Federal Guidance Issued for ESA Conservation Mitigation Banks

In what it termed a “hallmark event” in the history of the Endangered Species Act, the U.S. Fish and Wildlife Service on May 8 released federal guidance for the establishment, use, and operation of “conservation banks” to satisfy mitigation requirements under the Act. Conservation banks represent a market-based approach to mitigating authorized impacts to threatened or endangered species. The agency guidance is intended to spur the establishment of larger habitat reserves, simplify the regulatory process, and save time and money for project applicants. In addition, the guidance is likely to produce opportunities for landowners to obtain economic value for land that provides habitat for threatened or endangered species.

A conservation bank is a site where habitat for listed species is conserved and managed in perpetuity for the express purpose of offsetting impacts occurring elsewhere to the same species habitat. Sponsors of conservation banks preserve, restore, or enhance habitat, and then sell credits to developers that can be used to satisfy mitigation requirements under §7 or §10 of the ESA. While conservation banking has been utilized at the state level in California for several years already, the guidance represents a national approach by the FWS.

Conservation Banks v. Wetland Mitigation Banks

The new guidance is patterned after a 1995 federal guidance on the establishment and use of wetland mitigation banks under the Clean Water Act Section 404 permitting program. That guidance has led to the establishment of over 200 wetland mitigation banks across the country and the restoration and protection of many thousands of acres of wetlands since 1995. This new guidance may initiate a similar investment of private-sector resources and technology in the conservation of valuable habitat.

Two factors in particular may help facilitate the development of conservation banks. First, where wetland mitigation banks typically involve the restoration of degraded wetlands, the new guidance states that an “appropriate function” of conservation banks is the preservation of existing habitat with long-term conservation value in order to mitigate the loss of less valuable, fragmented habitat. Preservation is generally easier and less costly than restoration. Second, the area within which sponsors of wetland mitigation banks may sell credits for mitigation is limited to a particular watershed. In contrast, conservation banks are evaluated in the context of the “benefit to the species,” a “sharply contrasting standard” that may allow the sale of credits over a far broader area than a typical watershed.

Two Key Issues: Bank Siting and Management

Two issues of “paramount” importance, according to the new guidance, are the siting of the bank and its management program. The guidance recommends establishing a bank within an area identified in a species recovery plan where possible, and favors conservation of large, unfragmented habitat blocks. In addition, the guidance prefers locating a bank adjacent to an area already conserved and managed for the species, or in an area that can serve as a link in a wildlife corridor. Conservation banks may be established on private, tribal, local, or state lands. Additional guidance will be issued that will address the use of federal lands for conservation banks.

Moreover, active management of species habitat is usually required to control such factors as invasive exotic species, unauthorized use of the land, and other threats to the species. An active management program is “essential” to ensure that the potential conservation value of a particular property is realized and maintained. The amount of credits earned by a bank and available for sale is contingent on appropriate bank management to safeguard in perpetuity the species or habitat values for which the credits are sold.

Other Considerations

The process for approving a conservation bank is left somewhat vague in the guidance. The guidance states that the parties to a conservation bank agreement should establish a Conservation Bank Review Team (CBRT) — an “interagency group” of federal, state, tribal and/or local agencies to oversee the establishment, use and operation of the bank. Conservation bank sponsors are to submit a bank proposal to the CBRT, which reviews the proposal and negotiates the various components of the agreement with the bank sponsor. According to the guidance, a completed bank agreement should be signed by the FWS Regional Director. In addition, the guidance states that: