technical uncertainties and because "compensatory mitigation arguably sends the wrong message to the American public about the need for humility and restraint in dealing with the natural world"); Michael C. Blumm, The Clinton Wetlands Plan: No Net Gain in Wetlands Protection, 9 J. Land Use & Envtl. L. 203, 227 (1994) (noting environmentalists' objections to mitigation banking); Michael Lenetsky, Comment, President Clinton and Wetlands Regulation: Boom or Bane to the Environment?, 13 Temp. Envtl. L. & Tech. 81 (1994) (criticizing mitigation banking); see also Steve Bergsman, A Way to Compensate for Building in the Wetlands, N.Y. Times, May 14, 1995, at 9, col. 1 (describing the use of mitigation banking to replace environmental values that are lost); Debbie Levy, More Than One Way to Skin a Cattail, Wash. Post, Jan. 14, 1995, at E1, col. 1 (looking at mitigation banking as an alternative to conventional wetland mitigation).
31. See Virginia G. Veltman, Comment, Banking on the Future of Wetlands Using Federal Law, 89 Nw. U. L. Rev. 654 (1995) (calling for comprehensive Federal law to spur development of mitigation banks); William W. Sapp, Mitigation Banking: Panacea or Poison for Wetlands Protection, 1 Envtl. Law. 100 (1994) (encouraging use of mitigation banks, but with constraints on use of preservation); Jonathan Silverstein, Comment, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. Envtl. Aff. L. Rev. 129 (1994) (examining use of mitigation banks in watershed planning); Robert D. Sokolove & P. Robert Thompson, From the Environment The Future of Wetland Regulation is Here, 23 Real Est. L.J. 78, 85 (1994) (contending that wetland mitigation banking is a "win-win situation" and "the recognized future approach to wetland protection by environmentalists, scientists, and the regulated community"); Michael G. Le Desma, A Sound of Thunder: Problems and Prospects in Wetland Mitigation Banking 19 Colum. J. Envtl. L. 497 (1994) (concluding that mitigation banking system will retain elements of command and control regime); Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74 (1993) (arguing that mitigation banks would be useful in resolving problems with agricultural run-off); Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13 (1992-93) (proposing that mitigation banks be an integral part of a watershed approach to wetland protection); Zygmunt J.B. Plater et al., Environmental Law and Policy: Nature, Law, and Society 966 (1992) (expressing environmentalists' skepticism about mitigation banking because of technical uncertainties and because "compensatory mitigation arguably sends the wrong message to the American public about the need for humility and restraint in dealing with the natural world"); Michael C. Blumm, The Clinton Wetlands Plan: No Net Gain in Wetlands Protection, 9 J. Land Use & Envtl. L. 203, 227 (1994) (noting environmentalists' objections to mitigation banking); Michael Lenetsky, Comment, President Clinton and Wetlands Regulation: Boom or Bane to the Environment?, 13 Temp. Envtl. L. & Tech. 81 (1994) (criticizing mitigation banking); see also Steve Bergsman, A Way to Compensate for Building in the Wetlands, N.Y. Times, May 14, 1995, at 9, col. 1 (describing the use of mitigation banking to replace environmental values that are lost); Debbie Levy, More Than One Way to Skin a Cattail, Wash. Post, Jan. 14, 1995, at E1, col. 1 (looking at mitigation banking as an alternative to conventional wetland mitigation).
32. See Virginia G. Veltman, Comment, Banking on the Future of Wetlands Using Federal Law, 89 Nw. U. L. Rev. 654 (1995) (calling for comprehensive Federal law to spur development of mitigation banks); William W. Sapp, Mitigation Banking: Panacea or Poison for Wetlands Protection, 1 Envtl. Law. 100 (1994) (encouraging use of mitigation banks, but with constraints on use of preservation); Jonathan Silverstein, Comment, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. Envtl. Aff. L. Rev. 129 (1994) (examining use of mitigation banks in watershed planning); Robert D. Sokolove & P. Robert Thompson, From the Environment The Future of Wetland Regulation is Here, 23 Real Est. L.J. 78, 85 (1994) (contending that wetland mitigation banking is a "win-win situation" and "the recognized future approach to wetland protection by environmentalists, scientists, and the regulated community"); Michael G. Le Desma, A Sound of Thunder: Problems and Prospects in Wetland Mitigation Banking 19 Colum. J. Envtl. L. 497 (1994) (concluding that mitigation banking system will retain elements of command and control regime); Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74 (1993) (arguing that mitigation banks would be useful in resolving problems with agricultural run-off); Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13 (1992-93) (proposing that mitigation banks be an integral part of a watershed approach to wetland protection); Zygmunt J.B. Plater et al., Environmental Law and Policy: Nature, Law, and Society 966 (1992) (expressing environmentalists' skepticism about mitigation banking because of technical uncertainties and because "compensatory mitigation arguably sends the wrong message to the American public about the need for humility and restraint in dealing with the natural world"); Michael C. Blumm, The Clinton Wetlands Plan: No Net Gain in Wetlands Protection, 9 J. Land Use & Envtl. L. 203, 227 (1994) (noting environmentalists' objections to mitigation banking); Michael Lenetsky, Comment, President Clinton and Wetlands Regulation: Boom or Bane to the Environment?, 13 Temp. Envtl. L. & Tech. 81 (1994) (criticizing mitigation banking); see also Steve Bergsman, A Way to Compensate for Building in the Wetlands, N.Y. Times, May 14, 1995, at 9, col. 1 (describing the use of mitigation banking to replace environmental values that are lost); Debbie Levy, More Than One Way to Skin a Cattail, Wash. Post, Jan. 14, 1995, at E1, col. 1 (looking at mitigation banking as an alternative to conventional wetland mitigation).
33. See Virginia G. Veltman, Comment, Banking on the Future of Wetlands Using Federal Law, 89 Nw. U. L. Rev. 654 (1995) (calling for comprehensive Federal law to spur development of mitigation banks); William W. Sapp, Mitigation Banking: Panacea or Poison for Wetlands Protection, 1 Envtl. Law. 100 (1994) (encouraging use of mitigation banks, but with constraints on use of preservation); Jonathan Silverstein, Comment, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. Envtl. Aff. L. Rev. 129 (1994) (examining use of mitigation banks in watershed planning); Robert D. Sokolove & P. Robert Thompson, From the Environment The Future of Wetland Regulation is Here, 23 Real Est. L.J. 78, 85 (1994) (contending that wetland mitigation banking is a "win-win situation" and "the recognized future approach to wetland protection by environmentalists, scientists, and the regulated community"); Michael G. Le Desma, A Sound of Thunder: Problems and Prospects in Wetland Mitigation Banking 19 Colum. J. Envtl. L. 497 (1994) (concluding that mitigation banking system will retain elements of command and control regime); Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74 (1993) (arguing that mitigation banks would be useful in resolving problems with agricultural run-off); Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13 (1992-93) (proposing that mitigation banks be an integral part of a watershed approach to wetland protection); Zygmunt J.B. Plater et al., Environmental Law and Policy: Nature, Law, and Society 966 (1992) (expressing environmentalists' skepticism about mitigation banking because of technical uncertainties and because "compensatory mitigation arguably sends the wrong message to the American public about the need for humility and restraint in dealing with the natural world"); Michael C. Blumm, The Clinton Wetlands Plan: No Net Gain in Wetlands Protection, 9 J. Land Use & Envtl. L. 203, 227 (1994) (noting environmentalists' objections to mitigation banking); Michael Lenetsky, Comment, President Clinton and Wetlands Regulation: Boom or Bane to the Environment?, 13 Temp. Envtl. L. & Tech. 81 (1994) (criticizing mitigation banking); see also Steve Bergsman, A Way to Compensate for Building in the Wetlands, N.Y. Times, May 14, 1995, at 9, col. 1 (describing the use of mitigation banking to replace environmental values that are lost); Debbie Levy, More Than One Way to Skin a Cattail, Wash. Post, Jan. 14, 1995, at E1, col. 1 (looking at mitigation banking as an alternative to conventional wetland mitigation).
34. See Virginia G. Veltman, Comment, Banking on the Future of Wetlands Using Federal Law, 89 Nw. U. L. Rev. 654 (1995) (calling for comprehensive Federal law to spur development of mitigation banks); William W. Sapp, Mitigation Banking: Panacea or Poison for Wetlands Protection, 1 Envtl. Law. 100 (1994) (encouraging use of mitigation banks, but with constraints on use of preservation); Jonathan Silverstein, Comment, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. Envtl. Aff. L. Rev. 129 (1994) (examining use of mitigation banks in watershed planning); Robert D. Sokolove & P. Robert Thompson, From the Environment The Future of Wetland Regulation is Here, 23 Real Est. L.J. 78, 85 (1994) (contending that wetland mitigation banking is a "win-win situation" and "the recognized future approach to wetland protection by environmentalists, scientists, and the regulated community"); Michael G. Le Desma, A Sound of Thunder: Problems and Prospects in Wetland Mitigation Banking 19 Colum. J. Envtl. L. 497 (1994) (concluding that mitigation banking system will retain elements of command and control regime); Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74 (1993) (arguing that mitigation banks would be useful in resolving problems with agricultural run-off); Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13 (1992-93) (proposing that mitigation banks be an integral part of a watershed approach to wetland protection); Zygmunt J.B. Plater et al., Environmental Law and Policy: Nature, Law, and Society 966 (1992) (expressing environmentalists' skepticism about mitigation banking because of technical uncertainties and because "compensatory mitigation arguably sends the wrong message to the American public about the need for humility and restraint in dealing with the natural world"); Michael C. Blumm, The Clinton Wetlands Plan: No Net Gain in Wetlands Protection, 9 J. Land Use & Envtl. L. 203, 227 (1994) (noting environmentalists' objections to mitigation banking); Michael Lenetsky, Comment, President Clinton and Wetlands Regulation: Boom or Bane to the Environment?, 13 Temp. Envtl. L. & Tech. 81 (1994) (criticizing mitigation banking); see also Steve Bergsman, A Way to Compensate for Building in the Wetlands, N.Y. Times, May 14, 1995, at 9, col. 1 (describing the use of mitigation banking to replace environmental values that are lost); Debbie Levy, More Than One Way to Skin a Cattail, Wash. Post, Jan. 14, 1995, at E1, col. 1 (looking at mitigation banking as an alternative to conventional wetland mitigation).
35. See Virginia G. Veltman, Comment, Banking on the Future of Wetlands Using Federal Law, 89 Nw. U. L. Rev. 654 (1995) (calling for comprehensive Federal law to spur development of mitigation banks); William W. Sapp, Mitigation Banking: Panacea or Poison for Wetlands Protection, 1 Envtl. Law. 100 (1994) (encouraging use of mitigation banks, but with constraints on use of preservation); Jonathan Silverstein, Comment, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. Envtl. Aff. L. Rev. 129 (1994) (examining use of mitigation banks in watershed planning); Robert D. Sokolove & P. Robert Thompson, From the Environment The Future of Wetland Regulation is Here, 23 Real Est. L.J. 78, 85 (1994) (contending that wetland mitigation banking is a "win-win situation" and "the recognized future approach to wetland protection by environmentalists, scientists, and the regulated community"); Michael G. Le Desma, A Sound of Thunder: Problems and Prospects in Wetland Mitigation Banking 19 Colum. J. Envtl. L. 497 (1994) (concluding that mitigation banking system will retain elements of command and control regime); Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74 (1993) (arguing that mitigation banks would be useful in resolving problems with agricultural run-off); Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13 (1992-93) (proposing that mitigation banks be an integral part of a watershed approach to wetland protection); Zygmunt J.B. Plater et al., Environmental Law and Policy: Nature, Law, and Society 966 (1992) (expressing environmentalists' skepticism about mitigation banking because of technical uncertainties and because "compensatory mitigation arguably sends the wrong message to the American public about the need for humility and restraint in dealing with the natural world"); Michael C. Blumm, The Clinton Wetlands Plan: No Net Gain in Wetlands Protection, 9 J. Land Use & Envtl. L. 203, 227 (1994) (noting environmentalists' objections to mitigation banking); Michael Lenetsky, Comment, President Clinton and Wetlands Regulation: Boom or Bane to the Environment?, 13 Temp. Envtl. L. & Tech. 81 (1994) (criticizing mitigation banking); see also Steve Bergsman, A Way to Compensate for Building in the Wetlands, N.Y. Times, May 14, 1995, at 9, col. 1 (describing the use of mitigation banking to replace environmental values that are lost); Debbie Levy, More Than One Way to Skin a Cattail, Wash. Post, Jan. 14, 1995, at E1, col. 1 (looking at mitigation banking as an alternative to conventional wetland mitigation).
