BLM Mitigation Fund Holder Policy

United States Department of the Interior

BUREAU OF LAND MANAGEMENT

https://www.blm.gov

04/03/2023

In Reply Refer To:

1610 (HQ-210) P

EMS TRANSMISSION 04/20/2023

Instruction Memorandum No. 2023-037

Expires:  09/30/2026

To:                      State Directors

From:                 Assistant Director, Resources and Planning

Subject:             BLM Mitigation Fund Holder Policy

Program Area: All Resource Programs.

Purpose: The purpose of this policy is to ensure that a third-party mitigation fund holder (hereinafter, “mitigation fund holder”) approved by the Bureau of Land Management (BLM) meets minimum qualification standards for the collection, management, and disbursement of mitigation funds held in mitigation accounts. The use of a mitigation fund holder is established through a written agreement between the BLM and the mitigation fund holder that describes the purpose, roles, and responsibilities of the BLM and the mitigation fund holder, and the details of the administration of mitigation accounts established under the agreement.

Administrative or Mission Related: Mission Related.

Policy/Action: The BLM may approve mitigation fund holders that meet minimum qualification standards to establish mitigation accounts for use by entities granted land use authorizations by the BLM (i.e., permittees) when such accounts are an appropriate and efficient method for implementing mitigation measures required through a BLM decision document (e.g., Record of Decision or Decision Record) (hereinafter entities required to mitigate will be referred to generally as “permittees”). The term permittee refers to any project proponent that has a valid permit, right-of-way grant, lease, or other land use authorization from the BLM.

The establishment of these types of mitigation accounts are appropriate when multiple permittees have similar compensatory or other mitigation requirements (e.g., restoration of sagebrush habitat) or a single permittee has project impacts that require substantial compensatory or other mitigation that will be accomplished over an extended period and/or involve multiple mitigation sites. The use of mitigation accounts assists in streamlining permitting and preventing project delays once public land use decisions have been issued. Once established, these accounts allow the mitigation fund holder to collect and manage mitigation funds collected from permittees and expend the funds in accordance with agency decision documents and permits. The mitigation fund holder generally contracts with appropriate and qualified entities that implement the mitigation projects.

The BLM will only approve the use of a mitigation account by a permittee if a mitigation fund holder has met the qualifications described below in Section II, and after a written agreement (e.g., memorandum of agreement) between the BLM and the mitigation fund holder has been established as described in Section III.

The BLM is not required to establish mitigation accounts with mitigation fund holders. Permittees are not required to use mitigation accounts.

I.  Approvals

The appropriate Deputy Director or Assistant Director is responsible for approving national level agreements and entities qualified as national level mitigation fund holders. The BLM state director is responsible for approving agreements and entities qualified as mitigation fund holders at the state level. At a minimum, the agreement (e.g., memorandum of agreement) must be reviewed by the Regional or National Office of the Solicitor prior to BLM approval of the mitigation fund holder, execution of the agreement, and establishment of any mitigation accounts.

II. Entities Qualified to Hold Mitigation Funds

It is essential that mitigation fund holders entrusted with holding funds and managing mitigation accounts are qualified to ensure that mitigation measures meet performance criteria and are carried out for the duration specified in the permit or other public land use authorization. Holders of mitigation funds are generally proposed by the project proponent when proposing a project that will require compensatory mitigation, a permittee that already has a public land use authorization, or a mitigation sponsor (e.g., sponsor for a proposed mitigation/conservation bank or in-lieu fee program) and are subject to approval by the BLM. Entities that meet the qualifications listed below may be approved as mitigation fund holders:

1. A nonprofit organization that:

1. has a history of successfully performing holding and managing mitigation accounts;
2. qualifies for tax exempt status in accordance with Internal Revenue Code (IRC) section 501(c)(3);
3. is a public charity bureau for the state in which the mitigation area is located, or otherwise complies with applicable state laws;
4. is a third party organizationally separate from (having no corporate or family connection to) the mitigation sponsor (e.g., the entity accomplishing the mitigation project), the BLM, the project proponent, or permittee;
5. adheres to generally accepted accounting practices that are promulgated by the Financial Account Standards Board, or any successor entity; and
6. has the capability to hold, invest, and manage the mitigation funds to the extent allowed by law and consistent with modern “prudent investor” and endowment law, such as the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA) or successor legislation when funds are needed for long-term management and monitoring (i.e., stewardship). UPMIFA incorporates a general standard of prudent spending measured against the purpose of the fund and invites consideration of a wide array of other factors. For states that have not adopted UPMIFA, such as Pennsylvania, analogous state legislation (e.g., the Pennsylvania Uniform Trust Act) can be relied upon to achieve this purpose.

