Land is frequently protected to provide “mitigation” to offset the adverse impacts of development. For example, the deleterious effects of constructing a new highway that would destroy wetlands could be mitigated by acquiring and protecting other wetlands. Similarly, a housing development that would pave over farmland would mitigate that impact by acquiring and protecting other farmland. Mitigation banks are simply formed through the acquisition and protection of land by purchasing land or a conservation easement in excess of what is currently required by any specific development project. The excess land or conservation easement that is available for use to mitigate for other projects is the “mitigation bank.”

There are two basic scenarios:

  • A qualified land trust, joint powers authority, or governmental agency acquires land or a conservation easement. The location, size, and natural characteristics of the land make it suitable to mitigate the impact from development projects. The organization that establishes the mitigation bank finances all the costs of creating the bank and recaptures those costs when they sell mitigation “credits” for the acres of land needed by project proponents to meet the mitigation requirements for the development of their projects. The actual land or conservation easement remains in the ownership and management of the organization that established the mitigation bank. The credits sold are deducted from the credits available at the bank until all credits have been “sold” and the bank has been fully utilized.
  • A project proponent acquires land or a conservation easement on acreage that exceeds their mitigation needs. The project proponent transfers the land and/or the conservation easement to a qualified conservation holder such as a land trust, joint powers authority, or governmental agency to be held and managed for the conservation purposes. The excess acres are then available for the project proponent to use to mitigate their future projects or to make available to other project proponents for their mitigation needs. The project proponent who establishes the mitigation bank pays all the costs of establishing the bank. If other project proponents utilize the bank to meet their mitigation needs they typically compensate the project proponent who established the bank. The credits used or “sold” are deducted from the credits available at the bank until all credits at the bank has been fully utilized.