Indiana DNR wetlands program found out of compliance by federal district

Indiana’s statewide stream and wetland mitigation program has been found out of compliance with a federal timing requirement after collecting at least $109 million from landowners, developers and public agencies since its 2018 launch.

The finding, disclosed in a July 27, 2026, report by Indiana Capital Chronicle and WFYI, came from the U.S. Army Corps of Engineers’ Louisville District. The district said Indiana’s Department of Natural Resources was not meeting the requirement to begin land acquisition and initial improvements within three growing seasons after the first mitigation credit sale in a service area.

The Louisville District requested that DNR submit a corrective action plan and a projected timeline for reducing outstanding credit obligations. The action is a compliance finding and request for corrective work, not a final federal penalty or a shutdown of Indiana’s program.

Backlog spans mitigation obligations

DNR’s 2025 annual report showed the program was behind on more than 173 wetland credits and 84,711 stream credits at the end of 2025. More than 60% of sold stream credits and nearly one-third of wetland credits were behind schedule.

Credits represent mitigation obligations, not individual construction projects. Wetland credits are generally measured by acreage, while stream credits are measured by linear feet. After permitted impacts occur, the obligations require restoration, creation, enhancement or preservation of aquatic resources.

Only two projects had been fully completed since the program began, according to DNR. Another 27 projects were in some stage of development, including projects under construction or awaiting permits.

The backlog led DNR to temporarily pause credit sales in the Upper White and Whitewater-East Fork White service areas, two of the program’s 11 service areas. At the end of 2025, Upper White was behind on 48 wetland credits and more than 36,600 stream credits. Whitewater-East Fork White was behind on nearly 36 wetland credits and more than 10,700 stream credits.

How Indiana’s in-lieu fee program works

Indiana’s program gives developers and other permit applicants an alternative to completing mitigation themselves. Under the Indiana DNR program, an applicant can purchase DNR credits instead of restoring or preserving aquatic resources directly or using a private mitigation bank.

A permittee must obtain the applicable Army Corps permit and Indiana Department of Environmental Management water-quality certification before purchasing credits, according to DNR’s in-lieu fee program FAQ.

Once the associated fee is paid, the legal responsibility for providing compensatory mitigation transfers to DNR. The program is regulated by the Army Corps under the federal 2008 mitigation rule, while Indiana agencies administer related state requirements.

DNR says credit availability and prices vary by service area. Credits cannot be reserved and are sold on a first-come, first-served basis. Prices may be adjusted to reflect the full cost of delivering mitigation projects.

Where the money is allocated

Under the program’s allocation structure, 70% of credit-sale revenue goes to service-area funds for land acquisition, project planning, construction and management. Fifteen percent goes to administration, including staffing and operations, and 15% goes to reserves.

DNR reported that service-area funds totaled more than $76 million. The payments are not all taxpayer money: purchasers include private developers, landowners and public agencies. The Indiana Department of Transportation has spent nearly $45 million on credits, while private purchasers spent about $40.9 million and other local and state government units spent about $22.4 million, according to the July 27 reporting.

Why the delay matters to Indiana residents

Wetlands and streams can store floodwater, recharge groundwater, improve water quality and provide habitat. When mitigation is delayed, replacement of those functions may also be delayed, even though a permittee’s payment has already transferred responsibility for the work to the state.

The issue may also affect developers and public agencies that need credits in service areas where sales have been paused or availability is limited. DNR’s FAQ says prices can change as the agency accounts for the full cost of mitigation project delivery.

The 2022 Indiana Wetlands Task Force report previously warned that the in-lieu fee program was under-resourced and behind in fulfilling mitigation obligations. That historical assessment predates the Louisville District’s 2026 compliance finding, but it shows that concerns about project delivery existed before the current federal review.

DNR officials have attributed delays to factors including early staffing problems, the COVID-19 pandemic, demand, regulatory review and project complexity. Those explanations were reported by Indiana Capital Chronicle and have not been independently established as the sole causes of the backlog.

What happens next

The Louisville District is waiting to evaluate DNR’s corrective action plan and projected schedule. DNR also requested an extension related to its 2025 credit obligations, but the Louisville District had not granted that extension as of the July 27 report.

The next major accountability step is the corrective plan: how DNR will reduce outstanding credit obligations, move projects through permitting and construction, and demonstrate that future sales are matched by timely mitigation work. The available reporting establishes the finding by the Louisville District. It does not establish that the Detroit and Chicago districts, which also cover portions of Indiana, reached the same conclusion.

Sources

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