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Results of the FHWA Domestic Scan of Successful Wetland Mitigation Programs

Conclusions and Recommendations

The conclusions and recommendations of this scan report highlight common areas of concern expressed by the eight States visited with regard to the experience of establishing and managing wetland mitigation bank sites in perpetuity. In addition, the best practices, innovations, and continuing challenges common or unique to the States are presented.

Best Practices

The following best practices, which have the potential for national application, were observed:

  1. Flexible sizes for GSAs, appropriate to the drainage and intensity of development, are necessary for banking to continue to be a viable mitigation alternative, both for single-user, agency-funded banks and for private, entrepreneurial banks. Because single-user, DOT-funded banks can only be used for DOT projects, a HUC-8 service area is not always large enough to justify the effort of establishing a mitigation bank, nor are impacts within most HUC-8 boundaries numerous enough. It is generally accepted that larger mitigation sites, such as banks, provide higher quality wetland habitat and support landscape-level functions for aquatic species better than smaller sites which are subject to ecological isolation from continued development and other factors. Concentrating mitigation into fewer large sites also reduces monitoring and reporting requirements, which can represent substantial cost savings, and generally improves management potential and societal benefits (5).

  2. Use of umbrella mitigation banking instruments (i.e., statewide banking instruments that cover all DOT mitigation sites within the State) should be utilized whenever possible. The banking approval process is cumbersome. Having one agreement that covers all the various sites throughout the State will limit the bureaucratic process to one initial agreement. An exception to this may be when there are multiple COE jurisdictions with conflicting policies on banking. In that case, banking instruments for each jurisdiction might be practical.

  3. State DOTs have successfully used public lands owned by resource agencies or credible, non-profit natural resource groups to obtain land for mitigation, to assist with implementation of mitigation plans, and/or to assume responsibility for long-term management once the performance requirements have been satisfied. DOTs are not natural resource managers. The organizations with the appropriate expertise should manage those resources.

  4. DOT mitigation banks are often more economical than project-by-project mitigation. DOT mitigation banks costs appear to run in the hundreds to several thousands of dollars per acre of impact as opposed to upwards of hundreds of thousands of dollars for project-by-project mitigation. There are exceptions to this generalization, and costs vary widely based on land values.

  5. Mitigation is usually funded and initiated in advance of project construction. The mitigation site has already received approval through the MBRT process and no separate mitigation plan need be reviewed for each project.

  6. The use of Federal-aid highway funds to establish mitigation sites is permissible to compensate in advance of future impacts for foreseeable projects.

  7. DOT funding of positions in Federal regulatory and permitting agencies can expedite the permitting process. State DOTs that fund positions for the COE and USFWS receive in turn from those agencies, personnel dedicated to work on transportation projects and issues.

  8. In-house experts within State DOTs can represent significant cost savings for the design, implementation, and monitoring of wetland sites.

  9. Pooling mitigation credits together for entire State allows credits to be withdrawn from the banking system even if a bank site is not yet developed within a specific geographic area within the State.

  10. Credit can be given for upland buffers within the wetland mitigation area. Resource agencies often require buffers around wetland mitigation sites. The granting of credit for impacts for these buffers is a positive incentive for the further use of buffers by State DOTs and provides ecological benefits to the aquatic system.

  11. Public use of a State DOT mitigation site, such as hunting, increases the public benefit for the expenditure of mitigation dollars and increases the site's value as a public resource. Allowed public uses must be carefully considered to support, rather than impair, the integrity of the mitigation site.

  12. Some of the most successful sites selected for mitigation are those that are in a low ecological succession stage. Agriculture sites are often the easiest to convert to wetland areas and are often the most ecologically successful sites.

  13. Selection of restoration sites receive priority for mitigation development. Lands that were historically wetlands are typically more responsive to reversion back to a wetland system than creation sites that may require extensive engineering and earth movement.

  14. The preservation of existing high quality wetlands have been successfully incorporated into mitigation plans. Preservation as a component of a compensatory mitigation plan encourages the long-term protection of existing wetlands.

