Why Offsets on Public Lands is a Bad Idea
Florida counties are eyeing already-conserved public lands to offset impacts to urban and suburban wetlands. State law has allowed this since 2019 to some degree: “If state and federal mitigation credits are not available to offset the adverse impacts of a project, a local government may allow permittee-responsible mitigation consisting of the restoration or enhancement of lands purchased and owned by a local government for conservation purposes…” (Florida Statute 373.4135). We’ve heard a bill is being drafted that would open up even more opportunities to create offsets on conserved public lands in Florida.
Below, we show why EPIC thinks environmental offsets on public lands is generally a bad idea. Hint: it’s about additionality! We also highlight safeguards when using public lands is necessary.
Image: Miami-Dade County is considering using protected public lands to offset destruction of wetlands in urban and suburban areas. This is a choice to lose wetlands. Source: Report Related to the Establishment of a Mitigation Bank by Miami-Dade County, Directive No. 212315, p.13.
Under the Clean Water Act, impacts to wetlands and streams must be avoided, minimized, and then offset (aka ‘mitigation’) by restoration and preservation of streams nearby. In the US, private restoration companies provide the majority of wetland and stream mitigation for development projects needing permits. The amount of wetlands restored and protected across the US is 614,000 acres - or 80% of Yosemite National Park. The amount of streams restored is equally impressive - if stretched out, it would span the continental US (2,500 miles).
National regulations passed in 2008 (2008 Rule) prioritize offsets from new restoration and preservation. If we want to make sure that offsets provide a net gain or at least no net loss of the resource impacted, then you shouldn’t use land that’s already been protected, or restoration that was already planned and funded. This principle is called ‘additionality,’ meaning “the benefits of the measure improve on the baseline conditions of the site that is compensating for the impacted resources and their values, services, and functions in a manner that is demonstrably new and would not have occurred at the compensatory mitigation site without the measure” (the definition adopted in the 2023 FWS Mitigation Policy).” The word ‘additionality’ is found nowhere in the 2008 Rules for wetland and stream mitigation, but it’s there in spirit. The 2008 Rule states that compensatory mitigation helps meet “the longstanding national goal of ‘no net loss’ of wetland acreage and function.” In the broader world of environmental offsets, the ‘additionality’ principle is well-known and baked into voluntary standards and protocols (e.g., the Gold Standard, Climate Action Reserve, the Standard on Biodiversity Offsets, and even the US Fish and Wildlife’s recent compensatory mitigation rules). Lack of additionality in the carbon offsets world has led to public shaming of companies accused of greenwashing (e.g., Shell, Eni, BA, Nestle, TotalEnergies) and arguments to upend corporate use of carbon credits to claim net-zero emissions in recent years.
In the world of wetland and stream offsets, the additionality principle takes a backseat when available private land is constrained and people start to eye public lands as a place to develop offsets, as they’re doing in Miami-Dade County Florida right now. Or when agencies like the Forest Service or state agencies look to offsets as a new way to shore up funding sorely needed for management of public lands. Or when county and city governments want to build a mitigation bank to lower costs for developers in their jurisdictions. This leads to bad outcomes for natural resources and for taxpayers. Below are the arguments we've seen for putting offsets (aka ‘mitigation credits’) on public lands, our counter-arguments, and safeguards that can be put in place when you have to use public lands (hat tip: Duke University’s Nicholas Institute).
Note: Public agencies like Departments of Transportation create offsets for their own impacts fairly regularly, and we don’t have a problem with that. The problem comes when offsets are created on public land for impacts on private lands.
The “We’re running out of credits” argument
A Florida newspaper reported in 2019 that in South Florida, “The Everglades Mitigation Bank and the Hole-in-the-Donut banks have had 9-12 month periods without any credit, and the Loxahatchee bank will run out in five to six months, experts said.” In response to that, state Legislators passed a bill “...to remedy that pending crisis by opening the gates for local governments to allow developers to restore local public lands bought for conservation if no state or federal mitigation bank credits are available” (Florida Statute 373.4135). Fast forward to 2023, and Miami-Dade County is in the process of creating a mitigation bank, noting that “Insufficient wetland mitigation credits are currently available in Miami-Dade County, and no state wetlands credits are currently available” (Resolution R-1051-21). The County’s plans “...included Miami-Dade County lands that were [previously] purchased as part of DERM’s Environmentally Endangered Lands (EEL) Program and set aside for conservation.”
