National Wetland Mitigation Banking Study: Wetland

NATIONAL WETLAND MITIGATION BANKING STUDY

Wetland Migitation Banking

Institute for Water ResourcesWater Resources Support Center

U.S. Army Corps of EngineersAlexandria, Virginia 22315

Prepared by

Environmental Law InstituteWashington, D.C.

February 1994 IWR Report 94-WMB-6

National Wetland Mitigation Banking Study

This report is part of a series of reports that are being published during the National WetlandMitigation Banking Study. General background information pertaining to wetland mitigationbanking and the scope of the National Study were the subjects of a report published during thefirst year of the study.

Wetlands Mitigation Banking Concepts IWR Report 92-WMB-1, prepared by Richard Reppert,Institute for Water Resources, July 1992, 25pp.

A number of reports presenting the results of the first phase of the National Study are expected to bepublished in 1994. Among the reports already published, in addition to this report include:

Wetland Mitigation Banking: Resource Document IWR Report 94-WMB-2, prepared by the EnvironmentalLaw Institute and the Institute for Water Resources. This report presents bank-specificinformation obtained by the National Study in its inventory of banks and detailed case studyhistories of 22 wetland mitigation banks. The report also includes an annotated wetlandmitigation banking bibliography and a summary of study findings on fee-based compensatorymitigation.

Expanding Opportunities for Compensatory Mitigation: The Private Credit Market Alternatives IWRReport 94-WMB-3, prepared by Leonard Shabman, Dennis King, and Paul Scodari. This report looksat the economic forces affecting the market for mitigation credits. A framework that describesthe factors affecting the supply and demand of mitigation credits is presented. Interviews withprospective entrepreneurial bankers were conducted. Also interviewed are relevant regulatoryand resource officials for several of the banks.

First phase report IWR Report 94-WMB-4, prepared by Robert Brumbaugh and Richard Reppert,Institute for Water Resources. Summation of findings of phase one of the National WetlandMitigation Banking Study and recommendations for the final study phase.

For further information on the Wetland Mitigation Banking Demonstration Study, contact either:

Dr. Robert W. Brumbaugh Dr. Eugene Z. StakhivStudy Manager Chief, Policy and Special Studies DivisionInstitute for Water Resources Institute for Water ResourcesCasey Building Casey Building7701 Telegraph Road 7701 Telegraph RoadAlexandria, VA 22315-3868 Alexandria, VA 22315-3868Telephone: (703) 428-7069 Telephone: (703) 428-6370

Reports may be ordered by writing Arlene Nurthen, IWR Publications, at above address, by e-mailat [email protected], or by fax at (703) 428-8171.

iii

TABLE OF CONTENTS

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

CHAPTER ONE: WETLAND MITIGATION BANKING . . . . . . . . . . . . . . . . . . . . . . . 1

CHAPTER TWO: THE REGULATORY CONTEXT FOR WETLAND MITIGATIONBANKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

CHAPTER THREE: ECOLOGICAL ISSUES IN WETLAND MITIGATION BANKING 19

CHAPTER FOUR: BANK ORGANIZATION AND ENABLING INSTRUMENTS . . . 31

CHAPTER FIVE: MITIGATION ALLOWABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

CHAPTER SIX: MITIGATION BANK SITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

CHAPTER SEVEN: CREDITS DEFINED AND VALUED . . . . . . . . . . . . . . . . . . . . . . 63

CHAPTER EIGHT: AVOIDING AND CORRECTING FAILURES . . . . . . . . . . . . . . . 77

CHAPTER NINE: FINANCING OF BANKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

CHAPTER TEN: MITIGATION BANKING IN THE CONTEXT OF LAND USEPLANNING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

CHAPTER ELEVEN: CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

APPENDIX A: LIST OF WETLAND MITIGATION BANKS . . . . . . . . . . 131

APPENDIX B: EXISTING WETLAND MITIGATION BANKS . . . . . . . . . 135

APPENDIX C: FEDERAL BANKING POLICIES . . . . . . . . . . . . . . . . . . 149

WETLAND MITIGATION BANKING BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . 163

SELECTED SUPPLEMENTAL BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

iv

LIST OF FIGURES

Figure 1. Typical Single-Client Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Figure 2. Typical Resource Agency Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Figure 3. Typical Entrepreneurial Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Figure 4. Typical Banking System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

LIST OF TABLES

Table 1. State Wetland Mitigation Bank Laws and Regulations . . . . . . . . . . . . . . . . 14Table 2. Major Wetland Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Table 3. Wetland Types by Region and Major Systems . . . . . . . . . . . . . . . . . . . . . . 22Table 4. Wetland Functions and Outputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Table 5. State Wetland Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

v

EXECUTIVE SUMMARY

Wetland mitigation banking refers to a existed in the United States. In 1992, theresystem in which the restoration, creation, were more than 40 wetland mitigation banks inenhancement, or preservation of wetlands is existence and more than 60 proposed banks.recognized by a regulatory agency asgenerating credits that may be used to This document reports wetlandcompensate for multiple wetland impacts mitigation banking experience to date. Theoccurring generally within the same watershed Environmental Law Institute conducted anas the banked wetlands. inventory of banks that supplemented

Wetland mitigation banking is based Wetlands Mitigation Banking Study conductedupon the concept that in some circumstances by the Corps of Engineers Institute for Waterthere may be ecologically better ways of Resources (IWR). Additional information wasproviding compensatory mitigation for wetland gathered by IWR in a detailed study ofconversions than onsite replacement. It can selected banks.also provide economies of scale and greaterregulatory certainty for developers and the Existing mitigation banks were found topublic. Many developers, government represent a variety of institutionalofficials, and environmentalists acknowledge arrangements, although single-client publicthat mitigation banking can offer several works banks (mostly sponsored by statebenefits over other forms of compensatory departments of transportation) are the mostmitigation. However, there is less consensus common at present. Current experience hasabout the proper parameters for banking. revealed a great deal about public works

Wetland mitigation banking offers an banks should take advantage of thisopportunity to make compensatory mitigation information. However, at the time this reportmore ecologically significant by assuring that was prepared, there was little usefulmitigation can occur in locations that advance experience with public general use, andlandscape scale ecological goals; mitigation is private entrepreneurial banks; thus, the focusnot limited to where a development project of any pilot programs and future studieshappens to be located. Because mitigation should be on these types of banks. Thebanks are generally larger units than most transition to broader use of banking should beindividual compensatory mitigation projects pursued intentionally so that valuable lessonsand may include buffer areas, they may also can be applied rather than relying entirelyoffer greater resilience to natural (or upon ad hoc decisions in the field. An ad hocdevelopment-related) events that can cause approach is partly what has created thethe failure of many onsite mitigation projects. current situation in which there is greatTo the extent that mitigation wetlands are uncertainty among regulators, the public, andbanked in advance of wetland conversion prospective credit producers alike.projects, banking can also provide temporaladvantages over concurrent mitigation and Regulators and resource agenciesreduce uncertainty over the likely success of should consider individual mitigation andthe mitigation. wetland mitigation banking options with similar

Wetland mitigation banking, although mitigation banking is subjected topracticed for more than fifteen years, is a requirements, individual mitigation is not,concept still in its infancy. Ten years ago a individual mitigation may have significantmere handful of wetland mitigation banks financial advantages - even in cases where it

information gathered as part of the National

banks. Future approvals of public works

standards where appropriate. Where

Executive Summary

vi

is less desirable ecologically. be too complex. It should bear some

Individual mitigation and mitigation underlying wetland conservation plan -banking need not be subjected to identical assuring that the functions of concern areconditions; they simply need to have some those that are measured.parity of treatment. The adoption of a regionalor watershed-based wetland conservation In conclusion, wetland mitigationplan provides one way of taking this into banking offers the potential for restoration andaccount. Regional and national wetland conservation of ecologically meaningful andmitigation guidance or regulations can also robust wetland systems, planning on aprovide criteria, goals, and requirements for landscape scale, and the harnessing ofindividual mitigation projects and mitigation entrepreneurial as well as public funding to thebanks. task of wetland compensation. It provides

Credit valuation is basic to management of compensatory wetlands. Likeimplementation of banking. However, there is other forms of compensatory mitigation, itnot a single approach at present that can be presupposes a wetland policy that continuesendorsed for all banking purposes. The to allow the lawful destruction of certainexisting methods do, however, provide an natural wetlands. Its potential utility must beample array of options for use in mitigation measured not in comparison with a ban onbanking for different purposes. It is apparent wetland conversions, but on whether it canthat in order for any banking program to improve upon current compensatory methods.function, the selected credit definition cannot It appears that it can.

reasonable relationship to the goals of the

practical advantages in monitoring and

vii

ACKNOWLEDGEMENTS

This report was prepared with funding National Wetland Mitigation Banking Studyfrom the U.S. Environmental Protection conducted by the Institute for WaterAgency's Office of Policy, Planning and Resources (IWR), U.S. Army Corps ofEvaluation, its Office of Wetlands, Oceans Engineers. Section 307(d) of the Waterand Watersheds, and the U.S. Army Corps of Resources Development Act of 1990 providedEngineers Institute for Water Resources the authority to conduct the study to the(IWR) under an interagency agreement with Assistant Secretary of the Army for Civilthe U.S. Environmental Protection Agency. It Works.does not necessarily reflect the views of theseagencies and no official endorsement should The National Wetland Mitigation Studybe inferred. is being conducted within IWR Policy and

Environmental Law Institute staff who Eugene Z. Stakhiv. This report and theprepared this report included Jay Austin, National Wetland Mitigation Banking StudyDiane Cannon, Jeff Dobbins, Vanessa has benefitted from Dr. Stakhiv's review andGrimes, Karen Hester, Steve Mattox, James guidance throughout the course of theMcElfish, Matt McGinnes, Marcia McMurrin, ongoing effort. Kyle Schilling is the director ofSara Nicholas, Lisa Pelstring, Anne Platt, and IWR. Robert Brumbaugh is the studyLisa Vogel. ELI also gratefully acknowledges manager.the help of Ann Badgely, Donald Baur, andPat Parenteau of Perkins Coie, as well as the This report is only slightly modified andcomments of EPA (Ralph Heimlich, now at updated from a version published in July 1993USDA, and Tom Kelsch), IWR (Robert by the Environmental Law Institute. RobertBrumbaugh and Richard Reppert), the U.S. Brumbaugh made final editorial revisions onArmy Corps of Engineers (Jim Hilton), and the this report for publication as part of theWaterways Experiment Station (Jean O'Neil). National Wetland Mitigation Banking Study

This report was prepared as part of the performed final editing and formatting of this

Special Studies Division, whose chief is

series of reports. Brian Chromey (IWR)

report for publication.

viii

BLANK PAGE

1

CHAPTER ONEWETLAND MITIGATION BANKING

A. Introduction

Land development activities oftenadversely affect waters protected as wetlandsunder federal, state, and local regulatoryprograms. Wetlands are protected by lawbecause they are ecologically important, andbecause they perform a variety of usefulfunctions, including water purification,sediment trapping, wildlife habitat, floodstorage, and groundwater recharge.

Most conversions of wetlands touplands through development activitiesrequire governmental approval. Under severalregulatory programs, including §404 of theClean Water Act, a regulatory agency mayimpose conditions upon its grant of approvalfor a developer's conversion of wetlands. Theagency may require the developer to make upfor the loss of the wetland and its values bysubstituting replacement wetlands. Thisprocess is called compensatory mitigation.The developer is usually required to create,restore, or enhance replacement wetlands onor adjacent to the development site.

Within the last decade an alternativeapproach to onsite compensatory mitigationhas begun to emerge: wetland mitigationbanking. In wetland mitigation banking, largeroffsite wetland areas are used to mitigate fora number of independent wetlanddevelopment conversions. The landdeveloper itself need not produce thecompensatory wetland values; instead, the The Environmental Law Institute (ELI)developer can purchase them from another identified all existing and proposed wetlandentity that has produced and "banked" them mitigation banks using published andfor this purpose. The banked "compensation unpublished research, surveys and staffcredits" are recognized by the regulatoryagency as providing suitable compensation forwetland impacts.

Wetland mitigation banking is basedupon the possibility that it may provide greater

ecological benefits than onsite, project-specific mitigation. Because bankingmitigates for numerous individual wetlandconversions, compensation sites are likely tobe larger and more likely to be viablehydrologically and biologically. In addition,banked compensation wetlands can achievefunctional success in advance of the wetlandconversions for which they are to mitigate;and they can be continuously monitored andmanaged to assure the production of thewetland functions at issue. Wetland mitigationbanking offers potential efficiencies andeconomies of scale, and may offer continuingprofessional wetland management rather thanad hoc management by the developmententity.

This study examines the current statusof wetland mitigation banking in the UnitedStates. It examines all wetland mitigationbanks now in operation, as well as manyproposed banks. Its focus is upon theinstitutional components that affect banking'sability to succeed in ecological and economicterms. The study is intended to serve as acomprehensive reference for regulators,wetland developers, environmentalists, landowners, resource agencies, and othersinterested in wetland mitigation banking as ameans of wetland management andprotection.

B. Study Methodology

1

1 Includes information from a survey conducted byCorps of Engineers districts (in February 1992) as partof the National Wetland Mitigation Banking Studymanaged by the Corps of Engineers Institute forWater Resources (IWR).

Wetland Mitigation Banking

2

contacts. The information was compiled and understanding of current law is essential to anverified in July 1992. Relevant documents analysis of wetland mitigation banking and towere obtained on the existing and proposed any attempt to design an effective bankingbanks, including permits, memoranda of system. Chapter Three examines wetlandunderstanding, plans, maps, financial mitigation banking from the perspective ofinformation, and correspondence. The ecology and identifies the structural issuesdetailed case study of 22 banks as part of the raised by ecological factors.IWR National Wetland Mitigation BankingStudy also provided valuable information. Chapters Four through Nine analyze the

ELI also identified and collected federal banks: Chapter Four - bank organization andagency policies on wetland mitigation banking, enabling instruments; Chapter Five - types ofand wetland planning information -- including mitigation allowed for banking; Chapter Six -state wetland plans and other plans that selection of mitigation sites; Chapter Seven -address wetlands (such as coastal zone mitigation credit valuation methods; Chaptermanagement plans and state comprehensive Eight - preventing and correcting mitigationoutdoor recreation plans). failures and structuring long term land

As part of the National Wetland financing. These are the essential buildingMitigation Banking Study, IWR requested ELI blocks in all wetland mitigation bankingto supplement the information available on schemes.existing and proposed wetland mitigationbanks, through examination of a number of Chapter Ten places wetland mitigationpotential analogues to wetland mitigation banking in the context of land use and wetlandbanking. After examining a variety of possible planning. Finally, Chapter Eleven offers someanalogues, that might have relevance to the conclusions.structuring of mitigation banks, ELI concludedthat none shed any significant additional light Appendix A is an inventory of all existingon mitigation banking -- either because the wetland mitigation banks and all knownanalogy was not very close (as in the case of proposed banks. Appendix B is a detailedcredit unions, and air emissions trading), or matrix of statistical information on the existingbecause the outcomes were just as uncertain banks. Appendix C summarizes extant federal(as in the case of habitat conservation plans policies and guidance documents concerningunder the federal endangered species act). wetland mitigation banking.

The study focused primarily on the The report concludes with twoinstitutional components of wetland mitigation bibliographies: a comprehensive bibliographybanking programs. If banks are to serve as a of the literature on wetland mitigation banking,viable instrument of wetlands policy, banks and a supplemental bibliography of selectedmust be structured to succeed in both literature on related topics such as wetlandeconomic and ecological terms. restoration and mitigation.

C. Organization of the Report D. Definitions

This chapter introduces the Because wetland mitigation banking hasmethodology and defines the concepts used inthe study. It also summarizes statisticalfindings concerning the current array of banks.Chapter Two reviews the regulatory contextfor compensatory mitigation. An

institutional components of wetland mitigation

management; and Chapter Nine - bank

been developed ad hoc, there are no fullysanctioned or consistent definitions of terms.ELI here defines a number of the moreimportant terms used in this study. Thesedefinitions are based either upon commonly


3

used definitions [e.g., Association of StateWetland Managers 1992, NRC 1992] or uponour analysis of practice in the field. In short,these definitions are intended to be practicalrather than prescriptive; regulators may decideto adopt different definitions in order toimplement differing policy choices, asdiscussed in this study.

Mitigation Bank means a system inwhich the creation, enhancement,restoration, or preservation of wetlandsis recognized by a regulatory agency asgenerating compensation creditsallowing the future development of otherwetland sites.2

Onsite Mitigation means creating,enhancing, or restoring adjacentwetlands in an amount sufficient tomitigate for the specific developmentproject needing regulatory approval butnot producing "surplus" compensationcredits available for use in mitigatingother activities.3

In Lieu Fee System means a programin which a regulatory agency collectsfees in lieu of requiring a developer tocompensate for wetland losses throughonsite mitigation or acquiring creditsgenerated by a mitigation bank. Thefees are accumulated for use in futuremitigation projects by the agency. Inlieu fee systems were not analyzed inthis study.

Compensation Credit means the unitof wetland value that is recognized asthe basis for comparing the destroyedwetland to the banked wetland offeredin compensation. Credits areexpressed in units such as acres,habitat units, or numbers.

Creating wetlands means to alterupland environments or shallow aquaticenvironments to produce wetlands.

Restoring wetlands means to returnwetland values and functions to aformer wetland or degraded wetlandwhere human or natural activities havediminished or destroyed such valuesand functions.

Enhancing wetlands means to alter anexisting wetland to add, or increase,particular wetland values and functionsto levels not present under previousnatural conditions, or to slow the naturalimpairment of existing values andfunctions.

Preserving wetlands means to providelegal protection to natural wetlands thatwould otherwise be lost to lawfulactivities.

In the literature these terms are notalways defined consistently; in particular thereis frequently disagreement concerning thedistinction between restoration of wetlandsand enhancement of wetlands. We regardthese functions as similar, but note thatrestoration places a wetland in a priorcondition while enhancement may produce anew condition in a wetland.4

In some cases, the future development activities2

to be compensated for by the bank are alreadyidentified. In others, the credits are generatedspeculatively to compensate for as yet unspecifieddevelopment activities.

Onsite mitigation is the most common type of3

compensatory mitigation. It is sometimes erroneously into jurisdictional wetland status, reserving the termcalled "concurrent mitigation" because of the usual "enhancement" for activities that improve already-practice of allowing the compensation activity to occur jurisdictional wetlands. However, thisat the same time as (or after) the development activity, overemphasizes the regulatory rather than thebut "concurrent" is really a timing issue. Onsite ecological regime, and produces greater overlapmitigation may be advance mitigation. between the definitions of restoration and creation - a

Some definitional schemes suggest that4

"restoration" should apply to activities that bring land


4

Some definitions of "wetland mitigation study for lack of pursuit, failure to construct, orbanking" [e.g. Association of State Wetland lack of sufficient water to generate credits.Managers 1992] do not identify "preservation"as a mechanism that a mitigation bank may The 46 banks are located in 17 states.use to generate compensation credits, Eleven are located in California, whichpresumably because this would conflict with recognizes mitigation banking specifically incompensation as a means toward "no net state law and regulations. Eight are located inloss" of wetlands. Nevertheless, in practice, Florida, all but one in the Southwest Floridasome entities operating as mitigation banks Water Management District (SWFWMD). Thewith the blessing or acquiescence of one or SWFWMD developed an approach to advancemore regulatory agencies do use this mitigation for developers and localmechanism. governments with repeated mitigation needs

E. Wetland Mitigation Banks: a CurrentInventory

ELI identified existing and proposedbanks using a cut-off date of July 31, 1992, toassure consistency in the data. We definedexisting banks as either (1) having a signedmemorandum of understanding or similarinstrument (e.g. permit) rendering it "open forbusiness" or (2) having already issued creditswith the acquiescence of one or moreregulatory agencies. Thus, for purposes ofthis study, the essential characteristic wasregulatory recognition that mitigation couldoccur through use of the bank.

The information on proposed banks isas complete as possible but undoubtedlyexcludes some proposed banks. Existing andproposed banks are identified by location andtype in Appendix A. Statistical informationabout existing banks is summarized inAppendix B.

1. Number and Type of WetlandMitigation Banks

There are only 46 existing wetlandmitigation banks in the United States. Four ofthe existing banks -- Port of Los Angeles-Batiquitos Lagoon (CA), Mud Lake (ID),Washoe Lake (NV), and Northlakes Park (FL)-- were in suspended status at the time of the

5

that produced these single-user banks. Otherwater management districts in the state havebegun to examine the SWFWMD approach,and the state Department of EnvironmentalRegulation recently authorized its first wetlandmitigation bank. California and Florida lead inthe number of existing wetland mitigationbanks primarily because developmentpressures in both states were significantthroughout the 1980s and state or localregulators were willing to experiment with theconcept. No other state has more than 4existing banks (although the MinnesotaHighway bank has over 40 mitigation sites);and there is no consistent federal policytoward banking that would have encouragedits wider use.

Nearly seventy-five percent of theexisting banks are state highway banks, portauthority banks, or local government banksproviding mitigation for public works projects.Indeed, twenty-two of the 46 banks areoperated by state departments oftransportation to mitigate for highwayconstruction.

Six banks are controlled by privatedevelopers and used solely for advancemitigation of their own proposed projects.Only one existing bank is a privately owned

distinction that is of greater practical importance in the several multiple-site state highway banks as multiplefield. banks.

The First Phase Report of the National Wetlands5

Mitigation Banking Study (conducted by IWR)recognized 44 banks in 1992. The difference islargely attributable to that report's recognition of


5

bank offering credits for commercial sale to credits for general sale. The Walt Disneythe general public -- Fina LaTerre (LA). World (FL) proposed bank at Walker Ranch, inHowever, Fina LaTerre uses the majority of its consultation with regulators, discarded thecredits for mitigation of its own oil and gas bank approach and instead converted to aactivities and to maintain ownership of its large-scale advance mitigation effort forproperty. Three others are publicly owned, or identified projects (e.g., project-specific, offsitenonprofit-agency owned, banks offering mitigation). The Weyerhaeuser North Spitcredits for general sale; these are Bracut mitigation project, which we had not classedMarsh (CA), Mission Viejo-ACWHEP (CA), as a proposed bank because it appeared to beand Astoria Airport (OR). onsite, project-specific mitigation), apparently6

ELI's research identified 64 additional as a bank."proposed" banks known to regulators at thetime of the study. These ranged from banksthat were simply awaiting signatures on a finalmemorandum of understanding (MOU) orpermit with a regulatory agency, to banks thathad been proposed to regulatory authoritiesbut not reviewed.

Of the 64 proposed banks identified in1992, 15 are private entrepreneurial banksproposing to offer credits for commercial salegenerally, and 17 are state or localgovernment banks proposing to offer creditsfor commercial sale generally. The remainder(public and private) are proposing to reservecredits for their own future mitigation needs.Thus, at least among proposed banks, thepercentage proposing to offer credits forcommercial sale is substantially higher thanthat among existing banks (50%, in contrastwith 9% for existing banks). It remainsuncertain whether regulatory requirementsand scrutiny will alter this proportion.

The list of "existing" and "proposed"banks is understandably somewhat dynamic.For example, since the July 31, 1992 cut-offdate, many banks have been implemented.One of the proposed banks, Millhaven (GA),received its § 404 permit from the Corps ofEngineers on December 18, 1992; it operatesas a privately owned commercial bank offering

now will generate surplus credits and operate

2. Mitigation Allowable and CreditValuation

Most of the 46 existing banks recognizewetland restoration or enhancement as thebasis for compensation credits, althoughsome also recognize wetland creation. Onlytwo of the 46 existing banks use preservationalone as a basis for compensation. However,10 banks recognize preservation as oneamong several types of allowablecompensation activities.

Although the 46 existing banks use avariety of credit valuation methodologies, 15 ofthem use habitat-based methods (about 31%)and 12 use acreage (about 26%). Theremainder use versions of multiple functionvaluation schemes, best professionaljudgment, or idiosyncratic systems.

Most existing banks have beenapproved with compensation ratios of 1:1 orhigher. This means that the developer mustprovide one or more banked wetlandcompensation credits for each correspondingunit of impact to the converted wetland. Theapproach is designed to produce no net loss(with some margin of safety), or even somenet gain. Some of the banks have slidingcompensation ratios based on the attainmentof certain success criteria -- thus, a fullyfunctioning banked wetland may be authorizedto provide credits for use at a lower ratio (e.g.1:1) than a partially functioning bankedwetland (e.g. 5:1).

Subsequent to this inventory, several privately6

developed banks that offer credits for sale have beenpermitted. These include the W.E.T., Inc. bank (alsoknown as the Millhaven, GA bank) and the FloridaWetlandsbank.


6

F. The Future of Wetland MitigationBanking

Wetland mitigation banking does notnow serve as a major instrument of wetlandspolicy. There are few wetland mitigationbanks in existence and nearly all are single-user banks -- public or private developersperforming their own mitigation in advance.Virtually all are ad hoc arrangements betweendevelopers and regulators willing to ventureinto uncharted territory.

Consequently, the universe of existingbanks does not provide sufficient informationon which to evaluate the potential utility andperformance of mitigation banking. Currentexperience must be supplemented by analysisof the components of mitigation banks andhow they might operate. See Chapters Fourthrough Nine of this study.

Wetland mitigation banking's futureutility depends upon two developments: (1) aclear definition by regulators of banking's rolein meeting wetland protection objectives, and(2) careful attention to banking's institutionalcomponents.

First, wetland mitigation banking onlymakes sense in the context of a coherentregulatory system. Wetland compensationcannot perform precisely like a traditional free-market good. Demand for compensatorymitigation exists only because it is agovernment-imposed condition on wetlanddevelopment. Supply will exist only where thedemand can be anticipated. Where thegovernment clearly identifies its objectives, itbecomes possible for wetland developers and

prospective wetland restorers to anticipateand meet the need for wetland mitigation.Otherwise, ad hoc arrangements allowing theuse of offsite mitigation or restricting its useare unlikely either to produce good ecologicalresults or to encourage mitigation banking.

Critical in this context is the relationshipbetween mitigation banking and onsitemitigation. A policy initiative that deals withone but not the other will likely produceunintended consequences. For example, ifthe conditions for mitigation banking aredefined by regulators in great detail inguidance documents or regulations, butcorresponding provisions are not developedfor onsite mitigation, mitigation choices will bemade based on these disparities rather thanon what will produce the best ecologicalresult. This may produce poor economic andecological outcomes. Any rational regulatoryattempt to frame the use of mitigation bankingmust, therefore, deal with onsite mitigation.

Second, attention to the institutionalcomponents of wetland mitigation bankingschemes is essential. Wetland mitigationbanking can serve as a powerful ecologicaltool, foster land development activity whilesubordinating ecological goals, or fail to serveeither ecological or economic goals. While nosingle model of wetland mitigation banking isappropriate for all settings and all wetlandtypes, nevertheless, some common featuresof successful banking schemes can beidentified. Future banking efforts must begrounded in a fuller understanding of thestrengths and shortcomings of bank design.

7

CHAPTER TWOTHE REGULATORY CONTEXT

FOR WETLAND MITIGATION BANKING

This chapter sets out the regulatory vegetation typically adapted for life incontext in which wetland mitigation banking saturated soil conditions." Once an area hasoperates. It examines the laws, regulations, been identified as a wetland, it is necessary toand policies that give rise to a requirement for determine whether it is a "water of the Unitedmitigation in the form of substituted wetlands. States." The courts generally have interpretedThe chapter initially discusses the background the term broadly to include all waters, theof § 404 of the Clean Water Act, the primary degradation or destruction of which couldsource of federal regulatory jurisdiction over affect interstate commerce.wetlands. Next, it identifies the sources andevolution of federal mitigation requirements. Section 404 regulates "discharges" ofThird, it examines state wetland regulation "dredged or fill material" to waters of theschemes that operate independently of the United States. Activities that do not involve afederal § 404 program. discharge, but that might otherwise destroy or

After setting out the regulatory context, under § 404. In addition, § 404(f) exemptsthe discussion returns to the specific § 404 certain discharges from the permitdeterminations that lead to compensatory requirement discussed below -- such asmitigation, including the "sequencing" discharges from normal, ongoing farming,requirement. Sequencing requires two steps ranching, and silviculture, unless they convertbefore conversion of a wetland will be allowed a wetland to a new use and impair the flow orto occur with compensatory mitigation: circulation of the waters of the United Statesavoidance of the wetland conversion, and or reduce the reach of such waters.minimization of unavoidable losses. Thechapter concludes with a discussion of the Applicants wishing to discharge dredgedimplications of the current regulatory scheme or fill material to wetlands or other waters offor wetland mitigation banking. the United States must first obtain

A. Regulatory Requirements

1. Over view of Section 404 of theClean Water Act

Section 404 was enacted as part of theFederal Water Pollution Control ActAmendments of 1972. Since 1972, § 404 hasevolved into the major federal programregulating activities in the nation's wetlands.By its terms, § 404 regulates discharges ofdredged or fill material to wetlands and otherwaters of the United States. The § 404regulations define wetlands as "those areasthat are inundated or saturated by surface andgroundwater at a frequency and durationsufficient to support, and that under normalcircumstances do support, a prevalence of

degrade wetlands, are not currently regulated

authorization from the U.S. Army Corps ofEngineers (Corps), either through issuance ofan individual permit or as authorized under ageneral permit. Section 404(e) authorizesgeneral permits for categories of activities thatare similar in nature and will have onlyminimal adverse environmental impact.

Because of the historical role played bythe Corps in regulating dredging and otheractivities in navigable waters, Congress gaveit the principal job of administering the § 404permit program. At the same time, Congressgave EPA authority to, among other things,establish the standards the Corps would useto issue permits (the so-called § 404(b)(1)Guidelines), as well as the power to vetopermits issued by the Corps (§ 404(c)).

The Regulatory Contextfor Mitigation Banking

8

2. Jurisdictional Issues

Initially, the Corps did not implement§ 404 as a wetland protection statute. Thelanguage of the statute required a permit forany "discharge of dredge or fill material into Bayview Homes. In Riverside, a developerthe navigable waters." The term "navigable7

waters" was defined, somewhat elliptically, tomean "waters of the United States." Despite8

legislative history indicating a congressionalintent to extend the reach of federaljurisdiction to the limits of the CommerceClause, the Corps adopted a much narrowerdefinition of waters of the United States thatdid not include wetlands. A lawsuit ensued,and in Natural Resources Defense Council v. saturation. The Court, however, stoppedCallaway, the court held that the Corps was9

required to promulgate new regulationscovering wetlands. In response, the Corpsadopted a phased approach, which graduallybrought wetlands under regulation by July,1977.

Congress essentially ratified thisregulatory scheme in the 1977 amendments tothe Clean Water Act. As a compromise,however, the amendments created severalstatutory exemptions to the permitrequirement. To provide additional10

regulatory flexibility, Congress also authorizedthe Corps to issue general permits for classesor categories of activities deemed to haveminimal cumulative environmental impact.These permits are discussed in detail inChapter Ten.

Corps and EPA regulations define awetland as an area that is "inundated orsaturated by surface or groundwater at afrequency and duration sufficient to support,

and that under normal circumstances doessupport, a prevalence of vegetation typicallyadapted for life in saturated soil conditions."11

This regulatory definition was upheld by theSupreme Court in United States v. Riverside

12

argued that a wetland near Lake St. Clair wasnot subject to federal control because it wasnot periodically inundated by a navigablewater body. The Court rejected this argument,holding that as long as there was somehydrologic connection between a wetland anda navigable water body, the wetland wassubject to § 404 regardless of the source ofthe water (i.e., rainfall) that caused the

short of addressing the more difficult issue ofwhether "isolated wetlands," i.e., those with nohydrologic connection to navigable waters,would be covered.

Another significant issue has to do withthe methodology by which wetlands aredelineated in the field. There have beenseveral attempts to develop a uniformmethodology for wetland delineation. TheCorps produced a Delineation Manual in 1987,but EPA, the U.S. Fish and Wildlife Service(FWS), and the Soil Conservation Service (foruse in implementing the "swampbuster"provisions of the 1985 Food Security Act)each had their own methodologies foridentifying and delineating wetlands. A desirefor consistency led to the development of the1989 Federal Wetland Delineation Manual,which was jointly issued by the Corps, EPA,FWS, and the Soil Conservation Service. The1989 manual triggered a storm of protest fromfarmers, developers, mining companies, andregulated landowners who felt that it greatly

33 U.S.C. § 1344(a).7

33 U.S.C. § 1362(7).8

392 F. Supp. 685 (D.D.C. 1975).9

E.g., 33 U.S.C. § 1344(f) (exemption for normal10

agricultural and silvicultural practices).

33 C.F.R. § 328.3(b); 40 C.F.R. § 230.3(t).11

474 U.S. 121 (1985).12


9

expanded the scope of the § 404 program. the jurisdictional scope widens and additional13

In response, the Bush Administration wetland impacts could be expected to occur,formed a task force, which in 1991 produced thereby increasing the demand fora set of proposed revisions to the 1989 compensatory mitigation and potentially formanual. This time the dissension came from mitigation banks.conservation groups, wetland scientists, andseveral states, who argued that the revisionswould exclude millions of acres of valuablewetlands, including areas such as the FloridaEverglades and the Great Dismal Swamp. Toevaluate these claims, the 1991 revisionswere "field-tested" around the country. Theresults of the field tests indicated significantproblems with the proposed revisions.Meanwhile, Congress mandated, through anappropriations rider to the Water ResourcesDevelopment Act of 1992, that the Corps usethe 1987 Delineation Manual until a new onecan be developed. In January 1993, EPA alsoadopted use of the 1987 Manual to assureconsistency. In the meantime, Congressauthorized a study by the National Academy ofSciences on wetland delineation methods.

3. Implications for Mitigation Banks

These jurisdictional issues obviously areimportant to the overall § 404 program,including the mitigation issue. If the "no netloss" goal recommended by the NationalWetlands Policy Forum is to be achieved, thecost of doing so will be determined in part bythe physical extent of the wetland resourcethat must be maintained and replaced aslosses occur.

It is also important to note that changesto either the geographic scope of jurisdictionor the activities regulated by the § 404program are likely to have an impact on themarket for mitigation banks. If, for example,

areas are brought under jurisdiction, additional

B. Sources and Evolution of FederalMitigation Requirements

1. The Fish and WildlifeCoordination Act

One of the earliest federal statutes torequire mitigation for habitat loss is the Fishand Wildlife Coordination Act, originally14

passed in 1934, and strengthened bysubsequent amendments in 1946, 1958, and1965. The Act applies to bothcongressionally-authorized and federally-permitted "water resource developmentprojects," and specifically to issuance of § 404permits. It requires the Corps to "consult" withFWS and to consider FWS' recommendationsfor avoiding or compensating for habitat loss,but it does not require the Corps to adoptthose recommendations.

As a result of its various coordinatingand consulting roles under the CoordinationAct, the Endangered Species Act, and other15

laws, FWS has developed and published itsown comprehensive mitigation policy. The16

FWS policy creates four resource categoriesand ranks habitat according to its scarcityvalue, with "unique and irreplaceable" habitatreceiving highest priority. The policy thenprescribes a mitigation planning goal rangingfrom "no loss of existing habitat value" to"minimize loss of habitat value."

Much of the criticism came from the agricultural13

community. The Corps responded by issuing theRegulatory Guidance Letter on Prior ConvertedCropland (RGL 90-7). The effect of this RGL was toexclude from regulation large areas of previouslydrained wetlands that otherwise might have met thecriteria of the 1989 Manual.

16 U.S.C. §§ 661-667e (1976).14

16 U.S.C. § 1531 et seq.15

46 Fed. Reg. 7644 (Jan. 23, 1986).16


10

2. NEPA and the CEQ Regulations

Passage of the National EnvironmentalPolicy Act (NEPA) in 1969 ushered in a new17

era of environmental planning and ecologicalstewardship. Over the years, courts havebeen vigorous in enforcing NEPA's proceduralrequirement of the preparation ofenvironmental impact statements to considerthe environmental effects of "major federalactions" including § 404 permits, and ways tominimize any resulting harm.

In 1978, the Council on EnvironmentalQuality (CEQ) published regulations, bindingon all federal agencies, which spelled out theprocedures required to implement NEPA,including mitigation responsibilities. The As mentioned, Congress assigned EPA18

CEQ regulations define mitigation as follows: the job of developing the substantive criteria

"Mitigation" includes: environmental impact of proposed discharges

(a) Avoiding the impact promulgated interim regulations in 1975 andaltogether by not taking a final regulations in 1980. The § 404(b)(1)certain action or parts of Guidelines are a critical component of thean action. § 404 program. The Corps cannot issue an

(b) Minimizing impacts by proposed project complies with the Sectionlimiting the degree or 404(b)(1) Guidelines. In terms of mitigationmagnitude of the action requirements, the Guidelines state that "noand its implementation. discharge of dredged or fill material shall be

(c) Rectifying the impact by the proposed discharge which would haverepairing, rehabilitating, or less adverse impact on the aquaticrestoring the affected ecosystem." Under the Guidelines'environment. alternatives analysis, consideration is given to

(d) Reducing or eliminating environmentally damaging "practicable"the impact over time by alternative. An alternative is practicable if it ispreservat ion and available and capable of being accomplishedmaintenance operations after taking into consideration cost, existingduring the life of the technology, and logistics in light of overallaction.

(e) Compensating for theimpact by replacing orproviding substituter e s o u r c e s o renvironments.19

Like the Fish and Wildlife CoordinationAct, NEPA is a procedural statute; it does notmandate an outcome. Thus, NEPA does notrequire that agencies adopt any mitigationmeasures at all. Nevertheless, the processand the public visibility that it brings domotivate agencies to incorporate mitigationconditions into their permit decisions.

3. The § 404(b)(1) Guidelines

that the Corps uses to evaluate the

under § 404. Pursuant to § 404(b)(1), EPA

20

individual permit unless it determines that the

permitted if there is a practicable alternative to

21

whether the proposed discharge is the least

42 U.S.C. §§ 4321-4335.17

40 C.F.R. §§ 1500-1508. 40 C.F.R. § 230.10(a).18

40 C.F.R. § 1508.20.19

These regulations are now codified at 4020

C.F.R. § 230.

21


11

project purpose. mitigation will occur throughout

A more stringent alternatives analysis is process and includes avoiding,required when a "non-water dependent" minimizing, rectifying, reducingactivity is proposed for wetlands. An activity or compensating for resourceis considered "non-water dependent" when losses. Losses will be avoidedthe activity associated with the discharge does to the extent practicable.not require access or proximity to, or siting Compensation may occurwithin, wetlands to fulfill its basic purpose. on-site or at an off-siteThe Guidelines create two rebuttable location.presumptions for "non-water dependent"activities: (1) that practicable alternative sites The regulations further provide that "allwhich do not involve discharges to wetlands mitigation will be directly related to theare available; and (2) that such alternatives impacts of the proposal, approximate to theare less environmentally damaging than the scope and degree of those impacts, andproposed project, unless clearly demonstrated reasonably enforceable."otherwise.

The Guidelines also require that a additional or different mitigation requirementspermit not be issued if the proposed discharge may be required by the § 404(b)(1) Guidelines.would: (1) violate other environmental These regulations also preceded the 1990statutes/regulations (e.g., Endangered EPA-Department of the Army Memorandum ofSpecies Act, State water quality standards); or Agreement on Mitigation ("Mitigation MOA")(2) cause or contribute, either individually or discussed below.collectively, to significant degradation ofwetlands or other waters of the United States.

Moreover, the Guidelines require thatthe discharger undertake all appropriate andpracticable mitigation in order to minimize anypotential harm to the aquatic ecosystem. TheCorps evaluates permit applications to ensurethat mitigation occurs in the followingsequence: avoidance of impacts wherepracticable through the evaluation ofalternative sites, followed by minimization ofimpacts, and finally, appropriate andpracticable compensation for unavoidableimpacts.

4. Corps Regulations

The Corps of Engineers' regulationsstate that

Mitigation is an importantaspect of the review andbalancing process on many Environmental Protection Agency and the DepartmentDepartment of Army permitapplications. Consideration of

the permit application review

22

The regulations acknowledge that

5. The 1990 Army-EPA MitigationMOA

To standardize mitigation requirementsunder the § 404(b)(1) Guidelines, the Armyand EPA entered into a Memorandum ofAgreement in February, 1990. Developed as23

a clarification of existing policy rather than thecreation of new policy, the Mitigation MOAnonetheless has had a significant impact uponthe § 404 permitting process.

The Mitigation MOA refers to the CEQdefinition of mitigation, but condenses it intothree phases: avoidance, minimization andcompensation. Further, the MOA clarifies thateach of these steps should be evaluated in

33 C.F.R. § 320.4(r).22

"Memorandum of Agreement Between the23

of Army Concerning the Determination of MitigationUnder the Clean Water Act Section 404(b)(1)Guidelines," February 6, 1990.


12

this sequence (the "sequencing requirement"). of the state including fresh water and tidalThus, permit applicants must demonstrate wetlands. Michigan, the only state to havethat they have made every reasonable effort fully assumed the federal permit programto avoid and minimize wetland losses through under § 404(g), requires permits for a widecareful location and design before range of activities, including filling, dredging,compensatory mitigation techniques such as draining and excavating in wetlands. It alsowetland restoration, creation or enhancement is possible for states in effect to partiallycan even be considered. Compensatory assume the § 404 permitting authority throughmeasures must be "appropriate and the Corps' issuance of a general permit; thispracticable." "Appropriate" mitigation is based approach is discussed further in Chapterson the ecological value of the affected Four and Ten. Still other states do not have awetland. "Practicable" is defined in § 230.3(q)of the Guidelines, and requires considerationof "cost, existing technology, and logistics inlight of overall project purposes."

The Mitigation MOA governs standard(individual) permits, including after-the-factpermits, for which applications were filed afterFebruary 7, 1990. It does not apply to generalpermits, including nationwide permits. Itspecifies a clear preference for on-site, in-kindreplacement of wetland functions and values,and establishes a minimum one-to-one ratioas a rule of thumb for replacement. Mitigationbanks are recognized as an "acceptable formof compensatory mitigation under specificcriteria designed to insure an environmentallysuccessful bank." However, the MOA notesthat simple purchase or "preservation" ofexisting wetlands will not be consideredadequate compensation except in "exceptionalcircumstances." 24

C. State Permit and Mitigation banking through agency guidance orRequirements

At least twenty states have enactedwetland management programs [WorldWildlife Fund 1992]. Like § 404, thesestatutes generally require permits for specificactivities that have adverse effects onwetlands. For example, Oregon regulatesboth filling and removal activities in all waters

25

26

permit program per se, but protect wetlandsthrough "conditional use approvals."27

Many states specify mitigationrequirements as part of their regulatoryprogram. For example, Maryland requiresapplicants to "take all necessary steps to firstavoid significant impairment and thenminimize losses of nontidal wetlands." New28

Jersey requires that every freshwaterwetlands permit contain a condition ensuringthat "all appropriate measures have beencarried out to mitigate adverse environmentalimpacts, restore vegetation, habitats and landand water features, prevent sedimentationand erosion, minimize the area of freshwaterwetland disturbance and insure compliancewith the Federal [Clean Water] Act andimplementing regulations."29

At least nine states have statutesexpressly authorizing wetland mitigationbanks; others have explicitly addressed

regulation (Table 1). Oregon enacted itsWetlands Mitigation Bank Act in 1987.30

Since this report was prepared, the Army and24

the EPA issued a Joint Memorandum to the Field (onAugust 23, 1993) on the "Establishment and Use ofWetland Mitigation Banks in the Clean Water Act §404 Regulatory Program."

See O.R.S. §§ 196.800 to 196.900 (1987).25

See Mich. Comp. Laws. Ann. § 281.705.26

E.g., Vermont Wetlands Act of 1986, Vt. Stat.27

Ann. Title 10, § 905:7, 89 (1986).

Md. Nat. Res. Code Ann. § 8-1209 (1989).28

N.J. Stat. Ann. §§ 13:9, 13-13 (1987). 29

O.R.S. §§ 196.600-196.665.30


13

Under this statute, mitigation banks must be In complying with the first step of thepublicly owned and operated, be approved by sequence (i.e., avoidance of impacts), if lessthe Division of State Lands (DSL), and meet a environmentally damaging, practicablenumber of criteria. Credits can only be used alternatives to the proposed project can befor mitigation of permit actions within the found, the fact (or the amount) of thesame "tributary, reach or sub-basin" covered environmental impact will change. Thisby the mitigation bank, and may not be used affects the need for (or the amount of)until DSL has certified them. The price of any compensation. Similarly, the second stepmitigation credit must include all of the costs (minimization of impact) will have directincurred by the state in setting up and bearing on the demand for compensation. Inmaintaining the bank. addition to the sequencing requirements,

State regulation of mitigation banks has requirements of the program often involvesthe potential both to build upon and to conflict the provision of compensatory mitigation.with federal regulatory efforts. On the one Accordingly, both requirements are worthy ofhand, state programs can require closer examination.compensation for wetlands such as priorconverted croplands, which are exemptedfrom § 404, and can more closely regulatethose wetlands that are under federaljurisdiction. For instance, the Oregon bankingstatute utilized a pre-existing statewide systemof resource values that sets variablecompensation ratios ranging from 1:1 to 6:1depending on wetland type, a factor thatreceives little weight in the federal scheme.

On the other hand, precisely becausestate programs sometimes are based ondifferent objectives, they may proveincompatible with or restrict the market forfederally-approved mitigation. It seems likelythat state banks will not be entirely successfulunless they are able to overcome or reconcileany such differences with federal agencies.Conversely, state approval of wetlandmitigation banking, particularly in the contextof a comprehensive wetland planning effort,may serve to catalyze federal approval ofcertain mitigation banks.

D. A Closer Look at the Section 404Mitigation Requirements

The requirements of the §404 permitprogram have a profound effect on howmitigation banking will operate. The mitigationsequencing requirements are particularlyimportant because under current law they 40 C.F.R. § 230.10(a).establish preconditions for compensatorymitigation, and hence for mitigation banking.

compliance with the significant degradation

1. The Sequencing Requirements

The 1990 Mitigation MOA formalized athree-step sequencing process for evaluatingwetland impacts -- avoid, minimize,compensate. The first step, avoidance, issynonymous with the practicable alternativestest established by the §404(b)(1) Guidelines.

The Guidelines operate from a premisethat no discharge should be allowed wherethere is a "practicable alternative . . . whichwould have less adverse impact on theaquatic ecosystem, so long as the alternativedoes not have other significant adverseenvironmental consequences." Further, in31

the case of non-water-dependent projects,i.e., those that do not need to be located in oradjacent to wetland or other special aquaticsites, the Guidelines create a presumptionthat there are practicable alternatives. Toovercome this presumption, applicants must"clearly demonstrate" that there is nopracticable alternative that would have lessadverse impact on the aquatic environment.32

31

40 C.F.R. § 230.10(a)(3).32


14

Table 1.

STATE WETLAND MITIGATION BANKLAWS and REGULATIONS (1993)

State Statutes Governing Wetland Mitigation Banking

California: Cal. Pub. Res. Code § 30233 (1991).Cal. Fish & Game Code §§ 1775-1793 (1991).

Colorado:Colo. Rev. Stat. §§ 37-85.5-101 to -111 (1991).

Louisiana:La. Rev. Stat. Ann. § 49-214.41. (1991)

Maryland:Md. Nat. Res. Code Ann. §§ 8-1209.1 (1993).

New Jersey:N.J. Stat. Ann. §§ 13.913-13 to -15 (1988).

North Dakota:N.D. Cent. Code § 61-32-05 (1987).

Oregon:Or. Rev. Stat. §§ 196.600 to .665 (1987).

Texas:1991 Tex. Sess. Law Serv. ch. 3 §§ 6.01-6.07.

Wyoming:Wyo. Stat. §§ 35-11-310 to -311 (1991).

State Agency Regulations and Guidelines Governing Wetland Mitigation Banking

California:California Department of Fish and Game, Draft Guidelines for the Establishment of WetlandMitigation Banks (July 1991).

Maine:Code Me. R. ch. 310 (June 1990).

Maryland:18:9 Md. Reg. .08.05.04.01 to .06 (1991).

Minnesota:Minnesota Department of Transportation, Guidelines for Implementation of Wetland HabitatMitigation Banking, Technical Memorandum No. 87-28-Env-2 (June 18, 1987).

New Hampshire:New Hampshire Department of Transportation, Policy on Wetlands (October 1990).

New Jersey:N.J. Admin. Code tit. 7:7A §§ 14.1 - 15.7 (1992).


15

Oregon:Or. Admin. R. §§ 141-85-240 to -262 (1984).

Wisconsin:Wisconsin Department of Natural Resources and Wisconsin Department of Transportation,Compensatory Mitigation Policy for Unavoidable Wetland Losses Resulting from StateTransportation Activities. (Amendment to the Interagency Cooperative Agreement between theWisconsin Department of Natural Resources and the Wisconsin Department of Transportation)(November 7, 1990).

The Guidelines provide that an Another difficult issue is whether thealternative discharge site is practicable if it is project purpose and alternatives should be"available and capable of being done after judged from the viewpoint of the applicant ortaking into consideration cost, existing from the viewpoint of the "public interest."technology and logistics in light of overall From a property owner's standpoint, forproject purposes." An alternative site not example, the objective may be to maximize33

owned by the applicant may be considered the dollar return on investment by, for"available" if it "could reasonably be obtained, example, building luxury townhouses withutilized, expanded or managed in order to water access; whereas from the standpoint offulfill the basic purpose of the proposed the public, the basic need for housing couldactivity." be met through development of affordable34

Another key factor is how the "basic Corps is responsible for establishing theproject purpose" is defined, which in turn will "basic project purpose" as it develops thedetermine the range of alternatives to be record for each permit review. Interpretationconsidered. Take, for example, a regional of this requirement has varied over time, aswater supply program. If the purpose is illustrated by the following individual cases.defined as "construction of a new reservoir,"the range of alternatives will be limited to In one of its earliest decisions, thestructural approaches. If, on the other hand, Corps denied a permit to the Deltonathe purpose is defined as "providing adequate Corporation for a waterfront resort complex onwater supply," a broader range of alternatives, Florida's Marco Island. The applicantincluding nonstructural alternatives, may come claimed that since its purpose was to build aninto play, with a corresponding change in integrated waterfront project, inland locationsimpact on wetlands. were not practicable. The Corps disagreed,

housing at any number of locations. The

35

viewing the purpose of the project as"housing" for which there were many alternatelocations. This independent evaluation of anapplicant's purpose fell out of favor during theearly 1980s, when the applicant's statement ofpurpose became more or less a given. Forexample, in Louisiana Wildlife Federation v.York, the applicant had purchased hardwood36

bottomlands to convert to soybean fields.

40 C.F.R. § 230.10(a)(2).33

Timing is a key consideration in evaluating the34

availability of alternative sites. In Bersani v.Environmental Protection Agency, 674 F. Supp. 405(N.D. N.Y. 1987), aff'd, 850 F.2d 36 (2d Cir. 1988),EPA interpreted "available" to mean available at thetime the applicant entered the market looking for a siteto develop a shopping mall. The Second Circuitupheld this "market entry" theory despite thedeveloper's argument that at the time he applied forthe permit, the alternative location was controlled by acompetitor.

Deltona Corporation v. Alexander, 504 F.35

Supp. 1280 (M.D. Fla. 1981).

761 F.2d 1044 (5th Cir. 1985).36


16

Opponents argued that soybeans could be size" for a housing project in that area oughtgrown elsewhere, either by the applicant or to be.someone else. The Fifth Circuit rejected thisargument, holding that the Corps had a duty to Even if an alternative is available andtake the applicant's objective into account in feasible, the Guidelines provide that it may notsetting practicable alternatives. be considered if it would have a greater

More recently, Corps policy has shifted proposed discharge. The Guidelines alsoback towards the Deltona approach. In twocases involving permit "elevations," Corps37

headquarters reversed District Engineers'decisions that were deemed too deferential topermit applicants. In the Plantation LandingResort case, the applicant wanted to build acontiguous waterfront resort complex similarto the one involved in Deltona. The DistrictEngineer determined that because onecomponent of the project, a marine terminal,was water-dependent, the entire projectshould be considered water-dependent, withthe result that upland sites were notconsidered practicable. The Corpsheadquarters overruled the District on thispoint, holding that each component of amulti-purpose project must be evaluatedseparately, and that components such ashotels, restaurants and stores were not water-dependent. The case was sent back to theDistrict to allow the applicant the opportunityto rebut the presumption that these uplandsites were not practicable for other reasons.

The Hartz Mountain case involved aresidential housing development in theHackensack Meadowlands of New Jersey.Corps headquarters again reversed theDistrict Engineer on the ground that he hadplaced too much emphasis on achieving theapplicant's objective. Headquarters instructedthe District to make its own independentdetermination of what the housing need wasin the region and what the "minimum feasible

impact on the aquatic system than the

allow for the consideration of other adverseenvironmental consequences in judgingwhether an otherwise feasible alternative isthe least environmentally damaging. In somecases, this sets up a balancing test whichweighs the specific wetland impacts of aproposed discharge against the broaderenvironmental impacts of the alternatives.

