A Thesis Submitted to the Graduate Facultyof theNorth Dakota State Universityof Agriculture and Applied Science

The economic efficiency of wetland mitigation in Minnesota’s Red River Valley wasexamined using the Minnesota Routine Assessment Method on ten wetland case studies torate the functions o

ECONOMIC ASSESSMENT

OF WETLAND MITIGATION IN MINNESOTA

A Thesis Submitted to the Graduate Faculty

of theNorth Dakota State University

of Agriculture and Applied Science

ByRobert Loyal Sip

In Partial Fulfillment of the Requirements

for the Degree ofMASTER OF SCIENCE

ABSTRACTSip, Robert Loyal, M.S., Department of Agricultural Economics, College of Agriculture,North Dakota State University, February 1998 Economic Assessment of Wetland

Mitigation in Minnesota Major Professor: Dr Jay A Leitch

The economic efficiency of wetland mitigation in Minnesota’s Red River Valley wasexamined using the Minnesota Routine Assessment Method on ten wetland case studies torate the functions of impacted and replacement wetlands Secondary sources were used toassign dollar value to wetland functions of impacted and replacement wetlands Mitigationcosts for projects ranged from $279 to $4,171 per acre Estimated social values rangedfrom $207 to $1,027 per acre for impacted wetlands and from $268 to $927 per acre forreplacement wetlands Social values of replacement wetlands exceeded the social value ofimpacted wetlands in seven cases Values of replacement wetlands were 1.8 to 4 timesgreater than the values of impacted wetlands due to 2 to 1 replacement ratios Whensociety gains benefits from mitigation, then public cost sharing may be appropriate In onecase, the value of the impacted wetland was higher than the value of the replacementwetland There were insufficient data to evaluate two cases Results are only indicators ofefficiency, since not all social costs and benefits of the impact-mitigation activity areaddressed by legislation These results suggest wetland mitigation policy in Minnesotashould be reevaluated if efficient use of society’s resources is a legislative goal

I would like to thank Donald Ogaard and the Red River Watershed Management Boardfor financial support for this research and for the professionalism that this organizationcontributes to the natural resources management field A sincere thanks goes to Dr Jay A.Leitch for his integrity and sincerity as an adviser and instructor and for the countlessreviews of this thesis Thanks also go to my other committee members: Drs Donald R.Kirby, William C Nelson, and Walter D Svedarsky, who provided valuable insight andwhose comments and suggestions were greatly appreciated

I would also like to thank the following personnel from the Minnesota Board of Waterand Soil Resources: John Jaschke, Wetland Conservation Act program manager of thecentral office, who helped to interpret the various aspects and policy of the MinnesotaWetland Conservation Act; Brian Dwight, board conservationist of the Bemidji fieldoffice, who helped to apply the Minnesota Routine Assessment Method to the study

wetlands; Bill Best, board conservationist of the Bemidji field office; and Dan Eklund,wetland specialist of the Brainerd field office, for identifying case studies Charles Fritz ofNorth Dakota State University also helped to apply MNRAM to the study wetlands, andhis knowledge and suggestions were quite helpful

Also, thanks go to the various Minnesota Soil and Water Conservation District, LocalGovernmental Unit, Natural Resources Conservation Service, Minnesota Watershed

District, and Houston Engineering personnel who helped to identify wetland case studies

DEDICATION This thesis is dedicated to my loving wife, Amy, whose patience and understandingthroughout my college career has been unending Her constant encouragement and kindwords guided me through many long hours of preparing for examinations and assignments Her presence by my side throughout this graduate school experience was comforting Thank you, I love you

