Taking Wetland Mitigation to the Bank

Wetlands are protected under several state and federal regulatory programs, including Section 404 of the Clean Water Act and the wetland conservation provisions of the Food Securities Act ("Swampbuster"), which require a permitting action to alter, fill or otherwise change a wetland's characteristics. Permit conditions are placed on a permittee, which typically include compensation for wetlands that will be impacted as a result of some land alteration action. Wetland mitigation -- the replacement of impacted wetlands -- is commonly one such permit condition. In 1993, the Clinton administration's Wetland Plan, in association with the "no net loss" policy for wetlands, supported innovative solutions to wetland mitigation. As a consequence, mitigation wetland banking has received more attention as one of the prescribed solutions.

Wetland mitigation can be either in-kind or out-of-kind mitigation. The regulatory agency generally makes the ultimate decision, and in-kind replacement is typically required. Across the United States, there are four different methods for wetland mitigation: wetland restoration, wetland creation, wetland enhancement or wetland preservation. These types of wetland mitigation can occur either on-site (at the same location as the impacts) or off-site (at a different location, but as close as possible to the impacts) compensation.

There are three basic methods to accomplish the mitigation:

  • Conventional mitigation: On- or off-site mitigation in which wetlands are restored, created, enhanced or preserved in an amount sufficient to mitigate for the specific amount required for particular permit condition approval;
  • In-lieu fee system: A regulatory agency collects fees in lieu of requiring a developer to compensate for wetland losses. The fees are used for future mitigation projects by the agency; and
  • Mitigation banks: Restoration, creation, enhancement or preservation of wetlands for the generation of mitigation credits to be used for known or unknown future projects.

Across the United States, there are four different methods for wetland mitigation: wetland restoration, wetland creation, wetland enhancement or wetland preservation.

Each method has particular advantages and disadvantages, given the circumstances of the need for wetland mitigation. In some circumstances, mitigation banks can be a more effective means of mitigation.

What is Mitigation Banking?

In the enabling legislation (Federal Register, Volume 60, Number 228), mitigation banking is defined as

Wetland restoration, creation, enhancement and in exceptional circumstances, preservation, undertaken expressly for the purpose of compensating for unavoidable wetland losses in advance of authorized impacts to similar resources, when such compensation cannot be achieved at the development site or would not be as environmentally beneficial.

The overall goal of a mitigation bank is to provide economically efficient and flexible mitigation opportunities while fully compensating for wetland and other aquatic resource losses in a manner that contributes to the long-term ecological functioning of the watershed within which the bank is to be located.

How Do Mitigation Banks Work?

The establishment of mitigation banks is performed through following the established federal guidance on mitigation and other regional guidance often available. Regional guidance, as well as the mitigation banking regulatory approval process, occurs through various members of regulatory agencies, called the mitigation bank review team (MBRT). The U.S. Army Corps of Engineers (USACE), the U.S. Environmental Protection Agency (EPA), U.S. Department of Agriculture Farm Service and/or Natural Resource Conservation Service and state departments of natural resources, game and parks, or environmental quality are commonly represented on the MBRT.

The primary way mitigation banks achieve the overall goal is by the establishment of mitigation "credits" within the mitigation bank sites. Credits are established by the following actions:

  • Wetland restoration, creation, enhancement and/or preservation; or
  • Establishment of upland areas.

The ratio of credits to acres can vary and are negotiable with the MBRT. This method of credit establishment -- especially the inclusion of upland credits -- helps to contribute to the long-term functioning of the watershed. This is due in part to the creation of larger mitigation sites with upland buffers that generate an adequate number of credits to compensate for the foreseen impacts the mitigation bank will be used for. The ability to receive credit for establishing uplands, normally not a requirement under other mitigation options, gives value to both the mitigation site and the overall watershed.

Once credits are established in the bank (and approved by the MBRT), they can be used to compensate for a wetland impact within a pre-determined geographical area, which can be considered a debit. This process can occur until all the available credits are used up in the bank.

