ILF and CME FAQs
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In-Lieu Fee FAQs
Q: What is an In-Lieu Fee (ILF) program?
A: The In-Lieu Fee (ILF) program exists as a market-based regulatory mechanism to offset permitted impacts to streams and wetlands. The Federal Water Pollution Control Act (Clean Water Act) and the Rivers and Harbors Act require that any activity involving discharges of dredged or fill material into waters of the United States must offset the damage to or loss of aquatic resources. The US Army Corps of Engineers will issue a permit allowing for stream or wetland impacts, but will mandate that the permittee perform compensatory mitigation. In-Lieu Fee mitigation is a form of third party, offsite compensatory mitigation performed by government agencies or non-profit organizations such as MARS. Throughout Montana, MARS plans and implements compensatory mitigation projects within impacted watersheds and collects the required fees collected from permittees. Under our ILF program, MARS restores, enhances, and preserves wetlands and streams statewide to generate credits that can be acquired by polluters to compensate for aquatic impacts.
Q: How does MARS raise the bar?
A: We work in partnership with local landowners and watershed groups to identify and target wetland and stream sections that will enhance, protect, and restore the greatest quantity of aquatic resources feasible. MARS is committed to using funds collected from credit sales for projects that address major threats to watersheds. MARS projects strive to go above and beyond the minimum requirements to create the most ecological uplift possible.
Q: What is compensatory mitigation?
A: In accordance with Section 404 of the Clean Water Act, compensatory mitigation is the restoration, establishment, enhancement, and/or preservation of wetlands, streams, and other aquatic resources for the purposes of offsetting unavoidable adverse impacts to aquatic resources.
Q: What is a debit?
A: Debits are created when an entity (highway department, railroad, developer, etc.) negatively impacts waters of the United States. The amount of debits accumulated are determined by the US Army Corps of Engineers based on Section 10/404 permits.
Q: What is an advance credit?
A: The US Army Corps of Engineers may approve advance credits for sale to permittees by an In-Lieu Fee program. The ILF program then sells the advance credits before a mitigation project is planned. To account for the time difference between when the impact occurred and when the project is implemented, advance credits are sold at a higher ratio than a mitigation bank (typically 1.5:1). Once a sale is made, all responsibilities and obligations of debits are assumed by the debit purchaser (MARS).
Q: What is a released credit?
A: Released credits are certified by the Army Corps when a mitigation project achieves its success criteria (which are also called performance metrics). Credit release schedules and associated project milestones vary by project and will vary among restoration, enhancement, and preservation projects. As credits are released, they eliminate debits. If more credits are generated than there are debits, then the surplus of released, certified credits can be sold to future impactors at a rate of 1:1 because there will not be a temporal lag between the impact and the implementation of the mitigation project.
Q: What requirements must a proposed stream or wetland restoration project meet in order to qualify for mitigation credits?
A: We must meet or exceed our credit obligation from each sale within a full cost analysis standpoint, land protection is required in perpetuity, and approval is required from the US Army Corps of Engineers and the Interagency Review team.
Q: How are projects selected for mitigation?
A: ILF programs are required to create Compensation Planning Frameworks (CPFs) for each watershed service area that identify the opportunities, threats, goals, objectives, and project partners within the target watershed. When an advance credit sale is made, MARS refers to CPFs for guidance and collaborate with partners and landowners to seek out potential projects that can satisfy those credits. The pros and cons of each potential project are considered and discussed with the board and the US Army Corps of Engineers. Potential projects are prioritized and selected on a number of variables including: landowner willingness, ecological benefit, and cost benefit analysis.
To find the CPF for each watershed, click here: Compensation Planning Framework
Q: When a credit sale is made, what is the timeline for meeting the debt obligation?
A: MARS is required to implement compensatory mitigation projects within three growing seasons of the credit sale.
Q: How are wetland and stream credits calculated?