36. See Virginia G. Veltman, Comment, Banking on the Future of Wetlands Using Federal Law, 89 Nw. U. L. Rev. 654 (1995) (calling for comprehensive Federal law to spur development of mitigation banks); William W. Sapp, Mitigation Banking: Panacea or Poison for Wetlands Protection, 1 Envtl. Law. 100 (1994) (encouraging use of mitigation banks, but with constraints on use of preservation); Jonathan Silverstein, Comment, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. Envtl. Aff. L. Rev. 129 (1994) (examining use of mitigation banks in watershed planning); Robert D. Sokolove & P. Robert Thompson, From the Environment The Future of Wetland Regulation is Here, 23 Real Est. L.J. 78, 85 (1994) (contending that wetland mitigation banking is a "win-win situation" and "the recognized future approach to wetland protection by environmentalists, scientists, and the regulated community"); Michael G. Le Desma, A Sound of Thunder: Problems and Prospects in Wetland Mitigation Banking 19 Colum. J. Envtl. L. 497 (1994) (concluding that mitigation banking system will retain elements of command and control regime); Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74 (1993) (arguing that mitigation banks would be useful in resolving problems with agricultural run-off); Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13 (1992-93) (proposing that mitigation banks be an integral part of a watershed approach to wetland protection); Zygmunt J.B. Plater et al., Environmental Law and Policy: Nature, Law, and Society 966 (1992) (expressing environmentalists' skepticism about mitigation banking because of technical uncertainties and because "compensatory mitigation arguably sends the wrong message to the American public about the need for humility and restraint in dealing with the natural world"); Michael C. Blumm, The Clinton Wetlands Plan: No Net Gain in Wetlands Protection, 9 J. Land Use & Envtl. L. 203, 227 (1994) (noting environmentalists' objections to mitigation banking); Michael Lenetsky, Comment, President Clinton and Wetlands Regulation: Boom or Bane to the Environment?, 13 Temp. Envtl. L. & Tech. 81 (1994) (criticizing mitigation banking); see also Steve Bergsman, A Way to Compensate for Building in the Wetlands, N.Y. Times, May 14, 1995, at 9, col. 1 (describing the use of mitigation banking to replace environmental values that are lost); Debbie Levy, More Than One Way to Skin a Cattail, Wash. Post, Jan. 14, 1995, at E1, col. 1 (looking at mitigation banking as an alternative to conventional wetland mitigation).
37. See Virginia G. Veltman, Comment, Banking on the Future of Wetlands Using Federal Law, 89 Nw. U. L. Rev. 654 (1995) (calling for comprehensive Federal law to spur development of mitigation banks); William W. Sapp, Mitigation Banking: Panacea or Poison for Wetlands Protection, 1 Envtl. Law. 100 (1994) (encouraging use of mitigation banks, but with constraints on use of preservation); Jonathan Silverstein, Comment, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. Envtl. Aff. L. Rev. 129 (1994) (examining use of mitigation banks in watershed planning); Robert D. Sokolove & P. Robert Thompson, From the Environment The Future of Wetland Regulation is Here, 23 Real Est. L.J. 78, 85 (1994) (contending that wetland mitigation banking is a "win-win situation" and "the recognized future approach to wetland protection by environmentalists, scientists, and the regulated community"); Michael G. Le Desma, A Sound of Thunder: Problems and Prospects in Wetland Mitigation Banking 19 Colum. J. Envtl. L. 497 (1994) (concluding that mitigation banking system will retain elements of command and control regime); Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74 (1993) (arguing that mitigation banks would be useful in resolving problems with agricultural run-off); Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13 (1992-93) (proposing that mitigation banks be an integral part of a watershed approach to wetland protection); Zygmunt J.B. Plater et al., Environmental Law and Policy: Nature, Law, and Society 966 (1992) (expressing environmentalists' skepticism about mitigation banking because of technical uncertainties and because "compensatory mitigation arguably sends the wrong message to the American public about the need for humility and restraint in dealing with the natural world"); Michael C. Blumm, The Clinton Wetlands Plan: No Net Gain in Wetlands Protection, 9 J. Land Use & Envtl. L. 203, 227 (1994) (noting environmentalists' objections to mitigation banking); Michael Lenetsky, Comment, President Clinton and Wetlands Regulation: Boom or Bane to the Environment?, 13 Temp. Envtl. L. & Tech. 81 (1994) (criticizing mitigation banking); see also Steve Bergsman, A Way to Compensate for Building in the Wetlands, N.Y. Times, May 14, 1995, at 9, col. 1 (describing the use of mitigation banking to replace environmental values that are lost); Debbie Levy, More Than One Way to Skin a Cattail, Wash. Post, Jan. 14, 1995, at E1, col. 1 (looking at mitigation banking as an alternative to conventional wetland mitigation).
38. See Virginia G. Veltman, Comment, Banking on the Future of Wetlands Using Federal Law, 89 Nw. U. L. Rev. 654 (1995) (calling for comprehensive Federal law to spur development of mitigation banks); William W. Sapp, Mitigation Banking: Panacea or Poison for Wetlands Protection, 1 Envtl. Law. 100 (1994) (encouraging use of mitigation banks, but with constraints on use of preservation); Jonathan Silverstein, Comment, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. Envtl. Aff. L. Rev. 129 (1994) (examining use of mitigation banks in watershed planning); Robert D. Sokolove & P. Robert Thompson, From the Environment The Future of Wetland Regulation is Here, 23 Real Est. L.J. 78, 85 (1994) (contending that wetland mitigation banking is a "win-win situation" and "the recognized future approach to wetland protection by environmentalists, scientists, and the regulated community"); Michael G. Le Desma, A Sound of Thunder: Problems and Prospects in Wetland Mitigation Banking 19 Colum. J. Envtl. L. 497 (1994) (concluding that mitigation banking system will retain elements of command and control regime); Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74 (1993) (arguing that mitigation banks would be useful in resolving problems with agricultural run-off); Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13 (1992-93) (proposing that mitigation banks be an integral part of a watershed approach to wetland protection); Zygmunt J.B. Plater et al., Environmental Law and Policy: Nature, Law, and Society 966 (1992) (expressing environmentalists' skepticism about mitigation banking because of technical uncertainties and because "compensatory mitigation arguably sends the wrong message to the American public about the need for humility and restraint in dealing with the natural world"); Michael C. Blumm, The Clinton Wetlands Plan: No Net Gain in Wetlands Protection, 9 J. Land Use & Envtl. L. 203, 227 (1994) (noting environmentalists' objections to mitigation banking); Michael Lenetsky, Comment, President Clinton and Wetlands Regulation: Boom or Bane to the Environment?, 13 Temp. Envtl. L. & Tech. 81 (1994) (criticizing mitigation banking); see also Steve Bergsman, A Way to Compensate for Building in the Wetlands, N.Y. Times, May 14, 1995, at 9, col. 1 (describing the use of mitigation banking to replace environmental values that are lost); Debbie Levy, More Than One Way to Skin a Cattail, Wash. Post, Jan. 14, 1995, at E1, col. 1 (looking at mitigation banking as an alternative to conventional wetland mitigation).
39. See Virginia G. Veltman, Comment, Banking on the Future of Wetlands Using Federal Law, 89 Nw. U. L. Rev. 654 (1995) (calling for comprehensive Federal law to spur development of mitigation banks); William W. Sapp, Mitigation Banking: Panacea or Poison for Wetlands Protection, 1 Envtl. Law. 100 (1994) (encouraging use of mitigation banks, but with constraints on use of preservation); Jonathan Silverstein, Comment, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. Envtl. Aff. L. Rev. 129 (1994) (examining use of mitigation banks in watershed planning); Robert D. Sokolove & P. Robert Thompson, From the Environment The Future of Wetland Regulation is Here, 23 Real Est. L.J. 78, 85 (1994) (contending that wetland mitigation banking is a "win-win situation" and "the recognized future approach to wetland protection by environmentalists, scientists, and the regulated community"); Michael G. Le Desma, A Sound of Thunder: Problems and Prospects in Wetland Mitigation Banking 19 Colum. J. Envtl. L. 497 (1994) (concluding that mitigation banking system will retain elements of command and control regime); Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74 (1993) (arguing that mitigation banks would be useful in resolving problems with agricultural run-off); Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13 (1992-93) (proposing that mitigation banks be an integral part of a watershed approach to wetland protection); Zygmunt J.B. Plater et al., Environmental Law and Policy: Nature, Law, and Society 966 (1992) (expressing environmentalists' skepticism about mitigation banking because of technical uncertainties and because "compensatory mitigation arguably sends the wrong message to the American public about the need for humility and restraint in dealing with the natural world"); Michael C. Blumm, The Clinton Wetlands Plan: No Net Gain in Wetlands Protection, 9 J. Land Use & Envtl. L. 203, 227 (1994) (noting environmentalists' objections to mitigation banking); Michael Lenetsky, Comment, President Clinton and Wetlands Regulation: Boom or Bane to the Environment?, 13 Temp. Envtl. L. & Tech. 81 (1994) (criticizing mitigation banking); see also Steve Bergsman, A Way to Compensate for Building in the Wetlands, N.Y. Times, May 14, 1995, at 9, col. 1 (describing the use of mitigation banking to replace environmental values that are lost); Debbie Levy, More Than One Way to Skin a Cattail, Wash. Post, Jan. 14, 1995, at E1, col. 1 (looking at mitigation banking as an alternative to conventional wetland mitigation).
40. See Virginia G. Veltman, Comment, Banking on the Future of Wetlands Using Federal Law, 89 Nw. U. L. Rev. 654 (1995) (calling for comprehensive Federal law to spur development of mitigation banks); William W. Sapp, Mitigation Banking: Panacea or Poison for Wetlands Protection, 1 Envtl. Law. 100 (1994) (encouraging use of mitigation banks, but with constraints on use of preservation); Jonathan Silverstein, Comment, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. Envtl. Aff. L. Rev. 129 (1994) (examining use of mitigation banks in watershed planning); Robert D. Sokolove & P. Robert Thompson, From the Environment The Future of Wetland Regulation is Here, 23 Real Est. L.J. 78, 85 (1994) (contending that wetland mitigation banking is a "win-win situation" and "the recognized future approach to wetland protection by environmentalists, scientists, and the regulated community"); Michael G. Le Desma, A Sound of Thunder: Problems and Prospects in Wetland Mitigation Banking 19 Colum. J. Envtl. L. 497 (1994) (concluding that mitigation banking system will retain elements of command and control regime); Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74 (1993) (arguing that mitigation banks would be useful in resolving problems with agricultural run-off); Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13 (1992-93) (proposing that mitigation banks be an integral part of a watershed approach to wetland protection); Zygmunt J.B. Plater et al., Environmental Law and Policy: Nature, Law, and Society 966 (1992) (expressing environmentalists' skepticism about mitigation banking because of technical uncertainties and because "compensatory mitigation arguably sends the wrong message to the American public about the need for humility and restraint in dealing with the natural world"); Michael C. Blumm, The Clinton Wetlands Plan: No Net Gain in Wetlands Protection, 9 J. Land Use & Envtl. L. 203, 227 (1994) (noting environmentalists' objections to mitigation banking); Michael Lenetsky, Comment, President Clinton and Wetlands Regulation: Boom or Bane to the Environment?, 13 Temp. Envtl. L. & Tech. 81 (1994) (criticizing mitigation banking); see also Steve Bergsman, A Way to Compensate for Building in the Wetlands, N.Y. Times, May 14, 1995, at 9, col. 1 (describing the use of mitigation banking to replace environmental values that are lost); Debbie Levy, More Than One Way to Skin a Cattail, Wash. Post, Jan. 14, 1995, at E1, col. 1 (looking at mitigation banking as an alternative to conventional wetland mitigation).
41. See Virginia G. Veltman, Comment, Banking on the Future of Wetlands Using Federal Law, 89 Nw. U. L. Rev. 654 (1995) (calling for comprehensive Federal law to spur development of mitigation banks); William W. Sapp, Mitigation Banking: Panacea or Poison for Wetlands Protection, 1 Envtl. Law. 100 (1994) (encouraging use of mitigation banks, but with constraints on use of preservation); Jonathan Silverstein, Comment, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. Envtl. Aff. L. Rev. 129 (1994) (examining use of mitigation banks in watershed planning); Robert D. Sokolove & P. Robert Thompson, From the Environment The Future of Wetland Regulation is Here, 23 Real Est. L.J. 78, 85 (1994) (contending that wetland mitigation banking is a "win-win situation" and "the recognized future approach to wetland protection by environmentalists, scientists, and the regulated community"); Michael G. Le Desma, A Sound of Thunder: Problems and Prospects in Wetland Mitigation Banking 19 Colum. J. Envtl. L. 497 (1994) (concluding that mitigation banking system will retain elements of command and control regime); Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74 (1993) (arguing that mitigation banks would be useful in resolving problems with agricultural run-off); Timothy D. Searchinger, Wetlands Issues 1993: Challenges and a New Approach, 4 Md. J. Contemp. Legal Issues 13 (1992-93) (proposing that mitigation banks be an integral part of a watershed approach to wetland protection); Zygmunt J.B. Plater et al., Environmental Law and Policy: Nature, Law, and Society 966 (1992) (expressing environmentalists' skepticism about mitigation banking because of technical uncertainties and because "compensatory mitigation arguably sends the wrong message to the American public about the need for humility and restraint in dealing with the natural world"); Michael C. Blumm, The Clinton Wetlands Plan: No Net Gain in Wetlands Protection, 9 J. Land Use & Envtl. L. 203, 227 (1994) (noting environmentalists' objections to mitigation banking); Michael Lenetsky, Comment, President Clinton and Wetlands Regulation: Boom or Bane to the Environment?, 13 Temp. Envtl. L. & Tech. 81 (1994) (criticizing mitigation banking); see also Steve Bergsman, A Way to Compensate for Building in the Wetlands, N.Y. Times, May 14, 1995, at 9, col. 1 (describing the use of mitigation banking to replace environmental values that are lost); Debbie Levy, More Than One Way to Skin a Cattail, Wash. Post, Jan. 14, 1995, at E1, col. 1 (looking at mitigation banking as an alternative to conventional wetland mitigation).