Meanwhile, in Missouri, a reservoir impacting >250,000 feet of streams and 350 acres of wetlands plans to develop offsets on the Swan Lake National Wildlife Refuge (public lands that have already been conserved). The plan claims there are not enough credits available and does not mention the 150,000 feet of stream credits and roughly 350 wetland credits that indeed do exist as of this writing in the watershed. Some of these credits had not yet been approved by the Corps when the plan was written,** but no reasoning was provided. In the 2008 Rule, there is a stated preference to use credits from restoration that has already been completed and approved. This was brought up in a public comment (p.190) and yet still was not addressed. From recent developments, it appears the plan to develop mitigation on National Wildlife Refuge lands is ongoing.
Counter argument
For the latter example, our counter argument is simply that federal agency policies should be followed. In the case of the Corps’ 2008 Rule - use existing credits when available. In the case of the US Fish and Wildlife Service’s (FWS) National Wildlife Refuge Mitigation Policy (1999)* - avoid “siting mitigation for off-refuge impacts” except in “limited and exceptional circumstances.” The agencies should present strong reasoning for the deviation from requirements. Finally, the agencies that would benefit from restoration dollars flowing to their lands (e.g., USFWS) should probably recuse themselves from the mitigation approval process.
For other general “there’s not enough credits” cases, there likely market failure from artificially low credit prices. When demand for credits is high, private sector mitigation banks come in to fill the demand. Underpriced credits in an area of high demand leads to shortages. When ‘full cost accounting’ is not used in setting the price of credits, new banks are unable to compete. No profit-driven mitigation bank would sell credits below costs for long and still be in business. However, credits developed by non-profit or government organizations may purposefully or unwittingly omit the market value of land - particularly if they are using lands already conserved or donated lands.
This credit shortage problem is exacerbated when government agencies manage offset programs. The cost of staff time may be absent from the credit price. Government organizations may also be politically constrained and required to sell credits below cost. Rising land prices and inflation may also lack consideration in credit pricing. Duke University carried out a comprehensive review of in-lieu fee programs (which are often run by government agencies) and found numerous failures in pricing offsets costs (see discussion starting on p.12 of “The Financial and Environmental Risks of In Lieu Fee Programs for Compensatory Mitigation,” Doyle, 2019). Another case study on failures of credit pricing is the Western Association of Fish and Wildlife Agencies’ Lesser Prairie Chicken mitigation program. A 2019 audit estimated that the agency had committed to $95-$110 million in offset needs but only collected $65 million for that purpose, a 32-40% underestimate of the price at which offset credits should have been set.
Regulators may also allow permittees to develop credits that don’t include all of the same requirements/costs that a bank would have to provide, which is a failure to uphold the ‘equivalent standards’ required in the 2008 Rule.
Some consequences of artificially low credit prices:
The financial incentive to avoid impacts is undermined when credits are artificially cheap.
Taxpayers (or donors) pay for land conservation and developers don’t face the full cost of their impact on wetlands and streams (see related “Credits are too expensive” counter-argument below).
The credit provider finds challenges in delivering the amount or quality of restoration. This can occur when offsets are created after impacts occur and years after funds were collected. Delays mean that inflation and overhead costs erode the funds available to complete the restoration, which could lead to poorer quality restoration outcomes.
When subsidized, cheaper credits run out, developers have to face the reality of higher costs - which can be jarring.
*The 1999 FWS NWR mitigation policy “remains in place and is unaltered” by a newer FWS Mitigation Policy (2023). Even so, the newer Service-wide policy notes that “the Service usually does not support offsetting impacts to private lands by locating compensatory mitigation on public lands designated for conservation purposes” and if this was proposed, it would require “careful consideration and justification relative to the Service’s mitigation planning goal.”