The second step of the mitigationsequence, minimization, requires applicants tolook for ways to re-design or phase projects toreduce wetland impacts. For example, aparking lot might become a parking garage; acauseway might become a bridge. Subpart Hof the Guidelines lists a number of actions tobe evaluated in the context of minimizing theadverse effects of discharges. The third38

step, compensation, requires replacement ofunavoidable losses of wetland functions andvalues to the extent practicable. This iswhere, under current policy and practice,mitigation banking comes into play.

The sequencing requirements apply toall individual permits, regardless of the type orecological value of the affected wetland.39

This has been criticized by permit applicantsas unduly restrictive and costly. Others arguethat sequencing is impractical in areas wherewetlands are abundant (e.g., Alaska) andnon-wetland alternatives are scarce.Proponents of sequencing counter that

Pursuant to memoranda of agreement with the The Guidelines provide, however, that37

Corps under § 404(q), EPA, the Department of "[a]lthough all requirements in § 230.10 must be met,Interior, or the Department of Commerce may the compliance evaluation procedures will vary to"elevate" regional and national policy issues, or reflect the seriousness of the potential for adverseindividual permit decisions that involve aquatic impacts on the aquatic ecosystems posed by specificresources of national importance, for review by the dredged or fill material discharge activities." 40 C.F.R.agency's national office. § 230.10. See also §§ 230.6(a), (b).

40 C.F.R. § 230.70.38

39


17

compensatory mitigation does not always EPA Regions I, II, and III are developingsucceed and that -- to the extent that out-of- draft guidelines jointly with the Corps Northkind or out-of-watershed mitigation is allowed Atlantic Division and New England Division,-- it involves "apples to oranges" comparisons Region V of the FWS, and the Northeastof inherently incommensurable wetland Region of the National Marine Fisheriesfunctions and values. Service. The purpose of this document is to

The Mitigation MOA provides for operation of wetland mitigation banksdeviations from the sequencing requirements associated with highway construction. Oncewhere the requirements have been again, the agencies cite the 1990 Mitigationincorporated in a Corps and EPA approved MOA and require that sequencing be appliedcomprehensive plan, or where necessary to before mitigation banking is considered.40

avoid environmental harm (e.g. from saltwater intrusion or chemical contamination), or Similarly, the Galveston (Texas), andwhen EPA and the Corps agree that a Omaha (Nebraska) District Offices of theproposed discharge "can reasonably be Corps of Engineers have preparedexpected to result in environmental gain or interagency guidelines for the use of mitigationinsignificant environmental losses." banks in the § 404 permitting process. The

Since the distribution of the 1990 provide that all projects must follow the five-Mitigation MOA, several EPA, Corps, and step sequencing requirement set forth in theFWS regional offices have drafted or issued CEQ regulations, and incorporate sequencingguidelines for establishment and operation of from the §404(b)(1) Guidelines. Thewetland mitigation banks as an acceptable Galveston guidelines which have beenform of compensatory mitigation. EPA Region finalized adopt the "avoidance, minimization,IX issued final guidelines on December 20, and compensation" language of the Mitigation1991. These guidelines reference the MOA.EPA/Army MOA and reinforce the requirementthat all impacts must be avoided or minimized On August 23, 1993, the Army and EPAbefore compensatory mitigation is considered. issued a Joint Memorandum - CorpsThey also identify specific situations where Regulatory Guidance Letter (93-2). Thecompensatory mitigation in the form of memorandum endorsed the establishmentmitigation banking is appropriate. These and use of wetland mitigation bank's under theinclude water- dependent projects, projects Section 404 program. It specified that wetlandinvolving small unavoidable impacts, linear mitigation banks should generally be in placeprojects such as highways which involve many and functioning before credits may be used tominor impacts, and routine repair and offset permitted wetland losses. However, itmaintenance of public structures such as the may be appropriate to allow incrementalcleaning of drainage ditches. EPA Region IV distribution of credits corresponding to thehas released draft guidelines that are similar appropriate stage of successful establishmentto those issued by Region IX. The most of wetland functions. The Memorandum alsosignificant difference is that the Region IV prescribed development of a formal writtenguidelines include activities authorized under agreement concerning creation of the bankgeneral permits in the list of projects generally and use of a Section 404 permit for thisappropriate for mitigation banking. purpose.

provide guidance on the development and

Omaha guidelines which are draft expressly

2. Significant Degradation

The Guidelines prescribe that, even ifthere is no practicable alternative to theproposed discharge, a discharge may be See Chapter Ten.40


18

prohibited if it would "cause or contribute to The uncertainty resulting from thissignificant degradation of the waters of the normal market risk is then compounded byUnited States." They give four examples of uncertainty about the regulatory regime. Insituations where "significant degradation" may particular, in the absence of clearly-stated,occur: easily-measurable performance standards,

1. Significant adverse effects upon whether the compensatory measures willmunicipal water supplies, plankton, succeed to the satisfaction of regulatoryfish, shellfish, wildlife and special agencies. There also is a widespreadaquatic sites; perception that the federal agencies are not

2. Food chain contamination; viable from a policy standpoint. The recent

3. Significant loss of habitat or water mentioned above may serve to provide clearerquality functions; signals to the regulated community. Issues of

4. Significant adverse effects upon discussed further in Chapter Nine.recreation, aesthetic and economicvalues. Under the current regulatory approach,41

In order to comply with this provision of conservation generally comes about in at leastthe Guidelines, permit applicants frequently four ways. First, projects affecting wetlandsprovide compensatory mitigation as a means may not be proposed because the regulationsof off-setting the environmental impacts of the send a signal to the marketplace discouragingproposed activity. This has obvious relevance such development. Second, projects may beto mitigation banking. withdrawn or significantly reworked as a result

E. Effect of the Regulatory Scheme onMitigation Banking

Cost and uncertainty appear to be thebiggest impediments to widespread use ofmitigation banks. Replacing complexecological functions through wetlandrestoration, enhancement or creation canquickly become expensive as the cost of thefunctional assessment, purchase of interestsin land and perhaps water, construction,planting, maintenance and monitoring isadded up. While this also is true of onsite,project-specific mitigation, it is even moreimportant for banks, which usually areattempting mitigation at a much larger scalewith some degree of uncertainty about when,or even if, credits will be used.

bank operators run the risk of not knowing

fully in agreement on whether banking is

publication of the regional guidelines

regulatory risk and bank financing are

where there is little banking, wetland

of the public review and sequencing process,including evaluation by federal and stateagencies. Third, a small percentage (lessthan 5% per year nationally) of permitapplications are denied. Fourth, permits maycontain mitigation conditions. (The trackrecord of such permit conditions has not beenimpressive, however. As documentedelsewhere in this report, there is a high rate ofnoncompliance and failure of compensatorymitigation projects associated with individualpermits.) If the ecological arguments favoringa threshold size for mitigation projects arecredited, banking may produce much betterperformance under the fourth factor. Bankingmay also operate consistently with the firstthree factors.

The following chapters describe howwetland mitigation banks have been and couldbe structured given the present regulatoryregime.

40 C.F.R. § 230.10(c)(1)-(4).41

19

CHAPTER THREEECOLOGICAL ISSUES IN

WETLAND MITIGATION BANKING

Wetlands are highly diverse, ranging Wildlife Service, distinguishes seven majorwidely in size, species composition, species wetland types associated with differentrichness, topography, hydrology, productivity, regions and the major wetland systems withinappearance, and in the functions and values those regions. See Tables 2 and 3. Thesethey provide. Wetlands straddle two different include estuarine emergent, estuarineworlds -- the terrestrial and the aquatic, forested/scrub/shrub, estuarine non-encompassing properties of each [National vegetated, palustrine forested, palustrineResearch Council 1992]. Flood control, emergent, palustrine shrub, and palustrineerosion control, sedimentation and pollutant non-vegetated wetlands.filtration, habitat for diverse and rare wildlife,aquifer discharge and recharge are all There is great variability among wetlandfunctions and values magnified in wetlands types. Isolated prairie potholes of the upperbecause of their nexus between wet and dry. midwest bear little resemblance to the lush42

Awareness of wetland functions and zones of the Atlantic coast. Acidic bogs inunderstanding of the processes necessary for Massachusetts have virtually no species inwetlands to function in the landscape are common with Massachusetts coastal orcritical for any program of mitigation banking. estuarine wetlands only 20 miles away. AndThese provide the foundation for analyzing the the functions wetlands perform are diverseinstitutional banking choices considered in and dissimilar. See Table 4. A wetland thatChapters 4 through 10. provides erosion control or flood storage may

A. Ecological Considerations AffectingBanking

1. Wetland Types

Wetlands vary substantially from regionto region in type and in the functions theyprovide. Scodari [1992], simplifying thetaxonomic system used by the U.S. Fish &

43

grasses of the Everglades or the intertidal

have little significance for habitat orgroundwater recharge, for example. Thesedifferences make comparisons (andcompensation tradeoffs) among differentwetland types quite difficult. Even identicalwetland types may provide different levels offunctions and values.

Wetland functions can be defined as those42

duties wetlands perform for the ecosystem, regardlessof how these are viewed by human society. Functionsinclude storm-wave buffering, biomass production,groundwater discharge, wildlife habitat and food, andmany more. Values are those duties wetlandsperform that are considered beneficial to society, andcan overlap with functions. These can includewetlands' use as spawning grounds and nurseries for wetland types that are sometimes distinguished, suchcommercially important fish, contributions to as riparian systems, and omit some that are primarilysedimentation control, aesthetic values, and others. deep water habitats - e.g., marine systems.

These seven categories combine some43

Ecological Issues In Wetland Mitigation Banking

From Scodari 1992, Table 1.44

Represents percentage of total wetland acreage found in the conterminous United States.46

20

Table 2.

MAJOR WETLAND TYPES 44

WETLAND TYPE (% of all) DESCRIPTION46

ESTUARINE EMERGENT (4%) Tidal areas that are usually semi-enclosed by land with- Saltwater Marsh some access to open ocean and that are at least- Brackish Marsh occasionally flooded with freshwater runoff. Saltwater

marshes occur along coasts behind beaches or barrierislands, and in low-energy coastlines not associated withbeaches or barriers. They are characterized by soft-stemmed plants like Pacific cord grass and salt hay, butstiff cord grass often develops near open water. Brackish marshes occur along coastlines wherefreshwater from rivers and streams meets and mixeswith saltwater. They are usually dominated bymarshwater hemp, pickerelweed, arrowarum andcattail.

ESTUARINE FORESTED/SCRUB/SHRUB Tidal areas dominated by woody vegetation, mostly(<1%) young, stunted trees and shrubs. Mangrove swamps,

- Mangrove swamps which occur along the south coast of Florida, areperhaps the important type. Red mangroves usuallyoccupy lower, regularly flooded areas and blackmangroves occupy higher areas.

ESTUARINE NON-VEGETATED (<1%) Tidal areas that occur seaward of tidal marshes and- Intertidal flats mangrove swamps, at river mouths, and along rocky- Subtidal beds coasts. Intertidal flats are usually muddy, sparsely

vegetated and flooded regularly by tides. Subtidalaquatic beds are continuously submerged andcharacterized by plants that grow on or below surfacewaters.

Ecological Issues InWetland Mitigation Banking

WETLAND TYPE (% of all) DESCRIPTION46

21

PALUSTRINE FORESTED (50%) Mostly non-tidal freshwater areas characterized by- Wooded swamps woody vegetation at least 20 feet tall that can tolerate- Bottomland hardwood swamps prolonged wet conditions, including willow, red maple- Riparian wetlands and white cedar in the north; bald cypress, tupelo gum

and oak in the south. Wooded swamps are usuallyfound along rivers and streams and can have standingwater for half the year. Bottomland hardwood swampsusually occur in floodplains along rivers and streams inthe southeast and are inundated only during floodevents. Riparian wetlands are found along streams andupland floodplain terraces in the western states and areoften dominated by cottonwoods and sycamore. Theyare often highly integrated with other communities offlora and fauna that exist within the 100-year floodplainand are dependent upon high water tables andoccasional flooding.

PALUSTRINE EMERGENT (24%) Mostly non-tidal freshwater areas characterized by- Potholes perennial grasses and grass-like plants that grow erect- Freshwater marsh partly under and partly above water. They are found- Wet Meadows along the margins of rivers and lakes, in upland

depressions, and in seepage areas on gentle slopes. Potholes are isolated depressions that usually fill withwater during the rainy season and then dry outcompletely. They support a variety of unusual andspecialized plants.

PALUSTRINE SHRUB (15%) Mostly non-tidal freshwater areas characterized by- Bogs and fens shrubs and scrubby trees less than 20 feet tall. Bogs- Pocosins are poorly drained, acidic areas that form in shallow

depressions. They contain acid-tolerant plants such ascranberry bushes and venus fly-traps. Pocosins arebogs of the southeast that are found in broad, flatupland areas away from large streams and arecharacterized by evergreen trees and scrub-shrubvegetation.

PALUSTRINE NON-VEGETATED (6%) Represent freshwater ponds with vegetation cover of- Ponds less than 30 percent.



22

Table 3.

WETLAND TYPES BY REGIONAND MAJOR SYSTEMS 47

WETLAND TYPE REGIONS MAJOR SYSTEMS

ESTUARINE EMERGENT Gulf of Mexico ! Mississippi Delta RegionSouth Atlantic (LA, TX)Mid Atlantic ! South FloridaPacific ! Albemarle/Pamlico Sounds

(SC, NC)! Chesapeake Bay (MD, VA)

ESTUARINE SCRUB/SHRUB South Atlantic and Gulf Coasts ! South Florida mangrovesswamps

ESTUARINE NON-VEGETATED Gulf of Mexico ! Laguna Madre (TX)Mid Atlantic ! Chesapeake Bay (VA, MD)South Atlantic ! South FloridaPacific ! San Francisco Bay & Puget

Sound

PALUSTRINE FORESTED Lower Mississippi Alluvial Plain ! Bottomland hardwoodsUpper Great Lakes Basin swamps of the LowerGulf Coast Flats Mississippi Valley (MS, LA,South Atlantic Flats AR)Intermontane ! S. Atlantic wooded swamps

(FL, GA, SC)! Western riparian wetlands

PALUSTRINE EMERGENT Upper Mid-West ! Praire Pothole MarshesAtlantic Coast Flats (SD, ND, MT, MN)Gulf Coast Flats ! Nebraska Sandhills andArctic Rainwater Basin marshes.

! South Florida marshes! Alaskan tundra

PALUSTRINE SHRUB Great Lakes ! Northeast bogs (MN, ME,Atlantic Coast Flats MI)Gulf Coast Rolling Plain ! Southeast pocosins (NC,

SC, VA)



23

Table 4.

WETLAND FUNCTIONS AND OUTPUTS 48

FUNCTION OUTPUT

NATURAL PRODUCTS ! Provides commercially-used flora and fauna, includingtimber, hay, cranberries, peat, and fur-bearing animalsharvested for their pelts.

FISHERIES PRODUCTION AND ! Provides spawning, nursing, and feeding grounds andSUPPORT nutrient export for freshwater, estuarine and marine

fisheries; provides areas for commercial aquaculture.

FISH AND WILDLIFE HABITAT ! Provides nesting and feeding ground for many speciesof fish, reptiles, mammals, and birds, includingmigratory waterfowl. Supports consumptive (e.g.,hunting) and non-consumptive (e.g., nature study)recreation.

NATURAL AREAS/OPEN SPACE ! Provides aesthetic benefits and areas forarcheological, education, and research use.

FLOOD STORAGE AND CONVEYANCE ! Reduces property damage, soil erosion, the need forartificial flood control measures.

SHORELINE ANCHORING/DISSIPATION ! Protects beaches, habitats and property from erosiveOF EROSIVE FORCES effects; reduces the need to dredge navigable

waterways; maintains health of aquatic systems.

STORM WAVE AND SURGE ! Reduces property damage, beach erosion, and thePROTECTION need for artificially constructed barriers.

GROUNDWATER RECHARGE ! Supplies drinking and irrigation water, protects aquifersfrom saltwater intrusion in coastal areas.

POLLUTION ASSIMILATION/SEDIMENT ! Improves water quality, reduces pollution damage,TRAPPING reduces wastewater treatment needs.

BIODIVERSITY ! Supports a wide variety of flora, many of which arefederally listed threatened or endangered species.

ENERGY FIXATION/FOOD CHAIN ! Provides general ecological support.SUPPORT

NUTRIENT CYCLING ! Provides general ecological support.

Wetlands also differ dramatically in the them -- important considerations in the contexttime and difficulty it takes to restore or replace of mitigation and mitigation banking. A


24

bottomland hardwood in the southeastern implicates social values and goals. The issueUnited States, if cut down and drained today, requires a regulatory decision in the mitigationmight take up to 100 years or more to banking context.regenerate and fully mature [Gosselink, Lee,and Muir 1989]. In contrast, a restoredemergent wet meadow can resemble a fullyfunctional wet meadow in about three monthswith intensive management and planting[Greenhorne & O'Mara, personalcommunication], although the time to fullfunctional replacement may be considerablylonger.

Mitigation banks and, particularly,regional, state, or national banking regulationsor policies that ignore these differencesamong wetland types are likely to short-change the environment. Acre-for-acrereplacement of a bog by creating a red-mapleswamp, for example, is an unequal trade interms of rarity, time to maturity, and functions.The ecological issues thus raise a host ofinstitutional issues.

One of these is whether compensatorywetland mitigation should require "in-kind"replacement of wetland types and functions;or, if not, under what circumstances "out-of-kind" compensatory mitigation should beallowed. In-kind mitigation seeks to providethe same wetland type -- usually defined byhabitat -- that will be lost to development, andthe same array of functions generally. In-kindmitigation requires less understanding oftrade-offs because it is based on theassumption that certain wetland functions(both those understood and less wellunderstood) will follow the wetland form.

On the other hand, out-of-kindmitigation may provide a different kind ofbenefit. It may restore a locally rarer wetlandor provide more of a particularly neededfunction like flood control. It may enableregulators to replace the historic assemblageof wetlands in an area, or to "trade up" byrequiring a higher-value compensatorywetland to achieve broader watershed-enhancement or wildlife management goals.The in-kind vs. out-of-kind issue isfundamentally an ecological one that quickly

2. Wetland Locations

The functions that wetlands performare not abstract or portable. Indeed, mostwetland functions have value because ofwhere they exist in the landscape. A prairiepothole provides necessary habitat supportbecause it is in the flyway of migratorywaterfowl. A riparian wetland provides floodcontrol because of its location along a river orstream. An estuarine wetland providesnursery areas for valued species that thrive ina transitional environment between freshwaterand marine habitats.

The importance of functions in thematrix of a landscape is one of the primaryreasons that most contemporary mitigation isonsite mitigation. Many environmentalists49

and regulators have viewed onsite mitigationas preferable because, at least in theory, itreplaces the same values and functions aswere lost to development, and it does so inthe same location. Not only is the lossthereby minimized, but there should be lessdisruption to local hydrology and to localwildlife. The Association of State WetlandManagers argues strongly that onsitereplacement should always be given firstconsideration not only for hydrologic andhabitat reasons, but also because draining orfilling a wetland without replacing its localhydrologic functions may create potentiallyserious legal and financial consequences forupstream and downstream landowners andcommunities -- who may experience localizedflooding or dewatering. Regulators also haveargued that in many development projectsthere are remnant onsite wetlands that can,and should, be restored or augmented.

On the other hand, onsite mitigation

A secondary reason is that developers have49

access to their own sites and hence, the ability toundertake mitigation there.


25

also has ecological problems that may be located on a former wetland or degradedavoided with offsite mitigation (and mitigation wetland site to benefit from predisposedbanking). In many cases, developments in hydrology.wetlands do not leave an ecologically viableremnant wetland. Onsite wetlands can be Second, banking often requirescreated, restored, or enhanced, but the mitigation success in advance ofpermitted activities tend to leave a smaller development. This avoids some of thewetland base onsite. Adjacent impacts from problems with temporal losses. While not allthe new development may degrade what banking is advance mitigation, advancenatural wetlands do remain as well as the mitigation is frequently required by bankingonsite mitigation wetland; this is the case with programs.many "patch" wetlands and onsite mitigationprojects surrounded by housing developments Third, freedom to situate a bank withinor shopping centers [Lewis 1992]. Indeed, a broader area -- a watershed, sub-basin,onsite mitigation has a dismal record county, or even state -- may allow the bank to[Redmond 1990; Erwin 1991]. While meet a larger number of ecological goals50

requiring onsite buffers for mitigation wetlands considered on a regional basis. For example,can help ameliorate these impacts, the buffer a bank may be situated adjacent toitself may cut further into available acreage for waterbodies to filter sediment and pollutants.replacement wetlands. More importantly, Or it may be placed between two existingonsite mitigation is almost invariably done natural areas to eliminate edge habitat,concurrently with development or after the increase interior habitat, and provide afact, meaning that there is a temporal loss of corridor for wildlife to move along. A bankvalues and functions until the restoration has may be located along a stream or river to limitachieved some level of functional erosion, or sited in an urban area to providereplacement. In many situations, wildlife and badly needed wildlife habitat. The mitigationplants displaced during development either do is not limited to an imitation of the status quonot survive or migrate from the site. This at the development site, but may servemakes restoration of the former wetland's strategic goals which can have greateroriginal level of biodiversity difficult to achieve. ecological significance.

Offsite mitigation banking offers a Fourth, offsite mitigation also createsnumber of potential ecological advantages the possibility of producing and managing aover onsite mitigation. The potential for larger mitigation site than is usually possibleimproved ecological success is one of these; with project-specific mitigation (andit derives from several sources. First, offsite particularly onsite mitigation). Larger wetlandmitigation allows for greater latitude in systems are generally more self-sustaining.choosing a mitigation site that may produce a They can provide habitat for more types ofwell-functioning replacement wetland. Onsite species, a longer and more self-sustainingmitigation may require replacement wetlands food chain, more habitat niches, and a widerto be built on adjacent upland sites, creating variety of habitat types -- which, in turn, canthe risk of hydrologic failure. Or it may requirerestoring remnant wetlands that may sufferthe harmful impacts of the adjacent Siting a bank between existing natural areasdevelopment project. Offsite banks can be

51

The reasons for this record include other50

factors than ecological ones, including design Malmaison Wildlife Management Area and theproblems, lack of monitoring, and poor enforcement. Dahomey Wildlife Refuge banks - are sited adjacent toSee Chapter 8. existing wildlife preserves.

51

can also make the effective size of the wetlands in thebank much larger by providing buffers and wildlifecorridors, and by attracting species with larger rangerequirements. For example, two banks operated bythe Mississippi state highway department - the


26

better accommodate ecosystem succession, mitigation is preferred.migration, and change [Willard and Hilliard1990]. Larger sites provide more interiorhabitat for the many species dependent uponsuch habitat. They may better protect speciesfrom inbreeding effects due to the isolation ofsmall populations, and may be more resilientto natural disasters because of their largersize, larger seed banks, and more variedhabitat.

Bigger is not better in all cases,however. There are many situations wheresmall wetlands should replace similar smallwetlands lost to development and therebyprovide habitat for locally displaced species.Many species -- salamanders, for example --depend on small "patch" wetlands. Otherspecies depend on nearby edge habitat thatwould be minimized in a large site or in onecontiguous to another large natural area. Butthese size concerns can be met in banksthrough the use of buffer areas. A smallwetland with surrounding upland buffer ismore likely to survive (and to migrate) thanone surrounded by parking lots or boat ramps.

Finally, the comparative simplicity ofmonitoring and enforcement of ecologicalsuccess in a mitigation bank over multipleonsite projects should also increase thelikelihood of ecological success of thereplacement wetland, including the opportunityfor identifying problems and making mid-course corrections.

The disadvantages of offsite mitigationhave already been alluded to. Many of thevalues and functions provided by wetlands areimportant primarily because of where they areprovided. Flood control on one watersheddoes not "replace" loss of flood control onanother. For this reason, many mitigationbanking programs, policies, and proposalsspecify that banks must be located withinsome specified distance of the developmentprojects for which they are mitigating --typically this is stated in terms of a samewatershed requirement. Banking programsalso sometimes establish priorities orguidelines for when offsite banking or onsite

B. Ecological Difficulties in AssuringMitigation Success

Ecological issues arise not only inselecting the type and location of mitigationwetland activities, but also in assuring that themitigation is successful. Two issues areparticularly important: the first is the nature ofwetlands as dynamic systems, and the secondis the fledgling state of current technology inwetland restoration, enhancement, andcreation.

1. Recognizing the TransitionalCharacter of Wetlands

While most scientists would agree onthe soil types, hydrology, and vegetationnecessary to delineate a wetland at a giventime, this contemporaneous boundaryidentification does not incorporate the dynamicnature of wetland systems. Wetlands changeover time and over the landscape in responseto both internal and external forces [Willardand Hilliard 1990].

It is primarily the inevitability of changethat makes the regulation of wetlands and therestoration, creation, and enhancement ofcompensating wetlands so difficult. Imposingan institutional framework such as acompensatory mitigation banking system ondynamic wetland ecosystems is inherentlyproblematic. Where wetland regulation andbanking requires a certain degree of certainty,predictability, and adherence to internal rules,wetlands offer only uncertainty. Whilewetlands, like other ecosystems, obey a set ofnatural laws, those laws are not fullyunderstood. Even the simplest ecosystemhas many feedback loops of which we are notaware, and correcting failures in managedecosystems involves a great number ofunknowns [Ehrenfeld 1992].

An important consideration inmitigation banking is the mobile nature ofwetlands. They change over time and overthe landscape in response to internal and


27

external forces. An emergent wetland today isspeeding toward dry land tomorrow. Erosionand sea-level rise are forcing wetlands tomigrate or disappear. Providing adequatebuffers and upland areas for expansion maybe the only ways to incorporate this tendencyof wetlands to migrate within the landscape[Willard and Hilliard 1990]. As banks becomeestablished for longer periods of time, theissue of internal change and succession willbegin to emerge. Few active banks havebeen established long enough to experiencevegetative succession, in-filling, and theconsequent functional changes that may needto be addressed through crediting and debitingreallocations.

Wetlands, like other ecosystems, aresubject to a wide range and frequency ofstochastic events. Fires, floods, ice storms,hurricanes, even over-consumption ofvegetation by wildlife (eat-outs) are, for themost part, random and unpredictable. Yetthey can profoundly alter or destroy a wetlandsystem. More predictable impacts, such aspollutant loading from adjacent farms orintentional use of wetlands for wastewatertreatment can also degrade wetland systems.In providing valued habitat for many speciesand, at the same time binding heavy metals,pollutants, and other toxics in their sedimentsand vegetation, wetlands can accumulateenough toxics that -- magnified through theprocess of bioaccumulation up the food chain-- can be harmful to some animals andhumans.

Although there is nothing institutionallythat can be done to prevent stochastic events,and although wetland ecosystems continue toelude our complete ecological understanding,mitigation banking holds some potential toaddress some of these uncertainties --through better planning, larger size, detaileddesign, improved monitoring and enforcement,and other factors. The same potential maymitigate predictable causes of wetlanddeterioration.

2. State of the Art

From an ecological point of view, allforms of compensatory mitigation haveweaknesses. The sciences of wetlandsrestoration and creation are still inexact andcannot guarantee a successful replacementwetland [Kusler and Kentula 1990]. There isstill risk inherent in trading a functioningnatural ecosystem for a mitigation effort thatmay or may not replace those wetlandfunctions and values lost to development --and a strong likelihood that even "successful"mitigation will not achieve full functionalreplacement [King 1991].

There are, however, some situations inwhich the art and science of mitigation is moreadvanced than in others. For example, priorconverted croplands and farmed wetlandsunder current cultivation are relatively simpleto restore. Breaking drainage tiles andrestoring wetland hydrology can be muchsimpler than expensive and time-consuminggrading of upland areas. Coastal wetlandrestoration, also has been successful.Because these coastal wetland restorationsdo not require use of heavy grading equipmentor restoration of hydrology, they are generallyless expensive. Such wetlands are relativelyrare -- only five percent of the nation'sremaining wetlands base are coastal -- andthey provide tremendous economic benefitsas nurseries for commercial and sport fish,shellfish, and as stormwave buffers. Thus thetechnology of restoration and the ecologicalbenefits suggest that some concentration onthese wetland types is worthwhile.

The National Research Council'sreport on restoration of aquatic ecosystemsidentifies five wetland systems as idealcandidates for restoration efforts, each fordifferent reasons.52

These are nonexclusive categories, and52

indeed, a number of them overlap. For example,agricultural wetlands generally are freshwaterwetlands.


28

Riparian wetlands, often the mostdegraded, are ubiquitous, offer high potentialfor successful restoration based on theirlocation, and contribute many vital functionsworthy of restoration, including improvedwater quality, flood control, wildlife and fishhabitat, and erosion and sedimentationcontrol. Depressional, or isolated wetlands,are also widespread throughout the country,and may be easily restored, particularly if theywere drained rather than filled. Agriculturalwetlands are ubiquitous and often simple torestore since wetland soils and hydrologyoften remain; breaking drainage tiles, fillingditches, and ceasing crop production may beall that is needed to mitigate.53

Coastal and estuarine wetlands notonly have one of the best records to date ofrestoration success, but are in critical need ofreplacement; they support the commercial andsport fishing and shellfishing industries andprovide numerous other vital and irreplaceablefunctions. In addition, the many states andterritories that are eligible for funding andplanning assistance under the Coastal ZoneManagement Act may consider incorporatingbanking into their Special Area ManagementPlans (SAMPs) and other existing planningmechanisms.

Finally, freshwater wetlands, such asthe great deltas of the Mississippi, havesuffered the highest percentage of losses asa group, and are the subject of manyrestoration studies. They are slower tomature, however, and might not appeal toentrepreneurial bankers as much as thefaster-growing coastal marshes. Similarly,inland marshes such as the prairie potholes ofthe upper Midwest also have strongrestoration successes to date, but only occurin a limited number of northern states.

In contrast, some wetlands, such asspruce bogs, take centuries to mature and areincreasingly rare. These factors make themextremely difficult to reproduce and tend todiscourage their restoration or creation inonsite mitigation. The difficulties alsodiscourage such wetland types fromappearing in banks. Yet if regulators continueto allow some spruce bogs to be convertedthrough development, the likely outcome willbe a net loss of this valuable wetland type.

Because of the difficulty of restoring orcreating a spruce bog, wetland policy mayneed to take into account some form ofclassification. If private investors are lesswilling to attempt restoration of difficultwetland types because of the risks, costs, andtime involved, there are several possibleresponses in addition to prohibitions onconversions. One is to make mitigation ofdifficult or rare wetlands a higher priority forgovernment-operated banks. A second is tocreate incentives for entrepreneurial bankersto attempt such projects -- such as favorablecompensation ratios, or provisions for somecredit recognition prior to full functionalperformance.

Wetland mitigation technologies areimproving, but it appears that not all wetlandtypes are equally susceptible of restoration orcreation. It is, therefore, necessary toevaluate wetland losses as well as thefeasibility of compensatory mitigation projects(whether onsite or banking) with some care.Banking may offer a superior opportunity totest new techniques if the mitigation is inadvance of the impact. Some incentive orsupport for such experimentation, or itsutilization by government-operated banks, maybe advantageous.

Mitigation banks provide regulatorsand land managers an opportunity to take intoaccount ecological concerns. Carefulattention to bank siting mechanisms, creditdefinition and evaluation, and banking goals iscritical if banking is to succeed in ecologicalterms.

However, minimal data exist to indicate53

whether these restorations are succeeding over thelong term. The USDA Conservation Reserve Programand Wetlands Reserve Program offer some long-termprojects that could be followed to gauge the successof agricultural wetlands restoration.


29

The Case Against Ducks

There is something in the human spirit that loves ducks. There is something in many wetlandfunctional assessment techniques that loves ducks, too. Perhaps too much. Both because of thepopularity of ducks, and consequent pressure to rehabilitate duck habitat, and because a predominanceof scientific data on wetland species focuses on migratory waterfowl, a number of widely used wetlandassessment methods are skewed in favor of duck habitat. Assessment techniques such as the Fish andWildlife Service's Habitat Evaluation Procedure (HEP) use indicator species to characterize a wetland interms of habitat suitability for those species. Often at least one--if not most--of the species analyzed is amigratory waterfowl. Because the techniques rate the wetland higher as its suitability to waterfowlincreases, ideal duck habitat will generally score highest in these assessment methods.

WETLAND TYPES SCORE OUT OF 100 VALUE AS DUCK HABITAT

Deep Marsh 95 high

Shallow Marsh 90 high

Open Water 80 high

Shrub Swamp 76 medium

Bottomland Hardwood 76 medium

Fresh Meadow 68 medium

Wooded Swamp 67 medium

Bog 52 low

Seasonally Flooded 28 low

The box above represents a HEP-based habitat suitability index for highway districts inMinnesota that implement the state's highway mitigation bank. The average scores were derived from aformula that assesses individual wetland types as food, cover, and reproductive habitat for 8 indicatorspecies. It is not coincidental that the wetland types scoring highest -- shallow marsh (90), deep marsh(95), and open water (80) -- happen to be ideal duck habitat. In each of the 9 highway districts, between75 percent and 82 percent of all indicator species used were birds, to the exclusion of most other formsof life, including insects, amphibians, fish, plants, invertebrates, and so on. Only a handful of mammalsare represented. Half of the bird species used are ducks. By contrast, wooded swamps, which are idealhabitat for many nonwaterfowl species, including song birds, hare, grouse, and squirrel, scored high withevery indicator species except ring-neck ducks, which dropped the total score to 67. Seasonally floodedbasins, which provide critical habitat for many wetland-dependent species, are not as attractive to ducks,and scored 28.

In the context of wetland mitigation banking, credit producers wishing to maximize the amount ofcredits available in the bank would be foolish not to create high-scoring marshes and open water.Similarly, developers seeking to minimize the "debits" they generate by destroying wetlands shouldconcentrate development pressures on wetlands least suitable for ducks. Either way, there is a net gainin duck habitat and a net loss among other wetlands types. Similarly, there is less incentive to developrestoration techniques that improve the experience, success, and reduce the expense of restoring orcreating other wetland types.

30

BLANK PAGE

31

CHAPTER FOURBANK ORGANIZATION ANDENABLING INSTRUMENTS

A. Bank Organization

Like other forms of wetlands mitigation,mitigation banking arises from the need toreconcile two competing sets of interests:those of the private developers or governmentdevelopment agencies whose activities willhave some impact on existing wetlands thatare protected by law, and those of thegovernment agencies with jurisdiction over thewetlands. Thus, the two prerequisites that setthe stage for mitigation banking are, first, adevelopment entity in need of a permit orpermits to accomplish its proposed activities;and second, an agency, or group of agencies,that has a mandate for wetlands preservationand the authority to grant or deny permits.

As evidenced by the number of mitigationbanking agreements between statedepartments of transportation and variouspermitting agencies (22), it is entirely possiblefor developers and agencies to establishsuccessful banks purely as an offshoot of theexisting permitting process, without beinginvolved with complex governance structuresor outside parties. However, even in thesimplest DOT bank, the two sides play anumber of roles and perform several discretefunctions which, in more elaborate versions ofmitigation banking, often are separated fromthe permitting process and delegated to anumber of other entities in the public, private,or nonprofit sectors. This section analyzesmitigation banks into their functionalcomponents, identifies the field of players whomight fulfill these functions, and discussestypical combinations of functions and players These functions are not to be confused withfound in currently existing and proposedmitigation banks.

1. Functions

While mitigation banking schemes vary

widely in structure, every bank includes sixessential functions:54

Ë clientË permittingË credit productionË long-term property ownershipË credit evaluationË bank management

The diversity among banks largely resultsfrom the different ways in which these sixfunctions are allocated among the variousparties. As just noted, in the simplest banks,the functions are divided (or shared) betweena development entity and the permittingagency or agencies. As mitigation banksbecome more complex and the division oflabor in the area of wetlands mitigationbecomes more specialized, these same sixfunctions could be performed by as many assix different parties, some of which mayhave no connection to the permitting process.

The bank "client" is the entity or entitieswhose activities will create a wetlands impactfor which mitigation is being sought throughthe bank. A client thus is identical with awould-be permit holder, and can be anyprivate or public development entity whoseproject meets the permit requirements (as wellas any additional requirements for use of themitigation bank). While these entities typicallyplay several roles in the banking process, intheir role as clients they represent market

54

wetland functions. These "bank functions" weretermed Roles and Responsibities by the First PhaseReport of the National Wetland Mitigation BankingStudy (IWR Report 94-WMB-4). However, thesefunctions were labelled as follows: sponsor, client, andregulatory; long-term real estate interest; creditproduction and maintenance; credit and debitevaluation; and bank operation.

Bank OrganizationAnd Enabling Instruments

32

demand for compensatory mitigation credits, proponent of the plan for creating credits,and need not have any involvement in the acquires initial title or other right of entry to theactual mitigation work, or possess any site, and carries out the mitigation work.attribute other than a sheer willingness to pay While some of these tasks may be contractedfor the mitigation credits. Strictly speaking, out or otherwise delegated to an agent, thethen, the client function is not necessarily a credit producer bears primary financial andfunction of the bank, but it is an essentialelement in any transaction carried out by thebank.

The "permitting" function involves decidingwhether a project affecting wetlands, and forwhich mitigation may be required, will beallowed to proceed. It generally is exercisedby the government agencies, federal, state orlocal, with jurisdiction over affected wetlands.Often, there are several such agencies withconcurrent jurisdiction and varying degrees ofoversight; representatives from each agencysometimes form an interagency committeethat makes the individual permitting decisions.In the case of wetlands regulated underSection 404 of the Clean Water Act, agencyresponsibilities can range from commenting(FWS and other federal and state resourceagencies) through permit writing (the Corps ofEngineers and state water control agencies)to veto power (EPA). By establishingrequirements, such as sequencing orproximity restrictions, that determine whetherbanking will be an acceptable form ofmitigation in specific cases, the permittingagencies effectively create the market formitigation banking, and exert substantialcontrol over the regulatory climate in whichbanking will occur. Here again, whilepermitting is a function that can occur on aseparate track from the rest of banking, itnonetheless is an essential part of each banktransaction.

A third essential function is creation ofmitigation credits, the physical wetlandscommodity whose value is traded or sold bythe bank. The "credit production" functionentails the production of viable wetlandscredits on a specific mitigation site or sites byany of the accepted methods: restoration,creation, enhancement and, in certain cases,preservation. In more concrete terms, thecredit producer generally is the chief

legal liability for successful construction anddevelopment of the mitigation site, and oftenfor subsequent monitoring and maintenanceas well.55

Credit production can be performed by theclient or by the permitting agencies, but it56 57

remains analytically distinct from eitherfunction; it is also possible for a third party,such as another government agency, a privateentrepreneur, or a non-profit organization, toproduce and sell mitigation credits acceptableto both of the parties to the permittingprocess. Indeed, such third parties may58

As the most highly visible entity directly55

associated with the mitigation work, the creditproducer is roughly analogous to what other studies ofmitigation banking have referred to as the bank"sponsor." See, e.g., Short (1988).

In current banking practice, client-created56

credits are the rule: 42 of the 46 existing banks arededicated exclusively to the use of the creditproducer. Of these, more than half were created bystate departments of transportation, and theremainder have been created by port authorities,county governments, and a small number ofprivate companies. All of these are developmententities large enough to have both a need forsubstantial amounts of compensatory mitigation, andthe resources to produce it for themselves.

For instance, the City and Borough of Juneau57

(CBJ), Alaska, which has a general permit granted bythe Corps of Engineers that in essence delegates allpermitting authority to the CBJ, also has adopted anordinance establishing a public fund that will be usedto produce wetlands credits in mitigation banks.

This possibility has been realized in the few58

existing banks, such as Bracut Marsh, California, andAstoria Airport, Oregon, where a state resourceagency has produced credits for general use; andhopes for its widespread acceptance are reflected inseveral recent proposals for "entrepreneurial"mitigation banks.


33

become more proficient at acquiring suitable Fifth, once the wetlands credits have beenmitigation sites and producing surplus credits produced, both they and the impacts they willthan either permitting agencies or full-time mitigate must be quantified to conform to thebuilders of highways and condominiums. "currency" in which the bank is trading.

Fourth, given the desirability of creating credits proffered to and impacts mitigated byenforceable legal mechanisms which will the bank using one of the many evaluationensure that the mitigation site is maintained as methods discussed in Chapter Seven. Sincea wetland for an ecologically useful period of credit producers have a financial stake intime, it is important to identify and isolate the maximizing valuation of credits and clientsfunction of "long-term property ownership." have one in minimizing valuation of impacts,While, as noted, the credit producer often credit evaluation often is done by one of theholds fee title, a conservation easement or permitting agencies or by an outside partyother right of entry to the mitigation site, such as another resource agency orownership of these rights is a separate independent consultant acting as a wetlandsfunction which can be transferred to or "appraiser." Even in banks where the fieldexercised by parties not otherwise involved in work underlying credit evaluation is performedthe banking process. by a credit producer or client, final review of

For example, it already is fairly common standard, thus ensuring some independencefor credit producers to transfer their property for the credit evaluation function.rights to resource agencies or nonprofitgroups like the Nature Conservancy, either For instance, the proposedduring the bank's life or after all credits have entrepreneurial Springtown Naturalbeen used. Conversely, such groups or Communities Reserve bank would delegateentrepreneurs that hold a large quantity of the credit evaluation function to the Californialand with potential for wetlands creation or Department of Fish and Game to avoid anyenhancement could elect to retain their potential conflict of interest. Similarly, a modelproperty rights while allowing "mitigation memorandum of understanding drafted by thefarming," where credit producers would pay for Federal Highway Administration to assist statethe right to create credits on a specific parcel DOTs in their banking efforts calls for thewithout assuming ownership. In each of these creation of a "Technical Subcommittee" whichcases, the primary function of the long-term is composed of one member each from theproperty owner is to exclude any other uses of state DOT, the state department of fish andthe land that would interfere with its continued wildlife, and the local office of the Corps ofexistence as a dedicated wetland. Engineers. This technical subcommittee is

Depending on the precise nature of the using any "appropriate methodologies,"property right being held, long-term property including HEP, WET, or best professionalownership may entail other duties assigned by judgment. Versions of these evaluationapplicable property or contract law. These procedures have been adopted by DOT bankscould include active monitoring and in Arkansas, Montana, and Nebraska. maintenance of the wetland and financialliability for remedying mitigation failure or any Sixth, "bank management" is the processdamage to third parties -- responsibilities that of determining whether produced credits andgenerally fall to the credit producer, but also proposed debiting projects meet thecan be assigned contractually or as a conditions established for use of the mitigationcondition on transfer of property rights. Thisquestion of long-term responsibility formaintenance and liability is discussed morefully in Chapter Eight.

"Credit evaluation" determines the value of

this work by one of the permitting agencies is

charged with assessing proposed impacts

59

These procedures have been incorporated in59

draft memoranda in Arkansas and Nebraska.


34

bank, and recording resulting transactions. In resource agency bank, the entrepreneurialsingle-client banks, like the existing DOT bank, and the "banking system." Certain otherbanks, this function is minimal and largely entities that do not meet the full definition of ainseparable from the permitting process itself: mitigation bank -- such as wetlandsthe client and the permitting agencies agree in accounting systems and in-lieu fee mitigationadvance on the bank site or sites, subsequent -- also can be analyzed in terms ofuse of which is reflected in an informal ledger combinations of these same six functions.kept by one of these parties, which recordseach "withdrawal" of credits and updates the As noted, in most existing banks,balance accordingly. including all of the DOT and port authority

In more complex schemes where several while credit evaluation and bank managementdifferent parties are producing credits and either are performed by the permittingseveral others are purchasing them, the bank agencies or are the product of a less formalmanagement function may be delegated to a consensus between the agencies and thewholly or partially independent individual, client. To the extent that there is variationboard, or trust charged with the fiscal among these banks, it results from differingmanagement of funds and banked credits in assignments of long-term property ownership,accordance with criteria that may differ from as well as the related question of what partythose considered in the permitting process. will be responsible for maintaining the bankFor instance, in the proposed wetland banking site. (See Figure 1.) The single-client banksystem for Prince George's County, Maryland, reflects the natural division of labor where athe county government would name a bank large developer's repeated permit applicationsmanager who would have approval power create an ongoing relationship between theover proposed debits of one acre or less, and client and permitting agencies. However, theinform the clients and permitting agencies present dominance of this structure couldwhether mitigation is available from the bank; easily fade if the economics of and regulatoryfor larger debits, the bank manager would climate surrounding mitigation were to changemake a recommendation on the propriety of in favor of third-party credit production.bank use to an interagency oversight team.This two-tiered process relieves the permitting Second, by shifting the credit productionagencies from having to review the bank's function from the client to a state, local, orstatus each time a routine debit is proposed. quasi-public resource agency, a few existingSimilarly, the Minnesota Department of banks have been able to offer credits for saleTransportation bank uses a team of bank to the development community at large. Thismanagers, with representatives from the DOT form of banking, which is practiced by theand each of the various permitting agencies, Oregon Division of State Lands at its Astoriato decide which projects will be accepted for Airport site and by the California Coastalbank debits or credits. Conservancy at Bracut Marsh, gives the

2. Typical Combinations of Functionsand Players

By assigning the above six functions todifferent parties and combining them indifferent ways, it is possible to create anumber of different bank governancestructures. Among currently existing orproposed mitigation banks, these governancestructures tend to fall into four distinctpatterns: the "single-client" bank, the

banks, the client also is the credit producer,

resource agency complete control over theactual mitigation work, and provides a sourceof credits for clients who cannot feasibly enterinto the business of wetlands mitigation forthemselves. In addition to credit production,the resource agency often assumes the long-term property ownership and bankmanagement functions, and also may play arole in credit evaluation. (See Figure 2.)

Moreover, it is even conceivable that aresource agency could be delegated the


35

permitting function, thus combining all but the California, proposes to combine its existingclient function in a single entity. It also could state permitting power with management of abe accomplished through issuance of a banking system that would consist of sitesgeneral permit if the Corps were convinced proffered by public and private "bankthat the effects of the agency's mitigation developers." The "bank developer" role wouldactions and projects approved by it will be be limited to producing credits, providing for"individually and cumulatively minimal." This maintenance and long-term ownership, andmechanism would be used in the proposed receiving money from sale of credits by thewetland mitigation bank for the City and bank. In such a system, mitigation bankingBorough of Juneau, Alaska, and is discussed begins to resemble its financial counterpart,further in Section B of this Chapter and in with the individual "depositors" (creditChapter Ten. producers) playing no more important a role in

Third, the proposals for entrepreneurial "withdrawers" (clients).banking similarly tend to concentrate bankfunctions in the hands of a single entity, but The functional analysis discussed aboveone that is privately held. Thus, unlike the also can be applied to a number of mitigationresource agency banks, where the credit schemes which do not fit the definition of aproducer's conservation mandate provides "bank" used in this study. For example, thesome independent guarantee of the mitigation "North Dakota Wetlands Bank" (not listed inwork, entrepreneurial banks' wetlands Appendices A and B) is actually a statewideactivities will require separate oversight by the accounting system, created by statute, thatpermitting agencies. (See Figure 3.) For tracks wetlands losses and gains withoutinstance, the Neabsco [Virginia] Wetland Bank requiring advance mitigation. Instead, theproposal leaves bank management in the system is designed to ensure -- primarilyhands of the agencies, who would monitor the through production of wetland credits by publicbank on a transaction-by-transaction basis. agencies -- that total debits never exceed total

An example of more attenuated oversight production in the form of restoration andis found in the draft memorandum of creation projects has been performed onagreement proposed by the Home Builders federal lands by the United States Fish andAssociation of Greater Chicago, which would Wildlife Service, while the credit evaluationvest credit production, long-term property and "bank" management functions areownership, and bank management functions performed by the North Dakota Game andin many smaller banks, including private Fish Department, the North Dakota Statecorporations, that would be issued § 404 Water Commission, and the Office of thegeneral permits for their mitigation activities. State Engineer.The Corps would retain permitting authorityover development projects, and evaluate the In-lieu fee systems have all the structuralbank credits by "certifying" them, but characteristics of resource agency banks,otherwise would perform a relatively passive differing only in their willingness to issueaudit role. Bank clientele could include any permits for which mitigation work has not yeteligible developer that receives a fill permit been performed. The Maryland Nontidalfrom the Corps. Wetlands Compensation Fund collects fees in

Fourth, and most complex of all, are the mitigation banking, and applies theproposed "banking systems," in which a accumulated funds to mitigation projectsgovernment entity or entities manage public carried out by the state Department of Naturaland private credit production on multiple bank Resources and state Water Resourcessites for use in mitigating a wide variety of Administration. The DNR decides clients'projects. (See Figure 4.) Placer County, eligibility to use the fund as part of the

administration of the bank than the individual

credits by more than 2500 acres. Credit

lieu of requiring project-specific mitigation or


36

permitting process, sets fees based on the Ë individual bank permittype of wetland affected by the development Ë general permitproject, and owns the resulting mitigation site. Ë corporate charter

B. Enabling Instruments

Whatever its structure, a mitigation bankmust be recognized by the appropriateregulatory agencies with jurisdiction overwetlands activities before it can become fullyoperational. This recognition or officialsanction may take a variety of alternativeforms. At one extreme are informal"handshake" agreements such as the one thatcreated the Louisiana Department ofTransportation and Development mitigationbank, where the lack of a written agreementhas been the cause of a great deal of disputeand delay. Perhaps for this reason, virtually60

every existing and proposed bank employssome type of formal enabling instrument thatmemorializes the terms under which the bankwill operate. At the other extreme are highlydetailed planning documents such as theJuneau Wetlands Management Plan, whichnot only provides for mitigation banking, butalso fits it into the larger context of regionalwetlands management.

1. Instrument Types

At least six different types of enablinginstrument have been utilized or proposed bythe banks surveyed in this study:

Ë memorandum ofagreement/understanding

Ë individual development projectpermit

Ë legislation or regulation

Each of these instruments will be discussed inturn.

The most common form of enablinginstrument is the memorandum of agreement(MOA) or memorandum of understanding(MOU) between the permitting agencies andthe credit producer. More than fifty of theexisting and proposed banks possess final ordraft MOAs or MOUs, and several otherproposed banks indicated that one would bedrafted later in the planning process. Thesememoranda recite, in contract-like language,the specific terms under which banking will beconducted, generally at a particular site orsites known to the parties at the time theagreement is signed. Alternatively, thepermitting agencies may simply ratify thecredit producer's proposed site plan throughformal letters of assent in lieu of a separateMOA, as was done with the Patrick Lake bankin Wisconsin.

Where banking is intertwined with thepermitting process, as, for example, where abank results from project-specific mitigationthat created surplus credits, the developmentproject permit often will double as the enablinginstrument for the bank. Bank-specificprocedures can then be incorporated asconditions on that permit. A variant of thisscheme is found in the banks at GeistReservoir and Morse Reservoir in Indiana,where the surplus credits resulted frommitigation undertaken to remedy existingviolations of the Clean Water Act. In thosetwo cases, the permitting agencies made thesite plan and certain banking proceduresconditions of the after-the-fact permitseventually issued to the alleged violators.

Indeed, Short (1988) writes that "[l]ack of a60

formal written commitment related to the bank andlack of a timeframe within which the bank was to beimplemented have resulted in a situation where, 6years later, the bank still has not been implementedas intended and credits are overdrawn." The deficithas persisted to this day.

DevelopmentEntity

PermittingAgency(ies)

Mitigation

Bank

• permitting• credit evaluation• bank management(• long-term ownership)

• client• credit production(• long-term ownership)

(Functions in parentheses may be assumed by either of the parties indicated)


DevelopmentEntities

ResourceAgency

Mitigation

Bank

• credit production• long-term ownership• bank management(• credit evaluation) • client


• permitting(• credit evaluation)


37

Figure 1. Typical Single-Client Bank

Figure 2. Typical Resource Agency Bank


PrivateEnterprise

DevelopmentEntities

MitigationBank

• permitting• credit evaluation(• bank management)

• credit production• long-term ownership

• client


(• bank management)


38

Figure 3. Typical Entrepreneurial Bank

Figure 4. Typical Banking System


39

Further, since mitigation activities with individual bank charters and bylaws, thisthemselves may alter wetlands, banks also scheme might produce the streamlined,can be issued detailed permits independently flexible permit process desired byof any particular development project, a entrepreneurial banks, while imposing certainprocedure used in the Millhaven Plantation duties on the owners and managers of the[Georgia] Commercial Wetland Mitigation corporation. Even those jurisdictions that areBank and several Florida mitigation banks. skeptical about private mitigation bankingWhether the permit is issued for a could charter banks as public or quasi-publicdevelopment project or directly to the bank, corporations.the subsequent debits to the bank usually arerecorded in the permits written for the debiting Last, banks could be operated directlydevelopment projects. The Florida regulations under the terms of an enabling statute orrequire that each debit also be processed as regulation. The Oregon Mitigation Bank Act,a formal "modification" of or amendment to the which authorized the Director of State Landsoriginal bank permit. to create up to four pilot mitigation banks, is

However, if banking -- particularly expressly addresses most of the mattersentrepreneurial banking -- is to become viable usually covered in MOAs or permits. Due to aon a large scale, it may require a much less lack of appropriations, no banks actually werecumbersome enabling mechanism than the created under the statute. However, the Citypresent ad hoc use of MOAs and individualdevelopment project permits. The ArmyCorps of Engineers has authority to issueSection 404 general permits as bank enablinginstruments, and some mitigation bank61

proposals have adopted this suggestion. TheCity and Borough of Juneau, Alaska, has beenissued a regional general permit which, inaddition to delegating permitting power overwetland development projects to the municipalgovernment, also sanctions the operation of anumber of public mitigation banks in 2. Issuesaccordance with criteria specified in thegeneral permit. The Home BuildersAssociation of Greater Chicago draft MOAlikewise calls for issuance of general permitsto individual banks for their various mitigationactivities, but would continue to leave projectpermitting in the hands of the Corps.