R.L.S

TABLE OF CONTENTS

ABSTRACT iii

ACKNOWLEDGMENTS iv

DEDICATION v

LIST OF TABLES xii

LIST OF FIGURES xiii

LIST OF ACRONYMS xiv

CHAPTER 1 INTRODUCTION 1

Need for Study 4

Objective 5

Procedure 5

Organization 5

CHAPTER 2 ECONOMIC BACKGROUND 7

Social Value Philosophy 7

Wetland Economics 9

Efficiency and Maximum Social Well-being 9

Market Failure 11

CHAPTER 3 WETLAND REPLACEMENT 15

Wetland Conservation Act Mitigation Policy 15

In-kind Replacement and Out-of-kind Replacement 18

Wetland Replacement Ratios 21

No-net-loss 21

Mitigation Banking 22

Wetland Exemptions and de minimis 23

Improving Decision Making 24

CHAPTER 4 MINNESOTA ROUTINE ASSESSMENT METHOD FOR EVALUATING WETLAND FUNCTIONS 25

General Information 25

Scope and Limitations 26

Wetland Classification 26

Summary of Wetland Functions 27

Site Description 27

Functional Assessment 28

Floral Diversity and Integrity 29

Wildlife Habitat 29

Fishery Habitat 31

Flood and Stormwater Storage 32

Water Quality Protection 37

Shoreline Protection 39

Groundwater Interaction 40

Aesthetics, Recreation, and Education 43

Commercial Uses 43

User Guidance 45

Implications of the Minnesota Routine Assessment Method 45

CHAPTER 5 PROCEDURE 46

Site Selection 48

Secondary Data 48

Field Visits 52

Technical Evaluation Panel Results 53

Mahnomen County Impacted Wetland 54

Functional Assessment of Impacted Wetland 55

Floral Diversity and Integrity 56

Wildlife Habitat 56

Fishery Habitat 56

Flood and Stormwater Storage 57

Water Quality Protection 58

Shoreline Protection 58

Groundwater Interaction 58

Aesthetics, Recreation, and Education 59

Commercial Uses 59

Mahnomen County Replacement Wetland 59

Functional Assessment of Replacement Wetland 61

Floral Diversity and Integrity 61

Wildlife Habitat 62

Fishery Habitat 62

Flood and Stormwater Storage 63

Water Quality Protection 63

Shoreline Protection 64

Groundwater Interaction 64

Aesthetics, Recreation, and Education 64

Commercial Uses 65

Monetary Valuations 65

Floral Integrity and Diversity 66

Wildlife Habitat 66

Fishery Habitat 68

Flood and Stormwater Storage 68

Water Quality Protection 69

Shoreline Protection 69

Groundwater Interaction 71

Aesthetics, Recreation, and Education 71

Commercial Uses 72

Mitigation Costs 73

CHAPTER 6 RESULTS 76

Mahnomen County Wetland Case Study Results 76

Floral Diversity and Integrity 76

Wildlife Habitat 78

Fishery Habitat 78

Flood and Stormwater Storage 78

Water Quality Protection 79

Shoreline Protection 79

Groundwater Interaction 80

Aesthetics, Recreation, and Education 80

Commercial Uses 80

Mitigation Costs 81

Estimated Annual Monetary Values of Case Study Wetlands 82

Other Wetland Case Study Results 84

Becker County Wetland 84

Clay County Wetland Case Study 85

Clearwater County Wetland Case Study 86

Kittson County Wetland Case Study 87

Mahnomen County Wetland Case Study (Waubun) 87

Red Lake County Wetland Case Study 88

Roseau County Wetland Case Study (County Road 8) 89

Marshall County Wetland Case Study 90

Roseau County Wetland Case Study (County Road 6) 91

Findings 91

CHAPTER 7 CONCLUSIONS AND IMPLICATIONS 93

Sensitivity of Results 93

Policy Implications 95

Wetland Monitoring 97

Minnesota Routine Assessment Method 98

Wetland Replacement Ratios 98

Road Construction Projects 99

Local Governmental Unit Administration 100

Research Needs 100

REFERENCES CITED 102APPENDIX A MINNESOTA ROUTINE ASSESSMENT METHOD FOR

EVALUATING WETLAND FUNCTIONS 113

LIST OF TABLES Table Page

1 Draft 1996 Minnesota Wetland Report 4

2 Selected Economic Evaluations of Wetlands 8

3 Wetland Flood Control Values 36

4 Wetland Case Studies 49

5 Importance of Wetlands in Minnesota, Estimates of Wetlands Contributions to the States’s Welfare……… 67

6 Costs Associated With Producing Wetland Hay 73

7 Wetland Mitigation Costs in Minnesota 74

8 Per Acre Dollar Values for Minnesota Routine Assessment Method Wetland Functions 75

9 Minnesota Routine Assessment Method for Evaluating Wetland Functions, Ten Case Studies 77

10 Annualized Costs of Mitigation Projects (In 1996 Dollars) 82

11 Estimated Annual Monetary Values of Impacted and Replacement Wetlands, by Function (In 1996 Dollars) 83

LIST OF FIGURESFigure Page

1 Location of Study Area, Red River Valley 6

2 Production Possibilities Curve, Indifference Curve, and Point of Maximum

Social Well-being 10

3 Minnesota Wetland Areas 19

4 Prairie Pothole Region of the United States and Canada 30

5 Red River Basin of Minnesota, North Dakota, and South Dakota Flowing

North into Canada 33

LIST OF ACRONYMS

MNRAM Minnesota Routine Assessment Method

CHAPTER 1 INTRODUCTION Wetland ecosystems are comprised of diverse floral and faunal communities which provide society with biological, hydrological, and educational benefits Despite these recognized

benefits, wetland ecosystems have been considered wasted space and have been drained or filled for agricultural development, urban uses, and highway systems Because of these conflicting beliefs, wetland management has been a highly controversial issue in the United States,

especially in the Prairie Pothole Region (PPR) of the Upper Great Plains (Baltezore et al 1987) Issues being addressed by policymakers include the social value of wetlands and wetland acres/types needed to sustain ecosystem health Until these issues can be resolved, the wetland debate will continue Wetlands, like other normal economic goods, can always be used if demand exists and the next best alternative does not exist (Leitch and Baltezore 1992)

Regionally, the social value and management of wetlands have been issues of concern in

Minnesota The Minnesota Wetland Conservation Act (WCA), signed into law by Governor

