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U.S. House of Representatives 

Transportation and Infrastructure Committee

Subcommittee on Water Resources and the Environment

Testimony on H.R.1774 "The American Wetlands Restoration Act"

September 20, 2001

 (rescheduled from September 12)

Click here to read the testimony and background memo on the Committee's webpage

Mr. Chairman, my name is George Howard, and I have been building wetland mitigation banks since 1996.  In 1998, I started a mitigation banking firm, Restoration Systems, which my partner and I run in Raleigh, North Carolina.  Our principle projects at this time are the Bear Creek and Sleepy Creek Mitigation Banks on the Neuse River in Lenoir County, North Carolina.  Prior to 1996 I was a congressional aide in the office of Senator Jesse Helms from 1990 to 1993, and from 1993 to 1996 I was a legislative assistant for Senator Lauch Faircloth, with responsibility for the Environmental and Public Works Committee, and S. 851, The Wetland Regulatory Reform Act of the 104th Congress.

I am here to testify to the benefits of wetland mitigation banking and Congressman Jones’ bill, H.R. 1474.  This is an easy and enjoyable task, sir, and I deeply appreciate the opportunity.  I have believed since I worked in Congress, and seen proven as a businessman and mitigation banker in North Carolina, that environmental restoration and mitigation works, and it works best when it is practiced by the right people with the right incentives in the proper regulatory setting. Wetland mitigation banking is that setting, and it leads to better environmental outcomes than any other method of compensatory mitigation. 291 mitigation banks are up and operating across the country, Mr. Chairman, failures are few and successes are many. We need the Jones bill to build on this record of accomplishment and to provide our industry with a firm statutory foundation. 

My support for this legislation comes from personal experience.  Within a year after the final hearing on wetland reform for Senator Lauch Faircloth in 104th Congress, I was hip deep in a Carolina Bay building one of North Carolina’s very first mitigation banks.  Wetlands, once relatively abstract policy to me, had suddenly (and not without some irony) become quite personal. 

In 1996 and 1997, working for Ecobank, a Florida company, I helped permit and build North Carolina’s first fully permitted and sold out mitigation bank, the Barra Farms – Cape Fear Regional Mitigation Bank in Cumberland County, North Carolina. 

At this one site we planted over 200,000 trees of 9 species, filled 22 miles of ditches, and restored over 622 acres -- a square mile -- of farmed and fertilized Carolina Bay to its natural condition as hardwood swamp. Dozens of bird species flourish at the site today and once knee high cypress trees are now nearly 6 feet tall.  This bank is currently entering its 4th year of documented ecological success. 

Next week, our firm, Restoration Systems, will conclude a 38 month permitting and sales effort and begin construction on the Bear Creek -- Mill Branch Mitigation Bank on the Neuse River in Lenoir County, North Carolina.  The Neuse River has long been the subject of national concern.  Between two devastating hurricanes, Fran and Floyd, and an explosion in regional swine farming and urban populations, the Neuse has had a rough time of it.

Bear Creek is the first so-called “riverine” mitigation bank in the Neuse River basin and the first in Congressman Jones’ 3rd District. Riverine wetlands of the type and function we are restoring at Bear Creek are extraordinarily effective at nitrogen uptake and non-point source abatement.  Our restoration acreage will remove approximately 100,000 pounds of nitrogen per year from the Neuse watershed, which is a reduction of nitrogen in the immediate watershed of nearly 2/3rds!  In addition, the restored and protected bottomland hardwoods are the natural habitat of numerous North Carolina coastal species such as wild turkey, wood duck, bobcats and black bear.

Our project will be a positive, tangible, benefit to the beleaguered Neuse River, sir.  The Bear Creek Bank includes 83 acres of “farm-to-forest” riverine bottomland hardwood restoration, 34 acres of enhancement, and 303 acres of preservation[1]. Each of these elements will combine to produce the largest passive water quality project in the history of the Neuse River. 

In exchange for establishing the 425 acre bank and restoring 83 acres, 83 credits will be issued over time to Restoration Systems for sale in the local watershed.  Each of these credits has already been contracted to the North Carolina Department of Transportation until needed for unavoidable impacts associated with road construction.  Essentially, these credits will be “warehoused” until needed, which is likely to be many years from now and well after the wetland is performing important functions.  This means large “temporal” gains in wetland function will occur until the credit is used.  Temporal gains is a fancy way of saying that Bear Creek will be up and working long before the credits are need to off-set impacts.

But equally importantly, Mr. Chairman, Bear Creek will allow the North Carolina Department of Transportation to prepare more effectively for permitting needs in the Coastal Neuse region. NCDOT is committed to private mitigation banking as the most effective insurance that performance based mitigation credit will be available when the state highway plan demands it.  Restoration Systems is honored to be DOT’s long term partner in a commitment to North Carolina’s transportation needs, and the Neuse River.

