Understand the basics of mitigating banking

Mitigation Bank is a credit and debit system designed to ensure ecological loss, especially the loss of wetlands and streams caused by various development projects, and to compensate for the damage to the environment by protecting and restoring wetlands, natural habitats and streams in other areas. Net loss. To reduce means to reduce the severity of something. In this case, mitigating banking is reducing the damage to the environment.

According to the Ecological Restoration Business Association (ERBA), “Mitigation Banks are highly regulated companies that have historically been proven to provide the highest quality and most reliable environmental impact offset… Invest to help offset the effects associated with economic growth.”

Key points

  • Mitigation Banking is a way to offset the ecological loss of development projects by compensating for the protection and restoration of different areas.
  • Generally, mitigation banks include wetlands and streams, while conservation banks include habitats for endangered species.
  • As increasing industrialization has an inevitable impact on the environment, mitigation banks aim to protect nature, reduce harmful effects, and hold developers accountable.

The mitigation bank is a place developed for this purpose, and the individual or entity responsible for this type of repair work is called the mitigation banker. Just as commercial banks use cash as an asset that can be loaned to customers, mitigation banks also have mitigation credit, which can eventually be sold to those who try to offset mitigation debits. Usually, these credit-relieving buyers are individuals or entities engaged in commercial projects.

There are two types of mitigation banks:

  • Wetland or stream mitigation banks provide mitigation credits to offset ecological losses in wetlands and streams. These are regulated and approved by the U.S. Army Corps of Engineers (USACE) and the U.S. Environmental Protection Agency (USEPA).
  • Conservation Bank provides mitigation credits to offset the loss of endangered species and/or their habitats. These are regulated and approved by the U.S. Fish and Wildlife Service (USFWS) and the National Marine Fisheries Service (NMFS).

How does mitigation banking work?

After the mitigation bankers have purchased the environmentally damaged site they hope to regenerate, they work with regulatory agencies such as MBRT (Mitigation Bank Review Team) and CBRT (Protected Bank Review Team) to approve plans for the construction, maintenance and supervision of the bank.

These agencies also approve the amount of mitigation credit that banks can earn and sell through specific restoration projects. Then, anyone planning to do commercial development on or near wetlands or streams can purchase these mitigation credits, which will have a negative impact on the region’s ecosystem in the process. The mitigation banker is not only responsible for mitigating the development of the bank, but also responsible for the future maintenance and maintenance of the mitigation bank.

The U.S. EPA (U.S. Environmental Protection Agency) defines four different components of the mitigation library:

  • A bank site is a physical area that is restored, established, enhanced, or reserved.
  • A banking tool is a formal agreement between the bank owner and the supervisory authority to determine responsibilities, performance standards, management and monitoring requirements, and bank credit approval terms.
  • The Inter-agency Review Team (IRT) is an inter-agency team that conducts regulatory review, approval, and supervision of banks.
  • A service area is a geographic area that can compensate for the impact allowed by a particular bank.

history

The Clean Water Act (CWA) was passed in 1972. Article 404 and the other two provisions of the CWA mandate to avoid and minimize the impact on designated water bodies, and to provide compensatory mitigation for inevitable impacts. The following is a breakdown in chronological order:

  • In 1977, a law was passed requiring federal agencies to take measures to avoid impacts on wetlands.
  • In 1988, the state promulgated the “no net loss” policy for wetland values ​​and functions, and proposed the concepts of “similar substitution” and “functional substitution space substitution”.
  • In 1993, when the Clinton administration advocated the use of mitigation banks in the Federal Wetland Program, the concept of mitigation banks began to take shape.
  • The guidelines issued by the United States Environmental Protection Agency (USEPA) and the U.S. Army Corps of Engineers (USACE) on the role of mitigation banks in the CWA 404 program were expanded in 1995 to include guidelines for the establishment and use of mitigation banks.
  • In 1998, TEA-21 (Traffic Equity Act of the 21st Century) was enacted as a law, stipulating that priority should be given to the mitigation banking business of transportation projects.
  • In 2008, after four years of planning, a federal rule was implemented that established standards for bank mitigation, alternative fee programs, and personal mitigation (also known as licensee-responsible mitigation). These standards are consistent with the standards in CWA 404.

Benefits of ease of banking

Environmental protection

Mitigating the banking industry helps protect nature and its diversity. The impact of increasing industrialization and urbanization on natural habitats, streams and wetlands is inevitable. Mitigation banks provide an opportunity to at least partially offset this impact.

higher efficiency

The mitigation bank is more efficient because it can ensure the restoration or protection of a large amount of integrated land to offset the adverse effects of developers on many small sites. Alleviating the banks’ economies of scale and technical expertise not only make them more efficient in terms of cost, but also in terms of restoring the quality of the land.

Reduce time lag and regulatory convenience

It is easier for developers to purchase credit from approved banks than to obtain regulatory approval, otherwise it may take months to obtain. Since the mitigation bank has restored the affected land units in the process of earning credit, there is almost no time difference between the environmental impact of the service area and its restoration at the bank’s site.

Responsibility transfer

The mitigation banking system effectively shifts the responsibility for ecological losses from the developer (also known as the assignee) to the mitigation bank. Once the licensee purchases the required credit line in accordance with the regulations, the mitigation banker is responsible for the long-term development, maintenance and monitoring of the site.

Current state

Currently, the United States has approved a number of mitigation banks. According to the Regulatory Alternative Fees and Bank Information Tracking System (RIBITS) developed by the U.S. Army Corps of Engineers (USACE), as of July 2021, more than 2,000 banks have been approved.

Challenges and worries

The primary challenge to alleviate the success of banking business is the difficulty that regulators encounter in correctly assessing economic or monetary ecological losses. The credit provided to mitigation banks must be properly priced and evaluated by regulatory agencies, but although these agencies use many environmental assessment techniques, it is not easy to fully understand the economic impact of such damage to natural resources.

It is also questionable whether natural habitats and wetlands that can evolve for centuries can be artificially transformed in just a few years. In some cases, compared with natural wetlands, the quality of such artificially developed wetlands in terms of plant and animal diversity is lower than the standard.

It is also believed that, in contrast to the personal mitigation where developers create their own mitigation sites near the destroyed land, mitigation banks are often far away from the affected sites and therefore cannot fully replicate the affected sites.

Bottom line

Mitigation bank is a system through which the responsibility for ecological damage is transferred from the licensee to the mitigation bank through the credit and debit system under the regulatory guidelines. The relief banker develops, restores, protects and manages the land of the bank site and obtains relief credit, and then sells it to the licensee or developer for compensation.

Although the system has some limitations, such as lack of robust environmental assessment technology and poor quality of natural diversity in some cases, it still has many advantages. With the increase of private investment in mitigation banks’ development and ecosystem research and the relaxation of regulatory control, the future of mitigation banks is indeed bright for investors and nature.

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