Arne H Carlson on June 4, 1991, was enacted to help manage the state’s wetlands

Terms such as attributes, benefits, characteristics, features, functions, outcomes, outputs, services, social value, and value are used throughout the wetland literature It is important to clearly distinguish among these terms Attributes, characteristics, and features are physical components of wetlands such as size, depth, location, hydrology, vegetation, and water

chemistry Functions are the biological and chemical processes that occur in wetlands such as nutrient assimilation and groundwater recharge/discharge (King and Herbert 1997) Benefits, outcomes, outputs, and services are consumptive or non-consumptive services produced by wetlands such as flood control reduction, environmental education, visual aesthetics, water table

maintenance, and wildlife Social value and/or value represent the worth of wetland benefits, outcomes, outputs, and services to society Values are the willingness-to-pay (WTP) of

individuals or society for benefits, outcomes, outputs, and services of wetlands (King and Herbert 1997)

Wetlands can provide many benefits to society, and policymakers have been able to

recognize the importance of sustaining Minnesota’s wetland areas In Minnesota, WCA

(Minnesota Board of Water and Soil Resources 1993, WCA Statutes, p 2) states:

The legislature finds that the wetlands of Minnesota provide public value by

conserving surface waters, maintaining and improving water quality, preserving

wildlife habitat, providing recreational opportunities, reducing runoff, providing for floodwater retention, reducing stream sedimentation, contributing to improved

subsurface moisture, helping moderate climatic change, and enhancing the natural beauty of the landscape, and are important to comprehensive water management

The intent of WCA is to “conserve and use water resources of the state in the best interests of its

people, and to promote the public health, safety, and welfare” (Minnesota Board of Water and

Soil Resources 1993, WCA Statutes, pp 1-2) “Economic considerations alone do not justify adversely affective actions” (Minnesota Board of Water and Soil Resources 1996, WCA Rules, Chapter 8420, p 5) WCA was designed to be used at the local level to protect wetland

ecosystems

WCA is comprised of administrative rules and regulations to conserve wetland areas of the

state The Minnesota Board of Water and Soil Resources (BWSR), as delegated by the

Minnesota legislature, is primarily responsible for implementing and overseeing WCA, issuing administrative rules for WCA, and acquiring permanent easements for wetland Types I, II, and III WCA states that “wetland type” means a wetland type classified according to Shaw and

Fredine (1956) Local government units (LGU or LGUs) such as county highway departments,

planning and zoning offices, solid waste offices, and Soil and Water Conservation Districts

(SWCD or SWCDs) have the primary responsibility to administer WCA, while the Minnesota Department of Natural Resources (DNR) is responsible for statewide enforcement of WCA The

DNR may issue cease and desist orders and may also issue restoration and replacement orders

when violations occur according to Minnesota Statute S 103G.2372 (Minnesota BWSR 1993)

Public perception of what comprises a wetland often leads to confusion because many definitions have been developed since the early eras of wetland management Interpretations in

the past have led to various opinions among policymakers According to WCA, “wetlands means

lands transitional between terrestrial and aquatic systems where the water table is usually at or

near the surface or the land is covered by shallow water” (Minnesota BWSR 1993, WCA

Statutes, p 26) The Minnesota BWSR (1993, WCA Statutes, p 26) describes the attributes that

are part of a wetland

For purposes of this definition, wetlands must have the following three attributes:

(1) have a predominance of hydric soils, (2) are inundated or saturated by surface or ground water at a frequency and duration sufficient to support a prevalence of

hydrophytic vegetation typically adapted for life in saturated soil conditions, and (3) under normal circumstances, support a prevalence of such vegetation

Need for Study

The Minnesota Wetlands Conservation Plan (MWCP) was developed to guide the

stewardship of wetlands of the state (Minnesota DNR 1997) Research priorities identified in the

MWCP include an economic evaluation of wetland mitigation (Minnesota DNR 1997) The

economics of wetland mitigation is a concern to policymakers, LGUs, society, and developers

A primary issue is that some naturally occurring wetlands may have limited social value When

an impact occurs, the natural wetland must be replaced by another wetland of at least equal size

and social value (Minnesota BWSR 1996) Mitigation expenses may exceed the wetland’s social value, and/or the result may be a restored wetland that has greater or lesser value than the

original natural wetland The social values of impacted and replacement wetlands should be considered in mitigation plans so efficient uses are made of society’s scarce resources BWSR

estimated that expenditures exceeded $2.8 million in 1996 to administer WCA (Table 1) While

it is difficult to allocate these expenses to specific wetlands, the $2.8 million roughly averages about $700 per acre “saved” in 1996

Table 1 Draft 1996 Minnesota Wetland Reporta

or Filled

Acres Replaced Via Replacement Plans

Estimated Wetland Acres Impacted Via Exemptions

Total Administrative

Expenses for WCA

in 1996

aIn 1996, there were 240 replacement projects, 1004 exemptions approved, 976 No-Loss

determinations, and 93 restoration orders (Source: Jaschke, John 1998 Draft 1996 Minnesota Wetland Report Minnesota Board of Water and Soil Resources, St Paul)

Objective

The objective of this study was to assess the economic efficiency of Minnesota’s WCA

mitigation policy from society’s perspective It was assumed that individuals who impact

wetlands and comply with mitigation requirements made rational decisions to do so

