A mitigation bank is privately or publicly owned land managed for its natural resource values. In exchange for permanently protecting the land, the bank operator is allowed to sell habitat credits to developers who need to satisfy legal requirements for compensating environmental impacts of development projects. A mitigation bank is a free-market enterprise that:

• offers landowners economic incentives to protect natural resources;
• saves developers time and money by providing them with the certainty of pre-approved compensation lands; and
• provides for long-term protection and management of habitat.

Mitigation banks typically involve the consolidation of many small wetland mitigation projects into a larger, potentially more ecologically valuable site. Further, mitigation banks require the up-front compensation prior to affecting a wetland at another site. This ensures the success of the mitigation before unavoidable damage occurs at another site. With proper implementation and guidelines, mitigation banking has the potential to increase ecological benefits, save money for project applicants, and improve efficiencies in application and permitting processes.

The concept of mitigation banking has been around since the '70s. Mitigation banking is the restoration, creation, enhancement, or in exceptional circumstances, preservation of wetlands for the express purpose of providing compensation for unavoidable wetland losses in advance of development actions, when such compensation cannot be achieved at the development site or would not be as environmentally beneficial.

A mitigation bank is not like a checking account. Credits placed in deposit by a sponsor can only be spent by a user if the regulator approves the action. The "currency" of the bank must be measurable to the extent that wetland functions and values credited and debited are comparable. In many cases, owing to limitations in wetland functional assessment methodology, credits and debits have been measured simply in terms of acres of various wetland classes produced or lost.

Credits and debits essentially represent "currency" or units of trade. Credits represent the accrual or attainment of wetland functions at the bank site resulting from the restoration being done, while debits represent the loss of functions at the project site.

The Corps of Engineers, in conjunction with the Mitigation Bank Review Team, determine the number of credits available at a bank site based on the potential for restoring or enhancing the wetland functions as compared with existing conditions. The potential for restoring wetland functions is determined by applying an appropriate functional assessment technique, such as the Hydrogeomorphic (HGM) Approach for Assessing Wetland Functions.

Mitigation banking has a number of benefits over traditional compensatory mitigation. Mitigation banks can consolidate many small, scattered compensatory mitigation sites into one larger site that may be more advantageous for maintaining the integrity of the aquatic ecosystem. Mitigation banks bring together financial resources, planning and scientific expertise not practicable to many small compensatory mitigation projects, thus increasing the probability of success. Typically, mitigation banks are functioning at some level prior to project impacts, thereby reducing temporal losses of aquatic functions. Consolidation of compensatory of mitigation within a bank increases the efficiency of limited agency resources needed to review and monitor mitigation projects for compliance.

Summary:

• Reduce uncertainty over whether the compensatory mitigation will be successful in offsetting project impacts;
  
• Assemble and apply extensive financial resources, planning, and scientific expertise not always available to many permittee-responsible compensatory mitigation proposals;
  
• Reduce permit processing times and provide more cost-effective compensatory mitigation opportunities; and
  

Enable the efficient use of limited agency resources in the review and compliance monitoring of compensatory mitigation projects because of consolidation.

Wetlands are regulated under a number of statutory authorities. Regulatory agencies from the federal, state and local governments all have an interest in overseeing wetland protection.

Under current regulatory programs, parties seeking permits for activities that affect wetlands must first avoid and then minimize those effects. Any remaining damage must be compensated. Historically, the regulatory preference for compensation has been on-site creation, restoration or enhancement of a wetland. These mitigation efforts have resulted in several smaller "postage stamp" wetlands that have had limited success in reaching full-function potential.

The sequencing of avoidance, minimization and compensation still applies prior to using credits from any mitigation bank. However, in contrast to traditional mitigation activities, mitigation banking requires that compensation - restoration, creation, enhancement, and/or preservation - occurs before a site is affected by a project. Bank projects are put in place prior to allowing unavoidable impacts by a project. Credits are generated by this up-front activity. Those credits can then be used by the bank sponsor or sold to another party to offset impacts to wetlands that occur in other locations. Again, only impacts that cannot be avoided or minimized are available for compensation through credits from a mitigation bank.

Source: Department of Ecology

Ideally, mitigation banking can best be implemented in the context of watershed planning. Mitigation banks can be designed and located to address specific watershed needs. This could mean enhancing or restoring wetland functions that are in short supply or are of critical importance in a given watershed or drainage basin. Good ecological assessment of watersheds, combined with transportation, infrastructure, and development planning, will allow mitigation banks to be designed and located in areas where they serve the greatest ecological good.

The HGM Approach was designed to satisfy the need for better information on wetland functions within the programmatic requirements of the Clean Water Act Section 404 regulatory program. The HGM Approach is a wetland assessment procedure that is based on three fundamental factors that influence how wetlands function: position in the landscape (geomorphic setting), water source (hydrology), and the flow and fluctuation of the water once in the wetland (hydrodynamics).

The HGM Approach first classifies wetlands based on their differences in functioning; second, it defines functions that each class of wetland performs; and third, it uses reference to establish the range of functioning of the wetland. Regional assessment models are developed based on the functional profile that describes the physical, biological, and chemical characteristics of a regional wetland subclass.

Information may be obtained by writing to:
The Chief of Engineers, Army Corps of Engineers, ATTN: CECW-OR, Washington, DC 20314-1000.