**By February 2022, these credits would have been pending approval when the North Central Missouri Regional Water Commission submitted an RFP to shop around for stream and wetland mitigation services ("REQUEST FOR PROPOSALS For Stream and Wetland Mitigation Services East Locust Creek Reservoir (ELCR) ,Sullivan County, Missouri"). Another Request for Qualifications in late 2023 indicates the Commission was still shopping around for mitigation services, even knowing that credits were approved and available for use.
The “There’s no available land” argument
In dense urbanized areas, land available to create offsets is limited. For example, a 2012 Washington Post article noted “In Northern Virginia, construction is plentiful, but large swaths of land are hard to come by.”
Counter argument
In the vast majority of cases, this is a false argument, thinly veiling the opinion that offsets will be too expensive if you actually incorporate the full cost of the land (see the “Credits are too expensive” argument). In exceptional cases where there truly are no private land options for wetland restoration and preservation or when restoring degraded public lands provides a vastly greater outcome than using the land options available, agencies should use the safeguards noted below. Another option often used when land is limited is to allow credits from an adjacent watershed. This is allowed under the 2008 Rule and is a practical option, although it is a choice with a consequence of exporting the benefits of restoration outside of the watershed where the impact occurs (BenDor and Brozovic, 2007).
The “Credits are too expensive” argument
In multiple articles we reviewed, government representatives were troubled by the high cost that they or developers in their jurisdiction were facing, and wanted to create a mitigation bank to lower costs. For example, in Michigan, the Michigan Municipal Wetland Alliance offers “affordable credits” - $30,000 per credit vs. up to $100,000 per credit from private banks - to municipalities and agricultural producers (Warner, 2018). The Alliance is a public-private partnership between the Department of Natural Resources and the Michigan Municipal Wetland Alliance that uses state owned lands to lower the cost of mitigation credits.
Counter argument
Developers know this equation well: when demand exceeds supply, prices rise. Houses cost more when there aren’t many options for developing new housing. Why does this simple free market principle go out the window when the thing that is scarce is a natural resource? Yes, impacting a wetland will cost you a lot if there’s little to none left! Market pricing wetland destruction has led to a lot of avoidance of impacts in the first place.
If taxpayers in the jurisdiction think they are getting lower costs by using public lands, they’ve forgotten that they already paid for it before - supposedly to protect it in perpetuity. Taxpayers are not “getting a good deal” but rather giving a good deal - e.g., a subsidy - to developers in their area.
The lower credit prices in the examples above do not include land costs, but we don’t know whether the price also omits other costs incurred. Either way, it’s an artificially low cost, we just don’t know to what extent (see “We’re Running Out of Credits” counter-argument above). As noted above, taxpayers (or donors) pay for land conservation and developers don’t face the full cost of their impact on wetlands and streams.
The “Our agency doesn’t have enough money” argument
For example, Miami-Dade county mused in a January 2022 memo “...if the County were to establish its own wetlands mitigation bank, such a project could... create a much-needed funding source to restore County-owned conservation lands.” This isn’t the first time Miami-Dade eyed public lands as a revenue source. In 2009, the county considered “drilling for oil and gas at an old jet port that's now part of the Big Cypress National Wildlife Preserve as one potential way to get money” for expansion of Miami International Airport. In Northern Virginia, a County parks department official also noted: “The parks didn’t have the budget to do these repairs.”In a factsheet developed by the US Forest Service, the agency notes: “[an] analysis of 25 National Forests in watersheds with high potential for compensatory mitigation shows: 345,343 acres of unfunded and NEPA-approved priority restoration treatments, 5,802 miles of unfunded and NEPA-approved stream restoration,” and over $350M wetland and stream enhancement needs. The preamble of the 2008 Rule even mentions “Credits secured by private developers can provide a source of income for public entities to conduct aquatic resource restoration, establishment, enhancement, and/or preservation activities that could not be done under their current budgets.” A 2020 Nicholas Institute report included several cases of offsets developed on federal lands including: Big Branch National Wildlife Refuge, Daniel Boone National Forest National Forest, Everglades National Park, Great Smoky Mountain National Park, Francis Marion and Sumter National Forests, and Superior National Forest.
