Mitigation banking

Mitigation banking is a market-based system of debits and credits (used primarily in the United States as part of its "no net loss" policy) that involves restoration, creation, or enhancement of wetlands to compensate for unavoidable impacts to a wetland in another location. It involves a system of mitigation banks, sites where projects to restore, create, or enhance wetlands can be carried out in advance of impacts. The outcomes of these projects are valued through the creation of compensatory mitigation credits that can be purchased from mitigation banks to offset the negative impacts of developments or agriculture expansion on wetlands and aquatic habitats. This process is generally conducted with the aim of achieving no net loss of function and value for specific aquatic habitats, such as in terms of the biodiversity or ecosystem services provided by a wetland. Mitigation banking is a form of biodiversity banking, and a mechanism to conduct biodiversity offsetting (described by the term "compensatory mitigation" in the United States). Mitigation banking was developed in the United States with the aim of conserving wetlands (while still allowing development) by working towards a goal of "no net loss of wetlands", developing from compensatory mitigation policies under section 404 of the Clean Water Act. Since then, the concept has expanded beyond the United States and, from mitigation banking, various other forms of biodiversity banking evolved, including conservation banking and habitat banking.

The public interest is served when enforcement agencies require more habitat as mitigation, often referred to as a mitigation ratio, than is adversely impacted by management or development of nearby acreage. Wetland Mitigation Credits do not convey any interest in the real estate that hosts the mitigation bank. Wetland Credits are treated, for accounting purposes, as intangible personal property.

Terminology Mitigation banking is defined by the Natural Resources Conservation Service (a US government agency) as "restoration, creation or enhancement of wetlands for the purpose of compensating for manipulated wetlands at another location". This system uses mitigation banks - wetland areas that have been restored, established, enhanced, or preserved away from the site of impacts and set aside to compensate for future damage to wetlands. Banks can be created by bank sponsors (such as government agencies, corporations, non-profits) by making a formal agreement with the US Army Corps of Engineers that describes the plan for restoring the site and the number of credits it is expected to generate. The functions of the bank or the acres that have been restored within its "service area" (its geographical location) are quantified to determine the value of the credits sold by the bank. Where a wetland is described as "manipulated", this might mean that it has been drained, dredged, filled, levelled, or altered in some other way to allow agriculture or development to take place on the site. If manipulation of wetlands results in unavoidable adverse impacts, compensatory mitigation measures are used to offset these impacts. Unavoidable adverse impacts are negative effects on wetlands that cannot reasonably be avoided or minimised, therefore requiring compensatory mitigation. The mitigation sequence is used as a tool to guide the type and level of compensatory mitigation that will be required under the Clean Water Act. It includes the steps avoid, minimise, and compensate, requiring that avoidance and minimisation measures should be exercised before compensation. The term mitigation hierarchy may also be used and its framework has been expanded. Compensatory mitigation includes measures to restore, create, enhance, and preserve wetlands to offset unavoidable adverse impacts. It is a form of environmental mitigation and can include both on-site (on or adjacent to the site of impacts) and off-site mitigation. The measures that come under compensatory mitigation and conducted as part of mitigation banking are defined by the EPA as:

Restoration involves re-establishing wetland conditions to an area where wetland used to exist. Enhancement involves alterations to increase function and value of existing wetland. Creation involves making a new wetland or aquatic resource where one did not exist beforehand. Preservation involves permanently protecting wetlands that are considered ecologically important. This can involve physical and legal methods, such as conservation easements or title transfers. Mitigation banking is one of three main mechanisms used in the United States to carry out compensatory mitigation, in addition to in-lieu fee mitigation and permittee-responsible mitigation.

Mitigation banking in the US

Policies

In the United States, federal agencies (under section 404 of the Clean Water Act (CWA)), as well as many state and local governments, require compensatory mitigation (described as biodiversity offsetting in other countries) for the disturbance or destruction of wetland, stream, or endangered species habitat. Under the CWA, a permit is required for certain activities that impact wetlands and other aquatic habitats. To receive the permit, applicants might be required to compensate for the environmental impacts of their proposed activities, including by purchasing credits from a mitigation bank. Mitigation banking is administered and regulated by the US Environmental Protection Agency and the US Army Corps of Engineers (USACE). The USEPA identifies four components of a mitigation bank: the bank site, the bank instrument, the Interagency Review Team (IRT), and the service area.

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