Figure 1 is an example of a type of wetland. Under these guidelines, developers must first avoid and then minimize adverse impacts to wetlands to the extent practicable and then compensate for any unavoidable impacts. The arrangements have been designed predominantly to restore, enhance, and/or preserve wetlands, with some arrangements also allowing for the creation of wetlands. Corps officials in 11 of the 17 districts with the in-lieu-fee option stated that the number of wetland acres restored, enhanced, created, or preserved by the in-lieu-fee organizations equaled or exceeded the number of wetland acres adversely affected. When asked about functions and values of wetlands, officials in 9 of the 17 districts reported that the functions and values lost from the adversely affected wetlands were replaced at the same level or better through the in- lieu-fee organizations’ mitigation efforts. Recent Guidance May Affect Competition Between In-Lieu-Fee Organizations and Mitigation Banks in Districts With the In- Lieu-Fee Option

In-lieu-fee organizations have the potential to compete with mitigation banks for developers’ mitigation business to the extent that organizations and banks provide similar mitigation services and serve the same geographic areas. Effectiveness of Ad Hoc Mitigation Unknown

Our survey showed that since January 1, 1996, 24 of the 38 Corps districts allowed developers to mitigate adverse impacts to wetlands through ad hoc arrangements. Oversight of mitigation efforts performed under ad hoc arrangements was lacking in almost half of the 24 districts using such arrangements. Officials in seven districts said that they had not monitored either the mitigation efforts or use of funds made under ad hoc arrangements, and officials in three others did not know whether such monitoring had occurred. To better ensure the ecological success of mitigation efforts under ad hoc arrangements, we recommend that the Secretary of the Army instruct the Corps to establish procedures to clearly identify whether developers or recipients of funds are responsible for the ecological success of mitigation efforts and, using the same success criteria applicable to in-lieu-fee arrangements, to develop and implement procedures for assessing success. Scope and Methodology

To obtain information on the extent to which the in-lieu-fee option has been used and been effective in mitigating adverse impacts to wetlands, and on the extent to which in-lieu-fee organizations compete with mitigation banks for developers’ mitigation business, we conducted a two- phase telephone survey of Corps officials from the 38 district regulatory offices. We also asked Corps districts to supply, in writing, information not suited for collection by telephone, such as the number of permits issued per district that used in-lieu-fees to satisfy mitigation requirements during fiscal years 1998–2000; the total dollar amounts received by in-lieu-fee organizations; and the number of acres that in-lieu-fee organizations restored, enhanced, created and/or preserved from the time that the in-lieu-fee arrangements were established through fiscal year 2000. We judgmentally selected these districts because they had in- lieu-fee arrangements that were established in 1997 or earlier and had mitigation banks available as a mitigation option. 2. 3. 5. 9. As explained in our report, ad hoc fund recipients usually do not have a formal agreement with the Corps and typically perform mitigation at a single site with funds received from one developer for one development project. 2. 3.
Why GAO Did This Study

More than half the estimated 220 million acres of marshes, bogs, swamps, and other wetlands in the United States during the colonial times, have disappeared, and others have become degraded. This decline is due, primarily, to farming and development. Developers whose projects may harm wetlands must, according to environmental regulations, first avoid and then minimize adverse impacts to wetlands to the extent practicable. If harmful impacts are unavoidable, the developer must compensate by restoring a former wetland, enhancing a degraded wetland, creating a new wetland, or preserving an existing wetland. Such mitigation efforts can occur under the following three types of arrangements: (1) mitigation banks, under which for-profit companies restore wetlands under Army Corps of Engineers agreements and then sell credits for these wetlands to developers; (2) in-lieu-fee arrangements under which developers pay public or non-profit organizations fees for establishing wetland areas, usually under formal Corps agreements; and (3) ad hoc arrangements, under which developers pay individuals or companies to perform the mitigation. This report, determines the extent to which (1) the in-lieu-fee option has been used to mitigate adverse impacts to wetlands, (2) the in-lieu-fee option has achieved its intended purpose of mitigating such impacts, and (3) in-lieu-fee organizations compete with mitigation banks for developers' mitigation business. This report also discusses the use of ad hoc arrangements as a mitigation option. Most of the arrangements were designed to use fees received from developers to restore, enhance, or preserve wetlands, with a few arrangements designed to allow wetlands to be created. During fiscal years 1998 through 2000, developers used the in-lieu-fee option to fulfill mitigation requirements for more than 580 acres of adversely affected wetlands, and paid more than $39.5 million to in-lieu-fee organizations. The extent to which the in-lieu-fee option has achieved its purpose of mitigating adverse impacts to wetlands is uncertain. Although Corps officials in 11 of the 17 districts with the in-lieu-fee option said that the number of wetland acres restored, enhanced, created, or preserved by in-lieu-fee organizations equaled or exceeded the number of wetland acres adversely affected, data submitted by more than half of those districts did not support these claims. Officials in 9 of the 17 districts said that functions and economic values lost from the adversely affected wetlands were replaced at the same level or better through in-lieu-fee mitigation, but officials in more than half of those districts also acknowledged that they have not tried to assess whether mitigation efforts have been ecologically successful. As a result, the Corps cannot be certain that in-lieu-fee mitigation has been effective. Corps district officials in 9 of the 17 districts with the in-lieu-fee option said that organization and mitigation banks were competing with each other by providing similar mitigation services in the same geographic area. No competition existed in 5 of the 17 districts because either no mitigation banks were available, or in-lieu-fee organizations and mitigation banks provided different services, or served different geographic areas.

What GAO Found

GAO found that hoc arrangements typically were for one-time projects without a formal agreement. Oversight of mitigation affairs was lacking in almost half of the districts using such arrangements. Corps districts disagreed on whether responsibility for the ecological success of ad hoc mitigation rests with the ad hoc fund recipient or the developer.