42. A 1993 study identified only one active entrepreneurial bank. Wetland Mitigation Banking (Envtl. L. Inst.) 120-21 (1993) (discussing the Fina LaTerre bank in Louisiana) [hereinafter ELI]. Since then, other entrepeneurials banks have been created and are selling credits. See, e.g., Richard M. Hopen, Wetlands Mitigation Banking: Giving Entrepreneurs a Chance to Build Better Wetlands, 2 J. Envtl. L. & Prac. 32, 36 (1994) (profiling Florida Wetlandsbank in the City of Pembroke Pines, Florida, which was the only private mitigation bank in Florida at the time of publication); U.S. Army Corps of Engineers, National Wetland Mitigation Banking Study, First Phase Report, 12 n.13 (1994) (listing Florida Wetlands Bank and WET, Inc. in Georgia as entrepreneurial banks for which the Corps issued permits) [hereinafter Corps, First Phase Report].
43. See infra notes 34-161 and accompanying text (examining the historical development of wetland mitigation requirements).
44. See infra notes 162-213 and accompanying text (discussing the benefits of wetland mitigation banking).
45. See infra notes 206-10 and accompanying text (discussing three ways in which wetland mitigation banking insulates regulatory agencies from takings claims).
46. See infra notes 214-312 and accompanying text (discussing mitigation banking in the context of federal and state regulation).
47. See infra notes 313-46 and accompanying text (providing recommendations on how best to harness the potential of entrepreneurial wetland mitigation banks).
48. Indeed, for many years, the policy of the federal government was to encourage the draining of swamps. See Swamp Land Act, 9 Stat. 519 (1850). Recently, the U.S. House of Representatives issued findings that some wetlands constitute nuisances. See H.R. 961, 104th Cong., 1st Sess. § 801(a)(6) (1995) (finding that "while wetlands provide many varied economic and environmental benefits, they also present health risks in some instances where they act as breeding grounds for insects that are carriers of human and animal diseases").
49. See The Conservation Foundation, Protecting America's Wetlands: An Action Agenda 9-11 (1988) (identifying the multiple values of wetlands ranging from flood control to wildlife habitat to sources of recreation).
50. For example, wetlands can provide tertiary treatment for wastewater discharges from publicly owned treatment works. See Oliver A Houck, Land Loss in Coastal Louisiana: Causes, Consequences, and Remedies, 58 Tul. L. Rev. 3, 78 (1983) (noting that "[w]etlands constitute a natural waste treatment system" by filtering out pollutants and using them as nutrients to sustain life at the bottom of the food chain).
51. The filling of wetlands adjacent to the Missouri River for agricultural purposes contributed to the effects of the massive 1993 Missouri River flood. See Anthony P. Farrell, Comment, Agricultural Non-Point Source Pollution and Wetlands: A Sensible Approach, 1 Mo. Envtl. L. & Pol'y Rev. 74, 74-75 (1993) (observing that "[t]he disastrous flooding this summer in the Midwest might have been substantially diminished had many of the original wetlands been in place to absorb the excess rainfall received").
52. Wetlands serve "as critical feeding grounds and nurseries for a variety of fish, waterfowl, and other wildlife." Mark S. Dennison & James F. Berry, Wetlands 8 (1993). Up to 20% of endangered species depend on wetlands as well. Want, supra note 9, at 2-3.
53. Hoffman Homes, Inc. v. Administrator, EPA, 999 F.2d 256, 261 (7th Cir. 1993) (citing North American Waterfowl Management Plan 1 (1985)).
54. See Oliver A. Houck, Ending the War: A Strategy to Save America's Coastal Zone, 47 Md. L. Rev. 358, 358 (1988). In part out of a concern that the loss of productive Louisiana wetlands would have an adverse effect on the seafood industry, Congress responded with the Coastal Wetlands Planning, Protection and Restoration Act, Pub. L. No. 101-646, 104 Stat. 4778 (codified as amended at 16 U.S.C. §§ 3951-56 (Supp. V 1993)).
55. See White House Office on Environmental Policy, Protecting America's Wetlands: A Fair, Flexible and Effective Approach 3 (Aug. 24, 1993) (expressing support for an "interim goal of no overall loss of the nation's remaining wetlands, and the long-term goal of increasing the quality and quantity of the nation's wetlands resource base") [hereinafter Clinton Administration Approach]; Memorandum of Agreement Between the Environmental Protection Agency and the Department of the Army Concerning the Determination of Mitigation Under the Clean Water Act Section 404(b)(1) Guidelines, 55 Fed. Reg. 9210, 9211 (Mar. 12, 1990) (declaring goal of no net loss) [hereinafter Mitigation MOA].
56. Although this section focuses on the federal regulatory program, the principle of sequencing applies in many state programs as well. See, e.g., Minn. R. 8420.0520 Subpart 1 (1993) (requiring that applicant avoid and minimize adverse impacts before local government will consider or approve restoration or creation plans); Md. Regs. Code tit 08, § 08.05.04.05A (2) (1995) (requiring first avoidance and then minimization of adverse impacts to the nontidal wetland based upon material characteristics of the site).
57. See 40 C.F.R. § 230.10(a) & (d) (1994) (prohibiting discharge of dredged or fill material if there is a practicable alternative which would have a "less adverse impact on the aquatic ecosystem" and prohibiting discharge of dredged or fill material unless steps are taken to minimize adverse impacts). The Guidelines are clarified by the Mitigation MOA. See Mitigation MOA, supra note 41.
58. 40 C.F.R. § 230.10(a). Most importantly, the Guidelines specify that the regulatory agencies presume that such alternatives are available if the project is not water dependent Id. § 230.10(a)(3); Mitigation MOA, supra note 41, at 9212.
59. 40 C.F.R. § 230.10(d) (no permit shall be issued unless the applicant has taken "appropriate and practicable steps" to "minimize potential adverse impacts of the discharge"). See also Mitigation MOA, supra note 41, at 9212.
60. The Guidelines include compensatory mitigation as part of minimization. See 40 C.F.R. § 230.75(d) ("Habitat development and restoration techniques can be used to minimize adverse impacts and to compensate for destroyed habitat."). The Mitigation MOA, however, makes a clear distinction between the two. Mitigation MOA, supra note 41, at 9212.
61. For example, an interagency memorandum of agreement on sequencing took five years of effort to develop. Royal C. Gardner, The Army-EPA Mitigation Agreement: No Retreat From Wetlands Protection, 20 Envtl. L. Rep. (Envtl. L. Inst.) 10,337, 10,340 (1990).
62. The Corps issues or denies the § 404 permits. 33 U.S.C § 1344(a) (1988). In making these decisions, the Corps must apply regulations (the § 404(b)(1) guidelines) that the EPA developed in conjunction with the Corps. 33 U.S.C. § 1344(b)(1) (1988). During the permit process, the EPA and other federal and state agencies provide comments to the Corps. If the EPA is dissatisfied with the Corps' decision to issue a permit, the EPA may exercise a veto. 33 U.S.C. § 1344 (c) (1988). In reality, the EPA rarely exercises its veto authority. This bifurcation of authority, however, does not lead to a paradigm of efficiency, especially if the Corps and EPA have policy differences. As Professor Houck accurately observed at the time, "Section 404 is constructed on the backs of two beasts moving in different directions." Oliver A. Houck, Hard Choices: The Analysis of Alternatives Under Section 404 of the Clean Water Act and Similar Environmental Laws, 60 U. Colo. L. Rev. 773, 774-75 (1989). With the Corps embracing its new role as "America's environmental engineers," the beasts are now at least moving in the same direction, although perhaps not always at the same speed. Cf. Michael L. Davis & Royal C. Gardner, Recognizing the Corps' Commitment, 15 Nat'l Wetlands Newsl. 9, 10 (1993) (noting that 70% of Corps regulatory staff is now "trained in biology, ecology, or environmental sciences").
63. Mitigation MOA, supra note 41, at 9213. Although the Assistant Secretary of the Army (Civil Works) signs on behalf of the Department of the Army (and therefore the Corps of Engineers), my textual references will be to the Corps for simplicity's sake.
64. See infra notes 59-71 and accompanying text (describing modifications to the strict sequencing requirements).
65. Gardner, supra note 47, at 10,339-40.
66. This is somewhat analogous to buying down mortgage rates through points. By paying additional money up front, the mortgagor receives a lower interest rate. Jon W. Bruce, Real Estate Finance in a Nutshell 83 (3d ed. 1991).
67. Mitigation MOA, supra note 41, at 9211-12. See Gardner, supra note 47, at 10,342 (noting that revisions to earlier mitigation MOA do not resurrect the buy-down concept).
68. Mitigation MOA, supra note 41, at 9211-212.
69. Id. at 9212. On-site mitigation refers to mitigation that occurs in the area adjacent to the affected wetlands. Id.
70. Id. In-kind mitigation relates to the type of wetland function that a development project affects. Id. For example, if a housing development destroys wetlands that provided habitat for migratory waterfowl, in-kind mitigation would seek to offset the loss of that particular wetland function.
71. Id.
72. Id. The Mitigation MOA also approved mitigation banking as an option for compensatory mitigation. Id; see supra notes 216-22 and accompanying text (describing the development of national guidance for establishing and operating mitigation banks).
73. In addition to the furor surrounding the Mitigation MOA, the federal wetland program was buffeted by controversies about wetland delineation manuals, see Environmental Defense Fund & World Wildlife Fund, How Wet is a Wetland? (Jan. 1992) [hereinafter EDF & WWF], takings cases, see infra notes 117-40 and accompanying text, and an aborted enforcement initiative, see infra note 95.
74. E.g., Albrecht & Goode, supra note 17, at x (suggesting that "trouble looms when policies such as 'wetland sequencing' that are designed for nationally important aquatic areas are applied to [small] 'wetlands'"); Don Young, Wetlands Before Hospitals?, 12 Nat'l Wetlands Newsl. 3 (1990) (raising "questions of fairness and equality that seem to have received little attention in the formulation of [the MOA] policy").
75. See Searchinger, supra note 16, at 36-37 (summarizing complaints by members of the community affected by wetland regulations); Keith Schneider, Landowners Unite in Battle Against Regulators, N.Y. Times, Jan. 9, 1995, at A1 (discussing various property rights groups and their effect on governmental environmental policy).
76. U.S. EPA and U.S. Dep't of the Army, Memorandum to the Field: Appropriate Level of Analysis Required for Evaluating Compliance With the Section 404(b)(1) Guidelines Alternatives Requirements (Aug. 23, 1993), reprinted in 60 Fed. Reg. 13,709-11 (Mar. 14, 1995) [hereinafter Flexibility Memorandum].
77. Id. at 13,710.
78. Id. The Flexibility Memorandum also discussed the relationship between the avoidance analysis and the scope and cost of proposed projects. It stated that "[g]enerally, as the scope/cost of the project increases, the level of analysis should also increase." Id. at 13,711.
79. U.S. EPA & U.S. Dep't of the Army, Memorandum for the Field (Individual Permit Flexibility for Small Landowners) (Mar. 6, 1995).
80. Id. at 1.
81. 60 Fed. Reg. 38,650 (Jul. 27, 1995).
82. Id. Only individuals, rather than corporations, are allowed to use this NWP. Id. at 38,662.
83. Id. at 38,663. Interestingly, the preamble to the notice of the NWP's issuance asserts that "[c]ompensatory mitigation will generally not be accepted in lieu of on-site avoidance and minimation." Id. at 38,654. This statement does not appear to be consistent with the NWP's mitigation condition that discharges "must be minimized or avoided to the maximum extent practicable at the project site (i.e. on-site), unless the DE [Corps District Engineer] has approved a compensatory mitigation plan for the specific regulated activity." Id. at 38,663.
84. Indeed, it can be argued that a strict sequencing approach for all wetlands, regardless of their sizes, values, or functions, is a form of "tunnel vision," an administrative disease identified by Justice Breyer. Stephen Breyer, Breaking the Vicious Circle 11 (1993). Justice Breyer notes that carrying the "single-minded pursuit of a single goal too far" can result in "more harm than good." Id. Although Justice Breyer discusses the consequences of agencies seeking to remediate the "last 10 percent" in the context of health risk regulation, id. at 11-19, the principle is equally applicable to wetland regulation. Striving to protect all wetlands (including the least valuable 10 percent) can cause a public backlash against the regulatory process. See infra notes 141-61 and accompanying text (describing legislative attempts to reduce federal regulation of wetlands).
85. Cf. Thomas Addison & Timothy Burns, Comment, The Army Corps of Engineers and Nationwide Permit 26: Wetlands Protection or Swamp Reclamation?, 18 Ecology L.Q. 619, 638-40 (1991) (discussing potential of NWP 26 to degrade substantial acres of wetlands).
86. See U.S. Gen. Acct. Office, Wetlands: The Corps of Engineers' Administration of the Section 404 Program 55-73 (1988) (finding that Corps and EPA enforcement efforts are not effective).
87. Florida Dep't of Envtl. Reg., Report on the Effectiveness of Permitted Mitigation Sites (Mar. 1991) [hereinafter Florida DER, Mitigation Report].
88. U.S. EPA and U.S. Fish and Wildlife Serv., Interagency Follow-Through Investigation of Compensatory Wetland Mitigation Sites (May 1994) [hereinafter EPA & FWS, Mitigation Investigation].
89. Fla. Stat. Ann. § 403.918(2)(b) (West 1994).
90. Florida DER, Mitigation Report, supra note 73, at 4.
91. Id. at executive summary. A study for the South Florida Water Management District contained similar findings. Kevin L. Erwin, An Evaluation of Wetland Mitigation in the South Florida Water Management District 3 (1991) (observing hydrological problems at 25 of 40 (62.5%) mitigation sites).
92. Florida DER Mitigation Report, supra note 73, at executive summary. The report did find that where mitigation had been attempted, 27% of the projects could succeed. Id. at 3. If the permittees implemented simple remedial measures, the report suggested that the compliance rate for these projects could reach 40%. Id.