Similarly, corporate charters, which alsoare a feature of the Chicago Home Builders'proposal, may provide another less intrusivemeans of regulating mitigation banks. Bycombining the regulatory floor of existingcorporate law or a specialized enabling statute

one example of a detailed statute that

62

and Bureau of Juneau adopted an ordinancepatterned on the Oregon statute to govern thepublic mitigation banking called for by itsWetlands Management Plan. Along withestablishing substantive policies, the Juneauordinance creates a Mitigation Banking Board,which is further authorized to "adopt, by rule,standards and criteria for the site selectionprocess, operation and evaluation ofmitigation banks."

Generally speaking, the form of theenabling instrument has a number of practicaland legal implications for bank operation, withthe result that certain kinds of enablinginstruments may prove to be better-suitedthan others for certain kinds of banks. Issuesraised by the choice of an enabling instrumentinclude: (1) whether it provides generalguidance or is site-specific; (2) the duration ofthe instrument and the bank it governs; (3) theavailable means of dispute resolution,

See the discussion of the Corps' legal authority61

in Part B of Chapter Ten. the statute.

The Astoria Airport mitigation bank, described62

elsewhere in this study, predates this legislation and isnot governed by it, although most of its proceduresand policies are consistent with the ones set forth in


40

particularly where multiple parties are As presently used, individual developmentinvolved; and (4) the enforcement implications project permits pose some of the sameof a particular form of instrument. problems as site-specific memoranda of

As suggested above, one of the most mitigation banking, project permits by theirimportant issues is the degree of specificitywith which the enabling instrument must benegotiated and with which it governssubsequent bank operations. The vastmajority of MOAs and MOUs, the mostcommon instruments, relate to a single site,often incorporating detailed technicalspecifications for credit production on thatsite. While careful site planning obviously isdesirable, it remains an open questionwhether each of the signatory agencies needsto be involved in each site proposal to such adegree. These simple memoranda haveproven useful for small single-client banks, butthe effort involved in obtaining theseindividualized site-by-site approvals couldeasily frustrate the proponents of multiple-site,multiple-client banks.

Somewhat more ambitious are the "open-ended" memoranda that set forth generalprocedures for banking at a number of sites,not all of which will have been identified at thetime the agreement is signed. The MinnesotaDepartment of Transportation operates itsstatewide banking system under a "technicalmemorandum" agreed to by the DOT, theMinnesota Department of Natural Resources,the U.S. Fish and Wildlife Service, and theFederal Highway Administration; subsequentacceptance of individual banking sites isrecorded on a one-page form signed byrepresentatives of each agency. Similarly, arecent amendment to the interagencycooperative agreement between theWisconsin DOT and the Wisconsin DNRprovides generic guidance for mitigationbanking, and may become the basis for aproposed multiple-site bank in that state.These memoranda facilitate the process byremoving site selection and other technicaldecisions from the "constitutional" language ofthe enabling instrument and delegating themto bank managers or agency subcommittees.

agreement. Even when they focus on

nature tend to be ad hoc determinations of themerits of a particular mitigation plan for aparticular site. As long as the permittingagencies are only being asked to consider theviability of a single proposed mitigationproject, there is every reason for them tofocus on the technical details of that project,and little reason to establish a broader bankgovernance structure that could be expandedto include multiple mitigation sites.

Individual bank permits like the MillhavenPlantation permit often have the same site-specific focus as individual developmentproject permits. However, there is no reasonwhy these permits could not incorporate moregeneral provisions allowing the bank toacquire additional sites for credit production inaccordance with terms specified in the permit.In this regard, bank permits may prove to be abetter vehicle for creating flexible bankstructures.

Similarly, the open-ended nature of thegeneral permit for mitigation activities couldobviate the need for agency review of eachindividual site selection or credit productiondecision made by the permit holder, as longas permit conditions are adhered to. Aregional general permit might facilitate theestablishment and use of mitigation banks,with a number of potential benefits. First,regional general permits cover a broadgeographic area, affording more opportunity tomanage wetlands on a landscape scale.Second, regional permits often are an integralpart of a larger regional wetlandsmanagement plan, which may serve toeducate and involve many members of thepublic. Third, regional permits may involve alarge number of clients, thereby maximizingthe bank's financial stability. Fourth, regionalpermits can identify, in advance, the type andscale of construction activity that will beeligible to debit the bank.


41

Legislative and regulatory instruments and regulations can be drafted so as toclearly could be used to authorize a number of establish a uniform duration for all banks inbanks in one procedure, as was the intent the affected jurisdiction.behind the Oregon Mitigation Bank Act. Nor,in theory, would such instruments necessarily Use of a traditional corporate charterhave to be limited to the government and would constitute the mitigation bank as a legalresource agency banks described above. entity for as long as it complied with provisionsAssuming that the enabling legislation or of applicable corporate law. The charter orregulation were drafted with sufficient rigor, it the bylaws could, of course, provide forcould authorize banking by any entity -- public frequent review of bank performance, and foror private -- that meets certain enumerated dissolution of the bank if it failed to meetcriteria, in effect creating a permit-by-rule specified ecological or financial criteria. Forregime for mitigation banking. More likely, example, the draft Chicago Home Builders'however, site-specific conditions and MOA, which proposes incorporation of privateenforcement issues will continue to dictate banks, provides that the Corps could seizethat some form of individualized review and and liquidate banks that become insolvent.certification be given to each authorized bank, While this particular provision is contained inand to private banks in particular. an MOA, bank corporate charters could be

A second issue implicated by the choice enforcement provisions.of enabling instrument is the duration of thatinstrument and its effect on bank life. Like The third set of issues arising from thecontracts, memoranda of agreement can choice of an enabling instrument concerns thespecify any term of validity -- including resolution of disputes among parties to it. Thisperpetuity -- agreed to by the parties, with the is especially important where there is multipleresult that some banks operate for a certain agency jurisdiction over the banking process.period, while others have no fixed duration. Since memoranda of agreement typically areStill others are renewable through procedures signed by several state and federal agencies,set out in the memorandum itself. These they often explicitly provide a mechanism forbanks commonly are authorized for an initial resolving disputes about decisions that areperiod, after which the signatories reevaluate made under the agreement. The mostbank success and the effectiveness of the common such mechanism appears to be aagreement, and make any needed consensus requirement, which effectivelymodifications. The Montana DOT and Astoria gives each agency veto power over anyAirport [Oregon] banks both provide for decision. Other agreements, such as the draftreevaluation and updating after the first five MOA for the Prince George's County,years of bank operation. Maryland banking system, provide for

Similarly, since development project Pridgen Flats and Company Swamp [Northpermits often incorporate conditions on bank Carolina] and Astoria Airport [Oregon] banksoperation that have been specifically take the novel step of allowing a dissentingnegotiated and agreed to by the parties, bank party to propose amendments to the MOAduration under these instruments also will varywidely. Permits issued directly to banks, onthe other hand, often are issued for a fixedduration that will vary according to theregulatory scheme under which they areissued. General permits under Section 404may be issued for up to five years, and maybe renewed at the Corps' discretion. Statutes

required by legislation to include similar

decision-making by a majority vote. The

during its effective period. If the proposedamendment is rejected, the dissenter maywithdraw approval of, and cease to participatein, the original agreement.

Precisely because the broaderinstruments such as corporate charters,general permits, and statutes or regulations


42

are intended to delegate day-to-day mitigation work, and can be amply motivateddecisionmaking to entities other than the to comply by the threat of permit revocation.permitting agencies, they may be somewhat Individual bank permits are much moreless concerned than MOAs with the resolution problematic, since revocation of the bankof interagency disputes. To the extent that a permit is a weak sanction in cases of totalcredit producer or bank manager's exercise of bank failure, and it would be unfair to penalizethis delegated power involves it in a dispute the client/developer who purchased mitigationwith the permitting agencies, such disputes from the bank in good faith. In such cases,fall under the category of enforcement, which fines or other legal penalties against the bankis discussed briefly next, and separately in permit holder probably are the only effectiveChapter Eight. sanction.

The fourth, and perhaps most important, Section 404 general permits may beconsequence of the different forms of enabling modified or revoked at the discretion of theinstrument is that each necessarily will have Corps of Engineers, but these sanctions alsodifferent enforcement mechanisms. The may prove to be problematic if numerousPlacer County [California] banking system transactions have been carried out under theuses MOUs as the enabling instrument for general permit, with only a few sitespublic credit producers, and "operations constituting enforcement problems. In theseagreements" for private credit producers; the cases, Section 404 administrative and legalterminology suggests that the county draws penalties may be invoked against the specificsome distinction between interagency violations. Statutory and regulatoryagreements and ordinary contracts. On the instruments likewise can provide for their ownother hand, several memoranda of agreement enforcement, either by following the federalor understanding between agencies and Section 404 model or by incorporating otherprivate credit producers appear to assume legal mechanisms and penalties.that they will be enforced as contracts: theSpringtown Natural Communities Reserve A traditional corporate structure wouldMOU provides for its own enforcement under impose a number of fiduciary duties on the"contract provisions of U.S. and California law corporate officers and board members to actin a court of competent legal jurisdiction," and in the interests of the corporation and operatethe Neabsco [Virginia] Wetland Bank draft it according to the charter and bylaws; theseMOA has similar choice-of-law language, a are enforced through suits in equity or, inmerger clause and a severance clause, all of some cases, by the state's attorney general.which are staples of contract law. It is unclear how this form might be adapted to

Enforcement of permits generally is that the interests of the corporation can behandled through the same administrative made to coincide with the interests of thechannels that issued the original permit, and agencies; and second, that an agency wouldthe governing statute or regulation often will have legal standing to enforce these fiduciaryprescribe procedures for penalties, including duties. These difficulties suggest that thefines and permit revocation or modification. corporate form would need to be modifiedIndividual development project permits through a wetlands-specific "corporate code,"present the strongest case for strict or that it at best can only serve as an adjunctenforcement, since the party issued the to one of the other forms of enablingproject permit usually will be the same party instrument.responsible for success or failure of the

the mitigation banking context to ensure, first,

43

CHAPTER FIVEMITIGATION ALLOWABLE

While onsite mitigation is shaped both by restoration and enhancement is less clear-cut.the regulatory framework and extensive Restoration is the attempt to replace aexperience, the parameters of mitigation panoply of wetland functions and valuesbanking are not yet well defined. The where they had ceased to exist, or had existeddetermination of what mitigation is "allowable" only in a degraded state; while enhancementin a banking system is critical to both its generally is a less comprehensive effort thatecological and economic performance. strives to augment or add one or more

This chapter examines some of the criticalissues involved in defining mitigation for thepurposes of banking. What types of mitigationshould be recognized? How complete shouldit be prior to recognition of the credits? Howcan use of a mitigation bank be evaluatedagainst onsite mitigation? What developmentactivities should be authorized to obtaincompensatory mitigation from banks? Theseand other questions are the subject of greatscrutiny by numerous federal and stateagencies. Current banking experience, aswell as agency guidance documents, suggestpossible answers to these questions.

A. Types of Mitigation Allowable

This section examines the bankingactivities that regulators will recognize asproviding compensatory mitigation and theconditions attached to such recognition. Itexamines, in turn, mitigation methods,onsite/offsite mitigation, banks' service areas,requirements for in-kind or out-of-kindmitigation, and when banking mitigation mustbe advance mitigation.

1. Mitigation Methods

There are four methods of compensatorywetlands mitigation: creation, restoration,enhancement, and preservation. Creation isthe conversion of upland or aquaticenvironments to wetlands, while preservationis the provision of legal protection to existingwetlands that might otherwise be lost to lawfuldevelopment activity. The distinction between

wetland functions or values.

Identification of different mitigationmethods raises issues of priority among them.Restoration of previously existing wetlands isthe preferred choice of all federal and moststate mitigation policies. This is primarily dueto the uncertainty presently associated withwetland creation and concern about theecological wisdom of enhancement. Whilethere are no studies explicitly comparing thesuccess or failure rates of restoration withthose of creation, the Florida DER studyexamining the overall success of mitigationefforts found better, albeit limited, successwith restoration projects than with creationprojects, which had a failure rate of nearly 100percent [Redmond 1990]. The NationalResearch Council concluded that fundingpriority should be given to restoration ofdamaged wetlands over creation because ofrestoration's superior chances of success[NRC 1992]. In Wetland Creation andRestoration: The Status of the Science [Kuslerand Kentula eds. 1990], the most definitivework to date on this subject, the editorssuggest that restoration --

will have a greater chance ofsuccess in terms of recreating thefull range of prior wetlandfunctions and longtermpersistence than wetland creationat a non-wetland site. This is dueto the fact that preexistinghydrological conditions are oftenmore or less intact, seedstock forwetland plants are often

Mitigation Allowable

44

available, and fauna may banked parcels are larger and hencereestablish themselves from potentially ecologically significant. And theyadjacent areas. offer the possibility of extending legal

Still others have argued that restoration is areas that are otherwise vulnerable to lawfulpreferable from both an ecological and an destruction (e.g. through non-§ 404 activitiesethical perspective: "Restoration of degraded like wetland draining, exempt activities likesystems should be the first option to be farming and timbering, or dredge and fillconsidered since it would reestablish the activities that are often authorized undernatural order and ratio of community general or individual permits).composition in the regional ecosystem."[Kruczynski 1990]. Awarding credits for preservation is justly

Enhancement has not been widely ecologists because it does not replace lostanalyzed, in part because of its varying wetland values and functions -- it allows a "netdefinition; many banks use the term to mean loss." In spite of these concerns aboutthe same thing as restoration. However, preservation, in some cases preservation haswhere enhancement has been distinguished been accepted by regulators. The Companyfrom restoration, it has been regarded as a Swamp mitigation bank in North Carolina, formitigation method that requires caution. The example, consists solely of credits recognizedintroduction of new functions or the stimulation for preservation of a mature hardwood swampof particular functions over others raises some that otherwise would have been lost toof the same concerns as wetland creation -- logging, and that would have been technicallycan the new or enhanced functions be impossible to restore or re-create, at least withsustained and are they ecologically sound? In current technology. Of the 46 existingsome cases, enhancements have taken the mitigation banks, only Company Swamp, theform of managing for preferred wildlife Port of Pascagoula bank, and Fina LaTerrespecies. This may not adequately are "preservation" banks. Some view the Finacompensate for losses of diverse wetland LaTerre bank as enhancement--credits resultfunctions. It also may result in the loss of from maintaining the existing wetlands whichcertain functions formerly performed by the otherwise would be destroyed in the near"enhanced" mitigation site, such as habitat for future.non-preferred species.

Preservation is the most controversial preserved wetlands within a large bank thattype of mitigation. In general, the issue of may be largely the result of restoration,preservation as an acceptable mitigation creation, or enhancement is fairly common. Inmethod arises only in the context of offsite these cases, credits are generally attributed tomitigation. Onsite "preservation" is not the bank, recognizing the ecologicalregarded as compensatory mitigation, but is contribution of those preserved wetlands tosimply a required product of sequencing. the banked wetlands and the contribution ofBecause the requirement to "minimize" the banked wetlands to the value of the preservedimpact of the development project means to wetlands. preserve onsite wetlands, it cannot, therefore,produce "credits" that can offset wetland If preservation is recognized as anconversions. acceptable mitigation method, what criteria

In the banking context, however, may be acceptable? EPA Region IV's draftpreservation becomes a legal possibility as wetland mitigation banking guidance allowswell as potentially more attractive. The preservation if there is an "imminent threat" to

protection to rare or unique wetland types or

discouraged by natural resource agencies and

It should be noted that inclusion of

should be used to identify instances where it


45

the mitigation site. Unfortunately, however, an does the 1990 Corps/EPA Mitigation MOA.imminent threat can sometimes bemanufactured in order to provide impetus to In summary, restoration remains therecognize mitigation. Rarity of the threatened preferred wetland mitigation method forwetland may be a better criterion; so is the regulators. It has advantages on technical,length of time required for full or partial ecological, and compensation grounds. Thefunctional replacement. Rarity and length of choice of mitigation method will depend in parttime to functional replacement are recognized upon the ecological goals of the bankingas criteria for allowing preservation under the program. Banking schemes targeted at re-EPA Region V draft banking guidance and that creating the historical assemblage of wetlandsof the Corps of Engineers' Galveston District. necessarily will favor more restoration, while

Acceptance of preservation as a preferred-function systems, such as improvingmitigation method ordinarily requires at least erosion control.the establishment of a monitoring andmaintenance program. Simply preserving awetland does not guarantee that it will remaina healthy ecosystem. Many wetlands facethreats from invading exotic species, such asthe Melaleuca tree in Florida, that can rapidlydestroy wetland functions and values --particularly their value as habitat and food forwetland-dependent species. Preservationalone, without the necessary efforts andfunding to monitor and maintain the wetlandsite, may result in diminished values andfunctions over time.

Current guidance documents and existingbank agreements offer few comprehensiveviews on mitigation methods. While mostprefer restoration to other mitigation methods,only EPA Region IV's draft guidancetranslates that preference into differentialcompensation ratios. It sets compensationratios (mitigation wetlands required comparedto wetlands lost) for restoration at 2:1,creation at 3:1, enhancement at 4:1, andpreservation at 10:1. EPA Region IX's finalguidance and EPA Region V's draft guidanceprefer restoration to other mitigation methods.Restoration is also the preferred option in themulti-agency northeast regional guidancedrafted by FWS, the Corps, and EPA RegionIII; this draft guidance bars preservation as amitigation method. The U.S. Fish & WildlifeService's national guidance prefersrestoration. The Federal HighwayAdministration's draft model MOA does notaddress mitigation method or type; neither

wetland creation may be better suited to some

2. Onsite Mitigation or Offsite Banking

Whether, and when, a developer may usecredits from a mitigation bank rather thanperforming onsite mitigation is a critical issuefor banking programs. Ecological reasons canbe marshaled to support either onsite oroffsite mitigation, depending heavily uponcase-by-case factors. Most regulators nowrequire developers to perform onsite mitigationwhere it is feasible to do so. Given the weakrecord of much onsite mitigation and thepotential advantages of banking, thispreference may need to be reconsidered.

It is true that onsite mitigation constitutesthe most localized replacement of wetlandfunctions and values -- assuming that thesecan be fully replaced onsite given thehydrological, topographic, and adjacent-useconditions. The Association of State WetlandManagers, in a draft statement of bankingneeds, states: "Certain wetland functions andvalues such as flood conveyance are uniquelyon-site and destruction of such values on-sitewill cause nuisances and threaten adjacentlandowners." Many development projects donot completely obliterate the wetlands onsite,often leaving a viable remnant wetland thatcan be restored, enhanced, and protectedwith buffers from onsite development. As aresult, preferences for onsite mitigation arereflected in a substantial number ofdocuments.


46

For example, Oregon's wetland mitigation much more attractive option to regulators, andbanking statute allows use of a wetland thereby lead to an undue willingness tomitigation bank only where "all onsite sacrifice known, onsite, localized wetlandmitigation methods have been examined and values for offsite mitigation.found to be impracticable." The draft63

banking guidances of EPA Regions IV and V The sequencing issue is nothave similar requirements. The final banking determinative, however; banking can coexistguidance of Region IX simply expresses a with sequencing [see Chapter 9]. The real"preference" for onsite mitigation; while the issue is whether and to what extent theCorps of Engineers' Galveston and Omaha preference for conducting compensatoryDistrict draft guidances prefer onsite mitigation mitigation onsite should apply regardless ofunless there is a strong "ecological" reason for whether it comes at the end of a sequencingoffsite mitigation. In contrast, the multi- process or at the beginning.agency northeastern draft mitigation bankingguidance takes no position on the As noted in Chapter 3, the (primarilyonsite/offsite issue; neither does the ecological) reasons for favoring onsiteDepartment of Transportation's model mitigation do not appear to justify a categoricalagreement. requirement for onsite mitigation to the

Sequencing is also relevant to the issue of Indeed, regulators could, in someonsite mitigation versus offsite banking. circumstances, reasonably elect to reverseSequencing requires that a proposed impact the standard presumption and instead requirebe avoided or minimized before compensation use of mitigation banking as the norm --is allowed. If onsite wetlands are preserved to particularly for smaller projects or for projectsthe greatest extent feasible, it may be wise to that would likely produce adverse impactsaccomplish the remaining compensatory upon onsite mitigation wetlands. This wouldmitigation onsite. perhaps maximize the ecological benefits

However, as noted above, the onsite mitigation requirements to these project sites.compensatory wetlands may suffer from theadverse effects of the surrounding Alternatively, regulators could treat onsitedevelopment. Or, the minimization mitigation and offsite mitigation bankingrequirement may lead to the preservation of equally, and leave the decision between themnon-viable remnant wetlands onsite, with the up to the developer. If banking is adopted onremaining compensation credits being a widespread scale, sequencing is retained,purchased from an offsite bank. Some and if the assumptions about economies ofwetland managers argue that, in such scale are correct, it seems likely that thisinstances, it may make more sense not to "laissez faire" approach would yield resultspreserve any of the onsite wetlands and quite similar to requiring bank use for smallinstead to take full advantage of the projects and onsite mitigation for large ones.opportunity provided by banking to create or This approach has the additional advantage ofrestore an ecologically self-sustaining system avoiding any problems that may inhere inelsewhere. Others, concerned with "steering" clients to specific banks.preserving natural wetlands, have expressedconcern that mitigation banking will short-circuit the sequencing process. They fear that Onsite mitigation could continue to bebanking may make compensatory mitigation a

exclusion of offsite mitigation banking.

64

resulting from applying compensatory

O.R.S. § 196.620.63

64

preferred in certain classes of situations, such aswhere the wetland being destroyed could only bereproduced on the same site; or where the only way tosave the remaining wetland was through onsiterestoration of adjacent wetlands.


47

Finally, regulators could determine onsite for development projects within the sameor offsite mitigation on a case-by-case basis. "tributary, reach, or subbasin as the mitigationWithout a presumption, regulators would base bank," and that credits from an estuarinetheir decisions on what is ecologically most mitigation bank may be used only within theadvantageous, having institutionally leveled same estuarine system. The Oregon lawthe playing field so that neither option would further places an outer limit on use of credits,be financially advantageous to the developer. barring their use for projects located moreFor example, a wetland dredge or fill activity than 40 miles from the bank. The Minnesotathat destroys significant onsite flood-water highway department bank requires theretention but leaves a remnant wetland would mitigation to occur within the same highwayargue for onsite restoration or enhancement to district. There are nine such districts;augment local flood storage capacity. however, they are not set up to reflectHowever, destruction of a locally abundant hydrologic or other ecological boundaries.wetland that affects primarily wildlife habitat The new Millhaven (GA) bank is limited tocould be mitigated through a bank that "Chatham County, Georgia and the Savannahreplaces similar habitat nearby in a more River Basin north to the limits of the Coastalprotected setting or that, through Plain." Other banks have service areas ofcompensation ratios, replaces the wetland varying sizes.with another wetland type more locally rare orvalued. By leaving the decision up to the The relevant service area is bestregulator, the offsite/onsite determination can assessed in the context of areawide planning.be made to follow the goals of a Absent some limitations on service area, andcomprehensive regional plan. some understanding of the landscape-scale

3. Proximity Requirements

As discussed in Chapter 3, the location ofwetland functions can be as important as thecharacter of the functions themselves. Thisissue is at the heart of the onsite/offsitedecision. It also affects decisions about thegeographic range in which developmentprojects may acquire and use credits frommitigation banks.

While a nationwide or multi-state bank of been for the replacement of convertedfreely transferable credits would be the most wetlands with wetlands of the same type.economically attractive to developers, it would This preference is logical particularly in thenot serve many of the critically important goals context of the usual onsite compensatoryof mitigation. Therefore, every bank studied to mitigation -- the values and functions that aredate has a much narrower service area. being lost should be replicated as nearly asWhile not all banking instruments define this possible.service area, in general it is limited to relatedhydrologic units such as watersheds or sub- When removed from the onsite context,basins. See Appendix B (matrix of existing however, the issue of wetland compensationbanks showing service areas). type is less clear. The notion that in-kind

The Oregon wetland mitigation bankingstatute states that credits from a freshwatermitigation bank may be used only to mitigate O.R.S. § 196.620.

65

effects of mitigation banking, the bankingprogram is unlikely to serve ecological goals.If there is no areawide plan, the wisestapproach to ad hoc approvals of banks is ahydrologically based or habitat basedapproach to the service area. In this regard,the Oregon banking law offers a reasonablemodel.

4. In-Kind or Out-of-Kind Mitigation

The usual preference of regulators has

replacement is desirable on a local or regional

65


48

basis does have some validity. Habitat directly to the environment. Advancevalues, or flood control capacity are being lost mitigation can produce a short term net gain inand should be replaced. On the other hand, wetland values and functions -- there willin-kind replacement essentially requires always be a temporary surplus of wetlandcompensatory mitigation to maintain the functions and values as credits await maturitycurrent inventory of wetland values and and sale. Advance mitigation assures that nofunctions regardless of whether these are the debiting can take place until existing wetlandones most needed ecologically. Indeed, it functions and values can replace those thatrequires replication of what may be a will be lost, thus avoiding any temporal loss.significantly degraded or distorted inventory. Advance mitigation also diminishes the risks

Out-of-kind mitigation, quite feasible with replacement wetlands are in existence,banking, provides a potential opportunity to thereby negating the need for complex"trade up" -- to improve upon the wetland financial and enforcement arrangements toinventory through the opportunity provided by cover potential failures.compensatory mitigation requirements.Nevertheless, a number of banking schemes However, not all banking programs requireand guidance documents strongly discourage advance mitigation. The primary argument foror prohibit out-of-kind mitigation. EPA Region allowing banking with concurrent mitigation (orV, for example, suggests in its draft guidance with less than full functional replacement atthat it would require a compensation ratio of the time of debiting) is that this is the usualup to 5:1 for out-of-kind mitigation. The 7,000- practice with onsite mitigation. If fullacre Fina LaTerre (LA) bank is limited to functional replacement is required in advancetransactions that provide in-kind mitigation. of credit recognition for banks but not forSome other banks offer some flexibility by onsite mitigation, the argument goes, banksdefining in-kind broadly -- freshwater wetlands will be underutilized or competitivelymust compensate for freshwater wetland disadvantaged. An additional consideration islosses; estuarine wetlands for estuarine that credit producers may not invest inlosses. banking if they cannot achieve any return on

The decision requires consideration of the years after their costs are incurred. Thisgoals of the banking program. Absent consideration is particularly pertinent if theadoption of specific goals that would provide expectation is that mitigation banks willa consistent rationale for selecting out-of-kind produce some of the longer-maturing,mitigation, an in-kind requirement makes ecologically significant wetland types that aresense as a default standard. being lost. There are, moreover, several

5. Advance Mitigation

Wetland mitigation banking is generallyconsidered to be advance mitigation.Compensation credits are not recognized untilthe credit producer can demonstrate that thebanked wetlands have achieved some level offunctional replacement. This is the approachtaken in most policy and guidance documentsand by a number, but by no means all, of theexisting banks.

The benefits of advance mitigation accrue

of mitigation failure involved in debiting before

their investment in restoration until many

issues raised by requiring banks to achieveadvance mitigation. What constitutes"advance" mitigation is hard to define.Because of the variation in wetland systems,full functional replacement could mean 100years for a hardwood swamp or three yearsfor a wet meadow. This extreme range doesnot fit neatly into a networked banking system.

There are several potential means toresolve these difficulties. Full functionalreplacement could be viewed as the upperlimit of what advance mitigation means. Thelower limit could be defined as the work


49

necessary on the part of the credit producer to banking have explored the notion that someproduce a functional wetland -- design, types of development projects may be moreconstruction, establishment of the hydrology, suitable for banking than others. One of thesoil placement, planting if necessary -- issues is whether certain restrictions reflectingeverything but the time necessary for the this suitability might promote better use ofmitigation project to reach functional maturity. banks. Some financial guarantees and/or provisionsfor maintenance and monitoring can Commonly nominated projects for use ofsupplement this initial performance. See banking include linear projects, such as roadsChapter 8. and highways; fragmentary projects whose

Adjusting credit ratios and establishing "postage-stamp" mitigation projects doomedecological success milestones could also link to ecological failure; and projects that arebank mitigation to the purposes served by currently exempt from mitigation requirements,advance mitigation. For example, the Chicago such as prior converted croplands no longerHomebuilders Association has proposed that regulated by the Corps [RGL 90-7] orbank clients pay a premium for credits expedited under the nationwide permits.available immediately that have not achievedfull functionality. Under this scenario, the Linear projects -- recommended by thehigher price for the immediate credits covers Federal Highway Administration and the Corpsthe risk of failure, and provides funding for any as suitable projects for banking -- have amidcourse corrections or rehabilitation natural appeal because they create impactsneeded. Another approach to allowing use of that are unavoidable, at least in comparisonless than fully functional credits for mitigation with many other development projects. Linearis to require a higher compensation ratio for projects can, however, stretch over thecredits used before they reach full functional landscape for miles, involving multiplereplacement (e.g., the Weisenfeld Bank in jurisdictions and wetland types. This mayFlorida). create difficulties associated with multiple land

Currently, advance mitigation is not with in-kind replacement where multiplerequired for most onsite mitigation. As a wetland systems are affected. Impacts mayconsequence, the many ecological and be many miles from the nearest mitigationefficiency advantages of banking may go bank. underutilized because of the competitivedisparity. Leveling the playing field by There has also been some considerationrequiring advance mitigation onsite is one of limiting the size of wetland developmentsolution; another would be to apply to onsite projects allowed to use mitigation banks. Amitigation the same kind of adjustments in number of existing and proposed mitigationcompensation ratios used by some banks to banks do not allow debits of over five acres.account for temporal losses in wetland The intention, perhaps, is to preserve banksfunctions [see King 1991]. In any event, the for use by projects where onsite mitigationadvance mitigation issue must be considered costs would be exorbitant, or where onsitein the context of both banking and onsite mitigation is unlikely to reach a threshold ofmitigation in order not to create unintendeddisincentives.

B. Development Project-RelatedRestrictions

A number of analyses of mitigation

small acreage is likely to result in onsite

66

ownership, issues of proximity, and difficulties

Some of the newly authorized nationwide66

permits (NWPs) do carry mandatory mitigationrequirements that would make them suitable forbanking, but most of the 36 NWPs issued to date donot. These others could be modified to requiremitigation if banking became more available.


50

ecological viability. More likely, as is the case ecological goals. Many current banks appearin Oregon, the limit is imposed to avoid to serve only economic or efficiency goals,consuming a large quantity of the limited with a nod in the direction of ecology byavailable banking credits. The proposed requiring in-kind replacement of destroyed67

Prince George's County bank in Maryland wetland values at no less than a 1:1 ratio.does not prohibit larger projects outright but Many proposed banks plan to operate asmakes the process for using a bank much unrelated entities, satisfying credit demandsmore rigorous for parcels of one acre or more. as they arise without reference to anySuch a limitation may also make sense in particularly ecological objectives. But this isorder to heighten the scrutiny of wetland not the only possible approach to banking.losses that may have a profound local impactthat requires mitigation onsite. Banks present an opportunity to deal with

It may be appropriate to phase in way that onsite, project-specific mitigationmitigation banking for different types of does not. Banks can be sited in critical areas,development activities (e.g., limiting them can seek to produce wetland types ofinitially to mitigation for public works projects, particular value or concern, and can focusor conversion of agricultural wetlands). Once compensation for disparate small-scale lossesbanks have established a track record, on parcels of genuine ecological significance.perhaps the range of development activities Ecologically based approaches may alsothey can produce credits for can be provide bases for reconciling decisions aboutbroadened. Nevertheless, current banking onsite mitigation, offsite banking, andexperience does not suggest that such a fulfillment of the sequencing requirements.phase-in is necessary. Indeed, theprevalence of highway banks suggests that Use of planning approaches is discussedsuch a phase-in may have already occurred. in Chapter 10. Planning implies the

C. Mitigation Goals

Wetland mitigation banks need not serve

ecological issues on a landscape scale in a

establishment of mitigation goals. It appearslikely that any determination of "mitigationallowable" undertaken in the absence ofclearly articulated goals is likely to producemixed results on the ground.

O.R.S. § 196.620(8).67

51

CHAPTER SIXMITIGATION BANK SITING

Siting is a critical component of any banking system is ultimately to be driven bywetlands mitigation banking effort. the private decisions of credit producers and

To a wetland ecologist, bank siting is a operate should be designed to assure thatmatter of maximizing the values and functions ecological concerns are captured in sitingof a replacement wetland in a given region by decisions. The actual method of site selectionchoosing the ecologically optimal site. This may vary (e.g., prescription of particular sites,might involve applying siting criteria, such as criteria for site selection, performancepre-existing wetlands hydrology or adequate standards for offered sites, preferential creditbuffer space, that would limit available ratios for certain siting characteristics), but thechoices. On the other hand, developers of a system should reflect the underlying goals ofprivate, market-driven bank (and prospective the program. In addition to long term land useclients of a public or private bank), might and planning goals, most siting processes willargue that a wide range of available sites and need to address the following goals:flexibility in siting criteria should be the primaryfeatures of a banking system so that supply (1) Maximizing the potential forand demand can operate unimpeded. ecologically successful replacement of

Host communities, neighboring wetland values and functions, addressingcommunities, and adjacent landowners will at least: (a) the site's potential to create,have their own priorities for siting banks and a restore, enhance, and maintain adequatestrong stake in where a bank is sited for a wetlands hydrology; (b) the presence orvariety of reasons. Establishment of a bank availability of wetland soils, vegetation,may represent, variously, the loss of and wildlife species; and (c) protection ofpotentially significant property taxes, creation the site from harmful adjacent land uses.of a community amenity, an addition to thevalue of adjacent properties, an attractive (2) Providing enough siting flexibility tonuisance for wildlife, a significant alteration in ensure the participation of private creditwater availability, or impacts to adjacent land producers (if a private banking scheme isuses. Finally, the public and public agencies desired), and to accommodate the needssanctioning banking have a stake in siting to of public resource agencies that may wishmaximize conservation of wetlands. to accomplish multiple objectives.

This chapter identifies goals for productive (3) Minimizing the potential for publicbank siting, reviews policies and current opposition and adverse impacts. This canpractices on bank siting, and develops a set of include design trade-offs, an inclusive siteconsiderations to guide siting determinations. selection process, and assessment of

A. Siting Goals

Although most current practice is ad hoc,the identification of goals is important inmitigation bank siting. Mitigation banks areattractive chiefly because they offer anopportunity to make compensatory mitigationmore significant ecologically. Thus, even if a

clients, the framework under which they

current and future land uses.

(4) Consistency with local, regional, orstate wetland or water quality plans orcomprehensive development plans.

Mitigation Bank Siting

52

B. Policies on Siting Mitigation Banks

While no national policies or regulationsexist to guide bank site selections, a numberof existing and draft guidance documents doaddress siting. While these guidances havemany insights in common, they differfundamentally in the specificity andprioritization of siting criteria that, in turn,influence how useful they can be to banksiting efforts.

1. Federal Guidance

The multi-agency draft guidancedocument recently developed by the NewEngland offices of the Fish and WildlifeService, the Army Corps of Engineers'Baltimore District, and EPA Region III,provides general criteria for siting. Itrecommends selection of bank sites based on:restoration or creation potential, which in turndepends upon soil type and water availability;existing resource value, size, location andcost; adjacent land uses; presence ofcontaminants; potential for human intrusion,and long-term site protection. The draftguidance also recommends locating banks inthe same watershed or hydrological sub-basinas the impact areas, and particularly on formerwetland sites. The guidance does notaddress who is responsible for choosing thesite, and does not prioritize among thesecriteria.

EPA Region IX's final mitigation bankingguidance provides more specific siting criteriaand grants the bank operator (the creditproducer in our terminology), whether privateor public, responsibility for choosing a banksite. The guidance recommends siting withinthe same watershed or hydrological sub-basin, and prioritizing sites that are adjacentto high value habitats protected from futuredevelopment and compatibly managed. Theguidance gives priority to restorable wetlandssites, particularly those with minimal existinghabitat values. Habitat for rare or threatenedspecies populations is one of several specificcriteria listed. Like the northeast multi-agency

draft guidance, Region IX's final guidanceprovides a laundry list of possible siting criteriabut does not prioritize among them. Theguidance emphasizes habitat values morethan other wetland values and functions.

EPA Region IV's more recent draftbanking guidance closely follows that ofRegion IX, with a few exceptions. Generalcriteria for siting recommend locating banksnear high value habitats to increase the valueof bank habitat. Significantly, the draftguidance advocates the use of corridorsbetween banks and other habitat or usingbanks as a corridor to connect existing habitatpatches. It also cautions credit producers tosite and design banks to avoid negativeimpacts to existing habitats. Site selectioncriteria provided by the draft guidance addressbiological considerations first, followed bysocial, financial, and long-term protectionconsiderations. These criteria include habitatand land use development trends, habitatdiversity, regional goals for replacing specificwetland types or values, and habitat forspecies of special concern. Other criteria givepreference to degraded watersheds, sitesupstream of floodprone areas, sites with highrestoration success potential, sites that serveas wetland-upland corridors or buffers, andsites in areas with high nonpoint sourcepollution.

EPA Region V's draft guidance onmitigation banking [August 1992] is morespecific, ranks its criteria for siting in order ofimportance, and provides illustrations of each.Of highest importance are sites that havecompletely lost all functions but where thefunctions can be restored to their originalcondition; these include "prior converted"wetlands; after these, severely degradedwetlands such as "farmed wetlands" with highrestoration potential should be chosen.68

Next, upland sites adjacent to existing

These wetland categories are designated by68

the Agriculture Department's Soil ConservationService in connection with the federal "swampbuster"program. 16 U.S.C. § 3821 et seq.


53

wetlands where regrading would not harm theadjacent wetland are preferred for wetlandcreation. After these, the guidancerecommends upland sites in good locationswithin a watershed for wetlands creation.Responsibility for choosing a site would begranted to a committee comprised ofinterested federal, state, and local agencies.

The Corps of Engineers' Galveston(Texas) District guidance establishes apresumption in favor of banks that will requirelittle long-term maintenance and will be"ecologically and administratively self-sustaining." This general requirement isconsidered a prerequisite to bank approval.The guidance also requires a pre-approval sitesurvey to determine if there are any historicproperties that could be affected by the bankestablishment, and may require anarcheological survey. More specific sitingrequirements in the Galveston guidanceinclude locating a bank within the samegeographic area as the wetland loss sites,which could be the same watershed, sub-basin, or regime. Bank selection is influencedby the site's restoration or creation potential,with preference given to sites offering goodrestoration potential. Other considerations insiting include existing resource value, size,location and cost, adjacent land uses,presence of contaminants, potential foralteration, and "the ability to protect functionsover the long term." The guidance lists threetypes of land ownership that may beconsidered for bank sites -- state or federallands with restoration or creation potential;private land with subsequent transfer to apublic or non-profit manager; and easementson private lands. In contrast to EPA RegionIV's draft guidance, which prohibits banks onfederal lands except under limitedcircumstances, the Galveston Districtguidance lists public lands as desirable banksites.

In September 1992, the Corps' Omahadistrict issued a draft guidance that is similarto the Galveston guidance, including the samebases for bank site selection andrequirements for a site development plan.

2. State Guidance

A number of state agencies havedeveloped their own guidances for bankingthat address siting considerations. One of themost thorough was developed by theWashington State Department of Ecology[Castelle 1992], which presents asophisticated series of siting criteria thatexamine land ownership, adjacent land uses,and tradeoffs in losing upland functions andvalues when converted into wetlands. Theguidance also strongly recommendsinventorying an area for good candidate banksites, and developing siting criteria as acooperative effort among agencies,developers, conservation groups, propertyowners, and others: "Because bankingprograms often seek to balance economicgrowth with natural resources protection,selection criteria are best determined by acooperative review team..."

Of the nine states that authorize mitigationbanking by statute [see Chapter 2], fewinclude any guidelines or references to sitinggoals or criteria. Most defer the issue toimplementing regulations which, in turn, sayrelatively little. Oregon's Mitigation BankingAct includes criteria that should be consideredduring the site selection process, including:historical wetland trends, current and futureloss rate estimates, and potential contributionsof the proposed site to wildlife, fisheries,outdoor recreation, surface and groundwaterquality and quantity and flood control,research values, and regional economicneeds. These criteria, while rather general,incorporate a broader array of wetlandfunctions than most criteria at the federal levelor in existing banking agreements.

The California Fish & Game Department'sdraft 1991 guidelines for mitigation bankingoutline requirements for siting, including arequirement that banks "be designed tosupport wetland habitats likely to be impactedwithin 40 miles of the bank so that in-kindcompensation for wetland impacts can beachieved." New Hampshire DOT's DraftWetland Mitigation Banking Action Plan


54

[October 1990] calls for a state survey of plan that incorporates a diversity of habitatpotential sites for wetland banking as an early types for wildlife and to maximize wetlandstep toward establishment of a statewide functions; buffer areas; a "maximum ofbanking system. Wisconsin's DOT and wetland area, but not without regard forDepartment of Natural Resources, in an upland inclusions;" provision for public access;amended interagency cooperative agreement aesthetically pleasing vistas; a preference foron banking [November 1990], state a native species; an accounting of the types andpreference for sites not already owned by the sources of soils; and design and maintenanceDNR, and sites located near the development- procedures that minimize the need for activeimpacted wetlands or at least within the same management.watershed.

3. Non-Governmental Guidance

The Chicago Homebuilders Association,which has proposed a mitigation bank for theregion, has developed a model Memorandumof Agreement that includes detailed sitingcriteria applicable to the bank and as a modelfor similar banks elsewhere. It offers thefollowing criteria for evaluating and approvingbank sites:

! sites containing highly disturbed landsor prior converted wetlands, with apreference given to sites with highrestoration potential;

! sites with no "high quality wetlandspresent" where creation is the mitigationmethod;

! sites containing "some upland area toprovide diverse habitat";

! sites where adequate hydrology can be"secured;"

! sites near or adjacent to large public Most mitigation banks in existence todaylandholdings to increase effective bank were not sited according to the criteria listed insize; the guidances discussed above. Many were

The model MOA also recommends that arbitrary siting decisions. With many DOTsites should be evaluated to assure that they banks, the state agency simply mitigates onhave no hazardous waste; that no federal or land it already owns, and is thereby limited instate listed endangered or threatened species its opportunity. Other banks were createdwould be adversely impacted; and that they primarily because of the bank siteswould have no adverse impacts on other "high themselves. The Company Swamp bank, aquality ecosystems." The model MOA would forested wetland in danger of logging, wasrequire banks to have a restoration or creation used as a bank site because it was

At its best, the Homebuilders' modelincorporates the most far-sighted criteria fromthe federal guidances -- buffers, proximity toother natural lands, sites with high restorationpotential -- and adds a number of its owninnovative criteria, particularly its emphasis onhabitat diversity, native species, aestheticappeal and public access. On the other hand,a number of the model's criteria raisequestions. The prescription for upland bufferdoes not suggest an upper limit, raisingconcern that developers may seek tomaximize upland at a site at the expense ofcompensatory wetland. In addition, limitingwetland creation to sites with no "high-qualitywetlands present" raises the prospect thatsites with "low-value" wetlands may becometargets for creation or -- more accurately --conversion from one type of wetland toanother. Conversion provides no additionalcompensatory wetland acres and displacesexisting wetland functions and species; it is,for these reasons, expressly barred in EPARegion V's draft banking guidance.

4. Existing and Proposed Banks

the product of special circumstances or fairly


55

considered important enough to preserve. habitat value of wetlands but within theThe proposed Springtown (CA) mitigation framework of comprehensive regional goals.bank was a housing development site thatwas discovered to be endangered species Under Placer County's draft guidelines,habitat; wetland mitigation banking was bank sites can be proposed by any interestedconsidered a way to salvage some value. party, but may be approved only by the

The Bracut Marsh (CA) site was chosen must provide detailed information on the site,with ecological principles in mind. Restoration including a habitat delineation identifyingof a former large marsh site was designed to habitat type, acreage and values present. Themitigate for the loss of many small "pocket guidance further states that delineations ofmarshes" nearby. Though not technically inwetlands must meet the definition of wetlandskind, because pocket marshes sustain provided in the guidance and correspond todifferent species assemblages than a single the seven wetland subsystems listed in thelarge marsh, habitat replacement was a document as occurring in Placer County,guiding principle, as well as the fact that the including three subsystems of ripariansite appeared to have high restoration wetlands; two of palustrine wetlands; and twopotential. However, site suitability was poorly of lacustrine wetlands. The guidance isdiagnosed and the resulting wetland helpful in describing where these systems arerestoration suffered from poor soils, poor generally found in Placer County, and wherewater quality, and other defects resulting, in they are located in relation to currentpart, from the site's former uses. development and growth patterns. However,

In Minnesota, the state highway habitat replacement, generally onlydepartment has approved some 40 scattered development activities in palustrine systemssites to mitigate highway construction. Sites will be considered suitable for mitigationcan be proposed by "any interested party," through banking and, as a result, bank sitesincluding private landowners, with final are likely to be established only whereapproval granted by the DOT. Siting criteria palustrine wetlands can be restored orinclude preference for sites within highway created. rights-of-way, adjacent to rights-of-way, andstate or federal land over private lands. Cost-effectiveness of "developing the area as acredit site" is a "major factor" in choosing banksites. Many of the sites are less than fiveacres in size, not enormously different inecological impact than project-specificmitigation might be.

The proposed Placer County (CA)mitigation bank addresses siting criteria in itsdraft guidelines. The guidance explicitlyrecommends establishment of "smaller" banksites that provide localized replacement ofwetland values and functions. The guidancerecommends initially a bank in the county'seastern and western regions, and adds thatsites should be chosen to accomplishregional, state, federal and international fishand wildlife goals -- a clear emphasis on the

county. Nominators of potential bank sites

because of the guidance's emphasis on

C. Siting Considerations

The criteria listed in federal guidance andexperience from banks to date suggest anumber of factors that must be consideredwhen choosing a bank site, not the least ofwhich is having well-defined and prioritizedsiting criteria in place before site selection. Inaddition, establishing a method for siteselection, determining who is responsible forsite selection, and providing for a wide rangeof input into the selection process will improvechances of bank success down the road. Thefollowing describe issues that should beaddressed in any bank siting plan.


56

1. Jurisdictional Issues

Jurisdictional considerations must beincorporated into any site decision. Bankagreements often involve multiple agenciesand jurisdictions. And because the servicearea of banks is often ecologically defined --within a single watershed, for example -- it willlikely overlap more than one co-equalgovernmental jurisdiction (e.g., two counties,six local governments). Different jurisdictionsmay have differing priorities for a mitigationbank, and priorities may sometimes clash.For example, upstream communities may wishto site a bank for improved habitat, but indoing so may reduce instream flow to adownstream community. Downstreamcommunities, in siting a bank to controlflooding, may alter the regional water tablewith impacts surrounding neighbors.

Bank regulators and clients, too, will havecompeting interests in where a bank is sited.In general, there will be tension between thedesire of natural resource agencies to replacelost wetland values and functions as close tothe impacted site as possible, and the Ownership of the land on which a bank isinterests of bank operators or clients in as sited can influence a number of factors.wide a geographic range as possible to These include the ease and success ofmaximize the size of the market and fluidity of monitoring and enforcement efforts, thethe credits. In the case of the Port of Los performance of maintenance activities, theAngeles/Pac Tex bank (CA), the proposed price of credits, and long-term uses of the site.siting of a bank 80 miles south of the impact The Washington State banking guidance givessite created great opposition from Port area land ownership high consideration in bankresidents who felt their region was losing siting, generally discouraging the use ofvalues that would accrue to a distant privately owned sites. Private landownerspopulation. may not be willing to sell their lands for a

Some communities that are chosen to be siting for fear of use limitations or loss ofthe site of a wetland mitigation bank may property values. The state recommends usewelcome the rehabilitation of a natural system. of depleted highway borrow pits, right-of-wayOthers may resent the loss of potential remnants, and other public lands as preferredproperty tax revenues that would accrue from bank sites. The Corps' Galveston Districtthe site if developed. In the case of a non- draft guidance also recommends public landsbank mitigation joint project in Michigan before private lands.[Detroit Airport Joint Project], the operator"sweetened" the deal for a local community Conversely, EPA Region IV stronglyconcerned over potential property tax losses objects to the use of federal lands as bankby building into the replacement wetland sites. Its concern is, in part, that federal landsfishing piers and other recreational benefits are less likely to be threatened by

[Johnson, Johnson & Roy, personalcommunication].

In general, banks that operate at a singlejurisdictional level, such as the many stateDOT banks, may have fewer bank sitingproblems than areas with independent andcompeting banks. A state may have a largeregion from which to choose its bank sites, abroader range of wetland ecosystems tomitigate, and more options for acquiring thesites.

Because bank service areas often overlapjurisdictional boundaries, siting banks shouldbe a process that involves input from alljurisdictions and potentially affected parties,even if the ultimate siting decision is up to asingle party. The Port of Pascagoula (MS)SAMP mitigation bank is a good example ofmulti-jurisdictional cooperation andcoordination in wetlands permitting andmitigation.

2. Ownership of the Land

bank, and adjacent owners may oppose the


57

development and may be restored under banks at present are single parcels, rangingnumerous existing wetland restoration from fewer than 5 acres to over 7,000 (Finaprograms, while restoring privately owned LaTerre). The Minnesota DOT bank iswetlands more directly compensates for notable for its 40 different sites, scatteredwetland losses on private lands. In addition, across the state's 9 highway districts.the public land site provides a flow of publiclyenjoyed services before restoration, such as Most wetland ecologists would argue thatopen space, recreation, upland wildlife habitat, wetland banks should be as large as possibleand other functions. If a private landowner to avoid the habitat fragmentation and othercompensates for destroying wetland functions causes of failure in small, isolated project-on private land by restoring or creating a specific mitigation patches. Larger wetlandswetland on public land, the public may not be maximize biodiversity by providing habitat forfully compensated for the loss of some of more species that, in turn, form a morethese extant publicly-enjoyed values and complete ecosystem that can self regulate --functions. assuring the long-term success of the wetland

On the other hand, while siting banks on [Willard and Hilliard 1990]. The Californiaprivate lands allows for a wider range of Department of Fish Game wetland mitigationavailable sites and hence a more flexible banking guidelines specify that banks shouldmarket, restricting siting to private lands alone contain no less than 50 acres of new (orforgoes numerous benefits. Public lands do restored) habitat, except in exceptionalnot have to be acquired and are more likely be circumstances. The National Researchsecure in perpetuity. They are already lost to Council's report on restoration [1992] arguestax rolls, and are not likely to meet as much for rehabilitation of large, self-sustaininglocal or adjacent landowner opposition. ecosystems; "The objective is to emulate aMoreover, many public lands are surrounded natural, self-regulating system that isby compatible uses, improving the chances for integrated ecologically with the landscape inecological success of the mitigation project. which it occurs." The Federal HighwayFinally, management of mitigation wetlands on Administration's draft guidance for state DOTpublic lands can be integrated into ecological banks discourages multiple small sites formanagement of a suite of adjacent public institutional reasons: "Creation of multiplelands. small sites which are difficult to manage is not

In summary, a firm rule against mitigation mitigation and creates problems regardingon public lands appears unduly to restrict maintenance, access control, monitoring, andmitigation banking. Nevertheless, care must future conversion to non-wetland. It may alsobe exercised to assure that mitigation on lead to problems with local agencies andpublic lands does not simply displace public private landowners."funding of restoration efforts that would occurin any event, or fail to compensate the public Florida wetland consultants Robin Lewisfor extant non-wetland values. Land and Kevin Erwin, however, argue that underownership should be one of a number of some circumstances bigger is not better, andfactors considered when choosing a bank site, that the historical wetland patterns of thebut should not dictate the decision. region and needs of threatened species

3. Bank Size and Number of Sites

Another consideration is the size of abank, and whether the bank should consist ofone parcel or multiple parcels. Most operating

and minimizing long-term maintenance costs

conducive to permanent management of

should be considered when siting banks.Losses of small wetland areas are morecommon in many parts of the country thanlarge tracts. If the species being displaceddepend upon small wetlands habitat, they maylose out in the creation of a large replacement


58

wetland. Prairie potholes, vernal pools, small conditions that restored the site's wetlandsisolated wetlands support different naturally [North Bank Site, CA]. Siting bankscommunities than do large acreage sites. where hydrology is highly uncertain or

The ecological reasons to prefer small (e.g.,the ability to limit nearby irrigation tocompensation sites in some instances, avoid groundwater depletion, subsidence, orhowever, can be reconciled with the general saltwater intrusion) increases the likelihood ofpreference for larger banks. The small sites bank failure. may be embedded in a matrix of surroundinglands that ensure their continued longterm Understanding a site's hydrology will notfunction. A half-acre pond in the middle of a only improve the chances of ecologicalcondominium development may be hardly success of the bank, but will also aid in designworth considering as compensation, but a for buffers and upland to accommodate thesimilarly sized pond may be appropriate as a migration of wetlands in response to naturalbank when surrounded by native vegetation hydrologic fluctuations.and protected from encroachment, or whenpart of a matrix of such ponds.

