Senate Energy and Natural Resources Oversight Hearing on the Presidential Memorandum on Mitigation

The Energy & Natural Resources (ENR) Committee held a hearing on a November 2015 Presidential Memorandum entitled “Mitigating Impacts on Natural Resources from Development and Encouraging Related Private Investment.”

In her opening statement, Sen. Lisa Murkowski (R-AK) said federal mitigation practices have become a tool that slows down and increases costs for resource development projects.

In Alaska and other western states, where the federal government owns so much land, this is a big economic burden.

The memorandum goes beyond President George Bush’s “no net loss” principle for wetlands, she said.  It asserts agencies should establish “net benefit” goals for mitigation and apply those goals to all natural resources managed by the agencies.

Sen. Murkowski said the memorandum could lengthen the already long permitting process, encourage agencies to shut down development completely, and turn development into a “pay to play” exercise that’s only feasible for the largest businesses with the most profitable projects.

She submitted a letter for the record from herself and 18 other senators that requests the administration to clarify its intent and address the listed concerns.

Sen. Maria Cantwell’s (D-WA), the ranking member, said in her opening statement that the failure to mitigate development in the 19th century led to the creation of national parks and forests, and later to the passage of the National Environmental Policy Act (NEPA), Clean Air Act (CAA), and Clean Water Act (CWA).  The creation of the Abandoned Mine Lands program and the Superfund also resulted from past failures.  She said fixing unmitigated development after the fact is more expensive than taking the right actions upfront.

About the memorandum, she said it does not create any new mitigation requirements at any agency and the concepts it contains have a long history of bipartisan support.

Besides making mitigation more consistent across agencies, Sen. Cantwell said the memorandum’s only two significant directives are to ask agencies to establish ‘net benefit’ or ‘no net loss’ goals and to encourage advanced compensatory mitigation, including mitigation banking.

While she doesn’t believe that monetizing nature is always the best policy, Sen. Cantwell said incentives that bring private sector investments into the equation can lead to better outcomes.

The committee first heard from officials from two federal agencies, followed by a panel of witnesses who described how they will be impacted by the memorandum.


Micheal Bean’s Testimony

Micheal Bean is the Interior Department’s Principal Deputy Assistant Secretary for Fish and Wildlife and Parks.

Offering a brief history of mitigation policy and practice, he said, “Given the inherent and sometimes difficult conflicts associated with the department’s responsibilities for both facilitating development and conserving the natural and cultural resources of the nation’s lands and waters, effective mitigation of the impacts of development is critical in enabling the department to fulfill its statutory mandates.”

Contemporary understanding of mitigation has thus benefited from decades of scientific advances and experience implementing environmental laws and regulatory requirements.

The Interior Department works closely with the Army Corps of Engineers to ensure mitigation requirements are consistent with CWA permitting. For other resources—such as Alaska North Slope subsistence use areas—the Bureau of Land Management (BLM) identifies appropriate mitigation actions during project design phases, based on input from agencies, established policies, and stakeholder and public review.  Discussing the success of early mitigation efforts, Bean said that given the extent to which anadromous fish populations were in danger of extinction, the fish ladder and hatchery solution to the challenge of big dams did not prevent dramatic resource losses.  Additionally, frequent failure of early wetland compensatory migration efforts due to poor siting, inadequate monitoring, lack of long-term assurances has been extensively documented, which lead to the Corps of Engineers and the EPA to issue a new mitigation rule in 2008 under the Bush administration.

That 2008 rule articulated many of the principles that have been subsequently incorporated into department policies, improving consistency, transparency and predictability on how mitigation measures will be applied.  The rule holds all forms of compensatory mitigation to equivalent standards and focuses on how and where compensatory mitigation is planned, implemented, and managed to improve its ecological success and sustainability.  In the fall of 2013, Secretary Sally Jewell released Secretarial Order 3330, Improving Mitigation Policies and Practices of the Department of the Interior.  Secretary Jewell directed the department and each of its bureaus to follow a common set of principles for its mitigation decisions and to use a landscape-scale approach to guide the siting of compensatory mitigation efforts.

