Landscape Change and the Ecological Effects of Mitigation Banks Curtis C. Bohlen To appear in: Deborah Hayes, ed. Wetland Mitigation Banking Workshop Proceedings. Argonne National Laboratory. . University of Maryland, Center for Environmental And Estuarine Research, Chesapeake Biological Laboratory, P.O. Box 38, Solomons, MD 20688. This work 'was supported-under_^ Cooperative Agreement CR-818227-CI from the U.S.. Environmental Protection Agency, with the University of.Maryland Center for Environmental and Estuarine Studies. . • EPA 230-R-96-008 ------- Abstract Wetland mitigation and mitigation banking markets are complex legal, economic and political phenomena played out against a background of dynamic ecological systems. The ultimate environmental effects of increased reliance on mitigation banking therefore will be co-determined by economic, political, and ecological processes. In this study, I focus on landscape-level ecological consequences of what might be called a successful mitigation banking program, one in which mitigation sites are "successful", in that they support ecological processes typical of wetland systems. The ecological processes that occur in wetlands are determined as much. by the landscape context of the wetland as by characteristics of the wetland itself. Moreover, the social and economic values derived from those ecological processes also vary from site to site. Even a "successful" mitigation banking program engenders a gradual reconfiguration of the wetland inventory of a region including (1) geographic changes in the distribution of wetlands, (2) alterations in the size distribution of wetlands, and (3) alteration of'the hydrogeomorphic context of wetlands. Such changes.in the characteristics of the wetland inventory may have profound ecological and economic consequences. i A framework for analyzing landscape-level consequences of mitigation banking is introduced, and ways in which negative landscape-level effects may be reduced and positive effects enhanced are discussed. ------- Introduction It is difficult, as an ecologist, to identify the ecological consequences of expanded reliance on wetland mitigation banks. The long term environmental consequences of mitigation banks will be determined at least '• as strongly by legal, institutional, and political forces as by the ecology of wetlands. The concept of mitigation banks is sufficiently broad that it comfortably encompasses programs that would be widely regarded as an environmental improvement' over current practice, and also programs likely to accelerate deterioration of wetlands and other aquatic resources. In that respect, mitigation banking has a great deal in common with all compensatory mitigation, the consequences of which depend the details of • how it Is implemented. • A fragile (and brief) consensus on an appropriate role for, mitigation was hammered out in 1988, when the National Wetland Policy Forum developed the national goal of no net loss and an eventual net gain of wetland resources by acreage and function (Conservation Foundation 1988). This goal was adopted by the Chesapeake Bay Program, included as an explicit goal of • Maryland's Nontidal Wetlands Protection Act, referenced in Maryland's state mitigation banking legislation, and adopted by federal regulators (Chesapeake Bay Program 1988, Maryland Code 1989, EPA and DOA 1990). With a clear vision of the role of wetland mitigation in the larger context of wetland policy, regulators have developed a variety of rules and policies that have improved compensatory mitigation practice. Mitigation at the programmatic level, however, has of ten-not performed as well as anticipated. Site-by-site reviews of the environmental performance of mitigation programs have often found poor regulatory compliance, Iqw frequencies of environmentally successful mitigation, and widespread . replacement of wetlands by structurally and biologically simpler wetland types (e.g. forested wetlands replaced by emergent wetlands, or salt marshes replaced by mud flat; Race 1985, Harvey and Josselyn 1986, Bernstein and Zepp 1990, Crewz and Lewis 1991> Erwin 1991, Florida Department of Environmental Regulation 1991,. Race and Fonseca, In Press)/ Forty six • • percent of wetland consultants recently surveyed by the Chesapeake Bay Foundation thought that "existing regulatory requirements lead to compensatory mitigation that has little environmental benefit" either frequently or always (Bohlen et al 1994). And frustration with the regulatory complexity engendered by mitigation requirements has also figured prominently in development-oriented criticisms of wetland policy (Albrecht and Goode 1994). ------- Landscapes and Mitigation Banks .-:... i • , ' Mitigation Banks Recently, it has been suggested that the poor performance of mitigation programs is due, at least in part, to the perverse incentives faced by purchasers of mitigation services, who have no reason to be quality conscious, and every reason to be price-conscious as they select ways to satisfy their mitigation obligations (King and Bohlen 1994, Shabman et al. 1994). With few exceptions, the people and institutions paying for mitigation are not interested in producing functional wetlands, but in negotiating regulatory hurdles required to gain approval for other projects. Suppliers of low cost— and generally low quality—wetland creation and restoration services therefore dominate the market, and drive suppliers of higher quality—and higher cost—services to take refuge in niche markets providing wetland creation and restoration for customers (environmental groups, some government agencies, a few private landowners) that are more quality conscious. Mitigation banks may provide an opportunity to change the incentives and disincentives perceived either by purchasers of mitigation services, or by suppliers of those services, and thus improve the performance of mitigation programs (Shabman et al. 1994). More generally, mitigation failure has been blamed on everything from poor enforcement, to regulatory preference for on-site mitigation, from the ineptitude of regulatory personnel to inadequate identification of the goals of wetland protection. Mitigation banking has been promoted as a solution to many of the problems plaguing compensatory mitigation. It has been argued that the availability of banks will (1) increase the chance that mitigation obligations will be met, (2) allow agencies to deploy their limited enforcement and oversight resources to greater effect, (3) reduce reliance on poorly sited mitigation, (4) improve average performance of mitigation, and (5) enable mitigation of previously unmitigated small wetland impacts (e.g. Shabman et al. 1994). While these benefits may follow from establishment of mitigation •banks, such a beneficent outcome is far from assured. The rules underpinning mitigation banks can be seen as reflecting a three-way tug of war between project sponsors, mitigation suppliers, and the general public (as represented by the regulatory agencies) over who will bear the risks and uncertainties of mitigation1. The more the risks of mitigation can be shifted to the general public, the