Are small mitigation bank sites feasible
What happens when the regulatory requirements, design and construction costs, and the burden of restoration and maintenance becomes too much to be cost-effective for a mitigation bank under 20 acres? MPI often comes across many small but straightforward projects less than 10-acre wetland restorations that don’t happen. Is that the best conservation intent of the mitigation bank program which is to prevent the loss of any more wetland impacts and to restore as many lost wetlands as possible?
There are several reasons small wetland restoration and stream mitigation bank projects are not feasible in the United States:
1. Design and permit costs are relatively the same, regardless of a potential project’s acreage. There is often an economy of scale with construction operations.
2. Construction costs will fluctuate with the size and complexity of the restoration and if any hard infrastructure like outlet control structures or weirs are needed.
3. Vegetation establishment and maintenance will also vary depending on what vegetation is growing in and around the restoration area. Sometimes what is growing next to a prospective bank is
enough to make the project infeasible. The presence and abundance of Reed Canary Grass, Phragmites or other invasive species can kill a project from the start.
We typically tell clients at the concept level that mitigation bank costs typically range from:
· $80,000 to $1200,000 for design, permitting, construction oversight, easement establishment, and vegetation monitoring, reporting and maintenance.
· $150,000 to $250,000, or more, for wetland construction, vegetation establishment, and vegetation maintenance. Or $140, or more, per linear foot of stream restoration for a stream mitigation
bank project.
· $10,000 to $15,000 (or 1.5%-2.5% of total project costs) for escrows or other financial securities to fund future maintenance activities for the restoration in perpetuity.
And then landowners must factor in what the value of the mitigation bank credits are in the project’s bank service area. Those values can range from $40,000 per acre in outstate areas, to over $120,000 per acre in major metropolitan and suburban growth areas.
So, it’s easy to do the math and see that there can be little profit to be made for a landowner with a small restoration area to participate in the mitigation banking program. Especially since the entire process of design, permitting, construction, and receiving credits to sell can stretch from a minimum of 2 to 3 years for the initial credits to be released to 7 to 10 years for all the credits to become available to sell on the market. These are all generalizations, and the actual project and financials are different for every project.
If you are thinking about doing a mitigation bank project or are curious if your property is a good candidate, contact us to arrange for a complimentary, initial desktop review. We will review the project with you, look at aerial images and other data, and determine if a site visit is warranted to help validate the project.
And if the project doesn’t pencil out as a mitigation bank project, that is okay. Not all restoration work has to be in mitigation banks. If you want to pursue a restoration project privately for the habitat or hunting value, we can work with you on that as well. For much lower cost, faster completion time, and less regulatory oversight.
Resources:
Understanding the Basics of Mitigation Banking
Federal Guidance for the Establishment, Use and Operation of Mitigation Banks
In-Lieu Fee and Mitigation Banking FAQs
