TITLE 9. ENVIRONMENT

STATE WATER CONTROL BOARD

Exempt Final Regulation

Title of Regulation: 9VAC25-770. Virginia Financial Responsibility Requirements for Mitigation Associated with Tidal Dredging Projects (amending 9VAC25-770-10, 9VAC25-770-30, 9VAC25-770-60, 9VAC25-770-70, 9VAC25-770-80, 9VAC25-770-90, 9VAC25-770-100, 9VAC25-770-110, 9VAC25-770-120, 9VAC25-770-130, 9VAC25-770-140, 9VAC25-770-160; repealing 9VAC25-770-180).

Statutory Authority: § 62.1-44.15 of the Code of Virginia.

Effective Date: November 23, 2022.

Agency Contact: Dave Davis, Department of Environmental Quality, 1111 East Main Street, Suite 1400, P.O. Box 1105, Richmond, VA 23218, telephone (804) 698-4105, FAX (804) 698-4032, or email dave.davis@deq.virginia.gov.

Summary:

Pursuant to Chapter 356 of the 2022 Acts of Assembly, the amendments conform the regulation to a statutorily change shifting authority to issue and enforce permits from the State Water Control Board to the Department of Environmental Quality, including changing "board" to "department" as necessary and removing provisions delegating authority.

9VAC25-770-10. Definitions.

Unless a different meaning is required by the context, the following terms as used in this chapter shall have the following meanings:

"Applicant" means a person applying for a VWP individual or general permit.

"Board" means the State Water Control Board. When used outside the context of the promulgation of regulations, including regulations to establish general permits, "board" means the Department of Environmental Quality.

"Compensation" or "compensatory mitigation" means actions taken that provide some form of substitute aquatic resource for the impacted aquatic resource.

"Compensatory mitigation plan" means the written plan describing the proposed compensatory mitigation activities required by 9VAC25-210-80 of the Virginia Water Protection Permit Program Regulation.

"Department" means the Department of Environmental Quality.

"Director" means the Director of the Department of Environmental Quality (DEQ) or an authorized representative.

"Dredging" means a form of excavation in which material is removed or relocated from beneath surface waters.

"Excavate" or "excavation" means ditching, dredging, or mechanized removal of earth, soil or rock.

"General permit" means a permit authorizing a specified category of activities.

"In-lieu fee fund" means a monetary fund operated by a nonprofit organization or governmental agency that receives financial contributions from persons impacting wetlands or streams pursuant to an authorized permitted activity and that expends the moneys received to provide consolidated compensatory mitigation for permitted wetland or stream impacts.

"Law" means the State Water Control Law of Virginia.

"Mitigation" means sequentially avoiding and minimizing impacts to the maximum extent practicable, and then compensating for remaining unavoidable impacts of a proposed action.

"Mitigation bank" means a site providing off-site, consolidated compensatory mitigation that is developed and approved in accordance with all applicable federal and state laws or regulations for the establishment, use and operation of mitigation banks, and is operating under a signed banking agreement.

"Permittee" means the person who holds a VWP individual or general permit.

"Person" means any firm, corporation, association, or partnership, one or more individuals, or any governmental unit or agency of it.

"Practicable" means available and capable of being done after taking into consideration cost, existing technology and logistics in light of overall project purposes.

"State waters" means all water, on the surface and under the ground, wholly or partially within or bordering the Commonwealth or within its jurisdiction, including wetlands.

"Surface water" means all state waters that are not ground water as defined in § 62.1-255 of the Code of Virginia.

"USACE" means the United States Army Corps of Engineers.

"VWP permit" means an individual or general permit issued by the department or a general permit issued as a regulation adopted by the board under § 62.1-44.15:5 of the Code of Virginia that authorizes activities otherwise unlawful under § 62.1-44.5 of the Code of Virginia or otherwise serves as the Commonwealth of Virginia's § 401 certification.