more profitable the venture will be, either for the project sponsor, or for the- mitigation supplier. Simultaneously, however, 1Mitigation risk includes both risk of project failure, and also the risk of a "successful" project that provides lower than anticipated environmental benefits, or benefits different from those anticipated. Uncertainty is more inclusive, and reflects the limits of our current understanding of wetlands and aquatic ecosystems. ------- Landscapes'and Mitigation Banks such a shift increases the risk that effective mitigation for impacts to wetlands will not occur, thus denying the general public wetland benefits that they had enjoyed prior to the wetland impacts that engendered a mitigation obligation. The devil, as so often the case, is in the details, the trading rules under which a mitigation banking system is established, (compensation ratios, .financial and legal assurances, systems of evaluating credits, timing of credit withdrawal, frequency of impacts deemed mitigatable through banks and so on) will largely determine whether banks will improve upon existing mitigation programs/or just magnify their shortcomings. Banks, per se, are a dangerous opportunity: neither better nor worse than existing practice. As we shape the rules under which mitigation banks develop, we simultaneously determine whether or not experiments with banks will be seen as the start of a better era in managing aquatic resources. Of almost equal significance as the initial rules will be the stability of rules in the face of political and legal challenges. Agencies responsible for wetland regulation will before long find themselves in the uncomfortable position of adjudicating a market in which people will be playing for big stakes., and occasionally loosing2. Undoubtedly, regulatory intransigence will be blamed for financial difficulties, real or imagined; among mitigation banks. How the agencies respond to the inevitable legal challenges and inquiries from congressional offices may well determine'the long term environmental effectiveness of mitigation banking programs. At this point, therefore, the long term environmental effects of more widespread reliance on mitigation banks are difficult tef predict. The rules that will govern mitigation banks are still in flux, and our experience with existing banks is sufficiently small that the indirect economic, legal, and - political consequences, can not be predicted. We as yet have too little experience with commercial mitigation banks to know how well the environmental purposes of mitigation will be integrated with the financial demands for commercial success. And a variety of subtle consequences may yet crop up. .Widespread banking may change the incentives and disincentives faced by individuals, deciding whether or not to disturb existing wetlands (Bohlen et al. 1994). Increased reliance on and publicity.about banks 2The market for wetland mitigation credits is an artificial market, in which demand for credits, and the supply of credits are both determined by agency decisions.' Demand is shaped by such decisions as whether to require mitigation for small-scale wetland impacts, whether a bias for on site or in kind mitigation exists, and whether credits can be applied to distant wetland impacts. The supply of credits will also largely be determined by the conditions the agency places on mitigation projects and the number of credits assigned to projects. Thus agency decisions largely determine whether it is possible to make a profit as a mitigation supplier, and even whether an individual supplier will be profitable. The likelihood of political and legal challenge when companies go belly up should be obvious. ------- Landscapes and Mitigation Banks i i . ' for mitigation may affect people's willingness to take part in cooperative wetland restoration efforts3 as they realize that similar activities with other sponsors could generate income. Whether such changes in incentives will be of sufficient magnitude to alter the frequency or characteristics of wetland impacts remains unclear. ' • ' A Landscape Analysis of Mitigation Banking While it is probably impossible to be certain what the overall environmental impact of reliance on mitigation banks will be, one can begin' to understand the kinds of ecological changes banking implies. In order to do that, I will compare the ecological, implications of what might be called a "successful" mitigation banking scheme—one in which individual mitigation banks provide the environmental-services for which they were designed—with a "successful" project-by-projed: mitigation system.. Both these mitigation systems, it should be pointed out, are mythical in that they do not suffer from ariy of the vices we have come to expect from mitigation, But by examining the ecological consequences of these mythological beasts, I hope that to be able to isolate the ecological issues from the other uncertainties (and the politics) that would otherwise arise. ' I ' • Values and Functions i The physical and biological phenomena that occur in wetlands are conventionally termed "functions"; the subjective experience of those functions are called "values" (Richardson 1994). Functions are a property of a wetland and its geographical context. Values are a property of the interaction of human social, political, economic and ethical systems with the wetland, and with other ecological systems to which it is functionally related. Values, as the term is used here, include not only market values (e.g. timber production, hunting rights), but also unrnarketted direct (flood control) and indirect (support of anadromous fishes) values, including often obscure values mediated through ecosystem services. These values are emergent properties that arise neither from the wetland itself, nor from human society, but from the interaction of society with the wetland within a specific geographic (and therefore ecological, economic, and social) context. 3 A variety of cooperative programs have been designed to encourage wetland restoration, especially on agricultural lands. The most important of these are the the U.S. Fish and Wildlife Service's Private Lands Program and, U.S. FWS's Wildlife Extension Agreements, the U.S. Department of Agriculture's Wetland Reserve Program, and the USD A Water Bank Program, and the Department of the Interior's Small Wetlands Acquisition Program. ------- Landscapes and Mitigation Banks ' -• '•.,"' > Values emerge out of , but are not the same as, the underlying functions that , occur in the wetland. Functions and values are linked both by the ecological, chemical, and physical processes occurring in the wetland and by the social and economic phenomena that generate human perceptions of value. Tracing a particular function (e.g. sedimentation rate) to its many derivative values may be exceptionally difficult (Bohlen and King 1995). However, categories of values can be linked on a qualitative basis' with broad ecosystem functions (Richardson 1994), to provide an approximate basis for comparative analysis of wetland values. ' , The Wetland Resource Portfolio Any form of wetland compensation represents a