93. Id. at 5-6 (freshwater wetlands) & 11 (tidal wetlands).
94. Id. at 6 (freshwater wetlands) & 11 (tidal wetlands).
95. Id. at 3. Difficulty in creating freshwater wetlands is not unique to Florida. Similar problems exist in Southern California; a 1992 newspaper article
96. Florida DER, Mitigation Report, supra note 73, at 23.
97. Id. at 24.
98. Id. The DER recommended that when "tidal and freshwater wetland creation are authorized as mitigation, the permits must require that the wetlands be constructed before, or concurrently with, the authorized impacts." Id.
99. EPA & FWS, Mitigation Investigation, supra note 74, at 1.
100. Id. at 15.
101. Id.
102. Id. Some of the problems with mitigation failure can be traced to weak enforcement efforts. See ELI, supra note 28, at 109 (discussing studies in California, Florida, Oregon, Washington, and Gulf Coast states).
103. EPA & FWS, Mitigation Investigation, supra note 74, at 16.
104. Id.
105. Id.
106. Id.
107. Id.
108. The success rate also depends a great deal on the type of wetland system that is involved. See ELI, supra note 28, at 35-37 (discussing the use of the mitigation in restoration and enhancement projects); Florida DER, Mitigation Report, supra note 73, at 3 (noting distinction between tidal and freshwater mitigation projects).
109. Long before the National Rifle Association's infamous "jackboot" letter was publicized, the EPA was criticized as jackboots for its enforcement actions. Howard Kurtz, EPA Accused of Muddying Its "Jackboots" in Pennsylvania Wetlands, "Wash. Post, Jan. 3, 1990, at A3 (discussing the case of defendant John Poszgai). In the early 1990s, EPA and the Corps proposed a "Wetlands Enforcement Initiative." 56 Fed. Reg. 2408, 2414-17 (1991). The initiative sought to "emphasize the Federal government's commitment to Clean Water Act section 404 enforcement, to generally educate the regulated community and the public at large about the requirements of the section 404 program and the importance of wetlands, and to publicize Clean Water Act violations." Id. at 2414. EPA regions and Corps districts were to identify planned or pending enforcement actions against egregious violators that could be publicized. Id. at 2415. The proposed enforcement initiative was not particularly well-received in Congress. See, e.g., 137 Cong. Rec. 9340, 9343 (1991) (discussing Sen. Simpson's criticism of the enforcement initiative); 138 Cong. Rec. 2791, 2798 (1992) (discussing an article by Warren Brookes, submitted by Sen. Symms, describing the initiative as "a brutal display of naked power"). The agencies never went forward with the enforcement initiative.
110. Haynes & Gardner, supra note 8, at 10,262; H.R. 961, 104th Cong., 1st Sess. § 801(a) (5) (1995).
111. Penn Central Transp. Co. v. New York City, 438 U.S. 104, 123-24 (1978).
112. Id. at 124.
113. Id.
114. The relationship between the factors can be nebulous. For example, one view of the "interference with investment-backed expectations" criterion is that it is simply a measure of damages, rather than a separate factor. Richard A. Epstein, Takings: Private Property and the Power of Eminent Domain 65 (1985). Moreover, the "character of the government's action" criterion can be seen as a threshold inquiry that determines whether categorical treatment is appropriate. Haynes & Gardner, supra note 8, at 10,262 n.21.
115. Compare Loveladies Harbor, Inc. v. United States, 28 F.3d 1171 (Fed. Cir. 1994) (finding that a 99% diminution effected a taking) and Bowles v. United States, 31 Fed. Cl. 37 (1994) (holding that over 90% diminution effected a taking) with Ciampitti v. United States, 22 Cl. Ct. 310 (1991) (finding that 25% diminution did not constitute a taking).
116. Florida Rock Indus., Inc. v. United States, 18 F.3d 1560, 1567 (Fed. Cir. 1994), cert. denied, 115 S. Ct. 898 (1995).
117. See Loveladies Harbor, Inc. v. United States, 21 Cl. Ct. 153, 158-59 (1990) (examining remaining uses of property after permit denial); Florida Rock, 18 F.3d at 1566 (discussing speculative investment as a post-denial use).
118. 112 S. Ct. 2886, 2899 (1992).
119. Id.
120. Id.
121. Id.
122. Lucas v. South Carolina Coastal Council, 404 S.E.2d 895, 896 (S.C. 1991).
123. Id. at 901-02.
124. In its opinion, the Court first disposed of a procedural issue. Lucas, 112 S. Ct. at 2890. In 1990, during the pendency of the case before the South Carolina Supreme Court, South Carolina amended the Beachfront Management Act to provide for special permits for occupiable structures. Id. at 2890-91. The Coastal Council argued to the United States Supreme Court that Lucas must now apply for the special permit, and a decision be made on that application, before his takings claim could be considered appropriate for judicial review. Id. at 2891. The Supreme Court concluded that Lucas had presented a ripe claim for a temporary taking with respect to the time period between 1988 and 1990. Id. at 2891-92.
125. Id. at 2893.
126. Id. Any permanent physical occupation authorized by the government, no matter how small, can result in a taking. E.g., Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982) (holding that state law requiring landlords to permit installation of cable facilities on their properties constitutes a taking).
127. Lucas, 112 S. Ct. at 2893.
128. Id. at 2895. After articulating this "bright line" test, the Court then carved out a narrow exception. When acting to proscribe a use that does not inhere in the property's title, the government need not provide just compensation, even if the regulation renders the property valueless. Id. at 2899. The Court limited this exception to "the restrictions that background principles of the State's law of property and nuisance already place upon land ownership." Id. at 2900. Simply put, prohibition of common law nuisances does not result in a taking. As an example, the Court stated that the government need not compensate an owner who is denied a permit "to engage in a landfilling operation that would have the effect of flooding others' land." Id. Background principles of a state's law of property also could include the public trust doctrine. See Paul Sarahan, Wetlands Protection Post-Lucas: Implications of the Public Trust Doctrine on Takings Analysis, 13 Envtl. L.J. 537, 564-65 (1994) (suggesting that the public trust doctrine may be invoked to defeat takings claims related to wetland permit denials).
129. Loveladies Harbor, Inc. v. United States, 28 F.3d 1171, 1179 (Fed. Cir. 1994). Loveladies reasoned that Lucas dramatically altered the "character of the government action" criterion. According to Loveladies, prior to Lucas this criterion involved balancing an "owner's right to own and use the property without unwarranted governmental interference on the one hand, and on the other, the public interest asserted by the Government in support of the regulatory imposition . . . ." Id. at 1178. Lucas, in the view of the Loveladies' court, removed any balancing in this criterion; instead the question is whether the government is interfering with "an interest vested in the owner, as a matter of state property law, and not within the power of the state to regulate under common law nuisance doctrine." Id. at 1179.
130. Loveladies grossly mischaracterizes the effect of Lucas. Rather than effecting a sea change in the "character of the government action" criterion, Lucas affects (slightly) the economic impact criterion. Lucas clearly states that categorical treatment is only appropriate when the economic impact upon a property owner is total - i.e., the property has no economic or beneficial use because of the governmental action. Lucas's limited impact on the ad hoc balancing test is made clear in footnote 8. In that footnote, Justice Scalia responds to Justice Stevens' criticism that the "'deprivation of all economically beneficial use' rule [is] 'wholly arbitrary', in that '[the] landowner whose property is diminished in value 95% recovers nothing' while the landowner who suffers a complete elimination of value 'recovers the land's full value.'" Lucas, 112 S. Ct. at 2895 n.8 (quoting Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886, 2919 (Stevens, J., dissenting)). Noting that the landowner suffering a 95% deprivation may not invoke Lucas's categorical rule, Justice Scalia emphasizes that the landowner may still recover under the ad hoc balancing approach outlined in Penn Central. Id.
131. Loveladies Harbor, Inc. v. United States, 28 F.3d 1171 (Fed. Cir. 1994); Formanek v. United States, 26 Cl. Ct. 332, 335 (1992); Bowles v. United States, 31 Fed. Cl. 37, 49 (1994). The federal government has also settled two cases. The first was Beuré-Co. v. United States, 16 Cl. Ct. 42, 51 (1988) (holding that a takings claim is ripe for review), which settled for $761,818. James S. Burling, Protecting Property Rights in Aquatic Resources After Lucas, in Water Law Trends, Policies, and Practice 56 (Kathleen M. Carr & James D. Crommond, eds. 1995). The second involved a 2.8-acre lot in Old Orchard Beach, Maine, which settled for $338,000. Keith Schneider, Landowners Unite in Battles Against Regulators, N.Y. Times, Jan. 9, 1995, at A2.
132. Loveladies Harbor, Inc. v. United States, 28 F.3d 1171 (Fed. Cir. 1994); Formanek v. United States, 26 Cl. Ct. 332, 335 (1992); Bowles v. United States, 31 Fed. Cl. 37, 49 (1994). The federal government has also settled two cases. The first was Beuré-Co. v. United States, 16 Cl. Ct. 42, 51 (1988) (holding that a takings claim is ripe for review), which settled for $761,818. James S. Burling, Protecting Property Rights in Aquatic Resources After Lucas, in Water Law Trends, Policies, and Practice 56 (Kathleen M. Carr & James D. Crommond, eds. 1995). The second involved a 2.8-acre lot in Old Orchard Beach, Maine, which settled for $338,000. Keith Schneider, Landowners Unite in Battles Against Regulators, N.Y. Times, Jan. 9, 1995, at A2.
133. 28 F.3d 1171, 1174 (Fed. Cir. 1994).
134. Id. At the time of its permit application, Loveladies had sold all but 6.4 acres of the filled 199 acres. Id. at 1180.
135. Of the 12.5 acres, 11.5 acres were wetlands. Id. at 1174.
136. Id. at 1173. In determining what was the property at issue, the trial court focused solely on the 12.5 acres that were the subject of the permit application. The trial court excluded consideration of the 199 acres previously developed, the 6.4 acres of developed land which Loveladies still owned, and the remaining 38.5 acres of the 51-acre site. Id. at 1180-81. The Federal Circuit affirmed the trial court's decision. With respect to the "parcel as a whole" issue, the Federal Circuit was unconvinced that the trial court erred in its limited focus. Id. at 1182. The appellate court then examined the decision in light of Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886 (1992). Because the permit denial deprived Loveladies of all economically feasible use of the 12.5 acres, the denial amounted to a taking per se. Loveladies Harbor, 28 F.3d at 1182. Moreover, the filling of wetlands for a housing project did not constitute a common law nuisance that would have excused the government from providing just compensation. Id. at 1182-83.
137. Loveladies Harbor, Inc. v. United States, 21 Cl. Ct. 153, 159 (1990).
138. Id.
139. Id. at 160.
140. The trial court and appellate court reached the same conclusion, but by different means. Id. at 160 & n.9. The trial court decision, which was pre-Lucas, employed a balancing test Id. The appellate court decision, which was post-Lucas, treated the permit denial categorically. Loveladies Harbor, 28 F.3d at 1182.
141. 26 Cl. Ct. 332 (1992).
142. Id. at 333.
143. Id. at 333 & n.4.
144. Id. at 334.
145. Id. at 338-39.
146. Formanek, 26 Cl. Ct. at 340.
147. Id. The court reasoned that "there is no incentive to purchase the land for that [preservation] purpose as the government's action ensures that the land will be maintained in its natural state." Id. The court thus determined that "no competitive market" existed for Formanek's property "without the possibility of development." Id.
148. Id.
149. Id. at 341.
150. 31 Fed. Cl. 37, 49 (1994). In 1980, Bowles purchased a waterfront lot in a residential subdivision, intending to build his retirement home there. Id. at 40. The restrictive covenants in the subdivision required him to install a septic tank. Id. at 42. The building of the home and installation of the septic tank would require the filling of wetlands. Id. at 40. Accordingly, Bowles applied for a Clean Water Act § 404 permit; the Corps of Engineers denied the permit in 1984. Id. Bowles then brought a takings claim. Id.
151. Id. at 45 (discussing Lucas, 112 S. Ct. at 2894-895).
152. Id. at 47.
153. Id. at 49.
154. Id. at 48.
155. See Memorandum, Dep't of the Army, U.S. Army Corps of Eng'rs, Guidance on Alleged "Regulatory Takings" 2 (Apr. 30, 1991) (emphasizing to field personnel that recent takings judgments "should not alter current Corps regulatory policy or interfere with the Corps' legally mandated regulatory responsibilities") (appearing in materials for the National Real Estate Development Center's Seminar on Land Use and Regulation in the Wake of Lucas (Sep. 1, 1992)).
156. For example, Loveladies began its takings challenge in 1984 and finally prevailed in 1994. Loveladies Harbor, Inc. v. United Slates, 28 F.3d 1171, 1173 (Fed. Cir. 1994). Florida Rock brought its takings claim in 1982, and a final decision has yet to be rendered. Florida Rock Indus., Inc. v. United States, 18 F.3d 1560, 1562 (Fed. Cir. 1994).
157. See, e.g., Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 413 (1922) (observing that "government hardly could go on if to some extent values incident to property could not be diminished without paving for every such change in the general law").
158. While this section will focus on federal developments, the states are active in this area as well. See, e.g., 1995 N.D. Laws 1630 (repealing authorization for North Dakota's wetland mitigation bank); Bert J. Harris, Jr., Private Property Rights Protection Act, 1995 Fla. Sess. Law Rep. 95-181.
