Sustainability Law

Wetland mitigation banking is often touted as a happy medium between the interests of private developers, natural resource managers, and environmentalists, in which developers are allowed to offset unavoidable impacts on wetlands by purchasing “credits” from a designated mitigation bank—a wetland area that is restored, created, or preserved, then set aside to compensate for future impacts on wetlands due to development activities. The value of these “credits” is determined by quantifying the wetland function or by the acreage of wetlands restored or created.[1] Wetland mitigation banking is a tool used to achieve compliance with the “no net loss” goal mandated by section 404 of the Clean Water Act, [2] and is often regarded as a win-win situation that allows economic development while mitigating harmful impacts to the environment. Mitigation banks also create an incentive for landowners to preserve wetlands on their property, rather than viewing development as the only way to generate value from the land.

However, research has shown that mitigation banks fail to achieve the “no net loss” goal, both on a regulatory and ecological level.[3]  On a regulatory level, a Government Accountability Office (GAO) report published in 2005 found that the Corps of Engineers—which oversees compensatory mitigation—performed little oversight to ensure that compensatory mitigation was occurring.[4] More specifically, the GAO found that only 15% of the 152 permit files evaluated contained proof that a compliance inspection was completed. Further, despite the range of enforcement actions that the Corps could take for violations of compensatory mitigation requirements, the agency opted for negotiation, and in some cases was limited in recommending legal action because the agency did not specify mitigation requirements in the permits it issued. In response to the report, the Corps developed new regulations governing compensatory mitigation, including new minimum monitoring requirements.[5] The substance of the monitoring report, however, is left to the individual Corps district office to decide, so there is still the potential for compliance variability between different mitigation banks.[6]

On the ecological level, compensatory wetlands also fail the “no net loss” policy because the ecological value of created wetlands often pale in comparison to that of impacted wetlands. Federal regulation states that “in-kind” mitigation is preferable; that is, compensatory mitigation should be of a similar type to the affected wetland. However, compensatory mitigation banks are not required to replace the ecological functions, habitat types, or wildlife and plant species of the destroyed wetland.[7] One study of wetland mitigation banks in Ohio found that 25% of the wetlands surveyed did not meet the definition of a wetland.[8]  Similarly, a study of permit files in California found that 27% of constructed wetlands—i.e. wetlands that are man-made and not naturally occurring—did not meet the Corp’s jurisdictional definition of a wetland.[9] In fact, one study estimates that compensatory mitigation schemes have resulted in an 80% loss in wetland acres and functions.

Although these studies draw into question the effectiveness of wetland mitigation banking as a reliable conservation tool, the Corps and EPA’s final revised mitigation rule published in 2008 established wetland mitigation banking as one of three preferred compensatory mitigation schemes (the others include permittee-responsible compensatory mitigation and in-lieu fee mitigation)—a preference based on regulatory/administrative criteria, not ecological.[10]

While the 2008 mitigation regulations require a watershed approach when selecting the type and location of compensatory mitigation[11]—including location within the same watershed of the impacted wetlands, habitat connectivity, and relationship to hydrologic sources[12]—“most agencies responsible for wetlands have focused only on measuring [the] net change of wetland acreage”[13] because of the complexity of measuring wetland functions. The uncertainty of ecosystem restoration sciences (still a growing field) coupled with the uniqueness of each individual wetland makes it difficult to require specific ecological functions or conditions.

Furthermore, because the role of calculating mitigation bank credits falls on the land owner and federal, state, and/or local agencies who enter into a Memorandum of Understanding (MOU), or similar instrument establishing the bank,[14] each mitigation bank may quantify wetland functions differently, resulting in functional assessments of “credit” that vary widely. If the “no net loss” goal encompasses wetland acreage and functions, current regulations need to better define the procedures for assessing those wetland functions.

Efforts to quantify and standardize the functions and values of wetlands are already underway, including several by the Willamette Partnership in Oregon. A non-profit, the Willamette Partnership, uses the Oregon Rapid Wetland Assessment Protocol to translate the functional assessments of wetlands into functional acres that can then be traded as credits. Their crediting system measures specific wetland functions including sediment retention and stabilization, hydrology, aquatic support, raptor and mammal habitat, native plant diversity, and others[15]—to determine an effectiveness score. The ultimate credit also takes into account the baseline condition of the mitigation banking site (i.e. whether it was already a functioning wetland or if it is a constructed wetland) and the acreage.[16] The increased availability of these standardized procedures has improved the feasibility of measuring the loss of ecological value.

Current regulations already allow for wetland functions to be incorporated into the “credit” calculus, but because of scientific uncertainties related to the replacement of wetlands, regulations have excluded specific criteria in design and performance standards for wetlands. As the effort to better quantify wetland functions progress, existing compensatory mitigation regulations should be revised to focus on ecological values as the standard for determining “credits,” rather than a one-to-one wetland acreage approach. In the meantime, regulators can begin to incorporate these functional assessment procedures into their permitting decisions and mitigation banking instruments. Similarly, regulators should continue to adhere to the mitigation sequence: avoid, minimize, then mitigate,[17] while science catches up to the policy of wetland mitigation banking.