ALEXANDRIA, VA – July 5, 2011. Implementing financial assurances for mitigation project success can be challenging and place demands on regulators outside their regular areas of practice and expertise. The Institute for Water Resources (IWR) prepared this white paper on financial assurance for mitigation project success to provide a reference resource for Corps district staff involved with establishing and overseeing financial assurances.
“Implementing Financial Assurance for Mitigation Project Success” reviews key design and implementation issues and considerations relating to the use of financial assurances for mitigation project success. It describes and compares key features of alternative assurance instruments.
The paper is intended to be a “living document” that will be updated periodically as more information becomes available. Therefore, IWR is soliciting comments relating to whether key design and implementation issues and considerations have been adequately addressed and accurately represented, as well as information on Corps district experiences in establishing and using financial assurances in the mitigation context. The paper was prepared by IWR staff Paul Scodari, Steve Martin, and Aaron Willis. Comments and information on experiences should be submitted in writing to Steve Martin (steven.m.martin@usace.army.mil).
Financial assurance for mitigation project success can be defined as a mechanism that ensures that a sufficient amount of money will be available for use to complete or replace a mitigation provider’s obligations to implement a required mitigation project and meet specified ecological performance standards in the event that the mitigation provider proves unable or unwilling to meet those obligations.
Such assurances can be provided by third-party institutions, such as a surety (bonding) companies, insurance companies, banks and other financial institutions that agree to hold themselves financially liable for the failure of a responsible party to perform compensatory mitigation obligations. The purpose of requiring financial assurance in the mitigation context is to indemnify the public (through the Corps) against the potential loss of aquatic resources due to the failure of mitigation providers to perform their compensatory mitigation obligations.
Regulatory History Relating to Compensatory Mitigation
In 2008, the U.S. Army Corps of Engineers and the U.S. Environmental Protection Agency jointly promulgated regulations governing compensatory mitigation for permitted losses of aquatic resources under the federal permit program that implements Section 404 of the Clean Water Act and Section 10 of the Rivers and Harbors Act of 1899.
Among the rule provisions are general requirements for implementing financial assurances for compensatory mitigation projects that state in part, “The District Engineer shall require sufficient financial assurances to ensure a high level of confidence that the mitigation project will be successfully completed.” The rules further state that financial assurances “…may be in the form of performance bonds, escrow accounts, casualty insurance, letters of credit, legislative appropriations for government sponsored projects, or other appropriate instruments, subject to the approval of the district engineer.”
Send Comments
Comments are welcome from Corps district staff, other federal agency staff, non-federal government staff, the regulated community, mitigation providers, assuring entities, non-governmental organizations, and the general public. Comments and information on experiences should be submitted in writing to Steve Martin (steven.m.martin@usace.army.mil).
Learn More