Indiana DNR wetlands program found out of compliance by federal government

The ILF’s — in-lieu fees — are payments made by landowners ahead of impacts on land classified by the state or federal government as streams and wetlands.

When developers destroy wetlands or streams, the program allows them to purchase a credit from DNR that satisfies their obligations to mitigate the loss. The responsibility to restore, create, enhance or preserve a wetland then transfers to DNR. 

Experts say wetlands are protected largely to store flood water, recharge ground water and improve water quality. The Indiana Department of Environmental Management also points to wildlife protection and recreational purposes.

Two projects have been fully completed since the program began, said Mark Becker, land acquisition division director at DNR. There are 27 projects in some stage of development, including two currently in construction and three waiting on a permit.

But the program was behind on over 173 wetland credits — sold by the acre — and more than 84,711 stream credits — sold per linear foot — at the end of last year, according to its 2025 annual report provided by DNR to the Indiana Capital Chronicle. 

Over 60% of all stream credits sold are behind schedule, as well as nearly a third of wetland credits. The build-up is projected to increase this year in just about every service area across the state, the report said. 

One of the Army Corps districts overseeing Indiana found that its “program is not in compliance with this three-growing-season timeframe in all service areas” earlier this year. Katelyn Newton, public affairs chief for the Corps’ Louisville district, told the Capital Chronicle that the army’s engineering branch in June requested DNR provide a corrective action plan and “projected timeline for reducing its outstanding credit obligations.”

The backlog also led the program to temporarily stop selling credits in two of its 11 service areas in order to get caught up, Becker said. 

It’s an issue officials have been aware of since at least 2022, when a statutorily required wetlands task force report stated DNR had earned $60 million-plus in credits and spent or obligated over $8 million on consultant contracts to help the process of beginning projects.

The ILF program, the 2022 report said, was “under-resourced and behind in fulfilling mitigation obligations.”

“The IDNR program is required to initiate construction within three years of a credit sale, which is a challenge,” the report continued. “In the meantime, wetlands and streams are being filled without a timely replacement of the functions and values to the watershed as are required.”

Becker also pointed to early staffing troubles, the COVID-19 pandemic and higher-than-anticipated demand for ILFs as reasons the program got behind. It added four additional staff members in 2023. The program needed time to build up the funds through credit sales to begin its work, too.

But Becker also said getting projects off the ground, which can take years, has held progress up. Even after finding a suitable site, a challenge itself, the project goes through a rigorous review from state and federal agencies before further planning. 

The 2025 report said the program administrators meet monthly with the Army Corps Louisville district but have faced prolonged review response times and new requirements, contributing to project delays and likely cost increases for credit delivery. The program requested an extension from Army Corps districts on its credit obligations for 2025.

The Louisville district hasn’t yet granted that extension, Newton said, and is waiting to evaluate the request after reviewing the program’s corrective action plan. The Detroit and Chicago Army Corps districts also cover portions of Indiana and did not answer the Capital Chronicle’s inquiries on the request by publication.

Still, Becker said after those start-up challenges, more projects are entering the regulatory stage of the process.

“We have a pretty, at this point, robust pipeline of those projects that will start delivering credits over the next several years,” Becker said. “It took a while to get to that point.”

Money in, but little progress

Revenue from credit sales goes to three places. Most of it, 70%, is directed toward service area funds for land acquisition, project planning, construction and management. To date, those funds total over $76 million. Another 15% goes to the administrative fund, used for staff and operations, and 15% goes to reserves.

But of the thousand-plus credit purchases since the program’s launch, just 66 are considered fulfilled — meaning some form of mitigation happened in the service area of the disruption. Over 940 purchases, including several dating back to 2018, had not been fulfilled. 

Federal and Indiana law each have protections for wetlands, so when developers learn they may be building on a wetland, the U.S. Army Corps of Engineers then determines whose jurisdiction it falls under. The developer next has to get the appropriate permit to proceed. 

That’s when Indiana’s ILF program comes in.

Each of Indiana’s 11 service areas has a determined number of credits that can be purchased for disrupted streams and wetlands. Once the required amount from a purchase has been restored, that credit becomes available for purchase again.

Even when a project intended to mitigate is under construction or completed, though, its credits are released again for purchase only incrementally. That happens when it meets certain milestones, like after it’s fully permitted and real estate protections have been recorded. It only gets fully released at the end of annual monitoring, a minimum period of seven years for streams and 10 for wetlands.