I speak to individual mitigation banks because I am proud of them.  I feel our method of meeting mitigation needs, mitigation banking, is more effective than other types of mitigation, in large part because of the pride and commitment bankers universally feel for their projects.  It is difficult to legislate ecological success.  But Congressman Jones is attempting the next best thing:  legislating a system that rewards success.    Of the three principle methods, In-Lieu Fee Programs, Developer Mitigation and Commercial Mitigation Banks, only mitigation banking rewards success by allowing the mitigator to personally benefit from positive ecological outcomes.      

“Permittee” or “Developer Responsible” Mitigation

Two separate studies this year, from the National Academy of Sciences and the United States General Accounting Office, found significant shortcomings in non-banked wetlands mitigation projects.  These studies have been a tremendous boost to our industry by highlighting the strengths of mitigation banking relative to other approaches. 

The National Academy of Science’s National Research Council has reviewed the findings of numerous studies and concluded that “permittee responsible mitigation” – where the developer of wetlands is also responsible for their compensatory restoration --  remains highly unreliable.  

A typical failure found again and again in the National Academy’s analysis of developer mitigation is the failure of sites to be monitored for success or failure……at all.  In six of seven states the majority of sites received no follow up of any kind -- none.  In even the most conscientious state with regard to follow-up, California, two–thirds of permittee responsible mitigation at 324 mitigation sites were never visited a 2nd time after the permit was issued[2]!  That kind of inattention is unheard of at a commercial mitigation bank.

Mitigation Banking at Bear Creek 

Our firm, Restoration Systems, is required and accepts the responsibility to monitor nearly 150 acres of Bear Creek daily for five years.  We will install 20 monitoring wells that will be physically checked each week by soil scientists, during season, and electronically monitored 24/7 year-round until the wetland is successful.   We have 14 wells already installed for detailed restoration modeling.  In addition, we have provided a substantial surety bond that can be used to monitor and maintain the bank if we were to default on our obligation.   We personally guarantee bonds of this type and consider these guarantees a strong incentive to keep our commitments.

Another fundamental difference between our mitigation and the mitigation performed under a specific permit is the timing of impact versus the timing of the mitigation.  Our credits are released only when positive outcomes are documented.  40% of the potential credit at Bear Creek is withheld until after the 5th year of documented success at the site, and then released only at the subjective discretion of the state and federal Mitigation Banking Review Team.  25% of credit is released by the 2nd year of success. And only an initial 15% -- often inaccurately referred to as “pre-sales” -- is available before documented ecological criteria are met.2 

The initial 15% of credit is withheld until: 

  • The entire site is placed under a permanent protective conservation easement acceptable to our State and Federal Mitigation Banking Review Team, or MBRT.  (This guarantees two things at Bear Creek:  The site will never be commercially developed; but  more importantly, even in the event of total default by myself and my partners, the site can be expected over time to naturally and passively restore to wetland status from converted cropland.)


  • Financial Assurances sufficient to guarantee completion of site activities have been provided to the MBRT.


  • A Mitigation Banking Instrument is signed by state and federal agencies accepting a Detailed Mitigation Plan and memorializing numerous commitments from the Sponsor to the project.


By contrast, developer mitigation is a far less rigorous and more uncertain exercise.  The National Academy found that 30% of the mitigation projects studied were never even implemented.  The Committee was further disturbed to find that “some project files did not contain a mitigation plan or other explicit agreements on the size and type of mitigation to be provided.”   Mr. Chairman, the Bear Creek Detailed Mitigation of September 1998 runs 108 pages, has 27 figures, and the base topographic map alone cost over $20,000.  

The disparity in responsibility between a commercial mitigation banking and permit specific mitigation is so great that it is difficult to understand how the two different systems could have emerged from the same regulatory apparatus.  Private banks are relatively covered for years with professional attention and high-tech monitoring, while developer mitigation is often never seen again by a responsible party. 

Mr. Chairman, this kind of gross disparity demands the equivalency standards in Section 6 (c) of the Jones bill.  This is the heart of the Jones bill.  I hope that this provision will be pivotal to wetland statutory history. The Jones 6(c) provisions might someday stand for agency regulations demanding accountable and enforceable standards, the highest standards, for all mitigation, not just private banks.  I think such a legacy would be appropriate given the integrity of the bill’s sponsor, Mr. Jones.

In-Lieu-Fee Programs

The Jones bill 6(c)  provision also calls for equivalency standards between private banking and “in-lieu fee” programs.   In-lieu fee programs traditionally accept payments “in-lieu” of the developer performing their own project specific mitigation.  The program sponsor (often a non-profit or state resource agency) is then presumably obligated to perform mitigation of the type and kind of the impact.  The problem, according to the General Accounting Office investigation, is the frequent lack of a formal obligation on the part of the recipient program to perform the required mitigation.  Or, in cases where a formal obligation exists, a lower standard is applied to the recipient than might be expected in an evenly regulated  environment. 