Procedure The study was conducted in the Red River Watershed Management Board (RRWMB) jurisdictional area (Figure 1) Ten wetland mitigation projects were identified The working hypotheses were (1) that some impacted wetlands have social values less than the cost to replace them and (2) that some restored or created mitigation wetlands have social values less than their

restoration or creation cost Wetland functions of impacted wetlands were compared to functions

of mitigated wetlands using the Minnesota Routine Assessment Method (MNRAM) Where differences in functions occurred between impacted and mitigated wetlands, the differences were evaluated using dollar values from the literature By viewing and contrasting the differences between impacted and mitigation wetland values, the efficiency of mitigation was assessed

Organization This chapter introduced the problem, the need for the study, the objective, and the study

procedures Chapter 2 reviews wetland values and economic concepts Chapter 3 describes wetland replacement guidelines Chapter 4 describes MNRAM and discusses wetland functions Chapter 5 describes the study procedure Chapter 6 presents the results of the economic

assessment of ten wetland case studies Chapter 7 includes conclusions, implications, and

recommendations and identifies the need for further study of wetlands in Minnesota

Figure 1 Location of Study Area, Red River Valley (Source: Sinn, Mel 1998 Personal communication Surface water and hydrographics administrator, Division of Waters, Minnesota Department of Natural Resources, St Paul)

CHAPTER 2

ECONOMIC BACKGROUND

Wetland science is an evolving discipline that has often been used to interpret the role of wetlands in natural and social systems The debate over the importance and social value of wetlands continues as economists attempt to quantify wetland outputs using monetary valuation methods Many wetland valuation methods exist However, economic methods can result in wide-ranging estimates (Table 2) Accurate monetary valuations of PPR wetlands depend on (1) successful simulation of the wetland ecosystem, (2) identification of individuals who derive benefits from wetland products and services, and (3) the ability to estimate those benefits

(Nelson and Leitch 1983)

Social Value Philosophy The social philosophy that underlies wetland preservation and conservation is that of human value and ethics Humans make ethical decisions and place value on something (e.g., wetlands) that is important, whether it is culturally or aesthetically pleasing Economic values are derived from human wants, which are felt and expressed (van Vuuren and Roy 1993) Society derives utility or satisfaction from using wetlands through either consumptive or non-consumptive uses Wetland values are derived from wetland functions that produce wetland goods and services The value of a wetland function is based upon human judgment or the worth, integrity, quality,

or ecological importance of a wetland function (U.S Army Corps of Engineers 1995)

Table 2 Selected Economic Evaluations of Wetlands

Economic Study and Outputs

Real Per Acre Dollar Values Gosselink et al (1974), Louisiana

Fisheries Production

Waste Assimilation

Total Life Support Values

Jaworski and Raphael (1978), Michigan

made by individuals and society

Wetland Economics The economist seeks to measure the contribution of alternative natural resource (e.g.,

wetlands) uses to the welfare or well-being of individuals and society (Shabman 1986)

Economics is concerned with the efficient use of limited natural resources to achieve maximum social well-being and to satisfy the wants and desires of society (McConnell and Brue 1993) Social well-being considers the delicate balance between the welfare of present and future

generations (Tietenberg 1992) Wetlands are one of society’s scarce resources, and the purpose

of wetland economics is to efficiently manage this resource from society’s perspective to move toward maximum social well-being

Efficiency and Maximum Social Well-being

The most desirable condition for society is maximum social well-being, which refers to the

state in which society is as well off as possible, given its available resources, technology, tastes, and preferences (Randall 1987) The goal of society is to move toward maximum social well-being (Point B in Figure 2) by reallocating resources to higher and better uses Point B

represents maximum social well-being (Pareto-efficiency) and illustrates the point of tangency between a Production Possibilities Curve (PPC) and an Indifference Curve (IC) Efficiency occurs when society’s scarce resources are allocated to the highest and best use by using the least amount of an input to attain a given output or by attaining the maximum output using a given amount of inputs Three conditions necessary for Pareto-efficiency, a situation where it is

impossible to make one individual better off without making another individual worse off, include efficient resource allocation, efficient product mix, and efficiency in consumption

(Randall 1987) These conditions depend upon the ability of consumers and producers to

allocate their resources efficiently

Figure 2 Production Possibilities Curve, Indifference Curve, and Point of Maximum Social Well-being

A PPC illustrates what society can produce (Figure 2) More specifically, the PPC shows the maximum production of goods and services that society can produce in one period with a given set of resources such as land, labor, capital, and entrepreneurship (Fleisher et al 1987) For this illustration, it can be assumed that society produces two goods: consumer and

environmental goods Consumer goods (x-axis in Figure 2) can include automobiles, hospitals, houses, and roads Environmental goods (y-axis in Figure 2) are represented by wetlands, wildlife, vegetation, and clean air Because resources are not allocated according to their highest

and best use, inefficiency occurs, and production takes place within the PPC (Point A in Figure 2) At point A, society is on a lower indifference curve, and overall social well-being is lower than it could be

An IC represents the combination of goods and services that society wants In more certain terms, an IC illustrates the level of satisfaction or utility attained from consuming environmental

or consumer goods (Fleisher et al 1987) Movements from Point A toward Point B (or any other point on the PPC) occur by using policy tools such as market-like incentives, government

regulation, government provision, and moral persuasion (Randall 1987) When considering movements along IC1, movements from Point A toward either consumer goods or environmental goods are not less efficient as long as Pareto-efficiency criteria are met and maximum social well-being is attained

