What Is Mitigation Banking?
Mitigation banking is defined as:The restoration, creation, enhancement, or preservation of a wetland, stream, or other habitat area undertaken expressly for the purpose of compensating for unavoidable resource losses in advance of development actions, when such compensation cannot be achieved at the development site or would not be as environmentally beneficial.
Mitigation banking typically involves the consolidation of small, fragmented mitigation projects into one large contiguous site. Units of restored, created, enhanced or preserved land are expressed as "credits" which may subsequently be withdrawn to offset "debits" incurred at a project development site. Mitigation banking unites sound environmental and economic practices to restore and enhance wetlands, streams, and other habitat resources. Mitigation bankers restore, enhance, create and preserve water resources or other significant natural areas and assume responsibility for their long-term maintenance, earning mitigation credits, recognized by the regulatory agencies, for their efforts. Mitigation bankers can then sell these mitigation credits to permittees and others who must compensate for having impacted water resources or other natural areas. The sale of credits legally transfers the liability for the mitigation from the permittee to the mitigation banker.
Types of mitigation banks include:
- Wetland/Stream Banks: These banks offer credits that satisfy regulatory compliance for Section 404 of the federal Clean Water Act, and other State and local regulations, for mitigating unavoidable impacts to wetland and stream resources.
- Conservation Banks: These banks offer credits that satisfy regulatory compliance for Sections 7 and 10 of the federal Endangered Species Act, and other State and local regulations, for mitigating unavoidable impacts to threatened and endangered species and their habitats and other sensitive habitat areas.
For example, a mitigation banker purchases a tract of degraded wetlands or prior converted wetlands and undertakes the design and permitting process to restore, create, enhance and/or preserve the wetlands, and monitor them to assure the site's long-term success.
Who buys those credits? An applicant who has applied to the federal and/or state agency responsible for wetland/stream or species permitting, and has provided adequate justification of a need to impact the natural resource in question. The applicant must also provide evidence that the use of mitigation bank credits are the most environmentally preferable method.
An example: A private developer needs to impact 2 acres of existing wetland for commercial purposes. Once federal and state regulatory agencies have agreed that the developer cannot avoid or even minimize the effect on those 2 acres, the developer must compensate - hence, the word mitigation - for the wetlands' loss by purchasing credits in a mitigation bank or securing regulatory agency approval for some other form of mitigation (e.g., on-site, off-site, fee-in-lieu, etc.).
Why buy credits in a mitigation bank instead of replacing the resource on- or off-site? Purchasing credits gives the developer these major benefits:
- Save time and money: The developer, after following the Clean Water Act 404(B)(1) Guidelines to try to avoid or then minimize wetland impacts, or after following other relevant federal or local guidelines, then does not have to go through the time-consuming permit approval process to create or restore natural resources. One of the benefits described in the Federal Guidance for the Establishment, Use and Operation of Mitigation Banks is that "Use of mitigation banks may reduce permit processing times and provide more cost-effective compensatory mitigation opportunities for projects that qualify." The developer may not be experienced in natural resource restoration, which requires expertise and equipment the developer may not possess. For the long term, buying credits in a bank is usually less costly than "doing your own", particularly when an investment in additional land is required for mitigation and the cost of the additional permitting process is added to the construction task.
- Eliminates risk and responsibility: The credit transaction legally transfers all responsibility for mitigation to the mitigation banker.
- The mitigation bank assures that the mitigation works ? and lasts. Too often, resources restored on-site eventually fail because the landowner does not have sufficient incentive or know how to maintain them. Mitigation bankers assume total responsibility for the mitigation and guarantee perpetual maintenance of the bank?s environmental assets. Mitigation is typically performed prior to the impacts, therefore reducing or eliminating temporal loss of wetland and other resource functions.
- Mitigation is always assured to occur within one year of resource impacts and financial securities and conservation easements are in place prior to resource impacts.