Innovative Measures

The State DOTs in the wetland scan tour have encountered obstacles to banking throughout the history of their environmental compliance programs. Some of these problems are the result of particular State laws that restrict the expenditure of State dollars to certain activities, or the limits on the acquisition of private property through eminent domain laws. Other problems are the result of lack of flexibility of other State resource and regulatory agencies that operate within a particular State. Furthermore, the establishment and approval process of banks is uniformly bureaucratic and laborious. The following is a list of some innovative solutions employed by some of the States to further their mitigation goals and/or make the mitigation process more efficient.

  1. The ALDOT has used mitigation sites both for compensation for wetland impacts and for endangered species habitat mitigation. Credits can be used on their mitigation sites for both 404 impacts and to satisfy their requirements under Section 7 of the Endangered Species Act. Mitigation banks should be examined from an ecosystem perspective from both the wetland functions, as well as functions provided for special management species, such as endangered species, if these are non wetland related. This represents a true landscape approach.

  2. ODOT found that attempts to establish mitigation banks in Ohio were an exceptionally arduous and unwieldy process. ODOT is in favor of multi-project mitigation but found the MBRT process onerous. ODOT implemented a consolidated banking approach where mitigation for several projects can be performed at a single site without the necessity of going through the lengthy MBRT site-approval process.

  3. ODOT has turned over the reporting and monitoring requirements of one of their mitigation sites to a nearby local high school. The students perform the field monitoring including data collection. Students also prepare the monitoring reports and submit them to the regulatory agencies. This innovative approach provides an educational benefit of wetland mitigation sites. Educational value is an under-explored and under-utilized benefit of government-sponsored wetland mitigation programs. In addition, a direct benefit to ODOT is that they are relieved of the time and expense of preparing monitoring reports for this particular site.

  4. The ODOT is funding an entire COE regulatory office in Columbus to work on transportation projects. Currently, there are four separate COE districts in the State of Ohio. This has resulted in inconsistency in the administration of the 404 program caused by the differences in policy and procedure within each district. While funding positions for the resource and regulatory agencies is not necessarily a new development, ODOT is funding an entire office that cuts across the four COE districts in Ohio. ODOT's hope is that working with one office will lead to consistency and efficiency in the 404 program.

  5. The KYTC has delegated the mitigation site selection responsibility to the USFWS. This has resulted in a more expeditious development of the mitigation site proposal. The USFWS, being a resource agency, has the expertise to assess potential and existing habitat. Also, USFWS is knowledgeable of the resource needs for critical species. The responsibility of site selection for USFWS gives the agency the opportunity to work toward its own species recovery efforts, as well as general wetlands functions. In addition, as a commenting agency for the Section 404 program, the USFWS' direct involvement expedites the permitting process, as the agency has a vested interest in the development of mitigation proposals rather than simply critiquing them.

  6. MnDOT consolidates its available mitigation credits statewide into a collective pot administered by an umbrella organization (i.e., BWSR). The credits are allocated by wetland type. MnDOT allows credits to be drawn from the collective pool if a particular type of wetland is not within the geographic service area of the highway project site. Additional wetland bank sites will be developed in service areas currently lacking in a specific bank site of a particular wetland type.

  7. MnDOT is currently focusing mitigation efforts where needed and not necessarily within a particular designated geographic service area. If a particular watershed is heavily degraded or has suffered large historical wetland losses, mitigation efforts can be implemented within the area of greatest need rather than within the impact service area where the need for wetland mitigation may not be as great.