"Wetlands" means those areas that are inundated or saturated by surface or groundwater at a frequency and duration sufficient to support, and that under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions. Wetlands generally include swamps, marshes, bogs, and similar areas.

9VAC25-770-30. Compliance date.

An applicant for a VWP permit for completion of a dredging project in tidal waters must file proof of mitigation bank credit purchase or in-lieu fee fund donation or a financial responsibility mechanism with the board department at least 60 days prior to onset of any activity in permitted impact areas. The compensatory mitigation plan and financial responsibility documentation or proof of mitigation bank credit purchase or in-lieu fee fund donation shall be submitted by the permittee and approved by the board department prior to the onset of any dredging activities in permitted impact areas.

9VAC25-770-60. Transfer of permit.

The new permittee must submit proof of mitigation bank credit purchase or in-lieu fee fund donation or evidence of financial responsibility to the board department in accordance with this chapter within 60 days of the transfer of the permit from the existing permittee to the new permittee. If the old permittee has completed mitigation activities by filing proof of mitigation bank credit purchase or in-lieu fee fund donation before the transfer of the permit, the new permittee is not required to do so or to provide any additional evidence of financial responsibility. When a transfer of the permit occurs, the old permittee shall continue to comply with the requirements of this chapter until the new permittee has demonstrated that he is complying with the requirements of this chapter. The new permittee shall demonstrate compliance with this chapter within 60 days of the date of the transfer of the permit. Upon demonstration to the board department by the new permittee of compliance with this chapter, the board department shall notify the old permittee that he or she no longer needs to comply with this chapter as of the date of demonstration.

9VAC25-770-70. Compensatory mitigation requirements.

A. Compensatory mitigation for any project subject to a VWP permit must include measures to avoid and reduce impacts to surface waters to the maximum extent practicable, and where impacts cannot be avoided, the means by which compensation will be accomplished to achieve no net loss of wetland acreage and function.

B. The applicable compensatory mitigation standards are described in 9VAC25-210-80 and 9VAC25-210-115 of the Virginia Water Protection Permit Program Regulation. All aspects of the compensatory mitigation plan, including documentation of financial responsibility or proof of mitigation bank credit purchase or in-lieu fee fund donation, shall be finalized, submitted and approved by the board department prior to the onset of any dredging activities in permitted impact areas.

9VAC25-770-80. Cost estimates for in-lieu fee fund donations and mitigation bank credit purchases.

A. Permittees with compensatory mitigation plans that provide for donations to in-lieu fee funds must submit to the board department as part of the final mitigation plan proof that the entity is willing to accept the contribution along with a detailed, written cost estimate.

B. Permittees with compensatory mitigation plans that provide for purchase of mitigation bank credits must provide to the board department as part of the final mitigation plan proof that the selected bank has available credits, along with a detailed, written cost estimate.

9VAC25-770-90. Cost estimate for compensatory mitigation activities other than in-lieu fee fund donations or mitigation bank credit purchases.

A. The permittee shall prepare for approval by the board department a detailed written estimate of the cost of implementing compensatory mitigation activities. The written cost estimate shall be submitted concurrently with the final compensatory mitigation plan.

1. The compensatory mitigation plan cost estimate shall equal the full cost of implementation of the plan.

2. The compensatory mitigation cost estimate shall be based on and include the costs to the permittee of hiring a third party to implement the compensatory mitigation plan. The third party may not be either a parent corporation or subsidiary of the permittee.

3. The compensatory mitigation cost estimate may not incorporate any salvage value that may be realized by the sale of materials, facility structures or equipment, land or other facility assets at the time of implementation of the plan.

B. If the length of the estimated project life exceeds one year, the permittee shall add to the total cost estimate an amount to represent an appropriate rate of inflation over the period covering the life of the project.

