Administrative Rules of the State of Montana

BEFORE THE GOVERNOR'S OFFICE

OF THE STATE OF MONTANA

In the matter of the amendment of ARM 14.6.101 and 14.6.102 and the adoption of New Rules I, II, III, and IV, pertaining to implementation of the Greater Sage-Grouse Stewardship Act

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NOTICE OF AMENDMENT AND ADOPTION

TO: All Concerned Persons

1. On October 19, 2018, the Sage Grouse Habitat Conservation Program on behalf of the Governor's Office published MAR Notice No. 14-5 pertaining to the public hearing on the proposed amendment and adoption of the above-stated rules at page 1997 of the 2018 Montana Administrative Register, Issue Number 20.

2. On November 9, 2018, a public hearing was held in Helena, Montana. Public comment was accepted until November 19, 2018. Five written comment letters were received, and two oral comments were received during the hearing.

3. The Governor's Office has amended the following rules as proposed: ARM 14.6.101 and 14.6.102.

4. The Governor's Office has adopted New Rules I through IV as proposed, but with the following changes from the original proposal, new matter underlined, deleted matter interlined:

NEW RULE I (14.6.103) HABITAT QUANTIFICATION TOOL DESIGNATION

(1) and (2) remain as proposed.

(3) Minor versions of the Montana Mitigation System Habitat Quantification Tool Technical Manual for Greater Sage-Grouse shall be recorded by the program after a publicly announced meeting of the Montana Sage Grouse Oversight Team and after accepting public comment.

(4) Once the current Montana Mitigation System HQT has been applied to calculate the functional acres gained on ~~credits of~~ a proposed mitigation site, or the functional acres lost on ~~debits of~~ a proposed development site; the program has completed its review; and the project developer obtains the necessary state or federal permits, any subsequent versions of the HQT will not apply to the project except as provided in (b).

(a) Once the HQT has been applied to calculate the number of functional acres gained or lost ~~credits or debits~~ for a project and MSGOT has approved, the number of calculated functional acres gained or lost ~~credits or debits~~ will not be changed without written approval from every party to the mitigation transaction for the project ~~all affected parties~~, including, but not limited to:

(i) MSGOT;

(ii) the project developer; and

(iii) the credit provider.~~; and~~

~~(iv) any affected third parties.~~

(b) Permit amendments will be subject to the current version of the HQT to calculate functional acres lost ~~debits~~ resulting from new activities associated with the amendment.

(5) The current version of the MSGOT designated Montana Mitigation System Habitat Quantification Tool Technical Manual for Greater Sage-Grouse is the version made available to the public on the program's web site. Past versions of HQT and the technical manual will be blocked from further use except as allowed in (4)(a) and preserved in archive by the program.

(6) MSGOT or any other third party must apply the current version of the Montana Mitigation System Habitat Quantification Tool Technical Manual for Greater Sage-Grouse to calculate functional acres gained or lost ~~credits and debits~~ as provided on the program's website and applied by the program to perform the calculations for the following:

(a) through (d) remain as proposed.

(e) calculating functional acres gained ~~credits created~~ by funding from the Sage-Grouse Stewardship Account; or

(f) calculating functional acres gained ~~credits~~ through stand-alone efforts to create mitigation credit sites.

NEW RULE II (14.6.104) COMPENSATORY MITIGATION SYSTEM

(1) The mitigation sequence is applicable to all activities within sage grouse core areas, general habitat and connectivity habitat subject to agency review, approval, or authorization including temporary ~~temporal~~ impacts that are later rectified through reclamation and restoration activities, unless exempted by MSGOT.

(2) and (3) remain as proposed.

(4) Minor versions of the Montana Mitigation System Policy Guidance for Greater Sage-Grouse shall be recorded by the program after a publicly announced meeting of the Montana Sage Grouse Oversight Team and after accepting public comment.