For a mitigation bank to be effective financially for the potential bank sponsor, there must be a need for the development of a mitigation bank.

Determining the Need for a Mitigation Bank

Potential wetlands bank sponsors need to evaluate their future potential project impacts to wetlands to determine if a mitigation bank would be useful for their needs, based upon a pre-determined geographical service area (GSA). Depending on each state, the GSA boundary can change, but is usually based upon the cataloging unit of the Hydrologic Unit Map of the United States (USGS, 1980), the ecoregion of the Ecoregions of the United States (James M. Omernik, EPA 1987) or a section of the Ecoregions of the United States (Robert G. Baily, USDA, 1995). Other watershed or regional systems predetermined by regional or state regulatory authorities can also be used in specifying bank service areas. Larger GSAs that extend beyond watershed or ecoregion boundaries are occasionally used when the goal is to integrate bank use with other resource management objectives.

Once the GSA is determined and potential impacts are evaluated, it can then be decided if a bank is appropriate. Several factors are involved in determining if a wetland mitigation bank is a beneficial option, including number of future projects, potential project impacts requiring mitigation, timeframe of impacts and potential for on-site mitigation. Depending on all of these factors, the option to develop a mitigation bank may be advantageous for the agency or developer.


There are two choices of mitigation banking instruments: traditional and umbrella.

Other factors to consider in the decision to develop a mitigation bank include cost and timeframe. It may be more costly to develop a mitigation bank than to use other mitigation options (with the possible exception of in-lieu-fee mitigation), due to a more complex process for getting a mitigation-banking instrument approved. However, depending on the factors identified in Table 1, the development of a mitigation bank may save costs for mitigation in the future. In addition, the timeframe needed to develop a mitigation-banking instrument and get it approved by the MBRT is longer than for other types of mitigation.

Table 1

Factors to Consider in Developing a Mitigation Bank

Factor

Bank

Other Mitigation

Number of Future Projects*

Several

Few

Potential Project Impacts Requiring Mitigation*

Many

Few-None

Timeframe of Impacts

Timeframe is spread out

Impacts will occur all at once

Potential for On-Site Mitigation

Low

High

Determining the Type of Mitigation Bank

Once the decision is made to develop a mitigation bank, the next step is determining what type of mitigation-banking instrument best fits the particular circumstances of the bank sponsor. Mitigation banks must have an established "instrument" which describes in detail the physical and legal characteristics of the bank and how the bank will be established and operated. The instrument serves as the documentation of agency concurrence on the objectives and administration of the bank. There are two choices of mitigation banking instruments: traditional and umbrella.

Traditional banking instruments -- the most commonly developed -- consist of one banking instrument and one mitigation site large enough to establish enough credits to compensate for the determined future need.

Umbrella instruments are less common because particular circumstances need to be present for this type of instrument to be valuable. An umbrella instrument develops an overall system for operating individual mitigation bank sites within a GSA. Once the instrument is in place, each potential wetland mitigation site considered for inclusion under the umbrella instrument is reviewed by the MBRT. An umbrella instrument can be advantages if there is the opportunity for a sponsor to develop several potential wetland mitigation sites within one particular GSA. This method can be used if the potential mitigation sites are smaller in size and would collectively meet the potential future need.

Traditional banking instruments are more common in instances involving one bank site, usually large enough to accommodate future impacts. Umbrella instruments are utilized when multiple sites must be developed to accommodate future impacts.

Wetlands Banks Across the United States

Mitigation banking has become an increasing popular method for wetland mitigation. Currently, it is estimated that there are at least 200 approved wetland mitigation banks in the United States. Of these, there are at least 27 umbrella wetland mitigation-banking agreements. Comparatively, when wetland banking was in its infancy in 1992, there were 46 reported wetland banks in the United States.