For instance, in North Carolina, the in-lieu fee program operates under a formal MOU that is in general compliance with the recent guidance, but still results in standards short of those expected of mitigation banks.  Do not misunderstand, Mr. Chairman, The North Carolina Wetland Restoration program is run by resource professionals who care deeply about wetlands and North Carolina’s environment.  However, the program’s implementation has been slow relative to the rules that apply to banks.  According to the General Accounting Office and Wilmington District Army Corps, the North Carolina Wetland Restoration Program had performed no “actual mitigation,” despite having accepted $15.4 million in mitigation payments.  Efforts are underway to put the needed projects in the ground, but the environment has clearly suffered in the meantime.

The same patience is not extended to the private sector, nor should it be.  Private banks must have a project in place before credit can be applied to a permit and a wetland is allowed to be dredged or filled.  No fee program in the country is held to the same standard.

The In-Lieu Fee Guidance of last October was a welcome development in this regard and should have some significant positive effects, including the encouragement of higher standards for in lieu-fee programs and a stated preference for mitigation bank credits when they are appropriate and available.   I know a lot of people in Washington and around the country who worked hard to develop this guidance, and as a businessman I appreciated the help from Washington.  But bureaucracies do not turn on a dime, and guidance is not regulation  -- nor is it federal law.   Our national association reports that in-lieu fees continue to be accepted even in cases where commercial mitigation credit is available.

The central flaw of in-lieu fees is the acceptance by regulatory agencies of something short of an existing environmental project as acceptable and adequate compensation to wetland loss.  We have worked hard in our industry to make “credits” a summary of tangible, beneficial, tasks to meet the no-net-loss mandate.   Largest among them is identification of appropriate restoration property, the placement of a conservation easement on the land, and its physical restoration.  By taking payment first and performing these tasks later, in-lieu fee programs tend to undermine this simple understanding of what a credit means, and, in the process, cheapen our commitment to wetlands and the environment.  

An additional concern, not addressed directly by the report, is the appearance of conflict-of-interest created when in-lieu programs are administered by regulatory agencies.  I think we all agree there is a degree of unseemliness when regulatory agencies dedicated to environmental protection take payments for resource impacts.  Money and oversight should never mix, Mr. Chairman, and these programs are sometimes a mix of both.   The best way to put such concerns to rest is for these programs to embrace the same high standards expected of mitigation banks.  The 6(c) provisions of the Jones bill are a good opportunity for Congress to level the inconsistencies and raise the standards for all mitigation.

Conclusion (whew!)

Since its introduction in 1996 the American Restoration Act has fueled the confidence of hundreds of entrepreneurs like myself to stick with a difficult and uncertain business.  Mitigation banking as currently practiced is not for the impatient or the faint hearted, Mr. Chairman.  We keep at it because we love the idea of breeching levees, back-filling ditches and planting trees.  We have a builder’s passion blessed with the ecologist’s palette. But even pioneers need someone in Washington to legislate their path.  Congressman Jones has done so for us.

Major provisions of the Jones bill that should be enacted into law in the 108th Congress include: requiring financial assurances to provide guarantees of bank success; extensive opportunity for public comment; Mitigation Banking Review Team responsibilities; transfer of credits only after conservation; the preference for in-kind mitigation.  Each of these provisions has proven fundamental to the success of the mitigation banking guidance and deserves your explicit support in H.R. 1474. 

Law making -- as you gentleman understand more perfectly than anyone – is often a catalyst for unintended consequences.  Some negative.  Some positive.  Congressman Jones’ bill, I believe, will be the catalyst for many good consequences and better outcomes, many which might not be apparent today.  Banking systems can be applied to numerous resources to result in more effective protection and restoration.  Efforts to protect and restore endangered species, greenspace, streams, water quality buffers and numerous other resources will benefit from your endorsement of wetland banking.  Congressman Jones has taken an important step in making wetland mitigation banking the model for wise resource management in the 21st century.  I am hopeful this committee will take the next step by reporting H.R. 1474 to the full House.   

1  The Bear Creek – Mill Branch Mitigation Bank has an overall ratio (banked acres to impact acres) of 5.12 -to- 1.  This means that for each acre permitted for dredge or fill the mitigation bank has restored 1 acre of wetland, preserved 3.65 acres of wetland, and enhanced .40 of an acre of wetland.

2         The credit release schedule at the Bear Creek Mitigation Bank in percent and credits released per year of 84  credits:  15%  or 12.6  acres after  bank conservation; 10% or 8.3 acres after 1st year success; 10% or 8.3 credits after 2nd year success; 10% or 8.3 credits after 3rd year success, 15% or 12.6 credits after 4th year of success; 15%  or 12.6 credits after fifth year of success; and 25% or 21 credits after the 5th  year, if the bank meets “overall objectives and Success Criteria set forth in the mitigation plan” and approved by the MBRT (total 100%).






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