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<br />DEC-09-SB 11,26 FROM,M.B.S.S.
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<br />ID.970 247 8827
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<br />The Emergence. of Private 'Vetlands
<br />Mitigation Banking
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<br />Lawrence R. liebesman and Da'\id M. Plott
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<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, >d.
<br />o. ',! 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.....es 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 (;u.idance 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 ecolog.
<br />ical 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
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<br />Mr. U1be$man Is a parmer in '" S.7=r Spring, Maryland,
<br />law fi,,", of Uno"," and 1JIocber UP. .'II.. Piotr is an tJS$OCi-
<br />ate In '" Annapolis olftce of ltnowes and Blocber UP.
<br />1bis article was adapted fro"" an fPtid8/ry '" authors
<br />publlsbed in Utban L:ut4 (Urban La7J4 InszlluZe). June
<br />1996.
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<br />NR&:E Sum",er 1998
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<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 />c:has<!: 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 fmer:a.l encoungement of mi.
<br />tion banking, the pri\':I.te sectOr has been slow to estab-
<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 ofl'cred cro:Iirs
<br />fur future impaas: the Irvine Company's SlLnJOllqUin
<br />Marsh in southern California, and Tenneco Oil's 7,000-
<br />acre coast: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 endclvors bas fuded a gtowing cotuge indu$-
<br />try in enrrepreneurttl mitigation banking: Currently
<br />over seventy.fh-c commercial mitiga.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 condi-
<br />tions for making mfIigaIion banking work? 1W'R issued
<br />a multivolume repon in 1994 that identified _'en cri.
<br />teria necessary for the emergence and success of a pri-
<br />vate credit market:
<br />E.uIy sale of creditS to hciliure a reasonable and
<br />timelr retUrn on apltal;
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