Market Failure

Market failure occurs when free markets fail to result in socially efficient resource

allocations (Ward and Duffield 1992) Wetland mitigation, in some situations, may result in socially inefficient resource allocation According to public interest theories of regulation, government regulation is conducted to balance market failure to ensure that economic systems meet efficiency criterion (Salvatore 1996) Economists recognize two major cases of market failure in which market systems either (1) produce inefficient amounts of certain goods and services or (2) fail to allocate resources to the production of certain goods and services whose output is economically viable and justified (McConnell and Brue 1993) Market failure leads to economic inefficiency, and one role of the government is to intervene However, in the case of wetland mitigation policy in Minnesota, this intervention may not improve the situation

When considering wetland mitigation, actions that lead to inefficiency and reduces social well-being include the following: (1) projects where the social value of the impacted wetland is less than the mitigation costs, (2) projects where restoration costs exceed the social value of the wetland being restored, (3) projects where the impacted wetland is replaced with a wetland that has little or no social value, and (4) projects where the social value of the impacted wetland is less than the social value of the replacement wetland

Inefficiency may also occur when all the effects of an activity on social well-being are not considered For example, the resources used for wetland mitigation have an opportunity cost In other words, there are other uses for the resources that replace wetlands that may result in a greater contribution to social well-being Preserving a tract of native prairie, acquiring land for a state park, and building or maintaining infrastructure are examples of how society’s scarce resources can be allocated to better uses to increase social well-being The concern is whether society’s scarce resources are being used efficiently by “digging” holes across the landscape to replace wetlands that have been “destroyed” by wetland projects in Minnesota, or whether those resources would be better used elsewhere

The mitigation policy of WCA may also discourage activities that might benefit to society

For example, an activity may not be pursued on a tract of land that has wetlands on it because of the “red tape” process that the developer or landowner must go through with the LGU to

complete the project When situations such as this occur, projects are postponed, other sites are located, or projects are not completed Holtman et al (1996) investigated the relationship of wetland regulations and property values in Minnesota Eight case studies were conducted in the Twin Cities metro region and northwestern Minnesota One case study involved a project in Blackduck where the owner entered into a contract to sell 5 acres of land in 1995, with about 70

percent of the site being Type II wetland In 1996, the buyer backed out of the contract after realizing the process that takes place when wetlands are impacted In this case, the tract of land was not sold and represents a missed opportunity for the landowner to increase social well-being Policymakers have ensured that wetland acres in Minnesota are sustained by requiring wetland mitigation for projects that impact wetlands Although impacted wetlands are replaced

according to WCA guidelines, mitigation policy at times affects individual social well-being

Monetary incentives exist for individuals to convert natural wetlands into other uses such as cropland, shopping malls, parking lots, and housing developments However, wetland decisions are often impeded by the mitigation process that individuals must go through when wetland projects occur Mitigation projects result from economic decisions by individuals who consider the private benefits of conversion compared to private costs because wetlands in their natural state usually generate little monetary income (Turner and Jones 1991)

Understanding resource economics (e.g., wetland economics) and wetland science is

important for policy makers to make socially efficient decisions regarding wetland mitigation Resource economics offers approaches to guide wetland policy to correct for market failures by identifying optimal levels of wetland ecosystems for which marginal costs and marginal benefits

of wetland preservation are roughly equal (Lant 1994) Although satisfying the ecological requirements of wetland mitigation projects in Minnesota is important, the economic efficiency

of mitigation projects should be considered in the planning process If compensatory

requirements are too rigorous, social well-being will be impacted and may lead to conflicts, inefficient regulatory compliance and monitoring, and decreased public support for wetland protection (King and Bohlen 1994)

CHAPTER 3 WETLAND REPLACEMENT

In the Red River Valley (RRV) of Minnesota, wetland mitigation is done to offset wetland losses due to projects that impact wetlands Replacing a wetland has become a complex task for

landowners due to the legal and ecological requirements of WCA At times, this may not be

economically efficient because LGUs allocate substantial resources to coordinate and administer

WCA Although BWSR provides financial assistance in the form of block grants to SWCDs,

other costs such as increased travel and labor exist

In Minnesota, projects such as road, parking lot, or building construction may impact or alter a natural wetland When an impact or alteration is proposed, a regulatory determination must be made A landowner unsure if proposed work will result in a loss of wetland may apply to the LGU to determine whether the project is subject to wetland regulations (Minnesota BWSR 1996)

Wetland Conservation Act Mitigation Policy WCA policy provides for mitigation of drained or filled wetlands that includes restoration, enhancement, or creation techniques According to WCA, wetlands must not be drained or filled,

wholly or partially, unless replaced by restoring or creating wetland areas of at least equal public value under a replacement plan (Minnesota BWSR 1993) Public value must also be determined,

or a comprehensive wetland protection and management plan must be established (Minnesota BWSR 1993)

