updated 3/31/2008 4:54:09 PM ET 2008-03-31T20:54:09

The Bush administration announced requirements Monday that would encourage developers to compensate for the destruction of wetlands or streams by paying for the creation of new ones elsewhere, sometimes many miles away.

The approach, which emphasizes linking wetlands destruction and replacement efforts across expansive watersheds, has been a contentious issue since it was proposed two years ago.

The Environmental Protection Agency and the U.S. Army Corps of Engineers announced the regulation's final approval Monday, saying it will help to replace wetlands and streams that are unavoidably destroyed or severely impacted in construction or other activities.

"It will accelerate our wetlands conservation effort by establishing a more effective, consistent mitigation process," said Benjamin Grumbles, the EPA's assistant administrator for water.

The regulation encourages expanded use of so-called "mitigation banking" where a developer can obtain a permit to destroy a wetland or stream if the developer agrees to invest in wetland creation or enhancement elsewhere. This approach has resulted in creation of businesses that specialize in wetlands creation for a price.

While the regulation establishes standards for a number of mitigation approaches for lost wetlands, it emphasizes a preference for mitigation banking. "Sometimes you get greater ecological success ... and increased watershed health by looking off site" away from where a wetland is destroyed, Grumbles said in a teleconference with reporters to announced the new rules.

But environmentalists worried the new mitigation policy could encourage wetlands destruction and overall wetlands loss.

"There's nothing in here that says we're going to improve mitigation. It's just going to be easier and cheaper," said Julie Sibbing, a wetlands expert at the National Wildlife Federation. "And the cheaper it is to mitigate, the more economic it is to buy land that has wetlands on it and destroy them."

She said mitigation banking already is being used, but that the new federal rule will make it difficult to argue that a developer should be required to perform onsite mitigation instead. A wetland often is important to a local ecosystem and "it doesn't help to move it 100 miles away," said Sibbing.

The National Academy of Sciences in a report has encouraged development of watershed-wide mitigation programs and the EPA said the report's recommendations were taken into account in the new regulation.

"We do not feel there should be a preference for onsite projects. There have been many onsite mitigation projects that have failed," said Grumbles.

The EPA and Army Corps said the new rules will increase public participation in the process and require increased monitoring of mitigation projects.

Shortly before the new rule was proposed in 2006, the General Accountability Office, Congress' investigative arm, found that the Army Corps could not ensure that 40,000 acres of wetland restoration work, required annually, actually was being done.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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