Although 16 of the 46 existing banks arelarger than 100 acres, more than half of allexisting banks (24) are under 40 acres -- mostin the 10-30 acre range; these 24 do notinclude the multi-site highway banks such asMinnesota, North Dakota, and Georgia, whichtend to have sites in the same range.

4. Hydrology

Sites must have adequate hydrology tosupport a wetland ecosystem. No otherphysical feature is as important. This factorgives strong preference to restoration, and tosome extent enhancement, as a form ofmitigation. Where wetland hydrology alreadyexists, hydric soils are likely. Sites wherewetland hydrology must be created, and hydricsoils imported, should be ranked lower thanhistoric wetland sites.

Hydrological fluctuations and long-termmeteorological cycles also influence wherewetlands will grow and migrate. Droughts andfloods can contract and expand the size ofwetlands and the sum of their values andfunctions. Two banks have been suspendedto date because of long-term droughtconditions [Mud Lake, Idaho and WashoeLake, Nevada]; and, ironically, one potentialbank site was rendered unusable formitigation purposes because of flood

dependent upon institutional arrangements

5. Buffers

Providing buffers mitigates the impact ofadjacent land uses on banked wetlands,protects them from edge effects of adjacent"open" areas that encourage exotic speciesand predators, and can connect thereplacement wetland to other natural areasthat serve to enhance the effective size of thewetland (and its biodiversity and self-regulating capacity). Providing ample bufferareas and incorporating some adjacent uplandarea within a bank can help to accommodatethe migratory nature of wetlands in thelandscape. This is critical particularly forcoastal wetlands and areas of rapid erosionwhere migration means survival for thewetland. Surrounding bank sites with amplebuffers of edge, upland, and deep waterhabitat can help protect the site and itsneighbors -- although this will likely raise theprice of credits and pressure regulators toissue some credit for these nonwetland areasof a bank.

The proposed Chicago Homebuildersbanking MOA recommends as siting criteria"buffer areas contiguous to the wetlands toprotect them from potential adverse affects ofadjacent land uses." The Corps' GalvestonDistrict draft guidance states that "uplandsadjacent to or part of a wetland bank whichare shown to give wetlands a value byproviding additional seclusion or cover for


59

wetland-using animals or by providing a buffer waters can serve to filter nonpoint sourcemay be afforded a value in a reduced credit pollutants and improve water quality. Sitingamount." replacement wetlands where they can serve

Buffers should be a mandatory mitigate edge effects, expand their effectiverequirement of any mitigation bank or onsite size, improve the likelihood of self-regulation,mitigation, much as set-back requirements are augment biodiversity, and further safeguardnow regular features of local zoning and these areas. Siting wetlands to serve asplanning ordinances to protect streams and corridors between existing natural areasother natural features. expands habitat for many larger species who need wider ranges to survive, and can

6. Landscape Level Planning

The mitigation site should be locatedwhere it is not likely to suffer degradation. Byconsidering a broader swath of area than thebank site itself, and broader goals than creditcreation, bank planners should begin to avoidthe habitual practice of creating a postage-stamp marsh in a sea of concrete asmitigation. The migratory, successional natureof wetland systems makes siting within thelarger landscape critical.

Sites should also be chosen to address abroad range of values and functions aspossible, something that landscape-levelplanning can help with establishing goals andpriorities. Habitat replacement is one amongmany wetland values that should receiveconsideration during bank siting. Unlesshabitat is the guiding principle behind banksiting, other values and functions should beguiding bank siting as well. For example,restoring or creating wetlands to improve areaflood control has been largely overlooked inbanking to date. Restoring wetlands in the100-year floodplain will expand the floodplain'scapacity to retain flood waters and limit flooddamage. Many communities already restrictdevelopment in floodplains, so acquiring banksites should be less expensive there. Inaddition, communities benefit financiallythrough restoration of floodplains and banningdevelopment by receiving lower floodinsurance rates through the FEMA CommunityRating System.

Restoring or creating wetlands along successful regional banking system that seeksriparian areas, adjacent lakes, ponds, or other to make banking serve wider land use

as buffers to existing wildlife areas can

increase species mobility between habitatpatches to avoid isolating populations wherethey remain vulnerable to natural disastersand inbreeding effects. EPA Region IV'srecommendation for use of mitigation banksas greenways, wildlife corridors, and buffers tonearby natural areas makes great sense.

Finally, landscape-level planning can helpbank siting consider the effect of the site onneighboring properties. The replacementwetland will have its own impact on thelandscape. If the site attracts great numbersof wildlife, for example, it not only affects thewetland site but surrounding properties;adjacent farmers may be subject to greaternumbers of Canada geese, nutria, deer, andother wildlife eating row crops, or somelivestock predation. Altering hydrology for abank site may cause flooding or dewatering ofneighboring property. For example, wetlandrestoration by the Fish and Wildlife Service inthe Nebraska Sandhills altered local watertables and disrupted overland flow anddrainage patterns for surrounding landowners.Planning can help identify bank sites that maybe more compatible with existing or futureland uses, and that can diffuse communityopposition. Sites adjacent to a river, lake, orother waterbody not only improve water qualityfor the community, but might be designed toinclude walkways or other obvious benefits tothe community.

7. Site Surveys and Sampling

Site surveys must be a part of any


60

planning goals and minimize bank failures. potential sites, the more exacting the sitingEPA Region V's draft guidance strongly criteria can be. Where potential bank sitesrecommends inventorying possible sites prior are scarce, other requirements might beto bank establishment by an interagency relaxed, such as in-kind replacement, orcommittee. The Washington state guidance degree of proximity to development sites.makes inventorying a cooperative venture Certain siting criteria, however, must remainamong all interested parties. Developers and standard -- including suitable hydrology,credit producers interviewed for this study potential for ecological success, and adequateargued strongly for a private role in choosing upland buffer area.bank sites; because the capital cost ofacquiring a bank site is so high, banking mayonly be profitable for private operators whenthey already own the site. Nevertheless,private site selection can be coordinated withregional inventories and survey information.

Candidate sites should be thoroughlysampled for the condition of hydrology, soils,and adjacent land-use impacts. Several bankshave run into avoidable problems -- mostnotably the Bracut Marsh bank -- because ofinadequate sampling. Apart from determiningthe condition of soils and hydrology on thesite, potential sites should be considered inview of potentially harmful adjacent impacts,and in light of landuse patterns for the area.An ideal site today may be surrounded by lightindustrial use tomorrow. The West Eugeneproposed bank used advance identification tocatalogue and anticipate land uses and toidentify areas best suited for development,restoration, or preservation.

8. Limited Availability of Sites

The number of potential bank sites thatmeet reasonable siting criteria within a givenarea or watershed is limited, although thisnumber will vary widely among regions. Aseach potential bank site is restored,developed, or otherwise encumbered, the costof those remaining goes up. The number ofavailable restoration, creation, orenhancement sites in a jurisdiction or awatershed will inevitably influence their priceas well as any regional criteria for siting.Areas with a large percentage of acres in priorconverted cropland may have a wealth of sitesto choose from, while urban areas will havesignificantly fewer. In general, the more

9. Ranked Siting Criteria

Providing bank operators or regulatorswith an array of siting criteria that lackprioritization or detail creates the potential forconflicting criteria. Should a large site with arelatively low cost be chosen over a smaller,more expensive site that boasts morecompatible surrounding land uses and long-term site protection? Should banks performdouble-duty as nonpoint source pollutiontreatment facilities, even if the nutrient andpollution loading harms the overall quality ofthe wetland (and thereby reduces creditsavailable, particularly over time)? Shouldrarity or uniqueness of regional wetland typesdictate where banks are sited? A preliminaryinventory of potential bank sites in a givenarea, comprehensive planning, and clearlyestablished goals for the bank will help makesome of these choices clearer in a region.Prioritizing siting criteria, however, can makesiting guidance more useful.

10. Proximity

Bank sites should preferably be close toimpacted sites. Wetlands perform importantfunctions that are directly connected to theirlocation in the landscape. Therefore, bankingsites should generally be within the samewatershed and as close as possible toimpacted sites. While proximity should not beused to omit potential bank sites that offerother features, such as high restorationpotential, siting banks as near to the impactedsite(s) as possible will, in theory, produce theleast disruption of local functions and valueswithin the area, including alteration ofinstream flow and other hydrological


61

processes.

Proximity to impacts, however, is only oneof many important considerations in siting. Itsemphasis will depend, in part, on regionalmitigation goals and on the functions andvalues that are to be lost throughdevelopment. In general, a presumption infavor of proximate bank siting should berebuttable only by landscape-scale wetlandsplans, or by empirical findings for individualcases.

D. Summary

If these ten considerations are taken intoaccount when a banking program is organized-- or at the time of the recognition of the firstbank in an area -- the ecological potential ofmitigation banking is more likely to be realized.Continuation of the current ad hoc approach tomitigation bank approval risks, at worst,replication of the poor record of onsitemitigation, and at best, limitation of mitigationbanking to a minor role in wetland policy.Early attention to bank siting considerations isthe most important factor affecting thepotential usefulness of mitigation banks as aneffective instrument of wetland protection.

62

BLANK PAGE

63

CHAPTER SEVENCREDITS DEFINED

AND VALUED

Mitigation banks require systems for establish, in either a qualitative or quantitativevaluing the compensation credits produced fashion, the nature and extent of differentand for determining the type and number of services which a wetland may provide. Oncecredits needed as compensation for any those services are known, they may beparticular project. Credit definition and translated into a "currency" which can servevaluation is one of the most complex issues in as the medium of trade for a wetlandmitigation banking. It is difficult enough to mitigation bank.compare one wetland to another for purposesof mitigating a single project, although many Evaluation methods serve two differentmethods of doing so have been developed. It purposes. First, they define the currency foris, however, even more difficult to adapt any the bank. Second, they may establishof these methods to allow the use of credits replacement ratios. For example, a bank mayas currency available for a variety of use acreage as a "currency," but there may betransactions. Yet this is essential to a regulatory concern that an acre of createdmitigation bank. wetland purchased from the bank will not

Where a banked wetland has been bottomland hardwoods. The credit evaluationrestored or constructed for general purposes, system might lead to a determination thatcareful matching of values and functions mitigating the impact to an acre of hardwoodsbetween the converted wetland and the would require three acres of banked wetland --mitigation wetland is difficult. Mitigation bank a 3:1 ratio.credit definitions are an attempt to identifythose features which allow reasonable This chapter identifies the creditapproximations of replacement. But unlike evaluation systems now in use for mitigationdollar bills, one wetland is not equivalent to banks, summarizes their effects upon bankanother. An estuary on the Florida coast performance, and discusses the use of ratiosdiffers from a hardwood forest in the in accomplishing banking objectives.Mississippi Valley. Even a riparian wetland onone tributary is not the same as that onanother tributary of the same river system.Beyond obvious differences in characteristicssuch as size, location, or elevation, there areimportant differences in functions -- floodcontrol, wildlife habitat, water filtering,groundwater recharging, and others.

How can one evaluate two differentwetlands so that the degradation of one canbe offset by the restoration, enhancement orcreation of the other? To answer thisquestion, wetland scientists and managershave developed many of evaluation methodsranging from the complex to the simple. Mostof these methods were first utilized in non-wetland systems. These methods attempt to

compensate for the loss of an acre of mature

A. Types of Credit Systems

Assessment methods used for mitigationbanking may be divided into three groupswhich roughly correspond to greater scopes ofecological comprehensiveness:

• Simple indices are derived from quicklyand easily observed characteristics of awetland, and usually serve as surrogate"indicators" of one or more ecologicalfunctions.

• Narrowly tailored systems attempt tomeasure directly a limited range ofwetland services, such as wildlife habitat,through a detailed procedure focusing on

Credits DefinedAnd Valued

64

that particular wetland service. of a wetland type. A bank may, for example,

• Broadly tailored systems examine arange of wetland functions covering anumber of observable characteristics.

Three other approaches -- best professionaljudgment, combination approaches, andeconomic valuation -- are also brieflydiscussed below.

1. Simple Indices

For developers, a primary advantage of awetland mitigation bank is being able to avoidthe complexity of developing project-specificmitigation plans. For speed and clarity, simpleindices are greatly preferred, for they involvelittle in the way of intense field work andtherefore consume few resources. They arealso advantageous to regulatory agenciesbecause they are not resource-intensive toapply. Typically, simple indices merelydescribe characteristics of a wetland inquestion (i.e. size, number of species) ratherthan defining anything about the ecologicalservices it provides (i.e. wildlife habitat, floodstorage, recreation value).

Often they do provide a roughcorrespondence to the functions in question.At the same time, however, simple indicesintentionally ignore the complexities of wetlandecosystems. They may provide a good proxyfor some functions or values, but poorlyrepresent others. Bank regulators andmanagers must remain sensitive to thepossibility that the index being used has verylittle to do with the functions of concern.Careful consideration is probably necessary toensure that the simplicity and cost-effectiveness of simple indices do nottranslate into unacceptable losses of wetlandfunctions.

a. Acreage

The most common simple index used inmitigation banking is acreage. Usually, this issuperimposed upon a threshold determination

contain 30 acres of enhanced estuarineemergent wetlands, and a bank client wouldpurchase credits represented by those acresto compensate for development impacts onestuarine emergent wetlands elsewhere.

Acreage can be determined without a sitestudy, and is not dependent upon anyspecialized knowledge. Where the purpose ofthe bank is to streamline the process ofpermitting, acreage serves as a highlydesirable index because of its low cost ofassessment and the speed with whichcomparisons can be made.

The ease of using an acreage evaluationhas been demonstrated in the CompanySwamp bank. Although a more complexwildlife habitat analysis is used for mitigationof impacts greater than five acres, for smallerimpacts the transactions are done purely onan acreage basis. To date, few projects haveused the more sophisticated system; this isnot surprising, since the cost of doing so ismay be more than three times the cost of anacreage-based transaction [McCrain 1992].

The Company Swamp experiencehighlights some difficulties with a pureacreage analysis, however. McCrain notesthat in practice the acreage-basedtransactions compensated for only about 2/3of the habitat functions destroyed at theimpacted sites (as calculated under the moresophisticated system). Such losses are notsurprising when the index used (such asacreage) has very little connection with theecology of the wetland.

Because acreage is so removed from thenature of wetland functions, many banks useit only in combination with other requirements.Many banks that use acreage require, at least,that the banked acreage be of the samebroadly-defined wetland type as the impactedwetland. These in-kind transactions purport topay at least some attention to ecologicalfunctions. Many of the state DOT banks usein-kind acreage as the credit definition. The


65

definition of wetland type, however can be diversity indices can be a relativelyquite general -- sometimes as simple as inexpensive means of focusing bank efforts onfreshwater, estuarine, coastal. that function.

Other simple indices (see below) may be In an interesting twist on diversitybetter surrogates for ecological functions, concerns, the Seaworld Eelgrass Mitigationalthough they may require more detailed Bank in Southern California has consideredinformation. taking genetic diversity into account as a

b. Diversity

Most ecologists are familiar with thesimple indices used to represent the diversityof species in an area. These indices typicallytake into account both the number of differentspecies and the relative proportions of thosedifferent species in a given area. (Thus, forexample, in determining the diversity of ducks,a site with ten mallards, three northernpintails, and two northern shovelers would beless diverse than a site with five of each).

To determine a diversity index, data mustfirst be collected on the distribution of speciesin an area -- clearly a more resource-intensivetask than merely identifying a site's acreage.But these measures can, unlike acreage, betailored to project objectives or resourceavailability by limiting the diversitymeasurements to a particular species (i.e.wetland birds). Diversity indices could beused by banks as a currency. Depending onthe scale of the index, multiplying diversity byacreage could give "diversity units" whichcould then be traded by a bank that haddiversity as a goal. No mitigation bankspresently use such a system.

At the same time, however, diversity is a narrow focus on only the evaluated functionused by some banks as a supplementalstandard, influencing trades otherwiseconducted solely on an acreage basis. TheWashoe Lake mitigation bank in Nevada, forexample, uses the number and species ofwetland birds as a means of guaranteeing thequality of wetlands that are traded on anacreage basis. (Use of this bank is presentlysuspended due to drought conditions.)Especially where wildlife diversity is animportant factor to wetland managers, using

quality issue. Where the organisms ofconcern are all members of the same speciesor set of subspecies, such a method wouldadd an unprecedented level of sophisticationto the development of banks and mitigationprojects. Of course, such sophisticationwould require commitment of extensiveresources to determining a single wetlandcharacteristic.

The range of simple indices is by nomeans exhausted by acreage and diversity[EPA 1984]. For example, the SeaworldEelgrass Mitigation Bank is using the densityof eelgrass as a measure of quality.

2. Narrowly Tailored AssessmentMethods

While simple indices may or may notcorrelate with wetland functions, narrowlytailored assessment methods have beendesigned to predict or measure particularfunctions. Although they are more complexthan the simple indices, they do not attempt toevaluate the entire regime of wetlandfunctions. As a result, these methods may bemore accurate in predicting their subjectfunctions. At the same time, however, the useof narrowly tailored methods may encourage

rather than the range of potentially relevantwetland services. They also require moreinformation than the simple indices.

The most common assessment methodsof this type attempt to predict the compatibilityof the wetland habitats with desirable wildlifespecies. Many of these are variations on theHabitat Evaluation Procedures (HEP)developed by the U.S. Fish & Wildlife Servicein conjunction with other Federal Agencies.


66

These methods are used extensively by covers in the selected area (i.e. grassland,mitigation banks throughout the nation. stream, deciduous forest, etc.). Once the

The basic habitat assessment methods delineated, the HEP analyst must select therely on the twin notions of optimum habitat evaluation species. This involves consideringand carrying capacity. The latter idea those species that might be found in theassumes that for any environment, the wetland, and selecting those that have a "highpopulation of a species can only grow to a public interest, economic value, or both," orcertain size before running up against limits of that give a "broader ecological perspective ofspace, food, or other resource constraints. an area" [USFWS 1980]. Often, the project"Optimum habitat" describes the habitat which objectives will determine which species arecould support the largest possible carrying most appropriate for analysis (for example, ifcapacity -- i.e. the best possible combination maintaining bass habitat is the goal of aof landscape, vegetation type, vegetation mitigation project). The effectiveness of HEPstructure, hydroperiod, and other wetland analysis can be improved by selecting speciescharacteristics. that are sensitive to human interference, that

Habitat assessment procedures typically ecosystem, or that are representative of ainvolve field estimates of various class of species with similar habitatcharacteristics that studies have identified as preferences (a "guild"). [USFWS 1980;important to one or more fish or wildlife Oregon DSL 1986].species selected as evaluation species. Themodel then combines these characteristics HEP calculates the suitability of a wetlandand estimates how close the wetland under ecosystem as habitat through the use of aconsideration is to the optimum habitat for Habitat Suitability Index (HSI) model for eacheither a species or species assemblage. indicator species selected. The models are

In addition to habitat-focused methods, models. There are fewer than 200 speciesother narrowly-tailored methods may examine models extant. The HSI compares thebiological productivity, flood-flow retention, or ecological information gathered by the analystother specific wetland values. on each wetland (the impacted wetland or the

a. Habitat Evaluation Procedures(HEP)

The Fish and Wildlife Service's HabitatEvaluation Procedures (HEP) have been thestarting point for most of the habitatassessment methods now in use. The firstversion of HEP was released in 1976 (HEP76)and a revision, which is in more common usetoday, was released in 1980 (HEP80). Adescription of the latter is a useful startingpoint for describing other habitat assessmentmethods, including HEP76 and modifiedversions of both methods.

The HEP analysis is site-specific. Theanalyst must first define the study area. Theanalyst must then delineate the different land

area has been chosen and the cover types

are themselves critical parts of the wetland

either numerical models or descriptive "word"

compensatory wetland), to the optimumhabitat for the indicator species.

The HSI for each species is thepercentage of the optimum habitat supportprovided by the land cover in question (valuesrange from 0 to 1.0). This Index is thenmultiplied by the number of acres that fallwithin a distinct vegetation cover type tocalculate the number of habitat units (HUs)available as credits. The total number of bankcredits is the total of HUs of all cover types inthe bank. Where multiple species have beenevaluated using HEP, banking objectives willdetermine whether, and how, the HUs fordifferent species may be summed orotherwise aggregated.

HUs (or some annually adjusted version of


67

HUs) are then used as the currency for the methods.bank. A developer that destroys 100 HUs ata development site must acquire at least 100HUs produced by the bank.

b. HEP Variations

Many mitigation banks use some version credits and debits in six geographic and threeof HEP as their primary assessment method. biotic regions of the state [Tessman 1989;In most cases, however, the banks have Hayden-Wing 1988]. Impacts must bealtered the details of HEP to facilitate easier mitigated with credits from projects in thecomparison of disparate wetlands. The same size class and the region within whichmethods outlined below are a small, but they occur. The credits are developed as aillustrative, set of the available variations. function of 13 parameters chosen as critical

Minnesota's main innovation was to surface area; emergent vegetation coverage;establish baseline HSIs for different wetland drawdown exposure; water quality; watercover types in each DOT region in the state. supply; sedimentation rate; adjacent cover[Minnesota Department of Transportation quality; shoreline sinuosity; area of adjoining1987]. With these baseline HSIs established, marshy zones; number of islands; number ofthe only site-specific work for crediting or bays; number of peninsulas; and a complexingdebiting is deciding how the proposed actions factor (an adjustment which takes into accountare going to affect cover types. the surrounding landscape).

The Astoria Airport Mitigation Bank in The values for these parameters areOregon uses a modified HEP(80) [Oregon collected from office and field work, throughDivision of State Lands 1986]. On the basis of experimental data, visual estimates, or otherHSI word models, the assessment team methods. They are combined via acompared the available HUs for seven mathematical function into the "wetland value"different species at the site both before and (parenthetically called "habitat units" in theafter the mitigation activities. The total HUs SUPERBOG manual, though the model doesavailable as credits in the bank is the not explicitly or implicitly include HEPdifference in the totals of the species' HUs analysis).before and after restoration.

Despite their confidence in their pre- wetlands no larger than 20 acres. Since theproject assessment results, the Astoria bank focus is on waterfowl habitat and the wetlandshas generated fewer HUs than anticipated. that waterfowl prefer, the model may not beAstoria's experience highlights an important useful for other types of wildlife, functions, orlesson: Because HEP and related methods wetlands. It was designed using studiesrely so intensively on the nature and conducted in prairie wetland ecosystems andperformance of the vegetative cover created tailored for use in evaluating abandonedor enhanced, regulators must be careful to bentonite ponds affected by the statemonitor actual changes. If follow-up indicates abandoned mine lands program. Wyomingthat the planned enhancement, creation, or has, however, been using it as a basis forrestoration has failed or resulted in a state bank site analysis of wetlands throughout thesignificantly different than anticipated, the state, although only for assessing waterfowlevaluation process will need to be reapplied in habitat values. HEP is used for other habitatorder to make mid-course corrections. This is assessment needs. true for most narrowly tailored assessment

c. SUPERBOG

SUPERBOG is a computer programdeveloped by Wyoming's game and fishagency which tracks the balance of wetland

for the provision of habitat for waterfowl:

The model is designed to apply to


68

d. Habitat Evaluation System

Although conceptually similar to HEP, theHabitat Evaluation System (HES) [U.S. ArmyCorps of Engineers 1980] examines an entirewetland for the structural indicators of habitat(i.e. number of snags, extent of exposed steepshoreline, etc.) rather than selecting speciesthemselves as function indicators [WWF1992]. The output, a "wetland quality index,"is never associated with individual species.Instead, it provides an indication of the qualityof habitat for the entire wetland underanalysis. While it avoids direct speciestradeoffs, it does depend upon the simplifyingassumption that some features are good formost species -- excluding the ecologicalconcept of niche. Despite the single-scoreoutput of HES (which makes it amenable touse as a way of assigning currency), themethod is not presently used by any banks.

e. Other Narrowly TailoredAssessment Methods

Although habitat is by far the mostcommon function used as the focus ofnarrowly-tailored assessment methods, andvariations on habitation evaluation proceduresare the only such methods currently beingused by mitigation banks, other possiblemethodologies exist.

The Oregon Estuarine Mitigation Processis designed to evaluate an ecosystem'sproductivity and species richness as well ashabitat [Oregon Division of State Lands 1984;Salveson 1990; Oregon DSL 1986]. Thissystem is only used for estuarine areas. Theheart of the process is a set of relative valuesthat have been assigned to subtidal andintertidal habitats with different substrates.These values are indicators of "naturalbiological productivity and species diversity."[Oregon DSL 1986]. Unlike HUs, however,the values must be used in combination withacreage in order to serve as a currency.

For example, a brackish seagrass habitatwith a muddy substrate receives a 6.0 value,

while a fresh high marsh with cobble-gravelsubstrate is assigned a value of 3.0. Fillingfive acres of the former (6.0 x 5 = 30mitigation points lost) would require mitigationby creating at least ten acres of the latter(giving 3.0 x 10 = 30 mitigation points gained).

Narrowly tailored assessment methodshave been created to address other functionsas well, including hydrology, silvicultural value,and recreational or heritage functions.Descriptions of these methods may be foundin EPA Region V's review of assessmentmethodologies [U.S. EPA 1984]. Theuncertainty identified with hydrology-basedassessment methods still exists. Emphasizingsilvicultural value can sometimes conflict withoptimizing ecologically successful mitigation;the same may be true for enhancingrecreational value. These systems are notcurrently used by any banks.

3. Broadly Tailored AssessmentMethodologies

Recognizing the complexity of wetlands,and uncomfortable with the narrow focus offunction-specific methods, wetland scientistshave developed assessment methods thatattempt to evaluate a broader spectrum ofwetland functions. While their scope makesthem valuable, their complexity may makethem unwieldy and expensive for use inmitigation banking. And for many mitigationbanks and other mitigation transactions, thedesire for a single quantitative value has led todetailed methods that conclude by sacrificingall of the detail -- combining unrelatedfunctions into a single, dimensionless wetland"value" that has little or no ecologicalmeaning.

A scientifically ideal wetland assessmentmethod would be one that empirically,physically measured each wetland function inthe field and presented the results inquantitative form. Even if such exhaustivemeasurement of all functions were possible,the time and expense of such a method wouldmake its regular use unsuitable for repeated


69

transactions, such as those that may be although field inspection is generally required,required for mitigation banking. The broadly and some particularly useful indicators requiretailored approaches attempt to provide a rapid detailed field measurements.method for estimating these functions. In sodoing, however, they must take short cuts; it is Once the indicators have been collected,primarily in selecting those short cuts that the the method combines the indicators into threemethods differ from one another. ratings for each of eleven wetland functions:

a. WET and Related Methods

Certain broadly tailored methods arenearly as popular as the habitat-basedmethods. In particular, the WetlandEvaluation Technique (WET) developed bythe Federal Highway Administration, Corps ofEngineers, and Environmental ProtectionAgency has enjoyed widespread use.Perhaps even more than HEP, WET hasinfluenced the development of other methodsintended to describe the full spectrum ofwetland functions. And, as with HEP, WEThas gone through a variety of revisions andmodifications, and this continues, e.g., theCorps Waterways Experiment Station'sWetland Research Program.

The Wetland Evaluation Technique firstappeared in 1983 as "A Method for WetlandFunctional Assessment" [Adamus andStockwell 1983]. Informally named theFHWA/Adamus method after its sponsor anddesigner, the method was renamed WET(now "WET1.0"). It underwent extensivemodifications and was released as WET2.0 in1987 [Adamus et al. 1987].

The WET1.0 methodology is the beststarting point for exploring these detailedsystems. WET1.0 was a Herculean attemptto summarize the functions provided by awetland and to determine what observablecharacteristics provided hints indicating thepresence and extent of those functions. Themethodology requires the analyst to gatherinformation about some 80 different wetlandcharacteristics, or "indicators." Indicatorsinclude factors like the gradient (slope) of thebasin, soils, land cover in the watershed, andothers. Many of the indicators can be derivedfrom maps and other printed information,

groundwater recharge; groundwaterdischarge; flood-flow storage &desynchronization; shoreline anchoring &dissipation of erosive forces; sedimenttrapping; nutrient retention & removal; foodchain support; fisheries habitat; wildlifehabitat; active recreation; and passiverecreation & heritage value.

The ratings represent for each functionthe wetland's projected "effectiveness" (canthe wetland perform the function?);"opportunity" (does the wetland have theopportunity to be effective?); and "socialsignificance" (how important is the function tosociety?). The ratings are not numerical, butqualitative -- "low," "moderate," or "high."These qualitative ratings refer to theprobability that the wetland supplies thataspect of the function.69

Because of its scope, WET must be, at itsheart, a "broad-brush screening tool" (Adamusand Clairain 1988). For detailed wetlandevaluations, other methods are typically usedto fill in the gap. For example, HEP might beused to fill out habitat information for aparticular wetland. Even with suchsupplements to the revised version, themethodology has fallen under continuingcriticism. The main complaints have focusedon the inability of the method to take regionaldifferences into account [Lawless 1991]; itscomplexity [World Wildlife Fund 1992]; and itsinsensitivity to differences in wetlands. SomeCorps offices have been so frustrated withWET2.0 that they have simply told their staff

For example, a small, degraded agricultural69

wetland in a sparsely populated area might have, forthe groundwater recharge function, a "low" rating foreffectiveness, a "moderate" rating for opportunity, anda "low" rating for social significance.


70

not to use it [Lawless 1991]. retention; nutrient export; riparian support;

Its familiarity to wetland managers and the disturbance of sensitive wildlife; regionallack of alternatives has made WET the ecological diversity; ecological replacementmethod of choice for mitigation banks seeking cost; recreation use potential; recreation usean assessment method that examines the actual; and downslope beneficiary sites. Aspectrum of wetland functions. However, weighting system is then used to aggregatemost banks using WET and similar methods the individual functional ratings into a singlehave converted the broad qualitative ratings value for the wetland.into quantitative values.

The Arkansas Highway Department'smitigation banking proposal is one attempt toderive a single value from the multivariateWET analysis [Arkansas Highway andTransportation Department 1992]. Afterderiving the ratings for the different functions'characteristics (effectiveness, opportunity,significance) the model converts them intonumbers (high = 5, moderate = 3; low = 1).These numbers are summed to provide a"Bank Tract Rating" ranging from a high of120 to a low of 24 (some ratings were deemedunimportant or too complex and notdetermined). Depending on this value, thewetland is placed into one of three classes(high, medium, or low wetland value). Thiscategory and the quality of the impacted tract(farmed, disturbed, or undisturbed) serve asthe basis for determining what replacementratio is to be used.

The City of Juneau Bank takes anotherapproach through a modification of WET1.0.As in WET, each function is rated on aqualitative scale through the use of keys whichconvert "predictors" unique to each wetlandinto summary values. The result is a singlevalue for each function (rather than one foreffectiveness, etc.) which provides aqualitative probability that the function isprovided by the wetland. The range of valuesis broader than WET, ranging from "very low"to "very high." Each rating has acorresponding numerical value ranging from 1to 7. A somewhat different set of functionsthan in WET are evaluated under this system.The rated functions are: groundwaterrecharge; groundwater discharge; surfacehydrologic control; sediment and toxics

erosion sensitivity; salmonid habitat;

b. Other Broadly TailoredApproaches

Even though the following methodsaddress many of the same functions as WET,they may produce very different results.

The Wetland Evaluation Methodology(WEM) follows a process similar to WET,although more analysis is done at the datacollection stage [U.S. Army Corps ofEngineers 1988]. The number of indicatorsand functions is also lower. Six functions --flood-flow characteristics, water quality,wildlife, fish, shoreline anchoring, and visualvalues -- are analyzed via the collection ofecosystem data. A computer programconverts the data into a set of functionalratings ranging from qualitative (very low tovery high for shoreline anchoring potential) tonumerical (from 33 to 100 for general wildlifediversity and productivity).

The final step in WEM takes the variety offunctional assessments and converts theminto quantitative values. These "synthesisratings" are then adjusted based on the"downstream sensitivity" to the presence ofthe function. Multiplying this revised synthesisrating (which will range from 1 to 5) by an"importance factor" (ranging from 1 to 3) givesa quantitative value for each function. Thevalues for each function are then averaged togive a final, single, quantitative value for thewetland. This is a "quality" value (like theoutput of HES for wildlife habitat) and doesnot take the size of wetland into account.

WEM was developed specifically for thenorth central United States, and may not be


71

easily applied to other regions. Wisconsin quantitative values. The new method willDOT is the only organization that has used mimic the HEP accounting system for a rangeWEM in the banking context: the Patrick Lake of functions. One tool, the Hydrogeomorphicmitigation bank uses the final wetland value Classification System, considers wateras the basis for determining the requisite source, hydrodynamics, and geomorphicreplacement ratio. If the bank is of higher setting for the large variety of wetlands acrossquality than the impacted site (i.e., its WEM the country. Models for functions are beingscore is higher than that of the impacted site), developed for each general class of wetlands.then the mitigation will occur at a 1:1 acreage ratio. If the site impacted is of higher quality,however, the ratio is adjusted. Thus, if thebanked wetland has a score of 93 and theimpacted wetland has a score of 104, the ratiois 1.12 (104 ÷ 93 = 1.12), and for a 10-acreimpact site, 11.2 acres would be required fromthe bank. The proposed Wisconsin statewidebank does not appear to be considering theuse of WEM as its valuation method; it is(although simpler than WET) seen as toocomplex for the variety of projects that need tobe dealt with by a statewide bank.

Another approach, developed formitigation but not yet applied in the bankingcontext, is the Wetland ReplacementEvaluation Procedure (WREP) [Bartoldus etal. 1992] developed by a private consultingfirm. WREP requires recording various fieldobservations that influence wetland functions.The answers lead to scores for each function.WREP is designed for easy use without heavyanalytic resource commitments. Thedevelopers of the method claim that it isdesign-oriented, since it does not rely on asystem in which the answers to indicatorquestions push the analysis over thresholdsinto high/moderate/low resource ratings. Themethod is designed to highlight thedifferences between the wetland to beimpacted and the replacement wetland -- thesort of analysis that would be of particular usefor mitigation banks attempting to replacespecific lost functions, but which may be evenmore useful for mitigation of specificdevelopment projects.

The Corps Waterways Experiment StationWetlands Research Program is developing afunctional assessment method to replaceWET that will provide improved accuracy and

c. Landscape Level Analysis

Even the preceding methods can fall shortwhen impacts of concern take place on thelandscape scale, rather than within anindividual wetland. Although the methodsconsider certain landscape-scale issues, thesynoptic approach being developed by EPA isspecifically designed to look at wetlandimpacts on this scale [Abbruzzese et al.1990]. The approach uses mapping to displayindicators (such as wetland acreage,presence of hydric soils, population growth,etc.) that are converted to portray hydrologic,water quality, and habitat functions as well aswetland loss on watershed scales [WWF1992]. The result is a ranking of landscapesrather than wetlands; the method may be auseful complement to information aboutwetlands on a smaller scale. A similarapproach has been identified by the state ofMaryland, which is attempting landscape-levelassessments using Geographic InformationSystems (GIS) technology. The geographicapproach to information gathering andpresentation is not, by itself, amenable to useby mitigation banks because it lacks numericalunits to compare relative values and assigncredits. It is more likely that a method such asthis would be useful in siting banks, or inidentifying needed functions as the goal forreplacing lost values.

4. Best Professional Judgment

Faced with the complexities of choosing,learning, and implementing an assessmentmethod, many mitigation banks have opted forthe most commonly applied method forwetland analysis: estimates by people thatknow their subject. This "best professional


72

judgment" (BPJ) standard simply requires mitigation.individuals that are familiar with wetlands andtheir functions to make decisions regardingwetlands based on their own knowledge.Although the replicability of this method is low,knowledgeable individuals can provide agenerally consistent perspective on therelative value of similar types of wetlands.Indeed, the lack of a mechanical process maysometimes prevent the ecological misstepsthat might come with a numerical valueoutput. Best professional judgment is shapedby the same ecological knowledge that drivesthe formal techniques -- it is simply filteredthrough a less mechanical process.

Many banks, particularly those that havea limited number and size of credit sites, useBPJ as their way of establishing replacementratios. For example, an individual familiar withthe banked site might walk through the site tobe impacted and decide that the former is onlyhalf as valuable per acre as the latter. Thebank would therefore require the developer towithdraw credits at a 2:1 ratio. The proposedWest Tennessee and Northeast Utah bankshave suggested just this sort of case-by-caseBPJ/acreage evaluation system. This sort ofprocess relies on an established relationshipbetween the parties. Large scale banks wouldprobably find such a system unwieldy, and itsnecessarily unpredictable results wouldprobably frustrate developers. And evensmaller banks would probably wantoccasionally to inventory wetland values withintheir jurisdiction with a more exact method asa means of checking for unexpected slippagein certain functions.

Best professional judgment, whilerequiring case by case assessments withoutnumerical outputs, may also be analogous toappraisals in the commercial banking context.Banks make loans on the basis of creditreports (quasi-objective functional analyses)and on appraisals of particular properties.BPJ may be seen as a version of appraisals.The real issue then becomes holding theappraisers to a standard of quality and loyaltyto the ecological objectives of wetland

5. Combinations

Many large banks that use more detailedmethods do employ BPJ as a check on theresults of those methods (see MinnesotaDOT), and even the detailed methods usuallyhave a place for individuals to makejudgments concerning relative values and theirsignificance (consider WEM's significancevalues). Other methods may also be used aschecks on and supplements to the moreformal systems.

By combining methods, many banks havebeen able to avoid some problems andincrease ecological validity withoutsignificantly increasing the resourcescommitted to wetland analysis. Wisconsin'sPatrick Lake is typical in the way that it sets a1:1 acreage floor for mitigation, but requires agreater replacement ratio if WEM indicatesthat the impacted wetland is of relatively highvalue. Several methods using BPJ are"combination methods" as well. There roomfor creativity in combining methods, evenwhere resource constraints limit the numberand complexity of the systems. Idaho andWyoming banks, for example, use both HEPand WET as guidance for establishing ratiosto fill in complementary gaps.

6. Economic valuation

Although no wetland banking systemvalues wetland services in terms of theirmarket contribution, an economic analysis ofwetland functions is a potential alternativemeans of assessing wetland functions. If abank chose to estimate the dollar value of theservices provided by the wetland's functions,it could use economic valuation methods. Inmost cases, no market for such functionsexists, and methods such as surveying(contingent valuation), willingness to pay totravel to the wetland and/or to hunt there, orchanges in property values with a nearbywetland, would need to be used to estimatethe monetary value of the primary services.


73

Flood control, water purification, commercially well-tailored for swift processing of similarharvested resources, and others that involve transactions. It is not difficult to findadditional steps before going to market, can professionals that are familiar with thesebe estimated with somewhat more confidence methods. This familiarity may be one reasonby looking at market prices, value added, that wildlife methods are so common in bankscosts avoided, or other techniques. -- they are simply the evaluation methods with

But economic valuation of these goods most knowledgeable and comfortable.and services is a tricky business. Economicanalysis is useful insofar as it collapses all the HEP results are very sensitive to theservices of a wetland into familiar units. But species selected for evaluation. In addition,the added level of uncertainty and the manager must be aware of the effect thatawkwardness of converting different types of the use of the test will have on the overallservices into a single value unit makes mitigation process. Use of one test witheconomic valuation particularly unreliable. certain indicator species may lead to aThis is particularly true in the case of banking, phenomenon of "mitigating to the test" --because the conversion must occur at both certain cover types give higher HU values, sothe debit and the credit end. Moreover, by mitigation projects in the bank naturally wantconverting all functions into the same abstract to create that sort of wetland cover type (e.g.,unit (dollars), any ecologically significant open marsh is best for mallards, which are anfactors are masked. evaluation species, so mitigation projects, in

B. Evaluation of Systems

The selection of methods will be based onthe objectives of the banking program and theresources available.

Simple indices have great advantages formaking banking easier. Administrative costsare low and credit units are highly fungible.However, these methods are often the leastsensitive to wetland values and functions.Also, most simple indices do not take intoaccount scale effects. For example, a largerwetland may be more effective at flood controlthan the sum of a number of wetlands, orseveral small wetlands may provide a greaterrange of species than one large one.

Habitat-oriented assessment methodsare, after acreage, the most common systemsused by mitigation banks. Their quantitativeoutputs are easily converted into "credits" forbanking purposes, and the fish and wildlifefocus of the methods matches a primary goalof many mitigation systems. Because thehabitat assessment methods are in suchcommon use, they have often been fine-tunedto meet bank resource constraints and are

which resource managers and scientists are

an attempt to maximize HUs, create openmarsh). Minnesota's bank, for example, hasfound HEP to be biased toward the creation ofdeep water wetlands, resulting in a mitigationproject bias in that direction. The bank haseven considered using acreage instead ofHUs as part of an attempt to eliminate thistrend.

Habitat function methods can also requirea relatively significant commitment ofresources. Depending upon the variablesnecessary for the analysis, field testing mayrequire a large team of individuals and extendthroughout the year. One review noted thatHEP "is generally more time-consuming" thanother assessment methods [World WildlifeFund 1992]. Despite their limited focus, thedepth of analysis for these narrowly tailoredsystems may require information even moredetailed than that necessary for more broadlytailored methods. With this detail comesexpense, delay, and complexity. However, itshould be noted that HEP and other suchmethods can be simplified by the user.

As for the ecological soundness of themethods, it appears that HEP, when well-executed and with its interpretation limited to


74

its proper scope, can be a useful predictor of methodologies and converted them intowetland wildlife functions. Unfortunately, the quantitative values. For many banks thebroader the attempted scope of application, numerical values are easier to work with andthe more uncertain its results become. For more easily handled as the currency ofexample, HEP may do a particularly good job ecological functions. But such conversionsevaluating the habitat of evaluation species, are rarely based on ecological rationales. Thebut a poorer job of predicting habitat values practice of collapsing results into singlefor a set of species guilds. Attempts to numerical values necessarily reduces theextrapolate conclusions based on a few amount of information available about thespecies has risks for non-selected species wetland.groups (e.g. amphibians, plants, insects). Andcomparing cumulative HUs for different sets of Where mitigation is intended to protect aspecies involves risks inherent in comparing range of wetland values -- a decision implicitapples and oranges. in the choice of broadly tailored assessment

For wetland managers concerned about single value defeats the purpose of thethe spectrum of functions provided by a analysis. Using the intermediate results of thewetland, there is no substitute for a carefully broadly tailored methods -- ratings for each ofconsidered, broadly tailored analysis. The the functions -- may offer valuablemethods that have been presented here are supplemental information in combination withvery sophisticated. WET has been called the a more narrowly focused method. However,"most technically comprehensive method for using methods simply because they are highlythe assessment of multiple wetland functions" detailed may be more dangerous to wetland[World Wildlife Fund 1992]. The complex values in the long run than using simpledynamics of wetland functions are better indices.represented by these methods.

While the typically qualitative mitigation bank credit currency to work, it mustassessments may be frustrating, their be (1) simple to determine and to monitor, andimprecision is also realistic, reflecting the (2) able to represent a sufficient range ofuncertain state of wetland knowledge. The values and functions. None of the existingbroad results may be the most ecologically systems do both of these things well. Thesound means of expressing the dynamic mix multivariate systems are quite useful forof wetland functions. Unfortunately, the scope onsite, or project-specific, mitigation, but theyof information provided by these methods is a lack the simplicity for use in banking. Theproblem as well as an advantage. The simple systems overlook critical functions.creation of this information consumes The selection of a currency should reasonablyextensive resources -- certainly many more be tied to the purpose of the banking system,than simple indices -- and may require staff regional wetland goals, and the ease ofwith a greater breadth of knowledge than isnecessary for the other methods. In somecases, the attempt to evaluate every functionmay lead to lower quality results than areproduced by single-function methods: broadlytailored methods simply cannot address eachfunction with the same detail as can the morelimited techniques.

Moreover, many mitigation banks havetaken the qualitative results of these broad

methods -- collapsing the functions into a

70

In summary, in order for a wetland

This problem suggests the possible need for70

identification of key features of the particular wetlandsfacing development, and modification of creditsystems so that these are taken into account. "Unique features" are recognized as a WET element,but they are frequently lost when WET is transmutedinto a single credit number. A multivariate functionalapproach may have utility for banking if it can bemade simple enough and where the functions areselected in the context of a regional banking plan.


75

determination. wetland is not presumed to be as good as a

Finally, adjustments in the currency may compensate for instances where it is knownbe necessary over time if the expected results that the fully functioning replacement wetlandof compensation are not in fact being will not replace all of the functions at the levelproduced by the system. Banking instruments provided by the impacted wetland. (5) Stillwill need to provide for this potentiality; most other ratios are designed to provide ancurrently do not. incentive to delay use of mitigation bank

C. Compensation Ratios

Even after a currency has beenestablished, it may be necessary to identifythe ratios at which the currency will beapplied. The bank should establish theprocess or formula by which compensationratios can be applied to individually permittedwetland losses. In many present non-bankmitigation schemes (and many banks), habitatunits or acres are exchanged one for one.However, it is quite common in mitigationbanks to establish a compensation ratio of1.5:1, 2:1, or even 10:1, depending upon thecharacteristics of the wetlands and thecondition of the credits in the bank.

Ratios are commonly used in mitigationbanks for at least five reasons: (1) Someratios are designed to reflect the comparativevalue of dissimilar wetland types (e.g. rarertypes require a higher ratio of exchange formore common types). A ratio may also beused as a market incentive to encourage thecreation or restoration of a particular kind ofwetland -- it may favor certain out-of-kindtransactions in order to produce a gain indesired wetland types. (2) Other ratios aredesigned to favor restoration overenhancement or creation. (For example, theEPA Region IV draft guidelines provide that incircumstances where more detailed functionalanalyses are not possible, restoration is to beat a ratio of 2:1, creation at 3:1, enhancementat 4:1, and preservation at 10:1). (3) Ratiosmay compensate for the uncertainty thatcompensation wetlands can provide adequatereplacement for the natural wetlands beinglost. Thus, for example, a 1:1 acreage ratio isnot acceptable to many banking programsbecause one acre of restored or created

lost acre of natural wetland. (4) Ratios may

credits until full success has been achieved atthe bank site; higher ratios may be required ifthe client is using credits that are not yetfunctionally mature.

Particularly where the currency used by abank is not the result of a sophisticatedassessment technique, it may be necessary touse replacement ratios as a means ofensuring that ecological functions are beingretained. A wetland mitigation bank can dealwith this uncertainty as any other bank wouldby charging a "risk premium." While a bank'spremium might be the interest rate, thewetland mitigation bank's risk premium is theratio for allowing use of credits in the bank. Inthis way, the banking scheme guarantees thatany miscalculation about the level of serviceswill err on the side of surplus functions ratherthan too few. As the banked wetlandsfunctions become more stable and obvious,this replacement ratio can drop.

This "sliding scale" method is used inmany of Florida's wetland mitigation banks.The Florida DER has developed matrices forwetland types. On one axis, the matrixrequires the user to identify whether theimpacted wetland is undegraded, slightlydegraded, moderately degraded, or severelydegraded. On the other axis, the user mustidentify the stage of success of the mitigationwetland (e.g., no success criteria met, 2 of 6success criteria met, 4 of 6, and 6 of 6). Forexample, compensatory ratios for mangrovewetlands range from a low of 1:1 (where thecompensation is for a severely degradedmangrove wetland and the replacementmangrove wetland credits are fullysuccessful), to 2:1 (where the impactedmangrove wetland was undegraded andthebanked mangrove wetland has not yet met


76

the success criteria). Ratios for saltmarsh banks have significant confidence in theenhancement range as high as 10:1. The validity of their assessment and creditWeisenfeld Bank in Florida has ratios ranging production techniques, this conclusion isfrom 6:1 to 20:1, depending upon the success placed in some doubt by recent studiesof the credits at the time of their use. suggesting that the ratio necessary to account

Some banks set high replacement ratios 2:1 [Castelle et al. 1992].for particularly valuable wetlands, or those thatare difficult to restore or create. The proposed Regardless of what currency is chosenPlacer County (CA) bank sets an in-kind and what ratios are selected, banking systemsreplacement ratio of 3:1 for vernal pools and need to deal with whether to recognizefor climax riparian wetlands; and a underlying functions and values in thereplacement ratio of 2:1 for wet meadows and mitigation site as part of the "credit" availableemergent and freshwater marshes. for sale. For example, if a degraded wetland

Ratios can serve an important function in 134 after restoration, what amount should bemitigating for uncertainty and assuring recognized as available as compensationecological improvement. As with offset ratios credit? Most current banking schemes onlyfor excess pollution credits in prevention of recognize the net improvement, because thesignificant deterioration (PSD) areas under the underlying values were not produced asClean Air Act, the replacement ratio can be compensation. However, some otherset high so that there is actually a net increase schemes allow use of both the underlyingin the amount of wetland functions. Even if values and the added improvement (e.g., thethe goal is simply "no net loss," the Louisiana DOT bank); and banking systemsuncertainties should lead a wetland mitigation based on preservation necessarily rely almostbank to have a replacement ratio higher than entirely on the existing values.1:1.

A fairly typical ratio range for existing of this issue recognizes that even in a wetlandbanks is between 1:1 and 2:1. In California, creation (as well as wetland restoration orthe Bracut Marsh Bank has a 1:1 ratio, the enhancement), the pre-existing bank land hadPort of Long Beach Pier J Bank has a 1.5:1 values (e.g., for upland flora and fauna).ratio, while the Mission Viejo/ACWHEP bank Should the values created by the bank behas an initial 3:1 ratio that can be lowered offset by a deduction for those values lost?under specific circumstances. DOT banks This issue has been raised in connection withtend to be between 1:1 and 2:1. For example, a number of wetland creation projects. Inthe Virginia DOT banks fall in this range; the general it has been resolved not by aproposed West Tennessee DOT mitigation deduction -- a difficult solution given thebank sets a minimum ratio of 2:1. Although it difference in relevant functions -- but byappears that some present wetland mitigation adjusting the compensation ratio upward.

only for observable failures should be at least

has 54 habitat units before restoration, and

An even more sophisticated consideration

77

CHAPTER EIGHTAVOIDING AND

CORRECTING FAILURES

This chapter examines issues that failure require attention at the outset of afrequently arise after mitigation banks are in banking scheme.operation, but that require careful attention atthe outset. Specifically, it examines the ways The most common failure is improperin which banks can fail and how these can be design or construction of the mitigation site'splanned for and prevented or remedied; it hydrology. If a site's elevations are incorrectlyreviews the causes of project failure, the uses surveyed or constructed, for example, few ofof design and performance standards, the anticipated wetland functions will becontingency planning and monitoring, liability realized. In one study of onsite mitigation inand financial assurance requirements, and the South Florida Water Management District,enforcement. It also examines how long term researchers determined that 25% of allbank site ownership can be structured. mitigation projects were suffering from

A. Planning for Mitigation Bank ProjectFailure

A critical component in planning for amitigation bank is to anticipate the ways inwhich the mitigation project might beunsuccessful and to provide, in advance,institutional capability to address thosecontingencies. Attention to project failure isimportant because the science of wetlandcreation, restoration, and enhancement is stillnew [National Research Council 1992; Kuslerand Kentula 1990]. There are few guarantors71

of success. Even when a project has beenproperly designed and implemented, bothnatural and human-caused events can causefailure.

1. Project Failures

In general, mitigation projects fail for tworeasons. First, the project may be improperlysited, designed, or constructed. Second, afunctioning project may be damaged bysubsequent events. Both of these causes of

"significant" hydrologic problems [Erwin 1991].One of the first mitigation banks approved bythe Southwest Florida Water ManagementDistrict, the Northlakes Park Bank, failedbecause of improper hydrologic design.Although credits were recognized and debited,the bank failed in its attempt to rehydrate aforested wetland. The Fort Lee MitigationBank in Virginia also failed to achieve theexpected hydrology. Although this is acommon problem, some types of wetlands aremore susceptible than others to this kind offailure. Emergent wetlands surrounding openwater require less precision than, say,forested wetlands or estuarine marshes.

Other common failures include failure toidentify existing problems with substrates,soils, and contaminants. The Bracut Marshbank in California, for example, was sitedpartly on compacted soils unable to supportsuitable vegetation, and partly on woodydebris that formed an unstable substrateleading to formation of sinkholes in the marsh,and to migration of the debris with tidal flow.The Otterdam Mitigation Bank in Virginia hadhigher than expected construction costsbecause of a clay layer at the site that was notidentified when the site was selected. A (non-bank) wetland restoration project sited atSweetwater Marsh in San Diego Bayencountered both a hazardous waste landfilland a construction debris landfill, both ofwhich had to be excavated and removed for

The record is mixed. There has been a71

relatively higher degree of success with revegetationof coastal, estuarine, and freshwater marshes but lessconsistent performance with seagrasses and creationor restoration of forested wetlands [Kusler and Kentula1990].