The department’s policy issued last fall was one of many steps to be completed in response to the order.  It reaffirmed the department’s authority to require and determine the scope of compensatory mitigation, established a goal for the conservation outcomes of mitigation investments, enumerated standards when implementing landscape-scale mitigation approaches, and outlined bureau and office responsibilities for fulfilling the goals.

Furthermore, the department is working ensure that mitigation policies are responsive to emerging best practices and compatible with similar policies being developed by sister agencies and states.

On March 7, 2016, the FWS announced proposed revisions to its mitigation policy to provide a broad and flexible framework to promote efficient and effective conservation measures that address the potential negative effects of development, while facilitating review and approval of development projects.  The public will have the opportunity to review and comment on the revised policy through May 9, 2016.

DOI’s policy was issued contemporaneously with the President’s memorandum, which reinforces ongoing mitigation work at the department, encourages private investment in restoration and public-private partnerships, and helps foster opportunities for businesses or nonprofit organizations with relevant expertise to successfully achieve restoration and conservation objectives across all lands.


Brian Ferebee’s Testimony

Brian Ferebee, Associate Deputy Chief, National Forest System, U.S. Department of Agriculture, said the laws that govern his department—including the Organic Act and the Maximum Sustainable Yield Act—allow the agency to appropriately minimize effects from the use of National Forest System Lands to sustain goods and services the public receives with those lands.

The department first tries to avoid impacts, then to minimize impacts, and finally to compensate residual impacts to important resources.  In implementing the mitigation hierarchy, the Forest Service works proactively with proponents in the design and siting phase to reduce adverse impacts to resources.

If adverse impacts can be avoided, no mitigation efforts are necessary.  However sometimes, adverse impacts are not practical or possible to avoid.  At that point, the agency identifies appropriate mitigation actions through project review and engagement with other agencies, states, tribes, the proponent, and the public.  Proactive work by all parties can lead to successful outcomes.

While individual units of the forest system have been successful in developing and implementing proponent driven projects that involve compensatory mitigation, the Forest Service overall does not have as much experience as other agencies.  The President’s memorandum calls for the Forest Service to develop policy on mitigation.

Ferebee said the direction provides an opportunity for his agency to learn from past experiences in developing a consistent, systematic approach for future development.  As public input is important when developing new policies and procedures, stakeholders will be engaged.

The Forest Service is also learning from organizations—other federal agencies, states, tribes, and nonprofits—that have extensive expertise in this area.


Sen. Murkowski Questions Agency Witnesses

Sen. Murkowski asked Bean to what extent the agency’s legal authorities prohibit or modify the application of the principles and mandates outlined in the memorandum.

Bean responded that the memorandum is not intended to supersede laws and shall be implemented consistent with applicable laws.  It is not intended to change any legal authority of the Interior Department or any other agency.

Given the fact that the agencies have different legal authorities, Sen. Murkowski asked how the memorandum will result in consistent standards and guidance, while at the same time, offer what is referred to as “right tailored” approaches.

Bean responded that each agency can follow a general set of principles that are consistent across agencies.

For example, the preference given to advanced compensation over the past couple of decades makes clear that mitigation efforts sometimes fail.  The advantage, for example, of mitigation banking, is that it ensures successful mitigation prior to other impacts being authorized, so agencies have the authority to favor advanced mitigation compensation.

The policy also makes clear that there should be equal standards for various forms of mitigation, meaning that when mitigation is required, typically there are various ways that it can be addressed by the permitee or developer.  Permittees can carry out mitigation efforts, purchase credits from the mitigation bank, or make contributions to an In-Lieu-Fee fund.

Whatever method is chosen, the point is the standards should be the same so that there is a level playing field.

Sen. Murkowski asked if the standards are the same for what BLM applies versus what the Forest Service applies.

Bean said he cannot speak specifically about these agencies, but the memorandum’s goal is to have similar principles guide mitigation decisions for all of Interior’s agencies.

