Market Features & Rules: When a land developer fills or otherwise impacts a wetland they may buy offsets from a mitigation banker. The mitigation banker restores, enhances, creates or preserves an area of wetland to generate credits.  In April of 2008, the US Army Corps of Engineers (Corps) and US Environmental Protection Agency (EPA) jointly issued the Final Rule on Compensatory Mitigation for Losses of Aquatic Resources.

The number of credits generated by a restoration project is related to the area of wetland and/or the functional value of the wetland (credit determination varies by Corps district). In many instances the number of credits available for sale is less than the number of acres of restored. Further, a ratio is applied to the mitigation transaction typically in the range of one acre of impacted wetland to between one and three acres of restored wetland. Ratios increase to one to ten acres for wetland preservation projects that do not create or improve wetlands.

A mitigation banker is responsible for establishing a wetland bank following financial and environmental guidelines before credits are released to the bank for subsequent sale. The Mitigation Banking Instrument which constitutes approval to restore, enhance, create or preserve the wetland has historically taken between 6 and 18 months to complete and considerable longer in some Army Corps districts. The new Mitigation Rule sets a timeframe for steps in the approval process and agency decisions on mitigation banks should now be made within 225 days.

Mitigation is expected to take place before the impact on the wetland occurs, nonetheless credits are released to the bank sponsor over a period of a few years after the wetland is planned and authorized, and before 5 years of project monitoring concludes. In many instances up to 15 percent of the expected credits from a bank can be released before construction is complete.

To secure the long-term success of the mitigation bank, a performance bond and contingency security are required to cover construction and 5 year post construction monitoring of wetland quality and function. Long term management of the site must be guaranteed and endowed by the bank sponsor. Wetland mitigation credits must ensure that the wetland functions will be guaranteed to endure to perpetuity. The regulatory authority can exercise random audits and inspections of the compensation wetlands project.

Three main performance parameters are used to verify the number of credits created at the site and the site's credit value, including hydrology, vegetation and presence of exotics . Different states, and oftentimes, regulatory agencies in the same state use different methods to certify credits. Functional Assessment methods are more complex than acreage to credit equivalency ratios.

Wetland credit prices range anywhere from $3,000 to $600,000. The variability in the market value of wetland section 404 credits reflects differences in the availability and price of land suitable for bank development and the cost to create an acre of wetland compensation within a given region. Although the sales prices of wetland credits are not tracked or made publically available by the Corps, in-lieu fee prices can serve as a rough proxy.  Some state agencies set in lieu prices that can be paid if mitigation opportunities are not available. A sample of these in lieu fees include:

• $24,000 - $46,000 per acre of non-riparian wetland in North Carolina
• $36,000 - $63,000 per acre of riparian wetland in North Carolina
• $156,000 per acre of coastal wetland in North Carolina
• $55,000 - $65,000 per acre of nontidal wetland in Southeast Virginia
• $125,000 - $150,000 per acre of nontidal wetland in Northern Virginia
• $400,000 - $653,000 per acre of tidal wetland in Virginia
• $84,500 per acre of wetland in Oregon

Service Area: The basic rules for mitigation banking apply to the entire United States of America. Trading for a given bank is normally limited to a localized geographic region based on US Army Corps of Engineers hydrologic unit designations.

Market Participants
Sellers: Mitigation bank sponsors are the entities whose wetland creation, restoration, enhancement or preservation results in credit production. Environmental law Institute research documents 46 approved banks in 1992, 197 in 2002, and 330 in 2005.  Ecosystem Marketplace research puts the figure of approved banks at around 440 as of the end of 2008.  An additional 194 banks are in early stages of approval process.

Buyers: The client or permittee is the entity whose activities will result in a permitted wetland impact for which mitigation is being sought through a bank. Buyers of credits include public and private developers of land. Examples include the Department of Transportation and utilities in many states, commercial and industrial construction and residential developers.

Mitigation Banking Review Team: Representatives of the US Army Corps of Engineers with local regulatory agencies and community interests constitute an ad hoc Mitigation Banking Review Team to oversee the activities of mitigation bankers, evaluate the bank product that a banker proposes to build, and certify the creation of credits that can be used to mitigate identified impacts approved in an individual Impact Permit.

Contractors: Consultants are available in many states for hire to delineate wetlands or other waters of the United States, design wetland compensatory mitigation projects , or assist mitigation bankers in navigating the permitting process with the multiple agencies involved.