Mitigation Banks Gain Traction According to National Report Card

The Mitigation Rule RetrospectiveThe U.S. Army Corps of Engineers (Corps) and the U.S. Environmental Protection Agency (EPA) released their retrospective on the 2008 Mitigation Rule that first established a preference for mitigation banks over other means to provide compensatory mitigation for projects permitted under the Clean Water Act Section 404 program.

The report, entitled: The Mitigation Rule Retrospective: A Review of the 2008 Regulations Governing Compensatory Mitigation for Losses of Aquatic Resources, reviewed over 50,000 Corps permit actions nationwide and found that mitigation banking for wetlands was becoming increasingly used by permittees to meet their permit obligations.

Why Mitigation Banks are on the Rise

Interestingly, 90 percent of Corps permitted actions reviewed did not require compensatory mitigation due to the project proponents implementing avoidance measures or the project’s impacts not meeting the size thresholds above which compensatory mitigation is required. However, of the 10 percent of projects required to provide compensatory mitigation, 52 percent used commercial mitigation bank credits or in-lieu fee credits. As of December 2014, more than 1,400 mitigation banks and 45 in-lieu fee programs (ILF) have been approved by the Corps nationwide, with many of them in the Southeast, Midwest, and Pacific coastal states. This has resulted in a substantial increase in bank availability including a 52% increase in wetland mitigation banks and a doubling of banks offering stream credits since 2008. Nonetheless, there are large portions of the country that are not covered by mitigation bank service areas and where applicants need to provide either permittee responsible on-site or off-site mitigation (PRM).

Unfortunately, the requirements for such permittee responsible mitigation have increased substantially in terms of planning, monitoring, financial assurances, and long-term land protection such that it has become more difficult to comply with these requirements. On the other hand, mitigation banks have already gone through that approval process and therefore the agencies are more likely to provide approvals more quickly. Applications were processed within 120 days, on average, when using a mitigation bank compared to 177 to 243 days for either on-site or off-site permittee responsible mitigation.

Challenges for Bank Operators

Not everything is rosy for mitigation bank operators, however. While demand for credits has increased since the 2008 rule, it is not steady and is subject to considerable variation after stabilizing following the 2008 recession. In addition, bank operators continue to express frustration with the time it takes to get approvals from the agencies, the tendency to only allow small projects to use bank credits, and the lack of consistency by the agencies in following the preference for mitigation banks over ILF and PRM. The agencies counter that they are improving training and resources on mitigation banking and expect improvement in those areas.
All in all, the 150-page report provides a wealth of data on the compensatory mitigation program and how mitigation banks have become more and more vital towards meeting Clean Water Act requirements. More recently, a Presidential Memorandum has been issued that promises to bring more consistency to banking practices and requirements over other federal agencies. As the industry grows, it will surely have significant ramifications to the restoration economy and to applicants in finding greater efficiency in meeting their development goals.

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