Sen. Murkowski said this is exactly the problem.  The goal may look good on paper, but won’t work when the actually applied.


Sen. Cantwell Questions Agency Witnesses

Sen. Cantwell said the natural environment is changing, which makes the mitigation efforts even more challenging.  She asked how agencies will adapt their mitigation projects with that kind of dynamic change in the ecosystem.

Bean agreed that climate change introduces a new element of uncertainty related to future mitigation projects.  To the best of our ability, he said, his department tries to take into account the projected future of a mitigation site to ensure that it will endure over time.

The durability issue is most often raised in context of ensuring that commitments made on public lands can be sustained over time.  On private lands, conservation easements or other property interests can be fairly effective.  On public lands, the challenge is to have a commitment that survives the next planning cycle.

Ferebee noted that the Forest Service in is the process of developing its national policy.  It is thinking through terms like durability and engaging with its federal partners and the private sector to learn about the work they’ve done to address mitigation.

Sen. Cantwell asked if there was possibly an overreliance on compensation.  Beyond the mitigation hierarchy where you want to ensure that agencies are working together, she continued, how do you avoid making sure that somebody doesn’t prioritize market solutions as opposed to just saying no to a project, or if the market solution dominates over broader policies?

Bean responded that most projects do not have compensation aspects, because the mitigation efforts suffice to the extent that compensation is not valuable.  The small subset of projects that are allowed to go forward based on compensation and of those a substantial fraction choose the mitigation banking credit purchase option as a preferable alternative.

Sen. Cantwell responded that is a good thing, because it speeds a project up by knowing what type of mitigation needs to happen upfront.


Sen. Shelley Moore Capito (R-WV) Questions Agency Witnesses

Sen. Capito noted that one of her concerns with the memorandum is the vague and variable applications.  She asked about what the impact would be on a project such as a pipeline that crosses both public and private lands.

Ferebee stated that the memorandum will not have an impact on current projects.  When the Forest Service is engaged in those types of activities, it tries to bring all of the key players to the table to analyze the projects and work with the proponents on the best alignment.

Sen. Capito asked if the economic burden from mitigation plans could become prohibitive for small businesses in any way.

Bean responded that the goal is to have the compensatory requirement reflect the impact of the project, irrespective of the size of the project proponent.  Ferebee said the Forest Service would take a similar approach.


Sen. Angus King (I-ME) Questions Witnesses

Sen. King asked what sort of ‘creature’ the memorandum is, and is its legality on the spectrum of the executive branch’s constitutional authority.

Bean responded that agencies have the discretion within their existing authorities to act consistently with the memorandum, which the memorandum directs them to do.  The memorandum does not create new authority or contradict existing authority.  In that respect, it is very similar to an Executive Order (EO), directing agencies to use their existing authorities in particular ways.

Sen. King responded that the problem he sees is that we always seem to run into trouble with one size fits all prescriptions.  He asked if they felt if the policies set in principles that are established are of enough general application that no problems will occur where a rule is overly prescriptive.

Bean said the memorandum focuses on general principles of broad applicability, not on specific outcomes or specific projects, but rather to provide a broad set of overarching principles to guide agencies.

Sen. King asked about advanced mitigation practices and whether this is a situation where one says, “here is what we are going to do to ameliorate those effects.”

Bean responded that most state transportation departments now have mitigation banks to carry out mitigation in advance of future highway development projects.

Sen. King asked about projects that already contain mitigation, such as renewable energy projects that reduce emissions.  In other words, how do agencies take into account the environmental benefits weighed against the environmental costs?

Bean said that depends upon the resources affected.  If the potential benefits are not directly relevant to the resource it impacts, then that does not necessarily mean that they will negate them.

Sen. King said the point he is trying to make is that if a project has environmental benefits that should be included as a part of the equation.  Bean responded that it certainly is taken into account looking at the NEPA analysis in comparison to project alternatives.

Sen. Murkowski asked if the two departments use the same definitions for what qualifies as the best available science.