159. Many critics refer to it as the Dirty Water Act See, e.g., Dirty Water Act, Newark Star-Ledger, May 22, 1995 ("The new bill would relax national water quality standards, repeal a requirement that industrial facilities and municipalities obtain permits to discharge polluted stormwater into waterways and grant a series of waivers and exemptions from anti-pollution measures for a variety of industries and small communities."); Don't Dirty Our Water, Portland Oregonian, May 31, 1995, at B8 (arguing that the bill "would ease wetlands protection, relax national water-quality standards, exempt industries from many of the protections on the books and end regulation of storm-water pollution").
160. H.R. 961, 104th Cong., 1st Sess. § 803(g) (1995). The proposed legislation would require that an area be inundated or saturated for at least 21 consecutive days during the growing season in order to meet the definition of "wetland". Id. § 803(q)(B)(iv). This is very similar to the proposal supported by Vice President Quayle's Competitiveness Council. See 56 Fed. Reg. 40,446 (1991) (proposing revisions to the 1989 Federal Manual for Identifying and Delineating Jurisdictional Wetlands). For a critique of that approach, see generally EDF & WWF, supra note 59.
161. This approach is not without precedent. In 1993, the Corps and EPA codified in regulation a policy that excluded prior converted croplands from the definition of "water of the United States" for Clean Water Act purposes. See 58 Fed. Reg. 45,008, 45,036-38 (Aug. 25, 1993), 33 C.F.R. § 328.3(a)(8) (1994) & 40 C.F.R. § 230.3(s)(7) (1994). For a discussion of the merits of the policy, compare Michael L. Davis, The Case for Deregulating Prior Converted Croplands, 12 Nat'l Wetlands Newsl. 2, 2 (1990) with Jan Goldman-Carter, Cropped Wetlands Deserve Protection, Too, 12 Nat'l Wetlands Newsl. 3, 4 (1990).
162. H.R. 961, § 803(c)(1).
163. Id. § 803(c)(3)(C).
164. Id. § 803(c)(6).
165. Id. § 803(c)(3)(B).
166. Id. § 803(e)(3)(A). A permit would be granted if the project was found to be in the public interest Id. This requirement for an affirmative finding is slightly different from the Corps' present public interest test, which authorizes projects so long as they are not found to be "contrary to the public interest" 33 C.F.R. § 320.4(a) (1994). Of course, under the current regulatory regime, a project must also comply with the § 404(b)(1) guidelines. See 40 C.F.R. § 230 (1994).
167. H.R. 961, § 803(e)(2).
168. Id. § 803(d)(1).
169. H.R. 925, 104th Cong., 1st Sess. (1995).
170. Id. § 3(a). Takings jurisprudence generally eschews categorical rules regarding the economic impact of governmental actions. In cases in which courts have found takings, the diminution of value is far greater than 20%. This 20% rule is not H.R. 925's only departure from generally accepted takings principles. Most significantly, H.R. 925 applies its 20% rule not to the parcel as a whole, but to only the affected portion of the property. Id. Accordingly, almost every wetland permit denial or permit condition that calls for a project to avoid or preserve wetlands will require the federal government to provide compensation. Moreover, H.R. 925 arguably does away with any requirements for final agency action. See United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 126-27 (1985) (holding that mere assertion of regulatory jurisdiction does not amount to a taking). H.R. 925 can be interpreted to require compensation when the government identifies or delineates a landowner's property as a wetland, if that action causes a decline in the property's fair market value. See H.R. 925, § 3 (a).
171. H.R. 925, § 10(5)(A).
172. The Judgment Fund is a permanent appropriation established by 31 U.S.C. § 1304 (1988 & Supp. V 1993). Successful takings claims are paid from this account, rather than an agency's appropriations, which fund an agency's operating expenses, including salary and overhead.
173. See id.
174. H.R. 925, § 6(f).
175. The Corps' regulatory budget for fiscal year 1995 was $101 million. Energy and Water Development Appropriations Act, 1995, P.L. No. 103-316, 103d Cong., 2d Sess. (1994). If H.R. 925 requires the Corps to compensate landowners for every permit denial (several hundred each year) and every permit condition that calls for a project to avoid or preserve wetlands (thousands each year), see supra note 155, it is clear that the Corps' entire budget would be consumed.
176. See Browner Says Agency 'Will Not Be Partner' to Republican Rollback of Environmental Law, 26 Env't Rep. (Bureau of Nat'l Affairs) 466 (Jun. 23, 1995) (stating EPA administrator Browner's position that the EPA would not be a partner to a bill that would "roll back 25 years of environmental progress").
177. For a further discussion of the different types of mitigation banks, see ELI, supra note 28, at 43-46 (identifying different types of mitigation banks and classifying the banks into four distinct patterns: "the 'single-client' bank, the resource agency bank, the entrepreneurial bank, and the 'banking system'").
178. Theoretically, there may be no need to obtain a permit if the mitigation involves creating a wetland where none existed or restoring a wetland where one had previously existed. Early involvement of regulatory agencies is still critical, however, to ensure that mitigation gains are assessed accurately.
179. A regulatory agency's approval will always be needed when mitigation credits are to be used as compensatory mitigation in the context of a permit. Agencies sometimes require compensation ratios higher than 1:1. See e.g., N.J. Admin. Code tit 7, §§ T1, 7A-14.2(a)(2)(i) (1992) (stating that the ratio for created wetlands is "two acres created to one acre lost").
180. See infra notes 253-67 (listing and generally describing the statutes or regulations enacted by various states).
181. Although the Clean Water Act does not mention mitigation banking, other federal statutes encourage the use of banks. See Intermodal Surface Transp. Efficiency Act of 1991, 23 U.S.C. § 103(i)(13) (Supp. V 1993) (authorizing use of federal funds to assist states in establishing wetland mitigation banks).
182. Some restoration and creation activities may be authorized by general permit. See 33 C.F.R. § 330, app. A (nationwide permit 27) (1994) (describing wetland and riparian restoration and creation activities authorized by nationwide permit).
183. Typically, the MOA's signators will include federal and state regulatory and natural resource agencies.
184. Florida DER, Mitigation Report, supra note 73, at 23-24. Moreover, in the creation context, the upland area to be converted may provide environmental functions that will be lost in the conversion. Uplands are important too.
185. See ELI, supra note 28, at 156 (recommending that "[m]itigation banks relying on preservation should be prohibited except for losses of particularly rare and hard-to-replicate systems").
186. See Karen A. Jordan, Perpetual Conservation: Accomplishing the Goal Through Preemptive Federal Programs, 43 Case W. Res. L. Rev. 401, 406-12 (1993) (explaining land use restriction easements).
187. See EPA & FWS, Mitigation Investigation, supra note 74, at 33 (noting need for buffer zones).
188. Some groups decline to recognize that preservation has any role in mitigation banking. Corps, First Phase Report, supra note 28, at 24 n.34. Others seek to limit its use to high-quality or rare wetlands or by imposing high compensation ratios. See ELI, supra note 28, at 156 (maintaining that "[p] reservation banking should be prohibited except in order to compensate for unavoidable destruction of irreplaceable wetland types/habitats").
189. ELI, supra note 28, at 88.
190. Id. at 78-79.
191. Id. A regulatory agency may, however, require compensation ratios greater than 1:1.
192. Id. at 79.
193. These methodologies were developed initially for use in evaluating impacts of proposed projects, not for mitigation banking purposes.
194. U.S. Fish and Wildlife Serv., Ecological Services Manual, Standards for the Development of Habitat Suitability Index Models 103-ESM-1-2 (1981). This approach relies on a habitat suitability index (HSI) for particular indicator species. "The HSI has a minimum value of 0.0 which represents totally unsuitable habitat and a maximum value of 1.0 which represents optimum habitat." Id.
195. Id. at 103-ESM-1-1.
196. Id.
197. Consider the following example of an enhancement project. A farmer plants crops in and around a prairie pothole. The prairie pothole occasionally floods and is used by mallards; the flooding does not, however, significantly interfere with the farming activities. An enhancement project might involve ceasing farming in and adjacent to the prairie pothole and planting native aquatic vegetation. Once the vegetation is in place, the prairie pothole is now a more attractive place for mallards to land; there is now some cover from predators and additional food sources. Such an enhancement project would clearly increase the HUs of the prairie pothole.
198. 2 Paul R. Adamus et al., Wetland Evaluation Technique (WET) Methodology (1987).
199. Id. at 89. The functions examined are: groundwater recharge, groundwater discharge, flood-flow alteration, sediment stabilization, sediment retention, nutrient removal, food chain support, aquatic diversity or abundance, wildlife diversity or abundance for breeding, wildlife diversity or abundance for migration and wintering, and recreational opportunities. Id. at 89-136.
200. ELI, supra note 28, at 85 (quoting Adamus & Clairain 1988).
201. The Clinton Administration is committed to the rapid development of the HGM approach. Clinton Administration Approach, supra note 41, at 14.
202. Telephone Interview with Michael L. Davis, Chief of Regulatory Program, U.S. Army Corps of Engineers (Nov. 15, 1995).
203. Accordingly, if a sequential approach to mitigation is used, a permit applicant must still avoid and minimize impacts before turning to a mitigation bank for compensatory mitigation.
204. Of course, the long-term survival of the mitigation could be threatened by natural occurrences or the lack of a well-planned maintenance strategy.
205. U.S. Army Corps of Eng'rs, Expanding Opportunities for Successful Wetland Mitigation: The Private Credit Alternative 43-44 (1994) [hereinafter Corps, Private Credit Alternative].
206. See ELI, supra note 28, at 60 (describing approach that requires "a higher compensation ratio for credits used before they reach full functional replacement").
207. Lew Lautin, Florida Wetlandsbank Bond Release Schedules (May 9, 1995) (presented at CLE International's Florida Wetlands Conference in Orlando, Florida).
208. Corps, Private Credit Alternative, supra note 190, at 29-30.
209. Remedial actions may be necessary to maintain appropriate hydrology, to replant aquatic vegetation, or to remove invasive species, such as the melaleuca tree.
210. Mitigation sites do in fact become the subject of fill permits. See, e.g., Florida DER, Mitigation Report, supra note 73, at 18 (stating that five former mitigation sites were approved to be filled); see also Dufau v. United States, 22 Cl. Ct. 156, 159-60 (1990) (noting that the Corps granted a permit to fill 13 acres previously "set aside" as mitigation for earlier permit).
211. See, e.g., 33 U.S.C. § 1319 (1988 & Supp. V 1993) (listing penalties for violation of permit conditions or limitations).
212. If the bank sponsor is not a party to the permit, there is some question as to whether a regulatory agency may bring an enforcement action against the sponsor. Corps, First Phase Study, supra note 28, at 27. The bank sponsor may be a party to an MOA, but the enforceability of such a document is also open to question. Id.
213. Haynes & Gardner, supra note 8, at 10,262.
214. See Jordan, supra note 170, at 408 (discussing the use of conservation easements).
215. See Peter A. Buchsbaum, Federal Regulation of Land Use: Uncle Sam the Permit Man, 25 Urb. L. 589, 599-604 (1993) (describing the most commonly used federal nationwide permits).
216. Of course, in some circumstances, a smaller wetland system, such as a playa lake or prairie pothole, may provide critical functions. See Stephen M. Johnson, Federal Regulation of Isolated Wetlands, 23 Envtl. L. 1, 30 (1993) (outlining studies which concluded that isolated wetlands serve important functions).
217. One solution to the failure of mitigation could be to deny more permits or to increase enforcement efforts. See Maria E. Chang, Citizen Suits: Toward a Workable Solution to Help Created Wetlands Succeed, U. Fla. J.L. & Pub. Pol'y 77, 89-92 (1993) (advocating use of citizen suits to ensure compliance with permit conditions requiring compensatory mitigation). While greater monitoring and enforcement efforts (whether by regulatory agencies or the public) would probably reduce the number of mitigation failures, there seems to be little chance that legislatures will be moving in that direction. Indeed, it is more likely that enforcement budgets will be cut.
218. Haynes & Gardner, supra note 8, at 10,262.
219. Daniel J. Dudek & John Palmisano, Emissions Trading: Why is this Thoroughbred Hobbled?, 13 Colum. J. Envtl. L. 217, 218 (1988) (stating "[s]ince 1976, politicians, economists, attorneys and policy analysts have written at least 100 articles endorsing market-based approaches to achieving regulatory goals"). For a history of market-based approaches in environmental law, see Robert W. Hahn & Robert N. Stavins, Incentive-Based Environmental Regulation: A New Era From an Old Idea?, 18 Ecology L.Q. 1 (1991). Title IV of the Clean Air Act Amendments of 1990, which seeks to reduce sulfur dioxide and nitrogen oxide pollution, is perhaps the best-known market-based approach to environmental threats. 42 U.S.C. §§ 7651-7651(o) (Supp. V. 1993). For a brief description of Title IV's emissions trading program, see Gary C. Bryner, Blue Skies, Green Politics 126-27 (1993).
220. Daniel J. Dudek & John Palmisano, Emissions Trading: Why is this Thoroughbred Hobbled?, 13 Colum. J. Envtl. L. 217, 218 (1988) (stating "[s]ince 1976, politicians, economists, attorneys and policy analysts have written at least 100 articles endorsing market-based approaches to achieving regulatory goals"). For a history of market-based approaches in environmental law, see Robert W. Hahn & Robert N. Stavins, Incentive-Based Environmental Regulation: A New Era From an Old Idea?, 18 Ecology L.Q. 1 (1991). Title IV of the Clean Air Act Amendments of 1990, which seeks to reduce sulfur dioxide and nitrogen oxide pollution, is perhaps the best-known market-based approach to environmental threats. 42 U.S.C. §§ 7651-7651(o) (Supp. V. 1993). For a brief description of Title IV's emissions trading program, see Gary C. Bryner, Blue Skies, Green Politics 126-27 (1993).
