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November 25, 2014
Wisconsin's New Wetlands Law Creates Significant Demand for New Wetland Mitigation Banks
If you own unimproved real estate, you may want to consider the opportunities for creating wetland banks on this property. A new Wisconsin wetlands law provides significant new incentives for expanding the inventory of wetlands in this state for the benefit of the environment and the potential pecuniary benefit of the property owner. As a property owner, you now have the opportunity to consider the value attached to the creation of new wetlands or enhancing and expanding pre-existing wetlands on your property as part of your analysis for future use for certain qualified properties.
Overview of Wisconsin New Wetlands Law
Wisconsin's new wetlands law1-The Wisconsin Wetland Reform Act-and its mandatory mitigation requirement for individual permits has created significant demand for wetland mitigation bank credits in the state of Wisconsin. While a permit is still required prior to filling or excavating any wetlands, the new law created two categories of permits-general permits and individual permits. General permits are only available under limited circumstances for projects that will cause only minimal adverse environmental effects (typically impacts of less than 10,000 square feet). However, if the project does not qualify for a general permit, an individual permit is required prior to construction, and compensatory mitigation is a required component of all individual permits.2
Wisconsin's new wetlands law allows only three options for compensatory mitigation: (1) purchasing wetland credits from a mitigation bank located in the state, (2) paying into a state-run in lieu fee subprogram (which is yet to be established), or (3) the permitee can complete wetland mitigation in the same watershed or within one-half mile of the project (often referred to as "permitee-responsible mitigation")3. The law is explicit in its preference for the first two options, as permitee-responsible mitigation involves significant Department of Natural Resource (DNR) oversight.4 In addition, applicants often shy away from permittee-responsible mitigation due to the onerous long-term monitoring requirements and the uncertainty that such mitigation projects will be successful. DNR is now only in the early stages of developing its in lieu fee subprogram and it is unlikely that this program will be available as a mitigation option for applicants for quite some time. Accordingly, until DNR establishes its in lieu fee subprogram, many applicants are left with only one option-to purchase wetland bank credits.
A Burgening Demand for Wetland Banks
Currently, in the state of Wisconsin, there are very few banks with available credits, and oftentimes applicants require special approval from DNR to purchase these credits if the bank is located outside of the project's watershed. While there are several proposed wetland mitigation banks under review, it is uncertain how many of these will ultimately receive approval and when the associated credits will become available. Furthermore, even assuming that all of these banks are approved this year, DNR anticipates that the demand for credits will continue to quickly outpace availability-especially in certain watersheds. As such, the few wetland banks with available credits continue to see the price that applicants are willing to pay for credits increase. Applicants have reported that wetland banks are currently charging as much as $60,000 per wetland credit. It is anticipated that the cost of credits will continue to rise as project developers are left with no option other than to pay the mitigation bank owner the asking price if they wish their project to move forward.
Opportunities for Owners of Wetland Suited Property
The Wisconsin Wetland Reform Act has created significant opportunity for landowners to profit by restoring, creating, enhancing, or preserving a wetland area and generating wetland bank credits for sale. However, simply preserving an existing wetland without any additional enhancement will not earn wetland credits unless the applicant can show that the wetland is under a demonstrable threat for destruction. Moreover, not all land is suitable for a wetland bank and not every acre of land in a wetland bank will earn one wetland credit. Generally, only land that is currently or was historically wetland is suitable for a wetland bank. This is because wetland construction projects in areas that have no wetland history are often unsuccessful.
The number of credits earned per acre depends on the type of project and the anticipated net environmental benefit from the project. For example, wetland restoration (e.g., restoring an area that was historically wetland) will earn one credit per acre restored, while a project that enhances an existing wetland will often earn less than one credit per acre.
In addition, the wetland bank must remain wetland in perpetuity and the landowner will have to establish a conservation easement for the property. However, the wetland bank can remain privately owned and the landowner can still use the property for hunting and other recreational uses so long as they do not directly impact the integrity of the wetland. There is no requirement that the wetland bank be available for public use.
Suggestions for Assessing New Wetland Bank Opportunities
The wetland mitigation bank approval process can be an arduous process as it involves a multi-step review by an interagency review team consisting of representatives from several state and federal agencies. It is important that an environmental consultant with sufficient wetland experience be involved early in the process.
The process begins when the applicant (i.e., the bank sponsor) submits a prospectus outlining the general details of the proposed wetland mitigation bank. If the interagency review team approves the prospectus, it will request that the bank sponsor prepare a formal bank document with more specific details of the proposed mitigation bank. The bank document will then be published for public comment. Once the interagency review team issues a final approval of the bank document, the sponsor can begin work on the mitigation bank and will have an opportunity to begin selling a portion of the bank credits to help fund some of the up-front costs. After the project is completed, the bank sponsor will have to comply with some long-term monitoring requirements of certain wetland functional values for an average of 5 to 10 years after the project has been completed.
While creating a wetland mitigation bank can be resource-intensive, it can yield significant monetary and nonmonetary benefits to the landowner under the right circumstances.
12011 Wisconsin Act 118 became effective on July 1, 2012.
2Wis. Stat. § 281.36(3n)(d).
3Wis. Stat. § 281.36(3r)(a)(1-3)
4Wis. Stat. § 281.36(3r)(b)