Tuesday, November 17, 2015

NEPA Impacts Now Require Mitigation

President Obama has recently issued an important new Memorandum directing Federal agencies to employ mitigation banks to offset impacts to natural resources.

The directive re-emphasizes that agencies should seek to avoid any negative environmental impacts first, then minimize impacts, and finally, only seek compensatory offsets for harm that still occurs if necessary.  Within the limits of existing law, agencies should set ‘no net loss’ and ‘net benefit’ goals that apply to more natural resources.   (CEQ Blog Post)

The following analysis of the impacts of this memorandum are from the law office of Holland and Hart:

"We have entered a new regime in federal natural resource management, one that brings to mind Aldo Leopold’s observation that “Conservation . . . is a positive exercise of skill and insight, not merely a negative exercise of abstinence or caution.” In time, we will have a better sense of what the new regime will mean in practical terms. For now, the natural resource community will want to focus on the various agencies’ efforts to implement the directives. Across the federal government, for months to come, new rules and policies will be under development with implications for an enormous range of decisions affecting natural resources “that are important, scarce, or sensitive, or wherever doing so is consistent with agency mission and established natural resource objectives.”

These directives deserve considerable attention from those active in the natural resource law and policy arenas. There are new rules of the road for resource agency decisions subject to NEPA review, and they may significantly influence implementation of ESA and other resource protection laws. Federal resource planning efforts will likely change to include substantial consideration of “net gain/no net loss” benchmarks. Most fundamentally, the new directives seem likely to change the transactional environment facing developers seeking federal approvals for: infrastructure projects; energy, water, and mineral development; or other activities potentially impacting federal natural resources.

Agencies’ permitting and compliance decisions involve significant elements of subjectivity and uncertainty. The permitting process is often defined by bargaining over the allocation of risk between an agency wary of potentially unforeseen resource impacts and a developer or resource user wary of potentially unforeseen costs or delays. The Presidential and DOI directives can be seen as ratifying and calling for even greater effort by resource agencies to minimize or eliminate the risk of unforeseen impacts on natural resources. In effect, the agencies are being told to bargain harder, demand greater assurances, and accept little or no risk of adverse impacts when rendering decisions potentially affecting natural resources.

The directives raise the bar, but are not entirely one-sided. They encourage agencies to promote conservation banking, stewardship contracts, and other financial-incentive-based tools that generate “credits” that developers can use to offset adverse impacts of proposed projects. The internal logic of the directives appears to be that the new, higher standards for resource mitigation—net gain, or at least no net loss—are realistically achievable because any project’s unavoidable adverse impacts can be offset with conservation credits.

The agencies’ mandate to bargain harder will create difficulties for almost all resource users. To begin with, baseline resource information often lacks the empirical certainty that would make it obvious how to get to a net gain or no net loss. And what is a “net gain”? How big must that be? More challenging, the directives call for “durability” in mitigation, meaning that the quantitative and qualitative relationship of impact to compensation should endure so long as the impact continues. But natural resources change over time. Even resources that once seemed static are now recognized to be mobile as temperature, precipitation, fire, and other variables change across the landscape. The new directives will particularly frustrate those resource users who are not inclined to anticipate nor internalize within their project planning and business judgments the agencies’ resource management goals. Whatever the agencies were bargaining for yesterday, they’ll soon be bargaining for more.

There is something encouraging here for those resource users who approach the regulatory environment with a transactional mindset. The directives’ embrace of compensatory mitigation means that, once the directives have had time to be incorporated into agency procedures, there should be a predictable regulatory “solution” for a project potentially posing the risk of adverse resource impacts. In theory, the ultimate decision about whether - and on what terms - to approve a permit or other authorization should be somewhat less vulnerable to an agency official’s reluctance to countenance unavoidable adverse resource impacts. This is particularly so if the agencies do, in fact, embrace the use of mitigation banks and other credit-generating tools.

The other potential winners from the directives will be private investors in mitigation banks and similar financial structures that produce resource “credits” to exchange for impacts. 

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