221. Daniel J. Dudek & John Palmisano, Emissions Trading: Why is this Thoroughbred Hobbled?, 13 Colum. J. Envtl. L. 217, 218 (1988) (stating "[s]ince 1976, politicians, economists, attorneys and policy analysts have written at least 100 articles endorsing market-based approaches to achieving regulatory goals"). For a history of market-based approaches in environmental law, see Robert W. Hahn & Robert N. Stavins, Incentive-Based Environmental Regulation: A New Era From an Old Idea?, 18 Ecology L.Q. 1 (1991). Title IV of the Clean Air Act Amendments of 1990, which seeks to reduce sulfur dioxide and nitrogen oxide pollution, is perhaps the best-known market-based approach to environmental threats. 42 U.S.C. §§ 7651-7651(o) (Supp. V. 1993). For a brief description of Title IV's emissions trading program, see Gary C. Bryner, Blue Skies, Green Politics 126-27 (1993).
222. See Roy R. Lewis, Why Florida Needs Mitigation Banking, 14 Nat'l Wetlands Newsl. 7 (1992) (arguing that mitigation banks would improve the success of wetland mitigation by encouraging the development of large-scale, cost-effective mitigation sites, thereby allowing limited compliance staff to operate more efficiently). Of course, protecting the environment also serves the public's interest.
223. This benefit was initially discussed in Haynes & Gardner, supra note 8, at 10,262-68.
224. See supra notes 117-40 and accompanying text (discussing permit denials which sometimes constitute takings). Some permit conditions may give rise to a successful takings (or unconstitutional exaction) claim. E.g., Dolan v. Tigard, 114 S. Ct. 2309, 2310 (1994) (stating that a requirement to dedicate a portion of the property as a condition of further development was a taking if a sufficient nexus between legitimate state interest and the permit condition did not exist); Nollan v. California Coastal Comm'n, 483 U.S. 825, 825 (1987) (stating that permit condition regarding the granting of an easement was a taking if condition did not substantially further governmental interests). The initiation of enforcement actions and jurisdictional delineations also prompt taking claims, but these are not successful. E.g., Tabb Takes, Ltd. v. United States, 10 F.3d 796, 800-02 (Fed. Cir. 1993) (holding that the issuance of cease-and-desist order by Corps does not in itself constitute a taking).
225. See 26 Cl. Ct. at 339-40 (stating that the value before the taking was $933,921).
226. See Ciampitti v. United States, 22 Cl. Ct. 310, 320 (1991) (holding that a 25% diminution in value did not amount to a taking); Florida Rock Indus., Inc. v. United States, 18 F.3d 1560, 1567 (Fed. Cir. 1994) (suggesting that a diminution of 62% may not amount to a taking). Older Supreme Court cases suggest that the range of acceptable reductions may be greater. E.g., Euclid v. Ambler Realty Co., 272, U.S. 365, 385 (1926) (holding that a 75% diminution is not a taking); Hadachek v. Sebastian, 239 U.S. 394, 414 (1915) (holding that a 87.5% diminution is not a taking).
227. See Blumm, supra note 27, at 227 (discussing reliability concerns of mitigation banking); Searchinger, supra note 16, at 38-40 (discussing difficulties of creating self-sustaining wetlands).
228. Concededly, however, those advocating an elimination of wetland regulation will not be assuaged by mitigation banking's middle-of-the-road approach. Cf. Sierra Club Says Administration Should Shift Focus to Restoration, 1994 Daily Env't Rep. (Bureau of Nat'l Affairs) 20 (Feb. 1, 1994) (stating that "'in the middle of the road all you find is [sic] dead armadillos'").
229. See Proposed Federal Guidance for the Establishment, Use, and Operation of Mitigation Banks, 60 Fed. Reg. 12,286, (Mar. 6, 1995) [hereinafter Proposed Federal Guidance].
230. See Searchinger, supra note 16, at 40 (noting that the "existence of a mitigation bank may make regulators more likely to grant permits").
231. See Want, supra note 9, at 13-2 (stating that 31 states have wetland protection laws).
232. See, e.g., Federal and State Coordination: Wedands Protection, 46 Admin. L. Rev. 447, 450 (1994) (describing how New Jersey's program "goes beyond the federal program").
233. Actually, the Clean Water Act only mentions the term "wetlands" in conjunction with state assumption of the federal program. 33 U.S.C. § 1344(g) (stating that states may not assume sole regulation of tidal wetlands). Section 404 also does not use the term "mitigation." Instead, Corps and EPA regulations define "waters of the United States" to include wetlands, 33 C.F.R. § 328.3(a) & (b) (1994), 40 C.F.R. § 230.3(s) & (t) (1994), and the § 404(b)(1) guidelines discuss general mitigation requirements. 40 C.F.R. § 230.10 (1994).
234. The Corps and EPA frequently rely on guidance documents, such as regulatory guidance letters or memoranda of agreement, which have not been subjected to the Administrative Procedure Act's notice-and-comment rulemaking process. See Royal C. Gardner, Public Participation and Wetlands Regulation, 10 UCLA J. Envtl. L. & Pol'y 1, 24-39 (1991) (discussing use of memoranda of agreement, wetland delineation manuals, and other guidance documents). For an excellent explanation of why agencies avoid the notice-and-comment process, see Thomas O. McGarity, Some Thoughts on "Deossifying" the Rulemaking Process, 41 Duke L.J. 1385, 1436-58 (1992).
235. The Corps and EPA frequently rely on guidance documents, such as regulatory guidance letters or memoranda of agreement, which have not been subjected to the Administrative Procedure Act's notice-and-comment rulemaking process. See Royal C. Gardner, Public Participation and Wetlands Regulation, 10 UCLA J. Envtl. L. & Pol'y 1, 24-39 (1991) (discussing use of memoranda of agreement, wetland delineation manuals, and other guidance documents). For an excellent explanation of why agencies avoid the notice-and-comment process, see Thomas O. McGarity, Some Thoughts on "Deossifying" the Rulemaking Process, 41 Duke L.J. 1385, 1436-58 (1992).
236. Cf. U.S. Fish and Wildlife Serv., Ecological Service Instructional Memorandum No. 80 (1983) (providing interim guidance on mitigation banking); see also U.S. EPA & U.S. Dep't of the Army, Memorandum to the Field (Aug. 23, 1993) (discussing the establishment and use of wetland mitigation banks in the Clean Water Act § 404 regulatory program, reprinted in 60 Fed. Reg. 13,711-12 (Mar. 14, 1995)) [hereinafter EPA & Army, Interim Mitigation Banking Guidance].
237. See, e.g., U.S. Environmental Protection Agency Region IX, Mitigation Banking Guidance (1991).
238. Mitigation MOA, supra note 41, at 9212.
239. See EPA & Army, Interim Mitigation Banking Guidance, supra note 218.
240. Federal Guidance for the Establishment, Use and Operation of Mitigation Banks, 60 Fed. Reg. 58,605 (Nov. 28, 1995) [hereinafter Federal Guidance]. Interestingly, the five agencies involved - the Corps, EPA, NRCS, FWS, and NMFS - sought public comment on the guidance. See Proposed Federal Guidance, supra note 212. Because the guidance is an "interpretative rule," the agencies could have foregone the notice-and-comment process. See 5 U.S.C. § 553(b)(3)(A) (1994).
241. Federal Guidance, supra note 222, at 58,609. The federal guidance also encourages the bank sponsor, prior to the submission of the prospectus to the Corps, to consult with other "appropriate agencies." Id. The guidance describes the process as "pre-application coordination," but bank sponsors may view the prospect of contending with various federal and state agencies as a regulatory nightmare. In the context of individual permit applications (not involving mitigation banks), the Corps has stated that it "is responsible for initiating, coordinating, and conducting pre-application consultations" between the permit applicant and the federal resource agencies (the EPA, the FWS, and the NMFS). U.S. Army Corps of Engineers, Regulatory Guidance Letter 92-1 (Federal Agencies Roles and Responsibilities), 60 Fed. Reg. 13,703, 13,704 (Mar. 14, 1995) [hereinafter Corps Regulatory Guidance Letter 92-1]. Thus, the typical permit applicant has a single point of contact with the federal government: the Corps, which will coordinate with other interested agencies. In contrast, in the mitigation banking guidance, the Corps appears to abidicate its responsibility to lead the pre-application process, instead thrusting the responsibility back to the bank sponsor.
242. Federal Guidance, supra note 222, at 58,609.
243. 33 U.S.C. § 1344(a) (1989).
244. Federal Guidance, supra note 222, at 58,610.
245. Id.
246. Id. The agencies define consensus as "a process by which a group synthesizes its concerns and ideas to form a common collaborative agreement acceptable to all members. While the primary goal of consensus is to reach agreement on an issue by all parties, unanimity may not always be possible." Id. at 58,613.
247. The federal guidance does state, however, that the MBRT Chair (a Corps representative) has "the responsibility for making final decisions regarding the terms and conditions of the banking instrument where consensus cannot otherwise be reached within a reasonable time frame (e.g., 90 days from the date of submittal of a complete prospectus)." Id. at 58,610. Whether, in light of the guidance's emphasis on consensus, Corps representatives will exercise this "responsibility" remains to be seen.
248. Id.
249. Id.
250. See Memorandum of Agreement Between the Environmental Protection Agency and the Department of the Army (Aug. 11, 1992) (outlining permit elevation process for the EPA under Clean Water Act § 404(q)); Memorandum of Agreement Between the Department of the Interior and the Department of the Army (Dec. 21, 1992) (outlining permit elevation process for the FWS under Clean Water Act § 404(q)); Memorandum of Agreement Between the Department of Commerce and the Department of the Army (Aug. 11, 1992) (outlining permit elevation process for the NMFS under Clean Water Act § 404(q)). For a discussion of these § 404(q) MOAs, see Michael L. Davis & Royal C. Gardner, Recognizing the Corps' Commitment, 15 Nat'l Wetlands News 9, 9-10 (1993).
251. Federal Guidance, supra note 222, at 58,608.
252. Id.
253. Id. The proposed guidance stated that these creation projects "should be avoided to the extent possible." Proposed Federal Guidance, supra note 212, at 12,288. Although the final guidance dropped that phrase, the final guidance clearly discourages the use of creation.
254. Federal Guidance, supra note 222, at 58,609.
255. Id. at 58,608. The guidance also permits upland areas to be included in wetland mitigation banks, if the areas "increase the overall ecological functioning of the bank." Id. at 58,609. Thus, buffer zones surrounding a mitigation site may be included in banks. The guidance notes that these upland areas may not necessarily produce mitigation credits in and of themselves; rather, these areas will usually "increase the per-unit value of the aquatic habitat in the bank." Id. Upland areas might produce limited credit, however, when they "directly enhance or maintain the integrity of the aquatic ecosystem" and "might otherwise be subject to threat of loss or degradation." Id.
256. Id. at 58,611-12.
257. The proposed guidance suggested this 15% example. Proposed Federal Guidance, supra note 212, at 12,291. Because some commentators viewed this level as a floor and others viewed it as a ceiling, the agencies omitted it from the final guidance. Thus, the decision regarding the exact percentage of withdrawals will be made on a case-by-case basis. In any event, the final guidance emphasizes that any such debiting will be "limited." Federal Guidance, supra note 222, at 58,612.
258. Id.
259. Id. In addition to the appropriate land use restrictions, certain physical changes (such as fencing) may be necessary.
260. Id. at 58,609 & 58,613.
261. Id. at 58,612.
262. Id. at 58,608.
263. The proposed guidance specifically mentioned "financial assurances" in this context Proposed Federal Guidance, supra note 212, at 12,288. Although the final guidance omitted the phrase, it states that [i]n circumstances where establishment of a bank does not require such authorization, the details of the bank sponsor's responsibilities should be delineated by the relevant authorizing agency in any permit in which the permittee's mitigation obligations are met through use of the bank. In addition, the bank sponsor should sign such permits for the limited purpose of meeting those mitigation responsibilities, thus confirming that those responsibilities are enforceable against the bank sponsor if necessary. Federal Guidance, supra note 222, at 58,612 (parenthetical omitted). The delineation of the bank sponsor's responsibilities could include additional financial assurances.
264. Many, if not most, mitigation projects require a Clean Water Act § 404 permit because existing wetlands are manipulated to some degree. In those instances, the permit will incorporate the banking instrument, thus ensuring that the latter is enforceable.
265. Federal Guidance, supra note 222, at 58,612-13.
266. Id. at 58,613.
267. Id. at 58,612.
268. The Corps and the EPA share enforcement authority for the Clean Water Act § 404 program. See 33 U.S.C. § 1319 (1988 & Supp. V 1993) (outlining enforcement procedures and penalties).