Continuing Challenges

While mitigation banking has helped to reduce the permit processing time and can be an economical alternative to mitigation, challenges still remain for wetland mitigation through banking. Problems with enacting an effective and/or expeditious banking program include the following:

  1. The categorical restriction of mitigation banks to HUC-8 geographic service areas will inhibit mitigation banking. The large number of HUC-8 regions throughout most States, combined with their relatively small linear dimensions, will make banking uneconomical for most States. In addition, monitoring and reporting requirements for the numerous banks would be onerous. Many States already have low annual impacts to wetlands, perhaps amounting to only 20 to 30 acres of impacts per year. These impacts spread out over a multitude of HUC-8 areas would eliminate the usefulness of banking programs in all but a very few States. States with the most active and effective banking programs, both from the standpoint of wetlands benefits and program efficiency, are those with flexible and relatively large service area boundaries.

  2. The long-term management of mitigation sites is uncertain. Federal-aid funding is not available for long-term management of mitigation sites. Even if the DOT turns the bank sites over to resource agencies that have the expertise to manage natural resources, their limited funding may prevent them from adequately guaranteeing the ecological integrity of bank sites.

  3. Stream mitigation requirements are vague. DOTs are unsure of how to proceed with stream restoration and what the requirements are. Definitive Federal guidance is needed to resolve the uncertainty. Stream preservation both on and off existing wetland bank sites should be considered by the resource agencies for stream mitigation. Stream preservation is considered more ecologically sound and far more cost effective than stream restoration.

  4. Federal-aid dollars are often not used to establish mitigation bank sites. FHWA regulations in 23 CFR Part 777 allow the use of Federal highway dollars to construct mitigation sites for federally-funded highway projects. State DOTs should explore all options available to them to meet their mitigation needs.

  5. DOT management and financial officers are reluctant to fund mitigation banks or sites that will be used to compensate for projects years into the future.

  6. The MBRT review process has become more stringent, particularly since the proliferation of private banks. Performance standards have become more austere, and there seems to be subjective interpretations of what constitutes the most reasonable boundaries for geographic service areas. The COE is developing new regulations to address mitigation performance that should be released by the beginning of 2006. The new regulations should provide more clear guidance for performance standards and service areas.

  7. The MBRT is difficult to organize for site visits and meetings. Timely responses on new bank sites are often not forthcoming. Large banks that serve extensive service areas reduce the overall work load and concentrate site visits to one or a few sites. MBRTs should consider workload as one of the factors in determining the most practical number of banks within a jurisdiction.

  8. Some COE districts are averse to wetland banking. The new COE regulations on banking should provide definitive guidance so that the various COE districts implement consistent policies.

  9. Texas DOT noted that its demand for compensatory mitigation credits was reduced by two-thirds following the 2001 SWANCC decision. In 2001, the Unites States Supreme court issued a decision in Solid Waste Management Authority of Northern Cook County (SWANCC) v. U.S. Army Corps of Engineers that limited the COE's jurisdiction over waters of the United States. Specifically, isolated wetlands can no longer be regulated by the COE under the Commerce Clause on the basis of their usage by migratory birds. As a result of SWANCC, impacts to isolated waters may not need to be mitigated and, therefore, may have some effect on the construction of wetland mitigation banks. It is FHWA policy to mitigate for all wetlands regardless of whether or not they are under COE's jurisdiction. As this mitigation is not mandatory under Federal law or regulation, FHWA can choose a variety of measures to meet this mitigation policy for isolated wetlands. Many States also require that all wetlands be mitigated regardless of Federal jurisdiction. In those States, any loss of required mitigation for wetland impacts due to SWANCC would be negated by State laws that protect wetland resources beyond Federal jurisdiction. FHWA guidance has suggested that credit demands be estimated before banking in undertaken, and that banks be appropriate in scope to meet that demand. In the case of unforeseen events, such as SWANCC, which happen after banks are established and reduce or increase credit needs, there is a mechanism to recover Federal-aid funds through sale of the property where practicable.

  10. Invasive and exotic plant species are a persistent challenge on mitigation sites. Permitting agencies and State DOTs are not always in agreement about scientifically acceptable percentages of invasive plant species conditions on mitigation sites. Typically, a five-percent invasive species maximum is stated in COE permit conditions. DOTs believe that a 20-percent maximum can be reasonably achieved. Reference sites should be used to establish reasonable plant community composition standards.

