Stream mitigation banking is a market-based approach for managing negative impacts on fluvial systems under Section 404 of the US Clean Water Act. The core rationale of mitigation banking is that we should protect the environment not by preventing harm, but by pricing it: developers, public-works agencies, and other entities may damage a stream in one location as long as they pay for the restoration of a comparable stream elsewhere (see Compensatory Mitigation and Valuation of Ecosystem Services). That restoration is most often provided by a for-profit company that speculatively purchases rights to land with a degraded stream on it, then restores that stream to produce stream credits. The stream credits can then be purchased by developers or other entities to fulfill the permit obligations incurred by proposing to damage another stream somewhere else (see Stream Mitigation Banking in Practice). Along with its older sister, wetlands mitigation banking, stream mitigation banking is one of the oldest and most firmly established market-based approaches to environmental management in the world. As of 2018, there were nearly 3,500 mitigation banks in the United States, with sales estimated at least $1 billion per year. Mitigation banking has thus become a poster child for market-based (also referred to as neoliberal) approaches to conservation, inspiring comparable policies to tackle issues from endangered species to carbon dioxide emissions on every continent except Antarctica. However, there has been relatively little biophysical evaluation of whether stream mitigation banking actually leads to better outcomes for fluvial systems, and the data we do have are not promising (see Environmental Impacts).
Mitigation banking is part of a broader category of environmental policies, typically referred to as compensatory mitigation or offsetting. Compensatory mitigation attempts to address the fact that environmental agencies only rarely have the political clout to block environmentally damaging economic development. Instead, compensatory mitigation allows environmental harm as long as comparable ecosystems elsewhere are restored to offset the damage. The framework intended to guide compensatory mitigation practice is called the mitigation sequence or mitigation hierarchy, and in the United States it has three steps—avoid, minimize, compensate—that are intended to be performed in order. Projects should be designed to avoid damaging the environment as much as possible. Impacts that cannot be avoided should then be minimized. Compensation is acceptable only once options for avoidance and minimization have been exhausted. In theory, this should mean that compensatory mitigation is rare. The political difficulty of blocking economic development on environmental grounds, however, has transformed compensatory mitigation from a last resort into the first and final step in many cases. It is far easier for environmental agencies to ask permit applicants to pay to offset the damage from their projects than to ask that they be thoughtfully redesigned. The end result, as Houck 1989 ruefully observes, is that compensation, the third step in the sequence, is often understood to be synonymous with mitigation in its entirety. Background about Compensatory Mitigation Requirements under CWA Section 404 provides a useful overview of compensatory mitigation in the United States, while Darbi, et al. 2009 does the same for compensatory mitigation practices internationally. Hough and Robertson 2009 reviews the history of compensatory mitigation for wetlands and streams under Section 404 of the Clean Water Act. Environmental Law Institute 2002 is a useful overview of how compensatory mitigation works for wetlands, while Institute for Water Resources 2015 provides a more recent review of the state of compensatory mitigation under the Clean Water Act after the passage of the 2008 Mitigation Rule. Gardner 2011 describes wetlands mitigation banking in detail. Palmer and Filoso 2009 questions the overarching rationale undergirding compensatory mitigation (see also Maron, et al. 2012, cited in Environmental Impacts). Regulatory in Lieu Fee and Bank Information Tracking System provides basic information on all mitigation banks in the United States.
Darbi, Marianne, Holger Ohlenburg, Alfred Herberg, Wolfgang Wende, Daniel Skambracks, and Matthias Herbert. 2009. International approaches to compensation for impacts on biological diversity. Dresden, Germany: Leibniz Institute of Ecological and Regional Development.
This is an excellent and carefully researched overview of compensatory mitigation practice internationally, including in Germany and Australia.
Environmental Law Institute. 2002. Banks and fees: The status of off-site wetland mitigation in the United States. Washington, DC: Environmental Law Institute.
This report by a respected environmental nonprofit provided the first national overview of the state of compensatory mitigation under the Clean Water Act.
Environmental Protection Agency. Background about compensatory mitigation requirements under CWA Section 404.
This EPA website provides an accessible basic introduction to compensatory mitigation. The site includes links to many other useful resources.
Gardner, Royal C. 2011. Lawyers, swamps, and money: U.S. wetland law, policy, and politics. 2d ed. Washington, DC: Island.
This accessibly written book, updated in 2011, provides an engaging overview of stream mitigation banking’s older sister: wetlands mitigation banking.
Houck, Oliver A. 1989. Hard choices: The analysis of alternatives under Section 404 of the Clean Water Act and similar environmental laws. University of Colorado Law Review 60:773–840.
Houck, an environmental law professor familiar to readers from John McPhee’s classic piece “Atchafalaya,” provides a clear-eyed view of some of the many ways in which compensatory mitigation practice fails to live up to the theory.
Hough, Palmer, and Morgan M. Robertson. 2009. Mitigation under Section 404 of the Clean Water Act: Where it comes from, what it means. Wetlands Ecology and Management 17.1: 15–33.
The authoritative history of the development of compensatory mitigation under the Clean Water Act.
Institute for Water Resources. 2015. The Mitigation Rule retrospective: A review of the 2008 regulations governing compensatory mitigation for losses of aquatic resources. Washington, DC: US Army Corps of Engineers.
This report, written by the Institute for Water Resources but authorized both by the US Army Corps of Engineers and the Environmental Protection Agency, provides useful detail about the state of compensatory mitigation in the wake of the passage of the 2008 Mitigation Rule.
Palmer, Margaret A., and Solange Filoso. 2009. Restoration of ecosystems for environmental markets. Science 325.5940: 575–576.
This scathing critique argues that because restoration is itself so uncertain, the core premise of compensatory mitigation (that we can offset harm in one place via restoration in another) is impracticable.
US Army Corps of Engineers. Regulatory in Lieu Fee and Bank Information Tracking System.
RIBITS is the Corps’ database of all stream and wetland mitigation banks in the United States and is thus an excellent source of basic data on mitigation banking.
US Army Corps of Engineers and Environmental Protection Agency. 2008. Compensatory Mitigation for Losses of Aquatic Resources: Final Rule. In 33 CFR Parts 325 and 332; 40 CFR Part 230. Federal Register.
The preamble to the 2008 Mitigation Rule provides an excellent overview of compensatory mitigation. The language is dense and technical, however, so this is not a good place to start.
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