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Mitigation banking

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Mitigation banking is a market-based system (used primarily in the United States) that involves restoration, creation, or enhancement of wetlands to compensate for unavoidable impacts to a wetland in another location.[1] 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.[2] 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.[3]

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.[4] It forms part of the "no net loss" policy of the United States.

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.[5]

Terminology

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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".[6]

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.[1] 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.[6]

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.[6] 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.[7] It includes the steps avoid, minimise, and compensate, requiring that avoidance and minimisation measures should be exercised before compensation.[7] The term mitigation hierarchy may also be used and its framework has been expanded.[8]

Compensatory mitigation includes measures to restore, create, enhance, and preserve wetlands to offset unavoidable adverse impacts.[9] 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:[2]

  • 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 mechanisms used in the United States to carry out compensatory mitigation, in addition to in-lieu fee mitigation and permittee-responsible mitigation.[2]

History

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1970s - 2000s

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Compensatory mitigation was developed in the United States with the aim of balancing the demand for economic development with the need to conserve wetlands.[10] This began with the Clean Water Act (CWA) in 1972.[11] Under Section 404 of the CWA, a permit from the US Army Corps of Engineers is required to conduct certain activities that may impact wetlands. The developer must submit a Public Notice to their respective district of the US Army Corps of Engineers (USACE) requesting to carry out a project and associated ecological impacts on a wetland.

Mitigation banking was developed in the United States in the 1980s as a new method for compensatory mitigation with a market-oriented, off-site approach.[10] The initial approach had also drawn criticism both from environmentalists and developers.[12]

Guidance from the US Fish and Wildlife Service in 1983 led to the establishment of the first wetland mitigation banks in the early 1980s.[13] The practice began as a way for state highway and public works departments to comply with regulations for wetland mitigation, and later entrepreneurial banks were set up to sell credits to public and private developers.[14] For example, the Fina La Terre in Louisiana, signed off in 1984 and proposed by a private company, was one of the first mitigation banks in the country.[15]

No net loss of wetlands has been established as an objective for compensatory mitigation (including mitigation banking) since a 1990 Memorandum of Agreement by the EPA and USACE.[16] No net loss (NNL) is the idea that gains in wetland function and acreage through compensatory mitigation should be equal to the losses to wetlands caused by development impacts so that there is no overall loss.[17] The idea of an NNL national policy was proposed by the National Wetlands Policy Forum in a 1988 report and taken up by Candidate George H.W. Bush during his campaign for the 1988 United States Presidential.[10]

In 1995, federal guidance governing the establishment, use and operation of mitigation banks was issued by several government agencies, including USACE, EPA, NRCS, USFWS, and NOAA (National Oceanic and Atmospheric Administration) Fisheries. This guidance defined mitigation banks and their objectives, enabling the use of mitigation banking for compensatory mitigation to meet the goal of "no net loss" of wetlands.[18]

The expansion of the new mitigation banking approach had also been further motivated by the release of several reports between 1994 and 1999 that challenged the initial on-site, project-by-project approach for compensatory mitigation.[12]

2000s and beyond

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The application of mitigation banking has been expanded beyond wetlands to include streams and other aquatic habitats.[19] This led to the creation of the first stream mitigation bank in Fox Creek, Missouri in 2000.[20] The concept has also been expanded to develop other forms of biodiversity banking, including conservation banking for endangered species in California and habitat banking in other countries. By 2001, 23 states had statutes or regulations authorising the use of mitigation banks and a further 8 had issued guidelines to govern mitigation banking.[21]

In 2008, the regulations for compensatory mitigation (which includes mitigation banking) were revised by the USACE and USEPA under the 'Compensatory Mitigation Rule'. These new federal regulations established mitigation banks as the preferred method for compensatory mitigation and also introduced ecosystem services into the standards for mitigation banking.[22]

By 2024, more than 1200 mitigation banks had been approved and were operating in the United States with a total of 750,000 credits approved across the country.[23] However, state and regional studies on wetland compensatory mitigation suggest that a significant portion of compensation sites are failing to meet administrative and ecological performance standards, according to the Environmental Law Institute.[24]

Mitigation banking in the US

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Mitigation banking was developed in the United States.

