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Since wetlands provide a myriad of ecology benefits, programs to protect them, as well as strategies to compensate affected parties for their loss, have evolved over the past two decades. Under Section 404 of the Clean Water Act, a market-based management strategy called wetland mitigation banking requires developers to compensate for wetland loss or degradation resulting from their projects prior to developing the area. The federal government has endorsed this mitigation banking as an appropriate method to restore, create, enhance, and even preserve wetlands and thus compensate for unavoidable wetland losses. Under the compensation program, instead of requiring land developers to produce the compensatory wetland values, the developers can purchase those values from another entity that has produced and banked them for this purpose. Although these banked compensation credits are recognized as suitable compensation by the government, statistics indicate that this market-based incentive program has not produced a viable credit transfer program. The article first explains the problems with “The Nature of the Resource” by discussing wetlands valuation and describing the transition in attitudes and policies towards wetlands as a natural resource. Part II discusses the economic and ecological values of wetlands as well as valuation methods and barriers to accurate valuation. Part III then analyzes how federal regulation and administrative agencies cause most of the institutional problems in mitigation banking. Part IV addresses design problems by describing the system, the types of mitigation banks, credit measurements, among other things. Part V argues that the failures in issues discussed in Part II, Part III, and Part IV (i.e., The Nature of the Problem, Institutional Problems, and Design and Implementation) result from the government's failure to set up a mitigation banking program that "nudges" potential participants in right direction. After proposing alternative legislative language, the article concludes by asserting that while mitigation banking has gained some participation over the past decade, it cannot succeed without better efforts on the part of the national government to establish a viable credit program.

GW Paper Series

GWU Law School Public Law Research Paper No. 2013-16; GWU Legal Studies Research Paper No. 2013-16

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