California Department of Fish and Wildlife

Brief Report on Conservation Banking

Summary | Origins of Conservation Banking | Conservation Banking in Practice

Summary

Conservation banking is a promising new tool for effective natural resource management in California.

As of October 1998, there are in existence or in the process of being created 43 conservation banks composed of thousands of acres of wildlife habitat - land worth at least $40 million - in 13 counties of California. These include 3 conservation banks in Northern California, 11 in Central California (including 5 in metropolitan Sacramento), and 29 in Southern California (including 20 in San Diego County).

These conservation banks:
  • allow the private and public sectors to harness market forces to improve significantly upon traditional ways of protecting and restoring wildlife habitat;
  • advance effective regional habitat conservation by encouraging the bundling of mitigation "credits" at sites recognized to be high priorities for habitat protection and restoration in watersheds and ecosystems;
  • ameliorate the adverse impacts of development in areas of rapid growth (such as San Diego County and the Central Valley) through the creation of permanent habitat preserves;
  • provide a mechanism that assigns a monetary value to habitat, which in turn allows a landowner to obtain a financial return for conserving land rather than developing it; and
  • offer a viable alternative to the often costly process of conventional project permitting and mitigation at single sites California's conservation banks are diverse. For example:
    • in San Diego County, the Boys and Girls Clubs of East County Foundation is helping to finance its continuing programs for area youth by creating the two-phase San Vicente Conservation Bank on a 1,500-acre former cattle ranch and, thus, advancing the Multiple Species Conservation Program (MSCP) and the State's Natural Community Conservation Planning (NCCP) pilot program in Southern California;
    • in western Placer County, a private entrepreneur has created Wildlands Inc., a 315-acre preserve of wetland and riparian habitat funded by the sale of credits for the mitigation of Sacramento area development projects; and
    • through its award-winning 6,000-acre Coles Levee Ecosystem Reserve in Kern County, a division of ARCO is facilitating its continuing oil and gas operations, selling credits to other landowners in the Southern San Joaquin County, and helping implementation of the Metropolitan Bakersfield Habitat Conservation Plan

To promote wider use of conservation banks, the Administration of Governor Pete Wilson in 1995 promulgated a State policy on conservation banking. As a result, the successful use of conservation banking as a means to achieve important natural resources management objectives is flourishing in California

This catalogue has been prepared to document the beneficial effects of this policy and to increase the creation and utilization of conservation banks across California. The information collected is intended to be useful to a wide variety of individuals and organizations, such as the owners of land that is or may be utilized as conservation banks, parties seeking sites to mitigate for development projects, planners seeking to maximize regional resource restoration, the environmental community, and local, State, and Federal resource agencies

The catalogue is available on-line through the California Environmental Resources Evaluation System at:
http://ceres.ca.gov/topic/banking/catalogue_index.html

In addition, information and data can be added to the catalogue through use of a form available through CERES at:
http://ceres.ca.gov/topic/banking/submit_bank.html

Every effort has been made to provide complete and accurate data on the state's conservation banks. However, in order to ensure that one is in possession of the most current and reliable information, it is important to contact CDFW and/or the operators of conservation banks when contemplating involvement with a particular enterprise. Contacts for the Department in general and for each conservation bank are provided in the catalogue.

Origins of Conservation Banking

Conservation banking is an emerging and sophisticated resource management tool built on several foundations: the legal requirements for environmental mitigation; the State's experience with mitigation banks; the use of the marketplace to advance conservation; and the need to facilitate and promote more effective regional habitat conservation.

Mitigation Requirements

Conservation banking is possible and necessary because of State and Federal laws that mandate mitigation of environmentally adverse projects or activities. Under many long-standing statutes, any individual, firm, or public agency that undertakes activities that destroy, degrade, or adversely alter the environment may be required to set aside and/or restore habitat in order to offset the adverse impacts of the proposed activity. For the area impacted, a project proponent may be required to set aside or restore an equivalent or greater amount of acres or resource values.