C. During the term of the VWP permit, the permittee shall revise the cost estimate concurrently with any revision made to the compensatory mitigation plan or at any time unforeseen circumstances occur which increase the implementation cost. The revised implementation cost estimate shall be adjusted for inflation as specified in subsection B of this section.

D. During the term of the VWP permit, the permittee may reduce the cost estimate and the amount of financial responsibility provided under this chapter, if it can be demonstrated that the cost estimate exceeds the cost of implementation of the compensatory mitigation plan. The permittee shall obtain the approval of the board department prior to reducing the amount of financial responsibility.

9VAC25-770-100. Payment of in-lieu fee fund donations and mitigation bank credit purchases.

A. Permittees with compensatory mitigation plans that provide for donations to in-lieu fee funds or mitigation bank credit purchases shall make the entire donation or purchase before the onset of activity in the permitted impact areas. Permittees shall submit documentation of the payment or donation to the board department for approval a minimum of 60 days prior to onset of activity in permitted areas.

B. A permittee may satisfy the requirements of this section, wholly or in part, by submitting a photocopy of the documentation submitted to the USACE pursuant to § 404 of the Clean Water Act (33 USC § 1251 et seq., as amended in 1987) documenting the donation or purchase for the current project along with a photocopy of the document issued by the USACE indicating approval of the documentation, if applicable. Any documentation of the in-lieu fee fund donation or mitigation banking credit purchase pursuant to this subsection must demonstrate clearly that the donation or purchase was made to provide compensatory mitigation for the project that is the subject of the VWP permit.

9VAC25-770-110. Allowable financial mechanisms for compensatory mitigation activities other than in-lieu fee fund donations or mitigation bank credit purchases.

A. If a permittee does not purchase mitigation bank credits or donate to an in-lieu fee fund as part of his compensatory mitigation plan, the permittee must demonstrate financial responsibility using one of the mechanisms specified in 9VAC25-770-120 through 9VAC25-770-150. The mechanisms used to demonstrate evidence of financial responsibility shall ensure that the funds necessary to meet the costs of completing compensatory mitigation requirements for the permitted project as described in 9VAC25-770-70 will be available whenever they are needed. Financial responsibility mechanisms shall be in the amount equal to the cost estimate approved by the board department.

B. The permittee shall provide continuous coverage to implement the compensatory mitigation plan until released from financial responsibility requirements by the board department.

C. The director may reject the proposed evidence of financial responsibility if the mechanism submitted does not adequately assure that funds will be available to complete the necessary compensatory mitigation activities. The permittee shall be notified in writing within 60 days of receipt of a complete financial responsibility submission of the tentative decision to accept or reject the proposed evidence.

9VAC25-770-120. Surety bond.

A. A permittee may satisfy the requirements of this chapter by obtaining a surety bond that conforms to the requirements of this section and by submitting an originally signed duplicate of the bond to the board department. The surety company issuing the bond shall be licensed to operate as a surety in the Commonwealth of Virginia and be among those listed as acceptable sureties on federal bonds in the latest Circular 570 of the U.S. Department of the Treasury.

B. Under the terms of the bond, the surety will become liable on the bond obligation when the permittee fails to perform as guaranteed by the bond.

C. The bond shall guarantee that the permittee or any other authorized person will:

1. Implement compensatory mitigation in accordance with the approved compensatory mitigation plan and other requirements in any VWP permit for the project;

2. Implement the compensatory mitigation plan following an order to do so issued by the board department or by a court.

D. The surety bond shall guarantee that the permittee shall provide alternate evidence of financial responsibility as specified in this article within 60 days after receipt by the board department of a notice of cancellation of the bond from the surety.

E. If the approved cost estimate increases to an amount greater than the amount of the penal sum of the bond, the permittee shall, within 60 days after the increase, cause the penal sum of the bond to be increased to an amount at least equal to the new estimate and submit a revised mechanism to the board department. Whenever the cost estimate decreases, the penal sum may be reduced to the amount of the cost estimate following written approval by the board department. Notice of an increase or decrease in the penal sum shall be sent to the board department by certified mail within 60 days after the change.

