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The Department of the Interior Releases a Suite of Guidance on Compensatory Mitigation

January 6, 2017

In late December, the U.S. Department of the Interior released a suite of guidance related to mitigation, particularly compensatory mitigation. First, the Fish and Wildlife Service (FWS) finalized its Endangered Species Act (ESA) Compensatory Mitigation Policy. Second, the Bureau of Land Management (BLM) finalized a manual and handbook regarding use of compensatory mitigation. Finally, the Department released an opinion from the Solicitor of the Interior (known as an “M” Opinion) outlining the BLM’s authority to address impacts of its land use authorizations through mitigation and asserting that BLM “must require public land users to mitigate impacts to the public lands that would otherwise constitute unnecessary or undue degradation of public lands, or must deny the proposed use.” These guidance materials implement a 2015 Presidential Memorandum (“Mitigating Impacts on Natural Resources From Development and Encouraging Related Private Investment”), the 2013 Secretarial Order No. 3330 (“Improving Mitigation Policies and Practices of the Department of the Interior”), and the Department of the Interior’s Mitigation Policy set forth in a chapter in the Departmental Manual (600 DM 6, Landscape-Scale Mitigation Policy) that was released in 2015.

Because the above policies, opinion, and orders are not formal rules, they may be revised or rescinded with less process than formal rules, so affected parties should closely watch to confirm whether and how they might be changed or withdrawn by the incoming administration.

The above new policies and Solicitor’s Opinion are each described further below.

Fish and Wildlife Service ESA Compensatory Mitigation Policy

On December 27, 2016, a final ESA Compensatory Mitigation Policy was published in the Federal Register. The FWS had released a draft of this policy for public review and comment in the fall of 2016. The Policy replaces 2003 guidance regarding the use of habitat conservation banks; however, the scope of the new Policy is broader than the 2003 guidance. Whereas the 2003 guidance only addressed habitat conservation banks, the Policy addresses the use of multiple mitigation mechanisms, including permittee-responsible mitigation, conservation banking, in-lieu fee programs, and other third-party mitigation mechanisms such as habitat exchanges.

This Policy establishes standards for the use of compensatory mitigation when implementing sections 7 and 10 of the ESA. Although the Policy expressly applies to species protected by the ESA, the Policy notes that at-risk and candidate species would benefit from adherence to the Policy’s standards. These standards apply uniformly to all mitigation mechanisms, regardless of whether the mitigation is performed by a project proponent or a third party (such a habitat conservation bank). The Policy expressly encourages the use of market-based compensatory mitigation programs such as habitat conservation banks. Notably, the Policy generally does not apply to actions previously approved; however, it applies to amendments or modifications of approved actions and in circumstances such as when new information regarding the effects of an approved action becomes available, when levels of authorized incidental take are exceeded, and when a new species is listed or new critical habitat is designated.

The standards set forth by the Policy relate to: siting of compensatory mitigation actions; the use of consistent and equivalent metrics to evaluate impacts and benefits to species and their habitats; the requirement that compensatory mitigation be “additional” by providing benefits that are new and would not have otherwise occurred; the timing and duration of compensatory mitigation; and the durability of compensatory mitigation. In addition to these standards, the Policy establishes preferences that compensatory mitigation be sited in conservation areas identified in landscape-level conservation plans, implemented in advance of impacts, and implemented in a consolidated or programmatic nature, rather than on a piecemeal basis. The Policy also provides guidance regarding lands eligible for compensatory mitigation, including the use of public lands to mitigate impacts on private lands. Finally, the Policy provides guidance on the use of credits and debits in compensatory mitigation mechanisms, the use of compensatory mitigation to address short-term impacts such as harassment of wildlife, and various mitigation mechanisms, including criteria for third-party mitigation.

The Policy is the second of three policies related to compensatory mitigation under development by the FWS. The FWS released revisions to its 1981 mitigation policy in November 2016, which addressed mitigation of impacts to species under a suite of statutes the FWS implements, not just the ESA. Most significant, the mitigation policy adopted a mitigation goal of “net gain.” A third policy on the use of voluntary prelisting conservation measures released in draft in 2014 is anticipated to be released before the end of the Obama administration.