  11. Mineral mining rights, water supply needs, and other land use issues are not necessarily abdicated in wetland mitigation areas. State laws and/or unspecified legal conservation agreements may allow for unintended uses for mitigation areas. This places the practice of mitigation banking in jeopardy, and eliminates the landscape scale, ecosystem preservation benefits associated with preservation or restoration of large tracts of wetlands. Further, it adds credence to the policy of preferring on-site, in-kind, project-specific mitigation, which, while it does not have the benefits of establishing larger tracts as banks, is not as likely to be threatened with wholesale site conversion to other purposes, such as water supply reservoirs. The benefits of banking include sustainability, stability, and management for public uses. Converting banks to other uses threatens the credibility of banking in general, and government sponsored banks in particular.

  12. Resource agencies are often still reluctant to accept preservation as mitigation. The new pending COE regulations should address this issue and allow the use of preservation of high value wetlands particularly as a component of an integrated mitigation plan.


Based on the best practices, innovative measures, and continuing challenges described above, the scan team offers the following recommendations to improve the effectiveness and efficiency of wetland mitigation banking for State transportation agencies:

Adopt flexibility where prudent in the use of geographic service areas.

Current guidance stresses the use of an ecosystem and watershed basis for establishing service areas. As the COE district offices help States facilitate Federal guidance to adopt a watershed approach to wetland mitigation, some States have been able to adjust easily, while others are finding that this directive is drastically impacting their wetland programs, particularly with regard to the assignment of geographic service areas. Depending on what makes the best ecological sense for a given State, most States are already using geographic service areas established within river basins or six- to eight-digit hydrologic catalog units (e.g., HUC-6, HUC-8, etc.).

For States like Nebraska, whose bank service areas were originally established as major land resource areas by the MBRT, transitioning to a HUC-8 (or possibly HUC-6) approach is a substantial shift and has launched a series of discussions about the future of banking in the State. Clearly, such a change creates considerable financial, administrative, and long-term management challenges that need to be carefully explored. A close, widespread application of this policy (i.e., implementation of HUC-8 service areas) is inconsistent with TEA-21 and SAFETEA-LU, and may result in drastic reductions in the use of banking in general and in the development of single-user, DOT-funded banks in particular - both for wetlands and for other habitat. This is contrary to the ecosystem-based, landscape-scale concepts now being suggested by ecologists who have looked at these issues carefully from a best practices standpoint.

For States like Minnesota, which is currently trying to harmonize WCA (State-level) service areas with Federal directives, the transition has resulted in a few administrative delays but no significant impediments to the use of mitigation banks in the State. Minnesota would also like to enter into discussions about a protocol for mitigating outside a geographic service area where impacts occur. While the northern portion of Minnesota has a surplus quantity of wetlands, wetlands in the southern part of the State are scarce. From MnDOT's perspective, developing wetland mitigation banks in southern Minnesota as a result of unavoidable impacts that occur in northern Minnesota might be a more prudent use of mitigation dollars. However, the language in the Federal guidance does not currently encourage these kinds of discussions.

In order to further the overall goals of the Clean Water Act, mitigation opportunities in watersheds with the greatest ecological need should be given substantial consideration if the impact is located in a different watershed with less ecological need.

Improve the effectiveness of the MBRT process.

Mitigation bank review teams are established in all but two of the States that participated in the scan tour (Minnesota and North Carolina - which have entities, i.e., BWSR and PACG, that essentially operate as MBRTs). The purpose of an MBRT is to ensure a stable and reliable process in the development of high quality wetland mitigation banks in a State. All of the eight States included in the scan tour agree with MBRTs in concept, but feel that some challenges exist in their execution.