Counter argument
As we noted in public comments on a proposed conservation banking policy, “We empathize with public agencies lacking resources to properly manage their lands, and realize that baseline conditions may be degraded due to lack of resources. The solution to this problem, however, is not funding through environmental credit sales, but rather increased appropriations for agency budgets.” Using public lands creates a perverse incentive for government to defund agencies’ land management budgets because credit sales will replace that investment. This is especially a risk for local public lands where there will be a strong incentive to completely defund park management. Additionally, the promise of using mitigation credit sales as a funding source may not materialize and can even become a cost sink. A newspaper article noted that the City of Blaine, MN is using the proceeds from their mitigation bank’s credit sales to fund recreation projects in their Wetland Sanctuary (Hagan, 2018), but a 5-year capital improvement plan (2019) shows that the expenses of the wetland mitigation sites exceed expected credit sales by $1.5M (see table on p.16).*
One exception to our argument could be when public lands are actually threatened for development, which is rare in developed countries like the US (see an exception below in “The “There’s not enough land” argument, Western lands version”). A different case could be made for crediting in least developed countries where little to no conservation budget exists or is likely to exist in the near future.
In what should be extremely rare exceptions when mitigation on public lands is used for impacts on private lands in the US, we recommend the safeguards below.
*Some unknowns are whether the City was using already-preserved land (which would increase the subsidy to developers), and if there are expected credit sales beyond this 5-year period, which would lower the subsidy.
The “We are generating functional uplift, even if the land is already conserved” argument
The 2008 Rule even makes this argument in the preamble section: “As long as mitigation banks or in-lieu fee projects established on public lands provide environmental benefits over and above what normal management activities provide, there should be no conflict.”
Counter argument
We’ve said it before and we’ll say it again: “Additionality is not difficult to prove; it’s only difficult when the argument for a specific project is weak, as is the case with proving additionality on public lands.”
As Doyle et al. (2020) noted, “For a number of cases [of mitigation on public lands that] we reviewed, additionality was considered fulfilled because restoration funding would not have become available otherwise” and this was sufficient for current federal agency regulations. We question how the public can verify this. For example, there is a mitigation bank created on Everglades National Park lands that creates restoration credits by addressing issues with invasive species. While this is a worthy activity, how can the average citizen tease out whether restoration was already planned there given that there are BILLIONS of Federal dollars focused on Everglades restoration?
In the carbon offsets space, Blue Source LLC inked a deal with the state of Michigan to sell carbon offsets with dubious additionality on already-conserved state forest lands. The Pigeon River County project “claims that timber harvest will triple in the following decade (from 20,000 to 55,000 cords) a year [but]... officials said there weren’t any such plans.” Blue Source maintains that the project meets the American Carbon Registry standards.
We don’t want to see this kind of shady additionality in wetland offsets.
The “There’s not enough land” argument, Western lands version
Over 25% of land in America is owned by the Feds and almost all of that (92%) is in Western states. In this context, there may be situations where it is challenging to find private land to use for compensatory mitigation.
Counter argument
We agree that private land is more scarce in the West, but this doesn’t mean that opportunities to create offsets on private lands are impossible. In fact, there are close to 400 mitigation banks in Western states. One option we’ve seen in the West is banks being developed on state trust lands that are required to create an economic return for public schools and are nearly always leased to private interests like oil and gas development or agriculture. Because of this risk of impacts from use or resource extraction, additionality could be easier to prove.
Safeguards for When You *Have* to Create Offsets on Public Lands
Caveat: We think it’s totally fine to create offsets on public lands for impacts on public lands. Everything we note here is for the situation where an offset is created on public lands for an impact on private lands.
