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February 1, 2021

An Option You Can Bank On to Meet Environmental Obligations

The first 100 days of any presidential administration are always packed with developments that will impact our nation’s industries. Biden has sent a clear message that he is committed to the environment. With the number of executive orders already issued, and more slated to come, the mining industry watches carefully to position itself for its next steps—preparing for the upcoming actions of federal agencies or launching an effective advocacy strategy, as examples.
CEC has decades of direct mining industry experience and has partnered with our clients through some of their most challenging times. With that in mind, we find this to be an opportune moment to share our thoughts on one of the more viable, stable solutions to meeting environmental obligations: the mitigation bank. We predict a rise in the number of mining companies opting to utilize mitigation banks for two reasons: predictability and stability—two welcome concepts during a time that can often feel devoid of both.

Managing timelines and environmental risks with mitigation banks
Mitigation banks develop stream and wetland credits which mining companies can buy to offset the impacts of their projects. Mitigation banks do this by buying or securing rights to property, improving that property’s capacity and function as natural habitat, and then selling credits to offset environmental impacts elsewhere.
The concept is well established, and regulatory agencies are familiar with this way of meeting environmental obligations. In fact, mitigation banks are the preferred way to meet environmental obligations under the U.S. Army Corps of Engineers/U.S. Environmental Protection Agency 2008 compensatory mitigation rule.
Regulators like the fact that the environmental benefits are more than plans on paper—the new habitat actually exists and is delivering on its promises. Mitigation banks can help companies with quicker regulatory approval, since the regulators do not need to review and approve site-specific mitigation plans. This added certainty allows mining companies to plan budgets and timelines with greater certainty.

Determining the best way to work with a mitigation bank
There are multiple ways mining companies can work with mitigation banks, including:

Setting up an In-house mitigation bank – Some companies know they will have multiple environmental impacts over the years. These companies can reasonably set up their own in-house mitigation bank—one that buys properties, improves their environmental quality, and works with the Interagency Review Team (IRT)—the interagency team that provides regulatory review, approval, and oversight of the bank—to have the credits approved for release. The in-house bank then transfers credits as required by their development projects. As well as being able to predict the timing, it is also important that these companies be able to predict the geographic location of projects, so they can be sure that their bank has credits available in the needed service area.

Buying credits from a public bank – This option can sometimes offer a high degree of flexibility in responding to changing market conditions. It involves the mining company seeking a bank operating in the same service area that has credits available for purchase and buying those credits for use towards its projects. While this way to obtain credits can be flexible, it depends on the bank having credits available in the service area where they are needed. If you plan your impacts far enough in advance and talk to a mitigation bank sponsor, they may develop a bank in your service area and offer you a discounted rate as the “anchor tenant.”

Success in working with a mitigation bank
Here are some tips for success in working with mitigation banks:

Compare offers – While credits can be considered a commodity, prices of those credits may vary significantly. It pays to shop around for the credits needed for your projects.

Be aware of location-sensitive pricing – Some areas offer a plentiful supply of mitigation banks, driving down the cost per credit. Fewer banks in other areas may mean higher prices. Check prices in the relevant service area to avoid unexpected impacts on capital cost projections.

Stay current on banks in your area – Depending on demand, mitigation banks may build their projects in stages—working on one part of their property to make credits available and using the proceeds from those sales to develop other parts of the property. This means that even if a bank has no credits available right away, that situation may change in the near future. By staying current on the plans of each mitigation bank active in their service areas, mining companies can learn what credits may come on-stream in upcoming months or years, adding flexibility into their plans.


Getting good results from mitigation banks

Staying current on mitigation bank developments is a focus for CEC. Our professionals can provide information on the types and numbers of mitigation bank sites, mitigation credit availability, and service areas, as well as information on national and local policies and procedures that affect mitigation bank development and operation. With your business objectives in mind, CEC can make recommendations and advise you on how to work with a mitigation bank. Having a trusted partner enables you to stay focused on your strength—extracting mineral resources.

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