decision by society to invest in wetlands and other aquatic resources. It seams natural to speak (in analogy with other types of investments) of the wetland resource portfolio, A region's wetland portfolio represents the sum total of wetland resources in the region. The wetland resource portfolio is a component of the larger set of environmental resources in the region which together represent: the region's natural capital4 (Jansson et al. 1994, King et.al. 1995). The value of any' particular wetland is determined jointly by its characteristics (hydrology, ' vegetation, biota, etc.), location with respect to other .environmental resources, proximity to human activities, and so on. Wetland regulatory programs are among the most important tools we have for managing the wetland portfolio. We use them primarily to minimize conversion of wetlands to environmentally less beneficial • uses, but . regulatory programs also steer development more strongly away from certain. wetlands than from others. Compensatory mitigation represents an effort to reduce the long term negative consequences of impacts to wetlands by reinvesting in wetlands following unavoidable impacts. It represents an investment in natural capital to make up for a loss of natural capital elsewhere. Like more familiar (financial) investments, any investment in natural capital can be analyzed ,in terms of its risks and expected return, with risks and returns appropriately measured in terms of environmental benefits (King et al. 1994). A strategy for carrying out such investments (e.g. mitigation banking) can be analyzed in terms of (1) the kinds of investments it is likely to generate, (2) the changes it will produce in the resource portfolio. Wetland compensation through mitigation banks and compensation- through A. variety of natural systems including wetlands provide human society with environmental goods and services that improve the quality of human life. Natural capital, just like built capital, is valuable because of its ability to produce goods and services now and in the future. ------- Landscapes and Mitigation Banks project-by-project mitigation are contrasting strategies for reinvestments in natural capital following wetland impacts. If wetland impacts are rare, or if impacts are seldom mitigated, then the overall effects of mitigation banking versus project-by-project mitigation on the wetland resource portfolio will be small. With little impact to, and hence reinvestment in wetlands, the particular reinvestment strategy we follow would change the wetland portfolio only slowly, We would have time .to recognize nascent problems, and potentially respond to them in an adaptive manner (Walters 1986). If recent history is any indication, however, we can not assume that future wetland impacts will be insignificant. Between 1982 and 1989, there was approximately a 2.5% net loss of wetland area in the Chesapeake Bay Watershed, totaling about 37,000 acres (Tiner et al. 1994). Furthermore, those losses were unevenly distributed, with substantially higher losses in Virginia, especially-in the Norfolk—Virginia Beach area. i . . • • • The extent to which wetland losses will be mitigated remains to be seen. Currently, mitigation is required by federal regulators for only a small proportion of wetland losses (many wetland impacts are partially or entirely exempt from federal regulations, and most wetliand impacts are routinely approved through general permits that require no mitigation). State agencies differ widely in the degree to which they regulate small wetland impacts, and the extent to which they require mitigation for those impacts (Bohlen et al 1994). Few regulatory programs are currently re-quiring mitigation for a sufficient proportion of wetland impacts to approach the r>o-net-loss goal, even on paper. One of the benefits that has been suggested for mitigation banks is that many of currently unmitigated wetland impacts can be mitigated more practically and less expensively 'through a mitigation bank than through individual projects. Whether regulatory programs will acquire the authority to require mitigation more widely (either with banks or on a project-by- project basis) remains to be seen. Given the current anti-regulatory enthusiasms of lawmakers, especially at the federal level, the effective frequency of mitigation for wetland conversions appears more likely to decline than to rise, regardless of the development of mitigation banking schemes. Landscape Properties of Mitigation Banks An increased reliance on mitigation banks as a way to accomplish mitigation is likely to affect the wetland resource portfolio in different ways than would continued reliance on project-by-project mitigation. Some of these differences are inherent in the concept of mitigation banks. Others reflect the economics of wetland creation and restoration, and could, presumably be altered or managed with carefully constructed regulatory incentives and disincentives. Costs of wetland creation and restoration are ------- Landscapes .and Mitigation Banks strongly dependent on site-specific and design-specific factors, from local hydrologic conditions, to the cost of land, to the amount of earth that must be moved (King and Bohlen 1994). Mitigation Banks are intended as general, not specific mitigation, and thus will often have fewer regulatory constraints on . location and design than will project-by-project mitigation. The consequences of mitigation banks on the wetland resource portfolio can be divided into three broad areas, none of which are 'new or surprising: (1) Mitigation banking systems typically are based on relatively few, large creation or restoration projects. (2) Mitigation banking systems are likely to rely on construction or restoration of wetland types that are least expensive 'to produce. - (3) Mitigation banks involve expanded use of off-site mitigation. These effects may also occur to some extent with project-by-project mitigation; but the trends will be more pronounced as mitigation decisions are increasingly divorced from characteristics of the sites at which wetland impacts occur, and are driven instead by the costs of providing mitigation. Wetland Size Large wetlands, it is often said, are better than small ones. From a purely ecological point of view, this statement is untenable. Naturally occurring large and small wetlands are distributed non-randomly across the landscape, generally differ in hydrologic conditions, and interact with the surrounding- landscape in contrasting ways. To generalize by saying that one is "better" than the other is to ignore the importance of the interrelationship among ecosystems in the landscape, and thus do violence to principles of landscape ecology. Large wetlands and small wetlands are different, and play distinctly different roles in .the landscape. Which one is "better" will depend both on local landscape condition, and on local and regional environmental goals. ,- mdeed, it is not especially difficult to think of specific wetland values or functions for which small wetlands are likely to be better than large ones. Many amphibians, for example, breed preferentially in small