Wetland Mitigation Banking is a form of Environmental Market trading where wetlands are developed to create marketable wetland credits (acres and function). These credits are sold to others as compensation for unavoidable wetland impacts.
The Food Security Act (FSA), the Clean Water Act (CWA), and some State wetland laws require that negative impacts to existing wetlands are replaced with restored, enhanced, or created wetlands as compensation for the losses. The replacement of impacted wetlands with new wetlands is called Wetland Mitigation. Wetland Mitigation Banking is a type of wetland mitigation where wetlands are developed prior to impacts and the wetlands are sold to those required to compensate for the impacts. For NRCS, the National Food Security Act Manual (NFSAM) (Part 515 - Subpart B – Mitigation Exemption) outlines the mitigation requirements for compliance with Swampbuster. This Web page on Wetland Mitigation Banking is not intended to detail the FSA compliance or CWA permit requirements; it is intended to provide information to those interested in developing Wetland Mitigation Banks.
In 1995 the US Department of Agriculture, U.S. Army Corps of Engineers (USACE), U.S. Fish & Wildlife Service (FWS), and the Environmental Protection Agency (EPA) entered into an agreement and published the Federal Guidance for the Establishment, Use, and Operation of Mitigation Banks. This document establishes a framework on which wetland mitigation banks used for wetland credits can be approved, established, assessed, and maintained until all the credits in the bank are sold and the bank becomes “closed”.
In 2008, the EPA & USACE issued Compensatory Mitigation for Losses of Aquatic Resources: Final Rule (PDF, 567 KB). This Final Rule included information on mitigation banking as well as other information on compensatory mitigation.
Who can develop a wetland Mitigation Bank? And how do Banks qualify for wetland mitigation credit? A Bank Sponsor is any individual or entity that develops wetlands to be used in the wetland credit trading market. The sponsor is responsible for the cost of wetland development as well as long term maintenance to insure that the wetland continues to function as designed in the future. The sponsor works with an Interagency Review Team (IRT) to design and implement the wetland. Once the wetland has been developed, the IRT will determine the acres, wetland types(s), and functions on the site which are available as credits. As the credits are sold, those credits are subtracted from the bank until all the credits are accounted for. At this time the bank “closes” and no additional credits can be sold from the bank.
What types of land can be used for wetland mitigation banking? There are differences between the FSA and CWA requirements in terms of what lands can qualify for wetland credits. For USDA Program Participants (FSA), only wetlands that have been restored, enhanced, or created can qualify; preservation of existing wetlands do not qualify as this does not produce replacement acres of wetlands. Clean Water Act credits can be traded for preserving existing wetlands; however, this is not a common practice and generally requires higher replacement ratios. All banks must be approved by the IRT prior to beginning the project. Bank Sponsors should consider the credit market in the local area to determine whether the bank would be best suited to provide agriculture credits, Clean Water Act credits, or a combination of both.
What types of land are “best” for developing wetland mitigation banks? Even though banks can be made from restored, enhanced, and/or created wetlands, as a general rule, former wetlands restored to their original condition provide the best success and long term stability. This is followed by wetland enhancement, and lastly wetland creation. Long term success and stability is an important consideration since the Bank Sponsor is required to provide long term maintenance on the site to insure that it continues to function as designed.
- Restored wetlands (PDF, 47 KB) are typically easier and less expensive to develop because the land is being put back to its original condition based on landscape position and water (hydrology) sources.
- Enhanced wetlands (PDF, 43 KB) varies from the original wetland that formerly occurred on site. In these wetlands one or more specific wetland functions are accentuated for specific purposes, often at the expense of other wetland functions. The depth and duration of ponding may be altered to support wildlife or different vegetation encouraged to improve water quality. Typically, these modifications of the landscape and hydrology are more expensive to develop and maintain as compared with restored wetlands.
- Created wetlands (PDF, 36 KB) are commonly the most difficult and costly to develop and maintain. These are wetlands developed in a landscape and on soils which did not originally support a wetland. As a result more elaborate engineering design, installation of structures, and/or pumps may be necessary to develop and maintain created wetlands.
One very useful source of wetlands is lands coming out of wetland practices enrolled in the Conservation Reserve Program (CRP). The NFSAM (Part 515.10 E) allows CRP land to be used for wetland mitigation once the contract expires. NRCS, Minnesota, has prepared a fact sheet (PDF, 192 KB) on the cost and environmental benefits of using expired CRP lands for mitigation banks.
How long does it take to develop wetland banks? Time to develop a bank is highly variable and depends on the construction, IRT approval, and whether the bank will be used for agriculture (FSA) or development (CWA) credits, or both. Based on the timing of existing mitigation banks, it takes approximately 2 years. Before a bank can be authorized to trade credits, the development of the wetland should be complete and wetland functions assessed. Using former CRP land that is already in wetland condition can significantly speed up the process to only 6 - 9 months.
How are credits assessed? There are many types of wetlands across the landscape. They vary in depth, duration of ponding or saturation, landscape position, and region of the country. Wetland mitigation rules in the FSA, CWA, and different state laws vary. However, wetlands that serve to replace impacted wetlands generally require the wetlands to replace acres and functions in the same type of wetlands being lost. This is referred to as “in-kind” wetland replacement: same type of wetland, same wetland functions. Because of the wetland types in the region and the functions they support, one wetland type cannot replace a different wetland type. For example, in southern Bottomland Hardwood wetlands, the mitigation bank should be designed to replace those types of wetlands. In the Northern Plains, shallow marsh potholes are commonly impacted making the need for these types of replacement wetlands in demand. As a result, wetland banks should consider the types of wetlands being lost in the region and design replacement wetlands accordingly. The IRT will determine the wetland types and number of credits available from a wetland bank. Non-wetland buffer areas help protect the mitigation bank and also provide habitat support for the wetlands. Generally, these buffer areas are included in the credit base of a bank. The IRT will determine the credit base for non-wetland buffer areas included in the wetland bank.
