The Michigan Department of Envrionmental Quality (DEQ) explains wetland mitigation banking in the MDEQ Wetland Mitigation Banking Handbook:

 

Michigan’s wetland statute, part 303, Wetlands Protection, of the Natural Resources and Environmental Protection Act, 1994 PA 451, as amended (NREPA), requires that persons planning to conduct certain activities in regulated wetlands apply for and receive a permit from the state before beginning the activity.   Decisions on wetland permit applications are based on the review of the proposed project in light of the criteria in Part 303 and associated administrative rules.  Part 303 provides for the issuance of permits for wetland alteration when impacts are unavoidable and when they impact to the wetland is, on balance, deemed to be in the public interest.  However, Part 303 also recognizes that the permitted loss of wetlands may result in the loss of wetland functions and values which provide public benefits, such as flood storage, water quality protection, fish and wildlife habitat, and groundwater recharge.  Therefore, as a condition of the permit, the applicant may be required to create or restore wetland areas in a process known as compensatory mitigation, or more commonly, mitigation.

 

Wetland mitigation has traditionally been provided on a permit-by-permit basis.  That is, the permit applicant is responsible for the design and construction of new or restored wetlands to replace the area impacted by the permitted activity.  This process can effectively replace lost functions, such as flood storage or stormwater treatment, but it can have disadvantages.  From the point of view of the applicant, design and construction of new wetland areas may be complex and time consuming.  From the point of view of the resource, the new wetlands may be too small or isolated to fully replace the lost wetland functions and values, or may be in a less than ideal setting which may never support a fully functional wetland system.  This approach may also result in a delay from the time of wetland loss to the time of wetland replacement.

 

Wetland mitigation banking is a concept that has been developed nationally in an attempt to address these issues.  In a wetland mitigation banking program, new wetlands area created or restored in advance of anticipated losses in order to meet the future needs of a particular watershed or ecoregion.  Once these wetlands are established, they can provide mitigation credits that can be used to offset permitted losses.  These credits may be used by the person who establishes the bank, known as the bank sponsor, or may be sold to another party.

 Administrative rules authorizing wetland mitigation banking in Michigan, promulgated under part 303, took effect on December 25, 1997.  Mitigation banking offers an alternative, and a potentially more effective, means of replacing permitted wetland losses and complying with wetland permit conditions.