Banking on Mitigation

New regulations might change the landscape of national wetlands policy

by Amos Esty

Although the Clean Water Act protects U.S. wetlands, every year thousands of acres of swamps and marshes are legally destroyed and converted into golf courses, shopping malls and other forms of dry, lucrative ground. Since 1989, the goal of wetlands policy has been to achieve "no net loss," but that remains an elusive target. Under current guidelines, developers whose projects will impinge on natural wetlands can receive permits allowing construction in return for agreeing to offset the damage through a process known as compensatory mitigation. The two most common forms of this practice are individual mitigation, in which developers build compensatory wetlands themselves, and mitigation banking, in which developers purchase credits from companies (mitigation banks) that have restored or created wetlands nearby.

In theory, it's a pretty straightforward system—for each acre of natural wetland lost there should be at least one acre created or restored. But a 2001 study by the National Research Council concluded that despite mitigation efforts the country was losing about 60,000 acres of wetlands annually. Last spring, in an attempt to improve the process, the U.S. Army Corps of Engineers proposed new regulations that would force developers to meet stricter—that is, more expensive—standards for individual mitigation sites, which might make mitigation banks seem like a bargain in comparison.

According to the Corps, increased use of mitigation banking will address many of the problems that have kept "no net loss" from being realized. But a number of studies, and quite a few scientists, dispute the benefits of mitigation banks—and question whether it's even possible to engineer successful wetlands.

"How do you re-create something that took nature a thousand years to develop?" asks Joy B. Zedler, an ecologist at the University of Wisconsin-Madison and one of the authors of the NRC report. "You don't." At least not, she says, within the timescale imposed by the Corps. Most mitigation sites are subject to no more than five years of oversight, but some wetlands, particularly forested areas, might take decades to replace adequately the land lost to development.

According to Zedler, the primary obstacle is that although scientists know that wetlands help regulate water cycles, serve as water filters and provide habitat for diverse flora and fauna, even specialists don't always know how they do it. William M. Lewis, Jr., an ecologist at the University of Colorado at Boulder, believes that for now "we don't have any reliable way of replicating functions and values."

A study published last year by Ohio's Environmental Protection Agency supports these concerns. The agency studied 12 mitigation-banking sites across the state to determine how well they mimicked natural conditions. The results weren't particularly promising. Twenty-eight percent of the area surveyed consisted of shallow ponds lacking rooted vegetation and could not be considered functioning wetlands. Most of this acreage, however, had either already been sold as credits or approved for sale.

The Ohio EPA also found that plant communities were generally of lower quality than natural wetlands and more likely to be home to invasive species. The banking sites scored even worse when judged by the presence of amphibians. None provided habitat for either wood frogs or spotted salamanders, which the report called indicative of successful sites, and all were dominated by just a few species of frogs.

Of course, individual mitigation sites face all of these same difficulties. But two factors add to the risks of banks. First, if one small individual mitigation site fails, the effects on the surrounding landscape should be minimal. The collapse of a large bank site is a much more costly mistake. Second, whereas developers who create their own mitigation sites are usually required to do so in the immediate vicinity of the destroyed wetlands, mitigation banks tend to be located farther from the impact sites.

At the same time, mitigation banking has a number of points in its favor. For one thing, purchasing credits from a bank that has already restored or created wetlands can reduce or eliminate the time lag between the impact of development and the construction of new wetlands. According to George Howard, co-founder of Restoration Systems, a mitigation-banking company based in North Carolina, there's another advantage to mitigation banks: "Unsuccessful projects could bankrupt me personally," he says, "and that's a great incentive to succeed."

Perhaps the biggest problem with individual mitigation is that no one knows just how well it works. In 2005, the Government Accountability Office issued a report showing that the Corps rarely visited sites to ensure that required mitigation was being completed. And in most cases, annual monitoring reports from the permit recipients (usually a condition of approval) were never filed. "Until the Corps takes its oversight responsibilities more seriously," the report concluded, "it will not know if thousands of acres of compensatory mitigation have been performed."

So although many wetlands ecologists don't share Howard's enthusiasm for banking, there is agreement that, as he puts it, "the alternatives are a sad, sad story." According to the Corps, the drafted regulations are unlikely to change significantly before being finalized later this year, which means that mitigation banks will soon become an increasingly important part of national wetlands policy. Whether that's a step toward "no net loss" remains to be seen. As Zedler says, "there's a lot of promise in mitigation banking, but it all depends on how it's done."