Bean said it is inherent within DOI to look to the best available science.  Ferebee responded that the DOA has a definition of the best available science, but he is unsure if it is the same as the DOI’s definition.

Sen. Barrasso commented on the concept of irreplaceable natural resources, and if finite natural resources are considered irreplaceable.  He said this term is confusing and vague, and can be applied to a broad amount of resources.  He noted that the example Bean gave of complex coral reef systems off the coast of Hawaii is very different than other resources such as oil, coal, and natural gas.


Sara Longan’s Testimony

Longan, Executive Director of the Office of Project Management and Permitting for the State of Alaska Department of Natural Resources gave testimony about the specific challenges in Alaska and working with federal partners to think creatively and within their existing authorities to improve the current mechanisms in place to avoid and minimize avoidable impacts to resources.

It is concerning that the memo is seeking new mitigation goals when the existing mitigation regulations already impose challenges to regulators and developers in Alaska.  It has long been recognized that the “no net loss” policy has raised concern in Alaska where 63% of the nation’s wetlands are found.  In 1994, the Army Corps of Engineers and EPA produced the Alaska Wetlands Initiative report which specifically noted Alaska’s unique challenges, and concluded that a predictable and flexible program is essential.  This report is referenced in the CWA 2008 Mitigation Rule.

The federal regulators are heeding their own advice by making the 404 program in Alaska more practical and flexible.  BLM is developing new mitigation requirements to offset impacts from development within the National Petroleum Reserve Alaska (NPRA), which ultimately required $8 million in mitigation fees from Conoco Phillips in Alaska for the proposed GMT1 project.  These federal government protections are unrecognized by BLM as they seemingly initiate additional requirements and require more funds from developers.

The federal agencies should fully understand any unintended consequences that may result from implementing this memo.  Due to the history of regulatory challenges in Alaska, the memo is viewed as a step in the wrong direction, and we question the level of consultation the federal government took prior to its issuance.

Imprecise terms like “harmful impacts” and “irreplaceable character” are left to potentially conflicting interpretation and implementation by multiple federal agencies.

She urges the federal agencies to undertake a regulatory cost analysis and a NEPA focused review of the memo to help determine commercial and cumulative impacts.  The federal agencies should make it explicitly clear how non-federal lands may be impacted.


Doug Lashley’s Testimony

Doug Lashley, Managing Member of GreenVest, LLC, an environmental mitigation banking firm, began his testimony by saying mitigation banking is a key part of the federal permitting process.  This form of advanced compensatory mitigation means that the environmental benefits are achieved before the project is permitted.

Using our own capital, we then seek credits from the federal permitting agencies that can be purchased by developers.  A review of core permit data has shown that other types of mitigation can reduce the permitting process times significantly.  The approach used in our industry recognizes the ecosystem values of the watershed, and provides multiple incentives for habitat restoration.  Credit potentials, established by restoring and enhancing degraded ecosystems, generate functional uplift to the natural systems and the economic value of the properties.

This is the GreenVest mission of business – creating credits for developers.  We welcome the memo because it provides a framework to achieve efficiency within the various federal agencies involved in the permitting process.

With continued coordination with the Administration and all relevant federal agencies, we can accelerate permitting in a balanced and efficient way with reliance on ecosystem service banks.

This memo is a great incentive for agencies involved in permitting to find cost savings and efficiencies at a significant level.  The DOI has also announced the establishment of a natural resource investment center to enhance the prospects of the private sector to invest in in these projects.  This continued involvement of the private sector acknowledges that bringing capital to the table will help address the need to balance economic growth with environmental quality, and is fundamentally a sound policy.


Lynn Scarlet’s Testimony

Lynn Scarlett, Global Managing Director of The Nature Conservancy (TNC) testified that while serving in the DOI during the Bush administration, saw the effective application of policies to avoid and minimize mitigation impacts support agency decision making.  TNC believes that the memo can support project efficiency and better environmental outcomes.  Mitigation is not a new concept in the U.S. policy arena, but the track record could be improved.  TNC believes that this memo can improve efficiency in the permitting process.  The key emphasis is on measureable performance standards.  In the past, lack of clarity and consistency has resulted in inadequate environmental outcomes, and been bad for project developers, causing project delays and increased costs.

