You probably already appreciate your wetlands for the natural beauty and bountiful duck hunting they provide. In this blog, I’m going to talk about turning that natural asset into a fiscal asset – something that can be sold without having to surrender your physical asset.

Mitigation banking is the preservation, enhancement, restoration or creation of a wetland, stream or habitat conservation area which offsets or compensates for expected adverse impacts to similar nearby ecosystems. However, before you get too excited about this topic, understand that not every wetland will be accepted into a wetlands mitigation bank. Wetlands mitigation credits are a bit complicated.

First of all, what are wetland mitigation credits and wetland mitigation banks?

It’s a process that allows a developer, the department of transportation (DOT) or another entity to build in a sensitive area by setting aside a similar area of equal habitat elsewhere. For example, DOT needs to widen a road in Charleston, but doing so requires filling in a wetland. After a considerable amount of permitting and oversight, an interagency team representing SCDHEC, the Army Corps of Engineers, the US Fish and Wildlife Service, and the Department of Natural Resources concur that the road may be built provided a certain number of credits are purchased from a third-party wetlands mitigation bank. Purchase of the credits from the bank is rather straightforward, much like buying stock from a stockbroker. This streamlines the process and the credits represent known, well-managed wetlands with similar characteristics to the ecosystem to be compromised. It’s a superior method to creating a substitute wetland on a nearby parcel after the fact because these smaller wetland mitigation projects are often not managed properly, don’t necessarily provide equal habitat, and are often dried up because it wasn’t congruous to a larger wetland habitat.

So, where does the wetlands mitigation bank get credits?

Perhaps the answer is you, the landowner. Let’s say you own a large recreational tract located right outside Charleston. It’s mostly swamp, and you’ve thought about the tax benefits of putting it into a conservation easement. Or perhaps it has some wetlands on it, but duck hunting would be better if it had more wetlands. One of your colleagues has recently asked where they could get some borrowed material for a large project. All of this has you thinking about selling him some of your soil, expanding your wetlands, and improving your duck habitat. I have to tell you, the plan has potential. But before you do anything, stop and get further advice. If done properly, for a little extra time and investment, you could set up a profitable enterprise. Done on the cheap with zero regulatory oversight, you could open yourself up to some serious fines.

Is your property suitable for use in a wetland mitigation bank?

That all depends on the size of the existing banks and the characteristics of the wetland. Mitigation credits ideally swap in-kind on an acre per acre basis. That means, if 20 acres of a particular ecosystem to be compromised is a salt marsh, the credits must be for 20 acres of restored, created or preserved salt marsh. If no in-kind credits are available (salt marsh mitigation banks are relatively scarce) or if out-of-kind credits are determined to be more practical and economically preferable (e.g., of greater ecological value to a particular region), then out-of-kind credits are exchanged at a pro-rated rate. In other words, if the out-of-kind compensation is of lesser ecological value, then more land is set aside; if the out-of-kind compensation is of higher ecological value, then less land is set aside. The value of the credits also depends on the size of the bank site, with larger sites generating more credits. Restoring a site that was a historic wetland, but not currently a functioning wetland, also generates more credits. Also, wetlands that are preserved or created where no wetland was historically found may receive some credits but are not preferred unless it’s in an area where no other bank is available.

Now down to the good part – how much are these wetlands mitigation credits worth?

It varies widely from state to state and from ecosystem to ecosystem. Some of the factors used to determine the value of credits in a particular bank are types of soils, hydrology, vegetation, spawning waters, kind, location, maintenance etc. Rare aquatic systems such as upland bogs, limestone sinks, and pine savannahs have a higher value. In California, vernal pool credits have traded for as high as $500,000/acre! More typically, developers in the Southeast are willing to pay $10,000 to $100,000/acre for wetlands mitigation credits. The beauty of creating a wetlands mitigation bank with your recreational property is the influx of money from time to time that allows you to royally maintain your wetland for optimal hunting while the land is forever preserved in a conservation easement.

One last thing you need to know – the conservation easement is required, and there are long-term responsibilities. A bank site must be forever protected as a conservation site, usually through a conservation easement. Simply preserving, enhancing, restoring or creating a wetland, stream or habitat conservation area for your personal use is not enough. It must be regularly maintained and inspected to provide assurance to the bank that the credits have value. This is typically done through annual monitoring reports, which are prepared by a wetlands specialist and submitted to the interagency team for review and approval. This is a long-term obligation and expense that needs to be considered before you embark on creating a wetlands mitigation bank.