Environmental mitigation is required under several State laws. For example, under the California Environmental Quality Act, if a proposed project will "substantially diminish habitat for fish, wildlife or plants," mitigation is required. Compensatory mitigation is also required as a condition to "take" (kill, harm, etc.) a species under the California Endangered Species Act.

Environmental mitigation also is required under Federal statutes. For example, under the Federal Endangered Species Act, a habitat conservation plan that is designed to protect and "recover" a threatened or endangered species can require that a landowner "minimize or mitigate" for activities that are damaging to the species. The Federal Clean Water Act also requires mitigation for activities that alter or harm existing wetlands.

Conventional Mitigation

Despite their purpose -- to offset environmental impacts -- mandated mitigation measures often have had insufficient net beneficial impact. Often they are undertaken at the same site as the development or project being mitigated for, result in piecemeal patches of conservation, require complex in-kind compensation (such as replacing wetlands with similar wetlands elsewhere), and/or do not address the broader conservation objectives of the project's region.

For example, a typical property owner who seeks to develop or alter land may take the steps necessary to satisfy the mitigation requirements by doing so on a portion of the land to be developed. On a parcel of 10 acres, two or three acres might be set aside as a reserve in order to mitigate for the proposed development. While such a set-aside might satisfy the legal requirements, it may not substantially advance regional environmental objectives. The set-side or restored land may not itself be of high ecological importance or may not be connected to other protected open space with priority habitat value, and over the long term the set-aside land may lose some or all of its biological value because of its small size.

Similarly, when mandated on a project-by-project basis, environmental mitigation is often burdensome and costly to landowners. Determining what State and Federal laws and what specific mitigation requirements apply to a project can be very difficult. The accumulative total of mitigation requirements may be extremely expensive. Further, the process of designing and monitoring new mitigation projects for each development project can be time-consuming and costly.

Mitigation Banking

Though some mitigation banks began as early as the mid-1970s, it has been largely since the mid-1980s that the State and others have actively sought to prevent the inadequate, fragmented habitat conservation that too often results from project-specific mitigation. This has been attempted through the use of limited mitigation banks.

Mitigation banks are typically designed to consolidate the acquisition of mitigation land, and credits for mitigation, into large and biologically meaningful parcels. Credits are compiled in order to maximize restoration of other wise degraded or unrestored habitat. At the same time, mitigation banks serve to streamline the regulatory process for those parties needing to mitigate for projects. However, mitigation banks were originally oriented towards small areas, single species, and/or single habitat types. In addition, mitigation banks have not been widely used to advance larger conservation strategies. These banks frequently exist in isolation from other species and habitat protection measures.

In addition, mitigation banks are solely for the purposes of satisfying the mitigation requirements of a single project. They are not designed to provide credits of resource values that can be sold to third parties.

In recent years, CDFW has sought to consolidate mitigation required for wetlands alteration under the State Fish and Game Code and the Clean Water Act. In 1993, Governor Wilson signed into law SB 936, which directed the Department to establish wetland mitigation bank sites in the Central Valley and authorize credits at these sites for wetlands lost in urban areas. In addition, wetlands mitigation banking was made a specific priority of Governor Wilson's comprehensive State Wetlands Conservation Policy. (see below)

Other successful mitigation banking efforts are those associated with the NCCP pilot program, the Coles Levee Ecosystem Preserve, and the CalTrans Beach Lake Mitigation Bank in Sacramento County.

Conservation Banking in Practice

The Wilson Administration's 1995 policy on conservation banking has formalized and expanded the State's commitment to this important resource management tool.

The 1995 State Policy on Conservation Banking

In April 1995, Secretary for Resources Douglas P. Wheeler and Secretary for Environmental Protection James M. Strock took an important step to build on the progress of mitigation banking and to promote effective regional resource conservation by establishing a new State policy encouraging a "second generation" of mitigation banks called conservation banks. (see Appendix)

Like a mitigation bank, a conservation bank is a parcel, or a series of parcels of land, whose natural resource values -- habitat types or species present -- are sold to those who must compensate for resource impacts on land elsewhere. Conservation banking, however, represents an important evolution. Most mitigation banks are or can be conservation banks. All conservation banks are not mitigation banks.

