Stream Mitigation Banking

Nat Gillespie

In the US, there has been experience with wetland mitigation banking for well over a decade. Now, mitigation is being increasingly applied to certain types of wetlands – streams and rivers – that carry with them some very specific problems and issues.

In the US, there has been experience with wetland mitigation banking for well over a decade. Now, mitigation is being increasingly applied to certain types of wetlands -streams and rivers– that carry with them some very specific problems and issues. As the practice of stream mitigation grows in the US, the Ecosystem Marketplace takes a look at the problems and the potential. Luna Leopold, the father of modern hydrology and stream assessment, once said, "the more one studies rivers, the more complex they appear." Now, as the use of stream mitigation banking gains momentum among private developers and public infrastructure agencies across the United States, followers of Leopold find themselves contemplating the complexities of how the market-based approach to conservation will help (or hinder) efforts to offset the impact of development on America's flowing waterways. What, they ask themselves, will be the long-term impact of mitigation on the country's rivers and streams? (See related articles on wetlands mitigation: here and here) Most planners and developers think of streams as blue lines on a map. In reality, however, stream reaches are components of a much larger, interconnected system. While classified as wetlands under Section 404 of the Clean Water Act, streams differ from swamps and lakes because they are more dynamic and, importantly, because they link together entire landscapes. The dynamism and scale associated with streams often make it difficult to identify and rectify disturbances to their biological, chemical and hydrological functions. Despite, or perhaps because of, the complexity associated with stream restoration, the use of mitigation to offset damage to streams and rivers is increasingly in demand. "More mitigation banks are seeing the need for complex banks, providing riparian, wetland, upland and stream 'credits' to their customers," notes Mark Sudol, Chief of the Regulatory Program at the U.S. Army Corps of Engineers. By restoring sites so that their banking "instrument" includes various habitats, many entrepreneurs now offer the equivalent of one-stop shopping to developers that require stream, wetland, and upland mitigation credits.

A Growing Practice

Mitigation banking in general has been growing at an impressive rate across the US. In 2002, an Environmental Law Institute Report documented 219 approved mitigation banks and another 95 pending approval across the country, an increase of 375% since 1992. The growth of stream mitigation banking has been equally astounding: The first stream mitigation bank was formed in 2000 on a 2.6 mile stretch of Fox Creek in Missouri. The sponsor planted trees and shrubs along a 300-foot wide protected stream corridor, creating 197.2 stream mitigation credits. Five years later, there are an estimated two-dozen (no one has exact numbers) stream mitigation banks operating in the United States. These banks range from 15,000 linear feet of stream length (the currency used in stream mitigation banking) to 150,000 linear feet in size. With each linear foot of stream restored costing anywhere from $8,000 to over $50,000, even the quickest of calculations suggests that there is some real money in the business of stream banking.

The Role of Regulation (State vs. Federal)

The growth of stream mitigation banking is, in part, due to the growth and refinement of relevant regulations. It all began in 1996 when the US Army Corps of Engineers (USACE) began specifically regulating impacts to streams in its Nationwide permits. The use of off-site credits to mitigate for stream impacts began as a relatively simple equation: Many states determined a stream's net worth simply by its length. Under this scenario, a road construction project could affect 1,000 linear feet of a stream you'd need a canoe to cross, and for mitigation, the state highway department could purchase credits for 1,000 linear feet of a restored mountain brook that your child might jump across. Since then, argues USACE's Sudol, "The Corps' regulatory approach has changed significantly." He explains that the Corps is increasingly reviewing the science behind stream mitigation in-house and "requiring applicants to provide more extensive mitigation review." Richard Mogensen, a mitigation banker who serves as Director for Mid-Atlantic Mitigation LLC and was previously the President of the National Mitigation Bank Association, reflects, "Initially, construction of a wetland could mitigate for impacts to streams. Now, agencies are requiring specifics on streams so that streams are mitigated for streams." These new regulations are being developed at both the State and Federal levels. At the Federal level, for instance, the Army Corps of Engineers coordinated with other agencies to produce in 1995 the "Federal Guidance for the Establishment, Use and Operation of Mitigation Banks". This is being continually updated with added guidance produced in 2002 (view related article). The idea behind the 1995 report was to standardize the language that defines the general boundaries of wetlands mitigation banking. Since then, the Corps has been developing an online restoration and mitigation website listing all the current stream banks across the country, while working to field-test several protocols for monitoring and assessing the effectiveness of these banks. Meanwhile, at the State level, agencies have rebuked the Federal Government for its tendency to adopt a one-model-fits-all approach to restoring streams. They argue that not all streams are created equal, and that what is needed is a more decentralized, project-specific approach. In some states, such as Virginia, they have gone as far as adopting their own approach to stream mitigation. For instance, the Norfolk (Virginia) District Corps of Engineers accounts for five different parameters –including the size, stream order ¹ and the length of stream-when considering a mitigation project. These parameters together determine what are being called "Stream Condition Units" (or SCU's), which are essentially a more complex rating methodology used to determine a stream's physical and biological functions, something that is lost in a simple calculation of a stream's length. Additionally, some states have gone to great lengths to ensure that the mitigation does more than simply offset for damage done to a stream on a one-to-one basis. In Virginia, again, the regulators are requiring in some cases that 2 acres of stream be restored or protected for every acre of wetland impacted.

