Pursuant to Section 404 of the Clean Water Act, any development activity that adversely affects wetlands must be authorized in advance through a Section 404 permit. If impacts are considered unavoidable, compensation is usually required to mitigate for lost wetland functions and value. Any unavoidable impacts that result from project development must be fully compensated for through a wetland mitigation plan.
Compensation is where wetland mitigation banking plays a role.
Mitigation banking is an approved and accepted method for compensating for unavoidable impacts. As part of a sales transaction, the number of credits necessary to satisfy the requirements of a permit holder's Section 404 permit are debited against the mitigation bank's assets. According to federal guidance on the establishment, use and operation of mitigation banks, banks should be used to compensate for minor aquatic resource impacts. These standards are set to guarantee that the mitigation wetlands have achieved a jurisdictional, functional, and self-sustaining status. Upon meeting these standards, a permanent conservation easement on the property is assigned to a non-profit entity that will ensure that the wetlands remain in perpetuity.