F. The bond shall remain in force for its term unless the surety sends written notice of cancellation by certified mail to the permittee and to the board department. Cancellation cannot occur, however, during the 120 days beginning on the date of receipt of the notice of cancellation by the board department as shown on the signed return receipt. The surety shall provide written notification to the board department by certified mail no less than 120 days prior to the expiration date of the bond, that the bond will expire and the date the bond will expire.

G. The board department shall cash the surety bond if it is not replaced 60 days prior to expiration with alternate evidence of financial responsibility acceptable to the board department or if the permittee fails to fulfill the conditions of the bond.

H. In regards to implementation of a compensatory mitigation plan either by the permittee, by an authorized third party, or by the surety, proper implementation of a compensatory mitigation plan shall be deemed to have occurred when the board department determines that compensatory mitigation has been completed. Such implementation shall be deemed to have been completed when the provisions of the permittee's approved compensatory mitigation plan have been executed and the provisions of any other permit requirements or enforcement orders relative to the compensatory mitigation plan have been complied with.

I. The surety bond shall be worded as described in 9VAC25-770-190 A, except that instructions in brackets are to be replaced with the relevant information and the brackets deleted.

9VAC25-770-130. Letter of credit.

A. A permittee may satisfy the requirements of this chapter by obtaining an irrevocable standby letter of credit that conforms to the requirements of this section and by submitting an originally signed duplicate of the letter of credit to the board department. The issuing institution shall be an entity that has the authority to issue letters of credit in the Commonwealth of Virginia and whose letter-of-credit operations are regulated and examined by a federal agency or the State Corporation Commission.

B. The letter of credit shall be irrevocable and issued for a period of at least one year in an amount at least equal to the current cost estimate for implementation of the compensatory mitigation plan. The letter of credit shall provide that the expiration date will be automatically extended for a period of at least one year. If the issuing institution decides not to extend the letter of credit beyond the current expiration date, it shall, at least 120 days before the expiration date, notify both the permittee and the board department by certified mail of that decision. The 120-day period will begin on the date of receipt by the board department as shown on the signed return receipt. If the letter of credit is canceled by the issuing institution, the permittee shall obtain alternate evidence of financial responsibility to be in effect prior to the expiration date of the letter of credit.

C. Whenever the approved cost estimate increases to an amount greater than the amount of credit, the permittee shall, within 60 days of the increase, cause the amount of credit to be increased to an amount at least equal to the new estimate and submit a revised mechanism to the board department. Whenever the cost estimate decreases, the letter of credit may be reduced to the amount of the new estimate following written approval by the board department.

D. The board department shall cash the letter of credit if it is not replaced 60 days prior to expiration with alternate evidence of financial responsibility acceptable to the board department or if the permittee has failed to implement compensatory mitigation in accordance with the approved plan or other permit or special order requirements.

E. In regards to implementation of a compensatory mitigation plan either by the permittee or by an authorized third party, proper implementation of a compensatory mitigation plan shall be deemed to have occurred when the board department determines that compensatory mitigation has been completed. Such implementation shall be deemed to have been completed when the provisions of the permittee's approved compensatory mitigation plan have been executed and the provisions of any other permit requirements or enforcement orders relative to the compensatory mitigation plan have been complied with.

F. The permittee may cancel the letter of credit only if alternate evidence of financial responsibility acceptable to the board department is substituted as specified in this chapter or if the permittee is released by the board department from the requirements of this regulation.

G. The board department shall return the original letter of credit to the issuing institution for termination when:

1. The permittee substitutes acceptable alternate evidence of financial responsibility for implementation of the compensatory mitigation plan as specified in this chapter; or

2. The board department notifies the permittee that he is no longer required by this chapter to maintain evidence of financial responsibility for implementation of the compensatory mitigation plan for the project.

