On June 18, 2018, the U.S. Environmental Protection Agency (EPA) and the Army Corps of Engineers (USACE) clarified their guidelines for when offsets are required for wetlands impaired by development on the Last Frontier. The new policy recognizes the uniqueness of Alaska for wetlands permitting, by allowing alternatives and flexibility related to compensatory mitigation as Alaska is home to 174 million acres of wetlands covering 43 percent of the land area.

The two agencies signed a new memorandum of agreement (MOA), which takes aim at the USACE’s Alaska District for permitting development projects without “compensatory mitigation.” The USACE is the designated the lead agency on wetlands-related projects under CWA Section 404 (33 U.S.C. § 1344) and charged with evaluating permit applications for the discharge of dredged or fill materials into the waters of the United States, including jurisdictional wetlands. In 2008, the USACE and EPA issued a Final Rule providing for comprehensive standards for approaching wetlands filling, which first asks applicants and agencies to evaluate avoiding and minimizing wetlands impacts, and, if wetlands cannot be avoided, to develop “compensatory mitigation.” The concept behind compensatory mitigation is that developers are permitted to fill a designated acreage of natural wetland if they also offset this taking by setting aside or restoring a nearby property with high environmental value. For example, compensatory mitigation may be required to ensure that discharges do not cause or contribute to the violation of water quality standards or threaten endangered species or their habitat (see 40 CFR Part 230.10(b)).

When an applicant proposes a development project, a local district office of the USACE spearheads the wetlands permitting. According to reporting by E&E News, the Alaska District had only required mitigation in 26 percent of permits since 2015. The root of these low numbers was that the Alaska District had been taking a narrow view of the scale the State’s of watersheds, which in turn limited the review of environmental impacts. In addition, the Alaska District was following USACE Guidelines that designated that mitigation properties should be of “like-kind”—where similar, nearby environmental property offset wetlands impacts. The combined result of these factors was that the Alaska District applied a “less rigorous” standard when projects were deemed to have minor environmental impacts, despite filling hundreds of acres of wetlands.

The new MOA does not change mitigation requirements as set out in the 2008 Final Rule but supersedes two previous MOAs between EPA and USACE that justified the Alaska District to allow projects to move forward without compensatory mitigation. Given Alaska’s often pristine and expansive watersheds and wetlands land area, Alaskan projects may not practicably avoid wetlands. Also, the terrain of a proposed project may not present the opportunity to restore local resources due to technological constraints, limited availability of sites, limited accessibility to purchase credits from a like-kind approved mitigation bank or an approved in-lieu fee program, and unavailable sizeable tracts under public ownership.

The MOA provides applicants and the Alaska District with additional options for compensatory mitigation and suggests a preference for mitigation within the same watershed as a development project but also offers that “out-of-kind” compensatory mitigation may be appropriate when it better serves the aquatic resources (see 33 CFR Part 332.3(c) and 40 CFR 230.93(c)). For example, “restoring or enhancing streams and their riparian areas impacted by mining and other activities to improve fish habitat and other stream functions, or removing barriers in streams . . . to improve connectivity and other aquatic functions may, in certain circumstances, be environmentally preferable to wetland restoration . . . .”

Developers seeking wetlands permits from the Alaska District should be mindful of this new MOA in the preparation of their applications to USACE. Since the Alaska District, prior to the MOA, had been viewing watersheds narrowly and the MOA now provides for a larger scale for watershed review, applicants will need to find the “optimal” watershed scope in determining impacts and developing Records of Decision. The MOA does mention that “[t]he size of watershed addressed using a watershed approach should not be larger than is appropriate to ensure that the aquatic resources provided through compensation activities will effectively compensate for adverse environmental impacts resulting from section 404 permits.” However, the scientific and technical elements are yet to be tested.

On the other hand, the MOA offers opportunities for developers to work with USACE’s Alaska District in developing pragmatic and flexible solutions, such has out-of-kind offsets, habitat improvements or other environmental enhancement as an alternative to compensatory mitigation requirements that otherwise would apply.