pools that lack fish, and are located in or near the upland habitats in which the adults are found. For such amphibians, small wetlands are an important reproductive resource precisely because they are small, isolated from other surface waters, and closely associated with uplands. For a wide variety of birds and mammals, wetlands are not primary habitat, but provide valuable food, cover or other resources under certain conditions or at certain times of year. For such species, the role of a wetland as a ecotone—a transition between upland ------- Landscapes and Mitigation Banks and aquatic systems—is of central importance, and the area of wetland may be far less important than the length of the wetland's perimeter. For a given area of wetland, small wetlands will generally have a longer wetland-upland transition zone than would a single, large wetland. Even within a superficially similar class of wetlands, small and large wetlands need not supply identical environmental.benefits. For example, a majority of the water in many stream systems enters the surface water system by traveling through the narrow (often wetland) riparian areas along the smallest streams in the watershed. The larger riparian wetlands further downstream are less abundant (there are many small streams for every large one), and a relatively small amount of water enters the stream by traversing them. They thus may be less important than' the -upstream riparian wetlands for regulating water quality. The larger downstream wetlands, however may play an important role in river and floodplain ecology as components of the regularly flooded "aquatic-terrestrial transition zone" (Bayley 1995, Junk et al. 1989). Which ecological role (water quality or flood ecology) is more important depends on local and regional environmental goals, the presence or absence of other ecosystem stressors, and the relative importance of clean water and annual floods to the ecology of downstream ecosystems and the economy of downstream communities., I am therefore skeptical that large wetlands always represent the best investment in wetland resources. Whether they are, however, is not solely determined by the ecological services large and small wetlands provide, but also by the relative cost of constructing large and. small wetlands. Large wetlands are typically less expensive than small ones to construct, with a doubling in project size typically resulting in about a 20% decline in per acre costs (King and Bohlen 1994). Some of this difference in cost is attributable to a tendency for more intensive methods of restoration to be used on smaller projects, but costs associated with designing projects, transaction costs incurred while gaining regulatory approval and costs of monitoring are also important. . Unless strong regulatory incentives and disincentives are established otherwise, these economies of scale will lead mitigation suppliers primarily to produce large wetlands for mitigation banking purposes. In some regions, such large banks will represent the best possible investment in wetland resources for achieving water quality and environmental goals. In other regions, investment in several smaller wetlands may be a better approach to, take. Where that is true, regulatory agencies may want to encourage mitigation banks that are assembled from several separate mitigation projects, Such an approach is likely to be intermediate in cost between project-by- project mitigation and conventional mitigation banks, But can allow a more careful tailoring of mitigation characteristics to local and regional environmental goals. 8 ------- Landscapes and Mitigation Banks , . • Changes in Wetland Type Certain types of wetlands are more difficult to create or restore than others. All mitigation, therefore, whether via banks or via project-by-project mitigation, results in a shift in the wetland resource portfolio. Certain types .of wetlands, especially those with'peat substrates or those! reliant on ground water or direct rainfall as a source of water, are difficult to create or restore. Bogs, nutrient-poor fens, and certain sedge meadows, if 'impacted, are thus likely to be replaced inefficiently, if at all by any form of mitigation. Even in wetlands for which restoration technologies are well advanced, a variety of ecological properties, from plant species diversity, to soil characteristics, to canopy height and abundance of snags may take decades to return to levels typical of undisturbed Wetlands. On the whole/mitigation leads to a.shift in the wetland portfolio toward structurally simple, early successional wetland systems dominated by wetland plants with wide ecological amplitude like Typha and Peltandra (e.g., Benstein and Zepp 1990). Switching toward the increased use of.mitigation banks may exacerbate the problems this can cause. Banks are intended as general mitigation. The ecological characteristics of banks, and thus the environmental services provided by them are not as closely linked to specific impacts as are characteristics of project-by-project mitigation. While banks may be constrained in a variety of ways to ensure compensation of'wetland losses "in-kind", that term, is notoriously imprecise. The term is frequently used to refer only to the relatively coarse characteristics of vegetation described by the Cowardin et al. (1978) class designations (e.g., forested, scrub-shrub, emergent and so on for palustrine wetlands). Jn-kind constraints on mitigation>anks are less often aimed at soil or hydrologic conditions that are important in determining biodiversity at both the ecosystem and species levels. Project-by-project mitigation retains a closer link between the characteristics of the wetland lost and the characteristics of the compensatory wetland than do mitigation banks. While that constraint may sometimes be a source of inefficiency and higher mitigation costs, it also increases the likelihood that successful mitigation efforts will provide a close functional • replacement for the original wetland. Project-by-project mitigation may also have another, more subtle consequence. By requiring that the functions provided by compensatory mitigation be closely matched to the losses incurred, project-by-project mitigation may, in effect, discourage impacts to those wetlands for which compensation is most difficult. In a highly developed or disturbed landscape, close functional replacements for existing wetlands may be undesirable; specific wetland functions may be considered to be more beneficial than were the functions that were lost. In less severely modified landscapes, however, such a judgment is difficult to make. In less modified landscapes/ long term ------- Landscapes and Mitigation Banks evolutionary and ecological processes have linked the characteristics of wetland systems with those.of adjacent terrestrial and aquatic systems as part of a larger landscape mosaic. Existing landscape linkages have been little modified, and landscape-level ecological processes are more or less intact. Any changes humans make to the local wetland portfolio therefore will disrupt to a greater or lesser degree ecological processes that support