Avoiding AndCorrecting Failures

78

disposal at substantial expense [National cause problems. During preparation of theResearch Council 1992]. site for the 4.2 acre Naval Amphibious Base

Site selection difficulties can also arise dredging activities accidentally destroyed 6.2from failure to consider surrounding land uses acres of natural eelgrass. Fortunately, thethat may impair the longterm viability of the damaged area recovered on its own threemitigation site. Mitigation sites without upland years later. The bank site itself was lessbuffers or that are surrounded by impervious successful; initially, only 1.6 acres achievedsurfaces can quickly convert to uplands or successful vegetation. Similarly, the (non-become pollution sinks. The Batiquitos bank) Sweetwater Marsh restoration projectLagoon bank in southern California is subject had its plant nursery accidentally bulldozed byto heavy siltation from adjacent uses. contractors working on part of the mitigation.

Sometimes the site requires more active restoration project near the University ofor continuous manipulation than is practicable. California at Irvine had its vegetation killed inThe Mud Lake bank in Idaho failed because successive years first by misapplication ofdesigners failed to anticipate the difficulties herbicide and then by failure of the irrigationwith keeping the site hydrated. The selected system [Cone 1992].design required continuous pumping of wateronto the site. Unfortunately, insufficient water Other common problems facingwas available for mitigation because of mitigation sites include vandalism, naturalcompeting irrigation and development uses disasters (e.g., storms, fires, floods), iceand drought conditions. Moreover, the water damage, offsite activities (oil spills, damagethat was pumped to the site rapidly leaked from powerboat wakes, loss of stormthrough cracks in the hardpan soils that protection from barrier islands), accumulationformed there. The pump then fouled and of debris, and invasion by undesirable exoticfailed to operate. The bank, which was species, diseases and insect pests. A bankestablished in 1990 to mitigate the loss of 16 can also be a victim of its own success. Foracres of wetlands, failed to do so; the site is example, a mitigation site may be so attractivenow completely dewatered and the vegetation to wildlife that all the vegetation is eaten andis predominantly upland. the site is left vulnerable to erosion or washout

Poor plant selection, failure to sustain not preventable, but are (at least in theplants during the establishment phase, and aggregate) predictable. The credit producer's,improper planting depths are also common or long term landholder's, responses tostartup failures. So is the failure to import a foreseeable failures should be planned ingrowth medium where the onsite soils are advance.inappropriate for plant establishment. Even ifsites are properly selected and well-designed,some initial failure with revegetation can beexpected, and should be planned for.Vegetation may not do well initially for avariety of causes. For example, at PridgenFlats, a pocosin restoration bank in NorthCarolina, an adequate number of growingplants could not be obtained, so seeds wereused for much of the site. However, none ofthe seeds (sowed in Spring 1992) germinated.

Construction-related accidents also

Eelgrass Bank, for example, the Navy's

The (non-bank) Irvine Company wetland

of the substrate. Many of these failures are

2. Performance and DesignStandards

Most failures can be avoided at thedesign and construction phase using one oftwo general approaches: the performancestandard approach or the design standardapproach.


79

a. Performance Standards

In its simplest form, the performancestandard approach simply requires theagencies responsible for recognizing the bankcredits (or allowing their use) not to allow useof the credits until the project is fullyfunctioning. This is consistent with the notionof mitigation banks as providing advancemitigation for development activities, andsaves banking programs from unnecessarycomplexity. It is simple and effective.

However, it is not fully consistent withmuch current and proposed practice: manybanks and banking schemes allow the use ofcredits prior to full success of the bank.These schemes simply hold the creditproducer liable for correcting problems in theevent of failure; some also require a greatercompensation acreage ratio for use of creditsprior to full functional replacement.

Banks that allow use of credits prior totheir full functioning cannot, however,reasonably rely on performance standardsalone. While, in theory, enforcement wouldassure the prompt correction of any failures,enforcement does not always occur. Evenwhen it does, it is not always effective --especially where the development activity hasalready been completed. In such cases, theregulatory agency's leverage to obtaincorrective action is diminished because thedeveloper has already realized the benefit andhas no incentive for rapid compliance; and thecredit producer (if a different entity) hasalready been compensated for the credits andhas no incentive for rapid compliance. TheNorthlakes Park mitigation bank in southwestFlorida, for example, has not produced itswetland credits even though they were allexpended four years ago, immediately upon A more prescriptive approach is the useregulatory approval of the bank; the bank is in of design standards. Typically, this requiresdebit status. This is the same problem that the submission to a regulatory authority of sitehas afflicted onsite mitigation [Redmond assessments, plans, and detailed construction1990]. and operating information, before receiving

Nor has the prospect of having to site. The regulatory agency requires sufficientcorrect a failure always served as a sufficient information to assure itself that the mitigation

incentive to assure that due care was used inthe construction of the mitigation project.Indeed, where there is no penalty for a sitingor design failure but having to do it over again,the incentive for getting it right the first timemay be reduced.

The incentive for prevention provided bythe prospect of having to correct a failure is, ofcourse, greater where the initial investment ishigh. It is also greater where the response isnot limited simply to enforcement, but alsoincludes the regulator's ability to draw down atrust fund or forfeit an operator's performancebond, as discussed later in this chapter.

In sum, the performance standardapproach is quite workable where the creditsare not recognized until success is achieved.It is also workable in some instances ofadvance debiting where there is sufficientincentive in the bank developer's initial sunkcosts to encourage proper initial planning andconstruction, and/or where there is sufficientconfidence in the regulator's enforcementcapacity to assure correction of the failure.

Even with these factors in place,however, sole reliance on performancestandards may not be appropriate in somesituations where the failure may not beremediable. For example, in a givenwatershed, there may be a limited number ofsites suitable for mitigation banking. Ifincompetent design or construction maypermanently ruin the utility of one of thesescarce sites, it may not be appropriate to relyonly on prohibiting the sale of credits or onafter-the-fact enforcement.

b. Design Standards

approval to generate credits at a mitigation


80

project is likely to succeed. Bracut Marsh bank was constructed to

A number of existing banks submitted Unfortunately, the specifications proved to bedetailed design information as a condition of incorrect to allow regular tidal flushing of thetheir approval. Others defer this step until bank site. Even after this was first discoveredafter the bank has been approved. The draft -- six years into the project -- necessaryMOA for the proposed Neabsco (Virginia) changes were not made. Because of suchbank, for example, states that initial designs instances, design standards should be backedmust be submitted and that final designs are by performance standards. The Weisenfeldto be agreed to by mutual agreement between Bank in Florida, for example, has detailedthe credit producer and the Corps. Oddly, design specifications backed by successhowever, this draft proposes that in the event criteria. Some consultants have suggestedof a difference of opinion on design the matter that where a design has been approved andis to be submitted to arbitration. Normally, the accurately carried out, if it is unsuccessful, thepermitting agencies retain the final say on mitigation should be deemed completedesign decisions where submissions are [Garbisch, in Kusler & Kentula, 1990].required. However, the regulatory objective is to

Reliance on design standards may expenditure of good faith effort. Designimpose additional costs and reduce credit standards are not a substitute for success, butproducers' flexibility. However, where a a further guarantee. regulatory agency has reason for concernabout performance (either because it is Quality control can also be effective inallowing some drawdown of credits prior to preventing unnecessary failures. Mitigationbank success, or because there are few or projects designed by competent engineers,unique potential mitigation sites) design biologists, and other experts are more likely tostandards provide a rational approach. succeed. Wetland restorers consulted for this

Design standards may include be adopted to distinguish the qualified fromrequirements for preliminary site the unqualified. The accredited restorationassessments, proposed design parameters, expert would then certify the design andtiming of construction activities and construction of the project. Theidentification of materials, substrate, growth qualifications cannot simply be professionalmedium, and vegetation. They may also degrees, however. Because wetlandrequire certification of designs by persons with restoration is a fairly new field, many of itsrelevant professional training, monitoring of qualified practitioners have degrees in thethe construction activities, submission of as- "wrong" fields, or no degrees relevant to anbuilt drawings and progress reports, and other area of work which they have learned primarilyinformation [Garbisch, in Kusler & Kentula by practice. If there is accreditation of1990]. The Mission Viejo/ACWHEP bank persons or firms, it should be based onagreement not only provided for agency objective measures such as examinationreview and approval of designs, but required and/or experience requirements.a $10,000 payment from the credit producer tothe county government to fund a consultant to Although no existing bank requiresmonitor the bank's adherence to those accreditation or certification, this is not anstandards.

Even projects subject to design If advance mitigation is the rule, this may notstandards and quality control requirementscan experience failure. For example, the

exacting engineering specifications.

accomplish functional replacement, not just

study suggested that an accreditation process

72

72

be necessary; it is more necessary for cases wherecredits are available prior to full functioning of thereplacement wetland.


81

unusual way of preventing siting and design mitigation banking policy, requires thatfailure. For example, virtually all state and mitigation banks have contingency plans.federal regulatory programs for reclamation of These plans must be updated semiannually.mining sites require that the reclamation Again, there are useful analogies to miningdesign be certified by a registered reclamation. California law, for example,professional engineer. Likewise, building requires mine operators to preparecodes require that designs and as-built contingency plans that identify what thedrawings be certified by trained professionals. operation's response will be if catastrophicAs a matter of public policy, these laws do not events or maintenance failures occur. Planssimply rely on design or performance must be updated periodically as conditionsstandards, or the threat of liability in the event change.of a failure. Rather, the laws are designed toassure that a technically trained person is Maintenance can be important inplanning the project and overseeing it to preventing failures. The appropriate level mayprevent a failure. vary significantly based on the type of bank.

3. Contingency Plans andMonitoring

An entire class of potential mitigationbank failures arises after construction of themitigation site. These include disease,weather, third-party damage, accidents,catastrophic events, consumption of thewetland vegetation by wildlife, and others.Banking schemes must anticipate theseevents. Many of those we studied did not.

a. Contingency Plans

The only rational approach to suchsources of failure is to plan for them. Themost foreseeable failures are those fromnatural occurrences. For example, we canexpect the occurrence of a 10-year stormevent, even a 100-year storm event, duringthe life of a bank. If the bank has not beendesigned for these events, it is operating in afantasyland. It is logical, therefore, for theregulatory agency to insist on knowing whatthe bank operator intends to do should one ormore of these foreseeable ills appear. Theadvantage of requiring a contingency plan isthat it compels the operator to consider thesefactors at the planning stage and to ascertainwhat, if any, preventive (as well as remedial)measures can be taken.

The Florida Department ofEnvironmental Regulation, in its wetland

The Fina LaTerre bank requires substantialmaintenance, because it depends on activemanagement in order to generate credits fromthe avoidance of salt water intrusion. Others,such as the Company Swamp bank, requirelittle maintenance because they are simplepreservation banks. In order to keepmaintenance costs down, it may be possibleto allow substantial flexibility to bank operatorsprovided that they do sufficient monitoring topromptly detect and correct failures. Forexample, where a bank consists of emergentwetlands, it may be possible to defer activemaintenance for the first several years todetermine whether the hydrology andrevegetation is working. Meanwhile, sufficientmonitoring should occur to detect as quicklyas possible instances where the site has beendenuded of vegetation by muskrats ordamaged by ORV enthusiasts. One of themajor failings of Bracut Marsh was that nomonitoring was done for the first six years.This made it difficult to take meaningfulcorrective action. If there is a reasonablemonitoring program, coupled with a set ofperformance standards, and a contingencyplan for future failures, the banking instrumentmay not need to specify a particularmaintenance program.

b. Monitoring

A formal monitoring system is animportant element of wetland mitigationbanking. Monitoring not only helps ensure the


82

long-term ecological success of a bank, it can construction phase, inspections by "qualifiedlead to better daily management as well. individuals" (presumably employed by theBracut Marsh's problems could have been bank) must occur no less than monthly (andsolved earlier and easier if there had been within one week of any rain event). Thesystematic monitoring. results of the construction inspections must be

The question of who does the monitoring" must occur for not less than fivemonitoring is a serious issue. One option is to years from the date of credit production orrequire the credit producer to monitor the three years from the last sale of credits,bank. Requiring self-monitoring of a single- whichever is later. "Limited monitoring" thenclient bank, such as a DOT bank, forces the occurs every other year for 15 years from theparty causing an environmental impact to be end of the intensive monitoring period.responsible for making sure that its mitigationefforts are successful. Self-monitoring can While self-monitoring can be a usefulalso makes enforcement easier because the enforcement tool, it may make it possible forenforcing agency uses the permittee's own credit producers to make mitigation effortsdata to prove non-compliance. appear more successful than they are. An

The Weisenfeld Mitigation Bank in necessary. Economies of scale (and theFlorida is a good example of how self- requirement of advance mitigation) may makemonitoring can also be used to promote self- agency oversight more likely with mitigationenforcement. Weisenfeld was granted a banking than with onsite mitigation -- wherebanking permit from the Florida Department of the oversight record is weak.Environmental Regulation which not onlyrequires Weisenfeld to send regular Typically, existing mitigation banks aremonitoring reports to the Department and monitored on an ad hoc basis by theseveral other agencies, but requires regulatory agencies permitting theWeisenfeld to police itself. If the bank development activities. The responsibility ofdiscovers that it is not in compliance with the monitoring can also belong to an interagencypermit conditions, Weisenfeld must team, usually made up of the signatories of aimmediately explain to the Department the bank's MOA. It is preferable to spell outtype and the cause of non-compliance as well monitoring obligations in more detail to assureas the expected duration of continuing non- that they are fulfilled.compliance and the steps being taken toreturn to compliance. The Department Another option is to have a state orexpressly reserves the right to inspect, sample federal inspector paid for by the creditand monitor the bank site. The permit also producer. The Mission Viejo Company, forclearly states that all records and monitoring example, provides funding to Orange Countydata submitted to the Department may be for inspection of the Aliso Creek Wildlifeused as evidence in enforcement cases. Habitat Enhancement Project (ACWHEP).

In a multi-client bank, self-monitoring New York's statutory requirement thatmay be more complicated. Self-monitoring can commercial operators of hazardous wastebe the responsibility of the credit producer, treatment, storage, and disposal facilities fundlandowner, or the clients. an onsite inspector employed by the state's

The proposed Chicago Homebuilders At least one proposed bank (Prince George'smulti-client bank MOA provides detailed County, Maryland) will assign a bank managersuccess criteria and specifies that corrective who is responsible for inspecting the bank atmeasures must be undertaken. During the least annually, and after all major storms, for

submitted to the Corps. Then "intensive

agency check on such monitoring is clearly

Bank funding of inspectors is analogous to

Department of Environmental Conservation.


83

at least 5 years. The manager will submit allmonitoring reports to an interagency oversightteam. This system is appealing because itmakes one disinterested individualaccountable for monitoring the bank.

A designated bank monitor could easilybe required to have professional qualifications-- e.g., biologist, hydrologist, engineer.Requiring certification of bank monitors is oneway to try to assure accurate evaluations.Another is to require monitoring reports to besigned and certified by responsible companyofficials, as is the case with the dischargemonitoring reports (DMRs) required under theClean Water Act. Having certified reportsshould minimize the falsification of data bycredit producers. The Weisenfeld MitigationBank in Florida makes it a condition of thebanking permit that all monitoring informationmust include the name of the personresponsible for performing sampling,measurements and analysis.

At least as important as who does abank's monitoring is who gets the results ofthose evaluations and what they do with thedata. Monitoring results can go to thepermitting agency, interagency oversightteams, and/or the public. The reports can beused to evaluate or reevaluate credits, todetermine whether or not performancestandards are being met, and to demonstratecompliance with permit conditions.

4. Assigning the Risk of Failure

Critical to any banking scheme is clarity for a set of credits generated as a whole).regarding responsibility for correcting any This makes assignment of responsibilityfailures. Banking programs that assume difficult.flawless performance by all participants (andperfect cooperation by nature) are too Another alternative is to hold no onecommon. The issue arises most often where liable. Natural wetlands experience losses alla bank has been allowed to sell credits prior to the time. It may be irrational to expect moreachieving full performance. A somewhat from created, restored, or enhanced wetlandsdifferent problem arises in instances where than from the wetlands they replaced. Athe credits were fully functioning when used, possible approach is to hold no one liablebut the bank site fails due to subsequent where the event is one that would have (couldevents. have) destroyed the wetland for which the

a. Liable Parties

Given the potential for failure even ifsiting, planning, construction andmanagement are proper, who should bear therisk if the mitigation fails? The assignment ofliability should be explicit in any bankingscheme rather than implicit or unspecified.Among the options available are the creditproducer, the client(s), the site owner, no one,or the regulatory agency.

The most obvious candidate forresponsibility is the credit producer. Thecredit producer undertook to provide thecredits and should have planned forcontingencies. The regulatory agency and theclients both relied on the credit producer toproduce the wetland values and functions nowdamaged or destroyed. Presumably the creditproducer also has the expertise, site access,and resources to take corrective action.

Alternatively, the clients might be liable.They would have been liable had themitigation been onsite. They are the oneswho benefited from the use of the bankedcredits. Arguably, if the credits turn out to beno good (or less valuable than represented),the clients should make good on them. Thedifficulties, however, are that the clients maywell lack access to the site; they probablyrelied on the bank in order to avoid longtermissues; and untangling responsibility forcorrective action at a multi-client bank may bequite difficult. (Each client is not necessarilyresponsible for an identified parcel but rather

mitigation was required -- for example, a 100-


84

year storm event, a hurricane, a regional mitigation bank site will take place. Mostinfestation -- but to require rehabilitation in all regulatory agencies do not have the budget,other instances. technical expertise, or staff to undertake an

A related issue is what to do withconstructed but unsold credits that are Existing banking schemes are notdestroyed. Probably the best approach is not extremely helpful in specifying liability. The 22to recognize them as available unless they existing state Department of Transportation(and the rest of the bank) are rehabilitated. Banks (in 14 states) use several of theseThus, the credit producer bears the risk of loss approaches. In Minnesota and Northfor any unsold credits. However, the draft Carolina, the Department of Transportationinteragency guidelines for wetland mitigation (client and credit producer) remains liable nobanking prepared by the Corps of Engineers' matter who ultimately gets title to the land. InGalveston District make no one responsible New Mexico, the DOT is liable for 25 years;for failed or destroyed credits. The guidelines and in Wisconsin is liable until the bank site isprovide that "once the credits have been deemed "successful." Thereafter, no liabilityestablished, they will remain until all of the remains. In Idaho and Tennessee, the liabilitycredits have been withdrawn. Credits will not shifts to the ultimate landowner (usually abe adjusted up or down...even if the mitigation resource agency). In the Louisiana DOTbank exceeds expectations or does not meet bank, the liability was unstated and remains inexpectations." dispute between the DOT and the resource

Another possible liability scheme is to Nebraska DOT banking program leavesmake failures the responsibility of the long liability open for negotiation upon dispositionterm owner of the property. The purpose of of the site, a difficult time to resolve the issue.having a long term owner is to provide someassurance of the status of the wetland; Most non-DOT banks are silent as toresponsibility for maintenance and liability. However, some specifically make thereconstruction may be a longterm adjunct of client-credit producer (the same entity in mostthis responsibility. One difficulty with this existing banks) liable. The draft northeastallocation is the difficulty of insisting on interagency regional guidelines provide that inrehabilitation if the land owner has no direct the event that a bank fails to provide therelationship to the regulatory agency. How compensation required, "the permitteecan the regulatory agency compel a state remains responsible for compensating for theparks agency or a nonprofit conservancy to wetland functions lost as a result of permittedtake action? This would need to be explicit in activity."the authorizing instrument. The funding issuemay be particularly acute here. If the landowning entity is not the entity that receivedfunds for the sale of credits, it may benecessary to assure that it has a source offunds sufficient to deal with contingencies.

Finally, the regulatory agency itself mayassume the liability. Essentially, once it hasrecognized credits in mitigation of a permittedactivity, the agency may release the otherparties from liability. This approach is simpleand direct; however, it provides virtually noassurance that rehabilitation of a damaged

active rehabilitation effort.

agency landowner. The still-proposed

b. Financial Guarantees

Given the possibilities for mitigationfailure and the risks in allocating liability,financial guarantees can serve an importantfunction for mitigation banks. There arenumerous financial instruments that can serveto guarantee mitigation success, and toprovide a source of funds in the event ofcontingencies.

The best of these guarantees serve dualpurposes: (1) to ensure that funds will be


85

available to repair and maintain the site in the Financial assurance can be provided inevent of a problem not corrected by the credit a variety of forms: surety bonds, trust funds,producer, and (2) to provide the credit escrow accounts, sinking funds, insurance,producer with an incentive to design, self-bonds, and corporate guarantees.construct, and maintain the site properly.

Despite their utility, very few existing or to assuring performance and preparing forproposed banks have any provision for contingencies. The credit producer purchasesfinancial assurance. None of the state DOT a bond from a third party surety (paying abanks does. Several of the existing and premium and posting collateral), or provides a73

proposed private banks and publicly operated cash bond, letter of credit, or other assets thatbanks do provide for financial assurance, ensure that the site functions properly for thealthough these are the exception rather than specified period and that all necessarythe rule. Like most onsite mitigation projects, corrective actions will be taken. Once themost existing banks do not have such period has ended and performance has beenassurances. successful, the bond is released. (This may

Some mitigation banking policies and are reached, portions of the bond areguidance documents require financial released.) The bond provides both a sourceassurance, while others do not. The U.S. Fish of funds that can be drawn on by the& Wildlife Service's 1983 interim guidance, regulatory agency (or bank manager, ifwhile not expressly requiring financial appropriate) in the event of a default by theassurance, states that "means for long-term credit producer, and an incentive for the creditoperation and maintenance shall be agreed producer to do things right so that the bondupon..." In contrast, EPA Region IX's 1992 can be released. final guidance document for mitigation bankingspecifies that "a fund for remedial actions The Mission Viejo/ACWHEP bank hasshould be established as part of any banking an $800,000 bond posted by the client/creditagreement." EPA Region V's draft guidance producer with the county to assure thatdocument does not specify financial construction and vegetation is carried out.assurance; while EPA Region IV's draft The bond is releasable incrementally over fiveguidance for mitigation banks provides that years based on attainment of vegetationfinancial assurance "should be established as milestones. The Millhaven (GA) bankpart of any banking agreement" and should be approved by the Corps in December 1992in such form as to "provide an irrevocable must post a performance bond of $5,000 perguarantee of availability of the necessary acre. The bond is reduced to $1,000 per acrefinancial resources" to cover "bank needs, upon the Corps' verification that the wetlandincluding but not limited to remedial actions." acres are performing; thereafter, the reduced

The surety bond is the classic approach

also be done in stages. As certain milestones

bond remains in effect until the completion ofa five year maintenance period.74

A second approach is the establishment The rationales for not requiring financialof a trust fund. Unlike the bond, a trust fund isprimarily aimed at providing sufficient funds for

73

assurance from governmental entities are theassumptions that they will always be around to honortheir obligations, that as governmental agencies theyare likely to do so without resistance, and that torequire a financial assurance is either to incurunnecessary government expense (for a third partybond) or unnecessarily to idle limited government bank is bonded separately. The evaluations andresources (in a fund). The Federal Highway reductions are done by "block" in order to avoid theAdministration's 1992 draft model banking agreement expense and difficulty of bonding (and calculating thedoes not specify financial assurance. bond reductions) for the entire site at one time.

Each distinct "block" of wetland acres in the74


86

maintenance and contingencies, not at have been recognized as successful). Forproviding an incentive to the credit producer or "conditionally-certified" credits, the creditbank manager. The Batiquitos Lagoon producer would deposit $10,000 per acre.mitigation bank provided for a trust fund. (The This amount would then be reduced tofund was not created as the client -- Pac/Tex $5,000/acre once the acres achieved full-- withdrew). The client was to have provided certification (i.e., a refund). The proposeda $15 million initial contribution, which was to memorandum of agreement would also allowgenerate construction, operating, and the sale of credits by a bank that has nomaintenance funds for the first thirty years. assets (viz., that has not yet produced creditsConcurrently, there was to be a separate fund or conditional credits). These future credits --to earn and reinvest interest so that at the end sold at market prices and usable at aof thirty years the interest on the accrued proposed compensation ratio of 1.5:1 -- wouldbalance could thereafter generate annual require the deposit of $30,000 per acre intomaintenance funds. The Mission the escrow account. The credit producerViejo/ACWHEP bank has a client-created would, however, be permitted to withdraw up$143,000 trust fund which is intended to to $20,000 per acre to construct the bankgenerate $10,000 per year for operating and credits; and the further reduction of themaintenance expenses for a 15-year escrow amount to $5,000/acre would occurmaintenance period. The proposed when the credits received full certification.Springtown mitigation bank, also in California, Interest on the escrow account would behas proposed a trust fund funded by a usable by the bank for monitoring,surcharge on the sale of credits. Although the management, and maintenance. If the banktrust fund amounts have not been determined, becomes insolvent, its assets, including thethe bank's proponent suggests that $5,000- escrow account, would become the property$10,000 per acre might be an appropriate of the Corps of Engineers. The draftamount, and that ultimately the fund would agreement does not address the ability of thegenerate $60,000-$100,000 per year for Corps to use the escrow account in the eventoperating and maintenance expenses. of a dispute with the bank or upon particular

The Huntington Beach Mitigation Bank the principal after the conclusion of the 15-has a "trust fund." The fund is not tied to year monitoring period that follows the initialparticular acreage or success criteria, and it is "intensive" monitoring period.not limited to particular expenditures. Thefund is produced primarily through Sinking funds are accounts in which thecontributions and other funds going to the fund balance is allowed to decline over timelocal nonprofit conservancy that administers as the likelihood of failure diminishes. Theythe bank and has a balance of between can be tied to particular success criteria$5,000 and $10,000 for the entire site. (vegetation diversity and distribution, for

Other approaches include escrowaccounts and sinking funds. These combine Insurance is conceivably an alternativethe trust fund approach with incentives to approach. While insurance may not beperform maintenance and other required commercially available to guarantee a creditactivities. For example, the proposed Chicago producer's banking success, it may beHomebuilders bank would have an escrowaccount. Upon sale of credits at market price,the credit producer would deposit funds intoan escrow account "to ensure the long-termmonitoring, management, and maintenance"of the bank. The deposit would be $5,000 foreach "fully-certified" acre sold (credits that

75

defaults, nor does it specify what happens to

example).

Essentially this part of the proposed scheme75

resembles a privately operated in-lieu fee program. Money is paid to meet the developer's obligation, withthe expectation that future mitigation will be performedwith it.


87

possible to purchase insurance against the "financial test," is a less reliableoperator accidents, vandalism, and floods, guarantee. Bonds, trust funds, and otherfires, and storms. Insurance is good at formal financial instruments are meant todealing with contingencies; unlike surety protect the public interest in the event of abonds, trust funds, and sinking funds, default by the credit producer; in contrast, thehowever, it does not have a significant financial test essentially assumes that noincentive function. default will occur based on the size or assets

A variation on the surety and insurance wrong, or the company denies responsibilityapproaches is the bond pool. Bond pools are for a failure, the regulator is no better off thanrisk-sharing mechanisms. The participant in if it had no such guarantee; it will need to filethe bond pool posts a site-specific bond in an suit, or may need to attempt to extract assetsamount substantially less than that needed to from a bankruptcy without an enforceablecover all contingency costs, and in addition security interest that would give it a prioritypays a periodic non-refundable amount (or a claim.one-time premium) into a pool account. Thepayment to the pool is meant to cover Government-operated banks often(together with similar payments from other maintain that they should not be subject tobank operators) the aggregate risk of failures financial assurance requirements. Although,calculated for all participants. If a bank fails presumably, government agencies exist inand the operator defaults, the site-specific perpetuity and have the financial credit of thebond is used first for the rehabilitation work state, local, or federal government behindand the bond pool pays for all the excess not them, in reality financial difficulties arecovered. The advantage of a pool is that it endemic to governmental agencies.76

can reduce costs to individual operators while Appropriations may not be made by thestill providing an incentive to perform. The legislature to meet obligations that aredifficulty is in setting an appropriate fee or perceived as non-essential; or, fundingpremium given uncertainties in predicting the priorities may shift. In short, absent alikely number of bank failures and the costs of designated source of committed funds,correcting them. government-operated banks may be even less

Some regulatory schemes allow self- example, the Louisiana Department ofbonding or third-party corporate guarantees. Transportation bank has suffered from theCorporate guarantees can be as effective as absence of a trust fund or similar instrument.sureties if the solvency of the guarantor can Eighty-three percent of the credits in the bankbe continuously monitored and provided that were to have been generated by managementthe regulatory authority can quickly access the of the land to enhance wildlife habitat.guarantee funds without substantial litigation. Although most of the credits were used, theThey are poor substitutes if these factors are management activities did not occur. The sitenot present. Self-bonding, sometimes called owner -- the Department of Wildlife and Fish --

of the credit producer. If this assumption is

reliable than some private banks. For

received no funding from its ownappropriations or from the DOT to conductthese management activities.

If a formal financial instrument is used,it may be funded in several ways. Thebanking program may simply require afinancial instrument to be posted in a givenamount, leaving it to the credit producer torecoup this expense in the marketplace.Alternatively, the banking plan can assess a

The federal Surface Mining Control and76

Reclamation Act (SMCRA), 30 U.S.C. § 1201 et seq.,requires coal mine operators to post bonds toguarantee their performance of site reclamation. Eightstates, however, have enacted bond pool programsthat allow operators to post reduced bond amounts solong as they pay into a bond pool account (on a perton, flat fee, or per acre basis). See J. McElfish & A.Beier, Environmental Regulation of Coal Mining(Environmental Law Institute, 1990).


88

fixed surcharge on each sale of credits. This California Department of Fish and Gameapproach guarantees the fund a certain biologist estimates that 90% of the onsiteamount and also links the increase in the fund wetlands mitigation projects in Southernto the size of the risk at issue; as more credits California are never completed as requiredare issued and relied on, more funding is [see Cone 1992]. Studies of mitigation sites inavailable to handle failures. Florida showed that over half of the mitigation

How long should a bonding requirement, many mitigation projects were never eventrust fund, etc. be in effect? This question has commenced [Redmond 1990; Erwin 1991].no fixed answer. For example, because Studies of mitigation in Oregon, Washington,banked mitigation wetlands are designed to and Gulf Coast states also showed substantialcompensate for a wetland that conceivably noncompliance [Kentula et al. 1992; Sifneoswould have existed for decades -- if not in et al. 1992]. perpetuity -- it is not unreasonable from anecological perspective to require a perpetual Mitigation banking may provide a way ofcare fund. On the other hand, many types of improving the enforcement record of previous77

wetlands do not require longterm care; indeed, mitigation efforts since enforcement provisionsif they are truly replacing functions and values, can be written into the banking instruments.they should, by definition, be self-sustaining. Unfortunately, at this time, many mitigationThus, financial assurance could be for a far bank instruments do not directly addressmore limited duration. enforcement issues. Some of the banks have

The most logical approach is to link corrective action or enforcement. Thefinancial assurance requirements to the Minnesota DOT bank, for example, has two"ecological success" criteria established for districts which have been in a debit conditionthe bank. The guarantee for a successful for eight years. Obviously, bankingbottomland hardwood creation project, for instruments need to be strictly enforced if theyexample, would need to be for a far greater are to be useful. Because of their visibilitylength of time than that for a duck marsh. and potential scale, it should be easier toLinking assurance to success criteria also enforce against banks than against manyprovides an incentive for self-monitoring and smaller, scattered project-specific sites.speedy correction of problems by the creditproducer or other responsible entity. The There are a number of key enforcementlength of time for financial assurances to issues. First, it must be clear what is beingremain in effect could be determined either (1) enforced -- the § 404 permit of the bank client,by linking it to the achievement of site-specific the permit or other operating authority of thesuccess criteria, or (2) by establishing a fixed bank, or an MOA. Second, there is theperiod by wetland and mitigation type, with a question of whom the enforcement is to beprovision for release only upon demonstration directed against -- the credit producer, theof success at the end of that period. client, the bank manager, the longterm land

5. Enforcement

Rules requiring mitigation do nothingunless they are enforced. Enforcement ofmitigation efforts to date has been slim. One

efforts could not be called successful, and that

been in debit status for some time with no

owner, or all of them. Finally, what array oftools is available to the enforcementagencies?

a. What Instrument Is BeingEnforced?

An issue often overlooked in structuringmitigation banks is upon what legal authoritythe enforcement will be based. The Corps of

State laws governing the operation of77

cemeteries, another "perpetual" land use in moststates, frequently require such a fund.


89

Engineers can enforce a § 404 permit against evaluate the bank site after five years. Ita discharger (i.e., a mitigation bank client). If never did that evaluation, yet there were nothe permit contemplates the use of mitigation consequences.credits, presumably enforcement action canbe taken against the client if the credits are Enforcement is easiest when it is part ofnot delivered or if they fail. However, this a bank permit. The permit issued by theauthority may not adequately or fairly address Florida Department of Environmentalproblems with mitigation banks. The desired Regulation to the Weisenfeld Mitigation Bankenforcement may well be against the credit makes it clear that Weisenfeld is subject toproducer, bank manager, or landowner of the enforcement action, including penalties orbank. Yet they are not party to the § 404 revocation of the permit.permit, and so are not subject to its terms.Moreover, the Corps may wish to distinguishbetween the § 404 permittee and the bankoperator (credit producer, manager, etc.) ifthey are not the same. It may be useless topunish a client for the faults of the bankmanager, especially if the client lacks anyauthority to correct the violation.

For most banks, an MOA or MOU is thebasis for enforcement. Yet the enforceabilityof these instruments is not always clear. Arethey contracts? Regulatory instruments? Theenforceability of an MOA is not well settled,and the resulting ambiguity may give too muchnegotiating advantage to a credit producer orother party in the event of a controversy. In alllikelihood, an MOA would have to be enforcedin court using common law contract principles.These might include legal rules concerning theremedy of damages, the availability orunavailability of specific performance,limitations on punitive damages, rulesconcerning third party beneficiaries, and otherobstacles. Moreover, there is no way toimpose sanctions for violating an MOA, unlessit specifically provides for stipulated penalties. For a standard MOA, a simple contract suitfor performance of the mitigation or fordamages may be all that is available. Thismay not provide sufficient leverage to theenforcement agency, and may require levelsof pleading and proof that make enforcementdifficult.

Moreover, in practice, bank MOAs arenot always enforced as they should be. Forexample, the MOA for the Company SwampMitigation Bank required the NC DOT to

b. Who Are You Enforcing Against?

In the case of onsite mitigation, it isclearly the developer who remains responsiblefor faithful performance of the mitigation. Aswe have noted above, however, the picture iscloudier in the case of mitigation banks. If thebank is limited to sale of fully performingcredits (advance mitigation), enforcement isgenerally not an issue. The difficulty arises ifthe banking scheme allows the sale of creditsthat are in some sense not yet fully mature.

For single-client banks, where one partymaintains and uses the bank, enforcement isplainly against the single client/creditproducer. In the case of multi-client banks,the regulatory agency, as a practical matter,needs to enforce against the party responsiblefor the mitigation work and bank maintenance,not necessarily those buying credits from thebank. However, enforcement leverage wouldincrease if clients were jointly and severallyliable with the credit producers, or even ifclients were proportionately liable for theirmitigation credits. Indeed, if clients were heldliable for their share of mitigation credits itmight make compliance market-driven.Clients might demand a well-run, successfulbank (or purchase only fully mature credits)rather than risk being held responsible for afailed venture. Furthermore, liability wouldprovide an incentive for clients to demandregular monitoring and early detection andremediation of any problems.

Such liability might, however, makebanking unattractive in comparison with onsite


90

mitigation. Few developers will want to Some enforcement can be based on theexpose themselves to potential longterm § 404 or state permit allowing the bank client'sliabilities not within their own control. wetland conversion. The Corps has the

In general, therefore, banking schemes not comply with the permit conditions.that are not limited to advance mitigation will Although the threat of having § 404 permitsprobably need to give clients some protection revoked is serious, in practice it rarelyfrom liability, but will need to provide happens. Nevertheless, the threat ofregulators with other guarantees of revocation can be significant, if the permitteeperformance (such as performance bonds, has sufficient control over the bank site toescrow accounts, or trust funds). accomplish corrective action.

c. Enforcement Tools

If enforcement is based on a bank MOA,the enforceability of that instrument should beclearly spelled out. Indeed, the MOA shouldspecifically provide that it is enforceable byany party -- and/or by the public as third partybeneficiary -- and should include the parties'consent to jurisdiction in an appropriate courtor courts. Where the MOA is silent orcontains few enforcement provisions,enforcement based on implied agreements orgeneral principles of contract law may bedifficult or impossible.

Care in draftsmanship is important. Forexample, the fact that an MOA specifies sometypes of enforcement consequences and issilent as to others may deprive the enforcingagency of sufficient flexibility to addressspecific situations. The proposed ChicagoHomebuilders MOA is slim on enforcementprovisions, and limits those that it provides.For example, it requires that as a preconditionto enforcement, the Corps must notify thebank it is out of compliance, and then allow ita reasonable time to comply before takingfurther action. This provision provides a basisfor litigation and delay in enforcement. TheMOA further provides that where the bankdoes not come into compliance, the bankapproval is to be revoked. This may notprovide a real incentive for corrective action ifall of the credits have been sold. Moreover,the absence in the document of other potentialsanctions may seriously limit enforcementoptions.

power to revoke a permit if the permittee does

The threat of being denied futurepermits can be a very effective enforcementtool. Entities that work on a continuing basiswith regulatory agencies (state DOTs, largedevelopers, environmental consultants) realizethat it is in their interest to make a bankproject successful so that the agencies willreact favorably on their next permits.

The Corps also has the authority toassess penalties of up to $25,000 a day forviolations of § 404 permits. However, ourstudy has not revealed any cases where theCorps has actually assessed a penalty forfailure to perform mitigation.

The strongest guarantor of success, ofcourse, and one that obviates the need forafter the fact enforcement, is to requireadvance mitigation. The Acequia MitigationBank in Idaho, for example, requires thatmitigation must be complete and successfulbefore credits can be earned, and does notallow debits to be made until the credits areearned. Other banking schemes attempt touse interim milestones as a partial substitutefor complete advance mitigation. TheWeisenfeld bank permit makes thecompensation ratio for credits dependent onthe successive achievement of six specificsuccess criteria. Enforcement becomes moredifficult after credits have already beenrecognized. The Louisiana DOT bank is anexample of what can go wrong when adeveloper is given credits in advance ofpromised work. The LDOT received 64annual available habitat units for purchasing(preserving) 3000 acres of wetlands. It


91

needed more credits so it agreed to actively an enforcement tool, the Corps or othermanage and enhance the wildlife habitat of agencies could require provisions in bankingthe land in exchange for receiving an instruments that would require bank managersadditional 300 credits. The LDOT has to forfeit bank lands if they violate the terms ofcurrently debited all but 70 credits without the instrument.undertaking any management activities.There has been no habitat enhancement and Citizen suits might also be made a partthere is no formal banking agreement through of mitigation banking schemes. While suitswhich to enforce the obligation. under the Clean Water Act may be brought

Some banks have anticipated this type suits could be brought against mitigationof problem and have provisions in their banks where the client is not the same as thebanking instruments for the revision of credits credit producer or landowner. In structuring aafter reviewing monitoring reports. The MOA mitigation program, policymakers might wishfor Prince George's County Bank in Maryland, to consider legislation that would allowfor example, authorizes the oversight team to citizens to bring suit to enforce the bankingrecommend revising the credits and debits of instrument.the bank, as well as the MOA, after reviewingtheir monitoring reports. Indeed, it is There are several other ways that theconceivable that a bank could be penalized public can help enforce successful mitigationnot just monetarily for a violation, but through banking. Private citizens or environmentalforfeiture of certain credits to the state or groups could serve as unofficial bankfederal regulatory authority. inspectors, or as representatives on oversight

Forfeiture of financial assurance funds bank managers knew that the results of theircan also provide a powerful enforcement tool. monitoring reports would be available to theThe bank agreement for the ACWHEP bank in public. In today's business climate, mostCalifornia, for example, requires the Mission developers realize the importance ofViejo Company to provide an $800,000 bond environmental image. Image protection couldto Orange County at the start of the become another means of enforcement.construction of Phase I to ensure the successof habitat value replacement. The proposedHomebuilders Association of Greater ChicagoMitigation Bank MOA calls for money to bekept in an escrow account. In Georgia, theMillhaven bank must maintain a bond toguarantee monitoring and maintenance of thebank for a five-year period. The key to usinga financial instrument as an enforcement toolis that the regulatory agency must be able toaccess it without a prolonged legal process.The agency should be able to draw on thefund, bond, or letter of credit upon itsdetermination that a violation has occurredand not been remedied. If the agency's abilityto access the funds is contingent uponwinning a court case, the enforcement utility ofthe instrument is significantly reduced.

Besides using the forfeiture of a bond as

against § 404 permittees, it is not clear what

78

teams. It also might increase compliance if

B. Long Term Status of Bank Land

Attention to the long term status of bankland may also be desirable to assure longterm realization of the ecological benefits. Inmost onsite mitigation, the mitigation landremains the property of the developer and issubject to surrounding land uses and futureactivities in the same way as the originalwetland. In a small, but increasing number ofcases, however, developers have entered intoagreements with regulatory agencies,resource agencies, or non-profit organizations

Of course, the potential for exposure to this78

liability might increase the cost of credits, or reducethe attractiveness of entry into entrepreneurialmitigation banking. This tradeoff would need carefulconsideration.


92

to provide for the longer term protection of certain to continue in that status in perpetuity.onsite mitigation lands. This trend is even Such natural areas as national parks andmore common with mitigation banks. wildlife refuges require management to cope

Mitigation banking may be more development, infestation with diseases orcompetitive with onsite mitigation if no long exotic species, or pollution), and eventerm landholding requirements are imposed. wilderness areas require management. GivenOn the other hand, one of the advantages that the intensity of population pressures andmitigation banking offers the public (and external forces, so too will compensatoryresource agencies) is the opportunity to wetlands require attention in order to functionprotect units of a reasonable size over a over the long term.longer period of time. This may militate infavor of imposing such a requirement as a Prevention of inconsistent uses of thecondition of banking. The condition may draw bank site is equally important. Whilelittle opposition. Under many circumstances, compensatory wetlands may be protected bybank sites may not be subject to immediate regulatory schemes -- like § 404, state laws,development pressures. Indeed, some credit or § 4(f) of the Transportation Act -- they mayproducers may prefer to place bank land in also be lawfully degraded, farmed, timbered,other hands after they have extracted its used for rights-of-way, or other purposessalable value in the form of credits. They will which may be detrimental to their effectivebe relieved of a non-performing asset, and functioning. While some productive uses,they may be able to realize some such as farming or timbering, may becompensation credit, tax deduction, or consistent with long term functioning of apromotional value from the land donation. particular wetland, some entity needs power to

There are a number of options for long of monitoring and the ability to ejectterm bank site land holding. First, the land incompatible uses, the risk is that thesemay be deeded outright to a public resource compensatory wetlands will be lost to theagency, a nonprofit entity, or an independent same kinds of forces that gradually impairbanking entity. Second, the land may be natural wetlands on private lands.retained, but a conservation easementconveyed to a public resource agency (or to a The importance of the long term landnonprofit entity). Variations on this approach ownership function has been recognized inmay include deed restrictions or covenants EPA Region IV's draft mitigation bankingrunning with the land. Finally, land may be guidance. It provides that the bankingsold for private use, but a reversionary interest agreement should:may be given to (or retained by) a publicagency to ensure that the wetland character of reference the method to bethe land is maintained. used for perpetual protection

The goals of such arrangements are to the mechanism should provideensure (1) that there is management of the for irrevocable and perpetualland over the long term, and (2) that protection of the site in itsinconsistent land uses are prevented. restored or natural state with

Management may be necessary to site permitted activities. Suchmaintain wetland values and functions. Even mechanism should be fullyif the compensatory wetland is fully functioning enforceable by the permittingand self-sustaining at the point it is turned agency, by EPA and theover to the longterm land owner, it is not COE...

with external threats (e.g. adjacent

assure such consistency. Absent some form

of the banking site....Terms of

appropriate restriction of on


93

There are a number of factors If banks are at all sizeable, they may beinfluencing the selection of a land holding attractive targets for future public developmententity. While longterm ownership by (siting of transportation and utility corridors,governmental agencies is generally regarded recreational facilities) since they need not beas most desirable for protecting compensatory condemned and are already available. Huntleywetlands, government agencies may not Meadows, a large government-ownedalways be willing to accept the attendant wetlands preserve in Virginia, for example,responsibilities. Especially if mitigation sites has been frequently targeted as the leastare in many locations and cannot be co- expensive and most direct route for additionalmanaged with other state lands or federal highways in highly populated and congestedlands, agencies may see the possibility of Fairfax County. Florida resource and highwayownership as a logistical and administrative officials have noted the same tendency inburden they are unprepared to shoulder. This connection with mitigation lands. Thus, it mayconcern can be mitigated if the land is be important even if the state holds the land intransferred together with a maintenance fund fee for some other entity to hold a deedor trust fund. But even these are not restriction or conservation easement on thepanaceas; the limiting factor may be property. Even though such a restriction orpersonnel or other resources controlled by the easement could be condemned by the state,state legislature or federal government its mere existence would tend to thwartirrespective of separate funding. Where there inconsistent uses and to assure scrutiny of theis no funding, the land may suffer from decision to abrogate a bank site.neglect. The Louisiana DOT bank, forexample, suffers from lack of management One area of concern to localfunds, even though it is in state resource communities may be the long term effect ofagency ownership. having a wetland mitigation bank (viz.

Non-profit organizations are other areas the existence of a bank might bepotential landholders. This model has regarded with particular disfavor because thefrequently been used in California. However, land may well be in the hands of the state, thenot all sites will be attractive to such entities. federal government, or a non-profitThe Nature Conservancy, for example, prefers conservation organization that is exempt fromnot to maintain long term ownership or property taxes. This reaction is less likelymanagement of lands other than natural where the mitigation lands allow the economicheritage sites or other unique resource lands; development of other wetlands within theit tries to hold most conservation lands only same political jurisdiction -- in effect, the samelong enough for them to be acquired by level of development occurs and nothing isgovernmental agencies. Local non-profit lost. But where a mitigation bank primarilyentities may be more interested, but may lack supports economic development in anothersufficient institutional capacity to handle the jurisdiction, the local consequences may betask long term, even with a trust fund paying perceived as undesirable.for management expenses. Nevertheless,this approach may be quite practical in some In a few areas, therefore, it may beareas. necessary to overcome local resistance by

The most important requirement of the some revenue stream to the locality fromlong term land holder is that it be able to carry activities still permitted on the bank site. Forout the two key functions of management and example, the Patrick Lake wetland mitigationprotection. Placing a bank site into the hands bank in Wisconsin makes payments in lieu ofof a public entity is not itself a certain taxes. The payments commenced at $8,100guarantee that the wetland will be preserved. the first year, and decline by 10% each

"undeveloped land") on the tax rolls. In some

making payments in lieu of taxes, or providing


94

successive year, terminating after the tenth requires the payment of $35,000 annually foryear. In another example, the Bonneville up to two years to Nez Perce and LewisPower Authority has a wildlife habitat Counties in lieu of property taxes; thereafter,mitigation project (not wetland mitigation) in it is expected that the Idaho legislature willIdaho; it is purchasing a 60,000 acre ranch authorize the state to make payments to thewhich will be donated to the Idaho Department counties.of Fish and Game. The mitigation agreement

95

CHAPTER NINEFINANCING OF BANKS

The economic viability of wetland mitigation credits. This section also looksmitigation banking ultimately depends upon briefly at competition in the credit market.how banking policies address three forms ofrisk: regulatory risk, market risk, andecological risk.

Regulatory risk includes the possibilitiesthat regulators or legislators will change therules so that compensatory mitigation is notrequired for many wetland conversions, or thatregulators will not allow a particular bank tosell credits. Market risk is whether there willbe a sufficient demand for mitigation credits atcertain times and places. And ecological riskis the risk that a given bank site will notactually produce credits or that the creditsmay be destroyed.

Risk necessarily affects the economicviability of wetland mitigation banking. If theoverall level of risk is high, a very high rate ofreturn will be required to attract privateinvestment in, and development of, banks.And at some risk levels, no reasonablyachievable rate of return will be high enoughto induce entrepreneurial banking. To a lesserextent, these risk factors may affect publiclyoperated banks offering credits for generalsale -- these banks may be less able torecoup their investments of public moneys.Government policies can directly affectregulatory risk, partially affect market risk, andinfluence some aspects of ecological risk.

A. Market for Credits

Regulatory and market risk are thegreatest impediments to mitigation banking,but can be affected substantially by They also affect supply, but chiefly bygovernmental policy. Government policiesprimarily affect (1) the demand for mitigationcredits, and (2) the costs of producing

79, 80

1. Demand

Demand for mitigation credits isgoverned by two factors: pressure fordevelopment of wetlands for commercial,industrial, agriculture and other uses; andgovernment requirements for compensatorymitigation. If there is no developmentpressure, no market for credits will develop.And if governmental agencies either regularlydeny approval for wetland development orauthorize development activities withoutrequiring compensatory mitigation, no marketwill develop. Both external developmentdemand and government-generated creditdemand must exist in order for there to be amarket for mitigation credits. This is asignificant risk to potential credit producers.

Because a successful entrepreneurialsystem will depend upon entrepreneurs'perceptions that a reasonable rate of returncan be had for their investments in wetlandmitigation, government agencies must:

(1) assure that a wetland regulatorysystem requiring compensation willcontinue to exist; and

(2) establish clear standards for thedefinition and use of credits.

If the perception is that wetlands will be

79

adjusting the other two factors; or by producing creditswith government funds.

Shabman, King, and Scodari (1993) identify80

the various ways in which regulatory policies influencethe underlying forces of supply and demand ofwetland mitigation credits.

Financing of Banks

96

deregulated, or that permits will normally be Although both the factors identifiedgranted without compensation, there is little to above are critical, the more important factor isfoster development of private entrepreneurial the existence of certainty in making permittingmitigation banks. And if there are no clear decisions. Unfortunately, the ongoingstandards for the definition and use of credits regulatory, legislative, and policy debate over(e.g., in-kind or out-of-kind mitigation; ratios; wetlands regulation has actually contributed togeographic areas in which credits are usable; heightened uncertainty about whether asuccess criteria; liability for unsuccessful demand for compensatory mitigation will existmitigation; how long must performance be or whether much wetlands development willguaranteed), prospective credit producers occur without mitigation. This hasmust shoulder an extremely high level of discouraged the development of viableregulatory risk. mitigation banking systems. So long as the

The simplest approach to assuring development of viable mitigation banks issufficient, predictable demand would be to likely to be tentative and sporadic -- even if theadopt a consistent position on what wetlands second prerequisite (clear standards for thecan and cannot be developed, and a standard definition and use of credits) is addressed.approach to evaluating compensatorymitigation. Although the § 404(b)(1)guidelines provide some assurance of theformer, there is little certainty of the latter.Most of the governmental guidancedocuments are in "draft" form, and manyregulators are reluctant to innovate withoutclear direction from senior management.

The use of "sequencing" is neithersupported nor discouraged by the mitigationmarket's need for certainty. If sequencingwere always required, there would be areasonably predictable level of demand formitigation credits by those projects thatsatisfied the sequencing requirements.Conversely, if sequencing were eliminated,the demand for mitigation credits would behigher, but would not be substantially morepredictable. The market would reachequilibrium in either instance. Only ifsequencing resulted in virtually no decisionsallowing wetland development might it affectthe viability of mitigation banking. This doesnot appear to be a concern; in fact, even withsequencing a substantial number of § 404permits and state permits are issued everyyear. The elimination or modification ofsequencing is not, therefore, an economicprerequisite for mitigation banking.Nonetheless, Shabman, King, and Scodari(1993) maintain that sequencing doesinfluence the demand for credits.

regulatory battle continues unresolved, the

2. Production Costs

The costs of producing mitigation creditsconsist of the costs of acquiring lands suitablefor mitigation work, plus the costs ofmanipulating such lands to satisfy whateverlevel of performance is recognized by aregulatory agency as producing mitigationcredits. The latter costs include constructioncosts, operating and maintenance costs, andadministration costs (which includeinteractions with the regulatory authority).Production costs can be strongly influenced bythe type of mitigation that is to be performed.For example, earthmoving or intensiveplanting and vegetation management can bequite expensive.

The time period between performanceof the work and the sale of credits alsoinfluences the credit producer's costs. Theselatter costs may be real (interest on borrowedcapital) or attributed (the time value ofmoney).

