What is Mitigation Banking?
Mitigation is the preservation, enhancement, restoration, or creation of:
- Wetlands, estuaries, aquatic habitats;
- Streams, riparian areas, vernal pools, or tidal systems; or
- Specialized habitat areas that supported special status species
that offset anticipated adverse impacts to nearby, similar ecosystems due to development or other impacts. Mitigation banking is when credits are produced in advance of those impacts and made available to satisfy regulatory or permitting compliance for those impacts.
In short, it is a system of credits and debits that helps ensure lost ecological function caused by development is compensated by the restoration, preservation, or creation of wetlands, streams, and other similar habitat areas elsewhere.
Restored Wetlands and Streams offer credits to offset lost ecological services that occur in aquatic habitats. These are regulated and approved by the US Army Corps of Engineers (USACE) and the Natural Resource Regulatory agencies in the state in which the impacts occurred.
Conservation Banks provide credits to offset losses of threatened or endangered species and/or their critical habitat areas. Conservation banks are regulated and approved by the US Fish and Wildlife Service (USFWS) or the National Marine Fisheries Service (NMFS) and the Natural Resource Regulatory agencies in the state in which the impacts occurred.
Mitigation and conservation banks are driven by regulatory compliance for unavoidable impacts to aquatic or ecological resources through projects or development (e.g. infrastructure projects such as roads, bridges and tunnels, real estate developments or mining and energy projects). Mitigation banks sell ecological compliance credits to permittees through a transaction to compensate for these impacts, often within a limited geographical context. Through this transaction, liability for compensating for losses to ecological resources is transferred to the mitigation bank (EPA).
The Clean Water Act (CWA) Section 404 and the Rivers & Harbors Act, Section 10 regulate damage to aquatic resource functions and values that are impacted by development.
These regulations provide a foundation for agencies at the local, state, and federal levels seek mitigation for mitigation for impacts to wetland, stream, or habitats.
Mitigation banks, once approved by regulatory agencies, place a perpetual conservation easement on the land. Dedicated trust funds connected to these banks allow for the long-term management of natural resources necessary to maintain the bank. Approved mitigation banks are able to sell credits to developers, agencies, and others whose projects will impact various ecosystems.
A mitigation credit is a unit of ecological value associated with converting a naturally occurring wetland or other specific habitat to other economic uses. Mitigation credits that compensate for riparian impacts can be assigned value in relation to the linear distance.
A mitigation banker, often with investment partners, invests in an ecologically damaged or sensitive site.
This investment can include: outright purchase of the land; a management plan that includes a conservation easement and design-construct restoration plan; or developing state or agency-owned lands. The mitigation banker then works with regulatory agencies including the Mitigation Banking Review Team (MBRT), which evaluates and permits a proposed mitigation bank, and the Conservation Banking Review Team (CBRT), which approves plans for building, maintaining, and monitoring the bank.
The MBRT can include representatives from local, state, or federal agencies including: US Army Corps of Engineers, National Marine Fisheries Service, Environmental Protection Agency, US Fish and Wildlife Service, state environmental protection divisions, local water management districts, and county environmental and soil conservation groups.
How Mitigation Banks Work
Mitigation Bank Structure
A mitigation bank involves three entities: The bank sponsor/developer, the regulators, and the credit buyer. Each is dependent on the other to facilitate the establishment and transaction of credits for compliance.
A fundamental component of the mitigation is the mitigation banking instrument: this is the legal agreement between the bank owner and regulators that define terms of the bank, including performance standards and monitoring requirements.
Mitigation banks must demonstrate ecological uplift, such as restoration, enhancement, or creation of a site to create ecological credits.
Mitigation banks must implement long-term stewardship of a site to ensure ecological success, which is a requirement of the banking instrument.
Mitigation banks are tied to a service area, which defines the geographic limit of compensation for permitted impacts.
Mitigation Bank Process
Evaluate the Opportunity
The process to develop a bank begins with evaluating an opportunity, including market analysis to determine potential demand, as well as suitable locations for a bank site. Market analysis involves evaluating regional impacts to natural resources from various projects or development to assess potential current and future mitigation needs.
Evaluate the Site
A potential bank site requires onsite evaluation of natural resources to determine type and quality of ecological resources.
Permit and Design
The next step is to engage in design and permitting of the mitigation bank. Permitting a mitigation bank is a negotiation process between the bank sponsors and regulatory agencies. It’s at this point where the terms of the bank, such as mitigation ratios and credit approval, are determined.
The outcome is a banking instrument with defines the terms of the mitigation bank.
Enhance the Site and Sell Credits
Following permit negotiations, the site is improved. Credits may be sold prior to, during, or following restoration work.
The final step is long-term management and monitoring of the bank. This ensures the viability of the resource and compliance with terms of the banking instrument.
- What is the history of mitigation banking?
- Why use a mitigation bank?
- Why else should you choose to purchase credits from a mitigation bank?
What is the history of mitigation banking?
Why use a mitigation bank?
Traditionally, responsible parties had to provide, or contract with consultants to provide, compensatory mitigation to offset development impacts to habitat or waterways. This costs both time and money. Mitigation banking programs offer a number of advantages over this system, including:
- Reducing uncertainty about whether a mitigation project will successfully offset a development project impact;
- Assembling and applying a variety of financial resources, planning, design, and scientific expertise;
- Placing a permanent conservation easement on the land;
- Providing greater ecosystem benefits than a number of small parcel or onsite mitigation efforts;
- Reducing the time needed to process permits; and
- Consolidating efforts to make efficient use of limited agency resources in reviewing and compliance monitoring.
These things help provide more cost-effective compensatory mitigation opportunities and increased overall ecosystem services. The efficiency of the process allows Tellurium Partners to offer price-fixed mitigation credits.
Why else should you choose to purchase credits from a mitigation bank?
Securing mitigation credits from nearby ecosystems allows many large landowners, including the government, to maintain a property in its current management state, instead of breaking it up into suboptimal uses.
By choosing to purchase mitigation credits from a nearby mitigation bank, large landowners can continue to use the land for grazing, timber removal, low-impact recreation, or education, without depleting ecosystem services that are important to the public interest.
Finally, by purchasing credits from a mitigation bank, you know that you are investing in a successful restoration project instead of taking the risk of investing a lot of resources into a mitigation strategy that may or may not succeed. You don’t need to worry about regulatory policy or long-term management risks – these are the responsibility of the mitigation banker.