the physical, chemical, and biological integrity of surface waters. We would be displaying considerable arrogance to imagine that we can design or manage landscapes to support that integrity as successfully as millions of years of evolution and thousands of years of ecological change (Ehrenfeld 1978, Karr 1990, Angemeier and Karr 1994). The changes in the spectrum of wetland characteristics that are likely to accompany expanded mitigation banking will be most acceptable within moderately to highly modified landscapes. In such landscapes, the information embodied the characteristics of existing wetlands may be of reduced value to present-day landscape managers. Even in altered landscapes, however, considerable information from watershed planning or other in-depth analysis is needed in order to make informed judgments about whether out of kind mitigation is, in fact, appropriate. Rules for mitigation banks should be constructed so as to ensure that any changes the banks induce in the spectrum of wetland types in the wetland portfolio will be beneficial. Even in the context of mitigation banking, out-of- kind mitigation should be avoided to the extent possible unless an explicit rationale for replacing one wetland type with another (preferably based on detailed analysis). The bias toward in-kind replacement should be strongest for banks that are intended to ameliorate the negative consequences of wetland impacts in largely intact landscapes. Legislation, regulations, and agreements establishing a bank or banking program should explicitly define the relationship between banking and impacts to difficult-to-restore wetlands, high value wetlands, and other wetlands of special concern. Locations of Wetlands The decision to allow mitigation via a bank represents a choice to invest in wetlands at the site of the bank in favor of investing in wetlands at the site of wetland impacts. Expanded reliance on banks thus will lead to an altered spatial distribution of wetlands across the landscape. Location is central to both the functions of individual wetlands, and also to the values derived from those functions. Wetlands, like all ecosystems, are not isolated from their surroundings, but experience flows of organisms, energy, nutrients, water, and pollutants across their boundaries. Thus the ecology of a wetland reflects the nature of its surroundings. A wetland in an urban area will be qualitatively different from a similar wetland in a rural landscape; the two wetlands will differ in terms of the functions occurring within them. 10 ------- Landscapes and Mitigation Banks It is perhaps less obvious that the value of specific wetland functions will also differ with geographical context. The .value of nutrient trapping and transformation functions depends critically on what is upstream and downstream of a wetland. If no source of pollutants is found upstream of the wetland, than the wetland, while capable of providing water quality benefits, Will not have the opportunity. If downstream water bodies are unlikely to be harmed by additional nutrient influxes (perhaps because they have substantial assimilative capacity, or are so badly polluted that a little more nutrient will make little difference to ecosystem condition) then the ability of the wetland to remove nutrients will have little value. Location-dependence of the value derived from wetland functions may also arise because-of geographic variation in the existing availability of environmental services. . Wetland functions may be in short supply in some landscapes (from an ecological or societal perspective), and abundant elsewhere (Bohlen and King 1995). - .. • On-site biases embedded in current project-by-project mitigation systems are often reviled as irrational and unjust. While in practice, these'biases have sometimes resulted in poor or inefficient mitigation decisions, they arise naturally from the acknowledgment of the context-specific nature of wetland functions'and values. In the absence of adequate information about the values derived from a specific wetland, and knowledge of the need for specific environmental services in a region, an on-site bias (but not an absolute requirement) makes eminent sense. In the context of mitigation banking on-site biases will be weakened or ,.- eliminated all together. Thus regulatory agencies must better understand the consequences of moving wetlands about on the landscape, lest they risk creating successful mitigation, yet jeopardizing water quality and environmental goals that are the real purposes behind wetlands protection. The relative importance of different wetland functions can not be accurately determined outside of an ecosystem context. Watershed and ecosystem" •. . - planning and analyses thus would be valuable tools for regulatory agencies assessing either the credits to be assigned to a mitigation bank or mitigation ratios to be required for mitigation of specific impacts. Watershed planning efforts, however, are expensive, and in the current budget climate with respect to regulatory programs, are unlikely to be widely developed. Rules of thumb, and understanding of basic principles must often substitute for detailed analysis. Many wetland mitigation transactions in mitigation banks will he carried out with incomplete scientific understanding of the environmental trade-offs involved. Even in the absence of watershed or ecosystem-based planning, decisions must be made. The following discussion may help regulators better understand the consequences of moving wetlands about on the landscape (these ideas are developed somewhat more fully in Bohlen and King 1995), 11 ------- Landscapes and Mitigation Banks : Wetland Values and Associated Spatial Scales Considerable insight into wetland ecology, management, and politics can be gained by consideration of the scales over which wetland values and functions occur and are managed. Understanding the scales important for generating and managing wetland functions will be especially important in the context of mitigation banking. Only by understanding which functions develop over large scales, and which over small can regulatory agencies understand which wetland functions can be protected by off-site mitigation, and which can not. Figure 1 presents a framework for understanding wetland policy and management in terms of two scales. The. first is the largest scale over which management efforts are likely to be necessary and effective. The second scale reflects the distances over which the values derived from wetland functions are perceived. These two scales need not be, and in general are not, the same. Mismatches between the two scales lead to practical and political difficulties managing wetland resources (Bohlen 1993, Bohlen and Friday 1995) Wetland functions depend on the physical and biological environment of the wetland. However, the scale over which that dependence is harnessed for management purposes varies. For any wetland function, one can identify a range of spatial scales over which actions may be necessary for effective management. For most wetland functions, the smallest scale of management is on the order of a few meters or tens