Mitigation banking appears to provide regulatory relief for wetland conversions within the farm sector. However, the high costs of commercial mitigation banks preclude their use by agricultural producers. The result is that farmed wetland areas remain intact, but the frequent cropping continues and the wetland functions continue to degrade over time.

The Agricultural Conservation Innovation Center (ACIC), a private, non-profit organization, proposes to establish a pilot wetland mitigation bank project for use within the agricultural sector in southeast Missouri. By combining features of traditional mitigation banks and fee-based mitigation programs, this pilot project will provide environmentally sound mitigation at an affordable price for producers, thereby resulting in "no net loss" of wetland area or function.

The intent of this document was to initiate formal agency involvement and review of this pilot project, which is consistent with the role of the mitigation bank prospectus, as described in the Federal Interagency Guidance on Mitigation Banking. This document contains background information on agricultural wetlands; current mitigation banking policies and strategies; potential benefits of mitigation banking within the agricultural landscape; the technical feasibility of an agricultural-related mitigation bank; and information on the objectives of the bank and how the bank will be established and operated.

Only six percent of the wetlands subject to the Food Security Act are characterized as cropland (NRI, 1992). Some of these wetlands have significant functions well beyond their often small size, specifically, flood control, water quality, and wildlife habitat (Robinson, 1995). Others, however, provide fewer wetland functions and have lower values. These farmed wetlands are the focus of ACIC's mitigation banking pilot project.

Between the mid-1970's and mid-1980's, conversions to agricultural use accounted for 54 percent of wetland loss in the United States (Dahl and Johnson, 1991). A high percentage of these converted wetlands have the potential to be restored to functioning wetlands. The restoration of wetlands is recognized as the preferred wetland mitigation option under the Corps of Engineers (Corps) Section 404 Program and the Natural Resources Conservation Service (N-KCS) Farm Bill legislation.

Federal guidance, published by the Corps, Environmental Protection Agency (EPA), NRCS, Fish and Wildlife Service (FWS) and the National Marine Fisheries Service (NMFS) encourages "... the establishment and appropriate use of mitigation banks in the Section 404 and 'Swampbuster' programs." (FR 1995). The 1985 Food Security Act, as amended, also states that "... the Secretary may operate a pilot program for mitigation banking of wetlands to assist persons to increase the efficiency of agricultural operations while protecting wetland functions and values." (Public Law 104 - 127).

The following benefits are derived from consolidating wetland mitigation sites to offset impacts to wetlands within the agricultural landscape (Heggemann ET al., 1995):

· Increased Likelihood of Restoration Success and Improved Land Stewardship

Ownership of the restored wetland is removed from the landowners who perceive wetlands as a liability and often permit their functions and values to degrade over time, to organizations or agencies with extensive restoration experience and with a commitment to maximizing restoration values;

· Increased Flexibility

Allows greater flexibility in choosing mitigation sites that are predisposed to produce well-functioning wetlands (e.g., prior converted croplands);

· Economies of Scale

Combining the small mitigation payments from many conversions of small wetlands provides the resources to establish wetland/upland complexes with greater potential for enhancement and better protection from surrounding land use;

· Landscape Level Management

Mitigation sites can be located to complement existing watershed and habitat management plans by targeting specific needs within a watershed;

· Management Efficiency

Monitoring and long-term maintenance is more efficient due to the combined location of the sites; and

· Landowner Benefits

Benefits to the landowners include: (a) increased production on drained wetlands and adjacent lands; (b) relieved of the burden of maintaining a wetland area; and (c) mitigation is possible even if they lack suitable sites on their land.

• The Bank will only offer credits for the conversion of wetlands associated with
  agricultural activities.
• The cost of mitigation will be based on the local land purchase cost, restoration
  cost, and long-term management and maintenance costs
• Mitigation ratios would be based on functional capacity of affected wetlands.

The geographic extent of the service area will be based on regional watershed boundaries. The service area must be large enough to have sufficient lands available for restoration activities, i.e., prior converted croplands, and where there is sufficient demand for mitigation from the local producers to support the Bank. Priority will be given to mitigation sites within the same watershed where the wetland impacts occur.