269. Id. § 1319(g), (b), & (c) (1988 & Supp. V 1993).
270. New State Ice Co. v. Liebmann, 285 U.S. 262, 311 (1932) (Brandeis, J., dissenting).
271. Some states rely on the federal program, while others are studying the issue or actively developing their own policies. For example, Massachusetts is exploring the option of implementing one or two pilot mitigation bank projects. See Wetland Mitigation Banking in Massachusetts 11 (May 12, 1995 draft) (Report and Recommendations of the Wetlands Restoration & Banking Advisory Committee to Massachusetts Secretary of Environmental Affairs Trudy Coxe) (exploring whether compensatory wetland mitigation banking could improve mitigation success in Massachusetts). Similarly, Connecticut is working on state-wide regulations for mitigation banking. Telephone Interview with Brian Golemblewski, Environmental Analyst, State of Connecticut Department of Environmental Protection, Inland Water Resources Division (Aug. 8, 1995). With the assistance of a two-year EPA grant, Delaware is examining the utility of mitigation banks and will be distributing a questionnaire to the private sector regarding entrepreneurial banks to determine whether a market exists for such activities. Telephone Interview with Mark Biddle, Environmental Scientist, Delaware Department of Natural Resources and Environmental Control, Division of Water Resources, Wetlands Section (Aug. 8, 1995). In Michigan, a commission recommended to the Governor that the state adopt policies to encourage the development of mitigation banks. The Secchia Commission Report, Toward a User-Friendly Government 40 (Dec. 20, 1994). Other states are also considering bills to authorize expressly wetland mitigation banks. See, e.g., S. 360, 120th Gen. Assembly, 1993-94 Regular Sess. (Ohio). Even in the absence of formal policies, many state regulatory agencies have nevertheless approved mitigation banks on an ad hoc basis. By far, the most common type of mitigation bank is for state Departments of Transportation (DOTs). See ELI, supra note 28, at app. A (listing states with existing mitigation banks and the agencies and groups within those states which are responsible for the banks' management). The authorization for DOT banks takes various forms. In Mississippi, a Corps general permit allows the Mississippi State Highway Department to use a mitigation bank. U.S. Army Corps of Engineers, General Permit CELMK-OD-FE 14-GPM (Vicksburg District)-46 (Jan. 9, 1990). An interagency memorandum of understanding serves that purpose for the Montana Department of Transportation. Montana Interagency Wetlands Group, Interagency Memorandum of Understanding for the Conservation of Wetland Resources Associated with Highway Construction Projects in the State of Montana (1992). The South Carolina Department of Transportation also entered into an interagency memorandum of understanding. South Carolina Department of Transportation Memorandum of Understanding for Creation of the SCDOT Wetland Mitigation Bank (Jan. 20, 1994). In Washington, an interagency memorandum of agreement was signed. Washington State Department of Transportation Wetland Compensation Bank Program Memorandum of Agreement (Sept 15, 1994). In Wisconsin, an interagency coordination agreement was employed. Interagency Coordination Agreement Wetland Mitigation Banking Technical Guidelines for WiDOT Projects (July 20, 1993). The common feature of all these arrangements is that the parties include state and federal regulatory agencies. Other states that have permitted their departments of transportation to use wetland mitigation banks include: Georgia, Idaho, Louisiana, Minnesota, Nebraska, North Carolina, North Dakota, South Dakota, and Virginia. See ELI, supra note 28, at app. A.
272. In addition to the thirteen, Kentucky also has a statute mentioning wetland mitigation banking, but its scope is limited to surface coal mining operations for applicants eligible for Corps nationwide permits 21 or 26. Ky. Rev. Stat. Ann. § 224.16-070(3) (d) & (5) (Baldwin 1994). Nationwide permits 21 and 26 may be found at 33 C.F.R. § 330, app. A (1994). North Dakota's statute regarding a state wetland bank, N.D. Cent Code § 61-32-05 (1993), was recently repealed. 1995 N.D. Laws 599. Not everyone considered North Dakota's system to be a "true" mitigation bank. It was essentially an accounting ledger that kept track of wetland losses and gains in the state; the account maintained a large credit balance only because it included "the substantial wetland conservation programs of the U.S. Fish and Wildlife Service and the U.S. Soil Conservation Service [now the U.S. Natural Resources Conservation Service] which clearly are not intended to serve mitigation purposes." Corps, First Phase Report, supra note 28, at 11 n.11.
273. Arkansas Wetlands Mitigation Bank Act, 1995 Ark. Acts 562. The Act is directed at mitigation banks owned and operated by public entities. Implementing regulations have yet to be issued. See id. § 5(b) (requiring Arkansas Soil and Water Commission to adopt standards and criteria for mitigation banks).
274. Sacramento-San Joaquin Valley Wetlands Mitigation Bank Act of 1993, Cal. Fish &. Game Code §§ 1775-1796 (West Supp. 1995). In addition to this statute, which appears directed at activities within the Sacramento-San Joaquin Valley, the California Department of Fish and Game has issued rules that govern mitigation banking throughout the state. California Department of Fish and Game, Guidelines for the Establishment and Use of Wetland Mitigation Banks (Nov. 1990). For an article critiquing these guidelines, see Theodore J. Griswold, Messing With Mother Nature: The Quagmire of Wetland Mitigation Banking, 13 Cal. Reg. L. Rep. 1 (1993).
275. Resource Mitigation Banking Act Colo. Rev. Stat. §§ 37-85.5-101 to -111 (West Supp. 1994). The Act applies not just to wetlands but to any "natural resource which may be considered under a governmental permitting process where mitigation may be required, as well as any public recreation which may be involved in such a permitting process." Id. § 37-85.5-103(7).
276. Florida Environmental Reorganization Act of 1993, Fla. Stat. Ann. § 373.4135 (West Supp. 1995). The Florida Department of Environmental Protection has promulgated detailed implementing regulations. Fla. Admin. Code Ann. r. 62-342.100 to 62-342.850 (1995). For a further explanation of Florida's banking program, see Eric T. Olsen, Mitigation Banking Under the Florida Environmental Reorganization Act of 1993, Fla. Bar J. 68 (Aug. 1994).
277. Interagency Wetland Policy Act of 1989, Ill. Ann. Stat. ch. 20, ¶ 830/1-1 to 830/4-1 (Smith-Hurd 1993). The Act is directed at state agencies, which are authorized to establish "Wetland Compensation Accounts.¶ Id. ¶ 830/3-3. As of April 10, 1995, rules being developed by the Illinois Department of Conservation that describe the implementation procedures for the Interagency Wetlands Policy Act were still in draft form.
278. Louisiana Coastal Wetlands Conservation and Restoration Act La. Rev. Stat. Ann. §§ 49:214.1 to .41 (West Supp. 1995). The Louisiana Department of Natural Resources is presently developing implementing regulations. See id. § 49:214.41. For a discussion of provisions of the draft regulations, see Michael Rolland, The Systematic Assumptions of Wetland Mitigation: A Look at Louisiana's Proposed Wetland Mitigation and Mitigation Banking Regulations, 7 Tul. Envtl. L.J. 497 (1994).
279. Maine Department of Environmental Protection, Natural Resources Protection Act Wetland Protection Rules, Code Me. R. Ch. 310, § G (1990). The rules are promulgated pursuant to the Natural Resources Protection Act, 38 Me. Rev. Stat. Ann. tit. 38, § 480-D (West 1994).
280. Non-Tidal Wetlands Protection Act, Md. Code Ann., [Nat Res.] §§ 8-1201 to -1211 (West Supp. 1994). The Maryland Department of Natural Resources recently issued implementing regulations. Md. Regs. Code tit. 8, § 5.05.04-17-1 (1994).
281. Minnesota Wetland Conservation Act of 1991, Minn. Stat. Ann. § 103G.2242 (West Supp. 1995). The Minnesota Board of Water and Soil Resources established standards and criteria for mitigation banks. Minn. R. 8420.0700-.0760 (1993).
282. Freshwater Wetlands Protection Act, N.J. Stat. Ann. §§ 13:9B-13 to -15 (West 1991 & Supp. 1995). Regulations governing mitigation, including mitigation banks, can be found at N.J. Admin. Code tit 7, §§ 7A-14.1 to -14.5 (1992). For a comprehensive overview of the mitigation banking process in New Jersey, see Terry Caruso, Mitigation Banking in New Jersey (1995).
283. Oregon Wetlands Mitigation Bank Act of 1987, Or. Rev. Stat. §§ 196.600-.655.
284. 1991 Tex. Sess. Law Serv. Ch. 3 §§ 6.01-07 (Vernon). The Texas law expressly authorizes only public entities to establish mitigation banks; however, Texas agencies, along with their federal counterparts, have prepared guidance that governs the establishment of mitigation banks by private entities. Interagency Guidelines for the Development and Use of Mitigation Banks in the Galveston District, Corps of Engineers Prepared Jointly by the U.S. Army Corps of Engineers, U.S. Environmental Protection Agency, U.S. Fish and Wildlife Service, National Marine Fisheries Service, Texas Parks and Wildlife Department, Texas General Land Office & Texas Water Commission (June 1993) [hereinafter Texas Interagency Guidelines].
285. Wyoming Wetlands Act, Wyo. Stat. §§ 35-11-308 to -311 (1994). The specific requirements for the establishment and operation of mitigation banks are contained in recently published guidelines. Wyoming Dep't Envtl. Quality, Wyoming Statewide Wetland Mitigation Bank Guidelines for Interpretation and Implementation (1995) [hereinafter Wyoming Guidelines].
286. See 1995 Ark. Acts 562 § 2(d) (defining "mitigation bank" as a "publicly owned and managed wetland site"); Cal. Fish & Game Code § 1777.2 (West Supp. 1995) (defining "mitigation bank site" to include a publicly owned and operated site); Colo. Rev. Stat. Ann. § 37-85.5-104 (West Supp. 1995) (creating within Department of Natural Resources a resource mitigation bank); Fla. Stat. Ann. § 373.4135 (West Supp. 1995) (encouraging establishment of public mitigation banks); Ill. Ann. Stat. ch. 20, ¶ 830/2-2 (Smith-Hurd 1993) (stating that state agencies serving on Interagency Wetland Committee must develop an Agency Action Plan, which may include procedures governing a "Wetland Compensation Account"); Code Me. R. ch. 310, § G (1990) (stating that public entities may apply to undertake wetland restoration projects); Md. Regs. Code tit. 8, § .05.04.01 (10-1) & (68) (1991) (defining "bank operator" as person responsible for mitigation bank; "person" includes state, county, and local public entities); Minn. Stat. Ann. § 103G.2242 (West Supp. 1995) (authorizing wetland banking program for public projects); N.J. Stat. Ann. § 13:9B-13 to -14(b) (West Supp. 1995) (creating Wetlands Mitigation Council to oversee state mitigation bank); Or. Rev. Stat. § 196.600 (2) (1991) (defining "mitigation bank" as "publicly owned and operated wetland site"); 1991 Tex. Sess. Law Serv. Ch. 3, § 6.02(a) (Vernon) (authorizing state agencies and political subdivisions to establish mitigation banks). Although Louisiana's statutory scheme does not specify who is authorized to operate mitigation banks, proposed regulations allow both public and private entities to do so. See Rolland, supra note 260, at 515.
287. E.g., 1995 Ark. Acts 562 § 4, § 6 (stating that the Executive Director of the Arkansas Soil and Water Conservation Commission works in consultation with a Wetlands Technical Advisory Committee); Or. Rev. Stat. § 196.615 (1994) (enumerating the responsibilities of the Director of Division of State Lands with regard to wetland mitigation banks); and 1991 Tex. Sess. Law Serv. Ch. 3, § 6.02(a) (Vernon) (requiring the approval of General Land Office).
288. In Arkansas, public agencies must use mitigation banks, if practicable, to satisfy compensatory mitigation requirements. 1995 Ark. Acts 562 § 9(b).
289. E.g., 1995 Ark. Acts 562 § 4(a) (stating that the Executive Director may "[s]et a sales price for credits"); Fla. Admin. Code Ann. r. 62-342.470(5) (1990) (stating that credits may be "transferred, sold, or used"); Or. Rev. Stat. § 196.610(1) (1994) (stipulating that the Director may "[c]harge a fee for purchase of credits"); 1991 Tex. Sess. Law Serv. Ch. 3 § 6.02 (a) (7) (Vernon) (allowing bank sponsors to engage in "selling or contracting to sell mitigation credits").
290. E.g., 1995 Ark. Acts 562 § 6(c); Or. Rev. Stat. § 196.620(7) (1991) (stipulating that price is set to compensate state for costs and expenses).
291. For a general discussion of in-lieu payments or "fee-mitigation," see Corps, First Phase Report, supra note 28, at 35-37 (listing findings from a study of fee-based programs).
292. N.J. Stat. Ann. § 13:9B-14(b) (West 1991).
293. Id. § 13:9B-15(a).
294. N.J. Admin. Code tit. 7, §7A-14.1(a) (1995).
295. A contribution to the Wetland Mitigation Council is only one form of compensatory mitigation available to permittees. See id. § 7A-14.2(a) (distinguishing restoration, creation, enhancement and contribution). Although contributions are considered only if other forms of mitigation are not practicable, see id. § 7A-14.2(a) (4) (emphasizing that donations will only be considered if "other forms of mitigation are not feasible onsite or offsite in the same watershed"), the Mitigation Council has collected over $300,000 from six permittees since 1992. The New Jersey Wetland
296. A few other states allow or are considering similar in-lieu payments. See Md. Code Ann. [Nat. Res.] § 8-1209(b)(2) (1995) (authorizing Department of Natural Resources to accept monetary compensation in limited circumstances); Rolland, supra note 260, at 528 (noting that Louisiana's draft regulations provide for "in lieu" fees to be paid to the Louisiana Wetlands Conservation and Restoration Fund).
297. Cal. Fish & Game Code § 1777.2 (West 1995).
298. Colo. Rev. Stat. § 37-85.5-106 (West 1995).
299. Fla. Stat. Ann. § 373.4135 (West 1995).
300. La. Rev. Stat. Ann. § 49:214.41(D) (West 1995).
301. Code Me. R. ch. 310, § G.
302. Md. Regs. Code tit. 8, § .05.04.17-1 (1991).
303. Minn. Stat. Ann. § 103G.2242 (West 1995).
304. N.J. Admin. Code tit. 7, 7A-14.6(a)5(1992). In New Jersey, the Wetland Mitigation Council and New Jersey Department of Environmental Protection (NJDEP) recognize private and public mitigation banks. A public entity may operate a private bank, and vice versa. As a NJDEP environmental specialist explains: A private bank is one that is established by a public or private group, and will only be used by the applicant. A public bank is one that is established by a public or private entity, and is open for the general public to purchase credits from the bank. Caruso, supra note 264, at 4.