Wetland mitigation in the literature is commonly defined as avoiding, minimizing,

rectifying, reducing, and eliminating or compensating negative wetland impacts by restoring,

creating, or enhancing wetlands to impacted or lost wetland functions Since the enactment of

WCA, wetland mitigation has been considered to be important in maintaining and enhancing

Minnesota’s existing wetland base Wetland mitigation policies in general require replacing lost wetland functions and societal value Preferred mitigation includes wetland restoration or

enhancement rather than creation Restoration refers to reestablishing a wetland in an ecosystem where the wetland historically existed Enhancement refers to increasing one or more of the functions of an existing wetland, such as increasing the productivity of wildlife habitat by

modifying water elevation and plant species (Kruczynski 1989) Wetland creation refers to constructing a wetland in an area which had not been a wetland Replacement wetlands should

be designed to replace important ecological functions provided by impacted wetlands such as wildlife habitat, water quality, and flood storage (Kruczynski 1989)

The question with wetland mitigation plans is whether exact ecological conditions are replaced and how social well-being is affected (CAST 1994) Replacing exact ecological

functions is difficult because wetlands are complex systems Despite increased knowledge regarding wetland science, methods for estimating relationships among wetland characteristics, functions, and benefits are still in developmental stages because past research has been limited (Scodari 1990) When comparisons are made among wetlands, the results are differing attributes and functions This in turn leads to various wetland outputs For example, a particular wetland may provide flood storage, therefore reducing property damage, soil erosion, or the need for artificial flood control measures A similar wetland in a different ecological setting may provide different functions

Although there has been a considerable amount of research on the biology and ecology of wetland ecosystems, wetland outputs are comprised of complex hydrological and ecological

processes that are not completely understood because general methods for quantifying wetland functions and production of outputs are not well-developed (Scodari 1997) Sound economic valuation of wetland ecosystems depends upon correct technical assessment methods, complete data, and dependable scientific analysis to establish whether wetland services being valued by a social scientist are being provided by the wetland ecosystem in question (Shabman 1986)

By determining the objectives of a mitigation project, policymakers will be able to make better decisions Basic requirements for achieving success of wetland restoration, creation, and enhancement projects are understanding wetland functions and giving the wetland ecosystem time to produce outputs (Mitsch and Wilson 1996) Restoration and replacement of wetland functions and values must be accomplished according to the ecology of the landscape area that is

impacted According to WCA guidelines (Minnesota BWSR 1993, WCA Rules, p 13) wetlands

must be replaced in the following manner:

Replacement must be guided by the following principles in descending order of

priority: (1) avoiding the direct or indirect impact of the activity that may destroy

or diminish the wetland; (2) minimizing the impact by limiting the degree or

magnitude of the wetland activity and its implementation; (3) rectifying the impact

by repairing, rehabilitating, or restoring the affected wetland environment; (4)

reducing or eliminating the impact over time by preservation and maintenance

operations during the life of the activity; (5) compensating for the impact by

restoring a wetland; and (6) compensating for the impact by replacing or providing substitute wetland resources or environments

WCA divides Minnesota counties and watersheds into three wetland areas according to the

amount and distribution of presettlement wetlands: (1) a greater than 80 percent area is an area where 80 percent or more of presettlement wetland acres exist; (2) a 50 to 80 percent area is an area where at least 50 percent, but less than 80 percent, of presettlement wetland acres exist; and (3) a less than 50 percent area is an area where less than 50 percent of presettlement acres exist

(Figure 3) “Replacement wetlands shall be located within the same watershed or county as the impacted wetlands, except that greater than 80 percent areas may accomplish replacement in less than 50 percent areas” (Minnesota BWSR 1996, p 50)

In-kind Replacement and Out-of-kind Replacement

Wetland Mitigation in Minnesota can be accomplished using in-kind or out-of-kind

replacement procedures WCA states that in-kind wetland replacement occurs when wetland

functions lost as a result of drainage or filling are replaced by restoring a wetland of the same type and having the same topographic setting in the same watershed Since in-kind replacement

is difficult to achieve in greater than 80 percent areas, WCA enables counties that have greater

than 80 percent of presettlement wetland acres/areas to mitigate in counties that have less than 50 percent of presettlement wetland acres/areas A relatively new term/concept within wetland science is the fungibility of wetlands Fungible means of such a kind or nature that one specimen (wetlands) may be used in place of another specimen (wetlands) to satisfy an obligation such as wetland mitigation (King and Herbert 1997)

Figure 3 Minnesota Wetland Areas (Source: Minnesota Board of Water and Soil

Resources 1997 Minnesota Wetland Conservation Act Administrative Manual

Minnesota Board of Water and Soil Resources, St Paul)

In-kind replacement is more likely to occur in counties that are less than 50 percent areas or

