The nation's Section 404 permitting program, of the Clean Water Act (CWA), represents one of the longest regulatory histories of designing and implementing credit trading programs to satisfy regulatory requirements. The role and the function of in-lieu fee (ILF) programs in supporting this regulatory structure have undergone a substantial change. For the first time in the history of the Sec. 404 program, 33 CFR Part 332 and 40 CFR Part 230, Subpart J (the "2008 mitigation rule" or "rule"), prioritizes the use of off-site mitigation over on-site-mitigation. Additionally, the rule prioritizes advanced, third-party mitigation; especially as achieved through mitigation banks; over any off-site compensatory mitigation provided by ILF programs (33 CFR 332.3(b)(1)). This new regulatory environment favors the use of commercial mitigation bank credits while acknowledging that the limited permittee demand of off-site mitigation credits, in particular areas, justifies the continuing need for ILF programs (Corps and EPA 2008, p.19606,19611). This research examines how regulatory officials use ILF programs under the 2008 mitigation rule, and, it determines the extent to which ILF programs are capable of fulfilling the role envisioned for them under the 2008 mitigation rule. Simulation results indicate that commercial mitigation banks cannot meet risk adjusted returns under limited credit demand conditions. ILF programs offer some additional financial capacity to fill the void in commercial bank coverage; but, this potential is limited in low demand conditions. Furthermore, empirical case studies of a Virginia and Georgia provide evidence that regulatory officials rely on ILF programs to provide off-site compensatory mitigation almost exclusively in the absence of private credit supply, as intended in the 2008 rule. Evidence in Georgia and Virginia also indicate that, in some situations, ILF programs face difficulties in providing mitigation under the constraints of limited demand and more stringent regulatory requirements. / Master of Science / National permitting programs require people that impact wetlands or streams to offset unavoidable, adverse impacts by improving wetlands or streams elsewhere, a process called compensatory mitigation. A new regulatory rule, approved in 2008 (33 CFR Part 332 and 40 CFR Part 230, Subpart J), prioritizes that mitigation is provided at larger projects off-site of the impact. Key policy questions of “who should provide the mitigation?” and “when the mitigation should be provided” were an important part of the debate during the rule’s development. Wetland and stream mitigation may be provided by commercial (for profit) businesses, called mitigation banks. Commercial banks make wetland/stream improvement projects before permitted (adverse) impacts occur in anticipation of selling wetland/stream “credits” (quantified levels of improvement). Off-site mitigation may also be provided by in-lieu fee (ILF) programs operated by the government or nonprofit organizations. ILF programs first accept funds from permittees and then construct mitigation projects once sufficient funds have been collected, thus creating a lag between adverse impact and compensatory mitigation.
The 2008 regulatory rule favors the use of commercial mitigation bank credits over ILF credits, but allows regulatory officials, under certain circumstances, to use ILF credits when commercial bank credits of the appropriate type are unavailable. This research examines how regulatory officials use ILF programs, and it investigates the extent to which ILF programs are financially capable of providing off-site mitigation in situations where the appropriate commercial credits are unavailable. A financial simulation model is developed to examine the feasibility of mitigation projects under different costs and credit demand conditions. Results indicate that commercial mitigation banks cannot meet financial objectives under limited credit demand conditions. ILF programs offer some additional financial capacity to fill the void in commercial bank coverage, but ILF programs also face financial limitations under conditions with low demand for credits. Empirical case studies of Virginia and Georgia provide evidence that regulatory officials rely on ILF programs to provide off-site compensatory mitigation almost exclusively in the absence of a private credit supply, as intended in the 2008 rule. However, evidence in Virginia and Georgia also affirm that ILF programs face difficulties in providing mitigation in some situations of limited demand and stringent regulatory requirements.
| Identifer | oai:union.ndltd.org:VTETD/oai:vtechworks.lib.vt.edu:10919/79673 |
| Date | 16 October 2017 |
| Creators | Tutko, Benjamin Thomas |
| Contributors | Agricultural and Applied Economics, Stephenson, Stephen Kurt, Martin, Steven Michael, Geyer, L. Leon |
| Publisher | Virginia Tech |
| Source Sets | Virginia Tech Theses and Dissertation |
| Detected Language | English |
| Type | Thesis |
| Format | ETD, application/pdf, text/xml |
| Rights | In Copyright, http://rightsstatements.org/vocab/InC/1.0/ |
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