(5) The current version of the Montana Mitigation System Policy Guidance for Greater Sage-Grouse is the version made available to the public on the program's website. Past versions of the Montana Mitigation System Policy Guidance for Greater Sage-Grouse will be blocked from further use except as allowed in ARM 14.6.103(4)(a) and preserved in an archived by the program.

(6) and (7) remain as proposed.

(a) the number of calculated credits or debits will not be changed without written approval from every party to the mitigation transaction for the project ~~all affected parties~~, including, but not limited to:

(i) MSGOT;

(ii) the project developer; and

(iii) the credit provider.~~; or~~

~~(iv) any affected third parties; and~~

(b) and (c) remain as proposed.

(8) MSGOT or any other third party shall use the current Montana Mitigation System Policy Guidance for Greater Sage-Grouse provided on the program's web site and applied by the program to determine the number of debits or credits for the following:

(a) through (11) remain as proposed.

NEW RULE III (14.6.105) METHOD TO TRACK AND MAINTAIN THE NUMBER OF CREDITS AND DEBITS AVAILABLE AND USED (1) through (4)(c) remain as proposed.

(d) the location of all credits generated and debits generated; ~~and~~

(e) credit transactions between parties.; and

(f) service area of the debits and credits, respectively.

(5) remains as proposed.

NEW RULE IV (14.6.106) METHOD TO ADMINISTER THE REVIEW AND MONITORING OF MSGOT FUNDED PROJECTS (1) through (2)(g) remain as proposed.

(h) the geospatial location and/or legal description of where the project was implemented;

(i) through (m) remain as proposed.

(n) sage grouse leks on and in the vicinity of the project area, and trend data on the number of breeding males on those leks; ~~and~~

(o) the grant agreement number assigned by the Program and any amendments to the original grant.; and

(p) service area.

5. The Governor's Office, the Montana Sage Grouse Oversight Team, and the Sage Grouse Habitat Conservation Program have thoroughly considered the comments and testimony received and undertaken their own critical reading of the proposed rules. The following is a summary of the public comments received and the responses to those comments:

COMMENT 1: MSGOT should reconsider the change to the Montana Mitigation System Policy Guidance Document for Greater Sage-Grouse, October 2018 Version 1.0 that sets aside 5% of each individual Reserve Account contribution for use, at its discretion to address economic feasibility constraints. The new language redirects a portion of a reserve credits intended to function as an insurance pool to replace credits lost due to unavoidable losses and diverts to a pool of credits to address economic concerns for projects yet to be initiated. If a change to the underlying documents cannot be made within the context of the current rulemaking process, MSGOT should do so at the earliest possible opportunity.

RESPONSE TO COMMENT 1: MSGOT will take the comment into consideration. MSGOT approved the Policy Guidance Document on October 4, 2018. The concern expressed by this commenter can be discussed and considered by MSGOT during the future adaptive management reviews. MSGOT has discretion to work with developers who show economic feasibility constraints and has a variety of policy tools at its disposal. The Policy Guidance provides a process by which developers can endeavor to show economic feasibility constraints and request MSGOT assistance through either financial or credit-matching policy tools, one of which entails MSGOT matching the developer's credits with some of its own credits set aside in the Reserve Account. It is unknown if or when MSGOT might be asked to tap its own set-aside credits in the Reserve Account. If MSGOT receives such a request, it would exercise its discretion at that time to decide whether or not do to so. MSGOT may have credits available from the pool created by Stewardship Account grant awards or seek to apply other policy tools outlined in the Policy Guidance Document. Because MSGOT meetings are open to the public, the public is afforded an opportunity to comment prior to MSGOT making a decision about use of credits set aside in the Reserve Account or any of the other policy tools it has available.

COMMENT 2: Two commenters expressed concern about, and sought changes to, the Policy Guidance Document (Version 1.0, October 2018) and the Habitat Quantification Tool Technical Manual (Version 1.0, October 2018).