Conservation banks are designed to focus on the conservation of biological resources that are high priorities in specific regions. Further, conservation banks are designed to address the protection of habitat types and dependent species at the same time. Specifically, the State seeks to encourage banking in those parts of California that are engaged in regional habitat protection on a formal basis.

A regional preserve system that assures the protection of a wide range of habitats and species allows much more flexibility in conservation banking because the protection of specific amounts of each significant habitat type is assured. In addition, under conservation banking, mitigation credits may be allocated for the acquisition of land as well as its restoration. Finally, conservation banking facilitates the development of anticipatory regional conservation strategies. This allowance can effectively increase the value of the conservation bank lands.

In conjunction with long-term regional conservation strategies, the State conservation banking policy identifies as objectives the protection of:
  • the habitat of species currently listed under the State and Federal Endangered Species Acts or those that are likely to be listed;
  • tidal and seasonal wetlands, including vernal pools, surrounding uplands, and associated watersheds;
  • riparian habitat and adjacent lands; and
  • wildlife corridors that provide connectivity (the opportunity for wildlife movement) between adjacent natural areas (preserves, parks, etc.).

The land in a proposed conservation bank must possess habitat value that is determined by an authorized wildlife agency (for instance, CDFW or the U.S. Fish and Wildlife Service) to have substantial regional habitat value, be in need of protection and/or restoration, and be worthy of permanent protection. Rules are established as to what habitats can be mitigated at the bank, as well as the extent of the service area of the bank.

Terms for purchase of credits in conservation banks are determined by the regional market for mitigation. The price of each credit and financial arrangement surrounding the purchase of credits are determined strictly between the bank owner and credit purchaser. The number of credits likely to be purchased depends upon the level of development activity in the region, the uniqueness of the biological resources in the bank, and the amount of competition from other banks in the area. When demand for mitigation credits is high, banks can quickly sell out their credits.

When all conservation credits in a particular bank are sold, the property is managed in perpetuity as a wildlife preserve. The long-term management is funded by an endowment established through the sale of the credits. Depending on the specific circumstances, long-term management of the preserve is the responsibility of the bank owner, a nonprofit organization, or a public agency, including Fish and Game.

Environmental Benefits of Conservation Banking

Conservation banks provide for the protection of important habitats and linkages between key habitats. In addition, they offer an environmentally beneficial alternative to the current practice of requiring piecemeal mitigation for individual project impacts. Isolated mitigation projects that have little connection with their surrounding ecosystem often are more prone to failure than a mitigation project that is incorporated into a larger, ecosystem-based conservation bank or regional conservation plan.

In addition, conservation banks can take advantage of economies of scale that are often not available to individualized mitigation projects. Further, conservation banks provide incentives for private landowner participation and represent one of the best examples of private/public partnerships in an era of substantial fiscal constraints at all levels of government.

Conservation banks also can serve as a major funding component for the creation of an ecosystem preserve under a regional conservation plan. Finally, conservation banks simplify the regulatory compliance process.

Economic Benefits of Conservation Banking

Project-by-project mitigation often involves lengthy regulatory processes and significant costs for private landowners seeking project approvals. Conservation banks can greatly ease these burdens, reducing mitigation compliance to a single transaction and giving project proponents the certainty of having complied with mandated mitigation requirements.

Further, conservation banking allows landowners to recoup a higher value for their land, rather than suffer from constraints on land use due to environmental considerations. The availability of a conservation bank -- and the availability of conservation credits -- effectively makes the protection of habitat an economic asset that can be bought and sold by any third party that needs to mitigate for a project that occurs apart from and after the creation of the conservation bank.

As a result, conservation credits are commodities themselves that have monetary value and that, eventually, may be traded in a manner similar to air pollution credits.

