Feasibility Assessment

Questions When Considering an MCA

Is an MCA possible?

• Is there an approved RCIS in your area of interest?

  MCAs can only be developed within an approved RCIS boundary. If there is no approved RCIS, there cannot be an MCA.

  It is possible (perhaps even desirable) to develop an MCA while an RCIS is in development. It would be important to communicate with the RCIS proponent to ensure that they are aware of the potential need and interest in an MCA.

  Note that the MCA can not be finalized until the RCIS is approved.

• Do your plans to create advance mitigation credits align with the approved RCIS?

  To generate advance mitigation credits, MCAs must implement one or more actions described in the RCIS. MCAs must include actions that provide ecological uplift. Ecological uplift refers to the measurable improvement of habitat quality, water quality, and/or overall ecosystem function.

  The MCA sponsor must review the RCIS to ensure there are actions for the desired species, habitats, and/or other sensitive resources of interest.

• What MCA pathway best aligns with your needs?

  There are a couple of different pathways to consider when developing an MCA: 1) creating an MCA on one (or more) sites(s); and/or 2) establishing an MCA Framework for a suite of possible sites actions over a period of time.

  • MCA: This approach is typically for one site or sites that are close together, have a similar purpose, or have similar credit types. Good candidate sites for an MCA are sites that can be protected through conservation easements or are already protected but needs restoration for ecological uplift.
  • MCA Framework: Identifies a suite of conservation actions that are typically aligned by geography (e.g., along a stream, in the same sub-ecoregion), actions (protecting, restoring and/or enhancing) or resources (species, habitats, other conservation elements). The framework may be a useful option for sponsors that intend to create similar MCAs on multiple future sites.

  An MCA Framework allows for approval of MCA components that are “programmatic” or similar across multiple sites prior to identifying (and getting approval for) all the MCA sites in the Framework area, saving time and money, and gaining more certainty that the MCA will be approved and successful.

  Good candidates for pursuing an MCA Framework include: an infrastructure agency that has a program of planned infrastructure projects over a number of years (such as capacity or operations and maintenance projects in a transportation or flood protection plan) along a corridor, stream or in the same area with similar habitats; or a conservation organization that has a series of protection, restoration and/or enhancement projects over the next few years that can secure and sell mitigation credits to generate revenue for their projects.

  Regardless of the pathway, it may be beneficial to begin with an MCA Concept when you are scoping for an MCA or MCA framework, considering whether to pursue an MCA, proposing wildlife connectivity or habitat enhancement actions, or need assistance with figuring out the process. The MCA concept is optional and allows CDFW to provide initial feedback on proposed site(s); work with you to figure out the best, most efficient pathway to advance mitigation credits; discuss engaging with other regulatory agencies and potential partners; and provide other information for you to consider.

Goals and Needs

• What is your goal or problem to solve?

  Before starting the MCA process, consider your goals or the problems you are trying to solve.

  Understanding your goals will help you determine if an MCA is the right approach for your needs; whether you would like to pursue advance mitigation and if an MCA is the right advance mitigation tool to achieve your goals.

  Here are some examples of different goals and problems to solve from the perspective of hypothetical MCA sponsoring organizations:

  Potential goals:

  • Infrastructure agency: I want to secure advance mitigation credits so that I can reduce delays and costs, and speed up project delivery; and/or align project design and compensatory mitigation with regional conservation priorities.
  • Recreation/open space agency: I want to be able to use credits to mitigate for future project impacts that will need mitigation, and I want to generate funds by selling excess credits.
  • Conservation organization: I want to generate funding for restoration on public land to provide ecological uplift and support biodiversity.
  • Private landowner: I have a parcel of land that could generate credits that I could use for my own mitigation needs or to sell to others.

  Potential problem to solve:

  • Infrastructure agency: I want my project to be delivered on time, and to avoid being delayed by the mitigation process.
  • Land trust: I have a current project that could create advance mitigation credits that I could sell to fund future conservation projects.
  • Recreation/open space agency: I will need mitigation for a trail project, and could sell the excess credits from my current project, which I don’t need, to help fund this project.
  • Conservation organization: I want to create an opportunity for infrastructure agencies to align their mitigation dollars with regional conservation priorties and generate funding for conservation projects.
  • Private landowner: I need to generate a source of revenue that also helps to support habitat health and biodiversity.
• Is the project (or projects) you have in mind a good fit to an MCA?

  Organizations that have plans or projects already in the pipeline that could generate MCA credits, or benefit from an MCA might find an MCA to be a valuable option.

  The more detail about the conservation or habitat enhancement actions, the better to ensure an efficient MCA approval process.

