Mitigation banking is finally starting to find a foothold in Pennsylvania. Mitigation banking is the preservation, enhancement, restoration or creation of wetlands, streams or habitat conservation area which offsets or compensates a negative impact due permitted activities in a similar ecosystem. With the rapid development of Marcellus shale, the necessity for oil and gas pipeline construction, and the abundance of streams and wetlands, it is only surprising that Pennsylvania didn’t follow the lead of many western states in its development of a mitigation banking policy much earlier than now.

Mitigation banking is regulated by state agencies, the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers. Federal regulations state that once a site is approved, advanced credits will be available for sale. After additional monitoring is done, more credits will be released for use by other applicants, such as energy companies.

In 2008, the Army Corps of Engineers and EPA published new requirements for environmental mitigation that established a preference for mitigation banking, in-lieu fee programs and permitted responsible mitigation. In-Lieu fee programs mean those where a company pays a nonprofit organization or state agency that would be responsible for any habitat restoration. Instead of buying credits from a private company through mitigation banking, a company can choose to construct a beneficial project elsewhere to compensate for the disturbances caused by a project.

Prior to 2008, mitigation banks were only used by PennDOT so that multiple small impacts less than 1 acre in size could be consolidated and offset. Originally, off-site mitigation banking was only approved when on-site mitigation and other off-site mitigation were not practicable and if the wetland banking was proven to have the greater environmental benefit from other forms of mitigation. At the federal level, it has become clear that there has been a paradigm shift and now mitigation banking is preferred over on-site projects or in-lieu payments.

The Pennsylvania Department of Environmental Protection (“PaDEP”) has been attempting to expand from its traditional regulatory role of hands-on involvement in watershed management. Part of this effort is manifested in the PaDEP’s efforts to establish a new in-lieu fee program called the Pennsylvania Integrated Ecological Services, Capacity Enhancement and Support Program (“PIESCES”). The program allows applicants that are required to offset their aquatic resource impacts for both state and federal permit requirements to pay a fee to PIESCES, which is in turn used on aquatic resource projects within the watershed. The benefit of this plan is that it saves the permitee time and the cost it takes for them to try to complete independent restoration or aquatic enhancement projects independently. Also, by leaving the restoration projects in the hands of one group of environmentally knowledgeable people, the money can be aggregated and used for larger projects which may serve to have a larger environmental positive effect than multiple small projects. Also, the locations can be selected from anywhere in the entire watershed and chosen for the site’s ecological potential rather than because it is close or cost effective from the place where the disturbance occurred.

This program is similar to the program for wetlands that the DEP first established in 1996. The new program is designed to meet the stringent federal requirements established in the Joint EPA and ACOE Mitigation Rules established in 2008. Many applications for wetland banking projects are being filed. However, until there is a large enough pool of mitigation credit established so that mitigation banking can be a viable option for all projects, the new program will serve as a mechanism for permittees to meet their state and federal mitigation obligations, even though mitigation banking seems to be largely the preferred method of mitigation.

The proposed program was open for comments until the extended deadline of June 23, 2014. The proposed regulations have yet to be finalized but, once implemented, they will be a welcome move towards state and federal consistency and a swifter more straightforward permitting process.