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What are Mitigation Banks?

 

Mitigation Bank Credit purchase is a type of mitigation that may apply to impacts to freshwater wetlands and riparian zones. Mitigation Bank Credit purchase means buying a designated number of credits from an appropriate bank that has already successfully established wetlands and/or riparian zones of the same type as those that were impacted. Bank credits are usually purchased from a primary bank at a 1:1 ratio. That is for each acre of impact, one credit must be purchased.

Who creates Mitigation Banks?

 

Mitigation Banks are established by private companies or by public entities (like Counties or Townships).

Why create a Mitigation Bank?

 

Private entities create mitigation banks because the State of New Jersey and the Federal government often require that wetlands and/or riparian zones be replaced (mitigated) to compensate for unavoidable impacts. Applicants seeking mitigation are required to purchase mitigation credits from an established mitigation bank in the appropriate service area.

 

Public entities create mitigation banks to provide themselves with mitigation credits that may be needed when they conduct regulated activities within their jurisdiction.  For example, a county may create a mitigation bank to offset impacts from future anticipated road improvement projects or other improvements to infrastructure.

How do the economics work for a private company proposing to establish a mitigation bank?

 

An entity that builds a mitigation bank receives a certain number of “credits” from the Department (and in some cases federal regulatory agencies) based upon the size of the bank, the existing site conditions, and the amount of ecological benefit resulting from the activities proposed to create the mitigation bank. A credit is a commodity to be sold to an entity that is required to mitigate for unavoidable wetland impacts.  The private company makes a financial determination as to whether the number of credits that the Department will assign to the bank is sufficient to cover the upfront costs of creating the bank and whether the area in which the bank is located will generate enough customers to buy their credits.

To whom can the credits be sold?

 

In addition to determining how many credits a bank may sell, the Department also works with the banker to determine the service area for the bank. The service area is based upon the largest area that is ecologically similar to the area where the bank is located (usually a watershed management area). A banker can only sell credits to those in their service area. Establishing a service area ensures that a person seeking mitigation receives the right ecological type of mitigation when purchasing credits from a bank.

 

 

 

 

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Last Updated: January 10, 2019