  For example, conservation organizations or open space agencies that have projects in the planning or design phase that align with an approved RCIS could create credits and revenue for their projects. Infrastructure agencies that have projects that may need compensatory mitigation (such as routine operations and maintenance projects, or larger capital projects) can create an MCA or partner with an organization (e.g., conservation, open space agency, mitigation banker) to create credits for their projects.

  In addition, consider that MCAs can create three credit types, including Non-permanent Establishment credits, which are unique and an innovative advance mitigation tool under this sub-program.

  The three credit types are:

  • Permanent Preservation Credit: Implements RCIS actions to permanently protect, preserve and manage conservation elements in perpetuity; requires a conservation easement; only created on lands that are not yet permanently protected.
  • Permanent Establishment Credit: Implements RCIS actions to create, restore or enhance conservation elements; must also protect and manage the targeted resources in perpetuity; requires a conservation easement. May be created on unprotected or protected lands (that has not been used for compensatory mitigation for permanent impacts), or on lands that have been used as compensatory mitigation for non-permanent impacts, but the duration of those non-permanent credits has lapsed.
  • Non-permanent Establishment Credit: Implements RCIS actions to create, restore or enhance conservation elements; requires a long-term durability agreement that does not permanently protect land; must include a defined duration of protection and monitoring; may be created on unprotected or protected lands as long as they were not used for permanent impacts and any non-permanent actions implemented onsite have lapsed their term of use.
• What is the opportunity for excess credits?

  An MCA can incentivize larger mitigation projects by allowing MCA sponsors to create excess mitigation, resulting in excess credits — e..g. more credits than they need for compensatory mitigation at the time. Rather than limiting the scope and scale of mitigation projects, MCAs allow an MCA Sponsor to invest in a more robust ecologically beneficial project and capitalize on any excess mitigation they create. Those excess credits credits can be earmarked for use on future projects, or they can be sold to others needing those credits.

  Large mitigation projects have more opportunity to connect habitats, reduce fragmentation, protect biodiversity by reducing edge effects and threats like invasive species. They can also have a lower cost per acre versus smaller, isolated patches of habitat. In addition to incentivizing larger mitigation projects, this unique feature of the MCA program enables the MCA sponsor to generate revenue from excess credits, offsetting the cost of the mitigation project.

  Examples of projects that may produce excess mitigation might include: Creating setback levees that create more floodplain or riparian habitat than is required to compensate for project impacts, and transportation projects that enable wildlife movement or fish passage and improve habitat quality more than is required to compensate for construction impacts. For details and more information, see Section 5.4 of the RCIS Program Guidelines.

• Can the credits be used for permits approved by other agencies in addition to CDFW?

  MCA credits can be used to fulfill compensatory mitigation requirements established in permits issued by local, state or federal regulatory agencies; CDFW programs including the California Environmental Quality Act (CEQA), the California Endangered Species Act (CESA) and/or the Lake and Streambed Alteration (LSA) Agreements.  The credits created in an MCA are intended to compensate for impacts to ecological resources, including threatened and endangered species, other sensitive species, natural communities, ecological processes and wildlife corridors.

  While the RCIS Program is a California program led by CDFW, MCA credits may also be used to fulfill compensatory mitigation requirements established under any environmental law, as determined by othee applicable regulatory agencies. In these circumstances the other agencies will typically want to sign onto the MCA as an acknowledging agency.

  “Acknowledging agencies” as they are called in the RCIS Program Guidelines, can be any local, state or federal regulatory agencies other than CDFW, which can sign the MCA to indicate the MCA meets their standards and requirements. Alternatively, other agencies may decide to accept the use of MCA credits after an MCA is established on a project-by-project basis.

  These agencies may include, but are not limited to:

  • U.S. Fish and Wildlife Service
  • The U.S. Army Corps of Engineers
  • State Water Quality Control Board
  • NOAA Fisheries.

  With CDFW approval, MCAs may be combined with other instruments or agreements to create mitigation credits. This versatility may ease the inclusion of other agencies by allowing instruments that they are more familiar with, or that are already in development.

  It is important for the MCA sponsor to identify and coordinate with any acknowledging agencies as early as possible. See Section 5.2.1 of the RCIS Program Guidelines for more details.

• Are there other tools to accomplish your mitigation goals?

  An MCA is one tool in the mitigation toolbox. Other tools or programs include Natural Community Conservation Plans, mitigation or conservation banks, and in-lieu fee programs. While the goals of each tool are similar (biodiversity protection and efficient permitting and development), there are differences, benefits and limitations between the programs. For more information on CDFW’s other mitigation programs see the Landscape Conservation and Advance Mitigation Planning website.