50 to 80 percent areas since there is less difficulty in locating a mitigation site However, the price per acre to mitigate varies, and the costs incurred by mitigation practices may be quite high compared to the social value of the original, impacted wetland For example, an acre of wetland may trade in the land market on the basis of the value for commercial or residential development; however, this value may be considerably different from the value of services such as wildlife habitat, controlling floods, and groundwater recharge (Freeman 1993) As a result, wetland replacement practices in Minnesota may be questioned because converting a wetland to an alternative use in one ecosystem and replacing it in another may affect social well-being as well

as ecological patterns

WCA states that out-of-kind replacement occurs if the wetland functions lost as a result of

drainage or filling are replaced by creating a wetland or restoring a wetland of a different type or

in a different topographic setting than the impacted wetland or if the replacement wetland is in a watershed other than the impacted wetland or has a different inlet and outlet characteristics than the impacted wetland Mitigation does not account for all changes in a wetland ecosystem nor does mitigation replace exact wetland functions lost during land development projects for

example Mitigation compensates for wetland losses by requiring either 1:1 or 2:1 replacement ratios

Economists use a broader definition of in-kind and out-of-kind mitigation At times, in-kind replacement is not possible, and trade-offs occur (Salvesen 1994) Instead of replacing a wetland in-kind with another wetland, some individuals would argue that society would be as well off with a different type of out-of-kind mitigation The creation of a recreational area or the addition

of acreage to a state park may add more to social well-being than a wetland For example, a

development project in Florida impacted wetlands Instead of replacing the impacted wetland with another wetland, the developer excavated one-half acre of upland and filled it in with soil from the impacted wetlands The site was then graded, and various tree species were planted, therefore adding to the overall diversity and aesthetic value of the site (Salvesen 1994)

Wetland Replacement Ratios

Wetland replacement ratios are used to establish the acreage and type of mitigation wetland

that will replace an impacted wetland WCA provides replacement ratios based on wetland type, topographic setting, and local public value The following WCA ratios (Minnesota BWSR 1996,

p 61) are used to replace wetlands:

For impacted wetlands on agricultural land, or in counties or watersheds in which 80 percent or more of the presettlement wetland acreage exists, the minimum replacement ratio is 1:1, requiring an equal area be replaced for the area impacted Except for counties or watersheds

in which 80 percent or more of the presettlement wetland acreage exists, the minimum

replacement ratio for impacted wetlands on nonagricultural land is 2:1, requiring two times the impacted area be replaced

No-net-loss

The development of no-net-loss wetland legislation has been important in preserving

wetland acres No-net-loss of physical quantities of wetland ecosystems is generally applied to most circumstances where “with project conditions” are to have no fewer wetlands than

“without project conditions” (CAST 1994)

Developing and enforcing no-net-loss policy has been difficult since there is no perfect framework to monitor the economic or biological success of wetland mitigation projects in

Minnesota In 1991, Governor Arne H Carlson signed into law a no-net-loss policy to ensure that the wetlands of Minnesota would be protected and that functional values would be replaced (Minnesota BWSR 1997) Upon the determination of no-net-loss by an LGU, the presumption is that further losses in wetland acreages will not be tolerated even as social benefits of drainage or other alterations are considered (Taff 1992)

Mitigation Banking

A mitigation bank is the creation or restoration of wetlands that are bought, sold, or

exchanged to compensate for future impacts The value of wetlands in a mitigation bank is quantified usually in dollar values, which allows an individual to purchase or trade wetland credits to replace an impacted wetland (Degrove 1996) For example, a mitigation bank was created and an easement was purchased on 90 acres of wetlands that were restored and created in Polk County, Minnesota This mitigation bank was designed to be used by the Polk County Highway Department to replace wetlands impacted due to road construction projects (Eklund 1997) Establishing a trade in wetland debits and credits and ensuring no-net-loss was difficult

in the past as mitigation banking did not exist because values of wetland ecosystems were not established (Goldman-Carter and McCallie 1996)

Wetland Exemptions and de minimis

Not all wetland impacts require replacement plans; and, according to WCA, certain

exemptions may apply to a wetland impact For example, a wetland formed by beavers (Castor canadensis) or by culvert blockage is considered to be exempt from WCA rules and regulations Included in WCA are other exemptions that relate to specific agricultural activities, drainage

system maintenance, utilities and public works, wildlife habitat projects, and activities that fall

into the de minimis category WCA provides the de minimis exemption for wetlands or portions

of wetlands that have little or no social value According to WCA (Minnesota BWSR 1996, pp

21-23) replacement plans are not required for the following project types:

A replacement plan for wetlands is not required for draining or filling the following amounts of wetlands as part of a project, regardless of the total amount of wetlands filled as part

of a project: (1) 10,000 square feet of type 1, 2, 6, or 7 wetland, excluding white cedar and tamarack wetlands, outside of the shoreland wetland protection zone in a greater than 80 percent area; (2) 5,000 square feet of type 1, 2, 6, or 7 wetland, excluding white cedar (and tamarack wetlands, outside of the shoreland wetland protection zone in a 50 to 80 percent area; (3) 2,000 square feet of type 1, 2, or 6 wetland, outside of the shoreland wetland protection zone in a less than 50 percent area; (4) 400 square feet of wetland types not listed in items (1) to (3) outside of shoreland wetland protection zones in all counties; and (5) 400 square feet of type 1,

2, 3, 4, 5, 6, 7, or 8 wetland, in the shoreland wetland protection zone, except that in a greater than 80 percent area, the local government unit may increase the de minimis amount up to 1,000 square feet in the shoreland wetland protection zone in areas beyond the building setback if the wetland is isolated and is determined to have no direct surficial connection to the public water