Policy

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Mitigation banking tends to be conducted with an objective of no net loss of habitat value and function.

Mitigation credits

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Taxation

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Mitigation banking beyond the US

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Further information: Biodiversity banking

The mitigation banking concept has been extended to develop other forms of biodiversity banking that are applied outside of the United States as a mechanism for biodiversity offsetting. For example, mitigation banking in the United States has been used to inform and shape biodiversity banking frameworks in Australia, Germany, New Zealand, Canada, Colombia, and Brazil.

Biodiversity banking is an umbrella term that encompasses a range of market-based systems for offsetting, including mitigation banking, conservation banking, habitat banking, and species banking. Biodiversity banking describes a market-based framework for biodiversity offsetting where offsets can be traded in the form of credits to offset negative environmental impacts of development projects or activities.[25][12]

Conservation easements

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Further information: Conservation easement

In the United States, for land to be used for mitigation banking, a commitment to protecting these lands must be made using a legal agreement called a conservation easement.[26] This is a voluntary legal arrangement between a landowner and a government agency or conservation organisation to restrict future commercial or residential development on a site, permanently setting it aside to be managed for conservation purposes.[27][28] This may include a dedicated trust fund to finance the continued long-term management of the site for mitigation banking.

As part of this process, monitoring and enforcement are required to make sure that long-term investment into conservation continues in perpetuity.[29] Despite this, concerns remain over successfully monitoring and enforcing these agreements in practice.[30]

Setting aside land for mitigation banking in perpetuity might be regarded as a disadvantage for landowners, who may want to use the land in different ways for their own needs in the future (such as for agriculture or development) or may face a reduction in the value of their land.[31] On the other hand, using a conservation easement to permanently set aside the site of a mitigation bank might be regarded as beneficial for the achievement of broader goals for biodiversity conservation and in preventing future damage to wetland habitats and their biodiversity.

Assessment

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The success of mitigation banking in achieving its objective of no net loss

