Future of Wetland Mitigation Banking

Explore the current state of affairs around wetland mitigation banking and respective policy with bankers, consultants, and policy-makers.

This topic was covered in the 10th episode of Ecobot’s webinar series, Convergence of Wetland Science and Technology. View recorded episodes here.

Topics

  • Overview of wetland mitigation banking
  • Case studies in the integration of tech with wetland mitigation banking
  • Wetland and stream mitigation current state of affairs
  • Roving policy changes and impacts to wetland mitigation banking

Moderators Jeremy Schewe, PWS, Chief Scientific Officer, Ecobot
Daniel Martin, Consultant/Project Manager, Esri

Presenters and Panelists Susan-Marie Stedman, MS, Wetland Scientist/Policy Analyst, NOAA
Kae Hovater, President, EcoCredit Marketing and the Florida Association of Mitigation Bankers
Nichoel Church, PWS, Environmental Scientist, Snyder & Associates, Inc.
Tara Allden, J.D., Natural Resources Specialist, Kimley-Horn
Michael Sprague, CEO, Trout Headwaters, Inc.
Victoria Colangelo, CEO, The Mitigation Banking Group, Inc.
Drew Haley, Director of Operations, Mitigation Resources of North America

Overview of Wetland Mitigation Banking Wetland mitigation is the compensation for any loss of aquatic resources, including wetlands, streams, and species habitat. Mitigation is one of the tools society can utilize to offset land development impact on the ecological function and benefit of wetlands.

“Mitigation is what provides the delicate balance between economic development, and conserving our critical natural assets,” says Kae Hovater, President, EcoCredit Marketing and the Florida Association of Mitigation Bankers.

What Exactly is a Mitigation Bank? The EPA provides the following definition: A mitigation bank is a wetland, stream, or other aquatic resource area that has been restored, established, enhanced, or (in certain circumstances) preserved for the purpose of providing compensation for unavoidable impacts to aquatic resources permitted under Section 404 or a similar state or local wetland regulation. A mitigation bank may be created when a government agency, corporation, nonprofit organization, or other entity undertakes these activities under a formal agreement with a regulatory agency.

The value of a bank is defined in “compensatory mitigation credits.” A bank’s instrument identifies the number of credits available for sale and requires the use of ecological assessment techniques to certify that those credits provide the required ecological functions.

Mitigation banks represent a “third-party” compensatory mitigation, in which the responsibility for implementation and success of the project is assumed by a party other than the permittee. This transfer of liability has been a very attractive feature for Section 404 permit-holders, who would otherwise be responsible for the design, construction, monitoring, ecological success, and long-term protection of the site.

What is Fueling the Growth of Mitigation Banking? “Mitigation banks offer regulators the assurance of long-term success. There’s little to no time lag between the environmental impact and restoration. For the impact project owner, bank credits provide predictable fixed costs, typically reduce time to permit by up to 50%, and completely transfers the cost, risk, and liability from the permit-holder to the mitigation banker,” says Hovater.

“Both private and public mitigation bank sponsors find value, both economically and environmentally, to develop mitigation banks,” says Nichoel Church, PWS, environmental scientist, Snyder & Associates, Inc. “Selling credits is an investment, and the average life of a mitigation bank is approximately 10 years. Continually meeting performance standards during the monitoring phase results in success. And eventually mitigation banks should be self-sustaining with minimal maintenance required.”

Policy and regulations are playing an increasing role in the sheer growth of mitigation banking, outpacing the extent of surface waters and evolving development trends—and their potential impacts.

Current State of Mitigation Banking and the Impacts of Roving Policy Changes There are currently 45 different USACE districts. Each district has a different protocol for:

  • Defining service areas
  • Assessment methodologies
  • Jurisdictional determinations
  • Bank credit types (i.e. wetland or streams vs cold water or warm water)

These multi-level complexities require us to fully understand the requirements of each in order to successfully navigate the labyrinth of varying rules and regulations.

“The market for mitigation credits is driven by policy and regulations. Nobody is doing mitigation banking solely for the good of the world,” says Tara Allden, natural resources specialist, Kimley-Horn. “[While] it does enable permits, it’s a really neat thing to do, because we’re [also] doing the good of world improvement. Yet, it does have a regulatory driver and it is required by permitting, and I think that’s important to remember. So, you have to have a strong regulatory infrastructure to have successful mitigation bank projects.”

The Role of Compensatory Mitigation and IRT’s “One of the interesting things that happens in the world of mitigation banking…the word ‘mitigation’ is usually used as shorthand for ‘compensatory mitigation,’” says Susan-Marie Stedman, MS, wetland scientist and policy analyst, NOAA. “In NEPA, and then in the definition of ‘mitigation’ that was later applied to the Clean Water Act, ‘mitigation’ actually more broadly means ‘avoid and minimize’, and then ‘compensate.’ But in almost everything you will hear from us and from anyone working in this field, when they say ‘mitigation,’ they mean ‘compensatory mitigation.’ But one of the things that it is important to keep in mind is that ‘mitigation’ actually means ‘avoid and minimize’ first.”