As regulations become more stringent and our resources become more valuable, innovative solutions for wetland mitigation, which are determined to be economically feasible, consider a watershed approach. These solutions are flexible in their operation. Mitigation banking, either through a traditional instrument or by umbrella instruments, is a way to accomplish the required compensatory mitigation. Mitigation banks are expanding to not only include common emergent wetland impacts, but also stream impacts. Mitigation banking will continue to develop to meet future needs by providing a viable solution for various types of wetland mitigation requirements.

Traditional Instrument Case Study

The Iowa Department of Transportation (IaDOT) frequently needs to develop wetland mitigation sites to compensate for wetlands impacted by road construction. Due to the potential for several projects occurring in the same watershed, IaDOT choose to evaluate the need for a wetland mitigation bank.

To determine the need for the bank, IaDOT identified projects from their Iowa Transportation Improvement Program planning document that would occur in the geographical service area (GSA). Because the bank would use federal funding for development, it could be used for other transportation purposes. Therefore, county road department projects projected for the future are also taken into account.

A desktop screening was performed to determine potential wetland impacts as a result of the future projects. Based on this evaluation -- and the potential project timeframes -- the need for a wetland mitigation bank was determined to be a beneficial means of compensating for wetland impacts.

With an idea of the potential project, a minimum number of credits were needed to account for the future impacts. Sites were identified within the GSA that could meet the constraint of a minimum number of credits. Several sites were evaluated and one site was chosen. After further studies and evaluation, it was determined the site could potentially restore approximately 110 acres of wetlands, enhance approximately 10 acres of farmed wetlands and create 418 upland acres. Based on discussions with the MBRT, this site will produce approximately 145 wetland credits.

The MBRT reviewed the site and initial information on the operations of the mitigation bank in May 2001 and both were well-received. The instrument is anticipated to be finalized in the summer of 2002, with construction to begin in the summer of 2003.

Umbrella Instrument Case Study

The Papio-Missouri River Natural Resources District (Papio-Missouri NRD), which encompasses parts of the Plate River and Missouri River watersheds in eastern Nebraska, works in both rural and urban environments for the purposes of flood control, water quality and recreational resources. The situation offers a unique opportunity to develop wetland sites and incorporate wetland designs into Papio-Missouri NRD's flood control and water quality projects.

Because the Papio-Missouri NRD is a public entity, it helps address the needs of both rural and urban communities. The Papio-Missouri NRD had received several requests to help urban developers who would impact wetlands through development activities in and around the Omaha area. Often their impacts were relatively small and the difficulty to create a quality wetland mitigation site was difficult for such small amount of impacts.

The Papio-Missouri NRD determined that development of an umbrella instrument would allow them to develop credits through wetland projects and in turn be able to sell these credits to developers (or others) in need of wetland mitigation. A survey -- which assessed the potential response and foreseen usage of a mitigation bank -- was sent to developers. It was determined through the survey and analyzing past permit activities in the GSA that a mitigation bank would be well received and used for developers' mitigation needs.

The umbrella instrument was approved in December 2000, and the first site will be submitted to the MBRT for approval in early 2002.

e-sources

Environmental Law Institute -- National Wetlands Newsletter -- www.eli.org/publications/nwn.htm

National Wetlands Mitigation Banking Study -- www.wrsc.usace.army.mil/iwr/Services/PDCPNWetlandsM.htm

CRS Report 97-849 - Wetlands Mitigation Banking Status and Prospects -- NLE -- cnie.org/NLE/CRSreports/Wetlands/wet-8.cfm

U.S. Army Corps -- St. Louis -- www.mvs.usace.army.mil/permits/mitart.htm

Federal Mitigation Banking Guidance -- www.epa.gov/OWOW/wetlands/mitbankn.html

ELI's Wetland Mitigation Banking Study -- www2.eli.org/wmb/

This article originally appeared in the 04/01/2002 issue of Environmental Protection.

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