RESPONSE TO COMMENT 2: MSGOT approved both mitigation documents on October 4, 2018, after an extensive collaboration process among diverse stakeholders between September 2016 and December 2017, multiple opportunities for informal comment and discussion during the stakeholder process, and at least four MSGOT solicitations for comment on successive drafts. Stakeholders acknowledged that they could not agree on certain issues and that MSGOT ultimately had to resolve differences among stakeholder viewpoints. MSGOT endeavored to balance competing interests among diverse stakeholders holding strong and divergent views. Both mitigation system documents include an adaptive management section that calls for an annual stakeholder workshop to gather information, identify concerns, and discuss ideas for improvement. An adaptive management report would be prepared and provided to MSGOT for discussion during a publicly-noticed meeting, during which additional public comment may be taken. MSGOT also assesses whether specific adaptive management objectives identified in the mitigation documents are being met and ultimately decides whether major or minor changes are needed. MSGOT is committed to transparency through open deliberations by and with participants in the mitigation system, as well as ongoing improvement that reflects adaptive management learning, new information, and especially new science.

COMMENT 3: One commenter supported the proposed rules.

RESPONSE TO COMMENT 3: Thank you for your comment.

COMMENT 4: Some commenters expressed that certain statements were not in the actual text of the proposed administrative rules. Examples include: (1) the rules should require MSGOT meetings to be publicly noticed; (2) the rules do not provide sufficient assurance that developers can seek and obtain dispensation for mitigation obligations by using one or more of the policy tools in circumstances of economic infeasibility based on MSGOT's discretionary decision authority; and (3) developers should be able to challenge an HQT determination without having to incur the costs, delays, and uncertain outcomes of a full MAPA proceeding.

RESPONSE TO COMMENT 4: MSGOT approved the Montana Mitigation System Policy Guidance Document Version 1.0 October 2018, and the Montana Mitigation System Habitat Quantification Tool Technical Manual Version 1.0, October 2018 on October 4, 2018. The rules themselves direct implementation of these two mitigation system documents and describe the process by which future versions of the HQT and mitigation system documents will be established and managed. Accordingly, the rules and the underlying documents should be read as a whole and considered in tandem. This is particularly important with respect to the adaptive management sections within each document, respectively. In the Policy Guidance Document, see pages 84-87. In the Habitat Quantification Tool Technical Manual, see pages 64-68. Some of the perceived textual omissions in the rules are actually included in either or both of the two documents, respectively, and fully operational even if not also stated in the rules. Information contained in the supporting documents need not be duplicated in rule, and administrative rules need not delineate requirements that are otherwise legally provided for.

For example, the requirement for MSGOT meetings to be publicly noticed resides within the Montana Constitution; therefore, the requirement does not need to be duplicatively stated in rule. As a second example, the Policy Guidance Document itself provides for the process a developer can employ to obtain MSGOT's approval and application of policy tools to lessen or forgive the portion of the mitigation obligation borne by the developer (see Section 3.6 beginning on page 68). The process is well described in the Policy Guidance Document, including the procedural step that states MSGOT would make the decisions, with the underlying legal requirement that MSGOT meetings be publicly noticed resting elsewhere. In a third example, the Habitat Quantification Tool Technical Manual describes the process a developer would follow if HQT results were suspect (e.g., developer undertakes a third level site visit to collect data and the program applies the HQT using the updated data). The process falls well short of MAPA's formal rulemaking process and can be implemented by the developer, the program, and MSGOT through the course of regular MSGOT meetings.

COMMENT 5: Two commenters stated that the terms "major version" and "minor version" were ambiguous, were not actually defined in the glossary of the mitigation system documents and created uncertainty. These commenters went on to state that what constituted a major vs. a minor change was unclear, the process was ill-defined and subject to potentially arbitrary decisions, and the nexus between major / minor changes and the public comment process as contemplated in the Policy Guidance Document was not clear.