H. The letter of credit shall be worded as described in 9VAC25-770-190 B, except that instructions in brackets are to be replaced with the relevant information and the brackets deleted.

9VAC25-770-140. Certificate of deposit.

A. A permittee may satisfy the requirements of this chapter, wholly or in part, by obtaining a certificate of deposit and assigning all rights, title and interest of the certificate of deposit to the board department, conditioned so that the permittee shall comply with the approved compensatory mitigation plan filed for the project. The issuing institution shall be an entity that has the authority to issue certificates of deposit in the Commonwealth of Virginia and whose operations are regulated and examined by a federal agency or the State Corporation Commission (Commonwealth of Virginia). The permittee must submit the originally signed assignment and the originally signed certificate of deposit, if applicable, to the board department.

B. The amount of the certificate of deposit shall be at least equal to the current compensatory mitigation cost estimate for the project for which the permit application has been filed or any part thereof not covered by other financial responsibility mechanisms. The permittee shall maintain the certificate of deposit and assignment until all activities required by the approved compensatory mitigation plan have been completed.

C. The permittee shall be entitled to demand, receive and recover the interest and income from the certificate of deposit as it becomes due and payable as long as the market value of the certificate of deposit used continues to at least equal the amount of the current cost estimate for compensatory mitigation activities.

D. The board department shall cash the certificate of deposit if the permittee has failed to implement compensatory mitigation in accordance with the approved plan or other permit or special order requirements.

E. In regards to implementation of a compensatory mitigation plan either by the permittee or by an authorized third party, proper implementation of a compensatory mitigation plan shall be deemed to have occurred when the board department determines that compensatory mitigation has been completed. Such implementation shall be deemed to have been completed when the provisions of the permittee's approved compensatory mitigation plan have been executed and the provisions of any other permit requirements or enforcement orders relative to the compensatory mitigation plan have been complied with.

F. Whenever the approved compensatory mitigation cost estimate increases to an amount greater than the amount of the certificate of deposit, the permittee shall, within 60 days of the increase, cause the amount of the certificate of deposit to be increased to an amount at least equal to the new estimate or obtain another certificate of deposit to cover the increase. Whenever the cost estimate decreases, the permittee may reduce the amount of the certificate of deposit to the new estimate following written approval by the board department.

G. The board department shall return the original assignment and certificate of deposit, if applicable, to the issuing institution for termination when:

1. The permittee substitutes acceptable alternate evidence of financial responsibility for implementation of the compensatory mitigation plan as specified in this chapter; or

2. The board department notifies the permittee that he is no longer required by this chapter to maintain evidence of financial responsibility for implementation of the compensatory mitigation plan for the project.

H. The assignment shall be worded as described in 9VAC25-770-190 C, except that instructions in brackets shall be replaced with the relevant information and the brackets deleted.

9VAC25-770-160. Release of permittee from the financial responsibility requirements.

A. The permittee shall submit a notice that compensatory mitigation has been completed in accordance with the requirements of the approved compensatory mitigation plan, permit or other order, within 60 days of completion of all compensatory mitigation requirements. Unless the board department has reason to believe that the compensatory mitigation activities have not been implemented in accordance with the appropriate plan or other requirements, the board department shall notify the permittee in writing that the permittee is no longer required to maintain evidence of financial responsibility for the project. Such notice shall release the permittee only from the requirements for financial responsibility for the project; it does not release the permittee from legal responsibility for meeting the compensatory mitigation requirements.

B. Where a VWP permit for the project is no longer required under law, the board department shall notify the permittee in writing that the permittee is no longer required to maintain evidence of financial responsibility for the project. Such notice shall release the permittee only from the requirements for financial responsibility for the project.

9VAC25-770-180. Delegation of authority. (Repealed.)

The Director of the Department of Environmental Quality or a designee acting for him may perform any act of the board provided under this chapter, except as limited by § 62.1-44.14 of the Code of Virginia.