of meters, but the largest scale that needs to be considered varies. Production of timber in forested wetlands depends only loosely on conditions outside of the wetland. Thus timber production can be managed with little attention to conditions outside of the wetland itself. Anadromous fish populations, on the other hand, can seldom be effectively managed on a site-by-site basis because of their migratory habits. Values derived from wetland functions sometimes accrue locally, but at other times may accrue to individuals some distance away., The value of a tidal wetland for producing salt marsh hay, for example, accrues directly to the landowner or farmer. The benefits of waterfowl hunting accrue primarily to those with physical access to the wetland, or to nearby wetlands where resident birds may also forage. Benefits of flood attenuation by wetlands generally accrue to those living inland from coastal wetlands, or downstream from riparian wetlands. Water quality benefits of wetlands may be realized primarily in lakes, impoundments and estuaries hundreds of miles away from the wetland itself. And the values derived from some wetland functions (e.g., carbon sequestration) accrue over global scales. 12 ------- Landscapes and Mitigation Banks Scales At Which Wetland Values Are Received and Managed 1000 Km *j (5 1 00 Km I Q) O) n 0) u 1 0 Km 1 Km x fc 100m .. 10m • Habitat for Forest Interior Birds / Biodiversity / Wild Trout Production Timber ' Production / / ;._: Production of Anadromous Fishes Education Nutrient Removal and Transformation Global , Climate 10m 100m . ,.1 Km ' 10 Km 100 Km 1000 Km 10,000 Km Max. Distance From Wetland At Which Benefits Are Received Figure 1: Scales and wetland values. Management to affect the degree to which a wetland provides certain values is only possible at certain scales. Those scales do not necessarily match the scales at which the benefits of those wetland values are distributed. ' For purposes of developing wetland mitigation banking policy, one can identify three simplified cases. If the distance between the site of wetland impact and the site of mitigation is: (1) Larger than both characteristic scales associated with a particular wetland value then mitigation redistributes wetland benefits. (2) Similar to the characteristic scales of a particular wetland value, then mitigation may or may not replace wetland benefits. (3) Smaller than both characteristic scales then mitigation replaces wetland benefits. 13 ------- Landscapes and Mitigation Banks For wetland benefits with characteristic scales smaller than the distance between the site of impact and the site of compensation (case 1), mitigation represents a redistribution of environmental benefits from one location (and thus often group of people) to another. A successful mitigation site may provide opportunities for education of local school children similar to the opportunities that would have been available at the site of wetland loss. If the two sites are more than a few miles apart, however, chances are good that a different group of school children will enjoy thos;e benefits. Similar arguments can be offered for most local wetland benefits, from timber production to hunting rights. Thus the analysis of the effects of mitigation banks and off-site mitigation on functions with small characteristic scales should focus on the degree to which a change in the location and primary beneficiaries of functions is desirable (Bohlen and King 1995). Local policy makers may haye strong opinions about the wisdom of such intra-regional transfers of environmental benefits. ; For wetland benefits with characteristic scales similar to the distance . between the two sites (case 2), the effects of mitigation depend on the details of the ecology of the region, and on characteristics of the impact site and mitigation site. Since benefits accrue or are managed on a scale similar to the distance between the two sites, the benefits at one site can not be treated as independent of benefits at the other. Benefits may be dynamically linked. For example, the net effect on anadromous fish populations in the Chesapeake Bay of off-site mitigation for impacts to a freshwater wetland will depend on a number of features of the regional landscape: Are water quality in, both areas adequate to support reproduction of anadromous fish? Are waterways below the sites of impact and compensation both free of blockages to fish migration?. Similarly, the effects of off-site wetland compensation on water quality or biological integrity below the confluence of the sub-watersheds containing the site of wetland impact and a mitiga.tion bank will be influenced by a variety of ecological details. Typically, it will require careful biological analysis, and sometimes economic and social analyses to determine whether case 2 wetland benefits will be effectively maintained. For wetland benefits with characteristic scales substantially larger than the distance between the site of wetland impact and the site of mitigation (case 3), a successful mitigation project that provides appropriate functions at the mitigation site replaces the benefits lost at the other wetland. This is most easily seen in consideration of the benefits of the sequestration of carbon, and its effects on global atmospheric change. For all practical purposes, if the mitigation site sequesters carbon, it successfully replaces the carbon sequestering benefits lost at another wetland site, regardless of the distance between them. Thus wetland benefits with very large characteristic scales are the most likely to be replaced with off-site mitigation. 14 ------- Landscapes and Mitigation Banks The debate that often accompanies discussion about mitigation banking over what the appropriate distance.,bet ween, the site of wetland impact and the site of mitigation thus has no simple answer. The greater the distance from the site of impact, the fewer wetland benefits will be completely and effectively replaced, and the more redistribution of benefits will occur. The distance between sites of impacts to wetland and mitigation should reflect a judgment of which wetland functions and values are intended to be replaced by the mitigation bank. In some cases, a form of split mitigation, in which wetland values,relatively insensitive to location (e.g. habitat values for" migratory birds) are compensated for through a mitigation bank, while site- specific benefits such as water quality and flood attenuation benefits are addressed via on-site mitigation may provide a superior method of managing aquatic resources than would either conventional mitigation approaches or - simple use of mitigation banks. Wetlands Across a Modern Landscape Gradient Landscapes change in systematic ways as one moves from an urban center,! through suburbs, to high intensity agriculture, through low-intensity agriculture, to non-agriculturalforestand wildlands. This urban-rural landscape gradient (McDonnell and Pickett 1990), will play an important role in the shaping the consequences of mitigation banks. Wetland mitigation costs vary along the urban-rural landscape gradient, with higher costs in urban settings