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January 25, 2000

All The Way To The Mitigation Bank

Developers Buy Credits to Compensate for Wetlands They Destroy

by Bill Patterson

[This is the first article on mitigation banking.]

Last December two local developers proposed to fill tracts of wetlands in west Mobile. Federal regulations require companies to compensate for wetlands they destroy, a process called mitigation. Such compensation is an effort to promote the goal of "no overall net loss" of wetlands. Controversy arose when the developers announced they wanted to mitigate by buying "credits" from the Weeks Bay Mitigation Bank in Baldwin County. The Bank is a private, for- profit company. The Harbinger has learned that help from a state agency, the Alabama Department of Economic and Community Affairs (ADECA), was crucial in the establishment of the Weeks Bay Mitigation Bank.

The concept of mitigating with bank credits is new. Today there are about 100 mitigation banks in America. A mitigation bank is a damaged tract of wetlands that has been restored or enhanced, then permanently set aside. This improved land is then valued in terms of credits that may be marketed to companies that need to compensate for wetlands they destroy. According to the EPA, "The value of a bank is determined by quantifying the wetland values restored or created in terms of 'credits.'" Regulators rank the wetlands a developer plans to destroy as low, medium or high quality and, based on this ranking, set the number of credits that developers must purchase.

No Rules

No federal or state laws govern the approval and operation of mitigation banks. The closest thing to regulations is a set of federal guidelines published in 1995. The Weeks Bay Mitigation Bank was set up relying on the 1995 guidelines. In June 1997 the land's owners submitted a Prospectus to the US. Army Corps of Engineers, the federal agency responsible for the protection of wetlands. The Corps then organized, using the 1995 guidelines, a Mitigation Bank Review Team (MBRT). The MBRT is a committee co-chaired by the Corps of Engineers and ADECA, with representatives from ADEM, Alabama Department of Conservation and Natural Resources, EPA, Natural Resources Conservation Service and U.S. Fish and Wildlife Service. This group reviewed the Prospectus and negotiated with the owner. The owner and the MBRT produced a Banking Instrument, a document that binds the owners to operate their mitigation bank under specific conditions and establishes the MBRT as a permanent oversight committee. The MBRT allowed the Weeks Bay Mitigation Bank to sell 800 credits and set the price of one credit at $13,000. If the Weeks Bay Mitigation Bank sells all its credits, the project would generate $10,400,000, less expenses. Records examined by The Harbinger show environmental regulators have already "released" twenty percent of the bank's credits for sale.

Records from the Alabama Secretary of State's office show that the Weeks Bay Mitigation Bank is operated by Wetlands Restoration L.L.C., a corporation formed by Hooper W. Matthews Jr. as Registered Agent and Hooper W. Matthews III, Dale Ash and Cindy M. Colville as members. The company registered with the state on December 18, 1997. Much of the land purchased for the Weeks Bay Mitigation Bank was formerly owned by a state senator, Albert Lipscomb of Magnolia Springs. Lipscomb, who represents Alabama's 32nd Senate district, is Vice-Chairman of the Senate's Agriculture and Forestry Committee.

Lipscomb told The Harbinger he had "no prior knowledge" before he sold the land that it would be used for a mitigation bank. "A real estate agent handled it," he said. Lipscomb said, though the tract had been in his family for many years, he had owned it since the early 1980s and sold it, along with other property, "to get out of debt." Lipscomb said he had "personal and public policy questions" about the mitigation bank. He wondered how land in Baldwin County could be used to replace wetlands destroyed "thirty miles away in Mobile County." He also questioned how the property he had owned, which he called Bayou Cora Swamp, could be "restored" since it was "already wetlands."

ADECA'S Role

According to Wetlands Restoration L.L.C., its Weeks Bay tract is in bad shape. The Prospectus stated the tract consisted of "1,017 acres of overgrown and cut-over Pine Savannah." The document further described the cause of the destruction: "Timber harvest (most of the merchantable timber has been removed), ditching, soil disturbances, and absence of fire have contributed to the degradation of the original habitat." The property's new owners promised "restoration efforts would return the tract to a critical habitat found in Bay Forest, Moist Pine Forest and Moist Pine Savannah."

The Weeks Bay Mitigation Bank tract is not the only damaged land in that part of Baldwin County. ADECA owns 615 acres, called the Swift tract, adjacent to the Bank land. The Harbinger spoke with Gil Gilder, director of the Coastal Program for ADECA. Gilder said that the owners of the Weeks Bay Mitigation Bank wanted to work with ADECA for two reasons. First, because of the type of mitigation planned by the bank's owners, it made sense for them "to maintain our property at the same time." Secondly, ADECA would eventually take over ownership and management of the bank's land: "The property comes to us for perpetual preservation at the end of the sale of the credits."

Gilder said he "reported favorably on the establishment of the Bank to the Director" of ADECA. He said ADECA, which manages the Weeks Bay National Estuarine Research Reserve, "will acquire the property in increments after the establishment of the Bank." He said no land from the Weeks Bay Mitigation Bank has been transferred to ADECA yet, but that discussions are underway between ADECA and the Bank concerning the first transfer.

The Harbinger spoke last week with L. G. Adams, manager of the Weeks Bay National Estuarine Research Reserve. The Weeks Bay Reserve is one of twenty five such reserves in the nation. Adams said that while he didn't know why the owners of the mitigation bank choose to name it the Weeks Bay Mitigation Bank, the name has confused people. "A lot of people don't know the mitigation bank isn't part of Weeks Bay National Estuarine Research Reserve," he said, adding that he felt a more appropriate name would have been "Bon Secour Bayou Mitigation Bank." Adams said the only role Weeks Bay Reserve had in setting up the mitigation bank was "to accept the tract," and this was because "the owners had to find a party to take the property for perpetuity."

Asked about the acreage owned by ADECA, Adams said this land is wetlands in need of restoration or enhancement. He said the property had "large overgrowth and limited biodiversity," the consequence of past timber harvest and "changed hydrology. " According to Adams, "a positive side" of the agreement between ADECA and the Wetlands Restoration L.L.C. will be that the common management of their two tracts would provide "ecological uplift" for the ADECA land.

Under the agreement signed with the Weeks Bay Mitigation Bank, ADECA will have the right to sell mitigation credits once its tract has been restored or enhanced. The Banking Instrument reads: "The parties hereto acknowledge that ADECA may subsequently apply to the applicable governmental agencies in order to sell mitigation credits on WBNERR Lands." ADECA cannot sell credits without the mutual agreement with the Bank's owners. Gil Gilder of ADECA told The Harbinger that the agency "decided not to sell credits from its property," though he added ADECA "has that option." He said, "We don't want to be in the mitigation business."

Laurie McGilvray is the acting chief of the National Estuarine Research Reserve Division. In 1986 the federal agency approved Alabama's application for the Weeks Bay National Estuarine Research Reserve. Today the agency provides funds and sets policies for the local reserve. McGilvray told The Harbinger she did not know of another case in which an Estuarine Research Reserve had entered into an agreement with a mitigation bank. She said the Weeks Bay Reserve was not involved in "the approval process" that set up the Bank, and she was "comfortable" with the "coordination in management of the two properties" and the ultimate transfer of the Bank property to the Reserve. But she said she was "not comfortable" discussing the possibility that ADECA might sell mitigation credits, because she did not know enough about the issue.


[The Harbinger will have more on mitigation banking in the next issue.]


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