RESPONSE TO COMMENT 5: The terms "major version" and "minor version" are defined in ARM 14.6.101(5) and 14.6.101(6), respectively. It is true that they are not expressly defined in the Policy Guidance Document or the Habitat Quantification Tool Technical Manual. While administrative rules take precedent over the mitigation system documents, this oversight will be addressed at the earliest adaptive management review opportunity. Both mitigation system documents outline the adaptive management review process (see RESPONSE TO COMMENT 2 above) and clearly anticipate that some changes will be more common and routine in nature, while other, more significant changes may also be reasonably expected at this time because the program will be collecting and adding new credit and debit project data on a near-daily basis; because satellite imagery incorporated into the HQT will need to be replaced as new imagery becomes available; and because new, more refined science will become available and should be incorporated to reduce uncertainty.

The mitigation system documents and the administrative rules that describe the process for how the documents will change through time must be read in tandem (See RESPONSE TO COMMENT 4). MSGOT needs a method to record which version of the HQT and mitigation system documents were applied at the time of the program's analysis and its own decisions. Participants in the mitigation system will also need this information. Recordation of major and minor versions and the accompanying numbering system is the only means to implement other provisions of the rules, such as New Rule I (ARM 14.6.103(4)(a)) and New Rule II (ARM 14.6.104(7)(a)). Without versioning of the HQT and policies applied at the time decisions were made, the principles of grandfathering and finality of mitigation transactions could not be realized. Without a method and a process to manage change to the mitigation system documents, participants in the mitigation system (e.g., credit providers, developers, the program, and MSGOT) would not know what version of the HQT and Policy Guidance document formed the basis for any mitigation-related calculations and subsequent market-based financial transactions.

MSGOT seeks to balance the need for flexibility to implement the mitigation system documents so it can be responsive to new science, incorporate new data into the overall mitigation system on a project-by-project basis, correct editorial or technical errors, and refine analytical approaches with its needs to not only keep track of versions of both mitigation system documents as they evolve through time but also to establish a predictable, transparent method to do so that also fulfills MSGOT's public notice and comment requirements. MSGOT cannot implement the duties and powers assigned to it in its enabling statute and the Greater Sage Grouse Stewardship Act if it were in a perpetual state of formal administrative rulemaking. Decisions would be delayed, which in turn would delay developers' ability to obtain necessary state permits.

The rules require MSGOT to initiate formal rulemaking to incorporate major versions of the Habitat Quantification Tool Technical Manual by reference. This would occur after the adaptive management review, preparation of an adaptive management report, and opportunities for public comment during a publicly noticed MSGOT meeting. After any MSGOT decision to move forward with major changes and rulemaking, the public will have the ability to again review and comment on any proposed major version changes during the formal rulemaking process. For minor versions, both mitigation system documents outline an adaptive management process that engages stakeholders and interested members of the public prior to completion of the adaptive management report for MSGOT and MSGOT discussion during a publicly noticed meeting.

Nonetheless, to address these commenters' concerns, language was added to these rules that requires minor versions of both mitigation system documents to be recorded by the program after a publicly announced MSGOT meeting and after accepting public comment. Lastly, MSGOT could be petitioned to initiate rulemaking or MSGOT could initiate formal rulemaking of its own accord at any time pursuant to the Montana Administrative Procedure Act.

COMMENT 6: One commenter believes the mitigation system documents ignore the Governor's Executive Order which states that tall structures may be located outside of the 0.6 mile buffer in cases of economic infeasibility. It is not clear in the proposed rules or the policy manual that the program will apply a buffer of 0.6 miles to tall structures when economic infeasibility is demonstrated.

RESPONSE TO COMMENT 6: This comment appears to be based on a very narrow and incomplete reading of Executive Order 12-2015, which in turn, leads to an incorrect understanding of not only Executive Order 12-2015 but also conflates how Executive Order 12-2015 and the policy tools contained in the Policy Guidance document work together. Executive Order 12-2015 establishes a "no surface occupancy" of 0.6 miles in Core Areas or 0.25 miles in General Habitat or Connectivity areas from active sage grouse leks for any new proposed disturbance, regardless of the type of disturbance. Observance of this stipulation is mandatory for all developers, and adherence to this stipulation is incentivized through site specific multipliers, as described in the Policy Document.