2. An accredited land trust with a history of successfully performing this service and that meets the qualifications listed under section II.1.a-f above.

3. The National Fish and Wildlife Foundation (the Foundation), a charitable non-profit corporation established in 1984 by the National Fish and Wildlife Foundation Establishment Act, 16 U.S.C. 3701 et seq., as amended (the “Establishment Act”). The Foundation is recognized as a tax-exempt organization under Section 501(c)(3) of the IRC. The established purpose of the Foundation is to undertake and conduct activities that will further the conservation and management of fish, wildlife, and plant resources of the United States for present and future generations of Americans. The Foundation is authorized to receive and administer funds for mitigation of impacts to natural resources, and other amounts arising from legal, regulatory, or administrative proceedings, subject to the condition that the amounts are received or administered for purposes that further the conservation and management of fish, wildlife, plants, and other natural resources (16 U.S.C. 3703(c)(1)(K)).

4. The Foundation for America’s Public Lands (Foundation), a BLM-affiliated foundation established in 2017 by the Consolidated Appropriations Act, 43 U.S.C. 1748c, to leverage public and private dollars to conserve, protect and restore lands managed by the Bureau of Land Management for the benefit of the American people. The Foundation is recognized as a tax-exempt organization under Section 501(c)(3) of the IRC. The legislated mandate of the Foundation includes: (1) encouraging, accepting, and administering private gifts of money, real and personal property; and in-kind services for the benefit of, or in connection with the activities and services of, the BLM; (2) carrying out activities that advance the purposes for which public land is administered; and (3) in general, assisting the BLM with challenges that could be better addressed with the support of a foundation, including reclamation and conservation activities.

State and local government agencies are limited in their ability to accept, manage, and disburse funds for this purpose and should not be given responsibility for holding mitigation funds for compensatory mitigation sites on public or private lands. An exception may be made under the rare circumstance where a government agency is able to demonstrate, to the satisfaction of the BLM, that they are acting as a fiduciary for the benefit of the mitigation project or site essentially as if they are a third party, and can show that they have the authority and ability to:

1. Collect the funds;

2. Protect the account from being used for purposes other than the management of the mitigation project or site;

3. Disburse the funds to the entities conducting the mitigation project or management of the mitigation site;

4. Demonstrate it is organizationally separate from (having no corporate or family connection to) the mitigation sponsor (e.g., the entity accomplishing the mitigation program or project), the BLM, the project proponent or permittee; and

5. Adhere to generally accepted accounting practices that are promulgated by the Governmental Accounting Standards Board or any successor entity.

In cases where the mitigation fund is needed for stewardship (e.g., ongoing/long-term management, monitoring, and reporting) government agencies are not suitable entities to hold mitigation funds. Stewardship funds must be invested to prevent a loss in value over time. State agencies are generally not allowed to invest trust funds, they must be held in cash (i.e., not invested).

III.  Requirements for Mitigation Fund Holder Written Agreements

The use of a mitigation fund holder is established through a written agreement between the BLM and the mitigation fund holder. Generally, a memorandum of agreement (MOA) or memorandum of understanding (MOU) is the appropriate instrument for these types of written agreements. All MOAs or MOUs will be reviewed for format and consistency requirements in accordance with BLM Manual 1786, Memorandums of Understanding. The agreement must include the following information:

1. Purpose for the agreement;
2. Description of the BLM and mitigation fund holder and their respective authorities to enter into such an agreement;

3. Roles and responsibilities of the BLM and the mitigation fund holder; including that the government is not obligating any financial assistance or other resources which may be deemed as a transfer of value for the agreement;

4. Details of the administration of accounts established under the agreement, including:
   1. how funds will be collected, managed, and dispersed;
   2. depending on the purpose and tenure of the mitigation funds, how funds will be held—in cash (i.e., not invested) or be maintained in an interest bearing or investment account (i.e., invested) at one or more financial institutions that are a member of the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation, or successors to those institutions;
   3. administrative costs; and
   4. processes for disbursements;

5. Standardized form for use by depositors (usually an attachment to the agreement);

6. Description of required contents of an annual fiscal report to be submitted to the BLM with at least the following elements:
   1. balance of each individual depositor at the beginning of the reporting period;
   2. amount of any contribution to the account during the reporting period including, but not limited to gifts, grants, and contributions received;
   3. net amounts of investment earnings, gains, and losses during the reporting period, including both realized and unrealized amounts;
   4. amounts disbursed during the reporting period that accomplish the purpose for which the account was established;
   5. administrative expenses charged to the account from internal or third-party sources during the reporting period;
   6. balance of the account or other fund at the end of the reporting period; and
   7. specific asset allocation percentages, including, but not limited to, cash, fixed income, equities, and alternative investments.

