In-Lieu Fee: Lots of Questions, Few Answers

February’s second “Stakeholder Meeting” concerning upcoming Wetland Conservation Act rule changes took place yesterday at Cabela’s in Rogers.  A long overdue new dynamic entered into the discussions with the addition of at least 5 (uninvited) owners of wetland credit banks.

While similar meetings have taken place over the last few years, the bank owners introduced some tough new questions, and BWSR provided very little to help set these private business owners at ease.

In-Lieu Fee:  The “Problem Statement” within BWSR’s 2014 Siting of Wetland Mitigation in NE Minnesota report states:

“Ongoing and projected impacts to wetlands in northeast (NE) Minnesota are creating high demand for compensatory wetland mitigation. Due to the high prevalence of wetlands and the relative lack of drained wetlands in NE Minnesota, opportunities to meet the demand through traditional mitigation approaches are limited. Improved coordination of federal and state wetland regulatory programs can more effectively address these unique circumstances.”

BWSR proposed the In-Lieu Fee (ILF) program as a means to help compensate for a lack of traditional methods of generating wetland credits in the NE part of the state, especially for mining impacts.

The problem for BWSR is…the private banking market solved this problem on its own, using existing rules. 

As of today, less than two years later, over 6350 credits have been approved by BWSR for NE Minnesota.  Over 1700 of these credits are already available, with the remainder coming over the next 5 years.  According to Section 1.2 (page 8) of the 2014 BWSR report, these 6350 credits will satisfy demand in NE Minnesota until 2040.

Since these new credits were approved, BWSR has changed their tune on the need for an ILF program.  Now, rather than needed as a way to meet demand for credits in NE Minnesota, the ILF’s new purpose is to “achieve better, more targeted wetland mitigation” in priority locations with better projects.  This change of purpose was completed this past summer with the redaction of language BWSR had just added to the Wetland Conservation Act in 2012.  According to their 2015 Summary of Statute Changes, the 2012 language describing the ILF’s purpose to compensate for impacts to “wetlands on agricultural land, for impacts that occur in greater than 80 percent areas (NE Minnesota), and for public road projects” has been struck out (deleted), opening up the ILF program to be implemented statewide, for any type of impact and any purpose.

Mitigation Method Priorities:  Also introduced in yesterday’s meeting was a priority order of mitigation methods that requires those mitigating for impacts to first look for bank credits, then, if none are available, to the ILF program.  Problem is, Minnesota has one of the most robust and diverse private banking systems in the country, with bank credits available virtually everywhere in the state.  With an ample number of private bank credits available statewide, the ILF program would be useless as no projects would ever be allowed to move beyond the banking system for impact mitigation.  And there is little reason to believe this will change unless private bankers become concerned that BWSR, the state, and its ILF program will be a direct competitor to their banks, and thus become less likely to establish new banks to begin with.

Clearly, after speaking with some of the existing account owners following the meeting, this concern is very real.  At least one wetland account owner said they would not look to establish new banks considering the potential that the very same organization who oversees the Wetland Conservation Act (that creates the need for wetland credits), and is tasked with approving their private bank plans, could very well become their main competitor and the primary supplier of Minnesota’s wetland mitigation credits.

Is BWSR really solving a problem, or are they creating a problem to solve?