Mitigation resources will consist of funds offered to the Bank sponsor as mitigation by producers to compensate for the proposed Conversion activities. The funds will be held in an escrow account at a FDIC-approved banking institution upon the receipt of the first moneys directed to it through this agreement. Once sufficient funds have accumulated in the escrow account, the moneys will be transferred to the landowner for the purposes of easement acquisition and site restoration.

The appropriate transaction cost submitted to the Bank will be based on the following: (a) cost of the easement purchase; Co) cost of restoration (wetlands and adjacent upland buffers); (c) administration costs (e.g., title transfer, survey costs); (d) financial guarantee costs; and (e) long-term land management and site maintenance costs.

The Bank will acquire permanent easements or fee title and initiate restoration efforts as soon as sufficient funds are available. All moneys from this account are to be allocated to specific mitigation projects. Funds will be held in an escrow account in an investment instrument or banking institution to earn interest. Funds left over from mitigation or restoration proposals/projects, and interest earned will remain with the fund and be used for additional mitigation projects within the designated service area.

A Section 404 permit and 401 certification are required to participate in the Bank. The Bank will only offer mitigation credits for the conversion of farmed wetlands with incidental impacts to other wetland types within or immediately adjacent to the farmed wetland, eligible on a case-by-case basis.

Potential mitigation sites (i.e., candidate sites) will be prioritized based on the percentage of restorable wetlands (prior converted croplands), the type of wetlands to be restored (depression, slope, rivefine etc.), and landscape position (location within the watershed). Available lands will be targeted for permanent easement acquisition and subsequent restoration with funds from the Bank.

A survey of the site will be completed prior to construction. If significant resources are discovered during this survey or during construction, NRCS procedures (GM Chapter 420, Part 401) for compliance with federal laws and executive orders will be implemented to protect important resource information. Archeological and historic concerns will be coordinated with the State Historic Preservation Officer by the bank sponsor.

Mitigation debits and credits will be based on replacement ratios established in the State of Missouri Aquatic Resources Mitigation Guidelines and are consistent with the Missouri Modified HGM method of assessing functional capacity of the affected wetlands.

ACIC will be the sponsor and will manage the Bank. ACIC will be responsible for determining the transaction costs, identification and acquisition of the mitigation site easement, and coordinating the restoration, monitoring, and long-term management of the mitigation sites. ACIC will maintain a ledger and produce a report of activities which will be distributed to the Corps, NRCS, and other interested parties on a quarterly basis.

Mitigation sites will be protected in perpetuity with appropriate legal arrangements, such as permanent conservation easements on the restored wetlands and associated upland buffer areas, to be held by a federal or state resource agency or a non-profit conservation organization.

Dahl, T.E. and C.E. Johnson. 1991. Status and trends of wetlands in the conterminous United States, mid-1970's to mid-1980's. U.S. Department of Interior, Fish and Wildlife Service, Washington D.C. 28 pp.

Federal Register (FR). 1995. Federal Guidance forthe Establisl~nent, Use and Operation of Mitigation Banks; Notice. Department of Defense - Department of Army Corps of Engineers; Environmental Protection Agency; Department of Agriculture Natural Resources Conservation Service; Department of Interior - Fish and Wildlife Service; Department of Commerce - National Oceanic and Atmospheric Administration. Volume 60, No. 228, November 28, 1995.

Heggemann, L., S. McMillin and R. Darden. 1995. Concentrated wetland mitigation project. IN: Campbell, K.L. (Ed). Versatility of wetlands in the agricultural landscape. American Water Resources Association and American Society of Agricultural Engineers Conference Proceedings, Tampa, Florida, September 17-20, 1995. PP 121-125.

Natural Resources Inventory (NRI). 1992. Wetlands by type, broad use, and state (Excel Spreadsheet # 1974), developed by the USDA Natural Resources Conservation Service from the National Resources Inventory, 1992.

Public Law 104-127 - April 4, 1996. Federal Agriculture Improvement and Reform Act of 1996.

Robinson, A. 1995. Small and seasonal does not mean insignificant: why it's worth standing up for tiny and temporary wetlands. Journal of Soil and Water Conservation 50(4): 586-590.