Alabama DOT has noticed, for example, that following the formation of the MBRT in its State, approvals for mitigation bank projects went from 6 months to 12 months - and two years in some cases. Time delays were primarily caused by personnel changes on the MBRT and logistics difficulties in coordinating the schedules of the MBRT members for site visits and regular meetings. For similar reasons, Ohio DOT opted to bypass the MBRT framework altogether for a more time-efficient program given that the department administers more than 600 road projects per year. In addition, when conflicts arise or where new policies or research innovations warrant significant changes in the way wetland mitigation banks must operate in a State, the MBRT should play an instrumental role in helping to reconcile any conflicts or to facilitate operational transitions smoothly. Texas, Nebraska, and Pennsylvania are three States, for example, where more, not less, dialogue among the members of the MBRT could offer greater benefits to their respective wetland mitigation programs.

The size of the geographic service area may be correlated to the efficacy of the MBRT. Large geographic service areas reduce the number of banks throughout the State thereby providing more opportunity for the MBRT to focus on a relatively small number of banks rather than several dozen smaller bank sites.

The scan team recommends that the Federal agencies responsible for the establishment of the MBRTs examine opportunities for streamlining the efficiency of these entities and for providing guidance to them on how to negotiate and facilitate changes in banking agreements and bank operations as new policies and new science continue to impact these programs.

Issue guidance on the use of Federal-aid highway funds for mitigation banks.

The ability to use Federal-aid funds for mitigation banks has been in effect since 1991. State funds have always been available. Of the eight States visited, only two (North Carolina and Pennsylvania) have used Federal-aid dollars to support the establishment and operations of its wetland mitigation initiatives. North Carolina made the decision to utilize Federal-aid funds for its mitigation program due to cash shortages at the State level. While this improved the cash flow, use of Federal funds triggered compliance with Federal laws that perhaps would not have been necessary for some of the mitigation projects.

Most of the States have adopted an informal policy of using State project construction and/or maintenance dollars to finance the establishment of advance mitigation sites, reserving any applicable Federal dollars solely for highway construction use. Minnesota's annual operating budget for its wetland mitigation program, for example, is $3 million ($2 million in State bonding money and $1 million in MnDOT funds). The program is funded by the State general fund, with acquisition, design, construction, administration, monitoring, and site management as the major budget line items.

Kentucky, Ohio, and Pennsylvania DOTs have experienced unique struggles trying to communicate the financial aspects of banking to their accounting and legal personnel, and suggest that additional Federal guidance on this point would be helpful. Real estate transactions that involve using transportation monies to buy land for an intangible such as "credits," and then ultimately turning the land over to another entity, have been hard sells for some State DOTs. Kentucky is also compromised by the fact that its State Legislature only meets every two years. As a result, if a new funding mechanism needs to be approved to facilitate its wetland banking objectives, the cabinet may endure a three-year waiting period before implementation of any new measures are achieved.

Financing the long-term management of wetland mitigation sites established through these programs remains a perpetual challenge. Federal-aid funding is not available for long-term management of mitigation sites. Other State agencies or land/conservation trusts that assume ownership and management responsibilities for the sites in perpetuity are not receiving additional dollars to support their stewardship, and it is unclear how the ecological functions established at these sites will be maintained once COE's enforcement authority expires. Minnesota is considering allocating a five-percent portion of its annual payment to BWSR, its mitigation agent, to be set aside for a management trust.

Independent studies of mitigation site management costs (e.g., see Center for Natural Lands Management, suggest that the total costs associated with the long-term management of such sites, including the enforcement of conservation easements, can run from $100 to $1,000 per acre per year. Public access and recreational use of the sites can dramatically increase these costs. The center uses a property analysis record (PAR) methodology to help agencies determine the long-term management costs associated with perpetual mitigation site stewardship. An examination of this and other available tools, as well as an improved understanding of how to factor the contributions that volunteers make toward long-term land management, would be a useful resource for State transportation departments engaged in wetland mitigation banking.