and lower costs further from urban centers, for several reasons. The price of land is higher in urban areas, and the costs of some inputs to wetland mitigation projects (e.g. costs for disposal of fill material) also decline away from cities. Urban and suburban watersheds are often degraded by hydrolqgic modification, chemical contamination, and thermal changes; restoration and creation projects must be engineered to handle the stresses imposed by the surrounding urban setting. Urban and suburban mitigation must often be located in second or third best sites because of conflicting high value land uses. Poorer sites drive up project costs and reduce project performance. The expanded use of mitigation banks is likely to lead to a shift in the geographical distribution of mitigation efforts away from the more expensive urban and suburban sites and toward rural areas. Mitigation banks are not as closely tied to impact locations as project-by-project mitigation has been. This gives those supplying mitigation through banks more freedom to select cost- effective sites for mitigation. Wetland mitigation banks are therefore likely to be located in more rural areas; where costs are lower, and (often) the probability of producing a high quality mitigation project is higher. Yet most wetland impacts that trigger mitigation requirements occur within suburban landscapes. As a result, expanded use of mitigation banks is likely to result in a gradual shift in the location of wetlands out of the suburban and urban 15 ------- Landscapes and Mitigation Banks. landscapes in which most impacts are occurring, towards more rural landscapes, in which wetland creation and restoration efforts are least expensive. Regulators may well perceive that they have little reason to resist replacing urban or suburban wetlands with wetlands in rural areas. Both the • probability of successful wetland creation or restoration and the overall quality of the resulting wetland, are generally thought to increase as one moves from urban to more rural settings (NRC 1992). It is far from clear, however, whether a gradual shift in the wetland portfolio away from urban and suburban areas to predominately rural areas \yould, in fact, be beneficial from ecological or socioeconomic perspectives. , As one moves from urban centers through suburban areas to rural landscapes, the functions of an acre of wetland change. In general the overall quality of a wetland constructed for mitigation purposes is likely to increase (in terms of biodiversity, biological integrity, and ability to support fish or waterfowl populations, for example). Specific wetland functions, however, may increase, decrease, or change in some more complex way. Some wetland functions (e.g. flood storage capacity) are determined primarily by properties of the wetland itself, and show little change with landscape context. Other functions are controlled by dynamic relationships between the wetland and its surroundings, and thus are strongly influenced by the quality of surrounding lands. Habitat functions and sediment trapping functions demonstrate contrasting ways that wetland functions may vary according to the condition of the surrounding landscape (Figure 2a). Most habitat functions of a created or restored wetland can be expected to increase as one moves further from urban centers/and the proximity of the wetland to and average quality of adjacent habitat patches improves. Thus habitat functions typically will be inversely related to the level of urbanization of the surrounding landscape. The degree to which a wetland traps sediment, on the other hand, depends on both wetland hydrology and the influx of. sediments from the surrounding landscape. Without sediment influx induced by nearby land use practices, the wetland may have the capacity, but not the opportunity, to trap sediment. Agriculture and the construction of roads and suburban subdivisions are major sources of sediments to aquatic environments. Thus the opportunity to trap sediments is likely to be greatest in agricultural and suburban landscapes, intermediate'in urban landscapes, and lowest in landscapes dominated by forest. 16 ------- Landscapes and Mitigation Banks Wetland Functions and Values Accross a Landscape Gradient High Low High Ecological Function Low Societal Values Urban Suburban Agricultural Other Rural Location of Wetland Figure 2: Wetland functions and values across the urban-rural landscape gradient (From Bohlen and King, 1995). More than just functions change as one moves from urban to rural .landscapes. The significance of specific functions also changes, both from an ecological and from a socioeconomic perspective. Similar wetlands embedded in different landscape contexts may exhibit similar functions, but generate substantially different values. The marginal value of a particular wetland function (the value of a small change in the level of the function)" may be expected to decline as one moves from landscapes where wetlands and healthy environmental assets are relatively scarce (urban centers) to landscapes where they .are relatively abundant (rural areas). Construction of ,a forested flood plain wetland for mitigation along a stream that already has substantial forested flood plain, for example, may be of little ecological or socioeconomic value; if the stream in question is already healthy, water quality and ecosystem support services provided by the extra wetland area 17 ------- Landscapes and Mitigation Banks may be of little consequence. Construction of a similar wetland in a suburban area may offer recreational opportunities otherwise unavailable in a developed landscape (socio-economic value), and also make a significant difference in the health of adjacent stream systems (ecological value). The value of certain wetland functions may also be affected by the wetland's proximity and accessibility to human populations. Values associated with consumptive and non-consumptive uses of wetlands such as hunting or bird watching drop off quickly as the distance between the wetland and human populations increases, if only because costs of travel to such sites increases. Non-use values associated with the continued existence of a rare animal or plant species, on the other hand, are less dependent on access or proximity and decline only slightly with distance. These relationships can be depicted as shown in Figure 2b. The per capita marginal value of a (hypothetical) wetland benefit declines as you move from urban to rural landscapes, and related environmental services becomes less scarce. The number of people who gain from the benefit simultaneously declines with distance from the urban center. The result is that the net value of an additional unit of a wetland benefit provided in an urban area may be substantially greater than the value of an additional unit supplied in a rural area. ; The challenge for those trying to understand the consequences of wetland mitigation banks is to combine the thinking of figure 2b with the thinking of figure 2b. Whether wetland mitigation banks close to urban centers is more valuable than mitigation far from urban centers rests, again, on an understanding of environmental goals. Is it improved local hunting, increased regional waterfowl production, protection of biodiversity, establishment of clean water, reduction in flood hazard, or creation of environmental education opportunities that drives wetland policy? Conclusions Wetland mitigation banking will change wetland resource portfolios in a variety of ways. The effects of banking will include changes in the size, characteristics, and location of wetlands in the regions in which it is used. The significance of those effects, however, remains to be seen. While great uncertainty revolves around political, legal, and institutional features of mitigation banking, the success or failure of banking as an environmental management tool will rest in part on the sophistication with which regulators are able to assess and understand the consequences of banks. That, in turn, will require consideration of the underlying goals of wetland protection. 