  Natural Community Conservation Plan (NCCP): An NCCP is a landscape scale multi-species conservation plan and regulatory framework, managed by a local government agency, that is focused on biodiversity protection and streamlined development. The NCCP agency works to implement a regional conservation reserve design that contributes to the protection and recovery of multiple species while also streamlining the permitting process for planned development, infrastructure and other activities. There are more than six NCCPs in planning stages which together cover more than 8 million acres and are working to conserve habitat for nearly 400 special status species and a wide diversity of natural community types throughout California. The plans typically offer coverage for 30 to 50 years. For more information, see CDFW’s NCCP website.

  Conservation and Mitigation Bank: A conservation or mitigation bank is permanently protected land that is conserved and managed for its natural resource values. A bank sponsor permanently protects, restores, manages and monitors the land, and sells or transfers credits to permittees or project proponents that need mitigation credits. A privately owned conservation or mitigation bank is a free-market enterprise that:

  • Allows landowners economic incentives to protect natural resources;
  • Saves permittees/project proponents time and money by providing them with pre-approved compensation lands;
  • Consolidates small, fragmented mitigation projects into large contiguous sites that may have a higher wildlife habitat value;
  • Provides for long-term protection and management of habitat;
  • Offers the sale of mitigation credits in advance of identifying the compensatory mitigation project.

  A conservation bank is focused on habitat for threatened, endangered or other special status species, with typical participating agencies being CDFW, US Fish and Wildlife Service, and NOAA Fisheries. A mitigation bank is focused on activities to protect, restore, create or enhance wetland habitats, and may also include conservation and protection of state and/or federally listed threatened, endangered species and/or habitats. Mitigation banks may also include participation from U.S. Army Corps of Engineers, the US Environmental Protection Agency, CDFW, US Fish and Wildlife Service, State Water Resources Control Board and NOAA Fisheries. For more information, see CDFW’s Conservation and Mitigation Banking website.

  In-Lieu Fee Program: In-Lieu Fee programs restore, establish, enhance and/or preserve aquatic resources through funds paid to a public or non-profit natural resources management entity to satisfy compensatory mitigation requirements for authorized impacts to specific resources. The ILF sponsor collects funds from permittees (in lieu of providing permittee-responsible compensatory mitigation) and uses the funds pooled from multiple permittees to restore or create habitat. ILFs usually involve the U.S. Army Corps of Engineers, U.S. Environmental Protection Agency, and the State Water Resources Control Board, not CDFW.

Potential Partners

• What is the market for credits and potential credit buyers or partners?

  Considering who would use the credits is helpful when developing an MCA. Examples of different ways MCA credits can be used include:

  • MCA sponsor uses credits to mitigate for their own project impacts. This is the simplest use case; the sponsor uses all of the credits they generate: outreach is limited to the MCA sponsor’s organization.
  • MCA sponsor creates more credits than they need for their own projects (excess mitigation), with the intent to sell the excess credits to other project permittees to generate revenue.
  • MCA sponsor creates credits that they intend to sell to project permittees to generate revenue.
  • MCA sponsor creates credits that are then used by a partner who helped develop or fund the MCA.

  In the cases where an MCA sponsor intends to sell credits, it is helpful to know the market for mitigation credits. What agencies or organizations may need mitigation credits? Will the MCA generate credits that the agencies or organizations may be seeking? The MCA sponsor may want to engage with potential infrastructure agencies and regulatory agencies, to determine their needs. Alternatively, a sponsor may want to conduct an analysis to determine whether there is a market for the credits, and if so, who those users may be. If they can be identified early, it may be beneficial to involve those entities during the development of the MCA to ensure that the credits generated will meet their needs.

  Ideally, potential MCA sponsors and credit users were engaged during the development of the RCIS to ensure that the RCIS has actions that will benefit the resources of interest and generate credits. For this reason, it’s important for RCIS proponents to engage infrastructure, economic development, and land use planners throughout the development of the RCIS.

• What are the roles under an MCA (e.g., sponsor, land manager, endowment holder, buyer)?

  While the MCA sponsor leads the effort to develop an MCA, there are other specific roles and responsibilities (defined in the RCIS Guidelines) that need to be designated in order to create a successful MCA.

  Through outreach and collaboration, it is helpful to consider the roles and responsibilities that the sponsor and potential partners would play.

  Those roles may include:

  • Sponsor: responsible for developing the MCA, implementing the actions and securing the credits. Can be any person, public or private entity. Sponsors can use credits for their own purposes, or sell credits to others. The sponsor may act in more than one role; however, there are some restrictions.
  • Funder(s): Funding is needed for different things, including the development of an MCA, MCA actions themselves and long-term management. When funders are different from the sponsor, agreements may be needed to provide clarify on the value-add to the funder
  • Landowner: the landowner must be involved.
  • Easement holder: for permanent credits
  • Endowment holder: an entity qualified to hold the endowment, pursuant to Government Code §§ 65965-65968
  • Beneficiaries: receive credit for compensatory mitigation. They can be potential purchasers or users of the credits.
  • Land manager/stewardship: interim and long-term management of properties. These entities must be approved through CDFW’s due diligence process.
  • MCA review team: CDFW and any other acknowledging agencies.