At what price can wetland credits be sold? The price per wetland credit is a private transaction between the bank sponsor and the buyer. The IRT will determine the geographic area (watershed) a bank can service, but they do not determine credit pricing. The sale price depends greatly on the location of the bank, the wetland type, and the supply and demand for credits. Agricultural credit prices will generally be based on the agricultural value of the land and the cost of creating the credit. For example, if demand for credits in an area is strong, and if the value of a field suitable for agricultural use is $5,000 per acre, then the credits would likely sell for the same amount. On the other hand if the supply of credits was substantially greater than the overall demand for them, then the price of the credit would decline to the actual cost per acre of restoring and maintain the credit. CWA permits in urbanizing areas typically sell for much more than agriculture credits because the value of the land for non-agriculture uses is so much higher and the supply is substantially less than the demand.
In areas where land can be used to meet either FSA or CWA requirements there will be a trade-off between sales price and credit type (agriculture or development). Development of wetland credits and the release of credits to compensate for CWA impacts typically generate higher revenues, but often take longer to develop. Therefore, even though lower sales prices are generated for agricultural credits, the speed of approval and early credit release may offset the lower price to the credit supplier.
For wetland banks servicing CWA impacts, the USACE maintains the web site tracking system: RIBITS (Regulatory In-lieu Fee and Bank Information Tracking System). This site contains information on all CWA mitigations banks including the number of credits available, the service area, and contact information for the bank sponsor.
Long term protection: Lands placed in wetland banks must remain in wetland condition andprotected in perpetuity with appropriate real estate arrangements (e.g., conservation easements, transfer of title to Federal or State resource agency or non-profit conservation organization).
Long term maintenance and monitoring: Since wetland banks are intended to replace wetland acres and functions lost as a result of agriculture and/or development activity, the bank must stay in wetland condition in perpetuity, or until the land it was meant to replace is reverted back into wetlands. It is the responsibility of the bank sponsor that monitoring and periodic maintenance be performed to insure the bank functions as designed and continues to replace the wetlands lost. Credit pricing should reflect potential long term costs. Since Restored Wetlands rely on natural topography and water sources, the long term cost of maintenance can be reduced or eliminated. The potential cost of maintenance increases with enhanced and created wetlands.
Local demand for wetland bank sites: Potential wetland impacts by agriculture and development vary regionally. As a result, the demand for wetland bank credits varies accordingly. Prior to initiating a wetland mitigation bank, bank sponsors are encouraged to contact the USACE and/or local NRCS offices and investigate the local need and demand.
Who to contact? Contact depends on whether the mitigation bank is intended to replace wetlands as the result of CWA permitting, FSA impacts, or both. For CWA wetland banks, interested persons should contact the local USACE District office. Those interested in banks for FSA impacts should contact their local Natural Resources Conservation Service (NRCS) office. An IRT will be developed to work with interested bank sponsors to help plan, organize, and implement the wetland bank.
Information on how to restore, enhance, or create wetlands. The information contained on the web pages “Restoring Degraded Wetlands” on this site can assist interested bank sponsors with some of the tools and decisions necessary to develop wetlands.
- Bank Sponsor - Any public or private entity responsible for establishing and, in most circumstances, operating a mitigation bank or in-lieu fee program.
- In-kind– a resource (i.e., wetland) of a similar structural and functional type to the impacted resource.
- Interagency Review Team (IRT) – an interagency group of federal, tribal, state, and/or local regulatory and resource agency representatives that reviews documentation for, and advises the district engineer on, the establishment and management of a mitigation bank or an in-lieu fee program.
- Wetland Credit – a unit of measure (e.g., a functional or areal measure or other suitable metric) representing the accrual or attainment of aquatic functions at a compensatory mitigation site. The measure of aquatic functions is based on the resources restored, created (established), enhanced, or (for CWA only) preserved.
- Wetland Creation (NRCS definition) (PDF, 37 KB) - The creation of a wetland on a site location that was historically non-wetland.
- Wetland Enhancement (NRCS definition) (PDF, 43 KB)- The augmentation of wetland functions beyond the original natural conditions on a former, degraded, or naturally functioning wetland site; sometimes at the expense of other functions.
- Wetland Mitigation/Compensatory Mitigation - is the restoration (re-establishment or rehabilation), Creation(establishment), enhancement, and/or (for CWA only) in certain circumstances, preservation of aquatic resources for the purpose of offsetting unavoidable adverse impacts which remain after all appropriate and practicable avoidance and minimization has been achieved.
- Wetland Mitigation Bank - a site, or suite of sites, where resources (e.g., wetlands, streams, riparian areas) are restored, created, enhanced, or (for CWA only) preserved for the purpose of providing compensatory mitigation for impacts authorized NRCS for Food Security Act compliance purposes and/or Department of the Army permits
- Wetland Restoration (NRCS definition) (PDF, 46 KB) -The return of a wetland and its functions to a close approximation of its original condition as it existed prior to disturbance on a former or degraded wetland site.