In short, mitigation of project impacts is an eligible cost for participation with Federal-aid highway construction funds under both National Highway System and Surface Transportation programs, as well as other construction elements under the SAFETEA-LU. That remains the basic way in which wetlands mitigation, including banking, can be funded for Federal-aid highway projects. FHWA must work with State DOTs to clarify regulations and guidance regarding the use of Federal-aid construction funds to implement satisfactory procedures for such use in accordance with SAFETEA-LU. This applies to habitat banks as well as wetlands banks.

Engage inter-agency input in the adoption of functional assessment methodologies.

Functional assessment technology is still inadequate in general, or is not being fully implemented when it is appropriate. Assessment methodologies used to characterize wetland types and functions range from "best professional judgment" to meticulous data gathering and analysis based upon a specific methodology such as the WHAP or Habitat Evaluation Procedure (HEP). The National Mitigation Action Plan (13) outlines strategies for agencies to implement the hydrogeomorphic (HGM) approach to assessing wetland functions, and COE advocates for its support and implementation. The States' experiences with using a specific methodology, adopting one, or transitioning to a new one (due, for example, to the formation of an MBRT), have suggested three recommendations concerning their use.

First, the COE and other agencies should be directly involved in discussions and decision making related to the adoption of a functional assessment methodology. This is especially true for stream mitigation, which many States, save Minnesota, believe will be their next major issue of environmental concern. With the involvement of COE, in particular, site proposals may be rejected or mitigation ratios increased. Nebraska has invited the COE-Omaha District Office and other agencies to participate in training on functional assessment methods. North Carolina uses an MBRT-like entity called the PACG (Program Assessment and Advisory Group) to regularly discuss acceptable assessment methodologies and performance standards. Good communication about functional assessment methods is critical as this dictates the way in which credits are calculated and released through the course of a mitigation project.

Second, the scan team discovered that some assessment methodologies demonstrated a "bias" for one function over another in the wetland mitigation sites developed. For example, Alabama and Kentucky work very closely with their State and Federal wildlife and fisheries agencies, and thus their sites are often designed as waterfowl management areas to be opened eventually for hunting and recreation. TxDOT's adoption of the WHAP methodology reflects a bias for wildlife functions as well. While this is an entirely acceptable objective, the scan team noticed that water quality objectives (e.g., flood/storm water retention, highway runoff filtration, etc.) were usually not considered fully, and in some cases, could add to the functional values of the sites developed. This was especially true for TxDOT's Coastal Bottomlands mitigation bank site, which has significant water storage and water quality functions, although it does not currently receive credits for these functions. Some States, like Alabama and Ohio, receive credits for endangered species habitat on their wetland sites, while this is prohibited in other States. Credit for stream mitigation on existing wetland bank sites is also prohibited and considered "double dipping." Failure to recognize the value of these functions on a wetland mitigation site is not always practical from an ecosystem perspective, and regulatory agencies may want to consider on a case-by-case basis when allowing additional credits for wildlife habitat or stream mitigation on wetland bank sites is appropriate.

Third, the value of buffers and preservation credit ratios should be more carefully scrutinized. Vegetated buffers filter water runoff prior to discharge into an aquatic area. These buffers also can provide a corridor for wildlife migration. An upland buffer can, of course, be valuable habitat in itself. Some States give credit for upland buffers abutting wetlands. Credit should be given to buffers as they are becoming a requirement for mitigation sites and provide definitive ecological benefits. With regard to credit ratios for preservation, current guidance states that preservation should be used only in exceptional circumstances and only in coordination with a restoration activity (6). Many of the State DOTs visited on the scan, however, made a strong case for preserving unique or rare habitat types over restoring lesser functioning ones in some watersheds. Bottomland hardwood forest wetlands, for example, which can require 50-100 years to restore might be best pursued as a preservation objective, rather than as a restoration or enhancement activity. North Carolina, which is in the process of developing an extensive network of watershed plans at the local level, is discovering through this process, that sometimes "replacing a wetland with a wetland" does not make good ecological sense from an ecosystem perspective. Similarly, the Ohio EPA is currently establishing biological criteria for water quality that may significantly influence the way the State evaluates mitigation within its watersheds. As science advances and as professionals learn more about the biological aspects of watersheds, it may become necessary to place more value on the role of preservation and other kinds of "exceptional" mitigation in wetland mitigation plans.

