The purpose of this message is to transmit information and additional guidance on the language in TEA-21 that established the preference for using wetland mitigation banks.

FHWA's recently revised wetland mitigation regulation, 23 CFR 777, Mitigation of Impacts to Wetlands and Natural Habitat (65 FR 82913), became effective March 30, 2001. The revised regulation includes legislative, regulatory, technical, and policy developments that have occurred since 1980. The revision broadens the scope of the regulation to encompass all wetland mitigation projects eligible for Federal participation, not just those involving privately owned wetlands, and updates the regulation to implement the provisions of TEA-21, which expanded the mitigation banking eligibility provisions established by ISTEA. The regulation specifies that its provisions apply to all projects funded under the provisions of title 23 of the United States Code. This revision also addresses the added funding eligibility for impacts to natural habitats due to highway projects funded under title 23. Finally, the rule includes a provision requiring that existing wetland and habitat mitigation banks be given preference for use in establishing compensatory mitigation, if the highway project impacts occur within a bank's service area.

Concerning the final point about the preference for mitigation banking, we want to clarify that the wetland and natural habitat mitigation provisions in TEA-21 deal with issues of eligibility. That is, how and when Federal-aid highway funds can be used for these activities. Language in TEA-21 and the FHWA wetland regulation state that, to the maximum extent practicable, preference should be given to the use of mitigation banks. They also require the following four conditions be met:

1. that the wetland impact occurs within the service area of an existing mitigation bank,
2. that the bank contain sufficient credits to offset the impact,
3. that the bank used must have been approved as adhering to the Federal Guidance for the Establishment, Use and Operation of Mitigation Banks (60 FR 58605, November 28, 1995), and
4. that the eligibility preference be "In accordance with all applicable Federal laws, including regulations."

This last item means that Section 404 permit conditions apply to the banking preference. If the Section 404 permit conditions and the Corps' regulatory decision indicate a specific wetland bank (whether public or private) is an acceptable alternative for compensatory mitigation, the provisions in TEA-21 require the bank be used as compensatory mitigation for the projects wetland impacts to the greatest extent practicable. If on the other hand, the 404 final decision is that the use of a particular bank would not be acceptable as mitigation, then condition Number 4 above would not be met and banking would not be binding.

Please note that the TEA-21 provisions and 23 CFR 777 do not make a distinction between mitigation banks that are established with public funds and those that are privately funded, entrepreneurial operations. Therefore, the regulation does not establish any partiality for a particular type of bank over another. If a project has wetland impacts that occur within the service area of two or more banks, the decision as to which bank to use reverts to other considerations of practicability, which could include the following considerations:

1. cost,
2. which alternative provides the best compensation for lost or impacted wetland functions, and
3. acceptability under regulatory decisions

If further information is needed, please contact Mr. Paul Garrett, 303-984-2220, paul.garrett@fhwa.dot.gov; or Mr. Fred Bank, 202-366-5004, fred.bank@fhwa.dot.gov, of my staff.