in The Success of An Entrepreneurial Wetlands Mitigation Bank
Donald A. Carr
Winthrop, Stimson, Putnam & Roberts
At the First National
Mitigation Banking Conference
April 6-7, 1998 n
The successful establishment of a
wetlands mitigation bank, especially a large entrepreneurial one, is a
formidable task. It is not for the fainthearted, or for those who need quick
gratification. Legal risk, political risk and market risk must each be addressed
and overcome. Navigating the regulatory Scyllas and Charybdises requires both
experienced judgment at the helm and large quantities of good fortune.
There is certainly no one chart that can
lead the venture safely home. The following considerations may apply in many
mitigation banking enterprises:
- Make sure your business plan is solid
enough (and sufficiently well financed) to weather a review process that might
be more protracted than your worst forecast. This demands intelligent
selection of real estate and ultra-careful restoration planning so that
credits can be offered for some small fraction of what a project developer
would otherwise have to spend for mitigation. Then, even with the inevitable
overruns, there will be sufficient motivation to keep pressing ahead through
inevitable mitigation bank review team (MBRT) delays.
- Anticipate and show respect for deeply
rooted institutional suspicion of mitigation banking concepts and methods.
Some regulators have literally been brought up to believe that the only good
mitigation bank is a dead one; that they are all fly-by-night schemes and
ecologically fraudulent, etc. This attitude, which has its origins in EPA and
environmental community distrust of Reagan Administration deregulation
efforts, still persists in many quarters. It was not wholly illegitimate in
view of some early, ill-conceived bank enterprises.
- Therefore, do not proselytize
mitigation banking as a philosophy. Instead, focus on the net benefits of your
specific proposal compared to the poor results of site-by-site mitigation in
the area. Emphasize the technical details and superiority of your restoration
plan or the exceptional ecological function of your preservation land in order
to depoliticize the discussion.
- Be prepared to be in the middle of
historic interagency conflicts, and endeavor to make peace with all factions.
This warfare has multiple combatants (Corps, EPA and state
environmental/natural resource agencies) and has been flaming since at least
the Pyramid-Attleboro Mall litigation in the middle 1980s.
- Work with local and regional
environmental organizations to design and explain the merits of your plan so
that they can at least reconcile themselves to non-opposition, because it is
almost always impossible to succeed if they actively object. If, on the other
hand, the Nature Conservancy or other respected groups can be brought to
endorse your plan, this may be a significant advantage.
- Formulate your rate of return calculus
with the perspective that it will only be achievable if there are demonstrable
environmental advantages. You have to show clients and customers that your
product is cheaper, but you also have to persuade the agencies that your
product is clearly better than the usual command-and-control result.
- Remember that most of the people you
will be trying to convince do not have private sector backgrounds or
orientation. They have a different sense of the time value of money, and you
cannot pass GO unless they concur. The mitigation banking guidelines, and the
discretion, belong to them. They must be enticed by the merits of your idea
and its presentation, not lectured, browbeaten or compelled.
- Choose the consultants who are most
respected locally, and use experts in every necessary discipline. It is much
easier for the agencies to accept your proposition if it is championed by the
specialists with legitimacy in each area. This does not necessarily mean the
good old boys who used to work for the Corps, some of whom in fact may be
resented for having "sold out" or having succeeded in the private sector.
- Make a case for a conservative amount
of advance credit, rather than appearing to have a nefarious agenda to take
the money and run. The agencies hate taking the risk of buying the Brooklyn
- Factor generous mitigation ratios into
bank economics, along with flexibility for agency discretion dependent upon
mitigation success and quality or extent of impacts. Allow the agencies to
show they got a good deal in the end.
Again, these ten ideas are hardly
universal rules. For at least the foreseeable future, mitigation banking
practice will be more disparate than uniform. Some Regions and Districts will be
hard sells, some easier ones. Each new prospectus will have to invent itself.
Still, if you attempt sincerely to put yourself in the shoes of your regulatory
audience, you may have a good chance of coming out ahead.
Donald A. Carr
Winthrop, Stimson, Putnam & Roberts
1133 Connecticut Avenue, Suite 1200
Washington, DC 20036
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