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<br />DEC"09-SB 11.26 FROM.M,B.S.S. <br /> <br />',;.l" . <br />'n;; <br /> <br />ID.970 247 8827 <br /> <br />PA"'~ <br /> <br />The Emergence, of Private 'Vetlands <br />Mitigation Banking <br /> <br />.... <br />~ <br /> <br />.~ <br /> <br />,"' <br />{.) <br />.:;.. <br />'V <br /> <br />Lawrence R. liebesman and Da'\id M. Plott <br /> <br />W ctIands mitigation banking responds to <br />scrious problems in cmrent federal and <br />State wetlands regWato1Y programs, <br />Under Oeon Water Act ScctiOl1 404, 33 <br />" ,--P~, S 1344, and many cum:nt scate programs. appli- <br />i::ants must odhere to a strict "scquencing" process that <br />requires them fust to avoid. and then to minimize. 3d, <br />',',! ve= impaCtS to wetl:lnds. For projeCtS likc housing <br />th3t ue not water dependent, existing bw presumes <br />th3t there ue 'practicable altem;uives" to impacting <br />wctlands. .Compensatory. mitigation (creuin8 or <br />restor1ng wetlands) may only be used (or "lIII2voidable' <br />impacts, The agendes also prefer 'on-site and i1Hdnd' <br />mitigation (jor =ple. impactS to shrub-scrub nonti- <br />dal wetlands must be mitig;lIed by creating or restoring <br />like ,,-etbnds). The most difficult to establish forested <br />wcWnds must be mitigated at a rwo-for-one ",tio. <br />Stringent criteria and a "preference" for scquential <br />mitigation have ereated tretIl""dous economic disin, <br />ccoti.....cs md adverse e.o.v1ronmenul consequences, Tht: <br />success record (or isolated mitigation projects bas been <br />spotty, and few n:guIators believe that theoe projects <br />will succeed. A 1990 study by the Florida Dep3Itttlent <br />of Narwal Resources roWld only a V percent success <br />cite :I.t 119 sites. Sn12ll mitigation projects often are not <br />tied to larga watershed lIW12gement and do not pro- <br />\ide long.term benefits to the larger aqtI2tic ecosystem. <br />In No\'ember 1995, the ,-.rmy COtps of Engineers <br />(the Corps), the Environmental Proteaion Agency <br />(EPA), and three other fedcr:a.l 2gencies jointly issued <br />Federal (iuidance for the EsrabliSbmlmr, Use and <br />Operatit:m of Mitigation Banks (Guidance). 60 Fed.. <br />Reg, 58,605 (Nov, 28, 1995). premised on the idea th3t <br />large contiguous wetl:lnds areas proVide gre::uer ccolog, <br />ieal benefits than on-sitc, project<lpCcific mitigation. <br />The Guidmce defines" mitigation .bcank" as 'a site <br />"11ere wctlands and/or other aquatic re5Qurces are <br />restored, created. enh2nced. or in o:ceptional circum- <br />SWlCes. preserved expressly for the purpose of proVid- <br />ing compensatory mitigation in advance of authorized <br /> <br />Mr, Lllbe$man Is a parmer in '" S.U- Spring, Maryland, <br />law firm of Uno"," and 1JIocber UP, ,Ill.. Piotr is an tJS$OCi- <br />ate In the Annapolis o./ftce of ltnowes and Blocber UP. <br />1bis artide was adapted from an fPtid8/ry the authors <br />publlsbed in Utban l.:In4 (Urban La7J4 InszlluZe), June <br />1996, <br /> <br />NR&:E Sum",er 1998 <br /> <br />- <br /> <br />impacts to similar re:lOwces.' <br />Under a banking system. a bank sponsor creates or <br />restores Wge wetlands that optimize particul2r funaioI15 <br />such as flood storage, water purifiation, and habitat in <br />locations where success is likely, Pcnnit app\ic:mts pur' <br />cha.s<!: the routing mitigation credits to S2Iisfy their miti' <br />gation Oblig:a1:iODS, The b2nk sponsor assumes full respon- <br />sibility for the site'S pert'Ol!tWIce and the cro:Iit purchas- <br />er has no further mitigation burden. <br />Despite gtowing feder:I.I encoungement of mi. <br />tion banking, the pri\':I.te sectOr has been slow to estaI> <br />lish b2nks beause of the Wge apital invesam:nt <br />required and the unceruinty over their use in the regula, <br />tory process, According to a 1993 study by the <br />Environmental law Institute (EI.l), n~' 75 percent of <br />existing mitigation banlcs wen: for public works projects <br />such as highways and pott deve\opmctlL Most of these <br />were single-user banks. The Oilifomia. State Coastal <br />Conserw11cy has the longest apetience with mitigation <br />banlciI1g. ha\ing undertaken more than one hundred ",,,,. <br />l:Inds restoration projects In cooperation "'itb private <br />landowners, public agenda, and loa! governments. <br />Only twO projects cited in the Ell study offi:red cro:Iirs <br />fur future impaas: the Irvine Company's SlLnJOllqUin <br />Marsh in southern California, and Tenneco Oil's 7,OQ(). <br />acre c:oast:Il mitig;Uion bank in Louisiana. <br />In ,",cent years, ho~er. =preneurs have <br />begun to pick up "'lIere government agencies left off, <br />According to a February 1997 Army Corps of Engineers <br />Institute for Water Resources ~'R) National Banldng <br />Study Survey, over seventy commercW miriga.tion <br />banks e>dst in the United Sares. Thc emerging trend in <br />pri\':lte mitigation banking is evident in Florida, North <br />Carolina. Geotgia. California, and Vuginia, when: firms <br />are actively developing 'for profit" banks, The success <br />of these endclvol'5 bas fuded a gtowing cottage indu$- <br />try in enrrepreneurttl mitigation banking: CUtTently <br />over seventy.fh-c commercial mitig;1.t1on banks are in <br />the planning and permitting stages. <br />The emergence of printe mitigation banking raises <br />an impottanr question, What are the neces.suy condl- <br />tiOn.i for making mfIigaIion banking work? 1W"R issued <br />a multivolume repon in 1994 that identified 5e"en cri. <br />teria necessary for the emergence and success of a pri, <br />vate credit market: <br />EuIy sale of creditS to hciliure a reasonable and <br />timel}' retUrn on apltal; <br /> <br />341 <br /> <br />~, f <br /> <br /> <br />II <br /> <br />" <br />]1 <br />,~ <br />'l <br />!I <br />:1 <br />:i <br />'1 <br />~ 1 <br />,l <br />,J <br />j <br />,J <br />j <br />il <br /> <br />