Attachment D of Executive Order 12-2015 also contains industry-specific requirements, in addition to the preamble statements, general principles, and guidance for how the conservation strategy applies to land uses and activities, included in the main body of Executive Order 12-2015 which are required of all developers who require state permits to implement a project. Except for Attachment D, due to its specificity, all attachments are also to be applied, as is relevant and appropriate for a particular development project. Executive Order 12-2015 also sets forth that new development projects will be required to follow the mitigation hierarchy.

Focusing on the Executive Order 12-2015 passage mentioned by the commenter for tall structures such as communication towers or overhead (power) transmission lines, the complete text of Attachment D, Core Area Stipulations, paragraph 6 reads as follows:

6. Overhead Power Lines and Communication Towers: Power lines and communication towers should be sited to minimize negative impacts on sage grouse or their habitats. When placement is demonstrated to be unavoidable:

If economically feasible, power lines within 4 miles of active leks should be buried and communication towers should be located a minimum of 4 miles from active leks;
If not economically feasible, then power lines and communication towers should be consolidated or co-located with existing above ground rights of way, such as roads or power lines, at least 0.6 miles from the perimeter of active leks;
If co-location is not possible, the power lines and communication towers should be located as far as economically feasible from active leks and outside of the 0.6 mile active lek buffer.

If siting of overhead power lines is necessary within 2.0 miles of important breeding, brood-rearing, and winter habitat, follow the measures recommended by the Avian Power Line Interaction Committee to minimize collision potential and raptor perch sites or bury a portion of the line.

Anti-collision measures should be installed within 0.6 mile of the perimeter of known sage-grouse concentration areas such as leks and winter ranges, where icing conditions are unlikely to occur. If effective perch preventers are identified, they should be installed within 0.6 mile of known concentration areas.

Follow USFWS Best Management Practices for tall structures when erecting new communication towers. Communication towers should be constructed to preclude the need for guy wires; where guy wires are necessary, they should be fitted with anti-collision devices.

Burying existing overhead lines that have been identified as contributing to a decline in sage grouse populations will be considered as a mitigation option.

Electric utilities (including electric cooperatives) and the Avian Power Line Interaction Committee (which includes federal agencies and state wildlife agencies), have developed a set of Best Management Practices (BMPs) to guide construction, operation, and maintenance activities by electric utilities in sage grouse habitats. These BMPs should be applied to electric utility projects as appropriate.

The Program should conduct additional research into the challenges posed to sage grouse by overhead lines and communication towers and should bring that research to MSGOT for further consideration.

Executive Order 12-2015 is based on the best available science at the time of its 2015 signing. The newer mitigation system documents, and the HQT itself are also based on the best science available, with the stakeholders and the program incorporating scientific literature published through September 2018. Research and peer reviewed science is available specific to communications towers and overhead powerlines, which is summarized in Appendices C and D of the Habitat Quantification Tool Technical Manual.

Executive Order 12-2015, Paragraph 6, is the only industry-specific passage that contemplates consideration of economic feasibility when considering placement of structures. Consideration of economic infeasibility is incorporated into the Policy Guidance document and is the mechanism by which MSGOT considers economic feasibility when implementing Executive Order 12-2015.

The Policy Guidance Section 3.6 document provides that developers can seek MSGOT's approval for dispensation from their mitigation obligations when economic infeasibility is shown. A variety of policy tools are outlined in the Policy Guidance document, as well as the process developers should follow to obtain relief from MSGOT. MSGOT can weigh and balance impacts on sage grouse due to specific projects, but also when those specific projects are sited in various locations relative to active sage grouse leks, the mitigation obligation determined through application of the HQT and Policy Document, and information provided by the developer to support its request for dispensation.

Taken together, Executive Order 12-2015 and the Greater Sage Grouse Stewardship Act demonstrate that Montana contemplates mitigating impacts of development to sage grouse populations and habitat as an integral component of the conservation strategy and observance of the mitigation hierarchy is required, including compensatory mitigation, which the Montana Legislature found was consistent with incentivizing conservation.