The Benefits of Stream Mitigation

Proponents of mitigation banking for streams -like those for mitigation banking in general-often make their case on pragmatic grounds: development is inevitable, they say, and the creation of a market for enhanced or restored streams attaches some monetary value to important ecosystem attributes. "Ninety-nine percent of all requested Army Corps of Engineer Permits are issued," says George Kelly, principal and founder of the mitigation banking company, Environmental Bank and Exchange, LLC (EBX). He argues that the systematic approach provides an efficient, market-based system that assigns sorely needed financial worth to complex functions like flood control, water quality protection and wildlife habitat that until recently were rarely recognized, let alone valued. "High quality stream mitigation promotes good decision-making," adds Kelly, whose Montana-based company is involved in a 150,000 linear foot stream mitigation project in North Carolina. In their infancy, he explains, many stream mitigation projects stumbled as designers directed little attention to cost-efficiency or site selection, achieving questionable benefits at exorbitant costs per linear foot. By bringing business acumen to the business of restoring and enhancing streams, Kelly believes, stream mitigation banking firms exert a fiscal discipline on the practice of rebuilding streams. Additionally, with the free market comes the sort of flexibility often lacking in the public sector, and this can lead to enhanced cooperation and speed with regard to implementing stream restoration work. Private banks can make inroads with landowners who either distrust the federal government or feel that the government moves too slowly. "A large part of my work is on the ground," says EBX's Kelly, "walking the watershed and meeting with landowners." As opposed to successful, incentive-based federal programs with long waiting lists and funding often at the mercy of appropriations bills -programs like the Conservation Reserve Program– private entities can sometimes provide more money in a more timely fashion than can the State or Federal governments. The regulatory agencies, meanwhile, have embraced off-site compensatory stream mitigation for many of the same reasons they tout its successful application to other forms of wetlands: First, they say, mitigation occurs in advance of development impacts, and so temporal losses of ecological function are theoretically eliminated. Second, they argue, the watershed and ecosystem benefits are greater from the restoration of a physically larger area than from a series of smaller, fragmented mitigation sites. Third, they point out that the environmental professionals that create the mitigation-banking instrument are required to maintain the project site and acquire a conservation easement or similar deed restriction to protect the site in the long-term. In this way, the successful establishment of the project site and the subsequent environmental benefits are secured into the future.

