Money for Nothing? The Rise of Wetland Fee Mitigation
By Royal C. Gardner
INTRODUCTION
A cardinal theme of wetland regulatory programs is mitigation. Agencies with a wetland-protection mandate require developers to offset their projects' wetland impacts through compensatory mitigation: restoring a former wetland site, enhancing a degraded wetland, creating a new wetland, or preserving high-quality wetlands. Traditionally, the developer (through its consultants or agents) has implemented the mitigation project concurrent with or after the development project. Unfortunately, many such mitigation efforts failed and wetland functional values were lost.
In response to widespread mitigation failures, wetland-protection agencies authorized the use of mitigation banking. Mitigation banking typically involves mitigation performed in advance of project impacts. A bank sponsor restores, enhances, creates, or preserves a wetland site, thereby generating mitigation credits. The bank sponsor may then use these credits to compensate for the impacts of its future development projects. Alternatively, in an entrepreneurial mitigation bank, the bank sponsor may sell the mitigation credit it has produced to another developer to satisfy the latter's mitigation needs. In many cases, mitigation banking offers an environmentally preferable option to developer-provided mitigation. An obvious benefit of mitigation banking is its greater likelihood of environmental success.
Recently, however, wetland-protection agencies have promoted another mitigation option: fee mitigation. In a fee mitigation scenario, the developer writes a check, and the funds typically are deposited in an account that not-for-profit natural resource entities or governmental agencies (or both) manage for environmental purposes. Despite the good intentions of fee mitigation advocates, the use of fee mitigation raises several troubling policy, ethical, and legal issues.
First, from an environmental perspective, fee mitigation may not be a particularly attractive option. Unlike mitigation banking, fee mitigation typically provides mitigation after project impacts. Moreover, fee mitigation often raises a concern about whether the funds will actually be used to compensate for project impacts or whether they will be diverted for other purposes. Because fee mitigation credits may be less expensive on a per-acre basis than credits from mitigation banks, a fee mitigation program may serve to undercut the market for entrepreneurial mitigation banks and effectively discourages the private sector from investing more in wetland mitigation efforts. The rise of fee mitigation programs may interfere with the utility and environmental benefits associated with mitigation banks.
Fee mitigation also raises conflict of interest questions. Regulators may have an interest in promoting fee mitigation over other types of mitigation. The developer may be put in an awkward position when the permitting agency asks the developer to provide money to a fund overseen by the permitting agency. Even when the developer contributes willingly (which no doubt will be the case when fee mitigation is the least-cost alternative), the use of fee mitigation may, at the federal level, amount to an improper augmentation of appropriated funds, thus implicating the constitutional issue of Congress's control over executive branch agencies.
Part II of this Article provides a background on wetland mitigation requirements, focusing on mitigation banks and fee mitigation. Part III examines fee mitigation in practice and reports on the reliance of fee mitigation in federal and state programs. Finally, Part IV discusses the dangers - environmental, ethical, and legal - associated with fee mitigation programs. The Article concludes with a recommendation that legislation or administrative policy heavily circumscribe the use of fee mitigation in the wetland context.
A cardinal theme of wetland regulatory programs is mitigation. Agencies with a wetland-protection mandate require developers to offset their projects' wetland impacts through compensatory mitigation: restoring a former wetland site, enhancing a degraded wetland, creating a new wetland, or preserving high-quality wetlands. Traditionally, the developer (through its consultants or agents) has implemented the mitigation project concurrent with or after the development project. Unfortunately, many such mitigation efforts failed and wetland functional values were lost.
In response to widespread mitigation failures, wetland-protection agencies authorized the use of mitigation banking. Mitigation banking typically involves mitigation performed in advance of project impacts. A bank sponsor restores, enhances, creates, or preserves a wetland site, thereby generating mitigation credits. The bank sponsor may then use these credits to compensate for the impacts of its future development projects. Alternatively, in an entrepreneurial mitigation bank, the bank sponsor may sell the mitigation credit it has produced to another developer to satisfy the latter's mitigation needs. In many cases, mitigation banking offers an environmentally preferable option to developer-provided mitigation. An obvious benefit of mitigation banking is its greater likelihood of environmental success.
Recently, however, wetland-protection agencies have promoted another mitigation option: fee mitigation. In a fee mitigation scenario, the developer writes a check, and the funds typically are deposited in an account that not-for-profit natural resource entities or governmental agencies (or both) manage for environmental purposes. Despite the good intentions of fee mitigation advocates, the use of fee mitigation raises several troubling policy, ethical, and legal issues.
First, from an environmental perspective, fee mitigation may not be a particularly attractive option. Unlike mitigation banking, fee mitigation typically provides mitigation after project impacts. Moreover, fee mitigation often raises a concern about whether the funds will actually be used to compensate for project impacts or whether they will be diverted for other purposes. Because fee mitigation credits may be less expensive on a per-acre basis than credits from mitigation banks, a fee mitigation program may serve to undercut the market for entrepreneurial mitigation banks and effectively discourages the private sector from investing more in wetland mitigation efforts. The rise of fee mitigation programs may interfere with the utility and environmental benefits associated with mitigation banks.
Fee mitigation also raises conflict of interest questions. Regulators may have an interest in promoting fee mitigation over other types of mitigation. The developer may be put in an awkward position when the permitting agency asks the developer to provide money to a fund overseen by the permitting agency. Even when the developer contributes willingly (which no doubt will be the case when fee mitigation is the least-cost alternative), the use of fee mitigation may, at the federal level, amount to an improper augmentation of appropriated funds, thus implicating the constitutional issue of Congress's control over executive branch agencies.
Part II of this Article provides a background on wetland mitigation requirements, focusing on mitigation banks and fee mitigation. Part III examines fee mitigation in practice and reports on the reliance of fee mitigation in federal and state programs. Finally, Part IV discusses the dangers - environmental, ethical, and legal - associated with fee mitigation programs. The Article concludes with a recommendation that legislation or administrative policy heavily circumscribe the use of fee mitigation in the wetland context.