Invest more research and technology transfer in invasive plant control and vegetation management.

Of all the technical issues raised with regard to site maintenance, dealing with invasive plant species is by far the most prevalent issue of concern, followed by planting regimens and vegetation management. Nearly all of the States are investing research dollars and project monies into the development of knowledge and tools that can help eradicate invasive plants or noxious weeds (such as the Chinese tallow tree in Texas and purple loosestrife in Minnesota). Minnesota DOT has developed remarkably successful strategies for harvesting native plant species and suppressing the spread of invasives through the establishment of diverse vegetation/landscape communities. Nebraska is utilizing prescribed burning and mowing regimens in combination with the grazing of goats for managing vegetation and controlling weeds on its wetland mitigation sites.

Next to hydrology and soils, vegetation is a critical indicator of a site's sustainability. When a mitigation bank site's operational life cycle is complete, it is invasive plants and noxious weeds, not to mention ecological degradation caused by unforeseen land use changes, that may pose the greatest threat to the long-term ecological integrity of the functions of wetland mitigation sites.

Actively promote and share success stories about innovative partnerships.

Opportunities for enhanced inter-agency relationships and innovative partnerships are where wetland mitigation banking offers the greatest lessons learned. Perhaps the most successful innovative partnerships observed on the scan are those in Texas, North Carolina, Kentucky, and Minnesota where a third-party "mitigation agent" has stepped in to manage the mitigation tasks that the State DOTs may be understaffed or lack the expertise to conduct, or that they may not be required to do. TXPWD, EEP, USFWS, and BWSR all play this role, differing only in the formality of their involvement and level of funding. With their input, State DOTs are able to achieve wetland mitigation objectives that are considered "outside the box" and that ultimately foster a more comprehensive, ecosystem perspective of wetland mitigation for the State.

Clarify the definition of a "bank."

According to the 1995 Federal Guidance for the Establishment, Use, and Operation of Mitigation Banks, mitigation banking is defined as "the restoration, creation, enhancement and, in exceptional circumstances, preservation of wetlands and/or other aquatic resources expressly for the purpose of providing compensatory mitigation in advance of authorized impacts to similar resources." While the concept was pioneered in the early 1980s by the U.S. Fish and Wildlife Service as a way for State agencies and large regulated entities to consolidate mitigation for many dispersed impacts, it has become an economically important commercial endeavor dominated by entrepreneurial providers of mitigation credits. DOT-established banks remain the largest single sector of non-commercial banks.

Perceptions of what constitutes a bank vary widely among the States visited. In some cases, the term bankcarries a negative connotation, and some of the resource agencies and transportation agencies refuse to use it in their program name because a wetland mitigation bank may be perceived as a purely commercial enterprise. As one State agency staff person remarked, "We are not in the business of making money; we're in the business of getting credits." Moreover, banking can be perceived as a means of bypassing the sequencing requirement under the Section 404 regulations to avoid, minimize, and then compensate for the impacts of transportation projects on wetlands, although it has always been clear in Federal guidance that the availability of bank credits does not affect the sequence of mitigation steps. In States where agency relationships are still maturing, this perception may be evident - and to some extent, may inhibit creative thinking about the ecological benefits to be gained from banking.

On the other end of the spectrum, some States now consider the term "banking" irrelevant. North Carolina and Minnesota, for example, have adopted comprehensive, statewide approaches to compensatory mitigation at the ecosystem level, moving beyond the usual political, biological, and geographical boundaries inherent in traditional concepts of banking.

In the realm of compensatory mitigation, the desired outcome is ultimately what is most important, and that is economically efficient and flexible mitigation opportunities that replace essential aquatic functions for wetland and other aquatic resource losses in a manner that contributes to the long-term ecological functioning of a watershed.

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