BLM Manual MS-1794 and Handbook MS-1794-1 Addressing Mitigation

On December 22, 2016, the BLM released Manual MS-1794 – Mitigation (Rel. 1-1782) and Handbook H-1794-1 Mitigation (P) (Rel. 1-1783) that provide policy guidance to implement the Department of the Interior’s Mitigation Policy. The Manual provides “foundational” policy and guidance on mitigation to offset impacts from public lands activities, while the Handbook expands upon the guidance in the Manual and offers examples of how mitigation should be considered and applied.

In some respects, the Manual and Handbook echo guidance of the Department of the Interior and the FWS. They direct that mitigation be: considered and implemented on a landscape level; effective for the duration of impacts (“durability”); monitored for effectiveness, as required by land use authorizations; subject to adaptive management; and subject to periodic reporting by the land user. The Handbook guides the BLM on application of the “mitigation hierarchy” (the avoidance, minimization, and compensation of impacts) and provides specific examples of its application.

The Manual and Handbook, however, also offer guidance that is unique to the BLM and different than the agency’s past practices, such as the requirement of mitigation standards and use of mitigation strategies. The Manual and Handbook direct the BLM to develop defined and measurable outcome and performance standards for mitigation for resources that are “important, scarce, sensitive, or have a protective legal mandate.” Such mitigation standards should seek to achieve a “no net loss” of or a “net benefit” for the affected resource.

The BLM may incorporate mitigation standards into its RMPs, but the Manual and Handbook also allow for the development of “mitigation strategies” that identify and communicate potential mitigation needs and measures in a given geographic area or resource. Mitigation strategies may be developed through a project-level NEPA analysis or outside of a NEPA process. The BLM has prepared a handful of regional mitigation strategies, such as for solar energy, but has not widely utilized them. Therefore, including mitigation strategies in the Manual and Handbook raise a question on the extent to which the BLM will utilize them going forward and how efficiently they may be developed.

The Manual and Handbook extensively discuss use of compensatory mitigation. The Handbook identifies restoration, establishment, enhancement, and preservation of resources as acceptable types of compensatory mitigation. The Handbook also identifies mitigation banks, mitigation exchanges, in-lieu fee mechanisms, and land user-responsible mitigation as acceptable mitigation mechanisms. Both the Manual and Handbook prefer that mitigation be secured ahead of an impact occurring, such as through a mitigation bank.

The Manual and Handbook identify some limitations on the BLM’s use of compensatory mitigation. The Manual and Handbook explain that the mitigation policy applies “to a different extent” to actions authorized pursuant to valid existing rights, such as mining plans of operations and existing oil and gas leases. For these authorizations, the BLM must consider mitigation measures in NEPA analysis, but any required mitigation must be “consistent” with the terms of existing leases and existing contracts. Neither the Manual nor the Handbook, however, offers any guidance on how to evaluate whether compensatory mitigation is consistent with these prior authorizations. The Manual and Handbook require a “reasonable relationship” between the impacts of an action and the type, nature, and amount of compensatory mitigation. The Manual and Handbook also specify that they do not apply to prior land use authorizations unless such authorizations are renewed or amended.

The Handbook provides some long-awaited guidance on how public lands may be used as sites to implement compensatory mitigation measures. Historically, public lands offered few compensatory mitigation opportunities because such mitigation was not considered “durable.” Appendix 1 of the Manual, however, outlines how to ensure the durability of compensatory mitigation sites on public lands. It specifically identifies National Conservation Lands as the most durable BLM-managed lands but also describes how to provide durability of mitigation actions on other BLM-managed lands. The Manual, however, expressly disclaims any preference that mitigation of impacts to public lands be sited on the public lands.

