U.S. Court of Federal Claims Answers Jurisdiction Question

Wetlands mitigation banking agreements are subject to the rules of the U.S. Army Corps of Engineers (the Corps); they can serve a useful public purpose by assisting with the restoration and preservation of waterways subject to the Clean Water Act.

On November 21, 2014, the U.S. Court of Federal Claims issued a ruling in the case of Pioneer Reserve, LLC v. The United States. The Court rejected the Government’s argument that Pioneer’s breach of contract claim should be dismissed because Pioneer, located in Alaska, which entered into a “mitigation banking agreement” pursuant to the regulations implemented by the Corps, did not in fact, have a contract with the federal government.

Pioneer used its pristine land to establish a mitigation bank which will make mitigation credits available under the law (the Clean Water Act) to the proponents of development projects that will require compensatory mitigation credits to offset projected environmental damages resulting from the development of the project. A mitigation banking agreement was signed by representatives of Pioneer and the Corps, and Pioneer then encumbered to parcels of land with appropriate and protective environmental easements. The credits available to developers through the implementation of the mitigation banking agreement would be sold for $79,000 per credit. However, the Corps unilaterally and unexpectedly, so the plaintiff avers, drastically reduced the number of wetlands mitigation credits that could be sold, resulting in a significant financial loss to Pioneer. The plaintiff filed a breach of contract action in the court of claims, seeking damages of $12 million.

The Government argued that the claim should be dismissed, that Pioneer did not have a contract with the government; that the common elements of a binding contract were missing. The court rejected this argument, noting that in other cases the Government sought to enforce the terms of a mitigation banking agreement as being an enforceable contract with the federal government. Accordingly, the Court ruled that Pioneer alleged sufficient facts to establish the existence of a contract, and the case will proceed. The parties are now involved in the discovery phase of this litigation.