A: Credits are calculated based on the acreage of the mitigated area the type of compensatory mitigation that is being performed. Wetland credits can be calculated using functional assessments or acreage ratios. A functional assessment approach would multiply the functional score of a site by the acreage to produce functional units. A mitigation ratio approach assigns ratios to the impacted acres based on the type of mitigation that will compensate for the injury: re-establishment (1.5:1), rehabilitation (2:1), creation (2:1), enhancement (4:1), and preservation (5:1).
Stream mitigation credits are typically calculated with a functional assessment that multiplies the different elements of a restoration project by the total number linear feet of stream that will be restored. Some of these elements include: revegetating the riparian buffer, removing barriers to fish passage, noxious weed control, and removing disturbance from the buffer.
Q: How are the funds from selling credits used?
A: Credit sale allocation is 50% mitigation (all costs associated with implementation of mitigation projects), 17% contingency (unanticipated costs associated with planning or implementation), 13% long term management (adaptive management and remediation of mitigation site, including defense of protections and financial assurances), and 20% administration (administration and management of the statewide ILF program, project identification, including legal, accounting, and consulting fees).
Q: What happens if a watershed mitigation project does not meet success standards?
A: To have a mitigation site plan approved by the US Army Corps of Engineers, it must have an adaptive management plan addressing what will be done if success standards are not met. Funds for adaptive management plans are withdrawn from the contingency account. If adaptive management is not successful, the credits do not get released.
Q: How is In-Lieu Fee different from a mitigation bank?
A: In-Lieu Fee programs are provided by a government agency or non-profit organization whereas mitigation banks are for-profit businesses. Mitigation banks are funded through private investments. Bank projects are developed in a context of market-based conservation strategies that maximizes funding opportunities. Banks are required to build their projects and have the credits certified before they can sell them, whereas ILF programs sell advance credit and have three growing seasons from the date of sale to implement a project. Often, ILF programs will consolidate mitigation funds from multiple sales into a larger project with greater ecological uplift. They provide a third party mitigation option for rural or low-demand service areas where mitigation banks do not operate.
Q: What is the Final Rule (2008)?
A: EPA and the US Army Corps of Engineers promulgated the 2008 Final Rule through joint rulemaking to clarify and define the scope of Section 404 of the Clean Water Act. It states that there can be no net loss of watershed functions or services resulting from impacts to streams or wetlands. When a wetland or stream is negatively impacted, the net compensatory mitigation must be equal or greater than the degradation.
Q: What is a functional assessment?
A: Wetland functions are the physical, chemical, and biological processes that occur in wetlands. A functional assessment is a useful tool to express and quantify watershed health. It takes many factors into consideration and is site specific, but can include hydrologic conditions and diversity and distribution of native and invasive vegetation and. In Montana, we typically use the Montana Wetland Assessment Method for wetlands and the Montana Stream Mitigation Procedure for Streams.
Q: What is uplift?
A: Uplift is measured using a functional assessment that quantifies the increase in several ecosystem functions and services resulting from a restoration project, relative to baseline. For example, if the pre-restoration site doesn’t have any ponds or swales to capture and store spring runoff, and the restoration project creates these features, then there will be “long- and short-term water storage” uplift. Or, if a pre-restoration site has low habitat diversity and species richness because there is a monoculture of reed canarygrass, and the restoration creates has different layers of vegetation (like willows, cattails, and sedges) then there will be “wildlife habitat value” uplift.
Q: What is the difference between deed restriction and a conservation easement?
A: Deed restrictions and conservation easements are very similar – they are both legally binding restrictions on the use of land. The primary differences between the two involve the rigor of the process to create the servitude, the costs, and who possesses the authority to enforce restrictions. Deed restrictions are recorded at the County Clerk and Recorder’s office. Unless specified, they may not bind future landowners. They are enforced by the person specified in the restriction, typically a state of federal agency, the county planner, or neighbors. On the other hand, conservation easements are held and enforced by a third party – a land trust or public agency. They are more detailed than deed restrictions, documenting existing conditions as a reference for future conditions. A conservation easement creates an active, long-term relationship between the land trust and landowner. Conservation easements that meet certain qualifications are also eligible for income tax treatment as a charitable gift.