TNC has some principles that apply to this type of policy update.  Mitigation decisions should be applied in a landscape-context if possible, and incorporate early planning.  This approach enables developers to know in advance what areas should be avoided, and what areas should be prioritized.  It enables more efficient project review when agencies have clear expectations, and this could cut permitting time in half.


Shuan Sims’ Testimony

Shaun Sims testified that he is deeply concerned about the memo.  The underlying principles of avoidance, minimization, and compensation are generally sound and already being practice at the local, state and federal levels.  Though the memo seeks consistency across agencies, this can also prevent effective locally-driven conservation.

It introduces a number of concepts that are a cause of concern:

  • It introduces a new concept of increased private investment in resource restoration enhancement. This will be accomplished through mandated compensatory actions, not through the encouragement of economic activity that can enable users to be willing investors.
  • The definition of advanced compensation is based on the memo “environmental benefits achieved before a project’s harmful impacts occur” which leaves questions if it is intended to go beyond the current mitigation, which is currently standard for most mitigation projects.
  • He said it is not possible to provide enough mitigation for significant durability to prevent against any potential future environmental change when we are talking about a dynamic system that is ever-changing itself
  • The concept of mitigation to provide for a net environmental gain is premature at this point. This approach also assumes that baseline resource information exists at a level to provide certainty to get to net gain or no net loss.
  • Landscape and watershed level approaches that are discussed in the memo make sense from a natural resource management perspective, but he questions the size of the landscape that is being contemplated.
  • Irreplaceable natural resources – this is basically one more land designation designed to limit productive use of the resource base. There appears to be no shortage of attempts to limit the ability of industries to responsibly develop and utilize their resources

Laura Skaer, Executive Director, American Exploration & Mining Association stated that while her organization supports mitigation, the memo will unnecessarily create confusion, cause delays, increase costs, and hinder the ability of America to lessen its dependence on critical and strategic foreign minerals.

The Constitution gives congress, not the executive branch, the authority to make rules and regulations for managing public land.  The President’s authority is limited to implementing those laws.  Congress has enacted a number of land management statues with a single theme – managing for multiple use sustained yield.  This memo goes beyond implementation, and is in direct conflict with legislative acts that contain preventive standards that recognize there will be necessary degradation.

The memo contains no legal effect, it is marching orders from the executive branch, and will result in permit delays, increased costs, and perhaps permit extortion.  It is up to congress to change mitigation policies and control how public lands are managed, not the executive branch.


Sen. Murkowski’s Questions to Longen

Sen. Murkowski questioned Longen about the MPRA and the effort to align the mitigation interests to see if this memo gets us any closer.  With what we saw within NPRA and the compensation requirement, it seemed they were just trying to get the highest amount that Conoco would agree to.  She asked Bean how this payment was developed, and what metrics were used, to give clarity to anybody who is looking to do a project in Alaska.

Longen responded that we do not know the parameters that were used.  She noted that BLM has since made attempts to illustrate their transparency.  They are holding workshops throughout the state that seek input from the communities and from the public to help BLM effectively mitigate impacts.  It is important to realize that BLM cannot consistently follow metrics or parameters to estimate mitigation costs because those metrics are not in place in any regulation or well established policy.

Sen. Murkowski responded that BLM is now using some of that money to develop its landscape level regional

Mitigation strategy, so Conoco is bearing the burden of having to pay for BLM to develop its regional mitigation strategy.

To another question about regulation, Longen answered that the government agencies are trying hard to coordinate.  But herein, we have the process of unknown and unexpected guidelines that require Conoco to pay for compensatory mitigation.  The mitigation required for GMT1 was in addition to what they had to pay under the CWA.

In her closing remarks, Sen. Murkowski stated that the goals are salutary, but getting there is the challenge, and right now we are clearly have a ways to go.