Subsequently, in 1989, the  administration set a national goal of no net loss of wetlands to ensure that  these valuable resources are protected. Section 404 generally prohibits the  discharge of dredged or fill material in waters of the United States, which  include certain wetlands, without a permit from the Corps. To  replace lost wetland functions, the Corps can require compensatory  mitigation as a condition of issuing a permit when damage or degradation  of wetlands is unavoidable. However, we found that parts of the guidance are vague or  internally inconsistent, thus limiting their usefulness. Corps Guidance Establishes Two Primary Oversight Activities for Compensatory Mitigation

The Corps has three primary guidance documents that establish  requirements for overseeing compensatory mitigation performed by  permittees, mitigation banks, or in-lieu-fee arrangements: (1) The 1999  Army Corps of Engineers Standard Operating Procedures for the  Regulatory Program; (2) The Federal Guidance for the Establishment,  Use and Operation of Mitigation Banks; and (3) The Federal Guidance on  the Use of In-Lieu-Fee Arrangements for Compensatory Mitigation  Under Section 404 of the Clean Water Act and Section 10 of the Rivers  and Harbors Act. Although the Corps’ standard operating procedures call for  district officials to require and review monitoring reports for mitigation  banks and “other substantial mitigation,” it does not define substantial  mitigation. The Corps required permittees to  submit monitoring reports for 89 of the 152 permit files that we reviewed. However, we found only 21 files contained evidence that the Corps  actually received these required reports, ranging from a low of zero in two  districts to a high of 69 percent in Jacksonville. Furthermore, only 15  percent, or 23 of the 152 permit files, showed that the Corps had conducted  a compliance inspection. The file contained no evidence that the  Corps had received any monitoring reports or conducted compliance  inspections to determine the status of the required mitigation. Moreover, even when Corps officials conducted oversight, they did not  always perform suggested follow-up. Of the 85 mitigation banks that we reviewed, the Corps required  that 71 percent, or 60 of the 85 mitigation bank sponsors, submit  monitoring reports and 70 percent, or 42 mitigation bank files, contained  evidence that at least one monitoring report had been received. In addition, the files contained evidence that the Corps had  conducted at least one compliance inspection for 5 of the 12 arrangements. Corps Districts Can Take a Variety of Enforcement Actions to Resolve Violations but Rely Primarily on Negotiation

The Corps can take a variety of enforcement actions if required  compensatory mitigation is not performed. In cases where the permittee was to perform the mitigation, the Corps may  issue a compliance order, assess administrative penalties, require the  permittee to forfeit a bond, suspend or revoke a permit, and/or refer the  case to the Department of Justice for legal action. Corps Sometimes Limits Its Own Enforcement Ability

On occasion, district officials wanting to pursue enforcement actions after  detecting instances of noncompliance may not be able to do so because  they have limited their enforcement capabilities; that is, they have not  specified the requirements for compensatory mitigation in permits and  failed to establish agreements with third parties. Recommendations for Executive Action

Given the importance of compensatory mitigation to the section 404  program and its contribution to achieving the national goal of no net loss of  wetlands, we recommend that the Secretary of the Army direct the Corps  of Engineers to establish an oversight approach that ensures required  mitigation is being performed throughout the nation. As part of this  oversight approach, the Corps should  develop more specific guidance for overseeing compensatory mitigation  performed by permittees, mitigation banks, and in-lieu-fee sponsors; in  particular, the guidance should define key terms such as “substantial  mitigation” and specify the actions Corps officials should take if  required monitoring reports are not received;  clarify expectations for oversight of mitigation, including establishing  goals for the number of monitoring reports that should be reviewed and  the number of compliance inspections that should be conducted; and  review existing mitigation banks and in-lieu-fee arrangements to ensure  that the sponsor has an approved agreement with the Corps, as called  for in federal guidance; if such agreements are not in place, they should  be developed and the Corps should ensure that future mitigation banks  and in-lieu-fee arrangements have these approved agreements. Districts will inspect a relatively high percentage of compensatory  mitigation to ensure compliance with permit conditions.
Why GAO Did This Study

Because wetlands provide valuable functions, the administration set a national goal of no net loss of wetlands in 1989. Section 404 of the Clean Water Act generally prohibits the discharge of dredged or fill material into waters of the United States, which include certain wetlands, without a permit from the U.S. Army Corps of Engineers (Corps). To help achieve the goal of no net loss, the Corps can require compensatory mitigation, such as restoring a former wetland, as a condition of a permit when the loss of wetlands is unavoidable. Permittees can perform the mitigation or pay a third party--a mitigation bank or an in-lieu-fee arrangement--to perform the mitigation. GAO was asked to review the (1) guidance the Corps has issued for overseeing compensatory mitigation, (2) extent to which the Corps oversees compensatory mitigation, and (3) enforcement actions the Corps can take if required mitigation is not performed and the extent to which it takes these actions.

What GAO Found

The Corps has developed guidance that establishes two primary oversight activities for compensatory mitigation: requiring the parties performing mitigation to periodically submit monitoring reports to the Corps and conducting compliance inspections of the mitigation. However, parts of the guidance are vague or internally inconsistent. For example, the guidance suggests that the Corps place a high priority on requiring and reviewing monitoring reports when "substantial mitigation" is required, but it does not define substantial mitigation. Furthermore, one section of the guidance directs district officials to conduct compliance inspections of a relatively high percentage of compensatory mitigation sites, while another section designates these inspections as a low priority, leading to confusion by Corps officials. Overall, the seven Corps districts GAO visited performed limited oversight to determine the status of compensatory mitigation. The Corps required monitoring reports for 89 of the 152 permit files reviewed where the permittee was required to perform compensatory mitigation. However, only 21 of these files contained evidence that the Corps received these reports. Moreover, only 15 percent of the 152 permit files contained evidence that the Corps had conducted a compliance inspection. The Corps districts provided somewhat more oversight for mitigation performed by the 85 mitigation banks and 12 in-lieu-fee arrangements that GAO reviewed. For the 60 mitigation banks that were required to submit monitoring reports, 70 percent of the files contained evidence that the Corps had received at least one monitoring report. However, only 36 percent of the mitigation bank files that GAO reviewed contained evidence that the Corps conducted an inspection. For the 6 in-lieu-fee arrangements that were required to submit monitoring reports to the Corps, 5 had submitted at least one report. In addition, the Corps had conducted inspections of 5 of the 12 arrangements. The Corps can take a variety of enforcement actions if required compensatory mitigation is not performed. These actions include issuing compliance orders, assessing administrative penalties of up to $27,500, requiring the permittee to forfeit a bond, suspending or revoking a permit, implementing the enforcement provisions of agreements with third parties, and recommending legal actions. District officials rarely use these actions and rely primarily on negotiation to resolve any violations. In some cases, GAO found district officials may not be able to use enforcement actions after detecting instances of noncompliance because they have limited their enforcement capabilities. For example, because they did not always specify the requirements of compensatory mitigation in the permits, they had no legal recourse for noncompliance.