The costs of production are chieflydetermined by governmental standards. Thisis because the costs are incurred solely tosatisfy regulatory requirements. The demandfor credits is wholly derived from the demandfor development permits, not from an intrinsicdemand for quality mitigation wetlands. There

Financing of Banks

97

is, therefore, no competition among mitigation prices. The difficulty with this approach is thatcredits on the basis of quality. Government the regulated price (a) may be too low to cover81

establishment of credit standards is critical. the costs of mitigation, (b) may subsidize

Mitigation banking is unlikely to develop too high and hence result in little or no use ofwithout such standards because of the the bank. Regulated prices tend toregulatory risk that a given bank's credits will discourage entry by private credit producersbe rejected in any particular transaction. as well. As a consequence, regulated prices

3. Price Competition

The price of credits is primarilydetermined by the demand for credits on theone hand and production costs on the other.The supply of mitigation credits is alsoimportant; where there are many suppliers,prices are likely to be lower. However, thedemand side is more important in mostwetland mitigation banking situations becauseit is less likely that for any given transactionthere will be a great number of banksproducing exactly the right type of creditswithin a particular geographical area (such asa watershed) where the credits may be used.

On the demand side, the price ofmitigation bank credits must always becompared to the cost of alternatives. If aclient's alternative is no development, pricesfor banked credits may be quite high unlessthere are several competing banks with theright kind of credits available for use. If thealternatives include onsite mitigation, theclient may, in some cases, have costadvantages that will tend to drive down theprice of banked credits. Where a creditproducer or bank manager knows that a clientcannot do onsite mitigation, however, prices tothat client may be substantially higher thanprices offered to clients that enjoy such anoption.

The possibility of preferential pricing hasled some banking systems to set regulated

wetland development activities, or (c) may be

are not a desirable approach, with thepossible exception of cases where use of thebank (or banks) for all compensatorymitigation is prescribed, and costs for creditproduction can be accurately determined.

The best guarantee of a rate of return issimply governmental consistency in requiringcompensatory mitigation and in setting clearperformance standards. This will allow thepublic or private credit producer to gauge thedemand and evaluate its costs accurately. Asnoted earlier, the greater the uncertainty, theless likely it is that private entities willundertake mitigation banking.

This climate of uncertainty is, in fact, thestatus quo. There is virtually noentrepreneurial mitigation banking inoperation, and little current incentive to enterthe area. Almost all existing banks arepublicly funded or nonprofit banks, which areless sensitive to risk and which do not have tojustify their investment based on rate of return.The array of bank types is discussed in thenext section.

B. Bank Types

Funding for wetland mitigation bankscan come either from private investment inentrepreneurial banks (based on theexpectation of sales to clients), or fromgovernmental agencies or nonprofitorganizations. If mitigation banking is tobecome widely available and ecologicallysignificant, it will need to encourage moreentrepreneurial banking and/or substantiallyincrease government-sponsored banking. In theory, some competition based on quality81

could be stimulated if the government makes adistinction among credits either by establishingminimum performance standards or by recognizingvariable compensation ratios based on quality.

Financing of Banks

98

1. Entrepreneurial Banks

The only active "entrepreneurial" bank isthe Fina LaTerre bank in Louisiana. Thecompany (actually Fina's predecessorTenneco) needed to exclude saltwaterintrusion chiefly in order to protect (andmaintain legal ownership of) its oil and gasoperations in a coastal marsh, and secondarilyto mitigate for its own wetland developmentactivities. The expensive system of dikes andstructures it constructed for these purposesgenerated surplus credits which were offeredfor sale to third parties. The credit productionwas not economically dependent upon therebeing any sales; indeed, the company wouldhave undertaken it even without the prospectof sales. Because most of the costs of thebank were incurred for other reasons, theincome from sale of credits to third partieswas essentially a bonus.

Another interesting case is the proposedSpringtown, California wetland mitigationbank. The owners of the bank site have fewoptions for remunerative development of theland: indeed, by 1992, twelve successivedevelopment proposals had been rejected bylocal planning and governmental agencies --primarily because of the presence of anendangered plant (Cordylanthus palmatus).Consequently, mitigation banking is primarilya way of attempting to extract some economicreturn from sites where there is virtually nonetoday. The major investment -- the landacquisition -- has already been made; it is asunk cost. Thus, any revenue from sale ofmitigation credits would provide welcomereturn on a nonperforming asset.

These two cases help to illustrate thecurrent limited appeal of entrepreneurialbanking. At Fina LaTerre, there was littleadditional cost for the creation of saleablecredits; at Springtown, banking may mitigatean expected financial loss. Neither of these isa situation where banking is a free-standing

economic opportunity.82

Until there is a reduction in thesubstantial risk from uncertainty overgovernmental agencies' approach, trueentrepreneurial banking is likely to occur nowonly where the credit producer's alternativedevelopment options are quite limited (i.e.,opportunity costs are low), and the capitalcosts of the mitigation are also quite low.There is now no incentive for a land owner todevote substantial financial resources tobanking where other activities can producegreater returns or at least a greater certaintyof reasonable returns.

The failure of governmental agencies toreduce the regulatory risk (and to affect themarket risk) is why many of the proposedentrepreneurial banks identified by this studyare degraded agricultural wetland sites ratherthan other types of wetland or upland sites.The current rate of return from farming thesesites is low (so there is little opportunity cost),and the projected costs of restoration are low(so the potential return on investment is betterthan it would for a high-cost restoration).Such agricultural wetland restorations mayrequire only disruption of drainage systems orremoval of dikes and some revegetation.

The simplest approach to encouragingentrepreneurial banking was outlined above.It consists of providing greater certainty andconsistency in permitting and mitigationdecisions. This allows the market to producean appropriate number of credits with areasonable expectation of return.

A more complex approach wouldattempt to manage supply and demand toassure that even more uncertainty iseliminated. Such an approach could includelimiting the supply of credits or creditproducers. This could be done by limiting the

As noted earlier, since this report was prepared82

several entrepreneurial banks have beenimplemented, including the W.E.T., Inc. (GA) andFlorida Wetlandsbank.

Financing of Banks

99

number of potential mitigation sites by companies. In this respect, these bankspredesignating them. It could also be done by resemble "joint projects" -- providing mitigationestablishing a cap on the quantities of to a limited group for known developmentmitigation lands allowed to be in the bank at activities. Few nonprofit organizations areany one time, or by making mitigation banks a financially able to finance a bankpublic utility or regulated monopoly. An speculatively.alternative approach would have thegovernment guarantee credit producers areasonable return even absent an activemarket. This could be done by guaranteeinga given price (floor price), or by having thegovernment purchase unsold credits -- like theagricultural commodity support programs.83

These approaches would requireconsiderable sophistication and fine-tuning.They are, therefore, less attractive than thesimple approach.

2. Nonprofit Banks

The conditions necessary for the for a fixed price of $0.75 per square foot ofdevelopment of entrepreneurial mitigation mitigation (with a 1:1 requirement). Sincebanks are the same as those needed for 1981, the Conservancy has recouped onlynonprofit banks that are intended to be self- 38% of the funds expended; and reports thatsustaining. Although nonprofit entities may if the bank were fully sold out at the prescribedestablish banks for reasons other than return rate it would have recouped only 54%. Inon investment, they nevertheless require a effect, the Conservancy's donors andreasonable rate of return, which in turn means supporters have subsidized the mitigationthat they need regulatory consistency and a effort (or subsidized the developers,standard for the quality of mitigation credits. depending upon how you look at it).

Some banks are operated and The Astoria Airport bank, which offersadministered by nonprofit entities. This is the credits for general use, was constructed withmodel frequently used in California, where public moneys. It is unclear whether it will bebanks are operated by the California Coastal able to recoup its costs. Conservancy and similar entities such as theHuntington Beach Conservancy. The Government banks that are available tononprofit organization provides the mitigate for private development often seek toadministration and long term management, recover their costs through the sale of credits.while funding comes from the bank's clients. Where they do not, they may provide anIn most of the banks involving nonprofits, indirect subsidy to wetland-convertingstartup costs have come from a limited activities. Such a subsidy may resemble thatnumber of previously identified clients -- local which state and local governments oftengovernment authorities, development provide businesses in order to attract

3. Subsidized Banks

Under existing practice, the lack of areasonable prospect for a return oninvestment has meant that apart from the self-subsidization of the Fina LaTerre credits, anumber of existing banks offering credits forgeneral sale have been subsidized.

The California Coastal Conservancywas left to swallow the costs of the BracutMarsh Mitigation Bank, which failed to be self-supporting. The original terms of theagreement that established the bank provided

development -- i.e., tax breaks, industrialrevenue bonds. This concept has alreadybeen applied to wetlands mitigation. The Such supports could be funded by a chargeproposed Tenth West Corridor bank in Utah isexpressly intended to offer free or subsidized

83

on certain development activities (e.g., permit fees, orstate impact fees), or the government could hold thepurchased credit for resale at another time.

Financing of Banks

100

mitigation credits as an inducement to new development agencies upon the use ofbusinesses locating in business parks credits. A public bond issue may be andeveloped in wetlands of the City of Logan. appropriate way of accomplishing the same

4. Public Works Banks

Most government banks are meant tomitigate for public works projects. They arefinanced in the same manner as project-specific mitigation for these projects, althoughthey may achieve some economies of scale.Also, because government public worksagencies are repeat players in seeking permitsto develop wetlands, they can justify carryingthe cost of developing a mitigation bank.

Financing can occur in a number ofways. In the case of a highway bank, thehighway department may simply bear theentire cost of the bank from the beginning. Asan alternative, the state or other governmentalentity may have a conservation resourceagency incur bank development and startupcosts and recover those costs from the

thing. Some support for state highwaymitigation banking may come from the federalgovernment through the Intermodal SurfaceTransportation Efficiency Act.84

Sources of funds for government banksmay include federal and state highway funds,sale of credits, permit fees, and generalrevenues. It may also be possible to place asurcharge on development activities thatimpair wetlands in order to fund a governmentrestoration effort; this is the approach of manyin-lieu-fee systems, such as Maryland's non-tidal wetlands compensation fund.

Funds apportioned to the states under §84

104(b)(1) "may be obligated to wetlands mitigationefforts including wetland mitigation banks." 23 U.S.C.§ 103(i)(13); see also § 133(b)(11).

101

CHAPTER TENMITIGATION BANKING IN THE

CONTEXT OF LAND USE PLANNING

To the extent that existing wetlands whether an area is a potential disposal siteregulation schemes have been criticized for does not guarantee either that a permit will becreating a permitting process that often can be issued or that disposal will be automaticallyprotracted and uncertain, land use planning prohibited; instead, it is meant to providemay be a useful tool in the arsenal of the potential applicants with information to bewetlands regulator. The comprehensive used in planning development activities. Theadvance delineation, classification and information gathered through the ADIDevaluation of existing wetlands can decrease process also is considered in the subsequentpermit application evaluation time by providing review of permit applications. The ADIDa ready inventory of wetland resources and process involves the collection of all availableidentifying sites for potential preservation, water resource information, including datadevelopment, or restoration. Similarly, from the public, other agencies, and fromwetlands-related planning can be a useful approved Coastal Zone Managementvehicle for mitigation banking. Programs and River Basin Plans. All

Several existing mechanisms at the public review.federal, state, and local levels can integrateplanning with wetlands regulation and EPA has conducted a number ofpermitting. Each of these has been used to Advance Identification surveys of wetlands --formulate wetlands-related plans. However, a total of 76 to date, including 35 completed,only a small number of these plans have 36 ongoing, and five that are suspended orexplicitly incorporated mitigation banking, and otherwise incomplete. Of these surveys, threemost of those are of recent origin, making it in EPA Region X have explicitly incorporateddifficult to draw any definitive conclusions mitigation banking. The Columbia Southabout their success. Shore Wetlands Management Plan involved a

This chapter outlines the various Oregon. It contemplated the issuance of aplanning mechanisms and programs, regional general permit for all requireddiscusses examples of specific plans that mitigation in the area in conjunction with aincorporate mitigation banking, and explores mitigation bank. The Corps of Engineershow plans can use wetland mitigation banking issued the general permit in February 1991,to achieve ecological and social objectives. but withdrew it in 1992 at the City's request

A. Wetlands-Related Planning Tools

1. Advanced Identification Program

Section 404(b)(1) of the Clean WaterAct includes a provision that allows EPA andthe Corps to identify wetlands as suitable orunsuitable for disposal sites even before apermit application has been filed. ThisAdvanced Identification ("ADID") process maybe initiated by the agencies or by a requestfrom any other party. The determination of

EPA/Corps ADID decisions must be issued for

40,000-acre study area east of Portland,

after environmental groups challenged it asillegal. EPA also has suspended the ADID85

process for this area.

The Mill Creek Drainage Basin SAMP isanother ADID effort involving a 22-square-mileregion in King County, Washington. Amitigation bank is contemplated for this projectas well, which EPA predicts will meet

Northwest Environmental Defense Center v.85

U.S. Army Corps of Engineers, Civ. No. 91-476-JE (D.Or. 1992).

Mitigation Banking in theContext of Land Use Planning

102

resistance from regional development and importance, and which may be developedenvironmental interests. Finally, the West under certain circumstances in complianceEugene [Oregon] Wetland Management Plan with the § 404(b)(1) guidelines. For mitigationis an ongoing, EPA-funded local initiative that banking to be successful, there must be somecombines a management plan for an 8000- means whereby credit producers can obtainacre area with a proposed mitigation bank. advance assurance from EPA and the CorpsThe plan, although not yet finalized, has that their bank will meet the relevant criteriabecome a nationally known model of local for use. EPA and the Corps could use thewetlands management planning. same tools applied in the existing ADID

Since the ADIDs involve federal approval" for their banks before a significantagencies only, albeit at local invitation, they investment is made.generally do not incorporate state and localconcerns as effectively as state wetlandsplanning mechanisms and special areamanagement plans (SAMPs) under theCoastal Zone Management Act. Also, sinceADIDs are non-binding, they do not provideany means for making permit decisions,although they can influence such decisionsindirectly by providing a source of informationto regulators.

These examples suggest, nevertheless,that the ADID program is potentially relevantto mitigation banking in at least two ways.First, an ADID may be the initial step inbringing potential permit applicants andmitigation bank credit producers into contactwith one another. For example, if an ADIDwere to specify a list of approved mitigationbanks in the study area, a permit applicantwho sought to fill a particular site could bemade aware of this option for compensatorymitigation. Thus, the ADID program could, ineffect, screen applications for sites thatalready have been deemed suitable fordevelopment. By taking advantage of earlyplanning, the ADID program could worktogether with mitigation banking by providingbetter mitigation while reducing the cost anddelay associated with the individual permitprocess.

A second advantage that the ADIDprogram shares with most other forms ofadvance planning is that it provides some ideaof the relative value of wetlands in a givenarea by indicating which will be unsuitable fordevelopment by virtue of their ecological

program to give bank operators a "stamp of

2. Special Area Management Plans

The development of special areamanagement plans (SAMPs) under theCoastal Zone Management Act (CZMA) is86

another means of identifying areas as suitableor unsuitable for the issuance of a dischargepermit before a permit application is filed. TheCZMA, enacted in 1972 to protect the UnitedStates' coastal zone, gives coastal statesauthority to develop a program regardingactivities in the coastal zone. It requiresfederal actions, including the issuance ofpermits under § 404 of the Clean Water Act,to be consistent with the states' programs.Persons applying for federal permits toconduct development activities in the coastalzone must furnish a certification that theproposed development activity is consistentwith that state's coastal zone managementprogram. The program is administeredthrough the Office of Ocean and CoastalResource Management in the federalDepartment of Commerce.

Under the CZMA, the "coastal zone" isdefined as "the coastal waters and theadjacent shorelands," including wetlandsareas. This zone extends seaward to the87

outer limit of the United States territorial seaand inland from the shorelines "only to theextent necessary to control shorelands, the

16 U.S.C. §§ 1451-1464.86

Id. § 1453(1).87


103

uses of which have a direct and significant the area in question must be environmentallyimpact on the coastal waters." sensitive and under strong development

In 1980, the CZMA was amended to involved in the process. Third, a sponsoringprovide an express procedure for developing local agency must participate to ensure thatspecial area management plans. A SAMP is: local concerns are addressed. Fourth, all

a comprehensive plan includes definitive regulatory guidanceproviding for natural resource documents.protection and reasonablecoastal-dependent economic Generally, SAMPs cover a relativelygrowth containing a detailed small geographical area, and often areand comprehensive statement developed in conjunction with an ADID orof policies; standards and Section 404 general permit. In Jacksoncriteria to guide public and County, Mississippi, the Port of Pascagoulaprivate uses of lands and SAMP was partially funded through the CZMA.waters; and mechanisms for It also involved a request to the Corps for atimely implementation in general permit. This SAMP is noteworthyspecific geographic areas because it is the only one discovered by thiswithin the coastal zone. study that explicitly includes a mitigation88

The purpose of a SAMP is to protect the development on the Mississippi Gulf Coast,coastal environment while allowing for the impacts of shipbuilding and oil and gaseconomic uses. To date, a number of SAMPs refineries, and harbor pollution problems,have been developed in coastal states with Jackson County convened a task force tothe involvement of federal, state, and local develop a comprehensive plan for the area togovernments and the public. guide permitting, land use, and resource

Unlike ADIDs or other nonbinding protection. It consisted of four federalreconnaissance efforts, SAMPs have formal agencies, three state agencies and two countylegal status and can serve as the basis for agencies. The Corps of Engineers, alreadystate coastal wetland permit decisions. Since actively involved in the port through channelthey are part of a state's coastal zone dredging activities, became a key participantmanagement program, SAMPs also provide along with EPA.states with a mechanism for reviewing theissuance of § 404 permits through the The Pascagoula SAMP includes aconsistency review process under Section 307 development plan for the port area, aof the CZMA. mitigation plan, and a dredged material

The Corps of Engineers has been state, and local permitting decisions for theinvolved with SAMPs through its participation region, providing varying levels of protectionin the CZMA planning process. In addition, for wetlands based on their type and location.the Corps also has adopted the SAMP Because both port development and channelprocedure for areas which extend beyond thecoastal zones. The Corps applies four89

criteria before participating in a SAMP. First, The participants included the Jackson County

pressure. Second, the public must be

parties must agree to an end result which

banking element. In response to rapid harbor

90

disposal plan. The SAMP guides all federal,

Id. § 1453(17).88

RGL 86-10, October 2, 1986.89

90

Port Authority, the Jackson County Board ofSupervisors, the Mississippi Bureau of MarineResources, the Mississippi Bureau of PollutionControl, the Mississippi Department of Archives andHistory, the Corps, EPA, U.S. FWS, and the NationalMarine Fisheries Service.


104

dredging have an impact on wetlands, the functional equivalent or substitute forplan attempts to accommodate growth while sequencing. Thus, mitigation banks that arepreserving remaining wetland resources. A adopted as part of a SAMP may be authorizedmitigation bank was developed through to mitigate for wetland development activitiesacquisition and preservation of 3,500 acres of authorized under the SAMP that have notcoastal and nontidal wetlands in Jackson undergone sequencing.County, against which eight area-specificprojects, designated through the SAMP While the opportunity to foregoagreement, are allowed to mitigate wetland sequencing may have some attractiveness tolosses. All other projects must do mitigation developers, and may make sense ecologicallyoutside of the bank. The SAMP originally where the plan is truly "comprehensive," thiscontemplated a limit of 60 acres to be lost raises the stakes over the consideration andthrough the eight projects, although no adoption of SAMPS and similar plans. Ifabsolute limit was codified. segments of the public are not persuaded of

To date, no acres actually have been agencies, or the value of any banking schemedebited against the preserve. Because of an provided for in the plan, they have everyeconomic downturn, none of the projects incentive to oppose the plan. Comprehensivedesignated for bank use -- a channelization planning has value for wetlands protection andexpansion to reach the county airport, the encouragement of banking, but it requiresdevelopment of a recreational harbor, and detailed attention to the institutional factorsseveral private development efforts -- have discussed in this study if it is to succeed.been undertaken. Even so, the county plansto augment the original 3,500 acres byacquiring more wetlands in the area. Portofficials say the two main goals of the SAMPhave been achieved: preservation ofdwindling wetlands, and greater predictabilityin federal, state, and local permitting.

Wetland mitigation banks can besystematically incorporated into the SAMPprogram in two ways. First, mitigation bankscan be established as a part of individualSAMPs, as in the Pascagoula SAMP.Second, the SAMP program may be utilized tocoordinate development and mitigationactivities with existing banks, and to educatethe public about the use of banks as amitigation option. Because many SAMPsinvolve small geographical areas, this secondapproach may prove to be useful as mitigationbanking becomes more commonly available.

EPA and the Corps have agreed, inSection II.C. of their MOA, that sequencingdoes not apply to wetland developmentactivities where an EPA and Corps approvedSAMP fully considers and plans for wetlandconservation. The SAMP is regarded as a

91

the bona fides of the regulatory and planning

3. State Land Use Planning

A number of state land use planningmethods can affect the wetlands permittingprocess and mitigation banking. Comparativeinformation about current state wetlandplanning approaches is summarized in Table5 at the conclusion of this chapter. Like thefederal planning programs, the proceduresdescribed in these state plans provide anatural mechanism for including a mitigationbank -- particularly if banking already isauthorized under state law.

EPA is now providing grants to stategovernments for the development of statewidecomprehensive wetlands plans. These plansare intended to provide a flexible means ofcoordinating both private and public programs

The MOA also considers ADID areas and91

State Coastal Zone Management Plans as"comprehensive plans" that may obviate therequirement for sequencing, provided that they areapproved by the Corps and EPA. All three kinds ofplans must provide for compensatory mitigation inorder to forego sequencing.


105

and of balancing economic growth with natural Space Program" that is neither wetland-resource preservation. A statewide specific nor includes mitigation banking. Itcomprehensive plan would embrace the could be implemented to do so, however, likegeneral goal of "no net loss and long-term net the greenways programs. In Maine and othergain" of wetlands, and would provide a states, "Growth Management Plans" requireregional focus for these efforts. Our research all local governments to adopt local land usefound that no state has completed a plans. If amended, these plans could require,comprehensive wetlands plan; however, about or afford local communities an opportunity toone third (sixteen) are currently developing provide for, mitigation banking. one or are requesting EPA funding to do so.Of these, five states (Ohio, Tennessee, In sum, although few states haveCalifornia, Missouri, and New Jersey) have existing wetland planning mechanisms thatplans that are nearly complete. explicitly incorporate mitigation banks, many of

Despite the lack of a comprehensive easily incorporate and complement banking.plan, many states have developed other more With the comprehensive state wetland plansgeneral plans that include wetland protection now underway, many states could efficientlyelements. For example, in 1986, the adopt and implement mitigation bankingEmergency Wetlands Resource Act required through existing structures and plans.states to include in their StatewideComprehensive Outdoor Recreation Plans(SCORPs) a wetlands priority program. Formany states, these SCORPs are the onlyplanning programs that include wetlandprotection. Thus, SCORPs are very importantin the development of wetland plans.However, they also tend to be somewhatlimited, because their focus is centeredaround recreational goals.

Other state planning efforts focus onland acquisition for recreational purposes andfor habitat protection. Wetlands benefit fromthese programs, although they may notspecifically be referenced in the original plans.For example, in Colorado, Georgia, andOregon, greenway and river corridor plansalong rivers and in flood plains includewetland areas. These types of plans arepotentially useful for mitigation banking.Wetland banking on these lands or onadjacent lands has a good chance forsuccess, because management programsoften are already established.

More general state plans also could beuseful for mitigation banking on a statewidelevel. These plans often provide guidelinesfor and coordinate local government planningprojects. Florida has a "Conserving Open

them have more general programs that could

4. Local and Regional Land UsePlanning

Perhaps the most ambitious wetlands-related planning efforts have taken place atthe local and regional levels. Since states'authority over land use typically is delegatedto counties and municipalities in any event,the procedures and forums developed therefor general planning purposes often proveamenable to wetlands protection. Two of themore interesting plans -- both for their scopeand for their inclusion of a mitigation bankingelement -- are the West Eugene [Oregon]Wetlands Management Plan and the Juneau[Alaska] Wetlands Management Plan.

As noted above, the West Eugene plancommenced with a special study area of over8,000 acres, including 1,430 acres ofjurisdictional wetlands, that previously waszoned for industrial, commercial andresidential use. The study, which was fundedwith an EPA grant but conducted locally by theCity of Eugene and the Lane County Councilof Governments, identifies valuable wetlandareas for protection and lower value wetlandsfor possible development, and includes amitigation bank for compensation. The studywas conducted with extensive participation by


106

all sectors of the community and multiple retain permitting authority for other wetlands,levels of government, and has resulted in a but the plan will be used as guidance for thedraft management plan which is currently state's and the CBJ's comments during theundergoing final review. Corps' permit evaluation process. Thus, for

The draft plan would protect 1,070 CBJ a "one-stop permitting agency." Towardwetland acres and designate the remaining this end, the CBJ has adopted a separate360 to be filled. Compensation for the filled ordinance which creates a local agency toacres would occur either onsite or through a administer the permitting process, and alsoregional mitigation bank that would be large sets forth governance procedures for the CBJ-enough to provide some credits for impacts run mitigation bank called for by the plan. Siteoutside of the study area but within the selection and development is being carried outwatershed. Compensatory mitigation would under an EPA grant, and the entire permittingbe focused on creating a restored floodplain, process will continue to be monitored by botha connected system of trails and wildlife EPA and the Corps.corridors, open space, and greenways.Permitting authority for projects within thestudy area would be delegated to the City ofEugene through the issuance of a generalpermit by the Corps of Engineers.

Similarly, the Juneau Department ofCommunity Development has surveyed astudy area of fifteen square miles, 54 percentof which is occupied by wetlands. Using adetailed analysis of existing functions andvalues as well as public preferences, thesewetlands were classified into four maincategories: (1) those unavailable fordevelopment because of previous land userestrictions (parks or national forests); (2)those "generally not suited for development" --valuable wetlands for which compensation willbe "more difficult" and usually onsite; (3) those"generally suited to development," for whichmitigation banking or other offsite mitigationmay be used routinely; and (4) those "mostsuitable for development," which may bedeveloped using "best management practices"without any separate mitigation requirement.92

The City and Bureau of Juneau ("CBJ")has received a general permit from the Corpsof Engineers that effectively transfers allpermitting authority for the last two categoriesof wetlands to the local level; the Corps will

less valuable wetlands, the plan will make the

B. Implementation of Planning ThroughGeneral Permits

As seen in the above examples, thevarious planning mechanisms each carrydifferent weight in the permitting process,ranging from merely being a source of usefulinformation which regulators may consider, tobeing a set of advance land-use decisionswhich, at least at the local level, have theforce of law. While some planningmechanisms, such as SAMPs, have anindirect legal effect on § 404 permittingthrough consistency review, it appears thatpresently the only means of directly integratinglocal and state planning into the federalpermitting process is through issuance of ageneral permit, as has occurred in Juneau andis being proposed for West Eugene.

This method of delegating the Corps'authority to the local level promises tostreamline and expedite the permittingprocess, but also raises questions on theecological front. Obviously, permittingdecisions made in accordance with anapproved comprehensive plan will be nobetter than the plan itself; this places a heavyburden upon planners (and the Corps) toselect goals with care and to build in sufficientsafeguards to address the issues identified inthe preceding chapters of this study.

The plan also designates another category of92

wetlands with enhancement potential, on which onlywetland creation and enhancement will be permitted.


107

Moreover, it is an open question practice that the Corps already had adoptedwhether such delegation of federal authority to by regulation. The statute specifies thata local body effectively would bypass some of general permits may be issued for activitiesthe protections now embodied in § 404 and that are "similar in nature" and have onlyother environmental laws. Like state "minimal adverse environmental effects" whenassumption of the federal wetlands program measured on an individual and a cumulativeunder § 404(g) -- itself a controversial topic basis. The Corps' regulations expand upon93

-- the issuance of a general permit might this authorization by allowing for issuance ofmean that the locally-issued individual permits general permits in instances where theyno longer will be "federal actions" reviewable "would result in avoiding unnecessaryunder such laws as NEPA, the Endangered duplication of the regulatory control exercisedSpecies Act, and the Fish and Wildlife by another federal, state, or local agencyCoordination Act, although the Corps' retained provided it has been determined that theauthority to revoke certain permits case-by- environmental consequences of the action arecase might be. This potential underscores the individually and cumulatively minimal."need for careful decisionmaking at the time ageneral permit -- which clearly is a federal The Act also imposes a number ofaction subject to these requirements -- is procedural requirements on the issuance ofissued by the Corps. general permits. The Corps must provide

Because the use of general permits for and a general permit must satisfy thewetland planning and mitigation banking may requirements of the § 404(b)(1) guidelines. Incontinue to be subject to court challenges, it is addition, general permits must comply withuseful to review the Corps' legal authority for state water quality certification under § 401,issuing general permits, the various types of coastal zone consistency determinationsgeneral permits, and the uses to which they under the CZMA, and NEPA by preparing athave been put. least an environmental assessment; they are

1. Legal Authority for GeneralPermits

In the 1977 amendments to the CleanWater Act, Congress authorized the Corps toissue general permits on a "state, regional ornationwide basis" covering certain categoriesof activities. This amendment codified a94

95

notice and opportunity for a public hearing,

also subject to EPA veto under § 404(c).General permits may be issued for up to fiveyears, and may be revoked or modified at theCorps' discretion.

The regulations provide for three typesof general permits: nationwide, regional, andprogrammatic. The Nationwide PermitProgram ("NWP") is by far the largest andmost heavily used of the general permitcategories. Currently, there are 36 nationwidepermits under the NWP. However, it is96

regional and programmatic permits that haveprovided the greatest opportunity to facilitatethe establishment and operation of mitigationbanks -- integrating local planning andpermitting with § 404.

For an overview of the issues involved in state93

assumption, see Wood, "The Forum's Proposal toDelegate § 404 to the States: A Bad Deal forWetlands," National Wetlands Newsletter, July-August1989; Kean, "A Reply to Mr. Wood," NationalWetlands Newsletter, November-December 1989;Wood, "Section 404 Delegation: A Rebuttal toGovernor Kean," National Wetlands Newsletter,January-February 1990; Dawson, "States NeedCommitment, Leadership, and Backbone, Not Section404," National Wetlands Newsletter, January-February 1990.

33 U.S.C. § 1344(e)(1).94

33 C.F.R. § 322.2(f)(2).95

These permits are listed at 33 C.F.R. § 330,96

Appendix A.


108

2. Regional General Permits

Regional general permits are issued bya division or district engineer after notifying thepublic and providing the opportunity for publichearings. If an activity is covered by aregional permit, the applicant may conduct theactivity without obtaining an individual § 404 A programmatic general permit (PGP),permit. However, the Corps has authority to often called a state programmatic generalimpose additional conditions on a permitted permit (SPGP), is another type of generalactivity to protect the public interest, such as permit, introduced during the "regulatorymonitoring and reporting on mitigation reform" era of the 1980s. The SPGP is basedprojects. The Corps also has discretion to on an existing state, local, or other federaloverride the regional permit on a case-by-case agency program and is designed to avoidbasis where there is a "concern for the aquatic duplication with that program. The originalenvironment," and to "require an individual purpose of this type of general permit was toapplication and review." This veto authority streamline the permitting process and to97

may provide one answer to professed coordinate it with the activities of states andconcerns about the Corps giving up control other federal agencies. SPGPs may applyover individual permitting decisions. statewide or just to a portion of a state.

Regional permits may be issued for an states, including Maryland, Maine, Newarea larger or smaller than a state. A limited Hampshire and North Carolina. In addition, an98

number of regional permits have been issued SPGP has been proposed for New Jersey. -- including the Juneau permit and theColumbia South Shore permit. A regional Although the specific procedures inpermit may incorporate a specific wetland each state vary, SPGPs generally allow amitigation bank as part of a larger plan, or the person seeking a permit to file a singlepermit may include generic guidelines for the application with the state agency -- or file theestablishment of a bank in a given area. The same application jointly with the state and theColumbia South Shore regional general permit Corps. The application is processedthat was withdrawn by the Corps simultaneously by both agencies. The Corpscontemplated banking. This permit drew the coordinates input from relevant federalopposition of citizens groups, who were agencies and submits its recommendedprimarily concerned with their perceived lackof sufficient opportunity to participate in itsreview and development, as well as the lack 33 C.F.R. § 325.5(c)(3). The Clean Water Actof an environmental impact statement on theissuance of the regional permit, and the

regional permit's longer term potential toinsulate subsequent individual wetlanddevelopment decisions from federalprocesses.

3. Programmatic General Permits

99

SPGPs currently are being used in several

33 C.F.R. § 325.2(e)(2).97

Some have argued that the geographical98

scope of a regional permit must be larger than a state § 1344(e)(1). To date, the issuance of a SPGP hasbecause the statute refers to general permits on a been challenged only once, immediately after the"state, regional or nationwide" basis. However, the Corps began issuing the SPGPs. In National WildlifeCorps has in fact issued regional general permits for Federation v. Marsh, No. 82-3632, Envt'l L. Rep.sub-state regions. In the absence of any clear 20262 (D.D.C. 1982) the litigation was settled withoutlegislative intent on the question, it is likely that a deciding whether the Corps was authorized to issuereviewing court would defer to the Corps' broader SPGPs. Thus, the issue presumably is still open tointerpretation. litigation.

99

does not explicitly authorize the issuance of SPGPsand some have questioned whether they are legal. Because SPGPs often encompass a wide range ofactivities, it has been argued that these activities arenot sufficiently "similar in nature" to comply with thestatutory requirement, an argument that also wasraised in opposition to the regional general permit inthe Columbia South Shore case. See 33 U.S.C.


109

decision and permit conditions to the state, demand. The approaches reviewed in thiswhich issues the final permit decision. section take a more aggressive stance toward

Maryland's PGP was issued in 1991, get to the desired objective. They requireand covers discharges of dredged or fill more work and greater risk-taking bymaterial into most Maryland nontidal wetlands. government regulators than conventionalIt is limited to projects affecting less than five approaches; but they offer the potential toacres of wetlands. Plans submitted under the make banking a vital public policy tool and notPGP must meet the sequencing requirements just an occasional alternative to onsite, in-set forth in the Corps/EPA MOA. If wetland kind, compensatory mitigation.impacts cannot be avoided or minimized, thenthe use of a mitigation bank is authorized; in The examples of these approachesaddition, the state statute allows for monetary cited in this section are illustrative only; nonecompensation to be deposited in a nontidal of them represents a complete andwetland compensation fund "if is determined comprehensive effort centered aroundthat creation, restoration, or enhancement of achievement of the ecological objectivesnontidal wetlands are not feasible identified.alternatives."

Another PGP issued by the Corps'Wilmington, North Carolina, office applies tothe twenty coastal counties in North Carolina.It covers activities occurring in salt andbrackish marshes and estuarine waters; whileit sets forth procedures for consolidating thefederal and state permitting processes, it doesnot reference mitigation banking.

If the legal and policy issues can beresolved, these general permits provide apotential means of integrating traditionallystate and local land use planning with federalwetlands permitting. Other approaches caninclude the types of MOUs that most existingmitigation banks now use; these mayincorporate a wetlands plan by reference. Ofcourse, approval for the use of credits fromthe MOU-authorized banks remains subject tothe individual § 404 permits (or generalpermits) applicable to the developmentactivities.

C. Goal Setting in Wetland MitigationBank Planning

This section describes three different are compensated for in a way that makesapproaches to wetland mitigation banking sense in the regional landscape.designed to serve specific goals. Bankingmay simply be adopted to serve the generic This approach to banking provides a"no net loss" goal, or to satisfy development template for wetland restoration efforts, and

the role of planning, and then use banking to

1. Recreating the Historic WetlandAssemblage

Attempting to recreate regionally thewetlands that were endemic to an area prior toland development and ecological change is anecologically-based goal that can involvemitigation banking. This approach begins withthe premise that, given the limitations of ourecological knowledge, the pre-existingenvironment is most likely to guide us towardfunctional and ecologically meaningfulmitigation. This approach requires researchto determine what the landscape previouslycontained, and the funding and political will todesignate sites and to acquire and restorewetlands where necessary. This approach,where feasible, appeals to values about whatis native and unique about a specific region,and to a sense of restoring what belongs tothe landscape.

Banking fits into this approach becauseit provides an opportunity for large scale,offsite, out-of-kind mitigation. Differentialcompensation ratios and service arearequirements can assure that wetland losses


110

has advantages over in-kind compensatory that should be preserved, and degraded areasmitigation which may simply tend to reproduce better suited for development, thethe current degraded wetland assemblage. comprehensive plan was designed to channel100

Advantages of the approach include the restoration activities and mitigation bankinggreater likelihood of restoration success -- in toward achievement of this goal. Although therecreating the same type of wetland where it plan has drawn criticism from bothhad existed. The original soils may remain, a development interests (for targeting certainviable seed bank may remain or be available areas as mitigation sites) andnearby, and hydrology can often be restored environmentalists (for removing certainwithout major construction work. Advantages historic wetland areas from consideration asalso include the possible restoration of mitigation sites), the proposal provides a basisunforeseen values because of adherence to for establishing a banking system that makesthe pre-existing pattern. sense on an ecological rather than project-by-

Disadvantages to this approach tobanking include a lack of data to guide in Many restoration projects share at leastrecreating the historic assemblage, as well as some characteristics of the historicthe possibility that development demands may assemblage approach. For example, the 160be inconsistent with the necessary types and acre Patrick Lake Wetland Mitigation Bank inlocations of compensatory wetlands. Problems Wisconsin restored a sizable wetland site tomay include existing infrastructure that historic configurations and conditions. Theimpedes restoration of hydrology or that has state discovered an old photograph of acontaminated the restoration area. Other drained lake showing associated wetlands anddisadvantages may include the unavailability upland habitats. The state then sought toof the original plant or wildlife species or other recreate the original ecosystem throughchanges to the landscape that make full mitigation banking.restoration impossible.

A current example of the historicassemblage approach is the West Eugenearea restoration plan. The staff of the LaneCounty Council of Governments conductedhistorical research into the original prairiewetland complexes present before whitesettlement and widespread agriculturalconversion of the area. Based on theirresearch, the Council was able to construct aproposal based on the original assemblage ofecosystems including numerous wetlands,and to compare it to present-day ecosystemsand land uses. By dividing the current map ofLane County into sites ideal for restoration tooriginal wetland complexes, prairie remnants

project scale.

2. Maximizing the Array ofFunctions and Values

This approach involves structuringwetlands banks to produce a substantial arrayof functions. Such an approach may be idealin an area with great wetlands diversity, wherelosses include different ecosystems that asingle bank cannot fully replace. Such anapproach can also be an end in itself, seekingto produce the full panoply of wetlandfunctions and values on the premise that theyare all important and that one -- such ashabitat -- should not be emphasized at theexpense of others. A banking program thatattempts to produce many different functionswill likely require advance comprehensiveplanning.

In practice, this approach does notrequire each transaction with the bank orbanks to produce a one-for-one replacementof each function, but instead requires an

For example, if the original landscape100

contained forested wetlands but the remainingwetlands are all emergent cattail marshes, in-kindmitigation would simply reproduce what remainsrather than what may be more necessary or desirablein the landscape.


111

assessment of an array of functions and The Port of Los Angeles' bank atrequires that the entire array show a net Batiquitos Lagoon (subsequently suspended)increase with each transaction. was intended to achieve many different goals,

Advantages of this approach include, at lagoon; preserving or enhancing existing fishleast in theory, providing the most ecological and wildlife resources; retaining andbenefits to the watershed and to society enhancing habitat for endangered species;consistent with a scheme of compensatory maintaining water quality; providing publicmitigation. Because this approach is access to the lagoon shoreline; andnondiscriminatory toward any one function or maintaining each of these goals achieved invalue, it may also be the most politically perpetuity. On a broader level, thepalatable by accommodating certain Springtown Bank in California is proposed asdevelopment demands another system might a multi-resource, multi-purpose bank thatseverely limit. There is also some evidence to seeks to create credits for offsetting losses ofsuggest that more successful mitigation banks wetlands habitat, endangered species habitat,may be those designed to meet multiple open space, and even clean air. A bankingobjectives -- often regional ecology goals system constructed on the model of a[Riddle 1988]. multivariate approach need not produce all of

Disadvantages of this approach are complement of available banks may offerlogistical and philosophical. Replacing many these values.functions requires assessing each of thosefunctions and knowing how to replace them --a process that can be both difficult andexpensive. Creating multiple habitats, forinstance, requires more costly design andconstruction, importing more replacementspecies, more management, and morecomplex and costly monitoring. With a morecomplex system, more can go wrong. Inaddition, some functions or values may beheightened at the expense of others.Maximizing interior habitat will minimize edgehabitat for other species; hydrologicalrequirements of different wetland types mayconflict.

Also, seeking to maximize benefitswithin the array of potential wetland valuesmay not be consistent with a setting orlandscape that has a unique or specialized setof wetlands or wetland dependent species. Itmay be that a more targeted approach ispreferable to a broad effort to enhancewetland productivity. Nevertheless, themultivariate approach can offer one basisupon which to operate a wetland mitigationbanking system.

including restoring tidal influence to the

the values at one site. Rather, the whole

3. Maximizing One or SeveralParticular Functions

Maximizing a single function or value,such as providing habitat for an endangeredspecies, is the primary goal of a number ofactive banks today, and can also serve as thebasis for a regional banking system. Thisapproach abandons the idea of maximizing asmany different functions as possible, andconcentrates instead on emphasizing one ortwo considered to be the most desired. Banksunder this scenario can be designed to meetecological goals such as improving waterquality, or social goals such as reducingflooding in a floodprone area.

This preferred-function approach isgenerally easier and less expensive toaccomplish than trying to maximize andbalance many different functions. Becausethe goal is clearer, monitoring should beeasier and less costly; determining success issimpler as well. This approach may beappropriate where the identified need is forflood control, or wildlife corridors, or sedimenttrapping, or for a particular wetland type. Byclearly identifying the function to be


112

maximized, moreover, the banking program Wetlands banks might be coordinated withcan direct more attention toward assuring HCP planning, so long as there is some careperformance. taken to prevent a single banked parcel from

Disadvantages include wasting potential loss in one location and a for a species loss inopportunities to replace other functions by another. This arguably would produce a netconcentrating on only one or a few preferred loss because of the displacement of otherones. Selection of an ecologically valid goal functions from the banked wetland and theor goals is also critical. Some current banks loss of nonwetland functions in the species'have inadvertently become preferred function original range.banks through their overreliance on habitatevaluation methods in assessing the banks'currency and determining the extent of thecompensation obligation. This approach alsocreates the possibility that social goals may beselected in preference to ecological goals.

Examples of the preferred functionapproach include the proposed SouthwestFlorida Regional Wildlife and WetlandsConservation and Mitigation Area in Florida,which is designed to preserve habitat for theendangered red cockaded woodpecker. TheAnaheim Bank developed by the Port ofNewport Beach, CA, is designed to restorehabitat for four different endangered species --the brown pelican, the light-footed clapper rail,the least tern, and Belding's savannahsparrow. Other banks have been establishedto serve different single goals, such aspreservation of a rare ecosystem (CompanySwamp Bank, North Carolina); to restorewaterfowl habitat (the Minnesota DOT bank)or to preserve and enhance threatenedcoastal wetlands (Fina LaTerre Bank).

Wetland banking may be targeted atrestoring, creating, or enhancing endangeredspecies habitat. Section 10(a) of theEndangered Species Act allows the U.S. Fish& Wildlife Service to issue permits allowingthe incidental taking of endangered specieswhere the impact of the development activityis minimized and mitigated, the effect of thetaking does not reduce appreciably theprospects for the species' recovery, and thereis a habitat conservation plan (HCP).Recently there has been greater interest inHCPs that attempt to deal with a broaderecological community of endangered species.

being used twice -- mitigating for a wetland

4. Deciding on an Approach

One way to decide among the variouslandscape-level approaches when developinga mitigation bank is through comprehensiveplanning. By considering together regionalecological, social, and economic needs, aswell as current and likely future land-usepatterns, society can develop a plan to guidedevelopment, preservation, and mitigationactivities where they are most appropriatewithin the landscape. If an ecologically basedwetland mitigation banking program is desired(in preference to onsite, in-kind replacement ofwetland functions at a fixed ratio), a planningprocess is critical.

While no states currently have acomprehensive wetlands plan that can guidebank establishment, many regions and localentities have done resources planning. Thereare, therefore, models available for making thechoices that wetlands planning raises.Wetlands are more difficult perhaps becausethey involve not only issues of localpreferences for land uses, but nationalregulatory requirements and prohibitions. Theneed is for a planning mechanism that takesinto account local social values, thesenationally expressed social values, andregional ecological objectives. And, as thefew successful and unsuccessful wetlandplanning exercises attempted to date havedemonstrated, continuing public input iscritical.

Washington State's Department ofEcology suggests that because banking oftenseeks to balance economic growth with


113

natural resources protection, a cooperative rates, regional goals for restoration orreview team comprised of representatives preservation of specific wetland types, andfrom different interests -- natural resource habitat diversity and creation or enhancementagencies, developers, conservation groups, for rare or otherwise valued species. Theproperty owners, and others -- should make a public is likely to remain skeptical or uncertainjoint decision about where a bank is about the value or advisability of wetlandestablished and why [Castelle et al. 1992]. mitigation banking where there is no planning,Riddle and Denninger [1986] recommend that or where the planning appears to be donecomprehensive planning address, at least, without their involvement.regional wetlands loss trends, future loss


114

Table 5.STATE WETLAND PLANNING

Statewidecomprehensivewetlands plans

(as of 9/92)

Current State Planning for Wetlands Implementing AgencyProtection

AL None-has applied Coastal Area Management Plan* - Alabama Department of Economicfor EPA grant for and Community Affairs,wetland Department of Environmentalconservation and Management management.Huntsville, ALpreparing its ownmanagement plan.

- requires NPDES permits and other activities to beconsistent with Coastal Program

AK none Coastal Management Program* - Coastal Policy Commission, - requires coastal management programs according to

the Alaska Coastal Management Act of 1977

Anchorage Wetlands Management Plan - identifies ecologically or hydrologically important

wetlands and plans their protection - encourages planning for wetland mitigation prior to

development

Juneau Wetlands Management Plan - classifies Juneau wetlands for varying protection - establishment of a mitigation bank for projects

affecting under 5 acres of wetland

Governor's Office - Community Planning Department,

Anchorage

- Juneau Wetlands Review Board

AZ none Statewide Comprehensive Outdoor Recreation Plan - State Parks Department(SCORP)**

AR none none none

CA none-preparing a San Francisco Bay Plan - CA Coastal Commission, Sanstate wetlands Francisco Bay Conservation andstrategy to be Development Commissionpresented to the (BCDC), Fish and GameGovernor Nov. Department1992 - BCDC and Solano County

- guides the protection and development of the Bayand its natural resources

- attempts to maintain marshes and mudflats - encourages wetland mitigation and banking - suggests extending credit for certain fill removal

projects - authorizes the Point Edith mitigation bank

Suisan Marsh Protection Plan - recommends acquisition of marsh of property to

create refuge areas and to provide recreationalopportunities

CO none SCORP** - Division of Parks and Outdoor

The Boulder Valley Management Plan - an open-space initiative - includes creation of a greenway through the public

acquisition of nine miles along Boulder Creek

Recreation



(as of 9/92)


115

CT none-developing Conservation and Development Policy Plan for - Office of Policy Development andstate wetlands Planning Divisionstrategy with EPAand CT DOT

Connecticut 1992-1997 - suggests an avoid/mitigate approach towards the

protection of its inland wetlands - would like to encourage the development of "public-

trust" lands in the intertidal zone to ensure long-termpreservation

- plans to evaluate the long-term viability of mitigationapproaches

DE none-preparing Quality of Life Act and Planning and Property - Department of Natural Resourcesstate plan to and Environmental Controlinclude a section (DNREC)on mitigationbanking, to becompletedSeptember 1993 - DNREC's Division of Soil and

Acquisition Act - require counties to map inland and tidal wetlands - provide for coordination and criticism of proposed

land-use decisions between the county and the stateand counties

Coastal Management Program* - will determine the possibility of establishing a state-

wide mitigation bank - encourages the development of a non-regulatory

wetland creation, restoration, and enhancementprogram

- could result in the development of a Special AreaManagement Plan (SAMP)

Water Conservation

FL none Coastal Zone Management Program* - Department of Community Affairs

Surface Water Improvement Management Plan - protects Everglades through regulation of upstream

activities

Local Government Comprehensive Planning andLand Development Regulation Act - requires local governments to adopt a

comprehensive plan to protect and identify wetlands

Areas of Critical Concern and Resource Planningand Management Committees - protects areas containing natural or environmental

resources of state or regional significance (includingwetlands) from inappropriate land uses anddevelopment

- examples include Everglades National Park/ EastEverglades, Charlotte Harbor, and Lower KissimmeeRiver Basin

- South Florida Water ManagementDistrict



(as of 9/92)


116

GA none SCORP** - DNR's Parks and Recreation

Comprehensive Planning Act incorporates wetlandsprotection into planning process. It requires localgovernments to have plans approved by the Departmentof Community Affairs within 5 years

Metropolitan River Protection Act in 1971 - required a plan for land and water use along a 46

mile stretch of the Chattahoochee River, includingextensive wetlands

- all local development must be consistent with thisplan

Division

- DNR

- Atlanta Regional Commission

HI none Coastal Zone Management Plan* - Department of Land and Natural - defines wetlands as a protected resource - designates certain wetlands as Conservation Areas

State Plan Law - all state and local plans must comply with the State

Plan Law

Resources

ID none none

IL none Illinois Water Quality Management Plan - Illinois EPA's Division of Water - attempts to minimize wetland and floodplain damage

by reducing riverbank erosion and channelmodifications

Northeastern Illinois Metro Region Strategic Planfor Land Resource Development - encourages protection of environmental resources - developing a greenway plan which will address

wetland issues

SCORP**

Pollution Control

- Northeastern Illinois PlanningCommission

- Department of Conservation

IN none SCORP** - DNR

IA none none

KS none Kansas Water Plan - Kansas Water Office - a comprehensive state plan to protect riparian and

associated wetland areas - concerned with channel modifications and leaves

land use plans and zoning laws to city and countyauthorities

KY none SCORP** - Fish and Wildlife Department, KYNature Preserves Commission



(as of 9/92)


117

LA none Coastal Resources Program - Coastal Management Division of - prevent salt water intrusions due to coastal

development - local communities are encouraged to develop their

own coastal plans

Coastal-Wetlands Conservation and RestorationPlan - requires development of a long range wetlands plan

and provides annual descriptions of wetlandsprojects

the Office of Coastal Restorationand Management in DNR

- Coastal Restoration Division of theOffice

ME none Gulf of Maine Program - Gulf of Maine Council - includes a ten year action plan addressing wetlands - a regional plan which involves Maine, New

Hampshire, Massachusetts, Nova Scotia, and NewBrunswick

- habitat mitigation efforts (including wetlands) areexamined on state and local levels

1988 Growth Management Plan - requires local comprehensive plans - includes inventory and analysis of state goals

concerning wetlands

SCORP**

- Office of Community Development

- Bureau of Parks and Recreation



(as of 9/92)


118

MD none SCORP** - Office of State Planning

Coastal Zone Management Program* - recently provided funds for three wetlands plans that

will become part of the coastal zone plan

Chesapeake Bay Critical Area Protection Law in1984 - requires local governments to develop land-use

plans by dividing critical areas into three categoriesbased on intensity of development

- advocate the protection of nontidal wetland habitatthrough a 100-foot or larger buffer zone adjacent tothe Bay's shoreline, tidal wetlands, and tributarystreams

Economic Growth, Resource Protection andPlanning Act of 1992 requires local governments toinclude sensitive areas element to wetland plans andstate projects required to include growth policy

Nontidal Wetlands Protection Act prepares nontidalwetlands watershed management plans

The Chesapeake Bay Agreement - requires the development of a regional policy for the

protection of tidal and nontidal wetlands - train wetland managers in wetland identification,

delineation, functional assessment, and mitigationprocesses

- Coastal Resources Division

- Critical Area Commission

- Economic Growth, ResourceProtection and Planning Comm.

- Water Resources Admin.

