Wetlands 'banking' arrives in Pennsylvania, pipeliners take note.

Gas boom draws program to offset ecosystem disturbances

With thousands of miles of rivers, streams and wetlands in Pennsylvania, chances are a company building a large-scale project like a natural gas pipeline is going to disturb some type of waterway.

And then the company will be required to offset the project’s impact on the environment, which could mean a call to First Pennsylvania Resource, a Canonsburg company currently seeking approval to restore two streams and wetlands in Washington County.

If that project is approved, First Pennsylvania can use that acreage as credits that other companies can buy to offset disturbances caused by construction projects in nearby areas. The program is called mitigation banking.

Mitigation banking — which is regulated by state agencies, the U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers — is a relatively new program for Pennsylvania. But the practice could grow as the Marcellus and Utica shale plays develop. As natural gas, oil and natural gas liquids are produced, pipelines and other infrastructure will be needed to move those commodities through a state with about 84,000 miles of streams alone.

“The Marcellus Shale brought us here,” said Russell Krauss, vice president, marketing and research of Louisiana-based Resource Environmental Solutions, the parent company of First Pennsylvania Resource. “Oil and gas is the primary driver for our business.

“The goal is to follow the federal order of ‘no net loss’ of wetlands or streams,” Mr. Krauss said.

The first legal protection of wetlands was established during President Jimmy Carter’s administration in 1977. Later, President George H.W. Bush established the national policy of “no net loss” of wetlands, which provide wildlife habitats, flood control and pollutant filtration. The “no net loss” concept has been weakened and strengthened throughout the various administrations.

The state Department of Environmental Protection said there’s only one approved mitigation site in northeastern Pennsylvania at this time.

MarkWest Energy Partners, a Denver-based midstream company with offices in Canonsburg, has not used mitigation credits for its operations in the Marcellus or elsewhere, according to Robert McHale, manager of governmental and regulatory affairs.

“One of our primary goals when siting our infrastructure is to avoid impacts to cultural and aquatic resources,” Mr. McHale said. “We go to great lengths to accomplish that goal. If we were unable to avoid a resource, having available credits in a mitigation bank could be beneficial.”

First Pennsylvania Resource identifies streams, wetlands or flood plains that have been damaged due to agriculture, industrial or other human activity.

In Washington County, First Pennsylvania Resource wants to restore more than 6,400 feet of stream and 2.6 acres of wetlands in Washington Township. The work will add 60 feet of streams and almost two additional acres of wetlands.

Another proposed project in Somerset Township would acquire 2,900 feet of streams and 1.46 acres of wetlands. First Pennsylvania said when the restoration work is done, that area would have a total of 2,610 feet of streams and 4.14 acres of wetlands, according to documents published in the Pennsylvania Bulletin, the Commonwealth's official publication for rule making.

Nationally, Resource Environmental Solutions operates 47 mitigation banks and sites. In Pennsylvania, Ohio and West Virginia, it is seeking approval for work at 17 sites.

The mitigation banking program is relatively new to Pennsylvania — at least on a broad scale.

“Prior to 2008, mitigation banks were only used by PennDOT because they had numerous small impacts. Mitigation banks were created to consolidate the impacts associated with road activities crossing streams and wetlands,” said Amanda Witman, spokeswoman for the state DEP.

“Natural gas development in Pennsylvania has created the need for mitigation banks for timely permitting options.”

First Pennsylvania Resource currently has the only approved mitigation bank in the state in the Upper Susquehanna Watershed in northeastern Pennsylvania to offset disturbances in that area, according to the DEP. That means if a developer can’t avoid disturbing a waterway in Bradford County, for example, it can buy credits within the watershed to compensate for the disturbance.

“This site was just permitted last year and was recently constructed,” Ms. Witman said.

Basically, federal regulations state that once a site is approved, advanced credits will be available for sale. After additional monitoring is done, more credits will be released for use by other applicants — energy companies, real estate firms and other developers — who need to offset disturbances in that watershed, according to Ms. Witman.

Mitigation banking is one of the methods preferred by the federal government to offset disturbances to land and waterways.

In 2008, “The Army Corps of Engineers and EPA published new requirements for environmental mitigation that established a preference for mitigation banking, in-lieu fee programs and permittee-responsible mitigation,” she said. In-lieu fee programs mean those where a company pays a nonprofit organization or state agency that would be responsible for any habitat restoration.

Generally speaking, the Pennsylvania DEP treats proposed disturbances to wetlands in this way: Permit applicants need to avoid disturbances on the site. If it is not possible, then applicants must minimize them as much as possible. And applicants who create disturbances will be required to mitigate them, according to Ms. Witman.

Instead of buying credits from a private company through mitigation banking, a company can choose to construct a beneficial project elsewhere to compensate for the disturbances caused by a project.

A third option has been proposed that is called the Pennsylvania Integrated Ecological Services, Capacity Enhancement and Support Program (PIESCES).

“In extremely general terms, PIESCES will allow someone to pay DEP for any unavoidable impacts resulting from their permitted activity,” Ms. Witman said. “DEP then would put that money toward a project that offsets the unavoidable permitted impacts. DEP’s project will take place within the same ’geographic service area’ as where the impacts take place.”

That proposal is under federal review. More information can be found at the Army Corp of Engineers website at http://www.nab.usace.army.mil/Missions/Regulatory/PublicNotices.aspx.

The DEP is expected to provide additional comment opportunities in the future, Ms. Witman said.

In the U.S., there are roughly 1,300 mitigation banks, and about 1 million acres of wetlands have been restored, according to Mr. Krauss, who also is a board member of the trade group National Mitigation Banking Association.

Mr. Krauss said the price per credit varies based on the number of wetland acres or linear feet of stream and what’s required by a company’s permit.

According to the U.S. Department of Agriculture’s Natural Resources Conservation Service, the price per wetland credit is a private transaction between the bank sponsor and the buyer. The price isn’t determined by the DEP, for instance.

“The sale price depends greatly on the location of the bank, the wetland type, and the supply and demand for credits,” according to USDA data. “Agricultural credit prices will generally be based on the agricultural value of the land and the cost of creating the credit. For example, if demand for credits in an area is strong, and if the value of a field suitable for agricultural use is $5,000 per acre, then the credits would likely sell for the same amount.

“On the other hand, if the supply of credits was substantially greater than the overall demand for them, then the price of the credit would decline to the actual cost per acre of restoring and maintain the credit,” the USDA said. “[Clean Water Act] permits in urbanizing areas typically sell for much more than agriculture credits because the value of the land for non-agriculture uses is so much higher and the supply is substantially less than the demand.”

Stephanie Ritenbaugh: sritenbaugh@post-gazette.com or 412-263-4910

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