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See also

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References

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  1. ^ a b Environmental Protection Agency, United States (2024-06-28). "Mitigation banks under CWA section 404". EPA. Retrieved 2024-07-31.
  2. ^ a b c Environmental Protection Agency, United States (2008). "Compensatory Mitigation Rule Factsheet" (PDF). epa.gov. Retrieved 2024-07-30.
  3. ^ "Background on Compensatory Mitigation | Environmental Law Institute". www.eli.org. Retrieved 2024-07-31.
  4. ^ "Mitigation Trade: Making Up for Environmental Harm". Investopedia. Retrieved 2024-07-31.
  5. ^ Froger, Géraldine; Ménard, Sophie; Méral, Philippe (2015). "Towards a comparative and critical analysis of biodiversity banks". Ecosystem Services. 15: 152–161. doi:10.1016/j.ecoser.2014.11.018. ISSN 2212-0416.
  6. ^ a b c Natural Resources Conservation Service, US Department of Agriculture (2024-07-29). "Conservation Compliance Glossary". National Resources Conservation Service, USDA. Retrieved 2024-07-27.
  7. ^ a b OECD (2016). Biodiversity Offsets: Effective Design and Implementation. Paris: Organisation for Economic Co-operation and Development. doi:10.1787/9789264222519-en.
  8. ^ "Understanding the Mitigation Hierarchy". www.joesblooms.com. Retrieved 2024-07-31.
  9. ^ "Wetland Mitigation". The Wetland Conservancy. Retrieved 2024-07-30.
  10. ^ a b c J.B. Ruhl and James Salzman, No Net Loss? The Past, Present, and Future of Wetlands Mitigation Banking, 73 Case W. Rsrv. L. Rev. 411 (2022)
  11. ^ Hough, Palmer; Robertson, Morgan (2009-02-01). "Mitigation under Section 404 of the Clean Water Act: where it comes from, what it means". Wetlands Ecology and Management. 17 (1): 15–33. doi:10.1007/s11273-008-9093-7. ISSN 1572-9834.
  12. ^ a b c Bayon, Ricardo; Fox, Jessica; Carroll, Nathaniel, eds. (2009). Conservation and biodiversity banking: a guide to setting up and running biodiversity credit trading systems. London Sterling, VA: Earthscan. ISBN 978-1-84407-814-1.
  13. ^ US EPA, OW (2015-06-16). "Mitigation Banks under CWA Section 404". www.epa.gov. Retrieved 2024-08-05.
  14. ^ Ruhl, J. J., Salzman, J., & Goodman, I. (2009). Implementing the new ecosystem services mandate of the section 404 compensatory mitigation program a catalyst for advancing science and policy. Stetson Law Review, 38(2), 251-272.
  15. ^ Tyrna, Abbey Anne, "Wetland mitigation banks and the no-net-loss requirement: an evaluation of the Section 404 permit program in southeast Louisiana" (2008). LSU Master's Theses. 3116. https://repository.lsu.edu/gradschool_theses/3116
  16. ^ US EPA, OW (2015-06-16). "Memorandum of Agreement regarding Mitigation under CWA Section 404(b)(1) Guidelines (Text)". www.epa.gov. Retrieved 2024-08-05.
  17. ^ Salvesen, D., J. De Grove, L. L. Marsh, and D. R. Porter. 2013. Mitigation Banking: Theory And Practice. Island Press.
  18. ^ Kathrin Ellen Yates, Wetlands Mitigation and Mitigation Banking in Louisiana, 59 La. L. Rev. (1999) https://digitalcommons.law.lsu.edu/lalrev/vol59/iss2/10
  19. ^ "Stream Mitigation Banking". Ecosystem Marketplace. Retrieved 2024-08-05.
  20. ^ Harding, Scott D. (2001-09-28). "Fox Creek Mitigation Bank". Wetlands Engineering and River Restoration 2001. American Society of Civil Engineers: 1–10. doi:10.1061/40581(2001)25. ISBN 978-0-7844-0581-9.
  21. ^ Environmental Law Institute (2002). "Banks and Fees: The Status of Off-site Wetland Mitigation in the United States" (PDF). Environmental Law Institute. Retrieved 2024-08-05.
  22. ^ Hough, Palmer, and Rachel Harrington. "Ten years of the compensatory mitigation rule: reflections on progress and opportunities." Envtl. L. Rep. News & Analysis 49 (2019): 10018.
  23. ^ "The Basics of Mitigation Banking | EASI". Retrieved 2024-08-05.
  24. ^ "Ecological Effectiveness of Compensatory Mitigation | Environmental Law Institute". www.eli.org. Retrieved 2024-08-05.
  25. ^ "A Guide to Biodiversity Banking | Ecology by Design". | Ecology by Design. 2022-01-10. Retrieved 2024-07-30.
  26. ^ "Mitigation Banking 101: How Does Mitigation Banking Work?". The Mitigation Banking Group. 2022-11-01. Retrieved 2024-08-06.
  27. ^ "conservation easement | U.S. Fish & Wildlife Service". www.fws.gov. Retrieved 2024-08-06.
  28. ^ "What is a Conservation Easement? – National Conservation Easement Database | NCED". Retrieved 2024-08-06.
  29. ^ "Mitigation Banks". Freshwater Land Trust. Retrieved 2024-08-06.
  30. ^ Jessica Owley, Preservation Is a Flawed Mitigation Strategy, 42 Ecology L. Currents 101 (2015). Available at: https://digitalcommons.law.buffalo.edu/journal_articles/178
  31. ^ "Wetland and Stream Mitigation Banking". westernlandowners.org. Retrieved 2024-08-06.
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