MA none Coastal Zone Management Program* - Environmental Affairs Office - designates Areas of Critical Environmental Concern

Gulf of Maine (see Maine)

Nonpoint Source Management Plan (does notspecifically include wetlands)

Watershed Protection Plan - provides general protection to a watershed but does

not specifically include wetlands - focuses on non-point source pollution, discharge,

hazardous and solid waste

Waterways Protection Act requires harbor plans

Wetlands White Paper - stresses Massachusetts' no net loss of wetlands

position - outlines suggestions for further wetland protection

including greater planning

- Gulf of Maine Council

- Water Pollution Control

- Executive Office of EnvironmentalAffairs

- Department of EnvironmentalProtection Division of Wetlands



(as of 9/92)


119

MI none-developing a The state's Coastal Program* is being finalized by - NOAAstatewide wetlandstrategy under anEPA grant due in1994

NOAA

MN none Has Eight Water Planning Areas - Water and Soil Resources board

Rice County Water Plan - Department of Natural Resource's - includes protection of wetlands to increase water

quality

Critical Habitat Private Match - part of the Reinvest in Minnesota Program - matches cash, land, and easement contributions

from individuals and private organizations - critical habitat includes wetlands

Long Range Plan for DNR's Section of Wildlife - guides policy and acquisition efforts - establishes a goal to increase the quality and

quantity of Minnesota wetlands

Section of Wildlife

- DNR

- DNR

MS none Coastal Zone Management Program* - Bureau of Marine Resources - local governments can establish waterfront and

beach plans - incorporates earlier state wetlands protection laws

MO none- policy Wetland Management Plan - Wildlife Divisionrecommendations,wetlandconservationgoals, and a - DNR for MO's Interagencyfactual document Council for Outdoor Recreationdue August 1992

- presents habitat objectives and populationexpectations of wetland species

- promotes recreational use of wetlands - establishes a management philosophy for wetland

resources

SCORP**

MT none- just SCORP** - Parks Departmentreceived EPAgrant for awetlands strategy

NE none-has EPA SCORP** - Game and Parks Commissionapproval todevelop awetlands strategyto begin July 1993

NV none SCORP** - Department of Conservation andNatural Resources

NH none SCORP** - Planning's Outdoor Recreation

Coastal Zone Management Program* - encourages local communities to develop wetlands

protection ordinances

Program - Council on Resources and

Development



(as of 9/92)


120

NJ none-developing a Coastal Zone Management Program* - Department of Environmentalstatewide wetland Protection's Division of Coastalplan under an ResourcesEPA grant, to becompleted fall '92 - Department of Environmental

SCORP and Green Acres Program** - received 1961 bond money for the acquisition of

lands for open space and recreation, including46,000 acres of wetlands

Development and Redevelopment Plan of 1992 - defines wetlands as environmentally sensitive

planning areas - encourages the preservation of large, contiguous

tracts of land to protect sensitive natural resources

The State Planning Act of 1986 - promotes intergovernmental coordination for the

successful formulation of the Plan

Protection

- New Jersey State PlanningCommission

NM none SCORP** and the 1986 New Mexico Wetlands - State Parks and RecreationPriority Plan addendum - provides a planning framework to guide priority

decisions concerning the protection, restoration, oracquisition of wetlands

City of Albuquerque Plan was required by the RioGrande Stat Park Act of 1983 . The Plan suggestsrecreational use of the Rio Grande Bosque and theprotection of its wildlife and habitat.

Division

- City of Albuquerque

NY none-requesting Coastal Management Program* - Office of Coastal ResourceEPA funding for Managementstatewide plan

- decrease the size requirement for wetland protectionto ensure the protection of smaller wetlands

- authorizes counties to prepare county coastalprograms

Conserving Open Space Program

Great Swamp Management Plan - inventories Great Swamp resources - assesses regulatory and acquisition options

- Regional Plan Association's OpenSpace Program

NC none Coastal Zone Management Program* - Division of Coastal Management - encourages communities to develop local land-use

plans - advocates land acquisition as a management

method

in the Department of NaturalResources and CommunityDevelopment



(as of 9/92)


121

ND none SCORP 1991-1995** - Parks and Recreation Division, - includes a small wetlands acquisition program - farmers planting on converted wetlands will receive

no support or disaster payments, no farm storagefacility, insured, or guaranteed loans, or cropinsurance for that year

Division of Natural Resources

OH none-development SCORP** and the 1986 Wetlands Priority - Division of Wildlifeof a statewidewetland strategy tobegin September1992 - Ohio's DNR

Conservation Plan Addendum - will identify potential threats to and damaged

wetlands - encourages the acquisition of wetlands through the

Land and Water Conservation Fund

Coastal Management Plan* - draft released in February 1992 - includes wetlands protection goals through land

acquisition and mapping for protection, restoration,and use of wetland resources

OK none-OK noneConservationCommission isdeveloping state-wide wetlandsstrategy with anEPA grant



(as of 9/92)


122

OR none-draft of a Statewide Land Use Planning Program - Land Conservation andstatewide strategy Development Commissionto be released inMarch, 1993 - Division of State Lands,

- seeks to protect and manage estuarine resourcesand coastal areas including wetlands

- includes the Willamette River Greenway whichprohibits any change in land use within designatedboundaries which often includes wetlands

Wetland Inventory and Wetland Conservation PlansAct of 1989 and the Wetlands Conservation Plansare being developed in nine communities. Fifty-fivecommunities plan to develop these - covers land-use activity affecting inventoried

wetlands - communities expected to plan for mitigation of all

expected wetland losses - includes the West Eugene Special Area Study, a

regional planning effort to guide permitting anddevelopment away form sensitive areas, includes amitigation bank

SCORP** and the 1989 Wetland Priority Plan - includes identification of priority wetlands to guide

land acquisition - establishes criteria to assist wetland management

and acquisition decisions - stresses the need for a wetlands inventory and to

focus planning on increased land acquisition

Scenic Waterways Program - provides for the management of scenic rivers and

their associated wetlands

Department of EnvironmentalQuality,

- Department of Land Conservationand Development, andDepartment of Fish and Wildlife

- Division of State Lands and StateParks and Recreation Division

PA none Coastal Zone Management Plan* - includes a wetland strategy which guides policy

development for new wetland strategies

Wetland Protection Action Plan - guides wetland protection efforts and outlines

needed regulatory changes

SCORP** and the 1986-1990 Wetlands Addendum - to establish wetland protection priorities - will coordinate federal, state, and local wetland

permitting and protection activities

Design Criteria for Wetland Replacement - to guide future Wetland Replacement Plans

prepared by planning professionals

- Department of EnvironmentalRegulation

- Department of EnvironmentalResources

- Department of EnvironmentalResources



(as of 9/92)


123

RI none Coastal Resources Management Plan* - Coastal Resources Management - identifies six water types which aids management of

salt, fresh, and brackish water wetlands - a 1992 Addendum which broadens the definition of

coastal and freshwater wetlands - includes the 1986 Narrow River Management Plan

which encourages land management practices thatinclude conservation easements, zoning, and landacquisition

Guide Plan - includes general wetland policies

Council

SC none Coastal Zone Management Program* - SC Coastal Council - divides management authority in two sections:

critical areas and the coastal zone - coastal counties are divided into three regions and

are developing their own comprehensive plans

SD none Coordinated Soil and Water Conservation Plan - SD Association of Conservation - may indirectly affect wetlands through its water

quality improvement objectivesDistricts, the ConservationCommission, and the SoilConservation Service

TN none-development SCORP** - Department of Conservationof statewidewetland plan to becompleted inDecember, 1992

- 1990 Recreation Planning Report - describes wetland acquisition programs - describes North American Waterfowl

Management Program which is a joint effortbetween public and private sectors and encourageswetlands protection and management throughmultiple use of wetlands

TX none-developing a Texas Outdoor Recreation Plan - Parks and Wildlife Departmentstatewide plan asan outgrowth ofthe coastal zonemanagement effortthat will include - General Land Officemitigation banking,acquisition, andmapping

- state's version of SCORP** - includes a 1985 wetlands addendum which includes

plans for land acquisition and ensures wetlandprotection

Texas Coastal Management Plan 1990-1991 - monitor the success of enhancement and mitigation

plans of state-owned wetlands - coordinating agencies involved in mitigation projects

to minimize failure of these efforts - develop guidelines for mitigation banking at local or

regional levels - encourage donation of land and money and

establish a state fund for the acquisition of wetlands

UT none none

VT none SCORP**

River Basin Plans

Act 200



(as of 9/92)


124

VA none Chesapeake Bay Wetland Policy ImplementationPlan - addresses protection and restoration of both tidal

and nontidal wetlands - guides development of local, state, and federal

programs

Chesapeake Bay Preservation Program - see Maryland's Chesapeake Bay Critical Area

Program

Chesapeake Bay Agreement - see Maryland's Chesapeake Bay Agreement

WA none-requesting Puget Sound Water Quality Management Plan - Puget Sound Water QualityEPA funding for Authority, Department of Ecology,preparation of and Department of Communitystatewide wetland Development (DCD)strategy

- encourages development of local wetland protectionprograms

Growth Management Act of 1990 requires fastgrowing communities to plan extensively. This includesretaining open space, improving water quality, andencouraging economic development according to thestates natural resources. No plans have been completedyet.

Shoreline Management Act of 1971 gives permittingand management responsibilities of shoreline to localgovernments. An executive order resulted in greaterscrutiny of former permitting practices and a larger focuson wetlands mitigation

- DCD's Growth ManagementDivision

- Department of Ecology

WV none SCORP** - Wildlife Resource Division



(as of 9/92)


125

WI none SCORP** and the 1987 Wetland Priority Plan - DNR - includes the Natural Areas Program which

restores areas to their pre-settlement condition andwhich encompasses a wide variety of wetlands

- includes the Natural Heritage Inventory Programwhich identifies and ranks rare or uniquecommunities recommends protection priorities forNatural Areas

- include the Stewardship Program , a partnershipprogram between the private and public sectors forconservation land acquisitions

Coastal Zone Management Program* - seeks to balance the need for natural resource

preservation and economic development - grants used to fund wetland inventories and for land

acquisition

Chiwaukee Prairie-Carol Beach Land Use Plan - to guide local governments in acquiring

environmentally significant open spaces - provides a framework for private development in the

area

- Division of State Energy andCoastal Management

- Southeastern Wisconsin RegionalPlanning Commission

WY none SCORP** - Game and Fish Department

* The Coastal Zone Management Act (CZMA) is designed to promote natural resources management of the nation's coastalareas including coasts of the Great Lakes. One goal of coastal management is to preserve important estuarine and wetlandareas by acquiring or dedicating land, or to protect them by minimizing adverse impacts from other coastal activities. Whena state has an approved coastal zone management program (CZMP), the CZMA requires federal permit applications foractivities in the coastal zone to be consistent with the state CZMP

** SCORPs, Statewide Comprehensive Outdoor Recreation Plans, are required by the Land and Water Conservation FundAct of 1974. Each state must prepare a SCORP every five years to qualify for federal assistance through the Land andWater Conservation Fund. In 1986, the Emergency Wetlands Resource Act required amendments to all SCORPs whichwould specifically address wetlands and that these amendments were consistent with the 1986 National Wetlands PriorityConservation Plan.

126

BLANK PAGE

127

CHAPTER ELEVENCONCLUSIONS

Wetland mitigation banking is basedupon the concept that in some circumstancesthere may be ecologically better ways ofproviding compensatory mitigation for wetlandconversions than onsite replacement. It canalso provide economies of scale and greaterregulatory certainty for developers and thepublic. Many developers, governmentofficials, and environmentalists acknowledgethat mitigation banking can offer severalbenefits over other forms of compensatorymitigation. However, there is less consensusabout the proper parameters for banking. Thischapter briefly summarizes some of the moreimportant conclusions of this study.101

(1) Wetland mitigation banking canprovide ecologically sound and viablecompensatory mitigation.

Wetland mitigation banking offers anopportunity to make compensatory mitigationmore ecologically significant by assuring thatmitigation can occur in locations that advancelandscape scale ecological goals; mitigation isnot limited to where a development projecthappens to be located. Because mitigationbanks are generally larger units than mostindividual compensatory mitigation projectsand may include buffer areas, they may alsooffer greater resilience to natural (ordevelopment-related) events that can causethe failure of many individual mitigationprojects. To the extent that mitigationwetlands are banked in advance of wetlandconversion projects, banking can also providetemporal advantages over concurrentmitigation.

(2) A wetland conservation plan thatestablishes specific goals canprovide a useful basis for authorizingwetland mitigation banks.

Comprehensive planning can directwetland restoration, creation, enhancement,or preservation efforts to areas where they aremost important. A plan can provide a basisfor requiring greater functional replacement,emphasizing particular wetland functions, orrestoring historic wetland types. It can providea basis for out-of-kind mitigation or fortargeted mitigation of particularly rare orvalued wetland types.

The existence of a watershed-based orother regional wetlands plan can allow privateentrepreneurial and public banks offeringcredits for general sale to devise mitigationcredit offerings with greater assurance thattheir transactions will be approved byregulators - thus reducing their regulatory andmarket risks. Thus, planning can encouragethe development of economically viablemitigation banking. Public works mitigationbanks also should ordinarily be based oncomprehensive plans. Planning can assurethat DOT banks, for example, are not limitedeither to diffuse site-by-site mitigation of smallsites, nor to centralized mitigation of disparateand dissimilar impacts. Planning is essentialto maintain reasonable local replacement andto address landscape-scale issues. Puttingpublic works banking into the context ofregional plans also allows governmentalresource management agencies to identifyand to focus on key areas for restoration withpublic mitigation monies.

A wetlands conservation plan, while notan absolute prerequisite to banking, providessignificant advantages in realizing banking'spotential. With a plan, the flexibility inherent inbanking can be preserved but rationalized -

These conclusions should not be construed as101

representing the views of the U.S. Army Corps ofEngineers.

Conclusions

128

avoiding the ad hoc approach that has thus far planning that can make use of banking.stymied the development of banking systems. Finally, pilot projects for mitigation banking

(3) Firm and consistent regulation ofwetland conversions is a necessaryprecondition for a sustainablewetland mitigation banking market tooperate.

Because wetland mitigation bankingrequires a substantial speculative investmentof private or public funds in mitigationactivities, the stability of the regulatoryregimes covering wetland conversions iscritical. As noted in this study, it is particularlyimportant that the regulation of wetlandconversions be consistent and certain. (This isespecially important if wetland banks areexpected to produce difficult-to-restorewetland types). A consistent § 404 permitprogram would go a long way towardpromoting banking. So would the impositionof compensation requirements on activitieswhich are often exempt from compensationrequirements (e.g., certain nationwide permitsthat lack compensation provisions).

(4) Regulatory agencies need topromote a transition to mitigationbanking.

Regulatory agencies should provide afoundation for mitigation banking (both publicand private) by (1) adopting nationallyapplicable guidance providing clear standardsfor mitigation banking; (2) undertaking theplanning efforts that are essential formitigation banking; and (3) supporting pilotprojects.

Regulatory clarity at the national level iscritical. The major obstacle to mitigationbanking has been lack of certainty at all levelsof government and concomitant uncertainty inthe private sector. The Corps, EPA, and stateagencies should undertake reviews of wetlandrestoration sites in areas experiencingsignificant development pressures, and enlistcommunities in goal-setting, ADID procedures,and other first steps to accomplish wetland

should be targeted in these same areas,drawing in part from the current inventory ofproposed banks. While these need not be theonly banks, pilot banks should include aprogram of monitoring, reporting, andevaluation to gauge the success of the earlyapprovals.

Current experience has revealed a greatdeal about public works banks - not all of itaffirming the approaches that have beenused. Future approvals of public works banksshould take advantage of this information.There is virtually no useful experience withpublic general use and private entrepreneurialbanks; thus, the focus of the pilot programsshould be on these banks. The transition tobroader use of banking need not be lengthy,but it should be pursued intentionally so thatvaluable lessons in banking structure can beapplied rather than relying entirely upon adhoc decisions in the field. The ad hocapproach is partly what has brought us to thecurrent situation in which there is littlebanking, and great uncertainty amongregulators, the public, and prospective creditproducers alike.

(5) Wetland mitigation banking will beeffective only if substantial regulatoryattention is given to the terms andconditions (and performance) ofindividual mitigation projects.

Where mitigation banking is subjected tosubstantial requirements and individualmitigation projects are not, the latter may havesignificant financial advantages - even incases where it is less desirable ecologically.Any program should consider both forms ofcompensatory mitigation together. Forexample, mitigation banking guidancedocuments to date impose financial assurancerequirements, buffer zone requirements, oradvance mitigation requirements that are notimposed upon many individual mitigationprojects. While these requirements arehelpful in assuring the success of mitigation

Conclusions

129

banks, they are also highly relevant to these circumstances, sequencing may beindividual mitigation projects, which have a foregone based on the plan's consideration ofrelatively poor record. the same issues normally considered in

Both forms of compensatory mitigation however, no evidence that suggests a need toshould be considered by regulators at one exempt banking as such from sequencing.time. Individual mitigation projects andmitigation banking need not be subjected to Conclusionidentical conditions; they simply need to havesome parity of treatment. The adoption of aregional or watershed-based wetlandconservation plan provides one way of takingthese into account. Regional and nationalwetland mitigation guidance or regulations canalso provide criteria, goals, and requirementsfor onsite and offsite mitigation.

(6) Mitigation banking can operateconsistent with sequencingrequirements.

There is no inconsistency betweensequencing and mitigation banking. Indeed,sequencing remains a reasonableprecondition to all forms of compensatorymitigation; it preserves naturally functioningwetland areas to the extent possible in thelocations where they exist through avoidanceand minimization. The few currentlyrecognized exceptions to sequencing (e.g.comprehensive wetlands plans) applyreasonably well to banking that operateswithin an approved comprehensive plan. In

project-by-project sequencing. There is,

Wetland mitigation banking offers apromising approach to wetland compensatorymitigation. Like other forms of compensatorymitigation, it presupposes a wetland policythat continues to allow the lawful destructionof certain natural wetlands. Its potential utilitymust be measured not in comparison with aban on wetland conversions, but on whetherit can improve upon current compensatorymethods. It appears that it can.

Wetland mitigation banking offers thepotential for restoration and conservation ofecologically meaningful and robust wetlandsystems, planning on a landscape scale, andthe harnessing of entrepreneurial as well aspublic funding to the task of wetlandcompensation. It provides practicaladvantages in monitoring and management ofcompensatory wetlands. The usefulness ofmitigation banking will be greatly enhanced ifregulators establish equivalent parameters forother compensatory mitigation approaches.

130

BLANK PAGE

This list varies from the list provided in IWR Report 94-WMB-4, the First Phase Report. The primary difference102

is attributable to the individual listing of bank sites for two of the state highway banks. The IWR Report 94-WMB-4also includes Henderson Marsh (Oregon) and the North Dakota Wetlands Bank.

131

APPENDIX ALIST OF WETLAND

MITIGATION BANKS

EXISTING BANKS 102

1. California - Pier J, Anaheim Bay (public for own use)2. California - Bracut Wetland Mitigation Marsh (nonprofit bank for general use)3. California - Huntington Beach (govt. bank for own use)4. California - Mid City Ranch (state/local government bank for local govt. use)5. California - Mission Viejo/ACWHEP (private/local govt. bank)6. California - Naval Amphibious Base Eelgrass Bank (Navy bank for own use)7. California - Port of Long Beach - Pier A, Newport Bay Mitigation Bank (public bank for own use)8. California - Port of Los Angeles - Inner Harbor (public bank for own use)9. California - Port of Los Angeles - Pac Tex, Batiquitos Lagoon (public bank for own use)10. California - San Joaquin Marsh (public/private bank for own use)11. California - Sea World Eelgrass Mitigation Bank (private bank for own use)

12. Florida - Cheval Tournament Players Club (private bank for own use)13. Florida - Hillsborough County Utilities Dept. Mitigation Bank (local govt. bank for own use)14. Florida - Northlakes Park Mitigation Bank (local govt. bank for own use)15. Florida - Polk Parkway Bank (local govt. bank for own use)16. Florida - Polk Regional Drainage Project Bank (local govt. bank for own use)17. Florida - Southeast Mitigation Bank (local govt. bank for own use)18. Florida - Turner Citrus Inc./Hay and Mercer Ponds (private bank for own use)19. Florida - Weisenfeld/Meadow Woods (private for own use)

20. Georgia - Georgia Department of Transportation (single client DOT bank)

21. Idaho - Acequia (single client DOT bank)22. Idaho - Mud Lake Wildlife Management Area (single client DOT bank)23. Idaho - Old Beaver (single client DOT bank)

24. Indiana - Geist Reservoir (private bank for own use, resulting from violation)25. Indiana - Morse Reservoir WMB (private bank for own and general use)

26. Louisiana - Dept. of Transportation and Development (single client DOT bank)27. Louisiana - Fina LaTerre (private bank for own and general use)

28. Minnesota - Dept. of Transportation Wetland Habitat Mitigation Bank (single client DOT bank)

29. Mississippi - Dahomey National Wildlife Refuge (single client DOT bank)30. Mississippi - Malmaison Wildlife Management Area (single client DOT bank)31. Mississippi - State Line Bog & Dead Dog Bog (single client DOT bank)

Appendix A:List of WetlandMitigation Banks

132

32. Mississippi - Port of Pascagoula SAMP (local govt. agency for own use)

33. Montana - Interagency Wetland Committee Bank (single client DOT)

34. Nevada - Washoe Lake Mitigation Bank (state DOT bank for own and general use)

35. North Carolina - Company Swamp (single client DOT bank)36. North Carolina - Pridgen Flats (single client DOT bank)

37. North Dakota - North Dakota State Highway Dept. (single client DOT bank)

38. Oregon - Astoria Airport (state sponsored bank for general use)

39. South Carolina - Highway Mitigation Bank (single client DOT bank)

40. South Dakota - Wetlands Accounting System Bank (single client DOT bank)

41. Tennessee - West Tennessee Wetland Mitigation Bank

42. Virginia - Bowers Hill/Goose Creek (single client DOT bank)43. Virginia - Cabin Creek WMB (single client DOT bank)44. Virginia - Fort Lee WMB (single client DOT bank)45. Virginia - Otterdam Swamp (single client DOT bank)

46. Wisconsin - Patrick Lake (single client DOT bank)

PROPOSED BANKS

Alabama - State Highway Department (single client DOT bank)

Alaska - City and Borough of Juneau WMB (local govt. bank for general use)

Arizona - Asarco (private bank for own use)

Arkansas - State Highway Dept. WMB (single client DOT bank)

California - Bill Signs Trucking WMB (private bank for own and general use)California - Dune Mitigation Bank (local/govt. bank for own use)California - Folsom City (Willow Creek, Humbug Creek Parkway Plan)California - Mission Bay Eelgrass Mitigation Bank (local govt. bank for own use)California - Placer County (local government for general use)California - Sacramento County Caltrans Bank (single client DOT bank)California - Springtown Natural Communities Reserve (private for general use)

Florida - Bird Drive Mitigation Bank (local government bank for own use)Florida - Dept. of Transportation (single client DOT bank)

Appendix A:List of Wetland

Mitigation Banks

133

Florida - Disney World (private bank for own use)Florida - East Lake/McMullan Booth Road (local govt. bank for own use)Florida - Jerry Lake Weir Mitigation Bank (local govt. bank for own use)Florida - Mud Lake (local govt. bank for own use)Florida - North Trail WMB (local govt. bank for own and general use)Florida - Northwest Hillsborough County (local govt. bank for own use)Florida - Orlando International Airport Build-out (local govt. bank for own use)Florida - Pinellas County (local govt. bank for own use)Florida - S.W. Florida Regional Wildlife and Wetlands Conservation Mitigation Area (state

bank for private use)Florida - Wetlands Land Bank of Florida, Inc. (private bank for general use)

Georgia - Marshland Plantation Commercial WMB (private bank for general use)Georgia - Millhaven Plantation Commercial WMB (private bank for general use)

Illinois - Homebuilder's Association of Greater Chicago WMB (private bank for generaluse)

Illinois - Lake County WMB (local govt. bank for general use)Illinois - St. Clair County WMB (local govt. bank for general use)

Louisiana - Barksdale Air Force Base WMB (federal agency bank for own use)Louisiana - Himont Expansion Bottomland Hardwood Bank (private bank for own use)Louisiana - Pass A Loutre Deltaic Splay Development (state bank for general use)Louisiana - Terrebonne/Point Au Chien Wildlife Management Area (state owned bank for

general use)

Maryland - Prince George's County (local govt. bank for own use)

Nebraska - Lancaster County WMB (private/public bank for general use)Nebraska - Dept. of Roads (single client DOT bank)

New Hampshire - Dept. of Transportation (single client DOT bank)

New Jersey - Chimento Mitigation Bank (private bank for public or general use)New Jersey - Dept. of Transportation (single client DOT bank)New Jersey - Hackensack Meadowlands (public/private bank for general use)New Jersey - Passaic River Central Basin Wetlands Bank (public bank for general use)

New Mexico - Valencia County (single client DOT bank)

Ohio - Homebuilders's Association of Ohio (private bank for general use)

Oregon - Dalton Lake (single client DOT bank)Oregon - Port of Astoria WMB (local govt. bank for own use)Oregon - Turner Mitigation Bank (single client DOT bank)Oregon - West Eugene Mitigation Bank (local govt. bank for general use)

Appendix A:List of WetlandMitigation Banks

134

Texas - General Land Commission (state govt. bank for general use)Texas - Commercial Mitigation Bank, Arkansas County (private bank for general use)Texas - Dow Nature Refuge, Lake Jackson (private bank for own use)Texas - Taylor Lake Nature Preserve and WMB (private bank for own and general use)Texas - Wetlands Management, Inc. (private bank for general use)

Utah - Provo City WMB (local govt. bank for own use)Utah - Northeast Utah WMB (private bank for general use)Utah - Tenth West Corridor WMB (local govt. bank for general use)

Virginia - Dale City (private mitigation of violation for own and general use)Virginia - Lowe's Island (private bank for own and general use)Virginia - Neabsco Wetland Bank (private bank for general use)Virginia - Northern Virginia - Manassas (single client DOT bank)Virginia - Ragged Island Wildlife Management Area (public agency bank for own use)Virginia - Creeds (local govt. bank for own and state use)

Washington - Dept. of Transportation (single client DOT bank)Washington - Port of Everett (local govt. bank for own and general use)

Wisconsin - Statewide WMB (single client DOT bank)

Wyoming - Highway Dept. (single client DOT use)

135

APPENDIX BEXISTING WETLANDMITIGATION BANKS

BANK LOCATION CREDIT OVERSEEING CLIENTS OWNERSHIPPRODUCER AGENCIES current/future

LAND

1. Anaheim Bay Anaheim Port of Long USFWS, NMFS, Port of Long U.S. NavyMitigation Bay, Seal Beach Acting COE, EPA, CA Beach andProject Beach Through Board of Coastal Potentially

National Harbors Commission, Other PortWildlife Commissioners Regional Water DevelopersRefuge QualityOrange Commission, CACounty, CA Dept. of Fish and

Game

2. Bracut Wetland Humboldt CA Coastal CA Coastal multiple CA CoastalMitigation Bank Bay, CA Conservancy Commission, CA public & Conservancy, has

Dept. of Fish and private clients long termGame management

responsibility

3. Huntington Orange CA Coastal CA Coastal CALTRANS, Huntington BeachBeach County, CA Conservancy Commission, CA Orange WetlandsWetlands Dept. of Fish and County Flood Conservancy ownsRestoration Game, CA Coastal Control most of land;Project Conservancy, District Orange County

USFWS Flood Control andSanitation Districtsown the rest, butgranted easementsto HBWC

4. Mid City Ranch Humboldt CA Fish & Game CA Fish & Game, Humboldt CA Fish & GameCounty, CA City of Eureka, County, City

Humboldt County of Eureka

5. Mission Viejo/ Orange Mission Viejo USFWS, CA Dept. multiple - public- OrangeACWHEP County, CA Company & of Fish and Game general County

Orange CountyDept. of Harbors,Beaches, andParks

6. Naval West Side U.S. Naval USFWS, NMFS, U.S. Navy U.S. NavyAmphibious San Diego Amphibious Base CA Dept. of FishBase Eelgrass Bay, San and GameMitigation Bank Diego, CA

7. Port of Long Newport Port of Long USFWS, NMFS, Port of Long CA Dept. of FishBeach - Pier A Beach, Beach (Board of COE, EPA, CA Beach and GameNewport Orange Harbor Dept. of Fish andMitigation Bank County, CA Communica-tions) Game (City of Long

Beach)

Appendix B:Existing WetlandMitigation Banks


LAND

136

8. Port of Los Inner Harbor Port of L.A. Board of Harbor Port of L.A. City of Los AngelesAngeles - Inner -Port of Los Commissioners andHarbor Angeles, CA (Port of L.A.), Ca PotentiallyMitigation Bank Dept. of Fish & other

Game, NMFS, developersUSFWS

9. Port of Los Carlsbad, Port of L.A. Board of Harbor Port of L.A. CA State LandAngeles - Pac CA Commissioners CommissionTex, Batiquitos (Port of L.A.),Lagoon USFWS, NMFS,

City of Carlsbad,CA State LandCommission, CADept. of Fish andGame

10. San Joaquin Orange Irvine Company USFWS, CA Dept. Irvine Irvine Co. & Univ. ofMarsh County, CA of Fish and Game Company CA Natural Reserve

System

11. Sea World San Diego Sea World CA Coastal Sea World Sea World leasesEelgrass County, CA Commission, COE (others can the land from City ofMitigation Bank apply through San Diego

Sea World)

12. Cheval Hillsborough Cheval Associates S.W. FL Water one - privateTournament County, FL Partnerships, Inc. Management clientPlayers Club District

13. Hillsborough Hillsborough Hillsborough S.W. FL Water one - public; county ownedCounty Utilities County, FL County Utilities Management localDept. Mitigation Dept. District governmentBank

14. Northlakes Hillsborough Hillsborough Hillsborough Hillsborough county ownedPark Mitigation County, FL County County CountyBank Environmental

ProtectionCommission, S.W.FL WaterManagementDistrict

15. Polk Parkway Polk County, local govt. of Polk S.W. FL Water county govt. countyBank FL County Management

District

16. Polk Regional Polk County, local govt. - Polk S.W. FL Water county govt. countyDrainage FL County ManagementProject Bank District

17. Southeast Hillsborough Hillsborough S.W. FL Water county govt. unknownMitigation Bank County County, FL Management

District



LAND

137

18. Turner Citrus DeSoto Gene Turner and S.W. FL Water private privateInc. County, FL brother Management

District

19. Weisenfeld/ Orlando, FL Joseph State Bureau of private unknownMeadow Weisenfeld Wetland ResourceWoods Management

20. Georgia Dept. various GA DOT USFWS, COE, GA DOT state of Georgiaof EPATransportation

21. Acequia Cassia ID Transportation ITD ITD currently public -County, ID Dept. (ITD) ITD

22. Mud Lake Jefferson ITD, Fish and ITD ITD publicWildlife County, ID GameManagementArea

23. Old Beaver Clark ITD, Fish and ITD ITD currently public -County, ID Game ITD

24. Geist Reservoir Marion Shorewood Corp. COE private - privateCounty, IN Shorewood

25. Morse Hamilton Shorewood Corp. COE private - privateReservoir County, IN Shorewood

26. Louisiana Dept. Grant and LA DOTD LA Dept. of Wildlife LA DOTD LA Dept. of Wildlifeof LaSalle and Fisheries, LA and FisheriesTransportation Parishes DOTD, USFWSandDevelopment(DOTD)

27. Fina LaTerre Terrebonne Fina LaTerre USFWS, NMFS, Fina LaTerre Fina Oil andParish, LA Corp. SCS, LA DNR, LA Inc. A Chemical Co.

DWF Subsidiary ofFina Oil andChemical Co.

28. Minnesota statewide MN DOT MN DOT, MN MN DOT credit areasWetland DNR, USFWS, purchased by MNHabitat FHWA DOT, turned over toMitigation Bank MN DNR

29. Dahomey Bolivar MS State Highway USFWS, COE, State bought from privateNational County, MS Dept. EPA, DEQ, MS Highway owners by MS DOT;Wildlife Refuge Dept. of Wildlife, Dept. title transferred to

Fisheries & Parks MS Dept. of Wildlife,Fisheries, and Parks



LAND

138

30. Malmaison Grenada MS State Highway USFWS, COE, MS State bought by privateWildlife County, MS Dept. EPA, DEQ, MS Highway owners from MSManagement Dept. of Wildlife, Dept. DOT; titleArea Fisheries & Parks transferred to MS

Dept. Wildlife,Fisheries & Parks

31. State Line Bog Green MS State Highway USFWS, COE, MS State bought from private& Dead Dog County, MS Dept. EPA, DEQ, MS Highway owners by MS DOT;Bog Dept. Wildlife, Dept. title transferred to

Fisheries & Parks MS Dept. Wildlife,Fisheries & Parks

32. Special Jackson State of MS USFWS, Jackson Port of stateManagement County, MS County Port PascagoulaArea Plan for Authority, MS and Privatethe Port of DEQ, MS Bureau DevelopersPascagoula of Marine

Resources, EPA,MS Dept. ofWildlife, Fisheries,& Parks, MA Dept.of Archives &History, COE,NMFS, JacksonCounty Board ofSupervisors

33. MT DOT Statewide MT DOT Dept. of Health & MT Dept. of USFWSWetland Envir. Sciences, Transport-Mitigation Bank USFWS, EPA, ation

COE, MT Dept. ofFish, Wildlife, &Parks, FHWA

34. Washoe Lake Washoe NV DOT NV DOT, NV Div. NV DOT NV Division of StateWetland County, NV State Parks, NV Lands - uponMitigation Area (near Carson Div. of State Lands, completion of

City) COE credits, bank willbecome a state park

35. Company Bertie NC DOT NC Wildlife NC DOT state owns bank;Swamp County, NC Resources now considered part

Commission, of the RoanokeUSFWS, NC River NationalNature Wildlife RefugeConservancy

36. NC DOT Sampson NC DOT NC Wildlife NC DOT USFWSPridgen Flats County, NC ResourcesMitigation Site Commission,

USFWS

37. North Dakota statewide ND State Highway USFWS and ND ND State USFWSState Highway Dept. State Highway HighwayDept. Bank Dept. Dept.



LAND

139

38. Astoria Airport Clatsop OR Division of EPA, COE, NMFS, General Division of StateMitigation Bank County, OR State Lands Dept. of Land Lands

Conservation andDevelopment, Dept.of Fish and Wildlife,OR Div. of StateLands, Port ofAstoria, USFWS

39. Highway Black River SC DOT USFWS, COE, SC DOT future - SC DOT Mitigation Farms, Dept. of Health, SCBank, South central SC Coastal Council,Carolina SC Water

Resources Comm.,SC Wildlife MarineResources Div.

40. Wetlands Arlington, SD DOT FHWA, USFWS, SD DOT DOT owns it until allAccounting SD SD Games, credits used; willSystem Fisheries, and then donate to

Parks public or privateconservation agency

41. West Shelby TN DOT TN Dept. of TN DOT TN DOT currently;Tennessee County, TN Environment and at completion - TNWetland Conservation, TN Dept. ofMitigation Bank Wildlife Resources Environment and

Agency Conservation or TNWildlife ResourcesAgency

42. Goose Creek/ Chesapeake VA DOT EPA, COE, VA DOT VA DOTBowers Hill VA USFWS, NMFS,Tidal Mitigation VA State WaterBank Control Board, Now

called Dept. ofEnvir. Quality,DEQ), VA MarineResourcesCommission, VADept. of Game &Inland Fisheries

43. Cabin Creek Prince VA DOT EPA, COE, NMFS, VA DOT VA DOTGeorges VA DEQ, VA GameCounty, VA Commission, VA

Marine ResourcesCommission, VADept. of Game &Inland Fisheries



LAND

140

44. Fort Lee Prince VA DOT EPA, COE, VA DOT Fed. COE owned;Wetland Georges USFWS, NMFS, granted easement toMitigation Bank County, VA VA DEQ, Marine VA DOT

Resources Councilfor Fish and Game,VA MarineResources Council,VA Fish & Game

45. Otterdam Greensville VA DOT EPA, COE, VA DOT VA DOTSwamp County, VA USFWS, VA DEQ,

VA GameCommission

46. Patrick Lake Dane WI DOT COE, EPA, WI DOT perpetual publicWetland County, WI USFWS, FHWA, trust with WI DNRMitigation Bank WI DNR


141

BANK AUTHORIZING PERM. GEOGRAPHIC SIZE IN WETLANDINSTRUMENT yes/no SCOPE ACRES TYPE(S) IN BANK

404

1. Anaheim Bay 2 MOUs 1986 yes Port Districts of 119.6 shallow estuarineMitigation Project Southern CA Bight coastal embayment

2. Bracut Marsh MOU and Broadway yes in Humboldt 6 - acre mitigates for 'pocket'Mitigation Land Wetlands County bank on marshes (2 acres)Bank Restoration 13 - acre with a larger

Conceptual Plan parcel constructed marsh

3. Huntington Beach 2 MOAs 1988 yes within same 24.9 coastal ecosystem -Restoration Project hydrologic tidal marsh

drainage area aswetland mitigationbank

4. Mid City Ranch MOA 1988 yes in Humboldt 8.2 freshwater,County seasonal wetlands

5. Mission MOA yes within Aliso Viejo 32.3 freshwater marshViejo/ACWHEP Greenbelt - 3,400

acre open-space

6. Naval Amphibious MOU yes Naval Amphibious 10 aquatic beds ofBase Eelgrass Base - San Diego eelgrassMitigation Bank Bay

7. Port of Long Beach - MOU 1984 yes 25 miles from Long 29 salt marsh,Pier A Beach Harbor estuarine

8. Port of Los Angeles MOU 1984 yes within inner harbor 17.7 and deep water habitat- Inner Harbor of Port of Los possible

Angeles expansion

9. Port of Los Angeles MOA yes "Area of ecological lagoon - shallow water,- Pac Tex, Batiquitos continuity." 600 acres coastal embaymentLagoon Batiquitos Lagoon credit area

15 miles from Pac - 363Tex impact site acres

10. San Joaquin Marsh MOA between Irvine no the Irvine Ranch - 18 freshwater marshCo., USFWS, CA 65,000 acreDept of Fish and wetland systemGame

11. Sea World Eelgrass MOA yes same watershed less than eelgrassMitigation Bank one (.07)

12. Cheval Tournament permit with S.W. not county 26.94 forested wetlandPlayers Club Florida Water Mgmt. spec-

District ified

13. Hillsborough County permit with S.W. not county 13 forested wetlandUtilities Dept. Florida Water Mgmt. spec-Mitigation Bank District ified

14. Northlakes Park permit with S.W. no county 10.95 cypress wetlandMitigation Bank Florida Water Mgmt.

District



404

142

15. Polk Parkway permit with S.W. no county 3.2 forested wetlandMitigation Bank Florida Water Mgmt.

District

16. Polk Regional conceptual permit no county 24.3 forested wetlandsDrainage Bank with S.W. Florida

Water Mgmt.District

17. Southeast Mitigation MOU no watershed 31 upland - bufferBank areas, new

wetlands, andenhancement ofdisturbed areas

18. Turner Citrus, Inc. permit with S.W. yes watershed 2 = 47 pine flatwoodsFlorida Water Mgmt.District

19. Weisenfeld/ MOA no watershed 235 impacted - cypressMeadow Woods and mixed hardwood

wetlands, forestedwetlands

20. Georgia DOT MOA since 1987 yes try to stay as close varies variesas possible withindrainage site - 100miles from impact

21. Acequia MOA yes as close to impact 21.1 riparian andsite as possible (try palustrine, somefor watershed) open water and

aquatic-basedwetlands

22. Mud Lake Wildlife MOA yes try for watershed, 150 palustrine emergentManagement Area but not critical

23. Old Beaver MOA yes try for watershed, 7 - wetland shrub/scrub, plushor as close as 35.7 totalpossible

24. Geist River COE permit with yes not specified 25.4 forested wetland,written agreement some scrub/shrub

and emergent

25. Morse Reservoir COE permit with yes not specified 14.5 palustrine forestedwritten agreement wetland, mixed

hardwood

26. Louisiana Dept. of verbal agreement; yes statewide - outside 2944 forested wetlands,Transportation and state legislative coastal zone bottomlandDevelopment resolution for hardwood

purchase & transferof lands



404

143

27. Fina LaTerre MOA yes within same 7014 freshwater marsh,hydrologic unit; brackish marsh,other areas on shallow, open watercase-by-case basis coastal and

estuarine marsh

28. Minnesota Wetland MOU - MN DOT yes within DOT district 1750 mainly inland,Habitat Mitigation technical shallow and deepBank memorandum with freshwater marshes

letters ofconcurrence fromFederal agencies

29. Dahomey National MOA yes usually same 160 bottomlandWildlife Refuge watershed hardwoods

30. Malmaison Wildlife MOA yes usually same 318 bottomlandManagement Area watershed hardwoods

31. State Line Bog & MOA yes usually same State Line bottomlandDead Dog Bog watershed Bog - 103 hardwoods, pine

Dead Dog savannah/pitcherBog - 205 plant bog

32. Special special area yes same biotic region 4675 intertidal marshesManagement Area management plan & or geographic area and flats, openPlan for the Port of MOA implemented water habitat,Pascagoula plan estuarine scrub-

shrub

33. MT DOT Wetland MOU yes same biotic region no fixed freshwater wetland,Mitigation Bank or geographic area size (170 principally palustrine

to date)

34. Washoe Lake interagency yes within same 88.5 palustrine persistentWetland Mitigation agreement hydrologic emergentArea drainage area as

bank

35. Company Swamp MOU yes statewide; 1031 bottomlandpreferably within hardwood, cypress-coastal plains gum

36. NC DOT Pridgen MOU yes coastal plains area 127.3 pocosinFlats Mitigation Site

37. ND State Highway MOU no statewide; no fixed inland marshes andDept. Bank priorities: 1) along size (175 palustrine emergent

project; 2) in biotic to date) wetlandssub-region; 3) inbiotic region; 4)outside bioticregion

38. Astoria Airport MOA yes 8 mile radius - 33 freshwater marshes;single watershed working to achieve

brackish marshes



404

144

39. SC DOT none yes statewide 1,000 forested wetlands

40. Wetlands MOU yes watershed, then 25 palustrine emergentAccounting System biotic region orBank (SD) outside biotic

region, ifnecessary

41. West Tennessee MOA yes same watershed 398 100 acres -Wetland Mitigation bottomlandBank hardwoods, forested

wetlands, old creekchannels; 298 -cleared and drainedfor agriculture

42. Goose none; debits yes not specified; 10.64 estuarine emergent,Creek/Bowers Hill reviewed by generally in coastal palustrine forested,Tidal Mitigation Bank interagency plain of VA shrub/scrub

committee andincorporated intoindividual permits

43. Cabin Creek none; verbal yes general DOT 9 palustrine forestedcommitment with districtinteragency reviewand comment

44. Fort Lee Wetland none; verbal yes DOT district with 34 palustrine forested,Mitigation Bank commitment with preference to sites emergent

interagency review close to bankand comment

45. Otterdam Swamp none; debits yes DOT Suffolk 14 palustrinereviewed by district herbaceous,interagency shrub/scrub,committee, forestedincorporated intoindividual permits

46. Patrick Lake cooperative yes WI DOT district 1 160-170 palustrine emergentagreement between marshWI DOT and WIDNR, with letters ofconcurrence fromFederal agencies


145

BANK COMPENSATION CURRENCY/EVALUATION COMPENSATION RATIOSMETHOD METHOD

1. Anaheim Bay Mitigation restoration & creation modified HEP case-by-case based onProject habitat suitability indices for

20 species

2. Bracut Marsh Mitigation restoration acres determined by CA CoastalLand Bank Conservancy on a case-by-

case basis; never less than1:1

3. Huntington Beach restoration best professional judgement ratio not specified; has beenRestoration Project 1:1 to date

4. Mid City Ranch restoration, creation, modified HEP acre-for-acre; determined byenhancement CA F&G on case-by-case

basis

5. Mission Viejo - enhancement & creation acres starts at 3:1, can be loweredACWHEP under certain circumstances

6. U.S. Naval Amphibious transplant of eelgrass to habitat evaluation credit system 1:1 acreage basisBase Eelgrass bank based on mean density ofMitigation Bank eelgrass

7. Port of Long Beach - restoration & "Consensus Habitat 1.5:1Pier A enhancement Evaluation" analogous to HEP

8. Port of Los Angeles creation water surface acreage at mean 1:1Inner Harbor Mitigation high waterBank

9. Port of Los Angeles - restoration & surface water acres 1:1Pac Tex, Batiquitos enhancementLagoon

10. San Joaquin Marsh enhancement HU - modified HEP called HVA 1:1 minimum- habitat value analysis

11. Sea World Eelgrass restoration survey for density, quality and 1.2:1 - the 0.2 represents theMitigation Bank quantity of eelgrass: impacted amount of time (2 years) the

and mitigated areas have to habitat is out commission.have similar eelgrass density

12. Cheval Tournament creation & enhancement WET & best professional sliding scale dependent onPlayers Club judgment success criteria

13. Hillsborough County creation WET & best professional sliding scale dependent onUtilities Dept. Mitigation judgment success criteriaBank

14. Northlakes Park rehydration of drained case-by-case; impacts known 1:1 to 2.5:1 - variedMitigation wetlands in advance depending on impact

15. Polk Parkway Bank creation acreage based on success 2.5:1 - immediately aftercriteria: 30% canopy closure in construction began; 1:1 afterforested wetlands; 85% species successsurvival



146

16. Polk Regional Drainage creation WET (reference wetland); type sliding scale dependent onProject Park for type success criteria

17. Southeast Mitigation creation, enhancement & PMAs (Potential Mitigation high replacement ratio initiallyBank preservation Acres) with sliding scale

18. Turner Citrus Inc. creation, restoration & ratio dependent on wetland have used various ratios; 1:1enhancement type and wetland quality and greater

19. Weisenfeld/Meadow enhancement & FL DER valuation sliding scale from 20:1 to 6:1Woods preservation questionnaire dependent upon success

criteria

20. Georgia DOT creation, restoration & regulating agencies - 2:1 - 1:1protection professional judgment

21. Acequia creation HEP 1:1 or higher, determined byCOE

22. Mud Lake Wildlife enhancement HEP not specifiedManagement Area

23. Old Beaver restoration of riparian & HEP 1:1 or higher, determined byenhancement COE

24. Geist Reservoir restoration acres 1:1, determined site by site

25. Morse Reservoir restoration acres 1:1, determined site by site

26. Louisiana Dept. of enhancement & originally AAHUs HEP; now 1:1 Transportation and preservation acreageDevelopment

27. Fina LaTerre enhancement HEP 76 & AAHU 2:1

28. Minnesota Wetland enhancement & creation modified HEP with preference variesHabitat Mitigation Bank for waterfowl habitat and

publicly - owned land

29. Dahomey National restoration, no HEP or WET; use ratios 1:1Wildlife Refuge enhancement &

preservation

30. Malmaison Wildlife restoration & no HEP or WET; use ratios 1:1Management Area enhancement

31. State Line Bog and restoration, no HEP or WET; use ratios 1:1Dead Dog Bog enhancement &

preservation

32. Special Management preservation of Bangs no method necessary for case-by-case determined byArea Plan for the Port Lake & Middle River preserved sites; case-by-case special management areaof Pascagoula management units for highway 90 mitigation area task force

restoration,enhancement & creationof highway 90 mitigationarea



147

33. MT DOT Wetland Bank restoration, best professional judgment ratios determined on case-by-enhancement, creation & case basis by technicalpreservation subcommittee

34. Washoe Lake Wetland creation & enhancement WET 3:1 for enhanced wetlands,Mitigation Bank 0.3:1 for created wetlands

35. Company Swamp preservation HEP for losses of more than 5 varies according to HEP for >Mitigation Land Bank acres; acreage for losses under 5 acres; 1:1 for < 5 acres

5 acres

36. NC DOT Pridgen Flats restoration rate based on HEP analysis 2:1Mitigation Site done on unrelated pocosin tract

37. North Dakota State restoration & creation replacement by area using 0.25:1-8:1 determined byHighway Bank exchange options and ratios USFWS and ND DOT based

on type and location ofwetlands

38. Astoria Airport restoration OR Dept. of State Lands sliding scale based on habitatRelative Value System; value ranging from 1:1 to 6:1functional valuation ratings of1-6

39. South Carolina Dept. of restoration not specified not specifiedTransportation

40. Wetlands Accounting restoration, creation, acres noneSystem Bank, SD enhancement &

preservation (restorationpreferred)

41. West Tennessee restoration, acres case-by-case; minimum 2:1Wetland Mitigation enhancement, creation,Bank & preservation (in order

of preference)

42. Goose Creek/Bowers creation acreage not specified, but generallyHill Tidal Mitigation 1:1Bank

43. Cabin Creek creation acreage 2:1

44. Fort Lee Wetland creation acreage 2:1Mitigation Bank

45. Otterdam Swamp creation acreage 1:1

46. Patrick Lake restoration Minnesota Wetlands at least 1:1Evaluation Methodology(WEM)

148

BLANK PAGE

149

APPENDIX CFEDERAL BANKING POLICIES

U.S. Army Corps of Engineers and U.S. Environmental Protection Agency

Memorandum of Agreement Determination of Mitigation under §404(b)(1) Guidelines

Signed - February 6, 1990Effective - February 7, 1990

This MOA provides the Corps and EPA with policy guidance and procedures to implement theClean Water Act §404(b)(1) Guidelines. The Corps adheres to this MOA to make a "determinationof compliance with the Guidelines with respect to mitigation for standard permit applications." EPAuses the MOA to develop "positions on compliance with the Guidelines for proposed discharges andwill reflect this MOA when commenting on permit applications."

Under the Guidelines' sequencing scheme, Section 404 applicants must avoid adverseimpacts or prove that the impacts are unavoidable. The applicant is then required to minimizeunavoidable adverse impacts. If adverse impacts still exist after minimization, the applicant mustperform "appropriate and practicable" compensatory mitigation to offset the impacts. After followingthis sequence of criteria, mitigation banking "may be an acceptable form of compensatory mitigationunder specific criteria designed to ensure an environmentally successful bank." Significantly, theMOA states that once a bank has been approved by EPA and the Corps, use of that bank is"considered as meeting the objectives of the MOA, regardless of the practicability of other forms ofcompensatory mitigation." This guidance offers little detail of where or how to establish a bank. Theguidelines themselves state that national guidance for mitigation banks is forthcoming.

The MOA states a preference for mitigation "adjacent or contiguous to the discharge site." Ifon-site work is not practicable, however, off-site mitigation should be undertaken in the samegeographic area, "in close proximity and to the extent possible in the same watershed." In-kindmitigation is considered preferable to out-of-kind. The guidance cautions that wetland creation orother habitat development should be given careful consideration to the likelihood of ecologicalsuccess, given the "uncertainty" surrounding the science of wetland creation. Restoration is thepreferred form of compensatory mitigation, and "preservation may only in exceptional circumstancesbe accepted as compensatory mitigation."

Functional values are to be assessed by applying "aquatic site assessment techniquesrecognized by experts in the field and/or best professional judgment of federal and state agencyrepresentatives," provided there is full consideration of ecological functions as described in theGuidelines. The minimum acceptable functional replacement ratio is "one for one...with an adequatemargin of safety." The Corps and EPA agree to determine compensation ratios on a specific caseby case basis where possible.

Appendix CFederal Banking Policies

150

U.S. Environmental Protection AgencyRegion IX

San Francisco, CaliforniaMitigation Banking Guidance

December 1991

The Region IX guidance, the first developed and adopted by an EPA region, establishesmitigation banking as an acceptable form of compensatory mitigation requiring full compliance withall federal environmental laws, regulations, and policies. Mitigation banking may be used where "off-site mitigation is appropriate." "The goal of mitigation banking should be creation of self-sustainingfunctional ecosystems, equal in acreage and functions and values to those being lost, which areprotected in perpetuity." "Mitigation banking should be undertaken, when practicable, in areasadjacent or contiguous to discharge site" and in areas already under compatible management.Banks should be implemented in the same geographic area, close to the impacts and within thesame watershed when practicable.

Under Region IX's guidance, banking may include water-dependent or linear projects as wellas projects with small, unavoidable impacts and/or impacted wetlands with minimally existing orpotentially restorable functional values. Repair projects for public structures where mitigation mightotherwise not occur are also applicable to mitigation banking.

In Region IX, banking is not appropriate to be used when on-site mitigation is practicable orthe mitigation would "not lower a project's adverse impacts below the threshold of significantdegradation." Likewise, projects impacting "threatened or endangered species or naturalcommunities," "intact remnants of damaged or declining systems," "other regionally significantfunctional wetland values," or projects for which there is insufficient "knowledge or technology todetermine a reasonable likelihood of success" should be considered inappropriate for mitigationbanking.

The guidance finds in-kind mitigation generally preferable to out-of-kind, and stipulates thatbanks should replace the same range of functions and values as the impacted ones. Restorationshould be considered the first option for compensation. Purchase or preservation of existinghabitats, in the absence of restoration or creation, is generally not acceptable by Region IX.However, preservation of high value or vulnerable wetlands may be an integral part of an overallmitigation banking plan if beneficial to the entire aquatic ecosystem.

Region IX suggests that at minimum, banking should provide a one-for-one replacement of lostfunctional values. Absent more definitive information, one-for-one acreage replacement may beused. The guidance urges consideration and protection of surrounding areas to the maximumextent. For example, bank design, development and management should incorporate measures thatwill enhance upland areas, and reduce negative "edge effects."

Generally, the guidance advocates advance mitigation to offset lost values in advance ofimpacts. These lost mitigation functional values should be quantified and serve as a baseline formeasuring success. The guidance does however, retain some flexibility in the timing of creditissuance. "In some cases, however, it may be acceptable to allow incremental distribution of creditscorresponding to the appropriate stage of successful replacement of wetlands functions and values."


151

Region IX stipulates that mitigation banks must develop a formal, written agreement thatestablishes "specific guidelines for bank use, and defines required, permitted and prohibited actionsand obligations for each participating entity." All involved parties must sign it. Region IX identifiesnine requirements for the agreement, including bank life, reporting requirements, success goals,evaluation methodology and credit/debit procedures. In addition, banking agreements must identifyprocedures for holding the mitigation bank developers/operators accountable for all bank-relatedproject costs.