Notably, the Manual suggests the BLM intends to track compensatory mitigation at a national level. It directs that compensatory mitigation monitoring reports and geospatial information about impacts and compensatory mitigation be maintained by the BLM’s National Operations Center in Denver, Colorado. Because mitigation efforts often were not tracked at the State Office level let alone the national level, this direction marks a shift towards a more centralized and cohesive management of compensatory mitigation.

Solicitor’s Opinion on the BLM’s Authority to Address Impacts of Its Land Use Authorizations through Mitigation

On December 21, 2016, the Solicitor of the Interior issued an opinion addressing the BLM’s authority under the Federal Land Policy and Management Act (FLPMA) to require mitigation when authorizing uses of the public lands through oil and gas leasing, oil and gas permits, rights-of-way, grazing permits, and mining plans of operations. This opinion has been catalogued as Opinion No. M-37039. In the opinion, the Solicitor recognized the BLM generally may condition land use authorizations on requirements of mitigation, including compensatory mitigation.

Although the opinion does not direct the BLM to take any action, it outlines the legal basis for the BLM to require mitigation measures when authorizing land uses. Among the most significant conclusions, the opinion determines the BLM may incorporate mitigation standards into RMPs but that the BLM may require mitigation even when RMPs lack mitigation standards or guidelines. It also determines that FLPMA allows the BLM to require compensatory mitigation that yields a “net conservation benefit” —a conclusion that likely will be controversial because some view this standard as exceeding BLM’s authority. The opinion concludes the BLM may require mitigation not specified under the terms of existing land use authorizations, such as oil and gas leases; this conclusion suggests the BLM may have authority to require compensatory mitigation not specified in an existing oil and gas lease but does not expressly reach this conclusion. The opinion determines that impacts to public lands may be offset with compensatory mitigation on private lands.

The opinion significantly relies on the Department of the Interior’s broad discretion to manage the public lands. Although the opinion reinforces the BLM may require mitigation to avoid unnecessary or undue degradation, the opinion also heavily relies on FLPMA’s charge that the BLM manage the public lands for “multiple use” and “sustained yield” as allowing the agency to require that land users improve resources for future generations. The opinion also determines that the BLM’s broad authority over the public lands includes both land use authority akin to zoning, such as that possessed by local land use zoning boards, and regulatory authority, such as that possessed by the U.S. Environmental Protection Agency (EPA). The opinion also observes the BLM has the authority to act as a proprietor; the opinion describes the BLM as “the sovereign’s landlord” that can condition land uses on conduct or performance standards.

The opinion articulated few limits on the BLM’s ability to require mitigation. Most notably, the opinion determines that mitigation cannot be arbitrary or capricious and, therefore, the BLM must explain how mitigation avoids, minimizes, or compensates for an identified impact.

In a footnote, the opinion effectuates a change in policy by the Department. It revokes a conclusion in prior Solicitor Opinion No. M-37007, issued in 2001 by Solicitor William G. Myers III, who served under Secretary Gale Norton. This opinion interpreted FLPMA’s unnecessary or undue degradation standard in the context of the BLM’s hardrock mining regulations and the Federal Mining Law to conclude that some degradation could reasonably occur as a result of such activity expressly authorized under Federal law. In contrast, the new opinion interprets unnecessary and undue as having separate meanings and asserts that either can serve as a basis to reject proposed actions on public lands. The opinion concludes the BLM must require mitigation to prevent “undue” degradation, may assess whether resulting degradation is “unnecessary” after application of mitigation, or must deny a proposed use of the public lands. The new opinion fails to note that the BLM has promulgated specific regulatory standards in 43 C.F.R. § 3809.415 to govern how hardrock mining activities will prevent unnecessary or undue degradation.

The lasting impact of the FWS and BLM mitigation policies is unknown. Some land users have voiced strong opposition to these policies, suggesting that they may be on the incoming administration’s chopping block. Because they are policies and not formal rules, they can be set aside with less process than other formal rules. Therefore, land users should watch the Department of the Interior’s actions in the next year regarding these policies and other mitigation issues.