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February 8, 2000

Mitigation Banks: Making a Market

by Bill Patterson

[This is the second article about mitigation banks. The first examined the establishment of the Weeks Bay Mitigation Bank.]

The sellers of mitigation credits must anticipate a good market in south Alabama. The Harbinger has learned that the Weeks Bay Mitigation Bank will soon increase its size by one-third, adding another 324 acres to its recently-approved 1,017-acre site, and that two more mitigation banks are being developed in south Alabama. The first bank is at Lillian Swamp in Baldwin County, and the second is near Alabama Port in Mobile County. Federal and state laws require those who destroy wetlands to pay compensation for the destruction. This compensation is called mitigation, and one possible way to mitigate is to buy credits.

The Weeks Bay Mitigation Bank, which opened recently, was approved after two years of review by regulators. The developers of the bank at Lillian Swamp have worked almost as long to get approval. The bank, named the Boykin/Lillian Mitigation Bank, is 1,314 acres in size. Brad Gane, Chief of the Alabama Department of Environmental Management (ADEM) Coastal Program, told The Harbinger the Mitigation Banking Instrument for the project was "about in final draft" and that south Alabama's second mitigation bank will "come on line real soon." Gane said the Bank is on "Boykin family property." Regulators have approved 969 mitigation credits for sale by the Boykin/Lillian Bank. The owners of this Bank have pledged to create a $850,000 fund for management of their bank, a figure substantially greater than the $250,000 the owners of the Weeks Bay Mitigation Bank pledged for its management.

Federal guidelines call for perpetual management of a mitigation bank's land once its credits have been sold. The Weeks Bay National Estuarine Research Reserve, managed by the Alabama Department of Economic and Community Affairs (ADECA), will be caretaker of the land in the Weeks Bay Mitigation Bank. The perpetual owner of the Boykin/Lillian Bank will be a private foundation. A document from the Boykin/Lillian project, a Mitigation Banking Instrument dated September 23, 1999, describes the arrangement: "The Wetlands Foundation, Inc. [The Foundation] has accepted the appointment as the Long-Term Steward for the Boykin/Lillian Mitigation Bank." A brochure published by the Wetlands Foundation, Inc. explains it is "funded by private donations, grants, joint capital campaigns with other conservation and environmental organizations and endowment funds established by the mitigation banks while in their active status." The Mitigation Banking Instrument also described the owners in perpetuity of the Boykin/Lillian land: "The Foundation has established a Mobile Chapter of the Wetlands Foundation, Inc. and has appointed the following people as members of the initial Board of Directors of the Mobile Chapter: William G. Lindsey, Jr., Trustee, The Richard A. Boykin, Jr. Family Trust and Arthur L. Berger, President, WET, Inc."

Another mitigation bank is planned for south Alabama. Jose Negron, a wetland regulator for the Environmental Protection Agency (EPA) in Atlanta, told The Harbinger about the plans for a mitigation bank in Mobile County near Alabama Port. Documents at ADEM list the applicants for this mitigation bank as Robin H. Luce, Jex R. Luce, Jr. and Milton L. Brown. The bank is an 877-acre tract on Mon Louis Island, west of Highway 163. The bank's owners plan to call it the Alabama Port Wetlands Bank. Regulatory documents show the project is early in the review process.

Will Government Open A Bank?

The State of Alabama may soon sell mitigation credits. Discussions about a state mitigation bank began over five years ago during the Jim Folsom administration. Pete Conroy was the Governor's Liaison for Environmental Affairs under Folsom, and during those years, Conroy served as Chair of the Alabama Wetlands Mitigation Banking Task Force. Conroy told The Harbinger the Task Force met monthly for two years beginning in October 1994. He said the group's aim was to open a state mitigation bank and "do mitigation right." Conroy said a state-owned bank would have been an alternative to "entrepreneurial mitigation banks" because it could have sold credits at a lower price. Conroy said the Task Force envisioned the bank as a cooperative effort of state and federal governments as well as non-profit organizations such as the Nature Conservancy. "ADEM would have been the banker," he said, "and kept up with the credits." Conroy said he was surprised when "the pieces didn't fall together" for a state- run bank. "We carried it really far," he said.

But the Task Force's bank may still open. Conroy told The Harbinger he would soon call another meeting of the group, which he said was never formally dissolved. He said he had been contacted recently by representatives from the EPA and the Nature Conservancy who urged him to start up the Task Force. Conroy believes that the controversy about the Weeks Bay Mitigation Bank was responsible for these calls: "There's nothing else going on with wetlands in Alabama I know of except in the south part of the state." He also added that he expected Governor Siegelman will pursue new state policies on wetland management at the state level. "It's on the Siegelman administration's radar screen, though not during this session," Conroy indicated.

The Unplanned Public Debate

An unintended consequence of opening the Weeks Bay Mitigation Bank has been to create a local debate about mitigation banking. Last December a developer of a commercial site, the South Mobile Business Park, proposed to fill wetlands in Rattlesnake Bayou in the Dog River Watershed. Controversy arose because the developer announced he intended to buy mitigation credits from the Weeks Bay Bank in Baldwin County. The soon-to-be open Boykin/Lillian Bank will also be able to sell credits in Mobile County. Mobile Mayor Mike Dow entered the debate with a January 28 letter to the Corps of Engineers in Mobile, urging the Corps to reject permits that would compensate for wetland destruction through mitigation credits from outside local watersheds.

EPA also has objected to the proposed sale of credits from the Weeks Bay Mitigation Bank to abate wetland damage on Rattlesnake Bayou. Last week Jose Negron told The Harbinger he opposed the use of mitigation credits from Baldwin County for the South Mobile Business Park project. Negron believes that the developer can avoid or minimize damage to wetlands at the construction site. Negron also said the credits the developer planned to purchase in Baldwin County did not compensate for the wetlands the developer wanted to destroy: "We felt that it was not appropriate to mitigate on both sides of the Bay in the same manner." Negron's view is supported by a January 27, 2000 letter from William L. Cox, Chief of the Wetlands Section at EPA in Atlanta. Cox asked the U.S. Army Corps of Engineers to deny the use of mitigation credits from the Weeks Bay Bank for wetland destruction in Rattlesnake Bayou. In his letter Cox wrote that the project would cause "substantial and unacceptable impacts to aquatic resources of national importance and recommends that the subject permit be denied."

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

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