MDE's In-Lieu Fee Program

An in-lieu fee (ILF) program is defined in the 2008 Federal Mitigation Rule as being a program involving the restoration, establishment, enhancement, and/or preservation of aquatic resources through funds paid to a governmental or non-profit natural resources management entity to satisfy compensatory mitigation requirements for permits. An in-lieu fee program sells compensatory mitigation credits to permittees whose obligation to provide compensatory mitigation is then transferred to the in-lieu program sponsor. All the funds collected into the in-lieu fee program must be used to implement the mitigation requirements, with only a minimal administrative cost allowed.

MDE has successfully managed an ILF wetland mitigation program, which includes two independent special funds: (1) the Nontidal Wetlands Compensation Fund (Nontidal Fund), which has accepted mitigation payments since 1991; and (2) the Tidal Wetlands Compensation Fund (Tidal Fund), which has accepted mitigation payments since 1996. MDE has completed numerous mitigation projects throughout the State that have replaced lost wetland acreage, functions, and values using the Nontidal Fund and the Tidal Fund.

MDE and the Chesapeake Bay Trust (CBT) are partnering to provide a grant program using the Nontidal Fund for nontidal wetland restoration, creation, and enhancement projects throughout Maryland. Using this grant program, MDE and CBT have recently funded several nontidal wetland projects, which are currently under construction. The continuation of this grant program will allow MDE to complete wetland mitigation sites that will satisfy past and future ILF mitigation requirements.

The US Army Corps of Engineers (Corps) has determined that the ILF Program does not meet the requirements of the Federal Mitigation Rule. For this reason, the Corps will not allow the use of the ILF Program to satisfy federal compensatory mitigation requirements until the ILF Program is revised and approved by the Interagency Review Team (IRT), consisting of representatives from the Corps and other federal and State regulatory and resource agencies. MDE is working to revise the ILF program and state regulations related to nontidal wetland mitigation to be consistent with the Federal Mitigation Rule. MDE submitted the Prospectus (PDF) to the IRT in August 2015 and has received comments back. MDE will address all comments received and submit an ILF Instrument, which will provide greater detail on the ILF Program’s operation, including the process by which mitigation projects will be identified, implemented, and managed. After the ILF Instrument is approved by the IRT, MDE will begin accepting payments for compensatory mitigation projects in accordance with the ILF Instrument and the Federal Mitigation Rule requirements.