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Mitigation Hierarchy Explained

The mitigation hierarchy is a set of environmental rules for companies or governmental entities that impact nature by laying roads, building houses, or even drilling for oil. It makes it clear that they have to first avoid, as much as possible, doing any damage, then minimize the adverse impacts they do cause, and finally offset remaining unavoidable impacts.

The last step involves fixing whatever mess they make by either restoring or rescuing an ecologically similar area of equal or greater environmental value.

This last step supports an industry, known as “mitigation banking” or “conservation banking,” that earns billions each year creating “credits” representing rehabilitated and protected habitat. Developers buy these credits to offset their environmental impact.

Mitigation banks focus on wetland credits, while conservation banks focus on habitat for imperiled species. The restoration credits are what’s “banked” for future sales.

Obama’s Biodiversity-Friendly Move Spurs $2 Billion In Commitments To Conservation

Kelli Barrett

Biodiversity conservation in the US is getting revamped as federal agencies in the United States are accelerating their conservation commitments and drawing billions of private-sector dollars – largely because President Barack Obama is streamlining mitigation policies. The Fish and Wildlife Service released a revised umbrella policy earlier this month.

25 March 2016 | Late last year, just before he thwarted the Keystone XL oil pipeline, US President Barack Obama directed the five federal agencies responsible for land management to follow the mitigation hierarchy when designing biodiversity protection policies.

The presidential memorandum drew substantial attention, not necessarily because of its inclusion of the mitigation hierarchy, but for its ultimate objective of scaling up private investments for natural resource conservation. The Obama administration intends to streamline policies among federal agencies, aiming to create the right atmosphere for private investment.

It might be working. This month, 11 organizations – some public, though mostly private – committed over $2 billion to water, wildlife and land investments. It’s a commitment that the White House quickly labeled one of the biggest non-federal investments in conservation ever, and that mitigation banker George Kelly attributed to the positive policy signals.

“Policy consistency and clarity across the board really ratchets up the opportunity for large-scale private investment in conservation,” says Kelly, who is Chief Markets Officer of Resource Environmental Solutions (RES), a Texas-based restoration company and one of the 11 entities pledging millions towards conservation activities.

Agencies are in the process of bringing their policies in line with the memo, starting with developing a landscape-level planning effort and following the hierarchy, two of the memo’s primary provisions.

A Flurry of Federal Activity

In a White House announcement earlier this month, the Department of the Interior (DOI) and the Department of Agriculture (USDA) cited Obama’s memo when committing to accelerate restoration on public lands and farm fields. The USDA is funneling $20 million into Conservation Innovation Grants for developing technologies and tools that benefit both natural resources and marginalized agricultural producers. These grants encourage the use of conservation finance, leveraging non-federal funding through environmental markets, for instance, to improve private lands.

Meanwhile, DOI is taking steps to advance its newly launched Natural Resource Investment Center, which focuses on enhancing private investment opportunities in wetland and species mitigation, water conservation and infrastructure needs. DOI is also required, under the presidential memo, to release a new policy for compensatory mitigation under the Endangered Species Act (ESA) in 2016. DOI officials anticipate the policy to be out this spring.

And the Fish and Wildlife Service (FWS), which is part of the DOI, is the first of the required agencies to release a new mitigation policy, the first proposed revisions since 1981.

A New Policy for a New Approach

The DOI has made it clear that it is transitioning to a landscape-level approach to land management. A new policy it released last year lays out processes and principles to implement landscape-scale mitigation – basically a holistic approach that proactively protects and conserves natural resources rather than doing so on a project-by-project basis. It’s meant to enhance ecological results while increasing certainty among stakeholders, and DOI agencies, like the FWS, are taking heed of this big-picture transition.

“There’s a real focus on a landscape-scale approach to mitigation now, which is recognizing a lot of what we’ve learned over the years,” says Craig Aubrey, Chief of the Division of Environmental Review within the FWS.

The Big Revisions

This revised DOI policy applies to endangered species. The ESA was excluded from the 1981 policy, largely because, at the time, FWS officials didn’t feel the traditional concept of mitigation complied with ESA regulations, explains Brooke Wahlberg, an Associate Attorney at Nossaman. Much has changed, including an amendment to the ESA, which authorizes incidental harm. This amendment is the main driver for mitigation under the ESA and opens the act up to traditional mitigation.

The policy also expressly favors a net conservation gain from mitigation outcomes, as opposed to no net loss, which is different from the previous version.

This pleases some in the conservation community. Aubrey says the agency hasn’t received many comments yet from other stakeholders such as developers, landowners, and indigenous tribes, but initial impressions appear to be good.

“We were really excited to see the goal of net conservation gain added in,” says Will McDow, the Manager of Habitat Markets at the Environmental Defense Fund (EDF).

Several from the space are also happy to see the policy strongly recognizing advanced mitigation mechanisms, which, just like it sounds, delivers mitigation in advance of adverse impacts. Conservation banking generally provides mitigation ahead of development and is considered a form of advanced mitigation. In-lieu fee funds, government-sponsored ecological sites designed to offset development impacts, don’t.

“The policy is great for the mitigation community because they specifically recognize the value of banks in an ahead-of-impact context,” says Wahlberg.

“The policies are so different, they’re black and white,” adds Wayne White, President of the National Mitigation Banking Association, when comparing the revised version to its 1981 counterpart. White notes the entire school of thought on mitigation has shifted, now promoting landscape-scale planning and focusing efforts on areas of high conservation value. Three decades ago, compensatory mitigation was almost nonexistent.

“This policy gets to the level that we’ve been trying to reach with the Service and we’re interested to see how this steps down to individual programs,” White says.

A Question of Equivalency

However, this initial positive reaction doesn’t mean stakeholders are without concern. There is some uncertainty around equivalency, or if the same standard of mitigation applies across the different mechanisms.

It’s a significant question, since the cost of mitigation can vary depending on its quality. Bankers have claimed mitigation of an inferior quality that sells at a lower price undermines the more expensive and rigorous credits generated from their market.

When discussing equivalency, White notes the Habitat Credit Exchange. The exchange is a market mechanism that connects parties buying species offsets with the landowners, farmers and ranchers providing the habitat. It’s the brainchild of EDF, and the FWS mentioned the mechanism by name in its revised policy. The mention puts the exchange on the same level as other federally approved types of mitigation tools like banks or an in-lieu fee fund, McDow says.

But White says it’s unclear whether these exchanges indeed operate under the same standards. Their evolution is something to follow, he says.

McDow agrees that all types of mitigation need to adhere to the same high standards. “Equal standards are critical for expanding mitigation markets and bringing landowners in to expand conservation across the landscape,” he says.

Equivalency is also important when dealing with at-risk, or candidate species, like the  lesser prairie chicken, or the high profile greater sage-grouse. Though the birds aren’t listed currently, they may become listed.

“As an investor, if we decide to step into one of these programs and establish banks in combination with what the exchange has in place, we need to make sure that should the species be listed at a later point, that the credits are carried over,” White explains.

Paradigm Shift or Investment Spree?

The presidential memorandum appears to be spurring activity in conservation. But will these investments and the newfound attention in conservation last? Thinking about the upcoming presidential election in November reminds Kelly that a new political administration could easily change course, opting not to fulfill previous policy plans.

“Policies, unlike regulation, can easily be changed,” Kelly says.

Kelli Barrett is a freelance writer and Editorial Assistant at Ecosystem Marketplace. She can be reached at kbarrett@ecosystemmarketplace.com. 

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