The Role of in Lieu Fee Programs in Wetland/Stream Mitigation Credit Trading: Illustrations from Virginia and Georgia

In 2008 U.S. regulatory agencies established new rules and priorities for offsetting unavoidable wetland and stream impacts. The rule establishes a clear preference for off-site compensatory mitigation over on-site mitigation and compensatory mitigation in advance of permitted impacts by commercial mitigation banks. The rule, however, recognizes that commercial banks may not always be able to feasibly provide mitigation credits and allows in lieu fee (ILF) programs to serve as a secondary compensatory mitigation option. ILF programs accept fees for permitted impacts and then construct compensatory mitigation projects after sufficient fee revenue has been collected. Some stakeholders remain skeptical of ILF programs, charging that the regulatory preference for commercial mitigation banks is not being followed. This paper examines the extent to which regulatory officials adhere to compensatory mitigation preferences in Virginia and Georgia and whether ILF programs provide compensatory mitigation within the confines of the new rule. Examination of ILF transactions indicate that regulatory authorities closely follow compensatory mitigation preferences. Case study evidence also suggests that ILF programs experience some challenges in meeting compensatory mitigation time requirements given the financial and regulatory constraints in which they must operate.