152

U.S. Army Corps of EngineersGalveston DistrictGalveston, Texas

Interagency Guidelines for the Development and Use of Mitigation Banks

June 1993

The Galveston Army Corps of Engineers Interagency Guidelines provide guidance to ensuremitigation banking programs are implemented with consistency, to encourage interagency agreementin early stages of planning, and to establish procedures to develop mitigation banking Memorandumsof Agreement for each mitigation bank. In addition to a signed MOA, a potential wetland mitigationbank site requires authorization by the Department of Army.

The Galveston Guidelines consider restoration as the conversion of a previous wetland siteback to functional wetlands. Creation is the process of establishing a functional wetland from a lowquality upland (non-wetland site). Enhancement requires improving the function and value of anexisting wetland without altering the habitat type. Preservation is the least preferred type ofcompensation. It is only accepted by the Galveston Corps in rare cases and when combined withother forms of mitigation as well. The area of preservation should be high quality and hard-to-replace wetlands.

The guidelines establish a mitigation bank review team (MBRT) to be composed of federal andstate agency representatives. The team will "determine suitability of bank site location, evaluatebank site development plans, approve or determine the functions and value of the wetlands, makeperiodic site inspections of the mitigation bank and report findings to the Corps, and assist indeveloping and signing the mitigation bank MOAs." The agencies involved include the U.S. ArmyEngineer District Galveston, U.S. EPA, U.S. Fish and Wildlife Service, National Marine FisheriesService, Texas Park and Wildlife Service, Texas General Land Office, and the Texas WaterCommission.

Project specific mitigation, including in-kind and on-site replacement, is preferred unlessapplicant demonstrates that compensatory mitigation from the bank will result in a "higher qualitywetland and environmental gain." Additionally, a projects's potential impacts (after sequencing) mustnot result in significant degradation of the ecosystem. If on-site, in-kind mitigation is not"practicable", credits from a bank can be used provided that the bank is in the same watershed orhydrological basin as the impacts. The Galveston guidelines require that the bank be as self-sufficient as possible.

Credit approval will be determined by the Corps during the Section 404 process, pendingMRBT determination that the wetland is functioning. Upon receipt of a mitigation bank proposal, theCorps will make a "preliminary determination as to the likelihood of any historic properties" whichmay be affected by the proposal. Further investigation, including an archaeological survey, may berequired in the future.

Bank operators must provide the Corps with a documentation of anticipated need, current siteevaluation, and feasibility of site development on specific site. A copy of this document will also begiven to the MRBT. Assessment methods and replacement ratios will be determined on a case-by-


153

case basis by the MRBT.

The Corps' Omaha District has developed a draft guidance on mitigation banking that is verysimilar to the Galveston District guidance.


154

Intermodal Surface Transportation Efficiency ActFederal Highway Administration

23 U.S.C. §103(i)(13) and 23 U.S.C. §133(b)(11).

Under the National Highway System, funds apportioned to states under §104(b)(1) "may beobligated to wetlands mitigation efforts including wetlands mitigation banks." Federal highway fundscan also be applied to state and regional wetlands conservation, restoration, enhancement andcreation work. Contributions to mitigation banks "may take place concurrent with or in advance ofproject construction." FHWA money may be applied toward advance mitigation "only if such effortsare consistent with all applicable requirements of federal law and regulations and state transportationplanning processes."

Section 133(b)(11) also allows for states to obligate funds from federally funded surfacetransportation programs toward wetlands mitigation banks. Contributions can either be concurrentor in advance of project construction.


155

Northeast Regional Guidelineson the Establishment and Operation of Wetland Mitigation Banks (Draft)

developed jointly by theU.S. Army Corps of Engineers

North Atlantic DivisionNew England Division

U.S. Environmental Protection AgencyRegion IRegion IIRegion III

U.S. Fish and Wildlife ServiceRegion V

National Marine Fisheries ServiceNortheast Region

March 1992

The draft Northeast Regional Guidelines address wetland mitigation banks associated withhighway construction. The guidelines require resource review agencies to comply with all relevantfederal laws and policies and to apply mitigation sequencing to all projects under permit review.Unlike most mitigation banking policies or agreements, this one was drafted before any banks wereestablished in most of the area covered by these agencies. There are no existing banks in NewEngland, New York, Pennsylvania, New Jersey, Delaware, or the District of Columbia. Maryland hasthree proposed banks and Virginia has several existing and many proposed banks.

Under these guidelines, mitigation bank site selection is to be based on "existing resourcevalue, presence of contaminants, size, adjacent land uses, restoration and creation potential andthe ability to provide long term protection of the bank." In-kind mitigation is preferable to out-of-kind.Wherever possible, every effort should be made to "reduce negative edge effects," "contribute tooverall water quality in the ecosystem" and "provide for fish and wildlife migrational corridors."

The bank should be within the same geographic area as the impacts and "every effort shouldbe made to establish banks on former wetlands" to increase the likelihood of success. Restorationis preferred over creation and enhancement. The guidance defines restoration as establishing afunctioning wetland on a "former or degraded wetland site," and creation as establishing afunctioning wetland on an "upland (non-wetland site." The guidance does not define enhancement.Preservation or purchase of wetlands "does not constitute an acceptable mitigation bank."

The guidelines state that credits will be determined by the maximum practicable replacementof lost function. If there is no definitive information available, a minimum one to one acreagereplacement ratio will be used.

The multi-agency agreement establishes as a goal that banks should be as "ecologically and


156

administratively self-sustaining" as possible. The permittee seeking compensation credit has theresponsibility to demonstrate a successful offset of impacts, and if the bank fails in part or in whole,the permittee is held responsible for compensation. If a bank is not providing the intended functions,"the agency will restrict or prohibit use of the bank for section 404 purposes."

This guidance mandates that mitigation banks must be determined by the appropriate resourceand regulatory agencies to be functioning wetlands prior to issuance of credits. Once established,annual monitoring and reporting to resource and regulatory agencies is required. If the credits arecompletely withdrawn, monitoring can cease, as long as the bank has been successful for five years.

Mitigation bank sites, according to the guidance, must be protected in perpetuity through alegally binding mechanism. In order to implement the bank, there must be a written formalagreement which identifies the sponsor, overseeing agencies and parties responsible for "acquiring,developing, managing, and monitoring the mitigation bank site." The agreement must also identifysuccess criteria, evaluation methodology, and dispute settlement procedures and specify that "bankoperators and developers are accountable for all bank related project costs."


157

U.S. Environmental Protection Agency Region V

Chicago, IllinoisGeneric Mitigation Banking Program Under Section 404 (Draft)

July 10, 1991

In Region V both project specific mitigation and mitigation banking systems must follow thesequence of avoidance, minimization, and compensation. If there are adverse impacts that cannotbe avoided or minimized, mitigation banking will be considered only after all possible project specificcompensation alternatives have been shown to be "unacceptable." Compensatory mitigation "willfirst be developed on a project specific basis" with usage of the Bank "a last resort."

The preference for mitigation types are on-site and in-kind wetland areas. Both out-of-kind andoff-site compensatory mitigation "generally will require a greater acreage than in-kind or on-sitereplacement to achieve the same reduction in environmental losses." Compensation ratios will bedetermined as "a simple ratio based on loss trends for the particular type(s) of wetlands involved."If this information is not available, a ratio between 1:1 to 5:1 will be developed by the interagencyteam, and approved by the bank sponsor, Corps, and the Environmental Protection Agency. RegionV stipulates "a one for one 'credit' for each 0.01 acre of wetlands to be deposited."

Withdrawals from mitigation banks are acceptable if project specific mitigation cannot be"reasonably developed" or there remain small losses of wetlands that cannot be "reasonablyreplaced" through project specific mitigation. The guidance establishes an interagency work groupto audit "deposits" and "withdrawals" into and out of the bank. Before a mitigation site is depositedinto a bank, the work group will determine "whether or not the objectives of the compensatorymitigation sites are being met." Region V stipulates that wetlands constructed or restored and"deposited" into a bank "may remain the same or improve in quality (over time)." Wetlands notimproving in quality will be reviewed for "any necessary and appropriate remediation."

To assure compliance with the 404(b)(1) guidelines and the mitigation MOA, Region V'sguidance defines currency as "acreage of wetlands by type of wetland." The region goes on torequire yearly bank monitoring by EPA and the Corps to verify whether or not there is a surplus ofacreage. If the balance is negative, the bank will become insolvent. No deposits or withdrawals willbe permitted until a positive balance is restored.

This guidance also includes several appendices which outline the region's mitigationsequence, definitions, and acreage replacement considerations.


158

U.S. Environmental Protection Agency Region IV

Atlanta, GeorgiaMitigation Banking Guidance (Draft)

1992

Region IV recognizes that mitigation banking has many advantages over project-specificmitigation. Banking provides the opportunity to implement mitigation work in advance of impacts.This reduces regulatory uncertainty; brings resources and expertise together in the planning, bankdevelopment, and maintenance stages; maintains integrity of aquatic ecosystems throughconsolidation of fragmented habitats; and increases ease of monitoring and public awareness ofwetlands. Because banks are generally larger than specific mitigation projects, it is also easier tomonitor ecological success, maintain management accountability, and preserve the wetland valuesand functions once the bank has been established.

Region IV's guidance explicitly states that "banks cannot serve to alter the normal sequencingof the §404 permit review process or eliminate obligations of the permittee under that process." Italso specifies that "where all the required mitigation cannot be achieved on site, bank credits maybe used to complete compensation for the adverse impacts."

In language similar to that offered in Region IX's guidance, Region IV states that "for projectswhere off-site mitigation has been determined appropriate, mitigation banking may be an acceptableoption." These include projects with small unavoidable impacts, linear projects, projects involvingmaintenance of public structures, and projects for which general permits are issued and/oradministered by Army Corps of Engineers or state §404 programs. This last project type is notincluded in the Region IX guidance. Projects listed as inappropriate for mitigation banking includethose affecting rare, threatened or endangered species, "intact remnants of damaged or decliningsystems," or those affecting "regionally significant functional values of wetland or aquatic habitats."

In general, the guidance urges that banks should be sited as close, if not adjacent, to thedischarge site as possible. Where this is not feasible, the project should be in the same geographicarea ("in close physical proximity and within the same watershed.") In-kind mitigation is stated aspreferable to out-of-kind and restoration should be the first option considered. Region IV clarifiesthat preservation "is generally not a desirable form" of mitigation: "Only in rare, site-specific caseswill Region IV accept preservation as sole compensatory mitigation." Preservation may, however,be "an integral part" of the bank plan. Region IV encourages the use of sites with "minimal existinghabitat values" to maximize overall ecological benefits, and bank plans that enhance nearby lands.

Potential bank clients should "identify agencies and organizations to participate in planning";"identify entities responsible for acquiring, developing and managing the bank site"; select potentialsites; and "obtain preliminary concurrence from agencies in the early coordination phase ofenvironmental review process." A multidisciplinary team representing resource agencies will "assesspre- and post-mitigation functional value evaluations."

In general, mitigation should be implemented and proven successful in advance of projectimpacts. Credits may be distributed in phases over time, based on increments of success. In termsof compensation ratios, Region IV requires a minimum of one-for-one replacement of lost functionalvalues. However, where quantitative analyses are not possible, a 2:1 ratio is prescribed to


159

determine credits for restoration, 3:1 for creation, 4:1 for enhancement, and 10:1 for preservation.These ratios may be adjusted according to site specific conditions or in cases "where credits arewithdrawn prior to full functional development of the bank."

Region IV's guidance would require every bank to develop a formal, written, bankingagreement and a banking contract, which is described in detail in the guidance. It includes bankprocedures, identification of all parties and their responsibilities, and "an irrevocable guarantee ofavailability of the necessary financial resources" for which the mitigation bankers and bankmanagers are accountable. The financial assurance may be in the form of a "fully funded trust, aletter of credit with standby trust, or a surety performance bond with standby trust." There shouldalso be a mechanism for the protection of the site in perpetuity such as a conservation easement,deed restriction or transfer or dedication to proper entity and remedies for noncompliance with anyagreement provisions and requirements.


160

DRAFT Interagency Memorandum of Understandingfor Conservation of Wetland Resources

Associated with Highway Construction Projectsin the State of ________

Note: This was presented as a "strawman" mitigation banking model at a conference sponsored bythe Federal Highway Administration in June, 1992.

This Draft Interagency Memorandum of Understanding provides guidelines to identify andevaluate potential wetland impacts associated with highway construction and maintenance projects,to evaluate these impacts, and to implement mitigation for losses of wetland functions, values, andresources. One of the goals is to "establish a process to ensure the early involvement of concernedagencies" in addressing wetland impacts due to highway construction and to elevate wetland reviewearly on in highway planning.

The MOU will "function under the general guidance and oversight of the Interagency WetlandsGroup," which will have at least one representative from the Federal Highway Administration, UnitedStates Environmental Protection Agency, U.S. Corps of Engineers, and U.S. Fish and WildlifeService and representatives from the equivalent state agencies. The Interagency Wetlands Groupwill identify potential wetland impacts and classify them according to Army Corps regulations, theEndangered Species Act and other federal wetland classification guidelines. Based on the identifiedimpacts and regulatory requirements, the Group will refer the issue to the Technical Subcommittee.

The State Department of Transportation will identify wetland resources that may be impactedand contact the Technical Subcommittee if the resources include any of the following: "navigablewaters; wetlands exempted from Corps regulatory authority but subject to review under ExecutiveOrder 11990; and wetland habitats containing threatened or endangered species." Following wetlandresource identification by the state agency, the Technical Subcommittee, which is composed oftechnical representatives from federal and state agencies, determines "the extent, functions andvalues of all wetlands potentially impacted." After these determinations are made, the Subcommitteerecommends alternatives and mitigation options, including avoidance and minimization. If there isno final agreement among the representatives of the Technical Subcommittee, the issues arereferred back to the Interagency Wetlands Group. The legally defined lead agency has theresponsibility to finalize a decision.

The Technical Subcommittee will review mitigation work and advise the state transportationagency when it the mitigation project is "satisfactorily completed." The Subcommittee will ensurethat a Project Wetland Resource Inventory/Impacts Assessment is written and kept on record foreach project and available for use in project design and development.

A national monitoring and maintenance policy has not yet been developed by FHWA. Whilethe goals of mitigation are to avoid, minimize or replace wetlands impacts, the draft guidancerecognizes that "negative or positive balances may accrue and be carried forward from year-to-year." In banks identified by the Technical Subcommittee, balances carried forward "will be directedtoward wetland replacement within a similar biotic region or geographical area."


161

U.S. Fish and Wildlife ServiceEcological Service Instructional Memorandum No. 80

Interim Guidance on Mitigation BankingJune 1983

The 1983 Fish and Wildlife Interim Guidance ("Guidance") uses four resource categories,established in the USFWS 1981 mitigation policy, to establish a mitigation banking policy. TheGuidance establishes the types of mitigation allowed for each category and general conditions forconsideration of mitigation banking. In brief, resource 1 includes wetlands of highest habitat valuegrading to resource 4, wetlands of minor habitat value.

The Guidance also establishes that "all losses must be unavoidable and necessary" and "allon-site mitigation alternatives must be pursued first." There must be an ability to acquire the site by"easement, fee title or legal agreement" and site management must increase the naturally occurringhabitat value of the site.

For Resource Category 1, the mitigation goal is "prevention of all existing habitat value loss."Mitigation banking is "not an appropriate option." The goal of Resource Category 2 is "no net lossof in-kind habitat value." Following sequencing, in-kind mitigation is required. Habitats must be inthe same ecoregion, habitat type and the same State as impacts.

The goal of Resource Category 3 is "no net loss of habitat value and minimization of loss ofin-kind habitat value." Out-of kind mitigation is allowed but in-kind is the first priority and banks mustbe in the same ecoregion and State as impacts are.

The goal of Resource Category 4 is to minimize habitat value loss. In-kind mitigation is stillthe first priority but "dissimilar mitigation activities may be acceptable in cases of unavoidablelosses."

Under the Interim Guidance, the Fish and Wildlife Service (FWS) will formulate strategies "toarrest habitat deterioration, and restore and enhance habitat value." The development entity isrequired to implement this strategy in advance of project construction. The amount of mitigationrequired is determined by a HEP analysis or FWS-accepted equivalent habitat based analysis of theareas impacted and the sites selected for mitigation.

Credits may be withdrawn against a development proposal as long as the proposed habitathas either the equivalent in-kind habitat value or the Service or state determines that it has the sameor greater out-of-kind value. Credits will generally be effective in perpetuity and at least effective forthe life of the bank. Under this Guidance, the FWS does not accept financial contribution to a trustfund for future land acquisition and management as mitigation banking. Simple purchase of habitatis also not acceptable "unless loss avoidance can be unquestionably demonstrated." For bankmanagement, the Guidance encourages setting up either an interagency team to approve and vetobank transactions or establishing a third party banker, as in public trust property cases.

162

BLANK PAGE

163

WETLAND MITIGATIONBANKING BIBLIOGRAPHY

A. Mitigation Banking Generally

Anderson, Robert and Mark Rockel. April 1991. Economic Valuation of Wetlands:Discussion Paper #065. American Petroleum Institute, Washington, D.C. 57 pp.

Association of State Wetland Managers. 1992. National Wetland Symposium. EffectiveMitigation: Mitigation Banks and Joint Projects in the Context of Wetland Management Plans.Palm Beach Gardens, Florida, June 24 - 27, 1992. 93 pp. plus bibliography.

Anderson, Robert and Robert DeCaprio. 1992. Banking on the Bayou. National WetlandsNewsletter 14(1):10.

Bierly, Ken. 1987. Oregon Mitigation Banking. In Proceedings, Northwest Wetlands: WhatAre They? For Whom? For What?, Seattle, Washington. Institute for Environmental Studies,University of Washington.

Boesch, Russell. 1987. Mitigation Banking: A Balance of Interests. In Coastal Zone:Proceedings of the 5th Symposium on Coastal and Ocean Management, Orville T. Magoon,Hugh Converse, Dallas Miner, L. Thomas Tobin, Delores Clark and George Domurat (eds.);pp. 2516 - 2529. Seattle, Washington: American Society of Civil Engineers, New York, NewYork.

Brady, John. 1990. Mitigation Damage to Wetlands in Regulatory Programs and WaterResource Projects. 41 Mercer L. Rev. 893-991.

Brown, James D., David M. Soileau and R. Wilson Laney. 1986. Mitigation Banking in theSoutheast. In Proceedings, Southeastern Workshop on Aquatic Ecological Effects of PowerGeneration, Kumar Mahadevan, Rhonda K. Evans, Paul Behrens, Thomas Biffar andLawrence Olsen (eds.); pp. 455 - 475. Report Number 124. Sarasota, Florida, December 3 -5, 1986: Mote Marine Laboratory.

Castelle, A. J., S. Luchessa, C. Conolly, M. Emers, E. D. Metz, S. Meyer and M. Witter. March 1992. Wetlands Mitigation Banking. Report prepared by Adolfson Associates, Inc.,Herrera Environmental Consultants, Inc. and W & H Pacific, Inc., for Shorelands and CoastalZone Management Program, Washington State Department of Ecology, Olympia, Washington.Publication Number 92-12. 37 pp. plus appendices.

Wetland MitigationBanking Bibliography

164

Clark, Darryl. 1990. Mitigation Banking in Coastal Louisiana: General Banking Proceduresand MOA Provisions. Paper presented by Louisiana Department of Natural Resources, BatonRouge, at State Wetland Managers Conference, Jackson, Mississippi. April 1990. (Excerpts.)

Comiskey, J. J. and Eugene Z. Stakhiv. 1983. Applications of Mitigation Banking to U.S.Army Corps of Engineers Programs. Draft report submitted by U.S. Army Corps of Engineers,Water Resources Support Center, Institute for Water Resources.

Dunham, Fred O. February 1986. Mitigation Banking: A State Perspective. In Proceedingsof the National Wetland Assessment Symposium, Jon A. Kusler and Patricia Riexinger (eds.);pp. 257 - 259. Technical Report Number 1. Portland, Maine, June 17 - 20, 1985: Associationof State Wetland Managers.

DuPriest, Douglas M. and Jon Christenson. 1988. Constraints on Mitigation Banking:Oregon's Mitigation Banking Act of 1987. National Wetlands Newsletter 10(6):9-11.

Grenell, Peter. May 1988. The Coastal Conservancy's Emerging Role in Shaping WetlandMitigation Approaches: Standards and Criteria. In Proceedings of the National WetlandSymposium: Mitigation of Impacts and Losses, Jon A. Kusler, Millicent L. Quammen and GailBrooks (eds.); pp. 99 - 102. Technical Report Number 3. New Orleans, Louisiana, October8 - 10, 1986: Association of State Wetland Managers.

Grenell, Peter and Melanie Denninger. June 1992. Mitigation Banks and Joint Projects. California State Coastal Conservancy, Oakland, California. 19 pp.

Haynes, William J. II and Royal C. Gardner. May 1993. "The Value of Wetlands asWetlands: The Case for Mitigation Banking." Environmental Law Reporter 23(5):10261 -10265.

Heagerty, Daniel D. and Michael O. Concannon. April 1988. Mitigation Banking:Investments for Public and Private Benefits. In Proceedings of a Conference: Increasing OurWetland Resources, John Zelazny and J. Scott Feierabend (eds.); pp. 325 - 326. Washington,D.C., October 4 - 7, 1987: National Wildlife Federation.

Jensen, Meg. 1987. Mitigation Banks: An Alternative to Traditional Mitigation Techniques.Bureau of Land Management, Anchorage, Alaska. 18 pp. plus appendices.

Juneau (AK), City and Borough of, Department of Community Development. May 1989. City and Borough of Juneau Wetlands Management Plan. Public Hearing Draft. Mitigationbanking:pp. 73 - 76; wetlands ordinances for mitigation banking: pp. 51 -55 (Appendix A).


165

Kelley, Laura. 1992. Mitigation Banking: A Potential Tool for Port Planners. Master ofMarine Affairs Thesis, University of Rhode Island, Providence, Rhode Island. 156 pp.

King, Dennis M. 1992. Avoiding Another Taxpayer Bailout. National Wetlands Newsletter14(1):11-12.

Kusler, Jon. 1992. The Mitigation Banking Debate. National Wetlands Newsletter 14(1):4.

Lewis, Roy R. 1992. Why Florida Needs Mitigation Banking. National Wetlands Newsletter14(1):7.

Maddox, R. D. 1986. Estuarine Mitigation Banking: A Chance for Predictability. Master ofMarine Affairs Thesis, University of Washington, Seattle, Washington. 202 pp.

Marsh, Lindell L. and Dennis R. Acker. 1992. Mitigation Banking on a Wider Plane. National Wetlands Newsletter 14(1):8-9.

Niedzialkowski, Diane M. and John A. Jaksch. 1989. Wetlands Mitigation Banking as anInnovative Approach to Wetlands Regulation. In Freshwater Wetlands and Wildlife, R. R.Sharitz and J. W. Gibbons (eds.); pp. 1087 - 1097. DOE Symposium Series Number 61.Perspectives on Natural, Managed and Degraded Ecosystems Symposium, Charleston, SouthCarolina, March 24 - 27, 1986: Savannah River Ecology Lab, Aiken, South Carolina.

Reppert, R. July 1992. Wetlands Mitigation Banking Concepts. IWR Report 92-WMB-1. FortBelvoir, Virginia: U.S. Army Corps of Engineers Water Resources Support Center, Institute forWater Resources.

Riddle, Elizabeth P. 1986. Wetland Mitigation Banks: What They Are. California CoastalConservancy, Oakland, California.

Riddle, Elizabeth P. May 1988. Mitigation Banks: Unmitigated Disaster or Sound Investment? InProceedings of the National Wetland Symposium: Mitigation of Impacts and Losses, Jon A.Kusler, Millicent L. Quammen and Gail Brooks (eds.); pp. 353 - 358. Technical ReportNumber 3. New Orleans, Louisiana, October 8 - 10, 1986: Association of State WetlandManagers.

Riddle, Elizabeth P. and Melanie F. Denninger. February 1986. Coastal Wetlands MitigationBanks: The California State Coastal Conservancy Experience. In Proceedings of the NationalWetland Assessment Symposium, Jon A. Kusler and Patricia Riexinger (eds.); pp. 260 - 264.Technical Report Number 1. Portland, Maine, June 17 - 20, 1985: Association of StateWetland Managers.


166

Russell, Steve C. April 1983. Virginia Develops Wetland Bank. AASHTO Quarterly, pp. 16 - 17.

Russell, Steve C. April 1985. Update on Wetland "Banking" in Virginia. AASHTOQuarterly, p. 15.

Shabman, Leonard, Dennis King and Paul Scodari. May 1993. Making Wetlands MitigationWork: The Credit Market Alternative. Staff Paper SP-93-5, Department of Agricultural andApplied Economics, Virginia Tech.

Shirey, P. 1991. Regional Plans and Mitigation Banking: An Oregon Example. Presented atWetlands in Washington Conference. Eau Claire, Wisconsin. Professional EducationSystems, Inc.

Short, Cathleen. July 1988. Mitigation Banking. Biological Report Number 88(41). U.S.Fish and Wildlife Service, Research and Development, Washington, D.C. 97 pp. plusappendix.

Short, Cathleen. 1988. Wetland Creation and Restoration Efforts Associated with MitigationBanks. In Proceedings of the Fifteenth Annual Conference on Wetlands Restoration andCreation, F.J. Webb (ed.); Tampa, Florida.

Silvers, Matt and Don Linke. 1990. Mitigation Banking: Its Viability as a MitigationMechanism. Unpublished paper, Tulane Law School, New Orleans, Louisiana. 38 pp.

Soileau, David M., David W. Fruge and James D. Brown. 1985. Mitigation Banking: A

Mechanism for Compensating Unavoidable Fish and Wildlife Habitat Losses. NationalWetlands Newsletter 7(3):11-13.

Tettemer, John M. May 1988. Mitigation Banking: Our Best Chance for Long-Term WetlandsPreservation and Management. In Proceedings of the National Wetland Symposium:Mitigation of Impacts and Losses, Jon A. Kusler, Millicent L. Quammen and Gail Brooks (eds.);pp. 350 - 352. Technical Report Number 3. New Orleans, Louisiana, October 8 - 10, 1986:Association of State Wetland Managers.

U.S. Department of Transportation, Federal Highway Administration. 1992. Proceedingand Summary of Findings, FHWA Wetlands Mitigation Banking Workshop. Alexandria,Virginia, May 5 - 7, 1992.


167

World Wildlife Fund. 1992. Mitigation Banking: The Pros and Cons. In Statewide WetlandsStrategies: A Guide to Protecting and Managing the Resource. Island Press, Washington,D.C. 268 pp.

Zagata, Michael D. 1985. Mitigation By "Banking" Credits - A Louisiana Pilot Project. National Wetlands Newsletter 7(3):9-11.

Zagata, Michael D. 1988. Mitigation Banking as an Incentive to Industry and to Fish andWildlife Agencies. In Transactions of the Fifty-Third North American Wildlife and NaturalResources Conference, pp. 165 - 175.

B. Site-Specific Banking References

Clark, Darryl, J. Barras and M. Swan. December 1989. Land Loss and Habitat Change inthe Fina LaTerre Mitigation Bank Management Plan from 1984 to 1988 Using ClassifiedLandsat Satellite Imagery with a Comparison Between Earlier Classifications andPhotointerpreted Digital Data. Report prepared by Wetland Resources Section, InformationServices Section, Coastal Management Division, Louisiana Department of Natural Resources,Baton Rouge, Louisiana, for NOAA Office of Coastal Resources Management. 28 pp.

Clark, Darryl R. 1989. A Review of the Fina LaTerre Management Area, Theriot,Louisiana, with Recommendations for Management. Miscellaneous paper, CoastalManagement Division, Louisiana Department of Natural Resources, Baton Rouge. 13 pp.

Eliot, W. 1985. Implementing Mitigation Policies in San Francisco Bay: A Critique. California State Coastal Conservancy, Oakland, California. 36 pp.

Heagerty, Daniel D. 1987. Major Offsite Mitigation: Batiquitos Lagoon. In Coastal Zone:Proceedings of the 5th Symposium on Coastal and Ocean Management, Orville T. Magoon,Hugh Converse, Dallas Miner, L. Thomas Tobin, Delores Clark and George Domurat (eds.);pp. 2544 - 2548. Seattle, Washington. American Society of Civil Engineers, New York, NewYork.

Humboldt Bay Working Group. 1984. Humboldt Bay Wetland Mitigation Needs andRestoration Goals Study. California Coastal Conservancy, Oakland, California. * pp.

Isber, Caroline and Robert L. Kerr. 1988. Wetlands Mitigation Banking: A Study of theDevelopment and Implementation of the Bracut Marsh Mitigation Bank. Report prepared byKerr & Associates, Inc., for Regulatory Reform Staff, Office of Policy, Planning andEvaluation, Environmental Protection Agency, Washington, D.C. 65 pp. plus appendices.


168

Josselyn, M. 1988. Bracut Wetland Mitigation Bank, Biological Monitoring: 1987, FinalReport. Report prepared by Romberg Tiburon Center for Environmental Studies, SanFrancisco State University, Tiburon, California, for California State Coastal Conservancy,Oakland, California.

Kerr, R. and Associates, Inc. 1987. Wetlands Mitigation Banking: A Study of theDevelopment and Implementation of the Tenneco - LaTerre Bank. Report submitted toRegulatory Reform Staff, Office of Policy, Planning, and Evaluation, Environmental ProtectionAgency, Washington, D.C. 107 pp. plus appendices.

Knatz, Geraldine. 1987. Offsite Habitat Mitigation Banking: The Port of Long BeachExperience. In Coastal Zone: Proceedings of the 5th Symposium on Coastal and OceanManagement, Orville T. Magoon, Hugh Converse, Dallas Miner, L. Thomas Tobin, DeloresClark and George Domurat (eds.); pp. 2530 - 2543. Seattle, Washington: American Societyof Civil Engineers, New York, New York.

Laney, R. Wilson, Dennis L. Stewart, Gerald R. McCrain, Carol Mayes and V. C. Bruton. 1988. Final Report on the North Carolina Department of Transportation Company SwampMitigation Bank, Bertie County, North Carolina. Report submitted to U.S. Department of theInterior, Fish and Wildlife Service, Division of Ecological Services, Raleigh Field Office,Raleigh, North Carolina. 37 pp. plus appendices.

Marcus, Laurel. 1987. Wetland Restoration and Port Development: The Batiquitos LagoonCase. In Coastal Zone: Proceedings of the 5th Symposium on Coastal and OceanManagement, Orville T. Magoon, Hugh Converse, Dallas Miner, L. Thomas Tobin, DeloresClark and George Domurat (eds.); pp. 4152 - 4165 . Seattle, Washington: American Societyof Civil Engineers, New York, New York.

McCrain, Gerald R. 1992. Habitat Evaluation Procedures (HEP) Applied to MitigationBanking in North Carolina. J. Environ. Mgmt. 35:153-162.

Schonholtz, Robert. 1988. San Joaquin Marsh Mitigation Program: An Example of UrbanWetland Management on a Large Scale. In Proceedings of the National Wetland Symposium:Urban Wetlands, Jon A. Kusler, Sally Daly and Gail Brooks (eds.); pp. 336 - 339. Oakland,California, June 26 - 29, 1988: Association of Wetland Managers, Inc.

Simmering, Richard, Billy Craft, John Woodard and Darryl Clark. September 1989. AnEvaluation of the Tenneco LaTerre Mitigation Bank Management Plan. In Proceedings of aSymposium, Marsh Management in Coastal Louisiana: Effects and Issues, Walter G. Duffyand Darryl Clark (eds.); pp. 319 - 329. Biological Report Number 89(22). Baton Rouge,Louisiana, June 7 - 10, 1988: U.S. Department of the Interior, Fish and Wildlife Service andLouisiana Department of Natural Resources.


169

Soileau, D.M. June 1984. Final Report on the Tenneco LaTerre Corporation MitigationBanking Proposal, Terrebonne Parish, Louisiana. U.S. Department of the Interior, Fish andWildlife Service, Division of Ecological Services, Lafayette, Louisiana. 23 pp. plus appendices.

U.S. Department of Agriculture, Soil Conservation Service. 1988. Second Annual TennecoLaTerre Marsh Management Monitoring Report. Report submitted to Coastal ManagementDivision, Louisiana Department of Natural Resources, Baton Rouge, Louisiana. 63 pp.

U.S. Department of Agriculture, Soil Conservation Service. 1989. Third Annual FinaLaTerre Marsh Management Monitoring Report, 1989. Report Number 21913-89-15,submitted to Coastal Management Division, Louisiana Department of Natural Resources,Baton Rouge, Louisiana. 112 pp.

U.S. Department of the Interior, Fish and Wildlife Service. 1987. Wetlands MitigationBanking in the Municipality of Anchorage. Draft report prepared by U.S. Fish and WildlifeService, Anchorage, Alaska, for municipality of Anchorage and Anchorage WetlandsManagement Task Force. 16 pp.

U.S. Department of the Interior, Fish and Wildlife Service. 1987. Wetlands MitigationBanking in the Municipality of Anchorage. Draft report prepared by U.S. Fish and WildlifeService, Anchorage, Alaska, for municipality of Anchorage and Anchorage WetlandsManagement Task Force. 16 pp.

Winzler and Kelly Engineers. 1980. Bracut Marsh Feasibility Study. California StateCoastal Conservancy, Oakland, California.

170

BLANK PAGE

171

SELECTED SUPPLEMENTALBIBLIOGRAPHY

A. Mitigation Generally

Ehrenfeld, David. 1992. "Managed Systems," in: Ecology, Ethics and Environment: The BrokenCircle, ed by Stephen Kellert and Herbert Bormann. Yale University Press.

Erwin, Kevin L. 1991. An Evaluation of Wetland Mitigation Within the South Florida WaterManagement District, Volume 1. Kevin L. Erwin Consulting Ecologist, Inc., Fort Myers, Florida.

Garbisch, Edgar W. 1985. Compensating for Wetland Losses in the Mitigation Process. In:Proceedings of a Conference: Wetlands of the Chesapeake. Easton, MD, 1985: MarylandDepartment of Natural Resources.

Gosselink, James; Lyndon Lee and Thomas Muir, eds. 1990. Ecological Processes andCumulative Impacts Illustrated by Bottomland Hardwood Wetland Ecosystem. LewisPublishers.

Kusler, Jon A., Millicent L. Quammen and Gail Brooks (eds.). April 1988. Proceedings of theNational Wetland Symposium: Mitigation of Impacts and Losses. Technical Report Number3. New Orleans, Louisiana, October 8 - 10, 1986: Association of State Wetland Managers,Berne, N.Y.

Redmond, Ann. 1990. Report on Mitigation in Florida State Permitting Efforts. Florida Departmentof Environmental Regulation, Tallahassee, Florida.

Salvesen, David. 1990. Wetlands: Mitigation and Regulating Development Impacts. The UrbanLand Institute. Washington, D.C. 117 pp.

Zelaney, J., S. Feierabend (eds.). 1988. Increasing Our Wetland Resources. National WildlifeFederation, Washington, D.C.

B. The Regulatory Context for Mitigation Banking

Conservation Foundation. 1988. Protecting America's Wetlands: An Action Agenda. Final reportof the National Wetlands Policy Forum. Conservation Foundation/World Wildlife Fund,Washington, D.C.

Selected SupplementalBibliography

172

Council on Environmental Quality. 1989. Wetlands and Wildlife. In Environmental Trends, Chapter5. CEQ, Washington D.C.

Domestic Policy Council Task Force on Wetlands. August 1991. President's Implementation Plan.Available through EPA National Wetlands Protection Hotline.

Domestic Policy Council Task Force on Wetlands. November 1991. President's ImplementationPlan. Available through EPA National Wetlands Protection Hotline.

Environmental Law Reporter. 1993. Wetlands Deskbook. Environmental Law Institute,Washington, D.C.

Kentula, M. E., J. C. Sifneos, J. W. Good, M. Rylko and K. Kunz. 1992. Trends and Patterns inSection 404 Permitting Requiring Compensatory Mitigation in Oregon and Washington.Environmental Management 16(1):109-119.

Kentula, M. E., et al. Submitted. Trends and Patterns in §404 Permitting in Oregon andWashington. Environmental Management.

Krucynski, W. L. 1990. Mitigation and the Section 404 Program. A Perspective. In WetlandCreation and Restoration: The Status of the Science, Jon A. Kusler and M.E. Kentula (eds.);pp. 555 - 570. Island Press, Washington, D.C.

Sifneos, J. C., E. W. Cake, Jr. and M. E. Kentula. June 1992. Effect of Section 404 Permitting onFreshwater Wetlands in Louisiana, Alabama and Mississippi. Wetlands 12(1):28-36.

Steiner, F., S. Pieart and E. Cook. 1991. The Interrelationship Between Federal and StateWetlands and Riparian Protection Programs. Arizona State University.

Strand, M. N. April, May 1993. "Federal Wetlands Law," Environmental Law Reporter23(4,5):10185-10214, 10284-10316.

Tripp, J. and McHerz. 1988. Wetland Preservation and Restoration: Changing Federal Priorities.Va. J. Natural Resources Law 7:221-275.


173

Environmental Protection Agency and U.S. Department of Army. 1990. Memorandum ofAgreement Between the Environmental Protection Agency and the Department of ArmyConcerning the Determination of Mitigation Under the Clean Water Act Section 404 (b)(1)Guidelines. U.S. Government Printing Office, Washington, D.C.

Want. 1991. Law of Wetlands Regulation. Clark Boardman Environmental Law Series. New York,N.Y.

C. Restoration and Creation

Adamus, P. R. 1988. Criteria for Created or Restored Wetlands. In The Ecology andManagement of Wetlands Volume II: Management, Use and Value of Wetlands, D. D. Hook,W. H. McKee, Jr., H. K. Smith, J. Gregory, V. G. Burrell, Jr., M. R. DeVoe, R. E. Sojka, S.Gilbert, R. Banks, L. H. Stolzy, C. Brooks, T. D. Matthews, and T. H. Shear (eds.). TimberPress, Portland.

Berger, J. J. (ed.). 1990. Environmental Restoration Science and Strategies for Restoring theEarth. Island Press, Washington, D.C.

Cairns, J., Jr. (ed.). 1988. Rehabilitating Damaged Ecosystems, pp. 192 - 222. Volumes I-II. CRCPress, Inc., Boca Raton, Florida.

Cone, Marla. 1992. "Many New Wetlands Wither Away in Neglect." Los Angeles Times, August2, 1992.

D'Avanzo, C. 1990. Long-Term Evaluation of Wetland Creation Projects. In Wetland Creation andRestoration: The Status of the Science, Jon A. Kusler and M. E. Kentula (eds.); pp. 487 - 496.Island Press, Washington, D.C.

Dial, R. S. and D. R. Deis. 1986. Mitigation Options for Fish and Wildlife Resources Affected byPort and Other Water Dependent Developments in Tampa Bay, Florida. Biological ReportNumber 86(6). U.S. Fish and Wildlife Service.

Garbisch, E. W. 1986. Highway and Wetlands: Compensating Wetland Losses. Report NumberFHWA-IP-86-22. U.S. Department of Transportation, Federal Highway Administration.

Hammer, Donald. 1992. Creating Freshwater Wetlands. Lewis Publishing, Chelsea, Michigan.


174

Kentula, M. E. 1990. Wetland Creation and Restoration: EPA's Research Program and anExtensive Sampling Approach to Comparing Created and Natural Wetlands. In ProceedingsSociety of Ecological Restoration Annual Meeting; pp. 304 - 310. Oakland, California, 1989.

King, Dennis M. Summer 1991. Costing Out Restoration. In Restoration & Management Notes9(1):15-21. Ed. University of Wisconsin Arboretum, serving the Society for EcologicalRestoration.

King, Dennis M. 1991. Wetland Creation and Restoration: An Integrated Framework ForEvaluating Costs, Expected Results and Compensation Ratios. Prepared by ChesapeakeBiological Laboratory, Center for Environmental and Estuarine Studies, University of Maryland,Solomons, Maryland, for Kenneth Adler, U.S. Environmental Protection Agency, Office ofPlanning and Evaluation.

Kusler, Jon A. and M. E. Kentula (eds.). 1990. Wetland Creation and Restoration: The Status ofthe Science, Volumes I & II. Island Press, Washington, D.C.

Lewis, R. R. (ed.). 1982. Creation and Restoration of Coastal Plant Communities. CRC Press,Inc., Boca Raton, Florida.

McCreary, S. 1982. Legal and Institutional Constraints and Opportunities in WetlandsEnhancement in California. In Wetland Restoration and Enhancement in California, M.Josselyn (ed.); pp. 39 - 52. Report T-CSGCP-007. California Sea Grant College Program,University of California, La Jolla, CA.

National Research Council Report. 1992. Restoration of Aquatic Ecosystems: Science,Technology and Public Policy. National Academy of Science, Washington, D.C.

Odum, W. E. 1988. Predicting Ecosystem Development Following Creation and Restoration ofWetlands. In: Proceedings of a Conference: Increasing Our Wetland Resources, John Zelaznyand J. Scott Feierabend (eds.); pp. 67 - 70. Washington, D.C., October 4 - 7, 1987: NationalWildlife Federation.

Reimold, R. J. and S. A. Cobler. 1986. Wetlands Mitigation Effectiveness. EPA Contract Number68-04-0015, Metcalf and Eddy, Inc., Wakefield, Massachusetts.

Schneller-McDonald, Karen, Lee S. Ischinger and Gregor T. Auble. 1990. Wetland Creation andRestoration: Description and Summary of the Literature. Biological Report Number 90(3). U.S.Fish and Wildlife Service, Washington, D.C.


175

Webb, F. J., Jr. (ed.). 1991. Proceedings of the 18th Annual Conference on Wetlands Restorationand Creation. Hillsborough Community College, Tampa, Florida.

Willard, D. E. and A. K. Hillard. 1990. Wetland Dynamics: Considerations for Restored andCreated Wetlands. In Wetland Creation and Restoration: The Status of the Science, Jon A.Kusler and M. E. Kentula (eds.); pp. 459 - 466. Island Press, Washington, D.C.

Wolf, R. B., L. C. Lee and R. R. Sharitz. 1986. Wetland Creation and Restoration in the UnitedStates from 1970 to 1985: an Annotated Bibliography. Wetlands 6(1):1-88.

Zedler, Joy B. 1990. A Manual for Assessing Restored and Natural Coastal Wetlands, withExamples from Southern California. Pacific Estuarine Research Laboratory, BiologyDepartment, San Diego State University.

D. Wetlands Valuation

Abbruzzese, B., S. G. Leibowitz and R. Summer. 1990. Application of the Synoptic Approach toWetland Designation. EPA/600/3-90/066. U. S. EPA Environmental Research Laboratory,Corvallis, Oregon.

Adamus, P. R., E. J. Clairain. 1988. "Wetland Techniques Released." National WetlandsNewsletter 10(4):2.

Adamus, P. R., E. J. Clairain, Jr., R. D. Smith and R. E. Young. 1987. Wetland EvaluationTechnique (WET). Volume II: Methodology. U.S. Army Corps of Engineers WaterwaysExperiment Station, Vicksburg, MS. 178 pp.

Adamus, Paul R. and L. T. Stockwell. March 1983. A Method for Wetland Functional Assessment.Volume I: Critical Review and Evaluation Concepts, and Volume II: FHWA AssessmentMethod. Report Numbers FHWA-IP-82-23 & -24. Offices of Research, Development, andTechnology, Federal Highway Administration, U.S. Department of Transportation, Washington,D.C.

Amacher, Gregory S., Richard J. Brazee, Jonathan W. Bulkley and Russell A. Moll. April 1988. An Interdisciplinary Approach to Valuation of Michigan Coastal Wetlands. School of NaturalResources, University of Michigan, Ann Arbor, MI. 61 pp. plus appendices.

Amacher, Gregory S., Richard J. Brazee, Jonathan W. Bulkley and Russell A. Moll. June 1989. Application of Wetland Valuation Techniques: Examples from Great Lakes Coastal Wetlands.School of Natural Resources, University of Michigan, Ann Arbor, Michigan. 30 pp. plusappendices.


176

Anderson, R. and Mark Rockel. 1991. Economic Valuation of Wetlands. American PetroleumInstitute Discussion Paper # 065. 61 pp.

Arkansas Highway and Transportation Department. 1992. Wetland Banking Tract Proposal, TriceTract.

Bartoldus, Candy C., E. W. Garbisch and M. L. Kraus. 1992. Wetland Replacement EvaluationProcedure (WREP) Operational Draft. Environmental Concern, Inc. 155 pp. plus appendices.

Castelle, Andrew J., et al. February 1992. Wetland Mitigation Replacement Ratios: An AnnotatedBibliography. Report prepared by Adolfson Associates, Inc., for Shorelands and Coastal ZoneManagement Program, Washington State Department of Ecology, Olympia, Washington.Publication Number 92-09. 41 pp.

Castelle, Andrew J., et al. February 1992. Wetland Mitigation Replacement Ratios: DefiningEquivalency. Report prepared by Adolfson Associates, Inc., for Shorelands & Coastal ZoneManagement Program, Washington State Department of Ecology, Olympia, Washington.Publication Number 92-8. 116 pp.

Hayden-Wing, Larry D., S. Tessman and R. G. Schreibeis. 1988. A Waterfowl Habitat Model forEvaluating Wetland Impacts in Accordance with Section 404 of the Clean Water Act.Wyoming Game and Fish Department.

King, Dennis M. September 1990. Wetland Creation and Restoration: An Integrated Frameworkfor Evaluating Costs and Determining Compensation Ratios. Draft report prepared by Kingand Associates, for U.S. Environmental Protection Agency, Office of Policy Planning andEvaluation. 67 pp.

Larson, Joseph S., Paul R. Adamus and Ellis J. Clairain, Jr. October 1989. Functional Assessmentof Freshwater Wetlands: A Manual and Training Outline. World Wildlife Fund for Nature, theEnvironmental Institute and University of Massachusetts at Amherst. Publication Number89-6. 62 pp.

Lawless, William F. 1991. Memorandum for Regulatory Staff: WET II Assessment Methodology.U. S. Army Corps of Engineers New England Division. July 2, 1991.

Minnesota Department of Transportation. 1987. Technical Memorandum - Guidelines forInterpretation of Wetland Habitat Mitigation Banking. Tech. Memorandum No. 87-28-ENV-2.


177

Marble, Anne D. 1992. A Guide to Wetland Functional Design. Lewis Publishers, Inc. Ann Arbor,MI. 222 pp.

Mitchell, Lloyd C., et al. 1991. Wetland Value Assessment Methodology and Community Models.Environmental Work Group, Technical Committee, Coastal Wetland Planning, Protection andRestoration Act. U.S. Fish and Wildlife Service, Lafayette, Louisiana.

Oregon Division of State Lands. August 1986. Astoria Airport Mitigation Bank, Astoria, Oregon:Modified Habitat Evaluation Process (HEP). 21 pp. plus appendices.

Oregon Division of State Lands. 1984. Estuarine Mitigation: The Oregon Process.

Reppert, R. T., Wayne Sigleo, Eugene Stakhiv, Larry Messman and Caldwell Meyers. February1979. Wetland Values: Concepts and Methods for Wetlands Evaluation. Research report79-RI. Report prepared by USACE, Water Resources Support Center, Institute for WaterResources, for U.S. Army Corps of Engineers. 109 pp.

Sather, J. Henry and Jessop Low (eds.). 1990. Great Basin/Desert and Montane RegionalWetland Functions. Proceedings of a Workshop. Publication Number 90-4. Logan, Utah,February 27 - 28, 1986: The Environmental Institute. 153 pp.

Scodari, Paul Francis. November 1992. Wetland Management Benefits. Draft Report. Preparedfor the U.S. Environmental Protection Agency, Office of Policy, Planning and Evaluation,Economic Analysis Research Branch. 73 pp.

Scodari, Paul Francis. 1990. Wetlands Protection: The Role of Economics. Environmental LawInstitute Monograph. 89 pp. Environmental Law Institute, Washington, D.C.

Tessman, Stephen A. 1989. SUPERBOG and SUPERBOG II Instructional Documentation. Wyoming Game and Fish Department.

U.S. Army Corps of Engineers, Lower Mississippi Valley Division. August 1980. A HabitatEvaluation System for Water Resources Planning. 89 pp. plus appendices.

U.S. Army Corps of Engineers, St. Paul District. September 1988. The Minnesota WetlandEvaluation Methodology for the North Central United States. 97 pp. plus appendices.


178

U.S. Department of the Interior, Fish and Wildlife Service, Division of Ecological Services. 1980-81.Ecological Services Manual: Habitat Evaluation Procedures. Fish and Wildlife Service,Arlington, VA.

U.S. Environmental Protection Agency, Region V. September 1984. Technical Report: LiteratureReview of Wetland Evaluation Methodologies. 120 pp. plus appendices. EPA Region V,Chicago, IL.

U. S. Fish and Wildlife Service. 1980. Habitat Evaluation Procedures Manual (102 ESM). Washington, D. C.

World Wildlife Fund. 1992. "Review of Sources and Methods." In Statewide Wetland Strategies:A Guide to Managing the Resource. Island Press, Washington, D. C.

Zedler, Joy B., Rene Langis, John Cantilli, Magaret Zalejko, Kendra Swift and Sue Rutherford. 1988. Assessing the Functions of Mitigation Marshes in Southern California. In Proceedingsof the National Wetland Symposium: Urban Wetlands, Jon A. Kusler, Sally Daly and GailBrooks (eds.); pp. 323 - 330. Oakland, California, June 26 - 29, 1988: Association of StateWetland Managers, Berne, N.Y.

Zedler, Joy B. 1988. Why it's So Difficult to Replace Lost Wetland Functions. In Increasing OurWetlands Resources, Zelazny and Feierabend (eds.). National Wildlife Federation,Washington, D.C.

REPORT DOCUMENTATION PAGE Form Approved

OMB No. 0704-0788

Public reporting burden for this collection of Information IS ~tlmated to average 1 hour per response. mcluding the time tor rrviewlng instructions, searching eXisting data 5Ourc~. gathering and ma'nta~nln9 the data needed. and completing and reviewing the collection of information . Send comments ':1arding this burden est imate or any other aspect of this collection of informatIon, Including suggestions for reducing thiS burden . to Washington Headquarters ServICes. Directorate or Information Operations and Reports, 1215 Jefferson DavIS Highway. SUite 1204. Arlington. VA 22202-4302. and to the Office of Management and Budget. Paperwork Reduction P'oJect (0704-0 188). Wa,hington. DC 20503 .

1. AGENCY USE ONLY (Leave blank) 12. REPORT DATE 13. REPORT TYPE AND DATES COVERED February 1994

4. TITLE AND SUBTITLE 5. FUNDING NUMBERS National Wetland Mitigation Banking Study: Wetland Mitigation Banking

6. AUTHOR(S) Environmental Law Institute

7. PERFQRMING ORGANIZATION NAME(S) A~D ADDRESS(ES) 8. PERFORMING ORGANIZATION Envlronmental Law Instltute REPORT NUMBER 1616 P Street, NW Suite 200 Washington, DC 20036

9. SPONSORING / MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSORING / MONITORiNG USACE, Water Resources Support Center AGENCY REPORT NUMBER

Institute for Water Resources IWR Policy Study Policy and Special Studies Division 94-WMB-6 Casey Building 7701 Telegraph Road Alexandria, VA 22315-3868

11. SUPPLEMENTARY NOTES Available from the National Technical Information Services, 5285 Port Royal Road, Springfield, VA 22161 (703) 487-4650

12b. DISTRIBUTION CODE 12a. DISTRIBUT~N / AVAILABILITY ~TATEMENT Approve for Publlc Release; unlimited

13. ABSTRACT (Maximum 200 words) This document reports wetland mitigation banking experience to date. The Environmental Law Institute conducted an inventory of banks that sup~lemented information gathered as part of the National Wetland Mitlgation Banking Study conducted by the Instltute for Water Resources (IWR).

Corps of Engineers

Wetland mitigation banking, although practiced for more than fift e en years, is a concept still in its infancy. Existing mitigation banks were found to represent a variety of institutional arrangements , although single-client public works banks (mostly sponsored by sta t e departments of transportation ) are the most common at present . At t he time this report was prepared, there was little useful exper i ence with publi c general use, and private entrepreneuria l banks.

14. SUBJECT TERMS

Wetland mitigation banking , Wetland regulation, Wetland restoration, Watershed management, Natural resources management.

17. SECURITY CLASSIFICATION 18. SECURITY CLASSIFICATION 19. SECURITY CLASSIFICATION OF REPORT OF THIS PAGE OF ABSTRACT

Unclassified Unclassified Unclassified NSN 7540-01 -280-5500

15. NUMBER OF PAGES 186

16. PRICE CODE

20. LIMITATION OF ABSTRACT

Unlimited Standard Form 298 (Rev. 2-89) P,e,,,,bed by ANSI std 139·18 298-t02

Documents

National Wetland Mitigation Banking Study: Wetland