Wetlands Preservation: You Can Bank on it

August 1, 2001

Mike Sanford, a real estate practitioner in rural North Carolina, had no idea what a wetlands mitigation bank was until someone called him up one day and wanted to buy property for one. Now Sanford is one of a growing number of land specialists who are playing crucial--and profitable--roles in developing the banks.

Mitigation banks emerged in the 1990s as a market-based response to federal wetlands preservation efforts. The approach, spearheaded largely by developers, was seen as a way to balance a community’s need to develop in a wetlands area and the public’s interest in preserving the often swampy lands, which provide species habitat, groundwater recharge, and flood mitigation.

Under the concept, which was fleshed out in 1995 guidelines by federal wetlands development regulators at the EPA and the U.S. Army Corps of Engineers, developers are permitted to replace lost wetlands by purchasing so-called mitigation credits. The credits represent undeveloped properties in nearby designated areas that are available for development into wetlands by preservation specialists.

The attraction of mitigation banking is its market efficiency. Studies have shown that mitigation banks are more effective at establishing functional wetlands than any other form of mitigation, including one-for-one replacement. That’s because developers who take on a one-for-one replacement project don’t generally have the expertise to do it. Wetlands undertaken by mitigation banks, however, typically incorporate the expertise of professional wetlands biologists and engineers.

For practitioners, the growth of the concept has opened up a field of opportunity, because “mitigation bankers”--the entrepreneurs who organize the local market for trading credits--rely on real estate professionals to advise on the potential demand for a bank and to find the land to include in it. Practitioners also give a bank its local seal of approval. “We add credibility to the process,” says Sanford, with Real Property Services, Mooresville, N.C.

To start trading credits, a mitigation banker needs properties that make good candidates for wetlands development. That means land that has very specific soil conditions, sufficient water availability, and road access. The land must also be in the same watershed district as the land targeted for development.

If a good property exists in the area, a real estate practitioner will know about it, and that enables the mitigation banker to establish the bank efficiently, says Mark Cumbest, with Cumbest Realty, Moss Point, Miss. Bankers also need local professionals who know the rules governing real estate transactions and understand how those rules fit in with the EPA and U.S. Army Corps of Engineers guidelines, says Georgia Curry, with Old Reserve Realty, Jefferson, Ohio.

Most important, though, is the advice that practitioners can provide on whether a market exists for a mitigation bank. That means having a handle on the future demand for local wetlands.

John Thobe, with Sand Dollar Realty, South Padre Island, Texas, played a critical role in the launch of a mitigation bank in his area several years ago when he helped identify almost a half dozen developers who were interested in developing several local wetlands. Identifying the developers was key, because it demonstrated a market for the bank, says Thobe.

The skills and knowledge that allow a real estate practitioner to create value for investors can also be offered to a mitigation banker, enabling the banker to acquire property in a timely manner, get the bank functioning quickly, and begin selling credits.

“I love selling real estate, and I’ve always been an environmentalist at heart,” says Sanford. “Helping get a wetlands mitigation bank off the ground allowed me to fulfill both of those passions at the same time.”

Information on federal wetlands development rules is available from the U.S. Army Corps of Engineers at www.usace.army.mil.

Russell Riggs is an environmental policy representative with NAR Government Affairs. He can be reached at 202/383-1259.

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