The following are prudent safeguards to use to get the best environmental outcomes and ensure that government agencies are not unwittingly providing a subsidy for impacting wetlands and streams. The safeguards are from two main sources: EPIC’s 2023 policy recommendations for conservation banking, and Duke’s Nicholas Institute report “Compensatory Mitigation on Federal Lands” (indicated with Doyle et al., 2020).
First, prove full cost accounting and additionality:
Incorporate land costs (highest and best use appraisal cost) into the credit price when public lands mitigation is for impacts on private lands. For example, this Pierce County (WA) wetland ILF provides a detailed breakout of their credit pricing calculations that includes land price as well as other costs. Doyle et al. (2020) offer two additional mechanisms for a government agency to incorporate land costs: creating a bid/auction process for land access or estimating the “embedded cost of the land.”
The portion of the credit price that represents land costs (i.e., a portion of the revenue to the public sector) should be used for conservation-focused land acquisition to ensure a net growth in conserved lands.
To ensure full-cost accounting, Doyle et al. (2020) suggest that any public-private partnership creating mitigation credit (/ “no cost restoration”) should include contract language that “...externalize[s] all costs and liability associated with mitigation through appropriate contracts that divest the agency of all responsibilities associated with mitigation (e.g., permitting, design, restoration activities, maintenance and monitoring).” When agency time is used, the private partner should “pay a fee sufficient to recoup the time and resources necessary for agency personnel to manage the project.”
Require proof that public lands can meet the requirements for all forms of mitigation (financial assurances, durability of site protection, etc.) (see example of requirements in the 2008 Rule, § 332.4 (c) 2-14). Doyle et al. (2020) “recommend[s] maintaining strict equivalency into any standards developed for mitigation on federal lands.” The report also suggests that policy or guidance should describe “how to handle mitigation projects on lands where management changes undermine a project.”
Require proof that “Private lands suitable for compensatory mitigation are unavailable or are available but cannot provide an equivalent or greater contribution towards offsetting the impacts to meet the mitigation planning goal for the species”(as was required in the 2016 ESA mitigation policy, Section 6.2.2.)
Require explanation &/or quantification of “additional conservation benefits above and beyond measures the public agency is foreseeably expected to implement absent the mitigation” (as was required in the 2016 ESA mitigation policy, Section 6.2.2.)
Second, avoid the problems that stem from public management of an offset program.
What problems are we talking about? Failing to account for all costs, the inability of a Federal agency to retain fees for offset program management, political restrictions on changing credit prices, extreme time lags between when fees are accepted and when restoration actually occurs, and “an organizational culture that prevents an effective management of the program” are issues we’ve seen in research and news articles.
Doyle et al. (2020) suggest:
Ensure that the 2008 Rule’s preference for in-advance mitigation is upheld.
For Federal agencies, “Work with a third party…( e.g., National Parks Foundation, National Forest Foundation, National Fish and Wildlife Foundation)... to keep revenue at the unit where mitigation is occurring.”
Use the public bid process for access to public lands, which will “ facilitat[e] equivalency amongst mitigation providers… [and] ensures that the land management agency gets the best return or greatest restoration investment for making their land available.”
Consider higher credit ratios (“perhaps double”) when private land impacts are mitigated on public lands “to help address the costs of land access and any other assurance risk, or costs of management or monitoring that the agencies are taking on.”
Conclusion
Mitigation on public lands is generally a bad idea. It brings up all kinds of challenges because of the difficulty in proving additionality on already-conserved lands along with the bad track record government agencies have in running offset programs. There are policy constraints in which we’d support mitigation on public lands - essentially meeting all of the safeguards noted above. However, public agencies have rarely (if ever) implemented these safeguards in actuality. If you see a mitigation on public lands, look closely. It probably doesn’t pass the smell test of additionality and may be a transfer of investment from the taxpayer to developers. Not the greatest outcome for Nature or people.
The Restoration Economy Center, housed in the national nonprofit Environmental Policy Innovation Center (EPIC), aims to increase the scale and speed of high-quality, equitable restoration outcomes through policy change. Email becca[at]policyinnovation.org if interested in learning more, sign up for our newsletter, or consider supporting us!