  Certain roles must go through CDFW’s due diligence process. Early on, consult with CDFW to make sure you are engaging with the right agency and partner.

Resources, Capacity and Cost

• Do you have the capacity and resources to develop and implement an MCA?

  Developing and implementing and MCA takes capacity and resources, as does any mitigation process. Here is an overview of the work involved that will require resources and capacity:

  MCA development process: It’s important to identify the lead in your organization who will manage the development process. This includes drafting an MCA that is consistent with the approved RCIS, securing internal buy-in, conducting outreach to determine potential partners, and engaging with CDFW throughout the process.

  Consultants can also assist with developing MCAs to help relieve capacity constraints (see Reference Document in the Resources tab).

  CDFW collects a fee for review and approval of MCAs. The fee amount depends on the type of MCA submittal (e.g. MCA, Concept, or Framework) and the stage of approval. (See RCIS Program Fee Schedule.)

  MCA implementation: The resources needed for implementing an MCA are essentially the costs for developing the plans (if not done already); implementing the actions (protecting, restoring and/or enhancing the site); stewardship (through an endowment or other durable mechanism); other costs that may be associated with mitigation sites (permitting, conservation easement, securities, legal defense, accounting, reporting and management), and costs to manage the implementation.

  Just like banks, MCAs can be drafted to allow for a release schedule for credits, so credits can be secured and sold, generating revenue to fund the MCA actions over time.

• Pathways for funding an MCA — options vary based on sponsors and how credits will be used

  There are a number of pathways to funding MCA development and implementation. Funding for MCA planning, drafting and fees are typically borne by the MCA sponsor or a partner who has an interest in the MCA — for example, a potential user of credits or organization that supports the project.

  Here are five funding approaches based on how the credits will be used:

  1. To mitigate for sponsor’s own projects. Sponsor covers cost for MCA development and implementation. Example sponsors include transportation and water agencies, energy companies, or developers.
  2. To mitigate for sponsor’s own projects and then sell excess credits for revenue to help pay for projects. Sponsor pays for MCA development and implementation, but plans to sell excess credits to generate revenue. Examples include a Recreation/Parks agency or developer. Sponsor can also partner with an entity (such as an infrastructure agency) to fund partial implementation and then the excess credits can be used to cover the partner entities mitigation needs.
  3. Sell mitigation credits to those who need credits, generating revenue for conservation projects. Here the sponsor pays for MCA development and/or implementation, and then sells the credits to fund conservation projects. The sponsor could also receive funding from a partner (e.g., infrastructure agency) for MCA development and/or implementation and allow the funder to use the credits. Example sponsors include conservation, environmental non-governmental organizations, or open space agencies.
  4. Sell credits on the open market for profit. The sponsor pays for MCA development and implementation, with the intention to sell credits on the open market. Example sponsors include bankers, landowners, and mitigation investors.
  5. Sell credits on the open market for land stewardship. Sponsors, such as private landowners, pay for MCA development and implementation and then sells credits on the open market or to known partners, generating revenue for land stewardship or property activities on other parcels. Example sponsors include landowners, ranchers and farmers who engage in conservation activities.
• Sources for funding an MCA

  Sources of funding for an MCA (both development and implementation) include grants, infrastructure agencies, entities that will need mitigation in the future (mitigation is typically included in the cost of an infrastructure or development project), and external financing such as from the private sector.

  Because MCA credits can be sold, MCA sponsors can secure revenue from the sale of credits, generating revenue to pay for the MCA management. Also, since MCA credits can be sold to a project proponent once an MCA is established and credits are released, therefore, an infrastructure agency could fund another party (such as an NGO or banker) to establish the MCA and then receive the credits when they are released. These elements of an MCA also provide incentives for MCA sponsors to invest in larger conservation actions and create excess credits that they then can sell for revenue.

  While grant funding is not typically allowed to be used for mitigation, there may be opportunities to jointly fund a project using mitigation and grants funds. This could apply in situations where there is an opportunity to protect or restore a property that aligns with RCIS actions and priorities but is larger than an agency’s mitigation needs. In this case, grant funding and mitigation funding could be used to achieve that larger scale action, if there is clear accounting and the regulatory agencies allow it.

  A diversity of funding sources could also help fund elements of projects that are aligned with those purposes. For example, certain funds can be used for endowments, but others (e.g., bond funds) cannot. However, a diversity of funding sources adds complexity and requires transparent accounting.

  For more information on funding, see the Funding and Financing section in the white paper, “Regional Advance Mitigation Planning to Support Connect SoCal in the SCAG Region.”