“When putting in a mitigation bank, we’re overseen by an Interagency Review Team (IRT), as laid out in the Army/EPA Mitigation Rule from 2008. Each of the (IRT’s) governs a different set of natural resources or cultural resources. Each of them comes with that resource in mind, and also some understanding of the ecosystems. Therefore, everybody has a thought, or an opinion. Most of the resources are public trust resources,” says Allden.

Challenge of Multi-Layered and Jurisdictional Regulations “There are additional regulations in the Army/EPA Mitigation Rule. However, there are also state wetland regulations. There are some state mitigation requirements. There can even be county mitigation requirements, where counties don’t want compensation for impacts that occur in their county to go outside their county. So, you’re dealing with a pretty wide and layered landscape of policy and regulations when it comes to wetlands and mitigation,” says Stedman.

The evolving jurisdictional landscape between the last two administrations, in regards to the WOTUS Rule and the Navigable Waters Protection Rule (NWPR), is driving uncertainty.  Adding to the ambiguity is the fact that there is a provision in the Clean Water Act that allows states to assume the regulatory authority over most waters in a state. Meanwhile, work continues while the court takes up the Biden Administration’s latest EO, and how the EPA and USACE decide to proceed as a result.

Needless to say, the uncertainty that results from roving regulation of the actual resources is not making life any easier for anyone. With extensive career experience spanning a wide array of roles in the field, Tara Allden shares an illustrative example that brings to life the current state of play.

“If you’re a mitigation provider and you put your mitigation in the ground prior to 2020, and you included the ephemeral stream channels, and you were in a place where there was some other protection over connected wetlands, or your wetlands were connected but are now isolated—you’ve just lost a bunch of credits. So, from a mitigation provider [perspective], knowing what resources are regulated in your jurisdiction is extremely important for certainty,” says Allden.

The Name of the Game is Minimizing Uncertainty and Risk The uncertainty that stems from having so many different agencies involved [in the regulation and permitting process]—whether that be commenting on permits, or regulating resources, or serving as advocates.

“I honestly think that that’s where the most risk and time and money sits in the mitigation banking world. It can be very individually driven, and it’s where you can get a lot of things out of left field, which is why we go back to who we are as professionals, and scientists, and engineers, and policy makers, and attorneys. It is really important in building your reputation and starting from the beginning in relationship [building] with your Interagency Review Team. The name of the game is minimizing uncertainty and risk,” says Allden.

Case Study: Ecological Restoration Design Tye River Mitigation Bank
Michael Sprague, CEO, Trout Headwaters, Inc.

“How do you plan for ecological restoration at a watershed scale, and enable successful ecological improvement in perpetuity over the landscape? After all, that’s what a mitigation bank really must achieve.”

Project Overview Trout Headwaters, Inc. was charged with co-management and oversight of the restoration services for the Tye River Mitigation Bank (TRMB). The mitigation project occupies approximately 440 acres southeast of Arrington, in Nelson County, Virginia, offering over 31,000 high-quality stream mitigation credits.

The TRMB was established to provide offset (mandatory) compensation for the loss of jurisdictional Waters of the U.S. (WOTUS), including approximately six miles of streams, riparian buffer, and their ecological functions from unavoidable environmental impacts. The bank’s geographic service area operates under Section 404 of the Clean Water Act and Section 10 of the Rivers and Harbors Act.

The advantage of mitigation banks is readily apparent. Because they have already restored units of affected natural resources in the process of earning credits, there is no time lag between the environmental impact at a service area and its restoration at a bank site. The restoration is done in advance.

Challenges: Regulatory Compliance Requirements The first step was to gain a better understanding of the different variables across the landscape, and then the credit and economic values of the project. This required the capture and analysis of approximately 45 million environmental data points (with the help of an analytics platform).

Restoration design, execution, and continued monitoring for projects on streams, wetlands, and habitats is a huge challenge. Even with the inherent advantage of advanced technology—from data collection apps and drones, to ArcGIS and AutoCAD—the ongoing data collection and reporting function is monumental, in order to fulfill the vast amount of documentation required by the mitigation bank.

“Regulatory compliance requirements for mitigation banking are quite strict. The single project permit, the title work, the maps, the models, the property protections, the restoration plans and so forth, are probably something [upwards] of 1,100 pages,” says Michael Sprague, CEO, Trout Headwaters, Inc.

“To add to the challenge [presented by climate change], there is sometimes a challenging human environment, [which can be] subject to unexpected changes.”

Active Ecological Restoration: Giving Critical Building Blocks Back to Nature “There are a lot of ways to define the success of a project: the overriding goal for each and every project, beyond cost effectiveness, beyond whether it’s scientifically defensible. And beyond [that], have we improved the resources on the property on the site? Have we done that ecologically? Have we initiated and enabled ecological lift,” says Sprague.

“Our strategy for more than 25 years now has been to jumpstart nature’s processes of renewal and repair. We do this by taking away disturbances, by removing impacts, by restarting plant communities, by prudent management, by giving nature back those basic building blocks that she needs, and allowing development to occur naturally, and over time.”

Mitigation banking has become a vital resource for those spearheading the design and execution of ecological restoration.

“Informed adaptive resource management is, and it will always be, the silver bullet for successful ecological restoration here, now with the help of financial assurances and other things in perpetuity [from mitigation banking credits]. This is especially true as climate changes more rapidly—no manner of active restoration is ever going to survive or succeed without that prudent management,” says Sprague.

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