It has been recognized since at least 2013 that development will impact sage grouse habitat even if all stipulations of Executive Order 12-2015 are followed. Mitigation is an integral tool to offset impacts so that Montana can continue to issue permits for economic development, resource extraction, and infrastructure projects, even in Core Areas. Mitigation is viewed as a viable alternative to denying state permits.

COMMENT 7: One commenter objected to the requirements in New Rule I (ARM 14.6.103(4)(a)) and New Rule II (ARM 14.6.104(7)(a)) that written approval of changes in the number of calculated credits or debits also be obtained from MSGOT, the credit provider, the project developer, and any affected third party. MSGOT has authority to initiate rulemaking and MSGOT already represents debit and credit stakeholders, as well as various state Executive and Legislative parties. The rule's requirement that any affected third party provide written approval constitutes an effective veto. Even though MSGOT has authority to initiate rulemaking, it would be stymied.

RESPONSE TO COMMENT 7: New Rule I (ARM 14.6.103(4)(a)) and New Rule II (ARM 14.6.104(7)(a)) refer to specific credit or debit projects, not rulemaking. Once the HQT has been applied to calculate functional habitat gains or losses for a specific project, the rule provides that written approval is required by MSGOT, the project developer and the credit provider before the HQT results could be changed that would cause an increase or decrease in functional habitat. Similarly, once the Policy Guidance document has been used to determine the total number of credits or debits for a specific project, the rule provides that written approval is required by MSGOT, the project developer, and the credit provider before the number of debits or credits could be changed that would cause an increase or decrease in the number of debits owed or credits created. MSGOT seeks to provide clarity in the administrative rules that it cannot unilaterally change HQT results, the number of debits owed or mitigation obligation, or the number of credits created from a conservation project. MSGOT also seeks to recognize that once negotiated, mitigation transactions can be considered final, unless all parties to the transaction agree to amend the transaction in writing. MSGOT agrees that the proposed language was ambiguous and overly broad. Language has been added to both New Rule I (ARM 14.6.103(4)(a)) and New Rule II (ARM 14.6.104(7)(a)) to clarify that the rule pertains to a specific project, and written approval is required from every party to that mitigation transaction.

Lastly, MSGOT does not represent credit providers or developers in mitigation transactions. MSGOT's role is to implement Executive Order 12-2015 and the Greater Sage-Grouse Stewardship Act, consistent with the duties and powers granted by the Montana Legislature.

COMMENT 8: One commenter alternatively wants MSGOT to consider whether to initiate rulemaking on a quarterly basis but also suggests that MSGOT should have flexibility to make decisions and be agile without having to initiate formal rulemaking. Further, the commenter suggested the rules establish specific timelines for MSGOT decisions with respect to rulemaking, including text requiring MSGOT to complete rulemaking within 180 days.

RESPONSE TO COMMENT 8: MSGOT appreciates the commenter's awareness. As stated above, MSGOT seeks to balance the need for flexibility to make decisions after public notice and comment with the certainty and predictability that mitigation system participants need in order to plan either development projects that result in debits or conservation projects that create credits, respectively. See RESPONSE TO COMMENT 2, 4, and 5 above.

The Montana Administrative Procedure Act provides detailed statutory guidance with respect to administrative rulemaking and timelines for steps in the rulemaking process. In addition, the Montana Administrative Procedure Act establishes the requirements for the validity of rules, including the requirement that an adoption notice must be published within six months of filing the proposal notice, or else the entity proposing the rules must restart the rulemaking process from the beginning. MSGOT is required to implement, and will adhere to the requirements of, the Montana Administrative Procedure Act.

Governor's Office

/s/ Raphael Graybill /s/ Patrick Holmes

RAPHAEL GRAYBILL PATRICK HOLMES

Rule Reviewer Natural Resource Policy Advisor

Governor's Office

Certified to the Secretary of State January 2, 2019.