Crossover Assets™
Investing in Environmental Assets and Biodiversity

Wetland and Stream Mitigation Banks

Section 404 of the Clean Water Act (“CWA”) of 1972 established federal guidelines for regulating the discharge of fill or dredged materials into the jurisdictional waters of the United States, including wetlands, streams, and rivers. Mitigation is defined in a 1990 Joint Memorandum of Agreement (“MOA”) between the U.S. Army Corps of Engineers (“USACE”) and the U.S. Environmental Protection Agency (“USEPA”) as a sequential process that encompasses: (i) avoidance, (ii) minimization, and (iii) mitigation for unavoidable impacts to jurisdictional waters. This requirement for mitigation was later strengthened by the wetlands “no net loss” policy that was endorsed by George H.W. Bush and subsequent administrations.

Mitigation banking is a market-based approach that allows a bank sponsor (i.e., developer) to restore and preserve wetlands, streams, and other aquatic resources expressly for the purpose of providing compensatory mitigation for authorized impacts to similar resources at development sites. Mitigation banks operate similar to other financial institutions where transactions are described in terms of credits and debits. Credits represent the gain of ecological function at a mitigation bank, while debits represent the loss of ecological function at a development site. Bank sponsors can sell mitigation credits to permittees who are required to compensate for jurisdictional impacts incurred at their development sites. The sale of these credits legally transfers the liability for compensatory mitigation from the permittee to the bank sponsor. Regulatory agencies do not participate in setting the value of mitigation credits. The value of a credit is determined by the free market.

Historically, the USEPA and the USACE have required mitigation banking to comply with higher ecological performance standards than other forms of compensatory mitigation (e.g., permittee-responsible and in-lieu-fee mitigation). Because this variability in regulatory predictability and effectiveness resulted in mitigation sites of varying degrees of quality, the USACE and the USEPA enacted a new federal rule on April 10, 2008, referred to as Compensatory Mitigation for Losses of Aquatic Resources; Final Rule (Federal Register Vol. 73, No. 70). In the Final Rule, both agencies establish environmentally effective standards for compensatory mitigation that raise the performance standards for all forms of mitigation, thereby creating a “level playing field”. In addition, both agencies established a preference for mitigation banking by citing multiple advantages over other forms of mitigation including, but not limited to, a multi-resource agency review process, higher financial assurances, greater certainty of meeting ecological objectives, and reduced temporal losses of ecological functions and services. Most importantly, mitigation banks typically involve large-scale hydrological and ecological preservation, restoration, creation, and/or enhancement of wetlands and streams, which allows for the greater probability of a functional natural ecosystem.

Mitigation banking is estimated to be a $3+ billion dollar industry that is expanding rapidly due to the growing scarcity of our nation’s natural resources as well as the political and regulatory environment of the U.S., which has increasingly recognized the intrinsic value of our nation’s environmental infrastructure.

ADDRESS 3715 Northside Parkway STE 2-500 | Atlanta, GA 30327
PHONE 404.848.7500 EMAIL info@timbervest.net


Home | Crossover Assets^TM | Portfolio | Team | Articles | Glossary | Contact | Timbervest Website