How can tribes use mitigation banking for economic development?

By Mariah Black Bird

Compensatory mitigation banking (used interchangeably with mitigation banking) is the restoration, creation, enhancement or preservation of wetlands, streams or other aquatic resources to offset unavoidable development impacts. By design mitigation banks consist of both an ecological and natural resource component, and an economic development component. Mitigation banks can and should be profitable due to credit sales and favorable market prices and demand for credits. Due to their potential to generate profits, tribes might consider developing mitigation banks as an economic development opportunity. Non-tribal mitigation banks are generally managed by the for-profit private sector, but tribes can consider developing banks for purposes of tribal economic development, which comes with special governance considerations.

Economic development on a tribal reservation can be challenging for many reasons: land ownership issues, limited funding sources, knowledgeable human capital, reservation capital[1], as well as the lack of separation between business and tribal politics. Tribes are sovereign nations and are run by governing bodies often referred to as tribal councils. Traditionally tribal councils oversee all decisions made for the tribe, both related to governmental policy and economic development. However, as published in the Harvard Project’s highlight on Ho-Chunk, Inc. Winnebago Tribe of Nebraska,[2] to further ensure the success of economic development in Indian Country, there needs to be a solid understanding of the importance for the separation of tribal business from tribal politics.

So how would this look in a tribal mitigation banking setting? Two relevant and important components in bank development are the tribal council enactment of the necessary tribal codes (e.g., economic development code, tribal environmental code, tribal mitigation banking code), and creating a tribal compensatory mitigation entity to manage the mitigation project. Establishing this independent tribal entity creates a separation between business and political decision making and can help a tribal mitigation bank steer clear of agenda changes that result from leadership turnover among tribal councils. Establishment of a mitigation bank requires upfront investment in the feasibility assessment, bank design, natural resource management capacity and engagement with the bank permitting and approval processes; the failure of tribal leadership to appropriately support and fund this initial bank development can be devastating not only monetarily but culturally (i.e., if the mitigation includes culturally significant areas or species).

A tribe can achieve separation of government and business activities by mimicking the structure of a tribal economic development corporation.[3] The new entity does not have to be a corporation, but it needs to implement the same checks and balances as one. Notably, the structure does not need to completely sever the control of tribal council, as they have the right to govern their nation as they see fit, but it does shift the focus of the tribal council to governing the nation. Such a corporation or mimicked structure does not ensure success on its own though. The success comes from the tribal council and the understanding of the need for autonomy and treatment as a business enterprise. This type of structure would also encompass the exercise of tribal sovereignty to achieve ecological and natural resource restoration through mitigation banking. Mitigation banking can serve a dual function for tribes:  offsetting natural resource impacts of tribal and non-tribal development projects while also being profitable for the tribe.

Tribes should take advantage of the economic development benefits of mitigation banking while structuring the development of the bank to serve tribal sovereignty while promoting natural resource mitigation.

[1] Refers to the lack of functioning economies to keep community money circulation on reservations and within its territories to capture the maximum economic value for the money that tribes and its members possess. See Robert J. miller, RESERVATION “CAPITALISM”: ECONOMIC DEVELOPMENT IN INDIAN COUNTRY, 132 (2013).

[2] See https://hpaied.org/publications/economic-development-corporation-ho-chunk-inc(discussing the main factors of success, including the separation of business from politics).

[3] See https://hpaied.org/publications/prototypical-economic-development-corporation-native-american-tribes (discussing tribal economic development corporations in depth).