305. See Texas Interagency Guidelines, supra note 266, at 2.
306. See Wyoming Guidelines, supra note 267, at 4.
307. E.g., Cal. Fish & Game Code §§ 1785-1786 (West 1995); Colo. Rev. Stat. § 37-85.5-106 (West Supp. 1994); Fla. Admin. Code Ann. r. 62-342.450 (1995); La. Rev. Stat. Ann. § 49.-214.41D (West 1995); Code Me. R. ch. 310, § 1 (G) (1990); Minn. Stat. Ann. § 103G.2242 (West 1995); and Wyo. Stat. § 35-11-311 (1994).
308. E.g., Colo. Rev. Stat. § 37-85.5-104(1) (1995); Fla. Admin. Code Ann. r. 62-342.470(8) (1995); La. Rev. Stat. Ann. § 49:214.41D (West 1995); Minn. R. 8420.0720 Subpart 7 (1993); and Wyoming Guidelines, supra note 267, at § 10.
309. 1995 Ark. Acts 562 § 2(d) (defining mitigation bank as a "managed wetland site, created or restored"); Cal. Fish & Game Code § 1790 (West 1995) (stating that credits are produced by "successful creation"); Ill. Ann. Stat. ch. 20, ¶ 830/1-6 (Smith-Hurd 1995) (defining compensatory mitigation as "replacing or providing substitute wetland resources or environments"); Minn. R. 8420.0740 Subpart 1(A) (1993) (stating that restored and created wetlands are eligible for credits); Or. Rev. Stat. § 196.600(2) (1993) (defining mitigation bank as "created, restored or enhanced" wetland site); 1991 Tex. Sess. Law Serv. ch. 3, § 6.01(3) (Vernon) (defining mitigation bank as "a parcel of land which has undergone or is proposed to undergo those physical changes necessary to create and optimize the acreage and quality of wetlands habitat"); Wyoming Guidelines, supra note 267, at § 4 ("credit will only be given for new acres created or restored or for measurable enhancements of ecological function").
310. Colo. Rev. Stat. § 37-855-106(2) (Supp. 1995) (stating that for preservation, areas must be of "special value"); Code Me. R. § 310.1 E3(d)(iii) (1990) (discussing areas that are valuable ecologically and under threat by unregulated activities).
311. Texas Interagency Guidelines, supra note 265, at 4.
312. Fla. Admin. Code Ann. r. 62-342.470(2) (1995) (providing that credits may be obtained from restoration, enhancement, preservation, or creation activities).
313. Ill. Ann. Stat. ch. 20, ¶ 830/3-6(e) (Smith-Hurd 1995).
314. Or. Rev. Stat. § 196.620(6) (1994).
315. Id. § 196.620(6)(c)
316. Wyoming Guidelines, supra note 267, at preamble.
317. See 1995 Ark. Acts 562 § 6(b) (permitting no withdrawals until sufficient actions taken "to establish wetland function of the mitigation site"); Texas Interagency Guidelines, supra note 265, at 1 (noting that withdrawals are permitted only after success criteria have been met).
318. Md. Regs. Code tit. 8, § .05.04.17-1D(3) (1995).
319. Fla. Admin. Code Ann. r. 62-342.470(3) & (4) (1995). The limitation concerning freshwater wetlands flows from the low success rate in creation attempts. See supra note 81 and accompanying text.
320. E.g., Code Me. R. ch. 310, § E (1990) (requiring sequence of avoidance, minimal alteration, and compensation); Minn. R. 8420.0720 Subpart 2 (1993) (stating that an applicant may use the state wetland banking system after complying with the sequencing requirement).
321. Code Me. R. Ch. 310, § G.4 (1990).
322. Minn. R. 8420.0740 Subpart 3 (1990).
323. Cal. Fish & Game Code § 1776(e)(7) (West Supp. 1995).
324. E.g., id. § 1786(b)(3)(B) (stating that a trust or bond must be established to protect and maintain the wetland in case the operation defaults in its duties); Fla. Admin. Code Ann. r. 62-342.700(4) & (5) (1995) (describing requirements for financial responsibility for construction implementation and long-term management).
325. Md. Regs. Code tit. 8, § .05.04.16 B(1) (1995). See also Fla. Admin. Code Ann. r. 62-342.700 (1995) (stating that governmental entities shall demonstrate reasonable assurances of financial responsibility).
326. E.g., Md. Regs. Code tit. 08, § .05.04.17-1(C)(3)(b) (authorizing Department of Natural Resources to include bonds or alternate forms of security in banking agreements).
327. Cal. Fish & Game Code § 1786(b)(3)(B) (West 1995).
328. Fla. Admin. Code Ann. r. 62-342.700(5) (1995).
329. 1995 Ark. Acts 562 § 4(g) (requiring conveyance to "appropriate state agencies"); Ill. Ann. Stat. ch. 20, ¶ 830/3-2 (Smith-Hurd 1993) (transferring to a "public conservation agency or private conservation organization which will protect and manage the area"); Texas Interagency Guidelines, supra note 266, at 7 (deeding land to a "State, county, or quasi-public agency").
330. Minn. R. 8420.0720 Subpart 7 (1995).
331. See ELI, supra note 28, at 23 (observing that "[c]ost and uncertainty appear to be the biggest impediments to widespread use of mitigation banks").
332. See 1995 Ark. Acts 562 ("'mitigation bank' means a publicly owned and managed wetland site . . . ."); Ill. Ann. Stat. ch. 20, ¶ 830/3-3 (Smith-Hurd 1993) (authorizing the creation of a state account for wetlands preservation); Or. Rev. Stat. §§ 196.600 (2) (1994) ("'mitigation bank' means a publicly owned and managed wetland site").
333. See Administrative Procedure Act, 5 U.S.C. § 553(b)(3)(A) (1994) (establishing that notice-and-comment requirement is inapplicable to "interpretative rules, general statements of policy, or rules of agency organization, procedure or practice"); Gardner, supra note 217, at 24 (discussing the role of guidance documents in clarifying § 404 requirements).
334. Federal Guidance, supra note 222, at 58,606.
335. See Leonard Shabman et al., Making Wetlands Mitigation Work: The Credit Market Alternative 20-25 (May 1993) (Staff Paper SP-93-5 of the Department of Agricultural and Applied Economics, Virginia Tech).
336. An example of this occurred in the administration of the federal wetland program. Although the Corps is granted the statutory authority to deny or grant permits, other agencies such as the EPA, FWS, and NMFS play a consultative role. These agencies' participation in the decision-making process blurred the lines of authority; applicants complained that they had to contend with a number of different federal agencies and had to get each to agree to proposed projects. Consequently, it became necessary to issue guidance that clarified the roles of each agency. See Corps Regulatory Guidance Letter 92-1, supra note 223, at 13,704 (clarifying that the Corps is the decision-maker and that the permit process is not one of consensus).
337. The only states that attempt to make the use of wetland mitigation banks compulsory are Arkansas, 1995 Ark. Acts 562, § 9(b) (requiring public agencies to use mitigation banks when practicable) and California, Cal. Fish & Game Code § 1776(e)(7) (West Supp. 1995) (declaring policy that "exclusive method" of compensatory mitigation in Sacramento-San Joaquin Valley shall be from mitigation banks).
338. See supra notes 273-78 and accompanying text (describing programs permitting payment of funds in lieu of undertaking mitigation).
339. See Rolland, supra note 260, at 536 (explaining that the use of in-lieu fees will discourage "large landowners, developers and the oil and gas industry" from building banks).
340. See supra notes 236-37 & 291-95 and accompanying text (noting the limitations on the use of preservation to generate mitigation credits).
341. ELI, supra note 28, at 111 (conducting that mitigation banking is "unattractive in comparison with onsite mitigation" and that "[f]ew developers will want to expose themselves to potential longterm liabilities not within their own control").
342. See supra notes 254-67 (identifying states that authorize agencies to operate wetland mitigation banks).
343. See Fla. Admin. Code Ann. r. 62-342.850(6) (1995) (encouraging each water management district to establish at least two mitigation banks).
344. Furthermore, just because an agency proposes to undertake a mitigation project does not mean the project will come to fruition. Funding often depends on appropriations, and legislatures may not be forthcoming. See ELI, supra note 28, at 108 (stating that "absent a designated source of committed funds, government-operated banks may be even less reliable than some private banks").
345. In the absence of such laws, some state regulatory agencies lack the authority to recognize privately operated mitigation banks. In Wisconsin, for example, the Department of Natural Resources allows state Department of Transportation banks to operate, but has no legal authority to permit private banks. See Michael Cain, Memorandum, Authority to Adopt Mitigation Procedures 2-3 (Mar. 2, 1991) (legal opinion) (discussing the need for explicit legislative direction).
346. See supra note 253 and accompanying text (listing states which are establishing mitigation banks for departments of transportation).
347. E.g., N.J. Admin. Code tit. 7, § 7A-14.1(c) (1995) ("[m]itigation must be performed prior to or concurrently with permitted activities that will permanently disturb wetlands").
348. If, during the phase-in period, problems concerning mitigation banking develop and it becomes impracticable to require advance compensatory mitigation, the deadlines could always be extended. This is not uncommon with technology-forcing approaches to environmental protection. See Bryner, supra note 204, at 84 (noting waivers for deadlines for tailpipe emissions standards).
349. As discussed earlier, one of mitigation banking's virtues is its ability to compensate for small projects. See supra notes 200-02 and accompanying text (arguing that wetland mitigation banking may solve the problem of cumulative impacts from small projects).
350. 33 U.S.C. § 1344(g)(1) (1988).
351. Sapp, supra note 27, at 105-06.
352. 33 C.F.R. § 325.5(c)(3) (1995).
353. Eight states "operate at least a portion of their programs pursuant to state programmatic general permits authorized by the Corps." Sapp, supra note 27, at 106 (listing Connecticut, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, North Carolina, and Wisconsin). There is, however, one major problem with PGPs: They are probably illegal. The Clean Water Act authorizes the Corps to issue general permits for any category of activities that are "similar in nature, will cause only minimal adverse environmental effects when performed separately, and will have only minimal cumulative adverse effect on the environment." 33 U.S.C. § 1344(e)(1) (1988). A PGP that covers all filling activities in a state would seem to fail the first requirement that general permits pertain to a category of activities "similar in nature." If the Corps continues to rely on PGPs, it should seek express authorization to do so from Congress. See H.R. 3465, 103rd Cong., 1st Sess. § 7 (1993) (proposing to grant the Corps the authority to issue PGPs without the "similar in nature" requirement).
354. Proposed private property rights laws, if enacted, would eviscerate the market for mitigation banks. If a permit denial, or even a conditioned permit, gives rise to a claim for compensation, there will be no need for mitigation banks. The only bank operative under that scenario would be the federal treasury, which would be issuing millions of dollars in checks.
355. For example, one commentator reports that a developer filled four acres of wetlands in exchange for preserving 200 acres of wetlands in which an endangered plant lived. Sapp, supra note 27, at 130-31. Regulatory agencies should not plan on obtaining 50:1 compensation ratios very often, however. In Dolan v. Tigard, the Supreme Court held that the Fifth Amendment requires that the conditions in a land use permit bear a "rough proportionality" to the impacts of the project 114 S. Ct. 2309, 2319-20 (1994). There must be a "reasonable relationship" between the permit conditions and the project's effects. Id. at 2319. High compensatory mitigation ratios may have difficulty in satisfying this test. Similarly, Dolan may cast doubt on the ability of regulatory agencies to require out-of-kind mitigation. The "rough proportionality" requirement may limit compensatory mitigation to in-kind. See supra note 56 (noting that in-kind mitigation relates to the type of wetland function that a developmental project affects).
356. See Michael L. Davis, A More Effective and Flexible Section 404, 17 Nat'l Wetlands Newsl. 7, 9 (1995) (noting that in fiscal year 1994 the Corps denied less than 1% of the 48,000 applications to fill wetlands).
357. It also recognizes that non-regulated activities, such as non-point source discharges, can also affect a wetland that is protected from direct development.
358. Cf. David A. Dana, Natural Preservation and the Race to Develop, 143 U. Pa. L. Rev. 655 (1995) (arguing that a lack of compensation scheme for owners of areas such as wetlands accelerates the development process).
359. To protect the mitigation site from nearby activities, regulatory agencies also should grant credit for preservation of buffer areas.
360. Some state laws may prohibit easements "in perpetuity." Jordan, supra note 171, at 404-05. Accordingly, in those states arrangements should be made to transfer mitigation sites to conservation agencies or organizations.
361. See Oliver A. Houck, More Net Loss of Wetlands: The Army-EPA Memorandum of Agreement Under the § 404 Program, 20 Envtl. L. Rep. (Envtl. L. Inst.) 10,212 (1990) (criticizing revisions to Mitigation MOA relating to sequencing); Linda Winter, Sununu Pulled Rank, 12 Nat'l Wetlands Newsl. 3 (1990) (same).
362. See supra notes 61-71 and accompanying text (detailing the history of relaxing the requirements of the avoidance step).
363. See supra note 70 (noting that the strict sequencing approach for all wetlands, regardless of their characteristics, may carry the mitigation goal too far).
364. State departments of transportation are likely customers. See supra note 253 and accompanying text (noting various state efforts authorizing departments of transportation to use wetland mitigation banks).