Natural Community Conservation Planning (NCCP) Program

The State's NCCP pilot program in the 6,000-square-mile coastal sage scrub habitat of Southern California is precisely the type of regional habitat conservation strategy that is a priority for the creation and use of conservation banks.

Designed to conserve multiple species and their habitat while also providing for the compatible use of private land, the NCCP program was initiated by Governor Wilson in 1991. By early 1996, local governments had approved plans to guide habitat conservation and land use for over 209,000 acres of the central part of Orange County, including a permanent preserve of about 38,000 acres of several types of habitat. Preliminary approval by the City and County of San Diego had been given to the 580,000-acre Multiple Species Conservation Program (MSCP), an integral part of the NCCP program, and its accompanying 164,000-acre preserve system.

Conservation banks have been important to the planning and implementation of these plans and will continue to serve as an important tool to implement the NCCP program. In addition to the 1,500-acre San Vicente Conservation Bank cited in the Summary of this report, examples of other conservation banks that support the NCCP program follow.

The 260-acre Carlsbad Highlands Conservation Bank was created in 1995 by the Bank of America and has sold all available credits, some of which may be sold again by the Techbilt Construction Company. The conservation bank directly supports the Carlsbad Habitat Management Plan, which is an area within the Multiple Habitat Conservation Plan, which itself is a component of the NCCP program.

The Crestridge Conservation Bank, which is located east of El Cajon in unincorporated San Diego County, is a two-phase conservation bank of over 2,200 acres. The 310-acre Crestridge Habitat Management Area, a conservation bank created and owned by a different party, is adjacent to the Crestridge Conservation Bank. Together, these two conservation banks will provide an important habitat linkage under the MSCP.

In southern Orange County, the 327-acre Chiquita Canyon Conservation Bank is being created by the Orange County Transportation Corridor Agencies to mitigate for construction of future highway projects and for sales of credits on the open market. Encompassing an area that has the highest density of California gnatcatchers in the county, the conservation bank will make an important contribution to the preserve system provided for under the Southern Orange County NCCP.

In addition to the over 15 other conservation banks associated with the NCCP program, others are being established.

State Wetlands Conservation Policy

As a habitat type, wetlands historically have not fared well under conventional mitigation policies.

The type of project-by-project mitigation encouraged by current policies often results in smaller, fragmented wetlands rather than the larger, self-sustaining wetland ecosystems that will support fish and wildlife for the long-term. Initial banking efforts for wetlands have led often to costly and unsustainable mitigation banks because such efforts are often focused narrowly on a single species and do not recognize the importance of other species and potential impacts on associated species.

Governor Wilson's State Wetlands Conservation Policy of 1993 called for the development of statewide mitigation banking guidelines that focus on different species and habitat types banks in order to improve long-term sustainability and natural resources while lowering project costs. The Governor's policy specifically stated:

"The State will develop and adopt guidelines for wetland mitigation banks that recognize regional concerns, contain flexible mitigation ratios, are consistent with Federal agency guidelines, and encourage decisions to locate banks in the context of local or regional plans."

The expanded utilization of conservation banks under the wetlands policy ensures, that future wetlands mitigation will be of greater quality and biological viability than the traditional smaller, fragmented measures. In addition, the availability of off-site and, in certain cases, out-of-kind mitigation can greatly ease the regulatory process for project proponents.

Conservation banks have made a qualitative contribution to the 78,000 acres of increased, functioning wetlands achieved under the Governor's wetlands policy since 1993. Conservation banks substantially improve the long-term viability and ecological values of wetlands at bank sites. However, the banks have not added to the numerical total of wetlands acreage both because conservation banking is a recent innovation and because existing mitigation efforts have been designed to improve the manner in which impacts are offset, not necessarily to increase acreage.

In the future, conservation banks will serve to facilitate the creation and/or restoration of wetlands -- in lieu of other degraded or non-functioning wetlands -- thus effectively increasing the number of permanent wetlands in California.