But there are Problems

Stream mitigation, however, is not without controversy. For instance, one potential problem in for-profit stream mitigation is that, as an inevitable consequence of the free market, certain streams are less profitable and therefore less attractive to restore than others. Urban streams are one group that falls into this "less desirable" category. Stream restoration entrepreneurs are often wary of attempting to restore streams in drainage basins that exceed a certain threshold of impervious cover. To put it more simply, asphalt prevents water from seeping into the ground, allowing it to flow straight into river systems. As a result, such landscapes have experienced dramatic increases in peak discharge and in the recurrence interval of peak flows. In other words, where there is more concrete and buildings, floods tend to become larger and more frequent. All of this means that in rapidly developing areas, stream mitigation may constitute a less prudent investment because new culverts, new ditches, more asphalt and more buildings are continually changing the hydrology and decreasing infiltration rates. Likewise, larger rivers may be less appealing for restoration work because their size often dictates a greater cost per linear foot of restoration work. Additionally, the flood damage from large rivers is often spread over a larger floodplain area across a greater density of human settlement per linear mile. So higher order river segments present greater liability potential to the mitigation sponsor as residents look for scapegoats for the damage and discontent that so often follows floods. These conditions have led to a situation where, like brook trout and other sensitive fish species, stream mitigation bankers appear to be migrating to the headwaters where they are more apt to find the last refugia of natural hydrology, far from the hazards of potential landowner conflict and the devastating advance of suburbia. All of which leaves some urban and suburban watersheds, quite literally, hung out to dry. Since stream mitigation banking provides little incentive to attack the problems in these larger, more difficult locales, some experts believe that the problems of large and urban watersheds can only be addressed through changes in the tax structure or a considerable re-definition of the whole stream mitigation banking system.

A More Fundamental Concern

Beyond these "blind spots" for stream mitigation, some conservation groups have more fundamental concerns regarding the entire concept of offsetting damage to one ecosystem with the restoration of another. They are worried that, with the rapid increase of stream mitigation, the US may be revving up its mitigation engine without really raising its head to see where it is taking the country's environment. "What scares us," says Steve Moyer, vice president of government affairs at Trout Unlimited, a nonprofit whose mission is to protect, enhance and restore trout and salmon habitat, "is the potential that businesses seeking a profit will perform the absolute minimum amount of mitigation, which can never fully replace what natural habitat is lost." He says that the success of stream mitigation banking " depends entirely on how tightly the permit requirements are drawn." The underlying fear of stream conservation advocates is that an efficient off-site compensatory mitigation system ultimately serves to facilitate the approval of projects that should never gain approval because of the environmental destruction they will cause. They are, they say, worried about the inherent ability of ecosystems to be traded and fear that the creation of stream mitigation banks will ultimately serve simply to sanction development and promote growth. "There are some projects," Says Moyer, "that should never be permitted because of their impacts to streams, and our question is, will an increased reliance on artificial maintenance move us away from protection of natural streams and allow certain projects to proceed where the impacts should be fully avoided, not mitigated?" Still, not all conservation groups are against the use of mitigation. Many are torn between what they see as a "best possible" solution, one that may provide a welcome source of cash for the under-funded conservation and stream restoration projects, and an instinctual distrust of the idea that damage to one ecosystem can be offset by the protection or restoration of another. There are also conservation groups that have embraced the concept of mitigation, groups who argue that -since trends suggest that the use of stream mitigation is not only here to stay, but also likely to grow-the best approach for the conservation community may well be to engage in shaping the direction and standards of stream mitigation banking in the years to come.

In Conclusion

Overall, the jury is still out on whether stream mitigation banking will ultimately help or harm America's watersheds. Its proponents plead for pragmatism and argue that it is the best possible solution in an imperfect world. And, they say, it is a solution that is getting better and better every day. Its detractors, on the other hand, are troubled by its inherent assumption: the belief that society can restore the varied and complicated functions that streams provide, free of charge, in their natural and undisturbed state. Such hubris, they say, could one day prove dangerous. In the end, however, the verdict on the future of stream mitigation will depend to a large extent on how the US answers a question posed Palmer Hough, Environmental Scientist at the Wetlands Protection Division of the US Environmental Protection Agency (EPA); a question that recalls Luna Leopold's assertion regarding the complexity of riverine ecosystems. "Can we recreate ecological functions," he asks, "and move them around the landscape, and yet not lose a part of our environment that we might not yet fully understand?" Nat Gillespie is a recent graduate of the University of Michigan's School of Natural Resources & Environment and is a fisheries scientist with Trout Unlimited. He can be reached at [email protected].

¹Stream order is a simple method of classifying streams based on the number of tributaries located upstream. A stream with no upstream tributaries is a first order stream, and two first order streams meet to create a second order stream and so on.

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