At the BLM’s written request, the mitigation fund holder shall provide to the BLM copies of its financial statements audited by an independent auditor who is, at a minimum, a certified public accountant.

IV.  Monitoring Mitigation Fund Holder Agreements

All mitigation fund holder agreements must be recorded in the Mitigation Fund Holder Tracking List located on the Mitigation Funds SharePoint within 30 days of the agreement being fully executed. The following documents will be uploaded to the SharePoint site:

1. Fully executed agreement uploaded to the Tracking List prior to any collection of funds under the agreement;

2. Annual fiscal reports with contents as described in section III.6.a-g above; and

3. Any other documentation needed to ensure compliance with the agreement.

Existing mitigation fund holder agreements must be uploaded to the Tracking List within 60-days of issuance of this Instruction Memorandum.

The BLM office originating the mitigation fund holder agreement will be responsible for ensuring annual fiscal reports are accurate and complete. The Headquarters National Mitigation Lead will then review the information for accuracy and completeness and prepare an annual summary report at the end of each calendar year.

Timeframe: This IM is effective upon issuance.

Budget Impact: None

Background: President Biden issued Executive Order (EO) 14008, Tackling the Climate Crisis at Home and Abroad, and launched the America the Beautiful initiative on January 27, 2021. America the Beautiful is a decade-long challenge to pursue a locally led and voluntary, nationwide effort to conserve, connect, and restore the lands, waters, and wildlife upon which we all depend. These directives outline a goal of conserving 30 percent of lands and water by 2030. Department of the Interior Secretary Haaland issued Secretarial Order 3399, Department-Wide Approach to the Climate Crisis and Restoring Transparency and Integrity to the Decision-Making Process, on April 16, 2021, in response to EO 14008. As stated in SO 3399, “[t]he NEPA process can support the Department’s policy to listen to science; to improve public health and protect the environment; to reduce greenhouse gas emissions; to bolster resilience to the impacts of climate change; and to prioritize environmental justice.” Ensuring consideration of mitigation through the NEPA process and requiring compensatory mitigation when it is required by a BLM land use authorization is a necessary action in the implementation of SO 3399, and in achieving the America the Beautiful goal of conserving 30 percent of lands and water by 2030. This IM will contribute to implementation of the America the Beautiful goal through facilitating effective and efficient implementation of compensatory mitigation measures.

In 2018 the BLM conducted an internal control review (ICR) of its use of compensatory mitigation funds encompassing the period from fiscal year 2010 through fiscal year 2018. The goal of the internal review was to assess the sufficiency of practices associated with the collection, management, and expenditure of compensatory mitigation funds by the BLM and third-party mitigation fund holders. Thirty projects/programs for which mitigation fund holders collected compensatory mitigation funds were tested. The results of the ICR generated 14 recommendations, nine of which addressed internal control gaps or deficiencies related to third-party mitigation fund management or expenditures. The corrective action determined to address these control gaps and deficiencies was that the BLM would develop policy in the form of an Instruction Memorandum or other guidance document that institutes requirements and protocols for BLM’s involvement with and approval of mitigation fund managers for compensatory mitigation programs the BLM authorizes or authorizes a public land user to utilize.

In April 2022, the Department’s Office of Inspector General issued Report No. 2019-FIN-022, Weaknesses in the BLM’s Compensatory Mitigation Program Data Management System. The report concluded a similar investigation that began in 2019 to that conducted by the BLM’s ICR. The weaknesses (i.e., control gaps) identified were the same as those identified in the BLM’s ICR report. The OIG advised the BLM to implement the recommendations in the BLM’s ICR report. This Instruction Memorandum implements the corrective action in the BLM’s ICR report that addresses control gaps in the use of third-party mitigation fund holders.

Manual/ Handbook Sections Affected: The IM provides detailed guidance on the use of third parties as mitigation fund holders when implementing mitigation policy in Manual Section 1794 and Handbook 1794-1.

Coordination: The BLM Division of Decision Support, Planning and NEPA (HQ-210) coordinated the preparation of this IM with relevant Headquarters Program Leads in HQ-200, 300, 400, and 700 and State Offices. The program leads and the Resources and Minerals Committee reviewed the policy and provided feedback. The Department of the Interior Solicitor’s Office reviewed and provided input to this policy prior to its finalization.

Contact: Questions related to this IM and implementation of the policies outlined may be directed to Deblyn Mead, BLM Mitigation Program Lead, with the Division of Decision Support Planning and NEPA (HQ-210) at dmead@blm.gov.

Signed by:                                           Authenticated by:

David Jenkins                                     Robert M. Williams

Assistant Director                               Division of Regulatory Affairs and Directives,(HQ-630)

  Resources and Planning