Source: National Mitigation Banking Association
Mitigation banking is: “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 Units of restored, created, enhanced or preserved land are expressed as “credits,” which may subsequently be withdrawn to offset “debits” incurred at a project development site.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 of 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.
Keeping Families on the Land: Mitigation Banking as a Conservation Strategy
An increasing part of the Texas Agricultural Land Trust’s work includes mitigation banking, which offers another income stream for ranchers and farmers. Mitigation banking was largely created to give land developers a way to offset the impacts of land development. When a developer is impacting certain natural resources, such as streams, rivers, wetlands, or habitat for an endangered species, they must obtain a permit from a federal agency, either the U.S. Army Corps of Engineers or the U.S. Fish & Wildlife Service. The developer may obtain the permit by performing a number of actions in order to compensate for the adverse impact. One compensatory act is to purchase credits from a mitigation bank. The need for these credits in turn creates a market for private lands conservation.
Think of it this way: A new pipeline is slated to run through two acres of a wetland. The pipeline company must obtain a permit from the U.S. Army Corps of Engineers in order to comply with the Clean Water Act, and must compensate for the impact. It may obtain a permit by protecting and restoring an isolated wetland area near the project, or it can purchase two-acre credits, if available, from a mitigation bank servicing the geographic area of the project. The purchase of credits streamlines the permit process, and is beneficial for the resource, as a large area of land can be restored and protected, as opposed to multiple isolated sites. Finally, it helps the landowner by providing another source of income.
For credits to be certified by either the Army Corps of Engineers or the US Fish and Wildlife Service, the land must be permanently protected with a conservation easement, which is where the Texas Agricultural Land Trust comes in. Mitigation banking is one way in which we meet the goal in our current strategic plan of identifying innovative, incentive based solutions for private lands conservation. The donated conservation easement simply does not work for many landowning families. Mitigation banking can provide a financial incentive for those who wish to conserve their lands.
Did you Know?
What’s next for banking? In 1992, there were only 46 mitigation banks in operation. As of August 2013, there were 1800 banks in the EPA’s banking data base. http://water.epa.gov/lawsregs/guidance/wetlands/mitbanking.cfm
For the most recent estimates of the number of banks and bank sites across the country query the RIBITS website. It appears that this model for compensatory mitigation will continue to grow, creating more opportunities to compensation private landowners for conserving their land.
Mitigation Banking: Landowner Considerations
A Q&A with Terry Anderson, Co-owner Advanced Ecology
Advanced Ecology was founded in 1994 when Terry Anderson and his partners Mike and Donna Bird recognized the Clean Water Act and the Endangered Species Act’s regulatory requirements were creating opportunities to provide environmental services to corporate, government and industrial clients.
To date, Advanced Ecology, their private equity partners and joint venture landowners have committed over $70 million dollars in undertaking more than 25 mitigation-related projects in five states, conserving or enhancing over 25,000 acres of habitat.
TALT: What characteristics does a property need to have to be a potential mitigation banking site?
Anderson: First, a property has to be located in the region where a projects requiring mitigation are occurring. For instance, if a proposed road in the Houston metro area will negatively impact a wetlands, the highway contractor has to offset that impact in the same ecoregion and watershed. It can’t purchase credits from a mitigation bank in the Sabine River Basin to offset a Houston impact in the San Jacinto River Basin.
The current mitigation market in Texas can involve wetlands, streams or endangered species; therefore, a piece of property has to offer either the opportunity to enhance or conserve a watershed function or some form of endangered species habitat.
In Texas, especially with the current list of candidate species, the opportunity to create Conservation Banks may be greater than the opportunity to create Wetland/Stream Banks. By virtue of our geography and geology, Texas has far more rangeland habitat than wetland ecosystems. Development projects, particularly linear projects such as roadways, transmission lines, and pipelines are likely to encounter more and more problems and barriers if additional species become listed.
TALT: Is creating a mitigation bank something that landowners can do themselves or is it something that requires the expertise of an experienced partner?
Anderson: Creating a mitigation bank is a complicated high-risk, high-return venture that requires a high-level of specialized expertise. At the very least, landowners will need to enlist the help of several highly qualified, experienced consultants to navigate the multi-step process.
Creating a mitigation bank is not a quick flip proposition. It will likely take three to five years to secure the initial documentation and permits and ten years to complete development. If landowners are considering the possibility of creating a mitigation bank, the first question they should ask themselves is: Do I have the fortitude and financial resources to underwrite the cost of this proposed project or would I be better off entering a joint venture with a partner who could provide funding and share the risks?
On a cautionary note, I would suggest that landowners carefully vet any potential consultants or joint venture partners. Ask for references. Ask for a portfolio of completed, successful mitigation projects. Unfortunately, there are people in the environmental services sector who are happy to conduct environmental surveys on properties that have little or no chance of ever becoming a mitigation bank.
We’ve had people come to us, after they’ve already spent $50,000 to $250,000or more on banking projects, wanting to join forces with us to take their project to the next level—and we’ve had to tell them that their property lacks some of the basic components essential for creating a mitigation bank. Without solid advice, it’s easy to spend a lot of money “chasing a wild goose.”
TALT: What should private landowners consider before establishing their land as a mitigation banking site either singly or with a partner?
Anderson: Landowners need to not only consider the related economic costs and risks, but also the land use restrictions, just as they would for a traditional conservation easement.
Because a conservation easement will be involved, landowners need to identify land trusts that share a similar land management philosophy. In that process, it may be helpful to identify land trusts that have experience with mitigation banking.
Unlike a traditional conservation easement which is negotiated between the landowner and a land trust, a mitigation bank must also meet the criteria established by either the US Army Corps of Engineers or U.S. Fish and Wildlife Service. If all three parties can’t reach consensus the mitigation bank won’t be approved.
Because federal approval is essential, agency personnel are negotiating from the power position. Accordingly, land trusts hoping to hold easements on mitigation banks should have their legal counsel familiarize themselves with the mitigation process and easement templates.
Also, landowners need to prepare themselves for the long haul. Creating a mitigation bank is not a quick or easy process. A project will likely involve detailed environmental restoration, legalities that will be in place in perpetuity as well as elements of complex economics. For it to be successful, no components can be left to chance.
However, when the stars align it can be well worth the effort. There are some incredibly successful examples out there of big wins both ecologically and economically.