To the extent that a local shoreland management ordinance is more restrictive than the de

minimis exemption, the local shoreland ordinance applies

Improving Decision Making

Before society can understand wetland science, the framework between natural resources managers and economists must be strengthened, and awareness about wetlands must be

heightened Much research has been conducted in relation to socially balancing wetland

management decisions, and natural resources managers view wetland ecosystems as important to maintaining environmental health However, scientists and policymakers may not always be objective, free from bias, and skeptical in answering science-based questions regarding wetland ecosystems (CAST 1994) Government agencies attempt to balance needs for protection,

conservation, and development of wetland areas through management decisions regarding the wetland mitigation process (Kentula et al 1993) By developing a framework, managers will be able to make more efficient decisions regarding wetland management According to Mercuro et

al (1994), when individual choices contrast with those of collective choices, the conflict is not of moral values, but of the decision-making process by which choices are made To avoid conflict, policymakers should approach wetland mitigation with integrity and cooperation Controversy may be limited by including society in the planning process and by improving communication skills that are necessary to implement efficient policy

CHAPTER 4 MINNESOTA ROUTINE ASSESSMENT METHOD FOR EVALUATING WETLAND FUNCTIONS The Minnesota Routine Assessment Method, Version 1.0 (Appendix A) for evaluating wetland functions was used to assess and record wetland functions of impacted and replacement wetlands for each case study MNRAM was developed by the Minnesota Interagency Wetland Group (1996) to be used as a field evaluation tool to assess wetland functions MNRAM is a management tool for use in the field, allowing the user to collect and share data MNRAM is intended to be used on a regular basis where more rigorous methods are too data intensive and time consuming (Minnesota Interagency Wetland Group 1996) MNRAM is comprised of seven sections that include general information, scope and limitations, wetland classification, summary

of wetland functions, site description, functional assessment, and user guidance These sections

of MNRAM are described in the following discussions

General Information The general information section of MNRAM has the evaluator record wetland information such as the project name, owner of the land surrounding a wetland, geographic location, and the watershed within which the wetland is located Also, the name(s) of the evaluator(s) and date(s)

of the visit(s) are recorded

Scope and Limitations Temporal factors such as daily and seasonal weather conditions are recorded in the scope and limitations section of MNRAM as well as physical and natural features of the wetland,

adjacent land area, and the wetland comparison domain Wetlands are assessed for regulatory, mitigation design, restoration, and monitoring purposes

Wetland Classification Within the wetland classification section of MNRAM, wetlands of the United States can be classified according to the Cowardin System (Cowardin et al 1979) which places wetlands into five classes that include marine, estuarine, riverine, lacustrine, and palustrine The first four classes are further divided into subsystems Wetlands of the United States may also be

categorized using the Circular 39 system developed by Shaw and Fredine (1956), which places wetlands into 20 different types For WCA purposes, wetlands in Minnesota are classified using the Circular 39 system

Included within the wetland classification section of MNRAM is wetland regulation Wetlands are regulated according to jurisdictional area Federal regulatory agencies such as the U.S Army Corps of Engineers (USACOE) may have authority to regulate a wetland under

Section 404 of the Clean Water Act (P.L 95-217), while the U.S Department of Agriculture Natural Resources Conservation Service (NRCS) may have authority under the 1985 Food Security Act (P.L 99-198) to regulate wetlands located on agricultural lands (National Research

Council 1995) At the state level, the Minnesota DNR may have jurisdiction over certain

wetland activities, whereas LGUs such as SWCDs administer WCA at the local level

Summary of Wetland Functions The summary of wetland functions section of MNRAM has the user record the actual or

projected functions of the wetland as exceptional, high, medium, low, or non-applicable This

information is a permanent record of wetland functions for a wetland MNRAM can also be

useful to LGUs for monitoring the progress of a wetland project to ensure that wetland functions

are replaced in accordance with WCA policy

Site Description The site description section of MNRAM is divided into five segments: (1) The hydrologic setting has the user record field observations such as the hydrogeomorphology of the wetland, hydrology source, and alterations made to the hydrology of the wetland such as ditching or surface water diversions If wetland decisions are disputed at the local level by the landowner or appealed to BWSR, MNRAM can be used to document if standing water exists, the depth of standing water, the seasonal water level pattern, and the date of field observations Other

relevant hydrologic information for a wetland can be recorded here such as the location of

adjacent water bodies and the presence of water inlets or outlets (2) The vegetation segment has the user estimate the percent of each plant community that is represented in a wetland and to document which plant species dominates each community (3) The soils segment is used to document field observations and to record the soil types of a wetland and adjacent upland areas, soil texture, and drainage characteristics (4) The surrounding land use segment is used to

document the type of land use that is adjacent to or that surrounds a wetland Also, the percent land area that each land use type covers within the immediate watershed is estimated (5) The site sketch segment has the user draw or sketch the wetland and surrounding areas or to attach photographs

Functional Assessment The functional assessment section of MNRAM has the user document the quality of wetland functions The presence of special wetland features and other relevant wetland characteristics is