Of the credits that have been fulfilled, just 30 were mitigated completely or in part by the two projects so far constructed by the program. DNR purchased credits from mitigation banks — typically private operations that complete restorations of wetlands in advance for profit — for 38 of them. 

The service areas that the program elected to stop sales for, Upper White and Whitewater-East Fork White, remain especially behind, despite past delivered credits and projects currently in the works. That’s due to “substantial development pressure in the Indianapolis metropolitan area,” according to the 2025 report. 

Upper White was behind 48 wetland credits and over 36,600 stream credits at the end of 2025; for Whitewater-East Fork White, it was nearly 36 wetlands credits and over 10,700 stream credits.

‘Grossly overregulated’

Credit purchases have been dominated by a familiar source: the Indiana Department of Transportation. It’s spent nearly $45 million on credits over the years, more than all private purchasers at $40.9 million and all other local and state government units at $22.4 million.

It’s common practice for transportation departments to pay ILFs, to the point that the Federal Highway Administration has released guidance on it. In a statement to the Capital Chronicle, INDOT said it “generally leaves mitigation in the capable hands of DNR” because mitigation measures completed by a permittee are less favored. Federal mitigation regulations place ILF purchases ahead of self mitigation in order of preference.

Highways departments often impact wetlands when routing new roads. 

Sen. Chris Garten, a Charlestown Republican who has long criticized the state’s wetlands program, took aim at INDOT’s purchasing practice during a June state budget committee meeting.

“So we have a government program that charges another government agency, taxpayer dollars mind you, to go fund another program in a government agency,” Garten said then. “Only in government would this ever make sense.”

Garten authored a 2021 law that removed protections for many state wetlands. They previously fell into three classes until Senate Enrolled Act 389 removed protections for Class 1 and lessened them for Class 2. Class 3 wetlands, those that are especially rare, ecologically important and undisturbed by human activity, retained protection. 

A 2024 law sponsored by Garten and authored by now-DNR director Alan Morrison went further, shifting some Class 3 wetlands down to Class 2, which have fewer safeguards. The U.S. Supreme Court ruled in 2023 that federal protections apply only to wetlands with a continuous surface connection to federally protected waterways. 

Garten told the Capital Chronicle he’s not against all wetlands protections; he just thinks the Indiana program is “grossly overregulated” and that the mitigation program has ballooned in size over the years. 

He takes particular issue with how much developers pay for ILF mitigation, as well as how many acres of new wetlands the program adds. 

Depending on the type of wetland impacted and its location in the state, the developer buying a mitigation credit pays a different amount. The most expensive individual credit, for wetlands in the St. Joseph River service area, costs $120,000 per acre. 

Those factors also affect the mitigation ratio — how many acres of wetlands must be restored for every acre affected. Usually, it’s greater than one-to-one. 

“This program was designed to create more wetlands across the entire state of Indiana at all costs,” Garten said.

He believes Gov. Mike Braun’s administration has made positive steps with regards to wetlands but is having “conversations” about addressing them further legislatively. Garten pointed to how many other states have no dedicated wetlands laws at all. According to the National Agricultural Law Center, Indiana is one of 24 states with a state wetlands permitting program.

‘A very wet,’ ‘very flat state’

But Susie McGovern, water science and sustainability specialist with the Hoosier Environmental Council, thinks Indiana’s many lakes, rivers and streams warrant stronger protection.

“This is a very wet state,” she said, “and it’s also a very flat state.”

Wetlands exist “where water covers the soil, or is present either at or near the surface of the soil” for some or all of the year, according to the Environmental Protection Agency. 

That can be places like marshes and swamps, but also rivers, streams and lakes, McGovern said. 

She argued insufficient staffing and funding among both the state program and Army Corps remain “a huge barrier” to this mitigation and permitting processes going smoothly. 

She also worried about the impact of continued data center development on wetlands and their successful mitigation. At least three ILF purchases in 2025, totalling over $320,000, appeared to be associated with a Google data center in the Fort Wayne area.

A number of government agencies and nonprofits run ILF programs. But states taking in money and not spending it emerged as a problem soon after the programs started popping up, said Morgan Robertson, a professor at the University of Wisconsin-Madison’s geography department who specializes in wetland policy.

Robertson helped author the 2008 federal rule which implemented new restrictions on ILF programs, including the three-year time frame. 

Informally, Robertson said, he’s heard that problems keeping up with the mitigation end of ILF persist, even years after the rule. 

“It’s either habitat or it’s water quality or it’s flood detention, you know, it’s flood storage,” he said, and when mitigation doesn’t happen, “you’re not getting it back. That’s why the program exists.”

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