18 ------- Landscapes and Mitigation Banks , • The goals of wetland protection programs have often been poorly articulated. Legislative underpinnings have often been framed with little or, no regard for the larger environmental goals' of wetland protection (clean water, waterfowl, biodiversity, aquatic ecosystem support), and even less regard for how to make trade-offs among disparate program goals. Management of mitigation banks, however, can not be carried out in the same seat-of-the-pants way that has sometimes characterized project-by- project mitigation. Clear goals will be essential. The shift to mitigation banks represents a shift to more active intervention in landscapes, and a retreat from the belief that the best way to manage wetland resources is to follow natural example. As we rely increasingly on mitigation banks, we increasingly substitute human decisions (based, one hopes, on sound science) for the zero- order assumption that existing wetland resources represent the best available mix of resources for a watershed or region. Yet we will find it impossible to ' make the necessary decisions without clear goals, and sophisticated landscape or watershed planning. Only after the goals are established and analysis of regional environmental resources carried out can we ever hope to make sound decisions with respect to what changes in regional wetland portfolios may be desirable. . . It is ironic that even as we have moved toward policy for mitigation banks, overall wetland regulatory policy is still tied to a project-by-project, or impact-by-impact mind set fundamentally unable to address cumulative impacts. Mitigation decision making, whether for mitigation via banks or not> remains focused on on-site wetland functions. Little consideration is given in most regulatory programs to the role of wetlands in larger ecological and social contexts. Mitigation banking will have made a fundamental positive contribution to environmental policy in this country if the lessons we learn from mitigation banking help us to develop the tools for the analysis of watersheds to enable us to address cumulative impacts in a more rational way. 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Evaluation of selected Wetland Creation Projects Authorized Through the Corps of Engineers Section 404 Program. U.S. Fish and Wildlife Service, Annapolis Field Office, Annapolis, MD. Bohlen, C.C. and D.M. King. In Press. Location and wetland values: some . pitfalls of offsite wetland mitigation in the Chesapeake watershed. In S. Nelson and P. Hill, eds., Towards a Sustainable Coastal Watershed: The Chesapeake Experiment. Proceedings of a Conference. Chesapeake Research Consortium, Edgewater, Maryland. Bohlen, C.C., T.V. Grasso, M. Hirshfield, B. Kooser, A. Powers, J. Watts, E. Zucker, and J. Goldman-Carter. 1994. Wetlands Permitting Programs in the Chesapeake Bay Area. Chesapeake Bay Foundation, Annapolis Maryland. Bohlen, C.C. 1993. Wetlands politics from a landscape perspective. Maryland Journal of Contemporary Legal Issues 4:(1)1-11. Chesapeake Bay Program. 1988. Chesapeake Bay Wetlands Policy. Chesapeake Bay Program, Annapolis, MD. - Conservation Foundation. 1988. Protecting America's Wetlands: An Action Agenda. The Final Report of the National Wetlands Policy Forum. The Conservation Foundation. Washington DC. 20 ------- Landscapes and Mitigation Banks ' : > • Cowardin, Lewis M., V. Carter, F, C,Golet,and E. 1\ LaRoe. 1979. Classification of Wetlands and Deepwater Habitats of the United States. FWS/OBS-79/31 Office of Biological Services, Fish and Wildlife Service. U.S. Government Printing Office./Washington DC. Crewz, D. W., and R. R. Lewis III. 1991. An Evaluation of Historical Attempts to Establish Emergent Vegetation in Marine Wetlands in Florida. Florida Sea Grant Technical Paper TP-60. Florida Sea Grant College, Univ. of Florida, Gainesville, FL. , Environmental Protection Agency and the Department of the Army (EPA and DO A). 1990. Memorandum of Agreement Between the Environmental Protection Agency and the Department of the Army Concerning the •Determination of Mitigation Under the Clean Water Act'§ 404(b)(l) Guidelines. June 6,1990, Ehrenfeld, D. 1978. The Arrogance of Humanism. Oxford University Press. Erwin, K. L. 1991. An Evaluation of Wetland Mitigation within the South Florida Water Management District. South Florida'Water Management District, West Palm Beach, FL. , Florida Department of Environmental Regulation. 1991. Report on the Effectiveness of Permitted Mitigation. Department of Environmental . Regulation, Tallahassee, FL. Harvey, H.T., and M. N. Josselyn. 1986. Wetlands restoration and mitigation policies: comment. Environmental Management 10(5): 567-9. Jansson, A.M., M. Hammer, C. Folke, and R. Costanza. 1994. Investing in Natural Capital: The Ecological Approach to Sustainability. Island Press. Washington, D.C. Karr, Jarries R. 1990. Biological integrity and the goal of environmental legislation: Lessons for conservation biology. Conservation Biology 4(3):244-250. • King, D.M. and Curtis C. Bohlen. 1994. Estimating the Costs of .Wetland . Restoration. 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Ecosystem structure and function along urban-rural landscape gradients: an unexploited opportunity for ecology. Ecology 71(4):1232-1237 i Race, Margaret S., and Mark S. Fonseca. In Press. Overhauling compensatory mitigation: what will it take. Ecological Applications. Richardson, C.J. 1994. Ecological functions and human values in wetlands: a framework for assessing forestry impacts., Wetlands 14(1): 1-9. Shabman, L., P. Scodari and D. King. 1994. Expanding Opportunities for Successful Mitigation: The Private Credit Market Alternative. National Wetland Mitigation Banking Study. 1WR Report 94-WMB-3. U.S. Army Corps of Engineers Institute for Water Resources, Alexandria, Va. Tiner, R.W., I. Kensenski, T. Nuerminger, J. Eaton, D.B. Foulis, G.S. Smith, and W.E. Prayer. 1994. Recent Wetland Status and Trends in the Chesapeake Watershed (1982 To 1989): Technical Report. Chesapeake > Bay Program, Annapois, Maryland. Walters, C.J. 1986.. Adaptive Managmement of Renewable Resources. 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